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




                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN

               SERVICES, EDUCATION, AND RELATED AGENCIES

                        APPROPRIATIONS FOR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                      RALPH REGULA, Ohio, Chairman
 C. W. BILL YOUNG, Florida           DAVID R. OBEY, Wisconsin
 ERNEST J. ISTOOK, Jr., Oklahoma     STENY H. HOYER, Maryland
 DAN MILLER, Florida                 NANCY PELOSI, California
 ROGER F. WICKER, Mississippi        NITA M. LOWEY, New York
 ANNE M. NORTHUP, Kentucky           ROSA L. DeLAURO, Connecticut
 RANDY ``DUKE'' CUNNINGHAM,          JESSE L. JACKSON, Jr., Illinois
California                           PATRICK J. KENNEDY, Rhode Island
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania
 DON SHERWOOD, Pennsylvania         
                   
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
      Craig Higgins, Susan Quantius, Susan Ross Firth, Meg Snyder,
             and Francine Mack-Salvador, Subcommittee Staff
                                ________
                                 PART 2
                 DEPARTMENT OF HEALTH AND HUMAN SERVICES

                                                                   Page
 Secretary of Health and Human Services...........................    1
 Bioterrorism.....................................................   56
 Center for Medicare and Medicaid Services........................  595
 Administration for Children and Families......................... 1101
 Administration on Aging.......................................... 1951
 Special Tables...................................................  197

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 80-949                     WASHINGTON : 2002





                       COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky             NORMAN D. DICKS, Washington
 JOE SKEEN, New Mexico               MARTIN OLAV SABO, Minnesota
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 SONNY CALLAHAN, Alabama             NANCY PELOSI, California
 JAMES T. WALSH, New York            PETER J. VISCLOSKY, Indiana
 CHARLES H. TAYLOR, North Carolina   NITA M. LOWEY, New York
 DAVID L. HOBSON, Ohio               JOSE E. SERRANO, New York
 ERNEST J. ISTOOK, Jr., Oklahoma     ROSA L. DeLAURO, Connecticut
 HENRY BONILLA, Texas                JAMES P. MORAN, Virginia
 JOE KNOLLENBERG, Michigan           JOHN W. OLVER, Massachusetts
 DAN MILLER, Florida                 ED PASTOR, Arizona
 JACK KINGSTON, Georgia              CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ROGER F. WICKER, Mississippi        CHET EDWARDS, Texas
 GEORGE R. NETHERCUTT, Jr.,          ROBERT E. ``BUD'' CRAMER, Jr., 
Washington                           Alabama
 RANDY ``DUKE'' CUNNINGHAM,          PATRICK J. KENNEDY, Rhode Island
California                           JAMES E. CLYBURN, South Carolina
 TODD TIAHRT, Kansas                 MAURICE D. HINCHEY, New York
 ZACH WAMP, Tennessee                LUCILLE ROYBAL-ALLARD, California
 TOM LATHAM, Iowa                    SAM FARR, California
 ANNE M. NORTHUP, Kentucky           JESSE L. JACKSON, Jr., Illinois
 ROBERT B. ADERHOLT, Alabama         CAROLYN C. KILPATRICK, Michigan
 JO ANN EMERSON, Missouri            ALLEN BOYD, Florida
 JOHN E. SUNUNU, New Hampshire       CHAKA FATTAH, Pennsylvania
 KAY GRANGER, Texas                  STEVEN R. ROTHMAN, New Jersey    
 JOHN E. PETERSON, Pennsylvania
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
   
 VIRGIL H. GOODE, Jr., Virginia     
   
                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2003

                              ----------                              

                                          Wednesday, March 6, 2002.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                                WITNESS

HON. TOMMY G. THOMPSON, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH 
    AND HUMAN SERVICES

                          Chairman's Statement

    Mr. Regula. I think we will get started. I hear there may 
be a series of votes this morning and it will be disruptive to 
the Committee hearing, but we will do as well as we can.
    We are happy to welcome you, Mr. Secretary, and look 
forward to your testimony. You have a lot of challenges, and we 
are anxious to hear the solutions. One question I can discard 
is, what are we doing about an NIH director. Overnight took 
care of that one.
    But just in the interest of time, I am not going to do any 
opening statement. Mr. Obey?
    Mr. Obey. Go right ahead.
    Mr. Regula. Okay, well, Mr. Secretary, we will look forward 
to your testimony, and I know we will have some questions.

                         Secretary's Statement

    Secretary Thompson. Thank you, Mr. Chairman, members of the 
Subcommittee. It is an honor to come before you to discuss the 
President's fiscal year 2003 budget for the Department of 
Health and Human Services.
    Mr. Chairman, your support over the past year has been 
tremendous. On behalf of the President and myself, let me thank 
you for all your help. Congressman Obey, it is good to see you, 
and thank you for your good work over the many years, and thank 
you for your friendship.
    Mr. Chairman, the past 13 months have witnessed some 
significant achievements at the Department of Health and Human 
Services. I will detail some of these accomplishments in my 
testimony. But at the outset, let me note that we are making 
good on our promise to bring greater efficiencies to the way 
that we run the Department. The President's budget will reduce 
the number of HHS personnel offices from 46 to 4. We are 
realigning and consolidating throughout the Department, 
bringing better stewardship to our use of the taxpayers' 
dollars, and we have launched a regulatory reform initiative to 
reduce the paperwork burden on physicians, hospitals, as well 
as other health providers.
    As we make sure we are working efficiently, we are also 
providing the resources our health care system demands. The 
total HHS request for fiscal year 2003 is $488.8 billion. This 
is an increase of $29.2 billion, or 6.3 percent over the 
comparable 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. The fiscal year 2003 budget further strengthens our 
ability to deal with the threat of bioterrorism. In total, we 
are asking the Congress to give us an additional $4.3 billion, 
an increase of 45 percent over the current fiscal year. This 
funding will support a variety of activities to prevent and 
respond to the incidence of bioterrorism.
    Right now, we are providing $1.1 billion to State 
governments to help them strengthen their capacity to respond 
to bioterrorism and other public health emergencies. The money 
is part of the bioterrorism appropriation bill, and I want to 
thank all of you on a bipartisan basis for what you did, that 
Congress passed and the President signed into law on January 
10th. Most of the money has already been sent to the States.
    We are working to hook up every major county and State 
health system in the Nation electronically through the Health 
Alert network. The Network is developing communications, the 
Network used by the CDC, to be able to communicate with State 
and local health departments regarding possible disease 
outbreaks. We are providing more than a half a billion dollars 
for our hospital preparedness program, which will strengthen 
the ability of local hospitals to prepare for biological and 
chemical attacks. We are also looking at the opportunity to 
develop regional hospitals for surge capacities if in fact we 
really have a serious bioterrorism attack.
    The NIH is also researching for better anthrax, plague, 
botulism and hemorrhagic fever vaccines. We have purchased 154 
additional million doses of smallpox vaccine that we should 
have all in store by the end of this year, so that we will have 
one vaccine for every man, woman and child in America.
    When it comes to bioterrorism, we are growing stronger in 
our preparedness each and every day. We are also advancing 
important biomedical research and preventive health efforts. 
The NIH will get significant funding for new research into new 
vaccines and protecting the security of its facilities.
    The budget provides $5.5 billion for research on cancer 
throughout NIH, and a total of $2.8 billion for HIV-AIDS 
related research. The CDC will also receive $940 million for 
its State and local programs to improve local laboratories, 
train physicians, and expand cooperative training between 
public health agencies and local hospitals.
    We are also requesting $20 million for a new initiative 
called the Healthy Communities Innovation. It is a new 
interdisciplinary service effort that will concentrate 
Department-wide expertise on the prevention or the reduction of 
diabetes, asthma as well as obesity.
    And Mr. Chairman, we are also helping to prepare low-income 
Americans for the future. That is why welfare reform remains so 
important. The good news is that since 1996, welfare reform has 
exceeded expectations, resulting in millions moving from 
dependence on AFDC to the independence of work. Nearly 7 
million fewer individuals are on welfaretoday than in 1996, and 
2.8 million fewer children are in poverty, in large part because 
welfare has been transforming.
    I also would like to quickly point out that the article in 
the Washington Post today is incorrect. There is nothing in 
this proposal on TANF to abrogate the minimum wage laws or the 
Fair Labor Standards. I want to make that crystal clear to 
everybody.
    The President's budget boldly takes the next step, which 
requires us to work closely with States to help those families 
that have left welfare to climb the career ladder and become 
more secure in the work force. The foundation of the welfare 
reform's success remains work, which is the only way to climb 
from poverty to independence.
    The President's budget allocates $16.5 billion for block 
grant funding, provides supplemental grants to address 
historical disparities in welfare spending among States, and 
strengthens work participation requirements. The budget 
provides another $350 million in Medicaid benefits for those in 
the transition from welfare to work.
    We are also calling for a continued commitment to child 
care, including $2.7 billion for entitlements, as well as $2.1 
billion for discretionary funding. We are going to require 
States to engage everyone in the TANF program in work or work 
preparation activities. States will have to develop and 
implement self sufficiency plans for every family and regularly 
review the progress each family is making.
    We are giving States the flexibility also they need to mix 
effective education and job training programs with work, as 
well as money to strengthen families and reduce illegitimacy. 
Our budget also includes resources for programs targeted at 
protecting our most vulnerable and at-risk children, including 
significant funding for foster care and adoption assistance.
    Modernizing Medicare is another key component of our across 
the board effort to broaden and strengthen our country's health 
care system. Since becoming Secretary, I have begun to 
modernize the very structures of the centers for Medicare and 
Medicaid services. These reforms are essential to the continued 
success of Medicare, which is why the 2003 budget is a 
significant step forward. It dedicates $190 billion over 10 
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.
    While we will not agree on the overall cost, I am confident 
that as we come together in good faith, we can reach a fiscally 
responsible and effective conclusion about what the funding 
should be. This Administration recognizes the need to act now 
to help seniors obtain prescription drug coverage. Our budget 
provides $8 billion through the year 2006 for a new program for 
States to be able to set up a drug-only coverage program to low 
income Medicare recipients, whose income is 150 percent of the 
Federal poverty level or less.
    As we reach out to those still relying on welfare, and work 
to strengthen Medicare, we cannot ignore the roughly 40 million 
Americans who lack health insurance. Since January 2001, we 
have approved State plan amendments, ladies and gentleman, on 
Medicaid and SCHIP waivers that now have expanded opportunities 
for health coverage to 1.8 million Americans and improve 
existing benefits to 4.5 million individuals.
    The 2003 budget seeks $1.5 billion to support the 
President's plan to impact 1,200 communities with new or 
expanded health centers by 2006. This is a $114 million 
increase over fiscal year 2002, and will support 170 new and 
expanded centers to provide services to 1 million new patients. 
The President's budget includes $89 billion in new health 
credits to help American families buy health insurance 
immediately. The program will support purchase of health 
insurance as well as affordable expansions in State and Federal 
programs, and will provide States the flexibility to set up 
State-sponsored purchasing pools to harness the economies of 
group purchasing.
    Mr. Chairman, this comprehensive, aggressive budget 
addresses the most pressing public health challenges facing our 
Nation, from bioterrorism preparedness to coverage for the 
uninsured. What binds this proposal together is a commitment 
and a passion to ensure a safe and healthy America, and to 
improve the lives of the American people, while fostering the 
discipline the State of our economy demands. And I know this is 
a commitment that all of us share.
    Thank you again for letting me come before you today. I 
look forward to your questions and the opportunity to work with 
you on improving the quality of health and human services in 
America.
    [The justification follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
               HEALTHY COMMUNITIES INNOVATION INITIATIVE

    Mr. Regula. Thank you, Mr. Secretary. I am intrigued by 
what you are doing in health care, because I think that is a 
very sensitive subject with the public. It sounds as if you 
have some ideas on programmatic ways to address the situation. 
Will this require new authorizing legislation?
    Secretary Thompson. Some will. But I am hopeful that we 
will be able to, especially in the Healthy Communities 
Initiative, get the necessary dollars put together. We have a 
serious problem in America, as you know, Mr. Chairman, with 
obesity. That is directly related to the kind of incidence of 
increase we have in diabetes. We had a 3,200 person study done 
by NIH that was completed this past summer that showed that if 
individuals would reduce 10 to 15 pounds, walk or do other 
exercise 30 minutes a day, and walking is sufficient, for 30 
minutes a day, we could reduce the incidence of diabetes by 58 
percent. And we are spending $100 billion a year in health care 
costs on that disease.
    So if we are thinking, if we can set up demonstration 
programs across America to start addressing diabetes, asthma, 
obesity, we could really improve the quality of health of our 
citizens. That is what the Healthy Communities Initiative is 
about.
    Mr. Regula. It sounds intriguing. The practical 
administration, do you work through the mayor's office, or do 
you work through public health agencies? What is the tool?
    Secretary Thompson. You would have to work through the 
public health departments. I think that is the only way to do 
it.
    I also spent a week last year going to Indian reservations 
across America. I was absolutely saddened when I went to a 
reservation in South Dakota and on a Saturday morning, found 
individuals standing in line for dialysis. Several of them were 
amputees. It seemed to me that we have to get to the Indian 
reservation, where the highest incidence of disease is. Also, 
it is chronic with regard to African Americans and Hispanics. 
The minorities are the ones that really have to get the kind of 
information, the kind of diets and nutrition, and get people 
involved in exercise programs, in order to reduce obesity as 
well as diabetes. It is so important.
    Mr. Regula. What roles will the schools, the education 
system have, in this proposed program?
    Secretary Thompson. I didn't realize this until I came out 
here to find it, less than 25 percent of our schools have 
physical education programs. I think it is important for us to 
somehow try and get the Education Department and education 
establishment to start reinstituting physical education 
classes.
    I know it is a matter of economics. But it seems to me that 
if we are really going to change the incidence of obesity and 
getting young people back into physical activities, I think it 
is important to start somehow getting the education 
establishment to reinstitute physical education. Education and 
health departments are the key.
    We also have to get this communicated, through public 
relations departments, and the media. That is the way it is 
going to be.
    Mr. Regula. Do you anticipate working with the education 
departments?
    Secretary Thompson. Absolutely.
    Mr. Regula. All right. It appears to me that what you are 
trying to do is decentralize this information flow and programs 
to get them on the ground, get them to produce something of 
significance.
    Mr. Obey, would you like to go ahead with questions?
    Mr. Obey. Mr. Chairman, thank you.
    I am not sure if they call you Mr. Secretary or Governor.
    Secretary Thompson. Try Tommy.

                           HOMELAND SECURITY

    Mr. Obey. In any case, either title is probably a whole lot 
better than what a lot of people call you and me. [Laughter.]
    Secretary Thompson. That is probably true.
    Mr. Obey. Let me simply say first that I think that you 
have done a good job in getting out the added bioterrorism 
money that Congress provided last year.
    Secretary Thompson. Thank you.
    Mr. Obey. As you know, we had a severe difference with the 
White House. If I can risk criticism from the cheerleader from 
Mississippi in the Senate, who seems to think that members of 
Congress can't whisper any criticism on anything having to do 
with homeland security or the war, I have a lot of it. Because 
I was frankly as irritated as I could be that we had to 
overcome the resistance of the White House last year to provide 
money that we were told by your agency, by the FBI, by the 
National Security Agency and by a number of other agencies was 
badly needed.
    I am pleased to see that you are getting that money out to 
States as fast as possible. And I want to work with you in 
figuring out what else the Congress needs to do.
    I think that I am going to put in the record, to save time, 
Mr. Chairman, a description of what Congress provided by way of 
bioterrorism preparedness funding in comparison with what the 
Administration was willing to accept during that argument.
    Mr. Regula. Without objection, it will be entered.
    [The information follows:]

       Bioterrorism Preparedness Funding in FY 2002 Supplemental 
                             Appropriations

    Congress provided $2.5 billion in FY 2002 emergency 
supplemental appropriations for bioterrorism preparedness at 
HHS, as part of the terrorism preparedness and response package 
enacted in the FY 2002 Defense Appropriations Act.
    This was $1.0 billion more than the bioterrorism 
supplemental funding requested by President Bush. The major 
elements are as follows:
    National Pharmaceutical Stockpile--$1.1 billion to purchase 
and stockpile smallpox vaccine, antibiotics, and other 
appropriate vaccines, medicines, and medical supplies. The 
amount enacted is about $47 million less than the 
Administration's request, but that reduction was due to updated 
cost estimates rather than any policy differences.
    State and Local Health Departments--$865 million for grants 
to upgrade the capacities of state and local health departments 
to deal with bioterrorism and other outbreaks of infectious 
diseases, including planning and assessment, and improvements 
in epidemoiological, laboratory and communications capacity. 
The President had requested only $65 million in supplemental 
funding for these purposes.
    Grants to upgrade hospital planning and preparedness--$135 
million, compared to $50 million requested by the 
Administration.
    Funds to upgrade in-house CDC capacity--$100 million, 
compared to $50 million requested by the Administration.
    Accelerated NIH research on vaccines and treatments--$85 
million. The President requested no supplemental funding for 
this purpose. In addition, the enacted supplemental provides 
$70 million for construction of high-bio-safety-level labs at 
NIH to do this research, compared to zero requested by the 
President.

                          Health Care Funding

    Mr. Obey. But I would like to make a couple other points, 
Mr. Secretary. I get frustrated by this health care ying and 
yang that goes on every year, because both parties pose for 
political holy pictures on NIH. And I think there's a reason 
for that, because the benefits of research at NIH go out to 
everybody, regardless of income. People understand that.
    But then when I take a look at the rest of the health 
budget, the part of the health budget that is primarily aimed 
at poor people or isolated people, there the Administration's 
budget request this year has a $1.4 billion reduction. It is a 
7 percent reduction in nominal dollars that does not take into 
account inflation and does not take into account added case 
load. When you do that, it is about an 11 percent cut in real 
per capita assistance to the people that need it the most.
    And if you can run through what you are recommending, you 
have a $740 million decrease for the Health Resources and 
Services Administration and a $350 million decrease for the 
Centers for Disease Control. There's a $114 million increase 
for Community Health Centers, which I welcome, but that is 
still the smallest increase for that program in three years. 
The budget abolishes the community access program, it 
recommends a 75 percent cut for health professions. It cuts 
funding for CDC's chronic disease prevention by $57 million, 
and freezes maternal and child health care grants to States for 
childhood immunizations.
    For NIOSH, every Republican administration since I have 
been here has tried to squeeze the NIOSH budget. And this one 
is no exception. They used the war as an excuse to once again 
make cuts that Mr. Daniels would be recommending if the war 
were not here--there is no question in my mind. This 
Administration recommends cutting NIOSH by 10 percent.
    I had people in my office yesterday talking about their 
concern about rural health. Overall, HRSA's rural health 
programs would be cut almost in half from $149 million to $75 
million. Grants for rural hospitals would be cut from $40 
million to $25 million. Funding for State offices of rural 
health would be cut from $8 million to $4 million. Funding for 
items such as defibrillators would be cut from $12.5 million 
this year to $2 million next year.
    Why is that a balanced approach to health care? I mean, why 
on earth would we be cutting these programs, especially at a 
time when States are making cuts as well. I notice your 
successor in Wisconsin is eliminating the community health 
program, a $3 million item. He is eliminating it this year. And 
he says that he's eliminating it because he has assurances from 
President Bush that the Federal Government is going to put more 
money in to make up for that cut. I do not see how that is 
going to be possible, given what is happening to the budget.
    But why is that a fair allocation of resources?
    Secretary Thompson. Congressman, you paint a dismal 
picture, and I would just like to point out that we tried to, 
like you have, a tight budget situation, you only have so many 
dollars. And you have to make the tough decisions. The first 
item that the President and this Administration wanted to make 
sure we had money for was bioterrorism. There is a 45 percent 
increase there, $4.3 billion.
    Mr. Obey. The White House had to be dragged kicking and 
screaming into asking for that money.
    Secretary Thompson. The White House wanted to make sure 
that the money was well spent.
    Mr. Obey. I have confidence that you could spend it well.
    Secretary Thompson. I have a lot of confidence that I can, 
too, and that is what I am trying to do, Mr. Congressman. But 
the White House felt that it would be better to put it over two 
traunches, over two fiscal years, where it had been one. And 
that is why they are asking for the 45% increase in this 
budget.
    The second thing is, we had to make sure that we continued 
the amount of money at NIH. This is something that was a 
commitment made by everybody, Democrats and Republicans in this 
Administration. That was actually $3.7 billion. So when you add 
the $4.3 billion and the $3.7 billion, it was all the money 
that was allocated to the Department.
    I tried to squeeze and to put the money where I thought we 
could have the biggest impact, Congressman. And I think we did 
a very good job of placing the resources where we actually need 
it.
    In regard to CDC, if I could just quickly add to that, in 
regard to the CDC budget reduction, it was a reduction mainly 
because of the reduction in the need for purchase of medicines 
and antibiotics. We reduced that budget by $757 million this 
past year due to the purchase of medicine. So there is actually 
$757 million of medicines that had been purchased in the past 
fiscal year or in the process of being purchased that we would 
not need that extra money.
    In regard to CDC budget, the area that you were talking 
about as far as chronic, there is a reduction of $71 million. 
Most of that money, $68 million, came as a result of the 
program for the advertising program that was put in by the 
former Congressman, Mr. Porter. That was $68 million, an 
additional $3 million in administration savings. That is the 
$71 million.
    As far as programs, CDC has gotten increases. And NIH has 
got an increase. As far as community health centers, we have 
$114 million, this Administration is absolutely committed, as 
you are, to making sure that we are able to get 1,200 
additional or expanded community health centers in the next 
five years.
    Mr. Obey. Well, let me ask you a question on that. Our 
Governor has eliminated the entire State funding of $3 million 
for that program, because he says he's been assured by the 
Administration that the Federal Government will make that up. 
As I see the numbers in your budget, after you deduct the $10 
million increase for malpractice liability, which is a 
different purpose, you have a $104 million increase in this 
program for this year. That is the smallest increase in three 
years.
    In Wisconsin we are 1.9 percent of the nation's population, 
if we were to receive a similar percentage of that money, 
Wisconsin would receive a little less than $2 million of that 
increase. That would still leave us short of the Governor's cut 
by $1 million unless we got more than we were supposed to. And 
I guess I also wonder whether we are chasing our tail, if the 
Federal Government is putting money in at the same time that 
States are wiping out their support for these programs.
    Secretary Thompson. It is pretty difficult for me to be 
able to respond to a conversation that I was not privy to.
    Mr. Obey. There is not any way that you can guarantee that 
Wisconsin will get enough money to make up for that cut?
    Secretary Thompson. You know, like you do, I look out for 
Wisconsin, Congressman, wherever I possibly can. But in this 
regard, it goes out where thecommunities need it.
    Mr. Obey. So you can't guarantee it, and I can't guarantee 
it.
    Mr. Chairman, I have other questions, but we are out of 
time.
    Mr. Regula. I know. We will recess temporarily. Mr. Hoyer, 
did you----
    Mr. Hoyer. I am going to try to get back, Mr. Secretary, 
but I have another hearing.
    Secretary Thompson. Sure, go ahead.
    Mr. Hoyer. I do not know how many votes we are going to 
have, but if I can, I will get back.
    Secretary Thompson. Thank you very much, Mr. Congressman.
    [Recess.]
    Mrs. Northup [assuming chair]. I know that I do not look 
like Mr. Regula, but I actually am right now. [Laughter.]

                           DIET AND EXERCISE

    Mrs. Northup. Thank you, Mr. Secretary, and I appreciated 
your opening remarks and your remarks earlier today. I just 
thought I would start with a suggestion. As we talk about 
obesity and as we talk about exercise, to ask you make the 
suggestion that the President lead that effort. I do remember 
when President Kennedy, back in the early 1960s, talked about 
fitness and health, and you may remember the 50 mile walks. As 
could an average American, were they able to walk 50 miles. I 
remember being so inspired by that--I was a freshman in high 
school--that I organized our whole high school to see if we 
could lead up to it taking smaller walks and longer walks. 
People all over the State were trying to see if they could walk 
from Louisville to Lexington, or Louisville to Frankfort, our 
State capital.
    I do think we have a President that is in excellent health, 
and he invests a lot of time in recognizing the importance. He 
probably underestimates what his level of inspiration might be 
to the youth and the people of this country if he talked about 
what it means to him, and became very public about that. So I 
would just like to make that suggestion to you.
    Secretary Thompson. If I could just quickly respond, 
Congresswoman Northup, first off, I think you do an excellent 
job as Chairperson. [Laughter.]
    I want to add that, the second thing is, the President is 
excited about this. He wants to be involved. He wants to do 
something on prevention. We are developing a plan right now to 
put him front and center on a prevention kind of strategy. I am 
somewhat excited about that possibility, but also about the 
possibility that a lot of people from Hollywood would like to 
get involved. There is a lot of media interest in this, and a 
lot of interest from minority communities.
    So if we could somehow be able to orchestrate this and be 
able to come up with a real genuine strategy, I think we could 
do a great job on prevention. And that of course to me is what 
we need to do in America. I think it is really wrong headed the 
way we deliver health care, we wait until people get sick and 
then we spend thousands of dollars to get them well. We do not 
spend any money on prevention. And we know what works, reduce--
--

                         SCHIP MEDICAL WAIVERS

    Mrs. Northup. Right. Well, I just thought I would encourage 
you, from the very top, while I think it is important in every 
school, the truth is, besides learning about it in your head, 
your heart has to lead you. It makes a terrific difference when 
somebody gets very enthusiastic and says, look, this changes my 
life. Kids tend to follow that and want to participate.
    I thought I would ask a couple of questions about the 
medical waivers for the SCHIP program, and also some of the 
ideas that you have about allowing States some innovative ways 
to ensure that more people are covered. I remember the debate 
when the SCHIP started. So many States said, could we possibly 
use the dollars in the SCHIP to help families who are in work 
situations where they have the opportunity to purchase group 
health insurance plans, but their income is not sufficient to 
cover what their co-payment is? Could we help pay for that and 
could we help get a family plan when there is only an 
individual plan that is paid for by the employer?
    And what I ran up against was that the requirements for the 
SCHIP program are so extensive, so broad-based, that almost 
nothing but the Medicaid program would qualify. The benefits 
have to be so great. I wondered if we would go back and look at 
this, because in so many of the families that actually might 
qualify, their children might qualify for SCHIP, because the 
parents are now at work, they do not particularly want to have 
their child in a Medicaid program.
    Since private health insurance is the delivery system of 
most Americans that are independent, if we could go back and 
look at marrying the vouchers and the SCHIP program--allow 
States to have a little more flexibility so that far more of 
their uninsured could be covered--could you anticipate that 
being part of this program?
    Secretary Thompson. Congresswoman, you know I love new 
ideas. I love ideas like that that are exciting and on the 
cutting edge. Let me just quickly bring you up to date where we 
are. In Wisconsin, when I was Governor, I applied for a waiver 
to be the first State to allow for low income parents to be 
able to buy into the SCHIP program, the Medicaid program, with 
children. I want to tell you, after 24 months we were able to 
get a waiver. It has been proven to be extremely successful. 
Ninety-two thousand individuals have signed up on it, and in 
that capacity, 52,000 additional children have been signed up 
on Medicaid. So we were really able to get a lot of people 
covered.
    We were faced with a situation at the Department of Health 
and Human Services where we even had some waivers going back to 
1986, one waiver went back to 1986. So in the past year, we 
have cleaned up all the past waivers----
    Mrs. Northup. Do you mean pending waivers?
    Secretary Thompson. Pending waivers.
    Mrs. Northup. We did not have a decision yet from 1986?
    Secretary Thompson. A decision, and State plans. We have 
now had the whole backlog brought up to date, and we have 
handed out 1,506 waivers and approvals of State plans. We have 
developed a model waiver for the SCHIP program. As a result of 
that model waiver, the States of New York, Massachusetts, 
California, Arizona, Rhode Island and Delaware are now included 
in an SCHIP program like Wisconsin's that allows for low income 
parents to buy into the SCHIP program.
    In addition, in this budget, the President has requested 
$3.2 billion of money in the SCHIP program that has not been 
used by the States to be able to be continually used by 
theStates instead of being reverted back to the Treasury. So if that 
passes, hopefully other States will take an opportunity to adopt a 
model waiver, apply for it and get it and we will be able to expand it.
    In regard to your very good constructive suggestion, I 
would like to look at it. I am afraid the law does not allow us 
to go to the next step to marry an SCHIP Medicaid with a 
private insurance. But there is always the opportunity to 
change the law to allow that to happen, and I would be fully 
supportive of that.
    Mrs. Northup. Thank you very much. I look forward to 
working with you on that.
    I think Mr. Jackson is next.
    Mr. Jackson. Thank you, Madam Chairman.
    And let me begin by welcoming you, Secretary Thompson, and 
thanking you for your testimony.
    Secretary Thompson. Thank you.
    Mr. Jackson. Mr. Secretary, I have three questions. I am 
going to ask my three questions all at once, because of the way 
the Committee structures these questions and answers.
    Mr. Secretary, I am disappointed that the President's 
budget eliminates virtually all funding for the Health 
Resources Services Administration's health professions training 
program focused on diversity in the work force. The minority 
centers of excellence, health career opportunities and 
scholarships for disadvantaged students programs serve a 
critical role in supporting minority health professions, 
students, their institutions and the surrounding communities.
    I am interested in what the rationale was for these cuts. 
Do you think that we can find a way to work together to support 
these critical programs that have such a positive impact on the 
number of under-represented minorities entering the health 
professions? Past Secretaries who have come before our 
Committee have acknowledged this as a significant problem. They 
have acknowledged that these programs play a significant role 
in combating the problem. I am very interested in the 
Administration's rationale for these cuts.
    Second, Mr. Secretary, I am hoping that you can explain the 
rationale for the President's proposal to consolidate all 
public health services facilities construction programs within 
the Department. I strongly believe that NIH, HRSA and CDC have 
all done a good job in administering their respective programs. 
I am particularly impressed with the expertise and the 
sensitivity demonstrated by the National Center for Research 
Resources and the National Center on Minority Health and Health 
Disparities in this area.
    Can you tell me why the Administration feels differently? 
Also, do you believe that the Administration has the authority 
to transfer these programs without Congressional approval?
    And last, Mr. Secretary, my third question concerns LIHEAP. 
I am very concerned about your proposed budget cuts for LIHEAP. 
The State of Illinois receives a little more than $76 million 
from the LIHEAP program, making it the third largest recipient 
of LIHEAP funds. My Congressional district receives an average 
of $12 million, or about 16 percent of the State total. In 
terms of LIHEAP funds, the next closest Congressional district 
receives about 4 million, or about 5 percent of the State 
total.
    Obviously LIHEAP is an important program to me and my 
constituents. I am hoping you can explain to me why there is a 
reduction of $300 million in the regular LIHEAP appropriation. 
Thank you, Mr. Secretary, and thank you, Madam Chairman.

