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



 
                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN
               SERVICES, EDUCATION, AND RELATED AGENCIES
                        APPROPRIATIONS FOR 1999

========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND 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        DAVID R. OBEY, Wisconsin
HENRY BONILLA, Texas             LOUIS STOKES, Ohio
ERNEST J. ISTOOK, Jr., Oklahoma  STENY H. HOYER, Maryland
DAN MILLER, Florida              NANCY PELOSI, California
JAY DICKEY, Arkansas             NITA M. LOWEY, New York
ROGER F. WICKER, Mississippi     ROSA L. DeLAURO, Connecticut
ANNE M. NORTHUP, Kentucky        

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, Carol Murphy, Michael K. Myers,
                and Francine Salvador, Subcommittee Staff
                                ________

                                 PART 2

                 DEPARTMENT OF HEALTH AND HUMAN SERVICES
                                                                   Page
 GAO--Department of HHS Oversight.................................    1
 Secretary of Health and Human Services...........................   49
 Office of Inspector General......................................  167
 Health Care Financing Administration.............................  261
 Administration for Children and Families.........................  729
 Administration on Aging.......................................... 1411
 Special Tables................................................... 1529

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
48-269                      WASHINGTON : 1998
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        ESTEBAN EDWARD TORRES, California   
HENRY BONILLA, Texas                   NITA M. LOWEY, New York             
JOE KNOLLENBERG, Michigan              JOSE E. SERRANO, New York           
DAN MILLER, Florida                    ROSA L. DeLAURO, Connecticut        
JAY DICKEY, Arkansas                   JAMES P. MORAN, Virginia            
JACK KINGSTON, Georgia                 JOHN W. OLVER, Massachusetts        
MIKE PARKER, Mississippi               ED PASTOR, Arizona                  
RODNEY P. FRELINGHUYSEN, New Jersey    CARRIE P. MEEK, Florida             
ROGER F. WICKER, Mississippi           DAVID E. PRICE, North Carolina      
MICHAEL P. FORBES, New York            CHET EDWARDS, Texas                 
GEORGE R. NETHERCUTT, Jr., Washington  ROBERT E. (BUD) CRAMER, Jr., Alabama
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            

                 James W. Dyer, Clerk and Staff Director








DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 1999

                              ----------                              

                                       Thursday, February 26, 1998.

              GENERAL ACCOUNTING OFFICE OVERSIGHT OF DHHS

                               WITNESSES

RICHARD L. HEMBRA, ASSISTANT COMPTROLLER GENERAL FOR HEALTH, EDUCATION 
    AND HUMAN SERVICES DIVISION
WILLIAM J. SCANLON, DIRECTOR FOR HEALTH FINANCING AND SYSTEMS ISSUES
BERNICE STEINHARDT, DIRECTOR FOR HEALTH SERVICES QUALITY AND PUBLIC 
    HEALTH ISSUES
    Mrs. Northup [assuming chair]. Good afternoon. We'll get 
this hearing going. I am Anne Northup and I am sitting in for 
the Chairman.
    We're going to pick up on the second hearing for the 
General Accounting Office, the Department of Health and Human 
Services.
    Mr. Hembra.
    Mr. Hembra. Good afternoon.
    Mrs. Northup. Good afternoon.
    Mr. Hembra. I have a few brief remarks to make and then Mr. 
Scanlon, Ms. Steinhardt, and myself will be happy to answer any 
questions you might have.
    The focus of our statement is, of course, on Health and 
Human Services and the Government Performance Results Act. I 
would like to make a few remarks about the value of measuring 
for results within this Department, and I would also like to 
make a few comments that look at the importance of coordinating 
and fixing accountability for the multitude of programs that 
the Department has, ensuring that the Department has the right 
type of information systems to manage and evaluate its 
programs, and that it is in a position to deal with programs 
that are vulnerable to fraud, waste, and abuse.
    I think it is very important when you think of the Results 
Act and look at HHS. This is a Department, as our chart shows, 
that its fiscal year 1997 budget outlays were almost $340 
billion, it has a workforce of some 57,000 people, and it has 
responsibility for some 300 programs. It is the largest grant-
making agency in the Federal Government. It makes grants up 
around 60,000 a year. Its Medicare program is the Nation's 
largest health insurer, last year handling some 900 million 
claims for about 40 million beneficiaries. Its Medicare 
programs are our Nation's health care safety net for some 35 
million people. And, of course, its other agencies deal with 
research, assuring the safety of drugs and medical devices, 
providing support to needy children and families, and a host of 
other health and social services.
    If you look at the Results Act, it required HHS, like other 
Federal departments, to prepare a multiyear strategic plan that 
was to include a mission statement, long-term goals and 
objectives, the approaches for achieving them, linkages between 
both the strategic goals and setting up annual performance 
goals, the impact of key external factors that would affect the 
goals, and, of course, evaluations that would position them to 
determine how their programs are doing.
    The Department did submit its plan on time, the end of last 
September, and it recently submitted its performance plans 
which we are in the process of reviewing. To its credit, the 
Department has with its strategic plan a good management 
framework for determining whether its programs work as 
intended. However, we have found in looking at the strategic 
plan that it doesn't always discuss the effectiveness of 
outlying strategies, it doesn't always discuss the resources 
required to implement those strategies, there is little 
discussion of how it intends to address key external factors 
that could get in the way of it achieving its objectives, and 
while it talks about management and information systems, it 
doesn't really say much about the potential solutions. As 
you're well aware, this Department has some major problems with 
its information management systems.
    When you turn to look at coordination and accountability, 
it's a real challenge for the Department. A number of its 
programs relate closely both to other HHS programs as well as 
programs run by other Federal agencies. Many of its programs 
are operated by States, localities, and nongovernmental 
organizations. It desperately needs access to good information, 
good data about its programs, data that are both accurate, 
reliable, and timely. And, of course, while HHS is working to 
assure that its systems will work smoothly through the year 
2000, HHS has over 1,000 system applications and less than 25 
percent of its mission-oriented systems have been converted.
    HHS also relies a lot on surveys, and its surveys suffer 
from both data reliability and analytical timeliness problems. 
That reliability, timeliness, and consistency of data problems 
also extend to data that are driven by both States and 
localities.
    Finally, I'd like to point out that HHS, as you're well 
aware, must always be vigilant in protecting its programs from 
fraud, abuse, mismanagement, and waste. Medicare, of course, is 
a prime example. In the case of Medicare, we have two recent 
pieces of legislation--the Health Insurance Portability and 
Accountability Act of 1996 and the Balanced Budget Act--which 
have given the Health Care Financing Administration additional 
authority and additional resources to reform Medicare and 
strengthen that program. However, that's only going to be as 
effective as HCFA and HHS are in designing a good 
implementation strategy and carrying it out.
    So, in conclusion, while GAO certainly does not question 
HHS' commitment to carrying out its missions, the fact is that 
for years and years we and others have found, and we continue 
to find, the same type of problems with HHS' programs. I think 
the good news is if HHS can be held accountable, the Results 
Act can, in fact, be a powerful tool to bring a more 
disciplined, efficient, and effective approach for delivering 
our Nation's health and human services.
    With that, I will stop and we can respond to any questions.
    [The prepared statement follows:]

[Pages 4 - 30--The official Committee record contains additional material here.]


    Mr. Porter [resuming chair]. Mr. Hembra, I apologize for 
being delayed in a meeting in my office. I appreciate your 
opening statement which I will have to review from the written 
testimony.
    I want to thank my colleague, Mrs. Northup. When I left at 
noon she was in the Chair, as well as when I came back. I hope 
you got lunch in between.
    Mrs. Northup. A few things.
    Mr. Porter. Would you like to proceed right now?
    Mrs. Northup. That is fine, Mr. Chairman. Thank you.
    Mr. Hembra, you ended your statement by saying if HHS can 
be held accountable, the Results Act can make quite a 
difference. Who holds them accountable? Them, being the whole 
agency.
    Mr. Hembra. It's an interesting Department and it's 
probably unlike any other in the Federal Government. HHS is 
often referred to as a holding company. It has a number of 
operating agencies, some of which are some of the biggest and 
dwarf many of the other Federal departments in the Federal 
Government.
    I think, first and foremost, the Office of the Secretary as 
well as the heads of the individual departments within HHS have 
to take primary responsibility for accountability. I would take 
you to their strategic plan, I would take you to their core 
values, the things that are important to that Department. One 
of those core values is accountability stewardship for the 
efficiency and effectiveness of its programs. I would point out 
that while that Department has always had that core value, I 
think its track record would show that it has not performed 
that well.
    The other point of accountability has to be the Congress. 
If you stop and think about it, the whole reason behind GPRA 
was the frustration that the Congress felt with the inability 
of our departments and agencies to demonstrate good, solid 
management. And if a department was not going to do that, it 
was going to have difficulty doing it, I think out of 
frustration they felt that you could legislate it and it would 
happen. But I think history shows that the oversight 
committees, the appropriations committees, the authorization 
committees have to be in there constantly, as this subcommittee 
has done, constantly posing the question to the departments, 
how are you doing?
    Mrs. Northup. The concern I think is, in part, because HHS 
has such an effect on the people that live in our neighborhoods 
and our cities everyday, people we know, people we talk to. So 
many of its programs make a profound impact on the quality of 
life, the ability to become independent, the ability to grow 
and develop despite adverse circumstances. Sort of the only 
helping hand for many of the disadvantaged people in our 
communities, and not just the disadvantaged, the seniors. But 
there is also a sense that particularly in that agency programs 
start to take on lives of their own. I sort of say this in some 
jest.
    But, for example, if I thought maybe a critical time is 
seventh grade, boys seem to be more risk-takers than girls, and 
kids in the urban area seem to be most at-risk, so I start an 
urban seventh grade at-risk boys' program, it can all be 
targeted in the right direction, it can have all the right 
ideas, but it's operated by local communities. So you go from 
10, to 50, to 200 local community programs and then they start 
the association of directors of seventh grade at-risk urban 
programs, and then the program sort of has a life of its own. I 
worry about the Secretary being able to impact it, whether it 
is to combine it with another program, or maybe to decide that 
its outcomes haven't been so strong.
    One of the things that I've noticed the most difference 
between State programs and Federal programs is that if, at the 
State level, the governor makes a decision, those are actually 
his employees that carry it out. But if the President or his 
Secretary makes a decision, those are the State agencies that 
are operating it and they don't feel constrained at all to 
abide by that decision or to make that effort to change or to 
support it politically or otherwise.
    I just wondered if you had any thoughts on HHS' ability to 
change? If I've put my finger on the problem and any thoughts 
on how you overcome it?
    Mr. Hembra. I think there are two issues. When you look at 
programs, especially those which account for most of HHS' 
programs, those have been devolved to some extent down to the 
States and localities. First off, you have with regard to a 
number of broad programs a host of programs that the Federal 
Government has put into place. If you look at at-risk and 
delinquent youths, there are a number of programs. Early 
childhood, there are a lot of programs. Substance abuse, a lot 
of programs. Employment training, I think 163 programs. So 
that's one issue. You would expect that the department heads 
would make an effort to assure themselves and assure the 
taxpayer that that plethora of programs are under control and 
there isn't duplication. So that's one issue.
    As you look at the programs as they move down to the State 
and local level, I think what you have to assure yourself is 
that you have built in a proper balance between flexibility so 
States and localities don't feel like they are handcuffed and 
can't meet within the parameters of the program special needs 
and circumstances, but you have to balance with that 
accountability. There has to be some degree of accountability.
    The same holds true for HHS itself. The Secretary will say 
HHS is a decentralized Department, that a lot of autonomy has 
been given to its individual agencies. And the fact of the 
matter is that's true. But with decentralization there has to 
be some degree of accountability. There has to be a role, in 
the case of HHS, for the Office of the Secretary to play that 
holds these agencies accountable and, in turn, these agencies 
hold the recipients of Federal funds accountable to some 
extent. Once again, I think that's where the Results Act can be 
a powerful tool, because part and parcel of that is to assure 
that there is accountability regardless of which issue you look 
at when you have those types of programs.
    Ms. Steinhardt. Can I add to that?
    Mrs. Northup. Yes, please.
    Ms. Steinhardt. I would say that another aspect that you 
put your finger on has to do with a sort of loss of focus in 
programs as they evolve over time. In our statement, we talk 
about a number of programs that were developed originally to 
improve access to care for underserved populations, people who 
lacked access either because they lived in rural areas or 
something like that, and we started more than 20 years ago with 
very noble and worthwhile aims. But as the programs developed, 
they never really kept track of what they were trying to 
accomplish.
    Today, 90 percent of the counties in the United States have 
designations that include underserved areas becausewe've never 
gone back and taken a second look at where underservice actually 
occurs, what does that mean, how do we measure it, what are we trying 
to accomplish, where are we today, where are we next year, where are we 
the year after, are we meeting our targets--the kinds of tools I think 
that the Results Act now requires agencies to do--instead of letting 
things kind of keep going without returning to see whether we're really 
doing what we set out to do.
    Mrs. Northup. Have I used up my time, Mr. Chairman?
    Mr. Porter. You can have all the time you want.
    Mrs. Northup. I'll just take two more.
    When you talk about so many job training programs, so many 
other programs that sort of overlap, do you make any 
recommendations about maybe a more effective way? Block grants 
sometimes by this agency have been very unpopular when Congress 
has imposed them. But it does strike me that job training is 
unique to every city and State, that the needs that exist in 
Louisville probably aren't the same needs that exist in 
Chicago, and so does it make sense to put some of these 
programs together? And is there any effort within the 
Administration that you could see in the strategic planning 
where that was happening, or does this need to be done from the 
outside by the Congress?
    Mr. Hembra. Part and parcel of the Results Act is that the 
Department and departments that have responsibility for similar 
programs would look at the potential for duplication and 
overlap. Has that happened? Not very much. Usually when it has 
happened, the degree to which it happened, usually the source 
comes out of the legislative branch when questions are raised 
and mandates are placed on the agencies to take a look at it. 
Under the National Performance Review, there was some attention 
paid to overlap and redundancy and there were some programs at 
the margin, different areas that kind of disappeared or were 
not funded. But for the most part, once a program has been in 
place, that program is in place.
    What we know, what our work has shown--and we have done 
work on employment training, we have done work on early 
childhood, substance abuse--is that there are a multitude of 
programs that provide similar services to similar populations. 
What is missing right now is some analytical depth being given 
in terms of pursuing whether or not the opportunities are there 
to do some further consolidation and eliminate some of the 
redundancy and overlap. But we certainly can provide the 
subcommittee with that work that we have done over the last 
couple of years that highlight some of those different areas 
for you, including work on block grants and the whole issue of 
balancing accountability and flexibility. We would be happy to 
provide you with those reports.
    Mrs. Northup. I'd be very interested in that.
    [The referred to information can be found in the Committee 
files.]
    Mrs. Northup. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Northup.
    Ms. Steinhardt, as I listened, you were saying 90 percent 
of the counties are now including underserved.
    Ms. Steinhardt. Designations.
    Mr. Porter. Yes, designations. I think the reason for that 
is probably not the lack of oversight but the politics of 
getting everybody aboard. What I've been saying since I've been 
Chairman for the last three years is we have to get beyond that 
need to spread out our resources all over the place in order to 
get the votes to get a program adopted. If the program can't 
stand on its own merits, it shouldn't be adopted. We ought to 
target our resources where they're truly needed and not just 
spread them willy-nilly across the country simply because that 
gets us more votes to get the program adopted or changed. I 
think we are getting beyond that old political need and into 
what gets us results for people and what people really need 
help from the Government, putting our resources where they can 
get the job done. I hope so.
    I think this is in a way very similar to the line of 
questioning that Mrs. Northup just proceeded with. But let me 
see if we can examine this a little bit further. You have a lot 
of programs that are administered within the Department of 
Health and Human Services and then you have a lot of similar 
programs in other departments. HHS, for example, has several 
different childcare programs and substance abuse programs. 
There are similar programs in other departments. We pay for 
health care in several programs, including the Indian Health 
Service, and then we do a lot of the same things in the VA, the 
DoD to other eligible populations. We provide women's 
reproductive health services through Title X Family Planning, 
the Maternal and Child Health block grant, STD clinics, 
community health centers, Medicaid.
    What successes, in your opinion, has the Department and the 
Administration had in assuring that the measures for 
effectiveness for these various programs compare with one 
another? In other words, are we adopting in one department in 
one program a different measure of effectiveness than we are 
for a very similar program conducted by another department or 
even within the same department?
    Mr. Hembra. I think to a certain extent that remains to be 
seen. We're in the process of reviewing the Departments' 
performance plans, not only the ones for HHS, but, for some of 
your examples, the Department of Education, the Department of 
Labor. Those three departments have a number of programs that 
are similar. So, at this point in time, I'm not sure we can 
answer that definitively.
    I'm going to go out on a limb a little bit and suggest that 
based on what we have seen and what we have looked at 
initially, it suggests this is an area where it is probably not 
likely you're going to see a lot of attention paid. There is 
better coordination now probably than there has been in the 
past. But I'm not sure I would give coordination that good a 
grade.
    Mr. Porter. In other words, this may be the secondary 
approach, that once we get the first cut, we begin to look at 
things like this in a much broader government-wide context?
    Mr. Hembra. Yes. And without being overly critical of HHS, 
I think they have a really difficult challenge. The Performance 
Plans I'm going to venture to guess are going to focus much 
more on process measures and output measures as opposed to 
outcome measures. Part of the reason links to the absence of 
the type of information systems, the reliability of the data, 
the consistency of the data that would help them with their 
performance measures.
    Mr. Porter. I think that would be a huge mistake, because 
we're not looking at those things anymore. We're looking at 
outcomes. We're looking at how do we get resources to change 
people's lives in a positive way. How do we get results for 
people.
    Mr. Hembra. Right.
    Mr. Porter. If we're going to look at the data you 
suggested, it seems to me we're going right back to wherewe've 
been, and that is not a good place to be.
    Mr. Hembra. Oh, no. In fact, I think if you look at the 
welfare reform legislation and the requirements placed in it in 
terms of information, what that suggests, what the recent 
legislation on Medicare suggests, and what the Results Act 
requires is this Department and other Departments to really go 
back and revisit the type of data that are being generated that 
will position them to be able to determine whether or not their 
programs are working as intended and whether they are achieving 
the results that they were seeking.
    That is not the situation today. I think the Department of 
Health and Human Services would admit to you that it does not 
have those types of information systems. As a result, while I 
think there's going to be an honest effort on the part of the 
Department to develop some outcome related measures, I still 
think you're going to see the early performance plans more 
heavily ladened with process and output.
    Ms. Steinhardt. If I might just add. Actually, the 
Department in some areas, compared to other Government 
agencies, is further ahead in having measurable kinds of 
objectives. The Health People 2000 project is probably a model 
in many respects and that applies to all agencies of Government 
who play a part in achieving those goals.
    But, as Rich was saying, I think a big problem, and the 
Department knows it, is the fact that they just don't have the 
data to be able to track against all of those objectives. For 
about 30 percent of the Healthy People 2000 objectives there is 
no data by which they can measure the achievement of those 
objectives.
    Mr. Porter. Well, maybe one of their goals and part of 
their strategic plans ought to be that they develop the systems 
to give us that data, and that that be the central focus of 
what their plans aim to do.
    Ms. Steinhardt. And to its credit, the Department's 
strategic plan actually acknowledged the problems with the 
kinds of information systems they have. What wasn't in the plan 
was a plan for addressing those gaps.
    Mr. Porter. Now I know what my opening question for Donna 
Shalala will be. [Laughter.]
    I think this is exactly where the rubber hits the road. I 
think if you aren't aiming at the right target and you don't 
have the information to tell you when you hit it or not, you're 
going off in the wrong direction.
    Ms. Steinhardt. Exactly.
    Mr. Porter. I think that would be a terrible mistake for 
everyone.
    Let me go on to the next question. Due to multiple programs 
and subactivities within larger programs, it is almost 
impossible to find out how much the Federal Government is 
spending on such activities as childcare, disease related 
research, health services for children, or virtually any other 
specific activity. I find it difficult to understand how a 
secretary can assemble a budget and how we can appropriate 
intelligently without that specific information. What 
recommendations has GAO made to assure that procedures and 
systems are in place to determine that this essential data is 
available during the budget process?
    Mr. Hembra. The answer is, first and foremost, you're 
absolutely right. I think this is critical information. Work 
that we have done in GAO for several years would suggest there 
were recommendations directed at trying to get the agency moved 
in that direction, with more specificity to the resource issue. 
We can provide you with reports that would show you that.
    I think probably the greatest lever that has been put in 
place to force the agencies to finally do that is, once again, 
contained in the Results Act. Part of the critical piece of 
information is the resource question. The Results Act, in fact, 
is a budgeting tool. It is quite appropriate for appropriations 
committees to be a key point of oversight with regard to the 
Results Act because, if it is working properly, you should be 
able to demand and get from the Department that information 
with that degree of specificity.
    Now, it remains to be seen whether the discipline is there 
yet. But the framework is in place, and I think that's 
important. The Results Act I think recognizes, both with the 
strategic plans as well as the annual performance plans, that 
this is going to evolve over time and that if we stay on the 
departments, they should continue to get better. What they 
don't have this year, they'll be closer to the following year, 
and the year after that. But someone has to stay on them.
    Mr. Porter. I would like to right now ask both you and my 
staff if we can't make this annual pre-hearing review with GAO 
permanent, in the sense that we stay with you and you stay in 
touch with them so that we can see whether we're making that 
kind of progress and have the right questions to ask them when 
their hearings occur. Because I think if we don't do that, 
we'll lose it in our procedures and they will simply ignore it. 
I don't want that to happen, obviously. In other words, I would 
like to make this an ongoing process. Is that possible?
    Mr. Hembra. Well, it's not only possible, it's going to 
happen. GAO is integrating the Results Act, the Clinger-Cohen 
Chief Financial Officers Act, all of the management pieces of 
legislation that have been created over the last few years, 
integrating them into what we call our issue area work. So for 
the agencies that you have responsibility for and that I have 
responsibility for, you will see that. And we would be in a 
position at any point in time, whether it is done annually or 
more frequently, to be able to sit down and talk about where 
HHS is, where the Department of Labor is, and where the 
Department of Education is.
    Mr. Porter. That's wonderful.
    Mr. Hembra, I've been particularly concerned with the PATH 
audits which deal with the criteria and supporting 
documentation that must be submitted to allow teaching 
physicians to bill for services under Medicare. One of the 
realizations I come to is that there is a substantial variation 
in the definition of benefits, documentation requirements, and 
the enforcement of rules from Medicare carrier to Medicare 
carrier. This variation is not only a characteristic plaguing 
the PATH audits, it seems to pervade all decisions made by 
local carriers and intermediaries.
    How can we sustain a national Medicare program in which a 
service is reimbursed in some areas and not in others, where 
there is wide variations in documentation requirements, and in 
which each carrier or intermediary has broad discretion to 
interpret the rules?
    Mr. Scanlon. We are actually doing some work on the PATH 
audit now for the House Ways and Means Health Subcommittee 
looking into part of the issue that you've raised, which is the 
differences in regional interpretations of the Medicare 
statute.
    We started Medicare with the idea that we weren't going to 
interfere with the local practice of medicine, and, therefore, 
endowed within the contractors certain discretion. While the 
goal of not interfering with the local practice of medicine is 
admirable, there are times at which we need to consider the 
balance that comes about through standardization. We have at 
various times pointed that out and encouraged the Health Care 
Financing Administration to consider what they can learn from 
the practices of different contractors and to disseminate that 
information nationwide so that we would have a more reasonably 
balanced program.
    There are some efforts underway of that type, but not 
nearly as much as we think there should be. The PATH audits I 
think illustrate some of the consequences of the differences in 
information that come from the carriers. As you know, the 
General Counsel of the Department recommended that a certain 
number of the audits be stopped because basically the providers 
had been confused by information that they received from the 
contractors.
    Mr. Porter. Absolutely.
    It is particularly difficult to establish performance 
measures for science. I would be interested in your views on 
that subject. At the subcommittee's direction, NIH has 
completed a review of its overall administrative and support 
processes and costs. Are you familiar with this review? What is 
your reaction to it? What role should administrative standards 
of performance play in an overall performance plan?
    Mr. Hembra. Let me first speak to the issue of performance 
measures in a research environment. I've been thinking, as many 
have, about how you pull that off. I think it is recognized, it 
was recognized when the legislation was created, that probably 
perhaps the greatest challenge in terms of developing 
performance measures would be found in trying to develop them 
for the research community. There have been a lot of folks that 
have looked at it. I think the good news is the National 
Academy of Science, the National Academy of Engineering, the 
Institute of Medicine currently has a project underway that was 
started last month and is supposed to conclude a year from now 
that will address that issue and, hopefully, finally shed some 
light on how to get at outcome related measures in research.
    In the interim, we should not give the research community a 
break and say don't worry about performance measures, let's 
wait and see what the National Academy has to say. I think what 
you have to look at is the type of research you're talking 
about--basic, applied--and perhaps early on be satisfied more 
with output and process related measures until we can work 
through some common definitions and framework for developing 
outcome measures. But in looking at the paper on the project 
that is now underway, I think it's going to be able to shed a 
lot of light on that. But we could be a year from knowing how 
best to frame the outcome related measures associated with 
research.
    Mr. Porter. Mrs. Northup, if you have questions, just seek 
recognition and I'll be happy to recognize you.
    Mrs. Northup. I do have one, Mr. Chairman.
    Mr. Porter. Please.
    Mrs. Northup. I have a final question about the fraud and 
abuse questions. How would you suggest that the Secretary 
proceed? As we implement public policy based on waste and 
abuse, that then, of course, comes back--there are always going 
to be people in the system who have the very difficult stories 
as you try to apply standards, I guess I'd say. I'll give you 
an example.
    Last year, in the Balanced Budget Act we changed the 
standards for home health care. I believe those were based on 
GAO's and the Inspector General's recommendations from HHS. 
Today, in many of our districts, we have people that are 
complaining about, for example, the venipuncture requirement. 
Would you just say we made a mistake there and that we should 
change it? Is it that that standard was sort of the gate that 
opened up for the great expansion of home health and we should 
hold our ground? How do you proceed? Would you make any 
recommendations, since our original bill was based on some of 
GAO's recommendations.
    Mr. Hembra. Let me make a general comment and then Bill can 
jump in with more specifics. There was a lot of thought given 
to the provisions worked into both the Health Insurance 
Portability and Accountability Act of 1996 and the Balanced 
Budget Act, and we appreciate very much that our work was 
reflected in those provisions. I will tell you that some of 
GAO's work that was reflected in the legislation reflected 
recommendations that we had made as much as a decade ago--as 
much as a decade ago--that the Department did not act on.
    So, if you want to do something about the vulnerability 
with regard to fraud, waste, and abuse, the Department has to 
take the lead. The Department should not be sitting back 
waiting to learn that you have a situation in Medicare where 
you could be losing tens of billions of dollars a year and then 
have someone legislate that they take action, first and 
foremost.
    Mrs. Northup. Let me make sure I understand your point. Is 
your point that the gate got open, the expectations became 
higher and higher that we would fund services, and that now as 
we try to retract them in an area that it is harder to do 
without them?
    Mr. Hembra. I think we're learning that in an attempt to 
fix a problem, especially when it comes with regard to health, 
that oftentimes when you allow a benefit people are going to 
figure out ways to take advantage of it in a monetary sense and 
you're going to have to go back and revisit it.
    Bill, do you want to talk about that?
    Mr. Scanlon. Yes. I think you've hit upon an aspect of 
this, which is the fact that the benefit expanded greatly and 
it is always difficult to reduce something after that's 
occurred. Medicare never intended to be providing a long-term 
care benefit. That was very clear from the original legislation 
and how the program operated through 1989. At that point in 
time, as a result of a court case, there were restrictions 
placed on Medicare's review of claims and the result was we've 
had an incredible expansion of services.
    Including people that will be affected by this provision in 
the Balanced Budget Act are people whose only need for a 
skilled service is that they have blood drawing, and then by 
virtue of having that need, which may happen only once a month 
or once every six weeks, they are entitled to aides services 
several times a week. The issue here is that they are maybe in 
need of the aides services but they are not in need of very 
much in the way of skilled care. They have a very limited sort 
of need for skilled care. And bringing them into Medicare seems 
to be somewhat contrary to the original intent of the 
legislation. So, in some respects,you are restoring some of 
that original purpose behind the home health rules.
    Frankly, we are looking now into the question of how many 
people have only the need for venepuncture as a skilled 
service. Because if you think about it, an individual who is 
supposed to be eligible for home health services is homebound. 
They are people that have conditions that are serious enough to 
restrict their ability to leave home. And if the only sort of 
skilled service they need is venepuncture, it suggests 
something about their condition that we don't quite understand. 
We think that most people that are homebound are probably going 
to have other skilled needs as well. So we're not really sure 
of the magnitude in terms of the number of people that are not 
going to get services any longer under Medicare because of this 
provision.
    Mr. Porter. Thank you, Mrs. Northup.
    Mr. Hembra or Mr. Scanlon, you indicate that inherent in 
Medicare's fee-for-service program is the risk that some 
providers will deliver more services than necessary. Could you 
describe exactly what you mean by that statement.
    Mr. Scanlon. It has been perceived that the incentive under 
a fee-for-service system where you're paid for every service 
that you provide, and where the customer, in this case the 
beneficiary, has very limited obligations in terms of the cost 
they're going to pay, that a provider can ask you to come back 
for additional visits, can offer to do additional tests, and 
you as a consumer are going to be much less likely to question 
the need for those kinds of services. So it's not just a 
question of Medicare, but it's a question of all of health 
care.
    We've organized a system where we pay every provider for 
every service that they offer and we don't have consumers be 
sensitive to the costs of those services. Now in fairness to 
consumers, we have to deal with the reality that most of us do 
not have the information to challenge a physician about a 
recommendation for a service because we do not have the 
knowledge whether or not a service is truly needed in our 
circumstance.
    Mr. Porter. Could you then make the argument that many of 
the findings of GAO and the Inspector General concerning waste, 
fraud, and abuse are not the result of executive branch 
management failures but are inherent in the structure of the 
program itself?
    Mr. Scanlon. The fee-for-service system certainly 
encourages people to test the limits in terms of submitting 
claims for services that are either wasteful, fraudulent, or 
abusive. The issue is in recognizing that as an inherent part 
of the structure of the program, it becomes the executive 
branch's responsibility to try and put in the safeguards to 
detect as many of those fraudulent or abusive claims as you 
possibly can.
    The other thing that is happening today----
    Mr. Porter. Are they doing that now?
    Mr. Scanlon. We don't think they're doing it nearly as much 
as they should. One of the positive things that's happened over 
the last two years is the passage of the Health Insurance 
Portability and Accountability Act and the Balanced Budget Act 
which not only gives the department sort of guaranteed funding 
for trying to prevent fraud and abuse, but also gives them some 
new authorities in terms of being able to gather information 
from providers and being able to impose penalties on providers. 
That should be helpful. These kinds of things would be 
potentially effective in reducing some fraud and abuse.
    Mr. Porter. This would go something like if a particular 
provider is providing a volume of services quite different from 
what the average provider does, then you begin to look into why 
is this so?
    Mr. Scanlon. That's correct. We have argued on many 
occasions that the targeting of reviews on providers who are 
aberrant in terms of the claims that they submit is really a 
very cost-effective way to identify providers who are 
participating in fraudulent or abusive activities.
    One of the problems for Medicare is that the volume of 
claims that are being reviewed to determine whether the 
services were medically necessary has dropped dramatically. In 
the case of home health, in the mid-1980s we used to review 60 
percent of the claims being submitted. Today, we review about 2 
percent of the claims being submitted. In reviewing them, the 
follow-up may be that the claim is simply returned to the 
provider. It is not an issue of that becomes then sort of a 
marker that we need to be vigilant about this provider, it is 
simply that the provider didn't get paid for that claim but on 
another claim that's equally abusive the provider would 
potentially be paid 98 percent of the time.
    Mr. Porter. Why don't we privatize this and allow the 
private sector to uncover the fraud and keep a percentage of 
it?
    Mr. Scanlon. Well, we in some respects have privatized the 
review function with respect to having hired the contractors to 
administer the program. One of the things that we've argued is 
that the contractors need to be held more accountable for 
performance standards that we would like them to achieve. And 
the ability to detect fraudulent and abusive claims should be 
one of those performance standards.
    One of the advantages of GPRA is if we start to take the 
systematic view of the operations of not only the Department, 
but of the Health Care Financing Administration, that we 
establish the performance goals and that they will, in turn, 
sort of require us to establish performance goals for entities 
like the contractors and they will have to be held accountable 
if the Department is to succeed in terms of what its goals are.
    Mr. Porter. The only reason I raised that particular 
question is I talked to a private sector individual and he 
believes that he can review some twenty times as much as is 
being reviewed right now if he can be allowed to be compensated 
on the basis of how much fraud he finds. That seemed to me to 
be a pretty good deal for everyone--except for the people who 
are defrauding the Government. I don't know the truth of this, 
obviously, but it seemed intriguing to me. We might be able to 
privatize some of this and do much better.
    Mr. Scanlon. It is certainly a possibility. One of the 
things that we've looked into is the issue of commercial 
software that is used to detect patterns of abusive claims or 
aberrant claims that then need following up on. We've 
recommended that HCFA pursue the use of that commercial 
software in the Medicare program. They've tested it and found 
that it could be successful, yet they have not yet adopted that 
kind of software. We think it is something that is potentially 
useful.
    One of the concerns that is expressed at times about being 
aggressive in this regard is that there is a lot of gray area 
in terms of what is a medically necessary service,and that as 
HCFA becomes aggressive, providers who in all sincerity believe that a 
service is appropriate are going to be forced to justify each and every 
service. The concern would be sort of what kind of an outcry will you 
hear from them in that kind of a circumstance.
    Mr. Porter. Mr. Hembra, many of the concerns you raise with 
respect to HCFA and other areas in the Department are expensive 
to address. Information systems to improve management 
effectiveness in Medicare and Medicaid and to track the 
implementation of programs such as TANF are costly. 
Implementation of new programs such as welfare reform and 
recent significant changes to Medicare are also expensive.
    Is it your view that these concerns can be met within 
existing resources provided by the subcommittee in salary and 
expense accounts? If you think they can be carried out within 
existing resources, can you tell us what the agencies are now 
doing that they can stop? And if you feel they need more 
funding, can you tell us how much?
    Mr. Hembra. It seems like a fairly simple question. 
[Laughter.]
    No, we can't, not at this point in time. I think the more 
important issue is how the Department is coming before you and 
justifying what its needs are. I know Bill can speak to what's 
happening with HCFA, especially with the additional authorities 
that have been laid on that with regard to HIPAA and BBA.
    But generally speaking, if we are really serious about more 
efficient and effective management in the Federal Government, 
if we recognize, as HHS does, that it has an information 
systems problem and in order for it to really begin to shift 
from just how many people have we written a welfare check for 
and how many people have we paid for health care service to 
understanding and giving focus to outcomes, we have to have 
that information. There has to be a strategy that the 
Department has in place to help you understand what its 
approach is going to be to position that Department to have the 
information systems it needs. It is not something that has been 
done in the past. It is not something that has been well-
thought through. I think, as a result, no one is in a position 
right now to give you that answer.
    I think that's unfortunate. I think that says something 
about the management of the Department. If the Department is 
that dependent, which it is, on information that is reliable, 
accurate, timely, and consistent, especially with regard to the 
demands of information that is going to be generated up from 
States and localities, the Department should be in a position 
to do that.
    Now to its credit, I think with what has happened with the 
Medicare Transaction System that it is rethinking and, in fact, 
putting together a strategy for how to turn things around on 
its information systems. But I don't think it has a price tag 
to give you. And it is certainly something though that they 
should be able to do.
    Ms. Steinhardt. Can I just add. It actually relates to your 
first question to Secretary Shalala. Part of this is just the 
cost of moving to a results oriented focus now in Government. 
All the systems, no matter how well or poorly they now work, 
all of the major administrative systems that the Department has 
have been really oriented to tracking inputs and outputs not 
results. So it really requires a whole different kind of sets 
of information. And even where the Department now has some 
excellent data sources, data sets, they are usually on a 
national basis so there isn't the kind of information that you 
would need to be able to focus in on a particular area and look 
at results there.
    So, it is a huge challenge for the Department, but it is 
not unique. It is going to be a big challenge for the entire 
Federal Government. If you look at private industry, this is 
exactly what is happening there as companies have to invest now 
their capital needs in information systems because this is the 
way we're now managing in this country, in the world.
    Mr. Porter. Thank you.
    You indicate in your testimony that Head Start is an 
example of the difficulty in implementing the Results Act for 
certain types of grant programs. You indicate that Head Start 
was designed for maximum local autonomy and the data reported 
to the Department is self-reported. I gather from your 
testimony that much of the data reported is input; i.e., the 
meeting of standards. Of course, the ultimate test is how well 
Head Start students do in school years after they graduate from 
the program. Measuring these outcomes involves major efforts to 
track students, develop measures of success, and to create 
methodologically sound control groups.
    Given GAO's strong support for the Results Act, can you 
give the subcommittee some indication of how GAO recommends the 
agency approach these difficult issues, and how much it will 
cost to obtain such information in a timely manner?
    Mr. Hembra. A couple of years ago we went back and began to 
revisit Head Start as an expensive program, one that is viewed 
as one of the most successful Federal Government programs, a 
very popular program, serves a lot of young kids, and most 
people view it as successful. When you look at the evaluations 
that have been done of the Head Start program, little, if any, 
were impact evaluations. We have a report that we issued I 
think within this last year, Mr. Chairman, and we can provide 
you a copy, where we discussed and actually had an interesting 
discussion that is contained in the report with the Department 
with regard to the importance of impact evaluations.
    [The referred to information can be found in the Committee 
files.]
    Mr. Hembra. They strongly disagreed. I think the reason the 
Department disagreed with the importance we were placing on 
them building into their evaluation package impact evaluations 
was that it was difficult setting up control groups and 
evaluating that program over a period of time, tracking kids, 
and coming up with the right outcome measures to determine 
whether or not that program really makes a difference.
    Since that time, there are a couple of evaluations now 
ongoing, which we can provide you with some information for the 
record, that hopefully will shed a little bit more light on it. 
But right now there is not a good research base there that can 
tell you what the impact of Head Start has been. And these 
types of evaluations are, by the way, quite expensive also and 
they take a lot of time.
    [The information follows:]

    Mr. Hembra. According to Head Start, the Family and Child 
Experiences Survey project will provide information on the 
overall effectiveness of Head Start by collecting data to 
assess childrens' cognitive, physical, emotional, and social 
development and parents' goals in becoming economically and 
socially self-sufficient. Data will be collected from a sample 
of 2,400 families with children enrolled in 160 randomly 
selected centers in 40 Head Start programs across the country. 
Data will be collected through a variety of methods, including 
assessments, questionnaires and interviews.
    Four Quality Research Centers (QRC), located in four 
different universities across the country, make up the Head 
Start Quality Research Consortium. Each QRC is involved in two 
research initiatives: (1) to link quality practices in Head 
Start programs to outcome measures and to subsequently develop 
new instruments for measuring outcomes and (2) a center-
specific initiative reflecting that center's individual 
expertise.

