[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]




                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN

               SERVICES, EDUCATION, AND RELATED AGENCIES

                        APPROPRIATIONS FOR 1998

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS
                              FIRST SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                 JOHN EDWARD PORTER, Illinois, Chairman
 C. W. BILL YOUNG, Florida
 HENRY BONILLA, Texas
 ERNEST J. ISTOOK, Jr., Oklahoma
 DAN MILLER, Florida
 JAY DICKEY, Arkansas
 ROGER F. WICKER, Mississippi
 ANNE M. NORTHUP, Kentucky          DAVID R. OBEY, Wisconsin
                                    LOUIS STOKES, Ohio
                                    STENY H. HOYER, Maryland
                                    NANCY PELOSI, California
                                    NITA M. LOWEY, New York
                                    ROSA L. DeLAURO, Connecticut

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
  S. Anthony McCann, Robert L. Knisely, Susan E. Quantius, Michael K. 
                                 Myers,
                  and Francine Mack, Subcommittee Staff
                                ________
                                 PART 2

                 DEPARTMENT OF HEALTH AND HUMAN SERVICES

                                                                   Page
 Secretary of Health and Human Services...........................    1
 Office of Inspector General......................................  293
 Health Care Financing Administration.............................  391
 Administration for Children and Families.........................  643
 Administration on Aging.......................................... 1257
 Special Tables................................................... 1367

                              

                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 40-444 O                   WASHINGTON : 1997

                                  COMMITTEE ON APPROPRIATIONS

                   BOB LIVINGSTON, Louisiana, Chairman

 JOSEPH M. McDADE, Pennsylvania
 C. W. BILL YOUNG, Florida
 RALPH REGULA, Ohio
 JERRY LEWIS, California
 JOHN EDWARD PORTER, Illinois
 HAROLD ROGERS, Kentucky
 JOE SKEEN, New Mexico
 FRANK R. WOLF, Virginia
 TOM DeLAY, Texas
 JIM KOLBE, Arizona
 RON PACKARD, California
 SONNY CALLAHAN, Alabama
 JAMES T. WALSH, New York
 CHARLES H. TAYLOR, North Carolina
 DAVID L. HOBSON, Ohio
 ERNEST J. ISTOOK, Jr., Oklahoma
 HENRY BONILLA, Texas
 JOE KNOLLENBERG, Michigan
 DAN MILLER, Florida
 JAY DICKEY, Arkansas
 JACK KINGSTON, Georgia
 MIKE PARKER, Mississippi
 RODNEY P. FRELINGHUYSEN, New Jersey
 ROGER F. WICKER, Mississippi
 MICHAEL P. FORBES, New York
 GEORGE R. NETHERCUTT, Jr., 
Washington
 MARK W. NEUMANN, Wisconsin
 RANDY ``DUKE'' CUNNINGHAM, 
California
 TODD TIAHRT, Kansas
 ZACH WAMP, Tennessee
 TOM LATHAM, Iowa
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama        DAVID R. OBEY, Wisconsin
                                    SIDNEY R. YATES, Illinois
                                    LOUIS STOKES, Ohio
                                    JOHN P. MURTHA, Pennsylvania
                                    NORMAN D. DICKS, Washington
                                    MARTIN OLAV SABO, Minnesota
                                    JULIAN C. DIXON, California
                                    VIC FAZIO, California
                                    W. G. (BILL) HEFNER, North Carolina
                                    STENY H. HOYER, Maryland
                                    ALAN B. MOLLOHAN, West Virginia
                                    MARCY KAPTUR, Ohio
                                    DAVID E. SKAGGS, Colorado
                                    NANCY PELOSI, California
                                    PETER J. VISCLOSKY, Indiana
                                    THOMAS M. FOGLIETTA, Pennsylvania
                                    ESTEBAN EDWARD TORRES, California
                                    NITA M. LOWEY, New York
                                    JOSE E. SERRANO, New York
                                    ROSA L. DeLAURO, Connecticut
                                    JAMES P. MORAN, Virginia
                                    JOHN W. OLVER, Massachusetts
                                    ED PASTOR, Arizona
                                    CARRIE P. MEEK, Florida
                                    DAVID E. PRICE, North Carolina
                                    CHET EDWARDS, Texas

                 James W. Dyer, Clerk and Staff Director

 
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 1998

                              ----------                              

                                        Tuesday, February 11, 1997.

                 SECRETARY OF HEALTH AND HUMAN SERVICES

                                WITNESS

HON. DONNA E. SHALALA, U.S. SECRETARY OF HEALTH AND HUMAN SERVICES

                          Introductory Remarks

    Mr. Porter. Good morning. I want to begin by welcoming back 
the members of our subcommittee. Many of them are not here 
because there are no scheduled votes on the floor of the House 
today; we regret that, but there is nothing we can do about it.
    We do want to welcome you and your staff and the members of 
the public who are here today. This is the beginning of our 
fiscal year 1998 appropriations process and our first hearing.
    Let me begin by expressing our condolences upon the death 
of the wife of our colleague, Steny Hoyer. I think it would be 
appropriate, if I may do so, to ask us to observe a moment of 
silence.
    [Moment of silence.]
    Mr. Porter. Thank you all very much. Steny, of course, is 
not here today, and we will express our condolences to him 
personally when he returns.
    We also are missing our ranking minority member, Mr. Obey, 
who has recently had an operation.
    We are pleased to welcome back Lou Stokes, who is on the 
mend and getting better all the time, although his voice is 
still weak.
    And we welcome back to the subcommittee, after a short 
absence--two years is a short time on this subcommittee--Rosa 
DeLauro of Connecticut, who returns to the subcommittee.
    We also want to welcome our newest member, freshman member, 
Anne Northup of Kentucky, who joins us. Anne, we are delighted 
to have you aboard.
    Mrs. Northup. Thank you.
    Mr. Porter. As I have indicated previously and want to 
emphasize, ours has been a difficult bill to pass in the House 
of Representatives. The Senate has not been able to pass a bill 
in this area in the last two years.
    I want to state publicly that I intend to work very closely 
with all the members of the subcommittee, with Mr. Obey, our 
ranking member, with Chairman Arlen Specter on the Senate side, 
and with the Budget Committees, to do our best to assure that a 
602(b) allocation made to the subcommittee is such that we have 
a reasonable chance to pass the bill in the House, pass it in 
the Senate, to go to conference in a timely fashion, and 
produce a signable bill.
    I know that returning to a more normal process will allow 
our members to participate more fully in the process. 
Unfortunately, in the last two years it has been very, very 
difficult for everyone, without the Senate being able to pass a 
bill at all.
    I also want to say that this subcommittee has many senior 
Members of the House serving on it. They, and all the Members, 
have other responsibilities with other subcommittees; some of 
our senior members chair other subcommittees or are ranking on 
them, and as a result I will continue my practice of 
recognizing members for questions during a hearing in the order 
in which they arrive for the hearing. However, there will be 
times when it is necessary to accommodate senior members who 
have other obligations, and I hope that members will understand 
that. Members will normally be allocated 10 minutes for 
questions, as previously.
    Secretary Shalala, I want to welcome you to what I believe 
is your sixth appearance before this subcommittee. In early 
January, you passed a milestone of being the longest serving 
Secretary of HHS in history. And we certainly congratulate you 
on that. You have our great admiration for your service to our 
country. And while we don't always agree, we can only observe 
that you and your fine team represent the best of those who 
enter public service, and we thank you for your service to the 
United States.
    Madam Secretary, I also want to specifically thank you, 
your Assistant Secretary John Callahan and Dennis Williams of 
your staff for providing the subcommittee with all of the 
justifications by the end of last week. That's truly a 
remarkable achievement, and we very, very much appreciate it.
    I know that the budget you present us today has been the 
result of difficult negotiations with OMB, and I gather 
somedirect discussions with the President as well. While there are a 
number of commendable proposals in the budget, I particularly want to 
highlight the President's emphasis on infectious diseases, fighting 
infectious diseases.
    These newly drug-resistant diseases represent as much of a 
threat to our Nation in a sense as any national security issue. 
And I want to say right now, I will do my very best to provide 
at least the President's level for this activity.
    There are several concerns with the President's proposals 
for Medicare and Medicaid. I'll pass on these issues for now, 
as they are not the direct concern of the subcommittee. But I 
will leave them for discussion later when we get to the 
question and answer period.
    I cannot pass over, however, the wholly unsatisfactory 
funding level for the National Institutes of Health. I know 
that often we play a game of underfunding some accounts, 
knowing that others in the Congress, the Senate, others will 
take care of them. However, with NIH, I believe that this is a 
very short-sighted policy recommendation which endangers the 
funding for this premier institution, one that the President 
himself has cited for its critical role in the Nation's overall 
research agenda, and its contribution to the growth of our 
economy.
    Madam Secretary, I would ask that you please communicate my 
disappointment to the President, and indicate that I feel that 
this institution is much too important to provide a funding 
level as low as the one suggested in his budget.
    I'm also concerned that the budget in general, and your 
budget in particular, turns away from the emphasis on local 
decision making to solve locally-identified problems, and I 
believe returns to the error of categorical programs with 
strings and rules attached from distant bureaucracies in 
Washington. Your budget cuts the Social Services block grant, 
the Community Service block grant, and the Preventive Health 
block grant, and it freezes the Maternal and Child Health block 
grant.
    At the same time, narrow categorical grants are increased, 
some of them very substantially. In an era in which, throughout 
our economy and society, we are moving decision making closer 
to the people and to the problems that they face, this trend in 
your budget seems antiquated, and I must say, wrong.
    Finally, Madam Secretary, as I indicated in my recent 
letter to you, I am concerned that there is little evidence 
about the effectiveness of the programs that we fund contained 
in the justification. I'm particularly concerned that the 
consultations required by the Government Performance and 
Results Act have not occurred. This is the single most 
sustained program to begin to measure the performance of 
programs, and with only two to three months left before HHS 
begins to formulate the 1999 budget, I fail to see how Congress 
can have meaningful input to this process.
    The reports I've seen so far indicate that the agencies 
either are having trouble implementing the Act or are ignoring 
it. Madam Secretary, this subcommittee takes this legislation 
very seriously, and we want to work closely with you and your 
staff and the administrators of each program to develop 
measures that will help us and the American people evaluate 
programs we fund and that they pay for.
    With that, Madam Secretary, I want to turn to our ranking 
minority member, and that under present circumstances, would be 
Ms. Pelosi of California. Ms. Pelosi.
    Ms. Pelosi. Thank you very much, Mr. Chairman.
    I have this great honor because of the reasons that you 
spelled out earlier. I believe it is an honor to speak for the 
Democrats on this very, very important panel, when we are 
receiving our Secretary of HHS. It is an opportunity for which 
I'm grateful.
    First of all, Mr. Chairman, I want to thank you for the 
kindness you extended to Steny Hoyer, our colleague, at the 
start of this hearing. I want to join you in welcoming back 
Rosa DeLauro and join in welcoming Congresswoman Northup to the 
panel. We would be pleased in any event to have the great State 
of Kentucky once again so well represented on this panel. The 
fact that Mrs. Northup is part of the women membership of the 
House of Representatives is also noted. [Laughter.]
    Ever since Helen Bentley left, we've been hoping.
    In any event, Mr. Chairman, I thank you again for your 
opening remarks and your expression of proceeding in a 
bipartisan fashion to approach the important work of the 
subcommittee. The departments and agencies under the 
jurisdiction of the subcommittee are fortunate indeed to have 
you as our Chairman. You are a leader on health and education 
concerns, and in particular, your leadership in advancing 
biomedical research will make an historical contribution to the 
future health of the American people.
    I was particularly pleased at your comment about the 
funding, at least at the President's level, for infectious 
diseases, and agree with your characterization of the threat 
they pose to our country.
    Again, it is a pleasure to welcome Secretary Shalala here 
today. As we are fortunate to have Mr. Porter as our Chairman, 
and we are blessed to have your distinguished service as HHS 
Secretary, for reasons that go well beyond longevity. But 
that's important, too.
    Let me also commend President Clinton, as well as you, 
Secretary Shalala, for the budget request before us today. In 
the context of a balanced budget within five years, the budget 
includes important new initiatives, including the expansion of 
health care coverage for children and unemployed workers. I'm 
also pleased that it includes important new initiatives for 
preventing teen pregnancy, reducing tobacco and drug use by 
children, and responding to public health threats to the 
American people.
    Also, I'm pleased it proposes to fix serious problems 
caused by the passage of the welfare legislation in the last 
Congress. This budget request is a good place to begin our 
work.
    Again, Mr. Chairman, the members on our side look forward 
to working with you in a bipartisan fashion. We also look 
forward to working in a bicameral fashion, Senator Specter was 
helpful to us last year, to produce the best possible bill for 
the future of the American people.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. Pelosi.
    After all those very nice comments, I hate to start off 
with major criticism.
    Ms. Pelosi. Well, don't. [Laughter.]
    Mr. Porter. But when we come to the questioning portion, I 
will want to address some of the issues that I addressed in my 
opening statement.
    Madam Secretary, we're delighted to have you before us once 
again. The microphone is yours.

                           Opening Statement

    Secretary Shalala. Thank you very much, Mr. Chairman, 
Congresswoman Pelosi, members of the subcommittee.
    I am pleased to appear before you today to discuss the 
President's fiscal year 1998 budget for the Department of 
Health and Human Services. Theodore Roosevelt once said that 
nine-tenths of wisdom consists of being wise on time. This 
country remains the world's oldest and finest democracy, not 
because we always agree, but because we know when it's time to 
agree. These are the moments that have always defined 
generations.
    Mr. Chairman, we have reached one of those moments. Leaders 
on both sides of the aisle agree. We must balance the budget. 
The question is, how. At a time when our population is rapidly 
aging, and our health delivery system is rapidly changing, a 
time when advances in technology and medical research offer new 
hope and new ethical dilemmas, how can we put our budget in the 
black and meet our health care challenges for the 21st century.
    We believe the President's plan will allow us to do just 
that. It puts us on a straight path to balance the budget by 
the year 2002. And this Department is playing a leading role in 
that effort.
    Overall, the President's 1998 budget for the Department 
totals $376 billion in outlays, of which $34.7 billion is 
discretionary. Make no mistake: we believe this is a smart 
budget for a new century. It acknowledges that we live in a 
time of scarce Federal resources, and that Government cannot do 
it all.
    But it makes it clear that when we target our resources 
responsible and innovatively, when we team up with our private 
and our public partners, when we act as tough, savvy managers, 
the Federal Government can help lead the way to create a 
stronger and healthier nation, a nation capable of meeting 
challenges both old and new.
    Our first challenge is to preserve our Medicare and 
Medicaid lifeline by modernizing, by reforming, and by 
strengthening them. The President's plan would reduce projected 
Medicare spending by a net of $100 billion over five years and 
guarantee the solvency of the Part A Trust Fund until the year 
2007, a full 10 years.
    The independent HCFA actuary has actually written a letter 
confirming these numbers, and I will submit it for the record.
    [The information follows:]
    Offset Folios 015 Insert here



    We are able to achieve these savings with real reform, not 
with gimmicks, and without imposing new financial burdens on 
older Americans and people with disabilities. How? By 
modernizing Medicare so it fits the needs of older and disabled 
Americans, both today and tomorrow, which is why we're 
expanding choices among private plans, which is why we're 
making sure the Government is a more prudent purchaser of 
health care services, which is why we're tightening 
reimbursement roles, moving towards new payment systems, and 
investing in prevention benefits like mammograms and vaccines 
and colon screening, benefits that we know prevent illness and 
save lives.
    Medicaid, too, needs a new look, but we believe, not a new 
soul. We keep Medicaid's historic promise of health care for 
our most vulnerable Americans. At the same time, the 
President's budget includes net Medicaid savings of $9 billion 
over five years. Overall, we are saving $22 billion over five 
years. We are able to propose less savings than last year in 
part because of the great progress we've already made in 
reducing the Medicaid baseline, progress that couldn't have 
happened without strong management, without new legislation, 
and without increased State flexibility. Progress that must 
continue, which is why we're giving the States even more 
flexibility within Medicaid.
    We're throwing away mountains of red tape and regulations 
by eliminating the managed care waivers. We're also repealing 
the Boren Amendments so States have more freedom to set 
provider payment rates. And we're dropping archaic payment 
rules. And we're eliminating regulations that tie States' hands 
on staffing and other matters.
    Our second goal is to live up the lives of our children. 
And here the President's plan makes a firm, passionate 
commitment, by first and foremost tackling one of our Nation's 
most pressing health care challenges, a challenge I know that 
members on both sides of the aisle want to meet. Today, there 
are more than 10 million American children, 1 in 7, who go to 
bed every night without the security of health insurance. Most 
of these children are in families where parents work hard and 
play by the rules.
    That must end. Our Administration's proposal is designed to 
cut the number of uninsured children by up to 5 million over 
the next 4 years. Let me outline how we're going to do that.
    First, we'll offer a hand up to workers between jobs who 
need health insurance for their families while they get back on 
their feet. Our budget dedicates $1.7 billion this year to help 
these families get up to six months of health care coverage. 
This will help to insure 700,000 children.
    Second, we're proposing $750 million a year for a new 
partnership with the States, so that we can insure childrenwho 
fall between the cracks because their families earn too much to be 
eligible for Medicaid, but not enough to afford private insurance.
    And third, we're taking important steps to expand Medicaid 
coverage to reach more children. How? By allowing States to 
provide a full year of continuous Medicaid coverage for the 
$1.2 million children who qualify each year.
    Fourth, by adding 1 million adolescents to Medicaid by the 
year 2000. And fifth, by working with the States and private 
health care providers in an extraordinary private-public 
partnership to help find the 3 million children who are now 
eligible for Medicaid but not currently enrolled. We expect to 
enroll 1.6 million of those children by the year 2000.
    One of the President's highest priorities this year will be 
to move forward on the promise of welfare reform by changing 
our welfare program to a jobs program, so that everyone who can 
work has the opportunity to work. But real welfare reform does 
not mean punishing people who can't work. And that's why my 
Department's budget also includes $5.2 billion to restore 
Medicaid benefits to disabled children and to legal immigrants 
for either children or disabled adults, people who cannot be 
expected to work.
    These are important steps; steps that we can take together. 
But this budget's commitment to children and families does not 
end there. If you look at the increase in our discretionary 
budget, what you will see is an intense focus on our children, 
a focus on the early foundation they need to get a right start 
in life, and the guidance they need as adolescents to make the 
right choices with their lives.
    We cannot live in Washington for more than a day without 
noticing that people tend to disagree about everything. But 
people do agree that the early years of a child's life are 
critical to success in school and beyond. And to enrich those 
years, they do agree that Head Start works. It's part of a 
solution.
    Our goal is to expand Head Start to reach more of the 
children who need it but don't now get it. To do that, we're 
proposing a $324 million increase at Head Start, which will 
allow us to reach 36,000 more children, to continue to improve 
quality and to stay right on track to serve 1 million children 
by the year 2002.
    Today, we have almost half a million children in foster 
care, and 100,000 of them have no chance of returning back 
home. That's 100,000 children who want what every child 
deserves: a home and security and love. The President has 
issued this country a difficult but critical challenge. By the 
year 2002, we must double the number of children in foster care 
who are adopted or permanently placed every year. To reach this 
goal, the budget includes $21 million for a new adoption 
initiative, to help States remove the barriers that keep kids 
from finding love and permanent homes.
    Too often in the past, policy makers group children of all 
ages together. We're taking a more sophisticated approach by 
tackling the unique land mines that keep many of our 
adolescents from making smart choices with the only lives 
they'll ever have. After years of increases, there is some 
indication that teenage birth rates are finally going down, but 
not nearly enough. Every year, 200,000 teenagers 17 and younger 
have children. That hurts these children, it hurts their 
parents, and it hurts our entire nation. And that's why are 
part of a new welfare law, we are implementing a new $50 
million initiative to send our children one clear and 
consistent message that they must abstain from sex.
    There's been a lot of talk lately about rising drug use 
rates among teens. But when you peel away the rhetoric and take 
a cold look at the hard facts, what you see is that our teenage 
drug problem is for the most part a marijuana problem. The fact 
is that we have too many parents who don't feel comfortable 
talking to their kids about marijuana and sending them clear 
no-use messages. And we have a generation of children who are 
using marijuana earlier and earlier, and are more and more 
likely to be armed with the dangerous misconception that it 
will do them no harm.
    As part of the President's overall drug strategy, our 1998 
budget makes a $98 million commitment to fight these dangerous 
trends. By countering pro-use messages, especially among 9 to 
14 year olds, by leveraging State resources, by gathering State 
by State data on substance abuse, this committee and the 
Nation's Governors will know where we're succeeding and where 
we're not. And by dedicating an additional $30 million to 
expand research on drug treatment and prevention.
    There are a lot of different perspectives on the issue of 
tobacco. But there is one thing that we can all agree on. Our 
children should never smoke. Every year, tobacco-related 
illnesses claim the lives of 400,000 Americans, the vast 
majority of whom began smoking before their 18th birthday. And 
that's why the President stood up to the special interests and 
proposed the boldest initiative ever to kick Joe Camel and the 
Marlboro Man out of our children's lives. We made that promise 
to our children and to their parents. And in this budget, we 
include $34 million to implement the regulation and make that 
promise a reality.
    We're also requesting $36 million for CDC and $22 million 
for NIH to help States prevent cancer and encourage Americans, 
especially kids, to put down their cigarettes and pick up their 
health. The fact is, that when we work to cut teen smoking by 
half over seven years, we're focusing on a huge public health 
challenge that if successful, could save countless lives and 
dollars. That is our approach in this budget.
    As we move ahead to meet our third challenge, to build a 
public health agenda for the 21st century, parents shouldn't 
have to worry that the food or juice they give their children 
will make them sick. They shouldn't have to worry that their 
families or communities will fall victim to deadly outbreaks of 
infectious diseases. Today, too many do. The CDC estimates that 
there are as many as 33 million cases of food-borne illnesses 
every year in this country, and up to 9,000 deaths because of 
them.
    And emerging and re-emerging infectious diseases like Ebola 
are increasingly crossing oceans and continents to threaten all 
of us. In both of these areas, we know that it pays to be smart 
on the front end, to find innovative ways to prevent these 
tragedies, instead of just responding to them after they've 
occurred. And that's why the President has proposed a 
sophisticated $43 million early warning system, so that we can 
stop food-borne illnesses before they stop us. And that's why 
in this budget we're increasing funding by $15 million to 
improve training, research and the ability of States to prevent 
and respond to deadly outbreaks of infectious diseases.
    Another cornerstone of our public health agenda is and 
always will be medical research. To make sure that theUnited 
States remains preeminent in research, we propose a $13.1 billion for 
the NIH, as well as a second year of funding for NIH's new cutting edge 
clinical research center. Past NIH research has already led to 
remarkable breakthroughs in the treatment and prevention of HIV/AIDS. 
And now in this budget, NIH proposes to invest $1.5 billion in 
additional HIV/AIDS research, including a substantial increase in 
funding for AIDS vaccine research, so we can use the light of science 
to finally reach the end of this dark tunnel.
    But until we do, our first priority must be prevention. Our 
budget increases our prevention activities at the CDC by $20 
million to help prevent HIV among drug users, one of the groups 
at highest risk. And we continue our strong commitment to Ryan 
White activities by proposing $1 billion, $40 million more than 
last year, to empower those communities hardest hit to fight 
back.
    Preserving and modernizing Medicare and Medicaid, investing 
in the lives of children and families, creating a strong public 
health agenda for the 21st century. We have been able to make 
these commitments because of the strong management that we have 
brought to the Department. We have reduced our FTEs by 7,600 
since 1993. We have cut the bureaucracy, we have consolidated 
services, we have increased flexibility. And now we view the 
Government Performance and Results Act as an opportunity to 
continue along that path, to measure our activities with the 
only yardstick that matters: results. That's what the American 
people deserve. And that's what they will get.
    Barbara Jordan once said, what the people want is very 
simple. They want an America that is as good as its promise, an 
America as good as its promise. That's the future we've tried 
to create with this budget, a budget that makes some very tough 
choices, a budget that shows tough management, a budget that 
cuts costs and invests in lives, especially the lives of 
children and adolescents. And that is the America of the future 
that all of us can create if we seize this great opportunity, 
and as we have done in the past, if we move forward together.
    Once again, Mr. Chairman and members of the subcommittee, I 
want to thank you for giving me this opportunity to testify. 
I'd be happy to answer any of your questions.
    [The prepared statement follows:]
    Offset Folios 025 to 030 Insert here



    Mr. Porter. Madam Secretary, thank you for your excellent 
statement. I might say that it is time to agree, and there is a 
great deal in the President's budget in your Department that I 
think we can agree on, particularly the emphasis on children, 
whether it's expanded coverage under Medicaid or commitment to 
Head Start and to the early years. I've had the opportunity 
recently to talk to Rob Reiner of Castle Rock Productions who 
has, I think, a wonderful initiative that will fit in perfectly 
with the commitment that all of us make to early childhood 
development. This emphasis is, I think, a very, very good one.
    I would also say that we are definitely singing out of the 
same hymnal. On your management of the Department, you've done 
a tremendous job there to make the Department managed 
efficiently. And certainly on the question of looking for 
results in the programs that we fund.
    Having said that, I have to say that I personally was 
tremendously disappointed in the President's unwillingness in 
his State of the Union Address, and to a large extent also in 
the budget that I've seen, to come to grips with, I think, the 
issue that all of us must come to grips with, and that is the 
rate of increase in the major entitlement programs. And while 
you have suggested some improvements in Medicare and Medicaid, 
I don't think that we can provide the funding in many of the 
areas that the President himself indicates as priorities in his 
budget without sitting down and coming to agreement and doing 
major substantive changes to get control over the future rate 
of increase in the two entitlement programs.
    Simply to cap Medicaid and Medicare and shift the costs to 
other sectors I think is a non-starter in this Congress. Also 
to cut back on the commitment we've made to block grants and 
giving greater discretion at the local level is also, in my 
judgment, a non-starter.
    I'd like to begin the questions by referring to NIH 
funding, and again, I'm going to be critical. I am, obviously, 
very disappointed in the President's budget. I think 
particularly so, because the American people got a chance to 
see, at the Democratic convention, Christopher Reeve make a 
very elegant statement about the importance to people of 
biomedical research. The President emphasized this subject in 
his acceptance address. During the campaign, the President 
said, ``Cutting back on research at the dawn of a new century 
where research is more important than it has ever been for the 
last 50 years would be like cutting our defense budget at the 
height of the Cold War. We must not do it, and we will not do 
it.''
    The President came into my district, Madam Secretary, two 
weeks ago, and made a very, very eloquent statement about the 
importance of the human genome project, and how it would make a 
difference in the lives of children going to be born in this 
country in the next century. We in the subcommittee, while 
contributing hugely to deficit reduction, nevertheless placed 
NIH as a high priority in increased funding two years ago by 
5.7 percent and last year by 6.9 percent. The President's 
budget comes in for the next fiscal year at 2.6 percent, below 
the rate of inflation. And of that, $90 million has to be 
allocated to the new clinical center, as you mentioned, meaning 
that funding for operations or largely for grants would be, 
under the President's budget, less than 2 percent of an 
increase, again, way below the rate of inflation in this area.
    Even more disturbing is the fact that in the out-year 
projections, there is assumed the increase of one half of 1 
percent after the year 1998 in the President's budget. So for 
four straight years, the funding for NIH under the President's 
budget would be going in reverse, given the rate of inflation 
we have had.
    So I guess my first question would be, how does your NIH 
proposal in the budget match the President's rhetoric on the 
importance of biomedical research, and what can we do together 
to address this problem?
    Secretary Shalala. First of all, we agree that we need a 
strong NIH. There's no disagreement between the Administration 
and this committee.
    At the same time, we needed to respond to a wide variety of 
demands that were important to the Department and across the 
Government. Given the competing priorities and the existence of 
the discretionary spending cap, the best we could do within 
this budget was 2.6 percent.
    If more could be provided to NIH, without damaging the key 
priorities that we have laid out, we would welcome it. And we 
look forward to working with this committee, as we have in 
previous years, to see what we could do for NIH within the kind 
of constraints and priorities we have.
    On the out years, let me simply respond the way I did last 
year, and that is, we do this budget year by year, within the 
context of a balanced budget. And the priorities that we have 
are made year by year. So one should expect us to have a 
priority on NIH next year. But again, the path and the 
competing demands will require that we cut some things to be 
able to increase the NIH budget.
    Mr. Porter. Well, I think your heart and the President's 
rhetoric is in the right place. But that doesn't necessarily 
get us to where we need to go. I don't think we can put 
biomedical research funding on hold in this country. And I 
don't think that there is, perhaps, any higher priority for the 
American people than the commitment we make in this area, where 
the possibilities are so great, and where momentum is so 
necessary.
    So I look forward to working with you. I know that you made 
a personal appeal to the President, who was originally going to 
have in his budget, I understand, a cut for NIH, an absolute 
cut. And we hope to do much better than the President's budget 
indicates.

                              AIDS Funding

    Madam Secretary, there is substantial disagreement within 
the AIDS community about whether to put Ryan White resources 
into services for those who are already ill, or into drug 
purchases so that patients may stay healthy longer. Are you 
confident that your budget reflects the correct allocation of 
these resources, anticipating the circumstances a year from now 
when funding will be actually distributed?
    Secretary Shalala. We're in a difficult period in terms of 
the scientific breakthroughs that have taken place. We have a 
new set of drugs that are clearly having an effect on many 
people who are very sick and extending life. But what 
combinations of those drugs, what the dosage is, we're less 
sure. And the medical community is less sure.
    There was recently a conference at the NIH to try to 
develop standards of treatment. We have made an allocation to 
help the States and communities, based on what our current 
knowledge is. If that information changes during the course of 
the budgetary deliberations, I will be back to the committee 
with more accurate numbers. I know the communities are 
concerned about whether they're going to have to take some 
resources out of Title II of Ryan White. We have put a $15 
million increase there.
    Most of the expenditures actually will come out of 
Medicaid, because such a high percentage of people who are ill 
are Medicaid eligible. But in terms of the precision of this 
particular number, we did our best based on what knowledge we 
have, and we simply have to work with the committee and fine 
tune this as we're going along.

             Government Performance and Results Act (GPRA)

    Mr. Porter. Because we are so far ahead of when the money 
would be spent, we would welcome from your Department some 
suggestions as to how we could put flexibility into the budget 
beyond reprogramming, perhaps, that would help us address this 
need as we proceed through the next fiscal year.
    Madam Secretary, when will your staff begin to discuss 
program performance levels with the subcommittee, and will you 
give us your plan to assure that the measures the subcommittee 
wishes to consider will be included in the plan to implement 
the Government Performance and Results Act in part of your 1999 
budget?
    Secretary Shalala. Yes. And we intend to keep our 
commitments to this committee, and I really deeply appreciate 
your desires to see that the GPRA legislation helps us in our 
efforts in budgeting and managing in the Department.
    Let me cite a few things about our efforts in this area. 
The Department pilot tested GPRA at each one of our operating 
divisions in the 1998 budget. We will fully comply with the 
GPRA requirements for the 1999 budget and will fully consult 
with this subcommittee as we engage in this process.
    Ultimately, GPRA will help us find better ways to spend 
taxpayers' dollars and obviously manage our programs. But it 
won't be done overnight. We'll need very good data, and we have 
requests in this budget for this. We've reorganized our data 
sets, so that we can assess our programs. We'll need patience 
to find the best ways to deliver the services of the Department 
to our citizens. Every one of our operating divisions is 
developing strategic plans and the performance measures that 
they need to analyze strengths and weaknesses of these 
programs.
    As we enter our 1999 budget process, I want to personally 
assure you that we will be examining their efforts to ensure 
that they comply with the GPRA Act, and that we will continue 
to present to this committee the most effective and cost 
conscious budget possible.
    So I believe we're on track. Even though there clearly is a 
transition between first term and second term, we will not 
allow that to be an excuse, as well put this system in place.
    Mr. Porter. Thank you, Madam Secretary.
    Mr. Stokes, I yield to you.
    Mr. Stokes. I yield.
    Ms. Pelosi. Mr. Chairman, Mr. Stokes does have some 
questions. The gentleman indicated to me that he would submit 
them for the record.
    Mr. Porter. There's one question he would like us to 
address.
    Secretary Shalala. I must say, with the amount of illness 
on this committee, if you'd like me to detail a practicing 
physician. [Laughter.]

                          pulmonary hemorrhage

    Mr. Porter. Mr. Stokes asks, 90 cases of chronic pulmonary 
hemorrhage have been reported in the United States, a third of 
these have been in Cleveland. Cleveland also has had nine 
deaths from the disease.
    What is the Department doing to address this health 
problem?
    Secretary Shalala. I don't actually know the answer to that 
question, but I'll find out for you right away, Congressman 
Stokes, and get the answer to you.
    [The information follows:]

                          Pulmonary Hemorrhage

    In November 1994, CDC was notified of a cluster of 8 cases 
of pulmonary hemorrhage, a rare disease, in Cleveland, Ohio. 
The call came from Rainbow Babies and Children Hospital, a 
referral hospital. CDC immediately sent two epidemiologists to 
Cleveland to assist in an investigation. The investigation was 
conducted between 11/94-12/94. All cases reported were African-
American, seven were male, age range was 4 weeks to 16 weeks. 
One child died. Symptoms included pulmonary hemorrhage, 
limpness, and lethargy. Cultures of blood, urine, and stool 
were negative for bacterial, mycotic, and viral pathogens. A 
MMWR article in 12/94 described the investigation and requested 
physicians to report possible pulmonary hemorrhage cases to 
CDC.
    A second cluster of 6 cases of pulmonary hemorrhage was 
reported to CDC in December 1994, in Chicago, Illinois. A team 
of three CDC investigators was immediately dispatched to assist 
with the investigation. The infants aged ranged from 3 weeks to 
8 months. Six were African-American, 4 were male. At the time 
of admission all infants were afebrile but had anemia and 
histories consistent with either hemoptysis, epistaxis, or 
blood from the endotracheal tube. Cultures of blood, urine were 
negative for bacterial, mycotic, and viral pathogens. A MMWR 
article in 7/95 described the investigation and requested 
physicians to report possible pulmonary hemorrhage cases to 
CDC.
    Visual inspections of the homes of children affected led 
investigators to suspecting molds as a possible factor in the 
clusters. In August 1995, CDC convened a panel of experts to 
review the data collected during the two investigations as well 
as data collected subsequently. The purpose of this meeting was 
to review the evidence for an association between exposure to 
fungi in indoor air and disease among infants.
    As a result of the preliminary results of these two cluster 
investigations and the meeting, CDC prepared and distributed 
Home Clean-up Recommendations for fungus. The mold being 
investigated requires both water and cellulose to grow, and 
could occur from water damage secondary to flooding of homes 
(such as occurred in the summer of 1994) or from local 
plumbing/maintenance problems. The mold can be removed by 
washing walls and other items in a bleach solution, and 
correcting the source of the water damage to prevent 
reoccurrences of the problems.
    A case-control study to determine the risk factors for 
acute pulmonary hemorrhage among the cluster infants was 
conducted by Rainbow Babies and Children's Hospital, the 
Cuyahoga County Board of Health, the Cleveland Department of 
Public Health, with technical assistance from NCEH. This study, 
described in the January 17, 1997 MMWR, reported that all of 
the case-babies and 23% of the control-babies resided in homes 
where major water damage had occurred during the previous 6 
months. This finding prompted quantitative air sampling for and 
microscopic identification of fungi in the study homes. The 
quantity of fungi, including the toxigenic fungus Stachybotys 
atra was higher in the homes of case-infants than in those of 
controls.
    In collaboration with Emory University and selected medical 
examiners throughout the country, CDC is reviewing and studying 
infant lung tissue autopsy material to help determine the 
extent to which pulmonary hemorrhage is present among infants 
who die.
    We continue to provide technical consultation to the 
Cleveland medical center that first identified this problem, as 
well as area health departments.
    To date, CDC surveillance efforts have discovered seventy-
eight cases of pulmonary hemorrhage occurring from 1988 through 
1996. Twenty-three states have reported cases. Ohio has 
reported the most cases, 32.

                  Epidemiology of Pulmonary Hemorrhage

    Case Distribution across the U.S.:
Alabama: 1
Arizona: 1
California: 1
Florida: 4
Idaho: 1
Illinois: 10
Iowa: 1
Louisiana: 2
Maryland: 2
Massachusetts: 1
Michigan: 2
Mississippi: 2
Missouri: 3
Nevada: 1
North Carolina: 4
Ohio: 32
Oregon: 1
South Carolina: 1
Tennessee: 1
Texas: 4
West Virginia: 1
Wisconsin: 1
Wyoming: 1
    Annual Distribution: 1988, 1; 1989, 0; 1990, 0; 1991, 3; 
1992, 4; 1993, 16; 1994, 22; 1995, 12; 1996, 20.
    Gender Distribution: Male, 48 (61.5%); Female, 30 (38.5%).
    Survival Distribution: Survivors, 66 (84.6%); Non-
Survivors, 12 (15.4%)
    Racial Distribution: White, 19 (24.4%); Black, 56 (71.8%); 
American Indian 1 (1.3%); Hispanic, 2 (2.6%).
    Mr. Porter. I don't think we'll charge the Democratic side 
with that.
    Ms. Pelosi.

                               nih budget

    Ms. Pelosi. Thank you, Mr. Chairman.
    I certainly want to associate myself with your concern 
about the NIH budget, but do appreciate the comments of the 
Secretary. I also appreciate, as I mentioned, your interest in 
funding the infectious diseases initiative, at least at the 
level the President suggests, and your comments, complimenting 
the Secretary on some other initiatives relating to children in 
the budget. And it becomes clear that if these initiatives are 
going to be protected, that we need a bigger allocation.
    And I would hope that, again, your remarks at the beginning 
of the hearing, that you would work with Senator Specter and 
others in the leadership to get a bigger allocation for our 
committee. Because while we all support increased spending for 
the NIH and that it should be at least on par with biomedical 
inflation, that we can't have it all, if we have the constraint 
of the allocation that we've had in the past.
    And I know that you will fight very hard for that 
allocation. But I think that's the battle ground for us, rather 
than again, as I said in the past, this lamb eat lamb committee 
that we have, where everything in here is a priority, an 
important priority. And it's hard to find significant increases 
in funding without taking it out of some other good initiative.

                      aids drug assistance program

    I'd like to follow up your question, Mr. Chairman, about 
ADAP. Do I understand from your answer, Madam Secretary, that 
depending on the report of the committee chaired by Dr. Fauci, 
developing guidelines for standard of care for people with HIV/
AIDS, that the Administration is willing to look at a revised 
budget request for ADAP that would respond to the 
recommendations of the Fauci Committee?
    Secretary Shalala. Well, you'll remember that last year, we 
came back with a new request to pay for the protease 
inhibitors. What I have said is two things. Number one, I want 
to see what the recommendations are there. And second, I want 
to call around to the States and see what their situation is in 
terms of their ability to pay for the drugs. What we don't want 
to do is to shift huge costs on the States.
    But this is, we're all making a guess on this number, 
because we don't know enough about the treatment now to do much 
more than make a guess in terms of the amount of money we'll 
need and the number of people for whom the drugs will be 
affected. So I'm saying that we're willing to stand by this 
number now. We're going to be checking throughout the spring 
before this committee makes some decisions. We'll be coming 
back to you if we have an additions that we want to make.
    Ms. Pelosi. And if we go beyond the markup, would you be 
willing to look at an emergency supplement?
    Secretary Shalala. Well, we certainly did that before, and 
we certainly would consider that. I would hope that we'll be 
able to agree on a number in time for the appropriation.

