[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]




                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION


                             MARCH 13, 2002


                           Serial No. 107-100


       Printed for the use of the Committee on Energy and Commerce

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                            WASHINGTON : 2002
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               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
RICHARD BURR, North Carolina         BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
GREG GANSKE, Iowa                    BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           TOM SAWYER, Ohio
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
TOM DAVIS, Virginia                  THOMAS M. BARRETT, Wisconsin
ED BRYANT, Tennessee                 BILL LUTHER, Minnesota
ROBERT L. EHRLICH, Jr., Maryland     LOIS CAPPS, California
STEVE BUYER, Indiana                 MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       JANE HARMAN, California
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
LEE TERRY, Nebraska

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel


                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas                    SHERROD BROWN, Ohio
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
NATHAN DEAL, Georgia                 THOMAS M. BARRETT, Wisconsin
RICHARD BURR, North Carolina         LOIS CAPPS, California
ED WHITFIELD, Kentucky               RALPH M. HALL, Texas
GREG GANSKE, Iowa                    EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia             FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      PETER DEUTSCH, Florida
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
Mississippi                          GENE GREEN, Texas
ED BRYANT, Tennessee                 JOHN D. DINGELL, Michigan,
ROBERT L. EHRLICH, Jr., Maryland       (Ex Officio)
JOSEPH R. PITTS, Pennsylvania
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)


                            C O N T E N T S


Testimony of:
    Thompson, Hon. Tommy, Secretary, U.S. Department of Health 
      and Human Services.........................................    25
Material submitted for the record by:
    College of American Pathologists, prepared statement of......    58
    Pallone, Hon. Frank:
        Letter dated March 14, 2002, to Hon. Tommy G. Thompson...    60
        Letter dated March 15, 2002, to Hon. Tommy G. Thompson...    60
    Thompson, Hon. Tommy, Secretary, U.S. Department of Health 
      and Human Services, responses for the record...............    52





                       WEDNESDAY, MARCH 13, 2002

                  House of Representatives,
                  Committee on Energy and Commerce,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:15 a.m., in 
room 2322, Rayburn House Office Building, Hon. Michael 
Bilirakis (chairman) presiding.
    Members present: Representatives Bilirakis, Upton, 
Greenwood, Deal, Ganske, Norwood, Wilson, Shadegg, Ehrlich, 
Pitts, Tauzin (ex officio), Brown, Strickland, Capps, Towns, 
Pallone, Deutsch, Stupak, Wynn, Green, and Dingell (ex 
    Staff present: Patrick Morrisey, deputy staff director and 
counsel; Steve Tilton, health policy coordinator; Eugenia 
Edwards, legislative clerk; John Ford, minority counsel; 
Bridgett Taylor, minority professional staff; Amy Hall, 
minority professional staff; David Nelson, economist; and Karen 
Folk, minority counsel.
    Mr. Bilirakis. I call this hearing to order. I am extremely 
pleased to welcome the Honorable Tommy Thompson, Secretary of 
the United States Department of Health and Human Services.
    Mr. Secretary, I first would like to wholeheartedly commend 
you on your leadership throughout the last year, and it has not 
been easy god knows. You have demonstrated remarkable capacity 
and ingenuity in the face of unforeseen hardships.
    In particular, your leadership has been critical in 
developing our Nation's capacity to respond to the threat of 
bioterrorism. The purpose of today's hearing as we all know 
obviously is to discuss the priorities of the Department as 
reflected in the administration's fiscal year 2000 budget 
    To facilitate a dialog with the Secretary, which Ranking 
Member Brown and I are both anxious to do, I hereby request 
that members--I am going to limit members, with the exception 
of Mr. Brown and myself, and Mr. Tauzin, the chairman of the 
full committee, if he chooses to be with us, to 3 minutes.
    I would ask all of the members to try to limit their time 
if they possibly can to even less than that so we can get 
through this.
    Hopefully if we can do that, we might be able to go through 
a second round with the Secretary. I would ask unanimous 
consent that statements of all members of the subcommittee that 
are not here be made a part of the record.
    The Department of HHS fiscal year 2003 budget continues our 
efforts to develop systems and programs to improve the health 
and welfare of our country. The HHS request includes $448.8 
billion in total outlays, an increase of $29.2 billion, or 6.3 
percent over fiscal year 2002 levels.
    As we should expect, this budget provides substantial 
increases for protecting our Nation against bioterrorism. The 
budget request totals $4.3 billion for this effort. As you 
know, Mr. Secretary, our committee has taken intense interest 
in bioterrorism over the years, and we hope to have legislation 
on this issue to the President very soon.
    I look forward to continuing to work with you to ensure 
that we never have to face the reality of a bioterrorism 
attack, and I am certain that this is an area where we all 
agree that prevention is certainly the best policy option.
    I would also like to thank you and the President for 
focusing on improving access to health care and modernizing 
Medicare. These issues are critical and we must work to reduce 
the number of uninsured in our country.
    The focus in modernizing Medicare to include a 
comprehensive prescription drug plan is critical. We must act 
quickly to ensure that our Nation's seniors have access to the 
best available medical care in the world, and at the same time 
we must ensure that Medicare will be available to protect the 
next generation of Medicare beneficiaries.
    The budget requests an increase for the Centers for 
Medicare and Medicaid services, CMS. I have been very pleased 
with the work that we have completed to improve and streamline 
the operation of CMS.
    I hope that soon we will have a package of regulatory 
relief legislation from the Senate. It has been over there for 
quite a while. This is essential legislation that will help you 
continue to improve CMS' accountability, and responsiveness to 
beneficiaries and providers.
    Mr. Secretary, the members of this committee and I look 
forward to working closely with you and the President to 
deliver policies that address these very difficult problems. We 
must protect our Nation against bioterrorism, help the 
uninsured, improve our health care system, and modernize 
Medicare. I now yield to my good friend, Mr. Brown, of Ohio.
    [The prepared statement of Hon. Michael Bilirakis follows:]
Prepared Statement of Hon. Michael Bilirakis, Chairman, Subcommittee on 
    Good morning, I now call this hearing to order. I am extremely 
pleased to welcome the Honorable Tommy Thompson, Secretary of the U. S. 
Department of Health and Human Services. Mr. Secretary, I would first 
like to commend you on your leadership throughout the last year. You 
have demonstrated remarkable capacity and ingenuity in the face of 
unforeseen hardships--thank you sir. In particular, your leadership has 
been critical in developing our Nation's capacity to respond to the 
threat of Bioterrorism.
    The purpose of today's hearing is to discuss the priorities of the 
Department as reflected in the Administration's FY 2003 budget request. 
To facilitate a dialogue with the Secretary, which Ranking Member Brown 
and I are both anxious to do, I hereby request unanimous consent that 
the opening statement of all Members other than the Chairman and 
Ranking Member be limited to one minute, with full statements submitted 
for the record.
    The Department of Health and Human Services (HHS) Fiscal Year 2003 
budget continues our efforts to develop systems and programs to improve 
the health and welfare of our country. The HHS request includes $488.8 
billion in total outlays--an increase of $29.2 billion, or 6.3% over 
fiscal year 2002 levels.
    As we should expect this budget provides substantial increases for 
protecting our Nation against bioterrorism. The budget request totals 
$4.3 billion for this effort. As you know, Mr. Secretary, our Committee 
has taken intense interest in bioterrorism over the years, and we hope 
to have legislation on this issue to the President very soon. I look 
forward to continuing to work with you to ensure that we never have to 
face the reality of a bioterrorist attack. I am certain this is an area 
where we all agree that prevention is the best policy option.
    I would also like to thank you and President Bush for focusing on 
improving access to health care and modernizing Medicare. These issues 
are critical and we must work to reduce the number of uninsured in our 
country. The focus on modernizing Medicare, to include a comprehensive 
prescription drug plan is critical. We must act quickly to ensure that 
our Nation's seniors have access to the best available medical care in 
the world. At the same time we must ensure that Medicare will be 
available to protect the next generation of Medicare beneficiaries.
    The budget requests an increase for the Centers for Medicare and 
Medicaid Services (CMS). I have been very pleased with the work we have 
completed to improve and streamline the operations of CMS. I hope that 
soon we will have a package of regulatory relief legislation from the 
Senate. This is essential legislation that will help you continue to 
improve CMS's accountability and responsiveness to beneficiaries and 
    Mr. Secretary, the members of this Committee and I look forward to 
working closely with you and the President to deliver policies that 
address these difficult problems. We must protect our Nation against 
bioterrorism, help the uninsured, improve our health care system, and 
modernize Medicare. I now yield to my good friend, Mr. Brown of Ohio.

    Mr. Brown. I would like to thank the chairman, and thank 
the Secretary for joining us today. I respect your leadership, 
Secretary Thompson. I wish my message could be more positive 
this morning, however.
    With all due respect, the administration has not given us 
much to work with. There are a couple of initiatives in the 
budget that makes sense from a policy perspective, and as the 
chairman said, the Bioterrorism Preparedness Provisions come to 
    Then there are a number of initiatives which would make 
sense if they were not undercut elsewhere in the budget. For 
example, you rightly invest generously in NIH, which supports 
research into new medical treatments, but you cut funding for 
HRQ, which plays a crucial role in communicating that research 
to the medical community and to the public.
    You create a new program called the Healthy Communities 
Innovative Initiative that targets chronic conditions, like 
diabetes, and asthma, and obesity. More power to you, but then 
you starve well respected and successful programs at CDC, and 
you guessed it, that target chronic conditions like diabetes, 
and asthma, and obesity. It makes little sense.
    The administration puts money in the budget for health 
insurance tax credits, ostensibly to reduce the number of the 
uninsured, but then it doesn't propose rate regulation or 
guaranteed issue, or the other individual insurance market 
reforms that must be enacted if we want individuals to actually 
use those credits.
    And although we know that 900,000 children will lose health 
insurance during the 3 year lag in S-CHIP funding, the budget 
doesn't correct for that. The President reinforces the health 
care safety net, while simultaneously cutting hole in it.
    You increase funding for community health centers and the 
National Health Service Corps, and I applaud that, but you 
eliminate the community access program which helps stretch 
limited resources to reach as many uninsured individuals as 
    President Bush cuts funding for public hospitals, and 
children's hospitals, both of which provide life-saving care to 
the uninsured. The bottom line, Mr. Secretary, is that it is 
difficult for me to treat this budget as if it is a legitimate 
spending blueprint.
    It isn't a logical or even viable spending blueprint. It is 
a political document. This budget pursues two basic goals, both 
of them political. One, President Bush is going after the 
entitlements, Mr. Secretary.
    He is using this budget to means test Medicare and provide 
drug coverage outside the Medicare benefits package, knowing 
full well that Medicare's future depends on its ability to 
deliver comprehensive health coverage and its availability to 
all seniors, regardless of income.
    They are using this budget to further the goals of your 
HIFA waivers; that is, you are using waivers, and in this case 
prescription drug waivers, to transform Medicaid from a Federal 
entitlement into a State block grant.
    The second objective is as insidious as the first. The 
President stars major health care priorities to make room for 
more tax cuts. This budget literally ignores millions of 
retirees who can't afford their prescriptions. It simply 
ignores them.
    This budget ignores tens of millions of Americans who can't 
afford health insurance. This budget doesn't even maintain 
existing public health programs like Ryan White at sustainable 
    The budget doesn't include a dime to compensate for current 
and projected cuts in Medicare physician payments, even though 
no one, no one as far as I know, thinks that these cuts are 
    There are no dollars in the budget to repeal the completely 
arbitrary $1,500 cap on therapy services, and no dollars to 
restore the cuts in graduate medical education funding, and no 
dollars to restore the 15 percent cut in home health.
    But there is a $590 billion tax cut in the bill aimed, and 
in the budget, at tax breaks which overwhelmingly go to the 
most advantaged, and wealthiest of our constituents. This year 
the President is spending $590 billion on another tax cut after 
draining much of the surplus last year with a $1.6 trillion tax 
cut, instead of providing the prescription drug coverage to 
seniors, and addressing other pressing concerns.
    That's what makes this a political document and not a 
budget. Did the administration think that the implications of 
the proposal wouldn't register with us, and that by going 
outside of Medicare to cover a basic health care need that you 
could weaken support for Medicare down the road.
    This budget co-ops the prescription drug issue in an effort 
to begin unraveling Medicare and Medicaid, two public programs 
that have done more to promote the well-being of retirees, 
disabled Americans, and millions of low income children, than 
any other initiatives in this Nation's history.
    And this budget unveils yet another multi-billion dollar 
tax cut, siphoning off dollars that could be used to provide 
prescription drug coverage to seniors. Forgive me, Mr. 
Secretary, if I don't congratulate you on this budget.
    Forgive me if a lot of us on this side of the aisle second-
guess every sentence and every number in this budget. This 
administration has chosen tax cuts for the most affluent, 
instead of prescription drug coverage for our seniors.
    With all due respect to you and the positive contributions 
that you, Mr. Secretary, personally have made, but once you 
launch an assault on Medicare and Medicaid, trust and 
forbearance go out the window.
    When it comes to this budget, I only hope that Congress 
discards this wolf in sheep's clothing, and starts again from 
scratch. Thank you, Mr. Chairman.
    Mr. Bilirakis. The chairman of the full committee, Mr. 
Tauzin, for an opening statement.
    Chairman Tauzin. Thank you, Mr. Chairman. I want to thank 
you for holding this hearing and we are very fortunate to have 
a dear friend of this committee, Secretary Tommy Thompson, 
testify before us today.
    And, Mr. Secretary, I want to thank you for appearing again 
before the subcommittee, and helping us understand this budget 
today. In the short year that you have been here, we have seen 
a dramatic shift in both the culture and the responsiveness of 
the Department of Health and Human Services.
    We have seen this administration place health care very 
high on its agenda, and we have seen a real commitment to 
addressing the problem of the uninsured and strengthening the 
Medicare program, all issues that this committee is vitally 
interested in.
    And I want to commend you for your dedication on these 
issues, and particularly your efforts in the war on terrorism. 
Your department, and your leadership, I think has demonstrated 
the will of the American people in combating this threat.
    And the skill in which you have engineered the improvements 
in the departments under your jurisdiction to help America be a 
little safer is indeed extraordinary, and I want to thank you 
for that.
    Today we are focusing obviously on the 2003 budget 
proposal, and from all indications it is a good budget. And in 
case people have not focused on this, this budget increases HHS 
spending by 6.3 percent.
    It builds on the President's commitment to combat terrorism 
and to strengthen Medicare, and to double low income or to 
expand rather low income Americans' access to health care, and 
to double the NIH budget.
    The NIH is the premier institute for research in America on 
health care, and is doing such vital work to find not only the 
causes, but the cures for so many diseases that ravage our 
    You came up here last year to tell us about your plans for 
streamlining the CMS, and I frankly have to tell you that you 
have done an excellent job. We are interested in knowing what 
are the next steps in that process, and what we might do.
    When we created our patients first initiative, we learned a 
great deal, and it was as a result of that initiative and your 
work that we passed the regulatory relief and contracting bill 
on the floor with almost a unanimous vote for that effort.
    During your testimony today, we are interested in learning 
what else we might do to lift regulatory burdens on providers 
and beneficiaries. We think again last year was just a first 
step, and I hope that you do, too.
    We are deeply concerned about your efforts to modify the 
privacy rule, and obviously research and medical advances in 
wellness for our citizens depends upon the collection of 
valuable information.
    And we feel that the rules still threaten that effort, and 
we encourage you to continue your efforts to reform it, so that 
we protect a patient's privacy, and also facilitate the 
gathering of vital information, not only personal identifiable 
information, but information critical to research and 
development of new products and services.
    We have got an ambitious health agenda, Mr. Secretary. We 
want to finalize the bioterrorism bill, and as you know we are 
on that conference now. We are going to reauthorize PDUFA as 
soon as this committee can get to that important issue, and I 
think that is going to happen within a month.
    We are working as you know to modernize Medicare and to 
reform it, and to produce a prescription drug benefit for the 
citizens of this country. We are committed to producing that by 
late May and June of this year on the House floor.
    And we want to strengthen the welfare reform laws and 
enhance our safety net programs, and we invite your help and 
your counsel as we go forward. I want to mention that only a 
liberal viewpoint would define this budget as spending money on 
tax cuts.
    The President is not spending money on tax cuts. The 
Congress voted to cut Americans' taxes, and to reduce the 
amount of money coming into this government that was building 
up surpluses.
    We are not spending money on tax cuts. That is an 
extraordinary view that I hear around this capital. We are 
indeed spending more money, however, on HHS, and under your 
leadership we expect that money to indeed strengthen our 
programs and to work with us indeed to finalize our plans to 
promote a healthy America, and I thank you for that effort, 
sir, and appreciate you being here.
    [The prepared statement of Hon. W.J. ``Billy'' Tauzin 

 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce

    Chairman Bilirakis, thank you for holding this very important 
hearing. We are very fortunate to have Secretary Tommy Thompson, a true 
friend of the Committee, testify before us today.
    In just one short year, we have seen a dramatic shift in the 
culture and responsiveness of the Department of Health and Human 
Services. We have seen this Administration place health care high on 
its agenda. We have seen a real commitment to addressing the problem of 
the uninsured and to strengthening the Medicare Program.
    Mr. Secretary, you are to be commended for your dedication to these 
important issues, as well as your efforts in the war against terrorism. 
Agencies under HHS jurisdiction had one of the most difficult jobs last 
fall, yet they handled the bioterrorism crisis with great skill. On 
behalf of our Committee, let me say that we are grateful for your work.
    Today, we are focusing on an issue that is particularly timely. We 
will be reviewing the Administration's Fiscal Year 2003 Budget 
Proposal. From all indications, this is a good budget. HHS spending 
increases by 6.3 percent from 2002. The budget builds upon the 
President's commitments to combat bioterrorism, to strengthen Medicare, 
to expand low-income Americans' access to health care services, and to 
double the NIH budget by next year. As a society, we should be thankful 
that this Administration has focused so many resources on these 
important health care priorities.
    Mr. Secretary, last year you came before our Committee to discuss 
some of your plans to streamline CMS, the Agency formerly known as the 
Health Care Financing Administration. On this issue, you've also done 
an excellent job.
    In fact, in response to some of your recommendations and 
information we obtained from a Committee initiative--Patients First--we 
were able to pass a regulatory relief and contracting bill on the floor 
with an almost unanimous vote. During your testimony today, we are 
interested in learning whether you have additional suggestions about 
how we can further reduce regulatory burdens on providers and 
beneficiaries. Last year's legislation was only a first step. We 
welcome your input on how we can go even further.
    We are also very interested in learning how you plan to modify the 
medical privacy rule, a rule that if left intact, will place 
significant new burdens on medical providers, researchers and patients. 
Many Members of our Committee and I remain concerned about how the rule 
defines de-identified data for research purposes. We've heard from the 
research community that this provision will have a chilling effect on 
our ability to collect valuable patient information and that bothers 
me. This rule still needs some significant changes, so I ask you to 
keep working with us to improve the regulation and strike an 
appropriate balance between the legitimate privacy interests of 
patients and our medical system's need to utilize patient information 
to promote wellness.
    There are so many important issues that we want to discuss with you 
today. As you know, our Committee has a very ambitious health care 
agenda, ranging from finalizing a bioterrorism bill, to reauthorizing 
PDUFA, to modernizing Medicare and adding a prescription drug benefit 
to the Program, to strengthening the welfare reform laws and to 
enhancing our safety net programs for low-income Americans. We could 
use your help to move these bills through the legislative process and 
to get them signed into law this year. The Administration's budget 
rightfully focuses on all of these issues and, while our positions may 
differ on some of the details, we know that this Administration is 
committed to putting patients first and to promoting a healthy America.
    Mr. Secretary, as always, we are grateful that you are appearing 
before our Committee. We look forward to hearing your perspective on 
the Administration's health care priorities and to working with you to 
address the important health care issues confronting our country. Thank 

    Mr. Bilirakis. Mr. Pallone for an opening statement.
    Mr. Pallone. Thank you, Mr. Chairman.
    Mr. Bilirakis. All opening statements hereafter are limited 
to 3 minutes, a succinct 3 minutes I might add.
    Mr. Pallone. Thank you, Mr. Chairman. With all due respect 
to the chairman of our full committee, who mentioned liberal 
viewpoints, I don't know whatever you want to tag it, but the 
reality is that I think that Democrats are concerned about the 
fact that this budget really doesn't address the concerns of 
the average American.
    I don't know if that is a liberal or a conservative 
viewpoint, but that is our viewpoint. Mr. Secretary, President 
Bush's budget in my opinion is proof that health care is not a 
priority of this administration.
    Unfortunately, without dramatic changes made by Congress 
during the budget and appropriations process, more Americans 
will be uninsured, seniors will go without a true Medicare 
prescription drug benefit, and more seniors will lose their 
doctors due to inadequate Medicare reimbursements from the 
Federal Government to their doctors.
    And during this economic downturn the President's budget is 
particularly cruel to the uninsured, poor, and disabled, who 
rely on Medicaid to help with health care costs. The President 
has proposed a $9 billion cut over a 10 year period in Medicaid 
payments to public hospitals, and comes at a time when Medicaid 
rolls are expected to increase by 3 million people, including 2 
million children.
    If the administration is successful in making these cuts at 
a time when more people need Medicaid, we are going to see a 
dramatic increase in the number of Americans uninsured. And 
these cuts would not only harm Medicaid recipients, but also 
aggravate fiscal problems plaguing most States, including my 
home State of New Jersey.
    I am also disappointed that the President rehashed a token 
prescription drug benefit program that does nothing to help 
millions of middle income seniors who are not struggling to pay 
for their prescription drugs.
    The President requested $77 billion for prescription drugs 
for seniors, and an analysis shows that this would only cover 
about 3 million of the 40 million seniors. This attempt at 
proposing a low income drug benefit is clearly a political 
attempt for the President to avoid fulfilling a promise that he 
made to provide decent health care to seniors.
    And I believe that any serious prescription drug plan must 
include all seniors who are Medicare beneficiaries. Another 
sham proposal offered on prescription drugs is the prescription 
drug discount card.
    A recent GAO report clearly indicated that savings with 
this card would be slim to none. The discount cards are a mere 
gimmick, and again this attempt is a political ploy for the 
President to back down on seniors' need for a comprehensive 
prescription drug benefit.
    Finally, the President has severely undermined the need to 
provide health care to the uninsured. His approach at providing 
inadequate individual tax credits leaves unemployed and 
uninsured workers with little leverage over insurers who charge 
premiums between $3,000 to $7,000 a year.
    I believe that in order to guarantee the uninsured a 
package of necessary benefits the government needs to insure 
more people by expanding the S-CHIP program to parents of 
eligible children, and allowing people 55 and older to buy into 
the Medicare program.
    Another part of the solution is to expand employer-based 
health insurance, in which employers would be required or 
somehow provided an incentive to provide health insurance to 
their employees in return for government subsidies.
    And I don't say this, Mr. Secretary, just to be partisan, 
or just to be mean, or something of that nature. I really 
believe that health care is a major crisis that we face right 
now, and more needs to be done by the administration. Thank 
    Mr. Bilirakis. Mr. Upton for an opening statement.
    Mr. Upton. Thank you, Mr. Chairman, and I have a full 
statement for the record. Mr. Secretary, we welcome your 
participation here. I want to thank you again for the continued 
commitment of this administration and you to double the NIH 
budget, and we continue to be on that track within a 5 year 
time span.
    And it is so important that we find a cure for cancer, 
cystic fibrosis, and so many different things. I also want to 
welcome your participation, as I know it is there, and the 
administration's, as we go through a successful effort to come 
up with a prescription drug plan that will benefit our seniors.
    I know that we are going to spend some time this morning on 
fixing the physician fee as well. I have heard from so many of 
my physicians across Southwest Michigan, and I think our State 
has been impacted by more than $100 million in reductions in 
payments, and an average of more than $5,000 per physician.
    I look forward to working with you and the administration 
so that we can try to correct this problem. I yield back the 
balance of my time.
    [The prepared statement of Hon. Fred Upton follows:]