    Mr. Porter. On the other hand, the program is very 
expensive. If you don't evaluate it, you don't know whether the 
money is getting you anywhere.
    Mr. Hembra. That's exactly what our report says.
    Mr. Porter. Oh, good. We agree on that.
    Ms. Steinhardt. When we looked at a number of the training 
programs that are funded under Title VII and VIII of the Public 
Health Service Act, these are health professions training 
programs, we found that 6 of 23 programs that were established 
before 1990 have never been evaluated. There are a number of 
programs that do receive evaluations, but it is not built in to 
the way that the agency does its business.
    Mr. Porter. Do you recall which six those are?
    Ms. Steinhardt. No. I could find out for you.
    Mr. Porter. Could you provide it to us? We would be 
interested.
    Ms. Steinhardt. Sure.
    [The information follows:]

    Ms. Steinhardt. The following programs established prior to 
1990 have not been evaluated:
    (1) Grants for Programs for Physician Assistants
    (2) Exceptional Financial Need Scholarships
    (3) Financial Assistance to Disadvantaged Health 
Professions Students
    (4) Health Professional Student Loan Program
    (5) Centers of Excellence
    (6) Faculty Development for General Internal Medicine and 
General Pediatrics

    Mr. Porter. Essentially, all of the activities within HHS 
funded in this bill are grants to States, localities, 
universities, or not-for-profit organizations. Your testimony 
indicates many of the difficulties which exist when a 
Department mission is carried out through broad-based, flexible 
grant programs. Can you discuss the kinds of measures proposed 
by the Administration for programs such as the Social Services 
block grant, the Maternal and Child Health block grant, and the 
Preventive Health block grant.
    If you are not satisfied with these measures, what 
effectiveness measures would you recommend? And how would you 
propose to gather the data? Mr. Hembra, is it not true that the 
paperwork and reporting requirements would increase 
substantially and the flexibility of these grants would decline 
markedly if specific outcome measures were to be defined by the 
Federal Government and measured in a methodologically rigorous 
manner?
    Mr. Hembra. Let me make a couple points. First, and it goes 
back to a discussion with Mrs. Northup, that on those types of 
grants you have to seek a balance between providing flexibility 
and building in accountability. And so to a certain extent does 
it impose some burden? The answer is yes. But we're talking 
about a lot of money and I think that if States and localities 
need that money, it is not unreasonable to ask that they work 
with, as a stakeholder, the Department in defining what would 
be acceptable in terms of measurements and what is acceptable 
in terms of providing information to help measure whether or 
not they are working towards the goals.
    So this is not something that you should expect the 
Department to be doing unilaterally. That's the whole purpose 
of the Results Act is that you involve your stakeholders so 
that what ultimately comes out does not smack of being onerous 
on one particular stakeholder. Everyone has to be in the game. 
But none of us should sit here and suggest or think that 
meeting the requirements of the Results Act is going to be an 
easy road for anyone. It forces discipline. It forces 
discipline that has not been there before. And it does impose 
some burden. But I think with the money that is at stake, the 
obligation we have to the taxpayer, those that question, those 
that were behind to some extent the creation of the Results Act 
was that frustration that no one knew what was happening. So 
I'm not sure that's an unreasonable burden, especially if it is 
done consistent with the Results Act where stakeholders are 
working together to resolve those issues.
    Mr. Porter. You indicated that the Centers for Disease 
Control and Prevention has a particularly good performance 
plan. What features make this plan so good? Are there elements 
in the CDC mission that make the preparation of a plan pursuant 
to the Results Act easier relative to other agencies?
    Ms. Steinhardt. I'm trying to think about this because we 
haven't actually evaluated the performance plan for CDC. The 
responsibilities that CDC has, many of them relate to the kinds 
of objectives we set out in the Healthy People 2000 project. So 
I think, as I said before, we are kind of a step ahead there. 
But we will certainly be more than happy to share the results 
of our assessment of CDC's plan once we're finished with it.
    Mr. Porter. So the question really is ahead of what you 
have actually evaluated?
    Ms. Steinhardt. Yes. We're not quite there yet.
    Mr. Porter. All right. I think you've done an excellent job 
for us and you've certainly given us many questions to raise 
with the Department that have to be raised. I'm very encouraged 
that you will be working with us to keep the pressure on the 
whole process because I think you're exactly right, that if we 
don't do that, it is simply going to be an effort that will 
come and go and mean nothing. You can write all the laws you 
want and all the regulations pursuant to those laws, but if you 
don't ever see that they are carried out, why write them in the 
first place?
    So I think this whole effort is putting pressure in the 
right places. Our job is to bring very direct pressure uponthe 
departments and agencies under our jurisdiction and see that they 
follow through and that they develop over a period of time--because, as 
you point out, it is not easy or inexpensive to do all of this--the 
kinds of measurements where we can tell what we are getting for the 
money that is being spent and whether we really are helping to turn the 
corner on the problems that people face in our society who can't 
otherwise handle them themselves.
    So we thank you very much for your coming here today, for 
your extensive work in reviewing the Department, and we want to 
stay with you and make sure that this works in the long term 
sense. Thank you so much.
    Mr. Hembra. Thank you very much.
    Mr. Porter. The subcommittee stands in recess until 10:00 
a.m. on Tuesday.
    [The following questions were submitted to be answered for 
the record:]

[Pages 46 - 48--The official Committee record contains additional material here.]


                                             Tuesday, March 3, 1998

              U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

                                WITNESS

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

                        Introduction of Witness

    Mr. Porter. The subcommittee will come to order. Madam 
Secretary, I want to welcome you this morning. This is your 
seventh appearance before the subcommittee. Dr. Bowan was 
originally our longest serving Secretary, and then Dr. 
Sullivan, and now you are the longest serving Secretary, and I 
think that is wonderful, and it provides a good deal of 
stability to the Department. And I think your long tenure has 
been excellent for the Department and for the country. You have 
done a wonderful job there.
    Secretary Shalala. Thank you very much, Congressman.
    Mr. Porter. We look forward to working with you on the 
fiscal 1999 budget.
    We, I think, have worked well together. We realize this is 
going to be a very short legislative year and we have a lot of 
work to do in a very short time. And as always, we appreciate 
the cooperation of you and your Department, and Dr. Williams, 
who serves both as an invaluable resource for the subcommittee 
and also a strong advocate for the Department's interests and 
concerns.
    I want to congratulate you on the budget. Obviously, there 
are areas where we disagree. I will have to give you my short 
sermonette and that is, it looks very, very unlikely that the 
revenues that the President has put in his budget will 
materialize and that means that a good deal of the spending 
that is supported by those revenues is going to be very 
difficult to achieve, given the fact that our budget allocation 
will probably be less than would otherwise be the case.
    Let me also comment on one other thing, if I may, before 
you begin your statement, and that is the, I think, 
irresponsible proposal regarding cancer research; not that it 
isn't necessary, not that it isn't of extreme importance, but I 
think it leads in a direction that I have tried to avoid and 
all of my predecessors on both sides of the aisle have tried to 
avoid, and that is setting one disease against another in the 
context of NIH-funded research.
    I think that is a Pandora's box that we never want to open, 
and while it is well for the President, for you and the 
Department to say this is a priority, I think the way it has 
been presented in the budget is not helpful at all, and it 
would lead in exactly the direction I think we have to avoid, 
and that is the balkanization of the NIH research budget, which 
I think would be a disaster for NIH and for the country and for 
research.
    Having given you all my sermons now, I would be delighted 
if you would proceed.

                           Opening Statement

    Secretary Shalala. Thank you very much, Mr. Chairman, and 
thank you for your kind words. I will dispense with my lengthy 
statement and read a much shorter statement.
    Let me say at the beginning of my full testimony, I pay 
tribute to a retiring member of this committee, Congressman 
Stokes. As you know, and as I have noted before, I have known 
Congressman Stokes since I was a child. My mother was a law 
school classmate of his in Cleveland, and he has been an 
outstanding member of this body and I make note of that at the 
beginning of my comments, and I did want to say it even though 
he is not here today.
    I am very pleased to appear before you today to discuss the 
President's fiscal year 1999 budget for the Department of 
Health and Human Services. Last year, we spoke at great length 
about the need to balance the budget. The President's 1999 
budget achieves that goal, thanks to the extensive cooperation 
between Congress and the Administration last year. We proved 
that by working together, working out innovative solutions and 
working every dollar harder, we can continue to guarantee a 
better fiscal future for the people of this country. The 
President's new budget for HHS proves that with fiscal 
discipline we can address the needs of American families in the 
context of a balanced budget.
    Let me just touch on the highlights beginning with our 
three new initiatives. Last month, the President announced the 
21st Century Research Fund to launch a new era of path-breaking 
scientific inquiry. HHS will play the largest role, with new 
resources for our constellation of stellar research agencies, 
the CDC, AHCPR and NIH.
    Indeed, NIH will receive its single largest budget increase 
in its history, $1.1 billion next year, a down payment on an 
historic 5-year, 50 percent expansion.
    The new resources will allow NIH, CDC and AHCPR to attack 
our most defiant diseases in a coordinated, integrated way, and 
speed research results from labs into the clinics and 
hospitals. We also propose giving every Medicare patient the 
chance to participate in a cancer clinical trial so each can 
benefit and perhaps benefit others.
    The second major new initiative in this budget is the 
President's child care initiative. In millions of families, 
both parents must work to support their children. Inmillions of 
other families, single parents work doubly hard to support their 
children. The President's child care initiative will help families find 
and afford the quality child care that they need. It includes $24 
billion over 5 years in block grants to States, tax credits for 
families, tax incentives to businesses, and resources to help States 
enforce their child care quality standards. This budget also advances 
the President's commitment to bring a million children into Head Start 
by the year 2000, and more infants and toddlers into Early Head Start.
    The third new initiative in this budget is the Medicare 
buy-in plan. It answers the question troubling millions of 
aging Americans: What if I lose my health coverage before I am 
65? The buy-in plan would allow those age 55 and over to 
breathe a little easier.
    In addition to these new initiatives, this budget also 
advances the fight against our most pressing public health 
challenges, with 165 million new dollars for Ryan White 
treatment activities for HIV and AIDS; with 25 million new 
dollars to develop and expand national early warning systems 
against food-borne illnesses and infectious diseases; with 200 
million new dollars for the Substance Abuse Performance 
Partnership Block Grant to help States and communities to 
strengthen their control and treatment efforts; with 200 
million new dollars to fight tobacco's impact on public health 
and keep it out of children's hands.
    Mr. Chairman, let me take this opportunity to voice the 
President's strong desire to work with Congress to protect our 
children from tobacco. To do that, we must have comprehensive 
tobacco control legislation, comprehensive, not piecemeal, that 
includes the President's five key principles, and a large price 
increase.
    As we advance our public health promises, the President's 
budget, for the first time, addresses the serious inequalities 
in health services and health status for minorities. All 
Americans must have an equal opportunity for a healthy future.
    This budget includes $80 million to address several areas 
of disparity: Diabetes, infant mortality, breast and cervical 
cancer, heart disease, stroke, HIV/AIDS and child and adult 
immunization. We must correct this disparity so that all 
Americans have an equal opportunity for a healthy future.
    Finally, Mr. Chairman, I am proud of how this budget makes 
every dollar work harder. First, there are no better 
investments than fraud busting. Last year, our Inspector 
General's crackdowns on Medicare fraud returned almost $1 
billion to the Medicare Trust Fund. Our new budget includes 
another $138 million to fight fraud, and we are offering new 
fraud-busting legislation that would return another $2.4 
billion to Medicare.
    In addition to fraud-busting, we have proposed $264.5 
million in new user fees. These user fees are not only smart 
government, they are also crucial for HCFA to meet its 
obligations under the Balanced Budget Amendment and the Health 
Insurance Portability Act. But, speaking of smart government, 
we have sent you our first Government Performance Results Art 
(GPRA) annual performance plans which we developed in 
collaboration with Congress, with States and local and tribal 
governments, as well as our private partners. To us, GPRA is 
more than an acronym. It is a way to ensure that the line items 
in our budget truly serve to bring America's promise to all 
Americans.
    Mr. Chairman, members of the committee, I believe this is a 
historic budget for HHS that launches a new era at the 
Department, a new era for health and social policy. It proves 
that with innovation and discipline we can take strong steps 
for family health and well-being and physical health and well-
being. We have much to accomplish together.
    I would be happy to address any questions you may have.
    [The prepared statement follows:]

[Pages 52 - 61--The official Committee record contains additional material here.]


                         Tribute to Mr. Stokes

    Mr. Porter. Madam Secretary, Lou slipped in right after you 
started, and I think you ought to repeat what you said now that 
he is here.
    Secretary Shalala. Mr. Stokes, it is very nice to see you, 
Congressman Stokes. I wanted to begin my testimony today by 
paying tribute to you, to a beloved and highly respected member 
of this subcommittee, my fellow Ohioan, Congressman Lou Stokes.
    As I indicated, I have known Mr. Stokes since I was very 
young. He was a law school classmate of my mother's. And 
observing his growing legacy in Washington over the years, I 
have been inspired by his devotion to bring America's promise 
to all Americans.
    A few weeks ago, when Dr. David Satcher was sworn in as 
Surgeon General, he closed his comments by a quote by the 
educator and reformer Benjamin Elija Mays. He said, if it falls 
to your lot to touch the lives of others, then be sure to touch 
them in such a way that you leave them better than you have 
found them.
    Few have done more than Mr. Stokes to touch the lives of 
others and to leave the health and well-being of our Nation 
better than he found it. So I think I can speak for all of us 
in the Administration when I say today is a very bitter sweet 
day. His gain of a well-deserved retirement is our loss of a 
great advocate.
    Mr. Stokes. Thank you very much. Thank you.

                        Cancer research fundings

    Mr. Porter. I have to say, Madam Secretary, we all agree 
with that. And that was even better than the first time, Lou.
    As usual, we will go according to those who were present 
when we began and then add those who have arrived since that 
time. I will start the questioning and will operate under the 
5-minute rule.
    Let me go back to the subject I opened with, Madam 
Secretary, at the start, and ask you was the earmark for cancer 
research part of the budget that you originally submitted to 
OMB in September?
    Secretary Shalala. You know, we obviously negotiate our 
budget and collaborate with the White House. Let me simply say 
that all of us support the President's recommendations to this 
Congress. We do not believe that it is an earmark. I would 
rather describe it as an emphasis within the context of a 50 
percent increase. As Dr. Varmus will testify, we believe that 
within the context of a 50 percent increase, emphasizing and 
resulting in a goal of 65 percent for cancer is not 
inappropriate, given where we think the breakthroughs are going 
to be in research. And, we believe that cancer is on the cusp 
of a series of major breakthroughs and that this additional 
investment will make a major difference in the quality of life.
    Mr. Porter. Well, obviously, we agree with that very much. 
In fact, this subcommittee, many members of the subcommittee, 
have been very concerned about the allocations of funding by an 
institute that has seemed to have, in past years, shortchanged 
those diseases that affect the broadest populations in our 
country: cancer, heart disease, diabetes and the like. But how 
do you pull out cancer as opposed to heart disease? How do you 
pull out cancer as opposed to diabetes or Parkinson's Disease 
or Alzheimer's and say this one gets to the head of the line 
and we will make the judgment rather than having science make 
that judgment?
    Secretary Shalala. Well, I think that you will find that 
this conclusion is supported by science. Dr. Varmus will 
explain to this committee that the next dramatic transformation 
of medicine through, genetics and molecular biology, is indeed 
likely to occur in the study of cancer. I will leave it to him 
to make the scientific explanation.
    Let me also point out that we are not talking about 65 
percent for the National Cancer Institute. This is for cancer 
research across the institutes. And it is important that we see 
this for what it is, an emphasis, a goal. We believe, within 
the context of a 50 percent increase, that it is appropriate.

                    community health center program

    Mr. Porter. Well, Madam Secretary, let me just say, 
finally, that we believe--and since you didn't submit it in the 
original budget, we assume that this came out of the White 
House. We believe that cancer is a very high priority, but we 
also believe that the decisions as to where the allocations 
ought to be made should be made by science and by scientific 
opportunity, and we are very careful not to ourselves change 
the allocations by institute that are suggested by NIH, and we 
think that the White House ought to be just as careful in that 
regard and not set one disease against another.
    As you know, the Community Health Center Program is 
strongly supported by this subcommittee. However, a recent 
article in the Washington Post outlined the substantial decline 
in utilization in several community health centers as a result 
of indigent patients moving into managed care. The article 
indicated that nationally the number of Medicaid patients who 
visited community health centers declined by 11 percent.
    When Maryland moved its Medicaid patients to managed care, 
the center in Baltimore lost 25 percent of its patients. In the 
month when New Jersey moved its Medicaid patients into managed 
care, the number of Medicaid patients visiting the Newark 
clinic declined by 50 percent.
    Madam Secretary, are the number of patients visiting 
community health care centers increasing or decreasing? Do you 
view the movement of Medicaid patients into managed care as 
being essentially a positive or a negative trend, and what can 
be done to help these centers better compete against Medicare 
and others for the work of serving the poor?
    Secretary Shalala. Thank you for the question.
    That depends on where you live. This has also been a 
phenomena in some public hospitals around the country. They are 
seeing less Medicaid patients because the Medicaid patients 
have signed up for HMOs, and the HMOs are steering them to 
other hospitals. So it is a phenomena of a changing market, 
particularly as the States move people into managed care. But 
it really depends on where you are in the country.
    I was in Texas last year, and the community health centers 
have contracted with HMOs to service those patients so they are 
being reimbursed directly. What we did, earlier on in this 
Administration, is give the community health centers resources 
to put their houses in order in terms of their business offices 
so that they could, in fact, have a system in place to get 
those reimbursements.
    They also need to change their culture and not do business 
as usual, because they are now a part of this larger health 
care market in terms of competing.
    The kinds of subsidies the government has continued to give 
them are very much for people who don't have health insurance 
and for those people with Medicaid. They need to build 
relationships with the HMOs so that they can continue to 
service a population they have serviced before, but also new 
people that are coming in. So I think the answer to the 
question is, we don't know where this is going to end. We have 
to continue our support for community health centers, but 
continue to work with them so that they can change and adjust 
to this new market. They are better, for instance, for people 
who speak little or no English, and they can provide more 
culturally-sensitive services.
    I have encouraged the HMOs to work with community health 
centers. I have encouraged the States to design plans. When we 
gave the waivers, we included community health centers so that 
they see their health care system as an integrated whole. So we 
have, in fact, done some things. We will see these changes 
occurring in different parts of the country. We will have to 
watch them, but continue to give technical assistance and to 
work with community health centers.
    Mr. Porter. This looks like the same kind of problem that 
we face with our academic medical centers, teaching hospitals, 
where the populations that are being served by HMOs are no 
longer utilizing those facilities. We are going to have the 
same kind of problem in reference to Medicaid in the community 
health centers apparently. I would like you to put in the 
record the magnitude of the problem, whether the number is 
increasing or decreasing, where the effects have been, if you 
would, and let us take a look at that.
    Secretary Shalala. Yes. It may be more descriptive than you 
like because our statistics will vary. It will show you that 
this is geographically based and it is, I think, important that 
we are seeing a snapshot of a changing system. Then, we have to 
figure out where we can target resources so we can be helpful 
to very important institutions----
    Mr. Porter. Thank you.
    [The information follows:]

[Pages 65 - 66--The official Committee record contains additional material here.]


                         child care initiative

    Mr. Porter. Madam Secretary, you are asking for $1.8 
billion in new funding for your child care initiative. However, 
as I understand it, the mandatory component of the child care 
block grant increases by $100 million in fiscal 1999 with an 
additional 60 to 70 million dollars in required State matching 
grants.
    More importantly, the decline in caseloads has, according 
to the Ways and Means Committee, freed up as much as $4 billion 
a year that can be used for child care if the States choose. 
That is, welfare caseloads, apparently. Funds from the new 
welfare-to-work can also be used for child care.
    Madam Secretary, with so much money available for 
childcare, why do we need a new program or even to expand existing ones 
beyond current law? States, I believe, have had no compunction about 
putting money into child care. Why do you believe that the States will 
not use their windfall from declining caseloads to fund this high 
priority?
    Secretary Shalala. Well, let me say that we are talking 
about two different populations. States' funds are focused on 
the welfare population. The President's initiative is focused 
on low-income workers, people who are already in the workforce. 
This group of people has been left out. Their incomes are not 
high enough to take good advantage of tax credits and yet their 
incomes are too high to qualify in many States for child care 
subsidies.
    The States have fully drawn down the child care subsidies 
that were allocated under the TANF plan. We are talking about a 
different group of people, working parents who need subsidies, 
that's number one. Number two--we need to give parents choices. 
That includes parents who choose to stay at home. Parents need 
quality choices. So this money is also an investment in 
quality, which we do not have. As more parents go into the 
workforce, they need to be assured of the quality of the child 
care they are getting. But the fundamental point is we are 
talking about a working population, not about the welfare-to-
work population. And we do believe that an additional 
investment is needed. I think the parents believe this also. We 
have talked to them around the country.
    Mr. Porter. Thank you, Madam Secretary.
    Mr. Stokes.

                             welfare reform

    Mr. Stokes. Thank you, Mr. Chairman.
    Madam Secretary, let me personally say that by virtue of 
being the Ranking Member on the VA-HUD Subcommittee, I was 
required to be there this morning. We started at 9:00. So, that 
is why I was late getting here to hear your presentation. I am 
sorry to have put you through that tribute you paid to me 
twice, but I am glad at least I was here to hear it.
    I want to thank you very much. The special friendship that 
you mentioned that I have had with you and your mother over the 
years is something that I cherish. As everyone knows, I have 
great respect and admiration for both of you. I thank you again 
for your kind remarks.
    Let me start with a question regarding welfare reform. How 
well is welfare reform, in operation, measuring up to the 
criteria that it must move people from welfare to work, provide 
adequate education, training and child care to enable welfare 
recipients to become self-supporting, encourage parental 
responsibility, protect the health and nutrition of children, 
and enhance State flexibility?
    Secretary Shalala. Congressman Stokes, we don't know the 
answers to those questions yet. What we do know is that a 
combination of welfare reform, waivers we have granted, and 
particularly a very good economy, have caused the rolls to be 
reduced dramatically. We have significantly fewer people on 
welfare than we have had in a couple of decades. Because 
welfare reform has just begun, we have no national statistics. 
We cannot determine: the permanency of these placements; 
whether people are getting jobs that they could move up in; 
what is happening to their children and to the cognitive 
development of children. There are lots of studies out there 
that will give us some of these answers. The Congress has 
mandated a massive collection of statistics that will give us 
much more sensitive information.
    We know some other things, other than welfare rolls 
dropping. We know that the predictions that there would be a 
race to the bottom, that the States would pull their money out 
very fast and that they would lower their benefits and not help 
people make the transition have not come true. In fact, there 
are a number of States that have added more money and taken 
advantage of the flexibility in welfare reform to add more 
money to the system.
    There are a number of States who have allowed current 
welfare recipients to keep more income as they make the 
transition from welfare to work, and that prediction is not 
based on geography. You will find States as enthusiastic about 
doing that in the South as in the North, in the Midwest, and in 
the West.
    So the early indications are that people are, in fact, 
split between those that are getting jobs and those that are 
leaving for other reasons because they have other sources of 
income. For instance, they may get married or someone may take 
financial responsibility. We know that child support payments 
are up and that's good. We know that teen pregnancy is down. It 
is too early to come to a conclusion about the questions that 
you have asked, which are the appropriate ones: What has 
happened to the children? Are people really better off? Does 
work pay? We will have those answers, but we don't have them at 
this moment.

                       disparities in health care

    Mr. Stokes. Madam Secretary, let me ask you this, and this, 
of course, is something I have spoken with both you and all of 
your predecessors about for a number of years. In 1985, then 
Secretary of the Department of Health and Human Services, 
Secretary Heckler, commissioned a report to study health care 
in the United States. That report told us that there was a 
great disparity between minority health and majority health in 
this country. It listed six specific areas, starting with heart 
attacks, stroke, cardiovascular disease and so forth, where 
there is a wide disparity between majority health and minority 
health. That task force made certain recommendations.
    In 1995, there was a 10-year update by the Department of 
Health and Human Services relative to this disparity in 
minority health.
    Now, of course, you have an initiative known as Healthy 
People 2000. Considering the fact that we are about to enter 
the year 2000, the new millennium, my question to you is: How 
far have we come with respect to closing the minority health 
disparity gap?
    Secretary Shalala. We have made progress. For instance, 
there has been an increased number of mammograms taken by 
African-American women. We have made remarkable progress in 
immunizations, where 90 percent of the kids now in this country 
are immunized. The group that increased the fastest consisted 
of minority kids because those were clearly kids that were left 
out of the system. Our massive effort to increase childhood 
immunization rates really did make a difference.
    But we haven't come far enough, in the judgment of the 
President and obviously of me. You will remember that under the 
Department's goal setting in Healthy People 2000, and all 
previous goal setting, we have set separate targets for 
minorities and for the white population.
    The President announced 2 weeks ago that in the major 
priorityareas that you identified, infant mortality, cancer 
screening and management, cardiovascular disease, diabetes, HIV/AIDS, 
infection rates and child and adult immunization, we continue to have 
gaps in almost all the minority communities; whether it is American 
Indians or African-Americans or Hispanic or Asian Americans, these are 
big areas. We will no longer set separate goals that are lower than the 
broader population. We will remove our safety net and go with a new 
initiative in which I would describe the $80 million we have asked for 
in this budget as glue money and mobilize this country to close those 
gaps.
    We will no longer be satisfied with lower targets. We will 
try to close those gaps. This is an extraordinary and historic 
effort, which we have put in the context of the President's 
race initiative. This is one of the largest public health steps 
that we have ever announced. In this budget is $80 million, 
which I would describe as the glue money that would allow us to 
put together the various initiatives. This effort will be 
administered by the new Surgeon General. His co-leader will be 
Dr. Peggy Hamburg, who is here, and is the new Assistant 
Secretary for Planning and Evaluation. Dr. Hamburg was the New 
York City Health Commissioner, and knows well the difficulty of 
closing gaps on the ground.
    She made a historic effort, successfully, for instance, to 
reduce the tuberculosis incidents in New York City. She knows 
exactly how tough this is to do. She will head the interagency 
group to try to do this. But we have removed any protections 
that we may have and made a big commitment.

              HIV/AIDS treatment, prevention, and control

    Mr. Stokes. HIV/AIDS also continues to have a 
disproportionate impact on the African-American community. What 
does this year's budget request do to make sure that the 
investment in AIDS treatment, prevention and control follows 
the trend of the disease, especially in high risk populations?
    Secretary Shalala. We have identified HIV/AIDS. As you 
know, racial and ethnic minorities constitute approximately 25 
percent of the total U.S. population. Yet they account for 
nearly 54 percent of the AIDS population and, therefore, the 
new resources that we are asking for, including some of our 
increase for Ryan White, will be targeted toward this 
population. Congresswoman Pelosi has led this effort.
    We need to begin to shift our money to target the 
population. We are making an effort to do that, with a special 
concentration on reducing differences through the race and 
health initiative that we have announced.
    Mr. Stokes. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Stokes.
    Mr. Miller.
    Mr. Miller. Good morning.
    Secretary Shalala. Good morning.

                          medicare choice plan

    Mr. Miller. Let me start with some questions about 
Medicare. I have several seniors in my district in Florida, so 
it is an issue in which I have a great deal of interest. One 
section in the balanced budget agreement last year was the new 
Medicare choice plan, which is rather exciting. I think it is 
maybe one of the most significant changes in Medicare in the 30 
years of the program.
    But a key part of that is the consumer education effort, 
and I know HCFA will be coming forward here and we will get 
some more details.
    Secretary Shalala. Right.
    Mr. Miller. But it is a giant task that you have, and HCFA 
has to help educate the seniors when this information comes 
out. Are you confident in your ability to do this? Have you 
funded it properly?
    Secretary Shalala. Well, this is our first time out----
    Mr. Miller. Yes.
    Secretary Shalala. It would consist of educating consumers 
on the choices that people are going to have, and of course it 
has to be regionalized. We would obviously put out a Medicare 
handbook for the whole country.
    This is different, because we are going to have to break it 
down in a way in which people receive information about their 
own communities, and what health plans they can choose among in 
their home communities. So for the Department this will take an 
extraordinary effort. And using modern technology and working 
with seniors groups, we have a multifaceted, comprehensive plan 
to get the information out, to make it interactive, to train 
large numbers of people, and to work with seniors as they make 
these choices.
    It is our first time out doing this. I think we have very 
good people and they have very good ideas about how to do this. 
We obviously will have an advertising component to it, but we 
are going to mobilize communities to work with us to get this 
information out in a way that people can actually use it. It 
has to be very user-friendly.
    Mr. Miller. Yes. It is a marketing effort. Having taught 
marketing at the college level, I certainly understand what a 
giant marketing effort it will be.
    Secretary Shalala. Well, we would appreciate your advice, 
Congressman Miller.
    Mr. Miller. You need to recruit consultants who are able to 
design forms, that don't look too much like government forms. 
It is a great opportunity, but it is going to yield a lot of 
confusion. It is scheduled to roll out in November and you are 
right, regionalization of it makes it even more complicated.
    Secretary Shalala. And we will have an 800 number. There 
will be all sorts of ways. A number of us intend to get on the 
other end of the phones ourselves to see how it is working and 
to work with the programs.
    Mr. Miller. It is something that we will work on together.
    Secretary Shalala. It is a big effort, but we would be 
happy to have any marketing advice.
    Mr. Miller. Obviously, we all need to work together on this 
one because we all agreed to it last year.
    Secretary Shalala. We would be happy to give you an 
individual briefing if you would like to see more details of 
the program.

                           MEDICARE USER FEES

    Mr. Miller. We will be sure to address it when HCFA comes 
in here.
    Under Medicare you have user fees that have been increased 
and it is my understanding that the Ways and Means Committee 
doesn't like the idea of user fees. A lot of sources of user 
fees are providers and if they are cost reimbursed, doesn't 
that really mean we are going to pay for them anyway? If they 
are not cost reimbursed, it is not a problem but, if you charge 
for surveys, that is part of their cost structure, isn't it?
    Secretary Shalala. Well, I will check on that.
    Mr. Miller. Okay.
    Secretary Shalala. We are not going to do a cost 
reimbursement on it so they will absorb it as part of their 
overall costs. We are asking them to pay for audits and other 
kinds of things that require special efforts.
    Mr. Miller. Again, the Ways and Means Committee has to 
handle that, not us, but you are spending the money that--you 
think the Ways and Means Committee is going to approve, and I 
think it causes problems when we start addressing spending the 
money if the revenues aren't going to be there. I have a 
problem if you are going to mandate we have to be audited and 
we are not going to reimburse you to be audited. There is a 
fairness issue so we will have to see how Ways and Means 
addresses the issue. It causes a problem for us if we don't 
have the revenue.
    Secretary Shalala. Well, and that has always been true in 
the appropriations process. Obviously, there has to be 
coordination between the finance--the appropriate tax and 
finance committees, and the Appropriations Committees. But let 
me say about user charges. There is the question of who pays. 
They are making money on these programs. Medicare is now a very 
good payer in this country. When I first came here, everybody 
was complaining and stating that they were going to get out of 
Medicare because we weren't paying very well.
    Given the enormous discounts that corporations have 
negotiated with their HMOs, we are now a good payer and we pay 
on time and we think it is not inappropriate to have those 
institutions that are doing very well pay.

                       NIH and Tobacco Settlement

    Mr. Miller. Well, some providers don't feel as comfortable, 
but you are correct in some areas. Let me switch to another 
area and that is NIH, which as you know, this committee has 
been very strongly supportive of. But a lot of it is related to 
the tobacco settlement. Now, I am not pro tobacco, so I should 
be able to support any strong tobacco program. If we don't get 
a tobacco settlement, where are we going to get the money to 
pay for NIH?
    I don't think the Administration has provided the necessary 
leadership, and I don't see it coming out of Congress.
    Secretary Shalala. Yes. Well, I think we have provided the 
leadership. We began with our FDA regulations----
    Mr. Miller. But you haven't submitted a plan.
    Secretary Shalala [continuing]. Which the President has put 
in place. The President has submitted principles under which he 
would approve pieces of legislation that would come forward. We 
have already indicated that a bill that has been introduced on 
the Senate side, which will soon be introduced on the House 
side, meets the President's principles. We will review every 
bill that is introduced in that regard.
    We have provided technical assistance to any group of 
legislators that are drafting bills in this area.
    Mr. Miller. Why don't you submit a bill?
    Secretary Shalala. We have made it very clear that we will 
support comprehensive legislation. We believe we can get 
comprehensive legislation, that it will be bipartisan, because 
as you indicated, there is bipartisan support for comprehensive 
legislation in this area.
    Mr. Miller. Right.
    Secretary Shalala. It is not necessary that all of you 
submit a bill. There are bills up here that are acceptable. We 
have outlined in some detail what the elements of those bills 
would have to be for us to support them and we will work very 
closely with this bipartisan effort in Congress to pass 
legislation.
    Mr. Miller. I wish there was more leadership from the 
Administration. I think it is a very complicated situation 
because you have the Judiciary Committee and the Commerce 
Committee involved. You have the agriculture people, and the 
vending machine people upset because they are being put out of 
business. I get concerned about spending money before we have 
it, and that is what we are talking about doing with the 
tobacco company money, aren't we? That extra billion dollars is 
really coming out of tobacco.
    Secretary Shalala. Obviously, the tobacco legislation will 
need to be passed. We are working very hard to make sure that 
that happens. There should be no reason, in this Congress, that 
we can't pass bipartisan tobacco legislation. It is a very 
important public health step. There already is bipartisan 
support to do that.
    There are bills up here which are acceptable to the 
Administration. We are working closely with committees that are 
working on bills, and there is good reason to take this very 
large public health step. Remember that for us, reducing 
smoking among kids is the point here.
    Mr. Miller. Right.
    Secretary Shalala. And that will have an impact on the 
budget in the long run. But it is not unusual for us to 
recommend revenue sources and then target those revenue sources 
to pay for the budget that we have submitted.
    Mr. Miller. Thank you.
    Mr. Porter. Thank you, Mr. Miller.
    Ms. Pelosi.

                        Welfare Reform Research

    Ms. Pelosi. Thank you very much, Mr. Chairman.
    Madam Secretary, thank you for your excellent testimony. 
The priorities of the Clinton Administration are commendable 
and your efforts to make every dollar count, of course, are 
just music to our ears here. The initiatives, the 21st Century 
Research Fund, is the very least we can do; hopefully we can 
find the money. I hope that that will include investment in the 
National Institute for Nursing as well, because as we make 
progress in all of these other areas, we must not forget where 
we have contact with the patients.
    The child care initiative is excellent, and the Medicare 
buy-in is quite a step forward, as well as the other priorities 
that you presented.
    I wanted to also commend your excellent leadership, as 
demonstrated by your ability to attract the talent that you 
have in your Department across the board. I want to join in 
welcoming Peggy Hamburg. I know her experience and her talent 
will serve us all very well.
    I wanted to follow up on a couple of the questions posed by 
my colleague, Mr. Stokes, in relationship to welfare reform. 
Clearly, welfare reform has led to important changes in the 
lives of many families. We have read reports of lower caseloads 
across the country, though it is less clear what the outcomes 
have been for some who have left public assistance.
    I wonder if you could tell us about your research in this 
area. Your research program allows you to track outcomes for 
families formerly on Federal assistance. I am interested in the 
research and evaluation efforts that the department has under 
way.
    Secretary Shalala. Well, the Congress authorized a huge 
data collection effort, and in addition to that, gave us a 
number of million dollars to launch a research effort, which 
will include both case studies and the development of outcome 
measures.
    In addition, there are numerous private sector efforts. The 
major foundations in this country are alsomaking an effort to 
both collect data and to analyze it. So I see this as part of a much 
larger whole to study--this is probably going to be the most studied 
piece of social policy in American history given the resource 
commitments.
    The kinds of outcome measures, we all are interested in is 
whether people are fundamentally better off. Does work pay in a 
way that lifts people out of poverty? Are their kids doing 
better in school? Are they able to take advantage of the 
educational and training opportunities that we have put in 
place? Are they staying in their jobs, not necessarily the 
first job, but are they getting settled into a job? How is the 
interaction between their child care and some of the other 
programs that we have put in place working? Are they able to 
keep their Medicaid?
    One of the great concerns that the governors and I have is 
the place where we registered people for Medicaid was in 
welfare. Once people move off of welfare, they need to be told 
that they can keep their Medicaid for a certain period of time; 
every State, for at least a year, most of them for 2 years. And 
then their children can keep health insurance forever, because 
Congress has put in place a new children's health initiative. 
People need to know what they are eligible for, and it is 
complicated.
    We are requiring a change in culture. The culture of the 
welfare office is turning into an unemployment office. How is 
this working? How do employers feel about it? Working with 
Congress, we have put a lot of welfare-to-work resources in the 
Labor Department; big initiatives by the private sector. These 
are new initiatives related directly to low-income workers: The 
earned income tax credit, raising the minimum wage, all of 
these things to try to make work pay so people are, in fact, 
better off in the workforce.
    But it is going to take a little time to find out whether 
they actually are better off; tracking them, getting the States 
to collect the information while they are making all of these 
other changes.
    Ms. Pelosi. I appreciate that.
    Secretary Shalala. It is a big challenge.
    Ms. Pelosi. I appreciate that and the fact that the economy 
is doing so well, of course----
    Secretary Shalala. Absolutely.

