[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
REVIEW OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES' FISCAL YEAR 2008 
                                 BUDGET

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 6, 2007

                               __________

                            Serial No. 110-2


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                  JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California          JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts          Ranking Minority Member
RICK BOUCHER, Virginia               RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York             J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey       FRED UPTON, Michigan
BART GORDON, Tennessee               CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois              NATHAN DEAL, Georgia
ANNA G. ESHOO, California            ED WHITFIELD, Kentucky
BART STUPAK, Michigan                BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York             JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             HEATHER WILSON, New Mexico
GENE GREEN, Texas                    JOHN SHADEGG, Arizona
DIANA DeGETTE, Colorado              CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                    Mississippi
LOIS CAPPS, California               VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania             STEVE BUYER, Indiana
JANE HARMAN, California              GEORGE RADANOVICH, California
TOM ALLEN, Maine                     JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois             MARY BONO, California
HILDA L. SOLIS, California           GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas           LEE TERRY, Nebraska
JAY INSLEE, Washington               MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina     MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana

                                 ______

                           Professional Staff

                 Dennis B. Fitzgibbons, Chief of Staff

                   Gregg A. Rothschild, Chief Counsel

                      Sharon E. Davis, Chief Clerk

                 Bud Albright, Minority Staff Director

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Baldwin, Hon. Tammy, a Representative in Congress from the State 
  of Wisconsin, opening statement................................    12
Barrow, Hon. John, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    16
Barton, Hon. Joe, a Representative in Congress from the State of 
  Texas, opening statement.......................................     3
Burgess, Hon. Michael C., a Representative in Congress from the 
  State of Texas, opening statement..............................     9
Butterfield, Hon. G.K., a Representative in Congress from the 
  State of North Carolina, opening statement.....................    13
Dingell, Hon. John D., a Representative in Congress from the 
  State of Michigan, opening statement...........................     1
Doyle, Hon. Michael F., a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     8
Engel, Hon. Eliot L., a Representative in Congress from the State 
  of New York, opening statement.................................    15
Harman, Hon. Jane, a Representative in Congress from the State of 
  California, opening statement..................................     9
Hill, Hon. Baron P., a Representative in Congress from the State 
  of Indiana, opening statement..................................    12
Inslee, Hon. Jay, a Representative in Congress from the State of 
  Washington, opening statement..................................    11
Murphy, Hon. Tim, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     8
Pallone, Hon. Frank, a Representative in Congress from the State 
  of New Jersey, opening statement...............................     5
Schakowsky, Hon. Janice D., a Representative in Congress from the 
  State of Illinois, opening statement...........................    16
Solis, Hon. Hilda L., a Representative in Congress from the State 
  of California, opening statement...............................    10
Stearns, Hon. Cliff, a Representative in Congress from the State 
  of Florida, opening statement..................................    11
Stupak, Hon. Bart, a Representative in Congress from the State of 
  Michigan, opening statement....................................     6
Towns, Hon. Edolphus, a Representative in Congress from the State 
  of New York, opening statement.................................    14
Walden, Hon. Greg, a Representative in Congress from the State of 
  Oregon, opening statement......................................     7
Weiner, Hon. Anthony D., a Representative in Congress from the 
  State of New York, opening statement...........................    17
Wynn, Hon. Albert Russell, a Representative in Congress from the 
  State of Maryland, opening statement...........................    14

                               Witnesses

Leavitt, Hon. Michael O., Secretary, U.S. Department of Health 
  and Human Services.............................................    17
    Prepared statement...........................................    58


REVIEW OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES' FISCAL YEAR 2008 
                                 BUDGET

                              ----------                              


                       TUESDAY, FEBRUARY 6, 2007

                          House of Representatives,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:05 a.m., in room 
2123, Rayburn House Office Building, Hon. John D. Dingell 
(chairman of the committee) presiding.
    Present: Representatives Markey, Boucher, Towns, Pallone, 
Rush, Eshoo, Stupak, Engel, Wynn, Green, DeGette, Capps, Doyle, 
Harman, Allen, Schakowsky, Solis, Gonzalez, Inslee, Baldwin, 
Hooley, Weiner, Matheson, Butterfield, Melancon, Barrow, Hill, 
Barton, Upton, Stearns, Deal, Whitfield, Shimkus, Pickering, 
Fossella, Pitts, Walden, Terry, Ferguson, Rogers, Myrick, 
Sullivan, Murphy, and Burgess.
    Staff present: Sharon Davis, Elizabeth Ertel, Bridgett 
Taylor, Amy Hall, John Ford, William Garner, Jessica McNiece, 
Christie Houlihan, Ryan Long, Melissa Bartlett, Brandon Clark, 
Katherine Martin, and Chad Grant.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    The Chairman. The committee will come to order. The purpose 
of today's hearing is to receive before the full committee, 
testimony from the distinguished Secretary of Health and Human 
Services regarding the President's fiscal year 2008 budget 
request. Mr. Secretary, we welcome you.
    On occasions when a hearing is conducted at the full 
committee level, the Chair, after consultation with my dear 
friend Mr. Barton, will be following somewhat different 
procedures with regard to opening statements and questions.
    Consistent with the rules and past practices of the 
committee, the chairman and ranking member of the full 
committee then will be recognized for 5-minute opening 
statements. The chairman and the ranking member of the relevant 
subcommittees will be recognized for 3-minute opening 
statements.
    All other Members will be recognized for a 1-minute opening 
statement, but they may waive their statements for an 
additional 1-minute of questioning during the first round.
    The Chair wishes we could do this a little differently, but 
the situation is we have a very large committee and to do the 
business and show courtesy to all, this is probably the best 
solution. We used it during the past Congress where Mr. Barton 
and I worked it out, and it was generally satisfactory to the 
Members.
    Now I will recognize Members who are here when I call this 
hearing by order of their seniority on the full committee. Once 
all these Members have had an opportunity to deliver or waive a 
statement, I will recognize all members of the committee in the 
order that they arrived at the hearing.
    Sharon Davis, the chief clerk of the committee, will keep a 
careful accounting of the attendance for purposes of ensuring 
that this is fairly and properly carried out.
    The Chair will recognize Members for the purposes of 
questioning Secretary Leavitt under the same procedures that I 
have outlined.
    Before we proceed with the hearing, the Chair reminds our 
good friends and colleagues that the committee will be 
conducting two additional full committee proceedings this week. 
As previously noted, one, the full committee will reconvene on 
Thursday, February 8 at 10 a.m. to receive testimony of the 
Secretary of Energy regarding the President's fiscal year 2008 
budget request. And Members and their staff are invited to a 
briefing by the Intergovernmental Panel on Climate Change 
regarding its recently announced fourth assessment report on 
February 9 at 10:00 a.m.
    The Chair suggests very strongly that my colleagues should 
be there.
    The Chair now recognizes himself for the purposes of an 
opening statement.
    Today we will hear about the President's fiscal year budget 
from the Secretary of Health and Human Services, our friend 
Secretary Leavitt.
    Forty-six million Americans today lack health insurance. 
This problem warrants immediate attention. The administration, 
however, continues to shred the health safety insurance net.
    First the President has missed, and regrettably, an 
historic opportunity to reduce the number of uninsured 
children. Seven out of 10 uninsured children qualify either for 
Medicaid or the State children's health insurance program, 
SCHIP, but are not yet enrolled. The President, however, makes 
cuts in the program ensuring that we will not reach those 
children and that more children and their parents will become 
uninsured.
    Second, rather than working with the States to bolster 
health care coverage, the administration cuts key benefits; $50 
billion in overall calls to Medicaid coming on top of last 
year's $28 billion in cuts. It also induces the States to 
provide bare-bones packages and high-deductible plans that make 
little sense for the working poor.
    Third, the President proposes billions in tax breaks to 
encourage people to move from employer-sponsored coverage into 
high-deductible or bare-bones health plans in the unregulated 
insurance market. Studies have documented that this will cause 
employers to drop insurance coverage that they provide their 
workers today.
    Fourth, the President directly attacks the institutions 
that serve the uninsured and the underinsured, cutting upward 
of $50.4 billion from hospitals, public providers and medical 
education.
    On Medicare, the budget is as noteworthy for what is absent 
as what is included. The budget fails to address the documented 
problems in part D drug benefit or include one dime to address 
pending Medicare physician payment cuts, a very serious 
problem.
    According to the American Medical Association, physicians 
will see a 10 percent payment cut next year and cumulative cuts 
of more than 40 percent over the next 10 years. Moreover, the 
President would increase part D premiums for more Medicare 
beneficiaries, as well as the part D premium. Likewise, the 
budget does not propose any of the MedPAC-recommended cuts to 
HMO and private health plan payments, which alone would save 
tens of billions of dollars over that time.
    Instead, it proposes $252 billion over the next 10 years in 
cuts to Medicare fee for service, the program that enrolls the 
vast majority of our seniors today. In the public health 
service budget, there are several other proposals causing 
concern. Instead of existing programs being invested in what 
would affect children's health and adolescent health, the 
President's budget creates a new adolescent health promotion 
initiative with a budget of 17 million for a country of 300 
million people. The public health safety net takes another 
beating in this budget.
    Programs for training health professionals, substance abuse 
prevention, and chronic diseases are but a few examples. The 
budget for National Institutes of Health does not keep up for 
inflation, much less providing for needed increases where they 
could be spent for the public good.
    I am alarmed that the budget does not provide adequate 
resources for public health threats for bioterrorism. The Trust 
for Americans' Health says that reduction in the bioterrorism 
in public health preparedness programs is particularly 
troubling.
    We are cutting core boots-on-the-ground support for 
emergency disaster response, leaving the country at unnecessary 
levels of risk. While this budget provides increases for the 
Food and Drug Administration, I remain concerned that these 
increases will not be adequate to allow Food and Drug to 
properly ensure safety of drugs, food, cosmetics and medical 
devices. This is a disturbing message that we find in the 
President's budget.
    The Chair notes that I have completed my statement with 32 
seconds remaining, and I now recognize my dear friend Mr. 
Barton for 5 minutes.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman. And if you feel a 
little rusty, I can just show you what I good fellow I am; I 
will be happy to take over at any time, until you feel unrusty.
    It is time to have our full first committee hearing on the 
on part of the President's budget in health items and we do 
have our very eminent Cabinet Secretary, Governor Leavitt here. 
We welcome you, sir.
    This committee has a proud history of legislating and doing 
oversight in health care. In the last Congress we reauthorized 
for the first time in a generation the National Institutes of 
Health. We reauthorized the Ryan White AIDS Act and we also 
passed legislation to spur development of bioterrorism 
countermeasures. That is just a few of the examples of things 
that actually became law that originated in this committee in 
the last Congress. In the 110th Congress we have a new chairman 
who is going to do an outstanding job, I am sure, and I am sure 
that he wants to be active on health care.
    I will not be surprised if the emphasis changes. We have 
already seen a lot of the Presidential want-to-be candidates on 
the Democratic side talking about health care, and if they 
follow through, we are going to see lots of proposals that 
would require tax increases, government mandates and many, many 
more government bureaucrats involved in health care for the 
average American and the average American family.
    I personally think we ought to have more choices in health 
care and I think those choices ought to be based on market 
forces and openness and transparency as opposed to mandates and 
bureaucracy.
    We will have some spirited hearings and some spirited 
debates about that in this committee.
    Mr. Dingell has told me that he plans to reauthorize the 
State Children's Health Insurance Program which we commonly 
call the SCHIP program. That program expires this year. It is 
under the jurisdiction of this committee. And we certainly want 
to be involved in that.
    The new congressional majority has already passed a piece 
of legislation on the House floor requiring the Secretary of 
HHS to go out and negotiate Medicare part D prescription drug 
benefits for the senior citizens. Mr. Dingell taught me, when I 
was a junior member of this committee in the minority, that you 
held hearings and you held markups and you actually had a 
regular-order process to do major things like that. We have not 
done that so far. Some on the majority decided to legislate 
before they knew what they were talking about.
    But maybe we are coming back to the old way of doing things 
if this is the start of today's hearing. I certainly hope so.
    I do think that we need to look at the Medicare program and 
we need to look at the Medicare part D prescription drug 
benefit program. The numbers that I have been given show that 
the premiums are 42 percent lower than expected, the cost is 30 
percent lower than anticipated, and that the seniors that have 
chosen to participate in the program have somewhere between a 
70 and 80 percent satisfaction.
    So that seems to me that it is a program that is working. 
Costs are coming down, options are going up, and people are 
satisfied.
    We also need to look at the larger Medicare program. We 
need some long-term reforms in Medicare. And I am sure this 
committee is going to look at that. We have a funding problem 
in Medicare over time. The program is going bankrupt and I am 
hopeful that Chairman Dingell will take a systematic view of 
the overall program.
    The President in his State of the Union address announced 
two new innovative solutions for affordable health insurance. I 
am sure that the Secretary is going to talk about that in his 
statement. We do have millions of uninsured Americans. We do 
need to find a way to find health care and health insurance for 
those Americans that don't have it today. The President has 
announced two programs to do that.
    He has a tax deduction for basic insurance called the 
President's Affordable Choices Initiative. This would provide 
States with incentives to make basic affordable private health 
insurance available to their citizens and the Secretary of HHS 
would be able to redirect Federal payments away from 
institutions to individuals in eligible States.
    I think this is an idea that makes some sense. I certainly 
hope that we will take a serious look at it in this committee. 
And I also know that will have to be done in the Ways and Means 
Committee.
    I see that my time has expired, Mr. Chairman, so let me say 
that we on the minority side look forward to working with you 
and those in the majority in the health areas to find better 
health care at affordable costs for all citizens in America.
    The Chairman. I thank the gentleman.
     The gentleman from New Jersey Mr. Pallone for 3 minutes.

 OPENNIG STATEMENT OF HON. FRANK PALLONE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. Mr. Chairman, what a 
difference 2 weeks makes at the White House. Yesterday 
President Bush sent his budget proposal to Congress that 
completely contradicts statements he made on health care 2 
weeks ago during his State of the Union address. He 
specifically stated then that when it comes to health care, 
government has an obligation to care for the elderly, the 
disabled, and poor children. Yet yesterday the President 
proposed a budget that includes serious cuts to the very 
programs that serve these vulnerable populations; that is, 
Medicare, Medicaid, and the State children's health insurance 
program, SCHIP. So once again it appears as though the 
President's previous statements are nothing but empty rhetoric.
    And I am most alarmed about the President's proposal to 
reauthorize the SCHIP program. Under the President's plan, the 
Federal Government would reduce payments to States who cover 
children above 200 percent of the Federal poverty line. This 
would mean a drastic reduction in aid from my home State of New 
Jersey which covers kids up to 350 percent of the Federal 
poverty line. If enacted, I have no doubt that it would spell 
disaster for low-income children in New Jersey and across the 
country.
    As Congress works to reauthorize SCHIP, I urge the 
President to scrap his plan and work with Democrats to put 
forward a realistic proposal that maintains current eligibility 
standards and improves outreach and enrollment efforts.
    I also have serious concerns about the mix of Medicare and 
Medicaid proposals included in the President's budget. Once 
again, the President has put Medicare and Medicaid on the 
chopping block. Instead of trimming the fat currently going to 
managed care companies, the President would slash 
reimbursements to providers and burden beneficiaries with 
higher premiums.
    Noticeably absent from the President's budget once again is 
any mention of the physician payment fix. Apparently, ensuring 
physicians receive adequate payments is not a priority for this 
administration.
    And finally, Mr. Chairman, let me reiterate my firm 
opposition to the President's new health insurance tax 
proposal, and I stress tax proposal because that is what it is. 
This will be disastrous for consumers because it forces them 
into the unstable and uncertain individual insurance market. As 
with health savings accounts and associated health plans, the 
President's new proposal could potentially increase the number 
of Americans without insurance, especially among our most 
vulnerable citizens who need it most.
    And I am also firmly opposed to his plan to divert DSH 
payments away from our safety net hospitals. I whole-heartedly 
agree with the President that we need to do more to reduce the 
ranks of the uninsured; however, I disagree with the means he 
is proposing to get us there.
    As Congress considers possible solutions to this growing 
problem, we should be guided by the principle of first do no 
harm. Unfortunately the President's latest budget proposal 
fails to meet this basic test.
    And I have a lot of concerns in addition to the President's 
budget proposal, too many to mention now, but I look forward to 
asking the Secretary some questions later today and thank him 
for being with us.
    Thank you, Mr. Chairman.
    The Chairman. The Chair thanks the gentleman.
    The Chair recognizes now the distinguished gentleman from 
Georgia, Mr. Deal, for 3 minutes.
    Mr. Deal. Mr. Chairman, I will reserve my time for 
questions.
    The Chairman. The gentleman reserves his time.
    We will now recognize Members in the order announced 
earlier.
    The Chair recognizes next the gentleman from Michigan, Mr. 
Stupak, for 1 minute.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. Thank you Mr. Chairman.
    Welcome to the committee, Mr. Secretary. As chairman of the 
Oversight Subcommittee, I can tell you that we have quite a 
backlog of business with HHS. This morning I offer my 
commitment to work with you to expose the truth of how a 
sizeable bureaucracy has been functioning. The subcommittee 
will not be requesting documents or interviews that we don't 
need, but we will expect your cooperation in assuring that the 
committee has the information necessary to fulfill our 
constitutional responsibility to see that law is sufficient and 
is being administered properly.
    We have particular concerns about the compromises to both 
food and drug safety at FDA. We are concerned about the 
Department's ability to protect this country from bioterrorism 
and natural threats such as pandemic flu. We intend to examine 
issues of ethics and conflicts of interest that seem to plague 
your agencies. We want to work with you to examine problems and 
to call attention to your successes.
    On a personal note, a good start would be if you can answer 
questions I put to your predecessor back in July 2004 regarding 
the 1 800 adverse side effects numbers for prescription drugs. 
It has been almost 5 years and nothing has been done.
    Also by February 15, 2006, questions to you concerning 
Accutane specifically, with over 300 suicides reported by 
Accutane users, what is the FDA doing to protect users other 
than posting warnings on the FDA Web site?
    Thank you for coming. And I look forward to asking a few 
more specific questions later.
    The Chairman. The Chair recognizes now the distinguished 
gentleman from Michigan, Mr. Upton, for 1 minute.
    Mr. Upton. Thank you, Mr. Chairman I am going to reclaim my 
time under questions so I will waive my opening statement.
    The Chairman. Gentleman chooses to reserve his time. We now 
recognize the distinguished gentleman Mr. Walden for 1 minute.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you Mr. Chairman.
    Mr. Secretary welcome. We are delighted to have you here 
today. I realize in the budget of any size for a family of four 
or a family of 300 million you have to make some tough choices. 
And I want to commend the President for the additional 224 
million for community health centers. I think this is something 
that I hope Congress will certainly enact. I have seen 
firsthand the importance of these community health centers 
across my district.
    I am also pleased to see the President recommend a modest 
increase in funding for State offices of rural health. Ours in 
Oregon does a fantastic job. I am disappointed, however, that 
the President recommended eliminating funding for other rural 
health programs, such as rural hospital flexibility grants 
which fund quality improvement efforts at critical access 
hospitals and small rural hospitals. Representing a district 
that is more than 70,000 square miles in size, with many, many 
very small, isolated, rural communities, this program is 
essential for them. I will submit the rest of my comments for 
the record and I will look forward to hearing your comments.
    The Chairman. Without objection, the balance of the 
statement is inserted in the record.
    The Chair recognizes now the distinguished gentlewoman from 
Colorado, the vice chairman of the committee, Ms. DeGette.
    Ms. DeGette. Mr. Chairman, I will reserve my time for 
questioning.
    The Chairman. Gentlewoman reserves her time.
    The Chair now recognizes the distinguished gentlewoman from 
California, Ms. Capps.
    Mrs. Capps. Thank you, Mr. Chairman. I would reserve my 
time as well.
    The Chairman. Gentlewoman reserves her time.
     The Chair now recognizes the distinguished gentleman from 
Pennsylvania, Mr. Doyle.

