[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 2007

                              ----------                              


                         WEDNESDAY, MAY 3, 2006

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:15 a.m., in room SD-226, Dirksen 
Senate Office Building, Hon. Arlen Specter (chairman) 
presiding.
    Present: Senators Specter, Craig, Harkin, Kohl, Murray, and 
Durbin.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                        Office of the Secretary

STATEMENT OF HON. MICHAEL O. LEAVITT, SECRETARY

               OPENING STATEMENT OF SENATOR ARLEN SPECTER

    Senator Specter. Good morning, ladies and gentlemen. The 
hearing for the Appropriations Subcommittee on Labor, Health 
and Human Services, Education, and Related Agencies will now 
proceed. I regret a little late start here, but we have been 
conferring with the distinguished Secretary of Health and Human 
Services, and we wanted to get some background information 
before coming into the public hearing. This is a very important 
hearing because it involves the budget for the Department of 
Health and Human Services, and health is our number one capital 
asset. Without health, none of us can function.
    I could give an extensive testimonial to that over the past 
year, but I'll save that for another day and instead focus on 
the proposals for Federal expenditures. I say at the outset, as 
I have said privately to the Secretary, that I am very 
disturbed at the reduction in funds for his Department. There 
is a $1.6 billion reduction in funding for the Department of 
Health and Human Services, and that follows a pattern of 
reductions for--the other departments which are within the 
purview of this subcommittee. There have been reductions of 
some $2.2 billion for the Department of Education, reductions 
for the Department of Labor so that effectively, from the 
year--fiscal year 2005 until the present time, we have a 
reduction of $15.7 billion, and that means that there are vital 
programs for health, vital programs for human services which 
are inadequately funded to start with and are now really 
effectively starved.
    The National Institutes of Health (NIH), which is the crown 
jewel of the Federal Government, is level funded, and that 
means taking into account inflation, there will be fewer grants 
made, and there have been enormous advances made by NIH. The 
leadership's been provided really from this subcommittee long 
before you became Secretary, Mr. Secretary. When we took the 
NIH budget from $12 to $29 billion, there have been remarkable 
advances in the research on Alzheimer's and Parkinson's and 
heart disease and cancer, but not enough.
    As we speak, a very distinguished Federal jurist who has 
been named the 101st Senator as suffering from prostate cancer, 
and I lost my Chief of Staff, Carey Lackman, a beautiful young 
woman of 48 recently from breast cancer. In 1970, President 
Nixon declared war on cancer. If we had devoted the resources 
to the war on cancer which we devote toward other wars, we 
would have conquered cancer. In the past year, I have made the 
Kleenex industry wealthy, Mr. Secretary. This is a lingering 
aspect of chemotherapy treatment, and that brings me back to 
personalizing it just for a paragraph or two, but had the war 
on cancer been fought vigorously, I wouldn't have gotten 
Hodgkin's, I believe. The chances are good I wouldn't have. 
Well, that's the backdrop of these hearings and my views.
    As I told you privately a few moments ago and I think it's 
worth repeating publicly, the President called in a number of 
committee chairmen last week for our views on what ought to be 
done, and when I had the opportunity to talk to the President, 
and I have had the opportunity to get to know President Bush 
rather well, he was in Pennsylvania 44 times in 2004 when he 
ran for reelection and I was up too, and I was with him on most 
of those occasions, and I have a very high regard for the 
President and the job he is doing notwithstanding the poll 
figures. Up close, he is very much engaged, very much on top of 
the job. The persona that comes through the news media is very 
very different. But at any rate, he is prepared to hear candid 
views even if they don't agree with his, and I told him about 
the $15.7 billion reduction in spending and told him what was 
happening in the National Institutes of Health. I know that you 
are not the President, and as you reminded me, you are not even 
the Director of the Office of Management and Budget (OMB), but 
you are the Secretary of Health and Human Services. What I am 
calling upon all of the candid officers where I have a 
chairmanship and can make a constructive suggestion is to carry 
this fight to the Director of OMB and carry this fight to the 
President, and no department is more important than yours. To 
have level funding for NIH and to have cuts in the Centers for 
Disease Control and Prevention (CDC) with all the work CDC has 
to undertake is just unacceptable.
    Well, I appreciate your being here, Mr. Secretary, and I 
genuinely appreciate the job you are doing--leaving the 
Governorship of Utah, coming to Washington, tackling really big 
issues, and this matter of pandemic flu is of gigantic 
importance. Senator Harkin has been the leader, and I have 
worked with him as his partner, and we have moved ahead against 
some problems to produce $6.6 billion in funding. The potential 
for the pandemic flu if it strikes could be calamitous. When it 
has struck this country and the world in the past, millions of 
people have died. That's a real danger, and I am pleased to see 
what you are doing and what you plan to do even with major 
announcements to come tomorrow. Senator Murray has a time 
conflict, and I will yield to her at this time.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Well, thank you very much, Mr. Chairman. I 
am managing the floor for the Democrats in the supplemental and 
need to get back to the floor, and I appreciate the chairman 
yielding. I would second his statement and thank him for being 
the champion of NIH research, but also education and healthcare 
and all of the things that fall under the purview of this 
budget that you are presenting on behalf of the administration 
and echo his comments that investments in these diseases, 
investments in our future are absolutely critical to our Nation 
and the strength of our Nation in the future. I want to thank 
the chairman for his tremendous work on behalf of this and echo 
his sentiments that I am deeply concerned about the cuts that 
are coming. I can't stay for the questioning. I did want to 
submit some for the record and tell you personally that I have 
been out in the state talking to many seniors about the new 
Medicare Part D prescription drug benefit.

                   MEDICARE PART D DEADLINE EXTENSION

    Although I voted against it, I want it to work. I want our 
seniors to be able to sign up for this and make it work. I am 
very concerned about what I am hearing from seniors as this May 
15 deadline looms from seniors who can't get access or think 
they have signed up for something find out several weeks later 
they haven't. Many seniors are holding back signing up for it 
because they are worried about whether or not it's going to 
cover their drugs. I mean, you have heard all of it as well, 
and I hope that we can be thoughtful in our approach, and I 
would encourage you to look at extending the deadline--at least 
for those whose benefits don't begin until January of next year 
at the very minimum so that we don't cause a lot of seniors 
harm in the process. What I see is people signing up for these 
plans out of fear rather than out of knowledge. I think in the 
long run, we will all be hurt if that occurs, and I wanted to 
encourage you to work with us and continue to work with us. I 
know you are hearing some of the same things we are and really 
would like to see this--and to talk with you about that, but I 
specifically wanted to ask because we are now seeing seniors 
who signed up January 1 fall into the donut hole.
    There is tremendous concern about those seniors who had 
pharmacy assistance plans who had drugs before who signed up 
for a drug are now falling into that donut hole. Are they 
considered uninsured, or are they considered insured for the 
purposes of being covered under the pharmacy assistance plans--
and would like to get you or your staff to work with us as we 
try to help those seniors through that challenge right now. But 
Mr. Chairman, I will submit questions for the record, but I 
would like you and all of us to seriously look at this May 15 
deadline and try and accommodate many of these seniors who are 
really having challenges who I think we don't want to lose in 
this process, and we want to make sure that we have given them 
a benefit and not given them some dire circumstances. So I 
appreciate the opportunity to throw that out there and look 
forward to working with you, Mr. Secretary.
    Senator Specter. Thank you, Senator Murray. Before yielding 
to Senator Craig, let me call upon our current distinguished 
ranking member for an opening statement. Before you walked in, 
Senator Harkin, I was praising you behind your back for your 
leadership--the number one leader on the funding for pandemic 
flu, and I said I was your partner, and the floor is yours.

                    STATEMENT OF SENATOR TOM HARKIN

    Senator Harkin. Well, that's kind of you, Mr. Chairman, but 
I just follow your lead--that's all. If some of the reflective 
glory comes up, I am--that's all right, that's fine with me. 
Mr. Chairman, first of all, I want to thank you for your great 
leadership in so many areas--of course in this area of health. 
There is no stronger champion for the National Institutes of 
Health than the Senator from Pennsylvania.
    I have been by his side in--well, it's now going on about 
16 years now. If it weren't for Senator Specter's great 
leadership, we would never have doubled the funding for NIH 
that we did in the late 1990s and put it up where it is. Now, 
of course, we have some problems now in making sure we continue 
that funding, and of course that's one of the problems that I 
have with the President's budget, and I am sure the chairman 
does also.
    Welcome the Secretary, and then we'll just get to some 
questions in at that time.
    Senator Specter. Okay. Thank you very much, Senator Harkin. 
Senator Craig?

                    STATEMENT OF SENATOR LARRY CRAIG

    Senator Craig. Well, Mr. Chairman, I want to welcome the 
Secretary, and I must say that these two gentlemen struggle 
mightily with a very tough budget that Congress and this Senate 
have always supported, but your environment and our environment 
is one that we are being increasingly squeezed out of 
discretionary monies by mandatory spending. Someday, we'll get 
brave enough to take it on in a responsible way. But until that 
time, the struggle of the chairman and the ranking member and 
this member will continue to go on because there has to be a 
sense of fiscal responsibility. I just came from the floor 
suggesting that the supplemental that we have got out there 
deserved to be vetoed by a President who had sent a message 
because it was about $10 billion out of line, and that's 
because we can't quit spending around here without a collective 
pressure being brought upon us. At the same time, there are 
priorities of spending that we get squeezed away from. I will 
say, Mr. Secretary, when I was home in the last recess, the 
good news--even though the Senator from Washington expresses 
continued concern about prescription drugs--is that you are 
having a phenomenal success, and I hope you will speak about it 
today. To stand up and bring on line a massive new program that 
this one is and to already be able to register the kinds of 
successes--someone said to me well, gee, it must have been 
pushed off the front page by the price of oil. I said no, it 
was pushed off the front page because there was less criticism 
today and more praise as the results come in. I hope you will 
share those with us. Deadlines are important to cause people to 
react and to analyze and to decide on decisions that are 
necessary for them to make in a confused world. I will lastly 
say a couple of weeks ago, I am walking through the security 
line at the Boise Airport, and the fellow checking my ID said 
Senator, there are too many decisions, too many choices in 
prescription drugs, and I said well, then you would have 
preferred that we would have mandated a single program for you? 
Oh no, not at all.
    Then I said you need to get with it. He said I am and 
laughed. I said you saving money? He said, a lot of money, but 
it was a tough choice. He said I really had to force myself to 
do a little studying. Thank you. I yield the floor.
    Senator Specter. Thank you very much, Senator Craig. 
Senator Durbin, would you care to make an opening statement?

                  STATEMENT OF SENATOR RICHARD DURBIN

                    MEDICARE PART D FORMULARY PRICES

    Senator Durbin. Mr. Chairman, thank you very much. I would 
just say briefly thank you, Mr. Secretary, for being here. I 
think you have an awesome responsibility and some very 
important programs that are under your control and leadership. 
I would say on Medicare Part D that I will not quarrel with the 
premise that offering senior citizens coverage for prescription 
drugs is a good thing. It keeps them healthy and independent, 
strong, and out of hospitals and nursing homes longer. That's 
what they need. I do believe, though, that in my State there 
are still over 300,000 people who haven't made that choice. I 
don't know if that number has come down significantly in the 
last few days, but they only have 2 weeks left before they face 
a penalty for not making a choice. It is also a fact that those 
who have made a choice in terms of their prescription drug plan 
are going to be somewhat surprised to learn that the prices are 
not locked in. The prices of the drugs--in fact, the 
formulary--the available drugs that you can purchase under a 
plan can change on a daily basis, which leads to some 
uncertainty about their future. Many of us felt that it would 
have been a better approach to allow Medicare to offer one 
universal plan which consumers could choose if they like, allow 
Medicare to bargain for deep discounts in drugs and to offer 
them nationwide. Then if private insurers wanted to compete, 
they would be allowed to. That position did not prevail. So, in 
Illinois, it meant some 45 different choices for prescription 
drug plans, and some seniors struggled with them. Many 
pharmacists continue to struggle with them as of today.

                            NIH BUDGET CUTS

    I would also want to echo what I know was said earlier by 
Senator Harkin. The pride that we have taken in Congress in the 
fact that the research money for the National Institutes of 
Health was doubled over a period of time. A former congressman 
from my State, John Porter, was the chairman of the 
Appropriations subcommittee that led that effort. He couldn't 
have made it without the cooperation and enthusiastic help from 
the Senate side, and I think that Senators Specter and Harkin 
are justifiably proud of that as well. But I am troubled that 
we have seen that growth in NIH research stall in last year's 
budget and this year's budget continues. It's hard for me to 
believe that we are now at full capacity in terms of research 
for new drugs in America. I do believe that we need to expand 
the horizons, expand the opportunities to find cures for 
diseases, and this budget does not reflect that, and I hope 
that you will address that issue.

                   MEDICAL PROFESSIONAL AVAILABILITY

    One other issue that troubles me is the availability of 
medical professionals. With an aging American population, with 
increased demands for medical help for all of us, we want to 
make certain that when we push the button in our room, a nurse 
will show up, that a good doctor will be there to tend to our 
needs, and I am worried that we are not keeping up with that 
demand for our society. Sadly, one of the ways that we 
supplement our need for medical professionals is to go 
overseas, and I have done it myself--to go to other countries 
that will send us these medical professionals. In most cases, 
these countries cannot afford to give up their own, but they do 
because of the lure of living in the United States and the 
attractive salaries that might be available for these medical 
professionals. The only morally responsible thing that we can 
do is to increase the number of medical professionals in 
America. When it came to the Nurse Reinvestment Act, which 
Senator Mikulski and others pushed forward, we have not 
adequately funded it, and I think we are going to pay a price 
for it in terms of medical professionals and this continuing 
brain drain on the poorest countries in the world that are 
sending us their medical professionals they desperately need.
    As tough as it may be to practice medicine in the inner 
city of Chicago, it could not compare to practicing it in the 
Congo where there is one doctor for every 160,000 people, one 
surgeon for every 3 million. That is an impossible situation, 
and we make it worse because we bring those medical 
professionals to the United States--many times at the expense 
of these countries. The responsible thing for us to do is to 
develop our own medical professionals to meet the needs in the 
future. I hope that you will be able to tell us that your 
budget addresses that. I look forward to your testimony, and 
thank you for joining us today.
    Senator Specter. Well, thank you, Senator Durbin. Well, we 
welcome you here, Secretary Leavitt, notwithstanding the 
opening statements of the Senators. You come to this position 
with a very distinguished record in public service--elected 
three times as Governor of the State of Utah, having served as 
Administrator for the Environmental Protection Agency and 
having taken over this very important job at the very beginning 
of the President's second term in late January 2005. We give 
you the floor, Mr. Secretary. Take as long as you like. Do not 
run the clock on the Secretary.

              SUMMARY STATEMENT OF HON. MICHAEL O. LEAVITT

    Secretary Leavitt. Thank you, Senator. I will submit a 
formal statement for the record.
    Senator Specter. Your statement will be made a part of the 
record and any other prepared statement.

                      FISCAL YEAR 2007 HHS BUDGET

    Secretary Leavitt. You acknowledged in a very kind way my 
service--previously as Governor. I will tell you that I value 
every day I had that opportunity. However, I will also confess 
to you that earlier this week, I spoke with my colleagues at 
HHS and told them that I am among the few people I suspect in 
the world who can honestly say I can think of nothing that I 
would rather do in my life right now than exactly what I am 
doing. The issues here are demanding, but they are 
extraordinarily important to the people of this country and, 
may I say, the world. I say that with a sense of gratitude and 
humility with being in a position to have some impact on 
delivering on the most noble of aspirations that our country 
has--our desire to see cancer cured, to see other diseases 
cured as well, to find ways in which we can prepare ourselves 
for a pandemic influenza and to do the other things that are 
currently my responsibility. I just want you to know that these 
are difficult issues, but I am grateful for the opportunity to 
serve the American people. The budget that I'll reflect today 
is a big budget. It's $700 billion. $75.5 billion of that we 
refer to as discretionary. Senator Craig referenced the fact 
that that number is being squeezed by the fact that the rest of 
the budget continues to grow at an alarming rate. I have a new 
grandson. He is now 8 months old. When he turns 35, Medicare 
alone--one of the programs that I am responsible to manage--
will be 8 percent of our gross domestic product. By the time he 
retires at age 65, it will be 11 percent. I think everyone in 
this room knows that any nation that has one program that pays 
for the healthcare of those who have concluded their careers 
will likely not be on the economic leader board. I am deeply 
concerned about that as others are. It is having the impact of 
constraining our discretionary budgets. The budget I am here 
today to discuss is a deficit reduction budget. It is $1.5 
billion less than the budget that I was here a year ago to 
discuss. You mentioned my 11 years as Governor. During that 
period of time, I was responsible as the chief executive of my 
State to balance that budget, and I know that any time you are 
doing a deficit reduction budget, you are dealing with programs 
that have been on the budget for a very good reason and you are 
having to basically offset good programs against good programs. 
There are no easy choices here. There will be disagreement on 
what the priorities should be. I acknowledge that, and my 
purpose today is only to tell you the basis on which I made 
decisions given the need for this deficit reduction budget. You 
will find new initiatives here, things that I believe are 
extraordinarily important and that are important to the 
President, things that you have talked about.
    One of the things I am concerned about is our investments. 
At NIH, for example, we are seeking level funding at NIH, but 
there are new initiatives at HHS--for example, what we call 
critical path. Despite the fact that we have doubled the NIH 
budget, the number of molecules that we are able to actually 
take into the marketplace has been cut almost in half during 
that period of time. What that tells me is that we have to 
change the regulatory process and find new tools. So, one of 
the new initiatives we call critical path is essentially 76 
science projects, if you will, to find new ways of measuring 
the efficacy and the safety of drugs that will allow us to 
dramatically improve that rather dismal statistic. You will see 
some Presidential initiatives here that will be familiar to 
you, such as a continued expansion of the community health 
centers. You will also see bioterrorism emphasized and pandemic 
influenza preparedness. I hope we'll have a chance to talk at 
some length about our preparation. It is a very important 
matter, and we are giving it the highest level of priority at 
HHS. I have laid out the discretionary budget and asked those 
who helped me prepare it to use a set of principles--some 
things you will see follow through this entire budget. Some of 
those would be a pause in construction of new buildings, for 
example. Another thing you will see is that there are programs 
whose purposes have been addressed in other areas. I have 
discovered, like in many departments of the Federal Government, 
there are silos. There are places that deal in one silo with a 
problem and places that deal with it in another, and I have 
done my best to try to bring them together, and what that has 
allowed me to do is to find a way to be more efficient. You 
will see some programs with carryover funds where I have taken 
those funds and put them into some other purpose.

