[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:]

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[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:]

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    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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