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


 
                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN
               SERVICES, EDUCATION, AND RELATED AGENCIES
                        APPROPRIATIONS FOR 2009

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                   DAVID R. OBEY, Wisconsin, Chairman
 NITA M. LOWEY, New York            JAMES T. WALSH, New York
 ROSA L. DeLAURO, Connecticut       RALPH REGULA, Ohio
 JESSE L. JACKSON, Jr., Illinois    JOHN E. PETERSON, Pennsylvania
 PATRICK J. KENNEDY, Rhode Island   DAVE WELDON, Florida
 LUCILLE ROYBAL-ALLARD, California  MICHAEL K. SIMPSON, Idaho
 BARBARA LEE, California            DENNIS R. REHBERG, Montana    
 TOM UDALL, New Mexico              
 MICHAEL HONDA, California          
 BETTY McCOLLUM, Minnesota          
 TIM RYAN, Ohio                     

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Cheryl Smith, Sue Quantius, Nicole Kunko,
           Teri Bergman, Charmaine Mercer, and Andria Oliver,
                           Subcommittee Staff
                                ________

                                 PART 5
                                                                   Page
 Implications of Economic Trends for Workers, Families, and the 
Nation............................................................    1
 Opportunities Lost and Costs to Society: The Social and Economic 
Burden of Disease, Injuries, and Disability.......................   93
 Opportunities Lost and Costs to Society: The Social and Economic 
Burden of Inadequate Education, Training and Workforce Development  189
 Expanding Health Care Access.....................................  309
 Implications of a Weakening Economy for Training and Employment 
Services..........................................................  403
 Status of the World Trade Center 9/11 Health Monitoring and 
Treatment Program.................................................  489

                                ________
         Printed for the use of the Committee on Appropriations
                                 Part 5

      DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION,

              AND RELATED AGENCIES APPROPRIATIONS FOR 2009
                                                                      ?

                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN

               SERVICES, EDUCATION, AND RELATED AGENCIES

                        APPROPRIATIONS FOR 2009

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                   DAVID R. OBEY, Wisconsin, Chairman
 NITA M. LOWEY, New York            JAMES T. WALSH, New York
 ROSA L. DeLAURO, Connecticut       RALPH REGULA, Ohio
 JESSE L. JACKSON, Jr., Illinois    JOHN E. PETERSON, Pennsylvania
 PATRICK J. KENNEDY, Rhode Island   DAVE WELDON, Florida
 LUCILLE ROYBAL-ALLARD, California  MICHAEL K. SIMPSON, Idaho
 BARBARA LEE, California            DENNIS R. REHBERG, Montan     
 TOM UDALL, New Mexico              
 MICHAEL HONDA, California          
 BETTY McCOLLUM, Minnesota          
 TIM RYAN, Ohio                     
                                    a

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Cheryl Smith, Sue Quantius, Nicole Kunko,
           Teri Bergman, Charmaine Mercer, and Andria Oliver,
                           Subcommittee Staff
                                ________

                                 PART 5
                                                                   Page
 Implications of Economic Trends for Workers, Families, and the 
Nation............................................................    1
 Opportunities Lost and Costs to Society: The Social and Economic 
Burden of Disease, Injuries, and Disability.......................   93
 Opportunities Lost and Costs to Society: The Social and Economic 
Burden of Inadequate Education, Training and Workforce Development  189
 Expanding Health Care Access.....................................  309
 Implications of a Weakening Economy for Training and Employment 
Services..........................................................  403
 Status of the World Trade Center 9/11 Health Monitoring and 
Treatment Program.................................................  489

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 43-194                     WASHINGTON : 2008

                                  COMMITTEE ON APPROPRIATIONS

                   DAVID R. OBEY, Wisconsin, Chairman
 
 JOHN P. MURTHA, Pennsylvania       JERRY LEWIS, California
 NORMAN D. DICKS, Washington        C. W. BILL YOUNG, Florida
 ALAN B. MOLLOHAN, West Virginia    RALPH REGULA, Ohio
 MARCY KAPTUR, Ohio                 HAROLD ROGERS, Kentucky
 PETER J. VISCLOSKY, Indiana        FRANK R. WOLF, Virginia
 NITA M. LOWEY, New York            JAMES T. WALSH, New York
 JOSE E. SERRANO, New York          DAVID L. HOBSON, Ohio
 ROSA L. DeLAURO, Connecticut       JOE KNOLLENBERG, Michigan
 JAMES P. MORAN, Virginia           JACK KINGSTON, Georgia
 JOHN W. OLVER, Massachusetts       RODNEY P. FRELINGHUYSEN, New Jersey
 ED PASTOR, Arizona                 TODD TIAHRT, Kansas
 DAVID E. PRICE, North Carolina     ZACH WAMP, Tennessee
 CHET EDWARDS, Texas                TOM LATHAM, Iowa
 ROBERT E. ``BUD'' CRAMER, Jr.,     ROBERT B. ADERHOLT, Alabama
Alabama                             JO ANN EMERSON, Missouri
 PATRICK J. KENNEDY, Rhode Island   KAY GRANGER, Texas
 MAURICE D. HINCHEY, New York       JOHN E. PETERSON, Pennsylvania
 LUCILLE ROYBAL-ALLARD, California  VIRGIL H. GOODE, Jr., Virginia
 SAM FARR, California               RAY LaHOOD, Illinois
 JESSE L. JACKSON, Jr., Illinois    DAVE WELDON, Florida
 CAROLYN C. KILPATRICK, Michigan    MICHAEL K. SIMPSON, Idaho
 ALLEN BOYD, Florida                JOHN ABNEY CULBERSON, Texas
 CHAKA FATTAH, Pennsylvania         MARK STEVEN KIRK, Illinois
 STEVEN R. ROTHMAN, New Jersey      ANDER CRENSHAW, Florida
 SANFORD D. BISHOP, Jr., Georgia    DENNIS R. REHBERG, Montana
 MARION BERRY, Arkansas             JOHN R. CARTER, Texas
 BARBARA LEE, California            RODNEY ALEXANDER, Louisiana
 TOM UDALL, New Mexico              KEN CALVERT, California
 ADAM SCHIFF, California            JO BONNER, Alabama                 
 MICHAEL HONDA, California          
 BETTY McCOLLUM, Minnesota          
 STEVE ISRAEL, New York             
 TIM RYAN, Ohio                     
 C.A. ``DUTCH'' RUPPERSBERGER,      
Maryland                            
 BEN CHANDLER, Kentucky             
 DEBBIE WASSERMAN SCHULTZ, Florida  
 CIRO RODRIGUEZ, Texas              

                  Rob Nabors, Clerk and Staff Director

                                  (ii)


DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2009

                              ----------                              

                                      Wednesday, February 13, 2008.

