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




 
                PRESIDENT'S FISCAL YEAR 2007 BUDGET FOR
                   THE U.S. DEPARTMENT OF HEALTH AND
                             HUMAN SERVICES

=======================================================================

                                HEARING

                               before the

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

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 8, 2006

                               __________

                           Serial No. 109-55

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania           WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona               JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois               XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri           LLOYD DOGGETT, Texas
RON LEWIS, Kentucky                  EARL POMEROY, North Dakota
MARK FOLEY, Florida                  STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas                   MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York         JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin                 RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
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current publication process and should diminish as the process is 
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                            C O N T E N T S

                               __________

                                                                   Page

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

                                WITNESS

U.S. Department of Health and Human Services, Hon. Michael O. 
  Leavitt, Secretary.............................................     7

                       SUBMISSIONS FOR THE RECORD

AFGE Social Security Administration, Witold Skwierczynski, letter    82
Aponte, Kim, Aurora, IL, letter..................................    83


                PRESIDENT'S FISCAL YEAR 2007 BUDGET FOR
                   THE U.S. DEPARTMENT OF HEALTH AND
                             HUMAN SERVICES

                              ----------                              


                      WEDNESDAY, FEBRUARY 8, 2006

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:12 a.m., in 
room 1100, Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee), presiding.
    [The advisory and revised advisory announcing the hearing 
follow:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 01, 2006
FC-18

                      Thomas Announces Hearing on

              President's Fiscal Year 2007 Budget for the

              U.S. Department of Health and Human Services

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
the President's Fiscal Year 2007 Budget for the U.S. Department of 
Health and Human Services. The hearing will take place on Wednesday, 
February 8, 2006, in the main Committee hearing room, 1100 Longworth 
House Office Building, beginning at 10:30 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from the Honorable Michael Leavitt, 
Secretary, U.S. Department of Health and Human Services. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    On January 31, 2006, President George W. Bush discussed several 
legislative initiatives when he delivered his State of the Union 
Address. The President will provide further details on these proposals 
on February 6, 2006, in his fiscal year 2007 budget, as submitted to 
the Congress. The budget for the U.S. Department of Health and Human 
Services includes important benefits and services such as those 
provided under Medicare, welfare (Temporary Assistance for Needy 
Families), child care, child protection, child support and other social 
services programs.
      
    In announcing the hearing, Chairman Thomas stated, ``The President 
outlined several health and social service initiatives in his State of 
the Union Address that are under the jurisdiction of the Committee on 
Ways and Means. I look forward to hearing more about these proposals 
from Secretary Leavitt.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is to review the President's Fiscal Year 
2007 Budget proposal for the U.S. Department of Health and Human 
Services.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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FORMATTING REQUIREMENTS:

      
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noted above.

                                 

                       * * * CHANGE IN TIME * * *

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 06, 2006
No. FC-18 Revised

                     Change in Time for Hearing on

              President's Fiscal Year 2007 Budget for the

              U.S. Department of Health and Human Services

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee hearing on the 
President's Fiscal Year 2007 Budget for the U.S. Department of Health 
and Human Services, previously scheduled for 10:30 a.m. on Wednesday, 
February 8, 2006, in the main Committee hearing room, 1100 Longworth 
House Office Building, will now be held at 10:00 a.m.
      
    All other details for the hearing remain the same. (See Full 
Committee Advisory No. FC-18, dated February 1, 2006).

                                 

    Chairman THOMAS. At the outset, the Chair wants to indicate 
to Members that there is a minor bit of a static problem in the 
Committee room, and the Chair would suggest that as Members sit 
at their seats, they might want to touch the metal knobs on 
their drawers prior to touching the microphones, because there 
is a chance that the microphones might short out. I will tell 
the gentleman from California, you can touch your mic any time 
you want.
    [Laughter.]
    Chairman THOMAS. This is the new and exciting technological 
age.
    Good morning. This was scheduled to be the second of a 
series of hearings on the President's budget. We were scheduled 
yesterday to hear from Secretary of the Treasury, Secretary 
Snow. Pretty obviously, the funeral of Coretta Scott King, 
quite rightly, took precedent over that. We believe the 
Secretary will be available to us on the February the 15th, and 
so we are in the process of rescheduling that particular 
hearing.
    This then would have been the second in a series of 
hearings, but is therefore the first, on the President's 2007 
budget proposal, and the Committee welcomes the still 
relatively new Secretary of the U.S. Department of Health and 
Human Services (HHS), the Honorable Michael Leavitt. Thank you 
and we look forward to your testimony.
    In the world of health care, the Centers for Medicare and 
Medicaid Services (CMS) announced significant news last week. 
Due to strong and competitive forces, the average premiums paid 
by Medicare beneficiaries for the new prescription drug benefit 
are down 30 percent. They are estimated to be reduced from $37 
a month to $25. This comes on top of the news that 21 million 
Medicare beneficiaries are now receiving their prescription 
drugs through Medicare.
    The Chair believes that by most reasonable standards, 
implementation of this program has been successful. The Chair 
would refer to a quote. This one actually refers to hospitals. 
``Hospital spokesmen say the reimbursement formula does not 
give them enough return, and that the future growth, and in 
some cases even survival of their institutions may be 
jeopardized.'' This comes from a New York Times article dated 
1967. I think you will find, if you go back and look at the 
press articles in 1966 and 1967, focusing on the start-up of 
Medicare itself, there were always some difficulties in getting 
major programs under way, and the Medicare Modernization Act 
(P.L. 108-173), which included the new drug program, of course, 
is the largest expansion of the Medicare Program since its 
inception.
    So, we look forward to hearing from you, Mr. Secretary, 
about the progress in rolling out this program.
    The President's budget includes a number of proposals to 
help reduce the growth in Medicare. These proposals support our 
commitment to ensure that providers are paid accurately to 
secure the best deal for taxpayers and seniors. I am pleased 
that the Administration relied heavily on the recommendations 
offered by the Medicare Payment Advisory Commission (MedPAC).
    The Chair is also concerned about the accuracy of the 
current hospital diagnosis-related group (DRG) payment system. 
Last year, HHS acted on MedPAC's recommendations to base 
payments on the health of the patient, but only for some 
cardiac conditions in which there was an argument that doctors 
were performing procedures based upon the payment structure, 
rather than in the best judgment of a medical decision for the 
patient. As a result, the overall payment system has now been 
made more accurate in the area of decisions on heart 
operations, but remains highly inaccurate in other areas. I 
strongly encourage you, Mr. Secretary, to build on the progress 
made last year, and continue to apply a more sophisticated 
payment adjustment structure where appropriate, so that 
payments can reflect the acuity and severity of the decision 
made in the patient's health.
    We are going to look at a number of cost-saving provisions. 
There is going to be a lot of discussion. I do want to indicate 
that later today the President is expected to sign the Deficit 
Reduction Act (DRA) (P.L. 109-171). It reauthorizes the 
Nation's welfare programs, makes a number of provisions to help 
more low-income parents work and support the families. I assume 
there will be some questions directed to you, Mr. Secretary, on 
that program as well.
    I am very interested in hearing from you, but prior to 
that, I would recognize the gentleman from New York for any 
remarks he may wish to make.
    Mr. RANGEL. Thank you. I welcome the Secretary and his 
father here, and want his father to know that all remarks made 
at you are not personal, and that certainly we think you are a 
very courageous man to assume this great responsibility for 
your country.
    Most of our questions on this side will be to verify 
whether or not your office and this Administration truly 
believe that the government is incompetent in providing social 
services to American citizens, and whether they believe that 
the private sector, with its competition, can do a better job. 
More specifically, we would like to know, where is Social 
Security? Is it different from the last proposal? Are the 
private accounts still on the table? Is it going to cost a 
trillion dollars or more? We would like to know more about that 
as we move forward with this year's work.
    Health Savings Accounts (HSAs), is this another example 
where we want to get rid of entitlements, get rid of Medicare, 
and allow individuals to be more in charge of making the 
decisions and bolstering up the private sector to assume the 
responsibility that Medicare has. We want to know whether this 
philosophy has folded over into the way we have provided funds 
for the private sector and prescription drugs, and whether or 
not you think that the HSAs would have any better way of 
distributing health care as we found the pharmaceuticals and 
the Health Management Organizations (HMOs) in dealing with 
prescription drugs.
    We want to know why you are cutting money out of the budget 
for the block grants in social services, which once again, as 
the cuts that we have on the floor, will be hitting those 
families that have the aged, the disabled, the children, and 
how do you think that is going to help us?
    I hope that in your opening remarks that you could let us 
know philosophically where the Administration is going because 
people are suffering, and if we are going to depend on the 
private sector, as opposed to the employers, for health care, 
or the Medicare system, then we will know what our work is cut 
out for. I would like to yield whatever time is left to the 
Ranking Member of the Subcommittee on Health, Peter Stark.
    Mr. STARK. Thank you, Mr. Rangel, and welcome, Secretary 
Leavitt. In this budget and in the Administration's strategy, I 
have yet to find a Republican who would deny that the overall 
goal of the Republicans is to privatize not only Social 
Security but Medicare, and do away with Medicaid, and turn the 
health care system, Medicare in particular, into a voucher 
system, which would possibly protect low income, but certainly 
do nothing but make it more difficult, more costly, and less 
opportune for senior citizens to get the medical care that they 
deserve, and which they now get quite adequately under the fee-
for-service part of Medicare.
    I want to look at Part D as the poster child of what 
happens when people get obsessed with the free market. 
Particularly, I am impressed that the people who talk most 
loudly about the free market have really never held a job in 
private enterprise or know much about the free market, but they 
can spout about it a good bit.
    We talk about the number of people in Part D, and we know--
and by the way, I would not vote to repeal it. It was a lousy 
bill. I voted against it, but it is there, and I believe we 
should fix it. We have written to you, written to the Chairman, 
asking for oversight and an opportunity to work together to 
make it a Medicare benefit and not a gift to the private 
prescription drug industry. Twenty million people who signed up 
already had prescription coverage, and it was a lot better than 
what they got in the new plan. We are hearing reports now of 
the benefit manager, after people have signed up, in the first 
month of the operation of the plan, dropping drugs and raising 
prices on people who can't change. So, they are in, and all of 
a sudden they either have a higher cost for drugs they need or 
their drugs have disappeared. I think that we are treating the 
most vulnerable, sick, poor people in this country in an 
obscene manner, and those are the dual-eligibles who are being 
harmed the most.
    I hope you can explain to us why privatization for these 
programs, which have heretofore been entitlements, will be 
better for the American public.
    Chairman THOMAS. Thank the gentleman. Time has expired. For 
the record, the gentleman from New York mentioned that 
Secretary Leavitt's father, Dixie Leavitt, is here. The Chair 
also wants to indicate that his brother, Mark Leavitt, and his 
cousins Wade and Rod Leavitt are here as well.
    Mr. RANGEL. It is not going to be that rough. He has the 
whole family?
    [Laughter.]
    Chairman THOMAS. They believe in strength in numbers where 
they come from.
    [Laughter.]
    Chairman THOMAS. He has quantity and quality going for him. 
Let me say that any Member who has a written statement who 
wishes to place it in the record may do so without objection. 
Mr. Secretary, your written testimony will be made a part of 
the record, and you can address us during your time as you see 
fit. The time is yours.

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

    Secretary LEAVITT. Thank you, Mr. Chairman. I must say that 
I heard it was bring your father to work day.
    [Laughter.]
    Secretary LEAVITT. Hence, I brought my father, and I am 
delighted he is here, as well as my brother----
    Chairman THOMAS. Let me tell you, speaking for all of us 
who are no longer able to do that, I think it is a wonderful 
thing.
    Secretary LEAVITT. Thank you. I am pleased to have him 
here. The budget that the President has put forward is nearly 
$700 billion. It is a significant part of the effort of the 
U.S. government to meet the needs of our taxpayers.
    Roughly, broken into two categories you are well familiar 
with, one is the entitlement programs and the second would be 
the discretionary budget. The entitlement programs, over which 
this Committee has broad jurisdiction, I am sure will be the 
subject of much of our discussion. With respect to the 
discretionary budget, it makes up about $75.5 billion in the 
2006 budget. We are in a period of time where deficit reduction 
is necessary, and you will see that budget that the President 
has put forward contains a $1-1/2 billion reduction of the 
discretionary budget.
    I would like to spend just a few minutes, Mr. Chairman, in 
talking about the way I went about putting the budget together 
within the Department. I think rather than try to take a 
handful of specifics, the philosophy, as Mr. Rangel suggested, 
might be helpful in terms of understanding. As I respond to 
your questions today, I will try to refer back to the 
underpinnings of how I went about it.
    Let me first acknowledge I was Governor for 11 years of my 
State, and I put together 11 balanced budgets. I know many of 
those years were good years where we had growth in revenues; 
other years were years where we did not. I came to understand 
fully that reducing deficits is hard work, and it is difficult 
because almost every program that finds its way into a budget 
is there for a good reason, and there are people who feel 
passionately about it. Consequently, difficult decisions have 
to be made. I want to acknowledge that the decisions I have 
made will not be the same that some on the Committee would 
make, and that is why I am here, to let you know basically what 
decisions were made in the proposal and why they were made that 
way, and, obviously, you will then have an opportunity to 
exercise your judgment as well.
    The instructions I gave to those who assemble budgets in 
HHS were fairly straightforward I believe. The first was to 
tell them there are some new initiatives that need to be 
undertaken that will have a profound impact on the future of 
the Department and our citizens. For example, Health 
Information Technology is an example of such a new initiative. 
The new HIV/AIDS Initiative that you will see in the budget is 
an example.
    There were some commitments that the President has made 
that need to be filled. An example of that would be community 
health centers, expanding those dramatically, a commitment that 
we have to keep. The commitment that was made on access to 
recovery and faith-based initiatives. There are some threats 
that we have responsibility for--bioterrorism and the concern 
about pandemics--they are relatively growing or new threats 
that we have been responding to.
    Then there are some high demand and highly effective 
programs, that despite the fact that we are in the process of 
deficit reduction, I felt, and the President felt, needed to be 
funded and either new or in greater terms that we needed to set 
aside.
    So, I asked my colleagues to go through a series of 
principles, and hold the existing budgets up against them. One, 
I needed to find new money for those particular items, and I 
said, let's find if there are any one-time funds that we could 
apply that are not being repeated. Let's look for programs 
whose purposes have been addressed already, either in some 
other place or have concluded. Let's look for funds that are 
carrying over that haven't been used, and apply those against 
those priorities, or let's look for programs where we offered a 
cut last year, and they weren't enacted. If we still feel the 
same way, let's put them forward. So, that is essentially how 
we went about developing money for the new initiatives.
    I then asked them to begin looking at all of the 
investments across the entire Department. I believe there are a 
set of principles that can be put forward, and I asked them to 
compare each expenditure against those principles, and I would 
like to just enumerate those quickly for you.
    First is the need for our investments to be targeted. I 
asked them to look for programs where there was good done on a 
general basis, but where the more specific need was apparent. 
Therefore, let's begin to target. In some cases you will see 
examples of where we have funded fewer people, but the ones we 
have funded have been funded better, so target expenditures.
    The second would be looking for prevention programs. If we 
can prevent illness, we ought to prevent it instead of just 
paying for the treatment, so you will see an emphasis placed on 
prevention programs.
    You will also see, in a budget that is reflecting deficit 
reduction, I want to provide services and not always just build 
infrastructure. Infrastructure is important, but in a time of 
declining revenues, or at a time when we have fewer revenues, I 
want to make sure that people are served and not just bolster 
the infrastructure all the time.
    Fourth, I do believe that market-based choices or systems 
that allow markets to drive various investments to their most 
logical and their most efficient form are better than 
circumstances where we have ``Government does it all'' 
philosophy.
    Fifth, individual choice. I think if there are places where 
individuals can choose. Again, I think that is better than just 
the government always making choices.
    Sixth, I would point to the need for new research to be 
done, and if there are areas where research has basically 
worked its way through, then we need to discontinue our funding 
in that area and begin to find the new technologies.
    I have also asked them to look across the entire Department 
and to avoid siloed investments. Look for ways in which we can 
leverage investment across the entire Department. You will also 
find a very high standard was placed on looking for performance 
measures. If we can't measure it, I am suspicious of that. I 
want to be able to see how investments we have made are making 
a positive impact. If I can't measure it, it is a candidate for 
reduction.
    Mr. Chairman, that is an introduction to the principles, 
and I am happy to respond to questions from the Committee.

    [The prepared statement of Secretary Leavitt follows:]

    Statement of The Honorable Michael O. Leavitt, Secretary, U.S. 
                Department of Health and Human Services

    Good morning, Mr. Chairman, Representative Rangel, 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 nearly $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 provides more than $350 million for 
important ongoing 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.
    The budget maintains the President's commitment to the doubling of 
NIH, and includes new funding at NIH for important cross-cutting 
initiatives that will move us forward in our battle to treat and 
prevent disease--such as an additional $49 million for the Genes, 
Environment and Health Initiative and an additional $113 million for 
the Director's Roadmap. In addition, it contains an additional $10 
million at the Food and Drug Administration to lead the way forward in 
the area of personalized medicine.
    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.
    Our work to modernize Medicare is not done. Rapid growth in 
Medicare spending over the long-term will place a substantial burden on 
future budgets and the economy. The President's FY 2007 Budget includes 
a package of proposals that will save $36 billion over 5 years and 
continue Medicare's steady course toward financial security, higher 
quality, and greater efficiency.
    Along with the sustainability of Medicaid, our budget takes steps 
to improve the long-term fiscal health of Medicare. We are proposing a 
number of adjustments that will produce a substantial savings.
    The bulk of these Medicare savings will come from proposals to 
adjust yearly payment updates for providers in an effort to recognize 
and encourage greater productivity. These proposals are consistent with 
the most recent recommendations of the Medicare Payment Advisory 
Commission. To ensure more appropriate Medicare payments, the Budget 
proposes changes to wheelchair and oxygen reimbursement, phase-out of 
bad debt payments, enhancing Medicare Secondary Payer provisions, and 
expanding competitive bidding to laboratory services. Building on 
initial steps in the Medicare Modernization Act, the Budget proposes to 
broaden the application of reduced premium subsidies for higher income 
beneficiaries. Finally, the President's Budget proposes to strengthen 
the Medicare Modernization Act provision that requires Trustees to 
issue a warning if the share of Medicare funded by general revenue 
exceeds 45 percent. The Budget would add a failsafe mechanism to 
protect Medicare's finances in the event that action is not taken to 
address the Trustees' warning. If legislation to address the Trustees' 
warning is not enacted, the Budget proposes to require automatic 
across-the-board cuts in Medicare payments. The Administration's 
proposal would ensure that action is taken to improve Medicare's 
sustainability.
    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 THOMAS. Thank you very much, Mr. Secretary. I know 
that today's hearing is designed to focus on the President's 
Fiscal Year 2007 budget, so we are talking about today and 
principally tomorrow in the area of HHS. I do want to 
underscore, so if someone wonders why we aren't going to spend 
a lot of time on Social Security, notwithstanding the initial 
statement, Social Security was made independent from HHS in 
1995, and that will be the subject of other hearings that will 
come before us.
    So, mindful of the fact that we are supposed to look at 
today and tomorrow, I think, nevertheless, a brief comment from 
you, Mr. Secretary, about yesterday. Last year we went through 
some very unprecedented natural occurrences. It was kind of 
headlined by Katrina, but clearly, it was hurricanes in the 
plural that we had to deal with, and your responsibilities were 
important in making sure that people were comforted. I will 
provide you with a brief period of time if you so choose to 
make some comments about that prior to our examining the 2007 
budget, which is the purpose of the hearing. Mr. Secretary?
    Secretary LEAVITT. Mr. Chairman, that period of time was a 
profound moment in human service history. It was a point in 
time where literally millions of our citizens were displaced 
and found themselves in need of human services in a way that 
most of them had never experienced and never thought they would 
experience.
    I spent a good share of the month of September and October 
traveling to shelters where people were making temporary homes, 
where we were delivering health and human services to literally 
hundreds of thousands of people, including medical care, 
including all of the array of human services that our society 
has established to create that kind of safety net for people in 
need.
    One of the things I believe Hurricane Katrina taught us is 
that once the disaster has concluded, that helping people put 
their lives back together is a very important part of recovery. 
The Congress saw fit to allocate $550 million to go to the 
Social Services Block Grant, for example, to the affected 
States. I am happy to announce today that we have allocated the 
funds to the States, and that they will be going to the States 
immediately. We have allocated it based on a percentage of the 
Federal Emergency Management Agency (FEMA) registrants for each 
of the three hurricanes, Katrina, Rita and Wilma.
    In recognition of the severity of Hurricane Katrina, 
registrants from that hurricane are double weighted under the 
formula. Each Katrina registrant is counted twice, whereas each 
registrant from Rita and Wilma will be counted once. The 
allocation formula also weighs total FEMA registrants by the 
percentage of individuals in poverty in each State. That is to 
say, that the total number of FEMA registrants from 
Mississippi, for example, is multiplied by the percentage of 
individuals in poverty in Mississippi.
    The Department believes that the allocation formula directs 
funds to the States in a manner that is effective, and that it 
realizes the President's commitment to ensure that no State 
will be unfairly disadvantaged for providing aid and for 
providing services to affected individuals.
    I would like to acknowledge as well that in the course of 
all of the recovery, little note came about the fact that the 
States provided benefits to nearly 500,000 people. It was 
almost unspoken. It just happened. They stepped up. They 
provided the benefits, and have taken care of people in a time 
of need, in many cases people who were not from their States. 
They did it without hesitation.
    Chairman THOMAS. Thank you very much. Earlier, the Chair 
mentioned briefly a quote, and I have a series of quotes which 
I think are going to be useful as we talk about the phasing in 
of the single biggest expansion of the program in its history. 
I have a quote from the Fresno Bee, July 1, 1966, and it is an 
editorial saying, ``Medicare is here and there will be 
problems, but society has determined it is needed in the name 
of compassion. It is this spirit which must guide all who have 
anything to do with putting it in practice.''
    More to the point, the Waltham, Massachusetts News Tribune, 
on July 2nd, 1966 said, ``The most persistent problems occurred 
when hospitals ran out of government forms or patients forgot 
to bring their Medicare identification card. 'If we are by the 
worst of it, I think this thing is going to work. If Medicare 
grows over the next 6 to 10 months, we'll be able to grow with 
it and handle any problems that come up,' a hospital spokesman 
indicated.''
    I notice you have charts showing clearly that from the 
beginning of January until now, in anticipating the continued 
ability to deal with the unprecedented numbers since the 
inception of the program. The Chair looks forward to the 
Secretary making those presentations when such questions are 
asked.
    The Chair sees that his time is up, and the Chair will hold 
all Members to 5 minutes, including himself, and the Chair 
recognizes the gentleman from New York for any questions he may 
have.
    Mr. RANGEL. Thank you, Mr. Chairman, and thank you again, 
Mr. Secretary.
    In getting back to the philosophical deal of the 
Administration, and it is your position, as a trustee on the 
Social Security Trust Fund, do you believe the time has come 
where the Social Security system should shift more 
responsibility of retirement to the recipient, and that the 
private accounts would be a better way to do this rather than 
the Social Security as we see it today?
    Secretary LEAVITT. Mr. Rangel, as the Chair indicated, 
while I am a trustee--and I will answer in that capacity--it is 
not a direct responsibility of the Secretary of Health and 
Human Services beyond its trusteeship, but I take the 
responsibility as a trustee very seriously.
    Mr. RANGEL. I thought I mentioned--I described you as that.
    Secretary LEAVITT. You did it perfectly, sir.
    Mr. RANGEL. Thank you.
    Secretary LEAVITT. There is little question that Social 
Security is a problem. There comes a time in the life of every 
problem when it is big enough you can see it, but still small 
enough you can solve it. Social Security--and I would add the 
other two or three other major entitlements--are clearly in 
that window. It is my view that there are innovations that we 
can use that will in fact improve the long-term viability and 
the sustainability of not just Social Security but for Medicare 
and Medicaid.
    Mr. RANGEL. You do believe that there is a role for 
government to play, and that the entire responsibility for 
health and pensions should not be left entirely to the private 
sector?
    Secretary LEAVITT. Clearly, government has a role both in 
establishing, maintaining, regulating and assuring their 
success.
    Mr. RANGEL. Would you make an exception to prescription 
drugs, as you turn that over to the private sector, that that 
was either a tremendous mistake or a lot of corrections would 
have to be made?
    Secretary LEAVITT. Actually, I am very supportive of what 
has been done on prescription drugs. First of all, we have a 
prescription drug program for the first time for millions, and 
the prescription drug coverage that millions more had is now 
more secure. So, the government----
    Mr. RANGEL. So, that means that we as Members of Congress 
can go to our constituents and say that the Federal Government 
is proud of Medicare Part D, we are proud of what we have done, 
and if we had to do it again, we would do it the same way?
    Secretary LEAVITT. We are 38 days into the biggest change 
in Medicare's history. We are 38 days into what may be the most 
significant long-term change in our health care system in some 
40 years. Let me just give you an overview of the big picture.
    Mr. RANGEL. Mr. Secretary, we are here for the short term; 
the elections are in November. The answer to your question is, 
if we had to do it again, the Administration would do it the 
same way, and that they are very proud of the way we have taken 
over the prescription drug program. Then we need, for 
reelection purposes, the rest of the follow up, but basically 
at the end of the day at the townhall meeting, we are proud of 
the money that we have given to the private sector and how they 
have handled it in providing prescription drugs to our older 
people.
    Secretary LEAVITT. This country will feel more than 
satisfied. I think they will be very pleased as this program 
has a chance to take legs and to operate----
    Mr. RANGEL. Just give us the literature and that is all we 
got to run with anyway. Having said that, would we be just as 
proud of the HSAs, because it seems to be--and I hope you would 
agree--that having the HSAs takes the risk from the employer 
and shifts it really to the employees to take care of its own 
health needs, the same way the 401(k)s were supposed to take 
care of the employees' pension needs. Do you see an analogy 
between the two?
    Secretary LEAVITT. Let me respond by saying I think the 
country will be quite unpleased if we continue to have health 
care costs that escalate beyond what they are----
    Mr. RANGEL. I agree with you there.
    Secretary LEAVITT. --sixteen percent of the gross domestic 
product. Unless we are able to find some way----
    Mr. RANGEL. We are talking about the solution, Mr. 
Secretary. Everything that the President has decided--how he 
wants it done--has been a real problem, whether it is getting 
out of Iraq, cutting back the deficit, trying to provide for 
the poor and Katrina. So, we know the problem and we aren't 
working in a bipartisan way, unfortunately, toward the 
solution. Playing the cards that we do have, I am just asking--
we know the problem of the soaring cost of health care, what 
the cost the employers have. I am asking, will the HSAs shift 
that risk more to the employee rather than the employer?
    Secretary LEAVITT. The HSAs will make cost-conscious 
consumers of all of us, and it will in fact, I believe, have a 
positive impact of connecting people to their health care 
decisions. When that----
    Mr. RANGEL. Will that lessen the cost to the employer?
    Secretary LEAVITT. It will lessen the cost of health care 
to all of us, and assure that we can provide health care to 
more and more people.
    Mr. RANGEL. The answer is yes.
    Secretary LEAVITT. The answer is it will lessen the cost of 
health care to all of us, and that----
    Mr. RANGEL. Including the employer.
    Secretary LEAVITT. That is correct, including the employer, 
which is an important part of keeping the American economic 
equation competitive, so that people can have jobs and that 
they can pay for health care.
    Mr. RANGEL. There are figures in the budget to justify how 
HSAs will be costing us less in health care, the cost of the 
HSAs compared to the current cost. Do you have any numbers 
anywhere to say that it will be less costly?
    Secretary LEAVITT. What is clear is that if we are able to 
take the expenditures that we make currently and use them more 
efficiently, we can provide health care to far more people. 
Currently there are far too many, somewhere between 35 and 45 
million in America who have no health insurance. That is 
something we would all like to change, and HSAs is a very good 
part----
    Mr. RANGEL. I agree with what you said, but we don't have 
figures that justify saying this is going to cut the cost as it 
relates to the Federal Government.
    Secretary LEAVITT. I think it is very clear that it will 
help constrain the cost of health care, and then we all benefit 
when the cost of health care, the Federal Government, State 
governments and individual consumers, employers, our economy 
generally.
    Mr. RANGEL. I may agree with you, but it is not in the 
budget. That is all, it is not in the budget.
    Secretary LEAVITT. It hasn't been implemented yet, Mr. 
Rangel. I don't know how----
    Mr. RANGEL. So, there are no estimates, right?
    Secretary LEAVITT. I think economists have been very clear 
that, in fact, making cost-conscious consumers creates a 
downward pressure on health care, and if we are all paying 
less, we are all happier.
    Mr. RANGEL. Thank you, Mr. Chairman. I tried.
    Mr. SHAW. [Presiding.] The time of the gentleman has 
expired.
    Mr. Secretary, I would like to add my welcome to you to the 
Committee. We have been holding, in my congressional district, 
a number of Medicare meetings, townhall types meetings in order 
to familiarize my constituents with the new drug bill. There 
has been a lot of enthusiasm, the attendance has been high; but 
there is also some confusion, and I would like to direct you to 
one specific issue, which I think is probably--I think my 
constituents are--really, politics is getting into this more 
than anything else, and I would like for you to try to clear 
this up this morning.
    One of the specific issues that my seniors continue to 
raise is a concern about the bait and switch issue of Part D 
plans dropping coverage of a particular prescription drug mid 
year. I think Mr. Stark made comment to that in his opening 
statement. Would you explain to me what is being done to 
prevent this? Is there any way that the program can be amended 
or should it be amended to prevent this mid year switch?
    Secretary LEAVITT. This is a subject where people express 
concern. To my knowledge, no plan has yet amended their 
formulary to do that. There is a process. They cannot do it 
independently. They cannot do it on their own. They have to go 
to CMS, make an application, demonstrate that it is in the best 
interest of the plan. In many cases they may be shifting in a 
way that will make their plan either more competitive or will 
provide greater choices, but they can't do it without going 
through a significant process to demonstrate why it is being 
done, and have regulatory approval to do it. Those who suggest 
that it has happened misstate the facts. It has not. There is a 
process through which the plans can amend it, but it is not 
going to be done in a large number of cases, nor will it be 
done without oversight.
    Mr. SHAW. In my congressional district there are over 40 
plans for the seniors to choose from. What is currently being 
done to improve the way the seniors navigate through all this 
information, and what advice would you give the average senior 
who is very frustrated with the entire enrollment process?
    Secretary LEAVITT. I have been at the site of many 
enrollments. My father is here. I helped him enroll. I helped 
my wife's mother enroll. I have some experience with this, and 
I have some specific suggestions, but primarily it involves 
just getting drugs together, sitting down with someone who can 
help them if they need help. If you go on the 1-800-Medicare 
line, which has a less than one-minute wait now, they will talk 
people through it. Or if they like to use the Internet or have 
a family who does, they can do it from start to finish in less 
than one-half hour.
    I was in Oklahoma this week, and I sat down with a woman 
named Dorothy. She had just walked up to an enrollment fair, 
had not thought she would line up. Called the drug store, got 
the list of six medications that she took. She was paying $300 
a month. In less than a half an hour at an enrollment fair, she 
was able to come up with a plan that cost her $36 a month 
including her copay. She will save $3,000. People are having 
that experience all over America.
    We are signing up 250,000 new enrollments a week. If that 
wasn't a good plan, if people weren't saying to their 
neighbors, ``I saved money,'' if they weren't saying to their 
neighbors, ``I got my prescriptions filled just fine,'' we 
wouldn't be having 250,000 new enrollments a week. This is a 
good deal for seniors.
    Some require assistance. Health care is not without 
complication, and for that reason we have established 10,000 
partnerships at drug stores. Pharmacists are helping people in 
heroic ways. This is a huge transition but we are working our 
way through it. We have over 24 million people who are now 
participants, and it goes up every day.
    Mr. SHAW. In the time I have left, I want to get into 
another area. As you know, the issue of cancer treatment, early 
detection and prevention is near and dear to me. I owe my very 
life to early detection. I am actively supporting the National 
Cancer Institute's goal of ending the suffering and death due 
to cancer by 2015. I am extremely disappointed and discouraged 
to see that the President's proposed budget cuts 40 million in 
funding from the National Cancer Institute. I also understand 
that if we want to reach the 2015 goal, the key does not lie 
solely in the appropriation process. I will soon be introducing 
legislation strengthening the amended Medicare Program in the 
area of cancer treatment and detection. With the baby-boomers 
approaching Medicare age, we will have a major crisis on our 
hands in this program. We must lay the groundwork for us to 
provide these future beneficiaries with adequate cancer care.
    What specific improvements to the Medicare Program would 
you like to see in the area of cancer screening, treatment and 
prevention, and how can the Committee on Ways and Means help 
achieve this 2015 goal? We are so close to finding a cure, and 
this falls in, I think to No. 7 in your opening statement, that 
it is effective, what we are doing. When you are in a foot 
race, you see the finish line, you don't jog, you sprint, and I 
think we can do a better job. If you would address that, I 
would be most grateful.
    Secretary LEAVITT. Mr. Shaw, your question is asked both, 
as you suggest, with personal experience and conviction, as 
well as wisdom. It deserves a lengthy response and one I would 
be happy to give you either privately or submit for the record. 
I see that time is out, and therefore, don't want to shortcut 
the answer.
    Mr. SHAW. I would very much appreciate hearing that, and I 
would like for it also to be part of the record.
    [The information was not received at time of printing.]
    Mr. SHAW. Mr. Stark?
    Mr. STARK. Thank you, Mr. Chairman. I want to submit for 
the record a letter that was sent to Dr. McClennan on February 
2nd. It was a study of five ZIP code districts, taking prices 
from the Medicare.gov website, and it shows that, for instance, 
in New York, the plans in the first month, 38 of the 47 plans 
increased the cost of a five-drug package which generally 
covers drugs used by senior citizens for a variety of common 
ailments. The average cost increase was $155.80 a year. The 
increases range between a dollar and $400 annually. This is in 
the first month of the plan, and it was studied across the 
country, New York, California, Florida, Illinois and Texas.
    Mr. Secretary, if you haven't seen it, I would ask you to 
look at a copy of it. I would like to make it part of the 
record, Mr. Chairman, which defines that these companies are 
kicking up prices, and the seniors will have until May, I 
understand, to switch, but I think that in the program of Part 
D, one would presume that when the benefit managers get a 
contract for a prescription drug they would have assurance that 
they could hold the price for at least a year, and I hope that 
your office would look into it.
    Then further, we wrote to Dr. McClennan and Mr. Levinson--I 
hate to be tattling on your subordinates here, Mr. Secretary--
there are some plans that are violating the law, and I am sure 
as a former insurance broker, you are aware of this idea of 
coercing people or low-balling them into a drug plan, and then 
an attempt to sell them on the managed care plan, which may 
also be operated by the benefit manager. That is against the 
law. It is on page 131 of the Marketing Guidelines. Humana is 
one of the serious offenders. We have asked that the Inspector 
General look into that and that it be prohibited, and they 
should have to immediately cease from those practices. I hope 
you will look into that. I would like to make this letter to 
Dr. McClennan and Mr. Levinson part of the record.
    A final question then deals with MedPAC, who we have 
learned, at least, has been bipartisan, quite objective in 
advising all of us, and I want to know if you can tell me what 
MedPAC recommended with respect to Medicare Advantage payments. 
Are you aware of their recommendation there?
    Secretary LEAVITT. No. I mean I am not able to give them to 
you today.
    Mr. STARK. Okay. They did recommend that we cut back, and 
we are overpaying them. It is costing--for everybody who signs 
up for one of these plans, it costs the government more, 
increases adverse selection against either Medicare or other 
plans, and there seems to be no reason why we couldn't save 
perhaps $50 billion over 10 years by reducing the overpayments 
that we are now making to these Medicare Advantage plans.
    Would you assume for a moment that I am right, that for 
everybody who signs up into one of these plans, they cost the 
government more, they create adverse selection against the fee-
for-service part. Would you think that perhaps it would be a 
good idea to review and lower the payments to these Medicare 
Advantage plans, at least to the price that we pay for fee for 
service Medicare?
    Secretary LEAVITT. Would you like me to respond to all 
three of your questions or----
    Mr. STARK. Should we--if in fact, MedPAC is correct, don't 
you think that we should lower the price that we pay to these 
managed care plans?
    Secretary LEAVITT. The managed care plans ought to operate 
under the same price structure that other providers do, and if 
they are able to find ways of creating efficiency, they ought 
to realize the benefit of that.
    Mr. STARK. Should they be paid more, which to say, paid 
about 115 percent of what we pay even standard fee-for-service 
Medicare? Does that sound fair to you?
    Secretary LEAVITT. The objective is very clearly to give 
consumers a choice. If they choose and find the services 
better, they should have the capacity to do so. You raised the 
issues on prescription drug plans. We are without question now 
seeing prices----
    Mr. STARK. Should the taxpayers have to pay that, Mr. 
Secretary, or should the plans--because the plans can provide 
better care. In my district, Kaiser Permanente is one of the 
best managed care plans in the country, but my question is, 
should they be overpaid, or should they be able to operate in 
the market like everybody else?
    Secretary LEAVITT. In the long run the objective is to find 
uniformity and to find efficiency, and I know that there have 
been phase-ins that ultimately will end. The Congress did that 
for a reason. I suspect it was a good reason, and over time 
those will phase out, and they should be allowed to find 
efficiency, and where they do, they should be rewarded.
    Mr. STARK. There is no savings from these managed care 
advantage plans, so it might be something to look at.
    Mr. SHAW. The time of the gentleman has expired. Without 
objection, the two letters referred to will be made a part of 
the record.