OPENING STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman. It is a pleasure to get 
to call you that this morning. And thank you, Mr. Secretary, 
for coming down to help explain the President's priorities.
    It has been said that our budget is a statement of the 
Nation's priorities, and I for one am disappointed that it 
continues to be a bigger priority for our President to cut 
taxes for those who have plenty and to cut aid for those who 
have little.
    This President's Iraq policy costs us over $100 billion a 
year. And the burden for paying for that is placed squarely on 
the backs of seniors, children, and the working poor and not 
those who have plenty to give.
    Medicare cuts, Medicaid cuts, hardly enough funding for 
SCHIP to cover the children already in the program today. At a 
time when the President is pushing to take people from 
uninsured to underinsured, he proposes cutting support funds 
for the hospitals that serve as the last refuge for those folks 
and as a public health safety net.
    And finally, while the President claims his budget is 
fiscally responsible, it will hamstring our economy over the 
long run, adding another $3 trillion to the national debt over 
the next 5 years alone.
    Mr. Secretary I look forward to hearing how this budget 
will do more good than harm.
    The Chairman. The Chair now recognizes the distinguished 
gentleman, Mr. Murphy, for 1 minute.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Thank you, Mr. Chairman. And thank you, Mr. 
Secretary, for being here. Although I am pleased that there is 
a number of things that continue to be funded in the 
President's budget, I would like to ask that part of the thing 
that may come up is--maybe not necessarily in this hearing but 
maybe in the future--when you look at some examples of where we 
can be saving money and not just looking at the way that 
Congress usually deals with making cuts. These include such 
things as saving $50 billion and 90,000 lives by providing 
incentive payments or working with hospitals to reduce 
infections; to expand the number of volunteer doctors at 
community health centers and making sure that every family has 
a neighborhood doctor; to eliminate higher discriminatory 
copayments under Medicare for our Nation's seniors seeking 
mental health services; and also to work to establish regional 
collaborations to work on health information technology. All 
issues that I know are near and dear to you and the President.
    And I look forward to hearing your comments and working 
together with you to make sure we bring health care into the 
21st century and also make sure we really work to reduce health 
care costs and not just deal with the costs of health 
insurance. Thank you, Mr. Chairman I yield back.
    The Chairman. The Chair thanks the gentleman.
     The Chair recognizes now the distinguished gentlewoman 
from California, Ms. Harman.

  OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Harman. Thank you, Mr. Chairman. I apologize to you and 
our witness that I must leave soon for a memorial service for a 
dear friend, and I want to take my 58 seconds and flag an issue 
that I know is on everyone's mind, and that is pandemic flu 
preparedness.
    This budget includes another $1.2 billion on top of the 
$6.1 billion that we have already appropriated. But just in 
recent weeks we have seen a mutated avian flu virus kill two 
people in Egypt, and the scary part was that this virus was 
resistant to Tamiflu which at the moment is our primary post 
facto countermeasure.
    This is a dynamic evolving threat. We need a dynamic 
evolving response. I don't think anyone on this committee--and 
I am sure Secretary Leavitt is encouraged by how we responded 
to Katrina, and this is Katrina times 100. So I would urge you, 
Mr. Secretary, to make clear in this testimony and in your 
future statements how your Department will be ready, how your 
strategy will guarantee that this enormous potential threat 
will be handled.
    I think it is up there, Mr. Chairman, among the top horrors 
that could confront America if we don't act effectively. Thank 
you.
    The Chairman. The Chair recognizes now our good friend and 
colleague, Mr. Burgess.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here. I too am pleased 
that the budget makes a continued commitment to expanding 
health centers. Fully funding this initiative represents just 
one side of the coin, however. There are many entities that are 
willing and able to establish a community health clinic in many 
more areas of the country, none more so than the portion of 
north Texas that I represent. However, many archaic programs 
hinder the development of a medical home for millions of more 
Americans.
    I believe that while additional funding is essential, the 
committee must turn a critical eye toward the rules that govern 
the community health center as well as the Federal agency 
itself. When we again take up the important work of 
reauthorizing this program, I hope to work with you, Mr. 
Secretary, and you, Mr. Chairman, to address this important 
issue.
    STR remains a critical issue before our Nation, but I, just 
like the Secretary, I believe, feels that is an issue that 
requires a legislative fix and not a Federal agency fix.
    Another issue I would like to discuss is the state of the 
health care system in New Orleans. Having visited that area 
several times after Hurricane Katrina and discussing the 
situation on the ground with health professionals, I have great 
concerns that the money appropriated for rebuilding and relief 
in that area could be used in a more efficient manner.
    I am also concerned with the Federal agencies that assist 
hospitals, and other health care providers that are actually 
more of a hindrance than a help, but certainly look forward to 
hearing your comments on that. I yield back.
    The Chairman. The Chairman thanks the distinguished 
gentleman.
     And now the Chair recognizes the distinguished 
gentlewoman, Ms. Solis, for 1 minute.

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

    Ms. Solis. Thank you and good morning, Mr. Chairman, and 
Members.
    And, Secretary Leavitt, thank you for coming here. As you 
know, health care access is one of our big priorities here in 
the Congress. Forty-six million Americans are uninsured, and 
that includes 1 in 3 residents in my district who don't have a 
form of coverage and 14 million Latinos nationally who don't 
have any health care coverage.
    Eighty-three percent of the uninsured, as you know, are 
working families. And yet the proposed budget appears to leave 
our seniors and children with fewer choices and higher costs. 
Nine million children, including 1 in 5 Latino children, are 
uninsured and yet the President wants to reduce SCHIP 
eligibility for many of our children.
    Our safety-net providers and hospitals are also struggling, 
and they make that very well known to us when we go home to our 
districts. Communities of color bear the impact of the lack of 
health care, struggling disproportionately from chronic 
diseases such as diabetes and obesity, and yet the budget fails 
to place a priority on culturally and linguistically competent 
care.
    We must do better for all Americans. And I urge the 
administration and Secretary Leavitt to work with us and place 
a priority on ensuring access to quality, affordable, 
culturally and linguistically competent care in all of our 
communities.
    And I thank you, Mr. Secretary, and look forward to working 
with you.
    The Chairman. The Chair thanks the gentlewoman.
    The Chair recognizes now the gentleman from New Jersey, Mr. 
Ferguson, for 1 minute.
    Mr. Ferguson. Mr. Chairman, I will waive my opening 
statement for additional questions.
    The Chairman. Gentleman waives 1 minute; he will have that 
added to his time.
    The Chair recognizes now my good friend and colleague, Mr. 
Pitts, for 1 minute.
    Mr. Pitts. I will waive, Mr. Chairman.
    The Chairman. Gentleman has waived his 1 minute.
    The Chair recognizes now my good friend, Mr. Whitfield.
    Mr. Whitfield. Mr. Chairman, I waive my opening statement 
as well.
    The Chairman. Gentleman has waived his opening statement.
    The Chair recognizes now our good friend, Mr. Terry.
    Mr. Terry. Waived as well.
    The Chairman. Gentleman has waived his time.
    The Chair recognizes now the distinguished gentleman, our 
good friend and colleague, Mr. Stearns from Florida.

  OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Thank you, Mr. Chairman. I appreciate the 
Secretary being here. I praise the implementation and oversight 
of Medicare part D. In my congressional district I have heard 
nothing but overwhelmingly good news. And I have The Villages, 
which is the largest adult community in the Nation, and I have 
heard nothing but positive news.
    In fact recently in the Gainesville Sun, they printed a 
letter by one of my constituents, Mrs. Rannel James. She and 
her husband are both in their seventies. They have been married 
almost 50 years and they wrote, quote, Medicare part D has been 
a great experience for our family. We saved nearly $250 a month 
because of Medicare part D on our medications, and we look 
forward to continuing this savings next year.
    This benefit has given them coverage, and, it appears from 
their letter, peace of mind, which is most important.
    And also recently I think all of you saw the Washington 
Post editorial that appeared on November 2, 2006 talking about 
this prescription drug--how it is working and we don't need to 
change it.
    And so, Mr. Chairman, I am just very pleased that the 
Secretary is here and I want to compliment him and his staff 
for what a great job they are doing with the implementation of 
the Medicare part D program.
    The Chairman. The Chair recognizes now the gentleman from 
Washington, Mr. Inslee.

   OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Inslee. Thank you, Mr. Chairman. I was just looking at 
a newspaper. Someone described this budget as a dead on arrival 
document that gets everyone in a tizzy. So perhaps we should 
keep that in mind. But I think this budget is important to 
discuss--even though it will not pass--in illustrating how a 
priority is helping--a misprioritization is hurting Americans' 
health.
    When Americans go to get health care and it is not there--
if this budget were to pass, because of the cuts to the 
disproportionate share program for hospitals that help serve 
our 47 million Americans who do not have insurance, and they 
wonder where their health care went, it went into the sands of 
Iraq. And this policy document, this budget, makes very clear 
that the President has made a priority on the escalation to 
pour our taxpayer dollars into the sands of Iraq rather than to 
our Nation's uninsured and to our seniors, both of whom will 
have reduced access to health care.
    And the principal message I would take from this budget is 
we would rather escalate in Iraq than escalate our efforts to 
provide health care in America. And we will be talking about 
that this afternoon. Thank you.
    The Chairman. The Chair recognizes now our good friend from 
Michigan, Mr. Rogers, for 1 minute.
    Mr. Rogers. Mr Chairman, I waive my opening.
    Mr. Stupak. Gentleman has waived.
    The Chair then will recognize our friend and colleague, Mr. 
Hill, for 1 minute.

 OPENING STATEMENT OF HON. BARON P. HILL, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF INDIANA

    Mr. Hill. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for appearing before us today. I 
first want to say that I am happy to see that the President has 
made health care an issue and it has become a priority for him. 
I believe it is very important to ensure access to affordable 
health care to all of our citizens. An ailing workforce is 
terrible, not only because people are suffering, but because it 
costs the government millions of dollars for illnesses that 
could have been prevented. However, I do not believe by 
penalizing those who already have employer-sponsored health 
insurance by raising their taxes is the way to do so.
    That aside, it seems that the President and some of my 
colleagues on the Hill are attempting to develop some system of 
universal health care. While some may see ensuring affordable 
health care for all citizens as a government responsibility, 
others may view it as the responsibility of the private sector 
or individuals.
    I believe that these individuals have essentially skipped 
over one of the most important debates that Congress should 
have: Is affordable health care a right or a privilege? If 
Congress decides that affordable health care should be a 
constitutional right, it may then include all relevant players, 
insurance companies, pharmaceutical companies, hospitals, 
doctors, et cetera, in devising a program.
    Mr. Secretary, I look forward to your testimony today and 
specifically to finding out if you and the President have ever 
discussed whether or not affordable health care should be a 
citizen's constitutional right.
    The Chairman. The Chair recognizes now the distinguished 
gentleman from Illinois, Mr. Shimkus, for 1 minute.
    Mr. Shimkus. I will waive, Mr. Chairman. Thank you.
    The Chairman. Gentleman has waived.
    The Chair recognizes now our dear friend and colleague from 
Wisconsin, Ms. Baldwin.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman.
    And thank you, Secretary Leavitt, for joining us this 
morning. Our Nation is in the midst of a health care crisis. 
Nearly 47 million Americans are uninsured, and an additional 16 
million are underinsured. So an aggregate 63 million Americans 
either have no health insurance or only sporadic coverage, or 
have insurance coverage that leaves them exposed to high health 
care costs.
    And we all know this is unacceptable. But what is even more 
unacceptable is that the President's budget proposes harsh cuts 
to both Medicare and Medicaid, programs that actually do 
provide affordable comprehensive health care, and it offers a 
reform proposal that I fear will make many Americans worse off.
    In addition, this budget includes substantial cuts to 
health care providers, those who are actually providing the 
needed care to the 47 million uninsured Americans.
    Lastly, this budget proposes to fund the State child health 
insurance program at a level which we all know will fall far 
short of the amount needed to continue to provide health care 
to the children currently covered; this, at a time when we 
ought to broaden SCHIP to cover all uninsured children in 
America.
    This budget misses opportunity after opportunity and is a 
disappointment to the nearly 47 million Americans who have no 
health insurance at all. Thank you, Mr. Chairman.
    The Chairman. The Chair thanks the gentlewoman.
    The distinguished gentleman from Utah, Mr. Matheson.
    Mr. Matheson. Mr. Chairman, I will waive.
    The Chairman. Gentleman waives.
    The Chair recognizes now the distinguished gentleman from 
Texas, Mr. Gonzalez.
    Mr. Gonzalez. Waive the opening.
    The Chairman. Gentleman has waived.
    The Chair now recognizes our dear friend from California, 
Ms. Eshoo.
    Ms. Eshoo. Mr. Chairman, I will defer.
    The Chairman. Gentlewoman has deferred.
    The Chair recognizes now the distinguished gentleman from 
North Carolina, Mr. Butterfield.

 OPENING STATEMENT OF HON. G. K. BUTTERFIELD, A REPRESENTATIVE 
          IN CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Thank you, very much, Mr. Chairman.
    Mr. Secretary, let me join my colleagues in thanking you 
very much for your testimony today and your willingness to come 
down and engage in this process.
    The reason I am sitting on the third tier is because I am 
one of the newer members of this committee. In fact, this is my 
very first hearing. So thank you very much for being a part of 
it after.
    I represent the 15th poorest district in the Nation, 
eastern North Carolina, and we have a health care crisis in my 
congressional district. And I know you are sensitive to that. 
But I want you to encourage your Department and the 
administration to become more attuned to rural health issues.
    My health centers are doing the best that they can do. My 
hospitals are engaged in good quality health care, but they are 
not paying the bills. And many of our hospitals are challenged, 
and some are even threatened with going out of business.
    And so thank you for what you do, and I look forward to 
being an advocate on health care issues. And I look forward to 
working with you.
    I yield back.
    The Chairman. Gentleman's time has expired.
     Chair recognizes now the distinguished gentleman from 
Maryland, Mr. Wynn.

        OPENING STATEMENT OF HON. ALBERT RUSSELL WYNN, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND

    Mr. Wynn. Thank you, Mr. Chairman. And I welcome you, Mr. 
Secretary. I appreciate your presence here.
    Today I want to reiterate a point that was made by several 
of my colleagues, and that is my concern about the cuts to 
Medicaid and Medicare. This will affect in Maryland, my State, 
627,000 Medicare patients and 485,000 Medicaid patients.
    And the way we are affecting them is that we are reducing 
reimbursements to the physicians. And that is something that 
this Congress only a few months ago said was unacceptable. We 
understood there was a crisis that occurred when we did not 
reimburse physicians adequately.
    Moreover, we are going to hurt hospitals, disproportionate 
share hospitals and other hospitals that take in our uninsured 
population that you have heard about from many of my 
colleagues. So I think this is a very unwise policy.
    And then to increase premiums on this population of 
patients and customers I think is equally unwise, because we 
are in a health care crisis, as has been mentioned.
    I share the concern of my colleagues regarding the SCHIP 
program. We have 137,000 uninsured youth in my State alone. 
Many people now--in fact, there is a broad consensus that what 
we ought to do is start by universally covering our young 
people, those under 18. This policy moves in the opposite 
direction.
    Third, I want to mention LIHEAP. It is ironic that on one 
of the coldest days this region has experienced, we are looking 
at a budget that underfunds the LIHEAP program for low-income 
home energy assistance by $3.3 billion. We authorized $5 
billion for LIHEAP, and this administration comes in woefully 
short of that.
    And the problem becomes when we have programs from places 
like Venezuela who try to help, people say, oh, that is awful, 
we should not accept their assistance. But we in this country 
do not provide the necessary assistance for the poor when they 
confront these drastic weather conditions. So perhaps if we 
could do better, we would not have to accept charity from 
places like Venezuela.
    Finally, in closing I want to say my district is home to 
FDA. I am very proud and appreciative of that fact. But it was 
woefully underfunded by about $150 million----
    The Chairman. Time of the gentleman has expired.
    Mr. Wynn. Thank you Mr. Chairman. I relinquish my time.
    The Chairman. The Chair recognizes now the distinguished 
gentleman from New York, Mr. Towns.

 OPENING STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEW YORK

    Mr. Towns. Thank you very much, Mr. Chairman, for holding 
this hearing today. And thank you, Mr. Secretary, for coming.
    I am concerned that much of what the administration 
proposes is an escalating war on our public health system.
    The proposed reductions may virtually eliminate the health 
safety net for millions of our poor citizens. And that is 
wrong. These proposals will shift the weight of paying for that 
care onto already overburdened cities, counties, and States.
    The proposed cuts to Medicare and Medicaid for chronic 
disease programs, the lack of physician payment reform and the 
administration's inability to adequately fund health 
information technology is hurting this Nation's ability to 
provide effective quality care and to reduce health disparities 
among communities of color.
    I am deeply concerned that this administration is going in 
the wrong direction, and we should seize this moment to change 
the direction that we are going in.
    On that note, Mr. Chairman I yield back.
    The Chairman. Time of the distinguished gentleman has 
expired.
     The Chair recognizes now the distinguished gentleman from 
Illinois, the Reverend Rush.
    Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, I yield.
    The Chairman. Gentleman defers.
    And now the Chair recognizes the distinguished gentleman 
from New York, Mr. Engel.

 OPENING STATEMENT OF HON. ELLIOT L. ENGEL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEW YORK

    Mr. Engel. Thank you, Mr. Chairman, and welcome, Mr. 
Secretary. I must say that I am very much appalled at the 
budget released yesterday. Budgets are a reflection of 
priorities. And this one, in my opinion, sends a message that 
the health care needs of children, seniors, hospitals and 
communities are sacrificed for the administration's other 
priorities.
    The proposals within the budget strike the foundation of 
patient care, assaulting it from every possible angle. The 
children's health insurance program will see its funding cut 
from last year. And, worse, the amount allocated for its 
reauthorization is less than half the amount required to 
maintain coverage for current beneficiaries.
    While this alone will undoubtedly compound the number of 
uninsured, the hospitals and other safety-net providers have 
their funding slashed as well.
    The fiscal year 2008 budget calls for billions of dollars 
in draconian Medicare and Medicaid cuts, including $2.7 billion 
for New York hospitals and health centers just 2 weeks after 
CMS issued a regulation that limits States' abilities to draw 
down needed Medicaid dollars from lawful intergovernmental 
transfers. One of the most ill-thought-out proposals is the 
President's call for diverting up to $30 billion in essential 
payments to safety-net hospitals to States that promote private 
health insurance, like my State of New York, regardless of the 
scope of coverage. We can increase coverage effectively by 
expanding existing comprehensive----
    The Chairman. Time of the gentleman has expired.
     The Chair recognizes now the distinguished gentlewoman 
from Illinois, Ms. Schakowsky.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman. And thank you, Mr. 
Secretary. I feel like I am watching the old movie, Groundhog 
Day. We are living the same budget over and over again. Once 
again, the President has placed a higher priority on more tax 
cuts and a misguided war in Iraq than on meeting the Nation's 
health care needs.
    Despite a record number uninsured and medical bankruptcies, 
his budget either cuts critical health care initiatives or 
fails to provide adequate resources to meet the challenge 
before us.
    I have many of the same concerns that I did last year: 
proposed cuts in Medicare, Medicaid; nurse and health 
professionals training; the National Cancer Institute; 
preventive and mental health and provider payments that will 
jeopardize access to quality and timely care.
    I am also disappointed in the low funding levels for SCHIP. 
This year, like last year, I believe the President's diagnosis 
of the problem is the reverse of the actual problem.
    Americans are not paying too little for health care or 
getting too much. They are paying too much and getting too 
little. Shifting more costs onto the already overburdened backs 
of Medicaid and Medicare beneficiaries is the wrong answer. So 
too is the proposal to have U.S. taxpayers subsidize highly 
inefficient individual health policies instead of more cost-
effective public coverage.
    The movie Groundhog Day ends happily when Bill Murray comes 
to his senses, changes his behavior, and moves forward. 
Although the President's budget proposals show no sign of 
changing, I am confident under your leadership, Mr. Chairman, 
the Congress will move in a different direction to meet our 
health care priorities.
    And I would just like to add my support to what Dr. Burgess 
said about Katrina victims. We need to do more.
    The Chairman. The time of the distinguished gentlewoman has 
expired.
     Chair recognizes now the gentleman from Georgia, Mr. 
Barrow, for 1 minute.

