[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                 A REVIEW OF THE ADMINISTRATION'S FY2007 
                          HEALTH CARE PRIORITIES


                                 HEARING

                                BEFORE THE


                          COMMITTEE ON ENERGY AND 
                                 COMMERCE

                          HOUSE OF REPRESENTATIVES


                         ONE HUNDRED NINTH CONGRESS

                               SECOND SESSION


                              FEBRUARY 15, 2006

                             Serial No. 109-113

      Printed for the use of the Committee on Energy and Commerce


Available via the World Wide Web:  http://www.access.gpo.gov/congress/house


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                    COMMITTEE ON ENERGY AND COMMERCE
                      JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas                      JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida                  Ranking Member
  Vice Chairman                           HENRY A. WAXMAN, California
FRED UPTON, Michigan                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                    RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                      FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky                    SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia                  BART GORDON, Tennessee
BARBARA CUBIN, Wyoming                    BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois                    ANNA G. ESHOO, California
HEATHER WILSON, New Mexico                BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona                  ELIOT L. ENGEL, New York
CHARLES W. "CHIP" PICKERING,  Mississippi ALBERT R. WYNN, Maryland
  Vice Chairman                           GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
STEVE BUYER, Indiana                      DIANA DEGETTE, Colorado
GEORGE RADANOVICH, California             LOIS CAPPS, California
CHARLES F. BASS, New Hampshire            MIKE DOYLE, Pennsylvania
JOSEPH R. PITTS, Pennsylvania             TOM ALLEN, Maine
MARY BONO, California                     JIM DAVIS, Florida
GREG WALDEN, Oregon                       JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                       HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey                 CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan                     JAY INSLEE, Washington
C.L. "BUTCH" OTTER, Idaho                 TAMMY BALDWIN, Wisconsin
SUE MYRICK, North Carolina                MIKE ROSS, Arkansas                       
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
GRESHAM BARRETT, South Carolina

                    BUD ALBRIGHT, Staff Director
                   DAVID CAVICKE, General Counsel
   REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

                              CONTENTS


                                                                    Page
Testimony of:
        Leavitt, Hon. Michael O., Secretary , U.S. Department of 
                Health and Human Services 	                     26
Additional material submitted for the record:
        Leavitt, Hon. Michael O., Secretary, U.S. Department of 
                Health and Human Services, response for the record  102

                 A REVIEW OF THE ADMINISTRATION'S FY2007 
                          HEALTH CARE PRIORITIES


                       WEDNESDAY, FEBRUARY 15, 2006

                         HOUSE OF REPRESENTATIVES,
                     COMMITTEE ON ENERGY AND COMMERCE,
                                                              Washington, DC.

        
	The committee met, pursuant to notice, at 2:00 p.m., in Room 
2123 of the Rayburn House Office Building, Hon. Joe Barton 
[chairman] presiding.
	Members present: Representatives Hall, Bilirakis, Upton, 
Stearns, Gillmor, Deal, Whitfield, Norwood, Shimkus, Wilson, 
Fossella, Radanovich, Walden, Terry, Ferguson, Otter, Murphy, 
Burgess, Blackburn, Dingell, Waxman, Markey, Pallone, Brown, 
Rush, Eshoo, Stupak, Engel, Wynn, Strickland, DeGette, Capps, 
Allen, Schakowsky, Solis, Gonzalez, Inslee, Baldwin, and Barton.
	Staff present:  Chuck Clapton, Chief Health Counsel; Melissa 
Bartlett, Counsel; Ryan Long, Professional Staff Member; Nandan 
Kenkeremath, Counsel; Bill O'Brien, Research Analyst; David 
Rosenfeld, Counsel; Brandon Clark, Policy Coordinator; Chad 
Grant, Legislative Clerk; John Ford, Minority Counsel; Chris 
Knauer, Minority Investigator; Purvee Kempf, Minority Counsel; 
Amy Hall, Minority Health Professional Staff Member; Bridgett 
Taylor, Minority Health Professional Staff Member; Jessica 
McNiece, Minority Research Assistant; and Jonathan Brater, 
Minority Staff Assistant.
	CHAIRMAN BARTON.  The committee will come to order.  The 
chair recognizes himself for a five minute opening statement and 
then we will recognize Mr. Dingell for a five minute opening 
statement.  Then all the members who wish to make an opening 
statement will be recognized for one minute.  Let us see as I set the 
clock.  
	Good afternoon, I want to begin by welcoming the Secretary of 
Health and Human Services, the Honorable Michael Leavitt, to the 
Energy and Commerce Committee.  We look forward to working 
with you this year and we look forward to hearing from you today 
about the Administration's fiscal year 2007 health care priorities 
budget.  I want to thank you for your assistance in developing the 
recent reform package that we put in place for the Medicaid 
Program.  As a former governor, you understand and appreciate the 
need to improve this program.
	Through the passage of the Deficit Reduction Act, we are 
beginning to sustain Medicaid for those people who most often 
need the health care, and to get good health care through good jobs 
in a thriving economy instead of a Government welfare program.  
Reforms that we have adopted recently are beginning to rescue the 
program from the threat of financial collapse that has drug the 
program down over the last 10 to 15 years.  We look forward to 
working with you in the future to implement this program and also 
to working with the governors of the 50 States to implement the 
program.
	I want to highlight some of the changes in the law that has not 
yet received the public attention that they deserve.  According to 
the Congressional Budget Office, 115,000 disabled children 
covered by the Family Opportunity Act will receive improved 
health care services as a result of the recently passed Deficit 
Reduction Act.  The new law will provide access to new home and 
community based care to 120,000 additional individuals who will 
facilitate 100,000 nursing home residents to return to their 
communities through the Administration's Money Follows the 
Person Administration Program.  These are the true results of 
Medicaid reform.  Better access for better care for those in our 
society who need our assistance.
	There is still much to do to improve long-term health care 
service delivery and financing, as well as to promote Medicaid 
managed care.  I have received your proposals regarding additional 
improvements to the Medicaid program.  I look forward to 
working with you this year on some of those programs.
	This year, the Secretary and the Administration will also begin 
to implement the Medicare prescription drug benefit.  Making this 
program succeed is a high priority of yours; it is a high priority of 
this committee that I chair.  Since it began, critics have tried to 
make patients believe that they are not smart enough to understand 
the new Medicare drug benefit, that it would provide inadequate 
coverage, and that signing up is not worth their time because it 
cannot save them any money.  The critics are wrong about this.  
They were wrong when they complained about the Medicare 
prescription drug card.  They were wrong when they said nobody 
would offer any insurance plan, and they are wrong now.  Some 
sense political advantage in condemning the program and others 
cannot bring themselves to admit that free markets actually work.  
Transparency in competition will drive down prices and provide 
lower costs to consumers.  Even if the critics do not get it, the 
Medicare beneficiaries certainly appear to be getting it.  That is 
why over 3.6 million Medicare beneficiaries have already signed 
up for the new benefit.  You told me earlier today that there are 
close to 24 million Americans that have been enrolled in the 
program through one means or another, and enrollment is 
increasing at approximately 250,000 people per week.  That 
sounds like a success story to me.  If you add that to the fact that 
the premium which we estimated was going to be $37 a month is 
now down to an average of $27 a month, that appears to me again 
to be a successful program.
	This is a huge undertaking and there are going to be glitches.  
My goal is the same as yours, get rid of those glitches.  The 
committee is going to work closely with you and with Dr. Mark 
McClellan at CMS to get these glitches noticed, number one, and 
solved, number two.  We will have the first of what will probably 
be several hearings on that specific topic on March the 1st when 
Dr. McClellan is going to testify before the Health Subcommittee.  
I expect at that hearing that we will ask him some very direct 
questions about where the problems are and what is being done or 
has been done to fix those problems.
	Another high priority for this committee this year is going to be 
the reauthorization of the National Institutes of Health and its 
related programs.  I want to restate my deep commitment to 
reauthorizing the NIH and would ask your assistance in working 
out the technical details so that we can enact this long overdue 
legislation.  In addition, this committee needs to authorize the 
Ryan White Care Act.  I believe that funding unauthorized 
programs is not a responsible practice and I anticipate that the 
committee will work to reauthorize that program this year.
	I also intend to work with you and your agency on ways to 
continue to reform Medicare reimbursement and particularly the 
focus on position payment reform.  In order to preserve access to 
Medicare services for future generations, we must look at how we 
are spending our Medicare dollars today and what the incentives 
are to our physician community to continue to provide quality 
health programs and care for our senior citizens.  Another priority 
of the committee is going to be to work with you and your agency 
on the proposals outlined in the Administration's budget to provide 
consumers with greater access to comparative price and quality 
data about their health care providers.  I could go on but my time 
has expired.
	Welcome to the committee and we look forward to your 
testimony and the questions that follow it as soon as every member 
has been given a chance to make an opening statement.  With that, 
I want to recognize the distinguished Ranking Member of the 
committee and Dean of the House that has served the longest 
continuous service in the House of Representatives, the Honorable 
John Dingell of Michigan.  
	[The prepared statement of Hon. Joe Barton follows:]


PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, 
COMMITTEE ON ENERGY AND COMMERCE

	Good afternoon.  Let me begin by welcoming Secretary 
Michael Leavitt today to the Energy & Commerce Committee. We 
look forward to hearing him testify about the Administration's 
Fiscal Year 2007 Health Care Priorities.
	First, Mr. Secretary, I want to thank you for your assistance in 
developing the important reforms we put into place for the 
Medicaid program starting this year.  As a former governor 
yourself, you understood and appreciated the need to improve this 
program.   Through passage of the Deficit Reduction Act, we will 
sustain Medicaid for those people who often need health care the 
most and can afford it the least.  I want many more Americans to 
get their health care through good jobs in a thriving economy 
instead of from a government welfare program, but we will always 
need Medicaid to help the poor and disadvantaged.  The reforms 
we adopted to rescue the program from the threat of financial 
collapse are the same ones that Democratic and Republican 
governors all requested.  I look forward to working with you to see 
that the governors get the tools they need to better manage the 
program and deliver its benefits to the poor of their states. 
	I want to briefly highlight at least some of the changes in the 
law that have not recently received the public attention that they 
deserve.  According to the Congressional Budget Office, 115,000 
disabled children covered by the Family Opportunity Act will 
receive improved health care services.  The new law will provide 
access to new home and community based care to 120,000 
individuals; and it will facilitate 100,000 nursing home residents to 
return to their communities through the Administration's Money 
Follows the Person Demonstration.  These are the true results of 
Medicaid reform -better access to better care for those who most 
need our assistance.
	There is still much to be done to improve long-term care 
service delivery and financing as well as to promote Medicaid 
managed care.  I have received the Administration's proposals 
regarding additional improvement to the Medicaid program and I 
look forward to working with you this year on them.  
	This year the Secretary and the Administration also are 
required to administer the new Medicare prescription drug benefit.  
Making this program succeed is a high priority of yours, and it is a 
high priority of mine, too.   
	Since it began, critics have tried to make patients believe that 
they are not smart enough to understand the new Medicare drug 
benefit, that it provides inadequate coverage, and that signing up 
isn't worth their time because it cannot possible save them a dime.  
The critics are simply wrong.  They were wrong when they 
complained about the Medicare prescription drug card.  They were 
wrong when they said nobody would offer any insurance plans.  
And they are wrong now.
	Some sense political advantage in condemning the program, 
and others can't bring themselves to admit that free markets, 
transparency and competition will drive down prices and provide 
lower costs to consumers.  Even if the critics don't get it, Medicare 
beneficiaries certainly do.  That is why over 3.6 Million Medicare 
beneficiaries have already signed up for the new benefit.  That is 
also why the premiums that these beneficiaries are paying have 
dropped from the initial estimate of $37 down to an average of $25 
per month.  
	The implementation of this new drug benefit was a huge 
undertaking, and it has had its share of glitches.  My goal is the 
same as yours: Get rid of the glitches.  The Committee will work 
closely with the Secretary and Dr. Mark McClellan at C-M-S to get 
problems noticed, examined and solved, and to do it all sooner 
instead of later.  We will have the first of what will likely be 
several hearings on this topic on March 1st, when Dr. McClellan 
will testify before the Health subcommittee.  I expect that we ask 
him very direct questions about where the problems have been and 
what C-M-S is doing to fix them.  The Energy & Commerce 
Committee and its chairman are committed to doing whatever it 
takes to make sure this program provides the benefits that 
Medicare beneficiaries expect and deserve. 
	Another high priority for the Committee will be the 
reauthorization of the National Institutes of Health (NIH) and 
related programs.  I want to restate my deep commitment to 
reauthorizing the NIH and would ask for the Secretary's assistance 
in working out the technical details so that we can enact this long 
overdue legislation.  In addition, the authorization for the Ryan 
White CARE Act has now lapsed.  I believe that funding 
unauthorized programs is not a responsible practice, and I 
anticipate that the Committee will work to reauthorize these 
programs this year.  
	I also intend to work with you this year on ways to reform 
Medicare reimbursement, and particularly focus on physician 
payment reform.  In order to preserve access to Medicare services 
for future generations, we must look at how we are spending our 
Medicare dollars today and what are the incentives for providing 
quality health care.  
	Another top priority of the Committee will be to work with you 
on the proposals outlined in the Administration's budget to provide 
consumers with greater access to comparative price and quality 
data about their health care providers.  I believe that with the 
development of health savings accounts and similar initiatives that 
encourage patients to become consumers, we have the potential to 
revolutionize the delivery of health care in this country.  If these 
models are to succeed, however, we absolutely must be able to 
give patients the tools that they need to become smarter 
consumers.
	As Chairman of this committee, I plan to work with President 
Bush, Secretary Leavitt, Members of Congress, and our health care 
colleagues to work to ensure our citizens continue to have access 
to the best health care in the world.  Thank you again, Mr. 
Secretary, for appearing here today. I look forward to hearing your 
testimony.

	MR. DINGELL.  Thank you, Mr. Chairman.
	Good afternoon, Mr. Secretary.
	Forty-six million Americans are uninsured.  Six million more 
Americans have become uninsured since President Bush took 
office.  The public health infrastructure and all of its programs are 
limping.  The President's Budget moves us in the wrong direction.  
	After signing into law reconciliation legislation with $28 
billion in cuts to Medicaid over the next ten years, the President 
has returned with a fiscal year 2007 budget that makes another $42 
billion in cuts to a program that provides health insurance for more 
than 58 million Americans.  The Congressional Budget Office 
already documented that the first round of cuts would cause 
thousands to lose coverage each year.  These additional cuts will 
likely have that same effect on thousands more.
	Second, the Administration is proposing billions in tax breaks 
to encourage individuals and families to move out of decent 
employer-sponsored coverage into high-deductible health plans in 
the individual insurance market.  For a "mere" $156 billion a year 
we will have a program but will erode employer coverage, 
discriminate against the sick, provide little benefit to those of 
modest means, and increase the deficit.
	Third, the Medicare budget again moves in the wrong 
direction.  The budget fails to include any proposals to fix the 
documented problems in the Part D--D for disaster--drug benefit.  
The budget also fails to include one dime to address the pending 
Medicare payment cuts.  According to the American Medical 
Association, physicians will see payment cuts totaling $102.5 
billion in the next seven years.  This has been ignored by the 
Administration.  Likewise, the budget does not provide any of the 
MedPAC recommended cuts to HMO and private plan payments 
which alone would save $50 billion over that same time.  Instead, 
it proposed $105 billion in cuts over the next 10 years to hospitals, 
skilled nursing home facilities, and other providers all of which are 
vital parts of the Medicare's Fee-for-Service Program that enrolls 
the vast majority of seniors today.
	The President also proposes another increase in Part B 
premium for beneficiaries, the third premium increase brought 
forward by Republicans since 2003.  The budget also proposes an 
automatic cut in provider payments at any time general revenue is 
funding more than 45 percent of the program.
	Fourth, the Centers for Disease Control and Prevention, the 
National Institutes of Health, and the Health Resources and 
Services Administration, the Food and Drug Administration, and 
other Public Health Services agencies all play an important role in 
the protection of public health, yet they get the back of the 
Administration's fiscal hand in this budget.  
	The Food and Drug Administration is supposed to protect us 
every day from bad food, unsafe pharmaceuticals, and other 
dangers of this sort.  The budget does not give us enough to protect 
against counterfeit drugs, adulterated food, or unsafe medical 
devices.  The budget does not do enough to support people 
training, equipment, and facilities that we rely on to protect our 
homeland from public health emergencies that are caused by man 
or nature.  
	The budget does not do enough to support the discovery of new 
and improved treatments and cures for cancer, diabetes, stroke, and 
Alzheimer's, and other diseases that afflict so many of our 
Americans.  In this budget, the National Institutes of Health will 
sponsor less research this year than it did last year.  Clearly that is 
wrong.  The community health centers remain under funded, as do 
the other health safety net public health programs.  
	Finally, the Administration is missing in action concerning the 
catastrophic healthcare situation facing the greater New Orleans 
region still hurting from Hurricane Katrina.  Simply put, almost six 
months after the storm, with billions appropriated for recovery 
efforts, thousands of Americans are now receiving healthcare 
services in such facilities as tents and a city zoo.  Americans 
deserve better from this budget.  They expect better.  And I hope 
we are able to get it for them.  
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  Thank you, Mr. Dingell.
	Mr. Upton from Michigan for one minute as soon as I get the 
clock set.
	MR. UPTON.  Thank you, Mr. Chairman.
	I will use my time early here.  Thanks for convening today's 
hearing, and I welcome the Secretary to be with us for sure.
	I have to say that I know that putting together the HHS budget 
proposal must be a daunting one and some would say thankless 
task with many competing pressures and imperatives facing our 
country today and the difficult choices that obviously have to be 
made.
	There are some very wise investment decisions reflected in the 
President's Budget.  I was particularly encouraged by the proposal 
to provide a $55 million increase in funding for the Office of the 
National Coordinator for Health Information Technology to spur 
the widespread use of electronic medical records and other forms 
of Health IT.  I am strongly committed to that goal because of the 
promise that Health IT has to substantially improve the quality, 
efficiency, and cost effectiveness of our Nation's health care 
delivery system.  A recent Rand study found the widespread use of 
Health IT would save an estimated $168 billion a year, B as in big, 
money that can be reinvested to further strengthen our delivery 
system.
	Obviously, I have some questions about the tough decisions 
you had to make related to the NIH budget and CDC budget and I 
look forward to your answers this afternoon.
	I yield back the balance of my time.
	CHAIRMAN BARTON.  We thank the gentleman.
	The gentleman from California, Mr. Waxman.
	MR. WAXMAN.  Thank you, Mr. Chairman.
	Mr. Secretary, good to see you.  Unfortunately, I am not 
looking forward to your presentation because I think the budget 
that you are presenting to us is not a good budget.  After pushing 
through policies in the Deficit Reduction bill that took away 
protections for seniors and children and people with disabilities all 
in the name of helping States meet the financial burden of 
Medicaid, now the Administration brings us a budget that shirks 
massive cost onto the States.  The agenda is clear, push the cost 
onto the States and let the States shift them onto the beneficiaries 
and once again we ask the least able to bear the burden.
	We have 46 million uninsured, yet this budget cuts support for 
Medicaid.  It undermines the strength of basic Medicare.  It fails to 
address the difficult problems that have become glaringly apparent 
in the Prescription Drug Program.  It endorses massive raids on the 
public treasury with tax breaks for health savings accounts that 
undermine employer base coverage which slashes funds for health 
care programs at work.  It shortchanges NIH in its life saving 
research.  It cuts funds for State programs that provide for child 
immunizations.
	I only have a minute to tell you a few of the things I dislike 
about this budget but I am always pleased to see you.
	CHAIRMAN BARTON.  Thank you.
	The Health Subcommittee Chairman, Mr. Deal of Georgia.
	MR. DEAL.  Thank you, Mr. Chairman.
	Mr. Secretary, I want to thank you for your superb service in 
helping all of us as we work with the Deficit Reduction Act.  You 
were exemplary as was your staff.  You are the kind of public 
servant that I think all of us take pride in acknowledging your 
service and it has been a difficult task.
	I know that some of the questions today may evolve around the 
Medicare Part D and for the benefit of my colleagues, I would 
simply point out that we are going to have a full hearing on that 
subject on March the 1st.  Dr. McClellan is scheduled to testify.  
We will also have representatives from the insurance community, 
representatives from the pharmacy community, as well as perhaps 
representatives from the constituent base itself to testify at that 
hearing.  And I think that will amplify many of the questions that 
perhaps will surface today and we all look forward to that hearing.
	Once again, I thank you for being here today and I look 
forward to your testimony.
	I yield back, Mr. Chairman.
	CHAIRMAN BARTON.  We thank the gentleman from Georgia.
	Does the gentleman from New Jersey wish to make an opening 
statement, Mr. Pallone? 
	MR. PALLONE.  Thank you, Mr. Chairman for holding this 
hearing.
	The priorities laid out in the President's Budget are 
exceedingly misguided in my opinion and prove yet again that 
when it comes to health care, Republicans still do not get it.  The 
President's proposal once more puts Medicare and Medicaid on the 
chopping block, makes radical changes to our health insurance 
market, and eliminates programs that provide critical health 
services to those in need.  At the same time, the President has 
proposed $285 billion in tax cuts that largely benefit the highest of 
earners.  And make no doubt about it, if enacted, this budget will 
leave gaping holes in our Nation's social safety net and endanger 
our most vulnerable citizens while further enriching the wealthiest 
Americans.  Once you break through the President's rhetoric, it 
becomes clear that the only health care priority for this 
Administration is to divest itself of any responsibility to ensure 
every American has access to affordable and quality health care.  
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  I thank the gentleman from New Jersey.
	The Chairman of the Oversight and Investigations 
Subcommittee, Mr. Whitfield of Kentucky.
	MR. WHITFIELD.  Mr. Chairman, I will waive.
	CHAIRMAN BARTON.  Okay, Mr. Norwood of Georgia.
	MR. NORWOOD.  Thank you very much, Mr. Chairman, and I 
will be very brief.
	Secretary Leavitt, we are all very pleased and proud of you and 
appreciate all the hard work you have.  I believe you have probably 
one of right now the hardest jobs in Washington, D.C., between the 
Avian Flu and dealing with the Medicaid and Medicare and all that 
and I thank you for the way in which you have handled it and 
handled yourself.  I look forward to your testimony.
	CHAIRMAN BARTON.  The Ranking Member of the Health 
Subcommittee, Mr. Brown of Ohio.
	MR. BROWN.  Thank you, Mr. Chairman.
	Mr. Secretary, I know you have strongly held views and are 
exceptionally dedicated to your job.  We thank you for that.
	I wish I could comment the Administration's stewardship 
equally commend over our health care system.  First, they write a 
prescription drug law that bypassed the popular reliable and 
efficient insurance program we call Medicare in favor of complete 
and utter chaos.  The drug industry wanted private drug plans.  The 
privatization zealots wanted private drug plans so Medicare 
beneficiaries were forced into private drug plans.  Medicare 
beneficiaries were simply an afterthought.  Then the 
Administration writes a budget reconciliation bill that takes 
medically necessary health care away from the poor, the sick, and 
the elderly while preserving billions in overpayments, not just 
payments, but overpayments to HMOs.  That is not compassion, it 
is not conservative, it is negligent and it is fiscally corrupt.  Now 
the Administration proposes a budget that turns our health care 
system into a country club where the healthy and wealthy get tax 
breaks, the poor and sick can get in line at the free clinic.  Whether 
it is the drug bill, the reconciliation package, or the President's 
Budget, it is clear that the wellbeing of everyday Americans carries 
no weight with Republican leadership.
	Mr. Chairman.
	CHAIRMAN BARTON.  I thank the gentleman.
	The chair notes the presence of Dr. Gingrey, a visitor to the 
committee and Member of the full House.  We welcome him.  
	The chair asks Mr. Ferguson of New Jersey if he wishes to 
make an opening statement.
	MR. FERGUSON.  I do, thanks, Mr. Chairman.
	Mr. Secretary, thank you again for being here.  We welcome 
you and we certainly appreciate your service.  I know how hard 
you have worked on these implementation issues with Part D.  You 
have been traveling the entire country.  You have been working 
tirelessly and we thank you very much for those efforts.
	I have two quick points of interest that I want to just raise.  One 
is how the budget treats pandemic preparedness.  We continue to 
see reports of Asia and Europe about the spread of Avian Flu.  
Thankfully it has been limited to birds and a few human cases have 
been found primarily are people who handle fowl.  But I know you 
would agree, Mr. Secretary, that it remains a matter of time before 
this or some other pandemic strain mutates and it is spread from 
person to person.  I am very interested and concerned about how 
the requested funds will be spent for combating the flu and the 
spread of the flu.
	I also want to just raise a second issue about a new dual 
eligible low income subsidy access problem on the horizon for 
Medicare Part D, specifically for people who need vaccines.  New 
vaccines will now be covered under Part D which may create 
problems for the coverage.  Given that vaccines are largely 
administered in physician's offices and many vaccines need special 
storage requirements, beneficiaries in most cases will not be able 
to purchase them are regional pharmacies like mostly all other Part 
D covered drugs.  Currently the guidance given requires the 
beneficiaries to pay the charges out of pocket at the physician's 
office and then somehow seek reimbursement from their drug plan.  
In effect, their co-pay protections are not relevant or workable at 
this time.
	CHAIRMAN BARTON.  The gentleman's time has expired.
	MR. FERGUSON.  Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  All right, the gentleman from Illinois, 
Mr. Rush.
	MR. RUSH.  Thank you, Mr. Chairman.
	Mr. Chairman, last year's proponents of the budget touted the 
cost of Medicaid and other low income programs as "reform."  
Last year, I asked the question why is the majority for "reform" 
always focused on programs that affect the neediest, most 
vulnerable members of our society.  No doubt this year with this 
budget and the billions of dollars in cuts from Medicaid, Medicare, 
and other social programs the Administration will similarly 
characterize these funding cuts as "reforms."  And so like last year, 
I again ask the question, why is it then when it comes to reform, 
this Administration always wants to reform safety net programs 
and other low income initiatives that protect the poor, the elderly, 
the disabled, and our children?  Why aren't any reforms directed 
towards wasteful programs and initiatives that benefit the wealthy 
and the powerful?
	Mr. Chairman, I do welcome Secretary Leavitt to this 
committee.
	CHAIRMAN BARTON.  We thank you, Mr. Rush.
	The gentleman from Idaho.
	MR. OTTER.  Mr. Chairman, I waive my time and submit my 
statement for the record.
	[The prepared statement of Hon. C.L. "Butch" Otter follows:]

THE PREPARED STATEMENT OF THE HON. C.L. "BUTCH" OTTER, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO

	Thank you, Secretary Leavitt, for joining us today to discuss 
the direction of healthcare in this country for the upcoming fiscal 
year.  I'm glad that we have the opportunity to hear from you about 
the priorities that the Administration has set for this year and to 
share with you those areas which are particularly important to us.  
	Idahoans are overwhelmingly concerned with the high cost of 
health insurance and rising number of people who do not have 
healthcare coverage.  This issue invariably comes up nearly every 
time I talk with a constituent, whether he or she is a small business 
owner, a religious volunteer, a health care worker, or a concerned 
parent.  They share with me their alarm over the growing cost of 
healthcare and their fear that they and those they love will be 
unable to afford or choose the care that they need.
	Healthcare issues are extremely complex, and the cost of health 
insurance plays a major role in the high levels of uninsured in this 
country.  We must look for innovative solutions to this problem, 
and I am pleased at the President's interest in further developing 
Health Savings Account choices for Americans.  The creation of 
tax-free HSAs continues to have a profound impact on our 
healthcare industry, allowing Americans to have more control over 
their health care and providing coverage to those who might not 
otherwise have access to a good insurance policy.  As an advocate 
of personal responsibility and giving individuals more power to 
make the best healthcare choices for themselves, I wholeheartedly 
support the expansion of HSAs into government healthcare 
programs like Medicare and Medicaid.
	In addition, I greatly support the President's proposals aimed at 
encouraging individuals to purchase health insurance.  As a 
businessman, I was able to deduct 100 percent of what it cost me to 
provide health insurance for my employees.  Yet the law currently 
prohibits a single working mother without an employer-sponsored 
health plan from doing the same.  We need to work to create an 
environment in which health insurance is more affordable, and 
extending tax benefits to individuals for the purchase of health 
insurance or a health savings account is a big step in the right 
direction.
	Secretary Leavitt, I look forward to hearing about these 
proposals in more detail and hope to work with you to ensure that 
quality and affordable health coverage options are available to 
people in my state.

	CHAIRMAN BARTON.  All right, the gentleman from Texas, Dr. 
Burgess.
	MR. BURGESS.  Thank you, Mr. Chairman.
	I do have a statement I will submit for the record but a few 
points I want to make in the minute I have and I agree with you, 
Mr. Secretary, these are important investments for the future.  I am 
a big believer in consumer oriented, consumer directed health 
insurance, and I believe there is no greater portability than 
allowing someone to own their own policy.  But in order for 
consumers to make accurate decisions in regard to cost, price, and 
quality, we are going to have to increase the transparency in the 
medical system in this country.  Health information technology, 
something that you have championed and I do agree with, it has 
taken a long time to get that program up and running and it will 
cost significant dollars but I support that effort.  I would urge you, 
though, we need to keep our best and brightest physicians involved 
in the game, particularly in Medicare, if this system is to pay the 
dividends we expect it to.  The same could be said for pay for 
performance.  We have got to find a way to keep physicians my 
age and your age in the system and providing for our patients.  
These are the best trained, the most experienced physicians.  They 
are leaving in droves right now because of reimbursement.  
	Finally, I just have to say as far as the Gulf Coast is concerned, 
I got a Blackberry earlier today about the reopening of the HCA 
Tulane Hospital.  Mayor Ray Nagin asked them what was in their 
coffee.  I do not know what you are taking at Tulane but I want 
some of that.  Mr. Secretary, it is called the private sector.  It is 
called American ingenuity and investment and it works every time 
it is tried.
	CHAIRMAN BARTON.  The gentlelady from California, Mrs. 
Eshoo.
	MS. ESHOO.  Thank you, Mr. Chairman.  I hope you are taking 
good care of yourself.
	CHAIRMAN BARTON.  I am, I lost about 18 pounds.
	MS. ESHOO.  Good for you.  Well, continue doing that.  We 
want you to be well and stay well.
	CHAIRMAN BARTON.  I recommend highly fat-free crackers and 
every form of chicken known to man.
	MS. ESHOO.  Good.  That is great.
	Well with that, welcome Mr. Secretary.  It is good to have you 
before the committee today and I am sure that we are going to have 
many other discussions as well this year.
	First, along with many of my colleagues on the committee, I 
have deep concerns about many, many parts of the President's 
Budget.  I think that there are some opportunities that are really 
lost that the President does not speak to but I hope that the 
Congress and especially this committee will rise to the occasion 
and hopefully with your cooperation on a number of fronts.  
	One of them, one of the spots in the budget where I do find 
some good news is that there is support for personalized medicine 
and in the role genetics will play in health care.  And to be specific 
in that area, the statements of the Administration's policy on S. 
306, the Genetic Information Non-Discrimination Act of 2005.  To 
my colleagues, that passed unanimously in the Senate and the 
Administration obviously supports it and I thank you for that, Mr. 
Secretary.
	I hope that you will be a positive influence--
	CHAIRMAN BARTON.  The gentlelady's time has expired.
	MS. ESHOO.  If I might just finish this statement, this sentence.  
I hope that you will be a positive influence on members of this 
committee to support that legislation, which is H.R. 1227 here in 
the House, to accomplish it.  Thank you. 
	CHAIRMAN BARTON.  The gentlelady from Tennessee, Mrs. 
Blackburn.
	MS. BLACKBURN.  Thank you, Mr. Chairman.
	You know, I think it is unfortunate that some of our colleagues 
today are trying to claim that budget challenges are related to tax 
reductions from '03 and not out of control or unaccountable 
Washington spending.  So just for the record, according to the 
CBO in fiscal year 2005, the Federal Government received more 
revenue than in any other year.  Revenue has increased $274 
billion from '04 to '05.  The tax reductions by this Congress have 
not crippled Federal programs; they have indeed provided more 
money for Federal programs.
	And I do not agree with everything in the President's Budget.  
We must continue working to reform and renew some of the 
entitlement programs that are restraining and work on restraining 
our Federal spending.  And I appreciate the budget steps in that 
direction and I think it is unfair to the American people to hide the 
fact that our existing health and entitlement programs are on a 
sustainable path because they are not, they are on an unsustainable 
path and I thank the Chairman and welcome the Secretary and look 
forward to working with you on the situation.
	CHAIRMAN BARTON.  I thank the gentlelady.
	The gentleman from New York City, Mr. Engel.
	MR. ENGEL.  Thank you, Mr. Chairman and glad you are 
looking so well and you see, you can eat lots of chicken and not 
worry about bird flu.
	I welcome Mr. Secretary and thank you for coming.  I also 
want to associate myself with those on this side of the aisle who 
are looking at the budget and feel very badly about it.  I feel that 
we are going in the wrong direction in terms of providing health 
care.  The uninsured are becoming more and more, and cuts to the 
needy and working people are growing with leaps and bounds and 
I think this is just a very, very bad direction.
	With all due respect to the gentlewoman who just spoke before 
me, it is clear to us that the tax cuts are the reason why the poor 
have to suffer in terms of getting less and less health care.  This 
Administration has made its priority the priority for tax cuts and 
war and therefore there is nothing left to benefit the American 
people in terms of health care, in terms of education, in terms of 
childcare, and all the things that the American people know.  So I 
believe that the priority of the Administration ought to change, 
ought to be considered with health care.  More for health care and 
less for tax cuts.  And while the tax cuts are not the source of the 
entire problem, it is clear that there is so much more revenue 
coming in--
	CHAIRMAN BARTON.  The gentleman's time has expired.
	MR. ENGEL.  --therefore we have these widening deficits that 
are going sky high and crazy.  That has to stop.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  The gentleman from Florida, Mr. 
Stearns.
	MR. STEARNS.  Thank you, Mr. Chairman.
	I am delighted to have the Secretary here and we are all 
anxious to hear from him.
	I appreciate your staff working with my staff over the past few 
years on a Cash and Counseling delivery system that we provided 
that came from Governor Jeb Bush and is used in Medicaid and we 
have incorporated into Medicare to provide beneficiaries with 
flexibility and self design of their own personal care.  And I am 
pleased to see Cash and Counseling provision in major pieces of 
legislation this committee has moved, in first the demonstration in 
Medicare, and then this year in the Deficit Reduction Act in 
Medicaid where we made it a permanent option for Governors.
	Mr. Secretary, in the short time I have left, I just want to talk to 
you a bit about the NIH budget.  I support Chairman Barton's 
plans for the committee to reauthorize the NIH to make it flexible 
and more accountable for our future needs.  I think we all have to 
say to ourselves we doubled NIH so I think we better stop just a 
second and take a breath and say, "Are Americans getting a good 
return on investment here and does the director have the authority 
it needs to manage the program as it should be?"
	So I just leave you with that thought and I thank you, Mr. 
Chairman.
	CHAIRMAN BARTON.  Thank you.
	The gentleman from Texas, Mr. Green.
	MR. GREEN.  Thank you, Mr. Chairman for you and Mr. 
Dingell for holding this hearing on the HHS budget proposal and I 
would like to welcome the Secretary.
	My concern I guess is the health savings account.  It seems like 
HHS has worked for only small portion by 46 million uninsured 
but they cannot reduce our uninsured significantly.  They worked 
for a significant segment of our population and I notice in the poll 
a week ago that the number one domestic concern people have is 
health care.
	One program I do agree with the Administration on and I--we 
support the Health Community Centers Program.  I applaud the 
Administration for increasing funding for health centers and have 
proven so effective in delivering primary and preventative care to 
uninsured and underinsured.  I am disappointed that HCAP 
Program which helps put together collaboratives to develop these 
health centers are again not in the budget but I hope to be able to 
work with the Appropriations Committee and the House and 
Senate to do that.  I am concerned, like a lot of folks are, about the 
deep cuts in children's, graduate, and medical education and health 
preventions but I am looking forward to working with the 
appropriators to restore some of the funding.  
	But Mr. Secretary, I particularly want to thank you and Dr. 
McClellan for coming to Houston shortly after Labor Day. I know 
you were there on Labor Day and with the resources from HHS 
and the Public Health Service and we had a couple of hundred 
thousand folks, evacuees and providing the service and I look 
forward to working with you on our uninsured problem.
	Thank you, Mr. Chairman. 
	CHAIRMAN BARTON.  Thank you.
	The gentleman from Texas, Mr. Hall.
	MR. HALL.  I was just reading the statement for the first time 
that I am going to make here so I will read it the first time, Mike, 
to you if you do not mind.
	I do thank you for coming.  The health care spending, of 
course, is one of the really major areas, one of the largest areas of 
the Federal budget and it is also the most important to citizens of 
our country.  The money that we spend directly affects millions of 
people and it is important that America remain the leader in health 
care research and innovation for years to come.  And as we all 
know, health care spending is only projected to increase in the 
future.  There is just no question there is no way around that.  We 
need to find ways to be fiscally responsible with our health care 
spending while delivering better outcomes.  I know you are 
working toward that too and we have had meetings with you and 
you have been very generous with your time with us, and with this 
committee.  So we are all on one road, and to this end I am very 
pleased to see that the President's Budget contains an increase for 
health information technology.
	There are a lot of inefficiencies in the system that need to be 
addressed that more people can be covered with fewer resources.  
A recent study by the Rand Corporation estimated that if we did 
more to adopt health information technologies then we could save 
$77 billion a year and we would also deliver better health 
outcomes from reduced areas.  As I understand as HHS and 
NICHT are partnering to develop common standards to allow 
systems to work together seamlessly while protecting patient 
privacy.  
	CHAIRMAN BARTON.  The gentleman's time has expired.
	MR. HALL.  And I applaud these efforts and I yield back my 
time.
	CHAIRMAN BARTON.  The gentleman yields back.
	MR. HALL.  Good to see you.
	CHAIRMAN BARTON.  Ms. Capps of California.
	MS. DEGETTE.  Ms. DeGette.  I am going to waive my opening 
statement.
	CHAIRMAN BARTON.  Okay.  I was going in order of 
appearance and I saw you come in after the gavel.  Did you come 
in and leave and come back?  Okay, then the gentlelady from 
Colorado is recognized to waive her opening statement.
	MS. DEGETTE.  I waive my opening statement.
	CHAIRMAN BARTON.  All right.  The gentlelady is recognized, 
Mrs. Capps.
	MS. CAPPS.  Mr. Chairman, thank you for holding this hearing.  
I am going to submit my opening statement for the record and 
welcome the Secretary.  I look forward to the discussion period.
	[The prepared statement of Hon. Lois Capps follows:]

THE PREPARED STATEMENT OF THE LOIS CAPPS, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

        Thank you Mr. Chairman.   
        I am glad that we are holding this hearing today in order to 
discuss our HHS budget priorities for FY2007. 
        Unfortunately, though, the President's proposals reflect a lack 
of real investment for our nation's true current and future health 
needs.
        NIH is being level-funded, which is essentially a cut.  I worry 
about the future of medical research if we cannot even keep up the 
pace with today's needs, let alone tomorrow's.
        The President proposes cutting cancer research, yet we finally 
have evidence that our efforts are working and are beginning to see 
a declining death rate for cancer.
        How can we justify delivering a setback to those efforts?
        Nurse education funding is being level-funded, which is also an 
essential cut.  
        Back in 1974, Congress appropriated the equivalent of 609 
million in today's dollars for nurse education programs.  
        And while the Administration is emphasizing preparedness for 
pandemic flu and the threat of bioterrorism, it seems to be ignoring 
the fact that nurses are first responders and will be critical to those 
efforts.  
        There simply aren't enough nurses now and there certainly 
won't be enough in the future if we cut funding from training and 
retention programs.
        I hope today we can refocus attention to the true priorities of 
our public health infrastructure and ensure that we are doing the 
absolute best we can to serve America's health needs.

