    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

             H.R. 2376, GRANT WAIVERS AND STREAMLINING THE PROCESS

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

                                 JOINT HEARING

                                   before the

                   SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
                   NATURAL RESOURCES, AND REGULATORY AFFAIRS

                                    and the

                     SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                          INFORMATION, AND TECHNOLOGY

                                     of the

                         COMMITTEE ON GOVERNMENT REFORM
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 2376

    TO REQUIRE EXECUTIVE AGENCIES TO ESTABLISH EXPEDITED REVIEW PROCEDURES
    FOR GRANTING A WAIVER TO A STATE UNDER A GRANT PROGRAM ADMINISTERED BY
     THE AGENCY IF ANOTHER STATE HAS ALREADY BEEN GRANTED A SIMILAR WAIVER
                        BY THE AGENCY UNDER SUCH PROGRAM

                                   __________

                               SEPTEMBER 30, 1999

                                   __________

                               Serial No. 106-88

                                   __________

           Printed for the use of the Committee on Government Reform

         Available via the World Wide Web: http://www.house.gov/reform

                                     ______

                        U.S. GOVERNMENT PRINTING OFFICE
    62-841                     WASHINGTON : 2000

                         COMMITTEE ON GOVERNMENT REFORM

                         DAN BURTON, Indiana, Chairman
    BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
    CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
    CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
    JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
    THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
    DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington,
    MARK E. SOUDER, Indiana                  DC
    JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
        Carolina                         ROD R. BLAGOJEVICH, Illinois
    BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
    DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
    ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
    LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
    JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
    GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
    DOUG OSE, California                             ------
    PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont
    HELEN CHENOWETH, Idaho                   (Independent)
    DAVID VITTER, Louisiana

                          Kevin Binger, Staff Director
                     Daniel R. Moll, Deputy Staff Director
               David A. Kass, Deputy Counsel and Parliamentarian
                          Carla J. Martin, Chief Clerk
                     Phil Schiliro, Minority Staff Director

       Subcommittee on National Economic Growth, Natural Resources, and
                               Regulatory Affairs

                      DAVID M. McINTOSH, Indiana, Chairman
    PAUL RYAN, Wisconsin                 DENNIS J. KUCINICH, Ohio
    BOB BARR, Georgia                    TOM LANTOS, California
    LEE TERRY, Nebraska                  PAUL E. KANJORSKI, Pennsylvania
    GREG WALDEN, Oregon                  BERNARD SANDERS, Vermont
    HELEN CHENOWETH, Idaho               HAROLD E. FORD, Jr., Tennessee
    DAVID VITTER, Louisiana

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                        Marlo Lewis, Jr., Staff Director
                  Barbara F. Kahlow, Professional Staff Member
                           Gabriel Neil Rubin, Clerk
                     Elizabeth Mundinger, Minority Counsel

       Subcommittee on Government Management, Information, and Technology

                       STEPHEN HORN, California, Chairman
    JUDY BIGGERT, Illinois               JIM TURNER, Texas
    THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
    GREG WALDEN, Oregon                  MAJOR R. OWENS, New York
    DOUG OSE, California                 PATSY T. MINK, Hawaii
    PAUL RYAN, Wisconsin                 CAROLYN B. MALONEY, New York

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
              J. Russell George, Staff Director and Chief Counsel
                             Randy Kaplan, Counsel
                              Chip Ahlswede, Clerk
                        Trey Henderson, Minority Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on September 30, 1999...............................     1
    Text of H.R. 2376................................................     5
    Statement of:
        Callahan, John J., Assistant Secretary and Chief Financial
          Officer, Department of Health and Human Services; Samuel
          Chambers, Jr., Administrator, Food and Nutrition Service,
          Department of Agriculture; and Raymond L. Bramucci,
          Assistant Secretary, Employment and Training
          Administration, Department of Labor........................    68
        Green, Hon. Mark, a Representative in Congress from the State
          of Wisconsin...............................................    22
        Scheppach, Raymond C., executive director, National
          Governors' Association; and William T. Pound, executive
          director, National Conference of State Legislatures........    40
    Letters, statements, et cetera, submitted for the record by:
        Bramucci, Raymond L., Assistant Secretary, Employment and
          Training Administration, Department of Labor, prepared
          statement of...............................................   133
        Callahan, John J., Assistant Secretary and Chief Financial
          Officer, Department of Health and Human Services, prepared
          statement of...............................................    71
        Chambers, Samuel, Jr., Administrator, Food and Nutrition
          Service, Department of Agriculture, prepared statement of..   127
        Green, Hon. Mark, a Representative in Congress from the State
          of Wisconsin, prepared statement of........................    25
        Horn, Hon. Stephen, a Representative in Congress from the
          State of California, prepared statement of.................     3
        Kucinich, Hon. Dennis J., a Representative in Congress from
          the State of Ohio, prepared statement of...................    20
        Pound, William T., executive director, National Conference of
          State Legislatures, prepared statement of..................    55
        Ryan, Hon. Paul, a Representative in Congress from the State
          of Wisconsin:
            Prepared statement of....................................    11
            Prepared statement of Governor Tommy Thompson............    35
        Scheppach, Raymond C., executive director, National
          Governors' Association, prepared statement of..............    43
        Turner, Hon. Jim, a Representative in Congress from the State
          of Texas, prepared statement of............................    17

             H.R. 2376, GRANT WAIVERS AND STREAMLINING THE PROCESS

                                  ----------

                          THURSDAY, SEPTEMBER 30, 1999

            House of Representatives, Subcommittee on National
                Economic Growth, Natural Resources, and
                Regulatory Affairs, joint with the Subcommittee
                on Government Management, Information, and
                Technology, Committee on Government Reform,
                                                        Washington, DC.
        The subcommittees met, pursuant to notice, at 2:04 p.m., in
    room 2247, Rayburn House Office Building, Hon. Stephen Horn
    (chairman of the Subcommittee on Government Management,
    Information, and Technology) presiding.
        Present from the Subcommittee on National Economic Growth,
    Natural Resources, and Regulatory Affairs: Representatives
    Ryan, Terry, Vitter, and Kucinich.
        Present from the Subcommittee on Government Management,
    Information, and Technology: Representatives Horn, Biggert,
    Ose, Ryan, Turner, and Owens.
        Staff present from the Subcommittee on National Economic
    Growth, Natural Resources, and Regulatory Affairs: Marlo Lewis,
    Jr., staff director; Barbara F. Kahlow, professional staff
    member; Gabriel Neil Rubin, clerk; and Elizabeth Mundinger,
    minority counsel.
        Staff present from the Subcommittee on Government
    Management, Information, and Technology: J. Russell George,
    staff director and chief counsel; Randy Kaplan, counsel; Bonnie
    Heald, director of communications; Chip Ahlswede, clerk; P.J.
    Caceres and Deborah Oppenheim, interns; Trey Henderson,
    minority counsel; and Jean Gosa, minority staff assistant.
        Mr. Horn. A quorum being present, the subcommittees will
    come to order.
        The purpose of today's hearing is to examine the process
    Federal departments and agencies follow when considering State
    requests to waive statutory or regulatory requirements
    associated with Federal grants.
        Billions of dollars each year flow to State and local
    governments through Federal grants. Currently, Federal
    departments and agencies award these grants through nearly 600
    categorical block grant and open entitlement programs. In 1998,
    Federal grants amounted to more than $267 billion. Thinking
    back to 1965, that is what Lyndon Johnson spent to run the
    Great Society and the Vietnam war. Although 23 agencies award
    Federal grants, the U.S. Department of Health and Human
    Services handles nearly 60 percent of all Federal grant money.
        Several grant programs, including Medicaid and Temporary
    Assistance for Needy Families, allow States to circumvent
    certain statutory or regulatory requirements of the programs
    through waivers. In large part, States apply for these waivers
    to give them greater flexibility to find alternative ways to
    achieve more effective program results.
        Federal agencies generally approve these State requests.
    However, the cost, complexity, and delays experienced during
    the application process often impede a State's ability to
    implement a program designed specifically for the needs of its
    residents.
        For example, in 1994, officials in my home State of
    California wanted to lower the State's welfare benefits to new
    residents. At that time, California's welfare payments were
    more generous than those offered by many other States. However,
    this change in California's welfare reform project required a
    Federal waiver.
        California applied for the waiver on August 26, 1994. It
    was approved, but not until August 19, 1996, a full year and 9
    months later, almost 2 years.
        We have with us today a number of knowledgeable witnesses
    who will assist us in identifying the problems within the grant
    waiver process, and who will offer proposals to make the
    process more efficient.
        First, we will hear from Representative Mark Green of
    Wisconsin, who has introduced H.R. 2376, a bill designed to
    streamline the application process and increase the
    availability of waivers to State governments. It is a freshman
    bill. The bill specifically would require Federal departments
    and agencies to establish expedited review procedures for
    granting a State waiver if the same agency had previously
    granted a similar waiver to another State.
        In addition, we will hear from representatives of the
    National Governors' Association and the National Conference of
    State Legislatures. They will provide a State perspective of
    the grant waiver process.
        Finally, we will hear from representatives of three of the
    largest grant-awarding departments, the Departments of Health
    and Human Services, Agriculture, and Labor. These witnesses
    will provide the Federal perspective of the grant waiver
    process as it applies to their agencies.
        I welcome all of you witnesses today and look forward to
    the testimony. I now yield to the co-chair of today's hearing,
    the National Economic Growth, Natural Resources, and Regulatory
    Affairs Subcommittee vice chairman, Paul Ryan, for an opening
    statement.
        [The prepared statement of Hon. Stephen Horn and the text
    of H.R. 2376 follow:]

    [GRAPHIC] [TIFF OMITTED] T2841.001

    [GRAPHIC] [TIFF OMITTED] T2841.002

    [GRAPHIC] [TIFF OMITTED] T2841.003

    [GRAPHIC] [TIFF OMITTED] T2841.004

        Mr. Ryan. Thank you, Mr. Co-Chairman. I appreciate it. I
    thank everyone for coming.
        Today we are here to discuss an issue that may seem largely
    procedural. However, it has implications for many, many States.
    States are often the ones which take the initiative for major
    reform efforts. They often end up being the experimental
    laboratories of democracy, as Justice Brandeis once referred to
    them. For the rest of the country, the States are out there
    putting together programs and reforms that are leading the
    country.
        These reform efforts, performed on a small scale, often
    lead to a nationwide overhaul of outdated systems. In recent
    years, we have seen examples of this in the area of welfare and
    health care systems. Currently, some States are exploring
    options for bringing the disabled into the work force and
    providing long-term care coverage, just to name a few, and that
    is something we are working on in my own home State of
    Wisconsin, as well.
        It is important for the Federal Government not only to
    encourage these social experiments but also to provide an
    environment that will foster these types of initiatives. State
    and local governments often understand the needs of their
    constituents and the problems they face better than the Federal
    Government does. They are more familiar with the unique
    problems that must be addressed in implementing any new system.
        The focus of today's hearing will be on ways in which we in
    the Federal Government can create an environment that will
    encourage State and local governments to explore alternative
    solutions to social problems. Today we will examine agency
    processes for the review of State requests for waivers of
    statutory and/or regulatory requirements of Federal grant
    programs, agency track records in processing such State
    requests, and ways to streamline the agency processes for the
    States.
        This hearing will allow the sponsor of H.R. 2376, a bill
    intended to streamline the processing of similar State
    requests, the two major organizations representing State
    elected officials, and three major Federal grantmaking
    agencies, to discuss State experiences and suggestions for
    streamlining the grant waiver process for the States.
        I want to welcome my freshman colleague, Mark Green, the
    author of H.R. 2376, who also, as you may not know, represents
    Green Bay who just won over the Minnesota Vikings last week, so
    I just wanted to get that inserted in the record if I could.
        I would also like to welcome the National Governor's
    Association executive director, Raymond Scheppach--please
    forgive me if I didn't pronounce that correctly--and the
    National Conference of State Legislatures executive director,
    William T. Pound, who will ably represent the States' views
    today.
        I also want to mention that the USDA's Under Secretary for
    Food, Nutrition and Consumer Services, Shirley Robinson
    Watkins, has an illness, so we have somebody filling in for
    Shirley.
        I would also like to welcome the Assistant Secretary and
    Chief Financial Officer for HHS, John J. Callahan, and the
    Labor Assistant Secretary for Employment and Training
    Administration, Raymond Bramucci, who will represent their
    agencies and present the Federal agencies' views today.
        Currently, the Federal department and agency processes for
    reviewing State waiver requests are time-consuming and costly,
    diverting time and dollars from program delivery of services to
    those in need. President Reagan's federalism policies
    recognized the partnership between the Federal Government and
    State and local governments in the implementation of certain
    Federal programs. His federalism policies were premised on
    recognition of the competence of State and local governments
    and their readiness to assume more responsibility. I believe
    that we should focus on these federalism principles, keeping
    them in mind during today's hearing.
        H.R. 2376, ``to require executive agencies to establish
    expedited review procedures for granting a waiver to a State
    under a grant program administered by the agency if another
    State has already been granted a similar waiver by the agency
    under such program,'' will be considered today. This bill
    provides expedited consideration if a second State applies for
    a waiver similar to that already approved for another State.
    Mr. Green will discuss the specific problem which resulted in
    the bill's introduction.
        Currently, Federal agencies make awards to State and local
    governments under almost 600 categorical block grant and open-
    ended entitlement grant programs. In 1998 these awards totaled
    $267.3 billion, which is more than all Federal procurement for
    goods and services.
        Although 23 Federal departments and agencies make grant
    awards, six departments account for 96 percent of all grant
    award dollars. HHS carries the brunt of the burden with 58
    percent; Transportation, 11 percent; HUD, 9 percent; Education,
    8 percent; Agriculture, 7 percent; and Labor, 3 percent. The
    top 20 programs account for 78 percent of all grant award
    dollars. The top 27 programs, all programs over $1 billion
    each, account for 87 percent.
        Several of these programs allow waivers of key statutory
    and/or regulatory requirements, including Medicaid, which is
    the largest grant program, accounting for 39 percent of total
    dollars; welfare, which is the third largest grant program. And
    Food Stamps, which is the 21st largest Federal grant program;
    however, the grant award only covers the administrative
    expenses for State administration of the program. If both the
    administrative expenses and benefit portions are included, the
    grant program would rate between the second and third largest
    grant program in size.
        Besides considering H.R. 2376, the hearing will also
    consider other ideas for improving agency grant waiver
    processes, such as setting deadlines for agency review of State
    waiver requests; providing broad flexibility to waive many
    statutory requirements for States; allowing State certification
    of compliance with certain statutory requirements; and, for
    accountability, requiring quarterly publication of all waiver
    activity. Finally, this hearing will also consider ways to
    ensure budget neutrality for the open-ended entitlement
    programs.
        On August 3rd of this year, this subcommittee wrote all of
    the departments and agencies with Federal grantmaking programs
    where States are eligible recipients, to identify their
    statutory and regulatory waiver processes and to review their
    track record in responding to State waiver requests, including
    those that are similar to another State's already approved
    request.
        The Department of Defense did not provide any of the
    requested information. The Department of Transportation, which
    is the second largest grantmaking agency, only provided some of
    the requested information. One of the questions that we want to
    find out from this committee is what, if anything, are these
    departments hiding, and why aren't they giving us all of the
    full information that we have been asking for?
        Sixteen of the 24 departments and agencies had any
    statutory waiver provisions. Twelve of the 24 had any
    regulatory waiver provisions. Over the last 3 years, 12 of the
    17 agencies with any statutory or regulatory waiver provisions
    received waiver applications from the States. Five of the 12
    agencies--the Departments of Energy, Justice, Treasury, the
    Appalachian Regional Commission, and the Corporation for
    National Service--approved all such requests.
        This leaves us with seven agencies--the Departments of
    Agriculture, Education, HHS, HUD, Labor, Transportation, and
    the Environmental Protection Agency--that denied some waiver
    requests. Of the 1,801 waiver applications Government-wide
    which were reported to the subcommittee, only 5 similar
    applications, or less than one-third of 1 percent, were denied.
        We would like to hear from the witnesses the considerations
    that arose in reviewing waiver applications, including ensuring
    budget neutrality in the open-ended entitlement programs such
    as the HHS, Medicaid, and the Food Stamp Program from
    Agriculture.
        The bottom line is that 85 percent of all State waiver
    requests during this period were approved. Two agencies, the
    Departments of Labor and Agriculture, both of which will be
    testifying today, had the highest proportion of denials, 29
    percent and 13 percent, respectively. We would like to hear
    from them why their track record differs from other agencies.
    We would also like to hear from Labor and Agriculture why
    Republican Governors received a higher proportion of denials,
    31 percent and 16 percent, respectively, than Democratic
    Governors, 23 and 8 percent, respectively, a coincidence which
    sounds very interesting.
        Statutory waiver provisions are very diverse. For example,
    some allow waivers relating to program financing, such as both
    the grantee matching funds and maintenance of effort
    requirements for State pollution control agencies implementing
    the Clean Air Act; the maintenance of effort requirement under
    certain Education programs; and the grantee matching funds
    requirements under the Corporation for National Services' Learn
    and Serve and AmeriCorp programs.
        Besides program financing, some statutory provisions allow
    waiver of programmatic provisions. For example, the Social
    Security Act authorizes the Secretary of HHS to waive
    compliance with certain program requirements for an
    experimental, pilot, or demonstration program under Medicaid
    and the former Aid to Families with Dependent Children welfare
    program.
        I welcome an open discussion today about the ways to
    streamline agency processes for waiver requests by the States,
    since States, as partners of the Federal Government in
    implementing many of the Federal programs, deserve a simpler
    process.
        The States and local governments are our laboratories of
    democracy. It is up to us to try and make sure that they are
    flourishing, and that our waiver program is one that doesn't
    hold them back but lets them go into experimenting with
    programs that work for their people, so that government which
    governs closest to the people can govern the best.
        With that, I yield back the balance of my time.
        [The prepared statement of Hon. Paul Ryan follows:]

