[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
 PRESIDENT'S FISCAL YEAR 2004 BUDGET FOR THE U.S. DEPARTMENT OF HEALTH 
                           AND HUMAN SERVICES
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 6, 2003

                               __________

                            Serial No. 108-2

                               __________

         Printed for the use of the Committee on Ways and Means










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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.





                            C O N T E N T S

                               __________
                                                                   Page

Advisories announcing the hearing................................     2

                                WITNESS

U.S. Department of Health and Human Services, Hon. Tommy G. 
  Thompson, Secretary............................................     7


 PRESIDENT'S FISCAL YEAR 2004 BUDGET FOR THE U.S. DEPARTMENT OF HEALTH 
                           AND HUMAN SERVICES

                       THURSDAY, FEBRUARY 6, 2003

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                            Washington, DC.
    The Committee met, pursuant to notice, at 9:42 a.m., in 
room 1100 Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee) presiding.
    [The advisory and revised advisory announcing the hearing 
follow:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

January 30, 2003

FC-3

Thomas Announces Hearing on the President's Fiscal Year 2004 Budget for 
            the U.S. Department of Health and Human Services

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
the President's fiscal year 2004 budget for the U.S. Department of 
Health and Human Services (HHS). The hearing will take place on 
Thursday, February 6, 2003, in the main Committee hearing room, 1100 
Longworth House Office Building, beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from the Honorable Tommy G. Thompson, 
Secretary, U.S. Department of Health and Human Services (HHS). However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    On January 28, 2003, President George W. Bush delivered his State 
of the Union address, in which he outlined several legislative 
initiatives. The details of these proposals are expected to be released 
on February 3, 2003, when the President is scheduled to submit his 
fiscal year 2004 budget to the Congress. The budget for HHS is expected 
to include initiatives aimed at: strengthening and improving Medicare, 
assisting individuals who lack health insurance, improving health care 
quality, and reauthorizing and improving Temporary Assistance for Needy 
Families and related programs.
      
    In announcing the hearing, Chairman Thomas stated: ``The Committee 
looks forward to Secretary Thompson's appearance. This hearing will 
help lay the groundwork for the coming year's legislative business.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is to review the President's fiscal year 
2004 budget proposals for HHS.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Thursday, February 20, 2003. 
Those filing written statements that wish to have their statements 
distributed to the press and interested public at the hearing should 
deliver their 200 copies to the full Committee in room 1102 Longworth 
House Office Building, in an open and searchable package 48 hours 
before the hearing. The U.S. Capitol Police will refuse sealed-packaged 
deliveries to all House Office Buildings.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.

      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.

      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                      ***NOTICE--CHANGE IN TIME***

ADVISORY

 FROM 
THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

January 31, 2003

FC-3-Revised

Thomas Announces a Change in Time for the President's Fiscal Year 2004 
      Budget for the U.S. Department of Health and Human Services

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee hearing on the 
President's fiscal year 2004 budget for the U.S. Department of Health 
and Human Services, scheduled for Thursday, February 6, 2003, at 10:00 
a.m., in the main Committee hearing room, 1100 Longworth House Office 
Building, will now be held at 9:30 a.m.
      
    All other details for the hearing remain the same. (See full 
Committee Advisory No. FC-3, dated January 30, 2003.)

                                 

    Chairman THOMAS. Good morning. First of all, I want to 
thank you, Mr. Secretary, and I want to thank the Members. I 
know there are a number of very important events that are going 
on, and Members manage their time and they prioritize, and 
Members have different needs and wants. This is an important 
Committee, and I am pleased that Members believe it so by their 
presence. You can talk a lot about what is or is not important, 
but when you spend your time, that is when you really know, and 
the Chair appreciates the Members' attendance.
    Once again, we have the Secretary of Health and Human 
Services, former Governor Tommy Thompson. We look forward to 
his remarks. I do know that the Secretary has other 
obligations, and the Chair will attempt to conclude the hearing 
by 11:30 a.m., if at all possible.
    One of the items that we will address early in this session 
is welfare, and I found it interesting that before the 1996 
reforms, the average stay on welfare lasted what I consider to 
be an incredible 13 years, and as we now know, welfare rules 
actually discouraged work.
    The changes that occurred turned the program around, 
increased work, boosted incomes, and significantly reduced 
child poverty and dramatically lowered dependency.
    Our priority now, of course, is to help more people 
successfully transition to work. The House passed legislation 
to do that last year, but it did not get through all of the 
hurdles, including the Senate. Basically our Nation's major 
welfare program has effectively been on life support since 
September 2002. That is why there is some degree of urgency in 
acting.
    In addition to that, as we heard during the State of the 
Union, the President has prioritized the improvement for 
seniors of Medicare and strengthening by adding a prescription 
drug benefit. Just as I indicated Members' presence tell their 
priorities, this administration more than doubled the amount in 
the budget for dealing with Medicare for $100 billion in the 
President's budget. That is important. It is significant, and 
it is a number that allows us to make a number of decisions 
that we made on our own last year in our own budget, but it is 
very pleasing to see that the administration agrees that is a 
number around which you can begin to build a credible program.
    One of the things that we have to remember, of course, is 
that the push to reform Medicare is not only to provide a 
better Medicare for our seniors, but because the program is 
going broke, we need to make adjustments that will bend the 
growth curves in the outer years.
    We also, as the President addressed in the State of the 
Union, need to face the challenge of addressing uninsured 
Americans. It makes no sense whatsoever two people holding the 
same job, one gets 100 percent of their health insurance paid 
for by their employer, the other has to have a first dollar 
payment after taxes to provide themselves and/or their families 
with any insurance.
    Reducing medical errors, tackling the increasing costs of 
health care in general, all of these are proposals that the 
administration has said that they want to address. It is a time 
and a need for change, and I believe with the administration 
and the Congress working together, we can finally make those 
very significant and meaningful changes.
    With that, the Chair would recognize the gentleman from New 
York, the Ranking Member, for any comments he would make.
    [The opening statement of Chairman Thomas follows:]
    Opening Statement of the Honorable Bill Thomas, Chairman, and a 
        Representative in Congress from the State of California
    Good morning. We welcome Health and Human Services Secretary Tommy 
Thompson and look forward to his remarks on the Administration's 
welfare reform and health care priorities. We note that other 
obligations by the Secretary will require us to wrap up this hearing by 
11:30 a.m.
    Before the '96 reforms, the average stays on welfare lasted an 
incredible 13 years. And welfare rules actually discouraged work.
    The 1996 welfare reforms turned the program around, and increased 
work, boosted incomes, significantly reduced child poverty and 
dramatically lowered dependency.
    Our priority now is to help more people successfully transition to 
work--the only real and permanent path out of poverty. The legislation 
the House passed in May 2002 did just that. Unfortunately, the 
Democrat-led Senate failed to pass our legislation. So the Nation's 
major welfare programs have been effectively on life support since 
September 2002. We must act soon to put this successful program on firm 
footing.
    The President has also prioritized modernizing and strengthening 
the Medicare program. It is important to note the Administration has 
put $400 billion on the table over 10 years--more than double the 
amount he provided in last year's budget.
    One principle we should apply to any Medicare proposal is whether 
it actually reduces costs over time. Absent any change in law, the 
program's actuaries predict that annual spending on Medicare will 
nearly double within 10 years. And then the sizeable baby boom 
generation retires, and the numbers of workers per beneficiary drops 
from 4:1 today to 2:1 in the year 2030. The Medicare program must be 
run more efficiently, because the alternatives of cutting benefits or 
raising taxes are unacceptable.
    We also face the challenge of addressing uninsured Americans, 
reducing medical errors and tackling the increasing costs of health 
care in this country. I look forward to learning more about the 
Administration's proposals on these key issues.
    And now, prior to hearing from you, Mr. Secretary, I would ask the 
gentleman from New York, Mr. Rangel, if he has any comments.

                                 

    Mr. RANGEL. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary. We--the Nation is indeed fortunate to have a former 
Governor who understands the importance of Federal 
responsibility and that of local and State to be heading this 
program for us.
    It is very, very difficult for us as legislators and being 
in a minority to deal with the process that is supposed to 
allow us to make intelligent decisions for our constituents. 
Let us just take the welfare bill. With all of the concern that 
we had in the last Congresses, it is my understanding that when 
a session ends, the Congress ends, and that we have new Members 
of Congress, new Members of this Committee. We haven't had 
hearings this year. We don't know why we are on such a fast 
track. If indeed the bill expires, the Senate has indicated 
that they don't intend to do anything until March. They won't 
extend the funding until September. The Majority have the 
votes, and so it is not a question who wins and who loses. It 
is just an effort just to keep us out of the process, and so 
without coming to the Committee as we thought we had some 
degree of assurances, we understand that our Committee is going 
to be bypassed. So, we won't get a chance to ask you questions, 
because we don't have a bill.
    We get to Medicare. The President campaigned on providing 
prescription drugs. It is a national issue. We know Medicare, 
and there may be an effort by the administration to try to 
destroy Medicare as we know it, but if there is none, then as 
we look at what we hear a program is without detail is that 
prescription drugs would not be provided under the Medicare 
program, but under the health maintenance organization (HMO) 
program, which means that you have to leave Medicare and join 
HMOs. My friend Ben Cardin said he did not have any HMOs in 
Maryland, and then expert Pete Stark says if you don't have an 
HMO, the administration will make something up for you to get 
your prescription drugs. Then a staffer says, but I don't get 
it. I am under 55.
    It would seem to me that if we had more hearings and more 
dialogues since health care has to be a bipartisan issue, that 
we shouldn't have to frighten our seniors with questions that 
we don't have answers, and that somehow it would be healthy for 
us to go back to our respective Governors, all who are 
complaining about the shortages of funds and deficits that they 
have and the unfunded mandates that they are getting from the 
welfare bill.
    So, what I am saying to you is that you enjoy a luxury that 
some of my Republican friends can't enjoy. You don't have to be 
partisan. You haven't been partisan. You are here because you 
have been a great Governor and you understand the complexity of 
these matters. Help us not to be bipartisan, but share with us 
answers that we need to questions.
    Some of the Members have said we should have our own 
hearings, we should bring in the Governors, we should have 
witnesses. Well, you and I know that if we do that, it is going 
to be political. If the Chair--strike the Chair. If the 
leadership--because he is merely a tool of the leadership who 
makes these important decisions. If the Speaker refuses to 
allow us to talk with you and administrators of the welfare 
program and the Medicare program, I hope that you would 
consider coming and talking with us, whether it is a formal 
hearing that we are having or not, so that we can go home 
better informed as to the direction in which the administration 
would want to go.
    If we disagree with you, that is what America is all about, 
but to bypass hearings for issues this important, or to have us 
to vote up and down on details that are not before us is 
grossly unfair. I don't think the American people want it that 
way, and I look forward, Mr. Secretary, notwithstanding what 
the Majority does, to let you know that we on the Minority side 
would welcome an opportunity to discuss these complex issues 
with you so that we don't have to make up what we think the 
administration perceives as to how we deliver health care and 
welfare care.
    Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman very much.
    The Chair would acknowledge that there are Members who do 
have activities that they must attend, notwithstanding their 
current attendance, and that written questions may very well be 
submitted. As this is something we have done in the past, I 
assume that the Secretary and the administration would be 
prompt in responding to those questions that may be submitted 
in writing by the Members. With that, Mr. Secretary, any 
written statement you have will be made a part of the record, 
and you may address us, as I say, in any way you see fit.

 STATEMENT OF THE HONORABLE TOMMY G. THOMPSON, SECRETARY, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. THOMPSON. Thank you very much, Mr. Chairman. Good 
morning to you, Congressman Rangel, Members of this Committee. 
Thank you so very much for inviting me to testify this morning.
    Mr. Chairman, I am going to thank you for your continued 
leadership on so many issues that are vitally important to the 
American people. Over the past 2 years I have had the pleasure 
of working with you and Mr. Rangel, and I want you both to know 
that I appreciate your friendship, value your passion for 
public service, as I do each and every Member on this 
Committee.
    It is very good to have this opportunity to discuss the 
President's fiscal year 2004 budget for the U.S. Department of 
Health and Human Services (HHS). In my first 2 years at the 
Department, we have made tremendous progress in our efforts to 
improve the health, the safety and the welfare of the American 
people. We continue to make extraordinary progress in providing 
health care to lower income Americans through waivers and State 
plan amendments that have been granted to States for their 
State Children's Health Insurance Program (SCHIP) and Medicaid 
programs.
    We have expanded access to health coverage for more than 
2.2 million people and have expanded the range of benefits 
offered to 6.7 million other Americans. Our progress is 
substantial, but far from being completed.
    So, this year our work continues as we propose new and 
innovative programs to meet the health and the well-being and 
the welfare needs of our fellow citizens. The President's 
budget proposal contains $539 billion for HHS, an increase of 
$36.9 billion, or 7.3 percent, which will enable the Department 
to continue to work to improve the health and safety of our 
Nation.
    This proposal will fund programs to increase the Nation's 
readiness to respond to potential bioterrorist attacks, bolster 
disease prevention efforts, strengthen the Child Support 
Enforcement Program, enhance Temporary Assistance for Needy 
Families (TANF) and foster care, and strengthen and improve 
Medicare and Medicaid.
    Mr. Chairman, I know that you share the President's and my 
commitment to strengthening and modernizing Medicare, and, I 
might add, every Member of this Committee, in order to meet the 
growing and changing health care needs of seniors and 
individuals with disabilities.
    There has been much discussion and speculation in the media 
in recent weeks about the administration's plans to provide 
drug benefits to Medicare beneficiaries. One of the biggest 
fallacies is that we are going to force all seniors to go into 
HMOs, which is not the case. The Administration's proposal to 
strengthen and improve Medicare is still being developed, and 
further details will become available in the next few weeks, 
but I can assure you that the President and I are absolutely 
dedicated to adding a prescription drug benefit to Medicare and 
enacting meaningful changes to strengthen and improve the 
program. We have dedicated $400 billion over the next decade to 
achieve this ambitious goal, and we look forward to working 
closely with this Committee to develop and pass a responsible 
and effective and far-reaching Medicare bill this year.
    Another issue of key and personal interest to me--and I 
know one of Congresswoman Johnson--is the drastic toll that 
chronic diseases take on our society. Consider the following 
facts: More than 125 million Americans are living with a 
chronic disease; 7 of every 10 deaths, more than $137 million 
every year, are caused by chronic disease. More than 108 
million American adults were either obese or overweight in 
2001, and roughly 300,000 Americans die each year due to 
weight-related illnesses.
    We do things somewhat backward in America dealing with 
health care, because our health care system waits for people to 
get sick and then spends billions of dollars to make them well. 
We want to do things differently. That is why our budget 
proposes a coordinated Department-wide effort to promote a 
healthier lifestyle by emphasizing the prevention of obesity, 
diabetes, asthma and risky youth behavior. The HMO budget also 
includes an investment of $125 million for targeted disease 
prevention, and, as I mentioned earlier, enhanced preventative 
benefits will also be an integral part of our Medicare 
recommendations.
    Mr. Chairman, reforming welfare has also been a project 
that has been close to my heart for many years. As a Governor 
in the 1990s, I worked with Congressman Shaw and many Members 
on this Committee, and I appreciate this Committee's interest 
in what we achieved in Wisconsin, as well as the opportunity to 
work with Congress in 1996 on the national welfare reform law. 
I think I speak for most Americans in thanking all of you for 
tremendous success, a success that has transformed people's 
lives for the better, by moving adults from the dependency of a 
welfare check to the independence of a paycheck. You have 
improved the prospect of countless children.
    The President's budget proposes to build on that success in 
reauthorizing TANF this year and for the next 4 years after 
that. The proposal makes improving the well-being of children 
the major purpose of welfare. Despite that over 50 percent drop 
in TANF caseloads, we will continue to advance this cause by 
continuing to provide current program funding levels for the 
TANF block grant to States, tribes and territories. Billions of 
dollars that previously went toward cash assistance can now 
continue to be focused on improving the self-sufficiency of 
parents and strengthening families.
    The President's proposal also maintains a high level of 
commitment to child care funding at $4.8 billion. We must not 
turn our back on the opportunity to build upon the most 
successful social revolution in America in the last 60 years, 
as well as the millions of families who are beginning or 
continuing to climb the career ladder thanks to welfare reform.
    Improving child well-being remains an elusive goal, if we 
do not respond to families who seek support in building strong 
foundations and healthy marriages. The President proposes to 
let States offer voluntary innovative programs and services to 
support parents in providing their children with strengthened 
foundations and healthy family relations.
    This year we are also continuing the President's effort to 
improve the lives of children who are at risk of abuse and 
neglect. The budget proposed a child welfare program option 
that States can use to improve their child welfare systems. 
This option will allow States to develop innovative ways to 
integrate and coordinate their child welfare programs with 
their foster care programs. The expectation is that States will 
not only develop interventions that may prevent inappropriate 
removal of children from their families, but they will also 
improve services when foster care placement is the appropriate 
course for that child. All participating States would be 
required to maintain existing child protections to ensure that 
the safety and the permanency and the well-being of children 
continues to be the utmost and first priority.
    Another key component to the administration's commitment to 
America's families is our Child Support Enforcement Program, 
which I am very pleased to tell you has had some very 
impressive results. In 2001, over 1.6 million paternities were 
established or officially acknowledged. In 2002, child support 
collections hit a record $20 billion, up from $17.9 billion in 
2000 and $19 billion in 2001. The President's budget will allow 
the Department to continue to build on this success.
    We will soon offer a legislative proposal to enhance and 
expand the existing automated enforcement infrastructure at the 
Federal and State level and increase support collected on 
behalf of children and families. When combined with the 
opportunities to increase child support contained in the 
President's budget proposal last year, these proposals offer an 
additional $7\1/2\ billion in increased child support payments 
to families over 10 years.
    Mr. Chairman, the budget the President has proposed for HHS 
funds a wide variety of programs with a combined single 
purpose, to improve the lives and the quality of those lives of 
the American people.
    All of our proposals for building on the successes of 
welfare reform, to protecting the Nation against bio-terrorism, 
from increasing access to health care to strengthening and 
enhancing Medicare, all these proposals are put forward with 
the goal--in the goals of ensuring a safe and healthy America. 
I know the Members of this Committee share this goal, and with 
your support we are committed, Mr. Chairman, to achieving it.
    [The prepared statement of Mr. Thompson follows:]
     Statement of the Honorable Tommy G. Thompson, Secretary, U.S. 
                Department of Health and Human Services
    Good morning Mr. Chairman, Mr. Rangel, and members of the 
committee. I am honored to be here today to present to you the 
President's FY 2004 budget for the Department of Health and Human 
Services (HHS). I am certain you will find that, viewed in its 
entirety, our budget will help improve the health and safety of our 
Nation.
    The President's FY 2004 budget request continues to support the 
needs of the American people by strengthening and improving Medicare, 
enhancing Temporary Assistance for Needy Families (TANF) and Foster 
Care; strengthening the Child Support Enforcement Program; and 
furthering the reach of the President's New Freedom Initiative.
    The $539 billion proposed by the President for HHS will enable the 
Department to continue its important work with our partners at the 
State and local levels and the newly created Department of Homeland 
Security. Working together, we will hold fast to our commitment to 
protecting our Nation and ensuring the health of all Americans. Many of 
our programs at HHS provide necessary services that contribute to the 
war on terrorism and provide us with a more secure future. In this 
area, I am particularly focused on preparedness at the local level, 
ensuring the safety of food products, and research on and development 
of vaccines and other therapies to counter potential bioterrorist 
attacks.
    Our proposal includes a $37 billion increase over the FY 2003 
budget, or about 7.3 percent. The discretionary portion of the HHS 
budget totals $65 billion in budget authority, which is an increase of 
$1.6 billion, or about 2.6 percent. HHS' mandatory outlays total $475.9 
billion in this budget proposal, an increase of $32.3 billion, or 
roughly 6.8 percent.
    Your committee will obviously be vital to achieving many of the 
Administration's most important priorities. I am grateful for the close 
partnership we have enjoyed in the past, and I look forward to working 
with you on an aggressive legislative agenda to advance the health and 
well being of millions of Americans. Today, I would like to highlight 
for you the key issues in the President's budget that fall under the 
Ways and Means Committee's jurisdiction.
Supporting the President's Disease Prevention Initiative
    One of the most important issues on which we can work together is 
disease prevention. We all have heard the disturbing news about the 
prevalence of diabetes, obesity and asthma that could be prevented 
through very simple lifestyle changes. The statistics, I am sure, are 
as alarming to you as they are to me. For example:
           LDiabetes was the sixth leading cause of death 
        listed on U.S. death certificates in 1999, representing 
        approximately 19% (450,000) of all deaths in the U.S. in people 
        aged 25 years and older.
           LIn 2000, 38.8 million Americans met the definition 
        for obesity;
           LData indicate that 26 percent of all adult women, 
        and 20.6 of all adult men are obese;
    For this reason the HHS budget, consistent with the President's 
HealthierUS effort, proposes a coordinated, Department-wide effort to 
promote a healthier lifestyle emphasizing prevention of obesity, 
diabetes, and asthma. The FY2004 budget includes a new investment of 
$100 million for targeted disease prevention, and enhanced preventive 
benefits are an integral part of our Medicare reform recommendations.
Strengthening and Improving Medicare
    Through the leadership of Chairman Thomas, the Ways and Means 
Committee has been at the forefront of efforts to strengthen and 
improve the Medicare program. As we are all aware, our Nation's 
Medicare program needs to be strengthened and improved to fill the gaps 
in current coverage. This committee has dedicated countless hours to 
increasing public understanding of the challenges confronting the 
program, and your efforts have significantly advanced the debate over 
program modernization. While we remain steadfastly committed to 
ensuring that America's seniors and individuals with disabilities can 
keep their current, traditional Medicare, the President has proposed 
numerous principles for Medicare enhancements to ensure that we are 
providing our seniors with the best possible care. The budget builds on 
those principles by dedicating $400 billion over ten years to 
strengthen and improve Medicare, including providing access to 
subsidized prescription drug coverage, better private options and 
better insurance protection through a modernized fee-for-service 
program.
Prescription Drug Coverage

    Ensuring that Medicare beneficiaries have access to needed 
prescription drugs is a top priority for the President and me. This 
budget proposes a prescription drug benefit that would be available to 
all beneficiaries, protect them against high drug expenditures, and 
would provide additional assistance to low-income beneficiaries through 
generous subsidies for low-income beneficiaries to ensure ready access 
to needed drugs. The Administration's prescription drug plan would 
offer beneficiaries a choice of plans and would support the 
continuation of the coverage that many beneficiaries currently receive 
through employer-sponsored and other private health insurance.
Medicare Choices

    Medicare+Choice was introduced to provide beneficiaries with 
options in their health coverage. Over the past year, the Department 
has made significant strides in expanding beneficiaries' 
Medicare+Choice options by approving 33 new preferred provider 
organization through a demonstration. However, due to a variety of 
factors, in many parts of the country, few new plans have entered the 
program. More needs to be done to encourage plan participation in this 
important program. This Administration believes that Medicare+Choice 
payments need to be linked to the actual cost of providing care. 
America's seniors should have access to the same kind of reliable 
health care options as other citizens. We believe that we should move 
away from administered pricing to set Medicare+Choice rates and that 
those choices should be provided through a market-based system in which 
private plans compete to provide coverage for beneficiaries. Those 
beneficiaries who select less costly options should be able to keep 
most of the savings. It is time we give our seniors the choice they 
have been promised in Medicare.
Modernized Fee-for-Service