                           PREPARED STATEMENT

    Those are the means by which I have done it. I laid out a 
group of principles. I have tried to target as opposed to 
looking at general problems. I have tried to work at prevention 
as opposed to just ongoing funding of dilemmas. I have tried to 
look for places where there was new innovation. We'll get a 
chance to talk about all of them. I won't take more time. I am 
anxious to get directly to your questions, but I do want to 
tell you how appreciative I am of the chance to serve the 
American people and to be here today to work with you to 
accomplish that same purpose.
    [The statement follows:]

             Prepared Statement of Hon. Michael O. Leavitt

    Good morning, Mr. Chairman, Senator Harkin, and Members of the 
Committee. I am honored to be here today to present to you the 
President's fiscal year 2007 Budget for the Department of Health and 
Human Services (HHS).
    Over the past 5 years, the Department of Health and Human Services 
has worked to make America healthier and safer. Today, we look forward 
to building on that record of achievement. For that is what budgets 
are--investments in the future. The President and I are setting out a 
hopeful agenda for the upcoming fiscal year, one that strengthens 
America against potential threats, heeds the call of compassion, 
follows wise fiscal stewardship and advances our Nation's health.
    In his January 31 State of the Union Address, the President 
stressed that keeping America competitive requires us to be good 
stewards of tax dollars. I believe that the President's fiscal year 
2007 Budget takes important strides forward on national priorities 
while keeping us on track to cut the deficit in half by 2009. It 
protects the health of Americans against the threats of both 
bioterrorism and a possible influenza pandemic; provides care for those 
most in need; protects life, family and human dignity; enhances the 
long-term health of our citizens; and improves the human condition 
around the world. I would like to quickly highlight some key points of 
this budget.
    We are proposing new initiatives, such as expanded Health 
Information Technology and domestic HIV/AIDS testing and treatment that 
hold the promise for improving health care for all Americans. We are 
continuing funding for Presidential initiatives, including Health 
Centers, Access to Recovery, bioterrorism and pandemic influenza; and 
we are also maintaining effective programs such as the Indian Health 
Service, Head Start, and the National Institutes of Health.
    We are a Nation at war. That must not be forgotten. We have seen 
the harm that can be caused by a single anthrax-laced letter and we 
must be ready to respond to a similar emergency--or something even 
worse. To this end, the President's Budget calls for a four percent 
increase in bioterrorism spending in fiscal year 2007. That will bring 
the total budget up to $4.4 billion, an increase of $178 million over 
last year's level.
    This increase will enable us to accomplish a number of important 
tasks. We will improve our medical surge capacity; increase the 
medicines and supplies in the Strategic National Stockpile; support a 
mass casualty care initiative; and promote the advanced development of 
biodefense countermeasures to a stage of development so they can be 
considered for procurement under Project BioShield.
    We must also continue to prepare against a possible pandemic 
influenza outbreak. We appreciate your support of $2.3 billion for the 
second year of the President's Pandemic Influenza plan in the fiscal 
year 2006 Emergency Supplemental Appropriations Act for Defense, the 
Global War on Terror, and Hurricane Recovery. It is vital that this 
funding be allocated in the most effective manner possible to achieve 
our preparedness goals, including providing pandemic influenza vaccine 
to every man, woman and child within six months of detection of 
sustained human-to-human transmission of a bird flu virus; ensuring 
access to enough antiviral treatment courses sufficient for 25 percent 
of the U.S. population; and enhancing Federal, state and local as well 
as international public health infrastructure and preparedness. We also 
want to work with you to ensure that this funding is appropriated prior 
to October 1, 2006.
    The President's fiscal year 2007 budget also provides more than 
$350 million for important ongoing pandemic influenza activities such 
as safeguarding the Nation's food supply (FDA), global disease 
surveillance (CDC), and accelerating the development of vaccines, drugs 
and diagnostics (NIH).
    The budget includes a new initiative of $188 million to fight HIV/
AIDS. These funds support the objective of testing for three million 
additional Americans for HIV/AIDS and providing treatment for those 
people who are on state waiting lists for AIDS medicine. This 
initiative will enhance ongoing efforts through HHS that total $16.7 
billion for HIV/AIDS research, prevention, and treatment this year.
    The budget maintains the NIH, and includes important increases for 
important crosscutting initiatives that will move us forward in our 
battle to treat and prevent disease--$49 million for the Genes, 
Environment and Health Initiative and $113 million for the Director's 
Roadmap. In addition, it contains an additional $10 million for the 
Food and Drug Administration to lead the way forward in the area of 
personalized medicine and improved drug safety.
    One of the most important themes in our budget is that it increases 
funding for initiatives that are designed to enhance the health of 
Americans for a long time to come. For instance, the President's Budget 
calls for an increase of nearly $60 million in the Health Information 
Technology Initiative. Among other things, these funds support the 
development of electronic health records (to help meet President Bush's 
goal for most Americans to have interoperable electronic health records 
by 2014); consumer empowerment; chronic care management; and 
Biosurveillance.
    The Budget also includes several initiatives to protect life, 
family and human dignity. These include, for example, $100 million in 
competitive matching grants to States for family formation and healthy 
marriage activities in TANF. The President's budget also promotes 
independence and choice for individuals through vouchers that increase 
access to substance abuse treatment.
    In the area of entitlement programs, I want to begin by 
congratulating you and other Members of Congress for having 
successfully enacted many needed reforms by passing the Deficit 
Reduction Act (DRA). DRA supports our commitment to sustainable growth 
rates in our important Medicare and Medicaid programs. It also 
strengthens the Child Support Enforcement program. The Deficit 
Reduction Act also achieves the notable accomplishment of reauthorizing 
Temporary Assistance for Needy Families (TANF), which has operated 
under a series of short-term extensions since the program expired in 
September 2002.
    Medicaid has a compassionate goal to which we are committed. Part 
of our obligation to the beneficiaries of this program is ensuring it 
remains available well into the future to provide the high-quality care 
they deserve. With its action on many of our proposals from last year 
in the Deficit Reduction Act, the Congress has made Medicaid a more 
sustainable program while improving care for beneficiaries. The 
President's Budget proposals build on the DRA and include a modest 
number of legislative proposals, which improve care and will save $1.5 
billion over 5 years in Medicaid and S-CHIP and several administrative 
proposals saving $12.2 billion over 5 years.
    This Administration has also pursued a steady course toward 
Medicare modernization. In just the past 3 years, we have brought 
Medicare into the 21st century by adding a prescription drug benefit 
and offering beneficiaries more health plan choices.
    Medicare's new prescription drug benefit represents the most 
significant improvement to senior health care benefits in 40 years. CMS 
has already exceeded the enrollment target with more than 30 million 
beneficiaries with drug coverage as of April 18, 2006. In addition, 
almost 6 million Medicare beneficiaries get drug coverage from other 
sources such as the Department of Veterans Affairs. This brings the 
total to approximately 35.8 million Medicare beneficiaries who are now 
receiving prescription drug coverage. In most cases, their coverage is 
either completely new or much better and much more secure than it was 
before.
    Savings from the prescription drug benefit have been greater than 
expected. CMS' Office of the Actuary initially estimated beneficiary 
premiums averaging $37 per month. Today, however, the average monthly 
premium is $25 a month. And in some parts of the country, beneficiaries 
are seeing premiums of less than $2 per month. In 2006, the Federal 
government is projected to spend about 20 percent less per person than 
first estimated, and over the next 5 years, payments are projected to 
be more than ten percent lower than first estimated. So taxpayers will 
see significant savings and State contributions will be about 25 
percent lower over the next decade for beneficiaries who are in both 
Medicaid and Medicare. All these savings result from the lower expected 
costs per beneficiary.
    Our work to modernize Medicare is not done. Rapid growth in 
Medicare spending over the long-term will place a substantial burden on 
future budgets and the economy. The President's fiscal year 2007 Budget 
includes a package of proposals that will save $36 billion over 5 years 
and continue Medicare's steady course toward financial security, higher 
quality, and greater efficiency.
    The bulk of these Medicare savings will come from proposals to 
adjust yearly payment updates for providers in an effort to recognize 
and encourage greater productivity. These proposals are consistent with 
the most recent recommendations of the Medicare Payment Advisory 
Commission. To ensure more appropriate Medicare payments, the Budget 
proposes changes to wheelchair and oxygen reimbursement, phase-out of 
bad debt payments, enhancing Medicare Secondary Payer provisions, and 
expanding competitive bidding to laboratory services. Building on 
initial steps in the Medicare Modernization Act, the Budget proposes to 
broaden the application of reduced premium subsidies for higher income 
beneficiaries. Finally, the President's Budget proposes to strengthen 
the Medicare Modernization Act provision that requires Trustees to 
issue a warning if the share of Medicare funded by general revenue 
exceeds 45 percent. The Budget would add a failsafe mechanism to 
protect Medicare's finances in the event that action is not taken to 
address the Trustees' warning. If legislation to address the Trustees' 
warning is not enacted, the Budget proposes to require automatic 
across-the-board cuts in Medicare payments. The Administration's 
proposal would ensure that action is taken to improve Medicare's 
sustainability.
    President Bush proposes total outlays of nearly $700 billion for 
Health and Human Services. That is an increase of more than $58 billion 
from 2006, or more than 9.1 percent.
    While overall spending will increase, HHS will also make its 
contribution to keeping America competitive. To meet the President's 
goal of cutting the deficit in half by 2009, we are decreasing HHS 
discretionary spending. Our non-emergency request for discretionary 
budget authority for programs under the jurisdiction of this 
Subcommittee totals $61.1 billion, a decrease of $1.6 billion below 
fiscal year 2006. The $2.3 billion for the cost of the next phase of 
the President's plan to prepare against an influenza pandemic that I 
discussed earlier is in addition to this amount.
    I recognize that every program is important to someone. But we had 
to make hard choices about well-intentioned programs. I understand that 
reasonable people can come to different conclusions about which 
programs are essential and which ones are not. That has been true with 
every budget I've ever been involved with. It remains true today. There 
is a tendency to assume that any reduction reflects a lack of caring. 
But cutting a program does not imply an absence of compassion. When 
there are fewer resources available, someone has to decide that it is 
better to do one thing rather than another, or to put more resources 
toward one goal instead of another.
    Government is very good at working toward some goals, but it is 
less efficient at pursuing others. Our budget reflects the areas that 
have the highest pay-off potential.
    To meet our goals, we have reduced or eliminated funding for 
programs whose purposes are duplicative of those addressed in other 
agencies. One example of this is Rural Health where we have proposed to 
reduce this program in the Health Resources and Services 
Administration. The Medicare Modernization Act contained several 
provisions to support rural health, including increased spending in 
rural America by $25 billion over 10 years. For example, it increases 
Medicare Critical Access Hospitals (CAH) payments to 101 percent of 
costs and broadens eligibility criteria for CAHs. Moreover, recognizing 
that Congress adopted many of our saving proposals last year, we are 
continuing to make performance-based reductions.
    Our programs can work even more effectively than they do today. We 
expect to be held accountable for spending the taxpayers' money more 
efficiently and effectively every year. To assist you, the 
Administration launched ExpectMore.gov, a website that provides candid 
information about programs that are successful and programs that fall 
short, and in both situations, what they are doing to improve their 
performance next year. I encourage the Members of this Committee and 
those interested in our programs to visit ExpectMore.gov, see how we 
are doing, and hold us accountable for improving.
    President Bush and I believe that America's best days are still 
before her. We are confident that we can continue to help Americans 
become healthier and more hopeful, live longer and better lives. Our 
fiscal year 2007 budget is forward-looking and reflects that hopeful 
outlook.
    Thank you for the opportunity to testify. I will be happy to answer 
your questions.

                          HISTORICAL PANDEMICS

    Senator Specter. Thank you very much, Mr. Secretary. We'll 
now go to the questioning by the Senators with 5-minute rounds. 
In the second round, Mr. Secretary, I intend to go into the 
budget cuts on the Centers for Disease Control and the National 
Institutes of Health and others which, as I have outlined 
earlier, I think totally unacceptable, but let me begin with 
the issue of the threat of the pandemic flu. There is a draft 
report, which has appeared publicly, where you are stockpiling 
75 million doses of antiviral drugs and 20 million doses of 
vaccines. There are projections that there could be as much as 
40 percent of the workforce absent. There are guidelines to 
keep people from congregating together. There is even a note 
about local police departments and National Guard would have 
the primary responsibility for keeping order, but the military 
would be available to assist. This sounds like a very, very 
stark situation. We know that when such disasters have occurred 
in the past, there have been millions who have been killed. One 
of the really important matters to be covered is to acquaint 
the public with what the problems are--that it may be difficult 
or dangerous to go to the grocery store, that it is important 
to have a supply of water, that there ought to be provisions 
made for a worst-case scenario. There have been articles, but 
they are buried in the newspapers, and I do not think that 
there is a real public understanding of the seriousness of this 
program. Now, what you are saying here today is going to be 
carried in the news media, and this hearing is being covered 
live on C-SPAN, so it is reaching people as we speak. Stark as 
it is, I think we ought to be very candid, very frank--brutally 
frank with the potential nature of the problem. Now, Mr. 
Secretary, what is the worst-case scenario? If it's as bad as 
it can be, how bad would that be?
    Secretary Leavitt. Mr. Chairman, pandemics happen. They 
have happened through all-time. You can date back to ancient 
Athens--25 percent of that city was wiped out because of 
disease. You can roll forward, and virtually every century, you 
will see two or three pandemics. In the 14th century--Black 
Death, perhaps the best known, killed 25 million people across 
Europe.
    Senator Specter. How many people died in the pandemic in 
the United States not long into the 20th century?
    Secretary Leavitt. Your point is a very good one. We have 
had 10 pandemics in the last 300 years. We have had three 
pandemics in the last 100 years. In 1968 and 1957--a lot of 
people got sick. Not many people died. In 1918, however, many 
people got sick and regrettably, millions died. If we were to 
have a pandemic of equal proportion to that which occurred in 
1918, roughly 90 million people in the United States would 
become ill. About half of those--45 million would become sick 
enough that they would require some form of serious medical 
attention, and about 2 million people, regrettably, would die.
    Senator Specter. Well, those are pretty stark figures--90 
million, about one-third--almost one-third of the population, 
and you say millions would die. What basic precautions should 
people take?

                    PANDEMIC INFLUENZA PREPAREDNESS

    Secretary Leavitt. Well, for that reason, the President has 
asked that we mobilize the country. I have committed that we 
would hold pandemic summits in all 50 States. So far, we have 
had 46 of them. We are mobilizing State and local governments. 
We are also working to develop a global monitoring system.
    Senator Specter. What should individual citizens do? Should 
individual citizens stock up on water? Should individual 
citizens stock up on food?
    Secretary Leavitt. Mr. Chairman, the preparation for a 
pandemic is essentially the same preparation that needs to 
occur in any disaster. It's a good idea to have some 
nonperishable food stored at your home. That would be true for 
a hurricane or a tornado. It would be a good idea for a 
bioterrorism event or a nuclear event. It would be true as well 
for a pandemic. It's a good idea to have a first aid kit and to 
have prescription drugs stocked up in a way that if you were to 
need your supply and couldn't get to the drug store that you 
would have it. It's a good idea to have thought through how you 
would deal with your children--if you had to alternate going to 
work with your spouse or if they both needed to stay home and 
you had to have some kind of caregiving process. It's a good 
idea to take the same precautions as in any other emergency 
situation.
    Senator Specter. The red light went on in the middle of 
your answer, and I intend to observe the red light meticulously 
because I ask all the members of the panel to do the same, and 
now I yield to Senator Harkin.