    [The information follows:]

                                                   February 2, 2006
The Honorable Mark McClellan, Administrator
Centers for Medicare and Medicaid Services
Washington, DC

Dear Dr. McClellan:

    In addition to other startup problems with the new Medicare Part D 
drug benefit, a consumer issue appears to be developing that has 
serious long-range implications and, unless corrected, could seriously 
harm consumer confidence in the program. A cursory sample of various 
drug plans (see below) conducted by Consumers Union has revealed that 
the cost of some prescriptions has dramatically increased in just 1 
month; in the many plans with cost increases, the average increase in 
annual cost was about 5 percent.
    While by no means a true representative sample, these initial 
numbers may serve as a ominous warning sign that consumers cannot count 
on price stability in these drug plans, stability which is so vital to 
seniors on a fixed budget.
    Our small sampling of drug prices in five Zip Codes throughout the 
country from the Medicare.gov Web site (which states that it cannot 
guarantee the accuracy of company data) included an examination of the 
popular drug Lipitor, as well as a bundle of five drugs for various 
common ailments. The prices were sampled at the end of December 2005 
before the benefit began, and at the end of January--1 month into the 
program.
    A majority of plans sampled showed an increase in annual costs to 
consumers. These increases ranged from as little as $1 to, in some 
cases, over $400 annually. Several companies did reduce annual costs 
(and one Texas plan had a major downward correction). But 
overwhelmingly, the annual cost of plans for this sample package of 
drugs was upward. In the New York survey, for example, 38 of 47 plans 
increased the cost of the five-drug package, with an average increase 
of $155.80.
    With the 2004-2005 prescription drug discount card program, prices 
of drugs moved up and down, but a majority trended downward--which was 
great news for consumers, but begs the question why prices are up so 
sharply on these five drugs in most Medicare Part D plans in the first 
month.
    Is CMS tracking all drug prices in all plans? And if so, are you 
finding this general trend upward? Should consumers be warned of this 
development and review their choice while they still have the 
opportunity to switch plans before May 15, 2006?
    We had assumed that when a Prescription Drug Plan (PDP) negotiated 
discounts with a drug manufacturer, it would lock in that price for a 
contract year to provide price stability to the Medicare beneficiaries 
who elect to join that plan. That assumption appears not to be 
accurate. Is there information on whether any PDPs have negotiated such 
price stability? If so, could that information be made public so that 
the consumer would know which plans offer some stability, and which are 
likely to be more price volatile?
    Our nation's seniors have been going to a great deal of work to 
pick a plan that is best for them, with the understanding that they 
will pay a set premium for the year for a reasonably defined benefit 
package. While this first initial enrollment period permits non-
Medicare/Medicaid (dual eligible) consumers to make one switch in 
plans, after May 15th they are locked into their plan through the end 
of the year. Consumers Union's initial data shows--at least for the 
sampled drugs--that a consumer's thoughtful shopping choice can be 
diminished or perhaps even negated by changes in the plan's charge for 
one or more drugs. In some cases, the price increases are so large, 
they smell of a bait-and-switch.
    If CMS is detecting the same trend of price increases, we hope you 
will immediately and publicly urge the drug plans to halt these price 
increases. We also urge CMS to publicly report on the full range of 
price movements so that consumers can avoid plans that are showing this 
type of bad faith at the very beginning of this vital health program. 
Right now there are more than enough plans for Medicare beneficiaries 
to choose from--but seniors need to be made aware of those plans with 
poor startup service and bait-and-switch pricing behavior to make 
informed decisions about their health care.
            Sincerely,
                                                    William Vaughan
                                              Senior Policy Analyst
                     Consumers Union, publisher of Consumer Reports
                                 ______
                                 

      Changes in Annual Cost to Medicare Beneficiaries for selected
 prescription drugs between December 28, 2005 and January 30-31, 2006 as
                      reported on www.Medicare.gov
------------------------------------------------------------------------
                                                                   # of
                                                                   PDPs
                                          # of PDPs   # of PDPs    that
                                            that        that      had no
      State and  zip code         Drug    increased   decreased   price
                                           annual      annual     change
                                            cost        cost      in the
                                                                  month
------------------------------------------------------------------------
New York                        Lipitor  12          0           35
                                 ,\1\
                                 10 mg
------------------------------------------------------------------------
                                Package  38          3            5
                                 of 5
                                 drugs
------------------------------------------------------------------------
California                      Lipitor  10          0           38
------------------------------------------------------------------------
                                Package  36          7            5
                                 of 5
                                 drugs
------------------------------------------------------------------------
 Florida                        Lipitor   7          0           36
------------------------------------------------------------------------
                                Package  34          5            4
                                 of 5
                                 drugs
------------------------------------------------------------------------
Illinois                        Lipitor   9          0           34
------------------------------------------------------------------------
                                Package  35          5            2
                                 of 5
                                 drugs
------------------------------------------------------------------------
Texas                           Lipitor  10          1           36
------------------------------------------------------------------------
                                Package  37          8            2
                                 of 5
                                 drugs
------------------------------------------------------------------------
\1\ The Lipitor increases were all minor, generally about $10 increase
  in annual cost.

    In using the Medicare.gov Website, only PDPs were selected (no MA-
PDs), no preference was given to pharmacy, and all plans serving that 
Zip Code were reviewed.
    The package of 5 drugs includes one medicine from each of five 
major classes of drugs: it is not meant to be a package of drugs that 
anyone individual would take. It consists of Altace 10 mg capsules (an 
ACE inhibitor for high blood pressure); Celebrex 200 mg capsules (for 
joint pain, etc.); Lipitor 10 mg tabs (for cholesterol adjustment); 
Nifedipine 30 mg extended release tabs (for chest pain and high blood 
pressure); and Zoloft 100 mg tabs (for anti-depression).
    The Zip Codes are 00501, Long Island, NY; 32425, Bonifay, FL; 
60406, Chicago, IL; 75135, Caddo Mills, Texas; 94246, rural Northern 
California.
                                 ______
                                 
                                                   January 26, 2005
The Honorable Mark McClellan, M.D., Ph.D.
Administrator
Centers for Medicare and Medicaid Services
200 Independence Ave, S.W.
Washington, DC 20201

Daniel R. Levinson
Inspector General
Health and Human Services
330 Independence Avenue
Washington, DC 20201

Dear Dr. McClellan and Mr. Levinson:

    I am writing to bring your attention to a very disturbing article 
that appears in BusinessWeek online (see enclosure). According to this 
article Humana is violating CMS regulations by paying higher 
commissions to sales representatives enrolling people in Medicare 
Advantage (MA) plans rather than stand alone Prescription Drug Plans 
(PDP). An article in yesterday's Wall Street Journal (also enclosed) 
also references Humana's strategy on enrollment and implies that it may 
be widespread among organizations that offer both MA and PDP plans.
    Coercing beneficiaries to join the Medicare Advantage plan when 
they attempt to join a stand-alone drug plan is a direct violation of 
the Medicare Marketing Guidelines issued August 15, 2005: ``The 
commission rate (i.e., the percentage per enrollment) should not vary 
based on the value of the business generated for the Plan Sponsor 
paying the commission (e.g., profitability of the book of business).'' 
(page 131)
    Given the overpayments to MA plans, it is clear from these articles 
that Humana and perhaps other plans are steering plan enrollees into MA 
products to further their financial interests. I request the Inspector 
General open an immediate investigation into the marketing practices of 
Humana and all contractors who offer both stand-alone PDPs and MA-PDs 
to identify which plans are using these illegal marketing schemes.
    Furthermore, CMS must immediately direct plans to cease and desist 
this deceptive marketing, and impose appropriate sanctions for breaking 
the marketing guidelines. Plans that continue to violate the guidelines 
should have their contracts terminated.
    Beneficiaries are already overwhelmed trying to navigate the new 
law. They should not be subject to bait-and-switch tactics or other 
misleading marketing ploys once they have made a decision to enroll in 
a plan. Beneficiaries who express interest in MA offerings should be 
mailed information so that they have time to make an informed choice by 
evaluating the new plan and checking whether their providers are in its 
network. They are unable to make a properly informed choice when 
presented with the option over the phone.
    It is imperative that CMS and the Office of Inspector General hold 
Part D plans accountable for their misdeeds. If the law does not grant 
sufficient authority to allow the Administration to protect Medicare 
beneficiaries from these predatory practices, I ask that you work with 
me as soon as possible to enhance your enforcement capabilities under 
the statute.
            Sincerely,
                                                         Pete Stark
                                                     Ranking Member
                              Ways and Means Subcommittee on Health

                                 