                       HEALTH PROFESSIONS FUNDING

    Secretary Thompson. Thank you so very much, Congressman. 
Let me try to go through them one by one.
    In regard to the first one, the health professions cut, 
this one is something that we do not believe is as successful 
as other programs are. That is why there was a reduction. We 
did not have enough dollars in the allocation given to us by 
OMB, and we felt that this program was one that did not have as 
much success.
    Why do I say that? First off, only 30 percent of the 
individual doctors and medical personnel that have been trained 
in this program go into under-served areas. So we decided to 
put more money and an additional $44 million into the National 
Health Service Corps in order to those individuals going to 
under-served areas.
    In regard to that, we also spend approximately $8 billion 
in Medicare dollars--I know this is not in the jurisdiction of 
this Committee--that goes into training professions, $8 billion 
annually. We think that $8 billion and the additional $44 
million, which is $198 million in the National Health Service 
Corps, is a better utilization of the dollars than this was. We 
did put additional money into the real shortage area, and that 
is for nursing. We have put in some additional money in regard 
to that.
    But as far as doctors, that was reduced, I agree with you. 
We feel that we have compensated. We also put in some 
additional money at NIH for minority programs for use of 
scholarships for minority students. I think we have three 
programs up at NIH for minority students in order to go to 
school and going into science professions. So we use those. 
That is why.
    Mr. Jackson. Mr. Secretary, if I can, just before we get to 
LIHEAP, in past Committee hearings with Secretaries and expert 
testimony, the Committee has essentially concluded that African 
Americans who come from disadvantaged areas and are pursuing 
careers in the health professions, have a tendency to locate in 
those disadvantaged communities after advancing their careers. 
Native Americans have a tendency to relocate to or return to 
reservations and Native American communities after they have 
received their health professions training. Hispanics and 
Latino Americans tend to relocate back to Latino and Hispanic 
communities after the end of their educational careers.
    More often than not, the motivation for getting the 
education and solving some of the disparities and health issues 
that tend to plague these communities are the byproduct of 
broader general Anglo-Americans not willing, to come and work 
in these low income communities after their medical edcuation. 
So what we find here, and this is expert testimony well 
documented by this Committee, is that these programs are 
central to encouraging indigenous health professions personnel 
to get the training necessary and to return to their 
communities to help combat the overwhelming disparities.
    So I certainly hope, Mr. Secretary, that on the question of 
these particular cuts, that the Administration and your office 
would certainly reconsider it. Past Secretaries and past expert 
testimony has shown us that these programs do work. I would 
like to explore at some point intime the rationale that OMB 
made for these cuts. We have sufficient evidence that suggests it is 
just the opposite of what you are suggesting, sir.
    Secretary Thompson. I would just like to point out that we 
have the assessment that only 30 percent of the individuals 
trained to serve in medically under-served areas, that is why 
we put the money in the National Health Service Corps, because 
those individuals have almost 100 percent gone into under-
served areas, into minority areas, like you represent. I want 
to accomplish that. I want to be successful. And we feel that 
the National Health Service Corps is the better investment, for 
scholarships for minority students to be able to go back into 
under-served areas.
    We also are putting $8 billion into training doctors for 
the Medicare program. I know this is not in this jurisdiction, 
but a lot of that goes to minority students. I am fully 
supportive of that, I am passionate about that. Also, we set up 
three programs through NIH for minority students.
    For those three reasons, we felt that those three programs 
were more successful, Congressman, than this program. That is 
why we took a reduction. But at the same time, in the area of 
real shortage, nursing, we put an additional $6 million into 
that program in this category. Because we know there is a 
shortage there, and we want to be able to increase that.

            CONSOLIDATION OF HEALTH FACILITIES CONSTRUCTION

    In regard to the consolidation of the building program, I 
have a very decentralized department. I have 46 personnel 
offices. I have over 200 different computer systems. I have 
four bookkeeping systems. I have building missions in every one 
of the divisions. There are a lot of overruns. You say they are 
doing a good job. I agree, most of the time they are doing a 
good job.
    But I have overruns in some areas of building programs of 
over 20 percent. I do not think that is something you would 
accept. I do not. And that is why I want to be able to 
consolidate it, bring some centralization to it, and make sure 
we do not have the overruns.

                                 LIHEAP

    In regard to LIHEAP, there is a $1.7 billion request, that 
is level funding, from this year's spending it is not a cut. 
You can say there is a cut when you say there was $2 billion a 
year and a half ago, or look at unobligated contingency funds 
and if that is what you are basing it on, then I would have to 
agree with you. But based upon last year and expected 
obligations this year, there is a $1.7 billion, that was the 
level funding. Congress did offer a supplemental proposal of 
$300 million in a supplemental appropriation last year. That 
money has not been spent.
    That is why we thought level funding of $1.7 billion, 
especially with the prices going down, and especially this past 
year with the kind of weather conditions and the winter we had 
in Illinois and in Wisconsin and other northern States, we felt 
$1.7 million was the correct amount. Those are the reasons and 
rationales.
    Mr. Jackson. Thank you, Mr. Secretary.
    Mr. Regula [resuming chair]. Mr. Hoyer.

                      DEPARTMENT'S BUDGET REQUEST

    Mr. Hoyer. Mr. Secretary, thank you very much. I am going 
to try to be quick, as I told you, I have to go to another 
committee meeting.
    Let me first ask you, in your response to Mr. Jackson, you 
said, that is what we felt were the correct numbers. I 
understand what you are saying. Let me ask you something, 
though. In your opening remarks, you gave figures for the 
overall budget and in your remarks you have the budget figures 
that are within our jurisdiction. Using either one, can you 
tell me how much you requested that went to the President, went 
to OMB, and how much you got back? Do you know that number?
    Secretary Thompson. I got less. [Laughter.]
    Mr. Hoyer. I am not surprised or shocked. I am pleased that 
you asked for, I presume, did you ask for money that you didn't 
think we needed? [Laughter.]
    I know these are hard questions, Mr. Secretary.
    Secretary Thompson. Congressman, you know I would never ask 
for money I didn't think we actually needed.
    Mr. Hoyer. How much did you ask for, Mr. Secretary?
    Secretary Thompson. Pardon?
    Mr. Hoyer. How much did you ask for?
    Secretary Thompson. In which program?
    Mr. Hoyer. Overall. You say in your statement, the 
discretionary component of the HHS budget totals $59.5 billion. 
Now, you related that to $64 billion. Of course, that $64 
billion is in total for your department, some of which is not 
within our jurisdiction. So my presumption is the figure you 
use in your statement is the $59.5 billion relevant to this 
Committee. I do not care whether you relate to the $64 billion 
or the $59.5 billion. But my interest is in what you requested 
of OMB in discretionary spending to meet the needs that you 
perceived to be present.
    Secretary Thompson. We looked at, Congressman, the level 
funding in a lot of programs. You can add up those programs, 
and where there has been a reduction, and----
    Mr. Hoyer. You were level funding across the board?
    Secretary Thompson. Not entirely, no. But in those programs 
where there have been cuts, we had level funding.
    Mr. Hoyer. Okay. Can you get----
    Secretary Thompson. But you have also got to realize, there 
is some difficulties, because the HHS budget is the last one 
that the President receives from Congress. We were working off 
of what we thought the conference committee was going to come 
up with. So in some regards, we did not have the same amount 
that was finally appropriated by Congress and signed into law.
    Mr. Hoyer. Which was more, which was less?
    Secretary Thompson. The Congress usually exceeded the 
amount that we had requested, because we did not have the 
benefit of what the Congress was going to do. As you remember, 
this is the last proposal that was passed. Our budget had 
already been into OMB months before you had the opportunity to 
find the final numbers. We were trying to make changes right up 
until the end, sir.
    Mr. Hoyer. Mr. Secretary, I appreciate that. I would like 
to have for the record, if you do not have it in front of you, 
the amount that you requested that relates to that $59.5 
billion, to what you requested OMB was necessary to fund the 
objectives that are in your budget.
    Now, let me make it specific. You indicate that an increase 
of $2.3 billion. Now, there is a $3.7 billion in NIH alone. Is 
that correct?
    Secretary Thompson. That is correct.
    Mr. Hoyer. Does that mean there is a $1.4 billion cut,net 
cut in the remaining programs, some went up, some went down? Am I 
correct?
    Secretary Thompson. That is correct, but there is also a 
lot of one time items, Congressman, that didn't need to be 
funded. For instance, we had last year $645 million in CDC to 
increase the pharmaceutical----
    Mr. Hoyer. I heard that. I understand.
    Secretary Thompson. So we only have to have $300 million in 
CDC for that. We had $512 million in the purchase of smallpox. 
We only have to use $100 million this year, and not for 
smallpox, for another drug called Vig, for the antidote to a 
reaction to a smallpox vaccine.
    So there are many of those areas, there are a lot of one 
time items and building programs, Congressman, that were put in 
usually by individual Congressmen that were one time items that 
were backed out. All of those items probably were somewhere in 
the neighborhood of $1.6 billion. So you have to take that into 
consideration as well.

                               HEAD START

    Mr. Hoyer. All right. Let me go to a specific program, Head 
Start. You increased it by $130 million.
    Secretary Thompson. That is correct.
    Mr. Hoyer. That is 1.9 percent on its base, and a 2.9 
percent CPI environment. In your statement, it appears that you 
do not perceive there to be any additional seats available for 
Head Start children. Am I correct on that?
    Secretary Thompson. I do not know what you mean by seats 
available.
    Mr. Hoyer. Slots.
    Secretary Thompson. I know there's waiting lists out there 
for Head Start.
    Mr. Hoyer. Yes, we are doing somewhere in the neighborhood 
of between 50 and 60 percent of eligible children that have 
slots available to them in our Head Start system in America.
    Secretary Thompson. It is about 65 percent, Congressman.
    Mr. Hoyer. My question to you is, therefore, Mr. Secretary, 
am I correct in observing, because the increment allotted to 
Head Start is less than the CPI, that we do not contemplate 
additional slots being available in Head Start?
    Secretary Thompson. We think that there will be some 
additional slots available. But not many.
    Mr. Hoyer. You have got your little pink sheet there. Can 
you tell me how many? I do not want to pin you down, but----
    Secretary Thompson. I do not know where this pink sheet 
came from, Congressman. [Laughter.]
    Mr. Hoyer. Hey, these pieces of paper sort of fall from 
very helpful people I find.
    Secretary Thompson. It is estimated at 915,000 children, 
which is just about 5,000.
    Mr. Hoyer. Now, if we are going to serve 5,000 additional 
children with a 1.9 percent in a 2.9 percent environment, 
Governor, you have sat down and done these numbers. How are we 
going to do that?
    Secretary Thompson. All I can tell you is the numbers that 
were put through.
    Mr. Hoyer. I got you.
    Secretary Thompson. And that is what they gave all of us.
    Mr. Hoyer. One of the things we are concerned about, as you 
know, quality assurance and comparability with teachers' 
salaries. Because one of the things we have had, as you know, 
trouble getting, we require certain skill levels of Head Start 
folks, but the pay is substantially behind comparables.
    Secretary Thompson. Most of that $130 million is to go for 
the inflationary amounts for salary increases for the staff and 
the teachers, as you know, Congressman. We are also trying to 
put in, in the Head Start program, an additional reading 
program. We are trying to get $50 million for that program, 
Congressman, through other programs in the Department.
    Mr. Hoyer. An additional $50 million into Head Start?
    Secretary Thompson. Yes, internally.
    Mr. Hoyer. In addition to the $130 million?
    Secretary Thompson. That is internally. We are trying to 
develop a more accurate and a better reading program for Head 
Start students. So we are trying to internally fund that. We 
have folks doing that.

                         Vaccines For Children

    Mr. Hoyer. Mr. Chairman, if I can ask just one last 
question, and then I'll have to leave. As you know, Mr. 
Secretary, because you and I have talked about this, vaccines, 
you have talked about it in your testimony, as you know, 
unfortunately, we went down a point in terms of children 
covered from 76 to 75 in the last year. So we are at about 75 
percent.
    As I understand it, we have level funded vaccines. Now, you 
indicate that to some degree, some of those were one time 
expenditures. I do not know the figures off the top of my head, 
I think it was $675 million, part of that was for supplies, 
part of it was for local governments' administration, I guess. 
There was an additional sum for that.
    My question is, with the vaccine shortage, and a fourth of 
our children not vaccinated properly, will flat funding move us 
ahead?
    Secretary Thompson. I have set up a task force and I have 
assigned the Assistant Secretary of Health to take a look at 
this to find out how we can encourage more companies to get 
into the production of vaccines. The problem we have had is 
that too many companies have gotten out of the business because 
they've not found it profitable, and the liability is so 
extreme that they do not want to take the challenge, they do 
not want to take the risk, and they do not want to put in the 
investment to develop it.
    As a result of that, the level funding is about all the 
vaccine that is being produced. So until we get more companies 
involved, better manufacturing practices and better production 
rates, the money could just sit there, because we do not have 
the opportunity to spend it.
    To answer your second question, however, am I satisfied 
with only having 75 percent of the children vaccinated, 
absolutely not. I think it should be the goal of all of us to 
be able to find ways to get all of the children vaccinated, 
because it will save health expenses in the future, and it will 
also improve the quality of health of our students and children 
across America. I am passionate about it, and I agree with you 
and I support you in that regard.
    Mr. Hoyer. Mr. Secretary, not a question, but I want to 
make it clear that my question was not whether you were 
satisfied, because my presumption is that you are not. I want 
to tell you, I think you are a passionate advocate of this. My 
question was, and you do not need to repeat the answer, was at 
a freeze level, will that be sufficient to give us the 
opportunity to try to overcome that 25 percent.I know you want 
to do that, we share that view.
    Thank you, Mr. Chairman.
    Secretary Thompson. I am hoping to come up with some 
recommendations for you, Congressman, and for this Committee 
and for this Congress as to how we might be able to increase 
the vaccination supply and manufacturing in America. We are 
asking a lot of companies to come in and we are talking to 
them, trying to find ways to address this question.
    Mr. Hoyer. Thank you, Mr. Secretary.
    Mr. Regula. Mr. Secretary, did I understand you correctly, 
you are beefing up the Head Start program to move it into more 
of an education type of program? You mentioned reading and 
some. Because historically, it was a welfare program. That is 
why it is in your Department.
    Secretary Thompson. That is correct. We want to put a 
reading component, we think that is absolutely vital, in order 
to improve Head Start. And since we didn't have any extra 
dollars in the program, we are trying to find other monies and 
other programs that are close, similar to Head Start, but have 
the same kind of needs for children. We are trying to find $50 
million----
    Mr. Regula. I assume that you'd have to get a higher level 
of education or experience in the people that you hire to 
accomplish this, which would of course put some pressure on 
your salaries.
    Secretary Thompson. That is correct.
    Mr. Hoyer. Mr. Chairman, if you will yield on that. I 
absolutely support that objective. I think that is the right 
thing to do. Children clearly can learn a lot earlier, and we 
need to engage them and challenge them a lot earlier. I applaud 
your efforts. My only question was, if you can get $50 million 
from someplace, $130 million I do not think is going to give us 
the resources to get there.
    Thank you, Mr. Chairman.
    Secretary Thompson. Thank you, Congressman.
    Mr. Regula. Mrs. Lowey.

                              MAMMOGRAPHY

    Mrs. Lowey. Thank you, Mr. Chairman.
    I want to join the Chairman in welcoming you, Mr. 
Secretary. We look forward to continuing to work together.
    I want to begin with two questions that I'd like to put 
forward. The first regarding mammography. I was glad to see 
that you entered the debate and provided your input. I agree 
with you, based upon all the evidence which we have shared, 
that women should still undergo an annual mammogram after age 
40. It is important that women have all the facts about the 
procedure, but also that they understand that it is the best 
tool we have right now to detect breast cancer early.
    However, Mr. Secretary, I think that the current debate 
over the data on mammography misses the point. Because I think 
it is time for the next generation of early detection. I know 
that researchers across the country are looking at promising 
new methods. Despite these advances, even the new technologies 
have glaring shortcomings. Experts and scientists agree that we 
still have not found the 21st century early detection method we 
need. And I believe very passionately that we must 
substantially increase and accelerate research into these and 
other breast cancer screening techniques.
    I'd like to ask you what you think the next steps will be, 
what leadership will HHS provide on this important issue. I am 
going to follow up with one other question, and have you 
respond to both, because I too have to go to another hearing. I 
apologize.
    Number two, yesterday HHS issued a notice of proposed 
rulemaking to implement a new policy you announced last month. 
The new rule would expand the Children's Health Insurance 
Program, CHIP, to include ``unborn children.'' With all due 
respect, Mr. Secretary, I think the Department is going about 
this the wrong way. Not only does this rule invite an 
unnecessary and unrelated debate into what I think is an 
absolutely critical and important issue, but there are glaring 
holes, in my judgment, in the coverage this rule would provide.
    I have been told that under your proposed rule there are 
circumstances when the women's health could be at issue, but 
because that health problem may not immediately affect the 
fetus, the women would not be eligible for care. The rule would 
force physicians to pick and choose between what affects the 
fetus and what affects the woman. Clearly, a woman's overall 
health is vitally important to the health of her baby. This 
approach, frankly, just doesn't make any sense.
    And as you may know, Mr. Secretary, with Henry Hyde, I have 
introduced to several sessions a bill in the House that is 
identical to Senator Bond's bill which you endorsed in your 
announcement last month. The bill would allow States to cover 
low income pregnant women under CHIP. This is frankly a 
straightforward way to ensure that women receive the care they 
need for a healthy pregnancy.
    If you could explain to us, why did you choose to take a 
needlessly divisive and potentially flawed approach? Perhaps if 
you can begin with that question and we can go back to 
mammography. Thank you so much.
    Secretary Thompson. Well, first off, I am getting 
criticized for that rule, and basically I do not know why. The 
rule is set up to allow for low income mothers to get prenatal 
care, something I know that you believe in, something I believe 
in.

               SCHIP--PROPOSED RULE TO INCLUDE THE UNBORN

    Mrs. Lowey. So why didn't you just do that?
    Secretary Thompson. Because you have not passed the law 
yet.
    Mrs. Lowey. But I do not understand. Why do we have to 
provide coverage for the unborn child, which you and I know is 
controversial, and brings into it a whole other issue, when all 
we can do is deal with pregnant women?
    Secretary Thompson. I do not want to make it controversial. 
I want to be able to help low income women get prenatal care, 
so that they can have healthy babies. Because that is going to 
improve the quality of health of that baby. That is the reason 
for the rule.
    The reason you have an NPR, a Notice of Proposed 
Rulemaking, is to give people an opportunity to comment on it. 
We are going to have 60 days in which people can comment on 
this particular rule. We can make changes. There's nothing 
concrete about the rule. The ultimate objective of the rule is 
the same thing that you and Congressman Hyde are trying to do, 
to give low income women the opportunity to get prenatal care.
    So if you can pass the bill, we do not need the rule.
    Mrs. Lowey. But what I am trying to understand right now, 
under Medicaid, pregnant women are getting that coverage if the 
States----
    Secretary Thompson. Under Medicaid, but not under SCHIP, 
the way the law is written they cannot get it.
    Mrs. Lowey. Correct. Now, thank you, right. Mycolleague is 
helping me with that.
    Secretary Thompson. I am sure of that. [Laughter.]
    Mrs. Lowey. I always welcome my support from my good 
colleague.
    Medicaid requires States to cover prenatal care and 
maternity care for women with incomes up to 133 percent of the 
Federal poverty level, correct. Thirty-nine States have higher 
income ceilings, making even more women eligible for care. The 
Federal Government can also grant waivers to States to cover 
pregnant women under SCHIP and two States, New Jersey and Rhode 
Island, have already received such waivers and are covering 
pregnant women.
    Secretary Thompson. That is correct.
    Mrs. Lowey. Let me just say one thing. You and I know that 
we are both committed to covering pregnant women.
    Secretary Thompson. That is right.
    Mrs. Lowey. If we do it straight, and make it clear that 
pregnant women deserve these coverages, through waivers, 
through rules, through regulation, encouraging legislation, we 
can do what we really want to do. By talking about providing to 
unborn children, and I am not going to go into further details, 
you and I know, Mr. Secretary, with the greatest respect, it 
brings all kinds of other issues that have tied us up in the 
Congress for years and years and years.
    Let's just get pregnant women covered. I look at my kids, 
my children, you know, we always talk about our grandchildren, 
our kids are lucky that they get this coverage. And there are 
too many women that do not have the coverage. Let's just do it, 
through waivers, through regulations. Why get into the unborn 
child issue?
    Secretary Thompson. I can do it by waivers. You are 
absolutely correct. But only two States have done it. By the 
time I get waivers for the other 48 States, some may or may 
not, I think there's going to be a lot of women that will not 
get the coverage. That is why I put the rule out there, because 
I would like to get these low income women covered for prenatal 
care.
    That bill that you have introduced was introduced last 
session and it didn't pass. It doesn't look like it is going to 
pass this year. And in the meantime, a lot of low income women 
across America are not going to get prenatal care.
    So I made a decision. I made a decision, I have got the 
power and the responsibility to help low income women get the 
prenatal care. That is why the rule is out there, for no other 
reason than to get that coverage. It is the fastest, the most 
efficient way.
    If you can pass the law, fine, then we do not need the 
rule. And if you can get 50 States to apply for a wavier 
tonight, tomorrow, next week, we do not need the rule.
    Mrs. Lowey. Let's work together on that.
    Secretary Thompson. I want to work with you. I like you. I 
want to work with you.
    Mrs. Lowey. I like you, too. [Laughter.]
    Secretary Thompson. So let's----
    Mrs. Lowey. Let's do it. I have the greatest respect. Let's 
work on the waivers, let's work on the legislation. And if you 
can come out again and support the legislation--you know what I 
really believe? And as you know, I am involved in this----
    Secretary Thompson. I want to get to mammography.
    Mrs. Lowey. Okay. I want to say one more word and then to 
mammography. I just want to say, I am involved in the other 
debate. And I am not going to get into that now, because I 
think it is so important to make sure that pregnant women get 
covered.
    Secretary Thompson. So do I.
    Mrs. Lowey. And I do not want to politicize the issue. I 
can't imagine why you, knowing your commitment to this, would 
want to get into this issue right now.
    Secretary Thompson. I do not want to get into the issue.
    Mrs. Lowey. So let's work on waivers, pass my legislation 
that Henry Hyde introduced, with Bond, let's go back to 
mammography.
    Secretary Thompson. Let's pass the legislation.
    Mr. Regula. We'll move to the next.
    Mrs. Lowey. Oh. Well, you can respond another time. Unless 
you want to say something quickly about mammography.

                              MAMMOGRAPHY

    Mr. Regula. Mr. Secretary, go ahead.
    Secretary Thompson. Well, that is why we have put in an 
additional 12 percent increase at the Cancer Institute. All of 
us have got a loved one, in my case my wife had breast cancer, 
and is incident free for the last several years. It is 
absolutely vitally important. It is such an insidious disease. 
Let's get on with it, let's find the cure. That is why the 
extra money is in there.
    Digital mammography is the next step. It is not 100 
percent, but it is improving. Every year we are making some 
improvements. Let's keep the research dollars going until we 
find a cure.
    Mrs. Lowey. Thank you very much, Mr. Secretary.
    Mr. Regula. Thank you, Mrs. Lowey.
    Mr. Wicker.

               HEALTHY COMMUNITIES INNOVATIVE INITIATIVE

    Mr. Wicker. Thank you, Mr. Secretary. Always glad to hear 
from you.
    Let me just ask about the Healthy Communities innovation 
initiative. I understand that this program would target five 
communities. What do you mean by that?
    Secretary Thompson. We want to be able to do this program 
right. We want to be able to find five communities that are 
really going to step forward and put together a program to try 
to make their community healthy, by reducing asthma, improving 
nutrition, reducing obesity, and increasing exercise. As I 
indicated, we have 3,200 individuals in a study. We found out 
that if individuals would lose 10 to 15 pounds and walk 30 
minutes a day, you could reduce the incidence of diabetes by 58 
percent.
    Mr. Wicker. I was here for that part of the testimony. But 
how big is this community? Are we talking about the delta 
region of Mississippi? Are we talking about Los Angeles County? 
How much have you fleshed this out? Frankly, I asked some of 
your staff about this during the break and didn't really get a 
very clear answer.
    Secretary Thompson. Basically, it is very general. First 
off, you have got to have somebody that really wants to do it 
like Philadelphia last year, under Mayor John Street. He asked 
the whole city to go on a diet.
    Mr. Wicker. And it worked?
    Secretary Thompson. I think it did.
    Mr. Wicker. Do we have some data to back that up?
    Secretary Thompson. I am not sure, but I think we do.
    Mr. Wicker. I'd sure be interested in that. Now, we are 
going to spend $20 million on five geographic locations.
    Secretary Thompson. Right. You could increase that to six, 
seven, eight, whatever the Congress says. I threw out the idea, 
because I am looking at the situation in America where we are 
at epidemic as far as obesity and diabetes and asthma.
    Mr. Wicker. Well, listen, Mr. Secretary, I want to tell 
you, I am not trying to be critical, because I agree with the 
spirit of this program. And what you said about obesity is 
right on target. I just wish that we could figure out a way as 
a Government to get a handle on this problem, because it leads 
to so many other things, including diabetes, juvenile diabetes, 
cardiovascular disease and things of that nature.
    I am just wondering how, are we going to be duplicating 
what we are already doing, or how are we going to interact with 
the CDC programs? I understand you plan to run this program out 
of HRSA, is that correct?
    Secretary Thompson. That is correct.
    Mr. Wicker. For example, we spend, you are advocating $37.6 
million for heart disease prevention in the CDC budget, $62.1 
million for diabetes prevention and control, $227.5 million for 
health promotion, including obesity in the CDC budget. How will 
these two programs interact, or will the CDC not be 
participating with HRSA in these five particular communities?
    Secretary Thompson. Oh, absolutely they are going to 
participate. It is very important to participate. I look at 
this whole situation, Congressman, based upon the fact that we 
spend billions of dollars waiting for people to get sick and 
then trying to get them cured. We spend very little money on 
prevention. I want to get the President involved, I want to get 
the Congress involved, I want to get the media involved, I want 
to get the cities involved, I want to get the State Governors 
involved in starting a prevention kind of health quality in 
America.
    If I can highlight five communities or five regions and be 
able to put a lot of resources in there, I am hoping to make it 
a contagious kind of thing and that other cities will want to 
do it. And, other States will want to follow through and try 
and make it work. We have to incorporate the whole department--
CDC, HRSA, NIH, with all of our data on diet, on exercise, on 
asthma, on new therapies and so on to see what we can do to try 
and make a prevention kind of a theory. That is what it is.
    I want to get the President involved, I want to get sports 
people involved, I want to get the media involved, I want to 
get you and the Congress involved. That is what we are trying 
to do. We are trying to bring all of these programs together in 
an integrated fashion and see if we can have some successes. 
That is why we are starting out small.
    Mr. Wicker. If we appropriate $20 million, how soon can you 
have a program like this up and running and taking bids and 
deciding on the five communities and having something actually 
there?
    Secretary Thompson. Very quickly. In past experience, we 
are able. We got the bioterrorism bill signed on January 10th. 
By January 31st, we had letters sent out to all the Governors, 
providing the outlines of the bioterrorism program. We had the 
money set out 10 days later. We are having the plans put in by 
April 15th and we'll have all the remaining money out by May 
15th. I think that is the fastest any department has ever 
operated for such a huge program. And that is $1.1 billion. For 
$20 million, we think we can be just as fast.
    Mr. Wicker. Well, let me just say, Mr. Chairman, I 
appreciate your indulgence, and I think we may be on to 
something here. But I think the members of this Committee would 
want to see a concrete, fleshed out plan about how this will 
actually work. Because our goal is good. But I am just 
concerned, you mentioned information. And I noticed that we 
have spent two years developing an information campaign, and 
now it seems like we are going to abandon that. So I would just 
urge you to be specific.
    I would say I want to work with you, because I think you 
have hit the nail on the head as far as some activities that 
people can take, actually prevent health problems.
    Secretary Thompson. And I would welcome your suggestions on 
that as well, Congressman.
    Mr. Wicker. I look forward to working with you, Mr. 
Chairman, on this.
    Secretary Thompson. Thank you.

                               PREVENTION

    Mr. Regula. I must say personally, I like preventive 
medicine. I think that is where you get the great gains. I am a 
little interested in this, you took out the national campaign 
to change children's behavior. We had $68 million, yes. It 
doesn't seem to quite square. Maybe you can explain that.
    Secretary Thompson. Well, we put in $125 million last year. 
This year it is $68 million. We have not been able to get any 
of the commercials out as of yet. They will be coming out in 
May of this year and this fall. We just felt, that we had $125 
million plus $68 million, we--
    Mr. Regula. You had the money that is not been used?
    Secretary Thompson. It is not been used. That is the 
reason, Congressman, that we did not have to ask for money this 
year.
    Mr. Wicker. May I interject?
    Mr. Regula. Certainly.
    Mr. Wicker. It is not, Mr. Secretary, that you do not 
believe in that program?
    Secretary Thompson. No.
    Mr. Wicker. It is just that there's money waiting there.
    Secretary Thompson. The contracts have been let and the 
actual media will be going out in May of this year. And, this 
fall, the experimental programs are going to go out. Therefore, 
I would like to see some sort of feedback as to whether or not 
we are successful. We have $200 million invested in this 
program, and we have not seen any results of it yet.
    Mr. Wicker. I guess that is why I was asking a question 
about how long it is going to take to develop some of these 
programs. Seems like this has been an awful long time in the 
making without one single commercial being aired.
    Secretary Thompson. I think it is taking way too long, 
Congressman. I agree with you.
    Mr. Regula. Mr. Kennedy.