                  PANDEMIC INFLUENZA VACCINE STOCKPILE

    Senator Harkin. Thank you very much, Mr. Chairman. Again, 
welcome Mr. Secretary. Again, I just want to point out that 
this committee--the Senate went on record 73 to 27 on an 
amendment offered by Senator Specter on the budget to increase 
our budget allocation by $7 billion for health and education 
programs, much of which would go to this Department to make up 
for a lot of the cuts that we see in this budget. Of course, we 
don't have a budget yet. The House can't seem to pass one. So, 
I don't know what's going to happen on that later on down the 
pipe, but I am hopeful that that $7 billion that Senator 
Specter and 72 other Senators voted to support stays in there. 
If that's the case, then we can make up for some of the cuts 
that are in your budget that I think are just devastating--the 
cuts to Social Services Block Grants by $500 million, 
eliminating the Community Services Block Grant programs, the 
cuts--as you said, the level funding for NIH, which translates 
into cuts for some of NIH and for the Centers for Disease 
Control, the cuts on rural health programs, poison control 
centers, health professions trainings programs--all of these 
things all got cuts--all got cuts. Quite frankly, with the 
needs that we have out there, these cuts cannot stand, and 
that's why I am hopeful that we can get that $7 billion. Now, I 
want to follow up a little bit on the Avian Flu. I want to see 
if we can clarify the issue of stockpiling of antivirals. The 
World Health Organization recommended that countries stockpile 
sufficient antivirals to treat 25 percent of their populations. 
In your written statement, you concur with that goal. That 
would equate to about 80 million Americans. I understand that 
your Department has ordered or has on hand enough antivirals to 
treat about 26 million individuals, so that leaves about 50 
million--60 million short. I understand that you anticipate 
States will order 30 million courses of antivirals. The 
Government will subsidize that at 25 percent of the cost. 
States have been asked to place their orders with you by July--
by this July. The final course of treatment will be ordered 
using pending funds--2007--next year funds. Well now, again, I 
laid that groundwork to say that--are there any States that 
have indicated that they will not be able to order these 
medications because they have a lack of funds or a lack of 
legislative authority to do so?
    Secretary Leavitt. No State has made that statement to us 
at this point.
    Senator Harkin. Okay. What is your plan if States don't 
order these treatments by July?
    Secretary Leavitt. We intend to acquire 50 million courses 
of antivirals.
    Senator Harkin. You mean 50 million over the 20 you have?
    Secretary Leavitt. Let me reconcile the entire amount and 
then give you the timeframes. We will have by the end of 2006 
the 26 million that you have spoken of. We will have by 2008, 
50 million that will have been purchased by Federal money and 
that will be available for distribution.
    Senator Harkin. Okay.

                PANDEMIC INFLUENZA VACCINE DISTRIBUTION

    Secretary Leavitt. We will make a distribution of that 50 
million among the States on essentially a proportionate basis. 
So they will have that available to them in its entirety by the 
end of 2007. Each of the States then has an opportunity to 
supplement that--their proportionate share of that 50 million, 
and we will subsidize it by 25 percent up to their 
proportionate share of the remaining 31 million. We anticipated 
originally that we would ask States to make that decision by 
July. Since that information was provided to you, we have made 
a decision that we will allow them to buy off of our order and 
at the same time, deal directly with the manufacturer so that 
they could be more efficient rather than go through us.
    Senator Harkin. My time is running out. Mr. Secretary, in 
the case of a pandemic, State, and local health departments 
will have to distribute the vaccines. Are you encouraging 
States to organize mass vaccination exercises during this next 
flu season to get ready for that?
    Secretary Leavitt. We are.
    Senator Harkin. If so, will you allow the States to use a 
portion of the $350 million that we allocated for that to 
purchase annual flu vaccine?
    Secretary Leavitt. Actually, we would prefer that they 
utilize the $350 million to build up the public health 
infrastructure and to reach deep into the community to be able 
to do the kinds of things that Senator Specter was talking 
about.
    Senator Harkin. But isn't one way to do that is to purchase 
annual flu vaccine and put in place an infrastructure----
    Secretary Leavitt. Oh.
    Senator Harkin [continuing]. To distribute it? That's what 
I am saying.
    That's what I am talking about.
    Secretary Leavitt. I misunderstood your question.
    Senator Harkin. Yeah.
    Secretary Leavitt. At this point, we have not begun to 
distribute the stockpile of vaccine that we have. It is 
relatively small, but we will not release it until such time as 
we have seen person-to-person transmission.
    Senator Harkin. No, now we're--my time is running out, and 
that's not what I am talking about. What I am talking about is 
the annual flu vaccine.
    Secretary Leavitt. Oh.
    Senator Harkin. Is we put $350 million for--to build up 
State and local structures in case of a pandemic. One of the 
ways to test that to see if it works, to do it is to buy the 
annual flu vaccine and say okay, we are going to set up 
processes and methodologies to get that annual flu vaccine out.
    Secretary Leavitt. Third time is the charm, Senator. You 
got it.
    Senator Harkin. Okay.
    Secretary Leavitt. I think you finally reached me.
    Senator Harkin. So, my question--would they be allowed to 
use some of that $350 million to purchase the annual flu 
vaccine to test modalities out there to--how to get it out?
    Secretary Leavitt. I hadn't thought of that.
    Senator Harkin. Oh.
    Secretary Leavitt. It's a really interesting idea----
    Senator Harkin. Okay.
    Secretary Leavitt [continuing]. I'd be happy to give it 
some thought and respond back to you.
    Senator Harkin. I appreciate that. Thanks, Mr. Secretary. 
All right.
    [The information follows:]

                   Pandemic Influenza Infrastructure

    A major component of the $350 million allocated to States for 
pandemic influenza planning is for States to exercise their plans. 
States are permitted to use Public Health Emergency Preparedness 
cooperative agreement funds to purchase vaccine in limited quantities 
for the purpose of conducting drills and exercises. At this time, they 
are not permitted to purchase annual vaccine with the emergency 
supplemental funding for pandemic influenza preparedness. However, they 
may use some of these emergency supplemental funds during the influenza 
season as an opportunity to exercise mass vaccination plans.

    Senator Specter. Thank you, Senator Harkin. Senator Craig?

                        COMMUNITY HEALTH CENTERS

    Senator Craig. Thank you very much, Mr. Chairman. Mr. 
Secretary, during the Easter recess when I was back in Idaho, I 
visited a community health center, and I do that on a regular 
basis to see how it's working, who they are serving, how they 
are serving, and it is really one of those kind of unsung 
success stories out there that some of us fail to recognize. 
Obviously, this present--President hasn't failed to recognize 
that to lower income Americans, one way to serve them is making 
sure the door is open, and community health centers do that 
very well. This particular community health center in Nampa, 
Idaho told me that in the year, they had served over 25,000 
people, and the place was full, the parking lot was full, and 
the doctors and nurses there were very pleased with the work 
they were doing. Should this committee be concerned that 
expansion of new facilities coupled with a reduction in funds 
for training personnel to work in those facilities will slow 
the service--access to service in communities that need these 
facilities or worse--exacerbate shortages in medical personnel 
across the country?
    Secretary Leavitt. Mr. Senator, as I indicated earlier, 
this is one of the President's high priorities, and this budget 
includes funds to continue forward in his goal of providing 
1,200 new or expanded community health center sites. This 
includes enough for 300, 80 of which will be in the highest 
poverty counties. This is a passion for the President and for 
me, and we are working with every asset we have to continue 
moving it forward.
    Senator Craig. Okay. So as I said, funds as it relates to 
the training of personnel, we don't--you don't see that as a 
problem in relation to standing these up and facilitating them 
for service?
    Secretary Leavitt. As I speak with those who run and 
operate these in the same way that you have, there are always 
needs there.
    Senator Craig. Yeah.
    Secretary Leavitt. I would not want to say that we will 
have quenched that, but we do recognize that training is a 
component of it and want to meet those needs.

                    WELLNESS AND DISEASE PREVENTION

    Senator Craig. Okay. Mr. Secretary, myself and other 
Senators consistently over time have introduced legislation to 
authorize Medicare to cover medical nutritional therapy 
services for some beneficiaries. However, there is generally a 
cost associated with any legislation, and that usually gives us 
problems in this area. I am one who believes that good health 
oftentimes brings down costs as it relates to healthcare and 
that we ought to be increasing advocates of that instead of 
repairs of broken bodies, if you will, after the fact. Can you 
give me your general views based on your experience in 
implementing programs designed for health and wellness as 
opposed to programs designed to intervene or respond to long 
after diseases and ailments have onset?
    Secretary Leavitt. I believe, Senator, it should become our 
entire focus. When I say entire focus--until we begin to view 
wellness with the same passion we do treatment, not only will 
we not see improvement in our health, we will not see 
improvement in our fiscal health. I believe that is one of the 
reasons--in fact, one of the primary reasons, why the new Part 
D prescription drug benefit is such a historic point in time. 
For the first time, we have begun to provide for seniors the 
prescription drugs they need to stay healthy as opposed to 
simply treating them after they are sick. Over and over again, 
as I have traveled the country meeting with seniors, I have 
heard stories of people who have had heart operations, ulcer 
operations, and osteoporosis treatments that could have been 
prevented with a small amount of prescription drugs at the 
onset as opposed to the treatment at the end.

                       MEDICARE PART D ENROLLMENT

    Senator Craig. Well, my time is up, but you segued nicely 
from my request for a response as it relates to medical 
nutritional therapy and to prescription drugs. Could you for a 
moment give us some of the current figures as to where we are 
with participation as to where we thought we would be and some 
of the savings that are now already appearing on the scene?
    Secretary Leavitt. We anticipated that in the first year, 
we would see 28 to 30 million people enroll. We have now 
exceeded 30 million. We anticipate between now and the 15 of 
May that we will have--I don't know exactly of course, but 
another couple million. If you assume that that's 32 million, 
there are 42 million in total who are eligible. There are 6 
million who are getting coverage from either a private employer 
or some other source. If you add that 6 to the 32, you get 38. 
That would mean we have a shot at being able to have enrolled 
90 percent of every senior who is eligible for this benefit 
during the first year. That is a remarkable achievement in my 
mind, and it's a tribute not just to the Centers for Medicare 
and Medicaid Services (CMS), but to the thousands of 
pharmacists, the thousands of volunteers, the tens of thousands 
of people all over this country who have been involved in 
reaching out to seniors in their homes, in their places of 
worship, in their senior centers. The other good news is the 
cost is coming down. The program is getting better everyday. 
The cost is coming down, and we are getting people enrolled.
    Senator Craig. Thank you. It is a success story. We 
appreciate it.
    Senator Specter. Thank you very much, Senator Craig. Under 
the early bird rule, we turn to Senator Durbin.

                  MEDICARE PART D ENROLLMENT DEADLINE

    Senator Durbin. So, Mr. Secretary, there is more to the 
story, and here is the rest of the story. The Bush 
administration says that 35.8 million Medicare beneficiaries 
will have drug coverage as of mid-April. The truth is 75 
percent of those people--more than 26 million--already had 
prescription drug coverage before January 1 of this year 
through their employer, the VA or Medicaid. So there were 16 
million Medicare beneficiaries who previously did not have drug 
coverage. Only half or about 9 million have signed up for the 
benefit. Millions need more time. In my State of Illinois, 
606,000 people have not signed up for Part D, and the clock is 
ticking. It's less than 2 weeks away. Forty-five different plan 
choices, people--some of whom are flat on their back in nursing 
homes and in no position to make these choices--I think we have 
to acknowledge the obvious. Come May 15, the law will impose a 
penalty on a lot of people who did their best and just couldn't 
get this done, and I want to ask you point-blank do you think 
we ought to extend the signup deadline beyond May 15? Number 
two--should you allow senior citizens a do-over if they picked 
a bad plan that dropped the formulary, increased the cost? Do 
you think that that will be a reasonable way to deal with 
clearly a challenge that has not been met?
    Secretary Leavitt. Senator, millions of people--tens of 
millions of people--have prescription drug coverage who did not 
have it before. That is a great step forward, something I 
believe you would concur with. Let me again say that I believe 
that when May 15 comes, we will have reached roughly 90 percent 
of those who are eligible. Of the remaining 10 percent, about 
half of them will be a population that, granted, is very 
difficult to reach.
    Senator Durbin. But----
    Secretary Leavitt. We have had that problem--I want to 
answer your question. About half of them are in a low-income 
status, and we have granted them the ability if they qualify 
for the extra help--the people that you are most concerned 
about--we will not require that they wait until the next 
enrollment period. They will have no penalty, and they will 
have no wait.
    Senator Durbin. So increasing monthly premiums of 1 percent 
for every month past the deadline--are you going to waive that?
    Secretary Leavitt. If you are in fact a low-income eligible 
person, you will not have a penalty, and you will not be 
required to wait until the next enrollment period.
    Senator Durbin. Will the administration support extending 
the deadline beyond May 15?
    Secretary Leavitt. We believe that a deadline is necessary 
and that it is working. The Government actuary told us if we 
did not have a deadline, we would have substantially fewer 
people. We believe that the plan requires the time to mature. 
We think that the--that half of the people who are--who have 
yet to enroll will be eligible to enroll during that period 
once they have qualified for extra help.
    Senator Durbin. I think that we are missing the point here. 
Of the universe of people who did not have prescription drug 
coverage on January 1, some 25--let me get the figure correct 
here--25 percent of the Medicare beneficiaries, about 15 
percent of that number will have signed up by May 15, and 10 
percent will have not. So 60 percent of our goal will have been 
reached, but 40 percent not. You are shaking your head, but 
those are the numbers, and we get the report from your agency 
county by county. 606,000 people in my State, and we have done 
our best. What I say to you is I hope that you will understand 
their predicament, that the administration will relent and give 
these seniors a second chance to sign up without penalty. 
Second, if they have made a bad choice, I hope you will give 
them a chance to have a do-over, a makeover, support 
legislation that we have introduced. They can pick a plan that 
really is better for them. If I might ask one other question--
I'm going to run out of time. I am worried about whether or not 
we are doing what we need to do for our children on our watch. 
I go to schools across my State, and I ask a simple question--
how many here have someone in your family with asthma? You will 
see more than half the hands go up. You can tell by looking at 
the children we are dealing with obesity. We know that one out 
of every 160 children in America have autism at this point. How 
can we deal with these issues when we are facing a budget that 
is going to make such significant cuts in the Centers for 
Disease Control and Prevention, in the National Institutes of 
Health and that eliminates the NIH National Children's Study? 
How can we find out what's happening out there and really 
protect our children against what appears to be an onset of 
some terrible health challenges?

                      MEDICARE PART D PLAN CHOICE

    Secretary Leavitt. Senator, we do have an epidemic of 
obesity, particularly among our young people, and the Centers 
for Disease Control and Prevention does have a role as would 
many other agencies at HHS, and we are prepared to join with 
you in every way we can to assure that that occurs. It is a 
very serious problem. I would like to just mention one other 
thing on the choice of plans. A statistic I learned that I 
think you will find interesting--we did develop a standard plan 
that was recommended by the Congress. Only 10 percent of the 
more than 30 million people now have chosen that plan, which 
tells me that it was very important to people that they have a 
choice and that they are able to choose a plan that fits their 
situation. I know from signing a lot of people up that if they 
had just had to deal with the standard plan, no matter what it 
was, it would not have served them well. The plan will be 
simplified in the next version in the same way that the market 
has allowed for it to become better. We are all going to get 
better at this as time goes on. In 1965, Medicare became law. 
It got better in 1966. It got better in 1967. The plans are now 
maturing. The pharmacies are learning how to use the system. 
The consumers are now better informed. We are getting better at 
what we do. This is a very important milestone--undoubtedly the 
most important thing that's happened in healthcare in the last 
40 years.
    Senator Durbin. Thank you.
    Senator Specter. Thank you, Senator Durbin. Senator Kohl?

                     FDA GENERIC DRUG APPLICATIONS

    Senator Kohl. Thank you, Mr. Chairman. Mr. Secretary, the 
FDA currently has a backlog of more than 800 generic drug 
applications, which is an all-time high, and FDA officials 
expect a record number of generic applications this year and an 
even larger backlog. The Congressional Budget Office estimates 
the use of generics provides a savings of $8 to $10 billion to 
consumers every year, and that doesn't include the billions of 
dollars more of savings to hospitals, Medicare, and Medicaid. I 
believe it's now more important than ever that we speed less 
expensive generic drugs to market, and I would think that you 
agree. So do you support an increase in the FDA budget to help 
reduce this backlog, and how much do you believe the FDA needs 
to efficiently reduce the backlog and pass along the savings to 
our people and also to the Federal Government?
    Secretary Leavitt. Senator Kohl, I concur with you that 
there is a need to speed generic drugs to market. It is a good 
thing for consumers. It's a good thing for healthcare. We are 
taking steps to do just that--not only to speed them, but to 
prioritize them. The budget that I have proposed is the budget 
we have proposed. We think we can accomplish that within the 
budget that we have suggested.
    Senator Kohl. So you are not proposing any increase in the 
budget to help reduce this backlog?
    Secretary Leavitt. We are putting substantial focus on it, 
however, I will tell you, at FDA.
    Senator Kohl. I'd like to hope that's going to happen, that 
in fact we will get the kinds of numbers--increases that we 
need, that I think you believe we need, and you are saying that 
it's going to happen?
    Secretary Leavitt. Let me suggest one piece of information 
that might at least give you some insight into this. Of the 800 
applications, some of them are essentially for the same 
chemical or same molecule. So, we have begun to focus on those 
on in which there is not one generic or two generics. In other 
words, we want to get new generics into the market as opposed 
to a repeat of existing molecules that have been made available 
in some generic form. Now, we think we can do this better, and 
I think we have to.