    One of the basic tenets of our reform proposal is that seniors 
deserve the same range of health care delivery choices as federal 
employees enjoy. These choices should reflect the benefit innovations 
incorporated into private sector plans. The Administration is very 
interested in updating Medicare to reflect the insurance protections 
offered in the private sector. This system would modify and rationalize 
cost-sharing for beneficiaries who need acute care. It would also 
eliminate cost sharing for preventive benefits and provide catastrophic 
coverage to protect beneficiaries against the high costs caused by 
serious illnesses.
Medicare Appeals Reform

    Our budget also includes $129 million for the implementation of 
Medicare appeals reform. The adjudicative function currently performed 
by the Administrative Law Judges at the Social Security Administration 
would be transferred to the Centers for Medicare and Medicaid Services 
(CMS). In addition, the Administration proposes several legislative 
changes to the Medicare appeals process that would give CMS flexibility 
to reform the appeals system. These changes will enable CMS to respond 
to beneficiaries and provider appeals in an efficient and effective 
manner.
New Freedom Initiative
    Although Medicaid falls under the jurisdiction of the Energy and 
Commerce Committee, let me quickly mention several Medicaid initiatives 
that will also impact some vulnerable Medicare beneficiaries. Home care 
as an alternative to nursing homes for the elderly and disabled is a 
priority of this Administration. The New Freedom initiative represents 
part of the Administration's effort to make it easier for Americans 
with disabilities to be more fully integrated into their communities. 
Under this initiative, we are committed to promoting the use of at-home 
care as an alternative to nursing homes.
    It has been shown time and again that home care combines cost 
effective benefits with increased independence and quality of life for 
recipients. Because of this, we have proposed that the FY 2004 budget 
support a five-year demonstration called ``Money Follows the 
Individual'' Rebalancing Demonstration, in which the Federal Government 
will reimburse States for one year of Medicaid services for individuals 
who move from institutions into at-home care. After this initial year, 
States will be responsible for matching the Federal government at their 
usual share. The Administration will invest $350 million in FY 2004, 
and $1.75 billion over 5 years on this important initiative to help 
seniors and disabled Americans live in the setting that best supports 
their needs.
    In the same spirit as the ``Money Follows the Individual'' 
Rebalancing Demonstration, the Administration proposes four 
demonstration projects to support for the President's New Freedom 
Initiative. Each promotes at-home care as an alternative to 
institutionalization. The demonstrations are to provide respite 
services to caregivers of disabled adults and severely disabled 
children; to offer home and community-based services for children 
currently residing in psychiatric facilities; and to address shortages 
of community direct care workers.
    There are additional key proposals in our budget that will improve 
the lives of millions of Americans. For example, we are interested in 
working with Congress on a Medicaid Spousal Exemption and Medicare Part 
B Premiums for qualified individuals (QI's). The Medicaid Spousal 
Exemptions would give States the option to continue Medicaid 
eligibility for spouses of disabled individuals who return to work. 
Under current law, individuals with disabilities might be discouraged 
from returning to work because the income they earn could jeopardize 
their spouse's Medicaid eligibility. This proposal would extend to the 
spouse the same Medicaid coverage protection now offered to the 
disabled worker. Medicare Part B Premiums for QI's will continue 100% 
Federal Medicaid coverage of Medicare Part B Premiums for qualifying 
individuals, who are defined as Medicare beneficiaries with incomes of 
120% to 135% of poverty and minimal assets. Premium assistance will 
continue for five years.
Empowering America's Families

Reauthorization of Temporary Assistance for Needy Families (TANF) and 
the Child

 
 
 
                       Care Development Fund
 


    Building on the considerable success of welfare reform in this 
great nation of ours, the President's FY2004 budget follows the 
framework proposed in the FY2003 request which includes the 
reauthorization of TANF. The proposal includes five years of funding 
for the TANF Block Grants to States, Tribes, and Territories; Matching 
Grants to Territories; and Tribal Work Programs at current levels. In 
addition, the FY2004 budget reinstates authority for supplemental 
population grants at $319 million; Social Service Block Grant transfers 
to 10 percent; as well as funding of the $2 billion Contingency Fund 
with modified maintenance of effort and reconciliation requirements to 
make it more accessible for States.
    The central focus of the proposal strengthens work requirements 
while allowing States greater flexibility to define activities that 
will lead toward self-sufficiency. The Bonus to Reward High Performance 
States would be redesigned to provide $100 million a year for bonuses 
on employment achievement. We are proposing to eliminate the bonus to 
reduce out-of-wedlock birth. Our proposal offers a two-pronged family 
formative initiative: $100 million to fund research, demonstrations, 
and technical assistance efforts, and $100 million for matching grants, 
focused on building strong families and promoting healthy marriages. In 
addition, the Budget proposes to reauthorize state-based abstinence 
education grants for five years at $50 million annually to further 
assist with reducing the number of out-of-wedlock births, reducing the 
spread of STDs among teens, and helping teens make health life choices. 
These proposals demonstrate that this Administration is committed to 
strengthening foundations for our children and supporting programs that 
will empower persons who have not been able to work, for any number of 
reasons, to achieve self-sufficiency.
    Hand in hand with these efforts, the President's FY2004 budget also 
follows the framework established in the FY2003 budget and requests 
reauthorization of the Child Care and Developmental Block Grant Act and 
the Child Care Entitlement to assist States in meeting the critical 
child care needs of families.
Increasing Support for Children in Foster Care

    In a continuing effort to improve the lives of children who are at 
risk of abuse and neglect, this Administration is proposing a child 
welfare financing option that States can use to improve their child 
welfare service systems. This plan would allow States to choose a fixed 
allocation of funds over a five-year period rather than the current 
entitlement funding for the title IV-E Foster Care program. 
Participating States would receive their funds in the form of flexible 
grants which could be used for a wide array of child welfare-related 
purposes, such as child abuse and neglect prevention, maintenance and 
administrative payments for foster care, child welfare training, and 
family support. The flexible funding will allow States to develop 
innovative ways to ensure the safety, permanency and well-being of 
children, tailored to meet the needs of their child welfare 
populations. States which elect this option and experience emergencies 
affecting their foster care systems may access additional funding from 
the TANF contingency fund.
    The Administration is proposing a nearly $5 billion budget for 
Foster Care in FY 2004, an $89 million increase over last year's 
request. Not only will these funds support the child welfare program 
option, but they also will be used to provide payments for maintenance 
and administrative costs for more than 240,000 children in foster care 
each month, as well as payments for training and child welfare data 
systems.
    The Adoption Incentives Program has been successful in contributing 
to the substantial increase in the number of children who are adopted 
from the public foster care system in recent years. The President's 
FY4004 budget request includes reauthorization of this important 
funding. Additionally, we propose changes to the incentive system to 
target older children, who despite the overall gains in adoptions 
constitute an increasing proportion of the children waiting adoptive 
families. The President's budget request for the Adoption Incentives 
Program is $43 million.
    Another important issue we face with foster care is the transition 
for children out of these programs. Last year, nearly 20,000 children 
aged out of the foster care system. In order to assist these children, 
the President is committed to maintaining the Foster Care Independence 
Program, which provides a variety of services for youth who will likely 
remain in foster care until they turn 18 and former foster children 
between the ages of 18 and 21. The President's budget request for the 
Foster Care Independence Program is $140 million. Our budget also 
includes $60 million for an education and training voucher program for 
the approximately 20,000 youth who age out of foster care each year. 
Additionally, the Administration continues our commitment to the 
Promoting Safe and Stable Families Program, and this Budget increases 
substantially funding for the program to $505 million to assist States' 
ability to strengthen families and to promote child safety, permanency, 
and well-being. This important program also helps promote adoption and 
provides post-adoption support to families.
Child Support Enforcement

    Related to my commitment to strengthening America's families, I am 
proud to tell you that our Child Support Enforcement program has made 
some impressive gains. Child support collections hit a record $20 
billion in FY2002, and in FY2001, over 1.6 million paternities were 
established or acknowledged.
    The President's FY2004 budget will build on this success. 
Legislation will be proposed to enhance and expand the existing 
automated enforcement infrastructure at the Federal and State level and 
increase support collected on behalf of children and families. For 
example, proceeds from insurance settlements and gaming winnings will 
be subject to intercept for past due support and the process for 
freezing and seizing assets in multi-state financial institutions will 
be simplified. When combined with the opportunities to increase child 
support outlined in the President's FY2003 budget (expanded passport 
denial, offset of certain Social Security benefits and mandatory review 
and adjustment of support orders), these proposals offer an impressive 
$2.6 billion in increased child support payments to families over five 
years. The Budget also recognizes that healthy families need more than 
financial support alone and increases resources for the Access and 
Visitation Program to support and facilitate non-custodial parents' 
access to and visitation of their children.
Responsible Fatherhood and Healthy Marriages

    The President's budget also proposes $20 million for promotion and 
support of responsible fatherhood and healthy marriage. This funding 
will promote and support involved, committed, and responsible 
fatherhood and encourage the formation and stability of healthy 
marriages.
Fighting Bioterrorism
    As Americans confront the realities of terrorism and hatred around 
us, it is imperative that the Federal Government be prepared to keep 
our citizens safe and healthy. HHS' $3.6 billion bioterrorism budget 
substantially expands ongoing medical research, maintains State and 
local preparedness funding, and includes targeted investments to 
protect our food supply. The President's proposal significantly expands 
research funding needed to develop vaccines and medicines that will 
make biologic agents much less effective as weapons. HHS is committed 
to working closely with the new Department of Homeland Security to 
ensure that its pharmaceutical stockpiles include proper amounts of 
effective drugs and vaccines, and other biologics.
Faith-Based and Community Initiatives
    In support of the President's Faith-Based and Community Initiative, 
the HHS FY2004 budget supports programs that promote positive 
relationships that link faith- and community-based organizations, State 
and local governments, and Federal partners to develop a shared picture 
for substance abuse treatment and positive youth development.
    We are proposing to establish a new $200 million drug treatment 
program. For some individuals, recovery is best assured when it is 
achieved in a program that recognizes the power of spiritual resources 
in transforming lives. Under this new program, individuals with a drug 
or alcohol problem who lack the private resources for treatment will be 
given a voucher that they can redeem for drug treatment services. The 
program will give them the ability to choose among a range of effective 
treatment options, including faith-based and community-based treatment 
facilities. Another important program that helps some of our most 
vulnerable children is the Mentoring Children of Prisoners program. We 
are asking for funds to be increased to $50 million, which would in 
turn be made available to faith-based community-based, and public 
organizations for programs that provide supportive one-on-one 
relationships with caring adults to these children who are more likely 
to succumb to substance abuse, gang activity, early childbearing and 
delinquency. In addition, the budget request for the Compassionate 
Capital Fund is $100 million, the same amount requested in FY2003, and 
an increase of $70 million over the FY2002 appropriation. These funds 
would continue to be used to support the efforts of charitable 
organizations in expanding model social service programs. The Fund 
would also continue to provide technical assistance to faith- and 
community-based organizations to expand and enhance their services. 
These are just a few examples of the services that can be provided to 
those in need under this initiative.
President's Management Agenda
    I am committed to improving the management of the Department of 
Health and Human Services, and I realize that as we work to improve the 
health and well-being of every American citizen, we also need to 
improve ourselves. The FY2004 budget supports the President's 
Management Agenda and includes cost savings from consolidating 
administrative functions; organizational delayering to speed decision 
making processes; competitive sourcing; implementation of effective 
workforce planning and human capital management strategies; and 
adoption of other economies and efficiencies in administrative 
operations. We have also included savings in information technology 
(IT) which will be realized from ongoing IT consolidation efforts and 
spending reductions made possible through the streamlining or 
elimination of lower priority projects. I am also very excited about 
the IT infrastructure consolidation which should be fully implemented 
by October, 2003, that will further reduce infrastructure expenditures 
for several HHS agencies.
Improving the Health, Well-being and Safety of our Nation
    Mr. Chairman, the budget I bring before you today contains many 
different elements of a single proposal; what binds these fundamental 
elements together is the desire to improve the lives of the American 
people. All of our proposals, from building upon the successes of 
welfare reform to protecting the nation against bioterrorism; from 
increasing access to healthcare, to strengthening Medicare; all these 
proposals are put forward with the simple goal of ensuring a safe and 
healthy America. I know this is a goal we all share, and with your 
support, we are committed to achieving it.

                                 

