[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
PRESIDENT'S 2003 BUDGET PROPOSALS FEATURING HHS SECRETARY THOMPSON
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 6, 2002
__________
Serial No. 107-55
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
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C O N T E N T S
Page______
Advisory of January 29, 2002, announcing the hearing............. 2
WITNESS
U.S. Department of Health and Human Services, Hon. Tommy G.
Thompson, Secretary............................................ 9
SUBMISSION FOR THE RECORD
AdvaMed, statement............................................... 51
PRESIDENT'S 2003 BUDGET PROPOSALS FEATURING HHS SECRETARY THOMPSON
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WEDNESDAY, FEBRUARY 6, 2002
House of Representatives,
Committee on Ways and Means
Washington, DC.
The Committee met, pursuant to notice, at 10:12 a.m., in
room 1100 Longworth House Office Building, Hon. Bill Thomas
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
January 29, 2002
No. FC-11
Thomas Announces a Hearing Featuring
HHS Secretary Thompson on the
President's 2003 Budget Proposals
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
the President's fiscal year 2003 budget for the U.S. Department of
Health and Human Services. The hearing will take place on Wednesday,
February 6, 2002, in the main Committee hearing room, 1100 Longworth
House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from the Honorable Tommy G. Thompson,
Secretary, U.S. Department of Health and Human Services (HHS). However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
On January 29, 2002, President George W. Bush will deliver his
State of the Union address, in which he is expected to outline several
legislative initiatives. The details of these proposals are expected to
be released on February 4, 2002, when the President is scheduled to
submit his fiscal year 2003 budget to the Congress. The budget for HHS
is expected to include initiatives aimed at: strengthening and
improving Medicare; assisting individuals who lack health insurance;
reforming managed care; ensuring medical records confidentiality; and
reauthorizing and improving Temporary Assistance for Needy Families,
and related programs.
In announcing the hearing, Chairman Thomas stated: ``The Committee
looks forward to Secretary Thompson's appearance. This hearing will
help lay the groundwork for the coming year's legislative business. The
Committee will examine measures to secure a drug benefit, strengthen
Medicare, protect consumers in managed care, reduce the number of
uninsured, and guard sensitive personal medical information,'' Thomas
said.
``In addition, we will work to build on the tremendous successes of
welfare reform. Earnings for low-income parents have risen, child
poverty is down sharply, and welfare caseloads have been cut in half.
We need to press on with the work-focused approach taken since 1996 and
resist efforts to turn back the clock to pre-reform policies
discouraging work and promoting dependence.''
FOCUS OF THE HEARING:
The focus of the hearing is to review the President's fiscal year
2003 budget proposals for the U.S. Department of Health and Human
Services.
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``[email protected]'', along with a fax copy to
202/225-2610 by the close of business, Wednesday, February 20, 2002.
Those filing written statements who wish to have their statements
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The Committee seeks to make its facilities accessible to persons
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noted above.
Chairman Thomas. Good morning, and welcome to the
Committee's second hearing on the President's fiscal year 2003
budget. This morning we will hear from U.S. Department of
Health and Human Services (HHS) Secretary Governor Tommy
Thompson. The President's budget, as we said yesterday, lays
out three clear and concise priorities: Win the war, protect
our homeland, and revive the economy. These, to a very good
extent, relate to the tragic events of September 11th. Almost 8
million Americans are now unemployed, many of them without
access to affordable health insurance. This House addressed
that issue last year. The Senate's failure to act on stimulus
means the unemployed are still waiting.
The President's budget includes $90 billion in refundable
and advancable health care tax credits for the unemployed and
other uninsured.
As the first of the baby boomers approach retirement age,
this budget takes steps toward providing retirement security.
Medicare clearly forms a part of a secure retirement, but
Medicare, in its basic form, is 35 years old. The most obvious
wrinkle on the face of Medicare is the lack of a Medicare
prescription drug benefit, and that needs to be addressed. In
fact, it is overdue in being addressed. No one designing a
modern health program for seniors today would exclude
prescription drugs. In fact, the House has acted last Congress
on a prescription drug program. We plan to act in this
Congress. The difficulty has been in getting the Senate to act
so we can move together a bill to the President's desk.
Given the realities on terrorism and the recession, I
commend the President for not reducing the resources he
proposed last year for prescription drugs and Medicare reform.
That $190 billion was placed on the table in a period of
surplus. The $190 billion in today's budget is placed in a very
clouded atmosphere of significant additional resources,
demands, and I underscore, I commend the President for that
effort.
All of our seniors and disabled citizens deserve a
comprehensive prescription drug benefit in a modernized
Medicare Program. The President's proposal to provide immediate
relief to seniors through a prescription drug card is a good
interim step. I underscore ``interim.'' It will lay the
groundwork for Medicare and develop an infrastructure for a
fully funded prescription drug benefit and for seniors to learn
how to use it. It is a bridge to a more comprehensive drug
benefit program, and I hope that bridge is of short duration.
Modernization of Medicare must also include a
rationalization of how health care provider services are paid
for. Our government-run payment systems are fundamentally
flawed, whether it is how we pay private health plans in
Medicare or physicians serving our beneficiaries.
Mr. Secretary, you have been a strong leader on the issue
of health and welfare, both now in your current capacity as
Secretary and previously as Governor of Wisconsin. We look
forward to working with you. You have already made significant
changes in the administrative structure. I know you need
additional assistance. We do need to reauthorize the Temporary
Assistance to Needy Families, or the TANF program. That law has
been a resounding success, and we need to move forward in this
area as well.
The President's budget, I think, has started a constructive
dialog on many important issues. We look forward to continuing
the dialog and hearing your testimony, but more importantly, we
need to figure out how to structurally make the changes and how
budgetarily to finance the very real reforms that need to be
made. Nothing is more fundamental than providing prescription
drugs for our seniors. And so, prior to hearing from you, Mr.
Secretary I would ask the gentleman from New York, Ranking
Member, if he has any comments.
[The opening statement of Chairman Thomas follows:]
Opening Statement of the Hon. Bill Thomas, a Representative in Congress
from the State of California, and Chairman, Committee on Ways and Means
Good morning, and welcome to the Committee's second hearing on the
President's fiscal year 2003 budget. This morning we will hear from
Health and Human Services Secretary Tommy Thompson.
The President's budget lays out three clear and concise priorities:
win the war, protect our homeland, and revive the economy. These, to a
great extent, relate to the tragic events of September 11th. Almost
eight million Americans are now unemployed, many of them without access
to affordable health insurance. This House addressed that issue last
year. The Senate's failure to act on stimulus means the unemployed are
still waiting.
The President's budget includes $90 billion in refundable and
advancable health care tax credits for the unemployed and other
uninsured.
As the first of the baby boomers approach retirement age, this
budget takes steps toward providing retirement security. Medicare
clearly forms a part of a secure retirement, but Medicare in its basic
form is 35 years old. The most obvious wrinkle on the face of Medicare
is the lack of a Medicare prescription drug benefit, and that needs to
be addressed. In fact, it is overdue in being addressed. No one
designing a modern health program for seniors today would exclude
prescription drugs.
In fact, the House acted during the last Congress on a prescription
drug program. We plan to act in this Congress. The difficulty has been
in getting the Senate to act, so we can together move a bill to the
President's desk.
Given the realities of terrorism and the recession, I commend the
President for not reducing the resources he proposed last year for
prescription drugs and Medicare reform. That $190 billion was placed on
the table in a period of surplus. The $190 billion in today's budget
comes in a very clouded atmosphere of significant additional resource
demands, and so I underscore: I commend the president for that effort.
All of our seniors and disabled citizens deserve a comprehensive
prescription drug benefit in a modernized Medicare program. The
President's proposal to provide immediate relief to seniors through a
prescription drug card is a good interim step. I underscore
``interim.'' It will lay the groundwork for Medicare to develop the
infrastructure for a fully funded prescription drug benefit, and for
seniors to learn how to use it. It is a bridge to a more comprehensive
drug benefit program, and I hope that bridge is of short duration.
Modernization of Medicare must also include a rationalization of
how health care provider services are paid for. Our government-run
payment systems are fundamentally flawed, whether it is how we pay
private health plans in Medicare or physicians serving our
beneficiaries.
Mr. Secretary, you have been a strong leader on the issue of health
and welfare, both now in your current capacity as secretary, and
previously as governor of Wisconsin. We look forward to working with
you. You have already made significant changes in the administrative
structure. I know you need additional assistance. We do need to
reauthorize the Temporary Assistance to Needy Families, or TANF,
program. That law has been a resounding success, and we need to move
forward in this area as well.
The President's budget, I think, has started a constructive
dialogue on many important issues. We look forward to continuing the
dialogue and hearing your testimony, but more importantly, we need to
figure out how structurally to make the changes and how to finance the
very real reforms that need to be made. Nothing is more fundamental
than providing prescription drugs for our seniors.
And now, prior to hearing from you, Mr. Secretary, I would ask the
gentleman from New York, the ranking member, if he has any comments.
Mr. Rangel. Thank you, Mr. Chairman. Let me agree with you
that we are pleased to have the Secretary to come before us and
to provide the leadership as we try to protect the health care
for our aged and those people that, for no reason of their own
will, have to be relying on federally supported assistance and
welfare. And I agree with the Chairman that all we are doing is
having dialog. We realize we are in a war, we are in a
recession. The luxury we had in talking about surpluses are no
longer before us, and so to a large degree, we have got to
determine the priorities of the Congress and the
Administration. I do hope that any ideas that the Democrats
have in welfare that--led by Mr. Cardin and in health care, led
by Mr. Stark, we will have an opportunity perhaps, even outside
of the Committee, to at least have a review by the
Administration so that when the President talks about
bipartisanship, he truly means we work together in trying to
reach a conclusion and to further that goal. Then with the
permission of the Chair and the Committee at this time, I would
like to yield to Mr. Stark.
Mr. Stark. Thank you, and thank you, Chairman Thomas. Thank
you, Mr. Secretary for being with us today. The unfortunate
thing about the budget that you have got to work with is that
there is not much there. As far as domestic spending is
concerned, it is long on rhetoric and very short on dollars to
get the job done. The Medicare trust fund will disappear in the
year ahead, and we will go well into the Social Security trust
fund. So much for the Medicare and Social Security lock boxes,
which we all voted for time and time again. We are just, I
gather, ignoring those.
We hear rhetoric about reforming Medicare, and it is clear
that the Republican policy is to privatize Medicare--turn it
into a voucher system--as it is a Republican policy to
privatize Social Security and instead invest those funds in the
private sector as payback, I suppose, to the help they receive
from Enron.
So much for doing anything to protect the average senior,
either in health care or in Social Security. There is some
opportunity to expand the uninsured program. We can probably do
it better not using the Tax Code, which often is not the best
way. There are a series of items that I think we could work
together on, to fine-tune some of the problems that we have
with Medicare.
Obviously, the physician payment formula needs some work.
It was put together when we were in the majority, and you all
were in the White House. We made some mistakes. I think we
should fix those. Even though we don't have the money to do
what is right, we can change those formulas and improve the
status quo.
And there are some other items. Indeed, the Senate has a
bill that we sent over on regulatory reform and modernization,
things that should help you and help--I still say Health Care
Financing Administration (HCFA)--do their jobs better. We have
to stay away from the budget discussion, because the drug
benefit isn't meaningful, and the seniors understand that. They
can count the benefits with their shoes and socks on, and they
are not going to be flim-flammed into thinking they are getting
a benefit when they are just getting a pat on the head.
So regarding the budget, as we say in Oakland, California,
there is no ``there'' there, but let's deal with what we can.
I know that your testimony, Mr. Secretary, does deal with
TANF and some of the welfare issues which we normally don't get
to put a large audience when we deal with welfare issues in
this Committee. I would like to, if I may, yield briefly to Mr.
Cardin.
[The opening statement of Mr. Stark follows:]
Opening Statement of the Hon. Fortney Pete Stark, a Representative in
Congress from the State of California
First I'd like to thank Secretary Thompson for being with us today
to help illuminate the details of President Bush's health care
priorities since one cannot read the budget documents and ascertain
much in that regard.
Unfortunately, this budget is like much of what we've seen out of
the Bush Administration with regard to domestic spending priorities: it
is long on rhetoric and short on policy and dollars to get the job
done.
So much for a Social Security or Medicare lock-box. This budget
spends both of these trust funds for the foreseeable future just to run
the government. This is hardly sound budgeting. We know we've got an
explosion of Social Security and Medicare beneficiaries at the end of
the decade--we should be saving for those costs--not blowing the bank
now.
We all know that dedicating $190 billion over 10 years for a
Medicare prescription drug benefit doesn't come close to providing the
necessary funding. To create a meaningful prescription drug benefit--
one that provides each Medicare beneficiary with even a decent
prescription drug benefit--would probably cost at least $500 billion
over that timeframe.
We also know that the $190 billion allocated in the President's
budget doesn't all go to prescription drug benefit. $77 billion of
these funds are optional money to the states should they choose to
expand prescription drug benefits in Medicaid to seniors between 100-
150% of poverty. There is no requirement that the states spend any of
this money and actually provide drug coverage for anyone. The only two
other prescription drug proposals highlighted in the President's budget
are a waiver program, described as a budget neutral way for states to
expand drug coverage, and the President's phony prescription drug
discount card. In fact, much of the remaining funds seem to go to
Administration efforts to ``reform'' Medicare by turning it into a
voucher system in which government funds are protected and the
financial burdens on seniors increase.
The President claims to want to help the uninsured get health
insurance. Unfortunately, he has proposed a tax credit which simply
won't accomplish that goal.
These tax credits begin phasing out for individuals at $15,000
income and families with $25,000 in annual income. The subsidy level of
$1000/$3000 will not cover half the cost of a standard health insurance
plan ($2600 individual/$7000 family). For families with incomes below
$25,000, they would have to spend some 10-15% of their gross incomes to
be able to afford a policy under this proposal--and that is only if
they are healthy enough to qualify for coverage. Those costs are too
high for a family making decisions about paying the mortgage, or
putting dinner on the table, not to mention buying a health insurance
policy.
Expanding health insurance for the uninsured is a goal I hope all
of us share. I would advocate building on existing government programs
as a much more effective method of expanding coverage and urge you to
remain open to such alternatives this year.
There are many other components of the President's health care
budget which I haven't touched on. But, I think I will close with my
belief that the presentation of a budget is really a list of
priorities. It is clear from the President's 2003 Budget that providing
a prescription drug benefit to seniors ranks far below providing tax
breaks to the wealthy. It is obvious that steps for expanding access to
health insurance will be small. Clearly, it will be up to Congress to
come up with policies in both of these arenas if we are to see real
advancements in the near future.
I look forward to hearing from the Secretary with his thoughts on
these matters.
Chairman Thomas. The gentleman's time has expired.
The Chair would indicate that the Chair was extremely
generous in the first hearing. Many Members on both sides,
going 8, 10 and 12 minutes. To the degree that we can
discipline ourselves to the rules in terms of 5 minutes, which
includes questioning, and to the extent possible, the response
of the witness, I believe we can move along. And with that, I
would indicate----
Mr. Rangel. Mr. Chairman----
Chairman Thomas. The gentleman from Maryland is recognized.
Mr. Rangel. Mr. Chairman, just a courtesy to have an
exchange, so I can--what you are saying, and just inquire as to
whether or not this strict support of the rules would include
the Chair, because in honesty, you do have a tendency to
comment on everything that the Members have to say, which I do,
too, if I had the chance, and it would help us to discipline
ourselves if there--if we can see you set an example.
Mr. McCrery. Mr. Chairman, if I might be recognized.
Chairman Thomas. The gentleman from Louisiana.
Mr. McCrery. I was a Member of this Committee when we were
in the minority, and it has always been a rule on this
Committee that the Chair has wide latitude on his comments; he,
the Chair of the Committee. And I would hope that would be
maintained regardless of which party is in control of the
Committee.
Mr. Rangel. And I respect that.
Mr. McCrery. And I respect the Chairman's ability to run
this Committee, and I think he has the right as Chairman to
comment as he pleases.
Mr. Rangel. I respect that. I support that. I respect
majority rule. I was only trying to set a tone of fairness and
equity, but you certainly can do what you think you can get
away with.
Chairman Thomas. And what the Chair indicated was that
normally when the Ranking Member makes a statement out of
courtesy, he is not clocked either, if the gentleman will
notice the apparatus that determines the time available.
Mr. Rangel. You have been very kind, Mr. Chairman.
Chairman Thomas. The gentleman from New York handed off to
the gentleman from California. The Chair continued to allow it
to go forward. The gentleman from California handed off to the
gentleman from Maryland. Now, at some point, the relay is going
to end, and I made that point, and then to recognize you for
your generous intervention, the Chair said he would recognize
the gentleman from Maryland for a brief statement. The point
is, when you are given a privilege, you don't abuse it, and
frankly, the Chair believes that what was occurring was an
attempt to abuse the privilege, and the Chair will exercise
every power and prerogative to the Chair when privileges are
abused. The gentleman from Maryland wish to make a comment?
Mr. Cardin. Thank you, Mr. Chairman, and Secretary
Thompson, I want to welcome you here, and thank you for your
leadership on TANF. I am the Ranking Member, as you know, on
the Human Resources Subcommittee. I look forward to working
with you on TANF reauthorization. I am an optimist, and I think
that the structure that you have brought forward gives us
latitude to reach a bipartisan agreement on TANF, and I thank
you for the leadership within the Bush Administration on this
area.
I particularly want to compliment you on trying to update
the illegitimacy fund to make it a constructive fund to help
American families with technical assistance and eliminating the
discrimination on two-parent families today. I think they are
both improvements. But as you said in your statement, but even
with those notable programs, much more needs to be done, and I
agree with you.
So it is time to take it to the next level. You suggest
that we add to the TANF legislation child's well-being. I would
suggest that you broaden that to poverty reduction, and the
reason I say that is that we have been reducing the number of
people on welfare much faster than American families have got
now poverty.