               ADMINISTRATION ON AGING (AOA) BUDGET CUTS

    Senator Kohl. Mr. Secretary, some of the most painful cuts 
in the budget are programs under the Administration on Aging, 
which takes a $28 million hit in programs like Meals On Wheels 
and family caregiver support services. That means that--well, 
in my State, Wisconsin senior population continues to grow from 
705,000 senior citizens in 2000 all the way up to 1.2 million 
senior citizens estimated for 2025. The budget does not account 
for the growth and the need for services. In addition, this 
budget proposes to eliminate Alzheimer's demonstration grants. 
In Wisconsin, the Alzheimer's Association is in its first year 
of a 3-year grant where they are working in Jefferson County on 
a program to open a dementia care clinic at a hospital in Fort 
Atkinson in Jefferson County. It is the first of its kind and 
the only one in the area, and they would lose their funding 
after this year should this budget prevail. So how do you 
explain your plan to cut these vital programs while at the same 
time our aging population is growing?
    Secretary Leavitt. Senator, you have listed a number of 
different areas, so let me do my best to respond to them and to 
give you a sense of what was going on in here when I made these 
decisions. I asked my budget team to essentially use a series 
of principles. One of them I asked them is to look for one-time 
funds. So part of that may be one-time funds where the project 
was completed and hence wasn't repeated. Another principle was 
looking for programs where purposes were involved in a number 
of different places at HHS. So, it's possible that some of 
those were there. There were also some funds that were carried 
over from existing programs that I didn't repeat. Now, I can't 
respond directly. If you'd like me to get to you specifically 
with those, I'd be happy to respond, but my guess is that we'll 
find that those principles are the ones that were involved in 
helping to make the decisions we did.
    Senator Kohl. I would like some more information on those 
particular programs.
    Secretary Leavitt. We'll be happy to respond to that.
    [The information follows:]
                    Alzheimer's Demonstration Grants
    For 14 years under the Alzheimer's Disease Demonstration Grant to 
States Program (ADDGS), demonstrations in almost every State have 
highlighted successful, effective approaches for serving people with 
Alzheimer's. Similar to Preventive Health Services, it is time to put 
these models and the lessons that have been learned to work by moving 
them in AoA's core services programs--especially the National Family 
Caregiver Support Progam--as a number of States have already done.
    The fiscal year 2007 President's budget includes the elimination of 
ADDGS. This reflects that demonstration projects for individual with 
Alzheimer's and their caregivers are ready to be incorporated into the 
core activities of the National Aging Services Network.

                            RURAL HEALTHCARE

    Senator Kohl. There are a number of programs in your 
Department aimed at bolstering rural health. Wisconsin, one of 
the biggest beneficiaries in the country, received over 
$600,000 from the Rural Hospital Flexibility Grant Program just 
last year. This funding is used at over 60 rural hospitals that 
serve anywhere from 10,000 to 12,000 patients every year. The 
President's budget proposes to eliminate the Rural Hospital 
Flexibility Grant Program, the rural and community access to 
emergency devices and area health education centers. So how are 
rural communities expected to meet their unique healthcare 
challenges when these very important resources are being 
severely diminished?
    Secretary Leavitt. I, like you, come from a State where 
rural medicine is a very important part of the social fabric of 
our State, and so I have become quite sensitive to this. We 
have adopted a slightly different strategy and that is to try 
to bolster the reimbursement rates for providers in those 
areas. I have also begun to look for places, frankly, where I 
wasn't able to justify or I wasn't able to see a result. We 
have invested about $25 billion through higher reimbursements 
in rural areas, and that's the way we are intending for many of 
those funds to be replaced.
    Senator Kohl. Thank you, Mr. Chairman.

                            CDC BUDGET CUTS

    Senator Specter. Thank you very much, Senator Kohl. On 
round two, we begin now with Mr. Secretary. With respect to the 
budget cuts, the Centers for Disease Control and Prevention has 
been cut by $67 million this year. They have enormous 
responsibilities in many many areas which I shall not 
enumerate, and now we are looking to give them even greater 
responsibilities if there should be a pandemic flu. Dr. Julie 
Gerberding, a very distinguished Director of CDC, has sat at 
your side testifying, preparing on this item. The physical 
plant of CDC was a shambles when I visited it several years 
ago. Prize-winning scientists were sitting in hallways, toxic 
materials were not under lock and key, and we have carved out 
funds within our existing budget to fund almost a billion and a 
half dollars. Immediately, Senator Harkin and I found $137 
million. Now, the budget has been cut from $159 million to $30 
million--a $129 million cut. I have been lobbied very heavily 
by people in the Atlanta community to find the funds, but I 
can't find money out of thin air. How can CDC be realistically 
cut and their physical plant not improved given the increased 
responsibilities that you as Secretary are calling on them to 
perform?
    Secretary Leavitt. Senator, may I acknowledge that the work 
that this committee has done to be supportive of CDC is not 
just noticeable, but revered, and I also acknowledge that the 
budget that we are presenting to you is reduced by $179 
million. Within that total reduction, the buildings and 
facilities as far as new construction does make up $129 million 
of that. We have felt in a budget with a reduction or a deficit 
that we have made substantial progress in this area.
    Senator Specter. Should we stop the rebuilding?
    Secretary Leavitt. Well, we believe that we are capable of 
pausing on what will be a long-term strategy to continue to 
improve the facilities. We have made substantial progress. They 
are remarkable facilities, and I want to express my enthusiasm 
for how much the campus has been improved, and I want to 
acknowledge as well the role of you and Senator Harkin in 
accomplishing that.
    Senator Specter. Let me ask you to submit the balance of 
your answer in writing so I can go onto NIH.
    [The information follows:]

                           CDC Physical Plant

    CDC has made remarkable progress on its Master Plan with $1.2 
billion invested to date to upgrade their facilities. Since 2000, CDC 
has initiated or completed the construction of more than 2.7 million 
gross square feet (gsf) of laboratory and facility space. For fiscal 
year 2007, we have included $30 million for repairs and improvements of 
CDC facilities.
    Consistent across HHS, our request focuses on finishing projects 
that are near completion and maintaining existing facilities. No funds 
are requested to initiate new construction.

                          NIH RESEARCH GRANTS

    Senator Specter. NIH tells us that there are going to be 
more than 800 applications--no, 656 fewer applications, fewer 
ideas submitted. I am worried that there may be some for breast 
cancer in that group or prostate cancer or Hodgkin's. How can 
the crown jewel of the Federal Government--perhaps the only 
jewel of the Federal Government be cut in funds?
    Secretary Leavitt. Senator, I want to tell you again I 
agree with you that funding new research ideas is a vital, 
important priority and that the fiscal year 2007 budget 
finances 275 more new grants. Now, one of the things you will 
see is that the actual number doesn't reflect it because a lot 
of expiring noncompeting grants diminish the number. When we 
implemented the effort that you instigated in this committee to 
double the amount of funding, there was a huge amount of new 
grants. So, what we are in is the first year where there are 
not as many non-competing continuation grants.
    Senator Specter. Well, there will be a lot of grant 
applications denied and a lot of existing grant applications 
denied. I get lots of letters, and one illustrates it from 
Pittsburgh--what am I going to do, Senator Specter, on the 
tremendous progress I am making if they are going to cut off 
the funding and the grant's going to be withdrawn? Really, Mr. 
Secretary, this--these are not issues that can be handled 
within the purview of the funds which you are allocated. We are 
going to have to have a fundamental reassessment as to 
priorities.
    My red light just went on, but you--the red light doesn't 
apply to you, Mr. Secretary, just to my questions.
    Secretary Leavitt. I'd like to acknowledge that we are 
working to find opportunities for new investigators and for new 
innovations, and one of the things we are doing, frankly, is 
reevaluating the grants. After they have been concluded, then 
people must recompete. In some cases, there are research 
projects that simply don't stack up to the opportunities 
because we have essentially been able to get the value from 
them that the peer review process believes would be to our 
advantage. So, we have begun to redeploy that into new grants. 
So, the actual number of new projects is higher than it appears 
because of the decline in the number of noncompeting grants. 
The red light's on, and I am sensitive to it.
    Senator Specter. Well, I turn now to the second round for 
Senator Harkin, and I am anxious to see if he follows his 
customary pattern of having really tough questions in the 
second round.
    Secretary Leavitt. I am going to watch that too.

                           NIH FUNDING LEVELS

    Senator Harkin. You're putting me on the spot here. Just to 
follow up on the distinguished chairman's line of questioning 
on NIH--when we worked hard in a bipartisan fashion with so 
many others to double the funding for NIH, it was not meant to 
just double it and then reach a plateau and plateau off. We did 
this because for years, it had been underfunded, and we wanted 
to get it back up to where it had been maybe 25 years ago and 
continue the funding up. It was not meant to get it up and say 
oh, now we can level off. That's what I see happening, and we 
are falling into the same pattern that we did 30 years ago when 
NIH all of a sudden had--it was getting out maybe 4 or 5 peer-
reviewed grants per every 10 that came in--30 percent--40 
percent--50 percent. Now, we are getting down to 10 percent 
again. So it's like we're plateauing off again. So we are going 
to do this, and 10 years from now when we are probably gone, 
somebody will be kind of like well, we're going to have to 
double the funding again--not a good way to run things. So, I 
kind of plead with you use your counsels within the executive 
branch to tell them this is just not--this is not good. We--and 
I think that's why we had so much support for the amendment 
that Senator Specter offered on the $7 billion. A lot of it had 
to do with we are not going to let NIH fall into that same rut 
again. Well, that's a statement, and that's not a question--
darn it. Well, I had another statement too.

                       PANDEMIC INFLUENZA VACCINE

    I won't get into that, but on the flu vaccine, I do want to 
follow up a little bit on that. I have legislation in that 
would provide for a free flu shot for everyone every year--free 
flu--the Federal Government just provides a free flu shot. Now, 
why is that? Well, I am thinking about the vaccines and the--we 
have to get the infrastructure up for the pandemic flu that 
may--a lot of signs say is coming. As you point out, we have 
pandemics every so often. The infrastructure is not there to 
deliver it. So, if you had a free flu shot for everyone every 
year, not only do you save 35,000 lives a year perhaps or at 
least a good portion of those, you save a lot of 
hospitalizations, you save a lot of money if everyone got a 
free flu shot every year. Plus you get the States in to think 
about how you get it out there. You know, how do we start 
inoculating people in Wal-Marts and sporting centers, high 
schools, maybe even churches--after church or synagogue, they 
could get inoculated. In other words, to set up a system so 
that if a pandemic hits--bang, you have got it there and you 
can get it out. So I hope that you will take a look at that and 
see if there is any merit to getting a free flu shot for 
everyone out there, and I don't know if you want to respond to 
that or not.
    Secretary Leavitt. I'd love to respond just briefly. I 
believe one of the side benefits of our pandemic preparedness 
is the ability to take the annual flu vaccine dilemma off the 
table forever.
    Senator Harkin. Yeah.
    Secretary Leavitt. We will have to have new capacity 
developed and have it operating continually to keep our 
capacity warm----
    Senator Harkin. That's right.
    Secretary Leavitt [continuing]. The best thing to develop--
--
    Senator Harkin. That's right.
    Secretary Leavitt [continuing]. Would be new annual flu 
vaccine.
    Senator Harkin. That's right.
    Secretary Leavitt. So, I fully believe that we will see 
substantial increases in the availability of annual flu 
vaccine. How we distribute it, what the cost is and so forth 
will be a matter of policy, but we do need to increase it.

                           DISEASE PREVENTION

    Senator Harkin. Well, I appreciate that. I will continue to 
push that idea that we ought to just provide a free flu shot. 
It's about--I estimated about--well, if you figure the flu 
shot's about $10 for 200 million people, that's about $2 
billion a year, but then the lives you save, the decrease in 
hospitalizations--maybe won't cost that much, so you get a win 
on the other side. Let me follow up on Senator Craig's 
comments. I told him when he walked out I was going to follow 
up on that, and I think I heard you say this was--your primary 
concern is to get prevention out there. When you mentioned the 
Medicare, that 8 percent GDP now going to 11 percent, the 
answer is not just to provide more drugs for the elderly Part 
D, and I don't mean to get into that contest there, but the 
answer is just to start getting prevention earlier in life to 
our kids as they go through life. Now, you know I have been 
very concerned about child obesity, diet-related chronic 
diseases, and one of the areas I am particularly interested in 
is the junk food marketing that targets kids--its impact. Last 
December, the IOM report, ``Food Marketing to Children: Threat 
or Opportunity?'' was released in December. It outlined a 
series of policy recommendations for government, the food and 
beverage industry, schools, parents--designed to limit junk 
food marketing and instead to utilize the power of marketing to 
promote healthier diets. What's that got to do with you? Well, 
the final recommendation of IOM was for the Secretary of Health 
and Human Services to designate a responsible agency to 
formally monitor and report regularly on the progress of all of 
the recommendations in the report. On March 3 of this year, 14 
Members of the Senate wrote to you urging you to implement this 
final recommendation so that Congress can monitor the progress 
made or not made toward the goal to see whether we need to do 
something in that regard. Now again, I am not--don't want to 
put you on the spot. We have not heard back from you, but that 
was only March--that was March 3. But again, Mr. Secretary, 
does HHS have any plans to take the action recommended by the 
Institute of Medicine to appoint a monitoring body on food 
marketing to children? If you don't have that answer, just----
    Secretary Leavitt. I think I best respond to you----
    Senator Harkin. Respond to me.
    Secretary Leavitt [continuing]. In writing. I have read 
about your concern about this, and I have begun to make 
inquiries as to what the current status is.
    [The information follows:]

              Institute of Medicine Policy Recommendations

    Obesity prevention is one of my top priorities. I have asked 
Assistant Secretary for Health, Dr. John Q. Agwunobi, to work with all 
of the HHS agencies and offices to explore this issue in depth, and 
consider appropriate actions consistent with existing authorities and 
available resources.
    In addition, last year HHS and the Federal Trade Commission (FTC) 
sponsored a joint workshop on the effects of food marketing on 
children. On May 2, HHS and the Federal Trade Commission released a 
report titled ``Perspectives on Marketing, Self-Regulation and 
Childhood Obesity'' that recognizes that advertising and marketing can 
play a positive role in encouraging sound nutrition and physical 
activity.
    The report includes a series of recommendations for food companies 
and the entertainment industry to assist Americans in identifying more 
nutritious, lower-calorie foods; increase efforts to educate parents 
and children about nutrition and fitness; and to bolster the self-
regulatory strategies that are currently employed to monitor the 
marketing of food and beverages to youth. In addition, the Council of 
Better Business Bureaus and the National Advertising Review Council 
recently announced the formation of a working group effort to review 
and propose changes to the Children's Advertising Review Unit and its 
self-regulatory guidelines.

    Secretary Leavitt. Senator, could I just make one other 
quick statement on a previous matter?
    Senator Harkin. Sure.

                              NIH RESEARCH

    Secretary Leavitt. I'd just like to acknowledge that--the 
commitment that I feel to maintain the momentum of the research 
we have going at NIH. I'll probably be the only one who will 
say this is a good performance, but I have worked hard in a 
deficit reduction budget to make sure that we kept it at least 
flat. That is maybe good news only to me, but I wanted to tell 
you I have worked hard on it and will continue to. I also 
believe that what Dr. Zerhouni is doing with respect to trans-
institute projects with his Roadmap is a very important part of 
the future. I would like to see a greater percentage of the $30 
billion that we spend there every year for research on inter-
institute projects on basic science where all of the Institutes 
will benefit. I think that's a more efficient way than simply 
allocating to whatever disease or body part institute it is to 
have their own project, and I would like at some point to work 
with this committee to create a means by which that could be 
accelerated. We need more cross-institute work. We need to have 
less siloed research, multidisciplined research is clearly 
where we will find success in the future.
    Senator Harkin. I appreciate that. That's good.

                        COMPASSION CAPITAL FUND

    Senator Specter. Thank you very much, Senator Harkin. Just 
one final question before we conclude the hearing--Mr. 
Secretary, I note that you and First Lady Laura Bush were in 
Pittsburgh to talk about the progress on the initiative in 
relating to gang control, a Capital Fund--Compassion Capital 
Fund program--antigang efforts through a community and faith-
based organization back on March 7, 2005, and I would be 
interested to know what your thinking is on any progress there. 
The problem of gang warfare and shootings is epidemic and 
endemic. Just this morning, two teenagers were shot straight 
across from a high school in Philadelphia. The shootings are 
virtually a daily occurrence. Recently, there was a gunfight. 
Last week, two men were sentenced to life imprisonment for a 
massive gunfight outside an elementary school in February 2004 
which killed a 10-year-old. Are the funds made available 
through this new program that you and First Lady Laura Bush 
announced having any significant impact?
    Secretary Leavitt. We are nearing the point in our process 
of soliciting proposals. We have an obligation to come up and 
review it with the committee, and we intend to do that. I think 
at that point, we'll be in a position to evaluate together the 
kinds of things those funds are being used for. We are quite 
optimistic about it and hopeful that we can continue the 
momentum of the program.
    Senator Specter. Well, the announcement was sometime ago--
March 7, 2005. Have any grants been made under the program in 
the intervening 15 months?
    Secretary Leavitt. We have not yet received proposals. We 
have an obligation to come to the committee to review them with 
you before we do that, and we will do so.
    Senator Specter. Well, we have put up a fair amount of 
money last year, and you are asking for $35 million more this 
year in a budget where there are cuts on some very vital 
programs, so we don't want to keep those funds held in 
abeyance. If they can be directed effectively to juvenile gang 
problems, we want to do that.
    Secretary Leavitt. Thank you.
    Senator Specter. But if the money is not going to be 
awarded so that we can see some positive results from those 
funds, we want to use them elsewhere. Mr. Secretary, thank you.
    Senator Harkin?

