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


 
                     DEPARTMENT OF HEALTH AND HUMAN
                    SERVICES FISCAL YEAR 2009 BUDGET

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, FEBRUARY 27, 2008

                               __________

                           Serial No. 110-33

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html


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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
JIM COOPER, Tennessee                J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine               JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania    SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
ROBERT E. ANDREWS, New Jersey        PATRICK J. TIBERI, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia  JON C. PORTER, Nevada
BOB ETHERIDGE, North Carolina        RODNEY ALEXANDER, Louisiana
DARLENE HOOLEY, Oregon               ADRIAN SMITH, Nebraska
BRIAN BAIRD, Washington              JIM JORDAN, Ohio
DENNIS MOORE, Kansas
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, February 27, 2008................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................     1
        Prepared statement of....................................     2
    Hon. Paul Ryan, ranking minority member, House Committee on 
      the Budget.................................................     3
    Hon. Michael O. Leavitt, Secretary, U.S. Department of Health 
      and Human Services.........................................     5
        Prepared statement of....................................     7
        Responses to questions for the record....................    36
    Hon. Bob Etheridge, a Representative in Congress from the 
      State of North Carolina, questions submitted...............    34
    Hon. Marcy Kaptur, a Representative in Congress from the 
      State of Ohio, questions submitted.........................    35
    Hon. James P. McGovern, a Representative in Congress from the 
      State of Massachusetts, questions submitted................    35
    Hon. Patrick J. Tiberi, a Representative in Congress from the 
      State of Ohio, questions submitted.........................    36


    DEPARTMENT OF HEALTH AND HUMAN SERVICES FISCAL YEAR 2009 BUDGET

                              ----------                              


                      WEDNESDAY, FEBRUARY 27, 2008

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:00 p.m., in room 
210, Cannon House Office Building, Hon. John M. Spratt 
[Chairman of the Committee] presiding.
    Present: Representatives Spratt, Allen, Schwartz, Doggett, 
Scott, Etheridge, Ryan, Garrett, Hensarling, Conaway, Smith, 
and Jordan.
    Chairman Spratt. This hearing is on the 2009 budget request 
for the Department of Health and Human Services. This hearing 
gives us an opportunity for members to explore the President's 
budget request for HHS in greater detail. I would like to thank 
Secretary Leavitt for appearing before the Committee today and 
not only that, for accommodating our schedule change so that he 
could be at the hearing. We appreciate your coming again and 
look forward to your testimony.
    The HHS budget should be considered in the broader context 
of the President's 2009 budget which continues its same 
policies as the previous years, but with more dramatic affects. 
To help pay for the nearly $2 trillion in tax cuts over the 
next ten years, the budget cuts Medicare by $556 billion over 
ten years, more than double the cuts included in last year's 
budget. It also assumes legislative and regulatory cuts to 
Medicaid totaling $81 billion over the same period of ten 
years. These cuts will harm State's ability to serve the 
uninsured, at the same time they are experiencing budget 
shortfalls due to their own circumstances.
    The budget for HHS also cuts or freezes vitally important 
public health programs that are essential to increasing access 
for the under served or making advances in medical research 
that lead to improvements in health. The budget includes cuts 
to several safety net programs which are vital to supporting 
struggling working families, such as, LIHEAP, the low-income 
energy assistance program and SSBG, the Social Services Block 
Grant. These cuts will harm millions at the worst possible time 
just when our economy is on the edge of recession; just when 
employment is declining and Americans are depending most on 
these programs.
    We recognize the long-term challenges facing the budget. It 
is important, however, to keep in mind that this Administration 
has aggravated those challenges through it's policies, mainly 
large tax cuts resulting in the largest tax deficits in 
history. These deficits have led to a moratorium of debt that 
prevents resources. A mountain of debt, excuse me, I wish it 
was a moratorium. A mountain of debt that prevents resources 
from being used for other priorities.
    It is also worth noting that while the Administration has 
focused a great deal of time and energy on privatizing Social 
Security, that the President signed into law the Medicare 
Modernization Act of 2003 which created an even larger unfunded 
obligation than that of Social Security. As we consider the 
problems facing the federal budget, we should keep in mind that 
Medicare and Medicaid are experiencing the same challenges 
facing the health care sector, notably the rise in excess cost 
growth.
    Cutting Medicare and Medicaid to meet budget targets alone 
without addressing the underlying structural causes of excess 
spending growth, we fear will only lead either to shifting cost 
to other sectors or to putting beneficiaries at risk. Earlier 
this month Congress received the Administration's Medicare 
proposal to address the trustees Medicare funding warning. We 
are eager to learn more about this proposal and whether or not 
it would result in cost shifts and actually address the issue 
of cost growth in the health care delivery sector.
    The challenges ahead of us are tremendous, and we 
appreciate Secretary Leavitt's presence to help us understand 
the Administration's views and his own views on these 
particular issues. But before turning to the Secretary for his 
testimony, I want to recognize the Ranking Member Mr. Ryan for 
any comments that he may care to make. Mr. Ryan.
    [The prepared statement of Chairman Spratt follows:]

    Prepared Statement of Hon. John M. Spratt, Jr., Chairman, House 
                        Committee on the Budget

    Good afternoon, and welcome to the House Budget Committee's hearing 
on the 2009 budget request for the Department of Health and Human 
Services. This hearing provides an opportunity for members to explore 
the President's budget request for HHS in greater detail. I would like 
to thank Secretary Leavitt for appearing before the committee today and 
accommodating our schedule change for this hearing. We appreciate you 
coming and look forward to your testimony.
    The HHS budget should be considered in the broader context of the 
President's 2009 budget, which continues the same policies as previous 
years but with more harmful effects. To help pay for nearly $2 trillion 
in tax cuts over the next ten years, the budget cuts Medicare by $556 
billion, more than double the cuts included in last year's budget. It 
also assumes both legislative and regulatory cuts to Medicaid totaling 
$81 billion over the same time period. These cuts will harm states' 
ability to serve the uninsured at the same time they are experiencing 
budget shortfalls due to the economic slowdown. The HHS budget also 
cuts or freezes important public health programs that are vital to 
increasing access for the underserved or making advances in medical 
research that lead to improvements in health. As significant, the 
budget includes cuts to several safety-net programs that are vital to 
supporting struggling working families, such as the Low Income Home 
Energy Assistance Program (LIHEAP) and the Social Services Block Grant 
(SSBG). These cuts will harm millions at a time when they depend on 
these programs the most, particularly during this time of economic 
uncertainty.
    We recognize the long-term challenges facing the budget. It is 
important, however, to keep in mind that this Administration has 
compounded these challenges through policies resulting in the largest 
deficits in American history. These deficits have led to a mountain of 
debt that prevents resources from being used for other priorities. It 
is also worth noting that while the Administration focused a great deal 
of time and energy on privatizing Social Security the President signed 
into law the Medicare Modernization Act of 2003, which created an even 
larger unfunded obligation than that of Social Security. As we consider 
the problems facing the Federal budget, we should keep in mind that 
Medicare and Medicaid are experiencing the same challenges facing the 
health care sector, notably the rise in excess cost growth. Cutting 
Medicare and Medicaid to meet budget targets, without addressing the 
underlying causes of excess spending growth, will only serve to either 
shift costs to other sectors or to put beneficiaries at risk of losing 
access to necessary care. Earlier this month, Congress received the 
Administration's Medicare proposal to address the Trustees Medicare 
funding warning. We are eager to learn more about this proposal and 
whether it would result in cost shifts or actually address the excess 
cost growth of the health care sector.
    The challenges ahead are significant, and we appreciate Secretary 
Leavitt's presence to help us understand the Administration's views on 
these issues. Before turning to the Secretary for his testimony, I 
recognize the Ranking Member, Mr. Ryan, for any comments he may wish to 
make.

    Mr. Ryan. Thank you very much, Chairman. Welcome back again 
to the Committee, Secretary Leavitt. When you testified to this 
Committee last year, one of the important points you made was 
this: You said that we do not have a health care system in this 
country, that we have a health care sector. It is concept you 
repeated at the Ways and Means Committee, which I serve on, 
just recently as well. And you said that health care should be, 
``* * * a private market where consumers chose, where insurance 
plans compete, and where innovation drives the quality of 
health care up and may drive the cost down.'' And that 
principle as I understand it, underlies much of the 
Administration's approach to health care including the 
President's health tax proposal.
    This is important, because it goes right to the heart of 
the health care debate. If there are problems with health care 
they do not, they have not come about not because the market 
has failed, but because of distortions imposed upon it over the 
decades. Those who think they can fix health care with more 
government spending and intervention, I believe, are headed in 
the wrong direction, and consumers and patients will suffer for 
it.
    Let me just cite two examples, both of are which are 
relevant to the budget we are considering. First is health 
insurance. Most people in America who have health insurance get 
it from their employers or the government, that is from third 
parties. And this is mainly because of an accident of tax law 
that goes back to World War II when there were wage and price 
controls. What is odd is that we don't expect somebody else to 
chose our cars or refrigerators or our clothes for us, but with 
something as important as health insurance we do. It is no 
wonder some people get frustrated about their coverage or feel 
in danger of losing it. They are not calling the shots.
    Second is government spending. About 35 percent of the $2 
trillion we spend on all health care nationally comes from two 
government programs; Medicare and Medicaid. When government 
pours that much money into any sector it is going to affect 
prices and distort the practice of medicine. In other words, 
one of the reasons health care costs are rising so rapidly is a 
huge amount of spending and distortion and control that the 
government pumps into it.
    These programs also affect the benefits and pricing of 
private health insurance because they create benchmarks that 
commercial insurers fall back on too. The point is this: The 
key to both controlling health care cost and expanding coverage 
lies in removing the distortions in the market. That means 
several things including ownership. Health insurance should be 
owned by the people who use it. And we can accomplish this by 
shifting the current tax benefit from employers to individuals 
and families so we are not discriminating against people who 
get it from their jobs only.
    We can debate whether there should be a deduction or a 
credit or what have you, but the point is that it should be 
changed to personal ownership so you can move job to job with 
your health care.
    Transparency. One of the big problems in health care is 
prices are opaque. In Milwaukee, I have done the research, you 
can pay anywhere from $47,000 to $100,000 for bypass surgery. 
Anywhere from $600 to $5,000 for an MRI and the same procedure 
at the same hospital, but most patients and sometimes even 
doctors don't even know this.
    Entitlement reform. Something that is missing from nearly 
every major health care reform plan being discussed is that 
they don't include fundamental fixes in reforms to Medicare and 
Medicaid. As I indicated before, unless we reform those 
programs and moderate their unsustainable spending growth, they 
will continue adding to medical inflation and health care 
reform itself will fail.
    The President's budget does address these issues. If you 
would pull up chart number 1, please.


    Mr. Ryan. And it tries to foster a truer, more efficient 
marketplace. We may not agree with every specific proposal that 
the President offers, but he does point in an important 
direction that we ought to consider.
    I look forward to discussing these issues here with you 
today and I also look forward to discussing the Medicare 
trigger. But before I conclude, let me simply say this: We are 
going to be marking up the budget resolution here next week. 
And if the budget resolution that comes to the floor does not 
include any reforms to the Medicare Program to save money, then 
we will be forced with adding the unfunded liability, which is 
today stands at Medicare at $34 trillion which is about 
$300,000 per household, to $45 trillion over just five years. 
That means if Congress neglects it's responsibility and it's 
duty to do something to save and rescue Medicare, we will add a 
debt that goes from $34 trillion today to $45 trillion for the 
time when my children need this program.
    It is irresponsible of us to not take this action. So when 
I hear the word cut, the word cuts to Medicare as are in this 
budget, I simply look to the fact that under this President's 
budget, they are proposing to increase Medicare spending at 
five percent a year. If it goes up five percent from last year 
to the next year, that is not a cut. That is an increase of 
five percent.
    And with that, I yield.
    Chairman Spratt. Mr. Secretary, thank you again for coming. 
We have your testimony which was pre-filed and we will make it 
part of the record so that you can summarize as you see fit.
    I might mention that when you were last here and testified 
last year, we talked about program integrity funding and we put 
in our budget resolution, which passed, some substantial 
additional money for that very purpose in order to get at the 
problem of waste, fraud, and abuse in the programs under your 
jurisdiction. Unfortunately, that money was left on the cutting 
room floor when the budget was downsized at the President's 
insistence when we negotiated the omnibus for this year.
    I would hope that we could do something next year, and we 
would like your testimony, if you could, as to how bad the 
problems are and what can be done with additional program 
integrity money.