Still, now one in six children live in poverty, and you and
I know we need to do a lot better than that. So I would suggest
that as we work toward reauthorization, look at ways that can
help people get out of poverty, like the current restrictions
on vocational training need to be eased up, and the work
support programs, such as child care and wage supplements for
low-income families also need to be reviewed. So we need to do
more in resources. If we don't adjust the basic--there is a 22-
percent reduction, and I look forward to working with you. I
think with your leadership, we can work out a bipartisan
agreement, but it is going to take some more money. Thank you,
Mr. Chairman.
Chairman Thomas. You are welcome. The Committee rules have
been that the Chair and the Ranking Member make opening
statements. All other Members can submit written statements,
and the Chair will apologize to the Chair of the Health
Subcommittee and to the Chair of the Welfare Committee who
chose not to abuse the privilege, and the Chair appreciates
that.
And now, Mr. Secretary, once again it is a privilege to
have you before us. Your job is indeed a daunting one. There
are never enough resources, and unfortunately we haven't been
so creative as perhaps all of us would like in addressing a
very serious concern. But utilizing the resources you have with
the staff, very capable staff that you have surrounded yourself
with, we look forward to hearing your plans for the upcoming
budget year.
You have a written statement, I assume. It will be made a
part of the record, and with that you may address us in any way
you see fit. And I believe you need to turn that mirophone on.
STATEMENT OF THE HON. TOMMY G. THOMPSON, SECRETARY, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. Thompson. Thank you, Mr. Chairman, and good morning.
Good morning, Mr. Chairman, Congressman Rangel, Members of the
Committee. Mr. Chairman, thank you for your friendship and
support in my first year as HHS Secretary. Your counsel and
consideration have been both helpful and generous, and I
appreciate them very much.
Mr. Rangel, we may be an opposite sides of the aisle, but
we are on the same side when it comes to caring about the
health and well-being of every American. Thank you for your
leadership, and good work.
It is good to be with all the Members of this Committee
again. They had the opportunity to discuss the President's
Fiscal Year 2003 Budget for the Department of Health and Human
Services. Mr. Chairman, when I first appeared before you a year
ago to describe President Bush's ambitious agenda, I told you
that I accepted this job, because I wanted to help secure the
safety and welfare of the American people. Health security is
the ultimate goal of our efforts, and I believe that we are
reaching that goal to a degree never before in our history.
First, Mr. Chairman, let me review a few of our most
notable accomplishments. We responded quickly and effectively
to the terrorist attacks of 9-11 and the anthrax attacks that
followed. We made tremendous progress in providing health care
to lower income Americans. We provided 1400 waivers and State
plan amendments, expanding eligibility to about 1.8 million
people, over 300,000 in the State of California and over
600,000 in the State of New York, and we enhanced benefits to
4\1/2\ million individuals in America.
We have also committed substantial resources to community
health centers. Last year, I also committed to you to change
the way the Centers for Medicare and Medicaid Services (CMS)
work, and we are working every day to ensure you and this
Committee that the agency is run in the most efficient way
possible, in the most responsible way possible to this
Committee and other Members of Congress.
I applaud your work, Mr. Chairman and the Committees in the
areas of regulatory relief and contractor reform issues. The
President and I would urge your colleagues in the Senate to
move those important issues forward as well.
In addition, we launched a prevention initiative. We got a
new emphasis on organ donation and dramatically increased, with
your help and on a bipartisan basis, I might add, funding for
the National Institutes of Health. We strengthened the health
and well-being of American families, seniors and the
traditionally underserved populations. Our progress was
substantial, but of course it was not complete.
So this year the work goes on as we propose a balanced and
responsible approach to ensuring a safe and healthy Nation. At
the same time, this is a budget about priorities. As the
President said in his State of the Union message, our Nation
has no higher immediate priorities than defeating international
terrorism, defending our homeland and restoring economic
growth. So we must choose our priorities carefully, and I
believe the President is doing just that.
The President is providing unprecedented resources to
prepare for bioterrorist attacks against us, and he recognizes
that securing the safety and welfare of our country goes beyond
preparing for bioterrorism and protecting our borders. It goes
to the heart and the health of every American.
Mr. Chairman, the total HHS request for fiscal year 2003 is
$488 billion, almost a quarter of all Federal spending. This is
an increase of $29 billion, or 6\1/2\ percent over the
comparable fiscal year 2002 budget. The discretionary component
of the HHS budget totals $64 billion in budget authority. An
increase of $2.4 billion, or 3.9 percent.
Today, Mr. Chairman, I would like to focus on two groups of
Americans whose well being is of particular concern to all of
us as public servants, those who are struggling with continued
dependence on welfare, including the children and the young
people, as well as those older Americans who deserve a strong
improved Medicare system.
First, I will discuss the President's bold proposals for
the continued reform of the welfare system. As you know,
welfare reform has always been one of my greatest concerns. In
Wisconsin, we devoted substantial resources to helping
individuals get the training, health insurance, child care and
other services they needed to go from welfare to work. Welfare
reform has worked beyond expectations, resulting in millions
moving from the shackles of Aid to Families with Dependent
Children (AFDC) to the independence of work. Nearly 7 million
fewer individuals now are on welfare today than in 1996, and
2.8 million fewer children are in poverty because of welfare
reform.
In New York City, where employment loss is perhaps one of
the greatest concerns, there still were more than 53,000 job
placements for welfare recipients, from September through
December of last year. While the number of TANF recipients
increased briefly due to the terrorist attacks of September
11th, by December there were about 15,000 fewer individuals on
the TANF roles than in August. In fact, in December, there were
fewer individuals in New York City on welfare than at any time
since 1965, but we are not done. There is a clear and important
next step to welfare reform. The budget boldly takes that next
step, and I applaud the President for keeping us moving forward
in this historic endeavor.
The next step requires to work with States to help those
families that have left welfare, to climb the economic ladder
and become more secure in the workforce, as Mr. Cardin has just
indicated. And while doing so, we must not leave behind those
that are still in our caseloads. Our budget also provides
$16\1/2\ billion for block grant funding. It provides
supplement grants to address historical disparities in welfare
spending among States and strengthens work participation
requirements.
It also provides $100 million in broad demonstration
authority, focused primarily on encouraging stronger and
healthier families. Next, we will be submitting a proposal to
create a matching State grant program to strengthen families
and reduce out-of-wedlock births.
While this represents level funding for the TANF grant, in
reality, it provides money that States can spend on helping
workers remain in the work force. States will be able to apply
the savings gained from caseload reduction to new programs that
help workers thrive in the work force. We are giving States the
flexibility they need to creatively mix effective education and
job training programs with work, as well as money to strengthen
families and reduce illegitimacy. We hope to work closely with
all of you in Congress to more closely shape the next step in
welfare reform. In doing so, however, we cannot get away from
the foundation of welfare reform success, and that foundation
is work.
Work must remain at the core of TANF, for work is the only
way to climb out of poverty and become self sufficient, and we
must continue to make sure that work pays for families,
providing the proper child care and the proper health care
programs.
President Bush's budget helps in this regard by providing
another $350 million in Medicaid benefits for those in the
transition from welfare to work. I appreciate this Committee's
tremendous effort and want to recognize Mr. Herger's as well as
Mr. Cardin's bipartisan leadership, in particular, in support
of all of our initiatives to help America's families. Your
support was very evident recently as you advanced the
President's safe and stable families program, Mr. Herger,
through the legislative process.
The President's 2003 budget would increase funding for the
safe and stable families for this program to $505 million,
fully supporting the increased authorization included in this
new law which was supported on a bipartisan basis in this
Committee. These additional funds will be used to help move
children to adoption more quickly so that they become part of a
safe and stable family, as well as enhanced preventive efforts
to help families in crisis.
Our budget framework includes resources for a number of
additional programs targeted at protecting our most vulnerable
and at-risk children. The budget provides nearly $5 billion for
foster care, nearly $2 billion for adoption assistance, and $43
million in adoption incentive funds.
As we provide funding for programs and policies that will
enable adults to transition from welfare to work and to be able
to help ensure them a healthy start in life for disadvantaged
young people, we must not neglect our obligations to those on
the other end of life's horizon, our Nation's seniors. The
President's budget lays a firm foundation for meeting those
obligations, now and in the future, through a stronger Medicare
Program.
Right now, Medicare covers only 53 percent of the average
senior's annual Medicare expenses, and the program's benefit
package has not kept pace with advances in medication and
treatment. So the budget dedicates $190 billion over 10 years
for immediate improvements in comprehensive Medicare
modernization, including a subsidized prescription drug
benefit, better insurance protection and better private options
for all beneficiaries.
I know that some Members of Congress are concerned that the
$190 billion over 10 years is not enough, but we believe this,
amount is sufficient. The President and I will work with this
Committee and Congress to achieve that goal this year.
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. Let me assure you the President
remains committed to that framework and to bring the Medicare
Program up to date by providing prescription drug coverage and
other improvements.
The President and I are absolutely committed to providing
immediate assistance to seniors who currently have to pay the
highest prices for prescription drugs, and the policies we have
announced in the budget establish a framework necessary for a
Medicare prescription drug benefit. This budget proposes
transitional drug coverage for low-income seniors to help them
with high drug costs. The Federal Government will help States
provide comprehensive drug coverage up to 150 percent of
poverty, about $17,000 for a family of two.
This policy would eventually expand drug coverage for up to
3 million beneficiaries who do not now have prescription drug
assistance. It would be a mistake to address this issue in a
vacuum, however, which is why we propose that this program
should be integrated into the full benefit as quickly as
possible. But we don't need to wait to help now the most needy
seniors.
As you know, last year the President proposed the creation
of a new prescription drug card to reduce the costs of
prescription drugs for seniors. This year HHS will continue
working to implement a Medicare endorsed prescription drug
card, which will give beneficiaries immediate access to drug
discounts, hopefully up to 25 percent and other valuable
pharmacy services.
In addition, I announced several weeks ago a model drug
waiver program called Pharmacy Plus, to allow States to reduce
drug expenditures for Medicare beneficiaries and disabled
individuals with family income up to 200 percent of the Federal
poverty level, making it easier for States to take similar
steps to help their senior citizens who need help the most is a
goal we all must make.
The bottom line is that we need to enact a prescription
drug benefit this year, but it would be a mistake to address
prescription drugs in a vacuum. We must also make it part of a
comprehensive strengthening of Medicare, and I know you are for
that, Mr. Chairman, and I applaud you, securing the viability
of this popular program for our baby boomers and future
generations. We simply can't put the problems facing Medicare
off any longer. As I said a few moments ago, now is the time to
act.
The budget also includes an increase in funding to
stabilize the Medicare+Choice program by realigning payment
rates more closely with overall spending. Over 500,000 seniors
lost coverage last year, because Medicare+Choice plans left the
program. Today, about 5 million seniors choose to receive
quality health care through Medicare+Choice. Many seniors like
this option, and we must preserve it. And some of these
initiatives are immediate and tangible help to seniors, but let
me make it clear. These are not substitutes for a comprehensive
reform and a prescription drug benefit. Ultimately we must work
together on these broader issues, and I look forward to you,
Mr. Chairman, and other Members, to join you in this important
task.
Mr. Chairman, I know many Members of this Committee have
expressed concerns about Medicare payment systems, including
hospitals and physician payments. The President's budget
demonstrates that the Administration is willing to work with
you and Congress to address this issue. We agree that changes
should be made and believe that we must approach significant
changes carefully and consider all the provider payments, but
let me be clear: If increasing physician payments is on the
table, then we think adjusting other provider payments should
be as well.
I look forward to working with you, Mr. Chairman, and you,
Mr. Stark and your colleagues on this issue.
Finally, Mr. Chairman, the President's budget includes $89
billion in new health credits to help American families buy
health insurance. The program will support purchase of health
insurance, as well as affordable expansions in State and
Federal programs and will provide the States the kind of
flexibility they need to set up State-sponsored purchasing
pools to harness the economics of group purchasing.
The budget I bring before you today contains many different
elements of a single proposal, but binds them together as the
desire to ensure a safe and healthy America and to improve the
lives of the American citizens, while fostering the discipline
the state of our economy demands. All of our proposals, from
increasing access to health care for seniors and all Americans,
to protecting the Nation against bioterrorism, to investing in
biomedical research to supporting healthier communities, are
put forward with the single goal of building a safe and healthy
country.
I know this is a goal that we all share, and with your
support, we are committed to achieving it more fully in the
year 2003. Thank you again, Mr. Chairman, for letting me come
before you today. I look forward to answering your questions.
Chairman Thomas. Thank you very much, Mr. Secretary. And I
appreciate the comments and your remarks about being willing to
work with us, because frankly we have some difficulty with the
math, as it has been presented to us.
[The prepared statement of Secretary Thompson follows:]
Statement of the Hon. Tommy G. Thompson, Secretary, U.S. Department of
Health and Human Services
Good morning, Mr. Chairman and members of the 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 (HHS). 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. Our budget supports
the development and well-being of America's families; increases access
to health care; strengthens Medicare with a prescription drug benefit
and other improvements; and increases support for bioterrorism research
and preparedness, and supports the President's Management Agenda
through a number of management reform initiatives within the
Department. The President's budget also includes a $4 billion increase
for biomedical research at the National Institutes of Health (NIH).
This final installment of the President's five-year doubling is largest
year-to-year dollar increase that NIH has ever received.
Mr. Chairman, the total HHS request for FY 2003 is $488.8 billion
in outlays. This is an increase of $29.2 billion, or 6.3 percent over
the comparable FY 2002 budget. The discretionary component of the HHS
budget totals $64.0 billion in budget authority, an increase of $2.4
billion, or 3.9 percent. This committee has jurisdiction over much of
this budget. Allow me to highlight several important aspects of the HHS
budget.
STRENGTHENING AMERICA'S FAMILIES
President Bush has said that American families are the bedrock of
American society and the primary source of strength and health for both
individuals and communities. Our budget includes a number of new
initiatives that support this principle by targeting resources to
strengthen our nation's families. We look forward to working with the
Committee in considering the next phase of welfare reform and other
elements of the President's proposals to help America's low-income
families succeed.
Temporary Assistance for Needy Families
As a former governor, I can tell you that the Temporary Assistance
for Needy Families program--or TANF--has been a truly remarkable
example of a successful Federal-State partnership. States were given
tremendous flexibility to reform their welfare programs and as a
result, millions of families have been able to end their dependency on
welfare and achieve self-sufficiency.
Since 1996, welfare dependency has plummeted. As of September of
2001, the number of families receiving assistance, which represents the
welfare caseload, was 2,103,000 and the number of individuals receiving
assistance was 5,343,000. This means the welfare caseload and the
number of individuals receiving cash assistance declined 52 percent and
56 percent, respectively, since the enactment of TANF. Between January
and September of last year national caseloads actually declined about 2
percent, and while the July to September statistics indicate a slight
increase, the figures are still well below the previous year's caseload
levels. The general trend suggests the national caseloads are not
rising but, instead, have stabilized.
In New York City, where we are understandably most concerned about
job opportunities, they have achieved more than 53,000 job placements
for welfare recipients from September through December 2001. While the
number of TANF recipients increased briefly directly because of the
tragedy on September 11, by December there were about 15,000 fewer TANF
recipients on the rolls than there were in August. Indeed, in December
the City had its lowest number of persons on welfare since 1965.
Some other positive outcomes we have seen since the
law's passage include:
Employment among single mothers has grown to
unprecedented levels.
Child poverty rates are at their lowest level since
1978. Overall child poverty rates declined from 20.5 percent in
1996 to 16.2 percent in 2000. The poverty rate among African
American children declined from 39.9 percent to 30.9 percent--
the lowest level on record. The poverty rate among Hispanic
children declined from 40.3 percent to 28.0 percent--the
largest four-year drop on record.
The rate of births to unwed mothers has not
increased.
But even with this notable progress, much remains to be done, and
States still face many challenges. Last year, I held eight listening
sessions throughout the country to discuss the state of their TANF
systems and understand the new challenges they are facing. The states
overwhelmingly support this program. While keeping the basic structure
and purpose of the program, States, administrators, recipients,
employers, and advocates have provided valuable insight into where we
could make the program even more responsive to the needs of families.
In the near future, we plan to unveil our reauthorization proposal
to build on current successes of the program. Our reauthorization
proposal embraces the needs of families by maintaining the program's
overall funding and basic structure, while focusing increased efforts
on building stronger families through work and job advancement and
adding child well-being as an overarching goal of TANF.
Our budget proposes $16.5 billion each year for block grants to
States and Tribes; $319 million a year to restore supplemental grants;
$2 billion over five years for a more accessible Contingency Fund; and
a $100 million a year initiative for research, demonstration and
technical assistance primarily to promote child well-being through
strengthening family formation and healthy marriages. In addition, our
proposal will call for modification of the bonus for high performance
to reward significant achievement in promoting employment of program
participants.
We maintain State flexibility, but include important changes to
improve the effectiveness of the program. We will also expect States to
engage all families they serve and help them make progress toward their
highest degree of self-sufficiency--even those cases that may appear
hard to employ. We will eliminate the separate two-parent work
participation rates and give States more flexibility in designing
productive self-sufficiency activities while ensuring that the
participation rate requirements are meaningful. We will also ask States
to set performance goals for their TANF programs and report on their
progress toward meeting these goals.
I look forward to working with the Committee on reauthorization of
this hallmark program. I am confident that together we will witness
even greater achievements under the TANF program.
Other Programs Supporting TANF Goals
The President's budget also includes funding for several other
programs at the State and community level that work to support the
goals of TANF. The Job Opportunities for Low-Income Individuals program
(JOLI), provides grants to non-profit organizations to create new
employment and business opportunities for TANF recipients and other
low-income individuals. Our budget provides $5.5 million to continue
this valuable program. The Individual Development Account (IDA)
demonstration program similarly seeks to increase the economic self-
sufficiency of low-income families by testing policies that promote
savings for post-secondary education, home ownership, and micro-
enterprise development. The President's budget calls for almost $25
million to support IDAs. More broadly, the Social Services Block Grant
(SSBG) provides a flexible source of funding for States to help
families achieve or maintain self-sufficiency and provide an array of
social services to vulnerable families. The President's budget request
for SSBG is $1.7 billion.