                        AGING SERVICES PROGRAMS

    Senator Harkin. There was one thing I just--thank you, Mr. 
Chairman--that I wanted to bring up before you left, Mr. 
Secretary. When we first met when you came into my office when 
your appointment was scheduled, one of the things I remember we 
talked about was Systems Change Grants. Shortly after the 
Olmstead decision by the Supreme Court, Senator Specter and I 
started working to provide funds to help States get 
deinstitutionalized or to prevent institutionalization, but get 
people to deinstitutionalize. The Olmstead decision said you 
know, we had to provide the least restrictive environment. So 
we started this program called Real Systems Change Grants, and 
we started putting money in it to implement these programs. I 
believe, from all that I have known about it, it has been a 
success year after year. But every year, we have to fight to 
put the money into it. Again this year, the budget eliminates 
funding for the grants again--once again, so we fight again to 
put it in. Now, I now read that you have a new program in the 
area--in the administration on aging called Choices for 
Independence. Your budget's notes say, ``It seeks to reduce the 
current systemic bias in favor of institutional care.'' Well, 
that's what we were doing under Systems Change Grants. So 
again, what's the difference? Is this new program meant to 
replace it, to supplement it? I don't understand, and what's 
the difference between the two programs? Why would you 
eliminate the Systemic Change programs that we have been 
funding and now come up with this new program?
    Secretary Leavitt. Our purpose is to continue a portion of 
it in the Administration on Aging. We do believe, as you have 
stated, the need for us to deinstitutionalize and to have 
people served in the communities and homes, and that's the 
purpose. Perhaps we could provide you with more detail.
    Senator Harkin. Well, provide me with more details because 
it's not just aging. I mean, these are people with--a lot of 
the time physical disabilities, sometimes with mental 
disabilities, sometimes with both, but which has been proven 
that in many cases can live in a community setting. But a lot 
of times, it takes an initial expenditure made to get that 
done. After they get out, they're fine. As you know, there is a 
bias in Medicaid. Medicaid will pay for someone to be in an 
institution, but that institution wants to live in a community, 
they don't get that Medicaid support.
    Secretary Leavitt. Something we'd like to change.
    Senator Harkin. Well, I would like to change that too. 
That's why we had this program. So I wish you would really look 
at that. We are mandated--Supreme Court mandated. We got to--
they have got to deinstitutionalize. So, we need to change that 
bias in Medicaid, and I hope we can work with you to do that 
also to provide that, but I would like to know why this is 
different. You put it in aging, but it doesn't just cover 
aging, it covers everybody else. If you don't have it now----
    Secretary Leavitt. I have asked my staff to respond as 
quickly as possible.
    Senator Harkin. I'd appreciate that. Thank you very much, 
Mr. Secretary.
    Secretary Leavitt. Thank you.
    [The information follows:]

                        Aging Services Programs

    Thank you for this opportunity to clarify my remarks at the recent 
hearing. The Choices for Independence program ``complements'' the Real 
Choice Systems Change initiative. This is a very important distinction. 
Allow me to explain further how the two initiatives fit together.
    Since fiscal year fiscal year 2001, Congress has appropriated over 
$245 million for the Real Choice Systems Change (RCSC) Grants for 
Community Living. In implementing the RCSC program, the Centers for 
Medicare & Medicaid Services (CMS) has awarded over 297 grants to all 
50 States, the District of Columbia (DC), and two territories. In 
fiscal year 2006, Congress appropriated an additional $25 million to 
fund a new round of RCSC grants. States and other eligible 
organizations, in partnership with their disability and aging 
communities, have the opportunity through RCSC to submit proposals to 
design and construct systems infrastructure that will result in 
effective and enduring improvements in community long-term support 
systems. These system changes are designed to enable children and 
adults of any age who have a disability or long-term illness to:
  --Live in the most integrated community setting appropriate to their 
        individual support requirements and preferences;
  --Exercise meaningful choices about their living environment, the 
        providers of services they receive, the types of supports they 
        use, and the manner by which services are provided; and
  --Obtain quality services in a manner as consistent as possible with 
        their community living preferences and priorities.
    As one component of their RCSC efforts, beginning in fiscal year 
2003, CMS began partnering with the Administration on Aging (AoA) to 
fund States to develop Aging and Disability Resource Centers (ADRC) to 
streamline access to long-term supports for people with disabilities of 
all ages. Simplified access to services, as represented through the 
ADRC initiative, is a key element of a State's overall systems change 
efforts. AoA resources for the ADRC initiative have come from the Older 
Americans Act Title IV Discretionary funding.
    Choices for Independence builds on the Older American's Act unique 
mission, to help our Nation prepare for the aging of the baby boom 
generation. Like the Real Choice grants, Choices addresses issues 
facing Americans who need comprehensive home and community-based 
systems of long-term care to delay or avoid nursing home placement. 
Choices for Independence, like RCSC, is designed to promote home and 
community-based care. Choices will focus mainly on linking Older 
Americans with available services, improving consumer-directed care, 
promoting evidence-based disease prevention, and targeting individuals 
not yet eligible for Medicaid to help prevent them from spending down 
to eligibility. In this way, Choices will complement the work that Real 
Choice grants have so effectively begun to improve long-term care (LTC) 
service delivery systems at the State level. In fiscal year 2007, as 
CMS works to implement the Deficit Reduction Act of 2005 (DRA), they 
will continue working with States to reform their LTC delivery systems 
by building on the successful aspects of Real Choice Systems Change 
grants.
    The fiscal year 2007 budget for AoA essentially folds ADRCs into 
the Choices for Independence initiative. The fiscal year 2007 budget 
includes $28 million for Choices for Independence, including an 
estimated $12.5 million for ADRCs; at the same time, CMS is requesting 
no new funding for Real Choice Systems Change grants. After 5 years, 
these grants have made great strides in helping States make 
improvements to their home- and community-based health care delivery 
service systems. The initiative provided useful lessons that led to the 
development and implementation of the Money Follows the Person 
demonstration (focus is consumer-directed care) as well as the State 
plan options for home- and community-based services in the Deficit 
Reduction Act (DRA). While Choices for Independence does not currently 
assume funding from other agencies, AoA will continue to work closely 
on this initiative with CMS and the other HHS agencies that have been 
involved in the activities that led to its development.

    Senator Specter. Thank you very much, Secretary Leavitt. 
Thank you for what you are doing on the pandemic problem, and I 
urge you to do more on acquainting America with the nature of 
the worst-case scenario--how serious it could be and what 
people ought to be doing individually--and your efforts to stir 
up activity by state and local agencies to deal with the 
problem. I would appreciate your assistance, your thought on 
what we can do about these budget shortfalls and about what can 
be done on advocacy within the administration, within the 
Office of Management and Budget which has the final word here 
and really with the President himself. I think that there is 
not a recognition as to what this means on a lot of very 
difficult very important agencies like the Centers for Disease 
Control and Prevention. These cuts on so many of the health 
agencies are just unacceptable. We can't solve that this 
morning, and you can't solve it, and there may be--have to be 
some action on Congress somewhere to find something that can 
give so these cuts are not implemented. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Specter. There will be some additional questions 
which will be submitted for your response in the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

              Questions Submitted by Senator Arlen Specter

                     HEALTH PROFESSIONALS TRAINING

    Question. Mr. Secretary, I am disappointed that the budget proposal 
again eliminates funding for health professions training at HRSA, 
particularly those programs focused on diversity. Why does the 
administration continue to neglect these programs which play such a 
vital role in the education of young minority students in the health 
professions? What do we need to do to get the administration to match 
the support for these programs that exists in the Congress?
    Answer. The administration prioritizes the distribution of health 
professionals by maintaining funding for the Nation Health Services 
Corps, which places physicians in underserved areas, at $126 million. 
There is no longer a supply problem for physicians. Improving access to 
health care takes a commitment to improve the distribution of health 
care providers so that they are serving in areas where there are unmet 
or under-met healthcare needs. Programs that place people in the 
communities that need them is the best investment. In fiscal year 2005, 
only 16 percent of health professionals supported by the Health 
Professions program entered practice in underserved areas.

                      MEDICARE ELECTRONIC PAYMENTS

    Question. The President's budget includes a proposal to save $133 
million in Medicare by requiring all providers to accept electronic 
payments, submit electronic claims, and accept more electronic 
remittance advices. These savings are dependent upon virtually all 
providers doing this by October 1, 2006. While I laud the goal of 
increasing Medicare electronic transactions, I question how realistic 
this is given that the majority of providers in our Nation are in small 
practices or are solo practitioners. Many of these providers may not 
have computers in their office or may be reluctant to give up paper. If 
the savings are not realized, Medicare claims processing contractor 
budgets will be shortchanged in fiscal year 2007. Given that CMS 
recently instructed its claims processing contractors to institute a 
hiring freeze on both new and replacement hires, which I understand 
could last through the remainder of this year, and possibly into 2007 
in order to address current budget shortfalls, I am concerned with any 
proposal which could put their funding situation in further jeopardy. 
How does CMS intend to implement this proposal and achieve the 
estimated Medicare savings? What will the Agency do if the goal is not 
realized and the savings are not achieved?
    Answer. Senator, I appreciate your interest in our administrative 
processes. This proposal to save $133 million is part of an overall 
effort to modernize Medicare operations and administer this program 
more efficiently. We are working as expeditiously as possible to 
implement the proposal in 2006. It builds on laws that have already 
been in effect for several years including the Debt Collection 
Improvement Act (Public Law 104-134) which requires the government to 
issue payments electronically, and the Administrative Simplification 
Compliance Act or ASCA (Public Law 107-105) which requires most 
providers to submit Medicare claims electronically.
    CMS acknowledges that certain providers are exempt from the 
requirement to submit electronic claims and will continue to allow 
these providers to submit paper claims. However, CMS has asked the 
Medicare contractors to review providers submitting paper claims to see 
if they are actually entitled to the ASCA exemption. We expect that 
these reviews will contribute to the savings that CMS expects to 
realize next year. In addition, CMS has been taking a broad look at the 
full range of claims-related activities to see which could be 
streamlined or consolidated. For example, the Medicare contractors 
currently send beneficiaries a monthly Medicare Summary Notice (MSN) 
listing services provided. A few of these MSNs include a check to the 
beneficiary but most do not involve payment. CMS believes it could save 
between $15 and $30 million by sending these ``no pay'' MSNs quarterly, 
or maybe semi-annually, instead of monthly. Another potential area for 
saving resources without placing additional burdens on providers or the 
Medicare contractors is to require those providers who already bill 
electronically to receive other claims-related Medicare information and 
outputs electronically as well. CMS believes that it may be able to 
save $10 million from this initiative. While there are substantial 
amounts at stake, CMS is confident that it can become more efficient 
without jeopardizing the Medicare contractors' operations or burdening 
the providers.

                       MEDICARE INTEGRITY PROGRAM

    Question. CMS partners with private entities to administer the 
Medicare fee-for-service program. In addition to paying Medicare 
claims, handling appeals and answering beneficiary and provider 
inquiries, these contractors are the first line of defense against 
Medicare fraud and abuse. Unfortunately, the Medicare Integrity Program 
(MIP)--which is the portion of the budget that funds these critical 
anti-fraud activities--has been capped by statute since fiscal year 
2003. I am pleased the President's fiscal year 2007 proposal supports 
an increase for Medicare Part A and B Program Integrity efforts. 
However, I am concerned with funding for these activities this year. 
While I understanding there are no new dollars right now, I believe it 
is important to find ways for these contractors to operate more 
efficiently and effectively. One way to do this is for CMS to give 
these contractors greater flexibility to manage their MIP budgets. 
Currently, the Agency does not allow its contractors to transfer funds 
among MIP program lines if the total funds to be transferred exceed 5 
percent of the total funding. In these cases, the contractors must 
request approval from CMS, which can take months and exacerbate funding 
problems. This Committee included report language in our fiscal year 
2006 spending bill urging CMS to give its contractors this much needed 
budget flexibility. While CMS has granted its contractors flexibility 
to manage their program management budgets, they have not done so for 
MIP. Given the tight budgets contractors are currently facing with MIP 
dollars, will you consider giving these contractors greater flexibility 
so they can best manage their budgets to match programmatic needs?
    Answer. Although you are correct that the Health Insurance 
Portability and Accountability Act of 1996 (HIP AA) capped MIP funding 
at fiscal year 2003 levels, Congress provided an additional $100 
million in 1-year mandatory funding for fiscal year 2006 in the Deficit 
Reduction Act of 2005 (DRA) for the new Parts C and D workloads. As you 
stated, the fiscal year 2007 President's budget includes a proposal to 
increase MIP funding over the fiscal year 2003 capped level by 
$85,634,000 in discretionary funding.
    CMS requires all five major MIP functions (Medical Review, Benefit 
Integrity, Provider Education & Training, Provider Audit, and Medicare 
Secondary Payer) in order to have a robust arsenal in the fight against 
fraud, waste, and abuse. As you have noted, CMS is limited in its 
ability to shift MIP funds since we must ensure that a multi-faceted 
approach is maintained. In the last couple of years, CMS has increased 
this flexibility somewhat for the MIP contractors. For example, 
workload levels in Medical Review and Local Provider Education & 
Training (LPET) are scalable to a certain extent. During the budget 
formulation process, contractors determine the type and level of effort 
they will be able to provide given the available resources. As problem 
areas/issues surrounding their respective providers change, the 
contractors can revise their Medical Review and LPET strategies and 
shift the funding between the two functions as necessary.
    As a matter of routine, CMS expects the contractors to keep the 
agency informed of their changing resource requirements before they are 
in a deficit situation. CMS is then able to work with the contractors 
to identify workloads that can be altered or areas with surplus funding 
that can be shifted while still achieving CMS' goals and objectives. In 
limited cases, CMS is even able to provide additional funding.

                       OFFICE OF MINORITY HEALTH

    Question. Mr. Secretary, I am concerned that the budget proposal 
reduces funding for the Office of Minority Health by $10 million. In 
the face of a widening health status gap, how does the administration 
justify significantly reducing the budget of an office who's mission is 
to lead the Department in the elimination of health disparities.
    Also, in the fiscal year 2006 bill, the legislation calls for a 
renewed focus on OMH's support for historically black medical schools. 
Can you tell me the status of this effort?
    Answer. The Office of Minority Health (OMH), part of the Office of 
Public Health and Science (OPHS) in the Office of the Secretary, 
advises both the Secretary and OPHS on public health program activities 
affecting racial and ethnic minority populations. The fiscal year 2006 
appropriation for OMH included a one-time congressional earmark in the 
amount of $10 million, which was not continued in the fiscal year 2007 
President's budget.
    OMH recognizes the important role that historically black medical 
schools play in increasing minority representation in the healthcare 
workforce, and in providing needed services to minority communities. 
Therefore, OMH encourages minority serving institutions of higher 
education (including historically black medical schools) to apply for 
grant programs supported by the Department of Health and Human Services 
(HHS). In fiscal year 2006, OMH has received proposals from three 
historically black medical schools; these proposals are currently under 
review for funding consideration. In addition to its own support, OMH 
is also working with other HHS Operating Divisions to enhance 
Departmental opportunities to support these institutions.

                 NIH SLEEP DISORDERS CONFERENCE REPORT

    Question. Mr. Secretary, during the National Institutes of Health's 
Frontiers of Knowledge in Sleep and Sleep Disorders conference in March 
2004, Surgeon General Carmona gave remarks on the profound impact that 
chronic sleep loss and untreated sleep disorders have on all Americans 
and that dissemination of the existing body of medical knowledge 
regarding sleep and sleep disorders is critically important. What are 
the prospects for development of a Surgeon General's Report on Sleep 
and Sleep Disorders?
    Answer. The Office of the Surgeon General (OSG) is studying this 
topic as a potential subject for a Surgeon General's Workshop or 
Surgeon General's Conference. In addition to the comments he made at 
the March 2004 NIH conference on Sleep and Sleep Disorders, Surgeon 
General Carmona also provided information regarding healthy sleep 
habits in a December 29, 2005, press release, ``Tips for Parents of 
Teenagers,'' as part of The Year of the Healthy Child. In March 2006, 
OSG staff attended a scientific workshop on ``Sleep Loss and Obesity: 
Interacting Epidemics'' to gather more information and identify leaders 
in this field. In addition, OSG staff members have met with medical 
intern and resident advocates to discuss their prolonged work hours, 
and the potential impact on patient safety brought about by sleep loss 
in this population.

