[Senate Hearing 109-]
[From the U.S. Government Publishing Office]



 
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
              AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2006

                              ----------                              


                       WEDNESDAY, MARCH 16, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:42 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Arlen Specter (chairman) 
presiding.
    Present: Senators Specter, Craig, DeWine, Harkin, Kohl, 
Murray, and Durbin.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                        Office of the Secretary

STATEMENT OF HON. MICHAEL O. LEAVITT, SECRETARY
ACCOMPANIED BY:
        KERRY WEEMS, ACTING ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY, 
            AND FINANCE
        JENNIFER YOUNG, ASSISTANT SECRETARY FOR LEGISLATION

               OPENING STATEMENT OF SENATOR ARLEN SPECTER

    Senator Specter. Good morning. The Subcommittee on Labor, 
Health and Human Services, Education, and Related Agencies will 
now proceed. We have established a record for starting these 
hearings on time so that we do not keep busy people waiting or 
people who are not busy waiting. But as I had said a moment or 
two ago, the floor manager had scheduled my amendment for 
increasing the budget of the subcommittee by $2 billion, $1.5 
billion for the National Institutes of Health, and $500 million 
for Education. We just concluded the argument and came right 
over here and have had a very brief discussion with the 
distinguished Secretary.
    We do welcome you here, Mr. Secretary. You come to this 
office with a very, very distinguished record with the 
governorship of Utah and Administrator of the Environmental 
Protection Agency, and a very distinguished record before 
public service. We look forward to working with you.
    My full statement will be made a part of the record and in 
view of our late arrival I will make only a very few 
introductory remarks. As I had commented to the Secretary when 
we moved the hearing from 9:30 to 10:30, that has compressed my 
schedule, and I've asked Senator DeWine to be here to take over 
the chairmanship here at 11.
    But the only introductory comments that I will make are the 
daunting tasks which we all have. We have a budget for the 
subcommittee which is several billion dollars under what it was 
last year. We have a 3.5 percent cut for the Department of 
Labor. We have a $500 million cut for Education. There is a 
proposed budget for your Department, Mr. Secretary, for $62.4 
billion, which is a reduction of almost $1.3 billion, and 
that's not calculating the inflation rate. So that means it's 
another $2 billion on top of a billion, probably $3.5 billion.

                           PREPARED STATEMENT

    But you come to this job with a great reputation for being 
a wonder worker, so we will watch your work and we will work 
with you. Now I yield to my distinguished colleague, the 
seamless Senator Harkin.
    [The statement follows:]

              Prepared Statement of Senator Arlen Specter

    This morning, the subcommittee on Labor, Health and Human Services, 
Education, and Related Agencies will discuss the President'S $62.4 
billion 2006 budget request for the Department of Health and Human 
Services, which is $1.3 billion below the fiscal year 2005 level. We 
are Delighted to have before us the distinguished Secretary of Health 
and Human Services, the honorable Michael O. Leavitt.
    This subcommittee is pleased to see several shared priorities 
funded in the fiscal year 2006 budget, including $303 million over the 
fiscal year 2005 level for Community Health Centers and $203 million 
over the fiscal year 2005 level for the Strategic National Stockpile to 
protect our Nation against bioterrorism.
    However, this subcommittee is concerned by the small 0.5 percent 
increase in Biomedical Research Funding at the National Institutes of 
Health--which is a cut in real terms. Also of concern are the large 
cuts in funding of many HHS programs, including the complete 
elimination of 35 programs.
    Mr. Secretary, I know that you can appreciate the difficult 
tradeoffs that this subcommittee will need to negotiate in the coming 
months as we balance the competing pressures of biomedical research, 
worker protection programs and continued investment in our Nation's 
youth. Mr. Secretary, I look forward to working with you as we craft an 
appropriations bill that maintains our commitment to fiscal restraint 
while preserving funding for high priority programs.

                OPENING STATEMENT OF SENATOR TOM HARKIN

    Senator Harkin. Thank you very much, Mr. Chairman. I will 
follow your lead and not make a full opening statement. Again, 
thank you, Mr. Chairman, for your leadership on the floor, on 
NIH, to get that funding back up. It just--at a time when we're 
making so many great breakthroughs, when we've finished mapping 
the human gene, when we've gotten a lot of young people now 
more interested in basic research because of the doubling of 
NIH, now it seems like, well, we did that and now we don't have 
to do anything more.
    But that was just catch-up ball. We were just playing 
catch-up ball. Now we've caught up, now all of a sudden we're 
moving back again. So I just want to compliment my friend and 
my chairman for taking the lead on the floor on this.
    Just a couple--three things, Mr. Secretary. Again, welcome 
you to your first appearance before our subcommittee. 
Congratulations on your new position. Like the chairman, we 
have met personally and I've just heard a lot of good things 
about you, and your reputation is sterling, I can say that.
    I just--a couple of comments on the budget, eliminating 
services for some 25,000 kids on Head Start. That's very 
bothersome. The community services block grant program. Now, 
you might say, well, we're continuing some of the things like 
LIHEAP and Head Start, things like that, but if you don't have 
the people that do it, how does it get done? Community services 
block grants being zeroed out is just--I don't know what we--
what could be behind that.
    There's one other thing, the systems change grant. Your 
predecessor was very strong and the President was, the 
President spoke about this in the past, better check the record 
on the system change grants. This has to do with the court 
case--what am I thinking about--Olmstead case. The Supreme 
Court decision said that people with disabilities must live in 
the least restricted environment.
    Well, we've built up a system of nursing homes in this 
country that are still needed for some obviously. But for a lot 
of people with disabilities who can get to the community, they 
need these system change grants. Your predecessor and the 
President has spoken strongly about this and something called 
money follows the person, but there's nothing in this budget 
for it.
    So, again, just a few of those things I wanted to point to, 
but lest you think I think everything's bad in this budget, I 
compliment you for the increase in the community health 
centers. This is one thing that serves--the $300 million 
proposed increase is welcome, it's needed. They do a great job 
I'm sure in your State, mine, all over the country. So that is 
one right spot in this budget that will have our full support, 
you can be assured.
    Thank you, Mr. Secretary. Thank you, Mr. Chairman.
    Senator Specter. Thank you, Senator Harkin. We welcome you 
again, Mr. Secretary, and the floor is yours. We look forward 
to your testimony. Your full statement will be made a part of 
the record and our practice is to ask you to summarize to the 
extent you can, leaving the maximum amount of time for 
questions and answers. We have a very good attendance for the 
subcommittee today.

              SUMMARY STATEMENT OF HON. MICHAEL O. LEAVITT

    Secretary Leavitt. Thank you, Mr. Chairman, and Senator 
Harkin. I will in the spirit of efficiency summarize quickly. 
As you indicated, the budget--the overall budget is $642 
billion. That's a 10 percent increase over last year. Much of 
that will be in the Medicare Modernization Act and its 
implementation.

                                MEDICAID

    This subcommittee, as you pointed out, is $62.4 billion, 
and it's a lot of money, and we're here to do our best to 
defend how in fact we will do it efficiently. I hope we have a 
chance today to talk about Medicaid. Forty six million 
Americans are served by it. It's rigidly inflexible. The 
Governors are desperate to have some change so they can 
maintain coverage for people who have it and hopefully provide 
coverage for some who don't.
    I hope we have a chance to talk some about the 
implementation of the Medicare Modernization Act. That's the 
main event for 2005 in my opinion for HHS, and we're working 
hard to make certain that it's done well. We all have a 
substantial stake in its implementation.
    Community health centers is a favorite of mine to talk 
about too, Senator Harkin, and I'm hopeful that we'll get a 
chance to talk more about that.
    Homeland defense has been very much on my mind, as I 
suspect it is everyone else's, $4.3 billion to continue our 
work there, $600 million of it into strategic stockpiles. Our 
goal is to have needed medications within 12 hours of every 
man, woman, and child in the United States.
    NIH, a subject I know that's very important to you, 
Senator, and to others, $28.8 billion, $1.8 billion of that 
again in biodefense. The flu has become an area of major 
concern to me, particularly the--as we begin to see the avian 
flu become more prominent in Asia. I hope we have a chance to 
talk about our preparation there.
    The President has emphasized faith-based initiatives also, 
his hope that reauthorization of the Welfare Act of 1996 could 
be accomplished this year. This budget will support the 
administration's belief in both faith-based and also in 
abstinence education. The budget does support Head Start with 
$6.9 billion.

                           PREPARED STATEMENT

    A subject I hope we get a chance to talk about is Health 
IT. That's an issue that I intend to take on personally.
    It's what I believe to be a lean but strong and fiscally 
responsible budget, and I'm looking forward to more 
conversation.
    [The statement follows:]

             Prepared Statement of Hon. Michael O. Leavitt

    Good morning Mr. Chairman, Ranking Member Harkin, and members of 
the Subcommittee. I am honored to be here today to present to you the 
President's fiscal year 2006 Budget for the Department of Health and 
Human Services (HHS). The President and I share an aggressive agenda 
for the upcoming fiscal year, in which HHS advances a healthier, 
stronger America while upholding fiscal responsibility and good 
stewardship of the People's money.
    In his February 2nd State of the Union Address, the President 
underscored the need to restrain spending in order to sustain our 
economic prosperity. As part of this restraint, it is important that 
total discretionary and non-security spending be held to levels 
proposed in the President's fiscal year 2006 Budget. The budget savings 
and reforms in the President's Budget are important components of 
achieving the President's goal of cutting the budget deficit in half by 
2009 and we urge the Congress to support these reforms. The President's 
fiscal year 2006 Budget includes more than 150 reductions, reforms, and 
terminations in non-defense discretionary programs, 19 of which affect 
HHS programs. The Department wants to work with the Congress to achieve 
these savings.
    The President's health agenda leads us towards a Nation of 
healthier Americans, where health insurance is within the reach of 
every American, where American workers have a comparative advantage in 
the global economy because they are healthy and productive, and where 
health technology allows for a better health care system that produces 
fewer mistakes and better outcomes at lower costs. The fiscal year 2006 
HHS budget advances this agenda.
    The fiscal year 2006 HHS budget funds the transition towards a 
health care system where informed consumers will own their personal 
health records, health savings accounts, and health insurance. It 
enables seniors and people with disabilities to choose where they 
receive long-term care and from whom they receive it. Equally 
important, it builds on the Department's Strategic Plan and enables HHS 
to foster strong, sustained advances in the sciences underlying 
medicine, in public health, and in social services.
    To support our goals, President Bush proposes outlays of $642 
billion for HHS, a 10 percent increase over fiscal year 2005 spending, 
and more than a 50 percent increase over fiscal year 2001 spending. The 
proposed fiscal year 2006 HHS budget increase accounts for almost two-
thirds of the entire proposed federal budget increase in fiscal year 
2006. The overall discretionary portion of the President's HHS budget 
totals $67 billion in budget authority and $71 billion in program level 
funding. The discretionary portion of programs covered by this 
subcommittee totals $62.4 billion in budget authority and $65.3 billion 
in program level funding.
    The Department will direct its resources and efforts in fiscal year 
2006 towards:
  --Providing access to quality health care;
  --Enhancing public health and protecting America;
  --Supporting a compassionate society; and
  --Improving HHS management.
    The President and the Department considered a number of factors in 
constructing the fiscal year 2006 budget, including the need for 
spending discipline and program effectiveness to help cut the deficit 
in half over four years. Specifically, the budget decreases funding for 
lower-priority programs and one-time projects, consolidates or 
eliminates programs with duplicative missions, reduces administrative 
costs, and makes government more efficient. For example, the budget 
requests no funding for the Community Services Block Grant that was 
unable to demonstrate results in Program Assessment Rating Tool 
evaluation. Instead, the Administration proposes to focus economic and 
community development activities through a more targeted and unified 
program to be administered by the Department of Commerce. It is due to 
this scrutiny that I am certain the proposed increases in spending will 
enable the Department to continue to provide for the health, safety, 
and well-being of our People.
    Americans enjoy the finest health care in the world. This year's 
budget provides opportunities to make quality health care more 
affordable and accessible to millions more Americans. Our challenge is 
to ensure that everyone has access to health insurance.