   OPENING STATEMENT OF HON. JOHN BARROW, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Barrow. Thank you, Mr. Chairman, and good morning, Mr. 
Secretary. In addition to all of the concerns which have been 
raised, which I share, I have three areas of emphasis that I 
want us to focus on at some point today. That is SCHIP, SCHIP 
and SCHIP.
    I got a State that has the fifth highest number of folks 
enrolled in that very successful and very effective program. As 
a result of that, we are most adversely affected by a funding 
formula that rewards folks for getting on board but doesn't 
maintain them once they get on board. I want to know what the 
administration is going to do to help meet the funding 
shortfall in States like Georgia that have a lot of folks 
getting on board.
    I also want to know what the administration is going to do 
about refunding the formula, the funding formula, how to reform 
it so we don't have this shortfall on a year-to-year basis. 
Thank you.
    The Chairman. The Chair thanks the distinguished gentleman.
    The gentleman from New York, Mr. Weiner.
    Mr. Weiner. Thank you, Mr. Chairman.

 OPENING STATEMENT OF HON. ANTHONY D. WEINER, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF NEW YORK

    Recently the President did a victory lap in New York and 
announced that $25 million would be put towards those that had 
responded on September 11, stood on that pile digging for their 
friends and loved ones and are now dying. I can't find it in me 
to say thanks, though. Twenty-five million dollars is a 
fraction of the $1 billion or so that is probably going to be 
necessary; $25 million should not cleanse the Federal 
Government of its responsibility when it was the Federal 
Government that said it was safe for these heroic men and women 
to be there with paper masks over their face. And $25 million 
is really not a great gift when the rest of the budget cuts New 
York $2.7 billion.
    So I think it is commendable that to some degree your 
administration has said it is the responsibility of the Federal 
Government for these folks that are dying little by little, day 
by day, but I also think that it is shameful to do the victory 
lap about the $25 million and then hide from the $2.6 billion 
responsibility.
    Well, today you are not going to be able to do that. But I 
welcome you.
    The Chairman. The Chair thanks the gentleman.
     Chair notes that I think we have heard from all the 
Members who desire to make an opening statement.
    Is there any Member who desires to be heard at this time 
for an opening statement?
    Very well, then, Mr. Secretary, we express to you our 
affection and our welcome. If you would like to have somebody 
there at the witness table with you, it would be perfectly 
proper, and the Chair would say you may do so or even encourage 
you if you so desire.