    Mr. SHAW. Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman. Secretary Leavitt, 
welcome. On the question of the managed care plans, the 
President, I believe, is signing today a piece of legislation, 
the Spending Reconciliation Bill, which Congress just passed. 
Does it contain a reduction in expenditures for Medicare 
managed care plans over the next 5 years?
    Secretary LEAVITT. I don't know the answer to that, 
Congressman.
    Mr. MCCRERY. It contains $6.5 billion. So, we have taken to 
heart Mr. Stark's suggestions--at least to that extent, and I 
agree with him we need to continue to monitor that, and make 
sure that that sector of the Medicare program is not unduly 
reimbursed.
    I also agree with him that we need to closely monitor the 
actions of participating private sector plans and Medicare Part 
D. I am not familiar with the reports that he cited, but I 
would like to review those. I also know though of a number of 
other reports that have been issued recently that show that out 
of the top 25 pharmaceuticals most often purchased by seniors, 
there are discounts ranging from 35 percent on average at 
retail pharmacies, to a 46 percent discount with the mail order 
plans that are available under Medicare. Obviously, those 
studies, while not in conflict, may not give different 
impressions. So, it appears to me that at least from some 
studies that have been published, the private sector is doing a 
very good job through competition of lowering the price that 
the pharmaceutical----
    Mr. STARK. Would the gentleman yield for a second? There 
were several plans, although only about 10 percent that 
actually lowered cost, but the predominance was not. There were 
some that lowered.
    Mr. MCCRERY. Yes, but I think on average this refers to 
prices under the plans compared to over-the-counter prices 
before the plans were instituted, and that is certainly an 
improvement for seniors. We do need to continue to monitor 
that.
    Mr. Secretary, you recently visited my home State of 
Louisiana, and I very much appreciate your taking the time to 
visit the health care providers in the New Orleans area. I 
don't represent New Orleans, as I am from Shreveport, as far 
away from New Orleans as one can get and still be in Louisiana, 
but New Orleans and the surrounding area is extremely important 
to our State, to the economy of my State, and so I certainly am 
concerned about that. Louisiana faces significant challenges as 
we try to rebuild the health care system in that part of our 
State. I am just interested in hearing from you firsthand what 
your impressions were, what you took away from that visit, and 
what plans HHS might have to further assist getting the health 
care system in that region of my State up and running again?
    Secretary LEAVITT. Congressman, my first visit to pursue 
the goal you have discussed, the rebuilding of the health care 
system, actually took place in week two, where I met at the New 
Orleans Airport with hospital administrators to begin 
essentially a triage of the health care system. I have since 
met regularly with them, and I was in New Orleans about 3 weeks 
ago for an entire day, where I met with all of the major 
hospital administrators, the insurance plans, the Members of 
Congress from the State, various legislators. We had a very 
large group and met for an entire day to begin developing a 
collaborative approach to the rebuilding of the medical 
infrastructure in the greater New Orleans area.
    It is clear to me as well that the State of Louisiana sees 
this as an opportunity to begin to make dramatic changes for 
the better in their health care system generally. There is an 
opportunity in the greater New Orleans area brought about by 
this devastating catastrophe to build the medical system of the 
future.
    Frankly, I was in New Orleans the week before Katrina. I 
was told by the head of the Department of Health there that if 
you were to go to any hospital in the New Orleans area on an 
emergency, you would have a 24-hour wait. That is unacceptable. 
The system was not working. The opportunity here is to create a 
new system that provides outreach, not just in tertiary 
hospital emergency rooms, but in community health centers, and 
having a system that literally is driven by electronic medical 
records and where everyone has access to health care. There is 
a very exciting opportunity, and, frankly, there is available 
resources to do that, because once we take the money that is 
being spent on Medicaid and disproportionate share payments and 
Medicare and all of the other grants available, and the 
generosity of the Congress, there is an opportunity that is 
unsurpassed right now in the Gulf region to build a health care 
system of the future, and I think there is a good sense of 
interest in doing it.
    Mr. MCCRERY. Thank you for your interest, and I am hopeful 
that you will direct the Federal Government's effort to be a 
partner with Louisiana in building that new, more modern, 
progressive health care system in that region. We badly need 
it.
    I want to ask you about the Intravenous Immune Globulin 
(IVIG). I did get your letter today. Appreciate that, and 
appreciate the efforts to make sure that patients have access 
to the IVIG products. Thank you. Thank you, Mr. Chairman.
    Mr. SHAW. Mr. Levin?
    Mr. LEVIN. Thank you very much. Welcome, Mr. Secretary, and 
your family.
    Secretary LEAVITT. Thank you.
    Mr. LEVIN. We are going to discuss Social Security some 
other time. I just want everybody to understand--and you are a 
trustee--what is in the President's budget. For the first time 
there are actual figures representing the effect of 
privatization of these private accounts. There is also spelling 
out the proposals which are essentially the same as they were 
when the President presented them last year. The cost is $81 
billion plus over the years 2007 to 2011, and $712,144,000,000 
in a 10-year period.
    I raise this because you mentioned your philosophy, and Mr. 
Rangel raised it, and it is clear, it seems to me, when you put 
this all together, that what this Administration is proposing 
to people, whether it is health care, whether it is Social 
Security--and I want to come back to other issues--more and 
more you are going to be on your own.
    On the HSAs, for example, I was reading a recent article in 
the Wall Street Journal, and they quote people who make clear 
that that is the impact. This is one quote from a health care 
analyst: ``The risk is being transferred without the consumer 
really realizing that.'' It is being moved from the employer to 
the individual.
    You also mentioned the subsidization--MedPAC has suggested 
a major change in the subsidization. We are subsidizing the 
HMOs in major amounts. Mr. McCrery mentioned a reduction, but 
most of the subsidization remained, and it was left in, in a 
conference where no Democrat participated. So, essentially, we 
have a movement here from a system with an assured health 
benefit and assured pension benefit, to everybody being on 
their own. I don't think that should be masked. I think it 
should be said straight out.
    I wasn't sure I was going to talk about the cancer, the 
National Institute of Health (NIH), but Mr. Shaw mentioned it, 
and so I do want to come back to it, Mr. Secretary, because I 
read from this op-ed that was put in on Monday by people at 
Johns Hopkins, and here is what they say: On an inflation-
adjusted basis--and I quote--``the current NIH appropriation is 
smaller than it was 4 years ago in constant NIH funding 
dollars. The NIH funding has declined by more than $1 billion 
since 2003.''
    Now, I know you are given a number and you have to work 
with that number, but I don't think we should mask--and you are 
not doing that--you should say straight out what the impact 
likely is, for example, on cancer research and other research, 
because this op-ed spells out the kind of negative impact that 
could occur on cancer research at Johns Hopkins. So, you said 
you would like to provide something more detailed. Give us a 
straight answer on the impact of straight-lining NIH for a 
number of years on cancer research and other vital research.
    Secretary LEAVITT. Congressman, I don't think we should 
move forward without acknowledging that we are investing $4.8 
billion a year in this type of research. I would also like to 
make clear that I view the future of medicine to be much 
different than the past. The future of medicine is about 
finding ways to highly personalize therapies, to find ways that 
are preventative and preemptive, and much of the research that 
is being done to do that is at the National Cancer Institute, 
but much of the research is not. Much of it is at other 
institutes that are at the NIH. One of the most exciting is a 
new venture that we are instigating in a different area of NIH 
on genes and the environment, recognizing that we can identify 
the genetic makeup of the top 10 most socially costly diseases, 
cancer being one of them, and finding ways that we personalize 
our therapies. Now, that is not represented in the budget at 
NCI, but it is clearly benefiting from it. We are making a 
substantial investment.
    Would we all like to do more? The answer is yes. Will we do 
more in the future? The answer is yes. Are we contributing to 
finding the solution to cancer in other institutes? The answer 
to that is also yes.
    Mr. SHAW. The time of the gentleman has expired. Mr. Nunes?
    Mr. NUNES. Thank you, Mr. Chairman. Welcome, Mr. Secretary. 
I want to start off talking about--I basically have one 
question for you, but I do want to go back to some of the 
quotes that the Chairman was outlining in his opening 
statement, and when you go back to 1966 and 1967, many of the 
newspapers editorialized--and here is a quote from the New York 
Times. ``This great new experiment must be given ample time to 
get over its growing pains.'' That is a common theme that runs 
throughout most of the editorials when you go back to that time 
when the first parts of Medicare were first put into law.
    As negative as the press has been and that most Democrats 
have been on this new law, I, for the most part, believe that 
it is working pretty well, as evidenced by--in my district I 
don't receive very many calls on Medicare Part D, and when we 
do recommend people over to automated phone service that CMS 
has provided, it has been very successful. Recently CMS has 
found that the net cost to the Federal Government is expected 
to be $30 billion, down from a previously estimated $38 
billion.
    So, as we are moving through this process, Mr. Secretary, 
do you think that this new competition that has been added to 
Part D is going to continue this projected savings? I know that 
these are just your estimates, early estimates, but I want to 
know your thoughts on how competition among prescription drug 
plans is affecting the Federal budget as it relates to Medicare 
Part D.
    Secretary LEAVITT. Congressman, there is no question that 
competition is driving the cost of pharmaceutical products to 
consumers down. When we started this program the estimated cost 
was $37 a month. It is now $25 a month, almost a third savings. 
Not only are we seeing a couple hundred thousand people a week 
enroll in this benefit, but we are seeing millions of 
prescriptions filled every day, and we are seeing costs fall, 
and we are 38 days into it. This was the most significant 
change in Medicare in 40 years. No realist would expect that we 
would go through a change that is that profound, that large, 
without having some unexpected problems. We make no excuses. 
There were things that had to be fixed, but we found them, we 
fixed them and we are finishing them. Every day we are seeing 
the program work more smoothly.
    This is a good deal for seniors. The program is smoothing 
out in a way that I believe is going to benefit consumers on an 
ongoing basis.
    Mr. NUNES. I agree with you, Mr. Secretary, and 
furthermore, I think it is important to point out that, as you 
said, we are only 38 days into this program. It was 40 years 
old, and I hope that you will continue to work with this 
Committee to make sure that we can smooth out these bumps in 
the road because the American people expect us to. This 
Committee has an important job. You have an important job. We 
don't need to be continuing this constant badgering that the 
press and others have given you, that is, I think, totally 
unacceptable in this day and age. The American people expect us 
to make this program work. They asked for it. We have given it 
to them, and now we should work through the bumps. I thank you 
for your time here.
    Mr. Chairman, I yield back.
    Mr. SHAW. The gentleman yields back the balance of his 
time. Mr. Cardin?
    Mr. CARDIN. Thank you, Mr. Chairman. Behind each of these 
numbers and statistics is a person in this country who is 
struggling to meet their health care needs and deal with their 
own individual issues, and there are families that are 
concerned about it.
    So, Mr. Secretary, I just want to give you an example of 
one person who lives in my district. Her name is Barbara 
Waters. She suffers from epilepsy. Prior to January 1st, the 
medicines that she needs, $100 a month, was paid for under 
governmental programs, so she paid a small copayment. Because 
this drug is a benzodiazepine, it has been excluded from the 
Medicare Part D. She now has to pay $100 a month for this 
prescription. She asked me a very direct question. She said to 
me, ``The President said that this program's going to help 
people, that it won't hurt any of us. I can't afford $100 a 
month.'' She has to get help from friends right now in order to 
buy her medicine. If she doesn't buy it, she is subject to 
seizure.
    I guess my question to you is, will you support legislation 
that Mr. Ramstad and I have introduced, so that these drugs 
will be covered under Medicare Part D and we can live up to the 
commitment made to Barbara Waters and many, many other people 
when we said that this legislation would not harm those who are 
the most vulnerable, but would add additional benefits within 
the Medicare system?
    Secretary LEAVITT. Congressman, there are plans that can 
help people in your constituent's situation. The Congress chose 
to exclude some drugs from coverage. You are right, every 
single person who has a problem, it is a very serious problem 
to them, and this particular person you have talked about, I 
would like to see if we are in a position to be helpful to her.
    Mr. CARDIN. I thank you for that, because it is affecting 
her life, and I think we need to deal with it. She was 
protected before this law became effective, and now she is not.
    Let me move on to the second point. I must tell you, I am 
disappointed. I think you are the first Secretary in a budget 
appearance before our Committee not to mention the health 
disparity issues among minority populations and outcome, and 
life expectancy, and survivor rates from cancer, and from 
access to health care. I am concerned that the budget that you 
are presenting, which is going to flat fund NIH and cut 
dramatically from the professional education assistance, which, 
as I understand it, you are concerned as to how effective it 
has been in bringing minority professionals into health.
    I can tell you in my conversation with health care 
professionals, cutting the money, $120 million from this 
program, is certainly not going to be helpful in trying to 
attract more minority health professionals to gain access for 
minority populations and the NIH flat funding. So, what 
strategy do you have in order to bring more access of care to 
our minority populations?
    Secretary LEAVITT. I mentioned, Congressman, that I thought 
there were a number of programs where targeted strategy would 
be more efficient and better. This is a very good example. The 
idea is that currently we are funding a broad array of programs 
to assist in the recruitment of physicians and nurses and other 
health care workers. In many segments, we don't have a 
shortage. We do have a significant shortage in the area that 
you have spoken of, and the idea is to say let's have fewer 
programs that are funded, but let's fund them better.
    Mr. CARDIN. My concern is if you cut the money, it would be 
one thing if you were going to put the money into a new 
program, but as I understand it, you are just cutting the 
funds.
    Secretary LEAVITT. If we just kept funding the program in 
the same way, and we weren't more selective and more targeted, 
that would be an appropriate conclusion, but what I am 
suggesting to you is that there is a way for us to target our 
funds and have an impact in the areas where there are serious 
deficits that will be more profound than we have done in the 
past. It does mean that there are people who have been getting 
money from the Federal Government who won't, but the areas that 
you have spoken of, there would be no reasons for us not to 
fund them more intensely, not less intensely.
    Mr. CARDIN. Thank you. Let me just ask a last question, and 
that is about the therapy caps that went into effect on January 
1st. I personally have been working with 200 plus Members of 
Congress to get rid of the therapy caps because it is not good 
health care policy. The law allows you to issue regulations so 
that there could be exceptions to the therapy cap. Do you know 
the status of those regulations as to when they are going to be 
issued?
    Secretary LEAVITT. I don't know the exact date. I have been 
involved in some discussions. I know, in fact, that they are 
under consideration.
    Mr. CARDIN. If you could make sure that our Committee is 
kept aware of that, I would appreciate that.
    Secretary LEAVITT. I will get back with that.
    Mr. CARDIN. I would hope that you would also consider 
legislation to get rid of that therapy cap once and for all.
    Secretary LEAVITT. If I could get the name of the person 
that you were talking about, I would like to make certain that 
we are responsive to her need.
    Mr. CARDIN. I will get you Barbara Waters' information. 
Thank you.
    Mr. SHAW. Mr. Ryan?
    Mr. RYAN. Thank you, Chairman. Thank you, Secretary 
Leavitt, for coming today. We have heard some talk about HSAs, 
which was a very important component of the Medicare law. I 
wanted to ask you a couple questions along that theme. I think 
it is important to note what HSAs are and what they have done. 
They have only been in law for about 3 years, and really in 
practice for a little over 2 years.
    Some have said that HSAs are not working, they are not a 
good policy. If you take a look at the data, I think it speaks 
for itself. Number one, HSAs went from one million people using 
them a year ago to 3 million people using them now. Thirty 
seven percent of the people who have HSAs are people who did 
not have health insurance before. So, what HSAs have already 
done is priced health insurance within reach for 37 percent of 
those 3 million people who otherwise did not have health 
insurance.
    As far as the notion that there is adverse selection, the 
opposite has rung true. When you take a look at the data, over 
30 percent of the people earn less than $50,000. Fourty five 
percent of the people who have HSAs are over 45 years of age. 
So, what we are finding is that HSAs have become a good tool 
for people with risky health profiles; for people with lower 
incomes; for people who are older; to get health insurance that 
they could otherwise not have afforded.
    The question is this. HSAs get the consumer back in the 
game because we believe the current third-party payment system 
where you really don't care what things cost because somebody 
else is paying the bills, and you are not allowed to shop 
around on things like price and quality because you are either 
told who and where you have to go to by your HMO, or you don't 
get that information in the first place.
    So, now that we have this insurance product in place to 
incentivize consumers to actually care what things cost, we 
don't have the information necessary to make those kinds of 
decisions. That is the question I want to get to you. We have 
made progress on quality initiatives. The Medicare law put 
together a good quality initiative for hospitals. The DRA, 
which is being signed into law today, makes strides to improve 
dissemination of quality metrics for physicians. Where we don't 
have much transparency is in price.
    This is the question, Mr. Secretary. In the President's 
State of the Union address, he proposed a comprehensive agenda 
to make health care more affordable and more transparent. We 
have very little price information. Often when we get price 
information from physicians or hospitals, they are charged 
prices, not the actual paid prices. There is a huge gulf 
between what is actually charged and what is paid, and they 
vary among payers, just within certain regional areas.
    In 2003, the Office of Inspector General proposed a rule to 
redefine charges to be the average negotiated market price. 
Number one, when does the Department intend to finalize this 
rule, and number two, what other steps is HHS taking to improve 
price transparency, actual price transparency, so people who 
are beginning to shop for health care can actually do so with 
real information?
    Secretary LEAVITT. Congressman, I don't have to go any 
further than myself to find an example of where an HSA has 
improved my consciousness of decisions being made about my 
health and my purchases.
    After having an indemnity plan for a long time, I got an 
HSA, and for the first time I found out what my prescription 
drug costs were. It surprised me. I found that there was a 
generic, and for the first time it mattered to me, and I 
changed to the generic. The same thing happened with my spouse.
    I had a medical device I needed to buy. I found that the 
place I was going to be buying it through my health plan was 
far too expensive. It is kind of a colorful story--I won't take 
the time to tell you--but I found I could buy it for less than 
a third if I made a purchase myself. I suddenly had a reason to 
care, and I concluded for myself, and it meant something to me.
    It is happening. It is happening across the country. The 
point you have made about 37 percent of those who subscribe to 
HSAs who have no insurance at all is a very clear indication to 
me that we are pricing health insurance outside the reach. If 
we were to do the same thing with car insurance, where it paid 
for your oil filter and your gasoline, like we do health 
insurance, it would be a very difficult thing to buy car 
insurance as well. So, I believe what we are doing is the right 
thing, and that there will be more and more who see the virtue 
of it.
    Mr. RYAN. What is HHS doing----
    Secretary LEAVITT. What are we doing at the Department? I 
would suggest something you didn't mention that is very 
important to this. It is health information technology, the 
capacity to gather information and to provide it to consumers 
in a way that they can use it.
    Secondly, people need to be able to go to a health care 
provider and know what they are charging for things. Now it 
will be difficult in the near term to make that transparent on 
everything, but there are some very common procedures that 
could be listed by providers.
    A second thing is the need to bundle at times on a 
procedure basis. If I go in for a hip replacement, or a knee or 
an appendectomy, I get a hospital bill that has 42 different 
things on it. I don't know what is part of the charge, what 
isn't. It would be nice if I could say to a hospital or 
provider, ``What is it going to cost for this common 
procedure,'' and be able to know, and that the providers would 
have to live up with that price. We can have an impact on that 
at HHS by making information known as to what we are paying so 
that there are cost comparisons and there is the capacity to 
have cost transparency.
    Mr. RYAN. The proposed rules?
    Secretary LEAVITT. The proposed rules are in the works, and 
I am not able to give you a date, but I can tell you that they 
are in the works.
    Mr. RYAN. Okay, thank you.
    Secretary LEAVITT. Thank you.
    Mr. SHAW. Thank you. Mr. McDermott?
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Governor Leavitt, 
it is good to have you here, and I am sure you remember your 
days as a Governor.
    Secretary LEAVITT. Indeed.
    Mr. MCDERMOTT. You are now operating in a place where the 
principle of this budget is that we pit one group of poor 
people against another for less money while we give tax 
holidays to the rich. I assert that on the basis of what I see 
in this budget. Seattle has the best urban Indian health 
program in the country. The budget put here today cuts it by 40 
percent, and the assertion in the budget is, well, what you 
will do is you will just go to a community clinic. Now, you are 
going to go from a culturally sensitive clinic that has been 
dealing with Indian urban problems, and you are going to throw 
them out into the rest to compete with the other uninsured in 
the community. There is no justice in that. The problems that 
have been dealt with through that kind of program absolutely 
are going to be shattered.
    The same thing with your Social Security block grant. That 
Social Security block grant in Louisiana covers 36 percent of 
the children's welfare costs in that State, and you are cutting 
half a billion dollars--excuse me, $500 billion out of that 
program.
    Now, I guess what you are saying is we are going to recoup 
the money from the rest of the country to pay for the problems 
of Katrina and the problems of Louisiana. This example you just 
gave about your cost-conscious stuff, what you are doing is 
pitting consumers, that is, patients, against insurance 
companies.
    Now, when you are going out to buy food or contact lenses 
or whatever, that is like buying tile or buying a refrigerator. 
The other day--I am glad you have your father here today, and I 
certainly wish I could have my son here today. He would tell 
you that the other day when his wife had an emergency C-section 
for a baby in distress, he did not go to his computer and look 
for where the cheapest hospital in Los Angeles was. It probably 
would have been Los Angeles County, about 30 miles away. 
Instead he went to the hospital 6 miles away where the doctor 
was that had taken care of his wife.
    Now, when you say that you are going to--if people got skin 
in the game, as they say, this is when they make these 
judgments. They will kind of sit there and be cost-conscious. 
My son was not cost-conscious. I did not want him to be cost-
conscious. You would not have wanted him to be cost-conscious.
    Now, Governor Leavitt wrote us a letter on October 15, 
1999, and he said--this is 1999. Now, this is a long time ago. 
``Further reductions in funding for Social Security Block Grant 
(SSBG) will result in cuts to vital human services for our most 
vulnerable citizens.'' You went on to identify them as low-
income children, families, and elderly and the disabled.
    Now, you tell me what is the justice in this budget. How do 
you defend cutting programs that you yourself, when you were on 
the receiving end, said would hurt you? Do you think the 50 
Governors are not going to be hurt by this budget? I would like 
to hear your response in justifying how you can cut programs 
where you know from your own experience--you had to deal with 
it. I had to deal with it in the State legislature, what goes 
on up here. So, I would like to hear you justify it.
    Secretary LEAVITT. Congressman, let me start back with the 
issue of the Indian health centers and the community health 
centers. One of the things I learned as Governor is that if you 
have two facilities and they are across the street from each 
other, while they may be sponsored by different organizations, 
that is a function of silos, and that you can likely have one 
and have it serve people better because you can have better 
facilities than if you have two and they are sponsored by 
different organizations and that somehow those barriers--and 
that is what we are doing in this situation, is we are saying 
we have already got community health centers, why should we 
have two facilities in one area as opposed to having one 
excellent facility.
    Mr. MCDERMOTT. So, you are cutting out the Indian health 
service clinics by design in order to shove those Indians into 
the community? Is that it?
    Secretary LEAVITT. I hadn't thought of it as ``shove 
them,'' but we certainly invite them to have good quality care 
at community----
    Mr. MCDERMOTT. You give them no alternative.
    Secretary LEAVITT. Where we, I might add, serve already 
about 14 million people in a program that people love, compete 
and scramble to get one. Now, I would also like to talk a 
little bit about the use of funds to cover more people. One of 
the reasons that we are looking to have more efficient systems 
is because it allows us to cover more people. It is a lot 
better for everyone to have access to basic quality care than 
it is for a few to have unlimited care. That is the reason we 
have to be cost-conscious.
    I would like to respond to the block grant issue. There is 
no question that your view is based on where you sit, and I 
have now sat in both places, and I can tell you why it is that 
Governors like those grants. First of all, it is very flexible 
money. By flexible, it is also very difficult to know where it 
is having an impact and where it is not having an impact.
    Mr. MCDERMOTT. We set it up that way because you asked for 
a block grant----
    Secretary LEAVITT. There is no question----
    Mr. MCDERMOTT. --we had specific programs, and we lumped 
them all together and said here is the money, do it flexibly.
    Secretary LEAVITT. If we were not in deficit reduction, I 
would be suggesting that that would be a fine place to put that 
money, but I can tell you that my colleagues in the States are 
in a much, much different position than they were in 1999. 
There are many States who are doing extraordinarily well with 
their revenues. The State where I was Governor when that letter 
was written, at the time, was looking at budgets that had 
dramatically less money than they had dealt with the year 
before. They now have a billion dollars of new money, and I am 
delighted for them. We are in the position where we are 
reducing deficits. If we had the money, it would be great.
    Mr. MCDERMOTT. What about Louisiana?
    Secretary LEAVITT. We don't----
    Mr. MCDERMOTT. What about Louisiana? They lost their tax 
base----
    Mr. SHAW. The time----
    Mr. MCDERMOTT. --and you are saying to their Governor, 
hey----
    Mr. SHAW. --of the gentleman has expired.
    Secretary LEAVITT. We are watching Louisiana, as well we 
should.
    Mr. SHAW. The time of the gentleman has expired. Mr. 
Weller?
    Mr. WELLER. Thank you, Mr. Chairman. Mr. Secretary, welcome 
to the Committee. Good to have you here, and I appreciate the 
opportunity to talk with you this morning. The subject of 
community health centers, I appreciate my colleague from 
Washington State drawing attention to them, and first I just 
want to thank you as well as your predecessor, Secretary 
Thompson, for implementing the President's goal of expanding 
community health centers. Certainly in the last 5 years, I 
think the numbers I have seen, there are 777 new health centers 
that have been established and expanded, and 3.7 million more 
Americans, particularly low-income Americans who previously had 
limited access to quality health care, are now being served 
because of that expansion, and I have enjoyed working with 
Secretary Thompson and others in this goal.
    Let me direct my question, I guess, as we look at the 
President's budget as it addresses community health centers. 
The President's budget states that he wants to increase access 
to health care, particularly for low-income Americans, through 
adding 300 new and expanded health care sites, and including 
within those 300 new and expanded health care center sites 80 
new sites in counties with a high prevalence of poverty. How 
will that be achieved in the President's budget? Can you give 
us more specifics on how they would achieve that goal?
    Secretary LEAVITT. The funding is there, and you have the 
statistics right. We are looking to add 302 new centers, which 
will continue the movement toward the President's goal of 
1,200. He now has a new matter that has been proposed, and that 
is to add 80 of those in low-income or high-poverty areas. That 
is just one part of the way the President proposes to expand 
the kind of access that people have. It is a goal on which the 
President has some passion, and I think you have expressed it.
    As we indicated, these are sites that communities love to 
have and compete to have, and I have regular calls from Members 
of Congress saying, ``We would like to have one of these in our 
area. We think we should qualify, but we have not been 
approved.'' I wish we had more money to do it because we could 
expand them in an almost unlimited----
    Mr. WELLER. The county community health center located in 
Joliet, Illinois, in my district, I have been a supporter of 
that. When I visit it--and I visit at least once a year--I see 
not only low-income families, but also immigrants, minorities, 
and a lot of mothers with children that are utilizing the 
health care that is available through the community health 
center. Specifically, Mr. Secretary, can you tell us, in the 
President's budget that he has submitted to the Congress, what 
he proposes in funding for community health centers and how 
that compares to past year?
    Secretary LEAVITT. There is an increase of $181 million 
that has been proposed in this budget for that purpose.
    Mr. WELLER. How does that compare to previous years?
    Secretary LEAVITT. I am not sure. I am not sure of the 
answer to that in terms of the actual dollars.
    Mr. WELLER. Was that a $181 million increase?
    Secretary LEAVITT. We have 4,000 centers in all, in total. 
The President set a goal to improve or add 1,200 new ones.
    Mr. WELLER. Right.
    Secretary LEAVITT. You have cited the fact that we had 
already done so with 700-plus, and we now want to have another 
302, and 82 of those will be in areas that, of course, will be 
targeted----
    Mr. WELLER. You are saying the President proposes a $181 
million increase over previous funding.
    Secretary LEAVITT. That is correct.
    Mr. WELLER. I would note, having worked on this issue with 
your predecessor and with the Bush Administration, that every 
year the President has proposed a record increase in funding 
for community health centers, and I applaud that as we set 
priorities. As you know, we are in a deficit reduction mode. We 
have got to get spending under control. The President has made 
this a priority.
    One note, and I consider this a serious note, an area where 
I hope, Mr. Secretary, that we can work together, and that is 
the issue of the per visit payment limit, otherwise known as 
the Medicare payment cap. Studies have shown that a large 
majority of community health centers have experienced losses 
totaling over $51 million as a result of this payment cap, the 
average loss being about $75,000 on average for each community 
health center. We often think from Washington terms that is not 
that much money, but for a local community health center, that 
can have a big impact on a health center, and obviously 
reimbursement issues--and as a Governor, you dealt with them as 
a Governor and know how they affect the quality of care. I 
would note that the payment cap methodology has not been 
reviewed or adjusted since its conception in 1992, and the 
payment cap itself is adjusted for inflation only for physician 
services.
    That is why, Mr. Secretary, I want to ask you to examine 
the payment cap and look at how that can be part of the 
President's strategy to improve health care that would be 
available through community health centers. I have worked with 
my friend and colleague, Mr. Lewis of Georgia. I know he is 
interested in this issue, and I was wondering what your 
thoughts are on the payment cap. Is this something you feel 
deserves review, and is this something that we can work 
together to improve upon so we can help achieve the President's 
goal of improving health care through community health centers?
    Secretary LEAVITT. Congressman, I have been in dozens and 
dozens of community health centers. Every one of them is 
unique. Every one of them is a community that has in some way 
come together to put together a formula that works for them. 
There are some consistencies not only in the formulas they come 
up with, but the problems and challenges. The one that you 
mentioned of the payment cap is one that is universally cited 
as I go around and speak with them. We would be very pleased to 
have a conversation about the way that barrier could be 
overcome.
    Mr. SHAW. The time of the gentleman has expired.
    Mr. WELLER. Thank you, Mr. Secretary. I look forward to 
working with you on this.
    Mr. SHAW. Mr. Becerra?
    Mr. BECERRA. Thank you, Mr. Chairman. Mr. Secretary, thank 
you very much for being with us, and thanks again for the 
patience. We know it takes a while to get through all the 
questions, but we appreciate that you are willing to stay with 
us.
    Secretary LEAVITT. Thank you.
    Mr. BECERRA. I have a couple of questions. First I would 
like to touch on this whole issue of the prescription drug 
implementation, because in my State of California, as you are 
aware, not only the Governor and our four legislative leaders 
in the Senate and Assembly, Republican and Democrat, have 
written to you and the President saying we need some help, but 
I think throughout this country Governors and State legislators 
are saying this is not going well. The implementation has begun 
disastrously. You have millions of seniors who are wondering 
what to do. Now, I am looking at a letter--and I would like to 
submit this for the record, Mr. Chairman--dated January 13 from 
Governor Schwarzenegger in California and the four legislative 
leaders, Republican and Democrat, in the California 
legislature, asking for your help--it is addressed to you 
directly--in making sure that this transition from the Medicare 
Programs that existed and whatever drug plans that seniors had 
in California to this new plan, that during that time seniors, 
especially what we call dual-eligible seniors, those who are 
qualified for Medicaid--in California it is called MediCAL--
don't lose their coverage. I will just quote a couple of 
passages from the Governor's letter.
    ``Our residents are having difficulties accessing their 
prescription drugs.'' He goes on to say, ``Too many 
Californians are unable to get the prescription drugs they need 
to stay alive. Pharmacies are being overloaded with 
administrative responsibilities while trying to clarify 
patients' eligibility and enrollment information so they can 
bill the drug plans for services provided. The drug plans are 
not answering the phone calls coming in and are not resolving a 
large number of the problems people are facing. In short,'' he 
goes on, ``the transition is not functioning as CMS intended.'' 
He goes on, ``As a result, beneficiaries are being denied 
access to life-saving medications they need.''
    He goes on to ask if the Federal Government will work with 
the States to implement a temporary automated system that can 
help manage this transition, and he makes a call for the 
Federal Government to ``work with the State of California to 
ensure that the costs incurred by California taxpayers for this 
temporary expenditure are reimbursed.''
    So, my question first, Mr. Secretary, is: Are you prepared 
to say today that the Federal Government will reimburse my 
State of California and its taxpayers and any other State that 
faces similar problems with their dual-eligible Medicaid-
Medicare patients, reimburse those taxpayers for the costs 
incurred by the States in making sure that these seniors that 
qualify for prescription drugs don't lose those prescription 
drug benefits?
    Secretary LEAVITT. Congressman, what is the date on that 
letter?
    Mr. BECERRA. January 13th of this year.
    Secretary LEAVITT. We are approaching a month since then, 
and I can tell you that things are dramatically different. I 
think I may have met with Governor Schwarzenegger in his office 
a very short time before or after that letter, and----
    Mr. BECERRA. Well, I know he just held a press conference 
earlier this week saying that the problem is still dire, that 
the State legislature is going to move forward with an 
emergency plan to make sure that about a million seniors in 
California continue to have their coverage. So, they are still 
looking for reimbursement. They still haven't received the 
answer, and I am hoping that perhaps today here you can clarify 
whether or not the Federal Government will reimburse States 
like California, California taxpayers.
    Secretary LEAVITT. I have met with Governor Schwarzenegger 
and had regular communication with his office. I will tell you 
that things are dramatically better than when that letter was 
written. I will also tell you that we have indicated a 
willingness to reimburse the States. We have waivers now--or 
had signed demonstration waivers with 30 States. California has 
not chosen to sign one.
    Mr. BECERRA. Mr. Secretary, the fact that you are saying 
you are willing to reimburse is probably the most important 
thing, and I think that is critical.
    Secretary LEAVITT. I am willing to reimburse, but the 
States have to do their part as well. The 30 States have done 
that so far, and we are willing to work and are working daily 
with California.
    Mr. BECERRA. I appreciate that.
    Secretary LEAVITT. The important thing for me to 
communicate with you, though, Congressman, is that the 
conditions that existed when that letter was written do not 
exist today.
    Mr. BECERRA. Then we have to talk to the Governor because, 
as I said, he held a press conference this week saying that the 
situation is still the same for seniors in California.
    Secretary LEAVITT. I will say that, generally speaking, in 
a situation like this, the enthusiasm of critics is not always 
tempered with realism.
    Mr. BECERRA. Let me move on to one other point that is of 
some concern to me. As a trustee for the Social Security 
program, you have a great deal to say about what happens with 
Social Security. The President's budget includes very 
explicitly some $712 billion for privatization, his idea of 
privatizing Social Security. I have a difficult time 
understanding how it is that the President is able to find $712 
billion in his budget for privatization of Social Security, yet 
the President's budget also calls for the elimination of a $255 
lump-sum death payment that has been part of Social Security 
for more than 50 years for the survivors of a Social Security 
recipient who dies. On top of that, the budget calls for a cut-
off of monthly survivor benefits to 16- and 17-year-olds who 
are not in high school, so if they had to go to work to help 
the family, they would lose their monthly survivor benefit if 
their parent who was a Social Security recipient happened to 
die.
    Then you look at the fact that there are numerous programs 
under your jurisdiction that are being cut. Alzheimer's disease 
demonstration programs under the Administration of Aging, a $12 
million program is being zeroed out. Traumatic brain injury 
program focused on kids, a $9 million program being zeroed out. 
Universal newborn hearing program, a $9 million program being 
zeroed out. Emergency medical services for children, a $19 
million program being zeroed out. Training in primary care 
medicine and dentistry, an $88, $89 million program being 
zeroed out.
    All of these wouldn't total up to even 1 percent of the 
cost of the President's proposal to privatize Social Security 
over the long term, and so I am wondering if you could comment 
as to the priorities that the President and this Administration 
has with regard to seniors, Social Security, and health care.
    Secretary LEAVITT. Regrettably, we won't have time to 
respond to all of those. In my opening comments, I indicated 
that we are in a time of deficit reduction, and every program 
that you have spoken of is a program that obviously resonates 
with me, as it does you. I laid out a series of principles that 
we are using to do our best to meet the needs of the American 
people, all of them.
    Mr. BECERRA. I appreciate it, Mr. Secretary. Mr. Chairman, 
I would like to make sure that included in the record is the 
letter from Governor Schwarzenegger dated January 13th, and 
also to make sure that Mr. McDermott's reference to the October 
15, 1999, letter of the National Governors' Association, of 
which then-Governor Leavitt was a part, is also included in the 
record.
    Mr. SHAW. Without objection.