                PROVIDING ACCESS TO QUALITY HEALTH CARE

MMA Implementation
    The next important step toward meeting this challenge is the 
implementation of the Medicare Modernization Act (MMA), including the 
Medicare Prescription Drug Benefit and the new Medicare Advantage 
regional health plans. The Centers for Medicare and Medicaid Services 
(CMS) administrative budget request of $3.2 billion includes $560 
million for implementing the new voluntary drug benefit that begins 
January 1, 2006, enhanced health plan choices in Medicare Advantage, as 
well as numerous other MMA provisions. The new prescription drug 
benefit will cost $58.9 billion in 2006 and will be financed through 
beneficiary premiums and general revenue. The President's Budget also 
proposes $75 million for program integrity efforts to combat fraud and 
abuse in the new Part D and Medicare Advantage programs.
    February 15, 2004 was the final date for plans to submit Medicare 
Advantage 2005 applications to provide coordinated care plans, 
including local preferred provider organizations (PPOs). The deadline 
for stand-alone prescription drug plans, new Medicare Advantage 
contractors, and regional PPOs to submit their ``Notice of Intent to 
Apply'' was February 18, 2005. CMS has received significant initial 
interest from potential prescription drug plan sponsors to offer the 
Medicare drug benefit throughout the Nation. In addition, insurance 
plans have expressed interest in significantly expanding Medicare 
Advantage service areas providing more options to Medicare 
beneficiaries.

Medicaid
    The President and I are also committed to improving Medicaid. 
Medicaid provides health insurance for more than 46 million Americans, 
but as you are all aware, States still complain about overly burdensome 
rules and regulations, and the state-federal financing system remains 
prone to abuse.
    This year, for the first time ever, States spent more on Medicaid 
than they spent on education. Over the next ten years, American 
taxpayers will spend nearly $5 trillion on Medicaid in combined state 
and federal spending. The Department plans to make sure tax dollars are 
used more efficiently by building on the success of the State 
Children's Health Insurance Program (SCHIP) and waiver programs that 
allow states the flexibility to construct targeted benefit packages, 
coordinate with private insurance, and extend coverage to higher income 
and non-traditional Medicaid populations. Additionally, we estimate 
that proposals included in the President's Budget to strengthen program 
integrity and ensure that Medicaid doesn't overpay for drugs will 
create $60 billion in new savings over a ten-year period.
    The President plans to expand coverage for the key populations 
served in Medicaid and SCHIP by spending $15.5 billion on targeted 
activities over ten years. The President's Budget includes several 
proposals to provide coverage, including the Cover the Kids campaign to 
enroll more eligible uninsured children in Medicaid and SCHIP. In 
addition, the extension of the Qualified Individual and transitional 
medical assistance programs will ensure coverage is available to 
continue full payment (subject to a spending limit) of Medicare Part B 
premiums for qualified individuals, and provide coverage for families 
that lose eligibility for Medicaid due to earnings from employment. The 
Department projects that over 50 million individuals will be covered by 
Medicaid and SCHIP in fiscal year 2006, at a federal cost of $198 
billion.

Community Health Centers
    In addition to expanding access through Medicaid and SCHIP, the 
President's Budget builds on the Department's aggressive efforts to 
help those who are uninsured or underinsured by expanding the good work 
of community health centers. These centers provide quality, 
compassionate care to the patients who need our help the most, 
regardless of their ability to pay.
    The President's Budget requests $2 billion, a $304 million increase 
from fiscal year 2005, to fund community health centers. This request 
completes the President's commitment to create 1,200 new or expanded 
sites to serve an additional 6.1 million people by 2006. By the end of 
fiscal year 2006, the Health Centers program will deliver high quality, 
affordable health care to over 16 million patients at more than 4,000 
sites across the country. Health centers are effectively targeted to 
eliminate health disparities and provide a range of essential services. 
In 2006, health centers will serve an estimated 16 percent of the 
Nation's population who are at or below 200 percent of the federal 
poverty level. Almost forty percent of Health Center patients have no 
health insurance and 64 percent are racial or ethnic minorities. In 
addition, the President has set a new goal to help every poor county in 
America that lacks a community health center by establishing a 
community health center in counties that can support one, or a rural 
health center. The President's Budget includes $26 million to fund 40 
new health centers in high poverty counties.

Ryan White/HIV
    Our request also includes approximately $18 billion for domestic 
AIDS care, treatment, research, and prevention. We are committed to the 
reauthorization of the Ryan White CARE Act treatment programs, 
consistent with the President's reauthorization principles of 
prioritizing lifesaving services including HIV/AIDS medications and 
care; providing more flexibility to target resources; and ensuring 
accountability by measuring progress. The President's Budget requests a 
total of $2.1 billion for Ryan White activities, including $798 million 
for lifesaving medications through the AIDS Drug Assistance Program.

Providing Access to Quality Health Care: The Administration's 
        Comprehensive Plan
    These projects and reforms, as well as those at other Departments, 
cooperate to extend health care and insurance to millions of people. 
For instance, the President proposes to spend more than $125.7 billion 
over ten years to expand insurance coverage to millions of Americans 
through tax credits, purchasing pools, and Health Savings Accounts. The 
proposed Traditional Health Insurance Tax Credit would pay for 90 
percent of the cost of the premium of standard coverage, up to a 
maximum of $1,000 for an individual, and $3,000 for a family of four. 
The proposed Health Insurance Tax Credit for those with Health Savings 
Accounts (HSAs) would allow individuals to use a portion of the credit 
to purchase a high-deductible health plan while putting the remaining 
portion of the credit in an HSA. The Administration also proposes 
legislation that would that would allow small employers, civic groups, 
and community organizations to band together and leverage purchasing 
power to negotiate lower-priced coverage for their employees, members, 
and their families through Association Health Plans (AHPs). As opposed 
to previous proposals that limited AHPs to small businesses, this 
proposal also applies to private, non-profit, and multi-state entities 
outside the workplace.
    Thanks to the comprehensive nature of this vision, workers are 
already investing money tax-free for medical expenses through Health 
Savings Accounts, Americans have increasing flexibility to accumulate 
savings and to change jobs when they wish, and more Americans are 
accessing high-quality health care. We estimate that 12 to 14 million 
additional people will gain health insurance over the next ten years.

             ENHANCING PUBLIC HEALTH AND PROTECTING AMERICA

Bioterrorism Preparedness
    Since 2001, your support for HHS's bioterrorism efforts has been 
unwavering. As a result we have made tremendous strides in protecting 
our Nation from various threats. The HHS fiscal year 2006 budget builds 
upon these achievements to strengthen our ability to minimize the 
number of casualties that would occur as a result of a bioterrorist 
attack, or other attack with weapons of mass destruction. From 2001 to 
2005, HHS invested nearly $15 billion to prepare our Nation's health 
systems. The fiscal year 2006 budget requests $4.3 billion to continue 
this work, a 1,500 percent increase from the 2001, pre-9/11 level.
    The fiscal year 2006 request places the highest priority on those 
programs that address readiness issues for which there is a unique 
federal role. These include the new mass casualty initiative, the 
Strategic National Stockpile (SNS), and National Institutes of Health 
(NIH) research on next-generation countermeasures.
    HHS has a responsibility to lead public health and medical services 
during major disasters and emergencies. Toward this end, the 
President's Budget would invest $70 million in a new effort to develop 
federal mass casualty treatment capacity that can be rapidly deployed 
and staffed to supplement the surge capacity being developed at the 
state and local level. Of this amount, $50 million, financed through 
the SNS, will be used to procure and manage the mass casualty treatment 
units. The Medical Reserve Corps will be expanded by $12.5 million to 
support the enrollment, training, and credentialing of volunteers that 
could be deployed in the event of a national emergency. A new $7.5 
million effort will fund the development of a secure database that can 
consolidate healthcare provider credentialing information from federal, 
state, and non-government sources for quick retrieval in a major 
emergency. This activity will be fully coordinated with the state-based 
Emergency System for Advance Registration of Volunteer Healthcare 
Personnel that the Health Services and Resources Administration (HRSA) 
sponsors.
    The Strategic National Stockpile's goal is to provide state and 
local governments the pharmaceuticals and supplies they would need to 
minimize casualties from a bioterrorist attack or other major public 
health emergency within 12 hours. The budget requests a total of $600 
million for the SNS, an increase of $203 million above the fiscal year 
2005 enacted level (including the $50 million for mass casualty 
treatment units discussed earlier). The Administration has continued to 
reassess the stocks that are needed to best protect the American 
population. As a result, by the end of fiscal year 2006, the SNS will 
have sufficient antibiotics to provide prophylaxis to up to 60 million 
Americans exposed to the anthrax organism. The SNS will set up the 
highly specialized cold storage capacity needed for the IND vaccines 
procured through BioShield. Substantial funds will also be used to 
replace medications that are losing potency, and to maintain the 
capacity needed to deploy assets to any part of the Nation within hours 
of the detection of an event.
    Our Nation's ability to detect and counter bioterrorism ultimately 
depends on the state of biomedical science, and NIH will continue to 
ensure full coordination of research activities with other federal 
agencies in this battle. The President's Budget includes $1.8 billion 
for NIH biodefense research efforts, a net increase of $56 million. 
When this is adjusted for non-recurring extramural construction in 
fiscal year 2005, NIH biodefense research activities grow by $175 
million, or 11 percent, over fiscal year 2005. Included in this total 
is a $50 million initiative budgeted in the Public Health and Social 
Services Emergency Fund to develop new medical countermeasures against 
chemicals that could be used as weapons of mass destruction.
    HHS continues to have a strong commitment to preparing States and 
local public health departments and hospitals to prepare against public 
health emergencies and acts of bioterrorism. From fiscal year 2002 to 
fiscal year 2005, $5.4 billion has been invested in this work through 
the Centers for Disease Control (CDC) and HRSA's ongoing state and 
local preparedness programs. The fiscal year 2006 budget includes $1.3 
billion more for this work, increasing the cumulative total to $6.7 
billion.