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

    Secretary Leavitt. Thank you, Mr. Chairman. At our meeting 
last year I recounted experiencing that I had personally had 
going out with Office of Inspector General agents, particularly 
in Southern Florida where I saw first hand fraud and abuse. I 
saw office buildings full of what were very clearly shell 
businesses that had been established solely for the purpose of 
defrauding the American people and Medicare beneficiaries.
    Essentially they work in the same way. They set these up, 
they get a billing number in the same office building. They are 
able to find someone who can rent them names and lists who can 
in fact then begin to bill enough claims against Medicare that 
in a course of four or five months they can collect and then 
close down and leave. And they do it over and over and over 
again.
    I think I may have related the story last year where the 
week I was there the Inspector General agents had been able to 
procure access to three or four of the front people, not the 
people behind them, but they were able to get them to empty 
their bank accounts out. And they held checks for $10 million 
where they had simply written checks to clear the accounts out. 
We are talking about hundreds of millions, billions of dollars.
    You were very gracious last year in this Committee in being 
able to designate about $300 million plus for that purpose. 
This money pays dividends in multiples. I am talking about 
four, five, six, ten times the amount we spend we get back. I 
am appreciative of the chance to reinforce that and we hope 
very much that that could be considered in this budget. It just 
needs to happen. Every year we don't do it, money is going out 
the door. It continues.
    We have done a number of things in the meantime. We have 
changed or changing we are in the process, for example, 
requiring those who put durable medical equipment out in 
certain areas have to post bonds. We are essentially making 
everyone re-qualify. We are doing everything with the resources 
that we have and we are having some impact, but we need 
additional resources so we can do it other areas.
    I have posted my statement. I won't review it, other than 
to just say three things: The first is we have this budget is 
very clearly directed at trying to balance the budget, trying 
to sustain and put entitlements into a sustainable place. And 
to make certain that premiums are affordable to beneficiaries.
    I have grave concerns for all of the reasons that have been 
spoken already by Mr. Ryan. Medicare warnings have just become 
a seasonal thing. They come and they go like the cherry 
blossoms and when they happen we all stop, pause, and say that 
is a serious problem and then move on without taking action. I 
hope this budget will at least be viewed as a warning.
    Every year, every year, whoever sits in my chair, whoever 
sits in your chair all the money is going to have to deal with 
this until we do. And they will be facing the same kinds of 
issues that I have raised in this budget. I have gone through 
and done the best I could to find ways in which you could make 
the budget balance. I would suggest this is not reform. What 
this is, is a budget. It is a budget just doing the best I can 
and what I think is a broken system. This is a government 
regulated, price setting, centrally planned system and it will 
always produce choices that won't reflect a solution. And so I 
am hopeful that in the course of this that the budget well, it 
will make a lot of people unhappy, at least it will raise the 
one more warning that we have to deal with this.
    Now I recognize that there is a need to come up with a 
solution. And hopefully we will get to talk about solutions. I 
believe many of the same things Mr. Ryan said earlier, and that 
is the need for us to make Medicare more about educated 
consumers. And when we do, I believe, there is a means by which 
we can begin to turn the tide on this and create a true system.
    I know there will be lots of questions and so rather than 
take more of that time, Mr. Chairman, I will just yield 
whatever time I have left back, and lets go to the questions.
    [The prepared statement of Michael O. Leavitt follows:]