    Chairman THOMAS. Thank you very much, Mr. Secretary. I find 
it incredible that I need to ask you a series of questions, the 
answer to which may be illuminating not only to some folks who 
may be in the room or watching these programs, but perhaps 
would be to Members as well. The questions would go something 
like this: If a senior goes to a doctor who is in private 
practice, who is not employed by the government but is in 
private practice, and is treated by that doctor, is that under 
Medicare?
    Mr. THOMPSON. Yes.
    Chairman THOMAS. If that doctor tells the senior that they 
need to go to a hospital, the hospital could be for-profit, not 
for profit, run in many different structures, but let us take 
the most extreme case, which would be a private for-profit 
hospital, is that under Medicare?
    Mr. THOMPSON. Yes, sir.
    Chairman THOMAS. If a senior purchases an insurance policy 
to assist them in what is normally called the Medicare 
benefits, and they exercise those insurance structures, is that 
under Medicare?
    Mr. THOMPSON. Yes.
    Chairman THOMAS. If they were to go to a particular health 
organization structure, call it an HMO, if you will, and 
receive medical treatment at an HMO, is that under Medicare?
    Mr. THOMPSON. Yes.
    Chairman THOMAS. Obviously the direction of my questions I 
hope at this point are clear. You can say the benefit is going 
to be private rather than under Medicare, but all that says is 
either you do not understand Medicare, or you are purposefully 
creating a distinction without a difference in terms of where 
the senior is to receive either the health care or, as we 
anticipate, prescription drugs in the new program.
    For someone to say that what the President is attempting to 
do and what this Congress--this House especially has done in 
the last two Congresses, and hopefully will do in this 
Congress, is to modernize and improve Medicare, is to provide 
seniors a better service within and under Medicare and not 
create some bifurcated system which is Medicare and not 
Medicare. Based upon the Secretary's answers which will always 
be--in any way you characterize the way in which the seniors 
interact with the health care structure, it will be under 
Medicare, and if anyone attempts to create the idea that a 
program to serve those seniors, although different in the 
current program, we certainly hope, with far more benefits and 
with prescription drugs added, is not under Medicare is doing 
it knowingly to either scare seniors or to create an argument 
which has no merit.
    This Committee looks forward to working with you in 
creating a better Medicare, delivering services in new and 
novel ways, especially continuing the emphasis that this 
Majority has placed on preventive and wellness as a structural 
part of Medicare, and finally providing prescription drugs for 
seniors. Whatever the delivery vehicle will be, it will be 
under Medicare, and I thank the Secretary for participating in 
what the Chair would have hoped would not have to be a series 
of illustrations for the Members of this Committee as to what 
we are engaged in. I appreciate that, and with that I would 
recognize the Ranking Member if he wishes to inquire.
    Mr. RANGEL. Thank you, Mr. Chairman.
    When I was a youngster in law school, they had an 
expression that if the law and the facts were not on your side, 
raise your voice. I never understood it before today, but--you 
didn't understand that, Amo? Having said that, I assume with 
your answers, Mr. Secretary----
    Chairman THOMAS. Will you let me----
    Mr. RANGEL. Of course. Take your time.
    Chairman THOMAS. The problem is the gentleman assumed that 
I was raising my voice. Those who know me know that that was 
really pretty low.
    Mr. RANGEL. That may be a part of the problem, Mr. 
Chairman. Having said that, you didn't want your answers to be 
misinterpreted that there is no difference between HMOs and 
Medicare, did you, Mr. Secretary?
    Mr. THOMPSON. I am sorry, Mr. Congressman. I am sorry. I 
didn't hear that.
    Mr. RANGEL. You did not want us to misunderstand your 
answers to the Chair in having us to believe that there is no 
difference between receiving services for Medicare and 
receiving services from an HMO, would you? There is a 
difference, isn't there?
    Mr. THOMPSON. Well, Medicare includes all of the services, 
Congressman, as you well know.
    Mr. RANGEL. Well, suppose we have a hypothetical here, and 
someone wanted prescription drugs, and we are allowed to 
believe that you can only get it from an HMO, and those that 
were--did not want to join an HMO, they would not get 
prescription drugs under that hypothetical. I don't know the 
details, because it hasn't been shared with the Committee.
    Mr. THOMPSON. Under a hypothetical, the person was in 
Medicare and was not going to get drugs unless they were in an 
HMO; under a hypothetical, your question would be correct. My 
answer would be yes, but the hypothetical is not what the 
President is advocating, Congressman.
    Mr. RANGEL. Well, that is good. That would mean that 
someone on Medicare now under the President's program would be 
able to receive prescription drugs without ever having to leave 
Medicare and to join an HMO, since an HMO, would not be----
    Mr. THOMPSON. Since prescription drugs are not offered 
under Medicare yet, until Congress acts and the President signs 
it, right now the only way you get prescription drug coverage 
is either by another insurance policy or an employer or some 
other way that----
    Mr. RANGEL. No. I am talking about the details of a 
proposal which I am asking you to share with us, and that is 
that if someone was enrolled in Medicare as we know it, and the 
Chair would have me to believe that HMO is just an extension of 
Medicare--I don't want to get involved in that. I want to know 
how to explain to my folks back home that they can stay where 
they are in this broken down but well-respected Medicare system 
and not have to go into these HMOs that we never know from one 
night to the next whether they are going to leave town and 
insult the old folks; that they can stay there, and that we are 
looking for a proposal that would allow them to enjoy the 
benefits of a prescription drug program.
    Mr. THOMPSON. Congressman, we are still working on the 
Medicare proposal in the administration.
    Mr. RANGEL. Mr. Secretary, we don't have hearings here. We 
have to take advantage of your presence here. They go in the 
back room. They come out with these things. Please share with 
us. You have had to think about this.
    Mr. THOMPSON. I can assure you, Congressman, that the 
President is not going to force seniors into HMOs in order to 
get prescription drugs, but the final decisions dealing with 
prescription drugs have not been completed yet. We are still 
working on it, Congressman. I am sorry. We haven't finished it, 
but we are working on it. As soon as it is finished, I will be 
more than happy to come up, sit down with you and discuss it 
with you in full detail, sir.
    Mr. RANGEL. Okay. Now, when it comes to the so-called 
welfare reform that you played such a leadership role in, you 
do note that we have received real concerns from the Governors, 
your former colleagues, in terms of the changes in the 
economies, the increase in unemployment, the lack of being able 
to get the same waivers that you were able to use effectively 
to improve the quality of delivery of service. We would like to 
hear from them as Members of Congress. We won't be able to do 
this. We won't be able to ask them what do they think about the 
administration's proposal. Members of Congress that just got 
here haven't the slightest clue as to how they can improve the 
quality of their questions so they can go back home. We have 
new Members on this Committee.
    Would you not agree that the best way for us to understand 
and support your program would be for this Congress to have 
hearings on the President's proposal?
    Mr. THOMPSON. Congressman, I do not want to get involved in 
the internal operations of the Committee or of the Congress. I 
can assure you that I will be more than happy to come up and 
discuss it with you and other Members at any time that you so 
desire. I can assure you that the President and I want to pass 
a TANF proposal as soon as possible, and we want to work with 
you and try and make sure we get the best bill possible.
    Mr. RANGEL. Well, Mr. Chairman, I hope you don't consider 
it political, but I am taking advantage of the Secretary's 
offer, and I hope you allow us to have this room so that we can 
have a meeting with witnesses, and I hope you will cooperate so 
that----
    Mr. SHAW [presiding]. I was going to say, Mr. Rangel, you 
have the soft-spoken Chairman now.
    Mr. RANGEL. Well, I am glad to see that you are back and 
that you are fully recuperated. You look better than ever, and 
we welcome you back to the Congress.
    Mr. SHAW. Thank you. I feel good.
    Mr. RANGEL. Having said that, I was announcing that we 
intend to ask the Chair for the use of this room or any other 
room so that we could bring witnesses in, and hope we can 
receive the cooperation of the Chair in bringing in witnesses 
so that we can better understand what the administration 
proposal is, and also to receive some comment from the 
Governors as to how this could be effective, and for them to 
provide services to the poor.
    Mr. SHAW. Well, I am sure Chairman Thomas will have 
hearings on the proposals, but I am sure you can----
    Mr. RANGEL. No. The problem, Mr. Chairman, is that it is my 
understanding from the leadership that we will not have 
hearings on the welfare proposal.
    Mr. SHAW. Oh, the welfare. I thought you were talking about 
Medicare. I beg your pardon. No. It is my thought that the bill 
that is going to go to the floor is the exact same bill that 
came out of this Committee last year. That is my----
    Mr. RANGEL. I am saying that we do have--well, I don't know 
whether you were listening, but I am saying that this is a new 
Congress, we have new Members on this Committee and in the 
House, and I just thought that it would make a lot of 
legislative sense that we have hearings on that.
    Since the Secretary has agreed to cooperate no matter what 
restraints we have, I want to thank you for providing to us at 
least some window of opportunity to better understand the 
legislation. Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Secretary, it is good to see you back up here 
on the Hill, and I might add that if it were not for your 
example in Wisconsin with welfare reform, which much of the 
Federal welfare reform is patterned after, I doubt that we 
would have been able to sell the successes that we have sold.
    Just one other caveat I will throw in here is that the real 
heroes of welfare reform particularly are the single moms. We 
had faith in them, and they stepped up to the plate, and they 
have done--they are heroes in their own right and role models 
now for their kids.
    I would like to--Mr. Secretary, I got real close and 
personal with a feared disease in this country, being cancer, 
and in doing it, I was looking at some statistics that Amo 
Houghton passed along to me. Lung cancer is the leading cause 
of death of all of the cancers, yet we are only spending--we as 
a nation, not just as a government, are spending less on cancer 
research--lung cancer research than the next four forms of 
cancer combined. That is something we need to take a close look 
at, and I would hope that the cutting edge--your wonderful 
people out at the National Institute of Health (NIH), I hope 
that we can try to balance that playing field somewhat. It is 
not just a disease for smokers. It is for former smokers as 
well as nonsmokers. So, it is necessary that we attack this 
problem.
    I was fortunate, early diagnosis, but mine could have gone 
unnoticed if it weren't for a cold or persistent cold I was 
having that caused me to have a chest X-ray that I normally 
wouldn't have had, and whereas my prognosis is good, still you 
have got the frightening thought of lung cancer as being the 
most deadly of all forms of cancer.
    Mr. THOMPSON. Mr. Chairman, Congressman Shaw, first off I 
am delighted to have you back. I am so happy that they caught 
your cancer very early and that the operation was a success. I 
know I called you immediately after it, and I am so happy that 
you are back.
    Mr. SHAW. I appreciated that call, too.
    Mr. THOMPSON. You are a friend, and you were----
    Mr. SHAW. Charlie called me, too.
    Mr. THOMPSON. Well, he is a good man, too.
    I also want to thank you for your leadership on the welfare 
proposal, the TANF proposal, because I worked very closely with 
you, and it wouldn't have happened without you, and I thank you 
for your leadership. Your comment about the single mom is 
absolutely correct.
    In regards to lung cancer and all the cancers, it is an 
insidious disease. It has been around since time immemorial, 
and we are making progress. We have a great cancer institute 
director, Dr. Andy Von Eschenbach, who is just doing a 
wonderful job, and we are looking at the budgets and finding 
ways in which we can get more money into cancer research all 
the time, because this is one thing that the President and I, 
you, and most all the Members on this Committee certainly are 
concerned about. I am certainly hopeful that we are going to 
find that breakthrough.
    We are getting closer each time. New research is done. 
Gleevec this past year was a wonderful breakthrough drug which 
targets certain cancer cells and allows the good cells to 
continue. We are making that kind of progress, and hopefully we 
will be able to find a cure for all the cancers, lung cancer 
specifically, but all the others as well. All of us on this 
Committee and all of us in this room have certain loved ones 
that have been very close to us that have suffered cancers. It 
is a terrible disease, and we are going to do everything we 
possibly can and everything at my Department to do everything 
we can to find a cure.
    Mr. SHAW. We certainly appreciate those comments, and you 
certainly--NIH and Andy out there is doing a wonderful job.
    Mr. THOMPSON. Doing a great job.
    Mr. SHAW. I thank you for the choice to lead us in these 
efforts. Mrs. Johnson.
    Mrs. JOHNSON OF CONNECTICUT. Thank you very much, Mr. 
Chairman. There are a couple things that I do want to have a 
chance to say, but first I want to go through a brief series of 
questions parallel to the Chairman's. Mr. Secretary, under the 
law, is Medicare allowed to cover preventive care?
    Mr. THOMPSON. Some preventive care, not enough, 
Congresswoman.
    Mrs. JOHNSON OF CONNECTICUT. Only those specific things 
where we have changed the law, like mammograms----
    Mr. THOMPSON. Those are the only things that you have 
specifically done, and this Committee has taken a leadership 
role, and you specifically, and I thank you.
    Mrs. JOHNSON OF CONNECTICUT. Annual physicals, can Medicare 
provide annual physicals?
    Mr. THOMPSON. No. In very limited cases dealing with some 
cancers but very little. Not----
    Mrs. JOHNSON OF CONNECTICUT. Under the law----
    Mr. THOMPSON. The law should be changed. If I may add, any 
time somebody signs up for Medicare, there should be a physical 
examination. It should be mandatory, and it should be paid for, 
and we would be able to stop a lot of diseases.
    Mrs. JOHNSON OF CONNECTICUT. Correct. Does Medicare cover 
chronic illness, any management of chronic illness? Does 
Medicare do anything to----
    Mr. THOMPSON. Only the ones we set up demonstration plans 
for.
    Mrs. JOHNSON OF CONNECTICUT. Exactly. So, Medicare as we 
know it is inadequate, and I do not want to be part of 
delivering to the seniors of America Medicare as we know it. 
Medicare as we know it doesn't cover prescription drugs. 
Medicare as we know it doesn't cover preventive care. Medicare 
as we know it doesn't do anything to help the millions of 
seniors suffering with chronic illnesses. So, just let the 
record note, I for one do not want to come out of the end of 
this long legislative process with $400 billion in the budget 
with Medicare as we know it.
    Now, let me say one other thing. We have never had come 
before this Committee, never under any President, Republican or 
Democrat, what you have brought to us. For the first time you 
have brought to us a budget that provides $28 billion to 
encourage people to get long-term care insurance, plus $4 
billion to help people who are caring for elderly in their home 
with the costs of providing long-term care for family Members.
    Mr. Pomeroy and I have been working on this for 8 years at 
least. We have talked about it. We have had bills. The Chairman 
helped us with getting there. Mr. Hayworth helped us with 
getting a small provision in recently.
    We have got to think about long-term care costs, because 
the taxpayers can't support it through Medicaid when the baby 
boomers retire, and you are looking now at pushing forward an 
initiative that is going to have long-term budget implications 
that will be favorable to young people working, but also will 
provide far better care for our seniors as they age and need 
long-term care support, both in home and out of home.
    For the first time you are bringing us a budget with $87 
billion to begin the problem--attacking the problem of covering 
the uninsured, that is extremely important; $84 million for 
patient safety in your budget; $10 million to deal with the 
issue of developing interoperable technology. This is the 
future, and your budget has it in a very specific sense. I just 
want to thank you for that, and I hope at some other time we 
will have a chance before my Subcommittee to give you a chance 
to go into detail about your demonstrations, because they are 
bigger of heart and mind than any demonstrations that any 
Administration has ever proposed.
    They even want three States to take on the responsibility 
of providing universal care. We haven't read about them. We 
don't know about them. They were in the paper, but Congress is 
way behind the wheel of what is happening out there already 
between government and the private sector.
    Last, let me say that there are two counts in which we have 
to really think carefully--far more carefully than we have in 
the past as we move forward in prescription drugs. One is we 
have to do a better job of integrating care for our seniors, 
and I see the yellow light, so I am going to go to the other. 
The other thing we have to do is think about the fragility of 
our health care delivery system now, and on this I disagree 
with many on the other side of the aisle.
    There is a wonderful article in the New England Journal 
called ``The Homeostasis of Our Current System.'' It has 
received so much change, so many regulations, so many cuts and 
reimbursements, that it is far more fragile, and, frankly, for 
us not to pass a fix on the doctors' reimbursements this month 
is in my estimation a dereliction of duty. For us to not notice 
that our hospitals are being absolutely attacked by increases 
in costs, malpractice premiums, blood costs, nursing crisis 
costs, and that our data won't show any of that for 2 years is 
also a very serious problem.
    So, I just want the record to know that we should be doing 
a payer package now for at least 6 months, and that part of the 
$400 billion is going to have to go to hopefully a 3-year 
package of payments that will stabilize the system.
    My time is out. You don't get to answer. Sorry about that. 
I did want the Medicare as we know it issue and the big money 
in the budget to be a part of this hearing. Thank you.
    Mr. THOMPSON. Can I make a 30-second reply?
    Mr. SHAW. You certainly can.
    Mr. THOMPSON. Thank you.
    Thank you for your passion. Thank you for your direction. 
We are absolutely committed with you to do things on disease 
management and prevention of health. If you just look at the 
figures, $155 billion a year in tobacco-related illness, 
400,000 Americans die; $117 billion a year on obesity-related 
illness, 300,000 Americans die; $100 billion a year on 
diabetes, 17 million Americans have it, 16 million are pre-
diabetic, and 200,000 die each year, all three of those total 
much more than the total Medicare package. We are trying to do 
5 to 10 demonstration programs throughout America on disease 
management. We will have more bang for the buck, do more for 
quality care for Americans and improve the quality of health 
for all Americans. I thank you so very much for your 
leadership. Let us do it together.
    Mr. SHAW. Mr. Cardin.
    Mr. CARDIN. Mr. Chairman, if I could just make a unanimous 
consent request to put my questions in the record for Secretary 
Thompson in the interest of time. If it could be responded to, 
and we will be able to move on with the hearing.
    Mr. SHAW. Without objection. Mr. Stark.
    Mr. STARK. Thank you, Mr. Chairman. I would just like to 
remind the Committee that in 1995, every Republican on this 
Committee voted against adding preventive benefits to Medicare, 
and they have had now 7 years to correct the inadequacies, and 
we have had no suggestions from the Republican-controlled 
Committee to correct them. I certainly look forward to the day 
when they will do that.
    Mr. Secretary, welcome back. I want to talk about the 
budget that you--and your message in your prepared statement. I 
am afraid that your prepared statement, in addition to being 
vetted by Mr. Daniels at the Office of Management and Budget, 
was prepared by Reverend Swaggart and Reverend Robertson. It is 
interesting that you devoted 89 words to a drug benefit and a 
full page, or almost four times as much, to a faith-based 
voucher for people to go to Alcoholics Anonymous (AA). Now, as 
I recall, the President didn't have to pay a nickel when he 
went to AA, and I think that most of it is still free. Why we 
should give people a voucher for that when we can't afford a 
drug benefit escapes me.
    We have had a--you did a wonderful job in our home State, 
in Wisconsin, on welfare reform, and the administration kind of 
finished it up. In this last go-round they added the Kohlers 
and the Bumlers and the Bradleys with a trillion dollar tax 
cut. The last time I looked in Wisconsin, those families didn't 
need any welfare, but they did get it. By giving them that, you 
took out, or your Administration unfortunately took out, any 
money left for a drug care benefit for the average citizen. You 
cannot, we cannot, afford to provide a drug benefit with $400 
billion. The one that was previously leaked by the 
administration to the press would have paid less than 20 
percent of the drug benefit of anybody who spent up to 
approximately $7,000 in drugs, and less any premium that might 
be charged. So, it is inadequate.
    You have offered a discount card twice. You ought to get 
new lawyers, by the way. We are going to whip you the third 
time, Mr. Secretary, why you keep bringing that dead cat back 
here to give people a discount card. They get a better one from 
Reader's Digest and AT&T. Go away with that. It is a loser. 
Admittedly it maybe will make the seniors think they are 
getting something, but the seniors know better.
    The drug benefit that we need is an entitlement, and let me 
ask Mr. Rangel's question somewhat differently. I am in part A 
and part B as an entitlement in Medicare today. Can you 
guarantee us that any drug benefit will be available through 
the direct entitlement part A and part B as I have it today to 
all Members in part A and part B? That is 85 percent of the 
current beneficiaries.
    Mr. THOMPSON. All I can tell you, Congressman, is that the 
proposal is still being worked on, and the details have not----
    Mr. STARK. What we are scared about is that those of us in 
traditional Medicare, which the seniors understand--85 percent 
of the seniors are in it--will have to join a private plan to 
get a drug benefit. Is that your understanding?
    Mr. THOMPSON. Congressman, I have to repeat myself. Those 
proposals have not been worked out. There are several proposals 
on the board right now.
    Mr. STARK. So, far what we have heard, Mr. Secretary--and 
stuff like that is hard to keep--that is, the plan is to put 
seniors into a private proposal which would no longer be an 
entitlement and would end up as a voucher. That is where we 
were in 1964. The private plans have left us. That is the fear 
that is out there.
    I am not--you guys read the polls, the same polls I do. I 
hope that you can come back with a drug benefit, even if it is 
only $400 billion, and make sure--even if it is only $400 
billion, and you can't spend all that $400 billion just on 
drugs, but let us say it is, that is an entitlement that would 
be available on the same terms to all the people in the current 
part A and part B. You will go a long way to getting support, 
and we look forward to working together on that kind of an 
entitlement. We could argue about how much money then, but let 
us do that. I look forward to hearing from you as soon as you 
have formulated this plan. Thank you.
    Mr. THOMPSON. Congressman, I will be more than happy to sit 
down with you as soon as a plan is done and come up in your 
office and discuss it with you.
    Mr. STARK. I will come to your office.
    Mr. THOMPSON. Thank you. I appreciate that.
    Mr. STARK. We will have wall-eyed pike.
    Mr. THOMPSON. All right. Thank you, sir.
    Mr. SHAW. Mr. Houghton.
    Mr. HOUGHTON. Thank you, Mr. Chairman.
    Mr. Secretary, as always, it is good to have you here. 
Thank you for your presence.
    I have just got a couple of comments. One, to pick up on 
Mr. Shaw's comment about cancer research, the issue is that 
there is a lot of money being spent for cancer research. I 
don't know whether it is enough or not, but the proportions, it 
seems to me, are way off because there is a tremendous amount 
going into prostate and breast and colon cancer, but the 
biggest cancer killer of all is lung cancer, and I just think 
it is--the redistribution of that research money is important. 
So, that is number one.
    The other thing really----
    Mr. THOMPSON. Congressman, the only rejoinder I have got to 
that is the institute directors pretty much direct--well, 
pretty much, they do direct how the research money is going to 
go out, and I never get involved in it whatsoever. I certainly 
will carry your message to Andy Von Eschenbach, yours and 
Congressman Shaw's, and discuss it with him, but he will have 
to make the final decision, Congressman.
    Mr. HOUGHTON. I understand that, and I know you can't 
direct everybody's program under you, but I just have one final 
word, that for years and years and years there has been a 
disproportion here, and it just seems to me that you put your 
money where the big problem is. Maybe we will have a chance to 
talk about that a little later.
    The other thing I wanted to ask about is the Medicaid 
reform. New York State has a model called the SCHIP program. 
Nearly 500,000 children are involved, and the cost is a billion 
dollars, but the allotment for the State is about a quarter of 
that, and the rest is covered by redistributed funds.
    Could you help me a little bit on this, because obviously 
the States' budgets are under tremendous scrutiny and 
tremendous pressure. What is going to happen as far as the 
Medicaid program?
    Mr. THOMPSON. The Medicaid program? First, cancer research, 
we are putting in an additional--in this budget $204 million, a 
4-percent increase in the overall cancer research, and there 
are other moneys going into it, Congressman.
    In regards to Medicaid, the Medicaid proposal is going to 
still guarantee the mandatory populations. Nothing is going to 
happen. States are going to have the opportunity on a voluntary 
basis to be able to get, front-loaded, approximately $3.25 
billion the first year and $12.7 billion over 7 years if they 
go into a plan in which they will voluntarily redesign the non-
mandatory populations. That is about one-third of the 
populations and two-thirds of the options that consist of about 
two-thirds of the Medicaid budgets.
    We are also putting in a provision, Congressman, that will 
reduce the amount of money that States have to pay in order to 
get the matching share from the Federal Government. It is 
called the State match versus the Federal match, and under the 
current laws in order to get the Federal match, there are three 
things that go into the component. The first is increased 
population, the second one is utilization, and the third one is 
the inflationary costs of medical costs in a particular State.
    We are recommending in the budget, in the Medicaid 
proposal, that two of those things do not go into the equation 
anymore, one, the population increases, and the utilization, 
only the inflationary index of the medical costs, which means 
there will be less money from the State going in to get the 
Federal match. We are also allowing complete flexibility for 
States, if they so desire, to go into the Medicaid proposal on 
the optional population as well as the optional add-ons, which 
make up about two-thirds of their budgets. So, it should be a 
very good deal for the particular States that want to do this.
    Mr. HOUGHTON. Thank you very much.
    Mr. SHAW. Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman. Mr. Secretary, I want 
to get back to Mr. Stark's line of questioning, because you 
could have answered him more affirmatively on his question 
about whether the prescription drug benefit contemplated by the 
administration would be an entitlement just as he is entitled 
to part A Medicare, part B Medicare.
    Part B Medicare is an entitlement, but does every senior 
have to take advantage of part B Medicare?
    Mr. THOMPSON. Not every senior, no.
    Mr. MCCRERY. That is correct. It is voluntary, isn't it? 
part B is a voluntary entitlement. You don't have to sign up 
for part B.
    Mr. THOMPSON. That is true.
    Mr. MCCRERY. If you do sign up for part B, you are entitled 
to do that, and you pay a premium approaching $60 a month now.
    Mr. THOMPSON. That is correct.
    Mr. MCCRERY. Isn't it contemplated by the administration 
that the drug benefit will be voluntary, and if a senior 
chooses this entitlement, this voluntary program, he will have 
to pay some sort of premium? Isn't that contemplated by the 
administration's proposal?
    Mr. THOMPSON. There will have to be a premium paid, but in 
regards to the compensation of the drug benefit, it has not 
been fully decided yet, Congressman.
    Mr. MCCRERY. It will be an entitlement, will it not.
    Mr. THOMPSON. That it will.
    Mr. MCCRERY. It will be a voluntary entitlement, won't it.
    Mr. THOMPSON. Yes.
    Mr. MCCRERY. Just like the part B that Congressman Stark 
says he likes so much. So, I think Mr. Stark made an excellent 
demonstration of how the drug benefit contemplated by the 
administration will, in fact, be an entitlement under Medicare, 
just like part B.
    Now, speaking of Medicare and the long-term costs of 
Medicare, we know--or at least we suspect--the analysts tell us 
that by 2016 or so, the payroll tax revenues for Medicare won't 
be adequate to pay Medicare part A expenses; is that correct?
    Mr. THOMPSON. That is correct.
    Mr. MCCRERY. We also know that long term we have a fairly 
substantial unfunded entitlement under Medicare; is that 
correct?
    Mr. THOMPSON. That is correct, Congressman.
    Mr. MCCRERY. Mr. Secretary----
    Mr. THOMPSON. Everybody knows that.
    Mr. MCCRERY. Mr. Secretary, how will your Medicare 
modernization proposal improve that long-term financial 
outlook?
    Mr. THOMPSON. Well, since we are still working on the 
proposal, it is hard to quantify exactly what the impact will 
be on the long-term survivability and the fundability of the 
Medicare proposal.
    Mr. THOMPSON. We are expecting that it will improve the 
overall survivability of Medicare and make sure that it is 
there and put it on a better footing.
    Mr. MCCRERY. Well, I appreciate your dedication to doing 
that. I am anxious to see the details of how exactly your 
proposal will in fact improve that long-time financial outlook.
    Mr. THOMPSON. You are going to be able to improve it, but 
you are still never going to be able to make it financially 
solvent, Congressman, by adding a benefit, whether it be 
prescription drugs, stopgap loss or anything else. You can make 
improvements, but you will not close the gap in the future. If 
that is what you are asking me, it is impossible at this 
particular point in time without making some real, further, 
dramatic decisions.
    Mr. MCCRERY. Well, and those are the kinds of decisions 
that we need to start talking about. Mr. Stark yesterday 
provided me with some information, for example, on how much we 
would need to raise the payroll tax to close that gap. While I 
certainly don't want to do that, we have just got to start 
facing the fact that my generation is going to reach retirement 
age and we are going to be drawing down a huge sum of money 
from the Foreign Sales Corporation. of this country and 
Medicare and Medicaid and Social Security and these other 
programs; and, frankly, we are not so far talking in real blunt 
terms about what to do to fix it. So, I am hopeful that your 
proposal will go a long way toward fixing that and then we can 
add some other changes in the next few years to close the gap.
    Mr. THOMPSON. We have got to start someplace, and that is 
what the President wants to do. He wants to make some 
improvements to strengthen Medicare and the prescription drugs 
and the stopgap loss.
    Mr. MCCRERY. Well, I look forward to those proposals that 
will do that.
    On welfare, just very quickly, last year we had 13 
Subcommittee hearings on welfare reform. We had three full 
Committee hearings. One hearing had 47 witnesses, Mr. 
Secretary. We have had extensive hearings on welfare reform. We 
produced a bill last year. It is unfortunate the Senate 
couldn't follow suit and produce a bill. My question to you is, 
very quickly, has the administration changed its 
recommendations for welfare reform from last year to this year?
    Mr. THOMPSON. No, it has not, Congressman.
    Mr. MCCRERY. Thank you.
    Mr. SHAW. Thank you. Mr. Matsui.
    Mr. MATSUI. Thank you very much, Mr. Chairman.
    Thank you for being here, Mr. Secretary. I am trying to 
understand what I thought was some discrepancy between your 
answer to Mr. Rangel and then your answer to Mr. Stark, and 
maybe it is my misunderstanding rather than your 
misunderstanding. I have read in the newspapers, and these were 
only newspaper reports, that whatever prescription drug benefit 
the administration intends to give will be based upon the 
beneficiary moving from the traditional Medicare part A and B 
system to a new system, Medicare+Choice, or under some kind of 
HMO structure. Now, you have given Mr. Rangel the answer that, 
no, that is not so or that we are still working on it.
    Mr. THOMPSON. We are still working on it. The--but let me 
go on, Congressman. There is a lot of misinformation out there 
that the President and the administration proposal is going to 
force seniors into HMOs to get prescription drug coverage. I 
can assure you that is not the case.
    Mr. MATSUI. Okay. Let me just follow up then and maybe, 
given what you just said, I may not be able to get an answer 
from you. In your response to Mr. Stark--let me put it this 
way. Would a person have to give up the traditional entitlement 
Medicare benefits guaranteed to 36 million senior citizens if 
that individual wanted to get the prescription drug benefit 
under the new approach that whatever the administration is 
taking----
    Mr. THOMPSON. Congressman, I wish I could answer you, but 
the truth of the matter is the decision has not been made.
    Mr. MATSUI. So, it is possible then--and help me. It is 
possible then the newspaper reports are, in fact, correct, that 
maybe a senior would have to leave Medicare and perhaps go into 
an HMO or at least a non-entitlement type coverage in order to 
get prescription benefits. I am just putting it a different 
way. You could say it is possible or you can say no.
    Mr. THOMPSON. I have to say no, because the proposals are 
still being worked on, Congressman.
    Mr. MATSUI. Well, I don't know what you mean. If the 
proposal is still being worked out, I guess you could say yes.
    Mr. THOMPSON. No, I could say no; and that is what I am 
saying is no.
    Mr. MATSUI. No, no. You could say yes or no, because you 
are basically telling me at this time you can't tell me.
    Mr. THOMPSON. I can't tell you. I cannot tell you the final 
decisions at this point in time because they have not been 
made, Congressman.
    Mr. MATSUI. Thank you. So, then the articles that were 
written by these journalists, New York Times and Washington 
Post, could be accurate, because you have said there is 
misinformation out there. With respect to the basic question of 
whether or not that individual would have to leave Medicare, 
the traditional Medicare that 36 million seniors at this moment 
are receiving----
    Mr. THOMPSON. The article, Congressman, that said that all 
seniors would have to join an HMO to get prescription drug 
coverage is wrong.
    Mr. MATSUI. I understand that you answered Mr. Rangel's 
question in that way. That is not the question I asked.
    Mr. THOMPSON. Well, that is the question I have answered, 
sir.
    Mr. MATSUI. Well, then you are being non-responsive to me.
    Mr. THOMPSON. Well, I am trying to be responsive. I told 
you that we did not have an answer yet, and I will come back 
and talk to you as soon as we have a decision.
    Mr. MATSUI. Mr. Secretary, I am not trying to--this isn't 
Perry Mason. All I want to do is try to get some of the facts 
out of you, if I possibly can. If you are basically saying it 
is possible, it may not be possible, well, then I have to 
suggest then that perhaps the New York Times and the Washington 
Post stories may be correct. If you are saying--but you gave me 
the impression in your response to Mr. Rangel that, no, that 
those stories were not correct with respect to that basic 
issue. All I want to know is what it is. If you don't know, you 
don't know.
    Mr. THOMPSON. Congressman, the articles that were printed 
that said that all seniors would have to join an HMO to get 
prescription drug coverage is not correct. We have a proposal 
on Medicare. We are still working on it. We are working very 
hard on it; and, hopefully, we will have a proposal that we can 
give to you relatively soon.
    Mr. MATSUI. If I could just say that--and you know this 
better than I do, Mr. Secretary, because you have been a 
Governor that has worked on a lot of these issues that people 
need. Nineteen-sixty-four, when Medicare was first established, 
the reason it was established is because seniors just couldn't 
get the kind of coverage that people in the work force could 
get through either their employer or through private insurance 
because, obviously, you had a situation of adverse selection. 
You had a situation where seniors were more chronically ill 
than people in their thirties and forties. Unless you have 
community rating--I don't suspect the administration plans to 
move to a community rating.
    I would just hope--I would just hope that we go back and 
understand the fundamental reason why Medicare had to be put in 
place for senior citizens in the first place, because the worst 
thing in the world--and I know my time has just run out--would 
be to set up a private insurance program for senior citizens 
and find out that, through adverse selection and otherwise, 
that many would be really priced out of the market. That is a 
real danger, and I think that is the reason some of us are 
concerned about this.
    It isn't to try to put you on the spot or ask you questions 
that are difficult. It is really to try to find an answer to 
make sure that all seniors are going to be adequately covered 
in the real tough years.
    Mr. THOMPSON. Congressman, I appreciate that line of 
questioning. I appreciate your concern, and I wish that I could 
answer it directly. Until the decisions are made I cannot, and 
I am sorry about that.
    Mr. SHAW. The time of the gentleman has expired.
    Mr. Secretary, I would assume from the answers that you are 
able to give us as a little bit of a preview of what the 
President's plan might entitle, might involve, include, that it 
would be an entitlement under Medicare, is that correct?
    Mr. THOMPSON. That is correct, Congressman.
    Mr. SHAW. Thank you. Mr. English.
    Mr. ENGLISH. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate your testimony; and I know one 
of the issues that has engaged you in the past is the problem 
of the nursing shortage which is having a huge impact in a lot 
of places, not just like northwestern Pennsylvania but all over 
the country, particularly in rural areas. Do you see that this 
nursing shortage and its adverse effect on patient access to 
health care is a continuing trend? If you do, what do you see 
as some of the solutions to stop this future nursing shortage? 
If you would, I would like you to, in the process, comment on 
the need for funding education for advanced practice nursing.
    Mr. THOMPSON. Well, there is no question that the Nation 
continues to face a nursing shortage. We are putting in and 
this budget includes a total of $100 million for the Health 
Resources and Services Administration nurse education program 
in order to help support those individuals going to nursing.
    The good point, the bright spot, Congressman, is that we 
are seeing an increase in the enrollment in nursing schools 
across America this year, and the applications for next year 
are increasing as well. That is a positive sign. We need to 
continue to support scholarship programs for nurses. We need to 
continue to put out information to the high schools and 
colleges that nursing is a profession that has a great 
potential and is a great profession. We are doing that, and we 
are encouraging more along those lines.
    The last part of your question I did not hear.
    Mr. ENGLISH. Specifically having to do with funding under 
specific programs for advanced practice nurses. I might add I 
notice----
    Mr. THOMPSON. The Nurse Reinvestment Act that was passed on 
a bipartisan basis that was signed into law by the President 
last year definitely appropriated money for that, and we are 
doing that, Congressman.
    Mr. ENGLISH. Very good. My hope is that there will be an 
opportunity through this process to provide greater funding 
than the administration had proposed under a couple of 
programs, including the title VIII Advanced Education Nursing 
Program.
    On another point, I am delighted with the administration's 
continued effort to push for reauthorization of TANF. You may 
be familiar with the issue of full check sanction of welfare 
recipients who have refused to meet TANF work requirements. I 
think this is a critical reform, and my understanding is that 
full check sanction is going to be included in the bill that is 
likely to be considered in this Committee. Does the 
administration support the inclusion of full check sanction as 
one of the provisions of this bill?
    Mr. THOMPSON. It has certainly not taken a position on it 
totally. We certainly support the concept.
    Mr. ENGLISH. Well, I thank you.
    Finally, I wonder if you would comment for a couple of 
minutes on your view of the importance of funding for child 
care. I know that the administration in the past has taken a 
strong position in support of funding child care programs as a 
component of welfare reform and as a Governor I realize that 
was certainly your position. As we move toward reauthorizing 
TANF, I wonder if you would comment on where child care funding 
figures into the priorities of this process.
    Mr. THOMPSON. Well, the administration's proposal had a 
total of $4.8 billion set aside for child care. This Committee 
and the Congress added an additional mandatory increase of $1 
billion over 5 years, which is $200 million each year. The 
Congress also appropriated--Congress also authorized an 
additional $1 billion on top of that discretionary over 5 
years. So, actually, the $4.8 billion in the proposal being 
introduced and being discussed in the Congress is actually $6.8 
billion, an increase of $2 billion over what the President had 
requested.
    Mr. ENGLISH. That is most reassuring; and, Mr. Secretary, I 
hope for the opportunity to work with you to make sure that 
those funds are squared away as we move forward and finalize 
TANF reauthorizations. I thank you for your efforts. We deeply 
appreciate your expertise, dating from your service as 
Governor; and I thank you.
    Mr. THOMPSON. Thank you very much, Congressman. Appreciate 
that.
    Mr. SHAW. I thank the gentleman. The gentleman from 
Michigan, Mr. Levin, wish to inquire?
    Mr. LEVIN. Thank you. Welcome, Mr. Secretary.
    Mr. THOMPSON. Congressman, how are you?
    Mr. LEVIN. Good. Thanks. Quickly, there are about 35 
million people now who receive traditional Medicare coverage. 
Are you saying that you are assuring to those 35 million that 
they will receive the same prescription drug benefit as anyone 
else who is covered by Medicare but not through the traditional 
fee-for-service program? Are you saying that now to the 35 
million people?
    Mr. THOMPSON. No, I am not. I am saying that the proposal 
has not been fully decided and those decisions have not been 
fully made at this point in time.
    Mr. LEVIN. Okay. Have you seen a document that was dated 
January 10, 2003, that came from the White House that had three 
different options? One, the current system----
    Mr. THOMPSON. I have seen that, Congressman.
    Mr. LEVIN. Isn't there a difference in prescription drug 
coverage depending on which option one is under?
    Mr. THOMPSON. In that piece of literature that you have 
got, correct.
    Mr. LEVIN. Okay. You are saying----
    Mr. THOMPSON. I am telling you the final decision has not 
been made.
    Mr. LEVIN. Okay. That remains one option?
    Mr. THOMPSON. That remains one option, as there are many 
options on the table.
    Mr. LEVIN. All right. That remains one option.
    Mr. THOMPSON. That remains as one option.
    Mr. LEVIN. I urge everybody to look at it, and the 35 
million, understand that their prescription drug coverage, if 
any, would vary whether they maintain their present coverage or 
not. It is that simple, that clear. That is one option. Let me 
just say a word----
    Mr. THOMPSON. There are several other options, Congressman.
    Mr. LEVIN. I know. That is one option the White House has 
put forth.
    Second, just a brief word on wellness because--I am sorry 
Mrs. Johnson isn't here. Welfare, as we know it, for years a 
number of us have been proposing on a bipartisan basis the 
Medicare Wellness Act. You talked about smoking. Included would 
be smoking cessation services, hypertension and cholesterol 
screening, vision and hearing screening, hormone replacement 
therapy for people with osteoporosis, nutrition therapy. Why 
don't you support it? It is the Medicare Wellness Act. It has 
been there for several years on a bipartisan basis. If 
prevention is such a major premise, why not put it into 
Medicare? Why say we don't like Medicare as we know it when we 
can have Medicare as we want it? What is the problem?
    Mr. THOMPSON. Congressman, I don't know what your question 
is. I probably happen to be the strongest advocate----
    Mr. LEVIN. I know you are, but why----
    Mr. THOMPSON. On prevention, that is the future. If we want 
to control health care costs, prevention has got to be front 
and center.
    Mr. LEVIN. I am with you completely. I know where you 
stand. Where is the administration?
    Mr. THOMPSON. I think the administration is full and 
foursquare behind prevention. The President, I can assure you, 
is passionate about it.
    Mr. LEVIN. All right. Well, then let passion be embodied in 
proposals. Where is it? It is a hundred million. Where is the 
yes or no on the Medicare Wellness Act that we have proposed on 
a bipartisan basis and that would also eliminate the copayments 
and the deductibles for essential screening proposals? I urge 
you----
    Let me ask you this. If you could in the next week or two, 
tell us the administration position on the Medicare Wellness 
Act. Quickly, on welfare reform. You and I have worked 
together. We did in 1995 and 1996.
    Mr. THOMPSON. Yes, we have.
    Mr. LEVIN. Now, you say there is more flexibility in this 
proposal. Will the States be able, under this proposal that 
went through the House on a very partisan basis, will they be 
able to maintain their present mix of programs in all cases?
    Mr. THOMPSON. They are going to have to make some changes.
    Mr. LEVIN. All right. So, their flexibility will be reduced 
in certain instances, right?
    Mr. THOMPSON. It will be reduced in some areas but expanded 
in many others. Let me give you an example, Congressman. Right 
now, under the TANF law, at the end of the year if you have any 
extra benefits, any extra resources, you have to spend that 
only on the benefit side of it. You cannot put it into 
education. You cannot put it into training. You cannot put it 
into child care. This proposal would allow State Governors and 
State legislators to have the flexibility to use that money. In 
this past year, at the end of this past year was $2 billion----
    Mr. LEVIN. We are all in favor of that.
    Mr. THOMPSON. The $2 billion that the States could have 
used if we would have been able to change the law. The new TANF 
law gives the States that flexibility. That is huge 
flexibility, and that is real dollars.
    Mr. LEVIN. We are in favor of that. In many cases there is 
going to be less flexibility. I will send you the list of cases 
and if you will respond.
    Mr. THOMPSON. I certainly will, Congressman.
    [The list and comments follow:]