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

    Secretary Leavitt. Thank you, Mr. Chairman. And may I 
express what a privilege it is to appear before you and this 
committee on your first committee hearing.
    I will accept your invitation at appropriate times. If 
there are those who can give better answers than I am equipped 
to, I would like to be able to provide the best information we 
have available.
    This is a complex and a large budget. It required hundreds 
of people the better part of the year to develop, and there 
were tens of thousands of individual decisions. Rather than 
attempt today to select individual items from my opening 
remarks, I think it would be most helpful if I could just 
provide some context and move as rapidly as possible to the 
individual topics that the various members have indicated.
    Most of you are aware how this budget is arrived at. The 
President does, in conjunction with the Office of Management 
and Budget, lay out a context and does, in fact, provide 
instructions and themes and priorities.
    It is then sent to the various Cabinet members who have the 
responsibility then to provide instructions to those who lead 
the Department.
    I think it would be important for me to establish that 
context. It is very clear to me, and I hope to you and the 
American people, that the President shares the view that every 
American ought to have access to an affordable basic insurance 
policy. He shares the view that our homeland should be safe. He 
shares the view that we should do all we can to provide 
assistance to those who are in need.
    There is also a need to balance our budget. And this budget 
focuses a priority on balancing the budget by the year 2012.
    It is important in the President's mind, in addition to 
meeting those obligations, that we keep our economy strong. It 
is important to him that we keep our taxes affordable, that we 
spend taxpayer money wisely.
    Having those priorities given to me as a Cabinet Secretary, 
I called together my colleagues and gave them a set of 
guidelines. And I would like to review those with you if I 
could, because I think it will give you a context to understand 
the nature of these decisions.
    I first of all indicated to them that there were--there 
would obviously be a need to alter the glide path of the budget 
if we were going to balance by 2012, and that would, of course 
require choosing between programs, all of which had noble 
purposes.
    It is clear to me, and I am sure to all of you, if we are 
to balance the budget by 2012 it does require the selection of 
priorities between noble projects. And I don't have any 
question about the fact that there will be differences of view 
between Members and between the Congress and the administration 
on what those priorities should be.
    My purpose today isn't to reconcile all these 
disagreements, but simply to make certain you understand, the 
best I can, the judgments that were made.
    Recognizing that the hard choices need to be made, we also 
recognized there would be new programs, new initiatives, things 
that were important for us to respond to. And I gave my 
colleagues essentially four principles to follow in selecting 
those. And let me enumerate them.
    The first was if there were high demand, highly effective 
programs that are serving people well, we do need to make 
certain that they are made a priority.
    I will give you some examples. Head Start. We protected 
Head Start in this process. I would also recognize the Indian 
Health Service. The issue has been raised many times on SCHIP. 
We believe SCHIP is a priority that needs to be reauthorized. 
And I am anxious to have a discussion on the basis of which 
that should be done.
    There were a number of Presidential initiatives that the 
President wanted to assure were met. And my job is to make 
certain that they are. I will give you an example. Community 
health centers. The President made a commitment when he became 
President to have 1,200 new ones, and, in addition to that, to 
seek out the counties that had the highest need and make them a 
priority. This budget will address that.
    The third principle was if there are pressing new problems 
that we need to address, then we need to find room in this 
budget to do so.
    Many of you have mentioned the FDA and the need for greater 
focus on drug safety. You will see in this budget a response to 
that, because we see that as a high new priority.
    The fourth was to continue to seek funding and to advocate 
for funding in some areas that we have advocated in the past 
that have not been funded to the degree we believe they should 
be. I will give you examples. Health information technology, 
very important centerpiece on how we can make health care work 
better. Fraud and abuse. I have been Secretary now for 2 years. 
It has become evident to me that we need to do more in that 
area. And this budget requires response to that from a 
Congress.
    The Commissioned Corps, part of our United States Public 
Health Service. Many of you talked about Katrina. That is a 
priority.
    Those are the four principles that I asked my colleagues to 
look for in terms of adding new items to the budget.
    Now with respect to the more difficult task of how we would 
balance out the glide pattern so that we could land a balanced 
budget by 2012, I provided them with six principles, and if you 
don't mind I will just enumerate them because I think it will 
give us the basis of some conversation.
    You will see some places in this budget where one-time 
funds were not repeated. Many of you will be advocates, as I 
am, for the Centers for Disease Control, for example. You will 
note that there are some one-time funds that we did not repeat 
in this budget because this construction was done.
    Second, we chose to favor programs where there was a direct 
providing of a service as opposed to the bolstering of 
infrastructure.
    Now again, I would like to be able to bolster 
infrastructure and provide basic service. But when we are 
trying to make these judgments, I offered the guidance to my 
Department that I would like to see them emphasize the actual 
providing of services.
    I will give you a very good example of this. You will see 
places here where, in advanced nursing for example, we did not 
increase the funding, and in fact have reduced funding in a 
couple of places. But we have increased basic nursing by the 
use of loan forgiveness and so forth.
    And we have also funded community health centers. There is 
an example of where I said if I can't do both, I would rather 
provide services than infrastructure. So, again, I recognize 
that those are both noble purposes, but so you will understand 
why that happened, they made the decision based on that 
guidance.
    The third principle was to look for places where grants had 
been concluded or where activities had actually been concluded. 
A good example of this is in the National Cancer Institute. You 
will see a minor reduction in the overall budget of the 
National Cancer Institute, but I would like to point out that 
there it would be an increase in the number of new competitive 
grants that are provided. Why? Because we chose, rather than to 
provide an ongoing funding for a grant that had been concluded, 
to emphasize new grants. And so there will be more competitive 
grants. We think that is an important strategy.
    Now, the fourth would be to eliminate programs whose 
purposes might be undertaken by a number of different agencies. 
Now, HHS is a big Department. This is a big government. And it 
won't surprise any of you to find that on occasion when a noble 
purpose is being pursued, that there are more people pursuing 
it than just one department, with one program. And so I have 
sought out places where I could find budgets that were 
attacking similar problems and tried to coordinate those. I 
have looked for programs that we were involved in where there 
was, in fact, a redundancy.
    I think I have probably taken enough time to give you a 
sense of principles. I am anxious now, Mr. Chairman, to get to 
the actual specifics of the Members' questions.
    [The prepared statement of Secretary Leavitt appears at the 
conclusion of the hearing]
    The Chairman. Mr. Secretary you are most courteous.
     Chair will recognize the present occupant of the chair for 
5 minutes.
    Mr. Secretary, how much new funding does the 
administration's budget add to the SCHIP program? I believe the 
number is $4.8 billion over a period of 5 years. Is that 
correct?
    Secretatry Leavitt. Mr. Chairman, we view the continuation 
of SCHIP as a priority and we see it being about $15.4 billion 
in the future and we----
    The Chairman. New money, Mr. Secretary.
    Secretatry Leavitt. We would add $5 billion of new money 
plus the $4.4 billion that is currently left over from previous 
allocations, and then the $5 billion that is in the base that 
is a----
    The Chairman. Our numbers are $4.8 billion. Are we 
incorrect? If so, sir, where please?
    Secretatry Leavitt. My understanding is it is a billion a 
year. I am informed that I rounded up.
    The Chairman. $4.8 billion.
    Secretatry Leavitt. Correct.
    The Chairman. Thank you, Mr. Secretary.
    Now, Mr. Secretary, last year's SCHIP covered 4.4 million 
children. The numbers I get as we review the budget and we 
consult with the actuaries at CMS is fiscal year 2008, 4.7 
million; fiscal year 2009, 4.7 million; fiscal year 2010, 4.4 
million; 2011, 4.4 million; 2012, 4.3 million. Are those 
numbers correct?
    Secretatry Leavitt. Mr. Chairman, I am not able to follow 
the individual points. Let me give you the principle which we 
operate----
    The Chairman. Mr. Secretary, I would love to get that but I 
have to get down to numbers because we are talking about them. 
I don't mean any disrespect----
    Secretatry Leavitt. Do you want me to read them off again 
and ask my able counsel to help us.
    The Chairman. If counsel can help us. Are those numbers 
correct, sir?
    Secretatry Leavitt. I am informed they are correct.
    The Chairman. Thank you, Mr. Secretary.
     Now, Mr. Secretary, outside sources, including the 
Congressional Research Service, estimates it takes three to 
four times $4.8 billion in the President's budget to keep the 
children from losing coverage; is that true?
    Secretary Leavitt. We believe that the budget we have 
provided or that we have proposed is adequate for us to 
continue SCHIP. We do believe that SCHIP in the future ought 
not to be covering more adults than it currently covers, and we 
believe that it should be focused on children who are in the 
most need. And we look forward to working with Congress to 
achieve that.
    The Chairman. I hear you, Mr. Secretary, but with great 
respect, this is not responsive to the question.
    Congressional Research Service and others estimate that it 
takes three to four times the $4.8 billion in the President's 
budget to keep children from losing coverage; is that correct 
or not?
    Secretary Leavitt. That would not be consistent with the 
belief of the administration.
    The Chairman. Well, I am going to ask you to document that. 
The numbers that we have gotten everywhere tell us that is the 
case.
    Now, Mr. Secretary, your budget provides no new money to 
help States with the cost of covering children. In fact, it 
does just the opposite. It cuts other domestic programs by $117 
billion over 5 years as compared to the current spending level, 
and it cuts Medicaid by close to $50 billion over 10 years; is 
that statement correct?
    Secretary Leavitt. The budget is as you point out.
    I would like to make clear that we believe the budget does 
make responsible changes in the growth rate of Medicaid and, I 
will add, Medicare, that we can provide the underlying health 
care that is required for the groups that those programs were 
intended to serve with the budget that we have put forward.
    The Chairman. Now, Mr. Secretary, here, let us take a 
family of three whose income is not more than $36,000, and we 
reduce the funding to the States to take them off the SCHIP 
program. Is that a fair statement that your package would 
remove families of three which have income of not more than 
$36,000 and reduce payments to the States so that they would be 
removed from the SCHIP program?
    Secretary Leavitt. That would be dependent upon the State, 
and it would be dependent upon the rules adopted by the State.
    The Chairman. Well, then in the 19 seconds I have 
remaining, will you assure me that will not happen?
    Secretary Leavitt. I can assure you that it is dependent 
completely on the State rules, and if you would like to help 
reconcile that particular example in the State of Michigan, I 
would be pleased to do that after the hearing.
    The Chairman. In other words, Mr. Secretary, you are 
advising us to pray, and I do.
    Secretary Leavitt. It is always a good thing, Mr. Chairman.
    The Chairman. Well, with that record, I now recognize my 
dear friend Mr. Barton for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman, and I will stipulate 
the minority also supports prayer. We are pro prayer on our 
side, and we know we are going to need a lot of it on this 
committee of this Congress, so we are for that.
    What does ``SCHIP'' stand for, Mr. Secretary?
    Secretary Leavitt. It is the State Children's Health 
Insurance Program.
    Mr. Barton. State. It means the States are partially 
responsible and the ``C'' is for children.
    What is your definition of a ``child''?
    Secretary Leavitt. Well, that definition, obviously, is 
established by the States themselves, and the States have the 
ability to define what they will----
    Mr. Barton. My definition of a ``child'' would be a 
youngster, a toddler, or somebody living at home with a legal 
guardian or his or her parents, somebody normally under the age 
of, say, 18, but there are some States that is not a child; 
isn't that correct?
    Secretary Leavitt. I will accept your definition, yes.
    Mr. Barton. And we have now, I think, in the vocabulary an 
interesting term, ``adult children.''
    Do you think the original SCHIP program was established to 
cover adult children?
    Secretary Leavitt. No, Mr. Barton, it was not. I was 
Governor at the time and serving as part of the Governors 
Association team that dealt with Congress, and I am quite 
familiar with the historical background on this. SCHIP was 
intended to serve children, and has done a very good job at 
that, and we believe it should be reauthorized and that we 
should be focusing on providing health coverage----
    Mr. Barton. So, as to those States that choose under law--
now it is legal--to cover adult children, maybe we should ask 
those States to pay for the cost of that coverage.
    Would that be an unreasonable request to these States?
    Secretary Leavitt. We believe that those adults who are 
covered--we do not propose to remove them, but we do not 
propose to allow additional adults to be covered, and think we 
should focus SCHIP on children.
    Mr. Barton. On children--and, again, your definition and my 
definition and probably 100 percent of the dais up here on both 
sides says a ``child'' is somebody under age, living with a 
guardian or at home, sometimes in an institutional setting, but 
definitely somebody who is not yet ready to go out in the world 
and take care of themselves in most cases. We are in agreement.
    Secretary Leavitt. [Nods in the affirmative.]
    Mr. Barton. What should we do about those--let me ask for 
some information.
    What is the minimum requirement in the law to be covered 
under the SCHIP program? Is it 100 percent of the Federal 
poverty limit; 150 percent; 200 percent? What is kind of the 
minimum?
    Secretary Leavitt. Well, in States where--first of all, 
those in the lowest income would be covered under Medicaid. 
Children who had greater income than Medicaid, but under a 
limit established by the States, were permitted to be covered 
by SCHIP. The State was then provided substantial flexibility 
and the means by which they would be covered.
    Mr. Barton. But what is kind of the basic bar? In Mr. 
Pallone's State of New Jersey, they cover up to, if I heard him 
correctly, 350 percent of the Federal poverty limit; 350 
percent, is that the normal standard?
    Secretary Leavitt. That is not. It is 200 percent of the 
poverty level.
    Mr. Barton. The average is 200.
    Secretary Leavitt. Yes. Certain States' approach to the 
Federal Government received waivers to----
    Mr. Barton. In my home State of Texas, what is it, 200 
percent?
    Secretary Leavitt. I think it is 180 in Texas.
    Mr. Barton. So I am at 180. My good friend from New Jersey 
is at 350. Should the Federal Government pay that delta between 
180 and 350 or should the Garden State of New Jersey's 
taxpayers? If they choose to cover it at 350 percent, maybe 
they should pay that difference.
    Secretary Leavitt. We do believe that it is reasonable to 
have State differences in the States, but we also believe that 
States have an obligation to meet their share of it and that 
there needs to be some equity in the way----
    Mr. Barton. I mean, that is one reason Mr. Pallone's State 
is going to spend its SCHIP money in the first 2 months of this 
year, and the State of Texas last year had a slight surplus 
which Mr. Pallone's State wanted to take in the negotiations 
right at the end of the last Congress.
    Secretary Leavitt. SCHIP was designed as a system of 
allotments, and many States, most States, chose to manage those 
allotments to where, if they were getting to the point of their 
budget running out, they slowed enrollment. Other States did 
not, and those that did not tended to be----
    Mr. Barton. My time has just expired. If the chairman would 
let me ask one final question.
    The Chairman. Without objection, so ordered.
    Mr. Barton. Thank you, Mr. Chairman.
    If a bill that passed the House a couple weeks ago becomes 
law, you are going to have the authority to negotiate Medicare 
prescription part D drug prices for all the senior citizens of 
America. How do you feel about that?
    Secretary Leavitt. I do not believe that any one person is 
as able a negotiator as an efficient market. The efficient 
market that has been created is working in a way that has 
driven prices down and kept customers happy, and we think the 
system is working well.
    Mr. Barton. Thank you, Mr. Chairman.
    The Chairman. Thanks to the gentleman.
    The Chair recognizes now the distinguished gentleman from 
New Jersey, Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
     I am not going to get into this State-by-State thing 
because I think it is irrelevant.
    The fact of the matter is we know--and the President says 
when he is of good conscience, that he cares about covering 
kids and the uninsured, and whether there is some woman whose 
kid is on the street and cannot, get health care in Texas 
versus New Jersey, it does not make any difference to me. I 
think they should all be covered, and if you listen to the 
President's rhetoric, he suggests that they should be.
    The problem is that even though, Mr. Secretary, you are 
saying that SCHIP is a priority and works, the reality is that 
what you are proposing or what the President is proposing is 
going to cut down on the number of kids that have health 
insurance. And I think that is a national disgrace, and it goes 
against the rhetoric that the President is using in his State 
of the Union address and when he is out on the road. If he 
wants to cover more kids, he is going to have to put more money 
up front for the SCHIP program; and effectively, he is not.
    A number of children's health experts estimate that it 
would cost approximately $12 billion to $14 billion over 5 
years to keep up with medical inflation to prevent currently 
enrolled children from losing their coverage. So, if you are 
giving 5 million in additional dollars--billion--that means 
less kids are going to be insured and more kids are not going 
to have health insurance, whether they are in Texas or whether 
they are in New Jersey or wherever they happen to be, and at 
least another $35 billion to $45 billion over 5 years is needed 
to reach eligible but uninsured children. And what you are 
effectively doing here is cutting back on the eligibility down 
to 200 percent, but we are not even covering the kids that are 
currently enrolled with the amount of money that the President 
is proposing in his budget.
    I just have trouble understanding how the President's 
proposal to reauthorize SCHIP will improve coverage for 
children because common sense tells me that when you underfund 
a program and limit eligibility, a number of children are going 
to end up losing coverage. And I just have a couple of 
questions.
    Do you have a sense of how many uninsured children 
currently eligible--I say ``currently eligible''--for SCHIP 
will be enrolled because of the President's proposal? Do we 
have any numbers in that regard?
    Secretary Leavitt. Congressman, could I just respond 
generally and then to your specific?
    It is the belief of the President, and my own belief as 
well, that every person in America needs to have access to an 
affordable basic policy. There are two divergent views that are 
presented on how we should arrive at that point.
    One view is that the Federal Government essentially should 
ensure or provide coverage to everyone. The other view is that 
there is a basic Federal responsibility to care for those who 
are the most needy, and then that we have through our State 
governments a responsibility to assure that there is a market 
where people can buy a basic, affordable policy.
    This week I met with Governor Corzine from the State of New 
Jersey, who shares that aspiration and desires to see every 
person have an affordable basic plan. Recognizing that there 
may be a difference on which children should be covered by 
SCHIP, we have agreement on the fact that SCHIP is an important 
component part and that if you are poor or elderly or disabled, 
or if you are a pregnant mother in a low-income situation, or 
if you are a child needing protection, you will get coverage. 
SCHIP is a very important part of it.
    Mr. Pallone. Mr. Secretary, I just do not want my whole 
time to run out.
    The problem is this is a budget hearing, and we are talking 
about dollars, and I have no reason to believe--and if you have 
some reason to believe otherwise, tell me. I have no reason to 
believe that the level of funding that is being proposed by the 
administration is enough to even pay for the kids that are 
enrolled now, let alone expand it. In most States, there are 
more kids eligible and not enrolled in the SCHIP program than 
there are actually enrolled. So if you cannot even keep up with 
your budget numbers with those who are currently enrolled 
because of inflation, we are never going to get to the kids 
that are eligible even under your 200 percent and are children, 
not adults. We are never going to get to them. And the 
President goes out and suggests that he wants to do something 
about it, and for him to say ``well, OK, that is up to the 
States'' is not solving the problem because we know that a lot 
of the States do not have the money.
    Secretary Leavitt. Well, Congressman, let me make clear 
that we view the proposal we have made as being adequate to 
cover those children who are currently covered under SCHIP and 
to cover the program as it is currently constituted. We do not 
view that SCHIP is the vehicle to cover all children.
    Mr. Pallone. OK. I appreciate that.
    Let me just say, because I have only 15 seconds left, at 
the same time, you have significant cuts in the Medicaid 
program. Now, SCHIP is simply supplemental to Medicaid and does 
not cover as many people as Medicaid. If you cut Medicaid, how 
are you going to make up for the loss of the uninsured there?
    Secretary Leavitt. We are not proposing cuts in Medicaid. 
We are proposing savers to reduce the growth rate, and at some 
point as we go through, if you would like to go through 
individually, I would be very pleased to reconcile the 
reasoning that we used in how we made those decisions.
    The management of a program as big as Medicaid demands that 
you continue to look for ways to reduce the cost so we can 
serve more people. It makes no sense for us to allow a business 
to go forward without refinement.
    The Chairman. The time of the gentleman has expired.
    The Chair recognizes now the gentleman from Georgia, Mr. 
Deal, for 8 minutes.
    Mr. Deal. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here, recognizing the 
difficulty of anyone trying to explain budgets as large as the 
one that you preside over, but I thank you for being here and 
being willing to entertain our questions.
    I, for one, welcome the suggested changes that you are 
proposing to the SCHIP program, and let me tell you why.
    First of all, it is a block grant program, as you 
indicated, and if my figures are correct, the current poverty 
level in this country is $20,650. If I take that and compare it 
with the 200 percent of poverty that you are talking about 
proposing for SCHIP eligibility, that is $41,300 for a family 
of four, and I am speaking of a family of four.
    Now, if you go from that level to what we find in some 
States at 350 percent of poverty for a family of four, it takes 
it up to $72,275, which is the current eligibility level that 
some States have for their SCHIP program.
    Now, quite frankly, in poor States like the State of 
Georgia and many other States that are considered poor, if we 
were to extend eligibility for SCHIP and extend it to the 
family itself, which is being done in some States, at the level 
of $72,275, my State would be in great shape. But the reality 
is that is not practical, and I think what is happening with 
the SCHIP program is an idea that certainly was welcomed at the 
time but has gotten out of hand. The waivers that have been 
granted for expansion to the program are at a level that we 
just cannot simply afford it, and I welcome the changes that 
you suggest.
    Would you give us a brief overview of why you are 
suggesting the changes to the SCHIP program?
    Secretary Leavitt. I would like to put that, Congressman, 
in the context of our vision that everyone ought to have an 
affordable basic plan. We think that SCHIP is an important 
component of how we insure specific populations, but if we use 
SCHIP as essentially the engine to pull us toward a point where 
everyone is covered by the Federal Government, we do not see 
that as in the interest of the American people or of taxpayers.
    We have a vision of SCHIP covering children, meeting the 
mission that it has been given. We support its reauthorization.
    Mr. Deal. Now, when we look at Medicaid and the reforms 
that are proposed there, as I understand the proposal, the FMAP 
formula for all States would be at 50 percent; is that correct?
    Secretary Leavitt. We propose, on administrative expenses 
only, that it would be at 50 percent. We see a continuation of 
FMAP as it currently is with respect to the reimbursement of 
health care costs.
    Mr. Deal. I see. So it is not 50 percent across the board 
then?
    Secretary Leavitt. No.
    Mr. Deal. OK. Well, obviously, that would cause some 
concern for the poorer States that are at a higher FMAP level 
for the reimbursement of services. I appreciate the 
clarification on that.
    Let me also compliment you for the proposals that you have 
put in place with regard to building on the reforms that we 
have worked hard to put in place in Medicaid reform during the 
last Congress. And I know this committee heard from the 
National Governors Association, who were basically leading the 
charge for reforming Medicaid, because every State was facing 
crises with funding their own portion of the Medicaid formula.
    Would you briefly highlight some of the proposals that you 
are making for further amplification of Medicaid reforms?
    Secretary Leavitt. Yes. Thank you, Congressman.
    For example, we believe that Medicaid ought to be used for 
the purpose of paying for health care for those who are less 
fortunate. We do not believe that it ought to be the means by 
which we finance schools. There is a proposal for us to 
eliminate payment for some administrative functions that 
schools are billing us for. We want to pay for services, not 
for administration.
    Another example is that we believe that we need to have 
graduate medical education in our States. We think Medicaid is 
not the way to do that. We think there ought to be a more 
rational way of apportioning the burden of medical education.
    We also believe that we are overpaying for pharmacy. 
Medicaid is, by far, the highest-priced pharmacy reimbursement, 
not just in the Federal system but in the private system as 
well. And therefore we propose various savers. All of these are 
savers. None of these are cuts in Medicaid. All of this goes 
toward reducing the pressure so that we can make this a 
sustainable program.
    Mr. Deal. Well, obviously, one of the largest components of 
the Medicaid program is long-term care, and the last time, we 
tried to make significant changes, and I think we did move in 
the right direction for the reforms that this past Congress 
adopted. One of those was how much of an asset can you have in 
your home and still be eligible for the taxpayer to pay for 
your nursing home expenses? And we had--because of compromises 
that were put in place, we originally were at a half a million 
dollars, and we allowed under the change up to $750,000 if the 
State elected to go--and you are recommending that $750,000 be 
removed and that there be a cap at a half a million dollars?
    Secretary Leavitt. No. We believe that a person being able 
to protect a half a million dollar home is adequate. In some 
cases, that is even higher than under the bankruptcy statute. 
It leads, obviously, to a situation where a person has an 
incentive to acquire a larger home in order to preserve assets. 
A person with a three-quarter to a quarter of a million dollar 
equity in their home probably does not need to have public 
assistance through Medicaid.
    Mr. Deal. Well, I commend you for that position. It was one 
that we tried to advocate. We did not quite succeed in keeping 
it at that level, but I commend you for recommending it again.
    With regard to Medicare part D, are you generally pleased 
with the enrollments that have occurred and the projected cost 
of participating in Medicare part D, and can you give us some 
updated information as to where that stands?
    Secretary Leavitt. It continues to be very good news.
    We added over a million people after the recent 
reenrollment. We went through the reenrollment with very few of 
the problems that occurred during the initial implementation 
during the first 3 weeks. We now have well over 38 million 
people, 90 percent of those who are eligible. Of those who have 
enrolled, some were between 70 and 80 percent, depending on the 
survey that you look at.
    People are happy with this, and they are saving money, 
about $1,200 a year on average. The original estimate was $37 a 
month. This year the average will be $22. Why? It is because of 
competition. And do not take my word for it. That is what the 
actuaries tell us. They tell us that when people are given an 
opportunity to have good information about cost and quality, 
they choose high quality and low cost, and the efficient hand 
of the marketplace is clearly playing out here.
    Mr. Deal. In one of the debates that is ongoing in light of 
the language that the House adopted recently, allowing or 
instructing you to negotiate the drug prices, I think one of 
the assumptions was that if you had the ability to negotiate on 
behalf of all Medicare beneficiaries that you would be the 
largest negotiating bloc in the entire health care industry.
    My understanding is that there are some private insurance 
companies who, because they insure people beyond the Medicare 
population, actually have a larger bloc of population on whose 
behalf they negotiate prices; am I correct?
    Secretary Leavitt. You are correct. That negotiation, a 
rigorous negotiation, takes place now, and that is part of the 
competition that we have seen. Plans, very clearly, have to 
perform with the highest quality, at the lowest cost, in order 
to keep a customer. And it is happening now, and there are 
large-scale, rigorous negotiations taking place, and that is 
why we are seeing the drop in prices.
    Mr. Deal. Thank you, Mr. Chairman.
    Ms. DeGette. [presiding]. The Chair recognizes Mr. Stupak 
for 5 minutes.
    Mr. Stupak. I thank the Chair.
    Mr. Secretary, in 2002, I successfully included language in 
the Best Pharmaceuticals for Children Act that would ensure 
consumers know that they have the right to report to the FDA, 
side effects they are experiencing with a drug. This provision 
was intended to empower consumers and give the FDA more 
information to help identify adverse events and to take the 
necessary action. It took the FDA more than 2 years to issue a 
proposal, despite language in the law that required a final 
rule within 1 year of enactment. I sent comments in to support 
a proposal over 2 years ago. Yet no action has been taken by 
the FDA to finalize a rule.
    Mr. Secretary, it has now been 5 years, and the FDA has 
completely failed to implement this provision. It is estimated 
that 10 percent of all adverse events are ever reported to the 
FDA.
    Why, Mr. Secretary, has the FDA not taken action on this 
rule? Can we be assured that the FDA will take action to issue 
this rule within the next few months?
    Secretary Leavitt. Mr. Stupak, I am not able to give you a 
response now. I will give you one directly, following our 
hearing, by letter.
    I would like to tell you that I share the concern that you 
have on drug safety, and that ultimately the best way for us to 
begin to gather information on adverse effective drugs will be 
having an effective system of electronic medical records where 
we will see those kinds of reports on an ongoing and regular 
basis.
    Mr. Stupak. But with all due respect, Mr. Secretary, we do 
not need electronic medical records. All this is is a label on 
your prescription bottle saying, ``If you have an adverse 
effect of this drug, report it to the FDA: 1 (800) FDA-1088.'' 
it should not take 5 years when the law says 1 year.
    Secretary Leavitt. I will be responsive to your inquiry. I 
am not able to at this hearing.
    Mr. Stupak. OK. Well, let me ask you this one.
    Short of pulling a drug off the market, the FDA has no real 
enforcement authority when it comes to pulse market regulation. 
According to a recent Institute of Medicine report on the 
future of drug safety, the FDA's regulatory and enforcement 
options after a drug has been approved generally lie at the 
ends of the spectrum of regulatory actions: either do nothing, 
or precipitate the voluntary withdrawal of prescription drugs.
    Doing nothing implies not taking action on potential health 
threats to the public, and precipitating withdrawal implies 
caving in to the drug companies' financial interests. 
Therefore, the Institute of Medicine recommends that Congress 
ensure that the FDA has the ability to require post marketing 
assessments such as labeled boxes, box warnings and the 
fulfillment of post market study commitments by pharmaceutical 
companies. Again, it is something we put in the Best 
Pharmaceutical Act for children. These conditions may be 
imposed before both and after approval of a new drug, a new 
indication or a new dosage, as well as after the identification 
of new patterns of adverse events. But again, we do not know 
about adverse events because we do not tell people to report 
them, because we have been waiting 5 years to do that.
    Do you agree with the IOM on this recommendation? Would you 
suggest to Congress additional enforcement authority for the 
FDA?
    Secretary Leavitt. We view the IOM report to be an 
important road map to improvement, and there is a general 
belief--and I hold this belief--that we can improve in this 
area. And we look forward to working with you and other Members 
of Congress to implement in the appropriate way the IOM 
recommendations.
    Mr. Stupak. Well, the reason why I am asking about drug 
safety is because that is a concern of ours. It has been 5 
years since we have done--and none of this has been 
implemented. We are not going to allow legislation to go 
through, saying you have to do things within a year and it is 5 
years.
    While you may agree with the recommendations, please tell 
us if you think there are other things the FDA should be doing, 
and hopefully we have some reassurance the FDA will actually do 
it.
    Let me ask you one more that we have done on O&I while I 
still have a minute left. In December 2006, Dr. Trey 
Sutherland, chief of the Geriatric/Psychiatry branch at the 
National Institute of Mental Health pled guilty to conflict of 
interest charges brought by the U.S. Attorney's Office. These 
charges are based on investigative work performed by the 
Oversight Investigation Subcommittee and supplied to the NIH 
beginning 3 years ago. It is my understanding that both NIH and 
the Commission's Corps have failed to discipline Dr. Sutherland 
even after criminal charges have been sought.
    Is there any reason why two of the agencies that you 
oversee have yet to discipline Dr. Sutherland?
    Secretary Leavitt. Congressman, I am not familiar with that 
specific case. I would be pleased to find out about it and give 
you a response in writing.
    Mr. Stupak. OK. I have many other questions on more 
specifics, but we will be having hearings on drug safety, and 
in fact, we have one next week starting. So these are issues of 
concern to the subcommittee, and we will look forward to 
working with you.
    Secretary Leavitt. Thank you.
    Ms. DeGette. The Chair recognizes Mr. Upton from Michigan 
for 6 minutes.
    Mr. Upton. Thank you, Madam Chair.
    I appreciate your willingness to come up again. It is a 
daunting task. I wanted to follow up on Mr. Barton's question 
on the SCHIP just for a moment.
    I know that Michigan is one of those States that does, in 
fact, have beneficiaries who are over 18 participating. I am 
just curious to know how many other States are in that same 
category, and is there a ceiling or a cap in terms of the age 
of eligible folks who are able to benefit from SCHIP?
    Secretary Leavitt. I do not know the number of States, but 
I can tell you----
    Mr. Upton. Is it a big number?
    Secretary Leavitt. Well, I know there are three States that 
have more adults than they do children.
    Mr. Upton. Really? So over 18?
    Secretary Leavitt. That is right.
    Mr. Upton. Wow.
    The next question I have involves NIH. I have been one of 
the leaders, and I thought it was a great victory for this 
Congress to the degree that we were able to pass a renewal of 
the NIH reauthorization bill last year under Chairman Barton, 
and it was with great bipartisan support that it was promoted 
and passed. And I was part of the team that Speaker Gingrich 
actually put together back in the mid- to late 1990's, along 
with Mr. Barton and Mr. McCain and others in the Senate 
bipartisan group, to double the level of funding for the NIH. 
And it is my understanding that the CR that we passed this last 
week was carefully negotiated with not only the administration 
but on both sides of the Hill, and the funding level for the 
NIH and the CR that was passed in the House and is now pending 
in the Senate included $28.9 billion for the NIH for fiscal 
year 2007. I think that is the right number.
    My question is: In the President's budget that we received 
yesterday, the 2008 budget request is actually less than the CR 
provided for that we passed in the House last week. And I am 
just curious to know what your comment might be since you did, 
I guess, part of the negotiating for that level.
    Secretary Leavitt. Well, much of this is a function of 
timing. As you know, it is rather complicated what you are 
comparing to because of the introduction of the continuing 
resolution, and I think the important thing is here we want to 
support NIH. The budget that you are saying was prepared would 
have been prepared in advance of that agreement.
    Mr. Upton. Right. But you could accept a larger increase in 
the NIH budget knowing that it would otherwise be a reduction 
from what we passed last week?
    Secretary Leavitt. Well, would I accept it? Obviously, but 
what the actual----
    Mr. Upton. I do not see your support in the back, so--I 
know he is listening.
    Secretary Leavitt. That does not change our budget. Let me 
explain to you, if I can, what we are focused on at NIH.
    We have seen substantial new investment over the course of 
the years. We are focused now on making certain that the 
research we do continues to focus on new investigators and 
continues to operate in a way that we are getting new grants. 
And we are beginning to use more competitive grants, and we are 
looking also to get more projects that go across the various 
silos that naturally exist within NIH. You will see that being 
our focus.
    Mr. Barton. If the chairman will just yield for 30 seconds.
    We do support funding NIH at the authorized levels. We had 
one ``no'' vote on this entire committee on the reauthorization 
bill; we had two on the floor, and we had none in the Senate. 
And we did commit on a bipartisan basis that if we could get 
that reauthorization through, we would support significant 
funding increases for NIH, so we are going to continue to press 
for that.
    Mr. Upton. I am pleased to hear that.
    There has been some criticism level in this budget with 
regard to across-the-board cuts on providers, such as 
hospitals, under the Medicare market basket update cuts. And my 
question in this regard is that--we have a number of hospitals, 
I know, in my district that have done a very good job with 
health IT, with a whole number of different efficiencies that 
they have proposed, and my question is: Aren't we at some point 
penalizing these hospitals that have improved their 
efficiencies to such a degree that when we just take a slice, 