Influenza
    Since the H5N1 strain of avian influenza first appeared in 1997, 
public health officials have grown increasingly concerned about the 
possibility that a pandemic strain will emerge that could cause an 
additional 90,000 to 300,000+ deaths in the United States. Avian 
influenza has reappeared in Southeast Asia again this year, indicating 
that the virus has become endemic. The fiscal year 2006 budget 
continues to expand HHS's efforts to be prepared in the event this or 
another deadly influenza strain changes in a way that makes it easily 
communicable from person to person.
    Since fiscal year 2001, HHS has increased its direct expenditures 
related to influenza vaccine from $42 million to $439 million in fiscal 
year 2006, in addition to insurance reimbursement payments through 
Medicare. The fiscal year 2006 budget includes targeted efforts to 
ensure a stable supply of annual influenza vaccine, to improve access 
to influenza vaccine for children and Medicare beneficiaries, to 
develop the surge capacity that would be needed in a pandemic, and to 
improve the response to emerging infectious diseases before they reach 
the United States.
    Increasing the use of annual influenza vaccinations will both 
reduce annual morbidity/mortality, and make the Nation better prepared 
in the event of a pandemic. CDC estimates that 185 million people 
should receive annual immunizations but fewer than half of that number 
have ever been immunized in a given year. The President's Budget seeks 
to increase annual immunization rates by both making sure an ample 
supply is manufactured each year and working to ensure it is used. The 
President's Budget includes several initiatives within CDC's two 
immunization programs to expand the production of bulk monovalent and 
finished influenza vaccine for the 2006/7 influenza season. CDC will 
invest $70 million in new resources to build vaccine stockpiles. First, 
CDC will set aside $40 million in new mandatory Vaccines for Children 
(VFC) budget authority for a stockpile of finished pediatric influenza 
vaccine that can be used in the event of a late-season surge in demand; 
the first ever stockpile was purchased for the winter of 2004/5. 
Second, CDC's discretionary Section 317 program will invest $30 million 
in contracts to get manufacturers to make additional bulk monovalent 
vaccine over and above the amounts the companies expect to use for the 
2006/7 season. This added bulk vaccine will be available to be turned 
into finished vaccine if other producers experience problems, or if an 
unusually high demand for vaccine is anticipated. Bulk vaccine not used 
for the 2006/7 season will be kept for potential use the following 
year. Commonly, one or two of the strains in the trivalent influenza 
vaccine remain the same from one year to the next.
    HHS is also continuing its efforts to expand annual influenza 
immunizations. The Section 317 program will also use increased funding 
of $20 million over fiscal year 2005 to purchase an estimated two 
million doses of influenza vaccine for the 2006/7 influenza season to 
help states expand vaccination for children. Centers for Medicare and 
Medicaid Services has taken steps to ensure that physicians have 
appropriate incentives to improve vaccination rates. Since 2002, the 
Medicare reimbursement rate for the administration of influenza vaccine 
has increased more than four times, from an average of $3.98 in 2002 to 
$18.57 in 2005. The reimbursement rate for the vaccine product also 
increased, from $8.02 to $10.10.
    To ensure sufficient vaccine can be made quickly in a pandemic, the 
Nation needs to develop the ability to surge domestic vaccine 
production as soon as scientists determine that a pandemic strain has 
emerged. The President's Budget increases the Department's investment 
in pandemic preparedness efforts by $21 million, for a total of $120 
million in fiscal year 2006. This increase will be used to develop the 
year-round domestic surge vaccine production capacity that would be 
needed in a pandemic; this added surge capacity could also be used to 
respond to unexpected problems in the production of annual vaccines. It 
will finance contracts with vaccine manufacturers to develop and 
license influenza vaccines using new production techniques and 
establishing a domestic manufacturing capability. HHS will continue to 
ensure a year-round supply of specialized eggs needed for domestic 
production of currently licensed vaccines. Manufacturers will be 
encouraged to license and implement new processing and other 
technologies to improve vaccine yields from both new cell culture 
vaccines and existing egg-based vaccines. In addition, HHS will sponsor 
the development and licensing of antigen-sparing strategies that would 
increase the number of individuals who could be vaccinated from a given 
amount of bulk vaccine product. Finally, the President's Budget 
maintains the flexibility to redirect these funds to initiate pandemic 
vaccine production at any time a pandemic appears imminent.
    To improve our Nation's long-term preparedness and enhance the 
annual vaccine supply, NIH will invest approximately $120 million in 
influenza-related research nearly six times the fiscal year 2001 level. 
Research areas include new cell culture techniques for flu vaccine 
production, which complements the advanced development; vaccines for 
potential pandemic strains, including H5N1; next-generation antiviral 
drugs; rapid, ultra-sensitive diagnostic devices to detect influenza 
virus infection; and ways to make flu vaccine more effective among the 
elderly.
    These research and advanced development efforts will be 
complemented by expanding funding for CDC's Global Disease Detection 
initiatives by $12 million, from $22 million to $34 million in fiscal 
year 2006, to improve our ability to prevent and control outbreaks 
before they reach the United States.

Childhood Immunization
    The President's Budget includes proposed legislation in the 
mandatory VFC program to improve low-income children's access to 
routine immunizations that I believe members of this committee should 
strongly support. This proposed legislation would ensure that all 
children have access to all routinely recommended vaccines regardless 
of cost such as the newly-approved meningococcal conjugate vaccine. 
This legislation would enable any child who is currently entitled to 
receive VFC vaccines to receive them at state and local public health 
clinics. There are hundreds of thousands of underinsured children who 
are entitled to VFC vaccines, but can receive them only at HRSA-funded 
health centers and other Federally Qualified Health Centers. When these 
children go to a state or local public health clinic, they are unable 
to receive vaccines through the VFC program and the State may decide 
not to use scarce discretionary dollars to provide newer, more 
expensive vaccines. This legislation will expand access to routine 
immunizations by eliminating this barrier to coverage and will help 
States meet the rising costs of new and better vaccines. As modern 
technology and research has generated new and better vaccines, that 
cost has risen dramatically. For example, when the pneumococcal 
conjugate vaccine became available, it increased the cost of vaccines 
to fully-immunize a child by approximately 80 percent. A new 
meningococcal vaccine has recently been approved that will further 
raise the cost to fully immunize a child making this legislation even 
more important.
Focus on the Future--Health Information Technology and NIH
    Our fiscal year 2006 budget was also constructed with the knowledge 
that health information technology will improve the practice of 
medicine and make it more efficient. For example, the rapid 
implementation of secure and interoperable electronic health records 
will significantly improve the safety, quality, and cost-effectiveness 
of health care. To implement this vision, we are requesting an 
investment of $125 million. The Office of the National Coordinator for 
Health Information Technology would spend $75 million to provide 
strategic direction for development of a national interoperable health 
care system, and to address barriers to the widespread adoption of 
electronic health records. The Agency for Health Care Quality and 
Research continues to direct $50 million to accelerate the development, 
adoption, and diffusion of interoperable information technology in a 
range of health care settings.
    Equally important, major advances in knowledge about life sciences, 
especially the sequencing of the human genome, are opening dramatic new 
opportunities for biomedical research. Heretofore un-imagined prospects 
for more precisely predicting individual susceptibility to disease and 
responses to medication are now close at hand, as are new approaches to 
diagnosing, preventing, and treating disease and disability. These 
advances have been driven by the investments in research made by the 
National Institutes of Health (NIH), the world's largest and most 
distinguished organization dedicated to medical science.
    The fiscal year 2006 budget request for NIH of $28.8 billion seeks 
to capitalize on the opportunities these investments have created to 
further improve the health of the Nation. The NIH budget is built upon 
and reflects the tremendous growth in biomedical research spending in 
recent years. In fiscal year 2006, over $24 billion of the $28.8 
billion requested for NIH will flow out to the extramural community, 
which supports work by more than 200,000 research personnel affiliated 
with approximately 3,000 university, hospital, and other research 
facilities across our great Nation. These funds will support nearly 
39,000 investigator-initiated research project grants in fiscal year 
2006, including an estimated 9,463 new and competing awards. NIH will 
also fund close to 1,400 research centers, over 17,400 research 
trainees, and much more.
    In fiscal year 2006, NIH will also continue to implement the 
Roadmap for Medical Research by spending a total of $333 million, an 
increase of $98 million over fiscal year 2005, on initiatives to target 
research gaps and opportunities that no single NIH institute could 
solve alone. The budget request also emphasizes efforts to enhance 
collaborations for multidisciplinary neuroscience research and 
accelerate efforts to develop and evaluate vaccines against HIV/AIDS. 
Within this total, NIH will also increase funding to address critical 
requirements in biodefense, including a targeted $50 million research 
effort to develop new medical countermeasures for chemicals that can be 
used as weapons of mass destruction.

                   SUPPORTING A COMPASSIONATE SOCIETY

Faith-Based and Community Organizations
    As part of the Administration's Faith-Based and Community 
Initiative, the HHS fiscal year 2006 budget maintains a commitment to 
strengthen the capacity of faith-based and community organizations, 
including the Access to Recovery program, the Compassion Capital Fund, 
the Mentoring Children of Prisoners program, and Maternity Group Homes.
    The toll of drug abuse on the individual, family, and community is 
both significant and cumulative. Abuse may lead to lost productivity 
and educational opportunity, lost lives, and to costly social and 
public health problems, including HIV/AIDS, domestic violence, child 
abuse, and crime. Through the Access to Recovery program, HHS will 
assist States in expanding access to clinical treatment and recovery 
support services and allow individuals to exercise choice among 
qualified community provider organizations, including those that are 
faith-based. This program recognizes that there are many pathways of 
recovery from addiction. Through Access to Recovery individuals are 
assessed, given a voucher for appropriate services, and provided with a 
list of providers from which they can choose. Fourteen States and one 
tribal organization were awarded Access to Recovery funding in fiscal 
year 2004, the first year of funding for the initiative. The funded 
entities have identified target populations that include youth, 
individuals involved with the criminal justice system, women, 
individuals with co-occurring disorders, and homeless individuals. The 
President's Budget increases support for the Access to Recovery 
initiative by 50 percent, for a total of $150 million, and will support 
a total of 22 States participating.
    The Compassion Capital Fund advances the efforts of community and 
charitable organizations, including faith-based organizations, to 
increase their effectiveness and enhance their ability to provide 
social services where they are needed. The President's Budget includes 
$100 million, an increase of $45 million in support of the Compassion 
Capital Fund.
    Within this program, the President has proposed a new focus on 
young Americans that will include support for programs that help youth 
overcome the specific risk of gang influence and involvement. This 
three-year, $150-million initiative will provide grants to faith-based 
and community organizations targeting youth ages 8-17, and will help 
some of America's communities that are most in need. These 
organizations will provide a positive model for youth one that respects 
women and rejects violence.