  Prepared Statement of Hon. Fred Upton, a Representative in Congress 
                       from the State of Michigan

    Mr. Chairman, thank you for holding today's hearing on the 
President's fiscal year 2003 health care budget priorities. Last year, 
we were at peace and had the luxury of budget surpluses. This year, we 
are waging a valiant war against terrorism abroad, moving swiftly to 
securing our homeland against future terrorist attacks, and slowly 
emerging from a recession. We are going to have to set priorities and 
make some very difficult choices in this budget cycle, and this hearing 
will help us focus on these challenges.
    I share President Bush's and Secretary Thompson's strong commitment 
to enhanced funding for biomedical research. That has been one of my 
top priorities since coming to Congress in 1987, and I am pleased that 
the President's budget includes the final payment to fulfill the 
promise to double the NIH budget over five years. Funding biomedical 
research is one of the best investments of taxpayer dollars that we 
make. It is an investment that pays enormous dividends in improved 
health and quality of life for millions of Americans and millions 
across our world and in health care cost savings over the long term. 
Today, one in twelve Americans is a senior citizen. In just one 
generation, one in five Americans will be. So we must invest now in 
research on Alzheimers, Parkinsons, cancer, and other debilitating 
    And demographics dictate that act now to modernize and financially 
stabilize the Medicare program. When we created the Medicare program in 
1965, most seniors' greatest fear was developing cancer or having a 
heart attack and being financially drained by lengthy or frequent 
hospitalizations. Prescription drugs played a relatively minor role in 
treatment. Today, millions of seniors are really struggling with the 
high cost of the prescription drugs they need. No senior citizen should 
be forced to forego needed medication, take less than the prescribed 
dose, or go without other necessities in order to afford life-saving 
medications. I look forward to working with the President and HHS to 
develop a bipartisan Medicare prescription drug benefit as part of a 
Medicare modernization package during this session of Congress.
    One area that I believe must be a priority and that is 
unfortunately not reflected in the President's HHS budget is fixing the 
Medicare physician fee schedule. Fixing the fee schedule is not just a 
matter of fairness. Unless we act in a timely and thoughtful way to 
correct the problems that are resulting in significant and 
unanticipated cuts in Medicare reimbursement to doctors and other 
health professionals who are paid under the fee schedule, we are going 
to put both access to care and quality of care for today's and 
tomorrow's Medicare beneficiaries at very serious risk. Let me talk 
about the situation in Michigan as an example. Unless we fix the fee 
schedule problem, Michigan physicians stand to lose $105 million this 
year, an average loss of over $5,000 per physician. This could well be 
enough to push physicians already contemplating retiring or cutting 
back their practices over the edge. Some 47 percent Michigan's family 
physicians are 50 years old or older, and according to a national 
survey, about 80 percent of physicians in this age group are already 
thinking about leaving or reducing their practices. With 13.2 
physicians per thousand Medicare beneficiaries, Michigan is below the 
national average. So mitigating the cutbacks in 2002 and fixing the fee 
schedule to produce stable and equitable future updates is particularly 
crucial to continued access to care and quality of care for Michigan 
Medicare beneficiaries.
    Fixing the fee schedule is also particularly critical to access to 
care and quality of care in the rural areas of my state and across 
America. Rural populations have higher concentrations of the elderly, 
and rural elderly Americans tend to be sicker and less well insured 
than their urban counterparts. This makes health care providers in 
rural America particularly dependent upon Medicare payments, and 
particularly venerable to problems in payment policies that result in 
payments substantially below their true costs of providing care. And 
when rural communities cannot recruit doctors, nurses, and other health 
care practitioners, hospitals close, and not only Medicare 
beneficiaries, but entire communities lose access to care.
    It is important to note that problems in the physician fee schedule 
affect many other health care practitioners whose reimbursement rates 
are pegged to that schedule. In many rural communities, nurse 
practitioners, nurse midwives, nurse anesthetists, and physician 
assistants are vital to ensuring access to care and quality of care. If 
these rural communities cannot attract or retain these able health care 
providers, everyone suffers.
    So, again, it is vitally important that we act in a timely and 
thoughtful way to ensure that Medicare payment policies are fair and 
reflect the real cost of providing care.
    At the same time that we are giving priority to ensuring that 
Medicare beneficiaries are protected against high out-of-pocket health 
care costs and have ready access to physicians' services and the 
services of other health professionals, we must also focus on extending 
coverage to the uninsured. I was pleased to see that the budget 
recognizes the vital role that community health centers play in 
addressing the health care needs of the uninsured and Medicaid 
populations in my district and across the country. The increased 
funding in the budget for this program and for the National Health 
Service Corps Scholarship and Loan Repayment programs will go a long 
way to helping increase the number of centers and the number of 
individuals served.
    I look forward to working with my colleagues on the Committee and 
with you, Secretary Thompson, on these priorities. It will not be easy, 
but we must meet the challenge of balancing competing priorities in a 
way that strengthens our nation's health care delivery system and 
commitment to biomedical research.

    Mr. Bilirakis. Thank you. Ms. Capps.
    Ms. Capps. Thank you, Mr. Chairman. I also want to thank 
Secretary Thompson for coming to discuss the health budget with 
us. I was impressed with the goals and priorities outlined in 
the President's budget, and I was pleased about the resources 
that he has requested for some of the priorities.
    The administration's $4.3 billion request to address 
bioterrorism and threats is a good commitment for the coming 
year, and the $3.7 billion increase for NIH is the proper 
completion of the effort to double our Nation's health research 
    These are resources that will make a real difference in the 
lives of Americans. So I agree with many of the goals laid out 
in the budget. For example, the commitment to strengthening 
    But the details of this proposal do not substantially move 
us toward these goals. The President has stated that a 
prescription drug benefit for seniors is a priority. Yet the 
funds requested by the administration for this purpose, and the 
low income assistance program described here are woefully 
inadequate to meet the need.
    It simply leaves out too many seniors. Even the Speaker of 
the House has said that $300 billion is necessary. The 
administration's $190 million proposal is just not enough to 
provide meaningful help to the seniors.
    And the budget does not include any resources to assist the 
physicians and other health care providers facing significant 
cuts in their Medicare fees this year. This is such a major 
hole in the budget that you, yourself, Mr. Chairman, circulated 
a letter asking the budget committee to rectify this problem.
    I was pleased to support this effort in the legislation 
that you introduced last year. Turning to nurses, I have been 
pleased that Secretary Thompson has expressed support for 
efforts to address the nursing shortage, and it was good to see 
a small increase in Federal resources to that end.
    With your support and the support of many of my colleagues 
up here today, both the House and Senate were able to pass 
versions of the Nursery Investment Act. I hope that we will be 
able to count on your further support to move the bill to final 
passage and then to fully fund its provisions.
    Our health care system desperately needs this help, but I 
was disappointed that the budget cuts nearly 75 percent of the 
funding devoted to other health professions. In this era, we 
should be boosting funding for these programs, and not cutting 
    The terrorist attacks have made it abundantly clear how 
important prepared medical professionals are for our Nation's 
security. I hope that we can restore that funding before we 
regret its loss.
    There are several other cuts that seem counterintuitive to 
me as well. The budget eliminates the Community Access Program, 
and this program helps communities. The budget also cut $57 
million from the CDC's chronic disease programs. This is the 
time that we should be increasing efforts there. These are some 
of the examples.
    Mr. Bilirakis. The Chair apologizes, gentlelady, but your 
time is up.
    Ms. Capps. I look forward to hearing the Secretary. Thank 
    Mr. Bilirakis. Mr. Greenwood for an opening statement.
    Mr. Greenwood. Thank you, Mr. Chairman. I will take your 
admonition to be brief, and Mr. Secretary, I look forward to 
your testimony.
    In a time when revenues are way down from what we had hoped 
they would be because of the economy, it is really 
extraordinary that we have been able to have a budget here that 
in fact increases spending for health care programs by 6 
    The real challenge for all of us is to try and find ways to 
save on one piece of the budget so that we can spend more in 
other places.
    And the one place that I am particularly pleased to see 
your budget is that it recognizes a need to get savings from 
the average wholesale price of drugs, and you anticipate that 
we can save $5 billion plus over the next 5 years, and I look 
forward to working with you both legislatively, and if 
necessary, administratively, to get that job done.
    It is a real place where we are spending money for, and no 
good result, and we need to fix that, and I yield back the 
balance of my time, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman for yielding. Mr. 
Dingell for an opening statement.
    Mr. Dingell. Mr. Chairman, I thank you, and I commend you 
for this hearing. Mr. Secretary, welcome to the committee. It 
is a pleasure to see you here, and I thank you for your 
kindness to us.
    All of us are keenly interested in the budget of your 
department, and the programs that affect so many of this 
Nation's citizens. I look forward to hearing from you, Mr. 
Secretary, about the President's proposals to help seniors with 
the cost of prescription drugs, and to build critical health 
care research, and provide uninsured children and parents with 
health care coverage.
    I am pleased to note that the President's fiscal year 2003 
budget for HHS includes a significant increase in funding for 
anti-bioterrorism activities, and that is good. Chairman Tauzin 
and I, along with our committee members, have collaborated on a 
bill in a bipartisan fashion, which would authorize new 
resources for hospitals and other health care providers to 
prepare for potential bioterrorist attacks.
    The President's budget includes support for initiatives 
like those in our bipartisan bill, which is currently in 
conference with the Senate.
    Unfortunately, Mr. Secretary, the remainder of the budget 
for HHS does not give me much cause for enthusiasm. Lack of 
access to reportable prescription drug coverage through 
Medicare is the most pressing problem that seniors and disabled 
citizens face today.
    The President's budget includes no comprehensive Medicare 
drug benefit at all. The only proposed benefit is for low 
income seniors, and in this case the benefit is not even 
    Moreover, the amount that the President's budget allocates 
for all Medicare for the next 10 years equals 11 percent of the 
amount of the Congressional Budget Office estimates that 
seniors will need to spend on prescription drugs during the 
same time period.
    I doubt if anyone would agree that this amount of funding 
will provide meaningful benefits to our senior citizens. The 
President's budget also includes some troubling proposals for 
the uninsured, and I fear will do more harm than good.
    The President's budget would allow States to expand 
Medicaid and CHIP programs to cover more uninsured people 
through the Medicaid waiver process. But since these waivers 
must then be budget neutral, the only way States can expand 
coverage is by cutting the benefits of people already enrolled 
in Medicaid and CHIP.
    And that is hardly a comforting thought in a time when both 
providers and beneficiaries of these programs are already 
significantly short of the level of benefits that they in fact 
    Instead of focusing precious Federal dollars where they are 
likely to do the most good, most of the new money that the 
budget allocates for the uninsured would go toward tax credits, 
a doubtful proposition at best.
    The majority of uninsured people are below 200 percent of 
poverty, but the President's proposed $3,000 health care tax 
credit per family covers first of all less than half of the 
average cost of a family insurance policy.
    Low income families could spend over 15 percent of their 
total income just to buy such a policy, and then hundreds of 
dollars more in deductibles and co-payments just to receive 
    Payments to Medicare physicians decreased this year, Mr. 
Secretary, as you very well know, by 5.4 percent, and are 
expected to decrease again in 2003 and 2004 as well. This, and 
the cuts which are afflicting other parts of the health care 
industry, offer a real threat, not just to the industry, but 
very frankly to the patients and the beneficiaries of those 
    The administration has expressed interest in correcting 
this shortfall, but the President's budget implies that 
payments to other providers would be cut in order to address 
physician fees. Again, robbing Peter to pay Paul.
    The only increased payments to Medicare providers are for 
managed care plans, despite the fact that 86 percent of the 
seniors are enrolled in fee for service programs, clearly a 
mis-allocation of resources.
    Finally, the public health safety net takes a major hit at 
a time when the demand for these services is increasing. The 
bill haphazardly cuts, freezes, or inadequately increases the 
resources for programs that serve unmet needs.
    The Centers for Disease Controls' chronic disease 
prevention programs are cut, as are rural health services, drug 
abuse prevention, and children's medical education. The nursing 
shortage has not disappeared, and yet funds for health programs 
are slashed by over 70 percent.
    The Community Access Program, which provides grants to 
local groups to coordinate services for the uninsured, is 
eliminated. Funding levels are frozen for the maternal and 
child health block grant, and family planning services, Healthy 
Start, and Ryan White AIDS programs.
    Mental health activities are frozen, despite the fact that 
most people, and more than ever, could benefit from these 
crucial services given the stresses of 9-11. Mr. Secretary, you 
have my personal sympathy.
    I know that you would have liked to have done, but 
regrettably you have not been able to do so. But Congress 
certainly wants to do better, and the people certainly expect 
that better will be done.
    And we know that your responsibilities will be multiplied 
by the Public Health Service System tests that were imposed 
last fall. You responded well, but all of us know that more 
needs to be done.
    I hope that we can work together to strengthen our Nation's 
health care programs in the coming years, but the budget seems 
to stand in the way. Thank you.
    Mr. Bilirakis. Mr. Deal for an opening statement.
    Mr. Deal. Thank you, Mr. Chairman. Mr. Secretary, welcome 
to the committee, and I thank you for coming today, and I at 
the outset commend you for the efforts that you have made in 
running your department and removing many of the bureaucratic 
mazes that have perhaps been the highlight of that agency for 
far too long.
    I think you have made tremendous progress in that regard, 
and we all look forward to working with you to make the process 
work better in the future.
    You know, a 6.3 percent increase, I think for most of the 
small businesses and employees in my district, if they knew 
they were going to get a 6.3 percent next year, and in a time 
of slower economy, they would be very pleased.
    I think the challenge that obviously you face, and this 
committee, and the Congress itself faces, is allocating our 
priorities within those budget constraints. Certainly we look 
forward to working with you as to your priorities, and look 
forward to your message in that regard today.
    Some of us obviously recognize that there are some 
discrepancies. Upper payment limits, for example, in States 
like mine, we feel we have not been treated fairly, and some of 
that is due to legislation of this body, and hopefully we can 
correct that, and others would be due to administration within 
your agency.
    And we look forward to working with you, because when we 
talk about public funds and benefits to those that are the 
Medicaid eligible individuals, it ought to be a fair treatment 
across the Board, and not based on who has the political clout 
within the Congress.
    And we look forward to working with you to resolve some of 
those issues. Thank you, Mr. Secretary. I yield back the 
balance of my time.
    Mr. Bilirakis. Mr. Stupak for an opening statement.
    Mr. Stupak. Thank you, Mr. Chairman. Welcome, Mr. 
Secretary. I was going to point out in my opening statement the 
concerns that I raised last week at the PDUFA hearing, and I 
understand that a report was submitted to you some time ago, 
and I understand that we received it this morning.
    At last week's hearing, I indicated that I was concerned 
about enforcement action under PDUFA we are under, and in your 
testimony urging us to quickly approve PDUFA-3. I was concerned 
about the post-marketing surveillance of drugs, and the reports 
that were supposed to be completed.
    And we were using the figures last week, and about 90 
percent of the post-marketings were not completed, and I was 
concerned about enforcement action, and what enforcement action 
the FDA and others have in order to make sure that these 
studies are done in time.
    In looking at page 10 of the report, and again I have not 
had time to read it as it was clearly just given to us today, 
it shows that in biologics, approximately 14 percent, 301 
commitments have been made, and only 44 post-study reports have 
been completed, and in total under FDAMA, twenty-four hundred 
total commitments have been made, but only 882 reports have 
been completed.
    And if my math is correct, that is about 14 percent 
completion for biologics, and about 36 percent for the other 
prescription drugs out there. Our concern and the concern of 
the committee was how do you enforce this.
    I mean, if you are in FDAMA-2, and he wants to go to FDAMA-
3, and if we are not enforcing FDAMA-2, what changes would 
there be in FDAMA to make sure that there is--I'm sorry, PDUFA, 
PDUFA, to make sure that there is enforcement, and that these 
studies are done in a timely manner so you get the reports you 
    As in Serzone, you have been waiting for 6 years for a 
report, and Accutane, 15 years for a report. What is your 
remedy and what is your enforcement? So some of us have thought 
about subpoena power, and also tying the civil penalties into 
the sales of these drugs while these studies remain not 
delivered to the FDA.
    We are trying to find a way to expedite the process so the 
safety and effectiveness of these drugs can be given to the 
American public. So I will be looking forward to your comments 
on that.
    Also, the imports question. You were here last year, and we 
had a number of questions, and I believe it was in June on drug 
imports, and I will have a number of questions along those 
lines about that situation.
    And with that, Mr. Chairman, I know that you want to limit 
our time, and I just want to give some sense of where I am 
going with my questioning, and I yield back the balance of my 
    Mr. Bilirakis. I thank the gentleman. Dr. Ganske.
    Mr. Ganske. Thank you, Mr. Chairman, and thank you Mr. 
Secretary. The 6.3 percent increase reflects the additional 
costs of combating bioterrorism and I am glad that the 
administration is working on that.
    We are also fulfilling our commitment to double NIH 
funding, and I think that is important, too. Now, Mr. 
Secretary, my points are these. States like Iowa, my home 
State, are hurting with Medicare and Medicaid. Big time.
    Iowa is fiftieth out of fifty States in Medicare 
reimbursement. Iowa's rural hospitals in particular are 
hemorrhaging red ink. Iowa's doctors and other providers are 
telling us that they can't take any more new Medicare patients.
    Our Congressional budget and the administration's, I think, 
must find some additional funding for Medicare and Medicaid. I 
don't think we can fix this problem in a budget neutral way. We 
need additional funding if we are going to maintain services.
    So where do we find that money? Well, here are a few ideas. 
How about moth-balling the space station. That is about $50 to 
$70 billion. Maybe I will get some more bipartisan support on 
Tim Roemer's and my amendment on that.
    How about howitzering the Crusader? That's billions of 
dollars. There is an awful lot of pork in the budget and 
President Bush has talked about this. I think we can find some 
additional funding.
    With that additional funding, we need to increase real 
hospital DRGs, and we need to fix the wage index, and we need 
to freeze the physician payment to where it was last year, and 
then fix the formula for future years.
    The votes are there for that, both in the House and in the 
Senate overwhelmingly. And I would say this. I have not even 
talked about prescription drug costs. I am pleased that the 
administration incorporated some of the ideas from H.R. 1387, 
the Drug Availability and Health Care Access Improvement Act of 
2001, which I introduced, along with Representative Wynn.
    We have bipartisan support for that from across the 
ideologic spectrum. But I would say this. What good will it due 
my senior citizens in rural and small town Iowa if they have a 
prescription drug benefit if they no longer have a hospital and 
a doctor to go to in their community?
    And that is how important this is in terms of funding, and 
finding some additional funding. I look forward to working with 
you, Mr. Secretary, and the aqministration, and I don't mean to 
say that Congress doesn't have a big say in this.
    My colleagues on the other side have complained about the 
tax cut. Well, in response, I think there is a lot of spending 
items that are wasteful, and that we could do away with, and 
divert that funding over into the health care side. And with 
that, I will yield back, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman. Mr. Wynn for an 
opening statement.
    Mr. Wynn. Thank you, Mr. Chairman. Let me also welcome the 
Secretary. I am looking forward to his comments. I know that we 
all are, and so I will be brief. But it seems as though the 
committee has used these opening statements as an opportunity 
to add their personal indignations, and so I will probably 
follow suit.
    And only to say that everyone talks about additional 
spending, whether it is prescription drugs, rural hospitals, 
increasing access to care for uninsured, and the fact of the 
matter is that we don't have enough money.
    You are to be commended for the 6.3 percent increase that 
you are advocating, and I don't think it is insignificant, but 
the needs are far greater, and the fact of the matter is that 
we have made a big tax cut predicated on a surplus.
    When we had the surplus the tax cut made sense. The 
question now before us is that we are now in a deficit, and we 
don't have a surplus, and we are facing a deficit, and going 
into the Social Security Trust Fund, and how can we justify 
continuing this tax cut, and then sit here and bang on you for 
more of this, and more of that.
    And whether it id diabetes, or obesity, prescription drugs, 
or whatever, these are good issues, and we ought to fund them, 
and I think we ought to really take a serious look at whether 
or not we can afford a tax cut at a time or at a level of 
    With that, I will conclude my comments, and again, I look 
forward to your statements.
    Mr. Bilirakis. Dr. Norwood for an opening statement.
    Mr. Norwood. Thank you very much, Mr. Chairman, and thank 
you for the hearing, and, Mr. Secretary, thank you for joining 
us today. I want to tell you that I think you have one of the 
most difficult jobs in Washington, DC.
    Mr. Thompson. I agree with you, more so now than ever.
    Mr. Norwood. I also think you are doing a wonderful job, 
and I want to send my compliments to Dr. Crawford, who 
testified before us last week. He has done a great job, and I 
thank him personally for producing the agreement for the 
reauthorization of PDUFA in such lightening speed time.
    That to me is a fairly good indication of how well your 
agency is actually functioning. I know that we all who are 
sitting here are saying we want more and more money for health 
    And I think the only reason we are doing that is that the 
American people are saying that to us, and the American people 
have made it fairly clear that when they get to be 65 that they 
want free health care, and I don't think anybody on this full 
committee is ready to vote to abolish Medicare, and Medicaid 
for that matter.
    So that is really sort of where we are coming from, but you 
have a limited budget in which you must work. But I think that 
many of us are saying that if we are going to furnish health 
care, it needs to be decent health care.
    It needs to be where a patient actually does have access to 
a doctor. It needs to be a program where physicians in the 
country are not trying to get out of as far as they can, 
because the sooner they get out, the longer it will take them 
to go bankrupt.
    In this program, they can get there pretty fast if they 
just take on more Medicare patients. I know that your job is to 
tell us that we have to be budget neutral, and you know what? I 
agree with that.
    I just don't think we have to confine that just to your 
budget. We all look at the budget of the United States and be 
budget neutral in that. There is a great deal of waste in the 
Federal Government, and not one member here doesn't know that's 
    We need to divert funds from wasteful programs and 
efficient programs, and put it in health care so we can have a 
good program. Now, I have not seen a Presidential budget yet 
that I didn't have concerns about, and this one is the same.
    I am concerned that the budget does not do enough to ensure 
that providers are going to continue to serve Medicare 
patients, and it is a fact that they are not. It is going to 
stop. Simply put, asking us to be budget neutral is just not 
possible to do if we are going to continue with Medicare.
    But again we can be budget neutral in your part of the 
budget, but we also can be budget neutral in the whole budget 
of the United States, and get some money into these programs.
    I am concerned that the budget request on Medicaid, AWP, is 
going to have a very harmful effect on drug research.
    I am concerned about the reductions in health resource 
services administration, and health care research and quality 
budget, that particularly impact on health care professionals. 
We have got to solve this problem, and you have a hard job.
    Mr. Bilirakis. The Chair thanks the good doctor. Mr. Green.
    Mr. Green. Thank you, Mr. Chairman, and I would like to 
thank the Secretary for being here again. I don't know about 
our personal indignation at the budget, but obviously in a 
process like we have and you had when you were Governor, we all 
have differences of opinion.
    But just like I don't think we ought to mothball the space 
program. I would hope that we would get some more money out of 
ethanol, but be that as it may, one man's pork is another 
person's important project.
    And, Mr. Chairman, I would like to thank you for this 
oversight hearing on the budget, and I am again grateful for 
our Secretary being here. From the lifesaving research that is 
done by the NIH, to the Medicare and Medicaid programs, the HHS 
provides such critical services for every American.
    And it is imperative that you receive the resources that 
you need to continue to improve the health care of all of 
Americans. This past year, we realized how important our public 
health system is, and we learned that our system is in dire 
need of repair.
    I am grateful that the President increased his funding for 
the CDC and other programs through public health so that it is 
better able to combat bioterrorism. But it seems that we have 
increased bioterrorism at the expense of other worthwhile 
    Health care problems facing our country can't be solved by 
one agency or one division. We need to ensure that all 
agencies, and not just NIH and bioterrorism, receive adequate 
    Unfortunately, the President's budget contains significant 
cuts in programs that combat chronic disease, help the 
uninsured, and train a new generation of health care providers. 
I am particularly concerned because the administration's 
decision now for the second year in a row is to zero the 
community access program, the CAP program.
    CAP enables communities to coordinate and integrate health 
care for our Nation's 40 million uninsured by improving the 
infrastructure and communication among current agencies that we 
have, both on the local level and on the Federal level.
    With the decline in the economy and the subsequent rise in 
unemployment, more and more Americans are losing their health 
insurance, and now should not be the time to cut programs that 
the uninsured need to help get through the system.
    I am also concerned that the CDC's chronic disease budget 
has once again been cut. These programs fund breast and 
cervical cancer screening, cancer registries, diabetes 
prevention, heart disease, stroke prevention, arthritis 
programs, tobacco prevention and cessation, and also obesity 
    These diseases account for 70 percent of all of the deaths 
in our country, and more importantly, they are almost all 
entirely preventable, and that is what is frustrating.
    An ounce of prevention is worth a pound of cure, and I 
would like to also point out the shortcoming that has been 
point out before, but on the prescription drug benefit for 
seniors, and $190 billion creates such a small program for 
seniors, and most estimates estimate that we need $450 to $750 
billion over 10 years.
    And it seems like the administration's proposal would only 
buy seniors one pill, and that is the frustrating part. Mr. 
Chairman, again, I thank you for the hearing, and I will put my 
full statement in the record.
    Mr. Bilirakis. I appreciate that. Mr. Shadegg for an 
opening statement.
    Mr. Shadegg. Thank you, Mr. Chairman, for holding this 
important and timely hearing, and thank you, Mr. Secretary, and 
welcome here. We appreciate you coming to testify before us.
    Now, I want to echo the remarks of my colleague, Mr. 
Norwood, with regard to the difficulty of your job, and with 
several of the comments by my colleagues on the progress that 
has been made.
    I think that extraordinary strides have been made in the 
last year and I want to thank you for that. I particularly want 
to thank you for your advisory committee on regulatory reform.
    That committee will be in my hometown of Phoenix as you 
know next week, and it is expected to announce its initial 
recommendations on EMTALA. EMTALA, while clearly well-intended, 
is a law that is not working. It is failing.
    And I have worked long hours with the Arizona medical 
community on trying to improve that law, and in that effort, I 
was successful in persuading your CMS director, Tom Scully, to 
come to Arizona in January and spend a day hearing about a 
variety of issues.
    But particularly about EMTALA and the problems that it is 
causing in Arizona, and in Arizona's hospitals, and 
particularly in our inner-city hospitals. So I look forward to 
working with you on that, and I commend you for that effort, as 
well as many others.
    I also want to address the issue of the uninsured. I think 
that is an issue which our country absolutely must confront. 
The chairman held an important hearing on that issue just a few 
weeks ago, and one of the witnesses correctly noted that we are 
quickly facing a point where our Nation's uninsured may soon 
jeopardize the care for millions of other Americans who are 
fortunate to have health care.
    We simply must face up to the problem of our uninsured, 
which is why I am extremely pleased that the President's budget 
has put forth a reasonable approach to solving that problem 
through refundable health care tax credits.
    I think this is a vehicle that is widely misunderstood in 
the country, but would give people the ability to choose the 
health care they need, and would deal with the funding of 
health care for the uninsured, which simply is being ignored 
right now.
    The reality is for my colleagues who don't believe we can 
afford to provide refundable health care tax credits for the 
uninsured, they simply don't know that we are already bearing 
that cost, and it is being cost-shifted on to those with 
insurance and cost-shifted on to Medicare and many other 
    So I commend you for that effort, and I look forward to 
working with you.
    Mr. Bilirakis. Mr. Strickland for an opening statement.
    Mr. Strickland. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary. As I reviewed the Department of Health and Human 
Services fiscal year 2003 budget, I was pleased to see funding 
increases for bioterrorism preparedness, drug treatment 
programs at SAMHSA, National Institutes of Health, community 
health centers, and the National Health Services Corps.
    These are important programs that do much to protect and 
promote the health and safety of all of all Americans. However, 
I was dismayed to find that the budget lacks in areas that seek 
to ensure that undeserved communities have access to health 
care resources.
    There are cuts in funding for the Children's Hospital GME 
program, substance abuse prevention grants, and health 
professions programs through the Health Resources and Services 
    The budget slashes funding for rural health by proposing a 
50 percent cut in funding for the State Offices of Rural 
Health, the agency that assists States in the recruiting and 
training of health care professionals that serve medically 
undeserved rural communities, and administers the Medicare 
Rural Hospital Flexibility Program.
    The budget fails to provide for the elimination of the now 
and necessary, but automatic, 15 percent cut in Medicare rural 
home health payments, and it fails to eliminate the caps on 
Medicare disproportionate share hospital payments for small and 
rural hospitals.
    The administration's Medicare budget is grossly inadequate 
in my judgment, including just $190 billion over 10 years for 
all aspects of Medicare reform, and just $77 billion is 
specifically allocated to allow States to provide drug coverage 
for low income seniors.
    In additional to shifting the responsibility for a 
prescription drug benefit under Medicare from the Federal 
Government to the States, I find the prescription drug proposal 
laid out in this budget to be a fraudulent attempt in my 
judgment on the part of this administration to simply placate 
seniors who tell me they need a comprehensive benefit plan.
    Under the President's plan, there is no guarantee that even 
those seniors who are under 150 percent of poverty, and are 
eligible for the benefits described in the budget, would 
receive assistance because in this proposal there is no 
guarantee that the States will act.
    It is shameful that this type of proposal has been put 
forth as real help for seniors. These budget shortfalls should 
not be tolerated. Instead, we must pass a budget that more 
closely meets the obligation of the needs and priorities of 
working and retired Americans.
    And, Mr. Secretary, let me say that nothing that I said 
today reflects on you personally. I am a big cheerleader of 
Secretary Thompson.
    I agree with those who say that you are performing a 
difficult job admirably, but I felt that I should express these 
opinions, because I do think that they have merit. And I thank 
you for what you do, and I yield back the balance of my time.
    [The prepared statement of Hon. Ted Strickland follows:]