                      UNDERAGE DRINKING PREVENTION

    Question. In February, the Interagency Coordinating Committee on 
the Prevention of Underage Drinking (ICCPUD), led by SAMHSA, released 
``A Comprehensive Plan for Preventing and Reducing Underage Drinking.'' 
The plan sets three performance targets for 2009: reducing the 
prevalence of past month alcohol use by those aged 12-20 by 10 percent; 
reducing the prevalence of those aged 12-20 reporting binge alcohol use 
in the past 30 days by 10 percent; and increasing the average age of 
first use from 15.6 to 16.5. These are modest goals, and they expire in 
just 3 years. It is well recognized, however, that reducing underage 
drinking will take a concerted effort over many years--certainly more 
than 3--and no one should be satisfied with 10 percent reductions. Why 
didn't ICCPUD set more ambitious, longer-term targets? Would you 
consider doing so in your next annual report?
    Answer. The targets set forth in the Comprehensive Plan for 
Preventing and Reducing Underage Drinking are ambitious, yet 
achievable, particularly considering underage drinking rates have 
remained essentially unchanged for over a decade. The targets in the 
plan, which are to be measured over the 5 year period from 2004 to 
2009, represent an ambitious first step in addressing what has been a 
serious and persistent problem in our country. It is relevant to note 
that Mothers Against Drunk. Driving (MADD) has recently adopted targets 
that are in the same range, including a 3-year goal of reducing the 
proportion of 16 to 20 year olds who drink alcohol and/or engage in 
high risk drinking by 5 percent by 2008.
    While the Interagency Coordinating Committee on the Prevention of 
Underage Drinking (ICCPUD) and SAMHSA believe that the current 5-year 
performance targets set forth in the plan are ambitious, these targets 
will be revisited during the development of the next annual report.
    Question. One of the expected benefits of forming the ICCPUD was 
that it would result in fewer duplicative efforts in the area of 
underage drinking. The idea was that as the many Federal agencies with 
a stake in this problem learned about each other's efforts, they would 
discover where their efforts overlap and, as a result, eliminate 
redundancies. Has this occurred? Can you provide concrete examples in 
which agencies have streamlined their anti-drinking activities?
    Answer. Since the Interagency Coordinating Committee on the 
Prevention of Underage Drinking (ICCPUD) was created in 2004, the 
member agencies have worked together to conduct an inventory of Federal 
underage drinking programs, develop the Comprehensive Plan for 
Preventing and Reducing Underage Drinking and annual report, support a 
national meeting of the States, support town hall meetings across the 
country, and create a government-wide website. Through these 
activities, the member agencies have gained a greater understanding of 
the science related to underage drinking, as brought to the group by 
the National Institute on Alcohol Abuse and Alcoholism (NIAAA), and 
have enhanced their understanding of each other's activities.
    The ICCPUD agencies are using this .knowledge to support each 
other's activities, as exemplified by the recent town hall meetings 
funded by SAMHSA. These meetings were used to distribute research 
developed by NIAAA, and were strongly supported by a number of key 
ICCPUD partners, including the Office of Juvenile Justice and 
Delinquency Prevention (OJJDP), the Office of Safe and Drug Free 
Schools (OSDFS), and the National Highway Traffic Safety Administration 
(NHTSA). Several of these agencies encouraged their regional and State 
counterparts to support and participate in the Town Hall meetings. 
NHTSA used the meetings broadly to encourage the use of the HBO 
documentary, SMASHED: Toxic Tales of Teens and Alcohol and its 
accompanying educational package to facilitate and stimulate dialogue 
about future evidence-based underage drinking prevention action in 
local communities.
    The Centers for Disease Control and Prevention (CDC) and SAMHSA 
Center for Substance Abuse Prevention (CSAP) were both considering 
alcohol epidemiological activities in the States. As a result of work 
with ICCPUD, each agency became aware of the others' plans and avoided 
duplication of effort. CDC contributed to the development of the 
request for proposals issued by CSAP. This collaboration ensured that 
the CSAP funded program will be consistent with CDC's efforts.
    Question. It is my understanding that the Surgeon General intends 
to issue a first-ever ``Call to Action'' on underage drinking 
prevention sometime this spring. What is the status of the ``Call to 
Action'' and its expected release date?
    Answer. A Call to Action working group has developed a draft Call 
to Action, which will be reviewed by the Interagency Coordinating 
Committee on the Prevention of Underage Drinking (ICCPUD) member 
agencies in addition to the Department of Health and Human Services. 
The Surgeon General is committed to releasing the Call to Action at the 
earliest possible time.

                    PANDEMIC INFLUENZA PREPAREDNESS

    Question. Congress has appropriated $350 million for assistance to 
the States and localities for pandemic preparedness. The goal of that 
program is to assure that all localities meet a minimal level of 
preparedness. Is the Department planning to create a single, core set 
of performance standards that all jurisdictions must strive to achieve 
with these funds?
    Answer. As part of the Public Health Emergency Preparedness 
Cooperative Agreement, CDC in conjunction with State and local public 
health agencies and laboratories, national partner organizations, and 
Federal agencies, developed performance measures for overall public 
health preparedness. These measures are for all-hazards, including 
pandemic influenza.
    Question. As part of the initial ($100 million) funding that the 
Department is allocating to localities for preparedness, grantees are 
expected to perform some kind of preparedness exercise. Will the 
Department be reviewing the after action reports from these exercises? 
And if so, what resources (financial and personnel) has the Department 
set aside to provide technical assistance to the States to help them 
mitigate the deficiencies found in these exercises?
    Answer. All States submitted draft pandemic influenza preparedness 
and response plans to CDC in July 2005. As part of the $100 million 
emergency supplemental funding, the Department, primarily through CDC 
project officers and Subject Matter Experts, will assist in developing, 
conducting, and evaluating various aspects of the pandemic influenza 
plans through the use of exercises. As part of the award of the 
remaining $250 million in pandemic influenza supplemental funding, 
States will receive funds to ``fill gaps'' identified during the 
initial round of support. ``Gaps'' will be identified through two 
processes: first, by analyzing a comprehensive assessment conducted by 
local health departments measuring the many components of comprehensive 
influenza preparedness, and second, by analyzing results of exercises. 
Ongoing technical assistance will by provided by CDC.
    Question. How much of the $350 million has been released to the 
States and localities? By when does the Department expect these 
jurisdictions to have spent the funds? When will the remaining $250 
million be made available to the States and localities? Is there an 
expectation that the total $350 million must be obligated or expended 
by the end of fiscal year 2006? If so, is this a realistic expectation?
    Answer. States were awarded $100 million on March 7, 2006 to 
conduct planning for pandemic influenza preparedness. Eighty percent of 
those funds were restricted pending receipt of their supplemental 
applications. The applications have been received and evaluated and CDC 
is in the process of releasing many of the restrictions. We anticipate 
releasing most of the remaining restrictions by May 17, 2006. The 
remaining $250 million will be awarded later this summer. CDC does not 
anticipate that all funds will be expended by the end of the budget 
period. Recipients of funding may request for consideration that 
carryover funds to be awarded the next budget year.
    Question. Given that one of the most critical aspects of 
preparedness will be the ability of local jurisdictions to rapidly 
distribute a pandemic vaccine, will the Department encourage States to 
organize mass vaccination exercises during the next flu season to test 
their distribution plans? If so, will the Department allow the States 
to use a portion of the $350 million to purchase annual flu vaccine?
    Answer. States are permitted to use Public Health Emergency 
Preparedness cooperative agreement funds to purchase vaccine in limited 
quantities for conducting drills and exercises. They are not permitted 
to purchase vaccine with the emergency supplemental funding for 
pandemic influenza preparedness. However, they may use some of these 
emergency supplemental funds during the influenza season as an 
opportunity to exercise mass vaccination plans.

                       PANDEMIC INFLUENZA VACCINE

    Question. The U.S. Government will be contributing to the expanded 
production capacity of several manufacturing companies, who will use 
that capacity to produce and market seasonal flu vaccine in the absence 
of a pandemic. Given this unprecedented public investment in private 
corporations, is the Department taking steps to assure that the price 
charged public programs (e.g., Medicaid, Medicare) for seasonal flu 
vaccine is reflective of this investment?
    Answer. Our goal is to be able to produce enough vaccine for every 
American within 6 months of a pandemic outbreak. To accomplish this 
goal, we have focused our efforts on developing a cell-based vaccine 
for influenza. Without this investment in new technologies, we will not 
be able to produce enough vaccine in the event of a pandemic. Another 
key element of our plan is to ensure that manufacturers expand capacity 
in the United States. It is our hope that these manufacturers will 
produce seasonal influenza vaccine in the absence of a pandemic, 
allowing us to provide coverage to more Americans.

                   PANDEMIC INFLUENZA SURGE CAPACITY

    Question. Which HHS agency is in charge of assuring States and 
localities create the surge capacity for treating people who become ill 
during a pandemic?
    Answer. The Office of Public Health and Emergency Preparedness 
(OPHEP) is the lead office in HHS for ensuring that States and 
localities create the surge capacity for treating people who become ill 
during a pandemic. OPHEP works closely with both HRSA and CDC to ensure 
that funding through the State and local cooperative agreements enhance 
surge capacity and pandemic influenza preparedness.
    Question. Is the Department providing specific guidance and 
performance measures with respect to creating surge capacity? Has the 
Department estimated the cost of creating a minimum level of surge 
capacity?
    Answer. An influenza pandemic in a large number of communities 
simultaneously would make the need for expanded medical surge capacity 
critical. The 2005 cooperative agreement guidance for the Health 
Resources and Services Administration (HRSA) National Bioterrorism 
Hospital Preparedness Program provided performance benchmarks on surge 
capacity, including influenza. Specifically, grantees are required to 
establish systems that, at a minimum, can provide triage treatment and 
initial stabilization, above the current daily staffed bed capacity, 
for the following classes of adult and pediatric patients requiring 
hospitalization within 3 hours in the wake of a terrorism incident or 
other public health emergency--500 cases per million population for 
patients with symptoms of acute infectious disease--especially 
smallpox, anthrax, plague, tularemia, and influenza.
    In addition, the National Strategy for Pandemic Influenza 
Implementation Plan released on May 3, 2006, includes guidance to 
Federal departments and agencies, State and local government, the 
private sector, and the public about how to prepare for a pandemic. 
With respect to surge capacity, the plan includes a number of actions 
(with performance measures) on which HHS will collaborate with our 
partners at the Federal, State, local, and tribal levels and in the 
private sector. These include developing protocols for changing 
clinical care algorithms in settings of severe medical surge (action 
6.3.4.1), strategies for and protocols for expanding hospital and home 
health care delivery capacity (action 6.3.4.2), policies and protocols 
for emergency reimbursement or enrollment in Medicaid and State 
Children's Health Insurance Program that are appropriate for a pandemic 
(action 6.3.4.3), and ensuring that Federal medical assets are prepared 
to deploy to augment State and local capacity (actions 6.3.4.3 to 
6.3.4.7). The Department is currently preparing the plan to implement 
these actions within the timelines specified in the National Strategy 
for Pandemic Influenza Implementation Plan.

           PANDEMIC INFLUENZA PREPAREDNESS PLAN IMPLEMENTION

    Question. While significant funds are being invested in 
preparedness, when a pandemic hits the costs for Federal, State, and 
local governments will be significantly higher. Has the Department made 
an estimate of what the cost would be to implement its pandemic 
preparedness plans? For example, is there an estimate for what the 
actual pandemic flu vaccine will cost once it is available? Has the 
Department asked States and localities to estimate the costs of 
responding to the pandemic, as opposed to planning for one?
    Answer. It will be difficult to estimate with certainty the costs 
of implementing our pandemic influenza plans because each State and 
local preparedness plan is unique and because we do not know if we will 
be responding to a mild or severe pandemic. We are currently focusing 
our efforts on preparing for a pandemic to mitigate costs during an 
outbreak by ensuring enough vaccine for every American six months after 
human-to-human transmission, enough antivirals for 25 percent of the 
population, and. a stockpile of 20 million courses of pre-pandemic 
vaccine: We are also enhancing domestic and international surveillance 
to quickly detect a pandemic to slow its spread. We are working closely 
with States and local communities as they plan for a pandemic and to 
exercise those plans.

            UNINSURED ACCESS TO PANDEMIC INFLUENZA TREATMENT

    Question. Hospitals and other health care providers will bear the 
brunt of costs associated with a pandemic. During a pandemic we need to 
make sure that those who are uninsured are not deterred from seeking 
necessary care as early as possible. At the same time we don't want 
hospitals to have even higher levels of uncompensated care that could 
threaten their long-term financial viability. Has the Department 
considered what policies and funding might be needed to address this 
problem?
    Answer. As described in the National Strategy for Pandemic 
Influenza Implementation Plan, HHS will work with State Medicaid and 
SCHIP programs to ensure that Federal standards and requirements for 
reimbursement or enrollment are applied with the flexibilities 
appropriate to a pandemic, consistent with applicable law. In addition, 
we are also examining the recommendations of Federal Response to 
Hurricane Katrina: Lessons Learned report to determine what policies 
might be needed to respond to public health emergencies, including a 
pandemic.

                  PANDEMIC INFLUENZA RESPIRATOR MASKS

    Question. Last week the Institute of Medicine issued a report 
saying the respirator masks and surgical masks should not be re-used. 
The report also suggested that, as part of a larger strategy of 
infection control, N-95 respirator masks would offer some protection of 
health care workers. The WHO recommends use of these masks in a health 
care setting. How many N-95 masks does the United States now have 
stockpiled? How many N-95 masks are on order for the stockpile? Does 
the Department have an estimate of how many masks would be needed in 
the healthcare system during a pandemic, when manufacturing and 
distribution of such masks may be hard to accomplish?
    Answer. The Strategic National Stockpile has approximately 9.1 
million N-95 masks on hand and 98.4 million N-95 masks on order. The 
Centers for Disease Control and Prevention estimates that up to 1.5 
billion surgical masks and over 90 million N-95 respirators would be 
needed for the healthcare sector in the event of a severe pandemic. HHS 
purchased 150 million surgical masks and N-95 respirators in fiscal 
year 2006. The Federal Government, States, and the private sector share 
responsibility in ensuring an adequate level of preparedness. States 
have access to funding from Health Resources and Services 
Administration's (HRSA) National Bioterrorism Hospital Preparedness 
Program to address these surge capacity needs.

                       MEDICARE INTEGRITY PROGRAM

    Question. The Congress has provided significant funding, both 
mandatory and discretionary, to help CMS combat the unacceptably high 
payment error rate in the Medicare and Medicaid programs--literally 
hundreds of millions of dollars even after you have made some progress 
in reducing the error rate. Reportedly, over 90 percent of the Medicare 
Integrity Program funds, $720 million per year have been diverted to 
fiscal intermediaries and carriers doing routine claims processing, 
leaving about $50 million per year for the targeted error rate 
reduction contracts. What is the rationale for this diversion of 
resources from fraud and abuse activities?
    Answer. MIP funds are not used by fiscal intermediaries and 
carriers in the performance of routine claims processing. Separate 
funding under the Program Management account is set aside for that 
purpose. These contractors, however, have historically been the first 
line of defense in the fight against fraud and abuse. Under the MIP, 
they have conducted medical review, fraud review, cost report audit, 
provider education and other activities identified in the statute. All 
of these activities are intended to insure that payments are made 
properly and that inappropriate payments are recovered. Under the 
medical review/local provider education program, FIs and Carriers are 
evaluated on their ability to reduce the improper error rate.
    Additionally, a significant portion of the $720 million in MIP 
funding is used by a host of specialty contractors, most notably the 
Program Safeguard Contractors, whose sole focus is fraud and abuse 
activities.