Abstinence
    Expanding abstinence education programs are also part of a 
comprehensive and continuing effort of the Administration, because they 
help adolescents avoid behaviors that could jeopardize their futures. 
Last year, HHS integrated abstinence education activities with positive 
youth development efforts at the Administration for Children and 
Families (ACF), by transferring the Community-Based Abstinence 
Education program and the Abstinence Education Grants to States to ACF. 
The HHS fiscal year 2006 budget expands activities to educate 
adolescents and parents about the health risks associated with early 
sexual activity and provide them with the tools needed to help 
adolescents make healthy choices. The programs focus on educating 
adolescents ages 12 through 18, and create a positive environment 
within communities to support adolescents' decisions to postpone sexual 
activity. Where appropriate, the programs also offer mentoring, 
counseling, and adult supervision to promote abstinence with a focus on 
those groups which are most likely to bear children out of wedlock. A 
total of $206 million, an increase of $39 million, is requested for 
these activities.

Head Start
    The Head Start program helps ensure that children, primarily in 
low-income families, are ready to succeed in school by supporting their 
social and cognitive development. Head Start programs also engage 
parents in their child's preschool experience by helping them achieve 
their own educational, literacy, and employment goals. The HHS fiscal 
year 2006 budget of $6.9 billion will provide comprehensive child 
development services to 919,000 children. This level includes an 
increase of $45 million to support the President's initiative to 
improve Head Start by funding nine state pilot projects to coordinate 
state preschool, child care, and Head Start in a comprehensive system 
of early childhood programs for low-income children.

Temporary Assistance for Needy Families
    It has been three years since President Bush first proposed his 
strategy for reauthorizing TANF and the other critical programs 
included in welfare reform. During this time, the issues have been 
debated thoroughly but the work has not been completed and States have 
been left to wonder how they should proceed. We believe it is important 
to finish this work as soon as possible and set a strong, positive 
course for helping America's families. The proposal is guided by four 
critical goals that will transform the lives of low-income families: 
strengthen work, promote healthy families, give States greater 
flexibility, and demonstrate compassion to those in need.

Administration on Aging
    The President's Budget requests a total of $1.4 billion in the 
Administration on Aging for programs that serve the most vulnerable 
elderly Americans, who otherwise lack access to healthy meals, 
preventive care, and other supports that enable them to remain in their 
home communities and out of nursing facilities. It also continues 
investments in program innovations to test new models of home and 
community-based care.

                        IMPROVING HHS MANAGEMENT

    The President's Management Agenda (PMA) provides a framework to 
improve the management and performance of HHS. HHS has taken 
significant steps to institutionalize its focus on results and achieve 
improved program performance that is important to the HHS mission and 
the American taxpayer.
    Budget and Performance Integration (BPI) aims to improve program 
performance and results by ensuring that performance information is 
used to inform funding and management decisions. For fiscal year 2006, 
HHS operating divisions produced their first ``performance budgets'' 
which combine budget and performance information in a single document. 
With this new format the Department moved from the traditional approach 
of presenting separate budget justifications and performance plans to 
the use of one integrated document to present both budget and 
performance information. This move also enhanced the availability and 
use of program and performance information to inform the budget 
process.
    HHS has made significant steps in its implementation of the 
President's five government-wide management initiatives. The Program 
Assessment Rating Tool (PART) is an important component of the Budget 
and Performance Integration initiative and is used to assess program 
performance and improve the quality of performance information. Sixty-
five HHS programs were reviewed in the PART process between fiscal year 
2004 and fiscal year 2006. HHS consolidated 40 personnel offices into 
four Human Resources Centers, which became operational in January 2004, 
and is planning several upcoming projects to support Human Capital 
strategic management. Since the start of the competitive sourcing 
initiative, HHS has competed almost 25 percent of its commercial 
activities, resulting in increased efficiencies and savings for the 
American taxpayer. For example, HHS anticipates gross savings of $55 
million from studies completed in fiscal year 2004, which will be 
redirected to mission critical activities at HHS. This year, HHS will 
focus on structuring competitions to maximize efficiencies and savings, 
as well as implement a savings validation plan. HHS also implemented 
several processes to improve the financial performance of the 
Department, such as streamlining and accelerating the annual financial 
reporting process and combining annual audited financial statements 
with program performance information in the Department's Performance 
and Accountability Report. HHS is also continues to implement the 
Unified Financial Management System throughout the Department. More 
than 95 percent of HHS' information systems have certified and 
accredited security plans. Finally, HHS has been working to achieve a 
more mature Enterprise Architecture that links performance to 
strategic, capital planning, and budget processes.
    Over the past four years, the Administration has worked diligently 
with the Department to make America and the world healthier. I am proud 
to build on the HHS record of achievements. For the upcoming fiscal 
year, the President and I share an aggressive agenda for HHS that 
advances a healthier, stronger America while upholding fiscal 
responsibility and good stewardship of the People's money. I look 
forward to working with Congress as we move forward in this direction. 
I am happy to answer any questions you may have.

                          MEDICAID PROTECTION

    Senator Specter. Well, thank you very much, Mr. Secretary, 
for many things, most recently brevity.
    Mr. Secretary, I begin with a question on the Medicaid. It 
has been a topic among Senators. It serves people who are 
desperately in need of medical attention. There is a projected 
reduction which is represented at 1 percent, but in the out-
years it grows exponentially. You come with three terms as 
Governor of Utah, so you've been in the Governor's role. The 
Governors are very concerned about Medicaid.
    Senator Smith of Oregon has offered an alternative proposal 
to take a closer look at it on a commission, not satisfied with 
the review which has been made so far, which has--could have 
more depth. We can always study more. Of course it involves 
some delay. But how will the recipients of Medicaid at the 
present time be protected with the proposal which you have 
backed?
    Secretary Leavitt. Senator, that's the right question in my 
mind. How do we protect the coverage of people who are 
currently being served, and how in fact can we expand the reach 
of Medicaid? It's currently serving some 46 million Americans. 
But some of them are in jeopardy because the program has such 
rigid inflexibility that States are by the nature of that 
inflexibility being forced to look at diminishing the coverage 
substantially or eliminating the coverage of many optional 
groups.
    A couple of points. One is, if there is any perception that 
Medicaid is being cut, I would like to suggest that is not 
correct. The Medicaid budget will grow by in excess of 7 
percent over the next 10 years. We'll see almost $5 trillion 
spent at the end of that 10 years. We'll see $900 billion more 
from the Federal side be put into Medicaid. It is a rapidly 
growing program.
    What the budget does reflect is a desire to see it increase 
at a slightly slower rate. The Governors I believe are, as I've 
spoken with them, some--I think I've had conversations now with 
38 of them about this subject in direct and personal ways. 
There are a series of reforms that they're anxious to see that 
provide flexibilities that will allow them to continue the 
coverage of many who they believe are imperiled.
    The reforms are quite common sense in my mind. One is to 
reduce the amount that's paid for prescription drugs, not to 
reduce the number of people served by them or to reduce the 
number of drugs they can receive, but to change the way in 
which they are paid for. Medicaid would be widely known as the 
best payer in the business. They pay higher costs for 
prescription drugs than Medicare or for that matter most 
private plans. This would propose a statute change that would 
allow them to essentially pay the same rate as Medicare Part B 
will pay.
    The second reform is caring for what's known as an asset 
spend-down where people have learned to give their assets to 
their children so that the State can pay for their Medicaid, 
and Governors would like to see that changed.
    The third is in being able to provide a series of co-pays 
among those who are in higher income brackets served by 
Medicaid. Governors are interested to see Medicaid recipients 
become cost-conscious consumers in the same way that others are 
required.
    The fourth would be really a celebration of SCHIP, to use 
SCHIP more broadly to provide more flexibility in constructing 
benefit plans of again mostly mothers and children in higher 
income brackets that would provide the ability to serve more.
    The last is an important reform, and that is as the number 
of elderly served by Medicaid increases and will clearly 
increase in the future, there's a desire to in essence liberate 
Medicaid from exclusive use of nursing homes. We'd like to be 
able to have people served in their homes and in communities. 
It's more efficient, and frankly that's where they want to be 
served.
    So, Senator, those are the reforms that are on the table. 
They are reflected in the budget as a budget reduction, but 
only because they provide flexibility that in my judgement 
almost all the States will be using in health care in different 
ways to preserve the coverage of those who might lose it 
otherwise.
    Senator Specter. Mr. Secretary, let me compliment you on 
finishing your answer within 2 seconds of the allotted time 
which I have. That plus your opening statement on brevity gets 
you off to a very, very good start with this subcommittee.
    Secretary Leavitt. Thank you.
    Senator Specter. I'm now going to turn the gavel over to my 
distinguished colleague, Senator DeWine, to relieve me on the 
chairmanship. Thank you very much.
    Secretary Leavitt. Thank you, Senator.
    Senator DeWine [presiding]. Senator Harkin.

                       IOWA ARMY AMMUNITION PLANT

    Senator Harkin. Thank you very much, Mr. Chairman. Mr. 
Secretary, we visited earlier. We talked about briefly, a month 
or so ago, I forget when it was, about the situation at the 
Iowa Army ammunition plant that had to do with workers who had 
worked there for years in a nuclear weapons facility there.
    A little background. Several years ago a worker had 
contacted me there because of all the cancers that had been 
happening to people, asked me to look into this. I contacted 
the Department of the Army who informed me that they had never 
assembled nuclear weapons there, and so I went out on a limb 
and told this guy that he must be mistaken, and he never gave 
up, Mr. Anderson never gave up. He came back and we finally 
found out that in fact they had been assembling nuclear weapons 
there for many, many years, and many of the workers there were 
exposed to high levels of radiation, had no knowledge of this. 
They were sworn to secrecy. Many of them never talked to 
doctors, never talked to anyone, because of this oath of 
secrecy they had taken.
    Well, this has all gone through a lot of hearings and 
processes and stuff. Senator Bond and I have managed to win 
four votes on this. But basically the NIOSH Advisory Board on 
Radiation and Worker Health voted seven-zip, seven to nothing, 
to provide automatic compensation for former nuclear weapons 
workers at the Iowa Army ammunition plant.
    Now, under the law they are then to notify you by letter of 
their decision. Under the law you then have 30 days whether to 
approve or disapprove of this, and then of course Congress then 
can step in depending upon what the decision is. Have you 
received any--that notification yet?
    Secretary Leavitt. No.
    Senator Harkin. Well, this may be an unfair question, but 
I'll ask it. Do you have any explanation as to why you have not 
received an official notification?
    Secretary Leavitt. I don't. I've read accounts that the 
vote took place as you have indicated. I'm aware that--but I 
can't reconcile why they haven't. When I do receive it, we'll 
obviously act in a way that's timely.
    Senator Harkin. Well, Mr. Secretary, I--well, I wrote them 
a letter yesterday along with others to Mr. Howard, director of 
NIOSH, and Mr. Paul Ziemer, chairman of the Advisory Board on 
Radiation and Worker Health, because I didn't know, I really 
didn't know if they had transmitted or not. So I wrote them a 
letter saying, if you haven't, please do it. So I hope that we 
can find out why it is that they have not forwarded this, 
because these workers have been waiting a long time. It was a--
wasn't even a--as I said, wasn't even a close vote, seven to 
nothing. So I'm hopeful we can move ahead on that.
    The other thing I wanted to talk about just for the record, 
Mr. Secretary, it was reported yesterday that the White House 
disagrees with the GAO opinion that prepackaged video news 
releases prepared and distributed by Federal agencies or their 
public relations firms that do not disclose, that this would 
not constitute illegal covert propaganda.
    One of the videos reviewed by GAO was funded by one of your 
agencies, CMS. Now, again, I don't expect you to have these 
numbers at your fingertips, but if your staff could take note 
of this, as the appropriations subcommittee here, could you 
provide this subcommittee with your anticipated budget for 
fiscal year 2006 for public relations activities, including any 
contracts with public relations firms, media buys, et cetera, 
if you could provide that for the committee.
    Secretary Leavitt. Indeed we will.
    [The information follows:]

    
    
    Senator Harkin. I appreciate that.