	CHAIRMAN BARTON.  All right.  Seeing no Republicans, oh, 
Mr. Murphy of Pennsylvania, do you wish to make an opening 
statement?
	MR. MURPHY.  Real quick, sir, thank you.  All I have is one 
minute right?
	CHAIRMAN BARTON.  Yes, sir, you got one minute.
	MR. MURPHY.  Mr. Chairman, Mr. Secretary, thank you. 
	We all know we have one of the best health care systems 
available with great dedicated folks, but we also recognize that 
some of the issues being presented in the President's Budget is also 
looking at some reform.  When we talk about making reforms here 
with such things as health information technology, working on 
community health centers, it is important that we are aware of the 
idea that these things can save lives by the thousands and save 
money by the tens of billions of dollars.  What that really means 
we have to stop just focusing upon who is paying and we look at 
what we are paying for.  And I hope though that some of the issues 
being addressed today rather than simply reducing care or having 
people talk about reducing care, one of the things that we have 
done is I am the co-chairman of the Congressional Health Care 
Caucus.  It has identified over $300 billion of savings that we can 
have in the health care arena with reforms and it is not a matter of 
reducing care, it is a matter of doing it better and I certainly hope 
today in your comments and your continued commitments, Mr. 
Secretary, we will continue on those things together.  Thank you 
very much.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  Does Mr. Markey wish to make an 
opening statement?
	MR. MARKEY.  I wish to waive.
	CHAIRMAN BARTON.  Okay.  Mr. Allen?
	MR. ALLEN.  Thank you, Mr. Chairman and welcome Mr. 
Secretary.
	The Administration's budget continues on a path of 
dismantling the health care infrastructure in our country and will 
leave more people uninsured and more employers unable to afford 
health care coverage for their employees.  The Administration 
proposes to spend $156 billion over 10 years on a package of 
mostly recycled policies that promote health savings accounts and 
high deductible health plans.  It is an attempt to move people from 
shared risk and shared pooling arrangements to fend for 
themselves in the more expensive and volatile individual market.
	Recent studies indicate that the expansion of HSAs would in 
fact increase the number of uninsured and undermine the existing 
employer sponsored insurance system.  To cut wasteful Federal 
spending, this Administration should simply eliminate the well 
documented overpayments to Medicare HMO's and insurance 
companies and allow the Federal Government to negotiate lower 
prices for Medicare prescription drugs.  But that agenda I suspect 
will have to wait for another Administration.
	I thank you for being here.
	CHAIRMAN BARTON.  Does Mr. Bilirakis wish to make an 
opening statement?
	MR. BILIRAKIS.  No, I will just offer an opening statement into 
the record.  I waive.
	[The prepared statement of Hon. Michael Bilirakis follows:]

THE PREPARED STATEMENT OF THE HON. MICHAEL BILIRAKIS, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA

	Thank you, Mr. Chairman.
	I am pleased that we are here to examine the Administration's 
Fiscal Year 2007 budget proposal for the Department of Health 
and Human Services.  
	I am eager to hear your insights, Mr. Secretary, on the health 
care provisions in the Administration's budget proposal.  I am 
especially interested in learning how HHS continues to address 
problems experienced by Medicare beneficiaries enrolling in the 
prescription drug benefit.   
	This new benefit represents the most significant change to 
Medicare since the program was created.  I supported it then, as I 
do now, because I believe that it will help provide much needed 
assistance to many Medicare beneficiaries, especially the poorest, 
sickest, and those with the highest drug costs.    
	And while those of us who helped create it could reasonably 
expect there to be certain administrative and management 
challenges associated with its implementation, I must tell you that I 
have heard from constituents who have told me that they have had 
trouble getting the prescriptions they need. 
	I am eager to hear what steps HHS has taken to ensure that 
seniors who sign-up for prescription drug coverage get the 
medicine they need, when they need it, at the proper price.  I am 
hopeful that the problems about which I have heard are being 
addressed so that my constituents can obtain affordable 
prescription drugs.    
	I look forward to working with you, Mr. Secretary, and 
members of this Committee as we continue to monitor 
implementation of the prescription drug benefit and determine how 
to meet the health care needs of the American people now and in 
the future.  
	Thank you, Mr. Chairman.

	CHAIRMAN BARTON.  Does Mr. Walden wish to make an 
opening statement?
	MR. WALDEN.  Mr. Chairman, I just look forward to hearing 
the Secretary's remarks.
	CHAIRMAN BARTON.  Does Mr. Terry wish to make an opening 
statement?  He waives, too.
	All right, Mr. Gonzalez?
	MR. GONZALEZ.  Waive opening.
	CHAIRMAN BARTON.  Mr. Inslee?
	MR. INSLEE.  Waive opening.
	CHAIRMAN BARTON.  Ms. Baldwin?
	MS. BALDWIN.  Thank you, Mr. Chairman and Mr. Secretary.
	Our Nation is in the midst of a health care crisis.  Forty-six 
million Americans are uninsured, an additional 16 million are 
underinsured.  In aggregate, 62 million Americans have either no 
insurance, sporadic coverage, or have insurance coverage that 
leaves them exposed to high health care costs.  This is 
unacceptable.  But what is even more unacceptable is that the 
President's Budget proposes harsh cuts to both Medicare and 
Medicaid, programs that actually do provide affordable 
comprehensive health care.  And it offers a reform proposal that 
will make many Americans worse off.  
	I want to say just a few words about health savings accounts.  
In my opinion, the President is proposing to do to health care what 
he proposed last year to do to Social Security and that is moving 
from a system whose fundamental philosophy is promoting the 
common good--recognizing that we are all Americans and we are 
all in this together--to a philosophy of each man, woman, and child 
for themselves, sink or swim if you can.  We must recommit as a 
Nation to a fight for the common good including health care for 
every American and I believe this budget brings us further from 
that goal.
	Mr. Chairman, I yield back, thank you.
	CHAIRMAN BARTON.  The gentlelady yields back.
	Mr. Shimkus?
	MR. SHIMKUS.  Waive.
	CHAIRMAN BARTON.  Mr. Stupak?
	MR. STUPAK.  Thank you, Mr. Chairman.
	Mr. Secretary, welcome.  Briefly, Mr. Secretary looking 
through your testimony you did not say anything about New 
Orleans.  We were down there the 24th through the 26th of January 
and health care is dismal if you can even call it that.  What I see in 
New Orleans is--and the rest of the Gulf Region--is business as 
usual.  There does not seem to be any urgency to get health care 
moving again in New Orleans.  I am looking at a newspaper article 
right here from the Times Picayune where people are waiting nine 
and a half hours to get into emergency rooms.  But in our hearing, 
their representatives said that the Secretary had a vision of health 
care for New Orleans.  Hopefully during your oral testimony you 
can tell us what that vision is and what do we do to get medical 
profession and medicine and health care delivery being done in 
New Orleans in the rest of the Gulf Region and a more aggressive 
proactive approach my--Secretary, I think would be helpful down 
there.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  I thank the gentleman. 
	The gentleman from Maryland, Mr. Wynn.
	MR. WYNN.  Thank you, Mr. Chairman.
	Welcome Mr. Secretary.  Thank you for your work over the 
years.  Unfortunately I am a little distressed with this budget.  First 
of all, I note that you do not have a fix for the problems of the 
Medicare Prescription Drug Program.  Our seniors are confused, 
our seniors are actually losing access because of some of the 
problems with this program.  I do not see anything to address those 
concerns.
	The second problem I am concerned with is basically the 
severe cut $160 billion of Medicaid and Medicare on top of the 50 
that was already put in the Deficit Reduction Act.  The problem 
being that only shifts the problem down to the States.  The States 
are already strapped and so I see that as very problematic.
	But finally the thing I wanted to express concerns about these 
health savings accounts.  Over and over people said this so-called 
cost sharing does not work for the people who need it the most.  
The people who are the working poor, the mother with two kids 
who does not have insurance or cannot afford insurance, how is 
she going to afford a high deductible?  That issue was never 
addressed in this proposal and so what you have is less usage 
because of these--with these health savings accounts and more 
long-term costs.
	So I think there are a lot or problems with this budget.  I hope 
you will be able to address some of these issues in the course of 
your testimony.
	Thank you.
	CHAIRMAN BARTON.  I thank the gentleman.  
	I see no other Member present who has not had an opportunity.  
The chair asks unanimous consent that all Members not present 
have the requisite number of days to put their opening statement in 
the record.  Without objection, so ordered.
	[Additional statements submitted for the record follow:]

THE PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING

	Thank you, Mr. Chairman, for holding this timely hearing. I'd 
also like to thank Secretary Leavitt for joining us here today.  I 
realize what a critical time this is for your agency, and I appreciate 
you making it a priority to discuss our budget concerns.
	As the Secretary has noted, every program is important to 
someone, and difficult choices have to be made when it comes to 
distinguishing spending priorities.  I am a champion of fiscal 
discipline, but I cannot endorse the cuts the President has 
recommended to rural health care programs.
	Among the cuts to rural grant funding, the President proposes 
to eliminate the Rural Hospital Flexibility Grants, the Small 
Hospital Improvement Program, and the Rural and Community 
Access to Emergency Devices programs.  His budget also 
eliminates the Rural EMS program and essentially eliminates the 
Rural Health Outreach Grant Program. In total, the President has 
recommended cutting $133 million in rural health dollars.  This is 
a humble part of the overall Federal budget, but these funds are 
critical to states like Wyoming, and the citizens I represent.
	While almost 25% of America's population lives in a rural 
area, only 10% of America's physicians serve these areas.  The 
administration has justified these cuts to programs within the 
Office of Rural Health Policy, saying this funding is duplicative. 
Today, I hope to hear explanation of what other programs are 
supposedly filling this need. I would also appreciate being shown 
where rural-serving health entities may find support in the 
President's Budget.  As a Member of the House Rural Health Care 
Coalition, I support programs that aide access to quality health care 
for rural America, and I will continue to advocate for the funding 
necessary to support these programs.
	Again, thank you Chairman for calling this hearing, and I 
reserve the balance of my time.

THE PREPARED STATEMENT OF THE HON. HILDA L. SOLIS, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

 Thank you Mr. Chairman and good afternoon Secretary 
Leavitt.
 There is no other issue that is of greater concern to my 
constituents in East Los Angeles and the San Gabriel 
Valley in Los Angeles County than health care.
 More than 1 out 3 residents in my district lacks health 
insurance.
 As you know, our state and federal governments play a 
critical role in helping to ensure that many low-income 
families, particularly the young, the elderly, and the sick, 
have some sort of access to medical services.
 That is why I am so troubled by the President's Budget 
proposal, which includes deep cuts to Medicare, Medicaid, 
the State Children's Health Insurance Program (SCHIP), 
and other vital health programs.
 At a time when 44 million Americans, including 13 million 
Latinos, lack health insurance, we should not be cutting 
health programs that benefit families that otherwise will not 
have any health care.
 In fact, a recent study by the Congressional Budget Office 
(CBO) of the Medicaid cuts in the reconciliation bill found 
that sixty percent of those losing coverage due to new 
Medicaid premium charges would be children!
 Our nation's economic health depends on the good health 
of its families.
 I urge the Administration to reevaluate its budget proposal 
and the negative impact it would have on the Latino 
community and other communities across this country.
 Thank you, again, Mr. Secretary, for your presence here 
today, and I appreciate your attention to these concerns.

THE PREPARED STATEMENT OF THE HON. TED STRICKLAND, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

        Thank your Mr. Chairman. 
        Mr. Secretary, I have deep concerns that the President's Budget 
we have before us today will do more harm than good to the 
American people and their ability to access good quality and 
affordable health care.  This budget would lead to increases in 
Medicare premiums, cut funds for Medicare and Medicaid, and 
shift more of the cost of health care onto individual consumers 
through health savings plans. 
        This budget devastates rural health care by zeroing out Rural 
Hospital Flex Grants and Rural Access to Emergency Devices, like 
defibrillators, and cuts state offices of rural health.  Hospitals and 
patients in my rural district already face unique challenges, and 
this budget puts them at a disadvantage.  Also worrisome are this 
budget's dangerous health tax proposals, which will create greater 
obstacles to affordable health care for the elderly, people who are 
already sick, and low-income families. In addition, the President's 
proposals to expand health savings accounts provide only meager 
hope, at best, to those of modest income. 
        And, as you know, the recent budget reconciliation bill 
included over $50 billion in cuts to Medicare and Medicaid. Now, 
the President's Budget seeks to continue down that dangerous path, 
threatening the wellbeing of the most vulnerable in our society by 
making $160 billion in new cuts to these programs.  Unfortunately, 
this budget asks states to bear the brunt of these cuts while failing 
to take meaningful steps to control rising health care costs. 
        I strongly oppose these cuts and am hopeful that the members 
of this committee can work together to protect these vital 
programs.
        Thank You.  Mr. Secretary, I look forward to your testimony. 

THE PREPARED STATEMENT OF THE HON. HEATHER WILSON, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW MEXICO

        Thank you, Mr. Chairman, for holding this hearing today to 
review the President's Budget for health care.  And thank you, 
Secretary Leavitt, for being here today.
        I am concerned about many areas in this budget, including 
Medicare, rural health programs, health professions programs, and 
the National Institutes of Health.  But let me focus on two areas: 
Medicaid and the Indian Health Service.
        Last year Congress made changes in Medicaid that achieved 
about $7 billion in savings over five years, changes I did not 
support.  Now the Administration proposes additional Medicaid 
changes yielding an addition $13.5 billion in savings over five 
years, without making substantial improvements in the program 
that would improve people's health.  Most of these savings would 
come from administrative changes in areas HHS may not have the 
authority to change.  These changes include reductions in 
Disproportionate Share Hospital payments, rehabilitation services, 
and school-base health services: changes rejected by Congress last 
year.  I am concerned of the impact these changes would have on 
providers and services to Medicaid beneficiaries.
        We must strengthen and improve Medicaid to make it a better 
program for low-income children, pregnant women, disabled, and 
elderly Americans.  These changes simply fall short and could 
actually harm access to health care for these populations.
        The administration has also chosen to eliminate the Urban 
Indian Health Program, an important program within HIS 
providing health care to Indian people living in urban areas.  In 
Albuquerque, the Urban Indian Health Program provides $1.5 
million annually in health care services to the 48,000 urban Indians 
living in the Albuquerque area.  Two non-profit health 
organizations, First Nations Community Healthsource and the 
Albuquerque Indian Health Service Dental Clinic, receive grants 
from this program to provide services.
        We already have shortfalls within HIS, particularly for urban 
Indians.  Only 1% of the $3.1 billion HIS budget is earmarked for 
urban Indian health, while 75% of Indians now live in urban areas.  
Now the Administration wants to take away that 1%.  The Urban 
Indian Health Program is important for the health of urban Indians 
in Albuquerque and we must work to strengthen health care for 
Indians living in urban areas.
        Thank you, Mr. Chairman.

	CHAIRMAN BARTON.  Mr. Secretary, welcome to the 
committee.  We look forward to hearing your testimony and then 
we are going to have some questions.  We are going to recognize 
you for such time as you may consume.  I am going to set the clock 
at 10 minutes but take as much time as you wish.  Welcome to the 
committee.

STATEMENT OF HONORABLE MICHAEL O. LEAVITT, 
SECRETARY, U.S. DEPARTMENT OF HEALTH AND 
HUMAN SERVICES

	SECRETARY LEAVITT.  Thank you, Mr. Chairman.  
	I have submitted a prepared opening statement.  I will briefly 
summarize and then be eager to get directly to the questions of the 
members.  
	The budget that has been presented to you today is nearly $700 
billion.  It is roughly broken into two categories; all of you are 
familiar with them.  One is entitlement programs, that is to say 
decisions that we have made as a country to provide health care 
and other important human services to those in our Nation who are 
poor, elderly, or disabled.  And then there is the discretionary 
budget.  That would be a large group of programs that upon which 
you act each year.  We will have an opportunity, I am sure, to talk 
about both.  I will just comment briefly. 
	Particularly Medicare is of grave certain to me.  It currently 
occupies nearly 3.4 percent of our gross domestic product.  That is 
to say one program is 3.4 percent of every dollar that is generated 
in our economy and if it is allowed to continue to grow as it is, by 
2040 it will be nearly 8 percent of our entire gross domestic 
product.  Again, unchanged by 2070, and it will be 14 percent of 
our gross domestic product.  I do not think there is a person in this 
room who believes that that can continue as it is.  We will not be 
competitive as a Nation.  The jobs that are underlying our economy 
that ultimately generate the tax revenues that make possible for 
Medicare to be paid for and to be a commitment that we make as a 
Nation will disappear and the equation will no longer work.  And I 
just want to acknowledge that.  We will have some discussion 
about things that could be done in the near term and perhaps in the 
long-term but it is an important part of our conversation.
	I suspect that much of our discussion today will center around 
the discretionary budget.  If I may acknowledge that the budget 
that I am presenting here today is $1.5 billion less than the '06 
budget.  This is a period of deficit reduction.  As many of you 
know, much of my public service was spent as a governor of one 
of our States.  I was governor during the periods of time when we 
had tax revenues sufficient to expand programs.  I was the 
governor during times when we had difficult periods where we had 
to reduce our expenditures so as to balance our budget.  And while 
this is not a balanced budget, it is clearly consistent with the 
President's proposal to reduce the deficit by half by 2009.  In 
doing that, may I just acknowledge that whenever you are doing a 
budget and whenever you are reducing deficits you are faced with 
choices between very good options.  Everything in this option is 
good because someone feels passionately about it and because it 
represents something that I feel confident and my heart responds to 
it in the same way yours does.  There will be disagreement today 
with the decisions that we have made, I acknowledge that.
	My purpose today is to simply outline for you the rationale that 
I used and that was used by the Administration to make these 
decisions.  If you disagree, obviously that will now go into the 
legislative process and that opportunity will present itself.  I think 
it might be valuable rather than try to enumerate each part of this 
very large and complex budget if I were to provide you with a 
sense of the philosophy that went behind it, the general guidance 
that I gave to those who prepared it under my direction.  You will 
find, for example, in this budget though there are fewer dollars, 
you will find new initiatives.  You will find initiatives, for 
example, on health information technology or what I refer to as 
critical path to personalized medicine.  You will find new 
initiatives on providing our older Americans and disabled 
Americans with a choice to have health care in their homes and 
you will find new programs on HIV/AIDS.  All of these are very 
important new programs.  You will see a continued commitment 
on the part of the President on community health centers.  You will 
find that we have represented new dollars here for bioterrorism and 
for pandemic flu and for certain high demand highly efficient 
programs that we felt simply needed to be nurtured even during the 
period of deficit reduction.  We have chosen to fund those 
programs by looking for dollars within the budget that were one 
time dollars that may not have been repeated.  We have looked for 
programs whose purposes might be found in multiple places and 
we have looked for ways to tidy that up and to put it under one 
program.  You will see that we have used carryover funds in 
certain situations.  You can in times like this sweep the corners and 
find ways in which to accomplish more with less.  It is a time that 
drives efficiency.  
	I have also said to my colleagues there are a series of principles 
that I would like you to follow as you look at each program.  It 
might be valuable for you to know what those principles are.  I will 
likely through the course of our discussion today refer to those 
principles when I explain to you why I have made a reduction in a 
program that you might not agree with.  For example, in many 
programs, I found that they tend to approach a problem in a very 
general way, whereas there is a specific part of the problem that we 
could target.  In most cases, the principle is let us target the real 
problem, and while we might be brilliant at the general distribution 
of funds, let everyone get something, let us focus on the real 
problem and target funds.
	The second principle is in working to prevent as opposed to 
simply pay for after people are sick or after some disruptive 
damage has been done.  You will see an emphasis placed on 
prevention in this budget.  You will also see me biasing my 
judgments toward the direct delivery of services.  You will find 
places where there may have been a building program before that I 
have in this budget suggested we cannot afford this year, but I do 
not want to cut direct services and so we have not invested in 
infrastructure to the extent that it would have, in fact, compromised 
our ability to provide services to people.  You will see a bias on 
my part with respect to programs that allow markets or individuals 
to make choices, whereas government often might make choices 
that were less specific to their needs.  I believe that markets and 
individuals make choices that government-wide programs often do 
not and I think they are better choices.
	You will see a substantial emphasis here to invest in new 
technology.  We are going to talk, I think, later I am sure about 
some of the places that HHS funds research.  Hard choices needed 
to be made there and I concluded that if a grant for example had 
run its course and if the research had been concluded, that rather 
than continue that grant, we ought to emphasize new investigators.  
We ought to find new technologies on which we are simply now 
just starting so you will see emphasis on investment there.
	HHS is a very large department.  I have 27 different operating 
divisions that report to the Secretary.  It is large, as I said $700 
billion.  Many of those investments tend to be quite stove piped 
rather than look across the department where there is something 
happening in other operating divisions and they tend to see them as 
separate programs.  I try to look across the department which 
means in some cases you may find a program that has been 
eliminated, but it may be quite well funded in another or it may be 
that by putting the program together in A and B we can create a 
better program.  So you will see an approach that will be far more 
department wide as opposed to the stove pipe.
	You will also see heavy emphasis on my part on accountability 
and being able to measure.  In my judgment, if I cannot measure its 
benefit, there may be some measurement there but it T's it up in 
my mind for very heavy scrutiny.  And you will find places where 
there may have been good being done, but if I cannot measure it in 
a time of deficit reduction, I have just concluded that those were 
candidates for reduction.  So you will see targeting--you will see 
prevention orientation, you will see direct services over 
infrastructure.  And those are the kinds of principles that I used.
	Mr. Chairman, that gives you a broad overview of the way I 
have approached this budget.  Again, I want to acknowledge that 
this is a time for deficit reduction.  There will be suggestions I 
have made that you will not like and I understand that.  I am here 
to hear your thoughts and give you mine and the legislative process 
will then march forward.
	Mr. Chairman?
	[The prepared statement of Hon. Michael O. Leavitt follows:]

PREPARED STATEMENT OF THE HON. MICHAEL O. LEAVITT, 
SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

	Good afternoon, Mr. Chairman, Representative Dingell, and 
Members of the Committee.  I am honored to be here today to 
present to you the President's FY 2007 budget for the Department 
of Health and Human Services (HHS).  
	Over the past five years, the Department of Health and Human 
Services has worked to make America healthier and safer.  Today, 
we look forward to building on that record of achievement.  For 
that is what budgets are - investments in the future. The President 
and I are setting out a hopeful agenda for the upcoming fiscal year, 
one that strengthens America against potential threats, heeds the 
call of compassion, follows wise fiscal stewardship and advances 
our Nation's health. 
	In his January 31st State of the Union Address, the President 
stressed that keeping America competitive requires us to be good 
stewards of tax dollars.  I believe that the President's FY 2007 
budget takes important strides forward on national priorities while 
keeping us on track to cut the deficit in half by 2009.    It protects 
the health of Americans against the threats of both bioterrorism 
and a possible influenza pandemic; provides care for those most in 
need; protects life, family and human dignity; enhances the long-
term health of our citizens; and improves the human condition 
around the world.  I would like to quickly highlight some key 
points of this budget.
	We are proposing new initiatives, such as expanded Health 
Information Technology and domestic HIV/AIDS testing and 
treatment that hold the promise for improving health care for all 
Americans.  We are continuing funding for high-performing 
Presidential initiatives, including Health Centers, Access to 
Recovery, bioterrorism and pandemic influenza; and we are also 
maintaining effective programs such as Indian Health Services, 
Head Start, and NIH medical research.
	We are a nation at war.  That must not be forgotten.  We have 
seen the harm that can be caused by a single anthrax-laced letter 
and we must be ready to respond to a similar emergency - or 
something even worse.  To this end, the President's Budget calls 
for a four percent increase in bioterrorism spending in FY 2007.  
That will bring the total budget up to $4.4 billion, an increase of 
$178 million over last year's level. 
	This increase will enable us to accomplish a number of 
important tasks.  We will improve our medical surge capacity; 
increase the medicines and supplies in the Strategic National 
Stockpile; support a mass casualty care initiative; and promote the 
advanced development of biodefense countermeasures through 
NIH to a stage of development so they can be considered for 
procurement under Project BioShield.     
	We must also continue to prepare against a possible pandemic 
influenza outbreak.  This budget includes a $2.3 billion allowance 
for the second year of the President's Pandemic Influenza plan.  
These funds will enable us to meet several important goals, 
including providing pandemic influenza vaccine to every man, 
woman and child within six months of detection of sustained 
human-to-human transmission of a bird flu virus; ensuring access 
to enough antiviral treatment courses sufficient for 25 percent of 
the U.S. population; and enhancing Federal, state and local as well 
as international public health infrastructure and preparedness. 
	The President's FY 2007 budget also provides more than $350 
million for important ongoing pandemic influenza activities such 
as safeguarding the Nation's food supply (FDA), global disease 
surveillance (CDC), and accelerating the development of vaccines, 
drugs and diagnostics (NIH).  
	The budget includes a new initiative of $188 million to fight 
HIV/AIDS.  These funds support the objective of testing for three 
million additional Americans for HIV/AIDS and providing 
treatment for those people who are on state waiting lists for AIDS 
medicine.  This initiative will enhance ongoing efforts through 
HHS that total $16.7 billion for HIV/AIDS research, prevention, 
and treatment this year.
	Last July, the Administration emphasized five key principles 
for reauthorization of the Ryan White CARE Act: (1) serve the 
neediest first; (2) focus on life-saving and life-extending services; 
(3) increase prevention efforts; (4) increase accountability; and (5) 
increase flexibility.  The President has made fighting the spread of 
HIV/AIDS a top priority of his Administration, and he will 
continue to work with Congress to encourage prevention, and the 
provision of appropriate care and treatment to those suffering from 
the disease.  The President's FY2007 budget request for the CARE 
Act HIV/AIDS activities is $2.16 billion, an increase of $95 
million for several elements of the new domestic HIV/AIDS 
initiative.  The request will support a comprehensive approach to 
address the health needs of persons living with HIV/AIDS, 
consistent with the reauthorization principles.  The budget also 
includes a new authority to increase program flexibility by 
allowing the Secretary to transfer up to five percent of funding 
provided for each Part of the Ryan White CARE Act to any other 
Part.  
	The budget maintains the President's commitment to the 
doubling of NIH, and includes important cross-cutting initiatives 
that will move us forward in our battle to treat and prevent disease 
- $49 million for the Genes, Environment and Health Initiative and 
$113 million for the Director's Roadmap.  In addition, it contains 
an additional $10 million for the Food and Drug Administration to 
lead the way forward in the area of personalized medicine and 
improved drug safety.    
	One of the most important themes in our budget is that it 
increases funding for initiatives that are designed to enhance the 
health of Americans for a long time to come.  For instance, the 
President's Budget calls for an increase of nearly $60 million in 
the Health Information Technology Initiative.  Among other 
things, these funds support the development of electronic health 
records (to help meet President Bush's goal for most Americans to 
have interoperable electronic health records by 2014); consumer 
empowerment; chronic care management; and Biosurveillance.  
	The Budget also includes several initiatives to protect life, 
family and human dignity.  These include, for example, $100 
million in competitive matching grants to States for family 
formation and healthy marriage activities in TANF.  And it 
promotes independence and choice for individuals through 
vouchers that increase access to substance abuse treatment.
	In the area of entitlements programs, I want to begin by 
congratulating you and other Members of Congress for having 
successfully enacted many needed reforms by passing the Deficit 
Reduction Act (DRA).  DRA supports our commitment to 
sustainable growth rates in our important Medicare and Medicaid 
programs.  It also strengthens the Child Support Enforcement 
program. 
	The Deficit Reduction Act also achieves the notable 
accomplishment of reauthorizing Temporary Assistance for Needy 
Families (TANF), which has operated under a series of short-term 
extensions since the program expired in September 2002.  
	Medicaid has a compassionate goal to which we are 
committed.  Part of our obligation to the beneficiaries of this 
program is ensuring it remains available well into the future to 
provide the high-quality care they deserve.  Last year when I made 
my statement before this Committee, I said that the growth in 
Medicaid spending is unsustainable.  With its action on many of 
our proposals from last year in the Deficit Reduction Act, the 
Congress has made Medicaid a more sustainable program while 
improving care for beneficiaries.  The President's Budget 
proposals build on the DRA and include a modest number of 
legislative proposals which improve care and will save $1.5 billion 
over five years in Medicaid and S-CHIP and several administrative 
proposals saving $12.2 billion over five years.  
	This Administration has also pursued a steady course toward 
Medicare modernization.  In just the past three years, we have 
brought Medicare into the 21st century by adding a prescription 
drug benefit and offering beneficiaries more health plan choices.  
 	Medicare's new prescription drug benefit provides seniors and 
people with disabilities with comprehensive prescription drug 
coverage, the most significant improvement to senior health care in 
40 years.  Millions of seniors and people with disabilities are 
already using this benefit to save money, stay healthy, and gain 
peace of mind.  According to CMS' Office of the Actuary, 
Medicare's drug coverage will have significantly lower premiums 
and lower costs to federal taxpayers and states, as a result of 
stronger than expected competition in the prescription drug market.  
Moreover, beneficiary premiums are now expected to average $25 
a month - down from the $37 projected in last July's budget 
estimates.  The Federal government is now projected to spend 
about 20 percent less per person in 2006 and, over the next five 
years, payments are projected to be more than ten percent lower 
than first estimated.  So taxpayers will see significant savings.  
And state contributions for a portion of Medicare drug costs for 
beneficiaries who are in both Medicaid and Medicare will be about 
25 percent lower over the next decade.  All these savings result 
from lower expected costs per beneficiary; projected enrollment in 
the drug benefit has not changed significantly. 
	President Bush proposes total outlays of nearly $700 billion for 
Health and Human Services. That is an increase of more than $58 
billion from 2006, or more than 9.1 percent. 
	While overall spending will increase, HHS will also make its 
contribution to keeping America competitive.  To meet the 
President's goal of cutting the deficit in half by 2009, we are 
decreasing HHS discretionary spending by about $1.5 billion in the 
next fiscal year. 
	I recognize that every program is important to someone.  But 
we had to make hard choices about well-intentioned programs.  I 
understand that reasonable people can come to different 
conclusions about which programs are essential and which ones 
are not.  That has been true with every budget I've ever been 
involved with.  It remains true today.  There is a tendency to 
assume that any reduction reflects a lack of caring.  But cutting a 
program does not imply an absence of compassion. When there are 
fewer resources available, someone has to decide that it is better to 
do one thing rather than another, or to put more resources toward 
one goal instead of another. 
	Government is very good at working toward some goals, but it 
is less efficient at pursuing others. Our budget reflects the areas 
that have the highest pay-off potential. 
	To meet our goals, we have reduced or eliminated funding for 
programs whose purposes are duplicative of those addressed in 
other agencies.  One example of this is Rural Health where we 
have proposed to reduce this program in the Health Resources and 
Services Administration, given that HHS administers 225 health 
and social services programs that provide resources to rural areas.  
In addition, the Medicare Modernization Act contained several 
provisions to support rural health, including increased spending in 
rural America by $25 billion over ten years.  For example, it 
increases Medicare Critical Access Hospitals (CAH) payments to 
101 percent of costs and broadens eligibility criteria for CAHs.  
Moreover, recognizing that Congress adopted many of our saving 
proposals last year, we are continuing to make performance-based 
reductions.
	Our programs can work even more effectively than they do 
today.  We expect to be held accountable for spending the 
taxpayers' money more efficiently and effectively every year.  To 
assist you, the Administration launched ExpectMore.gov, a website 
that provides candid information about programs that are 
successful and programs that fall short, and in both situations, what 
they are doing to improve their performance next year.  I 
encourage the Members of this Committee and those interested in 
our programs to visit ExpectMore.gov, see how we are doing, and 
hold us accountable for improving. 
	President Bush and I believe that America's best days are still 
before her. We are confident that we can continue to help 
Americans become healthier and more hopeful, live longer and 
better lives.  Our FY 2007 budget is forward-looking and reflects 
that hopeful outlook.   
	Thank you for the opportunity to testify.  I will be happy to 
answer your questions.  

	CHAIRMAN BARTON.  Okay, thank you, Mr. Secretary.
	Let me reset the clock here quickly.  The Chair recognizes 
himself for the first five minutes of questions.
	The President's Budget for the National Institute of Health is 
$28.6 billion, which is basically a freeze over the fiscal year 2006.  
As you know, it is a high priority of mine to reauthorize the 
National Institutes of Health.  It has not been reauthorized in 14 
years.  In reauthorization, we need to put some reforms in place to 
make the institutes more able to address the health care research 
needs for our country.  What is your view of the need to 
reauthorize the programs at NIH?
	SECRETARY LEAVITT.  Mr. Chairman, we look forward to 
working with you on that matter.  I would like to tell you that as 
that discussion begins, that my time as Secretary has provided me 
with some insights I think I would be interested to express.  I 
mentioned the fact that across HHS is a lot of stove piping.  We do 
not often look at programs in the context of the larger purpose.  
And that is true in a lot of Government agencies and a lot of 
Governments.  It is in part true at NIH.  You will see in this budget 
an emphasis on what I refer to in the budget as trans-institute 
initiatives.  There are certain initiatives that will help every one of 
the institutes.  For example, an important part of our effort this 
year is a human genome and environment study.  Nearly all of the 
disease specific institutes have at their heart or the heart of their 
new science is the human genome and how we can connect what is 
going on in the environment with genetics.  That is something that 
will benefit every one of the centers or institutes.  You will also see 
what we refer to as road map.  Again it is emphasizing the need for 
science to be looked at on a multi-jurisdictional way.  Medicine in 
the future needs to be more personalized, it needs to be more 
predictive, it needs to be more preemptive so that we are 
emphasizing prevention.  And as we begin that discussion, I would 
like to suggest that those are important considerations.
	CHAIRMAN BARTON.  Okay.  In the budget reconciliation 
package that the President signed last week, we found savings to 
offset the proposed, I think it is 4.4 or 4.7 percent cut in physician 
reimbursement.  That was a one year fix.  So we held our 
physicians harmless for a year but under the current physician 
reimbursement formula, every year that we do not reform the 
program for determining how to reimburse our physicians, it 
reports these cuts and these cuts are cumulative.  What steps do 
you feel the President and yourself can make to work with this 
committee to reform the reimbursement scheme for our physicians 
so that we get something that is fair to them and fair to the 
taxpayers that accurately reflects the cost of the physician to 
providing health care services for our Medicare beneficiaries?
	SECRETARY LEAVITT.  Mr. Chairman, this is a perplexing 
difficult problem and it is one that is a collision that is going to 
occur every year until we come up with a new way of approaching 
this.  And in my judgment, the best way is for us to begin to assign 
a value on performance and not simply quantity.  We need to be 
focusing on pay for performance where we are rewarding 
physicians in a way that acknowledges the value they bring.  What 
we have seen over time often is that when rates are cut, the 
quantity of procedures increases.  And that is not going where we 
want it to go.  Where we want it to go is for us to have lower costs, 
fewer medical mistakes, and we want there to be higher quality.  A 
key to that is having health information technology that allows us 
to measure when quality is occurring.  You will see in this budget 
substantial emphasis on health information technology.  Several of 
the members mentioned health information technology in their 
opening statements.  That in my judgment is a critical element not 
only to reforming our payment structure but in reaching better 
quality as well.
	CHAIRMAN BARTON.  Well, are you willing to work with the 
committee and make it a priority to engage stakeholders, before the 
Congress adjourns, to try to come up with a new system?
	SECRETARY LEAVITT.  Mr. Chairman, yes, in fact, we have a 
number of pilots already that we are working to develop 
experience in this area.  And we think it is crucial that we find new 
ways of solving this problem.  This will be a perennial collision 
until we are done.
	CHAIRMAN BARTON.  All right, I agree with that.
	With that, I recognize the Ranking Member, Mr. Dingell for 
five minutes.
	MR. DINGELL.  Mr. Chairman.  
	Again, welcome, Mr. Secretary.  In December Chairman 
Barton wrote you forwarding several follow up questions of mine.  
In December, I along with Mr. Stupak, Mr. Brown, and Mr. 
Waxman sent you a letter with many key questions about the 
catastrophic healthcare crisis in the New Orleans region.  Finally, 
several Democratic Members and I wrote you after last year's 
budgetary hearing asking follow-up questions which were 
forwarded to you by Chairman Barton.  When will you answer 
these letters, Mr. Secretary?
	SECRETARY LEAVITT.  Mr. Dingell, I had hoped I would have 
that letter when I came today.  I feel like a student who forgot his 
homework.
	MR. DINGELL.  Three, Mr. Secretary, not one, three.
	SECRETARY LEAVITT.  Well those letters need to be 
thoughtfully considered and within a day or two you will have an 
answer.  I would like to tell you that that is an area that I do see 
tremendous opportunity.  Mr. Stupak mentioned it in his opening 
statement.  I have been in New Orleans a number of times.  I am 
going again next week.  I do believe that there is an opportunity to 
replace what was a clearly dysfunctional--
	MR. DINGELL.  Mr. Secretary, I just want the letter.  I have got 
other questions I want to ask--
	SECRETARY LEAVITT.  --talk about the letters.
	MR. DINGELL.  Mr. Secretary, we are sad.  We feel that you are 
disregarding your friends up here on the Hill since you were not 
being responsive.  This is not the kind of person I thought you are.  
Maybe it is indifference.  It is even possible, although unlikely, 
that it is arrogance.  When are we going to get a response to these 
letters?
	SECRETARY LEAVITT.  That is, Mr. Dingell, not something I 
would want to be tagged with.  I think that is a letter I need to 
personally deliver to you very soon.
	MR. DINGELL.  Well I look forward to receiving it.  I hope that 
we are both alive and in good health when it comes.
	Mr. Secretary, yesterday the New York Times featured a story 
by Robert Pear detailing private insurance plans, under Part D, that 
had been using a variety of tools that are designed to make it 
harder for seniors to get their drugs though the plan claims they are 
covered.  Mr. Secretary, one of the tools that the plans are using is 
called prior authorization which requires seniors to get approval 
from the plan before they can get their medicine.  This is a trick 
that has been used throughout the years to prevent people from 
getting adequate and proper care that the plan should provide and 
that their doctor thinks they happen to need.  There are a number of 
priority drugs that should be covered at least the cost to one 
beneficiary on a plan's formula that are still subject to prior 
authorization.
	Mr. Secretary, there are a number of drugs that are on the 
second level of plan formularies that are subject to prior 
authorization.  There are a number of prior authorization forms in 
total all across the plans.  Mr. Pear, in this article had, in just one 
plan, 39 prior authorization forms alone.  Given that there are some 
40 to 50 stand-alone drug plans in each area, that amount could be 
significant and it could be an unreasonable amount of paperwork 
for everybody concerned.  Now this plan referred to with 39 prior 
authorization requirements when it was approved to sell coverage 
under Part D.  Mr. Secretary, what are you going do about this?  
You have a mess on your hands.  You have a plan that will not 
work.  What are you going to do?
	SECRETARY LEAVITT.  Mr. Dingell, for the others who may not 
be as familiar with this, we have like any other plan there is a 
formulary for every plan.  And if--
	MR. DINGELL.  And some people are getting in the plan 
because the drug is on the formulary and then they find out all of a 
sudden it ain't.
	SECRETARY LEAVITT.  And I identified precisely the same 
problem that you have spoken to and I have--
	MR. DINGELL.  What are you going to do about it?
	SECRETARY LEAVITT.  Well I am going to do something about 
it.  In fact--
	MR. DINGELL.  Well I hope you and I are both alive and in 
good health when this occurs.
	SECRETARY LEAVITT.  Well I hope you are still alive by the 
30th of March because that is when I intend to have this problem 
solved.  I have told my colleagues at CMS and I have met with the 
insurance plans and we are working toward a standardization of 
that process.  It is unacceptable in my judgment as well to have 
that many forms--
	MR. DINGELL.  Mr. Secretary, you have got thousands of 
people that are walking away, that stand in line for a long time, 
without a plan.  They do not get their drugs filled.  They are 
charged more than the plan is supposed to charge.  The dentists or 
the doctors or the pharmacists do not know what the plan is or 
whether these people are covered and they are sent off.  You got 
people who have heart conditions or other serious conditions that 
cannot get their pharmaceuticals because the situation isn't 
working.  What are you going to do about that?
	SECRETARY LEAVITT.  Actually, Mr. Dingell, millions of 
people are having their prescriptions filled every day.
	MR. DINGELL.  And millions are not.
	SECRETARY LEAVITT.  I do not know in the millions there may 
be--
	MR. DINGELL.  The thousands, hundreds of thousands.
	SECRETARY LEAVITT.  No, there is not even that.  The system is 
working better every single day.  We have worked 46 days under 
this implementation.  We have 250,000 people a day who are 
enrolling.  This system is working.  By the end of this year, we are 
going to have 28 to 30 million people who are participating and...
	CHAIRMAN BARTON.  Two hundred and fifty thousand a week, 
not a day.
	SECRETARY LEAVITT.  That is what I meant to say, millions of 
people--
	MR. DINGELL.  I hope, Mr. Secretary you are back here 
because I do not think you are going to be singing the same song 
next year.
	Mr. Chairman, thank you.
	CHAIRMAN BARTON.  Thank you.
	MR. DINGELL.  Mr. Secretary, thank you.
	SECRETARY LEAVITT.  Thank you.
	CHAIRMAN BARTON.  Mr. Hall of Texas.
	MR. HALL.  Mr. Secretary, the Chairman interrupted me before 
I was through reading to you a while ago.  I want to get back to the 
ovarian cancer problem.  You know, within the budget it would 
seem that ovarian cancer research was lagging behind.  We passed 
a resolution to the House last year that pointed out while other 
cancer deaths had declined, the same cannot be said of ovarian 
cancer.  And there was a cut in the ovarian cancer research.  I just 
want to ask you what is to be done for the decrease for this disease 
and how does the Administration propose to advance survivability 
rates of this and other diseases with the current rate of funding, 
particularly for ovarian cancer.  Can you take a good hard look at 
that?
	SECRETARY LEAVITT.  Mr. Hall, I would be very pleased to do 
that.
	MR. HALL.  That is all I ask you to do, be responsive on today.  
Thank you and I yield back.
	SECRETARY LEAVITT.  Thank you.
	CHAIRMAN BARTON.  Is Mr. Waxman ready?
	MR. WAXMAN.  Why don't you call Mr. Pallone and I will 
have a couple minutes to--
	CHAIRMAN BARTON.  All right, Mr. Pallone?
	MR. PALLONE.  Thank you, Mr. Chairman.
	Mr. Secretary, I have to say that the system is definitely not 
working in my State of New Jersey and we continue to experience 
significant problems with implementation of the new Medicare 
prescription drug benefit.  It continues to take--I mean, basically 
the State is continuing to pay the drug bills of many low income 
people who have fallen through the cracks of the new program.  To 
date, New Jersey has paid $113 million in claims for its dual 
eligibles and State pharmacy assistance programs or i.e. PAAD as 
we call it or approximately $2.6 million a day.  Now despite the 
incentives from Medicare and Medicaid's efforts to reimburse 
States, it remains unclear whether New Jersey will be fully repaid 
under the waiver program designed by CMS.  Under the program, 
CMS will not reimburse New Jersey for its expenditures on behalf 
of 125,000 Medicare beneficiaries enrolled in the pharmaceutical 
assistance program or those who are eligible for the Part D low 
income subsidy.  The waiver strictly applies to those low income 
seniors who are duly eligible for Medicare and Medicaid.
	And a large part of the problem, Mr. Secretary, is that CMS has 
yet to confirm to New Jersey which of the 190,000 PAAD 
beneficiaries are eligible to the low income subsidy.  Presently, 
only 4,467 PAAD members were automatically deemed eligible 
for a Part D low income subsidy while CMS's record shows 
26,676 have enrolled in the slim D or qualified individual 
programs.  Slim D or qualified individual status should have 
automatically deemed all 26,767 as eligible for Part D low income 
subsidy in my opinion.
	Also, New Jersey has yet to confirm which PAAD 
beneficiaries were successfully enrolled in the Part D plan.  There 
is a lot of misinformation regarding the enrollment of these 
beneficiaries into Part D plan.  The State currently has no way of 
knowing how much was supposed to be covered by either one, the 
Part D prescription drug plan, two, the beneficiary I call sharing, or 
three, the State through wrap around coverage.  So New Jersey in 
my opinion should not be penalized for providing coverage in light 
of this missing information.  CMS should reimburse the State for 
part of the cost that was supposed to be paid for by the TDP just 
like it is doing for dual eligibles who have their costs covered by 
the State.  I understand that you had ongoing discussions with 
Governor Corzine about this issue but I do not think have come to 
any resolution.  You can tell me differently.  I have a letter here I 
would like to give to you if I could, Mr. Chairman from both of our 
Senators--
	CHAIRMAN BARTON.  Without objection.