        [GRAPHIC] [TIFF OMITTED] T2841.005

        [GRAPHIC] [TIFF OMITTED] T2841.006

        [GRAPHIC] [TIFF OMITTED] T2841.007

        [GRAPHIC] [TIFF OMITTED] T2841.008

        [GRAPHIC] [TIFF OMITTED] T2841.009

        Mr. Horn. Thank you very much. We now call on the gentleman
    from Texas, Mr. Jim Turner, the ranking member on the
    Government Management, Information, and Technology
    Subcommittee. Mr. Turner.
        Mr. Turner. Thank you, Mr. Chairman. This is a very
    important hearing. Having served in the Texas House and the
    Texas Senate for 10 years, as well as chief of staff to a
    former Texas Governor, I know how frustrated State officials
    can be with the Federal agencies once they have applied for
    waivers. This bill is designed to try to encourage an expedited
    procedure in cases where a State has been previously granted a
    waiver for a program.
        As we look at this issue, it is important to keep in mind
    that while the concept of an expedited waiver is good, it
    should not mean an automatic waiver. There are differing
    circumstances for each application that always must be
    considered. So I look forward to hearing the testimony of our
    witnesses and the concerns that they may have regarding this
    bill. I think all of us can concur at the outset of this
    hearing, that anything we can do to improve the efficiency of
    our Federal agencies in dealing with our State governments
    would be a step in the right direction.
        So, thank you, Mr. Chairman, and I look forward to our
    testimony.
        [The prepared statement of Hon. Jim Turner follows:]

        [GRAPHIC] [TIFF OMITTED] T2841.010

        Mr. Horn. I thank the gentleman, and now ask the gentleman
    from Nebraska, Mr. Lee Terry, if he would like to make an
    opening statement.
        Mr. Terry. I have no opening statement.
        Mr. Horn. And the gentlewoman from Illinois, Mrs. Biggert,
    the vice chairman for the Government Management, Information,
    and Technology Subcommittee, if you would like to make an
    opening statement.
        Mrs. Biggert. Thank you very much, Mr. Chairman. Today's
    hearing is a particularly important one. We are focusing on
    efforts to streamline and improve the Federal Government's
    processes for granting State waiver requests.
        Having served several terms in the Illinois State
    Legislature, I can certainly understand the negative
    consequences constraints can have on State efforts to serve the
    unintended populations. It has been said many times before, but
    each State is unique demographically. What practices might work
    on one State, might not necessarily work in another.
        As such, I believe the Federal Government should make every
    effort to accommodate waiver requests made by the States in
    order to help those in need. It is for this reason that I am a
    co-sponsor of Representative Mark Green's legislation to
    require executive agencies to establish expedited review
    procedures for granting State waivers in cases where another
    State has granted a similar waiver. I think this is what we did
    in the State of Illinois when school districts came forward
    with waivers, that then other school districts came in and
    received the same waivers, so I am glad to see that this bill
    is being talked about here today.
        So I commend you for holding the hearings and look forward
    to hearing from the witnesses.
        Mr. Horn. Thank you very much. I see the gentleman from
    Ohio has just come in.
        Mr. Kucinich. Hello, everybody.
        Mr. Horn. Would you like to make an opening statement?
        Mr. Kucinich. I sure would.
        Mr. Horn. Well, you have excellent timing.
        Mr. Kucinich. It is part of being here, I guess.
        Mr. Chairman, I am always appreciative for a chance to join
    you, having had the honor of serving with you on the Government
    Management, Information, and Technology Subcommittee, and I
    also pay my regards to the rest of the members on this
    committee. I want to thank you for holding this hearing on H.R.
    2376 and the waiver process.
        Agencies have the discretion to waive statutory and
    regulatory program requirements applicable to the States in a
    variety of circumstances. With these waivers, States are able
    to tailor the program to meet the unique needs of their
    individual populations. Waivers also serve as testing grounds
    for innovative solutions which could be adopted nationwide.
    Therefore, I welcome the opportunity to learn how we can
    streamline the process by which agencies review waiver
    applications.
        However, it is important to remember that waivers can
    exempt States from the eligibility requirements, terms,
    conditions and guidelines for important programs such as
    Medicaid, welfare, Food Stamps, and employment training.
    Waivers could jeopardize whether or not intended beneficiaries
    ultimately receive the help and protections our laws are
    intended to guarantee. Therefore, the decision to grant a
    waiver should not be taken lightly.
        For instance, I believe that we need to ensure that
    potential opponents of the waiver have notice and opportunity
    to comment on the waiver before it is considered. I also
    believe agencies should evaluate the benefits and drawbacks of
    any similar waivers that were granted in the past.
        Furthermore, the granting of waivers should not become an
    automatic exercise. Each State is unique and each waiver
    application needs to be considered on its own merits. If a
    particular requirement merits a waiver on every occasion, the
    requirement itself, not the waiver process, should be
    reevaluated.
        In conclusion, we should investigate ways to streamline the
    process without jeopardizing a thorough review of each
    application.
        I look forward to hearing the testimony, and I again thank
    the Chair for his leadership.
        [The prepared statement of Hon. Dennis J. Kucinich
    follows:]

    [GRAPHIC] [TIFF OMITTED] T2841.011

    [GRAPHIC] [TIFF OMITTED] T2841.012

        Mr. Horn. Thank you very much, and we now go to panel one,
    which is the Honorable Mark Green of Wisconsin, and we are
    delighted to have you here, Mark.

    STATEMENT OF HON. MARK GREEN, A REPRESENTATIVE IN CONGRESS FROM
                         THE STATE OF WISCONSIN

        Mr. Green. Thank you, Mr. Chairman, members of the
    subcommittees. I want to thank you. I am very grateful that you
    are holding this hearing here today. I am grateful for the
    opportunity to testify on the Federal waiver process in
    general, and specifically our proposal, H.R. 2376.
        According to information supplied to this committee, from
    1997 through August 1999, my home State of Wisconsin applied
    for some 70 waivers from Federal agencies. Now, as has been
    alluded to previously, these waivers were not because Wisconsin
    couldn't or wouldn't meet Federal policy objectives, but like
    so many other States, Wisconsin has wanted to try new
    innovative approaches to meeting long-standing policy
    challenges.
        Each of these waiver requests required extensive paperwork
    and man-hours to meet burdensome application requirements. Even
    after the necessary forms were filled out, the response and
    processing time from the agencies added further burdens,
    burdens of uncertainty and suspended policymaking. In some
    instances, it took over 18 months to get approval of a waiver
    request.
        Now, of course not all of Wisconsin's waiver requests were
    approved, but the burdens and costs Wisconsin encountered,
    regardless of whether they were approved, were as great either
    way. Let me give you an example of the burdens Wisconsin has
    faced in the waiver process, and I know that other States can
    tell similar stories.
        In 1997 Governor Tommy Thompson sought to implement a
    program known as BadgerCare. This innovative proposal, which
    passed our State legislature on a very wide bipartisan vote,
    aims to ensure access to health care for low-income children
    and families. According to Wisconsin's projections, BadgerCare
    is expected to cover an additional 46,200 uninsured low-income
    residents, including 23,900 children and 22,300 parents.
        Even though the Wisconsin legislature endorsed BadgerCare
    in 1997, and even though both Republicans and Democrats from
    our own congressional delegation repeatedly asked for swift
    consideration of the waiver request, it took HHS until 1999 to
    finally approve this request. The great shame in this was that
    during that delay, those thousands of low-income families lost
    out on access to health care, health care that they so
    desperately needed.
        I would like to reemphasize at this point that there are
    really two separate issues. One, of course, is whether or not a
    waiver should be granted. In most cases I am one of those who
    would come down on the side of allowing a State to experiment,
    to be creative, to be entrepreneurial in their policymaking.
        However, what I am more concerned with here today are the
    unnecessary costs, time, paperwork, manpower, which the waiver
    process itself entails, often regardless of the eventual
    results. Those costs are not reflected in the numbers the
    agencies have supplied. Their numbers deal with the eventual
    outcome, but they don't truly reflect the burden, the costs,
    that States have to bear.
        Now, I have a poster here which I would like to show you,
    and we will make handout copies of this and supply them to the
    committee afterwards. This was a poster put together called
    ``The Waiver Game,'' which is designed in a somewhat humorous
    way to show the Federal waiver process and the headaches that
    States have to go through.
        And what it does, this particular poster uses welfare
    reform as the example. First, the State has to pass welfare
    reform. Then they have to submit a 150-page waiver request. The
    agency responds with 10 pages of questions. Once the State
    answers those questions, the agency submits terms and
    conditions. Negotiations take place, there is a 6-month delay,
    and so on and so forth.
        It really is a game, although probably to neither party
    terribly humorous at the time. Every time a State takes a step
    forward on this board game, they seem to take a step back. The
    delays and the red tape are unreasonable, and I think we all
    agree should be greatly reduced.
        Last week I attended a hearing held by the Budget
    Committee. I heard in that hearing Governor Jeb Bush of Florida
    testify on some of his new education proposals. One thing
    really stuck out for me. According to Governor Jeb Bush, 40
    percent of the man-hours at the Florida Department of
    Education, that is 40 percent, are spent wholly on filling out
    Federal paperwork. Surely we can find more productive uses for
    their time and taxpayers' money. Clearly this is a case in
    point for simplifying the waiver process and setting up
    expedited procedures.
        And that of course brings me to my legislation, H.R. 2376.
    This bill, in a very modest, common sense way, would help
    streamline the complicated and time-consuming Federal waiver
    process. Simply put, it directs Federal agencies to establish
    an expedited review procedure for State-requested waiver if the
    agency previously authorized a similar waiver for another
    State.
        The inspiration for this bill came out of an effort that I,
    along with a number of my freshman colleagues, several of whom
    are here today, have made to reach out to Governors, both
    Democrat and Republican. In fact, the most recent response we
    received was from a Democratic Governor, the Governor of
    Kentucky. We have asked them, we have tried to find out from
    them what steps we could all take as a Congress to help them be
    innovative and creative in their policymaking.
        The Governors have told us that the costs and burdens of
    the waiver process restrict them in their efforts to meet their
    constituents' needs in innovative ways. This bill I think is a
    first small step in a larger effort to offer a helping hand, or
    at least help get government out of the way where its
    restrictions are unnecessary or overly burdensome.
        This legislation would allow any State to take advantage of
    the creative policymaking in another State, and to obtain a
    Federal waiver under an expedited, streamlined review. Should
    my legislation pass, I hope and believe that States would be
    more active in taking those opportunities, in borrowing from
    other States. Where they see a success story, hopefully that
    success story can serve as a benchmark. After all, it is the
    State and local leaders who know best, perhaps, what is best
    for their immediate constituents.
        Thank you for the opportunity to be here today, and I would
    be pleased to take any questions you might have. Thank you, Mr.
    Chairman.
        [The prepared statement of Hon. Mark Green follows:]