                     MEDICARE MODERNIZATION--PART D

    Secretary Leavitt. Senator, I might just comment----
    Senator Harkin. Sure.
    Secretary Leavitt [continuing]. Make one statement that we 
will obviously follow the guidance of our legal counsel on this 
matter and make certain that we are acting within the scope of 
the rules. We have a very demanding challenge in front of us 
collectively as a government during the next 15 months, and 
it's the rollout of Medicare Modernization, the Part D for 
prescription drugs.
    One of the--at the base of this conflict was the question 
of what tools we should deploy and use to provide people with 
information about their options under Part D. I mention that 
simply to put some perspective on the dilemma we're facing, 
reaching people, educating them. We enlist the help of the 
Senate, and at the risk of eliminating the good reputation I 
formed with Senator Specter on stopping when that red light 
goes on, I'll quit there.
    Senator Harkin. Well, Mr. Secretary, just summing up, we 
send out letters and information to our constituents all the 
time, but we sign our names to it, you know, and I'm certain 
those who in my State who disagree with me dismiss it because 
I've said it, and you know how that goes. But at least they 
know where it comes from.
    Secretary Leavitt. Right.
    Senator Harkin. Do you think that any information provided 
by HHS should be attributed to HHS? I mean, I realize you're 
going to get information out, but at least it ought to say 
where it comes from.
    Secretary Leavitt. That seems like a logical statement to 
me. I don't know the nature of this dispute. I know that there 
has been discussion between GAO and differences of opinion 
about it. At this point, our role is to first of all do the 
best job we can in being able to educate people on the 
opportunity that's there and at the same time make certain 
we're within the rules. I can assure you we'll do our best to 
stay within them.
    Senator Harkin. I thank you. We will, as I said, when you 
send those anticipated figures up, any contracts you have with 
media firms and stuff like that, we would like to analyze that 
closely.
    Secretary Leavitt. Thank you.
    Senator Harkin. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Senator DeWine. Senator Craig.

                    STATEMENT OF SENATOR LARRY CRAIG

                          PANDEMIC FLU VACCINE

    Senator Craig. Thank you very much, Mr. Chairman. I would 
hope that any activity or publicity that has been garnered as a 
result of certain advertising and information flows does not 
put a chilling effect on what I believe is a fundamental 
responsibility of the agency to communicate with the public, 
and to do so in a forthright and direct way. Clearly as we 
struggled to bring folks on line with the prescription drug 
card and to get them into the system so that as we roll out the 
plan as you're talking about, there clearly needed to be an 
informational flow. There was a partnership at AARP at that 
time that was a cooperative effort, Mr. Secretary, that I think 
worked extremely well.
    So while I do believe there ought to be full disclosure, I 
don't think you or I would dispute that, I would hope that 
anyone who might charge that you're doing something beyond 
without good grounds, this Senate spends a lot of time and 
money getting out our point of view, and more importantly, once 
a policy is developed and ready for the public, I think it's 
important that we communicate it effectively.

                              FLU VACCINE

    One question of you: Last year I wore a different hat than 
I wear today, and that was chairman of the Select Committee on 
Aging--Special Committee on Aging. We spent a lot of time prior 
to and after the announcement by Chiron that they had been 
forced to close their Liverpool plant and could not supply to 
the marketplace and to Americans the necessary flu vaccine that 
we had anticipated. We worked very closely with your 
predecessor in making sure that somehow we made it through, and 
we are making it through this year it appears. At least thank 
goodness we have not had a major outbreak, but the flu is out 
there and it's taking lives as it does.
    But I think you are right to be concerned of a pandemic, 
and therefore, clearly the need in this country to build a 
reliable supply of flu vaccine. We, by a--for a variety of 
reasons including liability, while our class action efforts of 
the past month may help some, we've run a lot of folks offshore 
or out of business. The business of making vaccines is not 100 
percent perfect in all instances. There is liability without 
question.
    Senator Bayh and I have introduced legislation, you're 
right. There are others who have looked at shaping the market 
or assisting the market. When we deal with the flu virus, and 
it is constantly in mutation, you cannot inventory this on the 
shelf and keep it there. It must be new with the season. You 
have to have the capability to produce it. I do believe there 
will come a day when you are right to be concerned about what's 
going on elsewhere in the world as it relates to flu vaccines. 
It is a killer of our elderly, there is no question about it.
    Could you for a moment spend some time on that issue with 
us as to what you anticipate you'll be doing? I see the 
Liverpool plant is back up in operation. It looks like Chiron 
is back in the market. That's wonderful. But we're still--we 
still have a very fragile system. We're looking at new 
techniques beyond the egg to cell for production purposes. 
Enlighten us if you would as to where you see it at this 
moment, and what we might do to assist you in ensuring a 
constant and reliable supply.
    Secretary Leavitt. Judgements on how much and when and what 
to buy are complex and often times required to be made with 
incomplete information, or at least imperfect information.
    Senator Craig. That's right.
    Secretary Leavitt. It's in some respects like many other 
commodity-type business or business decisions where there are 
peaks of use and the question as to whether you buy to the peak 
always or whether you buy what you think will be normal. The 
truth is they will not be manufactured unless there's a market, 
and often times government has to be that market. We've 
proposed in this budget for back-up guarantees some $20 million 
in 2005 and $30 million in 2006, and also $120 million for 
pandemic work for alternative production.
    I would like to just update you some, Senator, on efforts 
we are making to follow the avian flu in Asia. We have people 
on the ground who are now working with various governments in 
their clinics, in their--working with their governments, with 
their practitioners. We're trying to deploy more and more 
resources at the source. Pandemics have occurred on three 
different occasions during this century. There's no reason for 
us to believe they won't happen again. They strike quickly. We 
don't know when they will strike, we don't know where they will 
strike, and as you've suggested, we don't always know the 
strain of the flu, and we have to be in a position to respond 
quickly.
    It is a matter of grave concern to me. I am following this 
literally on a daily basis. I receive a daily briefing now from 
CDC and others involved. Currently I believe that we are 
following the right path, but we'll keep you and other members 
of the committee informed as things develop.
    Senator Craig. Well, I thank you very much. There are many 
of us following this. We're glad to see you fully engaged. 
You've made, in my opinion, the right statement. To ask 
companies to supply to an indeterminate market means that we 
have to stabilize the market, and the only way to do that is 
for government to be the stability. Therefore to, at the end of 
the cycle, to be able to buy out, if you will, excess, as long 
as the companies have met the level of projection, is something 
I think we ought to build a level of expectation for in the 
marketplace. It's in part why we don't have companies operating 
today. We bankrupt them by basically suggesting they supply to 
a market it didn't develop and then we weren't there to sustain 
them in the end.
    So I thank you for that. I'm glad to see there's increased 
money in the budget for those purposes and that we're moving as 
well as we can in relation to pandemic knowledge. Thank you.

                   STATEMENT OF SENATOR MIKE DE WINE

    Senator DeWine. Mr. Secretary, welcome.
    Secretary Leavitt. Thank you, Senator.

                 COMMUNITY ALTERNATIVE FUNDING SYSTEMS

    Senator DeWine. Ohio's Community Alternative Funding 
Systems, the CAFS program, serves individuals with mental 
retardation and developmental disability. However, the CAFS 
program apparently does not comply with Federal mandates, and 
as a result, Ohio will not be providing Medicaid services to 
this fragile population. You and I have talked about this, our 
staffs have talked about this, and I just want to again mention 
it to you that as we, Ohio, works its way through this problem, 
I hope that you will continue to work with Ohio to try to work 
this out. We understand Ohio has to comply with Federal law, 
but we need to make this transition as smooth as we can as we 
find other ways to serve this population. These are kids, these 
are kids in school, these are kids who really are a most 
fragile population. So I just look forward to working with you 
on that.
    Secretary Leavitt. Thank you. May I say that there is no 
disagreement on the nobility of the purpose and a commitment to 
find a solution.

                            MEDICAID FUNDING

    Senator DeWine. Good. We appreciate it. We'll work with 
you. We appreciate you working with us. Thank you very much.
    Last year, one of our Ohio children's hospitals in 
Cincinnati was pursuing a Federal grant trying to find money to 
continue a major project in improving the quality, the safety, 
and the efficiency of its care using technology, best 
practices, and sound management. But they looked around and 
they found that really there was no way to pursue Federal 
funding in regard to kids. It's rather ironic, I think, that 
that is true, because if they had been doing it, if it was an 
adult hospital, they had been doing it, there's Medicare money 
available. There's not Medicaid money available.
    So again we have a situation really where kids are 
discriminated against. I wonder what you can do to change that 
in your Department and what you see is the future to try to 
deal with this.

                        FLEXIBILITY IN MEDICAID

    Secretary Leavitt. I spoke briefly earlier about what I 
believe is a wide and broadly held view that Medicaid is 
rigidly inflexible and that it creates the kind of 
circumstances--we've talked a couple of times already today 
about where there are noble causes, noble pursuits that ought 
to be done, and there's no disagreement on the cause, but 
people are left without the capacity to respond to it.
    That's one of the reasons that we hope very much that the 
Congress will act to provide more flexibility in Medicaid. I 
believe one of those areas would be the ability to construct 
benefit packages that would be tailored particularly in the 
instances of mothers and children. We believe more flexibility 
will not result in anything other than more people being 
covered as opposed to fewer.
    Senator DeWine. Well, this is the type of thing that, you 
know, our children's hospitals really need the ability to deal 
with, and I would hope you would take a look at that as we may 
possibly design something to deal with that.