an across-the-board cut, that we are actually penalizing these 
hospitals in contrast to those that have not undertaken the 
same type of efficiencies? Is there not a better way to do 
this?
    Secretary Leavitt. In years past, even prior to this 
administration, there have been a number of occasions where 
they have not funded the entire market basket. In fact, it 
would be the rule, not the exception. The rationale we used in 
developing our proposal, which is 0.65--the market basket is 
minus 0.65--is we just took half the productivity increase that 
MedPac suggested that they would see, which is 1.3 percent. We 
figured let us have taxpayers benefit half, and the hospitals 
can receive half. Other than that, we concluded to fund the 
market basket for most hospitals.
    Mr. Upton. You were in Michigan last week and, I know, met 
with some of my State legislators. In the budget that was sent 
out yesterday, the preventative health and health services 
block grant was proposed to be eliminated. One of the 
provisions that one of my State senators, Tom George, proposed 
was a greater emphasis on smoking cessation programs; diet; a 
whole number of different things.
    It would seem like this would be a natural way where we 
could save money, and I am not quite sure how that fits with 
the elimination of this program.
    Secretary Leavitt. That was actually a continuation from 
last year.
    Mr. Upton. Simply because you proposed it last year, you 
did it again this year?
    Secretary Leavitt. You are exactly right. You have got it.
    Mr. Upton. OK. All right. My time has expired. Thank you.
    Ms. DeGette. The gentleman from Massachusetts, Mr. Markey, 
is recognized for 5 minutes.
    Mr. Markey. I thank the gentle lady very much.
    So just as coincidence would have it, I am the ``no'' vote 
out of all Members of Congress on the NIH reauthorization last 
year, and the principal reason that I was opposed is that in 
the last Congress, once again, there was not an increase in the 
NIH budget that would cover inflation; and as everyone in this 
room knows, over the last 4 years, there has been actually a 
12-percent cut in the NIH budget if you factor in inflation, 
and the consequence for research is dramatic.
    And we know that the President continues to adhere to the 
position that his tax cuts are sacrosanct, but we realize that 
a price has to be paid. In my opinion, this is the area that 
pays the single greatest price, because research is medicine's 
field of dreams from which we harvest the findings that give 
hope to the tens of millions of families that are afraid that 
that disease which has already affected someone else in their 
family could affect others in their family, whether it be 
Alzheimer's, Parkinson's, cystic fibrosis, diabetes, you name 
the disease.
    And the Bush administration--Mr. Secretary, I know that you 
are handed these numbers by President Bush. I just think 
President Bush makes a terrible mistake. When he is told that 
he has to make the choice between his tax cuts and research for 
all diseases in America, I just think he makes the wrong 
decision. And while it is true that the Republicans did vote 
for an increase in authorization for NIH, that was before they 
voted against an increase in appropriations, and the reality is 
that at $28.9 billion for fiscal year 2007, heading into fiscal 
year 2008 where there is not going to be an increase, there are 
tough choices that have to be made in terms of who is going to 
get funded for the research which is going to hopefully solve, 
find the clues at least, that can lead to the solving of these 
incredible diseases which affect American families.
    So I know that you are put in an impossible situation here, 
but I will say this: that it is a moral choice which President 
Bush is making. It is the wrong choice. Far greater than any 
threat from any terrorists to the average American is the 
threat that a disease which they already know exists in their 
family is going to afflict another person in their family. That 
is the greatest threat to every family in our country. And if 
there is an arsenal that could be used in order to give 
protection to a family, it is this NIH budget. And from my 
perspective, there is no more important issue that we are going 
to work on in this Congress. It will be to rectify this 
disaster area which President Bush, the White House, OMB, have 
created. And I know that at HHS you would welcome the money, 
and you would use it well, but I would--again, I appreciate how 
you are going to try to spread it around in ways that might be 
more effective, but it is much less money.
    So I will give you, Mr. Secretary, a chance to defend the 
President's tax policies and the consequences that it has for 
the NIH budget.
    Secretary Leavitt. Congressman, I support the President's 
budget. I recognize there is a difference in how you might have 
selected those priorities.
    An area where I believe there would be agreement would be 
how we are choosing to use the number we have, and I would like 
to articulate that to you because I think that would--I think 
you would be heartened by it.
    Mr. Markey. No. What I am saying is--what I would like you 
to justify is--President Bush's budget makes health cuts, 
health research cuts, in order to protect tax cuts. And that I 
would like you to defend, Mr. Secretary.
    Secretary Leavitt. The President obviously feels it is 
important for us to have a strong economy, and he views the tax 
cuts as integral to keeping a strong economy. He believes that 
$28.9 billion that the American people invest in research every 
year is a function of a strong, robust economy, and that if we 
want to see the kind of research investment that we all aspire 
to have, that it is critical to invest in the strength of the 
economy.
    Mr. Markey. Well, again, respectfully, Mr. Secretary, I 
disagree with President Bush. I think it is a misallocation of 
resources. Only the NIH can fully fund the cutting-edge 
research that the private sector will not invest in. And I just 
hope that he reexamines his decision on this issue. Otherwise, 
he is going to leave a legacy in the most important research 
area in all of the world, in a way that really will harm the 
hope that families need. And I thank you.
    Ms. DeGette. The Chair now recognizes Mr. Murphy from 
Pennsylvania for 6 minutes.
    Mr. Murphy. Thank you, Madam Chairman. Again, welcome, Mr. 
Secretary.
    In following up on conversations you and I have had before 
and in my opening comments here, I wanted to raise again some 
questions and see if these are things you continue to support. 
These are issues of how we can save money. Again, so much of 
the discussion here and on the Hill is about the cost of health 
insurance, and I know you are an advocate of work on the cost 
of health care through such issues as transparency and quality 
improvement, et cetera.
    There are a couple of issues I would like to find out 
specifically from you, and one that I raised earlier has to do 
with such things as the healthcare-associated infection rates. 
While we are all concerned about any illnesses or problems that 
occur or tragedies that occur, natural disasters, et cetera, in 
our Nation, it still is amazing to me--perhaps appalling is the 
word--that the Center for Disease Control reports that they 
have identified that there are about 2 million infections and 
90,000 deaths annually from healthcare-borne infections--subtle 
resistant staph infection to pneumonia, et cetera--and about 
$50 billion a year is from that.
    Now, I am submitting legislation to work on disclosure of 
that, because Pennsylvania is the only State that requires 
disclosure and makes that public. I believe about six States 
require it, but it is not out there.
    I am just wondering what some of your thoughts are in 
working with this Congress or with this committee on trying to 
directly address the massive expenses that go to such things 
that are so preventable. So many hospitals have been able to 
bring these numbers down to near zero, but as a Nation, we 
continue to pay the bills of those that are not working this. 
But there is plenty of evidence that it can be done. I just 
wondered what your thoughts are on how we can work to drive 
those costs down.
    Secretary Leavitt. I believe Pennsylvania is to be 
congratulated for their efforts to not only collect but to 
report information on hospital infections. It is unnecessary 
and it is preventable, and we need to move aggressively to make 
the information available and to reduce the infections.
    The best thing we can do is to have electronic health 
information systems that will gather the information, not only 
for the purpose of reporting, but also to be able to compare 
actual performance to standards that have been established by 
the industry themselves.
    Mr. Murphy. I appreciate that and I look forward to working 
with you on that.
    There is a second issue that you and I have spoken about in 
the past. While the President continues to maintain his 
emphasis on work in the community health centers, again I hope 
we can work on dealing with the issue that even--we do not even 
have enough physicians and nurses to staff the current 
community health centers. As you know, there is between a 10 
and 20 percent vacancy rate for OB/GYNs, for family practice 
doctors, for psychiatrists. And I have tried to deal with this 
before by trying to find some way of having doctors even 
volunteer, and hope we can continue to work on that through 
such things as allowing them to be covered under the Federal 
Torts Claims Act. It still is deeply concerning to me, and I 
hope we continue to work on that.
    Finally, I wonder if you can give us some update on the 
transparency issues. I know that the President signed an 
executive order last summer on this. Again, in so much of the 
time we are discussing the budget, we talk about the spending, 
and I think coupled with that should be how the administration 
is working towards reform and savings.
    Can you give us some information on how that is working and 
what kind of savings you see coming out of that?
    Secretary Leavitt. Congressman, we often refer to the 
``health care system.'' There likely is not, I think, a system 
you can say is health care. There is no economic system. We 
have a large, robust, rapidly growing sector, but there is no 
system. There is nothing that connects them together. We view 
the future to be a system of competition based on value, and to 
get to that system, we have to have four things. The first is 
electronic medical records. The second would be standards of 
quality that can be independently assessed and compared. The 
third would be cost assessments that people can compare, and 
the last would be incentives.
    The President created an executive order, putting the 
purchasing power of the Federal Government to implement those 
four cornerstones in Federal purchasing. We are now approaching 
the private sector and other large payors. We now have 10 of 
the largest 15 payors in the country who are committed to that. 
We have 51 of the largest 200. We believe that by April we will 
have nearly 60 percent of the entire health care marketplace 
beginning to work towards those four cornerstones. We believe, 
within 2 years, we will begin to see health care based on value 
in limited areas on limited procedures. Within 5 years, we will 
see the word ``value'' or that combination of cost and quality, 
as being a regular part of the medical lexicon. In 10 years, it 
will be ubiquitous.
    We are clearly moving on a pathway that will lead us to a 
transparent system of health care. Costs will be reduced 
because people will begin to pursue high quality and low cost, 
and we know that when consumers have that information they make 
those choices. Health care improves and the costs go down.
    Mr. Murphy. Well, I appreciate your continued commitment to 
this because patient safety, patient quality, and patient 
choice are three components that are really making sure we work 
to drive this forward. And I know the RAND Corporation said 
they estimate electronic medical records could save $162 
billion annually in reducing redundant tests and unnecessary 
hospitalizations. I know people in the health care system--
physicians, nurses, everybody in the health care--is dedicated 
to trying to work towards this quality, but we have to have 
that information in electronic medical records.
    I know you are making progress on this. I would like to see 
us move farther and Congress move faster on some of these 
things for standards, but please continue to push those. As 
part of the budget, it is too often ignored of how we can 
really drive costs down and not just find new ways of paying 
for it. So I thank the Secretary for coming here, and I look 
forward to continuing to work with you.
    Secretary Leavitt. Thank you.
    Ms. DeGette. The Chair now recognizes herself for 6 
minutes.
    Welcome, Mr. Secretary.
    Mr. Secretary, I assume that it is the administration's 
position that all eligible children for SCHIP or Medicaid 
should be covered; is that correct?
    Secretary Leavitt. We believe that the program should be 
focused on children and we do support its reauthorization.
    Ms. DeGette. Well, you talked to Mr. Barton about this 
whole concept of adult children, which you are in this budget 
proposing not to cover any longer; is that correct?
    Secretary Leavitt. We are proposing that those who are 
covered continue. We believe that we should focus our efforts 
on children; that is to say, those under 18.
    Ms. DeGette. Right. Now, all of those adult children who 
are covered right now are covered under waivers that this 
administration has given to the States, correct?
    Secretary Leavitt. That is correct, or a previous 
administration, and we would choose not to continue that 
practice.
    Ms. DeGette. OK. So, right now--so, according to CMS, we 
have 667,000 adults currently covered under the SCHIP program 
out of 7.3 million people who are covered in SCHIP.
    Do those numbers sound right to you?
    Secretary Leavitt. Those numbers sound in the ballpark, 
yes.
    Ms. DeGette. OK. So my question to you is, if you eliminate 
those adults--and by the way, those are not just childless 
adults who are in extreme poverty who are covered, they are 
also pregnant women and parents. If you unenroll those people, 
is it the administration's position that you will now be able 
to--and in addition to reducing the eligibility to 200 percent 
of poverty, is it your position you will now be able to cover 
all of the 2 million, roughly, kids who are eligible but 
unenrolled in SCHIP at this time?
    Secretary Leavitt. Let me be clear that we do not intend to 
unenroll adults who are currently in the program. We do 
intend--we would pursue a policy that would discontinue the 
enrollment of children----
    Ms. DeGette. OK, but to answer my question then, if you did 
not enroll any more adults then, is it your view that you would 
be able under this budget to enroll all of the rest of the kids 
who are eligible but unenrolled?
    Secretary Leavitt. It would be our position that SCHIP 
continue to operate as it does with State allotments, and 
States should be using those----
    Ms. DeGette. OK, but it is your goal--if it is the 
administration's goal to have all of these kids enrolled in 
health insurance, do you think this budget will be able to 
achieve that by reducing the eligibility to 200 percent of 
poverty and not enrolling any more adults? It is a simple 
question and it goes to the heart of the administration's 
policy here.
    Secretary Leavitt. The administration's policy is that 
every American should have access to an affordable, basic plan 
and that SCHIP is an important tool in being able to provide a 
portion of those that access, that it is important that we work 
with Governors like yours to develop plans similar to the ones 
that he has proposed where we are able to assure that there is 
some kind of access available to every child.
    Ms. DeGette. And do you believe this budget will be 
sufficient to enroll all of those kids, ``yes'' or ``no''?
    Secretary Leavitt. We believe that the budget is 
sufficient.
    Ms. DeGette. OK. Now, for a family of four, 200 percent of 
poverty is equal to $41,300. Under this budget, a family of 
four making $44,000 would become ineligible for SCHIP coverage. 
So if this family does not have access to employer-based health 
insurance, they are going to have to get coverage in the 
individual insurance market.
    How are they going to be able to find affordable insurance 
for their kids?
    Secretary Leavitt. The individual market does not perform 
in the way we aspire for it to, and therefore the President has 
made two very important proposals.
    One is to work with States, like the State of California, 
in developing proposals where there is an affordable, basic 
plan where the Federal Government is prepared to help with 
those who cannot afford it, like the one that you spoke of. But 
there is one problem that no State can solve, and that is the 
inequity that comes when a person who is a teacher's aide or a 
construction worker or a student, and does not have access to 
employer-based insurance, it is the inability for them to buy 
that in after-tax dollars. And therefore the President has 
proposed to level the playing field. There is no defendable 
reason that we provide a tax deduction to one employee who gets 
their insurance through an employer and not another. So those 
are two important reforms that we believe will strengthen the 
individual market.
    Now, may I say----
    Ms. DeGette. If you do not mind, Mr. Secretary, let us talk 
about that for a minute because I have a chart right here for 
Ennis, TX. It is in Mr. Barton's district, and if a family of 
250-percent eligibility--so still not a very high income 
family--is eligible for SCHIP right now, if they have to buy a 
private insurance policy in Ennis, TX, one of the policies, 
BCBS, would cost 61.4 percent of their income; one would cost 
23.9 percent; and one would cost 24.3 percent of their income. 
It is hard for any of us, on this side at least, to see how 
insurance policies this costly, even with the President's tax 
proposal, would be able to afford those policies even with the 
tax relief.
    Secretary Leavitt. Let us assume that that couple that you 
have spoken of in Ennis, TX--let us say one is a teacher's aide 
and the husband works in construction, and they earn $60,000 a 
year between them, and that is about--what?--275 percent, I am 
guessing now, of the poverty level.
    Clearly, they would be hard-pressed to have insurance for 
the reasons that you have spoken of. But under the two 
proposals that I have mentioned, first of all, there would be 
an affordable, basic plan available to them.
    Ms. DeGette. We are hoping the States develop those. They 
do not have that now, correct?
    Secretary Leavitt. Many States do. Texas, as a matter of 
fact, does. But let us just say for the purpose of this 
discussion that the President's proposals were enacted. The way 
it would be--that couple would receive a $4,500 tax benefit, 
and therefore the policy that they would purchase would be 
$4,500 a year cheaper. And let us assume that it was not enough 
and that the State of Texas decided that they wanted to 
subsidize the purchase of that insurance policy. We propose 
that the States would receive from the Federal Government 
assistance in being able to make certain that not only was a 
basic policy available but that a basic policy would be 
affordable.
    Now, it is possible that there would be people in Texas who 
do not qualify for SCHIP that would be helped in this way. We 
aspire for every American to have access to an affordable basic 
policy, but SCHIP should not be the vehicle by which we insure 
every adult and every child in America. There are different 
ways----
    Ms. DeGette. And I do not think anybody thinks that.
    Thank you, Mr. Secretary, and my time has really expired 
now.
    I would now like to recognize the gentleman from Texas, Mr. 
Burgess, for 5 minutes.
    Mr. Burgess. Mr. Secretary, thank you for your service to 
the country. We are indeed fortunate to have a man of your 
caliber serving in your position at this time.
    I think one of the things that perplexes me most of all is 
the SGR formula, and all of my discussions with Dr. McClellan 
over the last several years have led me to the conclusion that 
this is something that requires a legislative fix rather than 
an administrative fix.
    Am I correct in that assumption?
    Secretary Leavitt. The formula is a complex formula. Very 
few people understand it.
    Mr. Burgess. Yes or no?
    Secretary Leavitt. I personally believe there has got to be 
a better way.
    Mr. Burgess. I do as well, and that is why I wanted to 
bring it up, because we talk about the market basket formula. 
The SGR formula is a finite, fixed amount of dollars, and we 
slice the pie ever thinner if there are more people who make 
demands on that pie or submit invoices. The volume and 
intensity increases, and the reimbursement rates go down. But 
hospitals, drug companies, HMOs, Medicare, Advantage plans all 
enjoy market basket updates which the administration has now 
said perhaps we should look at those market basket updates as a 
place to arrive at some savings.
    So does the administration have a road map by which we may 
get to a more equitable system of provider funding? Whether it 
be a hospital or a doctor or an HMO or a drug manufacturer, 
does the administration have a road map as to how we get there?
    Secretary Leavitt. We believe that at least some portion of 
physician reimbursement ought to be based on the quality of the 
services that they render and the outcomes that they produce. 
We are not at the point at this moment that we can base large 
percentages of it, but some portion should. The road map 
includes electronic medical records which allows the 
information to be gathered on both quality and on performance. 
It involves having quality measures that can be independently 
assessed. We are in the process of working with the medical 
community if you want to----
    Mr. Burgess. So if we do all of those things--Medicare, 
which is an integrated program--perhaps then the funding silos 
would not be quite so rigid between the parts A, B, C, and D?
    Secretary Leavitt. That would be our aspiration.
    Mr. Burgess. Let me ask you a question on a completely 
different front, Hurricane Katrina.
    I have been down--in fact, our committee had a hearing a 
little over a year ago down in Louisiana. Charity Hospital for 
the first quarter of fiscal year 2006 received, as I understand 
it, or was due to receive, about $250 million in a 
disproportionate share of funds, so-called DSH funds.
    Is that a correct assumption?
    Secretary Leavitt. Actually it is over $1 billion a year.
    Mr. Burgess. The DSH money that was earmarked for Charity 
Hospital, where has that gone?
    Secretary Leavitt. Well, let me reconcile this.
    Louisiana receives just under $1 billion a year in a 
disproportionate share of hospital money. Under the Deficit 
Reduction Act, another $2 billion was allocated for recovery of 
the gulf region. We have allocated that money to the various 
States that were impacted, including Texas, to reimburse them 
for claims that they paid that were not otherwise compensated 
by Medicaid. We have allocated most of that money.
    Mr. Burgess. Allocated or paid?
    Secretary Leavitt. Actually paid. Paid, yes.
    Mr. Burgess. But the health care infrastructure in New 
Orleans, as I understand it--and I have not been down there for 
several months--but the health care infrastructure still is 
just literally hanging on by its finger nails.
    Secretary Leavitt. And other moneys were made available 
through other means in dealing with medical infrastructure, and 
that is an ongoing discussion.
    Louisiana properly wrestles right now with what they want 
the future of their health care system to be. Do they continue 
to use their charity system where they have two tiers--one for 
those who are insured and employed and one for those who are 
not? It is a very important decision, and they have an 
opportunity to upgrade on a perpetual basis their health care 
system if they choose that.
    Mr. Burgess. Perhaps that is a great idea for them, but 
should we not be giving them more encouragement to move ahead 
and move forward with this since there is a large component of 
Federal dollars that are involved?
    My discussions with doctors on the ground is that they are 
rapidly leaving the area as they are having to spend their own 
savings to keep their clinics open to see patients that cannot 
reimburse them because they have no health care coverage. 
Wouldn't we be better served by keeping those people on the 
ground and functioning and working in the gulf coast area, 
rather than allowing them to disperse throughout the country, 
and then trying to rebuild it whenever the State gets around to 
it?
    Secretary Leavitt. Two weeks ago, I sent $71 million to the 
hospitals and $15 million to the doctors and clinics for the 
purpose of whatever their need was, but most of them will be 
spending it on wage upgrades.
    Mr. Burgess. Did that have to go through a State agency for 
those hospitals and clinics to receive those dollars?
    Secretary Leavitt. It did, but the grant was made in a way 
that will assure that those dollars are received by the 
hospitals and clinics that need it.
    Mr. Burgess. I will look forward to following up with that. 
Let me just ask you a broad question. My time is about up.
    President Bush and I actually disagree on the fundamental 
question of how to deal with immigration reform in this 
country, and my side lost last November, so I have got to 
assume the President is likely to get his wish in the coming 
months. In all of the budgets that we are assessing today, how 
does the administration propose that we deal with the health 
care needs of 10 to 20 million people who may be in this 
country illegally as they then get in line for citizenship?
    Secretary Leavitt. Well, the larger question you ask is how 
do we pursue uncompensated care? And in my judgment, that is 
something that ought to be the subject of far more conversation 
than we have the time to have today.
    Ms. DeGette. Thank you very much.
    The Chair now recognizes Mrs. Capps from California for 6 
minutes.
    Mrs. Capps. Thank you, Madam Chair.
    Welcome, Secretary Leavitt, for being here today.
    I still am having a lot of trouble understanding how the 
priorities were determined in this HHS budget, especially after 
seeing the devastating cut. You have referred to it already. It 
is from $150 million to $105.3 million imposed on nurse 
workforce development. This includes the elimination of 
programs to strengthen advance practice nursing, and it comes 
after 3 years of flat funding.
     Keep in mind that back in 1974, Congress appropriated the 
equivalent of over 600 million in today's dollars for nurse 
education programs. I am sure you are aware that projections 
are that by 2020 our Nation will see a 29 percent shortage of 
nurses. HRSA itself reported in April 6, 2006 that nursing 
schools would need to increase the number of graduates by 90 
percent in order to address the overall shortage of nurses. You 
reference this in your opening remarks about training new 
nurses. But I would rejoin that you can't train new nurses 
without nurse faculty and these are the people who need these 
advanced degrees. And loan forgiveness for nursing students 
doesn't help if there is nobody to teach them.
    And so I want to get on record a very basic question to 
you. You do believe, don't you, that nurses are an essential 
part of our ability to deliver quality health care?
    Secretary Leavitt. I do.
    Mrs. Capps. And I am sure you also agree with assessments 
by HHS agencies that our nursing shortage is going to continue 
to grow if current trends continue?
    Secretary Leavitt. And if we continue to use current 
practices in the way we train them. There are many ways I 
believe we could expand that with----
    Mrs. Capps. Right. And as you just said, that is a subject 
for another discussion. You probably know that enrollment in 
nursing schools rose only 5 percent from 2005 to 2006, but over 
32,000 qualified applicants were denied admission because of 
the nursing faculty shortage and a lack of clinical placement. 
So it is pretty clear that decreasing funding for nurse 
education programs by $44 million is only going to harm our 
efforts to build a properly staffed nursing workforce.
    And I am also considering the emphasis our President places 
on bioterrorism and the pandemic flu preparedness. I believe it 
is blatantly counterproductive to divest from the front line of 
public health workers who could respond in the face of a 
national health emergency. Preparedness efforts are incomplete 
in the absence of a properly staffed public health workforce.
    And I do want to ask a follow-up question. I do have half 
my time left. And this is a big topic, but I would with like to 
know what the rationale is for these cuts in this budget. Just 
the highlights.
    Secretary Leavitt. Well, let me indicate as I did before 
that we were following, for example, the GAO assessment which 
indicated they believe they were an underperforming program. We 
also believe----
    Mrs. Capps. They were underperforming programs?
    Secretary Leavitt. That is right.
    Mrs. Capps. Current nursing schools?
    Secretary Leavitt. The grants that were being offered that 
we are proposing to be reduced was--GAO believed and we believe 
wasn't the best way to expend those dollars. I do believe that 
investing in the development of basic nurse infrastructure is 
an important one.
    Mrs. Capps. But you do understand we do have to have some 
kind of faculty prepared.
    Secretary Leavitt. We obviously do. But I am not certain 
personally, but you say this is probably a conversation for a 
different day, but I am not sure that we ought to be dependent 
completely on the large medical nursing school method. We have 
to find ways that will produce more nurses----
    Mrs. Capps. That could well be, but we have to have some 
kind of faculty, some kind of specialized personnel to impart 
the body of nursing knowledge to the second, to the incoming 
population. Let me go on because maybe we can come back and 
visit that topic.
    I am to understand also, I believe, in this budget that 
nursing education funding needs to be cut by one-third from 
last year, yet there is enough money to increase unproven 
abstinence only education, which the GAO itself concludes uses 
Federal funds for unproven scientifically inaccurate programs 
that lack oversight. I want to underscore this budget in actual 
dollars has 200 million and more in funding for abstinence only 
education but $105 million for nursing education.
    I am going to go on and talk about one other topic. You can 
come back to that if you want. I just want to make sure that I 
get another very big concern of mine out on the table, and that 
is these budget cuts and funding for the National Cancer 
Institute. It has been brought up before.
    In 2004, cancer deaths dropped for the second consecutive 
year. It is likely no small coincidence that the declining rate 
of cancer deaths coincided with an increase in NIH funding for 
many years, and that tells you something about the way the 
deaths--the way that it required for many years.
    But this year NCI funding is being cut. Even now the 
National Cancer Institute can only approve funding for 11 to 12 
percent of applications compared to 25 to 30 percent in past 
years. I don't think it was ever high enough.
    How can you justify impeding progress when this country is 
so committed to the 2015 goal of eliminating deaths from 
cancer? You were recently quoted in a National Journal article 
saying that we all want to invest more, but it is a function of 
capacity.
    And I refer back to my earlier question about the decision 
to fund unproven risky programs over life saving proven 
research. I want to ask you what is the justification for 
cutting cancer research? I know from personal experience--as 
many of us do--that it is not until stage 3--you talk about new 
cancer research--but it is not until stage 3 trials that this 
research comes to bear the kind of fruit that will actually--
and literally has--saved thousands of lives.
    Cutting cancer research funding I believe will directly 
impede our ability to reach the goal that was so poignantly 
expressed by Dr. Von Eschenbach to end deaths from cancer by 
2015.
    And I would like to have you now respond in the time that I 
have for how this is going to happen.
    Secretary Leavitt. Congresswoman, let me reiterate the fact 
that I don't think any of us have not been touched in some way 
by cancer and there is none of us who don't want to see it end 
and celebrate our progress. I want to point out we are not 
eliminating cancer funding. It is still the largest allocation 
of funding to NIH, in excess of $4\1/2\ billion a year. What we 
have chosen to do this year, however, is begin to award more 
competitive grants that we believe put us on the cutting edge 
of science. We continue that commitment----
    Mrs. Capps. But you would do this in the face of funding 
abstinence only----
    Mr. Stupak. I am sorry. The gentle lady's time has expired. 
I now recognize the gentleman from New Jersey, Mr. Ferguson, 
for 6 minutes.
    Mr. Ferguson. I thank the Chair. Welcome back, Secretary 
Leavitt. I am sure this is one of the most fun parts of your 
job. But we very much appreciate you joining us again as a 
committee and we are certainly very fortunate to have somebody 
of your caliber and your integrity serving in this very, very 
difficult capacity. We thank you for your service.
    Mr. Secretary, I want to talk a little bit about pandemic 
flu. You and I have discussed this on a number of occasions 
before.
    We have discussed preparedness. We continue to see reports 
from Asia and Africa, particularly in Egypt and Nigeria, and 
now we are even seeing reports in Europe about the spread of 
avian flu. The last stories I have seen point to 63 deaths from 
bird flu in Indonesia and, very alarmingly, 11 deaths in Egypt.
    For the record since it has been some time since we have 
had a chance to discuss this, I am sure you would continue to 
agree that it remains just a matter of time before this or some 
other pandemic strain mutates and is spread from person to 
person. If you disagree with that, please feel free to say so. 
But I continue to be very, very alarmed by that.
    To date, my understanding is that you have requested, and 
the Congress has appropriated, about $6.1 billion for the 
implementation of the $7.1 billion National Strategy on 
Pandemic Flu.
    I understand you are requesting $875 million, nearly the 
final billion, that would complete or fully fund the national 
strategy.
    Can you very briefly and generally talk for a second about 
what has been set aside for both antivirals and vaccines? And 
what has been spent of what has been set aside for antivirals 
and vaccines?
    Secretary Leavitt. Our pandemic plan can well be divided 
into five parts. The first would be the development of 
vaccines. Much of our $7.1 billion is involved in the 
development of new research as well as acquiring stockpiles. We 
continue to make heartening progress. We have released 
contracts now both on anti--on vaccines but also new 
antivirals, we have also made progress in the area of adjuvant 
technologies.
    I can tell you by that we are making progress toward our 81 
million courses of Tamiflu, for example, where we have--in 2008 
we will complete the 20 million course antiviral stockpile 
purchase to maintain the function of our health care system and 
to provide antivirals for our first responders and to stockpile 
an additional 24 million treatment courses for the treatment of 
influenza.
    We currently have--we are working with the States to 
complete that, all the States have taken advantage, almost all 
of them, there are four who haven't. So we are making very good 
progress, and I would say we are on schedule in every one of 
the five-point plan.
    Mr. Ferguson. I appreciate that. I know that of the final 
billion that would fund the remainder of the national strategy. 
I understand that the budget request this year is for $875 
million. Again we don't know when budgets are finished around 
here. We certainly don't know when they are appropriated.
    I would ask you to consider that if the administration is 
going to be submitting a supplemental this year, any kind of an 
emergency supplemental, whether it is for the war or anything 
else, that the administration would consider including the 
final billion dollars that would fund the National Strategy on 
Pandemic Flu, that that might be included as has been looked at 
and done in the past.
    I see this as a very urgent matter. I think it is a ticking 
time bomb. It is waiting to explode. And I just think the 
sooner the better that we fully fund and finalize this 
strategy. I think it will certainly be in the interest of the 
health care of our Nation.
    In the minute and a half I have left I just want to turn to 
one other topic.
    The budget that we are talking about today embraces the 
goal of personalized medicine instead of this ``one size fits 
all'' approach. I think that is something all of us would 
support, particularly with new technologies we have today and 
diagnostics and in other areas. Mr. Secretary, I just wanted to 
call to your attention legislation that I have supported in the 
past and will continue to support which would allow this 
tremendous gift of molecular diagnostics to help identify the 
types of treatments that are appropriate for each different 
individual.
    It is certainly the way of the future. It is a better way 
to treat diseases. It is a more humane way. It is a more cost 
effective way of treating diseases. For example, there is a 
test which would indicate if someone would respond in a 
particularly positive way to a breakthrough of breast cancer 
drug, for instance. As you know, this could make a tremendous 
difference in finding the most effective and efficient way to 
treat deadly diseases. And I would ask if you might be willing 
to work with us to move that type of legislation forward during 
this Congress.
    Secretary Leavitt. We view that as a land of great promise, 
and may I also say one of the things that Congress could do 
that would aid us in accelerating would be passing genetic 
discrimination protection. There is great worry that as we 
gather the information that is necessary to do the research and 
to organize it in a way that will help us make the 
breakthroughs here that people will be discriminated against 
and we need to give them the comfort of knowing they cannot be, 
and that bill I think will probably approach the House of 
Representatives very soon.
    Mr. Ferguson. Thank you, Mr. Secretary. Thank you, Madam 
Chair.
    Ms. DeGette [presiding]. I now recognize Mr. Doyle from 
Pennsylvania.
    Ms. Eshoo. Madam Chairwoman, could I just inquire about the 
time that the Secretary has? It would be instructive to know.
    Ms. DeGette. Mr. Secretary.
    Secretary Leavitt. I believe I was scheduled until 12:30.
    Ms. Eshoo. May I ask Madam Chair that if we don't have the 
opportunity to ask questions that we submit them directly to 
the Secretary and that we receive a timely response?
    Ms. DeGette. Mr. Secretary.
    Secretary Leavitt. I would be pleased to respond.
    Ms. DeGette. Without objection, so ordered. Mr. Doyle is 
now recognized for 5 minutes.
    Mr. Doyle. Thank you, Madam Chair. Mr. Secretary, welcome.
    In our dealings in the past when you were over at EPA, I 
had the pleasure of working with you on some issues and I want 
you to know I think you have done a good job there and I think 
you are a good person. I think you also have an impossible task 
trying to defend this budget given the constraints put upon you 
by the President.
    I want to talk a little bit about the affordable choices 
and suggest that maybe you need to think about going back to 
the drawing board on this one.
    I have been in the insurance business since 1975. I am 
licensed in all lines of insurance. I used to sell a lot of 
health insurance policies.
    It seems to me that the end result of the President's 
proposal of affordable choices is to put many more Americans 
into the individual insurance market, the most costly of the 
markets, group insurance obviously being less expensive than 
individual insurance.
    The problem that I find with most working poor that don't 
have insurance isn't that they can't get insurance. They can't 
afford insurance.
    When you look at the President's proposal, and he cites 
that a couple making $60,000 a year would save $4,500 in taxes, 
now that is assuming they are self-employed and are paying the 
15.3 percent in Social Security and Medicare tax. But if you 
have someone who is working poor, working for someone else, 
their actual saving is more than like $3,400. Now this is a 
couple making $60,000. Now I don't know about the rest of the 
country, but in Pittsburgh, PA, the people that I represent, 
most of the working poor in my congressional district aren't 
making $60,000. They are making between $20,000 and $30,000 and 
their employers aren't offering them insurance. And the 
deduction that the President proposes would put far less 
dollars back in their pockets than the $3,400 cited by a couple 
making $60,000. I don't believe a couple making 60,000 could 
find individual insurance for $300 a month. And I certainly 
know a couple making 20 to 30,000, they would be placed out of 
the market.
    The second point I want to make, though, and get your 
response to is the impact this has on those same families. This 
is like a double whammy. What we are basically asking the 
working poor in this country to do is to trade reduced 
retirement benefits in the future for some assistance in trying 
to buy health care today.
    And the reason I say this is that the formula that 
determines what you get in Social Security payments is based on 