                             women's health

    Ms. Pelosi [continuing]. To help some of these people off 
of Federal assistance as well.
    I was particularly interested in what the research and 
evaluation effort is. It sounds to me as if it is something 
that is being developed and will be public/private service.
    I wanted to move on to women's health issues. I want to 
commend the work of the NIH Office of Research on Women's 
Health and other women's health research at NIH. You are all 
doing an important job to address the particular needs of 
women, including research on breast cancer, microbicides, 
health care delivery, targeted prevention, many other areas 
that can help improve outcomes for women. Could you bring us up 
to date on some of the current work at NIH addressing women's 
health issues?
    Secretary Shalala. Well, you have identified the major 
initiatives, and the importance of the 50 percent increase for 
NIH can't be underestimated in terms of its impact on women's 
health. Particularly in the area of cancer, where we are really 
on the verge of breakthroughs, because of genetics in molecular 
biology. This is an opportunity to lower mortality rates and to 
develop strategies for treatment. The NIH has been a leader, 
not only in breast cancer research, but in cervical cancer. We 
have work going on, as you pointed out, in the Institute of 
Nursing in the treatment of patients. So I would identify all 
of the diseases, impacting on women as actually getting a push; 
including major breakthroughs in AIDS treatment.
    As you well know, the AZT international trials were stopped 
because we believed that we have now found a way to reduce the 
number of children who are born with AIDS by using a much 
cheaper treatment protocol. It was possible to stop the 
clinical trials as the first ones that came on line were 
analyzed. We are in the process now, with our international 
partners, of trying to put the resources together to make sure 
that we literally save millions of lives around the world. That 
is the result of a major investment from NIH, which will affect 
women and children around the world.

                  AIDS Drug Assistance Program (ADAP)

    Ms. Pelosi. Thank you, Madam Secretary. The 
internationalizing of the effort is very, very important, and I 
think the Clinton Administration is to be commended for it and 
I will have more questions when Dr. Varmus comes before us on 
that issue.
    I wanted to thank you for the requested $100 million 
increase in the ADAP funding now that we are on to the subject 
of AIDS.
    As you mentioned, more people are living with HIV/AIDS. As 
Mr. Stokes pointed out, more of these are women and people of 
color. And the Ryan White programs across the country continue 
to be critically important.
    I wonder if you could comment on how we can ensure that the 
comprehensive service systems built by the Care Act that 
facilitate access to AIDS drugs and primary care remain strong 
and able to help people with AIDS? And while I am at it, I will 
include, because of the time, my concern about the flat funding 
for the prevention. I think that our best dollar spent is on 
the prevention of HIV. Thank you also for requesting increased 
funding for research and treatment.
    But in terms of prevention and care, if you could comment.
    Secretary Shalala. Yes. I think that what you are seeing is 
the maturity of the programs. There is much better coordination 
at the State and local level and at the community level, in 
particular. While some things in this budget had to be flat-
funded, the importance of the increase of $165 million cannot 
be underestimated--whether it is emergency relief or the 
comprehensive care grants that will go up. We need to make sure 
that we get the social support systems in place and well-
coordinated with the medical services. And, make sure that home 
and community-based care and health insurance, continuation 
programs, continue.
    The Title II grants are expanded by 23 percent. I think 
that that improves coordination.
    On the prevention side, communities are getting much more 
active in prevention activities, but not enough for any of us. 
There are more actors in the prevention world than there have 
been before. We have identified the priority areas that will 
improve local coordination and local commitments, as well as to 
make surethat drugs and medical services are available in 
communities. These increases will take care of that. Hopefully, during 
the course of the year, we also will have these research components, 
and the investments in them, resulting in help in this area.
    Ms. Pelosi. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. Pelosi.
    Let me remind committee members that we go back and forth 
from Republican to Democratic for those Members who are present 
at the start of the hearing, and then from that point on we 
recognize those in order of arrival, and we make an exception 
for Ranking Members or subcommittee chairmen who specifically 
request that they go out of order. We are operating currently 
under the 8-minute rule.
    Ms. DeLauro.

              Quality Improvements in Child Care Programs

    Ms. DeLauro. Thank you very much, Mr. Chairman.
    Madam Secretary, thank you. As a cancer survivor, I thank 
you and the administration for the cancer research initiative. 
I think that we know that the opportunity to do research in one 
area also has a payoff, if you will, in other areas in looking 
at other illnesses and diseases.
    Let me make a comment first on the chairman's question of 
why we need to deal with a new child care initiative and why we 
need the present child care initiative. Just two quick points. 
In the State of Connecticut, State child care is so 
oversubscribed they can't take any more folks in the program. 
There has been an open enrollment period of 2 days in the last 
2 years.
    We have had 800 families who applied for child care so 
there are thousands of others who cannot avail themselves of 
the child care.
    As I understand, the State block grants require that 
welfare recipients be treated first in the priority and then 
the working poor second. The working poor are being left out of 
the equation and they, in fact, do not have the opportunity to 
avail themselves of tax credits or of child care.
    So, again, I applaud the child care initiative. Long 
overdue.
    A couple of questions. In 1994, I was proud to vote for the 
child care expansion and the Quality Improvement Act, which 
reauthorized Head Start. We are dealing with both quality and 
expansion, which need to go hand in hand. Without that, the 
public isn't going to provide the support we need on the 
program. We have got the scientific research on children's 
brain development and the importance of putting emphasis on the 
highest possible quality in all of our early childhood 
programs.
    Can you describe for us the steps proposed in the budget to 
further improve quality in both the Head Start and in the Early 
Head Start programs?
    Secretary Shalala. Well, as you know with Head Start, we 
will be going through the reauthorization process. In this 
child care fund that the President is recommending is a major 
new commitment to improve the quality of child care, and not 
just institutionalized child care.
    It is important that we establish quality networks in 
communities for children that are taken care of in small groups 
in individual homes. In my own hometown of Madison, Wisconsin, 
there is a model program for home-based care in which there is 
a network and there is training and opportunities to upgrade 
skills for those who are caring for small groups of children in 
homes, where many people place their children.
    In addition, we have included in our recommendations, for 
mothers who choose to stay at home with their young children, 
an opportunity for them to get some support and to learn things 
that will help them with their children.
    We consider the quality investment not just as an 
institutional investment, but in the variety of child care 
options that we want to give parents, each one of these require 
an investment.
    The big issue is access, clearly, because there are not 
enough resources for low-income working parents. But it is also 
quality. Parents are concerned about where their children are 
placed, how to judge quality, and about working on ongoing 
relationships with the people who take care of their children, 
in this country. And, I would add to that, not anticipating Mr. 
Hoyer asking me a question, this also has resources for the 
coordination between schools and child care and we are now 
rewarding, through financial systems, child care centers and 
Head Start centers that build collaborations. And, all of this 
will help.
    We are moving to a new era in this field that increases 
choice, increases options, supports people in the placement of 
their children, and improves quality across the board, and uses 
existing institutions to make it better.
    Ms. DeLauro. And we have an opportunity to learn from what 
we have done in Head Start because there has been a close look 
at Head Start in evaluating Head Start to see what works and 
what doesn't work so that when we move to the early childhood 
programs, the zero to three programs, that we are not making, 
if you will, the same errors.
    Secretary Shalala. Well, that's exactly right. Head Start 
itself is changing. We made the commitment some time ago, to 
this committee, to improve the quality of Head Start.
    The zero to three age group is a perfect example. There is 
almost no infant care out there. If someone asked me, is there 
enough welfare money out there to pay for child care, the 
answer is, no. There is very little money out there to help 
develop quality infant care. Parents are desperate. We need to 
help develop quality infant care. The zero to three initiative 
becomes very important as part of this. But, again, we need to 
give parents choices.
    If they choose to stay home, if they choose to work part-
time, or if they have the choice to work full-time, there 
should be quality places for them to place their children while 
they are at work.
    Ms. DeLauro. Another question, but first a final comment on 
that. I believe that we are not serving the people we represent 
well if we do not take the studies that have been produced on 
when we know the children are learning from zero to three. We 
have got the information. We don't need any further studies. We 
have got to try to provide the opportunity to impact our kids 
from zero to three so that they can have a successful life.
    I was recently contacted by a grandmother who lives in my 
district.
    Ms. DeLauro. In her letter to me, the overworked 
grandmother told me that her daughter was able to get off of 
welfare, get a job, until the State of Connecticut's delay in 
paying the child care provider forced the provider to close. 
When the constituent's daughter lost her child care, she also 
then lost her job. Because she wasn't working, she lost her 
welfare check. This is a woman from Clinton, Connecticut. I 
have the letter right here.
    This is the kind of administrative snafu that has a real 
effect on people's lives. In my view it is unacceptable. What 
kind of oversight does your Department have to ensure that 
States are dispersing Federal child care funds efficiently? Is 
there anything that we can do at this level to make sure that 
this doesn't happen in Connecticut or elsewhere since people 
are getting off of welfare, and are trying to find jobs, but 
they are getting caught in an administrative nightmare?
    Secretary Shalala. Well, we do have oversight authority and 
there are rules about how fast States should be reimbursed. I'm 
not familiar with this specific case. We have moved to a more 
businesslike system.
    The States have expanded rapidly. They are getting systems 
in place to make payments, but I have heard some stories around 
the country about payments. Medicare is a perfect example. We 
pay faster than the private sector does now--in terms of 
reimbursing for bills. The Federal Government has rules in 
terms of how fast we have to pay. We are paying so fast that we 
are not catching some mistakes--which I am concerned about at 
the same time. But, we need to recognize that these child care 
centers are places where working parents are placing their 
children and they can't be without those options.
    We would be happy to look into that particular case and to 
talk to the State of Connecticut.
    I don't think we need any additional authority. I think 
simply communicating with the States, that they need to get 
their own houses in order in terms of payments so that people 
don't go out of business. But it tells you something about how 
fragile the child care industry is and how delayed payments 
really affect places where parents can't pay very much money. 
People that work there aren't being paid very much.
    These are small businesses that need to make sure that 
their cash flow remains consistent. The government should be 
the last place that isn't being supportive of small businesses, 
it seems to me.
    Ms. DeLauro. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. DeLauro.
    Ms. Lowey.

                         food safety initiative

    Mrs. Lowey. Thank you, Mr. Chairman.
    Welcome. It is always a privilege for me to have the 
opportunity to talk with you and work with you and I applaud 
the administration's overall agenda on health and social issues 
and we can all be proud that you are leading the way. And I 
want to join my colleague in welcoming Peggy Hamburg here. It 
is a pleasure to have you as a part of the team, which is 
certainly a very distinguished one. I thank you very much. Good 
to have you here with us today.
    A couple of points. First of all, I want to associate 
myself with my colleague, Ms. Pelosi's leadership, on AIDS 
issues, and I am very pleased in looking at your request that, 
in addition, to the important allocation of funds towards the 
new drugs, that you also understand that emergency assistance 
to communities with a high number of AIDS cases is absolutely 
critical, certainly in the areas that I represent.
    Second, I also want to applaud the administration's 
proposed increase of 10 percent for cancer research. Certainly 
our chairman and this committee have been very strong 
supporters of the National Institutes of Health, and I wish we 
could see increases even in addition to the cancer research and 
to the other illnesses as well, and we would certainly work 
with you towards that end.
    I was very pleased to see the administration's emphasis in 
the budget again this year on improving the safety of our 
Nation's food supply. This is an area where I know we share 
concerns. Could you discuss with us how the CDC's food safety 
initiative will add to the cooperative efforts?
    Secretary Shalala. Well, there are a number of aspects of 
the food initiative. The CDC has asked for a $5 million 
increase. We are going to increase Federal support of 22 State 
health departments to detect food borne illnesses. It is the 
infrastructure that CDC is concerned about, and the quality of 
the surveillance system in the United States. That's where we 
are investing.
    There is also an investment in FDA inspections; 
particularly in inspections abroad. Again, they are part of a 
surveillance system, and we will have investments there. We are 
also going to improve coordination between State and Federal 
agencies in food handling practices and food borne disease 
outbreaks because some of the problems are just communication--
so that we can quickly identify the problems. We are going to 
make another investment in research in this area.
    Let me also say that we have a two-pronged or a three- or 
four-pronged strategy. Obviously, the research and the 
surveillance systems, are expanding our oversight and 
coordination. But, in addition to the technical and the 
scientific work that we are doing, we are translating that 
evidence into everyday activities. We believe that there should 
be a high tech and a low tech strategy with the food companies 
in this country--the private sector--we have launched a 
campaign to get Americans to prepare their food correctly, 
using cutting boards and cleaning them; separating their foods; 
to get everybody in the family to wash their hands before they 
eat. Basically it is a combination of food preparation and 
making sure that our hands are clean before we go to eat. These 
are the fundamental public health pieces, which the CDC and FDA 
are both concerned about, and are working with the Department 
of Agriculture. This is a massive effort to rebuild the 
infrastructure and at the same time to remind everybody that we 
have to do the fundamentals.
    I was at an elementary school in Cleveland, talking to a 
first grade class. I asked the kids, what should I tell the 
President? And, the first message was tell him to wash his 
hands before he eats.
    Mr. Hoyer. Everything I needed to know I learned in 
kindergarten.

                             breast cancer

    Mrs. Lowey. I thank you very much, and I just want to 
emphasize again that I am particularly pleased that there is a 
cooperative effort. When you go to the supermarket, or the 
local food store these days, you see products from every place 
in the world. Certainly FDA's responsibilities are critical in 
inspecting these products at the source and working with CDC. I 
am hoping that we can continue to make progress. I would be 
remiss, since I do ask you to share with us every year an 
update on the administration's efforts regarding breast cancer. 
I do believe this administration has taken the lead. We have 
seen some important successes. We know we have a lot more 
progress to make.
    Could you share with us the administration's initiatives 
for this year towards our goal of ending the scourge of breast 
cancer?
    Secretary Shalala. Yes. And this includes the action plan 
for breast cancer. Our future priorities will be focused on 
minority communities where there is less participation in 
mammography and in treatment and in services.
    There will be an enormous effort in taking the evidence 
that we have and making sure there is larger participation by 
women and minority communities in the services that are 
available.
    In addition to that, we intend to continue the research 
priorities that the National Cancer Institute and the other 
institutions that are doing cancer research. I expect that in 
treatment and identification, moving more people to earlier 
detection, that we will continue to make progress in these 
areas.
    Communications, alone, has started to make a difference. 
The special resources that Congress put into CDC to conduct 
outreach to low income women has begun to close the gaps 
between African-American women and the general population. It 
is important to have the prevention pieces and the research 
pieces together. I think that the Department has the best 
coordination we have ever had in this area.

                        medicare fraud and abuse

    Mrs. Lowey. In another area, with the time that's 
remaining, in looking at your statement I am very pleased that 
the administration continues to place a high priority on 
reducing fraud and abuse in the Medicare and Medicaid programs, 
so we can reprogram those dollars and use them efficiently and 
effectively.
    Could you share with us which initiatives you think are the 
most effective, what antifraud and abuse activities are you 
going to highlight this year? In other words, what is working?
    Secretary Shalala. Well, what seems to be working is 
Operation Restore Trust; and the new combination of the FBI, 
the U.S. Attorneys, the States attorneys general. Their 
coordinated efforts are expanding across the country.
    Last year, these efforts resulted in settlements and 
penalties that brought a billion dollars back into the trust 
fund--the largest amount of money ever put back into the trust 
fund in the history of the Medicare program.
    I think that indicates that the combination of a team 
effort--as opposed to competing with each other--of identifying 
systemic fraud in the system, as well as getting new rules in 
place, has made a difference.
    The new legislation as part of the balanced budget 
legislation will obviously help us in a number of areas, 
including blocking people from becoming Medicare providers who 
have previous felony convictions. We have asked for some 
additional legislation. Unfortunately, people are starting to 
use bankruptcy laws as a way of getting out of these 
investigations. We need to close those gaps. We have submitted 
legislation in that regard. We are putting in place some of the 
strongest rules we have ever had in our history. As part of a 
huge campaign, senior citizens are urged to look at their own 
records and report to us if they think there is something 
unusual about their bills.
    We are training people in senior citizens centers to be our 
eyes and ears. The other day in New York a woman walked up to 
me and said, I am one of your fraud busters. It turns out she 
lives in Florida. She is one of the people that has been 
answering the 800 number and have been following up with her 
fellow senior citizens in this area. We will be announcing some 
expansions of these efforts.
    Everybody groaned and moaned because they are used to 
officers coming in andsaying, oh, we are taking care of this 
because this is fraud. We have brought money back to the treasury. We 
said that we were going to do it if you gave us the resources to 
invest, and we have done it. We are asking for another $138 million 
this year. It will pay off tenfold. We now have coordinated systems in 
place and everybody is out there working.
    Mrs. Lowey. I think my time is up, but I just want to thank 
you and say that Eleanor Guggenheimer, who you know in New York 
is very much following this, and her program is very 
enthusiastic because they see some results.
    So I thank you, Mr. Chairman. Thank you.
    Mr. Porter. Thank you, Mrs. Lowey. Under the rules, Mr. 
Hoyer would be next, but he is yielding.
    Mr. Wicker.
    Mr. Wicker. Thank you, Mr. Chairman. I appreciate my 
colleague from Maryland yielding.
    Madam Secretary, let me join the other members of this 
subcommittee in welcoming you back this year. Your testimony is 
always very helpful.
    Secretary Shalala. Thank you.
    Mr. Wicker. It is a pleasure to visit with you.
    Last year, we had a discussion about what some members of 
this subcommittee felt was an unacceptably low proposed level 
of spending for NIH.

                       NIH and tobacco settlement

    Secretary Shalala. Yes.
    Mr. Wicker. I notice in this year's budget it mentions that 
NIH is a flagship of the President's Research Fund for America, 
and I just would simply say that that didn't seem to be much of 
a flagship last year, but I am glad that the administration was 
willing to work with this committee and plus-up the funds for 
this very important program.
    I want to follow up, first of all, on what Mr. Miller was 
asking. He was asking about the additional $1.15 billion 
proposed by the administration for NIH, and about the role of 
the tobacco settlement in this. The conversation sort of moved 
to the administration's leadership in the tobacco settlement. 
And I notice in the latest issue of the CQ--what do I have 
here, Congressional Quarterly Monitor, that congressional 
Democrats said yesterday they believe tobacco legislation may 
have a shot at becoming law this year, a long shot, but they 
wonder what role, if any, the Clinton administration plans to 
play in that issue.
    Let me just make sure that I understand the 
administration's position. The additional $1.15 billion 
increase in NIH is contingent, is it not, on the tobacco 
settlement?
    Secretary Shalala. We believe that a tobacco settlement 
will pass this year; that it has bipartisan support; that we 
can work out a good, strong piece of legislation; and we have 
submitted a balanced budget, and it is paid for. That 
legislation that will be passed in this Congress, and would be 
the source for funding the NIH increase. Let me make it very 
clear, we are committed to the NIH increase as a priority of 
the President. Like every other priority of the President, we 
work with this Congress to identify revenue sources to pay for 
those increases. However, we believe that the revenue source we 
have identified--part of a comprehensive piece of tobacco 
legislation--can be passed this year with very strong 
bipartisan support.
    Mr. Wicker. Well, perhaps you are right. But it does seem 
to me that without that tobacco tax, the money is not going to 
be there. Do you support the $1.15 billion in the event you are 
mistaken in the tobacco settlement and the tobacco settlement 
is not culminated?
    Secretary Shalala. I don't think I am mistaken in the 
ability of this Congress to enact a bipartisan piece of 
legislation.
    Mr. Wicker. But suppose----
    Secretary Shalala. We support it. Independent of 
identifying the source of funds, yes, absolutely, we support 
it. And, we will work with this committee.
    Mr. Wicker. Well, boy, I sure do, too.
    Secretary Shalala. And I am sure you do, too.

                              hcfa funding

    Mr. Wicker. I certainly do.
    Let me ask--you know, we fund the HCFA administration out 
of discretionary funds, and I noticed that your proposal for 
fiscal year 1999 for HCFA is $2.1 billion. If the 
administration's proposal to expand Medicare to include people 
as young as 55 is enacted, will that figure be enough to 
adequately fund HCFA so that it can handle the increased 
workload?
    Secretary Shalala. Yes, the answer is yes. The actuaries 
have estimated we are talking about 300,000 people that would 
participate in these programs. Some of them would be simply 
buying back into the COBRAs. We are talking about probably over 
200,000 additional clients that HCFA would have to handle. HCFA 
manages a program that includes over 30 million people. Two 
hundred thousand is a very small number. The administrative 
structures already exist. People walk into their Social 
Security office and can register for the program. We anticipate 
the participation of a tiny number of people, and the 
infrastructure to accommodate them already exists.

                           nursing facilities

    Mr. Wicker. All right. Finally, Public Law 104-134, the 
Balanced Budget Downpayment Act, signed by the President in 
1996, instructed you to provide for a study concerning the 
implementation of a process under which skilled nursing 
facilities would be deemed Medicare compliant if they become 
accredited by a national accreditation body.
    I understand that you were required to submit to Congress a 
report on this study by July 1, 1997. Where is this report?
    Secretary Shalala. I don't know and I will get back to you.
    Mr. Wicker. Well, do you have any opinion about how much 
money we might save if this type of independent body, such as 
perhaps the Joint Commission on Accreditation of Health Care 
Organizations, could provide this service as anticipated by 
Public Law 104-134?
    Secretary Shalala. Well, I think the answer is----
    Mr. Wicker. Is my question arcane enough?
    Secretary Shalala [continuing]. We expect to have the 
report completed and submitted in the spring. It is apparently 
a very complex issue. We have been advised by both the nursing 
home reform advocates and the industry itself that a more 
comprehensive report would be more useful. Unfortunately, a 
comprehensive report takes more time to complete. So, it is our 
intention to submit the report in the spring and then we will 
talk to all of you about whether you want us to go back and do 
something far more comprehensive.
    The one thing I have learned, regarding HCFA, isnever to 
guess at what the cost of anything should be. So, I would not guess. 
But I think that this committee should take a look at the report and 
let us know what you think we should do. I would be happy to discuss it 
with you at that time.
    Mr. Wicker. But your notes indicate that this might be 
ready by spring?
    Secretary Shalala. It will be ready in the spring.
    Mr. Wicker. This year?
    Secretary Shalala. This year.
    Mr. Wicker. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Wicker.
    Mr. Hoyer continues to yield. Mrs. Northup.

                              nih funding

    Mrs. Northup. Thank you, Mr. Hoyer.
    Secretary, thank you very much for being here today. I 
think we all have so many questions about all the programs and 
all the differences you make in the lives of the people that 
live in our district.
    I would like to start by just asking you to give me a 
better insight into what your role is in dividing up NIH funds, 
and in particular, by disease or by institute.
    And if you would allow me just to preface my question with 
saying that we are often sort of bombarded on this committee by 
people that have specific concerns. Obviously, if you have 
Parkinson's, there is not another more serious disease in the 
world than Parkinson's. I mean, it is so serious and so 
terminal.
    And we have tried to let the scientists designate funds, 
both because they know what the research capabilities or maybe 
impending breakthroughs are and also because I think it is the 
Chairman's wisdom, I have been very appreciative of it, that 
the last thing this committee ought to do is become captive to 
all the political forces that might direct research dollars.
    And I guess my question to you is: Are you also bombarded 
by the same types of pressures? And what your role is and 
whether--you know, what you think is appropriate in trying to 
provide these answers and designate money?
    Secretary Shalala. I am bombarded by so many people on so 
many issues. I am, like everyone else, lobbied heavily not only 
on NIH but on a variety of different issues.
    I think what we are talking about is the emphasis that the 
President has put in this budget, which expands the NIH base by 
50 percent over 5 years, and recommends a goal for cancer 
research, not for the National Cancer Institute, of 65 percent.
    Dr. Varmus will have more to say about that I indicated, 
before you came in, that we are on the verge of cancer 
breakthroughs, because of molecular biology and genetics, and 
we believe this investment would make some sense. As to the 
normal internal process of allocation: once this committee has 
made a decision and the Congress has passed the budget, the 
Director of the National Institutes of Health follows the 
internal allocation process which involves the institute 
directors. I am not involved in that process.
    Mrs. Northup. Are you involved in the proposals that you 
all make? For example, do you look at any of the charts that 
are available that show we spend this much for one particular 
disease, another amount for another particular disease?
    I was particularly impressed last year by the autism 
community that came and talked to us, and I think their 
complaint was that there might be fewer proposals that were 
even proposed to NIH because the beginning research, the sort 
of seed type of research, hadn't been available. And I am 
wondering at what level we address those issues and who is 
involved in answering those questions?
    Secretary Shalala. I think that the increase of 50 percent 
over 5 years gives NIH the opportunity to explore areas that 
have not necessarily been the highest priority for their 
scientists. It allows them, as NIH is very good at doing, to 
put resources in diseases in which there is not necessarily a 
lot of patients.
    I think you should see the 50 percent increase as an 
opportunity in many ways for every disease to get a boost and 
to get an additional investment. We are not simply talking 
about increases. We are talking about the steadiness. The 
things that are important to scientists and to this generation 
of scientists is some assurance of what the spending level is 
going to be over a substantial period of time so that they can 
make investments in terms of their own careers and the 
direction of their scientific investigations.
    This committee, the leaders of this administration, and the 
scientific leaders in this country are very concerned that we 
are deterring some of the brightest young scientists in the 
country from going into research because of our inability to 
assure them that training funds and research investments are 
going to be there for their entire careers, if they do first 
rate work.
    Mrs. Northup. Well----
    Secretary Shalala. I think that is very much a part of the 
investment that the President has decided to make.

                           fraud initiatives

    Mrs. Northup. Well, I understand that, and I share my 
colleague's observation that we are glad that the President has 
converted to that since last year's proposal. But I think that 
in a sense by most of us, that most choices would all be solved 
if there would be a new stream of revenue. We have to at least 
ask the questions, if that funding stream doesn't exist, what 
our other options are.
    I would like to ask another question about HCFA. And I 
appreciate the fraud initiatives that have been ongoing. I am 
somewhat confused about the balanced budget bill last year that 
included some fraud provisions, and whether or not we are 
prosecuting fraud under those or going back to old statutes. I 
have had a number of hospitals in particular complain that the 
Department of Justice has been very aggressive about saying, 
settle and pay up this fine now and we won't prosecute you at a 
much higher level when, actually, their HCFA advisor, their 
intermediary, has approved their processes in the past. They 
have said, yes, this is an appropriate code and now the 
Department of Justice says it isn't. And they have like 30 days 
to respond and settle, or else they are going to be prosecuted 
at a higher level. And I wonder if that's appropriate and, 
whether you make that decision or the Department of Justice or 
HCFA, that that is who will prosecute the case?
    Secretary Shalala. No. The decisions on prosecution are 
made by the Department of Justice. That question should 
beaddressed directly to them.
    Mrs. Northup. Did my alarm go off?
    Mr. Porter. No. You have about another minute.

   substance abuse and mental health services administration (SAMHSA)

    Mrs. Northup. One more question, about SAMHSA. I have been 
surprised that SAMHSA hasn't been more highly profiled in the 
discussion of how we approach children with respect to smoking, 
and in portioning out funds from the tobacco settlement. I 
think we all agree there are some public policy changes needed. 
There may need to be an increase in price, but certainly 
appealing to the heart and mind of children through media, 
through education, is very important. And I haven't felt that 
there has been a significant amount of the money given, or 
directed in that area. SAMHSA has been the lead agency in 
getting to our young people, regarding other health needs, 
drugs and other alcohol, and I have just been surprised that we 
haven't involved them more in the prevention.
    Secretary Shalala. They have been the lead on the Synar 
amendments. They have done a very good job. All States are in 
compliance with the Synar amendments, and it could be that 
because FDA has been so visible. They are very much an integral 
part of the team and to the extent that people think there is a 
relationship between substance abuse in general and other kinds 
of things, they have been integral. So it has been CDC, FDA, 
SAMHSA and the rest of the Public Health Service, and I will 
take your comments to heart.
    Mrs. Northup. How much of the tobacco settlement will 
actually go to them?
    Secretary Shalala. CDC is leading this through the Office 
of Smoking Prevention. That is the way it has been historically 
allocated. SAMHSA has the lead on the enforcement of the Synar 
regulations. They have just submitted a comprehensive report to 
Congress on that.
    There are different roles for different folks and 
historically, the CDC has had the Office of Smoking Prevention 
located in that office. I can assure you, SAMHSA has been at 
every table in every discussion.
    Mrs. Northup. Thank you, Mr. Chairman.
    Thank you, Mr. Hoyer.
    Mr. Porter. Thank you, Mrs. Northup.
    Mr. Hoyer.
    Mr. Hoyer. Thank you very much, Mr. Chairman.
    Madam Secretary, I join my colleagues in welcoming you to 
this committee.
    Mr. Chairman, I asked the staff to look at the record. This 
department was formed in 1953, as we currently know it, and 
obviously there were other appropriations put in in earlier 
years but in that 45 years Secretary Shalala is the longest 
serving Secretary of the Department, in looking at the record.
    I make this observation because I believe that one of the 
problems we have had in high levels of government since I have 
been on this committee, in the Congress, is the very rapid 
turnover, average 2-year stay, as Secretary of the Department. 
It is very difficult to get a handle on a department as complex 
and as large as the Health and Human Services Department and 
harder still to implement policy in that short period of time.
    I want to congratulate President Clinton for choosing 
Secretary Shalala. I do not know that I have served with a more 
knowledgeable, energetic, focused, effective Secretary. We have 
had some good Secretaries. That is not to denigrate any of the 
Secretaries. It is a good company in which I make this 
comparison and I want to congratulate you, Madam Secretary. You 
have been absolutely extraordinary in my opinion----
    Secretary Shalala. Thank you.
    Mr. Hoyer [continuing]. Of your grappling with the problems 
of the Department and even in engaging with the Congress on 
jointly solving those problems and funding our priorities.
    Mr. Obey. What do you expect? She is from Wisconsin.
    Mrs. Lowey. But we claim her in New York.
    Mr. Hoyer. That is why I was so surprised, Madam Secretary.
    But you have overcome whatever obstacles have been placed 
in front of you.
    Ms. DeLauro. And your association.
    Mr. Obey. How are the Terrapins doing?

                          coordinated services

    Mr. Hoyer. Not bad, as a matter of fact. The only team to 
beat two number one teams this year, I might say.
    I don't know how we got sidetracked into that, Madam 
Secretary. But Madam Secretary, I want to congratulate you and 
the President. The investments that this administration has 
proposed were supported by 77 percent of America. You don't get 
a much better democracy than that.
    I know this committee, in a bipartisan way, will support 
many, many of those alternatives. I support, as well, a tobacco 
settlement. I want to say I was in a very interesting meeting 
with Governors Hunt and Patton, who both said very strongly 
that they were in favor of a tobacco settlement and the 
Congress adopting legislation, which I thought was very 
interesting, and they thought it was the moral and right thing 
to do for this Nation. I hope we do it.
    You anticipated, of course, my question because I have been 
focused on this for many years, coordinated services. And I am 
pleased to see that you are rewarding collaborative services. 
Madam Secretary, I would ask you to bring me up-to-date on how 
you see our progress? I have historically talked about Labor, 
Education and Health and Human Services. I would add to that, 
Madam Secretary, HUD and USDA. As I have thought about this 
question and talked to you and Secretary Riley and Secretary 
Reich and now Herman about it, it occurs to me that USDA and 
HUD are absolutely critical components if we are going to have 
full family service centers. Joy Dryfoos refers to them as full 
service schools., But they are school-based and complimentary 
at school sites or co-located sites. Can you tell me what 
progress we are making in this area? You have already mentioned 
it, but I would like you to be broader in your answer, if you 
could be.
    Secretary Shalala. Well, if the question is specifically on 
the early childhood programs, what I noted was that, as we 
expanded Head Start, we gave priority to applicants that formed 
operational and funding partnerships with other community-based 
early childhood programs. I took some flack from some more 
traditionalists who didn't want to do this kind of--or were 
afraid of doing this kind of reaching out, but it actually 
allowed Head Start to focus more on full-day, full-year 
services to accommodate the needs of low-income working parents 
in particular. So I think we moved that.
    In addition, we provided grants to all 50 States, plus the 
District of Columbia and Puerto Rico, to establish new Head 
Start collaborative projects. This was done to coordinate early 
childhood programs in the State. This meant that they had to 
meet with other agencies at the same time. So we didn't just 
try to do it with new initiatives at the local level.
    We also gave grants to the States and said, it is time you 
move ahead in this area.
    We are also coordinating school-age care, and that involves 
all the agencies that you have indicated in the child care 
initiative. We are all going to work to coordinate and avoid 
duplication in the after-school programs.
    As you know, the President's investments include $800 
million for after school programs designated for the Department 
of Education. We believe, after school programs need to be 
coordinated with other programs. We have already started that 
process in meeting with other agencies.
    In terms of trying to increase the amount of one-stop 
shopping, there str crosscuts going on between the agencies. I 
agree with you. I was once at HUD early in my career as an 
assistant secretary, and HUD is very much a player here in 
terms of getting these activities coordinated. USDA works with 
us on a number of different issues, particularly related to 
early childhood, because of the WIC and the other programs that 
they have made investments in.
    Mr. Hoyer. Madam Secretary, I will be writing to you and 
the four other secretaries of the departments I mentioned, 
asking you for advice on what we might do in this bill to 
facilitate and encourage the integration of programs at the 
Federal level so that accessing them at the local level in a 
family service center setting would be assisted.
    Secretary Shalala. Okay.
    Mr. Hoyer. I would appreciate your help on that.
    Your department has been vigorous in enforcing Head Start 
quality and shutting down programs that can not do what we need 
for kids. The committee members don't know this--I am sorry all 
our Republican--Majority Members have left. This is the first 
Secretary--not you, Mr. Chairman.
    Mr. Porter. I am still here.
    Mr. Hoyer. Mr. Chairman, I think of you as sort of the 
speaker in this. You are with all of us.
    Ms. Pelosi. Above the fray.
    Mr. Hoyer. You are with all of us.

                          early start quality

    Mr. Hoyer. The fact of the matter is, this is the first 
Secretary of Health and Human Services who has looked Head 
Start providers in the eye and said, we expect outcomes, not 
just process. The first time that any Head Start grantees have 
been cancelled since 1965.
    I am not in favor of cancelling Head Start programs. We are 
for expanding them and improving quality and access. But the 
fact of the matter is, if they don't do the job, we are kidding 
the parents and the kids and ourselves.
    I want to congratulate you on that.
    The Early Head Start program, what steps are being taken to 
ensure that we do not have the same kind of quality problems 
with Early Head Start expansion that we did with Head Start 
expansion?
    Secretary Shalala. Because we have the quality money to 
invest in Early Head Start, as we have put those programs in 
place, we have also put the outcomes measures and a lot of 
technical assistance on the front end. After all, there is very 
little infant care in this country. There is not a lot of 
experience, but there is a lot of research in the area. So, 
again, as Congresswoman DeLauro pointed out, we need an 
evidence-based system.
    Second, the new child care initiative the President has 
laid out has a quality investment as part of it; and, 
increasingly, it seems to me, we have to do this in an 
integrated manner. We have got to bring the evidence to bear on 
the design of programs and on the ongoing management of 
programs.
    Mr. Hoyer. Thank you. I have other questions, but I will do 
it on the second round. Thank you very much, Madam Secretary.
    Mr. Porter. Thank you, Mr. Hoyer. There will be a second 
round after Mr. Obey's questions. I will ask members if they 
intend to stay for the second round, and then we will divide up 
the time.
    Mr. Obey.

                      emerging infectious diseases

    Mr. Obey. Thank you, Mr. Chairman.
    Just a couple of questions, Madam Secretary.
    A while back, we heard a lot of news about the outbreak of 
a new flu-like virus in Hong Kong. In the past, we have had 
concerns expressed about things like Ebola. I mean, the world 
is a smaller and smaller place, given the way people travel 
routinely around the world almost on a weekly basis. What do 
you see as the most urgent threats in emerging infectious 
diseases and how do you and CDC plan to deal with them?
    Secretary Shalala. Obviously, the flu-like viruses that we 
are beginning to see--and the avian flu in Hong Kong was an 
example of that, hantavirus, Ebola, AIDS and all sorts of 
diseases of which we haven't named yet--and the CDC, thanks to 
this committee, is starting to get the kinds of investments it 
needs.
    There is another round of investments that we have 
requested in this budget for emerging and infectious diseases. 
In addition, we need to build up the U.S. infrastructure, so we 
have much quicker turnaround times so that we can make the 
diagnoses much quicker, we can track these diseases much faster 
and get at them much quicker. That is part of the overall 
strategy of this budget.
    And, third, our international investments, as I indicated 
to you at the State of the Union, I consider the nomination of 
Dr. Grobroton of Norway as the new head of the World Health 
Organization (WHO) a major step in the right direction for the 
world in terms of upgrading the quality of the WHO.
    Mr. Obey. Very good.
    Secretary Shalala. I hope that the appropriations process 
will recognize that the international health investments that 
we make. Because taking someone of her caliber for that 
position--the U.S. will vote in May, and we will be voting for 
her--is a critical step and will dovetail with the kinds of 
investments we are making in CDC.
    We are also concerned about the old diseases. I have just 
finished a trip the end of last year to the east. Tuberculosis, 
in India, and, encephalitis in Japan, and AIDS continues in 
that part of the world. There are a whole range of diseases 
without emphasis on infrastructure, tracking systems and early 
reporting.
    We are trying enthusiastically, with great help of the 
Rotary Clubs, to eliminate polio by the end of the century, 
perhaps by 2002. But we have got a lot of work to do, and these 
investments and CDC's prominence is critical.

                   diseases resistant to antibiotics

    Mr. Obey. What about the problem of diseases that are 
increasingly becoming resistant to antibiotics, TB, the 
practice of feeding agricultural animals antibiotics on a 
routine basis? I mean, what----
    Secretary Shalala. That is part of it.
    Mr. Obey. I mean, what are we doing and what do we need to 
do in order to deal with that problem?
    Secretary Shalala. I think we need to do two things.
    One problem is the tendency to overmedicate in both this 
country and abroad and the inappropriate use of antibiotics. We 
started a conversation about an evidence-based system, and we 
need to be as careful about overmedication, as we are about the 
undermedication in this world.
    Second, because we are getting drug-resistant strains, we 
need to do much more work in many parts of the world to develop 
vaccines and other treatment strategies to overcome that kind 
of resistance.
    You might get Dr. Varmus into a conversation about 
malaria--still a disease that kills millions and millions of 
people and a disease that we need to pay attention to again.
    We have 19th century diseases that have returned in full 
force, and we need to make sure that the no-named diseases 
aren't the first ones we attack. But that we, have a designed 
strategy for attacking the problem. I think that you will find 
both in Dr. Varmus' testimony and the CDC's testimony a 
reflection of our own internal strategies. We fought hard for 
these relatively small amounts, compared to other things, in 
the laboratories, as well as the funding for the Centers for 
Disease Control, NIH and FDA.