                              job training

    Ms. Pelosi. I hope so, because I appreciate the Chairman's 
suggestion about flexibility in the budget beyond 
reprogramming. Last year, we were, at the end of the game, 
able, with Chairman Specter's cooperation, to put $100 million 
more for acquisition and administering of the drugs. So we want 
to get as close to the need as possible.
    In light of the new welfare law, I share with Mr. Stokes a 
concern. Many of us are concerned about how we can successfully 
help poor mothers overcome the obstacles they face every day to 
get job training and lasting employment; obstacles like 
transportation, lack of adequate child care, health insurance, 
problems with drug addiction, illiteracy and domestic violence. 
Almost half the women receiving Government assistance cite 
domestic violence as a factor for need, in the need for 
welfare.
    Will HHS clarify that victims of domestic violence will be 
made exempt from work requirements separate from the 20 percent 
hardship exemption?
    Secretary Shalala. Well, let me say that we're working very 
closely with the States now. And they are just starting to 
implement their plan. And we want to make sure that, 
particularly for the hardest to work with cases, often victims 
of domestic violence who need intensive services, or people 
with disabilities, but who can go to work, or people who have 
multiple issues that need to be dealt with, that the States do 
provide those kinds of intensive services, and don't simply use 
the exemption to put the toughest cases aside and not work with 
those cases.
    We're anxious that women who are victims of domestic 
violence get services, have an opportunity to work, aren't just 
simply categorized as exempt. We're also anxious that States 
not believe that taking a little bit more time with some cases 
and providing those services is to their detriment.
    So what we're going to do initially is work with the bill. 
No one is anywhere near their exemption at this point, because 
they're just starting down the road. We will see if there are 
special problems that it created. We have sent out some 
guidance to the States specifically on the issue of domestic 
violence. It is the one area where we have sent out what I 
think is very clear guidance to the States as part of the 
welfare bill in terms of working with victims of domestic 
violence about the kinds of services that ought to be 
available.
    So I think that my answer is imprecise because we're at the 
beginning stages of the welfare bill.
    Ms. Pelosi. If I may, then, in light of the welfare bill, 
many of us have had meetings with our constituents who are on 
public assistance, and they have some pretty good ideas. If I 
just may briefly convey some of them to you. Many of the teen 
moms that we're trying to help have a problem with literacy. So 
if you could wed the literacy issue to welfare reform and teen 
moms and welfare to work.
    Secondly, some have a substance problem. And the time line, 
the 18 months that they need for that, they think shouldn't 
count against some other time table for them. And these are 
people fully intending to abide by the law, but need some 
deferral of the start of the two year period.
    And lastly, well, lastly for right now, some of the 
grandmothers who had been on public assistance have been called 
in to go to work fare. Many people would like to see care for 
grandchildren by some of the welfare grandmothers to be 
considered work. It would cost a great deal of money to have 
full time child care for the children, the grandchildren of 
these grandmothers, who would then have to go to work instead 
of taking care of those children as work.
    I have a question on legal immigrants, but how am I doing 
with time, Mr. Chairman?
    Mr. Porter. You have about two minutes.

                               immigrants

    Ms. Pelosi. Okay. Let me commend the Administration for 
attempting to restore assistance to legal immigrants who may be 
unable to complete citizenship proceedings. As you know, SSI 
benefits and food stamps for legal immigrants are scheduled to 
end by the end of this summer. Madam Secretary, could you share 
with us your time line for enacting legislation which would 
restore funding for these elderly and disabled legal 
immigrants? How does the Administration propose to proceed from 
here?
    Secretary Shalala. Let me try to answer both questions 
quickly. Question number one, the way to answer that question 
is that we do not intend to reopen the welfare debate. The 
rules have been set out, the States have flexibility. This 
committee and every other committee has given the States 
substantial resources for child care. They've given them the 
flexibility.
    We need an opportunity to work with the States. And the 
States need an opportunity to establish their programs.
    The Administration does not want to reopen the bill, start 
conversations about this group should be exempted, this group 
should be exempted, this group should have a little more time. 
We believe the flexibility is there, and certainly the 
resources are there. Almost every State which has a reduction 
in the number of welfare recipients has extra money because of 
the nature of the block grant. They were given money based on 
an earlier number.
    So the States really do have some resources to work with. 
We don't think that the fundamental rules about the welfare 
bill should be brought up or re-debated.
    But within that discussion, there are some people who 
cannot work. There is no one in this country that believes that 
a disabled immigrant sitting in a nursing home in the United 
States of America can go to work. There is no one that thinks 
that a little child can go to work. And we have argued that for 
people that were already here in this country, not for the new 
people that are coming in under which we have agreed to a new 
set of rules that deem the income of the sponsor, but to people 
that are currently here, we should not cut them off their 
Medicaid. That's the money that's in our budget.
    Otherwise, we'll be shifting costs to the States. We'll be 
creating tremendous hardship. And we have suggested that the 
money should be restored for those people who are not part of 
the welfare reform debate, but who have been affected. We 
believe that we ought to restore the Medicaid money for that 
population. We're talking about disabled legal immigrants and 
children.
    Mr. Porter. Thank you, Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Porter. I notice that Mr. Bonilla has on cuff links 
that look like the Superman shield. And I don't know whether 
that indicates the questions are going to be tough.
    Mr. Bonilla of Texas.
    Mr. Bonilla. Thank you, Mr. Chairman. My eight year old son 
gave me these for Christmas.
    Welcome back, Madam Secretary. Nice to see you again.
    Secretary Shalala. Thank you.

                              nih funding

    Mr. Bonilla. I think it's remarkable on this subcommittee 
to hear this morning, in this town where you often see too many 
headlines about political bickering, that we all seem to be in 
agreement that we're concerned, as you are, about the funding 
level at the National Institutes of Health. And I'd just like 
to, for the record, say that I am also concerned about that, as 
is the Chairman and my colleagues on both sides of the aisle 
here, that we're going to try to do everything that we can to 
maintain a higher level of funding than the President is asking 
for.
    We've had this struggle before. You and I came in at the 
same time working on these issues. And we've always managed to 
give the National Institutes of Health at least close to what 
they wanted, if not what they needed. And we'll continue to do 
that.

                          diabetes prevention

    My first question this morning is about something that Mr. 
Stokes and I worked on over the years, and that is diabetes. 
Because it's a problem that has disproportionately afflicted 
minorities in this country. I'm delighted that the 
Administration is, talking about promoting preventive health 
care for diabetes. It's something that we've supported in 
Congress for years, and we're delighted that the White House 
and you are concerned about this as well.
    One in seven Hispanics suffers from diabetes. And as the 
population of my Congressional district is more than 60 percent 
Hispanic, finding a cure and promoting diabetes education are 
top priorities, and have been for me for some time. It amazes 
me that expenditures on people with diabetes accounts for a 
staggering 27 percent of the Medicare budget. This is something 
that the Speaker is starting to talk about as well, in terms of 
addressing the costs included in the Medicare budget.
    Each Congressional district includes, on the average, 
32,000 people with diabetes. By simply providing Medicare 
coverage for blood glucose monitors and associated testing 
strips, the CBO estimates savings a first for any preventive 
health care measure.
    Madam Secretary, I'd like to ask, what is your office 
planning to do to promote education and preventive care for 
diabetes, aside from what the CDC and NIH are currently doing?
    Secretary Shalala. Actually, within this budget is a 
strategy for diabetes that includes a research component. In 
1994, as you probably know, the NIH initiated an eight-year 
trial on type two diabetes which is the adult diabetes. We 
increased NIH funding in this budget.
    We are going to have a State-based control program to 
encourage screening and improve techniques to increase 
education. And we've asked for money for the CDC as part of 
this overall strategy.
    And HCFA, the Health Care Financing Administration, has a 
new benefit as part of our recommendations of modernizing the 
Medicare system, which is an expansion to improve outpatient 
self management and training, and coverage of glucose 
monitoring strips--the kind of thing that you just talked 
about. There actually is a major new initiative within our 
budget. While we reduce the growth in the Medicare programs 
substantially, $100 billion, we also add some new benefits that 
we believe in the long run will affect costs. We add, in 
addition to the diabetes benefit, we add flu shots and other 
kinds of things.
    The Medicare program was originally designed without 
prevention benefits. And what we do in the new budget is move 
to modernize the program. There are some direct things that 
actually will save money initially, and there are some other 
things that will save money in the long run.
    The management of diabetes, the research on diabetes, the 
education of people so they can manage their own cases, is very 
much a part of the integrated strategy in this budget.
    Mr. Bonilla. I've heard from some executives at one of the 
hospital conglomerates in this country. They're also concerned 
about this, and see this as a way of driving down costs, by 
educating people about diabetes at an early age. I come from a 
neighborhood where it seems like every, a person at every other 
house on the block was afflicted by diabetes. This seems to be 
true simply because they didn't know, they were not educated, 
and had no idea that if they just changed their diet and 
exercised a little bit, they could prevent something that 
causes great complications down the road. Have you heard the 
private sector getting more involved in this?
    Secretary Shalala. I have. And it is clearly one of those 
diseases where more education, more self management and more 
research in this area will help us bring down costs. Wehave 
tremendous costs for diabetes in this country. We spend a lot of our 
resources on juvenile diabetes, and we need to move on, continue 
expenditures in that area, but to move on and deal with diabetes, 
particularly that kind that could be managed better.

                            surgeon general

    Mr. Bonilla. I have a question now, Madam Secretary, about 
the Surgeon General. Since your last visit, the President still 
has not nominated a Surgeon General. Although we've had this 
discussion in past years, it still baffles me as to why this 
office shouldn't be eliminated, when you and other HHS 
officials are carrying out the role just fine. I've talked 
about this on this subcommittee before, about how CDC is a 
great advocate, and can carry the water on health advocacy.
    Every day that's gone by is evidence that the Government 
and the American people can function without this office. The 
money could be better spent on additional funding to find cures 
for diseases and even to provide additional health care for 
children.
    Do you still believe that this office is necessary, and is 
the President going to nominate a Surgeon General, now that the 
elections are long over and political consequences are few?
    Secretary Shalala. The answer is that we do believe that 
the office is still necessary. We do believe that this country 
needs a clear public health spokesperson, a physician who takes 
leadership on a wide variety of issues. And the President will 
make a nomination this spring.
    Mr. Bonilla. I come from the private sector, without the 
long 20 years of legislative experience before running for 
Congress. One of the things that baffles me is that in the 
private sector, when you have a position that's been open for 
that long, you begin to ask these kinds of questions. if you 
could exist without this position for this long, why can't you 
just do without it permanently. And that's why I just want to 
let you know where my rationale originates.
    Secretary Shalala. I appreciate that, Congressman.

           american stop smoking intervention study (assist)

    Mr. Bonilla. The question now, the Office of the Inspector 
General is conducting an audit on the ASSIST program, the 
American Stop Smoking Intervention Study. The main concern, as 
you know, is that various State ASSIST programs appear to have 
been involved in lobbying activities at the Federal, State and 
local levels, and that Federal funds may be being used 
improperly.
    Could you update us on the status of this investigation? 
And before you answer, I'd like to say that I don't think 
there's a member of this subcommittee that advocates smoking 
for children or in any way for anyone to break the law in 
providing cigarettes to minors.
    Secretary Shalala. I think we've provided extensive 
information to you about the activities of the ASSIST 
contracts. We've informed all of our contractors and all of our 
grantees that they are not to engage in lobbying activities 
which are prohibited under the Federal Acquisition and 
Streamlining Act. We have made it very clear that violations of 
the Act will not be tolerated by the Department. If allegations 
of violations of the Act are serious enough, we will turn them 
over to the Inspector General. The Inspector General is 
conducting an investigation.
    We have thus far found no lobbying violations in the course 
of our internal inquiry. And as you indicate, no one on this 
committee, and I don't know anyone in this country, that's in 
favor of smoking by children. It's a major public health 
problem. But we intend to obey the law and to make sure our 
contractors obey the law. And thus far, we have not found any 
violations. But we have made it very clear to the contractors 
that they are not to violate the law.
    Mr. Bonilla. Mr. Chairman, do I have time remaining for one 
more question?
    Mr. Porter. Yes.

                           health professions

    Mr. Bonilla. Madam Secretary, the last question I have is 
about HRSA. The Administration has chosen to significantly cut 
health professions, and this is a battle that I've been 
involved in the past years. I think it's so critical that we 
provide physicians and nurses, especially for underprivileged 
areas.
    I have talked to one of my hometown colleagues, Dr. Ciro 
Sumaya, last year, and he assured me that he would take my 
message back to you. Yet in the budget, there were only three 
significant cuts, and health professions topped the list with 
the largest cut. I'm wondering why there is an apparent lack of 
understanding on the dire needs of health professions in rural 
districts like mine. In some cases, especially in poor areas 
dentists' offices have actually closed. I am referring to a 
migrant health care in Crystal City, where they can't get 
anybody to come work there. They need funding like this to help 
them get a doctor in that office.
    Secretary Shalala. Thank you, Congressman. I'm going to be 
giving the same answer to the same series of questions. And 
that is, within the context of a balanced budget, we had to 
pick some priorities. In this case, what we did was protect the 
minority and the disadvantaged cluster to make sure we 
continued our investment in that area. And we cut some of the 
other areas.
    But we had to cut in some places or do level funding to 
meet our balanced budget targets. But we were careful to go 
through with a scalpel and to make sure that we protected our 
investments in minority and disadvantaged health profession 
areas.
    Mr. Bonilla. I thank you for being here again this morning, 
and look forward to continuing working with you.
    Secretary Shalala. Thank you very much.
    Mr. Porter. Thank you, Mr. Bonilla.
    Mrs. Lowey.

                        breast cancer detection

    Mrs. Lowey. Thank you very much, Mr. Chairman.
    And once again, I want to welcome you, Madam Secretary, and 
tell you how proud of you we are. Particularly as a New Yorker, 
I am especially proud. You have shown extraordinary leadership 
and I look forward to a very productive year.
    However, I do want to share the view of our Chairman that 
although the NIH did receive the biggest dollar increase in the 
HHS budget, $331 million or a 2.6 percent increase, we are in 
agreement on this panel that investment in the National 
Institutes of Health, which I know you share, is a top 
priority. And I hope that we can work together to increase our 
overall budget as well, as my colleague Ms. Pelosi stated, so 
that we can see a greater increase.
    One of the most difficult things on this committee is 
having to make choices. Because everything we fund is so vital 
to our communities and this Nation. So I do hope we can work 
together in a bipartisan, cooperative spirit.
    Madam Secretary, like many, I too was disappointed that 
scientists participating in the recent Consensus Conference 
organized by the National Cancer Institute were unable to agree 
that the benefit of regular mammograms for women in their 40s 
outweighed the risk. While the scientific community is divided 
in their interpretation of the data, and organizations such as 
the American Cancer Society continue to recommend regular 
mammograms for women in their 40s, we know that the mammography 
technology for women in their 40s is much less effective.
    And that's really the key. We're all adults. And if the 
scientific community is not all in agreement, we can accept 
that. But we cannot accept the fact that we are not pursuing as 
aggressively as we possibly could some answer to this difficult 
question. So I just feel, and I know you share our concern, 
that it is absolutely imperative that we improve the detection 
of breast cancer in younger women. To me, that is the goal, not 
that we should say to the scientific community, you have to 
agree. But that we should improve the detection. And perhaps 
you can share with us what you are doing in that regard.
    Secretary Shalala. We actually are doing a number of 
things, and have some investments, including the imaging 
research that's going on jointly with the CIA, for example, 
where they have a technology used for other purposes that 
possibly could be useful. And a grant has been given to, I 
think the University of Pennsylvania, to pursue this research.
    But you're right, we need to upgrade the technology. We 
need to get some scientific breakthroughs so we can be more 
precise. But we also need to make sure we get our act together 
in terms of giving women very clear information when we have 
that information. The National Cancer Institute Board will be 
reviewing the advice of that panel that was set up by the 
National Institutes of Health. We will continue to be 
consistent in our advice to women over 40, and that is, if 
there's any health history at all, they ought to be in touch 
with their doctor. And their doctor will make the appropriate 
recommendation for them.
    And while I realize there's mixed information, until we can 
get some consensus here, we will not probably go beyond that. 
Though as you well know, the Director of the National Cancer 
Institute read the data differently than the NIH panel. And he 
needs to take up that issue with the Cancer Advisory Board. And 
we'll wait for their comments.
    Mrs. Lowey. I'm pleased to hear that. Because just in fact 
last evening I was with a group of physicians who are 
specialists in that area. And they strongly disagree as well.
    So I'm very pleased that we're going to be pursuing new 
means of detection, and secondly, I'm pleased that the data 
will be reviewed. Because I would think the problem is, in many 
of our communities, it is very difficult for women, as 
independent as they would like to be, to understand all the 
information and make the right decisions. So I thank you.
    Secretary Shalala. Congresswoman Lowey, we also have 
improved the quality of the current mammogram machines and the 
people who both read them and use the machines through the FDA 
certification process. And as you well know, all the mammogram 
machines in the country now have gone through that 
certification process. That itself, plus a safe system for 
notification, has helped to improve detection for those that 
have gone to get mammograms. So there has been progress over 
the last four years.

                             teen pregnancy

    Mrs. Lowey. In fact, my colleague, our recently returned 
member, was very involved as many of us were in assisting Dr. 
Kessler and the FDA in getting the resources they needed. It 
was an insult to all of us that, what were the statistics, one 
in three mammograms were faulty. And this was an amazing 
statistic. So I'm glad we have some progress, and I thank you.
    I was also very pleased to see the Administration's budget, 
with its continuing emphasis on preventing teen pregnancy. As 
you know, we've organized in the Congress an advisory committee 
to the National Committee on Teen Pregnancy. Because we 
realized that this is such a critical issue in our communities.
    Can you tell us about the CDC's role in teen pregnancy 
prevention? How will it use the $13.7 million which you have 
requested?
    Secretary Shalala. Well, these are basically grants to 
local community organizations. Bringing down teenage pregnancy 
rates requires community based organizations. And the community 
is coming together--parents first, schools, and religious 
organizations. There is all of our evidence of areas in this 
country where teenage pregnancy rates have been brought down--
from rural areas to large communities. The communities 
themselves have organized to send clear and consistent messages 
to their young people and to organize other kinds of activities 
for young people.
    What we're looking for is innovative coalition and 
partnerships in communities because that's what seems to work. 
It's not just a single program but a whole community coming 
together with parental leadership and religious leadership and 
community leaders and the school leaders coming together at the 
same time. We're beginning to learn some things. As you know, 
there is some evidence that teenage pregnancy rates are 
starting to come down a bit. That does not mean that we 
shouldn't continue these investments and try to test some 
interventions and give local communities as much information as 
we can about what needs to be done.
    That's the first part. The second part is the abstinence 
based programs that are being expanded also under this budget. 
Some of it is part of the welfare reform. But it's an integral 
part of these overall efforts in communities.
    Mrs. Lowey. I've looked at and talked with people who are 
involved with the Best Friends program. And we've seen some 
real successes. But what we've seen over and over again is that 
it seems to be very difficult to replicate the successful 
programs. And one of the things that I did in the last session, 
and I hope to get it passed in this session and work with you, 
is to provide some additional money to evaluate the program, so 
we can really understand what works and what doesn't work.
    For those of us who have been on this committee, what we 
see over and over again is good things happening out there. And 
yet we can't seem to replicate them adequately so we can make a 
dent in the problem. And because this is such a serious 
national problem, even though it may be going down a little 
bit, I do hope we can have adequate evaluation and expand and 
fund the programs that really do work. And I look forward to 
working with you.
    Is that it?

                              food safety

    Mr. Porter. You have another minute.
    Mrs. Lowey. One of the areas that I have worked on, on 
another subcommittee, with food safety, and I was glad you 
referred to that. I was very pleased to note that you 
emphasized the budget area, where you are working to improve 
the safety of our Nation's food supply. Better coordination 
between the agencies in the area of food safety on many 
occasions has truly been our goal. Because as you know, the 
responsibilities are divided.
    Can you tell us what food safety role you envision for the 
CDC? What can the CDC uniquely contribute to making our 
Nation's food supply safer?
    Secretary Shalala. Well, the CDC puts in place the early 
warning system, and the tracking system, working with public 
health officials around the country. And what you need is an 
infrastructure across the country, and a paperless system for 
early warning, so that you can actually work with an 
appropriate State, if they need the CDC's help.
    So the CDC is actually responsible for putting that early 
warning system in place. What the President's food safety 
initiative does is modernize our system. Some States are very, 
very good. In fact, one of the reasons we haven't had wider 
outbreaks is, some of the places where we've had outbreaks, 
California, Washington State, have pretty sophisticated systems 
now in place. What we need is to have that nationally.
    But it's not only the CDC. It's the CDC, the FDA, the NIH, 
the Department of Agriculture, and the EPA. And what this 
system does is put these agencies together in a very smooth 
system. We were able to do that using the Assistant Secretary 
of Health, when we had to respond to questions about the mad 
cow disease issue in England. And one of the things that you 
saw here that wasn't as consistent abroad is that all of our 
spokespeople worked together, sent the same message to the 
American people about what we had in place, what we were going 
to put in place. And we had none of the same problems. And that 
had to do with public health officials working very close 
together, and them all speaking in English very clearly, and 
putting scientists in front of us to be the spokespeople on 
these issues. Because those are the people that are trusted by 
the American people.
    So we learned a lot from that experience. But we need to 
modernize the system, and that's what this process is all 
about. It's not necessarily under the jurisdiction of this 
committee, because some of the requests are in other pots. But 
I'm certain that everybody will work together to make sure we 
get this done. There's great enthusiasm out there in the 
States, as you can imagine, to make sure we get the system. 
This money is basically for them to put that infrastructure in 
place.
    Mrs. Lowey. Thank you, Madam Secretary. And thank you, Mr. 
Chairman.
    Mr. Porter. Thank you, Mrs. Lowey.
    Mr. Istook.

           american stop smoking intervention study (assist)

    Mr. Istook. Thank you, Mr. Chairman.
    Madam Secretary, I'd like to go back to something that Mr. 
Bonilla asked about. I want to make sure there are no 
misunderstandings, and that we try to get correct information.
    Mr. Bonilla asked you in regard to the ASSIST programs in 
particular about his concern that no taxpayers' money be used 
to lobby, whether it be at the Federal level, the State level, 
or the local level. You responded to him that no money is being 
used to lobby illegally.
    Now, I noticed the same distinction in your testimony last 
year, Madam Secretary, and I've written you about this topic 
about three weeks ago, seeking further information. Mr. Bonilla 
asked you last year, ``is it still your policy that Federal 
funds shall not be used for lobbying at the State and local 
levels.'' You responded, ``it is the law''. He presented you 
with a copy of a memo from HHS, in particular the National 
Cancer Institute, and a letter from the New York State Health 
Department, seeming to contradict claims that money was not 
being used to lobby. You stated on the record you would be 
happy to take appropriate actions if it furnished you with 
information, which you did.
    Then in your response to the subcommittee, your written 
response later last year, you say that people concur with you 
that Federal funds will not be used for lobbying, and here's 
the careful distinction, it will not be used for lobbying at 
the Federal, State and local levels in any manner which would 
violate Federal laws. In other words, rather than responding 
that money is not being used to lobby, you responded, money is 
not being used to lobby illegally. And I'm aware that your 
Department has taken the position that any contract which was 
awarded before October 1st, 1995, even though it may be a 
multi-year contract, and still had years to run, is not covered 
by the Federal law saying that public money should not be used 
for lobbying State and local levels, or any level.
    My question therefore is, have you inquired as to whether 
our taxpayers' money is being used, through the ASSIST program 
or otherwise, to lobby at any level? Whether you consider it 
legal or illegal, have you made that inquiry, and is it being 
used?
    Secretary Shalala. Let me repeat again, we have taken the 
position that once the law was passed, any contract after the 
law was passed cannot use Federal money for lobbying. We also 
are taking the position that if there is a renewal of any 
existing contract, it ought to be covered by the law that was 
passed. So that we would catch, as there are any extensions or 
renewals of contract, any new people coming up.
    As to whether before the law was passed, which was October 
1st, 1995, whether we have actually gone back to see whether 
anyone continues to lobby because they had a contract before 
that, I'm not sure I know the answer to that question.
    Mr. Istook. Madam Secretary, you were asked that a year 
ago. And now you're saying you didn't even check.
    Secretary Shalala. I think that we must not have understood 
the question at the time. We've been consistent in our 
interpretation of the law, and that is, any contract that was 
awarded after October 1st, and any extension of a contract 
after October 1st is covered by that law. But apparently we 
have not gone back to look whether we have sent notification to 
everyone who is on our contracts, or they've signed an 
affidavit saying that they understand what the rules are.
    But apparently, we have not gone back to see whether, even 
though it's a legal activity under our interpretation of the 
law.
    Mr. Istook. Madam Secretary, all those words amount to the 
fact that you didn't do a year ago what you were asked about 
and said you were doing. And you began your statement by 
saying, repeating, your words were to the effect of, repeating 
what I said earlier, that was not what you said earlier. 
Earlier, you gave Mr. Bonilla an answer designed to make him 
think that lobbying was not going on with taxpayers' money. You 
did not give the details that you gave now that said you've 
taken the contrary position that you believe some contracts are 
grandfathered in.
    I want to know how much of the American peoples' money, 
through the ASSIST program or anything else in HHS, is being 
used for lobbying expenses. And I might add that I'm also aware 
that in your contract documents, you try to avoid use of the 
term lobbying. You will usually use the term public policy. And 
a change of laws that is being advocated with our Federal money 
is lumped into a category of ``public policy,'' as though it 
was just some other aspect of policy, rather than lobbying 
efforts.
    So you said a year ago that you would check and take 
appropriate actions. Why didn't you do it then, Madam 
Secretary? Is it so unimportant to you?
    Secretary Shalala. Well, first of all, a year ago was 1996, 
and a year ago was the year after, some time after the law had 
been passed. Our responsibility is to enforce the laws once 
they're passed. And what I've indicated to you is that as of 
October 1st, 1995, any contract or any renewal of contracts by 
our lawyers' interpretations, are covered by this law, and we 
will enforce that.
    Mr. Istook. But you take the position that if you want to 
renew a contract, whether it was originally renewable by its 
original terms or not, if you have a contract which predated 
October 1st, 1995, it is your position that our Federal 
taxpayers money can be used to lobby, including lobbying at the 
State and local level. That is your position, correct?
    Secretary Shalala. Mr. Istook, I am interpreting the law as 
passed by the Congress. The law as passed by Congress, my 
understanding of that law is that it was not retroactive.
    Now, if there is a different interpretation of that law, 
and if----
    Mr. Istook. If you had an interest in stopping lobbying 
with taxpayers' money, you could do it, couldn't you?
    Secretary Shalala. I probably couldn't, under the law. I'd 
have to ask my counsel.
    Mr. Istook. You wouldn't have to renew contracts that 
predated that, would you?
    Secretary Shalala. You know, all I could do is obey the law 
as the law is passed. I can't talk to a contractor that was 
contracted in the previous Administration about a new law that 
was passed that doesn't apply to them.
    So I could do my best and enforce the new law. And that's 
what you should hold me accountable for.
    Mr. Istook. Well, Madam Secretary, I will repeat, whether 
it's the ASSIST program or any other program that comes through 
HHS, we've been strung out long enough. I think it's time that 
we be told exactly how much of our Federal taxpayers' money, 
through ASSIST or any other program, is going for lobbying 
expenses. And I would like to have that provided in full detail 
immediately.
    [The information follows:]
    Offset Folios 072 to 108 Insert here



    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Istook.
    Ms. DeLauro.

                            health insurance

    Ms. DeLauro. Thank you, Mr. Chairman, and thank you for 
your kind remarks at the outset of the hearing. I am delighted 
to be back.
    Madam Secretary, I am delighted that you are back. Thank 
you for your commitment to the children and families in this 
country.
    I also would thank the President for his initiatives in his 
budget and his continued commitment in this area.
    Let me also say to the Chair that I heartily endorse your 
comments and those of my colleagues, Ms. Pelosi and Mrs. Lowey, 
about negotiating the toughest and hardest 602(b) allocation. I 
want to see biomedical research increased. I am a direct 
recipient of that research, having survived ovarian cancer--so 
I know what research can provide.
    Also, this is a committee that directly affects the lives 
of working men and women in this country, whether it's their 
wages and their economics, whether it's getting their kids to 
school, whether it's ensuring their secure retirement, so we 
have a lot of different portfolios. And we need to address 
that. I think the 602(b) is going to be critical in our getting 
to where we need to be.
    A couple of areas that I wanted to address, if I can, Madam 
Secretary. I strongly endorse the President in terms of the 
initiative to promote health insurance for coverage of 
uninsured children in this country. I think this is critical in 
terms of prevention, and what we need to do at an early age to 
deal with the costs at the other end of this system.
    I am concerned, however, that while the initiative aimed at 
providing insurance for up to 5 million children, there's an 
estimated 10 million uninsured kids in this country. What 
happens to the other half under the President's plan?
    Secretary Shalala. Well, I think that you're to see this as 
a first step. What everybody would like to do is to make sure 
that every American child has access to good health insurance. 
And what we've laid out is a first step to get a system in 
place for doing this.
    For example, the 10 million American children, most of them 
are in working families. They are low income workers who don't 
have access to health insurance because their employer either 
doesn't provide it or it's too expensive for them to pay for it 
for their children. They may be in a situation in which their 
employer provides health insurance for them but not for their 
children.
    What we have done is gone back and looked at who these 
children are, and a little bit about where they're located, and 
said, of the 10 million, 3 million are actually eligible for 
Medicaid. But they're lost somewhere in the system. So we 
haven't asked for any money for those 3 million children. We 
actually, what we want to do is go out and find them, working 
with the States, working with private providers.
    In a number of States now where they've gone to full 
Medicaid managed care, the managed care industry is in fact out 
trying to find the children. You can look at a number of the 
States where we have these full managed care plans. So they're 
trying to find the children and get them registered.
    In another case, we know that we lose, some children lose 
their health insurance when their parents take a job. There are 
in fact a number of children who are enrolled in Medicaid, 
their parents are very low income. And suddenly, their mother 
gets a job, and they're above the eligibility limit, which may 
be above, just below what a minimum wage or just above what a 
minimum wage may be in that State. They need to be dropped from 
the Medicaid system.
    What the HMOs have said to us is, hey, let us keep these 
children on for a full year, they won't get lost in the system, 
and then we'll work with the States and try to find a way to 
keep them on that insurance, or to find a private sector way of 
keeping them on the insurance system. So there are another 
million children that we can take care of that way.
    We're talking about a grant program to the States, a 
decentralized program, Mr. Chairman, $750 million, in which the 
Governors, and many of them are already starting to think about 
what they would do, would work with the private sector. This 
money wouldn't be substitutional for employers, but perhaps 
help small employers, employers that have large numbers of low 
income workers, find a way to get a good health insurance plan 
for their children. They may just go out and buy an HMO package 
for those children.
    This is not a single expansion of an existing program. It's 
a way of finding children that are now lost in the system, of 
working with private employers and with the Governors to find 
the 10 million children and figure out a way. They are the most 
inexpensive group to find, to insure, and to make sure that 
every child in this country has insurance.
    We've done some of it through welfare reform. Many people 
would be interested to know that over half the States are going 
to extend their Medicaid beyond the one year requirement in the 
welfare bill. But the other half haven't even started to think 
about that, but they'd like to. So this is really a State-based 
program working with the private sector, or the insurance 
companies and the HMOs to try to get the kids covered. It's 
very modest, and some people have complained that we're only 
doing 5 million. We may end up doing more, if the insurance 
companies are as good as they tell me they're going to be in 
terms of identifying the children that are now out there that 
are eligible for programs.
    But this is a huge public-private partnership that will get 
us a huge gain by the end of this century, making sure that 
every single one of our children has good health insurance.
    Ms. DeLauro. That's what the point is, Madam Secretary, and 
I applaud it. I applaud these steps. My hope is that what we 
can do, through this committee and this Congress is to make 
sure that what we are doing reaches 10 million children. Let's 
find these kids. It is the least expensive way to move, toward 
healthcare coverage. And that ought to be what our goal is. And 
I know that that is the goal, your goal and the 
Administration's goal. And I think we ought to be committed to 
trying to help do that.
    Secretary Shalala. And I think my point is, this is really 
hard to do. This is not an easy step for us. This is a huge 
leadership and management job.

                               head start

    Ms. DeLauro. With enormous ultimate payoff, to these 
youngsters and to costs in the health care system.
    I'm particularly pleased to see that the largest percentage 
increase in the budget is for Head Start. I think that that's 
great, and I support the goal of serving a million children by 
the year 2000. Can you tell us, Madam Secretary, what 
percentage of eligible children will be served in 1998?
    Secretary Shalala. I don't have the percentage. The money 
that we are requesting adds another 36,000 children, and keeps 
us on a path to the year 2002, where we'll have a million 
children in Head Start. As you know, this is also an investment 
in quality Head Start. Congressman Hoyer was a leader, as all 
of you were, in this. This is not just an investment in 
expanding the number of children. This is an investment in 
changing the program so it fits better with working parents, so 
it improves, so that we have serious quality improvement. I've 
reported to this committee before that for the first time in 
history, we have closed Head Start programs that don't meet our 
quality standards. More than 40 programs have been closed. No 
programs were closed ever in the history of the program. But we 
set the standards, we have a hundred or so that are on some 
kind of probation that need to come up to our standards. So 
this is an investment, as much in quality, as it is in 
expansion in terms of the number of children.
    Ms. DeLauro. Just to follow-up on that----
    Secretary Shalala. It's 50 percent, by 1998.

                              early start

    Ms. DeLauro. I think that this is the critical piece here--
what we know about Head Start, through and the comments that 
you made, and Congressman Hoyer's work in terms of the quality 
of the Head Start program now with three and four year olds. 
And I go back to something that I first said, if we've got 
youngsters who are prepared to learn when they get to school, 
we can begin to build their education so that they become some 
of the scientists at the NIH, where we want to increase the 
dollars as well.
    Let me get to the Zero to Three initiative, my final 
question, Mr. Chairman. How many infants and toddlers are going 
to be served in 1998 under the President's proposal, and what 
are the steps that are being taken to ensure the same kind of 
quality as in other Head Start Initiatives. This is a critical 
stage, and there are a whole lot of studies. Time Magazine, in 
the last couple of weeks, talked about the zero to three years, 
zero to five, the prime period of time when youngsters, minds 
are at their keenest to be able to learn.
    Secretary Shalala. In fiscal year 1998, we expect to serve 
35,000 children in the zero to three category. In addition to 
that, as you well know, we have substantial investments in 
child care at the same time. We hope that Head Start will work 
with the child care providers to try to bring up quality in 
that area, too, so that we have a more seamless entry system.
    Ms. DeLauro. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. DeLauro.
    Mr. Miller.

                          balancing the budget

    Mr. Miller. This is my third year on this Appropriation 
Subcommittee, and it seems we have a lot more agreement on some 
of the major goals like balancing the budget than we've started 
off with in the past two years. So we can work toward that 
common goal.
    The problem is, the goal is there, but the devil's in the 
details, and this is the committee where the details are. There 
is disappointment in the President's budget. I mean, the media 
hasn't been really kind in many ways, and the Washington Post 
called it a ``loser,'' David Broder said ``you haven't made the 
tough choices.'' The article yesterday in the Washington Post 
was very correct, you didn't make the tough choices.
    This committee is going to make the tough choices, we're 
going to increase NIH funding. There's a lot of support here on 
the Democratic side and Republican side for NIH funding. And 
yet the increase that you all provide for in your budget is 
below inflation.
    And so you want to put money in other programs, which is a 
cop-out. And I know you support, and the President supports 
NIH. But it's a game you're playing, you're going to let us 
make that tough choice so you can put more money in other 
programs.
    That's part of the problem about, the budget. But we still 
have the common goal and we will move in that direction, and we 
will increase NIH and you all will be happy with us, and we'll 
be happy about doing it.
    Let me ask a couple of questions specifically. First, how 
many specific programs, new programs, are being created in this 
budget, and how many programs are being eliminated?
    Secretary Shalala. Are we talking about the discretionary 
budget?
    Mr. Miller. No, the total budget, which includes the 
mandatory part, too. Because there are new ones, of course.
    Secretary Shalala. I would be happy to provide it for the 
record.
    [The information follows:]

         Newly Established and Recently Eliminated HHS Programs

    The FY 1998 Budget Request includes the following new 
programs:

------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Mandatory:                                                              
    HCFA:                                                               
        Health Insurance for Unemployed     $9.8 billion over five years
         Workers.                                                       
        Voluntary Purchasing Cooperatives.  $125 billion over five years
        Expand Health Insurance for         $3.75 billion over five     
         Children.                           years                      
    HRSA:                                                               
    MCH--Abstinence Education.............  $50 million for FY 1998     
Discretionary:                                                          
    SAMHSA:                                                             
        State Data Collection Initiative..  $28 million for FY 1998     
    ACF:                                                                
        White House Adoption Initiative...  $21 million for FY 1998     
------------------------------------------------------------------------

    The following programs, funded in FY 1997, are eliminated 
from the FY 1998 Budget:

                        [In millions of dollars]                        
------------------------------------------------------------------------
                                            1997       1998             
                                          enacted    request    Decrease
------------------------------------------------------------------------
ACF:                                                                    
    Community Economic Development.....       27.3        0.0      -27.2
    National Youth Sports..............       12.0        0.0      -12.5
    Rural Community Facilities.........        3.5        0.0       -3.5
    Community Food and Nutrition.......        4.0        0.0       -0.8
                                        --------------------------------
      Total Programs Eliminated........       46.8        0.0      -46.8
------------------------------------------------------------------------

    Mr. Miller. Are there any programs being eliminated or 
close to elimination?
    Secretary Shalala. Well, we, as you heard from the 
questioning on health professions, we certainly are, I have 
alist of programs that are not getting cost of living increase that 
we're beginning to phase down. As you know, the LIHEAP program is 
getting a billion dollars. That's a reduction from four years ago. 
There are a number of programs that we could lay out for you that are 
going down.
    The overall increase in this budget is below the rate of 
inflation. It's 1.4 percent, the discretionary budget. So you 
can imagine within that, we have to accommodate the National 
Institutes of Health, that has a substantial increase. So there 
is a whole list of programs that do not get an inflationary 
increase.
    Mr. Miller. Are there any proposed for elimination, or any 
that you expect to be eliminated over the next couple of years, 
or consolidated into other programs?
    Secretary Shalala. We did a number of those things in our 
last budget. I think that what I have is a list of programs 
that are reduced below the 1997 appropriations. We also have 
done, as you know, consolidations of a number of these 
programs. I could give you a list of little ones that were 
consolidated into a larger one, but that's not a fair test. A 
fair test is, have we reduced the number below the 
appropriation levels, and if you look at that list, we've made 
some very tough choices.