how much you pay into the system and how much your employer 
pays into the system.
    And for those people that are making $100,000 a year, the 
people that are at the max and above, under this formula they 
would get about a 15 percent reduction in their benefits of 
Social Security. But when you apply the same formula to the 
working poor, people making between $20,000 and $30,000 a year 
and they are getting this $15,000 exemption to Social Security, 
their benefits--I saw a study that was done by, I will get the 
name of the organization, the Tax Policy Center in Washington, 
estimated that their benefits could be cut up to 50 percent.
    So it is sort of a double whammy. On the front end we are 
not giving the working poor enough dollars to go out and 
purchase insurance in the private market, in the individual 
market. And on the back end we are cutting their Social 
Security benefits because of this $15,000 exemption that they 
have taken advantage of.
    So my question is, how does the administration propose to 
make up this huge loss of retirement income and this plan for 
the very people who rely on their Social Security payments the 
most? I mean, I don't believe the administration has something 
against working poor, but it just seems to me that they get it 
on both ends of this deal. They don't get enough money to buy 
insurance in the private market and they get their Social 
Security benefits reduced on the back end. And I think that is 
a terrible dilemma to put our people in and I just wonder how 
the administration proposes to make up for the loss of 
retirement income.
    Secretary Leavitt. Congressman, there are two parts of the 
proposal that the President has put forward. The first is that 
every State should have an affordable basic insurance plan that 
is accessible to every citizen.
    That means they first of all need to make certain that it 
is available for sale, and then second of all they need to make 
certain it is affordable.
    That is an important distinction because the tax benefit 
has not been intended to be the sole means by which a person 
who could not afford health insurance----
    Mr. Doyle. How is this done, Mr. Secretary? How do you 
force or compel States to offer this affordable insurance? 
Since we are a free market people here and we are not going out 
to the insurance industry and be heavy handed with them and 
tell them they are going to have to cut their premiums and lose 
money. How does that happen?
    Secretary Leavitt. The President has asked I meet with all 
the Governors in the next 100 days. I will see almost all of 
them. Pennsylvania, your Governor is working on such a plan. 
The Governors of California, Texas, Washington, Wisconsin, 
Michigan--I can go all the way across here and I am currently 
receiving proposals from your Governors to do exactly what I 
have suggested and that is creating an affordable basic plan.
    But they are going to need help in two ways to make their 
plans work. They can't solve the problem of the discrimination 
that they receive on taxes. And there is no way to justify 
that. We have to fix that one way or the other.
    The second thing they need help is they could use some 
Federal money to help subsidize those who can't even afford a 
basic plan. And that is all we are proposing.
    Mr. Doyle. What are you going to do for the working poor 
and the back, though, with their retirement benefits?
    Ms. DeGette. Gentleman's time has expired.
    Mr. Doyle. That is a big concern, too.
    Mr. Stupak. Mr. Secretary, I would like to take this moment 
to ask you, we really do appreciate you being here with us this 
morning and a lot of good questions on both sides of the aisle. 
I count seven Members here who have not had time to question. 
And I am just wondering, I know you are scheduled to be here 
until 12:30. Is there any way you could extend that to 1 
o'clock so we can give the Members who are remaining the 
ability to ask their questions?
    Secretary Leavitt. How about 1:10?
    Ms. DeGette. That would be great. Thank you very much, Mr. 
Secretary.
    Mr. Shimkus. Could the chairman yield? Maybe we close the 
list, how Members come back and forth. So if those Members 
present----
    Ms. DeGette. I would add Mrs. Eshoo to that list.
    Secretary Leavitt. I want to make sure Mr. Matheson from 
Utah gets his question.
    Ms. DeGette. Absolutely, Mr. Secretary. Now we know where 
the power lies. Now we recognize Mr. Whitfield for 6 minutes.
    Mr. Whitfield. Thank you, Madam Chairman, and Mr. 
Secretary, we are delighted you are with us today and I want to 
congratulate you on the tremendous job you do at HHS.
    In August 2005, the Congress passed and the President 
signed a law establishing a national prescription drug 
monitoring program.
    Former Secretary Thompson supported the legislation. You 
supported the legislation. And last year we worked out--and the 
legislation housed that program at HHS. And we passed that 
legislation because prior to that without authorization from 
anyone, some members of the Appropriations Committee 
established an earmark that provided funding at the Department 
of Justice, and they--it was a mechanism that really didn't 
provide incentives and has not been successful in establishing 
a program at every State.
    And last year, we worked out an agreement so that the new 
program at HHS would receive $5 million and the old program at 
Justice would receive $5 million until we could get them meshed 
together at HHS.
    And in this budget that you have just submitted, there is 
no money requested for the NASPAR program and I would like to 
know why and was that a decision that HHS made or was it a 
decision that OMB made?
    Secretary Leavitt. Congressman, I know what an irritation 
this is to you. And I am sorry. It is a program we support. It 
is a program we would gladly administer. However, it is a 
decision that was made at OMB to view it more of a law 
enforcement program. I say that not as a matter of complaint 
other than just explanation that we are in a place where we 
don't control that decision. And I am happy to sponsor more 
conversation between you and those who do.
    Mr. Whitfield. Well, thank you, Mr. Secretary. Madam 
Chairman, I would like to say I think it would be appropriate 
for our committee to get a letter over to OMB on this issue and 
also to work with the appropriators to see to it that the 
authorized program at HHS, where it should be, receives proper 
funding. And I would yield my time to anyone that wants it. But 
that is--yes, I would yield to Mr. Pallone.
    Mr. Pallone. I just wanted to support your efforts myself 
and Ed and a number of us on this committee worked very hard to 
get the NASPAR program authorized and we do think it is very 
important. And I don't hear you saying you disagree. So I think 
we should initiate that letter. I would be glad to cosponsor it 
with my colleague from Kentucky and try to get some of this 
funding in during the appropriations process. And I appreciate 
your bringing it forward because I do think it is crucial.
    Mr. Whitfield. I yield the time to Dr. Burgess. Did you 
want time, Dr. Burgess?
    I yield back the balance of my time.
    Ms. DeGette. Thank you. I now yield to Ms. Solis for 5 
minutes.
    Ms. Solis. Thank you, Madam Chair, and thank you, Mr. 
Secretary, for staying to hear our questions. I have several. 
And the first one I would like to start out with is December 
15, 2006, a Congressional Hispanic Caucus Task Force on Health 
sent you a letter. And we have yet to get a response back. And 
it is regarding your interpretation of documentations that are 
now going to be required for newborns.
    And I wanted to ask you if we could get a response or if we 
can expect one and how soon? And also if you could please 
explain how that policy is somehow going to help us achieve 
eliminating health care disparities with respect to 
underrepresented communities.
    Secretary Leavitt. Congresswoman, I will confess to you 
that we worked awfully hard so I wouldn't have to answer the 
question, why haven't you answered my letter? Most of our 
letters are current and I will follow up to find out why yours 
isn't.
    Ms. Solis. And I would like to submit the letter we sent 
for the record if I could request unanimous consent, Madam 
Chair.
    Secretary Leavitt. When was this letter?
    Mr. Stupak. It was December 15.
    Secretary Leavitt. It may be that we count that as a 
current letter and we are working on it.
    Ms. Solis. And so when can I expect a response? Soon. OK. 
Can you explain to me a little bit about that regulation and 
how you see that fostering identifying these underrepresented 
groups?
    Secretary Leavitt. You will get a better response in the 
letter because I am not certain I am in a position to enlighten 
you very much on it.
    Ms. Solis. OK. One of the questions I had--and you didn't 
go from your text that you submitted--but I wanted to ask you 
about your Adolescent Health Promotion Initiative, $17 million. 
Does that include extending the Abstinence Only Program?
    Secretary Leavitt. That is a separate proposition.
    Ms. Solis. One of the concerns I have and something that 
the Hispanic community and the caucus is very concerned about 
is the increase, actually the upsurge or upping of teenage 
pregnancies amongst the Latino population. It is well above, I 
would say, in some cases 20 percent. In fact the statistics 
prove that 51 percent of Latino teens get pregnant at least 
once before the age of 20 and for African American it is 57 
percent become pregnant at the age of 20. So obviously the 
abstinence program is not working well. And one of the concerns 
we have is that information be provided in a culturally 
competent, linguistically competent manner. And I have yet to 
see any evidence that is happening in all the years of funding 
for these programs.
    Can you respond to that?
    Secretary Leavitt. We provide information to people in lots 
of different ways and the abstinence program is one of those 
that we pursue. And there are those who believe that it ought 
to represent--and I am among them--at least part of what we 
teach and part of the way we teach. And it is part of the 
ideology of the administration, and you can expect that we will 
continue to offer those proposals.
    Ms. Solis. OK, ideology I guess is one of the words that 
would concern me there. Because in many instances it is hard to 
reach these youngsters as it is and having nontraditional modes 
of outreach would be very, I think, very important and a much 
improved effort to get to these youngsters. But also employing 
some new methodology, maybe looking at what works for us in our 
communities along the area of--I don't want to say social work 
but people who are out there promoting health care prevention. 
And you probably are well aware of these programs, one of which 
I am familiar with, and I am hoping that we can get support 
through the SCHIP program, is promotoras program, and it 
currently exists in and along the border, becoming the 
fronteras, and they also exist in the State of California and 
other parts of the country actually, and some of the counties 
and local municipalities have taken it upon themselves to 
create these programs to extend campaigns of information to the 
local immigrant community--not just Latino--but other hard 
pressed groups. So I would hope that that might be something 
that we could discuss with you about extending services by way 
of outreach campaigns to these at-risk communities.
    Secretary Leavitt. I think you would find that many of 
those campaigns have at least some Federal money in them. And 
my point is that we do feel strongly that abstinence is an 
important message and that it is effective and it can be 
demonstrated.
    Ms. Solis. But it is not effective when the percentages 
keep going up in these very----
    Secretary Leavitt. You can make the same charge of the 
other programs that you advocate then. If the fact that we 
continue to see an increase is a function of the fact that the 
programs aren't working, then you would have to make the same 
indictment of both.
    We are all working at this. We all want to see those rates 
come down. There are some good signs that they begin to. But we 
believe that it is important to have abstinence as part of what 
is taught.
    Ms. Solis. One of the other concerns I have is with respect 
to the ability to train future physicians, not only in the 
nursing area but in the medical field and, as you know, 
Hispanic serving institutions don't receive as much monetary 
support in terms of adequately outreaching and recruiting to 
the Latino community to prepare for that potential growth and 
service that is going to be needed in coming decades.
    And I would hope that you would reconsider your formulas 
for funding to help promote for more recruitment, especially 
given the fact that in States like California, where you have a 
number of medical institutions, we are not seeing that kind of 
support coming through the Federal Government.
    Secretary Leavitt. Could I briefly comment?
    Ms. DeGette. Yes.
    Secretary Leavitt. Actually, we believe as you have 
suggested that our funding ought to be oriented toward areas 
and specific communities of need and not allocating money on a 
general basis. And many of the programs you see reduced in the 
area of nursing and other professional development you will see 
were reduced because they did a uniform across the board, and 
we would either rather target our money into areas where there 
are specific needs.
    Ms. DeGette. The Chair now recognizes Mr. Shimkus of 
Illinois for 6 minutes.
    Mr. Shimkus. Thank you, Madam Chairman. Secretary, welcome. 
I always appreciate your calm and thoughtful approach in, as we 
all know, a difficult large Federal bureaucracy that has many 
tentacles and it reaches throughout our society. So I 
appreciate it. And I appreciate you staying past 12:30 because 
I get to visit with you for a few minutes.
    I am going to have three primary areas. One is kind of a 
macro issue and then I will go down to a few specifics. The 
first one is on the overall debate on Medicaid funding. One of 
my frustrations is--I think we talked about this before--is F-
MAP funding, the differential between States--you know that as 
your former position--and then the games that those of us who 
are of not at the high levels of F-MAP ratios, the things we 
have to do to try to make up for what we feel is a loss. And 
that is the IGT, that is the hospital assessment.
    In 2 years left in this administration I would really ask 
that we try to make a bold move. It would be tough for Members 
across the country to defend inequities in a Federal system. 
And there will be some States who to rectify the differences 
would have to make some tougher choices. And I understand that. 
But I just feel that until we, if we keep doing this 
gamesmanship and find these other ways, it just distorts the 
system and makes it very difficult for people to understand, 
and we develop new programs to compensate for the loss of 
revenue, and if you could respond just briefly I will go to the 
other two.
    Secretary Leavitt. Congressman, that is essentially our 
view. We would like to see us have a straight-up formula where 
people put up real dollars and the games that are played and 
have historically distort the system and----
    Mr. Shimkus. But you could help lead with that by a debate 
on the ratios.
    Secretary Leavitt. There is no question that funding 
formulas are tough and they are the toughest debates in 
Congress, and that is where they start and that is where they 
get set. We administer them as best we can. But funding 
formulas happen in Congress.
    Mr. Shimkus. Let me, maybe we should have hearings on the 
funding formula for F-MAP and address the differential between 
States. And I think that is what you are highlighting. I would 
be receptive to that.
    The President's Health Centers Expansion Initiative has 
successfully increased the total number of health centers to 
over 3,800. When I first became a Member of Congress, now my 
district has changed a little bit, I did not have a single 
community health center. Now in my enlarged district of parts 
of 30 counties in Illinois, I have 13. And it has been a very, 
very successful program.
    The President's High Poverty Counties Initiative has been 
outlined as a next step. Can you explain that a little bit more 
fully for me?
    Secretary Leavitt. The President made clear he would like 
to have 1,200 new ones during the period of his service. We are 
going to achieve that, Congress being willing. He also then 
later said, and I want 180 of those to be targeted at the 
highest need areas, that is to say the areas with the highest 
levels of poverty, so some portion of the allocation each year 
is given priority for those counties.
    Mr. Shimkus. And the great thing about the community health 
centers that they do bring in the community involved and there 
is a partnership. And again it has been very, very helpful.
    The last thing I want to ask about is this recent GAO 
report on the AMP. We in the Deficit Reduction Act, which was 
hotly contested and debated and passed, tried to get a handle 
on this process. This recent GAO--and to the great excitement 
of some of our constituents and the local pharmacists and those 
people.
    The GAO report makes a premise that the AMP, as stated, 
would be less than the cost of the retail pharmacist for the 
purchase of the drug.
    Obviously that wasn't our intent. We want to get it to 
where it is competitive, where we can control costs, but we 
don't--the local pharmacists play a critical role in the health 
delivery process. And if they are not going to be compensated 
for just a break even, then they are not going to provide that 
service. So can you address that and what steps you might be 
doing to relook at the AMP and how we can get to some 
accommodation?
    Secretary Leavitt. Congressman, I spent a lot of time 
behind pharmacy counters in the last year talking to 
pharmacists, and it has become clear to me that most of them 
could run for mayor in their town and win.
    They are very popular people because they meet needs and 
they obviously need to be supported. I just need to tell you we 
fundamentally disagree with the conclusions of the GAO report 
on this. We just disagree with their conclusions, and we will 
offer more information about that later. We know that they need 
to be supported. We just can't come to the same conclusion they 
did.
    Mr. Shimkus. I have 20 seconds left, and the other issue 
that we debated before was dispensing, nature of a dispensing 
fee. What are your thoughts on that?
    Secretary Leavitt. That remains a State option.
    Mr. Shimkus. My time has expired. Thank you, Madam 
Chairman.
    Ms. DeGette. Mr. Secretary, I am pleased to tell you that 
by working collectively in a bipartisan manner, all of the 
other Members have agreed to limit their time who are here. So 
we hope you can stay for all of these.
    Secretary Leavitt. As long as Congressman Matheson gets to 
answer his question.
    Ms. DeGette. Well, we are going to put him last so you will 
stay. I am now pleased to recognize Ms. Baldwin for 5 minutes.
    Ms. Baldwin. Thank you, Madam Chairwoman, and thank you, 
Mr. Secretary. We heard in the State of the Union Address as 
the President was discussing health care matters a brief 
reference to State innovations, and that is going to be the 
subject of my second question, to sort of find out some more 
particulars surrounding that proposal.
    But I wanted to start with a different State innovation, 
and that is in Wisconsin its very successful prescription drug 
program called Senior Care. Senior Care in Wisconsin provides 
affordable drug coverage to over 100,000 Wisconsin residents at 
prices that are significantly below the part D prices, and I 
believe it is a shining example of what every government 
program should be.
    Senior Care is easy for seniors to enroll in. It involves a 
one-page form that they have to fill out. It is cost effective. 
And studies in our State have shown that for every dollar spent 
on Senior Care, it leverages an additional $4.35 from other 
non-Federal sources.
    It is comprehensive because it has no doughnut hole like 
part D, and for all of those reasons and others it is an 
extremely popular program. I am a big fan of the program and I 
receive an unbelievable amount of feedback from constituents 
praising the program, but also begging me to do everything 
within my power to make sure that that program is allowed to 
continue.
    As you may recall, Senior Care operates under a pharmacy 
plus waiver. That waiver is set to expire in June of this year. 
And Wisconsin has submitted its waiver renewal application in 
June of last year. The entire Wisconsin delegation, Republican 
and Democrat alike, have sent you a letter supporting this 
application, and yet we have not received a response to waiver 
application and we are interested in knowing about the renewal 
process.
    So I am asking you, Mr. Secretary, what assurances you can 
give me and Wisconsinites that this successful and cost 
effective program will be allowed to continue?
    Secretary Leavitt. Ms. Baldwin, thank you for your 
effective and cheerful advocacy. I am quite aware of Senior 
Care and I have spent a fair amount of time with Governor Doyle 
reviewing the waiver. As you are fully conscious, Senior Care 
came about before part D was on the scene and it now does 
provide hundreds of thousands of Wisconsin residents the 
benefit of part D.
    We continue to analyze the waiver request. I think I have 
been quite clear with the Governor, however, that the Federal 
Government is relying on part D for most of what we are 
providing seniors and while we have enacted, we are heartened 
by the success of part D in Wisconsin.
    Ms. Baldwin. We are heartened by the success of Senior Care 
in Wisconsin. Obviously there is a necessity of certainty. As 
we plan ahead, I would like to hear from you when we might 
expect----
    Secretary Leavitt. Senior Care can certainly continue. The 
issue is whether or not the Federal Government contributes 
money in Wisconsin and not in other States for that purpose, 
and so that becomes the issue.
    Ms. Baldwin. Of course, of crucial importance to us.
    Let me just return to the issue of State innovation. As you 
heard, I was, I took note and was delighted to hear the 
President highlight the issue of State innovation in his State 
of the Union Address. And I think that we can all agree that 
the proposals that we are seeing in States like Massachusetts, 
California, Maine and my home State of Wisconsin represent real 
progress in the debate about how we best expand access to 
health care.
    I have authored bipartisan legislation to promote such 
things. However, I noted the President's proposal involving 
State initiatives is limited to initiatives that use the 
private sector to expand coverage, and I don't think we should 
limit the States in that way.
    We should really encourage thinking outside of the box, 
innovations beyond that narrow array that the President may be 
talking about, and I am wondering if the administration is 
opening to allowing States to test other initiatives as well.
    Secretary Leavitt. We are interested in two things. One, 
affordable basic plans. Let me just restate that. Basic plans. 
And that, second, making them affordable. I just mentioned 
looking across the dais you mentioned Wisconsin. I was recently 
in Texas. I met with Governor Perry, who has put forth a 
proposal. I have been in California. I have been in Tennessee. 
I have been in New Jersey. I have been in virtually--I can't 
say every State, but most States right now are very focused 
this. But there are two problems they cannot solve on their 
own--at least one of them, and I have mentioned it a couple of 
times today.
    They can't resolve this discrimination that occurs between 
people who buy it in the employer market and those who don't 
have that opportunity. And we have to solve that problem if we 
are going to see the kind of innovation that you and I both 
aspire.
    The second part of this dilemma is that once you have a 
basic health plan there are still going to be people who can't 
afford it.
    And that is the point at which we need to step up and be 
able to help people who can't even afford the basic health 
plan, and we are looking for opportunities to do that.
    Ms. DeGette. The gentleman from Mississippi, Mr. Pickering, 
is recognized for 4 minutes.
    Mr. Pickering. Thank you, Madam Chairman. Thank you, Mr. 
Secretary, for your leadership and thank you for all the help 
you have given to my home State of Mississippi as we recover 
from Katrina.
    Let me quickly go through some questions.
    First, as you know, we passed a Combating Autism Act in the 
last days of the last Congress which increases the authorized 
funding to around $168 million, and that includes funding for 
you as Secretary to lead education, early intervention and 
detection, CDC has significant funding, and then NIH is a 
coordinating agency.
    My question is do you support fully funding those 
authorized levels or what is the current plans in the 
President's budget, and as the Secretary, for funding these 
initiatives?
    Secretary Leavitt. We will, in fact, use whatever the 
Congress appropriates in the most efficient way we possibly 
can. We recognize that the discussion of how much of the 
authorization will be funded will be part of what is resolved 
hopefully in this Congress.
    Mr. Pickering. So you support whatever Congress 
appropriates is your answer?
    Secretary Leavitt. I think you know that I support whatever 
the President proposes.
    Mr. Pickering. Do you know what the President has proposed 
on autism funding?
    Secretary Leavitt. I don't.
    Mr. Pickering. Do you know if he proposed anything in that 
funding in his budget and as it relates----
    Secretary Leavitt. I have had magically appear in front of 
me information that with tell me we have proposed $123 million 
in 2007 and $123 million in 2008.
    Mr. Pickering. Now, where that is relevant that is CR, is 
not specific. It does not give you, I believe, any direction. 
So the $123 million as it relates to autism, if you could, 
please let me know how you will break that down between your 
office, the CDC and NIH.
    Secretary Leavitt. That might be better able to respond in 
writing to you. It is not an issue that has happened recently 
enough that I don't know that that policy has been developed.
    Mr. Pickering. I appreciate and look forward to working 
with you on these very critical issues. As you know, one in 166 
of America's children is now diagnosed with some autism-related 
spectrum disorder, which is more than pediatric cancer, 
diabetes and AIDS combined. So we look forward to creating the 
emphasis and priority as we combat something that affects 
families across the country.
    And the other question that I would like to ask and this 
deals with the efforts in the last Congress and as we go 
forward on an issue your budget reflects the emphasis on using 
health information technology to create efficiencies and 
transformation of our health care delivery system.
    And on this, there is one component that I would like to 
ask and this is as it relates to remote monitoring of patients, 
whether it is diabetes or those who suffer from congestive 
heart failure.
    Do you support incenting remote monitoring through the 
physician fee schedules?
    Secretary Leavitt. I support, first of all, developing 
standards that will allow us to assure that remote monitoring 
is compatible with other parts of the electronic medical 
record.
    Second, to the degree that we are able to identify clear 
financial benefits from it, then it is something very clearly 
we ought to consider.
    Mr. Pickering. I look forward to working with you on both 
of these efforts on the standards and on whether remote 
monitoring can be used extremely well.
    And just in closing, and this is not a question but just an 
encouragement that I hope that you go back and look at the 
pharmaceutical, the A&P price. The GAO standard is independent 
analysis. I realize that there is a disagreement but I do hope 
that you can go back, listen to all sides and find a better 
solution than simply to disagree.
    Secretary Leavitt. Thank you.
    Mr. Pickering. Thank you.
    Ms. DeGette. Chair recognizes Mr. Gonzalez from Texas for 4 
minutes.
    Mr. Gonzalez. Thank you very much, Madam Chair, and 
welcome, Secretary Leavitt. Thank you for your service and your 
patience.
    Whether it is policy or physics, but I like to think semi 
in terms of for every action there is always an opposed and 
equal reaction. So what is going to be the reaction or 
consequences of what the President is proposing? You seem to 
proffer that it all is going to be a good reaction. But there 
are those that would disagree with you and the administration.
    So what I always do is I go back home and I ask the people 
in the health care field what are their greatest fears 
regarding the President's proposal. This is from the Texas 
Medical Association. The TMA just reported the results of their 
2006 physician survey which is done every 2 years in the fall. 
Below are some of the results compared to the 2004 survey. 2004 
we are talking about new patients being accepted by physicians 
in the State of Texas under Medicaid. It used to be 45 
percent--only 45 percent in 2004. In 2006 it is a decline to 38 
percent. Doctors accepting new Medicare patients in 2004, 68 
percent. Today or last year; that is, during the survey, it is 
62 percent. In 2002, those Medicare patients, the new ones, 
were being accepted by about 75 percent of the physicians in 
Texas.
    So one of the possible reactions is we are going to have 
fewer doctors tending to the patients under both Medicare and 
Medicaid. And I just will want your opinion when I finish with 
the other two examples.
    The next concerns, expressed by Methodist Hospital out of 
San Antonio, quote, health care providers in today's world must 
deal with costs associated with emergency preparedness, bad 
debt, the uninsured and expansion of services and facilities to 
better serve their community. How can the end result of these 
cuts not trigger an increase in health care costs to the 
private sector which would correspondingly increase the cost of 
health care insurance for everyone? So again this is going to 
be the reaction is not a positive one. It drives the cost of 
health care insurance up.
    Last, Christa Santa Rosa Children's Hospital, the President 
budget aims to redirect Medicaid DSH funding from supporting 
institutions to private health insurance. Some hospitals 
serving high proportions of indigent patients rely heavily on 
Medicaid DSH. The President's budget has a double hit toward 
hospitals, and there are also cuts proposed on the Medicare 
side.
    As we talk about the needs for hospitals to improve quality 
and incorporate health information technology, are you 
concerned that this budget will make those things even more 
difficult?
    Secretary Leavitt. Quick response. With respect to 
reimbursement rates, as you are probably aware, reimbursement 
rates by Medicaid are set by the State, and if they are 
beginning to see slippage in their patient acceptance that is 
something the State very clearly ought to deal with.
    With respect to Medicare, we monitor those very carefully 
and it sounds to me as though they are relatively stable in 
Texas, although it is something we are concerned about on a 
continual basis.
    Bad debt. We think that the bad debt is built into the 
rates that the hospital charges us and we think it is 
unreasonable for us to be paying both reimbursements for their 
bad debt and paying a rate that builds it in as an expense. As 
you pointed out, they build it into the expense. And if bad 
debt goes up, then what the bad debt reimbursement amounts to 
is essentially a foundation support for their overhead.
    With respect to health care indigent care, there are three 
areas that I am concerned about and we have to be very careful 
about. One is, despite efforts to have efforts to have every 
person have affordable basic insurance, there are going to be 
people who don't have it and hospitals need a way to get paid 
for that care. That is a given.
    Second, there are some public hospitals that very clearly 
need to have some support to keep their doors open. We need to 
provide that. But if we are successful, as we aspire to be, in 
getting high numbers of people who are currently having their 
medical bills perpetually paid by the Federal Government, if we 
can get them insured then there is no reason that we would need 
to pay the same amount of money that we are currently paying to 
the hospitals.
    Some of that money ought to be used to help people get 
insurance. And so we are just looking for where that balance 
is. And we want to work with Congress to say, where is the 
balance? We want to work with States to make certain that we 
are not----
    Mr. Gonzalez. Thank you for a very over optimistic outlook 
on the President's policies.
    Ms. DeGette. The Chair now recognizes Mr. Matheson from 
Utah for 4 minutes.
    Mr. Matheson. Thank you, Madam Chairwoman, and in my first 
hearing it is great to have my Governor and friend Secretary 
Leavitt here before us. Being now on the front row, you get a 
chance to ask questions after everyone else has and they have 
raised a number of issues that are very important to all of us, 
SCHIP, SGR. Even you mentioned the graduate medical education.
    In an effort to try to have something different to talk 
about as one of the last questioners, I feel like we are all 
talking about these issues, they are all of great importance 
and we are ignoring kind of a broader issue at the macro level, 
and that is I feel that our health care system in this country 
is on a path that is not sustainable.
    The fact of the matter is this country spends more by far 
than any other country in the world on health care per capita, 
and by various measures our outcomes are not as good as a lot 
of other countries.
    And if we are ever going to get around this effort to make 
sure children have access to health care or make sure we are 
training good doctors or all these other issues, it seems to me 
we also need to address the issue of we have a system that 
seems to be going down a path where costs are growing above 
inflation every year and you have to wonder how long that is 
going to last.
    In the ridiculously limited amount of time we have to talk 
about this, I would just like to highlight three things to see 
what your thoughts are.
    One is we often hear the lifestyle choices in this country 
affecting and driving a lot of health care issues. If we could 
get people to stop smoking, to eat well, to exercise, we would 
have a more healthy population. I certainly don't support any 
Government mandates on that activity. I am sure you don't 
either, but are there efforts we can do to try to address that 
dynamic to create a more healthy population?
    Second, I just heard this weekend at a retreat we were 
attending that in our health care system in the United States 
administrative costs represent 34 percent of all the money 
spent on health care. And the next highest country in the 
world, according to the presenter, was Canada, where it is 18 
percent of administrative cost. This is private and public, not 
just government. And that differential from 34 down to 18 is 
hundreds of billions of dollars.
    Are there thoughts about how we can work out a health care 
system in a way that would get more dollars going to actually 
providing services to patients and less in the administrative 
components of what we are doing?
    And finally, the notion proffered by a lot of people is 
that if we can actually achieve some form of universal access 
it actually represents a cost savings to our country. And I 
just want to throw these three items out to give us more 
transformational thinking about what can we do to get a handle 
on this cost situation and from a public policy arena how 
should we be looking at this?
    Secretary Leavitt. I could not agree more with my friend 
from Utah on virtually every point you raised. We are 
surrounded by economic systems. I have a credit card I got from 
a bank. You have a different bank. But they use the same system 
to optimize the value we get. I have a cell phone. You have a 
cell phone. We buy them from different vendors, but they work 
together. It is an economic system. I fly on an airline. It is 
a different airline than you do, but they use the same system. 
There is an economic system in all of these sectors of our 
economy.
    There is no system of health care in the United States. 
What we have is a sector that is without the discipline of a 
system that connects it. It has to be electronically connected. 
There has to be quality standards that can measure it. We have 
to figure out what the cost is so people can know it and 
compare it and then we can begin to deploy incentives.
    When we do people will begin to drive value up by having 
better control of costs. I could not agree more, and I would 
look forward to working with you and other members of this 
committee to drive that home.
    Mr. Matheson. I appreciate that. I think we need to get 
away from a lot of the partisan rhetoric that dominates the 
issue. I think there are practical ideas we can work on, and I 
look forward to doing that with you. Thanks so much.
    Ms. DeGette. Thank you so much. Last but not least, Mr. 
Green from Texas for 4 minutes.
    Mr. Green. Thank you, Madam Chairman, and again welcome, 
Secretary Leavitt. And I am the last one because I just came in 
this morning from Houston because we did a paying for college 
workshop last night, as we have done for a number of years in 
our district, and it really works.
    I have two quick questions. One is that the President 
proposes $25.7 billion in Medicaid cuts in 2008, including $5 
billion in Medicaid cuts through currently proposed regulation. 
Is there a state-by-state analysis of that?
    Secretary Leavitt. Well, what we are proposing is a series 
of savers. Running any program, you would expect that as 
Secretary I would periodically say it just doesn't make any 
sense that we pay that way or that we do it this way. We are 
proposing a group of actions that we think are just good 
management decisions.
    Mr. Green. My concern is that Texas is one of the States 
that we utilize intergovernmental transfers for our safety net. 
And I have gotten letters over the last few years saying that 
what Texas does as compared to other States there is no problem 
with it, with using this for the safety net, that we utilize 
it.
    Without knowing the effects of regulations on the States, 
are you prepared to offer States any assurance that critical 
medical services relied on by Medicaid and uninsured patients 
will continue if we are using again the IGT that had been OKed 
in the past?
    Secretary Leavitt. There is nothing inherently wrong about 
an intergovernmental transfer unless it is taking Federal 
money, recirculating it and using it as the match for Federal 
money. That doesn't work for us nor should it for any taxpayer.
    What we want is a program based on a partnership with the 
State where both partners are putting up real money.
    Mr. Green. OK. Again I think we tried to deal with that 
through our committee process before.
    My next question is you and the President have shared many 
of the Members' commitment and expanded the reach of our 
community health centers, and I am glad Mr. Shimkus brought it 
up, and I worked closely with our FQHCs in my own area and seen 
firsthand the quality they have. I noticed the President's 
budget has a $224 million increase.
    Now the CR that the House passed last week was $206 
million. Now is it the intent to have $224 million on top of 
that $206 million for the current year, so it would be $224 
million for the next year?
    Secretary Leavitt. Mr. Green, I am going to confess to you 
that all these different things you are trying to compare to 
just confused me. But I will tell you we do intend to meet the 
President's objective of having 1,200 and the actual number we 
have to reconcile with somebody who has all four of those 
budgets in front of them.
    Mr. Green. Obviously, I would be happy about that, if we 
could get the 206 through the Senate and then get 224.
    And to follow up on that on the program of the, High 
Poverty County Initiative, I represent Harris County in 
Houston, Texas, and you were there during Katrina and you saw 
that our infrastructure is not what it is in other States and 
particularly urban areas.
    My concern about going to only certain counties we have so 
few FQHCs per population in Harris County, the fourth largest 
city, and the third largest city in country actually has 80, 
and we are nowhere near half that. In fact we are probably 
about a third. And if there are no new funds in health center 
programs, how will it be that in counties that are underserved, 
very urban counties like Houston, Harris County, TX, that we 
will be able to deal with that? Again we have 800,000 uninsured 
Americans living in our county today. And these FQHCs are 
really the only net that we have to bring those folks in.
    Secretary Leavitt. I have been aware of the increase in 
community health centers in your area. Actually I was there for 
the announcement of, I think, four not too many months ago. So 
I am pleased we are making progress. It is one of the areas in 
our budget where there is substantial new money, and for the 
reasons that you have articulated.
    Mr. Green. Thank you, Mr. Secretary, and again welcome. 
Thank you, Madam Chairman.
    Ms. DeGette. Secretary Leavitt, thanks again, and on behalf 
of the whole committee, for coming today and for graciously 
extending your time. These are tough issues and we will look 
forward to working with you in the coming session.
    The committee stands adjourned.
    [Whereupon, at 1:00 p.m., the committee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                  Testimony of Hon. Michael O. Leavitt