Child Care
Child Care has played an important role in the success of welfare
reform by providing parents the support they need to work. The
President's budget recognizes this critical link and maintains a high
level of commitment to childcare. Continuing the substantial increase
in funding the Congress has provided over the last several years, the
President's budget includes a total of $4.8 billion in childcare
funding in conjunction with our request to reauthorize the mandatory
and discretionary funding provided under the Child Care Development
Block Grant and the Child Care Entitlement. States will also continue
to have significant flexibility under the TANF program and under the
Social Services Block Grant program to address the needs of their low-
income working families. These additional funding opportunities have
substantially increased the amount of resources dedicated to child care
needs. For example, in FY 2000 States transferred $2 billion in TANF
funds to the Child Care and Development Block Grant.
Child Support Enforcement
The Child Support Enforcement program offers another vital
connection to families' ability to achieve self-sufficiency and
financial stability. The President's budget proposes to increase child
support collections and direct more of the support collected to
families transitioning from welfare--goals this Committee has supported
vigorously. Under our proposal, the Federal government would share in
the cost of expanded State efforts to pass through child support
collections to families receiving TANF. Pass through payments enhance a
family's potential for achieving self-sufficiency while also creating
incentives for non-custodial parents to pay support and custodial
parents to cooperate in securing support. Similarly, States would be
given the option to adopt simplified distribution rules that ease State
administration but, more importantly, benefit families that have
transitioned from welfare by directing support otherwise retained by
the State and Federal governments to these families.
Overall collections would be increased by expanding our successful
program for denying passports to parents owing $2,500 in past-due
support, requiring States to update support awards in TANF cases every
three years, and authorizing States to offset certain Social Security
Administration payments when they determine such action would be
appropriate to collect unpaid support. Our child support legislative
package would also impose a minimal annual processing fee in any case
where the State has been successful in collecting support on behalf of
a family that has never received assistance.
Promoting Responsible Fatherhood
Helping custodial parents, generally mothers, collect support is an
important part of our efforts to assist America's families, but we
cannot ignore the critical role fathers play in the lives of their
children and families. Our budget includes a request for $20 million to
begin an initiative to promote responsible fatherhood by providing
competitive grants to organizations that work to strengthen the role
that fathers play in their children and families' lives. Faith and
community-based organizations and Indian tribes will be encouraged to
compete for these grants. These funds will be used to support programs
that effectively encourage responsible fatherhood and parenting skills
and to fund programs that promote successful parenting and healthy
marriages. We appreciate the support shown by Representative Herger in
introducing the President's proposal last September and look forward to
working with the Committee on its enactment.
Compassion Capital Fund
The President has been a leader in recognizing the important role
that charitable organizations play in delivering services to the
public, and we are proposing steps to increase Federal support for
these groups. Specifically, our budget seeks $70 million in additional
funds for the Compassion Capital Fund, for a total of $100 million.
These new funds will be used to expand the number of public and private
partnerships engaged in this critical effort and strengthen our ability
to identify those successful models for providing social services by
charitable organizations. Our budget also includes $1.6 million to
continue the Department's Center for Faith-Based and Community
Initiatives established under the President's Executive Order.
Promoting Safe and Stable Families
I appreciate this Committee's tremendous support for our efforts to
help American families, most recently your work shepherding through to
enactment the President's initiative to reauthorize and expand the
Promoting Safe and Stable Families Program. The President's budget
would increase the funding level for this program to $505 million,
fully supporting the increased authorization included in the new law.
These additional funds will be used to help promote and support
adoption so that children can become part of a safe and stable family,
as well as for increased preventive efforts to help families in crisis.
Our budget also supports the new authority for funding the
mentoring children of prisoners initiative included in the legislation
and advanced by the President in last year's budget. The budget
requests $25 million for grants to provide a range of activities to
mentor children of prisoners.
This landmark legislation also authorized a new program to provide
vouchers to youth who are aging out of foster care so that they can
obtain the education and training they need to lead productive lives.
The President's budget includes $60 million for these vouchers,
bringing the total request for the Foster Care Independence Program to
$200 million.
Child Welfare/Foster Care/Adoption
Our budget framework includes resources for a number of additional
programs targeted to protecting our most vulnerable and at-risk
children. Foster Care, Adoption Assistance, Adoption Incentives and
Child Welfare Services are designed to enhance the capacity of families
to raise children in a nurturing, safe environment. The President's
budget provides resources to help States provide safe and appropriate
care for children who need placement outside their homes, and to
provide funds to States to assist in providing financial and medical
assistance for adopted children with special needs who cannot be
reunited with their families, and to reward States for increasing their
number of adoptions. At the same time, the budget also supports Child
Welfare Services programs with the goal of keeping families together
when possible and in the best interest of the child.
The budget provides nearly $4.9 billion for Foster Care, $1.6
billion for Adoption Assistance, and $43 million in Adoption Incentive
funds. In addition, the President's budget seeks almost $300 million in
funding for child welfare services and training. Together, these funds
will support improvements in the healthy development, safety, and well
being of the children and youth in our nation.
Abstinence Education
The President's Budget proposes to reauthorize $50 million in
mandatory funding for Abstinence Education grants to States. These
resources complement Abstinence Education grants to community-based
organizations ($73 million). Both grants will continue to support the
message, through mentoring, counseling and adult supervision, that
abstinence from sexual activity is the only sure way for teens to avoid
out of wedlock pregnancies and sexually transmitted diseases.
Repatriation
Finally, our commitment to supporting America's families does not
stop at our borders. The President's budget seeks $1 million in funding
for the Repatriation program to assist U.S. citizens and their
dependents returning from foreign countries under extreme
circumstances.
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 changes.
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 seniors.
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
future.
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 comprehensive 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, last week, I 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 last week will give an estimated
368,000 low-income seniors new drug coverage. The model application I
have announced is easy to understand and use, and the Centers for
Medicare and Medicaid Services is working with numerous States--at
least 12--that have already expressed interest in this program. Making
it easier for states to take similar steps to help their citizens who
need help the most is the goal I believe we all share.
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.
EXPANDING ACCESS TO HEALTHCARE
President Bush and I also are proposing to improve the health of
the American people by taking important steps to fund health care for
the uninsured and create new tax supports to help purchase health
insurance. The President is proposing to combine new tax provisions to
help more Americans purchase health insurance with affordable
expansions of federal and state programs. Beginning in 2003, advance
credits will be available to individuals and families to directly
reduce their monthly premium payments for health insurance. We propose
to allow States, if they choose, to use pooling arrangements to give
these citizens even better options for their premium dollars. These
initiatives will go a long way in improving the well being of our
citizens and the quality health care they receive.
The President's budget also will increase and expand the number of
Community Health Centers, which provide family oriented preventive and
primary health care to over 11 million patients through a network of
over 3,400 health sites. About 40 percent of the patients treated at
health centers have no insurance coverage, and many others have
difficulty affording the care their insurance does cover. The FY 2003
budget will increase and expand the number of health center 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.
PROTECTING THE NATION AGAINST BIOTERRORISM
Mr. Chairman, as you may know, the Department of Health and Human
Services is the lead federal agency in countering bioterrorism. And
while this Committee's primary jurisdiction does not include
bioterrorism, I know all Members share my concern that we must better
protect our homeland from bioterrorism attacks. So, if the Committee
would permit, I would like to briefly touch on what this budget
proposes with respect to bioterrorism.
The President's FY 2003 budget request for bioterrorism is $4.3
billion, an increase of $1.3 billion, or 45 percent, $3.9 billion
excluding emergency funding provided through a supplemental
appropriation, and it underscores his commitment to providing the
Department with the necessary resources to protect the American people
from any biological or chemical attack. Our budget funds a wide variety
of bioterrorism prevention, identification, and response activities
that are administered through the Centers for Disease Control and
Prevention (CDC), the National Institutes of Health (NIH,), the Office
of the Secretary, the Substance Abuse and Mental Health Services
Administration (SAMHSA), the Health Resources and Services
Administration (HRSA) and the Food and Drug Administration (FDA).
The President believes, as do I, that state and local preparedness
must be a primary focus of our nation's bioterrorism protection
efforts. We have requested $1.5 billion, an increase of $406 million,
for planning and physical improvements to regional and local hospitals.
Additionally, our budget provides critical resources to state and local
organizations to improve laboratory capacity, enhance epidemiological
expertise in the identification, surveillance and containment of
bioterrorism-related diseases, improve electronic communication and
distance learning. The FY2003 budget also continues to provide $65
million in grants to states for the implementation of distribution
systems for pharmaceuticals deployed by the National Pharmaceutical
Stockpile
Our nation's hospitals, for example, must be capable of handling
the large number of patients that could result from a mass-casualty
incident, such as a bioterrorist attack. The President's FY 2003 budget
provides $591 million for hospital preparedness and infrastructure to
enhance biological and chemical preparedness plans focused on hospital
surge capacity and support a newly expanded focus on cooperative
training between public health agencies and state and local hospitals.
Our request will upgrade the capacity of hospitals, outpatient
facilities, emergency medical services systems and poison control
centers to care for victims of bioterrorism.
IMPROVING MANAGEMENT AND PERFORMANCE OF HHS PROGRAMS
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; centralize the public affairs and
legislative affairs functions; 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 line programs.
HHS continues to be at the forefront of the Government-wide effort
to integrate budget and performance. We were one of the first
Departments to add tables to its GPRA Annual Performance Reports that
provide summary tables that associate resource dollars and performance
measures HHS-wide. 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.
GOVERNMENT PERFORMANCE AND RESULTS ACT
HHS is committed to continual improvement in the performance and
management of its programs and the Administration's efforts to provide
results-oriented, citizen-centered government. The budget request for
FY 2003 is accompanied by annual performance plans and reports required
by the Government Performance and Results Act (GPRA). The performance
measures cover the wide range of program activities essential to
carrying out the HHS mission. Some notable FY 2001 achievements
include:
Reducing Erroneous Medicare Payments: CMS has
continued to reduce the payment error rate, cutting improper
payments from 7.97 percent in FY 1999 to 6.8 percent in FY 2000
and exceeding its targets in both years. CMS, with the
assistance of the Office of the Inspector General, is committed
to further reducing the error rate to 5 percent by FY 2002.
Moving Families Toward Self-sufficiency: ACF
reported that 42.9 percent of adult recipients of TANF were
employed by FY 1999. This is a primary indicator of success in
moving families toward self-sufficiency. It improves on the FY
1998 baseline of 38.7 percent and exceeds the target of 42
percent.
Families Benefiting from Child Support Enforcement:
The Child Support Enforcement program broke new records
nationwide in FY 2001 by collecting $18.9 billion, one billion
over FY 2000 levels. In one such initiative in FY 2000, the
government collected a record $1.4 billion in overdue child
support from Federal income tax refunds, and more than 1.42
million families benefited from these collections.
These are just a few of the dozens of impressive success stories
found in the 13 performance plans and reports. GPRA has been and will
continue to be an important part of our effort to improve the
management and performance of our programs.
WORKING TOGETHER TO ENSURE A SAFE AND HEALTHY AMERICA
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 and 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.
Chairman Thomas. As you know, I complimented you for
maintaining the Administration's position of $190 billion
through two budget years that look significantly different.
However, the budget that the House and the Senate were working
on had about $300 billion earmarked for this particular area,
Medicare reform and prescription drugs. And what I will request
of you is I will provide a written question to you, and so you
need not respond now and take the Committee's time up now. But
the question will run along these lines: You have in the budget
$190 billion for Medicare reform and prescription drugs. You
have outlined a program for low-income seniors that costs in
ball park of $75 to $80 billion. You have some modest savers in
the budget of about 5\1/2\ billion, but the Medicare+Choice
increase that you outlined is about 6.5 percent which is
somewhere in the vicinity of $3.7 to $4 billion. When you look
at the group that recommends changes to Medicare to us, MedPAC,
or the Medicare Payment Advisory Commission, we have before us
squarely the physician payment problem, both in terms of
formula and the dollar amounts which require a substantial cut
over 5 percent. If we are going to reinstate that, the ball
park budgetary figures that I am now getting is somewhere in
the vicinity of $80 billion.
The hospital recommendation was a full market basket update
for rural and disproportionate share hospitals. There is some,
then, pressure to go across the board with that kind of a
recommendation, just for rural and dish, it is about $6
billion.
There was a recommendation of increased payments to
dialysis facilities at about $3 billion. We still have that $15
billion home health sword hanging over our head that we need to
deal with. I have outlined, just in those areas of providers,
about $100 billion in payments.
This Committee, and indeed this House, has shown its
willingness to make tough decisions, but what we believe is
that as you are willing to work with us, decisions that are
very difficult in terms of payment adjustments between areas of
providers and new program initiatives, like drugs for seniors,
are going to require us linking our arms and working together.
And what this Chair would very much like is in response to the
very specific questions I will be asking you, where at all
possible, specific answers back as to a range of decisions that
the Administration would be willing to stand with the House on,
both in terms of provider payments and for areas of adjustment.
And I would hope that there would be a short turnaround on that
so that we can begin to construct the kind of increases in
payments, adjustments in other areas and initiatives in new
programs that not only seniors and disabled, but indeed all
Americans need.
Mr. Thompson. Mr. Chairman, I appreciate that, and I will
be looking forward to your letter. We will get a very quick
response to it. There is no question that this Administration
wants to work with you. I would like to point out quickly that
the $77 billion for Immediate Helping hand for prescription
drugs is, we anticipate would only be $7.7 billion. We expect
that after 3 years, it would be phased out and would be pushed
into the comprehensive Medicare drug benefit, and therefore you
would not use the balance.
We also believe that all the provider payment issues should
be on the table. I know Mr. Stark mentioned it. You have
mentioned it to me several times. I think that we are willing
to work with you. We are willing to look at it across the
board. There needs to be some changes. The law needs to be
changed. We can only implement the laws as they currently
exist, and we want to work with you, Mr. Chairman, and we
certainly will, and we think that we can come up with a
comprehensive package that will do what you want and what the
Administration wants on a bipartisan basis.
Chairman Thomas. Thank you, Mr. Secretary. And I do
appreciate your willingness to get it to me quick. My goal
would also that it be specific, and to the degree quickness
denies specificity, I will wait. But I would like to have a
very specific response.
The gentleman from California wish to be recognized?
Mr. Thompson. I am confident that if it is not specific, I
will hear directly from you, Mr. Chairman.
Chairman Thomas. Thank you, Mr. Secretary.
[The questions and responses follow:]
U.S. House of Representatives
Washington, DC 20515
February 8, 2002
The Honorable Tommy Thompson
Secretary
U.S. Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201
The Honorable Mitchell E. Daniels
Director
Office of Management and Budget
725 17th Street, NW
Washington, DC 20503
Dear Secretary Thompson and Director Daniels:
Thank you for testifying at the Ways and Means Committee this week.
We appreciate your hard work in developing the President's budget in
this difficult time for our Nation.
As we stated in the hearings, we commend the President for not
reducing the resources he devoted to prescription drugs and Medicare
modernization last year, notwithstanding the new realities of the war
on terrorism and an economic downturn, which has produced short-term
budget deficits. We share your commitment to ensuring that our seniors
and disabled beneficiaries receive the highest quality of care for a
price our taxpayers can afford.
The President's budget provides $190 billion over 10 years for
prescription drugs and Medicare modernization, of which $77 billion is
reserved for low-income drug assistance. The budget proposes spending
increases for private plans in Medicare of $4.1 billion. It also
proposes several modest savings proposals--competitive bidding for
durable medical equipment, Medigap reform, Medicare Secondary Payer and
Graduate Medical Education reform--which collectively total $6.5
billion. Hence, there is $116 billion remaining for prescription drugs
for all non-low income beneficiaries and Medicare modernization.
Although we believe $116 billion is insufficient for a comprehensive
prescription drug benefit, we assume you share our belief that none of
this money is intended for provider payment increases.
The Administration's budget includes a statement that any provider
payment adjustments must be budget neutral in both the short and long-
term. However, the Medicare Payment Advisory Commission (MedPAC), a
non-partisan advisory Committee of Medicare experts, recently
recommended provider payment changes that could collectively total more
than $174 billion over 10 years. The MedPAC recommendation for
reforming the physician sustainable growth rate alone would cost $128
billion according to the CMS actuary. Clearly, we are not suggesting
that we could afford, or that we should implement every MedPAC
recommendation. However, MedPAC has identified serious problems, such
as significant and successive payment cuts to physicians, which are
unsustainable and require reform.
Does the Administration believe Congress should address any of the
problems identified by the MedPAC (see attached list) with respect to
hospitals, home health agencies, physicians, skilled nursing facilities
and dialysis facilities? Please identify which provider problems you
believe merit Congressional action and which do not. Since the budget
calls for budget neutral payment adjustments, please provide a specific
list of Medicare savings recommendations, which can finance appropriate
provider payment changes.
Given the short legislative year, and our intention to act on
Medicare legislation this spring, we would appreciate a prompt and
detailed response to these requests.
Best regards,
Bill Thomas
Chairman,
Committee on Ways and Means
Nancy L. Johnson
Chairman,
Subcommittee on Health
Committee on Ways and Means
Enclosure: MedPAC Recommendations
______
------------------------------------------------------------------------
10 yrs billions
Medicare Payment Advisory Commission Recommendations of dollars
------------------------------------------------------------------------
Physicians
The Congress should repeal the sustainable \1\ $127.7
growth rate and replace it with the Medicare
Economic Index. The Secretary should revise the
physician productivity offset from -1.5% to -0.5% to
reflect the productivity of all costs rather than
just labor. The resulting update for 2003 is 2.5%...