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





















    Chairman Spratt. Thank you, Mr. Secretary. One of the 
issues we have dealt with in the past year is Medicare 
Advantage, which was tucked away in the back titles of the 
Medicare Modernization Act, which primarily dealt with the 
addition of a prescription drug benefit to the Medicare 
Program.
    CBO has told us that the differential on average in 
payments per beneficiary under Medicare Advantage as opposed to 
traditional fee for service Medicare is 13 percent. In other 
words, this program Medicare Advantage, which was intended to 
be a managed care option for Medicare and to therefore to save 
money, instead it is costing us more money than traditional fee 
for service medicare.
    Number one, do you disagree with that? And number two, have 
you seen the particular graph that was published by the CBO 
which shows that given the differential today and the likely 
growth of this program, because it is better funded, that the 
cost of providing for care of beneficiaries under this program 
over tens years is likely to be $150 billion more than fee for 
service beneficiaries?
    Secretary Leavitt. I am aware. I was not here in 2003, but 
I am aware that the Congress made a decision to expand the 
program on a countrywide basis. And that they established the 
pricing in a way that would accomplish that. I am also aware 
that they chose to have that additional pricing reflected in 
benefits and that it has clearly worked. And that people are 
happy with it and that they are in fact enrolling in large 
numbers and that we have now accomplished some 20 percent who 
of the beneficiaries who have chosen it.
    I am also aware that those who enroll not only are they 
happy because of the additional benefits, but because they are 
having an easier time getting a physician. Now do I think it is 
perfect? No, I don't. But I think it is a very positive move 
toward the kind of thing I spoke of earlier.
    I have indicated in other testimony that I believe there 
are some things we can do to refine it where the actual bidding 
that goes on is done in broader areas and we will begin to see 
competition drive the cost of it not just down to where it is 
now, but perhaps lower. I think we are on the right track we 
just need to continue to work and refine it in ways that will 
allow the market to work and for consumers to have the chose 
that they----
    Chairman Spratt. Well do you plan in the near term to 
equalize the cost between the two programs or at least to 
remove this 13 percent, 14, 15 percent advantage?
    Secretary Leavitt. I--well, again, I want to acknowledge 
the fact that these additional, this additional amount is going 
into benefits for beneficiaries. I think we can probably concur 
with that.
    I also believe it does need to be allowed to make certain 
we have a fully implemented national program. I also believe 
that if in fact we were to expand and refine the bidding 
process that we will see a market begin to not only drive it 
down to where it is equal with existing rates, but below. I 
think we can see it not only come to the point that it is 
equalized, but go below, because I believe that is the power of 
the market that it will unleash.
    Chairman Spratt. In your quest for program integrity, and I 
commend you for that, have you encountered waste, fraud, and 
abuse in the marketing of Medicare Advantage policies?
    Secretary Leavitt. Yes, we have.
    Chairman Spratt. Would you care to elaborate on that?
    Secretary Leavitt. Well it exists. And we are doing 
everything we can to just like we are in other areas to remedy 
that. And, unfortunately, when any program of this nature and I 
am not talking just about Medicare Advantage, I am talking 
about Medicare, we have to be vigilant and pursue not just 
integrity in that area, but in every area.
    Chairman Spratt. About ten years ago as part of the package 
deal that became known as the BBA, the Balanced Budget Act of 
1997, the package included a sustained growth rate factor. The 
problem being that when we bore down on rates we tended to see 
volume increases in the delivery of health care to make up for 
the reduction in rates. That has become a problematic ratio 
these days or equation these days so that for three years in a 
row or at two years in a row, we have had to correct it, patch 
it, one year at a time feeling that it would not be fair to 
administer the kind of cuts that it called for to physicians 
pay in particular.
    We have been waiting on some kind of resolution or 
correction of that particular formula given the fact that it 
tends to produce anomalous results. The Administration has 
indicated in the past that you were working on it, but we have 
never seen anything. Nobody has seen anything up here and 
consequently we go from year to year to year correcting the 
problem. What is your solution to the sustained growth rate 
factor?
    Secretary Leavitt. Well, first of all, let me just to 
concur with you, I think it is a lousy system. And I think it 
is the anytime you have a price setting centrally planned 
system, you are going to end up subsidizing the wrong things 
and over charging for others. And in Medicare we make a couple 
of thousand decisions that begins to drive all the decisions 
that consumers could make, I think, more wisely and more 
precisely.
    At the root of this problem is the differential pricing 
where you can go to Mr. Ryan's State in Wisconsin and see a 
rate that is half what it would be in Milwaukee or rather in 
Miami. You can't find any difference in the outcomes, but what 
you will see is that the minute we begin to reduce the rate 
they just start performing more procedures. There is nothing, 
there is no competitive or consumer pressure to drive those 
down and, frankly, that is one of the things that I believe we 
have got to unleash in Medicare Advantage is that pressure.
    Chairman Spratt. And part of the problem is that 
conscientious doctors who are not responding by volume 
increases are nevertheless penalized the same as those who are.
    Secretary Leavitt. Well I--that is what happens in a price 
setting, centrally planned, government regulated system. And we 
need to change it.
    Chairman Spratt. Well what is the change then? Surely, you 
are not talking about privatizing Medicare completely just to 
get at that particular problem?
    Secretary Leavitt. No, but I, frankly, if we could begin to 
see part ``A'' and ``B'' look a lot more like ``D'' we would 
begin to see the impact we have seen on ``D.'' I mean on ``D'' 
we started off believing the actuarial--I mean you have got--
there were estimates all over the place, but if you figure 
where it was finally adopted at $37 we are now delivering it 
for $25. We announced last week, I think, a $247 billion 
reduction in the original estimate.
    Now there are lots of things that go into that, but 
everyone I know including the government actuaries and any 
economist that you will find will tell you that a big part of 
that was competition. We adopted regional competitive 
environments where in order to get business people had to offer 
the least possible rate and they had to offer the best possible 
service. And people had a choice. And we have now seen quality 
go up and the cost go down.
    And so I am--I fundamentally believe that the way we 
ultimately begin to get at this cost escalation and the way we 
begin to convert it to a systemic or to a system is that we 
adopt the same strategy in part ``A'' and ``B'' that we have in 
``D.'' And that ``D'' remains a government regulated but market 
driven system.
    Chairman Spratt. Well given the situation now, has HHS with 
Medpack tried to devise, develop a better formula than the 
formula now in place for the sample growth rate?
    Secretary Leavitt. Well, we welcome the opportunity to work 
with Congress. It is obviously going to take legislation to do 
that. If it was just up to HHS I would have come up with 
something, but at this point it is a matter of legislation and 
we look forward to working in whatever way. We have got to fix 
it. We just keep patching it from year to year, I mean from six 
month to six months. We don't even make a year these days.
    So I don't I am not here today to say I have got the 
formula in my pocket, but it is something worth working on.
    Chairman Spratt. Okay. Thank you very much. Mr. Ryan.
    Mr. Ryan. I am going to deviate from what I was actually 
going to ask, because I thought that line of questioning was 
quite interesting.
    Let me go down this path of looking at ways in which we can 
reform Medicare to save Medicare. And you showed us the 
example, Mr. Secretary, of part ``D'' and how the choice in 
competition within part ``D'' actually drove down the projected 
price.
    And let me make sure I just understood what you just said. 
You are saying that the cost of the program has come in $247 
billion lower than the estimate of the program was?
    Secretary Leavitt. If that is the wrong number, it may be 
$240.
    Mr. Ryan. No, I think that is right. I just----
    Secretary Leavitt. Maybe $243.
    Mr. Ryan. Okay. So about a 40 percent reduction?
    Secretary Leavitt. Yes. It is a 40 percent reduction.
    Mr. Ryan. A 40 percent reduction.
    Secretary Leavitt. And it might be pointed out that we have 
enrolled 93 percent of those who are eligible in about a year 
and a half. And 86 percent of them are happy and the 14 percent 
who are not, have a recourse. They go off and find a plan that 
they like and they do. They change plans when they are not 
happy.
    Mr. Ryan. Because they are not stuck with the government 
monopoly. They have choices.
    Secretary Leavitt. Well and we have created a generation of 
very astute consumers. I can tell you that they have--you know 
there was scepticism when we started into this, and frankly, a 
little, people were a little grumpy about it, but they like it 
now a lot because they have choice. And they have information. 
And they have driven the quality up and the cost down.
    Mr. Ryan. I think that just from a Wisconsin perspective, I 
held a bunch of these sign up fairs in 2004 with your 
predecessor and there was a lot of concern, a lot of angst, a 
lot of just confusion. And we don't see nearly that amount that 
we did back then. And so it is encouraging to see that a market 
driven idea which gives the individual choices has actually 
drive competition, brought cost down, improved quality choice 
and satisfaction.
    I think it is not a huge stretch to say that if we try that 
idea somewhere else in government it may produce the same 
results. That is something that is kind of novel, I think, 
around here but something we ought to take a look at. And this 
kind of goes to the heart of the health care debate we are 
having today.
    You mentioned sector versus system. I think it would be 
roughly the same as saying that we really have a health care 
market rather than a health care system. And if we systematize 
health care as some will propose, in your opinion will that 
make the market more or less efficient? How will that affect 
patients if we systematize the rest of the health care market 
in that direction rather than injecting some of these market 
reforms that involve giving patient more power and choice?
    Secretary Leavitt. We just know at every in every--at every 
point it is deployed that when consumers have information about 
quality, when they have information about cost, and they have 
choice the cost goes down and the quality goes up. We have seen 
it in nursing homes. We have been able to provide people with 
information about nursing homes and one thing we find is that 
when we publish information about the quality and the cost and 
there is a comparison, we see the quality go up and the cost go 
down.
    Mr. Ryan. One thing that I would like to make an attempt to 
do, I will reach across the aisle with my democratic friends in 
the majority. An area that I think we ought to be able to have 
some consensus on. There is a bill I had with Senator Clinton 
on this issue and that is the issue of transparency.
    We just had the 45 percent trigger triggered. The Minority 
Leader, the Majority Leader just introduced the bill as 
required by the law which you sent up the means testing on part 
``D,'' I understand that is going to be controversial and I 
don't know where that is going to go. Medical liability, I 
understand that is controversial. I don't know where that is 
going to go. But there is a third, I think people are looking 
at me telling me where it is going to go. But there is a third 
element to it which is this transparency aspect. This 
transparency policy that you produced. The first two I think we 
all know those save money. You know means testing or income 
relating--sorry--and medical liability. We know that saves 
money.
    Can you explain to us how and why this transparency 
initiative, number one, what exactly is it and how and why that 
can help us save money. And I would like to simply say, humbly, 
that this is something republicans and democrats ought to agree 
on. That we ought to be able to work together on this. So if 
you could just go into that, I would appreciate that, 
Secretary.
    Secretary Leavitt. Let me just add that in every system 
that I know of that is a large socialized system outside the 
United States that most poignant political issue right now is 
how can we create more choice and also some sense of consumer 
pressure. And so this is not just something that is about those 
of us who believe it ought to be conducted in a private way.
    There are four cornerstones in my mind to how you create 
competition based on value. The first is electronic medical 
records. We have to connect the system. The second is measures 
of quality. We have to know what quality is in a way that has 
been agreed upon by the medical family. The third is to have 
price groupings where ordinary people can understand how much 
it cost. And then fourth we have got to structure the system so 
everyone has a motivation to drive quality up and cost down.
    Now we are making substantial progress in the area of 
electronic medical records being able to create standards. We 
need to drive adoption, but we also need to continue to drive 
the standards issue. On quality, we have the medical family now 
working together to develop standards. Actually, I have been in 
South Carolina and Wisconsin working with local collaboratives 
that are working to develop measures of quality. We are now 
getting to the point that those are standardized.
    Mr. Ryan. Can I ask you, right there? This is an issue that 
is difficult to get your hands around, quality, because of risk 
adjusting and other things. What you will eventually get into 
these conversations with lets just say replacing a hip and the 
American College of Orthopedics will say, ``Well, you know, 
replacing Jim's hip or my hip or John's hip is different. You 
can't measure the quality of these procedures because it is 
apples to oranges to bananas.'' Where is the industry able to 
get an accurate measurement of quality? Number one.
    Number two: Do you believe we are getting through a lot of 
the resistance that we have received lately from the provider 
community on being willing to submit their data to standard 
quality metrics?
    Secretary Leavitt. The American Medical Association and 
many of the and most, maybe I should say all of the 
professional societies that we are working with that define 
quality have been extraordinarily helpful. We have formed the 
Ambulatory Quality Alliance which includes not just the 
physicians and speciality associations, but also the hospitals, 
the large payers, the insurance companies and CMS and other 
government agencies. And we are collaboratively now getting 
down to the hard job of defining what quality is.
    Now, frankly, we are not very good at it yet, but we are 
getting better and we are getting more and more measures and we 
are beginning to see this happen. In various places around the 
country now you can literally get a copy of or you can get a 
table that will show how many procedures a particular physician 
performed. How many of them were done at a particular hospital. 
How many hospital bourne infections that hospital had. Next 
month Medicare will begin to publish a table on the internet 
where you can take any hospital in the country on any procedure 
and determine how much a hospital charged, how much they 
charged Statewide, and how much the national average and what 
the patient satisfaction was. We are beginning to know how to 
do this.
    Now we are not at the point we have to be, but when you 
begin to put those into place, this system can in fact be 
formed. What we have now is a sector. We have got to systemize 
it and when we do quality will go up and cost will go down.
    Mr. Ryan. Charged. Is that just Medicare charges?
    Secretary Leavitt. Actually, the system at CMS is, however, 
there are other systems that are beginning to develop. We are 
weaving a network of what we call chartered values exchanges. 
We now have 14 of them. I expect by the time we get to the end 
of the year we will have 30. These are local collaboratives 
that are using the same standards of quality and the same 
standards of health information technology to begin to weave 
into place this system.
    Mr. Ryan. And price standards?
    Secretary Leavitt. And price standards.
    Mr. Ryan. Okay. Well I could go on and on and on. I don't 
want to abuse my time. I appreciate it. Who is first over here? 
Okay. Thank you.
    Mr. Allen [presiding]. Thank you, Mr. Secretary for being 
here. I have a comment. I would like to, given more time, get 
into this philosophical discussion, but I have something more 
specific I want to deal with. But I did just want to say this: 
My blood pressure goes up when I read in your description in 
your testimony that there are two competing philosophies about 
the role government should play in health care. One is a 
Washington-run, government-owned plan where government makes 
the choices, sets the prices, and then taxes people to pay the 
bills. I don't believe that is a system that, frankly, any of 
us really expect and want.
    Secretary Leavitt. It is the one----
    Mr. Allen. The other is supported by the Administration is 
a private market where consumers chose where insurance plans 
can compete and where innovation drives the quality of health 
care up and may drive the cost down.
    Now, we are all for electronic medical records. We are all 
for measures of quality. But based on my experience, talking 
with my constituents back home, I simply do not believe that 
price and quality transparency is going to, across the whole 
range of consumers who are looking for health care, is going to 
drive them to this miraculous, higher quality, less efficient 
system. And I didn't really want to get too deep into that.
    But let me come to what it looks like to me. It looks to me 
as if the Administration is simply cutting budgets and letting 
the States deal with the consequences. The States and all the 
different people and individuals who are involved. For example, 
this new the new Medicaid regulations at the Administration has 
issued. The regulations include changes to targeted case 
management, rehabilitation, and school-based administration and 
transportation services.
    Taken together these seven new regulations result in cuts 
of more than $12 billion over the next five years. Now in Maine 
a lot of this is a direct cost increase to the States. In Maine 
Governor Baldacci's Office has informed us that these new rules 
could cost the State of Maine $45 million in the next 16 
months. That is one quarter of the deficit that the Governor 
and the Legislature are struggling with.
    I want to focus on the TCM rule, which is scheduled to go 
into affect on March 3. Just six days from now. That rule would 
limit the period of coverage for case management services for 
people transitioning from institutions to the community. It 
would disproportionately affect individuals with disabilities 
and mental illness, low-income seniors, and children in foster 
care.
    I have heard from dozens of providers in Maine, including 
Day One, a substance abuse treatment center; Pen Bay Health 
Care; Mid Coast Mental Health Center, as well as families with 
foster children who could have their services cut if this rule 
goes into affect.
    Mr. Secretary, very simply there is a lot of opposition to 
this rule on the Senate side, there is opposition in the House. 
You are hearing from the governors of their opposition. Will 
you delay implementation of this rule?
    Secretary Leavitt. Mr. Allen, Medicaid is a partnership 
with the federal government and the States. We are all serving 
the same people. It is a dispute, however, between the 
partners. And I suspect there is nobody in this room that is in 
a better position to understand both perspectives than me. I 
was a governor for 11 years. I think I understand where the 
States are coming from on this. I have heard from many of them.
    But if I could just put this in unvarnished terms, I would 
like to. There are a number of areas that we have issued rules 
where we believe that States are using ambiguities in the 
regulation to unfairly increase our share. And let me explain 
to you how this works and I know you may know this, but this is 
driven by consultants who get paid a contingency fee by being 
able to find any area in the law where there is the breath of 
some kind of ambiguity. And they have no incentive but to push, 
push, push, push, push the limits of what should and could be 
paid for by Medicaid. We have to push back by becoming explicit 
in eliminating those ambiguities as they happen. And when they 
do, it is then represented as though we are pushing costs off 
on to the States.
    I am trying to be a steward of the federal position here 
and I need to be able to push back on occasion when these fee 
based, contingency consultants find new ways and they have no 
incentive to do anything else because they get paid. And I need 
support here, not criticism.
    Mr. Allen. Well--yeah. But what--but isn't true that you 
are changing rules some of which have been in place for a 
considerable number of years. And that the States and the 
providers and the agencies have come to expect. And you know 
you may it is not exactly pushing back on something that has 
just happened recently, from my understanding.
    Secretary Leavitt. Well, lets just take the targeted case 
management----
    Mr. Allen. Yes.
    Secretary Leavitt [continuing]. As an example. You don't 
have to believe me on this, believe GAO. The GAO report itself 
I mean like two examples. One State, I won't name the States 
unless you ask me to, hired a contingency fee based 
consultants. They had $17 million in federal reimbursements 
according to GAO. They in their audit they concluded that $12 
million of the $17 million weren't really eligible but they 
were pushing the system. Another one had $76 million, three 
different programs in non-health care agencies.
    I mean I will give you an example. This is one that is 
often cited, schools. I mean none of us disagree with the fact 
that if there is someone at a school that could be enrolled in 
Medicaid we ought to have somebody there to help them. Well in 
reality what they do is they will have a person at the school 
whose job it is to enroll somebody, but a large percentage of 
their duties are actually other school duties, but Medicaid 
pays the entire bill.
    Now, if I am a governor and my county is dealing with me in 
that way, I would not like that, and I don't think the 
governors would either.
    Mr. Allen. Well let me just my time is up. I don't really 
want to extend it, except to make this point: This grows out of 
the fact that Medicaid is in fact a partnership. And so what we 
have is the two partners quarreling over who will pay which 
bill. But the bottom line is that when you pull back on what 
you have been funding in the past and then you are leaving you 
are simply moving that burden to the State or to the agencies 
and you are leaving behind the people you want to help.
    I could just as easy, in contrast to the argument you made 
earlier, I could just as easily make the argument that our 
system is so complicated, so entwined that we have spent a lot 
of time, particularly in the private sector and not just the 
public sector, arguing over who pays the bill and which bills 
they pay. We have got so much excess bureaucracy built into 
what, I think you had defined as competition that there may be 
a piece of the problem that we are really struggling with as a 
country.
    And I----
    Secretary Leavitt. I wouldn't argue that point, because I 
think you are right.
    Mr. Allen. I think I better go on or--I know we do. We do. 
I will withhold and recognize Mr. Garrett.
    Mr. Garrett. I thank you. And I thank the Chairman. Thank 
you. Thank you, Mr. Secretary.
    And to begin I guess I will just follow along some of the 
line the questioning that was here. During this presidential 
election, you know, we here so much talk about new medical 
plans out there, whether we should have a universal health care 
plan in this country and what the benefits of that would be. 
And so much of the attack always is saying that the current 
system isn't working to the degree that the American public 
wants it to. And that the current system is a market based 
system and that is what we need to move away from. This goes 
with some of the argument to a more government controlled 
central plan.
    But help me out with some of the numbers. If you were to 
take all the people in the country right now who are in 
Medicare and in Medicaid and other government programs and in 
the VA and you combine them altogether, what percentage do they 
make? What percentage of the American public right now is 
really getting their health care under a government health care 
system?
    Secretary Leavitt. Well under Medicaid and Medicare 
combined it would be under 30.
    Mr. Garrett. Yes. And then if you--and as a percentage then 
out of the population?
    Secretary Leavitt. Under 30 percent. It would be under 30 
percent. Is that what you are asking me?
    Mr. Garrett. Under 30 percent?
    Secretary Leavitt. Yes.
    Mr. Garrett. And then you add veterans on top of that?
    Secretary Leavitt. You can get public expenditures if you 
include all public expenditures----
    Mr. Garrett. Right.
    Secretary Leavitt [continuing]. Indian health, State, 
federal employees, you can get up to about 39 percent.
    Mr. Garrett. Yeah. About 40 percent. And then on top of 
that you have the fact that most Americans, if I am not 
mistaken, you can correct if I am wrong, don't buy their own 
health insurance they get it through their employer. So if we 
really talk about a free market based system where I, the 
patient, have a patient directed health care system, my 
understanding it is in just the high double digit like 15 some 
odd percent.
    Secretary Leavitt. It is a very small percentage.
    Mr. Garrett. So the assertion on the other side sometimes 
that we are in a market based system and that is not working 
for us and we need to move towards the government control 
system, the facts really don't support that. We are really 
already in a government dominated system, isn't that correct?
    Secretary Leavitt. And in order for even those who are 
employed and have employer based insurance to be part of that 