	MR. PALLONE.  It is our entire New Jersey Congressional 
Delegation and it asks you to revise the waiver program to provide 
reimbursement for all State pharmacy assistance program claims 
that should have been covered by Medicare Part D and this press is 
also made the waiver application which they submitted to CMS.  I 
have two questions.  First, can you tell me to what extent the 
Administration will reimburse New Jersey and other States for 
these costs and why the Bush Administration has resisted 
reimbursing States for covering SPAP claims in the first place.  It 
seems logical to me to the extent that Medicare was responsible for 
covering a portion of these claims, the State should be reimbursed 
for it.  So would you agree with that or, you know, if you could 
answer, that is my first question.
	SECRETARY LEAVITT.  Congressman, as you have indicated I 
have been in on-going discussions with Governor Corzine.  I spoke 
with him last night as late as 9:30 and we have 50 different States 
that we are working with.  I will suggest to you that we have 
struggled to get New Jersey working well for reasons that are not 
as clear to me nor them, but we are working on it.  And the 
important thing is that no one is going without their prescription 
drugs.  They are getting their drugs when they go to the counter 
and we will continue to do that so long as we need to, to make sure 
that that happens.  Let me be responsive to your specific question.  
We are prepared under this demonstration waiver to assure that 
New Jersey is reimbursed for anything that a plan would have paid 
for either a participant in the program or a participant who should 
have been enrolled in this system that was not identified because of 
the system problem.  They are getting their prescription drugs, 
New Jersey will be reimbursed.  Now New Jersey and a number of 
other States have State prescription drug benefits that are paid for 
by State dollars at their choice.  We will not be reimbursing them 
for moneys that would have been paid under a State program 
unless they would have been eligible for Medicare Part B.  We do 
not have legal authority to do that and it would not seem fair.  We 
honor the fact that New Jersey and a number of other States have 
chosen to pay for parts of prescription drugs that the Federal 
program does not and that continues to be their obligation and their 
payment requirement.
	MR. PALLONE.  I have a second question in the letter, Mr. 
Chairman.  I do not know--let me say the letter requested the 
Administration extend the waiver program's end date, which as 
you know, is today because the State continues to experience 
significant problems with implementing the new program and the 
large amount of information that is still missing, it is highly 
unlikely that all the problems will be fixed today.  So New Jersey 
would be forced to either continue to pay for the cost of drugs 
which should have been covered on Medicare Part D or let people 
go without their medications.  And obviously that latter is not an 
option.  So Mr. Secretary, you realize that the problem still exists, 
what steps are you taking to extend the waiver program and 
reimburse States for the cost that they incur beyond today?
	SECRETARY LEAVITT.  It is our judgment that under the waiver 
that New Jersey has signed we can take care of their 
reimbursement needs and continue to work with them.  I think 
New Jersey will be reimbursed in the way that you have outlined.
	CHAIRMAN BARTON.  The gentleman's time has expired.
	MR. PALLONE.  Okay.  I will submit this, Mr. Chairman.
	Thank you, Mr. Secretary.
	SECRETARY LEAVITT.  Thank you.
	CHAIRMAN BARTON.  The gentleman from Florida, Mr. 
Bilirakis.
	MR. BILIRAKIS.  Thank you, Mr. Chairman.  
	Mr. Secretary, back in the mid-60's when Medicare was 
devised and admittedly it was a plan that was submitted by the 
other party, certainly Congressman Dingell's father was a major 
part of that procedure with nine of us often times and had a lot of 
problems.  I do not know the date on the floor of this Part D of 
Medicare--we lose an awful lot of the clippings from the 
newspapers regarding these problems.  And I dare say that if those 
who oppose that program and if the media, particularly the 
editorial letters who may or may not have opposed that program, if 
they had basically slandered it because of the problems, the 
complexities, and that not, we probably would not have Medicaid 
today.  And what is happening with this Part D.  So let me ask you, 
will every Medicare beneficiary who wishes to enroll in the Part D 
plan be able to do so by the May 15 deadline?
	SECRETARY LEAVITT.  I will resolve this to make certain 
everyone has an opportunity.  It is a voluntary program.  We have 
90 days longer.  We are hopeful that Members of Congress will 
join with us in helping people enroll.  We are enrolling about 
250,000 a week--
	MR. BILIRAKIS.  You said 90 days longer--
	SECRETARY LEAVITT.  No, no, we have roughly 90 days left 
between now and the 15th of May.
	MR. BILIRAKIS.  Okay.
	SECRETARY LEAVITT.  We feel quite optimistic that it can be 
done.  If the Congress chooses to extend the period that will be a 
policy decision that you will make.
	MR. BILIRAKIS.  Yeah, if it turns out as a result of information 
available to all of us--you and to the Congress--that there are 
people out there who have not really decided yet who probably 
will want to and whatnot, would you oppose extending the 
deadline?
	SECRETARY LEAVITT.  Well, we will make known to you at the 
time any ramifications such a policy change would make.  At this 
point, we are moving with the assumption that it would be May 15.  
We think we can accomplish the task period, but at the end of that 
time if you choose to do so, then obviously we will follow along 
and do our best to make certain that people are enrolled.
	MR. BILIRAKIS.  And I realize that we should not even be 
talking about doing so this early in the game obviously.  But the 
point of the matter is that we want to make sure that everybody has 
that opportunity and so, HHS would be unbiased and honest in 
terms of telling us or sharing with us if there are people out there 
that probably would need more time.  Is that right?
	SECRETARY LEAVITT.  Mr. Bilirakis, our shared goal, I think 
everyone in this room is to make certain people have prescription 
drugs.  For the first time in our Nation's history a senior should not 
have to worry about having their prescription drug costs wipe out 
their savings.  We are working very hard to make certain people 
have opportunities to purchase a plan and we hope we can all work 
together in whatever way is necessary to accomplish that task.
	MR. BILIRAKIS.  So regarding the budget, NIH budget is at last 
year's level, the National Cancer Institute will be reduced by $40 
million this year.  Comments?
	SECRETARY LEAVITT.  Well, we are spending $4.8 billion a 
year on cancer research, that is up substantially from earlier in 
2001 and the whole NIH has been doubled since 1998.  We are 
committed to continuing to make progress on cancer and believe 
we can.  Earlier I mentioned the fact that much of our new 
investment at NIH is in the area of genetics and the environment.  
We are also working with what I call the critical path project which 
is to dramatically cut in the amount of time it takes to have a drug 
that comes from research able to go from bench to bedside.  We 
are working to make it more personalized, more preventative, and 
more preemptive.  All of those are new objectives of NIH and we 
are targeting the money in that way.  Would it be nice if we were 
able to dramatically increase the spending in NIH, yes.  And do we 
think in future years that will be possible, I do.  But this year, we 
are doing deficit reduction.  We have been able to keep it flat and 
that was the judgment we made.
	MR. BILIRAKIS.  So were the National NCI people, the National 
Cancer Institute people coordinated with before you decided to 
reduce the project by $40 million?
	SECRETARY LEAVITT.  Well we have had extensive 
conversations with the community.  Obviously no one is 
enthusiastic about not having a big increase.
	MR. BILIRAKIS.  Yes.
	SECRETARY LEAVITT.  And we hope in time that our continued 
investment will be possible.  Right now we are reducing deficits 
and being able to keep it flat was something that was very 
important to me and in the sense of being able to not see 
substantial cuts, $40 million is a lot of money in specific terms but 
in the context of a $30 billion budget at NIH it is relatively--
	MR. BILIRAKIS.  Many of us are concerned about that and we 
thank you, Mr. Chairman.
	MR. DEAL.  [Presiding]  Mr. Waxman?
	MR. WAXMAN.  Thank you, Mr. Chairman.
	Mr. Secretary, just to follow up on Mr. Bilirakis' question, you 
hope to put more money into NIH but now we are doing deficit 
reduction.  The President said he is going to halve the deficit by 
2012.  Many of us doubt that is going to be possible.  Should we 
look to 2012 to find more money into the research of NIH and 
NCI?
	SECRETARY LEAVITT.  The good news is, Mr. Waxman, we do 
our budgets one year at a time.
	MR. WAXMAN.  Well especially when you cut back on some of 
this research we do not just lose one year but we lose a lot of 
research and hope for the future.
	Now I want to get back the Medicare drug proposal because I 
think the rollout has been an absolute disaster.  People were turned 
away without their drugs.  Pharmacies could not determine a 
person's eligibility.  Sometimes they waited for hours on the phone 
just to try to get through to the plans.  People were charged too 
much.  Many vulnerable Medicaid beneficiaries including people 
in nursing homes were assigned a plan randomly and then it turned 
out to be inappropriate.  Some of these things are implementation 
problems and they will get worked out as time goes by but some of 
them are really based on the flawed concepts of the bill.  There 
have been a lot of legislative proposals out there designed to 
address some of the most immediate problems.  I would like us to 
have a fundamental fix where we have a drug benefit as part of 
Medicare itself.  But since we are not going to get to that, the 
budget that is submitted to us has no legislative proposals to 
remedy any of the problems which have become so obvious.  Is it 
your position that this program is working just fine?  Do you take 
the position that no legislative fixes are necessary to address the 
problems we are already facing and the ones that we will obviously 
see on May 15 if we do not change the deadline and remove the 
penalty?
	SECRETARY LEAVITT.  Mr. Waxman, we are 46 days into its 
implementation, the biggest change in Medicare's history.  No 
logical person would see a transition that complex and that large 
happening without some unexpected problems and we have had 
them.  We make no excuses.  The measure of our success is not 
what it looks like after 46 days it is what is going to look like when 
it is fully operational.
	MR. WAXMAN.  You do not see any legislative changes now?
	SECRETARY LEAVITT.  I do not see any change that I cannot do 
regulatorily right now.  Now I will tell you that we are already 
beginning to look at what I refer to as a Part B 2.0 that is the next 
plan year.  And I think you will see substantial changes evolving 
because the market is evolving.  The market has driven the cost 
down from about $37 a month to $25.
	MR. WAXMAN.  Mr. Secretary, I appreciate your conclusion 
and I gather that is the statement of the Administration that they 
are asking for legislation.  If you decide to, we are here and we 
certainly want this drug system to work.  And I want to give you 
an example of a problem that we had come up a number of times 
especially at a briefing that I had recently.  You have people on 
Medicaid who are also on Medicare, they are called dual eligibles.  
And they had a program under Medicaid where they were provided 
drugs.  It was a stable system, they knew what was covered and 
their drugs were going to be covered.  Now they are shifted over to 
Medicare.  Yet on Medicaid there was a limit on what the drug 
companies could charge.  It was the best price because of the 
rebates the companies had to provide.  Well now that they are 
under Medicare there are no rebates.  There are no limits.  And it 
seems to me that what we have had because of this shift is a multi-
billion dollar increase in the money that the drug company is going 
to make.  Dr. Steven Shandomyer of the University of Minnesota 
estimated the drug prices for these dual eligible beneficiaries are 
now 20 to 30 percent higher than when they were on the Medicaid.  
So it seems to me that we are talking about a windfall some say as 
much as $30 billion for drug manufacturers all at the taxpayer's 
expense.  Can you explain the rational of this to me?  It makes no 
sense for the Federal Government to be paying millions of dollars 
more for drugs they were getting at a discount price prior to 
January.  What is your response to that?
	SECRETARY LEAVITT.  Well the prices for pharmaceuticals are 
going down, not up and this program is representing a substantial 
savings for every senior who enrolls.  This is a good deal for 
seniors.  I mentioned to you--
	MR. WAXMAN.  Well not for dual eligibles.  They are getting 
less of a benefit and it is going to cost the taxpayers more money.  
	SECRETARY LEAVITT.  I would disagree with that assumption.
	MR. WAXMAN.  Well, I am going to take it then that you 
disagree with me and I would like you to look at it more carefully.
	The last point I want to raise in the few seconds I have left is 
that generic drugs play an important role in lowering the prices and 
yet we have seen a drastic increase for generic drug applications.  
At the same time there has been a dramatic decrease in the number 
of people at the FDA to process these drugs and there is a 16 
month time lag to review generic applications and then the budget 
does not call for an increase in the amount of money for FDA to 
ever meet its performance standards.  Do you think that there is 
any way we can get an increase in the number of staff to address 
this backlog or are we going to find ourselves falling further and 
further behind in getting generic drugs approved?
	SECRETARY LEAVITT.  Mr. Waxman, we are in agreement 
actually as you know with the need for us to continue to enhance 
the approval of generics.  We have, in fact, made substantial 
increases in years past in our staff and we have been able to 
increase dramatically the number of approvals.  We do have a 
backlog.  They tend to be a backlog of applications that are on 
medications that there is already one, two, or three in that category 
and we are anxious to get to as many different categories as we can 
at one time.  We share your goal of having more generics.  We 
think it is an important part of the reason the prescription drugs 
costs are coming down.
	MR. WAXMAN.  So you are prioritizing generics based on the 
categories?
	SECRETARY LEAVITT.  We want to make sure we have generics 
in every category.  If we have one that is--I am told that if we have 
one which there is already three in a category, we are better off 
approving one or two that we do not have, where we do not have 
approvals than just having a fourth or a fifth added.
	MR. DEAL.  The gentleman's time has expired.
	Mr. Upton?
	MR. UPTON.  Mr. Chairman.  Again, welcome, Mr. Secretary 
and I just want to thank you from what I heard from a number of 
different answers particularly the answer to Chairman Barton 
because I too hear a lot from my providers.  My hospitals, my 
nursing homes, equipment suppliers, and others all are concerned 
about the across the board cuts in inflation updates.  That is usually 
what they talked about.  And I think having a new system put into 
place where you are looking at a number of different pilot 
programs would solve some perennial problems that need to be 
resolved.  I look forward to working with you to see that that can 
happen in a constructive way.
	I want to follow-up just briefly on a question that Mr. Bilirakis 
asked.  He asked specifically about perhaps extending the deadline 
from May 15 for folks to sign up for Part D.  You answered it well.  
But the question that I have is what about the idea, whereas plans 
can change as they provide the medications to the beneficiaries 
but, in fact, the beneficiary is not able to change from one plan to 
the other.  Michigan has, I think, 42 different plans now and 
someone's own medication may change, the plan may change, and 
as I understand it, they are locked in for a year.  Is that right, into 
that plan, prescription--more that you are having so many enrollees 
sign up virtually every week, hundreds of thousands, millions 
across the country.  What would be the problem with allowing 
folks as plans change, they can change their plan for the 
beneficiary, what would be wrong with allowing the beneficiary to 
change the plan maybe a limit per year or something along that line 
so that they can make better accommodations for their own 
personal needs?  Would the Administration have any objection to 
that if we were able to pursue something like that?
	SECRETARY LEAVITT.  Mr. Upton, there are very good reasons 
that I will enumerate in a moment why it is valuable to have the 
capacity for a plan to change their formulary, many of which could 
endure to the benefit of a beneficiary.  It is important to 
acknowledge that this problem is talked a lot about.  People worry 
that a plan could try to change their formulary.  In order to do that, 
they have to go through an extensive process that includes the 
approval of HHS.  Now granted we are only 46 days into this but 
we have had exactly zero applications to change formularies and 
put another way this is a problem people are concerned about but it 
is not happening.  On the other hand, there are good reasons.  If 
there are, let us just assume that a generic drug was approved or 
one was clearly it was a drug safety problem.  A formulary needs 
to be changeable with the process in order to protect the 
beneficiary as well as to provide equity for the plan.  They cannot 
do it without approval.  They have to get HHS approval.  In order 
to have approval, they have to go through an extensive process 
including an independent panel, demonstrating that it is in the 
interest of the beneficiary.  So this is just one of those problems 
where people worry about it and I understand that, but it is just not 
happening and therefore, I believe it is overstated as a challenge.
	MR. UPTON.  Well that is good, thank you.
	As I mentioned in my opening statement, I talked a little bit 
about health information technology and I am very supportive of 
the budget you have presented in that regard.  I also chair the 
technology subcommittee.  Are there any statutory changes that we 
should be taking a look at to make sure that these budget increases 
can be accommodated?
	SECRETARY LEAVITT.  We are proceeding in the absence of 
Health IT bill that is currently being discussed, to develop 
standards.  If your question is are there things that could help us in 
that process legislatively, the answer is yes.  But we are making 
good progress.  We will see by the end of this year substantial 
deliveries or deliverables in important areas that will drive this 
forward.
	MR. UPTON.  Well I look forward to working with you and 
your department.  I appreciate your being here this afternoon and I 
yield back the balance of my time.  Thank you.
	SECRETARY LEAVITT.  Thank you.
	MR. DEAL.  The Chairman yields back.
	Mr. Rush is recognized for five minutes. 
	MR. RUSH.  Thank you, Mr. Chairman.
	Mr. Secretary and I have got three questions I want to get to 
rather quickly.  My question number one is would you be in favor 
giving all the angst and confusion around signing up for the 
Medicare Part D, would you be a supporter of extending the 
deadline from May 16 to another date, May 15 to another date?
	SECRETARY LEAVITT.  As we have spoken earlier, we are 
seeing enrollment of more than 250,000 a week.  We have 90 days 
left.  We believe that we can accomplish this task.  If in fact 
Congress chooses to extend it, obviously we will continue to enroll 
people.  That is a policy decision that will need to be made by the 
Congress.  I will say that people need deadlines.  If we did it 
indefinitely, people will not feel the need to investigate this.  Now 
that is a decision or a judgment that the Congress will need to 
make.  I believe by the time we have reached the period of 
enrollment, we will have reached our goal of 28 to 30 million in 
the first year.  This is not an easy population to find at time and I 
am sure there will be ongoing enrollment that will be valuable.  
	MR. RUSH.  Well, in light of that, can you or your office 
provide some members of this committee on a district by district 
basis how many eligible people have already signed up for 
Medicare Part B?
	SECRETARY LEAVITT.  Yes, I expect that we will deliver that 
information to you, each of the Members of the Congress some 
time next week.  It will not only demonstrate how many are 
eligible but it will also show how many have actually enrolled.
	MR. RUSH.  Okay.
	SECRETARY LEAVITT.  And I hope that information will be of 
value.
	MR. RUSH.  Thank you.  In your opening statement, you said 
that you had put an emphasis on prevention in this budget and I 
appreciate that emphasis and I share your belief that this is cost 
effective in the long run.  But giving this emphasis on prevention, 
can you explain why does the budget, your budget eliminate or 
make steep cuts in prevention programs such as the Universal 
Need and Learn Program, the Preventative Health Services block 
grant, the Community Services block grant, even the Health 
Professionals Training Program or scholarships for disadvantaged 
students?  Can you explain to me why those cuts here are those 
preventative in nature?
	SECRETARY LEAVITT.  Earlier I reflected the fact that during 
my period as governor I became quite conscious of the fact that 
any time you are dealing with reducing budgets you are dealing 
with a conflict between the good programs.  And there are many of 
those programs that I understand their purpose and I understand 
why people feel passionately about them.  I laid out a series of 
investment principles that talked about things like whether we are 
targeting our investments or whether we are going after prevention.  
And without responding to all of those, I will tell you that the 
reasons that I did it would have been embodied in those principles, 
one that you mentioned that would I think bare reflecting on.  Also 
as governor, I came to understand the value of having the block 
grants that the social services or the community services block 
grants.  At various times during my time as governor I wrote to 
Congress to advocate for them.  So I find myself as Secretary now 
on the other side of the table.  Well the governors like those and 
they like those because they are very flexible and you can put the 
money where you need it.  Frankly during many of the years when 
most budgets went up, it was times in which the States were 
having very difficult times financially.  But the States are doing 
better right now and we are cutting deficits and I made a decision 
that during this period I could not measure the impact they were 
having.  The States are in better shape financially than we were 
and I made a decision to make that as one of my cuts.  Now you 
may disagree with that judgment but that is the basis on which I 
made my decision.
	MR. RUSH.  So you still characterize this budget as being a pro-
preventative in nature?
	SECRETARY LEAVITT.  Oh, absolutely.  I have made 
investments that have focus on these programs and many of the 
cuts that you reflect some of them are not in my judgment oriented 
to prevention.  In some cases, they are oriented toward covering a 
large general population but were not targeted, were not 
preventative, and I made those judgments.
	MR. RUSH.  I applaud your increase in the dollars allocated for 
community based health clinics.  Can you explain to me what is 
your vision in regards to community based health clinics?  I 
understand that you are proposing at least 80 new community 
based health clinics?
	SECRETARY LEAVITT.  We actually--and I share the President's 
vision here.  I want to see community health centers expanded, 
1,200 of them.  In fact, this budget has enough for 302 centers to 
either expand or to start new ones, 80 of them will be in low 
income or in specifically targeted low income counties.  I see this 
as a way in which we can provide access to the basic health care to 
literally millions of people and for that reason we have that is a 
good example of the targeted program, one that clearly gives 
people a medical home in which they have prevention.  That is a 
good example of the kind of decision I made based on those 
principles.
	MR. RUSH.  Mr. Chairman, I yield back the five minutes of my 
time.
	MR. DEAL.  The gentleman yields back.
	Mr. Secretary, my turn now I suppose.  I have a couple of 
questions.  First of all, we have heard references made on both 
sides to situation in the Katrina aftermath and I would like for you 
to comment generally on where you think we are in terms of 
compensating those pharmacists and other providers who feel that 
they have been left out in the process and does this budget include 
specific dollars to address that problem and if not what kind of 
information can you give us with regard to resolving that question?
	SECRETARY LEAVITT.  The issues related to Katrina were in 
large measure dealt with in our Deficit Reduction Act where as 
much as $2 billion was allocated for us to deal with 
uncompensated care and in some cases to use whatever was left 
over to help rebuild the health infrastructure.  Comments have 
been made already about the need to do that.  I will not repeat 
those except to say that we see a grand opportunity.  The health 
care system there frankly did not function very well before.  Now 
we see an opportunity to develop an extraordinary health care 
system that will show the way for many others in the future.
	MR. DEAL.  So those funds in the Deficit Reduction Act would 
be more than adequate to cover the claims for care that some might 
claim are still uncompensated?
	SECRETARY LEAVITT.  We believe they are.
	MR. DEAL.  All right, thank you.  
	As you know, this committee has held two hearings on the 
issue of our preparedness for a potential pandemic influenza 
outbreak and I want to thank you again for testifying at our hearing 
we had back in November.  And I know that you have been 
working closely on the implementation of the plan itself.  We 
appropriated money during the last steps for the beginning of that 
process and I believe there is money in this proposed budget for 
additional funding to go forward with a further preparedness plan.  
Would you sort of outline for us what you think the steps we need 
to be taking during this next year are and how the funds that you 
are requesting would implement those steps?
	SECRETARY LEAVITT.  As you are aware, the President 
requested a $7.1 billion emergency supplemental.  The Congress 
funded $3.3 billion of that in the course of the last deliberations.  
Those dollars are being used for a combination of different efforts.  
One would be State and local preparedness.  I am in the middle of-
-I am not in the middle I am at the beginning of 50 State summits.  
I have been to ten and we have 36 of them either held or being 
planned but we will have 50 State summits where we are rallying 
local communities, business organizations, community groups, 
churches, schools, colleges, to prepare and $350 million will be 
used for that.  A large measure of it will be used for international 
and domestic monitoring so that we are able to bulk up the 
capacity we have to gather information about when the disease 
strikes and how broad it is.  We are also purchasing antivirals.  We 
will reach by the end of 2006 our targeted 20 million courses in 
stockpiles and we are developing jointly with the State's 
distribution needs.  We are also on the well advanced stages of 
developing new technology, cell based technology for vaccines 
and additional capacity to manufacture it.  As to the next phase, it 
is basically a continuation of what we are now doing.  We are in 
the process of doing RFPs, we have done one RFP for different 
manufacturers to help us build capacity and new technology.  What 
we have now will get us through the first phase of that but we are 
confident there will be promising technologies that we will need to 
nurture through it.  So this gets us into the game but we are clearly 
going to need the help of Congress and being able to fulfill that 
plan and be able to complete our preparation.  I will say, Mr. 
Chairman, that when it comes to a pandemic we are overdue and 
we are under prepared and there is a lot of work going on right 
now but we have still, we are still a long ways from the point of 
being able to rest with the assurance that we are ready.
	MR. DEAL.  Am I correct, though, that there would be other 
funds under the Public Health Security Act that could also be used 
for some of these purposes that you have outlined?
	SECRETARY LEAVITT.  Well we clearly recognize that every 
part of our public health infrastructure needs to be tuned in a way 
that it will meet multiple demands.  And so we are working to 
create a sense of synergy on what we are doing here with what we 
are doing in the other areas of concern such as bioterrorism or any 
natural disaster.  We are not just using these pandemic funds for 
pandemic.  We are generally expanding the preparation that is 
available to Americans for all natural disasters or all disasters 
rather they are manmade or natural.
	MR. DEAL.  Now in conclusion as one who has just toured the 
new facilities of the CDC in our State, I was very impressed with 
the improvements and the technology that is going to go forward in 
their future efforts there.
	Mr. Engel, you are recognized for five minutes.
	MR. ENGEL.  Yes, thank you, Mr. Chairman and thank you, Mr. 
Secretary.  It is not easy obviously testifying before the committee 
and I want to just again reiterate my disappointment in a lot of the 
things that my colleagues have mentioned about the budget but I 
welcome you.
	I want to first talk to you about a letter that I sent along with 
every colleague in New York, Democrat and Republican, all 29 of 
us signed a letter to you last October expressing our concerns 
about the Ryan White Care Act and funding concerns.  We--it is 
four months later and we have not received a response to that 
letter.  I would say respectfully that since every New Yorker again, 
Democrat and Republican, signed onto the letter, I think that four 
months is really too long to wait for a reply and I would hope that 
we could at least get an answer to some of our questions as soon as 
possible.
	As you know, no State spends more than New York to care for 
its residents with HIV and AIDS, over $3 billion last year.  
Unfortunately one of the epicenters of the AIDS crisis in the 
United States is in New York and we have always viewed this 
funding as a partnership between State, cities, and the Federal 
Government.  And we rose to the occasion bringing the financial 
resources to finance HIV services long before the Federal 
Government committed substantial resources for HIV.  We are 
concerned because we think that the intent of the funding and the 
way it is going to be done sort of borrowing from Peter to pay Paul 
and we feel that reducing the Ryan White resources that State's use 
to care for people with HIV and AIDS punishes those States that 
have been forthcoming in terms of money and we think that is 
really the wrong way to go.  People living with AIDS and HIV is 
increasing, and the demand for the Care Act services there is no 
justification we feel to hurt New York because we have done the 
right thing.  And would it not make more sense to the Federal 
Government to prioritize significant new dollars for HIV/AIDS 
care rather than pitting regions against each other in the fight for 
dollars.  I do not want to go into everything.  I do not have the time 
that we said in our letter, but it was a very well written thoughtful 
letter and I think again the fact that 100 percent of the New York 
delegation, you know, it is hard to get 29 members to agree on 
anything, but we agreed on this and I would just appreciate, and I 
say this not to embarrass you because I know you are obviously 
working as hard as you can but we would like an answer to our 
letter and I would like you to comment on some of the questions 
that I raised.
	SECRETARY LEAVITT.  Thank you, Congressman.  I am 
disappointed that your letter has not been responded to and I will 
find out why that is.
	MR. ENGEL.  Thank you.
	SECRETARY LEAVITT.  I would like to make clear that we are 
supportive of the reauthorization of the Ryan White Care Act.  As 
you are probably aware, we have laid out a series of principles that 
we think improve our capacity to respond and we want to serve the 
neediest first.  We want to focus on the lifesaving and life 
extending services.  We are interested in increasing our prevention 
efforts going again back to prevention.  In keeping with that, I 
would like to add that in this budget we are proposing a substantial 
new initiative that the President has announced that will test an 
additional 3 million Americans and will take as many as 4,400 
people off a State waiting list.  We see that as a significant new 
investment in this area, particularly during a time when we are 
working so hard to reduce deficits.  I mentioned it early today as 
one of the new initiatives that we have worked hard to find other 
ways and places where we could reduce them in order to fund that.  
And so I wanted to mention that given the fact that I am sure there 
are a lot of programs that people are unhappy about.  I wanted to 
make sure I got a chance to mention this one and I am sure would 
be favored to you.
	MR. ENGEL.  I would like to thank you.  I have obviously some 
more questions which I will submit but they are all stated in the 
letter.
	I want to talk to you about SAMHSA.  There is a SAMHSA 
funded Substance Abuse Prevention Program run by Bronx Aid 
Services.  They came to visit my office in Washington, D.C.  Kids 
in the Bronx which I represent have the highest rate of substance 
abuse in New York City and the program works to increase self 
esteem, counseling, and opportunities for these kids.  There are 
huge cuts to SAMHSA's budget and many programs are receiving 
cuts or flat funding this year and again I want to just express my 
dismay at getting such large cuts to SAMHSA of this treatment 
opportunities for substance abuse and mental health is so 
devastating and I am wondering if you could comment on that.  
	MR. DEAL.  This will have to be the gentleman's last question.
	SECRETARY LEAVITT.  I will just acknowledge that we are 
focusing our efforts on the transformation of the SAMHSA which 
will allow us to deliver better with the dollars we are investing and 
I am quite enthusiastic about this transformation effort and 
recognizing the limits of time obviously with that.
	MR. ENGEL.  All right, thank you, I just wanted to point and I 
have no other questions but there is a $71 million dollar cut so we 
think that is overboard.
	Thank you, Mr. Chairman.
	MR. DEAL.  The gentleman from Kentucky, Mr. Whitfield.
	MR. WHITFIELD.  Mr. Chairman, thank you very much and Mr. 
Secretary thank you for joining us today.  We all appreciate the 
great job you are doing a very difficult position.
	But first I want to mention a couple of things to you.  The first 
thing I want to mention to you is that we have heard a lot of 
discussion about budget reductions and loss of funds.  And the first 
thing that I want to talk to you about is an offer that we made to 
give you money and you all did not take it.  And I want to point 
out specifically what I am talking about.  Appropriators back in 
2001, without any authorization from any authorizing committee, 
particularly this one that has exclusive jurisdiction on the issue 
relating to prescription drug monitoring programs, started funding 
unauthorized programs and over the last three years have received 
something like $33 million.  This committee unanimously passed a 
National Drug Monitoring Bill that was passed on the House floor.  
It was passed in the Senate by overwhelming majority.  The 
President signed it in August.  We sent letters to OMB to Josh 
Bolton and said because this is a new program at HHS and we 
work closely with HHS staff and even prior to your assuming the 
responsibilities of Secretary, we worked with Secretary Thompson 
who was very supportive of it and we were shocked really that 
there was zero dollars in authorized program under HHS to 
implement this new program and there was $10 million over 
Department of Justice for the old unauthorized program.  And I 
would just like to urge you to work with us in trying to correct that 
error and get it over at HHS where we think it belongs, and after 
many hearings on the subject, we found some flaws in the DHA 
Program and I would ask you would you be willing to work with 
us to get additional money for this program?
	SECRETARY LEAVITT.  Mr. Whitfield, I am aware of this.  And I 
am most aware of it because we like the program.  I am also 
conscious of the fact that there is this ongoing discussion as to 
whether or not it ought to be in the Justice Department or at HHS, 
and the Chairman has made very clear to me where he thinks my 
allegiances ought to be and we just need to work out among the 
various committees how best to fund this.  We like it, we will be 
cooperative, we will do all we can.  We need your help as well on--
	MR. WHITFIELD.  Well when you are saying an ongoing 
discussion, who are you referring to?
	SECRETARY LEAVITT.  Well I recognize there is a little bit of a 
jurisdictional discussion going on between the committees of 
Congress and also we are very anxious to see the program succeed.
	MR. WHITFIELD.  Yes.  You know our view on this is the 
appropriators never had it authorized, not all of us are shocked that 
appropriators would do something like that, but this is the 
committee with jurisdiction and we did it overwhelmingly, passed 
it unanimously, and I know that you are supporting us so hopefully 
the Chairman and the rest of us can let our leadership know that we 
feel very strongly that the money should be at HHS and not DOJ 
so thank you for that. 
	The second issue I would like to raise, and I am not the only 
member of Congress that has been focused on this issue, there are 
also a number of Senators as well and we have had discussions 
with Dr. McClellan and that relates to the calculation of the 
average sales price for prescription medicines under Part B of 
Medicare used by oncologists and whether or not service to these 
should be included in that calculation.  And in the letter that Dr. 
McClellan wrote to some groups, he made it very clear that it was 
the position of CMS that these service fees, if they are valid 
service fees, should not be a part of the calculation of average sales 
price.  But that has never really been placed into a regulation at 
HHS or CMS and I was just curious do you have any thoughts on 
that particular matter?
	SECRETARY LEAVITT.  Your recounting of the history of this is 
consistent with my own understanding.  It is also my 
understanding that the regulations are under consideration 
currently and that we are working through that.  I think Dr. 
McClellan has stated the department's policies clearly as I could.
	MR. WHITFIELD.  Well I hope that they will take some action 
on it.  They have been working on it for some time and I do think it 
would clarify and even help alleviate a number of problems and 
any influence that you might have over there if you agree with us 
we would appreciate it.
	SECRETARY LEAVITT.  Thank you.  Well I do not know if I 
have influence there, I will test it out.
	MR. DEAL.  Thank you.  And Mr. Whitfield I am going to 
weigh in on that, too.  We passed a good bill and they are our 
friends on appropriations.  They need to understand that once we 
have done it, that we expect them to receive the wishes of the 
authorized program.  I will be working with you, Mr. Lewis, Mr. 
Rogers, and the ranking members of the minority side to make that 
happen.
	MR. WHITFIELD.  Thank you, Mr. Chairman.
	MR. DEAL.  Mr. Markey?
	MR. MARKEY.  Thank you, Mr. Secretary very much for 
coming here today.  
	You have got a very tough job.  Donald Rumsfeld says to the 
President, I need a massive increase in defense spending, he gets it.  
Secretary of Treasury says to the President I need a massive cut in 
taxes, he gets it.  In line comes health care, you are next, you get to 
deal with what is left over and as a result you have to make cuts 
and you have to make tough decisions because it is not given in 
this Administration the same priority that I am sure you would give 
it.
	So we have a situation here where you were talking about what 
happens if there is, if it is unchecked what happens to the Medicare 
budget.  What happens to the Medicaid budget in terms of the 
percentage of gross domestic product that it will consume in the 
years ahead.  What is happening in this budget though, Mr. 
Secretary, is a cut once again in the NIH research budget including 
inflation.  And there has been a 9 percent cut in the purchasing 
power of NIH over the last three years that is a reduction.  Now I 
was born in the same month as President Bush and President 
Clinton and we are the first baby boomers.  And there is going to 
be millions and millions coming every year after us and the 
estimate is that 16 million of us will have Alzheimer's, 16 million 
of us.  Now it seems to me that the best cost containment we can 
have is if we invest the extra few billions now to find a cure to 
work on prevention rather than what is estimated to be a $100 
billion a year bill for our baby boomers with Alzheimer's in 
nursing homes under Medicaid in a relatively short number of 
years.  This year it is $20 billion for Medicaid for Alzheimer's 
patients.  At that time, all the baby boomers are in today's dollars.  
In other words, 20 percent of today's defense budget would go just 
to one disease, Alzheimer's and Medicaid much less all the other 
costs related to Alzheimer's.  So Mr. Secretary, do you not think it 
makes sense for us to increase NIH research, to increase the 
likelihood we find the cure, that we find a preventative way of 
avoiding the trillions of dollars which are going to have to be spent 
just on the treatment and care for Americans, baby boomers who 
have Alzheimer's.  That would be one disease would be $150 
billion a year every single year, trillions of dollars.  Would it not 
make sense for us to make that investment today with additional 
research and the same way that the preceding generations had 36 
years of unchecked increase in NIH research for heart disease and 
stroke and for cancer that has actually made it likely that the 
average baby boomer sitting here if they are healthy today will live 
to 85 to 90.  In other words, the cost for Alzheimer's is going to be 
explosive because of the success of the preceding generations of 
research.  So can you explain to me how the White House can give 
you a budget but kind of forces you to cut NIH research when I 
know you know that the best thing you could do is to engage in 
that research in that prevention to avoid the long-term costs which 
are hundreds of times higher than any budget saving this year or 
next year or the year after.
	SECRETARY LEAVITT.  Mr. Markey, you pointed out the fact 
that Medicare and Medicaid make up a huge portion of our entire 
national budget.  We often refer to bills as cuts in the proposals we 
have made but the reality is we will see dramatic increases both as 
a percentage and in real dollars in that area.  And the point you 
have made is that many of those expenses will be driven by 
demographics that are very clearly in front of us and that if we can 
find ways of preventing those illnesses that it will ultimately create 
somewhere to our benefit.  That is a strategy that makes sense.  It 
is a strategy that we have followed.  It is a strategy that I suspect 
over time we will continue to follow.  This is a year which we are 
doing deficit reduction and we have worked hard and fought hard 
to be able to protect the integrity of the funding of NIH that we 
have--
	MR. MARKEY.  Well wouldn't you prefer honestly to have to 
have $5 billion less in tax breaks for the upper 2 percentile and $5 
billion more in research for Alzheimer's and Parkinson's and these 
other diseases that are going to hit just about every family in 
America in terms of changing and altering the whole history of 
those families.  Wouldn't it be better now to rather than those tax 
cuts to invest in that research and that prevention because of the 
payoff we know will come because we have seen it in health, in 
heart disease, we have seen it in cancer.  Wouldn't it be better for 
this generation to make that same investment and to not have those 
tax cuts?
	SECRETARY LEAVITT.  What I feel very good about is that we 
are targeting our investments of NIH in a way that will go across 
not just Alzheimer's but across all disease categories.  That we are 
going to be able to begin to explore the value of the human 
genome and the environment which I believe will in fact have a 
substantial impact on the demographics you have spoken of.  It is a 
new way of investing our dollars and we are deploring in the 
context of our critical path initiative, our road map initiative, and 
other efforts to make certain that we are focusing on the--
	MR. MARKEY.  I know what you are saying, Mr. Secretary, but 
after 36 years of NIH budget increases, we now have a 9 percent 
cut in purchasing power over a three year period.  It cannot have 
anything other than a negative long-term impact on the likelihood 
that we are going to find a cure for Alzheimer's and Parkinson's 
which tragically will probably affect unfortunately about, you 
know, a third of the people who are sitting up here today.  And I 
just think that in the long run whatever tax cuts, you know, the 
White House, President Bush, and Vice President Cheney might 
want to give to wealthy people has to be dwarfed by the epidemic, 
I mean literally an epidemic which is going to hit America in 
Alzheimer's and Parkinson's.
	SECRETARY LEAVITT.  But it is important to remember we are 
still investing $645 million a year.  It is not as though we are 
terminating our investment, $645 million a year is not chump 
change, it is a big investment and one that--
	MR. MARKEY.  But you are cutting the National Institutes of 
Aging the baby boomers retiring--
	MR. DEAL.  The gentleman's time has expired.
	The gentleman from Georgia, Mr. Norwood.
	MR. NORWOOD.  Thank you very much, Mr. Chairman and 
Governor, thank you so much for being with us.
	Let me just ask a quick question.  I know you have only been 
here a year and I bet you have figured out already that in this town 
everything is measured by how much you spend and if you do not 
spend more things are going bad rather than measuring things by 
what the results are.  We are trying to get to that but most people 
still believe if you do not add more money every year then you are 
really not doing things.  Now the comment was made there would 
be 9 percent cut.  Is that correct?
	SECRETARY LEAVITT.  We will continue to see dramatic 
increases in investment in all those categories.  What we are 
talking about is allowing programs to grow more slowly.  
	MR. NORWOOD.  To my knowledge, we have doubled NIH in 
the last 10 years, doubled.  And all we are really saying as I 
understand it is okay one year in order to try to get all this 
spending under control they are just simply not going to get an 
increase.  I hardly think that is the end of the world.  Certainly they 
ought to be able to manage it so it is not the end of the world.  If 
they cannot, they need to change the focus at NIH.
	SECRETARY LEAVITT.  I have learned over time, I have been 
through a number of budget years where things were not as good 
as others.  I have learned over time that it is during these periods 
where we find new ways and improved ways to invest and I think 
what I pointed out earlier where we are beginning to invest in 
trans-institute initiatives that benefit every disease category.  It did 
not take me a full year to figure out that at NIH there are 27 
institutes--
	MR. NORWOOD.  Right.
	SECRETARY LEAVITT.  --all of which are devoted to some kind 
of disease or a major component of health.  Every one of them has 
things in common and if we are investing generally in the basic 
science of genes and the environment and other things it helps us.
	MR. NORWOOD.  I have three questions and I will probably 
never get to them but I will try.  One of the things that has 
concerned me in the budget is that we ignore the fact that our 
physicians treating Medicare patients are going to get a cut of 4.6 
percent and that means we will have to fix it because that is not 
just a reasonable thing to do.  And then we also ignore the fact that 
MedPAC has recommended the 2.8 percent increase, which I 
happen to think MedPAC is a pretty darn good outfit.  Now my 
understanding is, my feeling I guess I should say is, that at least 
CMS thinks we are going to solve all this problem by going to pay 
for performance and I am just not so sure we are going to solve all 
these problems.  I understand the goal of pay for performance and I 
understand there can be some good things that come out of that, 
but a lot of the legislation that we are hearing about or listening to 
does not talk necessarily about quality of care but it talks about 
efficiency.  And I am concerned that if we write that language 
wrong, we are going to be actually rewarding our physicians for 
providing the cheapest care and not necessarily the best care.  Now 
I do not believe, and you can correct me, but I do not believe you 
would think that physicians ought to be rewarded for providing 
cheap care unless there are strong measures at CMS that show that 
they are also providing quality care.  In other words, it needs to be 
quality care for less money for this to work.  And if your crew has 
any suggestions about legislative language that can assure 
efficiency measures that are going to be created out of this, I really 
would appreciate it.  And I have listened to Dr. McClellan for 
hours on end.  We have talked about this and the potential 
unattended consequences there I think are very, very high, and if 
we are going to wait to get to pay for performance before we ever 
solve the physician payment formula, we are going to face this 
every year.  Why don't we face up to the fact that we are losing 
docs now because of payment in Medicare and let us give a modest 
increase as NIH keeps talking about wanting and everybody else 
wants Federal employees wants, give them a modest increase so 
we can work this out.
	Next question, I just need to go on.  What are you going to do, 
what is HHS going to do with at least the insurance plans in Part B 
that are engaging in inappropriate conduct?  And since we have no 
patient protections, I am fairly certain we can count on that and 
that is going to affect the pharmacists as it today affects the 
dentists and the physicians.  And I just hope you guys are going to 
be ready to get in there and fight for them.  
	SECRETARY LEAVITT.  The plans need to keep their 
commitments and if they do not, we have regulatory authority and 
we will use it.  One example of that, plans are required to have a 
24 hour response.  There needs to be an adequate or rather let me 
restate that.  They have a requirement to have a 1-800 response.  
We are now inventorying to find if they all do.  If they do not, you 
can count on the fact that I am going to use the regulatory authority 
given to me in the law to assure that they start.
	MR. NORWOOD.  Well they are already out there telling dual 
eligibles oh no, you are not a dual eligible you need to sign up for 
this plan.  They are doing that now.  And in conclusion, I think you 
are doing a great job with this.  We are 44 days out.  Pharmacists 
of course are upset and confused and got a cash flow problem.  But 
to a man when I talk to them or a woman, they tell me this is going 
to get better.  We think in time this is going to get better and this is 
going to work itself out.  I think it is, too.
	MR. DEAL.  The gentleman's time has expired.  We appreciate 
the comments.
	Mr. Green of Texas.
	MR. GREEN.  Thank you, Mr. Chairman.
	And again, thank the patience of the Secretary.  We only have 
these opportunities maybe a couple times a year so thank you for 
listening.
	Mr. Secretary, we all know that the President, you and the 
President share commitment with members on both sides of the 
aisle for a community health center program.  I have a health 
center in my district, Pasadena Health Centers, one of the 88 
HRSA's that announced that it received new access points 
beginning last December 1.  And I understand the funding date was 
pushed back because Congress did not finish the work on 
appropriations until late December and yet to date this money has 
not been approved and appropriated and has not gone out the door.  
Community health centers like Pasadena operate on a very slim 
margin.  They provide terrific care and are uninsured in our 
communities and they count on this grant funding to sustain their 
operations.  I know you and Dr. Duke at HRSA are committed to 
delivering the funding so can you give us a date certain when the 
centers may receive this grant funding and more importantly when 
this money is delivered will it be retroactive to December 1?
	SECRETARY LEAVITT.  When I was in Houston and you 
mentioned on Labor Day we talked a little bit about community 
health centers and the mayor, actually Mayor White at that point 
indicated the impact that the evacuees were having on your city.
	MR. GREEN.  In fact, you actually backdated for those five new 
centers in our area.
	SECRETARY LEAVITT.  Are you talking about those funds or are 
we talking about the funds after that point?
	MR. GREEN.  No, we are talking about the new center funds 
that they were supposed to receive December 1 for that 
designation.
	SECRETARY LEAVITT.  I do not know the answer to this.  I am 
going to have to get back to you.
	MR. GREEN.  Okay, if you could because I know that center 
happens to be in my district and we have four other ones and I am 
sure the rest of them around the country are calling their Members 
of Congress saying well when are we going to see the money now 
that it is February 1.  And again, that was Congress's fault because 
we did not do it until the reconciliation or they passed the budget.
	The next question and again I want to thank you for your 
response to Hurricane Katrina at least in my area.  Many health 
care providers stepped in and took care of the evacuees without 
regard to their ability to pay.  And when the City of Houston called 
to let us know that hurricane survivors were having significant 
problems accessing their prescription drugs, our office received an 
immediate response from a lot of the large pharmacies, the chain 
pharmacies.  In fact, it took action within hours to form an 
agreement with the State to get evacuees the prescriptions they 
needed.  And I know you were at the Reliant Park and also at 
George R. Brown.  I know the First Lady was there and saw these 
pharmacies that were set up literally within hours.  Despite the 
creation of an uncompensated care pool in the Texas Medicare 
Labor, these pharmacies have still not been reimbursed for the 
prescriptions provided to evacuees.  And to make matters worse, 
the Texas Medicaid Program has informed the pharmacies that 
CMS headquarters directed them to require patient's original zip 
code for reimbursement information, and that is extremely difficult 
to obtain retroactively, particularly four months later and given the 
mobility of the evacuee population.  Was it true that CMS directed 
State Medicaid programs require this information to the collection 
which is overly burdensome in my view, and can you clarify 
whether the pharmacies should seek reimbursements from 
Medicaid or FEMA as it seems these providers have consistently 
received conflicting information.  Again, these are the ones set up 
under the emergency situation with 200,000 people coming in.
	SECRETARY LEAVITT.  Congress was responsive to our request 
to provide funds and we have, there is not an unlimited number of 
funds that were provided and we want to make sure that we are 
using them to compensate the right people.  We want to make sure 
we do not get to a situation where because of poor record keeping 
we are paying people for things they did not provide.  And so I 
suspect that people at CMS have created criteria to try to make 
certain we are doing the right things with taxpayer dollars.  If it has 
become more onerous than it need be then perhaps we need to take 
a look at it and I would be happy to ask CMS to do that.  I am not 
aware of those requirements and this is the first I have heard of it.
	MR. GREEN.  Then I will probably just follow up with a letter 
because the pharmacies actually provided it at those shelters and 
again they took the information that they knew they could get at 
that time, but the pharmacies are the ones who were not receiving 
reimbursement.  The prescriptions were filled on an emergency 
basis because people showed up without their prescriptions, 
without anything, but they did go through the system out there at 
the Reliant Stadium and all positions that were literally from all 
over and they took down their information and so they were able to 
fill pharmaceuticals for them but I will get a letter to you--
	SECRETARY LEAVITT.  Thank you.
	MR. GREEN.  --on that so we can do that.  
	The last question I have in the 18 seconds is the elimination of 
health professions grants.  It has become clear that in the past 
decades we have problem with capacity for providers of primary 
health care, and at the same time the budget seeks to stand HHS 
programs that direct, in direct care service is given budget cuts in 
health profession programs, how can the agency plan, enable, and 
secure a primary health care workforce?  And again, we are 
looking at the health care centers that we are creating all over the 
country, community health centers, and is there something we can 
make sure that the personnel are there for our community centers?
	Thank you, Mr. Chairman.
	MR. BILIRAKIS.  [Presiding]  I thank the gentleman.
	The gentlelady from New Mexico, Mrs. Wilson to inquire.
	MRS. WILSON.  Mr. Chairman, I came in late.  I think there 
were some other members who--
	MR. BILIRAKIS.  Well I have been asked to go right on down 
the line so I am just following orders.
	MRS. WILSON.  Thank you, Mr. Chairman, I appreciate that.
	Mr. Secretary, thank you for being here today.  I have gone 
through the budget and there are a number of things, I think that 
are going to be issues of continuing concern and discussion, but 
one of them I wondered if you could talk about a little bit is the 
union Indian program.  There is a set aside that urban Indian health 
program in the past of 32 million that I think has been eliminated 
in this budget proposal.  And 75 percent of Indians live in urban 
areas and that is only a 1 percent set aside in the Indian health 
budget which is now being eliminated.  And I wondered if you 
could talk about how folks who do not live near the reservation are 
going to get their health care.
	SECRETARY LEAVITT.  I can.  This is a good example of a 
situation I found where we are funding in one side of HHS 
community health centers and in another operating division in 
HHS the Indian Health Service we were providing urban clinics for 
Native Americans.  And so I am just asked a question and I think it 
is the right response.  Why are we creating separate facilities in the 
same department to serve essentially some of the same population.  
And so what I have proposed is to combine those in a sense so that 
we are serving those populations through our community health 
centers.  Rather than have two less than ideally developed 
facilities, why don't we have one extraordinarily good one and that 
is the strategy here.
	MRS. WILSON.  What does that mean for a member of the 
Navajo Nation who is living in Albuquerque, New Mexico and for 
the service where they get it, how they are enrolled, whether there 
are co pays and so forth, how is this transition going to take place?
	SECRETARY LEAVITT.  We need to reach out to them and make 
certain that they know that health care is available to them and 
make certain it is extraordinarily good health care and that it is a 
both welcoming environment and in quality.  At least by my 
assessment it does not make any sense for us to be funding two 
facilities and sometimes in the same town and some cases serving 
very similar populations when we could have one significantly 
better facility if they were combining forces.  And I recognize that 
there are perhaps cultural reasons that they have chosen to be 
served there but I do not think we are doing that entire population 
any favors by dividing our capacity to provide care.  And so we are 
obviously going to have to change a pattern there but it will not 
only be more efficient but I think they can get better health care.
	MRS. WILSON.  Have the tribes been involved in the planning 
that has gone into this budget recommendation?
	SECRETARY LEAVITT.  There has been a lot of discussion about 
this through the Indian Health Service.  Now, you know, can I 
testify today that all of them are crazy about the idea, probably not 
because people like to have their own facilities.  It will 
undoubtedly affect a community of health care providers in a way 
but this is efficient.  It is a good use of taxpayer funds.  And 
frankly, it is a better way to serve people because we are going to 
provide them with I think superior health care and better facilities 
because we are combining them.
	MRS. WILSON.  And in Albuquerque we have multiple 
community health centers and we have the Albuquerque Indian 
Hospital and Clinic right next to UNM.  I know that this is--have 
you worked through, is your intention to close the Indian Health 
Centers or is your intention to expand the community health 
centers to cover the existing infrastructure for the ISS?
	SECRETARY LEAVITT.  I hesitate to make a blanket statement on 
that matter because I am guessing there will be situations where 
both will be true.  There will be places where we might be advised 
to close one.  I suspect there is or there will be.  But again the 
purpose here is to serve people better and to not duplicate services.  
I think this is a very good use of taxpayer funds and it looks after 
the way we can best serve people.
	MRS. WILSON.  I am asked to stay engaged with you on this as 
this develops because if it is news to me, I am betting that it is 
news to many of the Governors and pueblos who I represent and 
there are 48,000 urban Indians in Albuquerque who have had 
continual problems with the decline in funding in the Indian Health 
Service.  And we cannot just say well this it the way we are going 
to do it and not plan it.
	SECRETARY LEAVITT.  A budget is a proposal for discussion 
and obviously we will begin that conversation.  The extent of 
which has happened in Albuquerque I cannot attest to that.  I can 
tell you we have some of the most compassionate people on the 
planet in the Indian Health Service who want very much to serve 
the population.
	MRS. WILSON.  Thank you, Mr. Chairman.
	MR. BILIRAKIS.  Mr. Stupak?
	MR. STUPAK.  Thank you, Mr. Chairman.  
	Mr. Secretary, if I may, let me ask you a few questions about 
Accutane and then I want to ask you a little bit Hurricane Katrina 
again back in the Gulf Region.  Last Friday, Mr. Secretary, the 
FDA Advisory Committee met for the second time in two years to 
discuss the safety of Accutane.  The Advisory Committee was 
updated on a new pregnancy risk management program called 
ipledge.  While I am pleased to see some progress that has been 
made to better protect the public from the risk of pregnancy from 
Accutane, I have some concerns about the ipledge that I expressed 
in written comments to the Advisory Committee.  For instance, I 
am concerned that the implementation of the program has been 
delayed and the Academy of Dermatologists has called for another 
delay.  The FDA said at the Advisory Committee's hearing after 
the Advisory Committee hearing that it would not delay the 
implementation.  Can you reaffirm that it will not be delayed?
	SECRETARY LEAVITT.  On August the 12th of 2005, FDA 
approved new labeling for Accutane and included a strengthened 
risk management program.  The sponsors agreed to implement the 
risk management program that requires registration in the program 
of wholesalers and prescribers and pharmacies and patients who 
agreed to specific responsibilities designated to minimize 
pregnancy exposures in order to distribute and to prescribe and 
dispense them.  I am not sure, I am not familiar enough directly 
with this to give you the assurance you seek and maybe those who 
can and I think this is likely something I need to get back to you 
on.
	MR. STUPAK.  Okay, if you would.  Also I have given you a 
slide there and also a sort of like a little outline of things that have 
happened since February 1, 2001, and it ends at November 21, 
2002.  And I am pretty concerned that the FDA is failing to protect 
the American public from the psychiatric effects of this drug.  The 
FDA put a new advisory on their website last May after reviewing 
a study by Dr. Bremner of Emory University.  In fact, that is the 
study I just handed you.  If you take a look at the study, it says in 
the website the FDA says the FDA continues to assess reports of 
suicide or suicide attempts.  All patients should be observed 
carefully.  Patients should stop use if the patient has any of the 
symptoms.  But the Bremner study here shows us there is a 21 
percent decrease of brain metabolism in the area of the brain that 
mediates depression and in the study by Mr. Bremner 50 percent of 
the subjects experienced headaches which were associated with the 
decrease in brain function.  So you have over 160,000 people 
taking Accutane and of that 160,000 if half of them are having 
these headaches as the Bremner study shows, that is 80,000 people 
who could be experiencing the lack of brain metabolism of this 
drug.  So my question to you is this.  The FDA has received reports 
of 282 suicides since as of December 31, 27 suicides alone last 
year, and according to the FDA that only represents two or up to as 
much as 10 percent of the real number that is out there.
	So my question, Mr. Secretary with all these web updates, 
which studies, research, tracking and information sharing is going 
on between the FDA and National Institutes of Health to ensure 
that teenagers and their families are being protected from this drug 
other than just posting something on a website.
	SECRETARY LEAVITT.  Mr. Stupak, that seems like a very good 
question.  It is not one I am technically capable of answering 
today.
	MR. STUPAK.  If I may, Mr. Chairman, I will put those in the 
record.  Could you respond back in writing to the committee then?
	SECRETARY LEAVITT.  I would.  And speaking of responding 
back in writing, earlier in your opening--
	MR. STUPAK.  Right.
	SECRETARY LEAVITT.  You talked about the Katrina letter.
	MR. STUPAK.  December 15 letter.
	SECRETARY LEAVITT.  Yes, I spoke to Mr. Dingell and told him 
that we had hoped to deliver a response.  I have the response now.  
I did not an hour ago.  I will be delivering this in person to Mr. 
Dingell.  I just want you to know about it and also Mr. Brown and 
it will be responsive.
	MR. BILIRAKIS.  Without objection that will be made a part of 
the record.
	[The information follows:]