                       SENIOR MENTAL HEALTH CARE

    Mr. Kennedy. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary. I wholeheartedly agree that 
prevention is the way to go in health care. And in that regard, 
if I could be so bold as to suggest that Medicare and Medicaid 
ought to cover everyone in this country. That way we could get 
a handle on preventive medicine, because we would have the 
incentive as a Government to cover people earlier on and avoid 
all the costs later on that come from a private health 
insurance system that is only into quarterlygains, and 
therefore not interested in all the things that need to be done, like 
immunizations, like preventive health care. Because they are looking 
for their quarterly gain. That is the problem with for-profit, private, 
corporate insurance.
    I just would say that at the outset. I think single payer 
is going to have to be looked at as the direction we go in, or 
else we are never going to get the real kind of catchment area 
that we can work with in order to get real gains in preventive 
medicine, which is what health care should be, is about health 
care.
    I want to draw your attention to the issue I brought up 
last time, which you were good enough to remember when we saw 
each other recently, about mental health care. And senior 
citizens, there's going to be a booming senior citizens 
population, with baby boom becoming the senior boom. I want to 
ask you about that, because as you know, the over-utilization 
of Medicare can really be attributed to the fact that many 
seniors are going undiagnosed for mental illnesses.
    In the budget that you have submitted, I noticed that CHMS 
budget for mental health block grant is flat funded. And 
there's no other programs set aside except the one that I 
managed to work with the Chairman to earmark last year for a 
senior mental health initiative. Given the fact we are going to 
have this baby boom generation coming, and given the fact 
they've got huge mental health issues, and that we are not 
preparing for this, I'd like to ask you what we think we can be 
doing.
    Because in this budget, not only do we flat fund the CHMS 
block grant, mental health care block grant, but we also 
eliminate the funding for the education under the aging HRSA 
budget that trains doctors, nurses and social workers to care 
for patients and identify mental illnesses. That actually goes 
in great contrast to the report that HHS will soon release, the 
Primary Care Research and Substance Abuse and Mental Health 
Services for the Elderly, that is what that stands for, study. 
That says that primary health care services are the preferred 
services by older adult Americans when it comes to obtaining 
mental health and substance abuse services, which is obviously 
no surprise.
    So we have that report coming out, the PRISME report. It 
says that we need to increase access and yet we cut the block 
grant that helps them, and we also eliminate the funding for 
education of those that provide these services, which is a big 
part of extending accesses to make sure there is enough people 
out there who know how to deliver the services. And their 
funding is cut.
    So given all that, and on top of all of this, when you look 
at the increases in NIMH funding, there is one dollar invested 
in mental health for research, for every $6 that is invested in 
AIDS. One dollar invested for mental health for every $9 of 
cancer, $1 for every mental health for $65 of heart disease, 
and $1 for mental health for every $161 in schizophrenia and 
severe mental illness.
    So National Institutes of Mental Health is actually in 
comparison to all other areas, growing at the slowest rate of 
all other institutes at NIH. This is in spite of the World Bank 
and an independent study by the World Health Organization that 
four of the top ten causes of disability world-wide are severe 
mental illnesses.
    So I know that you are under the same kind of pressure as 
anyone else, and that is, how do we address this? I know it is 
a lot easier to ignore it, because then you do not have to pay 
for it. But Medicare is discriminating. It doesn't treat mental 
illness as a physical illness. We have our Surgeon General who 
says that it is physiologically a physical illness.
    And I do not think anyone in this room would support the 
notion that, well, we can't pay for cancer because we just have 
made a decision that we are not going to pay for it, because in 
essence, that is what we are saying when we do not pay for 
research in mental illnesses. You are just saying, well, we 
have made a political decision that we are going to cover 
cancer and AIDS, but we are not going to cover schizophrenia 
and severe mental illness.
    To me, I do not know how you can support that notion. I 
still do not know how we can support the notion of Medicare 
only reimbursing it 50 percent for outpatient services. I 
think, Mr. Secretary, you are on the right track for 
prevention, and I like these communities of care notions that 
you are pushing.
    But I think if we are going to address the long term costs 
to Medicare and Medicaid, we had better get a better handle on 
this mental illness issue, because I think it is going to drive 
a lot of the cost. Seventy percent of the admittance at 
hospitals for Medicare patients are drug and alcohol related.
    Secretary Thompson. Sixty-six in prison.
    Mr. Kennedy. So we know this. And I would welcome any work 
that you can do with me on trying to get this issue more on the 
national agenda than it is currently. I know of your support 
for parity back in Wisconsin, and I know you agree with this, 
and I know you have got a lot of pressures on you to balance 
your budgets and so forth. And I know there's not a lot of 
people out there screaming for this.
    So let me just scream on those people's behalf who aren't 
screaming about it and say that we really should do more. And I 
would like to work with you to see that we do more in preparing 
for senior mental health by making sure there's adequate 
dollars for training of primary care physicians and also making 
sure that we increase the block grant. I'd ask you if you have 
any comment on all of that.
    Secretary Thompson. First, I would ask you to keep 
screaming.
    Mr. Kennedy. Got it.
    Secretary Thompson. And I thank you for your leadership. 
And third, when you have a situation where you have a war going 
on and bioterrorism and you have the need to make sure you 
protect the homeland, put in $4.3 billion there, a 45 percent 
increase in there, there was not money left over for some new, 
innovative programs in this area.
    All I can tell you is I want to work with you, Congressman. 
I applaud your leadership and passion on this issue, and I 
encourage you, I wouldn't say screaming is the right word, but 
I would encourage your leadership and your dedication to do 
this.
    Mr. Kennedy. Thank you.
    Secretary Thompson. We are doing some good things out at 
NIH. I want you to know that.
    Mr. Kennedy. Good.
    Secretary Thompson. We are starting a combination treatment 
of mental disorders in adults and the elderly, and this is 
going to fund new clinical trials to examine the use of 
combination of treatments such as multiple medication,mixtures 
of medication, of psychosocial interventions for preventing and 
treating mental disorders in adults and the elderly. We need to do more 
of that. And if we get some extra dollars, I think this is one area 
that we need to address.
    The President has told Senator Domenici that he wants to 
work with him, and he wants me to be involved in it, and he's 
setting up a new Freedom Commission on Mental Health. I am 
going to be very active in that, and I hope you are as well.
    Mr. Kennedy. I would certainly love to work with you on 
that. Obviously I appreciate the work that you are doing, and 
think that this is a big, looming challenge for this country 
that we had better start addressing, the sooner the better. So 
thank you for your comments.
    Secretary Thompson. Thank you.
    Mr. Regula. Mrs. Pelosi.
    Mrs. Pelosi. Thank you very much, Mr. Chairman.
    Welcome, Mr. Secretary, Governor, Tommy.
    Secretary Thompson. Thank you. Congratulations to your new 
leadership.

                           Health Care Access

    Mrs. Pelosi. Thank you very much, Mr. Secretary. And thank 
you for your leadership on the ongoing. I was pleased in your 
statement that you said of all the issues confronting this 
Department, I had the more direct effect on the well-being of 
our citizens than the quality and accessibility of health care. 
Our budget proposes to improve the health of the American 
people by taking important steps to increase and expand the 
number of community health centers, strengthening Medicaid and 
ensure patient safety. All noble goals, and of course, expand 
the community health centers here, and certainly the other 
initiatives you had mentioned are very important.
    I am very concerned about the budget, Mr. Secretary, 
because I know that you have an appreciation for the challenges 
that we have. Wherever these decisions were made, I want to 
first of all associate myself with the leadership, the comments 
of Mr. Kennedy in terms of parity in mental health. If we do 
not go to that place, we are not being very smart as a country.
    But then again, we have missed opportunities in terms of 
accessibility to quality health care that are bigger than what 
this bill is going to do today.
    So in light of your comments, I am concerned about some 
specific items in the budget that are not in keeping with the 
goals stated here about accessibility to health care. For 
example, the President's budget freezes ADAP funding. That is 
very important to the AIDS Drug Assistance Program. As proposed 
in the President's budget, it would result in more States being 
forced to reduce services and deny low income uninsured 
individuals access to life savings HIV treatment.
    Funding for a related item, child care and adult block 
grant, funding is frozen in the President's budget. When I say 
related, I mean related to the health and well being of the 
American people. Funding for the CCDBG is frozen in the 
President's budget, and isn't access to quality child care part 
of leaving no child behind, as you mentioned in your comments? 
The very big concern that I have----
    Secretary Thompson. You do not know how hard I had to fight 
to get level funding, Congresswoman.
    Mrs. Pelosi. Well, I'd like to hear about that, Mr. 
Secretary. Because if you had to struggle to keep level 
funding, then we have a really big problem in our country in 
terms of establishing a priority for our spending. You have to 
advise us as to how we can help you, because we have to do 
better. This is a very big challenge for families across our 
country. I hope that that would be appreciated at the Executive 
Branch level.
    In terms of strengthening Medicaid, I am very concerned 
about the HHS rule issued on November 23rd that reduces from 
150 to 100 percent the Medicaid upper payment limit, that 
famous UPL. The upper payment limit for public hospitals was 
set at a higher reimbursement rate of 150 in recognition of a 
special mission in California to provide care and services to 
the Medicaid population uninsured individuals.
    The reduction of this reimbursement to 100 percent will 
cost California safety net hospitals at least $300 million in 
Federal Medicaid funds annually, jeopardizing access to vital 
health care services for low income populations. We have a very 
stringent standard to qualify for funds. I just think that you 
either have to characterize California's action as 
inappropriate to meet this mission of the uninsured, or isn't 
there some way to hold States that have used this money 
appropriately harmless for those reductions?
    In addition, getting back to the AIDS issue, the 
President's budget does not meet the challenge that you and 
others have put forth regarding the global AIDS issue. The 
President's budget freezes funding for CDC's global AIDS 
program. Isn't level funding inconsistent with the stated need 
to dramatically upscale U.S. support for global AIDS programs?
    The list goes on and on about what is frozen in the budget. 
I do not know how much more time I have, I have some other 
questions. I also want to just add one publicly, I have others 
for the record. And that is about your comment I have from one 
of my colleagues, Congresswoman Slaughter, a question relating 
to pre-eclampsia, a pregnancy-related condition that impacts 
approximately 10 percent of pregnancies, 35 percent of women 
with this condition develop serious complications.
    This issue just goes to the issue of women's health and I 
would just like to raise on the radar the kind of work that NIH 
is doing and this neglected women's health issue and put that 
on the record.
    Secretary Thompson. Could you send me that, so I can 
respond to that?
    Mrs. Pelosi. I will.
    Secretary Thompson. Can I respond to some of the things you 
raised?
    First, when we get the budget, level funding is not all 
that bad. When you look at the situation, we got the last 
fiscal year budget in the latter part of December. We were 
putting our budget together, and Congress was very generous 
with a lot of programs. So if we can continue the level funding 
on a lot of these programs, when you have an additional 45 
percent increase in bioterrorism, and you have a war going on, 
I think in a lot of these areas we should be well satisfied 
with that. I know we could use more money, but you have to also 
take into consideration the other ramifications.
    In regard to the AIDS program, the international AIDS 
program, with $500 million the United States is giving, we are 
putting in 25 percent of the global dollars. There's only $1.9 
billion raised so far. The United States, as one country, has 
put in 25 percent. I am serving on that board. And we have had 
our first meeting, we are going to have oursecond meeting in 
April, we are going to start handing out some of the grant dollars to 
some of the countries.
    It is a serious problem, and I applaud your leadership on 
it. But I think that the United States, as far as the 
international globe fund, is doing more than any other country 
by far, considering that we have 25 percent.
    In regard to the child block grant, this is something that 
I believe very strongly in, and I have fought very hard for it. 
We had to make some tough decisions in regards to the health 
and human services budget, with the amount of money that was 
allocated to us. We think that the level funding of it is as 
good as we could expect, considering the circumstances.

                             Funding Level

    Mrs. Pelosi. If I may, Mr. Chairman, for 30 seconds, 
respond to the distinguished Secretary. The needs have not been 
met. When we talk about at the current funding level only 12 
percent of eligible children will receive Federal aid care 
assistance, so we are not even coming close. We are only at 12 
percent. So while you might say that you fought for that, and I 
believe you and I admire you and commend you for that, but in 
terms of that and these other issues, freezing is not just a 
freeze, it is a cutback. Because the needs have grown so much, 
if we are talking about HIV-AIDS, domestically and 
internationally, when we are talking about people on Medicaid 
and the rest, the needs are growing.
    Secretary Thompson. Yes, they are.
    Mrs. Pelosi. So flat funding is not just to meet the needs 
of the same challenge as the year before, but an increased 
challenge. We certainly want everyone to manage their money 
very well and drain the most out of every dollar that is there. 
So if you can assure me that we can do that with that same 
amount of money, I would be very impressed.
    Secretary Thompson. We are trying to get more of the 
dollars out faster and better, and we are trying to get enough 
flexibility so the States and local units of government and the 
community health centers are able to do their job better.
    Mrs. Pelosi. I appreciate that, and my time is up, so I am 
going to close by just saying that we as a country are really 
not meeting the health and human services needs of our country. 
Respectful of our needs and the war on terrorism, as Ranking on 
intelligence, I know what those needs are full well. That does 
not mean that they should come at the expense of the other part 
of the strength of our country, which is the health and well 
being and education of the American people.
    I applaud your efforts, because I know what your record is. 
But I do not applaud the President's budget.
    Secretary Thompson. Well, the President is very 
compassionate. He has lots of problems and he's dealing with 
them, I think in an admirable job. I have the greatest respect 
for him. He did not ask to have 9/11 come upon us. Now that it 
is here, we have to deal with it. It requires beefing up of 
bioterrorism and it means an increase in national defense, and 
we all know that and recognize that.
    One of the good things that came out of 9/11, if anything, 
if you can say anything good came out of it, we have the 
chance, Congresswoman, to develop, because of bioterrorism, the 
best local-State public health system that we ever had. As you 
know and as everybody on this Committee knows, we have not 
invested our resources in a local and State public health 
system. With the bioterrorism money, we do now have a chance to 
really build a strong, visionary, positive local-State public 
health system that is going to help meet a lot of the concerns 
that you raised in your questions. I am very appreciative of 
the Congress giving us the dollars to do that.
    Mrs. Pelosi. I appreciate what you are saying. I just want 
to add one thing. Because you said that September 11th made a 
difference, and it did, and for that reason we should be 
revisiting $1.7 trillion tax cuts----
    Mr. Regula. Mrs. DeLauro.
    Secretary Thompson. You got the last word. Do I get to 
respond to that, or does she get the last word? [Laughter.]
    Mr. Regula. Mrs. DeLauro.

                       DIET AND PHYSICAL FITNESS

    Mrs. DeLauro. Thank you very much, Mr. Chairman. Welcome, 
Mr. Secretary. It is a delight to see you this morning.
    Let me just make a couple of observations and then get to 
questions. This goes back to something that the Chairman was 
saying, and the obesity and physical fitness in kids. In 
response to his question, Mr. Secretary, by getting the schools 
involved in physical fitness, you indicated that your 
Department and the Department of Education should work together 
to address the problem. Without any question, and I am a strong 
believer in prevention, and I applaud what you said in that 
regard.
    But I think what we need to do is, there ought to be 
communication, certainly, on this issue. Because within the 
Administration budget in education, it eliminates the program 
that we have to address this issue, the physical education for 
progress program, funded at $50 million this year, the 
Administration proposes to eliminate the program entirely in 
fiscal year 2003. We already had the discussion about the 
chronic diseases account at CDC, $57 million cut. And I 
understand what you were saying about the advertisement.
    But it is important, it is critically important that if we 
are going to deal with prevention, then the agencies need to be 
talking to one another. Because we can talk about some things, 
but when we have programs that are there and the funding is 
cut, and eliminated, not even level funded, but eliminated, 
then there is a sense of what the priorities are. You can't do 
it alone. No one is suggesting that you should. But we have 
other agencies and that kind of communication ought to occur. 
So I just want to put that on the record.
    The other piece with CDC, quite frankly, is that I believe 
CDC has the ability to eradicate a lot of illnesses and 
diseases. And what we do not do, what we do not do, and our 
priorities are not there to provide what resources we do need 
in order to address some of the issues and the illnesses that 
can be eradicated. I think level funding does have a 
repercussion.
    Let me give you, level funding, if you take into 
consideration what inflation is, inevitably comes down to being 
a cut, inevitably it does. I mean, let's go to inflation issues 
on Head Start. There's a difference in terms of the calculation 
of inflation rates. CBO, is it, I guess 2 percent, or 2 and a 
half percent, OMB is at 2 percent. If it happens that we are 
going to deal with 2 and a half percent inflation, a Head Start 
is going to be less able to do what it needs to do.
    I worry particularly about zero to three, because you have 
to have the 10 percent threshold on the overall appropriation 
to get us to doing anything about zero to three. In that case, 
we fall short if we are not dealing withaccurate levels of 
inflation in that respect.
    I just wanted to throw some of these things out. I mean, I 
do not know what you do do, if we deal with the inflation rate 
at 2 and a half percent. So that is a question that we want to 
ask you to deal with.
    On LIHEAP, there are arrearages from prior winters that 
people have to deal with. I am just going to mention this one. 
LIHEAP always for some reason, we can't see our way clear to 
taking care of people in the cold weather. I mean, give me a 
break. Excuse me, I am not saying that to you, Mr. Secretary. 
Every single year we fight about LIHEAP. You go to any 
community, at least in my part of the country, I suspect in 
your part of the country, and people are cold.
    There have been repercussions from September 11th. Lots of 
people are unemployed. Lots of families are in difficulty. And 
we sit around here fiddling, fiddling like we are doing on the 
Floor today on passing unemployment benefits for people in this 
Nation of ours.
    So level funding is a cut in funding for most of these 
programs.

                            RESEARCH SAVINGS

    My question, does the Federal Government get any 
remuneration or recoup any of the research that we--we put a 
lot out in research funding. And I am supportive of that. It is 
been helpful in saving my life, medical research. But we do a 
lot of it, lot of public dollars for that. I won't even go into 
the question of how the prices on prescription drugs rise, even 
with a lot of Federal dollars. But in terms of our ability, any 
kind of mechanism at NIH to recoup the research funding that 
goes into the investment of new drugs, how much money does the 
Federal Government recoup in that context?
    Secretary Thompson. I really do not know.
    Mrs. DeLauro. Can somebody take a look at that in your shop 
to see if we do? Because we do put a lot of Federal dollars in.
    Secretary Thompson. We put a lot in.
    Mrs. DeLauro. Which is great, I am there. But I want to 
know what we get by way of getting back something that then 
allows us to----
    Secretary Thompson. Are you talking about money that goes 
into a new therapy, a new drug?
    Mrs. DeLauro. Well, yes. In other words, we work with lots 
of good public-private partnerships. I was involved years ago 
when I first came with Bristol Myers on the CRDA for Taxol 
because of my interest in ovarian cancer. But we put up a ton 
of money. Do we get back anything that allows us to then do 
something?
    Secretary Thompson. I have been working with Senator Wyden 
on that. We had a report done last year, I think it was sent 
out in August or September, Congresswoman, and I will send that 
over to you.
    Mrs. DeLauro. Okay, that would be very, very helpful. 
Because it is an area I am particularly----
    Secretary Thompson. Senator Wyden is very interested in 
this as well.
    [The information follows:]

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    Mrs. DeLauro. There has been talk about moving Head Start 
to the Department of Education. How does that square with----
    Secretary Thompson. I have not heard that recently, 
Congresswoman. I wish you wouldn't even talk about it.
    Mrs. DeLauro. I am glad to hear you say that. Because we 
deal with a whole lot of services.
    Secretary Thompson. Let's not bring it up.
    Mrs. DeLauro. It is a pact. You have got my vote on that 
one, Mr. Secretary.
    Mr. Regula. I think we need to move on.

                           SHADOW GOVERNMENT

    Mrs. DeLauro. Let me just say, my last question, truly, and 
it is not a trick question, it is meant with the best of 
motives, because we deal with budgets that are tight. We have 
all been reading, and I know the appropriators, this is not 
only coming from me, it was in publication today, how many 
employees in your Department are part of a shadow government? 
Where does the money come from doing that?
    Has it been a part of our supplemental appropriation or any 
of the appropriations we talked about last year or currently? 
Give us some help with understanding where thebucks are coming 
from, since we are shortchanged, and what does it mean in terms of the 
deployment of your folks.
    Secretary Thompson. Very little deployment of my folks. And 
I do not know what the costs are. And, to the best of my 
knowledge, it does not come out of our budget.
    Mrs. DeLauro. So you do not know where the money is coming 
from to deal with the folks from your specific department that 
are doing this?
    Secretary Thompson. Well, the salaries certainly come from 
the budget that is approved by Congress, the Department of 
Health and Human Services, the employees that are involved in 
the shadow government are paid by the appropriation lines that 
are in the Department of Health and Human Service budget.
    Mr. Regula. I think we have to move on.
    Mrs. DeLauro. If you can find out, then, what are the other 
costs involved that may impact your budget, and in fact, where 
does the money come from to maintain a shadow government, as it 
has to do with people that are part of your shop. I am not 
asking you the general question. We'll try to get that 
elsewhere.
    Thank you very much, Mr. Chairman.
    Mr. Regula. Mr. Peterson.
    I might advise the members that this is a vote on the 
previous question regarding the rule, to allow for 
consideration of suspensions today. It is likely that the rule 
will be done with voice vote. Mr. Peterson.
    Mr. Peterson. Mr. Secretary, I'd like to welcome you. I'd 
like to thank you for what I think's been an outstanding job of 
service in your first year.
    Secretary Thompson. Thank you.
    Mr. Peterson. To have the job of getting your arms around 
your Department is a challenge, I think, for anyone. And then 
to have September 11th dumped on top of you and the role you 
have had to play, I commend you for how you have kept yourself 
together and presented yourself very well.
    Secretary Thompson. Thank you so very much, Congressman. 
That is very kind of you.

                           RURAL HEALTH CARE

    Mr. Peterson. Well, you have done well. My number one issue 
is the availability and quality of rural health care. I am not 
going to specific line item any item, because there is a 
number. But I want to start that rural health care is 
struggling to remain stable. In my view, the need in rural 
areas is going to grow. It is the senior population we have, 
aging fast. We are still, we have been hit the hardest 
economically in rural areas. We are still losing jobs, we are 
losing our younger population that balances out that payment 
system. There is a number of line items with rural that have 
been cut.
    I guess I'd like to ask, what is your view of rural health 
care's economic stability and what are your thoughts for the 
future?
    Secretary Thompson. I have many thoughts on it, and I thank 
you for the question. Congressman, I applaud you for your 
leadership. First off, I think we have to as a Congress take a 
look at the wage index and the utilization of the health care 
system under Medicare. That is where rural areas are 
discriminated against big time. But this is going to require a 
bipartisan effort on the strengthening of Medicare and 
reevaluation of Medicare as well as an improvement of Medicare. 
That is number one.
    Number two, I set up a rural health task force. We are 
holding hearings across America. We are going to issue a 
report. I don't know if it is going to be out in the month of 
April or the month of May. We are trying to develop some new 
strategies on rural health.
    Number three, we are going to be spending a week in Alaska 
this year, taking a look at rural health problems in Alaska. I 
am taking members of my department up there. We are also going 
to be traveling to other rural areas in America, taking a look 
at rural health and finding out how we can do it.
    Fourth, I come from a rural area. The city I grew up in is 
1,500, in a farming community. Living in a farm area is the 
type of thing that you know what rural health is all about. And 
I want to work with you. But a lot of these things are 
legislative, and we are going to have to have the support of 
Congress in order to change and make improvements.
    Finally, we are going to have to do something in regard to 
the reimbursement formulas.
    Mr. Peterson. Yes, Medicaid, I call it Medicare Lite. It 
doesn't get there.
    Secretary Thompson. But it is the legislation, it is the 
law.
    Mr. Peterson. I know that.
    Secretary Thompson. We have to change the law, and I can't 
do that as Secretary.

                            HOME HEALTH CARE

    Mr. Peterson. Where are you on the 15 percent cut on home 
health that is coming down the pike?
    Secretary Thompson. As you know, Congressman Thomas sent us 
a letter in regard to provider payments. When I appeared in 
front of the Ways and Means Committee, I said, if we are going 
to look at one provider payment, we should have them all on the 
table and take a look at them. Home health is one of those, 
skilled nursing homes is the second one, medical doctor's pay 
is the third one. Outpatient expenses is a fourth and 
hospitals. And all of these things are under consideration. We 
are responding to the letter that Congressman Thomas sent, I 
think you received a copy of that. We have been working through 
the Centers for Medicaid Service and through HRSA and other 
divisions to come up with a response to that letter.
    We are going to set out a menu of items for Congressman 
Thomas and the Ways and Means Committee to look at. The 15 
percent is going to be part of that. But it is actually not a 
15 percent reduction. I know that is what is being bannered. 
But when you put it in its actual place, the 15 percent was a 
cut of the pay that was in place from 1998 until the year 2000. 
And the Congress says you have to take a 15 percent reduction 
from that pay schedule from 1998 to fiscal year 2000. Then you 
postponed it in fiscal year 2000, you postponed it in fiscal 
year 2001, and that is where we are right now.
    In the meantime, there's been inflationary adjustments. So 
when you extrapolate all that, it is more like a 4.9 percent 
reduction, the 15 percent turns into a 4.9 percent. But even 
that is a reduction, and we are taking a look at that. We have 
all these provider payments scheduled, and we have responses 
where you might be able to save some dollars in order to 
backfill.
    The budget also requires us to be budget neutral. So we are 
trying to compress all of these things together and make it a 
budget neutral package for Congressman Thomas to look at it. As 
soon as we release it to Congressman Thomas, I'll be more than 
happy to send it to you, Congressman Peterson, soyou'll have a 
chance to look at it.

                        COMMUNITY HEALTH CENTERS

    Mr. Peterson. Thank you. I look forward to working with you 
on rural issues, because I have the most rural district east of 
the Mississippi.
    The community health centers, do you have any data on where 
they are located? What percentage of those are in rural areas?
    Secretary Thompson. Forty-seven percent.

                             DRUG TREATMENT

    Mr. Peterson. Okay. I have never seen that data.
    Secretary Thompson. Forty-seven percent.
    Mr. Peterson. One more issue, drug treatment. I see you 
have had a little bump in there, but I guess in my view, the 
drug problem in rural America has never been worse than it is 
today. In my district, I have a number of communities with huge 
heroin problems with very young people. Heroin is very 
difficult to break away from, especially when you are young. 
You had a very modest increase for treatment. Do not we have to 
somehow figure out how to have treatment for our youth in all 
regions of America? Because if we do not get them unhooked, 
they are going to be buyers. We have always been heavy on the 
enforcement end, moderate on the education end, very light on 
the treatment end. In my view that has to be somewhat equal.
    Secretary Thompson. Balanced out. It does. You know, I 
can't argue with you, I have got to agree with you. The 
question is, it is a matter of dollars and priorities. When you 
look at the situation facing us in November and December, when 
we put together this budget, we had to first take a look at the 
war effort. In our area, bioterrorism. We have put a 45 percent 
increase in bioterrorism and that was the top priority.
    The extra dollars, we stretched them as far and as good as 
we could. If we had extra money, treatment is absolutely 
vitally important in rural ares as well as urban areas.
    Mr. Peterson. Especially our youth. If we do not get our 
youth un-addicted, they can be lifetime users. And they won't 
live very long.
    Secretary Thompson. That is true.

                            SURGEON GENERAL

    Mr. Peterson. We talked a lot about preventive health here 
earlier. Who does the Surgeon General come under? Is that an 
independent person or is that under you?
    Secretary Thompson. It is under the rubric of the 
Department. But there are a lot of independent things in the 
Department. I am trying to integrate the Department better, but 
the Surgeon General is appointed and the Surgeon General is 
independent.

                           PREVENTIVE HEALTH

    Mr. Peterson. I guess I remember the days of C. Everett 
Koop, I think he played a huge role in public policy in this 
country. I know as a State Senator, he goaded me into doing 
things, just from listening to him. He inspired me to do 
things, chairing the health and welfare committee in 
Pennsylvania. And I think he had a huge impact on the 
population.
    We need to somehow develop a national bully pulpit that 
shouldn't cost a lot of money, but people speaking out on the 
talk shows, across this country. Because as we have doubled NIH 
and are coming up with wonderful solutions to diseases, we have 
become a less healthy society because of bad habits, whether it 
is no exercise, whether it is eating too much or whether it is 
risky behaviors. So the combination thereof, I think we have 
actually lost ground while we have increased our investment in 
the future. It is just because we need to change public 
understanding of health.
    Secretary Thompson. Congressman, you are going to get me on 
my soap box. Because let's face it, we spend billions of 
dollars in America to get people well after they get sick. And 
we spend just a small amount of dollars to keep them healthy. 
When only 25 percent of the schools have got physical education 
programs, I think that is a step backwards. When we take a look 
at the population in every one of our States, we are getting 
fat. It is an epidemic. Our young people are sitting in their 
homes watching TV and not outside exercising. We have to start 
eating properly, we have to start looking at nutrition, we have 
to look at exercise, we have to look at cleanliness, we have to 
look at ways in which we can reduce smoking, and we have to 
find ways in which we can moderate our alcohol intake and other 
drug intake and hopefully stop it.
    You take a look at these situations, you do not need rocket 
science to come up with a conclusion, you know, people have got 
to start taking care of themselves. We need more messengers out 
there, from the President on down. The President is passionate 
about this. I had a discussion with him less than two weeks ago 
about the fact that he wants to play a very vital role in this. 
As we all know, he's well respected all across America.
    So we are trying to develop a strategy. We want the new 
Surgeon General to go across America and articulate, like C. 
Everett Koop did, about healthy behavior. We have put $20 
million in here for a demonstration program for healthy cities, 
only five cities to set up a demonstration program. Mayor John 
Street from Philadelphia asked the people from Philadelphia to 
go on a diet last year. I am asking everybody in the Department 
of Health and Human Services, including myself, to go on a 
diet. I am trying to lose 15 pounds. I want everybody else in 
the Department to lose 10 to 15 pounds. I want people to walk 
30 minutes a day. And I think if the Department of Health and 
Human Services starts walking, maybe we can get this to be 
something of a novel situation.
    I want Congress to get healthier. I want to get the media 
involved. And when you take a look at the situation about the 
fact that in America we have 17 million people that are 
diabetics 17 million, we spent $100 million. We just had 
completed a study out at NIH done by 3,200 individuals. They 
found out that if you lost 15 pounds, walked 30 minutes a day, 
you would reduce the incidence of diabetes by 58 percent.
    Now, you can't extrapolate that into $100 billion, but if 
you are able to reduce the incidence of 58 percent, you can say 
the next $100 billion you are going to save $58 billion.
    I went out to a Native American reservation last year in 
South Dakota. I was absolutely saddened by the fact that I saw 
Native Americans standing in line to get dialysis on a Saturday 
morning, several of them were amputees. That to me, we have to 
get the Native American involved in diet and exercise, because 
of the high incidence of diabetes in Native Americans. We have 
to get African Americans and Hispanics involved also in diet 
and exercise. If we can do that, we can use this preventive 
health strategy and really do something about the quality of 
health.
    But it starts with you, it starts with me and it starts 
with everybody in this room. We have to start taking care of 
ourselves.
    Mr. Peterson. As one member of Congress, I will join you. 
Any way we can help you----
    Secretary Thompson. Walk with me.
    Mr. Peterson. I will do it. [Laughter.]
    Mr. Peterson. You give me the time.
    Secretary Thompson. Okay, sir. You are a great American.
    Mr. Miller [assuming chair]. Mr. Secretary, I am 
temporarily holding the Chair, but I am going to call on my 
colleague from Pennsylvania, Mr. Sherwood.
    Secretary Thompson. He is a wonderful guy.
    Mr. Sherwood. Well, thank you, Mr. Secretary.
    Secretary Thompson. How are the horses?
    Mr. Sherwood. The horses are fine. How are the Galway 
cattle?
    Secretary Thompson. The Galway are doing well.
    Mr. Sherwood. There are some of us up here who are thrilled 
that you are obviously trying to manage the budget, rather than 
just ask for more money.
    Secretary Thompson. Thank you.