Prepared Statement of Hon. Ted Strickland, a Representative in Congress 
                         from the State of Ohio

    Thank you, Mr. Chairman, for convening today's hearing.
    As I reviewed the Department of Health and Human Services fiscal 
year 2003 budget, I was pleased to see funding increases for 
bioterrorism preparedness, drug treatment programs at SAMHSA, the 
National Institutes of Health (NIH), Community Health Centers, and the 
National Health Service Corps. These are important programs that do 
much to protect and promote the health and safety of all Americans.
    However, I was dismayed to find the budget lacking in many areas 
that seek to ensure underserved communities have access to health care 
resources. There are cuts in funding for the Children's hospitals GME 
program, substance abuse prevention grants, and health professions 
programs through the Health Resources and Services Administration 
(HRSA). The budget slashes funding for rural health by proposing a 50 
percent cut in funding for the State Offices of Rural Health, the 
agency that assists states in the recruiting and training of health 
care professionals that serve medically underserved rural communities 
and administers the Medicare Rural Hospital Flexibility Program. The 
budget fails to provide for the elimination of the now unnecessary but 
automatic 15 percent cut in Medicare rural home health payments and it 
fails to eliminate the caps on Medicare disproportionate share hospital 
(DSH) payments for small and rural hospitals.
    The Administration's Medicare budget is grossly inadequate, 
including just $190 billion over ten years for all aspects of Medicare 
reform--and just $77 billion is specifically allocated to allow states 
to provide drug coverage for low income seniors. In addition to 
shifting the responsibility for a prescription drug benefit under 
Medicare from the federal government to the states, I find the 
prescription drug proposal laid out in this budget to be a fraudulent 
attempt on the part of the Administration to placate seniors who tell 
me they need a comprehensive benefit. Under the President's plan, there 
is no guarantee that even those seniors who are under 150 % of poverty 
($12,885 for an individual and $17,415 for a couple) and are eligible 
for the benefit described in the budget would receive assistance 
because under this proposal there is no guarantee the states will act. 
It is shameful that this type of proposal has been put forth as real 
help for seniors.
    These budget shortfalls cannot be tolerated. Instead, we must pass 
a budget that more closely meets our obligation to the needs and 
priorities of working and retired Americans. Thank you, Mr. Chairman, 
and I yield back the remainder of my time.

    Mr. Bilirakis. I thank the gentleman. Mr. Pitts.
    Mr. Pitts. Thank you, Mr. Chairman, in keeping with your 
wishes, I will be brief. Thank you, Mr. Secretary, for joining 
the committee today. I have always found your office, and your 
staff very responsive when we sought to meet with them or ask 
questions, and we thank you for that.
    And we appreciate your efforts to bring efficiency to your 
department, and the restructuring of the bureaucracy there. We 
look forward to working with you on a number of issues. Your 
plate is obviously very, very full, and you have a difficult 
    But we thank you for your track record, and look forward to 
working with you, especially on welfare reform, in some of the 
issues that we face. Thank you, Mr. Chairman.
    Mr. Bilirakis. The Chair thanks the gentleman. Mr. Ehrlich.
    Mr. Ehrlich. I will have mercy, too, Mr. Chairman. I have a 
statement that I will submit. Just one quick observation, Mr. 
Secretary. I was looking at your charter and thinking about 
your charter, and we all have our hot buttons, and you have 
heard many of these hot buttons today, of course.
    And in just looking through the outline that our committee 
prepares with regard to your testimony, a lot of these issues 
have been addressed, from low income drug benefits, and all the 
reimbursement issues, of course, and Medicaid.
    AWP has been mentioned, and the discount card and how best 
to get to the prescription drug benefit, and Medicare solvency, 
regulatory relief, NIH, work force shortages, the nursing 
shortage, which is a hot issue with many of us, and 
particularly myself, as it is with Ms. Capps and the chairman 
of the Health Subcommittee.
    Bioterrorism, genetic non-discrimination, CDC, the 
uninsured, FDA, community health centers, National Health 
Corps. Are you sure you still want this job?
    We appreciate your thoughtful approach to these issues. 
This is a very difficult job, and I personally appreciate the 
attention my office has received, and I look forward to your 
testimony, and I yield back.
    [The prepared statement of Hon. Robert L. Ehrlich, Jr. 

Prepared Statement of Hon. Robert L. Ehrlich, Jr., a Representative in 
                  Congress from the State of Maryland

    Mr. Chairman, thank you for holding this important hearing on 
funding priorities for the Department of Health and Human Services for 
Fiscal Year 2003.
    It is our privilege today to have The Honorable Tommy Thompson, 
Secretary of Health and Human Services, with us today as our sole 
witness. Mr. Secretary, I wish to add to my colleagues' thanks to you 
for spending this morning with the members of our Health Subcommittee 
to discuss your upcoming budget and matters of concern to us.
    Mr. Secretary, I would also like to thank you for your service to 
our country. I view HHS as serving a crucial role in our federal 
government. Before September 11th, your job was to advance the health 
of all Americans, increase access to affordable, quality health care, 
and ensure that proper measures and needed research in all health 
fields continued. This is a crucial function in our society.
    After September 11th, your job is all that and much more. HHS is at 
the forefront of the War on Terrorism. You are responsible for a $489 
billion organization whose mission it is to protect the health and 
safety of all Americans. The newest component of your mission, 
Bioterrorism Protection, totaling $4.3 billion in this budget, is 
crucial to our national security. I look forward to discussing this 
component with you and how it will work with state and local 
communities to benefit our safety.
    There is one other subject area I look forwarding to hearing you 
discuss. I know you have been active in providing additional resources 
to address our nation's nursing shortage, and I appreciate your 
efforts. As you may be aware, the House passed H.R. 3487, the Nurse 
Reinvestment Act, which Chairman Bilirakis, Mr. Brown, Mrs. Capps, Mr. 
Whitfield, and I worked together on last year. This legislation will 
allow you to provide educational scholarships to nurses who agree to 
work in medically-underserved areas.
    Mr. Secretary, this legislation is needed to address the nursing 
shortage nationally. One of my concerns is that while this legislation 
grants you the authority to pursue this program, it may not provide you 
sufficient resources to provide scholarships for this purpose. I will 
be eager to hear your view on this important issue and what you think 
you need in terms of resources to ease the nursing shortage and attract 
more bedside nurses to the profession.
    Mr. Secretary, once again, thank you for your attendance here 
today. I look forward to your testimony and our dialogue.
    Thank you, Mr. Chairman.

    Mr. Bilirakis. I thank the gentleman. Mr. Deutsch for an 
opening statement.
    Mr. Deutsch. Thank you, Mr. Chairman, and again I join in 
really direct praise of your work, and your Department's work, 
in some very specific areas. I think your response in post-911 
events has really been excellent, and thoughtful, creative, and 
really government efficiency at its best, and management at its 
best, and creative leadership at its best.
    I really compliment you and I look forward to working with 
you in the continuation of that area. I also think that praise 
in terms of research funding at NIH is a legacy that you can be 
proud of, and I think we on this committee and subcommittee can 
really be proud of as well.
    I want to know though, and again I know that it is not 
directly through your efforts, but it is through your 
department's efforts, and it is really the opportunity that we 
have to really work with you in terms of the budget as a 
committee of jurisdiction.
    I join with our ranking Democrat on the subcommittee, and 
the ranking Democrat on the full committee, Mr. Brown and Mr. 
Dingell, in their very, very specific, and very strong concerns 
regarding the Medicare prescription drug benefit issue.
    I think it is an area where the administration's attempts 
and budget attempts are really almost effectively zero. Out 
there in the real world, they really are effectively zero.
    And I think that each of us interact with constituents, but 
this is not a theoretical issue. This is a very real issue, and 
for literally millions, and tens of millions of Americans, this 
is a very, very real issue.
    It is the difference between lifestyle choices, and in most 
cases it is not the difference between eating and not eating, 
but it is clearly the difference between going out, visiting 
grandchildren, traveling, having electricity or heat at 72 
versus 52, and issues like that.
    And I think that for us in this budgeting that we are 
doing, not to address it when we still have the opportunity to 
address it, is a mistake of tragic proportions. And I think 
that our job hopefully will be able to give you the opportunity 
to push dramatically further than what the administration has 
offered on the table, which I think is a non-starter, and 
effectively close to a zero for the people who really do need 
the help.
    And with that, I would yield back the balance of my time. 
Thank you.
    Mr. Bilirakis. The Chair thanks the gentleman, and I think 
that completes our opening statements. Secretary Thompson, 
first, I too, want to thank you for the timely furnishing to 
the committee of the PDUFA performance goals and closure, which 
we have not had a chance to review, but I imagine that there 
will be a few questions going forward on that.
    Let me ask you, sir, the administration has requested that 
we find offsets--are you going to make an opening statement, 
Mr. Secretary?
    Secretary Thompson. I serve at your pleasure, sir.
    Mr. Bilirakis. If you want me to go right to questions, I 
will. It is up to you, sir.
    Mr. Brown. Mr. Chairman, we can make an opening statement 
for him.
    Mr. Bilirakis. Feel free to make an opening statement. I 
will set the clock at 10 minutes. I think this is just not my 
    Mr. Brown. Mr. Chairman, for one moment, can I have 
unanimous consent to enter into the record Ms. Capps' article 
that she wrote in The Hill and any other extraneous materials 
other members have?
    Mr. Bilirakis. Without objection.
    Mr. Brown. Thank you.
    Mr. Bilirakis. Is that okay with Ms. Capps?
    Mr. Brown. She asked for that.
    [The article and additional statements submitted for the 
record follow:

             Bush Health Budget Doesn't Live Up to Promises
                             By Lois Capps

    The President has come forward with a budget proposal highlighting 
some of the important health care challenges facing our country. I 
agree with many of his priorities, but am doubtful that the details of 
his proposals will accomplish these goals.
    There are many pieces of this budget that are strong and should be 
embraced by the Congress. For example, I applaud the Administration's 
$4.3 billion request to address bioterrorism threats. Many of the 
priorities raised in bills produced by the Homeland Security Task Force 
last year are being pursued here.
    I am also very pleased the Administration is embracing Congress' 
long standing commitment to doubling the NIH budget. This funding 
supports important research that benefits all Americans--from finding 
cures for Parkinson's and Alzheimer's to determining the most effective 
medical practices.
    But this budget, while setting impressive goals and increasing a 
few valuable programs, falls woefully short in addressing many other 
critical health care priorities.
    The Medicare prescription drug proposal is one such example. The 
Administration has declared that adding a drug benefit for seniors is a 
major priority. But the $190 billion allocated in the budget provides 
barely half of what Speaker Hastert has claimed is necessary. And the 
proposal itself--basically offering coverage to only low income 
seniors--would leave millions of seniors without coverage and still 
facing enormous drug bills.
    In addition, the Administration provides no help to doctors whose 
Medicare payments were cut by 5.4% this year and will likely see a 
sizeable cut next year. Just two weeks ago the Energy and Commerce 
Subcommittee on Health heard testimony on how these cuts will devastate 
doctors' ability to provide quality care to our seniors. A bipartisan 
group, led by Chairman Bilirakis, Ranking Member Sherrod Brown and 
myself, are committed to fixing this problem, but the Administration's 
budget leaves no room for any solution.
    I join the President in trying to ensure we have enough doctors, 
nurses and other health professionals to bring our public health system 
up to today's challenges. The terrorist attacks have made abundantly 
clear how important prepared medical professionals are for our national 
security. Hospitals cite staffing shortages as a major obstacle to 
their ability to continue providing quality care. And in my district 
and across the country, the crisis in long term health care is 
aggravated by a growing shortage of nurses and nurse assistants.
    To address this need, the Administration has correctly proposed 
increasing the National Health Service Corps and Nurse Education 
scholarship and loan programs by about $50 million. But at the same 
time, it has proposed to cut nearly $300 million from the programs that 
actually train the doctors, physician assistants, pharmacists and lab 
technicians we need. With the shortages in these critical areas, these 
cuts will devastate our public health system. In the interest of 
national security and public health, we should be boosting funding for 
training, not cutting it.
    We must also improve access to care for the uninsured. The 
Administration has proposed funding increases for Community Health 
Centers by $114 million. But it has called for eliminating the 
Community Access Program (CAP). This $105 million program helps 
communities coordinate public and private efforts to provide medical 
care to the underinsured and uninsured. CAP limits redundancy in 
federal expenditures and leverages private money to provide health 
care, ensuring the federal government gets more bang for its buck. 
Killing this program would seriously hurt our ability to wisely use 
federal dollars to help the uninsured.
    The Administration has also appropriately highlighted disease 
prevention and allocated $20 million in new money for the Healthy 
Communities Initiative. But it has cut $57 million from the CDC's 
chronic disease programs, which address illnesses like cancer, 
cardiovascular disease, and, diabetes. Chronic diseases account for 60% 
of our nation's health care costs. If we want to prevent disease and 
its costs, cutting CDC's efforts in this area is a bad idea.
    The details of this health care budget often reflect a plan that 
takes one step forward and two steps back. In many cases I agree with 
the Administration's stated goals, but this budget would not help us 
achieve them or improve health care for all Americans. Congress must 
improve this proposal.
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    In the interest of time, Mr. Chairman, I will get right to the 
point of my statement.
    My primary concern in any budget is its overall effect on rural 
states. To say that my home state of Wyoming is rural is an over 
simplification because what we are in fact is ``frontier.''
    According to the Webster's dictionary, ``frontier'' is defined as a 
region that forms the margin of settled or developed territory; a new 
field for developmental activity.
    As a region with roughly 100,000 square miles, and 480,000 people, 
with rugged mountainous terrain, and an unforgiving climate, Wyoming is 
perhaps this country's last frontier.
    So when vital health programs are cut from the budget, patients in 
my district scramble for care, and many health care professionals pack 
up their desk and head home for good.
    That is not an exaggeration.
    While I am very pleased with the President's budget increases for 
the National Health Service Corps and Community Health Centers, I am 
concerned about the cuts to a variety of other rural health programs 
that directly benefit my state.
    Examples include: State Offices of Rural Health, the Health 
Professions Program, and Rural Health Outreach and Network Development 
Grant--to name a few.
    While I understand budgetary constraints, we simply cannot cut the 
legs out from under rural health communities across this country. The 
effects could be devastating.
    I look forward to having the Secretary address these rural programs 
and, with that, I yield back my time. Thank you.
    Prepared Statement of Hon. Henry A. Waxman, a Representative in 
                 Congress from the State of California

    Secretary Thompson, it is a pleasure to have you with us today.
    I know from your testimony and the Administration's budget 
documents that you are here to paint a rosy picture of the 
Administration budget for HHS. Indeed there are some aspects that are 
very positive--increases for the national health service corps, 
increases for the important work of NIH, increases for the support of 
the Office for Generic Drug review in the FDA, to name a few.
    But unfortunately, as I look at this budget, I find the picture is 
much more one of disappointment than progress.
    First and foremost, it clearly does not provide sufficient support 
for an adequate and comprehensive prescription drug benefit under 
Medicare. The dollars allocated in this budget fall far short of what 
is needed--in fact, I would argue four times as much is needed as the 
amount you have allocated--and certainly will not allow us to construct 
a decent program that will meet the needs of our senior citizens.
    Second, despite the rhetoric about providing coverage for the 
uninsured, I see a budget that proposes a system of individual tax 
credits that would undermine the current employer based system of 
coverage and rely on an individual insurance market that does not 
provide affordable coverage for people who are sick or have chronic 
health conditions--in other words, the very people who need it. And I 
see a budget that does not make use of the strengths and successes we 
have had in our public programs of Medicaid and SCHIP. We know those 
programs work; we know extending coverage effectively reduces the 
number of uninsured.
    Further, this budget fails to provide assistance to the States to 
maintain and expand their Medicaid programs through endorsement of a 
higher Federal matching rate or through correction of declining support 
for disproportionate share institutions, and indeed cuts back on 
necessary support through arbitrary changes in the upper payment limit 
    Nothing in the budget takes us forward through expanding coverage 
for the severely disabled, through removing senseless restrictions that 
keep States from extending coverage to legal immigrant children, 
through expanded coverage for severely disabled children and their 
families, through better dental services, to name just a few.
    Instead we see proposals that undermine the protections of the 
current program through waiver programs that take away from the poorest 
beneficiaries to support limited expansion to others.
    I'm disappointed that in place after place in the budget, you've 
given with one hand but taken back with another, whether it is the 
reductions in manpower programs, the elimination of the CAP program, 
the effective cut in the prevention block grant, the flat funding of 
the Ryan White AIDS program, family planning, and many traditional 
public health programs that we know work.
    I look forward to hearing from you today, to improving this budget, 
and to working to expand and strengthen our programs to protect and 
improve the health of the American people. Thank you.