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        Mr. Horn. Well, thank you, and let me first yield time on
    our side to the ranking minority member. Oh, Mr. Turner went
    out. Well, let's go to the vice chairman of the Regulatory
    Subcommittee.
        Mr. Ryan. Thank you.
        Mr. Horn. Let me say there is a 5-minute questioning limit
    on all these. It will come back to him. We alternate between
    parties.
        Mr. Ryan. Thank you. Thank you, Mr. Co-Chair.
        Mark, let me ask you this: What do you see as the biggest
    problem, based on your Wisconsin experience, as a Wisconsin
    legislator prior to serving in Congress, with the waiver
    process for States?
        Mr. Green. I was in the Wisconsin Legislature for 6 years,
    actually during the height of welfare reform, the
    experimentation that really became a national model, and I
    think it was the uncertainty that the waiver process created.
        Again, legislation, the welfare reform movement in
    Wisconsin was completely nonpartisan, passed on wide bipartisan
    margins, and then once the waiver process started, it was as if
    the State was in suspended animation, not quite sure how to
    meet evolving needs because there was no predictability. I
    mean, we didn't know if a waiver was going to be granted, if it
    would be granted in part; if it was granted only in part, would
    the part granted be sufficient to carry out the intent of the
    legislature; what to do if it wasn't granted.
        That was very burdensome to our policymaking. I think the
    administration would tell you that their problem was literally
    the costs of having employees fill out all those forms and
    trying to stay in touch with whatever agency they were applying
    to, again to try to find out what was going to happen and when.
        Mr. Ryan. So it is not just granting one waiver for one
    BadgerCare initiative. There are several waivers included in
    getting BadgerCare implemented, something like that. Is that
    not correct?
        Mr. Green. Yes. In the case of BadgerCare, it was actually
    lumped into one waiver. Maybe a better case would be
    FamilyCare. We all have very catchy names. FamilyCare is the
    latest program for which a waiver has been requested, and there
    are over 40 requests for that.
        In the past, and I am sure other States are the same way,
    you will get a percentage of your waiver request, particular
    waiver provisions granted, and again that brings you back to
    this whole idea of whether or not sufficient to fulfill the
    legislative intent.
        Mr. Ryan. What are some of the waivers that Wisconsin has
    applied for in recent years, in addition to those two?
        Mr. Green. Well, there have been some in the education
    area, but the original BrideFare; LearnFare, which required
    welfare recipients to attend school, the children to attend
    school; really the whole gamut of welfare reform. And like many
    States, in the health care area there have been a number of
    waiver requests.
        Mr. Ryan. I assume you have had a chance to look at some of
    the written testimony of other witnesses. After reviewing the
    other testimony, are there any other recommendations you would
    have from some ideas you have heard for streamlining the waiver
    process?
        Mr. Green. Well, the National Governors' Association is
    suggesting that we need to undertake a full-blown study. I
    think a step that would be very helpful, and I would be
    interested in working with the committee, is to add a provision
    to this bill which would require agencies to publish
    periodically, quarterly, whatever period we choose, the status
    of waivers. In other words, how many waiver request
    applications they have received, how many have been denied, how
    many have been granted, how long that they have been hanging
    out there. I think that would help all of us really find out
    what the States are facing. So I think that is an excellent one
    in particular. I think that is a good idea.
        Mr. Ryan. I want to go back to the partial waiver approval
    again. You spoke about waivers being approved in part. Is that
    a common problem that we are seeing, that you get maybe three-
    fourths of your waivers for a program? And what kind of
    problems is that going to create? Are we going to be unable to
    go forward with a program if we only get, say, three out of
    four of the waivers approved? Is that something that you see as
    a common problem that we are experiencing?
        Mr. Green. I don't know if it is a common problem. It is a
    hard one, based on my limited experience, to comment. But what
    I will say is it does create tremendous uncertainty. I think
    agencies, State agencies plan on the success of their waiver in
    terms of designing their program and, again, oftentimes they
    are waiting with bated breath to get this reaction from
    whatever Federal agency is involved.
        They get the decision back, and then it takes them a long
    time to study the full impact and to make a calculation. In
    some cases they have to go back to the legislature. But they
    have to make a calculation as to whether or not the program can
    even work. Can they meet the original objectives that everyone
    has agreed to? And, again, I think that creates tremendous
    uncertainty, and it can handcuff State leaders in many ways.
        Mr. Ryan. Thank you, Mr. Chairman. I yield.
        Mr. Horn. Thank you. We now turn to the gentleman from Ohio
    for 5 minutes of questioning.
        Mr. Kucinich. I just have a comment, and then I would be
    glad to yield any time to Mr. Owens.
        I wanted to first of all congratulate Congressman Green for
    his presentation, and also for the creativity of the Waiver
    Game.
        Mr. Green. No pride of authorship. It didn't come from me,
    but I kind of like it, too.
        Mr. Kucinich. What I was wondering about it is if you have
    to roll the dice to play the game, or do you roll the dice when
    you don't play it?
        Mr. Green. Chutes and Ladders, looks like.
        Mr. Kucinich. We will have to think about that. But anyhow,
    you know, I am still interested in hearing more about this, and
    I appreciate you taking the time to come here.
        Mr. Green. Thank you.
        Mr. Kucinich. I will be glad to yield any time to Mr.
    Owens.
        Mr. Owens. Two questions I think were asked on the previous
    occasion when this was being considered. If there is an attempt
    to further streamline the waiver process, do you feel it is
    important that the opponents of the waiver have an opportunity
    to express their views?
        Mr. Green. Yes. I don't think that waiver requests should
    be made in the dark of night. I actually agree with what a
    number of people have said. I don't believe that where in my
    case it is a similar waiver, I don't think that the granting
    should be automatic, because I think States do have differing
    local conditions. I think there needs to be an opportunity to
    review those conditions.
        That is why in this bill I think we have given maximum
    flexibility to the agencies. We have asked them to create an
    expedited waiver review process. We didn't mandate precisely
    what it had to be, because we understand that there isn't a
    one-size-fits-all solution here. I think they do need the
    opportunity to examine both pros and cons.
        Mr. Owens. Do you think it is in order for an agency to
    evaluate similar waivers that have already been granted before
    granting some new waiver in the same area?
        Mr. Green. Well, I mean, I think that if an agency receives
    a similar--a waiver request that is similar to a previous one,
    presumably since that previous one was the first blush, they
    will have performed a lot of review and scrutiny of the waiver
    request. I would assume that they would rely upon at least some
    of their previous work. I think that is appropriate.
        Mr. Owens. Thank you. I yield.
        Mr. Horn. I thank the gentleman. I now yield time to the
    vice chairman of the Government Management, Information, and
    Technology Subcommittee, Mrs. Biggert of Illinois.
        Mrs. Biggert. Thank you, Mr. Chairman. In my opening
    remarks I spoke briefly about the State of Illinois having a
    waiver procedure which for a while caused us a couple of
    problems, and I want to see if this is something that has been
    addressed in this.
        No. 1, at some point we felt like we were the school board,
    sitting at a large school board, overseeing what various local
    school boards were doing when they came in for their requests.
    You know, I just have--will these agencies have the background
    and everything to really look at the different conditions in
    each of these States, really have the background, because it is
    not one-size-fits-all.
        But when we sat, we had to approve the waivers after they
    had made the request, or disapprove them, and so we felt like
    we were making decisions for a local level that we at the State
    would not be doing. How did you work that out so that the
    Federal agency doesn't feel like they are really involved too
    much into the State situation?
        Mr. Green. Well, we don't deal with that directly. Again,
    we do provide a lot of discretion and flexibility to the
    agencies. I think there is always a risk, and I think you are
    right, I think it is Federal versus State and State versus
    local, to pass judgment on what the ``lower'' elected body has
    done. I think that is inappropriate unless you have a clear
    conflict and preemption.
        We don't deal with that directly. I would certainly be
    willing to work with you to find ways to address that, but we
    don't deal with that directly.
        Mrs. Biggert. Then the other thing was that once we had
    granted a waiver for one school district, while we thought
    that, you know, we would look at the others, it became almost
    automatic that we then granted the waivers to other school
    districts, and in effect really kind of abolished the law on
    the books for that.
        And I am thinking of a couple of issues, and the only one I
    can think of is really one that we didn't grant because it was
    a couple of school districts came in and asked for waivers on,
    they call it the sprinkling system, when they were building an
    addition and they didn't have the money to finish that up for
    the year, so they wanted a waiver for the rest of the year to
    do that.
        And I think the first time we granted that and then really
    worried that we had really created an unsafe situation, and
    other school districts started pouring in, saying, ``Well, we
    don't have the money, either.'' So we had to go back and really
    kind of change that. But I think you have to be careful that an
    agency doesn't think, if they granted that waiver for one, then
    they have to do it for another.
        Mr. Green. Yes, and that is why, again, the idea of making
    it an automatic approval, I would be a little hesitant about
    that. But a least I think if we have the expedited review
    process, what I am hoping it will do is encourage States to
    borrow from each other.
        I think you are going to hear the agencies testify that
    they actually get very few similar waiver requests, and they
    have actually used that as logic for saying this bill may be
    unnecessary. I actually look at it the other way. I think that
    is a bad thing.
        We want States to borrow from each other. I mean, if we see
    California putting into place an innovative health care plan
    that meets the needs of an impoverished segment of society, I
    would hope that my State of Wisconsin would say, ``What are
    they doing? Can't we do this?''
        I would like that to happen more and more and more. So I am
    hoping one of the long-term consequences of this will be that
    there will be many more requests, and I don't think they should
    be granted automatically, but hopefully the expedited review
    will be so much less burdensome in costs and time that it will
    encourage States to borrow from each other.
        Mrs. Biggert. Thank you.
        Thank you, Mr. Chairman.
        Mr. Horn. Thank you. Does the gentleman from New York have
    any questions he would like to ask at this point?
        Mr. Owens. No questions.
        Mr. Horn. Well, I think everybody has been satisfied at
    this point. Let me just ask one question.
        I recall in the Department of Agriculture testimony that
    will occur later this afternoon, they say your bill is
    unnecessary because ``while waiver requests may appear to be
    similar, each State situation is unique,'' and therefore
    requires individual attention. How would you respond to this
    statement?
        Mr. Green. I would respond by saying that our legislation
    preserves enough flexibility for the agencies that they can
    take into account the fact that you have different conditions.
    I mean, again, California is quite dissimilar to the State of
    Wisconsin, my home State, and I don't think that because
    something has been done in California, it should automatically
    be granted.
        The agencies, if I may expound upon it a bit, have also
    suggested that this is unnecessary because of Executive orders
    which have directed a streamlined review process. I would point
    out that all of the data that I testified and supplied,
    including the frustration that Wisconsin had with welfare
    reform, all occurred subsequent to the most sweeping Executive
    order directing that there be an expedited waiver process.
        So while I think agencies are trying, I think we need to
    give them a bit of a nudge in moving in the direction of
    streamlining and lowering those burdens, and I think we can do
    this through this bill in a way that allows them to maintain
    the needs to or the flexibility to look at individual
    conditions.
        Mr. Ryan. Mr. Chairman.
        Mr. Horn. Yes, Mr. Ryan.
        Mr. Ryan. If I could add to that, I notice that the
    agencies claim that they have a new Executive order which
    streamlines the waiver application process and approval
    process.
        Looking at the Executive order that has been cited as that
    streamlining proposal, it goes back to the President's
    Executive order on October 26, 1993, where it said ``each
    agency shall, to the fullest extent practicable and permitted
    by law, render a decision upon a complete application for
    waiver within 120 days,'' and it goes on from there. Well, that
    was the Executive order in 1993, but since 1993 we have a whole
    rash of slowed down, delayed waiver processes, waivers that
    have either been denied or have been slowed, or maybe not
    applied for at all because of the process.
        Well, the new Executive order which a lot of the agencies
    claim fixes this, basically says the same thing. It says ``each
    agency shall, to the extent practicable and permitted by law,
    render a decision upon a complete application for a waiver
    within 120 days of receipt of such application by an agency.''
    So it doesn't seem as if this new Executive order fixes the
    problem.
        Since 1993 we have had these problems getting waivers
    approved, getting them approved in an expedited manner. This
    new Executive order is really no different than the prior one,
    so I think that is, of all things, a very important
    justification for the need for this type of legislation.
        With that, I yield.
        Mr. Horn. I thank the gentleman, and I thank the gentleman
    from Wisconsin. It is a very creative effort that you and your
    colleagues have undertaken.
        Mr. Green. Thank you.
        Mr. Horn. So thank you for coming, again.
        Mr. Green. Thanks very much, again, for the opportunity to
    testimony.
        Mr. Horn. You are quite welcome.
        We now go to panel two, which is Mr. Raymond Scheppach,
    executive director, National Governors' Association, and Mr.
    William T. Pound, executive director, National Conference of
    State Legislatures. So, if you gentlemen will come in, we will
    swear you in. This is an investigative subcommittee of the
    Government Reform Committee, and we swear in all witnesses but
    Members.
        [Witnesses sworn.]
        Mr. Horn. Both witnesses, the clerk will note, have
    affirmed the oath, and let's start with the National Governors'
    Association.
        Mr. Ryan. Mr. Chairman, if I could, at this point I would
    like to ask unanimous consent to include in the record a
    statement from Governor Tommy Thompson, the Governor of
    Wisconsin, on behalf of the Council of State Governments, for
    which he serves as the president.
        Mr. Horn. Without objection, so ordered.
        Mr. Ryan. Thank you.
        [The prepared statement of Mr. Thompson follows:]

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        Mr. Horn. Let's start in with the National Governors'
    Association, just in the order on the agenda.