    OVERVIEW HEARING: IMPLICATIONS OF ECONOMIC TRENDS FOR WORKERS, 
                        FAMILIES, AND THE NATION

                               WITNESSES

HAROLD MEYERSON, EXECUTIVE EDITOR-AT-LARGE, AMERICAN PROSPECT
JARED BERNSTEIN, PH.D., DIRECTOR, LIVING STANDARDS PROGRAM, ECONOMIC 
    POLICY INSTITUTE
ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, CENTER ON BUDGET AND POLICY 
    PRIORITIES
ALAN D. VIARD, PH.D., RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE
    Mr. Obey. Why don't we begin?
    Let me thank you all for coming this morning. I appreciate 
your willingness to testify, and I appreciate the fact that our 
minority members are here. I don't know where our majority 
members are but, we are going to have to hold down the fort.
    Let me explain what we are trying to do with the first 
couple of hearings we are having for the Subcommittee this 
year. Not everybody in life starts out as a winner, and not 
everybody in life ends up as a winner. This Subcommittee has 
jurisdiction over programs that help determine what Government 
does to help those who start out behind the starting line and 
what Government does to help those who, sometime along life's 
way, need a helping hand.
    Before Franklin Roosevelt, the Federal Government largely 
let people struggle on their own. When the Great Depression 
showed that cost was unacceptable, FDR and the Congress adopted 
many mechanisms in the New Deal that tried to make life less 
rocky and tried to make opportunity more widely available to 
more people in our society.
    When Dwight Eisenhower led a Republican resurgence, he 
chose largely not to try to repeal those achievements and, in 
fact, he created the Department of Health, Education and 
Welfare, which along with the Department of Labor and those 
agencies now as you know evolved, those agencies administer 
many of the programs that impact today's working families in so 
many ways.
    Before we begin to take testimony on the President's budget 
and its impact on those programs, I thought it would be useful 
to simply have several hearings to try to help us achieve a 
clear understanding of the context in which these programs are 
impacting today's American families.
    So today's hearing will focus on the economic and social 
conditions that are impacting the average American family, 
families that are in turn being impacted by the action that 
this Committee will take today and tomorrow. Before we hear 
testimony about the cost of taking certain actions in the 
healthcare area, we will be focusing on the cost of not taking 
those actions.
    Today, the Subcommittee will hear from a panel of 
distinguished witnesses who will present testimony to help us 
understand the broad economic and social trends impacting the 
Country and their implications. I have asked our witnesses to 
address national, economic and budget trends including wage 
stagnation, growing income inequality, and increasing 
globalization, competition and immigration.
    What we hear today I hope will help us to better understand 
how these trends impact the standard of living, the economic 
security and the well-being of American workers, families and 
those in need, particularly those at the bottom of the income 
spectrum, and I hope that the testimony will provide a larger 
economic framework and the context within which we will be 
considering the President's budget for these programs this 
year.
    Tomorrow and in the coming weeks, we will also hear from a 
variety of experts in public health, biomedical research, 
education and workforce development to help us understand the 
price of progress and the price of inertia and indifference as 
well.
    Today's hearing is the beginning of the process. Our first 
witness will be Mr. Harold Meyerson, the Executive Editor-at-
Large of the American Prospect. Many of you are familiar with 
Mr. Meyerson's weekly column in the Washington Post.
    Our second witness is Dr. Jared Bernstein, Director of the 
Living Standards Program at the Economic Policy Institute. His 
area of research includes income inequality and mobility, 
trends in employment and earnings, low-wage labor markets and 
poverty, and the analysis of Federal and State economic 
policies.
    Our third witness is Bob Greenstein. Mr. Greenstein is the 
founder and Executive Director of the Center on Budget and 
Policy Priorities, one of the Country's leading experts on the 
Federal budget and a range of domestic policy issues including 
low-income assistance programs, tax policy and social security.
    Dr. Alan Viard, he has one strike against him. He is from 
Ohio State, and they regularly maul the Badgers in football, 
but other than that he has excellent credentials. [Laughter.]
    Mr. Obey. He is a scholar at the American Enterprise 
Institute. He was a Senior Economist at the Federal Reserve 
Bank in Dallas and a Senior Economist on the Council on 
Economic Advisors.
    Gentlemen, I am happy that you are all here, and I will ask 
for your comments as soon as I have asked Mr. Walsh, the 
Ranking Member, for any comments that he might have.
    Mr. Walsh. Thank you, Mr. Chairman.
    I would like to welcome our witnesses and thank all of you 
for coming today.
    Mr. Chairman, nice job, a multi-talented guy. You can 
conduct hearings and run a Committee and interior decorate at 
the same time which is pretty neat, and I have no objection to 
the Green Bay green carpet on the floor, especially since my 
Giants finally, the first time in my lifetime, defeated the 
Packers at Lambeau in the post-season. So I am a happy camper.
    Mr. Obey. It won't happen again for a long time. 
[Laughter.]
    Mr. Walsh. I won't even talk about the Patriots, that new 
team from New England.
    I think our discussion today will really get to the heart 
of the philosophical differences between Republicans and 
Democrats, liberals, conservatives and those of us who fall 
somewhere in between when it comes to issues surrounding the 
economy.
    I have always felt that we have a responsibility to provide 
everyone with equal opportunity. Success is up to them.
    There is no question in my mind that everyone in this room 
wants to continue our Country's historic economic success well 
into the future. While we may be at a little bump in the road 
today, I am confident and optimistic that the American people 
will overcome this downturn as we always have.
    My view is that one of the very worst things we, the 
Congress, can do is follow economic policies that result in 
raising taxes on the American citizen and businesses. We have 
enjoyed economic success in the past in large part because of 
our relatively low tax rates. To raise taxes will, in my view, 
stifle the prospect of economic prosperity in the future.
    We need only to look back into our Country's recent 
history. For example, in the 1960s, President Kennedy 
dramatically reduced capital gains and other Federal taxes and 
sparked a dramatic period of economic prosperity and growth.
    President Reagan shook the American economy out of its 
malaise, ending double-digit inflation, unemployment and 
interest rates by working with Congress to again cut income 
taxes across the board. The commensurate cut in spending, 
unfortunately, didn't happen.
    We can look across the pond to Ireland with its 
historically sleepy agricultural economy and poverty, beginning 
with Albert Reynolds, then John Bruton and now Bertie Ahern, 
the Irish slashed corporate and personal income taxes and, in 
doing so, woke up the Celtic tiger. In 25 years, Ireland went 
from one of the poorest countries in Western Europe to now its 
wealthiest.
    Exemplary public education was also essential. Today, the 
Irish immigrants to the United States are going back to Ireland 
for opportunity.
    Kennedy, Reagan, Ireland, there seems to be a trend there. 
President Bush picked up on it in 2002, and it worked again.
    With that said, I also believe there are things the 
Congress can do proactively that can help spur the economy in 
the future.
    I think one of those things is to provide the resources to 
ensure that every child in America receives a high quality 
education from early childhood through college and beyond, 
whether that child lives in an affluent community or a poor 
community, whether rural, urban or suburban, whether the child 
has a disability or not. While this is and should be the 
responsibility of local communities, we should make sure that 
any mandates we lay on those school districts be fully funded 
by us.
    I do not think it is unreasonable for the Government, 
working with businesses and employees, to seek ways to reduce 
workplace injuries and thereby promote better health and 
greater efficiency. Making prudent investments in workplace 
safety provides an economic benefit to both employer and 
employee.
    Regarding healthcare, the American public, I believe, is 
now demanding universal healthcare. The Democrats have endorsed 
and embraced that by utilizing a Government-run system.
    I believe the Republican Party is ready to endorse 
universal healthcare soon also but based on a private sector 
model where people continue to have choices, where they 
maintain the doctor-patient relationship, and Government 
empowers them by providing tax incentives and deductions and 
makes the proper investment in research and then gets out of 
the way.
    We need to do this to be globally competitive and to 
maintain our quality of life.
    Mr. Chairman, I thank you for holding these hearings, and I 
look very much forward to hearing the testimony.
    Mr. Obey. Gentleman, why don't you proceed?
    Your statements will be placed in the record. Why don't you 
each take roughly 10 minutes and say whatever you have on your 
minds?
    Why don't we start with Mr. Meyerson?
    Mr. Meyerson. Thank you, Mr. Chairman, and I thank the 
Ranking Member as well.
    I am honored to be here today, and I am honored to be here 
particularly before the Chairman of this Subcommittee and 
Committee whom I know to be a tenacious champion of the rights 
and interests of the ordinary Americans.
    My name is Harold Meyerson. I am Executive Editor of the 
American Prospect which is an avowedly liberal political 
monthly founded 18 years ago by Robert Reich, Bob Kuttner and 
Paul Starr. I am also an op-ed columnist for the Washington 
Post. My testimony today, like my columns in the Post, clearly 
expresses my opinions only, and any overlap with the editorial 
positions of the Post is coincidental, accidental, very rare.
    Also, I am the odd man out here today. I am not even close 
to being an economist, and I presume I have been asked here to 
offer testimony because much of my writing deals with broad 
historic trends in the social and economic life of the American 
people.
    So I will endeavor to deal with that today, beginning by 
noting that over the past three decades, not the bottom, but 
the middle has fallen out of the American economy. The great 
social achievement of the United States in the 30 years 
following World War II, which was the creation of the first 
majority middle class of a society that offered more economic 
stability to more people than any society ever before in human 
history, has to a significant degree been undone.
    What happened that changed the economic life of the 
American people and why are we seeing polls that show a clear 
plurality of Americans--this is in several polls over the past 
two years, not simply in response to the immediate downturn--
showing that Americans say they now believe that their children 
will have a harder economic life than they themselves have had?
    Can this really be the voice of Americans, this most 
optimistic of peoples, believers for centuries in the certitude 
that their children, if they work hard, will have a better life 
than they themselves had?
    How has a Nation of incorrigible optimists--one of the many 
things you have to love about this Country--become, in many 
ways, a Nation of pessimists?
    What changes in public policy does our Government need to 
embrace in order to create again that valid sense of optimism?
    I am going to argue that what has fundamentally shifted in 
America today is that jobs, jobs for high school graduates, 
jobs even for quite a number of college graduates, no longer 
provide the upward level of income that they once did nor do 
they offer the level of benefits nor the assurance of steady, 
long term employment.
    In many ways, we are no longer a Nation of the kind of good 
jobs that was the case in the America I grew up in. The 
benefits, the pensions, the rising annual income that were a 
common, but by no means universal, experience of American 
workers a generation ago are now a thing increasingly in the 
past to all but the talented or fortunate tenth. That is why 
Americans now tell pollsters they fear that their children are 
going to have a harder time than they themselves did.
    The key determinants in the decline of the American job, 
there are many. I would say to a certain degree: de-
unionization, de-industrialization, globalization, even to a 
certain extent, automation. Each of these trends, moreover, 
reinforces the others and each is a cause and a consequence of 
the others.
    In the two decades following World War II, close to a third 
of the American nonagricultural workforce was unionized. During 
those years and from 1947 to 1973, median household income rose 
at the exact same rate that productivity rose. During those 
years, health insurance and defined benefit pensions became the 
norm for most major and many minor American employers.
    What has happened since then? Many things. The increased 
willingness of American employers to resist unionization, 
exploiting weaknesses in the National Labor Relations Act has 
certainly been a factor.
    De-industrialization has certainly been a factor. 
Manufacturing jobs, particularly durable goods manufacturing, 
have long paid more than service sector jobs. But, as the 
members of this Committee need not have pointed out to them in 
detail, we have been losing manufacturing jobs steady for many 
years. This doesn't simply begin with the Bush Administration. 
This is a long term development.
    The effects of globalization are many and varied and widely 
debated. Alan Blinder, the economist who served as Vice 
Chairman of the Federal Reserve, has focused, I think rightly, 
less on jobs lost and jobs created and more on the effect on 
incomes of American workers whose jobs are, in a broad sense, 
in competition with workers in other countries though their 
jobs may never in fact be offshored.
    That clearly extends now not simply to blue collar workers 
in manufacturing but to even professionals whose work can be 
digitized. It can be done by people in other countries.
    Blinder, as I recall, once said that we may have a decline 
in the number of attorneys whose jobs do not require face to 
face interaction, but there will still be a need for divorce 
attorneys in the United States and you have to get with your 
clients and figure that out. That is not a bright prospect for 
the American economy.
    Broadly speaking, I just want to address this last broad 
thing and what it suggests for Government policy.
    We all remember the time when the American economy was the 
marvel of the world because of our productive capacities. Our 
production along with the strategic competence of our leaders 
and the dedication of soldiers and sailors is what won World 
War II. It was the exports of manufacturing goods, of 
agriculture that revitalized the postwar Europe and Asia and 
one of the goals of the Marshall Plan, in fact, was to ensure 
that Europe had enough funds to buy those products.
    I am afraid that our role in the world economy today has 
changed in ways that nobody really could have prophesied. We 
have become really the consumers of last resort and, for that 
matter, the consumers of first resort.
    Stephen Roach, an eminent economist with Morgan Stanley, 
recently said that by his calculations, personal consumption in 
the American economy now amounts to 72 percent of our gross 
domestic product.
    England, you will recall, in the 19th Century was known as 
a nation of shopkeepers. America in the 21st Century is a 
Nation of shoppers. This is a problem. Consider what it means 
that our largest employer in most of the post-war period, 
General Motors, has been supplanted by Wal-Mart.
    GM, following the lead of Henry Ford, worked on the premise 
that if you work at GM you should be able to buy a new Chevy, a 
new GM car. Wal-Mart never had the premise that if you work at 
Wal-Mart you should be able to buy a car, though certainly you 
should be able to shop at Wal-Mart. That makes a difference for 
the dominant employer, shifting from production to retail.
    In the 1980s, there was some debate over industrial policy, 
and a lot of economists said we shouldn't have an industrial 
policy. We shouldn't pick winners. We should stay out of this 
altogether.
    Well, 20 years, we don't have an industrial policy. We have 
a diminished industrial base, and what has kept the economy 
afloat isn't the proceeds of production. It has been asset 
inflation, the rising value of homes against which Americans 
have had to borrow to purchase things they couldn't afford had 
they been dependent on their relatively static work-derived 
incomes.
    This isn't a sustainable strategy. Increasingly, the 
macroeconomic policy of the United States has been shop until 
you drop. Okay, we have shopped, and now we have dropped.
    What I would suggest broadly since my time is just about 
up, in reference to Government policy, is that I see a role for 
the public sector where the private sector is no longer willing 
or even able to go.
    The private sector welfare state--that is employer-provided 
health insurance, retirement funds, retirement health 
insurance--is crumbling. For the past two decades, American 
employers have been cutting back. In a global economy, they 
feel this renders them uncompetitive. This suggests to me a 
need for Government to step up and provide those things which 
Americans have counted upon as ancillary to their work and no 
longer is.
    Second, I think we need to foster a public works and 
industrial policy to create decent jobs here in the U.S. as 
long as most major transnational corporations no longer 
consider this necessarily part of their business plan. So I 
think that is an important element for Government to involve 
itself in.
    The third is to upgrade the jobs of those fifty or sixty 
million Americans who don't work in offshorable work, who 
aren't really in the global economy, in healthcare and 
construction and transportation, in retail sales, education, 
tourism, security, maintenance, logistics, elder care and child 
care.
    I see two ways of doing this. One is to upgrade some of 
these works, some of these jobs and credentialing them, making 
them more professional, doing what some European countries do 
which is professionalizing the people who take care of small 
children and seniors. I think that is a necessary strategy that 
will benefit the United States.
    Secondly is for the Government to enact a piece of 
legislation that has been kicking around Capitol Hill for a 
number of years, the Employee Free Choice Act which would 
enable workers more freely to join unions without fear of 
employer harassment and which I think would have a significant 
effect in these non-offshorable jobs, though I don't 
necessarily think it would in offshorable jobs.
    Capitalism creates prosperity, but it is governments that 
create the legal and social environment in which prosperity can 
be broadly shared. By assuming the responsibility for benefits 
programs that employers no longer offer, by investing in 
strategic industries, offering serious vocational education, 
creating green jobs and human service jobs and amending the 
labor law, I think the Government can begin the arduous and 
necessary work for building the American middle class and 
setting the Nation's economy on sounder footing.
    These are fundamental tasks. The preamble to the 
Constitution refers to it as promoting the general welfare, and 
our Government has been AWOL in these duties for a long time.
    Thank you, Mr. Chairman.
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    Mr. Obey. Dr. Bernstein.
    Mr. Bernstein. Chairman Obey, Ranking Member Walsh and 
members of the Subcommittee, I thank you for this opportunity 
to testify today on the important topic of income trends in the 
United States.
    Mr. Chairman, the biography on your Web site states ``Every 
American who works hard should be able to fully share in the 
bounty of America.''
    This statement is much like that of our mission statement 
at the Economic Policy Institute. To us, this is not nearly 
common sense. It is a fundamental American value and a 
benchmark against which economic progress must be judged.
    If the economy is expanding, if productivity is increasing 
smartly, if unemployment is low, then most families should be 
benefitting from the economy's overall growth. Yet, as the 
evidence I will show confirms, over the last few decades, 
broadly shared prosperity has been the exception, not the rule.
    The mechanisms which historically could be counted on to 
ensure a fair distribution of the fruits of growth are broken, 
and those crafting economic policy must offer ideas to repair 
them. As this campaign season progresses, polling data suggest 
that the American electorate is anxious for policy-makers to 
address these concerns and to do so ambitiously with an agenda 
that meets the magnitude of the problems.
    Now I again applaud this Committee for its foresight in 
getting in front of this wave.
    Before briefly outlining some policy ideas in this spirit, 
I present a set of facts that motivate these policies.
    Despite the impressive productivity growth that occurred in 
the 2000s, the real income of typical middle income families 
has stagnated. Census Bureau data show that between 2000 and 
2006, median family income is actually down by $1,000 or 2 
percent after adjusting for inflation. If, as many economists 
believe, the economy is or near recession, this may be the 
first business cycle on record wherein the median family fails 
to regain its prior peak.
    Note also that the Nation's poverty rate was actually one 
percentage point higher in 2006 than in 2000. Yet, the American 
workforce has been highly productive over these years with 
productivity up 19 percent in 2007.
    Now how can it be that productivity has grown quickly yet 
middle and low incomes have stagnated or fallen? The answer, of 
course, is growth has flowed largely to those at the very top 
of the income scale. By one measure, 22 percent of national 
income went to the top 1 percent in 2005, and this represents 
the highest level of income concentration since 1929.
    The trend towards greater inequality has been ongoing for 
almost 30 years. Back in 1979, the post-tax income of the top 1 
percent was 8 times higher than that of middle income families. 
By 2005, that ratio had grown to 21 times, a vast increase in 
the distance between income classes.
    The pace of income inequality has accelerated alarmingly in 
recent years. The growth in the share of income going to the 
richest income households was faster in 2003 to 2005 than over 
any other two-year period covered by the CBO data that began in 
1979.
    Over these few years, $400 billion in pre-tax 2005 dollars 
was shifted from the bottom 90 percent of household to those in 
the top 5 percent. Had income shares not shifted as they did, 
the income of each of the 109 million households in the bottom 
95 percent would have been, on average, $3,700 higher in 2005.
    Now some analysts have downplayed these income findings by 
making the following types of counter-arguments:
    Consumption inequality has grown more slowly than that of 
income inequality. That is true, but the rise in consumption 
over a period of stagnating income growth has meant the 
accumulation of highly problematic levels of debt for many 
American households.
    As I show in my written testimony, real expenditures 
actually fell about 3 percent, 2000 to 2006, for households in 
the bottom 40 percent while rising 7 percent for households in 
the top fifth.
    A second counter-argument is that real incomes of low and 
middle class households have grown over the last few decades. 
Of course, they have. The question is how fast relative to 
prior years and to other standard benchmarks like productivity 
growth.
    Again, as I show in my written work, by these two criteria, 
income growth has been far less favorable since the mid-1970s. 
Simply beating zero is not evidence of adequately shared 
prosperity.
    Finally, some argue that income mobility, the ability of 
families to move up the income scale over their life cycle, 
offsets the rise in inequality that I have emphasized. This is 
not so.
    Only if the rate of mobility, only if people are more 
likely to get ahead over time can it offset the growing 
inequality that I have documented. The solid consensus among 
mobility analysts is that the rate of mobility has not 
accelerated and may have slowed.
    Also, the extent of mobility in our economy is often 
exaggerated. According to a recent Treasury study, 79 percent 
of taxpayers who started in the bottom fifth of the income 
scale in 1996 remained in the bottom 40 percent by 2005.
    What policies might legislators consider to reconnect the 
living standards of working families to economic growth? In the 
interest of time, I will focus on two areas: Bargaining power 
and public investment.
    The ability of most workers to bargain for a greater share 
of the value they are adding to our economy is at the heart of 
the various gaps I have documented. Unions play a key role in 
precisely this area.
    The decline of unions over the past decades is partly a 
mechanical function of the loss of jobs in unionized 
industries, but the more important explanation is the very 
unbalanced playing field on which unions try to gain a 
foothold. Polls show that slightly more than half of the 
nonunion workforce would like some type of union 
representation, a finding that is not particularly surprising 
given the wage and income data I have shown above.
    The problem is that the legal and institutional forces that 
have historically balanced the power of anti-union employers 
and their proxies have deteriorated in recent decades. One 
legislative solution is the Employee Free Choice Act, the bill 
that helps to restore the right to organize in the workplace. 
EFCA gives members of a workplace the ability to certify a 
union once a majority signs authorizations in favor of the 
union and puts much-needed teeth back into labor law.
    Turning to our investment agenda, I do not need to convince 
the members of this panel, this Committee that it is critical 
to invest in the skills of our workforce of both today and 
tomorrow. Unfortunately, as Bob Greenstein stresses in his 
testimony, our budgetary priorities have been moving in the 
opposite direction.
    Now one reason this disinvestment is misguided is that 
recent initiatives in worker training have shown considerable 
promise relative to earlier less effective approaches such as 
the so-called Work First policies that de-emphasize job 
training and career paths.
    Effective strategies are grounded in extensive knowledge of 
the local labor market focusing on occupations and industries 
that offer the best opportunities for advancement. They help 
workers access education and training at community colleges, 
community-based training programs and union-sponsored programs 
that work with employers to design curricula based on skills 
that employers actually need.
    Now, in the current economic context with a recession 
possibly underway or soon to be so, there has been considerable 
discussion of investment in public infrastructure as a 
component of a stimulus plan. Though the plan agreed upon by 
Congress and the White House did not include such investment, I 
strongly believe it is an important topic for Congress to 
consider and not simply in the context of recession.
    Four facts motivate this contention: First, American 
households are highly leveraged and may be poised for a period 
of enhanced savings and diminished consumption. In this 
context, public investment should be viewed as an important 
source of labor demand.
    Second, there are deep needs for productivity enhancing 
investments in public goods that will not be made by any 
private entities who cannot, by definition, capture the returns 
on such investments.
    Three, climate change heightens the urgency to make these 
investments with an eye toward reduction of greenhouse gases 
and the conservation of energy resources.
    And, fourth, our job market appears to be weakening 
considerably. One area of particularly significant job loss 
has, of course, been construction. Jobs in residential building 
and contracting are down 244,000 over the past year. When we 
include other jobs related to housing such as real estate, we 
find a decline in almost half a million jobs since the peak of 
April 2006.
    In other words, there exists considerable slack in our 
labor market that will almost certainly deepen in coming 
quarters. In this regard, infrastructure investment serves a 
dual role of deepening our investments in public capital while 
creating good jobs for workers that might otherwise be 
unemployed or underemployed.
    Economists at EPI have carefully documented our public 
infrastructure needs, and I present these recommendations in my 
written testimony. They include water and sewage repairs, the 
maintenance of school buildings, highways, bridges, roads, 
rails and other productivity enhancements in public goods that 
private sector investments will not make.
    Moreover, it is important to recognize that (a) these are 
all necessary investments that should be made regardless of the 
state of the business cycle and (b) recent history suggests it 
is a mistake to think that labor market slack will no longer be 
a problem when the recession officially ends. Now this last 
point deserves a bit of elaboration.
    Much of the current recession and stimulus debate has 
stressed that recent recessions, such as the one in the early 
nineties or 2001, were both mild and short lived and perhaps 
the next recession will follow the same pattern, but such 
claims are based solely on real output growth and not on job 
market conditions.
    The allegedly mild 2001 recession wherein real GDP barely 
contracted at all was followed by the longest jobless recovery 
on record. Though real GDP grew, payroll shed another 1.1 
million jobs. The unemployment rate rose for another 19 months 
and for just under 2 years for African Americans.
    In conclusion, I stress that this agenda is but one set of 
ideas designed to move our politics and ultimately our economy 
back towards one where every hardworking family is ``able to 
fully share in the bounty of America.''
    I thank you and look forward to addressing your questions 
and comments.
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    Mr. Obey. Thank you very much.
    We are going to have to recess for a few minutes. I 
understand that we have a vote on the floor, and we may have a 
series of votes intermittently throughout the day. So it is 
just another contribution to the orderly consideration of 
issues in the Congress.
    We will be back as soon as we can.
    [Recess.]
    Mr. Obey. Well, I am told that we will have another one of 
these protest votes around 11:15. So why don't we proceed and 
maybe we can get both of your statements in before we have 
another one of these little sidetracking efforts?
    Mr. Greenstein, why don't you go ahead?
    Mr. Greenstein. Well, thank you, Mr. Chairman.
    As you know, income inequality has widened significantly in 
recent decades. I just want to take a minute and review a few 
key figures from one of the best data sources we have on this, 
the Congressional Budget Office data which cover the period 
from 1979 through 2005.
    Now the CBO data show that during this period the average 
annual after tax income of the top 1 percent of Americans, 
after adjusting for inflation, more than tripled, rising 228 
percent.
    By contrast, the average after tax income of the middle 
fifth of the population rose a modest 21 percent, which looks 
particularly modest when you recognize that this is over a 26-
year period, and the average income of the bottom 20 percent of 
the population, CBO found, was only 6 percent.
    Or, if you put this in dollar terms, the CBO data show that 
the average after tax income of the top 1 percent rose by 
$745,000 a year from $326,000 a year in 1979 to nearly $1.1 
million a year in 2005.
    Mr. Obey. One point what?
    Mr. Greenstein. $1.07 million in 2005. These figures are 
all adjusted for inflation and in 2005 dollars.
    Meanwhile, in the middle, the increase was $8,700, and they 
ended up at $50,200 in 2005. For the bottom 20 percent, the 
increase over this 26-year period was all of $900, and their 
average annual after tax income in 2005 was $15,300.
    Now this long term trend shows no signs of abating. If you 
look at the CBO data for the most recent year for which the 
data are available, 2004 to 2005, you find that real after tax 
income jumped an average of $180,000 per household for the top 
1 percent in this year while rising $400 for the average middle 
income household and $200 for the average household in the 
bottom fifth.
    Other research shows that nearly half of the income gain in 
the Nation in 2005 went to the top 1 percent and that the 
concentration of income at the top of the income scale appears 
to be greater now than at any time since 1929.
    Now this growing inequality has created concern across the 
political spectrum. Among those who have voiced strong concern 
about it in recent years are former Fed Chair Alan Greenspan 
and current Fed Chair Ben Bernanke. They and others, such as 
former Treasury Secretary Larry Summers, have also talked about 
some of the connections between inequality and areas where 
increased investments are needed to improve the competitiveness 
of the workforce and, therefore, the economy.
    I would like to talk just for a minute about this 
connection between inequality, the workforce and 
competitiveness, and domestic discretionary programs.
    So both Bernanke and Summers have emphasized the need for 
increased investment.
    Summers noted that to boost productivity, we need increased 
investment in education infrastructure and R&D, and he noted 
nothing is more important to our prosperity than the quality of 
the labor force. ``A growing body of evidence suggests that 
preschool education has an enormous rate of return, 
particularly for children from a disadvantaged background, and 
funding for these programs should be a high priority.''
    He also talked about transportation and other 
infrastructure areas where investment has been inadequate.
    In Chairman Bernanke's speech last year, he too called for 
``policies that boost our national investment in education and 
training.'' Bernanke noted that a substantial body of research 
demonstrates that investments in education and training pay 
high rates of return and that early childhood programs can also 
pay high returns in terms of subsequent educational attainment 
and lower rates of social problems.
    This is underscored by recent path-breaking research by a 
team of researchers from the University of Chicago, 
Northwestern and Harvard who estimated that eliminating poverty 
among children under five would substantially boost annual work 
hours and earnings among those children when they grew up.
    As you know, although the children of today are the workers 
of tomorrow, the United States has a higher level of child 
poverty than that of most other western industrialized nations.
    This takes me to some particular issues related to the 
Appropriations Committee where I think all of these issues come 
together. I will just mention three of these in the interest of 
time.
    First is early education and childcare initiatives as I 
just noted. Research has shown that quality early education can 
result in marked improvements in school readiness and success 
in elementary school. Research has also shown that childcare 
subsidy programs have significant impact on parents' employment 
rates and earning.
    But despite this evidence, Federal investment here has been 
falling. Head Start funding in 2008, for example, is 11 percent 
below the 2002 level, adjusting for inflation. Childcare 
funding 2008 is 17 percent below the 2002 level, adjusting for 
inflation.
    A secondary, I will briefly mention, involves housing 
vouchers which enable poor families to move to where there are 
more job opportunities and better schools. A number of studies 
have documented positive effects, especially for children, when 
families use vouchers to relocate to lower poverty areas.
    But, for example, the President's new budget falls $1.3 
billion short of simply maintaining the current vouchers in use 
and has shortfalls in other low income housing areas as well.
    The third and final area I will make is financial 
assistance to enable low income students to attend college. 
This is an area where the Nation is not performing adequately, 
and the inadequate performance both limits future gains in 
productivity and growth and contributes to inequality.
    A study by the Department of Education that looked at the 
period 2003 to 2004 found that among students from families 
below $20,000 87 percent of community college students had 
unmet needs that averaged $4,500 per student, 80 percent of 
students in that income bracket who were in four-year colleges 
had unmet needs averaging $6,000 a year. Many low income 
students facing such gaps drop out before completing college or 
are deterred from enrolling in the first place.
    Last year's student aid legislation is not going to make 
that large a dent in this. If you look at it, that legislation 
increases Pell Grants in increments through 2012-2013, but the 
level the maximum Pell Grant would reach 2012-2013 is only $250 
above the 2003-2004 level that the Department of Education 
study found left such big gaps.
    That is only $250 over it after adjusting for general 
inflation, and it is actually below the 2003-2004 level if you 
adjust for increasing tuition and fee charges which have been 
rising faster than inflation.
    To me, the growth in the financial aid gap for low income 
students at a time when inequality is widening due to a variety 
of forces in the private economy is an emblem of how Government 
policies are not responding adequately here either in terms of 
the economy's need for highly productive workers in future 
decades or in terms of the need to lean against the trend 
towards greater inequality.
    In recent years, policy-makers have increased financial aid 
for students from affluent families, who would attend college 
anyway, through such means as the creation of 529 plans in the 
tax code but have allowed financial aid for low income students 
to erode significantly in relation to tuition and fee charges 
which is increasing barriers that the lower income students 
face in obtaining higher education at a time when we should be 
reducing those barriers.
    Now I understand the concerns about the broader budgetary 
picture and future deficits, and our center has written 
frequently about the need for tough choices in the areas of 
healthcare revenues and social security, but domestic 
discretionary programs have not been the cause of the return of 
deficits and they are not the cause of the large projected 
deficits in the future.
    They have been falling for 30 years as a share of GDP. For 
non-defense discretionary, it was 5.2 percent of GDP in 1980. 
It is 3.7 percent today. Under the CBO baseline, it falls to 
2.8 percent by 2018.
    The bottom line here, I think, is that we need to make some 
very tough choices in the coming years in various parts of the 
budget, but we really cannot afford not to make investments 
that would both keep the United States more competitive in the 
international economy in future decades and boost the 
opportunities, to use Mr. Walsh's term at the start of the 
hearing, boost the opportunities for lower income children and 
families to get ahead and to lean against this widening income 
inequality that I believe ultimately poses some dangers both 
for the economy and for the Nation's political and social 
fabric.
    Thank you.
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    Mr. Obey. Thank you.
    I was evidently misinformed by those who told us that this 
vote wouldn't come until 11:15. We have nine minutes, so I 
would suggest we go vote.
    Mr. Walsh. We have a vote right now?
    Mr. Obey. Yes, another one.
    Mr. Simpson. We went through this already.
    Mr. Obey. I know.
    Mr. Simpson. I already voted. [Laughter.]
    Mr. Obey. Well, I am happy to stay if anybody else wants to 
stay. I don't think it is in any danger of passing. If members 
want to go vote, please go vote.
    Dr. Viard, why don't you proceed and we will try to get 
yours in before the next disruption?
    Mr. Viard. Thank you, Mr. Chairman.
    Chairman Obey, Ranking Member Walsh, members of the 
Subcommittee, it is an honor to appear before you today to 
discuss implications of economic trends for workers' families 
of the Nation. In my written testimony, I make three points 
which I will discuss briefly here now.
    Despite the rise in inequality during the last few decades, 
a development that no one disputes, real incomes have continued 
to rise in the middle of the income distribution. Real incomes 
have even risen at the bottom of the income distribution 
although the gains have been very small at that place.
    The existing Federal tax system is highly progressive. A 
large portion of the Federal tax burden is currently borne by a 
very small group of high income households. Also, economic 
mobility can make computations of income inequality, that are 
based on annual income, misleading. Households do move between 
low income and high income years to a significant extent.
    On the first point, the rise of real incomes at the middle 
of the income distribution, I will actually be repeating much 
of what Bob Greenstein has just told you. I think that is an 
indication of the fact that there is some agreement on some of 
the facts as to what is happening here.
    Some people have claimed that the middle class is actually 
failing to keep up with inflation, that the real incomes are 
actually falling, that the middle class is being destroyed and 
so on. I think it is important to realize that even though we 
are experiencing a rise in inequality in the United States, 
that those claims are simply not factual.
    Some people look at particular measures like average hourly 
earnings and point out that measure has not always kept up with 
inflation, but that is an incomplete measure because, at best, 
it is only telling you something about the labor earnings, the 
cash labor earnings that households are receiving.
    To actually see how households are doing, it is important 
to add in their other sources of income such as fringe benefits 
and Government benefits and then to subtract the taxes that 
they are paying to see what resources they actually have 
available for themselves and their families.
    Like Bob Greenstein, I will actually be using the 
Congressional Budget Office numbers. I agree with him that 
those are a reliable, high quality data source. They are 
available from 1979 through 2005, and I think they paint an 
interesting picture.
    The middle quintile, the 20 percent who are in the middle 
of the distribution with 40 percent above them and 40 percent 
below them, did experience a real income gain of 21 percent 
over that 26-year period. It is a smaller gain than one would 
have liked.
    I think that it is more than simply beating zero, to use 
Jared Bernstein's phrase, and of course it is true that the 
income gains that have occurred in the highest two quintiles 
and particularly the top 1 percent are much more rapid. 
Nevertheless, I think it is important to point out that even as 
inequality has risen the tide of economic growth has continued 
to lift the middle income boat.
    The bottom two quintiles have not experienced the same 
degree of growth as the middle quintile. The second quintile, 
after tax income, grew 16 percent over that period, a bit less 
than the middle quintile. As Bob Greenstein mentioned to you, 
the bottom quintile grew by a very meager 6 percent over this 
26-year period. Clearly, there is a source of concern with 
respect to that group of individuals.
    The second point I wanted to briefly discuss is the role 
that the Federal tax system plays in reducing income inequality 
in the United States. It is obviously a value judgment as to 
how the tax burden should be divided among different income 
groups. Of course, that is a responsibility that you have along 
with the members of the Senate and the President in determining 
how the tax burden should be divided. There are difficult value 
judgments involved.
    As those value judgments are made, I think it is important 
to have a clear understanding of the point that we are starting 
from, and the point that we are starting from is one in which 
the Federal tax system is highly progressive. Again, I turn to 
the CBO data for this point.
    In 2005, the top 1 percent of the population paid 28 
percent of the taxes. Now, if you were to look at individual 
income taxes alone, that number would be even more striking, 39 
percent in the CBO data.
    Of course, we know that individual income taxes do not make 
up the entire Federal tax system. Social insurance taxes, 
mainly the social security/Medicare payroll tax, are also an 
important part of the system, and that tax, of course, is 
regressive by itself. The top 1 percent, for example, pays only 
4 percent of the social insurance taxes in the Country.
    But when CBO adds together those taxes as well as the 
corporate income tax and excise taxes, nonetheless, the total 
tax system remains strikingly progressive. The top 1 percent 
pays 28 percent. The top quintile, the top 20 percent, pays 69 
percent of the cost of Government. The bottom quintile, which 
actually has a negative income tax burden, bears 1 percent of 
the overall Federal tax burden.
    So I think that we might have to recognize that we are 
starting from a Federal tax system that is highly progressive, 
and this does not merely reflect the income concentration that 
the other witnesses have described. The higher income groups 
are actually paying a higher share of the tax burden than their 
before tax incomes would indicate.
    For example, the top 1 percent has 18 percent of the before 
tax income in the CBO data, but they do bear 28 percent of the 
Federal tax burden. So, at the top, a higher fraction of income 
is being paid to the Federal Government than at the lower 
income groups.
    As a third point, I want to discuss the importance of 
economic mobility, and here I will turn to the Treasury 
mobility study that was released in November. This is actually 
the same study that Jared Bernstein referred to in part of his 
testimony. I think it shows that there is a significant degree 
of mobility in the United States and that for some households 
looking at their annual income can provide a misleading picture 
of their true economic circumstance.
    There are a lot of numbers in that Treasury study. In my 
written statement, I have a chart that presents what I consider 
some of the more striking numbers.
    The Treasury study looked at the bottom quintile, the 
bottom 20 percent of taxpayers based on 1996 income, and it 
looked at what happened to their real inflation adjusted income 
over the next nine years, so where did they end up in 2005 
compared to where they started in 1996.
    For this bottom quintile, 49 percent, nearly half, 
experienced a doubling or more of their real income during that 
9-year period. In fact, the average income of this group more 
than doubled during that time period. So it is clear that there 
was a significant number of low income households based on 
their 1996 income who in fact experienced very large income 
gains.
    There are others who experienced more modest gains. Eighty-
two percent of this low income group experienced some real 
income gain during that nine years compared to 67 percent of 
the taxpayers in all income groups.
    Of course, there is no denying that, for some households, 
being at a low income level is a longer term or more permanent 
condition. The Treasury study does show, for example, that of 
those taxpayers in the bottom quintile, that 18 percent did 
actually lose income and that roughly 6 or 7 percent actually 
lost more than half of their initial modest income during that 
9-year period.
    Clearly, there is a group there with long term difficulties 
that we have to be concerned about, but it is important to 
realize that looking at annual income can overstate the 
situation.
    The converse, of course, is that those taxpayers who are at 
the top of the income distribution do not necessarily maintain 
their incomes over time. The Treasury looked at the top 1 
percent in 1996. Sixty-five percent of that group lost real 
income to some extent over the next nine years. So a majority 
are losing income from that top point compared to a large 
majority gaining income at the bottom.
    Sixty percent of that top 1 percent moved out of the top 
one percent during the nine years of the sample. Thirteen 
percent of them actually moved out of the top quintile or top 
20 percent and moved somewhere into the bottom 80 over that 
nine-year interval.
    So while there is certainly no doubt that there is a group 
of people with long term low incomes, there is also a group 
with temporarily low incomes, and it is important to 
distinguish between them.
    In summary, Mr. Chairman, there has been a rise in economic 
inequality over the last few decades, an undeniable fact 
supported by all of the data that we have at our disposal. It 
is nonetheless true that middle incomes continued to rise 
during this period and low incomes even to a slight extent, 
although at an appallingly slow rate.
    The current Federal tax system is highly progressive. A 
small group of high income taxpayers pay a significant share of 
the cost of Government, including those programs that aid the 
less fortunate.
    While it is certainly true that there are some households 
that are at a long term low income position, there are others 
who move out of that position, and it is important to keep that 
distinction in mind.
    Thank you, Mr. Chairman.
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    Mr. Obey. Thank you. Thank you all.
    Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    It is amazing. All of you, I think, cited the same Treasury 
study and all came up with very different conclusions which 
doesn't surprise me, but a lot of it is philosophy and outlook.
    I tend to be an optimist. I guess I wouldn't be in this 
business all these years if I weren't.
    But to Mr. Viard's point, there is mobility. It is not that 
a certain family for generation after generation after 
generation is stuck in this lowest quintile. There is mobility.
    As we talked about, we have a very competitive society. 
Some people don't compete as well as others. Government has to 
be there for them, but again we are providing people with equal 
opportunity and it is not all about Federal spending. It is 
about opportunity, opportunity within this system that we have.
    Mr. Meyerson suggested that since people are now polling, 
that they can't do better, that the next generation can't do 
better than prior generations. Does that reflect reality or 
does that reflect a preponderant message in our media today? 
People do reflect what they see on TV and read in the 
newspapers to a certain extent.
    In any event, I am not a Pollyanna. We have certainly had 
problems, but I just don't believe that this huge disparity 
that we keep hearing about between rich and poor is real.
    The facts are, and I think they are facts that Mr. Viard 
mentioned, and I would like to maybe have all of you comment on 
these things. First of all, when you measure these things, how 
you measure them matters too.
    If, for example, the median income universe, if you look at 
that and you look at that median income universe, approximately 
one-third of those are very young folks who are just out of 
college or those who are retired, living on fixed incomes. If 
somebody has a fixed income, by its very nature, their income 
is fixed. Everybody else is in a more dynamic situation where 
they have the opportunity to grow their income.
    As we age, as our society ages, you are going to have more 
and more people on fixed incomes and therefore a wider 
disparity. I am not an economist, but it seems somewhat 
logical.
    If you take those, that third out, and you talk about who 
is left in that middle income, that median income group, the 
income per family goes from $46,000 a year to about $61,000 a 
year. The median income for married couple households under 
this scenario is $72,000 per year. Two income married couples' 
average income is $81,000 a year. Those are not poor folks.
    I mean are you all, are three of you convinced that society 
is becoming the monarchy versus the serfs or are we just 
talking around the margins or do we still have a dynamic 
society that allows people with equal opportunity to grow 
through these income strata?
    Anybody care to take a whack at that?
    Mr. Bernstein. Well, you have asked a lot of good, 
provocative questions. There is only one thing you said that I 
flat-out disagree with which is that somehow the gap between 
the highest and the lowest income families is a mirage or what 
you said was you just don't believe it.
    I think the best data that we have on this and I suspect 
every member on this panel including Alan would agree, in terms 
of just a snapshot of income at a point in time very 
comprehensively done is the CBO. You heard from my and Mr. 
Greenstein's testimony just how large those gaps are now 
relative to what they used to be, and I believe those are real.
    You do make the point that there is mobility, and you are 
absolutely right.
    How much mobility is there? Are we a Nation of serfs and 
kings? Of course we are not.
    The problem is that when you measure this, in my view, 
correctly--and we probably would have to have a whole seminar 
to debate what correctly is--you find that there is, I think, 
less mobility than Alan suggested in his report.
    The Treasury report that we have been talking about itself 
disagrees on this point. Its Table 1 is quite different than 
its Table 2. I think Table 2 is done correctly, and that 
controls for a cohort effect.
    As cohorts come into a sample and they age, their incomes 
go up by definition. You have to control for that. When you do, 
you find out that more than half, 55 percent, of those families 
who started out in the bottom fifth were in the bottom fifth at 
the end, 10 years later basically.
    Is that a lot? Is that a little mobility? We could argue. 
Those are adjectives that I don't know bring that much light to 
the matter. But it suggests there is significant immobility. 
More than half of those families start there and stay there.
    Secondly, and I will be brief, unless the rate of income 
mobility is increasing, families are facing a much more unequal 
income distribution over time. Families do get ahead over time, 
unquestionably, even when you control for age the way you are 