    Current state programs which states would have to 
discontinue to meet the new work participation requirements 
under the President's plan/H.R. 4
    1. Go to school 10 hours a week, work 10 hours a week, and 
study 10 hours a week. Michigan's 10-10-10 program. Michigan 
has a program in which participants are required to spend 10 
hours working, 10 hours in class, and 10 hours studying.
    2. After working for 4 months, go to school for a year to 
develop skills for a specific job and work 32 hours a week 
during the summer. Wyoming's skills upgrading program. Wyoming 
has a program which allows welfare recipients who have 
demonstrated a commitment to work by working full-time for 4 
months to pursue training which will lead to a specific job. 
They must take at least 12 credits per semester and 32 per 
year. If they are not in school, they have to work 32 hours a 
week during the summer. And they must maintain at least a ``C'' 
average.
    3. Work half the day and go to training for the other half 
of the day. Oklahoma's work & training program. Oklahoma has a 
program which allows people to work half the day and attend 
training to help them get promoted for the other half of the 
day. At the end of the training program, participants receive 
higher-level full-time jobs at their employers.
    4. Conduct an intensive 6 week job search and then get 
skills upgrading services if you don't find a good job. 
Portland's job search program. Portland's program encourages 
people to pursue longer, more targeted job searches to make 
sure they get the best available jobs. Longer job searches led 
to higher-paying jobs and more people getting benefits. If a 6-
week job search did not result in employment, the site then 
provided targeted education and training or other services for 
up to 6 months.
    5. Allow welfare recipients to participate in job-sharing 
programs in which they share a 40-hour a week job and attend 
school part time. New York's job sharing program. Participants 
share a job. Each of them attends school and studies half the 
time (20 hours) and works at the job the other half of the time 
(20 hours).
    6. Allow people who work at least 15 hours a week to go to 
school full-time and still receive TANF services. Arkansas 
program--state law mandates that at least 700 welfare 
recipients be in this program (13% of current adult caseload).
    7. Provide 6 months to a year of intensive substance abuse 
treatment before placing the participant in a job. Utah's 
barrier removal program. According to the Utah TANF 
Administrator, their experience is that at least 6 months of 
intensive substance abuse treatment is needed before an 
addicted recipient can sustain employment.
                                 ______
                                 
               U.S. Department of Health and Human Services
                                               Washington, DC 20201
    Thank you for sharing the examples of current state programs which 
would need to be modified in order to meet the new work participation 
requirements under the President's plan.
    Several of these programs would require only minor modifications in 
order to be countable under the President's plan for welfare 
reauthorization:
           LArkansas, Michigan, New York and Oklahoma combine 
        work with other activities to meet the current work 
        requirements. These programs would need to expand the hours of 
        required work to 24; in the latter two states, only an 
        additional 4 hours a week would be required. Time spent in 
        work-study positions, internships and co-operative education 
        would all be countable toward the 24 hour direct work 
        requirement under the President's plan. Classes and structured 
        study time could still be counted for the remaining 16 hours of 
        participation required.
           LUtah's barrier removal program could be countable 
        under the President's plan, if work activities are incorporated 
        into the treatment program after the first 3 months. Such 
        activities, including on-site community service, are common 
        elements of existing substance abuse treatment programs. This 
        approach is supported by recent research, which indicates that 
        even intensive substance abuse treatment is ineffective in 
        moving welfare recipients with substance abuse habits into work 
        if it is not closely linked with employment-related activities. 
        At the same time, involving such clients in productive 
        activities, particularly work, early on and as part of 
        treatment is considered very important to reducing their 
        substance abuse problems.
    States would receive more credit for some programs under the 
President's proposal than they do under current law.
           LUnder current law, none of Utah's barrier removal 
        program could be counted toward the work participation rate 
        calculation. Under the President's proposal, full-time 
        substance abuse treatment, mental health services, or 
        educational activities could be counted toward the 
        participation rate for up to 3 months. Such activities may also 
        be counted thereafter, when combined with direct work 
        activities.
           LUnder current law, job search is countable for only 
        four consecutive weeks, and for no more than 6 weeks in a year. 
        Under the President's plan, Oregon would receive more credit 
        for Portland's job search model than it does now. Intensive job 
        search and targeted education and training could be counted 
        toward the participation rate for up to 3 months. The work-
        related education or training could also be counted for up to 
        16 hours per week thereafter, when combined with direct work 
        activities.
    States that meet the participation rate requirement will continue 
to have flexibility regarding activities for the remainder of their 
caseloads.
           LIn the latest year for which data is available, 
        Wyoming achieved a 71.8 percent participation rate, very little 
        of which was due to its skills upgrading program. If it is able 
        to sustain this level of achievement, the state may continue to 
        allow additional recipients to engage in non-countable 
        activities.

                                 