                       MEDICARE IMPROPER PAYMENTS

    Question. The Congress just appropriated $100 million this year for 
fraud and abuse activities in the new Part D prescription drug program. 
What are the Department's plans for using this money to address payment 
errors in the Part D program? When do you intend to commit funds this 
fiscal year?
    Answer. The $100 million appropriated in the Deficit Reduction Act 
(DRA) will be used for many different purposes to maintain the 
integrity of the prescription drug benefit and fight against fraud and 
abuse from all sources. CMS is in the process of committing the funds 
provided in the DRA and plans on using all of the funds by the end of 
the fiscal year.
    CMS has developed a comprehensive plan for a Part D oversight 
program building off the approach that has worked successfully for Part 
A and Part B. CMS has established this plan in an effort to ensure that 
the funding provided in the DRA will help to combat fraud, waste, and 
abuse associated with the new prescription drug benefit. We have 
included strong safeguards in areas where we identified 
vulnerabilities, including eligibility, the bidding process, 
beneficiary plan, and retail pharmacy fraud, incentives to reduce cost 
and cost sharing, formulary development (kickbacks), and misuse of Part 
D beneficiary lists. This program will ensure that Part D contractors 
and other program stakeholders meet all applicable statutory, 
regulatory and program requirements.
    CMS is expanding its efforts in fighting fraud and abuse in 
Medicare by using State of the art systems designed to prevent problems 
and maintain integrity for the new Medicare prescription benefit. A 
portion of the funding appropriated in the DRA will be used to develop 
and/or maintain the following program integrity systems:
  --Risk Adjustment System (RAS).--The system intended to vary the 
        Federal share of premiums based on factors that are beyond the 
        control of the drug plan;
  --Medicare Advantage Prescription Drug (MARx) System.--A stand alone 
        system that will include the processing of all enrollment/
        disenrollment transactions associated with the Part D Program;
  --The Drug Data Processing System (DDPS).--The system that collects, 
        maintains, and processes information on all Medicare covered 
        and non-covered drug events for Medicare beneficiaries 
        participating in Part D; and
  --The Medicare Beneficiary Database (MBD).--The database that houses 
        Medicare beneficiary enrollment information.
    CMS has contracted with program integrity contractors, known as 
Medicare Drug Integrity Contractors (MEDICs), to assist the Agency in 
overseeing the Medicare Part D program. Part of the $100 million will 
be used to establish and support three MEDICs in the regions, in 
addition to the Eligibility and Enrollment MEDIC that began on November 
15, 2005. The MEDIC contractors will:
  --Analyze data to find trends that may indicate fraud or abuse;
  --Begin to investigate potential fraudulent activities surrounding 
        enrollment, the determination of eligibility, or the delivery 
        of prescription drugs;
  --Investigate unusual activities that could be considered fraudulent 
        as reported by CMS, contractors, or beneficiaries;
  --Conduct fraud complaint investigations; and
  --Develop and refer cases to the appropriate law enforcement agency 
        as needed.
    In addition, CMS will support compliance activities to combat 
fraud, waste, and abuse in association with the drug benefit. These 
efforts will include the following strategies: (1) Part D compliance 
monitoring; (2) accreditation organization validation studies for 
Medicare Advantage plans; (3) Part D auditing; (4) other compliance and 
monitoring strategies; and (5) compliance and oversight training for 
Medicare Advantage plans.
    CMS continues to work to ensure the integrity and validity of the 
data for the prescription drug benefit. The funding provided in the DRA 
will be used to monitor and evaluate prescription drug plans and 
Medicare Advantage plans to maintain data integrity. CMS' monitoring 
activities will include reviewing the plans' pricing and formulary to 
ensure that they follow the guidelines that have been established. In 
addition, CMS will review the data by performing payment validation of 
the plans.
    CMS will also use part of the $100 million to comply with the 
improper Payments Information Act of 2002 (IPIA). CMS is building on 
its current program integrity efforts by implementing new steps to 
analyze program data to detect improper payments and potential areas of 
fraud and abuse in the Medicare and Medicaid programs more quickly and 
accurately. CMS is using these analyses to more effectively educate 
providers and beneficiaries about ways to prevent and minimize waste, 
fraud, and abuse. CMS' program integrity efforts are being expanded 
beyond fee-for-service Medicare to encompass oversight of Part D 
prescription drug benefit and the new Medicare Advantage plans.
    The last activity that will be supported by the funding provided in 
the DRA are audits. These audits will include financial audits of at 
least one-third of all Part D organizations' financial records 
including bids, data relating to Medicare utilization and allowable 
costs as mandated in the MMA. In addition, CMS will use the funding to 
audit one-third of the Medicare Advantage plans for adjusted community 
rates and perform various cost plan audits.
    Question. The fiscal year 2006 Senate bill and conference report 
encouraged CMS to move forward on a $3 million demonstration of the use 
of data fusion technology to detect payment error and fraud and abuse 
in the Medicare program. We understand that the agency is moving 
forward with a data fusion and analysis project to identify improper 
payments to providers from Medicare using data sources outside of 
current fraud recovery efforts. What can you do to get this program 
moving forward more quickly?
    Answer. CMS will be competing contracts among the MEDICs to support 
and develop the Integrated Data Repository and an overall data 
infrastructure to support CMS fraud, waste and abuse efforts. This 
effort requires significant resources and will be funded with the $3 
million referenced in the Senate and conference reports and through the 
1 year MIP funding provided in the DRA. We anticipate that this effort 
will integrate Medicare fee-for-service data, prescription drug data, 
and Medicaid data into one central repository.

              CMS--STATUS OF QUALITY DEMONSTRATION PROJECT

    Question. Mr. Secretary, last year alone there were over 1.3 
million new cases of cancer diagnosed in America--I can't think of a 
single family who hasn't had a friend or family member affected by this 
terrible disease. The status quo is simply not acceptable. The last 2 
years your department has taken targeted regulatory action to prevent 
any access disruption through a demonstration project to support the 
development of quality-based payment policy. I strongly urge you to 
continue this important program and begin to move towards a permanent 
funding solution that will preserve patient access to community cancer 
care. Do you have any updates for the committee as to the status of the 
quality demonstration project?
    Answer. CMS is very focused on creating a payment system that 
offers better support for the delivery of high-quality, low-cost care 
as well as improving the benefits available to America's seniors to 
prevent disease complications and live longer healthier lives. CMS has 
worked closely with the AMA, AQA, and MedP AC among others to develop 
consistent and effective ways to measure the quality of care.
    We believe the oncology community is pleased with the improvements 
made in this year's oncology demonstration project. This project will 
enable us to capture more specific information about cancer patients 
including their treatments and whether current cancer care represents 
best practices and is provided in accordance with accepted practice 
guidelines.
    After reviewing this year's data, we will be able to make decisions 
about the continuation of the demonstration project and what additional 
improvements or modifications are necessary for 2007.

                  CMS--ADEQUATE PROVIDER REIMBURSEMENT

    Question. Mr. Secretary, when it enacted MMA, Congress established 
ASP as the reimbursement metric for prescription drugs covered under 
Part B of Medicare. My concern is that CMS has continued to resist 
using its administrative discretion to correct an ASP calculation 
problem that thwarts the clear legislative intent underlying the shift 
to ASP-based reimbursement. I am referring to CMS's insistence that it 
cannot exclude the prompt pay discounts that manufacturers give 
wholesalers from the calculation of ASP because the term ``prompt pay 
discounts'' appears in the list of price concessions that the statute 
says are to be netted out when ASP is calculated.
    Wholesaler prompt pay discounts reward the timely completion of the 
wholesaler's product purchase from the manufacturer, constitute an 
integral part of the revenues received by wholesalers for their 
services, and, in my experience, are not passed on to the wholesalers' 
customers. By insisting that wholesaler prompt pay discounts be netted 
out of ASP, CMS has undermined Congress' intent that payment at ASP+6 
percent should cover physicians' drug acquisition costs, allow for a 
reasonable level of pricing variability in the nationwide drug market, 
and provide compensation for drug-related costs that are not separately 
reimbursed. In essence, by requiring the inclusion of wholesaler prompt 
pay discounts in the ASP calculation, CMS has converted physician 
payments for Part B drugs from the congressionally mandated level of 
ASP+6 percent to the lesser amount of ASP+4 percent.
    Based on the statute and congressional language offered at the time 
of its adoption, what is CMS' interpretation of congressional intent 
with regard to adequate provider reimbursement for drug reimbursement, 
and the application of the prompt pay discount to that reimbursement 
for oncology services?
    Answer. The Congress defined the ASP to be an average measure of 
sale prices across a broad range of classes of trade and, therefore, 
established that payments to providers represent average drug 
acquisition costs and not the actual cost experienced by a particular 
provider or specific class of trade. Further, in establishing that the 
payment rates are 106 percent of the ASP, Congress established a 
corridor above the average acquisition cost to address variations in 
actual costs.
    CMS interprets section 1847A(c)(3) to require manufacturers to 
deduct prompt pay discounts given on sales included in the ASP 
calculation from the ASP numerator (ASP=sales in dollars/units sold). 
The language in section 1847A(c)(3) is plain, ``In calculating the 
manufacturer's average sales price under this subsection, such price 
shall include volume discounts, prompt pay discounts, cash discounts, 
free goods that are contingent on any purchase requirement, 
chargebacks, and rebates (other than rebates under section 1927). For 
years after 2004, the Secretary may include in such price other price 
concessions, which may be based on recommendations of the Inspector 
General that would result in a reduction of the cost to the 
purchaser.''
    In the preamble to the CY 2006 Physician Fee Schedule final rule 
(70 FR 70224), we stated that we lack the statutory authority to permit 
manufacturers to exclude prompt pay discounts from the calculation of 
the ASP. We continue to believe the use of ``shall'' and the 
limitations on the discretion to include other price concessions in the 
statutory language do not provide administrative discretion to exclude 
a statutorily named price concession from the ASP calculation.

                        CMS--PROMPT PAY DISCOUNT

    Question. What evidence is available to CMS that the prompt pay 
discount is being passed along to the provider of oncology services? If 
the prompt pay discount is not being passed along to providers, how 
does CMS achieve the congressional intent to rationalize provider 
payments with actual costs?
    Answer. CMS does not have evidence that prompt pay discounts are or 
are not being passed along to the providers of oncology services. CMS 
achieves the congressional intent by implementing the ASP methodology 
cited in section 1847A(c)(3).

              CMS--REGULATORY AUTHORITY FOR REIMBURSEMENT

    Question. Congress believes that CMS clearly has the administrative 
authority to put forward a regulation on provider reimbursement to 
resolve this issue. Does CMS share this view or is additional 
legislation necessary?
    Answer. CMS does not believe it has the regulatory authority to 
exclude prompt pay discounts from the ASP calculation. The ASP 
statutory language is plain and provides limitations on modifying price 
concessions. We believe the section l847A(c)(3) authority to adjust the 
price concessions is limited to those price concessions that would 
ultimately lower the ASP, whereas removing prompt pay discounts from 
the ASP calculation would increase Medicare expenditures.
                                 ______
                                 
               Questions Submitted by Senator Tom Harkin

                             MEDICARE FRAUD

    Question. Mr. Secretary, as you know, I have a long record of 
fighting fraud, waste, and abuse in the Medicare and Medicaid programs. 
I know that CMS has addressed the issue of fraud in payments to 
suppliers for power wheelchairs. However, there is still concerns among 
legitimate suppliers that CMS is not doing enough to root out suppliers 
that are not legitimate.
    I understand that CMS is developing tougher quality and 
accreditation standards for suppliers. When will these standards be 
released? And what is CMS doing to make sure that they only issue 
supplier numbers to legitimate providers? Are CMS's efforts to root out 
fraud and abuse in this area being hampered by a lack of resources?
    Answer. CMS plans on issuing new draft quality standards for 
suppliers on its website this summer. CMS will then solicit accrediting 
organizations to review suppliers and assure that they meet the new 
quality standards. We anticipate that accreditation activities will 
start before the end of calendar year 2006. Currently, to ensure that 
only qualified suppliers are issued supplier numbers, we perform site 
visits prior to enrollment and re-enrollment (which is required every 3 
years). We also perform additional reviews of potentially questionable 
suppliers. These reviews focus on questionable suppliers located in 
geographic areas where there is a high concentration of fraud and 
suppliers who have questionable patterns of billing and/or high claims 
error rates.

                         CMS--POWER WHEELCHAIRS

    Question. On April 6 of this year, CMS published a new final rule 
that requires that power wheelchairs suppliers review a beneficiary's 
medical records and determine if a physician's prescription is 
supported by medical evidence before a power mobility device will be 
prescribed. What documentation are suppliers required to verify before 
filling a prescription for a power mobility device? Will CMS issue 
guidance for suppliers on documentation requirements--including the 
level of specificity of the documentation--in order to clarify any 
ambiguities regarding filling a legitimate prescription?
    Answer. CMS would like to note that during the comment period of 
the interim rule, some suppliers noted that they were already 
experiencing a significant improvement in the timeliness, completeness 
and substantive content of medical record documentation submitted by 
physicians since the interim rule became effective. Along with the 
positive feedback from suppliers, CMS has not received any significant 
concerns from physician groups or other treating practitioners on this 
topic. In fact, one professional organization representing over 94,000 
physicians and medical students expressed support for the elimination 
of the certificates of medical necessity (CMNs) for power mobility 
devices (PMDs).
    As you are aware, the CMN for PMDs was eliminated. The CMN was 
originally designed to improve claims submission by allowing electronic 
transmission of certain data. Unfortunately, some in the industry saw 
the CMN as a substitute for evidence of a physician's independent 
comprehensive examination and analysis of whether a PMD was medically 
necessary. Despite CMS' and its contractors' statements to the 
contrary, these suppliers treated the CMN as the ultimate instrument in 
determining coverage. Some suppliers went so far as to hire physicians 
to fraudulently complete CMNs. Furthermore, our analysis of claims has 
found that in approximately 45 percent of cases, statements claimed in 
the CMNs were not supported by the source information in the patient's 
medical chart.
    Instead of a CMN, the Durable Medical Equipment Regional Carriers 
(DMERCs) will rely on the patient's medical chart to determine medical 
necessity. We are concerned that a one-page scripted form would not 
protect the Medicare program or its beneficiaries in the same way that 
source information culled directly from a patient's medical record 
would. The CMN did not help physicians or treating practitioners better 
document their patients' clinical needs for a PMD, it did not ensure 
that beneficiaries always received appropriate equipment, and it did 
not serve as an effective deterrent to fraud and abuse. We believe the 
beneficiary's physician or treating practitioner is in the best 
position to evaluate and document the beneficiary's clinical condition 
and PMD medical needs, and good medical practice requires that this 
evaluation be adequately documented. Thus, to minimize the 
documentation requirements for providers while assuring that 
documentation is adequate, physicians and treating practitioners will 
now prepare written prescriptions (as required by MMA section 302 and 
the final rule) and submit copies of relevant existing documentation 
from the beneficiary's medical record, rather than having to transcribe 
medical record information onto a separate form such as a CMN.
    The rule describes the information that must be included in the 
written prescription: beneficiary's name, date of the face-to-face 
examination, diagnoses and condition that the PMD is expected to 
modify, a description of the item being prescribed, the length of need, 
the prescribing physician's signature and date of signature. This model 
provides structure while maintaining appropriate flexibility for the 
prescribing physician or treating practitioner. Only about 10 percent 
of physicians and treating practitioners prescribe a PMD for a Medicare 
beneficiary in any given year, and the majority of those physicians and 
treating practitioners only prescribe one or two PMDs a year. Given the 
myriad of forms, brochures, requisitions and similar items in a typical 
physician's office, a requirement to have a specific prescription form 
handy in the event that it might be needed would impose an unnecessary 
burden on the physician and other treating practitioners when that form 
would only be needed once or twice a year for most prescribers, and 
never actually needed for the vast majority.
    Finally, the physician or treating practitioner must sign the 
prescription for the PMD and is, therefore, accountable for 
documentation of the medical need for the device. We believe that this 
required signature and source documents in the patient's chart 
effectively document the physician's attestation that the medical need 
for the device is legitimate.
    CMS and the DMERCs have provided extensive educational outreach to 
both suppliers and the medical community pertaining to the 
documentation requirements for PMDs. Examples of formal communication 
include CMS program instructions, Medlearn Matter articles, and DMERC 
supplier articles explaining the new responsibilities of suppliers. In 
addition, medical review activities vary depending on the situation 
under review. CMS cannot develop an all inclusive list of documents or 
information that Medicare contractors may request during audits. When 
requesting additional documentation, the DMERCs write to suppliers and 
ask for the specific documentation or information needed for a review. 
CMS has defined the circumstances under which contractors request 
additional information in the Program Integrity Manual. Local Coverage 
Determinations are issued by our contractors to describe in more detail 
the conditions under which Medicare payment is made. This additional 
documentation is only collected during the course of medical review 
audits and does not need to be collected for all claims.

                  MEDICAID/SPECIAL EDUCATION BENEFITS

    Question. This question concerns Medicaid and special education. I 
asked Education Secretary Spellings about it at our hearing with her in 
March, but she said I needed to ask you, so I'd like to do that now.
    Under current law, Medicaid pays for the cost of covered services 
for eligible children with disabilities. School districts can also be 
reimbursed by Medicaid for the transportation and administrative costs 
they incur in providing these services. But now the administration 
wants to prohibit schools from getting reimbursed for those costs. In 
fiscal year 2007, schools are expected to receive $615 million from 
Medicaid for transportation and administrative costs. If this change 
goes through, they'll have to pay the $615 million themselves, and many 
will have great difficulty doing so. I'm concerned about this, because 
if schools can't pay the transportation costs to children with 
disabilities, the children won't end up getting the services.
    Does CMS plan to implement this cut? If so, where do you recommend 
that schools find the money to make up the difference?''
    Answer. Appropriate Medicaid services will continue to be 
reimbursed as allowed under current law. However, claiming for certain 
Medicaid services in school settings has proven to be prone to abuse 
and overpayments. Schools provide a wide range of medical services to 
students, which mayor may not be reimbursable under the Medicaid 
program. Problem areas include but are not limited to school bus 
transportation and administrative claiming, as well as direct medical 
services. The fiscal year 2007 budget proposes administrative actions 
to phase out Medicaid reimbursement for some services, including school 
bus transportation and administrative claiming related to Medicaid 
services provided in schools.
    According to section 1903(a)(7) of the Social Security Act (the 
Act), for the costs of any activities to be allowable and reimbursable 
under Medicaid, these activities must be ``found necessary by the 
Secretary for the proper and efficient administration of the plan'' 
(referring to the Medicaid State Plan). Additional authority derives 
from section 1902(a)(17) of the Act, which requires that States take 
into consideration available resources. Through the authority of these 
statutes, the administration proposes to prohibit Federal reimbursement 
for transportation provided by or through schools to providers.
    HHS has had long-standing concerns about improper billing by school 
districts for administrative costs and transportation services. Both 
the Department's Inspector General and the General Accountability 
Office (GAO) have identified these categories of expenses as 
susceptible to fraud and abuse. GAO found weak and inconsistent 
controls over the review and approval of claims for school-based 
administrative activities that create an environment in which 
inappropriate claims generated excessive Medicaid reimbursements. Audit 
findings from States where the OIG conducted administrative claiming 
audits have shown egregious violations. Proper and accurate claiming 
for administrative services has not been carried out in compliance with 
applicable Medicaid regulations. Overall, the leading conclusions from 
these audits are that most States use an improper allocation 
methodology and insufficient attention is paid to the details of the 
claiming process.
    The fiscal year 2007 President's budget includes a regulatory 
proposal that would prohibit Federal Medicaid reimbursement for 
Medicaid administrative activities performed in schools. It 
additionally proposes that Federal Medicaid funds will no longer be 
available to pay for the transportation to and from school related to 
medical services provided through an Individualized Education Program 
(IEP) or Individualized Family Service Plan (IFSP).
    Schools would continue to be reimbursed for direct Medicaid 
services identified in an IEP or IFSP provided to Medicaid eligible 
children, such as physical therapy and occupational therapy that are 
important to meet the needs of Medicaid-eligible students with 
disabilities, as long as the providers meet Medicaid provider 
qualifications. CMS estimates that these proposals will save $0.6 
billion in fiscal year 2007 and $3.6 over 5 years.