        STATEMENTS OF RAYMOND C. SCHEPPACH, EXECUTIVE DIRECTOR,
        NATIONAL GOVERNORS' ASSOCIATION; AND WILLIAM T. POUND,
     EXECUTIVE DIRECTOR, NATIONAL CONFERENCE OF STATE LEGISLATURES

        Mr. Scheppach. Thank you, Mr. Chairman. I appreciate being
    here on behalf of the Nation's Governors to both talk about our
    recent waiver experiences as well as H.R. 2376. I would like to
    submit my full statement for the record, and I will summarize
    it in a few minutes.
        Mr. Horn. I might add that every witness's statement is
    immediately put in when we introduce them.
        Mr. Scheppach. Thank you, Mr. Chairman.
        Overall, the purpose of waivers is essentially twofold. No.
    1, it allows States to tailor specific programs to the needs of
    the citizens, but perhaps more important, it is to stimulate
    innovative approaches, which is really key.
        If we look back at what has happened over the last 6 to 7
    years, we would probably say when President Clinton took office
    there was a very important meeting in the White House in 1992
    with the 50 Governors that focused essentially on this waiver
    issue. Over the next several years, our sense was that the
    administration was quite good in terms of pushing the envelope
    with respect to waivers.
        In the welfare area, they approved 90 waivers for 44
    States; in the Medicaid area, 21 waivers that helped to hold
    down the rate of increase in spending. I would argue that to
    some extent those particular waivers, particularly in welfare,
    led to the welfare reform bill. I think more recently, in the
    last several years, we've had more trouble in the waiver
    process.
        I'm going to talk a little bit about some of the specifics
    because I believe you actually have to get into some of the
    major waivers in order to get a sense of the substance. The
    first are the so-called 1115 waivers, which are the Medicaid
    demonstrations. These are the large ones that are very, very
    important to States.
        These are normally approved for 5 years but you have a 1-
    year renewal period, and if you look around, you'll find that
    some States have had these for 10 or 15 years, which means once
    they're approved, every single year you come back for renewal.
    I would argue that these often take the longest amount of time
    to approve because they are the most significant waivers. It is
    not unusual to have them take a year, a year and a half, or
    even 2 years.
        The second waiver is the so-called 1915(b), which are the
    managed care waivers. These, initially get approval for 2 years
    but they are a 2-year renewal process. I would argue the
    progress here is more mixed, although I think the Department
    has been getting better recently. These take normally several
    months to approve, they could be up to a year, but I would put
    those as sort of medium responsiveness to the Department.
        The third category is the so-called 1915(c) which are the
    long-term care waivers for home and community-based care. These
    are 5 years with a 1-year renewal. I would compliment the
    agency on these. They have done a rather good job in this area.
    Most of those are probably approved within a 30-day period.
    When these get hung up, I would argue that it's over the whole
    question of budget neutrality, and I'll come back to that in a
    minute.
        The other area I'd like to mention is Food Stamps. What has
    happened at the State level is that States have moved to
    integrate services for low-income individuals, and I think the
    stimulus for this essentially was welfare reform, the so-called
    TANF, and it has changed the culture in States, as States have
    gone from welfare subsidies to employment and training
    programs.
        States would like to integrate Food Stamps into that
    general approach. You'd like to go to case management, so that
    when the person comes in to a welfare office, one person can
    talk about child care, employment and training, TANF, Medicaid,
    as well as Food Stamps, all at one place.
        The Food Stamp progress is not very good. First off, the
    basic underlying legislation does not allow a lot of
    flexibility for waivers. Second, I would argue that this agency
    is probably one of the worst in terms of their willingness to
    work with us, because I think they look at it as a Federal
    program, as a stand-alone program, as opposed to something that
    should be integrated into welfare reform.
        If you get into the children's health area, specifically I
    think the legislation built-in the possibility of 1115
    demonstration waivers. A number of States had interest in doing
    that but we're told it could not be done for a year, so
    essentially that one has been shut down.
        I have included in my testimony a couple of pages from
    Wiscon- sin Governor Thompson on his experience with
    BadgerCare. We've included in the testimony some of the State
    of Massachusetts' expe- rience in some of the 1115's which took
    2\1/2\ years to approve. I would, however, argue that the
    problems with the waivers are both congressional and
    administrative; that Congress often-times does not provide
    enough flexibility in the authorizing legislation.
        A perfect example: the old AFDC programs needed waivers
    while the TANF block grants provide the States with a lot of
    flexibility to tailor the programs. Essentially when Congress
    enacts flexible legislation, they don't need to have a detailed
    waiver process. Second, a lot of the requirements built into
    the legislation with respect to waivers are overly restrictive,
    so at times the agencies' flexibility is curtailed.
        The second problem, however, is the agencies. Some do a
    relatively good job. Others are much more difficult to work
    with.
        For suggestions, we don't have a detailed policy, but we'd
    be happy to get a couple Governors together, even with a couple
    of State legislators, to come back to the committee with some
    fairly detailed recommendations. But some suggestions are as
    follows.
        One problem is this whole question of budget neutrality;
    when OMB looks at it, they look at it with respect to a
    specific program for a specific year. So, if we're coming
    forward with a Medicaid waiver, there may be long-run savings
    in the next 4 years that would offset the increase in that
    particular year, but it's ruled out because you're essentially
    looking at a 1-year timeframe.
        Similarly, a Medicaid waiver might have savings for
    Medicare, but again, any time we have any impact on Medicare,
    we're automatically declared out of order. So on this issue of
    budget neutral- ity, we feel it should be expanded in a couple
    of ways--in terms of the timeframe and looking at offsets with
    respect to other programs.
        Second, when I look at the various waivers, you'll find
    that some of them are for 3 years, some are 5 years, with a 5-
    year renewal, some a 1-year renewal, some a 3-year renewal. It
    seems to make a certain amount of sense in moving toward some
    kind of a consistent renewal basis, perhaps even including
    where it's a standard renewal and putting it in a State plan,
    as opposed to doing it through a normal waiver process.
        Third, we need to find some way of changing the incentive
    mechanism for agencies and how it's coordinated with OMB. It
    has to become a higher priority within the Federal Government.
    Whether that can be done by saying waivers automatically go
    into effect unless people take positive action to stop it, and
    has to be the Director of OMB, or some way of changing that
    incentive, which will force people to the table.
        I agree with some of the previous comments that a lot of
    the cost is waiting, and it's the uncertainty. Particularly
    when talking about demonstration waivers; it means the State
    legislation can't go into effect because it is dependent upon a
    waiver. Legislatures sometimes only meet every 2 years, so if
    you miss that cycle, you've got a very substantial long-term
    problem.
        With respect to H.R. 2376, it obviously would be helpful.
    It is consistent with the Executive order. The new one has been
    adopted only a couple of months. We don't yet know whether they
    are working on an implementation process.
        However, I would say that the particular bill here is
    relatively narrow. It deals only with discretionary grants, and
    I would argue that 80 to 90 percent of our problems are in the
    entitlement areas of Food Stamps and Medicaid. And we've got to
    find a way, again, to look toward integrating Federal programs
    with State programs. There is really a revolution out there
    with respect to integration of services, and if the Federal
    Government continues to look at funding stovepipes Food Stamp
    Program where you can't integrate it, we're going to have
    continual problems in providing good programs for low-income
    individuals.
        I'd be happy to answer any questions.
        [The prepared statement of Mr. Scheppach follows:]

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        Mr. Horn. Does the gentleman from New York have any
    questions on this? Oh, excuse me, we need Mr. Pound's opening
    first. Then we'll question both and have a dialog between the
    two of you.
        William T. Pound is the executive director of the National
    Conference of State Legislatures. Mr. Pound.
        Mr. Pound. Thank you, Chairman Horn and members of the
    subcommittee. First of all I would like to begin by saying
    thank you to the House and the Government Reform Committee for
    everything they have done this year in moving toward improving
    the State-Federal partnership through this whole area of which
    the waiver activity is, I think, but one aspect. Not only the
    House but the full Congress and the administration, in the
    Executive order and the changes and the attempt to move in the
    right direction, we think, on an expedited waiver process and
    other aspects of this.
        My remarks are in the record. Let me just summarize a
    couple of things.
        First of all, this may seem to be primarily an
    administrative issue. Obviously the administrative branch of
    State government is where waivers generally originate, but
    frequently they originate there because of action the
    legislature may have taken or may be considering as it tries to
    conform itself or improve Federal-State-local programs.
        So there is a significant legislative interest at the State
    level in this whole problem, and it is one that we frequently
    hear about, particularly the frustration of the timeliness of
    the waiver process, and in many cases the difficulty of
    obtaining in one State what appears to have been granted in
    another State or in a very similar situation, but having to go
    through all the same hoops over and over again.
        It seems to me that there are several things we should look
    at in this; that we clearly want to maximize opportunities for
    State flexibility in these programs, and particularly to
    provide benefits and deliver services; that we ought to
    maximize the use of limited resources, particularly so that
    they go to the services as much as possible, and perhaps to the
    administration of them in a lesser proportion.
        We need the waiver process streamlined to the maximum
    extent possible, and we need one that will create productive,
    collaborative State-Federal partnerships, not adversarial ones,
    if we can. I think one of the problems is, all too often this
    process may breed rubbing the cat's fur backward occasionally
    as we go through it, rather than trying to more forward
    collaboratively.
        We need to keep people accountable for their actions at
    both the Federal and the State level, and I think we need to
    encourage duplication to the extent that we can. As we look at
    what we might do in this process, it seems to us in our
    discussion with State legislators that we need to make program
    waivers available across as many discretionary and mandatory
    State-Federal programs as possible, again in the remarks Mr.
    Scheppach just made.
        It would be ideal if we could maximize program flexibility
    by statute in the actual legislative process, and I hope you
    will do that. But, realistically, the waiver process will
    always be a very important part of this procedure.
        If we could simplify, some modifications that might
    simplify this process would be perhaps to make waiver
    modification self-certifying when States comply with all
    application requirements. This assumes that this is a
    collaborative process across the Federal-State lines.
        A second would be to place time limits on the waiver
    application review process. The 120 days that has been
    mentioned and is in the Executive order, and I believe is also
    in NGA recommendations, is certainly something that we support.
    It is obvious that there may be exceptions to that rule, and it
    seems to me that an exception process could be developed where
    circumstances do not permit the realization of a 120-day
    timetable. In addition, to the extent feasible we should make
    waiver application forms uniform across the agencies and move
    toward greater technology, particularly electronic application
    processes, in this relationship.
        Third, waivers granted for one State we would recommend be
    automatically approved for other States whenever they are
    similar. Obviously, there is difficulty probably in the
    definition of ``similar,'' but I think those are things that
    could be worked out.
        To the extent possible, waiver periods should be uniform
    and renewal processes ought to be the same across agencies. I
    think from the legislative standpoint, again, one of the great
    difficulties is an understanding of this process a lot of the
    time on the part of people who are in it, even when they're
    working closely with their State executive branch people
    through the process.
        Too often, the waiver process appears to be idiosyncratic.
    When you talk to legislators, you hear that it all depends on
    who so often rather than on a procedure; who reviews it, their
    sympathy, their understanding in State government.
        And I guess last I would say that on the Federal side, we
    think that intensive participation from the regional and State
    offices of Federal agencies is essential. Several witnesses
    have brought up the subject of the differences between States.
    That is one way to deal with that, with a sense that the
    regional office should have a greater understanding of the
    individual needs of States, even within a region, and sharing
    similar conditions.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Pound follows:]