                          nih outyear funding

    Mr. Obey. Let me ask you a different question and play 
devil's advocate.
    I don't know if you ever read Canticle of Lebowitz, a book 
that was out 25 years ago. I just read it again and another one 
by the same author. And you get all sorts of holy of holies, 
all kinds of burning of incense at the altars of whatever 
mystical group society is supposed to follow this year. I have 
got some honest questions about whether or not NIH in the 
outyears can absorb the kind of money that we are talking about 
putting into their budgets.
    You know, I know that 20 years ago we had a race between 
both parties to show who is most against cancer. I would guess 
the next 5 years we will have a race between the parties to see 
who is most for NIH research.
    But, I mean, does NIH really have and does the scientific 
community really have the capacity to take the kind of money, 
additional money we are talking about, in the fourth and fifth 
year of this ramp-up? How high do we want to get in the 
percentage of grants we are actually funding before we are 
running out of quality science? Are we going to be seeing NIH 
want to proceed with a bunch of new buildings, either on the 
Bethesda campus or another campus?
    I mean, I don't have any doubt that they can absorb some 
money in the first couple of years; but, beyond that, how much 
of the money that we are throwing at that wall is really going 
to stick?
    Secretary Shalala. I think those are very important 
questions to ask not only me but the Director of the National 
Institutes of Health and, in fact, the scientific community.
    I would point out that some of this money is clearly catch-
up. We would like to fund, initially, a third of all of the 
grants; and we have laid out a strategy to do that. The 
scientific community has had a pretty good consensus on that.
    In addition, some of the money is for training for the next 
generation of scientists and to make sure that we have enough 
training dollars to finance the next generation of scientists.
    Mr. Obey. Well, what kind of request do you think we are 
going to wind up getting for brick and mortar?
    Secretary Shalala. There is no significant request in what 
the President is putting forward for bricks and mortar, beyond 
the commitments we have made. We, obviously, will have some 
replacement costs, but we have no plans for a huge expansion of 
the NIH campus.
    As you know, we have been shifting money to the research 
universities in this country; and I believe that both the 
scientific community as well as the director of NIH are 
prepared to answer this.
    Mr. Obey. That is what I am getting at. There isn't a week 
that goes by that some university walks into my office and 
wants some special treatment to get money earmarked for this or 
for that; and I am simply wondering, with the significant ramp-
up that we get at NIH, how much more are we going to be 
stimulating universities to be coming to us to help fund 
buildings which they are going to say they need in order to 
fund the research which is being farmed out by NIH to the units 
to do the work?
    Secretary Shalala. Well, Congressman Obey, as you well 
know, it doesn't take much stimulus for the universities to 
come and ask you for buildings.
    Mr. Obey. But I hate to give them a gold-plated invitation.
    Secretary Shalala. Right. We did have an initial 
conversation about the infrastructure of the universities, 
about their laboratories and the need for changes in their 
laboratories. And, as you know, there are major reports from 
the National Academy of Sciences, from the NSFmost recently, 
about the research infrastructure needs.
    The President's 1999 budget submission does not anticipate 
that request as part of our overall money, and we have not put 
it in any of the materials that we have transmitted to you.
    I can answer the specific question about how the scientific 
enterprise will ramp up and I can answer the question about the 
NIH campus. We have, under Dr. Varmus' leadership, put a higher 
percentage of the money out onto the research campuses around 
this country, as opposed to vast expansion.
    As you know, the regional requests for the cancer clinical 
center was much larger than we ended up with. We worked through 
a process to get us there. I think it worked out very well for 
everyone involved. So I think we are going to be wary and very 
disciplined.
    It is not that we are unexperienced in this area, but we 
will have to work very closely with you, and we have got to be 
prepared to answer your very tough questions.
    Mr. Obey. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Obey.
    Do I assume that all members that remain have additional 
questions?
    Mr. Hoyer. Yes.
    Ms. Pelosi. Yes.

                      medicaid funds for abortion

    Mr. Porter. There are five of us. Let's try three minutes 
each.
    Madam Secretary, your budget proposes to delete the Hyde 
language on the use of Medicaid funds for abortion with a 
footnote saying the administration will work with Congress to 
address this issue. As you know, we spent--and I give 
tremendous credit to Mr. Hyde and Mrs. Lowey of this 
subcommittee, who spent literally hour after hour in intense 
negotiations to arrive at new revised Hyde language last year, 
that was reflected in our bill.
    Do you really think we ought to revisit this issue? And, if 
so, other than the overall objection that you have 
philosophically to it, what objection do you have to the 
revised Hyde language that was hammered out in a very, very 
difficult compromise?
    Secretary Shalala. Yes. Mr. Chairman, we have done this 
every year. We have always put a footnote in because the 
President's fundamental position has not changed. He believes, 
as many members of this committee do, that abortion should be 
safe, legal, and rare; and that individuals have the right to 
complete and accurate medical information and unharassed access 
to safe, legal, medical services.
    We have always opposed restrictions on the use of Federal 
funds for the exercise of a woman's constitutional right to 
obtain an abortion. What we say here is that we have 
implemented the Hyde amendment in the past because it has been 
the law of the land, and what we said in the footnote is that 
we will work with the committee. We have not submitted our own 
language, obviously, but that we will work with the committee. 
That is consistent with what we have done in previous budgets.

                       21st century learning fund

    Mr. Porter. All right. Madam Secretary, in your testimony 
you state that the 21st Century Learning Fund solidifies the 
foundation for a coordinated biomedical research system. Other 
than a mechanism for displaying an increase in funding, what 
specific administrative processes are part of the learning fund 
to coordinate research?
    Secretary Shalala. Well, we believe that sorting out the 
research portions from the prevention portions from the--from 
translating this material into practice is very much reflected 
in this budget.
    Did I bring my chart? I want to give you a sense of that; 
and that is why we included, Mr. Chairman, the NIH, the CDC and 
AHCPR, to give you a sense of how we are using the circle of 
the research fund on a specific disease.
    For diabetes, the basic science and treatment research 
would be done at NIH. The prevention research on the techniques 
to identify undiagnosed diabetes and encourage life-style 
changes would be at CDC. And, AHCPR would do the cost-
effectiveness on how the appropriate screening reduces the 
health costs.
    Mr. Porter. This is what we do already, though.
    Secretary Shalala. Well, the point of integrating 
everything into a research fund is to actually, for the first 
time, bring in all the scientific research components that are 
nondefense and to see if we can get better coordination among 
them.
    This should occur not only inside the Department but also 
with the NSF and with some of the other research enterprises of 
the government. I think we will be able to give more coherence 
and certainly we would identify the source of funding to do 
that.
    Mr. Porter. Well, that certainly is a worthy goal; and I 
understand what you are attempting to do.
    Ms. Pelosi.

                            medicare buy-in

    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Chairman, I want to join my colleagues and again 
commend the Secretary for her tremendous leadership and for the 
vitality of this proposal that she is putting forth today in 
terms of priorities and process and savings.
    I think the Medicare buy-in is very important. We have so 
many subjects to talk to you about, but that could have such a 
remarkable impact on people in our country, and is one of the 
areas that has not received as much attention this morning, as 
much commendation to the administration as is due. Could you 
elaborate on this for a moment? Why do you think the buy-in 
will self-finance and remain riable?
    Secretary Shalala. Well, we have presented a self-financing 
mechanism. Our actuaries have evaluated what they think the 
costs would be and who would enter the program. It is not a 
subsidized program.
    Let me talk about the 62 to 65 program, which would allow 
those who don't have health insurance between those ages to 
have an early buy-in to Medicare. We have assumed that sicker 
patients will enter that program and we have set the premium 
for that age group so that people who come in early will pay a 
little more after they turn sixty-five to overcome whatever 
additional costs there may be.
    Now who are we talking about? We are actually talking about 
a lot of women. Men of a certain age will tell you that the 
thing to do was to marry--when you were a senior in high school 
and after you graduated--was marry someone they had met who had 
been a sophomore while you were a senior. There are a lot of 
marriages where men have retired at 65, they enter Medicare, 
their wives are a little younger and they lose their health 
insurance because their husbands' companies covered them and 
the rest of their families.
    So to allow people, particularly--and we have met numerous 
people now who have a preexisting condition. There is no market 
for them. If you are 62 years old in this country and you have 
a preexisting condition or if you don't have a preexisting 
condition, the private insurance industry isn't announcing that 
they have an insurance plan for these people.
    It is paid for. It allows people to enter early. It is in 
this country's health interest to have more people covered with 
health insurance. It is not a subsidized program. We have a 
mechanism for delivering it administratively. The offices are 
already set up. So we believe we ought to move forward and we 
ought to move forward now on this program.
    Ms. Pelosi. It is such a good idea. It is a wonder someone 
didn't come forward with it sooner, but maybe the time is right 
now.
    In closing, Mr. Chairman, I want to again mention how 
pleased I am to hear the Secretary say over and over again how 
we have to internationalize our efforts in terms of prevention 
of disease and our efforts in terms of prevention and care in 
terms of AIDS.
    Thank you again, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you.
    Ms. DeLauro.

                           after school care

    Ms. DeLauro. Thank you, Mr. Chairman.
    Another area that I think is very forward looking that we 
haven't talked much about this morning is the whole issue of 
the administration's proposal on after-school care. We focused 
in on Head Start and early childhood, but yesterday I was with 
about 100 young people, juniors and seniors in high school, who 
are part of something that I have had in existence since 1993 
called the Anti-Crime Youth Council.
    I have talked with kids from the inner city, from West 
Haven and New Haven, as well as from the shorelines of Madison 
and Guilford, Connecticut; and, all of them were talking about 
the fact that they don't have access to after school programs, 
and they would love to be in after school programs.
    And FBI statistics show that most juvenile crime occurs 
after the kids get out of school and into the early evening.
    How would the after school programs work? Who is eligible 
to apply for funds? And who would determine the curriculum and 
activities in the program, Madam Secretary?
    Secretary Shalala. The budget is $800 million. It is 
actually given to the Department of Education to coordinate 
with us, and I think the President is particularly concerned 
about adolescents. As we expand child care and after school 
programs for younger children, we need to worry about what our 
adolescents are doing between the time they get out of school 
and when their parents arrive home. And adolescents, in 
particular, need choices; and that is the reason for the 
investment. We need to develop some choices.
    The money will go probably to the school districts. You 
need to ask the Secretary of Education about that. But, some of 
it will go to community organizations; obviously, boys and 
girls clubs and other kinds of community-based organizations 
will want to participate in after-school programs.
    I think that, particularly when we are thinking about 
adolescents, you have got to think of something other than 
doing your homework after school. They have to be kept busy; 
have some choices. We have reduced clubs out of high schools in 
this country because we haven't had the resources. Sports and 
intramural sports have been cut out. We have to give the kids 
choices other than staying in their classroom after school and 
getting their homework done so they have a mix of things to do.
    It is common sense; and it is time that we reassured 
parents. Just because the kids are a little older doesn't mean 
they don't need caring adults in their lives until their 
parents get home.
    Ms. DeLauro. Thank you, Madam Secretary.
    Thank you.
    Mr. Porter. Thank you, Ms. DeLauro.
    Mr. Hoyer.

                          program coordination

    Mr. Hoyer. Thank you. I agree 100 percent with the last 
point you made. I was shocked to hear that most teenage 
pregnancies occur in the afternoon. I don't know why I was 
shocked, because that is reasonable. Obviously, most juvenile 
crime is committed between 3:00 and 8:00 at night. So your 
point is well taken. If we had full service schools, we could 
give more choices.
    How is the Department of HHS progressing with the 
coordination between Job Corps and Head Start? We know that one 
of the big problems that we have with Job Corps is young 
children, mothers of young children in particular, and we have 
talked about a coordinated effort between Head Start and Job 
Corps. Can you tell me where that stands?
    Secretary Shalala. I don't know the answer to the question, 
but I would be happy to provide it for the record.
    [The information follows:]

             program coordination--head start and job corps

    Secretary Shalala. The Directors of the Head Start Bureau 
and the Job Corps have worked together to develop strategies 
that will encourage local Head Start programs and local Job 
Corps sites to work collaborate. Head Start programs continue 
to expand enrollment at a time when many Job Corps trainees 
face the need for child development and child care services for 
their pre-school children who have accompanied the trainees to 
Job Corps sites. Information is being provided to Head Start 
programs about the opportunities they have to develop local 
collaborations. This is discussed in the request for proposals 
to expand Head Start enrollment in fiscal year 1998.
    We also support the effort to get the Head Start programs 
on the site of Job Corps Centers, and encourage our local Head 
Start grantees to develop such co-located facilities in 
instances where it meets local needs and priorities. Our 
competitive announcements on Head Start expansion encourage 
this effort. Examples of successful collaborations exit in 
Flint, Michigan and San Diego, California where Head Start 
programs provide services to trainees in child care facilities 
on Job Corps campuses.

    Mr. Hoyer. Mr. Chairman, I will finish with that.
    It is very good to have you here. I think your testimony 
has been excellent.
    One of the exciting things about the President's proposal, 
particularly as it relates to the broadening of family 
services, is that it really falls right in with what you and I 
have been talking about. Nita Lowey is not here, but Mrs. Lowey 
in particular has been talking about this as well. Rosa and I 
have a bill. Obviously Nancy has been talking about the health 
services which are critical to young people. And the school 
construction program that we now are going to have. All of this 
ties in to the fact that we co-locate these services to make 
them more accessible to families and children and that we have 
a full spectrum, because families live differently. Secretary 
Riley talks about it. You talk about it.
    Parents go to work. They have to be at work at 8:30 in the 
morning or so. Because it is an hour or 45 minutes to get to 
work, they have to leave the children at 7:00 or 7:30 in the 
morning. We just need to utilize our school buildings much more 
than we do.
    I am convinced by Secretary Riley. We have got to do this 
in an encouraging fashion, not a mandatory fashion. If 
communities don't want coordination to work, it is not going to 
work. But, with this increased investment, I am going to push 
very hard--and I have talked to the President and the First 
Lady about it--very, very hard to see if we can escalate our 
encouragement, not just in the areas that you have talked 
about----
    Secretary Shalala. Right.
    Mr. Hoyer [continuing]. But across the spectrum----
    Secretary Shalala. Right.
    Mr. Hoyer [continuing]. With all those departments, 
nutritional programs, health programs, social service programs, 
job training programs for moms of young kids.
    You know, I have mentioned the Jessie Jackson analogy of 
the mom taking the child by the hand and getting on the school 
bus and going to the school. Both get services. They come home. 
Both think this is an important place to be, and it is really 
helping them in their lives.
    So I think this program is so in tune with that concept 
that I would hope we could, in all the departments, focus on 
it. As Al Gore has talked about in terms of reinvention, 
maximize the return we get on the investment we are going to 
make.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Hoyer.
    Mr. Obey.
    Secretary Shalala. I have a response to the Job Corps 
question. We do have a collaborative arrangement with the 
Department of Labor. We are starting to locate Head Start 
centers on Job Corps campuses as part of this overall strategy; 
and we can give you some examples of that.
    On the issue of model programs, I think Dr. Hamburg and I 
would love to show you the program the Children's Aid Society 
has in New York at a high school where all the services are a 
part of that, including the health services and the child care 
services, right in the facility.
    Mr. Hoyer. You have been to our retreat on a number of 
occasions.
    Secretary Shalala. Yes.
    Mr. Hoyer. We had Dr. Veda Johnson from the Whiteford 
Clinic in Atlanta, who came up with a similar concept. She is a 
pediatrician herself, and I would like to go to New York and 
see that.
    Secretary Shalala. Right.
    Mr. Porter. Thank you, Mr. Hoyer.
    Mr. Hoyer. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Chairman, by the way, I want to thank you. Because in 
terms of the Job Corps/Head Start program, you and this 
committee were very important----
    Secretary Shalala. Right, absolutely.
    Mr. Hoyer [continuing]. In engendering that initiative. 
Thank you, sir.
    Mr. Porter. Madam Secretary, I have two housekeeping 
matters that I have to bring up, if you will permit me.
    For over 30 years, HHS has been asked by the subcommittee 
to provide a series of tables and reports that we refer to 
collectively as the Moyer reports. Our staff relies on these 
reports for many purposes, including preparing the budget 
hearings.
    Unfortunately, the Department has found it increasingly 
difficult to provide these reports in a timely fashion. This 
year is no exception. The House report requested that the Moyer 
material be provided on January 1st, and the Senate requested 
it on February 1st. Unfortunately, it has not yet appeared.
    Madam Secretary, these are some of the few crosscutting 
tables done for Federal spending; and they are very useful to 
the subcommittee. Would you please give this matter your 
personal attention and either now or for the record provide us 
with a date when we can expect these reports this year and your 
commitment to timely filings in future years?
    Secretary Shalala. I will.
    Mr. Porter. Finally, Madam Secretary, I have a problem in 
my own district concerning the Community Action Project, CAP. 
CAP facilitates applications for Federal grants primarily 
involved in serving children and the disadvantaged.
    CAP had the opportunity to purchase a church and to expand 
its Head Start program, but for two and a half years the 
Department would not make a decision on whether CAP could 
purchase the building. I believe that if the Department has 
appropriated funds to award to qualified programs then they 
should, as an agency, work with applicants to successfully 
complete the grant process. In other words, the problem here 
isn't whether they denied it; they simply never came to a 
decision.
    I would like to speak with you further on how the 
Department will work to facilitate the grant process in the 
future.
    Secretary Shalala. I would be happy to do that.
    Mr. Porter. Thank you, Madam Secretary. You are doing a 
wonderful job. We appreciate your appearance for this seventh 
time and your wonderful, continuing service to our country.
    Secretary Shalala. Thank you very much, Mr. Chairman.
    Mr. Porter. Thank you.
    [The following questions were submitted to be answered for 
the Record:]

[Pages 98 - 166--The official Committee record contains additional material here.]


                                            Tuesday, March 3, 1998.

                      OFFICE OF INSPECTOR GENERAL

                               WITNESSES

MICHAEL F. MANGANO
DENNIS J. DUQUETTE, DEPUTY INSPECTOR GENERAL, MANAGEMENT AND POLICY
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET, DEPARTMENT OF 
    HEALTH AND HUMAN SERVICES

    Mr. Porter. The subcommittee will come to order.
    Our hearing is on the Department of Health and Human 
Services, continuing with the Office of Inspector General. And 
we are pleased to welcome Mr. Michael Mangano, the Principal 
Deputy Inspector General. If you would introduce the gentleman 
to your right and then proceed with your statement, please.

                           Opening Statement

    Mr. Mangano. Thank you very much, Mr. Chairman. With me 
today is Dennis Duquette, who is the Deputy Inspector General 
for Management and Policy.
    Simply put, the mission of our office is to help protect 
the programs of the Department of Health and Human Services 
against fraud, waste, and abuse by conducting independent and 
objective audits, evaluations, and inspections. I would like to 
focus my remarks this afternoon on three areas: one, to give 
you an idea of some of the recent projects that we have been 
working on; secondly, to look at some new ways that we are 
doing business; and third, focus in on our budget requests for 
the appropriations in 1999.

                            recent projects

    1997 was really an exciting and challenging year for us, 
and I would like to give you four examples of projects that we 
undertook this year to give you an idea of the range, the kinds 
of things that we were involved with. First, we basically 
concluded in this last year a multiyear effort, taking a look 
at abusive marketing and billing practices by some of the 
Nation's largest laboratories. These investigations resulted in 
about $800 million being returned to the taxpayers for 
fraudulent practices.
    Second, the Health Education and Assistance Loan Program 
provides loans to students seeking education in health-related 
fields. Some, however, when they complete their education, 
refuse to repay their loans. When that happens, we get involved 
in that particular case and move to exclude them from the 
Medicare and State health care programs. At the end of last 
year, 789 of those persons, rather than being excluded, had 
entered into repayment programs with the government. Our 
actions over the last several years have resulted in about $48 
million being repaid to the government.
    Third, we initiated about 250 investigations of parents who 
cross state lines to avoid paying their child support payments. 
As a result of that, we got 65 arrests, 41 convictions, and 
over $5 million is now being repaid to the custodial parent.
    And fourth, required by the Government Management Reform 
Act, we completed the first-ever complete review of the 
financial statements of the Medicare and Medicaid programs. In 
addition to finding some of the things with regard to 
accounting system problems, we discovered in doing that review 
that about $23 billion was improperly paid by Medicare in 
fiscal year 1996. Almost more important than that, the Health 
Care Financing Administration has developed an action plan to 
address each of the problems that we raised.

                     better ways of doing business

    In recent years, our interest and emphasis on 
interdisciplinary teamwork within our organization in greater 
collaboration with other Federal and State agencies has led to 
what we believe is a more effective and efficient approach to 
addressing the problems of fraud and abuse, and I will give you 
three examples.
    First, jointly with the Department of Justice, last year we 
initiated the Health Care Fraud and Abuse Control Program 
required by the Health Insurance Portability and Accountability 
Act of 1996. What this was was a coordinated interdisciplinary 
and intergovernmental attack on fraud against all Federal 
health care programs. In the first year, we think we returned 
substantial amounts to the Medicare trust funds, recovering 
almost a billion dollars as a result of restitutions, fines, 
judgments, settlements and administrative actions.
    Second, in order to increase our coverage of the Medicaid 
programs, we formed partnerships with 19 State audit agencies 
and 11 State Medicaid agencies, the Medicaid agencies to 
conduct thorough audits of State health care programs. I can 
tell you, as a result of those, about $140 million was 
identified for potential recovery by those States in Federal 
and State money, as well as for future savings.
    Third, together with HCFA, the Department of Justice, and 
the health care industries themselves, we have begun a series 
of voluntary compliance guidelines. These are plans to help 
health care providers make sure that their claims against the 
government are true and accurate and stay out of trouble. These 
guidelines are designed to prevent false claims, detect them 
when they occur, and resolve them early. We completed two of 
them within the last year, one for the laboratory industry and 
one for the hospital industry. And we are working on other ones 
over the next 6 months to 12 months looking at home health 
care, hospice, durable medical equipment, and some other areas.
    Finally, let me make a couple of comments on our funding 
request for fiscal year 1999. Our funding sources are two, 
basically. The Health Care Fraud and Abuse Control Program 
funds all of our Medicare and Medicaid work. The discretionary 
appropriation before this committee funds our work with all the 
other programs of the Department, namely public health, 
children and families, aging, and departmental management.
    For fiscal year 1999, the Health Care Fraud and Abuse 
Control Program would appropriate between $90 and $100 million 
for our work in Medicare and Medicaid. Our discretionary budget 
request is for $29 million. Mytestimony describes a number of 
projects we would undertake in 1999 with this money. While our Medicare 
and Medicaid work tends to get far more public attention than our work 
in these other areas, we believe this work is just as important to be 
done, particularly for effective program oversight.
    Mr. Chairman, I appreciate the opportunity to testify on 
our appropriations today, and I would be happy to answer any of 
your questions.
    The prepared statement follows.

[Pages 170 - 175--The official Committee record contains additional material here.]


                         compliance guidelines

    Mr. Porter. Thank you, Mr. Mangano.
    You mentioned guidelines. Can you tell me a little bit more 
about that?
    Mr. Mangano. Absolutely. We started an effort about a year 
ago to work with the health care industry to come up with a 
series of guidelines which are basically some principles that 
we think are important to ensure that particular health care 
providers do not get into trouble by submitting false claims. 
These involve things like, one, having a compliance officer; 
two, providing training to people on staff as to what is proper 
and what is not proper. Another facet of it would be doing some 
self-monitoring and self-auditing.
    Mr. Porter. But what I am most interested in is, what do 
you do with those guidelines? In other words, first of all, do 
you have authority--I assume you have authority to do that, but 
then who you provide them to?
    Mr. Mangano. Okay. The last one I will use as an example. 
We worked with the hospital industry to come up with a model 
compliance plan for the hospital industry. These plans are 
completely voluntary on anybody's part. We provide them as 
standards which we say, if you were to adopt all of these kinds 
of standards in your hospital, this would help prevent you from 
getting into trouble in the future.
    We understand that one size doesn't fit all; so we asked 
them to review these, and, if they can come up with a better 
plan, by all means do it. We don't require these, but when 
hospitals do have an effective compliance plan in place, that 
will be taken into consideration if they do get into trouble 
later on.

                              path audits

    Mr. Porter. You probably realize that my first question is 
going to be about the PATH audits.
    Mr. Mangano. Yes, sir.
    Mr. Porter. You and I and Inspector General Brown and 
others had a lengthy discussion last year about so-called 
``PATH audits'' at teaching hospitals. We included report 
language about this in our report accompanying the House bill 
last year. And basically that language asked you to stop the 
PATH audits, pending resolution of certain issues by the GAO 
and the authorizing committee.
    Can you bring us up to date on exactly what you are doing 
in this area, and are you just continuing on the same track?
    Mr. Mangano. Actually, after hearing the concerns that you, 
other Members, and other people in the private sector had about 
this project, we undertook last spring a complete review of 
this entire project. It took us a number of months to go 
through that. We went through every document that we could find 
in law and regulation as well as policy statements that HCFA 
had issued, contractor statements, et cetera.
    At the conclusion of that, we took a look at what we had, 
and basically we found that the Medicare program was providing 
about $8 billion to hospitals to provide for the training of 
residents and interns. Some of that training included the 
general supervision of those physicians.
    We then looked for what would be required of teaching 
hospitals in this setting. We reviewed the 1967 regulation 
stating that physicians, in order to be able to bill for a Part 
B service--this is a patient visit--needed to provide personal 
identifiable direction.
    Over the next few years, HCFA began to interchange that 
designation with personal identifiable services. We looked at 
every document that HCFA had issued during that time, and we 
found that the overwhelming majority of those documents 
instructed their regional offices and the contractors that the 
physician had to deliver the service either himself or herself, 
or to be present when the resident performed that service.
    Not every document, though, was that specific. We did not 
come across a single document, though, that said that you could 
bill Medicare and not be present during the service. So we then 
took a look at the contractors who have the responsibility to 
disseminate that information to the health care providers in 
their local community. We found that, the overwhelming majority 
of those, in their guidance to health care providers, indicated 
that in order to provide a service--in order to provide a 
personal identifiable direction--you had to, among other 
things, be physically present when the resident provided the 
service, or provide it yourself.
    We did find some contractors, though, that did not give 
that specific advice; they were either silent on the issue or 
were not as clear as most of the others. So what we decided to 
do was to say, in order to be absolutely fair in this, we will 
only pursue those reviews where it was clear from the 
contractor providing information to the health care providers 
in those communities, through policy directives from them, or 
audits that were conducted with the hospital where they had 
pointed those things out in the past. So where there was 
confusion, we have not pursued it. We only pursued it where we 
believed that the contractors did an effective job in those 
communities.
    Mr. Porter. And that is, in the time frame, what years to 
what years?
    Mr. Mangano. Our reviews right now are covering the time 
period July 1995 through June 30th of the next year.
    Mr. Porter. And how many audits do you have open at the 
present time?
    Mr. Mangano. We have about 40.
    Mr. Porter. About 40. Okay.

                       kennedy-kassebaum funding

    Let me get back here. Your budget for the current fiscal 
year is about $116 million, about 72 percent of which comes 
from money that is outside the annual appropriations process. 
Most of your money comes now from funds that were appropriated 
a couple years ago in the Kennedy-Kassebaum health care bill. 
That part of your budget has been growing pretty rapidly, about 
20 percent in fiscal year 1998, and you expect another 15 
percent increase in 1999.
    Since these funds do not come through the Appropriations 
Committee, who actually determines how much you will get each 
year from this funding source?
    Mr. Mangano. By law, the Attorney General and Secretary of 
HHS consult with one another and determine how much would be 
appropriated to the OIG.
    Mr. Porter. Last year, when you were here testifying on 
your fiscal year 1998 budget, you told the committee you 
expected to receive $80,500,000 from the Kennedy-Kassebaum bill 
for 1998 and that it would fund 691 FTEs. Now we see this year 
that your 1998 estimates have been revised upwards, so that you 
expect to get $84,650,000 and 851 FTEs.
    This is an increase of 160 FTEs over what you originally 
told the committee, or nearly 25 percent. How do you explain 
that very significant difference in your FTE estimate?
    Mr. Mangano. The Secretary and Attorney General decided 
that much later than the time that we had testified at the 
Appropriations Committee. At the time of the hearing, we were 
using figures that represented the minimum amount of money. The 
minimum amount of money that we could be receiving this fiscal 
year would have been $80 million; the maximum would have been 
$90 million. The Secretary and Attorney General didn't 
determine what the specific amount would be until much later.

                       hhs implementation of gpra

    Mr. Porter. We have been talking with GAO, as you know, 
about GPRA and the departments that we fund. Give us your 
overall assessment of where the Department of Health and Human 
Services stands with respect to implementation of GPRA. Are 
they doing a credible job at the Department?
    Mr. Mangano. I think this is a terribly difficult process 
for agencies to be going through. And this is the first year 
that the Department has come up with this schedule. I think it 
is a good first start. It is not where they want to end up. It 
is not where we would, I think, want to see them end up or 
where you would want to see them end up.
    We see encouraging signs. There are a number of very good 
outcome-oriented performance centers. I can recall some in the 
Centers for Disease Control where they talk about reducing the 
incidence of particular diseases by certain percentages--very 
specific figures. There are other areas of the plan that are 
much softer.
    We will be looking at a few of these performance plans in 
the agency. But we really haven't conducted any reviews 
ourselves of the standards that have now been published. But we 
think the Department will get better each year.
    Mr. Porter. I think that answers the question.
    Ms. Northup.

                            hospital audits

    Ms. Northup. Thank you. I would like to go to some of your 
hospital audits that are being conducted that are not along the 
PATH reviews. I don't think that is what they are. I certainly 
have a number of hospitals I've talked to concerned.
    First of all, it is my understanding that over the years 
the hospitals have used the compliance officers at HCFA to say, 
okay, is this bill incorrect? Is this proper? Is this right? 
And they have received answers that what they are doing is 
correct.
    Now, it is my understanding that they are being contacted 
by the Department of Justice with a charge that they have 
billed fraudulently in the past billing procedures that were 
approved by the compliance officer, and that the approach is 
along the lines of, if you pay this fee now and if you plead 
guilty to something, we will, close the record.
    Does that sound familiar to you?
    Mr. Mangano. What you have stated sounds familiar, but I 
think I would take a different view of it. In the past, 
hospitals, health care providers in all fields would rely on 
the Medicare contractors to provide them guidance on what was 
an appropriate bill and what was not. I think the results that 
we had from taking the first review of the HCFA financial 
statement showed us how enormous the problem of improper 
payments was.
    I mentioned $23 billion. $23 billion is a lot of money. 
That $23 billion would pay for every one of the Public Health 
Service agencies' budgets for this particular year. It would be 
an amount equal to almost twice the amount of budget for NIH.
    Now let me return to this. The Department of Justice has a 
responsibility to review the facts in the situation and to 
determine whether a false claim has been submitted. Our job is 
to do investigations and audits and to present that information 
back to the Health Care Financing Administration and ask them 
to take an overpayment. Or, if we see a situation of abuse, we 
turn it over to the Justice Department.
    I will give you one example of that. One of the projects 
that we are operating is what is commonly referred to as the 
72-hour project. This project is designed to see that hospitals 
have accurately billed for services of inpatients in the 
hospitals.
    Under the prospective payment system, the DRG system that 
they operate, a person's bill is to be covered by one DRG based 
on the patient's diagnosis. That bill is to cover all 
nonphysician services provided from 3 days prior to their entry 
into the hospital, and including through the hospital stay. So 
the DRG payment is a one-payment-pays-everything.
    What we began to find out in the late 1980s was that 
hospitals were submitting bills for the DRG, but were also 
billing for outpatient services, for example, for X-rays taken 
the day before the patient was admitted to the hospital. We 
conducted four audits in this area over a series of 4 or 5 
years. Every one of those audits found that hospitals were 
billing outside the DRG.
    We turned our information over to HCFA. HCFA went back and 
took an overpayment. There was over $100 million that was at 
fault here.
    After the fourth audit, we concluded there could not be a 
hospital in this country that did not know that this was 
inappropriate. We then started turning that information over to 
the Department of Justice who found it to be a violation of the 
False Claims Act. They began negotiating with hospitals across 
the country to get a repayment.
    Ms. Northup. How many hospitals would you say across the 
country are currently--right now being approached by 
theDepartment of Justice?
    Mr. Mangano. There would be quite a few. As of October 1st, 
there were 380 hospitals that had entered into a repayment 
program.
    Ms. Northup. But there are far more than that that haven't 
entered into a repayment program?
    Mr. Mangano. As of October, I believe most were pretty much 
opting into the program because the program was a graded 
penalty. If it was the first time for the hospital or their 
errors were very low, all we asked was that they repay what 
they had overbilled the Medicare program. But if they were 
repeat offenders, the penalties increased.
    I think the highest penalty anybody would have received 
from this would have been triple damages. But that would have 
been a hospital that was a repeat offender and one with high 
errors.
    Ms. Northup. Let me back up a minute.
    First of all, I think in the beginning I asked the 
question, whether or not compliance officers had told the 
hospitals that these were correct billing procedures.
    Is your evidence that they are correct, that these 
compliance officers had accepted these as correct billing 
procedures?
    Mr. Mangano. That is not my understanding. But to be honest 
with you, I haven't looked at that particular issue as to 
whether the compliance officers said the billing was correct.
    What we would basically do would be to go back to the 
Medicare contractors who had serviced that particular hospital 
or physician or whatever, and we would ask what they told the 
hospitals. It has been our experience that on this 72-hour 
window project, for example, that HCFA has been very consistent 
in saying that you may not bill in this manner. That concept 
was inherent in the development of the DRG system.
    Ms. Northup. Would you agree that a hospital that had 
gotten information from a compliance officer that said this is 
a correct billing procedure, that they shouldn't be prosecuted 
by the Department of Justice?
    Mr. Mangano. Well, you know, that is a decision that the 
Department of Justice has to make. What we would look at would 
be the underlying facts of the situation.
    Ms. Northup. Wait, let me back up a minute.
    It is in HCFA. Now, how does it get to the Department of 
Justice?
    Mr. Mangano. If we believe that a false claim has been 
submitted and it is an abusive situation, we would take our 
audit findings and turn them over to the Department of Justice 
and say, we believe that abuse has occurred here. You review 
this data and see if you agree with us. If you agree with us, 
then you determine what action is needed.

              health care fraud and abuse control account

    Ms. Northup. Well, first of all, you know, I notice that 
the Secretary today said that over $1 billion, I think, has 
been recovered. And she said it has been returned to the trust 
fund, and I guess I would just assume that she meant that was 
the Medicare Trust Fund. But from looking at the information in 
front of me, it looks to me like it goes into a special 
account, the Health Care Fraud and Abuse Control account, that 
then funds additional--in other words, there is every incentive 
to turn everything over, to demand a quick plea of guilty, and 
to pay the fine so that you put it back in your account and pay 
your salary and start the next one. It doesn't go back into the 
Medicare Trust Fund.
    Mr. Mangano. Yes, it does. The money is returned back to 
the Hospital Insurance Trust Fund, all of it, almost $1 billion 
last year, to help guard against this very issue.
    Ms. Northup. Wait a minute. I am confused. Here it says it 
is deposited in the Federal Hospital Trust Fund, but that there 
is a separate expenditure account.
    Mr. Mangano. I want to get into that, and I will explain it 
because I think I can clear this up.
    When the framers put this legislation together, one of the 
things that they were concerned about was a bounty system; that 
is, that it may unleash Federal Inspectors General, the FBI, 
and the Department of Justice to just go after people so they 
can increase their budgets each year. So one of the protections 
that they built into that legislation was to say that 
regardless of what you put back into the trust fund, we are 
going to tell you up front for the next 7 years exactly how 
much money you are going to get back from the trust fund. So 
they give us ranges.
    This particular year, fiscal year 1998, our range was 
between $80 and $90 million. It wouldn't have mattered whether 
we put a billion dollars in or $100 million into the trust fund 
in terms of the amount of money that we would get. So the money 
goes back into the trust fund, and the amounts that we get are 
set within a range for each year.

                            false claims act

    Ms. Northup. How do you decide between whether or not to 
apply the Medicare fraud bill that was passed last year or the 
False Claims Act?
    Mr. Mangano. You are talking about the Health Insurance 
Portability and Accountability Act from 1996?
    Ms. Northup. Yes.
    Mr. Mangano. That bill basically set up a mechanism here to 
create a Health Care Fraud and Abuse Control Program. What the 
designers had in mind was that the Department of Health and 
Human Services Inspector General would work with the Attorney 
General's office to develop a comprehensive program to attack 
fraud and abuse across the country, and that is what that 
program is designed to do.
    One of the weapons that the Department of Justice has, 
among many others, is the False Claims Act; the False Claims 
Act originally passed in 1863, and was amended in 1986. It is 
designed to appoint penalties for those persons who knowingly 
and in reckless disregard of the truth, of the law, falsely 
bill the Medicare program and any other Federal program.
    Ms. Northup. It was 1863, so I think it was before we had 
Medicare. But has any other administration ever applied this 
law to Medicare claims before this administration?
    Mr. Mangano. Oh, sure, absolutely. The False Claims Act? 
Yes, absolutely.
    Ms. Northup. Okay.
    Mr. Mangano. In fact, it became a very helpful device in 
1986, when the Congress built in some Qui Tam provisions, which 
basically said that if a whistle-blower comes to the government 
and uncovers a case of fraud, that whistle-blower, in exchange 
for coming forward and presenting the facts of the matter, can 
also reap some benefits in terms of money in those provisions. 
And actually, since 1986 to now, the number of Qui Tam suits 
that people have been filing with the Department of Justice has 
increased quite dramatically.
    Ms. Northup. Well, in conclusion, I am sure my time is up 
is, so let me just say that I think my concern is that in 
Kentucky, and especially in the rural parts, there are 
nonprofit hospitals, hospitals that have used, many of them, 
the same consultants who have come in to help them, 
yes,maximize their Medicare money and they have advised codes, codes 
that have been approved by compliance officers.
    I mean, obviously these rural, nonprofit hospitals are 
barely getting by, and maximizing Medicare is legitimate. I 
mean, they certainly can't provide services and underbill 
either. So they have used these consultants; they have gotten 
compliance officers to approve them. Now they find themselves 
in a position of being asked to pay enormous funds or being 
subject to prosecution by the Department of Justice, which 
includes criminal prosecution, three times the billing. 
Obviously, it is not considered excessive because they are just 
being asked to repay, dollar for dollar.
    And one hospital in fact became concerned and did their own 
audit. Secretary Reno encouraged the hospitals to self-report, 
promising that they would be very carefully taken care of and 
would only repay what they owed, no fine on top of it.
    Instead, they got a wall-to-wall audit, subject to double 
and triple for anything else that they found, which wasn't 
excessively in the big picture, in the global of all they 
billed, but for this hospital it was enough to make them close 
their doors. And it has a ring of the IRS to me, and of 
maximizing not who misbehaves, which of course is our goal--to 
target those people who have any sort of criminal intent--but 
rather to be overaggressive in a type of society--that we would 
expect in something other than a democracy. And that is a 
concern to me.
    I have talked to the authorizing committee. I am hopeful 
that there will be some hearings on this. But I am very 
concerned about excessive force and abuse of laws in a way they 
haven't been applied in the past.
    Thank you, Mr. Chairman.

                       funding for medicaid work

    Mr. Porter. Thank you, Ms. Northup.
    Mr. Mangano, we are a little confused about how you are 
funding your work under the Medicaid program. The Kennedy-
Kassebaum law clearly states that the funds available under 
that act were available for both Medicare and Medicaid 
activities. Yet, we have been told by some that you are funding 
Medicaid activities out of your discretionary budget and not 
from Kennedy-Kassebaum funding. The budget documents clearly 
imply that you are using the Kennedy-Kassebaum money for 
Medicaid purposes.
    If this is not the case, can you explain all this to us?
    Mr. Mangano. Sure. We fund all of our Medicare and Medicaid 
work out of the money that we receive through the Health 
Insurance Portability and Accountability Act. The discretionary 
money is used for all other purposes.