                  TREATMENT OF CHILDREN WITH HIV/AIDS

    Senator DeWine. Let me move to another area. Currently few 
programs specifically target the treatment of children with 
HIV/AIDS in developing countries. A primary reason is the lack 
of appropriate pharmaceuticals for use in children. We all of 
course know that children are not small adults and treating 
them that way jeopardizes their lives. With 2.5 million 
children infected with HIV around the world, it's essential 
that we have appropriate medications to treat them.
    How does your budget plan and your Department--how do you 
plan to ensure that HIV/AIDS drugs, both generic and brand name 
approved by the FDA expedited process, also include pediatric 
formulations as well as important dosing information needed for 
treating different age groups?
    Secretary Leavitt. Senator, NIH has provided $25 million in 
2004 and 2005, and they're proposing another $25 million in the 
2006 for pediatric drug research. I believe that information on 
the effects of those drugs in children is critically important 
as well, and I'm looking forward to working with you to ensure 
that we have success in this effort.
    [The information follows:]

                             HIV/AIDS Drugs

    On May 17, 2004 FDA published guidance for the pharmaceutical 
industry encouraging manufacturers to submit marketing applications for 
fixed dose combination (FDC) and co-packaged versions of previously 
approved single entity anti-retroviral therapies. The guidance 
encourages the development of pediatric formulations for these 
products. Also, subsequent to the publication of the draft guidance, 
FDA expanded the expedited review program to include single product 
generic applications. Most of the first line antiretroviral agents are 
currently available in pediatric dosage forms, so these pediatric 
formulations can be made available through the generic drug approval 
process.
    Regarding fixed dose and co-packaged combination products, only one 
company thus far has expressed interest to FDA in developing a 
pediatric combination product. This could be explained in part by the 
challenges associated with establishing appropriate doses for pediatric 
patients for a fixed dose combination product. Such combination 
products generally do not provide the dosing flexibility needed for 
pediatric HIV therapy. Also, many of the pediatric formulations are in 
the form of oral solutions that are not amenable to combination product 
development. Combination therapy in younger pediatric patients might 
best be accomplished through the use of individually formulated 
antiretroviral products that can be made available through the generic 
approval process. The adult combination products can be used in the 
older pediatric population.
    Regarding the application of the Pediatric Research Equity Act 
(PREA) to PEPFAR (President's Emergency Plan for Aids Relief) 
applications, the Agency is enforcing PREA for these applications as it 
would with any other application. However, PREA does not apply to most 
generic products or co-packaged products. When PREA does apply to a 
drug (including HIV drugs) we do not hold up approval but grant 
deferrals as appropriate for these life-saving treatments.
    In addition, the pediatric exclusivity provision of the 1997 FDA 
Modernization Act and the subsequent 2002 Best Pharmaceuticals for 
Children Act have generated many clinical studies and useful 
prescribing information for many products, including several for the 
treatment of HIV infection. FDA has an HIV Written Request Template to 
facilitate the development of products. Following are a few examples of 
products that have been approved for treatment of HIV infection in 
children. These approvals resulted from studies submitted in response 
to a Written Request from FDA.
    Ziagen (abacavir), Zerit (stavidine), Videx (didanosine), and 
Viracept (nelfinavir mesylate), in combination with other 
antiretroviral agents, are indicated for the treatment of HIV-1 
infection in children. Use of Ziagen in pediatric patients aged 3 
months to 13 years is supported by pharmacokinetic studies and evidence 
from adequate and well-controlled studies of Ziagen in adults and 
pediatric patients. Use of Zerit in pediatric patients from birth 
though adolescence is supported by evidence from adequate and well-
controlled studies of Zerit in adults with additional pharmacokinetic 
and safety data in pediatric patients. Use of Videx in pediatric 
patients two weeks of age through adolescence is supported by evidence 
from adequate and well-controlled studies of Videx in adults and 
pediatric patients. Use of Viracept in pediatric patients from age 2 to 
age 13 is supported by evidence from adequate and well-controlled 
studies of Viracept in adults with additional pharmacokinetic and 
safety data in pediatric patients.
    In addition, in March 2003, the Pediatric Subcommittee of the 
AntiInfective Drugs Advisory Committee of the Food and Drug 
Administration, Center for Drug Evaluation and Research discussed the 
development of antiretroviral drugs in HIV-infected and HIV-exposed 
neonates younger than four weeks of age. The Advisory Committee 
supported the continued need for development of products for neonates.
    These are just a few examples that demonstrate FDA's commitment to 
the principle that product development should include pediatric studies 
when pediatric use of the product is intended. In addition, through 
efforts to make safe and effective antiretrovirals available for 
treatment of HIV across much of the developing world, we expect to 
reduce the number of children born with HIV infection and thus 
significantly impact global health.

    Senator DeWine. Good. Well, my time is up, but we hope to 
continue to work with you on this. Thank you very much. Senator 
Kohl is gone. Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Thank you very much, Mr. Chairman. Mr. 
Secretary, thank you for being here today. I can't think of an 
agency that doesn't have more direct impact on lives of every 
single one of the constituents we represent here, and it's a 
tremendous job and we appreciate you taking it on.

                               HEAD START

    I do want to make one comment on Head Start. We had a 
conversation about this before and in a written response you 
sent to me you said that you are committed to ensuring the 
implementation of the President's proposals on Head Start that 
provide an opportunity for more children to be served by local 
Head Start programs at the highest level of quality.
    I liked the statement, but unfortunately the President's 
proposal does not provide for more kids to be in Head Start, 
and I just really urge you to go slow on this proposal. If we 
break the compact that these local communities have in 
providing Head Start, I think we're going to take away the 
basic tenet that Head Start was put together on. It's not just 
an education program. It's making sure that kids are ready to 
learn when they get to school.
    So I just--I ask you again, I will tell you I'm going to be 
working hard to make sure that we do this right and you'll be 
hearing more from me on that, because I'm very concerned the 
President's proposal will eliminate an important compact and 
just essentially put in another bureaucratic layer of 
government that won't help any child get to school ready to 
learn.

                         MIGRANT HEALTH CENTERS

    What I did want to ask you about today, however, is the 
budget request which we are here to discuss today, and I am 
very concerned about the mixed messages that we're sending 
communities. I really appreciate the President's leadership on 
funding for the community in migrant health centers. I couldn't 
agree more with the administration's support for these centers, 
because they do provide prevention-based affordable health 
care. They're not just a safety net. They really do a good job 
in providing health care for low income, often uninsured 
patients that often fall through the cracks in our health care 
system. So I applaud the administration's request for another 
$304 million. I think that's great.
    But what I am concerned about is a number of the other 
budget policies that are coming at us will make it impossible 
for these community health centers to meet their mission and to 
provide the health care that we're asking them to. The other 
proposals on New Starts and Medicaid and the elimination of 
coordination services like the Healthy Community Access Program 
are going to have a huge impact.
    We know that our community health centers are already 
seeing double digit increases in the number of patients that 
need care, and as the number of patients uninsured continue to 
increase, their load is going to continue to increase. We need 
to make sure that we're not just funding new health centers, 
but we're making sure that the existing ones get the support 
they need.
    Medicaid on average accounts for more than 30 percent of 
the revenue for these community health centers, so any policy 
cuts in Medicaid is going to have a direct impact on that. I'm 
already hearing from all of my community health centers that 
they are deeply concerned about the proposed cuts in Medicaid. 
We're already dealing with a mental health crisis under 
Medicaid. I think you know CMS just notified Washington State 
that they can no longer depend on the $82 million annually to 
provide community-based mental health care for low income 
patients.
    Another policy I'm very concerned about is you talked about 
providing flexibility, but you're taking away, but that's a 
point for another day. The community health centers are the 
ones who are going to absorb the impact of that on them.
    Then the elimination of the Healthy Community Access 
Program that works out in our communities. I know the 
administration in the past has said it's not effective. I 
really invite you out to Washington State or to talk to some of 
our HCAP grantees, because they really are making a difference. 
Elimination of that is going to be very hard for our community 
health centers to be able to succeed.
    So my question to you is, thank you for providing 
additional funds, but budget policies that impact these 
community health centers in very negative ways are going to 
make it impossible. How do you reconcile increasing the money 
but passing the policies that make it very difficult for them 
to be successful?
    Secretary Leavitt. Senator, let me respond on Head Start. 
I'll go through all of the three areas you talked about. The 
President's proposal would actually allow for 9,729 additional 
students to be served by Head Start. The President and the 
Secretary of HHS are enthusiastic about Head Start and want to 
make sure it continues not just to serve those, but to expand. 
I've had a number of meetings now with Secretary Spelling to 
talk about how we could coordinate activities between the 
Department of Education and HHS. We think that that will 
leverage those funds even further.
    With respect to health center funds and the whole subject 
of community health centers, that's another area where we share 
enthusiasm. We think that the President's proposal puts us 
again on a path to complete his objective of 1,200 new and 
expanding centers. This one will add 40 in the areas with the 
lowest incomes.
    We have made a policy decision to emphasize actual service 
delivery, and there are places in this budget, with health 
center funds being one of them, where the actual--where by 
statute only 15 percent of those funds could go for service 
delivery and went for other matters ancillary to it. So there 
was a priority put on our part for the actual delivery of 
funds.
    With respect to Medicaid, clearly community health centers 
are dependent upon continued participation by Medicaid. I 
think, as you pointed out and others have, that it's nearly 35 
percent of their overall budget. We want them to succeed. A cut 
in the number of dollars in Medicaid would in fact be alarming. 
However, this budget will reflect more than 7 percent more 
dollars going into Medicaid than did before. This is not a 
matter of cutting. We want Medicaid to increase. We want it to 
increase .2 of 1 percent than what had been proposed before, 
but there are very few large numbers in the President's budget 
that will reflect a 7 percent-plus increase, and Medicaid is 
one of them.

                               HEAD START

    Senator Murray. Well, I appreciate your response. I know 
I'm out of time. I just would ask you again to go cautiously 
with Head Start, because it is more than just an education 
program, and it is a success story, and I want to make sure we 
don't undo that.
    I just am concerned that if we just focus on new community 
health centers we are going to leave the ones that are out 
there not doing a good job and then we'll be back here saying, 
well, they don't do a good job, let's not fund any of them, and 
I don't want to go there. I think it's really important to 
understand the health care impact, the crisis, the budget 
numbers that are hitting these, the number of uninsured that 
are increasing, and we need to be able to do our part here. I 
will continue to work on that. I know you care as well, so 
thank you very much.
    Secretary Leavitt. Thank you.
    Senator DeWine. Senator Durbin.

                 STATEMENT OF SENATOR RICHARD J. DURBIN

    Senator Durbin. Thank you very much, Mr. Chairman. George 
Carlin is a great observer of life and has a routine relative 
to riding on airplanes, most of which cannot be repeated at 
this hearing.
    But there is one thing he observes: When starting to land 
in an airplane, the flight attendant says, let me be the first 
to welcome you to Washington DC. Carlin asked, if you're on the 
same plane I'm on, how can you be welcoming me anywhere? I 
would like to welcome you to this committee, but since this is 
the first time I've ever been on this committee, I can't. I'm 
just happy to be here with you today.
    Secretary Leavitt. Thank you.