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        Mr. Horn. Thank you very much. I will now yield to the vice
    chairman of the National Economic Growth, Natural Resources,
    and Regulatory Affiars Subcommittee, Mr. Ryan, for 5 minutes of
    questioning. Then we will go to the minority.
        Mr. Ryan. Thank you. Thank you, Mr. Pound and Mr.
    Scheppach. I apologize if I mispronounced your name.
        Mr. Scheppach. That's fine. Scheppach.
        Mr. Ryan. Both of you said something that was very
    interesting, and it seemed to come down to this: that there is
    discretionary decisionmaking in these agencies. It doesn't
    matter which agency as much as it matters who you call.
        Can you expand on that a little bit? Have States been
    discouraged by Federal agencies from filing waiver requests, by
    people at the other end of the telephone in certain agencies?
    If so, which agencies are doing this kind of thing? Also, have
    States been asking for quid pro quos, meaning alter the waiver
    in this way and we will do that? Could you expand on those
    areas?
        Mr. Scheppach. Well, I don't know whether it's agency or
    program specific. I think the areas where we've had the
    greatest problems are in Food Stamps and in CHIP, there's been
    a reluctance there. You know, the word gets around pretty
    quickly when two or three States submit waivers and they're
    turned down, and people aren't willing to negotiate. And so the
    message goes around and the rest of the 47 other States saying,
    you know, they're not interested in waivers it's not worth our
    time.
        So those program areas tend to be the bigger areas. I think
    HHS, where the big ones are concerned, is somewhat mixed. They
    do a very good job on the home and community-based. It's more
    mixed in the managed care area, and more difficult on the broad
    demonstrations.
        But I'd also concede that those areas where you're talking
    about fairly major restructuring of programs, where the
    innovation comes, and they are sometimes restricted by the
    budget neutrality question. But it does depend on the culture
    of the agency and the people you're dealing with.
        Mr. Ryan. Mr. Pound.
        Mr. Pound. I would concur with that. I think that the Food
    Stamp Program is an area and the Department of Agriculture is
    an area where there have been problems with that, particularly
    in some of the experimentation or waiver requests around the
    broad area of welfare reform. There are I think several
    instances that we're aware of where the--what we hear is, you
    pass a bipartisan program in a State legislature that envisions
    certain experimentation, and that there has been a very
    difficult time obtaining the waiver, particularly where it
    relates to some of the Food Stamp aspects, and in one case at
    least being successful only upon the intervention of the
    President.
        Mr. Ryan. Well, what do you think is the primary reason, if
    you can? I know this may be difficult to answer, but what would
    be the primary reason for waiver denial, across the board? What
    is the driving reason?
        Mr. Scheppach. Probably the budget neutrality.
        Mr. Ryan. The budget neutrality?
        Mr. Pound. Yes.
        Mr. Ryan. What about the time line? Have the States
    estimated on average what the average processing time has been
    for the Federal agencies to review the State request for a
    waiver, to get an answer? Do you know the average time for,
    say, Food Stamps, or waivers from HHS or Labor, Medicaid? Have
    you calculated that?
        Mr. Scheppach. Again, my sense on the demonstrations, the
    big ones, the average is probably a year or more.
        Mr. Ryan. So over the 120-day level----
        Mr. Scheppach. Yes.
        Mr. Ryan [continuing]. That the Executive order strives to
    achieve?
        Mr. Scheppach. That's right, but again, those are the big
    ones. I think the long-term care ones probably average less
    than 30 days, you know, because a lot of those are very, very
    quick. And managed care is probably 4 to 6 months, in that ball
    park. Now, Agriculture, I'm not sure, since I'm not sure we've
    had any approved.
        Mr. Ryan. Mr. Pound.
        Mr. Pound. I don't know the specifics of that. I would
    suggest, though, that this is a good reason why the study or
    the cooperative effort on a program in the future might be
    built into this legislation, where we would look and see what
    kind of a model can we develop here and what are the obstacles,
    working together between Congress, the agencies, the executive
    and legislative branch and State government. And I would second
    Mr. Scheppach's remarks about our willingness to actively
    participate in that.
        Mr. Ryan. OK, so let me just go beyond just H.R. 2376. What
    are some other ideas you think we ought to include in a model,
    in a waiver-expediting process? What do you think about a
    statutory deadline for processing a waiver request application
    from a State, or giving more broad statutory flexibility to
    more statutory provisions, something like the Ed Flex bill
    which I am sure you are very familiar with, that process? What
    do you think of, you know, a provision allowing State
    certification for financial requirements like maintenance-of-
    effort, matching funds set-asides, cost caps? Or a requirement
    requiring quarterly publication, like HUD does, for waiver
    applications or denials or the status of waiver applications?
    What do you think of things like that?
        Mr. Scheppach. Well, I think a lot of those could be
    helpful, but again we've got to remember that for the most part
    those go to discretionary programs, and our major problem
    continues to be in the entitlement area.
        I know it's not under your jurisdiction, but perhaps a
    package of amendments that comes forward from this committee,
    that's recommended to the other committees, might well be
    helpful. Also some guidelines in terms of future legislation,
    of the areas where waivers make sense and what are some
    guidelines, so that when new legislation comes forward, people
    can look to it.
        I'd have to argue that well over 80 percent of our problem
    is in the entitlement area, and again, it's the ability to sort
    of combine and integrate these programs.
        Mr. Ryan. That is very helpful. Thank you.
        Mr. Horn. Yes. Thank you. We now yield to the gentleman
    from New York, Major Owens.
        Mr. Owens. I have no questions, Mr. Chairman.
        Mr. Horn. OK. Mrs. Biggert, do you have any? The
    gentlewoman from Illinois.
        Mrs. Biggert. Thank you, Mr. Chairman.
        Mr. Pound, did you say that you thought that there should
    be in the law a definite period of time by which waiver
    requests should be--I guess what I am driving at is that in
    this, the bill that we have in front of us, it really is that
    each of the--each agency will establish the rules and
    regulations. Do you think that there should be uniform rules
    and regulations across the board for Federal agencies, or that
    each agency should promulgate its own rules?
        Mr. Pound. I think uniformity is desirable. I do think you
    need a possible safety valve procedure.
        Mrs. Biggert. Would that be like a model, or would that be
    an absolute within this law?
        Mr. Pound. Well, if you've got a safety valve, it seems to
    me you have not an absolute but a way for exceptions.
        Mrs. Biggert. For exceptions. Then what is involved in a
    waiver. States make a request. Is it a lot of paperwork? Right
    now, is there applications, or is it a definite way to fill
    out, or is it just something that each State must decide when
    they're making that waiver, that they kind of make up their own
    application?
        Mr. Pound. Ray.
        Mr. Scheppach. Well, generally there's a procedure and a
    form, but oftentimes it's an intricate type of thing because
    you'll submit the form and then you get a list of questions
    back, and then you've got to answer those questions, and then
    you get another list of questions, and then you go back and
    forth for a period of time. And then there'll often be
    negotiating sessions where a number of people will come in from
    the State and try to sit down with perhaps people from the
    regional office as well as people from the agencies here, to
    see whether they can work it out.
        Mrs. Biggert. Do you think, then, to maybe try and expedite
    this would be, one way would be to have an application that
    would have the questions that would usually come up in a
    request for a waiver, or is that too hard to do?
        Mr. Scheppach. I think it's kind of hard, because the
    questions come out, I mean, there are legitimate questions with
    respect to it, and the agencies do provide what information
    they need. It's just that it gets stretched out because it's an
    iterative process over a fairly long period of time, and at
    times I don't know that there's enough incentive to get closure
    on it, and it's the length of time that tends to be the
    problem.
        Mr. Pound. We could overreach by trying to overstandardize
    some of this, because there are enough differences in enough
    things that I think you could----
        Mrs. Biggert. Well, that was my concern with what you said,
    Mr. Pound, about having kind of a uniform rules and
    regulations, that in some respects it appears to be that some
    of these different areas, some are much more complex than
    others and much more detailed. That might cause problems with
    that. I think that's something that we will have to look at.
        But looking at the requests for waivers from the different
    States and looking at Illinois, it doesn't seem like we have
    made that many requests, actually. I have--in the Department of
    Agriculture and in EPA seem to be the most, and most of these
    have been--well, in the one area have been granted. In another
    there has been like 7 percent denials, so that doesn't seem to
    be such a problem, but it doesn't give the amount of time.
        Mr. Scheppach. Well, again, you've got to be careful with
    just looking at the numbers because, as I say, if an agency has
    turned down seven other States and Illinois wants to do that,
    they're not going to submit a waiver when the feeling is
    they're just not going to get it. So it's hard to just look at
    the actual numbers.
        Mrs. Biggert. Thank you.
        Mr. Horn. The ``more questions'' routine that you two had a
    dialog on sort of reminded me of Lucy and Charlie Brown and the
    football, where an agency just keeps sort of holding it out
    there that he might kick it this year, and there are just more
    questions, more questions. And that kind of bureaucracy does
    not impress me, I must say.
        In your testimony, Mr. Scheppach, you discussed the problem
    of budget neutrality and how multiple year waivers might cause
    problems with OMB's budget process. Just so we can get a feel
    as to what reality is in this regard, could you sort of make up
    an example of how we--one, how it overlaps on the multiple
    year, and then the Federal year and the State year and all
    that, and what suggestions you would have to how we could deal
    with that?
        Mr. Scheppach. Well, you know, sometimes what happens is
    that the State may want to make an investment. Let's assume
    that they want to make an investment in child care that helps a
    welfare person get off welfare. Therefore there's an increase
    in child care but there are savings in TANF in the next 4
    years, so there's an offset. I think under the general rules
    you can't do that kind of thing. In other words, they're
    looking at a specific program for a specific year.
        Or there may be a Medicaid change that may have some
    savings to Medicare. I mean, we have significant overlap in the
    so-called dual eligibles for low-income people between Medicare
    and Medicaid, and those two programs are getting increasingly
    interwoven. It's possible that whatever policy change at the
    State level might save the Federal Government money in
    totality, although it might cost more in Medicaid, and lower
    the costs in Medicare.
        And all I'm suggesting is a little more flexibility on
    netting all Federal programs, perhaps, and looking at a broader
    5-year timeframe as opposed to that 1 year. It's just
    worthwhile looking at and perhaps experimenting with, because
    right now a very high percentage of these do get kicked out
    because of the budget neutrality question, and yet there may be
    long-run budget savings.
        Mr. Horn. Mr. Pound, do you want to add anything to that
    discussion?
        Mr. Pound. No. I would agree with what he said. I think it
    is a frustration at the--the whole Federal budget process is a
    frustration at the State level a lot of the time, but----
        Mr. Horn. You can add the national to it.
        Mr. Pound. I know, but to the extent that you can consider
    the longer run horizon savings and the tradeoffs in programs,
    it would only be beneficial to this process.
        Mr. Horn. I think you have got a good point there. Let me
    ask if there are any other points you would like to make,
    because if there are not, well, we will move to the next panel.
    Well, the gentlewoman from Illinois.
        Mrs. Biggert. Thank you. Just from your point of view or
    from the State's point of view, what are the reasons usually
    given for a denial of a waiver, or why do you think they are
    denied?
        Mr. Scheppach. Well, as I said, I think the reasons are
    often the budget neutrality reasons.
        Mrs. Biggert. Well, I guess the reason I am asking this, do
    you think that politics get into this at all?
        Mr. Scheppach. Not in a big way, in all honesty, from what
    I've seen.
        Mr. Pound. It depends. It relates to the idiosyncratic
    nature of some of this, I think. I think the answer is
    sometimes yes, but maybe frequently no.
        Mrs. Biggert. And with some of these denials, are sometimes
    a partial waiver given to a State? I mean, is there somewhere
    that the Federal Government says you can do this but the other
    part is----
        Mr. Scheppach. Yes. I mean, there is negotiation and
    sometimes there is a partial, and the question is whether the
    partial works. Sometimes it just doesn't work, so the State
    says, you know, ``I need to integrate the entire thing. If you
    give me part of it, it doesn't work, so it's not helpful to
    me.''
        Mrs. Biggert. Thank you.
        Thank you, Mr. Chairman.
        Mr. Horn. Thank you. Well, unless you have any additional
    comments you think we ought to ask about and didn't, let us
    know. If not, on the way back to your offices, feel free to
    write us a note and we will put it in the record.
        Mr. Scheppach. Thank you.
        Mr. Pound. Thank you.
        Mr. Horn. Thank you for coming, very much.
        And so we will now move to the agencies, and that is panel
    three. Mr. Samuel Chambers, Jr., the Food and Nutrition Service
    Administrator, is testifying in the absence of Under Secretary
    for Food, Nutrition and Consumer Services Shirley Robinson
    Watkins of the Department of Agriculture. Mr. Raymond L.
    Bramucci, the Assistant Secretary, Employment and Training
    Administration, Department of Labor. Mr. John J. Callahan,
    Assistant Secretary, Chief Financial Officer, Department of
    Health and Human Services.
        And gentlemen, if you will, just stand, raise your right
    hand. If you have any staff back of you that is also going to
    give you advice, I want them under oath also. Anybody stand up
    who is going to advise them. OK. One, two, three, four, five,
    six. That is about the Pentagon ratio.
        [Witnesses sworn.]
        Mr. Horn. OK, the six supporters and the three principals
    are fine. I am going to have to turn over now to Mr. Ryan a bit
    for this, because of other commitments, and Mr. Ryan will be
    the Chair of the meeting. And I don't know if you want to
    preside from here or preside from there, whatever you would
    like.
        Mr. Ryan. This is fine.
        Mr. Horn. You seem very comfortable there.
        So, gentlemen, if we could just proceed then as the agenda
    is with Mr. Chambers, and just work our way through, we have
    the statements. We would like you to sort of spread it over
    between 5 to 8 minutes and get it on the record. It is
    automatically in the record, but get the high points from it so
    there is more chance for a dialog by the various members of the
    committee on both sides.
        So with that, I am going to have to leave for another
    meeting.
        Mr. Ryan [presiding]. Why don't we start with Mr. Callahan?
    I think that is the way we had it on the panel. That is
    probably the way you expected it, so we will just get started
    with Mr. Callahan.

     STATEMENTS OF JOHN J. CALLAHAN, ASSISTANT SECRETARY AND CHIEF
      FINANCIAL OFFICER, DEPARTMENT OF HEALTH AND HUMAN SERVICES;
        SAMUEL CHAMBERS, JR., ADMINISTRATOR, FOOD AND NUTRITION
     SERVICE, DEPARTMENT OF AGRICULTURE; AND RAYMOND L. BRAMUCCI,
     ASSISTANT SECRETARY, EMPLOYMENT AND TRAINING ADMINISTRATION,
                          DEPARTMENT OF LABOR

        Mr. Callahan. Thank you very much, Congressman Ryan.
    Congressman Ryan, Chairman Horn, Congresswoman Biggert,
    Congressman Owens, thank you very much for inviting the
    Department to testify here today about our review waivers of
    Federal law and regulations.
        We believe the HHS waiver process has been successful in
    approving nearly 684 waivers in the time of the Clinton
    administration. These include State-wide research and
    demonstration Medicaid waivers; 1915(b) Medicaid program
    waivers; 1915(c) Medicaid waivers; welfare reform waivers;
    child welfare waivers; refugee assistance waivers; and child
    support waivers.
        Every State in the Union; every State, I repeat, has
    applied for a waiver and received at least one HCFA and ACF
    waiver during the current administration. Indeed, I might add
    as a note, under the Medicaid 1115 State-wide demonstration
    authority for waivers, which has been in existence since 1960,
    during the Reagan administration starting in 1980, one State-
    wide waiver was approved. In 1988 under the Bush
    administration, during the time he was in office, there were no
    waivers approved. And there were 20 waivers approved under the
    current administration.
        We believe that the waiver process is one of constructive
    engagement between Federal and State governments. Our goal at
    the Federal level is to work with States as partners, emphasize
    State flexibility, and work with States to develop a smooth
    implementation process.
        Indeed, as part of that effort, as you know, the Department
    and the National Governors' Association reached agreement in
    1994, in a Federal Register notice that is part of my formal
    testimony. This agreement indicates first that there will be a
    collaborative effort in the waiver process in order to help
    States develop research and demonstration waivers in areas
    consistent with the Department's policy goals; second, the
    Department will consider proposals that test alternatives that
    diverge from those policy goals; and finally to consider a
    State's ability to implement the research and demonstration
    project.
        The NGA agreement also stated principles related to
    evaluation, duration of waivers, budget and cost neutrality,
    and State notice procedures, so that all the constituencies in
    the State would be aware of the waiver that was being submitted
    to the Federal Government. This agreement is also contained in
    my formal testimony.
        Prior to the enactment of national welfare reform, HHS used
    waiver authority broadly to give States flexibility to run
    their welfare programs. Most welfare reform waivers were
    approved within 4 months, many within 2 months.
        And in 1995 the Administration on Children and Families
    developed and announced an expedited 30-day review and approval
    process for waiver proposals that helped States address five
    major areas of helping welfare recipients become self-
    sufficient. Copies of this guidance are also included in my
    testimony.
        In HCFA the length of review time differs according to the
    type of waiver that is requested. Approvals and renewals for
    program waivers and home- and community-based waivers are time
    limited. They have to be acted on within 90 days, and our
    indication is that in these particular waivers--these are
    1915(c) waivers, I believe--that they are generally approved
    within a period of 60 to 75 days.
        The longer-term demonstrations which are the complex ones,
    the State-wide Medicaid demonstration waivers, do take a longer
    time. Indeed, I have some information, I believe, which has
    been supplied to me by the HCFA administration, that of 18
    States we averaged about 10 months to approve these waivers,
    and in 7 States they were approved in 6 months or less.
        And I might also add, as a point of reference vis-a-vis Mr.
    Scheppach's testimony, that with regard to budget neutrality,
    we do not do budget neutrality on a 1-year basis. We do it on
    the basis of the duration of the demonstration. So in the case
    of the demonstrations that are forwarded to us from the States,
    they're generally 5 years in length, so the budget neutrality
    calculations are for 5 years, not for 1 year. And indeed
    they're renewed for 3 years: the budget neutrality calculation
    will continue for the full length of the demonstration. So
    budget neutrality is not calculated on a year-by-year basis.
        Throughout this process, as I have indicated, the
    administration works cooperatively with a State, and provides
    technical assistance, urges the State to provide a public
    notice process to all its citizens, when it submits a waiver
    request; negotiates budget neutrality, et cetera.
        Let me just say that there are a couple of principles that
    guide our waiver process. Waivers are in fact like contract
    negotiations. They are not easy, but there is a mutual desire,
    I believe, on both sides, on the Federal and the State side, to
    attain a mutual goal of creating program innovation and
    flexibility.
        But we must realize we have to protect program integrity,
    and oftentimes the entitlement nature of the program. Medicaid
    is an entitlement as well, as some of the other programs that
    we're talking about. And we have at the Department a fiduciary
    and programmatic responsibility to do two things. One is to
    make sure that the demonstration is fiscally prudent, that is,
    it fits within the budget neutrality concept which was agreed
    by us and NGA; and the other is to ensure that we protect
    vulnerable populations.
        In the Medicaid demonstrations that we have dealt with over
    the years, we have added 1.1 million new eligibles to the
    Medicaid population. These are cooperative efforts, again,
    between the Federal Government and the State. We have also
    moved 4 million Medicaid beneficiaries to managed care. We
    believe this is positive, as well.
        But we have to be concerned also in the area of managed
    care, because in some cases people have indicated that
    individuals, and adults and children with special needs, may
    not always get the appropriate treatment under managed care.
    This is something that we have to be very careful about,
    because if the beneficiaries are Medicaid-eligible, they should
    receive appropriate care under either a current program or a
    revised program. So we have to deal with cost neutrality and,
    at the same time, make sure that the beneficiaries are
    protected.
        So those are the basic concepts that we use in our
    demonstrations. We feel we do approve them within a reasonable
    period of time, and we believe that our record indicates, with
    the 700 waivers we have approved, that we have a process that
    works and will continue to work over time.
        Thank you very much. I would be pleased to answer any
    questions.
        [The prepared statement of Mr. Callahan follows:]