Hospitals
The Congress should phase out the * 15
difference in the inpatient national rates between
hospitals in MSAs > 1 million and hospitals in all
other areas starting in 2003. In the first year, the
update for hospitals in MSAs < 1 million and rural
areas should be increased 0.55%.....................
Rural Hospitals
The Congress should revise the Medicare \2\ 1.8
Disproportionate Share payment formulas so that the
payments for rural and small urban hospitals are
capped at 10% rather than 5.25%.....................
Skilled Nursing Facilities
If refinement of skilled nursing payment \3\ 10
system is adopted by the Secretary as planned,
Congress should fold-in the resource utilization
group (RUG) add-on payments into the skilled nursing
rates...............................................
Home Health Agencies
The Congress should update home health
payments by market basket for FY 2003. (Current law
is mb-1.1%.) The Congress should retain the 10%
bonus payments for rural home health agencies.......
The Congress should eliminate the 15% *2
adjustment to home health payments, which otherwise
would result in a 4% to 7% reduction in payments....
Dialysis Facilities \4\ 17
The Congress should update dialysis *0.5
payments by 2.4% in 2003............................
------------------------------------------------------------------------
TOTAL................................................ 174
------------------------------------------------------------------------
\1\ Office of the Actuary, Centers for Medicare and Medicaid Services
(CMS), February 7, 2002.
\2\ Medicare Payment Advisory Commission, February 7, 2002.
\3\ CMS, Health Care Industry Market Update, February 6, 2002.
\4\ Congressional Budget Office (CBO), January 2002.
* Estimates based on BBRA, BIPA and discussions with CBO, February 6,
2002.
______
U.S. Department of Health and Human Services, and
Office of Management and Budget
Washington, DC 20201
March 14, 2002
Hon. Bill Thomas
Chairman
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515
Hon. Nancy L. Johnson
Chairman
Subcommittee on Health
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515
Dear Chairman Thomas and Chairman Johnson:
Thank you for your letter to the two of us regarding the
President's budget and the ways Congress could adjust Medicare payments
to health care providers in a budget-neutral fashion. We know you share
the Administration's dedication to better meeting the health care needs
of elderly and disabled Americans, and appreciate your longstanding
interest in and untiring dedication to these important issues.
President Bush believes that the Nation has a moral obligation to
fulfill Medicare's promise of health care for America's seniors and
people with disabilities. Medicare has provided this security to
millions of Americans since 1965. However, as Medicare's lack of
prescription drug coverage demonstrates, Medicare is not keeping up
with rapid changes in the way health care is delivered or with benefits
available in the private health insurance market.
To ensure that Medicare continues to provide our Nation's elderly
and disabled secure access to modern health care, the President's
Fiscal Year (FY) 2003 Budget renews his commitment to comprehensive
Medicare modernization with integrated prescription drug coverage. His
proposal is based on the framework for bipartisan legislation that he
proposed in July 2001. Specifically, the President's budget proposes to
invest $190 billion in Medicare to modernize the program by improving
health insurance plan options that include prescription drug coverage.
We agree with you completely that all of the new funding should be used
for the President's top priority of improving the coverage options
available to beneficiaries, including prescription drugs, and not for
increasing payments to fee-for-service Medicare providers.
The President's top three goals for improving Medicare include
quickly phasing in assistance with drug costs for Medicare
beneficiaries, sustaining and enhancing the options available to
beneficiaries in Medicare+Choice,, and strengthening and modernizing
the Medicare Program. This includes transitioning low-income
prescription drug assistance into a drug benefit that serves all
Medicare beneficiaries and adding new plan options for beneficiaries
and updating the benefit package. Many of these improvements, such as
full implementation of a prescription drug benefit, will take several
years to set up. The needed improvements identified in the President's
budget can begin to take effect sooner by building on existing
programs.
We agree with you that the current administrative pricing system
creates extremely complex provider payment systems that do not always
function smoothly or equitably. In our view, these problems further
underscore the need for the President's priority of fundamental
modernization of the Medicare program. We believe the primary focus of
the Congress should be on strengthening and modernizing Medicare, not
on revamping outdated, overly complex payment systems.
While we appreciate the work the Medicare Payment Advisory
Commission (MedPAC) has put into developing their proposals, we do not
believe these ideas are the appropriate starting point for a discussion of Medicare provider payments.
We have no compelling evidence that there is a problem with the
overall adequacy of provider payments, although we recognize that
recent short-term adjustments have been substantial in the system
Medicare uses to pay physicians. For example, while home health
services are vitally important to the Medicare program, home health
spending is expected to rise by over 42 percent this year and 12
percent next year, and this includes the adjustment to payments already
scheduled in current law. And although certain provider payments may
benefit from adjustment, we believe such adjustments can be
accomplished without draining new funds that are even more urgently
needed for improving Medicare benefits.
In the context of moving forward on our shared goal of modernizing
and strengthening Medicare, the Administration is willing to work with
Congress to consider limited modifications to provider payment systems
in order to address payment issues. Most importantly, as we all
consider changes to payment systems, we need to be cautious and recall
that any increases in spending will be borne, in part, by beneficiaries
in the form of higher premiums and coinsurance payments.
Therefore, while the President's Budget did not contemplate any
particular provider payment changes, we are willing to consider limited
adjustments to payment systems and to work with you to develop a
comprehensive package that is budget neutral across providers. We will
not support any package of provider payment changes unless it is budget
neutral in the short- and long-term. To this end, we recognize that
some provisions in law that, in the past, have restrained growth in
payments are about to expire, and extension of these provisions is one
potential way to ensure a budget-neutral package of reforms.
We believe it is possible to develop a fiscally responsible package
of provider payment adjustments that remain budget neutral. We are
happy to begin to work with you to provide technical support for such a
package if you desire. Enclosed is some additional information on
various provider issues that we hope will be useful in our continuing
discussions of these issues.
We look forward to working with you to advance the priorities of a
prescription drug benefit, a strengthened Medicare+Choice program, and
a modernized Medicare program, while also pursuing the issues
surrounding modifications to provider payment systems.
Sincerely,
Tommy G. Thompson
Secretary
Mitchell E. Daniels, Jr.
Director
______
Administration's Views on Various Provider Payment Issues
Physician Payment Update
The current system for updating Medicare's payment for physician
services was originally established in law in 1989, and has been
adjusted a number of times since then, eventually resulting in the
Sustainable Growth Rate (SGR) system that is used today. In general,
Congress' goal for the payment system was to restrain unsustainable
growth in physician payment under Medicare. The system has been working
precisely as designed. Between 1997 and 2001, Medicare physician
spending increased from 17.6 percent to 20.5 percent of total Medicare
fee-for-service spending. Moreover, physician spending continued to
increase, growing 5.3 percent in 1999, 10.7 percent in 2000, and 11.2
percent in 2001, far outpacing inflation in the broader economy.
Last year, a number of factors combined to cause the physician
payment formula, as set in law, to produce a negative update. First,
there has been a downturn in the economy, which affected the SGR
because it is tied to estimates of the nation's Gross Domestic Product
growth per capita. Second, actual cumulative Medicare spending for
physicians' services in prior years was higher than expected. Third,
information on services that were not previously included in the
measurement of actual expenditures was now included. Had this
information been captured in the measurements originally, spending
increases would have been 5.9 percent in 2000, and 9.7 percent in 2001,
rather than the respective 10.7 and 11.2-percent increases mentioned
above. Counting these previously uncounted actual expenditures, as
required by law, contributed to this year's negative update to
physician payments. However, despite the negative update, overall
Medicare physician spending is not projected to decrease this year. In
fact, as the Congressional Budget Office (CBO) noted before Congress
two weeks ago, program spending increases by 5.9 percent in 2002.
While a formula that produces these payment fluctuations year-to-
year should be reviewed, the underlying system is sound and effective.
As CBO Director Dan Crippen concluded in his testimony before Congress:
``In considering whether to change the current system for setting
Medicare physician payments, the Congress confronts the prospect of
reductions in the fees paid per service for the next several years.
MedPAC's recommendation would increase the Federal government's
spending for physicians' services under Medicare by $126 billion over
the next 10 years. In contrast, other approaches might have the
potential to lessen the volatility in the update without dismantling
the mechanism for linking physician fees to total spending for
physicians services or growth in the economy.Changes that increase
Medicare payments to physicians will increase Federal spending.
Incorporating higher fees for physicians' services into Medicare
spending as currently projected would add to the already substantial
long-range costs of the program and to the fiscal challenge to the
nation posed by the aging of the baby boomers. Raising fees would also
increase the premium that beneficiaries must pay for Part B of Medicare
(the Supplementary Medical Insurance program). Inevitably, over the
long run, higher spending by Medicare for physicians' services will
require reduced spending elsewhere in the budget, higher taxes, or
larger deficits.''
We believe that considerations of sustainability and of our other
urgent priorities in Medicare argue strongly that, if changes in the
physician payment system are undertaken this year, they should be
undertaken carefully and implemented in a way that does not
significantly worsen Medicare's long-term budgetary outlook. The
Administration supports reforms in physician payment that lessen
volatility, and further believes that any short-term payment problems
can be addressed at a much lower cost than the MedPAC recommendation
implies.
Home Health
The President's budget also assumes no further delay in the
implementation of the ``15-percent reduction'' in home health interim
payment system (IPS) limits. As you may know, this reduction is
somewhat of a misnomer. It does not translate into an across-the-board,
direct cut in Medicare payment rates for home health services, as many
have described it. Rather, the 15 percent reduction is a decrease in
the payment caps under the old IPS. The actual percentage reduction in
payments that will result from lowering the limits is much less. In
fact, the CMS actuary estimates that the 15 percent reduction will only
reduce payments to home health agencies by about 7 percent, not 15
percent. Further, after the PPS rates are reduced by 7 percent, we
would apply the home health update (currently estimated to be 2.1
percent), leading to a net reduction of approximately 4.9 percent.
Home health spending is expected to rise by 42 percent for FY 2002.
Even if the 15 percent adjustment occurs, we estimate that home health
spending would increase 12 percent in FY 2003, 8.3 percent in FY 2004,
and 7.8 percent in FY 2005. Therefore, we do not support a repeal of
the 15 percent adjustment in the caps.
Skilled Nursing Facilities
Prior to the enactment of the Balanced Budget Act 1997 (BBA), many
nursing home companies were expanding rapidly, taking on significant
debt, and leveraging themselves heavily for acquisitions of new homes
and allowing their debt-to-equity ratios to escalate steeply. That
strategy backfired on many of the industry's biggest companies when the
nursing home industry came under financial pressure resulting from the
implementation of the Prospective Payment System for skilled nursing
facilities (SNFs) and other Balanced Budget Act 1997 provisions. As a
result, Congress passed two laws to provide some relief. The Balanced
Budget Refinement Act of 1999 (BBRA) and the Medicare, Medicaid, and
SCHIP Benefits linprovement and Protection Act of 2000 (BIIPA) required
three Medicare payment ``add-ons:'' a 4-percent increase in per diem
rates; a 16.66-percent increase in the nursing component of each
Resource Utilization Group; and a 20-percent increase for certain
categories of high-cost, medically complex patients. The first two add-
ons expire on October 1, 2002. The third will expire when FIRS
implements a case-mix refinement rule. The Administration is currently
moving forward in its development of this refinement rule.
The President's budget proposal reiterates the administration's
commitment to paying SNFs fairly and appropriately for the delivery of
services to Medicare beneficiaries. CMS recently explored the fairness
and appropriateness of Medicare SNF payments in the February 6, 2002,
Health Care Industry Market Update--Nursing Facilities. While we surely
want to avoid overpaying any of our providers, we also must be
sensitive to their funding needs in order to maintain high quality
services. We are willing to continue to review the substantive
justification for modifying SNF payments with the Committee.
Hospital Updates
Under the President's budget assumption, inpatient hospital
payments for FY 2003 would follow current law and be updated by the
market basket, which accounts for inflation in the factors that
contribute to the costs to provide hospital services, minus 0.55
percentage points. Under current law, the update beyond FY 2003 would
be equal to the full market basket. Since the inception of the
inpatient prospective payment system (PPS), hospitals have received a
full market basket update only once in FY 2001. Since FY 1984 hospitals
have received on average approximately 60 percent of the market basket
forecasted increase. Even so, since the early 1990's, the Medicare PPS
inpatient margin has risen sharply from 1.3 percent in FY 1993 to a
historical high of 16.0 percent in FY 1997. Although there was a
decrease in FY 1999 to a 12.4 percent margin, the Medicare inpatient
hospital margins have begun to increase again. In addition, since the
early 1990's, there has been a significant drop in the number of
hospitals with negative inpatient margins. In FY 1991, 61.2 percent of
hospitals had negative inpatient margins compared to approximately 25
percent in FY 1999.
The stabilization of overall hospital margins in recent years
suggests that, overall, the restrictions on market basket increases of
recent years have not resulted in inadequate hospital payments.
Reasonable and modest limits on hospital market basket updates would
appear to provide adequate reimbursement for hospitals. Modest limits
below full market basket updates could be linked to continued careful
review of Medicare hospital margin data to ensure that margin problems
do not worsen, and certain hospital types that show clear evidence of
negative and declining Medicare margins could be monitored closely for
special consideration. The Administration believes that the savings
from such measured changes in hospital payment updates could be more
than adequate to finance reasonable net increases in total payments to
physicians.
There are market updates for other providers that were established
in the Balanced Budget Act 1997. To help restrain spending growth, you
could also consider extending market basket update reductions to the
calculations for other prospective payment systems.
We are prepared to provide further technical guidance to the
Committee whenever it is requested.
Mr. Stark. Thank you, Mr. Chairman. In an effort to get
back in the good graces, I will ask three quick questions, Mr.
Secretary, and then you can take as long as you want to answer
them. Then we will see how that works.
First of all, I have a question about the issue of
providing medical services to low-income pregnant women. It is
my understanding that under the rules laid down by President
Clinton that are still in effect, that it is possible now to
cover pregnant women under the children's health insurance
program or other programs. Therefore, it would be not necessary
to define a fetus as an unborn child and enter into that
argument area that will only separate many of us on issues
other than health care.
The second issue is that you state that Medicare+Choice is
underpaid, and that is very popular with the Medicare+Choice
lobbyists. The facts that I look at are that Medicare+Choice
payments have increased 25 percent since 1997, while Medicare
has only gone up in costs of 21 percent per capita under the
total cost of Medicare. The U.S. General Accounting Office
(GAO) tells us in its latest study that HMOs or Health
Maintenance Organizations, Medicare+Choice plans, are overpaid
as opposed to traditional Medicare.
So in the face of lower increase in per capita and the
GAO's study that we are already overpaying them, I would be
curious to know why you think that they are underpaid.
My third question is an attempt to elicit from you your
commitment, and this is prospective. It appears--and the
Chairman will blame this on the democratically controlled
Senate--but it does appear that there may not be a tax bill
this year. If the Senate doesn't bring it up and if your budget
mavens on your side of the aisle decide that that is an issue,
there is $600 billion leftover in the budget. If that is the
case--these are a lot of ifs--would you commit your personal
battle to get half of that, $300 billion, into Health and Human
Services so that we could use it for Medicare drug benefit and
TANF benefits? Those are my three questions.
Mr. Thompson. Well, Congressman Stark, let me tell you the
last one. Sure I will fight for anything I can get into
Department of Health and Human Services. There is a lot of
assumptions there that have to fall into place.
Mr. Stark. I understand.
Mr. Thompson. But if there is $600 million, I think I would
only fight for 25 percent because that is what we usually get,
but I will fight for that very hard.
Mr. Stark. Start high. We will take it.
Mr. Thompson. We have got a lot of needs that we could use.
The second question in regards to the unborn, there is an area
that really pregnant women are not covered for prenatal care,
and you know----
Mr. Stark. But they can be under current law.
Mr. Thompson. No, there is not. Under existing law, there
is--unless the State applies for the waiver.
Mr. Stark. Right.
Mr. Thompson. If the State applies for the waiver. We
thought it was easier, because this is a group of individuals
that we really wanted to serve, and I didn't want to get into a
pro-life and a pro-choice battle. I want to serve low-income
women and give them the prenatal care because we, you and I and
everybody on this Committee wants healthy babies. And I think
that we can achieve that. I know it got turned around and got
into this, and the rule is going to be out there.
We are going to have a chance to work on the rule.
Hopefully we can mitigate some of the harshness, the rhetoric
out there and be able to come up with a compromise that is
going to be able to allow for low-income women to get prenatal
care. That is my ultimate objective. I am pledged to that, I am
passionate about it, and I want to accomplish that. There is a
group of women out there that are not getting the coverage and
they need it.
In regards to Medicare+Choice, according to all of our
indications you look at it, there is only 14.2 percent of the
Medicare population now being covered by Medicare+Choice. We
lost coverage for 500,000 individuals last year, some in
Milwaukee in the State of Wisconsin, a city that----
Mr. Stark. What happens to the county executive? Will he
get covered with that modest pension he is going to get in
Milwaukie?
Mr. Thompson. The executive did not qualify for this
particular plan. He had his own health insurance plan, and
knowing that you come from that area, Congressman Stark, you
are fully familiar with it and so on. But it always appears
from all of the indications that Medicare+Choice plans are the
ones that are losing. That is why the President wanted to
stabilize it; I wanted to stabilize it. That is why the
additional money was placed in there. And I think that it is
the right thing, because the people that are in Medicare+Choice
plans really like them. We would like to be able to continue
that choice, even though it is a declining amount. There are
only 14.2 percent, as I indicated, of the population currently
covered by Medicare+Choice. Those are my answers, Mr. Chairman.
Chairman Thomas. The gentleman's time has expired. Does the
gentleman from Illinois wish to inquire?
Mr. Crane. Yes. Thank you, Mr. Chairman. Mr. Secretary, let
me start off by saying that I commend your efforts to move a
prescription drug benefit and modernize the Medicare program.