    [The information follows:]

                                     Governor Arnold Schwarzenegger
                                                      State Capitol
                                               Sacramento, CA 95814
                                                   January 13, 2006

The Honorable Michael O. Leavitt
Secretary of Health and Human Services
U. S. Department of Health and Human Services
200 Independence Avenue, S.W.
Washington, DC 20201

Dear Mr. Secretary,

    We write today to express our deep concern over the initial 
implementation of the new Medicare Part D prescription drug benefit. We 
want to work cooperatively with you to ensure that the nearly one 
million Californians who are dually eligible for Medicare and Medi-Cal 
have access to the prescription drugs that are essential to maintaining 
their health. The individuals are among the most vulnerable of Medi-Cal 
beneficiaries--they are either seniors or disabled persons--many with 
physical or mental disabilities, all of whom have few resources or 
income.
    Our residents are having difficulties accessing their prescription 
drugs. As a result, we are triggering state programs to provide 
temporary, emergency coverage of prescription drug benefits for the 
nearly one million Californians who are dually eligible for Medi-Cal 
and Medicare. We recognize the difficult task facing the staff at the 
Centers for Medicare and Medicaid Services (CMS) during this initial 
transition. The creation of a new program of this size is a monumental 
task, but the unprecedented movement of these one million dual 
eligibles to the new Medicare drug program on one calendar day appears 
to have overwhelmed the CMS and drug plan systems.
    As you know, CMS has been assuring states and beneficiaries that 
mechanisms were in place to ensure that during the transition no dual 
eligibles would go without their needed medications. While your staff 
reports that error rates have declined from 90 percent to 20 percent, 
this is still unacceptable. Too many Californians are unable to get the 
prescription drugs they need to stay alive. Pharmacies are being 
overloaded with administrative responsibilities while trying to clarify 
patients' eligibility and enrollment information so they can bill the 
drug plans for services provided. The drug plans are not answering the 
phone calls coming in and are not resolving a large number of the 
problems people are facing. We receive daily reports of beneficiaries 
in great distress because they have been unable to obtain their 
medications or are mistakenly required to pay significant fees in order 
to fill a prescription. In short, the transition is not functioning as 
CMS intended for some of the dual eligible population, and as a result, 
beneficiaries are being denied access to lifesaving medications they 
need.
    We would like to work with the federal government so that a 
temporary automated system can immediately be implemented to have 
Medicare pay for drugs for dual eligibles who are unable to obtain 
medications due to the transition problems. As you can appreciate, such 
a process would allow pharmacies to be paid for prescription 
medications using their normal billing system without the need for 
either the pharmacy or the beneficiary to make calls to either Medicare 
or the Medicare drug plan. This will allow Medicare patients to 
continue to have access to their needed medications while the new 
program's implementation problems are being addressed. This is critical 
to ensure that the burden of this implementation does not fall upon 
those patients who are least able to handle a loss of their 
medications.
    We intend to work closely and cooperatively with you and the 
Congress to ensure that beneficiaries receive the medications they need 
and the law intends. In addition, we call on the federal government to 
work with the State of California to ensure that the costs incurred by 
California taxpayers for this temporary expenditure are reimbursed. In 
the meantime, we will continue to assist your efforts to implement the 
Medicare Modernization Act to protect and care for our most vulnerable 
residents.
            Sincerely,
                                             Arnold Schwarzenegger,
                                                           Governor

                                                         Don Perata
                                       Senate President Pro Tempore

                                                      Dick Ackerman
                                           Senate Republican Leader

                                                       Fabian Nunez
                                                   Assembly Speaker

                                                     Kevin McCarthy
                                         Assembly Republican Leader
                                 ______
                                 
                                    National Governors' Association
                                               Washington, DC 20001
                                                   October 15, 1999
The Honorable Ted Stevens
Chairman, Senate Appropriations Committee
S-128, The Capitol
Washington, D.C. 20510

The Honorable Robert C. Byrd
Ranking Member, Senate Appropriations Committee
S-206, The Capitol
Washington, D.C. 20510

The Honorable C.W. Young
Chairman, House Appropriations Committee
H-218, The Capitol
Washington, D.C. 20515

The Honorable David Obey
Ranking Member, House Appropriations Committee
1016 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Stevens, Senator Byrd, Chairman Young, and Representative 
Obey:

    As you begin negotiations on the fiscal 2000 Labor, Health and 
Human Services, and Education (Labor-HHS) appropriations bill, the 
nation's Governors strongly urge to maintain your commitment to key 
state programs. We are adamantly opposed, as stated in the attached 
resolution the Governors adopted in August, to cutting funding for 
other vital health and human services programs such as Temporary 
Assistance for Needy Families (TANF), Title XX/Social Services Block 
Grant (SSBG) Medicaid, the Children's Health Insurance Program (CHIP), 
child support, and education and training programs which would 
adversely affect millions of Americans--with the greatest impact on 
children and the elderly in the greatest need.
    We are especially concerned about the status of SSBG in the current 
versions of the Labor-HHS bills. Over the past few years, SSBG has 
taken more than its share of cuts in federal funding. As part of the 
1996 welfare reform deal, Congress made a commitment to Governors that 
SSBG would be level funded at $2.38 billion each year. In fact, 
Governors reluctantly accepted a 15 percent cut in SSBG funds at that 
time in exchange for the commitment for stable funding in the future. 
However, repeated cuts in SSBG have been enacted regardless of that 
commitment. In fiscal 1998, funding for SSBG was reduced to $2.299 
billion. It was again reduced in fiscal 1999 to $1.909 billion. Further 
reductions in funding for SSBG will result in cuts to vital human 
services for our most vulnerable citizens.
    In addition, Governors strongly support the provision from the 1996 
welfare reform law that allows states to transfer up to 10 percent of 
their TANF block grant into SSBG. Both the House and Senate versions of 
the fiscal 2000 Labor-HHS bill reduce the amount states can transfer 
from TANF to SSBG. This restriction of flexibility is in essence an 
additional cut in funding for SSBG. The nation's Governors strongly 
urge you to restore the transferability provision to the full 10 
percent.
    SSBG provides services to needy populations, including low-income 
children and families, the elderly, and the disabled. While SSBG does 
have a strong connection with welfare reform efforts in states by 
providing valuable resources for child care and transportation, it also 
provides services to many individuals who are not considered welfare 
recipients. For example, in many states, SSBG funding is used to 
provide foster care assistance, meals on wheels for the elderly, and 
independent living services for the disabled--programs which are not 
allowable uses of welfare funds such as TANF.
    The Governors are not seeking increased federal funding; we are 
simply requesting that you fulfill your commitments and reject cuts in 
programs such as SSBG that would jeopardize our strong state-federal 
partnership.
            Sincerely,
                                        Governor Michael O. Leavitt
                                                           Chairman

                                      Governor Parris N. Glendening
                                                      Vice Chairman

                                 

    Mr. SHAW. Also without objection, I would like to put in 
the record a letter from the Department of Health and Human 
Services dated February 6th in which it shows that the reduced 
drug cost is going to save the State of California $113 
million, and I think that bears directly upon the problem that 
you have related to. So, without objection, both letters will 
be put into the record.

    [The information follows:]

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Administrator
Washington, DC 20201

Feb 6, 2006

S. Kimberly Belshe
Secretary
Health and Human Services Agency
State of California
1600 Ninth Street
Sacramento, California 95814

Dear Secretary Belshe:

    Thank you and your staff for the time spent over these past several 
months in discussions regarding the implementation of the Medicare 
Modernization Act of 2003 (MMA) and the Part D program. Most recently, 
your staff participated in the development of the section 402 
Demonstration Application Template for Reimbursement of State Costs for 
Provision of Part D Drugs which was released last week. I am pleased 
that states are already applying for the Demonstration.
    Throughout the discussions and requests for data regarding the 
state's net savings as a result of MMA, it has been our impression that 
California has consistently underestimated its savings in both the 
short-term and long-term. Moreover, California's recent request to be 
repaid the difference between what Part D and what Medi-Cal pays in the 
current discussions about the transition period to Part D certainly 
implies that the state would have spent more on behalf of dual 
eligibles than what Medicare plans will spend.
    As the President's Budget for 2007 is officially released today, I 
am able to fully respond to your letter of December 14,2005 in which 
you raised questions about the estimated savings to the state through 
federal assumption of prescription drugs which is then partially offset 
through the phased-down state contribution.
    Over the course of last year, our staffs had a number of occasions 
to discuss the state's estimated spending and savings and your requests 
to use alternative accounting method for rebates. The state estimated 
the requested adjustment would ``drop California's phased-down costs by 
$37.1 million.'' You also requested an adjustment to the baseline to 
``recognize the significant Medicaid prescription drug cost containment 
we implemented in September 2004.'' According to your letter, 
California's growth rate for calculating the state contribution should 
be 24.66 percent rather than the federal projected growth rate of 35.54 
percent.
    I am pleased to inform you that the newly updated National Health 
Expenditures (NHE) growth rate to be used for the calculation of the 
state contribution in the President's Budget is even lower than 
California's index. Nationally, the state contributions will be reduced 
by $37 billion in the period 2006-2015 compared to these costs 
estimated last summer in the Mid Session Review. In addition, we will 
apply the new index to recalculate the per capita amount used in the 
state contribution for CY 2006. California's new per capita amount will 
be $89.02 for the January-September period compared to the old amount 
of $98.54, a reduction of 9.7 percent.
    According to our estimates, when comparing annual payments based on 
December actual enrollment reported by California, using the new (NHE) 
will mean additional savings of $113 million for the state in CY 2006. 
These savings are significantly larger than you have requested based on 
your own estimates.
    In November, your staff provided data that estimated the State 
General Fund cost of drug expenditures for 1,021,000 dual eligibles in 
2006 at $1,158,368,500. In CY 2006, the state will make only 11 
payments for the state contribution. Even at the old per capita amount, 
California would have saved $52 million in CY 2006 (1,021,000 x $98.54 
x 11 months equals $1,106,702,740) which is worth even mote than the 
change to accrual methodology that you requested. Applying the new per 
capita amount to California's data, the state will save $158,584,880 
(1,021,000 x $89.02 x 11 months equals $999,783,620).
    We had previously estimated California's drug spending for duals in 
2006 would have been higher than state estimates resulting in even 
greater savings to the state, but applying California's own data, there 
is no reason to doubt the state will spend less with the state 
contribution than it would have if California had continued full 
coverage of the duals under Medi-Cal.
    While California has reported it has spent $18 million (including 
administrative costs) as of February 3 for the transition period to 
Part D, our Demonstration would reimburse the state for what it has 
spent. It is unclear to us, based on the guidance provided to 
pharmacists, whether California is being billed for the $1 or $3 
Medicare copayment or whether they have been collected at the pharmacy. 
What is clear is that state would recoup nearly all of the $18 million 
it has spent should the state choose to participate.
    While economists and analysts can reasonably adopt different sets 
of assumptions and estimates are constantly updated to reflect better 
and more current data, we are pleased that even using California's own 
data, the new growth rate will get savings that exceed your 
expectations.
            Sincerely,
                                            Mark McClellan, MD, PhD

    Attachment:

                      Revised Clawback Comparisons
------------------------------------------------------------------------
                                  B Annual      C Annual
                                Payments Old  Payments New
                                   NHE w/        NHE w/     D Difference
           A States               December      December        (C-B)
                                   Actual        Actual
                                 Enrollment    Enrollment
------------------------------------------------------------------------
Alaska                          $19,040,841   $17,202,153   $(1,838,687)

------------------------------------------------------------------------
Alabama                         $65,599,530   $59,264,881   $(6,334,648)

------------------------------------------------------------------------
Arkansas                        $33,815,887   $30,550,440   $(3,265,447)

------------------------------------------------------------------------
Arizona                         $57,615,285   $52,051,639   $(5,563,646)

------------------------------------------------------------------------
California                      $1,172,151,9  $1,058,962,6  $(113,189,39
                                 95            04            1)
------------------------------------------------------------------------
Colorado                        $72,876,673   $65,839,304   $(7,037,369)

------------------------------------------------------------------------
Connecticut                     $124,059,021  $112,079,205  $(11,979,816
                                                             )
------------------------------------------------------------------------
District of Col.                $10,975,558   $9,915,699    $(1,059,860)

------------------------------------------------------------------------
Delaware                        $14,025,128   $12,670,785   $(1,354,343)

------------------------------------------------------------------------
Florida                         $479,984,275  $433,634,375  $(46,349,900
                                                             )
------------------------------------------------------------------------
Georgia                         $130,993,456  $118,344,013  $(12,649,443
                                                             )
------------------------------------------------------------------------
Hawaii                          $22,175,070   $20,033,724   $(2,141,346)

------------------------------------------------------------------------
Iowa                            $66,174,915   $59,784,704   $(6,390,211)

------------------------------------------------------------------------
Idaho                           $18,060,946   $16,316,883   $(1,744,063)

------------------------------------------------------------------------
Illinois                        $333,221,963  $301,044,232  $(32,177,731
                                                             )
------------------------------------------------------------------------
Indiana                         $99,283,770   $89,696,387   $(9,587,382)

------------------------------------------------------------------------
Kansas                          $48,756,251   $44,048,082   $(4,708,170)

------------------------------------------------------------------------
Kentucky                        $81,122,635   $73,288,990   $(7,833,644)

------------------------------------------------------------------------
Louisiana                       $82,793,438   $74,798,452   $(7,994,986)

------------------------------------------------------------------------
Massachusetts                   $239,970,806  $216,797,916  $(23,172,890
                                                             )
------------------------------------------------------------------------
Maryland                        $92,240,710   $83,333,444   $(8,907,266)

------------------------------------------------------------------------
Maine                           $45,260,376   $40,889,787   $(4,370,589)

------------------------------------------------------------------------
Michigan                        $188,540,434  $170,333,941  $(18,206,493
                                                             )
------------------------------------------------------------------------
Minnesota                       $109,733,219  $99,136,780   $(10,596,438
                                                             )
------------------------------------------------------------------------
Missouri                        $191,708,376  $173,195,969  $(18,512,407
                                                             )
------------------------------------------------------------------------
Mississippi                     $76,553,279   $69,160,877   $(7,392,402)

------------------------------------------------------------------------
Montana                         $12,238,192   $11,056,405   $(1,181,787)

------------------------------------------------------------------------
North Carolina                  $247,898,287  $223,959,876  $(23,938,411
                                                             )
------------------------------------------------------------------------
North Dakota                    $5,458,968    $4,931,821    $(527,148)

------------------------------------------------------------------------
Nebraska                        $41,619,392   $37,600,396   $(4,018,996)

------------------------------------------------------------------------
New Hampshire                   $30,585,921   $27,632,378   $(2,953,543)

------------------------------------------------------------------------
New Jersey                      $271,291,722  $245,094,314  $(26,197,409
                                                             )
------------------------------------------------------------------------
New Mexico                      $8,845,259    $17,025,458   $(1,819,801)

------------------------------------------------------------------------
Nevada                          $22,496,284   $20,323,920   $(2,172,364)

------------------------------------------------------------------------
New York                        $779,819,148  $704,515,557  $(75,303,591
                                                             )
------------------------------------------------------------------------
Ohio                            $230,584,176  $208,317,710  $(22,266,466
                                                             )
------------------------------------------------------------------------
Oklahoma                        $55,382,475   $50,034,441   $(5,348,034)

------------------------------------------------------------------------
Oregon                          $63,234,635   $57,128,354   $(6,106,281)

------------------------------------------------------------------------
Pennsylvania                    $399,667,987  $361,073,866  $(38,594,121
                                                             )
------------------------------------------------------------------------
Rhode Island                    $41,678,993   $37,654,242   $(4,024,751)

------------------------------------------------------------------------
South Carolina                  $77,385,665   $69,912,883   $(7,472,782)

------------------------------------------------------------------------
South Dakota                    $12,956,089   $11,704,978   $(1,251,111)

------------------------------------------------------------------------
Tennessee                       $283,931,372  $256,513,410  $(27,417,962
                                                             )
------------------------------------------------------------------------
Texas                           $303,361,506  $274,067,264  $(29,294,242
                                                             )
------------------------------------------------------------------------
Utah                            $21,471,442   $19,398,042   $(2,073,400)

------------------------------------------------------------------------
Virginia                        $166,965,498  $150,842,399  $(16,123,099
                                                             )
------------------------------------------------------------------------
Vermont                         $18,454,617   $16,672,538   $(1,782,078)

------------------------------------------------------------------------
Washington                      $145,340,530  $131,305,656  $(14,034,874
                                                             )
------------------------------------------------------------------------
Wisconsin                       $145,195,338  $131,174,484  $(14,020,854
                                                             )
------------------------------------------------------------------------
West Virginia                   $30,780,689   $27,808,337   $(2,972,351)

------------------------------------------------------------------------
Wyoming                         $8,358,727    $7,551,563    $(807,164)

------------------------------------------------------------------------
    Total                       $7,311,736,7  $6,605,675,5  $(706,061,18
                                 48            59            9)
------------------------------------------------------------------------
    Percent Reduction                                       -9.66%
------------------------------------------------------------------------



                                           Revised Per Capita Amounts
----------------------------------------------------------------------------------------------------------------
                                               Per Capita Amounts                    Per Capita Amounts
                                     ---------------------------------------------------------------------------
                                            Old NHE w/December Actual             New NHE w/December Actual
                STATE                              Enrollment                            Enrollment
                                     ---------------------------------------------------------------------------
                                           JAN-SEPT                              JAN-SEPT
                                           BASELINE      OCT-DEC  BASELINE       BASELINE      OCT-DEC  BASELINE
----------------------------------------------------------------------------------------------------------------
AK                                    145.32             142.67             131.29             128.89
----------------------------------------------------------------------------------------------------------------
AL                                     61.31              62.64              55.39              56.59
----------------------------------------------------------------------------------------------------------------
AR                                     48.31              49.05              43.64              44.31
----------------------------------------------------------------------------------------------------------------
AZ                                     49.43              50.19              44.66              45.35
----------------------------------------------------------------------------------------------------------------
CA                                     98.54              98.54              89.02              89.02
----------------------------------------------------------------------------------------------------------------
CO                                    126.97             126.97             114.71             114.71
----------------------------------------------------------------------------------------------------------------
CT                                    156.20             156.20             141.12             141.12
----------------------------------------------------------------------------------------------------------------
DC                                     56.02              56.02              50.61              50.61
----------------------------------------------------------------------------------------------------------------
DE                                    124.97             125.20             112.90             113.11
----------------------------------------------------------------------------------------------------------------
FL                                    112.05             112.40             101.23             101.55
----------------------------------------------------------------------------------------------------------------
GA                                     89.00              85.90              80.40              77.61
----------------------------------------------------------------------------------------------------------------
HI                                     74.83              77.12              67.61              69.68
----------------------------------------------------------------------------------------------------------------
IA                                     98.07             102.46              88.60              92.57
----------------------------------------------------------------------------------------------------------------
ID                                     84.56              83.30              76.40              75.26
----------------------------------------------------------------------------------------------------------------
IL                                    127.63             127.63             115.31             115.31
----------------------------------------------------------------------------------------------------------------
IN                                     97.45              98.42              88.04              88.92
----------------------------------------------------------------------------------------------------------------
KS                                    105.40             105.83              95.22              95.61
----------------------------------------------------------------------------------------------------------------
KY                                     77.71              76.90              70.20              69.47
----------------------------------------------------------------------------------------------------------------
LA                                     75.52              75.77              68.22              68.45
----------------------------------------------------------------------------------------------------------------
MA                                    104.59             104.59              94.49              94.49
----------------------------------------------------------------------------------------------------------------
MD                                    133.43             133.43             120.55             120.55
----------------------------------------------------------------------------------------------------------------
ME                                     82.56              81.74              74.59              73.85
----------------------------------------------------------------------------------------------------------------
MI                                     82.13              82.53              74.20              74.56
----------------------------------------------------------------------------------------------------------------
MN                                    128.79             128.79             116.35             116.35
----------------------------------------------------------------------------------------------------------------
MO                                    119.96             121.00             108.38             109.32
----------------------------------------------------------------------------------------------------------------
MS                                     47.08              47.29              42.53              42.73
----------------------------------------------------------------------------------------------------------------
MT                                     75.35              79.00              68.07              71.38
----------------------------------------------------------------------------------------------------------------
NC                                     95.61              92.92              86.38              83.94
----------------------------------------------------------------------------------------------------------------
ND                                     76.43              78.96              69.05              71.34
----------------------------------------------------------------------------------------------------------------
NE                                    107.61             112.28              97.22             101.44
----------------------------------------------------------------------------------------------------------------
NH                                    148.33             148.33             134.01             134.01
----------------------------------------------------------------------------------------------------------------
NJ                                    159.59             159.59             144.18             144.18
----------------------------------------------------------------------------------------------------------------
NM                                     49.94              48.59              45.12              43.90
----------------------------------------------------------------------------------------------------------------
NV                                    109.35             111.35              98.79             100.60
----------------------------------------------------------------------------------------------------------------
NY                                    117.67             117.67             106.31             106.31
----------------------------------------------------------------------------------------------------------------
OH                                    127.34             128.04             115.05             115.68
----------------------------------------------------------------------------------------------------------------
OK                                     62.17              61.72              56.17              55.76
----------------------------------------------------------------------------------------------------------------
OR                                    100.16             101.46              90.49              91.66
----------------------------------------------------------------------------------------------------------------
PA                                    123.75             125.56             111.80             113.44
----------------------------------------------------------------------------------------------------------------
RI                                    115.60             120.93             104.44             109.25
----------------------------------------------------------------------------------------------------------------
SC                                     55.26              54.86              49.92              49.57
----------------------------------------------------------------------------------------------------------------
SD                                     90.90              96.49              82.12              87.17
----------------------------------------------------------------------------------------------------------------
TN                                    105.05             106.04              94.90              95.80
----------------------------------------------------------------------------------------------------------------
TX                                     78.37              78.13              70.80              70.59
----------------------------------------------------------------------------------------------------------------
UT                                     86.95              88.79              78.55              80.21
----------------------------------------------------------------------------------------------------------------
VA                                    137.20             137.20             123.95             123.95
----------------------------------------------------------------------------------------------------------------
VT                                    101.17             100.09              91.40              90.43
----------------------------------------------------------------------------------------------------------------
WA                                    127.21             126.91             114.93             114.65
----------------------------------------------------------------------------------------------------------------
WI                                    111.82             112.30             101.03             101.45
----------------------------------------------------------------------------------------------------------------
WV                                     63.89              64.30              57.72              58.09
----------------------------------------------------------------------------------------------------------------
WY                                    128.57             132.28             116.15             119.50
----------------------------------------------------------------------------------------------------------------



                                   Summary Of State Use Of IGTs And Recycling
----------------------------------------------------------------------------------------------------------------
                                                               (3) States
                                    (1)                        that have      (4) CMS        (5)
                                   States    (2) States that    Revised     Identifies    Unknown-
             State                that Do       Use IGTs        Existing     Potential      SPAs     (6) No SPAs
                                  Not Use     Appropriately     IGTs by     Recycling-     Pending    Submitted
                                    IGTs                        Removing    States May     Review
                                                               Recycling     Disagree
----------------------------------------------------------------------------------------------------------------
Alabama                          .........  ................  X(IH/DSH/NF/ ............  X(PHYS)
                                                               HHA)**
Alaska                           X (OP)     ................  ...........  X (IH/NF)     ..........
Arizona*                         .........  X(OP)             ...........  ............  ..........
Arkansas                         .........  X (OP/PHYS)       X (IH/NF)    ............  ..........
California                       X (NF)     X(OP)             X (IH/       ............  ..........
                                                               DSH)**
Colorado                         X (IH/NF/  ................  ...........  ............  ..........
                                  PHYS)
Connecticut                      X (IH/NF)  ................  ...........  ............  ..........
Delaware                         .........  ................  ...........  ............  ..........  X
DC                               .........  ................  ...........  ............  ..........  X
Florida                          .........  X (IH/OP/NF/      ...........  ............  ..........
                                             PHYS)
Georgia                          .........  ................  X (IH/DSH/   ............  ..........
                                                               NF)**
Hawaii                           X (IH/NF)  ................  ...........  ............  ..........
Idaho                            X (NF)     X(IH)***          ...........  ............  ..........
Illinois                         .........  ................  ...........  X (DSH)-      ..........
                                                                            X(NF)
Indiana                          .........  X (IH/PHYS/OP/    ...........  ............  ..........
                                             TRANS)
Iowa                             .........  ................  X (IH/DSH/   ............  ..........
                                                               NF)
Kansas                           .........  ................  X (DSH/NF)   ............  ..........
Kentucky                         X (OP)     X(OLP)            X (IH/NF)    ............  ..........
                                                               (PHYS)**
Louisiana                        X (DSH)    ................  X (IH/OP/    ............  ..........
                                                               NF)
Maine                            X (NF/OP)  X (IH)            ...........  ............  ..........
Maryland                         X (IH/NF/  ................  ...........  ............  ..........
                                  PHYS)
Massachusetts                    .........  ................  X (IH/OH/    ............  ..........
                                                               NF)
Michigan                         .........  X(PHYS)           X (IH/NF)    ............  ..........
Minnesota                        .........  ................  X (IH--      X (IH/DSH/    ..........
                                                               GME)         NF)
Mississippi                      .........  X(NF)             ...........  X (DSH)       ..........
Missouri                         X (IH)     X (PHYS)X (NF)    X (OP)       ............  ..........
Montana                          .........  X (IH/TRANS)      X (NF)       ............  ..........
Nebraska                         X (IH)     ................  X(NF)        ............  ..........
Nevada                           X(NF)      X (IH/CLINIC)     ...........  ............  X (PROF)
New Hampshire                    X (IH)     ................  X (NF)       ............  ..........
New Jersey                       .........  ................  X(NF)**      ............  ..........
New Mexico                       .........  ................  ...........  ............  ..........  X
New York                         .........  X (CLINIC)        X (IH/DSH/   ............  ..........
                                                               OP/NF)
N. Carolina                      X (PHYS)   ................  X (DSH)      ............  ..........
N. Dakota                        X(IH)      ................  ...........  X (NF)        ..........
Ohio                             X (NF)     X (IH)            ...........  ............  ..........
Oklahoma                         X (NF)     X (PHYS)          X (IH/OP)    ............  ..........
Oregon                           .........  X (IH/SBS)        X (NF)       ............  ..........
Pennsylvania                     X (IH)     ................  X(NF)        ............  ..........
Rhode Island                     X (IH/NF)  ................  ...........  ............  ..........
S. Carolina                      .........  X (OP)            X (DSH/NF)   ............  X (OLP)
S. Dakota                        X (IH)     ................  X(NF)        ............  ..........
Tennessee                        .........  ................  X (NF)**     ............  ..........
Texas                            X (NF)     X (IH/OP)         ...........  ............  X (OP/
                                                                                          PHYS)
Utah                             .........  X (IH/NF/PHYS)    ...........  ............  ..........
Vermont                          X (IH/NF)  ................  ...........  ............  ..........
Virginia                         .........  ................  X (IH/NF/    ............  ..........
                                                               OP)
Washington                       .........  X(IH/NF)          ...........  ............
West Virginia                    .........  X (NF/IH/OP)      ...........  ............  ..........
Wisconsin                        .........  X (IH)            X(NF)        ............  ..........
Wyoming                          .........  X (IH/OP)         ...........  ............  ..........
    Total States                 23         23                27           5             5           3
----------------------------------------------------------------------------------------------------------------
*Has not submitted any IH/NF SPAs
** Final SPAs to be submitted/approved
*** Final documentation of procedures pending
-Cook County DSH