                         MEDICAID AND MEDICARE

    Senator Durbin. I can't officially welcome you, but I've 
wanted to be on this subcommittee for a long time and I'm glad 
that it finally happened. It's very critical and important.

                            SOCIAL SECURITY

    The President is on a 60-day tour around America to cities 
to talk about the crisis or challenge or problem, or whatever 
is the word du jour of Social Security. There are many of us 
who believe that Social Security does present a challenge that 
we should address and address now with sensible, common sense 
approaches that over the long term will help us meet our needs.
    I'd like to show you a chart though that compares the 
challenge of Social Security to other challenges. I'll make 
sure the Secretary can see it there. You'll note on this chart 
that over the period of time of our debate about the costs of 
Federal programs, we anticipate by 2075 a 48 percent increase 
in the cost of Social Security as a percentage of our gross 
domestic product. Look at the numbers for Medicare and 
Medicaid, dramatically larger, 318 percent for Medicare, 342 
percent for Medicaid.
    So if the President is looking down the track and seeing 40 
or 50 years from now this light of a train coming toward us and 
warning us about this, certainly we should be sensitive to the 
fact that looming directly behind us is a locomotive that says 
health care in America that is about to run us over.
    You are addressing through this budget some of the cost of 
programs like Medicaid and Medicare. Neither this 
administration nor this Congress apparently has the political 
will to address the much larger issue we face in this country. 
If there were another line in this chart, the cost of health 
insurance by the year 2075, it might even be larger in terms of 
increase. So how can we address these things so tentatively in 
such a piecemeal fashion and expect to really resolve the 
difficulty?

                      AFFORDABLE HEALTH INSURANCE

    I just left a meeting with the President of one of the 
largest unions in America. He says we're about to lose 
manufacturing through his union because of the cost of health 
care. I hear that from small and large businesses alike. Yet 
we're not talking about it. If the President were making a 60-
day, 60-city tour about what to do to make sure that every 
American had affordable health insurance that provided basic 
protection for their family, he would have turnouts, 
unimaginable turnouts of people interested in this issue.

                                MEDICAID

    So I ask you this. What is--what do you think we should do 
in this next year? Is the answer to cut coverage on Medicaid? 
Every time someone in Washington says flexibility, I grab my 
wallet, because flexibility means less money, I know that, I've 
been around here long enough. I understand we need to change 
some rules, but I'm afraid flexibility is just a cover for a 
reduction in cost.
    Shouldn't we be asking for some advantage for consumers and 
taxpayers in this process? We're still in a position where 
Medicare cannot bargain under the new prescription drug plan to 
bring pharmaceutical costs down. Medicaid in most States is 
really limited as to how it can bargain with drug companies to 
bring the cost of drugs down for recipients in those States. 
Yet we know over the border in Canada drugs are a fraction of 
the cost.
    How can we be honest and sincere about dealing with health 
care if all we're going to do is cut benefits for poor people 
and not address cost issues such as the ones that I just 
mentioned?
    Secretary Leavitt. Senator, I've become fond of observing 
that there is a point in the life of every problem when it's 
big enough you can see it but small enough you can still solve 
it. Your chart reflects three of them. The President has 
clearly taken two of them on this year. That's--two out of 
three is a very significant undertaking.
    But the matter that you've reflected on, health care costs, 
clearly is one that we will all have to deal with. Now I, 
recognizing the limit of time, may I just say--point out four 
things that I believe can and should be done in this budget 
year to get us started?

                            MEDICAID REFORM

    One is in fact Medicaid reform. These are reforms that will 
not result in anyone losing health insurance, but in fact will 
allow us to preserve health insurance for many who have it and 
who are at risk of losing it, and I believe would have the 
capacity of expanding health care to others for reasons that 
I've already enumerated and won't repeat.

                               HEALTH IT

    The second is health IT. I believe health IT is the new 
frontier in health care productivity. Many things in this 
budget would point us toward being able to harness the powers 
of technology.
    But it leads us to, I think, a third, and that is we're 
measuring the wrong thing. We measure quantity of care, not the 
quality of care. We are not measuring outcomes. And I believe 
until we begin to measure performance outcomes and compensate 
providers and others on the basis of those outcomes, we will 
continue to see an unsatisfying result.

                       ACCESS TO HEALTH INSURANCE

    The fourth would be expanding health care to--or access to 
health insurance. The President's proposal would allocate $125 
billion over the next 10 years and would result in 12 to 14 
million people who currently do not have coverage to receive 
it. So Medicaid reforms, IT, pay for performance, and expanding 
access to health insurance through health savings accounts and 
other mechanisms I believe would be at least steps in the 
direction that you've pointed.
    Senator Durbin. I think they are steps in that direction. 
There may be some different--I don't know if association health 
plans is part of what you're suggesting here. They raise a lot 
of questions about standards and actual coverage and the like 
and the financial stability of the company's offering.

                        HEALTH SAVINGS ACCOUNTS

    Health savings accounts again have been a wildly popular 
theory here since Golden Rule Insurance Company became the 
favorite of then-Speaker Gingrich. We keep hearing about it 
every year. I'd like to see some demonstrated proof that it 
really does offer the kind of health insurance coverage that we 
want to see in the long term.
    I don't know, Mr. Chairman, if my time is expired here.
    Senator DeWine. Why don't you just continue.
    Senator Durbin. Thank you.
    Senator DeWine. Because I'm going to have some questions 
too, so why don't you just go ahead.
    Senator Durbin. Well, thank you very much.
    Senator DeWine. As long as the Secretary has a couple more 
minutes.

                                TITLE X

    Senator Durbin. I will just try to make it as direct as I 
can and as brief as I can. Let me talk to you about Title X. 
Title X, of course, is the family planning program, 
particularly for low-income people. If there's one thing that 
divides this Congress and this Nation, it is the question of 
abortion, and we have spent more time and anguish over this 
issue, what is the right thing to do. Most people would 
conclude that the right thing to do is to give to that 
prospective mother and father the option of planning their 
family so that they don't find themselves in a position where 
there are unintended or unplanned pregnancies forcing decisions 
which may lead to abortion.
    I take a look at where we are today. Your fiscal budget for 
2006 flat funds Title X family planning programs at $286 
million. This level of funding does not keep up with inflation 
and meets the needs of fewer than half of the low-income women 
who qualify. If we are truly trying to reduce the number of 
unintended pregnancies and abortions, how can we do it with a 
budget that does not meet the obvious need for family planning 
information, counseling, medications for the lowest income 
people in America?
    Secretary Leavitt. Senator, you're correct in that the 
budget between 2005 and 2006 is the same. That follows, 
however, a year where we did increase our proposal by $10 
million. I'd also point out the fact that the Federal share of 
Medicaid during that period of time who served that same group 
went up $65 million, and the Indian Health Service went up $19 
million.
    So while that one category may have been level, the broader 
view was up $84 million on----
    Senator Durbin. On Medicaid as opposed to Title X.
    Secretary Leavitt. On Medicaid and Indian Health Services, 
and they serve basically the same population.
    Senator Durbin. I would not disagree, but certainly that 
money is being spent on many, many other things, not focused as 
Title X is on family planning.
    Let me ask you in the same vein, most parents that I know, 
certainly my family, raising children preached abstinence, 
saying to these children, my children and many other children, 
wait, don't make a mistake, make the right decision and have 
enough respect for yourself to make that right decision. That 
has become such a major part of our effort now in trying to 
reduce teen pregnancy and unintended pregnancy.

                               ABSTINENCE

    The proposed budget includes a $38 million increase for 
abstinence only until marriage programs. The groups that have 
taken a look at this, like the National Academy of Sciences' 
Institute of Medicine, have criticized this investment in these 
abstinence-only programs. Some investigations by the House 
Committee on Government Reform have found that the abstinence-
only programs contain errors and distortions in the messages 
that they are giving to people and young people. One federally 
funded curriculum, for example, was found to be teaching 
students that sweat and tears are risk factors for HIV 
transmission, which I don't believe any reputable medical 
doctor would agree with.
    So I ask you, when it comes to these abstinence-only 
programs and the amount of money that we're putting into them, 
do you believe that this is our best investment in terms of 
good public health policy to reach the goal of educating young 
people so that they make the right decisions about their own 
bodies?
    Secretary Leavitt. Senator, we serve many populations in 
many different ways. This is a commitment on the part of the 
administration to teach one principle that we know is true, and 
that is abstinence is 100 percent effective. I also recognize 
that there are times when one program or another will have the 
validity of one fact or another or approach on all sides of the 
ideologic spectrum, and we ought not to be defending things 
that aren't true in any of those.
    We need to have a commitment to the truth, and the 
President's commitment to include abstinence-only programs is 
real, because he believes, as do I, that it is in fact what we 
ought to be teaching our children.
    Senator Durbin. I don't quarrel with that premise, and as I 
said, most parents start there. Some parents and teachers and 
counselors and ministers come to the conclusion that more has 
to be said beyond ``say no.'' So I won't go any further than to 
say I hope that we will test each of these programs to make 
sure that the information given is accurate and then be honest 
about the outcomes.

                          DIETARY SUPPLEMENTS

    My last question if I might ask relates to dietary 
supplements. I've had a passion over this industry and the laws 
regulating it. I got up this morning and I took my vitamins, 
for the record, so I am not opposed to taking vitamins. I think 
it's good, it's healthy. I don't think it's going to hurt me. 
Maybe it'll help.
    But some of these dietary supplement companies are selling 
products that have never been tested. They are making claims 
about their products' efficacy which they cannot substantiate. 
They are marketing their dietary supplements to children. The 
ephedra scandal of just a year or so ago is an indication of 
that element of the dietary supplement industry that was 
clearly doing all the things that I just mentioned to the 
detriment of the health of America.
    Senator Hatch and I have debated this back and forth. We 
don't see it all the time eye to eye, but we have come to a 
conclusion, and I hope that you will consider supporting it, 
and that is that the dietary supplement industry should at a 
minimum make adverse event reports to the Food and Drug 
Administration. If some company is making a dietary supplement 
that results in a bad health outcome, a seriously bad health 
outcome or death, that should be reported to the Food and Drug 
Administration. That is not the law today.
    What is your opinion? Do you believe that those who are 
marketing dietary supplements should be required to report 
adverse events to the Food and Drug Administration as those 
making over-the-counter drugs and pharmaceuticals are required?
    [The information follows:]

                          Dietary Supplements

    With enactment of the DSHEA, Congress made the decision to create a 
new regulatory regime for dietary supplements modeled more on the 
Agency's regulation of food safety and less on the drug regulatory 
model. With the exception for new dietary ingredients, FDA's regulation 
of dietary supplements is essentially post-market program similar to 
food regulation.
    Under the Dietary Supplement Health and Education Act (DSHEA), FDA 
relies on voluntary adverse event reports as a major component of our 
post-market regulatory surveillance efforts. Voluntary reporting 
systems are estimated to capture only a small percentage of adverse 
events, but they provide valuable signals of potential problems. When 
such a signal identifies a possible safety hazard, the burden is on FDA 
has the ability to gather and evaluate any scientific literature or 
information regarding whether the substance produces a safety hazard 
FDA has used this information to open investigations that led to 
removal of ephedra from the market and is currently investigating the 
marketing of steroids as dietary supplements. FDA's enforcement actions 
are enhanced by a close working relationship with DEA, the FTC and 
other State and Federal agencies.
    Another important aspect of FDA's regulatory and surveillance 
programs are current good manufacturing practice (cGMP) requirements 
for dietary supplements authorized in the Act. These regulations will 
establish industry-wide standards to ensure that dietary supplements 
are not adulterated. This final rule is in the last stage of review and 
is expected to be published in the near future.
    In addition, FDA has a post-market surveillance program to support 
enforcement of labeling requirements for dietary supplements. This 
compliance program, Dietary Supplements--Import and Domestic, contains 
guidance to FDA field offices regarding field exams and sample 
collections to determine compliance with the labeling requirements for 
dietary supplements. Significant violations of the labeling 
requirements for dietary supplements may lead to an advisory action, 
such as a Warning Letter, or to a court action for seizure or 
injunction. Imported products that do not comply with FDA labeling 
requirements are subject to detention and refusal when offered for 
entry into the United States.
    FDA will continue in its efforts to take action against dietary 
supplement products that threaten the public health and will continue 
to provide guidance to the industry and outreach to consumers in this 
regard. We further believe that the promulgation of the GMP rule with 
provide another measure of safety for dietary supplements, and we look 
forward to working with the Committee to further examine these issues 
and ensure that appropriate steps are being taken.