supposed to, but they are not getting ahead any more quickly.
    Therefore, families who are moving from, say, the bottom 
fifth to the middle fifth have a lot further to go than they 
used to have. The income gaps between these income classes are 
much larger and getting across that distance, I think, is a 
much harder climb particularly when wages are stagnant.
    Mr. Greenstein. A couple of points: I don't think there can 
be disagreement that there are very substantial income gaps 
between the top, the middle and the bottom. One can disagree as 
to whether that is a problem, but there are really substantial 
gaps.
    The second, I think we all agree. Alan noted this. We all 
agree that inequality has widened significantly since the CBO 
data began being collected in 1979.
    Mr. Walsh. Is that a function of the unfairness of society 
or the changes in age and fixed income levels and that sort?
    Is this an inherently unfair system that we have? Is that 
what you are saying.
    Mr. Greenstein. One can make judgments as to whether it is 
fair or unfair, but this is not primarily an issue of 
demographics. The population is not a lot older. Now it will 
become, but it is not a lot older now than it was in 1979.
    There have been--there are many studies on this--very large 
gaps, widening of the gaps between the income and the earnings 
of very highly paid individuals and those of people in the 
middle of the income scale.
    Just to give you a couple figures, in 1979, the average 
after tax income of households in the top 1 percent was 23 
times the average after tax income of households in the bottom 
fifth. By 2005, it was a 70 times ratio. Well, that was the 
highest on record.
    You can compare the top 1 percent to the middle fifth. 
Again, the ratio is much wider now than it was.
    Now the key point Jared mentioned is we would all be less 
concerned about this if the increase in inequality in a given 
year were paralleled by an increase in mobility across income 
groups. The best evidence is that there has not been an 
increase in mobility. Some studies find a decrease; some don't.
    This is: Is the glass half full or half empty? Some people 
move out; others don't.
    Of the people that were in the bottom fifth, the Treasury 
study shows in a given year, 10 years later 71 percent of them 
were either still in the bottom fifth or the next to the bottom 
fifth.
    Last little fact, last year, OECD issued a study of 
mobility in 12 advanced industrialized countries including the 
United States. The United States ranked among the three lowest 
in the degree of mobility.
    You could draw two conclusions from this. One is one may 
think--probably some of us on the panel do and some don't--one 
may think that the degree of inequality itself is too large 
now, but whether you agree with that or not, presumably, we 
would all agree that we want to increase mobility. We want a 
larger share of those at the bottom to move up, and I do think 
that leads to certain kinds of conclusions in various areas 
such as some of the education and other investments I talked 
about.
    Mr. Obey. I think we are going to have to move on.
    Mr. Walsh. Thank you, Mr. Chairman.
    Ms. McCollum. Thank you, Mr. Chairman.
    Gentlemen, although I was going up and down, I can show you 
the highlighted markings from last night, staying up, reading 
your testimony. So I am familiar with your testimony, and thank 
you for providing it ahead of time to the Committee.
    I am just going to cut right to the chase here. There are 
two issues that I would like to talk to you about and how they 
are affecting our economy and our competitiveness.
    The first is education, and it was touched on in some of 
the testimony about early childhood education. It was the 
Federal Reserve Bank in Minnesota that was really involved in 
releasing and following up on the study. So we have taken it to 
heart in Minnesota with discussions and hearings at a State 
level.
    But having said that, Congress and States and local 
property taxpayers, because they have felt stressed for a long 
time, aren't keeping up with the needs of making sure that our 
schools are ready to be globally competitive. That doesn't mean 
necessarily having all the bells and the whistles, but it means 
having enough textbooks with current and accurate information, 
teachers that are trained in science and technology and know 
how to teach it in an interesting and stimulating way, and ways 
in which our rural communities are fully integrated and hooked 
up to the Internet.
    In reading the testimony, I know it is not a silver bullet, 
saying, geez, if we just bring everybody up to a certain level 
of education, everything is fixed here because there are other 
pressures and squeezes on it.
    But as we watch China invest, as we watch the E.U. even 
change its higher education system, and as we know that our 
colleges are still where people come to get the very best in 
higher education from engineering and that, what should we as a 
Nation be doing from K-12 to higher ed to make sure that we are 
fully integrating our citizens?
    On a very selfish note, unless you have a fairly well 
educated population, you won't have a vibrant democracy as 
well. So this also goes to the core of our very being as a 
Nation.
    Then healthcare, the discussions that I hear a lot about 
healthcare are single payer, universal, all those great things, 
private sector, public sector. I think one of the key pieces 
that is missing is what does our healthcare system look like? 
What does it cover? What is a basic guarantee to an American 
for what their healthcare will be like?
    In my opinion, if we don't have that discussion and we 
allow all the other discussions to take place, it is going to 
be all the stakeholders that either have profits or a direct 
connection as to how the healthcare is delivered that are going 
to be making the decisions to what the healthcare looks like.
    I point out with Association Health Plans, we had votes in 
the last Congress which would have allowed employers to 
discriminate from even carrying basic healthcare coverage for 
women, obstetric and gynecology services.
    So healthcare and education, what should our platform look 
like if we are going to be successful into the future?
    Mr. Bernstein. I just want to make a few comments about 
education. I will leave the healthcare comments to others. This 
also speaks to some of the issues you raised, Mr. Walsh.
    To answer your question that you posed very directly to us, 
I don't think that you can explain away the kinds of trends we 
are talking about by citing demographics or aging.
    I think there has been an increase in the lack of fairness 
in the way economic awards are distributed, and one of the 
places I see it is in education. I think there is an intimate 
connection between income inequality and access to higher 
education.
    The idea is that as incomes become more unequal and the 
actual absolute values, as we have noted, of the lower income 
families grow more slowly in real terms, conversely while those 
at the high end are growing very quickly in real terms, the 
barriers to accessing our education system become that much 
steeper. There is solid research that shows even gifted 
children who come from lower income classes are having a more 
and more difficult time accessing our educational system.
    So, in that regard, I think we need to look in terms of a 
solution much more closely at policies that create access to 
higher education for children regardless of their income 
levels.
    There is an interesting rule that has been applied in 
various States called the 10 Percent Rule which says if you are 
performing in the top decile of your high school, you should 
have automatic entry into your State university. I also think, 
as others have mentioned, that entry itself isn't enough. These 
folks, these kids also need remedial help.
    But it is an interesting policy because it doesn't say you 
scored high on the SATs or any standardized test. All it says 
is you have done well relative to your cohort. Your cohort may 
be the most disadvantaged cohort in the Country, but you have 
shown in a relative sense that you can perform.
    Those kids ought to have automatic admission into public 
universities, and they are going to need some help in 
remediation both in terms of skills and, I think, income.
    Mr. Greenstein. If I could just briefly note, I would like 
to come back again to Mr. Walsh's phrase of equal opportunity. 
We don't have equal opportunity by income group in access to 
higher education or to adequate quality preschool education, 
and I think we need to address both of those.
    I think in the higher education area, we have particular 
problems now in the Federal tax code where subsidies for higher 
education delivered through the tax code are skewed to middle 
and higher income students and lower income students don't 
quality for them because their families don't earn enough to 
owe income tax.
    There is a bill, a bipartisan bill introduced by 
Congressman Emanuel and Congressman Camp to start to address 
that, to make some of the education tax credits partially 
refundable to help more lower income students go to college. I 
think we ought to take a serious look at that.
    I also think we need to look at--I am not an expert in the 
area but--the kinds of policy improvements and investments we 
need to make so that we don't have a situation where children 
from high income families are getting high quality preschool 
education, which the evidence increasingly indicates is 
important, while children from lower income, working poor 
families and lower income working families either have 
difficulty getting a childcare slot at all or are getting more 
of a maintenance slot that doesn't have the preschool education 
components that are important with it.
    Mr. Viard. I will address the education question as well 
which I think is very important.
    It is certainly the responsibility of Government to ensure 
that everyone receives an adequate elementary and secondary 
education. I think the preschool also is important. I agree 
with Bob Greenstein on that and that it is important to give 
people the basic skills they will need in life and in the 
workforce.
    I also, of course, favor equal opportunity for higher 
education. There may be more that can be done there.
    I do think it is important to realize the tax breaks that 
we have, of course, are one component of how we help people 
afford college. Those, of course, don't apply as much at the 
lower end of the scale, but obviously we also have public 
universities and a variety of programs on the spending side 
that are available at the lower income levels.
    I think that it is important to provide equal opportunity 
for higher education, and yet at the same time we have to be 
realistic about what can and cannot be accomplished by that.
    On the one hand, the information we have from the labor 
market suggests that college graduates and people with higher 
degrees are being rewarded to a greater extent than in the 
past, but it is unclear to what extent that is a reward to the 
education credential per se and to what extent it is a reward 
for particular skills, cognitive skills and others that are 
more likely to be possessed by those who have gone to college.
    To the extent that it is the latter, simply enabling people 
to go to college, while a good thing in and of itself, may not 
yield as many results as we would all like to see in terms of 
reducing earnings inequality. There, too, I think it is 
important to ensure that the adequate education is provided at 
the elementary and secondary levels when many of those skills 
are developed.
    Mr. Meyerson. Actually, in response to that, let me just 
say that it is still the case that a clear majority of the 
American people in the American workforce do not have BAs or 
BSes after four years of college.
    If you look at issues around income stagnation in the 
United States, I think you want to look as well at the issue of 
vocational education, skill development and more credentialing 
for people who don't go to college because the sharpest 
declines in income, if you look at the American workforce over 
the last 50 years, are among folks who have high school degrees 
but no more. It is the work lives of those people that have 
become less remunerative over the years. Unless you can posit 
an America in which everyone is going through college, we 
really need to address those folks in particular.
    Mr. Obey. Thank you.
    Mr. Regula.
    Mr. Regula. Thank you, Mr. Chairman.
    Along the lines of what you have just said, should we have 
policies that will encourage the development of two-year 
institutions that are focused on skills for the marketplace and 
would that address some of the concerns you have expressed here 
today?
    Mr. Meyerson. It sure would, and I am always happy to agree 
with a member of your party because these instances are not 
always that common, but I think you are absolutely right. I 
think we have fallen down on specific educational programs for 
people who are going to be going into those trades and those 
crafts.
    If you look at the project that the Bureau of Labor 
Statistics comes out with every year as to what are the jobs of 
the future, what are we going to be creating, it is kind of an 
alarming high-low list. You can be a cashier at Wal-Mart. You 
can be a sales clerk or you can be an attorney, but it is the 
middle stratum that we, I think in many ways, need to concern 
ourselves more with.
    And so, I think, Congressman, you are absolutely right.
    Mr. Regula. Along the same lines, as they develop income 
statistics, do most of these case studies factor in the value 
received by people in the lower income in housing grants, food 
stamps, a whole series of things? Wouldn't that have to be 
considered part of the totality of an income in making 
comparisons?
    Mr. Greenstein. This is one of the reasons many of us like 
the Congressional Budget Office data series because they do 
that, yes.
    Mr. Regula. I know they do that.
    I would like to ask you, Mr. Greenstein, and this is a 
budget question sort of unrelated to this. What do you think of 
the potential for a two-year budget whereby the second year 
would be spent in oversight?
    It seems to me in my experience here that we don't do 
enough oversight and, if we could adopt a two-year budget, it 
would enable administrators to plan more efficiently in the 
operation of a park or a program of whatever and, in turn, give 
us an opportunity to do more oversight. I would like your 
observation on that as a budget expert.
    Mr. Greenstein. Well, I think different budget experts have 
different views on this. I am not a proponent of the two-year 
budgeting, and I think my view is probably shaped some by my 
experience in developing budgets for a Federal agency back in 
the late 1970s.
    But what concerns me is if you are in an Executive Branch 
agency and you are developing a budget, you are delivering your 
budget to the department, your department heads maybe in July. 
It goes to OMB in September.
    If you think of a two-year budget, the lag between when the 
basic planning gets done and the year for which the funding 
would be provided, the gap is so long that my concern is we 
would end up providing some money for things that are no longer 
needed, we wouldn't meet other things that emerged, and I fear 
that the number of supplemental appropriations bills the 
Congress would have to do would grow so much that I am not sure 
you would get that much of a benefit in terms of the timing. 
But my main concern is the timeliness question.
    Mr. Obey. Would the gentleman yield?
    Mr. Regula. Yes, I yield.
    Mr. Obey. I simply think one of the things that gives me 
considerable disquiet is the fact that I think that because of 
the difference in rules between the House and the Senate, the 
Senate would absolutely have a field day if we went to two-year 
budgets because we would be relying on supplementals all the 
time and they could throw anything but the kitchen sink into a 
must-pass supplemental.
    Thanks for yielding.
    Mr. Regula. You have discovered that, have you? [Laughter.]
    Mr. Regula. How much time do I have left?
    Mr. Obey. One minute.
    Mr. Regula. Is there any analysis available--well, I guess 
CBO does this--in which they score all the extra benefits in 
arriving at the income disparities? I think you are saying that 
the CBO budget does do that Yes, okay.
    I thank you, Mr. Chairman.
    Mr. Obey. Thank you.
    Ms. Lee.
    Ms. Lee. Thank you, Mr. Chairman. I want to thank our 
panelists and thank you for this hearing.
    Let me say a couple things. First of all, I believe like 
many believe that budgets really are moral documents and should 
reflect our values and sense of ethics as a Nation. I am really 
pleased that we have Hubert Humphrey's quote reminding us of 
that.
    But as I look at this budget, we are out of whack with what 
I think Hubert Humphrey was trying to convey. I think this 
budget shows that, first of all, we are wasting our limited 
resources on a war that did not need to be fought.
    So I want to ask, I guess, Mr. Greenstein, if you have made 
an assessment or an impact as it relates to the war. Has it 
been a drag on the economy?
    We see now unprecedented amounts of money going into our 
military budget. Yes, we all want and believe and know we must 
have a strong national defense. But when you look at some of 
these Cold War era weapon systems, the waste, fraud and abuse 
that is being funded at taxpayers' expense, and then when you 
look at this terrible budget that cuts the children, the safety 
net, our senior citizens programs, you have to wonder what is 
going on there.
    Then the second question I have has to do with the impact 
of this budget on people of color in our Country and 
communities of color because when you look at income inequality 
and when you look at the programs that have been proposed in 
terms of the cuts, it is shameful what I see is happening.
    You have the national unemployment rate according to the 
Bureau of Labor Statistics, in January, it was about 4.9 
percent, but yet in the African American community it is 9.2 
percent, twice that. In the Latino community, it is 6.3 
percent.
    So how do we move forward as we look at income inequality 
in its total on everyone in our Country and then specifically 
on communities that are being hit the hardest?
    Mr. Greenstein. I don't know that one could say that there 
is an adverse economic impact at this point in terms of the 
defense spending, but there has definitely been an impact on 
the budget if one uses CBO data and looks at the swing from 
surpluses to deficits.
    In other words, you take in 2001, as you will recall, CBO 
projected surpluses as far as the eye could see, and we have 
had deficits rather than surpluses. If you look at the years 
through 2007 and you compare the forecast at the beginning of 
the decade of a surplus with the deficit that actually 
occurred, you find that a little under a third of the 
deterioration fiscally was due to economic and technical 
factors largely beyond policy-makers' concerns but more than 
two-thirds of it was due to legislation that was enacted.
    Then if you say, okay, what was the cost, where did the 
money go for that legislation that was responsible for about 70 
percent of the budgetary deterioration? About 48 percent of 
that cost is tax cuts. About 36 percent is security-related 
spending. Now that would include Iraq and Afghanistan and 
Pentagon increases and homeland security and the global war on 
terror.
    What particularly strikes me and I should note that I am 
not an expert on the defense budget, and others who know this 
better than I, I hope will look into this at depth.
    But what strikes me is that under the President's budget, 
the funding level for defense in 2009 exclusive of Iraq, 
Afghanistan and the global war on terror, exclusive of all 
those things, the non-war on terror part of the defense budget, 
would be $150 billion or 40 percent in real terms higher than 
it was in 2001.
    The question that I think needs to be asked is: Are we 
doing enough to scrutinize those parts of the defense budget 
that are unrelated, regardless of one's view on Iraq and so 
forth?
    Putting that to the side, for the base part of the defense 
budget that is not related to that, are we giving it the same 
level of scrutiny that we are giving the domestic side of 
appropriations? I am not sure we have in recent years, and I 
think we need to.
    Mr. Viard. I would like to make a few comments on that. I 
think it is important.
    Bob Greenstein mentioned earlier the fact that non-defense 
discretionary spending had been falling and over a long time 
period. It depends on the time period you look at, but it is 
right that if you look at 1980, we were spending 5.2 percent of 
GDP on non-defense discretionary and that is down to 3.7 
percent as of last year.
    But I think it is interesting to note that defense spending 
has fallen as a share of GDP over exactly that same time period 
despite the fact that we are at war in Iraq and Afghanistan 
today when there was no similar war in 1980.
    We were spending 4.9 percent of GDP on defense at that 
point, and we are now down to 4 percent of GDP even with the 
spending in Iraq and Afghanistan. This is last year's number, 
so it includes all of the money that was spent in Iraq and 
Afghanistan, whether it was in the supplemental appropriation 
or in the regular appropriation.
    I think, more generally, neither type of discretionary 
spending is the key to the long term budget trends that we 
face. Bob and I are in complete agreement on that.
    But I do think it is important to realize, of course, every 
dollar spent on defense, every dollar spent on anything else is 
always an opportunity cost. That dollar is not available for 
other purposes that it could be used for, and every dollar 
needs to be scrutinized. But we actually have seen a downward 
trend in defense spending.
    Mr. Bernstein. Can I make a quick comment on that?
    Mr. Obey. Just very briefly.
    Mr. Bernstein. Very brief, it picks up on something Alan 
just said. Basic economics reminds us that the opportunity cost 
of the conflict is not simply the hundreds of billions that we 
have sacrificed so far.
    We also have to consider the cost of foregoing the 
productive investments we might have made otherwise with those 
dollars. In my testimony, I outline a fairly detailed set of 
infrastructure investments, human capital investments that I 
believe would have strong offsetting effects to income 
inequality.
    So it is not simply the economic cost of war. It is the 
opportunity cost of not engaging in what I think are more 
productive investments.
    Mr. Obey. Mr. Rehberg.
    Mr. Rehberg. Thank you, Mr. Chairman.
    Mr. Greenstein, I would like to go back. I apologize for 
coming in and out, and I heard part of your testimony. I have 
looked through your testimony.
    I am trying to make a determination. Have you stated a 
percentage of gross domestic product that you think that 
discretionary spending ought to achieve?
    Mr. Greenstein. No, I hadn't in the testimony.
    Do I have a specific? I have not really done that. I could 
come up probably with some various areas that I would be happy 
to reduce funding on, but the changes regardless of which party 
was in control of actually getting them through would be near 
zero.
    So the level one need would depend in part on what one 
could do in some of those areas, but in particular what I don't 
think I would like to see is a further continuing decline in 
the percentage of GDP that goes to domestic discretionary 
programs. I think they are now a little over 3 percent of GDP.
    Mr. Rehberg. Philosophically, would you believe that as GDP 
increases it ought to be a percentage of that increase like an 
inflationary increase similar to what we do with most of the 
budgets or is that going too far?
    Mr. Greenstein. If I thought we were adequately meeting 
current needs in domestic discretionary, then I would recommend 
that they stay even with inflation and population growth which 
would be smaller than staying, lower than staying constant as a 
share of GDP.
    Mr. Rehberg. Objectively, how would you, under this theory 
then, ever in your mind determine that we are spending enough 
money?
    I would assume under your philosophy we are never spending 
enough.
    Mr. Greenstein. I wouldn't say never. I think there are 
particular areas--I have talked about some of them here today--
that I think we are under-funding. I think one has to make some 
hard choices.
    At a minimum, I would keep domestic discretionary constant 
as a share of GDP until we do a better job of meeting some of 
these key needs. Ideally, I would probably go up a little bit.
    But I do want to agree with Alan here and then bring it 
back into this context. If at some point we are able to make 
tough choices that involve, first and foremost, system-wide 
healthcare reform, this isn't just Medicare and Medicaid, 
system-wide reform that slows the rate of growth in healthcare 
costs, we make decisions that close the long term social 
security shortfall and--you and I would probably not agree on 
this--I think we are going to have to raise more revenues. I 
don't think you can do it all on the spending side.
    If we make the tough choices elsewhere, there would be room 
in the budget to do somewhat more. Is it one percentage more? I 
am not talking about a lot more as a share of GDP on the 
discretionary side. But the big decisions are the ones that 
have to be made on healthcare revenues and, to a lesser degree, 
Social Security.
    Mr. Rehberg. The problem with the hearing today--and I know 
that you had probably been given very specific not necessarily 
talking points but ideas to present to the Committee--is your 
brief discussion of mandatory or entitlement spending and how 
that is in fact going to be the big elephant in the room.
    I guess, philosophically then, would you agree that we 
should tie discretionary and non-discretionary Health and Human 
Services funding together as a percent of GDP, which according 
to my calculations is somewhere around 20 percent as opposed to 
the 3.7 percent number I have been hearing thrown around?
    Mr. Greenstein. To get to 20 percent, you would have to be 
including mandatory spending.
    Mr. Rehberg. That is what I am, yes, which you can't 
ignore. You can ignore for this hearing because probably your 
charge was to discuss that, but we can't ignore that any more 
than I would certainly.
    Mr. Obey. Would the gentleman yield on that?
    Mr. Rehberg. Yes, sir.
    Mr. Obey. Nobody has any instructions to ignore or include 
anything. We simply took note of the fact that we have no 
jurisdiction over mandatorys, and so while we may have opinions 
about it the operational question is what we do on the 
discretionary portion of the budget.
    Mr. Rehberg. And I didn't mean to suggest that the Chairman 
was doing that. It was the topic of the hearing is 
discretionary spending but if we are going to bring in defense 
spending and inefficiencies, which I happen to agree probably 
with the Chairman and the speakers that I think that defense 
and homeland security ought to be on the table as well for the 
waste, fraud and abuse. So we tend to agree on that.
    But if we are going to have a meaningful discussion about 
GDP and discretionary spending and percentages, while 
esoterically it is kind of fun to talk from an economic 
standpoint, but it is not very practical because it takes the 
human aspect of the Appropriations Committee out when we make a 
determination.
    I don't like it any better when members of my party say, 
well, we need to set defense spending at 4 percent of GDP and 
that is what our spending is going to be. I don't find that to 
be any more relevant to human needs and how we are going to 
spend our Federal dollars.
    Let me ask for a point of discussion of the four gentlemen 
if I still have the time.
    Mr. Obey. Thirty seconds.
    Mr. Rehberg. Then I will wait for another round
    Mr. Obey. Go ahead and ask. You have 30 seconds.
    Mr. Rehberg. No. It will take too long. I don't mind if you 
go ahead. I don't mind waiting.
    Mr. Obey. Mr. Kennedy.
    Mr. Kennedy. Thank you, Mr. Chairman.
    Could you all comment on the real impact of what you see 
the sub-prime lending crisis having on the economy and in the 
ongoing years and the underestimation of that in terms of Wall 
Street even today?
    Even after the impact that we already know it has had, how 
much do you think it still has been underestimated and to what 
extent regulatory-wise in Government the processes in terms of 
transfer of wealth?
    We talk a lot about taxes and regulation and what it does 
to stimulate growth. Can you put in the context of the last 
several years about how people's primary wealth is in their 
home and yet for the middle class their home values are now, 
because of this crisis of the fall of real estate, really 
stagnant and because of this regulatory relaxation that allowed 
people to speculate so freely and widely that we now have the 
very wealthy be able to have such a windfall, and yet the 
middle class are struggling to keep their heads above water, if 
you could?
    Mr. Meyerson. Let me address that in a couple of ways, 
Congressman.
    I think a lot of what is behind the sub-prime housing 
crisis gets us back to one of the larger topics, not that that 
isn't a huge topic but one of the larger topics of the day 
which is the relative falling behind and relative stagnation of 
median American incomes.
    Jared, help me out here. You said that since around 1980 
the middle quintile's income had increased, what was it, 26 
percent? Was that the figure?
    Mr. Bernstein. Yes.
    Mr. Meyerson. Well, let's compare that to the relative 
increase in housing costs or medical care or college since 1980 
which is way higher than 26 percent.
    There was actually an op-ed column Monday in the Washington 
Post, and I will merely say one should not believe everything 
one reads on the op-ed page of the Washington Post, speaking as 
a Washington Post op-ed writer, by Michael Hill who is not a 
columnist but a house builder executive. He is a home builder.
    It pointed out that 40 years ago the median price of a 
house in the United States was about twice the median household 
annual income. Twenty years ago, it was about three times 
higher. In the past 10 years, it is about 4 times higher. In 
most metropolitan areas, the gap is a lot wider than that.
    And so, in a broad sense, Americans have been keeping up by 
going into greater debt and, obviously, we have seen in the 
case of many Americans by taking out mortgages which really 
weren't all that great an idea to begin with.
    So I think when we talk, as we have earlier today, about 
median incomes of Americans and whether they are rising in 
compared to what. They are not rising compared to some of the 
fundamental costs that Americans need to spend on housing, 
medicine, higher ed, et cetera.
    Then on the regulatory front, I think it is really clear 
across the board that Wall Street as a metaphor and as a 
reality has created all kinds of financial which, as we found 
out over the last six months, they themselves don't understand 
the full implications of at times, that have created pockets of 
risk that have gone largely undetected.
    From my point of view, and I am sure our economists 
witnesses can get into this in greater detail, but from my 
point of view, we clearly need a financial system that is more 
transparent to borrowers, to lenders, to some of the banks that 
created them in order to reestablish a confidence in our 
financial system, which confidence, by the way, is not shared 
by many members of the financial system because that has been 
the whole point of pumping liquidity into our banks. Our banks, 
nobody knows what's on anybody else's balance sheets these 
days, and they have some questions as to what is on their own 
balance sheets.
    Mr. Kennedy. Right, right.
    Mr. Meyerson. That is a pretty dangerous situation.
    Mr. Kennedy. Can I ask?
    Mr. Obey. If you can take 20 seconds because the 
gentleman's time is expired.
    Mr. Kennedy. If I could, the mechanisms that you were 
talking about, Dr. Bernstein, about helping to grow the middle 
class. We have the tax system that is all designed to help 
those with wealth save, but it is not designed to help those 
who need to save, save, because they don't have any wealth to 
save. So can you comment on the mechanisms to help do that?
    The British have the baby bond program where when you are 
born, the Government allows you to have a $500 setaside and 
then it is matched on a sliding scale much like the reverse 
earned income tax credit. Then it is rolled into, basically, a 
401(k). When you are 18, you can turn that over for a college 
education or for a savings account for healthcare and the like.
    Do you think those kinds of programs that are designed and 
an automatic checkoff so that you don't have voluntary 
checkoff? Could you comment on that?
    Mr. Obey. Could I ask you to be very, very brief because 
the gentleman's time is expired?
    Mr. Bernstein. Okay, I will try to be very, very brief.
    The automatic checkoff is an excellent idea. That would be 
a simple change that would help increase precisely those kinds 
of savings.
    The idea of some sort of a demi-grant or a bond for middle 
class or low income people or in the case of a demi-grant for 
everyone, it has been discussed and perhaps could be helpful 
too.
    But I think the biggest challenge facing middle income 
families trying to save is the fact that the market basket of 
goods that they want to and aspire to consume, what we might 
sort of think of as the American dream package of the middle 
class, the idea that you could buy a reliable, decent home in a 
safe neighborhood and have an income from the labor market that 
enables you to pay for that package while saving for college 
tuition and paying for healthcare.
    That is where the problem is and that is where I think 
middle income families have been dis-saving and borrowing and 
becoming excessively leveraged and now are facing the costs 
they are in and going through a period of probably great de-
leveraging. Probably we will see less savings as folks try to 
pay down their debt.
    Mr. Obey. Thank you.
    Next is Dr. Weldon, but let me simply say I am somewhat 
concerned about his medical abilities because there are two 
people on this Subcommittee who seem to have a bug, a 
retirement bug with Dr. Weldon and Mr. Peterson and Mr. Regula, 
three. My God, four in a row. What did we do?
    Mr. Peterson. We are moving up. [Laughter.]
    Mr. Peterson. We don't want to be stuck with him.
    Mr. Obey. I would think that the good doctor could find a 
way to stop this epidemic. I don't know what is going on here.
    Mr. Weldon. Yes, I think one of the things that could quell 
the epidemic is if, well, I don't want to go there.
    Mr. Peterson. We are not going to buy.
    Mr. Weldon. Let me just thank the Chairman for this 
hearing. I wish I had been able to stay for all of it. I think 
this is a very interesting topic, and certainly you have a very 
interesting panel here.
    I would have stayed and listened to everybody, but it seems 
that ever since I announced my retirement I am busier than I 
ever was. Hopefully, that will begin to slow down.
    The question I had I was going to direct it to Dr. Viard. 
You go and stay at a hotel. Over the last 10 years, it is 
common for people to say were it not for all the illegal aliens 
working at this hotel the room rate would be higher, and you 
hear people say that at restaurants. Certainly on a 
construction site, construction costs would be higher.
    One of the most dramatic examples of this phenomenon of 
illegal immigration depressing wages in the lowest strata of 
our workforce I saw in a news report of a Swift's meat packing 
plant. I think it was somewhere in the Carolinas. Immigration 
came in and discovered about 80 percent of the employees there 
were not legal and shut the plant down.
    The interesting part of the story is they reopened two 
weeks later, fully staffed up, suggesting that these claims 
that illegal aliens are doing what Americans don't want to do 
is not really true. But, lo and behold, they have to offer 
higher wages for the workers that were there.
    Interestingly, I think a very high percentage of them were 
African Americans, suggesting that this illegal immigration 
issue is most acutely affecting, at least in some areas, the 
African American community in terms of their jobs and their 
wages.
    Now I know this is a complicated issue because I guess 
people in the second and third and fourth quintile are able to 
stay in hotels at a lower cost and do an expansion on their 
property at a lower cost, but I don't think this has been 
commented on, the impact that illegal immigration has.
    I knew Mr. Meyerson was commenting, and I caught a little 
of your concerns about this gap and how much of this ever 
widening gap in wages is illegal immigration playing a role in 
this. If we do more as a government to try to stem this, is 
that going to have a positive effect on the people that I think 
we are most concerned about in this hearing, the people who are 
struggling to make ends meet and afford benefits and things 
like that?
    Mr. Viard. Well, this is certainly an important issue. I am 
not an expert on immigration, but I can try to summarize what I 
understand from the literature that has looked at the economic 
effects of illegal immigration.
    I think that you are right, Mr. Congressman, to pinpoint 
the impact at the lower wage levels because the evidence that 
economists have gathered demonstrates, I think, that illegal 
immigration has not had a depressing effect on wages throughout 
the income distribution but that there probably is some 
depressing effect at the bottom of the income distribution.
    Economists expect that if there is an increase in the 
supply of labor, whether it is from illegal immigration, legal 
immigration, more people in the United States deciding to work, 
anything, that it will tend to depress the wages of those who 
are the closest substitutes for those workers but that there 
are economic gains for other people in the economy who could 
take advantage of those services more cheaply.
    Some illegal immigrants probably are performing work that 
would not be done by Americans, and so in some cases there may 
not be a depressing impact on anyone's wages. But, in other 
cases, I think there is no doubt that wages in certain 
occupations and some of the ones you mentioned, Mr. 
Congressman, are depressed to some extent by the presence of 
illegal immigrants.
    Obviously, that having been said, it remains an open 
question exactly what policy should or should not be adopted to 
address the situation of illegal immigration.
    Mr. Meyerson. If I could just add to that for one moment, 
you are absolutely right that there are particularly small 
sectors and maybe not so small sectors of the American economy 
where this kind of replacement has gone on, but in some of them 
what determines wage level actually is rate of unionization.
    If you look at what determines, since you used the example 
of hotels, wage levels in hotels, there are, and I can assure 
you this is maybe the one area of economics where I may 
actually have more data than the three distinguished economists 
on my left. Hotel contracts essentially vary from city to city. 
What the person who makes the bed in your room makes depends 
really on the percentage of hotels that are unionized.
    There are hotel locals in the United States, hotel 
workforces in the United States that are very, very heavily 
immigrant and, in some cases, I bet you fairly highly 
undocumented immigrants, people who are not here with 
documentation, where there may be a relatively decent level of 
wage anyway simply because of the rate of unionization in that 
particular city.
    Mr. Obey. The gentleman's time is expired.
    Mr. Weldon. Thank you, Mr. Chairman. I thank the witnesses.
    Mr. Obey. Mr. Simpson.
    Mr. Simpson. Thanks, Mr. Chairman. Before you start timing 
me, I want you to know that today it speaks of the two-year 
budget, Mr. Chairman.
    Mr. Chairman, Mr. Domenici says today we are going to go to 
a two-year budget cycle. I want you to know. He says that this 
year could be different since more members are complaining 
about the increasing difficulty in pushing annual spending 
bills through both chambers.
    Mr. Obey. I would be more interested in Mr. Domenici's 
opinion in the appropriations process if, with his long 
experience on the Budget Committee, he had been able to get a 
budget resolution through in two of the last three years.
    Mr. Simpson. I agree with you on that.
    Anyway, I appreciate the comments here today in this 
hearing, and I agree with the comments that have been made 
about education and the focus that has been placed on education 
and the barrier that has to mobility and so forth.
    I don't think we have done an adequate job in education in 
this Country over the last 20 years. We need to do a much 
better job, and we fail to invest in that at our own peril, 
quite frankly. That is for all people. There are different ways 
of doing that, whether it is two-year schools, whether it is 
community colleges, whether it is vocational education and 
other types of things that need to be done.
    One thing I have always been interested in is we always 
seem to measure an education system by how many people go to 
college. I don't know that everybody has to go to college, but 
we do have to be trained for our next job.
    The average, what is it? The average high school graduate 
today is going to be retrained for a completely new job seven 
times in his lifetime. If we don't have the training available 
for that, they are not going to have the ability to move within 
this mobility scale that we are talking about. They won't have 
the mobility to be able to move from one quintile to another, 
to enrich themselves.
    What other factors are there that contribute to the loss of 
being able to move? Certainly, education is an important one, 
but are there other factors?
    Mr. Bernstein. Yes, there are a set of factors that, and 
each one of them explains a small part of the change. Economic 
research has not found a silver bullet that explains 51 
percent.
    But the other factors have to do with the loss of higher 
paying jobs for non-college-educated workers particularly in 
the manufacturing sector. That has contributed probably 15 to 
20 percent of the increase in wage inequality.
    Mr. Simpson. Have those been replaced with high tech jobs?
    Mr. Bernstein. To the extent that those have been replaced 
with high tech jobs, those haven't gone to the non-college-
educated workers who have been displaced from manufacturing. In 
that sense, technology itself is implicated in higher levels of 
inequality. I am not saying it is a bad thing. In fact, if 
anything, it speaks to your point that we need to train workers 
for the types of jobs we are creating.
    But it is important to recognize something that was 
mentioned earlier, that the quality of jobs that we are 
creating is high at the top and pretty low at the middle and 
the bottom. If you actually look at the types of jobs that we 
are projected to create over the next decade or so, you will 
see home health aides. You will see security.
    These are of the 10 occupations adding the most jobs over 
the next 10 years. About six or seven are demonstrably low 
skill jobs. They are home health aides. They are security 
guards. They are cashiers, folks in retail. It is the quality 
of those jobs that is hurting.
    When a worker is displaced from a high value-added, 
unionized manufacturing job and ends up in the lower end of the 
service sector, they take a big hit and that is part of the 
inequality problem.
    Mr. Simpson. Then if you talk about inequality in incomes, 
you assume that income is related to productivity somehow. You 
assume that there is some relationship.
    Mr. Bernstein. Not as much as we should.
    Mr. Simpson. Is there a productivity disparity that is 
growing within the Country?
    Mr. Bernstein. A huge disparity, it is a real focus of my 
written testimony. I have a table in there that shows for about 
25 years the median income--you could look at the wage of the 
typical worker as well--was rising in step with productivity. 
They both grew at around close to 3 percent per year. They 
doubled between the mid-1940s and the mid-1970s.
    Since then, productivity has accelerated. By the way, over 
the last 10 years, it has accelerated again. Yet, the typical 
earnings and the median family income have been flat.
    Since 2000, productivity is up 19 percent. That is a real 
success story about the American economy. But the median wage 
is flat, and the median family income is flat, and the income 
of working age families is down about 4 percent. So there is a 
big productivity gap, and it is one of the reasons why 
inequality is so problematic right now.
    Mr. Simpson. You know this goes back to one of the other 
things that Harold mentioned. You said in your testimony that 
Americans now believe their children will have a tougher time 
than they had. I hear that all the time, and I think that is 
probably true.
    But I think there is another factor that contributes to 
that. One is that 30 or 40 years ago when my parents were in 
the workforce and so forth, jobs existed such that you 
graduated from high school and you went to work at a factory 
and you could pretty much be assured you were going to retire 
from that factory if you wanted to.
    Those jobs aren't there anymore, and we are animals that 
like security. We like to know the sun is going to come up 
tomorrow like it did today. Those types of jobs aren't there 
anymore.
    I think there is a great deal of insecurity in the world 
where people are going to have to be retrained for completely 
new jobs. Seven times in their lifetime is what I hear, and 
that creates uncertainty that is going to put enormous strains 
on all of our institutions. Governmental, religious, social 
institutions are going to be strained by this, I think.
    Mr. Meyerson. And, it is also a regional concern. When 
there is a dominant manufacturing industry in a particular 
place such as the State of Michigan, it doesn't follow that the 
new jobs for which people need to be retrained are going to be 
popping up in the State of Michigan.
    So, in addition to the economic instability, there is 
really a kind of the economy moves out on you. It moves out on 
you sometimes geographically as well as in your budget, and 
that is a big problem as well.
    Mr. Simpson. That is what trade does, quite frankly. We may 
get more jobs from trade, but they are not going to be jobs 
that we lost to trade. They are going to be in other areas.
    Mr. Bernstein. Well, that is why many of us argue that it 
would be very useful to take the benefits from our expanded 
trading regime from globalization and plow them into improving 
the quality of precisely the types of jobs we are creating. 
These jobs lack pension coverage. They lack health coverage. 
They often lack the kind of career training you are suggesting.
    I have suggested in my arguments for offsetting these 
inequality trends, investing in precisely those areas of these 
jobs.
    Mr. Kennedy [presiding]. Mr. Peterson.
    Mr. Peterson. Thank you very much.
    I am going to try to be brief here, but I wanted to lay out 
my thought processes.
    I have been in government 39 years: 8 at the local, 19 at 
the State and my 12th year here. When I first got in 
government, it was an urban-driven government at the State 
level, but the urban areas were declining. The wealth was 
starting to move out. The successful wanted to live in the 
suburbs.
    As I have been in government, we have had another shift. 
The merging of banks, the merging of corporations, the merging 
of utilities have moved the wealth to the suburbs and taken it 
out of the rural.
    So opportunity in the rural continues to decline. Farming 
is on the decline. Rural was sort of a fertile bed for 
reasonably priced manufacturing, lots of manufacturing plants 
out there.
    So I see us developing two different economies in America, 
and the rural economy doesn't really have any swing. They don't 
have much to say. At the same time, we have the globalization 
of the economy, and that is over. That has happened.
    Now, in the beginning, we were trading pretty well. We had 
more winners than losers. Now I think we have more losers than 
winners, and you sort of all stated that.
    But, currently, what is driving the jobs out of this 
Country is the inability of American manufacturing, processing, 
whatever they are doing. In a global economy, energy costs are 
number one. We have the highest energy costs in the world.
    This Congress isn't going to deal with that. We have 
ignored it. It never was a problem until the last eight years, 
but I can guarantee you this Congress is not going to deal with 
available, affordable energy for America, so that cost driver.
    We are putting $181 billion into the economy that energy 
took out. That is why Americans don't have money to spend. To 
heat your home, to drive your car takes a bigger part of your 
income, so you don't have any money to spend. I was a retailer 
all my life, so I understand people spending money.
    So we are going to give $181 billion to Americans so they 
can spend it, and that will help, but it won't solve any 
problems because if we don't deal with the cost factor.
    This Country has always been the big dog. For the first 
time in the history of this Country, we are not the only big 
dog anymore. We are just one of the dogs, and we are going to 
have a lot of countries nipping at our heels. I mean there are 
developing nations everywhere, not just China, India, South 
America, Malaysia. Developing countries are going to compete 
with us.
    If we don't have a competitive model for people to process, 
manufacture and do things, we won't have jobs for working 
people. That is my view. We have to learn to compete in the 
world marketplace we are in.
    I would like you to respond to that. Do you agree with that 
or disagree with that?
    Mr. Bernstein. I agree with a lot of what you said.
    I guess you probably know better than I. I am maybe less 
skeptical than you in that this body won't address the energy 
challenges we face, but you are sitting there and I am sitting 
here. That is discouraging to hear because it is obviously a 
critical point.
    I think that the issue of America's competitiveness, 
bringing it down to the level that we are talking about today 
because you are raising many big global issues, should be 
discussed in the current context in the following way: We are 
facing a downturn, and I agree with you that a stimulus package 
that is appropriately crafted can and should help. The package 
that we discussed, by pumping a percent or so of GDP in the 
economy will help, but it won't solve the fundamental problems.
    Now one of the problems that we have, that I articulate in 
great detail, in some detail in my written testimony, basing it 
off the work of economists who have looked into this quite 
carefully, is that in order for our Nation to compete there are 
investments that the private sector won't make, public sector 
investments in infrastructure that really do make a big 
difference in the Nation's productivity.
    This has to do with our infrastructure in transportation, 
roads, bridges, water, sewage systems, ideas that his Committee 
has talked about and are fundamental.
    Mr. Peterson. Because we don't fund those.
    Mr. Bernstein. No, no, but I know that the Chairman has 
raised interest in these issues.
    I am speaking broadly. For the Congress to investigate the 
productivity-enhancing effects of a new program that invests in 
productive infrastructure of the type that I have discussed, I 
think would help a great deal in offsetting the letter D grade 
that the American Society of Civil Engineers has given this 
infrastructure.
    We have the capacity to compete globally, but that capacity 
is diminished if our own public infrastructure is in deficit, 
and so I would argue that that is part of the answer as well as 
the human capital investments that we have spoken of here. I 
think we all agree that the quality of our workforce is a 
critical component to solving the problems you raise.
    Mr. Peterson. Your question of the energy issue----
    Mr. Obey. [presiding.] Your time was expired.
    Mr. Peterson. Whew, that was quick.
    Mr. Kennedy. I would like to give you a little bit more, 
but we really have to stick to the clock.
    Mr. Peterson. Oh, I didn't realize. I will be real quick.
    On the energy issue, less than two decades ago, we were 
self-sufficient. We are now 66 percent dependent on foreign 
oil, and that is increasing 2 percent a year every year I have 
been there. There is nothing on the horizon being considered by 
this body or the Senate that is going to change that.
    Renewables are wonderful. I am for them all, but their 
growth is minuscule. Until we have real energy to bring prices 
down, until the renewables play a bigger role, we are turning 
our back on them.
    The one last issue I wanted to share with you is the other 
thing that I have seen.
    Mr. Obey. I am going to have to ask you to take 20 seconds 
because we have to get to vote, and I haven't had any questions 
yet.
    Mr. Peterson. Oh, I am sorry.
    Technical training, it was mentioned by Mr. Regula. We 
exceed in academic training that trains the people who run the 
companies. They are running companies that are doing business 
all over the world. But to train workers in this America, I 
think we fail abysmally, and my State is even worse than the 
Country, Pennsylvania. We don't even have a community college 
system available to most Pennsylvanians.
    Mr. Bernstein. Agreed.
    Mr. Obey. I am sorry we have to bring this to a close. I am 
told we are probably going to have, what--four or five votes--
four votes, which means if we do that we would keep you waiting 
here until 1:30. I don't want to do that. So I am going to 
forego my questions and simply thank all four of you for 
appearing.
    We can debate what the extent of the gap is but, Mr. 
Bernstein, you said that we had seen about $400 billion 
transferred up the income scale from the bottom 90 percent to 
the top 10 percent over what period of time?
    Mr. Bernstein. It is only over 2003 to 2005.
    Mr. Obey. I would like to have that race car if I could.
    It just seems to me that also, Mr. Viard, that when I look 
at your chart on Figure 1, it certainly does show that the 
lowest, the second lowest and middle quintile have edged up 
somewhat in terms of income gain. But if you complete the 
picture with the top brackets, that line goes off the graph. 
The top 1 percent at 228 percent as opposed to less than 1 
percent a year for the middle.
    The only reason I emphasize that is to make the point that 
we will be making decisions on appropriations that will, in 
very modest degrees, impact the families who are experiencing 
this very, very, very slow growth in their own incomes. It 
would be kind of nice if we focused our efforts on those 
elements of the bill before us that actually focus on folks who 
need the help the most.
    Thanks very much for coming. I appreciate it.
                                       Thursday, February 14, 2008.