                          non-medicare budget

    Mr. Porter. That is straightforward enough.
    The budget request for the part of your work load that is 
not related to Medicare or Medicaid is going down in 1999. This 
is the part of your budget that is handled through the normal 
appropriations process.
    Is your other work load declining or have you made a 
decision to put a lesser priority on your other 
responsibilities?
    Mr. Mangano. I am very much aware that the President has 
very difficult choices to make in how to determine how much 
money people get to do the activities of their office. I know 
he has to consider the concerns of the health agencies in our 
department and the children and families programs.
    The President has decided to reduce our budget for this 
year by $3 million, and we will produce the best possible 
results for the $29 million that we receive.

                         oig performance goals

    Mr. Porter. Actually, the President only puts together a 
budget that everybody reads and looks at and talks about, but 
it is never adopted. So we have to worry about the real world.
    He worries about the press and the groups that are 
interested in the budget.
    How is the Inspector General's Office itself complying with 
the Results Act? How did you establish the actual performance 
goals for your own office?
    Mr. Mangano. We produced a strategic plan back a number of 
years ago. 1994, I think, was the first year we produced it; 
and we had three goals. Our performance standards then relate 
to the three goals.
    In our congressional justification, we included what our 
goals were and the standards that we would use to work against 
that.
    The first goal was to have a positive impact on HHS 
programs, and we thought that one of the performance indicators 
we ought to use or the most important was return on investment. 
If we are doing our job right, we ought to be returning money 
to the taxpayers in two ways: the first would be through 
expected recoveries through our investigations and our audits 
and the second through savings against future expenditures.
    We make a number of recommendations on the basis of our 
evaluations and audits each year that will help prevent the 
expenditures of money that shouldn't be spent. We were very 
pleased, for example, in the Balanced Budget Act of 1997 that 
many of the recommendations we had made were adopted by the 
Congress and will save a great deal of money.
    So the first important performance indicator we had was on 
the basis of return on investment.
    We had two other areas. The second area was managing 
effectively and efficiently, and here we concentrated on a 
couple of different performance measures that we thought would 
be effective. One was to have 90 percent of our reports 
produced within 1 year from the time we started it.An effective 
and efficient organization ought to be able to do that over time.
    We also felt it was important to make sure that our 
employees had the tools that were needed to do their job. So we 
are holding ourselves to 100 percent responsibility there.
    The third area was in attracting and retaining a 
diversified, committed staff; some of the indicators we are 
using, include our average training per employee per year and 
the percentage of employees that file grievances. We also do an 
employee survey every 3 years that looks at how satisfied they 
are with the job. We have tried to balance out the results of 
our office with some internal process planning.

                         employee satisfaction

    Mr. Porter. I don't know of any other office--maybe I just 
simply don't know--that measures employee satisfaction.
    Why did you look at this when others aren't?
    Mr. Mangano. Well, when the Inspector General came here 4 
years ago, she was concerned that we may not be doing the best 
job that we could be doing; and one of the ways to find out how 
well we are doing is to survey the employees. We did one about 
4 years ago; and then we did a follow-up a year or two after 
and asked the employees lots of questions about how they do 
their work including how well management is doing, are we 
paying attention to poor performers, and do they have the tools 
to do their job.
    We found that that information was extremely useful for us. 
It gave the managers feedback that they wouldn't have 
necessarily gotten if they just called people into their office 
and asked them and gotten a direct, honest answer. So it was 
valuable to us.

                       monitoring oig performance

    Mr. Porter. Now, who looks at your performance under GPRA?
    Mr. Mangano. The Inspector General's performance?
    Mr. Porter. Yes.
    Mr. Mangano. Well, I am assuming that the Congress clearly 
will look at it and this committee and the Senate 
Appropriations Committee will look at it.
    Mr. Porter. You look at the department's.
    Mr. Mangano. Yes, I know.
    Mr. Porter. Who looks at yours?
    Mr. Mangano. You look at ours; and, of course, the 
Secretary will look at ours. The General Accounting Office is 
also looking at many of the things that are in ours, and they 
will be doing that every year now.
    Mr. Porter. They are. We have asked them to; and they have 
been here to testify for the whole Department, including the 
Inspector General.
    Mr. Mangano, thank you very much for your very direct and 
good testimony this afternoon, for the good job that you are 
doing. We appreciate very much your coming to testify.
    Mr. Mangano. Thank you very much.
    Mr. Porter. Thank you. The subcommittee will stand in 
recess until 10:00 a.m. tomorrow.
    [The following questions were submitted to be answered for 
the record:]

[Pages 186 - 260--The official Committee record contains additional material here.]


                                          Wednesday, March 4, 1998.

                  HEALTH CARE FINANCING ADMINISTRATION

                               WITNESSES

NANCY-ANN MIN DePARLE, ADMINISTRATOR, HEALTH CARE FINANCING 
    ADMINISTRATION
ELAINE RAUBACH, DIRECTOR, BUDGET AND ANALYSIS GROUP, HEALTH CARE 
    FINANCING ADMINISTRATION

    Mr. Porter. The subcommittee will come to order.
    Our hearings on the budget for the Department of Health and 
Human Services continues this afternoon with the Health Care 
Financing Administration. We are very pleased to welcome Nancy-
Ann Min DeParle, Administrator of HCFA; accompanied by Elaine 
Raubach, Director of the Budget and Analysis Group of the 
Administration.
    Welcome.
    Ms. DeParle. Thank you, Mr. Chairman.
    Mr. Porter. Would you please proceed with your statement?

                           Opening Statement

    Ms. DeParle. Yes, I would. And in the interest of time and 
assuming that you probably have some questions for me, I am 
going to just highlight a few of the issues in our budget.
    I have been at the Health Care Financing Administration now 
for about three-and-a-half months and before that was at the 
Office of Management and Budget and enjoyed working with your 
staff. I look forward to working with the members of this 
committee on important issues for our Nation's Medicare and 
Medicaid beneficiaries.
    As we look forward to the future, nothing is clearer than 
the need to ensure that Medicare and Medicaid are strong, well-
managed, and responsive to our beneficiaries. We call this 
management concept ``beneficiary-centered purchasing'' and it 
is at the core of our mission at the Health Care 
FinancingAdministration.
    Our 1999 budget request reflects our commitment to aligning 
the agency's top priorities with the changes in the health care 
market place that will take Medicare and Medicaid into the 21st 
century. As the first chart shows, Mr. Chairman, these 
priorities include implementation of the nearly 300 provisions 
of the Balanced Budget Act in a timely and efficient manner, 
which is a top priority.
    It is an enormously complex and demanding undertaking and 
it includes implementing two brand new programs, the Medicare 
Plus Choice program which will provide beneficiaries with more 
health planning choices, and the Children's Health Insurance 
program which is the second item on my priority list and which 
will extend health insurance to millions of uninsured children 
around the country.
    The third priority that I would mention to this committee 
today is strengthening our ability to fight waste, fraud and 
abuse in Medicare and Medicaid. The new budget law that you 
enacted last summer includes a variety of provisions that will 
help us in our effort to improve our program integrity and the 
President has also asked for additional tools in his new budget 
proposal.
    And finally, the fourth item on our list of priorities is 
that we are hard at work in making sure that the data systems 
that manage Medicare and Medicaid payments are millennium 
compliant. In other words, that we are ready for the year 2000.
    So, even though those are just four priorities that are 
very simple to state, I think that you can understand that they 
are going to be difficult to achieve and we will need to work 
closely with the Congress in trying to do that.

                       program management account

    I want to spend the bulk of my time talking about the HCFA 
Program Management account which supports the priorities that I 
have mentioned. I also will talk this afternoon about the user 
fees on which our request depends and as well, I will touch on 
the Medicare Integrity Program.
    Our request for Program Management shows that it is 
possible for a government agency to handle massive national 
health benefit programs with increasing efficiency and 
productivity. Our request supports the President's commitment 
to a balanced Federal budget, even in the midst of the most 
sweeping changes since Medicare and Medicaid were begun over 30 
years ago.
    Indeed, for the past several years, we have been making 
tough decisions in financing program and administration from an 
essentially flat base in constant dollars as shown in the 
second chart. However, I think that, now more than ever, all of 
us would agree that it is very important to maintain adequate 
resources to ensure that these programs are strong, well-
managed and providing beneficiaries with the best possible 
service.
    We are actually, Mr. Chairman, requesting less than 1 
percent of total program outlays for Program Management 
funding. And I think this administrative cost compares 
favorably to the private sector. For example, the Blue Cross 
and Blue Shield Association's advertised administrative costs 
are 12.5 percent of benefit payments.
    We expect Medicare and Medicaid benefits, including the 
Children's Health Insurance Program to total over $329 billion 
in the fiscal year 1999. However, none of those mandatory 
benefits can be paid without the completion of activities 
funded from this program management discretionary account.
    Our Program Management request totals $2.1 billion and 
consists of the program management appropriation request of 
$1.7 billion, proposed discretionary user fees of $264.5 
million, and current law user fees of $195 million. So, in 
total, the request reflects an increase of $254.5 million from 
the fiscal year 1998 program level.

                            user fee funding

    I want to talk next about funding through user fees because 
I know that is a controversial topic in this committee and I 
want to talk about why I think it makes sense in our program, 
in particular. Our budget request relies upon the enactment of 
$264.5 million in proposed discretionary user fees, and $195 
million in current law user fees that together will finance 
almost 22 percent of our budget request, as shown in the third 
chart.
    Full funding of these fees is crucial to our ability to 
maintain our priority program operations, as well as our new 
responsibilities, such as implementing the new Medicare+Choice 
program that will give beneficiaries more health care options.
    We recognize the importance of controlling discretionary 
spending if we are to achieve a balanced Federal budget. We 
also recognize the equally compelling need for adequate 
administrative spending to effectively manage Medicare and 
Medicaid.
    We have attempted to reconcile these two goals through a 
proposal of alternative user fee funding mechanisms to make 
needed funds available. These user fees will support ongoing 
Medicare+Choice information campaign activities nationwide. 
And, as you know, last year your committee enacted the first 
tranche of those user fees, the $95 million for our first 
fiscal year 1998 activities.
    The user fees will also strengthen the effectiveness and 
efficiency of our program management operations and they cover 
provider and supplier enrollment registration, managed care 
application and renewal, initial provider certification, 
provider recertification, paper claims submission and duplicate 
or unprocessable claims submission.
    A significant portion of our budget depends on the 
enactment of these user fees and I think they are fully 
justified. One example, Mr. Chairman, is that in our programs 
with all the providers we have, we have not charged any sort of 
an application fee to those providers. And, you know, maybe we 
would all like to have programs where we did not have to charge 
a registration fee, but in HCFA I think it makes sense given 
the number of dollars that are coming through our programs and 
the responsibility that I think you rightly place on us and 
that you want to hold us accountable for managing those trust 
fund dollars and making sure that our programs have integrity.
    We have not, up until this year, even done a required site 
visit for all the suppliers that we do business with, like, in 
the durable medical equipment supply business. And I think you 
have probably heard some of the horror stories of things that 
we have found from our own suppliers, some of whom were 
pretending to do business from the sixth floor of a five-story 
building and things like that. There are certain activities 
that I think we need to engage in, in order to run a prudent 
business-like operation. And the user fees that we are 
requesting will enable us to do that.
    We need full funding of these user fees to avoid 
significant disruption of our operations that could delay the 
implementation of the Balanced Budget Act and our 
otherpriorities, and we are eager to work with this committee and the 
authorizing committees to enact this critical source of funding. And I 
know we will have a number of conversations about that.

                          medicare contractors

    I now want to talk very briefly about two of the specific 
accounts that comprise Program Management--Medicare contractors 
and Federal administration. Contractor functions, first, are at 
the heart of the Medicare program. In fiscal year 1999, 
Medicare contractors will process an estimated $935 million 
claims, almost a 5 percent increase over fiscal year 1998.
    Our Medicare contractors request includes an increase of 
around 6 percent or $54.2 million above the fiscal year 1998 
appropriated level for basic claims processing activities. Our 
1999 request for Medicare contractors is $1.3 billion and 
consists of the appropriation request of $1.1 billion plus 
$165.5 million in proposed discretionary user fees. This 
funding level accommodates the expected increase in the claims 
workload and provides resources sufficient to ensure integrity 
in claims processing operations as well as allow for other 
critical operational support, including Year 2000 compliance.
    In the past few years we have made great strides in 
improving efficiency in the area of claims processing through 
productivity investments, including the transition of 
contractors to selected standard claims processing systems and 
customer service improvements. We want to work with the 
Congress and continue to improve efficiency in these areas.

                         federal administration

    In the Federal Administration area, that portion of our 
Program Management account that supports the day-to-day 
operations of HCFA's headquarters, as well as our ten regional 
offices. The fiscal year 1999 request of $455.8 million 
consists of our appropriation request of $419.1 million, plus 
$36.7 million in proposed discretionary user fees. The request 
includes $322.6 million to fund 4,217 FTEs, including 190 
additional FTEs to support the implementation of the Balanced 
Budget Act, and 65 additional FTEs to support activities 
attributable to the Health Insurance Portability and 
Accountability Act.
    These additional resources are paramount to the successful 
implementation of this legislation, especially in the 
Medicare+Choice managed care provisions and activities to 
assist States as they implement insurance reform that the 
Congress enacted. The request also includes funding to ensure 
millennium compliance of Medicare systems at the HCFA data 
center in Baltimore.

                       medicare integrity program

    Finally, on the Medicare Integrity Program, Mr. Chairman, 
in fiscal year 1999 we will continue to implement the 
provisions of HIPAA, the Health Insurance Portability and 
Accountability Act, including measures to prevent fraud and 
penalize wrong-doers in the fraud and abuse area. The Medicare 
Integrity Program (MIP) will help us target fraud and abuse 
resources at the most vulnerable areas to maximize our return 
on investment and to protect scarce taxpayer dollars. And we 
hope to protect the fiscal integrity of the trust fund so that 
Medicare is available not only to those who need it today but 
also to those of us in the next century.
    This budget proposes $395 million in mandatory user fees in 
the Medicare Integrity Program, which together with the 
mandatory MIP funding level of $560 million will mean a total 
investment of $955 million. These proposed user fees will 
bolster our flexibility to focus on areas expected to yield the 
greatest return on investment.
    Although this user fee is not subject to appropriations we 
want to work with this committee, as well as the authorizing 
committee to enact our entire user fee program.
    Our fiscal year 1999 budget request was formulated to be 
both flexible and responsive to the changes in Medicare and 
Medicaid. I think that our budget request will allow us to 
respond quickly and effectively to the needs of our Nation's 
rapidly changing health care system.
    I appreciate the opportunity to be here with you today to 
present our budget request and I look forward once again to 
working with this committee and would be happy to respond to 
any questions that you might have.
    [The prepared statement follows:]

[Pages 266 - 279--The official Committee record contains additional material here.]


    Mr. Porter. Ms. DeParle, my first question is, are you 
enjoying this job? [Laughter.]
    Ms. DeParle. Are we having fun yet? Well, it is, I suspect 
it is a little like being the Chairman. There are days when it 
is fun and there are days when it is not fun. We have a lot of 
challenges ahead of us, but certainly this committee and your 
staff have tried to make it as enjoyable as possible and I 
appreciate that.
    Mr. Porter. Well, we are delighted that you have undertaken 
it. Obviously, you are very well prepared for it. I think you 
have one of the toughest and biggest jobs in all of Government. 
It is good that you are there, and I think you are going to do 
a superb job. We look forward to working closely with you and 
making certain we have the resources you need to do the job 
right.
    Ms. DeParle. Thank you. I appreciate that.
    Mr. Porter. Can we talk about user fees for a minute? As 
you said in your oral testimony, the Program Management budget 
depends on two funding sources: what you receive through 
appropriations and the enactment of user fee authority. The 
user fee proposal was submitted to Congress just this past 
Friday. Have you been in contact with the authorizing 
committees to determine howreceptive are they in taking up this 
proposal?
    Ms. DeParle. Well, you have touched on a very difficult 
area, Mr. Chairman. I knew and I think the Secretary knew in 
sending this request forward that it creates difficulties 
because we are working with two committees here and we know 
that is an awkward and cumbersome process.
    But I do believe that there is a good justification for 
each of the fees that we have proposed and I also think that if 
we are trying, as you, in the Congress and we, in the 
Administration, have committed, to work within a balanced 
budget, there are some areas where maybe user fees would not 
make sense. In the HCFA Program Management area and in our 
programs I think they do make sense.
    We have begun discussions with the authorizing committees. 
Now, that we have the legislative language we intend to go back 
and work with them and I am sure it will be a long process.
    But I do think that frankly, because of the additional 
responsibilities that they have given us number one--with the 
enactment of the Balanced Budget Act, which is critical to 
doing what we all know we must do, which is extending the 
solvency of Medicare--we have to get the job done on enacting 
those provisions in order to make good on the promise.
    And they realize that. They also, I think, recognize that 
as our program has grown and the number of claims, for example, 
in Medicare, has grown that we have not kept pace with the 
amount of oversight that we needed to do in order to be sure 
that our error rate would not increase.
    And, you know, you heard about our audit that was done last 
year. I am not happy with a 14 percent error rate. I am not 
satisfied with that. We have to do better. And until we figure 
out a way on a prepayment basis to know which claims are not 
good and which claims are, the only answer to that is to do 
audits and these user fees help to support us in that activity.
    So, I believe our authorizers are open to discussions with 
us and we know that we have, I know that I have some persuading 
to do and I appreciate your having an open mind as much as you 
can.
    Mr. Porter. Well, I hope they are as reasonable as you 
think they are. What happens if you get the authority--how long 
will it take to write the rules and regulations and how much 
could you collect in the first year? Are we not looking kind of 
a fair way off before you could get the authority and actually 
begin to use it?
    Ms. DeParle. Well, with the Medicare+Choice user fees, 
which your committee appropriated for us last year and worked 
with the authorizers on, we have already begun collecting money 
under those. We have already collected, I think, $38 million or 
so.
    I would never want to make promises about time frames 
within which things can get done because I have learned from my 
experience that things always take longer than you think but 
this would be a major priority to us and we would get it done 
as quickly as we could.
    Mr. Porter. This is the Commerce and Ways and Means 
Committees in the House.
    Ms. DeParle. Yes, sir, and Finance on the Senate side.
    Mr. Porter. I would imagine that this would work out if the 
authorizing committees are convinced that our bill would become 
the vehicle to enact them because I do not think they are going 
to put out a separate vehicle this year in any case.
    Ms. DeParle. I do not think they are either.
    Mr. Porter. Which means that time is kind of the essence 
here. There are not many legislative days scheduled. 
Appropriations is moving very fast. I do not know how fast the 
budget will move, but we would target a markup, assuming we 
have a budget, for early May. So, the faster you can talk to 
the authorizers the better off we will be.
    Ms. DeParle. I hear you. I appreciate your advice.
    Mr. Porter. Let me ask one more question now and we will 
have an additional round later. There is a provision in the 
Balanced Budget Act that takes effect on October 1st that has 
caused some concerns in the health community. The provision has 
to do with the status of patients transferred from a hospital 
to a rehabilitation facility.
    Apparently, after October 1st, patients who are transferred 
will be considered a transfer patient rather than a discharged 
patient. This status impacts the level of funding that 
hospitals receive as a result.
    Are you familiar with this issue and have you looked into 
the concerns that have been raised?
    Ms. DeParle. Yes, sir, I am both familiar with it and have 
had a recent discussion with the American Hospital Association 
and the Tennessee Hospital Association and the California 
Hospital Association. It is their top priority as you know. 
They are very concerned about it.
    Like every issue, it has two sides. The thing that 
motivated the Administration to request a provision in the 
Balanced Budget Act to try to address this problem was the 
problem we were noticing through Operation Restore Trust, our 
anti-fraud and abuse initiative, as well as just from our own 
numbers that there seemed to be a lot of hospitals that were 
discharging patients and then the next day the person would be 
in their home health unit, and it looked like they were trying 
to get the full DRG and then put them in another facility 
eligible to receive additional payments, in some cases. 
Unfortunately these kind of examples are the things that catch 
people's eye--but in the Wall Street Journal last year there 
was an example of a hospital that was discharging folks after 
they had gotten the full DRG and then basically wheeling them 
down the hall to their skilled nursing facility units. Then 
they could charge reasonable cost for a day and, thus, augment 
the bill. So, that is the problem this was designed to correct.
    The original proposal was much broader and in working with 
your colleagues in the Ways and Means Committee it has been 
narrowed so that what they have told us to do is to focus on 
ten DRGs that seem to be the ones that are most frequently the 
problem and to come up with a proposal related to that. And we 
are moving forward with that but we are talking to the various 
hospital associations and we are aware of their concerns.
    Mr. Porter. Thank you very much.
    Ms. Lowey?
    Ms. Lowey. Thank you, Mr. Chairman.
    And I just wanted, Mr. Chairman, before I move on, to 
associate myself with your last question because this problem 
has been brought to my attention, as well, by several of the 
hospitals in my district and they, you know, felt that although 
they understand why we made that decision what it does is it 
encourages hospitals to keep someone there formore than 10 
days, so, I am delighted to know you are working on it. Because many of 
us have been concerned about that issue and we thank you.
    I want to welcome you.
    Ms. DeParle. Thank you very much.

                         Medicare Payment Caps

    Ms. Lowey. And I thank you. You have inherited an enormous 
responsibility and we all wish you good luck. Certainly your 
credentials are very impressive and we all look forward to 
working with you to make sure the Medicare and Medicaid 
programs are protected and continue to serve the public.
    A couple of questions particular to New York. As you know, 
I and a number of other members of the New York delegation have 
expressed deep concern about the methodology HCFA used when it 
developed new Medicare payment caps for care provided by 
inpatient psychiatric and rehabilitation units. Specifically, 
HCFA did not address the caps for legitimate cost differences 
between geographic areas of the country, contrary to past 
practices in what is understood to be Congressional intent.
    It is vitally important that these new caps be adjusted so 
that health care services in the metropolitan areas are not 
harmed but payments to the truly inefficient hospitals can be 
reduced and we understand that.
    Unfortunately, these wage caps, as they are now, are the 
same regardless of where a hospital is situated. In New York 
City the caps will harm care for Medicare beneficiaries in need 
of psychiatric or rehab services, including services to treat 
severe burn victims.
    As you know, psychiatric care is already under a lot of 
financial pressure because it has been difficult to get managed 
care and other insurers to provide adequate reimbursement. And 
many of our urban hospitals are just being pushed to the 
breaking point. In my meetings with them, they make this very, 
very clear.
    Could you discuss with us what HCFA plans to do to respond 
to this problem and give us some idea of when we can expect 
HCFA to take appropriate action?
    Ms. DeParle. The issue that you have identified is one that 
came to my attention in January and I think you wrote me and 
Mr. Rangel has also written me about this and certainly from 
the standpoint of the New York delegation, there is no question 
about what you intended in the law.
    Unfortunately though, our lawyers advise me that the wage 
adjustment mechanism was written into other parts of the 
statute. It was not referred to at all in this section of the 
statute about these caps. And, so, what they contend is that we 
do not have the discretion to just read that into the law, 
because where it has been specifically referred to in other 
areas and it was not referred to here, the inference is that if 
Congress had wanted us to do that they would have told us to do 
it.
    As I said, I have no doubt of what you want or what your 
colleagues from New York want, but there is this issue of legal 
interpretation. I certainly can tell you that we agree that, in 
general, it makes sense to adjust for differential wages. And 
we would be happy to provide technical assistance or to do 
anything we can to help move it in that direction. But at this 
point, my lawyers have told me that they do not think I have 
the discretion.
    So, I think we have a meeting scheduled to talk more about 
this and I will go back and make sure that everyone is looking 
at every single angle on it. And I am aware of the problem.
    Ms. Lowey. I would appreciate that. And I am glad you said 
it is legal interpretation and not the law, which makes me 
think that maybe there are some questions because you can get 
other legal interpretations as you well know, you have received 
them on this issue, and we appreciate that you are continuing 
to work with us. And I look forward to the meeting and I hope 
we can resolve it because there are different interpretations 
of the law and there are people who feel very strongly about 
this and it severely impacts the industry.
    Ms. DeParle. Yes, I know.
    Ms. Lowey. So, I thank you very much.

                        Community Health Centers

    Another area facing New York, another serious issue facing 
New York has been brought to my attention. And this issue 
relates to the ability of community health centers to survive 
under Medicare managed care. I understand that New York State 
is in the process of implementing an 1115 waiver which HCFA 
approved but which waives so-called cost-based reimbursement 
for New York's community health centers.
    Twenty members of the New York delegation have written to 
you on this issue as well expressing our opposition to this 
treatment to health centers. If this waiver is allowed to 
stand, it is estimated that community health centers in New 
York will lose a minimum of $220 million over the next five 
years.
    And this certainly is money that our health centers could 
use for upgrading their facilities, so that they can compete in 
the managed care market place, or it is money that they 
certainly could use to care for the uninsured which is a major 
part of their responsibility. This cutback could force health 
centers to reduce services or even to close.
    Now, my understanding is that Congress expressed the intent 
that health centers receive cost-based reimbursement by 
enacting a six-year wrap-around payment for the health centers 
in the Balanced Budget Act of 1997. There are differences of 
opinion on this, but this is absolutely vital to our community 
health centers.
    Unless the six-year wrap-around payment is respected and 
implemented, it would really kill these centers that are 
providing such vital services. Could you give us an 
understanding of whether you intend to enforce the six-year 
wrap-around payment in New York?
    Ms. DeParle. I do not have an answer for you today. I can 
tell you that I think I have met with every health center in 
New York now in three-and-a-half months. I am teasing, but I 
have met with at least 20 of them about this issue.
    And again, there are questions here, as you pointed out, of 
legal interpretation as we move away from cost-based 
reimbursement, which the New York centers understand. They are 
very realistic about where the world is today. What they tell 
me is they just want to be in a position to compete fairly and 
they are concerned about having a transition to the new system. 
Which is, I think, what Congress was also concerned about.
    And, so, we are taking that into account and trying to 
develop the policy that we will be applying with respect 
tothis. And I would like to get back to you with a report on it because 
this is an issue that, I think, you will be glad to know is not just a 
HCFA issue. It is an issue the Secretary cares a lot about and it is an 
issue that our colleagues in the Department, particularly in the Health 
Resources and Services Administration care a lot about.
    So, we are working together on what is the best policy and 
I would like to get back to you with a more specific answer 
about New York.
    Ms. Lowey. Well, I certainly appreciate that. Certainly the 
Secretary is very well aware of the invaluable services of the 
community health centers and, again, they just want to be 
competitive and get fair treatment.
    So, I thank you. What is our time like, Mr. Chairman?
    Mr. Porter. You have 26 seconds left. [Laughter.]
    Ms. Lowey. Well, maybe I will just congratulate you on your 
waste, fraud and abuse program. I asked Secretary Shalala the 
same question, but I have been impressed with what I have 
heard. And certainly in New York, Operation Restore Trust has 
been doing an excellent job. I continue to be amazed that it 
still is what, 14 percent, $14 million? More than that?
    Ms. DeParle. That was our error rate. It is more than that 
I am afraid. The percentage is right, the dollars are a little 
bit bigger.
    Ms. Lowey. Oh, the error rate was 14 percent.
    Ms. DeParle. No. The error rate is 14 percent and that was 
an analysis of 5,000 claims and if you extrapolate that over 
our entire fee-for-service base, it is $23 billion.
    Ms. Lowey. Well, what we will do if we have another round 
is give you the opportunity to tell us what wonderful things 
you are doing.
    Thank you.
    Ms. DeParle. Well, and if I can get the user fees we can do 
even more. [Laughter.]
    Ms. Lowey. Thank you.
    Mr. Porter. Mr. Wicker, for 480 seconds.
    Mr. Wicker. Thank you, Mr. Chairman.
    Ms. DeParle, I am delighted to meet you. I was interviewed 
by your husband.
    Ms. DeParle. I was going to say my husband is a fan of 
yours. I think you know that.
    Mr. Wicker. And I hope that the next time he visits 
Mississippi, you will come with him and have dinner with me.
    My first two questions are sort of particularly Mississippi 
questions. One is about oncology drugs and the other to give 
you a heads-up about the occupational mix reclassification. But 
first to the oncology drugs.

                             oncology drugs

    Our entire delegation wrote you a letter last November and 
the concern was the inconsistency of care which exists between 
different States, in particular, the Medicare coverage 
termination process allows certain carriers to deny 
reimbursement for one oncology drug when a neighboring State 
with another barrier does reimburse it. Why does this problem 
exist and what can we do to limit the gray area which allows 
these inconsistencies?
    Ms. DeParle. The problem exists because of the way the 
Medicare program was designed. And it is just like when I 
talked about our contractors here today and the money that we 
need for them.
    When Congress set up Medicare, they wanted it, they decided 
not to go the route of Social Security and not to have a big 
agency with 60,000 employees, but rather to have a small agency 
and to do a lot of the work through contractors, through Blue 
Cross/Blue Shield and various other insurance companies that 
would pay the claims and would do all of those things for us.
    So, what happened was these contractors around the 
country-- and I think we are down to approximately 70, they 
often make decisions that relate to coverage of, in this case, 
these oncology drugs that you and I have corresponded about.
    What we are trying to move toward is a process for making 
decisions that would be evidence-based--in other words, based 
on what the science shows about what a particular device or 
drug or whatever it is, could do for our beneficiaries--and 
that would be more national in scope.
    But getting from where we are today to there is hard. We 
had a process that was being used to make so-called national 
coverage decisions which was sort of a hybrid process and 
basically was not an open process. And, so, when I was briefed 
on this back in December, I decided we needed to change that. 
And we just had a meeting yesterday about how can we put 
together a process that allows it to be more open and allows us 
to make decisions on more of a national basis?
    But I should be honest with you. It will be hard because we 
have now had 30-some years of operating where local carrier 
medical directors, like the one in Mississippi, can make these 
decisions on their own and sometimes they like it that way. 
Frankly, sometimes the companies like it that way because they 
can talk to a particular carrier's medical director and get him 
or her to agree with their position.
    So, I think where we want to move is to have more national 
consistency. And from your question it sounds like that is 
where you think we ought to be, too. But getting to there from 
where we are is hard.
    Mr. Wicker. I certainly hope that we can continue to work 
to move toward national consistency, as you say.
    I certainly am an enthusiastic supporter of the concept of 
Federalism. But human physiology does not change from State-to-
State. And I hope you can understand the frustrations of the 
best oncologists in Mississippi being prohibited from using 
drugs that the best oncologists in Alabama and Georgia are 
allowed to use.
    So, let us continue to make that a priority.
    Ms. DeParle. Yes. In the particular case you were talking 
about, we have spoken with the medical director and we have 
also surveyed the country and you are right, that particular 
one is prescribing something or agreeing to allow claims for 
something in a very different way than anybody else is. He has 
agreed to meet with the local oncology community and I think 
that is going on right now.
    Mr. Wicker. Well, perhaps that will address this specific 
issue.
    Ms. DeParle. I would like to not have a situation where 
Members of Congress feel like they have to carry the case for 
folks back home on an issue like this.
    And, so, I hope we can get there.

                   occupational mix reclassification

    Mr. Wicker. Now, to the occupational mix reclassifications, 
which has occurred for fiscal year 1999. I do not understand 
everything about this but what I do understand is that HCFA 
published a new rule and a lot of us were surprised that this 
particular mix was abolished.
    I understand it was because the American Hospital 
Association was no longer collecting occupational mix data 
required for reclassification and what I really understand is 
that this action would cost four rural Mississippi hospitals 
several million dollars.
    Now, if we could persuade the AHA to start collecting this 
data again what would be your attitude toward reconsidering 
this rule?
    Ms. DeParle. I had never heard of this before you wrote me 
about it, I am not an expert on it. But I did read up on it 
after I saw your letter. It is my understanding that we did not 
have a policy basis for not continuing to use the data. It is 
just that the American Hospital Association said they were not 
going to collect it any more.
    So, if they were to collect it again, then I believe my 
reaction would be to use it if it helps us make a better 
policy.

                          deemed status report

    Mr. Wicker. Wonderful. Yesterday, I asked Ms. Shalala why 
the Department had not submitted a report which Congress had 
asked for in 1996. This report was due last July and was 
supposed to give Congress an idea of the viability of letting 
independent accredited organizations certify skilled nursing 
facilities.
    HCFA already uses the Joint Commission on Accreditation of 
Health Care Organizations to certify hospitals. So, could we 
ask you to submit, when do you expect to submit this report 
that was due last July, before you came into office, I might 
add. And would it make sense to try this approach of 
independent contractors before moving toward the user fees?
    Ms. DeParle. Well, on the first part of the question, I am 
aware. of the report on so-called deemed status. And the simple 
answer is, it was not ready. I believe it was supposed to be 
due in July or so of 1997?
    Mr. Wicker. That is right, July of 1997.
    Ms. DeParle. And HCFA let the contract, as I understand it, 
for the outside contractor that was going to perform the study 
soon after the appropriations bill was done but it just was not 
finished.
    And last summer they considered sending up an interim 
report but, quite frankly, I looked at it and it did not really 
say anything. So, I was not sure that made sense to send you 
something that did not really say anything.
    I think it will be ready soon. I know there is a draft of 
it that is supposed to be coming to me. So, I would say, 
spring. It is almost spring now. I would say, soon.
    If you like, I can get back to your staff with a more 
specific date, I think it should be soon.
    Mr. Wicker. Okay. And did you want to comment about 
possibly holding off on user fees until we find out the 
feasibility of this approach?
    Ms. DeParle. I am not sure how much money it would save to 
go to a deemed status approach, Representative Wicker. I am 
open to looking at it, but I can tell you that I do not think 
that we are necessarily doing the best job we could be doing 
right now in oversight of some of the facilities that we need 
to be overseeing like skilled nursing facilities, nursing 
homes.
    At least I am not comfortable with where we are. And that 
is what would make me a little bit concerned about moving to a 
deemed status. I can tell you this, I will look at the report 
and I will sit down and talk to you about it and remain open to 
it. But I can tell you that I am not convinced that we are 
doing the best job we need to be doing as it is.
    Mr. Porter. Thank you, Mr. Wicker.
    Mrs. Northup?

                       hipaa anti-fraud measures

    Mrs. Northup. Thank you, Mr. Chairman.
    I do not know where to start. First of all, let me just ask 
you a quick question. The question of physicians have to 
include a copy of their license. Is that still part of you 
all's regulations or did you all reverse that maybe?
    Or was that a Senate bill that passed in the Senate?
    Ms. DeParle. I am sorry. Including a copy of the license?
    Mrs. Northup. That the requirement for the Medicare fraud, 
``Providers must submit a notarized or certified true copy of 
their renewed medical license and if they do not, their claim 
will be denied.'' And, of course, providers are complaining 
that this is a lot of paperwork and I mean complaining bitterly 
about it. And I am sort of reaching back in my memory as to 
whether you have left that in place or whether there is 
actually a Senate bill that passed in the Senate.
    Ms. DeParle. I need to get back to you with an answer for 
the record. I can tell you, though, that just from my own 
experience I suspect you would be shocked at some of the things 
that some people who get into the Medicare program would do. I 
was just down in Miami looking at some of the fraud and abuse 
problems we have and went into clinics where there were people 
who were practicing as doctors who were not licensed doctors.
    So, if that is a requirement it must have been designed to 
get at that. Now, the issue is, is there a way to get at that 
without requiring a lot of extra paperwork out of doctors? So, 
what I would like to do is go back and look at that and get you 
a better answer for the record.

                      maximized billing practices

    Mrs. Northup. That would be fine.
    Intermediaries. I asked this question yesterday and I am 
going to follow-up with you. The hospitals are concerned, they 
believe that the HCFA intermediaries have given approvals to 
certain billing codes that they rely on. Many of these 
hospitals, especially our rural hospitals--hospitals that 
Representative Lowey talked about feel like they are already at 
the breaking point--they hired consultants to help them. What 
they claim is that understanding the Medicare law is 
overwhelming, it is very difficult, it is sort of like the Tax 
Code for a person on the street.
    So, they hire consultant companies that come in to help 
make sure they maximize their billing opportunities. They then 
have the intermediaries from HCFA that approve these codes, but 
now the hospitals are being contacted by the Department of 
Justice which is saying that those billings were improper. DOJ 
is either saying we will see you in court and sue for double 
the costs or triple the costs of over-billing, because these 
billings are not okay, or you could pay us right now, in 30 
days, these enormous sums and plead guilty.
    All of these proposals are potential breakers for some 
ofthese hospitals. And they feel like that if they had the evidence 
that the intermediaries have given them, the information that these 
were correct billing codes that the intermediary should bear the burden 
of the costs.
    You know, it is one thing to say, you cannot do it any 
more; it is another thing to say, you did this for the last 
three years.
    Ms. DeParle. I understand your concern and, of course, I am 
not representing the Department of Justice. They make their law 
enforcement decisions. I can tell you that one thing that we 
are trying to do is to coordinate more closely with them and 
with the Inspector General because their work as partners in 
our efforts to prevent and stop health care fraud, waste and 
abuse is very important and we value their work.
    Mrs. Northup. Yes.
    Ms. DeParle. But we want to work more closely with them so 
that they are targeting the things that we think are really the 
biggest problems for our programs. And I can tell you that from 
our perspective and certainly from the Secretary's perspective, 
we want our rules to be fair, and we want them to be fairly 
applied. We want to be fair with the providers, and we expect 
them to be fair with us. We are not looking for inadvertent 
mistakes or honest errors, for someone to be persecuted because 
of that. We want things to be clear and fair, and certainly in 
the cases that have been brought to our attention where that 
has been the case, we have pointed that out to our colleagues 
at Justice.

                     doj program integrity actions

    Mrs. Northup. But it does not seem to get any response. I 
mean, I think their only complaint against HCFA is that they 
are now being held responsible for mistakes that were made by 
HCFA, but I think they feel like you all have stepped forward 
pretty fairly and said, Yes, this was a mistake.
    The problem is the Department of Justice does not care. 
They pursue the legal action--and it is substantial. How many 
hospitals are there in the United States--5,000?
    Ms. DeParle. More than that, but yes.
    Mrs. Northup. I mean, right now, a high percentage of those 
hospitals already have been contacted, and they expect it to be 
every hospital.
    Also, the Department of Justice Secretary Janet Reno said, 
If you self report, we will not charge out the double and 
triple overbid. However, when the hospitals have done that, 
Justice has done a wall-to-wall audit of every book, and to 
anything they found that was incorrect, they apply the highest 
penalties. And I guess I should ask do you all sit down and 
talk about this together? Maybe that is too casual.
    Ms. DeParle. Well, we actually are, and I do not think that 
is too much to ask. At my level, the Inspector General, the 
Deputy Assistant Attorney General who is responsible for this, 
and Eric Holder, the Deputy Attorney General--we are meeting on 
a regular basis to talk about the bigger picture and what the 
areas are that we should be focusing on. And through those 
discussions--and your concerns are some of the kinds of things 
we talk about--through those discussions, I hope this can be a 
smoother operation that will reflect what I think Congress 
wants, which is to make sure we are doing our job to protect 
these programs, but at the same time not doing so in an unfair 
fashion.
    When I talk to the folks at Justice about those kinds of 
situations, what they say to me is that if the intermediaries 
have not been clear, that that is something they will take into 
account as they proceed with making decisions about a 
particular law enforcement action. And I would suggest that you 
talk to them as well about this.