                                medicare

    Mr. Miller. There are a lot of good, or nice programs 
you're offering, the problem is balancing the budget.
    This is not under discretionary, but let me ask one 
question about the mandatory side of Medicare. And this goes 
back to the tough choices that President Clinton, when he spoke 
off his prepared text for the State of the Union address, said 
he wants to help us make tough choices. One is means testing 
Medicare Part B. You had it in your proposal back in 1993 or 
1994. But we've had it in our plan since. I don't know why you 
don't, or aren't willing to include that.
    Secretary Shalala. Well, first of all, we already means 
test Medicare. Medicare is means tested at the lower end, 
because Medicare pays the premium for low income beneficiaries. 
Second, on the issue of high income beneficiaries, we did 
indeed have means testing in our original health care plan. 
That health care plan also had coverage for everyone in the 
country. And the President has indicated that that's one of the 
things that he's prepared to discuss if it's put on the table 
as part of the negotiations.
    So we have not said no to that proposal.
    Mr. Miller. Yes, because you all didn't include it before, 
and we've included it in ours, and I don't know why you didn't 
include it.
    Secretary Shalala. We have some different things than you 
included. We have $100 billion in savings, in our proposal, 
$138 billion over six years. We reduce reimbursement rates, we 
modernize the program by cutting out a lot of overspending. We 
turn it into a much more businesslike operation, where we get 
good prices, so that we stop paying more for things than the 
private sector is paying, including everything from those 
glucose strips to walkers. I mean, there are a number of very 
strong steps we take in terms of modernizing the program.
    Mr. Miller. But you do not include means testing Part B.
    I can understand the argument of Part A, but the Part B, 
you know, somebody making $100,000 a year, I've got more 
seniors than anybody in the country. I talk about it in front 
of my wealthy seniors. I think we need means testing of 
Medicare Part B.
    Secretary Shalala. And Congressman Miller, all I can say 
is, the President has not said an absolute no on that issue. 
It's one of the things that you'll have in your proposal. We 
have some other things in our proposals that you may well not 
like.

                             official time

    Mr. Miller. It's a tough choice that we're willing to take.
    Let me switch to another subject, and that's the question 
of official time. Official time is authorized paid time off 
from assigned duties to engage in union activities. Refining 
that, there's been a dramatic increase, such as in the Social 
Security Administration, there's over a 100 percent increase in 
the last three or four years. And it's up to different agencies 
to arrange their own policies and such.
    Could you tell me your policies on official time and has it 
dramatically increased in your agency or Department by how 
much. What are the conditions that people can use official 
time, and where does that stand? Because it is, as I say, in 
some agencies of the Federal Government, it's doubled in three 
years. And there's a problem there, I think.
    Secretary Shalala. Yes. I'd be happy to provide that for 
the record. I don't have those numbers with me. But we'd be 
happy to go back and take a look.
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    Offset Folios 124 to 134 Insert here



                             welfare reform

    Mr. Miller. Welfare. In January I was in my district and 
spent time at welfare offices. In Florida, as you know, the 
legislature passed welfare reform in May, then it realized we 
would pass it in August. All of a sudden, they've got to 
implement their plan quickly, so there's a little 
disorganization right now in Florida.
    But I found cautious optimism by the people working in the 
system. I sat through interviews with people applying for food 
stamps. And I find that people within the system are really 
excited. They've been frustrated just dealing with paperwork 
and welfare, that they can't really help people get ahead.
    One of the questions that came up in my main two counties, 
Sarasota and Manatee Counties, was day care. One of the things 
we included in the plan was a lot more money for day care, 
which was a real positive, we all agreed. But I'm confused 
exactly where that, and I don't know if you know the answer 
right now, all that day care money went. It was almost a 
billion dollars a year of additional day care money that was 
going to the States. And the local communities haven't seen it 
yet. And they're frustrated, because they have all these people 
applying.
    Secretary Shalala. Right. The State of Florida has drawn 
down all their money, so they should call Tallahassee.
    Mr. Miller. Tallahassee hasn't responded. So I guess we 
just----
    Secretary Shalala. There's only one State that hasn't drawn 
down their entire child care allotment, and that's not Florida. 
So they really need to call their State.
    And again on child care money, we made an assumption about 
how much would be needed. And that's another issue that we may 
need to revisit, but probably not this year. Again, we need to 
let this welfare reform bill roll out. We need to work with the 
States. But it's much too early to come to firm judgments about 
there's not enough of this or there's not enough of this or we 
need to do this, from our point of view.
    Mr. Miller. Well, I appreciate your saying you don't want 
to reopen the whole thing. But you're adding a lot more money. 
One of the areas, for example, you mentioned, one you stressed, 
are the seniors that are in nursing homes. Actually, the 
original welfare plan had an exemption for people over age 75 
or something like that. And somehow or other that got dropped 
as it went through the process.
    And you know, I think we all agree that you can't send 
somebody back to their native country if they're in a nursing 
home right now. But----
    Secretary Shalala. Or shift the costs onto the States, 
which I think is a much more fundamental problem. But this is 
only for people who are already here. Again, there are 
different rules for people that are coming in.
    Mr. Miller. Of the total amount of money, you're trying to 
add back to welfare, how much of it is in that program, about? 
Most of it's in other areas than that.
    Secretary Shalala. Well, there's a food stamp piece. Let us 
look that up for you.
    The Medicaid for children and disabled--it's $4.89 billion.
    Mr. Miller. Out of the $21 billion.
    Secretary Shalala. Out of the $21 billion. That's the 
Medicaid piece.
    Mr. Miller. One of the problems with the Medicaid, you talk 
about shifting elderly expenses onto the States, but then your 
budget has a lot of other shifts of expenses onto the States by 
mandates in Medicaid. In your budget proposal with children, 
for example, it's a shift in adding mandates. You say, well, we 
don't want to add one mandate, but then you're adding other 
mandates. So it's contradictory.
    Secretary Shalala. No, in this case, I think one way to 
look at the issue of elderly disabled people in nursing homes 
and these kids that were here before is, this is a transition 
amount of money. It's not, the new rules, you would have to 
have become severely disabled after you arrived in the United 
States, that we're proposing. These are people that were here 
under a different set of rules, under a different set of 
assumptions. And it really is a transitional period. The States 
are going to have a tough time absorbing this amount of money 
while they're doing everything else.
    So I think that once we sit down at the table and everybody 
sees that these aren't people that can go to work that we could 
work through this issue.
    Mr. Miller. Thank you.
    Secretary Shalala. And again, we don't want to shift people 
out of the hospitals, either. Hospitals in Florida clearly 
don't want to take on responsibility for people that don't have 
health insurance.
    Mr. Porter. Thank you, Mr. Miller.
    Mr. Dickey.

                           budget priorities

    Mr. Dickey. Madam Secretary, you probably know that this 
subcommittee almost has an addiction to NIH. You know that.
    Secretary Shalala. I share it.
    Mr. Dickey. All right. Some $500 million is what we're 
going to have to add to what the President and you have 
recommended. Can you tell us where you think the cuts should be 
to support that increase?
    Secretary Shalala. No, sir. I'm here to present the 
President's budget. The President has made his choices.
    Mr. Porter. I said I don't think the Secretary will answer 
that, because she's supporting the President's budget.
    Mr. Dickey. Would you ask the President, then? [Laughter.]
    Are you saying by this that the cuts that would have to be 
put into place would endanger programs that you think are more 
important than NIH?
    Secretary Shalala. Well, the answer is that we laid out our 
priorities. And the discretionary fund had a 1.4 percent 
increase. Within that budget mark, we laid out and negotiated 
the Departmental priorities. And within that 1.4 percent, we 
were able to do 2.6 percent for NIH. There were, clearly, the 
Centers for Disease Control and Prevention, the Office of 
Children and Families, the Social Service block grant, I mean, 
there are a whole series of programs here which States and 
local communities have relied on. Most of them are not getting 
increases many of them are getting decreases. This country's 
commitment to substance abuse treatment, I mean, there are a 
whole range of programs here that we had to make choices about. 
And we chose to give the largest dollar increase to the 
National Institutes of Health, which is an indication of our 
priority for it.
    When considering a balanced budget, we're going to maintain 
some of this country's commitments, everybody's not going to be 
able to get the increase that we think they ought to get.

                                medicare

    Mr. Dickey. I believe my staff has provided you with a copy 
of a recent editorial from the Wall Street Journal, entitled 
How To Avoid Medicare's Implosion. If I may summarize, the 
article promotes moving to an investment-based system instead 
of the current pay-go system. The article claims that 22 year 
olds today would use just 1.3 percent of their wages to 
purchase a policy to provide health coverage when they reach 
65, compared with 2.9 percent that they are currently paying in 
Medicare taxes, without any assurance that they'll have 
coverage when they reach the time.
    In order to make the transition, a $2.59 trillion debt 
would be incurred to phase out those who are over 40 years of 
age or older. However, by keeping the tax rate of 2.9 percent 
through the transition period, the debt would be paid over a 
period of just over 50 years.
    Although I'm sure I'm leaving out quite a few details, the 
general concept seems logical to me, Madam Secretary. Could you 
comment on the investment based system approach?
    Secretary Shalala. Well, it may not be logical to young 
people who may end up paying twice in that system. Let me 
simply say that that article, like many other thoughtful 
articles, are options for the long term discussion of thefuture 
of the Medicare system. And there have been similar articles on Social 
Security, which is the subject of another discussion. And what the 
President has laid out in this budget is a 10-year program for Medicare 
solvency. What he has not laid out, though he has indicated that we 
should set up a bipartisan process, is a set of options for 
consideration for the long-term financing of Medicare.
    So Mr. Dickey, I actually would love to get into a longer 
term discussion about what I think the options are for the 
longer term. But we haven't even begun that discussion, either 
with Congress or within the Administration. What we are doing 
here is making sure that the Medicare system is solvent for 10 
years within the context of a balanced budget. And recommending 
that we are ready to participate in a process for the longer 
term discussion, which I'm certain will include both that 
suggestion and many others.

                         departmental contracts

    Mr. Dickey. Thank you, ma'am. Sometimes it's very difficult 
for appropriators to know exactly where all the money goes. I 
realize you will not have this with you today, but for the 
record, could you provide the subcommittee with a list of all 
of your contracts and subcontracts?
    Secretary Shalala. All of them?
    Mr. Dickey. Is it possible?
    Secretary Shalala. Yes. Yes, sir.
    Mr. Dickey. How long a list would that be?
    Secretary Shalala. Well, you're talking about all the NIH 
grants, you know, it's thousands of individual contracts. 
Because we basically are a contractor. Unlike the Social 
Security Administration, we don't sit there with people and 
sign checks. So we basically are in the contract business. We 
fund universities, we fund community-based organizations, we 
send money to States. And I'd be happy to do it, or to provide 
you with a description of the kinds of contracts. But either 
one, whatever you want.
    Mr. Dickey. I'd like the description first.
    Secretary Shalala. Okay.
    Mr. Dickey. Have you, you've never done this before?
    Secretary Shalala. Oh, I'm sure we have. I mean, we haven't 
actually, I'm not sure we've gone out and actually counted the 
numbers, but we certainly have that information. Because we 
know how many contracts NIH gave out, we know how many 
contracts CDC has awarded. What we could do is go through the 
programs and simply tell you whether we contract out and the 
number of contractors we currently have in that program. We'll 
do it.
    But remember, the Department was set up as a contractor. 
And that is to give the money out, in some cases there's a 
formula transfer to a State and local, to a State government. 
In other cases, it's a competitive contract that's peer-
reviewed, substance abuse demonstration grants, the NIH grants. 
But that's the way we're organized.
    [The information follows:]
    Offset Folios 144 Insert here



                        needle exchange program

    Mr. Dickey. The needle exchange research project endorsed 
by NIH has me very concerned. While I understand the purpose of 
the study is to try and prevent the spread of infectious 
disease, it does so at the expense of promoting illegal drug 
use.
    It seems to me the Department is assuming that people 
cannot change behavior, and it's creating policy to fit the 
lowest common denominator. Would you please comment on the 
Department's view on needle exchange projects, and whether NIH 
plans to proceed with the Anchorage research projects?
    Secretary Shalala. NIH did make a decision to go forward 
with the Anchorage project, as a result of an external review 
that the director of NIH commissioned. We have not yet come to 
a public conclusion on whether needle exchange programs are an 
effective way to prevent the spread of HIV infections. We do 
have some research out there, some demonstration programs that 
we're evaluating.
    We do have a report that will be coming to this committee 
some time this month, summarizing what research is out there. 
The Congress has set a very high standard before Government, 
other than these research projects, before the Public Health 
block grant, for instance, could be used for the purpose of 
needle exchange. It's a very controversial issue. It's our 
intention to lay out the research, what we know and what we 
don't know, for this committee.

                          hiv vaccine funding

    Mr. Dickey. One last question. How much money are you 
budgeting for the development of microbicides and an HIV 
vaccine?
    Secretary Shalala. For microbicides, our commitment is $100 
million over the next four years. That is an effort to develop 
something that women actually, this is the foams and gels, 
basic research in this area, that will help us to reduce the 
amount of sexually transmitted diseases, as well as HIV/AIDS.
    At the same time, the Department will launch an effort for 
an AIDS vaccine, which will be led by Dr. David Baltimore and--
let me see if I've got an exact number on what NIH is saying 
they're going to spend on vaccines. It's $148 million is the 
1998 number. And that again will be part of the NIH researcher, 
investigator-driven competitive grant program as well as the 
research that will be done within the NIH.
    Mr. Dickey. Thank you for your time and your answers.
    Secretary Shalala. You're welcome. Thank you.
    Mr. Porter. Thank you, Mr. Dickey.
    I have to say, the gentleman from Mississippi, it's good to 
see you have moved to the second seat from the end seat.
    Mr. Wicker.

                       fy 1998 president's budget

    Mr. Wicker. Thank you, Mr. Chairman.
    It's good to move up, and also it's good to have this 
particular capable member to my left, here.
    Madam Secretary, I just want to join the other members, 
first of all, and thank you for being here, and to say that 
your testimony today has reinforced my already held position 
that the President has a very effective and articulate 
spokesman. And we do have a lot of things that we've always 
been bipartisan about on this committee, and that we will be 
bipartisan about this year. We're after the same thing, better 
health for all Americans, and a better life for American 
families.
    In that regard, I would simply state that an honest 
balanced budget, with all of the benefits that that would 
entail, and at least the amount of tax relief for American 
families that the President has proposed, if not more, is also 
an integral part of the balanced budget and prescription for 
what we need in this country.
    Let me just take one more stab at the question about 
honesty in budgeting, in particular, with regard to NIH. I 
think what I heard you say is that you've got to make the 
budget come out right on paper. And I think everyone in this 
town that has really looked at this budget believes that the 
President has lowballed NIH, in expectation that this committee 
will come in and do the right thing and increase that funding. 
That enables the Administration to put money elsewhere and 
force this committee and this Congress to perhaps make tougher 
decisions.
    Particularly, did I understand you to say that in the out 
years, you fully expect those numbers to change?
    Secretary Shalala. Congressman, I think I was asked that 
question last year. I'd have to go back and look. And what I 
said was that, each year we would go through the same process. 
And that is, I would get an allocation from OMB and then we 
would go back and forth in terms of what our priorities are 
within that allocation.
    And while I'm well aware that the out years for NIH make it 
look like we would not come in with a 2.6 percent or even 
anywhere near that, in the out years, we don't intend to do 
that. Now, I have to do all this within the context of a 
balanced budget. So I'm not suggesting to you that we intend to 
create a deficit for the President within that, but that we 
will lay out our priorities year by year and hit those budget 
targets, the overall budget targets. Because that's exactly 
what we have to do with the balanced budget.
    Mr. Wicker. Well, I would just suggest to you, Madam 
Secretary, that the President's budget, as well as the 
Congressional budget, should be real. And when the President 
comes in, and when you come in and admit that what you 
projected, would get us there on paper by the year 2002, when 
those figures are not real, then there's no wonder that even 
the Washington Post, even David Broder and other commentators 
in this town are saying that this budget is a loser.
    Secretary Shalala. Congressman, we're not saying that at 
all. Whatever the President has laid out as his budget targets 
and we intend to go on this path towards a balanced budget. All 
I'm saying is within that number, we may have different 
priorities year by year. That's to be expected. I can't 
anticipate whether we're going to have a major breakthrough in 
AIDS, for example, that would change the dimensions of the NIH 
budget, or whether we're going to be successful at getting more 
kids health insurance, and that will change the dimensions of 
some other part of our budget, or whether the economy is going 
to stay up and we're going to move so many people so fast to 
work that we won't need as much child care money as we've 
projected.
    So we are committed to meeting our budget targets. We will 
do it every year. But there may be some variation, is my only 
point, within NIH and CDC and FDA and all the other parts of my 
budget. But let there be no question in your mind, this is not 
a sham, for any of us that had to go through the budget process 
this year. Each year, it will get tougher and tougher as we 
meet these budget targets.
    But the details, I just can't tell you three years from now 
what the exact number will be on NIH. We've laid out a path, 
and all I'm suggesting to you is that we've got to meet the 
overall number. But within that, we may have some differences.

         health insurance for the temporary unemployed workers

    Mr. Wicker. Let me move to the President's proposal to 
spend $9.8 billion over the next four years to subsidize health 
insurance for unemployed workers. The proposed spending in 1998 
is $1.7 billion. It goes up to $2.5 billion in 1999, $2.7 
billion in the year 2000, $2.9 billion by the year 2001. And 
then it's zeroed out in the year 2002, the year that we hope to 
obtain a balanced budget. And that mix is part of the 
President's so-called balanced budget by the year 2002.
    Now, I know that this is given to us as a four-year pilot 
program. But what do you anticipate the actual expenditure will 
be in the year 2002, if we go up incrementally each year, and 
then have to put in some number there in the year 2002? It 
certainly won't be a zero.
    Secretary Shalala. Well, first of all, that is not a 
permanent program. It's laid out as a demonstration for four 
years, with evaluation at the end of it. So somewhere in the 
third or fourth year hopefully we'll have some information, and 
we're going to have to have that conversation. This is the 
working family proposal for temporary unemployed workers. We'd 
like to try out this approach. And after that four year period 
is over, we will need to make a decision.
    Now, if we want to continue that program, we will have to 
accommodate it within our balanced budget numbers, in the same 
way that if we want to increase the NIH budget next year, it's 
going to have to be accommodated within their numbers. You 
can't gimmick this. Once you make a decision, as we have, to do 
a balanced budget, any changes we want to make, or any 
additional spending, has to be accommodated within the context 
of the balanced budget.
    We've laid it out very clearly, as a demonstration with an 
valuation.

     consolidated omnibus budget reconciliation act of 1986 (cobra)

    Mr. Wicker. One follow-up on that, and then I'll relinquish 
my questioning. How does that program interplay with COBRA, 
which is already a program which is in place to extend health 
insurance for individuals who have lost their jobs?
    Secretary Shalala. As you know, not everyone is covered by 
the COBRA program, particularly low income workers are not 
necessarily covered by COBRA. What this does is give the States 
flexibility to administer their own programs. They can 
administer this through Medicaid, through COBRA, or through an 
independent program.
    And remember, it's just, it's a short-term transition 
benefit. So it's not like someone will have this for four 
years. It's up to six months to help people be able to be on 
health insurance while they're between jobs.
    So it's a very specific way of trying to shore up our 
health insurance system, so we don't have a large number of 
people who don't have health insurance and add dependency onto 
our hospital system and onto our emergency health care system.
    This bill also conforms to changes in the Kennedy-Kassebaum 
bill in which the dollars could pay for COBRA costs. What I 
think they're going to be able to do is continue the COBRA 
coverage, so that the States can actually use the money to pay 
the COBRA costs. Remember, under COBRA, you can tap into the 
COBRA system to subsidize some low income workers so they can 
actually cover their COBRA costs. And that's the way the States 
can use the money. And again, the States would work out this 
program.
    But we're not going to have a bunch of people at the end of 
four years who have been on this program for four years, that 
suddenly are going to be left hanging. It's a short term 
program to help the States, again, fill this gap. Our overall 
health care strategy here is an incremental one. To get the 
kids who are now left out of the health insurance system 
because their parents are low wage workers, to find the workers 
who lose their jobs and are going to get another job, but are 
low income workers, again, and have lost their health 
insurance.
    We're trying to make sure that there aren't gaps in the 
health insurance system in this country, so that we can make 
certain that we're not putting extra burdens onto hospitals and 
other health care providers, that there's a seamless system of 
health insurance. So we're incrementally trying to fill these 
gaps.
    Mr. Porter. Thank you, Mr. Wicker.
    Madam Secretary, the State of Kentucky, as you know, has a 
rich heritage of leadership on this subcommittee, with Mr. 
Natcher, who has served on the subcommittee for 28 years, and 
the last 15 as our Chairman. And we are delighted to have 
another Kentuckian join us. And I might say, we are also 
delighted that she's on our side of the aisle.
    Mrs. Northup.

                                adoption

    Mrs. Northup. I'll try to live up to your expectations, Mr. 
Chairman.
    Madam Secretary, I'd like to ask you about the adoption 
program. You said you hoped to work with the States. I'm very 
interested in that issue.
    Do you support efforts, or do you tend to involve the 
Cabinet in making children available for adoption earlier by 
ending parental rights? This is a debate that's gone on for 
some time. The longer those parental rights are not terminated, 
the older the children get, the longer it takes then to place 
them, the higher risk that they are emotionally and 
educationally behind. And the problems are just quadrupled, the 
longer it lasts.
    Secretary Shalala. First of all, I think we have to be 
careful of the Federal role here. Because many of these laws 
are State laws, and this is a matter of working with the 
States.
    We're trying out, with the States, some new ideas. Let me 
give you an example. In Delaware and Illinois, getting older 
children adopted has been an issue that they've been working on 
for a long time. So what they're trying now is permanent 
placement, a guardianship concept, so that the older child is 
not absolutely cut off their ties to their blood family. In 
fact, they may have some younger siblings. But they clearly, 
for a variety of reasons, can't live with that family. They go 
to another family that has legal responsibility for them, and 
grow up in that family, but they're able to visit their 
original family. That concept of guardianship gets them in a 
permanent placement in a secure place. I met a young man, with 
the Governor of Delaware, who's on his way to the Army, that 
had that experience where, for three years, it made all the 
difference in his life. But he said the best thing about the 
guardianship was that he had two families, one that really 
disciplined him and took responsibility.
    So we will be working with the States. But the decision of 
when to cut off and to move that child to adoption is a 
decision for the States. They have full authority to make that 
decision. In our judgment, there are too many children bouncing 
around from foster care to foster care for too long a period of 
time. And someone, some caring adult, within the context of a 
fairer judicial system, needs to make a decision so that that 
child is protected.
    Mrs. Northup. Well, I agree with you. But the fact is, the 
States, really people from both sides of the political 
spectrum, are on both sides of this issue. But the fact is that 
the responsibility and the numbers that you quote are higher. 
Because the States that take the longest time to terminate 
those rights create children that fall into that category of 
unadoptable.
    I'd also like to ask you, as the mother of two of these 
children, who are of another race, whether there are still 
policies in your Cabinet that make it difficult to adopt 
children across racial lines?
    Secretary Shalala. There are not, and the Federal laws are 
very clear in this area. And this again is an issue of State 
implementation. Like the adoption issue, what we're going to do 
with our initiatives is help judges create more magistrates to 
hear cases. They need some relief. Add social service case 
workers, so that they can get the documentation done and move 
children more quickly to adoption.
    But on the issue of interracial adoptions, the laws are 
clear. We sent out very clear directives, States need to 
implement those laws and to move children, no matter what their 
race or what their disability, more quickly into a permanent 
setting, whether it's with their original family or with an 
adopted family or with some kind of a permanency decision like 
a guardianship. These children deserve what every child 
deserves, and that is a loving family and a home.

                           youth and tobacco

    Mrs. Northup. Let me ask you about tobacco. I may be the 
only person on this side of the table that's worked very 
closely with the groups that are curbing youth access to 
tobacco. I've been very interested in the Synar Amendment and 
the dynamics that it created in Kentucky. The dynamics for a 
State that was totally opposed to youth access laws and to 
implementation of any kind actually has become very involved in 
it.
    The Synar amendment is exactly what you said you supported, 
it measures success of programs, rather than deciding on the 
specifics of the program.
    Now that your agency has gone to FDA regulation, much to my 
dismay, I wondered if the Synar provisions have been just 
eliminated completely, or if you're still working so that 
States and local communities will become sort of the engaged 
community in discouraging kids from purchasing tobacco 
products?
    Secretary Shalala. No. The Synar Amendment has been 
implemented. Every State has complied with the requirements 
except for two, and we're working with them. There have been 
improvements. Coordination, I think, within the States, is 
getting better. But the States are required, in their 
applications for the Substance Abuse Performance Partnership 
block grants, to tell us what methodology they were using in 
conducting random unannounced inspections in 1996 and the 
results of those inspections. And I don't have Kentucky's 
results.
    But in Arizona, for example, they had 55 percent successful 
buys. In Louisiana 72 percent. This gives you some sense of how 
much out of compliance we have.
    Mrs. Northup. Madam Secretary, those are the baselines.
    Secretary Shalala. Right, exactly.
    Mrs. Northup. Nobody's in compliance with the final 
regulations, because we haven't reached those years.
    Secretary Shalala. That's exactly right.
    Mrs. Northup. They started with the baseline, and then they 
had three, four years where they could begin to work with their 
local communities and their State legislatures. When you said 
they're in compliance, all they've done is pass an original 
youth access law that complies with Synar.
    So the point is that FDA is stepping in and involving 
itself in youth access. However, we don't know whether what we 
had that was actually at the local level, that heretofore has 
always been seen as the most effective way to keep cigarettes 
out of the hands of children, we're not even waiting to see if 
this program would be effective.
    Secretary Shalala. Well, I think that the FDA regulations 
go beyond the compliance, these particular compliance issues, 
and move into advertising, for example, and other kinds of 
campaigns. So the FDA regulations are broader. We will be 
implementing both. As you know, the FDA regulations are 
currently before the court in North Carolina. So we will be 
hopefully moving forward with both of these. But the States 
have moved initially on the Synar Amendment. And as I 
indicated, there are only two that haven't filed with us. And 
we expect them to be in compliance right away.
    Mrs. Northup. Well, it took Kentucky a long time to get 
``religion.''
    Secretary Shalala. My understanding is it took your 
leadership in Kentucky to do that.

                           uninsured children

    Mrs. Northup. Let me ask you one more thing. And that's 
about uninsured children. Do you have any breakdown on how many 
children actually have families who work, who have access to 
health care but have not decided to take advantage of those 
group policies? And what their actual wage rates are?
    I know we keep saying that some of them have low income 
jobs. Some of them don't. I'm aware of people that have 
reasonable jobs. It's always difficult to make that decision to 
transition in to buy the health care policy. Or like you said, 
the companies pay for the individual rate. They do not pay for 
the family rate, and the parents don't take advantage of that 
opportunity.
    Before we go launching a new program and become responsible 
for 10 million children, don't you think we ought to have a 
breakdown of how many of those parents could actually purchase 
and afford to purchase a policy for their children?
    Secretary Shalala. Yes. We know a lot of things about the 
kids that don't have health insurance. We know, for example, 
that 3 million of them are actually eligible for Medicaid, but 
are lost somewhere in the system. And we know that the vast 
majority of them, 9 out of 10, come from working families and 
that those families are low income working families. Some of 
them have seasonal employment, or work two or three part-time 
jobs at the same time.
    A variety of States have had experience in this area. So 
there's some experience out there. And what the States have 
done is, different things in different States. In Tennessee, 
for example, they decided just to cover all their kids and do 
it as part of the matching program with the Federal Government. 
In other States, what they've done is go out and actually buy 
an HMO for very low-income working families.
    So what we have suggested is, number one, without any 
additional money, we go out and find the kids that are eligible 
for existing programs and get them in. And number two, that we 
give the States some resources to help them design programs 
with the private sector to make sure that people have access. 
Now, we're not talking necessarily about free health care. It 
may be that what the States will do is put together a pool of 
low cost health care for low-income workers, so everybody is 
paid something as part of that.
    But what we have said is we shouldn't design a cookie 
cutter program for the whole country. What we should do is give 
some resources to the States, make sure the programs that are 
in place are maxed out so that they really do cover who they're 
supposed to cover, and then fit all these pieces together to 
get everybody covered.
    Mr. Porter. Thank you, Mrs. Northup.
    Madam Secretary, we very much thank you for your testimony 
this morning. You've been very candid and forthright with us. 
We particularly appreciate your staying beyond the appointed 
time to handle all the questions.
    There will be a number of additional questions for the 
record that we will ask you to answer. And the subcommittee 
will stand in recess until 2:00 p.m. this afternoon.
    [The following questions were submitted and answered for 
the record:]
    Offset Folios 163 to 354 Insert here



                                      Wednesday, February 12, 1997.

                      OFFICE OF INSPECTOR GENERAL

                               WITNESSES

JUNE GIBBS BROWN, INSPECTOR GENERAL
MICHAEL F. MANGANO, PRINCIPAL DEPUTY INSPECTOR GENERAL

                        Introduction of Witness

    Mrs. Northup [assuming chair]. Good morning. We have at 
this hour the Office of the Inspector General, Ms. June Gibbs 
Brown, here with us to testify today. Good morning, and we'll 
let you begin.

                           Opening Statement

    Ms. Brown. Thank you, Madam Chairman.
    I'm the Inspector General of the Department of Health and 
Human Services, and the primary mission of my office is to 
protect and recommend improvements to the programs and 
management of the Department. Let me give you some examples of 
our recent work.

                            recent oig work

    We're nearing completion of a three-year investigation 
initiative called LabScam. LabScam is targeted at abusive 
marketing and billing practices at the Nation's largest 
independent clinical laboratories, involving the practice of 
running specimens through a single piece of automated multi-
channeled laboratory equipment, and then billing separately for 
each component test. Working with other law enforcement 
agencies, our LabScam investigation has generated almost $500 
million returned to the Government. We expect this amount will 
increase shortly to $823.6 million.
    Our office involvement in the Health Care Education 
Assistance Loan, or HEAL program, is another example of how we 
enforce program rules and return tax dollars. Through HEAL, HHS 
provides money to students seeking an education in a health-
related field of study. Unfortunately, some loan recipients 
ignore their indebtedness. When this happens, we propose to 
exclude the individual from participating in Medicare, Medicaid 
or other Federal programs and negotiate repayment. Our 
involvement has brought back so far $39 million to the program.
    Our program inspection activity continuously produces 
recommendations that improve program efficiency and 
effectiveness and save taxpayer dollars. A report on Medicare 
prescription drug allowances is an example of this. Based on 
1995 expenditures for prescription drugs, we found that 
Medicare pays approximately $450 million more than Medicaid for 
comparable drugs.

                     better ways of doing business

    Since the beginning of my tenure in November of 1993 as the 
Department's third Inspector General, I have aggressively 
sought new and better ways to stretch our resources and 
maximize our impact. Among these initiatives was the 
establishment of the executive level health care fraud policy 
group, through which we and the Department of Justice have 
jointly managed the development of our investigative cases. We 
also work with States to conduct joint audits of the Medicaid 
program.
    Another example is Operation Restore Trust. This is an 
interdisciplinary project in which Federal and State agencies 
join to fight fraud, waste and abuse in home health agencies, 
nursing homes and the medical equipment and supply industry. 
The two-year demonstration project, which ends this spring, 
targeted five States which account for about 40 percent of the 
Nation's Medicare and Medicaid beneficiaries.
    One example of the success of Operation Restore Trust was 
demonstrated in virtually eliminating more than $100 million 
per year in inappropriate payments for incontinence supplies. 
We have a chart here which shows that, as you can see, in 1994 
we reached a peak in payments. We analyzed that $104 million in 
annual savings could result from getting rid of these 
inappropriate payments. The problem was detected, and we 
alerted HCFA and the Congress to this problem. We did a 
nationwide investigation. There were 20 investigations that 
took place.
    We also did a program inspection, and new Medicare carrier 
guidelines were produced by HCFA. There was also a payment 
review crackdown. The result was, the problem was contained.
    My office is encouraging the health care industry to 
voluntarily institute internal controls by implementing 
Medicare and Medicaid compliance programs based on model 
compliance programs that we are developing.
    We recently developed a model for clinical laboratories, 
and we plan to develop additional models for other health 
provider industries. We will make them available through the 
internet.
    We're also developing review protocols. This is a method 
that provides an alternative to having my office conduct all 
the reviews of provider billing practices and leverages our 
audit impact. To cite one example, we found substantial 
widespread billing problems at teaching hospitals. We then 
established a review protocol that a hospital or a physician 
group can use to conduct an independent review at their own 
expense. A number of voluntary settlements are expected from 
these reviews. The first settlement using this protocol 
resulted in an agreement to pay $11.9 million back to the 
Government.

                       work underway and planned

    We also have a full schedule of work planned or underway 
this year and for fiscal year 1998. For example, in Medicare 
and Medicaid, we will continue our high priority work in the 
areas of home health, hospice, medical equipment and supplies, 
and nursing homes. And we'll strengthen our work regarding 
reimbursement for hospitals and physicians.
    Regarding Administration for Children and Family programs, 
we plan to evaluate various options and methods to improve 
child support collection. For the Public Health Service, we 
intend to assess the adequacy of the Food and Drug 
Administration's controls over investigation of new drugs, 
review FDA regulation of institutional review boards, and 
evaluate FDA device safety alerts. Further, we're going to step 
up investigations of Public Health Service fraud.
    These and other projects will contribute to our continuing 
oversight of the Department's programs.
    Mr. Chairman, we appreciate the opportunity to discuss our 
accomplishments and planned work. There's much more in my 
written testimony, and I'd be happy to answer any questions.
    [The prepared statement follows:]
    Offset Folios 362 to 369 insert here



    Mr. Porter [assuming chair]. Ms. Brown, thank you for your 
good statement. I have to apologize to you, I do have other 
subcommittee assignments, one of which is Foreign Operations. 
And Secretary Madeleine Albright is next door, and I had to get 
through my questions before I came here.
    I have to say, you provided the opportunity for our very 
newest member of the subcommittee to chair already, which is 
probably unprecedented. And I'm delighted that Mrs. Northup 
could take the chair.
    In accordance with our rules, I would call on Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    You have a tough job. I was just looking at your resume, 
how you've been in such a wide range from Pearl Harbor to the 
Defense Department, now to HHS. I guess there is a commonality 
there, too.
    Ms. Brown. Yes, there is.

                           teaching hospitals

    Mr. Miller. An issue that I just mentioned to you that I 
would like to have you discuss and explain is the whole issue 
of IL-372 and the medical school issue, especially the 
retroactivity. Would you explain the logic of this?
    The medical schools in Florida, I guess all over the 
country, are really concerned, especially about the 
retroactivity. You know, the logic and where it's going and why 
it was created, so give me the background of it, please.
    Ms. Brown. Okay. My Deputy, Mike Mangano, is here. He has 
headed some of this effort, and I'll let him explain it.
    Mr. Mangano. Thank you very much, Congressman.
    What we're doing in this particular study is taking a look 
at two issues at teaching hospitals. The first issue is what we 
call upcoding; that is, when a hospital has billed for a 
service that is more expensive than the service they actually 
delivered.
    The second one gets to the issue that you're raising, and 
that is the IL-372. What we're doing there is taking a look at 
how we reimburse physicians when residents at the teaching 
facilities deliver those services. Back at the development of 
IL-372, which goes back over 20 years ago, that individual 
provision made clear that for a physician to be reimbursed for 
a service at a teaching hospital, that physician either had to 
deliver the services themselves or be present when the resident 
was delivering the services, to guide the resident and teach 
the resident how to perform the diagnosis or the treatment.
    Over the years, there have been a number of questions that 
have come back to the Health Care Financing Administration 
challenging the issue about presence of the physician. The 
Health Care Financing Administration has been continuous and 
resolute on their policy that to actually get paid for 
services, you actually have to deliver a service. There have 
been a number of questions that have come in from the industry 
groups. Every time those questions come in, the response back 
from HCFA, and our longstanding policy, is you must be present.
    Now, those individual physicians themselves are paid 
through the graduate medical education program that the 
Department administers. So they're paid through that and other 
sources. But when their residents actually deliver that 
service, they must either be present or deliver it themselves.
    Mr. Miller. Is this part of Operation Restore Trust?
    Mr. Mangano. No, it is not.
    Mr. Miller. But they have to be present. I mean, I don't 
disagree with the policy, I guess I'm more concerned with this 
retroactivity, and also the issue of fraud. I guess there have 
been two medical schools in Philadelphia that have already been 
assessed a significant amount of money, and then when it gets 
to the fraud issue, it doubles or triples the costs. And so 
you've obviously got all the medical schools' attention very 
quickly on this issue.
    But has the interpretation of HCFA always been that you had 
to be present? That just started as of last year, correct. It 
may have been in writing, but that's not been the widespread 
acceptance of it, right?
    Mr. Mangano. My understanding is that that was the policy 
when they created IL-372, and it has been the consistent policy 
every year thereafter. The question about retroactivity has 
been a question that has been raised only in this last year. 
HCFA revised its regulations that deal with attending 
physicians just recently, in 1996. At that point, some of the 
industry groups claimed, ``Well, okay. Now you've clarified the 
policy for us, but don't go and apply the penalties 
retroactively.''
    But that individual regulation did not change one iota the 
presence issue. That presence issue has always been in 
existence.
    Ms. Brown. The thing that changed, Congressman Miller, was 
the fact that the physician had to be the attending physician. 
HCFA has actually expanded their interpretation. They now 
realize, in medicine, that there may be several attending 
specialists, and not just one attending physician for a 
particular patient. So they've expanded that interpretation to 
make more people eligible as attending physicians. But they 
haven't changed the policy that the person has to be there.
    Mr. Mangano. May I add one other thing, too, Congressman, 
which I think will help this issue. HCFA and the Medicare 
program pay their bills through a series of contractors located 
all across the country. They process the bills. It is possible 
over time that an individual contractor may have given 
incorrect information to a teaching hospital indicating that 
presence was not required.
    One of the first things we do when we begin a study like 
this is (and we have gone to the industry groups and told them) 
that we will go to the hospital and we will look exactly at the 
kind of guidance that was given to you by the carrier. We'll 
also look at your own internal procedures in the hospital to 
determine what you really did know. And if you honestly had 
incorrect information and an incorrect understanding of that, 
that will all be taken into account. So that gives an added 
protection to those hospitals.
    In the two reviews that were completed to date, one was a 
review done by our office. The other was a review done, as Ms. 
Brown talked about, under this new initiative we have, where 
hospitals can actually do the audit themselves, as long as they 
use our protocol. And if they come up with findings that are 
negative towards them, they need to repay that money.
    In both of those instances, there was no doubt that the 
carrier had given them very correct information, and that their 
internal policy guidelines within the hospitals recognized that 
presence element. There was no doubt inthose first two cases.