OPPORTUNITIES LOST AND COSTS TO SOCIETY: THE SOCIAL AND ECONOMIC BURDEN 
                  OF DISEASE, INJURIES, AND DISABILITY

                               WITNESSES

KENNETH E. THORPE, PH.D., ROBERT W. WOODRUFF PROFESSOR, CHAIR OF THE 
    DEPARTMENT OF HEALTH POLICY & MANAGEMENT, ROLLINS SCHOOL OF PUBLIC 
    HEALTH OF EMORY UNIVERSITY, EXECUTIVE DIRECTOR OF THE PARTNERSHIP 
    TO FIGHT CHRONIC DISEASE
JAMES N. WEINSTEIN, M.D., CHAIRMAN, DEPARTMENT OF ORTHOPAEDIC SURGERY, 
    DARTMOUTH-HITCHCOCK MEDICAL CENTER, AND DIRECTOR OF DARTMOUTH 
    INSTITUTE FOR HEALTH POLICY AND CLINICAL PRACTICE
J. PAUL LEIGH, PH.D., PROFESSOR OF HEALTH ECONOMICS, CENTER FOR 
    HEALTHCARE POLICY AND RESEARCH, DEPARTMENT OF PUBLIC HEALTH, 
    UNIVERSITY OF CALIFORNIA, DAVIS, MEDICAL SCHOOL
    Mr. Obey. Well, good morning, or good afternoon, or 
whatever it is. Let me apologize ahead of time. We have a mini-
filibuster going on on the Floor, one that is so tasteless that 
they even called a roll call in the middle of a memorial 
service for Congressman Lantos. Outside of that, the House has 
covered itself with grace today.
    But let me simply explain why we are here. Yesterday we had 
a hearing in which we discussed the economic context in which 
the choices that this Subcommittee makes on the various 
programs under our jurisdiction will be made, and we talked 
about who is getting what in the economy and we talked 
primarily, I guess, about the gap between the most well-off and 
others in our society. Today we are going to be focusing on 
health care.
    It has been my experience through the years that whenever 
we discuss Federal budgets, whenever we discuss appropriations, 
that people are very good at describing the cost of doing 
something, but they are not very good at describing the cost of 
doing nothing. Virtually every program with which we deal in 
this Subcommittee has a purpose. The purpose is to attack some 
problem.
    For instance, if we spend $43,000,000 on Lou Gehrig's 
Disease research around the Country, even though we do not 
specifically appropriate disease by disease, but if the effect 
of what happens is we spend about $43,000,000 on Lou Gehrig's 
Disease, that is a visible number to everybody. But we do not 
get a chance to compare it to the cost to this society of that 
disease itself, of the hospitalization cost, the lost income 
cost, all the other costs, not to mention the human cost.
    So today I would simply like to have our witnesses describe 
essentially what the costs are of problems that we are trying 
to attack through the health care budget, at least the portion 
of the health care budget that is appropriated and comes 
through this Subcommittee. So we have three witnesses who will 
present testimony on trends and health status of the U.S. 
population, the economic costs created by those trends, the 
health benefits and economic value of Federal investments in 
research and public health measures to help counter those 
trends.
    Our first witness is Dr. Kenneth Thorpe, Professor at the 
Rollins School of Public Health at Emory. He is Executive 
Director of the Partnership to Fight Chronic Disease. He has 
written broadly on health care financing and chronic disease 
issues. Dr. Thorpe previously served as the Deputy Secretary 
for Health Policy at HHS.
    Our second witness is Dr. James Weinstein, Chairman of the 
Department of Orthopaedic Surgery at Dartmouth-Hitchcock 
Medical Center and Director of the Institute for Health Policy 
and Clinical Practice. In addition to being a spine surgeon, 
Dr. Weinstein is also a highly regarded researcher and leader 
in comparative medical studies.
    My staff says that I should try to gavel down any witness 
who tries to get some free medical advice from you today.
    Our third witness is Dr. J. Paul Leigh, Professor of Health 
Economics at the University of California, Davis, Medical 
School. I want to take particular notice of the fact that he 
received a PhD in economics from a little known university 
called Wisconsin. He is primary author of over 140 science 
papers, as well as two books, including ``Costs of Occupational 
Injuries and Illnesses,'' and will address the issue of cost to 
society of workplace injuries and illnesses.
    Before I call on the witnesses, let me simply call on Mr. 
Walsh to make whatever comments he has.
    Mr. Walsh. Thank you, Mr. Chairman.
    Mr. Obey. And then we will see how much we can get done 
before the bells ring.
    Mr. Walsh. Thank you, Mr. Chairman.
    I would like to welcome our witnesses also. Thank you for 
coming today. I know you are all busy. This will be helpful to 
us.
    I said yesterday, at our hearing about the economy, that I 
believe that not only is it critical to our economic well-being 
to safeguard the health of Americans, but also it is the right 
thing to do. I know there are philosophical differences with 
respect to the details on this issue, at least with respect to 
health insurance. I hope, however, that there is widespread 
agreement on the need to prevent disease.
    I firmly believe in the adage that an ounce of prevention 
is worth a pound of cure; that it is critical to extend 
productive years as long as possible. To the extent we cannot 
prevent disease, we must continue to find new treatments. I 
think a large part of successful prevention programs relies on 
personal responsibility, making smart choices throughout one's 
life. Clearly, the medical community and government can and do 
play a role in making sure that people have the information 
they need to make those smart choices. But, at the end of the 
day, choosing behaviors that reduce the burden of disease is up 
to the individual.
    Of course, there are diseases that cannot be prevented, or 
circumstances where sickness will occur despite a healthy 
lifestyle. In these cases, clearly, we must rely on modern 
medicine and the incredible advances we have made through 
research conducted in the private sector, as well as supported 
by the government. I would like to get into that a little more 
in my questions, particularly as it relates to translating 
basic research into therapies that are widely unavailable.
    Unfortunately, I am going to have to step out briefly due 
to a commitment. I am going to address a conference on autism 
in the Canon Building, and I will be right back, if the votes 
do not intervene. Otherwise, I will be back right after the 
votes.
    Thank you all.
    Mr. Obey. All right.
    Thank you, gentlemen. Why do not you each go ahead for 
about 10 minutes or so, summarize your remarks. We will put the 
full text of you remarks in the record. Why do not we begin 
with you, Dr. Thorpe?
    Mr. Thorpe. Thank you, Mr. Chairman, Mr. Walsh, members of 
the Subcommittee. Thanks for the opportunity to testify today 
on the economic and social consequences of what I believe are 
under-investments in public health programs, particularly those 
targeting chronic disease.
    Among the many serious challenges our Nation faces, few 
have more grave long-term consequences than under-investment in 
population-based prevention and clinical management, including 
research and evaluation into the effectiveness of health care, 
largely because the programs--as the Chair just mentioned--that 
you deal with in this Committee have broader implications for 
the health care system than just the CDC or AHRQ or some of the 
other organizations and agencies that you look at; they 
directly affect rates of morbidity, mortality, productivity in 
the United States economy, and overall health care spending.
    I wanted to make just a couple of key points along those 
lines. First is that we know that chronic illnesses account for 
most of the mortality in this Country. Nearly 70 percent of 
deaths are linked directly to chronic illness. Two, we know we 
have an obesity issue. Over the last 25 years, the rate of 
obesity has doubled in this Country. Now, over 34 percent of 
adults are clinically obese, and we know that obesity is 
directly linked with a variety of chronic health care 
conditions.
    Chronic diseases overall account for nearly 75 percent of 
what we spend on health care, so virtually the entire book of 
business in the health care system is linked in one way or 
another to patients that have one or more chronic health care 
conditions. I think, most importantly, if you look at the 
Medicare program, over 95 percent of spending in Medicare is 
linked to chronically ill patients. They own that population. 
The same is true with Medicaid, that has a very high share of 
its overall spending linked to chronic disease.
    If you look at the growth in spending, about two-thirds of 
the growth in spending in the United States over the last 20 
years is linked to rising rates of treated prevalence of 
disease, largely chronic illnesses.
    Another statistic that I think is important as well, I 
mentioned that the rate of obesity in this Country had doubled 
since 1985. That doubling of obesity by itself accounts for 
nearly 30 percent of the growth in health care spending, both 
due to a rise in the incidence of disease, like diabetes, but 
also due to the fact that we are more intensively treating 
obese patients and obese adults today, something that we 
probably need to look at a little bit more clearly in terms of 
are they cost-effective in terms of the interventions.
    Chronic disease and its impact on health care goes beyond 
just medical care costs; it has an impact on productivity as 
well. Studies done by the Milken Institute out in California 
have shown that for every dollar we spend on the medical side 
linked to chronic illness, that we spend another $3.50 in lost 
productivity to our American companies. So we can see this 
overarching issue of chronic disease and obesity has a major 
impact on spending trends, the affordability of health care in 
the Medicare program and in the private insurance programs in 
this Country.
    The data also shows that we are spending, obviously, a lot 
of money, but we are not really spending it very wisely. We 
have a sick care illness still in this Country, not really a 
health care system. A health care system would do a better job 
of integrating prevention, self-management, workplace health 
promotion programs, along with more traditional health 
insurance in ways that we do not very effectively do today.
    The good news is that there is a lot of room for 
improvement. We know from data the Centers for Disease Control 
and Prevention have pulled together that about 80 percent of 
heart disease, strokes, diabetes, and about 40 percent of 
incident cases of cancer are potentially preventable if we just 
did three simple things--some of them are not easy to do: stop 
smoking, have a better diet, and get in shape. And, as I will 
talk in a minute, it basically does come down to individual 
responsibility, but we have a whole host of settings and 
programs that I think could be effective in working with 
patients and individuals--in the community, in the schools, in 
the workplace--that would help facilitate moving in this 
direction of stopping smoking and getting in better health.
    But to make these changes--and I think this is the point 
probably most germane to your consideration--is that we need to 
know what works and what does not. The best health and health 
policy decisions I think are based on data and scientific 
evidence. Health services research, the field that I work in, 
provides the data and evidence needed to make decisions and 
develop policies that optimize health care financing, the 
access to the delivery system and health care outcomes. I think 
it provides practitioners and policy-makers the tools and 
information to make health care in this Country more 
affordable, more efficient, safer, more effective, more 
equitable, more accessible, and more patient-centered.
    I think the Federal Government needs to be a leader in this 
endeavor. That does not mean they do it by themselves; the 
private sector makes a substantial investment through their own 
research in trying to figure these problems out. But if you 
take a quick look at recent year budgets, I think it shows that 
we clearly are under-investing in some of these public health 
and health services research activities. If you go back a 
couple of years ago, 2006, and look at what was spent through 
the CDC on chronic disease prevention and control, they spent 
$6.27 for each one of the 133,000,000 Americans that have one 
or more chronic health care conditions. That same group of 
individuals spent an average of over $13,000 a year in health 
care costs. As I mentioned earlier in the testimony, 
collectively, this group of chronically ill patients accounts 
for 75 percent----
    Mr. Obey. Would you state those numbers again?
    Mr. Thorpe. Sure. If you look at the----
    Mr. Obey. Half the time, people do not hear them the first 
time.
    Mr. Thorpe. There are a lot of numbers, so sorry for the 
cornucopia of numbers here.
    CDC's spending on chronic disease prevention and control, 
they spent $6.27 for each of the 133,000,000 Americans that 
have one or more chronic health care conditions. And if you 
look at that same group of individuals, their average health 
care spending was over $13,000 a year.
    To look at it another way, we have been pulling together 
data with our professional organization, Academy Health, to try 
to figure out just what do we spend overall on health services 
research--not just at the CDC, but AHRQ and other places, NIH, 
and places that support health services research at the Federal 
Government level--and our best estimate is we spend about 
$1,500,000,000 a year on these types of investments in health 
services research to try to figure out ways to do a better job 
of managing chronic disease, preventing the rise in obesity, 
the real drivers of what is going on in our health care system.
    To put it in another perspective, if you look at what Booz 
Allen Hamilton, every year they have an annual report on 
investment by the top 1,000 firms globally, and what they found 
was that private sector health care research and development 
was nearly $100,000,000,000 in 2006, about 65 times as much as 
we spend federally on funding health services research in the 
United States.
    I think it is probably safe to say that virtually all of us 
are affected by common chronic diseases. I usually go into an 
audience and ask how many people they know or do they 
themselves personally have high blood pressure, diabetes, heart 
problems, co-morbid depression, elevated cholesterol, back 
problems, pulmonary disease. You can go down the list. It 
affects virtually everybody in the room; they either have it 
themselves or they know somebody that has it.
    My sense and my hope is that, as you look at this portfolio 
of spending initiatives, that we need better information on how 
to prevent the rise in chronic disease; how to prevent this 
persistent rise in obesity in the United States, ranging all 
the way from kids to adults; and how can we get better value in 
managing where the money is spent, which is on those patients 
with multiple chronic health care conditions.
    Today we do not do a good job, I think, in managing those 
patients. It is the key driver of what is going up in terms of 
health care spending, and my sense is--and this is particularly 
germane to Medicare--that all these entitlements that many of 
us are worried about, in terms of their overall share of the 
GDP that is projected 5, 10, 15, 20 years down the road, unless 
we get a handle on the basics in terms of pulling excess 
clinical dollars, more effective treatment protocols in 
managing chronically ill patients, preventing some of these 
things in the first place, it is going to be very difficult for 
us to get a handle on entitlement spending.
    I will leave you with just one more statistic, and I will 
close. If you look at the lifetime health care spending for a 
senior, 65 or 70 years old, who is normal weight, no co-morbid 
conditions--so does not have a chronic disease--compared to 
that same individual who is obese and has one disability or one 
chronic health care condition, over the entire lifetime of 
those patients, of those individuals, the normal weight 
individual would spend about 20 percent to 30 percent less over 
their lifetime than that same person who is obese and has 
multiple chronic health care conditions. So it does make a big 
difference. We just need the information base, the data, and 
the research in order to figure out how we can do this better.
    With that, I will close. I look forward to answering any 
questions you may have and, again, I would like to offer my 
thanks once again for your invitation in working with you in 
this Subcommittee's longstanding commitment to health and 
public health.
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    Mr. Obey. Thank you.
    Dr. Weinstein.
    It is a miracle we have not had a vote yet. [Laughter.]
    Dr. Weinstein. Happy Valentine's Day.
    Thank you for allowing us to be here today to speak to you; 
it is an honor. And thank you for your continued support for 
research to all the entities--NIH, AHRQ, and others.
    As you know, the health care system, by some estimates, has 
some $400,000,000,000 to $600,000,000,000 in waste. We could 
certainly do a lot more with that money in research and 
education of ourselves, our infrastructure for training young 
physicians--going to be a dying breed--and what I call a 
research recession. We, as a Nation, are talking about 
recession, but I worry about how our health care dollars and 
research dollars are spent that we may lose the best and the 
brightest, and the unintended consequences of that may be 
tremendous.
    As you mentioned, I am an orthopaedic surgeon and I have a 
unique career in that I am able to work in many domains in 
understanding health care delivery. Following in the footsteps 
of Dr. Jack Wennberg and Elliott Fisher and others, who look at 
variation in this Country and the kind of money that we spend 
in end-of-life situations, and the Medicare budget varies by 
such significant amounts that we, as a Country, think that we 
are spending probably 20 percent too much even in Medicare, 
which is about a $26,000,000,000 of monies that could be spent 
other ways.
    Knowing the idea that there is variation in being an 
orthopaedic surgeon, I sought to try to find some solutions: 
Having data to support the treatment that we are offering to 
patients trying to empower our patients who have been left out 
of the milieu of the decision-making about how health care is 
offered. If patients are given a choice, they tend to make 
appropriate decisions. Our study recently funded by the 
National Institutes of Health, NIOSH, and others demonstrates 
that for a common condition, back surgery--some of you may have 
back pain today, listening to me. But the fact is that 80 
percent of our population, at some time in their life, 
experience back pain. If we take that common condition and try 
to dissect all that is being done for it, understanding the 
lack of evidence for most of the things that are being done and 
the costs associated with that, why had not we done clinical 
trials to understand the effectiveness of various treatments? 
To me, that was a call for me to try to stand up and do 
something as a health services researcher and an orthopaedic 
surgeon who practices spine surgery.
    I was fortunate to receive a $15,000,000 grant to do the 
first-ever randomized trials in this Country about these 
conditions, again, affecting some 80 percent of our population. 
Given the results of our trial, it appears that patients do 
have a choice. Surgical intervention is not always the best 
option. And, for individuals, choice matters. People who now 
have data can make these kinds of decisions, as can breast 
cancer patients or cardiovascular patients. We know from 
studies in breast cancer that the treatment of lumpectomy 
versus mastectomy for a woman facing breast cancer ought to be 
given to the woman to decide, not because a physician decides 
that one treatment is best for that patient. If the outcomes 
are the same, who should decide?
    In cardiovascular disease, where we have all kinds of new 
treatments--whether it is drug-eluting stents, Bear stents, 
bypass surgery, or just drug therapy--if the treatment options 
are equal, who should make the decision about those choices? We 
believe in the concept of informed decision-making or informed 
choice. The doctrine of informed consent--which is 
traditionally what I do when I am consenting a patient for a 
surgery--I believe is out of date, arcane, and none of us--that 
doctrine is about assault--are trying to assault our patients. 
We are trying to help our patients. I would like to see the 
doctrine of informed choice.
    Given the information we have from SPORT, the trial we have 
been doing on back pain, what is the cost of not doing these 
kinds of studies? We know from people that potentially are 
going to suffer strokes that there was a procedure called ECIC 
bypass, which was done mostly by neurosurgeons. Until that 
procedure was subjected to a randomized trial, thousands of 
patients were having that procedure done. Once the randomized 
trial was published in the New England Journal, that procedure 
went away. The thousands of women who face bone marrow 
transplantation for breast cancer, only to find out in 
randomized trials that that was not an effective therapy. That 
is not the way this Country should move forward. As I said in 
my statement to the group, the enemy of the best is the good 
enough, and I think we have been doing barely good enough, and 
certainly not the best.
    If we make the kind of investments that we have made in 
SPORT, our back pain surgery trial, there is the opportunity to 
save billions of dollars. Imagine patients who have a choice 
who decide not to have surgery. In our study, that is 30 
percent to 38 percent. Imagine if we took the dollars saved 
from not doing those procedures and applied them to other 
things that actually worked for patients based on best 
evidence--diabetes, cholesterol-lowering drugs, hypertension 
treatment, routine eye examinations--that have the kind of 
evidence to support the kind of treatments that we do not even 
well enough in this Country, knowing that they work.
    Fusion surgery for spine care is one of the major 
procedures that is going up at alarming rates. I do that 
procedure; I am affecting myself by what I am saying here 
today--but believe we do not have the evidence to support that 
volume of surgical increase that is occurring in this Country 
and do not currently have the studies to support it in the way 
that it is being done. Patients do not have the informed choice 
about making those decisions today because we lack the evidence 
to inform our physicians who are offering their patients that 
kind of treatment.
    The issue of comparative effectiveness--brought up in the 
opening statement by the Chairman--is one that Gayle Walinski 
has brought forward as an idea that I think is very powerful. 
In our own studies for people who have faced hip fractures, 
there are many different types of treatment for hip fractures, 
meaning very different types of devices. We know that the 
change in practice in the United States has been almost 100-
fold, a crossing over of old technology to new technology that 
now costs approximately two and a half times more, with greater 
morbidity and greater mortality. Why are we using these new 
devices and new technologies without the data to support them?
    Who is going to make these decisions? I hope it is us, as 
researchers, working with clinicians like myself, working with 
you as Congress and our patients to get to the information to 
get to informed patient choice. We need to look at cost-
effectiveness and we need to be accountable for the things we 
are doing and the investments we are making. I know that NIH 
and other agencies are under the gun because of the doubling of 
the budget and where is the return on the investment. I suggest 
that SPORT is an example of a tremendous return on investment 
if we just listen to the results, implement the strategies 
around informed choice to help patients, change the rates of 
procedures where patients actually know the risk and benefits, 
and there is more money to be spent.
    Knowledge and evidence versus guesses and the good-enough 
is not good enough. Don Frederickson, who was Director of the 
NIH in 1975 to 1981, almost 30 years ago, said field trials--
and I assume he was referring to clinical trials--are 
indispensable. They will continue to be an ordeal, and having 
done them, they are very difficult. You face a lot of criticism 
and a lot of difficult issues with colleagues who want to do 
what they think is best for their patients, despite not having 
the data. Trials lack the glamour, they strain our resources 
and patients, and they protract the moment of truth to 
excruciating limits. Still, if, in major medical dilemmas like 
we face in many of the issues in health care today, the 
alternative is to pay the cost of the perpetual uncertainty, 
have we really any choice? And I would argue the answer is no. 
A resounding no to continue as we are doing without the 
evidence to support the treatments that we are offering for 
patients, for your families, for my families, for patients 
around the world.
    SPORT was a practical clinical trial. It shows that things 
can be done in clinical practice with working with physicians, 
not around physicians; working with patients, not around 
patients; talking to patients, not at patients; and we can gain 
the kind of outcomes and cost-effectiveness and a comparative 
effectiveness data that Gayle speaks so highly of. I believe 
there is a return on investment. I believe there is the 
opportunity to retain our brightest and best young clinicians 
and scientists that we may lose to other countries who are 
certainly willing to invest more today.
    We need to know the truth about what works and we need to 
share that with our communities. We need to alter the 
incentives that seem perverse in how physicians may be paid for 
doing more than for doing what is right. Right-sizing our 
system seems appropriate at this time. And as Elias Zerhouni 
says from NIH, in his four Ps--being predictive, personalize, 
preemptive, and participatory--I think for the kind of basic 
research that we are talking about in the translational 
research area, the kind of research I am talking about today 
with clinical trials deals with patients who have problems 
today. The future of genetics, genomics, proteomics is 
tremendous, but we have to have the continuum of both of these 
working together to help our patients today.
    I thank the Committee for your time and look forward to 
your questions.
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    Mr. Obey. Thank you very much.
    Dr. Leigh.
    Mr. Leigh. Thank you, Chairman Obey and members of the 
Committee for inviting me.
    Most Americans between the ages of 22 and 65 spend 50 
percent of their waking time at work. Every year, millions of 
Americans experience injuries, illnesses, and even deaths in 
the workplace. The cost of occupational injuries and illnesses 
is nearly as great as the cost of cancer, roughly the same as 
the cost of diabetes, and greater than the cost of Alzheimer's. 
This large size is sometimes underestimated since Federal 
Government statistics systematically under-count occupational 
injuries and virtually ignore occupational disease.
    Despite these large costs, Federal budgets for research and 
statistics on occupational safety and health are a fraction of 
those for cancer, diabetes, or Alzheimer's. In addition, most 
of these costs are not absorbed by the worker's compensation 
system; they are passed on to other private insurance carriers, 
to Medicare, to Medicaid, to Social Security disability 
insurance, and to individual injured workers and their 
families. Finally, a disproportionate number of Hispanic and 
low-income persons experience these injuries. But what is 
especially tragic about this toll is that so many of these 
occupational injuries and illnesses could have been prevented.
    The failure to address these costs has a number of broader 
economic consequences since an ounce of prevention is worth a 
pound of cure. First, greater attention to the prevention of 
occupational injuries would partially restrain the escalating 
costs of medical care, now 16 percent of gross domestic product 
and rising. Second, it would decrease the high cost of worker's 
compensation insurance, which now extracts about 
$88,000,000,000 annually from business and government. Third, 
greater prevention would improve productivity, since there 
would be fewer workers who become disabled.
    Let me now address some of these points a little more in 
detail.
    National costs. I use the Cost-of-Illness method that 
divides costs in direct and indirect categories. Direct 
categories include hospitals spending and physician spending; 
indirect refers to wage losses and household production losses.
    Let me first address diseases.
    The greatest contributors to occupational disease are 
cancer, circulatory disease, respiratory disease, and job-
related arthritis. The number of yearly job-related disease 
deaths sums to over 66,000. Total costs were $49,000,000,000. 
Worker's compensation was not likely to cover these fatal 
diseases since so many of them do not manifest themselves until 
retirement.
    In addition to the fatal diseases, there was job-related 
arthritis. Job-related arthritis most frequently develops after 
age 55 and can be attributed to an on-the-job injury. A typical 
case would involve a worker who seriously injures his or her 
knee on the job at age 40 and develops severe osteoarthritis in 
that knee at age 70. In some cases, the knee may have to be 
replaced, and knee replacement surgery is expensive. Medicare, 
not worker's compensation, would pay for that surgery.
    Turning now to injuries, I estimate over 5,800 injury 
deaths that cost about $5,000,000,000 annually. I estimate 
about 8,000,000 non-fatal injuries that cost about 
$110,000,000,000. If we sum these two, it comes to 
$115,000,000,000 each year.
    Combining diseases with injuries, I estimate a total of 
$163,000,000,000. About 67 percent of this--$109,000,000,000--
is for indirect costs, lost wages; about $55,000,000,000 is for 
direct costs.
    Now, there are other cost estimates, not just mine. Liberty 
Mutual is an insurance company, one of the largest worker's 
compensation insurance carriers in the Nation. They also 
estimate costs of occupational injuries and illnesses. They put 
the figure anywhere from $155,000,000,000 to $232,000,000,000.
    My estimates, as well as those of Liberty Mutual, indicate 
a higher percentage of indirect costs--that is, lost wages--as 
a ratio to total costs when compared to other diseases, such as 
heart disease and cancer. The reason for these high indirect 
costs is that over 70 percent of occupational costs are due to 
injuries, not illnesses; and injuries account for more harm to 
younger persons than they account for by diseases.
    Occupational injury deaths, for example, frequently occur 
among people that are in their twenties or in their thirties, 
whereas, cancer and heart disease deaths frequently occur among 
people in their seventies and eighties.
    Now, all deaths are losses, but deaths among younger 
persons result in many more years of economically productive 
life loss than deaths among older persons. Moreover, deaths 
among parents with young children are especially tragic. 
Neither my estimates nor those from Liberty Mutual attempt to 
account for the emotional cost to children of losing a parent.
    These occupational injury and illness costs are large when 
compared to those for other diseases. My costs were almost as 
large as the estimates for cancer, on a par with the cost for 
diabetes, and greater than Alzheimer's. The upper range of 
Liberty Mutual estimates far exceed those for cancer.
    These estimates invite comparisons to Federal Government 
funding. The National Institute for Occupational Safety and 
Health (NIOSH) has consistently received among the smallest 
amounts of funding of all the institutes. The 2006 budget for 
NIOSH was $254,000,000. This compares to the National Cancer 
Institute, with 19 times the NIOSH budget; National Institute 
for Diabetes, Digestive and Kidney Disorders, 7 times the NIOSH 
budget.
    I am not arguing for a chance for any money--I think all of 
them should be increased--I am just providing a comparison.
    The Bureau of Labor Statistics under-count and the disease 
gap. A number of studies indicate that the Bureau of Labor 
Statistics may miss from 20 percent to 70 percent of all 
injuries and illnesses. There are many causes for this 
omission, but let me mention one: outsourcing to small firms 
with contingent workers.
    In the past 20 years, the American economy has seen greater 
reliance on big firms outsourcing to small firms who hire 
contingent workers. We all know that small firms, especially 
those with contingent workers, are less likely to report 
injuries to OSHA and BLS. But the greatest gap lies with 
measuring fatal occupational disease. Less than 5 percent of 
occupational disease is recorded in Federal statistics.
    Regarding worker's compensation. It pays about 
$55,000,000,000 in medical care and lost wages per year. A 
comparison to my estimate suggests that 66 percent of these 
costs--or about $108,000,000,000--is not covered by worker's 
comp. Well, who pays when worker's compensation does not pay? 
The short answer is everybody else.
    For medical costs, roughly $14,000,000,000 was paid by 
private insurance; $12,000,000,000 by Medicare; $4,000,000,000 
by Medicaid. For indirect costs, that is, lost wages, a 
significant portion, perhaps $20,000,000,000, was paid by the 
Social Security disability insurance.
    There are economic implications for cost shifting. The 
health of workers can be viewed as an economic externality, an 
unwelcome byproduct of production, similar to air pollution. 
Economic efficiency requires that private costs of production 
equal social costs. If private costs are too low, the firm will 
produce an inefficient amount, that is, too much pollution or, 
in our case, occupational injuries.
    Aggregate private costs, reflected by worker's compensation 
premiums, are too low. If the premiums were higher, the firms 
would have an economically appropriate incentive to reduce 
injuries. This reduction would likely involve prevention 
strategies.
    I just have a couple concluding remarks.
    Greater investments in preventing occupational injuries and 
illnesses are needed. Standards to reduce exposures to 
chemicals and ergonomic hazards would help prevent many 
occupational diseases and reduce the incidence of 
musculoskeletal disorders, which are responsible for nearly 
one-third of all injuries. In addition, an increase in the 
sizes of OSHA penalties, especially for repeat offenders, would 
help. For the sake of economic efficiency, employers should 
face a higher price for their neglect.
    Let me offer a low-cost policy suggestion. We should 
require health and safety information be attached to all job 
application forms. We know more about the fat content of potato 
chips before we purchase them before we do about the health and 
safety content of jobs before we take them. I think every job 
application form should carry a page of information on 
statistics, including death rates, particular to the specific 
occupations and industries relevant to the job applicant. This 
would permit prospective employees to turn down dangerous jobs, 
thus providing a free market incentive for employers to improve 
job safety.
    I hope that one question involves Hispanic workers. I 
wanted to make sure I was under the 10 minute limit. But thank 
you, Chairman, for inviting me, and I look forward to your 
questions.
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    Mr. Obey. Well, thank you. Thank you all very much. Let me 
simply say that we are in the last year of this 
Administration's tenure, and I think, as the last year's 
appropriation cycle indicated, we do not have a whole lot that 
we agree with in terms of the Administration's budget policies; 
and I think that was demonstrated by the fact that the 
President vetoed the bill produced by this Subcommittee last 
year.
    I do not particularly see any sense in chewing the same cud 
twice, as we say in farm country, and so I really regard this 
year, and our actions during it, as simply being preparatory to 
the new administration, whichever party it is; and I think 
everyone recognizes that there is a major chance that the next 
Congress and the next president will tackle the issue of 
universal health coverage. If we do, that has profound 
consequences all throughout the economy. It has profound 
consequences in terms of the way we distribute and deliver 
health care.
    And I view this Committee as having a responsibility to try 
to respond to this question: If we thought that, within two 
years, Congress will have passed legislation creating universal 
health care--forget the theological debate about what shape 
that will be--if we do that, where should we be putting money 
in this Subcommittee in order to try to prepare our health care 
system and our medical system for the implications of finally 
passing that kind of legislation?
    And let me ask each of you to respond. I have got a lot of 
other questions, but, because of time, I will then pass the 
witnesses down to the other members.
    Mr. Thorpe. I think, as I started out in my testimony, to 
me, the real critical part of a broader health care proposal, 
in addition to the uninsured, is the issue of affordability. If 
we do not find ways to make health care more affordable in the 
public and private marketplace, doing a universal insurance 
proposal may or may not be sustainable over the long haul. So 
we have got to find more effective ways of bending the cost 
curve on the per capita growth in Medicare spending, Medicaid, 
and private insurance pocket.
    Now, having said that, I think there is a lot of agreement 
that we need to do that in the business community and the labor 
community, and so on. You have to have a clear understanding of 
the issue. And if you look at the two facts that I raised--one 
is that 75 percent of spending is linked to chronically ill 
patients, where the money is; and, two, a very substantial 
amount of the growth in spending is linked to the rising 
incidence of disease. Diabetes itself has gone up 70 percent 
over the last 20 years. So in terms of an investment portfolio, 
it seems to me that we have got to find better ways of managing 
chronic disease in the system and preventing its rise over 
time. So I would point to just three or four areas in terms of 
thinking about where to make investments.
    One is that I think we need to change the way that we pay 
for health care. The Medicare benefit model was a great model 
for patients in the 1950s, what it was based on and designed 
after. The clinical characteristics of patients in the system 
today, and who are driving spending, are very different than 
they were 40 years ago. So we are going to need research into 
what makes sense in terms of restructuring our payment model.
    What makes sense in terms of restructuring how we deliver 
services, building into a more proactive delivery model: 
working with patients outside of the traditional physician's 
office; providing patients appropriate information on financial 
incentives to self-manage their condition.
    And prevention. What can we do that is cost-effective to 
slow the rise in obesity and, with it, slow the rise in chronic 
disease prevalence.
    I think that those are not only important because, you 
know, to me it is the centerpiece of making the whole system 
sustainable, but it is also areas I think, if you think about 
it, are just common sense initiatives. They deal with 
prevention and more effective clinical management. I think an 
opportunity, I would hope, in 2009 that we can build a 
bipartisan approach for moving forward with this as really a 
cornerstone of how to position the debate.
    Mr. Obey. Thank you.
    Dr. Weinstein.
    Dr. Weinstein. Thank you. I think there is some evidence 
out there of things that we can do in chronic disease 
management, as well as in end-of-life types of decisions, where 
we are spending a lot of money. I think if we take the chronic 
disease management programs, like Brent James has developed in 
Intermountain Health, and allow the Nation to benefit from 
those programs with what some of the plans are calling for, a 
new IT strategy. And, of course, Dr. Braylor's attempt at that 
was not successful, but I think that the idea that every 
hospital system has a different computer system and every 
patient does not have a transfer of information across this 
Country seems like an inordinate type of expense that ought to 
be changed.
    Imagine if we all had the same computer system that our 
patients were having their records kept on. It seems today that 
is possible. Maybe it is even Google. I am not supporting 
anybody, I do not own stock in it, but maybe there are better 
ways to do this.
    The idea of practical trials, like SPORT, where we actually 
get good information to empower our patients in making choices. 
We know every time we have done that we have seen changes in 
the rates of procedures, the cost of procedures, the outcomes 
of procedures, and the utilization of health care more 
appropriately.
    I agree with the ideas of prevention, but implementing 
those strategies, even back to when John Kennedy was President 
and we actually worked on physical fitness as a major program 
in our school system in the grade schools and high school, 
maybe we just need to go back to just simple things like that 
and getting back into physical education.
    The payment models are all backwards, as I said in my 
opening statement. The incentives for me are to do more. The 
more surgery I do, the more complicated the procedure is, the 
more I am reimbursed. I do not think that is the appropriate 
model for our health care system.
    The issue of episodes of care, which the NQF and others, 
NCQA and others, are working on--which I have been involved 
with with Dr. Fisher and others--looking at how you take an 
acute myocardial infarction patient or somebody with back pain 
and work through that episode in a payment mechanism that 
actually gets the highest quality care, while limiting the 
payment structure to that episode, maybe be an interesting 
model to pursue.
    I think the opportunities for end-of-life care. Again, do 
patients want to die in an intensive care unit? Certain studies 
by Joann Lynn and others have suggested that patients want to 
die at home. Yet, if you look in the California system, which I 
know some of you are from, especially in the UCLA area, most 
patients end up dying in the hospital. That is an extremely 
expensive way to die, especially, again, if patients were 
informed with informed choice and didn't desire to.
    A few ideas.
    Mr. Obey. Dr. Leigh.
    Mr. Leigh. Well, I agree with a lot of what has been said, 
especially with Dr. Thorpe, the emphasis on prevention, and I 
think that improvements or increases in the NIH budget, in the 
NIOSH budget. I am a believer in the economic efficiency in the 
sense that I think that the price of production for an employer 
ought to reflect the true costs associated with that. So if 
somebody is injured--back injury, hip injury--this should be 
figured into the production of the product. So this gives the 
appropriate incentive to the employer, then, to look for 
prevention strategies; not that one size fits all. Let's have 
individual employers find where the best prevention strategy 
might be to reduce these back injuries, reduce the hip 
injuries, again, encouraging prevention.
    It turns out that, with the obesity epidemic, I have a grad 
student now that we are doing some research on wages and 
obesity; and, as probably most of you know, obesity is much 
more prevalent among lower income people, so it might be a 
substantial increase in the minimum wage would result in fewer 
people with low income. An increase in the minimum wage would 
result in higher prices for soda pop and, as we have seen with 
cigarettes, when you put a tax on the cigarettes, people do in 
fact smoke less. So this may be a policy way to approach the 
obesity epidemic.
    But, in general, I agree with all the strategies related to 
prevention.
    Mr. Obey. Thank you.
    Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    Sorry I had to leave, but everyone is expected to do lots 
of things at once here.
    I was able to pass a bill here in the Congress that 
provided for hearing testing for all newborns, and it really 
has an impact, as you can imagine, on that child's ability to 
learn. And the idea of screening I think everyone accepts as a 
good concept for cancer and a host of others that focus on the 
individual, but there is another type of prevention program 
that I really think gives us a good bang for the buck, and that 
is population-based prevention, which develops and delivers 
interventions that reach large groups of people.
    I raise this issue in large part because of the explosion 
in the health entitlement programs and the cost of those 
programs that we have seen in the last couple of years. In 
fiscal year 2007, we spent over $600,000,000,000 on mandatory 
programs at the Department of Health and Human Services--
largely Medicare, Medicaid, and S-CHIP. In fiscal year 2009, 
just two years later, that number is expected to be about 
$680,000,000,000. That is pretty astonishing, that it would 
increase that much in a two-year period.
    We have to find ways, I think, to impact on health and 
cost. You do not want to focus on one or the other. So what 
types of studies have been done to evaluate the value of 
population-based prevention programs as a whole in terms of 
savings across the entire health care spectrum, particularly 
with respect to Federal entitlement programs?
    Any of you care to respond?
    Dr. Weinstein. I guess I would respond in a way that you 
might not expect. I am not sure that screening is always the 
right thing. Screening----
    Mr. Walsh. I was not suggesting that that is the only 
approach to prevention. I was suggesting that that is one, but 
a larger spectrum of individuals would be gathered in different 
prevention programs.
    Dr. Weinstein. I understand, I believe.
    Mr. Walsh. Okay.
    Dr. Weinstein. But I think the idea of screening is an 
important one to talk about because, you know, should we have 
PSA tests for men? Should we have colon cancer screening? 
Should we have mammography for women? What are the most cost-
effective? What is diabetes? You know, imagine if you changed 
the you know, if somebody says your blood sugar is 200, that is 
diabetic. If they change it to 210, we increase the number of 
people that are diabetics in this Country by maybe two million. 
I mean, so we have to be careful what we call disease versus 
pseudo-disease.
    So if we screen people for prostate cancer--and I do not 
know if any of the men here have had that screening, but if you 
have a positive PSA test, then you have to consider whether you 
are going to have a biopsy or not. And it is not just a needle 
stick, it might be 20 needle sticks. You might not know that. 
Probably not too comfortable. What if it is positive for cancer 
cells? Then you have a decision about treatment--radiation, 
chemotherapy, surgery. And the outcome of that treatment may be 
no different than having not been screened.
    So the issue is cost, which you are talking about the 
$600,000,000,000 to $680,000,000,000 change. As we screen more 
and we find more, there are consequences to that. As we do 
genetic testing, how are we going to respond to that, women 
with the genetic predisposition for breast cancer? Do we offer 
our daughters, at 16, mastectomy? I mean, realize the 
ramifications of what we are talking about.
    I agree with your concept, but I just want to suggest that 
the hearing test was wonderful, and obviously children need to 
hear to learn, and we have all kinds of wonderful medical 
devices to allow people to hear today that could not hear 
today. Great success in medical therapies. The population-based 
prevention, though, and based on screening, I think has some 
risks to it. That is all I am pointing out. So we have to be 
careful about what we recommend in the screening field around 
prevention.
    Mr. Thorpe. Let me just take a little different cut on 
this. In addition to what I do at Emory, I am also the 
Executive Director of this organization called the Partnership 
to Fight Chronic Disease. It is a group of nearly 100 
organizations ranging from the Chamber of Commerce to the labor 
unions and virtually everybody in between.
    We have been focusing a lot of our time figuring out ways 
to make health care more affordable, focusing on some targeted 
prevention interventions specifically dealing with people who 
are overweight--there is this, Dr. Weinstein mentioned, pre-
diabetic, pre-hypertensive patients and so on--to see how we 
can intervene to make sure that they do not switch over into 
those more extreme clinical categories, you know, going from 
200 to 600 in terms of blood sugar levels. Because, when it 
happens, you have a big spike in spending.
    So if you can find effective interventions targeted right 
there, we know the return on investment can be very 
substantial.
    We are scouring, with our 100 groups, looking at best 
practices in work site health prevention, school-based 
programs, community-based interventions, and what we have found 
is--I mean, it is somewhat frustrating that in the published 
literature--very little in terms of what is out there doing 
formal evaluations of programs that are up and running. We have 
found some good programs in the workplace. I think that those 
are promising. There are very few of them. If you think about 
it, there are seven million plus business establishments; there 
are probably a handful of big companies that really do this 
effectively.
    But in that data we have got published information that 
shows that we can get a positive return on investment if they 
are designed appropriately. And that is a lot of what we are 
trying to understand, is how the design of this really mattered 
in producing outcomes.
    On your Medicare question, I think that having this 
information on best practices is going to be essential for 
Medicare, because if you look at the cohort of 65-year-olds 
coming into the Medicare program today, they have two 
characteristics compared to that same cohort 15, 20 years ago: 
they cost a lot more; they have more of an elevated chronic 
disease profile. The only good news is that they are less 
likely to be disabled. So the disability rates have gone down a 
little bit.
    But if you look at the wave of people----
    Mr. Walsh. More chronic health issues in that cohort now 
than there were 15 years ago?
    Mr. Thorpe. Yes. If you look at Medicare, 75 percent of 
what we spend in Medicare is linked to patients that have five 
or more treated chronic conditions; it is diabetes, it is heart 
disease, it is pulmonary problems, it is co-morbid depression, 
it is asthma, arthritis, back problems. That is where the money 
is. So I think that there is a real opportunity for us to look 
more broadly to figure out prevention programs at the work site 
or in the community that we could put into place now that would 
improve the health profile of seniors coming into the program.
    I think while you were doing your talk, one of the things 
that I mentioned was that if you look at lifetime health care 
spending for a senior who is age 65, who is normal weight with 
no chronic conditions, compared to a 65-year-old who is 
overweight, has one or more disabilities and some chronic 
conditions, that healthier patient will spend about 20 percent 
or so less over the course of their lifetime. They live longer, 
true, but they spend less. So I think there is an opportunity, 
as we think about the entitlement issue, to tee it up a little 
bit differently than the usual way we have been dealing with 
it, which is increasing co-pays, reducing benefits, reducing 
payment levels, increasing the eligibility age, you know, 
paying around the board but not really fundamentally changing 
the level of spending among that population.
    Mr. Walsh. That is helpful. Thank you.
    Thank you, Mr. Chairman.
    Mr. Obey. Ms. McCollum.
    Ms. McCollum. Thank you, Mr. Chair, and thank you, 
gentlemen for your testimony. I am going to switch to Professor 
Leigh.
    Your comment focused on government's failure to address 
occupational injuries and illness, and I am currently working 
on legislation that would ban the re-importation of asbestos 
into the United States. The legislation would also require 
research on the health hazards of naturally occurring asbestos 
and invest research and treatment of asbestos-related 
illnesses. And in the President's budget, he cuts a lot of the 
research opportunities for occupational safety.
    As you may or may not be aware of, mesothelioma is not 
diagnosed until extraordinarily late. They have seen some 
successes with people being given this diagnosis and now 
living, a few people, years longer, but for the most part it 
is, as my predecessor found out, Congressman Vento, once 
diagnosed, it is pretty much you have X number of months to 
live.
    So could you talk a little more about the Government's 
role, its responsibility in regards to finding out more and 
understanding more about asbestos in the workplace, especially 
seeing as how many of us--I am 53--and older have been exposed 
to it throughout our lifetime? Why would it be important to 
know about this issue as it affects workers in the workplace 
and why it would be important to do the research in order to 
not only maybe find a cure, but to find early diagnosis.
    Mr. Leigh. Well, a lot of people have been exposed to 
asbestos and may not even know it. I think I was exposed years 
ago when I worked at Manpower Corporation and they had me work 
with mobile homes, and we were moving a lot of equipment 
around, and they had the one job, which was basically moving 
fiberglass and asbestos, which was in the back part of the lot. 
Thank goodness for the union there, because they would not let 
me work over three days. I was kind of upset because I wanted 
to keep working; it was a decent wage. But I was told, well, 
the union is not going to allow you to work more than three 
days. At the time, I was kind of upset about it, but I am very 
happy now that the union had that rule, because I didn't know--
I was 22 years old--I didn't know what I was being exposed to.
    So I think it is important for us to--and, of course, as 
you know, the cost of asbestos is growing, or asbestosis and 
mesothelioma, as all the pneumoconiosis. So it is important for 
us to know how to treat this, and greater research would help 
in terms of where the asbestos is now and how to reduce it.
    So it is a large problem, a significant economic problem. I 
welcome more investments in the research.
    Mr. Obey. Would the gentlewoman yield? And I promise it 
will not come out of your time.
    Ms. McCollum. I trust the Chair.
    Mr. Obey. The very first day I served on this Subcommittee, 
back in the early 1970s, I walked into the room and Dr. Dave 
Roll was testifying for the National Institute of Environmental 
Health Sciences, and as I walked in I heard him explain to the 
Committee what percentage of British shipyard workers who had 
been exposed to asbestos in World War II had died of 
mesothelioma, and it stunned me because, in my father's 
business, I had worked with asbestos products. So that got my 
attention in one whale of a hurry, which I think is the 
principal reason that, in my earliest years on this 
Subcommittee, I focused so much on occupational health and 
safety.
    But I am glad you asked that question.
    Ms. McCollum. Thank you, Mr. Chair.
    Mr. Obey. And it will not come out of your time.
    Ms. McCollum. Thank you, Mr. Chair.
    Another statistic that stood out to me--and you all touched 
on this in your testimony one way or the other about chronic 
disease and how it accounts for 75 percent of our Nation's 
health care spending. Now, I authored a bill, it was a 
constitutional amendment--I do not think we are going to amend 
the constitutional, get my language forward, but my intent was, 
by having a constitutional amendment to provide health care and 
preventative care for Americans, was to have a different 
discussion than the one that we are having.
    The discussion I believe that we should have should be what 
is the bottom basic set of access to health care should 
Americans expect in an industrialized country. It goes to the 
question of screening; it goes to the question of treatment; it 
goes to the question of prevention.
    What are you seeing missing from the current debate on 
health care that would address what should an American, in the 
most technologically advanced country in the world, expect 
their government to come together in the common good to make 
sure that they have access to truly good health care?
    Mr. Thorpe. That is a good and tough, difficult question, 
but I will go ahead and take a shot at it anyway.
    My sense is that--and this sort of comes from what I see 
some of the more innovative large, self-funded employers are 
putting in place now--that if we really focused on early 
detection, early diagnosis, and appropriate evidence-based 
treatment of care, you know, that is a model that I think would 
be very effective in terms of preventing disease and more 
effectively managing it when we diagnose and detect it. Let me 
give you an example.
    There are some very good health risk appraisals, very 
simple benchmarks that one could do to get a risk profile of an 
adult or an adolescent or a kid in school. And based on that 
risk profile, whether you are in normal health, good health, 
fine, you know, there are care programs and ways to make sure 
that you keep in good and normal health.
    If you are a diagnosed diabetic with some of these multiple 
chronic health care conditions, we want to make sure that we 
enroll you as quickly as possible into a plan, an evidence-
based plan to make sure that that disease is appropriately 
managed; and in most cases it is not. We know nationally that 
chronically ill patients get about 56 percent of the clinically 
recommended primary preventive maintenance services that they 
should get to manage their disease and prevent them from going 
into the emergency room, having amputations, losing a kidney, 
or going blind.
    So I think if you think about it in terms of not so much 
insurance benefit design discussions, but more on the primary 
population health risk appraisal type approach, where we are 
diagnosing and detecting disease earlier on in the stage of a 
particular problem, and then making sure that they get the 
right--and it is largely primary health care to appropriately 
manage it, those would be a bundle of services that I think 
most would agree on makes sense. It makes clinical sense; it 
makes good public health sense.
    Mr. Obey. Mr. Kennedy.
    Mr. Kennedy. Thank you.
    If we are spending so much money--Dr. Thorpe and Dr. 
Weinstein, you have both talked about this--in Medicare, 
Medicaid on all these treatments, but we do not know 
effectively what is the best treatment, wouldn't you suggest 
that we spend more of our dollars in CMS doing comparative 
analysis effectiveness in terms of before we start--I mean, I 
know in the mental health field there is a variety of different 
ways of addressing mental illnesses--pharmacologically, 
behaviorally, and the like--and some are far more expensive 
and, yet, do not show that much more effectiveness in terms of 
a result.
    And, yet, as you said, there has not been the kind of data-
mining or research and, yet, if there was, for a very little 
set-aside up front, we could be saving ourselves a lot of money 
on the payment side. What do we need to be doing to get to 
direct? Could you comment on the need for us to get CMS to do 
more in terms of internally directing some of their internal 
dollars to that comparative analysis effective research within 
their own budget before they start spending all this money just 
going out the door without knowing whether all of it is the 
best, most effective money spent? Could you comment on that?
    Dr. Weinstein. I would agree. I think there are lots of 
opportunities there for CMS to do such things. They have, as 
you know, supported some trials work. I think, for lung 
reduction surgery, they actually paid for the procedures being 
done to get the answer in a trial type way. So I would think 
this is a tremendous opportunity. As you think about what the 
costs are for what we pay in America versus what we might pay 
in Canada for drug issues and things like that, why are not we 
doing some comparative effectiveness of those things in this 
Country so that our citizens, you and I and our families, can 
get the cheapest drug with the highest quality, best outcome?
    You know, there is little incentive for people to test 
things that--I am for the free market, do not misunderstand me, 
but we need to allow people to understand, when we are doing 
trials, how you design a trial often can determine the results 
you are going to get. So if you want to test aspirin against 
drug X that is very expensive, you might find out that aspirin 
is really good. But if you do not want to know that the really 
cheap aspirin is really good, you will not test against 
aspirin.
    So I think there is an opportunity in CMS to do that kind 
of work. We have the opportunity to sort of do competitive 
purchasing. Why do we have to buy the most expensive things if 
there is not the data to support those technologies, there is 
not the increased survival? I mean, I mentioned the breast 
cancer bone marrow transplant program. Very expensive.
    Mr. Kennedy. Well, maybe you could give us this in a memo, 
because maybe we can, as a Committee, figure out a way to do 
some directed language, because there is an awful lot of money 
in that CMS. Obviously, it is obligated entitlement spending, 
but if they could save a lot more in the future, when the 
debate comes up on entitlement spending, in the way they direct 
it by doing more of the initial cost analysis on how it can be 
best spent, then, boy, we could get that entitlement spending 
to go a lot further than it is going.
    Dr. Weinstein. I agree, but I want to also throw out the 
fact that there are many things that we do well. For example, 
non-white males, black males are not getting the rates of total 
knee replacement--that is an effective treatment--for reasons 
we do not understand. And, yet, many people may be getting 
rates of those kinds of procedures more than they need. So 
there are lots of opportunities to deal with the whole 
population through that budget and deal with issues of 
disparity variation in ways that we have not thought about.
    Mr. Kennedy. Can you just explain why the public health 
schools have not intersected with your economic sections of 
your universities to come up with how you refigure these 
reimbursement systems? I mean, how come you guys cannot get 
together and figure out if we can buy futures in pork bellies, 
why cannot we buy futures in people's health and get a new 
economic system that will incentivize people's health and well 
being and market that? I mean, why cannot we redevelop an 
economic capitalist system to incentivize health, as opposed to 
sickness?
    Mr. Thorpe. I think it is an outstanding question, and I 
think some of it goes back to the fact that, really, until 
about two or three years ago, I think, the prevailing view in 
the economics world was that 70 percent, 80 percent, 90 percent 
of the growth in health care spending was all due to new 
technology; that we were powerless over it, that it was just 
this flood of new technology coming online; and that these 
other things that are more controllable, perhaps, in the near-
term--demographics, cost-sharing and so on--accounted for very 
little.
    Work we have been doing over the last five years I think 
sort of debunks a piece of that. Technology is a big part of 
this puzzle, but what we did in our work is introduced 
economist epidemiologists. Epidemiologists have, for years, 
been looking at rising rates of disease prevalence without 
figuring out the financial implications of it, and in economics 
the word epidemiology never comes up anywhere in any course, 
any term. I think I would be banned from the profession if you 
even talk about it. They just do not think about it in that 
way.
    So some of it is making sure we have the database and the 
problem appropriately framed, which we now do. And I think we 
are now in the process of saying, well, gee, prevention really 
is important; and that we really do need to think about more 
effective payment models. Dr. Weinstein mentioned some of the 
work they are doing on episodes of care. We need more research 
and work thinking through how we can buy more effective health 
care services for people who have ongoing, established medical 
conditions that perpetuate throughout the year, at the very 
least, and we just do not have that models as widely known as 
we should.
    There are good pilots, we know a little bit about them, but 
the fundamental research base in terms of how they work, how 
they change outcomes, how they affect cost, we have some data 
from, as was mentioned, Intermountain Health and from Kaiser 
and other places, but the research base in terms of thinking 
this through is quite limited.
    Mr. Obey. I am sorry to interrupt, but the gentleman's time 
is up. We have a vote coming up, so we have got a choice to 
make. We can either go vote and come back--we have the next 
hearing beginning at 2--or we can try to split the time, about 
two minutes apiece, with each of the three remaining 
questioners. How would you prefer it?
    Okay, then the gentlewoman is recognized for two minutes.
    Ms. Lee. Thank you.
    Thank you, panelists, for being here today.
    Dr. Weinstein, very quickly. How do you ensure that 
minority groups are well represented in clinical trials? Just 
last year we talked about--and I spoke with Dr. Griffin Rogers 
with regard to the hemoglobin variant using the A1C test for 
diabetes with regard to some ethnic minorities is just not a 
valid test in many ways, and we didn't know this until this 
hearing, and we followed up, and thank goodness we were able to 
get this straight.
    Second question. Informed decision-making is very 
important, but as a person who does a lot of medical research--
I am not a physician, but I have aging and disabled family 
members, so I know a little bit about it. I had a family member 
who had to have carotid artery surgery. A physician gave me the 
pros and cons of the stent versus the surgery. Very thorough, 
but I had a hundred more questions to ask. At the end of that, 
he says, so what do you want to do? I waited, well, what do you 
recommend?
    Bottom line is, yes, informed decision is very important, 
but for people who may not have access to the type of 
information, say, for instance, that I had access to, or are 
less educated and have not come up with all these questions, 
don't we need go to one step further and allow for the--and, 
again, in your research, I do not know if you did this--but 
have people feel that, once they have the information, ask the 
physician for their recommendation? Because I could not even 
figure it out.
    Dr. Weinstein. Well, the first question about enrollment of 
non-white patients in the trials, and I think all ages as well, 
so gender, race, and age are important. In fact, in our trial 
for back pain, we had one of the largest non-white enrollments 
of any trial done using the informed choice shared decision-
making tools, and it was remarkable.
    One of the diseases we actually studied, degenerative 
spondylolisthesis--a mouthful--is much more common in females 
and black females. So we actually had a higher enrollment than 
we even anticipated, which is really nice.
    So you are correct that clinical trials need to be looked 
at very carefully when you are saying what this is good for. It 
is just a clinical study, it is not necessarily about you.
    So then we need to empower you with information--which gets 
to your second question--that allows you to make a decision. 
And as Congresswoman McCollum was talking about what do we need 
to do, you know, we need access. So you needed access for your 
family member who had the carotid disease. You needed a 
decision tool. What would have been helpful for you is getting 
all this information in some unbiased way. I am a surgeon. What 
I like to do is surgery. If I am a physical therapist, I like 
to do physical therapy. So that is what I offer.
    I would like to suggest--and our data would suggest it is 
true--when we use these tools, we see different decision-making 
processes occur. They are written at a level so that the 
understanding of the person looking at it can be clear, their 
questions can be answered; they feel that they are 
knowledgeable, that we understand their values about their 
decision and their preferences.
    Those turn out to be very important variables in a health 
care system that is now drowning in cost, where we need to find 
simple tools that help people make those decisions. Not 
everybody with carotid stenosis or carotid disease necessarily 
has to have surgical intervention. What are those risks and 
benefits? What is my risk of stroke from that procedure? Memory 
Loss? What kind of cognitive disability might I have? Which 
might be more important to you than the risk of the actual 
infection from a surgery or whatnot. So those tools can be very 
helpful. And, in fact, from our trial, we are putting those 
kinds of tools on the Internet free to help people make those 
decisions.
    Mr. Obey. The gentlewoman's time has expired.
    Ms. Roybal-Allard.
    Ms. Roybal-Allard. Professor Leigh, thank you very much for 
your testimony, particularly for highlighting the fact that 
low-income and Hispanic workers have a significantly higher on-
the-job injury and mortality rate. You also mentioned during 
your testimony that much of those injuries and deaths are 
preventable, and that is one reason that I was happy that after 
seven years, legislation sponsored by myself and Congressman 
Miller and a lawsuit finally brought OSHA to the point where 
they did in fact issue the rules on personal protective gear, 
which the employer has to pay for. Unfortunately, during that 
seven-year interim period, there were many injuries and deaths.
    During your testimony you mentioned that you wish you had 
had some additional time to highlight the Hispanic population 
and the health and safety measures and on-the-job problems that 
they face, and I would like to give you the opportunity now to 
do that.
    Mr. Leigh. Thank you very much. Yes, I would like to 
mention. There was an earlier question about prevention 
strategies, and there are many that are in the workplace. For 
example, with nursing aides who are tending to elderly people 
in nursing homes, a lot of people are surprised. It turns out 
this is one of the most dangerous jobs a woman can take 
anywhere in the economy, because you can have a woman, let's 
say, who is 120 pounds trying to lift a 200-pound man who has 
Alzheimer's from one bed to a gurney, and the man can slap her. 
A lot of violence happens in these nursing homes.
    Anyway, they have now passed legislation in Texas where 
they have lift teams and lift tables, and groups of people who 
now are authorized to lift patients from beds to gurneys that 
are in nursing homes; and this has cut way down on the 
injuries, and this has saved on worker's compensation. It is 
just an example of where an ounce of prevention is worth a 
pound of cure.
    Regarding the Hispanic point, there are many studies done 
by the Bureau of Labor Statistics that indicate that Hispanics 
have a higher fatality rate and a higher non-fatality rate 
compared to all other groups. Let's see, there was one report 
that from 1992 to 2005 Hispanics were reporting more injuries. 
The percentage increase for Hispanic fatal injuries was 73 
percent. This trend was not evident for any other ethnic or 
racial group. And the same trend occurred for non-fatal 
injuries.
    Now, it also turns out not just Hispanics, but low-wage 
workers in general are subject to greater incidents for 
injuries.
    If you look on the BLS Web site, you will find the 10 
occupations with the greatest number of non-fatal cases, and 
these occupations include laborers, material movers, truck 
driver, heavy tractor trailer drivers, nursing aides, 
construction laborers, light truck drivers, retail 
salespersons, janitors and cleaners, carpenters, maintenance 
and repair workers, stock clerks, and order filers.
    Now, it turns out that except for carpenters----
    Mr. Obey. I apologize for interrupting, but we have only 
got about three minutes left if we are going to vote, and I 
have got two more members who need to ask a question. So I am 
going to ask you to supply the rest of that answer for the 
record or privately.
    Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman.
    Dr. Thorpe, I guess my question is directed to you, but I 
am interested in what the others have to say. You say in your 
written testimony the truth is the vast majority of chronic 
disease can be prevented or better managed, and then you have 
the statement ``these diseases could be prevented if Americans 
would do three things: stop smoking, start eating better, and 
start exercising.''
    These things seem so simple, but people do not seem to be 
getting the message. I mean, clearly, we are moving in the 
wrong direction when you look at all these diseases. How do you 
explain this phenomenon. Is the right information getting to 
people on smoking, eating better, and exercise? What is really 
going on here?
    Mr. Thorpe. Excellent question. I will try to make it 
quick. Just to give you a sense, I mentioned diabetes up 70 
percent since the mid-1980s. Over 90 percent of that growth is 
due to rising rates of obesity, pure and simple.
    I think the challenge is that we almost have to sort of 
start in multiple jurisdictions to find programs that are 
effective in helping people change behavior. It is not easy to 
do. I think you have to start in schools. There are some great 
examples of different States. Arkansas has perhaps a 
controversial program, but it is one that has taken the rates 
of childhood obesity in the Arkansas schools down, at the same 
time period when rates of obesity among kids are going up 
dramatically.
    There are good models at the workplace, where we have had a 
substantial impact on the weight distribution of workers and 
productivity. Unfortunately, we do not have a good 
dissemination or research base to sort of take those results 
and quickly diffuse them into other settings. I know in the 
other chamber Senator Harkin has been looking at this for some 
time to figure out what are the key design features of those 
programs that work; how can we encourage their diffusion.
    And community-based interventions. We are just starting to 
learn in a very scattered way about what works in the community 
to change behavior. Those are all areas that we should be 
making investments in to find best practices and find places 
where we can replicate good programs.
    Mr. Udall. Thank you.
    Mr. Obey. Ms. DeLauro.
    Ms. DeLauro. I will be brief.
    We have the Rudd Center in New Haven, Connecticut, which I 
represent and Kelly Brownell is doing a lot of work there on 
this issue; it is a very important issue. But I noted your 
testimony, Dr. Thorpe, though, you say CDC's spending on 
chronic disease prevention and control was $6.27 for each one 
of the 133 million Americans with one or more chronic 
conditions. The same group accounted for $13,143 in health care 
spending that year.
    You probably do know that, with CDC, there is a 
$475,000,000 cut in their budget, so we need your help and your 
support in that effort.
    Just quickly, Dr. Leigh, I will not go through the whole 
issue, but where do we get a better picture of direct Federal 
investment to have an accurate picture, if you will, of the 
costs associated with occupational injury and illness--because 
it is not coming out in the data that we are looking at--in 
terms of bringing down those costs? If you cannot answer it 
now, you can get it back to me for the record.
    And I would like to have you look at, if you would, and get 
back to us on the impact of the regulatory inaction we have 
seen at OSHA and tell us what that has caused.
    Okay, we do not have time. We have two minutes, right, Mr. 
Chairman?
    Mr. Leigh. Well, I would like to mention that the Bureau of 
Labor Statistics has two wonderful data sets: The census of 
fatal occupational injuries and also the annual survey for non-
fatal injuries. Now, a lot of people, including myself, have 
criticized that survey, but it is to say that we can improve 
upon it, and there are many ways that the Bureau of Labor 
Statistics can improve upon those data to have wider--
    Ms. DeLauro. We would welcome your help on how to do that, 
because we can help to design their program.
    Mr. Obey. Gentlemen, let me apologize for the abbreviated 
nature of this hearing, but it is a miracle we got it in at 
all, given what is going on on the House Floor. So thank you 
very much and we will see you back.
    We will reconvene at 2:00 with the Secretary.