 

	MR. STUPAK.  And without objection can that slide and 
document I submitted to him be--
	MR. BILIRAKIS.  Got it.
	[The information follows:]

 

	MR. STUPAK.  Thank you, Mr. Chairman.
	Getting back to Katrina and I appreciate the letter a few months 
ago.  We appreciate it.  Again, yesterday the Government Reform 
or I should say Mr. Davis released a report: A Failure of Initiative.  
And as I said in my opening comments that it seems like now in 
New Orleans it is business as usual.  And when I read this report of 
Mr. Davis he said passivity did the most damage.  The failure of 
initiative costs lives, prolonged suffering, and left all Americans 
justifiably concerned our Government is no better prepared to 
protect its people than it was before 9/11 even if we are.  So when I 
asked you earlier that I would hope that you would become more 
aggressive in the health care in New Orleans, we were down there 
for three days and they have not been reimbursed since August.  
Big Charity has not been reimbursed since August 29 when the 
hurricane hit through January and there are some questions like, 
"well they have not submitted proper documentation."  But if you 
do not have power, no computers, you are delivering care, 
everybody agrees they are delivering care, they have to be 
reimbursed.  We have to cut through the red tape and get these 
folks some money if they are ever going to provide health care 
material.  My time is up already.  The point is this is being done to 
expedite and provide health care down there.
	MR. BILIRAKIS.  Brief response, please.
	SECRETARY LEAVITT.  We do not lack aggressiveness on this.  I 
will be down there again on Tuesday.  I was there just a couple of 
weeks ago.  I think it was one of the great opportunities to 
demonstrate not just a renewed health care system but an 
exemplary health care system.  And I could act philosophic on it 
but the time is up and I think in the letter you will see our vision is 
real and our commitment is too.
	MR. STUPAK.  And more than vision we need health care.  
What about them there?  Their vision may be great but how do you 
implement vision if no one is implementing that on the ground?
	SECRETARY LEAVITT.  I think what you will find is that much 
of the health care that is there is being provided by HHS and you 
saw uniformed people running all over New Orleans that were 
providing it.
	MR. BILIRAKIS.  Mr. Fossella may inquire.
	MR. FOSSELLA.  Thank you, Mr. Chairman, thank you, Mr. 
Secretary for your patience and the job you do, appreciate it and 
appreciate you being here today.
	The first question deals with Ryan White funding and I am 
going to follow up a little bit to Mr. Engel's question before but a 
little more specific.  I guess one of the President's principles calls 
for the creation, the severity of need for core services index to be 
used and the revision of Title 1 and Title 2 funding formulas.  The 
index as I understand it to include among other measures the 
availability of other resources including local, State, and private 
resources.  It is my understanding that HRSA has formed advisory 
panels to help the development of such an index and the panels 
have discussed including an end adjustment that factors available 
resources in State's capacities to pay for services.  New York City 
is in New York State and has stepped up to the plate when it comes 
to administering the Ryan White from the dedication of significant 
resources.  Such an index includes an adjustment for available 
resources.  I guess the question we have then does this create a 
disincentive for jurisdictions like New York and will HHS if they 
have express that they will not--they have in the past, I believe 
pursued policies with inherent disincentives.  So are we with this 
new sort of proposal creating a disincentive for cities or States like 
New York?
	SECRETARY LEAVITT.  I hope not.  I mean, I do not, I have not 
thought that through deeply enough and I appreciate you raising it 
and I will give it more thought.  I will investigate that.  I do not 
know that I have got a response that would be satisfying to you 
because I have not thought it through deeply enough.
	MR. FOSSELLA.  That is fair enough.  And along those lines and 
I will follow up on our conversation then because it complements 
in a way with the notion of double counting as referred to and we 
are just concerned that with New York City, New York State sort 
of leading the way, perhaps other municipalities and States around 
the country have a lot to learn in administering Ryan White and 
servicing those most in need and will be prepared.  
	SECRETARY LEAVITT.  Thank you. 
	MR. FOSSELLA.  A second series of questions just deals with 
bioterrorism.  As you know, Mr. Secretary, we have a similar 
problem with Homeland Security funding.  There are two little 
pockets of money.  One sends money to 50 States and four cities 
for detection and monitoring both from CDC and hospital 
readiness.  And the other is Cities Readiness Initiative or CRI 
sends money directly to 23 cities.  And the program as you know is 
new, it is the first year.  Its primary purpose is local planning and 
coordination for bioterror preparedness.  A concern we have is that 
under the first part called CRI, New York City which we believe is 
still about the number one threat when it comes to terrorist activity 
is 23rd out of 23 cities in terms of per capita.  It may be solid in 
terms of absolute but it is 23rd of 23.  And the second part for 
CDC for public health preparedness in terms of hospital 
preparedness it ranks respectively 24th of 54 and hospital 
preparedness 54 out of 54.  I guess my question to you, Mr. 
Secretary, is do you believe that we should be moving more 
towards a risk based approach when it comes to allocating 
bioterrorism formula or is it status quo acceptable?
	SECRETARY LEAVITT.  I believe that risk based is more 
appropriate and we are beginning to tilt our grants in that way.
	MR. FOSSELLA.  So places like New York City, or wherever 
that risk may be, should expect to see an increase in formula at 
least on a per capita basis if we move in that direction you think?
	SECRETARY LEAVITT.  In Government we are masters of 
proportionate distribution.  We are not as good at risk based.  We 
need to get better.  There are times when proportionate distribution 
is appropriate but where we are measuring risk it is my judgment 
we ought to be tilting toward risk as opposed to proportion.
	MR. FOSSELLA.  Well I thank you because I know the House is 
on record in moving that direction, the Administration is on record 
with both Secretary Chertoff and yourself and we know it is the 
other body that seems to be an impediment to this but for the good 
I think of the American people who deserve the best when it comes 
to this type of funding and I appreciate your efforts in helping us 
move in that direction.
	I yield back, thank you.
	MR. BILIRAKIS.  The chair thanks the gentleman.
	Ms. DeGette for six minutes.
	MS. DEGETTE.  Thank you, Mr. Chairman.
	And welcome, Mr. Secretary.  Along with Mr. Stupak and Ms. 
Schakowsky, I was one of the three Democrats on the O&I 
Subcommittee who went to New Orleans a couple of weeks ago.  
And certainly everybody is concerned about the situation down 
there.  But we were appalled but what we saw so many months 
later.  I do not think anybody could agree that we are in good shape 
with the health care delivery system in New Orleans and I am sure 
you would not think that either.  I mean Charity Hospital which is 
the safety net hospital remains closed to this date with no clear 
reopening date.  The have the tents set up in the convention center 
which I guess they will be leaving in March.  The ambulances do 
not have a place to go.  There is no level one trauma center.  I 
guess there is one opening 6 miles or so away soon, but in the 
meantime, and even after that opens with the surrounding hospitals 
that are open, what we were told is people who need to go to the 
emergency room have to wait four to 24 hours to be seen in the 
emergency room and it is the type of thing they have got 25 
percent of their population back in New Orleans if as is projected 
which I think is optimistic but if 65 percent of the population 
returns by the fall, we are not going to be just in a delay situation, 
we are going to be in a crisis.  So kind of based on those 
observations, I have some questions for you.
	The first question I have, Mr. Secretary, is FEMA is making a 
lot of the key decisions regarding the funding of Charity Hospital 
and some of the other public hospitals.  And so my question is 
FEMA regularly briefing HHS and you as to the funding decisions 
that are being made with respect to health care?
	SECRETARY LEAVITT.  We are focused primarily on rebuilding 
the system.  And the extent of the actual deliberation or briefing 
that is going on I cannot personally attest to.
	MS. DEGETTE.  Would you mind supplementing your 
testimony to let me know if there are regular briefings, how often, 
and if there are minutes kept at those briefings?
	SECRETARY LEAVITT.  You may have other things you would 
like to outline that I am prepared to answer.  Obviously I am not 
saying anything, but at some point it might be helpful for you to 
for me to outline the process we are going through to help--
	MS. DEGETTE.  Well let me ask my next question which may 
lead to that, because what I saw is that Charity Hospital, which is 
operated by Louisiana State University, estimated that it would 
cost $257 million to basically redo that facility because the old 
hospital was really not in line with modern medicine so they had 
this sort of exciting vision but then FEMA under the Stafford Act, 
FEMA cannot pay for a brand new hospital if the cost for 
rehabilitation of the original hospital is 50 percent or more of the 
cost of a new facility.  So Charity is sitting here saying we do not 
have a dime from FEMA.  In the meantime, the private hospitals 
are reopening but they are not level one trauma centers and 
furthermore, they are not set up to deal with the poor and 
uninsured like we have in New Orleans.  And so it is like the worst 
nightmare of bureaucracy for the Charity Hospital folks because 
they have no money from FEMA.  The private hospital across the 
street is opening up later this month because private insurance 
money paid for it.  And so my concern is how--I know you have 
got a vision and I would like it if you would briefly talk about that 
vision but how long is it going to take?
	SECRETARY LEAVITT.  First, let me say that we are 
compensating or will be soon with the dollars that were recently 
appropriated the interim health care providing that is going on in 
parking lots and in tents--
	MS. DEGETTE.  Well that is fine but that is not a health care 
system.  You would agree with that.
	SECRETARY LEAVITT.  No, it is not.  And the second thing I 
would say is I ironically was in New Orleans on the week before 
the hurricane and I was told by the head of public health there that 
if I were to go through an emergency room anywhere in New 
Orleans on that day private or public, I would have a 24 hour 
waiting system.  Reality is that it was a lousy system before and--
	MS. DEGETTE.  So you can only imagine what it is like now.
	SECRETARY LEAVITT.  No, I have seen it.  I know exactly what 
it is and it needs to be improved.  The third thing I will point out is 
that in best estimates the City of New Orleans will be a different 
place and will have different meaning than before.  There are a lot 
of proprietary interests right now and I do not mean that just to 
imply profit and non-profit.  I mean to say that there are a lot of 
large hospitals and they are not going to need all the large hospitals 
they had before and they do not want, we do not want to have a 
system that is like they had before where the only place you got 
treated was in an emergency room.  What we want is a system that 
responds where everybody has a medical home where they are able 
to get help in community health centers and centers that ultimately 
funnel people into a primary care system and where people have 
the capacity to get health care when it is needed.
	MS. DEGETTE.  That is great.  When is it going to happen, Mr. 
Secretary?
	SECRETARY LEAVITT.  Well it is going to happen as rapidly as 
the local community can rebuild it.  We stand ready--
	MS. DEGETTE.  Well how can they rebuild?  I mean Charity 
Hospital cannot rebuild under any scenario because they do not 
have private insurance like the private hospitals do.  They rely on 
State and Federal dollars and the Federal Government has not 
given them a dime or any indication when they are going to 
approve some plan that will give them a dime.
	SECRETARY LEAVITT.  We obviously need to continue this 
conversation.  We are paying their Medicare and their Medicaid or 
will be paying their Medicare and Medicaid claims.  There are 
questions in the medical community, the broader medical 
communities as to how to reconstruct it.  The role of Charity 
Hospital is still very much part of discussion there.  And that is the 
reason there is a delay because they need to have a plan, a 
comprehensive plan that will say here is what we want this to look 
like.  And just going off and building or rebuilding one hospital is 
not going to--
	MS. DEGETTE.  Right, but Mr.--I know my time is up and not 
to beg the question but it is like the cart and the horse.  They 
cannot have a plan if the Federal Government is not working with 
them as a partner to let them know how much Federal funding they 
are going to have.
	SECRETARY LEAVITT.  We are working with them every day.
	MR. BILIRAKIS.  Mr. Terry for six minutes.
	MR. TERRY.  Thank you.  
	Thank you, Mr. Secretary for being here and I have a series of 
questions regarding Part D dual eligibles long-term health care and 
our pharmacists and if that was answered in the ten minutes I had 
to excuse myself for another meeting and come back I apologize 
but in the old Washington list and if it has been said before it has 
not been said by me and therefore you are going to hear it again.  
As mentioned to you at another time at least in the State of 
Nebraska, I am sure it is similar in other States regarding the 
prescription D sign up of dual eligibles there seems to be several 
that have been put into a program that did not meet their 
prescription needs.  That is one issue.  I think that one is the 
manageable one.  The other one is that the State seems to have just 
missed many dual eligibles that are in no program and there seems 
to be some confusion about the dual eligibles that are in long-term 
care facilities that are not being covered or in the alternative if they 
were put into a prescription D program, the policy there being sent 
rather large bills for their co pay.  Sometimes the co-pays being 
hundreds of dollars which seems to defy what we passed.  So with 
that little bit of background, can you explain to me and my 
pharmacy and my dual eligible constituents what is being done so 
that the States or the Federal Government pays with dispensing 
pharmacists and the costs of the drugs that they are observing 
themselves which I think is pretty darn heroic of them to do.  They 
do not have to do that but they are, as well as, the fact that they are 
being held responsible for the co pays for these folks.  And as I 
understand there is a difference between long-term care facility as 
well and just your ordinary non long-term health care folks that are 
dual eligible.  And the other part is there seems to be some 
growing fight over dispensing fees and whether or not your 
organization, or CMS under your leadership, can get involved and 
start resolving some of those dispensing fee issues that they, the 
pharmacists are being paid is less than the contracted price or that 
they are making a pharmacist submit the claim so many times and 
at 10 cents a shot in essence they are eating up their dispensing fee 
just in submitting the claim.  So if you could answer those three 
questions I would sure appreciate it.
	SECRETARY LEAVITT.  If a person who is a dual eligible walks 
into a pharmacy and they do not have a plan or do not think they 
know what plan it is and the pharmacist cannot identify where they 
are, the pharmacist has the ability to enroll them in a plan on the 
spot.  And when they enroll in the plan, it is called the Well Point 
Plan, they are then eligible to be reimbursed for that drug through 
the Well Point Plan and the reconciliation will be made by CMS as 
that the pharmacist will get reimbursed.  In the case of co-pay, now 
I have been in 20 States in the last two weeks.  I have been in 
pharmacies in most of them.  I have stood at the counters, I have 
walked through the process with people.  I have stood and waited 
for the 1-800 line to answer.  I think I have got a pretty clear 
picture of what is happening.  And what I find happening at the 
pharmacies is that at the beginning of the day or through the course 
of the day a pharmacy may accumulate a handful of prescriptions 
that they were not able to reconcile.  At the end of the day, they 
have to go back and make the calls to Medicare but they ultimately 
find or work through the problems.  What I am finding is that there 
are limited numbers.  And it is limited numbers of situations where 
people are literally outstanding more than a day or two or three on 
a prescription.  Now I acknowledge the fact that it has required 
additional work for them, and pharmacists have been heroic.  
There is little question in my mind that the entire pharmacy 
industry is being affected by this, not just Part D, but we are seeing 
a dramatic change in the way pharmacies work right now and it has 
created the same kind of problem that happened when any market 
changes.  I do not know if that is responsive to all three of your 
questions, but I hope it is responsive to at least two of them.
	MR. TERRY.  Well it did not hit on the enforcement of 
dispensing, but we will get to that on different date or something.
	SECRETARY LEAVITT.  I can quickly just tell you that with 
respect to Medicare Part D, the pharmacies work with their 
networks and if there is a cost reimbursement issue it is with the 
network, not with CMS.
	MR. TERRY.  All right, 44 seconds left.  Getting back to 
payments for those pharmacists that when they had not filled 
prescriptions when there was not a plan for a dual eligible, can 
they be reimbursed for that or are they going to have to eat those 
costs since they did not sign somebody up?
	SECRETARY LEAVITT.  No, if a person is over 65 and a dual 
eligible, they are in a plan.  If they are not in a plan they should 
have been in a plan and the State--
	MR. TERRY.  But some are not.
	SECRETARY LEAVITT.  Well let us work on that together 
because there are very few situations that I am aware.  I know there 
is a solution to it, I just cannot come up with it sitting here.
	MR. TERRY.  I appreciate that.
	I yield back as my time is up.
	MR. BILIRAKIS.  Ms. Capps for six minutes.
	MS. CAPPS.  Thank you.  
	Thank you, Mr. Secretary.  I appreciate the opportunity to talk 
with you.  Back in 1974, Congress appropriated the equivalent of 
$609 million in today's dollars for nurse education programs.  The 
Administration is now emphasizing preparedness for pandemic flu 
and a threat of bioterrorism--and earlier this afternoon you 
mentioned increased dollars for pandemic flu stockpiling.  I want 
to talk with you about the people who will be giving those 
antivirals.  And I also want to talk about the fact that our first 
responders in our communities, which nurses are a major player 
for a bioterrorist attack or a flu attack are critical to the efforts to 
respond to such a situation and I'm thinking about the hurricanes 
that affected the gulf coast.  Do you think you can--we know who 
is in great need and some often in short supply.  The disconnect is 
the fact that the President's Budget proposes level funding for Title 
8 nurse education programs at $150 million.  This is $1 million 
below fiscal year '05 funding.  And yet HHS's own Budget in 
Brief quotes the HRSA report which predicts that the nursing 
shortage is expected to grow by 229 percent in 2020.  Last year, 
the shortage of nurses in this country was around 7 percent, which 
is close to 150,000 nurses not at their jobs doing work that is 
needed for today's health care needs.  By 2020, given this scenario, 
we will have over 800,000 nurse positions going vacant.  That is 
without a Katrina, without the surge effect of a bioterrorist or 
pandemic flu attack.  You said it is only a matter of time.  It takes 
two to five years to educate and prepare a registered nurse.  I am 
one, I know.  You said yourself in your testimony that a budget is 
an investment in the future.  Funding for nurse education needs to 
be invested now in order to expand the nurse workforce shortage.  
That would be to meet today's needs.  I want to ask you to respond 
to whether or not we have adequate nursing staff levels and 
preparation for such to provide the health care that we will surely 
need in the event of a disaster.
	SECRETARY LEAVITT.  Ms. Capps, may I say that I am fully 
conscious and agree with you that we have to train more nurses.  I 
would like to talk about this at two levels.  One is the current 
budget and then I would like to spend most of my time if I could 
talking with you about 800,000 nurses in the existing system may 
or may not be even achievable.  We need to begin to think about 
how we--we need to think about new ways of training nurses to 
step outside the traditional method of training where people are 
able to--there are a number of different hospitals for example who 
have the capacity to train credential nurses within the hospital.
	MS. CAPPS.  And many of them already do.  
	SECRETARY LEAVITT.  And we need to expand that kind of 
thing because it allows us to do it more efficiently, and I think the 
argument can be made that it is very high level of quality.  We are 
focused in this budget on actually targeting the areas where 
specific nurses are needed or specific types of nurses and types of 
areas we need nurses as opposed to a more generalized approach.  
We also recognize the faculty is the big problem.
	MS. CAPPS.  That is what I am talking about.  Nurse education 
is what has declined so dramatically in funding.
	SECRETARY LEAVITT.  So we have chosen to focus our funding 
on faculty and not just the broad not--
	MS. CAPPS.  But I do not see evidence of that.
	SECRETARY LEAVITT.  As we appropriate the dollars there will 
be over $100 million.  That is the way we will be targeting our 
outlines.
	MS. CAPPS.  Well nurse education programs are being flat 
funded.  They are going to be receiving less funding.  And another 
thing you said is you would want to target them for certain specific 
needs but they are needed in every community.  And now we have 
a model, mostly it is community colleges.  I know particularly one 
challenge, which is the reimbursement rate for faculty positions 
with a master's degree in the community college, are less than 
what is provided for a critical care nurse or a public health nurse 
within the community system.  That is just one challenge but there 
are not enough dollars there to do any of the things that you have 
talked about.
	SECRETARY LEAVITT.  Well as you know our method of 
funding medical education particularly for nurses comes from a 
number of different of sources.  For example, our graduate medical 
reimbursement is one method.  And here--
	MS. CAPPS.  Is that for nurses or for doctors?
	SECRETARY LEAVITT.  Well it is primarily for doctors.
	MS. CAPPS.  Yes.
	SECRETARY LEAVITT.  It does not--
	MS. CAPPS.  It is much higher than that for nurses.  It is 
woefully short in that area, too.
	SECRETARY LEAVITT.  Your point is a good one and I concur.  
What I am suggesting to you is that our effort here is to fund 
faculty positions more intensely.
	MS. CAPPS.  Well whatever model you are using, like some 
innovative plan within a hospital, I am open to any ideas but I have 
not seen it yet and I am hoping now that my time is just about up 
that there would be a way that I can stay in touch with you on this.  
I work regularly with schools of nursing and nurse faculty.  They 
have talked with me individually and professionally within their 
groups and this is a crisis, meeting today's needs and we can only 
shudder to think of what we will face.  You can stockpile all the 
antivirus you want but unless you have somebody there to care for 
the sick and the dying it is not going to do a lot of good.
	SECRETARY LEAVITT.  Thank you.  I would like to continue the 
conversation.  There are some areas that I think--
	MS. CAPPS.  Thank you.
	MR. BILIRAKIS.  Dr. Burgess for five minutes.  Mr. Murphy?
	MR. MURPHY.  Thank you, I appreciate that.
	MR. BILIRAKIS.  Mr. Murphy for six minutes.
	MR. MURPHY.  I have to run out of here.  Three things I want to 
mention.  One Mr. Secretary has to do with the previously 
mentioned issues of the cuts in mental health funding and I 
recognize there are concerns for overlap but still the areas of 
mental illness are I think the funding for them is woefully 
inadequate.  And as so often happens in Congress and in part 
because OMB only scores spending, they do not ever score savings 
and we have a warped sense of looking at things.  That integrated 
health care what we look at how mental health funding and, excuse 
me, mental health treatment can save the costs of treating such 
things as heart disease, diabetes, lupus, back pain, and so many 
things half.  I mean they are massive savings.  And so I really am 
concerned about these cuts and I hope that that is something you 
can take back and look at how we can do it better.  It is not just a 
matter of cutting the funding.  It is doing it better, more efficiently, 
and looking at integrated care.  And I just want to leave that as a 
comment.
	The second thing I want to talk about with you is community 
health centers and you and I talked about this as we were walking 
down the hall here.  But is legislation going to try and help us get 
more doctors in those centers?  I think building these centers are a 
marvelous aspect, it brings health care to the underinsured and the 
uninsured.  It helps to reduce the cost of such things as Medicaid 
funding by 30 percent, but we do not have enough doctors, nurses, 
podiatrists, physiologists, dentists, and we have legislation that 
allows doctors to volunteer.  As you know that it is--they cannot 
because they cannot be covered by insurance at this point.  And I 
just wanted to give comment on some thought you might have 
about helping to move that.
	SECRETARY LEAVITT.  Well I was surprised that that was the 
case in our conversation and I have asked a member of my staff to 
help me understand what barriers there would be to changing it.  I 
am in community health centers all over the country and I see 
doctors who are there in one fashion or another and they must be 
employed there and not volunteering.  We need to enable people 
no matter what their capacity to volunteer and I am looking 
forward to working with you on this.
	MR. MURPHY.  I appreciate that.  And you understand that if 
Dr. Burgess or I wanted to volunteer somewhere we could not do 
it, the community health centers would turn us away, but if they 
wanted to pay us it would cost even more to have us, so I 
appreciate that.
	The other thing I wanted to mention is an area that the CDC 
has identified as a great concern.  Another area where I think 
massive cost savings could come if we reward how hospitals and 
physicians and clinics can make an improvement.  Instead we only 
pay for problems if it has to do with infections: pneumonia, 
methadone resistance, staph infections, or urinary tract infections.  
If a patient is in a hospital or a clinic or nursing home and they 
contract one of these, Medicare, Medicaid, other funds, the VA 
pays for that.  And even if the clinic loses money in the process we 
would still pay more, and yet we recognize that some hospitals 
have made tremendous advances in reducing infection rates and I 
believe we should be doing it and drafting legislation on this is be 
able to offer some funding stream to reward them for that.  CDC 
estimates there are 90,000 deaths a year from infections that occur 
in medical settings.  And I wonder if you have any thoughts about 
this, if this is something the Department of Health has been 
looking into that finding a way to work with hospice clinics and 
practices to reduce infection rates and how that can save money.  
Again, it is one of those things that CDC cannot possibly score 
because if we were to say let us pay whatever that fee would be if 
you show, if you demonstrate reduced infection rates.  And yet it 
would save, things like this could save more money than the other 
things that we are looking at in terms of--let me just speak to it as a 
potential patient, I would like to know that.  I would like to know 
what the facility I am going into, how its performance has been on 
this matter because I think it speaks very much to the quality and 
this gets back to the idea of transparency and being able to give a 
sense of disclosure as what a facilities results have been.
	We ought to be prepared to pay people better who have fewer 
infections and it ought to be known to patients if they are in a 
facility that has a disproportionately high number.  There are some 
hospitals I know in my area in Pittsburgh which have really 
focused on this, and there are other places around the country 
which in essence have been able to reduce some infection rates 
post operative where everything is to near zero.  It is I think a 
massive benefit and one that I would hope that HHS could take a 
careful look at.  I would love to work with you in terms of crafting 
some ways of awarding hospitals.  I know one of their concerns is 
once they start finding the data and reporting it that someone will 
sue them because they are finding these problems and quite frankly 
I think it is a greater benefit to our patients if we start seeing how 
we can help them so I appreciate that.
	SECRETARY LEAVITT.  Thank you.
	MR. MURPHY.  I thank you, Mr. Secretary.  
	I yield back.
	MR. BILIRAKIS.  Mr. Allen to inquire.
	MR. ALLEN.  Thank you.
	Thank you, Mr. Secretary for being here.  I have a comment I 
want to make and then some questions for you.  The comment 
relates to the opening statement of the gentlelady from Tennessee 
who is no longer here but in her opening statement, she said that 
tax cuts lead to greater Federal revenues.  It is not true.  She has 
lots of company and many colleagues of mine on the other side of 
the aisle routinely say that tax cuts lead to increased Federal 
revenues.  The President and the Vice President go out and say on 
a regular basis tax cuts cause added Federal revenues.  It is not 
true.  Last week Josh Bolton, the head of OMB when pinned down 
and he is not easy to pin down, admitted that tax cuts reduce 
Federal revenues.  But he said there is probably, there is certainly 
some stimulative effect to tax cuts properly structured but the net 
effect is to reduce Government revenues.  And therefore, you said 
in your opening this was a time for deficit reduction.  It was a time 
for tough choices but my only point is to say in these 
circumstances, many of us feel it is morally offensive to continue 
to promote tax cuts at the upper end of the income scale and to 
withdrawal health care services from low and middle income 
people.  That is the statement.
	The question goes like this.  The question really relates to how 
we can save money because we both agree that we need to find 
savings in these programs.  I look at the proposals in your budget 
and I do not see proposals that will actually reduce the cost of 
health care.  I see proposals in your budget that shift costs to 
States.  I see proposals that shift more costs to seniors.  I see 
proposals that will shift more costs to American families but I do 
not see anything in there that will actually reign in health care 
costs.  It seems to me that the Administration's idea of controlling 
costs is simply to pass the buck or the bill to someone else.  If this 
Administration were really interested in saving money, there are 
several proposals that would save money for both the Federal 
Government and beneficiaries.
	Right now the Medicare Payment Advisory Commission I 
think Mr. Miller would refer to it as a pretty darn good outfit and I 
agree.  MedPAC nominated a number of ways that we could save 
money.  We were overpaying Medicare HMO's.  MedPAC 
recommends eliminating the double payments to HMO's for 
indirect medical education.  Medicare makes direct payments to 
teaching hospitals, it does not need to also pay insurance plans for 
the same service.  MedPAC says that would save $5.5 billion.  
Does the Administration's budget include any proposal to 
eliminate that wasteful spending?
	SECRETARY LEAVITT.  Mr. Allen, let me just enumerate a 
number of proposals we have that I believe will--
	MR. ALLEN.  Well can I just get an answer to that question?  
Does your, does the President's Budget include any proposal to 
eliminate that wasteful spending?
	SECRETARY LEAVITT.  We do not view that as you have 
characterized it.  We think it is critical in order to assure that we 
have availability of health choices in rural communities all across 
America.  If it is not used at some point in time, the Congress may 
choose to consider it, but at this moment we believe it is necessary.
	MR. ALLEN.  Okay.  MedPAC also recommends eliminating 
the slush fund.  That is $10 billion at the Administration's 
discretion to further increase overpayments to the plans.  And 
according the CBO that would save $10 billion.  Does the 
Administration support a proposal to eliminate this overpayment to 
plans?
	SECRETARY LEAVITT.  We believe that the payment structure as 
it is currently constituted is necessary in order to assure that we see 
a continued availability in every marketplace in those plans.  We 
think that there is a good reason in the long-term, as well as the 
medium term, to create a competitive market that will, in fact, 
force the cost of structured health care down as we have seen it in 
the prescription drug benefit.
	MR. ALLEN.  Let me get to my last question.  MedPAC--I take 
it your answer to both of those questions is no.  MedPAC also 
recommends fixing the overpayment currently built into the risk 
adjustment payments to Medicare HMO's, private plans that are 
supposed to get lower payments if they serve healthy and therefore 
cheaper beneficiaries and higher payments if they serve sicker and 
more expensive beneficiaries.  The Reconciliation spending cut bill 
that just passed has phased out those extra payments for a few 
years but there is still $19 billion in savings on the table for that 
recommendation.  These are all free recommendations from 
MedPAC.  I take it that the Administration's proposal does not 
include that final savings either.  Is that right?
	SECRETARY LEAVITT.  We very clearly believe that the way to 
reduce health care costs, one of them is to have a competitive 
marketplace and we believe that is being achieved.  One example I 
was prepared to cite was the prescription drug benefit where we 
have seen the costs go from $37 on average to $25 that will result 
in not just beneficiary savings but literally billions of dollars of 
taxpayer savings.
	MR. ALLEN.  Have you seen the study that shows that those 
payments are 80 percent higher than the VA pays for the same 
drugs?
	SECRETARY LEAVITT.  I have seen that and they are nowhere 
near an apples to apples comparison.
	MR. BILIRAKIS.  The gentleman's time has expired.
	Dr. Burgess to inquire.
	MR. BURGESS.  Thank you, Mr. Chairman.
	Mr. Secretary, you have been here a long time and I appreciate 
your indulgence of this committee.  I am going to make more of a 
statement and there will be embedded within that statement 
questions and perhaps just like Mr. Dingell I can get answers from 
your office on those questions.  I will go back to the point I was 