    Chairman THOMAS. [Presiding.] Thank the gentleman. The 
Chair would recognize the gentleman from Illinois and would 
request that the gentleman recognize the Chair briefly.
    Mr. WELLER. I would be happy to recognize the Chairman.
    Chairman THOMAS. I do want to do it on the clock in the 
time that we have. The Chair apologizes for visiting with some 
constituents briefly. The direction of the statements that have 
been made need to be clarified and underscored.
    The gentleman from Michigan is right. There has been some 
proposal introduced. My understanding is the first year it was 
introduced was the year 2000. They are to be commended for 
finally beginning to look at preventive and wellness programs 
in Medicare. His party was the majority party for more than 30 
years when Medicare was on the books, and it wasn't until the 
new majority took over in the 104th Congress that we added 
quality preventive programs to Medicare. We did colorectal 
screening. We added diabetes testing and education. We added 
osteoporosis testing. In the last bill that passed the House of 
Representatives, that the gentleman chose to vote against, we 
covered cholesterol testing and we provided a physical for 
every senior in Medicare. Preventive and wellness was not added 
to Medicare until the Republicans became the majority.
    I do want to underscore that I am pleased that the 
gentleman has tried to move in a bipartisan way to finally, in 
the year 2000, talk about adding some preventive. We set up a 
system in 1997 which allows the Institute of Health and others 
to examine what it is that we should add to preventive that 
clearly makes sense. Since then, we have added nutrition 
therapy to diabetes and high blood pressure. We have a process 
in place that continues to evaluate preventive and wellness and 
when cleared by the appropriate agency will be placed on the 
Medicare agenda.
    For the gentleman to leave the impression that this 
administration or anyone else has not been aggressive and 
active in adding preventive and wellness is to simply ignore 
the facts and the record for 40 years. For 30 years they were 
in control. Nothing added. Since we have been in the majority, 
all of the items that I just listed and a process to add more 
is in place.
    The gentleman thanks the gentleman from Illinois for 
allowing for the time.
    Mr. RANGEL. Mr. Chairman, in all fairness, you mentioned 
the gentleman from Michigan----
    Mr. WELLER. Thank you, Mr. Chairman. Reclaiming my time.
    Mr. RANGEL. I would ask whether the----
    Chairman THOMAS. The gentleman from Michigan had his 5 
minutes and made his points.
    Mr. RANGEL. You really illustrate the need for prescription 
drugs.
    Mr. WELLER. Reclaiming my time.
    Chairman THOMAS. Well, the gentleman's frequent trips to 
Mexico in which he acquires drugs--the Chair may go along and 
actually get some prescription drugs. The gentleman from 
Illinois.
    Mr. WELLER. Reclaiming my time. Thank you, Mr. Chairman. 
Mr. Secretary, good morning and thank you for joining us. We 
appreciate how well you represent the administration and the 
good work you do, and we enjoy working with you.
    Mr. THOMPSON. Thank you.
    Mr. WELLER. Focusing again on preventive measures, let's 
talk about community health centers.
    Mr. THOMPSON. Yes.
    Mr. WELLER. I have been--as one who has taken an active 
interest in community health centers, I have been very pleased 
with the priority the President is giving--has given both with 
respect----
    Mr. THOMPSON. It is a huge priority to the President.
    Mr. WELLER. The personal commitment to community health 
centers and particularly with his proposal to expand care to 
uninsured Americans, and of course that is a goal I support.
    Over the last year or so, I have been working with some of 
my colleagues' legislation to improve the Medicare Program for 
health centers' elderly patients, for seniors who qualify for 
Medicare. Of course, as you have outlined today, the 
administration budget reinforces the importance of preventive 
benefits for the Medicare population. However, health centers 
are limited in what they can offer under Medicare and what they 
can provide and of course be reimbursed for; and many of us 
would like to see community health centers be able to offer and 
be reimbursed for those same services that other Medicare 
providers are able to offer. I was wondering, do you believe it 
makes sense to limit if you are a senior in a rural area or an 
area that is only served by community health centers not to be 
able to obtain those same type of preventive services you would 
be from another health care provider? Or would you support 
expanding it so community health centers could offer the same?
    Mr. THOMPSON. Congressman, I am so passionate and such a 
strong advocate of preventative health measures for all 
Americans, especially for seniors. If we are ever going to 
control health care costs in America, we have got to put 
prevention front and center, as I mentioned in answer to a 
question by Congressman--Congresswoman Johnson and Congressman 
Houghton. I would support it. I believe it is the right thing. 
It is the right direction, and anything we can do in this area 
I will support.
    Mr. WELLER. I look forward to working with you. Thank you, 
Mr. Secretary.
    Mr. THOMPSON. Thank you.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
Wisconsin.
    Mr. KLECZKA. Thank you, Mr. Chairman. Let me yield 30 
seconds to the gentleman from Michigan for a brief response.
    Mr. LEVIN. Mr. Thompson, we are talking about the future, 
but you have raised the past. In the 1995-1996 session, we 
proposed an amendment to add colon cancer, mammography, 
diabetes and prostate cancer screening to Medicare; and you 
voted against it, as did every other Republican who was then 
there and who is now on this Committee.
    Mr. KLECZKA. Mr. Chairman, thank you for the recognition. 
Mr. Secretary, I have a couple of quick questions. Number one, 
there is a physician fee freeze in the current budget 
reconciliation bill that we are addressing here in the 
Congress. I am getting letters and I am assuming my colleagues 
are that doctors aren't going to accept any more Medicare 
patients. They are not going to accept the assignments that 
many of the physicians have done because of the payment rates. 
Are you supportive of the freeze contained in the budget bill 
which would, I believe, lock in the--or prevent the decrease 
until October of this year?
    Mr. THOMPSON. There has been much discussion about it, as 
the Congressman knows. The Administration is in support of 
doing something for the physicians. Congressman Thomas has made 
a proposal as well as the Senate and the administration is 
hoping that Congress can reconcile it.
    Mr. KLECZKA. Okay. What position or what proposal does the 
administration support?
    Mr. THOMPSON. The Administration is hopeful that the 
Congress will be able to resolve that. The Administration has 
not taken a position on either one of the proposals.
    Mr. KLECZKA. So, you are saying the administration does not 
support the Senate proposal since that is the only one that is 
before us.
    Mr. THOMPSON. It is my understanding that Congressman 
Thomas has made a proposal.
    Mr. KLECZKA. Well, we haven't, okay? We haven't seen that 
here.
    Mr. THOMPSON. Oh, that is my understanding.
    Mr. KLECZKA. Well, could you share with this Member what 
that proposal is?
    Mr. THOMPSON. It is my understanding that there is a 
proposal that Congressman Thomas has, and there is a proposal 
that the Senate has, and the administration has not taken a 
position on either one. They support the concept.
    Mr. KLECZKA. Thanks.
    Chairman THOMAS. Would the gentleman yield on my time to 
explain it?
    Mr. KLECZKA. Sure. Go ahead.
    Chairman THOMAS. Last year, the House sent to the Senate a 
provision which would allow the administration to make a 
correction in the formula for reimbursement to physicians since 
there is what we call a plug number there now and we now have 
accurate data. If the accurate data were put into the formula, 
those significant negative updates would, in fact, reverse 
themselves.
    That legislation was moved out of the House and presented 
to the Senate. What the Senate has done in this Congress on the 
omnibus appropriation is to provide a $600 million short-term 
funding to stop the administration from going forward with the 
regulation which has been characterized by those individuals in 
charge of it. Used to be the Centers for Medicare and Medicaid 
Services (CMS). I can't remember what the name of it is now. 
They said that they would prefer not to implement that 
regulation.
    The Senate provision is a short-term funding. It also 
includes several other provisions which assist some providers 
and not all providers. The goal is to fix the flawed formula 
for physicians and then address in a broad and complete way 
reimbursement for all providers, just not certain hospitals or 
certain home health. So, the Secretary's characterization of 
our position and their position is that the House is for fixing 
the flawed physician formula and then moving forward addressing 
Medicare and assisting providers. The Senate has legislation on 
an appropriations bill in an attempt to help only some. The 
goal would be to try to stop the flawed formula from going 
forward and then address in a broad way all the other decisions 
that need to be made.
    Mr. KLECZKA. I thank you, Mr. Chairman. I am aware of the 
fact that we did pass legislation out of this Committee and out 
of the Congress last year----
    Chairman THOMAS. Right.
    Mr. KLECZKA. Addressing the problem in a more permanent way 
through a phasing process. However, the fact is that 
constituents around the country, or Medicare constituents, are 
faced with the prospect of the doctors denying them service 
because of the dilemma they are in. To hear that the 
administration today has no position and it is up to the 
Congress to do it, I think that is a cop-out; and I would have 
hoped that the Secretary would have came before the Committee 
and said, okay, we urge the Congress to do this so we can help 
those seniors who are going to be denied service by the 
physicians. Mr. Secretary----
    Mr. THOMPSON. Congressman, I would like to respond to that.
    Mr. KLECZKA. You already said you want Congress to fix it. 
I only have 5 minutes.
    Chairman THOMAS. Let me briefly say to the gentleman from 
Wisconsin----
    Mr. THOMPSON. You said the administration is not doing 
anything. The Administration delayed the rule until March 1, 
2003 to get Congress to do it. We can only implement the laws 
that you pass, Congressman. We cannot change them. We cannot 
change the fix on the physicians fee until Congress makes a 
change. We are complying with the law, and we delayed it till 
March first so Congress would have ample opportunity to fix it, 
Congressman. The Department did that.
    Mr. KLECZKA. Okay. We just were presented with a massive 
budget for fiscal year 2004 where the administration is taking 
a position on almost every part of this Federal government, 
okay? They weren't bashful in doing that, which I think is 
their job and their responsibility. On this one you seem to be 
taking a duck.
    Mr. Chairman--or Mr. Secretary, we are told by the OPM 
director that for the foreseeable future all dollars in the 
Medicare trust fund are going to be used for Federal operating 
expenses. Now you recall the talk when you were first appointed 
to the job of the lockbox and not touching these funds and all 
that other stuff. What is your view of drawing down and using 
every dollar in the Medicare Trust Fund for annual operating 
expenses of the Federal government?
    Mr. THOMPSON. Congressman, that is out of my Department's 
prerogative. That is up to Congress. If Congress passes the 
laws and they determine how it is to be funded----
    Mr. KLECZKA. Do you think that is wise policy on the part 
of Congress?
    Mr. THOMPSON. Well, it would be nice if we didn't have a 
recession, if we didn't have a war on terror. It would be nice 
if we had a stronger economy and we wouldn't have to do it.
    Mr. KLECZKA. It would be nice if we didn't have $2.4 
billion in tax cuts that are not only adding to the deficits 
but forcing us to draw down those trust fund dollars. The 
President's budget states that the legislation passed to 
modernize medicine last session did not meet his principles. 
What were the deficiencies in the Medicare modernization 
prescription drug bill of last year that doesn't meet the 
President's principles?
    Mr. THOMPSON. Congressman, I didn't hear you. I am sorry.
    Mr. KLECZKA. Okay. In the President's budget he states that 
no bill, and I am quoting, no bill met the President's 
principles for strengthening and improving Medicare. Last 
session, the bill that we passed out of the House was the 
Medicare Modernization and Prescription Drug Act. What was 
deficient about that bill that didn't meet the President's 
principles?
    Mr. THOMPSON. Well, that bill was a start. We just don't 
think it went far enough to make sure that the Medicare 
proposal for the future was going to be one which was going to 
be financially stable, and we certainly are concerned about 
that. We are also concerned about the fact that it doesn't have 
the stopgap loss in it. We also do not believe it had enough 
preventative health measures in it, and those are the things 
that we are concerned about. We think that there needs to be 
more choices. We think that seniors should have the opportunity 
to have the same choices in their health plans as you do and as 
I do.
    Mr. KLECZKA. Under the Medicare Program.
    Mr. THOMPSON. Yes, sir.
    Mr. KLECZKA. Okay. Mr. Chair, thank you for your 
generosity.
    Chairman THOMAS. Thank the gentleman for allowing for the 
exchange. Our purpose here is to, as much as we are able, 
enlighten rather than to inflame. The gentlewoman from 
Washington wish to inquire?
    Ms. DUNN. I do, Mr. Chairman. Thank you very much and 
welcome, Secretary Thompson.
    Mr. THOMPSON. Thank you, Congresswoman.
    Ms. DUNN. It is great to have you here, and I want to give 
you kudos for your proposal to allow States to retain their 
SCHIP funds for longer periods of time. It is really important 
to us in Washington State.
    Mr. THOMPSON. I know it is.
    Ms. DUNN. Yes. As you are also aware, I am sure, there are 
several States, including my State, New Mexico, New Hampshire, 
Vermont and Minnesota, that expanded their coverage for young 
people under the age of 18 before the SCHIP program came into 
being. So, to qualify for SCHIP funds they had to expand their 
program again.
    So, while I give you kudos for allowing us to retain the 
dollars longer, I also believe that we need to insure that 
those States that were innovative, that really showed an 
interest in covering children aren't penalized for that degree 
of progressivity that they showed when they did that. 
Washington State, for example, cannot actually utilize its 
SCHIP funds for children below 200 percent, even though we took 
the initiative to expand our Medicare Program.
    So, I am hopeful, Mr. Secretary, that as we consider 
improvements to that program, which you are doing in the 
administration, I hope that you will find it in your heart to 
be supportive of our efforts that we have done in our States 
and to allow that handful of States that were not grandfathered 
that expanded their child coverage programs that they would be 
able to use these SCHIP funds for children already on Medicaid.
    Mr. THOMPSON. Congresswoman, you will be happy to know the 
Medicaid proposal that we designed in the Department and which 
I unveiled last Friday does exactly that.
    Ms. DUNN. Thanks. That is all I needed to hear. Thank you 
very much.
    I am also worried about the payment formulas in Medicare. 
We have had this conversation before, talked about it a number 
of times. In most cases, certain States like Washington, 
Minnesota, Iowa continue to receive a lower payment for 
providing the same services to Medicare patients----
    Mr. THOMPSON. That is correct.
    Ms. DUNN. These geographic differences in payments can 
hinder access to services or quality of care. Let me just give 
you a couple of examples.
    The Medicare+Choice program that Washington State health 
plans have receives a lower payment compared to health plans 
everyplace else. Second, geographic adjusters and the physician 
payment system also result in different reimbursements in 
different regions.
    We certainly expect some variations but not the types of 
variations that we have been seeing and that we are penalized 
for in Washington State. I hold a concern that seniors be 
treated equally everywhere, that there is equity among seniors, 
regardless of where they live and where they receive their 
coverage.
    I would like to hear from you some comments on the 
administration's efforts to help stabilize the Medicare+Choice 
program, especially for these low-payment States.
    Second, I would like to hear your comments on how to fix 
the flaws in these formulas.
    Mr. THOMPSON. Congresswoman, I agree with you completely. I 
think that there needs to be some changes in the discrepancy of 
payments and the fluctuation of payments on Medicare 
reimbursement. The truth of the matter is that 71 percent of 
the reimbursement goes into wages, and that is the biggest 
driving force, and that is statutory. In the compilation of how 
we make the reimbursements that is statutory, and this Congress 
and the Department need to work together to review that.
    Regarding the Medicare+Choice, we are still working on 
that. The details are to be forthcoming as soon as we have 
completed action. I will be more than happy to sit down with 
you as soon as the decisions are made on the Medicare+Choice as 
well as on the Medicare strengthening proposal that we are 
going to advance.
    Ms. DUNN. I appreciate that, Mr. Secretary. I would like to 
call your attention to a piece of legislation that I am going 
to be offering this year that we do a number of things, 
including increasing the 2 percent update that is offered every 
year to 6.5 percent for the next 2 years. I would like to have 
a chance to talk with you, get your input on that piece of 
legislation. Since I still have a----
    Mr. THOMPSON. Thank you. I would be more than happy to.
    Ms. DUNN. Thanks. The other problem that I am concerned 
about is our access to medical innovations, drugs, devices but 
also tests. Currently, there are barriers to access to all of 
these. Last year I had proposed a bill that had to do with 
access to testing, and parts of this bill were included in the 
House Medicare package, which, as you well know, did not pass; 
and the thrust of it was to create a transparent system so 
that--and a predictability system at CMS so that we could allow 
these tests to be applied for and then eventually covered by 
Medicare. I am hopeful, Mr. Secretary, that you will work with 
me and our Subcommittee on Health and the full Committee to 
develop this kind of transparent process that we are all 
looking for in CMS so that seniors will have the access to 
technology that they need.
    Mr. THOMPSON. Thank you. Thank you very much, 
Congresswoman. I am more than happy to work with you and the 
Subcommittee.
    Chairman THOMAS. Thank the gentlewoman. Gentleman from 
Washington wish to inquire?
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Pleasure to see you 
here. You are a great cheerleader for the administration, and I 
would like to understand how you view a couple of things here. 
I understand that you have told us that people will not have to 
change anything in their coverage to get the pharmaceutical 
benefit. They won't have to go into any kind of other 
organization. People in Milwaukee, where there is one place, 
they will be able to stay just as they are and get this new 
benefit, is that correct?
    Mr. THOMPSON. Congressman, I did not say that. I said that 
they will not be forced into an HMO in order to get the new 
pharmaceutical. The decisions have not been made yet, and as 
soon as they are I will be more than happy to sit down with you 
and discuss them.
    Mr. MCDERMOTT. I hope it is out here in public. Let me go 
to another issue. The President says he wants to take care of 
people who aren't covered, and we come up with a tax deferral 
or a rebate for people to buy their own insurance. Now, I would 
like to ask--well, first of all, I think it is inadequate, 
because I think it is going to make people leave employment 
insurance to go out and buy their own or that is what is going 
to happen. Some employers are going to say, look, I am going to 
stop offering coverage. You can buy your own. Use the tax 
credits, and you are on your way.
    I want to know why you didn't think about expanding either 
Medicaid or Medicare? What is it? The studies that I have seen 
show that that is a much more efficient way to spend the money 
that the government's putting into it. Rather than giving a tax 
break which is an expenditure, why not put it into Medicare and 
Medicaid and let people join those programs?
    Mr. THOMPSON. You mean for the uninsured.
    Mr. MCDERMOTT. Yes. The President's put forward a package 
that reduces the number of people on Medicaid and is making it 
more difficult at the same time he says he wants to cover more 
people, and I don't--I really don't understand that. Why not 
put more money out to the States to cover Medicaid?
    Mr. THOMPSON. Congressman, we are going to allow $3.25 
billion for the States that want to voluntarily go into this 
new Medicaid proposal and allow for the States to design a 
program so that the uninsured, if they so desire, could go into 
the Medicaid program, if in fact the Governors and the 
legislators of that State so desire. We are going to allow them 
to have control over the optional side of Medicaid as well as 
the optional benefits so that they can make the determination 
in their own State.
    Mr. MCDERMOTT. Mr. Secretary, you were a Governor----
    Mr. THOMPSON. Yes, I was, 14 years.
    Mr. MCDERMOTT. When the Federal government gives with one 
hand and takes back with the other----
    Mr. THOMPSON. I don't understand where we are taking back. 
We are giving in this case.
    Mr. MCDERMOTT. You are giving them revenue neutral over 10 
years.
    Mr. THOMPSON. For the first 7 years, Congressman, it is 
going to be an additional $12.7 billion.
    Mr. MCDERMOTT. Oh, I see. So, get it through these next two 
Administrations or two terms of office and then we will leave 
the problem on the doorstep of somebody.
    Mr. THOMPSON. It will be beyond that, Congressman.
    Mr. MCDERMOTT. I see. Okay. Well, I am glad to hear that. 
Now, this was----
    Mr. THOMPSON. I would like to point out for you, 
Congressman, that States right now can do this. States can 
change the optional programs. The States can change the 
optional population, and they are doing it. We are giving them 
the opportunity to continue the Medicaid coverage for those 
populations. That is the beauty of the Medicaid proposal and 
advancing the money right now so that the States can do it, 
Congressman.
    Mr. MCDERMOTT. You can have all the flexibility in the 
world, but if you don't have the money--I don't know what the 
deficit in Wisconsin is. It is something like $3 billion this 
year. Now to say to the Governor of Wisconsin and the 
legislature, hey, you guys, you have got all the flexibility in 
the world but no money. The same thing is true in the State of 
Washington. They are using the flexibility, and they are 
cutting the program. So, I don't see, if you don't put more 
money into it----
    Mr. THOMPSON. Congressman, that is what they are doing now. 
If we pass the Medicaid proposal, they will have an additional 
$3.25 billion this year, plus it will reduce their expenditure 
from the State of Washington and the State of Wisconsin to the 
Federal government. Under the Medicaid law, in order to get the 
Federal matching share, States have to make a computation 
annually on three factors: the population increases, the 
utilization and the indexing and inflation of medical costs. 
What we are saying in the Medicaid proposal is reducing it so 
they will not have to pay for the population increases or the 
utilization. So, there would be less money from the State of 
Washington coming to Washington, DC, in order to get money back 
to Washington State. So, it is really a good deal for the State 
of Washington, and I am fairly confident that your Governor 
will be very enthusiastic and supportive of that.
    Mr. MCDERMOTT. What is our share of the $3.2 billion?
    Mr. THOMPSON. I haven't figured it out. I will get that 
figure to you before the end of the day if you want it.
    Mr. MCDERMOTT. I would like to have that.
    Mr. THOMPSON. Okay.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
New York indicates that at the program that Members chose not 
to attend, but rather to come here, they have concluded the 
program by playing Taps; and the gentleman from New York, I 
think rightly, suggests that those of us that are here 
conducting the people's business pause briefly and recognize 
through a moment of silence not just the ceremonies honoring 
those individuals but those individuals themselves. Thank you. 
The gentleman from Georgia wish to inquire?
    Mr. COLLINS. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary. It is always a pleasure to listen to your wisdom; 
and, once again, I want to reissue the invitation to you to 
visit Columbus, Georgia, and visit our community health center, 
one that has done remarkably well in delivering services to a 
very needed area of Columbus, Muskogee County. That is an area 
where there is a very substantial amount of poverty and low 
income. I hope that you will be able to make that visit.
    It is now--the health center is actually now located in the 
district of Congressman Sanford Bishop, but I know that he, 
too, would be glad to welcome and have you visit that area.
    Mr. THOMPSON. Thank you, Congressman.
    Mr. COLLINS. I am pleased to see that you all are proposing 
more funds to help the community health centers. This 
particular need at this center is not so much in the area of 
additional funding for the care but the resources for the 
capital outlay to have additional area to be able to provide 
the service in. They started out in a small facility several 
years ago, attending to just a handful of patients. Now they 
are up to over 4,000 patients and over 10,000 visits annually, 
and their facility is not much larger than the office suite 
that I occupy across the hall. So, you can know that they are 
in very much need. They have taken quite a load off of the 
local hospital, so I hope you will consider and come down as 
early as possible.
    Mr. THOMPSON. Thank you very much, Congressman. I would be 
more than happy to do that.
    Mr. COLLINS. In the area of the prescription drugs, my 
concern is this, and it is a concern of those who I have in the 
district and discussed this with on a number of occasions, that 
anything we do here or whatever we do here could possibly 
jeopardize the coverage that many already have. Even last 
year's bill that passed in the House had a tendency to--the 
numbers given to us, that would cause a third of those who were 
insured through a previous type of employment or such to lose 
that coverage. That about 95 percent of seniors would opt into 
that program under the Medicare insurance.
    Those numbers don't quite rhyme together with me, but is it 
the administration's position that those who have coverage will 
not lose that coverage because of something that is offered 
here by the Congress?
    Mr. THOMPSON. That is certainly going to be up to the 
individual, and we are certainly not going to force anybody to 
give up their coverage in any way, shape or manner.
    Mr. COLLINS. Well, the concern is not that they would--they 
would have the option of doing so, but the option might be 
someone else's to discontinue the coverage that they had under 
their previous employment or through their retirement. That is 
of concern to me.
    Mr. THOMPSON. You are talking about the supplantation of--
--
    Mr. COLLINS. Yes. I hope that we will take that and you all 
will take that into consideration with Administration, too, 
because that is--it could cause someone to go into a program 
that is much different than they have today or with less 
benefits than they have today. So, I hope we will keep that in 
mind.
    Much has been said about entitlement. This should be an 
entitlement. I know when we were dealing with the welfare 
reform bill back in 1996 and you were so helpful with us on 
that, at that time the welfare was a Federal entitlement. The 
way we structured it and with the help back to the States it 
became a State entitlement. The States control and look after 
the welfare. That is the approach I like about what you said a 
minute ago about the Medicaid program. The Medicaid program is 
a way to really get to and help those who are very low income, 
who are having to actually make a decision as to whether or not 
they are going to be able to get assistance and pay for their 
actual needs for existence at their home or buy drugs. There is 
very little help for them. It depends on the State and how they 
set the poverty rate.
    So, I would hope that we would be able to take a real 
serious look at that. I know there is some reluctance in the 
Congress to address it in the fashion you have brought forth. I 
hope that the Congress will take a look at that because I think 
it is a very workable solution to those who really need access 
and yet not jeopardize what others already have.
    So, I appreciate your work. I appreciate what you are 
doing. For those who want to use the word HMO when it comes to 
Medicare in maybe a negative way, I view it, Medicare, as a 
giant government-run HMO with 535 Members of the board of 
directors who can't decide on anything, who don't trust one 
another, who are behind when it comes to wellness, devices, 
procedures, and services and payment. Thank you for your time.
    Mr. THOMPSON. Thank you for your observations, Congressman.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
Missouri wish to inquire?
    Mr. HULSHOF. Thank you, Mr. Chairman.
    Mr. Secretary, welcome. I want to begin by also providing 
some kudos to you and specifically to the gentleman seated 
behind you, Mr. Scully, the Director of the Centers for 
Medicaid and Medicare Services. In the State of Missouri we 
have had, for a period of time, a dispute regarding our 
provider tax; and that situation has been resolved. Mr. Scully 
and his staff, I think, helped fashion a solution that has 
really been a constructive solution and maybe a model for other 
disputes regarding that difficult situation, so I wanted to 
publicly give Mr. Scully a plug for all of his efforts in our 
State.
    I want to focus my remaining time on the situation 
regarding the average wholesale price. Your own Inspector 
General, the General Accounting Office, your predecessor, 
others have highlighted the over payments for Medicare part B 
covered drugs and biologics. This is because, as most folks 
here probably know, that part B--that Medicare reimburses part 
B drugs at 95 percent of the average wholesale price, and these 
prices are generally viewed as being higher than the price that 
manufacturers charge providers.
    As you consider changes--and we certainly welcome changes. 
Nobody here on either side wants to see overpayments for these 
drugs. I would also caution you--in fact, maybe a little 
stronger, I would implore you that as you consider these 
changes you also consider them in tandem with making sure that 
physicians are actually reimbursed for other costs that are 
ignored by Medicare. Let me just give you a specific example.
    There are some oncologists in my district, indeed, across 
the country, that are performing miracles every day with cancer 
survivors. Sometimes these are clinical trials, sometimes 
cutting-edge, innovative technologies. Mr. Shaw, who we welcome 
back here today, is thankfully a cancer survivor. Yet many of 
these oncologists, as they provide this treatment, they have 
specialized training for oncological nurses and have to deal 
with side effects with these patients. Yet none of that is 
reimbursed at all.
    So, my fear is we have got a very cost-effective way in an 
outpatient setting to really help more Americans be cancer 
survivors, not cancer victims. My fear is that if we just focus 
entirely on moving to a competitive bidding structure, which 
I--again, I think a lot of us would support, that we are going 
to force a lot of these cancer patients into a perhaps less 
effective, more expensive inpatient setting.
    So, my only caution to you would be, again, as we look at 
market-based models, you are going to find a lot of support 
there, but let's really look at all of the costs, some of which 
are not being reimbursed, so that we can continue to have more 
success stories like Mr. Shaw.
    That is my comment, and if you wish to comment further----
    Mr. THOMPSON. Congressman, I would just like to say thank 
you for recognizing Tom Scully and the job that CMS is doing 
and the whole Department. We have attracted some real stars 
over there, and I appreciate that people recognize that.
    I also would like to tell you that we are trying to 
continue to streamline and revise Medicare reimbursement 
formulas, and it is a difficult and a very complicated 
procedure. I can assure you that we will continue that effort.
    I thank you for your comments and your suggestions. We will 
take them to heart, and we will continue to work with you 
toward the goal of making better coverage decisions. That is 
something that I have asked Tom Scully and Members of CMS to 
do, because we can save more money doing the kinds of things 
you said and the kinds of things that Congresswoman Johnson and 
Chairman Thomas have said in the areas of prevention. We can 
provide better care, more quality care and save dollars. It is 
a passion of mine to do that, and I thank you for your 
comments.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
Texas, Mr. Doggett, wish to inquire?
    Mr. DOGGETT. Thank you, Mr. Chairman; and thank you, Mr. 
Secretary. I do respect what you say and the service you are 
providing our country.
    I have to tell you that it is really troubling that every 
time this morning that we ask for a specific on this 
prescription drug plan you basically offer your regrets because 
you don't have any specifics. We have rushed forward with this 
hearing this morning at a difficult time when you were saying 
basically you would like to answer our questions, but you just 
don't have your orders from the administration yet. This 
Administration is in, now, year three of its life; and I 
believe that during that entire time it has yet to come forward 
with a specific prescription drug legislative plan; and I think 
just the failure over that time period to come forward with any 
specific legislative proposal is an indication of a rather low 
priority that it places on addressing what many seniors really 
view as a crisis.
    One, you have addressed this this morning that one health 
care reporter this year--now that we are finally focused on the 
possibility that you might come forward with a plan, one 
reporter after another has been reporting that the core of that 
plan is that if a senior wants to be able to get access to 
these desperately needed prescription drugs they have got to 
give up their choice of a doctor. You have said that that is 
not true. I don't think they pulled that notion down out of 
thin air.
    I understand that the administration--and I--if there is 
one thing this administration is incredibly good at, is just 