That said, I think we all recognize that this is the first year
that the baby boom generation shows up in the 10-year budget
window for Medicare. Your budget states that the part B deficit
overwhelms the surplus and part A revenues, a shortfall that is
projected to be $46 billion in fiscal year 2003 and $553
billion over the next 10 years. Given the Congressional Budget
Office (CBO) and Office of Management and Budget (OMB)
baselines for Medicare spending, it is clear that the program
is expending tremendous revenues annually.
The budget also states that many payment policies need to
be reformed, and you have proposed to do it in a budget-neutral
manner. Frankly, I believe this program is in need of
fundamental reforms. However in the absence of achieving
fundamental reforms, how can we change those policies in order
to keep up with the increase in health care expenditures in a
budget-neutral manner?
Mr. Thompson. Basically, Congressman Crane, I agree with
you. We have to--we have to make some structural changes in all
of these programs, and that is what we want to do. We want to--
we are going to answer the questions in written form by the
Chairman, and we are going to come back with suggestions on how
we might be able to modify them, and we also believe that we
should put prescription drugs in. We are putting an additional
$190 billion in to accomplish that. We are putting in Immediate
Helping Hand by allowing States to get a 90/10 match for 100
to150 percent poverty, and we think that is very important,
especially for that.
On the assumptions, we believe that our assumptions are
correct. And we think the assumptions the Medicare expenditures
on the baseline are going to be lower than what CBO has, and
CBO, of course, as we all know, will correct those figures in
March of this year, but as of right now, based upon our
assumption, based upon our experts, which this Committee has
used on a bipartisan basis in the past, we feel that our
assumptions are very correct.
Mr. Crane. Mr. Secretary, as regards temporary assistance
for needy families, it is my understanding that caseloads have
been reduced in excess of 50 percent over the last 5 years,
which is certainly very good progress. According to your report
in fiscal year 2000, work efforts among current welfare
recipients were three times its 1996 levels. As you know, this
Committee will work to reauthorize TANF this year, and I am
confident that we will further reform the program in such
manner as to reduce caseloads even further across all 50
States.
You are certainly an expert in this field, and my question
to you is this: Given the aforementioned progress the States
have made in reducing caseloads, and given the prospects by
which caseloads will be reduced in the near future, do you
believe that we need to send $16.7 billion to the States this
year rather than staying level? Shouldn't the amount in the
budget be going down each year?
Mr. Thompson. I really sincerely believe that we should
have level funding, Congressman. I will tell you why. Fifty
percent of the cases remaining are going to be the hardest to
place. These are individuals that have a lack of education, a
lot of those individuals have one or more drug problems,
alcoholic problems. Several have not finished school. Several
have not worked and you are going to spend more money on those
particular cases, integrating them into the work force. That is
point number one.
Point number two, you want to be able to use some of this
money, and what we are asking for this Congress to give us is
allowing the States more flexibility to use some of their
excess dollars to put in to work assistance, to be able to help
workers be able to go up the economic ladder, and that is
expensive. It requires training. It requires education. It
requires a lot of assistance in order to move people up the
ladder, because these are individuals that have been poorly
trained in the past or no training at all.
The third thing you want to do is you want to be able to be
sure the money--up to 30 percent of the TANF grant can go into
child care. We think this is a very important thing to provide
for quality child care and be able for those children to be
able to have a good start in life. To me, all of these things
argue for level funding, and I know I argued with OMB for level
funding. I know some people think there should be more money.
Other people think there should be less. I think it is just
right. I think what we need to do is continue to move forward,
move to the next level, the next plateau, refine TANF, make it
even better, and get more people off the roles. We must give
people the opportunity to move up the economic ladder.
Mr. Crane. Thank you, Mr. Secretary, and we look forward to
working with you.
Chairman Thomas. I thank the gentleman. The gentlewoman
from Connecticut wish to inquire of the Chair of the Health
Subcommittee?
Mrs. Johnson OF CONNECTICUT. I thank you very much.
Welcome, and thank you for being here. Secretary Thompson, do
you support privatizing Medicare?
Mr. Thompson. No.
Mrs. Johnson OF CONNECTICUT. I want that heard loud and
clear. I am Chairman of the Health Subcommittee. I do not
support privatizing Medicare, and I am sick and tired of this
partisan divide that some are trying to create between those
who want to privatize Medicare and those who don't. I don't
know anyone who wants to privatize Medicare. We have an
obligation. We have taken it on by law and we intend to fulfill
it in Social Security and Medicare to provide retirement income
security seniors and retirement health care security to
seniors, and I know no one who supports privatizing Medicare,
and I want the record to note that very clearly.
I do, though, want to make two comments, and one short
question. First of all, I appreciate, Secretary Thompson, that
you have acknowledged that this body, not the House, because we
will bring forward another prescription drug bill. We are
committed to that. Seniors need it, modern health care can't
proceed without prescription coverage. We have done it once. We
will do it again, and with it will come some very significant
modernization of the Medicare program and justice for a lot of
our providers through the administrative reforms that we passed
here already once.
So I believe we can make significant progress in the House
on improving the quality of the Medicare Program, as well as
including prescription drugs. I am less optimistic that the
Senate will be able to act.
So I am very impressed that you have, through your budget,
laid out the way we can, through the government, increase
access to prescription drugs for our seniors, freeing up
valuable Federal dollars so that we can subsidize senior
prescription drugs to higher income people in higher cost parts
of the State like Connecticut--of the Nation like Connecticut.
And that through your effort to provide a discount card are
going to really be able to move manufacturer discounts down to
all seniors.
If you do that, you will help every senior significantly
and low-income seniors tremendously, and I hope that we will
move through the House and Senate a prescription drug bill that
then can assure that this will become a Medicare benefit in 2
or 3 years, but since it takes two or 3 years for our plan to
be implemented, I am very glad that I see in your budget this
commitment to meeting seniors' needs now and that also in your
budget, it is loud and clear the need to move forward on health
care for the uninsured.
That much said, I do want to just correct a fact that was
stated earlier by the Ranking Member, Mr. Stark, about the
Medicare choice programs, because, again, you are committed in
your budget to helping us fix the problems. Sixty-five percent
of seniors in America that get the valuable benefits, I mean,
if they weren't valuable, we wouldn't see so much complaining,
would we?
Mr. Thompson. No.
Mrs. Johnson OF CONNECTICUT. Sixty-five percent of those
seniors live in areas where Medicare choice plans have gotten a
14-percent increase since 1998 as opposed to the 21-percent
increase that fee-for-service patients have received. No wonder
these plans are having difficulty. These skewed results that my
colleague referred to that makes it look like the choice plan
has got more results from the artificial floor that the Senate
and the House passed for rural counties.
So the money is going to areas where there are no people,
and the areas where there are people, benefits from these
programs are being starved. This is our only means, our only
means as a Congress to help seniors deal with the challenge of
multiple chronic illnesses. And managing those chronic
illnesses is high on my agenda, so I am very glad to see you
are so committed to helping us fix the Medicare+Choice plans.
As for my question, I will just refer to it because I am
not going to give you time to answer it clearly, but I wanted
to get these issues on the table.
My question is really the Chairman's question. It is
unconscionable for the government to drive capable physicians
out of practice, and we cut their reimbursements this year
because we have an arbitrary formula in place that I was on the
Committee when we passed it, and I am proud to say I opposed
it, because it is the only payment system that is tied to
economic growth and it is the only payment that caps volume.
So if you are an internist and you see more seniors because
we have more seniors and they are living longer, your
reimbursement gets cut. It is absurd, but we are in this
terrible position that to fix what is an absurd law that was
passed when I was on the minority side of the Subcommittee, I
might add, and opposed, I have got to get that in there,
because it is so important, when--to fix that now under the
current circumstances is going to be extraordinarily expensive,
and that is only one of the very big payment problems we have.
But 2 years ago, 45 percent of our doctors felt Medicare
was treating them unfairly, and 2 years later we are in very
deep trouble in terms of the quality of care that is going to
be available to our seniors if we don't act. So thank you for
listening. We do have our work cut out for us and I look
forward to working with you.
Mr. Thompson. Thank you very much, Congresswoman Johnson,
and I thank you for your questions and your comments. I
couldn't agree with you more, with your statement. There is no
intention whatsoever to privatize Medicare or Social Security
in this Administration or me personally. We certainly want to
make sure Medicare+Choice is able to survive. As most people
that have Medicare+Choice like it--would like to be able to
continue it. I think it is the right thing to do. In regards to
provider payments, I think we have to look at all of them. The
physicians' payment is the only one, as you indicate, when the
economy goes down, they get cut. When the economy goes up, they
get an increase. It doesn't make much sense, and so hopefully
we can change that. But we have to implement the law as it is
written, and therefore we will work with you on a bipartisan
basis and you specifically, Congresswoman Johnson, because you
have taken the lead in this along with the Chairman, we want to
be able to try and correct this, and we will do everything we
possibly can to assist you.
Chairman Thomas. I thank the gentlewoman. The gentleman
from Pennsylvania, Mr. Coyne wish to inquire?
Mr. Coyne. Thank you, Mr. Chairman. Mr. Secretary, as you
know, the State of Pennsylvania conducts the--administers the
Program of All-Inclusive Care for the Elderly (PACE), which is
a highly effective.
Mr. Thompson. Right.
Mr. Coyne. Pharmaceutical----
Mr. Thompson. It is one of the best ones, Congressman.
Mr. Coyne. And I am just wondering how the new program that
is being proposed by your Administration at Health and Human
Services is going to interface with the program that we have
already in Pennsylvania.
Mr. Thompson. It would be extremely helpful to the State of
Pennsylvania Congressman. Once the State pays 100 percent of
the PACE Program, then for the 100 to 150 percent, the State of
Pennsylvania would receive 90 percent payment and be able to
expand their program, probably get some reimbursement dollars
out of it. It would be very helpful to the State of
Pennsylvania. It would be directly integrated. Pennsylvania
would apply for the program, and they would certainly--it would
certainly be granted because of the PACE Program is one of real
stars out there for prescription drug coverage as you know.
Mr. Coyne. So there would be no problem with the State
applying to the Federal Government to go beyond the current----
Mr. Thompson. No. It is our intention that it would build
upon the PACE Program and allow them to go the next step. It
may even allow for the State of--the State of Pennsylvania to
get some dollars.
Mr. Coyne. Thank you.
Mr. Thompson. Okay.
Chairman Thomas. I thank the gentleman. The gentleman from
New York, wish to inquire?
Mr. Houghton. Thank you, Mr. Chairman. I am going to give
you a Christmas present early. I am not going to ask you a
question, but I do have several questions that I would like to
refer to you, and I will put them in writing.
Mr. Thompson. Thank you.
Mr. Houghton. I just wanted to say that, you know, we are
dealing with probably the most difficult issues in our
government, you know, the whole concentration on the budget and
on terrorism and everything is absorbing our time. But what you
are doing I think is extraordinary. You bring clarity of mind.
You bring purpose. You are supporting the present. I think you
are doing a great job. Thanks very much.
Mr. Thompson. Thank you, Congressman. That is the best
question I have ever received in this Committee, and I thank
you very much.
Chairman Thomas. The gentleman's time has expired.
Mr. Thompson. I wish his question could keep going on, Mr.
Chairman.
Chairman Thomas. The gentleman from California, Chairman of
the Human Resources Subcommittee, Mr. Herger wish to inquire?
Mr. Herger. Thank you very much, Mr. Chairman. I would like
to continue on that best question that you ever received. Mr.
Secretary, I want to thank you for the work that you have done.
Mr. Thompson. Thank you.
Mr. Herger. It is a pleasure as Chairman of the Human
Resources Subcommittee to be working with you in reauthorizing
welfare reform for the next 5 years. It is a pleasure to be
able to work with a program that is probably arguably the most
successful program in the last generation, one which is unlike
the old AFDC welfare program where we saw caseloads increasing
even during prosperous times of the 1980s. We have actually
seen the caseload decrease by, as was pointed out, more than 50
percent, and even in your State, I understand, in Wisconsin, it
has been reduced by even more than 90 percent, talking with
you. I want to thank you for--and at the same time, I might
mention the poverty levels have been going down.
Mr. Thompson. That's right.
Mr. Herger. The poverty levels for children, have been
decreased by more than 2 million during this period of the
TANF, Temporary Assistance to Needy Families, reform. You have
already answered--responded to one of the questions I had, and
that is on the funding level.
Mr. Thompson. Yes.
Mr. Herger. In responding to the gentleman from Illinois,
there are many who talk--who mention to me that with the roles
decreasing by more than 50 percent, shouldn't we be reducing
the funding? And I believe you responded to that. You made the
comment that we cannot do welfare reform on the cheap, yet we
have others who would come to me and say we need to increase it
by tens of billions of dollars, and it would seem to me that we
are being very generous on maintaining the level of $16.5
billion spending, considering the roles have decreased by 52
percent.
But I would like to move to another area. Certainly two of
the key reasons why I believe welfare reform has been so very
successful, one has been that we are--we have begun to require
work, and certainly in your State where you did experimentation
with this prior even to the 1996 law, I am very interested in
what your thoughts are for maintaining this work. And we have
some who would propose that we slack off in our work
requirements. Right now we have increased by three-fold 30
percent of those on welfare are working. Many, like myself,
feel that should be increased, or should be more than 30
percent of those who are able-bodied and working. Some would
like to, perhaps, go back to just education, and certainly, I
have concerns on that, of doing anything.
That old adage that I heard growing up on the farm, ``if it
ain't broke, don't fix it.'' I certainly would think it would
be a disaster if we were to fix something that is working.
Certainly, we want to fine-tune and work and make it better.
But I would like to begin by, just on this area of the work
area, the other, the time limits I would like to get into, but
just in the area of work, what are your responses to those who
would like to see us move away from work, and how well do you
feel this is working? What is the recommendation of the
Administration?
Mr. Thompson. Thank you very much, Congressman. Let me
quickly point out that I was head of the National Governors
Organization when the first TANF bill was enacted, and we
negotiated with Congress for $16.5 billion, and we asked that
it not be cut for 5 years. And the Congress kept their
commitment. I think the Governors kept their commitment, and it
has been, I think, a very successful program. The only area
where I disagree with you is that I think it is probably the
biggest social change in 60 years rather than 25 years. That is
the only change I would make to your statement, Mr. Herger.
In regards to work, I think it is absolutely essential. I
think work has got to be a very viable component of any
reauthorization of TANF. In the existing law, 50 percent was
supposed to be in a work capacity, but every time a State
reduced the caseload down by 1 percent, the work requirement
was reduced by 1 percent.
So now we are down to about 5 percent instead of 50
percent. It is about 5 percent that are required to work in
America, pursuant to a law, because the caseloads have been
reduced. In my own State of Wisconsin, we don't have any work
requirement pursuant to the Federal level. We have a State
requirement that requires it. I absolutely think it is
important. I think it is the only way to get out of poverty. I
think there has to be more, but also I think we can now move to
the next step and use some adjustments to allow for education
and for training to be able to continue up the economic ladder,
and I fully want to work with you and the Members of this
Committee in order to accomplish the next step. I really feel
passionately about this, and I think it is great for
individuals. It is great for children, and I think it can be
even a better program if we work together to accomplish that.
Mr. Herger. Thank you, Mr. Secretary.
Chairman Thomas. I thank the Chairman. The gentleman from
Michigan, Mr. Levin, wish to inquire?
Mr. Levin. Well, thank you, and we are glad you are here.
Mr. Thompson. Thank you, Mr. Levin.
Mr. Levin. I am going to continue with some friendly
questions. I won't pick up your statement about this
Administration opposing privatization of Social Security, which
I don't think is really its position, but let us go back to
welfare for a moment, because I think your answer to Mr. Herger
and to Mr. Crane, that answer is an important one, because no
one wants to weaken the work requirement. What we want to do is
to, as you say, help people who are working move up the
economic ladder.
Mr. Thompson. That's true.
Mr. Levin. And we are glad that you are emphasizing that.
Mr. Thompson. Thank you.
Mr. Levin. The figures are pretty clear, though. I think
the reporting requirements under the welfare bill were too
weak, and I think you would agree. We don't really have a good
enough idea of what is happening to people. But from the
studies available, it is pretty clear that the majority of
people who leave welfare to work remain in poverty are working
at jobs that pay $6, $7, $8 an hour. That is the majority of
people.
Mr. Levin. If we want work to lead to independence, the
work has to be ruminative enough, and I think that is what you
are emphasizing.
I might also point out, when we talk about level funding,
if you take into account inflation, what is being requested
here really isn't level if you compare it with the original
amount; and as you know so well, because you have been a
pioneer in this, I think now about maybe more than 50 percent
of TANF is going for support services, not for cash income. So
the question becomes how do we help people become productive
enough in terms of their remuneration?
So let me ask you in that regard about transitional
Medicaid because, as you know, a very substantial portion of
people who leave welfare for work don't end up with health
care; and, as you know, some of us, Mr. Castle and others and
I, have proposed--and Mr. Cardin is very much into this--
transitions into traditional Medicaid to make sure people who
are working have health care. There is no provision in this
budget, as I see it, for any improvements in transitional
Medicaid. Why not?
Mr. Thompson. Congressman, we are putting in $350 million,
which was going to be terminated in order for a continuation of
1 year of health care. We think that is a very positive step. I
think we need to look at what you are saying, but, right now,
the $350 million is a tremendous step forward.
The second thing you mentioned that I wanted to comment on
is in regards to the cases, in regards to records. There are a
lot of States that have not kept individual case files on every
case. I think it is very important for us. If we are going to
move and allow for individuals to be able to continue, there
has to be a case history, a case file and a case direction on
every individual coming off of TANF. Right now, that is not the
case.
Wisconsin is the only State that does that. I think it is
very important if we are going to keep individual case files,
we should be able to do them with our counselors, and States
should have them. States will not particularly like it, but I
think in this case when we are level funding, giving them the
necessary dollars, that we should develop that case file. With
that I think you can give the assistance necessary through the
$25 million in counseling that we are asking in this budget
bill, to be able to, in technical advice to the States, allow
for a plan to be developed for each individual to be able to
assist them in moving.