making during my opening statement and it seems like a long time 
ago now but the reimbursement for physicians, we have got to 
focus on that this year.  The Chairman brought it up, Dr. Norwood 
brought it up as well.  There was not a single day when I was in the 
private practice of medicine or during my residency or during 
medical school where I woke up and on the way to work that day I 
said boy, I hope I can be inefficient and duplicative today.  I 
always went to work to deliver my best products.  So the concept 
of pay for performance is something that a lot of physicians look at 
with a lot of disdains because we came to work to do our best work 
that day anyway and you better pay up for that performance.  And 
currently we are not being paid.  Now you know that I spoke with 
everyone that I could find between Christmas and New Years to 
beg for administrative relief about the what is euphemistically 
called the negative update that physicians got the 1st of January 
because although it was a legislative issue and the Deficit 
Reduction Act did attend to that, there was a technical glitch that 
kept the Deficit Reduction Act from going into and having a 
course of law before the 1st of the year.
	As a result, there was a negative update to physicians and I 
have a sheet of letters from doctors in my district and indeed 
around the county who sent me the letters that they are sending to 
their patients that I will no longer be able to see you on Medicare 
because I can no longer afford this continued string of cuts that is 
happening to my reimbursement.  As a consequence, we are losing 
the doctors who are the peaks of their careers, the doctors who are 
the best diagnosticians, the doctors who in fact take the least 
amount of money to come to a conclusion and treatment plan for 
patients.  And that is doctors that are my age.  And if we eliminate 
them from the playing field, what we are going to have are doctors 
who are just out of training who inherently it costs more for them 
to deliver their care.  Now if you want to structure the pay for 
performance system on top of that quandary of physicians, I 
submit to you that you are going to be diminishing the value that 
you are ultimately going to get from a pay for performance system.
	The same would be true of an information technology system.  
I know Mr. Murphy wants to put millions and millions of dollars 
into information technology.  I do, too, but if we do not pay to 
keep the doctors in the system who do the best care, then it does 
not matter what kind of information system that we have, we are 
not going to derive the value that we intend from that.
	So again, I think we need to think outside the box.  Can we pay 
doctors under Part A?  I think we should look at that.  I think that 
is a valid expenditure to make.  Should we allow doctors to 
balance bill?  We have already income related the Part B premium, 
why not allow doctors to balance bill?  Chairman Barton brought 
that up last year during one of our hearings on physician payment.  
We have got to come up with a better solution than what we have 
been doing because just standing pat we are losing doctors out of 
the system.
	As far as the issues in the City of New Orleans, I was a part of 
that hearing and I have to tell you that it is a stark difference 
between what is happening at LSU and what is happening across 
the street at Tulane and I eluded to that in my opening statement.  
Tulane was up and ready to go.  They had stripped all the 
sheetrock off the walls, they had reconditioned their electrical 
equipment and refurbished their emergency room on the first floor 
of the hospital they are ready to go.  Now if on your ironic trip to 
New Orleans a month or a week before the hurricane hit had you 
stopped in Tulane, you would have seen a hospital that was ready 
for a disaster.  They did not know what was coming.  They could 
have been the North Ridge Earthquake but it did not matter, they 
were ready and they had as a corporation sponsored DMAT teams 
so they had people to come and help them when things got tough.  
Now during the week of the storm and the flood afterwards they 
were in just as bad a shape as everyone else.  But in the months 
that have followed, they have put a plan in place and yes they have 
some insurance money but they have also made a commitment to 
invest new capital because they want to be there on the ground 
when the city is reborn.  Contrast that, and we heard testimony 
during the end of our hearing in New Orleans, other hospitals had a 
plan but they never intended to use it.  And you go to the other 
health care facilities and they had a plan that they had purchased 
because they are required to under Medicare, but they had never 
opened the plan.  Their plan remained call 911 if we get into 
trouble, and we all know what happened to that system.  So all I 
would ask is as we funnel millions and millions of dollars into this 
recovery process, and I know we must, we do have to look at the 
things that went right and how can we capture those best practices 
for other parts of the country that may be exposed to other types of 
disasters.
	Finally, I had an amendment on the Deficit Reduction Act that 
would have streamlined the set-up of Federal qualified health 
centers in areas that had been impacted by Hurricane Katrina and 
their evacuees and that would have included some places in Texas.  
For whatever reason, the other side pulled this out at the eleventh 
hour in conference committee.  I hope you will work with us to 
streamline this set-up federally qualified health centers and these 
are not poor counties but they are counties that have significant 
poor populations.  I have some of the highest infant mortality rates 
in the country in the City of Fort Worth in some of my zip codes.  
We needed a federally qualified health center there before Katrina.  
Now that we have so many displaced persons from Katrina, we 
need it even more or the numbers are only going to be worse this 
year.  
	Thank you very much for your time.
	Thank you, Mr. Chairman.
	MR. BILIRAKIS.  I thank the Doctor.  
	Ms. Solis to inquire.
	MS. SOLIS.  Thank you, how many minutes, sir?  I did not have 
an opening statement but six minutes?
	MR. BILIRAKIS.  You were not here, you waived.
	MS. SOLIS.  Okay.  All right, then I will be quick.
	Thank you, Mr. Secretary for being here.  I think you may be 
aware I represent a heavily minority district in California, East Los 
Angeles in the San Diego Valley.  One in three residents lacks any 
form of health care coverage and about a third of our population 
are children under the age of six without any form of health care 
coverage.  In terms of the Latino community though I have some 
issues and concerns with respect to how we provide assistance to 
cover the 13 million Latinos that are currently uninsured out of the 
total 44 million Americans that do not have any health care 
coverage.  And I say that because I understand that there are some 
programs that are currently due to be reduced and these programs 
as I understand them have provided how could I say bridging the 
gap between communities of color that would perhaps not always 
get the fair and same treatment as other communities.  And I am 
talking in particular about programs like the Office of Minority 
Health, the National Center on Minority and Health Disparities, 
and the Preventative Health and Health Services block grant racial 
and ethnic program known as REACH.  I understand that these 
programs are due to be cut back.  Do you have any response to 
that?
	SECRETARY LEAVITT.  I am not able to respond to each of those 
individually.  If you--maybe we could get that list and I could do--
	MS. SOLIS.  I will be happy to turn this over to you so you can 
respond.
	And the other is that in 1996, illegal immigrant restrictions to 
Medicaid and SCHIP where put into place through the welfare 
reform package but there was an attempt to try to provide coverage 
for the Latino community, vulnerable community, illegal 
immigrants, pregnant woman, children through the passage of the 
Immigrant Children Health Improvement Act.  Will the 
Administration's budget address the high number of uninsured 
rates in the Latino community and what potential for any efforts 
there to provide coverage to this community that receives now 
disparate treatment in health care?
	SECRETARY LEAVITT.  Well we are working with the minority 
populations in general.  I would suggest that the most significant 
one would be the expansion of our community health center 
system.  We have money in the budget for 302 additional or 
expanded services that will bring additional services to literally 
millions.  A high proportion of those who use those centers tend to 
be in the communities that you have described.
	MS. SOLIS.  One of the concerns I have in my own district is 
that as of late in the last two years, LA County our health delivery 
system there closed 11 community health centers and I have not 
seen any movement on the part of the Federal Government to try to 
help provide some assistance there to fill that gap.  I would ask that 
if there is a way that I could ascertain information as to what your 
plans are in that immediate area that you and I know is a high need 
locale, if you could provide us with evidence of any attempts or 
how we can work with you to see that these qualified health care 
clinics are indeed full of, listed in full capacity funding and helping 
us bridge that gap.
	SECRETARY LEAVITT.  You are probably aware that I worked 
with Governor Schwarzenegger to develop a waiver specifically 
targeted at Los Angeles County, and I am guessing the heart of 
your district.
	MS. SOLIS.  Yes.
	SECRETARY LEAVITT.  To provide several billion dollars over 
the course of years to assure that we are able to provide a medical 
home for them and hospital care.  This was a specifically targeted 
waiver, and that would have expanded dramatically access to 
health care.  And we are beginning to work to develop a pool that 
can in fact be used to give people not just uncompensated care, but 
actually access to a health care home, and I believe the number 
was a couple of hundred thousand that would be added to the roles 
of the insured through this waiver.
	MS. SOLIS.  I would like to get more detailed information.  
	And then just lastly in the last two or three months we have 
been holding our own town hall meetings and visits with seniors 
regarding the prescription program that you all are rolling out and 
we have heard from our seniors, particularly Spanish language 
Latino elderly that are having problems with interpreters providing 
services and the long wait on the telephones.  And I am very 
discouraged with the response from the Administration.  Many of 
our constituents do not have access to the Internet.  Information 
has not been given to them in their language appropriately and 
culturally in my opinion and I would hope that you would provide 
us with the information on what attempts you are taking to make 
sure that that happens.  I had a constituent that called me who had 
problems getting her heart medication and so I am very, very 
concerned and would like to, you know, to get feedback from you.  
	MR. BILIRAKIS.  Response?
	SECRETARY LEAVITT.  I will provide you, and you will be 
provided, along with other Members of Congress next week a list 
of statistics on how many people in your district have actually 
enrolled and how many are eligible.  I will also tell you that we 
now have the call wait time on our 1-800 Medicare line down to 
under a minute and we are offering Hispanic language choices that 
are necessary or needed.  So I hope that will meet the needs of 
your constituents better.
	MS. SOLIS.  Thank you.
	MR. BILIRAKIS.  Mr. Walden to inquire.
	MR. WALDEN.  Thank you very much, Mr. Chairman.
	Mr. Secretary, welcome and thank you for your endurance and 
patience and all of us have been able to get up and leave and come 
back and you have not moved and I admire that.
	SECRETARY LEAVITT.  Thank you.
	MR. WALDEN.  I want to follow up on what Dr. Burgess said 
about the reimbursement of physicians and other providers, 
especially in rural areas.  You know, my district is somewhat like 
the State you were governor in and it is very rural, and I have got a 
physician out in the far regions of Eastern Oregon who is an 
internist who is probably in his 50's.  Every time I get out there he 
tells me he is the last one in town.  He oversees a health clinic that 
he helped the community establish that is 60 miles from the little 
town he is in, and he is not making any money literally, and cannot 
quit, and cannot afford to keep going.  And I am just concerned 
about the rural safety net, and I think what the Administration has 
done on clinics and expanding federally qualified clinics is terrific, 
and the Bush Administration will never get the credit that it 
deserves in this area, but you all hoped to save one in little old 
Fossil, Oregon and helped us establish one elsewhere and I think 
they are a real safety net and I congratulate you for that.  But this 
issue of physician reimbursement is something we all need to work 
on in the Congress and the Administration.
	SECRETARY LEAVITT.  I realize that this is the time for you to 
ask the questions, but perhaps you would entertain a question.  We 
put $25 billion into rural health with the idea of specifically 
targeting reimbursement rates in rural America.  Has that not had a 
positive impact on you?
	MR. WALDEN.  It is certainly better than not having it, but the 
problem is that it is so acute in some of these rural areas I am 
finding the same thing Dr. Burgess is.  I met with a group of 
physicians in Bend, Oregon, which is not exactly a rural area in the 
terms of my district, and yet two or one of them have said they are 
not taking anymore Medicare patients in their practices because 
they cannot afford to.  And that is an echo I hear throughout the 
district that is a real problem.  Now Oregon has got its own set of 
issues.  In my take we, you know, there is no cap on medical 
malpractice and that is a cost driver that is affecting them and how 
they practice medicine certainly.  But it is still a major issue.  I am 
one of the co-chairs of the Rural Health Care Caucus, and I 
thought what we had done when we passed the Medicare Bill was 
a big help and certainly one of the biggest packages to move 
forward on rural health care and the Administration supported it, 
and I think the add on we did for home health care made a real 
difference, but as you know that 5 percent add on expired.  And so 
we continue to just struggle.
	SECRETARY LEAVITT.  This is obviously a matter of grave 
national focus, it has to be.  I hear what you are saying with respect 
to physicians who get up in the morning and go to work and what 
their reimbursements are and what they would like them to be.  On 
the other hands, we are looking at a health care system that now 
occupies 16 percent of the gross domestic product.  Medicare alone 
is almost 3.5 percent of the gross domestic product.  So we have 
got to find some way, and I agree with Dr. Burgess, people do not 
get up in the morning and say, you know, I am going to go out 
and--
	MR. WALDEN.  Be inefficient.
	SECRETARY LEAVITT.  --be inefficient.  But they also do not get 
up in the morning and go off and say I am going to go off and 
resist change.  
	MR. WALDEN.  Yeah.
	SECRETARY LEAVITT.  But they do.  So this is really about 
finding ways to implement private practices.
	MR. WALDEN.  And that is right.  I think what you are doing on 
expanding community health care centers makes a big difference 
for a lot of people who would otherwise when their child is ill they 
wait and go to the emergency room.  If they can work with a local 
clinic, we can all save costs and they can get better health care 
quicker before it is an emergency.
	I want to go back to Medicare in the literally one minute I have 
left because good news is never news.  And I recognize when I 
hear from my pharmacists and their issues you and I have 
discussed, and their issues on the sign up and we are actually going 
to host two sign up sessions for people in March in my district in 
working with CMS and I thank you for that to help them navigate.  
But I am amazed 250,000 Americans a week are signing up.  Do 
you have any numbers that look at how many people who lacked 
coverage, had no prescription drug coverage that now have it as a 
result of this plan?  Because that was what I used to hear when I 
would go to senior centers and I know I heard in this committee 
nobody is going to offer a plan and then the drumbeat is there are 
too many choices.
	SECRETARY LEAVITT.  Over time we will find that out, but I 
can tell you it is millions that now have coverage that never had it 
before.  And another figure that is not fully appreciated is the 
millions that will keep it who would have lost it.  We had very 
impressive acceptance among corporate plans and retirement plans 
many of whom were dropping prescription drug benefits because 
of their expense, and they are now able to keep it.  There are 
literally millions who have it who did not before.  There are 
literally millions who are keeping it who would have lost it.
	MR. WALDEN.  My time has expired.  Thank you, Mr. 
Chairman.  Thank you, Mr. Secretary.
	MR. BILIRAKIS.  I thank the gentleman.
	Mr. Gonzalez for six minutes.
	MR. GONZALEZ.  Thank you very much, Mr. Chairman.
	Mr. Secretary, we may disagree some of us on this side of 
where I sit on the aisle with you but it does not mean that we do 
not appreciate your service and admire you.
	SECRETARY LEAVITT.  Thank you, Mr. Gonzalez.
	MR. GONZALEZ.  The first thing is that we will get a majority 
staff report and then we get a minority staff report and you cannot 
believe that they are analyzing the same budget.  So the first 
question is would you agree or disagree with this statement.  The 
President proposed legislative changes that cut $35.8 billion from 
Medicare Fee for Service Program over five years for a total of 
$105 billion in Medicare budget cuts over ten years.  Yes, sir?
	SECRETARY LEAVITT.  Would that come from a majority or 
minority staff?
	MR. GONZALEZ.  Well I am not going to tell you but do you 
agree that is--
	SECRETARY LEAVITT.  Well that is not one I am able to give 
you a technical response to.  If you would like to give it to me I 
can make an analysis.  Questions like that deserve a very 
thoughtful answer.
	MR. GONZALEZ.  You are starting to sound like Alan 
Greenspan.
	SECRETARY LEAVITT.  That is a real compliment, thank you.
	MR. GONZALEZ.  It was not meant as a compliment.  I served 
on Financial Services and we never got an answer from Alan 
Greenspan.
	SECRETARY LEAVITT.  He was very skilled about it.
	MR. GONZALEZ.  Well he may now, now that he is a private 
citizen of sorts.  Let me ask you something else that is somewhat 
troubling and of course I am reading from the minority analysis.  
For the first time, payments to Medicare providers would be 
automatically cut in the event general revenues exceed 45 percent 
of program funding unless Congress acts with its own proposals to 
meet the 45 percent cap.  The Medicare Modernization Act 
provided that if the 45 percent was exceeded, the trustees would 
issue a warning and Congress was supposed to act.  But the 
Medicare Modernization Act included no automatic cuts.  That is 
true.  
	SECRETARY LEAVITT.  That is true.
	MR. GONZALEZ.  Why?  Why the changes?
	SECRETARY LEAVITT.  Well I think it is an acknowledgement 
that at some point in time we have to decide how many tax dollars 
can go into Medicare and how many dollars can beneficiaries and 
others and we just have to decide where the point is that we are 
prepared to make the changes.  Change is not easy.  I indicated 
earlier it is now Medicare alone is 3.4 percent of the gross 
domestic product.  If it goes on until 2040 it becomes 8 percent.  
We will not have an economy that will sustain jobs at that point.  
And if we do not have sustainable jobs, we have no revenue to 
sustain Medicare.  
	MR. GONZALEZ.  Wouldn't it be more appropriate to just not 
leave it in the hands of Congress should we reach the trigger or the 
threshold?  Is it not the responsibility of representatives of the 
people to make that determination on how we would address that 
shortage?  If the trigger is there and we know there is a 
consequence, would it not be more appropriate rather than to have 
something that is automatic in nature?
	SECRETARY LEAVITT.  But Congress--the proposal is that the 
Congress could.  They could implement changes that in fact would 
make it unnecessary.
	MR. GONZALEZ.  Well that leads me to my next question.  
Under what we presently have and the threshold is met as opposed 
to what you propose and it would pass obviously that it is 
automatic what would happen under the two different scenarios 
from the 45 percent when the threshold or the trigger is reached 
under the present scheme of things if Congress did not do 
anything?
	SECRETARY LEAVITT.  What we do is if Congress does nothing 
in the long-term that this system is not sustainable and we end up 
with a lot of people who lose whatever they have and that is 
unacceptable and we are proposing here is an alternative.  If 
Congress will not act, then it will take an act of Congress to put 
into place this automatic decrease.  Congress could very easily 
avoid it by taking the steps to do things that were hard.  Let us face 
it, making any change in Medicare would be hard.  So at some 
point if Congress is unwilling to do it, then there is at least a 
remedy that creates--
	MR. GONZALEZ.  Then why not have this in all our different 
budgets?  When we have thresholds and triggers if something 
would automatically happen rather than Congress taking the 
initiative or being proactive, I mean--
	SECRETARY LEAVITT.  Well I think that we are in agreement 
that Medicare, it sounds as though we are in agreement that 
Medicare is unsustainable but we have got the figures of which to 
resolve that and this is one idea and I think it is a pretty good one.
	MR. GONZALEZ.  It is also a question of priorities and not just 
un-sustainability so that leads me to the next question then.  If we 
move forward with real fixes for Medicare, would it not be prudent 
to figure out what it is really going to cost to provide health care to 
so many Americans in this program?  And of course I am leading 
right up to the sustainable growth rate.  I always forget that.  
Sustainable growth rate formula which since 2001 everybody has 
been saying we have to change but we are not changing and we 
have kind of discussed it.  Dr. Burgess had touched on it.  Greg 
Walden touched on it.  Anyone talks about it but we do nothing.  
Well there is something out there right now, some legislation by 
Clay Shaw.  Do you believe that the sustainable growth rate 
formula is accurate, fair, and realistically reimburses doctors in this 
Nation for their services to Medicare patients.
	SECRETARY LEAVITT.  I think the system is not a good system.  
	MR. GONZALEZ.  No, I am asking you if this particular formula 
that, under which we operate right now.  This is what--the doctors 
are not going to get any more, any less unless this formula 
changes.  I mean is it a fair formula, does it realistically reimburse 
physicians for their services?
	SECRETARY LEAVITT.  Congressman, I believe it is a bad 
system and by nature one that is not precise, and I believe that we 
would be far better off if we could go to a system that would begin 
to acknowledge the fact that what we are after here is not quantity, 
it is quality.  And that if we do not do that we will continue to have 
this collision every year.  What happens when we cut the rate is 
that we just get more procedures and the system continues to 
march toward un-sustainability in a different in a different--
	MR. GONZALEZ.  But it is a flawed formula?
	SECRETARY LEAVITT.  It is a flawed system.
	MR. GONZALEZ.  Thank you very much.
	MR. BILIRAKIS.  Mr. Inslee for six minutes.
	MR. INSLEE.  Thank you, Mr. Secretary.  You said a couple 
things in your opening statement that were intriguing to me.  When 
I asked you about it and you said something to the affect that our 
hearts are full of compassion all of us for those who are afflicted 
but we hope to help through these programs.  You also made 
repeated references to the concept that this is a time of deficits so 
we had to take that into consideration in our policies.  And the 
budget in our review has in significant ways cut existing levels of 
programs to commit to help the people who are dear and tied to our 
compassion one of which that is particularly concerning to me is 
our rather wholesale cuts to our Institutes of Health research 
budgets which hold such tremendous potential.  We cut the Cancer 
Institute for $40 million.  That is real dollars it is actually more 
than in inflation adjusted dollars.  I think it is $20 million dollars in 
the National Heart, Lung, and Blood Institute.  This is very 
concerning because I think one of my colleagues said that we 
doubled the budget in NIH in the last ten years but we have gone 
up about 1,000 percent in our genetic knowledge and the like.  We 
are just on the cusp of such tremendous advances and yet we are 
cutting these budgets at a time of tremendous advancement.
	That causes me great concern.  And I want to put this in the 
context of real people which is two citizens, Washington friends of 
mine.  One has prostate cancer, a 55-year old guy had original 
diagnosis and surgery.  He later had some recurrence and now is in 
radiation therapy.  He will be looking for, I would think he would 
say it would make sense to make as much investment as we can in 
medical research to treat that disease but we are cutting $40 
million of our existing level of research into cancer.  Another 
friend of mine, he did well in the software business, and in this 
budget he is going to get about a $2 to $4 billion dollar tax cut, $2 
to $4 billion tax cut.  The fist guy with the cancer we will call Fred 
with the cancer.  He is getting a cut in the promise of his Federal 
Government to do something about his potentially life threatening 
disease.  The other fellow, let us call him William, is getting a tax 
benefit of $2 to $4 billion out this budget.  How do we possibly say 
that, you know, the second guy with the billions is entitled to more 
compassion in this time of deficits that the first with cancer?
	SECRETARY LEAVITT.  Let me reconcile for you the approach 
that we are taking with this because I think you yourself made the 
point that our genetic knowledge, for example, is expanding and in 
many other areas.  We are still investing $4.8 billion a year in 
cancer research.  We are not stopping our research, we are simply 
saying $4.8 billion is what we can afford this year.  At the same 
time, we have an entire group of initiatives that will benefit every 
one of the institutes of NIH and at the heart of that is cancer.  
Those were valued at several hundred million dollars.  So you can 
say well we are reducing that by $40 million.  What is going on at 
the NCI at the same time we are doing joint projects that go across 
the entire breadth of NIH that will have substantial benefit to NCI.  
You know, let us acknowledge the fact that we are flat funding in 
this budget the National Institute of Health.
	MR. INSLEE.  I think you are not seeing my question.  My 
question is to compare two individuals in different circumstances, 
one with billions of dollars and one with billions of cells that we 
are trying to solve cancer of.  And my question to you is why is the 
first with the billions of dollars in this budget entitled to 
compassion by giving them additional tax relief but the second 
with cancer is you are entitled to less compassion than we had in 
last year's budget because we are cutting the budget or we are 
getting dumber in our scientific knowledge and so it does not make 
sense to make any more investments, or we think we are maxed 
out on the potential human achievement for treatment of cancer.  
One of those three, or there is something about the genetic makeup 
of the billionaires in our country that exceeds in our compassion 
value than those with cancer.  Now I would like to know from your 
Administration, and you are responsible for my citizens and my 
colleagues and my friends' health care, which one of those justifies 
this prioritization?
	SECRETARY LEAVITT.  You are asking me to make a judgment, 
a policy judgment on tax policy or something in a debate that 
obviously will go on here in Congress.  I will add that another 
person who got a substantial or will likely get a substantial tax cut 
is making a remarkable contribution to science outside of the 
National Institutes of Health or in partnership with the National 
Institutes of Health.  The only effort that is growing in this Nation 
is not--on cancer is not what is going on at NIH gratefully.  There 
are sources coming from lots of places and one of the places are 
those who have researchers in this country and make donations and 
we make--and in making that donation we give them a tax 
deduction which is essentially we are saying you do not have to 
pay tax on that money and a good share of it will go into cancer 
research.
	MR. INSLEE.  I want to make sure we understand the tax cuts 
you are referring to are not deductions for charitable giving.  I am 
talking about eliminating the State tax, significant decreases in 
marginal rates for dividends and the like, do I hear you are 
asserting that the reason that you justify a cut in our Federal 
research budget for dealing with cancer is the fact that there are 
many generous Americans who are making individual 
contributions.  Is that the reason for it?
	SECRETARY LEAVITT.  No, I am simply trying to reconcile the 
policy, the value judgment you are asking me to make and that is a 
tax issue that will be dealt with--
	MR. INSLEE.  Well would you if given a chance, would you 
advise the President as far as your position that it would make 
sense between these two individuals that one fellow perhaps 
should get less of a tax cut and the other fellow perhaps should get 
better research for his cancer?
	SECRETARY LEAVITT.  The equity of that is not the subject of 
this hearing nor is it in fact that it is a policy judgment that 
Congress will need to make.
	MR. BILIRAKIS.  The gentleman's time has expired.
	Ms. Baldwin to inquire.
	MS. BALDWIN.  Thank you, Mr. Chairman.
	And thank you, Mr. Secretary.  I have a comment or at least a 
question for later evaluation and then a couple of additional 
questions.  I know you listened attentively to all of our opening 
statements and I commented about some of my concerns with 
regard to the approach, the ideology behind how savings accounts 
versus other approaches we could take to deal with our crisis of the 
uninsured.  On the way over here today, I was made aware of a 
report out of the Center on Budget and Policy Priorities that was 
released just today, so I do not expect you have had a chance to 
take it in, but it basically looks at the cost and coverage impacts of 
the President's Health Insurance Budget proposal, health savings 
accounts in particular.  And computer modeling reaches an 
estimate that the proposals will raise the number of uninsured in 
this country when fully implemented by a fairly sizeable number of 
600,000 people.  Now I feel confident that the Administration 
would not be moving this forward had they not reached a different 
sort of analysis.  But this report certainly embodies my concerns 
about this approach.  And so at such time that you have had a 
chance to look at this and compare that to your own assumptions in 
putting together this package, I would be interested in hearing your 
evaluation and how many more people you think going ahead with 
a health savings account approach will ensure.  
	Now to my specific questions for now.  Secretary Leavitt, in 
late August of last year, Dr. Susan Wood at the FDA Commission 
for Women's Health and the Director of the Office of Women's 
Health resigned over the Administration's refusal to issue a final 
decision on the Plan B application.  And she said and I quote "I 
can no longer serve a staff when scientists and clinical evidence 
fully evaluated and recommended for approval by professional 
staff here has been overruled."  Furthermore, a GAO report 
released in November of 2005 concludes that political inference 
played a role in the FDA's delay on the Plan B application.  I guess 
I want to know if you are as concerned as I am about the 
possibility or allegations that political ideology is being placed 
ahead of Women's Health and Science and an agency within the 
Department of Health and Human Services?  And additionally, 
what are you specifically doing to ensure that scientists in your 
agency are not being censored by political appointees as we have 
seen in recent allegations in NASA and as we have seen and heard 
about in the case of the Plan B situation?
	SECRETARY LEAVITT.  Let me respond to both of your 
questions.  First of all, I must say to you you are correct.  I cannot 
imagine an analysis that would demonstrate that the President's 
proposal would have fewer people.  It is very clear from the 3 
million people that now have health savings accounts that roughly 
40 percent of them have never had insurance or did not have 
insurance before.  The estimate is that you will see as many as 20 
million people with health savings accounts by 2010 if the 
statistics hold up and there is no reason to think they will not.  That 
means we will have roughly 8 million people who have insurance, 
many of whom do not have it now because of cost considerations.  
I could spend more time--
	MS. BALDWIN.  Right.  If I may, I am sure you would not have 
gone forward if you did not think there would be a net increase.  I 
am going to be real interested in a more technical analysis of the 
different assumptions you make versus this report.  This report that 
I have had a chance to scan today does raise the concerns that I 
have always had about using this model to address the situation but 
I would love to hear you address the question about censorship of 
scientists and--
	SECRETARY LEAVITT.  I am quite aware of the basis on which 
those decisions were made.  We were presented with a new policy 
dilemma involving the use of what is now a prescription drug that 
is available today through a prescription to all populations.  We 
have been asked to break new policy ground that involves splitting 
the approval process by age.  The decision was made that because 
it provided new public policy questions that we needed to seek 
additional comment which we have done.  The comment period 
ended in November and those comments are now being analyzed.  
This is a process that is followed in regulatory agencies across the 
Government and it is an appropriate one.
	MR. BILIRAKIS.  The gentlelady's time has expired.
	All time has expired.  I believe you have a unanimous consent 
request?
	MR. BURGESS.  Yes, Mr. Chairman, I have a unanimous 
consent request.  I have some data from Texas that shows of the 
2.5 million Medicare beneficiaries 500,000 now have prescription 
drug coverage that did not have it before January 1 and this was 
dated as of January 20 and I just wanted to submit that for the 
record.
	MR. BILIRAKIS.  Without objection that will be the case.
	[The information follows:]

 

	MR. BILIRAKIS.  Mr. Secretary, you have been a trooper.  What 
else can we say?  Thank you so very much for your patience and 
your consideration and your fairness.  Many here have already said 
they were going to submit written questions to you.  As you know, 
we customarily do that so I would ask you of course to respond to 
those and others that are submitted by the committee staff over a 
period of time.  Thank you so very much for being here.
	SECRETARY LEAVITT.  Thank you, Mr. Chairman.
	MR. BILIRAKIS.  The hearing is over.
	[Whereupon, at 5:28 p.m., the committee was adjourned.]