Key: NF--Nursing Facility Services; IH--Inpatient Hospital Services; DSH--Disproportionate Share Hospital; OP--
  Outpatient Hospital Services; SBS--School Based Services; GME--Graduate Medical Education; Trans--
  Transportation; Clinic--Clinic Services; Prof--Professional Services; Phys--Physician Services; OLP--Other
  Licensed Practitioners; and HHA--Home Health Agency


                                 

    Mr. THOMPSON. Mr. Chairman, could we see that letter?
    Mr. SHAW. Yes, I will have it distributed to the Members.
    Mr. THOMPSON. Thank you.
    Mr. SHAW. Ms. Hart?
    Ms. HART. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for taking the time to come before 
us at a very critical time for making sure that Americans are 
being provided with the services that they expect. Obviously, 
in a time of transition, there is some pain. We are trying to 
make sure that we address the problems and certainly fix them.
    We have had in my State of Pennsylvania a significant 
number of glitches; however, I do appreciate your quick 
response to many of them at this time.
    One of the things that has happened, I think, that some of 
the other Members have addressed a little bit has been the 
challenge regarding dual-eligibles, those who are covered by 
Medicare and Medicaid, as they transition from Medicaid to 
Medicare. Under the system, some of the States, especially 
Pennsylvania, have spent a significant number of resources sort 
of filling the gap during the transition, and I know CMS has 
acknowledged that they will be made whole for these 
expenditures.
    Can you give me an idea of how that is going to be done? Is 
that going to come out of some of the insurers that you have 
contracted with? What is the plan for that at this time, if 
there is one?
    Secretary LEAVITT. Let me reconcile the whole experience 
and then specifically answer your question.
    It became evident to us in early January that for the vast 
majority of people the system was working, but for some it was 
not. When they went to the drug counter for the first time, the 
system did not know who they were.
    We found that there were two basic problems. First, when 
people enrolled late, that is to say, if they enrolled in the 
plan on December the 28th and then they went to the drug 
counter on the 2nd of January, the enrollment had not yet been 
accomplished. Consequently, it set off a series of manual 
transactions that the pharmacist had to do, and it took people 
more time, and it was frustrating to them. Likewise, if a 
person were to change plans late in the month, it had the same 
effect.
    There was a second part of that equation, and that is that 
as the data was transferred from, say, the State of 
Pennsylvania to CMS or from CMS to an insurance plan, the 
transition of the data was not always perfect, and the 
imperfection meant that there may have been Mary Smith in 
Philadelphia and there may have been 12 Mary Smiths. The 
pharmacist didn't know who it was and, consequently it caused 
more trouble. So, there were data-matching problems that there 
are always in a transition like this.
    Consequently, at the beginning of the transition, there 
were about 10 percent--and many of them were dual-eligibles--
that had to take more time at the drug counter. Now, States 
appropriately stepped up, and we cooperatively worked with them 
to say let's make certain that no one leaves the prescription 
drug counter with their prescription being filled. The State of 
Pennsylvania began to pay the pharmacists in situations where 
they were not certain.
    We have committed to pay the States or to reimburse the 
States for what the plan would have paid. We will also pay 
additional administrative expenses. Those will not come from 
the Federal budget--the administrative expenses will, but the 
cost of the drugs will come from the plans, and we will collect 
from the plans and give it to the States.
    Ms. HART. So, the reimbursement then, to make sure that I 
am following you, would have been, had all the information been 
correct and up-to-date and in order, would have come from the 
plan; therefore, that is where it is going to come from 
ultimately.
    Secretary LEAVITT. That is right. The plans received a 
premium for it, and they need to pay the claim. We will 
reconcile and make certain that the States do not have to deal 
with the plans. We will assure that that happens in a way so 
that it happens properly.
    The States were extraordinarily helpful in all of this, and 
if anyone decides they want to change 25 million beneficiaries 
on the same day, again, they should talk to me. One of the 
suggestions I would make is exactly what we did, and that is to 
have the States there as a buffer so we can feather out any 
problems, which is exactly what we are doing. The system is 
getting better every day. It is not only a good deal for 
seniors, but we are working through this, and the system gets 
better every day.
    Ms. HART. Before I run out of time, I just want to address 
one other issue as well, and that is specifically making sure 
that people with disabilities are getting services 
appropriately under the system. Is there some special thing 
that you are doing right now to help make sure that they are in 
line properly?
    Secretary LEAVITT. We have been working with the States to 
assure that any of those who are in special need categories are 
given assistance. There have been those who have found it 
frustrating when they go to the drug counter and find that they 
have to wait until we can identify them in the system. People 
are getting their prescriptions filled, the vast majority of 
them without delay and in a very routine way. Some are having 
problems. That number diminishes as time goes on, and we are 
taking particular care of those who are disabled or in the 
class that you have referred to as dual-eligibles.
    Ms. HART. All right. Thank you, Mr. Secretary. I yield 
back.
    Mr. SHAW. Mr. Jefferson may inquire.
    Mr. JEFFERSON. Thank you, Mr. Chairman.
    Mr. Secretary, I don't know quite where to begin, there is 
so much to talk about. I appreciate your comments to Mr. 
McCrery, of my home State, about the opportunity you see there 
to build a world-class health care facility back home, but I am 
having a little trouble understanding what the steps are that 
you have in mind to get there; what the resources are that you 
have identified to get to that point in time.
    I don't know if you have had a chance to read newspaper 
reports from back home about the doctors who have made the 
exodus from our city in the wake of the storm, some 4,000 or so 
before the storm, now some number of perhaps less than 1,000. 
Many of the ones who are there are specialty doctors who don't 
have general practices. Many are having a hard time. They have 
lost their businesses and patients have gone away, of course, 
so they don't have any--it is very hard to start up again. 
There are gaps in insurance, and the Small Business 
Administration (SBA) is not working for them.
    A lot of the programs that our area depended on heavily--
you have mentioned already how you were there and how they had 
a difficult time getting services, even emergency care 
services. Imagine how bad that would be now compared to what it 
was then.
    So, I would like you to help me identify what you want to 
apply with respect to the specific services support that will 
get us back to beyond where we were in the light of the fact 
that these important reductions in programs are very critical 
to us. They were critical to us back before the storm, and now 
even more so, and yet we are looking at cuts here that may hurt 
us.
    One of the programs that is proposed by some of the doctors 
back home is to give them incentives to relocate, such as those 
that are given to folks to locate on Indian reservations and in 
rural areas now, incentives that are cut back in the budget, 
but which we were hoping we could add on to New Orleans to make 
it a special kind of place to attract doctors back, to give 
them support for salaries, to give them support for relief from 
medical school payments, that sort of thing.
    Tell me, if you can, what are the specific resources 
available to us to get us to this world-class position you were 
talking about, that are in your budget now? What do you think 
of these incentives that we need to help draw our doctors back 
home?
    Secretary LEAVITT. The best incentive for a physician to go 
back home is a health care system that works, and most of those 
people will tell you and me that the one that was there before 
didn't, and that if we can build one that does, it will be a 
big improvement, one they will want to work in.
    Mr. JEFFERSON. Tell me how to do that, how you are 
supporting that.
    Secretary LEAVITT. I met with the entire medical community, 
the leaders of the hospital associations, the medical 
associations, the insurance companies, with the hospital 
administrators and so forth, and said to them: You don't want 
Washington to design this for you. You want to do it yourself. 
Let's agree upon some principles. Instead of building a lot of 
tertiary care and expecting people to walk up to your emergency 
rooms, why don't we have a large number of community clinics 
where people can get preventative care. Why don't we use the 
Medicaid and the Medicare funds that we are already spending 
and the special dollars that have been allocated over the years 
to Louisiana to pay for its disproportionate share population, 
and design a system that not only includes prevention and 
wellness and electronic medical records, but also distributes 
health care in a way that people can reach out and get it.
    If we could agree upon those principles, I would be 
prepared, I conveyed to them, to spend considerable time and 
considerable resources from Medicaid and Medicare and the other 
sources that are available to design a new system that will 
work and work well and serve everybody.
    Mr. JEFFERSON. You would be committed to substantial new 
resources?
    Secretary LEAVITT. There are existing resources----
    Mr. JEFFERSON. Well, that is what worries me.
    Secretary LEAVITT. There is no health care system in 
greater New Orleans right now and substantially fewer people. 
If we can redirect the resources that are there, and there is 
$2 billion that was included in the DRA, a big portion of which 
went to pay for Medicare expenses that have already been 
conducted, but what is left over is available. That is a 
substantial amount of resources that we have discretion to use.
    Mr. JEFFERSON. The other thing I would like to ask you to 
address for me, although there is no time for it now, your 
Department invests a lot of money with the Institute of 
Medicine reports, various ones that talk about overcoming gaps 
in medical attention, research, and treatment of minority 
populations versus the larger populations in the country. For 
instance, the National Health Care Disparity Reports released 
in 2003, 2004, and 2005 to your agency illuminate a number of 
organizational, programmatic, and funding priorities that have 
been recommended to your agency as a result of your having 
contracted for them. Yet we don't see these being implemented 
in any meaningful way. Are there plans to take these reports 
and put them into action on your watch?
    Secretary LEAVITT. A good example would be the new HIV/AIDS 
initiative. We all know in this room that a very high 
disproportion of minority citizens are in the group who are 
struggling with that disease, and the initiative will be used 
to target and to assure that they get the help they need.
    Mr. JEFFERSON. I agree with that and I thank you for that, 
but the recommendations that are most outstanding for them, 
that are most continuous are the ones that relate to Medicaid 
and Medicare. I wish you would take a closer look at those and 
incorporate that into the Department's program for this coming 
year. Mr. Chairman, I would like to have a chance to submit 
this to the Secretary, and ask him in the name of the Committee 
to please make a response to these. There are so many questions 
here about these issues that I cannot get to them all now.
    [The information was not received at time of printing.]
    Secretary LEAVITT. Yes, sir.
    Mr. SHAW. The time of the gentleman has expired.
    Mr. Foley.
    Mr. FOLEY. Thank you very much, Mr. Chairman. Welcome, 
Governor. Let me first just take a minute on HSAs, because I 
think it is important for consumers to be empowered when it 
comes to health care. People in my community join Costco. They 
pay a membership fee to save money on household items. They 
will drive across a busy intersection to save a penny on a 
gallon of gas, and they will drive around town looking for an 
additional quarter percent interest on a Certificate of Deposit 
(CD). When it is their money, they are concerned about how they 
spend it. Under the current rules of engagement, insurance 
providers, others: ``Don't worry, it is covered. Your insurance 
will take care of it.'' No one asks fundamental questions.
    I was in the restaurant business. An all-you-can-eat salad 
buffet, people load up their plates. If it is 10 cents an 
ounce, they take only the items they want and what they like. 
We have to empower consumers. It is not always that easy, but I 
believe people make best decisions when it is their money.
    Community health centers. We had a dedication last week. 
The speaker complimented the Republican leadership, 
particularly the President for his focus on community health 
centers. The person doing the introduction was a Democrat. 
Sitting in the audience, the phrase was not specifically for 
me. My colleague Alcee Hastings was there. We have made 
phenomenal gains, and thanks to the $600,000 grant to that 
center, they are going to be serving minorities, AIDS patients, 
and others who currently do not have access. We are taking 
people out of the expensive emergency room settings and putting 
them in family user-friendly.
    I represent some Indian reservations. Those people are now 
in community health centers in the community because on the 
reservation they did not have the professionals to treat the 
patients. So, when I hear people using pejoratives like they 
are being ``thrown out of'' the reservation and into some 
inadequate health care--let me remind my colleagues, go visit 
some of those sites on Indian reservations. You will see the 
apparent need for quality professionals to serve that 
underserved community. Your community health centers are 
providing that.
    Let me also thank you for the $53 million allocation to 
displaced residents of the States impacted by the hurricanes--
Wilma, Katrina, and others. The $53 million to Florida, we 
sincerely appreciate it. Let it not be lost on any of my 
colleagues, particularly those who attended a funeral 
yesterday--Louisiana is getting $220 million, Mississippi $128 
million. So, the money is going to people who desperately need 
it, regardless of ethnicity, color, or background.
    Let me also ask you a very important question, and I thank 
you because I know Mr. McCrery and Mr. Shaw and I have all sent 
you a letter on the issue of IVIG, and I have your response, 
which is heartening, that you acknowledge not only the concerns 
of the Administration, your office particularly, but are also 
looking to provide some intermediate assistance. I know there 
has been a huge cry for help from our community participants in 
providing this life-saving treatment for patients with primary 
immune deficiency diseases, neuropathies, and a number of other 
disorders.
    It has been shocking, the lack of opportunity and access, 
the costs, and so if you could just take the remaining time and 
give me a little bit of comfort. I know your letter does 
provide it. I entered my questions into the record so that we 
can have a follow-up to those specifics. I also notice in your 
letter, you strongly suggest that you and other agencies will 
be working with patients, product manufacturers, distributors, 
physicians, and hospitals. If you could elaborate.
    Secretary LEAVITT. Thank you, Congressman. I would like to 
give you my direct assurance that we will be working with you 
and the other Members of Congress and your staff to resolve 
this situation. The CMS has established a temporary add-on 
payment for 2006 for physicians and for outpatient departments 
who administer the IVIG to Medicare patients. The physician can 
also contact the manufacturer to report problems, but we are on 
the problem, we understand it, and we want to resolve it.
    Mr. FOLEY. Great. That assurance is swell, and now I see my 
yellow light, but I also wanted to thank you particularly for 
Florida, as we embark on our Medicaid modernization, to try and 
find better ways to serve the community, those most needy. You 
have given us the flexibility. We are watching it carefully. I 
know there has been a lot of conversation on Part D. Some 
people have wanted to extend the deadline from the day we 
started enrollments. We understand there is a problem. We have 
expressed the concern. We want our constituents to be able to 
carefully enroll in a program. There is a reason April 15th is 
the date your taxes are due to the IRS. If you don't have a 
fixed deadline, no one will sign up. They will continue to push 
back and wait.
    I know you understand the concerns. I know you also 
understand the confusion. People should be a little patient. We 
have seen statistics that indicate a lot of people have 
enrolled in this very valuable program. So, to call it a 
failure, to call it so utterly confusing that people cannot 
figure it out, I think, demeans the senior citizens we serve. 
They made it through depressions. They made it through Korea, 
World War II, Vietnam, all the other conflicts of this world. 
Some people act like they cannot figure out a simple form. So, 
I look forward to working with you on making certain people get 
the benefits that they are entitled to.
    Secretary LEAVITT. Thank you.
    Mr. SHAW. The time of the gentleman has expired.
    Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary. I gather, Mr. Secretary, you agree with Chairman 
Thomas's opening comments that the implementation of this 
prescription drug coverage is one of the Administration's real 
success stories.
    Secretary LEAVITT. I think we would all agree that having 
millions of people have prescription drug coverage who didn't 
before----
    Mr. DOGGETT. As to how many millions fit in that category--
you have had all of 2004, all of 2005, we are now into 2006, 
and the millions that you have covered who were not covered 
when the President signed the bill into law in December of 2003 
is about 3.5 million. Isn't that correct?
    Secretary LEAVITT. Sir, we have been enrolling people since 
October 15th.
    Mr. DOGGETT. Yes, sir, and you have had----
    Secretary LEAVITT. November 15th.
    Mr. DOGGETT. --really 2 years to get ready for it, and you 
have enrolled--when you say millions, you have enrolled exactly 
3.6 million, haven't you, that didn't have coverage before.
    Secretary LEAVITT. There are 24 million people who 
participate, and many of those would not have prescription drug 
coverage today who may have had it a year ago and may well not 
have it next year.
    Mr. DOGGETT. Everyone--well, I understand the speculation 
about next year, but of your 24 million that you all boasted 
about today, only 3.6 million lacked coverage of some kind when 
this bill was signed into law, right?
    Secretary LEAVITT. Medicaid has been in law for 40 years, 
and there are still 50 percent of the people who are eligible, 
regrettably, who have not yet signed up.
    Mr. DOGGETT. Yes, sir, I am glad you make that point, and I 
assume you don't disagree with my 3.6 million figure or would 
have said so. You actually have reduced since last year in your 
publication in the Federal Register of 39 million people you 
were--of America's seniors that you were going to target to 
cover, that you would probably only get to 29 million this 
year, right?
    Secretary LEAVITT. It became evident to me that 28 to 30 
million would be a great success. The actuary established a 39-
million-person limit----
    Mr. DOGGETT. Is this----
    Secretary LEAVITT. --but in our judgment and the judgment 
of those who look at it from Wall Street and the markets, we 
believe 28 to 30 million is a reasonable number.
    Mr. DOGGETT. About 10 million or 11 million less than last 
year. With reference to this program, you refer in your written 
testimony to the President's comment about being good stewards 
of tax dollars. I gather it is also your belief that the 
implementation of this prescription drug program is one of the 
best examples of being a good steward of tax dollars, just as 
it is a good example of success for this Administration.
    Secretary LEAVITT. I think there is no question the fact 
that the market is now driving the cost of prescription drug 
coverage down is something we all ought to cheer.
    Mr. DOGGETT. The cost to the taxpayers of this bill 
currently is estimated to be over $700 billion for this decade, 
right?
    Secretary LEAVITT. The cost is coming down, and that is 
good news.
    Mr. DOGGETT. The cost to the taxpayers, the estimate still 
is over $700 billion for this decade, isn't it?
    Secretary LEAVITT. The cost estimates are as they are, and 
I am not----
    Mr. DOGGETT. You are not familiar with what it costs?
    Secretary LEAVITT. I am familiar with them, but there are 
lots of ways to express it, and what is clear is that we are 
seeing a dramatic reduction in the cost of prescription drugs 
for consumers----
    Mr. DOGGETT. Comparing that reduction----
    Secretary LEAVITT. --and it is because of the consumer--
because of the fact that consumers now have choice----
    Mr. DOGGETT. Yes, sir, and comparing that reduction in cost 
with a program that existed before this bill was signed into 
law where the Federal Government does some negotiating for our 
veterans to reduce their costs, you are also familiar, are you 
not, with the study of the top 20 most prescribed drugs, that 
if you take the very cheapest prices that these plans are now 
getting under the Republican prescription drug bill and you 
compare that to what the Veterans Administration negotiated on 
behalf of our veterans for their drug prices, that the veterans 
are still getting theirs at about half the lowest cost under 
these plans, aren't they?
    Secretary LEAVITT. I am not familiar with that study----
    Mr. DOGGETT. Not familiar with the tremendous savings----
    Secretary LEAVITT. I don't think it is necessarily the----
    Mr. DOGGETT. --that we get when you use negotiating power. 
You don't suggest that if your office on behalf of all Medicare 
recipients were involved in trying to negotiate the highest 
prices in the free world on prescription drugs that our 
uninsured folks have had to pay, that if you were involved in 
negotiating you couldn't get the prices down to a more 
reasonable level than what your most successful plans are 
achieving?
    Secretary LEAVITT. If that were the case, Secretaries of 
Health and Human Services would have used that authority with 
Medicaid, which is now the most expensive--until the DRA, is 
the most expensive drug plan----
    Mr. DOGGETT. You think----
    Secretary LEAVITT. The truth of the matter is the best way 
to reduce prescription drug costs is to have a market, which we 
now have for the first time, and we are seeing dramatic 
reductions in prices for all consumers----
    Mr. DOGGETT. So, you continue to oppose giving any 
negotiating authority as this bill does----
    Secretary LEAVITT. It is not the best way to bring prices 
down. We are seeing the best----
    Mr. DOGGETT. One other quick area----
    Secretary LEAVITT. --way, which is very clearly bringing 
the cost of prescription drugs down.
    Mr. DOGGETT. One other quick area, since my time is 
expiring, President Bush made history last year by being the 
first President in memory, I think, to call a White House 
Conference on Aging and then not show up for it. The first 
recommendation of that conference was to increase funding for 
the Older Americans Act (P.L. 89-73), which in real dollars has 
fallen every year of this Administration. Under your budget, 
does that trend continue where you continue to cut the real 
dollar purchasing power available through the Older Americans 
Act for seniors across this country?
    Secretary LEAVITT. I am not able to respond to that 
question directly. We will be happy to get the information to 
you.
    Mr. DOGGETT. Thank you. I believe it does, that the trend 
continues, that the seniors who are relying on the Older 
Americans Act, the first priority of a White House Conference 
on Aging, which was mostly Republican-selected Members through 
the White House and otherwise, that that objective is not being 
met. Thank you, Mr. Chairman.
    Mrs. JOHNSON. [Presiding.] Mr. Herger?
    Mr. HERGER. Thank you, Madam Chairman. Mr. Secretary, I 
want to join in thanking you and commending you for being part 
of the Administration, for bringing your expertise, and the 
manner in which you are dealing with these incredibly important 
issues.
    An issue that I have been involved with as Chairman of the 
Subcommittee on Human Resources that I know you are very much 
familiar with has to do with welfare reform. My question has to 
do with an area that I believe we have had some of the greatest 
success ever with the welfare reform in 1996. We have seen 
welfare rolls, where we have seen those who were on welfare, 
families, being able to go out and find work, being able to be 
trained for work, being able to be prepared, and being able to 
return to the workforce. We have seen those that are on 
poverty, the poverty levels, drop dramatically because of that.
    So, my question has to do with that, a follow-up to that on 
what the Administration is doing now. The DRA, which the 
President will be signing later today includes provisions to 
promote even more work and assist even more to be able to work 
among welfare recipients. This law will expect all States to 
engage 50 percent, just half of those that are welfare 
recipients today, in work or training starting next year. Some 
say that is too tough but I disagree, and I would hope we could 
encourage even more to be out engaged in either work or being 
trained on being able to get jobs.
    Could you, Mr. Secretary, talk a little about the efforts 
your Department has started that would better uncover the work 
that is already going on, already going on but not reported, 
which would help States meet this goal of 50 percent? 
Specifically, can you talk about using the National Directory 
of New Hires and what results you have see thus far from these 
efforts?
    Secretary LEAVITT. Congressman, to give you specifics, I 
will need to submit them to you and for the record. I will, 
however, reflect a little on this subject from my days as 
Governor.
    I was quite deeply involved as Governor and also as 
Chairman of the National Governors' Association in the 
development of the original welfare reform and the 
implementation of the Temporary Assistance for Needy Families 
(TANF) program. I can tell you that the work requirements have 
been a very important part of the progress we have made, not 
only the progress institutionally and as a government, but in 
the individual lives of people. We have given people a sense of 
motivation that has been critical to their own sense of self.
    Now, I want to be clear that there is not a Governor or a 
Secretary that I know that isn't anxious to assure that the 
lives of those who are truly in need, that their needs are met, 
but helping them establish a sense of purpose and having the 
training that is necessary changes lives in very personal and 
deep ways, and I have seen it personally, and I am proud to be 
part of it, and it is time for us as a society to raise our 
expectations one more notch.
    Mr. HERGER. Thank you, and I agree completely. In another 
area, the DRA proposes $150 million per year in new funding for 
healthy marriage and responsible fatherhood services. As we 
know, it is--as a parent--I am a parent. Most listening are, 
most of us. It is difficult enough to raise children with two 
parents working let alone, as we see, so many families with 
just one.
    Your budget suggests $250 million per year for these 
purposes. Since the President is just now signing the DRA which 
overlaps with the release of the budget this week, I wanted to 
be clear that you are still proposing an additional $100 
million per year in funding for these programs on top of what 
is provided for in the welfare reform provision of the DRA. 
Beyond just the level of funding, could you discuss what the 
Department hopes to accomplish with these funds?
    Secretary LEAVITT. Congressman, in the early testimony I 
made, I indicated that one of the principles that I believe in, 
a principle of investment, is that you invest in prevention, 
not just treatment. Most of the funds we spend in our 
Department are focused on treatment. We are picking up the 
pieces after something has gone wrong.
    The money that is being proposed to strengthen healthy 
marriages is about prevention. It is about helping prevent the 
devastation that often comes when families, the unit of our 
society that ultimately we have to depend on for the vast 
majority of care that occurs, to strengthen them and to 
strengthen the prevention of bad things happening.
    Mr. HERGER. Thank you very much, Secretary Leavitt.
    Mrs. JOHNSON. Mr. Pomeroy?
    Mr. POMEROY. Madam Chair, Mr. Thompson was here before me, 
and if you are calling in order, I have to acknowledge that.
    Mrs. JOHNSON. Mr. Thompson?
    Mr. THOMPSON. Thank you, Madam Chair. Thank you, Mr. 
Pomeroy. Mr. Secretary, thank you for being here. I want to get 
back to this issue of California. I have another letter that 
came after my colleague Mr. Becerra's letter, where the 
Governor mentions that he has talked to you a number of times, 
as you indicated. As of 5 days ago, California was still paying 
for about 11,000 prescriptions a day. The Governor has asked--I 
guess the State has asked--for some certain data from your 
shop. I guess I want to know when can California expect that 
they can and the program off to you where you will be 
fulfilling your responsibility and paying for it. Then, also, 
what is the status of the data? Are you collecting the data, 
and can they expect to get answers to their questions anytime 
soon?
    Secretary LEAVITT. The data that they have requested is 
being provided, and I will tell you that I have asked the 
Governor to work for a transition as of the 15th of February, 
one that we are confident can be made.
    Mr. THOMPSON. If it is not, is there an extension in the 
works?
    Secretary LEAVITT. We are prepared to make an extension if 
the States are, in fact, doing what they need to do to take 
care of this. I have waivers signed now with 30 States. 
California is not one of them. I did have a conversation with 
the State of California's representatives a day or two ago, 
informing them that we were going to be able to return $113 
million to them that was savings because of the prescription 
drug benefit and the----
    Mr. THOMPSON. Notwithstanding that, the issue that I was 
interested in is the fact that California is having to pay for 
and do the Federal Government's work on 11,000 prescriptions a 
day. They don't feel confident--as a matter of fact, I will 
read from the letter. It says, ``It is my intent and the intent 
of the California Legislature to extend the program beyond this 
date because we are not yet satisfied the problems we have 
discussed have been fixed to adequately protect California's 1 
million dual-eligibles.'' So, they want some assurance that 
this is going to happen, and they are looking for the data that 
I mentioned, including how these systemic problems have been 
addressed and exactly how many of these have been covered.
    Secretary LEAVITT. We have the data, and it has been 
provided and it is being provided. It is ultimately going to 
require that the State begin what I refer to as pressurize 
their system. If they just take all the--if they continue to 
pay claims the way they are now, there will be a limit, 
frankly, the length of time that we are prepared to assure 
their reimbursement. I have given him every assurance that we 
are prepared to assure that they----
    Mr. THOMPSON. Well, I think our Republican Governor wants 
to make sure these guys are covered, and they are willing to 
work with you to make sure that that happens.
    Secretary LEAVITT. I am pleased about that, and I flew to 
Sacramento and I met with him personally. I have talked with 
him several times. I will----
    Mr. THOMPSON. He mentions that in the letter, but as I say, 
the letter was dated February 6th, and it mentions that 
although you have had phone conversations and a meeting, the 
data has not come to them, and they are not confident----
    Secretary LEAVITT. There is no reason to think that 
California is any different than the 30 States which we have 
been able to strike a waiver with, as they seem to think they 
are. We are prepared to work with them. We hope very much we 
can do it. There will be a limit to which I am prepared to 
make----
    Mr. THOMPSON. Thank you, Mr. Secretary. If you could--you 
say you have the data. If I could get copies of that so I 
could----
    Secretary LEAVITT. We will be happy to supply you with the 
data.
    Mr. THOMPSON. On the State Health Insurance Program (SHIP), 
I haven't had the same experience as some of the other folks on 
the Committee, nor the experience that you explained. I hear 
from a lot of my constituents that they are having trouble 
navigating through the difficulties of this prescription drug 
program. What we are finding is that the SHIPs actually help, 
and I guess you recognize that yourself, and your shop has said 
that individual counseling has been working wonders. I am 
interested in knowing how that is dealt with in the budget.
    It looks like there is not enough money to provide them 
with the staff and the ability to provide this counseling, and 
I guess the money is combined with some other moneys. So, I 
would like to know how the SHIP funding breaks out. If you do 
agree that this is the most effective way to help people sign 
up, why aren't we funding them at a level that is required?
    Secretary LEAVITT. The State Health Insurance 
Implementation Plans have been very helpful, but, gratefully, 
they are not the only avenue. They have been one. There are 
30,000 pharmacies that have been heroic in their----
    Mr. THOMPSON. How much funding are they going to get?
    Secretary LEAVITT. I don't know the exact budget number, 
Congressman. I can get that to you, but I can tell you I have 
met with them all over the country, and they are doing heroic 
work and they are doing helpful work. This is a conversation--
--
    Mr. THOMPSON. Can we try and get them the level that they 
need to fund their program?
    Secretary LEAVITT. We need to fund them to the extent that 
they need, but I want to make clear that they are not the only 
way in which enrollment takes place. We are enrolling 250,000 
people a week in this program, and it is happening with 
increasing efficiency. It is not easy to bring a new benefit, 
the biggest change in 40 years, and people are working through 
it. The system is better every day. As a pharmacist in Alabama 
told me, there are a few bumps but it is getting better every 
day, and that is----
    Mr. THOMPSON. I don't disagree with you, Mr. Secretary, but 
if the community-based outreach level of funding, the $43 
million--if the SHIPs got all of that, that would equate to 
only a dollar per constituent that they counsel, and that is 
just not adequate.
    Secretary LEAVITT. As you know, the SHIPs are for the most 
part volunteers, and those are highly leveraged dollars, and 
they are a good investment, and they do a wonderful job. It 
would not be reasonable for us to assume that all of those who 
are enrolled will be enrolled through the SHIPs. We need to 
have senior centers, churches, pharmacists, health care 
workers, and families. I will tell you that the biggest source 
of enrollment has been the children of mature Americans who 
have been willing to sit down----
    Mr. THOMPSON. I have heard from them, also.
    Secretary LEAVITT. Well, it is a very important part of 
this, and they need to help.
    Mr. THOMPSON. I have heard very few positive stories from 
those children, but, Madam Chair----
    Secretary LEAVITT. We appreciate the fact that they worked 
through it.
    Mr. THOMPSON. Thank you, Mr. Secretary. I would like to ask 
unanimous consent to submit this February 6th letter from 
Governor Schwarzenegger into the record.
    Mrs. JOHNSON. So, ordered, but I thought that letter was 
submitted earlier.
    Mr. THOMPSON. There are two different letters. Mr. Becerra 
had one that was from, I think, earlier in the month or from 
last month. Mr. Shaw's letter that he referenced was not from 
California. It was a letter from the Secretary's shop to 
California, and it dealt with the clawback, something 
completely different than what we are talking about.
    Mrs. JOHNSON. Thank you, so ordered, and if the Secretary 
would like to submit the answer he sent back to either of those 
letters, we would be happy to include them in the record as 
well.
    Secretary LEAVITT. Thank you.