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                                        Tuesday, February 26, 2008.

OPPORTUNITIES LOST AND COSTS TO SOCIETY: THE SOCIAL AND ECONOMIC BURDEN 
      OF INADEQUATE EDUCATION, TRAINING AND WORKFORCE DEVELOPMENT

                               WITNESSES

ROBERT G. LYNCH, EVERETT E. NUTTLE PROFESSOR, DEPARTMENT OF ECONOMICS, 
    WASHINGTON COLLEGE
THOMAS W. RUDIN, SENIOR VICE PRESIDENT FOR ADVOCACY, GOVERNMENT 
    RELATIONS AND DEVELOPMENT, THE COLLEGE BOARD
HARRY J. HOLZER, PROFESSOR OF PUBLIC POLICY, GEORGETOWN PUBLIC POLICY 
    INSTITUTE AND SENIOR FELLOW, THE URBAN INSTITUTE
WILLIAM E. SPRIGGS, PROFESSOR AND CHAIR, DEPARTMENT OF ECONOMICS, 
    HOWARD UNIVERSITY, WASHINGTON, DC
    Mr. Obey. If the committee will come to order?
    As members know, this subcommittee has jurisdiction over a 
great many programs that deal with people who often begin life 
behind life's starting line, and the purpose of these programs 
is to try to equalize people's opportunity to make a full and 
decent life for themselves and their families and their loved 
ones.
    We often hear congressional debate about the cost of making 
certain appropriations. We don't often hear much said about the 
cost of not making those appropriations.
    It always bothers me, for instance, when people say that 
each and every American has X thousand dollars share of the 
national debt. That's true. But what we don't often see is a 
description of what the value of the assets are which are owned 
by the United States government as a representative of the 
taxpaying public.
    Example: what is the value to each citizen of Glacier 
National Park, or Yellowstone? They're often very hard to 
quantify. But I would venture to say that the value of assets 
owned by the American people are at least equal to the value or 
to their share of the nation's outstanding debt.
    Another example that I've tried to use: Lou Gehrig's 
Disease. We spend roughly $43,000,000 to try to find a cure for 
that disease, nationwide.
    This committee does not specifically appropriate to deal 
with diseases. It shouldn't. But that is the effective amount 
that's spent nationwide to try to discover the causes and the 
cures of that disease, so we know what the cost to us is if we 
double that funding.
    But we don't know what the cost of the disease itself is to 
this society when you total up the cost of hospitalization, the 
cost of doctors' visits, the cost of lost income from the 
disease, the cost of medical services to patients as they 
progress through the disease.
    So what we are trying to do here today, we heard this 
morning from the Secretary of Education, we'll hear tomorrow 
from the Secretary of HHS, and we'll hear later on from the 
Secretary of Labor, and we will have tough discussions about 
what it costs to provide increased services for OSHA or 
increased funding for the National Institutes of Health, or 
increased funding for Pell Grants, but today I want the 
witnesses to deal with the cost of not moving ahead to make 
progress in all of these areas.
    We have with us four distinguished witnesses.
    First is Dr. Robert Lynch, Professor and Chair of the 
Department of Economics at Washington College; Dr. Tom Rudin, 
Senior Vice President for Government Relations and Development 
at the College Board; and Dr. Harry Holzer, Professor of Public 
Policy at Georgetown Public Policy Institute and a Senior 
Fellow at the Urban Institute, and Dr. William Spriggs, Chair 
of the Department of Economics at Howard University and 
formerly a senior economist for the Joint Economic Committee of 
the National Urban League.
    Before I call on the witnesses for their testimony, I'd 
like to ask Mr. Walsh for whatever remarks he would care to 
make.
    Mr. Walsh. Mr. Chairman, I'd just like to thank you for 
holding this hearing. I look forward to hearing from the 
witnesses. I welcome them here today, and I hope to get a few 
questions in when they complete their testimony.
    Thank you. I yield back.
    Mr. Obey. Thanks.
    Well, gentlemen, why don't we proceed first with Dr. Lynch.
    Mr. Lynch. I want to thank Chairman Obey, Ranking Member 
Walsh, and all the other members of the subcommittee for giving 
me this opportunity to discuss with you my research on early 
childhood education.
    I will describe for you what we know about the benefits of 
public investment in early education programs, including Head 
Start, and some of my own research on the costs and benefits of 
extending and enhancing Head Start.
    A key message that I want in part is that public investment 
in the education of young children is an outstanding use of the 
taxpayers' money.
    Research is increasingly demonstrating that the policy of 
investing in early childhood education is one of the best ways 
to improve child well-being, increase the educational 
achievement and productivity of children and adults, and reduce 
crime.
    Assessments of high quality programs have established that 
investing in children has a large number of lasting, important 
benefits for children, their families, and society as a whole, 
including its taxpayers.
    In general, participating children are more successful in 
school and in life after school than children who are not 
enrolled in such programs.
    In particular, children who participate in early education 
programs tend to have higher scores on math and reading 
achievement tests, have greater language abilities, require 
less special education, and are less likely to repeat a grade.
    They have lower dropout rates, higher levels of schooling 
attainment, and graduate from high school and attend college at 
higher rates.
    These children experience significantly less child abuse 
and neglect.
    Both as juveniles and as adults, they are less likely to 
engage in criminal activity.
    Once these children enter the labor force, their employment 
rates and their incomes are higher, along with the taxes that 
they pay back to society.
    Parents of children who participate in early education 
programs also benefit. They benefit both directly from the 
services they receive and indirectly from the subsidized child 
care provided by publicly funded programs.
    For example, parents are less likely to abuse or neglect 
their children and are more likely to be employed and have 
higher earnings.
    Careful long-term analyses of three high-quality early 
childhood education programs have found benefit/cost ratios 
that varied from a minimum of 4:1 to a high of more than 17:1, 
which means that every dollar invested in these programs 
returned between $4 and $17 in total benefits.
    In addition to providing benefits to participating children 
and their families, early education programs lead to government 
budget benefits by generating savings in government spending on 
K-12 education, on child welfare, and on the criminal justice 
system, and by increasing tax revenues.
    It is noteworthy that while participants and their families 
get part of the total benefits, the benefits to the non-
participating public and government are large, and in and of 
themselves, tend to far outweigh the costs of these programs.
    For example, when all the costs are borne by taxpayers, and 
when we take into account only the benefits that generated 
budget savings for government, benefit/cost ratios for early 
education programs have been calculated to equal about 3:1.
    That is, every tax dollar spent on these programs generated 
about $3 in budget revenues and budget savings.
    Thus, it is advantageous even for nonparticipating 
taxpayers to help pay for these programs because the costs to 
government are outweighed by the positive budget impacts that 
these investments eventually produce.
    Now, with respect to Head Start specifically, most studies 
have found that the immediate impacts of Head Start, whether 
measured in terms of achievement test scores or the behavior, 
motivation, and health outcomes of participating children have 
been positive.
    There have been only a few studies of the long-term impacts 
of Head Start and these, too, generally show small to moderate 
positive effects.
    A carefully controlled, large-scale randomized study of the 
outcomes of Head Start is currently underway, the National Head 
Start Impact Study. It has published its first year findings 
from a study that plans to follow children for four years.
    After just one year of Head Start, there were small to 
moderate statistically significant positive impacts for three- 
and four-year-olds on several measures of cognitive 
achievement, social, emotional behavior, access to health care, 
and health status.
    In addition, from the parenting programs, we find that 
there were small, statistically significant improvements in the 
parenting practices of parents of children who had attended 
Head Start.
    In my own research, I analyze the costs, and many, but not 
all, of the benefits of public investment in prospective high 
quality pre-kindergarten programs.
    In other words, I look at what would happen if we extended 
and further enhanced Head Start.
    I find that a larger and improved Head Start program would 
generate growing annual benefits that would surpass the cost of 
the program in six years. The annual budgetary, earnings, and 
crime benefits eventually exceed the cost of the program by a 
ratio of more than 12:1.
    The net annual effect on government budgets alone--that is, 
excluding the crime benefits and the earnings benefits that go 
to citizens--the net annual budget benefits alone turn positive 
within nine years.
    That is, starting in the ninth year, and every year 
thereafter, annual government budget benefits due to an 
enhanced the Head Start would outweigh annual government costs 
of the program, and do so by growing margins over time.
    For every tax dollar invested in high quality Head Start, 
we would eventually experience more than $3 in government 
budget benefits.
    And of course, on top of the budget savings, an enhanced 
Head Start program would substantially increase the earnings of 
workers, grow the economy, and reduce the cost to individuals 
from crime.
    So what research demonstrates is that investment in early 
education, even when its benefits are not fully accounted for, 
is an effective public policy strategy for enriching children 
and enriching the nation.
    A nationwide commitment to high quality Head Start would 
cost a significant amount of money up front, but it would have 
a substantial payoff in the future, as it will reduce costs for 
remedial and special education, for criminal justice and child 
welfare, and it will increase income earned and taxes paid.
    Over time, government budget benefits alone outweigh the 
costs of Head Start. That is, a high quality Head Start would 
pay for itself.
    The consequence of not extending and further improving Head 
Start is more crime and poverty and a weaker, less globally 
competitive economy with less skilled workers earning lower 
incomes.
    Thus, we should be investing in high quality early 
education to improve the quality of life of millions of our 
children, to reduce crime, to make the workforce of the future 
more productive, and to strengthen our economy. It is one of 
the wisest investments our nation can make.
    Thank you very much.
    [The information follows:]