truly miraculous, more miraculous than any of these 
prescription drugs and their cure, at spinning these proposals. 
You may have some kind of eyewash that comes out to cover the 
proposal or another near worthless discount drug card or 
something, but the question that I want to ask you about this, 
I understand y'all want to disclaim any limitation on people's 
choice of their doctor with the political cost associated with 
it. Can you guarantee us that you personally will not support 
any prescription drug plan that does not give a statutory 
guarantee to those that are in traditional Medicare, 36 million 
people, that they will not be disadvantaged in any way if they 
choose to get their prescription drugs through the traditional 
Medicare rather than choosing to go into an HMO or some kind of 
private health care scheme?
    Mr. THOMPSON. Congressman, let me assure you that Medicare 
strengthening, revitalization, prescription drug coverage, is 
of the highest priority of the President, of myself, and the 
total Administration.
    Second, let me also reiterate that we are working extremely 
hard and have spent many hours, many days spent on this 
Medicare proposal. We continue to meet on it. We continue to 
work on it, and the final decisions have not been made. I do 
not want to give you any erroneous information. I do not want--
--
    Mr. DOGGETT. I understand. I just want to know about the 
guarantee. Can you do that or not?
    Mr. THOMPSON. I am not going to say anything about the 
details of the proposal until they are done. It would be 
foolish on my part to comment on a proposal that a decision may 
be made that will----
    Mr. DOGGETT. I respect your position. I understand you have 
to work within this administration, and you are telling us you 
cannot guarantee that what some in this Committee call an 
incentive to go into a private insurance plan and I would call 
a penalty of a discrimination, that if you want your 
prescription drugs, you are going to have to pay a high penalty 
for doing it, you are not going to be treated the same way as 
those who go into--as I gather from some of the questions that 
you answered this morning, we have a Medicare entitlement, but 
it would be an entitlement to whatever limited coverage the HMO 
wanted to provide, and the administration in its plan has been 
unwilling to announce that there would be those statutory 
guarantees against discrimination.
    You all can have all the compassion, and I am sure it is 
great and extensive, and that you care about it as much as I 
do, but you can have all the compassion you want and you could 
have all the speeches you want, but if you do not put in 
statutory guarantees to prevent discrimination against the 
people that have relied on this Medicare system since Lyndon 
Johnson signed it into law, then you are going to harm them and 
you are going to be limiting them in their choice.
    Now, as relates to this supposed imminent collapse of 
Medicare, the truth of the matter is Medicare is not becoming 
officially insolvent for 28 years, is it? The longest time in 
its history that it has projected solvency. Isn't that correct?
    Mr. THOMPSON. It is not supposed to be financially 
insolvent until 2030.
    Mr. DOGGETT. Twenty-eight years. Better than it has been in 
the past. Those who want to buildup some kind of phony crisis 
in order to apply radical solutions, shouldn't they consider 
that our ability to solve any problems with Medicare which 
needs to be addressed is going to be significantly worsened if 
we add more than $1 trillion of debt to the national debt by 
the various proposals this administration is advancing?
    Mr. THOMPSON. Congressman, if in fact the administration 
policy is able to rejuvenate the economy, create more jobs, 
create more tax revenues, we will have enough money, but it 
is----
    Mr. DOGGETT. It is 10 years the deficit is in--and a 
trillion even under your estimate.
    Mr. THOMPSON. All I can assure you is that is not my 
bailiwick. I am working on Medicare and Medicaid and uninsured 
and liability insurance and welfare, and those are my issues. 
You want to ask me questions about them, I would be more than 
happy to answer them to the best of my ability.
    Mr. DOGGETT. Thank you. Thank you, Mr. Chairman.
    Chairman THOMAS. Prior to recognizing the gentleman from 
North Dakota, the Chair recognizes the gentleman from New York.
    Mr. RANGEL. I have to leave, and I thank you for extending 
me this privilege, and thank the Secretary and----
    Mr. THOMPSON. Thank you, Congressman.
    Mr. RANGEL. Also, we look forward that we hope that the 
leadership would see its way clear to have hearings on these 
issues, but we accept your kind invitation to join with you for 
more clarification.
    I also would like to join in and thank Tom Scully for the 
great sensitivity he has displayed during the emergencies that 
we are having in our hospitals. He has been a good trooper. 
Thank you.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
North Dakota wish to inquire?
    Mr. POMEROY. Thank you, Mr. Chairman. Mr. Secretary, you 
are from Elroy, Wisconsin.
    Mr. THOMPSON. That is correct.
    Mr. POMEROY. I am from Valley City, South Dakota, small 
towns in rural America.
    Mr. THOMPSON. How big is your city?
    Mr. POMEROY. Several times the city of Elroy.
    Mr. THOMPSON. It is a big city.
    Mr. POMEROY. The disadvantage of rural America in keeping 
health care services available are very, very troubling. I have 
had meetings all across the State on the reimbursement 
disadvantage of our Medicare, yet in light of the aging nature 
of these small towns on the prairie, it means that 
disproportionate sums of their money come from Medicare. So, 
you will have small hospitals that are getting 70 percent of 
their money from Medicare, but Medicaid disadvantages among the 
reimbursement rate, especially if they are not community access 
hospitals. This has really created an extraordinary problem 
with keeping care available in rural America. These facilities, 
you can tell they think they are absolutely at the breaking 
point.
    I am interested in your thoughts in terms of how we 
continue to address issues relative to rural reimbursement and 
making certain that the disparity between rural and urban 
reimbursement becomes addressed. As you mentioned, 70 percent 
of the Medicare reimbursement is wage related, and there is a 
wage discount relative to rural America. On the other hand, as 
they fight for doctors and fight for nurses and these medical 
professionals, they find that they are not in a rural labor 
pool. They are competing head to head with these city areas.
    So, what are your thoughts on that, Mr. Secretary?
    Mr. THOMPSON. Congressman, let me tell you that when I was 
the Governor of Wisconsin, I sued Medicare on that question and 
lost. It is statutory, and I welcome your comments. In fact, I 
support your comments. Coming from a rural area and a city that 
is seven times smaller than yours, I certainly understand full 
well. Approximately 71 percent--well, not approximately, it is 
71 percent. The reimbursement formula is based upon wage, and 
rural areas do not measure up under that formula. Congress has 
got to change that formula. We cannot do it administratively, 
Congressman.
    Second thing is there is less of an adjustment for rural 
hospitals versus urban hospitals, and that is also statutory.
    Mr. POMEROY. I note that in the proposal to enhance funding 
for rural health centers, in a way the disparity continues. 
North Dakota, for example, has one rural health center, as 
opposed to the rural health clinics which we have several 
serving vast areas.
    Mr. THOMPSON. I understand that.
    Mr. POMEROY. Is that an administrative call and could you 
reevaluate that question?
    Mr. THOMPSON. I would be more than happy to reevaluate 
that. We were putting in an additional $169 million this year 
to build more community health centers, and hopefully we can 
get some into North Dakota.
    Mr. POMEROY. I have enjoyed and North Dakota providers have 
enjoyed having access to Tom Scully. He has been kind enough 
to----
    Mr. THOMPSON. What is this, a Tom Scully cheering squad?
    Mr. POMEROY. There is always a----
    Mr. THOMPSON. Don't encourage him.
    Mr. POMEROY. There is something behind a compliment usually 
in a Congressional hearing. I would ask that Tom Scully come to 
North Dakota to hear firsthand from some----
    Mr. THOMPSON. I would be happy to send him to North 
Dakota----
    Mr. POMEROY. Maybe in February, Mr. Secretary.
    Mr. THOMPSON. February would be a good time for Scully. He 
usually goes to California and Florida in February, but I think 
North Dakota is better.
    Mr. POMEROY. I thank you for that. I would just close, Mr. 
Secretary, by adding that we don't have an HMO in North Dakota 
anymore delivering the services. I used to be the insurance 
commissioner in our State, so I am very familiar with basically 
the failure of HMO model delivery systems in rural America. I 
think a lot of the concern you have heard on our side of the 
aisle this morning about linking a prescription drug benefit to 
forced enrollment in HMOs is--we don't have HMOs. You do 
something like that, our people don't get prescription drug----
    Mr. THOMPSON. Congressman, I can assure you we are not 
going to force seniors into HMOs.
    Mr. POMEROY. Thank you, Mr. Secretary.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
Kentucky, Mr. Lewis, wish to inquire?
    Mr. LEWIS OF KENTUCKY. Yes, thank you. Back last year when 
we were working on the welfare reform bill, I had a lot of 
educators in my district that were concerned about forcing 
people into low-wage jobs that were dead end, and they were 
very concerned about that. My question is, is that the case, 
and how does it compare to the Aid to Families with Dependent 
Children (AFDC) results on good employment for individuals?
    Mr. THOMPSON. Congressman, every person who was on AFDC was 
locked into poverty. They were approximately 22 percent below 
poverty level on AFDC. If you were just on minimum wage, you 
are above the poverty line, and if you get the earned income 
tax credit added onto that and if the State has an earned 
income tax credit, you can be anywhere, at a minimum wage job, 
anywhere from 15 to 30 percent above the poverty line. So, by 
working, you definitely are better off than by being on the old 
AFDC. Most of the AFDC recipients who have left and have gone 
into the workplace are much higher than minimum wage. So, it 
has worked out extremely well.
    Another good statistic is even though during this downturn, 
during the economy downturn, the cases on welfare are 
continuing to go down nationwide by 3.9 percent; and so now 
over 54 percent of the recipients have left the old AFDC since 
1996 and over 59 percent of the individuals--54 percent of the 
families and 59 percent of the individuals. So, it is working, 
and it is continuing to work. The failures are going to be 
coming out at the end of next week that will show that during 
this downturn, the caseload--even though the unemployment 
increases have been going up, the welfare levels have still 
continued to go down by the rate of 3.9 percent.
    Mr. LEWIS OF KENTUCKY. Isn't there an even greater 
incentive for States to put in the revised welfare reform bill, 
I think a bonus--$100 million bonus for States that create the 
kind of jobs or provide the kind of jobs that are going to be 
helpful to----
    Mr. THOMPSON. We want to make sure we go to the next 
plateau in welfare reform in America. We want to assist those 
individuals. We want to make sure that we help individuals 
continue to leave the welfare rolls and get the kind of 
assistance they need, get the opportunities to live and to work 
like every other American, and get the opportunity for 
themselves to have a job and raise their family and hopefully 
purchase a house.
    Mr. LEWIS OF KENTUCKY. Wonderful.
    Mr. THOMPSON. Thank you so very much for your comments.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
Texas wish to inquire?
    Mr. SANDLIN. Yes, sir. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for coming today, and I will try 
to be as brief as I can. You have been asked a lot of specifics 
about basic coverage provision. Let me ask you something a 
little bit different. I notice the budget contains $400 billion 
for Medicare. Specifically, how much of that $400 billion in 
dollars is applicable to prescription drug coverage?
    Mr. THOMPSON. That has not been determined yet. You cannot 
determine that--our actuaries cannot make that ascertainment 
until after we make the final details of the package. As soon 
as that is done, we will be able to quantify that for you.
    Mr. SANDLIN. Okay. Now, you said that the President's 
position is and the administration's position is that seniors 
will not be forced out of Medicare in the HMOs. Is that 
correct?
    Mr. THOMPSON. That is correct.
    Mr. SANDLIN. We have not heard or not seen any statutory 
language or budget notation or anything that establishes or 
identifies a specific prescription drug plan within Medicare 
itself, as has been discussed today as a part A or part B-type 
plan. Is that correct?
    Mr. THOMPSON. There are several proposals out there, 
Congressman, and the final determination has not been made. 
That is why I cannot answer your question directly. I am sorry 
about that. I apologize to you, but until the final decisions 
are made--once they are made, I will be more than happy to come 
up and talk to you.
    Mr. SANDLIN. No apology necessary. Since no decisions have 
been made, it is possible that the government----
    Mr. THOMPSON. A lot of decisions have been made, but not 
the total decision.
    Mr. SANDLIN. On that, I understand what you are saying. 
Since no decision has been made on that, then it is quite 
possible that the plan will be just to give money to HMOs and 
let them operate a plan independent or outside of Medicare. 
Isn't that correct?
    Mr. THOMPSON. That----
    Mr. SANDLIN. That is possible?
    Mr. THOMPSON. It is--no. It is not possible.
    Mr. SANDLIN. It is not possible. Then you are saying for 
sure the administration----
    Mr. THOMPSON. It is not possible for all the $400 billion 
into HMOs and be the only one----
    Mr. SANDLIN. I didn't ask you about all the $400 billion. 
You are telling me now that if it is not possible, that they 
will be required to go into an HMO; then, conversely, you are 
telling me the administration's plan is to specifically put a 
part A or part B-type plan into Medicare so that there will be 
prescription drug coverage for seniors under Medicare.
    Mr. THOMPSON. I didn't say that, Congressman. That----
    Mr. SANDLIN. I know you said both ways, so I am just trying 
to see which way we are going to hop.
    Mr. THOMPSON. Those decisions have not been made.
    Mr. SANDLIN. You understand we are probably going to vote 
on this next week.
    Mr. THOMPSON. I don't think so. That is not my 
understanding.
    Mr. SANDLIN. Okay. Well, that was what I was told.
    Mr. THOMPSON. If you are going in this next week, God help 
you.
    Mr. SANDLIN. That is exactly what I was thinking. That is 
the help I need. In looking at the budget, in the event that it 
does go the HMO route, there is no specific notation within the 
budget or requirement that certain benefits be provided by an 
HMO, is there?
    Mr. THOMPSON. Once again, Congressman, those decisions have 
not been made.
    Mr. SANDLIN. Well, I know the decisions haven't been made, 
but I assume you are discussing them. We are not going to just 
pull them out of a hat.
    Mr. THOMPSON. We are discussing it every single day, 
Congressman.
    Mr. SANDLIN. So, that is one of the possibilities?
    Mr. THOMPSON. Anything is possible.
    Mr. SANDLIN. Anything is possible.
    Mr. THOMPSON. The probability of that is so unlikely, that 
it is----
    Mr. SANDLIN. Okay. Let me ask you this--and I have not 
heard this. Does the administration ever look at the cost of 
overhead, for example, of Medicare versus a private HMO plan in 
determining which sort of benefit to provide?
    Mr. THOMPSON. Yes, we do, sir.
    Mr. Sandlin. I don't know if this is accurate or not. I 
have seen it----
    Mr. THOMPSON. We plug this in, and our actuaries take into 
consideration the total costs.
    Mr. SANDLIN. Let me ask you, because I am just asking for 
an education. Some of the newspaper reports have said Medicare 
has been able to--or they anticipate Medicare overhead to be 3 
to 5 percent and the private plan is to be 25 to 30 percent. 
Would that be accurate with what you have heard or not?
    Mr. THOMPSON. That is not--I don't think that is an 
accurate statement.
    Mr. SANDLIN. Anyway, you consider that as a factor in 
making that decision?
    Mr. THOMPSON. We consider that as a factor, absolutely.
    Mr. SANDLIN. Of the $400 million that you mentioned a while 
ago, some of that is set aside----
    Mr. THOMPSON. Billion.
    Mr. SANDLIN. Billion. It is set aside--I am a country boy, 
too, so that is a lot of money.
    Mr. THOMPSON. It is a lot of money for us, yes.
    Mr. SANDLIN. Is set aside for increases in provider 
payments. Is that correct?
    Mr. THOMPSON. Sorry?
    Mr. SANDLIN. Some of the $400 billion goes to increases in 
provider payments, is that correct, such as to physicians?
    Mr. THOMPSON. Oh, yes.
    Mr. SANDLIN. Do we know what amount of money we----
    Mr. THOMPSON. No.
    Mr. SANDLIN. You would attribute there? So, we are talking 
about fitting Medicare and increase in provider payments to 
physicians. Is there anything in there--or does the 
administration support increasing the payments to hospitals, 
rural hospitals in particular?
    Mr. THOMPSON. That is not part of the Medicare proposal.
    Mr. SANDLIN. So, we don't have any proposal to increase 
payments to hospitals?
    Mr. THOMPSON. Not in that proposal, no.
    Mr. SANDLIN. I believe my time is up. Thank you, Mr. 
Chairman.
    Chairman THOMAS. Thank the gentleman. The Chair feels 
compelled to announce that no markup is scheduled next week on 
Medicare legislation, and you probably could substitute the 
month of February at this time for that same announcement. The 
gentlewoman from Ohio wish to inquire?
    Ms. TUBBS JONES. Thank you, Mr. Chairman. Mr. Secretary, 
thank you very much. It is my first time on this Committee, and 
I am glad to be----
    Mr. THOMPSON. Congratulations, Congressman.
    Ms. TUBBS JONES. Thank you. On behalf of all the residents 
of the State of Ohio, even though I don't represent all of 
them, I have some questions I would like to ask of you.
    Of particular concern in the State of Ohio in the past has 
been the fact that with Medicaid, the HMOs have come and gone. 
We have had people with an HMO 1 day, 30 days later they are 
gone, and we are scuffling without notice to have them provide 
some other type of service.
    I am interested in knowing, sir, are you familiar with this 
statistical information that in 1999, 99 HMOs withdrew or 
reduced service, leaving 407 seniors in a lurch?
    Mr. THOMPSON. You are talking about Medicare+Choice, I 
believe?
    Ms. TUBBS JONES. Excuse me. With regard to HMO, yes. I 
switched my statement a little bit. I started out saying that 
HMOs with Medicaid have run away from my constituents in Ohio. 
My question now is, are you familiar with the fact that under 
the Medicare+Choice program which began with 2.4 million 
beneficiaries, many have been forced out of Medicare, and that 
in fact in 1999, 99 HMOs withdrew or reduced their service, 
leaving 407 seniors without coverage?
    Mr. THOMPSON. I don't know the exact statistics that you 
are referring to, but I am fully cognizant, Congresswoman, of 
the fact that Medicare+Choice has had a reduction in companies, 
reduction in HMOs and of course invariably a reduction in 
subscribers. I do not know the exact number in Ohio.
    Ms. TUBBS JONES. So, clearly since you are familiar with 
that information, many of us on the Democratic side have been 
accused of trying to scare seniors about HMOs, when in reality 
there is sufficient data to support the fact that HMOs have run 
out on Medicare recipients and that we need to be concerned 
about their conduct. Is that a fair statement, sir?
    Mr. THOMPSON. It is partially fair. The other part of it is 
that the Congress and the administration have not put enough 
money into Medicare+Choice for the companies that do offer the 
HMOs to make a return on their investment. As a result of that, 
they were going broke; and instead of going broke, they 
withdrew. So, there is enough blame to go around.
    In regards to the reduction in size, yes, they have, from a 
little over 15 percent down to a little over 11 percent of the 
population. Those seniors that have chosen Medicare+Choice 
programs still in business and the Medicare beneficiaries who 
have them still argue very strongly, very forcefully, that they 
like their Medicare+Choice and they like the choice, part of 
it.
    Ms. TUBBS JONES. I don't have but a little bit of time, and 
so if you could just make your answers a little bit shorter, I 
would be appreciative. Let me say this to you, sir. The 
important part of all of this is that we as a government have 
not allocated sufficient dollars to health care, so that we 
have 41 million people in this country without any kind of 
health care. That is a fair statement, is it not, sir?
    Mr. THOMPSON. There is no question we have 41 million--40 
million Americans currently that are uninsured, and we have put 
forth a plan in this administration of $89 million to address 
that.
    Ms. TUBBS JONES. So, are you saying with the $89 million we 
will cover all of the 41 million who don't have any health 
care?
    Mr. THOMPSON. I am not. I am also saying that we are 
addressing that issue----
    Chairman THOMAS. On the Chair's time to make sure that the 
record is accurate, we are not talking about 41 million people 
who don't have health care. It is 41 million who are without 
health insurance.
    Mr. THOMPSON. That is correct.
    Chairman THOMAS. Or whatever the number is. Now, the 
problem with that--and I will agree with the gentlewoman from 
Ohio that they oftentimes have to get their health care in the 
most expensive way, in emergency rooms and other places. It 
isn't timely, and it is a problem. That number is a number who 
are uninsured, or something close to it, not those who don't 
have health care. Thank you.
    Ms. TUBBS JONES. Well, some would argue, Mr. Secretary, 
that the health care they provide is like having no health care 
at all, would they not?
    Mr. THOMPSON. That is up to the individual, Congresswoman. 
I would point out that the tax credit proposal that is advanced 
by the President would take 6 million of those 40 million and 
give them health insurance, if the Congress would adopt it.
    Ms. TUBBS JONES. The other 35 who don't have any money to 
pay health care up front wouldn't have any. I don't want to get 
lost in a discussion that I did not create.
    Mr. THOMPSON. It is a step. I don't see anything else out 
there right now, and I am saying that we are advancing 
proposals to solve the problems, and that is what my Department 
is trying to do.
    Ms. TUBBS JONES. Mr. Chairman, do I have some more time? I 
believe you said it was on your time.
    Chairman THOMAS. Sure.
    Ms. TUBBS JONES. Thank you very much. Let me ask you, Mr. 
Secretary, it says the--in your statement on page 5, the 
administration is very interested in updating Medicare to 
reflect the insurance protections offered in the private 
sector. This system would modify and rationalize cost sharing 
for beneficiaries who need acute care. It would also eliminate 
cost sharing for preventive benefits and on and on and on.
    What insurance protections do you believe are provided in 
the private sector that ought to flow into people who have 
Medicare?
    Mr. THOMPSON. We think seniors should have the same 
opportunity and the same health plan as you do, as the 
President does, as I do, and every one of the Congressmen. We 
believe every senior should have the capability and the option 
to have the same benefits as Congress and the administration.
    Ms. TUBBS JONES. So, for example, Members of Congress's 
monthly premium is $98.93. The seniors ought to be paying 
$98.93. There is a monthly premium deductible, none for 
Congresspersons, but under the plan you propose there is $275 
for seniors, or would it be none? Last question.
    Mr. THOMPSON. Well, there is no question that there are 
going to be some payments made as there are currently, and 
there is no question that the administration has put in $400 
billion to subsidize those drugs. There is no question that you 
have a selection, I believe, of 12 to 15 different health 
insurance programs, as I believe seniors should have.
    Ms. TUBBS JONES. If they can afford to pay for it.
    Mr. THOMPSON. Well----
    Ms. TUBBS JONES. Thank you very much, Mr. Chairman.
    Chairman THOMAS. Thank the gentlewoman. To underscore the 
point the Secretary made, the Federal Employees Health Benefit 
Program offers a smorgasbord of various programs, preferred 
provider organizations (PPOs), HMOs, a number of others, and 
obviously the services are different and each individual is 
able to pick and choose that health program that fits their 
needs.
    One of the difficulties with Medicare is a ``one size fits 
all,'' when in fact you have a very diverse lot who happen to 
be seniors today. The gentleman from Florida wish to inquire?
    Mr. FOLEY. Thank you, Mr. Chairman, I do. I welcome the 
Secretary here, particularly in light of the fact that he has 
been so articulate on preventative health care. We have had a 
lot of discussions on this issue. I think some of my colleagues 
on both sides have minimized your commitment to that, and I 
want to thank you, because you recognized the importance, as my 
colleague John Lewis and I have fought for osteoporosis 
screenings and glaucoma screenings, to add that into Medicare.
    Let me also underscore--and I think what is important as we 
discussed, the last speaker and the Chairman so adequately 
presented, Members of Congress do have an insurance plan and a 
prescription drug coverage, and I have never heard one of them 
refer to it as being forced into a plan. I have never heard one 
of them reject it. I know there are a lot of wealthy people who 
service in Congress, but none I think has passed on the 
opportunity to be an insurance model.
    Mr. Scully was mentioned, and I hope he is clearly aware, 
faint praise is sometimes deadly in this building. ``We have 
zero desire to push people into HMOs'' was his statement to the 
Senate. I believe that stands, and I know you are of the same 
mindset.
    All seniors will have access to prescription drugs, whether 
through Medicare, managed care, HMOs, PPOs. I know we are all 
on the same wavelength on that. Is that correct?
    Mr. THOMPSON. That is absolutely correct, and thank you for 
saying that, Congressman.
    Mr. FOLEY. We have a lot of people in Florida that are 
anxious to hear those words, and I know you are a man of your 
word. Senator Hagel and I had prepared, a couple years ago, a 
prescription drug discount card.
    Mr. THOMPSON. Yes, you did.
    Mr. FOLEY. We introduced it to Congress. The White House 
adopted it as a proposal. A recent court ruling indicated that 
it was out of order because Congress has not authorized it. I 
have reintroduced the plan. I am encouraged by the opportunity, 
and hopefully we will have quick hearings so we can put on the 
table a chance to have seniors have access to prescription 
drugs now at a discount.
    Now, other groups have come out strongly opposed to it. 
They say it is a sham, it is an attempt not to provide 
prescription drug coverage. Well, I ask the American 
Association of Retired Persons--who offers discounts to their 
Members if they join their plan, discounts on food and lodging 
and travel benefits--if it is so good in their arena, why isn't 
it good for prescription drug coverage? I ask the millions of 
Americans who are at Costco and Sam's Wholesale Club, who buy a 
Membership card and then enjoy discounts on a wide variety of 
whole products, why it is such a terrible idea when we have it 
now offered to seniors in a discount setting.
    So, you said last time that with an authorization, you 
could probably have a drug discount card up and running within 
30 to 60 days. If this Congress passes that plan, can you still 
live with that guideline?
    Mr. THOMPSON. Yes, we can.
    Mr. FOLEY. That will provide real relief today?
    Mr. THOMPSON. Yes, it would, Congressman.
    Mr. FOLEY. I know why the other side doesn't like it, 
because it takes away the sting of their argument. It is 
interesting in this building that they call deficits--when it 
is a tax cut to the very seniors in my community who have 
actually thanked me for the conversation on relieving them of 
the taxation on dividends; because they say, if I am given more 
in my own wallet, I can go to whatever pharmacy I want, buy the 
drugs I need, pay my rent and food and other things, thanks to 
the fact that you are taking away a tax on the income that I 
hopefully will be able to use in the future. All of a sudden, 
tax cuts for the rich is the nomenclature around here, yet I 
always heard of dividend stocks as for widows and orphans, 
people who needed the income to help them in their golden 
years.
    So, they want to spend $900 billion on prescription drugs, 
but they don't call that a deficit spending proposal. They call 
that enhancements. So, I love the way this place works.
    All I can say to you, Mr. Secretary, we are going to have a 
good time, because we are going to in fact bring prescription 
drugs to seniors through a discount card. Then we are going to 
ramp up our proposal to provide--which the President 
articulated--with the $400 billion of new spending.
    So, if people would rather play policy than politics, I 
think we can get something done. I know they have all left, 
mostly. Pete, I am glad you are still here, but I know at the 
end of the day, if people are serious about helping seniors, we 
can get it done.
    Finally on the comment about no health care for people, 41 
million people, there is emergency room service always provided 
to anyone regardless of ability to pay, race, creed, color, 
national origin. We also have health organizations within our 
own community, Palm Beach County Taxing District. We also have 
Medicaid. We also have Medicare. We have veterans' health care. 
So, anybody that suggests 41 million people are out there 
without any coverage is absolutely not understanding the facts 
on the table.
    So, with that, if you have a minute to respond, unless the 
Chairman would like to interrupt and give me some more time, I 
would love to hear your thoughts on some of those proposals.
    Mr. THOMPSON. Congressman, first off, thank you for your 
passion in the area of preventative health. This is something 
we have to do. I am so committed to it, because I think we can 
save so many dollars but improve the quality of health of all 
citizens in America by watching what they eat, reducing their 
smoking, or not smoking, and increasing their exercise, we can 
really improve the quality of health.
    I love your passion on the drug card, and I have yet to 
find anybody, whether it be 10, 15, 20 or 25 percent that would 
not take the discount, and I thank you for it and I hope you 
pass it.
    I am committed to coming in with an uninsured proposal. We 
have got a very modern Medicaid proposal, and the Medicare 
thing is--Medicare proposal will be coming. I want to work with 
you, and I want to work with all Members on this Committee, and 
I am confident with those individuals that really want to get 
something done, we can get something done this year and we can 
improve the quality of health for all citizens, especially the 
seniors in America.
    Chairman THOMAS. Thank the gentleman. The Chair would 
recognize for the next and the last word the gentleman from 
California.
    Mr. STARK. Thank you, Mr. Chair. Just a couple of things 
very quickly, Mr. Secretary. I was quite disappointed to learn 
that you had told your intermediaries to stop providing the 
information service to the seniors when they call in on the 800 
numbers, providing an information service and publishing 
booklets that will explain the very complicated options that 
are available. I think that is penny-wise and pound-foolish, 
and I hope that you would consider----
    Mr. THOMPSON. I don't think we did, Congressman--we have 
not, Congressman. The New York Times article was just plain 
wrong.
    Mr. STARK. Was incorrect. I am happy to hear that.
    Mr. THOMPSON. In fact, we are doing more of it, 
Congressman.
    Chairman THOMAS. Incorrect means wrong. Right?
    Mr. STARK. I think it is a service that should be provided.
    Mr. THOMPSON. Absolutely. In fact, we are doing much more. 
In fact, we are putting it in many languages Congressman Stark.
    Mr. STARK. Thank you.
    Mr. THOMPSON. We are expanding it rather than reducing it, 
sir.
    Chairman THOMAS. Do you have another one?
    Mr. STARK. You are doing the Lord's work.
    Second, I would hope that in the--in your urgency to inform 
people, that you and Chairman Thomas would say that within, 
say, 2 weeks after you all decide what this drug benefit will 
be, that you would return with Mr. Scully and we would have 
another hearing. I know we are crowded on the schedule, but if 
we could have a couple hours of hearing once that--just on the 
drug benefit once it is determined. I think you saw the 
interest on both sides today, and I hope you will find time to 
get together with Chairman Thomas, Mr. Scully, and come back so 
we can then get all the details on the drug benefit when it is 
finalized. Will you agree with that?
    Mr. THOMPSON. I cannot agree with what the Committee is 
going to do, that is completely up to the Committee Chair; but 
if you want me to come back to see you, Congressman, I will be 
more than happy to do that. In fact, you are from Wisconsin. I 
would love to come and see you, Congressman.
    Chairman THOMAS. I would tell the gentleman that it is my 
understanding and certainly the understanding of the majority 
that what we want to do is to improve Medicare in a number of 
ways, including prescription drugs.
    The way in which you asked the question, which said we 
would only have a hearing on the prescription drug portion, 
would I believe shortchange the American people, when all of 
the other changes that we want to make would be included in 
that bill. I will tell the gentleman from California that we 
certainly will have hearings. We will make the request, 
depending upon time and circumstances. We always enjoy having 
the Secretary with us. I am sure that if he is not able to 
physically, we will have a written statement, but my goal would 
be to arrange the time so that the Secretary could be with us 
when we look at the legislation which would help in making 
Medicare a better product for seniors in a number of ways, 
including making available prescription drugs in a far broader 
way than they are currently available under Medicare.
    The assumption that there are no drugs available under 
Medicare is, of course, an inaccurate one. Excuse me, it is 
wrong.
    Mr. STARK. The sooner the better, Mr. Chairman, and we will 
be glad to----
    Chairman THOMAS. Appreciate that.
    Mr. STARK. Thank you.
    Chairman THOMAS. Thank you. With that, the--no further 
questions, the hearing is adjourned. Thank you very much, Mr. 
Secretary.
    [Whereupon, at 12:10 p.m., the hearing was adjourned.]
    [Questions submitted from Messrs. Crane, Cardin, and 
Doggett to Mr. Thompson, and his responses follow:]