                          provider audit cases

    Mrs. Northup. Are you under any sort of understanding 
that--first of all, I do not know how the Department of Justice 
becomes involved, and whether you refer a case. Yesterday, I 
understood that HHS actually refers the case to them.
    Ms. DeParle. What we are trying to do is to put the rules 
out and to audit claims and to make sure we are paying for 
things we are supposed to pay for and are not paying for things 
we should not be paying for. If we have a case, though, where 
it appears there has been a pattern, or it is more than just a 
minor thing, then we refer those kinds of things to the 
Inspector General. They investigate them to see whether there 
is anything to it more than just an honest mistake, and then 
they in turn could make a referral to the U.S. Attorney's 
Office, which actually does these prosecutions. That is how it 
works.
    Mrs. Northup. In trying to understand the culture of this, 
would you say that for a number of years, firms sort of helped 
hospitals maximize and that now the understanding that you have 
to be self-controlling is taking hold--that the challenges are 
paying for the sins of the past?
    Ms. DeParle. There was an article in the Wall Street 
Journal about this a few weeks ago, and it said it all, because 
it featured a guy who had made his career out of running what 
he called ``Medicare maximization'' seminars around the country 
that had dollar signs all over them and attracted hospitals 
folks in. And now he bills himself as a compliance person to 
protect them from getting in trouble.
    I think we have moved from a situation that was rather more 
fluid to one where we now have zero tolerance. Why is that? It 
is because of the need to manage these programs more 
efficiently. But it is difficult when you are caught in that 
transition.
    Mrs. Northup. Well, especially if there was actually within 
HCFA somebody that was giving their blessing to this. I do not 
know whether you all can train your compliance officers more or 
whether you can assume more of the responsibility, or when 
there is evidence that compliance officers or managers approved 
it, but I think that is a real problem of fairness, and the 
Department of Justice seems to be keeping score about how many 
people--they may take it into consideration by offering an 
agreement, but it has not cost you.
    Ms. DeParle. We need to do a better job of making sure that 
our intermediaries understand the policy and that they in turn 
convey that policy to the hospitals fairly, and certainly, if 
it is brought to my attention that there is a case where that 
was unfairly handled, I would certainly make that argument. But 
as you understand, and as I think the Secretary said, we are 
not the law enforcement officials.
    Mr. Porter. Thank you, Mrs. Northup.
    Mr. Bonilla?
    Mr. Bonilla. Thank you, Mr. Chairman.
    Good afternoon, Ms. DeParle. How are you?
    Ms. DeParle. Just fine, thanks.

                            false claims act

    Mr. Bonilla. Just for the record, I want to follow up on 
what Ms. Northup brought up about billing disputes under the 
False Claims Act. This has been a big problem for a lot of 
hospitals in Texas, and Secretary Shalala was kind enough 
torespond to a letter with some questions I had about this problem just 
this week. Unfortunately, I did not get a lot of the answers I wanted 
to hear, because the Secretary referenced that it was a Department of 
Justice decision. Nonetheless, it is hurting a lot of small hospitals 
that can barely make ends meet as it is.
    I do not think anyone in the administration wants to put 
any greater burden on their backs than currently exists out 
there, and that is my concern. I just wanted to raise that and 
ask that you respond to some questions I will submit for the 
record.

                            medicare+choice

    I would like to move now, if I could, to what I call the 
``Medicare tax,'' the $95 million in user fees to disseminate 
new information to users, specifically a tax on those who 
choose to use managed care programs.
    There was a great dispute about how much money should be 
spent on that last year, as you recall. We got the figure down 
to about $95 million. It was up in the neighborhood of $150 
million that was proposed initially, if I am not mistaken.
    Ms. DeParle. $200 million.
    Mr. Bonilla. $200 million. And I think we had initially 
gotten it down to about $150 million and then lower. So we are 
glad that we have at least made progress in that area, because 
in my view, it does impose an unneeded burden on those who are 
using the Medicare program through managed care.
    My first question is this. Although HCFA currently conducts 
numerous beneficiary education and information dissemination 
activities, it has not elaborated on its plan to use existing 
infrastructure in meeting the Balanced Budget Act requirements 
for this education and information campaign. This Subcommittee 
encouraged HCFA to use a toll-free number and the Internet to 
provide information to beneficiaries. We all know there is a 
propensity among older Americans not to use computers at a 
higher rate than some other age groups.
    My question is will HCFA use some of its existing toll-free 
lines to offset the costs of its beneficiary information and 
education campaign?
    Ms. DeParle. We intend to set up a toll-free line, Mr. 
Bonilla, but not to use our existing toll-free lines. What I 
would like to do is provide you with a more detailed briefing 
about this, because I will not be able to do it justice this 
afternoon. But basically, the kinds of toll-free lines that we 
have are toll-free lines to our intermediaries and carriers for 
beneficiaries to call in their local areas to get answers to 
things. Those people are paying fee-for-service claims, and 
they would not be in a position to provide answers to questions 
about the managed care plans. So that for that, we are looking 
at a different kind of system, and we are close to having a 
plan and actually wanted to get up here soon to brief the staff 
of this committee, so I would like to provide you with a 
briefing on what our plans are there.
    But as to whether we intend to use existing infrastructure, 
we certainly do, and in fact, back at my desk is a list of 
calls that my staff wants me to make that I have not gotten to 
yet, to all kinds of groups, groups like AARP, disease groups, 
church groups, all sorts of outside groups that we hope will 
disseminate this information in their newsletters and in their 
forms of media and on their computer web pages.
    We are also going to have a Medicare web page that we will 
be launching this month--we are now into March--that will have 
comparison information on it about the Medicare plans. That is 
something we are already in the midst of setting up, and that 
is part of our existing infrastructure.
    We are going to have to build on these outside things and 
other things because we will not have the resources to do 
everything within the $95 million. Just to send a postcard out 
to all of our 38 million beneficiaries with the new preventive 
benefits that you all enacted last summer would be very costly 
when I first got here, I thought, we ought to send out 
postcards to all the beneficiaries, telling them about the 
mammograms and the pap smears and all that. That was going to 
cost $11 to $12 million to do that, so we did not do that.
    Mr. Bonilla. Is that a First Class rate, or is that a bulk 
rate?
    Ms. DeParle. It's a bulk rate, and again, I can give you 
the details. I had the same reaction you did--how could it 
possibly be that much. It is expensive.
    All that is to say that we heard the committee last summer 
and your views about how we should use this money, and I think 
you and I may disagree about the importance of informing 
beneficiaries about the new managed care plans. I think it is a 
very good thing for our beneficiaries and for the program and 
that we do need to do a very solid job of informing them; but 
we are not going to be doing a Cadillac here, I can tell you 
that, because we will not have the resources.
    Mr. Bonilla. My only concern at the beginning is not 
whether or not people should be informed--sure, they should be 
informed--it was about the astronomical figure that we started 
out with--and I appreciate your refreshing my memory--of $200 
million.
    Ms. DeParle. It was $200 million, and we are doing it 
within $95 million. What that means is that you gave us last 
year a prioritization of the things you thought we ought to do 
with the money, and one issue was whether we should do health 
fairs in certain places around the country. I think that was 
the last thing on your list. So, in deciding how to spend this 
money, we are going to bear that in mind, because we only have 
a limited amount. And I think it is fair to say that we have to 
be accountable for that.
    Mr. Bonilla. I was concerned because at some point, you can 
only do so much to teach a person something.
    Ms. DeParle. Oh, I agree.
    Mr. Bonilla. And with direct mail, as you were discussing 
earlier, it is very effective--that is one of the most 
effective ways to get anyone, and if they are concerned about 
health care, they are going to read it. And if you sent them 
three postcards, you would still be under the budget that you 
have here. So I appreciate the use of the Internet and the 
phone lines, but my concern initially was just to make it an 
efficient information dissemination and not just to roll out a 
$200 million program without any accountability.
    Ms. DeParle. I hear you. I think the constraint that you 
placed on us through the amount that you appropriated will 
guarantee that it will be done in an efficient way. But also, I 
do not think any of us know what is the best way to 
communicate, and it may differ in different parts of the 
country; in different cultural groups, there may be different 
ways of doing it. And one thing that I have talked with 
thestaff up here about is that we may want to try some different things 
in different parts of the country. There may be some places--in Mr. 
Porter's district, maybe a health fair would be great, and people would 
really like that and would really benefit from it; maybe in your 
district, it would be different. And if we can within the constraints 
of the dollars, by using local resources and local alliances and 
infrastructures, I would like to try some different things, too. Then 
we can give you more feedback about this works, this does not work, 
this is worth spending money on or it is not. That is how I would like 
to do it.

                        toll-free inquiry lines

    Mr. Bonilla. I am going to run out of time soon, and I have 
a couple more specific questions that I want to ask.
    Several health plans that operate toll-free lines to field 
pre- and post-enrollment questions reported a $5.50 or less 
per-call estimate. That includes the phone call itself, 
training, staffing and overhead. How does this estimate compare 
with HCFA's per-call estimate for the proposed new toll-free 
call centers?
    Ms. DeParle. I think that is probably a little more than 
half of what we estimate, and I think the information you are 
talking about might have been from Pacific Care, and I did take 
a look at that.
    As I said, maybe we should do a separate briefing on this, 
because it is complicated. But we think the kinds of calls we 
are going to get will be different from the ones that these 
managed care plans get. From my experiences--and I imagine you 
have them, too--talk about seniors, when they call in, and they 
want more general information about what does it mean if I go 
with one plan versus another. I do not think it is going to be 
just ``Is podiatry covered in your plan?'' It seems like the 
health plans that get calls, they seem to be more limited to 
that kind of question as opposed to ``Should I go on a managed 
care plan at all?''
    So we do not know, and we are going to find out. We are 
going to find out when we set this up, and we will be able to 
give you more exact details, but I think our estimates are that 
it would be more like $9 per call, and we are going to have to 
find that out.
    Mr. Bonilla. Okay. I have a handful of other questions, but 
the bell has run on me, so I cannot continue. But if I send 
those to you, would you get an answer to me as quickly as you 
can?
    Ms. DeParle. I certainly will. Now that I know you are 
interested in and knowledgeable about this, I would be happy to 
spend some time talking to you about it.
    Mr. Bonilla. Thank you.
    Mr. Porter. Thank you, Mr. Bonilla.
    Ms. DeParle, we have the Agency for Health Care Policy and 
Research (AHCPR) to also consider in this afternoon's hearing. 
The Chair would tell Members that I have a meeting that I must 
attend with the Speaker along with other subcommittee chairmen 
at 4 o'clock, but whoever would like to stay and chair can do 
so.
    I would like to beg the indulgence of the subcommittee to 
ask Ms. DeParle several more questions, and then we will hear 
from AHCPR.

                  proposed supplemental appropriation

    We received a supplemental package yesterday, and as you 
know, it contains $16 million for HCFA to support oversight and 
enforcement activities of the Health Insurance Portability and 
Accountability Act. You propose to pay for this increase with a 
limitation to Peer Review Organizations which is mandatory. 
Have you been in contact with the authorizers and do they 
support this offset?
    Ms. DeParle. I have not been in contact with the 
authorizers yet, Mr. Chairman, and I will do so and get back to 
you about that. It seemed to be the best and most appropriate 
place to suggest an offset to us, but I will get back to you 
about that.
    Mr. Porter. All right, thank you.
    There are companies that reaudit or recycle processed 
claims which were previously processed electronically. They 
have discovered significant errors and incorrect billings, 
which apparently resulted in recoveries of millions of dollars. 
This type of private sector company is then reimbursed a 
portion of the recovered overpayments as their fee for their 
work. Have you considered employing private sector contractors 
to assist not only in identifying fraudulent claims, but also 
claims which have errors?
    Ms. DeParle. When I was at OMB, I did meet with some 
companies about that idea, and I thought it had some appeal. At 
the time, I was told that we could not do it because we were 
limited under the Medicare statutes and the kinds of contracts 
that we could contract with.
    Under HIPAA, however, there has been an expansion where we 
can now use other kinds of private sector contractors other 
than just the Blue Cross/Blue Shield insurance company types of 
contractors. So perhaps that is an angle that we could look at, 
and I would be happy to explore it and get back to the 
chairman.
    Mr. Porter. It seems to me that with some oversight, you 
could probably save a lot of money and it would not cost 
anything.
    Ms. DeParle. It does not sound like we have much to lose, 
yes.
    Mr. Porter. Another Balanced Budget Act authorization issue 
that was brought to my attention deals with the Medicare 
Interim Payment System for home health care. Some concern is 
being raised that this provision will force many elderly into 
more costly long-term care facilities and take away their 
choice to stay with their families and communities. Are you 
aware of these concerns and how do you respond to them?
    Ms. DeParle. Well, second only to the number of community 
health centers I have met with are home health companies around 
the country, and I am aware of that. Again, just to put it in 
context, as I am sure the chairman knows, home health was an 
area where we were growing 30, 40 percent a year for the last 6 
or 7 years, until we are spending $17 billion a year.
    There have been a lot of concerns both in the 
administration and in Congress about fraud, waste and abuse in 
this area, based on our Operation Restore Trust. So what we did 
this past summer was work with Congress on a number of 
provisions. The thing that everybody agrees on is that we need 
to move to prospective payment, because the way we havebeen 
paying home health companies gives them no incentive to be efficient.
    We are moving to prospective payment. Everyone agrees with 
that, including the industry. But we are in a place right now 
where we are doing an interim payment system that essentially 
starts to move to prospective payment and starts to reduce 
payment on a per-beneficiary aggregate basis. What that should 
mean is that the company gets a payment that is big enough on 
average to cover everybody that they have in their caseload, 
but it certainly is a reduction for many of these companies, 
and that is what we are hearing.
    We want to continue to monitor the situation, and as I 
said, just Monday, I was out with Chairman Barton down in Texas 
where I met with a number of home health companies. We will 
continue to monitor and report to the Congress if it turns out 
that there are problems.
    We do believe, though, that the payments are fair and that 
an efficient company ought to be able to continue to provide 
the kind of service they have been providing, and that it 
should not result in the horror stories that some of them are 
offering.
    Mr. Porter. Thank you.
    Ms. Lowey, do you have additional questions?
    Ms. Lowey. I will pass, Mr. Chairman. Thank you.
    Mr. Porter. Mrs. Northup?
    Mrs. Northup. Just briefly, I think the chairman brought up 
the reimbursement for the processing companies like Blue 
Crosses. This suggestion about going to a private contractor 
seems to me to then rule out the opportunity that Blue Cross 
and Blue Shield that they are the processor to participate, 
because maybe that would not be authorized.
    The question I have is in the bill that was passed, it is 
true that the authorizing committee required processing 
companies to meet fraud, abuse requirement, but the 
appropriations process is going to appropriate some money for 
the actual administration of that, and that the administration 
money did not go up, while the requirements by the authorizing 
committee for what they do in terms of processing and checking 
for fraud and abuse did go up?
    Ms. DeParle. Well, it certainly is the case that the number 
of claims that come through Medicare review has gone up quite a 
bit, and that our funding both to pay claims through the 
contractor budget and also, until recently with the Medicare 
Integrity Program, to audit and to look at the claims, did not 
go up, so that is the case.
    When I was talking about the need for contractor reform, 
what we would like is to get to a place where there would be 
more competition both on the side of who pays our claims for us 
and also who reviews the claims and does the audits. And with 
the HIPAA bill, we were given the opportunity to do more 
bidding and to get more competitive on who monitors and who 
audits our claims, but under the law, we have not been able to 
change the fact that we have to deal with certain types of 
companies that are insurance companies to pay claims.
    We have a bill that is back up here again, I think, this 
year for contractor reform to allow us to use a broader group 
of companies.
    Mrs. Northup. But besides doing that, doesn't it make sense 
to take out the administrative cost from the appropriations 
process for the processing of fraud and to actually do exactly 
what the chairman suggested, and that is provide a portion of 
what is recovered back to whomever processes it, whether it is 
a Blue Cross/Blue Shield--whether you have your processor doing 
the fraud and abuse or whether you have another company doing 
it, if both of them do not have the same incentive to check, 
you are going to have the same problem.
    Ms. DeParle. There are those who argue that, and I see what 
you are saying. Right now, we pay on a cost-plus basis for just 
processing the claims. Your argument would be that if they got 
an incentive for being more careful and for paying more 
correctly, then----
    Mrs. Northup. Exactly what he suggested, but make that 
available to everybody. And that would take a change in the 
law, but I just wanted to follow up on that.
    Ms. DeParle. Yes; I see what you are saying. Thanks.
    Mrs. Northup. Mr. Chairman, thank you.

                             erythropoietin

    Mr. Porter. I have one final question--actually I have many 
more questions, but we do not have time for them. I sent a 
letter to Secretary Shalala back in September asking the 
Department to proceed carefully in implementing any final 
program memorandum that would change the way HCFA reimburses 
for the use of the drug erythropoietin in end-stage renal 
disease.
    There have been concerns raised by numerous groups over 
this change. I received a response back just last week from the 
Secretary. She stated that you were monitoring the effect of 
this policy change and would take appropriate steps once you 
reviewed the results of this monitoring effort. The change took 
effect on September 1, 1997, six months ago. When will you have 
the results on your monitoring efforts?
    Ms. DeParle. Soon. I have been looking at this, and I have 
gotten letters from both sides of the aisle and all over the 
country from Members, and I am concerned about it.
    If the earlier policy was done too quickly, I do not want 
to make the same mistake here, so I have talked to my staff 
once, and I want to do so again, and I would be happy to letyou 
know when I am in a position to make a decision, which I hope will be 
very soon.
    Mr. Porter. Ms. DeParle, how many of these people here work 
for you?
    Ms. DeParle. Four, it looks like.
    Mr. Porter. Oh. I thought all of them did.
    Ms. DeParle. I am just happy they are all interested in our 
budget.
    Mr. Porter. Yes. We really appreciate your very candid 
answers to our questions and your good testimony and the fine 
job you are doing at HCFA. We know it is a very, very tough 
job, and we are going to work very closely with you to give you 
the resources you need to do it.
    Ms. DeParle. Thank you, Mr. Chairman. I appreciate the 
time.
    Mr. Porter. Thank you.
    The subcommittee will stand in recess for 3 minutes.
    [The following questions were submitted to be answered for 
the record:]

[Pages 298 - 728--The official Committee record contains additional material here.]


                                           Thursday, March 5, 1998.

                ADMINISTRATION FOR CHILDREN AND FAMILIES

                               WITNESSES

OLIVIA GOLDEN, ASSISTANT SECRETARY
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET

    Mr. Porter. The subcommittee will come to order.
    We continue our hearings for the budget of the Department 
of Health and Human Services. We welcome Olivia Golden, the 
Assistant Secretary for the Administration for Children and 
Families.
    Nice to see you again. Why don't you proceed with your 
statement.
    Ms. Golden. Mr. Chairman, thank you. I'm delighted to 
present the President's budget request for the Administration 
for Children and Families (ACF) for fiscal year 1999. I'm 
accompanied by Dennis Williams, the Deputy Assistant Secretary 
for Budget for the Department.
    President Clinton has presented to Congress the first 
balanced budget in 30 years. It addresses the concerns of 
Americans, serves their interests, and creates opportunity. 
This budget keeps faith with the longstanding commitments of 
this Department. Even in this time of limited resources, the 
budget includes significant increases for several of our 
programs. In keeping with the Administration's policy to 
increase support for programs that promote economic security 
and independence as well as healthy development for our 
children, while working towards more efficient Government, our 
budget is targeted in areas that have produced significant 
payoffs.
    The fiscal year 1999 budget for the Administration for 
Children and Families is $40 billion, of which $21 billion is 
being requested in new budget authority. The remaining $19 
billion is available through the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996. Entitlement 
programs represent approximately $31 billion of our $40 billion 
budget.
    While the Administration for Children and Families funds a 
wide range of programs, including Low Income Home Energy 
Assistance, community services, programs for persons with 
developmental disabilities, Native Americans, and refugees, 
over 65 percent of ACF's $8.7 billion discretionary spending 
supports programs serving young children through the Child Care 
and Development Block Grant and the Head Start Program. We are 
seeking increases for these two programs, as well as Adoption 
Incentives and Adoption Opportunities, programs for persons 
with developmental disabilities, and Violent Crime Reduction 
programs. I would like to highlight a few of our key 
programmatic initiatives in these areas.

                         child care initiative

    The Clinton Administration has been committed to making 
work pay through a variety of supports for working families, 
including the Earned Income Tax Credit, Family and Medical 
Leave, and Child health insurance. In this year's budget 
proposal, the President is making the next installment on his 
commitment to working families with the Child Care Initiative. 
As the President said in his State of the Union Address, ``No 
American family should ever have to choose between the job they 
need and the child they love.'' This initiative supports 
parents' choices so that they will be able to find and afford 
quality child care.
    At the White House Conference on Child Care in October, we 
heard from people from all walks of life about the importance 
of high quality child care choices for parents who work. The 
experience of these parents, providers, health professionals, 
and others echoes the message that recent brain research has 
taught us: For children in child care, the quality of that care 
has a tremendous impact on their development and readiness to 
learn.
    In support of this initiative, we are requesting 
approximately $2 billion in increases for child care in fiscal 
year 1999. Of this amount, $1.8 billion is entitlement funding 
to expand child care subsidies to reach a million additional 
children by 2003 and to create the Early Learning Fund. This 
Fund will enable States to provide challenge grants to 
communities to protect the health and safety of the youngest 
and most vulnerable children in child care and promote their 
early learning and development.
    In addition, the Administration requests $180 million in 
discretionary funds for several programs targeted toimproving 
the quality of care. The funds will support a National Child Care 
Provider Scholarship Fund to improve provider training and reduce 
turnover, a Standards Enforcement Fund to allow States to enforce their 
own health and safety standards by hiring more inspectors and 
increasing the number of licensing visits to child care programs, and a 
Research and Evaluation Fund to provide research into child care issues 
for low-income working families, consumer education, and to establish a 
national hotline to link families with resources.

                               head start

    The Head Start program fosters the development of young 
children from low-income families and enables them to function 
at their highest potential. There is an increasing body of 
evidence which supports the advantages which accrue to 
disadvantaged children and families who attend Head Start. 
Studies demonstrate the Head Start programs produce immediate 
gains across a diverse range of areas, such as cognitive 
functioning, academic readiness and achievement, self-esteem, 
social behavior, and physical health. Studies also show that 
Head Start children have better high school attendance rates, 
are less frequently retained in grade, and have less need for 
special education.
    Because Head Start makes a difference, we are requesting 
$4.7 billion for fiscal year 1999, a $305 million increase. 
This level will support 30,000 to 36,000 additional infants, 
toddlers, and pre-school children and their families; moving 
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, we will double the number of Early 
Head Start children served to a total of nearly 80,000 infants 
and toddlers by 2002. Our 1999 request will support nearly 
50,000 infants and toddlers, an increase of 10,000 over the 
1998 enrollment.
    We have made dramatic progress toward developing an 
outcome-oriented accountability system for Head Start which can 
be used to determine the quality and effectiveness of Head 
Start programs. The first results from our pilot give us reason 
for encouragement--the quality of classrooms is good, and, 
perhaps most important, program quality, including small class 
sizes, good adult to child ratios, and richer teacher-child 
interactions is related to children's outcomes, such as the 
development of language skills.

                   child welfare and child protection

    This budget reflects a strong Administration commitment to 
the safety, permanent placement, and well-being of children who 
have been abused or neglected or are in danger of abuse or 
neglect. Each year millions of children are the subject of a 
report of abuse or neglect. About 40 percent of these reports 
are substantiated, affecting nearly 1 million children a year. 
During 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 
our most vulnerable children.
    In response to these staggering numbers, Congress enacted 
the Adoption and Safe Families Act of 1997. We are pleased that 
this budget includes increases of $20 million in the Adoption 
Incentive Program and $4 million in the Adoption Opportunities 
Program in order to implement the act. Our goal is to double 
the number of children who are adopted from the foster care 
system or placed in other permanent settings from 27,000 in 
1996 to 54,000 in the year 2002.

                    programs to reduce violent crime

    The fiscal year 1999 request includes $105 million to 
reduce the violence that threatens all of us and cuts short too 
many lives. In addition to the $15 million requested for the 
Education and Prevention Grants to Reduce Sexual Abuse of 
Runaway, Homeless, and Street Youth, these funds include $88.8 
million for the Family Violence Program, and $1.2 million to 
continue the activities of the National Domestic Violence 
Hotline. Over 160,000 calls have been answered since the 
hotline became operational in 1996.

          programs for persons with developmental disabilities

    We are requesting a $5 million increase to implement the 
program authorized under the Families of Children with 
Disabilities Support Act. This demonstration authority offers 
States a small but crucial set of resources to assist these 
families to achieve self-sufficiency by addressing such 
problems as inadequate child care options, missed job training 
or job opportunities, and the loss of medical assistance.
    In conclusion, I would like to say that the agency's 
planning documents required under the Government Performance 
and Results Act (GPRA) and its budget are being displayed 
together for the first time. The Administration for Children 
and Families is committed to the achievement of results, to the 
measurement of results, and to working jointly with our State 
and local and nonprofit partners to achieve those results. The 
priorities reflected in our fiscal year 1999 budget support the 
strategic goals which have been developed in our performance 
plan and are consistent with the HHS strategic plan transmitted 
to Congress on September 30, 1997. Targets in the performance 
plan could change based upon final congressional appropriations 
action.
    We look forward to Congress' feedback on the usefulness of 
our plan, as well as to working with Congress on achieving the 
goals in the plan. Mr. Chairman, I wanted to say a particular 
personal thank you for your commitment to GPRA. We've been 
finding that it has really helped us focus on the work with our 
partners toward achieving results.
    Thank you, Mr. Chairman. I will be happy to answer any 
questions that you and the committee may have at this time.
    [The prepared statement follows:]

[Pages 733 - 741--The official Committee record contains additional material here.]


                            gpra-head start

    Mr. Porter. Thank you, Secretary Golden. Since you began 
with the President's budget, I have to begin with my 
sermonette, which goes something like this. The President's 
budget includes $100 billion in new revenue increases over the 
next five years in order to achieve balance. It is extremely 
unlikely that we're going to see this fiscal year any of that 
enacted into law. I may be wrong, but my read is that it is 
very unlikely that any of it will come about this year. Which 
means that the budget therefore overstates spending for the 
next five years, at least at this point, by the same $100 
billion. Which makes it more difficult for us because our 
allocations will be lower to meet the kinds of suggested 
increases that the President has put into the budget. 
Obviously, we hope that we have more resources. But I think the 
reality of it is we probably will not and that will make it 
more difficult for us to fund the kind of priorities that 
you've mentioned so prominently in your testimony. That's 
simply a backgrounder.
    Let's begin with what the General Accounting Office has 
testified before this subcommittee concerning the 
implementation of GPRA. They cited Head Start as being an 
example of a grant program that was very difficult to deal with 
under the Results Act. The program was designed for maximum 
local autonomy and the data that is reported to the Department 
is self-reported and unvalidated. It is primarily input data, 
that is, the meeting of standards and not outcome data. Of 
course, the ultimate test is how well Head Start students do in 
school in the years after they graduate from the program. This 
requires a major tracking and evaluation effort on your 
agency's part. That would seem to me to be an integral part of 
determining what difference Head Start makes in the lives of 
young children.
    How are you approaching this major effort to track Head 
Start students after they leave the program? And how much is it 
going to cost you to do this in the right way?
    Ms. Golden. I'm actually delighted to talk about this 
because I think it's a big success story. Now that you've 
highlighted that GAO, before they saw our plan, thought it was 
going to be a real difficulty, I actually think this may be a 
particularly important area that we may all want to highlight.
    Since the 1994 reauthorization where Congress told us to 
focus on measures and outcomes, we've been very serious about 
creating the ability to assess and report the outcomes for Head 
Start children. For example, we want to assess and report 
cognitive outcomes; the academics call it early numeracy and 
literacy, or the kinds of skills that you would see in a four 
year old that would make it likely they would succeed in 
school. We've put the investment into measuring those outcomes.
    You'll see in our GPRA plan that we completed a pilot last 
spring, which was a nationally representative sample. This year 
we're carrying out the first year work. Even from the pilot we 
learned a lot, because what we're doing is looking both at 
outcomes and at quality of the programs. In the past, we were 
able to look at quality but we didn't have the outcome 
information to see how they matched up. What we learned from 
the pilot is both that quality was good and that the outcomes 
looked good. We also learned that if you looked across 
programs, higher quality linked to better outcomes in the way 
you would hope was true, especially in terms of the language 
and literacy skills.
    We've made the investment together with a range of 
researchers to go from the pilot to this year's sample. We're 
working with others in the Administration in our hope to have a 
sample that can continue so that we'll also be able to look at 
the children after they enter school. We are going to set the 
baselines and targets once we have this year's information.
    It sounded from the GAO comments before they saw this plan 
as though they thought it would be hard because of local 
autonomy. But I actually think that while Head Start programs 
care enormously about the ability to tailor services to the 
local community, they do share a conception of what quality is 
and what good results for children would be. We've done a lot 
of consultation and have had a real shared sense of excitement 
about being able to collect this information. We're very proud 
of that.

                          head start research

    Mr. Porter. Let me have you respond specifically to some of 
the things that were in the GAO report and you can tell me 
whether they didn't have the plan or they're not thinking in 
the correct way.
    ``The body of research,'' this is from GAO, ``The body of 
research on current Head Start is insufficient to draw 
conclusions about the impact of the national program.'' ``No 
single study used a nationally representative sample, 
permitting findings to be generalized to the national 
program.'' ``Although the body of literature on Head Start is 
extensive, the number of impact studies was insufficient to 
allow us to draw conclusions about the impact of the national 
Head Start program.'' ``No completed large-scale evaluation of 
any outcome of Head Start that used a nationally representative 
sample was found in our review.'' ``Most of the research that 
HHS cited as evidence of Head Start's impact is outdated, 
however, and, as previously mentioned, insufficient research 
has been done in the past 20 years to support drawing 
conclusions about the current program.''
    Those are fairly definitive statements made by GAO. Canyou 
respond to them?
    Ms. Golden. Sure. We believe that those statements are not 
correct. There is an important review of the literature that 
the Packard Foundation just did. Also there are also summaries 
of the literature done by the Advisory Committee on Head Start 
which included distinguished researchers, and was a bi-partisan 
group. I would say that the consensus of the researchers 
looking at the research is that there is clear evidence across 
a range of studies of the impact of Head Start on school 
readiness. There's a smaller pool of studies that address those 
impacts that appear later, such as reduced use of special 
education.
    GAO used criteria to select studies based on more narrow 
criteria than most of the distinguished researchers in the 
field have used. At the same time, I share their view that we 
should be continuing to seriously invest in research. That's 
why we've made the investment in outcome measurement. We're 
also doing an Early Head Start a research study that is a 
random assignment study and includes an extraordinary array of 
distinguished research partners. We're making a range of 
investments to extend what already exists to the next steps.

                    head start performance measures

    Mr. Porter. The Department's press release on the 1999 
budget says with respect to Head Start that, ``Program 
qualities improved, including increased salaries for Head Start 
teachers, improved facilities for children, and safer and 
better equipment.'' These are not, of course, performance 
measures. Can you cite any empirical data to indicate that 
these inputs actually improve the readiness of children in Head 
Start for school and improve their success in school?
    In looking at your annual performance report, you have 
about 15 or so performance goals listed for Head Start. It 
looks to us like 10 of these are simply listed with the phrase 
``measure and baseline to be established by 1999.'' This does 
not seem adequate to us when we are looking at nearly a $5 
billion request for the program. Don't you believe that 
Congress is entitled to more than this when you are asking us 
to appropriate that amount of money?
    Will you describe for us some of the principal performance 
goals in your annual plan for Head Start, how you went about 
establishing them, and how you intend to actually measure and 
validate results?
    Ms. Golden. As I had the chance to explain a moment ago, 
the performance measures where the baseline is about to be 
established are ones where we've made the investment in 
collecting information for the first time from a national 
sample. We carried out the pilot last spring and we're carrying 
out the sample this year. I think it is a very exciting first. 
It is collecting information from a national sample on 
children's cognitive development, their development in terms of 
the pre-literacy skills, their social/emotional development, 
what teachers and parents assess about their development. We 
think that is very important. It adds to a range of other 
outcome measures we had before, for example, children's health. 
But we added to that by investing in collecting all of that 
outcome information.
    That outcome information provides one of the key empirical 
pieces of evidence that you asked me about at the beginning. 
One of the things we learned from the pilot, which is 
consistent with previous research--is that key process 
measures, teacher qualifications and retention, for example, do 
relate to the key outcomes. We're excited about that. I think 
it is consistent with what previous research shows. We think 
that it is centrally important to be carrying out that major 
outcome effort.
    Just one other thing about why that investment in outcomes 
is so important. It is not only important for Head Start, it's 
important for child care and the education world because what 
we're doing is groundbreaking and it's of interest to the range 
of people in the education world and in the child care 
community who have also been looking for measurement strategies 
that would work in early childhood education. The GPRA 
legislation and focus as well as the 1994 reauthorization have 
really stimulated some important work.
    Mr. Porter. Thank you, Secretary Golden.
    Mr. Hoyer.
    Mr. Hoyer. Thank you, Mr. Chairman.
    Welcome, Secretary Golden. Good to see you.
    Ms. Golden. Thank you.

                          head start grantees

    Mr. Hoyer. How many Head Start programs are there now in 
the United States?
    Ms. Golden. There are about 1,600 grantees. If you add in 
delegate agencies, I think it's probably over 2,000.
    Mr. Hoyer. If you add in what agencies?
    Ms. Golden. If you add in delegate agencies, which are, for 
example, grantees working with other nonprofit agencies in 
their communitees to serve children.
    Mr. Hoyer. Are we talking about 1,600 grantees with maybe 
400 subcontractors?
    Ms. Golden. Yes. I don't know the exact number of delegate 
agencies, but that's about right.
    Mr. Hoyer. Is that the concept?
    Ms. Golden. That's about right.
    Mr. Hoyer. So we are talking about approximately 1,600 
programs?
    Ms. Golden. That's right.
    Mr. Hoyer. As you know, I have had a discussion with 
Secretary Shalala and some of your predecessors over a long 
period of time and have talked about the fact that for 30 years 
we concentrated on process. How many Head Start grantees do we 
have on the list now?
    Ms. Golden. I don't know the exact number of seriously 
deficient grantees at this point. Typically, I think we've been 
dealing with 20 grantees at one time, something like that. The 
numbers aren't large but it's critically important to address 
them because you're both able to turn around quality in that 
program and send a signal to other programs. That'sbeen very 
important.
    One of the things we've seen over the last few years is 
that the quality of Head Start programs, as demonstrated by our 
monitoring, has gone up and the number of seriously deficient 
grantees has gone down as we've focused both on tough 
enforcement and on quality support.
    Mr. Hoyer. How many grantees, if any, were canceled last 
year?
    Ms. Golden. Certainly some were. I don't know the exact 
number for last year.
    Mr. Hoyer. I would like the exact number of grantees that 
were canceled last year and I would like to know who they are 
for the record. I would also like the list of the at risk 
grantees.
    Ms. Golden. I'll check. I'm sure that at the point where 
we've officially notified them it should become public.
    [The information follows:]

[Pages 746 - 748--The official Committee record contains additional material here.]