    Mr. Bilirakis. Please proceed, Mr. Secretary. I apologize.

                   HEALTH AND HUMAN SERVICES

    Mr. Thompson. Chairman Bilirakis and Congressman Brown, and 
members of the committee, I thank you so very much for your 
hospitality and your willingness to work with me. I appreciate 
it very much.
    I would like to point out that we want to be very 
responsive to all members of this committee, and to Congress. 
We are very happy to report that we have been able to reduce 
the response time from CDC and CMS from 70 days when I first 
came in here as Secretary, and now down to 20 days, and we are 
working toward our goal of 15 days.
    And if you do not receive a response, and you feel that it 
is not timely, please call me personally, and I will take care 
of it.
    This budget, Mr. Chairman and members, was sent down with 
three priorities.
    The first one was of course the war that has taken place, 
the second one was homeland security, and the third one is 
taking care of the needs of the American public.
    So it is an honor to come before you today to discuss the 
President's fiscal year 2003 budget for the Department of 
Health and Human Services. Mr. Chairman, it is always good to 
see you, and thank you for your tremendous leadership in 
advancing a sound health care agenda for our country.
    Congressman Brown, thank you for your deep concern with 
many of the issues that are facing us today. And to all of you, 
thank you so very much for your bipartisan support. During the 
past 13 months we have witnessed some significant achievements 
in the Department of Health and Human Services.
    I will detail some of them in the course of my testimony. 
The total HHS request for fiscal year 2003 is $489 billion. The 
discretionary component totals $64 billion, and budget 
authority, an increase of 3.9 percent over the fiscal year 2002 
    Let me begin by discussing our efforts on bioterrorism. 
After September 11th, I appointed Dr. D.A. Henderson, the 
physician who spearheaded the successful drive to eradicate 
small pox worldwide, to head a newly created Office of Public 
    And about 20 feet away from my office, we have set up a 24 
hour a day, 7 days a week, command center, where we receive 
information from all over the world about possible bioterrorist 
    And we have been very aggressive and prudent in our work to 
prepare for any biological or chemical threat our enemies could 
use against us. To prepare further, President Bush and I 
requested an additional $4.3 billion, an increase of 45 percent 
over the current fiscal year, to support a variety of critical 
activities to prevent, identify, and respond to incidents of 
    We are also requesting more than half-a-billion dollars for 
our hospital preparedness program, which will strengthen local 
hospital preparation for biological and chemical attacks, and 
expand the surge capacity.
    We are currently providing the $1.1 billion that Congress 
on a bipartisan basis appropriated for State governments to 
strengthen their capacity to respond to bioterrorism and other 
public health emergencies.
    We are also developing a system to connect every major 
county and metropolitan region with the Health Alert Network. 
We have the best opportunity, ladies and gentlemen, to develop 
a public health system that all of us can be very proud of.
    The Congress on a bipartisan basis appropriated 
supplemental money to address immediate public health needs 
related to bioterrorism preparedness. We have responded by 
making 20 percent of the total funds immediately available to 
the States, and the remaining 80 percent will also be 
distributed expeditiously.
    The NIH is researching better anthrax, plague, hemorrhagic 
fever vaccines. We are purchasing an additional 154 million 
doses of smallpox vaccine. The result will be that by the end 
of this year every man, woman, and child, in America will have 
the vaccine he or she needs.
    When it comes to bioterrorism, we are growing stronger in 
our preparedness each and every day. We are also advancing 
important biomedical research, and the budget provides $5.5 
billion for research of cancer throughout NIH, and a total of 
$3.7 billion for HIV AIDS related research.
    We are also requesting $20 million for a Healthy 
Communities Initiative. This is a new effort, ladies and 
gentlemen, that is going to concentrate department-wide 
expertise on the prevention of diabetes, asthma, obesity, and 
health disparities in minority communities.
    I am deeply concerned, as all of you are, about how obesity 
is affecting our health as a people. Roughly 3 out of every 5 
adults are overweight, and approximately 300,000 U.S. deaths a 
year currently are associated with obesity and simply weighing 
too much.
    The total direct and indirect costs attributed to being 
overweight and to obesity amounted to $117 billion in the year 
2000. We also have a serious problem with diabetes. Nearly 16 
million Americans have diabetes, and 800,000 more fall victims 
to the disease annually.
    This epidemic is witnessing a terrible increase, tripling 
within the last three decades. Yet, we have got solid research 
showing that if you exercise just 30 minutes a day, and walking 
is a perfectly suitable form of exercise, and lose 10 to 15 
pounds, your risk of getting diabetes falls by nearly 60 
    When you extrapolate that, we spend $100 billion a year on 
diabetes, and if we were able to reduce the instance of 
diabetes by 60 percent, that is a savings of $60 billion.
    The President and I, and I know you are as well, are 
absolutely passionately committed to our across the board 
prevention initiative. Preventive health care saves huge 
amounts of money, but more importantly can save untold 
thousands of lives.
    We are also helping to prepare low income Americans for 
their future, and that is why welfare reform remains so 
important. The good news is that sine 1996, nearly 7 million 
fewer people are on welfare today than in 1996, and 2.8 million 
fewer children are in poverty, in large part because welfare 
has been transformed, and is transforming.
    We are calling for a continued commitment to child care, 
including $2.7 billion for entitlement child care funding, and 
$2.1 billion for discretionary funding. We are giving the 
States the flexibility they need to make effective education 
and job training programs with work, as well as money to 
strengthen families and reduce illegitimacy.
    Strengthening Medicare is another key component of our 
across the board effort to broaden and strengthen our country's 
health care system. The 2003 budget dedicates $190 billion over 
10 years for immediate targeted improvements, and comprehensive 
Medicare modernization, including the subsidized prescription 
drug benefit, better insurance protection, and better private 
options for all beneficiaries.
    I know that this committee and other members do not believe 
that is enough, but I think we should work together to find the 
right amount. The administration recognizes the need to act now 
to help seniors obtain prescription drug coverage.
    Our budget provides $77 billion and $8 billion through the 
year 2006 for States to expand drug only coverage to low income 
Medicare recipients whose income is $150 percent of the Federal 
poverty rate.
    And also the Federal Government will pay 90 percent of the 
costs for drugs for individuals from 100 percent of poverty to 
150 percent of poverty. Also this year, HHS will continue to 
work to implement the President's proposed Medicare endorsed 
prescription drug card.
    The card will give beneficiaries immediate access to 
manufacturer discounts on their medicines and other valuable 
pharmaceutical purchases. At the same time, and as was 
mentioned several times, we cannot ignore the roughly 40 
million Americans who lack health insurance.
    Since January 2001, we have approved State plan amendments 
in Medicaid and S-CHIP waivers that have expanded the 
opportunity for health coverage to 1.8 million Americans, and 
improved existing benefits to 4.5 million individuals.
    I want to point out that we have handed out 1,500 waivers 
and modifications of State plans, and we are no longer behind. 
When I came in there were some waivers going back to 1986, and 
right now we are current, and we get waivers out within 90 
    The 2003 budget also seeks $1.5 billion to support the 
President's plan to impact 1,200 communities with new or 
expanded health centers by 2006. This is a $114 million 
increase over fiscal year 2002, and would support 170 new and 
expanded health centers, and provide services to 1 million 
additional patients.
    And last week, we issued 27 grants totaling $12 million 
under President Bush's Health Centers Initiative to help more 
Americans gain access to quality health care. In addition, the 
President's budget includes $89 billion in new health credits 
to help American families buy health insurance, which will 
provide health coverage for many low income families.
    And I know, Mr. Chairman, and members of this committee, 
that we have taken some of the suggestions of this committee 
last year and put it into the new plan. So that an individual 
can apply and get a number from a regional IRS office, and 
immediately take that number to an insurance agency, and apply 
for it.
    It also gives States the opportunity to pool the uninsured, 
which will lower their costs. Mr. Chairman, I know that many 
members of this committee are concerned about PDUFA 
reauthorization. FDA and the industry have been negotiating in 
good faith for many months. We spent last weekend tying up the 
ends, and today we will have completed our deal.
    We have developed a sound plan. The agreement reached 
several weeks ago calls for increased resources for FDA, 
including more funding for drug safety after drug approval, a 
concern that some of you have mentioned already.
    The agreement also urges earlier communications between 
drug and biologic innovators, and the FDA during the approval 
and review process. Working together with you, and with 
Chairman Tauzin, and with the other members of this committee, 
we can reach an accord on PDUFA that will serve our Nation 
    Mr. Chairman, this comprehensive aggressive budget 
addresses the most pressing public health challenges facing our 
Nation, from bioterrorism preparedness to coverage for the 
uninsured in order to ensure a safe and healthy America.
    I am confident that working together, we can finish to 
improve the health and well-being of our fellow citizens. I did 
a 20 minute speech in less than 10 minutes, and I want to thank 
you, Mr. Chairman, for letting me come before you today. I look 
forward now to answering your questions.
    [The prepared statement of Hon. Tommy G. Thompson follows:]

Prepared Statement of Hon. Tommy G. Thompson, Secretary, Department of 
                       Health and Human Services

    Good Morning Mr. Chairman and members of the Sub-Committee. I am 
honored to appear before you today to discuss the President's FY 2003 
budget for the Department of Health and Human Services. I am confident 
that a review of the full details of our budget will demonstrate that 
we are proposing a balanced and responsible approach to ensuring a safe 
and healthy America.
    The budget I present to you today fulfills the promises the 
President has made and proposes creative and innovative solutions for 
meeting the challenges that now face our nation. Since the September 
11th attacks we have dedicated much of our efforts to ensuring that the 
nation is safe. HHS was one of the first agencies to respond to the 
September 11th attacks on New York City, and began deploying medical 
assistance and support within hours of the attacks. Our swift response 
and the overwhelming task of providing needed health related assistance 
made us even more aware that there is always room for improvement. The 
FY 2003 budget for the Department of Health and Human Services builds 
on President Bush's commitment to ensure the health and safety of our 
    The FY 2003 budget places increased emphasis on protecting our 
nation's citizens and ensuring safe, reliable health care for all 
Americans. The HHS budget also promotes scientific research, builds on 
our success in welfare reform, and provides support for childhood 
development while delivering a responsible approach for managing HHS 
resources. Our budget plan confronts both the challenges of today and 
tomorrow while protecting and supporting the well being of all 
    Mr. Chairman, the HHS budget request for FY 2003 totals $488.8 
billion in outlays, an increase of $29.2 billion or +6.3 percent over 
the comparable FY 2002 budget. The discretionary component totals $64.0 
billion in budget authority, an increase of $2.4 billion , or +3.9 
percent over FY 2002. Let me now discuss some of the highlights of the 
HHS budget and how we hope to achieve our goals.


    Mr. Chairman, as you know, the Department of Health and Human 
Services is the lead federal agency in countering bioterrorism. In 
cooperation with the States, we are responsible for preparing for, and 
responding to, the medical and public health needs of this nation. The 
FY 2003 budget for HHS bioterrorism efforts is $4.3 billion, an 
increase of $1.3 billion, or 45 percent, above FY 2002. This budget 
supports a variety of activities to prevent, identify, and respond to 
incidents of bioterrorism. These activities are administered through 
the Centers for Disease Control and Prevention (CDC), the National 
Institutes of Health (NIH), the Office of Emergency Preparedness (OEP), 
the Substance Abuse and Mental Health Services Administration (SAMHSA), 
the Health Resources and Services Administration (HRSA) and the Food 
and Drug Administration (FDA). These efforts will be directed by the 
newly established Office of Public Health Preparedness (OPHP).
    On January 31, 2002, HHS announced plans for making $1.1 billion 
available to States. This funding is available for hospital 
preparedness, laboratory capacity, epidemiology, and emergency medical 
response. Approximately 20 percent of this total either has already 
been provided (or will be provided within the next few weeks) for 
immediate expenditure to all eligible entities in base awards that will 
be used to establish core programs and address current needs for 
bioterrorism preparedness. The remaining 80 percent will be made 
available for expenditure once the Secretary has approved the States' 
work plans for their awarded funds. States will submit plans which will 
be reviewed by the HHS staff to ensure that funding is used wisely for 
bioterrorism efforts.
    In order to create a blanket of preparedness against bioterrorism, 
the FY 2003 budget provides funding to State and local organizations to 
improve laboratory capacity, enhance epidemiological expertise in the 
identification and control of diseases caused by bioterrorism, provide 
for better electronic communication and distance learning, and support 
a newly expanded focus on cooperative training between public health 
agencies and local hospitals.
    Funding for the Laboratory Response Network enhances a system of 
over 80 public health labs specifically developed for identifying 
pathogens that could be used for bioterrorism. Funding will also 
support the Health Alert Network, CDC's electronic communications 
system that will link local public health departments in covering at 
least ninety percent of our nations' population. Funding will be used 
to support epidemiological response and outbreak control, which 
includes funding for the training of public health and hospital staff. 
This increased focus on local and state preparedness serves to provide 
funding where it best serves the interests of the nation.
    An important part on the war against terrorism is the need to 
develop vaccines and maintain a National Pharmaceutical Stockpile. The 
National Pharmaceutical Stockpile is purchasing enough antibiotics to 
be able to treat up to 20 million individuals in a year for exposure to 
anthrax and other agents by the end of 2002. The Department is 
purchasing sufficient smallpox vaccines for all Americans. The FY 2003 
budget proposes $650 million for the National Pharmaceutical Stockpile 
and costs related to stockpiling of smallpox vaccines, and next-
generation anthrax vaccines currently under development.
    Another important aspect of preparedness is the response capacity 
of our nation's hospitals. Our FY 2003 budget provides $518 million for 
hospital preparedness and infrastructure to enhance biological and 
chemical preparedness plans focused on hospitals. The FY 2003 budget 
will provide funding to upgrade the capacity of hospitals, outpatient 
facilities, emergency medical services systems and poison control 
centers to care for victims of bioterrorism. In addition, CDC will 
provide support for a series of exercises to train public health and 
hospital workers to work together to treat and control bioterrorist 
    The FY 2003 budget also includes $184 million to construct, repair 
and secure facilities at the CDC. Priorities include the construction 
of an infectious disease/bioterrorism laboratory in Fort Collins, 
Colorado, and the completion of a second infectious disease laboratory, 
an environmental laboratory, and a communication and training facility 
in Atlanta. This funding will enable the CDC to handle the most highly 
infectious and lethal pathogens, including potential agents of 
bioterrorism. Within the funds requested, $12 million will be used to 
equip the Environmental Toxicology Lab, which provides core lab space 
for testing environmental samples for chemical terrorism. Funding will 
also be allocated to the ongoing maintenance of existing laboratories 
and support structures.
    The FY 2003 budget also includes $60 million for the development of 
new Educational Incentives for Curriculum Development and Training 
Program. The goals of this program will be the development of a health 
care workforce capable of recognizing indications of a bioterrorist 
event in their patients, that possesses the knowledge and skills to 
best treat their patients, and that has the competencies to rapidly and 
effectively inform the public health system of such an event at the 
community, State and national level.


    Advances in scientific knowledge have provided the foundation for 
improvements in public health and have led to enhanced health and 
quality of life for all Americans. Much of this can be attributed to 
the groundbreaking work carried on by, and funded by, the National 
Institutes of Health (NIH). Our FY 2003 budget enhances support for a 
wide array of scientific research, while emphasizing and supporting 
research needed for the war against bioterrorism.
    NIH is the largest and most distinguished biomedical research 
organization in the world. The research that is conducted and supported 
by the NIH offers the promise of breakthroughs in preventing and 
treating a number of diseases and contributes to fighting the war 
against bioterrorism. The FY 2003 budget includes the final installment 
of $3.9 billion needed to achieve the doubling of the NIH budget. The 
budget includes $1.75 billion for bioterrorism research, including 
genomic sequencing of dangerous pathogens, development of zebra chip 
technology, development and procurement of an improved anthrax vaccine, 
and laboratory and research facilities construction and upgrades 
related to bioterrorism. With the commitment to bioterrorism research 
comes our expectation of substantial positive spin-offs for other 
diseases. Advancing knowledge in the arena of diagnostics, therapeutics 
and vaccines in general should have enormous impact on the ability to 
diagnose, treat, and prevent major killers-diseases such as malaria, 
TB, HIV/AIDS, West Nile fever, and influenza.
    The FY 2003 budget also provides $5.5 billion for research on 
cancer throughout all of NIH. Currently, one of every two men and one 
of every three women in the United States will develop some type of 
cancer over the course of their lives. New research indicates that 
cancer is actually more than 200 diseases, all of which require 
different treatment protocols. Promising cancer research is leading to 
major breakthroughs in treating and curing various forms of cancer. Our 
budget continues to expand support for these research endeavors. The FY 
2003 budget also includes a total of $2.8 billion for HIV/AIDS-related 
research. NIH continues to focus on prevention research, therapeutic 
research to treat those already infected, international research, and 
research targeting the disproportionate impact of AIDS on minority 
populations in the United States.

                      PRESCRIPTION DRUG USER FEES

    As a result of our investment in biomedical research through the 
NIH, new breakthrough drugs and medical treatments will be discovered 
to treat and cure serious diseases afflicting millions of Americans. A 
major mission for the Food and Drug Administration is to determine 
which of these therapies are safe and effective and to get these on the 
market quickly. The Prescription Drug User Fee Program known as PDUFA, 
enacted by Congress in 1992, has been enormously successful in speeding 
up drug approval times. This program is due for reauthorization this 
year and is one of the top priorities of the Administration. I commend 
you, Mr. Chairman, and the Members of this Committee, for your 
leadership in this area and we appreciate your bipartisan commitment to 
act quickly to reauthorize this key program during this fiscal year and 
to ensure that enactment of this legislation is not put at risk by the 
inclusion of controversial provisions.
    As you are aware, the FDA and the drug and biologics 
representatives have agreed upon a blueprint containing the proposed 
specifications for the reauthorization of PDUFA III with input from 
consumer and patient groups, health professionals, and other 
organizations. This proposal calls for significant increases in user 
fees to put the program on sound financial footing and make the 
collection of fees more predictable. The proposed drug user fee amount 
would be $222.9 million in FY 2003 with increases in the out years to 
$259.3 million in FY 2007. The FY 2003 request is approximately a $90 
million increase over the $133 million that was collected for FY2001. 
The PDUFA III proposal includes several important new initiatives. One 
of the more significant among these is the agreement to use industry 
fees to significantly expand the capacity of FDA to conduct risk 
management activities during the first few years after drugs are 
approved. We expect that this will lead to more targeted and effective 
drug prescribing patterns by physicians and fewer adverse effects for 


    The FY 2003 budget includes $25 million for a Healthy Communities 
Innovation Initiative--a new interdisciplinary services effort that 
will concentrate Department-wide expertise on the prevention of 
diabetes and asthma, as well as obesity. Of this amount, $20 million is 
available in HRSA. The purpose of the initiative is to reduce the 
incidence of these diseases and improve services in 5 communities 
through a tightly coordinated public/private partnership between 
medical, social, educational, business, civic and religious 
organizations. These chronic diseases were chosen because of their 
rapidly increasing prevalence within the United States. In addition 
there is $5 million in CDC for a national media campaign to promote 
physical fitness activities, with an emphasis on families and 
    More than 16 million Americans currently suffer from a preventable 
form of diabetes. Type II diabetes is increasingly prevalent in our 
children due to the lack of activity. In a recent study conducted by 
NIH, participants that were randomly assigned to intensive lifestyle 
intervention experienced a reduced risk of getting Type II diabetes by 
58 percent. HHS plans to reach out to women and minorities to help make 
this initiative a success.