market they have to have information about the quality and the 
cost so they can make judgements on value. That is what is 
absent now is that none of us have information about what 
quality is or what cost is and the result is we essentially 
don't make decisions and the market just continues to go up 
because we pay on volume----
    Mr. Garrett. Right.
    Secretary Leavitt [continuing]. Not on value.
    Mr. Garrett. Right. And so to go along the lines of Mr. 
Ryan here, is if you really want to have a patients directed 
system or a doctor/patient directed system the decision making 
factor has to be follow the money which would be with the 
patient then as opposed to the government?
    Secretary Leavitt. That is my view.
    Mr. Garrett. Okay. On another unrelated note with regard to 
SCHIP. At the end of last year Congress passed and the 
President signed legislation that extended SCHIP through March 
of '09. And at that time provided an additional $800 million in 
funding to cover the so called shortfall States, New Jersey 
being one of them. Those States that would not have had 
adequate funding to cover their eligible SCHIP populations.
    There was a lot of debate on that. Both Congress and the 
President rejected proposals to greatly expand SCHIP Program 
beyond its original intent back then. And yet in the 
President's budget request now he proposes an additional $2.2 
billion in SCHIP spending for fiscal 2009 and $19.7 almost $20 
billion over the next five years.
    This is a huge increase over his request of just last year. 
And some of us were standing with the President on his number 
last year saying that that was the right number. A year goes by 
and now we are looking at a $20 billion increase at this point.
    So my first question is, what happened over that time? And 
what do you say to those of us who are standing with that 
number?
    Secretary Leavitt. Well, first of all, thank you. And then 
second of all, let me reconcile it for you. First of all, the 
President's number last year was just under $10. We had $5 and 
then we had $4.8, I believe, of money that had was still in the 
previous allocations. The number this year is $19.7, I believe. 
It is about $10 billion difference.
    What we have attempted--the most important change is for us 
to drop one year and add a more expensive year, which if we are 
working to develop a policy to fund the policy that is what we 
would need to do, because we have got a new period.
    The second is we have more updated information about the 
number of children. What we have attempted to do is to take the 
policy that the Congress passed and put into place a budget 
that reflects that policy. And the budget numbers reconcile.
    Mr. Garrett. And that is not what the numbers were what the 
President was trying to do last year when we were throwing out 
those other numbers then?
    Secretary Leavitt. Well, again, we have better numbers this 
year than we do last year. And we added on a more expensive 
year and dropped the less expensive year.
    Mr. Garrett. One last question in my last 12 seconds is 
this: Is that also in the President's proposal is to provide 
additional funds to provide greater dollars to the States for 
outreach purposes to try to bring in the uninsured kids. A 
report that the HHS came up with shows around 689,000 uninsured 
children with incomes under the $200,000 level were eligible, 
but not enrolled in SCHIP.
    I guess my question here is, we are already providing an 
incentive to the States because it is a two to one matching for 
the States as far the SCHIP Program. That seems to me to be a 
substantial incentive already for States to do it. Here if you 
divide the numbers up it is around $450 million over the period 
of time off the pack of paper it comes down around $100 or $200 
per child that you are going to try to bring in.
    Aren't we already giving enough incentives to them? Isn't 
this the States responsibilities to bring them in? And finally, 
isn't it ultimately the parents responsibility when we already 
have a federal program to provide free health care to their 
children that they should be have some responsibility and not 
the other tax payers to give them additional funds to bull into 
a system?
    Secretary Leavitt. Yes. Yes. And yes. And may I just say 
our goal here is to identify those children who are under 200 
percent of the poverty level, do our best to enroll them first. 
And we felt there was a need for us to aggressively do that. I 
think that was the will of and the policy of Congress and we 
attempted in this budget to reflect that.
    Mr. Garrett. Okay. Thank you.
    Chairman Spratt [presiding]. Ms. Schwartz.
    Ms. Schwartz. Thank you, Mr. Chairman. And I appreciate the 
opportunity to ask some questions. I had a chance to do that, I 
guess, a week or so ago at Ways and Means and then did submit 
some questions for you, so you may know the direction that if 
you have had a chance to see them, you may know the direction I 
am going to go in.
    And I think I am going to try and find a place where we 
agree. Okay? We are always looking for bipartisan cooperation 
here. So I really want to talk about the fact that budgets I do 
believe are moral documents and there is a great deal of 
concern about health care and health care costs and how we 
contain them. I do think we should start with a goal and I 
would define the goal very differently than Mr. Ryan does, but 
I define the goal that under Medicare in particular we are 
going to try and get quality health care needed by seniors in 
this country in the most cost effective way possible.
    And I agree with you that cuts, particularly across the 
board cuts, not targeted, not directed, but across the board 
cuts in Medicare particularly to our hospitals, for example, 
are not reform. And I agree with you. You just said that and I 
really do agree with it. But where we do agree, at least 
rhetorically, is that there are ways that we could make the 
Medicare system, of payment system, really encourage quality, 
demand, accountability, and to be able to better assure 
quality. And we--there are several ways of doing that and you 
have talked about some of them and certainly so have I.
    Electronic medical records.
    Secretary Leavitt. Yes.
    Ms. Schwartz. Comparative effectiveness data and 
distribution of that data. Some of the data you are talking 
about, but really using that in a very effective way. 
Encouraging e-Prescribing, which I obviously have a bill on and 
I would like to see happen. But in fact in the budget, the 
budget does not reflect those priorities, nor have been the 
statements from the Administration to encourage that. So we 
included some of this language, for example, in the legislation 
that we didn't finally pass, the CHAMP Act. It didn't, we 
didn't hear from the Administration saying, ``Good idea. Lets 
do that that part of it.''
    And the fact is that in your budget, in the President's 
budget, comparative effectiveness research and the agency for 
Health, Research, Quality is actually cut. So instead of moving 
in the direction of saying, ``Okay. We are not going to just 
randomly, arbitrarily cut reimbursement, we are going to 
actually be smart about this. We are going to use technology. 
We are going to make some investments.''
    So instead of saying to our hospitals, ``We are going to 
help you do electronic medical records. We are going to help 
you do e-Prescribing. We are going to reduce errors, demand 
transparency and accountability. Disseminate the most up to 
date information possible. Share with you quality at a 
neighboring hospital you may not know about. And really make it 
more efficient, more effective, and higher quality.'' And yet 
your budget actually cuts those areas.
    So I ask it as a question I would like to see these things 
happen. I think we have an opportunity to do it through 
Medicare. I think it can be a huge driver towards quality and 
efficiency and savings, both of lives and of dollars. And then 
we can save those dollars. That is reform. That is changing the 
system for the better. It gets health care that we need to 
people without saying to our hospitals and there are hospitals 
in my district. They are saying back to me, ``Congresswoman 
Schwartz, you are telling us we should do electronic medical 
records. We should encourage these things, but in fact under 
medicare we are getting cut. We have no idea how we are going 
to make up those millions of dollars.''
    So can you explain how the rhetoric does not match this 
budget and does not make the kind of investments that truly can 
make a difference in both lives and dollars.
    Secretary Leavitt. First, may I say I am pleased about the 
things we agree on.
    Ms. Schwartz. Okay.
    Secretary Leavitt. Second, lets talk about comparative 
effectiveness. As I recall, this is a big budget, but as I 
recall the reduction was $9 million.
    Ms. Schwartz. Correct.
    Secretary Leavitt. We spend that much at CMS on comparative 
effectiveness in a week. The fact that that particular line 
item might have been reduced is likely because we were doing it 
a lot in CMS and we are doing a lot of it in FDA. So to say 
that one item was reduced a little and then assume that we 
don't believe in that as a tenant would not be correct. We have 
a strong belief in quality and finding ways to do it.
    May I address the larger issue you raised?
    Ms. Schwartz. Yes. But do follow up on how you could speak 
to what else you are moving on. I mean I understand we just 
have this report from the GAO about some of the work that is 
being done by CMS. It is moving too slowly, basically, 
according to them. And----
    Secretary Leavitt. I would concur with that. Nothing 
happens fast enough.
    Ms. Schwartz [continuing]. That we need to move much more 
quickly and much more aggressively to make this happen.
    Secretary Leavitt. Well if we can sign up for more 
aggressive, I am there. So much of this would be driven faster 
if consumers had information about what was quality. And where 
we ought to be investing is in how we can bring together a 
system that includes the four cornerstones I have spoken of 
earlier. Our time is up, but this is an engagement I hope we 
will have on the next----
    Ms. Schwartz. Yes. And I know that my time is up, but let 
me just say this is one that I think we do have to move beyond 
the rederick. And it is, well it isn't only tools for 
consumers, but really is also tools for health care providers 
and hospitals. In Pennsylvania, and you know Pennsylvania some 
good work on this with the Health Care Cost Containment Council 
and the Patient Safety Authority and some of the work we are 
really doing. It is a way for hospitals to look at each other, 
because really if you are having a heart attack and you are in 
an ambulance, it is not when you call the Health Care Cost 
Containment Council and say, ``Would you send me that brochure 
so I can compare which hospital to go to.''
    It really is the hospitals who are actually saying, ``Wait 
a minute, I don't want to be tenth on the list, I want to be 
first on the list for quality and efficiency.'' So it is to 
just say lets wait until we can get it to the consumers is 
actually just too far down the line. We really have to use 
Medicare and use the power of your office and ours, you know, 
to move this much, much more quickly. And to not just have the 
same discussion next year and the year after, because then what 
we are doing is slashing quality and that is not what we want 
to do, because we are just cutting services arbitrarily rather 
than where we really know it would not make a difference.
    And thanks.
    Secretary Leavitt. Mr. Chairman, would you indulge a 60-
second response? In a three month period, starting last month 
until two months from now, I will be in 40 different 
metropolitan medical markets, meeting with their medical 
family, where we have discovered many, I would say more than 
100 different groups and communities working to crack the code 
on quality. And we are working to bring them together and to 
harmonize standards, not just with quality but an electronic 
medical records, all of which is aimed directly at this.
    Government has a role and it is--and we are working to move 
this as rapidly as possible. There are some natural barriers to 
this that we don't have time to talk about today.
    Amen. Could you write me down as being for that.
    Chairman Spratt. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. Mr. Secretary, 11 
years as a governor, however many years as Secretary of HHS, 
have you had any experience at all in which an organization you 
are dealing with, either a State agency or one of your 
subordinate agencies but then they bill it, that you decided 
would get less money than they thought they were going to get 
or actually less money than they got the year before where they 
thought that was a good idea?
    Secretary Leavitt. No, sir, I have not.
    Mr. Conaway. Me either.
    Secretary Leavitt. At least seldom.
    Mr. Conaway. Yeah. I have never come across that yet where 
that, you know, a legitimate cut which is less money or 
reduction in the rate of growth wasn't seen as the end of the 
earth.
    We use the word reform in this arena, tolerance, spending, 
others, and that is a kind, gentle word that has no meaning. I 
think we have to begin to use the word renegotiate. You are 
attempting a renegotiation with the States and Medicaid in this 
arena where they have stretched the original intent of the 
rules to gain the system in effect with professionals. And 
whether it is the group, you know, nursing homes or in this 
instance some other things that you mention, you know, those 
renegotiations are going to have involve people getting less 
money than they thought they were going to get or less money 
than the rate of increase.
    And so I just don't think you can have your cake and eat it 
too in this arena. They are going to have to be as a result of 
a renegotiations folks are going to get less money. In that 
regard, can you talk to us any detail that you want on this, it 
is like the proposal, $113 billion reduction over five years on 
reimbursements, the premium reform proposal, other kinds of 
things where you are showing the savings in this entitlement 
arena on the budget. Just, you know, cuts like that are very 
dry on the paper. How can what do we expect to actually happen 
with respect----
    Secretary Leavitt. Well let's----
    Mr. Conaway [continuing]. As they deal with this?
    Secretary Leavitt. Lets go back to this issue of our 
relationship with the States, which you know, I have spent a 
big part of my career thinking the way they are and so I guess 
it is appropriate that I am now having to deal on the other 
side of this negotiation. But it has become clear to me that 
they are, in some cases, driven by these fee contingency fee 
consultants who have little to lose from just pushing as far as 
they can knowing that it may take us years absent this kind of 
a rule change to beat them back through court.
    I mean, for example, States we routinely pay public 
hospitals a little extra money for a legitimate reason. So 
States have, through their consultants, have figured out that 
if you appoint a lot of hospitals as public hospitals you get a 
little extra money a lot of places. And then they sweep that 
money up and they put it into their general budget. And that is 
the money that they use to pay their match.
    So they are taking our money and paying our match which we 
match again. Now that is a very clever approach, but it is 
wrong. And it isn't a true partnership. And what I am looking 
for is a partnership where they put up money and we put up real 
money. Now I understand the need for them to, when I say the 
need, I understand why they do that. But if I am running a 
program with integrity, I have to push back, otherwise we have 
no negotiation here. We have no integrity in our partnership.
    And so as I said, I have been I am not surprised by the 
criticism. I am not surprised by the lobbying campaign. I am 
not surprised by the fact that we end up with every medical 
constituency who gets that money and every school district that 
gets that money and every rehab program that gets that money 
are somehow coming back saying, ``You are cutting services.'' 
Well the reality is we are cutting off their staff person who 
is also doing other things that we are picking up.
    And it has been driven by consultants who get paid a 
portion of it. And there is a lot of criticism of this. But 
this is good program management that we are doing. And it is 
saving $18 billion that can go to medical costs for poor 
people. And that is what it ought to be in.
    Mr. Conaway. Thank you, Mr. Secretary. I will yield back. 
Thank you.
    Chairman Spratt. Mr. Doggett.
    Mr. Doggett. Mr. Secretary, I would like to explore just 
how good that program management is and the issue of waste, 
fraud and abuse and just continue the discussion that you and I 
had two weeks ago this afternoon in the Ways and Means Health 
Subcommittee.
    Just to be fair to you, let me just go back and quote to 
you my last question to you and your last answer to me. And it 
was, ``I asked last June and again in October, we have 
submitted it in writing, we have asked it orally, to tell us 
what happened to the $100 million that you wasted in paying 
private insurance companies for retroactive coverage for low-
income beneficiaries that they were never told about until too 
late to take advantage of it. I still don't have an answer. The 
Health Subcommittee doesn't have an answer to it's written 
questions. Do you think before you come to testify before the 
Budget Committee this week or next, because we thought it was 
going to be much earlier the day. When I get a chance to ask 
you about this again that you could please bring us these 
answers that have been due since last summer?''
    And your answer, Secretary Leavitt, was, ``That seems like 
it would be a smart thing to do.''
    And my question to you today is, have you done what you 
said would be the smart thing to do and brought the answers to 
these eight month old questions?
    Secretary Leavitt. I do not have them with me today. I 
don't know the status of them.
    Mr. Doggett. Well, it is incredible. But so is some of your 
other testimony.
    Secretary Leavitt. They were, Mr. Doggett, provided.
    Mr. Doggett. Let me ask you about----
    Secretary Leavitt. Just so that----
    Mr. Doggett. No, sir, they have not been provided to my 
office as of the beginning of this hearing. If they have been 
provided it is while you have been testifying.
    Secretary Leavitt. Well, that is not the information I 
have.
    Mr. Doggett. Let me ask you about the $150 billion of waste 
that Chairman Spratt asked you about and the two reasons that 
you told him not to worry, that we would spend $150 billion in 
the Medicare Advantage Program.
    First of all, this is not a new program. And we have seen 
year after year, promises like you made today that eventually 
this was going to save money and year after year we have wasted 
money on it. We know have the Congressional Budget Office 
telling us we are about to waste another $150 billion.
    And the two explanations why Chairman Spratt and this 
Committee shouldn't worry about it that you gave were, first of 
all, that you know if we refine the bidding process it will all 
go away and it will become a real bargain. I asked you about 
that two weeks ago whether you or any of our republican 
colleagues in any of these Committees had ever offered a single 
legislative proposal to do that. Have you done that in the 
intervening two weeks?
    Secretary Leavitt. Mr. Doggett, as I told you last year, 
this program is now three years old and we are at a point where 
we ought to be looking at some serious----
    Mr. Doggett. Yes, sir.
    Secretary Leavitt [continuing]. Refinements.
    Mr. Doggett. Fortunately----
    Secretary Leavitt. And----
    Mr. Doggett [continuing]. In less than a year this 
Administration won't be here.
    Secretary Leavitt. Perhaps I could finish my answer, Mr. 
Doggett.
    Mr. Doggett. Well you haven't answered. If you will answer, 
I will let you finish. But the question was have in the last 
two weeks come up with the legislative proposals that this 
Administration couldn't come up with in the last seven years? 
And isn't the answer just simply, no, we haven't done anything?
    Secretary Leavitt. We have not advanced proposals.
    Mr. Doggett. Thank you for your answer.
    Secretary Leavitt. But it is time for us----
    Mr. Doggett. Thank you for your answer.
    Secretary Leavitt [continuing]. To be working with the 
Congress to do so.
    Mr. Doggett. It is past time. We can agree----
    Secretary Leavitt. And we are very willing to do so.
    Mr. Doggett. We can agree on that.
    Secretary Leavitt. We are very willing to do so.
    Mr. Doggett. Now the second----
    Secretary Leavitt. Medicare Advantage is a good thing. It 
provides----
    Mr. Doggett. I understand----
    Secretary Leavitt [continuing]. Important benefits.
    Mr. Doggett [continuing]. You have a----
    Secretary Leavitt. And that is where that money went----
    Mr. Doggett [continuing]. Strong----
    Secretary Leavitt [continuing]. Was to benefits.
    Mr. Doggett. And that is my second question. I am glad you 
touched on that, because that is exactly where I was going.
    Secretary Leavitt. Good.
    Mr. Doggett. The second excuse that you give to Mr. Spratt 
about why we shouldn't worry about this wasted $150 billion is 
well the benefits all go to the beneficiaries, what you were 
just telling me. And the question that I have for you, sir, is 
why has your Department refused to require these private 
insurance companies to notify us of exactly what benefits went 
where instead of just giving us a little anecdotal evidence. We 
don't know whether these benefits have been used. We don't know 
if these benefits have been effective. We don't know if these 
benefits have been worth a fraction of the $150 billion that we 
are about to expend on them. Why does the Department refuse to 
obtain that information?
    Secretary Leavitt. Congressman, your colleagues in the 
Congress made a decision that they wanted Medicare Advantage as 
a choice for people to be a national plan. And they have 
accomplished that in the way that I have described. And it has 
been a very successful program.
    Now in terms of your question----
    Mr. Doggett. Yes, sir, in terms of my question.
    Secretary Leavitt [continuing]. I am not exactly sure what 
you are asking. And I would be happy to respond if you want to 
put it to me in writing so that I can go to my----
    Mr. Doggett. Well I am not sure you are going to be in 
office long enough----
    Secretary Leavitt [continuing]. Go to the people who manage 
the program and ask.
    Mr. Doggett [continuing]. To answer to it if it is at the 
same speed as the little $100 million question that I asked you 
last year that you won't provide us.
    Do I understand also, Mr. Secretary, that an answer to 
Chairman Spratt and the problem that our health care providers, 
particularly our physicians have all over this country, about 
how we change the formula under which they are paid that you 
have no legislation and no ideas how to fix that other than 
this ideological commitment to privatize Medicare?
    Secretary Leavitt. That is, first of all, no small matter.
    Mr. Doggett. But you don't have a proposal on how we can 
provide for a reform of that?
    Secretary Leavitt. I put forward a proposal with respect to 
that in the Trigger legislation. And I would also suggest to 
you that while that may not in fact be scoreable in your terms, 
it will save money. And I would also suggest to you that it 
that the solution to the problem of the SGR fix is something 
that Congress has to fix. I don't have the capacity to do that.
    Mr. Doggett. Finally, Mr. Secretary, you are aware of the 
Government Accountability Office report a bipartisan request 
from Senator Colburn and Senator Carper on improper payments 
that federal executive branch agencies made last year. Your 
Department had five of the 14 reports of improper payment. And 
on two of them you could not even provide a report estimate of 
when you could tell us how much had been improperly paid.
    That was Medicare Advantage and the Medicare prescription 
drug benefit. Since that came out almost a month ago, do you 
have any estimate now of when you could estimate how much was 
wasted on these two programs?
    Secretary Leavitt. That is not information I have.
    Mr. Doggett. Thank you, sir.
    Chairman Spratt. Mr. Etheridge.
    Mr. Etheridge. Thank you, Mr. Chairman. Mr. Secretary, I 
have a number of questions. I won't read them, I am going to 
submit them for the record and ask if you will please to 
respond in writing so that we won't--we have got several votes 
coming up and it will take an extended period of time and not 
keep you here.
    Secretary Leavitt. I would be happy to respond.
    Mr. Etheridge. Thank you.
    Chairman Spratt. Mr. Scott.
    Mr. Scott. I had one quick question, if I could. And that 
is if Medicare could provide the services generally provided 
under Medicare Advantage for less than the subsidy that we are 
providing, could we do it better ourselves than this private 
thing where we have to pay a rebate?
    And if you are not prepared to answer that, you can 
answer----
    Secretary Leavitt. Well I have no way of being able to 
respond to it in an authoritative way, but I do know this: That 
whenever we have provided people with choices in a broad enough 
area, competition has not driven it up, the quality up and the 
cost down. And I have no reason to believe that that wouldn't 
happen here too.
    Mr. Scott. That means you could not provide it cheaper? We 
have to pay a rebate right now.
    Secretary Leavitt. I am not sure--would you restate your 
question? I may have answered the wrong question.
    Mr. Scott. Medicare Advantage we provide a rebate to help 
the private industries provide the Medicare Advantage. And my 
question is if we just did it ourselves like we do Medicare, 
couldn't we do it cheaper?
    Secretary Leavitt. The Congress made a decision to provide 
enhanced fee for service reimbursement in specific areas so 
that those who would like to have a Medicare Advantage product 
could. It was done always with the anticipation that once the 
program was well in place that adjustments could and should be 
made in order to bring the reimbursement down not just to the 
levels equal, but with the anticipation that in some ways it 
would be some areas it would be below and hence less expensive.
    Mr. Scott. Okay. Thank you. Thank you, Mr. Chairman.
    Chairman Spratt. Thank you, Mr. Scott.
    Mr. Secretary, thank you very much for coming.
    Secretary Leavitt. Thank you.
    Chairman Spratt. We will conclude the hearing with this 
round of questions, because we have got four votes coming up 
on--three or four votes coming up on the floor. We don't want 
to impose upon your time further, but we appreciate your 
forbearance and your forthright answers to our questions.
    Secretary Leavitt. Thank you.
    Chairman Spratt. Thank you. I ask unanimous consent that 
members who did not have the opportunity to ask questions of 
our witness be allowed seven days to submit questions for the 
record. Without objection, so ordered.
    [Questions for the record submitted by Mr. Etheridge 
follow:]