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    Mr. Obey. Thank you.
    Why don't we proceed with you for five minutes, and then 
we'll go vote and come back and hear the others too.
    Mr. Rudin. Great. Thank you, Mr. Chairman. Appreciate the 
opportunity to be here, ranking Member Walsh.
    The College Board is the organization I represent, and 
we're a national non-profit membership organization, and our 
members are schools, colleges, and universities that focus on 
connecting more students to college.
    So we appreciate the opportunity to be part of this 
conversation. Thank you.
    Mr. Chairman, I can summarize my presentation. I would like 
to take the full five minutes, but I can summarize it in three 
words, and that is, higher education pays.
    From lifetime earnings, to increased access to pension and 
health plans, to being a healthier citizen, to overall 
community vigor, higher education yields significant benefits 
for both individuals and for society as a whole.
    Now, I have given you a couple of materials in advance. One 
is this publication, ``Education Pays,'' and another is a 
publication that summarizes some of the key points from our 
2007 Education Report, and I'll just summarize a few key points 
from that report.
    We know, and I think it's pretty well understood, that 
access to a college education does lead to higher earnings for 
individuals, a 60 percent premium on your earnings if you've 
graduated from college versus just graduating from high school.
    People with a Master's Degree earn twice as much over their 
lifetime as people with a high school degree, and people with 
professional degrees earn almost three times as much over their 
lifetime in terms of earnings.
    Even people who have attended college for some time, not 
even finishing the degree, earn on average 19 percent more than 
high school graduates.
    And access to pension plans and health care is at least 
twice as high for people from college graduate groups than for 
people who have no high school degree or perhaps even dropped 
out of high school.
    So the individual benefits to having a college degree are 
quite significant.
    But what about the question of whether government, 
foundations, scholarship organizations should invest in 
education of individuals? What's the payoff to society for 
that?
    Well, we think it's significant, and I'll cite just a few 
key pieces of data.
    The typical college graduate working full-time for a year 
pays 134 percent more in federal taxes than the high school 
graduate, and pays 80 percent more in all taxes--federal, 
state, and local.
    College graduates are more likely than high school 
graduates to donate blood, to vote.
    And in one interesting chart that is in front of you, it 
shows that college graduates are more likely to value and 
understand, be willing to accept the opinions of others who 
have different views than them than high school graduates.
    And perhaps one of the more compelling pieces of 
information that we've uncovered and that is in our report is 
that the benefits of higher education extend to those who don't 
even have a college degree.
    A recent study showed that, for example, people who work in 
a metropolitan area, who do not have a college degree, still 
benefit if those around them, and if an increasing number of 
those around them, have a college degree.
    For example, a 1 percentage point increase in the 
proportion of the local population holding a four-year college 
degree leads to a 1.9 percent increase in the wages of a worker 
without a high school diploma and a 1.6 percent increase in the 
wages of a person with a high school diploma.
    So there are significant benefits when the overall 
community is better educated that accrue even to those who 
haven't gone to college.
    Now, what about other benefits, to health and parenting?
    Low income Bachelor's Degree recipients are more likely 
than high school graduates of any income level to report 
excellent or very good health. They have better access to 
health care and better understanding of how to take advantage 
of it, and more money to pay for improved health care.
    Another interesting point that illustrates the societal and 
social impacts of a college degree: 61 percent of four-year 
graduates ages 25 to 34 exercise vigorously once a week. That's 
twice as much as high school graduates.
    And by 2005, the smoking rate in this country had dropped 
to about 20 percent, but among college graduates, that had 
fallen to 9 percent.
    And even if you look at the data from 50 or 60 years ago, 
when about 40 to 45 percent of the people in this country 
smoked, it was the same for college graduates and non-college 
graduates, but once the awareness became pretty widespread that 
smoking was bad for you, smoking dropped overall, but among 
college graduates, it dropped quite significantly compared to 
others.
    So we have data for particular states. The data for 
Wisconsin mirror the data across the country in terms of wages 
and in terms of overall societal benefits.
    I'll cite one piece of data from Wisconsin: 28 percent of 
people who do not have a high school degree in Wisconsin, Mr. 
Chairman, are Medicaid participants, but only 5 percent of 
Bachelor's Degree recipients in Wisconsin are Medicaid 
recipients.
    So the benefits are substantial.
    We believe an investment in education pays great dividends, 
both for individuals and for society in general, and I'd be 
happy to talk with you further about some of the work that's 
underway to try to close the achievement gap in terms of access 
to education and some of the work that this committee is 
supporting and that we're helping to implement across the 
country.
    Thank you.
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    Mr. Obey. We have a floor action. This first vote, there 
are eight minutes left. Almost nobody has voted yet. Then we 
have another five-minute vote. Then we have 10 minutes of 
recommit debate. Then a 15-minute vote on recommit. And then 
five for final passage.
    So the floor action is pretty well screwing up this 
hearing.
    What I'd like to do if I can is to try to squeeze another 
witness in before we go to vote.
    Dr. Holzer.
    Mr. Holzer. Thank you, Mr. Chairman, Mr. Walsh, and other 
members.
    I want to talk today about the economic costs of inadequate 
investments in workforce development, not just for individuals, 
but for the whole economy.
    In my statement, I have four points to make, although I'll 
focus primarily on one of them, because of the reduced time.
    First of all, the very low earnings and employment of 
millions of Americans generate not only high poverty rates but 
they impose huge costs on the U.S. economy overall.
    Secondly, federal investments in workforce training to 
raise these earnings have declined quite dramatically over 
time.
    Third, the research evidence and the evaluation evidence, 
while somewhat mixed, does show that many of these public 
investments are cost effective at raising the earnings of these 
workers, and many more newer approaches are very promising.
    And fourthly, therefore, the federal government should make 
major new investments in workforce development while also 
undertaking many new evaluation studies to improve our 
knowledge of exactly what works.
    I want to focus primarily on the first point about the 
costs of low earnings.
    Roughly 10 million Americans, 10 to 15 million Americans 
live in low-income families and have very low wages. Many have 
poor basic skills, no high school diplomas, but very few of 
them have any serious post-secondary education or training.
    Now, what costs do they impose, not only on themselves and 
their families, but also on the overall economy?
    Well, since worker earnings generally reflect their 
productivity in the labor market, low earnings of the poor 
directly reflect 10s of billions of dollars of lost 
productivity to the U.S. economy.
    These poor workers also generate large budgetary costs to 
the federal government. We spend roughly $600,000,000,000 each 
year in means tested programs for the poor. Now, at least half 
of that is Medicaid alone. But remember, these programs mostly 
treat the symptoms of poverty, not its causes.
    Furthermore, low potential earnings tend to discourage many 
workers and drive many of them out of the labor force 
altogether, and here especially, I'm talking about low-income 
minority men, whose employment rates have been declining over 
time.
    Young men with low earnings potential are much more likely 
to engage in behaviors that are very costly to society, like 
participation in crime and fathering children outside of 
marriage.
    Crime, in particular, imposes enormous costs on the United 
States, estimated by some analysts to be in the value of 
$1,000,000,000,000 to $2,000,000,000,000 a year in 
administrative costs and lost output and costs to victims.
    The cost of fathering children outside of marriage is also 
extremely costly to the economy and society, because the 
children who grow up in these families are more likely 
themselves to have very low education, to engage in crime, and 
to suffer from bad health, generating this ongoing cycle of 
costs across many generations.
    But the costs to the U.S. economy go well beyond the poor 
themselves and their families.
    For instance, employers often report difficulty filling not 
only their high skilled jobs but jobs in the middle skill 
categories that don't require a college degree, but certainly 
require some training beyond high school. Sometimes they have 
those difficulties even when they're paying reasonably high 
wages.
    Positions remain vacant for significant periods of time, 
especially in tight labor markets. Their recruitment costs 
rise, their compensation costs rise, and many employers report 
having to accept less qualified and less productive employees 
than they have in the past.
    These difficulties and costs for employers will likely grow 
when the baby boomers begin retiring, and especially in those 
sectors of the economy like health care and elder care, where 
labor demand is likely to grow very substantially.
    And these concerns may ultimately raise the rate at which 
employers choose to offshore their production or to recruit 
immigrants from abroad to fill the jobs remaining in the United 
States.
    So this vast range of costs imposed by poor skills and poor 
earnings is borne not just by the poor, but by employers and 
the economy overall.
    Now, in my statement I make other points about the dramatic 
declines in investment spending over time.
    Investment spending in workforce training peaked in 1979. 
It's declined by roughly 70 percent in real terms. It's 
declined by about 85 percent relative to the size of the 
economy.
    We spend a smaller share of our economy than virtually any 
other industrialized nation on workforce training programs for 
less educated workers.
    One might say, well, if these programs aren't effective, 
maybe it's reasonable that we spend less money on them.
    I think the evaluation evidence on these programs is 
somewhat mixed, but there's many, many examples for rigorous 
evaluations of cost-effective programs, and I could detail 
those during the question and answer session.
    So finally, what I think all this implies is that we do 
need to invest more in the most promising new kinds of job 
training and workforce development, the kind that involve 
partnerships between the private sector, community colleges, 
state and local agencies and intermediaries. This involves not 
only training, but a range of financial supports and services 
to low-income workers.
    And while we're making those investments, we certainly need 
to invest also in rigorous evaluation to improve our knowledge 
over time about exactly what's cost-effective in this realm.
    But certainly, while we get that information, we need to 
improve the size of those investments, given the costs 
associated with those very low earnings.
    Thank you.
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    Mr. Obey. Thank you.
    Let me suggest that we go vote. We will have this vote and 
then a five-minute vote.
    And so I would suggest that we cast these next two votes, 
and then if we come back here, we will have a 25-minute window 
before we have to go and vote on the next two items.
    I'm sorry to do this to you, Bill.
    [Recess.]
    Mr. Obey. Well, as you were about to say before we were 
rudely interrupted, Dr. Spriggs, please proceed.
    Mr. Spriggs. I want to thank you, Chairman Obey, and I want 
to thank the ranking member, Mr. Walsh, for inviting me to 
speak.
    I'm not going to be speaking on investments in people or 
those programs, but actually, investments in making people get 
connected to the program so that these programs can be 
effective.
    In particular, I want to talk about the social services 
block grant and the community block grant programs.
    These are programs that give states a great deal of 
flexibility in figuring out how to connect people who need 
services to the services, and to close the gap for people who 
need services but aren't connected because they aren't part of 
a program, as an example, TANF.
    The vast majority of the direct recipients of the social 
services block grants that states use are children; 63 percent 
of those who benefit are children.
    If we were to cut the program in this current environment, 
it would be doing it in the face of a growing need on the part 
of attaching children to services.
    The number of poor children in this country since 2001 is 
up 1.1 million. That's roughly the population of the state of 
Rhode Island. And these needs are likely to grow, as the 
economy looks like it is slowing down.
    A cut from $1,700,000 to $1,200,000 would be a cut very 
close to 30 percent, and that would mean roughly 2.7 million 
fewer children could be attached to important services like day 
care, which we just heard was an important investment that the 
government should be making.
    These services are provided normally in partnership between 
services directly provided by the state and with community 
partners. A big part of that takes place through the community 
block grants, agencies that are vital, especially in rural 
areas.
    In many cities, there are lots of different social service 
agencies, but in many rural areas, there aren't, so the 
community partnership in Lewiston, Idaho, for example, is very 
important for connecting people to getting help on 
weatherization, on housing counseling, as we know is a very 
important thing right now.
    It's very important in Indian Head and Russ County in 
Wisconsin, for instance. That's the way that children get their 
access to Head Start and to Fresh Start, Wisconsin Fresh Start.
    So those grants are important devices for connecting people 
to the services that they need to receive and keep the 
investments going.
    I want to talk about a problem that we have with the safety 
net, and that funds to SSBG and the community grant can help 
with.
    This last expansion that we had was very unique, because as 
opposed to having poverty decline since 2001, as I mentioned 
earlier, poverty actually increased.
    Part of this anomaly is that even though low-income 
workers, those who actually were in poor households, saw their 
wage earnings increase, their sources of income from the safety 
net actually went down, and this was most dramatic when you 
look at issues of access to TANF, access to food stamps, access 
to unemployment insurance, so that those automatic stabilizers 
which we would have anticipated being kicked in to help people 
through the recession and keep their consumption high actually 
didn't reach the people we thought that they should have 
reached.
    The block grants were frozen in amounts so that even though 
there was a rising demand for services, states were not given 
more resources to actually help make that connection take 
place, so things like job training and like child services 
tended not to reach the people we would want to reach.
    There is data collected by the Center for Economic Policy 
Research and the Center for Social Policy Research at the 
University of Massachusetts, Boston that help to highlight this 
gap between needs, those who get service, those who are 
eligible for service, and then those who actually get service. 
These gaps can be rather huge.
    For instance, if we just look at housing assistance, 
something that we clearly need at the moment, 10.2 percent of 
folks in Illinois are eligible, but only 2.1 percent actually 
receive housing assistance among those who are eligible.
    Here in Washington, D.C., 19.3 percent of the population is 
eligible for housing assistance, but only 6.1 percent actually 
received the assistance that they were eligible for.
    And as we look at a downturn in the labor market and think 
about something as fundamental as food stamps, there can be 
huge gaps. In Texas, for instance, almost 23 percent of 
families in Texas are eligible for food stamps, but only 2.7 
percent of the families who are eligible actually receive the 
food stamps.
    These grants, these social services block grants, give 
states the flexibility to fashion as they see the needs in 
their state how to connect people to the needed services, to 
child care, to foster care, how do we get them to job training, 
and get them the right job training, and their partners and the 
community action agencies and through the community block 
grants add that extra amount for making sure that services are 
provided.
    We should make sure that states have those resources and 
can connect people to the programs that you have actually 
appropriated funds for, to make sure that they are doing the 
job, the programs are doing the job that you want to have done, 
and that the people you want served are being served.
    And it's very important that, especially in our rural 
areas, where these community block grants are really essential 
to making sure that they're going to service providers, so that 
child care takes place, so that job training takes place.
    So these investments you heard are great investments, but 
they have to be connected to the people who need the services. 
Cutting those monies to social service and to community service 
block grants is a way of making those programs less effective.
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    Mr. Obey. Thank you very much.
    Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    I'd like to direct questions to, first to Dr. Lynch, and 
then to Dr. Holzer.
    Regarding Head Start, you talked about short-term analysis, 
short-term results, positive. I've heard that historically. 
Long-term study generally shows small to moderate improvement.
    The point, I guess, is that kids, once they get ahead from 
Head Start, and they get into a not quite so pro-education an 
environment, let's say, they start to lose that.
    Is that true? And what do you see causing this, and how do 
we deal with that?
    Mr. Lynch. Well, there is some accuracy to what you're 
saying, in that if you have children who go through a Head 
Start program and then subsequently go on to schooling that's 
of inferior quality, you see some of the initial benefits that 
they get start to fade.
    On the other hand, if we see those children going into 
reasonable quality schools to good quality schools, we see that 
those benefits last, the cognitive benefits.
    Some of the other benefits seem to last, regardless. For 
example, grade retention and need for special education seem to 
last, in either case.
    So it is important, therefore----
    Mr. Walsh. Grade retention?
    Mr. Lynch. In other words, the reduction in repetition of 
grades, so kids who were held back, that declines, and that 
seems to persist, regardless of the kind of quality school they 
go on to.
    But in general, if you want to maintain the gains that 
initially happen in Head Start, it is important to also invest 
in the quality of the subsequent schooling that children go to.
    Mr. Walsh. You mentioned that, after nine years, savings to 
the government of programs amounted to a 3:1 investment, 
positive return to the government.
    How do you--how do those savings come? How does that 
benefit accrue?
    Mr. Lynch. Yes. The savings are in about seven or eight 
different areas.
    One is, children who go through these programs are less 
likely to need special education, which is very expensive.
    They are less likely to be retained in grade. And every 
time a child is retained in grade, we're spending an extra 
$10,000, approximately, per year.
    Third, children who, and parents who go through these 
programs, they're much less likely to be involved in child 
abuse and neglect, and we save a lot of money in our child 
welfare system.
    Fourth, the children, as juveniles, and subsequently as 
adults, they're much less likely to be involved in criminal 
activity, saving us an enormous amount of money in the criminal 
justice system.
    Fifth, the parents who go through these programs, who have 
children in these programs, get the subsidized child care, and 
therefore they're more likely to go out and get a job and earn 
income and pay taxes.
    Sixth, the children who go through the program, they 
graduate from high school at higher rates, they go on to 
college at higher rates, they have higher earnings, and they 
pay a lot more in revenue to the government, as well.
    So all these different forms, these are enormous savings 
that we get. They don't all happen in year one, but they happen 
over time, and over the time they grow larger each and every 
year.
    Mr. Walsh. Thank you.
    Dr. Holzer, regarding workforce development, you said 
research was mixed on raising incomes, and yet you call for 
major new investment. Why? How do you explain that?
    Mr. Holzer. Well, very simply, a lot of the research 
evidence today is outdated.
    People still cite, and even in my statement, I still cite a 
random assignment study of JTPA, for instance, that's roughly 
two decades old.
    The program has likely changed quite dramatically since it 
morphed into WIA, and in fact, the evidence that we have on 
WIA, some of its non-experimental is really quite positive, 
especially on displaced workers and on adult services.
    And on many, many other----
    Mr. Walsh. So you anticipate that current programs are much 
more effective than past?
    Mr. Holzer. That's my guess. If you look at the whole new 
generation of programs, many of them focus much more on 
community college training, where there is evidence of 
effectiveness.
    Mr. Walsh. Right.
    Mr. Holzer. They engage the private sector more, sectoral 
programs, career ladder programs.
    So my anticipation is that the evaluation evidence will be 
more positive, but I also emphasize at the same time that we 
make these investments that we also invest heavily in 
evaluation, rigorous evaluation, so we get a better sense over 
time exactly of what works and maybe reallocate resources 
accordingly.
    Mr. Walsh. Okay. You also made the statement that we spend, 
it was something like, we spend a smaller amount as a percent 
of our federal budget--well, we spend a smaller amount as a 
percent of budget than all other countries, developed 
countries; was that the statement?
    Mr. Holzer. Virtually all other industrial countries, as a 
percentage of GDP.
    Mr. Walsh. Now, is that federal budget to federal budget? 
Or does that include BOSEs, community college, vocational high 
school? Does that include all of those things?
    Mr. Holzer. That includes--the figure comes from a study 
that USGAO did in 2003, and they went across all agencies in 
the federal government.
    Mr. Walsh. Just federal?
    Mr. Holzer. Just federal.
    Mr. Walsh. So it doesn't include state, doesn't include 
local, doesn't include community colleges, BOSEs, vocational 
high schools?
    Mr. Holzer. No, it does include some of them. It includes 
the portions of those programs that actually fund employment 
services, and as a percentage of GDP.
    Now, I'm quite certain that if you added in those other 
components, the state components and other things, that number 
would go up a small amount. It might be 2/10ths of a percent of 
GDP. It wouldn't dramatically change the qualitative result.
    Mr. Walsh. Okay. Thank you, Mr. Chairman.
    Mr. Obey. Ms. McCollum.
    Ms. McCollum. Thank you, Mr. Chair.
    To kind of follow up on that, I was with some German 
parliamentarians this weekend, and we were talking about 
Transatlantic trade and global competition and that.
    And what they were--what I was most surprised to hear, and 
I shouldn't have been, is that in Germany, they thought their 
commitment to worker training and retraining was 3:1 to where 
ours was, maybe 2:1 in some other parts of Europe, but a real 
high emphasis into lifelong learning skills for all workers.
    So if there's anything that you could follow up more and 
comment on that, I'd appreciate it.
    Another issue that I've been--and it kind of goes back to 
adults and it also goes back to young adults not necessarily 
making good decisions, young adults thinking that they aren't 
going to go to college or that they aren't going to need 
college, or people who have been out of high school maybe for 
10, 20 years needing math and science to go back in.
    They go to the community colleges. They spend a lot of time 
and energy doing remedial work to get up to a standard in order 
to start taking classes.
    I wonder if there's been any discussion about even to make 
it more cost effective and user friendly, especially in rural 
areas, to look at the way we view community education.
    In Minnesota, community education can also sometimes mean 
math, science, and writing classes for adults going back.
    If you have any comments you'd like to make on that.
    And then thirdly, and this isn't as related, but the 
housing foreclosures.
    One of the most important things, I can tell you as a 
teacher, is stability in a child's life.
    What brings a child the most stability is knowing that 
there's going to be a roof over their head and there's going to 
be a parent there, and there hopefully will be something 
nutritious on the table, and if you're from a cold weather 
climate like the chairman and I, that there's some heat in the 
house.
    What do you see the effect or are you concerned about the 
effect of what we're seeing with some of the foreclosures, 
especially in the areas that we're seeing now, and what should 
we be doing to prepare ourselves and our schools and these 
students, to give them an opportunity during what proves to be 
very, very tough times, especially for these families?
    Mr. Spriggs. If I can take a first stab at one of your 
concerns, and that is, the community block grants provide help 
for a lot of the agencies that do weatherization in rural areas 
and provide housing counseling.
    So now would not be the time to want to cut those programs, 
because a lot of those families that may be facing foreclosure 
need the housing counseling advice, and they need it from 
someone who will be impartial.
    One of the big problems out there is finding a paid-for 
housing counseling service that isn't tied to the industry.
    And weatherization is one of those great services that 
takes place, particularly in Minnesota and Idaho and Wisconsin, 
that these community action agencies provide. So keeping them 
in place would be very important.
    Mr. Holzer. I'll take a stab at least at the first question 
you raised about these international comparisons.
    And I agree totally. If we define more broadly, as Mr. 
Walsh suggested, that we should also include expenditures on 
vocational educational for high school students, college 
students, community college students, adult displaced workers, 
that's a broader concept, but if you defined it that way, the 
gaps between us and many of these other industrial nations 
would likely be even larger.
    And there we actually have quite strong evidence, high 
quality career and technical education for young people, so I'm 
not talking about old, old-fashioned voc ed. I'm talking about 
career academies, tech prep, those kinds of models. Those are 
very cost-effective. And yet we invest very little in them, and 
those investments have, if anything, diminished over time.
    So again, defining it more broadly that way makes the 
point, I think, even more valid.
    In terms of your point about community education, and I'm 
trying to think of other examples that would fit that model, I 
think there are some states, and I'm familiar with the state of 
Kentucky, that has developed a statewide model for all of its 
community colleges, to make that education much more accessible 
to low-income adults, as well as young people in all their 
sites across the state, and to link those training programs 
with employers.
    So they have these so-called bridge programs to try to 
remediate the basic skill deficiencies, and then to move those 
into more occupational based training.
    And without rigorous evidence on effectiveness, they look 
quite impressive, just in terms of what they've managed to 
achieve statewide. So one of many models that we might try to 
emulate in other places.
    Mr. Obey. We have this vote.
    [Recess.]
    Mr. Obey. Mr. Honda.
    Mr. Honda. Thank you. Thank you, Mr. Chairman, and the 
ranking member.
    Let me just say to the chairman, I appreciate having these 
witnesses today, because it validates the kind of things we 
sense education can really be, in the early childhood and 
workforce.
    The question I had was about early childhood or Head Start 
and its performance across the country. Although it's good, 
it's uneven, and I was hoping that you might be able to explain 
whether it's uneven through states or regions, and perhaps some 
of the dynamics that might contribute to the unevenness.
    Mr. Lynch. One of the issues is that, with Head Start, 
there are about 1,500 programs across the country, and while 
they all have to follow federal guidelines, they vary in terms 
of what they specifically do.
    And among important issues that we see is that in some 
areas, the requirements, for example, for teachers are much 
higher than in other areas, so in some areas, all the teachers 
have Bachelor's Degrees, and even maybe certification in early 
childhood education, and we know from the research that that's 
extremely helpful in terms of improving the outcomes, versus in 
other areas, many of the teachers only have a high school 
degree.
    So there's going to be a variation across the programs, 
because while they follow the federal guidelines, there's a lot 
of internal differences in what they're actually doing.
    Mr. Honda. The guidelines don't require a certain level of 
preparation before you teach or before you're involved in it?
    Mr. Lynch. No, they require just a high school degree.
    Mr. Honda. Okay. So that sort of suggests the need for some 
sort of in-service training for upgrading the training?
    Mr. Lynch. Absolutely. That certainly would suggest--one of 
the things that we find is that if you were to improve the 
qualifications and training of the teachers and staff, that 
does generate enormous benefits to the children.
    Mr. Honda. This difference in preparation or requirements, 
is that a phenomenon by regions or is that something that's 
just scattered?
    Mr. Lynch. It varies by state, often, because of state 
requirements.
    While again, everyone follows the federal requirements, 
every state has their own specific requirements that may or may 
not go beyond the federal minimum requirements.
    Mr. Honda. Okay.
    Mr. Lynch. So some states have much more rigid requirements 
than others.
    Mr. Honda. In the discussion about the children's 
continuing success as they go on, and when they don't have a 
program that has had Head Start in it, what is the impact of 
parents being exposed to Head Start, and are there components 
of Head Start that have parent education, that would suggest 
that their participation does help youngsters' continuous 
growth?
    Mr. Lynch. Well, we know that when parents participate in 
the education of their children, in these early education 
programs, that, again, there too, the outcomes tend to improve 
for the children.
    And we also know that many of the Head Start programs have 
classes for parents, specifically have training for parents 
specifically, and that improves a number of things, for 
example, the incidence of hitting or slapping, the kind of 
discipline that parents use.
    So there are benefits directly to the kids from their 
parents participating, and there's benefits to the parents 
themselves, in terms of being better parents by participating 
in the programs.
    Mr. Honda. You mentioned that when a youngster is involved 
in Head Start, there's less need for special education.
    Do they assess youngsters for special education at the 
third and fourth year or is this just because of the program or 
the strategies that the kids go through?
    Mr. Lynch. What we find is that when the children enter the 
public school system, K through 12, that fewer of them are 
found to require special education if they had quality 
preschool before they go into the K through 12.
    So it seems to be an outcome that's a consequence of the 
education and the training and the emotional development that 
happens in the early, in the third and fourth--excuse me--when 
they're three and four years old.
    Mr. Honda. So it's not so much academic preparation, it's 
more socialization and----
    Mr. Lynch. This is one of the key things that I think is 
often misunderstood, is that among the benefits of early 
education are, some of it is definitely the cognitive outcomes, 
you know, achievement test scores and things like that, but 
many other benefits are the social and emotional development, 
less aggressivity, more persistence.
    And we know that this ability to control your emotions and 
be persistent, stick to it, have enormous benefits, and indeed, 
are more predictive of outcomes over life than are things like 
IQ test scores.
    And there is some evidence, of course, that IQ test scores 
do--improvements in IQ test scores tend to fade over time, but 
these other benefits persist.
    And it's a little bit like saying that antibiotics don't 
cure the common cold, and therefore the antibiotic is 
worthless. No, that's nonsense. Antibiotics may not cure the 
common cold, but they generate enormous other benefits in terms 
of lung infections, sinus infections, et cetera.
    And it's the same thing here. We know that the early 
education may not a huge impact in terms of IQ test scores, but 
in all these other areas, they do, and these have long-lasting, 
lifelong consequences, and that's very important.
    Mr. Honda. Thank you.
    Mr. Obey. A lot of questions, very little time.
    Dr. Lynch, you talked about Head Start and the economic 
value of providing more support for it.
    Based on your work, my staff estimated that the 
$164,000,000 cut from the Head Start program could cost as much 
as $1,200,000,000 over 40 years in lost government tax revenue, 
reduced individual earnings, and increased costs from crime and 
child abuse.
    Is that a reasonable estimate, and if not so, why?
    Mr. Lynch. Oh, it's definitely a reasonable estimate, and 
indeed it could be larger than that.
    One of the issues is that that estimate is based on the 
things that we know that we can quantify, but there are also a 
number of other benefits that are very difficult for us to 
quantify in monetary terms.
    For example, children who go through Head Start and other 
early education programs are less likely to be teenage parents. 
What's the monetary value of that? They are less likely to 
abuse alcohol and drugs. What's the monetary value of that? 
That's not included in that estimate.
    So that is a reasonable estimate for the things that we 
know that we can quantify, but it does not include all the 
benefits.
    Mr. Obey. Mr. Rudin, we often hear the argument that it's 
wrong to tax lower income people or middle income people in 
order to pay for increased college benefits for people who will 
wind up in the higher end of the income ladder.
    Yet your statement indicates that there's a ripple effect 
which increases income for non-college people as well as people 
who go to college, and you indicate that I think you said 
there's a 1.9----
    Mr. Rudin. Percent increase.
    Mr. Obey. Explain that.
    Mr. Rudin. Yeah. That's a----
    Mr. Obey. What I'm getting at is, I'm very suspicious of 
numbers. I think almost anybody can put together any numbers 
they want.
    How do you arrive at that specific conclusion?
    Mr. Rudin. The economists that did this study, what they 
did is they looked at whether the spillover effect, they called 
it, of having more college-level educated people in a community 
would affect the earnings of low-income citizens, and in fact, 
it did. It drove up their earnings. For each 1 percent more 
college graduates in the community, it increased the earnings 
of non-high school graduates by 1.9 percent.
    Mr. Obey. How did they reach that conclusion? What's the 
mechanism by which that occurred?
    Mr. Rudin. Yeah. They did a study of several cities, and 
they looked at both the productivity, and therefore the--first, 
they looked at how many students were--how many of the workers 
were college educated, and then they tried to measure the 
productivity in terms of the wages of both the college 
graduates and the high school and non-high school graduates.
    What they found, and we think this is important, it does 
illustrate that the broad benefits of an investment in higher 
education are significant. You can get benefits that accrue to 
people who don't go to college when you increase the percentage 
of college graduates in the workforce.
    The reason why is there's an increase in productivity, 
there's a likelihood that you have better and more efficient 
use of new technologies, the likelihood of increased 
opportunity to be innovative and creative, and the likelihood 
of greater communications between and among workers in a 
workforce.
    And finally, when a community suffers an economic shock 
from the closure of a plant or the closure of a business or an 
economic downturn like we're in today, you have workers who are 
probably more likely to have the flexible work skills to absorb 
that, that economic shock in the community, maybe start their 
own businesses, maybe ease into another job because of their 
college degree, and that can raise the overall economic 
productivity of a community, large or small.
    Mr. Obey. Your statement indicates that in recent years, 
increased college enrollment has been almost exclusively in the 
upper half of the income distribution.
    The administration is recommending that we zero out the 
SEOG student aid program. That's what, a $757,000,000 
reduction.
    Is it fair to say that the elimination of funding for that 
program is likely to add to the education disparity, and also, 
therefore, add to the income disparity in this society?
    Mr. Rudin. Well, we think that is a fair statement.
    That program serves the people who need access to financial 
aid the most, the neediest students, particularly at a time 
when Pell grants, the purchasing power of a Pell grant has 
declined in the last 20 years from about half of the cost of 
college to about a third of the cost of college. To suggest 
further cuts, we think would be pretty devastating to the 
people who need the greatest access to financial aid.
    Mr. Obey. Dr. Holzer, you indicated that we are investing 
today in job training programs, that we've had about what, 
about a 75 percent reduction from the high point? That's in job 
training programs.
    The administration is now recommending that we zero out the 
vocational education program.
    What conclusion do you reach about the advisability of that 
decision, and what effect is it having on the quality of 
America's workforce and the ability of families to become 
economically upwardly mobile, shall we say?
    Mr. Holzer. I think that's ill-advised. I think the area of 
vocational education is one of the areas where we have--is it 
on now?
    I think the area of vocational education is one of the few 
areas where we have very solid, rigorous evidence on what 
works, what's cost effective, and I think those federal funds 
do help to fund career academies, tech prep programs, and a 
variety of newer models that are really much more effective 
than the older generation of vocational education was, and 
these are programs that not only benefit lower income 
Americans, but some of our most at risk populations, while 
they're still in school benefit in terms of higher earnings 
once they graduate, and these benefits persist for at least 
four years after they graduate, so this is really a penny wise 
but pound foolish approach, I think, to cut in areas where the 
need is great and where the evidence of what works is very 
clear.
    Mr. Obey. Dr. Spriggs, the administration is also asking 
for a reduction in the low-income heating assistance program of 
roughly 22 percent.
    I have constituents in my district--two weekends ago it was 
28 below zero. I'm talking about real temperature, not the 
chill factor. Ten days earlier, it was 38 below zero.
    And the problem in our state is that right now the state 
forbids energy companies from cutting off people's heating 
supplies, even if they haven't paid their bills, but that 
expires in April.
    I've got constituents who make 15,000, 18,000 bucks, who 
have a $4,000 heating bill. I don't know how in hell they're 
going to pay that.
    And we have such a small percentage of people who are 
eligible for LAHEAT, who are in fact collecting.
    You talked about using programs like the community service 
block grant in order to plug people into information about what 
they're entitled to, where they can get help. How do you tie 
those two together?
    You've got a lot of people in this Congress who think that 
programs like CSBG are just liberal social fantasy programs, 
it's money down a rathole.
    Are there any specific examples you can give about the 
direct benefit of those programs to low-income people?
    Mr. Spriggs. Well, specifically, in the case that you just 
raised, about access to LAHEAT, and in particular the CSBG 
agencies themselves overwhelmingly are the major source of 
weatherization help for low-income families.
    Mr. Obey. Can you give me examples of how they might help 
to plug people into health care networks that they otherwise 
would not plug into?
    Mr. Spriggs. One of the things that the community action 
partnerships do and the community action agencies do is tie 
the, especially the old age and children, directly into 
programs that they need.
    The mother who is trying to keep a job, isn't on TANF but 
needs to connect to child care services, or the mother who is 
taking care of an elderly parent and needs assistance in 
getting adult day care and access to that, that's what these 
programs do. They connect the individuals to these types of 
services.
    So withdrawing those services means that you would lose a 
potential worker. She would have to stay home in order to take 
care of her parents, or she might have to stay home to take 
care of her children. So these are the kind of gaps that are 
filled.
    And foster care--most of the hard-to-place children receive 
assistance through the foster care programs, again done either 
by the state or in partnership through the CSBG agencies.
    So you have young men who present severe mental problems 
because of all the stress and strains they've been put through, 
and those families couldn't take on the burden of dealing with 
a foster care child with those issues, if they didn't have 
access to these programs.
    So it's really filling the holes for folks who would 
otherwise fall through the cracks of programs we are already 
funding, but they can't connect to the programs.
    Mr. Obey. One last question.
    We have a lot of concern in this society about abortion. We 
have a lot of political controversy about it. But I don't know 
of very many people, if any, who are thrilled by the idea of 
abortions.
    We always look for ways that we can minimize the pressure 
on women to have an abortion.
    How do you think these programs fit into that? Of what 
utility is a program like community service block grant, for 
instance, in taking the pressure off women, economically, to 
have an abortion and not carry their fetus to full term?
    Mr. Spriggs. Well, even before that stage, many of the CAA 
agencies are the way in which family planning gets funneled, 
not family planning in that sense, but family planning in sense 
of encouraging marriage. This is where marriage counseling 
takes place, and that sort of thing.
    So the route through which people could get help who might 
not otherwise have the money for getting that kind of 
counseling, that's how we funnel that money.
    And at the local level, to provide the safety net that lets 
the women know that there would be access to child care, that 
there would be access to other support systems, that's how she 
knows that's going to take place.
    So it's the existence of these programs that can reassure 
her that there will be help, that she won't be on her own, and 
that there will be services that could help her through the 
problem.
    Mr. Obey. Thank you. Just one other thing with respect to 
health care.
    In Portage County, in the southern part of my district, the 
local CAP agency works with programs like the community service 
block grant in order to provide access to dental care for 
thousands of poor people who otherwise would have no ability to 
get it.
    I've been told of several cases of people who have actually 
died because of dental problems that have gotten out of 
control.
    So I think there are many indirect benefits for funding of 
programs like that, that aren't generally recognized.
    Mr. Walsh, any other questions?
    Mr. Walsh. No, thank you, Mr. Chairman.
    Mr. Obey. Anyone else?
    [No response.]
    Mr. Obey. All right. Thank you all very much. It's a 
miracle we managed to finish before the next roll calls.
    Thanks again.

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                                          Wednesday, March 5, 2008.