                         civil false claim act

    Mr. Miller. The dean of the medical schools talked to me, 
as you can imagine. So it raises the issue. I don't even have a 
medical school in my district, and I'm not a lawyer and I'm not 
a doctor.
    I'm just sharing their concerns. One of the concerns is, 
that HCFA has acknowledged, this is a vague issue. They show me 
that back in the Federal regulation it was vague, perhaps 
necessarily, on the presence of a physician during outpatient 
services. This was issued in 1995.
    And they don't disagree with the basic idea. I see this all 
the time, such as the whole Superfund program, the whole fight 
over Superfund is retroactivity. And it drives you crazy. It 
drove me crazy my first year, when they passed estate tax, they 
made it retroactive back to dead people. And I just said, well, 
that's not fair, the fairness issue.
    Tell me about the fraud issue. These are not doctors that 
are going to intentionally going to get wealthy on cheating, 
because normally it's not lucrative. I'm not sure exactly how 
they get reimbursed, but they're all concerned because it 
doubles or triples damages. So why are we going after the fraud 
issue?
    Ms. Brown. That is the Civil False Claim Act. And it is a 
civil action. It is not a criminal action which might be 
implied when we say fraud.
    However, there is a penalty if they knowingly violated the 
rule. And so there are penalties assessed.
    We have a couple of instances, I believe there's 20 going 
on at the current time, where there is reason to believe that 
somebody had some misinformation. Of course, we will temper, 
possibly even have just a single repayment, where somebody 
honestly misunderstood the problem.
    So we are trying to take that into consideration. The 
hospital groups have visited me on a regular basis with 
notebooks full of quotes. We have checked those out 
extensively, and we have responses for them. So I would be glad 
to discuss this at any level you like.
    Mr. Miller. So you're saying that this has always been the 
law and that there is no vagueness in the interpretation over 
five years. I mean, were doctors reimbursed back in 1990, have 
medical schools always been this way?
    Mr. Mangano. This is the policy that's been in existence 
since IL-372 was issued in 1969. So it is a longstanding 
policy.
    Mr. Miller. Well, why was HCFA reimbursing the medical 
schools all this time, and why are there tens of millions of 
dollars in individual hospitals?
    Mr. Mangano. They had not caught the problem, and it was 
only recently brought to our attention. We went out and did the 
review. That was the first review that we did. We discovered 
the problem there, and then we looked at another hospital and 
said, wait a minute, this is widespread.
    HCFA would really have a very limited opportunity to 
discover this problem.
    I would add one other thing that may be helpful. The 
primary organization that represents the teaching hospitals, 
the American Association of Medical Colleges, has been 
questioning the retroactivity for a long, long period of time 
and has raised this issue a couple of times with HCFA. And I 
can show you letters back from HCFA that absolutely clarify 
this to them. The most important one in my mind was a letter in 
1993, which said, absolutely, you must be present.
    When we go out and take a look at the hospital, we don't 
even look at the prior years; 1994 is the first year that we'll 
even take a look at when we do our review. So that even if a 
teaching facility had incorrectly asked for reimbursement for 
their teaching physicians up through 1993 when they did get the 
absolute clear documentation, if they cleaned it up, and there 
was no problem in the following year, we won't find anything.
    Ms. Brown. And it's only if we find something subsequent to 
1993 that we then go back and look at prior years.
    Mr. Miller. What took effect on July 1 of 1996? Is that a 
new ruling of IL-372?
    Mr. Mangano. No. I believe what that is, is a new 
regulation that the Health Care Financing Administration put 
out, that generally dealt with the issue of attending 
physicians. And that went into effect.
    Mr. Miller. So there's no question about it after July 1 of 
1996, that's clear. The question is, since 1969, the generally 
accepted practice within medical schools is, as long as the 
doctor signed a note covering that intern, that qualified then 
you were reimbursing them for the past 15 years that way. And 
then you said, well, wait a minute, we're not going to do this 
anymore.
    Mr. Mangano. That may be the case, but HCFA would have no 
way of knowing that a physician at a teaching hospital had 
submitted a bill for a patient unless they went out and audited 
those records and checked back.
    Mr. Miller. It's hard to understand that. If it's a 
generally accepted practice within the entire teaching hospital 
throughout the country, I'm assuming that's the case, that HCFA 
couldn't understand, there have been enough physicians that 
have been through the medical schools.
    Mr. Mangano. It may have been the practice, but HCFA over 
the years has continually said it's an incorrect practice, and 
has issued guidelines on any number of occasions. There are 
indications in the internal documents that we found at the 
hospitals themselves, the two reviews that we have completed, 
indicating to us that the hospital staff knew they were 
violating the law.
    Mr. Miller. Yes, okay. Explain to me one more time and 
clarify the issue of why it's fraud, I mean, why are you going 
after these double, triple damages.
    Ms. Brown. That's provided for under the Civil False Claim 
Act. So it isn't being treated as criminal. But if a hospital 
knowingly overcharged, we can collect not only the amount 
overcharged, but either double or treble damages.
    Mr. Miller. So the hospitals in Philadelphia, one was $20 
million and one was $30 million.
    Mr. Mangano. University of Pennsylvania was $30 million.
    Mr. Miller. I mean, this could bankrupt some hospitals, 
medical school hospitals in the country. So I need some more 
information to understand why, if it was generally accepted 
principles before last year, why wasn't it stopped before. I'm 
concerned about the retroactive issue.
    Mr. Porter. Thank you, Mr. Miller.
    Mrs. Northup.

                        prescription drug costs

    Mrs. Northup. You talked about the study that you did 
comparing the cost of prescription drugs from Medicare to 
Medicaid. I presume your difference in prices was comparing the 
price of the same prescriptions?
    Ms. Brown. Yes.
    Mrs. Northup. And one program was obviously paying a higher 
price for those prescriptions. Did you do any comparison with 
how those compare to the costs of drugs used in the private 
sector?
    Ms. Brown. Yes, that was included. This study is being 
done; we aren't trying to collect money back or anything. We're 
trying to show whether or not Medicare is overpaying for the 
prescription drugs. They're limited on the number of 
prescription drugs Medicare pays for, for example some cancer 
drugs, some used in connection with certain therapies, and 
there are a few others. But Medicare really has very limited 
coverage for that. And what coverage is available is usually 
under Part B of Medicare.
    We looked at what was being paid for those drugs, not only 
under Medicaid, but also in some cases, we were able to see 
what was paid on the retail market. And there were 
substantially greater amounts being paid by Medicare.
    Mrs. Northup. Can't Medicare negotiate for prices for those 
drugs at the same level that insurance companies negotiate, and 
lower it not just to the Medicaid level, but to the private pay 
amount?
    Ms. Brown. No, Medicare does not have the authority under 
the law to negotiate for these prices, or to bid for anything 
like durable medical equipment or others.
    Mrs. Northup. Well, if Medicare can't negotiate, why would 
we compare them to Medicaid?
    Ms. Brown. Well, we weren't being critical of what Medicare 
had done. We're providing this information to the agency and to 
the Congress to see whether or not they, knowing what is 
happening out there, feel it's appropriate to change policy in 
this way.
    Mrs. Northup. Okay. So, if we were going to change policy, 
we might change the policy to pay the price that they pay at 
the retail market.
    Ms. Brown. That's possible. There is an average retail 
price that's associated with these drugs. However, that average 
retail price is not some kind of a derived price based on what 
people are paying. It's very much like the sticker on a new 
car. It is a price that the drug company put on that particular 
drug.
    Mrs. Northup. Right.
    Ms. Brown. So it doesn't really have any meaning. And in 
reliance on that, we have been paying more than the rest of the 
market.
    Mrs. Northup. In fact, it's possible that if you looked at 
it, that the drug companies have been willing to sell it via 
insurance companies. In other words, if I have a private plan, 
it might be that they actually are willing to sell the drug for 
considerably less, because my insurance company will only pay 
them so much.
    Ms. Brown. Yes, that's possible.

                               heal loans

    Mrs. Northup. Let me ask you also about the repayment of 
HEAL loans, the student loans that you said people were 
reneging on. You said you have moved to make sure recipients of 
HEAL who default didn't then have access to Medicare or 
Medicaid benefits.
    Ms. Brown. No, if I said that, it's slightly different from 
that. They will be excluded, if they are billing now as 
graduate medical people. They cannot bill a Federal program for 
any medical care given, unless they either repay their loans or 
negotiate some kind of a payment schedule to repay the loan.
    Mrs. Northup. Can you just move to collect the money? I 
mean, what if they aren't in a position where that's relative?
    Ms. Brown. Well, they can negotiate. We provide the 
information to HCFA. And we, of course, send out the notices 
that we will move on the exclusion action, unless they repay 
the loans or negotiate in order to repay.
    Now, somebody who might be taking care of low income people 
or something and not making much money can certainly negotiate 
to pay so much a month. We do not exclude them, as long as they 
keep up those payments. If they renege on that payment 
schedule, then they're excluded until the entire amount is 
repaid.
    Mrs. Northup. Do you have any idea what the total default 
amount is?
    Mr. Mangano. No, we don't. What we can tell you is that 
each year when there are defaults, the Public Health Service 
will give those loans to us and we'll work those cases. To 
date, we've had over 600 individual health care providers enter 
into repayments. And the total amount that has either been 
repaid already or is on schedule to be repaid is almost $39 
million.
    Mrs. Northup. I would appreciate the information on what 
the total amount of default is, and how many students are 
defaulted and paying. Are there 6,000 that are not, or are 
there 1,000 that are not? What is the total amount that is 
owed? This information will tell us if we can judge whether or 
not we ought to be more aggressive than just excluding them 
from enjoying the benefits of those programs.

                          types of OIG audits

    And lastly, I'm interested in knowing when you do an audit, 
whether your audit is strictly financial and making sure of the 
best accounting practices, or whether you actually do a 
management audit?
    Ms. Brown. We actually do thousands of audits every year, 
and there's a full range of audits. We do a lot of management 
or operational audits that look at specific programs and how 
they're operating, and analyze that data. Financial statement 
audits are required of under the Chief Financial Officers Act. 
We're doing those now. HCFA will probably be the largest one 
that's ever been done in the world, because there are so many 
entities that are being audited. And it's costing about $9 
million this year.
    We also do all kinds of other financial audits. I have a 
staff of people in Kansas City who analyze all the audits that 
are contracted out. So the Single Audit Act audits and so on 
are all sent there for analysis. We make sure that the 
collections take place that are the result of those audits.
    Mrs. Northup. Then some of your audits do show, for 
example, that priority goals and the most essential needs 
aren't where the money is going?
    Ms. Brown. Yes, those are very typical of the types we do.
    Mrs. Northup. Have you ever done audits in the area of 
mental health centers? As we provide more and more grants to 
community health for children's needs and so forth, many of 
those needs are easier to document, making it easier to reach 
out and touch the population they're directed to.
    But the most profound needs, the homeless, are not met. So 
we're pouring millions and millions more dollars into these 
community health centers. And in Kentucky I see ours focusing 
on stress management, weight reduction, and those sorts of 
issues. I'm not saying they aren't important. But the more 
critical, the more profound needs, the needs that are sort of 
harder to reach out and touch and bill for, are not being met.
    Ms. Brown. That is the type of thing that is subjected to 
audit, or we also have an inspection and evaluation group that 
does a lot of work in this area. The mental health area is one 
that has been identified as a priority. Because we know there 
are many problems in that area, we will be doing a lot of work 
in that area this year.
    Mrs. Northup. Okay.
    Ms. Brown. There are other kinds of problems as well, such 
as, we had one complaint where an individual had placed his 
mother in a home. She was able and mentally alert, and it was 
more of a residence type facility. There was a bulletin board 
item that said, come to a get acquainted coffee, and he urged 
her to go to that coffee. Later he found and turned the 
information over to us, that for everybody who attended that 
get acquainted coffee, Medicare was billed for mental health 
services for group therapy.
    So there's a range of abuses going on in this program. And 
we will be looking at that. We will be trying to identify that 
the highest priority work is done, turn that information over 
to management and, of course, make it available to the Congress 
in case they need to make any changes in the way it operates.

                           teaching hospitals

    Mr. Porter. Thank you, Mrs. Northup.
    Ms. Brown and Mr. Mangano, we have had brought to our 
attention the question that Mr. Miller raised with you about 
audits of academic health centers. And I want to suggest that 
this is a very sensitive matter, that academic health centers, 
from my perspective, are already under great siege in our 
health care system. Because as HMOs have taken over more and 
more of the private sector, and to some degree the public 
sector as well, the flow of funds to these vital teaching 
institutions has diminished greatly. And the Congress, because 
the President vetoed the bill, and because no other legislation 
was forthcoming, the Congress has done nothing to try to 
protect them and assure that they survive in the future.
    So they are very, very vulnerable at this point in time, 
and also critical to future health care in this country. This 
is where our physicians and other health care professionals are 
trained. And without the existence of these facilities, this 
country and our health care system is just in deep, deep 
trouble.
    So first, I find it troubling that the audits are occurring 
at the time they are, not that it isn't your job. Obviously, it 
is your job to enforce the law and make certain that it is 
obeyed. But it is, I think, a very difficult time for these 
facilities, and one where if we are going to be collecting $30 
million from one and $40 million from another, we may find them 
closing their doors and unable to function. This worries me, to 
start with.
    Second, I'm very concerned with information that we have 
that has pushed at least one of the institutions towards 
settlement, with threats of criminal prosecution and the 
collection of double and treble damages, which I understand are 
in your discretion and not mandated by the law. This, to me, is 
exactly where the IRS has got itself into trouble with the 
American people. And I do not want to see our Inspector General 
system being accused of heavy-handedness and threats that, in 
order to get a settlement in any situation, that may redound to 
your disadvantage and the disadvantage of the system.
    Yes, you have great independence, and yes, you have great 
power. But it seems to me that has to be exercised with a great 
deal of discretion and subtlety, I might add. And the word that 
we have coming back is that that has not been the case, and 
that concerns me very greatly.
    Please respond at any time.
    Ms. Brown. It is not our choice, this is the law. And we 
are limited to the enforcement of the existing law. There's a 
qui tam suit here by an individual, and the Department of 
Justice is in it. And we just look at the circumstances.
    We have gone a long way into looking at notes and records 
of the hospital and so on to see whether or not they were 
aware, whether there was any deliberateness about billing, 
whether they had received some information that might have 
misled them into thinking this was legal to bill when the 
physician actually didn't appear or perform a service. We have 
to enforce it as it is. And we enforce the damage level 
provided for by law, based on the amount of knowledge they had 
of what was going on.
    Mr. Porter. Well, one would have to assume that if this was 
widespread, where all the teaching hospitals were doing 
virtually the same thing, and we're talking about scientists 
here who are intelligent people, and who generally try to do 
what is expected of them in terms of meeting their legal 
requirements, if it's as widespread as it seems to be, it 
immediately raises the question as to whether anybody 
understood what the standard was and whether there was 
sufficient notice in the system that people were doing 
something they shouldn't be doing.
    I don't think there is any doubt--let me read you a 
statement that you might want to respond to in a general way, 
and then I have some specific questions. The statement is in a 
document recently published by certain of the academic teaching 
facilities.
    It states that, ``In short, as currently implemented, the 
PATH initiative amounts to an IG program to coerce medical 
schools and teaching physicians into forfeiting millions of 
dollars of fees billed in good faith by threatening punitive 
damages if they do not settle audits based on the retroactive 
application of HCFA regulations. This process is fundamentally 
unfair. In no event should teaching physicians be subject to 
punitive financial or criminal penalties based on the IG's 
retroactive application of HCFA regulations.''
    That seems to me to be a fairly strong reaction to what is 
happening here from a group that has a great deal of 
credibility in our society, and isn't generally known as 
lawbreakers. And I would like you to respond to that, then I 
have a series of particular questions to get at the issue 
itself, the retroactivity.
    Ms. Brown. Well, I feel that's very strongly worded and not 
a totally accurate statement. I would be happy to have someone 
meet with whichever members of your subcommittee would care to 
have it done, where we could show some of the reasoning, where 
we could actually show books and records of knowledge of this 
prior to the billing. I think that is an irresponsible 
statement.
    Mr. Porter. All right. Let me continue. If I understand 
correctly, the billing by teaching physicians, what you're 
reviewing are two things, the documentation supporting the 
physical presence of teaching physicians, and secondly, 
documentation supporting the level of a physician visit, the 
evaluation and management services that have been billed. Is 
that a good statement?
    Mr. Mangano. That's correct.
    Mr. Porter. With respect to the physician visit issue, can 
you describe what standards you're applying in these audits to 
determine whether the documentation in the medical record 
supports the level of physician visit billed? And in describing 
the standard, could you discuss, and I'm going to mention them 
all and then I'll go back and do them, what standard was HCFA 
employing during the period that you're auditing?
    Is it true that HCFA had instructed all its Medicare 
carrier subcontracts to severely limit their audits of 
physician visit coding from the period January 1, 1992, until 
HCFA issued documentation guidelines in November, 1994? Is it 
also true that after HCFA issued these guidelines in November 
of 1994 until August 1, 1995, that the carriers were instructed 
again not to audit physician visit coding for the purposes of 
recoupment, but rather for educational purposes, so that 
physicians could be trained as to the new documentation 
requirements?
    And finally, prior to 1992, was there a completely 
different coding system in place for physician visit services? 
And if so, how did the documentation requirements for the pre-
1992 codes differ from the post-1992 codes?
    Let's go back to the first of those. What standard was HCFA 
employing during the period that you're auditing?
    Mr. Mangano. My understanding is that HCFA has always 
required documentation of services. Their simple philosophy is 
that we pay for services when they're delivered. And they were 
looking for documentation that would show that a physician 
delivered the service or was there when the resident actually 
performed that individual service.
    That hasn't changed over time. That has been the policy of 
HCFA back to the 1960s.
    Mr. Porter. Well, is it true that HCFA had instructed all 
its Medicare carrier subcontractors to severely limit their 
audits of physician visit coding from the period January 1, 
1992, until HCFA issued documentation guidelines in November of 
1994?
    Mr. Mangano. The one thing that I can think of that would 
relate to that was a request that was sent in from one of the 
contractors to HCFA, saying that they wanted guidance from HCFA 
as to how to implement this. If my memory is correct, that 
individual contractor had not been applying any audits against 
the teaching facilities, and had not been interpreting this 
policy in the correct way.
    The HCFA response back to them was, ``Well, don't do 
anything different now. Wait until we get the regulations 
out.'' But that was directed, if it's the same one I'm thinking 
of, to only one of the contractors.
    We've only completed two reviews, so we only know that the 
problem exists in those two cases. We've invited other 
hospitals to come in and join this process. We're doing two 
more audits, and 15 hospitals have volunteered to do the audit 
themselves. They are already into the program.
    So once we have a better idea of what the other hospitals 
are doing, we'll know how pervasive this issue is.

                          teaching physicians

    Mr. Porter. You know, you've got academic teaching 
physicians who are very, very important people in our society 
scared to death they're going to go to jail. This is not, to my 
way of thinking, a good thing for our country. Yes, it's a good 
thing to find out whether there's outright fraud. But it seems 
to me there's a large question as to whether doctors knew what 
they were supposed to do and what documentation was supposed to 
be provided.
    Mr. Mangano. Mr. Chairman, you're absolutely right. And 
that's exactly why, when we start every one of these audits, we 
go into the institution and ask, ``What are your internal 
policies; did you make it clear to your physicians that they 
needed to be present?'' And it's only in those instances where 
the Justice Department does the negotiation with the hospitals 
to determine whether any fines are to be levied in that case.
    But we found, for example, one of the contractors in one of 
the reviews that we're looking at that did not give correct 
information to the hospital. And that is, they said that the 
only thing that was required was that the physician initial off 
on the resident's visit. And in that case, that is going to be 
sufficient for us, because that's the information they gave to 
them.
    So when we look at them, we are going to consider that. In 
the two cases that we have completed, we have internal 
documents that said they knew what the policy was, and they 
directed people to do otherwise.
    Mr. Porter. Well, that would of course be a different 
matter.
    Mr. Mangano. Right. And it's sort of interesting, because 
at least in one of the hospitals, they brought in an outside, 
independent consultant to review their records and they said, 
``You know, you've got a big problem here.'' Eighty percent of 
these claims for physician services are incorrect.
    So that's the kind of documentation we've seen in the two 
hospitals that we've been at so far.

                                upcoding

    Mr. Porter. All right, let me go on with the next question. 
And this is again about the physician visit issue. Is it also 
true that after HCFA issued these guidelines in November of 
1994, and you are auditing prior to that time as well, it's my 
understanding, until August 1, 1995, that the carriers were 
instructed again not to audit physician visit coding for the 
purpose of recoupment, but rather for educational purposes, so 
that physicians could be trained as to the new documentation 
requirement?
    Mr. Mangano. I'm not aware of that. It's possible that it 
went out, but I'm not aware of that particular document.
    Mr. Porter. Prior to 1992, was there a completely different 
coding system in place for physician visit services?
    Mr. Mangano. If you're referring to how they individually 
code the documents, I'm not sure of that. But when we go in 
there, we look at the policy that was existing at the time, and 
we determine whether the codes are correct. That's how we 
determine whether there's been an upcoding going on, as opposed 
to a correct billing.
    There have been physician visit codes that have changed 
over the time. But we only look at the codes that were in 
existence at the time we do the review.
    Mr. Porter. Because you're telling me you're not sure on a 
lot of these things, I'm going to ask you to respond in writing 
to each of these questions, in detail.
    Mr. Mangano. Sure.
    Mr. Porter. Because I think that there are--the whole tenor 
of this raises some questions that are very disturbing to me. 
And I think we have to get to the bottom of whether there is 
retroactive application and whether, in fact, the physician out 
there who was performing the services knew what was expected of 
him. Because only then, it seems to me, can you find fault with 
them. If you have people that were doing what they thought was 
right and performed the services, then obviously, when you talk 
about a facility telling their physicians to do something they 
know is wrong, it's a different question.

                 teaching hospitals--physician presence

    Let's go to the physician presence issue. Can you describe 
how your office interprets the standard set forth in 42 C.F.R. 
405.2521(b), the regulations in place during the period being 
audited under PATH, and can you address these issues? What 
significance, if any, does your office place on the wording of 
the physical presence requirements being different for major 
surgical procedures and other complex and dangerous procedures 
in paragraph (b)(2) than it is for all other procedures in 
paragraph (b)(1)?
    Mr. Mangano. Well, not having the document in front of me, 
I'd have to look at it. But I can tell you that the physician 
must document. Whether it was for a major surgical procedure or 
any other procedure that the physician is going to bill for, 
physicians must document that they were present at the time 
that the resident delivered the service or they delivered it 
themselves. We would look for notations in the medical records.
    Hospitals base everything on medical records, good medical 
records. So we look at the medical records to determine whether 
there was any indication, either by the physician or the 
resident, noting that the physician delivered the service or 
was present to assist the resident.
    Mr. Porter. But the question is, aren't there significant 
differences between major surgical procedures and other complex 
procedures and an average physician action under paragraph 
(b)(1), which provides different regulations when you have a 
lesser procedure, apparently?
    Mr. Mangano. My recollection of that instruction is that it 
goes on to state, and gives examples in which the physician is 
required to have that presence or to deliver the service 
itself. It does lead off with the major operations itself. But 
in terms of documenting whether the physician delivered the 
service or was present, it's the same for both. They must note 
that that has happened.
    Mr. Porter. What significance, if any, do you place on the 
language in paragraph (b)(4) that the attending physician 
should personally examine a patient ``within a reasonable 
period after admission''?
    Mr. Mangano. I believe that is a policy of HCFA.
    Mr. Porter. And are you looking at the reasonableness of 
the period? What are you looking for there?
    Mr. Mangano. I believe that provision deals with 
establishing the notion of an attending physician for the 
individual patient.
    Mr. Porter. Right.
    Mr. Mangano. That would be important to establish the 
attending physician, but would not have any importance, in my 
mind, in terms of whether a physician actually delivered the 
service. The physician would be able to bill for something like 
that.
    Mr. Porter. What documentation must be provided for an 
attending physician to bill a ``personal and identifiable'' 
service? What sort of documentation do you need then?
    Mr. Mangano. They would have to note in the medical record 
that they had done that service.
    Mr. Porter. And?
    Mr. Mangano. And we give wide flexibility to that.
    Mr. Porter. What requires them to do that?
    Mr. Mangano. HCFA regulations.
    Mr. Porter. HCFA regulations. And which regulations are we 
referring to, the ones adopted in November of 1994, or other 
HCFA regulations?
    Mr. Mangano. These regulations would go back to the 
beginning of the Medicare program, where they do require 
documentation of any services that are delivered.
    Mr. Porter. If a Medicare carrier instituted physical 
presence or documentation requirements over and beyond the 
requirements in duly promulgated regulations, would your office 
enforce those standards, and if so, under what authority?
    Mr. Mangano. If the individual contractor went beyond what 
HCFA policy was, and I would think that if an individual 
contractor went out of its way to change the policies, we would 
go with the HCFA policy nationally.
    Mr. Porter. Okay.
    Mr. Mangano. There are some instances, though, where local 
contractors do have some flexibility to require additional 
documentation if they think in their local community that 
somebody has been abusing the program. And that's certainly 
acceptable, as far as the Medicare program.
    Mr. Porter. Okay. I have some questions along those lines. 
What if a local carrier--I think you just answered that.
    What if the local carrier rules were disavowed in a HCFA 
letter by Tom Ault in April, 1995? What if Tom Ault's letter 
said, you can ignore local carrier rules?
    Mr. Mangano. Well, Tom Ault is a high level HCFA official, 
and he is in a key position to establish policy for the office. 
If HCFA were to change their national policy through Tom Ault, 
then that would of course change our job.
    Mr. Porter. What if HCFA acknowledged that IL-372 was 
ambiguous with respect to its requirements?
    Mr. Mangano. I think we'd have to get a little bit more 
specific than that. If they said the whole thing was ambiguous, 
then this project would end, because they would be changing 
their policy positions on that.
    With regard to that individual statement though, in the new 
regulations that were issued in 1995-1996, they had a phrase in 
there that talked about ambiguousness, but they were only 
talking about the attending physician relationship. It didn't 
have anything to do with physician presence.
    Ms. Brown. This is where they expanded the definition of 
attending physician, so that more people could qualify, since 
there are a number of specialists who might be handling a 
particular case.
    Mr. Porter. Okay. What if following local contractor rules 
would lead you to recover a large amount from one institution 
in one State, and nothing from another institution in another 
State, even though the teaching physicians in both institutions 
had exactly the same documentation in the medical record?
    Mr. Mangano. One of the things that I mentioned early on 
was, when we begin any one of these studies, we go out and we 
look at the instructions that were given from the contractors 
to the local institutions. And if a contractor deviated from 
what the policy was at HCFA, if they said, for example, we're 
not going to require the attending physician to actually note 
in the medical records that they were present, then we take 
that clearly into consideration.
    So in a community where the contractor has said, you must 
absolutely be present, you must document the medical record and 
indicate that you were present, as was the case in the 
Pennsylvania ones. That's a different story.
    Mr. Porter. Well, let me submit to you these questions for 
written response. I'd like you to do it as quickly as is 
reasonably possible.

                teaching hospitals--enforcement of rule

    And let me say that I am personally going to look into this 
much more closely, because there is obviously a great deal at 
stake here in both respects, enforcing the law on one hand and 
the future of teaching hospitals on the other.
    I certainly would counsel that, and I've counseled with the 
Department of Justice as well, as they're involved in this, 
that using threats and intimidation and threats of double or 
treble damages is not the way you want to go in this. I think 
you will run into serious problems and reactions here in the 
Congress if that's the word coming back to members from their 
teaching hospitals.
    And I would caution that the law should certainly be 
enforced, but that you've got to be very careful in the way you 
go about enforcing it and the message that you send to the 
academic health community. I think we've got to be very 
sensitive. We're dealing with very well-trained, educated 
people who generally are very careful about obeying the law.
    Ms. Brown. Sir, if anyone on my staff used threats or 
intimidation, I would certainly take action on that matter.
    However, just letting people know what the risk is or how 
we would handle it, that's factual information they need. So it 
depends upon how it's done, and I certainly don't want people 
to use any kind of intimidation tactics.
    Mr. Porter. I would also like you to tell me if this is not 
information that should not be divulged, your plan on 
proceeding with audits, what you're looking into currently and 
what time table you have and the like.
    Ms. Brown. We'll include that in our answer.
    Mr. Porter. Fine. Mr. Miller, any further questions?

                teaching hospitals--retroactivity issue

    Mr. Miller. Yes, I have a couple of clarifying questions. 
I'm sorry to keep dwelling on this issue. You all have a tough 
job. And you do good work. There's so much waste and fraud, and 
I've got more seniors in my Congressional district than anybody 
in the country, and especially with the Medicare, you always 
hear the problems. We don't mean to pick on you, I didn't know 
the Chairman was going to raise the same issue. Because you all 
do good work.
    But I am concerned about retroactivity, for one thing. 
Explain to me something, clarify it in my mind. Again, I'm not 
the accountant, I'm not the lawyer. If a doctor, if a resident 
and then the teaching physician goes around, sees a patient, 
and I don't know what they say, but the resident says, this 
patient has a sore throat. And the teaching doctor just 
initials it. That's not enough. And he may have walked in the 
room with the doctor. But that's not enough, right?
    Mr. Mangano. Yes.
    Mr. Miller. But if the auditor said it was okay in 1990, 
and accepted it in 1990 with just his initials and signature, 
now, if he would write that down, I went in the room and I 
agree, this patient has a sore throat, is that what it takes?
    Ms. Brown. Well, we look at procedures, not just noting a 
condition. But aside from that, I doubt if there was anybody 
doing this kind of audit in 1990. I was not IG here at that 
time, I was with Defense. But I don't think anybody was doing 
this type of review.
    When it came to our attention, of course, we looked into 
it. And trying to decide whether or not we should look into it, 
whether this was a widespread problem or not, there was a memo 
which absolutely clarified the policy that HCFA took in 1994. 
And so we took a time subsequent to that, 1995, and looked at 
whether this was occurring.
    Only where we saw it was occurring after there was 
supposedly good knowledge of what the policy was, then we 
looked back to see if this was going on for a long period of 
time. Was this something new, or had this hospital been 
charging this way for a longer period of time. If so, we went 
back. Even if somebody had billed incorrectly up until this 
1994 period, if they had changed after this HCFA clarification, 
we are not going back in those cases. This is a way of trying 
to have a manageable job here and making the scope definable.
    So it would be for someone who was recently committing this 
offense that we would look back and see if there had been a 
long period of time over which they were doing it.

                                 coding

    Mr. Miller. Well, let me ask one more question along that 
line. The issue of over-coding. With IRS, if you make a 
mistake, the mistake's in your favor, you get the money. But I 
guess you all don't, maybe that's in the law, that if there's 
an under-coding issue that you catch in an audit, they don't 
get credit for that.
    Ms. Brown. We've issued some specific guidance, in fact, in 
these PATH reviews, they're paying for the review, of course, 
that should they want to look for instances where there's 
under-coding as well as over-coding, we gave them information 
about the way they could recover monies that were identified.
    Mr. Miller. Oh, so you will allow that?
    Ms. Brown. Yes, we certainly encourage anyone. And if an 
entity is really making honest mistakes, there usually are 
under as well as over-coding mistakes. They should be able to 
identify and recover some of that.
    Mr. Miller. Thank you.
    Thank you, Mr. Chairman.

                        savings generated by oig

    Mr. Porter. Thank you, Mr. Miller.
    I have just a few more questions, if I may ask them. We 
note that in your budget justification this year you do not 
cite an overall dollar amount of savings that are generated by 
the activities of your office. In prior years, I believe you 
have always cited such a figure to show how effective you were. 
Why have you decided not to include any overall savings amount 
in this year's budget document?
    Ms. Brown. I have some charts on that. We will put those 
up. As you can see, we have savings amounts for each year. And 
there are totals. We've broken that down further, because there 
were a lot of questions in the past about what is the makeup of 
those savings. And in a very general way, I can say the black 
areas are from investigation, through fines, penalties and 
recoveries due to investigative matters.
    The white is mostly through audits. And these are things, 
whether it's a pre-award audit, post-award audit or this group 
that looks at CPA audits that come to our office, those are 
actual dollars saved because of audit activity.
    The shaded areas, by far the largest, are because of 
actions that have been taken that are policy changes. Those 
could be changes created by Congress; it might be from 
regulatory changes, or other types of policy changes. And for 
that, we use the Congressional Budget Office figures as to what 
the savings amount was. There are very few instances where they 
don't have figures. For the most part, it is made up that way.
    Last year, as you can see, there was a big dip. That was 
due to several things: two furloughs, where we couldn't send 
people around, and then not having a budget for most of the 
year. And we were working on continuing resolutions. Wehad to 
severely curtail the travel of our auditors and investigators, so we 
weren't able to accomplish nearly as much last year as we had in the 
past.
    Mr. Porter. Ms. Brown, the question was, why wasn't it 
included in your budget justification? Why wasn't this 
information, as it always has been in the past, included in the 
budget justification?
    Ms. Brown. We had a very different budget this year, 
because of the Kassebaum-Kennedy legislation. We are getting 
the majority of our money from the Trust Fund. That money is no 
longer part of our budget justification.
    In the past, we had Social Security, but that is no longer 
part of the Department. Because of these changes, there are a 
lot of computations we'd have to make to be sure that we're 
using comparable data.
    Mr. Porter. Well, in your latest semi-annual report to 
Congress, you cited a dollar amount of savings to the 
Government of $4.7 billion for the last fiscal year, which is I 
believe the figure you have in the shaded area.
    Ms. Brown. Yes.
    Mr. Porter. And you've told us that that is policy changes 
rather than audits or collections, is that correct?
    Mr. Mangano. Yes. There are a number of reasons for it. The 
shaded area, which is usually the largest category that we have 
here, relates to policy changes, as enacted through legislation 
and regulations instituted by agencies of our Department.
    Mr. Porter. So this would not actually represent money that 
comes in the door to the Federal Treasury, the white and the 
black areas would, but the shaded area would not?
    Mr. Mangano. That's correct.
    Mr. Porter. So it's simply money you didn't spend?
    Mr. Mangano. Yes, largely in the shaded area here would be 
legislative or regulatory changes. Over the last year or so, 
because of the problems with having a Medicare reconciliation 
package in, there haven't been many new legislative proposals 
that have been adopted by the Congress and the Administration.
    We think this year is going to be a far better year, as you 
begin to tackle the very difficult problems.
    Mr. Porter. Let's hope. So----
    Ms. Brown. But there would be things such as the 
incontinence supplies, the other chart, where we were paying 
about $104 million for items that really weren't qualified. We 
can show that that amount had been going up at a very sharp 
angle, and then with the clarification and enforcement efforts, 
it went down. We can really show almost a zero for billing for 
things that weren't qualified to be paid for under incontinence 
supplies.

                               oig budget

    Mr. Porter. Your total budget proposal for fiscal year 1998 
is $112.4 million. Over 70 percent of this is now classified as 
mandatory spending and is outside of the annual appropriations 
process. How does this come about?
    Mr. Mangano. With the Health Insurance Portability and 
Accountability Act of 1996, the Congress established a separate 
account to deal with health care fraud and abuse. For 1997, 
that amount was set aside at $104 million, of which $70 million 
was given to us to operate the activities that we do in the 
Medicare and Medicaid program. That money is considered a 
mandatory account. We can only spend that money on Medicare and 
Medicaid.
    Mr. Porter. So these PATH audits, for example, are part of 
that mandatory spending?
    Mr. Mangano. No, they are not.
    Mr. Porter. They're not?
    Mr. Mangano. That's correct. Oh, I'm sorry. They are. They 
would be part of the mandatory side because they're dealing 
with the Medicare program.

                        report on actual revenue

    Mr. Porter. All right. The committee, as you know, has 
asked you to submit a semi-annual report on actual revenues 
collected relating to this new mandatory part of your budget as 
well as your base budget. The initial report that you submitted 
on January 31st was not terribly informative concerning the 
period ending September 30th, 1996. What steps are you taking 
to improve future versions of this semi-annual report to the 
committee?
    Mr. Mangano. The semi-annual report was a retroactive 
report of the prior six months. It was asking for information 
related to recoveries that would come into the Medicare Trust 
Fund. After the Health Insurance Portability and Accountability 
Act is in place, all health care settlements at the Federal 
level will go into the Medicare Trust Fund, whether their 
settlement is related to Medicare, Medicaid, the CHAMPUS 
program in Defense, the Veterans Administration programs, etc.
    So to create the six month backlog, we had to go to the 
Health Care Financing Administration and ask them, over the 
prior six months, how much was received as a result of 
investigative activities. They gave us a figure of $67 million.
    After this bill was passed, we set about developing 
information that we could provide you on a quarterly basis. We 
are now tagging every individual health case at the Federal 
level. The Department of Justice is keeping these records. 
Every time a case is opened in our office or in one of the 
other Federal Inspector General's Office or the FBI, etc., it 
will be given a number. We will be able to track that number 
through the system, so we'll know how much money in the future 
is collected.
    In the first quarter of this fiscal year, I'm happy to 
report that out of our office alone, the amount of money that 
has been collected through investigations is $185 million. That 
money is now in the Trust Fund.
    Ms. Brown. A lot of records have to be changed for this, 
because I believe the question was, whether the dollars 
reported were receivables. That was the case at the point at 
which we reported it. Now we're asked to report whether or not 
that payment was actually made and deposited in some Federal 
account. So we have to go a lot further. We have to involve all 
of the other IGs who have health care responsibilities, the 
FBI, and the Department of Justice. And all of them have to 
modify the system and have a reporting mechanism to get that 
information to us.

                    teaching hospitals--justice role

    Mr. Porter. Let me ask, this gets me back to a PATH 
question. At what point in your audit process does the 
Department of Justice have a role? Where do they come in when 
you're doing one of these audits?
    Mr. Mangano. Well, actually, in most audits they have no 
role or responsibility. If we suspect there is an intent to 
defraud or a fraudulent activity going on, we do an audit or an 
investigation and turn the information over to the Department 
of Justice. The Department of Justice actually makes the 
determination as to whether they'll prosecute the case or not. 
If they decide to prosecute, either criminally or civilly, they 
do the negotiations with the offending party.
    Mr. Porter. So in this case where you have a settlement of 
$30 million, is that Philadelphia?
    Mr. Mangano. That's correct.
    Mr. Porter. Was the Department of Justice involved in that 
one?
    Mr. Mangano. They did the negotiation.
    Mr. Porter. So you found what you felt was evidence of 
fraud?
    Mr. Mangano. That's correct.
    Mr. Porter. Okay. Is there a target amount for recoveries 
in regard to the PATH audit program?
    Mr. Mangano. There is not, no.
    Mr. Porter. Okay. I think we've covered a lot of ground 
here. I appreciate your answering all of the questions. If you 
would, please follow up with the questions we provided to you.
    And we thank you for your good work and appreciate your 
candid answers. Thank you very much.
    The subcommittee will stand in recess until 2:00 p.m.
    [The following questions were submitted to be answered for 
the record:]
    Offset Folios 414 to 482/800 Insert Here



                                        Tuesday, February 11, 1997.