                        SPECIAL EXPOSURE COHORTS

    Question. The Labor HHS Appropriations Act of 2006 (Public Law 109-
149) requires NIOSH to prepare a report within 180 days of enactment 
evaluating whether there are additional radiosensitive cancers not 
already on the list of 22 cancers eligible for compensation under the 
Special Exposure Cohort provision of EEOICPA and RECA that should be 
eligible for compensation. Will NIOSH deliver this report to Congress 
on schedule?
    Will NIOSH solicit comments from experts in radiation epidemiology 
before submitting this report?
    Answer. NIOSH is currently working on finalizing this report and is 
seeking comments from a set of experts with diverse expertise and 
perspective, including experts in radiation epidemiology. The report 
will be peer-reviewed prior to submission. We are working as quickly as 
possible to obtain comments/edits from the outside reviewers to 
expedite the process.
    Question. The Office of Management and Budget recently issued a 
``Passback'' memo to the Department of Labor, which called for options 
to ``contain the growth in benefits'' from new Special Exposure Cohorts 
under the Energy Employee Compensation law. To accomplish this, the 
memo outlines options including administration clearance of all Special 
Exposure Cohorts before a decision is made by you as Secretary of 
Health and Human Services. Has your Department formulated a legal and 
policy response to the OMB memo and if so, could you please share that 
response with the Committee?
    Answer. The National Institute for Occupational Safety and Health 
(NIOSH) is responsible for receiving and scientifically evaluating 
petitions from classes of workers seeking inclusion in EEOICP A's 
Special Exposure Cohort. NIOSH carries out this responsibility under 
regulations promulgated in May 2004, and amended in December 2005, to 
make the rule consistent with the amendments to EEOICPA contained in 
the Ronald W. Reagan National Defense Authorization Act for fiscal year 
2005. In fulfilling this duty, NIOSH evaluates the feasibility of 
scientifically estimating radiation dose for workers in the class that 
is petitioning for inclusion in the SEC. If a dose estimate is not 
feasible, NIOSH evaluates whether or not the health of the workers in 
the proposed SEC class was potentially endangered by their radiation 
exposure.
    NIOSH presents its scientific and technical evaluation findings and 
recommendations to the Presidentially appointed Advisory Board on 
Radiation and Worker Health (the Board), a chartered Federal Advisory 
Committee. The Board considers the NIOSH evaluation and then makes a 
recommendation to me to either add or not add the class of workers to 
the SEC. My decision about whether or not to add the class members to 
the SEC is based on the following: the requirements of the law and the 
above-mentioned regulations, the NIOSH findings and its recommendation 
to the Board, and the recommendation of the Board.
                                 ______
                                 
            Questions Submitted by Senator Daniel K. Inouye

                         HEALTH CENTERS PROGRAM

    Question. I would like to express my sincere appreciation to Dr. 
Elizabeth Duke for her continued support and interest in the extension 
of health care service delivery networks to the underserved residents 
in some of the most geographically isolated communities in Hawaii. In 
particular, I am pleased with consideration to the future establishment 
of a health center on Lana'i. Through the establishment of these health 
centers, significant improvements have been noted in access, quality, 
and continuity of care. All of which are integral to the early 
detection, diagnosis and intervention in a myriad of potentially 
debilitating diseases.
    Answer. Thank you for your support of our work in the Health 
Centers program. This program is integral to our mission to enhance the 
health and well-being of Americans by providing for effective health 
and human services

                EMERGENCY MEDICAL SERVICES FOR CHILDREN

    Question. As expressed last year, I am very concerned that once 
again the Emergency Medical Services for Children (EMSC) program has 
not been included in your budget. It can not be stressed often enough 
that the emergency care and resuscitation of children is uniquely 
different from adult resuscitation. One size does not fit all in the 
emergency care of children. There is great disparity in the quality and 
availability of emergency services for children across this country. 
While other programs are directed at ensuring the adequacy of adult 
emergency care services, this is the only program specifically directed 
at saving the lives of children. How does the Department plan to ensure 
that America's children receive the emergency care they deserve with no 
targeted funding?
    Answer. States, through the Maternal and Child Health Block Grant 
program, can continue to fund these specialized services.

                   BACCALAUREATE TO DOCTORAL PROGRAMS

    Question. A long-standing supporter of the National Institute for 
Nursing Research, I am pleased that the administration has continued 
funding of this program. However, what impact will the $1 million 
reduction have on the National Institute of Nursing Research's 
development of initiative that supports fast-track baccalaureate-to-
doctoral programs? These programs were proposed to help increase the 
number of nursing faculty and in turn decrease the number of qualified 
nursing school candidates who were turned away in prior years.
    Answer. The overall reduction of $792,000 in the fiscal year 2007 
budget request of $136.6 million for the National Institute of Nursing 
Research (NINR) will have no impact on its programs that fast-track 
baccalaureate-to-doctoral nurses to increase the number of nursing 
investigators. These programs are supported within the Research 
Training mechanism in NINR, and the fiscal year 2007 President's budget 
maintains the current level of support of this activity. NINR remains 
committed to developing the next generation of nurse scientists. NINR 
encourages and supports strategies to change the career trajectory of 
nurse scientists. The Institute emphasizes early entry into research 
careers, including fast-track baccalaureate-to-doctoral programs, and 
supports pre-doctoral and postdoctoral nurses who are the future 
researchers and nursing faculty.
                                 ______
                                 
                Questions Submitted by Senator Herb Kohl

                           GENERIC DRUGS/FDA

    Question. The FDA currently has a backlog of more than 800 generic 
drug applications--an all-time high--and FDA officials expect a record 
number of generic applications this year and an even larger backlog. 
The congressional Budget Office estimates the use of generics provides 
a savings of $8 to $10 billion to consumers every year, and that 
doesn't include the billions of dollars of savings to hospitals, 
Medicaid and Medicare. It is now more important than ever that we speed 
less expensive generic drugs to market.
    Secretary Leavitt, do you support an increase in the FDA budget to 
help reduce the backlog? How much do you believe the FDA needs to 
efficiently reduce the backlog and pass along the savings to Americans 
and the Federal Government?
    Answer. First, let me state that I understand that Congress and the 
public are concerned about the high cost of prescription drug products. 
I believe that generic drugs play a very important role in granting 
access to products that will benefit the health of consumers and the 
government. Prompt approval of generic drug product applications, also 
known as abbreviated new drug applications, or ANDAs, is imperative to 
making generic products available to American consumers at the earliest 
possible date. This has been a high priority for FDA as it has been for 
me during my time here at HHS. I believe that the process improvements 
that FDA is currently implementing along with the investments we 
continue to make in generic drugs offer the best promise for reducing 
ANDA review time.
    FDA has made significant investments to improve the generic drug 
review process with the funds appropriated by Congress. In fiscal year 
2007, FDA plans to spend $64.6 million relating to generic drugs, 
including $29 million in the Office of Generic Drugs, or OGD. This 
level represents an increase of more than 66 percent from the 
comparable fiscal year 2001 amount, which has resulted in a lower 
median review of 2 months.
    FDA has made significant process improvements to increase the 
efficiency of the ANDA review process. In fiscal year 2005, OGD focused 
on streamlining efforts and took steps to decrease the likelihood that 
applications will face multiple review cycles. OGD instituted 
additional enhancements to the review process such as early review of 
the drug master file as innovator patent and exclusivity periods come 
to an end, cluster reviews of multiple applications, and the early 
review of drug dissolution data.
    In fiscal year 2006, FDA is building on these process improvements. 
FDA began a major initiative to implement Question-based Review for 
assessment of chemistry, manufacturing, and controls data in ANDAs. 
This mechanism of assessment is consistent with the International 
Conference on Harmonization Common Technical Document and will enhance 
the quality of evaluation, accelerate the approval of generic drug 
applications, and reduce the need for supplemental applications for 
manufacturing changes.
    FDA's OGD will continue to institute efficiencies in the review 
process to facilitate the review and approval of ANDAs in fiscal year 
2007 and beyond. FDA will also continue to work closely with generic 
manufacturers and the generic drug trade association to educate the 
industry on how to submit applications that can be reviewed more 
efficiently and that take advantage of electronic efficiencies that 
speed application review. FDA will also work with new foreign firms 
entering the generic drug industry. It will take time for these new 
firms to understand the requirements for generic drug product 
applications. However, in the long-term, these efforts will shorten 
overall approval time and increase the number of ANDAs approved during 
the first cycle of review.
    With the process improvements stated above and the investments we 
continue to make in generic drugs, FDA will continue to reduce ANDA 
review time and deliver safe and effective generic drug products to the 
American public.

                    PROGRAMS SERVING OLDER AMERICANS

    Question. Some of the most painful cuts in this budget are programs 
under the administration on Aging, which takes a $28 million hit in 
programs like Meals on Wheels and Family Caregiver Support Services. 
That means that while Wisconsin's senior population continues to grow--
from 705,000 senior citizens in 2000 to 730,000 seniors this year and 
1.2 million seniors by 2025--this budget does not account for the 
growth in the need for services.
    In addition, this budget proposes to eliminate Alzheimer 
Demonstration grants. The Wisconsin Alzheimer Association is in its 
first year of a 3-year grant, where they are working with Jefferson 
County to open a dementia care clinic at a hospital in Fort Atkinson. 
It is the first of its kind and the only one in the area. They would 
lose their funding after this year should this budget prevail.
    How do you explain the administration's plan to cut these vital 
programs when our aging population is growing?
    Answer. The fiscal year 2007 President's budget includes the 
elimination of the Alzheimer's Disease Demonstration Grant to States 
Program (ADDGS), Preventive Health Services program, and small cuts to 
other AoA programs including a reduction of $906,000 to Home-Delivered 
Nutrition Services and $1,980,000 to Family Caregiver Support Services. 
These reductions reflect an effort to reduce the deficit while focusing 
on programs that provide needed services most efficiently.
    For 14 years under ADDGS, demonstrations in almost every State have 
highlighted successful, effective approaches for serving people with 
Alzheimer's. Now, it is time to put these models and the lessons that 
have been learned to work by moving them into AoA's core services 
programs--especially the National Family Caregiver Support Program--as 
a number of States have already done.
    Preventive Health Services is a limited, formula-grant funding 
stream intended to foster the provision of health promotion/disease 
prevention services in the context of the core community-based long-
term care services of the National Aging Services Network. AoA's 
proposal under the Choices for Independence initiative supports the 
same type of evidence-based health promotion and disease prevention.
    The Home-Delivered Nutrition Services and Caregiver Support 
Services programs have demonstrated efficiencies in leveraging Federal 
dollars. In addition, demonstrations such as Choices for Independence 
are aimed at increasing even further the efficiency of these programs. 
While reductions in Nutrition and Caregiver services reflect an effort 
to reduce the deficit, they also reflect an effort to target reductions 
in programs that have the greatest potential to maintain service 
delivery with fewer dollars.

                              RURAL HEALTH

    Question. Secretary Leavitt, there are a number of programs within 
your Department aimed at bolstering rural health. Wisconsin, one of the 
biggest beneficiaries in the country, received over $600,000 from the 
Rural Hospital Flexibility Grant program last year. This funding is 
used at over 60 rural hospitals that serve anywhere from 10,000 to 
20,000 patients per year. The President's budget proposes to eliminate 
the Rural Hospital Flexibility Grant program, the Rural and Community 
Access to Emergency Devices, and Area Health Education Centers.
    How are rural communities expected to meet their unique health care 
challenges when their resources are being slashed?
    Answer. The Medicare Prescription Drug, Improvement and 
Modernization Act (MMA) will increase Medicare spending in rural 
America by $25 billion over the 10 years following MMA enactment, 
substantially increasing funding for hospitals and other rural health 
providers. This Act serves as a catalyst in rural communities by 
increasing payments to hospitals, health professionals and other 
services. In addition, the budget includes an additional $181 million 
to provide added direct health services to underserved communities 
through 302 new and expanded health center sites--about half of which 
are likely to be in rural areas.

               MEDICARE DRUG BENEFIT ENROLLMENT DEADLINE

    Question. Less than 2 weeks remain for most Medicare beneficiaries 
to sign up for prescription-drug coverage without penalty. Yet last 
week a Kaiser Family Foundation poll found that only 55 percent of 
seniors realize the deadline is May 15, and only 53 percent know 
enrolling after the deadline will cost 1 percent more per month. 
Earlier this year, the Senate voted to give you authority to extend the 
enrollment deadline, but the House has not yet acted. Do you support 
Congress passing legislation to extend the deadline?
    Answer. We are focused on enrolling people now, while the resources 
are in place to help beneficiaries get the savings and security of 
prescription drug coverage. According to the Office of the Actuary at 
CMS, keeping the current May 15th deadline encourages beneficiaries to 
take action and enroll. The actuaries believe that extending the 
deadline would likely decrease overall enrollment in 2006 as pressure 
on beneficiaries to enroll would be diminished. However, in light of 
the cost effects on our vulnerable populations, we have recently waived 
late-enrollment penalties for beneficiaries approved for low-income 
subsides if they enroll in a drug plan by the end of 2006.
    Proposals to extend the enrollment deadline beyond May 15 include 
no funding for Medicare to maintain the high level of enrollment 
support that is available right now. Beneficiaries should be encouraged 
to take advantage of outreach resources like the 1-800 MEDICARE 
telephone line. There are short waiting times now and individual, one-
on-one counseling is available to help people select a coverage plan.
    Tens of thousands of beneficiaries are currently enrolling every 
day, and there is still time to enroll in a plan.

                 NATIONAL INSTITUTES OF HEALTH FUNDING

    Question. The President's American Competitiveness Initiative 
states that sustained scientific advancement is the key to maintaining 
our competitive edge--and I agree with that. The President's fiscal 
year 2007 budget proposal commits $5.9 billion to research and 
education in basic science, that is the physical sciences--and I agree 
with that as well. What I don't understand is why the President would, 
in the same budget proposal, flat fund the National Institutes of 
Health and its research into health sciences and biotechnology. Other 
industrialized countries are making investments to make sure they get a 
piece of the growing biotech and health care sectors of the world 
economy--why aren't we?
    Answer. In fiscal year 2003, President Bush fulfilled his 
commitment to complete the historic doubling of the NIH budget, which 
grew from $13.6 billion in fiscal year 1998 to $27.2 billion in fiscal 
year 2003. During this 5-year period, NIH was able to fund nearly 
11,600 more research grants than it did before the doubling began, 
representing research ideas that are leading to vaccines, cures, 
treatments, and other fundamental scientific breakthroughs helping to 
open up even more new opportunities for improving human health.
    With the fiscal year 2007 budget request of $28.6 billion, the NIH 
budget will have grown by +$8.1 billion, or +40 percent, during this 
administration. While the fiscal year 2007 request for NIH is a 
straight-line from the fiscal year 2006 level, NIH plans to continue to 
make strategic investments in trans-NIH initiatives and priorities 
within its available funds. These include increased support for new 
investigators, new research project grants, and the NIH Roadmap for 
Medical Research, a new initiative on Genes, Health and the 
Environment, and expansion of the Clinical and Translational Science 
Award program launched in fiscal year 2006. The NIH budget also 
includes increased investments in national priorities related to 
developing biodefense countermeasures and pandemic influenza 
diagnostics, vaccines, and therapeutics. These initiatives will 
preserve our investment in biomedical research and support medical 
advancements that will make healthcare more predictive, personalized, 
and preemptive and thus, improve the length and quality of human life.
    NIH welcomes the proposed increase in funding for the physical 
sciences. Biomedical research is becoming increasingly multi-
disciplinary, requiring both science and mathematics to conduct 
projects in emerging areas of great scientific promise, such as 
bioinformatics, computational biology, nanotechnology, tissue 
engineering, and biomedical diagnostic imaging, to name just a few.

                          SUBCOMMITTEE RECESS

    Senator Specter. Thank you all very much. The subcommittee 
will stand in recess to reconvene at 8:30 a.m., Friday, May 19, 
in room SD-192. At that time we will hear testimony from the 
Hon. Elias A. Zerhouni, M.D., Director, Department of Health 
and Human Services.
    [Whereupon, at 11:30 a.m., Wednesday, May 3, the 
subcommittee was recessed, to reconvene at 8:30 a.m., Friday, 
May 19.]
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