Mr. Levin. Okay. I want to ask you about the social
services block grant quickly. I just urge--I think the
transitional Medicaid improvement isn't in there because of a
shortage of money. It is a grievous problem. People move out of
TANF for--they may have some income support and they have no
health insurance.
Let me ask you about social service block grant. Can you
answer in just a couple of seconds? The funding request is $1.7
billion. Where is the money going to come from to improve it,
to increase it? I understand the President agreed earlier today
or yesterday to keep the promise made to the Governors to raise
it. Where is the money going to come from?
Mr. Thompson. I am not sure, Congressman, of the answer. I
will be back in touch with you.
Chairman Thomas. The gentleman's time has expired.
It is the Chair's intention to continue this hearing until
the bells ring. My understanding is that approximately 20
minutes to 12:00 p.m. the bells will ring. There will be two
votes, and that will consume the remainder of the time. So if
our Members are mindful of the time and especially of those who
might have indicated that they would very much like to ask
questions of the Secretary, the Chair would urge you to, among
yourselves, try to prioritize the amount of time we have
remaining. The Chair will call on each Member. The gentleman
from Louisiana wish to inquire?
Mr. McCrery. Thank you, Mr. Chairman. I will be brief.
Quickly, on the question of privatization of Medicare, I
think Chairwoman Johnson spoke to that well. However, I would
note, Mr. Secretary, that the President's emerging proposals on
Medicare do stem from the recommendations of the National
Bipartisan Commission on Medicare Reform, and those in fact do
envision a much larger role for the private sector in the
delivery of health care through the Medicare system; isn't that
correct?
Mr. Thompson. That is correct. It is about choices,
Congressman. It is about allowing an individual to have the
same choices under Medicare as a Federal employee does, with
their own health insurance programs.
Mr. McCrery. Exactly.
Mr. Thompson. That is absolutely correct.
Mr. McCrery. I just wanted to make that clear. On the issue
of welfare reform, there is no one better situated than you,
Governor Thompson.
Mr. Thompson. Thank you.
Mr. McCrery. Mr. Secretary, to comment on the funding that
was agreed to in 1995 and later enacted in 1996, I was on the
Conference Committee on Welfare Reform, and you were ever
present, as were a number of other Governors, Michigan's, for
example, in pressing us to give the most liberal funding for
the next 6 years; and we did that.
Mr. Thompson. That is correct.
Mr. McCrery. In fact, Mr. Secretary, isn't it true that we
gave the States, the Governors, a choice of base years on which
to----
Mr. Thompson. You did.
Mr. McCrery. Base the funding; isn't that correct?
Mr. Thompson. That is correct, and we negotiated----
Mr. McCrery. And in each case the State chose the base year
with the highest level of funding; isn't that correct?
Mr. Thompson. Not the highest. It could go back a couple of
years.
Mr. McCrery. The highest among the 3 years----
Mr. Thompson. Among the 3 years. They could pick a base
year out of those 3 years. You are absolutely correct. They
couldn't go back beyond that. But you are absolutely correct.
It was negotiated between the Governors and the Conference
Committee, and I thought we came out very well as Governors----
Mr. McCrery. Yes. I thought the Governors came out
extremely well. You did a----
Mr. Thompson. Well, I thought fairly well----
Mr. McCrery. Great job of negotiating on their part.
I say all of that just to underscore the Administration's
contention that the $16.5 billion level funding is sufficient
for this program. In fact, I would certainly urge us to look at
decreasing the funding. I know that may not be possible, but
certainly no increase is warranted based on the discussion you
and I just had and the experience we have had with the program
over the last 6 years. With that, Mr. Chairman, I will yield
back the balance of my time.
Mr. Thompson. Let me just say I do not think it would be in
the best interest to cut it. I think we can get by on----
Mr. McCrery. I am not sure that it would, but I think we
ought to explore it.
Mr. Thompson. And the second thing is I did want to point
out in my first answer to you, Congressman, that the President
and I feel very strongly that a senior on Medicare should have
the option to either go into the new program or stay in the
existing one.
Mr. McCrery. Absolutely.
Chairman Thomas. The gentleman from Louisiana yields back
his time. The gentleman from Maryland wish to inquire?
Mr. Cardin. Thank you, Mr. Chairman.
Mr. Secretary, let me follow up on this fund level, because
I think there are some misunderstandings here. We keep on
saying there has been a caseload reduction, and I am not sure
the figures we are using are accurate. There has certainly been
a cash assistance reduction dramatically.
Mr. Thompson. That is right.
Mr. Cardin. But the number of people being served with TANF
funds is still a very large number.
Mr. Thompson. It is.
Mr. Cardin. And that is good. That is a success story. When
we help people move up the economic ladder, as you point out,
that is what this should be about.
Mr. Thompson. That is true.
Mr. Cardin. So States are using more and more of their TANF
money for noncash assistance programs; and to the extent that
we don't make Federal funds available, those programs are going
to be the first hit, the ones we want to encourage the most,
because cash assistance is going to have to be paid out. And if
the economy remains soft and we know people are losing their
jobs, we know some of them are not qualifying for unemployment
insurance, they are going to end up--could end up back on cash
assistance.
So I just caution my colleagues who are talking about the
fact that they think that we have had dramatic reduction in the
needs of the States, it is just not accurate; and, of course,
the Governors and the legislators, State legislators, are here
telling us that on a daily basis.
The last point on funding, if you level fund it by 2007, it
is a 22 percent reduction in the basic funding level on what it
could buy; and I hope we could do better. I agree with Mr.
McCrery. I think we should consider the funding level. I take
it from a different side. I think we need to at least adjust it
for inflation, and I hope we will have a chance during the
budget debate to talk about that.
I also want to also put in a plug, as I said earlier, about
changing the goals. You mentioned child welfare, which I think
is good. I would urge we broaden it to reduction of poverty,
and I hope we will have a chance to sit around and talk about--
--
Mr. Thompson. I do.
Mr. Cardin. The explicit goals within the welfare system.
That is not a dollar issue. It is an issue of what is the next
level. What do we expect the States to be able to accomplish
during the next 5 years?
Then on the work requirement I want just to concur on your
comments. I think giving a caseload reduction makes the work
requirement meaningless. So I think we need to look for a
better way to define it. We would suggest you take a look at
making the credit based upon employment rather than on caseload
reduction, because that is more relevant to what we are trying
to accomplish.
Then, last, I want to thank you for, in the President's
budget, having the child support pass-through provisions. This
Committee has passed that on several occasions. We have not
been able to get it through the other body. I am a little bit
concerned on how you pay for it, but I do hope that we will be
able to get that finally passed. That is extremely important to
low-wage families and people who really need this additional
assistance, and I want to thank you for including that in the
President's budget.
Mr. Thompson. Thank you. If I could quickly comment on
several things.
First off, in regards to the pass-through, as you know I
pioneered that when I was Governor of the State of Wisconsin.
We have 100 percent pass-through which we have paid through
waiver savings. It has been very good, and there has been a
recent study put out in the State of Wisconsin by I believe the
Institute of Poverty. That shows that any welfare mother that
has received any amount of money up to $100 per month once she
leaves welfare is less likely to go back on if she is receiving
the money from the father or the spouse that doesn't have
custody of the child, a noncustodial parent.
The second thing is, in regards to work, I think it is
important for us to modernize that, because the work
requirement right now is nonexistent for most States and it is
at such a low level we should be doing that. I appreciate that.
In regards to indexing the amount of money, that is a
question we are going to have to discuss. You and I have
discussed that in the past; we will in the future. I think I
have a meeting with you coming up sometime in the middle of the
month to sit down. I hope we can get together, Congressman
Herger and Congressman Cardin, and sit down and develop a
bipartisan--I think there are really some wonderful innovative
things we can do to improve children and spouses in regards to
going on to the next plateau.
In regards to child poverty, I think there are other
things. I am willing to discuss that, but I think there is also
child abuse and healthy standards for children, nutrition and
so on and so forth all should be considered, all should be in
the dialog, and I am willing to sit down and discuss that with
you.
Mr. Cardin. Thank you, Mr. Secretary.
Chairman Thomas. Thank the gentleman for yielding back his
time. The gentleman from Michigan, Mr. Camp, wish to inquire?
Mr. Camp. Yes, thank you, Mr. Chairman.
Mr. Secretary, I appreciate your testimony today and
particularly your comments that we ought to continue the
success of the 1996 welfare reform law. Obviously, you laid out
very well the successes in terms of caseloads declining by 50
percent, 2 million children having left poverty, work by
welfare recipients having risen by 50 percent or more and
record shares of single parents working now.
My question is, having just visited a Michigan work site
which is really to help remove barriers to employment that
people have and I was very struck by the efforts and successes
they have had there, can you tell us what other States are
working with people to help find good jobs and jobs of the
future like the program we have in Michigan?
Mr. Thompson. Absolutely. The wonderful thing about the
block granting of the TANF dollars is it allows States the
flexibility to set up new and innovative programs. There are so
many States that have set up different ways to do it, but there
is one problem in the existing law. It did not require the
States to develop a case record of every person.
What should be done, I believe very strongly in the new
reauthorization of TANF, is that every State, every person that
is still on TANF has to have a history and a plan of work and
education and also development, and it should be based upon 40
hours every week. You should be able to do that, and I think
you would be able to enhance, you know, the benefits for the
recipient, but I think you would also make great progress in
moving more people into work and in better jobs.
If you follow that record and follow that history, you
should be able to develop a better plan for individuals; and
with the declining caseload it seems to me that is where we
should be putting some emphasis in the next reauthorization
bill.
Mr. Camp. I appreciate that; and just quickly, because I
want to give other people some time as well, I appreciate the
principles you laid out on Medicare reform.
Mr. Thompson. Thank you.
Mr. Camp. Also, that any recipient could stay with the
current system if they chose to. I think that is an important
point to make. No one would have to opt for changes if they
didn't want to.
Mr. Thompson. That is correct.
Mr. Camp. Thank you. Thank you, Mr. Chairman.
Chairman Thomas. Thank the gentleman. The gentleman from
Wisconsin, Mr. Kleczka, wish to inquire?
Mr. Kleczka. Thank you, Mr. Chairman.
Mr. Secretary, if I could start out by making an
observation, it wasn't too long ago when you were Governor of
the State of Wisconsin, and the State had a small surplus, and
you sent checks out to all the taxpayers. Then last year, when
you are part of this Administration, we thought we had a
surplus, and we sent checks back to all the taxpayers. Well,
now, as you well know, the State of Wisconsin has a rather
large deficit, $1.2 billion, and now as you come here before
the Committee and testify, this budget puts us back into a
deficit. Now, I don't really think you are a jinx, Governor,
but there is some real bad luck following you around, Okay?
Mr. Thompson. I have been congratulated over here, and I am
being criticized now for the----
Mr. Kleczka. I am just trying to make this observation,
that there is some bad luck following you around. But, on a
serious note, I have to believe that the Administration
voiced----
Mr. Thompson. I just would like to point out that I vetoed
the first bill that the legislature passed to send back the
checks. Then they went back and passed another one instead of
having it vetoed, so you know that.
Mr. Kleczka. Right. But there is a deficit of $1.2 billion.
But I think I recall that the Administration did voice
support for the Breaux-Frist Medicare reform bill which
provides for a voucher or some of us say a premium support plan
wherein the seniors are going to get a fixed dollar amount and
have to go shopping in the private market for a health
insurance plan. I just recall as I sit here the words of former
Speaker Gingrich who indicated that his goal was to have
Medicare wither on the vine, and I think if we ever go to that
system you are going to see that Medicare is going to be slowly
phased out. So for those of us who fear that once that system
comes on board that we are going to privatize Medicare, I think
those fears are genuine, and I think that criticism is right on
the mark.
What the Committee Republicans tried to do was partially
privatize Medicare with this thing they called Medicare Choice,
and I think it is time that, instead of slugging another $4
billion into Medicare Choice, we admit it is a failed
experiment.
I can only point out to the Milwaukee experience wherein
the seniors there in their Choice plan, one of the remaining
Choice plans, didn't pay a deductible, and this company came
and indicated, well, now we are going to put into the policy
a--was it $350 hospital deductible for the seniors? And they
just blew a gasket and, you know, thanks to the hard work of
Mr. Scully, they did come to their senses and drop it somewhat.
But, nevertheless, the GAO came before this Committee early
last year, and they indicated point blank that the Medicare
Choice program is costing Medicare more dollars than the fee-
for-service. Now, the Chairman of the Health Subcommittee, Ms.
Johnson, can try to remake history, but that is exactly what
the GAO told us.
So my plea to you and to our Health Subcommittee, which
will be meeting on this issue shortly, is to admit defeat. The
Medicare choice program did not work. Over a half a million,
500 million I think----
Mr. Thompson. Five----
Mr. Kleczka. Five-hundred million seniors have already
exited the program knowing full well it is not to their
benefit, and let us admit the mistake and move on.
Now as far as the drug benefit, everyone is talking today
about the need for a drug benefit as part of Medicare. Well,
the rhetoric doesn't match the facts. The program that this
Committee passed out 2 years ago provided for a drug benefit
run by the insurance companies. When we asked the insurance
companies whether or not they wanted to participate in this,
all of them said, no; and I think later on one said, maybe. So
that was the Republican drug benefit.
As I look at this budget, what we are talking about is a
welfare drug benefit. Now there are no other portions of the
Medicare Program shared with the States. This is a Federal
initiative. I think if we are going to be honest with our
seniors, some 30, 35 million seniors, let us provide for a drug
benefit as part of the Medicare Program just like we provide
for physicians care, just like we provide for hospital care,
and forget this stuff about just a welfare program. Because the
Medicare Program was never meant to be a welfare program, and I
don't think that we should change it at this juncture.
So those are the observations, Mr. Secretary, that I wanted
to make to you. Hopefully, we can work together over the coming
months to make the program better but to leave in place the
guaranteed benefit of a Medicare Program. If we are going to
start shifting these folks to the private market like we tried
in the Medicare Choice, we are going to go back to where we
were 35 years ago, where 50 percent of the seniors in this
country didn't have any health care insurance because they
couldn't afford it. If we tamper with that guaranteed Medicare
benefit, that is exactly, Mr. Chairman, where we are going to
be headed. Thank you very much.
Chairman Thomas. The gentleman's time has expired.
Mr. Thompson. Congressman----
Chairman Thomas. For accuracy in the record, the Chair
would like to note that former Speaker Gingrich's statement
about withering on the vine was in reference to HCFA or the
Health Care Financing Administration. And, lo and behold,
rather than withering on the vine, there was a mercy killing
under this Administration.
With that, the last Member that the Chair would recognize
prior to the two votes carrying us to noon would be the
gentleman from Minnesota, Mr. Ramstad.
Mr. Ramstad. Thank you very much, Mr. Chairman.
Like my colleague, Mr. Kleczka, I agree that you did a
great job as Governor of Wisconsin and you are doing a great
job as Secretary of Health and Human Services, especially for a
guy from Wisconsin.
Mr. Thompson. Thank you, Congressman.
Mr. Ramstad. But as my neighbor and long-time friend, Mr.
Secretary, you know that our States are penalized by the
Medicare managed care reimbursement formula, a formula that
defies logic by rewarding high-cost, inefficient health care
States. I notice that the President's budget includes some
reforms for Medicare+Choice that will improve conditions but
unfortunately stop short of the comprehensive reform that is
needed. Why doesn't the Administration support looking at more
a comprehensive reform that includes reimbursement reform?
Mr. Thompson. Congressman, I wish I had a simpler answer
for you. I don't. I think that the only way we are going to be
able to do that is to get involved in restructuring Medicare
and strengthening it and taking care of those discrepancies
that you talked about for Minnesota and Wisconsin and Iowa and
a lot of rural States in which their reimbursement formulas are
under what other individuals get. It is going to require
dollars, but with the limited dollars that we had we wanted to
structure a Medicare benefit for pharmacy and for drugs, and we
also felt that that was the best thing.
We also wanted to keep the Medicare+Choice plans as viable
as we could within limited dollars we had, and that is the
reason, sir.
Mr. Ramstad. I understand those limited dollars, but the
current disparities are just an unconscionable outrage for
Minnesota seniors, Wisconsin seniors, Iowa, North Dakota, and
South Dakota. Those more rural States--Washington State. They
are just so inequitable to those seniors and States that have
been delivering health care in a cost-effective way. We are
being penalized----
Mr. Thompson. Absolutely.
Mr. Ramstad. And that makes no sense. Just as I said
earlier, it defies logic.
The other question I had, I was encouraged to see a strong
commitment to addressing the problem of access to substance
abuse treatment. The President's budget calls for an increase
of $127 million as a first step to close the treatment gap to
serve an additional 52,000 Americans suffering from addiction.
I hope Administration, and I am sure you do, realizes that this
is a small step, that last year 3\1/2\ million drug addicts,
drug addicts according to the Office of Drug Control Policy,
3\1/2\ million drug addicts were denied treatment for lack of
access in this country. So to give 52,000 Americans treatment
is a step in the right direction, but the American Medical
Association (AMA) tells us there are 26 million alcoholics and
addicts in this country. Until we go to parity for chemical
dependency treatment in the private sector as well as mental
health treatment, we are not going to solve this problem. Is
there any consideration of supporting chemical dependency
treatment parity?
Mr. Thompson. Yes, there is, Congressman, and we are
looking at that. This Administration, the President feels very
strongly about it, and that is why he put that $127 million in
there. There are limited resources, but this is indicating that
this is a priority of this Administration, and we want to make
sure that we provide for improving chemical and drug treatment
as well as mental health in this country. We also wanted to do
this by putting in the $127 million and trying to get away from
the disparity that now exists.
Mr. Ramstad. I am so heartened to hear you say that, Mr.