    [The information follows:]
                                                      State Capitol
                                               Sacramento, CA 95814
                                                   February 6, 2006
The Honorable Michael O. Leavitt
Secretary of Health and Human Services
U.S. Department of Health and Human Services
200 Independence Avenue, S.W.
Washington, DC 20201

Dear Mr. Secretary,

    I write today to follow up on our meeting on January 19, 2006, and 
our phone conversation on January 24, 2006, regarding the 
implementation of the new Medicare Part D Prescription Drug Benefit.
    As you know, on January 20, 2006, I signed Assembly Bill 132, which 
established an emergency program intended to serve as the payor of last 
resort for individuals who are unable to receive their prescription 
drugs from Part D due to problems in the Medicare system. The 
legislation appropriated $150 million to provide services under this 
program, which expires on February 11, 2006. It is my intent and the 
intent of the California Legislature to extend the program beyond this 
date because we are not yet satisfied the problems we have discussed 
have been fixed to adequately protect California's one million dual 
eligibles.
    While I agree with you that Medicare Part D is a federal program 
and it is the federal government's full responsibility to ensure the 
program's success, as Governor, I cannot allow California's most 
vulnerable residents to forfeit their access to the prescription drugs 
they need to survive. It is California's desire to discontinue our 
emergency program as soon as the State has confidence that our dual 
e1igible residents will receive the prescription drugs they need under 
the federal program.
    For us to be confident that our residents are protected, we need 
one of two things from the federal Centers for Medicare and Medicaid 
Services (CMS). First, as we have discussed previously, the State of 
California needs data from CMS that proves the systemic problems in the 
program have been resolved. As of this point, CMS is not providing data 
on system performance, data accuracy, or even the number of cases that 
CMS caseworkers are resolving. The State bas repeatedly requested from 
CMS data that will allow us to measure the extent of the problem and 
quantify any improvements. Without this data, it will be nearly 
impossible for California or your Department to make an informed 
decision as to when the State should discontinue its emergency program. 
I ask you to direct CMS to deliver this data to the states as soon as 
possible.
    Second, as I have also mentioned previously, I believe that the 
federal government has a viable option to make it easier for the states 
to end their emergency programs. CMS is currently employing the 
services of WellPoint, a Medicare Part D Prescription Drug Plan, to 
serve as the fail safe mechanism to assist those individuals who are 
``falling through the cracks'' and have not been assigned a plan. I 
believe that CMS should expand the role of WellPoint to pay for 
prescriptions where there is an error in eligibility, including 
copayment amounts or an incorrect denial of a drug. Further, I believe 
that CMS can assist WellPoint with the resources to make this solution 
work. Again, I encourage you to exercise that option as soon as 
possible because it is a viable option to enable states to end their 
emergency programs.
    As we have discussed, the federal government must fully reimburse 
California for the costs the State has incurred because of the 
difficulties with implementing Part D. I appreciate that you and CMS 
have worked quickly to identify a process that will allow states to 
recoup some of their costs. However, I understand that your proposal 
will not cover all of California's expenses because your proposal does 
not cover the costs of the Part D copayments. This decision guarantees 
that California will be forced to pay a portion of the costs for this 
federal program--this is unacceptable. The State stepped in to protect 
residents of California because of problems with a federal program; 
California taxpayers should not be forced to shoulder the financial 
burden of fixing a program that is the federal government's 
responsibility. The federal government must pay states the Medicare 
reimbursement amount for services provided and must not reduce that 
reimbursement by the Medicaid copayment or any other amount. I ask that 
you direct CMS to cover all of the costs the states incur.
    I understand that you plan to make this reimbursement mechanism 
available for costs incurred through February 15, 2006, and that this 
deadline can be extended as needed. I look forward to working with you 
to ensure that states are fully reimbursed for our efforts to protect 
our most vulnerable beneficiaries and I encourage you to extend this 
deadline if Medicare and Medicaid eligibles continue to have problems 
receiving their prescription medications. I intend to continue to work 
cooperatively with you to ensure that the nearly one million 
Californians who are dually eligible for Medicare and Medi-Cal have 
access to the prescription drugs that are essential to maintaining 
their health.
            Sincerely,
                                              Arnold Schwarzenegger
                                                           Governor

                                 

    Mr. THOMPSON. Could we submit other questions to be 
answered?
    Mrs. JOHNSON. Yes, you are always free to submit written 
questions. Mr. Brady?
    Mr. BRADY. Thank you, Madam Chairman. Mr. Secretary, thank 
for being here today. Partisan comments aside, I think the 
criticism of the rollout for Medicare in whole are fair 
criticisms, but I think it needs to be understood that in a 
major reform, an improvement of a program like this, there are 
bound to be glitches. We are dealing with a lot of seniors who 
can be hard to reach. The ones we are most determined to reach 
to provide them help sometimes are the toughest to get to. Lots 
of glitches in the system. We know this will be a difficult 
year, but in the end--I know in Texas, one-third of our seniors 
who are the poorest are going to get the most help. My 
neighbors who are on the plans--it is starting to work and they 
are seeing a reduction in their drug prices, and while in 
Texas, too, we are concerned about budget items, I think we are 
most--I am most concerned about those seniors' budgets. This 
Medicare plan is going to make a huge difference in a lot of 
seniors' lives. I love the thought that rather than government 
handing them a Medicaid-plus program, we have all these drug 
companies competing against each other to sell them at the 
lowest price and the most accessible drugs. That is a huge 
change from the government knows best approach. I think in the 
long run this will be very, very helpful to our seniors.
    Let me talk about Hurricane Rita. In the regions in Texas 
that I represent, ours are the border counties. They took in 
first almost half--400,000 of the Katrina evacuees. We are 
thrilled to have them, and we know if the situation were 
reversed, Louisiana would be taking us in. So, we are glad to 
have them.
    Hurricane Rita actually is sometimes described as ``the 
forgotten hurricane'' because not only did we have the Katrina 
evacuees, but Hurricane Rita actually landed at a higher wind 
speed than Katrina. It did more damage to the electrical and 
water and sewer grid than Katrina, did more damage to the 
refineries along our coast than Katrina. In many of our 
counties, 60 percent of the homes are damaged or destroyed. It 
wiped out our timber industry, and that is a crop that takes 40 
years to regrow.
    We are really struggling. In fact, because we have so many 
of our Katrina folks in our hotels and now in our apartments, 
we cannot get back our own workers to try to recover and 
rebuild. So, we are in quite a jam.
    I was very angry at the U.S. Department of Housing and 
Urban Development's (HUD) decision to basically turn their back 
on our Hurricane Rita communities last week in their allocation 
of the community development block grants. I was pleased to see 
today the allocation for Texas of $88 million in social 
services block grants to help in health care and those issues. 
It is about a third of what we need, but it is a huge step 
forward. We appreciate that allocation. We know we will be 
back, both in Congress and with your agency, your Department, 
to ask for more.
    My only comment--it is not even a question. I just would 
ask for your continuing commitment, as you have already shown, 
to helping our communities not be forgotten; help us recover 
and dig out of this hurricane while we also take care of our 
Katrina neighbors, whom we are glad to have with us. Any 
comment you want to make, Mr. Secretary?
    Secretary LEAVITT. Thank you. I am appreciative of your 
acknowledgment of the Social Services Block Grant and the 
allocation that is an attempt to do just that, but I think it 
is also important for us to continue to remember that the 
recovery of people and their lives is a huge part of a 
disaster, and we can learn good lessons from Katrina and Rita 
and Wilma this year.
    Mr. BRADY. We were very disheartened by HUD's decisions. We 
are heartened by HHS, so thank you for helping us move back 
into progress.
    Secretary LEAVITT. Thank you.
    Mr. BRADY. Thank you, Madam Chairman.
    Mrs. JOHNSON. Thank you. Mr. Secretary, it is my turn to 
question now, so I have the privilege of welcoming you to our 
hearing, and I look forward to working with you in the months 
ahead on the issues that you have addressed. I do want to share 
with you, as we open, a comment from a constituent, Gail 
Glizewski. Gail says, she told me, ``I am the happiest senior 
citizen in town. All you have to do is call for help. I am 
going to save $2,000 a year. The Medicare drug plan has given 
me security for the future and peace of mind.''
    Honestly, I never saw a happier face, and I really commend 
you and your staff, all the way down to your staff, for the 
energy and determination you have brought to planning the 
implementation of this program and dealing with the problems, 
which have been challenges. I thank you for your leadership. 
That first weekend I could call down here any time practically 
day or night and speak to one of the top people at CMS because 
they were on it, they were working with the plans, and they 
were working to help individual seniors and individual small 
pharmacists. I am pleased to say that as I have gone around my 
district in the last week and talked to the small independent 
pharmacists, they now see the problems as having been either 
worked out or are being worked out, and I thank you for that.
    I also want to mention that the analogy to the VA is 
misleading. The VA provides a much narrower formulary and only 
delivers it to a few hundred hospitals. We provide a very broad 
formulary, and we are delivering it to every senior and their 
nearby pharmacies all across the country. I am proud of the 
breadth of the formulary that you put out there, and I am proud 
of the job you have done to implement it. The fact that costs 
are 20 percent less than expected, who would have ever thought? 
It would never have happened under a command-and-control 
pricing system. In fact, one of the things we had to do was fix 
those old pricing systems because we were paying more than 
anyone else in the market. So, it is a good job.
    I was the chief sponsor of the Children's Health 
Initiative, and we expected 6, 8, 9 million kids would be 
signed up. The first year, 660,000. The first 2 months you have 
signed up 21 million. That is simply an incredible record, and 
I thank you for it because Gail is not the only one. I have had 
seniors who saved $4,000, $5,000, and I honestly think it is 
unfair but also unethical that, whether you are news outlet or 
an individual Member of Congress, that you give more time to 
the complexities and challenge of the program than you do to 
the benefits, because of the seniors who have called my office, 
a significant proportion haven't even tried to register because 
they are scared. That is terrible. We should be part of 
educating; we should be part of reminding them of the security 
and the help. The average savings per prescription is $73 
across the country. So, I urge my colleagues, get your answers, 
but urge people to sign up, urge them to call. I wanted to be 
sure to get that on the record.
    I want to go on, though, to the Health Technology 
Initiative that not only is in this budget, but that you 
personally have really led. I want to ask you how is the 
National Coordinator of Health Information Technology and the 
Agency for Health Care Quality and Research going to divvy up 
this money and what is going to be the relationship between 
that and the American Health Information Community?
    Now, that is a lot of gobbledygook for those listening, but 
the bottom line is that under your leadership, implanting 
health technology in the cities through the community health 
centers and others, encouraging collaborations between 
community health centers, hospitals, and doctors is actually 
meaning now we are reaching the uninsured and bringing them 
into the system with electronic health records. I would not 
want to say that collaboration through the WAT program and 
others in any way hampered by budget decisions. So, could you 
talk about your Health Information Technology Initiative and 
our efforts to reach the uninsured and the homeless?
    Secretary LEAVITT. We have a clear vision of a health care 
system that is interoperable, where medical records can be the 
part of the life of every American if they choose. The vision 
will produce lower costs, fewer medical mistakes, higher 
quality, and, frankly, less consumer hassle. By the end of this 
year we will have taken significant steps to accomplish that 
vision. By the end of this year, we will have basic electronic 
records standards that will be usable. We will have standards 
established and implemented on consumer empowerment and on 
chronic care management and a very important one, 
biosurveillance, the ability to take information from emergency 
rooms for public health purposes and for our homeland security 
purposes.
    This is a movement that has to happen because it is at the 
heart of every aspect of health care. If we are going to see 
consumer costs constrained, it will be in part because we have 
used the efficiency of technology. If we are going to see 
wellness improve, it will be in part because we have access to 
information. If we are going to see physician payment systems 
improved, it will be because we have information technology. If 
we are going to see quality improvement to where people are 
spending less because they are healthy, it will be because we 
have improved information technology. It is at the heart of all 
of those, and we are working hard. By the end of this year, we 
will use the money in this budget to have actual deliverables.
    Mrs. JOHNSON. Thank you very much. I agree. It is one of 
the key answers to controlling Medicare costs while improving 
quality. I thank you.
    Mr. Larson?
    Mr. LARSON. I thank the gentlelady from Connecticut, and I 
thank you, Mr. Secretary, for your service to the country. I 
just have first, more of an information question that I hope 
you can provide the Committee. Last November, the Committee's 
Democratic staff asked CMS to provide a detailed breakdown of 
Medicare beneficiaries by congressional district, including the 
number of duals, number of Medicare Advantage enrollees, age 
versus disabled, and other points. This is something, as you 
know, that the Social Security Administration (SSA) does for 
Social Security benefits, and it is enormously helpful for 
everyone, regardless of party affiliation or policy position. 
In fact, it has been very helpful for me with regard to my 
district. Yet we have had trouble getting basic data of this 
sort out of CMS, and I am hoping you might be able to help 
along that line.
    Secretary LEAVITT. I will do my best.
    Mr. LARSON. I thank you for that, and that is very 
important. I think there are an awful lot of good questions, 
and I do a lot of hearings throughout my district as well as 
forums, because I do think it is important to provide everyone 
with all the information that they can have. There are winners 
and losers in this system. There is no question about that from 
what I have found. We encourage everybody that we come in 
contact with to sign up.
    There isn't a single hearing that I conduct where people 
don't wonder aloud why it is that we prohibit you from 
negotiating directly with the pharmaceutical companies. That is 
just the hard reality, that in law we prevent you from 
negotiating directly with pharmaceutical companies. There are 
many veterans who come to this meeting also and will cite 
specifically what the VA does on their behalf. So, you might 
imagine that it confounds the elderly when they look at this 
essential issue in terms of getting prescription drugs that are 
affordable and accessible to them. As I say, there are winners 
and losers in this program. There shouldn't be any losers in a 
program where we are seeking to provide the best benefits that 
we can for our seniors.
    Would you lobby, would you take on the effort of 
negotiating directly with the pharmaceutical companies? There 
are several proposals, I know, including one of my own, before 
Congress to do just that.
    Secretary LEAVITT. Congressman, I have traveled to, I 
suspect, 42 or 43 States regarding Medicare and stood in front 
of seniors and talked to them about their individual situations 
and answered their questions, and I can honestly tell you, if 
there are winners and losers, I haven't met the losers. I don't 
know how you lose on a program where you have the government 
subsidizing either 100 percent or 75 percent of your drug bill. 
This is a good deal for seniors----
    Mr. LARSON. Well, I guess the seniors then in the groups 
that I have been talking to are struggling through 44 different 
choices that they have and coming up and saying, well, under 
this plan or that plan I may be advantaged or not advantaged, 
and I don't understand why it is that the veteran who lives 
next door to me pays a $7 deductible and I am going through all 
these machinations.
    Secretary LEAVITT. Well, it may be----
    Mr. LARSON. Would you call them winners?
    Secretary LEAVITT. I would say it may be that their 
neighbor is in the veterans' plan, which has, in fact, one of 
the most restrictive formularies.
    Mr. LARSON. Which goes directly to my point.
    Secretary LEAVITT. It may have been one of the--it is one 
of the more restrictive formularies we have.
    Mr. LARSON. They will take that restriction, I will tell 
you that right now.
    Secretary LEAVITT. Then one of the good things we could do 
is have a plan in the choice of plans that would emulate that. 
If we had----
    Mr. LARSON. Your predecessor said that he would, and he 
recommended negotiating directly with the pharmaceutical 
companies to lower the price. Tommy Thompson said that that is 
what he thought was the best way to go. Would you pursue that 
avenue?
    Secretary LEAVITT. I believe that the best way to reduce 
prices is to have a robust, competitive market, and we have 
seen that demonstrated in Part D.
    Mr. LARSON. If this was competitive, when the government is 
providing the money to the companies to compete against the 
government, how is that competitive?
    Secretary LEAVITT. We have regulated prices in Medicaid, 
and----
    Mr. LARSON. When every other Nation in an industrial 
economy negotiates on behalf of their citizens and we don't, we 
end up subsidizing them with our citizens. How is that 
competitive?
    Secretary LEAVITT. We currently have a high number, some 
argue too many, but we have a high number of plans who are 
going to the pharmaceuticals and saying to them, ``If I am 
going to be competitive in this marketplace, I have got to have 
your lowest cost.'' They are formulating their plans to be the 
lowest, and we are seeing the benefit in the form of lower 
prescription drug costs for the first time in decades. It is a 
fact. It is happening.
    Mr. LARSON. Not according to the report that was most 
recently issued by Henry Waxman. In fact, you can go to 
drugstore.com, for that matter, and get lower rates than within 
the existing program. It is----
    Secretary LEAVITT. All I can tell you, Congressman, all 
that needs to be said, is that when this program was started, 
the average cost to an American would have been $37 a month. It 
is now $25. I just sent back hundreds of millions of dollars to 
States who would otherwise be suffering higher costs because of 
it. Prescription drug costs are getting lower, and they are 
getting lower because we have a robust, competitive 
prescription drug market for the very first time, and that is a 
good deal for seniors, and it is a good deal for taxpayers.
    Mr. LARSON. Respectfully, Mr. Secretary, you are an 
honorable man and so are all the people that serve on this 
Committee, but when seniors make decisions, ``lower'' is a 
relative term. When you are making the decision between the 
food you put on your table, how you heat and cool your home, 
and the prescription drugs that you have to take for your 
survival, ``lower'' is a relative term. We need the best 
possible price, and that happens when you negotiate on behalf 
of all the seniors impacted, not these narrow groups, not 44 
different people negotiating. That doesn't create the kind of 
competition that we know in terms of supply and demand.
    Secretary LEAVITT. Congressman, I would argue that for the 
first time in the history of this country, there is no reason 
that a senior should have the worry that their prescription 
drugs would wipe out their savings. That was not true before 
January 1st. It is true now. We are seeing seniors who are not 
only having their health protected because they have 
prescription drugs they did not have before. We are seeing them 
save money, and we are seeing them have the peace of mind that 
they will not have their prescription drugs wipe their savings 
out. Is it a perfect plan? No; but for the first time, millions 
have coverage who did not, and that is good news.
    Mr. LARSON. It is an imperfect plan that needs to be 
perfected by the willingness of the government to step forward 
on behalf of those seniors and negotiate a price for them where 
they can survive. Thank you.
    Mrs. JOHNSON. Mr. Beauprez?
    Mr. BEAUPREZ. Thank you, Madam Chair. Mr. Secretary, thank 
you for being here. I actually would commend the prescription 
drug plan. My seniors are very happy that that $36, $37 premium 
did not come true. What some of us thought would happen when 
free market principles are applied to health care actually did 
happen, that when you brought more, not fewer, and certainly 
not only one option to the marketplace, that it did drive 
prices down. In my State, we are seeing premiums around $22, 
$23, and the seniors are very grateful for that. Competition 
works everywhere else. People like choice everywhere else. I 
think this was a step in very much the right direction. Our 
seniors, as well as the taxpayers, are well served by it.
    I want to ask a very, almost personal question because it 
relates specifically to one of my constituents, and I will get 
to it in a minute. In the DRA, we took some steps to modernize, 
reform Medicaid specifically, and Medicare. One of those steps 
related to oxygen and oxygen concentrators that are used by a 
growing number of seniors. Before my father passed away, he was 
on oxygen himself, so this does become pretty personal. Can you 
walk me through what we did in the DRA and specifically what in 
this budget might address the use of oxygen by so many of our 
seniors?
    Secretary LEAVITT. The practice has been, when people use 
oxygen, to rent the machine and the service. It has seemed 
inconsistent to many in the Congress and to many of those of us 
who administer the program that service goes on and on and on, 
and at some point in time the machine is never paid for. It 
just goes on perpetually. So, the proposal is after 13 months 
of paying 10 percent a month of the cost of the machine, it 
ought to belong to the consumer. That just seems good sense, 
and it is good sense for the plan and good sense for the 
consumer himself or herself.
    Mr. BEAUPREZ. At the end of that 13 months, you are not 
going to cut off payments to where people no longer get their 
oxygen?
    Secretary LEAVITT. We just want them to own the machine.
    Mr. BEAUPREZ. Okay. Well, in my district--and I believe 
probably nationwide--oxygen suppliers specifically sent out 
letters and informed their users, senior citizens whose lives 
depended on oxygen, rather obviously, that the Federal 
Government, this Congress, this Administration, you, I guess, 
were going to terminate their oxygen. Do you want to tell 
whoever might be out there listening what the truth is once 
again?
    Secretary LEAVITT. It is true often that the enthusiasm of 
critics rarely has--they rarely temper their criticism with 
realism. In this case, we simply wanted them to have a better 
deal. We wanted them to own the oxygen equipment. We wanted the 
government not to have to pay for it over and over and over 
again, and we wanted the oxygen companies to have a fair price 
but to not have an unfair price.
    Mr. BEAUPREZ. Well, on durable medical goods, such as an 
oxygen concentrator, it isn't only the government in this case, 
which I am going to get to in a minute; it is about an 80/20 
split with the co-pay that the individual pays. This is a case 
that was actually brought to me: Russ, on behalf of his wife, 
Jane, came to me and he said, ``This doesn't make any sense. My 
wife is now on oxygen.'' He said, ``Every single month, I am 
charged $31.87. My insurance provider pays almost $160.'' He 
said, ``This is going to go on for as long as my wife lives and 
is on oxygen.'' On the back, he copied the concentrator. He 
said, ``I can buy the thing for $635 complete with every bell 
and whistle.'' In just a little over 3 months, between his co-
pay and the insurance company's payment, you own the thing. 
Now, what you are telling me is it will actually go on for 13 
months and then we give ownership to the individual, to the 
patient, correct? Continue to provide the oxygen and whatever 
maintenance is necessary for the equipment.
    Secretary LEAVITT. We want people to have the oxygen they 
need. We just don't want the taxpayers to have to pay an 
unreasonable amount for it. The system needs to work. It needs 
to work for taxpayers and for the beneficiary.
    Mr. BEAUPREZ. It makes sense to me. I think it is shameless 
when you have individuals, such as my dad was before he passed 
away, that were absolutely dependent on every breath they took 
on that machine, to send them a letter and suggest to them that 
the Federal Government somehow is going to take away their 
lifeline, their oxygen. Absolutely unconscionable. I thank you 
for the explanation, and I yield back, Madam Chair.
    Mrs. JOHNSON. Mr. Emanuel?
    Mr. EMANUEL. Thank you. I would like to thank the 
Chairperson for the time, Mr. Secretary, for the hearing, to 
your father for being here, who I am sure is proud. As Mark 
Twain used to say, ``At 13, I had concluded my father was a 
fool. By 17, I was shocked what he could learn in only 4 
years.'' One of the--there is a whole debate about whether, in 
fact, in the budget the propositions are--as it relates to part 
B are cuts, slowing the rate of growth, and so forth. Let there 
be no doubt that by your own estimate, that is, the 
Administration's, $36 billion over 5 years saved. The 
Administration cites MedPAC as the source for these ideas.
    I would like to bring your attention--because as we look 
for savings across the board, the President says in the State 
of the Union he would like to find savings. We have to be belt-
tightening everywhere. The Medicare Payment Advisory 
Commission, the source that you all cite for your savings, also 
says we should eliminate the Preferred Provider Organization 
(PPO) slush fund, which would save over the same 5 year window 
$5.4 billion. That was not part of the President's 
recommendations in the budget, but MedPAC, which is what you 
cite for these cuts, reductions, slowing the rate of growth--
however you want to talk about it--or including in the 
participation rate for those making over $80,000, MedPAC calls 
for the elimination of the overpayment of private plans, saves 
$30 billion. I am not sure whether that was a 5 or 10 year 
number, but $30 billion there.
    MedPAC called for the elimination of the double payments 
for medical education. That is a $5.5 billion saving. They also 
called for the removal of the extra risk fund, which is $19 
billion. If MedPAC is going to be the umpire we use, i.e., you 
use--we talk often about MedPAC here as a source for giving us 
guidance on how to deal with Medicare issues--there are four 
recommendations that tally well over $60 billion in savings 
that we net. Whether it is omission--you didn't get the report, 
I am more than willing to send you the MedPAC recommendations, 
Mr. Secretary, if you didn't get them. There is $60 billion in 
corporate welfare in this deal that is not in the President's 
budget.
    Now, there is some merit to the argument--and we have 
discussed it at length--of whether people making X dollars 
should pay a higher cost than those making below X dollars. 
There is a rationale for that argument. We will have that 
discussion. I have an indication I know we are going to lose, 
but what I am wondering is, if MedPAC is such a good source for 
this guidance on this policy, why were the other 
recommendations that were real dollars--these aren't rounding 
errors; we are talking about $30 billion: the PPO slush fund, 
the overpayment, the double payment for education, as well as 
the risk adjustment. We are talking about close to $60 billion 
totally omitted. So, if we are going to look for extra 
sacrifice across the board, everybody has to have some skin in 
the game, I am amazed at the omission in the budget of savings.
    Now, that doesn't say that those replace the ones you have. 
There is an argument for that. You can see there is not a 
question here. It is a statement, because I would argue that 
this budget keeps in place a lot of corporate welfare of the 
worst kind. Now, if you want to advocate the free market and 
using privatization, fine, but I don't think the taxpayer 
should subsidize the private market. You want to be in the 
business? Be in the business. You want to compete against 
Medicare? Compete against Medicare. We are just not asking 
taxpayers to subsidize your competition. That is what this is.
    Now, I would also like to lend my words to my colleague 
from Connecticut. You have examples of people who are going to 
be able to get some prescription drugs. I can sit here--Terry 
Vickers, a constituent of mine who was enrolled January 1st and 
was cut off January 30th. We still have no solution to that 
person's problem. They got 1 month of drug benefit in January. 
I have a couple, Julia San Juan and her husband. She got 
enrolled--dual-eligible. She got enrolled, he isn't. The 
pharmacist had to give them five pills to hold them over for 
his blood pressure. We still have no solution with my 
caseworkers. It is not just a perfect plan or a good plan, and 
it is not just a rollout start problems. This is structurally, 
in my view, flawed.
    Now, you can disagree with the direct negotiations. You can 
disagree with reimportation, because at the end of the day we 
are subsidizing Europe and the rest of the world, both on the 
R&D side and the price side, or getting generics to market 
quicker. In every one of those free market ideas, direct 
negotiations just like what Costco does or Sam's Club does, 
allowing the free market to work in the sense of competition 
between--I will finish up, Madam Chair--and then also generic 
markets against name brand. In every one of those areas, it is 
a free market principle of competition that would bring in 
better price competition, not just to the seniors but to the 
taxpayers. In these plans overall, you continue corporate 
subsidies and corporate welfare and put it on the back of 
others where they need not have to have these cuts. Thank you.
    Mrs. JOHNSON. I am sorry to gavel my colleagues down, but 
the ones who have been waiting have been waiting for a very 
long time.
    Mr. EMANUEL. I apologize for being long-winded.
    Mrs. JOHNSON. I would like to recognize Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Madam Chair. Mr. Secretary, good to 
see you. Thank you for your indulgence here today and your 
participation. Mr. Secretary, I want to switch gears and 
discuss another critical issue affecting access to affordable 
prescription drugs for seniors. As you know, when we passed the 
Medicare Modernization Act, at least in the House, we also 
passed an amendment that would have allowed the reimportation 
of less expensive prescription drugs from Canada and other 
countries. Unfortunately, the conference did not adopt the 
provision, but the general practice has been to allow 
individuals to purchase drugs from Canada for their own 
personal use. When I have queried officials from Customs or 
CMS, they have consistently told me that that is the general 
practice, that is, to allow individuals to purchase drugs from 
Canada for their own personal use, not to allow pharmacies to 
make bulk purchases for resale, but to allow individuals to 
purchase drugs.
    So, relying on that policy, both the State of Minnesota and 
the Minnesota Senior Federation have set up programs to help 
facilitate the purchase of mail-order prescription drugs from 
Canada. The programs have worked well. We are a border State 
with Canada. In fact, many residents have taken buses to 
Canada, and others have bought prescription drugs over the 
Internet. It has worked well. It has saved money. After all, we 
allow the free flow of all other goods and services pursuant to 
the North American Free Trade Agreement (NAFTA), which many of 
us here worked hard to pass to create the free trade zone 
comprising Canada, the United States, and Mexico. So, it seemed 
consistent with that as well.
    Well, just in the past few days, I have been absolutely 
shocked and, quite frankly, outraged to learn that there has 
been a surge in confiscations of mail-order prescription drugs 
by the Customs Service. Seniors from Minnesota who have relied 
on these drugs, many life or death drugs that they need to 
continue a quality of life, continue living, their drugs have 
been confiscated, at least 100 cases that we are aware of. Now, 
this is obviously very distressing to seniors who are counting 
on receiving drugs that they quite literally in many cases need 
to survive.
    Mr. Secretary, I want to ask you two questions, please. 
One, are you aware of why the recent surge in confiscations, 
just since the 1st of the year? Why has the policy seemingly 
shifted into one of confiscating mail-order drugs from Canada? 
Further, given that we import food and all other goods and 
services from Canada without problems, that there is no 
evidence of Americans being harmed by drugs from Canada, can 
you tell me why HHS continues to block reimportation of 
prescription drugs as a policy?
    Secretary LEAVITT. First of all, our job is not to block 
it. It is to find out if it is safe, and we are not certain and 
cannot guarantee that it is. It is the Congress who will make 
that policy decision. I don't know with respect to the specific 
circumstances you reference, but I might be able to give you 
insight as to why that is occurring.
    Many people who acquire drugs from Canada do so over the 
Internet. A site recently noticed on the Internet was called 
Canadian Generics, and the U.S. Food and Drug Administration 
(FDA) did some work to find out what was behind it. It had 
Canadian flags and all kinds of symbols of Canada. When you 
actually dug into it, you found out that the ISP was in China. 
You found out the website was in Belize. You found out that the 
check was negotiated in the West Indies and that the postmark 
on the drugs was Dallas, Texas.
    When you actually look at the drugs that came, you find 
that every one of them was mis-dosed, in some cases having 
dramatically more, as much as 100 percent more of the active 
ingredient than was represented. In some cases, they were 
brilliantly counterfeited in packaging, but when you actually 
tested the substance, it was tap water, not the substance that 
was supposed to be in the syringe.
    My point is that if you are buying drugs over the Internet 
from sources you are not sure of, it is buyer beware. I cannot 
as Secretary of Health and Human Services attest or warrant to 
the safety of those drugs. I don't know if that was the case in 
any of those 100 situations, but I can tell you that it is now 
a $34 billion industry, and that it is of major concern not 
just to us but to the World Health Organization.
    Mr. RAMSTAD. Well, is it your--and I will yield back, Madam 
Chair. Is it your suspicion, at least, that there is a nexus 
there to the 100 cases I referenced of confiscation, that there 
is a connection between actual reason to believe or proof of 
unsafe drugs? Or were these random confiscations? That is what 
I am trying to get at. Has the policy shifted?
    Secretary LEAVITT. I don't know the answer to that, except 
that we know that drug counterfeiting is a substantially 
greater risk every day. I can tell you that if you----
    Mr. RAMSTAD. Well, can you find out the answer to that 
question?
    Secretary LEAVITT. I would be happy to.
    Mr. RAMSTAD. The seniors in Minnesota, I think, deserve to 
know. Is the policy shifting? Should the Minnesota Senior 
Federation change--they are trying to make it easier to----
    Mrs. JOHNSON. Thank you. This is an important point----
    Mr. RAMSTAD. --buy prescription drugs for seniors. So, if 
you would get back to me, Mr. Secretary. Thank you. I look 
forward to your response.
    Mrs. JOHNSON. Yes, if the Secretary would get that 
information and get back to us, I would appreciate it.
    Mr. RAMSTAD. Thank you, Madam Chair.
    Mrs. JOHNSON. Mr. English?
    Mr. ENGLISH. Thank you, Madam Chair. Mr. Secretary, I 
appreciate your testimony today. Like some of the others who 
have posed questions, I have gone through an extensive process 
in my district in reaching out to seniors who are making 
decisions about the new Part D benefit. I guess the bulk of my 
interest today has to do with that. I have been fascinated by 
the flip-flop we have seen from the other side today. After 
all, they had proposed language also that barred the Federal 
Government from direct negotiations on drug pricing. My own 
view has been that we need to give an opportunity at least for 
the networks that are being set up here to provide the service 
to negotiate themselves with the drug companies and see if we 
could generate discounts.
    I noticed with interest that the current estimates on the 
price of the overall benefit have dropped significantly, and I 
would like you to comment on whether some of the drug pricing 
advantages we have seen from the establishment of this benefit 
and the competition contained with it have actually brought 
down some of those prices.
    Secretary LEAVITT. Congressman, that is at the heart of the 
reason that the drug prices are going down. We now have an 
organized competitive market for the first time in prescription 
drugs, and I believe the benefits have not only been realized 
because of that, but they will continue to be realized.
    Mr. ENGLISH. I am concerned, though, about one of the 
aspects of the benefit that I have been skeptical of from the 
outset, and that I have heard a lot about from seniors, and 
that is the enrollment penalty, the late enrollment penalty for 
the new Part D benefit. I realize that there are other areas of 
Medicare, including part B, that have these sorts of late 
enrollment penalties. I also realize that the penalty is modest 
up front, but is cumulative. I am wondering, can you articulate 
in your view the purpose of these late enrollment penalties? 
Why are they important to the Medicare system? I guess at what 
point do you think the penalty would become so high as to 
effectively price seniors out of the coverage market? Does such 
a point exist?
    Secretary LEAVITT. Part D is an insurance program. Like any 
insurance program, if you wait until just before you are going 
to use it, it is quite expensive. For example, if you bought 
life insurance just before you were going to use it, it would 
be very expensive. If you bought long-term care insurance just 
before you were going to use it and move into a facility, it 
would be quite expensive.
    The same is true with prescription drugs. If we allowed 
people to buy the program just before they were going to use 
it, we know that they would put off purchasing it until just 
before they had a need, and then they would run up high costs, 
and that would bring the cost up for everyone. This is a 
function of creating an actuarially sound pricing mechanism 
that will recognize the risk that increases when people put off 
buying it until they know they have a need.
    Mr. ENGLISH. At some point, would the Administration 
consider a proposal that would establish--even as we have a 
window for people to make changes every year in their benefits, 
would there be perhaps an openness to the idea of creating some 
sort of cap on this penalty if people decide to buy into the 
benefit within an annual window?
    Secretary LEAVITT. That is a policy question that would 
require the approval of Congress. The basic construct of the 
program now is the actuarial soundness that I have spoken of. 
The impact would be that it would increase the cost to all 
participants; that is to say, if a person chose not to enroll 
and then later enrolled in that window, the cost of their drug 
benefit would have been subsidized not just by the government 
but by all those who were participants before.
    Mr. ENGLISH. Understood. That is a policy question, and 
what I would like to do is engage CMS and your Department and 
explore the policy implications of perhaps consider a 
legislative remedy down the road that might speak to some of 
those concerns. My concern is not with the immediate penalties 
as much as looking at the out-years, how some of these 
penalties could buildup to make the benefit, in effect, 
prohibitive for some who perhaps have enjoyed pretty good 
coverage and would find themselves in a situation in the out-
years of wanting to take on the benefit and would find 
themselves, through no fault of their own, at a serious 
disadvantage. I salute you though for your answer, and I am 
grateful for the opportunity to have this exchange. I yield 
back the balance of my time.
    Mrs. JOHNSON. Thank you. Ms. Tubbs Jones?
    Ms. TUBBS JONES. Thank you, Madam Chairwoman. Mr. 
Secretary, good afternoon. I am Stephanie Tubbs Jones. I come 
from Cleveland, Ohio. How many letters did you get from our 
Governor about problems with the Medicare sign-up and how much 
money needed to be reimbursed to Ohio for problem with the 
prescription drug program?
    Secretary LEAVITT. I actually spent a fair amount of time 
in Ohio directly with the Governor and with those who are 
applying for the benefits and visiting with beneficiaries and 
pharmacists and others. I think I have a reasonably good 
picture of what has been happening, both in Ohio and other 
States.
    Ms. TUBBS JONES. Does your picture include that tons of 
seniors--I don't even know how to put numbers on it--were 
having problems getting through to the call-up lines? I 
personally opposed the program but attempted to help my 
constituents in light of the fact that it was a program that 
involved--sent out brochures. Then people would call my office 
and say, ``Congresswoman, we cannot get through on the line. We 
cannot``--having a problem. So, what have you done to relieve 
the problem in Ohio, sir?
    Secretary LEAVITT. Perhaps I could show you generally how 
that is occurring. If I could show these charts, this might be 
an appropriate----
    Ms. TUBBS JONES. You know what? I don't think I have time 
for charts. Why don't you get those charts to my office and 
then I will review them. I don't have but 5 minutes.
    Secretary LEAVITT. Then just let me give you the quick 
version, that the time waits were absolutely unacceptable 
during the first week or week and half, and they have dropped 
consistently----
    Ms. TUBBS JONES. This is just Ohio?
    Secretary LEAVITT. No, that is not just Ohio, but that is 
the national picture. Ohio would have not been any different.
    Ms. TUBBS JONES. Well, then, that won't help me, Mr. 
Secretary. I would love for you to send me these charts so I 
can review them, but I have a lot of other questions I want to 
ask you.