                      EXPANDING HEALTH CARE ACCESS

                               WITNESSES

JEANNE LAMBREW, PH.D., ASSOCIATE PROFESSOR OF PUBLIC AFFAIRS, 
    UNIVERSITY OF TEXAS, AUSTIN, TEXAS
DEBORAH CHOLLET, PH.D., SENIOR FELLOW, MATHEMATICA POLICY RESEARCH
GREG NYCZ, EXECUTIVE DIRECTOR, FAMILY HEALTH CENTER OF MARSHFIELD INC.
RICHARD POPPER, EXECUTIVE DIRECTOR, MARYLAND HEALTH INSURANCE PLAN
    Mr. Obey. We are missing one witness, but I think we will 
get started anyway.
    As I have noted several times before in these hearings, we 
are taking a lot of testimony. We will be having a lot of 
debate and discussion about where we ought to be putting our 
money in terms of programs under the jurisdiction of this 
Subcommittee, and that discussion usually takes place in terms 
of what does it cost to do this, what does it cost to do that, 
what does it cost to do that. We do not very often have a focus 
on what it costs not to A, B, or C, and that is basically what 
I want to get into today.
    We have a lot of subjects before this Subcommittee. One of 
them that I am most interested in is the question of access to 
health care. I do not care about people's political theology. I 
do not care whether health care services are delivered at the 
local level, State level, Federal level. I do not care. I could 
care less if we have a system that is seen as largely a 
government-oriented system or a privately-oriented system.
    What I care about is whether every blessed human being in 
this Country has access to the health care they need without 
sweating. So we have a number of witnesses here today, I think, 
who can walk us through the cost of not meeting these needs.
    There is one other aspect that I would like to focus on, 
because I believe that regardless of what the rhetoric is in 
the Congress or in this town, I believe that whoever is elected 
president next time is going to have no choice but to deal with 
the question of universal health care, and if that is the case, 
then the question is since we do not have jurisdiction over 
that issue--but we do have responsibilities with respect to a 
large variety of health programs in this bill--the question is 
what efforts should we be focusing on, what programs should we 
be focusing on; what programs should we be expanding or 
changing in order to try to prepare the health care system for 
the day when we will have universal coverage and universal 
meaningful access.
    So that is basically what I want to talk about today.
    Before I call on our witnesses, let me simply ask Mr. Walsh 
for any comments he might have.
    Mr. Walsh. Thank you, Mr. Chairman. Thank you for holding 
this hearing. I very much appreciate your comments regarding 
universal health insurance, universal access to health care. I 
think that you are right, I think whoever is the next president 
will need to deal with this in a realistic way during the 
campaign and as president, and I think it is a debate that the 
Country is ready for.
    I very much appreciate the opportunity to hear from our 
witnesses today, all from the different perspectives on health 
care and access to health care. I think your views are very 
important to us in our consideration of this important issue.
    I do note that Dr. Chollet has a degree from Maxwell School 
at Syracuse University, which is a great school. It is the 
number one school of citizenship and governance in the Country. 
My son has a degree from there also, for which I am very proud.
    So we welcome you today and----
    Mr. Obey. What a case of rampant conflict of interest. 
[Laughter.]
    Mr. Walsh. She was not my witness, Mr. Chairman, but I am 
delighted that she is here.
    This is a key issue for us going forward, and we welcome 
your testimony and look forward to asking a few questions and 
delving into your expertise.
    Thank you, Mr. Chairman.
    Mr. Obey. Thank you.
    Dr. Jeanne Lambrew is a professor at the Lyndon B. Johnson 
School of Public Affairs at the University of Texas at Austin; 
Dr. Deborah Chollet is Senior Fellow at the Mathematica Policy 
Research; Mr. Greg Nycz--in the interest of full disclosure, I 
should confess that I have known Mr. Nycz for many years. I 
regard him as a good friend--he is Executive Director of the 
Family Health Center at Marshfield, Wisconsin; and we do not 
have him here yet, but I expect he will be here shortly, 
Richard Popper, Executive Director of the State of Maryland 
Health Insurance Plan.
    So let me ask each of you--we will put your statements in 
the record--if you would summarize your statements, then we 
will get to the questioning.
    I want to begin with you, Dr. Lambrew.
    Ms. Lambrew. Chairman Obey, Ranking Member Walsh, and other 
members of the Committee, I thank you for the opportunity to 
testify today on expanding access to health care. I do need to 
apologize; I lost my voice. I sound worse than I feel, but I 
will try to get through this. And I also have some figures I 
will be referring to that are in my submitted statement.
    I also want to thank you for your contributions to 
improving the health of vulnerable Americans. Your jurisdiction 
over programs that have served as a literal lifeline to people 
have really made a difference, the access in our Nation, and I 
also think it is commendable that the way you are looking at 
the broader issues of health access today.
    What I would like to do in my testimony is review the 
evidence that suggests that health reform should be at the top 
of the next Congress's agenda. I will do that by looking at a 
snapshot of the system, looking at trends, reviewing the 
research and the implications of our broken systems. In 
addition, I will offer several observations about solutions 
that are being considered.
[GRAPHIC] [TIFF OMITTED] T3194B.001

    Ms. Lambrew. But, to start with, nearly one in five of all 
Americans reports some sort of access problem, meaning that 
they cannot access health care because of cost. This largely 
results from lack of health insurance coverage. We have 47 
million Americans who lack health insurance at a point in time, 
but to put this into perspective, as you can see in Figure 1 in 
the testimony, that is more than the whole population of the 
West Coast of the United States, it is more than the population 
of Canada, and it is double the number of people who have 
diabetes in this Nation. It is a large problem.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T3194B.002
    
    Ms. Lambrew. But even looking at those statistics is 
misleading and kind of understating the problem. As you can see 
in Figure 2, fully one out of three Americans, 82 million 
Americans, has some gap in coverage over the course of two 
years; and even having a small gap in coverage means a person 
behaves more like an uninsured person than an insured person in 
terms of their access patterns.
    [The information follows:]

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    Ms. Lambrew. While it is a common problem, we also know 
that there are patterns among the uninsured. Age matters. When 
you look at Figure 3, which kind of shows your insurance status 
from age and the different types of insurance, we see that 
Medicare does provide universal coverage for our seniors. We 
have virtually no uninsured seniors. Look at the other end of 
the spectrum. We have very few uninsured children. Clearly, 9 
million uninsured children is a lot, but the rate of uninsured 
children is less than that of any other non-elderly population.
    Young adults have the highest uninsured rate, primarily 
because they are losing access to their family coverage and 
they experience significant work transitions. And then we see 
older adults who are not yet eligible for Medicare have a low 
uninsured rate, but they are at risk for all sorts of health 
problems and cannot easily access health coverage when they 
need it.
    So we have age patterns. We also have work patterns. What 
we do know is that, contrary to popular perception, about four 
in five uninsured Americans are in working families. About 83 
percent of people who have access to employer-based insurance 
enroll in it, but we see a lot of people who do not have access 
to employer-based coverage. Why is that? Part of it is because 
small firms are not likely to offer health insurance coverage. 
Only 45 percent of firms with fewer than 10 employees offer 
health insurance today.
    Firm type matters as well. As you can see in Figure 4, we 
have different patterns. Retail firms are much less likely to 
offer health insurance coverage than manufacturing or State or 
local governments.
    In addition to work and the work patterns we see in our 
uninsured problem, we also have income patterns. About two-
thirds of our uninsured Americans have income below 200 percent 
of the poverty threshold, which is about $21,000 for a family 
of four. Only about 36 percent of low income workers have ever 
even been offered health insurance, even though they are more 
likely to take it when they get it, and they have few 
affordable options in the individual market. So we all know 
income matters in our health insurance system.
    But before I kind of turn to the trends, I do want to say 
un-insurance is one problem, but under-insurance is another 
one. Because the costs of premiums and health care cost sharing 
have risen faster than wage growth, we see that about 16 
million people are under-insured, meaning they are paying a 
large fraction of their income out of their pocket even though 
they have a health insurance card. This is a big problem for 
personal bankruptcies. We know that in 2001 about half of all 
personal bankruptcies were caused by medical debt.
    [The information follows:]

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    Ms. Lambrew. In addition, when you look at Figure 5, you 
see that when we look at people who are in the individual 
market who have low income and high costs, they are paying as 
much out-of-pocket as uninsured people. Their health spending 
comprises about 50 percent of their income, which is pretty 
startling for somebody who actually has health insurance.
    [The information follows:]

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    Ms. Lambrew. So looking at these grim statistics, people 
wonder is it getting better or worse. Unfortunately, we see in 
Figure 6 that we have had a significant growth in our uninsured 
population. The number of uninsured Americans has growth at a 
rate that is three times that of population growth and seven 
times that of job growth.
    We also have seen that the profile of the uninsured has 
changed recently. Almost all of our uninsured growth is amongst 
adults, not children, and that is thanks to the children's 
health insurance program and Medicaid that have served as a 
Safety Net.
    [The information follows:]

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    Ms. Lambrew. In addition, we have seen the uninsured kind 
of creeping into the middle income distribution. When you look 
at Figure 7, you can see--and it is a little bit of a 
complicated chart--that we are seeing kind of constant growth 
of the uninsured amongst medium-and high-income people; was, 
the low-income population kind of ebbs and flows with the 
economy, depending on how we are doing. So we actually can 
anticipate, with the economic downturn, we will see more low-
income uninsured, but t has been a steady erosion of coverage 
among middle-income Americans.
    Why is this happening? We all know it is because employer 
coverage is declining. The rate of firms offering coverage has 
dropped from 69 percent to 60 percent just since the year 2000, 
more precipitous decline among small firms. This is because 
costs are climbing. Again, since the year 2000, we have seen 
premiums cumulatively increase by 98 percent; was, wages have 
only grown by 22 percent, eating away at our wage base as well 
as diminishing our employers' competitiveness.
    [The information follows:]

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    Ms. Lambrew. Looking at patterns across States, you see one 
State and we see patterns across all States, but the uninsured 
population is concentrated primarily among low-income States; 
not a surprise when health insurance is so expensive. So if you 
look at the map that we have shown you on Figure 10, what we 
see is we have lot of uninsured people in the South and 
Southwest. Being from Texas, we have the highest rate of 
uninsured in the Nation, and you can see it is partly because 
of the job structure: fewer manufacturing jobs, more service 
industry jobs, more part-time work.
    [The information follows:] 

    [GRAPHIC] [TIFF OMITTED] T3194B.008
    
    Ms. Lambrew. In addition, we cannot correlate that with 
high health care costs. The next chart shows that we basically 
have different patterns for high health care spending. We have 
higher health care spending in the Northeast primarily, with a 
swath kind of in the middle part of the Country. How does that 
relate to things? We know that there are higher costs of living 
and higher aging populations in those States.
    But it does not quite correlate with everything else we 
think. We do not have a good relationship between costs and 
quality. So, for example, even though you can see high costs 
areas in the Northeast, we do not necessarily see better 
outcomes in the Northeast. So we have a cost problem that is in 
a different place than our uninsured problem.
    But if you look at the third map on Figure 12, what we see 
is that when we look at cost growth the whole Nation is 
affected. We really kind of see that every State has this 
problem of high health care cost growth, so the States that are 
low now are going to catch up to the other ones quite quickly.
    Before talking about the consequences of these patterns, 
though, I have to say that racial variation is as important as 
geographic variation. We have large serious racial disparities 
in our coverage patterns so that we know that African-Americans 
are uninsured at a rate of 22 percent and Hispanics at a rate 
of 36 percent compared to 13 percent for white Americans. This 
contributes, but does not fully explain, why we have racial 
disparities in our health system.
    Why do these statistics and trends matter? We know that 
being uninsured is associated with worse access. Uninsured 
people are 25 percent more likely to report delaying or 
foregoing needed care. We know that about 22,000 people die 
each year because of lack of health insurance. To put that into 
perspective, that is more than the number of homicide deaths in 
the U.S. in the same year. We also know it affects health and 
financial security; that it is a family problem, it is a 
business problem. We know it is an economic problem. Having 
these uninsured people diminishes our economic prosperity by 
$65,000,000,000 to $130,000,000,000 each year.
    But I do want to say, as I think Chairman Obey indicated, 
that access to coverage is important, but it is not sufficient, 
because we do need to have high quality coverage and a Safety 
Net that makes sure that people can get access to the care that 
they need. We are lacking an adequate supply of primary care 
providers, as this Committee knows. For example, between 1997 
and 2005, the number of medical school graduates entering 
family practice dropped by 50 percent.
    We also have non-financial barriers to access that 
persists, anywhere from lack of information about when and how 
to access the system to subtle forms of discrimination that 
still pervade our system. So a health reform plan designed to 
improve access should start with expanding coverage and 
improving efficiency, but cannot end there. It really has to do 
more to succeed in promoting access to valuable health care.
    I will end by just making three comments about the 
solutions that are out there. Clearly, we are hearing a lot 
about health reform in this particular presidential election, 
but I think it is also something that the Congress has 
consistently put on the table every year, including members of 
this Committee. Rather than discussing these ideas in depth, I 
think there are three comments that I would make for each of 
these proposals.
    One is that it is important to recognize we cannot address 
one without the other. We have to address the costs and quality 
of access problems simultaneously because, if we do not address 
costs, the access problems will persist.
    Second, we really have to look at, probably, national 
solutions. States have and can provide us with frameworks and 
feasibility of different ideas and solutions. They really are 
responsible for local quality and kind of innovation. At the 
same time, we have to recognize the fact that we cannot 
construct an effective and efficient system State-by-State. 
There are different challenges that the States face, both 
structural--like balanced budget requirements--as well as 
challenges that Deborah Chollet will talk about. It also, going 
State-by-State, tolerates similar inequality. If we have more 
uninsured people in low-income States, by definition those low-
income States cannot do much about them. So if we are really 
going to try tackling this problem, we have to do it 
nationally.
    I will say, lastly, that in this time of debate--and I 
think, Chairman Obey, you said this at the start--we cannot let 
the perfect be the enemy of the good. There are solid ideas out 
there that can be crafted. I think we see a lot of commonality 
among some of the proposals that have been put on the table. 
But, most importantly, I think that the need for action is now.
    So I will stop, and thank you again for the opportunity to 
testify.
    [The information follows:] 