          Questions for the Record Submitted by Mr. Etheridge

    1. Mr. Secretary, I understand that you are here to discuss the HHS 
Budget Request, but I also know that you are a Social Security Trustee 
and that policies recommended in your budget would affect this 
important safety net.
    a. The President has proposed a health care tax plan that would 
reduce taxable income for some low-income workers. This would--in the 
short term--reduce payroll taxes, but would present a problem when the 
same workers apply for Social Security at retirement. These low-income 
workers rely heavily on Social Security for retirement income, but the 
President's plan would reduce their credited earnings and therefore 
their payments under Social Security. Has the Administration done any 
analysis of the long-term implications of the Health Care tax proposal 
for low- and middle-income workers once they reach retirement? Would 
they be at higher risk of elderly poverty under these plans?
    b. Does the President's Social Security privatization plan fix 
Social Security? If not, what are the long term prospects for Social 
Security solvency, and what is the President doing to address the 
issue? Won't workers be at risk of lower Social Security payments under 
the President's plan? Social Security was designed to be a rock solid 
guarantee workers can count on, not a risky gamble by Wall Street 
bankers.
    2. The President continues to propose cuts to Medicare and Medicaid 
that would be devastating to our citizens who depend on the services 
these public health-care safety nets. These cuts were a bad idea when 
the President proposed them last year, and the greater cuts in this 
year's budget are an even worse idea this year when states are already 
facing financial challenges from the economy.
    a. How do you expect states to absorb a $47 billion cut to Medicaid 
over ten years given the challenges they will face?
    b. How do you think the cuts to Medicaid will impact the number of 
uninsured Americans?
    c. Do you think that the cuts to Medicaid will be shifted to 
providers who serve the low-income families who depend on them, or will 
Medicare beneficiaries have to pay more out of their pocket?
    3. Most the savings in your budget proposal come from cutting 
payments to hospitals and several other service providers by setting 
annual payment updates permanently below the level of medical 
inflation.
    a. Is it your opinion that this will motivate providers to be more 
efficient? Are you concerned that this will instead lead providers to 
opt out of Medicare and Medicaid entirely, or force them to go out of 
business as many have, especially in rural areas?
    b. One of the biggest cuts in the budget is a three-year freeze on 
hospital payment rates. Many hospitals already lose money on Medicare. 
Do you believe that hospitals are overcharging the government for 
health services? Are you concerned that costs will increasingly be 
shifted to other payers, or that hospitals will be forced to cut 
corners in ways that could harm patients?
    4. Under current law, doctors will experience a Medicare payment 
rate cut of 10 percent in June and an additional 5 percent in 2009. 
Especially in rural areas, medical clinics are closing because they 
can't afford current payment rates--additional cuts will be 
devastating. Every year since 2003, Congress has passed--and the 
President has signed--one-year fixes to prevent physician rate cuts 
from going into effect.
    a. Why isn't the Administration exercising leadership on this issue 
and presenting ideas for making the physician payment system 
sustainable for physicians as well as for the budget?
    b. Has HHS done any analysis to determine whether these types of 
cuts can be maintained indefinitely without eventually driving 
providers out of the Medicare business and harming beneficiaries' 
access to services?
    c. Is the Adminstration doing anything to control the costs of 
managed care? Why are the physicians bearing the burden of the 
Administration's budget mess?