 


RESPONSE FOR THE RECORD BY THE HON. MICHAEL O. LEAVITT, 
SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

The Honorable Joseph R. Pitts:

1.) 
Question: 
	Mr. Secretary, the Deficit Reduction Act of 2005 (DRA) 
included language to reduce payments for certain imaging services 
provided in the physician office setting or at stand-alone imaging 
centers.  The payment amounts will be reduced to the amount paid 
in the hospital outpatient setting.  I am told that some codes may be 
reduced by over 30 percent - and even some as steeply as 75 
percent, such as for vascular imaging using ultrasound.  While I 
can understand the desire to address differences in payments 
between settings, I am concerned that the hospital outpatient value 
was settled upon simply because it saved money.  Has there been 
an analysis of whether or not the outpatient payment amount is 
adequate or appropriate?

Answer: 
	In 2006 Medicare pays a physician $903 for doing an MRI of 
the brain or an MRI of the abdomen.  Medicare will also pay a 
Hospital Outpatient Department (OPD) $506 for the exact same 
test.  Thus, Medicare is paying almost $400 or 78 percent more for 
doing these MRI imaging tests purely depending on whether the 
test is performed in an OPD or a physician's office.  Similarly, 
Medicare will pay 267 percent more for doing an ultrasound 
guidance for artery repair in a physician's office than an OPD 
($228 vs. $62).  These comparisons do not include a physician's 
interpretation of the test for which Medicare will pay a separate 
fee.  There is no consistency in the percentage that the physician 
fee schedule exceeds the hospital OPD payment amount.  The 
percentage difference varies by procedure.  
	In the context of: (1) significantly larger payments under the 
physician fee schedule than the OPD for the same service for 
certain imaging services, (2) site neutral payments for the same 
service identified by MedPAC as a long term goal under Medicare 
fee-for-service payment systems, (3) rapid growth in Medicare 
spending for imaging services for several years, (4) MedPAC 
raising methodological issues that suggest relative values under the 
physician fee schedule for imaging services would be too high, 
combined with  a lack of procedure and equipment specific 
information on alternative equipment utilization assumptions to 
use in the practice expense formula to address such issues, section 
5102(b) of the Deficit Reduction Act of 2005 establishes a 
payment limit for the technical component of imaging services.  
The provision requires that Medicare not pay a physician more 
than Medicare would pay the OPD for furnishing the same imaging 
procedure. A physician's interpretation of the test for which 
Medicare will pay a separate fee is not affected by the provision.  
	This step to level the playing field between physicians' offices 
and hospital OPDs only applies to procedures where Medicare 
pays more in physicians' offices; the DRA cap provision does not 
apply to all imaging procedures furnished in physicians' offices.  
In addition, the percent that Medicare payment rates for physicians 
exceeds OPDs are not all as large as the examples cited above; in 
numerous cases, the differential is 10 to 20 percent.  Thus, the 
overall impact is not expected to be as dramatic as the example of 
some procedures. 
	The DRA provisions will be implemented through notice and 
comment rulemaking.  These proposals are expected to be 
published this summer and will allow for a 60 day public comment 
period.  A final rule will be published by November 1, 2006 and 
will be effective for services furnished on or after January 1, 2007. 

2.) 
Question: 
	As you know, the President's FY2007 budget calls for an 
inflationary increase in funding for the medical device user fee 
program.  This Subcommittee has also shown support for this 
program by fully funding the program the last two years.  Can you 
tell us how the agency is doing in regards to meeting the 
performance goals associated with the user fee program with the 
funding it has gotten to date?

Answer: 
	Secretary Thompson's November 14, 2002, letter to Congress 
defines the performance objectives FDA is pursuing under 
MDUFMA.  The commitment letter defines a comprehensive set of 
challenging goals and a schedule for meeting them.  
	FDA's  performance to meeting MDUFMA's performance 
goals is, to date, consistent with the high expectations established 
for the program.  We have attached FDA's performance report for 
FY 2004.  The FY2005 performance report is currently under 
review within the administration, and we will forward the report 
when it is complete.	 
	To allow FDA time to build its capacity to meet the ultimate 
(FY 2007) goals set by MDUFMA, the commitment letter provides 
for a phased implementation of goals, with more goals and higher 
performance expectations each year.  During FY 2005, 18 
additional goals went into effect (two of these apply to workloads 
handled exclusively by CBER); six more go into effect this year 
(FY 2006).  During FY 2007, FDA will be responsible for a total 
for 77 quantitative goals covering five receipt cohorts.  In addition, 
FDA is expected to pursue eight additional nonquantifiable 
commitments, such as developing an appropriate bundling policy 
(where FDA imposes only one fee for two or more closely-related 
applications from the same applicant), continuing its efforts to 
develop mechanisms for the electronic receipt and review of 
applications, and improving the scheduling and timeliness of 
preapproval inspections.
	Although FDA does not expect to meet every goal specified by 
MDUFMA, the trends are promising.  FDA is, in general, showing 
better performance as it implements new policies and procedures 
designed to improve the timeliness of our review processes.  
Although it is too soon to know what FDA's final performance 
statistics will show - many goals still have applications that remain 
open - FDA's performance on applications within more recent 
receipt cohorts is better than performance in older cohorts, 
showing that the improvements we have been making are 
beginning to bear fruit.  If you had taken a snapshot of 
performance for the FY 2003, FY 2004, and FY 2005 receipt 
cohorts on December 31, 2005, you would see that FDA is meeting 
or exceeding 19 of the 24 goals in effect, and is not meeting only 
two goals; no applications have qualified for the remaining three 
goals.  Most of these goals still have, or may have, additional FDA 
actions, so these results may change, but we are very encouraged 
by what we have accomplished so far.

3.) 
Question: 
	During operation of the medical device user fee program, has 
the agency been able to determine specific direct and indirect costs 
of performing the various types of premarket approval (PMA) and 
510(k) device approvals?  Will you be able to determine 
incremental direct and indirect costs that will be associated with 
improving review times under more aggressive performance goals 
in future legislation?

Answer: 
	FDA is engaging with industry and stakeholders as it works on 
MDUFMA reauthorization.  If the MDUFMA reauthorization 
results in changes to the performance goals, we will be able to 
estimate direct and indirect costs.  
	During  FY 2005, FDA contracted with Dr. Dale Geiger, a 
recognized expert in the field of government cost accounting, to 
prepare a report of the costs of FDA medical device review 
processes.  Dr. Geiger examined FDA medical device reviews 
conducted during FY 2003 and FY 2004, including investigational 
device exemption applications,  premarket approval applications 
(PMAs), PMA supplements, biologic licensing applications, BLA 
supplements, and 510(k) premarket notifications.  Dr. Geiger 
examined both direct and indirect costs and this work will assist 
FDA with cost analysis in gard to the performance goals resulting 
from the MDUFMA reauthorization.

4.) 
Question: 
	What criteria does the agency use to determine the allocation 
and priority for the distribution of any increase in staff across FDA 
components, including offices, divisions, branches, and districts 
resulting from the medical device user fees and related 
Congressional appropriations?

Answer:  
	When MDUFMA was first enacted, FDA developed an internal 
plan for the allocation of anticipated resources-both from fees 
and from appropriations.  In doing this, the agency estimated the 
percent of the device review workload that was performed in 
CDRH and the percent that was performed in CBER.  Those initial 
estimates indicated that 83 percent of the device review work in 
the two centers was performed in CDRH and 17 percent was 
performed in CBER.  FDA's initial allocations to the two centers 
of the total of increases for device review from both fees and 
appropriations were based on these estimates, and allocations 
within each center were made by Center management after 
assessing where the resources were needed to enhance the device 
review process as defined in MDUFMA.  
	From subsequent data, it is evident that this allocation to 
CDRH needs to be increased and the allocation to CBER needs to 
be reduced.  This is because CBER represents a smaller percent of 
the combined device review work between the two centers than 
originally estimated.  In addition, CBER had a well-developed IT 
infrastructure and did not need to spend as much on IT as did 
CDRH, so CBER was able to focus more of its resources on 
personnel.  In future allocations, increases are being given in larger 
measure to CDRH.  
	In addition to the funds allocated to the two centers and to the 
Office of Regulatory Affairs (a little over 80 percent of the total of 
increased funds), allocations have to be made to accounts that 
support the additional FTE in the Centers and ORA.  These 
planned allocations provide about 7.3 percent of the total increased 
funds to the Office of the Commissioner, about 6.2 percent for rent 
and rent related costs for housing the additional staff, and about 7.1 
percent to the FDA central account, which pays for a variety of 
support costs, including the cost of local and long distance phone 
services, operation of health units, mail and document storage, and 
HHS charges for facilities, human resources, and other employee 
support costs.


The Honorable Ed Whitfield

1.)
Question: 
	The Deficit Reduction Act of 2005 appropriates $2 billion for 
use by HHS to pay the uncompensated health care costs of 
providers who have delivered care to affected individuals or 
evacuees under a Section 1115 project as a result of Hurricane 
Katrina. It was Congress' intention that Federal Qualified Health 
Centers (FQHCs) and other providers would be eligible to receive 
funding under this uncompensated care pool if they provided care 
to evacuees of and individuals affected by Hurricane Katrina.
	Does HHS intend to ensure that FQHCs are eligible to receive 
funding under the uncompensated care pool if they provide care to 
evacuees of and individuals affected by Hurricane Katrina?

Answer: 
	Reimbursement for qualified items and services provided by 
Federally Qualified Health Centers (FQHCs) to eligible individuals 
will not be prohibited from reimbursement under the 
uncompensated care pools (UCCP).  Eight states have been 
authorized under Hurricane Katrina Multi-State section 1115 
demonstrations to reimburse providers that incurred 
uncompensated care costs for Katrina evacuees who do not have 
other coverage.  States have the discretion to reimburse providers, 
including FQHCs, in accordance with the state's approved UCC 
plan.

The Honorable John Dingell

1. 	The Budget includes Legislative cuts to Medicaid of $4.9 
Billion over five years, and another $12.2 billion in cuts through 
regulatory changes, for total gross cuts of $17.2 billion over five 
years.  These cuts are in addition to $28 billion in cuts to Medicaid 
over 10 years in the Republican reconciliation spending cut bill - 
the Deficit Reduction Act.
	The reconciliation law will result in higher co-payments for 
healthcare services for 13 million working families, people with 
disabilities, and seniors (including 4.5 million children), higher co-
payments for prescription drugs for 20 million individuals 
(including 6.6 million children), the loss of coverage for at least 
65,000 people in just one year alone because they cannot afford 
higher premiums, and benefit cuts for at least 1.6 million people.
	Now the President proposes a new round of cuts to Medicaid -- 
$42 billion over the next ten years.  According to an independent 
analysis of your proposals, the primary savings come from shifting 
costs to states.

A.) 
Question:
	Please provide the State-by-State effect of each of the spending 
cuts you propose in Medicaid.  If you cannot, explain why.

Answer: 
	The CMS Office of the Actuary does not prepare state-by-state 
impact analyses of Budget proposals.

B.) 
Question:
	The proposal to restrict funding for governmental providers 
saved $1.2 billion over five years when it was in last year's budget, 
and now saves $3.8 billion in this year's budget.  Please state 
exactly what has changed in your proposal to make it cut an 
additional $2.6 billion over five years.  Why do you now think you 
can do this policy by regulation, when last year you claimed you 
needed legislative authority?

Answer: 
	The President's FY 2007 Medicaid Budget includes two related 
legislative proposals that curb questionable financing practices by 
providing a Federal match for only those funds kept by providers 
as payment for services (the "net expenditure" proposal) and 
limiting reimbursement levels to no more than the cost of 
providing services (the "cap at cost" proposal).  It is anticipated 
that both of these proposals will be implemented through 
administrative authority.
	Specifically, the Medicaid baseline for the President's FY 2007 
Budget (which includes both regulatory and legislative proposals) 
only reflects a five year $3.8 billion savings estimate for the "net 
expenditure" provision.  The additional savings from the "cap at 
cost" proposal are not included in the Medicaid Budget baseline.  
In other words, a portion of the total savings from the 
intergovernmental transfers (IGT) proposal was included in the FY 
2007 Budget estimates, but not all the savings that should have 
been.  The "cap at cost" proposal is estimated to save $1.5 billion 
over five years.  After accounting for the interactions between the 
two proposals' estimates, the total net savings are estimated to be 
$5.1 billion over five years.  Despite this oversight, the total 
savings for these FY 2007 Budget proposals is somewhat less than 
the estimate for the FY 2006 Budget proposals because additional 
states have eliminated their inappropriate use of financing practices 
to maximize federal Medicaid reimbursement in the intervening 
year.
	This policy will be promulgated by regulation under the 
authority of section 1902(a)(30)(A) of the Social Security Act (the 
Act), which requires that payments be "consistent with efficiency, 
economy and quality of care."  This provision of the Act requires 
the Secretary to protect against abuses by states and providers.  
The taxpayer should not pay more to a public entity than it costs to 
deliver the service to a Medicaid beneficiary.  Additional authority 
to protect the fiscal integrity of the program is also found at 
1903(i)(3) and (i)(17).

C.) 
Question:
	The budget includes a new proposal on school-based 
administration and transportation. This proposal is a regulatory 
change, not a legislative one, and it saves a considerable amount of 
money.  Please explain what the Centers for Medicare and 
Medicaid Services (CMS) is proposing to change with respect to 
services in schools?

Answer: 
	Appropriate Medicaid services will continue to be reimbursed 
as allowed under current law.  However, claiming for certain 
Medicaid services in school settings has proven to be prone to 
abuse and overpayments.  
	According to section 1903(a)(7) of the Social Security Act (the 
Act), for the costs of any activities to be allowable and 
reimbursable under Medicaid, these activities must be "found 
necessary by the Secretary for the proper and efficient 
administration of the plan" (referring to the Medicaid State Plan).  
Additional authority derives from section 1902(a)(17) of the Act, 
which requires that states take into consideration available 
resources.  Through the authority of these statutes, the 
Administration proposes to prohibit federal reimbursement for 
transportation provided by or through schools to providers.
	HHS has had long-standing concerns about improper billing by 
school districts for administrative costs and transportation 
services.  Both the Department's Inspector General and the 
General Accountability Office (GAO) have identified these 
categories of expenses as susceptible to fraud and abuse.  GAO 
found weak and inconsistent controls over the review and approval 
of claims for school-based administrative activities that create an 
environment in which inappropriate claims generated excessive 
Medicaid reimbursements.  Audit findings from states where the 
OIG conducted administrative claiming audits have shown 
egregious violations.  Proper and accurate claiming for 
administrative services has not been carried out in compliance with 
applicable Medicaid regulations.  Overall, the leading conclusions 
from these audits are that most states use an improper allocation 
methodology and insufficient attention is paid to the details of the 
claiming process.
	The President's 2007 Budget includes a regulatory proposal 
that would prohibit Federal Medicaid reimbursement for Medicaid 
administrative activities performed in schools.  It additionally 
proposes that Federal Medicaid funds will no longer be available to 
pay for the transportation to and from school related to medical 
services provided through an Individualized Education Program 
(IEP) or Individualized Family Service Plan (IFSP).
Schools would continue to be reimbursed for direct Medicaid 
services identified in an IEP or IFSP provided to Medicaid eligible 
children, such as physical therapy and occupational therapy that 
are important to meet the needs of Medicaid-eligible students with 
disabilities, as long as the providers meet Medicaid provider 
qualifications.
We estimate that these proposals will save $0.6 billion in FY 2007 
and $3.6 over five years.

D.) 
Question:
	Under current law, the Social Security Act at section 1903(c) 
reads, "Nothing in this title shall be construed as prohibiting or 
restricting, or authorizing the Secretary to prohibit or restrict, 
payment under subsection (a) for medical assistance for covered 
services furnished to a child with a disability because such services 
are included in the child's individualized education program 
established pursuant to part B of the Individuals with Disabilities 
Education Act or furnished to an infant or toddler with a disability 
because such services are included in the child's individualized 
family service plan adopted pursuant to part H of such Act." In 
light of this language, what is the legal basis for the authority to 
terminate Medicaid payment for these services?

Answer: 
	According to section 1903(a)(7) of the Social Security Act (the 
Act), for the costs of any activities to be allowable and 
reimbursable under Medicaid, these activities must be "found 
necessary by the Secretary for the proper and efficient 
administration of the plan" (referring to the Medicaid State Plan).  
Additional authority derives from section 1902(a)(17) of the Act, 
which requires that states take into consideration available 
resources.  Through the authority of these statutes, the 
Administration proposes to prohibit federal reimbursement for 
transportation provided by or through schools to providers.

E.) 
Question:
	 The budget states that CMS will also issue regulations that 
restrict the services that States can provide under the category of 
rehabilitation services.  Please provide further details on the 
proposed rules and what services will continue to be permitted.  
Also, please cite the statute or regulation that gives you the 
authority to make this change.  What States will this provision 
affect?



Answer: 
	Rehabilitation services are an optional Medicaid service under 
Section 1905(a)(13) of the Social Security Act (Act) and defined at 
42 CFR 440.130(d).  Rehabilitative services are typically offered 
to individuals with special needs or disabilities to help improve 
their health and quality of life.  Under current practices, states are 
billing Medicaid for rehabilitation services that are intrinsic 
elements of non-Medicaid programs.  For example, CMS has 
determined that the costs of therapeutic foster care services, 
adoption services, family preservation and family unification 
services are being shifted by some states from foster care to 
Medicaid.  Under the rubric of therapy support services, states are 
also shifting costs of non-medical support services and routine 
supervision provided by teacher's aides in school settings to 
Medicaid.  Also, states are claiming for services that are not 
rehabilitative, which were previously approved by CMS as 
rehabilitation services.
	All states provide rehabilitation services as an optional benefit 
in Medicaid.  States can also provide rehabilitation services 
through home and community based services (HCBS) waivers, but 
the provision of such services through HCBS waivers would not be 
impacted by this proposal.  
	The FY 2007 Budget proposes to prevent cost shifting by 
issuing a regulation that would clearly define allowable services 
that may be claimed to Medicaid as rehabilitation services and 
exclude payment for rehabilitation services that are intrinsic to 
programs other than Medicaid.  The regulatory change will also 
clarify that Medicaid payments will be available for rehabilitation 
services that are intended for the maximum reduction of physical 
or mental disability and restoration of an individual to the best 
possible functional level.  
	Through review of State Plan Amendments (SPAs), CMS has 
found that, by using overly broad definitions of rehabilitative 
services and payment methodologies that are not tied to specific 
covered services, states are bundling services together which 
Medicaid is not supposed to pay for at all, such as room and board.  
CMS has also found that these methods serve to effectively 
circumvent the statutory IMD exclusion, and the principle that 
Medicaid is the payer of last resort.  To address these concerns, we 
find authority in a variety of places in title XIX of the Social 
Security Act, including sections 1902(a)(4)(A), 1902(a)(30)(A), 
section 1903(i)(17), and section 1905(a).
	The Administration does not develop state-by-state estimates 
on legislative proposals.

F.) 
Question:
	Given that many States already have preferred drug lists and 
requirements that beneficiaries use generic drugs, what new 
authority are you proposing to give States?

Answer: 
	The President's FY 2007 Budget proposal would allow States 
to use private sector management techniques to leverage greater 
discounts through negotiations with drug manufacturers through 
managed formularies. 
	The Administration is currently developing the specific details 
of this proposal.

Formulary Classifications and Coverage:

1.) 
Question:
	 Last June, CMS issued an important clarification of its 
guidelines to drug plans submitting bids for the Part D program. 
This guidance stated that CMS would require "all or substantially 
all" drugs to be covered by the plans in six categories: 
antidepressants, antipsychotics, anticonvulsants, anticancer drugs, 
immunosuppressants, and drugs for HIV/AIDS.  The guidance was 
based on the complexity and high cost of the diseases that these 
drugs treat, as well as evidence-based practice.  Also stated was 
CMS's expectation that plans would not use management 
techniques such as prior authorization or step therapy for patients 
stabilized on crucial drugs in these categories. Since January 1, 
2006, however, a widespread problem of plans not fulfilling this 
guidance has been reported. Patients who had been stabilized on a 
drug from one of these six important categories are being told at 
their pharmacy that their drug will not be covered. 

A.) 
Question:
	What enforcement measures will CMS provide to ensure plans 
provide access to these vital medications?  Has CMS taken any 
enforcement action to date against plans that were not complying 
with these requirements?

Answer: 
	Plans are required to meet Part D program and contractual 
requirements as a condition of participation.  In the formulary area, 
CMS has in place a thorough review process for Part D plan 
formularies, which must be satisfied before a plan can be approved 
to participate in the program.  Formularies are reviewed pursuant 
to 13 different criteria that ensure beneficiaries have access to the 
medicines they need at competitive prices.  CMS will continue to 
monitor plan formularies throughout a plan year to ensure that 
beneficiaries have appropriate access to covered drugs.  A plan 
found out-of-compliance will be instructed by CMS to 
immediately resolve any formulary deficiencies.  Plans also have 
been advised that failure to satisfactorily comply with Part D 
program requirements in 2006 is grounds for non-renewal in 2007.

B.) 
Question:
	This requirement is only in effect for the first year of the 
benefit.  Does CMS plan to continue to require plans to cover all or 
substantially all drugs in these categories in the future as well?

Answer: 
	Yes.  CMS has issued guidance on drug formulary 
requirements for the 2007 contract year.  This guidance retains the 
requirement that plan sponsors include on their Part D plan 
formularies "all or substantially all" drugs in six categories: 
antidepressants, antipsychotics, anticonvulsants, anticancer drugs, 
immunosuppressants, and drugs for HIV/AIDS.

C.) 
Question:
	What is CMS's authority to require a 90-day transition period?  
Are plans required to follow this CMS guidance or is it optional?  
What recourse does CMS have against a plan that does not follow 
this requirement?

Answer: 
	Under 1860D-11(d)(2)(B) of the Social Security Act, CMS has 
authority, similar to the Director of OPM with respect to health 
benefits, to prescribe reasonable minimum standards for health 
plans.  Under this authority we have required all Medicare drug 
plans to offer enrollees a transition process.  CMS has an ongoing 
compliance monitoring program in place, and will follow-up with 
plans and take enforcement actions if necessary to ensure 
compliance with requirements.
2.) 
Question:
	On February 3, 2006, CMS released guidance on the coverage 
of Niacin, stating that beginning June 1, 2006, it would no longer 
be covered under the Part D benefit, but until that point, plans that 
had advertised covering Niacin must continue to do so.  It is my 
understanding that the AARP plan was not in compliance with this 
CMS directive and was excluding coverage of this medicine.  
What actions has the Department of Health and Human Services 
(HHS) taken to ensure private plans are following this directive?  
What sanctions have been levied against noncompliant plans?

Answer: 
	CMS has issued more recent policy clarification regarding 
prescription Niacin products.  This policy clarification supersedes 
our February 3, 2006 letter.  
	The Food and Drug Administration has determined Niaspan 
and Niacor to be safe and effective drugs, used therapeutically for 
the treatment of dyslipidemia, and that they do not serve as 
nutritional supplements or address vitamin deficiency.  
Additionally, these products are used at dosages much higher than 
appropriate for nutritional supplementation.  For these reasons, 
CMS has superseded its initial February 3, 2006 letter and 
determined that these products should not be considered 
prescription vitamins for purposes of Part D coverage.  The new 
policy guidance does not require plans to add these products to 
their formularies for 2006.  However, for the 2007 contract year, 
prescription Niacin products should be considered for formulary 
inclusion similar to all other Part D drugs.

Part D

1.)
Question:
	What steps is HHS taking to assist dual eligibles who have 
medicines that are not preferred (with respect to cost-sharing) 
under their plan's formulary to either appeal so that those 
medicines are moved to a preferred tier or to assist the beneficiary 
to either (a) move to an alternative but equally effective medicine 
or (b) move to a plan with lower out-of-pocket costs?

Answer: 
	It is important to keep in mind that the cost-sharing structure 
for dual eligible beneficiaries is outlined in statute.  Therefore, dual 
eligible beneficiaries are not subject to specific formulary cost 
sharing structures of the various prescription drug plans.   
	With regard to off-formulary drugs for dual eligibles, CMS has 
required Medicare prescription drug plans to establish an 
appropriate transition process for new enrollees including full-
benefit dual eligibles who are transitioning to the Medicare benefit 
from other prescription drug coverage. CMS believes that a 
requirement for an appropriate transition process balances the 
protection of certain vulnerable populations with the flexibility 
necessary for Medicare prescription drugs plans to develop a 
benefit design that promotes beneficiary choice and affordable 
access to medically necessary drugs.  All plans transition processes 
address the plan sponsor's method of educating both beneficiaries 
and providers to ensure a safe accommodation of an individual's 
medical needs with the plan's formulary. 
	We understand that many plans have systems in place that 
trigger a written notice to the member when a plan provides a 
transitional first fill of their prescription. Other plans provide 
instructions through their contracted pharmacies.  In whatever the 
form, we have noted to plans that the instructions to the beneficiary 
should: 

(1) Explain that the supply is temporary, 
(2) Indicate that the member needs to work with the plan and 
his or her physician to identify appropriate drug substitutions, 
(3) Advise that the member has a right to request a formulary 
exception, and 
(4) Provide the procedures for requesting such an exception. 

	Additionally, full benefit dual eligibles have the opportunity to 
change plans at anytime.  We feel these protections will help 
ensure dual eligibles have access to necessary medications under 
the new Medicare prescription drug benefit.



The Honorable Elliott Engel:

1.)
Question:  
	Redistribution of Ryan White Resources: The Administration's 
Ryan White reauthorization principles make it evident that there is 
momentum toward the redistribution of CARE Act funds.  It 
appears that the goal of the Administration is to shift funds among 
jurisdictions through drastic changes in funding formulas, 
restrictions on the use of funds, and the elimination of provisions 
that limit the loss of resources to jurisdictions over time.  An 
examination of the effects of the principles indicates that funds 
would be redistributed in a manner that will harm persons living 
with HIV and AIDS in many of the States that are impacted most 
heavily by the epidemic. What is the rationale for shifting funds 
around? We are not faced with a shifting epidemic.  Rather, we are 
faced with an expanding epidemic.  There is not a single 
jurisdiction in which this epidemic has stabilized or diminished.  
I've heard references to jurisdictions with "older" epidemics and 
inferences that an "older" epidemic is somehow more stable.  But 
the reality is that an older epidemic is likely to be a much more 
expensive one to manage.  And we know that all jurisdictions are 
seeing new infections each year and increasing numbers of persons 
with HIV and AIDS requiring a range of services.  The state of 
emergency associated with this epidemic is not confined to one 
region, but continues in heavily impacted States and throughout the 
Nation.  It would seem that if Ryan White funds are to follow the 
epidemic, they must continue to flow to all jurisdictions and be 
increased in order to address overall increased need.  I've heard 
discussion around "reforming" and "modernizing" the CARE Act, 
but I hope these are not euphemisms for taking resources away 
from some people living with HIV and AIDS in order to shift 
funds. Again I would ask, what is the rationale for redistributing 
funds, and why do the Administration's principles focus on 
shifting badly needed funds around instead of enhancing resources 
and services in all jurisdictions?

Answer: 
	The Administration's Principles and proposal focus on the best 
way to distribute the monies already appropriated by Congress and 
does not focus on new congressional appropriations.  Both the 
IOM report "Measuring What Matters" and the recent GAO report, 
"Changes Needed to Improve the Distribution of Ryan White 
CARE Act and Housing Funds" have concluded that there are 
large disparities in per case funding of HIV/AIDS due to multiple 
provisions in the Act which result in a distribution of funds among 
grantees in a manner that does not reflect the relative distribution 
of AIDS cases in these jurisdictions.  If additional funding were 
made available without removing these provisions, we would not 
achieve the goal of redistributing funds more equitably as funds 
would flow to the same jurisdictions that have higher per case 
funding at the present time. 

2.) 
	Elimination of "Double Counting": I have a few questions 
about the Administration's reauthorization principle that calls for 
the elimination of so-called "double counting" of AIDS cases 
between Title I metropolitan areas and States, which the principle 
maintains contributes to an unequal distribution of Federal funds. 

a.)
Question: 
	First, the principle suggests that an equal dollar-per-case 
distribution of Ryan White funds can be achieved by adjusting the 
Title I and Title II formula awards only, thus disregarding the rest 
of the CARE Act, including Title I supplemental awards as well as 
Title III, Title IV, and Part F awards.  The principle states that its 
goal is to count every AIDS case equally and distribute funds in a 
fair manner.  How can this goal be achieved when the principle 
fails to consider funding from all titles of the CARE Act?

Answer: 
	The 80/20 provision was instituted in the 1996 reauthorization 
to adjust for concerns that combined Title I and Title II funds in 
states with EMAs caused more funding per AIDS case than states 
without EMAs.  This provision created a two-part formula for Title 
II base funding that takes into account the number of AIDS cases 
that reside within the state but outside of any EMA's 
jurisdiction. The methodology is as follows: The most recent 10 
years of ELCs are calculated for all states and territories.  80% of 
the ELCS (award is) are divided among all states and territories 
based upon each state's proportion of the total ELCs in all states 
and territories.  The remaining 20% is based upon each state's 
proportion of the total ELCs in all states and territories that are 
located outside the EMAs within a state.  However, this does result 
in the double counting effect. In effect, a portion, but not all of the 
cases attributed to an EMA in a state are counted twice in 
calculating the Title II base award. Eliminating the "double 
counting" phenomenon would mean that the state's base award, in 
a state with EMA(s), would be based solely on the ELCs in the 
non-EMA area of the state.  
	The Administration, after much deliberation, has determined 
that the Title structure of the Ryan White CARE Act should 
remain.  The findings of both IOM and GAO are conclusive: 
without altering several legislative provisions that create structural 
barriers under Titles I and II in the CARE Act, funding per AIDS 
case will continue to vary greatly.  Because of the current 
structural barriers, the CARE Act will be unable to distribute funds 
equitably and effectively address unmet need across the country.  
Our goal is to distribute CARE Act dollars equitably so that 
funding is available to serve individuals living with HIV/AIDS 
who cannot afford to pay for the care they need.   

b.)
Question:   
	Second, I have a concern about the impact of this principle on 
the jurisdictions with the largest numbers of persons living with 
HIV and AIDS.  Consistent with its intent - to direct assistance to 
the jurisdictions disproportionately affected by the epidemic - the 
CARE Act has provided direct funding to metropolitan areas 
impacted by the epidemic to ensure a coordinated local response.  
At the same time, the CARE Act has recognized the key role of 
States -- which administer Medicaid and regulate the health care, 
health insurance and other key sectors -- in coordinating a 
statewide response, by giving States partial credit for their AIDS 
cases in Title I cities.  These considerations are equally valid 
today. Any application of this principle will lead to a devastating 
loss of resources to high-prevalence States.  For example, 
eliminating the statewide component of the Title II formula would 
lead to a loss of about $54 million in the five highest prevalence 
States - New York, California, Florida, Texas and New Jersey.  
These five States are home to more than half of all Americans 
living with AIDS.  Six additional jurisdictions would lose more 
than half of their Title II base funding for HIV care - the District 
of Columbia, Massachusetts, Connecticut, Missouri, Nevada, and 
Minnesota.  In all, 18 States would lose more than $76 million in 
Title II funding. While some areas undeniably need additional 
funding, is it reasonable to reduce resources in the jurisdictions 
that are hardest hit by the epidemic? 

Answer: 
	The President's Principles call for more equitable distribution 
of CARE Act funds, which is paramount in the reauthorization. 
 Changes in the CARE Act are not intended destabilize services, 
but are designed to assure that persons in need of HIV services and 
unable to pay for them shall be able to receive those services, both 
in urban communities and in rural communities.  By maintaining 
important provisions in the legislation, such as maintenance of 
effort and matching fund requirements, the Administration will 
ensure that states continue to contribute state and local funds to 
critical HIV/AIDS services to minimize any impact that 
redistribution of CARE Act funds might have.

b.)ii.
Question:   
	How would the Administration propose to address possible 
funding reductions in the highest prevalence States?  Wouldn't a 
more reasonable approach involve increasing resources to address 
overall increased need and to assure that all persons living with 
HIV and AIDS have access to care?

Answer: 
	The Administration's Principles related to equity in funding 
distribution are based on current funding levels and do not address 
additional Congressional appropriations as a means to attain equity 
among jurisdictions and States.  If additional funding were made 
available without removing these provisions, we would not achieve 
the goal of redistributing funds more equitably as funds would 
flow to the same jurisdictions that have higher per case funding at 
the present time.  

3.)
Question:   
	My question on the SNCSI principle relates to the index itself. 
The development of a needs-based index is of concern insofar as 
data that would be used to make allocation decisions might not be 
universally available.  For example, one important measure of need 
would be HIV cases, but we know that name-based HIV 
surveillance data is collected in only 33 states. When data are not 
universally available for eventhe most basic measure of need for 
HIV services, is it your belief that a meaningful, scientifically 
sound, feasible needs-based funding formula is possible at this 
time?

Answer: 
	The Administration's CARE Act reauthorization principles call 
for the establishment of objective indicators to determine severity 
of need (SON) for funding of core medical services and proposes 
that such an index take into account HIV prevalence, poverty rates, 
availability of resources including local, state and Federal 
programs and support, and private resources.   There are 
established national data bases from sources including Census, 
Labor, CDC, CMS, HRSA that are being examined by HRSA in 
response to the IOM report, "Measuring What Matters: 
Allocations, Planning, and Quality Assessment for the Ryan White 
CARE Act,"  that may be utilized in the development of a 
meaningful and scientifically sound needs-based funding formula.  
Insofar as the status of HIV surveillance data collection by all 
states, the CARE Act requires that all states have HIV reporting in 
place by 2007 to receive formula grants under Titles I and II of the 
Act.  The fact that the SON index will need to take into account 
HIV data means that there will need to be close coordination in the 
implementation of both HIV data and the SON index proposals.

b.)
Question:   
	My question relates to the existing Title I and Title II formulas, 
which are based on estimated living AIDS cases involving a 
weighted, ten-year case count.  The formula does not account for 
people living with AIDS diagnosed more than ten years ago, who 
are likely to be the persons requiring the most intensive services.  
The formula might have been appropriate when the CARE Act was 
first authorized, but today, due to successes in terms of treatment, 
people with AIDS are living much longer.  I know the 
Administration's principles support changing the formula to 
incorporate a SNCSI, but if a scientifically sound, feasible needs-
based index is not forthcoming, how would the Administration 
propose to distribute resources in a manner that considers all 
persons living with this disease that need services?

Answer: 
	The Administration's Principles for reauthorization of the 
CARE Act, propose key new provisions that will distribute 
resources in a manner that follows the epidemic, including:
?	Using HIV Cases in Formula -- Maintain the current 
statutory requirement that all states submit HIV data by the 
start of fiscal year 2007.  Having the full scope of HIV is 
critical to successful care and treatment programs that 
prevent people from advancing to AIDS.
?	Eliminating Double Counting -- Eliminating the double 
counting of HIV/AIDS cases between major metropolitan 
areas (Title I) and the states (Title II). 
?	Eliminating Hold-Harmless Provision -- Eliminating 
current provisions that entitle cities to be "held harmless" 
in funding reductions.

	The elimination of these provisions will better target funds to 
heavily impacted communities and aid in getting persons with 
HIV/AIDS into care earlier in disease progression by assuring 
every AIDS case is counted equally and areas get the funding 
assistance they need.  

c.)
Question:  
 	Still another concern about the SNCSI principle is the proposal 
to use HIV incidence - or new cases of HIV per year - as an 
indicator of need, when the true indicator of need would be 
HIV/AIDS prevalence - the total number of persons living with 
HIV and AIDS.  Medical advances, reductions in deaths, and new 
infections each year result in more and more people living with 
this disease.  The goal of addressing this epidemic can only be 
achieved by recognizing all persons living with HIV and AIDS 
who need services.  All that said, why propose a formula that fails 
to consider all of the individuals we are seeking to serve by 
awarding funds based only on new cases of HIV?

Answer: 
	One variable under consideration for the Severity of Need 
Index is HIV prevalence.  A number of other data elements from 
CDC's HIV/AIDS Reporting System (HARS) will also be 
considered in the development of the index.  HIV prevalence will 
be examined by stage of disease (HIV or AIDS); progression to an 
AIDS diagnosis with a year of the HIV diagnosis; AIDS diagnosis 
without a previous HIV Diagnosis; HIV prevalence by age, 
race/ethnicity, and gender.  

d.)
Question:    
	A final concern about the SNCSI principle is that it cites 
significant differences in access to HIV care throughout the 
country and recommends a drastic change to the formula for 
allocating funds to States and localities.  The principle suggests 
that differences in Ryan White Title I and Title II funding to States 
are responsible for different levels of HIV/AIDS services among 
States.  I think we can safely say that differences in access to 
services are attributable to many factors, including the differences 
in resources that States, themselves, provide for the care of persons 
with HIV/AIDS as well as the services available through medical 
assistance programs.  Is it realistic to view a single financing 
mechanism - specifically, the CARE Act -- as the means to 
equalize these inherent differences?

Answer: 
	It is not realistic to view a single financing mechanism as a 
means to equalize differences in HIV/AIDS resources across the 
country.  Congress has had an implicit expectation that State and 
local governments, other funders, grantees, and subgrantees would 
share the financial burden of HIV treatment and support services.  
The expectation that States would contribute financially to HIV 
services was underscored through the CARE Act State payer of 
last resort, maintenance of effort, and matching funds 
requirements.  While the current economic climate is compounding 
the pressure on the federal government, states, and localities to 
control health care expenditures, these CARE Act legislative 
provisions go far in assuring that all other private and public 
financial resources are utilized before CARE Act funds are tapped 
for payment of HIV/AIDS care and treatment.   Thus provisions in 
the CARE Act such as these serve as a means to require states and 
localities to maintain existing  HIV/AIDS financing resources and 
protect critical CARE Act dollars from being used to supplant 
other available resources.

4.)
Question:    
	Seventy-five Percent Set-Aside for Core Medical Services:  
One of the Administration's principles calls for the establishment 
of core medical services and would impose a requirement to use 75 
percent of Ryan White funds for these core medical services.  This 
requirement is inconsistent with years of publicly funded health 
and social services that have recognized the key interplay between 
medical care and other services, including but not limited to 
adequate nutrition, housing, case management (especially for 
persons with complex medical care needs), and outreach and 
education to bring people into care and to prevent further 
transmission.  Recognizing that the CARE Act is but one 
component of a wide array of publicly financed health and medical 
care programs, and that the CARE Act is intended as payer of last 
resort, it would seem more efficient to allow jurisdictions to utilize 
funding as appropriate based on local needs and priorities.  
Variability among States in terms of populations impacted and 
their needs, alternative sources of financing and health coverage, 
and a wide array and composition of health and social service 
providers suggest that the flexibility that has been a hallmark of the 
CARE Act should continue.  Perhaps encouraging Medicaid 
expansion programs for people with HIV would prove to be more 
beneficial than imposing restrictions on CARE Act funds with 
regard to core services. The Early Treatment for HIV Act, which I 
tried to pass in the Energy and Commerce Medicaid markup comes 
to mind as a reasonable means of enhancing access to medical 
services.  It is not clear that creating parameters regarding 
allowable uses of CARE Act funding will result in increased or 
enhanced coverage. Finally, it is my understanding that most, if not 
all, jurisdictions that receive Ryan White funding do not support 
this principle.  What is the rationale for or proposed benefit of 
imposing this sort of restriction?  Is there research to suggest that 
imposing this type of requirement will result in better managed 
services? 

Answer: 
	Advancements in HIV/AIDS care and treatment mean that 
people living with HIV/AIDS are living longer and healthier lives.  
Efforts to identify persons earlier in disease progression and bring 
them into care also means an increasing numbers of uninsured or 
underinsured are dependent on the CARE Act for care and 
treatment.  In 2004, 71% of CARE Act funding was directed to 
health care services and medications.  An additional 9% of CARE 
Act funding supported case management services.  The 
establishment of a minimum limit of 75% reflects the amount of 
CARE Act resources that will minimally need to continue to meet 
this need.  HRSA does include housing assistance in its definition 
of health related support services.  Job assistance services are not 
eligible for funding under the CARE Act. We are not aware of any 
research that suggests increasing the threshold to 75% will result in 
better managed services.  It is important that care coordination is 
an integral part of core medical services provided under the CARE 
Act in order to assure optimum management of patient care and 
program services.

a.)
Question:   
	AIDS Drug Assistance Program (ADAP) I have two questions 
about AIDS Drug Assistance Programs.  My first question relates 
to fiscal year 2006 funding.  AIDS Drug Assistance Programs 
across the country currently have nearly 1,000 people (954) on 
waiting lists.  After rescissions, the FY06 budget provides a 
negligible $2.2 million appropriation increase nationally for this 
vital program that has a historical growth rate of more than $100 
million per year.  We applaud the President's proposal to add $70 
million to the FY 07 budget to address ADAP need.  In light of the 
President's FY 07 proposal, will the Administration support an 
emergency appropriation for ADAPs during FY06 to prevent the 
growth of waiting lists, or will people living with HIV/AIDS in 
need of medications have to wait another year for relief?