    Chairman Dingell and Congressman Barton, thank you for the 
invitation to discuss the Department of Health and Human 
Services' budget proposal for fiscal year 2008.
    For the past 6 years, this administration has worked hard 
to make America a healthier, safer and more compassionate 
nation. Today, we look forward to building on our past 
successes as we plan for a hopeful future.
    The President and I have set out an aggressive, yet 
responsible, budget that defines an optimistic agenda for the 
upcoming fiscal year. This budget reflects our commitment to 
bringing affordable health care to all Americans, protecting 
our nation against public health threats, advancing medical 
research, and serving our citizens with compassion while 
maintaining sensible stewardship of their tax dollars.
    To support those goals, President Bush proposes total 
outlays of nearly $700 billion for Health and Human Services. 
That is an increase of more than $28 billion from 2007, or more 
than 4 percent. This funding level includes $67.6 billion in 
discretionary spending.
    For 2008, our budget reflects sound financial stewardship 
that will put us on a solid path toward the President's new 
goal to achieve a balanced budget by 2012.
    I will be frank with you. There will never be enough money 
to satisfy all wants and needs, and we had to make some tough 
choices.
    We take seriously our responsibility to make decisions that 
reflect our highest priorities and have the highest pay-off 
potential. We recognize that others may have a different view, 
and there are those who will assume that any reduction signals 
a lack of caring. But reducing or ending a program does not 
imply an absence of compassion. We have a duty to the taxpayers 
to manage their money in the way that will benefit America the 
most.
    I would like to spend the next several minutes highlighting 
some of the key programs and initiatives that will take us down 
the road to a healthier and safer nation.