    [Questions for the record submitted by Ms. Kaptur follow:]

            Questions for the Record Submitted by Ms. Kaptur

    1. Mr. Secretary, in December, President Bush signed a bill 
containing a provision to make research results from the National 
Institutes of Health available to the public. Congress too has 
expressed the importance of this provision. Can you please update me on 
what HHS is doing to support the policy and to ensure that it goes into 
effect without delay?
    2. Mr. Secretary, in an Agriculture Appropriations subcommittee 
hearing held earlier today, the FDA indicated that this budget will not 
cover their inspection needs. While the GAO identified that it will 
take 13 years to complete the backlog of inspections at foreign drug 
facilities, your budget only asks for three new inspectors. How can you 
chair an interagency taskforce on food safety and still believe that 
this budget will protect us?
    3. In Ohio, the budget shortfall for its upcoming fiscal year 
(beginning July 1) is predicted to be as much as $1.9 billion. 
Unfortunately, this challenge is not unique to Ohio, as more than two 
dozen states are facing a shortfall. In addition, economic indicators 
are reflecting significant financial strain on our nation's families: 
median household income is on the decline, foreclosures are on the 
rise, and nearly 5 million more people are living in poverty than there 
were in 2000. Knowing this, why would the President suggest major cuts 
for important social safety net programs, such as the Social Services 
Block Grant and the Child Care Development Block Grant?
    4. Mr. Secretary, nearly two-thirds of America's hospitals lost 
money treating Medicare patients in 2006. Both Medicare and Medicaid 
hospital margins are negative. Why has the Administration called for 
drastic cuts to Medicare and Medicaid over the next five fiscal years, 
limiting hospitals' efforts to serve some of its most vulnerable 
patients?

    [Questions for the record submitted by Mr. McGovern 
follow:]

           Questions for the Record Submitted by Mr. McGovern

    Question 1: As it has for the past several years, the president's 
FY 2009 budget proposal cuts the CDC dramatically. Funding for CDC was 
$6.049 billion for FY 2008 enacted, and the FY 2009 budget request is 
$5.618 billion. This means CDC core programs are cut by $431.9 
million--a reduction of 7.67%.
    When taking inflation into account, the reductions are compounded 
even further. In FY 2005, the CDC's core programs were funded at $6.3 
billion--an amount equal to $6.8 billion in today's inflation-adjusted 
dollars, according to the Bureau of Labor Statistics' consumer price 
index. Therefore, the budget request for FY 2009 core programs is more 
than one billion dollars below the CDC's FY 2005 funding, simply taking 
inflation into account. Such reductions dramatically decrease the 
purchasing power of CDC programs and have serious, negative 
repercussions on America's public health programs.
    On April 20, 2007, Dr. Julie Gerberding, Director of the CDC, 
presented a ``professional judgment budget'' at the request of House 
Appropriations Committee Chairman David Obey. According to her 
professional judgment, CDC's core programs required $6.9 billion in 
funding for FY 2008--more than $1 billion above the current FY 2009 
proposed amount.
    In addition, the Administration's budget eliminated CDC's 
Preventive Health and Health Services Block Grant. As the founder and 
Co-Chair of the Congressional Study Group on Public Health, I find this 
unacceptable. Of the $97 million eliminated for these programs, $2.7 
million is projected to be cut from Massachusetts public health 
programs. How do you expect states and the CDC to complete its public 
health mission with these types of eliminations?
    Do you, Secretary Leavitt, believe the CDC can sustain a 7.5% 
reduction in funding and services without damaging the nation's ability 
to fight disease outbreaks, global viruses, unintentional injuries, and 
address critical public health trends (e.g. obesity, diabetes, etc.)? 
Would you, Secretary Leavitt, support Congressional efforts to restore 
and add more funding to this critical agency?
    And finally, Mr. Secretary, if you do stand in support of these 
reductions, given that the CDC sends nearly 70% of the funds it 
receives out to state and local health departments, I would like to 
receive from you in writing how you believe states and localities will 
need to address the impact your proposed cut will have on our local 
communities.
    Question 2:
    1) According to a study by The Commonwealth Fund, Massachusetts 
ranks highest in the nation on coverage and quality--a result of which 
we are very proud. Our new health law is an important part of our 
achieving success, and we appreciate your support in approving our 
waiver. However, I don't understand your support for these types of 
state waivers, and your support for a budget that would cut 
approximately $3.2 billion from our Massachusetts hospitals, home 
health and skilled nursing statewide providers over the next five 
years. The loss of these dollars seriously undercuts the ability of 
Massachusetts' providers to take on the reforms necessary under the new 
health law. How do you explain the ``disconnect'' between your support 
for state health reforms, and the very sizable reductions you propose 
to Medicaid dollars for the states, and Medicare reimbursements for 
providers?
              additional question by congressman mcgovern
    Mr. Secretary, I am concerned that the National Institutes of 
Health do not appear to be sufficiently prioritizing research that 
would develop imaging technologies for prostate cancer detection and 
treatment comparable to what women currently have for breast cancer 
detection. I am advised that only a few million dollars were spent last 
year on this kind of research, even though prostate cancer is an 
epidemic in our nation and affects one in six American men generally 
with a disproportionately high mortality rate for African-American men. 
The National Cancer Institute-funded studies show the frequent 
ineffectiveness of PSA tests and digital rectal exams, which lead to 
unnecessary and costly biopsies and surgeries and to unnecessary 
psychological and physiological complications for millions of American 
men. One estimate is that digital imaging for prostate cancer detection 
and treatment could save several billion dollars a year by reducing the 
number of unnecessary biopsies and surgeries and related 
hospitalization costs. Women have mammograms, but men don't have a 
``Manogram.'' What does your Department plan to do in Fiscal Year 2009 
to get us closer to the day when imaging technologies will be 
developed, manufactured, and accessible to the men in our communities?

    [Questions for the record submitted by Mr. Tiberi follow:]

            Questions for the Record Submitted by Mr. Tiberi

    Mr. Secretary, Medicare covers a number of prostate cancer 
treatments. Recently, a report from the Agency for Healthcare Research 
and Quality (AHRQ) has brought to our attention the lack of comparative 
effectiveness data for prostate cancer. Of the eight prostate cancer 
treatments, no one treatment emerged as the best option for prolonging 
life or minimizing side effects. However, Medicare's reimbursement of 
these various treatments dramatically varies. One treatment in 
particular is reimbursed at 3-4 times the rate of all the other 
treatments when considering total episode care costs. Has anyone in 
your Department examined the discrepancy in reimbursement, especially 
considering the lack of comparative effectiveness data? And if so, what 
is HHS doing to create incentives or disincentives, for physicians, 
hospitals, and Medicare beneficiaries to choose one treatment vs. 
another?

    [Secretary Leavitt's responses to questions submitted 
follow:]

          HHS' Responses to Questions Submitted for the Record

                             BOB ETHERIDGE

    1. Question. Mr. Secretary, I understand that you are here to 
discuss the HHS Budget Request, but I also know that you are a Social 
Security Trustee and that policies recommended in your budget would 
affect this important safety net.
    a.) The President has proposed a health care tax plan that would 
reduce taxable income for some low-income workers. This would--in the 
short term-reduce pay roll taxes, but would present a problem when the 
same workers apply for Social Security at retirement. These low-income 
workers rely heavily on Social Security for retirement income, but the 
President's plan would reduce their credited earnings and therefore 
their payments under Social Security. Has the Administration done any 
analysis of the long-term implications of the Health Care tax proposal 
for low and middle income workers once they reach retirement? Would 
they be at higher risk of elderly poverty under these plans?
    Response: Under current law, the portion of compensation an 
individual receives in the form of employer-provided health insurance 
is not included in taxable income for the purposes of either income or 
payroll taxes. Insurance premiums for individually purchased coverage, 
on the other hand, are paid with after-tax dollars. SDHI would change 
the tax treatment of both employer-provided and individually purchased 
health coverage in a manner that puts both insurance types on an equal 
footing. For both types of insurance, taxable income would include the 
insurance premium and would allow a deduction that is initially $15,000 
in 2009 and that would be indexed to the CPI in later years. As shown 
in Table 1, compared to current law, income subject to income and 
payroll taxes would increase by the cost of the insurance premium (for 
employer-provided plans) but fall by the deduction for those with 
employer insurance and for those with individually purchased coverage.
    A low-income worker with employer insurance would likely see a 
decrease in taxable wages in the near term when the insurance premium 
is less than the deduction. But because medical insurance premiums will 
almost certainly rise more rapidly than the deduction amount (which 
increases with the general level of prices), within ten years or so 
workers would likely see an increase in taxable income relative to 
current law. Except for older workers near to retirement, lifetime 
wages subject to Social Security taxes would likely increase, which 
would cause Social Security benefits to increase.
    A low-income worker purchasing coverage on their own would 
generally have lower Social Security wages in all years under the 
proposal, although the proposal would allow them the option of 
rejecting the deduction for Social Security purposes. Taking the 
deduction for Social Security purposes would cause Social Security 
benefits to be smaller, but would put a low-wage worker purchasing 
their own health insurance on an equal footing with an otherwise 
similar low-wage worker with employer-provided insurance.