                  HEALTH CARE FINANCING ADMINISTRATION

                               WITNESSES

BRUCE C. VLADECK, ADMINISTRATOR, HEALTH CARE FINANCING ADMINISTRATION
CARL SWANSON, DIRECTOR, DIVISION OF BUDGET, OFFICE OF FINANCIAL 
    MANAGEMENT
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET, DEPARTMENT OF 
    HEALTH AND HUMAN SERVICES
    Mr. Porter. The subcommittee will come to order.
    This afternoon we continue the Departmental hearings for 
Health and Human Services, with the Health Care Financing 
Administration, Dr. Vladeck.
    Dr. Vladeck, we're delighted to welcome you today to 
present your testimony. You always do that with a great deal of 
skill, which we appreciate, as does the Secretary.

                           Chairman's Remarks

    But let me begin by making a short statement. And I have to 
say, Dr. Vladeck, I'm very disappointed in the President's 
budget in the sense that I think he has failed to come to grips 
with what is to me the most important issue before us, and that 
is the rate of increase in the major entitlement programs that 
you administer.
    And without doing so, I believe that the very priorities 
that the President mentioned in his State of the Union Address, 
particularly education, are going to be squeezed in such a way 
that we can't provide adequate funding to address those needs. 
I believe that Head Start and biomedical research and others 
simply will suffer unless we have the courage to do this.
    And I hope very frankly, and I'm lobbying you on this, but 
I hope very frankly that the Congressional leadership and 
representatives from the White House, including yourself, will 
sit down quietly, very early, and find the common ground that 
we need to address the rate of increase, in a very real sense, 
in both Medicare and Medicaid, and put this issue on a 
bipartisan basis, tell the American people what must be told to 
them, that we can't sustain programs at the rate that we have 
in the past, but that we can do it, and maintain quality, if we 
will work together to find that solution.
    And I have to say that also, that I consider moving the 
home health care costs for Medicare Part A to be funded under 
Part B, which comes under general revenues, I don't see that as 
a solution. It may be a kind of band-aid that we pull funds 
from another source when the program is not living up to the 
parameters that we drew for it. But I don't think that's a 
solution. I think it's a gimmick, really. I'm sorry to say it, 
but I think it is. And I don't think that's going to be 
something that will fly in the Congress, and I think we'll have 
to sit down and work these things out. I just hope that the 
Administration and the Congressional leadership is willing to 
do that. We have to come to grips with this problem. This is 
the only time to do it. Next year we will be politicized, as 
you know. And I just would urge everyone to quietly begin 
negotiations to get this job done.
    That's my sermonette for this afternoon. Please proceed 
with your statement.

                          budget opportunities

    Mr. Vladeck. Mr. Chairman, I appreciate your comments.
    If I may beg your indulgence, let me proceed, perhaps, with 
the statement we had prepared, which is not entirely on point 
with your comments, but obviously, I'm happy to answer any 
questions or respond to any concerns you might have.
    And let me also say that we are very hopeful that 
circumstances will permit us the opportunity in the very near 
future for the representatives to the Administration and 
Congressional leaders to come to a comprehensive set of 
arrangements that will produce a balanced budget, that will put 
our programs on a more solid, long-term footing, and that we'll 
really break some of the log jams that have occurred around 
these issues in the last several years. I think we are very 
much committed to it. And again, I'd be happy to respond to 
specific questions or concerns.
    But we have already very early in this Congress perceived a 
kind of change in the character of the conversations that I 
think bodes very well for the opportunities this year. And we 
very much look forward to the opportunity to work with you and 
your colleagues and the leadership of both parties to get the 
job done.
    Mr. Porter. And I appreciate that sentiment.

                       Introduction of Witnesses

    Mr. Vladeck. Let me be just a little bit more parochial 
about the part of the budget closest to my heart, and then 
obviously we can address some of these other issues as well. It 
would be inappropriate if I didn't begin by introducing my 
colleagues. I think you know Dennis Williams, the Deputy 
Assistant Secretary of the Department for Budget. I think he 
has a permanent chair here, actually.
    Mr. Porter. He's been longer on this subcommittee than any 
of us. [Laughter.]
    Mr. Vladeck. You may not be familiar with Carl Swanson, who 
is the Director of the Budget at HCFA, and who is largely 
responsible for preparing the Administrator for this hearing. 
Thus, any shortcomings or failures in my presentation today can 
be attributed to him. [Laughter.]

                           Opening Statement

    Mr. Vladeck. We're really very proud of the President's 
budget request for the Health Care Financing Administrating for 
fiscal year 1998, because we do think it represents an 
important step in reflecting a commitment which is part, we 
believe, of the long-term answers for the Medicare and Medicaid 
programs, of transforming the Health Care Financing 
Administration from a passive payer of bills to a more 
aggressive, beneficiary-focused and quality-focused, value-
focused purchaser of health care. We do this within an 
environment of consistent constraint. I believe you've seen 
charts such as the one that's on the left in the past.
    But operating under the kind of budgetary constraints to 
which the Chairman was referring, I believe that at least for 
the last five years, even in nominal dollars, we have been 
running very close to level on program management. We had a 
significant reduction in our staff at the beginning of that 
period, but kept constant throughout, while the workload 
continued to increase.
    And while our [4,000] people and our Federal administrative 
budget of about [$350] million supports, as you know, the 
largest health care purchasing programs in the world, the total 
budget for the agency, including the benefit programs, is 
requested at $334 billion in 1998. The chart to your right is 
our favorite depiction of the extent to which administrative 
expenses to actually operate the program are less than one 
percent of the total benefits we're paying.
    [Clerk's note.--Later changed to 4,085 people and $359 
million.]
    The pie chart in the lower right hand corner explains this 
better. Throughout our history, we have leveraged the 
appropriated dollars through a series of partnerships with 
private organizations and with the States who do much of the 
work of operating the Medicare and Medicaid programs. Almost 70 
percent of our entire Federal administrative budget represents 
the funds we pay to the Medicare contractors, the private 
insurance companies who pay the claims, communicate with 
providers and beneficiaries, do program integrity review and 
things of that sort. Another share goes to the States, both for 
their quality activity and for their administration of the 
Medicaid program.

                      medicare transaction system

    This budget includes a number of initiatives to assist in 
our transformation from a passive bill payer to a more focused 
and effective purchaser of care. In many ways, the most 
important is the continued investment in the Medicare 
Transaction System, or the MTS, which when completed, will give 
Medicare, for the first time in its history, a single, 
integrated state-of-the-art data system. The MTS will 
standardize claims processing, but, perhaps more importantly, 
give us the opportunity to do a substantially better job of 
preventing fraud and abuse and overpayment before claims are 
paid, rather than having to pay and chase afterwards, provide a 
significantly higher level of service to all our customers at 
lower administrative costs, and respond much more quickly and 
responsively to requirements put on us by new legislation or by 
changes in the marketplace.

                           medicare handbook

    I am proud to say that this year's budget also includes 
continued funding for annual distribution to all of our 
beneficiaries of the Medicare handbook, the closest thing the 
Medicare program has to the annual summary of plan benefits 
that all of us with private health insurance or Federal 
employees health insurance expect as a matter of course and a 
matter of right. But that's only one piece of the very 
substantially expanded provision of information and educational 
services to all our customers, but particularly our 
beneficiaries that are contained in this proposal.

                           quality activities

    We are also substantially redirecting and rethinking all of 
our quality activities, including those funded through the peer 
review organizations, the PROs, through an entitlement account. 
We have gotten away from this sort of cops and robbers 
mentality of trying to find the one or two percent of 
egregiously poor performers, and moved to efforts to increase 
the average quality of care available to our beneficiaries, 
both in the fee-for-service and in the managed care programs. 
And within the next few months, we will be publishing in the 
professional literature a couple of reports: one on changes in 
the quality of care for Medicare beneficiaries who have 
recently experienced a heart attack, and another report on 
changes in quality of care for Medicare dialysis patients, 
showing that these initiatives are really beginning to pay off 
and really beginning to make a difference in peoples' lives.

                          hcfa reorganization

    Just a couple of additional points, if I may. As many HCFA 
watchers are aware, we are in the midst of a process I 
announced in November to substantially reorganize the entire 
agency. This is the most systematic reorganization since the 
agency was created 20 years ago. I'm often asked by my 
colleagues and by many of our staff, why, with all the other 
things you have to do in the midst of all this ferment about 
Medicare and Medicaid, are you going to the considerable time 
and trouble of this kind of effort. And it's precisely because 
we see continuing new challenges in an era of constrained 
resources, certainly constrained personnel ceilings and 
constrained budgets, that we have to use the resources we have 
much more efficiently.
    Let me just give one or two examples, if I may, in that 
regard. First, the continued growth in the size of the Medicare 
managed care program, which grew by approximately one million 
enrollees in calendar year 1996 alone, obviously significantly 
expands our responsibilities to monitor the performance of 
those HMOs and to ensure that they're providing high quality 
care to our beneficiaries. In order to do that, we have to 
redeploy people from other functions or other activities. By 
re-engineering the ways in which we do business or otherwise 
rethinking the ways in which we're organized, we can perhaps 
become more efficient.
    Similarly, and perhaps even more immediately, the Health 
Insurance Portability and Accountability Act of 1996 is very 
important legislation that was achieved on a bipartisan basis 
with marvelous cooperation. It gives us a number of 
considerable responsibilities, including some oversight of 
Stateregulation of private health insurance and administrative 
simplification without any associated increase in resources. We have 
about 10 people working full time on implementation of the insurance 
provisions of that legislation, and probably 30 or 40 working full time 
on the administrative simplification provisions. If we're going to 
continue to do our other work, we need to significantly redeploy our 
resources. And those are again just brief illustrations of what this 
reorganization effort is all about.
    With that effort, with the kind of talents and commitment 
we have among our folks, and with the kind of support, frankly, 
that this organization has received from folks in both parties 
who understand what it is we do and the importance of it to 
making the programs work, we are optimistic about our ability 
to cope with continuing growth of demands in the future, and 
about our ability within the levels of support to get the job 
done. Obviously, we expect this will be a busy and significant 
year on the programmatic and entitlement side, as well as on 
the operating side. We're happy to answer questions about any 
of those issues, if we can.
    I thank you for the opportunity to be here.
    [The prepared statement follows:]
offset folios 811 to 819 insert here



                   enrollee increase in medicare hmos

    Mr. Porter. Mr. Vladeck, thank you for your statement.
    Let me ask first, you said that enrollees in HMOs under 
Medicare grew by one million in the last year, is that correct?
    Mr. Vladeck. Yes.
    Mr. Porter. What has caused that increase?
    Mr. Vladeck. I think there are two things that go on. The 
most important, frankly, is the increase in the number of 
plans, and particularly the increased availability of Medicare 
HMOs in communities in which, in the past, there were none or 
only a very small number. Even in some communities in which for 
a long time there were one or two HMOs providing services to 
Medicare beneficiaries, it has been our experience that new 
entrants can change the competitive dynamics of those markets 
very substantially. They tend to create a competition to 
improve benefits and reduce premiums. That has a very positive 
effect on enrollment.
    But if you look from community to community, what you find 
is that communities in which managed care really took off in 
the private sector over the last five or seven years, sometime 
in the last two or three years, the plans turned their 
attention to the Medicare market, in which they had never 
participated before, or in which they had never before been 
very active. And that's where a large share of our growth has 
occurred. Let me give you just one or two examples.
    In both metropolitan Boston and metropolitan Philadelphia, 
we have gone from single digit proportions of Medicare 
beneficiaries enrolled in HMOs to approximately a third over 
just a three-year period. It's sort of a takeoff phenomenon in 
the market. And there are still a number of major metropolitan 
areas, particularly in the southeast and some parts of the 
midwest, where we are just beginning to see the sort of taking 
off that has occurred in some of the northeastern cities in the 
last few years.
    Mr. Porter. Well, I would simply say that the plan, the 
balanced budget plan of 1995 that the President vetoed would 
have created some choices for Medicare beneficiaries of this 
type, and given them some incentives to choose the lower cost 
alternative, including managed care plans, among others. 
Preferred providers, the individual medical savings accounts, 
and the like. And it seems to me that if you are here 
testifying that people are moving to managed care plans without 
any particular financial incentive, simply because they've 
become more credible in the areas in which they are providing 
services, and are beginning to compete for beneficiaries' 
business, I think this ought to be the kind of common ground 
that we could find to structure Medicare in such a way that 
gives consumers greater choices and does restrain the rate of 
increase in the growth of the program, and preserves quality of 
care. I think this is exactly the kind of common ground we 
ought to look to.
    Mr. Vladeck. Well, again, Mr. Chairman, the President's 
budget does call for making available to Medicare 
beneficiaries, not only traditional HMOs, but preferred 
provider organizations and provider-sponsored networks. It also 
calls for a substantially expanded effort in beneficiary 
education and informational services. It does not, however, 
call for creating any greater financial risk to beneficiaries 
based on the choice they undertake of the kind that we objected 
to in earlier legislation.
    But I do think there is an opportunity to find a lot of 
common ground here.
    Mr. Porter. My recollection of the bill that was vetoed is 
that it gave people no Part B premium in return for choosing 
one of four options that they might think were best for 
themselves. I don't call that an additional financial risk. I 
think it's quite the opposite, it gives them a financial 
incentive and allows them to save some money that they're 
spending now for choices in the marketplace.

                      home health care legislation

    Let me ask you, let me go back to the Part B Trust Fund 
question. I mentioned in my opening remarks your proposal to 
shift some of the home health care costs from Medicare Part A 
Trust Fund to Part B. From the appropriations perspective, by 
how much would this proposal increase the mandatory payment 
coming from our bill to the Part B program?
    Mr. Vladeck. Over the five year period, Mr. Chairman, I 
don't have the year by year figures, but I suspect Carl does, 
we estimate the gross transfer, and I'll explain that in a 
second, would be approximately $80 billion. Of that $80 
billion, approximately a quarter of it would not appear in 
payments to home health agencies. It would appear in payments 
to managed care plans, because the rates of capitated plans are 
tied to fee-for-service and because projections that we're 
going from about 14 percent to 22 or 23 percent enrollment in 
managed care over the budget window, then roughly 18 percent or 
so of these costs end up in Part B payments to managed care 
plans rather than in payments to home health agencies.
    So it's about $80 billion gross, of which $60 billion is 
payments to home health [Clerk's note: ``$60 billion'' later 
changed to $65 billion].
    Mr. Porter. All right. You propose to exempt the Part B 
premium paid by beneficiaries from this added cost. What is the 
rationale for the Administration's proposal? Won't 
beneficiaries end up ultimately paying for this transfer 
anyway, either through taxes that support the mandatory Part B 
payment in our bill?
    Mr. Vladeck. Well, there is clearly an issue of the 
incidence of the costs associated with the inclusion of home 
health care benefits in Part B. Our view is that 
beneficiarieswhose average income is $13,000 or $14,000 a year, three 
quarters of whom live in households with incomes below $25,000 a year, 
should not be expected to bear that additional cost.
    Mr. Porter. Correct me if I'm wrong, that the method of 
payment won't really change the fact that home health care is 
reimbursed at cost. Am I correct?
    Mr. Vladeck. Well, we have separate proposals in the 
President's budget to change the way we pay for home health 
care, and to effect a number of other changes in the home 
health care program. Among these changes, quite apart from this 
allocation, of course, between Part A and Part B, would be a 
savings of approximately $15 billion [Clerk's note: Later 
changed to $14 billion] over the five years of the budget.
    Mr. Porter. This will require legislation in both respects, 
am I correct?
    Mr. Vladeck. Of course.
    Mr. Porter. And do you want to give us a percentage of how 
likely you think this legislation is to be adopted?
    Mr. Vladeck. Well, I've been hearing all kinds of 
optimistic reports about the prospects for a comprehensive 
balanced budget agreement. I think the fact is that if you 
don't address the impact of the growth in home health costs on 
the Hospital Insurance Trust Fund, and you're concerned about 
the well-being of the Trust Fund, there aren't a whole lot of 
other tools that are available.
    I'm optimistic about the big picture solution, and so I 
assume we'll have to find how to do the necessary pieces within 
it.
    Mr. Porter. Well, I hope we get both of them done. Ms. 
DeLauro.

                        civil rights compliance

    Ms. DeLauro. Mr. Stokes is just recovering. My own voice is 
under siege, I've got an inner ear infection. So we all 
apologize.
    Mr. Vladeck. I wish I were the kind of doctor who could 
help you with that. I'm sorry. [Laughter.]
    Ms. DeLauro. I just have two questions for my colleague.
    Mr. Porter. We won't even charge you for those.
    Ms. DeLauro. Thank you so much, Mr. Chairman. Is that 
because this is the first meeting back for me, or----
    Mr. Porter. Yes, that's about it. [Laughter.]
    Ms. DeLauro. Thank you.
    The question is, is the agency, Dr. Vladeck, prepared to 
publicly remind managed care organizations serving Medicare and 
Medicaid beneficiaries that health plans are expected to comply 
with Title VI of the 1964 Civil Rights Law and other civil 
rights laws?
    Mr. Vladeck. That point is extremely well made and well 
taken. And the answer is yes, we have been in conversations 
with the Department's Office of Civil Rights and other groups. 
In fact, I think I'm meeting tomorrow to discuss some work 
we've been doing with the National Medical Association. And we 
have some remediation to do on that score. But the answer is, 
absolutely, we need to be much more forthright about that.
    Ms. DeLauro. Will you be requiring States to monitor and 
enforce these laws, as well?
    Mr. Vladeck. Frankly, I will plead ignorance on some of the 
issues involved in the appropriate mechanisms for enforcement 
on issues of this kind within the context of the Medicaid 
program. But we will do what needs to be done to make sure 
these requirements are enforced.
    Ms. DeLauro. Thank you.
    Mr. Porter. Is that all the questions you have for Mr. 
Stokes? Now we're looking at the clock.

                      medicare transaction system

    Ms. DeLauro. Thank you. Thank you very much. I apologize 
for being late to the hearing.
    I have two or three questions, one on the Medicare 
Transaction System, which has been discussed in terms of 
reducing paperwork and improving cost efficiency. It has been 
under development for some time. What is the status of the 
program right now?
    Mr. Vladeck. Because of the continued complexities of 
budgeting a multi-year development effort of this kind on an 
annual appropriations, we are in the process of examining a 
number of different scenarios. We are well along in the 
development of the software for the MTS system. We agreed about 
a year ago on the basic, what the systems people like to call 
architecture of the system, how many machines and where they 
ought to be.
    So we have a basic architecture. We are moving along with 
the software development.
    We would hope, sometime within the next year, 
approximately, to begin identifying the first physical sites at 
which some of the activities would be housed. And then the rate 
at which we phase in both the new software and physical 
facilities is something we're looking at in terms both of 
budgetary constraints and in terms of everyone's quite 
legitimate concerns about minimizing the amount of risk to the 
budget and to the program from trying to jump forward in steps 
that are a little bit too large. But we are on a phased in 
implementation process that's underway, and that extends for 
somewhere from the next three to five years.
    Ms. DeLauro. So within the next three to five years?
    Mr. Vladeck. Again, there are pieces to this phased-in 
implementation. The first part is the total redesign of our 
system for paying Medicare managed care plans. And we would 
expect to have that up and running in Federal fiscal year 1998. 
The last parts of the system, which are a replacement of our 
existing processing for Part A, for basic hospital claims, is 
probably at the tail end of that five year horizon, with a 
number of intervening steps in between.

                       medicare integrity program

    Ms. DeLauro. I'm supportive of the Medicare integrity 
program. How does this differ from the Operation Restore Trust 
that you talked about before the subcommittee last year? What 
savings have you found from your efforts and what additional 
savings do you anticipate from this effort?
    Mr. Vladeck. Let me make the distinction, if I may. What we 
now call the Medicare Integrity Program was essentially, from 
HCFA's point of view, that part of our contractor budget in the 
past that we called payment safeguards consisting of the 
activities of coordination of benefits or Medicare secondary 
payers, fraud and abuse work by the contractors, audit activity 
and medical and utilization review. Those activities, as you 
know, were pulled out of the discretionary part of the budget 
under the provisions of HIPAA last year and established with a 
separate funding stream.
    There is some overlap between those activities and the 
activities of Operation Restore Trust, which was begun as 
ademonstration project by Secretary Shalala and the President in 1994 
on a very small scale. With the expanded funding made available under 
HIPAA to the Inspector General and to the Department of Justice and to 
our General Counsel, the demonstration project is now being 
substantially expanded. Operation Restore Trust, which had a total 
budget, I think, of something in the range of $3 million a year, has 
already returned 20 million dollars in actual [Clerk's note: Later 
changed to ``potential''] recoveries and repayments. And there's an 
awful lot of activity still pending in litigation or elsewhere in the 
legal system. And it will be expanded under the authorities provided to 
the relevant agencies in HIPAA.
    We are continuing to talk about a rate of return on the 
entire program integrity effort, including not only Operation 
Restore Trust, but the Medicare Integrity Program, in the range 
of 12 to one. The 1997 budget for those activities is $440 
million.
    Ms. DeLauro. For the two programs?
    Mr. Vladeck. For the Medicare Integrity Program and for 
HCFA's part of Operation Restore Trust, although most of the 
dollars for the expanded ORT will be expended by the Inspector 
General and by the Department of Justice. But we are still 
talking about rates of return in the range of 10 or 12 to one 
from all of those activities.

                           medicare handbook

    Ms. DeLauro. On both of those activities. Okay.
    I was interested in your comment about the Medicare 
handbook, and how it's been put on the internet. Please don't 
misunderstand this, because I truly do applaud your outreach 
efforts.
    But how many seniors use this new kind of technology? Do 
you have any idea of how many hits you're getting on a typical 
day?
    Mr. Vladeck. I don't have that specific information with 
me. The answer is five percent of our beneficiaries, which is a 
number I've just pulled out of the air. But just to give you an 
example of the level of activity, we're talking about almost 
two million people. I remember hearing something of the number 
in the order of plus or minus 10 percent of our beneficiaries 
have some kind of access to electronic communications. I think 
it's also important to emphasize that major consumers of this 
information are not just beneficiaries themselves, but their 
family members and particularly folks in insurance counseling 
agencies, other volunteer programs and so forth, who may be 
much more likely to be comfortable accessing this material 
electronically.
    I myself don't have the software to pull it down along with 
the nice graphics, although I can get the text copy.
    Ms. DeLauro. Do I have time?
    Mr. Porter. I'm looking at the time, we have two agencies 
this afternoon, and I didn't think we were going to have as 
many members as we have now. I was about to say we can allow 
maybe seven minutes each. Why don't you go ahead and ask your 
last question. And here's Nita, well, there goes the seven 
minute rule. [Laughter.]

                           clinical research

    Ms. DeLauro. I'm interested in promoting clinical research, 
and was a co-sponsor in the last Congress of the Clinical 
Research Bill. But recently I understand that the military 
health care system has negotiated an agreement with NIH to 
cover the routine costs of clinical research. These are costs 
that would be incurred anyway if the patient was not 
participating in research that is covered by the military 
health care system. This offers, obviously, the patient the 
opportunity to participate in cutting edge research to which 
they would otherwise not have access.
    Have you examined the possibilities of a similar type of 
agreement between NIH and Medicare?
    Mr. Vladeck. Though we've had very extensive discussions 
with the NIH, actually, when I first talked to Dr. Varmus about 
this, he suggested that we first focus on seeing if we could 
come to an agreement with the National Cancer Institute, 
because so large a proportion of clinical trials are there.
    Ms. DeLauro. Exactly.
    Mr. Vladeck. We undertook a range of discussions then. 
Senators Mack and Rockefeller introduced legislation in the 
Senate which overlapped, to a considerable extent, what we had 
been talking about. And at the very end of the last Congress, 
we met with them and with their staffs to see if we could all 
come together around a set of agreements.
    I think we were making progress when everybody went into 
recess. But we will gear up those discussions again. And we 
will proceed simultaneously on the administrative front and the 
legislative front and do whichever comes first.
    Ms. DeLauro. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. DeLauro.
    Mr. Bonilla.

                   medicare subvention demonstration

    Mr. Bonilla. Thank you, Mr. Chairman.
    Hello again, Dr. Vladeck. I have a question about Medicare 
subvention. As you may or may not know, in the South Texas, San 
Antonio area, we've got a lot of military retirees. And they're 
very concerned about medicare subvention.
    I understand that HCFA has or will shortly be submitting 
language for legislation to the House Ways and Means, 
Subcommittee of Ways and Means, implementing a Medicare 
subvention demonstration project. Could you tell me if this is 
true? Do you plan, or are you getting together a bill now?
    Mr. Vladeck. The Administration submitted proposed 
legislation to this effect last year. We are going to be 
submitting essentially the same legislation at the beginning of 
this Congress rather than the end. It will be an administration 
proposal jointly by us and the Department of Defense to our 
committees of respective jurisdiction. And given the much 
better timing this year relative to the Congressional session, 
we are hopeful we can move such legislation through.
    Mr. Bonilla. How high up is the subvention issue, on your 
radar screen? Because it's something that a lot of us around 
the country hear about quite a bit.
    Mr. Vladeck. We're very much aware of it. And in fact, as 
you know, the several million of our beneficiaries who are also 
military retirees are not the shyest or most retiring of our 
beneficiaries. So we have had a lot of communications from 
them. And we think, frankly, that there are a number of 
communities in the United States, San Antonio may well be a 
good example, where we have the potential for a win-win 
situation through this subvention. So we are eager to move this 
process forward.

                           regulatory burden

    Mr. Bonilla. I know you get an earful about the many 
regulations HCFA turns out all the time, and also paperwork.I 
was looking at an article in the Medical Herald recently that states 
Texans spend at least $500 million too much on their health care bills, 
blaming Federal Government regulations and administrative red tape. 
According to a Texas Medical Association study of 20 office-based 
physicians in various specialties in settings across the State, 
administrative hassles with Government-sponsored programs like 
Medicare, combined with other entities, costs Texas residents $360 
million each year.
    I've heard a lot of stories from my constituents of the 
problems they face in complying with every requirement from 
HCFA. I'm sure you're hearing about this as well, and if so, my 
question is what is HCFA doing to ease the administrative 
burden so that providers can spend more time actually taking 
care of health care needs versus regulation and paperwork?
    Mr. Vladeck. Well, Mr. Bonilla, we believe that much of the 
burden on providers arises from the different requirements 
placed on them by different payers. And as the health care 
market has become more fragmented and more decentralized, that 
problem has gotten worse.
    That's why we were pleased with the direction again 
contained in the administrative simplification title of HIPAA 
as enacted last year, which calls for the Secretary, working 
primarily from materials developed by the private sector, to 
adopt a set of standards over the next several years for 
standardizing all the sorts of information that is employed by 
payers and providers of service in the billing and quality 
assurance processes. And we believe, as clearly was the intent 
of the legislation, that implementation of those provisions 
will make life simpler and more economical for everyone.
    Mr. Bonilla. Do you think that this figure of $360 million 
a year is accurate, just based on your expertise, I know you 
haven't looked at Texas specifically, that this figure is 
accurate?
    Mr. Vladeck. I really would have no particular way of 
knowing that. I would say that again, we believe that because 
of our very, very heavy reliance on electronic billing that, as 
compared to other health insurers who pay providers directly, 
and as opposed to those which operate on a basis in which the 
provider has no billing expense because he just bills the 
patient, and the costs of being reimbursed are incurred by the 
patient. We believe that our costs for providers as well as for 
ourselves are lower than most other direct payers for health 
providers, again, because we are so heavily electronic, and 
because we do benefit from considerable economies of scale in 
those transactions.
    Mr. Bonilla. We'll be working with you more on that in the 
future, I'm sure. And I appreciate you answering our letters 
whenever we have an inquiry that we send to your office.

                              telemedicine

    I want to turn now to telemedicine. This is something very 
important in my area, but not just because I've got a district 
that is 58,000 square miles and is larger than any State east 
of the Mississippi. It's a rural area, of course, but I know 
sometimes telemedicine can be very significant from urban area 
to urban area, because certain specialists may not be 
available. Nonetheless, I do have some areas where people have 
to travel 100 miles to get to the nearest doctor.
    I'm encouraged that HCFA has responded to language the 
committee inserted in last year's report, instructing HCFA to 
use telecommunications technologies to increase access to 
medical specialty care in these rural underserved areas. My 
understanding is that HCFA is administering a three year 
experiment in which Medicare will pay for telemedicine service 
at 57 Medicare certified facilities. Are any of those 
facilities in the State of Texas?
    Mr. Vladeck. I'm afraid, I believe the answer to that is 
no.
    Mr. Bonilla. I believe, my colleague is whispering to me, 
he's going to ask about Oklahoma next. [Laughter.]
    Mr. Vladeck. I actually had the pleasure of visiting the 
hub of the telemedicine program at the University of Oklahoma 
several years ago and was enormously impressed. But that is not 
one of our demonstration sites either. These were selected by 
national competition. And the sites are primarily, I believe, 
in the midwest and in the southeast, as having been the places 
that were most developed earliest.
    I might also say that our colleagues at the Health 
Resources and Services Administration, Office of Rural Health, 
have funded a number of additional telemedicine demonstrations 
as well. But I honestly can't tell you where those are.
    Mr. Bonilla. Well, that's something that I'm going to 
continue to push for in my area. Because at the South Texas 
Medical Center, it's important at the military hospitals there 
that link up with our private sector researchers. It's 
extremely important to the future health care needs of our 
area.
    Do I have remaining time, Mr. Chairman?
    Mr. Porter. No.
    Mr. Bonilla. Thank you, Dr. Vladeck.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Bonilla.
    Mr. Wicker.

                        survey and certification

    Mr. Wicker. Let me ask you about certification of survey 
process, Mr. Vladeck.
    I understand that there has been a problem with the survey 
process for hospitals and nursing homes, and that as a result, 
there is a backlog of certain cases. Would you comment about 
what your suggestions are for this?
    Mr. Vladeck. Yes, sir. There was, as of a year ago, a very 
significant backlog of certifications for new facilities in 
those parts of the country where we had the largest number of 
facilities seeking to enter the Medicare program. Thanks to a 
considerable extent to the work of this subcommittee, an 
additional appropriation was made available for these survey 
and certification activities in the current fiscal year. And we 
expect as a result that by the end of this fiscal year that 
backlog will be pretty much eliminated.
    Now, I'm going to sound probably somewhat predictable to 
you. The President's budget for fiscal year 1998 proposes a new 
means of financing the initial surveys, through a fee charged 
to the applicants. And the budget reflects not maintenance of 
the 1997 level, but an assumption that the fee would be enacted 
so that the appropriation request returns to the earlier year 
level. And if we can't, through whatever the sources, maintain 
the current level of funding, we are concerned that the backlog 
would begin to re-emerge as facilities continue to seek to 
enter the program.
    But we do believe that for this fiscal year, at least, the 
additional appropriation will make it possible for us to pretty 
much wipe out that backlog.
    Mr. Wicker. Without the fee?
    Mr. Vladeck. Without the fee, but with the additional $12 
million, or $10 million in the appropriation, like this year's.

                                deeming

    Mr. Wicker. Well, as an alternative to the President's fee 
proposal, let me ask you how much consideration has been given 
to another suggestion. That is more or less the privatizing of 
some of this function. Are you aware, the Joint Commission on 
the Accreditation of Health Care Organizations has proposed to 
contract with the Federal Government for this purpose. Have you 
looked into estimates about how much money could be saved by 
moving into this methodology?
    Mr. Vladeck. Well, we already do have a relationship with 
the Joint Commission, sir. Under the statute, the Joint 
Commission is deemed. The Joint Commission on Accreditation for 
General Hospitals is deemed to qualify Medicare certification. 
And we have also deemed the Joint Commission as an accreditor 
of home health agencies.
    And I believe if we haven't already, then we will, for 
ambulatory surgical facilities as well. The 1996 appropriations 
act substantially broadened our deeming authority. And we had 
expected it would give impetus to additional efforts on the 
part of private accrediting bodies to seek status where they 
could be deemed to qualify for Medicare approval. Since that 
time, we have identified a couple of private organizations in 
the area of ambulatory surgical facilities. But frankly, I have 
been somewhat surprised by the relative paucity of applications 
from private accrediting organizations for deemed status for 
additional kinds of facilities.
    Mr. Wicker. Do you know what percentage of this function is 
being performed by private accrediting organizations now?
    Mr. Vladeck. In the hospital sector, about 80 percent of 
all hospitals participating in the Medicare program are 
certified on the basis of Joint Commission deeming rather than 
on the basis of our own survey. On the home health care agency 
side, where the Joint Commission and one other organization 
have been deemed for a number of years, I think the number is 
perhaps 200 of the 10,000 home health agencies participating in 
the Medicare program that are certified by virtue of such 
deemed status.
    Mr. Wicker. And nursing homes?
    Mr. Vladeck. We do not permit deeming of nursing homes.
    Mr. Wicker. Has your agency looked into allowing this 
procedure with regard to nursing homes?
    Mr. Vladeck. Because of the particular history of the issue 
of nursing home quality, the 1996 appropriations bill requires 
us to report to the Congress by July 1, 1997, on the 
desirability and practicality of deeming for nursing homes. And 
we will have that report to you in keeping with that schedule.

                disproportionate share hospital payments

    Mr. Wicker. Okay. Let's move to the disproportionate share 
hospital payment issue. I think you and I have probably had 
some discussion about this last year. But in this year's 
Administration budget, the President's proposing to reduce the 
DSH payments by 26 percent. Now, this is a substantial decrease 
to those hospitals which serve the lowest income Medicaid 
patients. And I'm just wondering what your thoughts were in 
making that recommendation.
    Mr. Vladeck. Sir, we've been very much influenced by a 
study performed by the Urban Institute several years ago, which 
is consistent with our own less systematic analysis of the 
issue. That study has suggested that approximately a third of 
all dollars that flow through State disproportionate share 
hospital programs left the health system altogether, and 
perhaps another third of those dollars were basically a 
recycling of dollars contributed to the DSH program by health 
care providers themselves.
    In our conversations with organizations representing the 
safety net hospitals and safety net providers such as the 
National Association of Public Hospitals or the Association of 
Children's Hospitals and Related Institutions, we found that 
they believe that only about two-thirds of the DSH dollars 
currently in the system are in fact going to subsidize services 
in institutions which really do serve a disproportionate share 
of low-income folks.
    And so we believe that with better targeting of DSH dollars 
you could reduce total expenditures by 25 or 30 percent and 
still get at least as many dollars to the institutions that 
most need them.
    Mr. Wicker. Well, I appreciate that. And I would just 
simply point out that DSH outlays have grown only at a rate of 
2.4 percent annually for the last several years, actually since 
1992. And it would just seem to me that we ought to look at the 
area of the Medicaid program that is growing at a much higher 
rate, and that corrections can be made through the 
disproportionate share program without disadvantaging the 
hospitals that really, really need it.

                      payments to rural hospitals

    I want to ask you about one issue in particular, and that 
is, the action by HCFA on October 1 of last year, concerning 
the ability of rural hospitals to be reclassified as other 
urban, for purposes of determining the Medicare payment 
reimbursements. I was one of the Congressmen who vigorously 
protested this new regulation by your agency. The effect of it 
was to disadvantage 28 hospitals and to cut their 
disproportionate share revenue by some 10 percent, while 
readjusting funds for over 5,000 other hospitals by an 
absolutely insignificant sum.
    Why in the world would we take such an action, that would 
have that traumatic of an effect on these 28 small hospitals, 
when the reallocation could not possibly have helped the other 
5,000 to 5,100 hospitals?
    Mr. Vladeck. I think the answer needs to be understood in 
the terms of the history and in the rationale for the 
reclassification process in the first place, and what occurred 
on October 1 of last year. The whole problem of geographic 
reclassification of hospitals participating in the prospective 
payment system arose because in the initial years of 
prospective payment system, the standardized amounts or basic 
rates for rural institutions were lower than they were for 
urban institutions.
    And for those institutions that, either because they 
actually shared a labor market with urban institutions or for 
other reasons experienced some of the same cost pressures as 
urban institutions, receiving the lower rate created an 
inequity. Therefore, Congress created the geographic 
reclassification, as a way of addressing, on a case-by-case 
basis, the instances in which treatment as a rural institution, 
with the consequent lower rate, seemed to produce an inequity.
    What happened on October 1, 1995, was theelimination of the 
differential between rural and urban hospitals in the standardized 
amount, except for the hospitals in urban areas with more than a 
million population, the so-called ``large urbans''. And it seemed to us 
that once the original reason to have a reclassification process was 
made moot by the raising of rural standardized amounts to the urban 
level, the rationale for such a reclassification had been eliminated. 
This despite the glitch that remained in the law under the much 
proportionately smaller issue of disproportionate share hospitals.
    Mr. Wicker. Let me just follow up on that question. I think 
this did happen on October 1st, 1996. So we're just half a year 
into it.
    But you're not contending that you were mandated by law to 
make this change. You will concede that this was discretionary 
on the part of your agency.
    Mr. Vladeck. Yes, sir. But I think we felt the action we 
took was consistent with the direction of the law that called 
for the elimination of the urban-rural distinction, and 
therefore, much of the initial rationale for the 
reclassification process.
    Mr. Wicker. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Wicker.
    Mr. Istook.

                     intergovernmental cooperation

    Mr. Istook. Thank you, Mr. Chairman.
    I have to depart momentarily, so I'm not going to be able 
to get into anything with you, as much as I'm sure you'd love 
to take that time together. I do want to express appreciation 
for the cooperation and courtesy that your office has given. 
You've helped on a couple of waivers that involve Oklahoma, and 
helped us get some information through computer runs and so 
forth. That's very much appreciated.
    And although most of it will have to be, of course, 
followed up by correspondence, the essence of what I did want 
to go into with you comes down to this. When we in Congress, of 
course, debate something that has very large economic impact, 
involves a lot of money, it's a process, of course, that's out 
in the open, you hear all sorts of things, Congressman A thinks 
this, Congressman B thinks that, Congressman C thinks something 
different. And a variety of views are fully aired.
    When an initiative or a program comes to us, such as the 
President's budget and the President's proposals, I recognize, 
as other witnesses have said, everyone in the Administration is 
asked to be a team player and an advocate and present the 
ultimate approach that has been directed by the President. But 
in so doing, that sometimes hinders us, because we get the 
company line, rather than the details and the information that 
we often need to be able to make a decision.
    Now, with that in mind, I hope, one, you'll keep that in 
mind with the information we want to request of your office. 
Secondly, I did want to ask specifically on the so-called kids 
care initiative, and just looking at, in a highlight fashion, 
what has been the role of HCFA in developing the plan and the 
intended role in actually administering it? And I say 
developing it, because it certainly is my understanding that 
this is, these are ideas that were elsewhere and were perhaps 
run through HCFA as opposed to implemented. But I would like to 
know, since your agency is in such a critical position, what 
really was the role of HCFA in developing it, as opposed to 
being asked to endorse it.