                  Transforming the Health Care System

    Helping the Uninsured

     The President has laid out a bold path to 
strengthen our health care system by emphasizing the importance 
of quality, expanded access, and increasing efficiencies.
     The President's Affordable Choices Initiative will 
help States make basic private health insurance available and 
will provide additional help to Americans who cannot afford 
insurance or who have persistently high medical expenses.
     It moves us away from a centralized system of 
Federal subsidies; and,
     It allows States to develop innovative approaches 
to expanding basic health coverage tailored to their 
populations
     The President's plan to reform the tax code with a 
standard deduction ($15,000 for families; $7,500 for 
individuals) for health insurance will make coverage more 
affordable, allowing more Americans to purchase insurance 
coverage.

     Value-driven Health Care

     The budget provides funds to accelerate the movement 
toward personalized medicine, in order to provide the best 
treatment and prevention for each patient, based on highly-
individualized information.
    It provides $15 million for expanding efforts in 
personalized medicine using information technology to link 
clinical care with research to improve health care quality 
while lowering costs; and,
     It will expand the number of Ambulatory Quality Alliance 
Pilots from 18 sites in fiscal year 2008.

    Health IT

     The President's budget proposes $118 million for 
the Office of the National Coordinator for Health Information 
Technology to keep us on track to have personal electronic 
health records for most Americans by 2014 by supporting our 
efforts to:
     Implement agreed upon public-private health data 
standards.
     Initiate projects in up to twelve communities 
based on recommendations of the American Health Information 
Community. These projects will demonstrate the value of 
widespread availability and access of reliable and 
interoperable health information.
     Develop the Partnership for Health and Care 
Improvement, a new, permanent non-governmental entity to effect 
a sustainable transition from the AHIC.

         Addressing the Fiscal Challenge of Entitlement Growth

    The single largest challenge we face is the unsustainable 
growth in entitlement programs such as Medicare and Medicaid. 
The administration is committed to strengthening the long-term 
fiscal position of Medicare and Medicaid and to moderating the 
growth of entitlement spending. The fiscal year2008 budget 
begins to address Medicare and Medicaid entitlement spending 
growth by proposing a package of reforms to promote efficiency, 
encourage beneficiary responsibility, and strengthen program 
integrity.

     Medicaid

    Medicaid is a critical program that delivers compassionate 
care to more than 50 million Americans who cannot afford it. In 
2008 we expect total Federal Medicaid outlays to be $204 
billion, a $12 billion increase over last year.
    The Deficit Reduction Act (DRA) that President Bush signed 
into law last year has already transformed the Medicaid 
program. The DRA reduced Medicaid fraud and abuse and also 
instituted valuable tools for States to reform their Medicaid 
programs to resemble the private sector.
    In fiscal year 2008, we are also proposing a series of 
legislative and administrative changes that will result in a 
combined savings of $25.3 billion over the next five years, 
which will keep Medicaid up to date and sustainable in the 
years to come. Even with these changes, Medicaid spending will 
continue to grow on average more than 7 percent per year over 
the next five years.
    Along with the fiscally responsible steps we are taking 
with Medicaid, we are following the same values in modernizing 
Medicare.
     Medicare
    Gross funding for Medicare benefits, which will help 44.6 
million Americans, is expected to be nearly $454 billion in 
fiscal year 2008, an increase of $28 billion over the previous 
year.
    In its first year, the Medicare prescription drug benefit 
has been an unparalleled success. On average, beneficiaries are 
saving more than $1,200 annually when compared to not having 
drug coverage, and more than 75 percent of enrollees are 
satisfied with their coverage. Because of competition and 
aggressive negotiating, payments to plans over the next ten 
years will be $113 billion lower than projected last summer.
    We also plan a series of legislative reforms to strengthen 
the long-term viability of Medicare that will save $66 billion 
over 5 years and slow the program's growth rate over that time 
period from 6.5 percent to 5.6 percent.
    Similarly, we are proposing a host of administrative 
reforms to strengthen program integrity; improving efficiency 
and productivity; and reduce waste, fraud and abuse-all of 
which will save another $10 billion over the next 5 years.

                Promoting Health and Preventing Illness

    We are also taking steps in other ways to transform our 
health care system. Helping people stay healthy longer also 
helps to reduce our nation's burden of health care costs. The 
President's budget will:
     Fund $17 million for CDC's Adolescent Health 
Promotion Initiative to empower young people to take 
responsibility for their personal health.
     Strengthen FDA's drug safety efforts and modernize 
the way we review drugs to ensure patients are confident the 
drugs they take are safe and effective.
     Enhance FDA and CDC programs to keep our food 
supply one of the safest in the world by improving our systems 
to prevent, detect and respond to outbreaks of food borne 
illness; and,
     Include $87 million to increase the capacity for 
the review of generic drugs applications at the FDA and 
increase access to cheaper generic drugs for American 
consumers.

                 Providing Health Care to Those in Need

    SCHIP expires at the end of fiscal year 2007 and the 
President's budget proposes to reauthorize SCHIP for five more 
years, to increase the program's allotments by about $5 billion 
over that time, to refocus the program on low-income uninsured 
children, and to target SCHIP funds more efficiently to States 
with the most need.
    The President's budget proposes nearly $2 billion to fund 
health center sites, including sites in high poverty counties. 
In fiscal year 2008, these sites will serve more than 16 
million people.
    We propose increasing the budget of the Indian Health 
Service to provide health support of federally recognized 
tribes to over $4.1 billion, which will help an estimated 1.9 
million eligible American Indians and Alaskan Natives next 
year.
    We are also proposing nearly $3 billion to support the 
health care needs of those living with HIV/AIDS and to expand 
HIV/AIDS testing programs nationwide.
    In addition, we are requesting that Congress fund $25 
million in fiscal year 2008 for treating the illnesses of the 
heroic first responders at the World Trade Center.

                 Protecting the Nation Against Threats

    We must continue our efforts to prepare to respond to 
bioterrorism and an influenza pandemic.
    Some may have become complacent in the time that has passed 
since the anthrax-laced letters were delivered in 2001, but we 
have not. Others may have become complacent because a flu 
pandemic has not yet emerged, but we have not.
     The President's budget calls for nearly $4.3 
billion for bioterrorism spending.
     In addition, we are requesting a $139 million in 
funding to expand, train and exercise medical emergency teams 
to respond to a real or potential threat.
     Our budget requests $870 million to continue 
funding the President's Plan to prepare against an influenza 
pandemic. The budget requests funding to increase vaccine 
production capacity and stockpiling; buy additional antivirals; 
develop rapid diagnostic tests; and enhance our rapid response 
capabilities.
     In fiscal year 2008, the Advanced Research and 
Development program is requested within the Office of the 
Assistant Secretary for Preparedness and Response (ASPR). Total 
funding of $189 million will improve the coordination of 
development, manufacturing, and acquisition of chemical, 
biological, radiological, or nuclear (CBRN) Medical 
Countermeasures (MCM).

                       Advancing Medical Research

    The research sponsored by NIH has led to dramatic 
reductions in death and disease. New opportunities are on the 
horizon, and we intend to seize them by requesting $28.9 
billion for NIH.
    Our proposal in fiscal year 2008 will allow NIH to fund 
nearly 10,200 new and competing research grants, continue to 
support innovative, crosscutting research through the Roadmap 
for Medical Research, and support talented scientists in 
biomedical research.

               Protecting Life, Family and Human Dignity

    Our budget request would fund $884 million in activities to 
help those trying to escape the cycle of substance abuse; 
children who are victims of abuse and neglect; those who seek 
permanent, supportive families through adoption from foster 
care; and the thousands of refugees that come to our country in 
the hopes of a better life.

             Improving the Human Condition Around the World

    If we are to improve the health of our own people, we must 
reach out to help other nations to improve the health of people 
throughout the world.
    Our budget requests $2 million to launch a new Latin 
America Health initiative to develop and train a cadre of 
community health care workers who can bring much needed medical 
care to rural areas of Central America.
    CDC and NIH will continue to work internationally to reduce 
illness and death from a myriad of diseases, and in so doing 
will support the President's Malaria Initiative; the Global 
Fund to Fight HIV/AIDS, Tuberculosis, and Malaria; and the 
President's Emergency Plan for AIDS Relief.
    These are just some of the highlights of our budget 
proposal. Both the President and I believe that we have crafted 
a strong, fiscally responsible budget at a challenging time for 
the Federal Government, with the need to further strengthen the 
economy and continue to protect the homeland.
    We look forward to working with Congress, States, the 
medical community, and all Americans as we work to carry out 
the initiatives President Bush is proposing to build a 
healthier, safer and stronger America.
    Now, I will be happy to take a few questions.

                                 
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