               Question Submitted by Representative Crane

    Secretary Thompson, as you may know, some Members of this Committee 
have expressed their concerns about physician-owned hospitals that 
specialize in specific health care services. In particular, some have 
suggested that such hospitals are a threat to existing full-service, 
community hospitals. As someone who believes that innovation and 
competition drive quality results in the health care marketplace, I 
hope Congress and the Bush administration will think carefully about 
advocating legislative or regulatory changes that will protect the 
status quo and stifle innovation rather than ensure a vibrant health 
care marketplace both now and for the future.
    I believe it is worth noting that not all so-called specialty 
hospitals are the same. For instance, I am aware of some specialty 
hospitals that are licensed as general acute care hospitals with 
around-the-clock emergency rooms that simply focus on a particular area 
of health care. This type of innovation has been proven to result in 
better care, leading many non-profit hospitals to form similar joint 
ventures with physician partners.
    The Lewin Group recently finished a study demonstrating how cardiac 
care services provided by a certain group of heart hospitals compare on 
measures of patient safety, quality, and community impact to cardiac 
services provided in peer hospitals, including major teaching 
hospitals, across the country. Attached for the record is a copy of 
this study.
    Secretary Thompson, is this specific example in the Lewin study 
consistent with the Department of Health and Human Services' recent 
initiative to encourage hospitals and other health care providers to 
release quality of care data and patient satisfaction information?
    Attachment
                                 ______
                                 

A Comparative Study of Patient Severity, Quality of Care and Community 
  Impact at MedCath Heart Hospitals Executive Summary--September 2002

    For informational purposes, each of MedCath's hospitals is licensed 
as a general acute care hospital, while the company focuses on serving 
the unique needs of patients suffering from cardiovascular disease.
Purpose
    The Lewin Group prepared this report for MedCath to determine how 
cardiac care services provided in MedCath heart hospitals compare on 
measures of patient severity, quality and community impact to cardiac 
services provided in peer hospitals across the country that perform 
open-heart surgery.
Methods
           LEight MedCath heart hospitals were compared to 
        1,139 peer hospitals that perform open-heart surgery in the 
        United States. Peer hospitals are defined as short-term general 
        hospitals, including major teaching hospitals. Peer hospitals 
        consist of (1) Peer Community Hospitals--946 non-major teaching 
        hospitals and (2) Major Teaching Hospitals--193 major teaching 
        hospitals that have an interns and residents to bed ratio of 
        0.25 and above.
           LTo allow for statistical analysis, the patient data 
        for the peer group of hospitals has been severity adjusted to 
        be comparable to the MedCath data. Using publicly available 
        information, the Lewin Group analyzed fiscal year 2000 MedPAR 
        data using an APR-DRG cardiac case mix index (CMI). Cardiac 
        case mix index calculations were based on Medicare discharges 
        and were calculated using the general approach used by the 
        Centers for Medicare and Medicaid Services (CMS).
           LQuality of care was measured through an analysis of 
        length of stay, mortality, discharge destination and patient 
        complications.
Findings
           LAs a group, MedCath heart hospitals have a higher 
        case mix severity than the peer community hospitals.
           LAfter adjusting for risk of mortality, MedCath 
        heart hospitals on average exhibited a 12.1 percent lower in-
        hospital mortality rate for Medicare cardiac cases compared to 
        the peer community hospitals.

  After Adjusting for Risk of Mortality, MedCath Heart Hospitals (on 
 Average) Exhibit 12.1% Lower Mortality Rates Than the Peer Community 
                               Hospitals
[GRAPHIC] [TIFF OMITTED] T87137A.000

 MedCath heart hospitals also have shorter lengths of stay for cardiac 
 cases (4.12 days) than the peer community hospitals (4.99 days) after 
                        adjusting for severity.

   MedCath heart hospitals, on average, have 17.4% shorter severity-
   adjusted length of stay for cardiac cases than the peer community 
                               hospitals
[GRAPHIC] [TIFF OMITTED] T87137B.001

           LMedCath heart hospitals discharge a higher 
        proportion of patients to their homes as compared to the peer 
        community hospitals (89.6% vs. 72.4%) and transfer a lower 
        proportion of patients to other facilities or home health 
        agencies (7.8% vs. 23.3%). This resulted in approximately $12.2 
        to $15.2 Million in reduced aggregate Medicare expenditures in 
        FY2000 for patients treated in MedCath facilities as compared 
        to the peer group. This is based on an actual savings of $922_
        $1,145 per discharge.
MedCath heart hospitals discharge 23.8% more patients to their homes 
        than the peer community hospitals and transfer fewer patients 
        to other facilities
        [GRAPHIC] [TIFF OMITTED] T87137C.002
        
           LIn addition, an analysis of secondary diagnostic 
        codes shows that patients treated at MedCath heart hospitals 
        typically show lower rates of medical complications versus 
        patients treated at the peer group community hospitals.
           LMedCath heart hospitals ranked near the middle of 
        their respective markets for the total volume of inpatient 
        cardiac care provided to Medicaid and uninsured patients.
Conclusion
    Our analysis found that in comparison to the peer group of 
community hospitals, MedCath heart hospitals had relatively higher 
cardiac case mix severity, lower mortality rates and lower average 
length of stay. We further found that MedCath heart hospitals 
discharged a higher proportion of their Medicare cardiac patients to 
their homes and transferred fewer discharged patients to other 
facilities. This results in reduced aggregate Medicare expenditures for 
patients treated in MedCath heart hospitals as compared to patients 
treated in the peer group community hospitals.
Answer:

    The example you cite is consistent with our Department's initiative 
to encourage hospitals and other health care providers to provide 
consumers with quality of care data. Consumers and purchasers want to 
be able to make more informed decisions, and providers need to know how 
to improve the quality of their care. Through several initiatives at 
the Centers for Medicare and Medicaid Services, the Agency for 
Healthcare Research and Quality, and elsewhere, the Department is 
working in collaboration with others to help bring this about.

                                 

              Questions Submitted by Representative Cardin

The Impact of the administration's TANF reauthorization proposal on 
        States
    Since you testified here last year on the administration's welfare 
proposal, State budgets have deteriorated significantly--to the extent 
States are now facing budget shortfalls approaching $85 billion. In 
addition, unemployment has gotten worse--with a total of 2.3 million 
jobs lost over the last 21 months.
Question

    Given these changes, how can you be confident that States will be 
able to implement the administration's welfare proposal, which imposes 
many new requirements with no new resources?
Answer

    As a former Governor, I know how effective strong work programs and 
the States running them can be, even with fiscal constraints. With a 
renewed focus on work and the inherent flexibility of the TANF program, 
I am confident that States will meet the new requirements and move 
families to independence within the resources proposed in the budget. 
In light of current budgetary constraints and the nation's focus on 
homeland security, the administration's TANF request represents a 
significant commitment and maintains historically high levels of 
funding.
    We believe that States should be able to meet the incremental cost 
of the increased work requirements associated with the administration's 
reauthorization proposal. As I demonstrated in Wisconsin, when States 
implement effective work requirements, and provide needed experience, 
training and supports to clients, the assistance caseload will continue 
to go down making more resources available to support low-income 
working families. Given that TANF funding is based on expenditures at a 
time when welfare caseloads were at their highest levels, and that 
States have significant flexibility in the use of their TANF and Child 
Care and Development Fund (CCDF) dollars, and in the design of their 
programs, meeting this challenge is within the capacity of States. 
Finally, it is important to note that even in the current economy, our 
latest numbers show that caseloads continue to decline.
    As you will recall, both you and the President have said that 
States have enough resources because the ``welfare caseload'' has 
dropped by half while the welfare block grant has remained at the same 
level. However, this ignores the fact that while the number of people 
receiving cash assistance has dropped, the number of people receiving 
employment-related services has grown considerably, which is a stated 
goal of TANF. The TANF program serves both populations. Thus, simply 
talking about those receiving cash assistance does not make any sense, 
especially since the General Accounting Office (GAO) has told us that 
the number of families served by TANF might be twice as large as the 
cash caseload.
Question

    Would you agree that just referring to those receiving cash 
assistance does not fairly represent the number of families that 
benefit from TANF funding?
Answer

    States certainly provide a wide range of services and benefits to 
low-income working families that are not included in the caseload as 
receiving TANF cash assistance. GAO's report to you, ``Welfare Reform: 
States Provide TANF-Funded Services to Many Low-Income Families Who Do 
Not Receive Cash Assistance,'' estimated that: ``at least 46 percent 
more families than are counted in the reported TANF caseload (or 
830,000) are receiving services funded, at least in part, with TANF/MOE 
funds.'' The report also explains that: ``The number of families 
receiving monthly cash benefit payments declined by over 50 percent, 
which made more funds available for non-cash services.'' This 
highlights the critical dynamic of the President's reauthorization 
proposal--effective work programs lead to ``assistance'' caseload 
reductions and enhance a State's ability to fund other services and 
supports.
    The GAO report also noted that the data States collect and report 
on families receiving services does not lend itself to a full count of 
all families served. In PRWORA, Congress defined the data to be 
collected and reported by States to those receiving assistance, and 
limited the Department's authority to collect additional information. 
As a result, we have little information on the number of clients or the 
nature of services and benefits offered by States outside of those on 
the cash caseload.
    Last year, the Congressional Budget Office (CBO) informed us that 
the administration's welfare proposal would cost $8 to $11 billion to 
implement. However, your plan does not include any new resources for 
either TANF or child care.
Question

    How do you expect States to meet this unfunded mandate? Aren't you 
concerned that they might be forced to cut services for the working 
poor to pay for the new requirements on welfare recipients?
Answer

    We do not agree that the administration's proposal creates an 
unfunded mandate. As States implement stronger work requirements and 
move adults into employment, cash assistance caseloads can continue to 
decline, freeing up funding States can use for support services. This 
year's CBO analysis of the budgetary impact of H.R. 4 dated February 
13, 2003, has clarified that the possible additional costs of work 
requirements were based on the assumption that ``states took no action 
to reduce or avoid such costs.'' CBO goes on to clarify that it expects 
States to avoid most or all of those costs and therefore the work 
requirements are not unfunded mandates. In other words, States will use 
the tremendous flexibility that Congress provided in enacting PRWORA to 
meet the new requirements and provide services to the working poor, as 
the administration intended.
    The TANF program has been highly successful in helping low-income 
families move to work, reducing dependency and child poverty, and 
transforming the welfare system to a program of temporary support. 
Thus, we proposed to maintain the basic funding structure and 
flexibility of the TANF program. Our plan builds on State success in 
promoting work by making sure that work expectations are meaningful and 
that States help all families make progress in moving from welfare to 
work. To strengthen families, our plan continues to provide support to 
low-income working families. Our plan even expands these supports by 
ensuring that families receive more of the child support paid by absent 
parents. We also are committing up to $300 million per year in Federal 
and State funding for marriage and family formation activities that 
will give States incentives and program models that they can use to 
develop more effective efforts in these areas. And our plan authorizes 
new waivers that would help States improve the effectiveness and 
efficiency of their cash, housing, nutrition and work force programs.
The Increased Work Requirements in the administration's Proposal
    Last year, 41 of the 47 States surveyed by the National Governors' 
Association said the administration's plan would require 
``fundamental'' changes to their welfare programs. Some specifically 
complained that the proposal would force them to focus on ``make-work'' 
rather than real jobs.
Question

    Did the administration consider the States' concerns when it 
resubmitted the same welfare plan this year?
Answer

    Yes, we did. The Administration's plan was developed after my 
department conducted extensive listening sessions that, I believe, 
allowed for an unprecedented degree of input from the States. The 
listening sessions were designed in concert with the National 
Governors' Association (NGA), the American Public Human Services 
Association (APHSA), and the National Conference of State Legislators 
(NCSL) and involved both oral interaction and written input from nearly 
every State. What we heard as a universal theme was to keep the focus 
on work and to maintain flexibility. The Administration's plan includes 
nearly all of the recommendations made by States and retains the basic 
Federal-State partnership that was a landmark feature of the 1996 
legislation. In that legislation, States were given tremendous 
flexibility to operate their programs, but work requirements were 
established as the core of the TANF program.
    We do not agree that our proposal will lead States to focus on 
``make-work'' rather than real jobs. Our proposal strengthens current 
work requirements and useful work experiences in a wide array of 
programs that help clients build skills. Actual work experience and 
skills enhancement have been demonstrated as critical to work success 
in experiment after experiment. The Administration's plan gives States 
broad flexibility to decide what activities to incorporate into their 
programs. States decide how best to assist recipients in moving from 
welfare to work and toward self-sufficiency. And the proposal continues 
to give States broad flexibility to spend their TANF funds on any 
activity that meets one of the four broad goals of the program.
    Last year the House passed a welfare bill that would require States 
to increase the percentage of welfare recipients in work activities; 
eliminate vocational education and job search from the list of direct 
work activities; not serve legal immigrants with Federal grants; and 
cut an entire family's welfare check for a parent's non-compliance with 
certain requirements.
Question

    As a former Governor, how do you justify all of these infringements 
on State flexibility?
Answer

    I do not agree that our proposal infringes on State flexibility. 
Because work requirements had essentially been eliminated by the 
caseload reduction credit under current law, our proposal does 
strengthen requirements to enable all families to achieve independence 
through work. If we expect parents to leave welfare, we need to help 
them find the best employment that they can in a job that is stable, 
that can lead to job progression, and that will help to move the family 
out of poverty. Our goal is to help parents figure out how to do that.
    States have considerable flexibility in developing self-sufficiency 
plans for families. As a matter of clarification, the administration's 
proposal does not require 40 hours of ``work'' per week. It requires 24 
hours of work and an additional 16 hours in work or other activities 
that achieve a TANF purpose. The difference is not that certain 
activities cannot be counted toward the 40 hours requirement. Rather we 
simply split them up, with work as the central focus. Job search and 
vocational education can then be blended with work activities. In 
addition, we have proposed allowing States to count, as participating 
for up to 3 months, cases in which parents are not working at all but 
are participating in other activities States deem as needed, such as 
job search, training or substance abuse treatment. Such flexibility 
does not exist in the current program.
    In addition, both our proposal and the House-passed bill allow 
States to count on a pro-rata basis those working 24 hours or more. 
This increased flexibility is not allowed under current law.
    With respect to legal immigrants, our proposal continues the 5-year 
bar for most qualified legal immigrants entering the U.S. on or after 
August 22, 1996. The bar applies to Federal means-tested public 
benefits, which include TANF and Medicaid program benefits. However, 
under current law, some qualified aliens are exempted from this 5-year 
bar. They include: refugees, asylees, aliens whose deportation is being 
withheld, Americans, Cuban/Haitian entrants, as well as veterans, 
Members of the military on active duty, and their spouses and unmarried 
dependent children. Additionally, States may choose to use their own 
funds to provide cash assistance to many legal immigrants. If States 
choose to provide immigrants with cash benefits, they can count those 
expenditures toward their State Maintenance of Effort (MOE) 
requirements. And according to the MOE report for FY 2000, State funds 
have been used to help legal non-citizens with food, medical 
assistance, and cash assistance in 12 States.
    With respect to the full-check family sanctions in H.R. 4, this 
provision was not contained in the administration's reauthorization 
proposal.
Extension of TANF Waivers to States
    When you were Governor of Wisconsin, you received a welfare waiver 
under the former AFDC program. You said the waiver was beneficial 
because it provided more flexibility for your State to experiment.
Question

    Do you support allowing States to extend their existing waivers 
under TANF?
Answer

    Because PRWORA has transformed welfare, we don't believe it is any 
longer necessary for States to continue waivers that were initiated 
over 6 years ago. Under the former, prescriptive AFDC program, waivers 
were needed for States to make work requirements a fundamental feature 
of the program and to implement other innovative solutions to enable 
families to achieve independence. That is why as Governor of Wisconsin 
I actively sought and implemented work-focused waivers that encouraged 
families to work and led to historic caseload declines. Under TANF, the 
context for such waivers has fundamentally changed and they are not 
needed. The TANF program provides States with extraordinary flexibility 
to fund and operate a wide variety of work and training activities, and 
to provide supportive services and benefits so clients can get and keep 
a job, and improve their economic circumstances.
    Even when a State's waiver ends, the flexibility of TANF will 
enable the State to meet current requirements with little change in the 
design or operation of its program. Clients receiving assistance 
through Maintenance of Effort (MOE) funds expended in separate State 
programs are not subject to the work requirements. Through a judicious 
use of Federal, segregated MOE funds, and separate State funds, a State 
can fundamentally decide whether and how work requirements apply to 
families in different circumstances. For States with time-limit 
waivers, few or no changes in requirements or exemptions that apply to 
families will be required. For many families, the Federal clock only 
starts when the waiver expires, thus these families may receive 
assistance for 5 years after the end of the waiver. Federal assistance 
can be provided beyond 5 years for up to 20% of the entire caseload 
(including child only cases for whom time limits do not apply). A State 
may use segregated MOE or separate State funds to provide assistance 
without Federal time limit requirements, or remove the needs of the 
parent(s) and continue to use Federal funds for these ``child only'' 
cases.
    The waivers we needed under AFDC were due to restrictive policies 
that limited State flexibility. While TANF has been transformed, our 
concern now must turn to how well States can make TANF work with other 
assistance programs they operate. Other programs have their own and 
sometimes very prescriptive rules that inhibit a State's ability to 
innovate and enable the wide array of these aid programs to work better 
together for the families they serve. As an alternative to extending 
old waivers, the administration proposes new waiver authority that will 
allow States to build stronger, more integrated and effective service 
systems across a broad range of public assistance and training 
programs. States would have broad flexibility to design new strategies 
and approaches for achieving stated program goals.
Proposal of an Optional Child Welfare Grant
    The Administration's FY 2004 budget includes an optional child 
welfare block grant. Similar proposals have been controversial in the 
past because of concerns about undercutting Federal protections for 
abused children and eliminating the relationship between need and 
funding.
Question
    The Administration's plan seems to suggest that if the proposed 
child welfare block grant funding is insufficient, then a State can use 
the contingency fund in the TANF program. Do you think it is a good 
idea to use this funding source considering the TANF contingency fund 
is capped, it is needed for the TANF program, and most importantly, it 
does not currently work as intended?
Answer
    It is reasonable for these two closely related programs with 
similar populations to tap into a single safety net. Our projections 
indicate that--even in an economic downturn and in light of our 
proposal to make the Contingency Fund more accessible to States that 
encounter an additional need for TANF funds--the fund also can easily 
sustain the emergency needs of those States electing the child welfare 
financing option.
    Our design for this proposal reflects our intent that access of the 
child welfare system to the fund be available in only those rare 
circumstances where the State itself is suffering severe economic 
crises and needs assistance to serve abused and neglected children. The 
triggers and other requirements we propose specifically for the child 
welfare financing option would offer safeguards that limit access to 
the fund to truly needy States and only when the crisis is not of their 
own making. For example, poor planning or policy decisions should not 
be rewarded.
    Just as the TANF block grants have provided States the flexibility 
to meet the requirements of a similar population, the child welfare 
financing option is designed to allow States to invest in effective and 
innovative services that prevent child abuse and neglect, prevent 
foster care placement, and when necessary, place children in permanent 
homes. We believe that these investments, over time, will reduce the 
need for more foster care funds.
    In summary, we regard both the child welfare financing option and 
the increased accessibility to the Contingency Fund for TANF programs 
embodied in the House-passed welfare reform bill to offer significant 
steps in program design that effectively provide for unanticipated 
program needs.
Medicare Provider Reimbursements
Question