    Of all the issues confronting this Department, none has a more 
direct effect on the well being of our citizens than the quality and 
accessibility of health care. Our budget proposes to improve the health 
of the American people by taking the steps to increase and expand the 
number of Community Health Centers, strengthen Medicaid, and ensure 
patient safety.
    Community Health Centers provide family oriented preventive and 
primary health care to over 11 million patients through a network of 
over 3,400 health sites. The FY 2003 budget will increase and expand 
the number of health center sites by 170, the second year of the 
President's initiative is to increase and expand sites by 1,200 and 
serve an additional 6.1 million patients by 2006. We propose to 
increase funding for these Community Health Centers by $114 million in 
FY 2003. Our long-term goal is to increase the number of people who 
receive high quality primary healthcare regardless of their ability to 
pay. With these new health centers, we hope to achieve this goal.
    In addition to expanding Community Health Centers, we are seeking 
to expand the National Health Service Corps by $44 million. Currently, 
more than 2,300 health care professionals are providing service to 
health centers patients and others in under-served communities.
    The Medicaid program and the State Children's Health Insurance 
Program (SCHIP) provide health care benefits to low-income Americans, 
primarily children, pregnant women, the elderly, and those with 
disabilities. The FY 2003 budget we propose strengthens the Medicaid 
and SCHIP programs by implementing essential reforms in the way we pay 
for prescription drugs, by extending expiring SCHIP funds, and by 
testing solutions to barriers in community living for disabled children 
and adults.
    We propose to extend coverage of Medicare Part B premiums for 
people with incomes between 120 and 135 percent of the Federal poverty 
level, also known as Qualifying Individuals (QI-1s), for one year until 
September 2003. Currently, States through the Medicaid program must pay 
for the Medicare premiums and cost sharing for certain low-income 
Medicare beneficiaries. The funding to pay for Part B premiums for QI-
1s expires in September 2002. This proposal would ensure no 
interruption of current benefits while discussions take place about how 
better to integrate the QI-1 programs with other Medicaid programs that 
also pay Medicare premiums.
    For FY 2003, we propose to continue Transitional Medicaid 
Assistance for an additional year and provide families with an 
important incentive to work. Currently, States are required to provide 
up to one year of Medicaid for families who, due to work, would 
otherwise lose Medicaid eligibility. The provision is due to expire in 
September 2002. We propose to allow families to continue to take those 
first steps toward self-sufficiency--often in jobs without health 
insurance--without fear that their medical bills will leave them worse 
off than before. The initiative would cost $350 million.
    Also, we propose to work with stakeholders to develop legislative 
proposals that build on the Health Insurance Flexibility and 
Accountability (HIFA) demonstration in order to give states the 
flexibility they need to design innovative ways of increasing access to 
health insurance coverage for the uninsured. The Administration's plan 
also would allow at State option those who receive the President's 
health care tax credit to increase their purchasing power by purchasing 
insurance from private plans that already participate in their State's 
Medicaid, Children's Health Insurance, or State employees' programs. 
This could help keep costs down and provide a more comprehensive 
benefit than plans in the individual market. Further, this will give 
tax credit recipients a range of choices among insurance products, 
which the new tax credit program will make affordable.
    Additionally, as part of the New Freedom Initiative, a nationwide 
effort to support community based models of care that help remove the 
barriers of equality that face individuals with disabilities, we 
propose four demonstrations to test solutions to many of the barriers 
to community living for disabled children and adults. Two 
demonstrations will provide Medicaid respite services to caregivers of 
disabled adults and to caregivers of significantly disabled children. A 
third demonstration will allow home and community-based services as an 
alternative for children receiving care in a residential treatment 
facility. All three of these demonstrations will help the 
Administration evaluate the feasibility of providing such services 
under the Medicaid program. A fourth demonstration will address the 
shortage of direct service workers.
    We also need to make an effort to narrow the drug treatment gap. As 
reflected in the National Drug Control Strategy, Substance Abuse and 
Mental Health Services Administration estimates that 4.7 million people 
are in need of drug abuse treatment services. However, fewer than half 
of those who need treatment actually receive services, leaving a 
treatment gap of 3.9 million individuals. Our budget supports the 
President's Drug Treatment Initiative, and to narrow the treatment gap. 
We propose to increase funding for the initiative by $127 million. 
These additional funds will allow State and local communities to 
provide treatment services to approximately 546,000 individuals, an 
increase of 52,000 over FY 2002.

                         STRENGTHENING MEDICARE

    The FY 2003 budget dedicates $190 billion over ten years for 
immediate targeted improvements and comprehensive Medicare 
modernization, including a subsidized prescription drug benefit, better 
insurance protection, and better private options for all beneficiaries. 
Last year, President Bush proposed a framework for modernizing and 
improving the Medicare program that built on many of the ideas that had 
been developed in this Committee and by other Members of Congress.
    That framework includes the principles that:

 All seniors should have the option of a subsidized 
        prescription drug benefit as part of modernized Medicare.
 Modernized Medicare should provide better coverage for 
        preventive care and serious illness.
 Today's beneficiaries and those approaching retirement should 
        have the option of keeping the traditional plan with no 
 Medicare should make available better health insurance 
        options, like those available to all Federal employees.
 Medicare legislation should strengthen the program's long-term 
        financial security.
 The management of the government Medicare plan should be 
        strengthened to improve care for seniors.
 Medicare's regulations and administrative procedures should be 
        updated and streamlined, while instances of fraud and abuse 
        should be reduced
 Medicare should encourage high-quality health care for all 
    The President's FY 2003 Budget also includes a series of targeted 
immediate improvements to Medicare, which can be implemented as part of 
comprehensive Medicare legislation, to provide both immediate benefit 
improvements for seniors and to help implement a Medicare drug benefit 
and other long-term improvements more effectively.
    The improvements the President and I have proposed include not only 
a subsidized drug benefit as part of modernized Medicare, but also 
providing better coverage for preventive care and serious illness. The 
program's lack of drug coverage is just one example of its outdated 
benefits and it will have even more difficulty giving beneficiaries 
modern and appropriate treatment for their health problems in the 
future. We propose that preventive benefits have zero co-insurance and 
be excluded from the deductible. We must make these improvements to 
more effectively address the health needs of seniors today and for the 
    Let me assure you, the President remains committed to framework he 
introduced last summer, and to bringing the Medicare program up to date 
by providing prescription drug coverage and other improvements. We 
cannot wait: it is time to act. Recognizing that there is no time to 
waste, the President's Budget also includes a series of targeted 
immediate improvements to Medicare.
    As you know, last year the President proposed the creation of a new 
Medicare-endorsed prescription drug card program to reduce the cost of 
prescription drugs for seniors. This year, HHS will continue working to 
implement the drug card, which will give beneficiaries immediate access 
to manufacturer discounts on their medicines and other valuable 
pharmacy services. The President is absolutely committed to providing 
immediate assistance to seniors who currently have to pay for 
prescription drugs.
    Assistance, however, will not come only through the prescription 
drug card program. The budget proposes several new initiatives to 
improve Medicare's benefits and address cost. This budget proposes 
additional federal assistance for drug coverage to low-income Medicare 
beneficiaries up to 150% of poverty--about $17,000 for a family of two. 
This policy would eventually expand drug coverage for up to 3 million 
beneficiaries who currently do not have prescription drug assistance, 
and it will be integrated with the Medicare drug benefit that is 
offered to all seniors once that is in place. This policy helps to 
establish the framework necessary for a Medicare prescription drug 
benefit and is essentially a provision that is in all of the major drug 
benefit proposals to be debated before Congress. That is, the policy 
provides new Federal support for comprehensive coverage of low-income 
seniors up to 150 percent of poverty. And in all the proposals, the 
Federal government would work with the states to provide this coverage, 
just as we are proposing with this policy.
    In addition, I recently announced a model drug waiver program--
Pharmacy Plus--to allow States to reduce drug expenditures for seniors 
and certain individuals with disabilities with family incomes up to 200 
percent of the federal poverty level. This program is being done 
administratively. The Illinois initiative illustrates how we can expand 
coverage to Medicare beneficiaries in partnership with the federal 
government. The program we approved will give an estimated 368,000 low-
income seniors new drug coverage.
    The President's budget also includes an increase in funding to 
stabilize and increase choice in Medicare+Choice program by aligning 
payment rates more closely with overall Medicare spending and paying 
incentives for new types of plans to participate. Over 500,000 seniors 
lost coverage last year because Medicare+Choice plans left the program. 
Today close to 5 million seniors choose to receive quality health care 
through the Medicare+Choice program. Because it provides access to drug 
coverage and other innovative benefits, it is an option many seniors 
like, and an option we must preserve. The President's budget also 
proposes the addition of two new Medigap plans to the existing 10 
plans. These new plans will include prescription drug assistance and 
protect seniors from high out-of-pocket costs.
    Some of these initiatives give immediate and tangible help to 
seniors. But, let me make clear: these are not substitutes for 
comprehensive reform and a universal drug benefit in Medicare. They are 
immediate steps we want to take to improve the program in conjunction 
with comprehensive reform, so that beneficiaries will not have to wait 
to begin to see benefit improvements. I want to pledge today to work 
with each and every member of this Committee to fulfill our promise of 
health care security for America's seniors--now and in the future.


    I am committed to being proactive in preparing the nation for 
potential threats of bioterrorism and supporting research that will 
enable Americans to live healthier and safer lives. And, I am excited 
about beginning the next phase of Welfare reform and strengthening our 
Medicare and Medicaid programs. Ensuring that HHS resources are managed 
properly and effectively is also a challenge I take very seriously.
    For any organization to succeed, it must never stop asking how it 
can do things better, and I am committed to supporting the President's 
vision for a government that is citizen-centered, results oriented, and 
actively promotes innovation through competition. HHS is committed to 
improving management within the Department and has established its own 
vision of a unified HHS--One Department free of unnecessary layers, 
collectively strong to serve the American people. The FY 2003 budget 
supports the President's Management Agenda.
    The Department will improve program performance and service 
delivery to our citizens by more strategically managing its human 
capital and ensuring that resources are directed to national 
priorities. HHS will reduce duplication of effort by consolidating 
administrative management functions and eliminating management layers 
to speed decision-making. The Department plans to reduce the number of 
personnel offices from 40 to 4 and consolidate construction funding, 
leasing, and other facilities management activities. These management 
efficiencies will result in an estimated savings of 700 full time 
equivalent positions, allowing the Department to redeploy staff and 
other resources to advance primary missions.
    HHS continues working to improve budget and performance integration 
in support of the Government-wide effort. Although we work in a 
challenging environment where health outcomes may not be apparent for 
several years, and the Federal dollar may be just one input to complex 
programs, HHS is committed to demonstrating to citizens the value they 
receive for the tax dollars they pay.
    By expanding our information technology and by establishing a 
single corporate Information Technology Enterprise system, HHS can 
build a strong foundation to re-engineer the way we do business and can 
provide better government services at reduced costs. By consolidating 
and modernizing existing financial management systems our Unified 
Financial Management System (UFMS) will provide a consistent, 
standardized system for departmental accounting and financial 
management. This ``One Department'' approach to financial management 
and information technology emphasizes the use of resources on an 
enterprise basis with a common infrastructure, thereby reducing errors 
and enhancing accountability. The use of cost accounting will aid in 
the evaluation of HHS program effectiveness, and the impacts of funding 
level changes on our programs.
    HHS is also committed to providing the highest possible standard of 
services and will use competitive sourcing as a management tool to 
study the efficiency and performance of our programs, while minimizing 
costs overall. The program will be linked to performance reviews to 
identify those programs and program components where outsourcing can 
have the greatest impact. Further, the incorporation of performance-
based contracting will improve efficiency and performance at a savings 
to the taxpayer.


    Mr. Chairman, the budget I bring before you today contains many 
different elements of a single proposal; what binds these fundamental 
elements together is the desire to improve the lives of the American 
people. All of our proposals, from building upon the successes of 
welfare reform, to protecting the nation against bioterrorism; from 
increasing access to healthcare, to strengthening Medicare, are put 
forward with the simple goal of ensuring a safe and healthy America. I 
know this is a goal we all share, and with your support, we are 
committed to achieving it.

    Mr. Bilirakis. Right on 10 minutes. I am really not anxious 
to get into questions, though it seems like it today doesn't 
it? I will start. Mr. Secretary, the administration has 
requested that we find offsets for all new health care 
expenditures this year, and to pass and provide a payment bill 
in a budget neutral manner.
    At the same time, we will have to fix several very serious 
Medicaid and Medicare problems, including correcting the 
formula for setting physician reimbursement, and reducing some 
of the shortfalls for certain Medicaid providers.
    I ask, has the administration been able to identify any 
areas for potential savings that could be used to offset the 
costs of these very important initiatives. If they have, and a 
list is being compiled, when can we have that made available to 
    Mr. Thompson. Mr. Chairman, we have worked extremely hard 
on this, because we know it is a subject that a lot of 
individuals on this committee and throughout Congress are 
concerned about, as well as many providers.
    It is a very difficult question, and we have been working 
hard on it. We have come up with several suggestions, and we 
are responding to Chairman Thomas' letter that was sent to us a 
couple weeks ago.
    And we should have the final decisions made, and the final 
recommendations made, sometime this week. We expect to give 
that report to Chairman Thomas, I believe, sometime tomorrow.
    And then the rest of the members that have requested it, 
such as yourself, Mr. Chairman, will receive it, I hope, on 
Friday morning.
    Mr. Bilirakis. Friday morning? Okay.
    Mr. Thompson. And we want to work with you on it, and it is 
a whole list of recommendations on----
    Mr. Bilirakis. Are you open to suggestions?
    Mr. Thompson. We are open to all kinds of suggestions. We 
know that there is not any easy answer, and I want you to know 
that all providers are on the table, and that is what has to be 
done, because you have home help, and you have got outpatients, 
and you have got the health, and you also have the doctors and 
the outpatients.
    All of these together, and we have got recommendations on 
all of them, Mr. Chairman.
    Mr. Bilirakis. Mr. Secretary, given the many problems 
associated with the existing Physician Payment Formula, we have 
talked about this time and again, our committee on a bipartisan 
basis is committed to changing the payment structure 
legislatively to ensure that 5 percent cuts never happen again.
    I know that you are encouraging us to do this 
legislatively. I wonder, is the administration taking any steps 
to change that formula and to make suggestions in changes of 
that formula, and if you are, what might those steps be? Are 
you trying to address the issue?
    Mr. Thompson. We are trying to address the issue in total, 
and my response to Chairman Thomas is that what I want you to 
know is that any change is statutory and must be made by 
Congress. We can't do it administratively.
    We can make recommendations, but Congress will have to make 
the final decision on it.
    Mr. Bilirakis. All right. Are you making recommendations to 
Chairman Thomas? You have mentioned him 2 or 3 times already.
    Mr. Thompson. Well, he is the one that precipitated our 
action by sending us a letter with a whole list of questions 
that we are trying to respond to, and we hopefully are going to 
get that information to him sometime tomorrow afternoon.
    Mr. Bilirakis. Mr. Brown, Mr. Tauzin, Mr. Dingell, and I, 
have introduced a piece of legislation to make some changes.
    Mr. Thompson. I know you have.
    Mr. Bilirakis. If you have any suggestions regarding any of 
the changes that we propose to make, we certainly would 
appreciate hearing them.
    Mr. Thompson. I think the best way to handle that, Mr. 
Chairman, would be that as soon as this information is made 
public, that we have a working group to sit down and I will 
make my staff available at any time that your staff is 
available, and let's work on your proposal.
    And let's work on what Chairman Thomas of the Ways and 
Means Committee comes up with, and let's see if we can't 
develop a proposal that is suitable on a bipartisan basis that 
can pass both Houses of Congress.
    Mr. Bilirakis. Let me ask you, sir, about the upper payment 
limit issue, some States are getting a larger break in terms 
    Mr. Thompson. I don't think any State is getting a bigger 
break over another, on the upper payment limit. First off, 
under President Clinton, he put limits on the upper payment 
limits for nursing homes and for private hospitals, and the 
last remaining part of the equation was public hospitals OMB 
requested the Department of Health and Human Services to draft 
a rule for public hospitals.
    We drafted that rule, and that rule will go into effect on 
April 15 of this year, and it will put the public hospitals in 
the same position as private hospitals, and skilled nursing 
homes that were placed there under the Clinton Administration.
    And under that all States were treated the same, and if you 
had your proposal in, you received it. And I want you to know 
that somebody mentioned that Wisconsin was treated differently, 
and I want to point out it was not.
    And that Wisconsin was treated before I got here, and the 
amendment--Wisconsin does not have any public hospitals, and so 
it does not get any upper payment limits for public hospitals, 
only fur nursing homes.
    Mr. Bilirakis. Well, I am not referring to Wisconsin, but I 
am referring to some of the 7 and 8 year phase-in type of 
things. They are basically taking advantage, if you can call 
it, getting rewarded for more years for it.
    Mr. Ganske. Mr. Chairman, that was a statutory thing, and 
it was an amendment put in by Speaker Hastert, and it was 
before I got here that that passed and became the law. And I 
just want to point that out, that it is statutory, and several 
States lobbied for it.
    And Wisconsin, California, and Illinois were three, and I 
don't know that you can criticize anybody that was able to 
successfully get the Speaker to introduce it.
    Mr. Bilirakis. I won't say anything further in that regard, 
except to say that some of us are very unhappy about it.
    Mr. Thompson. And I think the power of this body is to pass 
legislation, and to put other States in the same position.
    Mr. Bilirakis. Thank you very much. Mr. Brown to inquire.
    Mr. Brown. Thank you, and thanks again, Mr. Secretary. The 
only increased Medicare provider funding in your budget that I 
can find is $3.4 billion for Medicare+Choice, and programs over 
the next 10 years. What goals do you hope to achieve with that 
$3.4 billion; more prescription drug coverage, or more reduced 
cost sharing? Where do you go with that?
    Mr. Thompson. Basically, as you know, Congressman Brown, 
the Medicare+Choice program has been reducing the number of 
coverages and the number of people.
    Last year, we lost a little over 500,000 and we are down to 
about 14.4 percent of the Medicare population covered by Medi-
care+Choice. And we felt that this was the only way that there 
was going to be able to stem that. In 90 percent of the cases, 
that reversal, because the individuals that had 
Medicare+Choice, are very satisfied with it.
    But the individual companies that are involved in Medi-
care+Choice cannot maintain it at the current reimbursement 
rates, and we felt that it was necessary to try and increase 
the rates and stem the tide of erosion of the coverage.
    Mr. Brown. There has been legislation offered, and 
bipartisan in some cases, to require that Medicare+Choice 
count, and that Medicare HMOs agree once a beneficiary is 
unenrolled that the Medicare+Choice plan must not for a period 
of 1, 2, or 3 years, must agree to not cut benefits in any way. 
Is that something that you would make part of this?
    Mr. Thompson. It is not part of this, Congressman, and the 
only--I am not opposed to that. The only caveat is that if a 
company is losing benefits that they are losing dollars, and is 
going to either go bankrupt or get out of the market.
    And it is pretty hard to continue to force them to keep 
    Mr. Brown. But are we getting any kind of assurances from 
these companies as we put in more money last year, and we were 
putting in this money now, are we getting any assurances from 
them that they will not cut services, or allow prescription 
drug coverage to atrophy, or whatever else might happen with 
managed care----
    Mr. Thompson. We do not have the legal authority to do so, 
but we jawbone very effectively and tried to make sure that 
none of the coverages are dropped. We do everything we possibly 
an, and we get on the telephone and talk to the insurance 
carriers, and do everything that we can to possibly keep them 
in the business. But that is about as far as we can go 
    Mr. Brown. Are you asking for more statutory authority?
    Mr. Thompson. At this point in time, no.
    Mr. Brown. I am concerned that-and we have done this 
before--that this Congress has put more money into provider 
funding for the 14.4 percent of beneficiaries. Does that mean 
85.6 percent beneficiaries don't get help that way?
    And that the $190 billion in your budget for--well, the 
required prescription drug coverage seems pretty inadequate if 
we are looking at the FEHBP and those calculations for the 
FEHBP, and to bring coverage to the level of FEHBP, and that 
Federal employees, and Members of Congress have would cost $750 
billion, what kind of prescription drug coverage do you see 
with this $190 billion, in light of the fact that our numbers 
that say half the FEHBP coverage for beneficiaries would need 
$750 billion?
    Mr. Thompson. These are figures from our actuaries at CMS, 
Congressman Brown, and we feel that you can deliver the 
beginning of prescription drug coverage. We know that this 
Congress last year in the budget bill put aside $300,000 
billion over 10 years.
    But the President and this administration feels very 
strongly that if you just do prescription drug coverage that it 
is going to be a lot more costly.
    But if you strengthen it and make some efficiencies, and 
allow for some cost sharing, you are going to be able to get by 
with $190 billion. My request of you--and I know that your 
passionate on this, is to work with you, and try and develop a 
figure, and try to develop a bipartisan Medicare proposal.
    And instead of eroding it, it strengthens it, and makes it 
financially suitable and financially solvent. This is the 
President's objective, and it's mine, and I know it is yours. I 
only hope we can set aside partisan politics, and get on with a 
bipartisan approach, and I want to work with you to accomplish 
    Mr. Brown. Well, we wold love to do that, but the problem 
is not you, but the President has put us in a box where he 
wants $590 billion more in tax cuts, and yet all you can offer 
is $190 billion for prescription drugs; when even Speaker 
Hastert has said $300 billion is what is necessary.
    And then I look at what happens with Medicare+Choice, where 
in 2001 when they get the extra billion dollars, that GAO found 
that 70 percent of those plans didn't use the money to improve 
    So how are we going to take care with the box that you have 
put us in, where the tax breaks are primarily for upper income 
people are putting us in a situation where we will have to 
choose either a generous, or even an adequate, and forget 
generous, prescription drug benefit, or it is tax breaks for 
the wealthiest Americans.
    Mr. Tauzin said we are not spending the money in a tax cut, 
and you can say it however you want it. But the fact is that it 
is a choice. We either do an FEHBP adequate generous level, or 
what the AARP has said, about $700 billion or whatever number 
you choose.
    But certainly adequate or maybe generous, or we do the tax 
cut and don't have this kind of money. I mean, I want to work 
with you, but how do we get out of this box?
    Mr. Bilirakis. A brief response to that, sir, because we 
have two votes on the floor.
    Mr. Thompson. First off, I don't want to put you in a box, 
and second off, Medicare+Choice, companies are losing money, 
and we wanted to keep them in the market because the individual 
subscribers that have them believe in them, and like their 
coverage, and like their programs.
    I want to be able to maintain that, and that is why we are 
trying to stabilize that. In regards to Medicare, $190 billion, 
I think that is a giant first step, and I would like to work 
with you, and I think that just instead of complaining about 
the dollars--and I can understand your position--I would like 
to be able to say why don't we start.
    You know, instead of saying 750, 300, 190, let's start 
looking at the whole subject, the Medicare Program, as well as 
including the prescription drug. I am passionate about it, and 
I know that you are.
    And I would like to be able to come up with a Medicare 
strengthened bill with catastrophic coverage, with a 
prescription drug coverage, and also do something about the 
first dollar coverage, and be able to do something together on 
a bipartisan basis, but we can't do it unless we start, and I 
am willing to start.
    Mr. Bilirakis. All right. The Chair will recess. We have a 
couple of votes on the floor, and as soon as those votes are 
over, we will get started again.
    [Brief recess.]
    Mr. Bilirakis. The Chair will yield to Mr. Pallone to 
    Mr. Pallone. Thank you, Mr. Chairman. Mr. Secretary, just 
as sort of a forewarning, I want to ask about dietary 
supplements, and I also want to ask about American Indians. So 
if we get too far into it, I may switch to the other one just 
so I can get to it if you don't mind.
    On the dietary supplement issue, when you were here a year 
ago, I had asked you a question about the good manufacturing 
practices, and whether we were going to see those regulations 
put into place.
    And at the time, I believe you said within the next few 
months, by June or so, and over a year has passed, and they 
still have not been put into place. And I know that Senator 
Harkin over in the other body put in $4 million last year for 
the adverse event reporting.
    In other words, if there had been incidents where there had 
been problems with dietary supplements, that they would be 
reported. And supposedly we were having the adverse event 
reporting and $4 million spent on that, and then the FDA was 
supposed to within 15 days publish the GMPs.
    But as far as I know, none of this gas happened, and I 
would just ask what is happening? Has that $4 million been 
accepted by the FDA, and what are they doing about adverse 
reporting, and when are these GMPs going to be published, 
because they are obviously late?
    Mr. Hubbard. I am Bill Hubbard from the FDA, Mr. Pallone. 
On the GMPs, those regulations have been drafted, and they are 
being discussed with the new deputy commissioner at the FDA, 
who has just arrived. And he is looking at them and discussing 
them with the Secretary's office.
    So they should be done soon we hope; and on the adverse 
event, the money has come to us, and we are setting a stronger 
adverse reaction reporting system for dietary supplements.
    And we will see results from that as the year flows 
    Mr. Pallone. Again, I am not trying to be difficult, but it 
is pretty much the same thing that we heard a year ago, and a 
year has passed, and we haven't seen any progress to my 
    So I would just stress again how important it is to move 
quickly on that, because as you know, we do have the incidents 
in the media where there are things reported and there are some 
    And I think that those good manufacturers who really are 
out there doing a good job would like to see these things 
    Mr. Hubbard. They would. You are absolutely correct, 
Congressman, and there has been a lot of discussion and a lot 
of controversy developing internally, and we have not had an 
FDA commissioner, and we now have an individual that I think is 
outstanding, and Dr. Crawford and I can assure you that we will 
move very quickly on this thing. And I will keep you personally 
informed myself.
    Mr. Pallone. I appreciate that, and let me move on to the 
Native American issue. A couple of things. You mention in your 
speech about the Homeland Security Funding, and the Anti-
Bioterrorism Funding, and I think there is $3.1 billion for 
homeland security, and $4.3 for Anti-Bioterrorism.
    The tribes have been very concerned because they don't know 
if they can access either pot of money.
    Mr. Thompson. Yes, they can.
    Mr. Pallone. Okay. If you could just comment on that, 
because there is no specific language about it in the 
    Mr. Thompson. Well, what we are doing with the bio-
terrorism money is that we have got $1.1 billion to get out. 
The President signed the bill on January 10, and 21 days later 
we had the letters out to all the Governors, and we have 
already sent out 20 percent of the money. And 10 percent, which 
is to set up their planning, and----
    Mr. Pallone. Mr. Secretary, none of those letters went to 
tribal governments, and so they are concerned about the----
    Mr. Thompson. But I talked to the tribal governments at 
their tribe----
    Mr. Pallone. NCAI?
    Mr. Thompson. Yes. I talked to them and they gave me an 
award for----
    Mr. Pallone. It is always helpful when they give you an 
    Mr. Thompson. Yes. So I talked to them at that point, and 
received it, and told them that I want them involved.
    Mr. Pallone. Well, maybe there is some way to notify?
    Mr. Thompson. And we went across the country, Congressman 
Pallone, and we set up informational hearings, and we invited 
all individuals involved. And if you want me to specifically 
send out letters to them, I would be more than happy to. I 
contacted them at the conference, at the Congress.
    Mr. Pallone. I would appreciate it if some effort could be 
made in a proactive way to contact them and say that is 
    Mr. Thompson. I would be more than happy to do it. I want 
them involved.
    Mr. Pallone. All right. And then the last thin--and I want 
to see how much time is left----
    Mr. Thompson. What we are really trying to do with this 
bioterrorism money, Congressman, is really trying to build a 
strong local and State public health system. We have not done 
that in America.
    Mr. Pallone. Oh, I agree.
    Mr. Thompson. And what we are doing is we are sending out 
templates from what the best programs are in communications to 
the State Health Departments. We figure it has got to be bought 
into by the Government and the State Health Departments.
    But we are demanding that those individuals go out and find 
out from the tribes and from the----
    Mr. Pallone. But you know how it is, Mr. Secretary, and I 
don't have to tell you as you were the Governor of Wisconsin, 
    Mr. Thompson. And I had 11 tribes.
    Mr. Pallone. [continuing] they don't deal directly with----
    Mr. Thompson. I appreciate the advice and we will do a 
better job.
    Mr. Pallone. One more quick question.
    Mr. Bilirakis. If it is a quick question and quick answer, 
and if there is no objection to it.
    Mr. Pallone. I just wanted to ask you that you mentioned 
diabetes in a major way, and about the new initiatives in your 
    Mr. Thompson. Yes.
    Mr. Pallone. And obviously you know that is a huge problem 
for Native Americans. How is this new initiative going to help 
them or have they been taken into consideration in that?
    Mr. Bilirakis. Can you do that in writing, Mr. Secretary?
    Mr. Thompson. Yes.
    [The following was received for the record:]