                        head start collaboration

    Mr. Hoyer. As you know, I am very interested in coordinated 
services, particularly as it relates to children and families. 
What efforts are you making to coordinate within the Department 
of Health and Human Services, Department of Education, 
Department of Labor, USDA, and HUD? There may be other agencies 
that would be useful collaborative partners.
    Ms. Golden. Those are key. Actually I was at an Early Head 
Start program the other day which had collaborated with the 
Department of Defense. They were located in a Department of 
Defense child care center. The Department of Justice is 
sometimes a collaborator of ours as well. I would just 
underline my agreement with your commitment over the years to 
focus on collaboration. The only way to make services work for 
children and families is to put the pieces together.
    In my experience, we have to do that in two ways. One is in 
the community. We have to make sure that local child care and 
Head Start and Early Head Start programs have the flexibility 
as well as the clear direction and expectation that they'll 
reach out to other programs at the community level. And at the 
Federal level, we have to stress building those bridges.
    Just a couple of examples, and there are many. Last year we 
provided our Head Start expansion resources with a reward--with 
an incentive for those programs that were building links to 
child care. And as I've been travelling in the last few months, 
I have seen a lot of really interesting collaborations. The 
State of Maine has put together a statewide child care-Head 
Start collaboration in response to that initiative. I was just 
in Connecticut following a field hearing where I saw 
Congresswoman DeLauro and had the chance to meet with a group 
of people that put together a bipartisan initiative there which 
brought together the State Department of Education, local 
school systems, child care, and Head Start to focus on quality 
care for three and four year-olds. What they're doing, and this 
is an interesting innovation, is making the resources available 
to programs that will accept either the Head Start performance 
standards as the real gold seal of quality or NAEYC 
accreditation. And they're doing that with State resources. So 
those are just a couple of examples.
    We've been trying with all of these agencies both to 
convene people at the local level and to try to build the 
bridges at the Federal level.
    Mr. Hoyer. Madam Secretary, I have become convinced, and 
Secretary Riley, Secretary Shalala and others have convinced 
me, as well as practitioners on the ground who have tried to 
put these collaborative efforts together, that you have got to 
start from the ground up. Because if people don't want to do it 
at the local level, it's not going to get done.
    But, on the other hand, I am for mandating the Federal 
Government to better collaborate and overcome its turf and its 
geographic limitations so that federal agencies are 
articulating with our kindergarten and first grade teachers. 
There needs to be a collaborative effort there and a knowledge 
as to what is going on. What are we going to do to accomplish 
this?
    As you know, I was very concerned, and remain concerned, 
about the 1994 authorization for construction funds 
availability in Head Start. I am opposed to that, as you know, 
because I think it will utilize very scarce resources. We know 
we have schools that are collapsing. To build new Head Start 
and try to build new schools at the same time is a waste of 
money and does not effect the collaborative effort that I would 
like to effect.
    Ms. Golden. It sounds as though the question really is 
about both what we're doing to force ourselves to collaborate 
and what we're doing in this particular example around 
construction.
    On the broader question of what we're doing to force 
collaboration, I certainly wouldn't claim to you that it is 
perfect. But I think that both in the early childhood area and 
in the welfare-to-work area having, again, it's sort of the 
GPRA idea, having a clear sense of the results we're trying to 
accomplish, is pushing us all to collaborate in some powerful 
ways. Maybe I should give you one example in each area.
    On the early childhood side, one of the things we've done, 
and this is within our agency, Head Start and Child Care, we 
were encouraging local programs to collaborate. Sometimes they 
were running into bureaucratic rules or fiscal obstacles. So we 
just had a conference where we brought together our fiscal 
experts as well as the programmatic leaders and worked through 
systematically the sensible ways to do these things so you 
don't have to invent them over and over again each time. That's 
anexample.
    On the welfare reform side and the welfare-to-work side we 
collaborate with HUD, USDA, and Transportation as critical 
partners. We've been meeting at the Federal level in 
Washington. We have also been pushing our regional offices to 
bring people together. That's been very productive. Just one 
example. We've been finding that transportation is a major 
issue for families moving into the workplace, and having the 
Department of Transportation be at the table and encourage 
local transit authorities to be at the table has been 
enormously useful. So those are examples.
    On the issue of construction, we're still continuing to 
review individual examples. I would note that in the context of 
the Connecticut Initiative, where I met with people, 
constraints on school space came up as an issue. The idea that 
people should talk together about how to solve problems 
certainly was bubbling up. I don't think I have a comprehensive 
solution to report to you, rather sort of case by case 
attention to that issue.
    Mr. Hoyer. I would like you to provide me with a list of 
programs that were given construction authority. I know it was 
very few up until recently and I hope it remains very few.
    Ms. Golden. We would be happy to.
    [The information follows:]

HEAD START CONSTRUCTION LOANS

Program:
                                                          Amount of Loan
    Philadelphia Parent Child Center, 2515 Germantown Ave, 
      Philadelphia, PA 19133..................................  $240,000
    Indiana County Head Start, 550 Philadelphia St., Indiana, 
      PA 15701................................................   219,000
    Total Action Against Poverty, PO Box 2868, Roanoke, VA....   520,000
    Self Help East Bay Head Start, 16 Liberty St., Warren, RI.   250,000
    Action Opportunities, Inc., Cross St. Box 562, Ellsworth, 
      ME......................................................   100,000
    Grand Forks School District, 3600 6th North, Grand Forks, 
      ND...................................................... 1,295,000
    Marion Crawford CAC, 240 East Church, Marion, OH..........   120,125
    Dane County Parent Council, 2096 Red Arrow Trail, 
      Fitchburg, WI 53711..................................... 1,270,524

    Mr. Hoyer. I know I have gone over my time, but the 
Connecticut example is a perfect opportunity. There is school 
space constraint but I bet the school base has a cafeteria, 
janitorial services, and recreational facilities available in 
that school. If you took the Head Start construction money and 
built a facility adjacent to the school, accessible even in 
weather to the school, you save on nutritional services, on 
recreational services, and janitorial services while providing 
quality Head Start services. Then you have the articulation 
between the Head Start, the pre-K, K, and first grade teachers 
talking to one another about Sally and what is she doing at age 
three and four and what is she going to do at age five and six.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Hoyer.
    The Chair would note that the rule has motivated Democrats 
to arrive en masse this afternoon. We have four in a row before 
we get back to a Republican.
    Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman.
    Thank you to you, Secretary, and I appreciate your coming 
up to Connecticut and participating in the field hearing. It 
was outstanding. I'm delighted that you got a chance to meet 
with some of the folks up there and see the kinds of things 
they are doing.
    Ms. Golden. Thank you. I really appreciated the 
opportunity.

                       early head start--quality

    Ms. DeLauro. I'm really very, very excited to see the 
proposed expansion of the Early Head Start program for children 
who are age zero to three. I think it is the direction that we 
have to move in. I think it offers an important opportunity for 
those youngsters who are able to participate. Even though we're 
looking at this expansion, we know that we're going to serve 
less than 2 percent of the eligible children.
    The question that I have moves in that direction and 
focuses in on quality. Given what we know about the importance 
of quality care for young children, what I think it's 
imperative for us to focus in on and make sure that the Early 
Head Start programs receive the training, the technical 
assistance, and the monitoring in order that we are providing 
the best possible care for these children. It is my 
understanding that in the Early Head Start the training and 
technical assistance contract envisioned a smaller number of 
programs and this may be stretching our resources here.
    The first question is, how are we addressing that issue? 
And secondly, what kind of training is being given to Head 
Start staff in the regions so that, in fact, they're equippedto 
monitor Early Head Start programs that are serving infants and toddlers 
which, as we know, are different from the Head Start programs that are 
serving pre-schoolers?
    Ms. Golden. I would start by underlining the fact that 
quality is critically important in Head Start as a whole. It 
is, if anything, more important for babies and toddlers because 
they're more vulnerable and because, as we know from the 
research, the changes that happen in children's brains in those 
years are critical. So I think there is nothing more important 
in all of my responsibilities or our responsibilities than 
making sure those programs are top quality.
    We've benefitted in Early Head Start by the lessons of Head 
Start; for example, having the set-aside resources for 
technical assistance. A quick sketch of what we've been doing 
in general and then let me answer your specific questions about 
being stretched. We've been focusing on a range of technical 
assistance activities. We have a new director's program at the 
time an Early Head Start program is selected. I think that's 
the one I was delighted to hear at that field hearing. She 
described the program as awesome, which was wonderful news for 
me. We're also doing on site training for staff, for teachers 
so that they get to receive intensive training. Consultants are 
available through the Technical Assistance Network.
    We also are monitoring, and you've highlighted that. This 
year we will be monitoring all of the programs that received 
grants in the first wave of Early Head Start. They've been 
operational for a year. We will be monitoring them in relation 
to the performance standards that went into effect January 1st 
of this year which were mandated by the Congress in the 1994 
reauthorization. That's the first time there have been infant/
toddler performance standards in Head Start and we're very 
proud of them. Those are some of the key steps.
    We're taking very seriously the issue of how we enable this 
technical assistance system effectively move from working with 
22,000 to almost 39,000 babies and toddlers. We'll be able to 
increase the investment because of the set aside approach in 
technical assistance. But we've also been trying to talk with 
some of the best and the brightest researchers about anything 
we should think about differently, what else should we be 
doing. We have had some very successful conversations. They've 
been highlighting ideas like spending even more time with 
people in initial planning so that they start off completely on 
the right foot, with the idea of having the technical 
assistance consultant be on site perhaps for periods of time.
    In terms of regional office staff and monitoring, we're 
having regional office staff receive training from one of the 
distinguished consultants, Ron Lally in the Southwest 
Institute. We also have been focusing on making sure that the 
monitoring teams have a mix of Federal staff, as well as 
distinguished peers and distinguished people in the field, 
which is what we do throughout Head Start. We're working very 
hard on effective monitoring and it is something that I think 
we have to keep paying attention to over the coming months and 
years.
    Ms. DeLauro. Just one final comment on this whole effort 
here. I'm always struck by the words of Dr. Comer, who was a 
pioneer in the efforts of child development, that it is the 
quality of the environment in which our children are in and, 
particularly in the zero to three, what we know that provides 
that atmosphere for development so that they can move forward.
    Ms. Golden. Absolutely.

                               child care

    Ms. DeLauro. I was contacted, and I mentioned this when the 
Secretary was here, I was contacted by a grandmother who lives 
in Clinton, Connecticut, which is in my district, and just let 
me run through this very, very quickly. Her daughter was able 
to get off of welfare and get a job until the State's delays in 
paying the child care provider forced the provider to close. 
When my constituent's daughter lost her child care, she also 
lost her job. This is an administrative snafu. It has an impact 
on people's lives. In my view, that's not what we're trying to 
accomplish in welfare-to-work.
    What kind of oversight does your department have to ensure 
that States are dispersing Federal child care funds 
efficiently? Is there anything that we can do at the Federal 
level to make sure that this doesn't happen again, whether in 
Connecticut or anywhere else in the country?
    Ms. Golden. I agree with you that that's absolutely the 
wrong thing to have happen. Let me say a little bit about the 
Connecticut example and then the broader one. Actually, that 
same day that I was in Connecticut with you at the field 
hearing I did have the chance to talk with some senior 
officials and I did have the chance, because I was aware that 
Connecticut had had some problems in terms of a contractor 
paying out on child care, to let them know how seriously I took 
it. I think they heard that message. And their perspective is 
that it has been addressed. I haven't checked back; you may 
have a better sense than I do. I think it's always possible for 
us to convey concern and the fact that it isn't the appropriate 
direction.
    In terms of the overall Federal role, it is a block grant. 
We shouldn't be involved in with every piece. I do think though 
that if States have child care failures that interfere with 
their ability to enable families to move to work and to stay at 
work, that will harm them on the welfare reform side. As you 
know, for example, the Congress put into the welfare law 
incentive payments to reward States for high performance. And 
if States systematically are failing on the child care side, I 
think one thing we know is that they won't succeed at moving 
families to work and at having them stay at work. I think 
that's one area where we will have some leverage.
    Ms. DeLauro. Thank you very much.
    Mr. Porter. Thank you, Ms. DeLauro.
    Mr. Stokes?

                     head start full-day, full-year

    Mr. Stokes. Thank you, Mr. Chairman.
    With regard to the Head Start Program, to what extent are 
we addressing the need for full-day and full-year child care 
services and partnershipping with local child care centers and 
family child care homes?
    Ms. Golden. That's an enormously important issue. As I know 
you're well aware, as families move to work from welfare, as 
more low-income families are working, they need full-day 
services. As I was saying to Congressman Hoyer, last year we 
used our Head Start expansion resources in a way that 
encouraged those partnerships and we are seeing them around the 
country. I've had the chance to visit some and I actually had 
the chance a couple months ago to visit a program that is 
actually providing Head Start services in the evening for 
parents with shift work because that is startingto happen as 
well.
    So I would say that there is enormous interest around the 
country, that there are a variety of partnerships, but we still 
aren't completely there. We do have parents who need longer 
hours than they're getting. But we are working hard to do 
everything we can do to make sure that programs can put those 
pieces together.
    Mr. Stokes. Can you tell us how many additional full-day/
full-year slots will be provided by your Fiscal Year 1999 
budget request?
    Ms. Golden. We do not have an exact number for full-day and 
full-year slots. We'll be seeking applications, and putting out 
resources while encouraging applicants to include a community 
needs assessment and a look at collaboration. So I don't have 
an exact number for you. We should be able to report to you on 
the results from 1997 which would give you a sense of what we 
could expect in 1998.
    Mr. Stokes. Are you in a position to give us some 
indication, or some idea of how many children are in need of 
full-day/full-year services that you're not able to provide the 
service for?
    Ms. Golden. Again, I don't think I have an exact number, 
although we will look for a number. I think my own sense as I 
travel and I talk with people is that there are considerable 
needs and they are getting greater as we're succeeding in terms 
of making the link to move families to work.
    I was, just for example, visiting an Early Head Start 
program. We're learning a lot on the Early Head Start side 
because those are programs that between the time they applied 
and now, have had to shift their planning because more families 
need longer hours. The program I visited serves families in a 
variety of settings. It has home visiting if it's a two parent 
family with a parent at home, it has family child care and it 
has child care centers for parents who work. They are finding 
that the distribution of needs is moving toward working 
families. I think that's probably the central message; there 
are more than there were and it is changing each day.

                         responsible fatherhood

    Mr. Stokes. As we now seek to strengthen families, it is 
becoming increasingly clear we must do more to help restore 
parent-child relationships. Today, we're seeing more attention 
being given to the working concept of responsible fatherhood. 
While there are a growing number of programs across the country 
that carry this mission, do we really know what is working in 
this area?
    Ms. Golden. That's an interesting question. I was actually 
just talking with some of the children's experts in one of the 
States I was visiting about what we know. I think we're at the 
early stages. I don't think we have answers yet. We're funding 
some demonstration projects. Actually, one direction we address 
this issue is through our child support resources. There is the 
access and visitation project there that the Congress created 
and we've been trying to do some demonstrations there. In 
addition, a number of Head Start programs focus on fatherhood 
and male involvement.
    I would say that we certainly have some lessons we think 
are true. For example, reaching fathers at birth is also an 
important time. It's not only the mother for whom that moment 
is really important, and you have a good chance to keep a 
father engaged. We also know that reaching fathers and 
encouraging continued involvement is a way of contributing to 
continued economic support. I think we know some early lessons 
but I don't think we know the final answers yet. We need to try 
a range of strategies.
    Mr. Stokes. In terms of responsible father projects that 
you are currently knowledgeable of within your department, can 
you give us some idea of the total level of that investment?
    Ms. Golden. We could provide you with a list and with the 
dollars. There is some work that is going on outside my portion 
of the agency. But within ACF, we're investing through some of 
our research and demonstration resources in the child support 
area. A number of Head Start programs, in the Southern region 
in particular, have done some really important work on male 
involvement and father involvement. We've also had some 
outreach through some of the work with youth. I think there are 
several different places where we're putting those pieces 
together. In addition, some States may be choosing to create 
initiatives in that arena through the resources that we give to 
them.

                   child abuse and neglect-prevention

    Mr. Stokes. Let me ask you about child abuse and neglect, 
which I think we can all agree is a very serious matter. What 
major prevention initiatives have you undertaken in this area?
    Ms. Golden. Yes. As you know, that's an enormously 
important arena. Prevention is critical because if you reach 
families early and can prevent children from going through the 
agony of abuse or neglect, you've made a huge difference to 
their lives. I would highlight several different initiatives. 
Essentially States and communities carry out the initiatives 
but we try to fund them, stimulate them, and provide 
leadership.
    Congress, in the Adoption and Safe Families Act, actually 
reauthorized some resources that are important to the 
prevention area, the family support resources. So that's one 
program focused on this area. Another program is the community-
based family resource programs where States provide resources 
at the community level. A third place is Early Head Start. 
Early Head Start programs in some cases, like the one I 
visited, are doing home visiting programs that focus on 
children's development but also on the parent's learning and 
the parent's relationship to the child. It is another area 
where putting the pieces together at a local level is critical 
because you can have resources coming from several different 
places. And the fourth place that I would highlight is that the 
Congress has given us authority to authorize State waiver 
demonstrations in relation to child welfare. Several States 
that we've approved have wanted to focus on an early prevention 
approach as part of what they were doing. So there's a range of 
places that we're working on that relate to prevention 
activities.

                        welfare reform/research

    Mr. Stokes. We've talked a little bit about welfare reform 
this afternoon. The Welfare Reform Act was enacted without the 
benefit of research conducted in the communities where welfare 
recipients are found in large numbers. So that the community-
wide impact might be understood, is there a welfare reform 
research agenda? Can you talk about that a little bit for us?
    Ms. Golden. Sure.
    Mr. Stokes. To what extent will research centers in 
Historically Black Colleges andUniversities and other minority 
institutions be involved in this effort.
    Ms. Golden. Let me start by underlining your point that the 
research agenda on welfare reform is enormously important. You 
will see in our request that we believe it is important and we 
request the resources to support it. It is important because 
one of the things that welfare reform has done is decentralize, 
so there are different things going on in different places. In 
order to find the creative and effective ideas and to find 
those that aren't working, we need to be conducting research so 
we can offer you as policymakers the pertinent information.
    There is a set of key pieces to our agenda. One piece is 
our work with States around evaluations of particular policies, 
and we've supported some of those. We are focusing on making 
sure that those evaluations look at outcomes for children and 
for adults. And we have many more States that want to work with 
us than we have resources to work with them. A second piece is 
a range of evaluation projects with different researchers and 
community organizations that have projects. Last year, we did a 
general announcement for a range of issues and got approximtely 
100 requests. We were able to fund 9 projects. There is 
enormous interest in welfare reform evaluation. A third piece, 
as you know, includes areas that may be particularly affected 
by welfare reform, including rural communities and inner-city 
communities. Those are all very important pieces of the 
research agenda. In addition, a final piece which links GPRA 
and a results focus is one that uses our research to help us 
think about the best measures to use in assessing State 
results. I think there is really an important agenda.
    In terms of the involvement of Historically Black Colleges 
and Universities, I'm familiar with our work with Historically 
Black Colleges and Universities around the early childhood and 
Head Start agenda. I don't know whether any are currently 
involved in our welfare reform research agenda, and we'll get 
back to you with that information. There would certainly be 
important opportunities there.
    [The information follows:]

                        Welfare Reform Research

    There are currently no Historically Black Colleges or 
Universities that are receiving welfare reform research funds.

    Mr. Stokes. I would appreciate it if you would follow 
through on that for me. We must be sure to get that piece of 
information into the record.
    Ms. Golden. I will do that, sir.
    Mr. Stokes. Thank you. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Stokes.
    Mrs. Lowey?
    Mrs. Lowey. Thank you, Mr. Chairman.
    Welcome, Madam Secretary.
    Ms. Golden. Thank you.

                             Welfare Reform

    Mrs. Lowey. I just want to say at the outset, as we read 
through the budget, the scope of the programs you administer 
are really extraordinary and I want you to know that you 
personally have my enormous respect. Just to keep track of it 
is amazing.
    Ms. Golden. Thank you.

                             Welfare Reform

    Mrs. Lowey. We certainly appreciate your detailed, 
knowledgeable presentation. One of the areas surrounding 
welfare that I've been particularly concerned with is the 
problems of welfare dependency and domestic violence, because, 
frankly, they're often intertwined. I certainly know that in my 
State there is great competition for the exemption because so 
many women have severe domestic violence problems.
    I noted in your budget justification that some domestic 
violence funds will be used to provide States with information 
on how to best assist these women on welfare who are also in 
domestic violence situations to become more self-sufficient. 
I'd be very interested to know what you're planning, what 
models will you be disseminating. It is an enormous challenge. 
How will you accomplish this?
    Ms. Golden. It is an enormous challenge and an important 
one. As was noted in the budget justification, we have gone to 
one of the experts in terms of national knowledge to collect 
models and information and provide training. I actually had the 
experience myself several months ago of visiting a program in 
Anne Arundel County in Maryland where both child support and 
welfare workers have received training through this strategy on 
domestic violence issues.
    I was very struck by the way in which the workers said it 
changed their way of dealing with parents and it also made them 
more successful at enabling mothers to move towards self-
sufficiency. That is, in some cases a mother might need a 
strategy that would not let her move to work, but in other 
cases, if they ask the right questions and learned what she 
needed, she might need a security deposit and the first month's 
rent so that she could move. Then she might be able to take 
some steps toward work that shecould not have taken before.
    The workers learned understanding, sensitivity, and a 
knowledge about the resources in that community that were 
available for families. That changed their perspective 
dramatically.
    I think the critical things here are to learn about the 
knowledge that's out there in the domestic violence community, 
to collect best practices, to disseminate those, and to work 
with States on the training of people at the line level who are 
talking to families. I think that as long as it's theories it 
may not work for parents, but if people at the line level 
change their perspectives, that will make a difference.
    Mrs. Lowey. I've visited some of these shelters and, as 
you're saying, it's more than the lectures, more than the 
books, it's the people who are there on the front line, and the 
smaller the better. The most successful shelters, I don't know 
if you visited Langhouse in lower Manhattan, there are several 
very successful ones, are the ones that have maybe a dozen or 
more women, they have people there with specific responsibility 
to provide employment assistance, help with their children, and 
they are providing child care.
    Again, what I find amazing about so many of these difficult 
challenges we face, as Dr. Comer has found with the education 
system, a lot of this is not rocket science. He will often say 
what the child needs is a warm environment where they feel the 
teacher cares, the principal cares and they are helping to lift 
this child up to achieve their potential. In these shelters 
where they are most successful, there is someone at the top who 
cares and there are people in that center that are really 
focused on what each individual person needs beyond a safe 
environment so the abuser won't be following them.
    I feel very strongly that unless we are really learning, 
and that's why I was interested in how we're spending this 
money, unless we're learning from the successful models and 
trying to replicate them, it is not rocket science and I'm 
concerned that the money is just going to go to some person who 
is going to write some manuals. But what we really need is to 
replicate the successful models. I've seen some of the larger 
shelters and it is the impersonal nature of them that I think 
leads to failure.
    Ms. Golden. I think that's right. I think we need to 
replicate success and we need to take those lessons and make 
them real for the range of people who will be working with 
families.

                          adoption initiative

    Mrs. Lowey. I look forward to continuing to work with you 
on that.
    Another area. I've applauded the Administration's adoption 
initiative which is intended to move children more quickly out 
of foster care and into permanent homes. Could you discuss with 
us what you have found to be most effective in finding long-
term placements for children, what initiatives would you be 
intending to replicate if the adoption request is funded, and 
why is it so important to fund this discretionary program.
    Ms. Golden. Let me start with why it is so important to 
fund it and then talk to you about what we'll be funding. As 
you know, the Congress passed and the President signed the 
Adoption and Safe Families Act, responding to the fact that we 
need to put children's safety first and their permanence 
central, and that too many children linger in temporary 
settings for a long period of time. Carol Williams, who is the 
Associate Commissioner for the Children's Bureau, has a 
wonderful phrase for this. She says, ``When we carry out this 
legislation, everyone in the system will look at a child with a 
child's timeframe.'' Two years or three years or four years 
being in limbo can be very damaging to a child. And so the 
legislation is meant to ensure that children have a safe, 
permanent home.
    There are two sources of funding for this initiative: One, 
the adoption incentives program which reflects the focus on 
results by providing States with additional resources if they 
increase the number of children adopted from the foster care 
system; and the second program, which you've highlighted, is 
the discretionary adoption opportunities which provides 
resources for technical assistance and to enable States to 
reduce the barriers to adoption.
    Let me give you some examples of barriers. I have been 
talking to States a lot about this as I've been traveling. One 
set of issues is about the court system--coordination with the 
court system, We anticipate about $5 million will go to States 
for a range of projects and activities to reduce these 
barriers. A second set of issues mentioned in the law has to do 
with geographic barriers. A State may have adoptive families 
waiting in one geographic area, an enormous number of foster 
care children in another, and not have figured out how to make 
a connection between them. People around the country have been 
trying to come up with some strategies to reduce such barriers. 
That is the kind of model you could replicate. Another thing, 
and this is another one of those things that's not rocket 
science but is very hard to accomplish, is concurrent planning. 
In some cases wishful thinking may be the reason that two, 
three, four years go by while the worker is trying to reunify a 
child with his or her parent. Sometimes a worker won't start 
the focus on adoption until there is no hope of reunification, 
when they could be planning for both possibilities from the 
beginning.
    Mrs. Lowey. Thank you very much. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Lowey.
    Mrs. Northup.

                            early head start

    Mrs. Northup. Thank you, Mr. Chairman.
    Madam Secretary, I have some questions that take a little 
bit of a different tack. I think we all agree that the early 
years of every child's life are just so important as later 
years. It is very difficult to find the balance of right 
programs. Every family is different, every child is unique. 
Most parents benefit from constant encouragement, constant 
participation--and even every background, every level of 
experience, they all benefit from those.
    I wanted to ask you about some of the recent studies that 
talk about the American family. They say that stress and sleep 
deprivation is a terrible problem for the parents, and that 
there is attachment disorder problems between many young 
children. I worry that as we try to provide better 
opportunities for our very young children that we might begin 
to so institutionalize it that we lose the benefits of what 
some families are providing now. I was surprised to read last 
week that 50 percent of all pre-school children right now are 
at home with their moms--that doesn't mean that 50 percent of 
moms are home, it means 50 percent of pre-school children 
arewith their moms--and that half of the children that aren't at home 
with their moms are with their grandmoms or with a relative.
    I had an experience, but I really want to protect the 
school and teachers. I do spend a great deal of time in the 
schools and there are fabulous teachers, but I had an 
experience also recently where a classroom full of learning 
disabled pre-school and first and second-graders were in a room 
with somebody who could have cared less about these children. 
There was no relationship. I felt like I should stay just to be 
there for a whole day with these children. And that's not the 
first example. Like I said, it is not the majority, it's just 
an example.
    When we consider that the institutionalization of what 
works best in providing, I'm worried that we will have probably 
less training for people that are in the system for zero 
through three, that we're already stretched too thin to provide 
always good experiences within our schools, and there are other 
opportunities to help stretch the dollars. Let me give you a 
couple of my concerns.
    One of them is that in the minority community in 
Louisville, in several of the really inspirational faith-based 
efforts, they are finding that they have had started these 
wonderful programs, they have engaged the families, and now as 
the school system seeks to expand the Head Start and 
everything, it sort of preempts or negates their efforts rather 
than build on those efforts, rather than collaborate.
    We know that family literacy is extremely important and 
successful if the most at-risk children are going to read. Yet, 
there seems to be an effort by Head Start to exclude the family 
literacy. In fact, I had somebody recently that was involved in 
a program say to me, ``It is almost getting to be that the 
school system wants to take the child home from the hospital 
and provide full-day efforts.'' This isn't somebody that's in a 
church-based system or anything; this is somebody that is part 
of the system that is struggling with inadequate resources, 
tremendous needs for specific children. Unfortunately, an 
effort to create such a system that the individual needs and 
opportunities seem to be overlooked. I know that's a big 
picture, but can you respond to whether you're sensitive or 
concerned about that?
    Ms. Golden. Let me try because I talk to a lot of parents. 
I think many of those issues are very broad issues; that is, 
what I hear you saying and what I hear a lot from parents' 
saying is that they have lots of different kinds of choices. 
And, when they need to work their wish is that their child can 
be with somebody who is warm, connected and responsive to their 
child. I do think, by the way, that one of the areas where we 
have a consensus from research and from what parents think is 
one that knows what quality is for babies and toddlers, and 
what those warm and responsive relationships are like. That's 
important.
    I want to give you one example of what I think it means to 
respond to those concerns. I had the chance about two weeks ago 
to visit an Early Head Start program which is actually near 
here, in Northern Virginia. They have a home visit portion of 
the program which responds to parents who are at home. In their 
case, those are mostly immigrant families where the husband is 
working perhaps at different kinds of day labor or construction 
and the mother is at home. The home visitor is able to work 
with that family in the home. They have family child care and a 
small center child care program. I want to tell you the story 
of the family program because I think it helps you see how you 
can focus on quality in really informal settings, in a 
neighbor's home or a relative's home.
    The mother there told me about the difference between 
having her child go to a family child care provider who had 
received support and training from Early Head Start versus what 
had happened before with their previous child care provider. 
She said ``Now my child is happy to go. She used to cry.'' She 
said, ``This woman is down on the floor with the kids playing 
with toys, playing with them, engaged with them. There is a 
schedule and structure but it is also responsive. Each of my 
children feels they get individual attention.'' And for me, 
that was a parent saying the abstract word ``quality'' that you 
people use means something real and I can see it through my 
child.
    I would say as we invest in Early Head Start, in Head 
Start, and in quality child care we need to make sure that 
we're helping parents find the choices that they need for their 
children. That's what this is all about--safe and healthy 
environments that are good for children and help them grow.

                    adoption opportunities--grantee

    Mrs. Northup. I've talked to an organization in my district 
that was awarded a grant for the adoption opportunities. In 
fact, its whole focus is within the minority community. I'm 
sure that you understand that for many years the minority 
community was less engaged in going through formalized 
processes of adoption and going through the formalized 
processes at all. What that meant is that there were many 
minority children that were available for adoption but not 
necessarily minority families that were available to adopt 
these children despite the willingness and interest that might 
exist.
    This agency was awarded a grant but it was unfunded. I know 
that last year we increased the amount of money that wefunded 
towards that. I wondered if your agency was making these grants 
available as quickly as possible, and if you anticipate that everybody 
that was awarded a grant will be funded?
    Ms. Golden. I don't know the specific circumstances. An 
applicant was approved for funding and they were told they were 
awarded one but they hadn't received it yet; is that the 
situation?
    Mrs. Northup. Well, then they were told that the funds--I 
guess you all awarded more grants than you actually funded. So 
they are on the list.
    Ms. Golden. Okay. Why don't we look into that specific 
example and get back to you about what the circumstances are.
    Mrs. Northup. All right. It is very important in my 
district. They are well known. They've been basically operating 
just from whatever resources they could pull together out of 
the community privately funded. But they really are in need of 
support and do a very good job.
    Ms. Golden. We'll look into that example and let you know.
    [The information follows:]

                         Adoption Opportunities

    The Kentucky One Church One Child, Inc. (OCOC) application 
received an average score of 85.0 which placed it in rank order 
as the fourteenth highest scored application in the ``approved/
unfunded'' category. This is the category that is used for 
applications that are approvable and have no significant 
weaknesses that would prevent their being approved, but for 
which there are insufficient funds to be able to award a grant 
from the funds available to support a given priority area. Due 
to budget constraints the Children's Bureau was unable to fund 
new projects scoring at the level of 85.
    We will publish a new set of priorities in this fiscal 
year. We anticipate publishing the next announcement in the 
Federal Register by the Spring or Summer, 1998. The Kentucky 
OCOC program may wish to resubmit their application for funding 
consideration at that time.

    Mr. Porter. Thank you, Mrs. Northup.
    Ms. Pelosi?

                       developmental disabilities

    Ms. Pelosi. Thank you, Mr. Chairman.
    Secretary Golden, thank you for your testimony and for the 
magnificent service you give to our country and our country's 
children and families and your enthusiasm for those children. I 
want to associate myself with the question of my colleague, Mr. 
Stokes, about the research agenda. I appreciate the answer that 
you gave and, as you get more information, I would be very 
interested in that. That was a question that I had for 
Secretary Shalala the other day.
    I also appreciate the fact that my colleague, Mrs. Lowey, 
asked the question about domestic violence because that's an 
issue of great concern to me.
    I had a question about developmental disabilities. I'm 
aware that the developmental disabilities programs have 
provided for over 25 years necessary supports and protections 
for a very vulnerable population. How would people with 
developmental disabilities be affected if the program were 
limited in its ability to conduct system change activities?
    Ms. Golden. I think the question is about the $5 million 
request for the investment.
    Ms. Pelosi. Yes, it is.
    Ms. Golden. That's a very important item, as you know. 
Those resources would support State grants in order for those 
States to be able to demonstrate how they would build statewide 
systems to support families with children with disabilities. 
Let me be more precise.
    In many States many families are more often raising 
children with developmental disabilities at home. Service 
systems have changed, from welfare reform, which creates an 
added pressure and incentive for the parent to go to work, to 
changes in the health care system, such as managed care. We're 
hearing a lot from families, from communities, and from States 
that there is enormous interest in figuring out how to build 
effective supports around child care, around transportation, 
around job training, around health care that will enable those 
families to successfully be self-sufficient. We've heard a lot 
about specific rural issues as well as issues in urban 
communities.
    For example, enormous interest was generated when we put 
out a little bit of money in the child care arena having to do 
with child care for children with disabilities. Interest was 
much more than we expected. That makes us believe that there is 
a particular need out there to focus some attention in 
particular States on looking across those systems to build 
supports for families, and that's what we would like to do. We 
think we'll learn a great deal that would add to the work that 
you highlighted, the really important work that the 
developmental disability networks have done on behalf of both 
adults and children with developmental disabilities.

                               child care

    Ms. Pelosi. I'm very interested in that. Two children in 
our family are teachers of children with developmental 
disabilities. The impact on their families, especially, as you 
mentioned, with the addtional challenges preserved by welfare 
reform, is very important.
    I wanted to sing my same old song about child care that I 
say every now and then in this committee. And maybe I'm asking 
for your advice, Assistant Secretary Golden. It seems to me 
that a committee with the wonderful jurisdiction of ours, 
Labor, Health and Human Services, and Education--job training, 
opportunities for children from the earliest time in their 
lives, and education--it seems to me that this is the place 
where we could come up with an initiative that would address 
the child care issue head on, from the training of child care 
workers to the appropriate child care for children.
    At the turn of the century or even a little later than 
that, we saw women get the right to vote, then during World War 
II women first really went into the workplace, and since then, 
of course, the higher education of women. Women became more 
seriously engaged in professions and in the workplace 
andreaching their fulfillment outside the home, as well as inside the 
home. The bridge to all of these things that have happened which give 
women more options is child care. And for many people that piece is 
absent. Now that's not just a piece that's absent as far as women's 
options are concerned, but for families to be able to afford a standard 
of living that is appropriate for their children to reach their own 
fulfillment.
    Do you see a model someplace where we could, in this 
committee, look to something that says, in our job training 
section, we could support an initiative for training child care 
workers, or making it part of the curriculum of higher 
education if it's in the education function? We probably would 
be educating many of these same mothers who are looking for 
child care because that could become their profession. But it 
seems to me we have all three elements right here. Do you know 
of any model, or do you have any suggestion? Year in and year 
out we talk about not having enough money, or not enough slots, 
or not enough opportunity for children and their families. I 
salute the Administration for the initiative on child care that 
was presented in this budget. But I still think we're speaking 
incrementally and I think we've got to be thinking drastically 
differently about it.
    Ms. Golden. In terms of models for going even another step, 
I think that you're right to think about how the training and 
higher education systems can support the child care agenda. I 
would highlight what I think we learned from the work leading 
up to the President's initiative and then maybe see if that 
offers any lessons.
    First of all, I couldn't agree more that the message of how 
central child care is came through to us at that White House 
conference, not only from parents, not only from providers, not 
only from governors and State legislators of both parties, but 
also from private employers. It really struck me that the 
message about child care is both a message about work and the 
economy and the enormous needs that parents have and that 
employers have for parents to have good child care, and it is 
at the same time a message about children's healthy development 
and safety. The sense is that child care is a critical 
connection I think we heard from everybody at that conference.
    That's the reason that the President's proposal addresses 
not just one area, but affordability and quality and safety. It 
addresses some of the particular issues you've highlighted 
through the scholarship agenda, and it offers communities 
flexibility to make some of these connections through the Early 
Learning funds. So there may be particular States or 
communities that can take the next step that you've noted.
    I do think that the idea that you could go even further by 
more systematically engaging other players in the child care 
issue is worthy of thinking about. I think there is some 
foundation examples that are local, some foundations that have 
focused, for example, on after school care and brought lots of 
partners together. Those might be some places to look for 
additional lessons.

                     child care and welfare reform

    Ms. Pelosi. I appreciate that. Thank you.
    I understand that we needed to reform welfare and I don't 
think there was any disagreement on that fundamental point. But 
I still need you to explain to me why, when we have not 
prepared for this by having adequate child care, we are saying 
to mothers, ``don't take care of your children at home, go out 
and work in the TANF program--now you have to work, but we 
haven't figured out how we're going to take care of your 
children.'' It seems to me that should have come first before 
we insisted on mothers going out there. I say that with 
complete respect for the goal. The outcome that we wanted was 
to move people off welfare and give them the opportunity to go 
to work, but we don't have this piece in place.
    Do you see the child care infrastructure that we have now 
as a match for the TANF program?
    Ms. Golden. I think that, first of all, the first thing I 
see is how critical child care is for mothers to go to work 
under TANF. I've been traveling a lot and talking with parents 
who have moved to work and I do hear their joy at having the 
dignity of that job, and I hear always, as I think you're 
suggesting, a sense of how critical the child care support is 
to make that possible. I just talked to a mother in New 
Hampshire the other day who talked to me at length about that.
    My sense of where the States are on child care for welfare 
families is that the fact the President and many people here 
focused on the fact that there had to be resources added to 
child care before the President signed the legislation, that 
that's been very important and the States are making those 
investments for welfare families. At the same time, and this is 
I think the critical reason that we need the next step that's 
in the President's child care proposal, making those 
investments for welfare families is enormously important for 
the reasons you highlight, but the next step, which you've also 
highlighted, is low-income working families who are struggling 
to keep a job.
    And so what I've been seeing as I travel is that States are 
putting in the resources to enable welfare families to move to 
work, but that there's a critical need among working families. 
Nationally, about 10 million families would be under the income 
eligibility level for the Federal child care program but only a 
little more than 1 million of those were receiving assistance 
in 1995, the last year for which we have complete data. The 
President's proposal would take that up to something more than 
2 million.
    So I guess I would say that there's been a key investment 
in the first piece, but the other piece is so critical because 
the last thing we want is for a family that is already working 
and getting by to have to lose that job and go to welfare 
because they were unable to find child care.
    Ms. Pelosi. Thank you. Mr. Chairman, I know my time is up, 
but I just want to say that it is reported to me that in my 
city of San Francisco we have 5,000 to 7,000 children on the 
waiting list for child care.

                      office of community services

    Mr. Porter. Thank you, Ms. Pelosi.
    Secretary Golden, I'm not going to use the remaining time 
today to discuss this with you, but I want you to know that the 
State of Illinois is continuing to have great difficulty in its 
dealings with the Office of Community Services over the 
approval of its fiscal year 1998 CSBG plan. I find this 
especially troublesome in light of the fact that the amendatory 
language suggested by the Office of Community Services was 
later rejected by that office and that there has been no 
response to further amendatory language submitted by the State 
of Illinois on February 11. I may need to discuss this matter 
with you further at a future date, but I hope it can be 
resolved, obviously.
    Ms. Golden. Thank you.
    Mr. Porter. Let me finish with one concern. Unfortunately, 
we haven't had nearly enough time to discuss all the 
tremendously important responsibilities that you have. But 
going back to Head Start, I find it unacceptable that we have 
increased spending from 1993 to 1998 from approximately $2.7 
billion to $4.3 billion and yet we're only serving about 
100,000 extra kids. It was 714,000 children in 1993, it is 
830,000 today according to our figures, yet we've put 
substantially more resources in this account. I realize that 
that is controlled by law and that you have no ability 
necessarily to change it. But I think that the Congress ought 
to change it. What we really ought to do is get more children 
served by the program, particularly now that we are monitoring 
the quality standards I think quite well. I hope that we can 
put additional resources here and that we can also put 
additional kids in the program and make it work for them, too.
    Ms. Golden. I think that the reason the Congress made those 
commitments in 1994 was the commitment to quality and to 
results. And so, obviously, the Administration's perspective is 
that it continues to be critically important to make those 
quality investments that work for children. That's the reason 
that it has been centrally important to restore that quality 
and it will be important to continue that investment.
    Mr. Porter. Secretary Golden, thank you. We have many 
additional questions for the record that we ask that you 
respond to.
    We thank you very much for your excellent testimony and 
your very direct answers to our questions.
    Ms. Golden. Thank you very much, Mr. Chairman.
    Mr. Porter. Thank you.
    [The following questions were submitted to be answered for 
the record:]

[Pages 767 - 1409--The official Committee record contains additional material here.]