    b.) Question. Does the President's Social Security privatization 
plan fix Social Security? If not, what are the long term prospects for 
Social Security solvency, and what is the President doing to address 
the issue? Won't workers be at risk of lower Social Security payments 
under the President's plan? Social Security was designed to be a rock 
solid guarantee workers can count on.
    Note: If he claims that most people won't experience a benefit cut 
because payroll taxes will eventually rise relative to current law 
because of health care inflation:
    c.) Question. Does that mean the President now endorses long term 
tax increases to extend Social Security solvency?
    Response: The President believes that the fiscal health of Social 
Security is a vital, shared bipartisan responsibility. As the Social 
Security Trustees' report has noted for several years, the Social 
Security program is not on a financially sustainable path under current 
law. The President has repeatedly called for legislation to strengthen 
Social Security's finances permanently, has offered specific ideas for 
doing so, and has declared his willingness to consider alternative 
proposals.
    The President has supported personal accounts in Social Security, 
but has not supported ``privatization.'' Under the President's 
proposal, Social Security would continue to be administered by the 
Social Security Administration, as it always has been. The personal 
accounts themselves would be voluntary; those who prefer to remain 
wholly under the existing administrative structure and to receive the 
benefits that it can provide, would be able to do so. Even the proposed 
personal accounts would not be ``privatized'' but would be administered 
in a structure much like the federal Thrift Savings Plan, which 
currently adds to the retirement security of employees of the federal 
government.
    The risk of benefit reductions exists in proportion to the amount 
of further delay until Social Security is financially strengthened. As 
the President's proposal shows, if we were to act today, we could fully 
provide promised benefits for today's seniors, without raising taxes, 
while delivering to future beneficiaries levels of benefits that are 
higher in inflation-adjusted terms. No one would have a benefit ``cut'' 
relative to current levels. If Congress continues to delay action, 
however, then by the end of the next two presidential terms, that will 
no longer be the case: at that point, legislators will face tough 
choices between raising taxes and cutting benefits below the rate of 
inflation.
    2. Question. The President continues to propose cuts to Medicare 
and Medicaid that would be devastating to our citizens who depend on 
the services these public health-care safety nets. These cuts were a 
bad idea when the President proposed them last year, and the great cuts 
in this year's budget are an even worse idea this year when the states 
are already facing financial challenges form the economy.
    a.) Question. How do you expect states to absorb a $47 billion cut 
to Medicaid over ten years given the challenge they will face?
    b.) Question. How do you think the cuts to Medicaid will impact the 
number of uninsured Americans?
    c.) Question. Do you think that the cuts to Medicaid will be 
shifted to providers who serve the low-income families who depend on 
them, or will Medicare beneficiaries have to pay more out of their 
pocket?
    Response: I am deeply troubled that you view the Administration as 
undermining the healthcare safety net. The Administration shares your 
concern in protecting the Medicare and Medicaid programs so that they 
are available for those who need it. The FY 2009 President's Budget 
seeks to promote fiscal responsibility so that the long-term 
sustainability of Medicare, Medicaid, and the State Children's Health 
Insurance Program can be ensured.
    I can appreciate that Medicaid is one of the largest programs in 
State budgets. As Medicaid competes for resources at the State level 
against all the other demands, an erosion of confidence in the 
integrity of the Medicaid program is harmful for both Medicaid and for 
the people who rely on it. The administrative actions we initiated last 
year will provide greater stability in the program and equity among the 
States. Each of the rules was vitally important to ensure: the 
integrity of the Medicaid program; that Medicaid beneficiaries are 
receiving the services for which Medicaid is paying; that those 
services are effective in improving the health outcomes of individuals 
with Medicaid; and that taxpayers are receiving the full value of their 
dollars that are spent through Medicaid. The Medicaid proposals in the 
FY 2009 President's Budget further this progress and enhance access and 
continuity of coverage by improving program integrity, increasing State 
flexibility, and promoting cost-effective management of Medicaid 
dollars.
    3. Question. Most the savings in your budget proposal come from 
cutting payments to hospitals and several other service providers by 
setting annual payments updates permanently below the level of medical 
inflation.
    a.) Is it your opinion that this will motivate providers to be more 
efficient? Are you concerned that this will instead lead provider to 
opt out of Medicare and Medicaid entirely, or force them to go out of 
business as many have, especially in rural areas.
    Response: While this Budget proposes a total of $183 billion in 
savings to the Medicare program over five years, it is important to 
recognize these numbers in context. Over the next five years, Medicare 
benefits spending will total $2.8 trillion. The budget proposals only 
slightly reduce average annual growth in Medicare spending; under this 
budget Medicare spending will still grow 5 % from FY 2009 to FY 2013, 
which is a higher growth rate than both the average medical inflation 
and CPI projections for this time period. In addition, encouraging 
providers to be more efficient saves beneficiary out-of-pocket costs of 
$6.2 billion over five years.
    The proposed $18 billion in savings for Medicaid are a fraction of 
the $1.3 trillion in total outlays from FY 2009 to FY 2013. Under this 
budget, Medicaid spending will still grow by 7.1 % during the next five 
years.
    b.) Question. One of the biggest cuts in the budget is a three-year 
freeze on hospital payment rates. Many hospitals already lose money on 
Medicare. Do you believe that hospitals are overcharging the government 
for health services? Are you concerned that costs will increasingly be 
shifted to other payers, or that hospitals will be forced to cut 
corners in other ways that could harm patients?
    Response: It is true that Medicare hospital savings in the Budget 
are the largest for any provider type, but hospitals are also the 
largest category of Medicare spending. In fact, other providers will 
see a similar percentage reduction to their current spending levels. 
Despite average negative profit margins, hospitals (inpatient and 
outpatient) continue to have significant access to capital to expand 
their services. Hospital (inpatient and outpatient) construction 
spending has grown 191% between 1999 and 2007, with $32.6 billion spent 
on construction in 2007 alone.
    4. Question. Under current law, doctors will experience a Medicare 
payment rate cut of 10% in June and an additional 5% in 2009. 
Especially in rural areas, medical clinics are closing because they 
can't afford current payment rates--additional cuts will be 
devastating. Every year since 2003, Congress has passed--and the 
President has signed--one-year fixes to prevent physician rate cuts 
from going into effect.
    a.) Question. Why isn't the Administration exercising leadership on 
this issue and presenting ideas for making the physician payment system 
sustainable for physicians as well as for the budget?
    Response: Creating some stability in Medicare physician payment 
levels is important in order to ensure beneficiary access to care. But 
at the same time, we need to ensure that we are getting the most 
appropriate value for our expenditures, that quality of care is of the 
highest levels, and that the fee-for-service payment system doesn't 
create incentives to generate excess volume and intensity of services.
    We do not have a magic bullet to deal with the Medicare physician 
payment issue. However, we are working on some important elements that 
could be building blocks that ultimately are part of a revised Medicare 
physician payment system. We have been implementing the Physician 
Quality Reporting Initiative (PQRI), which creates payment incentives 
for eligible professionals, who satisfactorily report quality measures. 
We are very interested in building on the success of our Physician 
Group Practice demonstration and incorporating a mechanism for 
physician group practices to report and perform on quality measures. We 
are implementing the medical home demonstration project and are 
interested in the potential for the model to change how care is 
furnished to and coordinated for Medicare beneficiaries. We are very 
interested in creating financial incentives to encourage physicians to 
implement electronic health record systems. We have been working to 
develop meaningful, actionable, and fair measures of physician resource 
use to initially be used for confidential feedback reporting to 
physicians about the comparative costs of their care. As in other 
payment systems, value-based purchasing and transparency initiatives 
give consumers access to data that can improve their healthcare 
choices. We are exploring issues involved with posting the names of 
physicians who successfully report PQRI measures on the CMS website.
    b.) Question. Has HHS done any analysis to determine whether these 
types of cuts can be maintained indefinitely without eventually driving 
providers out of the Medicare business and harming beneficiaries' 
access to services?
    Response: We have not done the specific analysis requested. In 
light of Medicare's longer-term financing challenges, as documented 
clearly in recent Trustees Reports, our single most important goal is 
to encourage continued improvement in the efficiency and quality of 
health care delivered to Medicare beneficiaries, while preserving 
access to services in a way that is fiscally responsible. Our ability 
to fulfill the goal of access depends, of course, on continued active 
participation of physicians in Medicare. Currently, nearly 95 percent 
of eligible physicians and other practitioners are Medicare 
participating providers, up from approximately 90 percent in 2004
    c.) Question. Is the Administration doing anything to control the 
costs of managed care? Why are the physicians bearing the burden of the 
Administration's budget mess?
    Response: Regarding the cost of managed care in Medicare Advantage, 
Congress established current payment levels to ensure that the MA 
option was available all across the country, including in rural areas. 
While it is true that MA plans in most regions are being paid more than 
the FFS rates, the vast proportion of the extra amounts are required to 
go directly to beneficiaries in the form of reduced cost sharing or 
extra benefits. Because of these policies, beneficiaries in all parts 
of the country have access to at least one Medicare Advantage plan. The 
Administration continues to support policies that will ensure all 
beneficiaries across the country have access to these plans.
    Medicare Advantage (MA) rates are tied to fee-for-service rates, 
therefore, the proposals to reduce spending in traditional Medicare 
will also reduce MA payments. Nearly 25 of the proposed Medicare 
savings in the Budget will be borne by managed care plans.

                             JAMES MCGOVERN

    1. Question. As it has for the past several years, the president's 
FY 2009 budget proposal cuts the CDC dramatically. Funding for CDC was 
$6.049 billion for FY 2008 enacted, and the FY 2009 budget request is 
$5.618 billion. This means CDC core programs are cut by $431.9 
million--a reduction of 7.67%.
    When taking inflation into account, the reductions are compounded 
even further. In FY 2005, the CDC's core programs were funded at $6.3 
billion--an amount equal to $6.8 billion in today's inflation-adjusted 
dollars, according to the Bureau of Labor Statistics' consumer price 
index. Therefore, the budget request for FY 2009 core programs is more 
than one billion dollars below the CDC's FY 2005 funding, simply taking 
inflation into account. Such reductions dramatically decrease the 
purchasing power of CDC programs and have serious, negative 
repercussions on America's public health programs.
    On April 20, 2007, Dr. Julie Gerberding, Director of the CDC, 
presented a ``professional judgment budget'' at the request of House 
Appropriations Committee Chairman David Obey. According to her 
professional judgment, CDC's core programs required $6.9 billion in 
funding for FY 2008--more than $1 billion above the current FY 2009 
proposed amount.
    In addition, the Administration's budget eliminated CDC's 
Preventive Health and Health Services Block Grant. As the founder and 
Co-Chair of the Congressional Study Group on Public Health, I find this 
unacceptable. Of the $97 million eliminated for these programs, $2.7 
million is projected to be cut from Massachusetts public health 
programs. How do you expect states and the CDC to complete its public 
health mission with these types of eliminations?
    Do you, Secretary Leavitt, believe the CDC can sustain a 7.5% 
reduction in funding and services without damaging the nation's ability 
to fight disease outbreaks, global viruses, unintentional injuries, and 
address critical public health trends (e.g. obesity, diabetes, etc.)? 
Would you, Secretary Leavitt, support Congressional efforts to restore 
and add more funding to this critical agency?
    And finally, Mr. Secretary, if you do stand in support of these 
reductions, given that the CDC sends nearly 70% of the funds it 
receives out to state and local health departments, I would like to 
receive from you in writing how you believe states and localities will 
need to address the impact your proposed cut will have on our local 
communities.
    Response: The Preventive Health and Health Services Block Grant 
(PHHSBG) has served as a flexible resource supporting state and local 
prevention efforts. CDC has funded 61 grantees, including all 50 
States, the District of Columbia, 8 Pacific Island territories, and 2 
Native American Indian tribes. Because of the difficulty in 
establishing consistent measures for a flexible program like PHHSBG, 
there are limited national outcome data on a consistent set of measures 
across all states. PHHSBG was created more than two decades ago as a 
means to consolidate multiple categorical grants in place at the time. 
Since its creation, a number of categorical grants have emerged that 
address some of the same public health issues. In the main areas 
covered by the PHHSBG, CDC categorical programs are now funded at $800 
million a year. As a nation, we face difficult decisions in 
prioritizing how we use the scarce resources available to meet the 
overwhelming needs in health as well as other areas. As CDC strives to 
improve efficiency and effectiveness, existing programs will continue 
to be available to address many public health issues traditionally 
covered by the Block Grant.
    2. Question. According to a study by The Commonwealth Fund, 
Massachusetts ranks highest in the nation on coverage and quality--a 
result of which we are very proud. Our new health law is an important 
part of our achieving success, and we appreciate your support in 
approving our waiver. However, I don't understand your support for 
these types of state waivers, and your support for a budget that would 
cut approximately $3.2 billion from our Massachusetts hospitals, home 
health and skilled nursing statewide providers over the next five 
years. The loss of these dollars seriously undercuts the ability of 
Massachusetts' providers to take on the reforms necessary under the new 
health law. How do you explain the ``disconnect'' between your support 
for state health reforms, and the very sizable reductions you propose 
to Medicaid dollars for the states, and Medicare reimbursements for 
providers?
    Response: The FY 2009 Budget proposes to reform and transform the 
health care system by allowing States the opportunity to craft 
innovative solutions to provide people access to affordable insurance. 
The Budget complements existing State efforts with policies that would 
expand the use of high risk insurance pools and subsidize the purchase 
of private insurance for low-income individuals.
    While the Budget proposes a total of $183 billion in savings to the 
Medicare program over five years, it is important to recognize these 
numbers in context. Over the next five years, Medicare benefits 
spending will total $2.8 trillion. The budget proposals only slightly 
reduce average annual growth in Medicare spending; under this budget 
Medicare spending will still grow 5 % from FY 2009 to FY 2013, which is 
a higher growth rate than both the average medical inflation and CPI 
projections for this time period. In addition, encouraging providers to 
be more efficient saves beneficiary out-of-pocket costs of $6.2 billion 
over five years.
    The proposed $18 billion in savings for Medicaid programs are also 
a fraction of the $1.3 trillion in total outlays from FY 2009 to FY 
2013. Under this budget, Medicaid spending will still grow by 7.1 % 
during the next five years.
    It is true that Medicare hospital savings in the Budget are the 
largest for any provider type, but hospitals are also the largest 
category of Medicare spending. In fact, other providers will see a 
similar percentage reduction to their current spending levels. Despite 
average negative profit margins, hospitals (inpatient and outpatient) 
continue to have significant access to capital to expand their 
services. Hospital (inpatient and outpatient) construction spending has 
grown 191% between 1999 and 2007, with $32.6 billion spent on 
construction in 2007 alone.
    The home health proposal is consistent with the Medicare Payment 
Advisory Commission's (MedPAC) recommendation during the January 2008 
meeting that home health agencies receive a 0% update in 2009. MedPAC 
estimates that Medicare margins for home health agencies averaged 15.4% 
in 2006 and will reach approximately 11.4% in 2008. Further, MedPAC 
analysis shows that the number of home health agencies continues to 
grow, as does the volume of services provided. At the same time, 
quality of care is improving, and cost growth remains low. A 0% update 
for 2009 through 2013 would encourage program efficiency without 
affecting the ability of home health agencies to furnish high quality 
care to Medicare beneficiaries.
    Spending on SNFs continues to increase, with an increasing volume 
of services provided, and beneficiaries having few problems accessing 
SNF care. The proposed 0% update for FY 2009-2011 would encourage 
program efficiency without affecting the ability of SNFs to furnish 
high quality care to Medicare beneficiaries. This proposal is 
consistent with recommendations made by MedPAC for 2009 and builds upon 
these recommendations for future years. MedPAC estimates SNF Medicare 
margins averaging 11.4 % in FY 2008. This proposal would also 
strengthen the long-term financial security of Medicare, which is 
critical to stability in access as well as quality.
    3. Question. Mr. Secretary, I am concerned that the National 
Institutes of Health do not appear to be sufficiently prioritizing 
research that would develop imaging technologies for prostate cancer 
detection and treatment comparable to what women currently have for 
breast cancer detection. I am advised that only a few million dollars 
were spent last year on this kind of research, even though prostate 
cancer is an epidemic in our nation and affects one in six American men 
generally with a disproportionately high mortality rate for African-
American men. The National Cancer Institute-funded studies show the 
frequent ineffectiveness of PSA tests and digital rectal exams, which 
lead to unnecessary and costly biopsies and surgeries and to 
unnecessary psychological and physiological complications for millions 
of American men. One estimate is that digital imaging for prostate 
cancer detection and treatment could save several billion dollars a 
year by reducing the number of unnecessary biopsies and surgeries and 
related hospitalization costs. Women have mammograms, but men don't 
have a ``Manogram.'' What does your Department plan to do in Fiscal 
Year 2009 to get us closer to the day when imaging technologies will be 
developed, manufactured, and accessible to the men in our communities?
    Response: To identify prostate cancer at an earlier stage through 
specialized and targeted imaging, screening and detection methods, the 
National Cancer Institute (NCI) is funding numerous grants and other 
research initiatives. These efforts aim to develop tools including in-
vivo models (animal and human) for molecular imaging and analysis; 
imaging tracers; in-vivo image-guided therapy using multi-modal imaging 
approaches; imaging methods to provide metabolic assessment of the 
presence and extent of human prostate cancer; and combinations of 
imaging with emergent technologies such as nanotechnology, genomics, 
proteomics and high-throughput screening.
    Novel imaging techniques and therapies being explored include: 
advanced ultrasound devices, portable imaging devices to detect 
prostate cancer, nuclear magnetic resonance (NMR) imaging, 
superconducting quantum interference device (SQUID) imaging, gene-based 
imaging and therapy to target metastatic prostate cancer, morphologic, 
metabolic and functional prostate imaging, metabolic imaging using 3-D 
magnetic resonance spectroscopic imaging (MRSI), PET imaging using 
oncogenic approaches, and advanced quantitative image analysis 
techniques. Image-guided cancer therapy is a rapidly evolving area that 
may provide more effective and efficient treatment methods through 
minimally invasive techniques.
    With the advent of a better understanding of cell and biological 
processes at a molecular level coupled with the development of new 
biological reagents and probes, and recent developments and 
improvements in imaging technology, it is appropriate to focus 
attention on bringing together these advances. The NCI is facilitating 
pre-clinical and clinical multi-disciplinary research on cellular and 
molecular imaging related to cancer through In vivo Molecular Imaging 
Centers (IMIC) supported by Specialized Programs of Research Excellence 
(SPOREs) grants.
    NCI also works with The American College of Radiology Imaging 
Network (ACRIN), the cooperative group which serves as a multi-
institutional platform for conducting phase II and III clinical trials 
in screening, diagnosis, staging, response to therapy and image-guided 
therapy. A clinical trial studying 134 participants with biopsy-proven 
prostate adenocarcinoma evaluated the accuracy of combined magnetic 
resonance imaging (MRI) and magnetic resonance spectroscopic imaging 
(MRSI) performed at 7 institutions in the localization of prostate 
cancer and its incremental benefit on diagnostic accuracy when compared 
to MRI alone, and found no overall improvement in accuracy. The NCI-
sponsored Development of Clinical Imaging Drugs & Enhancers (DCIDE) 
program competitively expedites and facilitates the development of 
promising investigational imaging enhancers (contrast agents) or 
molecular probes from the laboratory to Investigational New Drug (IND) 
status.
    In addition to developing new imaging technologies, NCI is also 
aware that new tools and techniques for prostate cancer detection need 
to be made available to patients in their local communities. NCI 
efforts are underway to address racial disparities in prostate cancer 
incidence and mortality rates. The Southern Community Cohort Study 
(SCCS), which expects to enroll 90,000 participants in 12 states, is 
examining why prostate cancer rates are higher in African American men.