    Secretary Leavitt. Senator, I have not had the benefit of 
being able to hear you and Senator Hatch debate these issues. 
It sounds like a colorful and rather interesting thing to hear. 
I'll look forward to hearing more--to find that the two of you 
have agreed on this. Sounds like something I ought to learn 
about.
    Senator Durbin. Let me share it with you. I won't put you 
on the spot any more on this, but I hope you'll take a look at 
it. It could be a reasonable way to bring some regulation to an 
industry which by and large is doing a wonderful job, but there 
are some players in this industry who are not.
    Mr. Chairman, thank you for your forbearance and patience, 
and Mr. Secretary, thank you for being here.

                              OLMSTEAD ACT

    Senator DeWine. Mr. Secretary, just a few more questions. 
President Bush signed an executive order in response to the 
1999 Supreme Court decision in regard to the Olmstead Act. This 
Court said that the disabled have a right to live in a group 
home or other supportive system rather than being pushed into 
an institution, and the Court directed the government to 
develop opportunities for the disabled to better live in their 
communities. The Court also said forcing them into institutions 
is discriminatory.
    The executive order told the agencies to put together plans 
to make this happen. How are you proceeding in reaching this 
goal?
    Secretary Leavitt. Senator, it would be better if I could 
provide you with specifics. The actual plan and the execution 
of that plan inside either our agencies our broader would be 
unknown to me. But I would like to point out that the 
President's money follows the person it is designed 
specifically to----
    Senator DeWine. That was my next question anyway.
    Secretary Leavitt. Good. Well----
    Senator DeWine. We can--you can proceed.
    Secretary Leavitt. One of the----
    Senator DeWine. But you will give us, Mr. Secretary, you 
can follow up then in regard to this question about----
    Secretary Leavitt. Yes.
    Senator DeWine [continuing]. What the plan is and what the 
timing would be on that.
    Secretary Leavitt. We will be responsive on that query, and 
I'll also point out as one of the specific Medicaid, for 
example, proposals that we would like to see adopted this year 
would be a capacity, a flexibility, again stepping away from 
the rigid inflexibility that is currently there to serve those 
who are disabled and particularly those who are elderly.
    Medicaid is a good example of a policy that just needs to 
be changed, needs to be modernized. Medicaid was established in 
the 1960s. The state of practice at that point was to 
institutionalize basically those who were either disabled or 
elderly and disabled, and consequently Medicaid, without some 
waiver or without a change in the law, simply doesn't allow us 
to pay for any circumstances outside an institution, and that 
just needs to change. It's making the point that you have and 
we hope very much that Congress will act with some dispatch to 
give States that capacity.

                                DISABLED

    Senator DeWine. Your President's proposal and your budget, 
the money following the person, I wonder if you could elaborate 
on that in regard to how that will affect the disabled, and 
specifically how that will work in the 50 States. Are we 
talking about 50 State programs, or how will that blend with 
national uniformity and how these programs will be 
administered?
    Secretary Leavitt. Well, specifically it would create----
    Senator DeWine. This is--my understanding of this--excuse 
me--this is a--these are pile-up programs.
    Secretary Leavitt. That's right. It would create a 5-year 
demonstration that finances services for individuals who are in 
transition from institutions to the community. The Federal 
Government would fund 100 percent of the community-based 
services for the first year and then funding would revert back 
to the States at the current Federal match, which means the 
Federal Government on average would pay about 65 percent.
    The demonstration would test whether the increased use of 
home and community-based services would reduce spending on 
institutional care as the advocates and as this Secretary 
believes that it will.
    Senator DeWine. How will that work in regard to the 
disabled community? I mean, this is designed in my 
understanding for the disabled community but also for older 
Americans. Is that correct?
    Secretary Leavitt. Well, the rationale of the program is 
that the proposal would encourage States to move from 
institutionalizing long-term care patients who are served by 
Medicaid into home and community services, which in turn may 
reduce the spending on institutional care. The proposal is an 
attempt to rebalance the system, as I've indicated, where long-
term care has been essentially institutionalized under the 
Olmstead decision by increasing the care-setting choices and 
assisting individuals with disabilities. They will be able to 
live in the home and community-based settings.
    This is where they want to be served. Frankly, it's where 
their families want to serve them. It leverages the great 
American asset of people loving their families and choosing to 
care for them and it helps in the right spot. Disability groups 
have been very supportive of this and we'll continue to work 
closely with them and with you on various proposals as we learn 
more.
    Senator DeWine. Mr. Secretary, I'd like to commend FDA's 
actions in quickly enacting Best Pharmaceuticals for Children 
Act, as well as a pediatric rule. How those two programs 
interact can sometimes though be very tricky, but they interact 
nevertheless, and that's what they were designed to do.
    [The information follows:]

                 Best Pharmaceuticals for Children Act

    The BPCA is a critical tool in NIH's effort to ensure that adequate 
information is available concerning the effects and efficacy of 
pharmaceuticals in children. The NICHD is working with the FNIH and the 
Secretary to implement the provisions of the law, and to facilitate the 
testing of drugs.

                               BACKGROUND

    The Best Pharmaceuticals for Children Act (BPCA) established 
procedures to identify health risks and effectiveness of drugs in 
children. The Secretary delegated the functions of developing the 
priority listing of drugs to be tested to NIH and FDA, and the program 
for testing those drugs to NIH. Dr. Zerhouni delegated the NIH duties 
to NICHD. Over the last few years we have had several communications 
with Sen. DeWine's staff about implementation issues. Most recently, 
they have raised questions about the testing of a particular on patent 
drug, Baclofen, which is proposed for treatment of spasticity in 
children with cerebral palsy.

                                  BPCA

    Under the BPCA program, different procedures are followed for 
testing on- and off-patent drugs for pediatric use and labeling. 
Following the BPCA's enumerated procedure for on patent drugs, NICHD 
tests a drug only after the manufacturer and current patent holder 
decline a request from the FDA to conduct the testing and after private 
donor decline to provide support through the Foundation for the 
National Institutes of Health (FNIH). (NICHD and FNIH have a Memorandum 
of Understanding in place to conduct the testing.) If the FNIH is 
unable to raise sufficient private funds to support the requested 
testing, and so-certifies to the Secretary, the Secretary refers the 
drug to NICHD for inclusion on the BPCA program priority list of drugs 
for testing in children.

                            ON-PATENT DRUGS

    Senator DeWine. I'd like to bring an issue to your 
attention. My staff has already raised this with NIH. And that 
is the on-patent drugs that are currently awaiting study in the 
NIH Foundation. The pediatric rule provides for the rule to be 
invoked when a Secretary makes a certification regarding 
insufficient funds. Preliminary discussions have suggested this 
would be an appropriate action for HHS, FDA, and NIH to take.
    I'd ask that you have your staff take a look at this issue, 
you take a look at it, and get in touch with the appropriate 
staff at NIH and FDA and begin the process of invoking the 
pediatric rule so clinical trials can begin. I would ask you do 
this and get back in touch with me in regard to this so we can 
get some resolution and move forward.
    Secretary Leavitt. I will do so, Senator. Thank you.

                           GLOBAL AIDS FIGHT

    Senator DeWine. I appreciate it. Let me turn if I could to 
the CDC's work in the global AIDS fight, and you and I have 
talked about this before. Specifically in the countries, the 
non-focus countries, countries such as India and China, let me 
ask you, does the CDC's global AIDS program do you believe have 
the infrastructure necessary to expand its programs in these 
non-focus countries? If not, what's needed to expand their 
response?
    Second, let me ask you, will you support providing 
increased program support and resources to the global AIDS 
program and other HHS programs that are part of the emergency 
plan?
    Secretary Leavitt. The President has made a commitment to 
expand appropriations to $15 billion to undertake that 
challenge. Obviously that will need to include the deployment 
of proper infrastructure in those countries as well as others. 
We're working hard now to target our efforts to provide for the 
greatest possible need. We've laid out a series of principles 
and we're working to follow those principles.
    Senator DeWine. I look forward to having further discussion 
with you in regard to this. It is a very difficult question, as 
I think your answer would indicate. Taking the finite resources 
that we have, even though this administration has made a major 
commitment, which I commend the administration for, and the 
Congress has done the same, when you look at the need, it's 
still finite resources, and trying to make a determination of 
how aggressively we move into countries like India and China is 
a very, very tough call.
    But, you know, if we don't--if the world does not stem the 
emerging AIDS problem in India or China or Russia, the 
ramifications are going to be absolutely unbelievable. When it 
moves, AIDS moves in India, for example, into the general 
population, the results are going to be absolutely devastating, 
and it's getting very close to that.
    So it's, you know, these are just tough questions, they're 
tough calls. I just look forward to working with you and 
sharing ideas.
    Secretary Leavitt. Thank you. I look forward to the same 
interaction.
    Senator DeWine. I appreciate it. Well, Mr. Secretary, we 
thank you very much for your time and attention and look 
forward to working with you on many issues.
    Secretary Leavitt. Thank you.

                          SUBCOMMITTEE RECESS

    Senator DeWine. Thank you very much Mr. Secretary.
    The subcommittee will stand in recess to reconvene at 9:30 
a.m., Wednesday, April 6, in room SD-124. At that time we will 
hear testimony from the Honorable Elias Zerhouni, Director, 
National Institutes of Health.
    [Whereupon, at 11:45 a.m., Wednesday, March 16, the 
subcommittee was recessed, to reconvene at 9:30 a.m., 
Wednesday, April 6.]
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