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        Mr. Ryan. Mr. Chambers.
        Mr. Chambers. Good afternoon, members of the committee. I
    am Samuel Chambers, Jr., Administrator of the Food and
    Nutrition Services at the U.S. Department of Agriculture. I am
    pleased to speak to you this afternoon about how the Food and
    Nutrition Service [FNS] manages the Federal grant funds for the
    Nation's Federal domestic nutrition assistance programs, as
    well as how FNS implements grant waivers. I would also like to
    share the Department's comments on the bill before you.
        The Food and Nutrition Services administers 15 domestic
    nutrition assistance programs. We believe that these programs
    form a nutritional safety net for America's low-income
    families, providing the Nation's children and their families
    with access to a more nutritious diet and encouraging better
    eating choices.
        Each of these 15 programs is targeted at populations with
    specific nutritional needs, and all of these programs operate
    under Federal assistance awards to States who agree to operate
    them under requirements established in the authorizing
    legislation and through regulations, formal instructions,
    policies and procedures.
        The largest nutrition assistance program FNS administers is
    the Food Stamp Program. Currently, approximately 18 million
    Americans receive nutrition assistance in the form of Food
    Stamp coupons or electronic benefit transfer [ebt] payments in
    order to purchase their food.
        The Food Stamp Program consists of two parts: benefits
    provided to households, and an administrative grant that
    provides funding to State agencies for administering the
    program. Benefits, of course, are 100 percent federally funded,
    while most administrative expenses are at a 50-50 match ratio.
        Now, our agency has authority granted for three types of
    waiver situations in the Food Stamp Program. The first, of
    course, is program administration. The second is with regard to
    work requirements, and that is the one that probably gets the
    most attention. And then, of course, demonstration projects.
        In the first area, administrative waivers, our regulations
    allow us to waive Food Stamp Program requirements so long as
    such a waiver is consistent with the provisions of the Food
    Stamp Act, and of course does not result in material impairment
    to participants or applicants.
        Now, to give you an example, we recently approved a waiver
    for the State of Maryland concerning when a household must
    report income changes. Under the new procedure, a household
    will be required to report new employment within 10 days of the
    start of employment, instead of 10 days after the household is
    aware of that new employment. This waiver we believe will help
    households better understand when they need to report a change
    in earned income due to a new job, and will also make it easier
    for caseworkers in that State to determine when a household
    should report a change and whether that household is complying
    with the change report requirements.
        Now, in this area as well as the other two areas, our
    standard for responding to waiver requests, once they are filed
    with one of our seven regions, is 60 days--not 6 months but 60
    days.
        In the second area, the one that I referred to as being
    probably the one that's most popular, that having to do with
    work requirement waivers, the Personal Responsibility and Work
    Opportunity Reconciliation Act of 1996 restricts participation
    in the Food Stamp Program to 3 months during any 3-year or 36-
    month period for certain able-bodied adults between the ages of
    18 and 50. FNS may waive this requirement when an area has an
    unemployment rate greater than 10 percent or insufficient job
    opportunities. Currently, FNS has approved 39 State requests
    for such waivers.
        Again, we currently act and our standard for acting on
    these waiver requests is also 60 days. When a State agency can
    certify data from the Bureau of Labor Statistics showing an
    unemployment rate above 10 percent in a specified area, FNS
    actually allows those States to operate under that waiver
    starting at the time that they actually request the waiver, so
    that those happen in a much, much shorter period of time than
    the 60-day standard that we normally provide.
        The third category, which is, of course, demonstration
    grants, allows us to permit States to conduct pilots or
    experimental projects. Currently, 13 States are operating
    demonstration projects so that they can test new techniques to
    increase the efficiency of the Food Stamp Program or to improve
    delivery of benefits to eligible households.
        Under this authority, FNS is required by statute to respond
    to waiver requests, again within 60 days from receiving the
    request, by either approving or denying the request or by
    requesting clarification of a particular request. If we fail to
    respond within that 60-day timeframe, the waiver is approved
    unless its approval is specifically prohibited by statute. So
    again, you're talking about the same 60-day span that is
    applied across all three categories of waivers.
        The Food and Nutrition Services uses its waiver authority
    appropriately, giving prompt and careful consideration to each
    State's proposed changes in program requirements. Because the
    Food Stamp Program and other programs that we administer
    comprise a nutritional safety net for millions of low-income
    families and are national in scope, each change in program
    rules has the potential to affect the health and well-being of
    millions of Americans. Recognizing this, the Department
    approves many waivers each year, allowing States to experiment
    with changing program requirements in the interests of
    improving the effectiveness of program administration and
    service to our Nation's families.
        As an aside, I don't know if Mr. Scheppach has left, but he
    mentioned during his testimony that he was not aware that our
    agency had approved any waiver requests, and I think we've
    submitted information to the committee already but I'd like to
    at least clarify for his benefit, if not others, that for the
    year 1999 we approved 116 requests, waiver requests, for 47
    States. For 1998, the year before, we approved 163 waivers for,
    again, 47 States.
        Mr. Ryan. How many denials?
        Mr. Chambers. In both of those years, in 1999 we denied 17,
    and in 1998 we denied 25, so overwhelmingly the great majority
    of the waiver requests that we received in each case from the
    majority of States, 47 States, were responded to in the
    affirmative.
        On occasions, different States may seek waivers from our
    agency to test a familiar programmatic change, which is
    something that's been referred to here. FNS believes it is
    necessary to test the waiver of a program requirement first in
    a particular geographic area or in a limited population, so
    that its effects can be thoroughly evaluated before additional
    waivers are granted.
        You heard previously numerous individuals testified that no
    State is created entirely equal to another, and that is one of
    the reasons that we try to be very judicious in our review of
    waivers, to make certain that the externalities, if you will,
    or spillover effects of a particular waiver that is proposed in
    one particular State and approved, is tested thoroughly and
    documented as being not only in support of the programs mission
    goals and objectives, but that it does not create an undue
    hardship on either the State that is administering that change
    or the individuals who are in fact the recipients, intended
    recipients of those benefits.
        The committee is considering a bill today which would
    require agencies such as ours to expedite its review of a
    State's waiver request. The Department believes that this
    proposed legislation is unnecessary, and I don't think I need
    to say anything more about that except to reiterate that the--
    that has already been indicated.
        While the waiver requests FNS receives from States may
    appear to be similar, again, each State situation is unique. In
    giving each waiver request prompt and careful consideration,
    FNS must not only consider the requesting State's particular
    circumstances, but we believe we must also, if the proposed
    change is already being tested and evaluated elsewhere, under
    what circumstances.
        In this way, we are able to support State innovation while
    at the same time providing the necessary oversight to ensure
    that programmatic changes are effective and beneficial. When an
    approved waiver unexpectedly results in problems for a State or
    its recipients, the impact is limited in scope, and the
    Department and other States are able to learn from that test
    case.
        Mr. Chairman, this concludes my prepared remarks, and I
    would be pleased to answer any questions that you or other
    Members may have at this time. Thank you very much.
        [The prepared statement of Mr. Chambers, Jr., follows:]

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        Mr. Ryan. Thank you, Mr. Chambers.
        Mr. Bramucci.
        Mr. Bramucci. Mr. Chairman, members of the subcommittee, my
    old friend Major Owens, I am pleased to be here to talk about
    Federal grant waivers. I will summarize my testimony and it's
    pretty straightforward. We believe in waivers. We are using
    waiver authority to the maximum in terms of sound policy, and
    we are pushing the envelope whenever and wherever it is sound
    to do so, actively looking for ways to grant waivers rather
    than reject them, or to work with States to help them
    accomplish their goals in other ways.
        We are doing business in a new way at the Department of
    Labor, and it's very much in keeping with the spirit of the
    Workforce Investment Act. This act was unique, in that it
    brought members of both parties together in agreeing that the
    best job training or worker assistance programs are those that
    are designed at the local level.
        Mr. Chairman, since we responded to Chairman McIntosh's
    August 3rd request, we've continued to analyze, and my formal
    testimony provides you with more detailed information, but it
    boils down to this: Under the Secretary's waiver authority for
    1997 and 1998, 40 States and one Territory requested and were
    granted waivers of JTPA and Wagner-Peyser requirements. We
    approved 423 waiver requests; 26 other requests were not needed
    because States could do what they were requesting. We didn't
    have the legal authority to waive 98 requests, and we
    disapproved 54 requests. So we were approving about 9 out of
    10.
        My written testimony describes in detail our use of waiver
    authority, with a special emphasis on waivers under the JTPA
    program. With due respect to that law, it's history.
        I became Assistant Secretary of Labor for Employment and
    Training the day the Workforce Investment Act was passed.
    Before that, I spent 4 years as New Jersey's Commissioner of
    Labor, and I know how important it is to partner with States
    and with local communities to make good things happen, and I
    witnessed firsthand the wariness of State officials to Federal
    officials, and I witnessed also the wariness of local officials
    to State officials and Federal officials.
        We are working hard to ensure that our actions reflect the
    spirit of partnership and the flexibility that is inherent in
    the act, and the best way the States can ensure they have the
    flexibility they need is to take the authority to set their own
    course that the Workforce Investment Act gives them by moving
    expeditiously to write a State WIA plan and submit it.
        Our current policy on waivers is grounded in the work
    started by Senator Mark Hatfield of Oregon. He worked on one
    State waiver authority with Oregon State and local officials,
    and we worked with them to try to figure out how to help them
    improve job training and employment programs. When Senator
    Hatfield expanded the waiver authority under JTPA, he agreed
    that certain key features of the program, such as eligibility,
    allocation of funds, and labor protections, should not be
    waived. I wholeheartedly support the Hatfield doctrine.
        One of the principles of the President's ``GI Bill for
    American Workers'' which evolved into and was enacted as the
    Workforce Investment Act, was State and local flexibility.
    Accordingly, the administration proposal included a
    codification of Senator Hatfield's waiver authority that has
    been contained in annual appropriation bills.
        Under Welfare-to-Work, the Secretary has the authority to
    waive the statutory requirement that programs at the local
    level be administered by the Private Industry Council if the
    State shows that designating an alternative agency would
    improve service. In 1998, a total of 20 requests from 5 States
    was received for waivers, and they were approved.
        Getting back to the Workforce Investment Act, one of its
    key principles is State and local flexibility. The form and
    substance of the interim final rule for WIA reflects our
    commitment to regulatory reform and to writing regulations that
    are user-friendly, and in a question and answer format to make
    them easier to use. And to provide greater flexibility, the
    regulations do not include all of the procedures mandated under
    JTPA. As a result, they were only half the length that JTPA's
    were, as they were published in the Federal Register, and we
    used far more ``mays'' than ``shalls.''
        Under WIA, 90 percent of the waivers granted in the past
    won't be necessary. Since WIA is inherently more flexible than
    JTPA, we won't get as many waiver requests and the ones we get
    will be handled faster. But there are limitations to what we'll
    allow. We won't allow waivers of the basic purposes of title I
    of the act: establishment and functions of local areas and
    local boards; review and approval of local plans; and worker
    rights, participation and protection.
        Mr. Chairman, I thank you for the opportunity to present
    the Department of Labor's point of view, and stand ready to
    answer any of your questions.
        [The prepared statement of Mr. Bramucci follows:]