Answer: 
	The Administration does not plan to seek an emergency 
appropriation for ADAP at this time.

b.)
Question:   
	Second, again, while we applaud the Administration's proposal 
to provide $70 million in additional funding to address ADAP 
waiting lists, my concern is that limiting the use of the funding to 
the elimination of waiting lists does not address the complexity of 
the issue.  I think we all agree that all Americans should have 
access to the medications they need to stay alive.  ADAP was 
constructed and continues as a payer of last resort, providing 
access to costly medications when there is no other source of 
coverage or the individual cannot afford to pay for the 
medications.  Similar to variations in Medicaid, States have 
constructed widely varying ADAP programs in terms of eligibility, 
formularies, etc.  Because Federal funding has not kept pace with 
ADAP program growth, some States have waiting lists for 
medications.  But it is also true that in order to avoid the 
development of waiting lists, some States have instituted other cost 
containment measures, such as eligibility restrictions and reduced 
formularies.  The end result is even more variation in access to 
care.  It seems that providing funding for States that have ADAP 
waiting lists, without considering the composition of ADAP 
programs and eligibility standards, especially in those States that 
have initiated or plan to initiate cost containment measures, will 
not be an equitable way in which to address the ADAP crisis.  
Instead of limiting the additional ADAP resources to States with 
waiting lists, wouldn't it be more beneficial to expand the 
eligibility for these funds in order to enhance ADAP resources in 
all jurisdictions that are struggling to provide medications to their 
residents with HIV and AIDS?

Answer: 
	The $70 million will be used to help the States end current 
ADAP waiting lists and help support care for additional patients.  
The funding mechanism is under discussion within the 
Department.

6.)
Question:   
	Elimination of "Hold Harmless" Provisions:  The principle that 
calls for the elimination of provisions that entitle cities and States 
to be held harmless is a major concern.  The "hold harmless" 
provisions limit the extreme service disruptions that would result 
from the precipitous loss of resources to a jurisdiction and give 
time for a local response to ensure that no one loses critical 
services.  It is in light of the Administration's apparent intent to 
redistribute CARE Act resources that I raise this concern.  The 
elimination of the "hold harmless" provisions might be viewed as a 
means of fostering shifts in funds to address disparities.  However, 
these disparities cannot be corrected through major shifts in 
resources between states without compromising services for 
persons living with HIV and AIDS in jurisdictions that lose 
funding.  How would the Administration propose to address the 
disruption in services that would accompany drastic reductions in 
resources in some jurisdictions as a result of the Administration's 
principles?  And again I have to ask - wouldn't a better approach 
be to increase resources to keep pace with the continued growth of 
the epidemic and address overall increased need?

Answer: 
	The Administration is attempting to respond in two ways:  1) 
by seeking to increase funding resources for HIV/AIDS care and 
treatment as reflected in the President's FY2007 budget; and 2) by 
proposing through the Admnistration's Principles the elimination 
of structural barriers in the CARE Act to allow  better targeting of 
these new dollars to respond to the epidemic in our hardest hit 
communities.

7.)
Question:   
	Ryan White CARE Act Feedback Meetings and Alternatives to 
Principles Has the Administration considered any alternative 
proposals?  For example, I understand that the National Alliance of 
State and Territorial AIDS Directors, or NASTAD - an 
organization that represents State health department HIV/AIDS 
program directors - has developed alternative recommendations 
for a reauthorized CARE Act.  In addition, I understand that a 
Ryan White Legislative Group has been established to offer 
alternative solutions to reauthorization issues.  Has the 
Administration considered alternative proposals to address the 
need for enhanced resources and resolve variations in access to 
care?

Answer: 
	The Administration began work on CARE Act reauthorization 
in January, 2003. Since then, there have been many opportunities 
provided by the Administration for HIV/AIDS organizations, 
persons affected by HIV/AIDS, and the public to offer comments 
and proposals on the reauthorization of the CARE Act.  The 
Administration has had discussions with key constituent national 
groups including National Alliance of State and Territorial AIDS 
Directors (NASTAD) and Communities Advocating Emergency 
AIDS Relief (CAEAR) to hear their views and alternative 
proposals on changes to the CARE Act.  In addition, both the 
CDC/HRSA Advisory Committee on HIV and STD Prevention 
and Treatment (CHAC) and the Presidential Advisory Council on 
HIV/AIDS (PACHA) developed reauthorization proposals 
resulting from public meetings (which were attended by hundreds 
of people representing themselves and many organizations) and 
other opportunities to hear constituency groups' views and 
proposals on the CARE Act reauthorization.   Both the CHAC 
recommendations and the PACHA resolution included, among 
other proposals, better targeting of CARE Act resources to follow 
the epidemic in order to promote equity in the allocation of CARE 
Act resources. 

8.)
Question:   
	Restructuring the Ryan White CARE Act While it does not 
appear to be among the Administration's principles, I have heard 
proposals that call for drastic modifications to the structure of the 
CARE Act, including eliminating or collapsing titles.  Is it the 
Administration's intent to change the basic structure of the CARE 
Act in an extreme manner, such as eliminating or collapsing titles?

Answer: 
	 No, the intent of the Administration is not to collapse or 
eliminate the CARE  Act Titles or the programs funded under the 
various Parts and Titles of the CARE Act

Irritable Bowel Syndrome (IBS) 

1). 
Question:   
	Secretary Leavitt, I hold great interest in the National Institute 
of Diabetes and Digestive and Kidney Diseases' (NIDDK) 
research portfolio on Irritable Bowel Syndrome or IBS.  Can you 
provide the Committee with the level of funding that NIDDK has 
dedicated to gastrointestinal functional and motility disorders over 
the last five years?

Answer: 
	The NIDDK supports a broad-based research approach to IBS 
that includes fundamental research in gastrointestinal motility, 
immunology, and cell biology, and clinical research in patients 
with IBS.  This research is aimed at understanding the 
development of the pathways that control motility mechanisms in 
the gut; research on the integration of pain, motility and behavioral 
neural circuits, and the relationship of gut inflammation to these 
pathways; translational research aimed at moving discoveries in 
animal models into studies in humans; and clinical studies.  
NIDDK funding for IBS research for fiscal years 2001 through 
2005 was:  FY 2001, $9.3 million; FY 2002, $10.8 million; FY 
2003, $16.5 million; FY 2004, $16.9 million; and FY 2005, $19.4 
million.




The Honorable Charles Gonzales

1.)
Question:
	Secretary Leavitt, as you know under current law, there is a 
problem with the Medicare physician payment system.  According 
to the American Medical Association, Medicare payments to 
doctors are slated to be cut every year for the foreseeable future.  
Beginning in 2007 doctors will see a cut of 4.6 percent in their 
Medicare payments, and a total cut of 34% over the next nine 
years, about $26,000 per physician per year.  First, I would note 
that the President's Budget includes no proposal to address this 
matter.  There is language indicating you may wish to address this 
issue, but I would like to know - is it correct to state that at this 
time the Administration has no proposal, legislative or otherwise, 
to fix physician payments?

Answer: 
	The Deficit Reduction Act (DRA) of 2005 eliminated the 
negative physician update that would otherwise have taken place 
for 2006.  In 2006, the physician community is developing quality 
measures that would cover a broad group of physician specialties 
and a wide range of clinical areas for physicians to begin reporting 
in 2007.  We are working closely with the physician community to 
develop these evidence-based quality measures.  During 2006, we 
are conducting a physician voluntary reporting program to allow 
physicians to report some existing quality measures and to allow us 
to test administrative mechanisms for reporting such measures.  
We are also examining the administrative issues that would be 
involved with alternative mechanisms to reward physicians who 
report information on quality measures.  As the year transpires, we 
will assess progress in the development of performance measures 
for physicians, as well as mechanisms for the reporting of 
measures in 2007.  This will provide physicians with the 
opportunity to report measures first, leading to payment for 
reporting and performance on such measures in the future.  We 
would be happy to work with you and your colleagues on the 
physician update issue for 2007 and future years.  

2.)
Question:
	This is not a new and unexpected problem.  Congress has had 
to make adjustments to Medicare physician payments over the past 
number of years since President Bush has been in office.  The 
Medicare Payment Advisory Commission  (MedPAC) first called 
for a new formula in March of 2001- two months after the 
beginning of President Bush's first term.  How is it that after this 
many years of having a problem that is clearly identified and has 
been discussed in numerous hearings, letters to the Administration, 
public forums and other venues, the Administration still has 
absolutely no proposed solution?  Can you tell me when the 
Administration will have a proposal to address the physician 
payment cuts in Medicare

Answer: 
	The President's Budget indicates support for linking quality to 
Medicare payment in a cost neutral manner.  Given concerns about 
the overall financing of the Medicare program, we do not believe 
that providing additional aggregate funding to finance incentive 
payments is either supportable or necessary.  On the other hand, 
we believe that savings from reducing care that is unnecessary or 
otherwise inappropriate affords opportunities to fund incentive 
payments.  We believe we should examine possibilities of 
improving care coordination and using some of the savings 
generated in one payment system to fund incentives in another, as 
long as these reforms do not provide inappropriate incentives not 
to furnish necessary care.
 	The foundation of effective pay-for-performance initiatives is 
collaboration with providers and other stakeholders to ensure that 
valid quality and efficiency measures are used, that providers are 
not being pulled in conflicting directions, and that providers have 
support for achieving actual quality improvement.  Consequently, 
to develop and implement these initiatives, we are collaborating 
with a wide range of health care providers, other public agencies, 
and private organizations who share our goal of improving quality 
and avoiding unnecessary health care costs.  CMS is working with 
the provider community to identify and test budget-neutral 
incentives that will stimulate Medicare providers to improve 
performance on quality and efficiency measures. 

3.)
Question:
	Is this current reimbursement formula for physicians a fair and 
realistic reimbursement formula for doctors

Answer: 
	The current physician payment system focuses on payment for 
individual services, but does not provide incentives for physicians 
to take into account all of the services furnished to beneficiaries to 
treat an episode of care, or furnished during a period of time to 
treat chronic disease.  This often has the effect of directing more 
resources to delivering care that is not of the highest quality (for 
example, duplicative tests and services, as well as hospital 
admissions or visits to treat potentially avoidable complications).  
Conversely, providers who have good ideas and want to take 
action to improve quality of care find that Medicare's physician 
payment system does not provide them with the resources or the 
flexibility needed to do so.  As a result, providers are unable to 
invest in activities that, properly implemented, have the potential 
to improve quality and avoid unnecessary medical costs.
	Linking a portion of Medicare payments to valid measures of 
quality and effective use of resources would give providers more 
direct incentives and financial support to implement the innovative 
ideas and approaches that result in improvements in the value of 
care that our beneficiaries receive.  CMS supports provider 
payment reforms that would encourage quality and efficiency, and 
discourage increased complications and costs.

4.)
Question:
	Secretary Leavitt, I am deeply concerned about the potential 
impact of proposed reductions in federal Medicaid spending on 
children and on children's hospitals, since Medicaid pays for the 
health care of one in four children and nearly half of the patient 
care in children's hospitals.  CHRISTUS Santa Rosa Children's 
Hospital in my district is the largest provider of Medicaid services 
in the state of Texas-more than 70% of all of its patients are 
covered by Medicaid.  Additionally, Texas has the fastest growing 
child population in the nation.  Please explain to me what the 
administration proposes to do to make sure that the $60 billion 
reduction in Medicaid spending won't jeopardize the ability of 
children to receive the care they need, particularly the sickest 
children in the country who rely on children's hospitals.

Answer: 
	Last year when you addressed this question to me I reported 
that the President's FY 2006 Budget had the goal of cutting the 
budget deficit in half by 2009.  Some of the savings to achieve that 
goal were proposed to come out of the budget for Medicaid and 
SCHIP-- in fact, the budget proposed $60 billion in savings over 
ten years for Medicaid and SCHIP.  The net savings for these two 
programs, however, was $44.5 billion because the budget also 
included $16.5 billion in proposed new spending.
	The President's commitment to Medicaid reform proposals 
culminated in the Deficit Reduction Act of 2005 (DRA) which 
helps to achieve a transformation of Medicaid from a 1960s 
welfare program to a 21st century, innovative and adaptable 
provider of health care services for a broad spectrum of 
Americans.  The President's FY 2007 builds on the success of the 
DRA by including both legislative and administrative proposals.  
Taken together these modest changes would save approximately 
$13 billion over five years.
	With regard to specific services for children and other 
vulnerable populations, the DRA provides that States can choose to 
implement benefit flexibilities authorized by a new Section 1937 
of the Social Security Act.  However, the statute prohibits states 
from requiring certain groups of individuals to enroll in benchmark 
coverage, such as pregnant women, certain low-income parents, 
adults and children with disabilities, dual eligibles, and certain 
other aged and disabled individuals in need of long term care or 
adults and children with special needs.  
	Non-disabled children can be offered the benchmark or 
benchmark equivalent coverage specified in Section 1937, and for 
those children under 19, states will be required to provide wrap-
around coverage consisting of EPSDT services if the benchmark 
and/or benchmark equivalent package does not offer these 
services. CMS policy is that EPSDT services will remain intact for 
children, and CMS will not approve any State plan amendment 
submitted under the new section 1937 that does not include the 
provision of EPSDT services for children under 19 as defined in 
section 1905(r) of the Social Security Act.

5.)
Question:
	Secretary Leavitt, you have identified targeted case 
management as one area where states should cut their Medicaid 
expenditures, yet targeted case management is an extremely 
valuable service for many children.  For example, a child in foster 
care who has asthma, depression from suffering abuse and learning 
disabilities may need his caseworker to coordinate treatment with 
his teachers, doctors, therapists, foster parents and birth family.  
This coordination is not waste, fraud or abuse, and in many states 
this targeted case management provides a critical service and a 
significant portion of the funds to serve these vulnerable special 
needs children.  In the face of billions of dollars worth of 
additional tax cuts for millionaires, why are you suggesting cutting 
this support out from under these children?

Answer: 
	The Deficit Reduction Act of 2005 (DRA) included a provision 
to clarify what is reimbursable under the Medicaid case 
management benefit and the targeted case management (TCM) 
benefit.  The Centers for Medicare and Medicaid Services (CMS) 
is currently drafting regulations to implement section 6052 of the 
DRA.
	The FY 2007 President's Budget proposes to reimburse case 
management at the administrative matching rate of 50 percent.  
This legislative proposal was in the FY 2006 Budget and the 
Administration is proposing it again because there is evidence to 
indicate that states have attempted to shift costs associated with 
other social service programs to Medicaid.  There are instances 
where the Medicaid program is being charged improperly for case 
management services when another program should maintain 
responsibility for payment.
	Under the proposal, the match for case management will be the 
same as it is for an administrative activity.  It does not eliminate 
federal financial participation (FFP) for case management services, 
nor does it affect Medicaid eligibility for those services or any 
other Medicaid services.  In addition, the proposal does not affect 
the amount of reimbursement that states will receive for Medicaid 
services to which an individual may be referred by a case manager.

6.)
Question:
	Secretary Leavitt, the budget proposes investing an additional 
$1 billion in outreach efforts to enroll eligible children in CHIP.  
Yet the budget also proposes freezing SCHIP funding at next 
year's level.  Given that health care costs continue to rise and that 
many states have already cut back on services, reduced eligibility 
or increased co-pays because they have the funds to service 
children at current levels, isn't it disingenuous at best to spend 
money on enrollment without adding funds to actually serve the 
children enrolled?

Answer: 
	The FY 2007 President's budget proposal does not "freeze" 
SCHIP funding; it assumes SCHIP will continue at its current 
level.  We look forward to working with Congress on the 
reauthorization of SCHIP.
	Approximately $9.5 billion in federal SCHIP allotments is 
available to states for FY 2006, not including the FY 2003 
redistribution ($171.6 million) or the FY 2006 additional allotment 
($280 million) to eliminate funding shortfalls (as appropriated by 
the Deficit Reduction Act of 2005).
	In addition, there are sufficient funds in SCHIP to meet current 
state needs, as well as to cover additional children that would be 
enrolled as a result of the comprehensive outreach efforts that the 
President has proposed through the "Cover the Kids" campaign.  
Therefore, if the President's redistribution and outreach proposals 
are passed, we estimate that there will be plenty of funding in the 
system to cover these children.

7.)
Question:
	Secretary Leavitt, the passage of the Medicare Modernization 
Act last Congress created a new program, Part D, to provide 
prescription drug benefits for seniors.  In regards to Part D benefits 
and Preferred Drug lists, what criteria are going to be used to 
determine the drugs available for Medicare beneficiaries?  Will the 
limited Oregon-style evidence-based medicine approach be utilized 
or will the more complete EBM system, as originally described, be 
the basis for medication reviews?  How limited will the drug 
formularies be and how will inclusions or exclusions be 
determined?

Answer: 
	The MMA required that CMS develop, in consultation with the 
United States Pharmacopoeia (USP), model formulary guidelines 
for Part D plans.  The USP guidelines identify categories and 
classes of drugs, and plan formularies must include at least 2 drugs 
per category and class outlined by the USP.  For six categories of 
drugs of critical concern -- antidepressants, antipsychotics, 
anticonvulsants, anticancer drugs, immunosuppressants, and drugs 
for HIV/AIDS -- CMS requires plan formularies to cover "all or 
substantially all" available drugs.  
	CMS reviews all Part D plan formularies to ensure that 
beneficiaries have access to a broad range of medically appropriate 
drugs to treat all disease states.  In addition, a plan formulary 
design must not discriminate or substantially discourage 
enrollment of certain beneficiaries.  CMS created rigorous 
formulary standards that rely on existing best practices in the 
industry to ensure beneficiaries have access to medically necessary 
drugs, while offering flexibility for plans to offer benefits in the 
most cost efficient manner.  Each formulary is reviewed by CMS 
pursuant to 13 different criteria:

1.	Review of USP categories and classes (USP Model 
Guidelines)
2.	Comparison with American Hospital Formulary System 
categories and classes
3.	Two drugs per category and class
4.	Review for USP formulary key drug types
5.	Review of tier placement for all drugs
6.	Review of widely accepted treatment guidelines
7.	Review for 6 therapeutic categories or pharmacologic 
classes requiring uninterrupted access ("all or substantially 
all" requirement)
8.	Review for common drugs used by Medicare population
9.	Quantity limit review
10.	Prior authorization review
11.	Step therapy review 
12.	Insulin supplies and vaccine review
13.	Long-term Care accessibility review

	Additionally, CMS has provided detailed guidance to plans 
regarding the process for making formulary changes within a plan 
year.

8.)
Question:
	Secretary Leavitt, how does the FY 2006 Health care budget 
address reimbursements for acute care health services that are 
mandated for hospitals to provide?

Answer: 
	The Administration recognizes and supports the important part 
hospitals play in our health care delivery system through the 
federal health care programs that we administer.  I believe that the 
mandated services you are referring to in your question relate to 
those required under the Emergency Medical Treatment and Labor 
Act (EMTALA).  In 1986, Congress enacted EMTALA to ensure 
public access to emergency services regardless of a patient's 
ability to pay. The statute imposes specific obligations on hospitals 
participating in the Medicare program that offer emergency 
services, which include providing a medical screening examination 
when a request is made for examination or treatment for an 
emergency medical condition, including active labor, regardless of 
an individual's ability to pay.  Hospitals are then required to 
provide stabilizing treatment for patients with emergency medical 
conditions.  The provisions of EMTALA apply to all individuals 
(not just Medicare beneficiaries) who attempt to gain access to a 
hospital for emergency care.
	Although the President's Budget does not specifically address 
reimbursements for acute care health services that hospitals are 
mandated to provide under EMTALA, the Centers for Medicare & 
Medicaid Services is currently implementing a program that 
reimburses certain health care providers for these services.  Section 
1011 of the Medicare Modernization Act (MMA) set aside $250 
million a year for fiscal years 2005 through 2008 to assist 
hospitals, physicians, ambulance providers, and Indian Health 
Service and Tribal organizations to recoup a portion of their costs 
associated with providing emergency services required by 
EMTALA.  Individuals for which eligible services may be 
reimbursed include qualified undocumented immigrants who are 
uninsured or cannot afford emergency care.  Two-thirds ($167 
million) is allotted to all 50 States and the District of Columbia, 
based upon their relative percentages of the total number of 
undocumented immigrants.  The remaining one-third ($83 million) 
is allotted to the six States with the largest number of 
undocumented immigrant apprehensions.  The first and second 
rounds of payments to providers under Section 1011 has been 
completed and was made for services rendered during the third and 
fourth quarters of FY 2005.   


9.)
Question:
	The President's budget calls for $169 million for Health 
Information Technology (HIT), an increase of $58 million over 
FY2006.  Some may consider this a significant increase.  I don't 
think it is enough.  Any practicing physician will tell you about the 
significant inefficiency in our current system of health care with 
respect to medical records/health information.  I think tremendous 
gains in better care and cost savings can be achieved with better 
health information infrastructure.  And sooner is better than later.  
How is the $169 million for HIT going to be used in FY2006?  Is 
this money going toward demonstration programs and what is the 
process by which these demonstration programs are chosen?

Answer: 
	The FY 2007 budget request includes a total of $116 million 
for the Office of the National Coordinator for Health Information 
Technology (ONC).  In addition to funds requested within ONC, 
the FY 2007 request includes $50 million in the Agency for 
Healthcare Research Quality to advance the use of health IT to 
enhance patient safety.  There is also $4 million in the Office of the 
Assistant Secretary for Planning and Evaluation for independent 
evaluations of EHR adoption and economic factors influencing 
health IT implementations in the health sector.
	ONC will continue to build upon foundational initiatives 
underway through its contractors to develop the long-term capacity 
to support widespread adoption of interoperable health IT.  Core 
activities include
?	Developing and harmonizing standards that are required for 
health information and data portability, which will include 
a process to maintain and update these standards over time;
?	Continuing the development of a certification process for 
health IT, which will include refinements to existing 
certification criteria for inpatient and ambulatory EHRs as 
well as new criteria related to the NHIN architecture.
?	Continuing the development of production-quality 
prototypes for Nationwide Health Information Networks 
(NHINs) which will enable secure exchange of electronic 
health records (EHR) and other health data; 
?	Developing personal health record architectures that will be 
integrated with the NHIN architecture, which will allow 
personal health information data to be controlled by the 
consumer and not just by clinicians and providers;
?	Evaluating variations in the State laws and organization-
level business policies around privacy and security 
practices, including variations in implementations of 
HIPAA privacy and security requirements.  Lessons will be 
incorporated into the NHIN prototypes.



The Honorable Edward J. Markey 
Medicare Part D

	Looking at the President's Budget, I was surprised that the 
President has not proposed any changes to his Medicare 
Prescription Drug Program. Clearly we have seen a chaotic 
implementation of a confusing and overly complex program. 
Seniors have been calling for an easier solution and democrats 
have proposed providing seniors with the option of comprehensive 
plan that is run by Medicare which offers low cost drugs that have 
been negotiated by the Secretary

1.) 
Question:
	The President says that he wants to offer seniors choices.  
Would you support offering seniors the opportunity to choose a 
plan that is administered by Medicare?

Answer: 
	We are very pleased that following the Part D prescription drug 
benefit's initial enrollment period, more than 90 percent of people 
with Medicare are now receiving coverage for prescription drugs.  
Surveys by independent analysts have shown that a majority of 
enrolled beneficiaries are satisfied with their coverage and are 
saving money on prescription drugs.  Ongoing analysis conducted 
by CMS continues to show that the Medicare prescription drug 
program is providing significant discounts on prescription drugs, 
with available savings remaining stable over time.  Cost estimates 
of the Part D program are much lower than expected, in part 
because of aggressive price negotiation.  Lower than expected 
bids, which were a direct result of price negotiations, have in turn 
resulted in lower costs for both beneficiaries (in the form of lower 
premiums and better benefits) and taxpayers.  The Medicare 
prescription drug benefit experience thus far demonstrates that 
government price negotiation is unnecessary because competition 
is working.

2.) 
Question:
	When seniors encounter problem getting their prescriptions 
filled and they have to call their plan. They are usually either put 
on hold (literally for hours), are hung up on or are not able to speak 
with an actual person in customer relations to help resolve their 
issue. 1-800-MEDICARE has gotten faster, but it can't answer 
many specific questions and often tells beneficiaries that they have 
to call their plans. Has CMS or HHS done anything to force plans 
to reduce the plans' wait times and become more user friendly?

Answer: 
	We are very serious about overseeing plan call centers and 
enforcing their adherence to the requirement that beneficiaries get 
the information they need.  Medicare beneficiaries should be able 
to count on a high level of customer service from their plans.  For 
this reason, CMS has implemented a broad set of requirements for 
plan call centers that reflect the services they should be expected to 
provide reliably.  CMS has been tracking actual plan performance 
and complaints, and we have been taking enforcement actions 
when necessary.  CMS also has publicly released comparative 
information on plan call center performance and complaint rates to 
assist beneficiaries in identifying plans with a high level of 
customer service.



3.) 
Question:
	On May 16th will seniors be able to go to the pharmacy and fill 
their prescriptions without hassle, or will millions be turned away 
once again while the states are left to pick up the tab?  What has 
been done to ensure that the problems in late December and early 
January won't be repeated on May 15th when there will be another 
wave of enrollment?

Answer: 
	CMS has been reaching out to beneficiaries and educating our 
partner network about the importance of enrolling in the first half 
of the month to maximize chances of a smooth transition to new 
Part D coverage.  We also have taken steps to improve the 
regularity and consistency of data exchanges between plans and 
CMS to increase the likelihood that pharmacies will have 
enrollment and cost-sharing information available to them when 
new enrollees first try to fill a prescription using their new 
coverage.  These efforts have resulted in significant improvements.

Public Health Service Evaluation Funding Questions:
	It is my understanding that after appropriations have been 
made, the Secretary reduces funding for some programs and moves 
that money to other programs or even other agencies at HHS using 
the PHS Evaluation funding system. 

1.)
Question: 
	What is the purpose of PHS Evaluation funding?

Answer:
	PHS Evaluation funding supports critical evaluation activities 
throughout HHS.  These evaluations, and the data collection and 
analysis that support them, improve program performance by 
ensuring that timely and accurate information is available to 
support funding and management decisions.  PHS Evaluation 
funds finance the entire budget of the Agency for Healthcare 
Research and Quality, major data collection activities in the 
Centers for Disease Control and Prevention and the Substance 
Abuse and Mental Health Services Administration, and other 
evaluation and research activities across the Department.  

2.)
Question: 
	What is the legal authority for PHS Evaluation funding?

Answer:
	The use of PHS Evaluation funding is authorized by section 
241 of the Public Health Service Act.  The annual Labor, Health 
and Human Services, and Education Appropriation Acts specify 
the amount of funding that may be transferred from one program to 
another (2.4% for FY 2006 - see Section 207, General Provisions 
of P.L. 109-149), and specify, in each agencies' annual 
appropriations language, the amounts of PHS Evaluation funding 
to be received by specific HHS programs.

3.)
Question: 
	How much money was been moved within HHS though this 
process in the last fiscal year? How much over the last five years? 
How much do you anticipate moving in FY 2007?

Answer:
	In FY 2005, the last fiscal year for which final data is available, 
$827.1 million of PHS Evaluation Funds were utilized by HHS 
agencies.  For the five years between FY 2001 and FY 2005, a 
cumulative total of $2,911.2 million of PHS Evaluation Funds 
were utilized.  In FY 2007, the President's Budget requests that 
$845.3 million of PHS Evaluation Funds be used.

4.)
Question: 
	What programs within each agency are sources of PHS 
Evaluation funding and which programs within each agency are 
the "recipients" of PHS Evaluation funding?

Answer:
	As for the sources of PHS Evaluation funding, Section 241 of 
the Public Health Service Act allows the Secretary of Health and 
Human Services to use up to one percent of funds appropriated for 
all programs authorized under the Act for evaluation of such 
programs.  The actual amount to be transferred is also specified in 
the annual appropriations bills.  The programs of the Food and 
Drug Administration and the Indian Health Service, although part 
of the Public Health Service, are not authorized by this Act and, 
therefore, do not participate in the PHS Evaluation program.  Some 
of the programs in the other PHS agencies are not financed by the 
Public Health Service Act (e.g., the Maternal and Child Health 
Block Grant in the Health Resources and Services Administration).  
Likewise, these programs also do not participate in the PHS 
Evaluation program
	Recipient programs, as directed by Congress through the 
annual Labor-HHS Appropriations Act, include: the entire Agency 
for Healthcare Research and Quality; numerous health surveys and 
occupational disease and workplace safety activities within the 
Centers for Disease Control and Prevention; health surveys within 
the Substance Abuse and Mental Health Services Administration; 
research and evaluation conducted by the Assistant Secretary for 
Planning and Evaluation in the Office of the Secretary; activities of 
the Office of the National Coordinator for Health Care Information 
Technology; Ryan White Special Projects of National Significance 
within the Health Resources and Services Administration; research 
and evaluation activities within the Administration for Children 
and Families; the National Library of Medicine's National 
Information Center on Health Services Research and Health Care 
Technology in the National Institutes of Health; other research and 
evaluation activities in the Office of Public Health and Science and 
the Office of Public Health Emergency Preparedness in the Office 
of the Secretary; and other agency-specific efforts to evaluate the 
effectiveness of individual programs.

5.)
Question: 
	At what point in the budget process are decisions about PHS 
Evaluation funding made?

Answer:
	Decisions about usage of PHS evaluation funds are made at the 
same time in the budget process as decisions about the usage of 
appropriated funds.  The President's Budget and HHS's 
Appropriation Acts specifies how PHS evaluation funds are to be 
used.



6.)
Question: 
	What is the process by which the donor programs and recipient 
programs are determined and what the process for determining the 
amounts that are either given or received for each program?

Answer:
	Recipient programs are identified in HHS's budget submission 
to Congress and are ultimately chosen by Congress when it passes 
HHS appropriation bills.  Donor programs are billed 
proportionately to the amount of budget authority each has for 
programs authorized by the PHS Act (not counting exclusions).  

7.)
Question: 
	Is comprehensive, understandable information about PHS 
Evaluation funding available any public form? If so, where?

Answer:
	As required by law, HHS submits an annual report to the 
Labor-HHS Appropriations Subcommittees.  This report shows the 
amount each Agency receives and the amount each agency 
donates.

8.)
Question: 
	Is comprehensive, understandable information about the 
various programs affected by PHS Evaluation funding compiled in 
any public form? If so, where?

Answer:
	The annual report to Congress includes information on the 
amounts that each agency donates.  Some agencies are routinely 
requested by the Appropriations Subcommittees for additional line 
item detail in Questions for the Record following budget hearings.  

9.)
Question: 
	If PHS Evaluation funding were reduced or eliminated, what 
would the Secretary do with the money?  If that is not known, what 
process would be used to make those decisions? 

Answer:
	In FY 2005, each donor agency contributed 2.4% of amounts 
appropriated for eligible programs under the PHS Act 
authorization and not otherwise excluded.  If less PHS Evaluation 
funding were allocated by Congress, then the contribution from 
these programs would be less than 2.4%, more money would stay 
where it was originally appropriated, and less would be transferred 
to places where it is used for evaluation activities and the support 
of other ongoing programs, as currently directed by Congress.

Avian Flu /pandemic

1.)
Question:
	With Katrina, we had a situation where because everyone was 
in charge, no one was in charge. I am afraid that we are setting 
ourselves up for another case of this with our plans for pandemic 
flu. Who is ultimately in charge of pandemic preparations? Are 
you in charge, is Dr. Gerberding in charge, is Secretary Chertoff in 
charge or does the buck stop with someone else?

Answer:
	The Department of Health and Human Services serves as the 
Federal Government's primary agency for the public health and 
medical preparation and planning for and response to a pandemic.  
The Secretary of Health and Human Services will lead Federal 
health and medical response efforts, will serve as the primary 
Federal spokesperson for pandemic health issues, and coordinate 
the actions of other departments and agencies in the overall public 
health and medical emergency response efforts.   The Secretary of 
Homeland Security will provide overall incident management for 
the Federal response, and coordinate with HHS and other Federal, 
State, and tribal agencies in providing non-medical support.  The 
Secretary of Homeland Security will also gather and fuse 
information in order to provide a "common operational picture" for 
the Federal Government.
	The National Response Plan (NRP) stipulates mechanisms for 
coordination of the Federal response, but sustaining these 
mechanisms for several months to over a year will present unique 
challenges.  While day-to-day situational monitoring would likely 
occur through a central operations center, critical decision-making 
would be accomplished through an interagency body comprised of 
senior decision makers from across the Government.  This would 
occur through a mechanism such as a joint interagency task force.  
These and other considerations applicable to response to a 
pandemic will be incorporated in the NRP review process and 
inform recommendations on revisions and improvements to the 
NRP and associated annexes.
	Irrespective of the mechanism used for interagency 
coordination, and pursuant to the NRP, policy issues that cannot be 
resolved at the department level will be addressed through the 
Homeland Security Council/National Security Council-led policy 
coordination process.

2.) 
Question: 
	A special interest legal liability exemption rider was inserted 
into Department of Defense Appropriations Conference Report at 
the last minute.  This rider provides virtually unlimited liability 
protection to the drug industry and no money for compensation to 
victims if you make a declaration that a qualified pandemic or 
epidemic product deserves this liability protection. I am concerned 
that the term "epidemic product" is overly broad and I would like 
to get your opinion on what is covered by this term and how you 
plan to use this power to exempt the drug industry from liability.

Answer:
	We are very pleased that Congress has provided limited 
liability protections in this area.  As you know, we have proposed a 
dramatic plan to ensure the nation's preparedness against a 
possible pandemic influenza that would have devastating effects.
	One of the key barriers to our preparedness is the need for a 
strong and robust domestic vaccine manufacturing infrastructure 
that has the capacity to quickly ramp up production to provide 
vaccines for 300 million Americans.  Since 1979, the number of 
U.S. licensed vaccine manufacturers has declined from 26 to 8.   
And for many vaccines, there is no longer a US-based 
manufacturer.
	One reason for this, along with an uncertain market and other 
factors, is the continuous threat of liability facing vaccine 
manufacturers.  As we developed our plans for pandemic flu, the 
vaccine industry made clear to us that there were three barriers that 
had to be addressed:
1.	The threat of unwarranted liability 
2.	The lack of a guaranteed purchaser 
3.	The importance of streamlining regulatory barriers. 

	With Congress' help, we are now able to address each of these 
barriers.  We are pleased that Congress has acted to provide limited 
liability protections for vaccine manufacturers and providers, with 
an exception to allow suits to proceed against companies who act 
with willful misconduct.  We believe this strikes an appropriate 
balance of removing the threat of frivolous and unwarranted tort 
suits, while still retaining appropriate access to court remedies.  
With respect to our pandemic influenza vaccine contracts, we do 
plan to make use of the authorities afforded under the PREP Act.  
	It seems clear to me that Congress intended to focus this Act on 
products to meet the threats of pandemic flu and bioterrorism. 
 While it is premature to discuss future hypothetical situations, I 
assure you we will strive to use this authority in a manner 
consistent with good policy and Congressional intent.  We are also 
pleased that Congress has acted to put in place a structure to ensure 
that Americans injured by a vaccine to treat or prevent pandemic 
flu are appropriately compensated.

3.) 
Question: 
	Do you think it would be appropriate to use this power to 
protect Merck who did not follow up on critical studies that 
indicated that Vioxx was linked to heart attacks from liability 
claims? Yes or no?

Answer:
	We are very pleased that Congress has provided limited 
liability protections in this area.  As you know, we have proposed a 
dramatic plan to ensure the nation's preparedness against a 
possible pandemic influenza that would have devastating effects.
	One of the key barriers to our preparedness is the need for a 
strong and robust domestic vaccine manufacturing infrastructure 
that has the capacity to quickly ramp up production to provide 
vaccines for 300 million Americans.  Since 1979, the number of 
U.S. licensed vaccine manufacturers has declined from 26 to 8.   
And for many vaccines, there is no longer a US-based 
manufacturer.
	One reason for this, along with an uncertain market and other 
factors, is the continuous threat of liability facing vaccine 
manufacturers.  As we developed our plans for pandemic flu, the 
vaccine industry made clear to us that there were three barriers that 
had to be addressed:
1.	The threat of unwarranted liability 
2.	The lack of a guaranteed purchaser 
3.	The importance of streamlining regulatory barriers. 

	With Congress' help, we are now able to address each of these 
barriers.  We are pleased that Congress has acted to provide limited 
liability protections for vaccine manufacturers and providers, with 
an exception to allow suits to proceed against companies who act 
with willful misconduct.  We believe this strikes an appropriate 
balance of removing the threat of frivolous and unwarranted tort 
suits, while still retaining appropriate access to court remedies.  
With respect to our pandemic influenza vaccine contracts, we do 
plan to make use of the authorities afforded under the PREP Act.  
	It seems clear to me that Congress intended to focus this Act on 
products to meet the threats of pandemic flu and bioterrorism. 
 While it is premature to discuss future hypothetical situations, I 
assure you we will strive to use this authority in a manner 
consistent with good policy and Congressional intent.  We are also 
pleased that Congress has acted to put in place a structure to ensure 
that Americans injured by a vaccine to treat or prevent pandemic 
flu are appropriately compensated.

4.) 
Question: 
	Do you think it would be appropriate to use this power to 
protect GlaxoSmithKline who concealed information showing that 
their product Paxil increased the risk of suicidality in children from 
liability claims? Yes or no?

Answer:
	We are very pleased that Congress has provided limited 
liability protections in this area.  As you know, we have proposed a 
dramatic plan to ensure the nation's preparedness against a 
possible pandemic influenza that would have devastating effects.
	One of the key barriers to our preparedness is the need for a 
strong and robust domestic vaccine manufacturing infrastructure 
that has the capacity to quickly ramp up production to provide 
vaccines for 300 million Americans.  Since 1979, the number of 
U.S. licensed vaccine manufacturers has declined from 26 to 8.   
And for many vaccines, there is no longer a US-based 
manufacturer.
	One reason for this, along with an uncertain market and other 
factors, is the continuous threat of liability facing vaccine 
manufacturers.  As we developed our plans for pandemic flu, the 
vaccine industry made clear to us that there were three barriers that 
had to be addressed:
1.	The threat of unwarranted liability 
2.	The lack of a guaranteed purchaser 
3.	The importance of streamlining regulatory barriers. 

	With Congress' help, we are now able to address each of these 
barriers.  We are pleased that Congress has acted to provide limited 
liability protections for vaccine manufacturers and providers, with 
an exception to allow suits to proceed against companies who act 
with willful misconduct.  We believe this strikes an appropriate 
balance of removing the threat of frivolous and unwarranted tort 
suits, while still retaining appropriate access to court remedies.  
With respect to our pandemic influenza vaccine contracts, we do 
plan to make use of the authorities afforded under the PREP Act.  
	It seems clear to me that Congress intended to focus this Act on 
products to meet the threats of pandemic flu and bioterrorism. 
 While it is premature to discuss future hypothetical situations, I 
assure you we will strive to use this authority in a manner 
consistent with good policy and Congressional intent.  We are also 
pleased that Congress has acted to put in place a structure to ensure 
that Americans injured by a vaccine to treat or prevent pandemic 
flu are appropriately compensated.

5.) 
Question: 
	What other "epidemic products" do you think it would be 
appropriate to protect from liability?

Answer:
	We are very pleased that Congress has provided limited 
liability protections in this area.  As you know, we have proposed a 
dramatic plan to ensure the nation's preparedness against a 
possible pandemic influenza that would have devastating effects.
	One of the key barriers to our preparedness is the need for a 
strong and robust domestic vaccine manufacturing infrastructure 
that has the capacity to quickly ramp up production to provide 
vaccines for 300 million Americans.  Since 1979, the number of 
U.S. licensed vaccine manufacturers has declined from 26 to 8.   
And for many vaccines, there is no longer a US-based 
manufacturer.
	One reason for this, along with an uncertain market and other 
factors, is the continuous threat of liability facing vaccine 
manufacturers.  As we developed our plans for pandemic flu, the 
vaccine industry made clear to us that there were three barriers that 
had to be addressed:
4.	The threat of unwarranted liability 
5.	The lack of a guaranteed purchaser 
6.	The importance of streamlining regulatory barriers. 