                        child health initiative

    Mr. Vladeck. I think it's not giving away any deep, dark 
executive branch secrets to say that a team was convened within 
the Department of Health and Human Services some time last fall 
to look at the issue of what came to be called the Child Health 
Initiative. That included our representatives as well as 
representatives from other agencies within the Department, both 
operating agencies and representatives of the Office of the 
Secretary.
    We were not the chair of that initiative, but we were very 
active participants. I would say that you then have to start 
parsing the pieces to talk about roles and involvement. The 
part of the Child Health Initiative that is the least specific 
and that speaks to working with the States on eligibility 
outreach for kids who are currently legally eligible for 
Medicaid but not enrolled in fact was something of a personal 
hobby horse of mine, and was a part of this process.
    My interest in this grew out of our work and our concerns 
with the implementation of the welfare reform legislation and 
the recognition that eligibility determination systems on the 
income maintenance side would be changing as a result of 
welfare reform. We are concerned about what that might mean for 
kids and families who previously might have been receiving cash 
assistance, or who would now be receiving, or who would be 
working or under other arrangements.
    So that was my personal thing. But I think it's fair to say 
this really was a team process. Again, to say more than one 
ordinarily would in these circumstances, the proposal to permit 
States the one year of continuous eligibility for kids on 
Medicaid, which is a major part of this proposal, and is 
obviously a very central Medicaid issue.
    And one which is very much at the heart of our operational 
responsibilities, is one which my colleague Dr. Jo Buford from 
the Office of the Assistant Secretary of Health first proposed 
to this work group, as we were going through various processes. 
We immediately seized on it as a valuable idea. But we were 
somewhat internally embarrassed, and now more publicly so that 
she thought of it first, from some of her experiences as a 
pediatrician.
    So I think the various pieces came from various places. But 
this has been around and we've been very much involved in the 
formulation of the entire package.
    Mr. Istook. Since my time is limited here, I would be 
interested to receive, and would ask you for, because I know in 
doing the evaluation process, even if you're for something, you 
try to make a critical and straightforward analysis of it. 
There's great concern, for example, that usually goes back to 
talking about programs during the LBJ Administration, where 
projections were only 1,000 percent off and so forth.
    I would certainly like to receive whatever documents were 
prepared within HCFA trying to analyze the possibilities that 
the financial projections, which we now have, might not be 
accurate, where the assumptions are, where the potential 
difficulties are. I'm certain that your agency looked into 
those. It may not be the bottom line of what is your opinion. 
But I think looking at those and receiving those from you would 
be very important to the efforts that we have underway.
    Mr. Vladeck. I would be happy to provide that information. 
John Klemm, who is our chief actuary for the Medicaid program, 
is probably as professional and as distinguished an estimater 
of Medicaid expenses as there is to be found. AndI think he 
himself would be the first to acknowledge that there is an element of 
art as well as science in all Medicaid budget estimating.
    But we'd be happy to share with you some of Mr. Klemm's 
professional work on trying to figure out the numbers on the 
subject.
    [The information follows:]
    Offset Folios 850-853 Insert here



    Mr. Istook. I appreciate that. We hope it doesn't come 
back. We're only a couple of years removed from having 20 some 
odd percent growth rates of that.
    Mr. Vladeck. Oh, understood. And we'd be happy to give you 
a lot more information about the estimating process.
    Mr. Istook. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Istook.
    We have lost several of our members who had to attend the 
Rules Committee. I have one more question that I'd like to ask, 
and then I'll yield to either Mr. Wicker or Ms. DeLauro or both 
for any further questions.

                       graduate medical education

    Dr. Vladeck, we have had in our country for a long time a 
system of training in terms of residence, through teaching 
hospitals, that in the present context of the growth of managed 
care, seems to be under great siege. We also now have the IOG 
who is conducting audits on some questionable standards that we 
will get into tomorrow. And I understand that you are proposing 
changes in the way you reimburse graduate medical education as 
well.
    What are we going to do to ensure that we have teaching 
hospitals in this country in the future, and aren't we going in 
the wrong direction here?
    Mr. Vladeck. Well, Mr. Chairman, I hope you will find, 
without prejudging the comments of my friends and colleagues in 
the academic medical community, that while they will not 
applaud everything we're proposing, they will respond in kind 
to our budget proposals about graduate medical education.
    We have in the President's budget responded to what they 
have identified as their principal priority relative to the 
changes in the health care system. And that is finding a way to 
protect Medicare payments for direct and indirect graduate 
medical education payments, as more and more of the Medicare 
program moves into managed care. And we have proposed to, in 
effect, remove those payments from the capitation payments to 
HMOs and pay them directly to the academic institutions. And I 
think again, that responds directly to their principal concern.
    We have proposed a number of frankly relatively modest 
additional changes to some of the ways in which we calculate 
payments for graduate medical education that try to tilt the 
incentives in that system in the direction in which everyone 
seems to believe we should be going: towards more investment 
and training of primary care professionals and towards more 
training outside the walls of the hospital in freestanding 
primary care settings of one sort or another.
    We are proposing some reductions over the course of the 
budget period in the size of the indirect medical education 
adjustment. We think those are substantially below the 
reductions that have been proposed by others. But they do speak 
to the broader question, which you quite appropriately 
introduced, and which, if I may, I'll spend one minute on.
    Increasingly, when we talk about Medicare's payments to 
academic medical centers, we are talking about the only formal 
payments remaining in the system specifically to support that 
enterprise. It was one of the reasons why we had some concerns 
about the financing mechanisms. The majority's notion in the 
1995 legislation of some more broadly-based trust fund is 
something that has considerable appeal.
    I've talked to Mr. Thomas and others on the Ways and Means 
Committee about this whole issue. I do think we need a more 
broadly-based mechanism for eliciting broader participation 
from those who pay for health services in the support of 
academic medicine.
    In the meantime, we have this ambivalence of being the only 
guy in town and wanting to hold up our end and maintain our 
responsibility. But we're starting to feel a little bit like 
the Maytag repairman in that regard. We would very much like to 
work with you and others concerned about these issues to begin 
to explore a way to more broadly share support of this vitally 
important national objective.
    Mr. Porter. We understand that the overall effect of the 
changes you're proposing, however, is to provide less 
reimbursement than you are now. Is that correct?
    Mr. Vladeck. It would really depend on what one believes is 
happening with the growth of managed care and where those 
dollars are going. To the extent that the growth of Medicare 
HMOs is in fact diverting a significant amount of money from 
those institutions, I believe the net payments to academic 
medical centers would actually go up.
    In very small communities in which there is very little 
managed care penetration at the moment, it would be a 
reduction.
    Mr. Porter. Again, I think this is an issue that we have to 
address now. And I hope that it will also be on the table when 
negotiations go on between the White House and the Congress on 
these issues.
    Mr. Vladeck. I don't know how it can be avoided. I know of 
the concern for these institutions. I don't know if you had a 
chance to discuss this issue earlier today with Secretary 
Shalala, but I know there are few things she feels more 
strongly about. It has to be part of the agenda.
    Mr. Porter. Thank you.
    Mr. Wicker.

                 private health insurance for families

    Mr. Wicker. Yes, Mr. Chairman.
    During your testimony in 1995, Mr. Vladeck, you mentioned 
the rate of growth of Medicaid as the number of people covered 
by private insurance has fallen dramatically.'' Along those 
lines, I'd like to ask you to comment about some proposals 
other than the Administration's which would help families 
purchase their private health insurance. A Senate task force 
will soon introduce legislation to make the cost of health 
insurance fully tax deductible for families with children, 
where those families have adjusted gross income of less than 
300 percent of the poverty level.
    The Administration, in attempts to increase the number of 
families covered by private insurance, considered this 
proposal. Id' be happy to hear your comments on that sort of 
suggestion.
    Mr. Vladeck. Mr. Wicker, when you start talking about the 
Internal Revenue Code, you get out of my depth, both 
substantively as well as jurisdictionally. But I do know the 
Administration has supported the increase in the deductibility 
of health insurance premiums for self-employed persons in 
conjunction with the Congress over the last several years.
    And in general, my personal belief would be that it's a 
sensible thing to do. But the tradeoff between the revenue lost 
and the number of folks who would then be able to get insurance 
is really an area in which I can't claim any expertise.

                             medicare fraud

    Mr. Wicker. Thank you. And just one quick thing. How much 
time does your agency spend investigating Medicare fraud?
    Mr. Vladeck. Well, it's a very interesting way you put the 
question, sir. Because in principal, the actual investigative 
authorities lie with the Inspector General and the law 
enforcement agencies such as the FBI and the State law 
enforcement agencies. We spend a very large amount of time and 
effort seeking to prevent and detect potential frauds through a 
variety of both manual and automated mechanisms. We have lots 
of computer edits we run on claims. We have lots of manual 
reviews we do. We do lots of audits, or our contractors do lots 
of audits, of health care performers.
    I'm probably over-reacting to your particular choice of 
words. Forgive me, because of the sensitivities of this. Once 
it becomes an investigation, in the legal sense, and since we 
don't have subpoena power, we turn over these matters or, 
increasingly, we're already working in conjunction with either 
folks from the Inspector General or folks from the FBI or other 
law enforcement authorities.
    So we spend a lot of time on these issues, but we try to be 
careful to say that we're not investigating them in the legal 
sense.
    Mr. Wicker. Thank you very much.

                                closure

    Mr. Porter. Thank you, Mr. Wicker.
    Dr. Vladeck, there's a rumor that you might be leaving 
HCFA. Is there any truth to this rumor?
    Mr. Vladeck. Sir, I will definitely be leaving HCFA. The 
charter of appointment that I keep over my desk that I received 
from the President reminds me every day that I serve not only 
at the pleasure of the President, whom I knew when I got the 
appointment, but it then goes on to say ``for the time being.'' 
[Laughter.]
    In a job like this, the day you arrive you start leaving. 
I've said publicly that for family reasons, I think 1997 is 
likely to be my last year in this job. But I have no plans more 
specific than that.
    Mr. Porter. Well, if you're not back here at the desk next 
year, we'd like to say what a wonderful job you have been doing 
and are doing at HCFA, and we appreciate yourexcellent 
testimony today. You've been very forthcoming with our questions, and 
we look forward to working closely with you for the remainder of your 
term, however long it may be.
    Mr. Vladeck. Well, I appreciate that, although with that 
comment, I'd probably better not come back next year. 
[Laughter.]
    Mr. Porter. I just didn't want to miss the opportunity.
    Mr. Vladeck. I really do appreciate it, Mr. Chairman. Thank 
you.
    Mr. Porter. Thank you.
    The subcommittee will stand in recess for five minutes.
    [The following questions were submitted to be answered for 
the record:]
    Offset Folios 862 to 1078 Insert Here



                                       Thursday, February 13, 1997.

                ADMINISTRATION FOR CHILDREN AND FAMILIES

                               WITNESSES

OLIVIA GOLDEN
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY FOR BUDGET, DEPARTMENT 
    OF HEALTH AND HUMAN SERVICES
    Mr. Porter. The subcommittee will come to order.
    I want to apologize, Ms. Golden, and Dennis, and everyone 
in the room. There just aren't enough hours in the day. I'm 
sorry to come in late. We will proceed with the hearings on the 
Administration for Children and Families.
    Before we do, Ms. Golden, let me yield to Dennis Williams, 
who wanted to make a correction on the record of something from 
this morning's hearing.
    Mr. Williams. Yes, Mr. Chairman. You asked me this morning 
about a proposal in the budget to exempt CDC from the vaccine 
excise tax. And you asked me whether we were asking you to take 
this action or the Ways and Means Committee. I said this 
committee, but I was inaccurate about that--oh, I'm sorry. I 
said Ways and Means, and I was inaccurate. We are asking, 
through appropriation language, we are asking this committee to 
take action.
    And the reason we're doing this, the Vaccine Compensation 
Trust Fund, these revenues go into that Trust Fund, the Trust 
Fund is in surplus at the moment. There's more than adequate 
revenues to meet its obligations in 1998. Therefore, we're 
asking that the vaccine for children program and the 
immunization program at CDC be exempt from this for the year, 
because the revenue is not required.
    By asking this committee to take that action, it actually 
provides some additional revenues and outlays actually 
available to us to spend for other purposes. That's why we've 
asked this committee to take that action.
    Mr. Porter. And Dennis, you're aware that we cannot do that 
without Ways and Means sign-off.
    Mr. Williams. Yes. I understand you'd have to consult with 
them.
    Mr. Porter. Thank you.
    Mr. Williams. But it does have a benefit to this committee 
if both parties agree.
    Mr. Porter. Absolutely.

                        Introduction of Witness

    Now, Olivia Golden, the Administration for Children and 
Families, please proceed.
    Ms. Golden. Thank you. Mr. Chairman, Congressman Miller, 
members of the subcommittee, I'm pleased to present the 
President's budget request for the Administration for Children 
and Families for fiscal year 1998. I'm accompanied, as you 
know, by Dennis Williams, Deputy Assistant Secretary for Budget 
for the Department.
    President Clinton has presented to Congress a budget which 
addresses the concerns of Americans, serves their interest and 
creates opportunity, a budget that keeps faith with the 
longstanding commitments of this Department. In keeping with 
the Administration's policy to increase support for programs 
that promote economic security and independence, and healthy 
development for our children, while working toward more 
efficient government, our budget is targeted in areas that have 
produced significant payoffs.
    The fiscal year 1998 budget for the Administration for 
Children and Families is $37 billion, of which $15 billion 
comes from new requested budget authority. The remaining amount 
is available through the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996, which appropriated $19 
billion, plus $3 billion of available carry-over balances in 
entitlement programs.
    This budget meets the challenge of continuing investments 
which will lead to future service improvements, cost savings 
and ultimately citizens who are more independent. At a time of 
very tight resources, we are seeking increases for Head Start, 
for the Child Care and Development block grant, and for the 
Violent Crime Reduction programs. In addition, we are 
requesting funds to address the urgent need to find permanent 
homes for children who too often remain in the foster care 
system for many years, with a goal of 54,000 children to be 
adopted or placed in other permanent settings in the year 2002.
    The fiscal year 1998 budget request includes approximately 
$8 billion for ACF discretionary programs. To create a positive 
future, we must build on peoples' strengths, hopes and 
successes, and act together to ensure appropriate and full 
opportunities to grow, learn and thrive for all our children 
and youth. At the same time, we must create stability and 
economic security for our families and communities.
    While the Administration for Children and Families funds a 
wide range of discretionary programs, including Low Income Home 
Energy Assistance, community services, programs for the 
developmentally disabled, for Native Americans, for refugees, 
over 65 percent of ACF's discretionary spending supports 
programs serving young children through the Head Start and 
Child Care and Development block grant programs.
    I would like to take this opportunity to highlight just a 
few of our key programmatic initiatives.

                               head start

    The Head Start program gives Head Start children who are 
the most at risk a better chance at learning and of success in 
life. In fiscal year 1998, we are requesting $4.3 billion, a 
$324 million increase. This level will support an additional 
36,000 children, for a total enrollment of 836,000 children and 
their families. This increase continues to move us towards the 
President's goal of providing services to 1 million children by 
the year 2002.
    Because early investment in children gives them the best 
chance of continued success, our fiscal year 1998 request also 
continues our commitment to the early Head Start program, 
increasing 1997 enrollment by 8,000 infants and toddlers to 
35,000 in fiscal year 1998.
    In addition, this investment in Head Start builds on our 
success over the past few years in ensuring quality throughout 
the program. The performance of Head Start grantees continues 
to be closely assessed. Funds continue to be targeted to 
provide training and technical assistance to poorly performing 
grantees. And if grantees are found to have deficiencies which 
are not corrected within agreed-upon time frames, HHS 
terminates their Head Start grant and appoints a replacement 
agency to provide quality services to that community.

                 child care and development block grant

    The best safety net for our children is and always will be 
strong families. Whether they are struggling to get jobs or to 
keep them, we know that families need quality child care to 
keep their children safe. In fiscal year 1997, Congress 
appropriated $937 million of discretionary funds for the Child 
Care and Development Block Grant for fiscal year 1998. We are 
requesting an additional $63 million for fiscal year 1998, the 
amount needed to bring the block grant to its authorized 
discretionary level of $1 billion.
    Public Law 104-193 consolidated the Child Care and 
Development Block Grant discretionary funds, and the former 
Title IV(a) Child Care Entitlement program into a single, 
integrated child care program. In fiscal year 1998, a total of 
$3 billion will be available for child care services. 
Nevertheless, as welfare reform is implemented, States will 
face increased pressures to provide child care to support the 
new work participation requirements.
    Additional child care dollars will help provide critical 
support to States' efforts to expand services, while continuing 
their commitment to providing quality child care.
    Approximately 660,000 children are currently served with 
the Child Care and Development block grant. The need for 
additional child care is expected to continue to increase as a 
result of welfare reform. Child care funds currently available 
for the working poor reach only a small percentage of the 
estimated 9 million children in families with a single working 
parent or dual working parents that could be eligible for Child 
Care and Development block grant funds. On average, poor 
families pay 18 percent of their income on child care.
    In December, 1994, the General Accounting Office reported 
that the availability of affordable child care is a decisive 
factor in allowing low income mothers to work.
    So the Administration's fiscal year 1998 request will allow 
States to serve more families, keeping families off welfare and 
giving parents peace of mind, knowing that their children are 
safe and healthy in child care. We must continue to expand 
child care opportunities to those working parents who are 
struggling to remain out of the welfare system. We must 
continue to build the quality of those opportunities, so that 
children are in care that is safe and supportive of their 
development. And as we see welfare reform efforts successfully 
moving more and more parents to work, we must work to help them 
in their efforts to provide care for their children.

                   child welfare and child protection

    In addition, this budget reflects a strong Administration 
commitment to the safety, the permanence and the well being of 
children who have been abused and neglected or are in danger of 
abuse and neglect. Each year, millions of children are the 
subjects of a report of abuse and neglect. About 40 percent of 
thosereports are substantiated, affecting nearly 1 million 
children a year. At the end of 1995, over 450,000 children were in 
foster care, an increase of almost 42 percent since 1988.
    While many of these children will return home, nearly 
100,000 will not. These are large numbers, and the children 
behind these numbers are our most vulnerable children, children 
whose safety, well being and healthy development depend on how 
well our services respond to these families.
    The Administration seeks to improve this situation through 
a major adoption initiative whose goal is to double the number 
of children who are adopted from the foster care system or 
placed in other permanent settings in the year 2002. This will 
increase the number of children adopted or placed from 27,000 
in 1996 to our goal of 54,000 in 2002.
    In partnership with the States, we will identify barriers 
to permanent placement, set individual State goals for each 
year, and reward successful performance and raise public 
awareness.

                        violent crime reduction

    In addition, the fiscal year 1998 request includes $99 
million to reduce the unacceptable violence that threatens all 
of us and cuts short too many lives. These funds include $13 
million for the Community Schools Youth Services and 
Supervision Grant Program. It provides communities with 
resources to develop, coordinate and deliver academic 
enrichment and job training and employment activities for 
youth, to provide links to caring adults, and develop family 
and community support in communities beset by crime and 
violence.
    It also includes $70 million for the Family Violence 
program, including battered women's shelters, which provide 
immediate assistance to victims of violence and their 
dependents, and $1 million will continue the activities of the 
National Domestic Violence hotline. This national, 24-hour 
toll-free hotline was first funded in fiscal year 1995, and 
began providing crisis assistance, counseling and local shelter 
referrals across the country on February 21st, 1996.
    Over 72,000 calls have been received since the hotline 
became operational. Our budget fully funds Violence Against 
Women Act programs in fiscal year 1998.

                          entitlement programs

    Entitlement programs represent approximately $27 billion of 
the $37 billion budget of the Administration for Children and 
Families. As part of welfare reform, Congress pre-appropriated 
$19 billion of the $27 billion needed in fiscal year 1998. New 
fiscal year 1998 budget authority requested for entitlement 
programs is approximately $8 billion.
    Last summer, we made a new beginning on one of our Nation's 
most vexing problems, the welfare system. We have begun to help 
many people in our national community to help themselves. The 
children of welfare are more likely to drop out of school, to 
run afoul of the law, to become teen parents, to raise their 
own children on welfare. Our goal is for the system no longer 
to fail these children and families, trapping many of them in a 
cycle of dependency. The system should help people to move from 
welfare to work, and it will do so by requiring work of every 
able-bodied person, by protecting children, by providing child 
care, and by promoting parental responsibility through tougher 
child support enforcement.
    We have been working closely with States and territories as 
they tailor reform plans to meet the needs of their 
communities. As of February 5th, we have certified new welfare 
reform plans for 35 of the 41 States and one territory that had 
submitted plans.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions you may have.
    [The prepared statement follows:]
    Offset Folios 1090 to 1093 Insert here



                          head start--increase

    Mr. Porter. Ms. Golden, thank you for that excellent 
statement.
    Let's begin with Head Start. And I'll proceed through 
different segments. I'm going to yield to Mr. Miller in 10 
minutes and we'll go back and forth and include others that 
might come in.
    Ms. Golden, appropriations for the Head Start program have 
increased dramatically over the past several years, starting in 
1990 and continuing through the current fiscal year. In 1990, 
the appropriation was $1.5 billion, and we are now at $4 
billion for fiscal year 1997. Your request for fiscal year 1998 
is $4.3 billion, an 8 percent increase.
    Can you tell the committee how you have used the increased 
appropriations in recent years, and how you plan to spend the 
increase that you are requesting for fiscal year 1998?
    Ms. Golden. Yes, and thank you, Mr. Chairman, for 
highlighting Head Start, which I know has been both a 
bipartisan priority of the committee and of the Congress, and a 
key priority for the President.
    The increase over recent years, which has been about $2.1 
billion since fiscal year 1992, has gone for several purposes. 
One critical purpose has been to increase the number of 
children enrolled which in fiscal year 1997, is up to 800,000 
children. The President has aimed to reach 1 million children, 
or about half of those eligible, by the year 2002.
    Enabling the most needy children to be ready for school is 
critical for all the rest of our education goals. A second use 
of the resources has been to invest in quality. One of the 
priorities of the Congress and the Administration in the 
bipartisan 1994 reauthorization was to assure that every Head 
Start program across the country works by making sure that the 
level of quality in every program is what it ought to be.
    And so the Congress set aside resources to invest in the 
quality of programs. And we've been doing that.
    A third key area of investment has been investment in the 
new early Head Start program, to assure that among the increase 
in children, we reached some families with babies and toddlers, 
because of the compelling evidence that reaching children early 
is particularly effective at giving them a head start.
    Mr. Porter. In your funding guidance document that you sent 
to grantees in December, you indicated that you had not yet 
decided how to spend the approximately $227 million that you 
had set aside in fiscal year 1997 for program expansion. Is 
that still under consideration, or can you tell us how those 
expansion funds will be spent?
    Ms. Golden. We're in the final stages of internal 
clearance, so we don't have a final document at this time. 
Expansion funds will be spent to reach 50,000 children 
nationwide. And we're still working out the final details.
    Mr. Porter. Do you foresee expanding all Head Start 
programs into full day programs, and if so, why? What would be 
the cost of making such a change?
    Ms. Golden. Our expectation is that there will always be a 
mix of needs among Head Start children. There will always be 
some children who need part day services. But there are an 
increasing number of children who need full day services, 
because their parents are working. About 50 percent of Head 
Start children, for example, have a parent on welfare. And as 
we move towards welfare reform, more and more of those parents 
will be working.
    What we find as we look around the country is that there is 
an enormous amount of creativity in terms of Head Start and 
child care partnerships which bring resources together to 
benefit children with full day services. So our expectation is 
that local grantees are probably going to need to provide a mix 
of services, and that creative partnerships will probably be an 
important part of that. What we need to do is make sure that a 
parent doesn't have to choose between moving to work and 
behaving responsibly under welfare reform and having a Head 
Start spot for their child. So that's the general direction 
that we see ahead of us.
    Mr. Porter. According to the guidance document, about 55 
percent of the 1997 funding increase will be spent for program 
expansion. Can you tell us--well, I think you just answered 
that. Tell us how the rest of the funds are being spent.
    Ms. Golden. There are a variety of setasides in the statute 
in terms of quality, cost of living, and technical assistance.

                       head start--cost per child

    Mr. Porter. Have you traced the per pupil, per child 
expenditure under Head Start, and how much more it is costing 
per child today than it did not very long ago?
    Ms. Golden. I don't have the exact figure in front of me. I 
can tell you that when the Congress passed the 1994 
Reauthorization, there were two setasides that were meant to 
ensure that the cost per child was high enough to provide 
quality. One is the cost of living setaside. So the cost per 
child has risen with the cost of living. The second was a 
setaside to provide for quality investment, because of a 
concern that in the previous few years, the increase in number 
of children had been too rapid and had eroded quality. So the 
Congress committed to that investment in quality.
    So we've had an increase to account for the cost of living, 
plus some additional investment to ensure quality. I can 
provide you with the exact numbers.
    [The information follows:]

    Ms. Golden. In FY 1992 the average Head Start cost per 
child was $3,415; in FY 1993 it was $3,758; in FY 1994 it was 
$4,343; in FY 1995 it was $4,534; in FY 1996 it was $4,571; and 
in FY 1997 it is estimated at $4,977.

    Mr. Porter. Tell me what you mean when you say investment 
to improve quality. I don't quite understand that.
    Ms. Golden. What the Congress did was set aside 25 percent 
of the increased funds for a range of quality purposes. And the 
statute gives a variety of examples. One example would be a 
program where the playground is falling apart, and they've 
never had the resources to invest in it.
    Mr. Porter. I see.
    Ms. Golden. Another example would be a program where the 
teacher salaries have eroded over time, and they just can't 
fill the positions and there's turnover. So they're not able to 
meet the children's needs. Those would be the kinds of things 
that would be appropriate quality expenditures.

                    head start--eligible population

    Mr. Porter. Okay. What percentage of the potentially 
eligible preschool children is currently being served by Head 
Start, and does the Administration have a goal in terms of what 
percentage of eligibles the program should eventually serve?
    Ms. Golden. The goal that we're working toward at this 
point is to reach 1 million children in the year 2002. That's 
about half of the eligible three and four year olds. That 
represents a real commitment to the program as well as the 
strongest growth we can sustain in the context of the overall 
balanced budget.

                          head start--research

    Mr. Porter. Despite Head Start's long history and 
popularity, definitive research seems to be somewhat lacking 
concerning the program's effectiveness. Is the Department 
currently carrying out any longitudinal research studies that 
focus specifically on Head Start participants?
    Ms. Golden. Yes. Let me highlight for you, Congressman, 
both what I think the research says now and what we're doing to 
add to that. Because I think that's enormously important.
    The research is clear that Head Start enables children to 
reach school more ready to learn. That's something the 
bipartisan advisory committee highlighted, and that reviews of 
the research show. Children who have been in Head Start are 
academically and in health terms more ready to learn. A recent 
review by the Packard Foundation looks at about 150 studies and 
highlights the effectiveness of Head Start and of other early 
childhood programs in ensuring longer term effects.
    We don't believe we should stop with that. I think you're 
absolutely right to highlight the need for additional research.
    In the longitudinal arena, we're making quite a number of 
investments. We're investing in partnership with other 
agencies, on a number of studies--NICHD, which is doing a child 
care study, the Department of Education, and NIMH. We're also 
investing in a major research study of early Head Start, which 
is particularly important. That's the part of the program that 
begins with infants and toddlers. This study is a major random 
assignment study that both has a national researcher and a set 
of distinguished local researchers engaged with the program.

                 head start--early childhood initiative

    Mr. Porter. I'm certain, this is not on the subject 
directly, but I'm certain you have been talking with Rob Reiner 
of Castle Rock Productions about their early childhood 
initiative.
    Ms. Golden. Not personally, but I am aware of it.
    Mr. Porter. I wondered what interface, if you haven't 
talked to him, I'm sure he's going to talk to you, what 
interface you would have with that initiative, which seems to 
be really going to increase the awareness of the American 
people of the importance of nurturing during the first three 
years of childhood and providing the kinds of love and care and 
even instruction that can change the future course of many of 
the lives of young children.
    I was very impressed, I spent maybe 45 minutes or longer 
talking to him, and felt that this really had the potential. 
Because he's going to hit so many different bases of really 
having some impact. And I would think that the Government, 
particularly your administration, would have a great deal of 
interest in this. And perhaps have a very definite role to 
play, as well as what he's doing in the private sector.
    Ms. Golden. We're very excited, and the Administration has 
been working with him. I haven't had the opportunity yet 
myself. But I share everything you've said, it's enormously 
important. I think the Congress was absolutely right in 1994 to 
see ahead to the importance of those early years of life and 
invest in Early Head Start. Because I think that the new 
research is confirming what I think people in the field 
believe, but it's taking a little while for the science to 
catch up of how enormously important those years are.
    So thank you for the suggestion.
    Mr. Porter. Thank you.
    Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.

                        elimination of programs

    I'm very pleased with what I'm seeing here today, and I 
have a couple questions about your having to make some tough 
choices and priorities obviously, all these great programs and 
how do you allocate money and scarce resources. I know you went 
through some tough choice.
    Do you know how many programs within your area do not exist 
in this budget that were here two years ago? A lot of them were 
small ones. And how many new ones are being created?
    Ms. Golden. I can tell you some of the examples. I'm not 
sure I have a total. This budget, for example, does not fund 
four discretionary programs within the community services arena 
providing those resources through a block grant instead. This 
budget proposes to consolidate a set of small programs 
providing services to runaway and homeless youth, and not to 
provide those in separate programs, in order to provide for 
more coordinated services.
    An initiative, the youth gang prevention initiative, one 
that was, we think it's important to invest in youth, but what 
we had here was one investment in community schools.
    There are certain ways, probably at least half a dozen, I 
don't think I can give you an exact number.
    Mr. Miller. Consolidation makes lots of sense, so I'm glad 
to see us moving in that direction.
    The overall funding of the discretionary part of it, I'm 
glad to see you establishing certain priorities, for example, 
the summary page I'm looking at is page 66. It just lists the 
$8 billion of discretionary spending. It's the overview, I 
guess, that has that list. When Secretary Shalala was here the 
other day, and we look at the entire budget of things within 
this committee, there are some items that we support very 
highly on the committee.
    For example, NIH. An article in the Washington Post Sunday 
or Monday talked about how the President, I'm using this as an 
illustration, that the Administration gave a low inflationary 
increase to NIH, and it's an area that, on this committee, wide 
bipartisan support, and we'll all give NIH as much as we feel 
we can afford.
    The Administration knows we're going to do that, they're 
not opposed to it. But we're going to make that tough choice.
    So I kind of want to go through here, Head Start, wide 
bipartisan support. Your total amount of money is increased 
only $210 million, but $324 million goes to Head Start. And I'm 
trying to see where the minuses are and what the problems are 
you're going to create by that, in order to hold your increase 
as low as you have, and what impact, that is, Refugee Entry and 
Assistance is down $31 million, I see. Community Services Block 
Grant, down $74 million. What impact will those losses mean?
    Ms. Golden. Let me speak to each of those. In the Refugee 
and Entrance Assistance example, that's not a change in 
services. That's better forecasting. So that one should not 
have an impact. We anticipate the same level of refugee 
entrance this year, and that's the dollar amount we anticipate 
will be needed.
    In the case of the Community Services Block Grant, we are 
proposing a level that's higher than fiscal year 1996 and 
higher than the Administration proposed last year. It isunder 
the constraints of an overall balanced budget, less than the Congress 
provided last year. I think that was a hard choice. Our hope is that 
many of those are important activities that States may be able to fund 
in other ways. They now have more flexibility under the welfare block 
grants. They may be able to do some of the work-focused activities in 
other ways. That was a difficult choice.
    Mr. Miller. That was a discretionary, the community 
services discretionary activities is down $47 million?
    Ms. Golden. That's the example I gave you where again, as a 
difficult choice, we're not funding individual discretionary 
programs. They would need to be supported by States through the 
overall Community Services Block Grant or other flexible 
resources.
    Mr. Porter. Mr. Miller, if I could interrupt just a moment. 
I'm going to go ahead and vote and leave you in the Chair. If I 
can get back before you have to go, otherwise please just 
recess.

                          head start--quality

    Mr. Miller [assuming Chair]. Right. Great, thank you.
    Let me go back to Head Start. I have visited the Head 
Starts in my area, my two main counties in Florida are Sarasota 
and Manatee Counties. We also have a migrant Head Start in 
southern Hillsboro County which I visited a couple of years 
ago. I guess that's in the total Head Start program.
    Ms. Golden. It is.
    Mr. Miller. And certainly there's widespread support for 
it, in fact, I am chairing a fund raiser for the program coming 
up some time in April, I think, or something like that. My wife 
and I are, which I'm glad to see a program like that going 
outside of just relying on Federal funding for a program. I'm 
delighted to see that, and I'm delighted to see, this is the 
one in Sarasota where they have a board that is a good cross 
section of the community, the business community and all 
providing for it.
    Ms. Golden. Terrific.
    Mr. Miller. So it's a good program. But at any rate, there 
were real concerns about quality, I remember, back in 1994. And 
previously, Head Start had never terminated a program. Now, I 
think you have started saying hey, we're getting tough. Can you 
talk about what's happened over the past few years because of 
putting the pressure on those that are not delivering the 
quality that we expect?
    Ms. Golden. We're very proud of what we've been able to 
accomplish. We've terminated about 65 programs since October of 
1993. And have many more that we have turned around. Because of 
course, what you hope is not to get to the point of 
termination. You hope by identifying the needs, creating a 
corrective action plan and working with the program, you're 
able to deliver the kind of quality you intended.
    There are a couple of things I'm particularly proud of. One 
is that we've had extraordinary support from the overall Head 
Start community. I think the example you give from Sarasota, in 
most cases, people who provide Head Start programs, who work in 
Head Start programs, care about quality. And they don't want 
other programs to be out there that aren't meeting those 
standards.
    So we've had extraordinary support. And I believe that what 
it's meant is that we are now delivering high quality services 
to children and that we've increased the standards everywhere.
    We've also been able to do some other things that 
contribute to that goal. We were able, in November to publish a 
revision of the Head Start performance standards that the 
Congress had asked us to in the reauthorization. This was the 
first major revision of the standards since they were published 
in 1978, and provide some, again going back to Chairman 
Porter's comments about very young children, provide for the 
first time the key standards for quality all the way from birth 
to four or five years old, so that we've got it all in one 
place for grantees to work from.
    I believe that it's been an important accomplishment that 
we can all be proud of.

           head start--cost per child compared to child care

    Mr. Miller. What is the cost of Head Start per person, per 
child, compared, especially if you have the comparable hours, 
about, to a day care program?
    Ms. Golden. Well, our data on child care are not very good 
because the Federal Government provides resources to States, 
which match them and combine them with other sources and spend 
them in lots of ways. It's clear that the cost of Head Start is 
more like a kindergarten or preschool program than it is like a 
child care program, because it focuses on providing quality 
services and health care services. It is hard to figure out the 
child care data. Because what you have is a Federal share that 
will be combined in a variety of ways to serve a child.
    Mr. Miller. With this large amount of additional money 
flowing into child care, and we're all delighted that it ended 
up flowing in there, is there going to be a better way to track 
that?
    Ms. Golden. I believe tracking is enormously important. We 
are working on a couple of things. The welfare reform 
legislation includes some data requirements. And in addition, 
we're trying to set up some research studies. In some cases, we 
want partnerships where we will work with an academic partner 
and a state agency partner to be able to track the child care 
information better. I believe that is important.

                            child care funds

    Mr. Miller. When I was home a couple weeks ago, I spent 
time actually in the welfare offices going through interviews 
with applicants. It was interesting. But one of the questions 
that kept coming up was child care money. I know there's child 
care money. And the money is somewhere. I'm assuming it's in 
Tallahassee in my State.
    But they don't have it, or have access to it yet. Where 
does that stand? The money is apparently at the State capitals, 
is that right?
    Ms. Golden. That's where it should be. I think they should 
talk with Tallahassee. We can certainly try to track down if 
there's been a specific issue in Florida. Essentially, all the 
States came in October 1st, which is when the child care 
provisions of the new law became effective, with their 
requests. All but one State asked for everything that they 
could have, and we do expect that one State to come back and 
ask for the rest.
    The actual process of getting the money out to States 
should be moving smoothly. I don't know of a specific problem.
    Mr. Miller. It's a very large amount of money. I mean, it's 
a big increase over last year. Is there going to be a problem 
with too much money hitting the system at one time, or are they 
going to be able to absorb that money quickly?
    Ms. Golden. What we know right now is that there's a huge 
demand for child care. We're hearing that from everyone. 
Andthat there----
    Mr. Miller. But are the providers there to deliver?
    Ms. Golden. So far as we know. The States have said they 
want and expect to spend all the money, except one State, which 
we think will come back for the rest when its legislature 
meets. So we expect them all to be asking for it.
    We intend to work with the States around any administrative 
obstacles that they may have, and we can certainly come back to 
you later in the year. Many State legislatures are meeting for 
the first time since the welfare reform legislation was passed. 
So we'll know a lot more about the specifics in a few weeks.