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        Mr. Ryan. Great. Thank you, Mr. Bramucci.
        Let me start with you, Mr. Callahan, and then the other two
    witnesses. With the letter you sent here to the subcommittee,
    you stated, ``Waiver applications are highly individual, in
    that each embraces matters grounded in the specifics of the
    State's current plans, demographics, needs, resources and
    priorities. Therefore, each application is considered
    individually and not in comparison with other applications.''
        I think that is a very valid point and it is a very
    noteworthy point, but does HHS streamline its review process in
    any way for a State waiver application which is similar to that
    approved of another State? If not, can you explain that more
    fully? I mean, aren't there some cases where some of these
    things do resemble other cases, other States, or is every
    single one clearly and distinctly different.
        Mr. Callahan. Well, I think there's always differences in
    probably virtually every State waiver that comes in. I think
    your point may be correct that there's not major differences in
    every application----
        Mr. Ryan. Right.
        Mr. Callahan [continuing]. And that's a valid point. But I
    think one of the things that probably ought to be kept in mind
    here is, when the waiver is finally approved, it is for a
    rather long period of time.
        So, for example, on the major demonstrations that you're
    concerned about, the 1115's, when a State waiver is approved,
    it's approved for 5 years. It's also renewed for 3 years. And
    the other ones that we're talking about, they're generally
    approved for 2 or 3 years and renewed for 2 or 3 years.
        So the key thing here is, aside from the streamlining that
    you're concerned about, is to have a constructive process so
    that you get a good, solid waiver, and once it's agreed to,
    it's locked in for a long period of time. So I guess our
    feeling on this would be, the important thing is the end goal,
    which is to get to the approval of a waiver that both sides----
        Mr. Ryan. A quality waiver.
        Mr. Callahan. A quality waiver. That's a good point.
        Mr. Ryan. Sure.
        Mr. Callahan. And I think the record would indicate, again
    given the number of waivers, we've achieved that.
        Mr. Ryan. Well, and I think you will find no disagreement
    on the fact that we want to achieve a quality waiver so it is a
    program that can be locked in, but aren't there similar quality
    waiver requests coming, and aren't there some coming in 1 day,
    and then a few days down the road or a year down the road, very
    similar waiver requests that are structured the same way
    because another State got them in just as quickly?
        Mr. Callahan. Undoubtedly that may occur. Obviously, not
    having sat in front of those 685 waivers that have been
    approved, I can't give you a very specific answer. But I do
    think we are mindful of time. Not only are the State people,
    the State officials that deal with us are mindful of time,
    we're mindful of time as well.
        But we want to make sure, when we approve that waiver, that
    we do the two things that I talked about earlier. It has to be
    budget-neutral, and that was agreed with us by the National
    Governors' Association. They signed on to that agreement. And,
    second, we have to make sure that the people that are served
    under these programs are well served, and that's the thing that
    we're aiming at.
        Mr. Ryan. Well, and that is our question with Wisconsin.
    Had BadgerCare been approved a year earlier, we could have
    served all those extra low-income people, had it been approved
    earlier. So the consequences of not acting, not granting
    approval, are fairly dire as well.
        Have you estimated a ball park timeframe as to what the
    average approval process is at HHS?
        Mr. Callahan. We will supply that for the record in detail,
    but let me say it's my general understanding that in the area
    of the major demonstrations, which are the 1115's, there have
    been some that have taken a long time. The New York case was a
    long time. I think you've already eloquently stated that the
    Wisconsin case took a long time. Some of the other major
    demonstrations took as little as 3 months, sometimes more, in
    the 6 or 7 month timeframe.
        Mr. Ryan. Well, as you know, the Executive order says 120
    days is the goal.
        Mr. Callahan. Right, but again, these are the most complex
    ones because they deal with revisions in the Medicaid program.
    It is very clear, because the Medicaid program is an
    entitlement program, we're not going to push people who are
    entitled to Medicaid out of it.
        And, second, we do have to do these budget neutrality
    calculations, which are complex, which apply to a 5 year
    period, and we work with the States to determine what we call
    the ``without waiver baseline'' which is the projection of what
    we believe a normal projection of Medicaid expenditures without
    the waiver would be for 5 years.
        So these are more complex, and I would suggest that I'm not
    sure you'd want to do those in 90 or 120 days, because if you
    set a very arbitrary standard, saying, ``OK, we've got to
    conclude it in 90 days,'' and we agree to say, ``OK, we'll
    either approve it or deny it within 90 days,'' you might get
    more denials.
        I guess my point here is, it's better to keep the parties
    at the table, and that's what we're aiming for.
        Mr. Ryan. Sure, but wouldn't you agree that it could be
    done a little faster? I mean, given the fact that the
    administration's own Executive order says we want to do this
    within 120 days? I agree, an arbitrary date may increase the
    possibility of denials, but can't progress be made.
        Mr. Callahan. Yes, I don't deny that progress can be made,
    and we have on our part put out a lot of technical assistance
    guidelines to the States to indicate the things that we're
    concerned about when we come to the table. We would hope that
    sort of technical assistance will create a situation where
    we'll come to the table as quickly as possible and get these
    things approved as quickly.
        Mr. Ryan. We will go to another round of questions, but I
    would like to ask my colleague, Mr. Owens, if he would like to
    ask any questions at this time.
        Mr. Owens. Yes. Thank you very much. I hate to sound like
    an old-fashioned Democrat liberal, but the assumption is being
    made that the more freely waivers are granted, the more
    improved government, and I think that both the White House and
    the Republican majority in the Congress agree with that
    assumption and are pushing very hard, and your record
    demonstrates that. I think you--had we been talking about this
    10 years ago, the record would be quite different in terms of
    the kind of waivers, number of waivers and kind of waivers
    granted.
        But I really have some problems with the assumption that
    automatically things are done better at the State and local
    level. You know, we have a scandal in New York where a clerk
    for the last 7 years has been taking bribes to marry people
    without making them follow the proper requirements, and some
    folks are wondering whether they are married or not, you know,
    appropriately. We have a situation where 20,000 kids were
    forced to go to summer school because there were blunders on
    the testing, the process of scoring the test. We have a
    Governor of the State of New York under investigation and
    scrutiny because of some ethical questions, ranging from his
    fee, the fees he collects for his speeches, to the way they let
    contracts.
        And on and on it goes. Corruption at the local level, you
    know, I know we are all familiar with. I think, Mr. Bramucci,
    you were with State government. I know that local government is
    the same thing. You would concede that it isn't the most
    efficient and the cleanest form of government. We had a
    situation recently where the mayor of New York had to be
    ordered by the Federal court to stop abusing potential welfare
    recipients and Food Stamp recipients.
        So, I just wonder, in this process of rushing to grant
    waivers and place our faith in the State governments, do we
    have some safeguards? And can we have more safeguards and some
    stringent penalties for people who violate the law because the
    waivers give them a situation where nobody will be watching,
    monitoring, holding them accountable?
        We have large amounts of money not being spent, that we
    think ought to be spent for job training, day care. We have a
    situation where large amounts of money are being saved by
    adopting certain policies, because the Federal share is part of
    it and there is a State and local share, and therefore these
    waivers give the government a chance to save a lot of money on
    the backs of people who are in great need, and they are being
    denied things that they really are due according to the
    legislation and they are eligible for.
        So I wonder if you would comment on any safeguards that we
    might need, like penalties in the law which really put people
    in jail for violating the law. After they have been given all
    this freedom, if they are caught violating the law, they really
    have to pay a price. Or some other means of making certain that
    while we give this greater flexibility and freedom, we don't
    undermine the real purpose of the laws, mostly the safety net
    laws that people want to push for waivers with. And I just
    wonder if you want to, each one of you might want to comment on
    that?
        Mr. Bramucci. Since the Workforce Investment Act envisions
    the greatest transfer of authority and initiative to the local
    level under State auspices, remember I said in my testimony
    that notwithstanding that transfer and that new partnership
    from the bottom up, we would not give waivers on eligibility
    for benefits and for programs, allocation of funds, nor labor
    protection. We'll be watching that very closely, because what
    we're not trying to do here is have an excuse for less people
    being trained, but for more, and to do it more expeditiously,
    however, by having fewer rules and regulations and more
    flexibility on the part of local communities to design the kind
    of programs they need for the local citizens.
        But the aim is to expand the availability of training and
    education to people who direly need it in our economy. We'd be
    sweeping things under the rug to take that--to take a point of
    view that we're trying to save money here on services. We're
    trying to save money on red tape. We're trying to extend the
    availability of the service to eligible workers, Congressman.
        Mr. Owens. Now I would like to see about that waiver for
    truck drivers in New York City.
        Mr. Bramucci. Yes. You asked me about that before.
        Mr. Chambers. I'd like to make a few comments in response
    to that question. I've had 31 years of experience in
    government, all of that time in human services, working with
    Food Stamps and similar programs, TANF, the old AFDC program.
    I've been a caseworker, a child welfare worker. I've been a
    supervisor, manager. I've done constituency services. I've been
    a county director, I've worked at the county level, I've worked
    at the State level. I've only had 1 year of experience at the
    Federal level, and I can tell you, I've seen in that 31 years
    some of everything. I think when I'll retire I'll write a book
    and call it ``Anything You Never Want To Know About Government,
    And Then Some.''
        But, at the same time, I've seen some absolutely wonderful,
    creative work done at every level of this American government,
    and I have to believe that my collective experience over that
    period of time at the three levels of government, at least in
    the human services, suggests to me that in the main the people
    who are managing these programs and who are carrying out the
    directives of the administration and Congress really are people
    of good will and intent and tremendous talent and expertise.
        I believe, and I think it would be my--hopefully my
    colleagues' perspective also, that the waiver authority that we
    currently have granted to us allows us a lot of opportunity to
    do real partnership and collaboration with our peers. And by
    virtue of the fact that we have been able to do waivers, I
    think, and meet many of their requests, in fact, in the
    majority of cases, their requests for innovation and
    creativity, I think we pretty much feel that we've got our
    hands pretty well firmly on the throttle here.
        I think in terms of situations where experiments go awry or
    perhaps the results that are achieved are not precisely what
    others or individuals might have hoped, I think there are means
    that we have at our disposal for addressing that, both in terms
    of negotiating with those States that have gotten the waivers,
    changes in those provisions so that the problems can in fact be
    corrected and the results can in fact be improved.
        So I think as long as we can maintain a spirit of
    collaboration, partnership and cooperation in this regard
    without the rancor that sometimes pervades discussions between
    advocate groups and States as well as the Federal agencies, and
    then even our customer constituents, as long as we can somehow
    get past all that, I think we have a real opportunity for real
    success here in terms of reinventing government and making a
    positive step for quality of life for all of our citizens, the
    ones that we represent who are here as well as those that are
    not here, that need our services. So, thank you, that's my
    perspective.
        Mr. Owens. Thank you.
        Mr. Callahan. I think with regard to the waiver process,
    your point is a correct one. These are waivers, these are time-
    limited waivers, so it is incumbent upon all the agencies that
    have the waivers, including our own, to look at and evaluate
    these waivers not only to see whether they made improvements in
    the program, but clearly that there were no adverse effects on
    the beneficiaries of the program. And that's the basic
    philosophy that we use in dealing with the waivers, so your
    point is a correct one.
        Mr. Ryan. Mr. Owens, let me respond. As an old classical
    liberal, I guess as a young classical liberal, I just think it
    is important to quote Winston Churchill at this time, who said
    that democracy is the worst possible form of government except
    for all other forms of government. It is a sloppy process. You
    do have graft and corruption. You do have unintended results.
        But the foundation of democracy, from my perspective, is
    the idea that government which governs closest to the people,
    governs best. That way you have those who are right there in
    the streets, in the schools, in the hospitals, on the front
    lines of the fight for reviving our society, helping make the
    decisions on how to improve the conditions in our society.
        And I think what we're trying to achieve here is a good
    cooperation, not a Federal Government hunkering down on top of
    the State governments or the local governments. And, Mr.
    Chambers, I think what you said was a wonderful statement,
    which is, we are not trying to achieve finger-pointing, we are
    just trying to achieve results.
        I think everybody that works at all of these departments
    and in these State governments, and here in Congress for that
    matter, are well-intentioned people trying to achieve good
    results for their citizens, their fellow citizens. Our
    constituents, your constituents, are all citizens of the United
    States of America.
        But, having said that, we do have this wonderful thing in
    America, and that is, we have these institutions of democracy,
    State and local governments, all over the country who have a
    good, in most cases better perspective on how to help and care
    for people in their areas. The whole purpose of waivers is to
    try and get those tools in the hands of those local
    governments, those State governments.
        Mr. Owens. Would the gentleman yield?
        Mr. Ryan. I would be happy to yield.
        Mr. Owens. I have to run, but I just want to say I have
    served at all three levels of government, and I don't agree
    with you at all.
        Mr. Ryan. Well, thank you, Mr. Owens. I appreciate that. I
    think we are just going to agree to disagree on some of these
    things.
        Let me go to you, Mr. Callahan. I wanted to ask you a few
    specific questions, because we were going down the path on the
    some of the health care programs that you administer, and in
    NGA's written testimony they explain that Texas and Michigan's
    applications to combine waivers under Section 1915(b) managed
    care and Section 1915(c) long-term care, to create managed
    long-term care programs under Medicaid, required more paperwork
    and more staff resources than if they had requested separate
    waivers for each section.
        Why was this the case? I mean, why did HHS require more
    paperwork for a combined application than for separate
    applications?
        Mr. Callahan. Well, I haven't had the benefit of seeing Mr
    Scheppach's testimony, and I will have to supply that answer
    for the record.
        Mr. Ryan. If you could, please.
        Mr. Callahan. Yes, sir.
        Mr. Ryan. Let me go on and let me ask you, maybe you can do
    this in written followup, but later in their testimony they
    said, ``Currently many States are interested in pursuing
    coordinated care options for individuals who currently have a
    fragmented health care delivery system''--that is something we
    are experiencing here in my home State of Wisconsin--``those
    frail seniors eligible for both Medicaid and Medicare. Several
    States have engaged in protracted negotiations with HCFA''--the
    Health Care Financing Administration within HHS--``but have
    ultimately, and for several years in some cases, withdrawn
    their application.''
        The goal of State experimentation, State improvement in my
    State is to try and get at all slices of society, to make sure
    no one is slipping through the cracks. We do have different
    health care policies, different health care services out there
    that people can at the same time qualify for, yet it is sort of
    a stovepipe viewpoint from the Federal Government.
        Mr. Callahan. I understand the concerns that you have
    raised about the seamlessness of care. However, we do have to
    acknowledge the fact that Medicare and Medicaid are two very
    different programs.
        Mr. Ryan. Clearly.
        Mr. Callahan. In Medicare, there are concerns that we have
    to deal with vis-a-vis the trust fund on Medicare, in terms of,
    for example, if there were a basically a waiver that was
    designed just hypothetically, say, to save Medicaid funds but
    expand Medicare funds. That has an impact on the Medicare trust
    fund. I think that's something that actually the Congress would
    have to consider, as well.
        Mr. Ryan. Are the budget neutrality----
        Mr. Callahan. If I could just finish----
        Mr. Ryan. Oh, sure.
        Mr. Callahan [continuing]. There are a couple of other
    things, too. There are differences in the Medicare and Medicaid
    beneficiaries, in eligibility rules. For example, in Medicaid
    programs we have permitted waiving freedom of choice in
    providers of programs. That is, States as part of their
    demonstrations have put a lot of Medicaid beneficiaries in
    managed care programs.
        A Medicare beneficiary is free to choose. A Medicare
    beneficiary is free to choose as to whether he or she wants to
    be in fee-for-service or whether he or she wants to be in
    managed care. That's part of the basic statute.
        So those sorts of things have to be weighed in these
    matters, and I think it's those, among other considerations,
    that I think are legitimate concerns we'd have to deal with
    before we resolve the problem along the lines that have been
    suggested.
        Mr. Ryan. Do you have any thoughts on how we can resolve
    that, any statutory changes or anything like that?
        Mr. Callahan. Well, I think you'd have to look at changes
    in both the underlying authorizing statutes, both Medicaid and
    Medicare. I think one of the points that your colleagues made
    here which is a good one, if these things become so routine and
    accepted over time, maybe what we have to do is, go back and
    change the basic underlying statute. And insofar as this