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    [GRAPHIC] [TIFF OMITTED] T0636A.001
    
    [GRAPHIC] [TIFF OMITTED] T0636A.002
    
    On behalf of my colleague from Louisiana, he was concerned 
that, as you talk about trying to do all you can to support 
Louisiana, the social services block grant for Louisiana was 
reduced by almost $8 million, from $25.7 million, almost $26 
million, to down to $18 million. He is concerned about what--
your real concern for helping Louisiana when you would reduce 
those dollars, their dollars by $8 million, and perhaps you 
could get back to Mr. Jefferson about what happened there. Let 
me----
    Secretary LEAVITT. Perhaps I could mention to you that that 
isn't necessarily--they are getting the vast majority of that 
Social Services Block Grant funding; $220 million of the $550 
million is going to Louisiana. So, I am not sure what he is 
referencing.
    Ms. TUBBS JONES. Well, I am not sure either, but maybe you 
can get back to him. He asked me to ask the question, and I am 
doing that on his behalf. Another thing that I am concerned 
about is the reduction of dollars to the Office of Minority 
Health, and the reason I am concerned about it is when we 
started doing Social Security, the President committed to 
African Americans that ``I am going to make sure you have 
Social Security, and I am going to figure out how it is that 
since you die early, why--that we are going to make sure you 
get Social Security.''
    Well, the response by the African American community was, 
``Mr. President, don't fix Social Security since I die early. 
Fix why I die early.'' One of the reasons that African 
Americans die early is because of the disparity in dollars 
available to African Americans in health care. One of the most 
important programs that dealt with that is the Office of 
Minority Health. Can you give me an explanation of why, when 
your Administration or the Administration is concerned about 
minority health, that you would reduce dollars to that 
particular program?
    Secretary LEAVITT. I can give you an explanation on why it 
is that we are increasing the dollars going into community 
health centers, where a large percentage of them are served, is 
being increased. I can show you how we are using dollars from 
programs that emphasize the diseases that affect minorities in 
disproportionate share. I can show you many different 
situations where we are emphasizing as a matter of both theme 
and substance our need to supplement the needs of minority 
people.
    Ms. TUBBS JONES. You know what? It is funny because your 
response is, ``The way I am going to fix it is I am going to 
help community health centers.'' I am looking at a piece that 
says the budget eliminates Health Resource and Service 
Administration's community health State planning grants. I am 
doing one, and I am reducing the other. The reality is there is 
a significant need to fund programs that provide support to all 
communities, but particularly minority communities, because of 
the health disparity.
    Let me take you to another page. According to my notes, the 
President is cutting funding for national family care giver 
support, home-delivered meals, congregate meals, protection of 
vulnerable older Americans, preventive health services, 
nutrition services, incentive programs, and Alzheimer's 
disease. Don't you think those programs are more important to 
the maintenance of seniors in our community?
    Secretary LEAVITT. Every program is important to someone in 
a budget, and we are in a period of time where we are reducing 
deficits. I have been forced to make decisions that dealt with 
conflicts between those priorities. These are my judgments. You 
may have different values and, in fact, that is why we are 
here, is to talk about which decisions I made and you----
    Ms. TUBBS JONES. You recognize--a last question, Madam 
Chairwoman. You recognize that the programs that I just talked 
about for seniors are some of the programs that allow seniors 
to stay in their homes versus going to nursing homes, right?
    Secretary LEAVITT. No one in this Administration has 
anything but enthusiasm about being able to have seniors served 
in their homes. You will see many programs in this budget that 
make that possible and enable it.
    Ms. TUBBS JONES. Well, we differ on it, and I thank you, 
Madam Chairwoman, for----
    Mrs. JOHNSON. If the gentlelady will suspend, I am going to 
give the Secretary a chance at the end to make some comments, 
because so many of the questions have taken all the time and 
not resulted in dialog.
    Ms. TUBBS JONES. Madam Chair, I----
    Mrs. JOHNSON. Your questions at this point----
    Ms. TUBBS JONES. --am not the only one that took all the--
--
    Mrs. JOHNSON. Your question at this point is repetitive of 
your earlier questions, and as I say, there are Members that 
have been waiting a long time to question, so I am going to 
recognize Mr. Chocola now.
    Ms. TUBBS JONES. I appreciate it, Madam Chairwoman, but 
don't just chastise me. I am not the only one----
    Mrs. JOHNSON. Oh, I am not. I have been having to gavel 
down a lot of my colleagues. I am sorry to do that, but I am 
doing that out of fairness to the ones who are waiting. In 
fairness to the Secretary, I am going to give him a few minutes 
at the end to be able to respond to attacks like corporate 
protection. Mr. Chocola?
    Mr. CHOCOLA. Thank you, Madam Chair, and thank you, Mr. 
Secretary, for being here. Thank you for your patience. A lot 
of the questions I was going to ask have already been asked or 
touched upon, but maybe I will give you a chance to respond to 
some things that have been discussed. My district is in north-
central Indiana. We have had some seniors, Medicare 
beneficiaries, that have been confused. We have had some 
problems with dual-eligible issues, but what we have found is 
kind of a magical thing. When you don't complain about it, when 
you don't tell the seniors how confusing it is, but sit down 
with them and help them, we have been able to help thousands of 
seniors through townhalls, workshops, office visits, telephone 
calls. We have experienced some great stories. I will just 
share a couple of them with you.
    One constituent spent roughly $654 a month prior to 
implementation of Part D. Under the new experience, he is 
paying $217 a month. He pays a $66 premium, so he has one of 
the higher-priced plans, but he saves $370 a month. He is one 
of the winners, and he is a pretty happy guy. One other is a 
constituent that qualified for the extra help for low-income 
individuals. She takes seven prescriptions, $297 a month. Today 
she pays $23 a month. So, I don't think that our experience is 
unique, but would you like to comment further on that?
    Secretary LEAVITT. There are 250,000 people a week 
enrolling in this benefit. They are not enrolling in it because 
people said they had trouble at the drug counter. People are 
telling their neighbors, ``It worked well for me.'' The vast 
majority of people who go to the drug counter will get their 
prescription in a normal and routine way. There have been a 
small number of people who have had to spend some extra time, 
and every one of those, it is a problem for them, and it is a 
big problem for me, and we are doing everything we can. This is 
a good deal for seniors. Every one of them saved money.
    I had the same experience. I sat down on Christmas Eve with 
my wife's mother. She had been told by friends of hers at the 
senior center, ``Oh, I heard this was confusing.'' It took us 
half an hour. She had a list of her prescription drugs. She was 
spending well over $8,000 a year. The drug benefit will cost 
her about--she got a little better plan. She got one that did 
not have a deductible, but she will save almost $5,000. I 
worry, like you do, that there have been those who have 
discouraged seniors. That is unfortunate, because it is a good 
deal for seniors and we want make certain that they have the 
prescription drugs that they need.
    Mr. CHOCOLA. I appreciate your efforts. Just Friday, I had 
a call from a constituent that had called our office earlier 
and said this plan is incomprehensible, there is no way he can 
navigate through it. We sat down with him, and he called on 
Friday and said this is the best thing he has ever experienced, 
and he took back all of his complaints before. So, I think the 
amazing thing is when you sit down and help people, we find 
that there is a lot of help out there.
    Secretary LEAVITT. We are getting through this. This is the 
implementation of the largest change in Medicare's history. 
Medicare was not implemented originally without unexpected 
problems. The fact that we are finding them, fixing them and 
finishing them and that the system gets better every day is the 
measure of success.
    Mr. CHOCOLA. I agree. Just on another issue, I used to be 
in the manufacturing business, used to make things like chicken 
feeders, and we could make thousands of chicken feeders without 
ever making a mistake. We never wrote anything down. Everything 
was bar-coded. I don't see that level of technology for things 
that are available to make widgets implemented in the health 
care system. The President talked about electronic medical 
records within 10 years. It seems to me that we are at the 
Betamax/VHS stage where we can't quite determine what the 
standard ought to be that we ought to operate under. Do you 
have efforts to try to identify that standard, and how are you 
going to get to that point?
    Secretary LEAVITT. Yes. The Chairperson referenced the 
American Health Information Community. That is an effort to 
create standards so that electronic medical records can move 
forward. In this budget, there is substantial new money 
directed toward health information technology because it is at 
the heart of our capacity to make health care more efficient. 
Your point about the bar-coding in a manufacturing facility is 
a good one. There are efforts currently being deployed all over 
the country for bar-coding within the health community. The 
problem has been that the bar-code standards didn't match up. 
We are now creating a bar-code standard so that when something 
is bar-coded in New Mexico, it is the same as when it happens 
in Minnesota. When that occurs, we will begin to see greater 
efficiency. I believe that the President's vision, in fact, 
will be carried out and that it will result in fewer medical 
mistakes, lower costs, higher quality, and a lot less hassle.
    Mr. CHOCOLA. Well, every conversation I have with health 
care providers, I ask the question: Why can't we apply proven 
practices and procedures and technology that is used in the 
manufacturing business every day into the health care system? I 
am not sure I always get good answers, but I certainly would 
appreciate all your efforts to make sure that we implement that 
because I think we will all be winners if that is the case.
    Secretary LEAVITT. Thank you.
    Mr. CHOCOLA. Thank you, and I yield back, Madam Chair.
    Mrs. JOHNSON. Thank you. Mr. Pomeroy?
    Mr. POMEROY. I thank the Chair. I have worked very hard to 
try and get the Medicare Part D program explained to the senior 
citizens I represent and to assist them to the extent possible 
in signing up: a mass mailing, a radio Public Service 
Announcement (PSA), meetings all across the State, and I have 
hired additional staff to assist with the outreach efforts to 
try and get the word out to people. I appreciated, Mr. 
Secretary, your trip to Fargo in basically the same spirit.
    My conclusions are slightly different than my friend from 
Indiana's. I think we have got some real problems here that we 
are going to have to look at and consider. I believe 
improvements can and must be made to this program. Hearing some 
of the discussion about how swell everything is going, I am 
thinking of that line from the Groucho Marx movie: Do I believe 
you or do I believe my own eyes?
    On Monday, I had a meeting in Fargo with a number of 
stakeholders in this system. They certainly included seniors, 
senior advocates trying to help people sign up, pharmacists, 
physicians, medical system representatives. There were real 
concerns expressed at this meeting, Mr. Secretary. I would like 
to just relay a few of them to you.
    One of them involves the issue raised by my colleague, 
Congressman Ramstad, about the appearance of a stepped up 
effort to stop people from accessing, of their own free will, 
drugs in Canada if they want to. I have heard you saying that 
was not coming from HHS. You have not issued direction or been 
part of communications about stepped up restrictions?
    Secretary LEAVITT. No, I know of no change in policy that 
would have been reflected in his story. That does not mean that 
there haven't been changes, but they have not come as a result 
of the implementation of Part D.
    Mr. POMEROY. Okay, but you are stepping up efforts to 
restrict drugs coming down from Canada?
    Secretary LEAVITT. We are stepping up efforts to protect 
people from counterfeit drugs. That is what I was referencing.
    Mr. POMEROY. Right, although the situation--Mr. Ramstad 
referenced a situation similar to what some in my State have 
talked about. They have been doing this for a while. This isn't 
one of these fancy Internet deals, whipping them around the 
world. These are suppliers they have worked with, maybe for 
years. Now they are finding problems where they have never 
found them before, and that would reflect then this new 
initiative that has been--this stepped-up effort by HHS?
    Secretary LEAVITT. It is hard to hear about one anecdote 
and respond in terms of if it was caused by one thing or 
another. I don't know the answer to it.
    Mr. POMEROY. I do note the part of the your answer that 
said the policy was pre-existing, we are stepping up efforts to 
enforce the policy.
    Secretary LEAVITT. On counterfeit drugs.
    Mr. POMEROY. On imported drugs from Canada?
    Secretary LEAVITT. Not specifically. We are working to 
assure that consumers are protected from counterfeit drugs.
    Mr. POMEROY. By stepping up efforts to restrict imported 
drugs from Canada coming into the United States?
    Secretary LEAVITT. Not specifically Canada, but generally. 
I am not able to make reference--I am happy to respond, but I 
have no knowledge of any policy change that is directly 
focused----
    Mr. POMEROY. Not a policy change, but stepped-up 
enforcement activity.
    Secretary LEAVITT. I am not able to respond to that because 
I have no specific knowledge.
    Mr. POMEROY. I would request information to the extent that 
you can get it. The complexity of this plan is bewildering. It 
is not a start-up bump. It is going to continue to be 
bewildering. I am going to ask that this cartoon that appeared 
today in the Fargo Forum appear in the record, and it, in a 
humorous way, depicts the bewildering situation that seniors 
are facing.