                          head start--increase

    Mr. Miller. Head Start had a big increase two years in a 
row, assuming this increase goes through this time, it will be 
big increases several times in a row, and can it absorb it 
without throwing too much at the system?
    Ms. Golden. Well, I guess I do have the sense that in the 
case of Head Start, we've really built the ability of the 
programs, and there are waiting lists and there are needs out 
there. I think it's important to be thinking about that, but I 
believe the capacity also is out there.
    Mr. Miller. We're having a vote on a rule, I think. Can we 
recess and come right back?
    Mr. Hoyer. Whatever you want to do. I'm going to come back.
    Mr. Miller. Yes, why don't we take a recess.
    [Recess.]
    Mr. Porter [resuming Chair]. The subcommittee will come to 
order.
    Mrs. Northup of Kentucky.

                        head start--partnerships

    Mrs. Northup. I had another subcommittee meeting, so I 
missed some of your remarks, but I have a summary here.
    I do want to ask you about the Head Start program. As local 
communities begin to address welfare reform and the challenges, 
there is a need for early childhood education. What are the 
availability of waivers so that they can integrate money, Head 
Start money with, say, private tuition money and other monies 
that maybe come from other places?
    Ms. Golden. That's an enormously important issue, how 
communities can put together programs that build on the quality 
of Head Start and provide or leverage other resources. I 
haven't yet had any experience where a community needed a 
waiver to do that. There's a lot of creativity and flexibility 
going on out there right now. There are examples right now all 
over the country. And what we'd like to do is provide technical 
assistance and share experiences, so that communities can see 
how to do that.
    It's particularly important, you mentioned welfare reform, 
and Head Start programs need to be able to respond to the needs 
of children who need full day services in a partnership way. 
That's enormously important.
    Mrs. Northup. Well, actually, I'd like to bring to your 
attention to Louisville, Kentucky. They have found you all 
fairly inflexible. And have proposed a program that would 
combine funding sources and federal money with private money, 
and feel very discouraged. It's possible that you would find 
that the law doesn't allow it, and if that's true, I'd like to 
know, so that we can maybe look at changing the law. But the 
complaint that they have right now is the inflexibility coming 
from your Department.
    Ms. Golden. I'd be happy to follow up with Louisville. I 
know we had some conversations where we provided information, 
and I will be glad to follow up.
    Mrs. Northup. And you know, I'd like to also encourage you, 
separate from appropriations, to be as flexible as you can. 
Because I know our State is probably like many States trying to 
combine scarce resources at the State, local and Federal level 
for Head Start. And to give them the ability to include as many 
children in as comprehensive a way as possible is obviously the 
goal.
    Ms. Golden. Yes. I believe that's right. The goal is really 
to ensure that the Head Start quality and the parent 
involvement and the effectiveness can really reach children 
through this range of funding sources.

                          adoption initiative

    Mrs. Northup. I understand that the adoption initiative is 
under your office. And I'd like to ask you, since I realize the 
adoption laws in each State are the product of each State, but 
if children are not available for adoption, then it becomes a 
Federal problem, if then we have those children in this stream 
longer than they need be.
    Ms. Golden. Absolutely.
    Mrs. Northup. It's been debated, it's been strongly 
debated, that terminating parental rights of children earlier 
would make a tremendous difference. That children develop more 
emotional, educational challenges the longer they are in foster 
homes, back in their natural homes and removed again, all of 
these things complicate the problems.
    So are you doing anything with States to encourage the 
speedup of termination of parental rights, when consistently 
the parents do not go through the program they need to, do not 
complete it, and then the child is returned to State care?
    Ms. Golden. Let me give you an overview of what we're doing 
to work with the States to speed up adoptions, and then focus 
on the termination of parental rights issue. The President, in 
December, announced a commitment to double the number of 
children placed into adoption or other permanent placements 
from the public child welfare system by the year 2002, from 
27,000 to 54,000. And he asked the Secretary of Health and 
Human Services to report back to him in 60 days on the specific 
recommendations. That report is due tomorrow. We will be 
presenting it to the President tomorrow and have much more 
detail.
    We've been consulting with approximately 600 people over 
that period, through focus groups. And you're absolutely right 
to highlight the wide array of barriers. We've heard a lot 
about a whole lot of reasons why State agencies and courts, 
even with the best will in the world, aren't moving the system 
effectively.
    There's been an enormous amount of Congressional leadership 
on that issue, and we are very eager to work with you and 
others in Congress who are committed to that issue. We'll have 
more details after we give the report to the President 
tomorrow.
    But I would highlight the things for which we seek budget 
authority. Two things that are probably relevant. One is 
technical assistance to States. We need to get the best 
expertise out there. And we need to share information across 
States. There have been States that have implemented some 
excellent reforms in termination of parental rights State laws 
and other States need to know about them.
    We're also asking for authority for grants to States to do 
some intensive work in removing some of the barriers to 
adoption within each State. Again, with the hope that you could 
get a model which could be disseminated.
    And we're also intending, for the first time, to do 
performance based funding in child welfare. We're going to be 
proposing an adoption incentive that rewards States for 
successfully increasing the number of adoptions. I would really 
look forward to working with you in that arena.
    Mrs. Northup. I understood from the Secretary that there 
was no prohibitions or obstacles to adopting across racial 
lines. That is not what I have heard locally. But she assured 
me there were no reluctances there.
    Ms. Golden. I can tell you a little bit about the status. 
As you know, the Congress passed the Multi-Ethnic Placement Act 
and then amended it to strengthen it. We've provided 
information to the States, and we're in the process of 
providing guidance that would include penalties. I believe that 
Kentucky may be one of the States that is not completely in 
compliance, but I could check that and provide you with 
information if that would be helpful.
    Mrs. Northup. Thank you, yes.
    [The information follows:]

    Ms. Golden. Currently, Kentucky is one of two States not 
fully in compliance with the requirements of the Multiethnic 
Placement Act. Kentucky, however, has been cooperative 
throughout this process and the State is currently working with 
the Office of Civil Rights to complete the changes necessary to 
come into compliance.

    Mr. Porter. Thank you, Ms. Northup.
    Mr. Wicker.
    Mr. Wicker. Mr. Chairman, in light of the hour, I have some 
questions which I will submit for the record. But I will not 
ask them at this particular time.
    Mr. Porter. All right, thank you, Mr. Wicker.

                           funds for refugees

    Ms. Golden, your request includes a $17 million reduction 
in funding for transitional and medical services. The request 
also indicates that the refugee and entrance ceiling will 
remain level with 90,000 as compared to 1997. Why are you 
requesting a decrease in TAMS if the ceiling remains the same, 
and is the request sufficient to continue the current policy of 
providing eight months of assistance?
    Ms. Golden. Staff assures me that the request is 
sufficient, that it isn't a change in services, but improved 
forecasting, as well, I believe, as some carry-over money.

                   head start--performance standards

    Mr. Porter. Okay, thank you. Last November the Department 
issued new Head Start program performance standards. I think 
I'm going to pass on this question at this point in time and 
ask you to answer that for the record.

                     community services block grant

    Congress provided a substantial appropriation increase for 
the Community Services block grant in fiscal year 1997. We 
increased it from $389 million in fiscal year 1996 to $489 
million in fiscal year 1997. Now we see that you're proposing 
to cut it back to $414 million in fiscal year 1998, a reduction 
of $75 million or 15 percent. The budget documents don't appear 
to indicate why you're cutting back on this block grant. Can 
you tell us why? And wouldn't it be a hardship on the States 
and local community action agencies to increase this program 
substantially in one year, and then cut it substantially in the 
next? How does that make sense?
    Ms. Golden. This was of course a difficult set of choices. 
In the context of a balanced budget, we had to make some 
difficult choices. The request for the Community Services Block 
Grant is greater than the Administration's request last year 
and greater than the 1996 level. You're right, that it doesn't 
reach the one time increase in funding that Congress provided 
in 1997.
    I think that our hope is, that part of it is just about a 
year with difficult choices. The other is that it is a year 
where States have more flexibility for some of the kinds of 
welfare to work community action, community services kinds of 
activities within their welfare reform block grant authority. 
So we are hoping that the key needs will be met.
    Mr. Porter. Thank you.
    Mr. Hoyer.

               programs for the developmentally disabled

    Mr. Hoyer. Ms. Golden, welcome to the committee. I 
apologize for not being here; we had another committee meeting, 
and I'm the ranking member and had to be there.
    As you know, I'm very interested in Head Start and other 
early childhood programs. But let me ask you another question 
that Ms. Pelosi wanted to ask. She could not be here. She was 
very interested in the developmental disabilities program, as 
you know, and noted their level funding. She wanted to ask you 
about that, and what impact that would have.
    Ms. Golden. Thank you, Congressman. And by the way, I want 
to thank you for your commitment to early childhood programs as 
well.
    The developmental disabilities programs are enormously 
important. We're finding that they are particularly important 
in a year like this one where we're trying to provide support 
and assistance to the States as they implement welfare reform 
and move families to work in cases where many families have 
members who are developmentally disabled. So the expertise 
we've developed is particularly important.
    The choice to level fund those programs was again a 
difficult choice in a year of tight budgets. We believe that it 
would be a considerable mistake to make any further cuts in 
them. We really believe that they are important and high 
priority and that we need to sustain at least level funding in 
a year of very tight budgets.
    Mr. Hoyer. Let me do a follow-up for Ms. Pelosi. Assuming 
level funding, what would be the reduction in services?
    Ms. Golden. I don't have a specific number for that. I 
think we are hoping to work as hard as we can with the 
developmental disability community and with a variety of 
sources of funding to see how much of services we can maintain.

                               head start

    Mr. Hoyer. Regarding Head Start, you have a significant 
increase, which I was pleased to see. And I know that a portion 
of that is to add 36,000 new children?
    Ms. Golden. Yes.
    Mr. Hoyer. Okay, 36,000 new infants and toddlers.
    Ms. Golden. A total increase of 36,000 children, an 
increase of 8,000 infants and toddlers.
    Mr. Hoyer. Let me ask you something in terms of the Head 
Start performance. As you know, I've been very interested in 
that and I'm a very strong supporter. But I believe that, as 
you know, from 1966 through 1993, none were canceled. You 
indicated that 65 programs were terminated as of, I suppose, 
today, although the Secretary mentioned 40, and another 100 on 
the list. But that was probably a round figure.
    Ms. Golden. It was probably the number from the previous 
testimony, last year.
    Mr. Hoyer. Okay. Sixty-five programs terminated; do you 
know how many are on probation?
    Ms. Golden. I don't know that number, but I could get it 
for you.
    Mr. Hoyer. Okay. Do you know the number who were put on 
probation and who have gotten off probation and are still 
operating? That is to say, did we had a successful 
interventions?
    Ms. Golden. Well over 100. And it may be getting close to 
200 at this point. One of the things we've found, and I think 
we owe you and many others in the Congress a great deal of 
gratitude for this, is that when you have the kinds of tough 
tools that the 1994 reauthorization provided and you set a 
deadline, you often really wake up a program's board and really 
get a commitment to turning that program around. And it makes 
it possible to improve the quality in a way that was harder to 
do before.
    Mr. Hoyer. Okay. Again, one of the things that I've been 
very interested in and I think is going to be a very big issue, 
is coordinated services. Senator Hatfield is no longer a member 
of the Senate, but as you know, he had a variation of the 
coordinated services that I've been talking about for some 
period of time, with waivers and a consolidation of money into 
single programs. Can you tell me what you're doing with 
reference to the Department's role, and then the Department's 
role as it relates to the Department of Education and the 
Department of Labor?
    Ms. Golden. Yes, there are quite a variety of different 
activities. And what we need to do is really link all of them 
together effectively. We've been doing a number of things 
across Head Start and child care to build those links more 
effectively. An example would be, this is actually linked to 
the quality issue you were describing a moment ago, I was out 
in Denver a year ago where we needed to close a program that 
wasn't effective.
    One of the concerns in that community was that it wasn't 
effectively linked to child care. We're expecting to get 
investment in the replacement grantee that will be a unique and 
creative partnership across early childhood programs, Head 
Start and child care. There are examples across the country, 
and we need to be disseminating that information.
    We've also been trying to do joint research investments 
across Head Start, child care and education, as well as joint 
technical assistance. We're going to try to make sure that's 
provided more collaboratively.
    With the Department of Education, I think we have several 
areas where there's some history and experience. An example 
would be the Head Start performance standards that we published 
in November in response to the reauthorization. We worked on 
those very closely with the Department of Education, because 
the early childhood education portions of them also had 
implications for the Department of Education's early childhood 
programs. And so we worked together every step of the way.
    We need to develop some new links, though, because welfare 
reform will push us into the new partnerships around education 
and training and work focus programs for adults. So I guess I 
would say, I believe we've made progress, but I would not say 
to you that we're all the way there yet.
    Mr. Hoyer. I've been, as Mr. Williams will tell you, 
interested in this for a long, long time.
    Ms. Golden. Absolutely.

                    head start--capital expenditures

    Mr. Hoyer. We did, as you know, appropriate some money 
three years ago and we had a study done. I'm going to pursue 
that this year and look forward to working with you on that.
    On Head Start, you may not have this, but I was very 
concerned and I discussed it with the Chairman and others on 
the capital expenditures of Head Start funds. As you know, 
historically they could not utilize funds for capital 
expenditures. We took that off prohibition. I'm very concerned 
about it because I'm not so sure that that'swhere I think the 
most productive use of funds is. Can you tell me, of the fiscal year 
1996 funds, what amount, if any, was authorized for capital 
expenditures to construct?
    Ms. Golden. We can get you the specific number for the 
record.
    Mr. Hoyer. Could you get me that?
    Ms. Golden. I would guess it's very small. Because we have 
been focusing particularly on reaching children and on some of 
the investments in people.
    I'm sure there are particular programs where a facility was 
just not acceptable any more, where they spent some money to 
rehabilitate it. We should get you a number, I don't have that 
available.
    Mr. Hoyer. I'd appreciate your getting that.
    [The information follows:]

    Ms. Golden. In FY 1996, an estimated $30 million was 
committed by Head Start grantees to purchase or undertake a 
major renovation of a Head Start facility.

    Mr. Hoyer. And I have some other questions, but I can do it 
on the next round. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Hoyer.
    Mrs. Lowey.
    Mrs. Lowey. Thank you very much. And welcome.
    Ms. Golden. Thank you.

                               child care

    Mrs. Lowey. My first question is concerning child care. It 
seems we've been working on the issue of standards and what 
kind of appropriate standards you can put in place as long as 
I've been in Congress. And we know that standards for child 
care facilities vary greatly across the country.
    Perhaps you can help me by explaining what role does the 
child care development block grant currently play in ensuring 
quality standards for child care facilities, and what I'm 
really interested in knowing is, can it play a bigger role? 
There is real inconsistency in child care standards from State 
to State.
    Ms. Golden. Let me highlight both the important role it has 
had, and then see if I can address your question about the 
future. The block grant had an important role in a number of 
ways. As you know, for many years, it has been the source of 
child care funding that provided resources earmarked for 
quality.
    And therefore, it's been the place where States were able 
to fund licensing or monitoring activities, support, and 
technical assistance. Much of what States have done to improve 
quality has been funded through the Child Care and Development 
Block Grant.
    When the Personal Responsibility Act passed, what that did 
was bring together all the child care funding streams, the 
Child Care and Development Block Grant and the funding streams 
that were formerly on the AFDC side, and put all of them under 
the provisions of the Child Care and Development Block Grant. 
So in some sense, the importance of the Block Grant and of the 
work you and others have done in your leadership on it has 
grown, because it now sets the framework for all of the funding 
streams.
    And as you know, the provisions regarding standards 
essentially require States to have their own standards, sort of 
a balancing act to not have Federal standards. I guess my own 
sense is that there are a lot of opportunities for leadership. 
I think the direction for next steps is not the direction of 
Federal specification, but of sharing information, of 
dissemination, of technical assistance.
    One of the things that we've been emphasizing to States, 
for example, is that under the new welfare reform legislation, 
a State planning process needs to occur on child care. We're 
hoping it will occur at the community level, and that there 
will be many opportunities for community members to speak to 
the issue of quality.
    And I'd be happy to think about additional roles, but I do 
think that the leadership, dissemination, technical assistance 
and research roles are very important ways of simulating 
progress on quality.
    Mrs. Lowey. Clearly, we know there can't be mandatory 
standards at this point. But to what extent has the agency put 
in place national standards as a recommendation, as the goal to 
which one should work? In other words, you're leaving it to the 
States, but you're there to provide technical assistance. I 
don't think there is a national standard in place.
    Ms. Golden. There is not a national standard. There are a 
couple of things that may be helpful. I do believe that one of 
the reasons it was so important that we publish the Head Start 
performance standards in November, and that it covered ages 
from infants and toddlers up, is that States that choose, and 
particularly States that would like to do partnerships, have an 
opportunity should they choose to take, to use, to draw on, 
those quality standards.
    And I think as Chairman Porter said earlier, with the new 
evidence about the earliest years of life, and the critical 
development that occurs in the infant and toddler years, I'm 
very hopeful that at least some States would choose to build on 
those quality standards.
    Another thing we've done is try to connect child care and 
health to prompt a healthy child care campaign across the 
country. And that at least gives the opportunity for the 
medical community to be focused on at least what's healthy and 
safe child care, and how we get that to happen.
    We haven't done everything you've suggested. I think we've 
made some early steps, and I would be very happy to hear your 
ideas for additional ones.
    Mrs. Lowey. I would like to pursue this with you, because I 
believe the welfare bill had $4.5 billion in child care. That's 
the number that we have been hoping for and working on a long 
time. And it's still not enough. And in giving the money to the 
States, hoping that they will provide the kind of standards 
that we expect, I would hope that we can look nationally and 
perhaps based on evaluations see what we can do on a Federal 
level to improve the quality of child care.

                       child support enforcement

    On another area, child support enforcement, I would be 
interested if you could provide us with an overview of the 
implementation of the child support enforcement provisions in 
the new welfare law. We know that these provisions will greatly 
enhance our ability to put billions in child support payments 
into the hands of women and their children where I feel these 
payments belong.
    Could you discuss with us where you are in the 
implementation of these provisions? Will there be additional 
funds made available to states to help them implement 
andimprove their enforcement systems? And could you alert us as to when 
the funding will be available?
    Ms. Golden. Sure. Let me highlight first the overall 
implementation. I share your sense that the child support 
provisions in the Personal Responsibility Act are enormously 
important and that they will provide critical resources for 
children and for families.
    It's a very ambitious set of provisions on which we have to 
move fast in order to do this. One category is statutory 
changes States need to make. For example, license revocation 
provisions, in case a parent is not providing child support.
    For most of the statutory changes, we're in a position 
where something like half the States already have those 
statutes in place. The other half need to do them. There are 
usually staggered deadlines in a law, giving State legislatures 
time to meet. And State legislatures are meeting now, so we 
will be providing them with information.
    A second critical category is computer systems. At the 
Federal level the statute requires work on expanding the 
Federal parent locator service. We're moving ahead and expect 
to meet the deadlines. And at the State level, the law requires 
systems development. We're working very hard with the States 
that are having problems in order to get them certified by the 
deadline.
    Most of the resources are provided in a matching mechanism. 
I guess the additional resources I would highlight is that the 
Congress did make technical assistance resources available for 
us to work with the States. And we've moved ahead on some of 
that, but we need to plan for the whole of it and move ahead on 
the rest over the upcoming weeks and months.
    Mrs. Lowey. Mr. Chairman, shall I go on? What are our 
limitations?
    Mr. Porter. We have a few minutes. You may proceed if you 
wish.
    Mrs. Lowey. First of all, before I get to the next 
question, following up on your comments about computers, it 
seems to me, Mr. Chairman, no matter who testifies, we're 
working to improve our computer systems. One of the things that 
has been truly amazing to me since I'm on this committee is 
that the computers don't talk to each other. And whether it's 
child support or another kind of program which is administered 
within HHS, and there are many, it seems to me there should be 
some kind of interaction.
    And when you talk about improving the computers system, is 
this connected to the overall effort to have a computer system 
whereby one could really track the various forms of income 
support and other programs that the Government contributes to?
    Ms. Golden. Those are very important questions. And I think 
a couple of, parts of the answer, this isn't going to be 
comprehensive, because I think the comprehensive answer is 
probably pretty technical. We actually have some good news on 
the Federal part, on the Federal parent locator service that 
Congress asked us to do. We've built a partnership with the 
Social Security Administration, which has lots of experience in 
handling large data bases of that kind. And so we're actually 
going to be able to work with them and not have to reinvent it, 
which we're very pleased with and believe will be an efficient 
way of meeting the goal.
    At the State level, I think there is considerable variation 
in how linked the systems are. It is an area in which, as far 
as I understand it, there are often privacy and confidentiality 
issues, but there are also big advantages to ensuring 
connections. And my sense is that different States are in 
different places as far as being able to accomplish that.
    Mrs. Lowey. That's probably another area where we should 
continue to talk. Because if we're really going to go after the 
deadbeat dads, I think it would be important to have some real 
computer linkages. I don't know how you can do it otherwise.
    Ms. Golden. Well, there are currently a variety of matching 
activities. We do, for example, match with IRS and collect 
child support collections that are owed from tax refunds. So 
there are a variety of activities going on. But we could 
provide you with fuller information if that would be useful.
    [The information follows:]
    Offset Folios 1134 to Insert here



                             child welfare

    Mrs. Lowey. That would be helpful. Thank you.
    Last year, especially in New York, the death of Alicia 
Scuerzo brought attention to a child welfare system which is 
under a great deal of stress. And it's not just in New York 
City, I believe, but it's in many communities throughout the 
country. Can you give us some idea of how your agency does work 
with local child welfare agencies? How do you follow through? 
How do you provide assistance to help children not fall through 
the cracks?
    Ms. Golden. Let me provide you with an overall answer to 
that question, and then perhaps say a little bit about the 
adoption initiative for which additional resources are 
requested in this budget. Overall, we have been trying to 
reform the way we work with State agencies because we believe 
that the monitoring and review that Federal agencies did around 
foster care, adoption, and child protection was too focused on 
paper, on what was in the case folders.
    We have tried to refocus to look at results, at children's 
safety, at permanence and at well-being. And we have also 
refocused to ensure that we're able to provide much stronger 
technical assistance.
    As you know, most of the key statutes that govern the 
decisions made in child abuse and neglect cases are State, so 
that States have a great deal of autonomy. But it's criticalfor 
us to be both providing a focus on whether this is really working or 
not, and to be providing the support.

                          adoption initiative

    This budget requests, an additional $21 million in 
discretionary resources for a new and ambitious adoption 
initiative which the President kicked off in December. He 
emphasized that too many children in the child welfare system 
linger over an extended period of time in foster care, because 
an overburdened child welfare system, we're not necessarily is 
not able to respond promptly.
    The President directed Secretary Shalala to report back in 
60 days on specific recommendations. Sixty days is tomorrow. We 
will be delivering that report on time. People are right now 
writing and copying. And we'll be able to provide additional 
details at that point.
    I want to highlight what I said earlier, to the 
Congresswoman from Kentucky. We've encountered enormous 
excitement from States and communities about actually working 
on these issues together, with leadership from the Congress and 
the President. We expect to have an agenda that's both 
legislative and administrative, and we'd eagerly like to work 
with the Congress. I believe that there's nothing more 
important than this set of issues.
    Mrs. Lowey. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Lowey.
    Ms. Golden, thank you very much for your very forthright 
testimony. We appreciate it. And we apologize for all the 
interruptions, but there isn't much we can do about the votes. 
Thank you very much for the fine job that you're doing.
    Ms. Golden. Thank you.
    Mr. Porter. The subcommittee will stand in recess for two 
minutes.
    [The following questions were submitted to be answered for 
the record:]
    Offset Folios 1138 to 1724 Insert here



                                       Thursday, February 13, 1997.

                        ADMINISTRATION ON AGING

                               WITNESSES

ROBYN I. STONE, ACTING ASSISTANT SECRETARY FOR AGING
WILLIAM F. BENSON, DEPUTY ASSISTANT SECRETARY, OFFICE OF GOVERNMENTAL 
    AFFAIRS AND ELDER RIGHTS
EDWIN L. WALKER, DIRECTOR, OFFICE OF PROGRAM OPERATIONS AND DEVELOPMENT
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY FOR BUDGET, DEPARTMENT 
    OF HEALTH AND HUMAN SERVICES
    Mr. Porter. The subcommittee will come to order.
    We're very pleased to welcome next the Acting Assistant 
Secretary for Aging, Robyn I. Stone. And Dr. Stone, why don't 
you introduce the people that you brought with you and then 
proceed with your statement.

                   Introduction and Opening Statement

    Ms. Stone. Thank you, Mr. Chairman.
    I'd like to introduce Bill Benson, who is one of my deputy 
assistant secretaries at the Administration on Aging, and Edwin 
Walker, who is the Director of the Office of Program Operations 
and Development. I'm assuming you all already know Dennis 
Williams.
    Thank you, and good afternoon, Mr. Chairman and members of 
the subcommittee. I appreciate this opportunity to discuss with 
you today the President's fiscal year 1998 budget request for 
the Administration on Aging. Our fiscal year 1998 budget 
request totals $838 million, essentially the same level as 
fiscal year 1997. At a time of fiscal moderation, this amount 
reflects the Administration's commitment to programs that 
improve the quality of life of older Americans, especially 
those with physical and cognitive impairments that put them at 
risk of institutionalization. The programs administered by AOA 
are designed to help older people remain independent and 
productive as long as possible.
    The budget request also reflects the Administration's 
intent to make Government more efficient by consolidating the 
management of programs that serve the elderly. We propose two 
transfers in this budget. The Health Resources and Services 
Administration will transfer to AOA the Alzheimer's Disease 
Demonstration Grants, and the Employment and Training Administration of 
the Department of Labor will transfer the Community Service Employment 
for Older Americans program.
    Fiscal restraint and the need for cost-efficient 
management, along with the requirements of the Government 
Performance and Results Act, or GPRA, are driving us to focus 
our budget request on activities with proven effectiveness, 
while we scale back those we can no longer afford. At the same 
time, we are making progress on better use of new information 
technology. In short, I come before you today not only to 
report on the results our programs are achieving throughout the 
country, but also about how AOA is doing more with less.
    AOA serves older persons and their families within the 
framework of the Older Americans Act. The service delivery 
levels funded by AOA will be maintained in fiscal year 1998, 
and targeted to the needs of socially and economically 
disadvantaged older persons, particularly the low income and 
minority elderly.
    Briefly summarized, our fiscal year 1998 budget request 
will provide funding for:
    Nutrition services, which are currently providing over 240 
million congregate and home-delivered meals annually, and which 
this year celebrates its 25th anniversary in serving older 
Americans. A major Congressionally-mandated evaluation 
completed last year found this to be one of the most efficient 
and effective of all Federal programs. It is targeted on those 
most in need: about half of meal recipients are low income and 
17 percent of these recipients are minorities. And, nutrition 
services have proven to be the core of a comprehensive and 
coordinated system of community based services, which is a 
major focus for our GPRA activities this year.
    Supportive services, which include over 40 million rides 
for doctor and pharmacy visits, nutrition and related 
activities, over 12 million responses for information and 
referrals, and access to vital services for seniors and their 
families, nearly 10 million personal care services to elderly 
in need, and 1 million legal counseling sessions.
    Support services for the frail elderly, which include an 
additional 1.3 million personal care services and almost a 
million reassuring visits and telephone calls.
    Protection of vulnerable older Americans, which includes 
State long-term care ombudsman programs, prevention of elder 
abuse, State elder rights and legal assistance programs, and 
outreach counseling and assistance. These programs are central 
to the advocacy role that is mandated by the Older Americans 
Act.
    Alzheimer's Disease demonstration grants, the majority of 
which are currently administered by State Offices on Aging, and 
which support new and innovative ways to help people and their 
families who confront this very tragic disease. A modest 
increase in funding is due for this program, which has proved 
successful in such areas as building linkages between families, 
doctors, and community supports, and outreach for low income 
and minority groups, and those who live in rural areas.
    Modest funding for aging training, research and 
discretionary programs. This limited request will provide 
viable and critical support for a number of our activities, 
including the Eldercare Locator and aging resource centers.
    These services are the cornerstone for effective local 
systems of community-based services, and provide the leverage 
for coordinating service funding throughout the States, 
localities and other Federal services. As a major portion of 
our GPRA efforts, we are strengthening partnerships with 
States, tribal organizations and communities to build and 
expand these systems. Affordable and accessible home and 
community-based care is preferred by elderly and disabled 
Americans. Home and community-based care is, however, complex, 
and must be tailored to personal needs. The national network of 
State, tribal and area agencies and their service providers 
contribute the flexibility and responsiveness that make 
community-based services so effective.
    Another focus for our efforts in fiscal year 1998 is 
information, both information collection and dissemination. 
States, area agencies on aging, and tribal organizations say 
they need us to provide current and accurate information on the 
practices in the field that work best. Older people and their 
families tell us they need information about the services 
available in their communities. We are working hard to meet the 
challenges of being the Federal focal point, provider, broker 
and disseminator of information related to the field of aging, 
serving consumers, researchers, practitioners and the formal 
aging network.
    Our World Wide Web site is a good case in point. Started on 
a shoestring as an employee initiative, it has developed, 
through rich content on our own site and links to other aging 
related sites, into something very close to ``one-stop 
information shopping'' in the aging field. This information 
resources, which serves up to 500 different users every day, 
was featured in a story in Reader's Digest last year.
    Another example of our priority focus on information 
dissemination is our support for the Eldercare Locator, a 
nationwide 800-number directory and referral service for older 
people and their families to find out about services available 
in communities across America. This service, which has fielded 
more than 10 million calls--mostly from women, who are the 
primary caregivers for elderly people--was described recently 
in a story in Parade magazine, and was featured on ABC News. We 
are getting tremendous feedback about the Eldercare Locator.
    Another agency focus is on older people as consumers, 
promoting their participation in planning, managing and 
delivering the services they need, enhancing the ability of 
older people to safeguard themselves, their rights and their 
property, and helping older consumers to make informed choices 
for themselves, their families and their communities.
    Our request for Federal administrative funds will support 
150 full time equivalent positions and related expenses. The 
small staff of AOA is responsible for overseeing the vast 
network of 57 State units, 222 Indian tribal organizations 
serving more than 300 tribes, area agencies on aging, and more 
than 27,000 service providers throughout the country. In 
keeping with the Department's down-sizing efforts, we have 
reduced our staff by more than 20 percent over the last several 
years, and are committed to keeping our staffing requirements 
at a minimum level.
    Our staff is also responsible for implementing a new 
Congressionally-mandated National Aging Program Information 
System, overseeing the data collection efforts by States and 
validating the figures. This NAPIS system is an important piece 
of our effort to meet the requirements of GPRA. We have a 
strategic plan in place and are concentrating on building 
strong ties to State and localities, many of which are quite 
advanced in such areas as performance-based planning, budgeting 
and measurement.
    The vision of AOA is to ensure that present and future 
older Americans have an independent, productive, healthy and 
secure life. This budget request will greatly support the 
cornerstone of comprehensive and coordinated home and 
community-based services, which are needed to make the 
improvements and the provisions of the Older Americans Act a 
reality in local communities across the country. Our request 
will also continue to build on the foundation of enhancing 
AOA's ability to meet its vision and to continue to be 
responsive and effective in serving our consumers.
    Thank you, Mr. Chairman. My colleagues and I will be happy 
to answer any questions which you and the members of the 
subcommittee may have.
    [The prepared statement follows:]
    Offset Folios 1734 to 1737 Insert here



               reauthorization of the older americans act

    Mr. Porter. Thank you, Dr. Stone.
    Let me begin by asking about your authorization, which 
expired at the end of fiscal year 1995, well over a year ago. 
You're currently operating on the basis of the expired law, I 
assume?
    Dr. Stone. Yes, we are.
    Mr. Porter. And when is the Administration going to submit 
a bill to Congress for reauthorization?
    Dr. Stone. We are currently working on the reauthorization. 
I don't know, Edwin, whether you have any comments on that.
    Mr. Walker. Yes. In the last Congress, we submitted a bill 
quite early in the process, and this year we're working on a 
letter to come to the Congress, which will restate our 
principles and identify areas that we think need to continue to 
be enhanced this year. So we are looking forward to again 
working with the Congress on the reauthorization and would hope 
for an early passage.
    Mr. Porter. And if it isn't reauthorized by the time we 
mark up, I assume we are going to mark up on the basis of 
existing law?
    Mr. Walker. That is correct.

                    effectiveness of aging programs

    Mr. Porter. How does the Department measure effectiveness 
in the Older Americans Act programs? Do you have specific 
outcome measures for these programs that everyone knows they 
have to meet?
    Dr. Stone. Yes, we do. As I mentioned in the opening 
testimony, there are a number of GPRA items that we have been 
working on, actually fairly vigorously. In the nutrition 
services area, which is one of our largest programs, we are 
using the performance measures that were established in the 
formal nutrition program evaluation. And as I said, this 
baseline evaluation has demonstrated that we are effective in 
providing nutrition to a whole range of elders, and in 
targeting low income and minority elders as well.
    We have also established performance based outcomes in the 
area of elder abuse, and I am currently working with my staff 
on a whole range of outcome measures that we will use with 
States and area agencies in the area of home and community-
based services.

                         program consolidation

    Mr. Porter. You administer a number of small, categorical 
programs that seem to serve very narrow purposes. Wouldn't it 
be more efficient if most of these smaller programs were 
consolidated into the large Title III service program?
    Dr. Stone. In fact, Mr. Chairman, we are focusing on some 
levels of consolidation. In the area of Title VII, for example, 
we have been focusing on consolidating all of those programs 
together. We are also focusing on the transfer of a program 
from another part of the Department, as well as one from the 
Department of Labor, to consolidate the aging programs in one 
place through an agency that is really dealing with a whole 
range of services, meeting the needs of elderly in the 
communities.
    Mr. Porter. In the fiscal year 1997 appropriations bill 
enacted last fall, some of us frankly thought that two of these 
programs had not been separately funded, the ombudsman and the 
elder abuse program. We see now from your budget materials that 
the agency decided to go ahead and fund these two programs 
separately. Both the House and Senate bills had zeroed them 
out, and there was no earmarking for them in the bill under the 
larger program, as had been done in the fiscal year 1996 bill.
    Under the circumstances, will you explain to the committee 
how you arrived at the decision to fund them separately once 
again?
    Dr. Stone. Actually, we funded those programs through the 
supportive services and centers program in fiscal year 1997 
similar to the way that they were funded in fiscal year 1996. 
We have been made aware of this issue and, in fact, my staff 
was up on the Hill on February 10th meeting with some of your 
staff to address these concerns.
    Bill, I don't know whether you want to highlight some of 
the outcomes of that visit.
    Mr. Benson. Mr. Chairman, we recognize that there is some 
confusion and misunderstanding over this issue, with regard to 
the funding of the ombudsman program and elder abuse activities 
within the Title III-B supportive services account. We just 
became aware of this as an issue this past Friday during the 
Department's budget briefing up here on the Hill. As a result, 
several of our staff met with Mr. Knisely and Mr. McCann. 
Hopefully, we've begun a process in which we can be sure that 
there aren't these kinds of misunderstandings between us in the 
future.
    Mr. Porter. I think that the consultation ought to come 
before rather than after. And we should know what your plans 
are where there's a question of interpretation that might be 
seen one way by Congress and another by the Administration.

                       preventive health services

    Another small program that you want to fund is preventive 
health services. Why couldn't the States address these health 
concerns through the larger Title III program? Is it simply a 
matter of not trusting the States to do what's right? And what 
are the funds actually spent on in this program?
    Dr. Stone. Good question. It is true that this is a small 
program. We do believe, however, that it is very critical to 
ensure that there is an explicit focus on health promotion and 
disease prevention, particularly because we know that the 
effects are significant, not just for younger people, but for 
older people as well.
    This program actually supports a whole range of services, 
ranging from screenings, to education about self care, to 
issues about secondary and tertiary prevention which are so 
critical for the elderly, particularly those who are disabled. 
In addition, I think it is important to understand the 
leveraging nature of these dollars. With these dollars, States 
and local communities can go to their local health departments, 
to the non-profit communities, and to the private sector and 
leverage other health promotion and disease prevention dollars. 
And the States and area agencies have been able to put together 
extremely innovative programs, using these preventive dollars 
as ``seed'' or leveraging dollars.
    So we believe it is important, and I don't think it really 
is a question of not trusting the States. I think it is more a 
question of making sure that we have an explicit 
acknowledgement of the importance of disease prevention and 
health promotion in all States and all local communities.

            community service employment for older americans

    Mr. Porter. Let me focus for a moment on the senior 
employment program. As you mentioned, the President's budget 
proposes to transfer the Older Workers program under Title V of 
the Older Americans Act to your agency from the Department of 
Labor.
    Dr. Stone. Right.
    Mr. Porter. First, you said this, but why would that 
transfer take place? And secondly, if all the community service 
employment funds were allocated to the States, what 
administrative cost savings would you expect as compared to the 
current situation where 10 national organizations, as well as 
the States, receive funds?
    Dr. Stone. Well, let me try to take these in order. With 
respect to the first question, this goes back to the issue that 
you raised about consolidation of programs. And one of the 
important aspects with regard to this employment program is 
that senior employment programs should not be separate from the 
whole range of community-based services that are being provided 
to elderly folks in the community.
    Consequently, we felt it was critical to begin to 
consolidate these programs under the aegis of the 
Administration on Aging, which has the responsibility for most 
of the Federal aging policy. So it was a natural progression to 
transfer that program over to the Administration on Aging.
    With respect to a difference in administrative costs, the 
levels for the States and the national sponsors are currently 
the same. But I think the more important thing to understand is 
how effective and efficient the national program offices, the 
national sponsors, have been in terms of reaching their targets 
for employment placement. They actually were 70 percent 
successful in reaching their targets, as opposed to only 50 
percent for the States.
    So in fact, these national sponsors, which have 
historically tremendous expertise and background in doing these 
kinds of placements, are very efficient and very effective. And 
that is one of the reasons why it is important to keep 
responsibility, for the most part, with these national 
sponsors, while recognizing the importance of using the States 
in this program as well.
    Mr. Porter. What if these programs were operated by the 
States and the current national grantees had to compete for the 
funds at the State level? Wouldn't that work just as well as 
what we're doing now? Or better?
    Dr. Stone. Clearly, that is somewhat of an empirical 
question. I think that we have seen the effectiveness of these 
national sponsors. And your suggestion is certainly something 
that we could consider.
    However, we believe at this point that as we transfer the 
program over to the Administration on Aging, because we have 
seen the effectiveness of these national sponsors, that we 
would maintain the program as it was administered through the 
Department of Labor.
    Mr. Porter. You probably realize that you may be the 
designated spear catcher here.
    Dr. Stone. Yes, I know.
    Mr. Porter. This is an area where many members of the 
subcommittee have had great concerns. And I imagine those 
concerns will continue in this Congress.
    Mrs. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman.
    Thank you for appearing before us.
    Dr. Stone. Thank you.

                funding for nutrition services programs

    Mrs. Lowey. I have always been a great advocate of 
congregate meals and meals on wheels. And in fact, I think that 
as so many of us visit those senior centers, and you see that 
it's not just nutrition, it's a lifeline to civilization for 
these seniors.
    In looking through your budget justification, however, I 
was particularly interested in the extraordinary increase in 
the meals on wheels program, the home delivered program, 
relative to the congregate meals program. In fact, there seems 
to be a transfer from the congregate meals to the meals on 
wheels. In fact, I see that the waiting list for the meals on 
wheels program is really surprisingly high.
    Now, you requested a $5 million increase for meals on 
wheels. So my first question is, what kind of an impact will 
this have on the waiting list. But I also want to know, was 
this transfer made because of tough choices, or because the 
congregate meals programs were not needing these funds, or did 
you just have to say, okay, how do we do this?
    Secondly, one of the things that I was amazed at recently 
in talking to one of my local supervisors, that if a town 
decides to raise the cost on the attendance from $1 to $2, to 
improve or to supplement their program, that extra $1 they 
charge gets deducted from the Federal payment, is that correct? 
They were sure it was. I didn't know that.
    Dr. Stone. No, they cannot charge for these meals. So----
    Mrs. Lowey. No, no, it's a voluntary contribution. In other 
words, they do. I mean, most senior centers have a voluntary 
contribution.
    Dr. Stone. Yes.
    Mrs. Lowey. Now, say their voluntary contribution is $2. If 
they decide to enrich the program because of inflation, and 
they may not feel that you're keeping up with it adequately, 
and they raise the suggested contribution to $3 (now all of 
these, if the people can't afford to pay, they don't pay 
anything), that extra $1 gets deducted from the Federal funds 
that we're giving them?
    Dr. Stone. I am told it goes into the expansion of the 
program.
    Mrs. Lowey. Will you look into that?
    Dr. Stone. Yes, I will look into that.
    Mrs. Lowey. I questioned the supervisor, and he was 
absolutely sure. If you could look into that and get back to 
me, I would appreciate it.
    [The information supplied for the record follows:]

             Voluntary Contributions for Nutrition Services

    The Older Americans Act requires that voluntary 
contributions received from senior citizens for Nutrition 
Services programs be used to expand those programs. The 
Administration on Aging has recently become aware of some 
confusion in the field regarding this matter and the handling 
of program income at the local level. Therefore, AoA is now in 
the process of developing guidance to be issued to AoA Regional 
Offices and to State and local agencies to clarify this issue.