                                 LIHEAP

    Mr. Sherwood. LIHEAP is very important in my area, but we 
do have a mild winter. We do have lower prices. It is different 
than it was a couple of years ago. There are some of us that 
understand that, and we appreciate that you are managing the 
problem.
    Secretary Thompson. Thank you.

                           PREVENTIVE HEALTH

    Mr. Sherwood. I was out, but I think my colleague may have 
covered it. I think we just can't emphasize it enough, 
preventive health care. It is what we do to ourselves. And I 
think we have a whole generation of young people growing up 
that do not understand that. I understand that every second or 
third or fourth big soda that a kid drinks a day increases his 
or her chance of being obese by 80 percent.
    Secretary Thompson. I hadn't heard that figure, but it is a 
nice one.
    Mr. Sherwood. And in all our high schools, pretty much, we 
have given the cola companies exclusive sales contracts. We 
trade off high school scoreboards or some other beneficial 
thing to let folks sell high sugar beverages in our schools. We 
might be very much on the wrong track there. Because type II 
diabetes, they are changing the name, as you well know, it is 
no longer adult onset. We have just got to hang in there and 
work on that one altogether. Anything we can do, please talk to 
us.
    Secretary Thompson. You came in too late. I had all these 
people, I was on a soap box here, extolling the values of 
exercise and diet and healthy habits, especially in the area of 
diabetes. One hundred billion dollars spent last year on 
diabetes, 17 million Americans. It is epidemic.

                            MEDICARE FORMULA

    Mr. Sherwood. Well, we are certainly with you.
    The other thing I'd like to discuss just a little bit is 
that Medicare doesn't serve all Americans equally. That is a 
problem that bothers me. In most of my district, seniors do not 
have a Medicare plus choice plan to choose from. Therefore, 
they do not have the same rights as seniors in some other parts 
of the country that do. And I think we just need to continue to 
examine the system.
    And I am a budget hawk. But we have to continue to examine 
the system that pushes down reimbursement for the most 
efficient providers. These rural hospitals have slightly lower 
wage rates, slightly less overhead experience than in some 
other areas. But they are reimbursed so much less that it is 
severely impacting the system. And I am really not sure that 
our funding formulas have served us well there. They've started 
out with a level and for 20 years, added a percent to 
everybody. When you are high, the percent means a lot more than 
when you are low. The gap gets greater.
    Secretary Thompson. Congressman, I'll give you one 
percentage, one figure. The indexing wage and the Medicare 
formula amounts to a 71 percent disparity between urban and 
rural. So if you are going to change it, it is the wage factor, 
the wage indexing amounts to the 71 percent widening of that 
gap.
    But that is legislative. We can work with you, but it is 
going to have to be done by Congress, and you are going to have 
to realize that Congress has got to pass a law to change that 
formula if you are going to make a difference for rural areas.

                           PRESCRIPTION DRUGS

    In this budget, there are some things that I would like to 
quickly point out that I think would be very helpful in rural 
areas. One of those, for seniors especially, one of those is 
the 90-10 program that we are putting in there for prescription 
drugs. That would allow the States to pay up to 100 percent of 
their payments, up to 100 percent of poverty, but get the F-
match for that 100 percent. And then from 100 to 150 percent, 
and I believe your State has a prescription drug program----
    Mr. Sherwood. PACE and PACE Net.
    Secretary Thompson [continuing]. It would be very helpful 
to your State. Because between 100 and 150 percent, the Federal 
Government is going to come in with a 90 percent match. And 
that should free up your State and give you an opportunity to 
expand your program with less dollars and actually give you 
some dollars back.
    We also have an $89 billion program in there for health 
insurance which has got some new innovations in it that I think 
are going to be very helpful in your State and my State and 
other States. That is, instead of waiting to get your tax 
credit at the end of the year, you have the opportunity under 
this program to apply for a number from an IRS office. You 
would take that number into your insurance office and be able 
to apply up to $1,000, if you are single, and up to $3,000 if 
you are married and have children, and be able to apply that on 
your insurance premium up to 90 percent of your insurance 
premium.
    It also gives the states the opportunity to set up pools. 
So you could have in your State all the uninsured put together 
in a pool. And it should be a very good rate, because a lot of 
those uninsured are actually young people that have not got 
insurance, and individuals that are working that can't afford 
it. So you should have a fairly good rate, and you could 
develop pooling. So these are two innovations in this budget 
that could be extremely helpful to your State and your rural 
areas as it would be across most States across America.
    Mr. Sherwood. Well, the 90-10 sounds promising. Because 
Pennsylvania has a very good system----
    Secretary Thompson. This would be ideal for you.
    Mr. Sherwood [continuing].--To buy prescriptions for the 
lowest income people. But because of budgetary constraints, it 
can't reach up high enough. This would help in that. Because we 
know that Medicare beneficiaries often pay the highest prices 
for their medication.
    Secretary Thompson. Those that are individuals and notinto 
a group pay the highest amount.
    Mr. Sherwood. That is right. And that is something that we 
some time have to address, I think.
    Secretary Thompson. But that 90-10 is a great program. We 
also set up a model waiver program called Prescription Plus and 
Pharmacy Plus. The State of Illinois has just applied for it, 
and they are under that program, which is an innovation that we 
set up in the Department, working with the State of Illinois by 
giving them a waiver that is budget neutral, based upon what 
they are going to spend in their Medicaid program. They are 
going to be able to extend pharmaceutical coverage to 368,000 
Illinoisans.
    Mr. Sherwood. Well, thank you very much. It is very obvious 
from here your command of the facts and your work, and we 
appreciate it very much.
    Secretary Thompson. Thank you very much, Congressman.
    Mr. Regula [resuming chair]. Mr. Istook.
    Mr. Istook. Thank you, Mr. Chairman.
    Mr. Secretary, very good to see you.
    Secretary Thompson. It is always a pleasure to see you, 
sir. How is Oklahoma?
    Mr. Istook. Oklahoma is in great shape. I am sure Wisconsin 
is as well.
    I first want to applaud your support and the budget support 
for abstinence education funding. I think we share a concern 
that we address, the dire consequences of unwed pregnancies, by 
encouraging people not to get in that situation in the first 
place lest they fall prey to the elements of disease, of 
education problems, economic problems, all those that can 
follow.

                      LIMITED ENGLISH PROFICIENCY

    I did want to address two other topic with you, however, 
this morning. One of them relates to interaction with the IRS, 
and the other to what we have talked about before some, on the 
limited English proficiency requirements. Regarding the IRS, 
testimony in the Subcommittee I chair recently indicated that 
in the earned income tax credit program, about 30 percent of 
the taxpayers' money that is paid out under that program, and 
30 percent in this case equals $8.5 billion to $10 billion, 
that amount of money is being paid to false or fraudulent 
claims, currently.
    Secretary Thompson. I didn't know that.
    Mr. Istook. Yes. There is a brand new, recent survey by the 
IRS, the total payout under the program is around $35 billion. 
This is the fraud-waste-abuse element of it. It is incredibly 
high.
    But it turns out, according to the IRS, that a lot of it 
traces back to the problems with correctly defining who is a 
dependent child of a person claiming the EITC. That is an area 
that obviously interfaces with a lot of the mission of HHS. 
Various registries I know are maintained. I would not pretend 
to know all of them. And there is an effort that is happening 
at the highest level with the Treasury Secretary and the 
Commissioner of the IRS personally heading it up, trying to see 
what we need to change to have the mechanisms to attack this 
enormous level of abuse of taxpayers' money.
    My question to you therefore, was one, to ask if you 
currently have yourself and your Department undertaken a role, 
and secondly, if you have not yet, I would encourage you to 
initiate contact with Commissioner Rosotti and Secretary O'Neil 
and offer the services of HHS in trying to handle this problem.
    Secretary Thompson. Congressman, I knew there was fraud 
involved, but I did not know it was in the neighborhood of 30 
percent, 30 to 35 percent. That is appalling to me. And I would 
take your suggestion to heart, and we'll make the contact 
relatively quickly.
    Mr. Istook. I appreciate that.
    Secretary Thompson. And I appreciate the advice.
    Mr. Istook. Good. I am sure you can provide a lot of 
expertise that will help them in this.
    The thing I wanted to visit with regarding limited English 
proficiency, and I know that HHS has asked for, has reopened 
the comment period.
    Secretary Thompson. For 60 days.
    Mr. Istook. For 60 days. And I think that 60 days won't 
expire until some time in April, I believe. I think you issued 
it last month.
    Secretary Thompson. I think you are correct.
    Mr. Istook. I am glad to know of that reopening. I am 
concerned about what's happening in the meantime. For example, 
when it was still HCFA, there was a letter that was issued, it 
turns out, in some of these things, they are very slow in 
coming to light, Mr. Secretary. There was a letter issued in 
August of 2000 by HCFA indicating that the cost of providing 
translators would be something that could be put into the 
matching figures by State entities in Medicaid funds, thereby 
taking a lot of the cost of this regulation and putting it 
right back on the taxpayers, as well as on the private entities 
that are hit.
    You may be aware of, and if not, I would certainly urge you 
to read the communication from the American Medical Association 
to your Department, first questioning even the legal authority 
to apply the standards to physicians, questioning the expense 
of it, the fact that it just makes it more of a loss for 
physicians to treat Medicaid and Medicare patients. I won't try 
to read the whole letter here, but I would certainly direct 
your attention to that letter from the American Medical 
Association which concludes, for example, that access to health 
care services would actually decrease rather than increase 
because of this additional Federal mandate upon health care 
providers.
    Secretary Thompson. When is that letter dated?
    Mr. Istook. I do not have the date on my excerpt of it. Do 
you happen to know the date, Bill? It was during the original 
comment period, one of the comments that was submitted. We can 
help make sure that the precise document comes to your 
attention.
    But it also came to light recently that your Office of 
Civil Rights, and I do not think there is a handle yet on just 
how many orders or agreements have been issued in this area. 
For example, there was an order, a voluntary compliance 
agreement, I believe it is technically called, with the main 
medical center requiring them to post and provide translation 
services in nine languages as well as make people aware that 
they were to be provided in others, requiring their notices to 
be printed in English, Farsi, Kamar, Russian, Serbo-Croatian, 
both the cyrillic and Roman alphabets, Somali, Spanish and 
Vietnamese, plus inform people that interpreter services are 
provided in additional languages as well.
    Further, I am told through the Office of Management and 
Budget, they are in the middle of trying to do the impact study 
that was supposed to have been done originally with this. I 
have been informed informally that although they are still 
calculating, they are calculating that it has amulti-billion 
dollar cost. How much of that falls upon the private sector as opposed 
to the public sector, I do not know, and we do not have a final report 
from there yet.
    I wanted to ask, what steps have you taken? I am not sure 
if there is a handle on this problem yet. Do you feel that you 
have a handle on what is happening in this area, the cost to 
taxpayers, the imposition of costs upon the medical community, 
as well as, of course, a lot of other communities?
    Secretary Thompson. Congressman, I am not familiar with 
that order, I am not familiar with the OMB study. I do know 
that the reason that we republished the guidance and the rule 
is to get the comments.
    Mr. Istook. Of course.
    Secretary Thompson. Because we want to get the information 
in. We know that there are some problems in it, and the best 
way to address those problems is to get the information in and 
then act upon it. That is why I requested that this rule be 
republished. But I did not know about the American Medical 
Society letter, and I did not know about that order.
    Mr. Istook. My personal opinion, what I would urge is that 
since this whole thing is undergoing a review, that the prudent 
course of action would be to suspend any enforcement actions 
that are pending under these LEP requirements, while you are 
going through the review period. Otherwise it is certainly my 
impression that others within your Department are very 
aggressively pursuing and trying to lock in people with 
compliance, enforcement measures, voluntary agreements under 
threat of other action and the like. There seems to be an 
element within your agency that is aggressively doing that.
    Secretary Thompson. That is why I am trying to integrate 
the Department, Congressman. I do not know if people realize--
--
    Mr. Istook. It is a challenge that I can appreciate.
    Secretary Thompson. I do not know if everybody appreciates 
the fact that I have 85,000 workstations for 63,000 employees. 
I have got 3,200 servers, over 200 different computer systems, 
most of which do not talk to each other. I have got 46 
personnel offices when I only need one. I am getting it down to 
four. I have got four different bookkeeping systems, one which 
only uses single entry bookkeeping. I have 30 year old 
software. I have individuals, every division has their own 
lawyers, their own public relations outfit, their own 
scientists and their own lobbying forum. I am trying to run a 
department that you can be proud of and that I can be proud of. 
We are making lots of changes, every single day.
    But it is not easy.
    Mr. Istook. I would encourage you to try to help bring some 
stability so that you can manage the change by putting the 
brakes on some activities until you can decide what direction 
they should in fact be going.
    Secretary Thompson. I am trying to.
    Mr. Istook. I believe this is one that is about to surface 
as a tremendous cost driver, increasing the cost of medical 
care, increasing the cost to the----
    Secretary Thompson. Thank you. I appreciate your admonition 
and advice and I will certainly take it into consideration.
    Mr. Istook. Thank you. I appreciate that, Mr. Secretary.
    Secretary Thompson. I thank you so much for bringing it up.
    Mr. Regula. Mr. Miller.
    Mr. Miller. Thank you for staying this late. I appreciate 
it.
    Secretary Thompson. Well, thank you for staying so late.

                               NIH BUDGET

    Mr. Miller. And thank you for your budget presentation. It 
is difficult in times of war and coming out of a recession to 
put these budgets together. You make some tough choices. I am 
pleased with, for one thing, the NIH budget. You do have to 
make some tough choices and we are supportive of you.
    Last October, my daughter donated 60 percent of her liver 
to our son in New York, in Mount Sinai.
    Secretary Thompson. Would you congratulate her and thank 
her for me?
    Mr. Miller. They are both doing well, and our son is going 
to be able to live. You have been an advocate of organ 
donation, back in Wisconsin and here.
    Secretary Thompson. Passionately.
    Mr. Miller. Anything I can do to help, I would be more than 
happy to, because I have been personally impacted by that.
    Secretary Thompson. Thank you.

                             NIH LEADERSHIP

    Mr. Miller. One thing that concerns me, and I see this 
morning a new NIH director may be announced, I do not know, 
maybe you have already done it.
    Secretary Thompson. It has not been announced, but it is 
imminent.
    Mr. Miller. But it concerns me about the director of the 
CDC, who I have been impressed with. There are six department 
heads, or institute heads, out at NIH that are now vacant. We 
went over two years without an NIH director, as you know.
    What concerns me is that there is a litmus test that keeps 
us from drawing and attracting the most outstanding people. I 
am sure the gentleman or the person that is going to be 
nominated is going to do an outstanding job. And I may be a 
minority within my party up here on the Hill, partly because of 
my personal experience of our daughter donating to our son, 
that I want to have a time in the future that we can grow an 
organ in the laboratory. There are advances NIH is making, 
leading us in that direction.
    But I do not want us to put up these roadblocks, and we 
have had a temporary, and a fine person over there at NIH, but 
for over two years, you know you do not work as well with an 
acting department head. I hope we do not last that long at CDC. 
I am concerned this litmus test keeps us from attracting or 
finding the quality people that we need in areas that are so 
critical, when we are pouring large sums of money in there. 
Would you address this litmus test issue, and does it apply to 
other than these health issues? Does it get into areas that 
have nothing to do with this? Or is it just in the health 
related areas, like Surgeon General and such?

                             ORGAN DONATION

    Secretary Thompson. You have raised a couple of questions, 
a couple of issues, and I would like to address both of them if 
I might, Congressman. First off, on organ donors, first let me 
thank you, and would you please express my appreciation to both 
your daughter and son. That is a wonderful thing. People do not 
realize there are 80,000 Americans waiting for an organ. Only 
23,000 are going to be able to receive on this year. A person 
dies every 16 minutes waiting for an organ. Can you imagine the 
angst that your son would have gone through if he didn't have a 
sister that was willing to do that?
    I am passionate about this, and now I am trying to get 
Hollywood interested, I am trying to get the media interested. 
I would like to get everybody involved. There was just a 
wonderful young man by the name of Chris Klug who won a medal 
at the Olympics who got a liver transplant, 18 months ago. He 
probably would have died by now if he would not have had that 
transplant. He and I had a television hookup across America. It 
was just wonderful to see this individual, especially when he 
participated and got a medal at the Olympics. It just made my 
heart good to show people that you can do it.
    I tell people, God doesn't want your organs in Heaven, He 
wants your soul. If your organs had a chance to vote on your 
deathbed, I am sure your eyes would vote to continue to see, I 
know your heart would vote to continue to beat, and I know your 
kidneys and livers would vote to continue to drink Wisconsin 
beer and eat Wisconsin cheese. [Laughter.]
    Secretary Thompson. I want people to realize that that is 
there. In regards to the litmus test, there is not, and I want 
to state this, there is not a litmus test. In regards to NIH, 
there was a lot of questions raised about it. There's no 
question that I was pushing Tony Fauci, a wonderful, eminent 
scientist. But the truth of that matter is, Tony wanted to keep 
the institute directorship and run the National Institutes of 
Health. The White House felt that that was not proper and made 
a decision. I discussed it with Tony Fauci, who is a very close 
friend of mine and a great scientist. And he recognized that 
and understands it.
    The White House is going to be making an announcement on an 
NIH director and I can assure you, there is no litmus test. As 
you know, I am very passionate about stem cell research and 
about the need for it. I think the President made the right 
decision on August 9th with his decision. We are moving ahead. 
We have the stem cell research up. We have 78 stem cell items 
now that basic research can be done. I can assure you, there's 
no litmus test on that.
    In regard to FDA, we just appointed a wonderful guy out 
there to be the second in command while they look for the other 
one. He is doing an outstanding job, he's a pharmacologist and 
a veterinarian. As you know, food safety is one of those items 
we have. And Les Crawford is going to be doing an outstanding 
job. He is a wonderful scientist and he is doing an excellent 
job and he's only been there for a week.
    In regard to CDC, Jeff Copeland has done an excellent job. 
He is a wonderful scientist, a wonderful individual. He is 
leaving the first of April. I want a person at CDC by the first 
of April.
    In regard to the six, I know the stories make it sound much 
worse than it really is, we are interviewing people for the six 
directorships at the institutes. Two of them are going to be 
filled shortly. And we have offers out on some other ones, so 
they are going to be filled very quickly. I think you are going 
to like the individual that is going to be nominated for NIH, 
and I can assure you, there is no litmus test in the 
Department. There is no litmus test in the White House, and we 
are proceeding to get the best person possible.
    Mr. Miller. It is widely reported in the press that there 
is a litmus test.
    Secretary Thompson. I understand. I read the same articles. 
I just want to hit that right square on the head. There is no 
litmus test. We are looking for the best person possible. And I 
am pushing very hard to get these done quickly.
    Mr. Miller. I am hoping as you are, praying that we do not 
need organ donors, we can have, modern medicine will come up 
with ways to grow the liver in the laboratory and do that, and 
not have to do that. So I hope we do not allow policies to 
develop in this country that make us the Luddites or the flat 
earth society and England and these other countries are the 
ones that move forward. I may be a minority within my party, 
our party, but I feel, you know, from a personal standpoint, my 
good friend and I may not totally agree on this issue all the 
time.
    Let me switch to another issue, and one more comment, 
because I think the day is long already. Just hold out tight on 
earmarks, earmarks at NIH in particular. As we go into the 
final conference report, it is going to be very tempting. I 
know my colleague, reading articles in the newspaper, that 
there's going to be an effort to do more earmarking. Some 
agencies in this Government, NOAA for example, is basically all 
earmarked, and some others, Energy.
    We have resisted that at NIH, and I hope you can continue 
to resist that when we get to the final negotiations and 
conference report. When it gets to things like biomedical 
research and all that, I think we have to be really--it is a 
slippery slope. I think you agree with me.
    Secretary Thompson. I agree with you, and I follow the 
leadership of your wonderful Chairman, I follow his lead on 
everything that I possibly can.
    Mr. Miller. Thank you. Thank you very much.

                HOMELAND SECURITY-HOSPITAL COORDINATION

    Mr. Regula. I just have a couple of things, and I know it 
is late. So I'll move quickly.
    Is there any effort through your agency to coordinate 
hospitals? It seems like every community has a hospital and 
they sort of do their own thing. With this homeland security, 
there ought to maybe be a clearing house to avoid duplication. 
All these processes get expensive.
    Secretary Thompson. It is hard, but we have now, 
Congressman, with this wonderful opportunity to develop a 
local-State public health system, to really develop a State 
plan. That is why we just didn't send the money out. We want to 
be able to have a consistent and a comprehensive plan. So we 
sent out the directions on January 31st, 21 days after the 
President signed the bill. And we were sending out templates, 
now, of what some States, we look at some States as really 
doing an exemplary job in communications, in education and so 
on. We are taking those templates and sending them out to 
States and saying, you should take a look at these.
    Now we are going to have these plans resubmitted, or 
submitted to us by March 15th through April 15th. We have 
several groups set up to monitor them, to look at them and to 
advise the States what is best and what should be. And we are 
hoping to develop a comprehensive but yet a local and State 
public health system. We are also looking at hospitals, what 
they need. We have $525 million for, in this budget, to go out 
to hospitals. But we want a consistent plan set up so we do not 
waste the money. We want to make sure the emergency wards are 
going to be well educated, so if somebody comes in with a 
strange disease, they know what to do with it.
    We are going to have communication set up to all thelocal 
and State public health departments through our health alert network, 
connected with CDC and NIH and the Department, so we can get 
information out across America on any kind of infectious disease or so 
on and so forth. We also want to develop a regional capacity in 
hospitals for surge capacity in case there is a huge, if there was a 
tremendous breakout of anthrax poisoning or smallpox, we would have a 
regional hospital that we could make sure that could take care of 
thousands of individuals. So we are looking at that kind of a 
comprehensive plan, and we are working very hard.
    I have got some of the best people, I have got D.A. 
Henderson, who is the father of eradication of smallpox, in 
charge of this. He is going to be the Assistant Secretary for 
Bioterrorism Preparedness. I have got Jerry Hauer, who set up 
the bioterrorism program for New York, second in command. I 
have got Dr. Michael Asher from California, who's coming out 
for 9 to 12 months. He is an expert on laboratories. He is 
advising. I have retired Major General Phil Russell, who's 
probably the most, one of the foremost experts on vaccines 
there. Those four individuals are bringing other scientists in 
to advise the State and local on that particular thing.
    So it is well set up to do the comprehensive job that you 
are expecting us to do.
    Mr. Regula. Well, that will be a great legacy for your 
Administration to get that done and to get these 200 computers 
talking to each other, and the 46 agencies coordinated. You 
could go back to Wisconsin with a gold star.
    Secretary Thompson. Go back and raise my cattle.

                               NIH GRANTS

    Mr. Regula. There you go.
    One other question. NIH. We are meeting on this fifth year, 
and I assume you are going to oversight this, that this money 
is used carefully. Because sometimes I am observing agencies in 
Government that too much money gets dissipated in ways that 
perhaps are not productive. Not saying that they can't use it, 
but there will be grants in there that will have a life in 
there beyond the fifth year that we are doing this increase.
    I guess what I am asking, are you planning ahead? We do not 
have a commitment to continue this level of funding.
    Secretary Thompson. We do not. This year will be the most 
grants ever sent out. Seventy-five to 80 percent of the money 
goes out in grants. And 35,000 grants this year, there will 
probably be about 25 percent of the grants received that will 
get funded this year. So we have a lot of grants coming in. We 
are going to have a record amount of money going out. And we 
are monitoring very closely.
    We are also doing something a little bit different. We are 
also putting $150 million this year in a new program to send 
dollars out for laboratory security and laboratory improvements 
at State universities. So this is also going to be part of the 
new dollars that we are asking for in NIH. We think that this 
is one. And of course, we are also building a new laboratory, a 
BSL3 lab on the campus at NIH, and we are building a BSL4 lab 
at Fort Detrick. This is the one that handles the most virulent 
viruses and we really need that kind of capacity. We have found 
that during the anthrax scare that we did not have the 
laboratory capacity at CDC or Fort Detrick. With this new 
laboratory, we should be able to handle any situation that 
comes forth.
    Mr. Regula. So that is where some of the new money will go.
    Secretary Thompson. That is where some of the new money is 
going.
    Mr. Regula. But as you make these grants, in your planning 
process, you anticipate that they will have a four year life?
    Secretary Thompson. Three to five years, usually.
    Mr. Regula. Okay. But in any event, we will be budgeting 
for that as you construct the 2004 budget.
    Secretary Thompson. It is going to require, Congressman, 
approximately $2 billion to $2.5 billion to maintain the 
ongoing commitment.

                           HOMELAND SECURITY

    Mr. Regula. Last question. You are really homeland 
security, your agency. You coordinate with Governor Ridge?
    Secretary Thompson. Yes.
    Mr. Regula. I have not quite figured out what his portfolio 
is.
    Secretary Thompson. We usually meet Tuesday and Thursday 
mornings in the White House. We have a very good working 
relationship.
    Mr. Regula. He is really coordinating all the agencies that 
have a piece of it, then.
    Secretary Thompson. That is correct.
    Mr. Regula. We will have questions for the record.
    Mr. Regula. We thank you, and you have been very 
impressive.
    Secretary Thompson. Thank you very much.
    Mr. Regula. You have done a great job this morning. We have 
had better attendance than we have had this year, it is 
evidence that people are interested in what you do and the line 
of questioning.
    Secretary Thompson. You are a wonderful Chairman and a good 
friend, and I thank you.
    Mr. Regula. We enjoyed the visit.

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                                         Wednesday, March 20, 2002.

                CENTERS FOR MEDICARE & MEDICAID SERVICES

                               WITNESSES

THOMAS A. SCULLY, ADMINISTRATOR, CENTERS FOR MEDICARE & MEDICAID 
    SERVICES
KERRY WEEMS, ACTING DEPUTY ASSISTANT FOR BUDGET, DHHS
    Mr. Regula. Welcome, Mr. Scully. We're happy to have you. 
Your full testimony may be made part of the record and you can 
summarize for us.
    Mr. Scully. Good morning, Mr. Chairman, Mr. Wicker. Thank 
you for having me here today. I'm Tom Scully, Administrator of 
the Centers for Medicare & Medicaid Services.

                             CMS Priorities

    I would like to give you a quick overview of some of the 
priorities Secretary Thompson and I have for 2003. As always, 
we appreciate the support that you have given us this year, and 
also the Committee staff which, as always, has been great for 
us to work with.
    If you count Medicare and the Federal and State parts of 
Medicaid together, CMS is the biggest single entity in terms of 
spending in the Federal Government with outlays of $542 
billion. Between our employees and our contractors, we have 
about 65,000 CMS State and local contract employees that run 
these programs. It is a big, big organization, a big ship to 
turn, and we've been working very hard for the first 10 months 
that I've been there to make Medicare and Medicaid much more 
user friendly, beneficiary centered programs.
    As you know, when I first came in, Secretary Thompson and I 
changed the name from HCFA to the Centers for Medicare & 
Medicaid Services. We've reorganized the agency around three 
simplified centers that we think represent the agency's major 
lines of business, and we made a big effort to change the 
atmosphere at the agency to make it much more responsive to the 
seniors, the Medicaid beneficiaries, and other beneficiaries 
that we serve.
    The first thing we did was really enhance outreach 
education and improve our Medicare & Your education budget. 
This included a lot of different things, including an 
advertising campaign, which included, as you I'm sure know, $30 
million in television and print ads focused on the broader 
community; We also focused a portion of that, about $50 
million, on the minority community, to basically get seniors to 
call 1-800-MEDICARE. And they did that in huge numbers. At the 
peak of that campaign we received nearly 60,000 calls on our 
highest call volume day. This convinced me of a number of 
things, primarily that seniors and disabled have a lot of 
questions about the Medicare program that they fundamentally 
don't understand. So we're going to keep plugging away on that 
very hard.
    We also significantly expanded our 1-800-MEDICARE number so 
that if you happen to call from Ohio or Florida or Texas, you 
get detailed questions answered about your home town and where 
you're coming from. If you're in Tupelo, Mississippi and you 
call, you will get an operator who can tell you about the 
nursing homes in Tupelo and the health plans in Tupelo. We 
think it's a significantly improved consumer education tool.
    In November, we successfully launched the quality 
initiative, which is going to kick off in mid-April. On nursing 
homes, as of April 15th, we will publish data on quality 
outcomes in six States, one of which is Ohio, Mr. Chairman, 
another of which is Florida. Florida, Maryland, Ohio, Rhode 
Island, Colorado and Washington, every nursing home in those 
States will basically have published in each local newspaper 
nine common data points and outcomes for quality for the 
largest nursing homes in each newspaper's circulation area. The 
nursing homes have been very supportive of it, the unions have 
been very supportive of it, and the consumer groups have been 
supportive.
    This is the first step in a big effort the Secretary and I 
have planned to roll out over a number of years in various 
areas of the health care sector to give consumers a lot more 
information on quality. We both believe that consumers are 
starved for much more information on the quality and outcomes 
in the health care system.
    Third, we are trying to improve response to providers and 
beneficiaries. When I came in, Mr. Chairman, I had been in the 
health care business for the last several years. I think HCFA-
CMS has done a great job of running these programs, but it was 
perceived to be kind of an unassailable fortress from the 
outside consumer's point of view. So we created 11 open door 
policy forums for each sector of the health care system to come 
in and talk to senior staff in the agency and get their nuts 
and bolts questions answered whether it's about nursing homes 
or hospitals or physicians. We made a big effort to open up the 
agency and become much more responsive to the enormous number 
of beneficiaries and also health care providers that we serve. 
I think we've done a pretty good job on that as well.

                          Proposed Legislation

    We have a lot of different plans coming up as well for 
2003. As you know, in the President's budget, the President put 
$190 billion in for comprehensive Medicare overhaul. It's a 
very high priority for the Administration. A portion of that is 
to try to not only reform the Medicare program but also begin 
to start covering seniors with prescription drugs. There's $8 
billion in our entitlement side of the budget to begin a low-
income drug assistance program, and we'll take immediate steps 
to start covering the lowest-income seniors for drugs, 
prescription drugs. We're committed to try this year to enact 
Medicare reform and a prescription drug benefit.
    As part of that Medicare reform, one of our primary 
concerns in the existing Medicare program is that the Medicare+ 
Plus Choice program, which already provides drug benefits to 
seniors, has a very well-designed program that helps low-income 
seniors get lower co-payments loaded up within the drug benefit 
that is basically evaporating. It's a very big concern of the 
Administration and we'll try to do the best we can to put money 
into the Medicare+ Choice program to at least maintain its 
viability. Because it's shrunk pretty significantly the last 
couple of years to the great dismay of many Medicare 
beneficiaries, especially low income beneficiaries.