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    [GRAPHIC] [TIFF OMITTED] T0636A.003
    
    Mr. POMEROY. We have had 8,700 people sign up in North 
Dakota that weren't automatically assigned or have creditable 
coverage. One of them is my mom, my 85-year-old mother with 
whom I sat down and worked this through, and I have encouraged 
in my PSA families to undertake this as a family undertaking, 
but there is no getting around it. It is absolutely complex, 
and we need to look at ways to make it more simple. The 
Republican elected insurance commissioner has called for 
standardization of formularies, standardization of plan 
designs. I think that his recommendations need some 
consideration.
    Secretary LEAVITT. Congressman, can I say that we are 
currently dealing with what I will refer to euphemistically as 
Part D 1.0. We are going to be starting very soon on what will 
be prescription drug Part D 2.0, which is the next plan year. 
Part D 2.0 will be informed dramatically by what we have 
learned with 1.0. The market has clearly driven the cost down, 
and the market now clearly needs to simplify it. This program 
does need simplification, and the market will lead us there, 
and I believe we will do all we can to guide the market there, 
because there is no reason that this plan cannot and should not 
continue to improve every year. It will be a blessing in the 
lives of millions of people. It is today. It isn't perfect. We 
were not handed a perfect plan to implement. Our implementation 
has not been without flaw, but we are finding the problems. We 
are fixing the problems. Millions of people are getting their 
prescriptions filled every day.
    Mr. POMEROY. I know my time has expired. I appreciate the 
acknowledgment of the need to work on this program and make it 
more simple. I did not hear that in your earlier statements. I 
have been here a while. Look, I will acknowledge this thing is 
doing some good. My mother is going to save $2,000 this year. I 
believe that, as frustrating as seniors are finding the sign-up 
period, it is worth their work to do it, but I want to make it 
less frustrating for them as we implement improvements.
    Secretary LEAVITT. How long did it take you to sign your 
mother up?
    Mr. POMEROY. It took about 45 minutes once we had all her 
stuff together.
    Secretary LEAVITT. That matches my experience. If you can 
get the drug bottles and the Medicare card, it is half an hour 
or 45 minutes, depending on if it is the first time you have 
done it. It takes some time, but it works for people.
    Mr. POMEROY. I was the insurance commissioner of North 
Dakota for 8 years. I know a little bit about coverages, and I 
can use a computer. She would have had a heck of a time had I 
not been there. I yield back.
    Mrs. JOHNSON. The gentleman from Massachusetts, would you 
like to inquire?
    Mr. NEAL. Thank you, Madam Chairperson. I apologize for 
being late. Mr. Bolten is at the Committee on the Budget, and 
that is where I was. They were simultaneously scheduled. I want 
you to know, Mr. Secretary, your name did come up over there.
    [Laughter.]
    Secretary LEAVITT. I guess I am relieved.
    Mr. NEAL. You did indicate a couple of moments ago--and I 
am going to go back to Social Security in a second--that the 
cost of the program is going down.
    Secretary LEAVITT. Part D.
    Mr. NEAL. Mr. Secretary, is it not fair for those of us who 
were critical of the initiative as proposed to have heard the 
former Director of the Center for Medicare & Medicaid Services 
suggest publicly that it was going to cost $400 billion, and 
then within a matter of days of the vote, which took place, by 
the way, at 4 o'clock in the morning--or I think that is when 
we started. I think we ended around 6:00--that it was suggested 
it was going to cost $750 billion? Is it a little bit 
inconsistent then to come back and say the cost of the program 
is going down after it was suggested at the outset it was going 
to cost $400 billion? In a sense, it is like the former head of 
OMB saying that the cost of Iraq was going to be $60 billion a 
year--or $60 billion in the run-up to the war.
    Secretary LEAVITT. I am aware that there were differences 
of view on what it was going to cost, not between 700 and 400, 
but there were differences that were smaller than that. The 
difference between the 700 number is a different plan year and 
different--it would be comparing apples to oranges, but your 
point I understand.
    Mr. NEAL. Thank you. Mr. Bolten is coming back here I think 
at 4:30 today, and he will be delighted to see me based on the 
testimony you have offered after we went back and forth on 
those numbers. I will say he is pretty definite in explaining 
the position of the Administration as it relates to these 
numbers.
    Secretary LEAVITT. It is clear--I am not referring to 
differences--I know that it started at one number and numbers 
were re-estimated. That is a matter of history, not a matter of 
opinion.
    Mr. NEAL. Right, and I appreciate that line. Thank you very 
much. Mr. Secretary, last year we began the Social Security 
discussion here, really never began the debate but began the 
discussion. The issue has kind of made its way back into the 
President's budget. Is there going to be a recommendation from 
the Administration that we begin to discuss the solvency of 
Social Security in a bipartisan manner? Or is it going to be 
the way that it was done last year, it is our way or no way?
    Secretary LEAVITT. The President in his State of the Union 
address indicated that he believes, as I suspect you do, and I 
do, that the entitlements need to be dealt with. I believe his 
commitment is to do it in a bipartisan way.
    Mr. NEAL. I raise that question because, if you recall last 
year, the President suggested as part of the proposal that the 
only thing that was necessary was that there be private 
accounts and no discussion of any tax increases. If we are 
going back to the idea of a commission that is supposed to 
stand up intellectually under rigor and some scrutiny, I don't 
know how you could begin the discussion and constrain it by 
saying these are the two items that are cornerstones of the 
initiative or there cannot be a discussion. I just offer that 
to you. You ran a State. You know something about doing these 
things. If you start from the premise that we are not going to 
do this or we are not going to do that, it strikes a tough 
chord for people on the other side who might hold a slightly 
different view.
    Secretary LEAVITT. I understand your point.
    Mr. NEAL. Thank you, Madam Chairman.
    Mrs. JOHNSON. Thank you very much. As we conclude on this 
issue of the numbers, I do want the record to reflect that our 
estimate of our bill was $400 billion. That was 2 years of no 
program and 2 years of a program. Under that same scenario, the 
other bill, the major Democrat bill was $1.3 trillion for 2 
years of no program and 2 years of a program.
    Mr. NEAL. Would the gentlelady yield?
    Mrs. JOHNSON. I would be happy to yield.
    Mr. NEAL. Thank you. Madam Chairperson, do you think that 
there would be a reasonable conclusion on this side, given 
testimony of the professionals who have made a career over at 
CMS, do you think that when they said they were told not to say 
anything about the numbers--one of the nice things about 
appointed officials in this town is that they really do care 
about their careers after they leave here.
    Mrs. JOHNSON. That is----
    Mr. NEAL. Is that reasonable?
    Mrs. JOHNSON. --an interesting issue, reclaiming my time. 
You will remember that at that point your bill had not been 
subjected to a rigorous estimate, so it was hard to say these 
are the two estimates now and these are the parallel estimates 
that will take place once there is 4 years of a program. The 
point I am making is that there was a big disparity in costs 
over 4 years. That disparity of costs would have increased 
commensurately with the change in the estimate of our bill, 
because when you compare an estimate for 2 years of no program 
and 2 years of program with an estimate for 4 years of program, 
you are going to get a higher estimate when the program is in 
place for 4 years. That is a no-brainer. Everybody knew it. If 
it had been our bill for 400, that would have been one thing. 
If it had been your bill for $1.3 trillion, that was another 
thing, but at the time, we were unable to do apples and 
oranges. So, it was a lot of speculation, and there were a lot 
of controversies about the estimates. Bottom line, what is 
happening with our estimates would have happened if the other 
bill had been passed, the only difference being the costs would 
have been extraordinarily more. So, we are dealing with what we 
have. I appreciate you, Mr. Secretary----
    Mr. NEAL. Would the gentlelady yield?
    Mrs. JOHNSON. --for being here. I am going to wrap this up. 
The Secretary has been here a long time, but I would be happy 
to talk with you afterward. Mr. Secretary, thank you for being 
here. Thank you for your leadership on the international health 
issues that we are now as a leader in the world community of 
Nations and one of the most advanced in health care responsible 
to provide leadership in those areas, and thank you to you and 
your staff right down to the secretaries and the others that 
stayed late, that worked weekends, and that have really held in 
there over this month of February, and now into March, to make 
sure that we could straighten out the bugs in the program and 
that seniors will get the help with prescription drugs that we 
put in place for them and that they would not be disappointed. 
Thank you for being with us.
    Secretary LEAVITT. Thank you.

    [Whereupon, at 1:23 p.m., the hearing was adjourned.]

    [Questions submitted by Mr. Shaw and Mr. Thompson to 
Secretary Leavitt. His responses follow:]

               Questions submitted by Representative Shaw

    I have been holding monthly Medicare prescription drug benefit 
information sessions in both of the counties that my congressional 
district reaches. The attendance at these sessions has been very good. 
Many seniors have been interested in enrolling in the new benefit. 
However, like seniors across the county, my constituents have raised 
concerns and are confused.

    Question: South Florida seniors continue to raise concern about the 
``bait and switch'' issue of Part D plans dropping coverage of a 
particular prescription drug mid-year. Please explain to me what is 
being done to prevent this. Is there any way that the program can be 
amended to prevent this mid-year formulary switch?
    Answer: CMS recognizes the importance of formulary stability for 
the Medicare population. However, prescription drug use is constantly 
evolving, and new drug availability, new medical knowledge, and new 
opportunities for improving safety and quality at low cost will 
inevitably occur over the course of a year requiring changes to the 
formulary. CMS will continue to ensure that each formulary provides a 
broad range of medically appropriate drugs and does not discriminate or 
substantially discourage enrollment of certain groups of beneficiaries.
    It is important to note, all proposed formulary changes, excluding 
formulary expansion changes, must be submitted to CMS for review and 
approval. Additionally, beneficiaries will not lose coverage for their 
drugs because of a mid-year formulary change except for clear 
scientific evidence, cost reasons related to a new generic drug coming 
on the market, or new FDA or clinical information becomes available.

    Question: Seniors in my district have over 40 choices of Part D 
plans. We all know that competition is great but it is causing much 
confusion. What is currently being done to improve the way seniors 
navigate through all the information? What advice would you give the 
average senior who is very frustrated with the entire enrollment 
process?
    Answer: As indicated in the 2007 call letter, CMS is planning to 
use its negotiating authority this year to simplify beneficiary 
choices. Multiple bids for the 2007 contract year from a single plan 
sponsor represent meaningful variation based on plan characteristics 
that will provide beneficiaries with substantially different options 
such as variation in deductibles, the use of flat copays versus 
coinsurance, and coverage in the gap versus no coverage. This will 
allow beneficiaries with clear preferences in one or more of these 
areas to more easily navigate plan options based on the coverage 
characteristics they value most. Beneficiaries have a variety of 
resources available to assist in choosing among plans, including 
comprehensive formulary and network pharmacy information on the 
Prescription Drug Plan Finder tool at www.Medicare.gov, assistance from 
trained customer service representatives at 1-800-MEDICARE, and 
personalized counseling through the State Health Insurance Assistance 
Programs (SHIPs).

    Question: The enrollment deadline of May 15, 2006, for Part D 
coverage during calendar year 2006 was set to ensure that seniors who 
wished to enroll did so in a timely manner. However, many have feared 
that this enrollment deadline will not provide seniors enough time to 
review plan options and enroll especially in light of the computer 
difficulties experienced between plans and pharmacists during the first 
month of the benefit. What specific steps are you taking to ensure that 
seniors have adequate time to review all plan options and enroll in 
coverage by May 15, 2006?
    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 playingfield 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.
    Question: The issue of cancer treatment, early detection and 
prevention is near and dear to me. I am actively supporting the 
National Cancer Institute's goal of ending the suffering and death due 
to cancer by 2015. I am extremely disappointed and discouraged to see 
that the President's proposed budget cuts $40 million in funding for 
the National Cancer Institute. Question: Our nation is on the brink of 
numerous breakthroughs on the early detection of, and treatment for 
cancer. We need to sprint, not jog, to the finish line. Why does the 
proposed budget cut NCI funding at such a critical point? What 
commitments have the HHS and the Administration specifically made in 
support of NCI's 2015 goal?
    I also understand that if we want to reach the 2015 goal, the key 
does not lie solely in the federal appropriations process. I will soon 
be introducing legislation strengthened and amended the Medicare 
program in the area of cancer treatment and detection. With the baby 
boomers approaching Medicare age, we will have a major crisis on our 
hands in the program. We must lay the ground work now to provide these 
future beneficiaries with adequate cancer care. What specific 
improvements to the Medicare program would you like to see in the area 
of cancer screening, treatment and prevention? How can the Ways and 
Means Committee help achieve the 2015 goal?
    Answer: The prevention, early detection, and treatment of cancer 
are major priorities within the Department of Health and Human 
Services. We are pleased to report that Medicare now covers a full 
range of cancer screenings recommended by the U.S. Preventive Services 
Task Force. Medicare beneficiaries are covered for screening tests and 
procedures aimed at early detection of breast, cervical and vaginal, 
colorectal, and prostate cancers. Coverage of a one-time initial 
preventive physical exam (aka the ``Welcome to Medicare Visit'') 
provides new beneficiaries an opportunity discuss cancer risk factors 
and screening regimens with their doctor.
    Through its evidence-based National Coverage Determination process, 
Medicare also now covers smoking cessation counseling for beneficiaries 
diagnosed with a smoking-related illness or condition, or taking 
medication affected by smoking.
    Challenges remain in ensuring these services are well utilized by 
those who would benefit the most. Toward that end, we have launched a 
comprehensive outreach program to educate providers and beneficiaries 
about the availability of these life-saving benefits. In addition, with 
the new Part D prescription drug coverage, Medicare may now cover a 
wider range of cancer-related drugs and vaccines, as they become 
available. Cancer drugs administered by a physician (or oral 
equivalents of drugs usually administered by physicians) continue to be 
covered under Medicare part B.
    Finally, the Cancer Prevention and Treatment Demonstration for 
Ethnic and Racial Minorities (established by the Benefits Improvement 
and Protection Act of 2000) is now underway. This demonstration is 
aimed at reducing disparities in cancer prevention and treatment for 
African American, Latino, Asian American/Pacific Islander, and American 
Indian/Alaskan Native beneficiary populations. These projects will be 
designed around new and innovative intervention models to facilitate 
appropriate use of Medicare-covered screening, diagnosis, and treatment 
services by these populations. We look forward to continuing to work 
with you in support of these important initiatives.

    Question: How do you think Congress can support the 2015 goal and 
do more to foster collaboration with other agencies and the private 
sector?
    Answer: The President's Fiscal Year 2007 Budget requests $4.75 
billion in funding for the National Cancer Institute (NCI) at NIH, 
which leads the Administration's efforts toward achieving the 2015 goal 
of eliminating suffering and death due to cancer. Addressing the cancer 
problem requires that NCI work across institutional and sector 
boundaries, share knowledge, and bring together the diverse members of 
the Department of Health and Human Services (DHHS) family of agencies, 
as well as other federal offices, that can help develop systems-based 
solutions to the cancer problem. For example, DHHS Secretary Mike 
Leavitt announced earlier this year the Oncology Biomarker 
Qualification Initiative (OBQI)--an unprecedented interagency agreement 
among NCI, FDA, and the Centers for Medicare and Medicaid Services 
(CMS) to collaborate on improving the development of cancer therapies 
and the outcomes for cancer patients through biomarker development and 
evaluation. CMS will continue to join and support these collaborative 
efforts in pursuit of the 2015 goal, and we appreciate your shared 
interest.

    Question: My doctors have told me that smoking probably did not 
play any role in my form of lung cancer. I have been told that any 
number of factors, like our genes, our age, and the environment, can 
cause cancer. Is the NIH doing enough to support efforts to better 
understand the causes of cancer? How will the proposed decrease in the 
NCI's budget affect this?
    Answer: The Following was not received at the time of printing.

             Questions submitted by Representative Thompson

    Question: Reimbursement rates for physicians in counties across 
America are too low because CMS hasn't updated their geographic cost 
factors. Doctors in Sonoma County are getting paid 8.2% less than your 
own staff acknowledges that they should be paid. This is happening to 
doctors all-over. CMS has supported a budget neutral solution--going so 
far as to propose a budget neutral fix for Sonoma and Santa Cruz 
counties in the 2005 August Federal Register. You then withdrew this 
proposed solution due to what you cited as ``nearly complete lack of 
support'' in the November 2005 Physician Fee Schedule Final Rule. We 
will always see opposition to a ``fix'' that takes away from group A to 
give more to group B--regardless of whether or not group B really does 
deserve more. The CMA has proposed a nationwide fix that would cost 
only $115 million and has bipartisan support. Is CMS willing to work 
with Members to find an offset for this cost? What is CMS willing to do 
to make sure that this problem--which I have been fighting to resolve 
since I came to Congress in 1998, and others have been fighting even 
longer--can finally be rectified?
    Answer: One proposal by the California Medical Association (CMA) 
would cost $115 million per year. That's more than a billion dollars 
over a 10-year budget-scoring window. Another CMA proposal would cost 
$300 million per year. That's $3.0 billion over 10 years.
    Locality changes are budget-neutral with respect to the aggregate 
amount of Medicare money in a State. That is, reconfigurations of 
localities within a State do not result in any more Medicare money for 
the State in the aggregate, but only redistributions of money within a 
State. Since there will be both winners and losers in any locality 
reconfiguration, we rely on State medical associations to be the 
impetus behind these changes. We have assumed that opposition, or lack 
of support, from a State's medical association generally indicates a 
lack of broad support for the proposed change through the State's 
medical professional community. We have been working and will continue 
to work with the CMA, Members of Congress and other interested parties 
on the physician payment locality structure in California.

    Question: State Health Insurance Assistance Programs--or SHIPs--get 
funded through the Medicare and You Education Program. According to the 
FY07 HHS Budget in Brief, they--and other outreach programs--are funded 
through Community Based Outreach. This year, Community Based Outreach 
is funded at $43.6 Million. What portion of that funding is allocated 
specifically for the SHIPs? What factors does CMS consider when 
determining the level of funding SHIPs need to meet beneficiary demand?
    Answer: The Community-based Outreach appropriations are allocated 
across all the programs under that umbrella based on CMS objectives and 
corresponding program needs at the time the funding is to be 
distributed. Annual SHIP grants are awarded in late March, and fiscal 
year (FY) grants are announced at that time. For FY 2006, CMS awarded 
about $30 million in funding to SHIPs to help beneficiaries with 
enrolling in Medicare's new prescription drug program and understanding 
many other aspects of Medicare benefits. The FY 2007 grants will be 
announced in late March 2007, with the exact SHIP allocation known 
shortly before that time.
    The level of funding allocated to the SHIPs is generally based on 
the relative number of beneficiaries in each state and the expected 
level of effort that is required to deliver counseling services. 
Consideration also is given for special needs groups that may require 
greater resources to serve, such as rural beneficiaries or other 
targeted populations.

    Question: The Deficit Reduction Act 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 more than 30% and others by as 
much as 75%, such as for vascular imaging using ultrasound. I 
understand the desire to address differences in payments between 
settings, but I'm curious about how it was decided to use the hospital 
outpatient value. Was it because it would save money, or were their 
other factors involved? Has there been any 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 playingfield 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.

    [Submissions for the record follow:]

                                AFGE Social Security Administration
                                          Baltimore, Maryland 21244
                                                   February 7, 2006
Committee on Ways & Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington D.C. 20515

Dear Secretary Leavitt,

    Below are four questions that necessitate a response. Please find 
them below.

    1.  The National 800 Number Network has been a growing concern for 
Medicare Part D beneficiaries because of the busy rates running above 
35%. Can you confirm the busy rate of callers to the 800 Number and 
explain how this issue is being addressed?
    2.  How are your Processing Centers addressing the large backlog as 
a result of the 200,000 in office visitors a day?
    3.  As the baby boomers retire, how will the SSA have the funds to 
replace SSA employees when their budget was cut by $300 million this 
year (FY07 proposed cuts appear to be significant as well); compounded 
by the increased responsibilities the government imposed on the SSA 
with the new Medicare Part D program?
    4.  SSA Commissioner Barnhart recently enacted a two-year hiring 
freeze across-the-board which went into effect January 6, 2006. In 
addition, the Commissioner suspended all overtime pay and restricted 
unpaid leave. How will you address employee dissatisfaction and 
maintain morale when SSA employees are fighting such an uphill battle?

            Sincerely,
                                               Witold Skwierczynski
                                                          President

                                 
                                             Aurora, Illinois 60505
                                                   February 3, 2006

To the Honorable Congressman Bill Thomas and the Committee on Ways and 
Means:

    Please find attached a letter that I had written to Speaker of the 
House Dennis Hastert regarding my concerns with the Social Security/
Supplemental Security and Medicaid process.
    I am very concerned regarding the President's Fiscal Year 2007 
Budget and its cuts to Medicaid, childcare and TANF. As you will see 
from my letter, I am an advocate for my clients many who are disabled 
and seeking SSI and Medicaid. Therefore, I witness firsthand the 
process involved in applying for these programs both for my clients as 
well as our local IDHS office.
    The current system is already fraught with red tape and back logs 
in the processing of Medicaid claims especially in our area of Aurora/
Kane County. I know however, these same issues are statewide. The 
current process of IDHS removing the P3 status, as well as the budget 
cuts to the Kane County IDHS office specifically (notwithstanding a 
need for further funding for the CAU Unit), our SSA Oak Brook office 
which serves our residents being too back logged, and finally a 
shortage of Administrative Law Judges to hear the cases, leads to the 
actual applicants unduly suffering and not having their cases heard in 
a fair and timely manner.
    Further cuts to the Medicaid Program as well as the other cuts 
outlined in this budget will be detrimental to many of the over 50 
million people who rely on Medicaid, as well as those applying. These 
cuts will also further burden local IDHS Office's which have already 
suffered from massive cuts and layoffs and are unable already to 
process the great volume of claims due to being short-staffed in a 
timely manner.
    I ask that you consider this letter and attachment to be officially 
submitted for record. Thank you for your time and attention to this 
matter.
            Sincerely,
                                                         Kim Aponte
                                 ______
                                 
                                                   October 13, 2005
Speaker of the House Dennis Hastert
14th Congressional District
235 Cannon Office Building
Washington, DC 20515

Dear Speaker of the House Dennis Hastert:

    I am writing this letter to you as a representative of Aurora 
Township and as a social service professional. As case manager of 
Aurora Township in our General Assistance and Emergency Assistance 
programs, I witness firsthand those physically and mentally disabled 
individual's that come to our office to apply for assistance because 
they are unable to be self-sufficient due to no income and having to 
wait oftentimes years for their Social Security Disability Income 
(SSDI)/Supplemental Security Income (SSI) and subsequent Medicaid cards 
to be approved.
    The application processes for all of these programs are technical, 
confusing and altogether too lengthy resulting in many individual's not 
qualifying for the benefits that they should be entitled to. The SSD/
SSI process of usually over two years to make a determination on 
whether an individual is actually disabled or not is inhumane in that 
it forces those who cannot work and have no income to not have the 
medical or mental health services they so rightly are entitled to, not 
have access to prescription coverage (many times to lifesaving 
medications), as well as having no form of income with which one can 
survive. This lengthy process has also caused many individuals to 
become evicted or foreclosed on their apartments or homes and forces 
the burden then on friends and family members (many who are low-income 
themselves) to support these individuals until their determinations 
come through.
    Linked to the long application process of SSD or SSI, is the 
Illinois Department of Human Services (PA) application process for a 
medical card (Medicaid). This process takes anywhere from 60-77 days 
and is also very confusing, lengthy and complex. In most cases these 
applications are automatically denied unless the Social Security 
Administration (SSA) has deemed an individual disabled.
    I am writing to ask your assistance and intervention in advocating 
for and proposing legislation that would improve Social Security's 
Disability process.
    I currently have many clients that have been waiting over two years 
for their medical cards and SSD or SSI to be approved. Many of these 
clients have serious medical conditions such as Congestive Heart 
Failure, and are on lengthy lists of medications averaging from 
$300.00-$500.00 a month. Many are close to being evicted and many more 
have already lost their homes or apartments due to an inability to work 
and not receiving ongoing supplemental income. I also have clients that 
are needing surgeries for a variety of medical conditions and are 
unable to have this necessary medical treatment because of not having 
income, insurance or now even the ability to be seen at Cook County 
Hospital because they do not live in Chicago. I also have clients that 
were on SSI previously, were taken off due to incarceration and now the 
reinstatement process also takes up to two years or more, even if their 
medical situation is the same or has worsened.
    Many are represented by lawyers, however, this has not shortened 
the process, as applicants are now waiting a hearing date before a 
judge, and they're told there could be up to a year delay as there are 
a shortage of judges to hear these cases. I feel this two-year plus 
application process is unfair and unjust. I cannot imagine being too 
sick and disabled to work and knowing I had to wait up to two years to 
get assistance that is rightly due to these individuals. I cannot 
imagine what it would be like myself knowing my medications I needed to 
survive cost from $300-$500.00 a month and I nor my family had the 
ability to pay for them. I, myself, could not afford to pay for 
prescriptions totaling these amounts on my full-time income.
    I have spoken to many doctors and lawyers who agree that the 
process is unfair and inhumane. They too are frustrated wondering how 
it is that several doctors can deem an individual incapacitated by a 
medical condition and yet the IDHS and SSA board's medical staff 
routinely deny and refute these diagnoses.
    As a Township, which is mandated to provide General Assistance to 
its residents in need, we, unlike many others were assisting these 
individuals with medical and prescription assistance until PA or SSA 
reached a decision. However now, due to having had several very 
expensive surgeries for these clients within this year alone (one was 
$74,303.00 at Public Aid rates), we no longer are able to assist these 
individuals until they have been denied for Medicaid and have appealed 
(as they are deemed presumptively eligible for Medicaid). This leaves a 
60-77 day window that these desperately ill people will not have any 
resources to carry them through for medical assistance or 
prescriptions.
    I will be the one once again facing these individual's and letting 
them know that they will have to do without their lifesaving medication 
and/or any needed medical treatment for 60-77 days until Public Aid 
renders a decision which 90% of the time will be denied unless SSA 
approves them. Perhaps because I am the one who sees them on a daily 
basis, I feel compelled to stand up for these individual's rights that 
are being violated by a system that few challenge. I am asking for you 
to stand up for these individuals as well.
    I would appreciate any assistance you may be able to lend to this 
matter. And if you have any questions, please feel free to contact me 
at work.
            Sincerely,
                                                         Kim Aponte