    Mr. Walker. We will look into it. But the guidelines are 
that any contribution, any voluntary contribution, has to be 
used to expand the program. It goes back into additional 
service delivery. That's one of the components of the program 
that has made it very popular over the past 25 years, and made 
it a real success--because seniors have a sense of ownership in 
this program and see the immediate results of their 
contributions.
    Mrs. Lowey. However, they said, and I won't pursue this if 
we're not sure, they said that extra dollar gets deducted from 
their Federal share, which didn't make sense to me.
    Dr. Stone. I can't imagine.
    Mr. Walker. No.
    Mrs. Lowey. I think he was wrong. But he insisted, and so 
does his staff. So we'll check that out.
    Mr. Benson. In fact, I believe in fiscal year 1994, the 
amount of voluntary contributions nationwide was about $170 
million, which went directly back into the program. So that 
directly relates to an increased number of meals served by the 
programs who raised those donations.
    Mrs. Lowey. But it doesn't decrease?
    Mr. Benson. Absolutely not. No, it absolutely expands the 
services.
    Mrs. Lowey. I had a feeling he was wrong, but he insisted 
he was right.
    Dr. Stone. Now, with respect to your first question, yes, I 
would say that unequivocally, the decision was made through 
tough choices. We did not reduce the level of funding for the 
nutrition services program as a whole. But within the total, we 
did make a decision--because we have seen a tremendous increase 
in the demand for home-delivered meals--that we would make this 
shift, a small transfer, from congregate to home-delivered 
meals. And in fact, this really mirrors the trends that have 
already been occurring in the States. We have seen these trends 
over the years, in the States themselves shifting some of their 
dollars to home-delivered meals programs.
    It is also true, however, that if a State believed this was 
not an adequate shift, they could then transfer the money back. 
So, this really gives a lot of flexibility to the States. And 
we have really been trying to respond. While recognizing that 
there are waiting lists on the congregate side, there are also 
a heck of a lot of people living at home who really need these 
home-delivered meals. And this is part of the tough choices 
that we are making.
    Mrs. Lowey. Well, I just am one who feels that both are so 
vital.
    Dr. Stone. Yes, we believe that too.
    Mrs. Lowey. We'll look at our numbers again and perhaps 
request some additional numbers from you. I would not want to 
deny the additional funds, in fact, I would like to increase it 
for the home delivered program.
    Dr. Stone. Yes.
    Mrs. Lowey. But I would also like to see if perhaps we can 
get additional funds for the congregate meals program. One of 
the difficult things, as my colleagues know, we have on this 
committee, is every decision is a tough choice.
    Dr. Stone. Yes.
    Mrs. Lowey. Because these programs are so very worthwhile. 
There are some other subcommittees I'd like to invade, I'm sure 
we'd like to do it together.
    Dr. Stone. We would like to help you with that. [Laughter.]
    Mrs. Lowey. But for our seniors, I truly believe, I believe 
these congregate meals and these home delivered meals save us 
money in health expenses, frankly. I feel they're so vital.

                          in-home respite care

    One of the other areas where I noticed you requested 
funding, was for a respite care benefit. I have always been a 
real fan of respite care programs. I think they save us a lot 
of money in the long run in long term care. You have had 
experience with respite care programs through your Alzheimer's 
program. And I know we have some in our district which have 
proved life savers to families.
    Perhaps you can just discuss with us what you think the 
benefits are, what are the cost savings, what have you learned 
from your experience with the Alzheimer's program?
    Dr. Stone. Well, a couple of things. First, as you know, in 
the President's budget, we have made a request for a very 
marginal, but I think very important, respite care benefit for 
families, families that are dealing with an individual who has 
Alzheimer's and related dementias.
    I have spent 20 years looking at caregivers. That is my 
area of expertise, and I can tell you that women--daughters and 
spouses, wives in particular--are between 80 and 90 percent of 
all long-term informal caregivers. We will never see that 
replaced, regardless of what we do. The family is still the 
mainstay of all of long-term care, despite the myths about 
family abandonment. It just has not happened. We see the same 
level of family care now that we saw 10, 15 years ago.
    What respite care does is provide support and, frankly, a 
break for the caregiver. A little bit of a time to get away, to 
go to the store, to take a weekend vacation. This is clearly 
something that for some of these caregivers, gives them the 
break they need to be able to come back and then provide untold 
more hours of care. If we monetized the amount of informal care 
that is provided in this country, it would blow us all out of 
the water. In fact, I could get you the figures if you'd like 
to see them. It's pretty phenomenal.
    So a small investment in respite, particularly one that 
allows family members to take some time off and get away, is 
well worth the money that it costs, in terms of what we get 
back in return.
    Along the same lines in our Alzheimer's initiative we will 
be building on the demonstrations that were conducted through 
HRSA and which we are proposing to transfer to AOA. We are 
asking for a very modest increase to continue to look at ways 
in which we can support family caregivers, and ways in which we 
can link family caregivers to physicians and other health 
providers in the community, so that they understand better the 
needs of people with cognitive impairment. Also, so that we can 
really support and reinforce our long-term care system, which 
is basically wives and daughters, and sometimes men. If there's 
no daughter and there's no wife, frankly, a man does step up to 
the plate. That is the good news.
    Mrs. Lowey. Well, I also think with regard to that, I have 
long been interested, I'm not even sure of the status, whether 
we ever got it passed, but credits and deductions, there are 
many women, rarely men, many women as you said so well, that 
have had to give up their jobs----
    Dr. Stone. Yes.
    Mrs. Lowey [continuing]. To stay at home and be a 
caregiver. And really, we should look at both sides of the life 
cycle.
    Dr. Stone. I agree.
    Mrs. Lowey. Child care and adult care. And in fact, if a 
woman or a man chooses rather than to pay a caregiver to stay 
home and provide that care, that's a job.
    Dr. Stone. Yes.
    Mrs. Lowey. And it should be treated as a job.
    Dr. Stone. It is a job. Many, many women are actually 
working a fulltime job and also doing the caregiving 
simultaneously. So, many of them are actually pulling double 
duty.
    Mrs. Lowey. Well, thank you very much. Thank you, Mr. 
Chairman. I look forward to working with you.

            tax credits and leave provisions for elder care

    Mr. Miller [assuming Chair]. Thank you. I just have a few 
questions.
    I think by the way we did pass something in our tax bill 
last year giving tax credits for taking care of elderly 
parents.
    Dr. Stone. Yes.
    Mr. Miller. I mean, it's not under your--there was a 
provision.
    Dr. Stone. That is true. And actually, the Family and 
Medical Leave Act also has provisions for elder care. So we 
have been moving in the direction of paying attention to this 
issue.

                     funding for nutrition services

    Mr. Miller. Let me cover one thing that Mrs. Lowey was 
asking. This is about your senior centers and the meals on 
wheels. If they get a contribution, they get to keep that 
within their organization, but only for use for expansion of a 
program. The meals on wheels doesn't break even in my 
community, they need money to support it. This is not a means 
tested program, right?
    Dr. Stone. That is correct.
    Mr. Miller. Is there an incentive for them to try this? I 
know wealthy people have used the services and have been 
generous in contributing in the local community. But is there 
an incentive to try to solicit that type of support, since they 
get the benefit from it?
    Dr. Stone. Yes. But I should say that the majority of these 
folks are actually low income or near-poor. In fact, the 
nutrition evaluation indicated that a substantial proportion of 
even the very low income elderly are making voluntary 
contributions. These are folks who absolutely don't have many 
dollars to put forward.
    Mr. Miller. This past fall, or sometime this past year, I 
delivered meals for a day. It was an interesting experience. I 
think everybody on this committee, since we're so close to it, 
should do that. I'm serious. Ask the local meals on wheels to 
invite them. Because a lot of times, you don't think about it, 
you've got a busy schedule. Unless you get invited, and they 
invited me to do that. It was great. Some woman from the local 
program, in Manatee County delivered the meals on wheels. I 
rode around with her, and I'd go up and knock on the door and 
somebody would recognize me and say, I see you on TV or 
something like that. It was kind of a shock. They had no idea 
who that guy was. [Laughter.]
    But they said, a real Congressman here? I think you should 
try to specifically find out where each of us represent and ask 
them to send a letter and make a phone call.
    Dr. Stone. I think it's a great idea.
    Mr. Miller. You learn a great deal about that program by 
that I'm not sure what kind of a cross section I saw, but I 
think it was worthwhile.

                    title vii program consolidation

    A couple of questions about the title VII consolidation. 
We're talking about the grants, and maybe you were talking 
about it with Mr. Porter, but consolidating these smaller 
programs for the vulnerable elderly. The programs still exist, 
but in block grants, is that the way it's structured? You're 
still going to have the requirements but it's in a block grant? 
I'm confused.
    Mr. Benson. Currently there are four distinct programs 
within Title VII, each with a line item, although several of 
them have had zero funding in the last couple of years. What 
wepropose to do is collapse that into one account, one line. Within 
that amount, we specify that we would continue level funding for one of 
the four programs, the ombudsman program. Currently, the entire Title 
VII request is roughly $9.2 million, of which $4.4 million goes to the 
ombudsman program. So we would specify in our proposal that it stays 
with the ombudsman program. But the States would then have the 
flexibility to decide in those other three programs where they would 
direct the rest of that pot of money.

                      grants for native americans

    Mr. Miller. You mentioned the programs for, the Indian, 
tribal program and then you have the Native Alaskan and 
Hawaiian. Why do Native Hawaiians need a separate program? 
Aren't they covered by the regular program? I'm new on the 
Interior Appropriations subcommittee this year, so I'll find 
out a little bit more about Indian issues later.
    But why wouldn't that program be transferred to interior? 
I'm not that knowledgeable of the Bureau of Indian Affairs. 
Address both the Hawaiian and Alaskan programs, why do we need 
separate programs for that, why can't it be covered by the 
regular program? And then the Indian program, why wouldn't that 
be shifted? It's not a big program, I know.
    Dr. Stone. Let me just say, there are clearly some very 
different issues between States and tribes. I think this is one 
of the reasons we have to really focus on specific Native 
American issues, versus thinking about it as just one large 
program. Bill, you can elaborate on that.
    Mr. Miller. Why can't that be handled within, the Bureau of 
Indian Affairs? They handle all the other Indian issues.
    Mr. Benson. I think there are two reasons that that is the 
way it is in the older Americans Act, Mr. Miller. First of all, 
with regard to the Hawaiian issue, Title VI is directed to 
Native Americans. And several years ago, the Congress began 
specifying, within a number of programs for Native Americans, a 
separate category for Native Hawaiians. That is why Title VI 
ended up with two parts: Part A for Indians and Alaska Natives, 
and Part B for Native Hawaiians.
    Secondly, the reason it's in the Older Americans Act is 
because the services that are anticipated to be provided under 
Title VI, which are the direct grants to tribal organizations, 
in large part mirror the services that are provided under the 
Title III grants to States. An awful lot of that goes into the 
nutrition program.
    As the Administration on Aging, we have the expertise in 
administering the meals program under Title III. The 
presumption was that we could provide that same kind of 
expertise and support to tribal organizations under Title VI. 
Secondly, the tribes have the opportunity to benefit from Title 
IIIB services in their communities as well.
    So there is tremendous overlap, and the programs are 
intended to be the same. To move it to the Bureau of Indian 
Affairs, and this is something that was looked at internally in 
the Department a couple of years ago as part of the 
``Reinventing Government'', initiative would have segregated 
out and made a tremendous gap between serving Indian elders and 
non-Indian communities, as well as serving urban Indians. I 
believe roughly half the Indian elder population in this 
country resides in urban areas.
    So Title VI was intended to try to make sure Indians get 
the same kind of service with the same kind of expertise and 
support backing them up.
    Mr. Miller. Indians in urban areas live in residential 
areas just like non-Indian Native Americans. Do they get 
special types of meals or are they covered by a different meals 
on wheels program?
    Mr. Benson. No. Usually what happens for urban Indian 
elders is that they are entitled to services under Title IIIB, 
which is what supports other people age 60 and over in 
particular communities. For example, in a city like Miami, if 
there were any Indians living in the urban area, they would go 
to the area agency on aging for services.
    However, some cities have elected to create special 
community centers for urban Indian elders. For example, Seattle 
has an urban Indian center, as does Los Angeles and other 
communities, where they try to be very specific in meeting 
their particular cultural needs. But those funds still come out 
of Title IIIB.
    Mr. Miller. So my area is Sarasota. Sarasota finds they 
have 75 Native American elders, do they have to apply 
separately for those 75 elders?
    Mr. Benson. No, absolutely not. They would be part of the 
general older population that's served by the Older Americans 
Act in that community.
    It is possible if they all lived in the same area that a 
meals program might want to create a meal site that caters, if 
you will, to the Indian elder population--if there were enough 
of them to provide culturally sensitive meals, for example. 
That's a possibility. And that is happening in some of the very 
large cities.
    Mr. Miller. Well, I commend you, these are tough choices. 
You are holding yourself at a flat budget, which means based on 
inflation that's less income, with programs that are popular. 
But moving towards consolidation is something that we support. 
With the fiscal problems we have, it's tough choices, cancer 
research versus Head Start versus meals on wheels.
    So I appreciate the work you've done in holding the line on 
your budget, and thank you and I've enjoyed it. And we'll stand 
adjourned.
    [Questions and answers for the record follow:]
    Offset Folios 1761 to 1851 insert here



    Offset Folios 1852 to 1895/2100 Insert here




                           W I T N E S S E S

                              ----------                              
                                                                   Page
Benson, W. F.....................................................  1257
Brown, J. G......................................................   293
Golden, Olivia...................................................   643
Mangano, M. F....................................................   293
Shalala, Hon. D. E...............................................     1
Stone, R. I......................................................  1257
Swanson, Carl....................................................   391
Vladeck, B. C....................................................   391
Walker, E. L.....................................................  1257
Williams, D. P...........................................391, 643, 1257


                               I N D E X

                              ----------                              

                 Secretary of Health and Human Services

                                                                   Page
Secretary of Health and Human Services...........................     1
    Acquired Immunodeficiency Syndrome:
        African Americans, in....................................   228
        Drug assistance program..................................    21
        Funding..................................................    18
        HIV vaccine funding......................................    93
    Actuary, Letter from.........................................     6
    Adoption:
        Assistance...............................................   147
        Program..................................................    96
    Budget:
        Balancing................................................
          74, 137................................................
        National Institutes of Health............................
          21, 24.................................................
        President's FY 1998......................................    93
        Priorities...............................................    89
    Cancer:
        Breast cancer detection..................................    28
    Consolidated Omnibus Budget Reconciliation Act...............    95
    Contracts:
        Departmental.............................................    90
    Downsizing, Effects on Black Workers.........................   244
    Early Start:
        Quality..................................................   288
        Strengthening of.........................................    73
    Environmental Health:
        Children's...............................................   106
    Food Safety..................................................    30
    Full Time Equivalent:
        Ceiling--FY 1993-2000....................................   106
        NCFA FTE.................................................   141
    Governing Council on Children and Youth......................   290
    Government Performance and Results Act (GPRA)...............19, 101
    Head Start:
        Investment...............................................    73
        Program standards........................................   289
        Quality and expansion....................................
          245, 287...............................................
    Health Care Affordability & Accountability Legislation.......   246
    Health Insurance:
        Children, for............................................    71
        Healthy workers..........................................   140
        Temporary unemployed workers.............................
          94, 145................................................
        Uninsured children.......................................
          99, 142, 211, 220......................................
    Health Professions..........................................27, 242
    Healthy Start................................................   216
    Health Safety Net............................................   217
    Immigrants...................................................    23
    JOBS:
        AFDC recipients participating in.........................   188
    Legislative Measures.........................................   246
    Medicaid:
        Disproportionate share hospital payments.................   144
        Entitlement spending.....................................   138
        Impact of funding proposals..............................   139
    Medicare:
        Investment-based system approach.........................    90
        Part B...................................................    75
        Proposal.................................................   120
    Mammogram Consensus..........................................   242
    Managed Care:
        Provided preferences.....................................   240
        Training centers.........................................   240
    Needle Exchange Program......................................    93
    Official Time...............................................76, 122
    Opening Statement.............................................4, 11
    Operation Restore Trust (Medicare)...........................   286
    Prevention:
        Diabetes.................................................    25
    Proposals, President's FY 1998...............................   151
    Pulmonary Hemorrhage........................................20, 226
    Research:
        National Institutes of Health............................   121
    Status of Beneficiaries......................................   186
    Status of Programs...........................................   150
    Substance Abuse..............................................   213
    Surgeon General..............................................    26
    Teen Pregnancy...............................................    29
    Tobacco:
        American Stop Smoking Intervention (ASSIST)..............
          26, 31, 120............................................
        Youth and................................................    98
    Tuskegee Study Participants Apology..........................   241
    User Fee:
        Proposals................................................   212
    Vaccine:
        HIV, funding of..........................................    93
    Violence.....................................................   213
    Welfare Reform:
        Federal role in idea sharing.............................   290
        Job Training.............................................    22
        State Allotments.........................................    88
        Waivers..................................................   140
        Work Opportunity Reconciliation Act of 1996..............   215

  Department of Health and Human Services, Office of Inspector General

Ambiguity of Instructions........................................   345
Ambiguity of Rules...............................................   324
Adult Resolution Process.........................................   333
Better Ways of Doing Business..................................294, 297
Budget for Audit Contracts.......................................   342
Change in Documentation Requirements.............................   326
Child Support--IRS Link..........................................   348
Civil False Claim Act............................................   306
Coding...........................................................   318
Compliance Programs..............................................   349
Composition of Implemented Savings Excluding SSA.................   303
Coordination with Office of Research Integrity...................   339
Departmental Cooperation.........................................   347
Documenting Savings from Mandatory Funding.......................   332
Forfeiture of Property...........................................   342
Government Performance and Results Act...........................   333
Head Start Program...............................................   340
Health Education Assistance Loans..............................309, 347
Home Health, Hospice, and Nursing Homes..........................   352
Impact of Welfare Reform on OIG..................................   351
Incontinence Supplies............................................   302
Issues Related to Universities...................................   355
LabScam Investigation............................................   329
Legal Standard of OIG PATH Audits................................   344
Legislative Changes..............................................   337
Limitation on Audits.............................................   326
Local Carrier Rules..............................................   323
Managed Care Systems.............................................   355
Management Decisions on Recommendations..........................   332
Mandatory Funding................................................   331
Many Factors Considered..........................................   324
Medicaid Audit Partnerships......................................   353
Medicare Program Changes.........................................   348
Medicare Transaction System......................................   338
Medicare and Market Forces.......................................   351
Most Significant OIG Reports.....................................   334
National Institutes of Health Investigations.....................   355
OIG Budget.......................................................   320
OIG Financial and Staffing Resources.............................   347
OIG Funding Sources..............................................   299
OIG Justification................................................   357
OIG Legal Staff..................................................   343
OIG Staffing Level...............................................   341
OIG Strategic Plan...............................................   334
Opening Statement................................................   293
Operation Restore Trust..........................................   354
Outstanding Debts to HHS.........................................   333
Physical Presence Issue..........................................   327
Physician Liability for Overpayments.............................   328
Physician Visits and Level of Service............................   325
Physicians at Teaching Hospitals.................................   322
Prescription Drug Costs..........................................   308
Prescription Drug Payments.......................................   351
Public Awareness.................................................   353
Quarterly Reporting..............................................   330
Recent OIG Work..................................................   293
Report on Actual Revenue.........................................   320
Research Fraud...................................................   339
Resources for Collections........................................   332
Retroactivity Issue..............................................   346
Role of Department of Justice....................................   329
Ryan White Act...................................................   339
Savings Generated by OIG.........................................   318
Teaching Hospitals.............................................304, 310
Teaching Hospitals--Enforcement of Rule..........................   317
Teaching Hospitals--Justice Role.................................   321
Teaching Hospitals--Physician Presence...........................   314
Teaching Hospitals--Retroactivity Issue..........................   317
Teaching Physicians..............................................   313
Types of OIG Audits..............................................   309
Upcoding.........................................................   314
Upcoding of Physician Visit Codes................................   324
Witnesses........................................................   293
Work Underway and Planned......................................294, 299

                  Health Care Financing Administration

Beneficiary-Centered Purchaser...................................   396
    Emphasis on Results and Outcomes.............................   399
    Key Operational Roles........................................   398
Civil Rights Compliance.........................................407-408
Clinical Laboratory Improvement Amendments:
    Alternate Quality Assessment Survey (AQAS)...................   561
    Authorizing Legislation......................................   557
    Budget:
        By Object................................................
          617-618................................................
        Rationale................................................   561
    Facility Inspections..................................448, 559, 581
    Methods of Correction.......................................559-560
    User Fees....................................................   562
Clinical Research With NIH......................................409-410
Federal Administrative Costs:
    Authorizing Legislation......................................   573
    Beneficiary Services.......................................577, 587
Electronic Information Support..................................578-579
Market Research..................................................   580
Payments to States...............................................   585
Provider and Beneficiary Outreach...............................579-580
Prudent Management...............................................   583
    Budget:
        Account Summary..........................................   573
        Funding Summary..........................................   591
        Rationale................................................
          468, 574...............................................
    Claims Payment...............................................   576
    FTE...............................................422, 442-443, 621
    New Workload.................................................   481
        CFO Audits...............................................   574
        Initial Enrollment Packages..............................   569
        Millennium Computer Change...............................   574
    Partnership with States.....................................589-590
    Positions By Grade...........................................   622
    Quality Assurance..........................................581, 588
    Significant Items............................................   632
Foundation for Accountability (Facct)............................   582
HCFA On-Line.....................................................   579
HCFA Reorganization..............................................   399
Health Advisory Services..............................398, 453-454, 472
Health Care Quality Improvement Program..........399, 475, 544, 581-582
Health Care Fraud and Abuse Control (HCFAC) Account..............   516
Health Care Trust Funds, Payments to:
    Appropriation Language.......................................   510
    Authorizing Legislation......................................   605
    Budget:
        Appropriations History Table.............................   605
        By Activity..............................................
          511, 607...............................................
        By Object................................................   604
        For Obligation...........................................   512
        Rationale................................................   514
        Summary of Change........................................   513
Health Insurance Portability and Accountability Act......409, 497, 501, 
                                                                    575
    Administrative Simplification...............................429-430
    Regulatory Burden............................................   411
Health Plan Employer Data and Information Set (HEDIS)............   583
Health System Performance:
    Beneficiary Health Status and/or Risk........................   566
    Managed Care Access..........................................   566
    Medicare Current Beneficiary Survey........................473, 566
    Vulnerable Populations, Meeting Needs of.....................   568
Home Health Care Legislation..............................391, 406, 426
HMO Loan and Guarantee Fund:
    Amounts Available for Obligation.............................   629
    Appropriation Language.......................................   628
    General Statement............................................   628
    Language Analysis............................................   627
Kennedy-Kassebaum (See Health Care Portability and 
  Accountability)
Managed Care:
    Access to Quality Care......................................456-461
    Adequate Hospital Stays................................498, 459-460
    Discrimination in Beneficiary Care..........................450-452
    Education of Beneficiaries.............................453, 458-459
    Enrollment...................................................   405
    Growing Numbers Served.......................................   405
    Historial Data...............................................   625
    Medicaid.....................................................   484
    Patient Savings.............................................454-455
Medicaid:
    Administrative Services......................................   447
    Appropriations Language......................................   480
    Authorizing Legislation....................................483, 595
Beneficiary Services.............................................   493
    Budget:
        Amounts Available for Obligation.........................   599
        Appropriations History Table.............................   596
        By Activity..............................................
          483, 597...............................................
        By Object................................................   598
        Proposed Law.............................................   603
        Rationale................................................   493
        Summary of Changes.......................................   594
    Child Health Initiatives......................416-421, 449, 457-458
    Components, Coordination of................................486, 577
    Contract With America Advancement Act of 1995................   498
    Disproportionate Share Hospital (DSH) Payments.......414, 445, 461, 
                                                          499, 503, 630
    Fraud Control Units..........................................   502
    GeoAccess....................................................   492
    Growth:
        Blind and Disabled Population............................   489
        By Eligibility...........................................   489
        Outlays..................................................   488
        Program Spending.........................................   488
        Receipts.................................................
          445, 470-471, 488, 490.................................
    Illegal Aliens...............................................   436
    Immigration Bill Funding.....................................   433
    Language Analysis...........................................481-482
    Mental Health ``Carve-Out''..................................   458
    Medstat Contract.............................................   492
    Payments by Type of Service..................................   600
    Personal Responsibility and Work Opportunity Reconciliation 
      Act of 1996.........................................495, 498, 500
    Policy Development...........................................   486
    Premium Payments.............................................   486
    Proposed Per-Capita Cap and AIDS.............................   461
    Proposals Being Reviewed:
        Georgia..................................................   490
        Kansas...................................................   490
        Louisiana................................................   490
        Missouri.................................................   490
        New Hampshire............................................   490
        New York.................................................   490
        Texas....................................................   490
        Utah.....................................................   490
        Washington...............................................   490
    Proposed Legislation........................................502-507
    Prosthetic Devices...........................................   630
    Review (Waiver)...................................439-440, 485, 589
    Section 1115 Statewide Waivers:
        Coverage Under...........................................
          491-492, 564-565, 568, 589.............................
        Expanded Coverage........................................   445
        Alabama..................................................   490
        Delaware.................................................   490
        Florida..................................................   490
        Hawaii...................................................   490
        Illinois.................................................   490
        Kentucky.................................................   490
        Massachusetts............................................   490
        Minnesota................................................   490
        Ohio.....................................................
          449, 490...............................................
        Oklahoma.................................................   490
        Oregon...................................................   490
        Rhode Island.............................................   490
        Tennessee................................................   490
        Vermont..................................................   490
    Section 1915(b) Waivers...............................457, 565, 589
    Service Growth...............................................   487
    State Estimates...............................493-494, 499, 601-602
    Survey and Certification.....................................   502
    Title XIX....................................................   483
    Tracking (Waiver)............................................   485
    Vaccines for Children Program................................   499
    Voluntary Contribution & Provider Specific Tax...............   639
    Welfare Reform Transition Costs..............................   500
Medicare:
    Demonstrations (See Research, Demonstrations and Evaluation)
    End-Stage Renal Disease......................................   568
    Fraud Investigation..........................................   424
    Graduate Medical Education..................................422-423
    Growth in Beneficiaries and Expenditures....................470-471
    Market-Oriented Strategies...................................   452
    Medicare Handbook.......................393-394, 398, 409, 472, 476
    Peer Review Organizations.............................394, 582, 590
    Proposed Legislation.......................................426, 430
    Rebate Statutory Formula.....................................   640
    SMI Premium Estimates......................................426, 608
    Therapists in Independent Practice...........................   437
Medicare Current Beneficiary Survey (MCBS).....................398, 473
Medicare Contractors......................................433, 523, 638
    Administrative (Non-Renewals)................................   437
        Appeals..................................................   533
        Authorizing Legislation..................................   523
        Beneficiary and Provider Services........................
          524, 531, 579, 587.....................................
        Communication............................................
          472, 534...............................................
        Education and Training...................................
          534, 633...............................................
        Funding..................................................   437
        Simplification...........................................   530
    Billing/Claims Payment............................435-436, 527, 576
    Budget:
        Rationale................................................
          525-526................................................
    Claims Processing.....................................438, 527, 605
    Claims Reimbursement.........................................   528
    Commercial Off-the-Shelf Software (COTS)..............539, 555, 638
    Expenditures, Control of.....................................   445
    Filing Limit.................................................   437
    Medicare Secondary Payments..................................   584
    Participating Physician and Supplier Rates...................   535
    Payment Safeguards.................429, 434, 437, 476, 535, 583-584
    Productivity Investments....................................529-533
    Provider Identification......................................   531
    Providers...................................................623-625
    Significant Items......................................630-631, 638
    Summary Notice.............................................524, 639
Medicare Integrity Program (MIP).......396, 408, 474, 476, 521, 535-538
    Los Alamos National Laboratory...................399, 539, 584, 638
    Operation Restore Trust...............................399, 408, 474
Medicare Transaction System...393, 398-399, 426-429, 446, 472, 474-475, 
                                                               524, 638
Opening Statement..........................................392, 396-400
Organizational Chart (Current)...................................   464
Organizational Chart (Proposed)..................................   465
Program Management:
    Appropriation Language.......................................   518
    Authorizing Legislation......................................   612
    Beneficiary Support Network............................398, 469-470
    Budget:
        Account Summary..........................................   614
        Administrative Cost Table................................   619
        Amounts Available for Obligation.........................   609
        Appropriations History Table.............................   613
        By Activity..............................................   611
        By Object................................................
          615-616................................................
        Summary of Changes.......................................
          478, 610...............................................
    Growth Rates.................................................   403
    Language Analysis............................................   519
    Percentage of Total Spending.............396-397, 404, 467-468, 573
    Proposed Legislation Summary:
        Health Insurance for Those Between Jobs..................   642
        Health Coverage for Children.............................   642
        Survey & Certification User Fee..........................   642
        Voluntary Health Insurance Purchasing Coop...............   642
Research, Demonstrations and Evaluation:
    Accomplishments............................................563, 584
    Authorizing Legislation......................................   563
    Budget:
        Account Summary..........................................   563
        Congressional Mandates...................................   571
    Demonstrations:
        Alternative Payment Methods..............................   568
        Centers of Excellence....................................
          474, 567...............................................
        Competitive Bidding......................................   567
        Competitive Pricing......................................
          398, 473, 567..........................................
        Coronary Bypass Graft Surgery............................   564
        Medicare Choices.........................................
          567, 569...............................................
        Prospective Payment Systems..............................   568
        Risk Adjustment Methodologies............................   473
        Social HMO...............................................   568
        Subvention with Department of Defense (DoD)..............
          410, 632...............................................
        Telemedicine.............................................
          411-412, 433-434, 441, 569, 632........................
    Funding Summary..............................................   570
    Obligations by Program Areas.................................   572
    Reducing Provider Payments...................................   456
    Significant Items..................................631-637, 641-642
Strategic Plan:
    Government Performance and Results Act-Benchmarks (GPRA).....   471
Survey and Certification:
    Authorizing Legislation......................................   541
    Budget:
        By Activity..............................................   541
        Rationale................................................   548
    Constituents Awaiting Surveys....................412, 430, 436, 546
    Enforcement:
        Health...................................................   544
        Safety Standards.........................................   544
    Funding Summary..............................................   545
    Growth of Facilities.......................................475, 543
    Initial Fee Legislation...............................413, 430, 542
    Privatizing and Deeming................................413-414, 444
    Redesign Survey Process....................................552, 555
    Significant Items............................................   642
    Support Contracts............................................   553
    Survey Coverage........................................431, 547-548
    Terminations.................................................   624
    Unit Cost Methodology, including Variations..................   550
Total Funding..................................................466, 477
Witnesses, Introduction of.......................................   392

                Administration for Children and Families

Head Start......................................................662-664
    Increase...........................................652-653, 658-659
    Cost Per Child..............................................653-654
    Eligible Population....................................653-654, 657
    Research.....................................................   654
    Early Childhood Initiative..................................654-655
    Quality.....................................................656-657
    Partnerships.................................................   659
    Performance Standards..................................661, 674-677
    Capital Expenditures.........................................   664
    Funding......................................................   671
    Payment System...............................................   673
    Performance Measures...............................677-679, 805-808
    Program Effectiveness.......................................679-680
    Unserved Eligible Children (3-4yrs).........................791-794
    Early Head Start.............................................   803
Adoption Initiative........660-661, 669-670, 683, 709-710, 803, 805-807
    Office of Refugee Resettlement (ORR)........................707-709
    Funds........................................................   661
    Carryover Funds.............................................714-717
    Reauthorization........................................717-718, 756
    Targeted Assistance..........................................   718
Community Services Block Grant.................................661, 681
    Annual Report...............................................786-787
    CSBG Evaluation..............................................   682
    Program Consolidation.......................................682-683
Child Care.................................................664-666, 756
    Funds......................................................658, 757
    Head Start Collaboration.....................................   685
    Child Care & Development Block Grant........................794-797
    Foster Care..................................................   709
Office of Child Support Enforcement (OCSE)......................666-667
    Internal Revenue Service.....................................   668
    Social Security Administration...............................   668
    Fatherhood..................................................788-790
Child Welfare..............................................669, 749-754
    Budget Request..............................................754-755
    Research.....................................................   808
Government Performance Results Act (GPRA)........................   712
    Bonus and Pay Incentives.....................................   680
Administration on Developmental Disability (ADD).................   662
    Program......................................................   662
    Funding.....................................................686-687
Community Based Resource Centers................................688-690
Enterprise Zone..................................................   690
National Center on Child Abuse and Neglect (NCCAN)..............690-705
    Child Abuse........................................690-693, 797-798
    Research Grants.............................................693-696
    Demonstration Grants........................................696-698
    Training & Technical Assistance.............................698-705
Foster Care.....................................................709-710
Social Services Block Grant (SSBG) Funding............689-690, 710, 712
Cuban Mitigation Program.........................................   711
Family Preservation and Support.................................712-714
Low Income Home Energy Assistance Program (LIHEAP)........718-738, 797, 
                                                                811-812
    Funding.....................................................761-774
Welfare Reform.............................................789, 799-800
    State Plans.................................................774-775
    Assistance Payments..........................................   775
    Time Limits.................................................775-776
    In-State Residency..........................................776-786
    Implementation...............................................   801
    Research....................................................801-802
    Entitlement Funding..........................................   810
    Welfare Recipients..........................................810-811
    Tribal Family Assistance.....................................   790
    Workload....................................................789-790
    Information Dissemination....................................   790
Temporary Assistance for Needy Families (TANF)..................790-794
    State Patterns...............................................   798
Health Care Services.............................................   802
Family Support Payments to States...............................707-709

                        Administration on Aging

Witnesses........................................................  1257
Introduction and Opening Statement...............................  1257
Statement by the Assistant Secretary for Aging...................  1261
Congressional Justification......................................  1307
Alzheimer's Demonstration..................1275, 1282, 1283, 1287, 1288
AoA Personnel:
    Full-Time Equivalents........................................  1288
    Employee Performance.....................................1276, 1277
Community Service Employment for Older Americans.................  1269
Federal Council on Aging.........................................  1284
Future Directions:
    Growth of Aging Population...............................1289, 1290
    Preparing for the Future.................................1296, 1297
Health:
    Managed Care.......................................1300, 1301, 1302
    Ombudsman....................................................  1302
    Preventive Health Services.............1266, 1286, 1293, 1294, 1299
Home and Community-Based Services:
    Adult Day Care...............................................  1295
    In-Home Respite Care.........................................  1270
    In-Home Services for Frail Elderly..................1292, 1293, 306
    Nutrition Services:
        Funding for Nutrition Services Program...................
          1268, 1271, 1279, 1304.................................
        Meals for the Elderly....................................  1297
        Numbers Served...........................................  1298
    Program Innovation...........................................  1291
    Voluntary Contributions for Nutrition Services...............  1269
Information Dissemination....................................1299, 1303
Effectiveness of Aging Programs........................1265, 1276, 1280
    Government Performance and Results Act.......................  1276
Legislative Proposals:
    Title VII Program Consolidation..............................  1272
    Programs Consolidations/Transfers............1265, 1266, 1267, 1295
    Reauthorization of the Older Americans Act...............1265, 1275
Native American Services.........................................  1287
    Grants for Native Americans........................1272, 1273, 1274
Older Americans Act Funding:
    AoA FY 1996 Funding Level....................1291, 1292, 1293, 1294
Partnerships.....................................1289, 1300, 1301, 1302
Program Assistance for Vulnerable Elderly:
    Ombudsman..........................................1275, 1277, 1278
    Small Categorical Programs...................................  1277
Senior Community Service Employment Program............1269, 1275, 1285
Tax Credits and Leave Provisions for Elder Care..................  1271
Title IV Discretionary Funding...................1289, 1290, 1291, 1292