    The Healthy Communities Innovation Initiative is a proposed 
demonstration grant program to create healthy environments and 
to improve health outcomes in areas where asthma, diabetes, and 
obesity associated morbidity and mortality rates are high. The 
program will be administered by HRSA and be modeled after the 
successful Healthy Start community-based demonstration program. 
Grants will be awarded competitively to public or nonprofit 
private organizations, including tribal organizations, applying 
as or on behalf of a community-based consortium. Therefore, 
tribal organizations will be eligible to compete for these 
grants to focus on innovative community-level efforts to 
prevent and treat diabetes, obesity and asthma among Native 
Americans. In addition, the Indian Health Service receives $100 
million annually, specifically for the prevention and treatment 
of diabetes among Americans and Alaska Natives. Funds are 
distributed to 318 diabetes programs, primarily located in 
Indian country, but including 33 programs in urban areas.

    Mr. Pallone. That would be fine.
    Mr. Thompson. We are doing a lot with the Native American 
    Mr. Pallone. You can get back to me in writing. Thank you.
    Mr. Bilirakis. Mr. Greenwood.
    Mr. Thompson. We are doing a lot on it.
    Mr. Greenwood. Thank you, Mr. Chairman.
    Mr. Thompson. Congressman, how are you?
    Mr. Greenwood. I'm fine, Mr. Secretary. The Oversight and 
Investigations Subcommittee has been looking for some time at 
the question of importation of drugs. It is a thorny 
complicated question, because it has multi-facets, and it has 
to do with people bringing prescriptions in from Canada and 
    Mr. Thompson. It is a serious problem.
    Mr. Greenwood. But that is how we think of it for the most 
part, but what we did is we went out to Dulles Airport, and we 
had an airplane come in filled with passengers, and in the 
belly of that plane was all of its freight.
    And we watched as the freight was put through x-ray 
machines, and then items that looked like they might be drugs 
were pulled out and opened up, and inspected. And what we 
discovered was a witches' brew of legal and illegal drugs.
    Of course, no prescriptions involved in these drugs coming 
from all over the world. And it was frightening to think that 
consumers could go on the internet, for instance, and think 
that they were ordering some perfectly approved and inspected 
product from around the corner, when in fact it might come from 
halfway around the world.
    And it might be bogus, and it might be tainted, and it 
might make them sick. We had parents of a young man who died 
from drugs that he had acquired over the internet. I would be 
interested in your views on what you think can be done about 
this to protect people from these dangerous products.
    Mr. Thompson. Very little right now, Congressman, and I 
want to compliment you on your leadership in this effort.
    Dr. Bill Hubbard, who is from the FDA, was just down in 
Miami, and this was one that just came in by one individual. 
There were a thousand that day that came in, and this one had 
all different kinds of drugs and everything like this.
    The Customs Office wants to know what they can do, and so 
Dr. Hubbard went down there, and he brought this back. Now, 
what he has to do under the law is he has to contact the 
individual who applied for this thing, and requested it, and 
ask that person if they want a hearing.
    That is all that we can do under the law. Usually when we 
do this, they don't want a hearing, and then we can dispose of 
it. But if they want a hearing, then we have to have a hearing, 
and they have to justify why they are doing this.
    It is a serious problem. We would like to be able to have--
the Customs Office would like to be able to have the 
opportunity to return these items, and there is no question in 
my mind why we should not have that authority.
    Right now when we take this, we have to get back a letter 
within 90 days to the person that applied for it. But there is 
nothing we can do. What is happening is that we are sure that 
this individual is reselling it.
    We don't know if they are packaged right, and we don't know 
if they are counterfeits, and we don't know the results of 
testings. There are syringes in here, and just everything that 
you can well imagine; a lot of valium, and just everything.
    And that was just one and there were a thousand that day 
that came in.
    Mr. Greenwood. And what we discovered that day was that 
even to the extent--in most places these packages are never 
even looked at.
    Mr. Thompson. That's right.
    Mr. Greenwood. They go right to the person to whom they are 
    Mr. Thompson. There is no law against it.
    Mr. Greenwood. And to some extent, they may or may not be 
inspected, but looked at through an x-ray machine. And then 
when they do find a bucket like that, they will toss it into a 
cardboard box in a side room and wait for the FDA to arrive.
    And someone from the FDA may come by once a week for an 
hour and look at a few things. So it is really just frightening 
to think that these kinds of products could get into the bodies 
of Americans without any protection.
    Mr. Thompson. Congressman, you have got to realize that we 
only had 115 inspectors until this year, and thanks to you, and 
thanks to the members of this committee on a bipartisan basis, 
you gave us $98 million to hire more inspectors.
    We will have an additional 400 inspectors on the ports of 
entry and at the airports by the end of this year, and we only 
had 150 up until this year. So hopefully we will be able to do 
a much better job, but we should have at least the authority to 
reject these, and be able to send them back to the 
manufacturer, instead of sending them on.
    Mr. Greenwood. Let me get to another issue very quickly. It 
has to do with mental health, and it has to do with consumer-
run services. I am informed that the budget takes the little 
tiny $2 million that is available for consumers, and consumer/
supporter technical assistance centers, and eliminates it.
    What this is about is the ability to try to bring people 
into empowerment who have suffered mental health problems, 
either individually or within their families, and this little 
$2 million was helping to provide technical assistance that 
they could use to be advocates.
    I would hope that we could have your support in restoring 
that, and that $2 million is not a lot of money, but it is 
pretty important money.
    Mr. Thompson. We would be more than happy to work with you. 
As you know, I have appreciated your counsel on many issues 
before, and I will continue to work with you on them.
    Mr. Bilirakis. I wondered if we could ask Mr. Hubbard what 
was the attempt to transport drugs into the country? Were they 
in suitcases or----
    Mr. Hubbard. No, just in a package.
    Mr. Bilirakis. Just like that?
    Mr. Hubbard. Here, show him the package.
    Mr. Bilirakis. Carrying it? Yes, I saw that.
    Mr. Hubbard. That's how it came in.
    Mr. Brown. Would the gentleman yield for a moment?
    Mr. Bilirakis. I would be glad to yield.
    Mr. Brown. Do you have the same concerns, Mr. Secretary, 
about Canada, to the same degree?
    Mr. Thompson. Well, the problem that we have, Congressman 
Brown, is that we don't have problems with people going into 
Canada. That is not the concern. But what we are concerned 
about is if Canada--other countries will send them through 
Canada, and then get into the United States through other 
    Mr. Brown. Canada will allow those drugs to come in? I am a 
little concerned about the website on this issue that the FDA 
has. My understanding is that you withdrew the language that 
was there before, and sort of instructing us on what to do.
    I take a bus to Canada every couple of months. It is about 
an hour or 2 drive from where I live, and we are concerned 
about the language on what in fact you all might do.
    I don't think people are worried that you are going to 
board the bus and the FDA is going to be there or anything like 
that, and arrest these people, unless they stop and gamble in 
Windsor, and buy duty-free alcohol at the border, but that is a 
whole other issue.
    But I guess we are looking for a little more clarity from 
them on this whole issue.
    Mr. Thompson. The problem his not been fully defined yet. 
We are looking at it, but we want to work with you, and we want 
to work with Congressman Greenwood, who has taken a leadership 
role in this.
    I have asked Les Crawford, who is the Acting Commissioner 
right now, to really take an in-depth look at this and make 
some recommendations so that I can bring them back to you.
    And bring them back to this committee, in the hope that we 
can come up jointly with some good legislation. I am just 
fearful that a lot of our elderly citizens are going to be 
duped into buying something that may be counterfeit, and that 
may be harmful to them. And this is a big concern of mine.
    Mr. Brown. Do we know enough about--do we in this country, 
our government officials, and your agency, know enough about 
how the Canadians process imported drugs?
    Mr. Thompson. I think we do.
    Mr. Brown. And if you are satisfied with the way that they 
import drugs, then there should not be a problem with our 
importing them from Canada should there?
    Mr. Thompson. We are certainly satisfied with the Canadian 
laws and the Canadian manufacturing processes and practices. We 
are concerned about other countries. In some countries 
according to my experts at the FDA, 40 percent of the drugs 
coming out of certain countries are counterfeit.
    We are concerned about those kinds of drugs getting into 
our market in the United States.
    Mr. Brown. As you should be.
    Mr. Thompson. And causing health concerns, and even death 
in some cases, and that is our big problem.
    Mr. Brown. Thank you, Mr. Chairman.
    Mr. Bilirakis. Dr. Ganske to inquire.
    Mr. Ganske. Thank you very much. Mr. Secretary, what we are 
dealing with here is tetracycline, a common antibiotic. Now, 
what we are really dealing with is the fact that we have a 
protection measure that gives the drug companies in this 
country protection against overseas competition for drugs that 
are made and manufactured in the United States and shipped 
    And Congress overwhelmingly passed a law a year or 2 ago 
saying that we should allow for the reimportation of those 
drugs that are made and manufactured in the United States.
    There was a provision put on the bill that said they could 
only come back in if they were then relabeled by the drug 
companies so that they would get to see who buys them 
wholesale, and have basically a bottleneck.
    I think that needs to be fixed. Now, I agree with you that 
you need to have appropriate inspection. It shouldn't be 
difficult to determine who are our honest wholesalers. Geneva 
World, and Farma World, in Geneva, Switzerland, for instance 
are they okay?
    And I am more than happy to support initiatives, and I have 
in the past, to increase the funding for the FDA to do that 
type of inspection. But I would point out that this isn't a 
potential problem just with drugs coming into the country.
    How do you know, or how does any person know that the drug 
they are getting from their pharmacist is the real thing? How 
often does the FDA inspect the drugs that are in this country?
    We have had well-documented examples of dilution, or 
substitution, for people on expensive drugs in this country. So 
I think it is a bit of a red herring to bring up a box that 
some individual citizen has brought into this country for 
    And what we are really dealing with here is the fact that 
the pharmaceutical companies do not want to see overseas 
competition. I am sure that you would like to see a global 
market on this, because American citizens are subsidizing the 
rest of the world, in terms of our drug costs.
    I mean, I can bring charts here that show that drugs made 
and manufactured here cost twice as much for the same drugs 
that are then sent overseas. And our citizens are very, very 
unhappy about this.
    So I will tell you what. If you work with me, in terms of 
setting up protocols, so that we can implement the law that 
Congress has passed, I will work with you to make sure that you 
get the appropriate funding for the inspection.
    Mr. Thompson. Congressman, as you know, last year I came up 
here and said, you know, I have a serious problem in the FDA. I 
have 715 inspectors totally in America. We have to inspect 
56,000 places across America.
    We have 150 individuals that inspect incoming things from 
our ports and our airports, 150. And I said we are only 
inspecting less than 1 percent of all the food that is coming 
into the United States.
    And I said that I am really concerned about that. I asked 
you, and I asked this committee on a bipartisan basis, to give 
us more inspectors. We requested $61 million more, and this 
Congress in their wisdom, and I thank you for it, gave us $98 
million, and we are going to now be able to go up to 673 
additional inspectors and personnel that are going to help us 
do the job.
    I want to work with you, and the FDA has been under-funded 
for a long time in this arena, and we need to do more. This is 
not a red herring, and I don't intend it to be a red herring.
    This is 1 day in which a thousand of these packages came 
into America, and we just took one. There were 999 that were 
delivered, and only one package was brought up here just to 
show that there is a problem.
    I want to develop protocols, and I want to develop an 
international market, and I want to work with you to accomplish 
that, and I will make my staff, and me myself personally, 
involved in this thing to see if we can't come up with a 
successful solution.
    I do not want to in any way inhibit that elderly citizen 
from being able to purchase drugs wherever he or she can, and 
that as long as I have some sort of security and protection, 
then the remedies will be addressed by the medicine and not in 
a counterfeit fashion.
    Mr. Ganske. Well, do you think that the funding that you 
are asking for or that is in the budget for this is adequate?
    Mr. Thompson. I certainly think that what the Congress did 
in the supplemental appropriation last year, and giving us the 
$98 million, was a giant step forward. Am I totally satisfied? 
No, I am not.
    Mr. Ganske. How much more would you like to see?
    Mr. Thompson. Well, I think that is something that we need 
to sit down and discuss, and I need to make sure that I contact 
    Mr. Ganske. Thank you. Thank you, Mr. Secretary.
    Mr. Bilirakis. Mr. Dingell to inquire.
    Mr. Dingell. Mr. Chairman, I thank you. Mr. Secretary, I am 
aware of the travails you confront, and I want to commend my 
friend, Dr. Ganske, for the questions. Food and Drug does not 
have enough people to address domestic problems?
    Mr. Thompson. They don't.
    Mr. Dingell. And they don't have enough money to address 
imports, and they don't have enough money or personnel to 
address almost any of their functions. And yet you can't get 
the money out of OMB, and this is not a new thing, as was the 
case in other administrations.
    But you are not able to levy the kind of charges that you 
do for prescription pharmaceutical clearances, which does work, 
and which has given you speedy and thorough, and effective 
clearance of new drug applications?
    Mr. Thompson. That's true.
    Mr. Dingell. I wonder when the administration and the OMB 
are going to recognize that the protection of the American 
public from imports, and from other things, like devices and so 
forth, is only going to be achieved either by putting out a lot 
more money, or by bringing forward a system of user fees and 
charges for the services that the Food and Drug gives.
    Mr. Thompson. Well, Congressman, as you know, you were very 
instrumental in the supplemental appropriation on food safety, 
and I thank you for your leadership. You and I have personally 
discussed this on many occasions, and I am talking strictly as 
myself, Tommy Thompson.
    I think we should go to the user fee route, and I would 
support it. I know that I am probably talking strictly to 
yourself and myself on this issue, and we probably will not be 
able to pass it.
    I don't have a vote and you do, but I certainly think it is 
the right thing to do, and I think we certainly have to do 
something. You are absolutely correct that we are looking at 
inspecting less than 1 percent of the food coming into America.
    We are doing a woefully inadequate job as it relates to the 
inspection of drugs coming into America, and we need to do a 
better job. But when you only have 750 inspectors, and you have 
56,000, and you have over 300 ports of entry, it is impossible 
to do it with 750 individuals, no matter if they were all as 
capable as you were, Mr. Dingell, when you went through the 
    Mr. Dingell. I would not stand in favor of either 
effectiveness or courtesy. However, the matter is behind us, 
and I will observe that I have had better times in dentist 
    Mr. Secretary, these questions here are asked with a great 
deal of respect and affection for you, and I appreciate what 
you have just said, and I hope that I have not placed you in 
harm's way. Mr. Secretary, States are required to cover 
pregnant women in Medicaid today up to 133 percent of poverty.
    This coverage includes care for women, and care for the 
unborn child. States can cover women above 133 percent of 
poverty. In fact, 39 States already cover women above 133 
percent; isn't that true?
    Mr. Thompson. I am almost certain that it is, yes.
    Mr. Dingell. Now, Mr. Secretary, I believe in California 
that they cover pregnant women up to 300 percent of poverty; is 
that correct?
    Mr. Thompson. If you have got the figures there, I never 
would question you, Congressman Dingell.
    Mr. Dingell. I got it from the staff and so we can both 
have faith in it. Mr. Secretary, States do not need then to use 
a waiver to cover pregnant women above 133 percent.
    Section 1902(r) of the Social Security Act allows States to 
waive income and assets requirements to raise the coverage 
levels for pregnant women in Medicaid; isn't that right?
    Mr. Thompson. That's correct.
    Mr. Dingell. So I am coming around, Mr. Secretary----
    Mr. Thompson. I know what you are coming around to, sir. 
You are trying to lead me into a trap, Congressman.
    Mr. Dingell. Mr. Secretary, I would never put you in a 
trap. I just am trying to ask you a question. I am trying to 
understand that if we have this situation, why is it necessary 
for us to go the waiver route when the practical result of the 
waiver route is to require cutbacks in benefits to other 
persons who have need, while you expand the coverage in other 
    The net result is that no significant increase in overall 
care, but a shift in the kind of care and who would be eligible 
recipients of care because the waiver route is taken.
    Mr. Thompson. Well, as you probably know, the waiver route 
has been very successful.
    Mr. Dingell. I have some worries.
    Mr. Thompson. What are your worries?
    Mr. Dingell. Well, in Utah, the waiver route in fact has 
caused significant reduction in benefits, while at the same 
time causing increases in benefits in other areas. And I don't 
have enough time to go into exactly----
    Mr. Thompson. Can I respond?
    Mr. Dingell. Of course. Sure.
    Mr. Thompson. We have issued 1,506 waivers in the past 
year, and we have been able to give 1.8 million Americans 
insurance coverage under the waiver process that would not have 
    We have been able to expand benefits by 4.5 million 
individuals that expanded benefits. Utah wanted to be able to 
develop a plan to reduce the benefits for some classifications.
    Mr. Dingell. Now you are hitting the point.
    Mr. Thompson. In order to expand the coverage, they reduced 
the coverage by 14,000 to what the State employees are 
receiving under their insurance coverage in order to cover an 
additional 35,000 individuals.
    I looked at the tradeoff and since everybody, even the ones 
that were being reduced, were still getting the same amount of 
health insurance coverage that the State employees in the State 
of Utah were receiving, I thought it was a good tradeoff to get 
three times as many more people that were not covered by 
insurance covered.
    It was also supported by individuals in the Congress, and 
in the U.S. Senate from that State, and from the Governor, who 
has done an excellent job of expanding health insurance 
benefits in that State, sir.
    Mr. Dingell. I guess my time is up.
    Mr. Bilirakis. Mrs. Wilson.
    Mrs. Wilson. Thank you, Mr. Chairman, and Mr. Secretary, I 
am very pleased to have you here to talk about what you are 
doing in Health and Human Services. I particularly wanted to 
commend the emphasis in your budget on the community health 
centers, bioterrorism preparedness, and the health research, 
which has been mentioned by others here this morning.
    I wanted to ask you about the State Children's Health 
Insurance Program, S-CHIP. In your budget, and as you 
previously announced, your intention to try to continue to 
extend that program and the State's continued access to it.
    And it has been an important program for the expansion of 
health care benefits for children in many States. But I am 
concerned though that unless there is more flexibility 
associated with that program that we may end up as New Mexico 
is, turning money back in to S-CHIP, close to $200 million, at 
simultaneously because of the budget crunch in the State, 
reducing the access of children to Medicaid funds because of a 
fairly strict requirement in the program for maintenance of 
level of effort.
    In New Mexico, we have 95,000 children who are less than 
185 percent of poverty, and because they were already eligible 
for Medicaid, we cannot use S-CHIP funds for those children. If 
you go up to 235 percent of poverty, there are only 6,000 more 
kids that are in that range.
    So we have had very little flexibility from your 
predecessor on what we can use those Federal funds for, and 
with a State with very high levels of children in poverty, we 
really encourage you to work with us and what flexibility we 
can use so that we don't end up reverting funds while we are 
cutting benefits.
    Mr. Thompson. Congresswoman, you are absolutely correct, 
and we want to work with you. First, let me quickly point out 
that we put in a model waiver for this particular program for 
    Second, the President has said that the $3.2 billion that 
could have been reverted back to the Treasury on S-CHIP is not 
going to. It is back in the budget so that the States can still 
use it.
    So New Mexico will not have to turn back that $200 million 
that you were talking about. The third thing is that I started 
a program when I was in Wisconsin to allow low income parents 
to be able to sign up with S-CHIP and got a waiver to do it.
    And I started that program, and as a result of that 
program, other States have followed through; Massachusetts, New 
Jersey, Delaware, New York, Arizona, and California. And we 
have put in a model waiver so that other States, and hopefully 
New Mexico would take advantage of that model waiver.
    And I think it would probably solve some, if not all, of 
your problems.
    Mrs. Wilson. We would like to work with you on that, 
because our----
    Mr. Thompson. I would love to.
    Mrs. Wilson. [continuing] waivers have not been approved, 
and we have not been able to have access to those funds. The 
State is now considering reducing Medicaid eligibility for 
children, which will potentially--we may have a situation where 
we have 6,000 children between 185 and 235 percent of poverty 
who have great benefits, while we lose 46,000 poorer children 
who will no longer have health coverage because of the anomaly 
in the law that says that you cannot--if you were at 185 
percent of poverty when you started out, you cannot use any of 
this money for those children who were already eligible for 
    Mr. Thompson. If we can construct a waiver to help you, and 
we will not be in the violation of the law, we will do that.
    Mrs. Wilson. And if we need to change the law, I think we 
need to recognize that the current situation with the States is 
not a circumstance where they are unwilling to continue the 
level of effort. It is a financial crunch caused by a 
recession, and we need to take care of those who need help the 
    Mr. Thompson. I could not agree with you more, and that's 
why the President has put forth in his budget provisions that 
the $3.2 billion, which even as you know certainly could have 
been used by the Federal Government for other programs, said, 
no, this is the right thing to do, and leave it in the States, 
and allow the States to be able to develop their S-CHIP 
    We want to be able to cover these children. We have found, 
however, that the best way to cover children is to allow the 
parents to also sign up. Then they are much more apt to bring 
their children and to sign up for the program.
    And that is what the model waiver does, and I want to work 
with you, and if we need to change the law, we will tell you 
that, and will be more than happy to try to attempt to support 
you in getting that accomplished.
    Mrs. Wilson. I appreciate that, because we are in a real 
    Mr. Thompson. The S-CHIP program is a great program and 
let's use it. I mean, we have got the money there and let's 
maximize the use, and let's get as many people covered as 
possible, and that is going back to Congressman Dingell's 
    We were able to use that model waiver to allow for 1.8 
million Americans this year to be covered by health insurance.
    Mrs. Wilson. Thank you, Mr. Chairman.
    Mr. Bilirakis. We will also have the opportunity to raise 
questions in writing to the Secretary. I understand that you do 
have to leave at one o'clock?
    Mr. Thompson. Yes, I do.
    Mr. Bilirakis. Okay. Dr. Norwood to inquire.
    Mr. Norwood. Thank you, Mr. Chairman. Mr. Secretary, the 
administration's budget included over $5 billion in savings 
from Medicare and AWP, and based on the assumption that you 
would fix the problem administratively if Congress actually 
failed to act.
    Mr. Thompson. I would much rather have you act, Mr. 
    Mr. Norwood. Well, I think we should, too, and in the 
proposal developed by the committee to fix this AWP problem, we 
also included several provisions that would increase physician 
reimbursement to make up for the loss of the drug revenues.
    Would you be precluded from making that similar increase to 
provide a reimbursement absent specific legislative authority?
    Mr. Thompson. It is our understanding that we do not have 
the authority, in fact, to assign it to the physicians. We know 
that we don't have the authority to do that. Second, there is 
some question whether administratively we have the authority on 
    Mr. Norwood. Well, I am actually trying to make the point 
to this committee that we need to fix this problem, and not 
leave it up to you to have to fix the problem.
    Second, because I know that time is running out on us, the 
President's budget allows for $4 billion for Medicare+Choice 
plans. A lot of us have difficulty with that. And in a 
situation where the rural fee for service provider is seeing 
Medicare patients, and have nothing to do basically with 
Medicare+Choice plans.
    And we are shorting that group $1.25 billion in the 5.4 
percent cut. There are a number of Members of Congress who 
don't understand that inequity, and why we would so desperately 
need to put $4 billion into Medicare+Choice, which I would 
agree is underfunded, too.
    But at the same time, and in the same year, and in the same 
budget, allow a decrease of 5.4 percent, which to tell you the 
truth, Mr. Secretary, what we are talking about is a cut below 
what we already pay, which is a round cost.
    Why couldn't since we have to be budget neutral here, why 
couldn't we share the wealth a little bit and just give the 
Medicare+Choice $2.75 billion, and put the $1.25 billion into 
the fee for service plans and keep these people from dropping 
out of the plans?
    Mr. Thompson. Congressman, you have the power and the 
authority to do that. We look at it in this situation under 
Medicare+Choice right now, 14.4 percent of the Medicare 
recipients are in Medicare+Choice plans. Last year, we lost 
550,000 more individuals because the companies could not make a 
living or make a profit, and they pulled back.
    Mr. Norwood. But you didn't actually lose them. What they 
did is they dropped out of that managed care plan.
    Mr. Thompson. And went into fee for service.
    Mr. Norwood. And they still had health care.
    Mr. Thompson. Yes.
    Mr. Norwood. My concern is about not having health care 
because the rural doc can't survive.
    Mr. Thompson. And that is because of the 5.4, but that is 
also the law that was passed in this Congress in 1998 and 1999, 
and we have to change the law. CMS can only implement what the 
law says as you know.
    Mr. Norwood. I understand that and that is clear to me, but 
the rules that are being given to us, even though we will 
change the law, means one or two things. We either have to be 
budget neutral in the entire budget.
    Mr. Thompson. Right.
    Mr. Norwood. Which is totally impractical to be budget 
neutral just within your budget. I am just telling you that we 
won't get there. Or we have to put it in the supplemental, 
because some of us think that it is an emergency, and to keep 
the doctors out there treating over 65.
    Mr. Thompson. It is very serious, and is something that we 
are very concerned with, and that's why we are working with 
Congressman Thomas and this committee, and the Ways and Means 
Committee, to make recommendations, and give this Congress a 
lot of options, in which they can look at and review.
    Hopefully there will be some in there that will be able to 
be supported on a bipartisan basis.
    Mr. Norwood. Well, I would ask the administration to give 
us a signal and we can put it in the supplemental, and that 
will solve that. Let me thank you on--and this is the last 
subject, Mr. Chairman--your work on privacy. You and I talked 
about this.
    Mr. Thompson. Many times, and I appreciate your concerns.
    Mr. Norwood. Chairman Tauzin brought it up today, and I 
just want to say for the record that it is absolutely critical, 
unless you want to waste millions, and millions, and millions 
of health care dollars.
    Mr. Thompson. You are absolutely correct.
    Mr. Norwood. And you can give us the fix for that.
    Mr. Thompson. I am happy to be able to report that 
yesterday I signed the transmittal letter to OMB on these 
particular things. I am not at liberty under the law to discuss 
them until we publish them, but hopefully we will be going to 
the Federal Register relatively soon with recommendations, and 
I would love to have the opportunity to come up and discuss our 
changes with you.
    Mr. Norwood. Well, Mr. Chairman, I hope that you will make 
that happen, and that then gives us a comment period; is that 
    Mr. Thompson. That is correct.
    Mr. Norwood. Well, time is of the essence.
    Mr. Thompson. It is.
    Mr. Norwood. And people get nervous, and they start 
wondering will I be able to obey the law, and what is the law.
    Mr. Thompson. And you are absolutely right. And we want to 
make sure in the areas of research and consent that doctors and 
health providers are able to continue to do their business, and 
be able to do it in a practical way.
    Mr. Norwood. The HHS Secretary was one heck of a job before 
9-11, and it is an unbelievable job now, and I really sincerely 
thank you for what you are doing.
    Mr. Thompson. The Governorship of Wisconsin never looked 
    Mr. Bilirakis. I would like to ask for unanimous consent to 
allow all members to submit written questions to the Secretary, 
and we will keep the record open for 5 days, and without 
objection, if Mr. Ganske has a quick question, and not a 
comment, but a quick question that requires a quick answer, we 
will allow it.
    Mr. Ganske. The Secretary may want to look into that box 
there. There may be a medicine in there that would help you 
with your job.
    Mr. Thompson. Which one.
    Mr. Bilirakis. Thank you, Mr. Secretary. Thank you so much 
for your time.
    Mr. Thompson. Thank you, Congressman Bilirakis, and 
Congressman Brown, thank you.
    Mr. Bilirakis. The subcommittee is adjourned.
    [Whereupon, at 1 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