Secretary. The AMA declared in 1956 addiction and alcoholism
are a disease; and if you accept that, which I think most
Americans do, you can't justify the discrimination against
treatment of this disease vis-a-vis all other physical
diseases. So thank you very much for that recognition and your
efforts.
Chairman Thomas. Thank the gentleman. The Chair would note
we have less than 5 minutes on the vote.
Mr. Secretary, there are Members on both side of the aisle
on this Committee that wish to ask you questions. We will make
sure that they submit them in writing, and we would appreciate
a relatively rapid response to those questions.
With that, the hearing is adjourned.
[Whereupon, at 11:40 a.m., the hearing was adjourned.]
[Questions submitted from Messrs. Houghton, McInnis, Foley,
Doggett, and Mrs. Thurman to Secretary Thompson, and his
responses follow:]
Questions Submitted by Representative Amo Houghton
Question:
The President has proposed $77.1 billion over 10 years for States
to offer prescription drug coverage for low-income seniors. As you
know, some States already have significant programs in existence; for
instance, New York covers seniors with individual incomes up to $35,000
and families of two up to $50,000 (approximately 300 and 400% of the
Federal poverty level, respectively). Would this new proposal allow
States like New York to use the new Federal money in place of current
expenditures (and free up money for other health initiatives) or would
they only be allowed to use the new Federal assistance for further
expansion of current programs?
Answer:
Yes. The new Federal money may be used in place of current
expenditures. While the administration would encourage that it be used
for further expansion of current programs, it is not a requirement. As
I've stated at previous hearings, this administration is committed to
ensuring that beneficiaries receive the high quality care they need and
deserve, including prescription drugs, and we want to continue to work
together to develop a comprehensive prescription drug benefit.
Question:
I applaud you and the administration for not proposing any further
cuts to providers--my rural district in upstate New York is still
struggling with BBA cuts. I look forward to working with the
Administration to ensure quality care for these fragile areas. There's
a part in the budget proposal that I believe states that any payment
adjustment to providers should be budget neutral--could you clarify? Is
that budget neutral among just the provider pool?
Answer:
The Administration shares your commitment to ensuring quality of
care for all Medicare beneficiaries, including those in America's rural
areas. You are correct, the administration's budget proposal does state
that any adjustment to providers be done in a budget neutral manner
across all providers. So if increasing payment to one type of provider
is on the table, then we think adjusting other provider payments should
be as well. We believe that any such change should be undertaken
carefully to ensure that we do not adversely impact beneficiaries'
access to care.
Question:
I applaud you and the administration for your proposal to continue
funding levels of the TANF block grant, despite the reduction in case
load--I think that will allow states to take ``the next step'' in
continuing the success of welfare reform. Can you expand on what
general improvements the Administration would like to see made to
welfare program?
Answer:
On February 26, President Bush announced the administration's
proposal to build on the successes of the Temporary Assistance for
Needy Families (TANF) program. The President's welfare reform agenda
will strengthen families and help more welfare recipients work toward
independence and self-reliance.
Key components of the President's welfare reform proposal include
helping welfare recipients achieve independence through work by
increasing the minimum work requirements. Under current law, at least
50% of welfare families are required to participate in work and other
activities designed to help them achieve self-sufficiency. The
President's plan phases out the caseload reduction credit (which
significantly reduced current state work participation requirements)
and increases the work requirement by five percentage points each year
until reaching 70% in FY 2007.
The plan also requires welfare recipients to be engaged in work
activities for 40 hours per week, either at a job or in programs
designed to help them achieve independence. At the same time, the
President wants to give states more flexibility to count education, job
training or substance abuse treatment as work. Therefore, the proposal
would require that only 24 hours be spent in the workplace. The
additional 16 hours could include training, education and other
activities related to a TANF purpose, as determined by the state.
States have broad latitude to define these additional constructive
activities. The plan makes special accommodations for parents with
infants, teenage mothers attending school, and individuals who need
substance abuse treatment, rehabilitation or special work-related
training.
The Administration also proposes to strengthen child support
enforcement by encouraging states to give child support payments to
custodial parents and their children. Under current law, government
keeps a substantial portion of the money collected to pay child support
in cases of families that have ever received welfare. The President's
proposal provides financial incentives for the states to give as much
of this money as possible to families, especially to parents who have
left welfare.
Our proposal embraces the needs of families by promoting child
well-being and healthy marriages. To this end, we establish improving
the well-being of children as the overarching purpose of TANF. This
meaningful change recognizes that the four current goals of TANF
(providing assistance to needy families so that children may be cared
for in their or their relatives' homes, ending the dependence of needy
parents on government benefits, preventing and reducing the incidence
of out-of-wedlock pregnancies, and encouraging the formation and
maintenance of two-parent families) are important strategies for
achieving this purpose. Similarly, we clarify and underscore that the
fourth goal of TANF is to encourage the formation and maintenance of
healthy, two-parent, married families and responsible fatherhood. In a
new initiative, the President's plan directs up to $300 million for
programs that encourage healthy, stable marriages. These programs
include pre-marital education and counseling, as well as research and
technical assistance into promising approaches that work.
Finally, the proposal encourages innovation by states to help
welfare recipients achieve independence. New waiver authority would be
established to enable states to integrate a range of programs in order
to improve their effectiveness. This new flexibility will help states
design fully integrated assistance programs that could revolutionize
service delivery. Under the President's proposal, states would be given
the flexibility to streamline and coordinate support programs--such as
food stamps, childcare, income supplements and transportation
assistance--which now operate under different agencies, different
rules, and different reporting requirements. Although the waivers will
allow new flexibility, States will remain accountable for program
performance and will be required to develop integrated performance
goals, measures and evaluation criteria. The integrated programs must
meet the underlying objectives of the involved programs.
Questions Submitted by Representative Scott McInnis
Question:
Mr. Secretary, your Medicare budget document notes that you
recognize that ``Medicare's extremely complex provider payment systems,
based on regulated prices, do not always function smoothly and
equitable over time.'' The document also states that you are willing to
work with Congress to reform payment policy by making ``budget neutral
adjustments across provider payment updates.'' Does this mean that some
providers will benefit and others will not? I represent a number of
rural areas in Colorado with small community hospitals as well as some
larger hospitals in more urban areas. Mr. Secretary, can you explain
how changes in hospital payment updates for Fiscal Year 2003 are going
to impact these different sectors in health care?
Answer:
As you may know, the hospital market basket update is set into law
at market basket minus 0.55 for FY 2003. It should be noted that since
the inception of inpatient PPS, hospitals have only once received a
full market basket update (FY 2001). Given this, the hospital industry
overall has faired well. In 1997, the inpatient PPS margin rose to a
historical high of 16.0 percent. Although there was a decrease in 1999
to a 12.4 percent margin, the inpatient hospital margins still remain
very high. Hospitals in large urban areas are fairing better than those
in smaller urban areas and in rural areas. There are several proposals
that address this issue including MedPAC's upcoming recommendation of
an update of market basket minus 0.55 for large urban areas and a full
market basket update for hospitals in all other areas. As we move
forward, we need to explore such proposals and continue to ensure that
hospitals are paid appropriately, regardless of their location.
Questions Submitted by Representative Mark Foley
Question:
Do you have any recommendations on how to get more Federal money to
hospitals for the care they provide to illegal aliens?
Answer:
Historically, Medicaid, like other federally funded entitlement
programs, has never been allowed to cover ``illegal'' or
``undocumented'' aliens. It is generally limited to legal immigrants
who intend to remain in the United States permanently. The Personal
Responsibility and Work Opportunity Reconciliation Act 1996, in
addition to reforming the nation's welfare programs, tightened up
longstanding immigration laws to ensure that legally admitted aliens
can support themselves without turning to publicly supported programs.
The law prohibited new entrants from receiving Medicaid benefits for 5
years after entry. The President has indicated that he does not intend
to pursue a change in this 5-year prohibition as part of the
reauthorization of the 1996 law.
There are very limited circumstances in which hospitals can be paid
by Medicaid for services provided to illegal aliens. States are
required to cover emergency services for all aliens who meet all other
Medicaid eligibility requirements. This includes people in the country
illegally, as well as non-citizens in the United States legally, but
barred from Medicaid for some other reason. ``Emergency services'' are
those needed immediately to treat conditions of sudden, unpredictable
onset that have possible serious health outcomes.
Questions Submitted by Representative Lloyd Doggett
Question:
Since nicotine addiction is the leading cause of preventable death
in America today, what new initiatives have you undertaken as Secretary
to reduce this public health epidemic?
Answer:
In fiscal year 2002, the Department of Health and Human Services
(HHS) increased its commitment to funding tobacco control programs by 7
percent, for a total of $975 million. The National Institutes of
Health's (NIH) tobacco control research budget increased by 14 percent
to $486 million. Listed below are additional initiatives I have been
pleased to be part of:
An initiative to increase awareness of tobacco use
among women and girls. In August, Women and Smoking: A Report
of the Surgeon General was released. HHS and our public and
private partners have undertaken this initiative to engage
women across the country in the fight against tobacco.
I have taken a number of steps to increase the
visibility and coordination of tobacco use cessation and
treatment initiatives throughout HHS. The Agency for Healthcare
Research and Quality (AHRQ), the Centers for Disease Control
and Prevention (CDC), the Centers for Medicare and Medicaid
Services (CMS), the Health Resources and Services
Administration (HRSA), NIH and the Substance Abuse and Mental
Health Services Administration have all collaborated on the
development of a national blueprint for disseminating and
implementing evidence-based clinical and community strategies
to promote tobacco use cessation.
I have asked the Office of the Surgeon General and
CDC to establish a cessation sub-committee to the Interagency
Committee on Smoking and Health.
Question:
Tom Novotny, a 23-year employee of your Department was the leader
of the US delegation to the International Framework Convention on
Tobacco Control (FCTC). Since the August 2001 announcement of his
departure, has the US delegation taken any position on any pending
public health issue at variance with the position of the tobacco
industry? Is so, please describe them.
Answer:
HHS is committed to a strong FCTC. Dr. Kenneth Bernard now serves
as the head of the US delegation. Dr. Bernard brings to the delegation
a wealth of public health, international, and diplomatic experience.
Under Dr. Bernard's leadership, the process for developing the US
position has remained unchanged. An experienced and active interagency
workgroup, comprised of highly qualified professionals from across the
Federal government, is the primary vehicle for discussion and debate.
In addition, Dr. Bernard and other members of the interagency workgroup
have met with a variety of private organizations interested in the
FCTC. These organizations include tobacco product manufacturers as well
as non-governmental health advocacy organizations. While it is
essential that the delegation be informed regarding the issues and
concerns of all interested parties, the position of the U.S. Government
is developed through independent and objective analysis. This position
is being developed to ensure an effective framework for reducing
tobacco use globally. We continue to believe that the Member States of
the World Health Organization must work together to achieve a
convention the majority of members can sign. The FCTC will be a strong
convention because of its breadth and the large number of members who
sign it.
Question:
In your July 2001 response to my prior questions regarding the
involvement of your Department in deliberations of an interagency
working group related to tobacco trade matters, you stated that HHS
played an advisory role in discussions between the United State Trade
Representatives (USTR) and the Government of the Republic of Korea
regarding the privatization of the Korean Government's tobacco monopoly
and the imposition of import tariffs on cigarettes. Specifically, you
stated, ``In considering the potential public health impact, HHS has
focused on whether the proposed policies would increase demand for or
reduce the price for tobacco product.''
Did your Department conclude that public health would not be
adversely affected by any reduction or delay in the imposition of the
40% tobacco import tariff proposed by the Korean government?
Please also provide a full description of HHS analyses and
conclusions on this matter, along with any and all documentation.
Include in this a complete listing of all agencies and employees within
your Department that were involved.
Answer:
HHS is actively involved in the implementation of Executive Order
13193--Federal Leadership on Global Tobacco Control and Prevention. HHS
was involved in the interagency discussions of proposed changes to the
Korean Tobacco Business Act and privatization of the Korean
Government's tobacco monopoly. HHS' position in these discussions was
based on scientific findings that demonstrate increasing the price is
one of the most effective ways to decrease consumption of tobacco
products. Based on this scientific evidence, HHS supports policy
actions that increase the price of tobacco products. Therefore, the
U.S. position in the discussions with Korea was consistent with public
health goals because the tariff on tobacco products was increased.
Question:
Aside from the Korean trade proceedings, has the USTR invited your
Department to offer advice on any other tobacco-related matters? If so,
provide a complete listing of each instance along with a description of
the circumstances and include any analyses and conclusions developed by
your Department. Include in this material a complete listing of all
agencies and employees within your Department that were involved in
developing your advice.
Answer:
Since July 2001, USTR has consulted HHS on three matters.
In September 2001, the USTR considered a request
from the Government of Indonesia to designate 12 additional
products for benefits under the Generalized System of
Preferences (GSP). Tobacco was initially one of the 12
products. HHS recommended excluding tobacco from the list of
products for which GSP was granted. After interagency
deliberation, tobacco was excluded.
In February 2002, USTR contacted HHS regarding a
request for guidance from the Embassy in Warsaw, Poland
regarding correspondence from Phillip Morris that expressed
concern over a government of Poland proposal to raise the
tariff on unprocessed tobacco from 30 percent to 105 percent.
USTR indicated that their recommendation was that Embassy in
Warsaw not make representations to the government of Poland.
HHS concurred with this recommendation.
USTR requested HHS participation in an interagency
meeting as part of the ongoing negotiations on the U.S. Chile
Free Trade Agreement. Dr. Stuart Nightingale represented HHS at
this meeting, and presented positions developed by CDC in
consultation with the U.S. Department of Agriculture. As an
adviser to USTR in these matters, HHS requested that its
position be noted in all public discussions of the U.S.
position, including the summary of the discussions that will be
made available to the public at the close of negotiations, as
required by Executive Order 13193. Because negotiations are
ongoing, this information is considered deliberative. For
further information, please contact John Veroneau, Assistant
U.S. Trade Representative for Congressional Affairs, who can
set up a briefing for a member of your staff with the
appropriate clearance.
Question:
I was also pleased to hear from you that your Department, in
accordance with section 2(c) of Executive Order 13193 ``Federal
Leadership on Global Tobacco Control and Prevention,'' has made
progress with international tobacco control needs assessments. In your
July 2001 correspondence with my office, you stated that the CDC would
produce the first report on the People's Republic of China by December
31, 2001.
Please provide me with a copy of this report. In addition, please
update me on the status of the needs assessment on India, which in your
July 2001 letter you stated would be ready for peer-review early this
year.
Answer:
I am pleased to report that significant progress has been made on
the international tobacco control needs assessment. Although the
complexity of the tobacco control situation in China and the challenges
of coordinating a global peer review process has resulted in some
delay, the report currently is undergoing final review. As soon as the
report has been finalized, we will provide you with a copy. With
respect to the report on India, work has already begun and we project
the report will be completed by the end of the year. CDC staff will be
in India in April and will use this opportunity to continue discussions
with Indian officials and researchers working on the report to advance
its progress.
Question:
Regarding section 2(d) of Executive Order 13193, you stated that
the National Institutes of Health (NIH) worked collaboratively with the
World Health Organization to issue a Request for Application (RFA) that
would solicit research projects on the global burden of tobacco use.
Please provide me with a detailed description of any responses to that
RFA. Also, please update me on the progress you have made since July
2001 in implementing this initiative.
Answer:
NIH's International Tobacco and Health Research and Capacity
Building Program is a unique Fogarty International Center program
developed in cooperation with several other NIH institutes, including
the National Cancer Institute and the National Institute on Drug Abuse.
The NIH received 62 applications in response to the RFA. These grant
applications were reviewed on March 4 and 5 by an NIH Special Emphasis
Panel, organized by the National Cancer Institute, that included
scientists with special expertise in tobacco control issues globally.
Once scores are available, the Fogarty International Center, and its
collaborating partners, will prepare a funding plan based on the number
of applications of high scientific merit and available funds.
Questions Submitted by Representative Karen Thurman
Question:
My question is simply this, given these circumstances, how do you
expect states like Florida to pay for the President's Pharmacy Plus
program?
Answer:
The President's budget includes two low-income drug proposals.
Under the Transitional Medicare Low-Income Drug Assistance program,
starting in FY 2003, the Administration proposes to expand drug
coverage for low-income Medicare beneficiaries. States could expand
drug only coverage to Medicare beneficiaries up to 100 percent of
poverty at regular Medicaid FMAP. This should be considerably less
expensive than providing the entire Medicaid benefit package. For
individuals between 100 and 150 percent of poverty, Medicare would pay
90 percent of the costs of the drug only benefit and States would be
responsible for the remaining 10 percent. Starting in FY 2006, the
President's budget proposes a comprehensive Medicare modernization
program that includes a prescription drug benefit for all Medicare
beneficiaries. Federal support for comprehensive drug coverage for low-
income beneficiaries would continue even after the Medicaid drug
benefit is fully implemented, and would be integrated with it. There
would be subsidies for premiums and cost sharing for the low-income.
While the Transitional Medicare Low-Income Drug Assistance program
requires new legislation, States can implement the Administration's new
Pharmacy Plus model waiver demonstration program right now. Pharmacy
Plus is HHS' response to states' desires to initiate responsible
solutions to a growing need for pharmaceutical access. Pharmacy Plus
contains a check off application, model terms and conditions and a
budget neutrality shell to guide states through the process of
preparing and submitting a request for Medicaid Section 1115
demonstration authority to expand pharmacy only coverage. This
initiative is intended to provide States with flexibility to design
programs that meet the needs of state-specific populations, while
guidance is provided up front on what HHS will require of states.
While states can provide drug benefits to the elderly with incomes
below 100 percent of the poverty level, they must provide the entire
Medicaid benefit package and cannot limit Medicaid coverage just to a
drug benefit without a waiver. Without Pharmacy Plus, to provide drug
benefits to this group, states would have to provide the full range of
Medicaid-covered services as well. This would be very expensive, and
many states don't have the funds available to provide that kind of
coverage to a larger client population.