                           Education Campaign

    In 2003, we also devoted $122 million to continue the 
aggressive Medicare education campaign that we started both on 
our 1-800-MEDICARE number and in the ad campaign that I 
discussed earlier. On a more CMS focused issue, we have made a 
big effort to try to improve the accountability of the agency. 
As I mentioned, one of those areas is to improve education, but 
another is CMS's own accountability. The President's budget 
includes $51 million to modernize CMS's own very archaic CMS 
financial and accounting systems. We are spending $256 billion 
in Medicare, using both our accounting systems and payment 
systems for our 49 contractors that are very antiquated, very 
old. We're going to make a significant effort in this budget to 
modernize and improve them.

                       Program Management Budget

    Overall, Mr. Chairman, we're asking for a $2.5 billion 
administrative budget. That's a 3.2 percent increase overlast 
year's appropriation. We think this level will allow us to run the 
program efficiently and aggressively in the next year. I think in the 
context of our $500 billion plus program, spending $2.5 billion to run 
programs of this massive size is, I think, fairly reasonable.
    There are two other things that I've talked about in the 
past that are not in the President's budget request because 
they basically happen separate from that. One, as I mentioned, 
the Ways and Means Committee three years ago and the Finance 
Committee and the authorizing committees passed significant 
reforms in the way that we process Medicare appeals under 
Sections 521 and 522 of the Benefits Improvement and Protection 
Act. That money has not been appropriated. Mr. Thomas and I 
think others in the Senate feel strongly we should do that. 
It's not in the President's budget because it just is not 
doable under our current structure. That is about $149 million 
a year in CMS costs. I'm pretty certain that you're going to 
have the authorizing committees ask about that.
    Secondly, while the President's budget for 2003 does, in 
fact, include a significant amount of money for this education 
and advertising campaign, I wasn't around when the budget was 
developed for 2002. As you know, Fiscal Year 2001 was funded 
basically by putting in a hiring freeze. Although it's not in 
the budget for 2002, it is in the budget request for 2003. So 
we probably will need to request a reprogramming for 2002 if 
we're to do the Medicare advertising campaign this coming fall.
    So Mr. Chairman, that's as fast as I can talk. Thank you 
for having me this morning, and I'd be happy to answer whatever 
questions I can.
    [The justification follows:]

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    Mr. Regula. Thank you.

                     Coverage of Oral Cancer Drugs

    At one of last year's hearings, we heard about the FDA 
approval of the new oral cancer drug called Gleevec. This drug 
has a 90 percent success rate. Unfortunately, oral cancer or 
any oral drugs, I guess, are not covered by Medicare. There's a 
bill in to amend this statute to cover all anti-cancer drugs, 
at least. But this may be several years away.
    Is there some way we could accelerate the reimbursement 
policy to cover these breakthroughs for cancer clients?
    Mr. Scully. Mr. Chairman, Gleevec in particular is an 
incredible drug for leukemia. In fact, it's a pretty direct 
outgrowth of another of your programs, the human genome 
project. So I think it's a tremendous drug.
    Medicare, by statute, does not cover outpatient drugs. We 
are in the process of going through a very narrowly defined 
mandate by Congress a couple of years ago to cover more self-
injectable drugs. Basically, Medicare covers nothing that's not 
administered in the physician's office or in the hospital.
    So any outpatient drug is not covered. There is a lot of 
discussion about that. There are a lot of oral drugs out there, 
to be honest with you, that if they were covered--especially 
things like cancer drugs, Embryol for arthritis--could cost 
billions of dollars a year. So we prefer as the Administration 
to look at it in the context of Medicare for an overall 
prescription drug package. I think virtually any prescription 
drug package in reform will cover those drugs.
    I think we're trying to look at it in the context of 
overall drug coverage. Gleevec is clearly an oral drug that is 
not covered by current law.
    Mr. Regula. You would contemplate having this as part of 
the reform package that you're talking about on drug 
reimbursement?
    Mr. Scully. All the Medicare drug coverage that's 
contemplated basically is all about covering exactly these 
drugs, outpatient oral prescription drugs in the Medicare 
program. Gleevec happens to be a terrific one. It's also 
unbelievably expensive. I think it's probably, $30,000 per 
patient per year, something like that. But it has an amazing 
cure rate.
    Mr. Regula. Thank you. I have a number of other questions, 
but we'll go to other Committee members. Mr. Wicker.

                      Issues Affecting Mississippi

    Mr. Wicker. Thank you very much, Mr. Chairman, and thank 
you, Mr. Scully, for your testimony and for being with us.
    You mentioned outreach and education, you also mentioned 
your advertising campaign and prescription drugs. First, a 
comment about outreach. I want to thank you for coming to 
Mississippi, particularly for coming to Tupelo, Mississippi and 
meeting with a group of providers from all across north 
Mississippi. I think you speak their language. You were 
reassuring to them. I continue to get comments from medical 
providers, from doctors, that they were very encouraged. It's 
one of the best services that I've provided for them in seven 
and a half years.
    So thank you for coming in, and even if I didn't understand 
everything you were saying, they did, and you made me look 
good. [Laughter.]

                           Prescription Drugs

    Mr. Wicker. I appreciate that.
    Let me touch first on prescription drugs, and then ask you, 
if I have time, about the advertising campaign. Many States, as 
you know, are having severe budget problems because of the 
explosive growth in the rate of the Medicaid program. The 
primary cause of that is the increase in the amount of 
reimbursements for prescription drugs. Medicaid costs for 
prescription drugs grew nationally by an average of 18.1 
percent per year from 1997 to 2000 compared to the overall 
national growth rate of Medicaid programs of only 7.7 percent.
    In my home State of Mississippi, Medicaid ran out of money 
just this month. The average rate of growth has beensimilar to 
the national average there. The problem is getting worse. In a recent 
annual report by the Mississippi Medicaid office, prescription drug 
costs for Medicaid in Mississippi grew by 30 percent between fiscal 
year 1999 and fiscal year 2000. They estimate a 25 percent growth rate 
for the next fiscal year.
    As the Administration considers prescription drug proposals 
for the Medicare program, what lessons are you learning from 
the States where prescription drug costs are spiraling out of 
control? Many States say they are handcuffed by Federal 
requirements as they seek solutions to this problem. So if you 
would comment on that, I would appreciate it.
    Mr. Scully. I think we've learned some things from the 
States. There are a lot of States that could learn things from 
other States. Since I was in Mississippi I've created a whole 
Mississippi task force in the agency, and we're working on a 
whole bunch of waivers. I've talked to Rica Payton, your 
Medicaid Administrator, a lot.
    And I hope we're going to put together a comprehensive 
waiver in Medicaid in Mississippi that's going to help 
significantly ease the issues in Mississippi. There are so many 
issues in Mississippi, as you know. It's hard to resolve all of 
them quickly. We have a number of disease prevention ideas.
    On the Medicaid side, some of the States, like Florida have 
been very creative in trying to constrain the drug costs and 
have put together pretty creative and clever ideas about how to 
do that. We're going to try to help coach the Mississippi folks 
into doing some of those things.
    One of them is basically, and it's not particularly popular 
in some corners, but a lot of States do not use their ability 
to have formularies and to do bulk, group negotiations with the 
drug companies to lower prices as well as they do. I don't 
think Mississippi has done that as well as they can, and we're 
trying to help them put together a better program to make sure 
that they cover all the prescription drugs for their Medicaid 
population, but do it in a more cost-effective way, with their 
negotiating a little more aggressively.
    I'm pretty confident that we can help Mississippi quite a 
bit. We've been spending a lot of time talking to them, I think 
they've been somewhat distracted by their own massive budget 
problems. But I think we can help on some of those issues and 
we spend an awful lot of time on it.
    Beyond just the drug prices, I think I've spent a lot of 
time in the Mississippi delta, and we're committed to spending 
a lot of time and a lot of money and a lot of effort in 
Mississippi, on the overall problem with health care access, 
because it's obviously the lowest income State in the country.

                     Medicare Advertising Campaign

    Mr. Wicker. Well, I appreciate that. It just seems like in 
flush times, we enjoy the Medicaid match, and it's been good 
for the State. But it has certainly turned ugly. When we look 
at the percentages of growth in the prescription drug costs, 
that's something that we really do need your help with 
suggestions. I look forward to speaking with my friend from 
Florida to my right, and asking him what their percentage of 
growth was in terms of prescription drug costs.
    Let me just ask you briefly, Mr. Scully, how did you get 
your advertising campaign up and running so quickly? I don't 
want to cause strife within the Administration, but later on 
this week, or later on this month, when I get a chance, I may 
ask another agency why they couldn't have been like their 
younger brother, CMS, and gotten their advertising campaign up 
and running like you did.
    Mr. Scully. I'm not sure.
    Mr. Wicker. Well, it sounds like a good success story. How 
are you going to measure the effectiveness of your advertising 
campaign?
    Mr. Scully. We have a contract to conduct an evaluation, 
which we'd be happy to share with you on the tail end of the 
campaign. The campaign worked pretty well. We got it up and 
running pretty quickly because number one, the Secretary was 
incredibly supportive from the first day. He even thought the 
campaign ads were funny. Not everybody did.
    When I came in, I found the data we had for Medicare 
beneficiaries were pretty stunning, about their lack of 
understanding of just about everything. So our goal was to get 
people to call 1-800-MEDICARE. They did in huge numbers, as I 
said nearly 60,000 a day, at the peak of the campaign in late 
October. That's still running significantly higher than it has 
in the past. And I think the 1-800 call centers are much better 
staffed and the answers are better.
    How did I do it so quickly? Basically because I'm foolishly 
aggressive, I guess, and I have a great Secretary to work for 
who backs me up on everything. So we got it done in three or 
four weeks. But to be honest with you, we probably are not 
going to stick with Leslie Nielsen. The evaluation said he was 
stunningly, extremely popular. He's very, very popular with 
minorities, and the ads did very well. The issue was that a 
couple of months later, people tend to remember Leslie Nielsen 
more than 1-800 Medicare. So we may change the branding to 
something else. [Laughter.]
    Mr. Scully. But I think for a first step, in trying to get 
people to think out of the box, it worked pretty well.
    Mr. Wicker. Thank you.
    Mr. Regula. Mr. Miller.

                        DME Competitive Bidding

    Mr. Miller. Mr. Scully, you have one of the more difficult 
jobs in this town. But you knew what you got into when you 
accepted this position. Mr. Wicker said you visited his 
district. Let me invite you to my district.
    Actually, your predecessor came down, and it was one of the 
best things that happened, they came down and met with the 
providers, actually met with beneficiaries, too. I think it's 
good to get out of the district. I know it takes time away. But 
when you can relate to them, it just calms so many concerns, of 
all the different providers that are there. So if ever it works 
in your schedule that you get to my area, I've got as many 
seniors as anybody in the Nation, if not more, in my district. 
So there is a great deal of interest in that. The whole economy 
is based on health care for seniors.
    I have several questions. On DME, I know in Polk County, 
there has been a demonstration project as far as bidding out 
DME. What's the status as far as any savings? I don't know how 
familiar you are with that particular project. Is that what's 
going to happen in the DME area?
    Mr. Scully. Very successful. I think we did one in San 
Antonio and one in Polk County. The savings were 17 percent in 
the first year.
    I think there's a lot of potential in doing that, and we're 
looking at expanding it. I had a discussion this morning about 
this, actually, with my staff. I think competitive bidding on 
DME is a great idea. I do think, however, you've got to be 
careful, to some degree. That's just my own personal opinion. 
We're very aggressive on competitive bidding.
    But as a former not-particularly-good antitrust lawyer 
earlier in my life, I also think that, for instance, the VA 
does a great job of buying supplies. But they're 10 percent 
more or less of the market. In a lot of cases, Medicare is the 
market, and in a lot of cases in DME we are 80 percent of the 
market. I think you've got to be careful how you do competitive 
bidding when you're the entire market. And in many cases we 
are.
    So if you're buying 80 percent of the supplies on the 
market, you can pretty much set the prices. So I think the DME 
competitive bidding idea is a great idea. I think we've got to 
be careful that we throw our 80, 90 percent market share around 
in the right places. But I think we can clearly save money.
    Mr. Miller. There are a lot of small businesses that are in 
this DME business. If you drive them all out of business, 
you're right, you create a monopoly, and that's not the intent. 
You want to make sure you can maintain a competitive market 
place if you go into that.
    Mr. Scully. That's precisely my concern. If you walk out 
and say, we're going to take the lowest bidder on all 
wheelchairs, a big company will undercut everybody else, give 
you a low bid and run everybody else out of business. I think 
that's certainly something we've got to watch.

                         NURSING HOME LAWSUITS

    Mr. Miller. Let me ask a question about lawsuits and 
nursing homes. I sent you a letter last year and you sent me a 
response. But what's the status of that now? We read in our 
newspapers in Florida about how many nursing homes are in 
bankruptcy and the tremendous amount of lawsuits. You see 
billboards all over my area for lawyers, come to me and we can 
sue the nursing homes.
    Now a lot of it's State law, I understand. But it passes 
through to the Federal Government through Medicare or Medicaid. 
Have you seen anything to show that lawsuits are really hurting 
the availability of nursing home care in any of the States, 
Florida in particular?
    Mr. Scully. Obviously, liability reform is something the 
Administration strongly supports in some contexts. I haven't 
done any studies on it, but a lot of the nursing home chains 
have moved out of Florida or shut down in Florida because of 
the high liability rates. I think that's been a problem. A 
couple of chains have actually totally pulled out of Florida.
    I don't think there's any question liability costs are a 
big problem. I hired two young Wall Street analysts who work at 
the agency now to try to evaluate, because we're a big 
Government contractor, what the rates of return are for what 
we're spending in Medicare and Medicaid. We just put one out on 
nursing homes, the viability of nursing homes, the 
reimbursement level of nursing homes. I think it's pretty 
thorough and pretty credible. I'd be happy to send it to you.
    I think the nursing home industry is coming back slowly. 
But there's no question, in certain States the liability is a 
huge issue. In Florida, it's probably the single biggest issue 
they have.

                      MEDICARE CONTRACTING REFORM

    Mr. Miller. Yes. I'll be interested in whatever else you 
have on that issue, and you did respond to me last fall about 
it.
    Let me switch to another issue. This would be great, if you 
could come to my district and talk to some of my providers. For 
example, I was speaking to the medical society in Sarasota last 
week. Their biggest complaint is consistency in claims 
processing. That's the details that I as a legislator don't get 
involved in and you may not see. But there is a great 
frustration, a great frustration by the physicians, different 
carriers have different standards. They're not following the 
same standard.
    Now, they can give specific illustrations, and that's what 
you might be able to listen to when you come down there. But 
they feel the consistency problem is their major concern right 
now.
    Mr. Scully. I would agree with that generally, although 
there are a lot of different ways to do it. As you probably 
remember, I used to represent, I think, six hospitals in your 
district, so I know a lot of them. I'd be happy to come down.
    Basically, we have about 50 contractors in Medicare. As you 
know, last December the House passed, I forget the vote, 402 to 
10, contractor reform. I hope the Senate is going to act on it 
quickly. The goal basically is that we have about 50 
contractors and we think we can more efficiently operate with 
maybe 20 to 25. They are mainly Blue Cross plans around the 
country, but there are some others, such as Mutual of Omaha. 
They're split up between Part A and Part B.
    We think we could get a lot better consistency and a lot 
better contract management if we did two things. One is to 
narrow the number of contractors, and second, to change the way 
we pay them. Right now we're paying on cost, and they don't 
really have a significant financial incentive in the program. A 
lot of the ``Big Blues'' like being in Medicare, because it's 
good to be in Medicare on the commercial side. But their 
financial incentives aren't aligned necessarily with ours. And 
we'd like to change their financial incentives, pay them a 
little better based on performance and probably slowly, over 
five or six years, get the number of contractors down closer to 
20 from 50.
    There is a lot of inconsistency between parts of the 
country. So if you're in a Catholic system or a multi-State 
system, you find totally different payment policies in one 
State to the next. That's something we're trying to fix.

                      TREATMENT OF PROSTATE CANCER

    Mr. Miller. I have a few more questions on that line. But 
let me ask one more question, change the subject again, and 
that's about treatment for prostate cancer, the use of 
brachytherapy. There are so many different ways to treat it. 
It's been in my family, my brother, my father. This is one of 
the newer ways of treatment. There is concern about the 
reimbursement levels of that treatment. And as an option, it 
can be more cost effective than surgery, and it has a lot of, 
as I'm sure you are aware of, benefits.
    What's the status of that? You have choices available for 
treatment, and one of the most famous, most recent ones was the 
former mayor of New York. You just kind of have to make your 
own choice as a man if you have to have treatment.But then 
reimbursement can affect that. So you want to make sure the 
reimbursement allows you to keep those choices.
    Mr. Scully. I think the reimbursement for brachytherapy is 
pretty fair. Brachytherapy is basically a radioactive kind of 
pellet. I've been pretty involved in that over the years, and 
the controversy about that was, we had an unbelievably 
complicated out-patient PPS regulation that was put in place a 
couple of years ago. I won't torture you with the details, but 
we had an equally complicated way of folding in the drug and 
devices. There was a lot of dispute about how that rule was 
going to be drafted. It's effective on April 1st.
    I think brachytherapy is very fairly reimbursed in there. I 
was involved years ago on the hospital side of actually putting 
it into the reimbursement system. I haven't run into anybody 
yet that thinks they're over-reimbursed. But I'm pretty 
confident that brachytherapy treatment is pretty fair. And they 
are paid in the pass-through system on the out-patient side. I 
think the reimbursement is fair.
    Mr. Miller. I'll have some more questions in round two, but 
thank you very much, and glad to have you here.

                        PHYSICIAN REIMBURSEMENT

    Mr. Regula. Ms. Granger.
    Ms. Granger. Thank you.
    Mr. Scully, thank you for being here. And thank you for 
being so responsive when I called you, particularly when I 
called you at the last minute. I greatly appreciate it, I know 
you tried to call me recently.
    My question has to do with physicians reimbursement. Of 
course, you know, January 1st of this year the payment update 
for physician services was cut by 5.4 percent for 2002. I 
understand there's another cut coming 2003. I hear phone calls 
constantly from physicians. Then when I went home this last 
weekend, the front page were all the physicians that are no 
longer taking Medicare patients. Then I get all the calls from 
the seniors who are very concerned about that.
    I think the burden is very real. I've been in the doctors' 
offices and I've watched them look at their records. So this 
would place an additional hardship on physicians, and I think 
really greatly affect the quality of care of seniors, and also 
affect the number of physicians who are staying in medicine and 
encouraging their family members to go into medicine.
    We're considering a legislative solution by the Congress, 
but my question would be, since this would take such a long 
time, wouldn't it be beneficial for the Centers for Medicare & 
Medicaid Services to provide an administrative solution now?
    Mr. Scully. The law is incredibly restrictive. I've been 
around too long, I guess, but I was very involved in writing it 
in 1989 when I was in OMB and the White House. The original 
physician pay reform dates back to 1989, and I've been involved 
in it since then. The formula has worked pretty well over the 
years. I think if you look at nursing homes, hospitals and 
various parts of Medicare, since 1989, the most predictable and 
reliable payment scheme with the least controversy has been the 
physician fee schedule.
    In the last couple of years, it's backfired a little bit. 
Congress tightened up the formula a little bit in 1999, I think 
with the best of intentions. But the formula is a multi-year 
recapturing formula. What happened effectively, is for the last 
two years--and this isn't a popular way to put it but--we 
accidentally overpaid physicians by quite a bit. The targets 
for spending in Part B of physicians for the last two years 
were a little over 5 percent each year.
    And by accident, we didn't understand at the time, 
physician payment growth two years in a row was over 11 
percent. And some of that payment didn't show up in the 
calculations, because we had some new codes and other things 
where we basically had approximately $2 billion a year in 2000 
and 2001 that was spent that we didn't realize, believe it or 
not, that we'd spent in those years.
    It's a multi-year recapturing formula by design. So it 
happens when we overpaid for a couple of years, the formula 
recaptures it. So you automatically get a 5.7 percent 
reduction. It's not a reduction in spending. Actual physician 
spending this year has gone up about 1 percent and next year it 
will go about 5 percent. It's a reduction in the base payment 
used to calculate the total payment.
    ``So, the base payment for an office visit was $38.26 in 
2001. This year, in 2002, it's $36.20. But every one of the 
other 7,000 codes in the physician system spins off that.''
    So it's not a reduction in actual spending. It's a 
reduction in the per visit spending. And every physician is 
going to see that, and they're angry about it and I understand 
that. They don't like hearing the fact that they were 
inadvertently overpaid the last couple of years.
    So relative to what the formula should have been all along, 
they're about where they should have been. But with what they 
got paid in the last couple years, they're very angry and I 
understand that. I have five physicians in my family, so I hear 
about it all the time. And I'm hesitant to go out to the 
district, because I have to wear a bullet proof vest.
    But we're very sensitive to it. We are working with the 
Ways and Means and Finance Committees in Congress to fix it. We 
don't think that the fix that MedPac, for instance, suggested, 
which is an enormous one, is appropriate. We do think that the 
formula has to be fixed. We do think some modest corrections 
are appropriate, and we're working to do that. We sent a letter 
up from Secretary Thompson and Mitch Daniels, the OMB Director, 
the other day, talking about ways to do it and how to finance 
it.
    I'm pretty confident before the end of the year there will 
be some adjustment. I can't tell you it's going to make all the 
physicians happy, but we hope it will get the formula back on a 
track where it will be back to where it was, which is 
defensible and a solid way to keep paying physicians. I think 
the basic physician paying formula worked extremely well for 
the last 12 years. We just happened to have had a significant 
glitch this year.
    Ms. Granger. I would ask you then to get out your flak 
jacket and your armor and please come to my district, too, and 
explain that. Because my doctors aren't exactly happy.
    Mr. Scully. Not many doctors are happy in Texas in 
particular. Believe it or not, some people in my agency think I 
don't ever do any work, I just travel around the country. I 
generally, almost every Friday, am in some Congressional 
district.
    Ms. Granger. I'll put a request in, then, please. Thanks.

                      HOSPITAL REIMBURSEMENT RATES

    Mr. Sherwood [assuming chair]. Welcome. Thank you for 
coming to chat with us. If you like to wear Kevlar, come back 
to northeastern Pennsylvania.
    I commend you for your efforts to try and straighten out 
the bureaucracy and run Medicare efficiently. We also have to 
run it fairly and as you well know, the hospitals and health 
systems in northeastern and north central Pennsylvania have 
been encroached upon from New York City and Philadelphia with 
higher wage rates. We receive lower in-patient prospective 
payments than nearby hospitals, based on their historic 
indices.
    Our hospitals in the Scranton/Wilkes-Barre/Williamsport 
area were very efficiently run, they kept their costs down. And 
I think the fact that they've been efficient hurts them. 
Because then they don't get their wage rate up. Now the 
neighboring regions are stealing all our people. It's very hard 
to keep nursing staff and allied health staff.
    So the hospitals in the Scranton/Wilkes-Barre and 
Williamsport statistical areas can't pay the higher wages 
because their Medicare payments reflect the history of lower 
wages. It's a catch 22. And I know you've been looking into 
that. But I'd like to ask you to educate the Subcommittee a 
little bit about how we got in this mess and how we might 
resolve it. I'm also interested in, I've never been able to 
make a coherent explanation to my Medicare beneficiaries and my 
physicians at home, my hospital administrators, because they 
just grind me to a pulp, showing me what they receive and what 
their neighbors receive. It's a tough situation.
    Mr. Scully. It is a tough situation. I'm a native 
Pennsylvanian originally, so I'm pretty familiar with that 
area. It's probably the number one question I get. It's very 
complicated, but essentially about a $100 billion a year pot of 
money for hospital in-patient services, that's about what we 
spend a year on hospital in-patient services. Based on MSAs, 
Metropolitan Statistics Areas, some States still have some 
rural areas left. Every MSA in the country has its own rate. 
It's based on your historical wages.
    So hypothetically, if you had a $10,000 hip replacement, 
the national average is a wage index of one, in New York City, 
I can't remember the exact wage index, it might be 1.3 in New 
York City, so you get paid $13,000 for hip replacement in New 
York City. In rural Pennsylvania the wage index might be .78, 
so you get paid $7,800.
    That varies like that all across the country based on your 
historical wages. So it is a bit of a catch 22. So what 
happens, if you have low wages, you tend to spiral into that 
low-wage category. I haven't found a better or easier way to do 
it, because costs in health care do vary around the country. 
The Secretary and I are talking about next year's hospital 
rule, which comes out next January, about some modest ways to 
change it. But it's a finite pot of $100 billion, and it's 
budget neutral.
    So any time you take a little money and shift it from an 
urban area to rurals or other things, nobody's ever happy. 
There's no easy way to take care of it. I think the problem you 
have, which has happened in a couple of places, is that 
legislatively over the years, Philadelphia has been expanded to 
the north, so that almost every county north of Philadelphia, 
and Scranton/Wilkes-Barre is probably an hour, over an hour 
drive, is now in the Philadelphia wage index, either by 
legislation or other creativity. And New York, amazingly, it's 
about probably an hour and a half west, New York City has now 
expanded out to Newburgh, New York and other places.
    So Scranton/Wilkes-Barre is surrounded by people with New 
York City and Philadelphia wage indices, even though they're 
also rural. I think your area has about a .8 wage index. So a 
hip replacement just north may be $12,000 and just south may 
get $12,000, and in Scranton, you get $8,000, and you clearly 
have a problem recruiting nurses and health care folks. So the 
question is, should you then take Scranton/Wilkes-Barre and 
legislatively make them look like Philadelphia, too? I'm not 
sure that I've found an easy way to fix it. But there's no 
question you have a problem in Scranton/Wilkes-Barre.
    But the way the law is written, it's got to be fixed, as 
you know, legislatively. And there are probably a hundred of 
these before the Ways and Means and Finance Committee every 
year. Usually the committees fix a couple of the most 
egregious. I think I committed to your hospital administrators, 
when we met a few weeks ago, to send a staff person up there to 
do a little more research on the merits of Scranton/Wilkes-
Barre.

                               WAGE RATES

    Mr. Sherwood. If you had sort of the highest wage rate in 
the country and a .8 one, and they were stepped down as you 
move, we could understand it. But we butt right up against.
    Mr. Scully. Well, they used to be. Unfortunately----
    Mr. Sherwood. But they're not any more.
    Mr. Scully. I agree.

                    MEDICARE+CHOICE PLAN DEPARTURES

    Mr. Sherwood. So it's very hard for me to defend my 
position that I represent those people fairly, when their 
neighbors right next door get paid so much more money. Of 
course, that means the nurses go there, the health 
professionals go there. It makes it very hard, then, to run the 
quality of care that we'd like to do. So that's an issue that I 
think we have to solve.
    The other thing that I'd like to go over a little bit, and 
then maybe I can come back to something else, but 
Medicare+Choice is the other example. Because of the rates, the 
Medicare+Choice people decided not to play in my area. So while 
it would seem that health care, all Medicare beneficiaries 
across the country should have roughly the same privileges and 
options, we have several areas in the country where there is no 
Medicare+Choice.
    And again, that's a basic unfairness that I think we've got 
to address. It has the same kind of root problems. I worked 
real hard two years ago to try and get the law changed on it, 
and it was changed a little bit and it helped some areas of the 
country but it didn't help mine. The people still shut down.
    That's real hard to go home and explain to your 
constituents that think they're equal to somebody in another 
part of the country, and that I ought to be able to fix it.
    Mr. Scully. That's a very difficult problem all across the 
country. Unfortunately, the fixes in Medicare+Choice, to some 
degree, backfired. That may not be good news to you. But what 
happened in Medicare+Choice is the rates were set for years 
based on fee for service. In your district, a lot of your 
district, there's relatively low fee-for-service traditional 
Medicare costs. So the rates were relatively low, and there 
wasn't any managed care. A lot of members from rural areas in 
1997 felt strongly that the program was on cruise control in 
New York and Philadelphia and Miami and probably Louisville, 
and that we ought to takesome of that money in the high rate 
urban areas and push it down to the rural areas, which conceptually is 
a very good idea.
    Unfortunately what's happened is for the last five years 
we've had a 2 percent cap in most of the urban areas on 
Medicare+Choice and the money was pushed down into the rural 
areas, thinking that people would show up, and they didn't. So 
the plans just haven't been providing in the rural areas, 
because it's very difficult in a town with one hospital to put 
together a managed care network.
    So basically the money was put out in the rural areas. 
Actually there's about $2 billion a year that's theoretically 
out there to be spent in rural areas in Medicare+Choice and it 
didn't happen. I think that was done with the best of 
intentions. Unfortunately what it did was to starve the areas 
where the program was doing well.
    So in Philadelphia, Pittsburgh, New York, Louisville where 
the program had been doing great and was growing, you had 2 
percent capital and cost increases to fund the rural side, and 
11, 12 percent a year increases in spending. Very predictably, 
in the last five years what's happened is, in the areas where 
it had been successful, co-payments went up, deductibles went 
up, drug coverage went down. Plans have been getting out. We've 
lost 2 million seniors in the program. It's gone from about 18 
percent of the program to about 12 percent of the program.
    Basically in an attempt to fund the rural areas, which 
hasn't worked, we've starved the urban areas and the program is 
melting down. The President put some money back in his budget 
this year. Program spending in Medicare+Choice has gone from 
$43.0 billion a year to $42.6 billion a year in the last two 
years, which just shows that people are dropping out. The 
people that are staying in, the plans are staying in by their 
fingernails, the seniors who are staying in all across the 
country are extremely angry. I was in Phil English's district 
on Friday talking about this issue.
    Basically the thing that bothers me about it is, especially 
for low-income seniors, it's a lower cost option than the 
traditional program plus Medigap that a lot of seniors like and 
saves them money. It's increasingly more costly, less 
attractive, and we get a lot of angry seniors and its a far 
less attractive program than it used to be. A lot of it really 
was done with the best intention of trying to fund it in rural 
areas, but the people didn't show up. The health plans just 
flat out decided not to participate in rural areas. I'm not 
sure there's an answer to that, but unfortunately we've largely 
killed the program in urban areas at the same time.
    Mr. Sherwood. Well, but see, you killed it in my rural 
area, too, because we had it, but it went away. It's not that 
we're trying to develop one that we never had. We had competing 
providers. But in this last go-round, they just decided to pull 
out of the market.
    Mr. Scully. I think it's public knowledge, I was on the 
Board of Oxford Health Plans for eight years, while I was out 
of the Government, which is the largest HMO in New York City 
and was one of the largest Medicare+Choice plans in the 
country, and I watched it happen. The finances just don't work. 
The President put $3.2 billion in the budget to increase 
funding this year for it, and we hope very much it will be 
included in whatever Medicare bill we have.