	With Congress' help, we are now able to address each of these 
barriers.  We are pleased that Congress has acted to provide limited 
liability protections for vaccine manufacturers and providers, with 
an exception to allow suits to proceed against companies who act 
with willful misconduct.  We believe this strikes an appropriate 
balance of removing the threat of frivolous and unwarranted tort 
suits, while still retaining appropriate access to court remedies.  
With respect to our pandemic influenza vaccine contracts, we do 
plan to make use of the authorities afforded under the PREP Act.  
	It seems clear to me that Congress intended to focus this Act on 
products to meet the threats of pandemic flu and bioterrorism. 
 While it is premature to discuss future hypothetical situations, I 
assure you we will strive to use this authority in a manner 
consistent with good policy and Congressional intent.  We are also 
pleased that Congress has acted to put in place a structure to ensure 
that Americans injured by a vaccine to treat or prevent pandemic 
flu are appropriately compensated.

6.) 
Question: 
	The legal liability exemption rider passed last year also created 
a compensation fund, but did not provide any money for it.  Does 
the Administration plan to ask for funds to assure that 
compensation funds would be available for those who might be 
injured and no longer have recourse to the courts to seek 
compensation for damages?  If there's no funding, or not enough 
funding, in the compensation fund, are the drug companies still 
exempted out from legal liability for injuring the public?

Answer:
	We are very pleased that Congress has provided limited 
liability protections in this area.  As you know, we have proposed a 
dramatic plan to ensure the nation's preparedness against a 
possible pandemic influenza that would have devastating effects.
	One of the key barriers to our preparedness is the need for a 
strong and robust domestic vaccine manufacturing infrastructure 
that has the capacity to quickly ramp up production to provide 
vaccines for 300 million Americans.  Since 1979, the number of 
U.S. licensed vaccine manufacturers has declined from 26 to 8.   
And for many vaccines, there is no longer a US-based 
manufacturer.
	One reason for this, along with an uncertain market and other 
factors, is the continuous threat of liability facing vaccine 
manufacturers.  As we developed our plans for pandemic flu, the 
vaccine industry made clear to us that there were three barriers that 
had to be addressed:
7.	The threat of unwarranted liability 
8.	The lack of a guaranteed purchaser 
9.	The importance of streamlining regulatory barriers. 

	With Congress' help, we are now able to address each of these 
barriers.  We are pleased that Congress has acted to provide limited 
liability protections for vaccine manufacturers and providers, with 
an exception to allow suits to proceed against companies who act 
with willful misconduct.  We believe this strikes an appropriate 
balance of removing the threat of frivolous and unwarranted tort 
suits, while still retaining appropriate access to court remedies.  
With respect to our pandemic influenza vaccine contracts, we do 
plan to make use of the authorities afforded under the PREP Act.  
	It seems clear to me that Congress intended to focus this Act on 
products to meet the threats of pandemic flu and bioterrorism. 
 While it is premature to discuss future hypothetical situations, I 
assure you we will strive to use this authority in a manner 
consistent with good policy and Congressional intent.  We are also 
pleased that Congress has acted to put in place a structure to ensure 
that Americans injured by a vaccine to treat or prevent pandemic 
flu are appropriately compensated.

7.)
Question: 
	If only some states agree to accept the federal subsidy of 25 
percent to stockpile antiviral drugs, how will the U.S. government 
ensure that all Americans are equally protected in a pandemic?  
Shouldn't this be a federal responsibility, given all the other 
responsibilities that are left to the states?

Answer:
	Preparedness is a responsibility of all levels of government, 
communities, organizations, families, and individuals.  The federal 
government is taking the primary lead in a variety of areas 
including expanding the nation's vaccine production capacity, 
procuring and stockpiling antiviral drugs, engaging in international 
and domestic surveillance and monitoring, and stockpiling non-
pharmacological interventions (masks, etc..).
	Specifically, for antiviral drugs, the federal government is 
purchasing the majority of these drugs without any state 
contribution.  For the remaining 31 million, HHS is providing 
equal opportunity and equal access for states to prepare. Whether 
states take advantage of this opportunity will depend on their 
assessment of their level of preparedness and readiness.
	Finally, it is important to note that Tamiflu does not equal 
preparedness; rather, it is only one of a number of tools that could 
help reduce the human health effects of a pandemic.

9.)
Question
	What is the status of contract negotiations for the antiviral 
stockpile?  By what date does the Administration anticipate 
meeting its objective of 81 million courses of antivirals?

Answer:
	HHS has ordered 26 million treatment courses of influenza 
antivirals.  By Decmber 31, 2006, 24 million courses will have 
been delivered to the Strategic National Stockpile.  By March 31, 
2007, an additional 2 million courses will have been delivered.  
The pandemic influenza supplemental appropriation in December 
2005 provided funding for the majority of these 26 million courses.
	The supplemental appropriation also provides funding with 
which HHS will establish arrangements for State purchases of 31 
million treatment courses.  Under these arrangements with antiviral 
manufacturers, States will pay 75 percent of the purchase price and 
the Federal government will contribute 25 percent.  HHS has asked 
States to notify us of their intent to purchase the subsidized 
antivirals.

HHS' purchase of 26 million courses and the additional State 
purchases of 31 million courses are factors that have led antiviral 
manufacturers to expand production capacity.
	HHS' purchase of another 24 million courses for the SNS 
depends on the appropriation of additional funding.  HHS 
anticipates that for an HHS purchase placed during the first quarter 
of Fiscal Year 2007, a substantial portion of the 24 million 
additional courses will be available for delivery by the end of 
2007.  HHS will purchase the balance of the antivirals for delivery 
in 2008.

11.)
Question
	Containing a pandemic is a global undertaking. Producing 
vaccine for all Americans is a worthy goal; but assuring that all 
people around the world can be vaccinated may provide additional 
protection from a pandemic's health, social, and economic impact.  
What would be the incremental cost were the U.S. to establish a 
larger goal (perhaps twice the planned 600 million doses) as part of 
a commitment by developed countries to contain a pandemic world 
wide?

Answer:
	The Administration has established a goal to enable the 
production of 600 million doses of vaccine within six months of 
the emergency of a pandemic influenza virus.  Funding requested 
by the Administration to date supports the expansion of 
manufacturing capacity to produce the necessary levels of 
vaccination for the United States.  At this time we are unable to 
estimate the cost of purchasing the vaccine toward the 600 million 
dose goal.  The Administration will work with the Congress to 
provide the resources necessary to support the purchase these 
vaccines. 
	We appreciate the funding Congress provided for the first year 
of our Pandemic Influenza Plan.  However, additional funding is 
needed in FY 2007 to build on the momentum we have achieved 
this year.  The FY 2007 budget includes a $2.3 billion allowance 
for the second year of our plan.  These funds will allow us to more 
fully engage vaccine manufacturers and move us closer to 
achieving our goal of purchasing enough antivirals to cover 25% of 
the population.
	We have met with industry about how we will manage the FY 
2006 funding, given that we did not receive the advanced 
appropriations for FY 2007 and FY 2008.  This funding and the 
liability protection provided by Congress have been an excellent 
first step in engaging industry to develop needed technologies, 
build domestic vaccine surge capacity, and increase domestic 
antiviral production capacity.  We look forward to working with 
you to achieve our goals in these areas.

12.)
Question
	Will the additional egg-based and the new cell-based 
production capacity that the federal government is funding be 
available for interpandemic production of flu vaccine?

Answer:
	Our plan includes a number of investments for improving 
vaccine production capacity.  These include expanding:
	Egg-based domestic vaccine production:  to acquire 20 
million additional pre-pandemic vaccine treatment courses and 
develop surge capacity to produce approximately 60 million 
courses within 6 months of a pandemic outbreak;
	Cell-based domestic vaccine production:  to develop surge 
capacity to produce approximately 240 million courses within 
6 months of pandemic outbreak by 2010; 
	The development of dose-stretching technologies to extend 
the vaccine supply; and
	The development of commercially-produced vaccine to 
protect against multiple strains.

	Our FY 2006 supplemental request included $6.7 billion over 
three years to meet our pandemic preparedness goals.  Congress 
provided funding for the first year of this plan.  The FY 2007 
budget seeks funding for the second year.


Office of Generic Drugs Questions 
	Generic drugs save consumers billions of dollars each year and 
usually cost 60 to 90 percent less than the brand-name version. It is 
my understanding that the office of generic drugs has a backlog of 
975 generic drug applications. 

Question: 
	Why with a clear demand for more low cost generic drugs, this 
record backlog and increased number of applications has the 
President's budget asked for essentially flat funding for the Office 
of Generic Drugs? 

Answer:
	FDA understands that Congress and the public are concerned 
about the high cost of prescription drug products.   Generic drugs 
play an important role in granting access to products that will 
benefit the health of consumers and the government.   Prompt 
approval of generic drug product applications, also known as 
abbreviated new drug applications (ANDA), is imperative to 
making generic products available to American consumers at the 
earliest possible date.  
	FDA believes that making improvements in the process for the 
review of generic drug applications offers the best promise for 
reducing ANDA review time.   With this goal in mind, in fiscal 
year (FY) 2005, FDA's Office of Generic Drugs (OGD), focused 
on streamlining efforts to improve the efficiency of the ANDA 
review process.   OGD added chemistry and bioequivalence review 
teams and has taken steps to decrease the likelihood that 
applications will face multiple review cycles.   OGD also instituted 
revisions to the review process such as early review of the drug 
master file as innovator patient and exclusivity periods come to an 
end, cluster reviews of multiple applications, and the early review 
of drug dissolution data.
	In FY 2006, we will build on these process improvements.   
We have begun a major initiative to implement Question-based 
Review for assessment of chemistry, manufacturing, and controls 
data in ANDAs.   This improvement builds on the Quality-by 
design and risk-based review initiatives of FDA's Center for Drug 
Evaluation and Research.   This mechanism of assessment is 
consistent with the International Conference on Harmonization 
Common Technical Document and will enhance the quality of 
evaluation, accelerate the approval of generic drug applications, 
and reduce the need for supplemental applications for 
manufacturing changes.  
	FDA's OGD will continue to institute efficiencies in the review 
process to accelerate the review and approval of ANDAs.  FDA 
also will continue to work very closely with the generic 
manufacturers and the generic drug trade association to educate the 
industry on how to submit applications that can be reviewed more 
efficiently and that take advantage of electronic efficiencies that 
speed application review.   We also will work with new foreign 
firms entering the generic drug industry.   The Agency recognizes 
that it will take time for these new firms to understand the 
requirements for generic drug products.   In the long term, 
however, these efforts should shorten overall approval time and 
increase the number of ANDAs approved during the first cycle of 
review.   In FY 2006, FDA plans to spend $62.8 million relating to 
generic drugs and, specifically, $28.3 million in OGD.   For FY 
2007, FDA has requested $64.6 million relating to generic drugs, 
$29 million specifically in OGD.

1.)
Question 
	Why at a time when we are trying to reduce costs in health 
care, are we slowing down the approval of generic drugs? 

Answer: 
	The approvals  have continued to increase annually; FY 2003 - 
284; FY 2004 - 320; FY 2005 - 361.  Further, the average review 
time for approval has declined from 22.3 months in 2000 to 19.5 
months in 2005 and the median review time has declined from 18.9 
months in 2000 to 16.3 months in 2005.

2.)
Question 
	What percent of the 975 generic drug applications that are in 
the backlog are for first in class generics? Backlog as of 1/1/06.

Answer:
	We currently do not distinguish "first generic" applications 
from other applications.  We are presently committed to our long 
standing first-in, first-reviewed policy to review applications in 
turn.  We also note that it is unclear as to what would constitute a 
"first in class generic" for this type of request.  For example:

1)	Is a "first in class generic" only the first ANDA received 
referencing a brand product?  
2)	Would "first in class generics" include all ANDAs received 
the first day that any ANDA was received for that reference 
product?
3)	Would a second generic for a particular reference become 
the "first in class generic" if there were deficiencies in the 
preceding "first" application?  
4)	Would only the first ANDA for any drug in a therapeutic 
class be the "first in class generic"?
5)  Or would an ANDA qualify as a "first in class generic" if it 
were the first ANDA for a particular strength or dosage form, 
say, even if other ANDAs had already been received for 
different strengths or dosage forms of the reference product? 

3.)
Question 
	How much additional funding would the office of generic 
drugs need to eliminate this backlog?  

Answer:  
	FDA's present backlog is approximately 1000 applications.  
FDA is currently receiving approximately 800 applications per 
year and approving about 500.  To reduce the current backlog by 
one third (about 330 applications) annually over three years, we 
would have to approve or tentatively approve 1130 applications 
per year.  That number includes all of the projected 800 
applications that we receive in the fiscal year plus 330 more to 
reduce the current backlog.  In order to approve or tentatively 
approve the approximately 90 applications per month, we would 
anticipate needing 70 FTEs for the first year and an additional 40 
FTEs in each of the subsequent years, both to avoid having the 
backlog redevelop and to address anticipated increases in the 
number of ANDAs submitted.  It would be necessary to have all of 
the FTEs on board at the beginning of each of the fiscal years.
	We should also point out that the backlog, as traditionally 
defined, includes ANDAs cycling through the Office of Generic 
Drugs.  For example, if an ANDA is submitted and reviewed, and 
there are significant problems with the ANDA, a deficiency letter 
is issued to the applicant.  The applicant's response, called an 
amendment, goes back into the review queue to await review.  In 
some cases, the applicant does not respond in a timely manner due 
to their own resource limitation and priorities.  These types of 
applications would also be considered to be part of the backlog.  
Because of this dependence on applicant responsiveness, it might 
not be possible to totally eliminate the backlog.

4.)
Question 
	On average how long does it take to conduct a first-in-class 
review of a generic drug? What is the longest amount of time it has 
ever taken? What is the shortest amount of time it has ever taken? 
(In both cases, please cite the name of the product and the date 
when it was approved.)

Answer: 
	As noted above, we do not differentiate between first-in-class 
ANDA reviews and other ANDA reviews.  Review times are 
highly dependant on the complexity of the product and the quality 
of the application and do not necessarily reflect the resources or 
efficiency of the Office of Generic Drugs.

5.)
Question 
	On average how long after a brand name loses its patent 
protection do generics enter the marketplace? What is the longest 
amount of time it has ever taken? What is the shortest amount of 
time it has ever taken? (In both cases, please cite the name of the 
product and the date when it was approved.)

Answer: 
	The length of time for a generic drug to enter the marketplace 
depends on a number of factors, such as the applicant's commercial 
interest in the product, the ability of a generic manufacturer to 
produce the product, whether an application is ready for approval 
after the patent protections ends and if there is any exclusivity for 
the product (such as pediatric exclusivity).  Even after approval, a 
firm may decide for its own business planning not to launch the 
product.  FDA does not keep records in such a way that we would 
be able to readily discern the longest or shortest amount of time it 
has taken for a generic to reach the market after the brand name 
has lost its patent protections.

6.)
Question 
	It is my understanding that first-in-class applications must wait 
approximately 450 days before its bioequivalence can be 
evaluated, approximately 360 days before it gets a clinical review 
and approximately 530 days before it is reviewed by a 
microbiologist. Are these time periods correct? These seem to be 
unacceptably long periods of time.  What are the agencies goals 
with regard to reducing these backlogs? How much additional 
funding and how many additional staff would you need in order to 
reduce the time to less than 120 days for each phase?   To less than 
90 days? 



Answer: 
	As discussed above, the Office of Generic Drugs does not 
distinguish between first-in-class applications and other types of 
applications.  It is true that the wait in the specific disciplines was 
at that level on the date the numbers were obtained.  However, the 
applications do not all wait for that length of time.  The chemistry 
reviews are the driving force of the review process and are 
reviewed according to the first-in, first-reviewed policy.  When an 
application has been found satisfactory from the chemistry point of 
view (assessment of no deficiencies has been endorsed at the team 
level), this information is communicated to the other appropriate 
review disciplines (e.g., bioequivalence, microbiology).  Those 
applications found acceptable from the chemistry standpoint are 
then moved to the top of the queue in the other disciplines so as not 
to hold up an action.  Clear, high quality, complete applications are 
generally reviewed more easily and efficiently.
	The overall goal for OGD is to meet the statutory timeframe 
and act on all applications within 180-days.  The staffing needed to 
meet this goal and to reduce the backlog is discussed in the 
response to question 3.  
	To be able to have all review disciplines begin to review 
applications at 120 days, it could require an additional 30% 
increase over the figure provided in Question 3 (91, 52, and 52 
FTEs in years 1, 2, and 3).  To begin review in less than 90 days 
could require a 50% increase (105, 60, and 50).  Since we have not 
contemplated these time frames, these estimates are highly 
speculative.

7.)
Question 
	On average how long does it take to approve a generic drug? 
How does this compare to the length of time that is needed to 
approve a brand name drug?

Answer:
	During 2005 the average approval time for a generic drug was 
19.5 months.  The average time for NDA priority approvals is 10.1 
months and the average time for other NDA approvals is 20.6 
months.  A comparison of these approval times would be 
misplaced because the goal dates for new drug applications are set 
by the user fee program and there are far fewer applications for 
new drug products.

8.)
Question 
	On average how much do drug companies make for each 
month that generics do not enter the market to compete with their 
brand name drug after it goes off patent?

Answer:
	One cannot derive a meaningful average because of the product 
-specific nature of the potential profit.  Further, we generally do 
not have access to such information.  

Substance Abuse Cuts:
	Drug abuse is a huge problem in my district. Educators and 
local police are struggling with how to prevent the problem from 
spinning out of control. This problem is not limited to my district. 
In fact, 23 million Americans struggling with severe substance 
abuse nationwide.

1.)
Question 
	Do you agree that prevention and treatment of substance abuse 
is critical to ensuring that people are healthy and productive 
members of our society? 
Answer: 
	At the heart of the Administration's success in reducing drug 
use is a change in perceptions about the acceptability of using 
illicit substances.  Education programs and outreach activities, 
backed up by scientific studies, have worked to spread the word 
that illicit substance use can be harmful to a person's health and 
well being, as well as a detriment to society as a whole.  Effective 
education and prevention programs that focus on risk reduction 
and increasing resilience affect the perception of harm associated 
with drugs.
	Despite all our attempts there are and will be some who will 
choose to use illicit drugs and many will become dependent.  For 
some, early interventions will help them redirect their lives.  For 
others, treatment will be necessary.  The Administration has 
adopted a public health understanding of drug use and addiction 
and believes that drug use is a treatable disease.  Like many other 
diseases, it is a relapsing condition that often requires not just the 
treatment itself but assistance in finding a job, a stable living 
environment and a social life that connects them to the society they 
are rejoining.   Fortunately there are community-based programs, 
including faith-based programs, that are available to help. 

2.)
Question 
	Then why does the President's budget cut $72 million from the 
Substance Abuse and Mental Health Services Administration 
include cuts to treatment and prevention of substance abuse? 
Shouldn't we be increasing our commitment to eradicating drug 
abuse? 

Answer: 
	While the $71.6 million reduction in the budget request for 
SAMHSA for FY 2007 compared to its FY 2006 appropriation 
reflects a decrease of 2.25 percent, the actual decrease in funding 
for substance abuse is $35.9 million from FY 2006, which 
represents a decline of 1.5%. Despite this decrease, all continuation 
grants will be funded under the budget request, and the 
Administration is requesting funding for new grants under the 
Access to Recovery program that will offer choice to individuals in 
need of treatment, expand the array of services to include recovery 
and support services, and expand the array of providers to include 
new community-based programs, including faith-based programs.  
The Administration remains committed to prevention and 
treatment.

3.)
Question 
	Please provide a list of all of the HHS programs that provide 
funds to communities to help them address local issues of drug 
abuse. Please include programs that fund education, prevention and 
treatment. 

Answer: 
	The Administration has requested $2.3 billion for Fiscal Year 
2007 to help prevent and treat drug use.  These funds will be 
available through the following programs:

Substance Abuse Prevention and Treatment Block Grant - FY 
2007 request $1,758,591,000.   This program distributes funds to 
States using a formula stipulated in statute to carry out substance 
abuse prevention and treatment activities in the State.  Though 
there are some requirements that States must meet, States have 
tremendous flexibility in how they use the funds to address their 
State need.  One requirement is that States must use at least 20 
percent of their allotment for primary prevention.  

Discretionary Grant Portfolio - FY 2007 request for prevention is 
$180.6 million and for treatment $375.4 million.  These funds are 
made available to public and non-profit private entities on a 
competitive basis to address drug use.  The following are the 
primary discretionary grant programs:

Access to Recovery - FY 2007 request $98 million.  These grants 
are made to States to implement a voucher program for treatment 
that offers patients a clear and independent choice on treatment; 
expands the array of services, placing emphasis on recovery 
services that have been sorely needed in the treatment system; and 
expand the array of providers by including new community-based 
and faith-based programs to help drug users to recover.  This 
program also brings accountability into the substance abuse 
treatment system.  Fourteen States and one American Indian Tribe 
received the first cohort of these grants in FY 2004.   FY 2007 
funds would be used for the next cohort of Access to Recovery 
grants, giving the same States and all the other States a chance to 
compete for funds.

Strategic Prevention Framework - FY 2007 request $95.4 million.    
These grants provide program support to States to implement a 
comprehensive substance abuse prevention system in the State that 
relies on community involvement.  At the end of FY 2006, 40 
States and American Indian tribes will have received a grant.

Drug Free Communities - FY 2007 request $80 million (funds for 
this program are appropriated to the Office of National Drug 
Control Policy).   The program is intended to reduce substance 
abuse among youth; help community coalitions strengthen 
collaboration; enhance intergovernmental collaboration, 
cooperation and coordination; enable communities to conduct data-
driven, research-based prevention planning, and provide 
communities with technical assistance, guidance, and financial 
support. 

Screening, Brief Interventions, Referral and Treatment - FY 2007 
request $31.2 million.   These grants expand and enhance State 
substance abuse treatment service systems by: 
?	expanding the State's continuum of care to include 
screening, brief intervention, referral,       and brief 
treatment (SBIRT) in general medical and other community 
settings;
?	supporting clinically appropriate treatment services for 
nondependent substance users;
?	improving linkages among community agencies performing 
SBIRT and specialist substance abuse treatment agencies; 
and 
?	identifying systems and policy changes to increase access 
to treatment in general and specialist settings.  

Targeted Capacity Expansion Grants - FY 2007 request $21 
million.   The purpose of these grants is to expand and/or enhance 
the community's ability to provide a comprehensive, integrated, 
and community-based response to a targeted, well-documented 
substance abuse treatment capacity problem and/or improve the 
quality and intensity of services. For example, a community might 
seek a Targeted Capacity Expansion grant to add state-of-the-art 
treatment approaches or new services to address emerging trends 
or unmet needs.

Grants to Benefit Homeless Individuals - FY 2007 request $34 
million   The purpose of these grants is to enable communities to 
expand and strengthen their treatment services for homeless 
individuals with substance abuse disorders, mental illness, or with 
co-occurring substance abuse disorders and mental illness. 
"Homeless" persons are those who lack a fixed, regular, adequate 
nighttime residence, including persons whose primary nighttime 
residence is: a supervised public or private shelter designed to 
provide temporary living accommodations; a time-limited/ 
nonpermanent transitional housing arrangement for individuals 
engaged in mental health and/or substance abuse treatment; or a 
public or private facility not designed for, or ordinarily used as, a 
regular sleeping accommodation. 

Children and Adolescent Programs  - FY 2007 request $20.6 
million.  Key activities in this category include: State Adolescent 
Substance Abuse Treatment Coordination grants, which help build 
capacity in States to provide effective, accessible, and affordable 
substance abuse treatment for youth and their families; Child and 
Adolescent Mental Health and Substance Abuse State 
Infrastructure grants, which focus on children, adolescents, and 
youth in transition to adulthood with serious emotional 
disturbance, substance abuse disorder, or co-occurring disorders, 
and their families; and Family Centered Substance Abuse 
Treatment Grants for Adolescents and their Families, which 
provide services to adolescents and their families/primary 
caregivers using previously proven effective practices that are 
family centered and increase the likelihood of successful treatment 
and reintegration of the adolescents into their communities 
following the period of formalized treatment..

Criminal Justice - FY 2007 request $24 million  There are several 
initiatives related to the criminal justice population.  The Family 
and Juvenile Treatment Drug Courts (Drug Courts) Grant Program 
provides funds to be used by treatment providers and the courts to 
provide alcohol and drug treatment, wrap-around services 
supporting substance abuse treatment, assessment, case 
management, and program coordination to those in need of 
treatment drug court services.  Grants are also available to expand 
and/or enhance substance abuse treatment and related reentry 
services in agencies that currently provide supervision of and 
services to sentenced juvenile and young adult offenders who are 
returning to the community from incarceration for 
criminal/juvenile offenses.  Because reentry transition must begin 
in the correctional or juvenile facility before release, funding may 
be used for limited activities in institutional correctional settings in 
addition to the expected community-based services.

Pregnant and Postpartum Women - FY 2007 request $3.9 million.   
The purpose of these grants is to expand the availability of 
comprehensive, high quality residential substance abuse treatment 
services for low-income women, age 18 and over, who are 
pregnant, postpartum (the period after childbirth up to12 months), 
or other parenting women, and their minor children, aged 17 and 
under, who have limited access to quality health services.

KI Questions

1.)
	The Public Health Security and Bioterrorism Preparedness and 
Response Act of 2002 contains an amendment, which I authored, 
that requires the President to make available Potassium Iodide, or 
KI, for populations within a 20 mile radius around a nuclear power 
plant.  According to the U.S. Food and Drug Administration, "KI 
is a safe and effective means by which to prevent radioiodine 
uptake by the thyroid gland, . and thereby obviate the risk of 
thyroid cancer in the event of a radiation emergency."  KI pills are 
available for approximately 18 cents a pill, making them a cheap 
and effective way to protect our citizens.



Question:
	The guidelines issued August 2005 by HHS for the distribution 
and stockpiling of KI appear hostile to the intention of this 
provision, and appear to endorse sheltering and evacuation 
INSTEAD of KI distribution - rather than embracing KI 
distribution as part of an emergency plan that includes sheltering 
and evacuation options.  Recent evacuations during the Katrina and 
Rita Hurricanes suggest that the Department's confidence that 
those living nearest to a nuclear facility can be easily evacuated is 
wildly optimistic.  Even if citizens are able to evacuate, during 
their evacuation they will likely be exposed to radioactive iodine 
and they can easily be protected from debilitating side effects such 
as thyroid cancer by taking KI.  Furthermore, the guidelines put the 
onus of responsibility for designing a plan for stockpiling and 
distribution of KI on State and local governments, rather than 
providing these governments with guidance on these procedures.  
Given that KI is cheap, easily administered, and highly effective, 
why does HHS continue to discount the benefits of KI and not 
provide clear guidelines for state and local governments to access, 
stockpile, and distribute KI?

Answer: 
	At the request of the President, HHS is working to make KI 
available up to 20 miles from a nuclear power plant.  The 
guidelines for requesting, stockpiling and distributing KI within 
the 11-20 mile radius were published in the Federal Register in 
August 2005.  We received comments on the guidelines from 
many sectors and have been working closely with other 
Departments and Agencies, as well as the States and the public to 
ensure that input is heard from all parties with concerns.  For states 
who choose to participate in the program, the guidelines propose a 
process similar to that used by the NRC to distribute KI in the 0 -
10 mile zone.  As I am sure you know, there is not universal 
agreement that KI should be provided beyond the 10 mile EPZ.  
The KI guidelines present a balance perspective that addresses 
important considerations such as pediatric populations, sheltering-
in-place, evacuation, special circumstances, current NRC 
protective action measures and more.  The goal of the guidelines is 
to allow states to consider what distribution mechanisms, 
stockpiling, and utilization options best support their current 
planning initiatives.  The guidelines have been submitted to OMB 
for review for compliance with all statutes, including the 
Paperwork Reduction Act, and budgetary considerations. HHS is 
eager to receive approval from OMB so we can publish the 
guidelines and move forward to provide KI to states that choose to 
apply for this program.
	HHS has also taken steps to procure and make available 
enough pediatric (liquid) KI to protect children within the full 20-
mile radius of a nuclear power plant in those states with approved 
KI distribution programs.  This liquid form of KI is easier to 
administer to small children than the previously available tablet 
form.  This acquisition was recommended by the interagency 
Weapons of Mass Destruction Medical Countermeasures 
Subcommittee, approved by the Secretaries of HHS and DHS and 
approved by the Office of Management and Budget (OMB), under 
delegated authority from the President. 

Stem Cell Question

1.)
Question
	Last year, when we urged the President to expand his policy on 
embryonic stem cell research and provide more funding for this 
exciting field of scientific research shows promise for helping treat 
and potentially cure juvenile diabetes, Alzheimer's and Parkinson's 
diseases, and spinal injuries, the Administration refused. However, 
the President said that he was very excited about the potential of 
research on stem cells that are found in umbilical cord blood. 
However, the President's budget eliminates the Cord Blood Stem 
Cell Bank program. Why has the President decided to eliminate 
this program? Has the President changed his mind about the 
potential of cord blood stem cells?

Answer:
	Because a balance of $18 million remains from appropriations 
made in FYs 2004, 2005, and 2006, the FY 2007 budget does not 
request funding for the National Cord Blood Stem Cell program.  
HRSA will use the funds remaining to implement the Cord Blood 
Stem Cell program during FY 2006 and FY 2007.  Specifically, in 
each of these fiscal years, approximately $9 million of the 
remaining balance will be used toward the implementation of the 
program and the collection of an estimated total 13,800 new cord 
blood units.  HRSA is committed to working with you as they 
begin to implement this important new program.

FDA Labeling 
	In the preamble of guidance that the FDA recently released on 
drug labeling, to the guidance included language that asserted that 
FDA decisions should preempt the states. I understand that this 
preamble does not have the force of law. But I want to make sure 
that I understand the Administration's position on federal 
preemption. Do you think that approval by the Food and Drug 
administration exempts the drug company from liability? If so, to 
what extent should companies be liable for the products they have 
on the market?

1.)
Question
	Do you believe that people who are injured by drugs that were 
approved by the Food and Drug Administration should not have 
any recourse?  Do you believe that they should not have any 
recourse through the state courts?

Answer:
	As you know, the President has called for common-sense 
medical litigation reform that would allow individuals harmed to 
receive fair compensation for their actual losses, but that would put 
a stop to the frivolous, out-of-control lawsuits that are driving up 
health care costs so dramatically.   By reining in non-economic 
damages, the legislation will improve access to care, by stabilizing 
the malpractice insurance market and encouraging doctors to keep 
practicing medicine, in particular treating high risk cases, in their 
communities. 

Hearing Loss: 
	In a response to my letter about portable music players and 
hearing loss to Dr. James Battey, the director of the National 
Institute on Deafness and Other Communication Disorders 
(NIDCD) on February 14, 2006, Dr. Battey wrote that significant 
progress has been made in hearing research. The first program that 
he identified as one of the promising areas of research was the 
Newborn Hearing Screening and Early Intervention. The Director 
stated, "Results from NIDCD-supported research show that if 
children are identified with a hearing impairment by 6 months of 
age and then received appropriate intervention, they have 
significantly better language development than children whose 
impairment was identified after 6 months of age. Without 
appropriate and timely identification and intervention, early 
childhood hearing impairment interferes with the development of 
oral/aural communication, impedes academic performance, and 
results in negative long term vocational consequences." 



Question
	Why when approximately 2-3 out of 1,000 children are born 
each day who are deaf or who have a hearing loss significant 
enough to potentially affect their speech, language and cognitive 
development and NIH identified the importance of newborn 
screening does the President's FY07 budget eliminate the 
Universal Newborn Hearing Screening/Trauma program?

Answer:
	The Universal Newborn Hearing Screening program has 
increased the percentage of newborns screened for hearing loss 
prior to hospital discharge.  In FY 2004, 93.2 percent of newborns 
were screened for hearing loss prior to hospital discharge, 
exceeding the yearly target.  The FY 2007 request continues the 
FY 2006 President's Budget policy and provides no funding for 
this program.  The more flexible MCH Block Grant may address 
activities under this authority.

Ryan White: 
	According to the HHS Budget in Brief, the President's budget 
request increases Ryan White funding by $95 million dollars and 
directs $70 million to "address the on-going problem of State 
waiting lists and provide care and life-saving medications to those 
newly diagnosed as a result of increased testing efforts" and directs 
the other $25 million to expand outreach efforts by providing new 
HIV community action grants to intermediaries including faith and 
community based organization, and to provide technical assistance 
and sub-awards to grassroots organizations. 

1.)
Question
	How does the President intend to distribute the $70 million to 
the states?

Answer: 
	The funding mechanism is under discussion within the 
Department.

2.)
Question
	Will it go to the ADAP program or through the Title II base 
grants?

Answer: 
	To allow maximum flexibility, the $70 million will be 
distributed to States.  The States will have the option to use these 
funds to purchase medications through the State ADAP and to 
expand services for people living with HIV disease.

3.)
Question
	Will the $25 million go to the Title II or IV programs or will it 
be distributed through another program?

Answer: 
	The President proposed $25 million in the FY 2007 budget is 
to expand outreach by providing as many as 25 HIV community 
action grants to community and faith-based organizations to 
provide technical assistance and sub-awards to grassroots 
organizations.  



Drug Safety Questions

1.)
Question:
	Adderall was approved in 1960, why did it take so long for the 
FDA to learn about the full range of potential risks associated with 
this product? 

Answer: 
	Twelve reports of sudden death in children were reported to 
FDA between 1999 and 2003.  The number of deaths reported was 
less than the number of sudden deaths that would be expected to 
occur in this population without treatment. For this reason, the 
FDA decided not to take any further regulatory action at that time.  
However, upon review of individual cases, we noted that some of 
these deaths occurred in patients with underlying heart defects.  
Although this is by no means proof that such patients are at 
increased risk from this drug, because these defects themselves 
place patients at increased risk of sudden death, we, nevertheless, 
decided to change the labeling for Adderall XR in August 2004 to 
include a warning that these patients should ordinarily not be 
treated with Adderall products. 
	In February 2005, FDA issued a Public Health Advisory and 
information sheets on its website at http://www.fda.gov to provide 
up-to-date information about Adderall's safety profile. 

2.)
Question:
	How long after the FDA became aware of the safety issues 
associated with Adderall did it start an investigation?

Answer: 
	In February 2005, when FDA became aware of Health 
Canada's decision to suspend sales of Adderall XR, but not revoke 
the approval in Canada, of Adderall XR as a treatment for 
Attention Deficit and Hyperactivity Disorder (ADHD), FDA 
reviewed the action it had already taken 6 months previously.  
Once FDA learned that Health Canada's action was based on 
precisely the same information upon which FDA had already 
acted, it concluded that no additional labeling changes were 
needed, but did decide to issue a PHA to inform the public about 
Health Canada's action and to explain that we had already acted 
and felt that Adderall and Adderall XR should remain on the 
market.  It is noteworthy that Health Canada, upon receiving 
advice from its own advisory group 6 months later, decided to 
return Adderall XR to the Canadian market.  
	As with any drug, FDA will continue to carefully assess any 
new data that emerges which significantly affects the safety profile 
of this drug and will take immediate, appropriate action to promote 
the public health and make the public aware of its findings.

3.)
Question
	Despite the many drug safety issues that have been raised over 
the past couple of years, the Office of Drug Safety only received a 
$4 million dollar increase. How much of the ODS funding will go 
to:
a.	studying safety questions that have been raised 
about specific drugs?
b.	updating the AERS system? 
c.	Setting up a program to collaborate with CMS?
d.	Looking for concerning trends within 
epidemiological data?
e.	the drug safety oversight board?
f.	the Sentinel System?
Answer: 
	The 07 Drug Safety increase will be applied to the CDER Drug 
Safety Program, not specifically to the Office of Drug Safety.  
CDER's portion of the 07 Drug Safety Increase totals $3.564 
million.

a.)  $0.425 million
b.)  $2.0 million
c.)  $0.250 million  - Please note that Line c is redundant to 
Line f.  According to the FY 07 Congressional Justification 
Drug Safety Increase description, "collaboration with CMS 
will be known as the Sentinel System".
d.)  $0.889 million
e.)  We do not anticipate funding the costs of operating our 
drug safety oversight board from this funding increase.
f.)  Please see note under Line c.





The Honorable Edolphus "Ed" Towns

1.)
Question:
	Secretary Leavitt, beginning in 2007 physicians will experience 
a significant pay decrease totaling $176.9 billion over the next 7 
years.  This decline occurs in spite of the fact that physicians are 
taking measures to offset these cuts by providing increased 
services.
	MedPac recommended giving physicians an update to address 
the significant Medicare payment cuts that will be made to 
physician payments over the next 10 years beginning in 2007.  
However, the President's budget does not adequately address the 
situation.
	Additionally, Dr. Unterrick, a physician from my district 
strongly expressed the concern the physicians in my district have 
about the cuts to physician payments and their impact on the 
delivery of health care on my "News and Views" Television 
Program. 
	What measures are you taking to ensure that physicians who 
strongly desire to continue treating their Medicare patients will be 
able to do so in lieu of escalating health care costs and declining 
physician payments?

Answer:
	The current physician payment system focuses on payment for 
individual services, but does not provide incentives for physicians 
to take into account all of the services furnished to beneficiaries to 
treat an episode of care, or furnished during a period of time to 
treat chronic disease.  This often has the effect of directing more 
resources to delivering care that is not of the highest quality (for 
example, duplicative tests and services, as well as hospital 
admissions or visits to treat potentially avoidable complications).  
Conversely, providers who have good ideas and want to take 
action to improve quality of care find that Medicare's physician 
payment system does not provide them with the resources or the 
flexibility needed to do so.  As a result, providers are unable to 
invest in activities that, properly implemented, have the potential 
to improve quality and avoid unnecessary medical costs.
	Linking a portion of Medicare payments to valid measures of 
quality and effective use of resources would give providers more 
direct incentives and financial support to implement the innovative 
ideas and approaches that result in improvements in the value of 
care that our beneficiaries receive.  Provider payment reforms 
should encourage quality and efficiency, and discourage increased 
complications and costs.
	The physician community is developing quality measures that 
would cover a broad group of physician specialties and a wide 
range of clinical areas for physicians to begin reporting in 2007.  
We are working closely with the physician community to develop 
these evidence-based quality measures.  During 2006, we are 
conducting a physician voluntary reporting program to allow 
physicians to report some existing quality measures and to allow us 
to test administrative mechanisms for reporting such measures.  
We are also examining the administrative issues that would be 
involved with alternative mechanisms to reward physicians who 
report information on quality measures.   

2.)
Question:
	Secretary Leavitt, I serve a very diverse congressional district, 
which is being devastated by the impact of HIV/AIDS.  
Fortunately, there are specialty pharmacies in the 10th 
congressional district of Brooklyn that are able to cater to those 
who are living with HIV/AIDS.

	The President's FY 2007 Budget proposes states to exhaust all 
other third party sources of payments before paying Medicaid 
claims.  Presently, states are able to pay claims as received and 
then later bill other sources of coverage.  I'm concerned that the 
proposed policy will result in payment delays for pharmacies, and 
may result in reduced willingness of pharmacies to participate in 
the Medicaid program, thus reducing access to all beneficiaries and 
especially those in my district.
	What measures are you taking to address this potential 
situation since it could prove fatal to many Brooklynites?

Answer: 
	Under current law, Medicaid agencies generally reject medical 
claims whenever there is another third party that is legally liable to 
pay the claims. The claims are returned to the provider instructing 
them to bill the third party. This is referred to as "cost avoidance." 
There are some exceptions to this rule. Exceptions to this rule are 
found in sections 1902(a)(25)(E) and (F) of the Social Security 
Act.
	The FY 2007 President's Budget proposes administrative 
actions to discontinue all waivers of the cost avoidance standard 
for pharmacy claims.  Without such waivers, states would be 
required to deny any pharmacy claim for which there is a liable 
third party payer.  States will no longer have the option of "pay and 
chase," or paying the claim and pursuing payment from a third 
party.