 Responses for the Record of Hon. Tommy Thompson, Secretary of Health 
                           and Human Services


    Question: It is my understanding that HHS has arranged with the 
Department of Defense to obtain over 218,00 doses of the existing 
anthrax vaccine, enough for post-exposure immunization of 73,000 
individuals and pre-exposure immunization of about 36,000 ``high risk 
workers,'' or some combination thereof. Is your Department examining 
the need for increased production of the anthrax vaccine at a second 
manufacturing site to meet civilian bioterrorism preparedness needs 
and/or as an insurance policy against a catastrophe or production 
stoppage at the current sole production site?
    Answer: The Department of Defense (DOD) is negotiating with BioPort 
on behalf of both DOD and the Department of Health and Human Services 
for the purchase of Anthrax Vaccine Adsorbed, (BioThrax TM). 
Secretary Thompson has requested the purchase of 0.5 million doses in 
FY02, 1.0 million in FY03 and 1.5 million in FY04 to meet civilian 
biopreparedness needs.
    We have carefully examined the option of increasing production of 
AVA at a second production facility site and have instead opted to 
pursue the aggressive development of a second generation anthrax 
vaccine consisting of a highly purified recombinant component of 
Bacillus anthracis, the bacterium that causes anthrax. Abundant 
preclinical evidence is available to indicate that immunization with 
the recombinant protective antigen (rPA) of B. anthracis generates 
long-lasting protective immunity against inhalation spore challenge in 
animal models of the disease. At present, NIH is planning Phase 1 
safety and immunogenicity trials in humans for rPA, and has committed 
significant funds for the accelerated development and manufacturing of 
this highly promising vaccine candidate. We are confident that 
accelerated development and production of an improved vaccine will 
offer significant advantages over subsidizing an additional production 
site for AVA.


    Question (1): Congress made it quite clear when it passed BIPA that 
the so-called ``self-injectible'' provision was intended in part, to 
restore coverage for those thousands of Medicare beneficiaries who, up 
until 1997, had coverage and then abruptly lost that coverage due to a 
change announced through a HCFA policy memorandum. It has now been over 
a year since this direction to CMS was enacted and no action has been 
taken. While I understand CMS's stated concern of ensuring that the 
implementation of the provision does not have ``unintended 
consequences'' for beneficiaries or the trust fund, do you agree that 
CMS should at least restore coverage for those products that were 
covered until 1997?
    Answer (1): The specific drugs paid for under CMS's policy varied 
across carriers both before and after the policy clarification that was 
issued in 1997. CMS's goal now is to implement the BIPA provision to be 
used by carriers. Considering that BIPA changed the statutory standard 
for which drugs are to be paid for when delivered incident to a 
physician's service, we believe the particular drugs that will be paid 
for under this provision should be determined by the criteria in the 
new process, regardless of the coverage by carriers prior to 1997.
    Question (2): As you know, I have a continuing interest in 
establishing effective and workable standards for protecting the 
confidentiality of patient information. As the Department will be 
issuing modifications to the HHS privacy regulation through new 
rulemaking, I believe the Department should issue these changes 
    I am concerned that the research provisions of the final rule could 
disrupt vital health research efforts. Over 140 academic research 
institutions, medical specialty doctors, hospitals and others recently 
wrote you and warned of the potential problems caused by the rule. 
``[The rule] will seriously impair our ability to conduct clinical 
trials, clinicopathological studies of the natural history and 
therapeutic responsiveness of disease, epidemiologic and health outcome 
studies, and genetic research.''
    While there are problems that need to be addresses in many areas of 
the rule, a few key changes to the research provisions would go a long 
way toward instilling patient confidence that information about them 
will be used appropriately.
    The requirement in the regulation that written consent be required 
for routine health care activities is clearly unworkable. What 
specifically will the new rulemaking propose for fundamentally fixing 
this provision? Will the NPRM give health care providers the 
flexibility they need by giving providers the discretion to decide when 
consent for use of information for treatment, payment and health care 
operations is needed?
    What other changes will be made to the regulation to ensure that 
research will not be adversely affected? Will the Department change the 
de-identification standards so that researchers do not have such a high 
hurdle to reach and therefore end up using identifiable data, rather 
than de-identified data?
    Answer (2): The Department published proposed improvements to the 
Privacy Rule in the Federal Register on March 27, 2002. President Bush 
and I believe strongly in the need for federal protections to ensure 
patients' privacy. The changes that we have proposed will allow us to 
ensure strong protections for personal medical information while 
improving access to care. They are common-sense revisions that would 
eliminate serious obstacles to patients getting needed care while, for 
the first time, providing federal privacy protections for patients' 
medical records.
    The proposal is intended to ensure strong privacy protections while 
correcting unintended consequences that threaten patients' access to 
quality health care. The proposed rule includes provisions that would:

 Require a patient's prior authorization before a provider can 
        use or disclose protected health information for non-routine 
        purposes such as marketing or sharing with employers for 
        personnel decisions;
 Protect the individuals' right to access their personal health 
        information, to receive an accounting of disclosures that have 
        been made of their health information, and have a medical 
        record amended, if it contains incorrect or incomplete 
        information, or to have a statement of disagreement included in 
        the record;
 Strengthen the notice requirements that give patients an 
        opportunity to understand and make decisions based on privacy 
        practices, while removing burdensome prior consent requirements 
        for the routine purposes of treatment, payment and health-care 
        operations that created serious obstacles to patients' access 
        to quality care;
 Explicitly prohibit marketing without individual 
        authorization, while allowing doctors and other covered 
        entities to communicate freely with patients about treatment 
        options and other health-related information;
 Clarify that State law governs disclosures about a minor to a 
        parent or guardian;
 Simplify the research provisions to allow for combined 
        permissions and to more closely follow the Common Rule; and
 Provide model business associate contract provisions and allow 
        covered entities up to an additional year to modify existing 
        contracts to be compliant with the Rule. This extension does 
        not apply to small health plans that already have an additional 
        year to comply.
    Specifically, with regard to the Privacy Rule's provisions 
regarding consent and research, the proposal would strengthen the 
notice requirements that give patients an opportunity to understand and 
make decisions based on privacy practices, while removing burdensome 
prior consent requirements for the routine purposes of treatment, 
payment and health-care operations that created serious obstacles to 
patients' access to quality care. Under the proposal, health care 
providers and other covered entities would have the discretion to 
decide for themselves whether to obtain an individual's consent to use 
or disclose the patient's information to carry out treatment, payment, 
or health care operations, and if so, the flexibility to decide how and 
when it is needed.
    On research, the proposal would simplify the research provisions to 
allow for combined permissions and to more closely follow the criteria 
in the Common Rule for waiving the individual's consent. In addition, 
the proposal would permit certain identifiable data elements about an 
individual, such as zip code and dates of service, to be released for 
research purposes, while still ensuring that direct identifiers, such 
as name, address, and social security number, remain protected. As a 
further protection for the individual, the proposal would condition 
release of these limited data sets on the researcher's agreement to 
restrict further access and disclosure of the information.
    The Department will take public comment on the proposed changes 
until April 26, 2002. Thereafter, we will act expeditiously to complete 
the rulemaking process.
    Question (3): Of the many concerns I could raise about funding for 
mental health services, let me highlight one of the most troublesome. 
That budget proposes to eliminate altogether funding for mental health-
consumer technical assistance centers. If our goal is to help mental 
health consumers around the country achieve independence through 
recovery from mental illness, why decimate a program specifically 
focused on consumers of mental illness and their path to recovery?
    Among a number of proposed cuts, the Administration's budget for 
the Center for Mental Health Services (within the Substance Abuse and 
Mental Health Services Administration) would end all funding next year 
for the five centers that provide technical assistance (TA) to help 
mental health consumers around the country achieve independence through 
recovery from mental illness. The budget offers virtually no 
explanation for decimating consumer-support programs, currently drawing 
only $2 million, or less than 1 percent of the Substance Abuse and 
Mental Health Services Administration's (SAMHSA) discretionary funding 
for Programs of Regional and National Significance (PRNS).
    Answer (3): The Center for Mental Health Services (CMHS), within 
the Substance Abuse and Mental Health Services Administration, leads 
Federal efforts in caring for the Nation's mental health by: providing 
effective services, generating and disseminating new knowledge as to 
the effectiveness of treatment, and supporting States and local 
communities to adopt evidence-based interventions. The involvement of 
consumers in these efforts is critical to their success. In fiscal year 
(FY) 2003, CMHS plans to continue support for a number of consumer 
activities in the States that will help consumers influence the 
development and adoption of these evidence-based interventions. States 
are required to have Mental Health Planning Councils, which include 
consumers, to review and comment on State mental health plans and 
reports relating to Community Mental Health Services Block Grant 
funding. SAMHSA supports the National Knowledge Exchange Network, which 
provides a wide range of information about mental health treatment and 
services to consumers. SAMHSA will also be continuing its State-wide 
Family Network Program, over $5 million in grants, which gives adults 
and families a voice in providing services for themselves and or their 
children. Among other things that this program supports are conferences 
and other activities to disseminate what we know works in the treatment 
of mental illness for consumers. SAMHSA's Consumer Operated Service 
Program ($5 million) supports the implementation of consumer delivered 
self-help and related consumer support services in 9 sites across the 
country to identify expected outcomes when self-help is used as an 
adjunct to traditional mental health treatment. Additionally, SAMHSA's 
Circle of Care program ($2 million) provides funds for tribal and urban 
Indian communities to plan, design, and assess the feasibility of 
implementing a culturally appropriate system of care for American 
Indians/Alaskan Natives children and their families.
    Continued funding for the technical assistance centers is not 
included in the President's FY 2003 budget. As the Nation continues to 
address several critical needs, including relief from the September 11 
attacks and subsequent acts of bio-terrorism, difficult fiscal choices 
had to be made in developing the FY 2003 budget request.
    However, to allow for an orderly transition to other funding 
sources and avoid any detrimental effects during the interim period, 
SAMHSA is proposing to issue a 1-year Guidance for Applicants to fund 
the existing consumer technical assistance centers for 1 additional 
year, including support for the Annual Alternatives Conference.


    Question: Last year, the Department of Health and Human Services 
launched its Health Insurance Flexibility and Accountability initiative 
to allow states to use the section 1115 waiver process to expand 
Medicaid coverage to populations that weren't previously covered.
    As you know, community health centers are a priority of bipartisan 
majorities in this Congress and with President Bush. In 2000, Congress 
passed legislation ensuring that health centers received adequate 
reimbursement under Medicaid through a prospective payment system. In 
so doing, Congress explicitly stated that health centers are unique 
providers, in need of unique payment protections if they are to fill 
their statutory mission to provide care to the uninsured.
    Earlier this year, your Department approved an 1115 HIFA waiver for 
the state of Utah. This waiver expands care to previously uninsured 
individuals but also allows the state to waive the PPS requirements for 
health centers that serve this expansion population.
    I am extremely concerned that the department's approval of these 
waivers will undermine the very public commitment that Congress and the 
Administration have placed on health centers. It also allows states to 
exploit the good will and support of health centers through expanded 
funding for health centers by ``robbing peter (Federal appropriations) 
to pay Paul (Medicaid).''
    This is a very important issue to me--Ohio's Medicaid program was 
under an 1115 waiver and health centers were reimbursed only a fraction 
of their costs under that approved waiver.
    Can you give me assurances, as well as the 80% of the members of 
this subcommittee that cosponsored the PPS legislation, that the 
Department of Health and Human Services will not approve future HIFA 
waivers that waive health centers' PPS reimbursement requirements under 
    Answer: We certainly do not envision HIFA serving as a vehicle to 
undermine Congress's intent in establishing a PPS methodology for 
payment of health centers. While the HIFA guidance mentions the 
flexibility states may exercise with respect to benefits and cost 
sharing, waivers of PPS requirement are not mentioned, either in the 
HIFA guidance or the application template.
    As you know, the State of Utah recently received approval to 
implement a section 1115 demonstration that expands coverage. This 
demonstration is not a part of the HIFA initiative. It is true that 
Utah has a waiver of the PPS requirement for services rendered to the 
expansion population. The administration granted this waiver only after 
careful consideration of the implications, including the benefit of 
providing coverage to individuals who were previously uninsured. Any 
care Federally Qualified Health Centers (FQHC) were previously giving 
to these individuals was likely not reimbursed.
    Any future request for a PPS waiver, whether part of a HIFA or non-
HIFA proposal, would be treated in the same fashion. The request would 
be carefully reviewed, taking into consideration all implications.