                       RURAL REIMBURSEMENT RATES

    Mr. Sherwood. But when you said you starved the urban areas 
to try and make it work in the rural areas, that money in the 
rural areas didn't end up getting spent, right, because nobody 
would play.
    Mr. Scully. The plans didn't want to play.
    Mr. Sherwood. So therefore the money wasn't spent.
    Mr. Scully. If you look at it the way the Balanced Budget 
Act does, the money disappears. But when you look at the 1997 
Balanced Budget Act, when they put a blended rate in, 
theoretically to fund the rurals higher, the money is sitting 
out there waiting for people theoretically to show up in urban 
areas. And they haven't because it's hard to put together a 
network.
    One of the major complaints about Medicare's managed care 
system is that there's one PPO in the country. In Medicare, the 
traditional Medicare program where you have basically a closed 
panel HMO, doesn't exist in most rural areas, and what most 
people under 65 prefer in health care these days are point of 
service plans or preferred provider networks. Very difficult to 
do that in Medicare. So the kinds of hybrid plans that are 
popular for non-seniors don't exist in Medicare, and we're 
doing some demos to try and do that.
    But trying to put together a closed panel HMO in Scranton 
and Wilkes-Barre would be tough. But in more rural counties, 
it's virtually impossible. The health plans just don't want to 
do it.

                          MANAGED CARE OPTION

    Mr. Sherwood. But if you listen to the rhetoric on the 
floor here in Washington, you'd think that managed care doesn't 
work. But if you want to talk to an angry senior, you want to 
talk to somebody who was in a plan that did work and then 
hadn't canceled. They really get upset about that.
    Mr. Scully. I would agree. I think four or five years ago, 
the perception was that the program was exploding and it was 
very popular and it was a great way for seniors to get a drug 
benefit and trade off a slightly together network of providers 
in exchange for a drug benefit and avoid buying highly-
expensive Medigap insurance. But it's quickly disappearing.

                       PRESCRIPTION DRUG BENEFIT

    Mr. Sherwood. Mrs. Northup.
    Mrs. Northup. Thank you.
    I'm interested in asking you about some of the prescription 
drug benefits that are available to seniors. We all know that 
private plans cover prescription drug benefits. We are eager to 
see Medicare be modernized so it reflects sort of the same mix 
of benefits. I think the seniors in my district feel strongly 
about that.
    Since it's been hard to build a consensus for what Medicare 
overhaul might look like in a way that's both solvent over the 
long term and provides a modern health benefit, in the 
meantime, the question about prescription drugs, if you're a 
senior that needs expensive prescription drugs, is a problem.
    I wondered, Kentucky does not have a State plan. But I 
wondered if you could tell me, do you all have a partnership 
with State plans? Have those been successful? I know that we'll 
be working with your office or that Congress will to develop an 
overall plan. And I just wondered, will those be built on top 
of the State plans. Will they take the place of State plans?
    Mr. Scully. Some of the States have done a great job, asI 
mentioned earlier, and some have not done much. I'm not as familiar 
with Kentucky, but for instance, in Illinois----
    Mrs. Northup. We don't have one, I don't think.
    Mr. Scully. We invited the State to come in and work with 
us. In Illinois, we put together a very aggressive Pharmacy 
Plus waiver, which we're trying to use as a template for other 
States. It's something the Secretary feels very strongly about. 
Essentially in Illinois, we allowed them to come in for a drug 
waiver and they cover all seniors now, to 200 percent of 
poverty, which was 368,000 additional seniors that were just 
picked up in Illinois.
    Essentially the argument they made to us, which we 
accepted, was that modest-income and low-income seniors were 
spending down their assets so quickly to get into Medicaid, 
either to get into the nursing home or to get Medicaid drug 
coverage at lower incomes, that we'd be better off basically 
expanding, as would the State. Eventually we'd end up spending 
the same amount of money just by covering more people.
    So essentially what Illinois has come up with is a budget 
neutral multi-year waiver that says that we will pay for all 
Medicare beneficiaries for drugs up to 200 percent of poverty, 
which is a lot. We're trying to encourage other States to do 
the same thing. Now, the State obviously has to pay its share. 
It's a matching program.
    But we would welcome any State that wants to come in. We're 
very aggressively pushing the Pharmacy Plus template and trying 
to find a way. The President proposed a lot of money for a 
prescription drug benefit right off the bat this year, as you 
know, in a 90-10 match for the States for an enhanced drug 
program. But that takes legislation.
    In the meantime, we're encouraging States to come in and 
work in any way we can. We've covered a lot of people in New 
York for a variety of benefits, covered Illinois with a massive 
expansion for prescription drugs. We'd love to get the 
prescription and Medicare reform legislation enacted this year, 
and we're determined to get started. But in the meantime, we're 
trying to work as aggressively as we can with any State to get 
them to come in and expand the drug coverage for seniors.

                       PRESCRIPTION DRUG WAIVERS

    Mrs. Northup. If a State develops a plan, will that be out 
of date, do you see, when we pass a national plan? Or do you 
see a national plan building upon what the States have already 
done?
    Mr. Scully. I think most States, if we had a national plan, 
would be happy. Because most of the States that have an 
expansive plan now, like Pennsylvania has the PACE program, 
Illinois has a big program now, essentially it's still somewhat 
Federally matched, State matched dollars. A new Medicare drug 
program will probably be all Federal dollars, so you'll be 
basically buying out the base of whatever the States have done.

                TRANSITIONAL LOW-INCOME DRUG ASSISTANCE

    Mrs. Northup. Actually, I was in a meeting and more and 
more the sentiment, I think, is not to buy out. In other words, 
if all we do is take what States are currently doing now and 
take over the responsibility, we're spending a lot of Federal 
dollars without anybody that's on the front line needing 
services getting any difference in service. So one of the 
proposals was to marry Federal dollars with State programs that 
exist, so that you get an improved benefit, cover more seniors, 
but don't lose the dollars that are already going in that 
direction.
    Mr. Scully. Well, that's clearly what the President's 
immediate action in the budget was. We put a significant amount 
of money, $8 billion for the next three years, to give the 
States, if they wanted to cover up to 150 percent poverty, to 
do it with a 90 percent Federal match, which is a significantly 
enhanced match, to get the States incentivized to start 
spending money on the lowest-income people, seniors, for a drug 
benefit now. They can do it through their Medicaid program, 
passed by the Senate last week. West Virginia has a Mountaineer 
program that has kind of a drug discount card. They could fund 
that.
    We think that we need to get started on covering 
prescription drugs and the lowest-income people first, and the 
President has put a lot of money in his budget to try and kick 
that off. So we're extremely interested in trying to get 
something done this year in that area.
    Mrs. Northup. Do I have a few more minutes, Mr. Chairman? 
Oh.
    Mr. Sherwood. Pennsylvania intended to use that money to 
raise their income level. They have a very good PACE plan that 
goes up to 110 percent of poverty. They were going to put that 
in to run it up higher.
    Mrs. DeLauro.

                       PRESCRIPTION DRUG BENEFIT

    Mrs. DeLauro. Thank you very much.
    Just in listening to the discussion, a couple of things. On 
the prescription drug issue, how much in the budget is set 
aside for a prescription drug benefit?
    Mr. Scully. The President proposed $190 billion over 10 
years for Medicare reform, and depending on how you----
    Mrs. DeLauro. That's what I wanted to ask you. What is 
encompassed in that $190 billion? What are the parts of that? 
What's prescription drugs, what's Medicare reform, what do you 
mean by Medicare reform?
    Mr. Scully. Well, you probably can save money through some 
Medicare reform. For example, the vast bulk of seniors that 
have Medigap insurance have first dollar coverage in Medigap. 
So once they write their check to Blue Cross in Connecticut or 
whomever for their Medigap plan, they have no co-payments, no 
deductibles and very little incentive to contain costs.
    So one of the things in Medicare reform, outside of trying 
to reform the structure, is to get seniors who are not poor to 
be a little more cost sensitive in purchasing the drugs. I 
think the vast bulk of the $190 billion is for the cost of 
financing prescription drugs. I don't know the exact number.
    Mrs. DeLauro. So there are no other issues pertaining to 
Medicare or other health related things with regard to seniors 
that comes out of that $190 billion? You know what I would love 
to have you do for me, is to chart out that $190 billion, and 
if you could let me--I just want to see if it's a 
misunderstanding, is that there is only really about 6 percent 
of seniors who are going to get covered for prescription drugs 
under the current budget proposal.
    Mr. Scully. That's the $8 billion of low-income assistance 
that we think we should do right away this year.
    Mrs. DeLauro. What's low income?
    Mr. Scully. It's up to 150 percent of poverty.
    Mrs. DeLauro. What's the dollar amount on that?
    Mr. Scully. Eight billion dollars over three years.
    Mrs. DeLauro. No, the individual.
    Mr. Scully. One hundred fifty percent of poverty.
    Mrs. DeLauro. Who's covered? I just want to get some sense 
of who's getting covered.
    Mr. Scully. I think 150 percent of poverty for a family of 
three is probably about $17,000. It's clearly low. But most of 
those people have nothing now. Most States, there are still, I 
think, 32 States that don't even cover, because it's a Medicaid 
option, that don't even cover up to 100 percent of poverty.
    Most of the States are between 90 and 100 percent of 
poverty. I think there's 18 States up to 100 percent of 
poverty, and we're trying to encourage them as a first step to 
immediately, this year, do that. The main Medicare reform 
bills, whether it's Senator Graham's in the Senate or whether 
it was Congressman Thomas' over here, almost all those don't 
kick in for three years. What the President tried to do in the 
budget is say, we want to have a serious debate about Medicare 
drug coverage, but none of the bills kick in until 2005, and we 
should cover the poorest people immediately, and we're trying 
to do that through the States.
    Mrs. DeLauro. If you can get me what the dollar amount is, 
is there any money in that $190 billion that does go to the 
States for anything that they and I have to do with this, other 
than it going, being a direct benefit to seniors in terms of 
their prescription drug coverage?
    Mr. Scully. The $8 billion----

                   COST OF PRESCRIPTION DRUG BENEFIT

    Mrs. DeLauro. What I'm trying to find out literally is what 
of that money is going to go for prescription drug coverage. I 
don't know about any of my other colleagues, but it clearly is 
the single biggest issue that I hear about. I've been doing 
something called office hours for 12 years. I go to a large 
grocery store, a Wal-Mart or Stop and Shop, etc., every 
Saturday morning. The issue of health care in the 12 years I've 
served in the Congress has come up every single time in various 
incarnations.
    People who were uninsured at the outset, that's coming back 
again. People who have had insurance but then couldn't get 
access to what they needed, the whole HMO question, and 
prescription drugs. So it's health, health, over and over 
again. Now the particular emphasis is on prescription drugs.
    So that again, correct me if I'm wrong, I thought that 
there was an original Administration amount for $300 billion or 
somewhere, that number which has now come down to $190 billion.
    Mr. Scully. There are a million issues there. The bills 
that passed the House last year were, I think, $156 billion. 
The budget resolution in the Senate last year was $300 billion, 
the House just passed a budget resolution with $350 billion, 
the Senate I think is debating one today for $500 billion. The 
President has basically said, we want to work with Congress to 
get something on prescription drugs.
    We proposed $190 billion, the bulk of which is for 
prescription drugs. Eight billion dollars is an immediate grant 
to the States. They can either do it through Medicaid or 
through some other function they have, like the PACE program, 
that may not be Medicaid, to immediately spend $8 billion over 
three years to get people up to 150 percent of poverty.
    The rest of it is a longer-term package, and whether it's 
$190 billion or $300 billion, the President has said repeatedly 
we're happy to talk about it. During my first job in the first 
Bush Administration, when I was trying to save catastrophic, 
which was a bipartisan effort, a drug benefit passed in 1988. 
It was repealed before it actually kicked in in 1989, and----
    Mrs. DeLauro. If you would, I wasn't here at the time, but 
I certainly read the articles about that. One of the particular 
reasons why it failed, at least as I understood it, is that in 
fact it was a small percentage of seniors who were covered. The 
bulk of seniors, and by no stretch of the imagination, someone, 
if it's $19,000, is someone who is affluent, people who are 
making $19,000, or $20,000 or whatever it is, are in tough 
straits here for prescription drug coverage.
    But the reason why it failed, in my estimation, was that we 
didn't have the coverage of everyone. It looks like to me that 
we're going down the same road on this, that we're just going 
to parcel out this to a small percentage of people.
    Mr. Scully. There was a bipartisan effort to avoid repeal 
of catastrophic health insurance with the Administration years 
back and Chairman Rostenkowski and others, and the AARP, 
believe it or not, supported catastrophic very aggressively. I 
don't think it was discussed enough before it was passed, nor 
was it before it was repealed. I may be the only person in 
America who will still tell you, it was extremely good health 
care policy.

                       COST OF PRESCRIPTION DRUGS

    Mrs. DeLauro. I'm not debating that. Except that what 
happened was, and I would just say with regard to this that I 
think in terms of lowering the costs of drugs overall, when you 
have volume, which is what we all understand, when you have 
people buying in quantity and great volume, then in fact what 
you have is you begin to see those costs come down.
    It's true, and when we give the opportunity to our HMOs, to 
the institutional folks, we give them the opportunity to buy at 
a lower rate, if we were to give all seniors the opportunity to 
buy at a lower rate, I believe what we would do is see the cost 
of prescription drugs come down tremendously.
    Final question, because my time is over, what efforts are 
you making with the drug companies themselves? Everywhere we 
go, whether it's hospitals, whether it's HMOs, no matter what 
the carriers are, the biggest increase in inflation has been 
around the cost of prescription drugs. What kind of efforts are 
you making with the pharmaceutical companies to come to 
something that they can potentially look at in lowering the 
rates of their prescription drugs for people in the United 
States, because they do it overseas?
    Mr. Scully. You hit on a topic I've spent a lot of time on. 
We don't cover prescription drugs in Medicare right now, we 
only cover in-patient hospital drugs. We think the 
Administrations plan is a first step. It's not the solution, 
but I couldn't agree with you more. I represent 40 million 
people in the Medicare program, and they all walk into the drug 
store and buy in groups of one, which is crazy. As I mentioned, 
I used to be on the board of Oxford, and I know how PBMs work. 
We bought in groups of two and a half million in New York City 
and we got big discounts.
    The President proposed, and it was the agency's idea, and 
the Secretary was very aggressively behind it, as a first step, 
a Medicare prescription discount card so we could start to 
organize those 40 million people into big purchasing pools.We 
have a debate about how you subsidize seniors additionally with a drug 
benefit. But a first step right away, we believe, is getting those 40 
million people organized, like they do in the commercial sector. Most 
folks under 65 are organized by the insurance company in a purchasing 
pool to get significant drug discounts.
    That's what our drug discount card was all about as a first 
step. Obviously, we've been sued and haven't been able to 
implement it yet, but we wanted it last fall. We think it will 
save 15 percent on drugs.
    That's not going to make seniors happy. But it is going to 
get them initial discounts. Then we can have a healthy 
discussion, I hope, in Congress, about how to turn it into a 
real insurance program where they're paying $15 co-payments 
like we pay. But as a matter of course right now, the only 
people in the country that pay full prices walking into a drug 
store for over-the-counter drugs are the uninsured and seniors. 
We think that's not too smart. So we believe we ought to get 
started trying to group our 40 million seniors into purchasing 
cooperatives.
    We're happy the drug companies are out there proposing 
their own discount cards. We think that's fine. But our view is 
the best way to get the drug companies to drop their prices is 
not to call and say, pretty please, what would you like to 
charge us? We need to organize our 40 million seniors in this 
significant market power, to go out and get better prices.

                VOLUME DISCOUNTS FOR PRESCRIPTION DRUGS

    Mrs. DeLauro. I would just only say to you, I think we 
could move at a much quicker rate if we were willing to take 
the cooperative that we have now, or the pool that we have, 
which are Medicare seniors all over the country, millions of 
people. You get that kind of volume buying at a reduced rate, 
you will see how fast those drug prices would come down.
    It would just seem to me that we have already the mechanism 
under Medicare to put a new part C, whatever the alphabet is on 
it, to put that in, deal with it on a co-pay basis. Nobody's 
asking for a free handout. We could cover all seniors, we could 
do something first rate for the seniors in the country and give 
them a little security in these older years.
    Mr. Scully. I think the concern we have, and this is a 
philosophical one, we want to get a drug benefit done, this is 
one of the big issues that's held it up, is that if you took 
off 40 million seniors and just had me go out and do what I do 
for hospitals and physicians. I could just go out and set 
prices, but it becomes a very politicized system, and we don't 
believe that's going to work very well. We would rather have 
our seniors in, let's say if you're in Connecticut in four or 
five private PBMs, which is what the private insurance 
companies do, and have them negotiate in bulk for flexible 
market rates, rather than having the Government try to go out 
in a very politicized system and set rates for drugs, which we 
don't think will work.
    We clearly want to get this done.
    Mrs. DeLauro. No one's asking to set rates for drugs. 
That's a very good argument that the pharmaceutical companies 
make all the time. That's not true. What we want them to do is 
make prescription drugs, for which we put in a heck of a lot 
of, this Committee does, a heck of a lot of public dollars for 
research for them to produce their drugs, we get it to the 
market and we find in fact there are all kinds of people who 
are priced out of the market and they can't afford them. That's 
wrong. That's not what our obligation is in this Committee or 
in this Congress or as public officials.
    Mr. Scully. I totally agree with you. I've spent a lot of 
time on this in the last 15 years. I was very involved in 
creating Medicaid drug rebates. I don't get invited to too many 
Christmas parties at the drug companies.
    Mrs. DeLauro. I don't get invited, and they're all in my 
district. [Laughter.]
    Mr. Scully. But I also think we need to make sure we don't 
blow off the Medicare program when we cover drugs.
    Mr. Sherwood. What I think we do know is what you said, 
that the people that pay full price are the people that walk in 
one by one. And I think your estimate of 15 percent lower is 
very modest. If we could organize this, like you intended to 
with the card, I think you'd see lots of costs drop far more 
than 15 percent. Because we know that purchasing power works.
    So I think that's a great idea and it's a great first step. 
The fact that in Pennsylvania, PACE Net works very well, and if 
we could put some Federal dollars with it, what we would do is 
increase the amount of people it covers by raising the 
percentage of poverty. That would be a great thing.

                     MEDICARE CONTRACTOR OVERSIGHT

    I'd like one little follow-up. You have a 9.2 percent 
increase for Medicare operations to cover the costs of Medicare 
contractors. Can you describe to me briefly the process of 
contractor selection and what oversight you exert over 
contractor charges? In other words, I'm afraid that I'm going 
to find that contractors are paid on cost, rather than bidding 
services. If they're paid on cost, then you've got to have some 
oversight of costs.
    Because any time I've ever seen a system that you're paid 
on cost, when the telephone companies and the utilities were 
paid on the cost of doing business with a guaranteed profit, 
they bought equipment they didn't need, because it raised 
their--I'd like to see how that works here.
    Mr. Scully. I agree with you, and I think probably the Blue 
Cross plans are the primary contractors here. By tradition, 
we'd probably agree with you. We've made a lot of changes, the 
Secretary has been driving most of them, and I'm totally 
supportive of all of them. Part of this is contractor reform. 
We have statutorily paid Medicare contractors on cost. It 
hasn't been a particularly great business. In all candor, I 
think most of the plans are in the Medicare program because the 
systems are similar and they can kind of cross-subsidize. But 
generally it's not a good business. I don't think any Medicare 
contractor is making very much money. They're generally in it 
for cross-subsidizing systems and buildings and other things. I 
don't think most of them think they're appropriately 
incentivized.
    And some of them have been dropping out because it's not a 
great business, especially some of the Blues, for instance, 
have been going ``for profit''. They're not doing very well on 
cost contracts, so they've either beenspinning those off or 
they've been dropping out.
    That's a problem in the long term for the Medicare program. 
We think we want to keep the better contractors in. So one of 
the things we'd like to do is get away from costs, actually, 
and pay them on performance. It may actually cost a little 
more. But we think we'll get better contract performance reform 
out of it.
    But I would argue that considering, for instance, the 
Medicare program is $255 billion this budget year and the Blue 
Cross plans that basically run it, and Mutual of Omaha has some 
contracts, and some others, I think it's about $1.7 billion in 
the Medicare contractor budget. The amount that we actually 
spend administering $255 billion of benefits is stunningly 
small.
    I think to be honest with you, I think if we incentivize 
the contractors better, some of them have looked at it as a 
long-term good business to be in, and we're encouraging some 
consolidation. But it's a tough business and I don't think any 
of the insurance companies are making any money on it. I think 
it's just a core business they've been in for years. I see very 
few people looking at this as a great future business 
opportunity. I think to some degree we'd be better off if they 
looked at it that way.
    Mr. Sherwood. Well, I think we have an idea at home that 
will save you $7 million. We'd be glad to talk about it.
    Mr. Scully. I'd be happy to help you out on that.
    Mr. Sherwood. Thank you very much. I think we're getting 
low on people, so I think we have another panel. We'd be glad 
to hear anything other you have to offer. But I think we're out 
of questions.
    Mr. Scully. Thank you. You've all been terrific to work 
with, as has your staff, and I appreciate it. Thanks for all 
your support this year.
    Mr. Sherwood. Thank you.
    

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                                         Wednesday, March 20, 2002.

                ADMINISTRATION FOR CHILDREN AND FAMILIES

                               WITNESSES

WADE F. HORN, ASSISTANT SECRETARY
KERRY WEEMS, ACTING DEPUTY ASSISTANT SECRETARY, BUDGET
    Mr. Sherwood [assuming chair]. Good morning. Thank you very 
much for coming to share your wisdom with us, to this huge 
group here. [Laughter.]
    Mr. Sherwood. I think if you'd like to make an opening 
statement, then we may have a vote or we may have some folks 
come back and we'll chat a little bit.
    Mr. Horn. Sounds good. Thank you very much, Mr. Chairman. I 
am very honored to appear here today to discuss the President's 
fiscal year 2003 budget request for the Administration for 
Children and Families. Kerry Weems, Acting Deputy Assistant 
Secretary for Budget, accompanies me here at the table.
    The fiscal year 2003 budget for the Administration for 
Children and Families is $47 billion, a 5.3 percent increase 
above the fiscal year 2002 enacted level, reflecting the 
President's commitment to support the well-being of America's 
families. The request includes $33.9 billion in entitlement 
funds and $13.1 billion in discretionary spending. In addition 
to seeking continued funding for a wide range of programs 
serving some of this Nation's most vulnerable populations, our 
budget targets resources to strengthen our Nation's families, 
address youth issues, expand the participation of faith-based 
and community-based organizations, and focus on the President's 
management reform agenda.
    Cornerstone to our budget for strengthening families is 
reauthorization of the tremendously successful Temporary 
Assistance for Needy Families, or TANF, program. We would 
maintain funding by providing $16.5 billion annually for block 
grants to States and tribes, $319 million a year for 
supplemental grants, $2 billion over five years for a more 
accessible contingency fund, and $100 million a year--funded by 
the elimination of the illegitimacy reduction bonus for a 
research, demonstration and technical assistance initiative 
primarily focusing on family formation and healthy marriage.
    Our proposal also would redirect $100 million from the high 
performance bonus to establish a competitive matching State 
grant program to promote healthy marriages and reduce out-of-
wedlock births, and would replace the remaining bonus with a 
$100 million a year bonus to reward employment achievement.
    Child care also plays an important role in the success of 
welfare reform by providing parents the support they need to 
work. Our budget recognizes this link by maintaining the 
historically high level of child care funding currently 
provided to States. Child care entitlement funding would be 
continued at $2.7 billion, and discretionary funding under the 
Child Care and Development Block Grant would be continued at 
$2.1 billion.
    States also would continue to have flexibility under both 
TANF and the Social Services Block Grant to address the child 
care needs for low income working families. Further, we are 
requesting $6.7 billion for Head Start to maintain the current 
level of enrollment and services while continuing to strengthen 
the program's focus on improving early literacy.
    Child support provides another vital link to a family's 
ability to achieve self-sufficiency. Our budget would increase 
child support collections and direct more of the support 
collected to families. Not only would these policies provide 
more financial support to families, but fathers would know that 
when they pay child support their families will benefit and 
their children will know they are being helped by both parents. 
To support these efforts, families that have never received 
assistance would be required to pay a $25 annual user fee when 
child support collections are made on their behalf.
    The importance of the role of a father in a child's life 
also is reflected in our request for $20 million for a new 
initiative to promote responsible fatherhood. This program 
would provide funds for competitive grants and projects of 
national significance that focus on public education and 
awareness and the development of best practices, research and 
technical assistance.
    To further our efforts to strengthen families, ACF's budget 
would increase the funding level for Promoting Safe and Stable 
Families to $505 million, fully supporting the recently 
reauthorized program levels. These funds would help children 
stay with, or return to, their biological families, if that is 
safe and appropriate, or place children with adoptive families.
    Next, our budget targets youth by supporting the new 
authority for funding the Mentoring Children of Prisoners 
program at $25 million, along with $60 million to support the 
new voucher program for youth aging out of foster care to 
pursue education and training. In addition, our budget requests 
$10 million for Maternity Group Homes, which would provide a 
range of service to young, pregnant and parenting women.
    The President has been a leader in recognizing the 
important role that charitable organizations play in delivering 
services to the public. We are proposing steps to increase 
Federal support for these groups through such programs as 
Maternity Group Homes, Mentoring Children of Prisoners and 
responsible fatherhood. In addition, our budget seeks an 
increase of $70 million for the Compassion Capital Fund, to 
strengthen our ability to identify and promote successful 
models for providing social services by charitable 
organizations.
    Finally, our fiscal year 2003 request for Federal 
administration is $184 million, including the $1.6 million for 
the Center for Faith-Based and Community Initiatives. This 
funding level will support a reduced work force reflecting the 
President's focus on management reform through work force 
restructuring and consolidation. Further, ACF is committed to 
working with our partners to focus on results. Under the 
requirements of the Government Performance and Results Act, or 
GPRA, ACF's strategic goals, objectives and performance 
measures have been developed and reflected in the fiscal year 
2003 budget request.
    We look forward to working with the Congress in achieving 
these budgetary goals. I want to thank you again, Mr. Chairman, 
for inviting me to be here today, and I'd be happy to answer 
any questions you might have.
    [The justification follows:]

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                         HEAD START EVALUATION

    Mr. Sherwood. Let's talk about Head Start a little bit. How 
do you evaluate your Head Start program? Do you think the 
changes are in place to change it from what in lots of areas 
has been basically a political patronage program into a 
developmental program?
    Mr. Horn. As I'm sure you're aware, Mr. Chairman, the 
President is very interested in making sure that we strengthen 
the early literacy development component of the Head Start 
program. As such, this year we will be launching a $50 million 
initiative within Head Start to strengthen the early literacy 
component in Head Start without sacrificing the comprehensive 
nature of the services of the program.
    I do think that Head Start has been a successful program in 
the past. But as all programs need to do, it needs to evolve as 
we gain new knowledge. We have more knowledge today about how 
to help young children develop early literacy skills. Our 
challenge is to translate that new knowledge into changes and 
practice at the community or local grantee level. That's a big 
part of what we're interested in doing.
    Mr. Sherwood. So what are your qualifications, then, to 
work in Head Start, to work with the children? What are your 
hiring qualifications?
    Mr. Horn. As you may be aware, there is a statutory 
requirement that by September 30th, 2003, at least 50 percent 
of the teachers in Head Start be credentialed. We're at about 
46 percent of credentialed teachers now in Head Start, and 
we're on track to getting to the 50 percent level. In addition 
to that, we are working with teachers who may not have a 
credential to make sure they do have the skills necessary, 
particularly in the area of early literacy development, so that 
they can more effectively help pre-school children under their 
charge to develop these critical skills.

                          CHILD CARE SERVICES

    Mr. Sherwood. Thank you. The Child Care and Development 
Block Grant is designed to improve the availability, 
accessibility and affordability of child care. What do we know 
about the outcomes of the Child Care Block Grant program along 
these lines? In other words, is it working?
    Mr. Horn. It certainly is working in the sense that it is 
helping primarily low income parents access child care. In the 
President's proposal, $4.8 billion in the Child Care and 
Development Fund is available for subsidies for low income 
families. It's not the only source of funds for child care. 
States also have the ability to transfer up to 30 percent of 
their TANF block grant money into the Child Care and 
Development Fund. They can also spend additional money directly 
through the TANF block grant to help with child care subsidies. 
And they can use money out of the Social Services Block Grant.
    All told, the Federal Government helps to subsidize child 
care for low income families to the tune of almost $9 billion a 
year. When you add in State maintenance-of-effort requirements 
on these programs, the amount of money available for child care 
subsidies grows to about $11.7 billion. That's sufficient to 
help to provide about 2.7 million children with subsidies for 
access to child care.
    In terms of this Administration's interest in improving the 
quality of child care, part of our interest is to take what we 
know about early literacy and early childhood development and 
find creative ways of getting that information into the hands 
not only of preschool teachers and Head Start teachers but also 
child care providers. So a lot of the work that we're going to 
be doing through Head Start, the information that is developed, 
we also will be then aggressively disseminating that 
information to child care providers as well.

                            SCHOOL READINESS

    Mr. Sherwood. It's a very difficult area, because you know, 
as we all know, there's been this historic shift in the amount 
of attention that young children get as parents don't live in 
the same area with grandparents, and both parents work, which 
in my generation was not as common. My experience on the school 
board for many years is that you have so many children coming 
to kindergarten and first grade that haven't been worked with 
as much as we used to see. Then the public school teachers have 
responsibilities that normally were worked out by parents or 
aunts or uncles or grandparents.
    So I think that this is just an area we need to spend so 
much attention to.
    Mr. Horn. And we agree with that. In fact, the President 
has made very clear his interest in helping children learn to 
read and helping to develop those skills in the preschool years 
as well, so they can be successful in school. That's one of the 
reasons why, in his budget for the Department of Education, he 
has included $90 million in efforts to get that kind of 
information into the hands of preschool teachers as well as 
child care providers.
    Mr. Sherwood. Thank you very much. We'll have the Chairman 
take back over so we're properly run here.
    Mr. Regula [resuming chair]. Thank you. I'm sure you did 
very well. You moved along in great shape here. Did you leave 
any questions?
    Mr. Sherwood. Sure moved all the panel members out. 
[Laughter.]
    Mr. Regula. Okay. Thank you again, Mr. Sherwood. I see now 
why you're unopposed. [Laughter.]
    Mr. Regula. Well, that's good timing.

                      EARLY CHILDHOOD DEVELOPMENT

    I would be interested in your response on Head Start, but I 
can get that from the staff. Do you inform child care givers 
about how to successfully provide for social, emotional and 
cognitive development of infants and toddlers? In other words, 
do you get your information out to people that need to work 
with children?
    Mr. Horn. Yes. There is a quality set aside in the Child 
Care and Development Block Grant of 4 percent. States actually 
exceed that 4 percent and spend about 6 percent of their block 
grant monies on quality initiatives. Most States, if not all, 
use a good portion of those funds in terms of professional 
development for child care providers as well as consumer 
education, that is, disseminating information to parents so 
they can make better choices in terms of child care, better 
informed choices.
    At the national level, we fund a number of technical 
assistance resource networks that also provide this information 
both to providers and to parents.
    I might say, Mr. Chairman, it's a pleasure to see you 
again. You might recall the last time we were together, you 
were giving me a tour in Canton, Ohio, of the NFL Hall of Fame. 
It's a pleasure to see you again.
    Mr. Regula. Well, nice to see you. I know you have some 
Ohio ties. [Laughter.]
    Mr. Regula. We also now have the National First Ladies 
Library in Canton. So the next time you come back, we'll give 
you a tour of that.
    Mr. Horn. I'd be pleased at that.
    Mr. Regula. I have a personal interest, my wife started it.