                                           Thursday, March 5, 1998.

                        ADMINISTRATION ON AGING

                               WITNESSES

DR. JEANETTE C. TAKAMURA, PH.D., ASSISTANT SECRETARY FOR AGING
DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET, DEPARTMENT OF 
    HEALTH AND HUMAN SERVICES

    Mr. Porter. The subcommittee will come to order.
    Our hearings continue with the Administration on Aging, and 
we are pleased to welcome the Assistant Secretary for Aging, 
Dr. Jeanette C. Takamura, again, accompanied by Dennis 
Williams.
    Secretary Takamura. Thank you very much.

                           Opening Statement

    Chairman Porter, and members of the subcommittee, I truly 
appreciate this opportunity today to discuss the President's 
fiscal year 1999 budget request for the Administration on 
Aging.
    As you know, Mr. Chairman, I am really beginning my fourth 
month of service here in Washington, D.C., and, hence, this is 
the first time I'm appearing before your committee as Assistant 
Secretary.
    Let me note that I've submitted a full written text and 
will be extracting from it this afternoon.
    Mr. Chairman, I know that you are very well aware that 
America is blessed with the gift of longevity. Over just the 
span of this century, we have seen the human life span extend 
far more than it ever has over 4,000 years. It's quite a gift 
and it's quite a miracle. For the first time the average 
American can claim more living parents than children, and, as a 
result of that, it's no wonder that the U.S. Census Bureau is 
telling us that in two short years we will actually see four 
generation families in America.
    More than ever then, if support for older Americans is 
really support for America's families. Cognizant of all the new 
challenges and the new opportunities which lay ahead with 
American longevity in the new millennium, we have begun within 
the Administration on Aging to reorient our work to be able to 
address the emergent needs of older Americans in the 21st 
Century.
    Our fiscal year 1999 budget request totals $871 million. As 
you know, it's the same funding level as in fiscal year 1998. 
This amount is dedicated to primarily two things--first of all, 
to improving the quality of life of older Americans; and, 
secondly, to helping older adults and their families remain 
independent and productive. Funding for the Administration on 
Aging's programs means, in concrete terms, at least one meal a 
day for some elders, and, in some instances, just one meal a 
day, period; the only hope of transportation to doctors and 
grocery stores; and the only hope of help and respite for many 
older Americans and their caregivers. With that, I would note 
that in many regards our caregivers are really bearing 24-hour 
concerns.
    From my every day experience both in Hawaii, as well as 
through my activities at the national level, I am fully 
cognizant of the extent to which caregivers often 
placethemselves at risk as they care for even more frail and vulnerable 
members of their families. These are 24-hour a day concerns.
    Briefly summarized--and I will be brief because I know that 
the afternoon is getting on--our $871 million request asks for 
support for nutrition services--a funding request of about $486 
million; for supportive services about $300 million.
    Let me just back up a minute and note for you that two 
years ago we had a major evaluation undertaken focusing on our 
nutrition services programs. That evaluation concluded that our 
nutrition programs under the Older Americans Act are among the 
most effective, most efficient programs offered by the Federal 
Government.
    What I would also then note is that there are supportive 
services programs under Title III(b) of the Older Americans 
Act. They provide 40 million rides annually to older people--to 
doctors, to grocery stores, to pharmacies, etcetera, and we are 
providing over 12 million responses to requests for information 
and access to vital services.
    In addition to that, of course, we are serving about a 
million people who have legal services related concerns. We are 
asking for $9.8 million for in-home services support, and this 
funding will help us to do a variety of things, including, for 
example, responding to needs for home visits and for telephone 
reassurance calls. We already know that in the past fiscal year 
there were 700,000 of these needs that the Aging Network met.
    We are also asking for $9.2 million to protect vulnerable 
older Americans. I'm sure that you are well familiar with what 
this funding actually covers. It includes, of course, our State 
long-term care ombudsman programs, as well as programs for the 
prevention of elder abuse and neglect. It also addresses State 
elder rights and legal assistance programs, and outreach, 
counseling and assistance.
    We also are asking for your continued support for training, 
research and discretionary programs. These monies have always 
been used to enable us to undertake some innovative work. I 
will note for you, that as we move into the 21st Century, we 
anticipate serving not just one cohort of older Americans, but 
more and more we are well aware of the fact that we will be 
serving three to four cohorts.
    Just yesterday my staff and I were determining how many 
cohorts. We went back to the year 1900 and figured out how many 
older American cohorts we need to address in the next 
millennium. It comes down to about three or four. Each of these 
is very different, each has different needs, different 
interests, different wants, if you will, and different levels 
of resources available to them.
    We're asking you for your support for our budget also 
because we are very much engaged in Operation Restore Trust. 
Within the State of Illinois, you are linked in with this 
particular endeavor.
    Federal administrative funds are being asked to support 142 
full-time equivalent positions in the Administration on Aging, 
and, of course, these 142 positions work with a vast network 
that we call the Aging Network. This includes 655 State units 
on aging--excuse me, area agencies on aging, 57 State units on 
aging, about 27,000 providers, 6,400 senior centers, and I hope 
I'm not forgetting anything else in the process. I would--oh, 
yes, 221 tribal organizations.
    Over the last several years we have been very cognizant of 
the need to be lean and mean. We actually reduced our staff by 
about 30 percent. This means we are not only lean and mean--we 
are hard-pressed to meet the requirements of the Older 
Americans Act and do the work that we need to do to address 
current needs, as well as to anticipate the needs we foresee in 
the next millennium.
    I would simply note for you, Mr. Chairman, that the Older 
Americans Act services have been and will continue to be the 
cornerstone of effective local systems of community-based 
services. We are proud to have provided leadership in this 
regard starting from 1965.
    It is because of the Older Americans Act that we have been 
able to leverage the coordination services funded through 
States, localities and other Federal sources. I will note for 
you, because of your continuing interest in GPRA that this 
year's budget request includes the first annual performance 
plan required under GPRA.
    We welcome your reactions to our performance plan and are 
certainly committed to working with you and other members of 
Congress in achieving the goals that are identified therein.
    Our plan for 1999 relies on data which we have received 
from both States and area agencies on aging, from all levels of 
services, and I want to assure you that we are moving toward 
not just having service outcomes but also performance outcome 
measures.
    Let me just say, and I am attempting to move quickly 
through my testimony, that we anticipate very shortly that 76 
million baby boomers will join the ranks of older adults. I am 
one of those. As one of the baby boomers, I not only know that 
we will comprise about one-third of the population, I not only 
know that we make up about half of the nation's households, but 
I know that one out of nine of us--and I certainly hope to be 
one of these people--will live to see at least 90 years of age. 
And the 100 year plus category happens to be the most rapidly 
growing segment of our older adult population.
    There is no doubt that America's gift of longevity comes 
with many, many challenges, but as many opportunities, and we 
would like to be able to take advantage of the opportunities.
    As we look ahead, it's very clear to us that there is a lot 
that we can do to prepare not only for America's longevity 
population, but also for the millennium, and I would suggest to 
you that, among other things, we must continue to stress the 
importance of healthy lifestyles through health promotion and 
disease prevention. We must help people to understand the 
complex maze of the health care and long-term care systems, and 
we must be sure that all Americans, regardless of age and, 
certainly those who are elders, who are confronted with lots of 
complex issues, know their rights as consumers whether they are 
consuming services from the public sector or the private 
sector.
    We also know that it is important to encourage communities 
to develop and use home and community-based services, 
especially those that use strategic cost-saving technology. I 
would mention that we continue to feel it extremely important 
to encourage experimentation and testing of best practices.
    In this regard, I would suggest to you that we feel that we 
must modernize many of the Older Americans Act programs,as, 
again, we anticipate that we will be serving from three to four cohorts 
of older Americans in very short order.
    In closing, let me just summarize and emphasize some of the 
things that I view to be my priorities as the Assistant 
Secretary for Aging:
    First of all, we must, we absolutely must, because we do 
have the opportunity, ready America for longevity. It means 
making sure that our population understands the economic 
security requirements that people will have as they age. We 
must also ready America for longevity in terms of health and 
long-term care needs. We must modernize our Older Americans Act 
programs. We must continue to give even greater emphasis to 
consumer education and protection, particularly as it relates 
to health and long-term care. I am, and the Administration on 
Aging will always be, a strong supporter of public and private 
sector partnerships. And, as I have said already, we need to 
continue to pursue vigorous experimentation and testing.
    We certainly celebrate the introduction and implementation 
of GPRA requirements because we do feel that experimentation 
and testing and GPRA requirements go hand in hand.
    The vision of the Administration on Aging is to ensure that 
we have an America ready for longevity. We don't want to walk 
into the 21st Century looking backward and regretting that we 
did not put into place the policy program, and service 
foundation that is necessary. It is really an America in which 
both present and future older Americans have an independent, 
productive, healthy and secure life. We think that the budget 
request submitted by the President will support the cornerstone 
of comprehensive and coordinated home and community-based 
services. We also expect that this request will permit us to 
build on our existing foundations and to underwrite the 
beginning steps that we need to take to implement our visions 
and to continue to be responsive and effective in serving our 
consumers and their families.
    I would like to thank you again for your time. I certainly 
would be happy to answer your questions.
    [The prepared statement follows:]

[Pages 1415 - 1423--The official Committee record contains additional material here.]


                              older adults

    Mr. Porter. Thank you, Secretary Takamura.
    Who do we define now as an older adult? [Laughter.]
    Secretary Takamura. Well, not you, not me and not any of 
the members of the Subcommittee. [Laughter.]
    Secretary Takamura. I'm not sure. It's actually----
    Mr. Porter. You said you are about to join the ranks of the 
older adults, and I don't know what that refers to.
    Secretary Takamura. Right, that's right. Well, I'm a baby 
boomer born between 1946 and 1964, so I anticipate----
    Mr. Porter. All those people are going to be joining the 
ranks of the older adults? Older than what?
    Secretary Takamura. Beginning in the year 2011, they will 
begin to be 65 years of age plus. So this is quite--it's going 
to be quite a remarkable phenomenon. I would actually suggest 
that we're going to change the face of the earth.
    Mr. Porter. As an older adult, I think we should make our 
categories a little more discrete and exclusive. [Laughter.]
    Secretary Takamura. Anyone 100 plus.

                          retirement security

    Mr. Porter. I'll tell you, my own personal goal in this 
area, and I think the United States, is now able to do this--we 
weren't certainly earlier able to do it, and I won't live to 
see it perhaps be completely implemented--but I think we are on 
the verge of being able to give every single American real 
retirement security where they own their own Social Security 
account and they make a lot more in terms of benefits than the 
system can produce today. I believe that this is entirely 
necessary given the fact that we are living longer, and they 
make a lot more in terms of benefits than the system can 
produce today. I believe that this is entirely necessary given 
the fact that we are living longer and we have fewer younger 
workers to support us under our old system, and it's time for 
the United States to turn the corner on this and devise the 
kind of public retirement program that we would have devised in 
the middle of the Depression if we had the resources to do it--
that is, a fully vested, fully funded program. I think we are 
ready to do it, and that would not mean that we wouldn't need 
an Administration on Aging. Obviously, there's a lot of 
services that would still be needed, but if everybody had 
retirement security, economic security, in their advanced years 
that would certainly overcome a lot of problems.
    Secretary Takamura. I would love to comment specifically on 
your specific proposal, but I think Ken Apfel would probably 
think that that is something to which he would like to respond.

                            legal assistance

    Mr. Porter. You don't need to if you don't want.
    Let me ask you what legal assistance is provided? You 
mentioned that several times.
    Secretary Takamura. Yes, legal assistance is actually 
provided to older adults in part through the Older Americans 
Act. You know, one of the benefits of the legal services 
programs of the Older Americans Act is that in every State 
across the country, a lot of pro bono services are shaken out 
of the private bar that might otherwise not be available.
    The truth of the matter is that--let me give you a very 
simple example. Many people in planning for their own wills are 
unaware of the fact that there are specialty attorneys who know 
something about wills, trusts, real estate, probate, pension 
law, tax law, et cetera. And not knowing that, they go to a 
friend or a relative who is a corporate attorney and ask them 
to prepare their will.
    We feel that it is extremely important to give people 
information that gets them to the right people. We feel it's 
important to mobilize, galvanize, if you will, the resources 
that exist, and our legal services programs permit us to do 
that.
    Mr. Porter. Thank you.
    As someone who has been on the job only three and a half 
months, you're entitled to a honeymoon of sorts and not be 
asked these kinds of questions, so please forgive me.
    Secretary Takamura. That's all right. [Laughter.]

                             budget choices

    Mr. Porter. The President loves to offer a budget that 
makes increases in many areas and then say what a champion he 
is of the areas where he is making increases. It seems to me 
that accountability demands that in those areas where he isn't 
making increases he takes blame for that.
    You're being level-funded. Does that mean that this 
Administration doesn't care about senior citizens in America?
    Secretary Takamura. No, I don't think so. I think that we 
are working, as you well know, within a balanced budget 
environment, and I think the Secretary mentioned in her own 
press conference that there were some difficult choices to be 
made.
    Mr. Porter. Except that you came up on the short end of the 
choices.
    I have to give you my sermon, although you might have heard 
it earlier, but we are going to have tough choices of our own, 
obviously, in the subcommittee and they're going to be tougher 
than the President's because he just added some revenues that 
aren't going to be there, I'm afraid. We are going to have to 
fit our spending within smaller allocations under the budget 
process than otherwise would be the case, and that's going to 
make it very difficult.

                             state spending

    What money are the States putting into older American 
programs, and what proportion of total spending on these 
programs comes from the Federal Government? Are the States 
carrying their fair share of the load?
    Secretary Takamura. The States are actually contributing a 
very large portion of the monies that go for aging services. 
They match the monies that are received from the Administration 
on Aging. I would say that most States recognize that there is 
a demographic revolution going on. One could call it a 
longevity revolution, and to the extent that they are able to 
put forward monies, State monies, if you will, toward meeting 
the needs of the older adult population we are seeing that 
happen, both for home and community-based care, as well as to 
support staff at the State level.

                 government performance and results act

    Mr. Porter. You have GPRA responsibilities like every other 
agency and department. Can you tell us with a greater degree of 
specificity where you are in all of that and where you get your 
data that would meet performance measures?
    Secretary Takamura. Certainly, I would be happy to do that, 
yes.
    You know, we are very proud of the progress that was made 
in two areas--one, of course, is in the GPRA evaluation of the 
nutrition program, which suggested, as I said earlier, that our 
nutrition programs are among the most effective and efficient 
Federal programs that target people in need.
    The other area that we are very proud of is the evaluations 
that was conducted of our long-term care ombudsman program by 
the Institute on Medicine. We are currently in the process of 
developing the evaluation design and methodology for our Title 
3(b) services. These services are a little bit more difficult 
to evaluate. Nonetheless, what we are very proud of is that we 
have been in communication, in discussion, in roll-up-your-
sleeve work sessions, with representatives of both our State 
units on aging and our area agencies on aging.
    We were able to convince two leading researchers in the 
country to donate their time almost pro bono to working with us 
to come up with a research design that will serve us well.
    So we feel that we are making significant progress in this 
area.
    I am also proud of the fact that in our designing our 
strategy and methodology for the Title III(b) evaluation, we 
are really giving a great deal of emphasis to the notion of 
partnership and collaboration.
    Mr. Porter. Thank you, Secretary Takamura.
    I think the better answer to the question of the level 
funding at $871 million is that you weren't there to advocate 
because they were forming the budget before you got on the job.
    Secretary Takamura. Thank you, what can I say? [Laughter.]
    Mr. Porter. Mr. Stokes?
    Mr. Stokes. Secretary Takamura, welcome before our 
subcommittee.
    Secretary Takamura. Thank you, it's an honor to appear 
before you. I know you are retiring--we'll miss you.
    Mr. Stokes. Thank you so much.
    Mr. Porter. No, no, he's going to join all those programs. 
[Laughter.]
    Secretary Takamura. Well, I know. Actually, I was going to 
sign him up to be a volunteer in some of our programs.
    Mr. Stokes. If they're calling you--what is this term--an 
older adult, I don't know what they'll call me. [Laughter.]
    Secretary Takamura. Grand older adult.
    Mr. Stokes. Longevity, Secretary Takamura, in your formal 
statement, you made a fascinating statement. You said for the 
first time the average American can claim more living parents 
than children.
    Secretary Takamura. That's right.
    Mr. Stokes. And, it says that four generation American 
families will soon be the norm.
    Secretary Takamura. That's right.
    Mr. Stokes. That's a fascinating statement.
    Secretary Takamura. Isn't it?
    Mr. Stokes. It really is.
    Secretary Takamura. It's an indication of the gift of 
longevity because not every country in the world can say that. 
We are among a handful of countries, so it is a gift.
    Mr. Stokes. Even at the beginning of this century, we were 
quite a ways from that.
    Secretary Takamura. I know, that's right. Forty seven 
years, average life span, at the beginning of the century and 
now we're up to 76 years or so.
    Mr. Stokes. That is right.
    Secretary Takamura. Yes.
    Mr. Stokes. It shows we are making great progress in that 
respect.
    Secretary Takamura. We are.
    Mr. Stokes. Last year, Elderly Nutrition Program, though 
you were not here, I congratulated your agency on the elderly 
nutrition program evaluation.
    Can you talk to me, just a little bit, about the level of 
need in your nutrition program? Are you still having waiting 
lists and so forth?
    Secretary Takamura. Well, Congressman Stokes, the waitlist 
question has been one that we have been wrestling with for quite a 
while. Part of the reason for that is that not every meal site actually 
has a wait list. There are some that have kept wait lists; and there 
are others that have not.
    We know that among those that have kept wait lists--again, 
because there isn't a set methodology for actually recording 
wait lists--that there are about 77,000 people every day who 
are purportedly on these wait lists, but, again, we feel that 
the data may be needing some validation. So we're not quite 
certain about that.
    Mr. Stokes. Well, will your budget address this level of 
need?
    Secretary Takamura. Well, our budget, as it's currently 
submitted, will actually address--let me just say that from 
last year to this year, of course, we were very pleased to 
receive a three percent increase in our budget of about $35 
million. That provides us with a new baseline for serving older 
Americans, and we hope to use that money to meet as many of the 
needs that exist as possible.

                  health promotion/disease prevention

    Mr. Stokes. Madam Secretary, let me ask you this--why do 
you feel the need to fund a separate title for health 
promotion, and what will that money be used for?
    Secretary Takamura. Okay, I really love that question, and 
the reason I like that question--thank you for asking--is 
because longevity is a product of all the health promotion 
success that we've had in this country, in part. If you really 
look at how we can avoid the high costs of health care, or 
long-term care, over the long-term, one of the ways that we can 
do that is to ensuring that people receive good health 
promotion, disease prevention information, and also participate 
in activities that are targeted toward that.
    We think it's extremely important to emphasize the 
importance of health promotion and disease prevention.
    Mr. Stokes. Do you think that will make a difference in the 
lives of older Americans?
    Secretary Takamura. Absolutely, absolutely. There have been 
recent studies that have shown that even people who are in 
their 80's and 90's are able to improve their health and 
improve their strength by doing weight-bearing exercises, as 
examples. This kind of information needs to be made more widely 
known. Our health promotion monies help us to address 
depression among the elderly, and what we know is that the more 
older adults are connected up to social networks and social 
systems, the less likely they will be depressed, the less 
likely they will end up in institutions.
    I think it's extraordinarily important to do this for the 
long-term.

                          Baby Boom Generation

    Mr. Stokes. You mentioned a few moments ago that you fell 
into the category of being a baby boomer.
    Secretary Takamura. That's right.
    Mr. Stokes. You also mentioned that in the year 2011 those 
baby boomers will hit 60.
    Secretary Takamura. That's right, or 65.
    Mr. Stokes. How is the Administration on Aging going to 
work to meet the needs of the baby boomers, and will the Older 
Americans Act be able to meet the demand?
    Secretary Takamura. We think that the Older Americans Act 
will meet the demands of our baby boomer population, but some 
of the work that we are preparing ourselves to do as we march 
toward the new millennium is to ensure that we decrease the 
number of people who really are going to be in need. Some of 
that we can do through good health promotion work.
    Another quite important initiative, quite frankly, is that 
we really need to continue to give support to our Eldercare 
Locator, to our National Aging Information Center, and other 
initiatives because we know that right now we have the eyes and 
ears of baby boomers. Many of them are being to face elder care 
responsibilities. Indeed, there is data to suggest that our 
families are increasingly more involved in elder care than any 
other kind of care.
    Baby boomers, quite honestly, are looking for the services 
that they can utilize to help support their family members. We 
cannot underscore the importance of our elder care locator or 
our area agencies on aging as focal points, and our State units 
on aging for building the comprehensive health and long-term 
care systems that we need.

                              Older Women

    Mr. Stokes. Right now, as we see this increase in 
longevity, one of the things that is apparent is women are 
living longer than men in our society.
    Secretary Takamura. That's right.
    Mr. Stokes. Some of them have the advantage of Social 
Security, while some others don't.
    Is this something that your agency is perhaps looking at?
    Secretary Takamura. We are very concerned about that. In my 
reading I ran across a very startling statement, and I wish I 
could remember the researcher who made this statement, but she 
said essentially that most married older women are one man away 
from poverty. We are indeed very concerned about. We think that 
the Social Security debate, which the Chairman mentioned 
earlier, is critical to this, but we also know that our pension 
counseling programs, which are operated currently in six 
States, can offer the kind of technical information that people 
often times don't have access to. We feel that's important and 
we also think that there's a lot of work that needs to be done 
to ensure that our population, young and old, is financially 
literate.
    So, indeed, these are concerns of the Administration on 
Aging.

                 Government Performance and Result Act

    Mr. Stokes. This is my last question, if I still have some 
time. How well is your agency doing in meeting the GPRA 
requirements mandated by Congress. I would appreciate it if you 
would take a moment to elaborate on this and tell us whether 
you are working on strengthening your partnerships.
    Secretary Takamura. I think I noted just very briefly for 
you a few minutes ago that indeed we are doing exactly that. I 
would say just about three weeks ago we had an opportunity to 
meet with representatives from the States, as well as 
representatives from our area agencies, and we were pleased to 
have in that meeting as co-partners or leaders or 
collaborators, if you will, the National Association of State 
Units on Aging and the National Association of Area Agencies on 
Aging, and also two leading researchers who are well-known for 
their ability to work with quantitative and qualitative 
measures.
    Congressman Stokes, we started the day, by literally 
rolling up our sleeves and going to work and looking at some 
potential research approaches that we could take. I am very 
pleased to tell you that the conversations and the discussions 
were very candid. We movedthrough to designing some approaches 
so rapidly that by noon we were ready to get to specifics, and I think 
this is a first-time occurrence. I think it is a very heartening 
occurrence. We intend to work as closely with our partners in the 
future as we did that day. We consider that a real breakthrough.
    Mr. Stokes. Madam Secretary, you're doing a good job, and 
we appreciate your answers.
    Secretary Takamura. Well, you've done a great job.
    Mr. Stokes. Thank you.
    Secretary Takamura. Thank you.
    Mr. Porter. Thank you, Mr. Stokes.
    Secretary Takamura, we'll have additional questions for 
you, which we would ask that you answer for the record, and we 
thank you for your good testimony, your direct answers to our 
questions. We promise you that next year we will schedule you 
on a Tuesday or Wednesday afternoon when more members will be 
here----
    Secretary Takamura. Well, thank you.
    Mr. Porter [continuing]. Because your honeymoon will be 
over and all the tough questions will follow. [Laughter.]
    Secretary Takamura. I need to talk to you about honeymoons 
because when I got married, I didn't have one. So I have yet to 
ever experience one. [Laughter.]
    Mr. Porter. Well, thank you for testifying, and we look 
forward to working very closely with you.
    Secretary Takamura. Thank you very much.
    Mr. Porter. The subcommittee will stand in recess until 
10:00 a.m. Tuesday.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1431 - 1584--The official Committee record contains additional material here.]








                           W I T N E S S E S

                              ----------                              
                                                                   Page
DeParle, N. M....................................................   261
Duquette, D. J...................................................   167
Golden, Olivia...................................................   729
Hembra, R. L.....................................................     1
Mangano, M. F....................................................   167
Raubach, Elaine..................................................   261
Scanlon, W. J....................................................     1
Shalala, Hon. D. E...............................................    49
Steinhardt, Bernice..............................................     1
Takamura, Dr. J. C...............................................  1411
Williams, D. P...................................................   729
Williams, D. P...................................................  1411











                               I N D E X

                              ----------                              

                 Secretary of Health and Human Services

                                                                   Page
Adoption.........................................................   127
After School Care................................................    94
ASSIST...........................................................   107
Balancing the Budget.............................................    53
Bioethics........................................................   149
Breast Cancer....................................................    80
Budget--New Spending.............................................   110
Cancer Research Fundings.........................................    62
Closing the Health Disparity Gap.................................   135
Community Health Center Program..................................63, 65
    Community Services...........................................   117
    Consolidated Health Centers..................................   114
Congressional Review Act.........................................    98
Coordinated Services.............................................    87
Diabetes.......................................................100, 147
Diseases:
    Emerging Infectious Diseases.................................    89
    Resistant to Antibiotics.....................................    90
Disparities in Health Care.......................................    68
Early Start Quality..............................................    88
False Claims Act and HCFA........................................   102
Family Planning..................................................   161
HCFA Funding.....................................................    82
Head Start.......................................................   147
Health Care Advances.............................................   136
Health Centers...................................................   101
Health Professions...............................................   101
    Pipeline.....................................................   149
HIV/AIDS Treatment, Prevention and Control.......................    69
    AIDS Drug Assistance Program (ADAP)..........................    75
    HIV/AIDS.....................................................   139
Homeless Programs................................................   158
Initiative:
    Child Care Initiative........................................    67
    Food Safety..................................................    78
    Fraud........................................................    85
    Quality Improvements.........................................    76
    Race.........................................................   152
Innovative Program and Fiscal Management.........................    59
    Fraud-busting................................................    59
    User Fees....................................................    59
    GRPA.........................................................    59
Lead Poisoning...................................................   150
Liver Transplant.................................................   108
Managed Care.....................................................   129
Medicaid Funds for Abortion......................................    92
Medicare:
    Buy-In.......................................................    93
    Choice Plan..................................................    70
    Fraud and Abuse.............................................80, 131
    User Fees...................................................71, 103
Mother and Child Care............................................   131
NIH Funding.................................................83, 90, 109
Nursing Facilities...............................................    83
Opening Statement................................................    50
Preventative Health Services Block Grant.........................   117
Program Coordination.............................................    95
Pulmonary Hemorrhage.............................................   152
Research--How Children Learn.....................................   124
Resolution of Issues.............................................   108
Strategic Plan...................................................   125
Therapy Services Regulations.....................................   164
Tobacco..........................................................   148
    Tobacco Minority Health......................................   153
    Tobacco Programs--CDC/FDA....................................   122
    Tobacco Regulations........................................103, 121
    Tobacco Settlement NIH..................................72, 81, 109
    Tobacco Settlement SAMHSA...................................85, 125
Tribute to Mr. Stokes............................................    62
21st Century:
    Challenges of the 21st Century...............................    56
    Learning Fund................................................    92
    Preparing for the 21st Century...............................    54
Uninsured........................................................   138
Welfare Reform...................................................    67
    Research.....................................................    73
    TANF.........................................................   104
Witness, Introduction............................................    49
Women's Health...................................................    74

       Inspector General, Department of Health and Human Services

Accuracy of Intermediaries.......................................   195
Better Ways of Doing Business..................................168, 172
Child Care.......................................................   191
Compliance Guidelines............................................   176
Discretionary Priority Areas.....................................   188
Discretionary FTE Reduction......................................   188
Employee Satisfaction............................................   184
Exclusion of Manufacturers.......................................   186
False Claims Act.................................................   181
FTE Levels 1994-1999.............................................   188
Full Time Equivalent Staffing....................................   199
Funding for Medicaid Work........................................   182
FY 1998 FTE Estimate.............................................   187
HCFAC Funding and FTE............................................   187
Head Start Program...............................................   189
Health Care Fraud and Abuse Control Account......................   180
HHS Implementation of GPRA.......................................   178
Hospital Audits..................................................   178
Kennedy-Kassebaum Funding........................................   177
Managed Care.....................................................   197
Medicare Services--Venipuncture..................................   196
Medicare Fraud--Provider Investigations..........................   194
Medicare Fraud--Beneficiary Knowledge............................   194
Mental Health....................................................   198
Monitoring OIG Performance.......................................   184
Non-Medicare Budget..............................................   183
Office Upgrades/Furniture........................................   193
OIG Funding Sources..............................................   173
OIG Performance Goals............................................   183
Opening Statement................................................   167
PATH Audits......................................................   176
Recent Examples of OIG Work......................................   171
Recent Projects..................................................   167
TANF Implementation..............................................   190
Tobacco..........................................................   200
Witnesses........................................................   167
Work Underway and Planned........................................   173
Written Testimony................................................   170
Accreditation vs. External Review................................   355
Appeals and Grievances...........................................   316
Balanced Budget Act..............................................   385
    FTEs.........................................................   313
    Medicaid Costs...............................................   318
    Proposed Repeal..............................................   305
Capital Asset Plan...............................................   304
Chief Information Officer........................................   305
Children's Health Insurance Program..............................   349
    Innovation...................................................   381
Civil Monetary Penalties.........................................   312
Clinical Laboratory Improvement Amendments (CLIA)--Testing 
  Requirements...................................................   376
Clinical Trials..................................................   321
Commercial Off-The-Shelf Software................................   315
Community Health Centers..................................283, 367, 380
Congressional Justification......................................   404
Consumer Assessment of Health Plans Study (CAHPS)................   316
Consumer Satisfaction Survey..............................343, 353, 371
Consumer Rights and Empowerment..................................   375
Critical Access Hospital Program.................................   347
Customer Improvement Strategies..................................   317
Deemed Status Report.............................................   287
Dental Care--Medically Necessary.................................   389
Documentation Guidelines, Physician..............................   326
End Stage Renal Disease (ESRD)...................................   323
Erythropoietin...................................................   296
    Payment Policy...............................................   334
False Claims Act.................................................   291
False Claims Activities..........................................   330
Federal Administration....................................264, 271, 318
Federal Administrative Costs.....................................   313
Financial Management Investment Board............................   303
Fraud and Abuse..................................................   346
Fraud and Abuse Plan.............................................   325
Government Performance and Results Act (GPRA)....................   272
    Bearing on Proposal to Expand Medicare.......................   370
    Implementation.............................................298, 369
    Issues.....................................................357, 362
    Medicaid Issues..............................................   367
    Private Sector Measurement...................................   299
HCFA Administration of Programs..................................   355
HCFA Budget Priorities...........................................   276
Health Care Safety Net...........................................   378
HIPAA Anti-Fraud Measures........................................   287
HIPAA--Fraud and Abuse...........................................   299
HIV Disease......................................................   391
Home Health Interim Payment System...............................   401
Insurance Counseling and Assistance..............................   325
Lead Poisoning...................................................   376
Lung Volume Reduction Surgery....................................   303
Managed Care.....................................................   311
Maximized Billing Practices......................................   288
Medicaid.........................................................   267
    Outreach for Eligible Children...............................   392
    Safety Net Hospitals.........................................   302
    Medicaid Appropriation.......................................   317
    Medicare Beneficiaries--Education of.........................   328
Medicare Buy-In..................................................   398
Medicare Compare.................................................   315
Medicare Contractors............................264, 270, 310, 338, 357
    Transitions..................................................   307
Medicare Integrity Program.....................................264, 271
Medicare Integrity Program Contracts.............................   360
Medicare Payment Caps............................................   282
Medicare State Certification.....................................   270
Medicare Streamline Auditing Capabilities........................   325
Medicare+Choice.................................291, 322, 336, 338, 379
    Advocacy Groups..............................................   372
    Balanced Budget Art Initiatives..............................   339
    BBA Beneficiary Education Activities.........................   352
    Beneficiary Education Program..............................341, 343
    Beneficiary Education Under BBA..............................   370
    Education Materials..........................................   373
    Expenditures.................................................   371
    FY 1998 Funding for Education Initiatives....................   352
    Information and Education Strategies.........................   336
    Information Efforts..........................................   331
    Periodic Assessments of Expenditures.........................   352
    Periodic Expenditure Assessments.............................   342
Mental Health Parity Act.........................................   387
Millenium........................................................   300
Minority Health Disparity........................................   376
National Provider Identifier.....................................   316
Oasis Data Set...................................................   312
Occupational Mix Reclassification................................   286
Ohio--Medical Beneficiaries......................................   384
Oncology Drugs...................................................   285
Opening Statement..............................................261, 266
PAP Smears--``Thin Prep''........................................   397
Payment Safeguards--Support For..................................   365
Payment Rates and Fraudulent Claims..............................   359
Payments to Health Care Trust Funds..............................   267
Peer Review Organizations........................................   307
Physician License Numbers........................................   356
Private Contracting............................................374, 393
Program Integrity:
    DOJ Actions..................................................   289
    Performance Measures.........................................   361
Program Management.............................................262, 268
Provider Audit.................................................290, 300
Purchasing Cooperatives..........................................   310
    Purchasing Power.............................................   275
Research and Demonstrations......................................   269
Supplemental Appropriation.......................................   294
Surety Bonds.....................................................   400
Surety Bonds for Managed Care Contracts..........................   401
Technology Assessment Committee..................................   320
Telemedicine Demonstrations......................................   306
    Toll-Free Inquiry Lines......................................   293
Uninsured Individuals............................................   378
User Fee Funding................................263, 268, 274, 379, 397
    Audit Activities.............................................   331
    FTEs.........................................................   308
    Managed Care................................309, 333, 344, 353, 373
    Paper Claims.................................................   334
    Patient Care.................................................   328
    State Certification..........................................   309
Venipuncture.....................................................   347
Welfare Reform...................................................   377
Witness List.....................................................   261

                Administration for Children and Families

Administrative Budget............................................   830
Adoption and Safe Familes Act....................................   838
Adoption Initiative..............................................   758
Adoption Opportunities....................................761, 814, 839
Child Abuse and Neglect..........................................   755
Child Care..................730, 735, 753, 763, 764, 768, 803, 842, 865
Child Support.............................................767, 796, 797
Child Welfare..................................................731, 738
Community Economic Development...................................   834
Community Services...............................................   765
Congressional Justification......................................   883
    GPRA Performance Plans....................................... 1,348
Development Disabilities Programs...............731, 740, 762, 815, 840
Early Learning Fund..............................................   809
Expiring Legislation.............................................   797
Family Preservation and Support..................................   776
Foster Care and Adoption Assistance............................769, 770
Head Start, General..................................730, 737, 798, 868
    Analysis of Success..........................................   848
    Collaboration with Other Departments..................749, 865, 867
    Construction Loans...........................................   750
    Coordination with Other Agencies.............................   852
    Early Head Start.................................751, 759, 868, 872
    Expansion in FY 1999.............................854, 857, 869, 870
    Full-Day/Full-Year.........................................753, 857
    GAO Recommendations..........................................   849
    GPRA.......................................................742, 851
    Grantees.....................................................   745
    High Risk Programs...........................................   844
    Job Corps....................................................   846
    Oversight Responsibilities...................................   870
    Participation................................................   844
    Performance Measures.......................................744, 846
    Program Income and Expenditures..............................   849
    Program Specialists..........................................   876
    Quality....................................................866, 881
    Research.....................................................   743
    Training and Technical Assistance............................   873
    Vouchers.....................................................   881
Low Income Home Energy Assistance................................   778
Native American Programs.........................................   829
Opening Remarks..................................................   729
Opening Statement................................................   733
Refugee Resettlement...........................................768, 791
    GPRA.........................................................   796
Reimbursable Sources.............................................   829
Responsible Fatherhood.........................................754, 858
Social Services Block Grant....................................774, 812
Social Services Research and Demonstration.......................   818
    Welfare Reform and Social Services Research Plan.............   819
Violent Crime Reduction Efforts................................731, 739
Welfare Reform.................................................757, 856
    Research...................................................756, 863
Witnesses........................................................   729

                        Administration on Aging

Agency Priorities................................................  1452
Alzheimer's Disease..............................................  1442
Budget Choices...................................................  1425
Baby Boom Generation.............................................  1328
    Baby Boomers.................................................  1452
Congressional Justification......................................  1454
Consumer Protection..............................................  1445
Government Performance and Results Act...........1426, 1429, 1431, 1453
Health Care Fraud and Abuse..................................1439, 1445
Health Promotion/Disease Prevention..........................1427, 1450
Legal Assistance.................................................  1424
Nutrition Program............................................1436, 1448
    Nutrition Program Income Analysis............................  1439
Older Adults.....................................................  1424
    Older Americans Act Reauthorization..........................  1433
    Older Women..................................................  1428
Opening Statement................................................  1411
Performance Goals................................................  1445
Retirement Security..............................................  1424
Secure Retirement................................................  1452
Staffing.........................................................  1444
State Spending...................................................  1425
Statement by the Assistant Secretary.............................  1415
Transportation...................................................  1446
Witnesses........................................................  1411