                              MARCY KAPTUR

    1. Question. Mr. Secretary, in December, President Bush signed a 
bill containing a provision to make research results from the National 
Institutes of Health available to the public. Congress too has 
expressed the importance of this provision. Can you please update me on 
what HHS is doing to support the policy and to ensure that it goes into 
effect without delay?
    Response: NIH implemented Division G, Title II, Section 218 of 
Public Law 110-161 on January 11, 2008 (http://grants.nih.gov/grants/
guide/notice-files/NOT-OD-08-033.html). As of April 7, 2008, applicable 
manuscripts arising from NIH funds must be submitted to
    PubMed Central upon acceptance for publication. As of May 25, 2008, 
NIH applications, proposals, and progress reports must include the PMC 
reference number when citing a manuscript that falls under the Public 
Access Policy. NIH has developed a website (http://
publicaccess.nih.gov/) with training materials and frequently asked 
questions. In addition, NIH is in the midst of a communications effort 
that includes in-person trainings, news articles, and other outreach 
efforts. Finally, NIH sought formal comments on the Public Access 
Policy and its implementation. It also held an open meeting for 
stakeholders on March 20, 2008, and issued a 60-day Request for 
Information later in March 2008. All comments collected are publicly 
available at publicaccess.nih.gov/comments.htm.
    2. Question. Mr. Secretary, in an Agriculture Appropriations 
subcommittee hearing held earlier today, the FDA indicated that this 
budget will not cover their inspection needs. While the GAO identified 
that it will take 13 years to complete the backlog of inspections at 
foreign drug facilities, your budget only asks for three new 
inspectors. How can you chair an interagency taskforce on food safety 
and still believe that this budget will protect us?'
    Response: FDA has developed a comprehensive Food Protection Plan to 
address the changes in food sources, production, and consumption in 
response to today's challenges. The Food Protection Plan presents a 
robust strategy to protect the nation's food supply from unintentional 
contamination and deliberate attack. The President's Budget for FDA 
requests an increase of $42.2 million for FDA's implementation of the 
Plan's risk based strategies to ensure the safety of domestic and 
imported food and feed. In addition, the budget supports establishing 
an FDA presence overseas in China and in other countries, provides for 
over 1,000 additional inspections and 20,000 additional import field 
exams, enhances emergency response capabilities, and develops new tools 
to detect and quickly identify risk signals and expand FDA's risk based 
surveillance.
    3. Question. In Ohio, the budget shortfall for its upcoming fiscal 
year (beginning July 1) is predicted to be as much as $1.9 billion. 
Unfortunately, this challenge is not unique to Ohio, as more than two 
dozen states are facing a shortfall. In addition, economic indicators 
are reflecting significant financial strain on our nation's families: 
median household income is on the decline, foreclosures are on the 
rise, and nearly 5 million more people are living in poverty than there 
were in 2000. Knowing this, why would the President suggest major cuts 
for important social safety net programs, such as the Social Services 
Block Grant and the Child Care Development Block Grant?
    Response: The President's FY 2009 budget maintains significant 
investments in programs that provide critical services to children and 
families while at the same time taking a responsible approach to 
deficit reduction.
    In fact, the budget request includes increases in funding for key 
investments in programs serving children and families, such as the 
Adoption Incentives Program (request of $19.7 million is over $15 
million more than the FY 2008 enacted level), the Mentoring Children of 
Prisoners program (request of $50 million is $1.4 million more than the 
FY 2008 enacted level), and Head Start (request of $7 billion is $149 
million more than the FY 2008 enacted level).
    The Administration recognizes the importance of child care and has 
recommended continued funding of the CCDBG at $2.1 billion. In 
addition, Federal and State funding for child care is at an all time 
high and has increased more than threefold between 1996 and 2008, from 
approximately $3.6 billion to $12 billion. This includes the increase 
in Federal child care funding enacted by the Deficit Reduction Act of 
2005 (DRA), which totals $1.8 billion in new funding through FY 2010 
when factoring in State matching funds. Also, States have numerous 
funding streams that can be used for child care, and they have maximum 
flexibility to maintain coverage for needy families. By design, the 
Child Care and Development Fund (CCDF) block grant is not the only 
source of Federal support for child care. For instance, States may 
transfer up to 30% of their TANF funds to CCDF, or spend TANF directly 
on child care without limit.
    Finally, it is important to understand that there are a number of 
other programs including Head Start, State funded Pre-K, and the 21st 
Century Community Learning Centers, that are providing quality care for 
children who otherwise might be in need of child care services during 
the hours they attend those programs.
    At the same time, however, the Administration is committed to 
deficit reduction and consequently the budget targets resources to 
those programs with measurable outcomes and applies funding reductions 
to programs that have failed to demonstrate results, like the Social 
Services Block Grant.
    4. Question. Mr. Secretary, nearly two-thirds of America's 
hospitals lost money treating Medicare patients in 2006. Both Medicare 
and Medicaid hospital margins are negative. Why has the Administration 
called for drastic cuts to Medicare and Medicaid over the next five 
fiscal years, limiting hospitals' efforts to serve some of its most 
vulnerable patients?
    Response: It is true that Medicare hospital savings in the Budget 
are the largest for any provider type, but hospitals are also the 
largest category of Medicare spending. In fact, other providers will 
see a similar percentage reduction to their current spending levels.
    Despite average negative profit margins, hospitals (inpatient and 
outpatient) continue to have significant access to capital to expand 
their services. Hospital (inpatient and outpatient) construction 
spending has grown 191% between 1999 and 2007, with $32.6 billion spent 
on construction in 2007 alone.
    In addition, while this Budget proposes a total of $183 billion in 
savings to the Medicare program over five years, it is important to 
recognize these numbers in context. Over the next five years, Medicare 
benefits spending will total $2.8 trillion. The budget proposals only 
slightly reduce average annual growth in Medicare spending; under this 
budget Medicare spending will still grow 5 % over FY 2009 to FY 2013, 
which is a higher growth rate than both the average medical inflation 
and CPI projections for this time period.
    The proposed $18 billion in savings for Medicaid are a fraction of 
the $1.3 trillion in total outlays from FY 2009 to FY 2013. Under this 
budget, Medicaid spending will still grow by 7.1 % over the next five 
years.

                             PATRICK TIBERI

    1. Question. Mr. Secretary, Medicare covers a number of prostate 
cancer treatments. Recently, a report from the Agency for Healthcare 
Research and Quality (AHRQ) has brought to our attention the lack of 
comparative effectiveness data for prostate cancer. Of the eight 
prostate cancer treatments, no one treatment emerged as the best option 
for prolonging life or minimizing side effects. However, Medicare's 
reimbursement of these various treatments dramatically varies. One 
treatment in particular is reimbursed at 3-4 times the rate of all the 
other treatments when considering total episode care costs. Has anyone 
in your Department examined the discrepancy in reimbursement, 
especially considering the lack of comparative effectiveness data? And 
if so, what is HHS doing to create incentives or disincentives, for 
physicians, hospitals, and Medicare beneficiaries to choose one 
treatment vs. another?
    Response: There are a number of treatment options for prostate 
cancer depending upon the beneficiary's individual clinical situation, 
physician input and beneficiary preferences. These options can be 
delivered in any number of settings, and the costs associated with 
delivering these treatment options can vary based on the complexity of 
the procedure and the patient's individual clinical circumstances. We 
have not examined the total episode care costs for the different 
prostate cancer treatments in the different settings in which these 
treatments are furnished.
    As with Medicare payment for all services, Medicare pays for 
different prostate cancer treatments under different payment systems 
depending on the site in which the services are furnished. Payment 
rates are established under each Medicare payment system generally 
based on the relative costs or typical resources involved in furnishing 
services.

    [Whereupon, at 3:15 p.m., the Committee was adjourned.]

                                  
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