                            HEAD START GOALS

    I think probably we covered the questions. Head Start. Are 
you satisfied that it's meeting its goals?
    Mr. Horn. No, I'm not. I'm not satisfied. Neither is the 
Secretary, nor should any of us be satisfied. We should always 
be challenging ourselves to improve every program that we have 
oversight authority for. So we are particularly interested in 
strengthening the early literacy component in Head Start. This 
year we're launching a $50 million initiative to help 
disseminate information, new information about how children 
develop early literacy skills, to Head Start grantees so they 
can translate that new knowledge into practice.
    The Secretary is very clear in challenging us always to 
think about ways to improve all the programs that we oversee. 
So if you ask me do I think this is a program that is 
important, yes. If you ask me am I satisfied that we are doing 
all we can to make sure that all the children in Head Start are 
optimizing their development, no. And none of us should be. We 
should always be challenging ourselves to do better.

                      EARLY LEARNING IN HEAD START

    Mr. Regula. I think it started out as custodial. But now I 
hope at least it's moving toward a preschool, part of the 
learning experience of preschool children. Because the evidence 
grows almost daily about the importance of those first early 
years for a child's development. Is that what you perceive 
happening with Head Start?
    Mr. Horn. Yes, and I think you are exactly correct, it is 
very critical what happens in the early years of child 
development. We know that children who arrive at kindergarten 
and first grade with good early literacy skills, it's very 
predictive of success later on in the educational system.
    Mr. Regula. Is this changing the perception of the people 
that you employ, to try to get those who have some skills in 
development, educationally?
    Mr. Horn. Yes. We've changed a lot in terms of our 
knowledge in this area. Back when I was in graduate school, and 
I'm a clinical child psychologist, the thinking at the time was 
that it was inappropriate to introduce the alphabet or letters 
and numbers in any systematic way to children before they 
entered first grade, let alone preschool. What we've learned is 
that actually we can do that in creative ways that maximize 
children's development.
    When I was the Commissioner for the Administration on 
Children, Youth and Families in the first Bush Administration, 
I remember going on site visits. If we saw the alphabet in the 
classroom, we told the grantees to take the alphabet down. Now, 
I don't think that it's appropriate to be standing up in front 
of three- and four-year olds with flash cards about the 
alphabet. But I don't think we ought to keep the alphabet 
secret from them, either.
    So I think there are creative ways for us to introduce the 
alphabet letters, numbers and even early reading skills to 
children in ways that are helpful. That's the kind of new 
thinking and information that we're trying to get out.

                      LASTING EFFECT OF HEAD START

    Mr. Regula. There's been criticism, and it's been in the 
press, that Head Start children don't, say, after fourth grade, 
there's no evidence that this had made a difference. How do you 
respond to that?
    Mr. Horn. I think there is a danger to think that Head 
Start is a one shot inoculation against everything else that 
can go wrong in a child's life, including failing schools. So 
the idea that if we give a child a year or two of Head Start, 
if they transition into failing schools, they'll do fine. I 
think that's a little bit naive. So it doesn't surprise me that 
if a child gets a really good experience in the preschool 
years, but then transitions into a school that is really not 
doing its job, that the child starts to fall behind again.
    This is why the President feels very strongly not just 
about preschool and early learning, but also education reform 
more broadly. So it seems to me what we need to do is look at 
the entire life span of the children and make sure that all 
along the path to adulthood that they're interacting with 
systems that are effective in helping them maximize their 
development.
    Mr. Regula. Very well. Thank you for coming. Unfortunately 
we have a vote on, so we're going to have to adjourn the 
hearing. I appreciate your insights.
    You have a challenging responsibility, you're dealing with 
one of the Nation's most precious assets, children. Thank you.
    Mr. Horn. Thank you.

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                                      Wednesday, March 12, 2002.

                        ADMINISTRATION ON AGING

                               WITNESSES

JOSEFINA G. CARBONELL, ASSISTANT SECRETARY FOR AGING
KERRY WEEMS, ACTING DEPUTY ASSISTANT SECRETARY FOR BUDGET, OFFICE OF 
    THE ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY AND FINANCE
    Mr. Regula. Our panel is the Administration on Aging, 
Assistant Secretary for Aging, Josefina Carbonell, accompanied 
by Kerry Weems.
    Ms. Carbonell, you have been launched with a great 
introduction by Carrie Meek, so we will not need to spend any 
more time on that. She spoke highly and effectively on your 
behalf. We look forward to your testimony, and your entire 
statement will be made part of the record.
    I have been involved in aging issues for many years, along 
with Claude Pepper back when we were co-chairmen.
    Ms. Carbonell. Mr. Chairman, thank you for this opportunity 
to discuss the fiscal year 2003 budget request for the 
Administration on Aging. We look forward to continuing to work 
with you on issues important to American seniors.
    With me today is Kerry Weems, with the HHS Budget Office, 
and some other staff from the aging program and support team in 
the aging agency. My written testimony is being submitted for 
the record, and in the interest of time, I will summarize my 
testimony.
    The Administration on Aging is part of a Federal, State, 
tribal and local partnership, and one of the Nation's largest 
providers of home and community-based care for the elderly. 
This partnership, called the Aging Network, is made up of 56 
State units on aging, 235 Indian tribal organizations, 655 area 
agencies on aging, and over 29,000 direct service providers in 
every community.
    The fiscal year 2003 President's budget requests $1.3 
billion to continue to support the health, well-being and 
independence of older Americans and their caregivers. This will 
fund all of our core service programs such as meals, supportive 
services, caregivers, preventive health, and Native Americans 
at or above fiscal year 2002 levels. This request includes a 
$2.4 million increase for our home delivered meals and 
preventive health programs. We are requesting $745 million for 
nutrition programs. This amount includes funds previously 
appropriated to the Department of Agriculture to support the 
meals programs funded with the Administration on Aging dollars.
    This year is the 30th anniversary of our nutrition 
programs. These programs began as a 3-year demonstration 
program, and over the years they have provided almost 6 billion 
meals to at-risk seniors. This budget request will allow the 
Aging Network to provide over 300 million meals in this budget 
request.
    We are also requesting $357 million for supportive 
services. This funding, along with the dollars provided both at 
the State and local levels, will allow the network to maintain 
current levels of services. This funding enables communities to 
provide rides to medical appointments, grocery stores and 
drugstores. It provides handyman, chore and personal care 
services so that older persons can stay in their homes. It is 
also used for community services such as adult day-care, health 
education activities, and information and assistance. Our 
network also provides meals and supportive services to Native 
Americans and Native Hawaiian seniors.
    Our request for these services totals $28 million. For the 
family caregiver support program, our budget request is $141.5 
million, which includes $5 million for the Native American 
caregiver program. This amount will help maintain the current 
level of services for the caregivers who so desperately need 
them.
    The Administration on Aging budget request includes $28 
million for training, research and discretionary projects. We 
are asking for $18 million to continue ongoing projects. In 
addition, we are requesting $10 million to test new and 
creative programs that improve the quality of life for older 
Americans and their families.
    Pension counseling and the elder care locator programs, now 
permanent activities, began as demonstration projects. The 
request to maintain these activities is $2.4 million. The 
request for preventive health activities is $21.5 million. This 
includes a $439,000 increase that will help us focus on the 
Secretary's health priorities, such as in the area of diabetes, 
cardiovascular disease and obesity.
    State long-term care ombudsman and elder abuse prevention 
programs help protect frail seniors. The budget request is for 
$18 million in this area.
    The Alzheimer's demonstration program tests effective 
models of care. These grants have proven to be very successful, 
and they have helped to expand support services, particularly 
for hard-to-reach minority, low income and rural families 
across America. Our request is for $11.5 million in this area.
    Our budget requests $19 million for Federal administration. 
It includes funds for costs associated with employee pensions 
and retiree health benefits. Along with our budget, we provided 
the committee with our performance plan and report under the 
Government Performance and Results Act. I am very pleased with 
the progress in this area, particularly in measuring the 
results of our programs.
    I would like to commend our State and local partners, many 
of whom are with us this afternoon, for working with us on 
this.
    Thank you, Mr. Chairman. I am happy to answer any 
questions.
    [The statement of Ms. Carbonell follows:]

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               NATIONAL FAMILY CAREGIVER SUPPORT PROGRAM

    Mr. Regula. Has the caregiver program, which is relatively 
new, reduced the incidence of people going into full time 
homes, nursing homes and so on? In other words, is it working 
in letting people stay in their own environment?
    Ms. Carbonell. The caregiver program is a great program. We 
are seeing results at the State and community levels.
    This is the first year that the family caregiver program is 
in operation. We are beginning to see some excellent results in 
communities, particularly as States and local communities 
develop the capacity to serve this new impending population.
    For instance, we are looking particularly at being able to 
expand the outcomes measurement piece in this program, which is 
a new program. We are finishing a study that will be ready by 
September that will look at outcome measures including how many 
people we are keeping out of institutions. We project that we 
are going to serve over 250,000 caregivers.
    Mr. Regula. The caregiver can be someone that comes in 
occasionally, a relative or family member that comes once a 
week to help out this person?
    Ms. Carbonell. A caregiver can be someone that cares not 
only for elders, but also for children or grandchildren under 
the age of 18. There are caregivers that are either family or 
informal caregivers, neighbors, church people, community 
volunteers.
    Mr. Regula. And they get a small amount of money for this 
service? Do they get paid something?
    Ms. Carbonell. The beauty of this program is the 
flexibility under which it was constructed. It allows States 
and local communities to implement it to meet local needs. For 
instance, there are certain States that allow a small stipend 
to help the caregivers with transportation and respite 
services, either center-based or home-based.
    The program is doing many things in rural areas. In the 
State of Georgia, they have Meals on Wheels, sort of a respite 
program on wheels; that is, a van that travels to provide 
respite care services to rural communities in Georgia.
    We are looking at and forming new partnerships in faith-
based organizations in the community. We are also reaching out 
to intergenerational activities, fostering and improving their 
partnerships and those exchanges between generations because 
the caregivers that we are supporting also are taking care of 
grandchildren under the age of 18.
    We are also looking at opportunities and projects that are 
targeted towards disabled children, and the caregivers of those 
disabled children, to allow them to support their activities, 
to remain independent in the community and with the support of 
those caregivers.
    Mr. Regula. Mr. Sherwood.

                           NUTRITION PROGRAMS

    Mr. Sherwood. Thank you, Mr. Chairman.
    I was happy to see that the administration requested an 
additional $2 million for the Meals on Wheels program because I 
know how successful that is at home. Can you tell me how these 
funds are allocated and how many additional seniors you can 
help with that? Or how does that work?
    Ms. Carbonell. We placed the additional dollars in home 
delivered meals because we know there is a need in that area; 
the outcome that we get is keeping people out of institutions.
    We expect with the total nutrition budget request to serve 
close to 302 million meals. The money flows to States and it is 
formula based. The bulk of the money goes to States on a 
population basis, and the States then determine their own State 
priorities and then provide the money to local communities 
based on local priorities.
    The local communities again set up their needs and address 
their needs based on particular community needs. So it is not 
only population based, but based on the number of high risk and 
poor individuals in the area.
    Mr. Sherwood. My Congressional district is one of the older 
demographically in the country. These programs have been very 
successful, and very important. They just fill a real need as 
families, because of economic circumstances, with children and 
grandchildren living in different cities or States, and you do 
not have as strong a multigenerational family, outside 
caregivers are a wonderful thing.
    How do you determine your efficiency? In other words, your 
Meals on Wheels, do you look that money over critically between 
districts to see who gets the most bang for their buck?
    Ms. Carbonell. The beauty of the Older Americans Act is 
instead of us dictating to States and local communities the way 
the dollars are to be spent, the local communities work with 
the area agencies on aging, to determines what the pressing 
needs are. In looking at how we fund home-delivered meals 
programs, it is based on population, which is how the bulk of 
how the dollars get distributed within and throughout 
communities.
    We are looking at the outcome measures. We are looking at 
malnutrition. There is a large percentage of elderly people 
that are malnourished. The beauty of the Older Americans Act is 
that it takes these Federal dollars and coordinates these 
dollars and matches them with other State and local dollars, 
which allow us to serve over 7 million seniors across America's 
communities. Three million of those seniors that we serve are 
home-bound, and many of them are under the home-delivered meal 
program.
    So again our experience from our outcome measures is that 
we are trying to reach and are reaching by the fact that we are 
serving such a large proportionate share that are both home 
bound, and also that are poor and that are disabled or home 
bound, and also that live in rural areas.
    Mr. Sherwood. We have a great many people that this service 
is very important to, not that they cannot necessarily afford 
to buy food, but they are alone, they are losing their 
enthusiasm, and this is just a wonderful thing, someone comes 
in and it brightens up their day and it is one of the things 
that keeps them going and keeps them in their own home. It has 
been an excellent program.
    Ms. Carbonell. We are very proud of the success that our 
partners at the local level have had. As a former service 
provider, I can tell the gentleman that the success of the 
program is not only in the sheer numbers of the people that we 
are serving with the limited dollars that we have, but the most 
important is the kind of impact, that we are keeping people out 
of institutions.
    The senior center and the congregate meal sites, are 
another part of the nutrition program, another critical point.
    I heard in the earlier hearing Mr. Kennedy speaking about 
the
mental health needs of the elderly and of depression and 
isolation issues. I can tell Members there is not a better 
program which targets reducing isolation and depression than 
the participation and the social interaction that happen at 
these adult senior centers, congregate sites and adult day-care 
centers across the Nation.
    Mr. Sherwood. And the Meals on Wheels reaches so many 
people who can't or won't get out to others, and so they both 
fill a need.
    Ms. Carbonell. Absolutely.
    Mr. Regula. Mr. Peterson, go ahead and take your time now.

                           PREVENTIVE HEALTH

    Mr. Peterson. Can you give us a little detail on the 
preventive health services?
    Ms. Carbonell. It is a program that provides mostly health 
promotion and education. That means that it works in 
communities, under this new Administration and with Secretary 
Thompson's leadership, we target these funds that we have in 
our particular agency to complement services--for instance, 
from CMS, from SAMHSA, and from other agencies. In addition, in 
health promotion, we have risk reduction, health screening such 
as cardiovascular, the detection of diabetes, cholesterol and 
intervention and referral to appropriate services.
    Most of the focus of the health promotion activities again 
is in support of other funded activities. One of my priorities 
in this administration and of the Secretary is to foster better 
collaboration under the one department initiative, to work more 
collaboratively, to be able to merge the two systems: Our 
social support systems which we are known for in the 
communities across the country, with the medical model.
    Many of our current providers in communities are also 
Medicare and Medicaid providers in our communities. It is by 
the integration of both of those services that we are able to 
better create efficiencies; but most importantly, create the 
impact that we want to reach. We want to do the prevention 
services, reach and identify individuals ahead of time so they 
can be referred to appropriate services.

                           PHYSICAL ACTIVITY

    Mr. Peterson. I guess we have a problem in the country from 
my viewpoint, and I don't think that many would disagree with 
the lack of physical activity in society, and it is certainly 
prevalent with seniors. Is there any effort being made, because 
there is probably nothing we can do for seniors, if they had 30 
minutes of good physical activity every day. That raised the 
blood pressure, that got the heart pumping and the blood 
circulating, for clarity of mind and feeling good afterwards. 
Is there any broad, focused message to get people to realize 
how much better they would feel if they did something for 
exercise?
    Ms. Carbonell. First of all, the Secretary has put all of 
us on a diet, so this baby boomer is also walking, starting at 
the top.
    Most importantly, let me tell you the kind of things that 
are happening in senior centers and even Alzheimer's programs 
across the country. There are recreational therapy and physical 
therapy, not just tied to the actual medical component of the 
physical therapy, but the recreational and social component of 
exercise and keeping active.
    Wheelchair bound seniors that are in adult day-care centers 
are doing exercise right from their wheelchairs. And, my 
Deputy, Dr. Peggy Giannini, has expertise in disability and 
veterans affairs, and this is the first time we have had a 
medical doctor working with us under the agency. I have 
instructed her to lead the effort on the physical activity and 
obesity reduction, which again reduces many of the high risk 
behaviors of illnesses and chronic conditions.
    So one of the things that we are doing is working with CDC 
on a recently released report, called the Aging and States 
Program, to have a better collaborative effort between the 
Administration on Aging and community health centers across 
this country in States and in local communities. Again we want 
to improve how we leverage those dollars so we can get the 
experts from the health communities to our senior centers, to 
assist us in improving the efficiencies of those physical 
activity programs to get better outcomes on people's health.
    We are also partnering with the President's physical 
fitness program in that we are creating intergenerational 
activities for physical fitness. I don't know if the gentleman 
is aware, we had a very large Florida senior Olympics program. 
Many of your States have them, and the Deputy is also reaching 
out to the Veterans Administration, to try to coordinate a 
family caregiving support program to provide respite care 
during their veterans physical fitness sports program at that 
time.
    We are doing some creative things. These additional dollars 
will allow efforts to leverage the dollars at the community 
level to put together to with CDC and HRSA and other 
components.

                           VOLUNTEER PROGRAMS

    Mr. Peterson. The RSVP program is not under your bailiwick; 
is it?
    Ms. Carbonell. No, it is not. But the RSVP program, as much 
as the senior companion programs and others under the freedom 
corps, senior corps, works in conjunction and is an integral 
part of our senior centers and Aging Network.
    Mr. Peterson. When our seniors first become seniors, they 
have a lot of ability. Too often it rusts because they do not 
use it. In my view, we need to figure out how to harness the 
brain power of our seniors, because I find those that continue 
to use it do not lose it, and we have a problem where somehow 
we look forward to this retirement and sit on a porch and not 
do anything. In a few years, we do not know our name or the day 
of week it is.
    Ms. Carbonell. We conservatively have 130,000 volunteers 
that work actively day in and day out in programs in 
communities across this Nation, including the nutrition program 
that assist not only at the senior centers as clerks, as social 
service aides, as telephone workers, but also with home-
delivered meals, delivering meals to the homes of homebound 
citizens across this country.
    We have in the Medicare Pantrols, a very successful 
program. We have an excellent group of certified, trained 
volunteers that are assisting to educate and assist 
beneficiaries in watching out for wrong billings and in 
assisting them to just to be better health consumers.
    In the area of the long-term care ombudsman program, we 
have over 1,000 paid ombudsmen. In addition, we have 8,000 
trained certified volunteers that go into nursing homes to try 
to address nursing home abuse-in, not just in nursing home-but 
in assisted living facilities and in group homes.

                           PHYSICAL ACTIVITY

    Mr. Peterson. I would urge you not to overlook the use of 
our media. You know, today we have the ability to communicate 
with everybody in this country through television, and we ought 
to have a honed message that teaches us all that if we do not 
use it, we lose it, and that we need physical activity. All of 
the recent studies, no matter what disease it is, 30 minutes a 
day of activity drastically changes your likelihood to contract 
that. And just the general feeling about yourself, the mental 
state, it often comes down to physical activity. And I think if 
there is a threat to this country's health, seniors, middle age 
on down, it is lack of physical activity.
    I think structured programs reach some of the targeted 
base, but if we have a clear message, we can reach them all, 
those that can comprehend. And I think we can change behavior 
if we get the right message. We have got to get people that 
they will listen to. We have got to get some people that they 
will listen to. I hope this administration gives us another C. 
Everett Koop. We all have sorts of role models that are giving 
these messages. Look at the messages of Ed McMahon. I don't 
agree with all of his messages, but he is a voice that 
Americans listen to, and we need to take people like that that 
can talk to our seniors and make sure that--so much of health 
is behavior.
    Ms. Carbonell. That is right, sir. And I think the 
Secretary is right on target in this. He is committed to making 
sure that physical activity and the reduction of obesity are 
addressed in the Surgeon General's report--he wants to make 
sure that he gets in front of this issue, and that there is 
media and press, and that we do identify those individuals that 
we know are active in communities across this country. For 
instance in Michigan, we heard of a football player who is not 
only involved in training and assisting high schools, but he is 
involved in mentoring children in the elementary schools in 
physical activity. So intergenerational programs are important.
    But we must do better making sure that that is on the front 
agenda, and I can assure you that we take that to heart, and we 
will proceed, and that will give us the ability to focus on 
those areas where the Secretary is heading.
    Mr. Peterson. Thank you.
    Mr. Regula. Mr. Kennedy.
    Mr. Kennedy. Thank you, Mr. Chairman. I would like to 
associate myself with the remarks of my colleagues Mr. Peterson 
and Mr. Sherwood. I think they got it right on both the meals 
program and the behavioral exercise issue. We do need to have a 
Presidential physical fitness program. My cousin-in-law, Arnold 
Schwarzenegger, was former President Bush I's physical fitness 
director, and he still tells me that I am getting ``too 
flabby.'' so I have my own behavioral health management with 
Arnold because he says he ``will be back'' if I get too flabby.

               NATIONAL FAMILY CAREGIVER SUPPORT PROGRAM

    Anyway, Mr. Chairman, you asked about the caregiver 
program, and caregivers, half of them are over 65. They are 
seniors themselves. They have got their own health care 
problems, and they are trying to take care of their loved ones. 
They are burned out, and they get no support.
    And if we want to save money, let alone save their quality 
of life, we ought to put more money in the caregiver program. 
For pennies we are giving them the respite they need to put a 
loved one in elderly care while they go out and exercise. If 
they are not well, believe me, the person they are caring for 
is not going to be well, or the person they are caring for is 
going to be in a nursing home or someplace else.
    So I think the best money we can spend is on this caregiver 
program. And the States have been utilizing it, but I want to 
call your attention to the fact that there are 7 million 
caregivers, but the family caregiver program, is only able to 
help 250,000 of them right now.
    So, Mr. Chairman, I think your point is on a good issue, 
These people, young and elderly alike, just need help, and they 
will do it all. Believe me, they are providing the care for 
nothing, and all we need to do is make sure they do not get 
burned out. So I think we need to really bump up.
    Would you comment on the needs out there for the caregiver 
program?
    Ms. Carbonell. Well, like I said before, this is a program 
that has been very much welcomed by caregivers across this 
country. And one of the first meetings that I had was--one of 
the first listening sessions that I had, we brought all the 
caregiver groups together to meet early in August, and we heard 
from them, and it was particularly striking to hear from one 
caregiver, Mr. Kennedy, just what you mentioned. She said to 
us, you know, why do you call us informal caregivers? We are 
not informal. We are here 24 hours, 7 days a week. There is 
nothing informal about us.
    Mr. Kennedy. That is right.
    Ms. Carbonell.
    And that is the beauty of this program. It is reaching to 
be able to assist caregivers so they can have some time for 
themselves. It is a work force issue, too. It is a private 
industry issue and a business issue. This is about assisting 
folks to remain employed, gainfully employed, to keep at least 
part-time employment so there would be some adult day care 
respite, some support, some transportation, the whole gamut of 
services.
    In this proposal we are particularly going to focus on 
improving, again, the information on the program, by going out 
to communities. So we are making a special emphasis so that 
caregivers are aware that this program is up and running and 
that they should access their local communities for help.
    Mr. Kennedy. Well, if you could stay in touch with us on 
that, I would really like to track the success of that program. 
I hear from my constituents all the time who are giving care 
for their loved ones just how tapped out they are.
    Ms. Carbonell. It is a very welcome program. Our Department 
estimates that there are upwards of $95 billion in estimated 
savings if we were to pay for the kind of health and support 
that these caregivers are providing. So it is a very critical 
program, and we are very proud that it is on its way and that 
we are getting some good outcomes out of it. And I will be 
happy to come back and keep you abreast. Thank you.
    Mr. Kennedy. Thank you.
    Just two more questions, Mr. Chairman.

                              ELDER ABUSE

    You spoke briefly when responding to Mr. Peterson about the 
shocking report on elder abuse and theWould you comment on what 
is being done and what progress is being made on the HHS study for 
elder abuse and what is going on?
    Ms. Carbonell. Almost all of the programs that we provide 
under the Older Americans Act and the aging network address not 
only the prevention, but target the four high-risk factors of 
folks as evidenced--the four high-risk factors that usually 
occur when a person is abused, and frailty is one of them. The 
second one is isolation. The third one is depression, and the 
fourth one is just caregiver stress.
    So if you look at almost all of the core service programs 
that we provide at the senior center; the home-delivered meals, 
the personal care and the homebound services, and now the new 
family caregiver support program, these addresses, again, the 
reduction of those high-risk factors which are the main causes 
of the elder abuse. If you look particularly at the ombudsman 
program, like I mentioned before, this ombudsman project again 
has been successful in providing key information not only to 
residents in facilities, but to their caregivers and their 
families in addressing and resolving the complaints.
    If we look at the outcomes of the ombudsman program, we 
address well over 200,000 complaints a year and achieve a 
resolution rate of over 70 percent per year. I think that those 
are pretty good results. But we must continue to work to do 
better. And we are partnering particularly with CMS, again, to 
ensure that we look at those areas where there are consistent 
patterns of abuse, because the information we collect under the 
ombudsman programs will give us critical data that will assist 
us in focusing better efforts in that area. So we look forward, 
under the Secretary's leadership, to the task force that he has 
put together to address this issue. Most importantly, in 
partnering with CMS we hope to improve the capacity of the 
ombudsman program to respond at the local level.
    Mr. Kennedy. I appreciate that because, of course, many 
seniors are concerned about going into nursing homes. They are 
concerned about their quality of life when they are older, who 
is going to take care of them, and that is an issue that we 
need to pay a lot of attention to.

                           NUTRITION PROGRAMS

    I just wanted to reiterate, the meals program is absolutely 
critical. As you know, one in three seniors in the congregate 
meals program are at high nutrition risk, and three out of the 
four in the home program are at high nutritional risk. Three 
out of four. You are right, this is the only meal they receive 
every day, and it has got great utility not only in delivering 
the meal, but the smile and the human connection that people 
just do not get any other way. So I appreciate the support for 
this kind of program. We definitely need to do more.

                            PROGRAM OUTREACH

    I would just ask what does your budget do to reflect the 
growing minority communities?
    Ms. Carbonell. We are very proud of the record. We serve 
over 30 percent of the population, that means 30 percent of 7 
million that we provide services to across this country, come 
from some ethnic minority. That is compared to close to 16 
percent of the general population. If you look at the poverty 
level, we are also over the amount. And if you look at the 
rural statistics, the number of rural seniors we are serving, 
approximately 34 percent of the folks that we are serving 
across communities, come from rural communities compared to 24 
percent in the general population.
    But most importantly, again, is the importance of the Older 
Americans Act and the kinds of services that were laid out and 
how it was reauthorized. Number one, the targeting language is 
there. So that means that the targeting of these funds is going 
to those with greatest social and economic need, whether 
seniors come from the minority community, whether they are 
disabled, whether they are economically disadvantaged, or 
whether they are geographically inaccessible because they live 
in remote parts of our community.
    So the track record in reaching the most disadvantaged is 
there, and we are very proud of that, and we hope to continue 
to, again, target the folks most at risk. We cannot serve 
everybody, but our partners in the communities are reaching 
those in most need.

                           PENSION COUNSELING

    Mr. Regula. One last question. I understand you do 
counseling service on pension benefits?
    Ms. Carbonell. Yes.
    Mr. Regula. That becomes, I would suspect, very important 
to seniors, wanting to make sure, A, are they getting all they 
are entitled to; and, B, are there things that they are 
missing.
    Ms. Carbonell. That is correct, sir.
    Mr. Regula. Do you do this through the centers, or how do 
you reach the seniors to let them know that you have this 
service?
    Ms. Carbonell. The pension counseling program is a program 
that addresses not only the pension assistance for folks to tie 
in--for instance, they don't remember or they do not 
necessarily know where to turn to access their pension or their 
spouse's pension. They have lost contact with the company. The 
company has closed down. These demonstration programs are in 
many communities in this Nation, and we have been able to 
recoup millions of dollars in pensions for many of our seniors.
    Mr. Regula. It would seem to be very important to surviving 
spouses. Often one spouse, the husband, takes care of the 
financial arrangements, and suddenly there is a widow with not 
much understanding of what benefits are there.
    Ms. Carbonell. Absolutely. That is a critically important 
piece, but so is the other type of financial assistance that we 
give under the regular supportive services from case managers 
and caseworkers across this country. Some of the folks don't 
even know how to balance their checkbook or do not necessarily 
know--they do not know how to do payments by computer, and they 
have to go in person and all of those things.
    Many of our caseworkers across communities serve homebound 
clients or just people who do not know exactly how to handle 
their finances. This is going on day in and day out in local 
communities. We are proud of the work that they are doing.

                         MEDICATION MANAGEMENT

    Mr. Regula. I think Mr. Sherwood made a very good point on 
Meals on Wheels. Do they get involved in helping people knowing 
what pills they should take? This has to be confusing to 
elderly people. They have a whole array of pills. Do they ask 
the person who comes to their doors with the meals to ``give me 
a little help here''?
    Ms. Carbonell. Well, we are not necessarily assisting, but 
we do have a medication management program that works as part 
of the services that we provide in communities. For instance, 
the medication management is available in facilities where they 
are licensed to provide that care; for instance, in the social 
medical model, the adult day health care centers, which are 
paid by Medicaid waivers across communities. And medication 
management is something that they just make sure to remind them 
to take the medications and that they take them on time, et 
cetera, both homebound or in congregate settings.
    In assisted living facilities, it also is a service--a 
support service that is available in those assisted living 
facilities that allows elderly people who have some kind of 
chronic condition to still remain and live independently in the 
community without going into a nursing home by providing these 
kinds of support in housing settings.
    Mr. Regula. Any more questions?