    committee can look into that and can suggest that, then I think
    that's something you should----
        Mr. Ryan. Yes, I think that is a very--that is what we did
    with welfare reform.
        Mr. Callahan. Right.
        Mr. Ryan. I think it is a very, very valid point.
        The CHIP program, I know the CHIP program is relatively new
    and waivers have been set aside for a year.
        Mr. Callahan. Right.
        Mr. Ryan. What is the status of that right now?
        Mr. Callahan. As you know, in the CHIP program, I think
    it's within the last 4 to 6 weeks we had the last two States
    finally come in and have their CHIP programs approved, so all
    States now have either a separate CHIP program or, as you know,
    what they call the M-CHIP program, where they cover the
    children under Medicaid expansion as opposed to the CHIP
    program per se, the S-CHIP program.
        And, as you know, we estimate that somewhere in the order
    of 1.3 million children are now covered under the CHIP program.
    The President has asked and directed our agency to go out and
    actually visit all 50 States, right now which we're finishing
    up, to see why we aren't getting more kids that are Medicaid
    eligible and/or CHIP eligible, enrolled in Medicaid and CHIP.
    I'm sure some of your State legislators have talked to you
    about that.
        So I think we want to be in the process of getting this
    overall program up and running at a fairly high rate before we
    get back into the waiver process. I think we will get into the
    waiver process at some point.
        Mr. Ryan. Do you have any idea what the time line is?
        Mr. Callahan. I'd like to supply that for the record,
    because I----
        Mr. Ryan. Because I think the legislation had some
    requirements within it that----
        Mr. Callahan. Oh, I understand.
        Mr. Ryan. A specific time line.
        Mr. Callahan. Right. I understand, but I'd like to confer
    with the HCFA administrator on that.
        Mr. Ryan. If you could, I would appreciate that.
        Mr. Bramucci, I just wanted to ask you a quick question. I
    was intrigued with your testimony, but I also notice that,
    looking at the statistics that the Department supplied the
    subcommittee and the other departments supplied the
    subcommittee, that the Department of Labor has the highest
    denial rate of any other department in the Federal Government,
    a 29 percent denial rate.
        Could you--you briefly touched on some of the denial
    reasons, but could you go into a little more specific why your
    Department is the highest, has the highest denial rate, and
    what are the reasons for the bulk of these denials?
        Mr. Bramucci. Well, statutorily we have--the biggest number
    that you saw in our graph. By the way, this has been added to
    our testimony. You'll notice that the biggest number on
    negativity are the ``no authority to waive.'' That isn't a
    denial, it's simply a denial of authority under the statute.
        We simply--54 cases are all that we denied over those
    years, and in most instances we're eager--I mean, some of the
    things talked about here, when we have a request for a waiver,
    for instance, that's on our website. We publish not only the
    request for a waiver but the answer, so that States can pick up
    information as to what is OK and what isn't, in order to
    facilitate discussion.
        We have detailed meetings with our partners all over the
    country on these issues. And, you know, I've been around the
    country now. I've been on this job 14 months. I have traversed
    hundreds of programs out there with all kinds of officials.
    I've never heard an official, Republican, Democrat, or a
    Ventura-ite, ever question our waiver objectivity. I have
    never----
        Mr. Ryan. Jesse Ventura has never questioned your waiver?
        Mr. Bramucci. No, he has not.
        Mr. Ryan. OK.
        Mr. Bramucci. No, they have not questioned our--in all the
    time I've been in this office, 14 months, not one person has
    accosted me or said to me, ``Bramucci, the Labor Department is
    not doing its job properly.''
        Mr. Ryan. Let me ask you about the 54 discretionary waiver
    denials or the 54--I just saw your chart for the first time
    here--where the waiver was disapproved. Is there a pattern
    there? Is there a systematic pattern? Is there a reason why
    those were disapproved? It sounds like those were disapproved
    by discretionary decisionmaking within the Department of Labor.
        Mr. Bramucci. Basically it's commingling of funds or
    requests to waive outcomes or performance data that we found we
    couldn't live with. It would just not be proper under our
    stewardship of the law. You know, Congress just didn't say,
    ``Here, send the money out and there are no requirements,'' and
    so we're the referee. We have to call it.
        And we would like to say yes because we have an active
    partnership going. But I will point out to you, Congressman,
    that most of that is all moot because we have moved to a new
    era. We're out of the business of doing----
        Mr. Ryan. With the new law?
        Mr. Bramucci. With the new law. Ninety percent of the
    requests and approvals we made would not be germane today.
        Mr. Ryan. I think that's a very good point. The new law
    hopefully will take hold, and hopefully we can take care of
    this experimentation.
        Mr. Bramucci. We've got to get the States to file their
    plans, and we've got I think 16 in the house now, because this
    is a massive enterprise of passing authority and initiative out
    to the States and to the local communities. And we think it's
    going to work, and there is an enormous push for it, and it
    will remove a tremendous amount of frustration at
    intergovernmental relations.
        Mr. Ryan. Well, let me ask each of the three of you this:
    To get a better handle on the 85 percent approval rate reported
    by the agencies to the subcommittees, 85 percent of the waivers
    being approved, were any State waiver requests only partially
    approved by each of your agencies? And if so, what percent of
    your agencies' approvals were partial approvals, and can you
    give me the nature of the partial approval process? Let's just
    go down the line. Mr. Callahan?
        Mr. Callahan. In terms of partial approval, I suppose the
    question may be a definitional one. And you'll forgive me for a
    moment, but if a State comes in and puts in a waiver request,
    and then we negotiate with them and we come out with a
    different product in the end, is that--do you determine that to
    be a partial waiver?
        Mr. Ryan. I would think so.
        Mr. Callahan. Well, why?
        Mr. Ryan. Well, the input is, the State legislature passes
    a program. Let's take BadgerCare, our own program back home. It
    requires so many waivers. The output is something that looks
    different than what the State government passed.
        Mr. Callahan. So in essence, then, if I may, in that case
    I'd have to give you precise information as to whether the
    initial waiver was not approved in its entirety, as opposed to
    whether a different waiver was approved, and we'd have to do
    that. That would take quite a bit of work.
        Mr. Ryan. I think a better question would be, in the
    approval where it ends up becoming a partial approval, are
    there cases where with other States they did get approval, and
    another State did not get approval, for very similar provisions
    or waivers that were being requested?
        Mr. Callahan. Well, that would require a detailed
    examination of all these 684 waivers that we've approved.
        Mr. Ryan. Just off the top of your head, as an
    administrator.
        Mr. Callahan. I would say by and large for a lot of these
    waivers, the 1915 (b)'s and (c)'s, a lot of them were probably
    approved in very close conformance with the original
    submissions. The 1115's, which are the more complex waivers,
    probably under your definition would be viewed as ``partial''
    waivers. They're very complex and----
        Mr. Ryan. Do you think there is, do you have, are you
    applying a consistent application of scrutiny to waivers coming
    in, regardless of the States.
        Mr. Callahan. Yes, absolutely.
        Mr. Ryan. Mr. Chambers.
        Mr. Chambers. Unfortunately, the information that I have
    available to me here today does not include that breakout, so
    I'm going to have to get back to you for the record.
        Mr. Ryan. OK.
        Mr. Bramucci. I don't think so. Generally we get a package
    of waiver requests, and to the extent that we would approve--
    that a State did 40 requests and we approve 35, if we find--
    that would be partial in terms of their package of requests.
    But what our practice has been, Mr. Chairman, is to take a look
    at the ones that are borderline and negotiate that with the
    State, to say, ``If you do this, we will be able to do this,''
    or ``If you change these words or that word, we will be able to
    do it.'' We don't believe that there is an issue on the part of
    our partners in the States in that regard.
        And to the argument about whether or not we have ever
    denied a State a waiver where we had granted a similar waiver
    previously, the answer is yes, in one case. That involved the
    State of Florida. The then-Governor was Lawton Chiles, and we
    had an ongoing dispute with them on their JTPA review process,
    and we were not, because of the legal nature of the dispute, we
    were not capable of approving that request. That's the only
    request I know of where we have taken a similar request,
    granted it in one State and denied it in another.
        Mr. Ryan. Well, let me ask the three of you gentlemen this,
    and then we'll close. Do you think that denials or the
    negotiations that are entered into to restructure waiver
    requests can serve or are serving as disincentives for other
    States to go under the same process? Or let's say three States
    give you a waiver for a program, they are denied, do you think,
    as the NGA testifies, that that is a disincentive to other
    States to go down the complicated, expensive and timely task of
    looking for a waiver?
        Mr. Callahan. I would say emphatically not.
        Mr. Ryan. Why?
        Mr. Callahan. And the reason is 684 waivers that are
    approved over the last several years. That's a lot of waivers
    that are approved, and I think when our colleagues at the State
    level or at the local level want to do something innovative and
    constructive and they believe in it, they're going to pursue
    it.
        So, for example, even in the case of Wisconsin where we did
    have differences, we kept working and working and working. And
    the ultimate result was that the kids, under the ultimate
    BadgerCare demonstration that was approved, were approved under
    the M-CHIP program for an enhanced match for services; and the
    families, the adults, were approved under the Medicaid program,
    the State Medicaid program.
        Mr. Ryan. Yes.
        Mr. Callahan. So in the end, the people were served. So I
    would believe, my feeling is that for those waivers where there
    is strong State support for their waivers to serve their
    constituents and our common constituents, that they will pursue
    the waiver process.
        Mr. Ryan. Well, for the record, in the end they were served
    2 years after the legislation passed, but I appreciate your
    comment.
        Let me ask just this quick question. We have talked about
    some different ideas, different ideas for streamlining the
    waiver process. What are your thoughts on these ideas? A
    statutory deadline, I think, Mr. Callahan, I got your
    impression on a statutory deadline for processing waiver
    requests. What about broad statutory flexibility to waive most
    statutory provisions, like the Ed Flex bill?
        I don't know, given that that doesn't necessarily affect
    each of your agencies, you may not have a clear opinion on that
    one, but what about statutory provisions allowing State
    certification for financial requirements like maintenance of
    effort, matching funds, set-asides, cost caps, or a statutory
    requirement for quarterly publication of approvals and denials
    and a processing time for each, like what HUD does with its
    waivers? What are your thoughts on reforms like that? We will
    start with Mr. Bramucci.
        Mr. Bramucci. Well, built into the Workforce Investment Act
    is a requirement that we turn around these requests in 90 days.
    We've done better than that most of the time. Our record with
    Welfare-to-Work, a highly--an extensive program, $3 billion
    over 2 years, we had 20 requests, we turned them around in
    weeks, for waivers. I don't see, and this isn't----
        Mr. Ryan. So you like the statutory deadline, or----
        Mr. Bramucci. No. I think that--I think things in our
    Department are running fine. I think we're very attuned to the
    need to turn around decisions and to work closely with State
    and local partners. And the old philosophy, ``If it ain't
    broke, don't fix it,'' ours ain't broke, and I'm confident that
    we're doing the right thing and we have excellent lines of
    communication with our partners.
        Mr. Ryan. So you don't think there is anything we can do to
    further streamline the waiver process?
        Mr. Bramucci. I'm talking about the Labor Department, and
    in the Labor Department, with the change of legislation which
    is dramatic in that, it is an enormous transfer of authority
    and discretion to local and State governments. Therefore, the
    whole issue becomes moot in terms of how you treat us. Our
    rules are different, because our rules now are to approve the
    State's mechanism for taking clear title to this power and
    authority, so our relationship changes. Waivers are now less
    and less important. Maybe that's the answer.
        Mr. Ryan. Very good point. Thank you.
        Yes, Mr. Chambers.
        Mr. Chambers. Let me say that I really need to think more
    about the substance of your question, but I will say this much.
    After my review of this whole situation, I think--I have a
    couple thoughts.
        One, I think we have adequate, if you will, direction
    within the statute and regulations, that we are required to
    conform to the 60-day standard that we apply, we meet in the
    majority of cases, except in a few cases where because of lack
    of information or the timely receipt of that information,
    deliberations may go on, negotiations may go on somewhat
    longer. But I think that our overall track record is one that
    would support the fact that the system is not broke, it is
    functioning.
        If I would make any recommendation at all, and this is
    based on my work both at the State and county level as well as
    now at the Federal level, and being able to compare
    relationships across those three levels, I would say that the
    one thing that we could do that would help our overall
    administration of these programs, regardless of where you
    happen to sit, in which part of the king's court you happen to
    sit, would be if we could somehow dispel the notion that, one,
    the States are intimidated by the Federal agencies. My
    experience of 31 years is that there are very few elected or
    appointed people in State governments who are intimidated by
    Federal agencies. My experience over the last years is
    certainly anything less than that.
        Second, I believe we need to encourage and support, as I
    think the committee is trying to do today, the negotiation, the
    ongoing dialog, and the collaboration between all levels of
    government, with the understanding that we can achieve more
    working together than we will ever be able to achieve taking
    cheap shots at one another.
        I think, unlike the testimony, at least my review of some
    of the testimony that's been given here by at least one
    individual, that the environment that we exist in is a much
    healthier one than some would suggest. There is ongoing dialog.
    Our agency continues to have dialog with multiple
    constituencies about our programs, including State
    representatives, people who are members of and participate with
    the American Public Human Services Association [APHSA], for
    example.
        We will have staff at their national meeting this next week
    in Park City, UT, there not for the purpose of engaging in
    conflict but for the purpose of showing support for the States'
    efforts as regards the Food Stamp Program, which is our
    flagship program, but at the same time hopefully responding to
    some of the issues that the States have been discussing with us
    over the last year, particularly in the area of program
    integrity and access to program benefits, so on and so forth.
        So I think there is in fact a healthy dialog that we need
    to support and reinforce and fuel wherever we possibly can.
        Mr. Ryan. Mr. Callahan.
        Mr. Callahan. I would say in general four things. One, some
    of the time deadlines that are in some of the statutes and
    regulations are helpful. Second, I think the agreement that we
    have with the NGA is a helpful guideline to evaluating these
    waivers.
        And then the last two things is, I think it is very
    important that we maintain fiscal stewardship along the lines
    of cost neutrality; and, second, that we basically uphold the
    congressional statutes that have been passed, especially vis-a-
    vis the entitlement status for the individuals under these
    programs, whether it's Medicaid or welfare or child welfare.
        Mr. Ryan. It seems like each of you are more or less saying
    that statutory changes may be necessary as well. I think
    clearly, Mr. Bramucci, that is what you were saying. That is
    just an observation. I am not necessarily asking you a
    question.
        Are there any other statutory requirements that you think
    would add to that, to addressing those needs that you just
    mentioned, Mr. Callahan?
        Mr. Callahan. I'm sorry. Vis-a-vis what, what statutory
    changes? Vis-a-vis the process, or----
        Mr. Ryan. Yes.
        Mr. Callahan. Well, I just--I would respectfully say that I
    don't think the process is broken. I've maintained in my
    testimony, both the oral and the written testimony, that I
    believe what we have is a process of constructive engagement.
        Now, maybe this chart is an oversimplification, and none of
    us likes complication, whether it's in our daily life or what
    have you. But you all know, both members and staff, that
    government is complicated. People come to this with a lot of
    different views.
        And we at the Federal level have an obligation to uphold
    the Federal laws as they are passed, which you pass and we have
    to administer, and we have an obligation also to be prudent
    fiscal stewards in this regard. And I think the waiver process
    that we have put into effect, which has approved these 685
    waivers over these last several years, has tried to meet those
    two goals.
        Mr. Ryan. Well, I think what I would like to have the three
    of you leave with is basically this, that there is another side
    to this story; that the Governors are frustrated, that the
    State legislatures are frustrated. The NGA, through their
    testimony, I would ask you to read their testimony, are
    frustrated; that they see other States getting waivers, they
    are coming up with similar waivers, and it still takes a heck
    of a long time, longer than the 120 days as called for in the
    Executive order.
        So all I am asking is, please think it through a little
    bit. This legislation will continue to move down the tracks,
    and the intent here is not to undermine existing Federal
    legislation. The intent is to get good answers at good,
    reasonable pace of time, to better serve the very people we are
    trying to serve.
        BadgerCare is a good example. We would like to have had
    BadgerCare in law in 1997 when we passed it and conceived of it
    in Wisconsin, but it is just now becoming implemented.
    Meanwhile, thousands of people were without health care in the
    low income part of the State.
        So it is frustrating, and there is a lot of frustration out
    there from the other levels of government, specifically the
    Governors and the States. So I just ask you to take a look at
    that. We will submit everybody's questions and statements in
    the record.
        With that, the hearing is adjourned, and I want to thank
    everybody for coming.
        [Whereupon, at 4:25 p.m., the subcommittees were
    adjourned.]
        [Additional information submitted for the hearing record
    follows:]

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