    On January 24, Rep. Dave Camp and I were joined by 291 other 
Members of Congress in urging immediate, bipartisan action early in the 
108th Congress on Medicare provider payments. Twenty-eight 
of 41 Members of the Ways and Means Committee signed our letter, which 
is enclosed. Last June, the House passed legislation that would provide 
this much needed relief as part of a more comprehensive bill (HR 4954), 
and the Senate introduced similar legislation, but no action was taken 
before the 107th Congress adjourned. I would prefer that 
Congress enact a Medicare outpatient prescription drug benefit. 
Unfortunately, Congress has been unable to reach consensus on this 
issue. As a result, a number of reimbursement reductions have already 
taken effect, and access to hospitals, home health agencies, nursing 
homes, and physician care has suffered. I would urge you to support 
immediate action by Congress and CMS on the adequacy of payments in 
light of the financial condition of these providers, the implications 
for access for Medicare beneficiaries, and the overwhelming bipartisan 
support in Congress for reimbursement restorations.
Answer
    Fairly reimbursing physicians who participate in Medicare is of 
great concern to the Department. To avoid a negative update in the 
Medicare physician fee schedule we had hoped for the possibility of a 
regulatory correction. CMS Administrator Tom Scully and I thoroughly 
explored CMS' options and concluded that the agency had no discretion 
in setting the physician fee update. However, in response to recent 
Congressional action that amended the statutory Medicare reimbursement 
formula, CMS on February 26 issued a regulation that recalculates the 
calendar year 2003 physician fee schedule rates based on a 1.6-percent 
increase to the fee schedule conversion factor--the dollar amount used 
to translate the resources used in providing a service into a payment 
rate. CMS is also sending revised payment files to Medicare carriers to 
allow physicians to be paid at the higher rates for services provided 
to beneficiaries on or after March 1. Because of the change in payment 
rates under this rule, CMS is extending until April 14 the deadline for 
physicians to decide whether or not they want to participate in 
Medicare. Nearly 90 percent of physicians enrolled to treat Medicare 
beneficiaries chose participating status in 2002.
Medicaid Emergency Care Access
Question
    As the author of the prudent layperson standard for emergency care 
that was enacted for Medicare and Medicaid beneficiaries in the 
Balanced Budget Act 1997, I was disturbed by the administration's 
efforts earlier this year to dismantle this projection for Medicaid 
managed care enrollees. This rollback of protections threatened to 
severely curb access to necessary emergency treatment for the poor and 
disabled. In addition, those hospitals that serve this population would 
find that states' coverage limits could place an even greater burden on 
an already frail financial foundation. On January 17, I wrote to you to 
express my deep concern over this decision. To date, I have not 
received a written response. I am pleased that the administration 
rescinded this decision on January 23. However, CMS Administrator Tom 
Scully was recently quoted as saying, The December 20 policy letter was 
very defensible. There's a lot of justification for giving states more 
flexibility. Please advise me as to what action if any your Department 
intends to take in regard to this important standard.
Answer
    In an effort to provide states with increased flexibility to manage 
their Medicaid programs and to facilitate more appropriate use of 
preventive and primary care, CMS notified state Medicaid directors in 
December 2002 that the administration was removing the ``prudent 
layperson'' standard for Medicaid beneficiaries enrolled in managed 
care organizations. However, on January 22, the administration 
rescinded its decision. CMS is enforcing the provisions you authored in 
the 1997 Balanced Budget Act requiring MCOs to provide coverage of 
emergency care services for Medicaid beneficiaries that a ``prudent 
layperson'' would consider necessary.
Beneficiary Education Cutbacks
Question
    I am greatly concerned by a December 24 bulletin signed by two 
senior officials at CMS instructing Medicare fiscal intermediaries that 
to save money all tasks associated with customer service plan functions 
are to be stopped, effective with the receipt of this memorandum. 
Thomas Grissom, director of the Center for Medicare Management, was 
quoted as saying that the directive was needed to stay within our 
budget restrictions. My office has since received a fact sheet 
clarifying the previous directive and assuring us that responses to 
beneficiary inquiries and local support through State Health Insurance 
Programs (SHIPs) will not be affected by budget constraints. However, 
the fact sheet does indicate that Medicare contractors will no longer 
participate in local seminars, and it does not challenge the reduction 
in call monitoring activities, which are used to ensure that correct 
information is given to beneficiaries and providers. I remain concerned 
by an emerging pattern in which mid level managers issue directives to 
rollback beneficiary protections and services, and that these 
directives are neither acknowledged, publicized, nor reversed until 
they are brought to light by the press. Please assess the extent to 
which funding constraints will affect beneficiary education and 
outreach activities for the remainder of FY03 and FY04.
Answer
    Beneficiary education continues to be a high priority for CMS. 
Medicare beneficiaries are increasingly being asked to make complex 
decisions about their health care. Research indicates that many 
beneficiaries do not know where to go to answer their Medicare 
questions. The National Medicare & You Education Program (NMEP) 
educates beneficiaries about their health plan options through print 
materials, a toll-free line, Internet site, and community outreach. The 
program also funds a national ad campaign to raise awareness of what 
resources are available to beneficiaries. In FY 2004, $149.5 million 
will be allocated to NMEP, almost the same funding level as FY 2003. 
This reflects our desire to maintain our beneficiary education efforts 
while funding other priority activities. The majority of funding in the 
program covers the cost of providing telephone services and print 
materials.
Preventive Benefits/Colorectal Cancer Screening
Question
    You have demonstrated an admirable commitment to strengthening and 
improving access to preventive benefits, in particular, colorectal 
cancer screening. I remain concerned that since the enactment of a 
Medicare benefit for screening, participation has only increased by 1 
percent, according to a March 2000 GAO report. Because this benefit has 
been greatly underutilized relative to the 1997 CBO score, I maintain 
that removing barriers to utilization, such as waiving the deductible 
and coinsurance and providing an office consultation visit, which is 
currently covered for diagnostic colonoscopy, would be relatively 
inexpensive. I am hopeful that you will support bipartisan, bicameral 
legislation to effect these improvements that I will reintroduce 
shortly.
Answer
    As you know, preventive medicine is one of my top priorities. I 
believe that disease prevention is one of the most important issues on 
which we can work together. For example, the HHS budget proposes 
efforts to promote healthier lifestyles to help people prevent obesity, 
diabetes and asthma. The FY2004 budget includes a new investment of 
$100 million for targeted disease prevention, and enhanced preventative 
benefits are a focus of our Medicare reform recommendations. Along 
those lines, and to increase utilization of existing services, the 
President's ``Framework for Modernizing and Improving Medicare'' would 
waive all cost-sharing (co-insurance and application of the part B 
deductible) for all covered preventive benefits. Medicare covers 
several colorectal cancer screening procedures, including flexible 
sigmoidoscopies, colonoscopies, and barium enemas, which are currently 
subject to both co-insurance and deductibles. Also, CMS has announced 
its intention to use its national coverage determination process, which 
includes a public comment period, to evaluate the merits of covering a 
new type of fecal-occult blood test for colorectal cancer screening.
Physician Boutique Practices
Question
    Last year, the growing problem of Medicare-participating physicians 
requiring seniors to pay substantial access fees to receive care, came 
to national attention. Your response to my March 2002 letter inquiring 
whether these ``premium'' practices violated balance billing 
protections in current law and urging you to clarify and enforce the 
law included a directive to Regional Administrators that they should 
remain neutral on these agreements if asked by physicians. Since that 
time, these practices have proliferated and are now threatening access 
to care for many of my constituents in Maryland. Physicians who 
participate in Medicare receive taxpayer-subsidized payments; at a time 
when the administration is expressing concern about Medicare's ability 
to meet its current and future obligations, support for these 
``exclusive'' practices should not continue. I would hope that the 
administration would join me in taking action to end Medicare's 
participation in these ``boutique practices.''
Answer
    I appreciate and share your concern about so-called ``premium'' 
practices, and I remain strongly committed to ensuring all Medicare 
beneficiaries have access to the high quality care they need and 
deserve. Physicians have some discretion in their ability to select 
patients under current law, particularly when providing care for no 
covered services. However, we are continuing to monitor these 
``boutique practices.'' Should we uncover any evidence of coercive 
activity, we will consider what responses would be appropriate to 
address the situation.

                                ------                                


                                                   January 24, 2003
Hon. Dennis Hastert
Speaker
U.S. House of Representatives
Washington, DC 20515
Hon. Nancy Pelosi
Minority Leader
U.S. House of Representatives
Washington, DC 20515
    Dear Speaker Hastert and Minority Leader Pelosi:
    We are writing to emphasize our strong support for legislative 
action--as soon as possible--to stabilize the Medicare Program for the 
millions of seniors who rely on it for their health care needs.
    We are seriously concerned that many Medicare beneficiaries in our 
districts are losing access to vitally important health care services 
due to the inadequacy of current Medicare payment rates. As a result of 
payment reductions and inadequate reimbursements, many beneficiaries 
have lost--or are at risk of losing--access to their physicians, 
hospitals, Medicare+Choice plans, nursing homes, home health services 
and other providers on whom they rely for care. To ensure that our 
elderly and disabled constituents do not experience further 
disruptions, Congress must take immediate action to address this urgent 
crisis now that the 108th Congress has convened.
    This issue demands bipartisan action and a comprehensive solution. 
We urge you to assign a high priority to stabilizing the Medicare 
Program for both beneficiaries and providers. Thank you for considering 
our views on this important issue for our Nation's seniors.
            Sincerely,
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             Questions Submitted by Representative Doggett
                                                  February 10, 2003
Mr. Tommy Thompson
U.S. Department of Health and Human Services
200 Independence Avenue, S.W.
Washington, D.C. 20201-0004
    Re: Written Questions Following the February 6, 2003 Ways & Means 
Hearing

    Dear Secretary Thompson:
    Below please find the questions I submit following your February 6, 
2003 appearance at the Committee on Ways & Means Hearing on the 
President's Fiscal Year 2004 Budget. I look forward to your prompt 
response.
Inclusion of Tobacco in the U.S.-Chile Free Trade Agreement
    As you know, in December 2002 the U.S. Trade Representative 
concluded negotiations on the U.S.-Chile Free Trade Agreement. This 
agreement includes the phase out of import tariffs on leaf tobacco and 
manufactured tobacco products. You previously told this Committee that 
HHS was involved in deliberations of an interagency working group 
concerning the U.S.-Chile Free Trade Agreement.
            1. Did HHS conclude that public health would not be 
        adversely affected by the reduction or elimination of import 
        tariffs on tobacco?
            2. Has HHS been involved in similar deliberations regarding 
        other bilateral agreements and the ``Free Trade Area of the 
        Americas'' agreement?
            3. Provide a copy of the memoranda and documents that 
        contain HHS's analyses and conclusions concerning Questions 1 
        and 2.
            4. Provide a complete listing of all agencies and employees 
        within HHS that were involved in reaching the conclusions in 
        Questions 1 and 2.
Other Advice Regarding Tobacco-Related Trade Matters
            5. Identify by date and issue each time since January 2001 
        that the U.S. Trade Representative (USTR) has invited HHS to 
        offer advice on any tobacco-related matter.
            6. For each instance listed in response to Question 5, 
        include a full description of the circumstances and include a 
        copy of the memoranda and documents that contain HHS's analyses 
        and conclusions.
            7. For each instance listed in response to Question 5, 
        include all agencies and employees within HHS that were 
        involved in developing your advice.
Korean Tobacco Business Act
    Your response to my February 2002 questions acknowledged the 
involvement of HHS in discussions regarding changes to the Korean 
Tobacco Business Act, which included a proposal by the Korean 
government for a 40% tobacco import tariff. However, my question also 
asked that you: ``provide a full description of HHS analyses and 
conclusion on this matter, along with any and all documentation. 
Include in this a complete listing of all agencies and employees within 
your Department that were involved.''
            8. As requested in February 2002, please provide the items 
        that were not included in your answers, namely:
                    a. a full description of HHS analyses and 
                conclusion on this matter,
                    b. any and all documentation, and
                    c. a complete listing of all agencies and employees 
                within HHS that were involved.
Framework Convention on Tobacco Control
    Since the negotiations on the Framework Convention on Tobacco 
Control (FCTC) began in October 1999, over 13 million people have died 
from tobacco-related illnesses. In 2002 you told this Committee that 
``HHS is committed to a strong FCTC.''
            9. What position has the HHS taken with regard to banning 
        misleading terms like ``light,'' ``low tar,'' ``mild'' and 
        similar terms on the packaging of tobacco products?
    Illicit trade in tobacco products results in billions of dollars in 
lost taxes while increasing the number of young smokers worldwide.
            10. Does HHS support the inclusion in the FCTC of specific 
        labeling and reporting requirements to allow enforcement 
        officials to track tobacco products? If so, what requirements 
        does HHS support?
International Tobacco Control
    In your response to my February 2002 questions, you indicated that 
the international tobacco control ``needs assessment report'' on China 
was undergoing final review and that you would provide me with a copy. 
You also indicated that the report on India would be completed by the 
end of 2002.
            11. Please provide me with a copy of the China and India 
        reports.
    In your response to my February 2002 questions, you indicated that 
the Fogarty International Center and its collaborating partners would 
prepare a funding plan for the research and training projects on the 
global burden of tobacco use, pursuant to the requirements of section 
2(d) of Executive Order 13193.
            12. Please update me on the progress HHS has made since 
        March 2002 on this initiative.
            13. Please provide me with a copy of documents showing 
        progress since March 2002.
Tobacco and U.S. Public Health
    Nicotine addiction is the leading cause of preventable death in 
America today.
            14. What initiatives has HHS undertaken since March 2002 to 
        reduce this public health epidemic?
Medicare Prescription Drug Coverage
    When you appeared before the Ways and Means Committee on April 17, 
2002, you cautioned against the greater use of government bargaining 
power to lower prescription drug prices for Medicare recipients, as we 
have for veterans and military retirees, because of ``the possibility 
of distorting the market.''
            15. Are you still reluctant to endorse getting the Medicare 
        Program on the side of seniors in negotiating prices with the 
        pharmaceutical industry?
            Sincerely,
                                                      Lloyd Doggett
Answers

    Thank you for your February 10, 2003, letter regarding global 
tobacco control activities at the Department of Health and Human 
Services (HHS). I appreciate the time you took to write and am pleased 
to respond to your questions.
Trade in Tobacco and Tobacco Products
    At the invitation of the Office of the U.S. Trade Representative 
(USTR), HHS has participated in deliberations of the inter-agency Trade 
Policy Staff Committee (TPSC) and Trade Policy Review Group (TPRG) 
related to trade in tobacco and finished tobacco products. Our role in 
the TPSC and TPRG is to advise USTR and other Federal agencies 
regarding the potential public health impact of any tobacco-related 
trade action. Since January 2001, the USTR has consulted HHS on seven 
matters:
    In the spring of 2001, HHS was involved in the interagency 
deliberations around discussions with the government of the Republic of 
Korea regarding the Korean Tobacco Business Act.
    In September 2001, USTR considered a request from the government of 
Indonesia to designate 12 additional products, initially including 
tobacco, for benefits under the Generalized System of Preferences 
(GSP).
    In February 2002, USTR contacted HHS on a request for guidance from 
the U.S. Embassy in Warsaw, Poland, regarding correspondence from 
Phillip Morris that expressed concern over a government of Poland 
proposal to raise the tariff on unprocessed tobacco from 30 percent to 
105 percent.
    During the course of the second half of 2002, HHS participated in 
deliberations on the U.S.-Chile Free Trade Agreement having to do with 
reduction in tariffs on manufactured tobacco products.
    In January and February 2003, HHS participated in deliberations 
regarding negotiations on the Free Trade Agreement of the Americas.
    HHS has also provided initial consultation to USTR regarding 
negotiations on the Central American Free Trade Agreement and the U.S.-
Australia Free Trade Agreement, both of which are at very early stages.
    For our participation in the work of the TPSC and TPRG related to 
trade in tobacco and tobacco products, HHS has not produced any formal 
briefing materials or guidance documents. Below please find a list of 
agencies and employees who represent HHS in these matters:
Office of Global Health Affairs, Office of the Secretary

William Steiger, Ph.D., Director
Melinda Moore, M.D., M.P.H., Deputy Director
Stuart Nightingale, M.D., Chief Medical Officer
Office on Smoking and Health. Centers for Disease Control and 
        Prevention

Rosemarie Henson, M.S.S.W., M.P.H., Director
Terry Pechacek, Ph.D., Associate Director for Science
    As you know, Ambassador Peter Allgeier, the Deputy U.S. Trade 
Representative, chairs the TPRG. I believe he can provide detailed 
information regarding the representation of other Federal agencies, as 
well as any documentation of the deliberations of the TPSC and TPRG.
Framework Convention on Tobacco Control
    Your letter also inquired about the HHS position on two issues 
related to the Framework Convention on Tobacco Control (FCTC)--
proposals to ban certain terms and labeling and to impose reporting 
requirements to track tobacco products.
    The U.S. Delegation supported having a strong provision in the FCTC 
that prohibits false, misleading or deceptive claims on the packaging 
of tobacco products. However; the Delegation did not support language 
that specifically bans certain words or descriptors. We prefer 
permitting each country to determine when and whether such terms are 
used in a deceptive fashion under its own legal standards and to 
determine the appropriate remedy necessary to prevent deception. Our 
position was consistent with Article 11 of the final draft of the FCTC, 
which on March 1 over 170 countries supported for submission to the 
World Health Assembly this May.
    The U.S. Delegation also supported the labeling and reporting 
requirements now included in Article 15 of the FCTC text approved for 
submission to the World Health Assembly. The U.S. worked diligently 
with the European Union, Canada and many other countries on strong 
consensus language on these provisions. These include requirements that 
packets and packages of tobacco products sold on the domestic market 
carry the statement: ``Sales only allowed in (insert name of country, 
sub-national, regional or Federal unit).'' Other requirements include 
monitoring and collection of data on cross border trade and exchange of 
information among customs, tax, and other authorities.
China and India Reports
    Regarding the status of the China report, a final draft is in the 
process of going through clearance within HHS. We will send you a copy 
of the report as soon as it is finalized.
    With respect to the report on India, we have had to change the 
timeline for completion of the report, in part because of turnover in 
the political leadership within the Ministry of Health in India. The 
Centers for Disease Control and Prevention (CDC) has now begun the 
planning process for the India report with significant collaboration 
from the Ministry of Health, and staff from the Office on Smoking and 
Health within CDC will be traveling to New Delhi by the end of March to 
meet with the new Minister and continue discussions and project 
planning. We will share a copy of the report with you as soon as it is 
completed.
Global Tobacco Control Grant Program
    With respect to your inquiry about the global tobacco control grant 
program at the National Institutes of Health (NIH), in July of 2002 the 
NIH Fogarty International Center (FIC) and eight partners announced 14 
new research and training grants to combat the growing incidence of 
tobacco-caused illnesses and death in the developing world. This 
successful initiative demonstrates the commitment of different HHS 
agencies to global tobacco control. (Attach: Press Release)
Tobacco and U.S. Public Health
    Your letter asked what initiatives has HHS undertaken since March 
2002 to reduce tobacco use in the United States. I want to assure you 
that reducing tobacco use, particularly among youth, is key to my 
overall health prevention strategy. The following are some examples of 
our major initiatives:
    HHS worked with the U.S. Office of Personnel Management to 
encourage Federal Employee Health Benefits Plans to include smoking 
cessation coverage in their plans. This action, which began on April 
10, 2001, will provide access for Federal employees to cessation 
services that meet the Public Health Service clinical guidelines, 
published in 2000.
           LThe Centers for Medicare and Medicaid Services 
        (CMS) has developed the Medicare Stop Smoking Program (MSSP), a 
        demonstration study to determine the most feasible and 
        effective smoking cessation intervention for older Americans. 
        At my request, a Smoking Cessation Subcommittee had been 
        established within the Department's Interagency Committee on 
        Smoking and Health (ICSH). The Subcommittee, composed of 
        leading experts in the field of tobacco use cessation from the 
        private and public sector, was charged with making 
        recommendations on how best to promote smoking cessation. The 
        Subcommittee met five times between October 2002 and February 
        2003, including three public meetings in which Members of the 
        public and public health community gave testimony on effective 
        approaches to cessation. The Report draft which came out of the 
        Subcommittee outlines a series of science-based recommendations 
        for a broad and comprehensive approach to tobacco use 
        cessation, such as a Federally funded national quitline, a mass 
        media campaign to encourage cessation, and partnerships between 
        HHS and community organizations to put in place programs and 
        policies that promote cessation.
           LThe National Blueprint for Disseminating and 
        Implementing Evidence-Based Clinical and Community Strategies 
        to Promote Adult Tobacco Use Cessation (National Blueprint) is 
        a consensus document that is the result of a public-private 
        collaboration of Federal agencies--the Agency for Healthcare 
        Research and Quality (AHRQ), the Centers for Disease Control 
        and Prevention (CDC), the National Cancer Institute (NCI), the 
        National Heart, Lung, and Blood Institute (NHLBI), the Health 
        Resources and Services Administration (HRSA), the Substance 
        Abuse and Mental Health Services Administration (SAMHSA), and 
        the Centers for Medicare and Medicaid Services (CMS); and non-
        Federal groups--the Robert Wood Johnson Foundation (RWJF), the 
        American Legacy Foundation (Legacy), and the American Cancer 
        Society (ACS). The National Blueprint provides a common 
        framework for cooperation and coordinated action among all 
        Federal, State, and local: agencies as well as private-sector 
        organizations and individuals interested in taking effective 
        clinical and community steps to reduce tobacco use. We will 
        share a copy of the report with you as soon as it is completed.
           LThe Youth Cessation Evaluation Project is a 
        partnership between the CDC's Office on Smoking and Health, the 
        National Cancer Institute and the Robert Wood Johnson 
        Foundation, with scientific leadership from the University of 
        Illinois at Chicago, to evaluate approximately 50 youth 
        cessation programs across the country. This evaluation project 
        will compare the relative effectiveness of these interventions 
        and provide data to inform best practices for youth cessation 
        programs.
           LThe National Institute on Drug Abuse (NIDA) 
        supports research on the treatment of nicotine addiction by 
        focusing on the testing of nicotine replacement and no nicotine 
        medications in combination with behavioral strategies. NIDA is 
        also studying individual and gender differences in cigarette 
        abstinence. In addition, NIDA is supporting basic research on 
        neurochemical and molecular mechanisms of nicotine addiction, 
        the structure and function of nicotinic receptors (nAChRs) in 
        the brain, and the pharmacologic basis of nicotine addiction. 
        Finally, NIDA projects are examining genetic differences in 
        nicotine sensitivity as well as behavioral genetic studies of 
        smoking behavior.
           LThe CDC's National Tobacco Control Program (NTCP) 
        funds 50 states, the District of Columbia, and seven U.S. 
        territories. Many states are relying more than ever on NTCP to 
        maintain the states' basic capacity to carry out effective 
        tobacco prevention and control programs. The NTCP average 
        funding per states is approximately $1.2 million with total 
        funding for the program at $58 million.
Medicare Prescription Drug Coverage
    I want to assure you that the Medicare Program is always concerned 
for and working on behalf of Medicare beneficiaries. Specifically 
regarding prescription drugs, we strongly support giving all seniors a 
prescription drug benefit, and the President's framework provides real 
relief, more choices, and better benefits. In 2004, it guarantees that 
seniors would benefit immediately from discounts of 10-25 percent or 
more through a Medicare-endorsed drug card. In 2006, the comprehensive 
drug benefit envisioned by the President encourages competition, 
protects the financial security of Medicare, and provides better 
benefits at a lower cost.
    The President's plan encourages the use of effective tools--such as 
preferred drug lists and formularies that are already widely used by 
the private sector--to get lower prices to beneficiaries and reduce 
overall costs. And, under the President's plan, seniors will see lower 
costs by the collective pooling of their purchasing power. What we want 
to avoid are the restrictive features of a government-controlled system 
that lead to (1) higher retail costs or (2) restrictions on access to 
valuable new drug treatments in order to control costs.

                                
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