    Question (1): I have joined my colleagues, Chairman Bilirakis and 
Mr. Greenwood, in urging HHS since February 2000 to resolve the issue 
of coverage for injectable drugs. Can we get this issue resolved 
through a policy memorandum rather than a long rulemaking process?
    Answer (1): As you may know, the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act (BIPA) amended the statute to 
define drugs covered ``incident to'' a physician's services as those 
drugs ``which are not usually self-administered by the patient.'' The 
prior statutory standard had been drugs ``which cannot . . . be self-
    Unfortunately, the new wording is not entirely clear. For example, 
there are several meanings that could be given to the terms ``usually'' 
and ``by the patient'', as well as questions about whether particular 
categories of drugs should be presumed to meet, or not meet, these 
criteria. It's a complicated issue and we are committed to getting it 
right. Without proper guidance to Medicare's carriers, this provision 
could cost many billions of dollars. It was scored by CBO as costing 
$100 million in the first year, and $1.1 billion over 5 years, but if 
defined more expansively than intended, it could cost much more.
    We are now looking at data provided by our carriers and consulting 
with our professional clinical and legal staffs to help us determine 
how best to write our guidance on this issue. We expect to have a 
policy decision soon and will continue to keep you informed regarding 
all of our efforts.
    Question (2): I believe that we have a real opportunity to address 
the issue of genetic non-discrimination this year. The President has 
voiced his support for it and it also has bipartisan support in this 
Committee and in the Congress. Can we count on the cooperation of HHS' 
technical staff so that the Committee can act on a bipartisan bill this 
    Answer (2): The technical staff at the National Human Genome 
Research Institute (NHGRI) at NIH and the Department have been 
providing assistance to members of the House, on both sides of the 
aisle, for a number of years. They have assisted in educating members 
and staff about the advances in genetic research, the development of 
genetic tests, and how such tests are used. The President and I agree 
that genetic discrimination should be made illegal and we will continue 
to provide whatever level of technical guidance that may be needed.
    Question (3): What is your timeframe for appointing Directors for 
each Institution at NIH to ensure implementation and accountability of 
the proposed activities in the FY 03?
    Answer (3): All appointments of NIH Institute and Center Directors 
involve a national search to identify individuals with outstanding 
scientific and leadership skills for the position. A broadly 
representative search committee representing (including representatives 
from both inside the NIH and from outside scientific and patient 
organizations) is charged with identifying candidates, reviewing 
applications, and recommending a list to the NIH. Following this 
process, the (Acting) Director, NIH, interviews the candidates and 
makes a tentative selection.
    National Institute of Biomedical Imaging and Bioengineering 
(NIBIB)--The Acting Director, NIH, has made a tentative selection for 
the Director, NIBIB, and the recommendation is being forwarded to the 
Secretary this week.
    National Institute of Neurological Disorders and Stroke (NINDS)--
The Acting Director, NIH, has extended an offer to a candidate for the 
Director, NINDS, and is awaiting a decision from that individual.
    National Institute of Mental Health (NIMH)--The vacancy 
announcement for the Director, NIMH, closed on March 30, 2002.
    National Institute on Drug Abuse (NIDA)--The vacancy announcement 
for the Director, NIDA, closed on April 8, 2002.
    It is anticipated that the Search Committees for NIMH and NIDA will 
start interviewing applicants and completing reference checks mid-April 
and refer highly qualified candidates to the Director, NIH, by mid-May.
    National Institute on Alcohol Abuse and Alcoholism (NIAAA)--The 
vacancy announcement for the Director, NIAAA, closes on May 1, 2002.
    National Institute of General Medical Sciences (NIGMS)--Regarding 
the vacancy for the Director, NIGMS, the membership of the search 
committee is being finalized; we anticipate that the announcement will 
probably be posted late March/early April 2002.
    Question (4): What is the status of the Presidential Commission's 
Report on Complimentary and Alternative Medicine?
    Answer (4): The Report was completed by the White House Commission 
on Complementary and Alternative Medicine Policy and was delivered to 
the President on March 25, 2002. Copies of the Report were delivered to 
the House Energy and Commerce Committee and the Senate Health, 
Education, Labor, and Pensions Committee. The Report is available on 
the web site for the White House Commission at http://
www.whccamp.hhs.gov/finalreport.html .


    Question (1): Mr. Secretary, as you may recall, I raised concern 
with you late last year regarding Advanced Cell Technology, the company 
that announced it had succeeded in cloning a human embryo. I wrote to 
you with my concern that ACT received a federal grant even though it is 
involved in scientific pursuits that the House has voted to ban and the 
President opposes. I have enclosed several documents on this issue I 
would like included in the Congressional Record.
    You responded very quickly to my letter and assured me that the 
Department of Health and Human Services supports the House passed H.R. 
2505, ``Human Cloning Prohibition Act of 2001,'' and that you asked the 
Inspector General at HHS to investigate this matter and report back to 
    Thank you for your prompt response on this matter. I would only ask 
if you have received a report from your Inspector General and what 
other steps the Department is taking to make sure that taxpayer funding 
is not going to groups that are attempting human cloning or creating 
embryos specifically for research?
    Answer (1): The Inspector General informed me that the final report 
of her audit was issued to ACT on April 26, 2002. I have also received 
a copy of that report.
    NIH grants management and program officials work closely with 
grantee institutions to assure compliance with all applicable laws, 
regulations, and policies. Section 510 of Public Law 107-116 (the 
Departments of Labor, HHS, and Education, and Related Agencies 
Appropriations Act of 2002), prohibits the use of appropriated funds to 
support certain human embryo research, including cloning. Quoting this 
provision, the NIH Grants Policy Statement states that NIH funds may 
not be used for the creation of a human embryo(s) for research purposes 
or for research in which a human embryo(s) is destroyed, discarded, or 
knowingly subjected to risk of injury or death greater than that 
allowed for research on fetuses in utero under 45 CFR 46.208(a)(2) and 
subsection 498 (a) and (b) of the PHS Act. The term ``human embryo(s)'' 
includes any organism not protected as a human subject under 45 CFR 46, 
as of the date of enactment of the governing appropriations act, that 
is derived by fertilization, parthenogenesis, cloning, or any other 
means from one or more human gametes or human diploid cells.
    In addition, the Policy Statement also notes that a March 4, 1997 
Presidential Memorandum prohibits NIH from using Federal funds for 
cloning of human beings.
    If a grantee is using non-Federal dollars for research that would 
be prohibited by Section 510 of Public Law 107-116, it must be able to 
demonstrate a clear separation between the non-Federal dollars used for 
that activity and Federal funds awarded for a permissible activity.
    Question (2): I have a few questions about the Title X program 
enforcing compliance with state rape and child abuse reporting laws. 
Since the Fiscal Year 1999 Labor/HHS/Education Appropriations Bill was 
signed by President Clinton, and every subsequent year, it has been the 
law of the land that Title X family planning providers must obey state 
laws requiring notification or the reporting of child abuse, child 
molestation, sexual abuse, rape or incest. Current law, signed into law 
by President Bush states: SEC. 212. Notwithstanding any other provision 
of law, no provider of services under Title X of the Public Health 
Service Act shall be exempt from any state law requiring notification 
or the reporting of child abuse, child molestation, sexual abuse, rape 
or incest.--P.L. 107-116 (H.R. 3061)
    (a) Mr. Secretary, what guidance has your agency developed to 
inform regional administrators, grantees and providers of these legal 
requirements which may, for example, require them to notify child 
protective services agencies if these types of abuse are suspected?
    Answer (2a): On January 12, 1999, the Office of Population Affairs 
(OPA), which administers the Title X Family Planning Program, issued a 
memorandum to Regional Health Administrators regarding these 
requirements. This memorandum, which sets out ``OPA Program Instruction 
Series, OPA 99-1: Compliance with State Reporting Laws,'' was intended 
to serve as a formal notice to the Regional Health Administrators, 
Regional Office Family Planning Program staff, and Title X Grantees 
that Title X providers must report incidents of child abuse, child 
molestation, sexual abuse, rape, or incest to the appropriate State 
authority in accordance with requirements imposed by State laws. This 
Program Instruction remains in effect. Additionally, Regional Offices 
are encouraged to utilize available resources, such as Title X training 
centers and technical assistance contractors, to make certain all Title 
X providers are aware of their responsibilities under individual State 
laws, and are equipped to handle sensitive situations.
    A copy of ``OPA Program Instruction Series, OPA 99-1: Compliance 
with State Reporting Laws'' is attached.
    (b) Please provide any procedures established by the Office of 
Population Affairs to monitor compliance with this provision.
    Answer (2b): The Office of Population Affairs monitors Title X 
Family Planning service grantees for compliance with all program 
requirements through several mechanisms, both written and 
observational. Written monitoring occurs through annual grant 
continuation applications, and reviews of written grantee policies and 
procedures. On-site monitoring of grantees through site visits occurs 
annually, and comprehensive, on-site program reviews occur every three 
    (c) Do federal confidentiality requirements, or any other 
requirements, preclude Title X providers from asking a recipient's age 
or date of birth?
    Answer (2c): No--there are not any Federal confidentiality 
requirements, or any other requirements that preclude Title X providers 
from asking a recipient's age or date of birth.
      Department of Health & Human Services        
                            Office of the Secretary        
                             Assistant Secretary for Health        
                            Office of Public Health and Science    
                                               Washington, DC 20201
TO: Regional Health Administrators, Regions I-X
FROM: Deputy Assistant Secretary for Population Affairs
SUBJECT: OP A Program Instruction Series, OP A 99-1: Compliance with 
State Reporting Laws

    The Fiscal Year 1999 Omnibus Appropriations bill (P .L. 105-277) 
contains new language governing the use of Title X funds. Specifically 
section 219 states,
        Notwithstanding any other provision of law, no provider of 
        services under title X of the Public Health Service Act shall 
        be exempt .from any State law requiring notification, or 
        reporting of child abuse, child molestation, sexual abuse, 
        rape, or incest.
    This memorandum is intended to serve as a formal notice to the 
regional offices, as well as Title X grantees, concerning compliance 
with State reporting laws. A copy of this memorandum should be provided 
to all Title X grantees in your region, and Title X providers should 
refer to this memorandum as needed, if questions in this area arise.
    The language of section 219 means that Title X providers must 
report such incidents to the appropriate State authority in accordance 
with requirements imposed by State laws. The reporting and notification 
requirements referenced in section 219 concern State laws; the 
authority to enforce compliance with such laws lies with the States. It 
is therefore important that grantees review and be familiar with the 
relevant reporting requirements in their individual State. Because 
State laws vary, it is not possible for this office to provide more 
specific guidance as to the requirements of particular States' laws; 
grantees are urged to consult with their own attorneys for specific 
    Identified instances of child abuse, child molestation, sexual 
abuse, rape, or incest present serious medical and psychological 
situations for patients and their families. Findings of such instances 
coming within the applicable State law should be documented in the 
medical record and reported as required by the applicable State 
requirements. The Office of Population Affairs encourages efforts to 
augment existing training programs for Title X providers to ensure 
optimal medical assistance in such situations. Grantees should fully 
understand their obligations under State law related to reporting when 
such acts or actions are disclosed, and they should review current 
protocols for responding to such reports. We also encourage enhanced 
counseling and education efforts targeted to the unique needs of 
adolescents. Title X providers are encouraged to continue to work at 
the local level in an interdisciplinary manner with other local health 
care providers who may also have reporting obligations under State law, 
law enforcement officials, child protective services, social service 
experts and others in order to explore how best to respond to these 
situations. To accomplish this, regional offices and Title X grantees 
are encouraged to utilize resources available through the regional 
training centers and the technical assistance contractor, as well as 
other available resources.
    We appreciate your continued cooperation in assuring that grantees 
are aware of their obligations and hope this memorandum provides 
clarification on this matter.

cc: Regional Program Consultants, Regions I-X
         Prepared Statement of College of American Pathologists
    The College of American Pathologists (CAP) is pleased to submit 
this statement for the record of the Energy and Commerce Health 
Subcommittee hearing on the Department of Health and Human Services' 
fiscal 2003 budget request. The College is a medical specialty society 
representing more than 16,000 board-certified physicians who practice 
clinical or anatomic pathology, or both, in community hospitals, 
independent clinical laboratories, academic medical centers and federal 
and state health facilities.
    As Congress considers the HHS budget request for the next fiscal 
year, the College asks that lawmakers give special attention to two 
issues important to ensuring quality health care for all Americans and 
access to that care.

                       BIOTERRORISM PREPAREDNESS

    The nation's clinical laboratories and the pathologists who provide 
medical direction in those facilities form the front line in the battle 
against bioterrorism. Because these laboratories often serve as the 
point of entry for specimens that may be infected with biological 
agents, it is essential that laboratory personnel be adequately 
educated, trained and prepared to rapidly respond.
    The College applauds President Bush for his administration's 
efforts during the past six months to support this goal and improve the 
nation's ability to prepare for and respond to the bioterrorism threat. 
The College also appreciates the efforts of Energy and Commerce Chair 
Billy Tauzin, ranking member John Dingell and other committee members 
for their bipartisan efforts last year in support of the Public Health 
Security and Bioterrorism Response Act of 2001, H.R. 3448.
    This legislation would expand education and training for medical 
personnel, enhance controls of biological agents and waive certain 
Medicare requirements during public health emergencies. Further, the 
bill would make grants available through HHS to professional societies 
and private accrediting organizations to educate and train medical 
personnel and develop proficiency testing programs that, using non-
lethal samples of biological agents, help laboratories hone their 
ability to detect infectious agents likely to be used in bioterrorist 
attacks. This approach is commendable, as these professional 
organizations are frequently best suited to assess and meet the 
education and training needs of their members.
    The bill tightens regulatory control of biological agents without 
imposing undue burdens on clinical laboratories that diagnose and 
verify the presence of these agents in the course of patient care. 
Also, H.R. 3448 contains a provision crucial to the ability of 
laboratories to respond swiftly to acts of bioterrorism: authority for 
the HHS Secretary to waive certification requirements for clinical 
laboratories in the case of a national emergency. Under the Clinical 
Laboratory Improvement Amendments of 1988 (CLIA), certain requirements 
are established for the inspection and certification of laboratories. 
In times of national emergency, it may be necessary to waive these 
requirements to ensure adequate access to clinical laboratory services.
    The College urges the subcommittee to ensure that HHS funding for 
fiscal 2003 include support for bioterrorism preparedness as provided 
for in Public Health Security and Bioterrorism Response Act of 2001.


    On January 1 of this year, Medicare's annual update to physician 
payments produced a 5.4 percent cut that may jeopardize physician 
participation in the program and, ultimately, beneficiary access to 
care. Despite evidence that a flawed formula behind the annual update 
caused this reduction, the administration budget request for fiscal 
2003 contemplates no additional spending to correct the problem.
    The CAP thanks Health Subcommittee Chair Michael Bilirakis, ranking 
subcommittee member Sherrod Brown and other committee members for their 
introduction last November of legislation to substantially reverse the 
January 1 reduction and replace the flawed ``sustainable growth rate'' 
(SGR) system behind Medicare's annual updates with a formula that more 
accurately reflects physicians' practice costs. The College greatly 
appreciates the subcommittee's early efforts to address this problem 
and urges passage of legislation this year to mitigate the harmful 
effects of the January 1 reduction and improve the payment formula for 
coming years.
    This year's 5.4 percent reduction affects pathologists profoundly 
and exacerbates existing financial pressures brought on by increasingly 
complex and costly regulatory requirements and rising liability 
insurance rates. The January 1 reduction in payments is the fourth 
payment cut--and the largest--since Medicare instituted its physician 
fee schedule a decade ago. Since 1991, Medicare physician payment rates 
have risen an average of only 1.1 percent annually, or 13 percent less 
than the annual increase in practice costs, as measured by the Medicare 
Economic Index. Further, the January 1 reduction comes on top of cuts 
to pathology services made in the transition to resource-based practice 
expenses, such as an 11.5 percent drop in payment over four years for 
the diagnosis of breast cancer, prostate cancer and malignant melanoma.
    Pathologists and other physicians cannot continue to sustain the 
financial pressures the Medicare program has placed upon them. 
Compounding the current problem of falling payment rates are numerous 
new administrative requirements imposed on Medicare providers in recent 
years. For example, documentation requirements necessitated by Medicare 
program integrity initiatives and various provisions of the Health 
Insurance Portability and Accountability Act of 1996 have created 
substantial new paperwork burdens in laboratories and physician 
offices, and more are expected in coming years. These requirements 
raise the cost and complexity of providing care, but come with no 
additional compensation. We appreciate this Committee's commitment to 
reducing regulatory burdens, as well as the efforts of the Centers for 
Medicare and Medicaid Services. Yet, this relief cannot serve as a 
substitute for what is really needed: an alternative payment approach 
that meets the needs of Medicare patients and better reflects the costs 
of their care. Further adding to the burden on providers are rising 
professional liability insurance rates and the cost of technological 
advances critical to maintaining state-of-the-art medical care.
    The 2002 payment cut stems from the flawed SGR formula. This system 
inappropriately reflects downturns in the general economy and that, 
along with data errors by the Centers for Medicare and Medicaid 
Services, have short-changed physicians by $15 million since 1998. The 
Medicare Payment Advisory Commission (MedPAC) warned last year that 
significant cuts in 2002 ``could raise concerns about the adequacy of 
payments and beneficiary access to care.'' MedPAC adopted a 
recommendation that Medicare replace the SGR with a system based on 
estimated changes in physician practice costs less an adjustment for 
growth in multifactor productivity (labor, supplies and equipment--not 
just labor, as is now the case).
    MedPAC's concerns regarding access must not be taken lightly. 
Experiences with Medicare+Choice disenrollment and Medicaid patient 
access give ample evidence of the need to maintain adequate payment to 
ensure adequate access. This year's reduction and future cuts that are 
likely absent immediate changes to the update system will force some 
physicians to discontinue accepting new Medicare patients, switch from 
participating to non-participating provider status, reduce 
administrative staff, retire early or take other actions to limit their 
Medicare liability. It is unfortunate that those same actions likely 
will jeopardize Medicare patients' access to care.
    The College thanks the Subcommittee on Health for the opportunity 
to present its views on these important issues and offers its support 
and continued assistance as the administration and Congress work to 
address these pressing issues in coming months.
                      U.S. House of Representatives
                           Committee on Energy and Commerce
                                                     March 14, 2002
The Honorable Tommy G. Thompson
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201
    Dear Secretary Thompson: Thank you for participating in the House 
Energy and Commerce Committee Subcommittee on Health hearing on March 
13, 2002. During the hearing we discussed whether the American Indian 
and Alaska Native (AI/AN) tribes would be included in the methodology 
for the $25 million for Healthy Communities Innovation Initiative, 
which includes a new initiative on diabetes. I would like to take this 
opportunity to follow up on our discussion.
    As you know, one of the fastest growing, most costly, and most 
deadly diseases is diabetes, with an estimated 800,000 new cases 
diagnosed every year. At a general population growth rate of almost 6% 
per year, the Centers for Disease Control (CDC) is calling diabetes 
``the epidemic of our time.'' Diabetes currently costs the U.S. 
approximately $100 billion and kills approximately 200,000 people every 
year. If we do not take immediate and dramatic steps to reverse this 
trend, over the next decade diabetes will cost this country $1 trillion 
and claim over 2 million lives.
    Diabetes, in the last half of this century, has severely impacted 
American Indian/Alaskan Native (AI/AN) communities. In some AI/AN 
communities, 60% of the adults have been diagnosed with diabetes 
(Position Statement from Indian Health Services National Diabetes 
Program). A recent Indian Health Service (IHS) study shows a steady 
increase in the rate of diagnosed diabetes in AI/AN adolescents and 
young adults. (Interim Report to Congress Special Diabetes Program for 
Indians, January 2000)
    Traditionally, AI/AN communities were not susceptible to diabetes 
due to the traditional food sources they consumed. However, their 
lifestyle has shifted to a decrease in physical activity and an 
increase in high calorie-high fat diet. If the general population is 
experiencing a diabetes epidemic, then the AI/AN people are in an even 
more serious diabetes health situation.
    Given such realities, I would like to know if the methodology for 
the $25 million Healthy Communities Innovation Initiative will include 
AI/AN tribes for diabetes prevention? According to your written 
testimony to the House Energy and Commerce Committee Subcommittee on 
Health (3/13/02), you state that five communities will participate in 
this initiative. I am hopeful AI/AN communities will be considered for 
participation in this initiative. Clearly, such funding is necessary to 
support continued diabetes research and prevention activities in AI/AN 
    I look forward to your response.
                                         Frank Pallone, Jr.
                                                 Member of Congress
                      U.S. House of Representatives
                           Committee on Energy and Commerce
                                                     March 15, 2002
The Honorable Tommy G. Thompson
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201
    Dear Secretary Thompson: Thank you for participating in the House 
Energy and Commerce Committee Subcommittee on Health hearing on March 
13, 2002. During the hearing, we discussed whether American Indian and 
Alaska Native tribes have access to the homeland and bioterrorism 
security funds available to the Department of Health and Human 
Services. I appreciate your statement that Indian tribes are eligible 
for both homeland and bioterrorism security funds, and that you will 
notify them of their eligibility. I would like to take this opportunity 
to follow up on this discussion.
    Due to the events of September 11, 2001, the need for both state 
and tribal governments to have established and viable emergency 
management services is very apparent. I have spoken with numerous 
American Indian tribal representatives during the past six months, and 
have learned that they are very concerned that their governments will 
be left out of this homeland and bioterrorism security initiative.
    As you may know, the 10th U.S. Circuit Court of Appeals recently 
ruled that, ``Indian tribes are neither states, nor part of the federal 
government, nor subdivisions of either. Rather, they are sovereign 
political entities possessed of sovereign authority not derived from 
the United States, which they predate.'' In addition, the United States 
Government committed to a trustee relationship with the Indian Nations. 
Defined by treaties, statutes and interpreted by the courts, the 
trustee relationship requires the federal government to exercise the 
highest degree of care with tribal and Indian lands and resources. 
Given these legal factors, I believe Indian tribal governments need to 
be included in the homeland and bioterrorism security plan and adequate 
funding needs to be made available to support such efforts.
    I learned from you during the hearing that once the President 
signed into law the homeland and bioterrorism legislation on January 
10, 2001, a letter was sent to all governors entailing the homeland 
security funds available to states. I also recently learned that the 
Bush Administration has given State governors 60 days to meet with 
their state and local health services officials concerning development 
of homeland and bio-terrorism security preparation plans. The governors 
are then to submit their plans to the federal government for funding 
support. Unfortunately, American Indian tribes and their health 
departments are not specified in this plan, and thereby appear to be 
completely left out of the important process of securing our entire 
nation from terrorist threats. Similar to state governments, Indian 
governments have citizenry to protect as well and should have access to 
the available funds.
    Given this current situation, I respectfully request that letters 
be sent to tribal leaders nation wide to inform them that these 
homeland and bioterrorism security funds are available to them. This is 
crucial to ensuring that our homeland is secure from bioterrorist 
    Please provide me with a timeline of when you will be notifying the 
Indian tribes regarding their eligibility to access homeland and 
bioterrorism security funds.
    I look forward to your response.
                                         Frank Pallone, Jr.
                                                 Member of Congress