The Medicaid Pharmacy Plus waiver templates that CMS is providing
as a companion to the President's Transitional Medicare Low-Income Drug
Assistance budget proposal will help states get to the starting line of
100 percent of poverty if they are not already there.
Question:
I think many of my colleagues on both sides of the aisle have heard
from their constituents that they simply cannot pay for their
prescription drugs because they are just too expensive. Can you assure
me that the President will be able to force manufacturers to provide a
genuine discount to Medicare beneficiaries, and that the local
pharmacist will not have to take a cut in their margin?
Answer:
The Administration highly values the important role pharmacists
play in the lives of Medicare beneficiaries. It is extremely important
to the President that this key role be preserved under the Medicare-
endorsed drug assistance initiative. The initiative is designed to
expand beneficiary access to the range of important services
pharmacists provide beyond filling prescriptions, including counseling,
information on the benefits of generic substitution, and identification
of dangerous drug interactions.
The proposed design of the Medicare-endorsed Prescription Drug Card
Assistance Initiative would deliberately move the discount pressure of
the current discount card market away from pharmacies and toward
manufacturer rebates and discounts. The Medicare-Endorsed Prescription
Drug Card Assistance Initiative would pool market power to allow card
sponsors to negotiate rebates or discounts with manufacturers. Medicare
beneficiaries would belong to only one card program at a time, and
would be allowed to switch card programs every 6 months. These two
attributes of the proposed drug card initiative would give card
sponsors the power to effectively negotiate with manufacturers for
rebates.
Question:
Mr. Secretary, is there anything in the President's budget that
keeps these plans from taking the money and running away with it in the
following year?
Answer:
Let me assure you, I am committed to improving the Medicare+Choice
program and seeing that it remains a viable option for Medicare
beneficiaries. I, too, was troubled by the number of plan departures
last year and this administration is committed to bringing stability to
this program.
As you know, since 1998, payment increases for private plans have
failed to stay anywhere close to medical cost increases in many parts
of the country--the so-called ``non-floor'' counties that have
accounted for the vast majority of Medicare+Choice enrollment. Between
1998 and 2002, private plan payments in these areas increased by just
11.5% while Medicare fee-for-service costs (government plan costs) went
up by 22%--almost twice as much. It is no wonder the plans are having
to cut benefits, raise copayments, and even pull out of the program--
creating serious problems for the beneficiaries who depend on them.
Even with all the problems caused in recent years by the unfair
payment system for private plans, there are still over 5 million
Medicare beneficiaries enrolled in private plans--so for many seniors,
private plans are the best option. Indicators of care quality and
enrollee satisfaction in these plans are high. And even after the
recent cutbacks in benefits, they can still be a better deal for
seniors than enrolling in traditional Medicare and buying an expensive
supplemental policy to cover the large benefit gaps.
We support a fairer payment system for private plans in Medicare
because the current payment system is causing seniors to lose access to
valuable benefits and is clearly hurting the quality of care they
receive. I look forward to working with you on this important issue in
the coming months.
Question:
Mr. Secretary, given the track record of Florida's high risk pool
and the fact that premiums for risk pool enrollees are typically over
250% higher than for group insurance, do you think the President's tax
credit proposal will provide enough coverage to enrollees? And, Mr.
Secretary, how is Florida going to pay for reopening their already
bankrupt high risk pool?
Answer:
The Administration's proposal creates a refundable income tax
credit for the cost of health insurance purchased by individuals. The
credit provides a subsidy of up to 90 percent of the health insurance
premium, up to a maximum credit of $3,000 for a family of four. The
credit is targeted toward lower income individuals and families who do
not get coverage through their employer or a public program--since they
are more likely to be uninsured and do not benefit from the existing
tax subsidy for employer-provided insurance.
To increase the purchasing power of this credit, qualifying health
insurance could be purchased not only in the individual market, but
also through private purchasing groups, state-sponsored insurance
purchasing pools and state high-risk pools. High risk pools exist in 29
states and for people with serious illnesses they can provide an
important vehicle to obtain quality insurance that provides
comprehensive coverage. The credit would make premiums more affordable
for those already getting coverage in a high-risk pool, but by their
nature such pools do generally require state subsidies to cover their
costs.
Recognizing that states with high-risk pools may not decide to
expand their availability--and that many states do not have high risk
pools--the President's proposal gives states additional options. In
particular they will have the option of letting certain individuals use
the credit to buy into privately contracted state-sponsored purchasing
groups--such as Medicaid or SCHIP purchasing pools for private
insurance, or state government employee programs (for states in which
Medicaid or SCHIP does not contract with private plans). Overall this
proposal will permit up to 6 million Americans who would otherwise be
uninsured during a year get coverage, and will support many more lower
income working families who must currently purchase health insurance
with little or no government help.
Question:
The 15 percent cut. Are you or the President against eliminating
this cut?
Answer:
The President's budget assumes no further delay in the
implementation of the ``15-percent reduction'' in home health interim
payment system (IPS) limits. As you may know, this reduction is
somewhat of a misnomer. It does not translate into an across-the-board,
direct cut in Medicare payment rates for home health services, as many
have described it. Rather, the 15-percent reduction is a decrease in
the payment caps under the old IPS. The actual percentage reduction in
payments that will result from lowering the limits is much less. In
fact, the CMS actuary estimates that the 15-percent reduction will only
reduce payments to home health agencies by about 7 percent, not 15
percent. Further, after the PPS rates are reduced by 7 percent, we
would apply the home health update (currently estimated to be 2.1
percent), leading to a net reduction of approximately 4.9 percent.
Home health spending is expected to rise by 42 percent for FY 2002.
Even if the 15 percent adjustment occurs, we estimate that home health
spending would increase 12 percent in FY 2003, 8.3 percent in FY 2004,
and 7.8 percent in FY 2005. Therefore, we do not believe a repeal of
the 15 percent adjustment in the caps is necessary.
Question:
Do you or the President support increasing the composite rate for
dialysis facilities by 2.4 percent?
Answer:
I appreciate your special concern for the state of dialysis
facilities. I share your concerns and am committed to providing the
best possible care for all Medicare beneficiaries, including those with
dialysis needs. To this end, we have been working to improve quality
and to strengthen the conditions of coverage at dialysis facilities.
For example, we are working to implement an electronic system to
measure the appropriateness of care delivered at individual dialysis
centers. We are also developing measures to improve the performance and
accountability of ESRD Networks and State survey agencies. Furthermore,
to increase options for ESRD beneficiaries, we have recently completed
a demonstration project involving Medicare+Choice and we expect to have
the results of an independent evaluation of the project by the end of
the year. Although we are working to improve dialysis for Medicare
beneficiaries administratively, changing the composite rate, as MedPAC
recommends, would require legislation. There are a number of ideas on
the table for addressing Medicare provider payment adjustments. The
Administration is committed to working with Congress to make
adjustments to provider payments that are budget neutral overall. We
look forward to examining all of MedPAC's forthcoming recommendations
and working with Congress on this issue.
Question:
Have you changed your mind, or will you seek to address medical
errors this year?
Answer:
This is a high priority for this Administration and for me. A
number of steps are being taken by this Administration to reduce
medical errors and improve patient safety.
Last year, I created a Patient Safety Task Force, with the Centers
for Medicare and Medicaid Services (CMS) as an active participant.
Currently, CMS is working with its Federal agency partners--the Agency
for Healthcare Research and Policy, the Centers for Disease Control and
Prevention, and the Food and Drug Administration, as well as with the
Veterans Health Administration's National Surgical Quality Improvement
Project, to develop the Medicare Patient Safety Monitoring System. The
task force recognizes and stresses the importance of partnerships--
within HHS, across the Federal government and with the private sector
and health care professionals.
The aim of the system is to produce state and national rates of
patient harm and the risk factors that contribute to the harm among
hospitalized Medicare beneficiaries. The system is scheduled to be in
production in June 2002 with the initial reports ready by October 2002.
In addition, CMS is supporting special studies on patient safety by
the New York and Ohio Quality Improvement Organizations (QIOs, formerly
PROs). Also, several QIOs are carrying out local projects in patient
safety. For example, the Wisconsin QIO is working with a statewide
coalition to implement best practices to improve medication safety in
Wisconsin hospitals. The Ohio QIO also has implemented a project in
falls prevention in hospitals using safety culture surveys, root cause
analysis tools as well as probabilistic risk assessment tools and the
Alabama QIO is working to improve medication safety in dialysis
centers.
[A submission for the record follows:]
Statement of AdvaMed
AdvaMed is the largest medical technology trade association in the
world, representing more than 800 medical device, diagnostic products,
and health information systems manufacturers of all sizes. AdvaMed
member firms provide nearly 90 percent of the $68 billion of health
care technology products purchased annually in the U.S. and nearly 50
percent of the $159 billion purchased annually around the world.
AdvaMed strongly supports the Presidents commitment to the
protecting and preserving the Medicare program, increasing medial
research through funding for the National Institutes of Health (NIH)
and extension of the research and experimentation (R&E) tax credit,
improving access to technologies for people with disabilities, and
expanding access to health care coverage for the uninsured. We look
forward to working with the Administration to ensure that the medical
research developed by the government and in the private sector not only
improves the quality of the care delivered to patients in all settings
and programs, but also the productivity of the health care system
itself.
With great interest, we noted that during President Bushs State of
the Union address, the President mentioned the need to ensure Medicare
beneficiaries access to the latest health care options. As the
Committee knows, and has tried to address legislatively, Medicare is
often too slow to incorporate technologies and methods of delivering
care. These time delays frustrate the programs ability to provide the
most cost-effective, high-quality care to Americas seniors and
individuals with disabilities.
We believe it is in the best interest of patients and the Medicare
program to have the Medicare system capitalize on advanced
technologies, which have revolutionized the U.S. economy and driven
productivity to new heights and new possibilities in many other
sectors. Significant advances in health care technologies--from health
information systems that monitor patient treatment data to innovative
diagnostics tests that detect diseases early and lifesaving implantable
devices--improve the productivity of the health care system itself and
vastly improve the quality of the health care delivered. New
technologies can reduce medical errors, make the system more efficient
and effective by catching diseases earlier--when they are easier and
less expensive to treat, allowing procedures to be done in less
expensive settings, and reducing hospital lengths of stays and
rehabilitation times.
Medicare Beneficiary Access to Technology
AdvaMed applauds Congress for the steps it took in the Balanced
Budget Refinement Act of 1999 (BBRA) and the Benefits Improvement and
Protection Act (BIPA) of 2000 to begin to make the Medicare coverage,
coding and payment systems more effective and efficient. In addition,
the Centers for Medicare and Medicaid Services (CMS) has recently made
some changes to modernize its coverage and payment systems.
Despite these efforts, however, current policies still fail to keep
up with the pace of new medical technology. Serious delays continue to
plague the amount of time it takes Medicare to make new medical
technologies and procedures available to beneficiaries in all treatment
settings.
As demonstrated by a Lewin Group report provided by AdvaMed to the
Congress in 2000, Medicare delays can total from 15 months to five
years or more because of the program's complex, bureaucratic procedures
for adopting new technologies. Keep in mind that all this is after the
two to six years it takes to develop a product and the year or more it
takes to go through the Food and Drug Administration (FDA) review. In
addition, these delays are even more pronounced when you consider that
the average life span of a new technology can be 18 months.
The impact on patients has been dramatic. As physician witnesses
testified in Congress last year, cancer patients have had to fight for
years to get Medicare to cover positron emission tomography, a
potentially lifesaving scanning technology that has been broadly
available to people under private health insurance for a decade. In
addition, tens of thousands of seniors and people with disabilities
have not been able to receive advanced technologies like coronary
stents (which reopen blocked arteries), cochlear implants (which
restore hearing) and heart assist devices (which keep patients alive
while waiting for a heart transplant).
These delays stem from the fact that for a new technology to become
fully available to Medicare patients, it must go through three separate
review processes to obtain coverage, and receive a billing code and
payment level. Serious delays in all three of these areas create
significant barriers to patient access.
That's why we strongly support provisions based on language from
H.R. 2973, the Medicare Innovation Responsiveness Act introduced by
Representatives Ramstad (R-MN) and Thurman (D-FL), and incorporated in
HR 3391, the Medicare Regulatory and Contracting Reform Act developed
with the leadership of this Committee, that would create a council for
technology and innovation within CMS to oversee and coordinate Medicare
coverage, coding and payment decisions on new technologies and require
a GAO report on ways CMS can make better use of external sources of
data to expedite hospital inpatient payment updates.
As the Senate continues work on this legislation, we look forward
to Congressional receipt of the first annual BIPA-required report that
was due December 1, 2001, on the time taken by the Secretary to make
and implement necessary coverage, coding, and payment determinations
for newly covered items, services, or medical devices.
Making Medicare's Coverage Process More Transparent and Timely
While CMS has improved the transparency for making national
coverage decisions and attempted to instill timeframes within the
process, timeliness is still a major problem. Under the current
national coverage process framework, CMS has 90 days to determine
whether it will make a coverage decision or refer the request to either
the Medicare Coverage Advisory Committee (MCAC) or an outside health
technology assessment (HTA) group--or sometimes even to both. These
outside assessments take between 3 and 12 months each. CMS then has 60
days to review the recommendations of the MCAC or HTA, and should a
positive coverage determination be made, it takes 180 days from the
first day of the next calendar quarter to issue a code and set a
payment level.
The coverage process should be streamlined and made more
accountable, timely and transparent. Steps should be taken to reduce
redundancies in the MCAC panel and HTA reviews. In addition, the focus
of the MCAC panels should be directed toward gaining practical clinical
advice from the medical experts on its panels.
Some of these issues were addressed in BIPA which requires CMS to
act within 90 days of receiving a coverage decision request, to provide
an avenue of appeals for affected parties, and to report annually to
Congress, beginning December 1, 2001, on the coverage, coding, and
payment timelines relating to the decisions made each year (noted
above.) We have become increasingly distressed over the delay in
implementing these provisions and request that the Committee urge CMS
to implement BIPA without further delay.
These concerns at the national level highlight the importance of
local coverage determinations in providing Medicare beneficiaries with
access to new medical technology. Generally, about one dozen decisions
are made a year at the national level; compared to thousands made
locally. We request that the Committee urge CMS to assure that it will
continue to support local coverage decision-making authority.
Reforming the Coding Process
After coverage is approved, a coding process is used to determine
how a device or procedure will be identified and to which payment
bundle it will be assigned. There are three different coding systems,
but each of them involves significant time lags in assigning and
updating codes. Under the new hospital outpatient perspective payment
system (PPS), CMS now assigns and updates codes on a quarterly basis.
To reduce coding delays of 15-27 months, CMS should use the outpatient
PPS system of quarterly updates as a model for applying similar systems
to other settings, such as the inpatient hospital setting and doctors'
offices.
Inpatient Prospective Payment System
Improving the timeliness and accuracy of Medicare payment
adjustments to account for advances in medical technology and
procedures used in the hospital inpatient setting remains an important
priority for AdvaMed. An important provision in H.R. 2971, the Ramstad/
Thurman bill, would address the concerns about inpatient reimbursement.
Specifically, Section 5 of the bill would require the Secretary to
assign items to an existing DRG if the national average base payment is
at least equal to 90% of the cost of care involving the technology and
within $2500 of the cost of such care. If no existing DRG satisfies
these criteria, the Secretary would assign the technology to a New
Technology DRG that does. We look forward to working with the Committee
in 2002 to address concerns about timely inpatient technology access
for Medicare beneficiaries.
Outpatient Prospective Payment System
The hospital outpatient prospective payment system (OPPS) has had a
difficult time in these first two years of its implementation. One
reason is that the type of data needed to construct the base Ambulatory
Payment Classification (APC) groups is not easily obtained from
historical claims submissions.
We believe that data inadequacies, as well as policies on
incorporating resource costs associated with devices and medical
technology will continue to be issues in the 2003 OPPS update, underway
now. We request that the Committee urge CMS to:
make this process open and transparent,
share proposed data and methodology with interested
stakeholders now during the development stages of the proposed
rules
define and accept additional sources of data, and
work collaboratively to resolve issues before
publishing the proposed rules.
Although the majority of new device categories under the pass-
through payment system will sunset at the end of this year, this
program, along with new technology APCs, provide important access for
Medicare beneficiaries to innovation in the outpatient setting. CMS did
not approve any new pass-through categories during the quarterly cycles
since April 1, 2001. Some of the criteria established last fall for
eligibility for a new pass-through category or new tech APC seem overly
burdensome. We request that the Committee monitor this program, and
urge CMS to be flexible.
Payment for New Clinical Laboratory Tests
Innovative diagnostic tests help saves live and reduce health care
costs by detecting diseases earlier when they are more treatable. With
today's advanced technology, testing can be performed in a variety of
settings from large clinical reference laboratories to hospital
outpatient labs, to physician offices, and even in patient's nursing
homes.
Although BIPA substantially improved the processes for setting
reimbursement rates for advanced diagnostic tests, serious flaws still
exist, making it difficult for beneficiaries to gain access to many
innovative technologies. That's why AdvaMed strongly supports
provisions based on H.R. 1798, the Medicare Patient Access to
Preventive and Diagnostic Tests Act introduced by Reps. Dunn (R-WA) and
McDermott (D-WA) and incorporated in HR 3391 that would establish much
needed procedures and criteria for determining reimbursement for new
clinical laboratory tests. We are hopeful that similar provisions will
be included in a companion bill in the Senate.
Conclusion
AdvaMed applauds Congress and the President for recognizing the
value of medical research and innovation for improving the quality of
care Americans receive. Innovative technologies can modernize and
advance the efficiency of the Medicare program, and all other health
care options, with early detection, better health care information
technologies, less invasive procedures and devices. We look forward to
working with Congress, the President and Secretary Thompson on ways to
modernize Medicare, incorporating the benefits technology can bear, and
furthering advances in medical research.