                          SENIOR MENTAL HEALTH

    Mr. Kennedy. Mr. Chairman, I would like to say that I look 
forward to working with you. We talked about the senior mental 
health piece. It has got to be a collaborative approach. 
Obviously, AoA is the best vehicle for a lot of collaboration 
because you reach the seniors. I look forward to working with 
you. We might need some authorizing language, so I look forward 
to working with you on that to reach out to seniors who are in 
distress and make sure we identify them properly and get them 
treated for what they need to be treated for.
    Ms. Carbonell. Like I said before, we are the best vehicle 
in the community setting to, number one, reduce isolation and 
two, to reduce depression.
    I forgot to say when the other gentleman asked me about 
preventive health, that one of the services we have under the 
preventive health category is mental health counseling, 
although of a limited nature, because we--in most ways we are 
in support. But mental health assessment and the risk 
assessment for mental health comes in the way of caseworkers as 
they intake and do the assessments in many of these individuals 
to try to address their mental health as much as their physical 
and mental health needs.
    Mr. Regula. Your agency does do the work of the Lord, and a 
lot of people depend on you. Thank you for being here.
    The committee is adjourned.
    Ms. Carbonell. As I said, this is the 30th anniversary of 
our nutrition program, and we want to give you an apron that we 
created to celebrate and encourage you, Mr. Chairman, and the 
other Members to join us in delivering meals.
    Mr. Regula. That ought to fit my wife.
    Ms. Carbonell. We invite both of you to deliver a meal in 
your congressional districts.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2003

                              ----------                              

                                          Wednesday, March 6, 2002.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                                WITNESS

HON. TOMMY G. THOMPSON, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH 
    AND HUMAN SERVICES

                          Chairman's Statement

    Mr. Regula. I think we will get started. I hear there may 
be a series of votes this morning and it will be disruptive to 
the Committee hearing, but we will do as well as we can.
    We are happy to welcome you, Mr. Secretary, and look 
forward to your testimony. You have a lot of challenges, and we 
are anxious to hear the solutions. One question I can discard 
is, what are we doing about an NIH director. Overnight took 
care of that one.
    But just in the interest of time, I am not going to do any 
opening statement. Mr. Obey?
    Mr. Obey. Go right ahead.
    Mr. Regula. Okay, well, Mr. Secretary, we will look forward 
to your testimony, and I know we will have some questions.

                         Secretary's Statement

    Secretary Thompson. Thank you, Mr. Chairman, members of the 
Subcommittee. It is an honor to come before you to discuss the 
President's fiscal year 2003 budget for the Department of 
Health and Human Services.
    Mr. Chairman, your support over the past year has been 
tremendous. On behalf of the President and myself, let me thank 
you for all your help. Congressman Obey, it is good to see you, 
and thank you for your good work over the many years, and thank 
you for your friendship.
    Mr. Chairman, the past 13 months have witnessed some 
significant achievements at the Department of Health and Human 
Services. I will detail some of these accomplishments in my 
testimony. But at the outset, let me note that we are making 
good on our promise to bring greater efficiencies to the way 
that we run the Department. The President's budget will reduce 
the number of HHS personnel offices from 46 to 4. We are 
realigning and consolidating throughout the Department, 
bringing better stewardship to our use of the taxpayers' 
dollars, and we have launched a regulatory reform initiative to 
reduce the paperwork burden on physicians, hospitals, as well 
as other health providers.
    As we make sure we are working efficiently, we are also 
providing the resources our health care system demands. The 
total HHS request for fiscal year 2003 is $488.8 billion. This 
is an increase of $29.2 billion, or 6.3 percent over the 
comparable 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. The fiscal year 2003 budget further strengthens our 
ability to deal with the threat of bioterrorism. In total, we 
are asking the Congress to give us an additional $4.3 billion, 
an increase of 45 percent over the current fiscal year. This 
funding will support a variety of activities to prevent and 
respond to the incidence of bioterrorism.
    Right now, we are providing $1.1 billion to State 
governments to help them strengthen their capacity to respond 
to bioterrorism and other public health emergencies. The money 
is part of the bioterrorism appropriation bill, and I want to 
thank all of you on a bipartisan basis for what you did, that 
Congress passed and the President signed into law on January 
10th. Most of the money has already been sent to the States.
    We are working to hook up every major county and State 
health system in the Nation electronically through the Health 
Alert network. The Network is developing communications, the 
Network used by the CDC, to be able to communicate with State 
and local health departments regarding possible disease 
outbreaks. We are providing more than a half a billion dollars 
for our hospital preparedness program, which will strengthen 
the ability of local hospitals to prepare for biological and 
chemical attacks. We are also looking at the opportunity to 
develop regional hospitals for surge capacities if in fact we 
really have a serious bioterrorism attack.
    The NIH is also researching for better anthrax, plague, 
botulism and hemorrhagic fever vaccines. We have purchased 154 
additional million doses of smallpox vaccine that we should 
have all in store by the end of this year, so that we will have 
one vaccine for every man, woman and child in America.
    When it comes to bioterrorism, we are growing stronger in 
our preparedness each and every day. We are also advancing 
important biomedical research and preventive health efforts. 
The NIH will get significant funding for new research into new 
vaccines and protecting the security of its facilities.
    The budget provides $5.5 billion for research on cancer 
throughout NIH, and a total of $2.8 billion for HIV-AIDS 
related research. The CDC will also receive $940 million for 
its State and local programs to improve local laboratories, 
train physicians, and expand cooperative training between 
public health agencies and local hospitals.
    We are also requesting $20 million for a new initiative 
called the Healthy Communities Innovation. It is a new 
interdisciplinary service effort that will concentrate 
Department-wide expertise on the prevention or the reduction of 
diabetes, asthma as well as obesity.
    And Mr. Chairman, we are also helping to prepare low-income 
Americans for the future. That is why welfare reform remains so 
important. The good news is that since 1996, welfare reform has 
exceeded expectations, resulting in millions moving from 
dependence on AFDC to the independence of work. Nearly 7 
million fewer individuals are on welfare





                           W I T N E S S E S

                              ----------                              
                                                                   Page
Carbonell, J. G..................................................  1951
Horn, W. F.......................................................  1101
Scully, T. A.....................................................   595
Thompson, Hon. T. G..............................................     1
Weems, Kerry............................................595, 1101, 1951




                               I N D E X

                              ----------                              

                Department of Health and Human Services

                                                                   Page
Abstinence Education.............................................   193
Abstinence-Only Education........................................   181
Abstinence Until Marriage Program................................   164
Access to Dental Care..........................................148, 150
Adoption.........................................................   128
AIDS Drugs Assistance Program (ADAP).............................   152
Bioterrorism/Food Safety.........................................   174
Care for the Profoundly Mentally Ill.............................   131
Child Care.....................................................129, 153
Child Care and Development Block Grant (CCDBG)...................   137
Children's Hospital GME..........................................   107
Community Health Centers.........................................    81
Compassion Capital Fund..........................................   138
Congressional Justification......................................   256
Consolidating Personnel Offices..................................    98
Consolidation of Health Facilities Construction Activities......37, 101,
     145, 185
Coordinated Federal Microbicides Plan............................   157
Diet and Exercise................................................    33
Diet and Physical Fitness.......................................53, 117
Drug Treatment...................................................    81
Department's Budget Request......................................    38
Emergency Preparedness.........................................135, 163
Evaluation Tap Funding...........................................   146
Faith and Community Based Programs...............................   118
Family Planning Waivers..........................................   166
Full-Time Equivalent.............................................    99
Funding for Title VII and VIII Programs..........................   186
Funding Level....................................................    52
Funding Mandatory Program........................................    95
Global AIDS......................................................   154
Head Start......................................................39, 170
Health Care Access...............................................    50
Health Care Funding..............................................    31
Health Care Worker Shortages.....................................   112
Health Disparities in Health Care Access.........................   159
Health Insurance Accountability Demonstration....................    97
Health Insurance Portability and Accountability Act (HIPPA)......   126
Health Professions.............................................168, 185
Health Professions Funding.......................................    36
Homeland Security-Hospital Coordination..........................    91
Healthy Communities Innovation Initiative..............29, 45, 136, 145
HHS Agency Leadership............................................   192
HIV/AIDS.............................................151, 155, 183, 187
HIV Treatment and Prevention.....................................   187
HIV Vaccine Research Program.....................................   156
Home Health Care................................................80, 178
Homeland Security................................................30, 93
Immunization.....................................................   163
Limited English Proficiency.....................................86, 109
Low Income Home Energy Assistance (LIHEAP).....................140, 170
Macular Degeneration Therapy.....................................   114
Mammography......................................................42, 45
Medicaid 1115 Family Planning Waivers............................   182
Medicaid Transition Costs........................................   109
Medicaid Upper Payment Limit (UPL)...............................   153
Medicaid Waivers for the SCHIP Program...........................   121
Medical Savings Accounts.........................................   121
Medicare Formula.................................................    84
Medicare Savings.................................................   114
Men's Health.....................................................   133
Mental Health....................................................   182
Microbicide Research...........................................167, 189
Minority HIV/AIDS Initiative.....................................   188
Morehouse School of Medicine.....................................   192
Moyer Table......................................................   198
NIH:
    Budget......................................................89, 111
    Grants.......................................................    93
    Leadership...................................................    89
Nurse Education Loan Repayment...................................   174
Nurse Shortage...................................................   173
Official Time....................................................   112
Oral Health....................................................193, 195
Organ Donation..................................................90, 105
Oversight of Nursing Homes.......................................   119
Prescription Drug User Fee Act (PDUFA)/Generic Drugs.............   176
Prescription Drugs...............................................85, 96
Prevention.......................................................    47
Preventive Health................................................82, 84
Primary Care.....................................................   185
Private Patents on Federally Funded Research.....................   132
Proposed New Authority for States to Shift Funds.................   142
Proposed Rule to Make ``Unborn Children'' Eligible for SCHIP.....   172
Public Affairs and Legislative Affairs Offices..................99, 177
Recoupment of Federal Research and Development...................   179
Research Coordination Council....................................   103
Research Savings.................................................    55
Rural Health Care................................................    80
SCHIP Medical Waivers............................................    34
SCHIP-Proposed Rule to Include the Unborn........................    43
Scleroderma Research.............................................   161
Senior Mental Health Care........................................    48
Services for Individuals with Mental Retardation.................   124
Sex Education....................................................   161
Shadow Government...............................................79, 180
Single Food Agency...............................................   175
Statements:
    Chairman Statement...........................................     1
    Secretary's Statement........................................     1
Stem Cell Research.............................................101, 133
Surgeon General..................................................    82
Top Management Positions.........................................   111
Toxemia..........................................................   162
Transfer of Funds................................................   166
Vaccines for Children............................................    40
Welfare Reform and the Food Stamp Program........................   127
Youth Media Campaign.............................................   116

  Department of Health and Human Services Efforts to Prepare Against 
                              Bioterrorism

Advanced Research in Bioterrorism................................    58
Anthrax and Other Bioterrorist Threats...........................    39
Anthrax Effects/Studies..........................................    43
Bioterrorism.......................................56, 62, 77, 110, 115
Bioterrorism/Food Safety.........................................   121
Bioterrorism Preparedness and Response...........................54, 66
BSL-4 Laboratory and Related Infrastructure......................   116
CDC National Pharmaceutical Stockpile............................    74
CDC's Buildings and Facilities...................................   108
Communications...................................................    34
Community Health Centers.........................................    35
Construction.....................................................    40
Coordination Between Agencies....................................    33
Educational Incentives for Curriculum Development and Training 
  Program........................................................   111
Emergency Medical Services for Children..........................    43
Emergency Operations Center......................................    59
Emergency Supplemental Funds.....................................    93
Emerging Infectious Disease Agents...............................    71
Enhanced Metropolitan Response Systems...........................    98
Environmental Public Health Tracking Network and Centers for 
  Excellence.....................................................   118
Epidemic Intelligence Service....................................    58
Fort Collins Facility............................................    76
Funding for NIH..................................................    34
Funding for State and Local Plans................................    47
Funding for Upgrading CDC Capacity...............................    66
Health Alert Network............................................72, 106
Health Care......................................................    51
Health Professions Programs......................................    58
HHS Efforts to Prepare Against Bioterrorism......................    89
Homeland Security................................................    50
Hospital Infrastructure Program..................................   112
Hospital Preparedness Program....................................   127
HRSA's Hospital Preparedness Guidelines..........................   117
Increased Funding................................................    36
Inter Agency Coordination........................................    53
Laboratory Registration/Select Agent Transfer Program............    60
Laboratory Response Network and National Electronic Diseases 
  Surveillance System............................................   101
Metropolitan Medical Response System.............................    84
National Electronic Disease Surveillance System..................   107
National Laboratory System Demonstration Project.................   105
Office of Emergency Preparedness.................................   117
Pharmaceutical Stockpile.........................................    69
Poison Control Centers Program...................................    79
Preparedness.....................................................    50
    Bioterrorism Preparedness....................................    88
    CDC's Laboratory Preparedness................................    70
    Hospital Preparedness........................................    45
    Office of Emergency Preparedness.............................57, 82
Public and Private Laboratories..................................   128
Public Health Preparedness.......................................    44
Public Health Training Facilities................................   112
Push Packs.......................................................    52
Rapid Toxic Screen...............................................    65
Resources........................................................    52
Select Agents...................................................40, 110
Single Food Agency...............................................   126
State and Local Plans............................................    47
Statements:
    Acting Director for CDC, Dr. Fleming's Statement.............    25
    Administrator for HRSA, Dr. Duke's Statement.................    30
    Administrator for SAMHSA, Mr. Curie's Statement..............    18
    Chairman's Statement.........................................     1
    Deputy Secretary's Statement.................................     1
    Director for NIAID, Dr. Fauci's Statement....................     9
Vaccinations.....................................................    33
    Anthrax.................................................45, 55, 114
    Smallpox Vaccination.............................38, 41, 48, 74, 88
Vaccine HealthCare Center........................................    67
Witnesses........................................................     1

               Centers for Medicare and Medicaid Services

Annual Performance Plan and Report.............................901-1100
Appeals:
    Medicare Contractor Workloads................................   738
    On-Going.....................................................   737
Appropriation History Tables:
    Federal Administration.......................................   757
    Medicaid.....................................................   827
    Medicare Operations..........................................   747
    Program Management...........................................   816
Appropriation Language:
    HMO Loan and Loan Guarantee Fund.............................   805
    Medicaid.....................................................   772
    Payments to Trust Fund.......................................   794
    Program Management...........................................   723
Asian Americans & Pacific Islanders..............................   695
Assisted Living Facilities.......................................   644
Audiology........................................................   699
Audited Financial Statement....................................744, 845
Authorizing Legislation:
    Clinical Laboratory Improvement Act..........................   842
    Federal Administration.......................................   748
    Health Care Fraud and Abuse Control..........................   848
    Medicaid...................................................775, 826
    Medicare Operations..........................................   731
    Program Management...........................................   817
    Research, Demonstration and Evaluation.......................   768
    State Children's Health Insurance Program....................   860
    State Grant and Demonstration Program........................   856
    Survey and Certification.....................................   758
Balanced Budget Act Program Management Request...................   756
Benefits Improvement and Protection Act of 2000................635, 714
Budget Authority by Activity:
    Medicaid.....................................................   775
    Payments to Trust Fund.......................................   807
    Program Management...........................................   812
Budget Authority by Object:
    Medicaid.....................................................   829
    Payments to Trust Fund.......................................   801
    Program Management...........................................   813
Budget Priorities:
    Access to Health Care........................................   717
    Accountability...............................................   718
Budget Request:
    Federal Administration.......................................   714
    Medicare Operations..........................................   714
    Research, Demonstrations, and Evaluations....................   715
    Survey and Certification.....................................   715
CMS Budget Summary..............................................708-721
CMS Priorities...................................................   595
Chief Dental Officer.............................................   647
Claims Processing................................................   736
Claims, Unprocessable..........................................730, 733
Claims Volume....................................................   735
Clinical Laboratory Improvement Amendments (CLIA) of 1988:
    Authorizing Legislation......................................   842
    Rationale for Budget Estimate................................   843
    Summary Table................................................   842
Cost of Prescription Drug Benefit................................   626
Cost of Prescription Drugs.......................................   627
Coverage:
    Brachytherapy for Prostate Cancer............................   702
    Non-Disabled Individuals with HIV Disease....................   693
    Oral Cancer Drugs............................................   612
    Thoracic Electrical Bioimpedance.............................   682
DME Competitive Bidding..........................................   615
Dental:
    Care for Children............................................   683
    Care for Children on Medicaid................................   687
    Disease in Children..........................................   696
    Grant for Children, Funding..................................   696
    Waivers and Services.........................................   688
Discretionary Budget Summary.....................................   702
Drug Rebate Program for Medicaid HMOs..........................674, 791
Education Campaign...............................................   597
Electronic Claim Transaction.....................................   652
Eligibility Screening Tool.......................................   667
Emergency Room Costs and Reimbursements..........................   670
Encounter Data Collection........................................   744
End-Stage Renal Disease Reporting System.........................   648
English as a Second Language.....................................   670
Error-Rate Testing Program.......................................   639
Evaluations of Medicaid Managed Care Systems.....................   646
Executive Summary...............................................711-721
FTE History Table................................................   654
Federal Administration...........................................   714
    Administration Summary.......................................   750
    Authorizing Legislation......................................   748
    Budget Request...............................................   748
    Expenses, Fixed..............................................   751
    Expenses, Variable...........................................   754
    Purpose and Method of Operations.............................   749
    Rationale for Budget Request.................................   749
    Recent Legislation and New Activities........................   756
    Summary Table................................................   748
Financial Statement Audits.......................................   744
Fraud Education and Training Funding.............................   654
Fraud, Waste, and Abuse..........................................   848
Funding of Dental Grant for Children.............................   696
Funding Levels...................................................   651
Funding Summary..................................................   708
GAO Report, March 2002...........................................   687
GSA Rental Payments..............................................   691
Government Performance and Results Act (GPRA)....................   901
Grants to States for Medicaid..........................772-793, 825-835
Grijalva Settlement Agreement....................................   745
Growth in Home Health Care.......................................   685
HMO Loan and Loan Guarantee Fund:
    Appropriation Language.......................................   805
    Language Analysis............................................   806
Healthcare Integrated General Ledger and Accounting System 
  (HIGLAS)................................................633, 743, 838
Health Care Fraud and Abuse Control:
    Authorizing Legislation......................................   848
    FY 2003 Funding Increase for MIP.............................   854
    Implementing FY 2002 and FY 2003 MIP Contracting Efforts.....   855
    Medicaid/SCHIP Program Activities............................   851
    Medicare Integrity Program Activities........................   851
    Priorities and Strategies....................................   848
    Summary Table................................................   848
Health Information Privacy Regulation............................   787
Health Insurance Flexibility and Accountability..................   662
Health Insurance Portability and Accountability Act (HIPAA)....632, 839
    Administrative Simplification Regulation..............741, 756, 787
    Privacy Regulation.........................................742, 787
Home Health:
    Growth.......................................................   685
    Outcome-Based Quality Improvement System.....................   648
Hospital Reimbursement Rates.....................................   619
In-Patient Care Reimbursements...................................   671
Informal Dispute Resolution for Nursing Homes....................   679
Information Technology.........................................716, 747
    Budget Estimates.............................................   836
    Key Agency Initiatives.......................................   838
Issues Affecting Mississippi.....................................   612
Language Analysis:
    HMO Loan and Loan Guarantee Fund.............................   805
    Medicaid.....................................................   773
    Program Management...........................................   726
Lead Screening of Children.......................................   700
Legislation Summary--Program Management..........................   730
Less Costly Oral Health Care.....................................   697
Low-Income Prescription Drug Assistance........................676, 792
Lung Volume Reduction Surgery....................................   650
Managed Care:
    Options......................................................   623
    Reconsiderations.............................................   744
    System.......................................................   653
March 2002 GAO Report............................................   687
Medicaid:
    Amounts Available for Obligation.............................   830
    Appropriation Language.......................................   772
    Appropriations History Table.................................   827
    Authorizing Legislation....................................775, 826
    Background of Program........................................   775
    Benefit Services and Growth..................................   777
    Budget Authority by Activity.................................   775
    Budget Authority by Object...................................   829
    Composition of Population....................................   780
    Distribution of Monies by State..............................   779
    Estimates of Grant Awards (by State).........................   832
    Health Insurance Tax Credit..................................   793
    Impact of Proposed Legislation...............................   789
    Language Analysis............................................   773
    Managed Care.................................................   776
    Medicaid Requirements........................................   828
    Medical Assistance Payments................................783, 831
    Obligations..................................................   648
    Proposed Law.................................................   834
    Rationale for Budget Estimate................................   783
    Reform Demonstrations........................................   781
    Reimbursement for Environmental Samples......................   700
    Section 1115 Demonstrations..................................   781
    State and Local Administration...............................   786
    State Children's Health Insurance Program....................   786
    State Estimates............................................778, 783
    Statutory Authority for Reimbursement........................   700
    Summary of Changes...........................................   825
    Survey and Certification.....................................   788
    Vaccines for Children Program..............................788, 835
Medicare & Medicaid Administrative Costs.........................   632
Medicare+Choice Plan Departures..................................   621
Medicare&You Education Program............................717, 742, 858
    Funding......................................................   642
Medicare:
    Advertising Campaign.........................................   614
    Coverage of Clinical Trials..................................   655
    Education Program..........................................742, 858
    Payment Error Rate...........................................   638
    Reform and Drug Benefits.....................................   636
Medicare Benefits................................................   840
Medicare Contractors.............................................   680
    Contracting Reform...........................................   616
    Oversight.............................................629, 664, 680
Medicare Integrity Program (MIP):
    Activities...................................................   851
    Contracting Efforts..........................................   855
    Funding......................................................   854
Medicare Operations..............................................   714
    Appeals......................................................   737
    Appropriation History........................................   747
    Authorizing Legislation......................................   731
    Budget Request...............................................   733
    Change in Configuration......................................   824
    Changes Required by Legislation..............................   741
    Claims Processing............................................   736
    Contractor Workload..........................................   736
    Enterprise-Wide Activities...................................   741
    Information Technology.....................................740, 747
    Inquiries....................................................   738
    Non-Renewals.................................................   740
    Ongoning Activities..........................................   734
    Operations...................................................   740
    Physician/Supplier Program...................................   739
    Program Improvements.........................................   746
    Proposed Legislation.........................................   732
    Provider Education and Training (PET)........................   739
    Provider Toll-Free Lines.....................................   741
    Purpose and Method of Operations.............................   731
    Rationale for the Budget Request.............................   734
    Summary Table..............................................731, 733
    Systems Maintenance..........................................   739
    Systems Transitions..........................................   740
    User Fees.............................................713, 730, 732
MedLearn.........................................................   636
National Medicare&You Education Program....................717,742, 858
National Quality Forum...........................................   661
Nuring Home:
    Deficiencies.................................................   644
    Informal Dispute Resolution..................................   679
    Initiative Funding...........................................   655
    Lawsuits.....................................................   616
    Oversight Improvement Program..............................756, 766
    Quality Improvement Initiative...............................   661
    Variations...................................................   646
    Web Site.....................................................   686
Opening Statement:
    For the Record...............................................   598
    Oral.........................................................   595
Oral Disease in Very Young Children..............................   684
Oral Health Care, Less Costly....................................   697
    Organ Procurement Organizations..............................   651
    Organization Chart...........................................   704
    Ostomy Supplies..............................................   701
    Outreach Efforts.............................................   669
    Payments for Mental Illness and Substance Abuse..............   674
Payments to Health Care Trust Funds:
    Amounts Available for Obligation.............................   795
    Appropriation Language.......................................   794
    Budget Authority by Activity.................................   797
    Budget Authority by Activity (Permanent).....................   804
    Budget Authority by Object...................................   801
    FY 2001 Crosswalk for Accrued Retirement and Health Benefit 
      Costs......................................................   798
    FY 2002 Crosswalk for Accrued Retirement and Health Benefit 
      Costs......................................................   799
    FY 2003 Crosswalk for Accrued Retirement and Health Benefit 
      Costs......................................................   800
    SMI Premium Estimates........................................   802
    Summary of Changes...........................................   796
Peer Review Organizations........................................   767
Physician Payments...............................................   677
Physician Reimbursement..........................................   618
Prescription Drugs...............................................   613
    Assistance, Low-Income.......................................   676
    Benefit...............................................623, 625, 792
    Cost of Benefit..............................................   626
    Coverage.....................................................   675
    Volume Discounts.............................................   628
    Waivers......................................................   624
Privacy Regulation.............................................742, 787
Program Improvement Reduction....................................   643
Program Improvements.............................................   745
Program Evaluations in Fiscal Year 2001..........................   656
Program Evaluations in Fiscal Year 2002..........................   660
Program Integrity................................................   637
Program Management:
    Amounts Available for Obligation.............................   810
    Appropriation Language.......................................   723
    Appropriations History Table.................................   816
    Authorizing Legislation......................................   817
    Breakout of Activities.......................................   716
    Budget.......................................................   597
    Budget Authority by Activity.................................   812
    Budget Authority by Object--2 Year...........................   813
    Budget Request...................................733, 748, 758, 768
    Change in Configuration of Medicare Contractors..............   824
    Detail of Direct Full-Time Equivalent Employment.............   818
    Detail of Positions..........................................   819
    FY 2001 Crosswalk for Accrued Retirement and Health Benefit 
      Costs......................................................   820
    FY 2002 Crosswalk for Accrued Retirement and Health Benefit 
      Costs......................................................   821
    FY 2003 Crosswalk for Accrued Retirement and Health Benefit 
      Costs......................................................   822
    FY 2003 PM Request--BBA......................................   756
    Federal Administration.......................................   748
    Language Analysis............................................   726
    Legislation Summary (Proposed)...............................   730
    Medicare Operations..........................................   731
    Medicare Operations Change in Configuration..................   824
    Medicare Survey and Certification Program....................   758
    Proposed Legislation Summary.................................   730
    Research, Demonstrations and Evaluation......................   768
    Salaries and Expenses........................................   815
    Summary of Changes...........................................   811
    Summary Table (Current Law)..................................   728
    Summary Table (Proposed Law).................................   729
    Voluntary and Involuntary Terminations (Medicare State 
      Certification).............................................   823
Proposed Law User Fees.........................................713, 732
Proposed Legislation.................................596, 730, 789, 834
Provider:
    Education and Training Program........................640, 739, 853
    Reimbursement................................................   737
Publicity Campaign...............................................   642
Quality Improvement Pilot Program................................   660
Reduction in Accredited Hospital Recertification.................   646
Reduction of Full-Time Equivalents...............................   647
Reimbursement:
    Emergency Room Costs.........................................   670
    Environmental Samples........................................   700
    In-Patient Care..............................................   671
    Medicaid, Statutory Authority................................   700
    Provider.....................................................   737
    Rates........................................................   678
Research Coordination Council....................................   666
Research, Demonstrations, Grants and Evaluations.................   715
    Authorizing Legislation......................................   768
    BBA Mandated Research Initiatives............................   769
    Budget Request...............................................   768
    Evaluating CMS Programs/New Alternatives.....................   770
    Medicare Current Beneficiary Survey..........................   770
    New Freedom Demonstration....................................   770
    Programs.....................................................   689
    Purpose and Method of Operations.............................   768
    Rationale for Budget Request.................................   768
    Summary Table................................................   768
Rural Reimbursement Rates........................................   622
Security Needs Assessment........................................   665
Significant Items:
    House Report.................................................   864
    Senate Report................................................   870
    Conference Report............................................   896
Social Security Administration...................................   632
Staffing.........................................................   650
State Certification, Voluntary and Involuntary Terminations......   823
State Children's Health Insurance Program (SCHIP):
    Authorizing Legislation......................................   860
    Background...................................................   860
    Enrollment...................................................   861
    Funding...............................................757, 791, 862
    Recent Legislative Changes...................................   861
    Summary Table................................................   860
State Grant and Demonstration Program............................   856
State Health Insurance Assistance Program........................   641
Statutory Authority for Medicaid Reimbursement...................   700
Summary of Changes:
    Medicaid.....................................................   825
    Payments to Trust Funds......................................   796
    Program Management...........................................   811
Summary Table:
    Clinical Laboratory Improvement Amendments...................   842
    Federal Administration.......................................   748
    Health Care Frauud and Abuse Control.........................   848
    Medicare Operations..........................................   731
    Research Demonstration and Evaluation........................   768
    State Children's Health Insurance Program....................   860
    State Grant and Demonstration Program........................   856
    Survey and Certification.....................................   758
Survey and Certification Program...............................645, 715
    Authorizing Legislation......................................   758
    Budget Request...............................................   760
    Direct Survey Costs..........................................   760
    Funding......................................................   686
    Nursing Home Oversight Improvement Program...................   766
    Purpose and Method of Operations.............................   758
    Rationale for Budget Request.................................   759
    Recertification Level Comparison.............................   761
    Summary Table................................................   758
    Support Contracts............................................   764
    Surveys and Complaint Visits.................................   762
System Transitions...............................................   653
Teleconsultation Requests........................................   655
Telemedicine Funding.............................................   649
Temporary Assistance to Needy Families...........................   663
ThinPrep PAP Test................................................   698
Ticket to Work/Work Incentives Improvement Act of 1999...........   856
Transititional Low-Income Drug Assistance........................   625
Treatment of Prostate Cancer.....................................   617
Unprocessable Claims...........................................730, 733
Upper Payment Limit............................................694, 785
User Fees, Medicare Operations............................713, 730, 732
Vaccines for Children Program..................................788, 835
Volume Discounts for Prescription Drugs..........................   628
Wage Rates.......................................................   621
Waivers and Dental Services......................................   688
Workforce Planning........................................643, 719, 751

                Administration for Children and Families

Adoption Programs................................................  1127
Child Care:
    Child Care.............................1114, 1126, 1141, 1143, 1147
    Child Care and Development Block Grants......................  1133
    Child Care Services..........................................  1109
Early Childhood Development......................................  1110
Head Start:
    Early Learning in Head Start.................................  1111
    Head Start...............................................1139, 1146
    Head Start Evaluation........................................  1109
    Head Start Goals.............................................  1111
    Lasting Effect of Head Start.................................  1112
Faith-Based Programs:
    Compassion Programs..........................................  1137
    Faith-Based Programs.........................................  1121
Foster Care......................................................  1113
Low Income Home Energy Assitance Program.........1120, 1138, 1143, 1145
Office of Refugee and Entrant Assistance.........................  1123
Poverty Rate.....................................................  1131
School Readiness.................................................  1110
Social Services Block Grant......................................  1144
TANF Block Grant.................................................  1143
Welfare:
    Welfare......................................................  1149
    Welfare Reform...............................................  1124

                        Administration on Aging

Budget.......................................................1982, 1986
Coordination with other Agencies.................................  2003
Elder Abuse......................................................  1969
Interagency Task Force...........................................  1980
Justification....................................................  2006
Long-Term Care...............................................1984, 2001
Medication Management............................................  1971
National Family Caregiver Support Program.......1163, 1968, 1978, 1984,
     1992, 2003
Nursing Homes....................................................  1976
Nutrition Programs.........................1963, 1970, 1978, 1988, 2004
Opening Statement................................................  1953
Pension Counseling...........................................1970, 1976
Performance Measures.............................................  1977
Physical Activity............................................1965, 1967
Preventive Health................................................  1965
Program Outreach.................................................  1970
Providing Services...............................................  1973
Regulations......................................................  1975
Senior in Communities............................................  1980
Senior Mental Health.............................................  1971
Senior Volunteers................................................  2004
Training, Research and Discretionary Projects....................  1992
Volunteers Programs..............................................  1966
Witnesses........................................................  1951

                                
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