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    Mr. Obey. Dr. Chollet.
    Ms. Chollet. Mr. Obey and members of the Committee, good 
morning and thank you for inviting me to testify this morning. 
I also commend you for your sincere interest in this topic and 
your concern about access to care for all Americans.
    The Robert Wood Johnson Foundation State Coverage 
Initiatives issues each year a State of the State Report, and 
in the last year I think aptly said that for many States that 
are moving forward, the status quo is no longer an option. And 
it is no longer an option for the reasons that Dr. Lambrew 
indicated: Costs are out of control, coverage is eroding, 
access to care is impeded, and the impediments to access to 
care also reflect the quality of care and ultimately the cost 
of care. So this tangle of problems has become intolerable in 
virtually every State, but some States have begun to act on it.
    You asked me to address the current and the planned State 
comprehensive access initiatives. My written testimony 
addresses the initiatives in four States--New York, Maine, 
Vermont, and Massachusetts. The planned initiatives in other 
States generally are variants on these. The States that are 
moving forward have taken pages from the books of these States 
and combined them in ways that are unique and still changing as 
we speak, as the legislatures continue to debate these 
questions either in regular session or in some States, like New 
Mexico, in special session. So those questions and the 
configuration of their initiatives is changing as we speak.
    But I would like to go back to these four initiatives which 
have become the templates for reform in many States. While they 
have many details and they differ from each other, they have a 
few elements in common that I think are key.
    The first is that each serves small group workers and 
individuals with income above the State's Medicaid and CHIP 
eligibility levels, but for whom conventional insurance is 
clearly unaffordable. Medicaid and CHIP stop in most States 
around 250 percent of poverty or less, and health care in most 
States is unaffordable below 300 percent of poverty, leaving a 
large gap of adults and children without access to insurance, 
especially if they are not offered insurance through an 
employer.
    The second is each of these programs offers deep subsidies 
to these target populations in order to make health care 
affordable; not only to make the premium affordable, but in 
some States, depending on the configuration of the product, to 
make the out-of-pocket spending that Dr. Lambrew referred to 
also affordable.
    The third is that each hopes to encourage small employers 
to continue to offer coverage, but none relies on this 
strategy. Each expects to serve large numbers of individuals as 
group coverage erodes, especially for low-wage workers. None of 
them anticipate that that erosion of coverage in the group 
market is going to stop any time soon, and, in fact, they all 
expect that it will ultimately play out to a dominantly 
individual health insurance market in their State, especially, 
as I said, for this target population of low wage workers.
    And, finally, each offers a defined insurance product or 
set of products that compete in the commercial health insurance 
market and, as a result, these programs anticipate that it 
would be entirely possible that they would become the dominant 
insurer for the segment of the population that they would 
serve, that is, individuals and small group workers.
    There are some essential differences in this strategy and 
my written testimony goes through some of them in great detail 
or in significant detail.
    One, the Healthy New York program is a reinsurance program; 
it is not a direct insurance program. It works with HMOs and 
picks up a portion of the costs--generally called a corridor 
reinsurance strategy--picks up a portion of their costs between 
$5,000 and $75,000 per worker or per enrollee per year, so that 
when the enrollee's premiums accumulate to $5,000, Healthy New 
York kicks in 90 percent of the cost at that point for each 
dollar spent, up to $75,000. Above $75,000, the carrier is 
expected to privately reinsure or otherwise retain the cost of 
that coverage.
    Healthy New York is offered through HMOs in the State. HMOs 
are the predominant source of style of coverage in New York 
State, so the Healthy New York product is available in every 
community.
    Maine operates the Dirigo Choice program, which serves 
small group workers and individual residents with incomes below 
300 percent of poverty. Dirigo offers three comprehensive 
health insurance products, each with high deductibles, each, 
when not subsidized, is qualified for a health savings account. 
The enrollees below 300 percent of poverty are subsidized in 
two ways: their premium is bought down by the program so that 
they are paying an income-scaled premium; the deductible is 
bought down so that the deductible, that very high deductible, 
is income-scaled for enrollees below 300 percent of poverty; 
and the out-of-pocket limit is reduced to make both the premium 
and the uninsured expenditures in the plan more affordable to 
low income families and individuals.
    Vermont operates a program called Catamount Health, which 
is a standard PPO product with a $250 deductible, relatively 
low. It subsidizes premiums for employees also below 300 
percent of poverty. It is a little different from the other two 
programs in that it relies directly on an employer assessment--
and I will come back to that issue because it relates to the 
ERISA question that has already come up.
    Vermont is also, unlike the other programs, committed to 
considering an individual mandate requiring all of their 
residents to obtain and keep health insurance coverage if in 
fact the combination of the Catamount Health plan, outreach 
efforts to enroll eligible residents in Medicaid, and Dr. 
Dynasaur, their CHIP program, do not achieve 96 percent 
coverage by 2010. So they are on a track to reconsider the 
success of this program in just a couple of years.
    Massachusetts has enacted arguably the Nation's most 
comprehensive set of reforms in 2006. Effective in 2007, 
Massachusetts now requires every resident to be insured. It 
blended its small group and individual market so that the 
products that are available to small groups are available to 
individuals at the same price. It established a connector to 
vet and market health insurance plans to individuals and small 
groups. Within the connector, it established Commonwealth Care, 
which is a program to subsidize individuals with income below 
300 percent of poverty, to help them meet the mandate to obtain 
coverage.
    Massachusetts, at the same time, expanded its Medicaid 
program so that all children at 300 percent of poverty are 
eligible for Medicaid. That means that the Commonwealth Care 
program is targeted to adults below 300 percent of poverty, 
while their Medicaid program picks up children.
    It also assesses employers, like the Vermont program, to 
pay for each worker who is uninsured. But it is also, like the 
Catamount program, a very nominal assessment so as to not 
basically antagonize ERISA.
    In addition, Massachusetts requires all employers with at 
least 11 employees to offer a Section 125 plan, sometimes 
called a cafeteria plan, to help individuals pay for health 
insurance with pre-tax dollars. That means that individuals who 
are offered an employer plan, many of whom, surprisingly, do 
not have access to a Section 125 plan, can begin to pay their 
contributions to care with pre-tax dollars, reducing the cost 
of their premiums by as much as a third.
    In addition, individuals who do not have an offer of an 
employer-based plan can use their Section 125 plan to buy 
individual premiums through the Connector or elsewhere.
    And, finally, Massachusetts focused on preserving the 
Safety Net, recognizing that this is a work in progress; and 
they combine and rationalize their streams of funding to 
support Safety Net providers in an uncompensated care trust.
    You asked me to comment on whether the individual State 
programs, such as these programs, could build toward a national 
system ensuring access to care for every American, and I 
believe that they could. But not without a Federal vision and 
not without Federal leadership.
    Every State that seeks to ensure access to coverage for all 
of its residents has to navigate a maze of Federal laws and 
regulations related to their Medicaid and CHIP programs; 
related to ERISA, which governs employer-sponsored health 
insurance benefits, both insured and self-insured in many ways; 
various provisions of the Internal Revenue Code that interact 
with other Federal laws; HIPAA, the Health Insurance 
Portability and Accountability Act, which governs small group 
coverage at the Federal level--at least sets out basic rules 
for small group coverage and some basic rules for individual 
coverage in the States as well. And the process of navigating 
these kinds of Federal rules and regulations is arduous. Every 
State that enacts comprehensive reform sets itself up, in 
effect, for a challenge based on one of these laws to either 
have their laws preempted or sets themselves up to somehow run 
afoul of Medicaid and CHIP regulations and risk loss of Federal 
funding for those programs.
    Nevertheless, I believe that there is a very strong reason 
to pursue State-based systems of reform within a Federal 
vision, and that is largely because the States are closer to 
the problems of access and, therefore, State policy-makers can 
be more accountable to problems of access on an ongoing basis. 
In addition, the States have a long history of insurance market 
oversight and consumer protection, and that history really 
should be maintained and strengthened with a national guarantee 
of access to coverage, not overruled or offset.
    So, with those comments, I again thank you for the 
opportunity to testify and look forward to a further 
conversation.
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    Mr. Obey. Thank you. Mr. Nycz.
    Mr. Nycz. Chairman Obey, Ranking Member Walsh and other 
members of the Subcommittee, we heard kind of an excellent 
national review and an overview of what is going on in the 
States. I want to take you down into the trenches in terms of 
what is happening in community health centers in delivering 
care directly to people.
    Our community health center is located in North Central 
Wisconsin. We cover about 8700 square miles of territory and we 
provide medical, mental health, oral health, and pharmaceutical 
services to approximately 50,000 low-income people in our 
State.
    On behalf of our patients, volunteers, and board members, 
the staff of more than 1100 community health centers 
nationwide, I would like to thank you for the trust you have 
placed in the community health center programs to help us help 
people and return real value to the taxpayer and the health 
care system.
    This Subcommittee has put in place a primary health care 
infrastructure that each year touches the lives of over 17 
million Americans, and I hope you are justly proud of that 
work, because it means a ton in our communities. With your 
help, we are capable of expanding this system of care to reach 
30 million Americans by 2015.
    In the coming health care debate, policy-makers and 
advocates must focus not only on providing everyone insurance, 
but on building and strengthening the critical infrastructure 
needed to put that insurance to use in our rural and inner city 
communities.
    I want to share three specific examples that demonstrate 
the importance of the investment you make in community health 
centers and why strengthening that infrastructure must be a 
critical component of any health care reform proposal.
    Those of you from rural States understand the difficulties 
many smaller, more isolated communities have in recruiting and 
retaining physicians, let alone dentists, mental health 
providers, and pharmacists. In partnership with their 
communities, community health centers are solving these 
problems while providing vital health care services and badly 
needed economic boosts for their communities.
    A number of years ago there was talk of de-funding Northern 
Health Centers, which serves Northeastern Wisconsin. It is a 
predominantly very pretty part of the State. The concern was 
that they were a small center and they had perennial problems 
with provider vacancies. I volunteered to help them. At a 
meeting with Federal officials, a young man from the community 
made this point: ``I have a master's degree, I have a great job 
with the school system, and I have great insurance, but on a 
snowy winter night, when my wife and I were awakened by our 
sick child, we realized we had lost something very special: 
access to health care.'' With slippery roads and the nearest 
hospital 45 miles away, they anguished over what to do. He 
said, in the past we could call the health center and a 
provider would meet them down at the health center and take 
care of their child. He said he wanted his health center back. 
And so did over 5,000 rural residents who signed a petition 
circulated throughout the area.
    The point made was if not the health center program, then 
who would help their community? With a show of strong local 
support, the Federal representatives answered the call. They 
did not fund the health center. The community rallied under the 
leadership of that same well-insured individual. They built a 
new facility and today they are looking at their second 
expansion in the face of unprecedented demand for dental and 
other primary care services.
    Those of you who represent urban areas may have noticed in 
your districts what we are experiencing in Milwaukee: health 
care infrastructure tends to flow, over time, out of the inner 
cities and into more affluent locations, leaving some 
neighborhoods lacking basic primary care. The result: people 
gravitate to hospital emergency rooms for their care.
    The Milwaukee community is responding by creating the 
Milwaukee Health Care Partnership. The partnership has brought 
together the major health care systems, the community health 
care centers in the city, and county and State governments. 
They are developing a comprehensive plan to deal with the 
uninsured. Key among those plans are growing the inner city's 
primary care infrastructure with an initial focus on 
Milwaukee's community health centers.
    Like many States, Wisconsin has increased its investment in 
health centers. These investments help to further leverage the 
continued growth in the Federal community health center program 
made possible by this Subcommittee, making a big difference in 
the lives of inner city residents and helping to improve the 
efficiency of our health care system.
    Finally, I would like to pose a simple, but important, 
question. What happens when you open a new dental clinic in 
Wisconsin, a clinic that takes all based on need, not ability 
to pay, and a clinic that provides a sliding fee for those with 
limited financial means?
    In June of last year, we opened our third dental clinic in 
Chippewa Falls. In the first six and a half months, we treated 
over 5,800 patients. Our patients came from 42 of Wisconsin's 
72 counties, often driving hours to get to our clinic. We have 
never advertised this clinic, our marketing budget is zero, and 
as of today we are booked out through May.
    This map over here illustrates how far poor people need to 
travel to get dental services. And for those of you who are not 
familiar with the State, you can see in the far southeastern 
part of the State that we have had people from Milwaukee and 
Kenosha come to our health center in Chippewa Falls. That is 
250 to 300 miles distant. Green Bay--which many of you may know 
where that is--that is 190 miles distant.
    Think about how far you folks have had to travel for your 
last dental checkup and think about the difficulties that many 
of these poor folks face trying to get dental services.
    So why do our largely poor patients travel so far? The 
answer is simple, it is pain. It is unrelenting oral pain. They 
have no access. In Wisconsin, 20,000 people per year go to 
emergency rooms because of non-traumatic oral pain. We do not 
know how many more show up in urgent care centers or in 
physician offices. They get antibiotics and they get pain 
medicine; they do not get treatment.
    This year we will provide dental services to over 25,000 
patients in need. Still, over half a million low-income people 
in our State lack access today.
    I would like to share just one example of how oral health 
and general health are connected, and the importance of your 
investments in health centers.
    A diabetic patient presented as jaundiced and very ill, and 
this was at one of our dental centers. He had a large lesion on 
his leg for the past four years that would not heal. He also 
had severe oral health disease. Following a full mouth 
extraction and dentures, he reports his blood glucoses are 
under control, he has good skin color, his skin lesion finally 
healed, and he is very happy.
    You are called upon to make tough choices with limited 
resources. Health centers return real value to people all 
across this great country of ours. Health centers also return 
real value to the taxpayers of this country. We are grateful 
for the investments you have made in our system of care, yet, 
we can and should do more. We are prepared to do with your 
help.
    Thank you.
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    Mr. Obey. Thank you.
    Mr. Popper, I am sorry that you look like you were a 
suspicious character and could not get through security this 
morning. [Laughter.]
    Mr. Popper. That is quite all right. I could have gotten 
here earlier. My wife was injured last night, so I had to get a 
four-year-old and eight-year-old off to school this morning.
    Mr. Obey. Is she all right?
    Mr. Popper. She is okay. She just is not very mobile, so I 
had to get the young ones off to school. I would not have had 
the security problem if that had not happened.
    Mr. Obey. Well, thank you for making the effort.
    Mr. Popper. No problem. Thank you. I am really honored to 
be here to speak to you this morning.
    My name is Richard Popper. I am Executive Director of the 
Maryland Health Insurance Plan.
    The Maryland Health Insurance Plan is one of 34--soon to be 
35--State high-risk pools available in soon to be 35 States in 
the United States. Although I only represent one high-risk 
pool, I do have a sense of some of the broader issues--which I 
am going to speak about today--regarding high risk pools. I 
used to be a member of the board of directors of the National 
Association of Comprehensive Health Insurance Plans, which is 
the high-risk pool association, and prior to that I was the 
Assistant Director of the California Managed Risk Medical 
Insurance Board, which oversees California's high-risk pool and 
also their S-CHIP program, Healthy Families. For that I worked 
in Los Angeles County government, which is ground zero, as we 
all know, for the uninsured. So I do have somewhat of a broad 
perspective beyond Maryland.
    The Maryland Health Insurance Plan, as I said, is one of 
soon to be 35 high-risk pools across the United States. High-
risk pools are nonprofit or government organizations created to 
offer health insurance to the uninsurable population--and that 
is different than the uninsured. To understand who the 
uninsurable population is, you need to understand sort of how 
the health insurance market is set up in the United States, 
which some of the previous speakers talked about.
    Health insurance in the United States is voluntary. You can 
opt to purchase it if your employer offers it or you can opt 
not to. If you do not have employer-based coverage and your 
income is not low enough to be on Medicaid or M-CHIP, but you 
are not sick enough or old enough to be on Medicare, you have 
to buy an individual insurance product, similar to buying car 
insurance: you go to see an agent or you can buy it online. And 
just like with car insurance, with car insurance you can get 
denied car insurance if you have a poor driving record.
    In the individual health insurance market in the States 
that have high-risk pools, you can be denied health insurance 
because of your health condition. It can be something as 
serious as you have leukemia, cancer, diabetes, or it could be 
you are 20 pounds over weight standards. In Maryland we have 
one plan that denies people for severe acne. It can be that 
much of a difference in health conditions that result in an 
individual insurance plan denying you coverage.
    So when you want to buy insurance, you have the means to 
buy insurance, and no one will sell it to you, in the States 
that have high-risk pools, people are denied health insurance 
and they become what we call uninsurable. They want to buy 
insurance, no one will sell to them, so they turn to a State 
high-risk pool. Currently, the 34 State high-risk pools across 
the U.S. have 190,000 subscribers enrolled in them, and, as I 
said, those people's health condition can vary significantly, 
from something very serious to something fairly minor, but 
because they have added risk, carriers do not want to provide 
them coverage.
    Risk pools provide individuals access to comprehensive 
health insurance coverage, but, because it is a risk pool, they 
pay a higher premium, generally, than what healthy people would 
pay if they were granted an individual policy and could pass 
medical underwriting. On average, risk pools surcharge their 
premiums for enrolled members from about 125 percent, or 25 
percent above what healthy people would pay, to 200 percent, or 
twice the rate at what healthy people would pay for an 
individual insurance product.
    About nine of the high-risk pools States offer a low-income 
subsidy. Maryland is one of those States that tries to discount 
the premiums for low-income individuals to try to create sort 
of a bridge from the Medicaid program so that the premium can 
be more affordable for people who are low-income but 
uninsurable.
    The reason high-risk pools charge more premium is because 
we are in business to lose money; we do not make profits. Our 
loss ratios vary from 110 percent in one State to 390 percent, 
which means for every $1.00 in premium we get, we have claims 
costs that are $1.10 in one State all the way up to for every 
$1.00 in premium we get we have $4.00 in claims costs. So in 
order to subsidize that, we charge higher premiums, but we also 
do assessments or other funding mechanisms among the 34 States. 
Most of the States assess individual market and some States 
small group, small employer health plans that are regulated by 
the States, and they assess it equally among all the other 
people who have group insurance or individual insurance.
    A couple of the other States use maybe tobacco funds or 
tobacco tax. In Maryland, we have a hospital assessment, so 
whenever you go into a hospital in Maryland, you pay a sales 
tax, almost, on top of your facility fee that helps fund the 
high-risk pool. It is designed to provide a broad assessment to 
fund these people with chronic health conditions or uninsurable 
health conditions to make the insurance affordable and help 
subsidize the high-risk pool, which otherwise could not be 
designed.
    In understanding high-risk pools, you need to understand we 
are not like the Massachusetts initiative or Healthy New York. 
We are not designed, as I say, to save the world, to cover 
everyone. We are not designed to provide universal coverage in 
our high-risk pool. What we are designed to do is provide sort 
of universal potential access to everyone. Everyone in the 
State who wants to buy health insurance can buy health 
insurance; it becomes a question of affordable, which we know 
is the key question.
    The makeup of high-risk pools is very interesting. About a 
third of the Maryland high-risk pool are self-employed 
individuals. Other populations that enroll in high-risk pools 
are unemployed people, employed people who work at companies 
that do not offer health insurance coverage, people who are 
retired or disabled. About a little more than half of the 
enrollees are women and enrollment can vary State-to-State. 
Some are more dominated by the self-employed; others have high 
levels of employed people.
    In Maryland, if you look at my testimony, page 3, I lay out 
some of our most popular or most top-reported occupations of 
employed people who enroll in the high-risk pool. This includes 
sales representatives, consultants, realtors, truck drivers, 
limo drivers, nurses, day care providers, housekeepers, 
waiters, teachers; people you bump into every day who do not 
have insurance coverage through their job but need to buy it 
and want to buy it, and the high-risk pool is the only place 
where they can get it.
    It is usually a temporary stopping place. Most of our 
members only enroll for, on average, two years. We have some 
people who will be with us for ten years, but, on average, 
people come and then they get other coverage. Maybe they are so 
disabled they are in the waiting period for Medicare to kick in 
after two and a half years; maybe their spouse gets a job; 
maybe they go into Medicaid because their situation 
deteriorates. But we tend to be a transient health insurance 
plan, not a long-term one.
    States have used high-risk pools to respond to recent 
Federal mandates to expand coverage. Some of the previous 
speakers talked about HIPAA, the Health Insurance Portability 
and Accountability Act of 1996. That required States to offer 
guaranteed issued coverage to individuals who had group 
coverage and exhausted it; either their employer dropped the 
health insurance plan or they left their job or were fired or 
decided to retire; they took up COBRA--which we know can be 
expensive--they maxed out the COBRA; at that point they have a 
two month, 63 day guaranteed issue period and States are 
required to offer these people guaranteed issue.
    And most of the high-risk pool States, the high-risk is the 
guaranteed issue mechanism that allows people who have this 
Federal mandate that they must get health insurance, their only 
option to go to is the high-risk pool. Thirty percent of the 
Maryland health insurance plan's 13,000 members are eligible 
because of this Federal mandated HIPAA right that they have.
    Also, in 2002, Congress passed the Federal Trade Act that 
required States or encouraged States to offer mechanisms for 
people who lost their job because of international trade or 
whose pension plan went insolvent and their pension was taken 
over by the Pension Benefit Guarantee Corporation and they no 
longer had their group coverage as well. Maryland and a lot of 
the high-risk pools are the mechanism in the States, besides 
COBRA, that offer coverage for these people to access the 65 
percent tax credit that is used for the Federal Government to 
subsidize the cost of their premium either in COBRA or in the 
high-risk pool.
    Maryland had the highest take-up of any State in terms of 
HCTC, the health coverage tax credit-eligible populations, 
largely because we were Bethlehem Steel, which went insolvent 
and was broken up into pieces and 20,000 former employees and 
retirees of Bethlehem Steel in Maryland had no place else to go 
if they were under age 65 to get their health insurance, and 
they came to the Maryland Health Insurance Plan. So we do not 
have the highest HCTC enrollment; we have the highest take-up 
rate.
    Also, we get a lot of people who have been approved for 
Social Security because they are obtaining Social Security 
early, at age 62, or because they are on Social Security 
disability and they have to wait two and a half years for 
Medicare coverage to kick in. We get a lot of referrals from 
congressional offices for people who finally get approved for 
Social Security disability, but they have to wait two and a 
half years for Medicare and their income is not low enough to 
be on Medicaid, so they often call us up to refer them over to 
the high-risk pool in the State of Maryland.
    We also do outreach to all the Social Security field 
offices in Maryland so that folks who get Social Security 
disability know that there is something for them to hold them 
over until Medicare kicks in after up to two and a half years.
    So because high-risk pools have formed a way to either meet 
recent Federal mandates or to fill in the cracks in the health 
insurance marketplace, Congress, in 2002, for the first time, 
appropriated funding authorized by the Federal Trade Act to 
high-risk pools. This was wonderful for the high-risk pools 
because, previously, we were dependent on State funding or 
assessment funding; and that appropriation amounted to 
$40,000,000 in fiscal year 2003, another $40,000,000 in fiscal 
year 2004. Maryland was the first State to receive this new 
Federal funding, which we were really grateful for, and it does 
help us to reduce premiums or reduce member costs or disease 
management programs, and also expand our capacities.
    The funding, which we really appreciate this Committee 
having a lead role in because in fiscal year 2008, in December, 
this Committee was able to appropriate, through the leadership 
especially of Chairman Obey, $49,000,000 to keep this program 
going because it has not been appropriated every year. It was 
not appropriated in fiscal year 2005; it was not appropriated 
in fiscal year 2007. So we really appreciate it and we look 
forward to Maryland getting its share.
    As you look at different options that some of the previous 
speakers discussed to expand coverage, please bear in mind that 
in a lot of these options to expand coverage high-risk pools 
will play an important part. If the Federal Government elects 
to mandate insurance, that everyone has to have health 
insurance coverage, like a lot of States do for to meet that 
mandate, will use the high-risk pool, because that is an option 
for people who are high-risk, as a mechanism to make sure that 
there is guaranteed access to health insurance in order to meet 
the Federal mandate.
    If Congress, instead of mandating coverage, elects to 
provide subsidies to encourage people to buy coverage--such as 
a tax credit, which we already administer through the Federal 
Health Coverage Tax Credit Program--again, high-risk pools will 
be a mechanism through that tax credit for people to buy 
coverage if they are uninsurable.
    The last thing I would ask the Committee to think about is 
that if this issue of expanding health coverage and reducing 
the uninsured continues to take up a lot of your time analyzing 
options, debating options, and it goes on for a number of new 
years and involves the new administration that will come in 
next year, bear in mind that high-risk pools are serving the 
uninsured today, tomorrow, next week, next year. So as these 
debates go on at the macro level, please bear us in mind that 
we are down in the micro level actually serving these folks and 
providing them coverage today.
    So thank you again for inviting me to come today. I hate to 
be the one who arrived late and leaves early, but I have a 
State budget hearing at 1:00, and while your allocation of risk 
pools gave us $3,000,000, I have $100,000,000 on the table in 
Annapolis at 1:00, so, with all deference to you, I will have 
to leave around 11:45. But thank you very much.
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    Mr. Obey. All right.
    Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    That was fascinating. Thank you all very much. I would like 
to ask three questions. I have five minutes, so I will try to 
make my questions brief, if you could make your answers brief.
    Dr. Lambrew, you gave us this great package of charts and 
in it you say that 47 million Americans are uninsured, and on 
the next chart you say at some point 82 million are uninsured, 
26 million are always uninsured and 36 million are temporarily 
uninsured. Can you sort of explain that a little bit, those 
disparities in numbers?
    Ms. Lambrew. Thank you. What happens is that you basically 
have the 47 million is a mix of the two, it is a mix of 
people----
    Mr. Walsh. Always and sometimes?
    Ms. Lambrew. Exactly. And that is why you cannot see the 47 
million on the chart. They are also different data sources, 
just so you know, so that often comes out. But when we try to 
figure out how to target the uninsured, it is tough, because we 
have some people who are just the chronically uninsured--these 
are people who generally have high health costs or have some 
preexisting condition, have trouble getting insurance, but more 
often they are people who are unemployed or coming in and out 
of jobs and they just cannot afford it. They do not have the 
access to it, nor can they afford it.
    Mr. Walsh. Thanks.
    Dr. Chollet, you talked about the different State plans and 
I think what you said was it would not be a bad idea for every 
State to have their own plan as long as the plan was to get 
everybody under the umbrella, but have the Federal Government 
basically get out of the way. Is that what you said?
    Ms. Chollet. Not quite. I think the vision for State level 
plans has to come from the Federal Government. I think there 
has to be a national vision. I personally----
    Mr. Walsh. So create a template for these State plans?
    Ms. Chollet. Yes, sir.
    Mr. Walsh. And then change the rules federally so that 
would enable those?
    Ms. Chollet. That is right. And HIPAA in many ways is a 
good example of that, which laid out a national vision for how 
small group health insurance should be marketed, guaranteed 
issue; it established minimal rules for individual coverage--it 
should be guaranteed renewable. HIPAA stepped back in some very 
key areas and, therefore, to my mind, it does not meet its 
stated objective of making coverage available to everybody 
regardless of health status, but it made some very important 
contributions and it amended Federal laws as necessary to make 
that vision implementable by the States.
    So I think the vision does have to come from the Federal 
Government. I do not think, though, there should be 50 unique 
State programs that are totally unique in all respects. I think 
citizens should be able to expect some continuity moving from 
State to State, but the minimal continuity is that they should 
have access to affordable health care somewhere.
    Mr. Walsh. Great. Thank you.
    And Mr. Nycz, the community health centers provide a 
remarkable service, I agree. Our community health center in 
Syracuse, New York is headed by a dentist, so that is something 
he cares, obviously, very deeply about. But the question I 
had--and you got at this a little bit--regarding health 
coverage or access to health care in those communities, whether 
it is Chippewa Falls or it is downtown Syracuse, can you tell 
me how much cheaper it is to treat a patient in a community 
health center setting as opposed to going to a hospital 
emergency room?
    Mr. Nycz. There are a lot of national figures on how much 
community health centers save, which we can get that 
information to you, but the cost of not taking care of people--
I think which is also the Chairman's point--is huge, and these 
folks that are going to dental emergency rooms, they are 
getting 250--the Medicaid agency has to pay about $250, on 
average, for those folks, who leave the emergency room after 
$250 of expense with the same problem they entered, and they 
still need care.
    So they come to us. We are trying to redirect them to save 
that $250 on the dental side. And as I said, in Wisconsin we 
know that there are at least 20,000 a year of those visits, and 
the vast majority of those are Medicaid. So we are paying, 
taxpayers are paying for those visits. They do help people with 
pain and give them something for the infection, but the 
underlying disease process continues.
    Mr. Walsh. Whatever you can garner to provide us, just unit 
cost, you know, community health center visit, triage sort of 
visit versus emergency room.
    Mr. Nycz. The other thing I will say is they are struggling 
with this in Milwaukee and I think they got an excellent plan. 
It is going to take more because people have now oriented 
themselves to emergency rooms; they just show up. So they are 
trying to work in information technology in that to link the 
community health centers with the emergency rooms and then 
address the health literacy issues and redirect them. So even 
if you have community health centers and you open up access, we 
still have to think smart about this in terms of redirecting 
those patients out of the expensive emergency rooms.
    And the last thing I will say is a lot of people who go to 
emergency rooms end up in the hospital.
    Mr. Walsh. That is true. Thank you very much.
    Mr. Chairman, I yield back.
    Mr. Obey. Ms. Roybal-Allard.
    Ms. Roybal-Allard. Dr. Lambrew, first of all, thank you for 
sharing your snapshot of our broken health care system. What 
you did not include in your testimony today, but have included 
in your past writings, is your analysis of the under-use of 
preventive health services in this country and our inability to 
realign incentives from sickness to wellness.
    This under-use of prevention services is highlighted by the 
fact that CDC's budget has been losing ground over the past few 
years and this year the President wants to further cut CDC's 
budget by $433,000,000. In your opinion, what has been the 
consequences of these cuts to prevention and what percentage of 
our national budget do you think should be devoted to 
prevention?
    Ms. Lambrew. That is an excellent question, and I think 
that when we think through what we spend now, they are not very 
good estimates, but of our roughly $2,000,000,000,000 health 
system, we estimated that about 1 percent to 3 percent is 
dedicated to prevention; and that is not just through CDC, it 
is also through health insurance companies paying for 
mammographies and screening, etc. That is very, very little in 
the face of what our new challenges are.
    This century, our challenges are chronic illness. It really 
has eclipsed all the kind of historical sources of diseases, to 
the point where, when you look just at obesity, we know that 
the next generation of children may have shorter life 
expectancies than their parents because of the obesity crisis. 
We have not seen that ever since we have been recording these 
statistics.
    Can we solve this only through health insurance? Absolutely 
not. It has to be a partnership with communities, schools, 
workplaces, as well as ensuring that the high value preventive 
services that we do know get delivered in the health care 
system are affordable and available. It really does require a 
comprehensive approach.
    And going back to the previous question about can we 
actually save money, the statistics are pretty overwhelming. I 
mean, we know if we fully immunize all children, we could save 
about $40,000,000,000. I cannot remember over what time period, 
but we can save from immunization. If we could tackle this 
obesity crisis, the statistic is startling. Returning seniors' 
obesity levels back to what it was in the 1980s could save 
Medicare $1,000,000,000,000 over 25 years according to a bunch 
of very smart economists.
    So there is clearly a need to invest in prevention. We do 
not do a good job. It needs to be done in partnership with CDC 
and the public health system as well as the integrated system. 
I have definitely been proposing ideas, something like a 
wellness trust, as a way to consolidate and redeploy our 
prevention dollars to really get at that.
    Ms. Roybal-Allard. What specific impact does the under-use 
of prevention have on our under-insured population and do you 
think that it is possible to build a realignment of incentives 
from sickness to wellness into the current healthcare system?
    Ms. Lambrew. Sure, and the under-insured issue for people 
with insurance not using it, I might get this not exactly 
right, but there was a study recently that looked at Medicare 
co-pays that said even just adding a $10 co-pay for mammography 
for seniors resulted in a significantly big drop in 
utilization. So we know it is a problem because we do not have 
financial incentives out there for people to use the type of 
preventive services that they need.
    I will say we also every week we see new studies from the 
American Cancer Society and other folks that say that because 
of our lack of comprehensive prevention, we get diagnosed later 
when it is harder to deal with our cancers than any other 
nation.
    Ms. Roybal-Allard. If we are going to successfully realign 
our priorities, should we also be focusing on educating the 
right mix of providers within the healthcare system and what do 
you think that mix should be?
    Ms. Lambrew. Absolutely. When we think through our 
challenges, when I talked about the primary care shortage, we 
do not have enough providers in the primary care community to 
deal with our acute and chronic illness, let alone the kind of 
prevention workforce that we need.
    There was one study that said if we had every doctor 
provide the recommended clinical preventive services, it would 
take that doctor, for a typical patient load, seven hours out 
of a day to do so. We need to find new ways of delivering 
prevention, given how critical it is.
    Some of the ideas I have been working on: look at 
broadening the prevention workforce, creating new certification 
programs, making sure that the pharmacists, the people in 
schools and workplaces can do this because a lot of it can be 
done in those settings.
    But I would say, going back to Chairman Obey's earlier 
comment about what do you all do to get ready for health 
reform, the workforce issue is enormous, just enormous. We need 
the software as well as the hardware, software being the people 
who can really dig in and get these systems aligned, as well as 
the hardware of clinics and hospitals and information 
technology to make it all work.
    Ms. Roybal-Allard. Dr. Chollet, in your testimony, you 
speak about the importance of giving the States broad authority 
to develop their Medicaid and S-CHIP programs. In the last two 
years, CMS has issued a series of seven regulatory packages 
designed to decrease the Federal outlay of Medicaid services. 
Many of these were originally rejected by Congress because they 
eliminate payments for legitimate healthcare expenses and 
because they pass the unfunded cost on to the States.
    Now, California has approximately 6.7 million individuals 
on its Medi-Cal program and the fiscal impact of these rules on 
the State will be several billion dollars annually. The result 
will almost certainly be to destabilize an already fragile 
healthcare safety net system, causing closure of hospitals and 
the reduction of services.
    Do you have any thoughts on how the Federal Government can 
reduce Medicaid expenditures without passing legitimate 
healthcare costs on to the States and without compromising 
access for our most vulnerable citizens?
    Ms. Chollet. Ms. Roybal-Allard, it is an excellent 
question.
    This is a huge issue for every State and certainly for a 
State like California. The complexity of the Medicaid and CHIP 
rules, the capriciousness from the States' perspective of 
funding for these programs, the lack of reliability with 
respect to how the budget will change from year to year has had 
a huge chilling effect.
    These programs are the baseline. They are essential to the 
fabric of how the States finance healthcare and increasingly so 
as group coverage has eroded and as individual health insurance 
coverage has moved out of the reach of populations below 300 
percent of poverty in every State and in some States, arguably, 
below 400 percent of poverty.
    The problem has reached into the middle class, but the 
States find that they are not able to rely on funding at the 
very base any longer, and therefore many States just sit and 
wait and wonder what is going to happen to their Medicaid and 
CHIP budgets.
    I think what I would suggest and what I introduced in my 
written testimony is that these rules be rationalized so that 
the Federal Government and the State governments can reliably 
predict what the expense is going to be and that there be a 
Federal Government commitment to making these programs a stable 
foundation for every State. It is what they need and, in the 
absence of it, the States cannot move forward in guaranteeing 
access to coverage for their middle income populations which 
are increasingly at risk.
    Mr. Obey. Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman.
    I think, Mr. Nycz, you had a comment to her question. I 
thought I would give you an opportunity to respond.
    Mr. Nycz. Yes, actually I do have an idea on how you can 
reduce Medicaid expenditures and improve quality, and that is 
expand the community health center program. There is research 
that demonstrates that health centers can provide cost to 
Medicaid patients at a lower rate by championing things like 
prevention and early detection.
    The other point that I guess I would make is that there was 
a brand new article just came out this month in Lancet 
Oncology, and they took a look at all the people with cancers 
in the country and found that uninsured and publicly insured 
through Medicaid have way more late stage cancers, and they did 
not find that for Medicare which was interesting.
    In one of the commentaries on that in that same journal, 
they mention that Canada, the U.K., places where they do have 
universal health coverage, there is still it is much less 
common for individuals who are lower income, lower educational 
level to access screening services.
    So having insurance alone is not enough. You need an army 
on the ground that can help work with people in the 
communities, and that is why I support and I have been working 
for community health centers for the last 35 years.
    Mr. Honda. Thank you.
    Let me just add my appreciation to the Chairman for putting 
this together. This is a helpful discussion for me.
    One of the areas that is of interest to me is the ability 
for our community health centers to have adequate resources to 
find culturally and linguistically competent providers and 
implement best practices in our communities. What kind of 
activities exist right now and what are some of the gaps that 
we should be looking at?
    Mr. Nycz. Well, first of all, you provide support for an 
amazing array of programs that come together synergistically to 
help in communities, and the workforce issue is really key. The 
National Health Service Corps is critical to growing community 
health centers. That is absolutely critical.
    But you also fund State primary care associations, rural 
State association. Those folks come together, and they help us 
recruit dentists, for example. They have dental recruitment 
programs.
    We use Telehealth, for example, which your Committee also 
funds to extend mental health services to remote areas.
    Finally, I think we try to get bilingual-bicultural staff, 
but in the end we are increasingly looking to growing our own. 
The National Association of Community Health Centers work with 
A.T. Still University. They have stood up a dental school. They 
have stood up a medical school.
    Ultimately, I think we are going to have to address the 
workforce issue by finding those people who are uniquely 
qualified to serve the patients in the areas where we are 
trying to help.
    Mr. Honda. I have visited a lot of reservations, and what I 
think I saw was pretty devastating. It was appalling. Where 
does that fit in the context of the things under discussion 
since we are talking about sovereignty and also delivering 
healthcare.
    Mr. Nycz. In Wisconsin, most of the tribes after that 
Indian Health Self-Determination Act, I think 1984, most of the 
tribes chose to have their own healthcare facilities. They are 
also plagued, however, with difficulties in recruiting and 
retaining.
    They do have federally-qualified health center status in 
Wisconsin. The State in that program helps them a lot, but 
workforce issues continue to plague, I think, tribal clinics.
    Part of what A.T. Still is doing in dentists and physicians 
is they are growing people with the specific thought that they 
would go to work in community health centers and in tribal 
clinics and in VA facilities across the Nation.
    Mr. Honda. Very quickly, before my time is up, Mr. Conyers 
has a bill, H.R. 676. Do you have any reaction to that bill, or 
do you know anything about that bill?
    Mr. Nycz. I guess I do not. I do not know, but I kind of 
side with what the Chairman said. As a health center director, 
I do not care what is done. If it can help people get 
healthcare, I am for it.
    Whether it is incremental or universal, the fact remains it 
is not going to be just providing coverage and money. It is 
going to be in the trenches with the right people, bicultural, 
bilingual folks who can take care of people on their level and 
who can champion prevention.
    So I am sorry I cannot comment on that particular.
    Mr. Honda. Thank you, Mr. Chairman.
    Mr. Obey. Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman. I appreciate this 
hearing too. This has been great. So thank you for all your 
time.
    I have a couple of questions and then a question for the 
whole group.
    Mr. Popper, one of the questions I have is you get these 
folks into the high risk pool. Have you done any analysis as to 
what the savings has been even though their premiums are high 
and they pay more? Have you done anything to study, even though 
the costs are high, what savings there are to the system?
    Mr. Popper. I cannot speak about all 34 States, but the 
Maryland Health Insurance Plan was designed to reduce 
uncompensated care. That is our statutory mission and that is 
why the hospitals agree to this surcharge on hospital facility 
fees to fund the program because they realize that if our 
population does not get insurance, these folks will end up in 
the emergency room and getting all their services through the 
emergency room. So we have a proven method of reducing 
uncompensated care by keeping people out of the emergency room.
    Only about a third of our costs go to hospitals. The rest 
goes for prescription drugs, specialty outpatient, primary care 
physicians, durable medical equipment, what have you. So we are 
designed to reduce uncompensated care, and we do do that 
because really these folks would have no other place to go.
    Mr. Ryan. What has been the reduction?
    I mean I know that the hospital assessment does not pay for 
everything. You are piecing this whole thing together.
    Mr. Popper. Right.
    Mr. Ryan. But has there been a reduction in these folks 
going to the emergency room that you could somehow quantify?
    Mr. Popper. Oh, yes, clearly. What is interesting in the 
Maryland Health Insurance Plan is that our losses for the first 
two months that people are enrolled are twice as high as they 
are after someone has been in the plan for twelve months.
    So people come in. They are uninsured. Seventy percent of 
our new members are coming freshly in uninsured, and they 
access services because they have a lot pent up demand in 
things, and then the costs drop within a year, our per month 
costs. So that drops.
    In terms of a dollar for dollar of every dollar in the 
Maryland Health Insurance Plan reduced three dollars in 
uncompensated care, I do not have that number for you today. I 
could work to get it for you.
    Mr. Ryan. Yes, if you could, that would be great.
    Mr. Nycz. Because we see their medical costs drop after 
being in the plan.
    Mr. Ryan. If the national association has that information 
for the 34 States, that would be great too.
    Mr. Nycz. I will work on getting that for you, Congressman.
    Mr. Ryan. I appreciate it. Thank you.
    Dr. Lambrew, you mentioned 1 to 3 percent of healthcare 
money is spent on prevention. Do you have any recent numbers on 
every dollar of prevention that is spent, how much that saves 
us in the system?
    If you said it, I missed it and I apologize.
    Ms. Lambrew. I did not say it partly because it depends on 
what the prevention is. Prevention is a term that covers lots 
of different services, anywhere from a mammography which is 
quite clinical down to smoking cessation which is more about 
how do we prevent people or encourage people to quit.
    There have been some studies of workforce-workplace 
wellness programs that try to say that the range of activities 
that businesses usually conduct, which is trying to get people 
or encourage people who have chronic illness to adhere to 
services, making a good cafeteria, all that kind of good stuff.
    The studies generally say for every dollar you invest, you 
save three dollars within several years, and that is the 
closest I have seen to anything as kind of a generalized study 
on this, but it is on the workplace wellness system for kind of 
an average set of workers.
    Again, we can see it service by service. We have some 
cumulative sense, but I know there is a whole effort going on. 
I think the Urban Institute has a big project. CBO is 
considering this right now because if we do not get better at 
figuring this out, how can we expect you to make the 
investments?
    Mr. Ryan. One final question and I guess I will throw it to 
you, Dr. Lambrew since I love the Center for American Progress, 
and I will let you hit this out of the park.
    I think we have made some mistakes as far as how we present 
this, and Mr. Honda mentioned Mr. Conyers' bill of which I am a 
cosponsor. The fact that in the U.K. and in France, their life 
expectancy is a couple years longer than ours here. We make 
this healthcare argument. Our argument should be you will live 
longer if we put this system in place.
    So I want to ask you why is it in the U.K. and France that 
they live longer than we do here in the U.S.?
    I have been to France a couple times. A lot of smoking 
going on over there. I wonder how that fits in. [Laughter.]
    Ms. Lambrew. Yes. Actually, I should check the statistics. 
I still think we might smoke more.
    We are similar in many respects especially if you look at 
some of the European nations and Australia in terms of our 
demographics. It is not significantly different.
    Income statistics are generally similar. McKinsey Global 
Institute has been doing some studies, looking at controlling 
for wealth, how do our costs compare?
    We stand out because we allow this uninsured problem to 
persist. There is no doubt that is why we are singularly 
different than these other nations. Every other industrialized 
nation does find a way to provide basic access to their 
citizens. As a result, it is not just infant mortality and life 
expectancy. It is outcomes from surgery.
    The study that we just heard about is a landmark study. 
There was another one in Health Affairs a month ago that talked 
about deaths amenable to healthcare, that found that everybody 
is declining but here we decline slower. Every other country 
has kind of dropped in their deaths amenable to healthcare at a 
much more rapid rate than we have.
    To throw in another one, a study that looked at people who 
join Medicare and followed them five years out and found that 
people with chronic illness who join Medicare have a 
significant improvement in their health status after five years 
being on Medicare. I mean the statistics are overwhelming.
    Health insurance matters. We do not provide it to most 
people. It is not everything, and we do need to have 
complementary systems. It is solvable. It is important, and I 
do hope that this becomes the election issue that it promises 
to be.
    Mr. Obey. Let me ask a few questions. We are told that we 
are probably going to have votes around 11:30 on the floor, so 
that will pretty much crunch this hearing.
    Mr. Popper, whenever you feel that you have to leave, 
please feel free to. We understand the situation.
    Dr. Lambrew, let me ask a basic question first. You 
indicated in your statement that access needs to be addressed 
in order to address skyrocketing healthcare costs. Some people 
would say that is counter-intuitive, that the more access you 
have, the more cost, the more you are going to drive up cost.
    Tell me why you say what you said.
    Ms. Lambrew. I think there are multiple different reasons, 
but the two I would bring to the fore because we have some data 
on it are, first of all, when we have again the 82 million 
people who have gaps in coverage at some point in time, to the 
extent that they incur costs through the emergency room, 
because there are other uncompensated care costs in the system, 
most of those costs get passed along to other people in the 
form of what is called the hidden tax where we basically are 
paying for that uncompensated care because providers have to 
charge people who have insurance more.
    One study suggests that every family pays $922 more per 
year in premiums because of this cost shift of what can be 
claimed on the uninsured being shifted to people who already 
have health insurance.
    It is a vicious cycle: more uncompensated care, more of a 
cost shift to people with insurance, the more expensive it is, 
the more people drop coverage. So, number one is this idea of 
cost shifting that exists in the system.
    The second, and there was a study done by the Commonwealth 
Fund back in December that really tried to illustrate this, is 
we know there are some things we could do to change our cost 
trajectory: prevention, chronic disease management, information 
technology, making our system more rational and less 
complicated. All that is harder to do if we have gaps in the 
system.
    So we are limiting and inhibiting our system-wide cost 
containment tools by having people coming in and out of 
coverage arrangements and not being able to implement the types 
of changes we know.
    I mean when you look at what the Congressional Budget 
Office has been doing, the director keeps testifying and 
saying, our budget problem is a healthcare problem, and we 
cannot solve the Medicare and Medicaid problem until we solve 
the system-wide problem.
    It is a huge problem. We have to solve the system-wide 
problem. As one economist said, covering all the uninsured is a 
prerequisite to doing so.
    Mr. Obey. Anybody else want to comment on that?
    Ms. Chollet. I would like to add one comment that relates 
to the earlier discussion about health status and investment in 
health. Part of the problem of people rotating in and out of 
coverage when they rotate in and out of jobs, when their income 
falls, when their circumstances change, is that it gives the 
system a very short-term perspective.
    The carriers, in particular, focus on the next year. If you 
ask them to try to project a premium, for example, that they 
would offer over three years, they have a hard time doing that 
because they think that population, their covered population is 
going to change year by year.
    That means when you have an investment of a dollar that 
will yield a three dollars rate of return over three years, 
every carrier sees it, at best, as a wash because I only expect 
to have that person in my plan for one year.
    So the process of rotating people in and out of coverage 
generates this very short-term perspective and subverts any 
investment in health status, and I think that is a problem that 
is unique to this country. One of the reasons that other 
countries do have better health statistics is because there is, 
in fact, a rate of return to investment in health status.
    Mr. Obey. Well, it seems obvious to me that we have the 
most perverse disincentives in the world for people to focus on 
prevention because, very frankly, for many of these diseases 
the consequences show up later in life.
    That means that if people transfer insurance companies two 
or three times, the insurance company cares about the people 
they are covering today, and they know that it is very likely 
in the end that it is going to be Medicare that will wind up 
getting stuck with the long-term ills. So why should they focus 
on it?
    Dr. Lambrew, you said that 22,000 people die because of the 
lack of insurance. I am always suspicious of numbers and 
statistics, with all due respect to the mathematics part in 
your title. Where do you get that number? How hard is it and 
how can you back it up?
    Ms. Lambrew. The number comes from the Institute of 
Medicine which, back in years 2001 through 2004, conducted a 
series of reports, comprehensive reports, looking at the 
literature and trying to document everything from does 
insurance matter kind of on an access basis all the way through 
the economic cost to society.
    They, back then, estimated that about 18,000 adults would 
have conditions. I think that they looked at the condition at 
death, looked at their insurance status prior to death and 
estimated that of all the deaths in a year 18,000 were due to, 
again, what is called amenable to healthcare sorts of diseases.
    But the numbers have been updated since then because that 
number was for 2003, I think, to 2007 which is what the Urban 
Institute did just this fall through the spring.
    Actually, I would say as a note, it is controversial. I do 
not want to discount that, but at the same time when we do 
know, again, we can do the accumulation of evidence. I think 
there have been some very good reviews of the evidence that say 
if we take it as a whole, because we cannot necessarily pick 
one thing or one reason why people die, it does have a 
difference.
    Mr. Obey. All right.
    Dr. Chollet, well, I think virtually all of you talked 
about the fact that we are losing employer-based coverage and 
seem to be evolving to individual coverage. To me, that again 
is exactly going in the wrong direction because the whole idea 
of insurance to spread risk as widely as possible so that you 
do not wind up encouraging all kinds of cherry-picking.
    What are the best things that Congress can do to try to 
reverse that trend, short of passing universal healthcare which 
I hope we do yesterday?
    Ms. Chollet. Mr. Obey, I do not think I have a clear answer 
for that question because there are so many forces that 
contribute to the loss of employer-based coverage. The biggest 
one, of course, is healthcare costs generally and, therefore, 
the cost of health insurance. If health care costs generally 
did not outpace earnings growth by order of magnitude, probably 
we would not see the erosion of employer-based coverage.
    There are no more tricks, if you will, in the Federal 
pocket around tax exemption. So that is not any longer on the 
table.
    And, there is no way to offset the fact that an employment-
based system puts American companies at a disadvantage in 
international competition.
    I think the States have become more or less resigned to a 
lot of movement between especially small group coverage and 
individual coverage and are looking for ways to accommodate 
that movement rather than try to counteract it.
    So, in answer to your question, I think the best thing the 
Federal Government can do is to pay attention to the fact that 
there is going to be movement in and out of employer-based 
coverage, that small employers that now offer coverage are not 
likely to continue to offer coverage, and that low wage workers 
cannot take a discount on their wages to pay for health 
insurance.
    So support of those kinds of systems that enable people to 
move between individual coverage and group coverage, if it is 
offered, and retain access to healthcare and their providers, I 
think would be the most important service that the Federal 
Government could offer.
    Mr. Popper. Just some color commentary from the back yard, 
the third or fourth largest segment of employed individuals who 
apply to the Maryland Health Insurance Plan are consultants. 
The Federal Government and--I will probably get in trouble with 
the governor--the State Government are using more and more 
contractual workers and consultants to do their work. We have 
people applying to the Maryland Health Insurance Plan who work 
for Voice of America, and you would be amazed the Federal 
agencies they work for and they do not get health insurance. So 
they have to turn to the individual market to get coverage.
    You can talk about tax incentives to buy, health credit tax 
incentives, this and that, but you have the sort of overall 
market trend in employment that Fortune 500 companies, small 
business, governments are moving more and more away from 
employing people and instead contracting with them.
    With Maryland State employees, you get access to buy the 
employee health benefits, but the State does not put any money 
towards it. So you have to buy the full loaded group cost to 
buy it, and a lot of those people do not do it. Then when they 
get sick, they come over to the Maryland Health Insurance Plan.
    With the Federal Government, if you are a contractor, I do 
not think you get an option to buy into the Federal health 
system. So just some news from the back yard in terms of the 
type of people we see coming into the risk pool.
    Mr. Nycz. The other thing that I have observed over the 
last 35 years is insurance is not what it once was when we 
started the Greater Marshfield Community Health Plan 
comprehensive first dollar coverage.
    When you think about what is insurance and why do we have 
it, if you are a person of means and you have assets that you 
want to take care of, then insurance helps you spread the risks 
so that you do not have to tap your assets in the case that you 
get really sick.
    If you are a low income person without any assets, with 
very little revenue, insurance in that sense does them no good. 
So then you look at to what extent does that insurance used in 
a different fashion as a tool to allow them to access health 
services.
    And so, you would evaluate insurance differently if you 
were looking at a low income, uninsured population compared to, 
in the State risk pools, people who generally have more means 
but because of their work environment and their preexisting 
health conditions cannot get insurance in the individual 
market.
    Ms. Lambrew. A very quick comment which is I do some work 
with a coalition called the Better Healthcare Together which is 
famous for Wal-Mart and SEIU being the key members. They 
basically say that they do not think that they can solve this 
on their own, so they are trying to advocate for national 
change.
    But, in the interim, there is one thing you all are 
responsible for and people are grateful for which is funding 
the research on what works and what does not. At the end of the 
day, we are going to have to figure out who gets what.
    I do not want to use the word, rationing, because that is 
an ugly word, but until we can prioritize what is high value 
and what is low value and figure out how to do that, we are not 
going to be able to get at this trend.
    Comparative effectiveness research, which you funded 
through AHRQ, is critical. We see the business coalitions 
coming behind it. Our CBO director has said this could save. It 
actually could self-fund itself over 10 years according to what 
their estimate of the CHAMP Act.
    I thank you all because that is an important, critical 
investment that you have been making over time.
    Mr. Obey. We will hear more of this, this afternoon, in our 
panel. But it certainly seems to me that if we are moving, and 
I profoundly believe that we are, to universal healthcare being 
dealt with at the Federal level, you have tremendous incentives 
to actually figure out what does work and what does not work 
because the Federal Government is going to be spending a hell 
of a lot more money. It would be nice if we spent it on 
something that was useful.
    Mr. Nycz, you know how much this subject bugs me, but it 
really bugs me that dental care seems to be looked at as one of 
those fancy extras that is not basic to real healthcare. I 
wonder if you would just take a couple minutes to comment on 
why that is not true and also tell me, give me some examples of 
how dental care has led to catastrophic health situations for 
individuals.
    Mr. Nycz. Well, I think maybe part of the reason dental 
care is viewed that way is because as a profession you hear a 
lot and you see on billboards, people are talking about 
cosmetic dentistry, not dental health related stuff but 
cosmetic. So people get the impression that is teeth whitening. 
That is everything else.
    Most of the people are deeply affected by this problem 
pretty much live in the shadows of our society. Folks with 
means, I still believe, do not fully understand this problem, 
but we have a raging epidemic of early childhood carries.
    I mean it breaks your heart to see kids coming in where you 
say we have to pull six teeth. We have to do crowns, and this 
is a little six year old child.
    How does it affect the family when you have a child with 
chronic pain, up all night? You have to go into work. You 
cannot go into work. I mean I think it affects productivity. 
When children are affected that way, the parents are affected 
that way. If you cannot get help for your child, that is a 
horrible feeling as a parent.
    You can go from children. You go through the life cycle. 
You can up to people who are thinking about having children. 
The research that we are getting out the National Institute or 
Oral and Cranial Facial Research says there may be an impact of 
periodontal disease in pregnant women on the birth of their 
child.
    The Journal of Obstetrics and Gynecology, I think back in 
January of 2006 or 2007, had an article telling ob-gyns to take 
a look in the mouth and, if you have a woman with progressive 
periodontal disease, it may lead to a very low birth weight 
baby.
    The researchers are still working on that, but my view on 
that is if you have a pregnant mom and she has periodontal 
disease, a lot of these folks are on Medicaid. They cannot get 
care. So even if you tell the ob-gyns you have to refer them, 
unless you have a place for them to go, then they just load up 
guilt on them.
    We do not wait, so we prioritize pregnant women with 
periodontal disease. Even though we have waiting lists, we will 
put them at the head of the list and get them because it may 
mean.
    I mean think about how many thousands of births we have in 
Milwaukee. We have this huge disparity in low birth weight 
babies and infant mortality between the black community and the 
rest of the community. How much of that is driven or could be 
driven by the fact that they are not getting access to basic 
services including dental?
    So you go up the ladder. You go to the elderly. There is no 
dental benefit for the elderly. How does it affect the 
nutrition of someone who cannot chew because they have few 
teeth and the teeth they do have are painful and they do not 
have money to get dentures? So it affects their nutrition.
    Studies out of England and here, if you are 
institutionalized and you are an elderly person, you can 
aspirate or inhale bad oral bacteria that can cause pneumonias. 
In England, they found one of the largest reasons for people 
going from nursing homes into hospitals is because they are 
aspirating these bad oral bacteria into their lungs and because 
of their fragility, they are contracting pneumonias. That is a 
great expense.
    I know that is happening in our Country too. We are going 
into the nursing homes. We are training the nursing 
professionals on how to brush the teeth of the nursing home 
residents so they get daily oral hygiene to prevent that from 
happening rather than waiting for them to hit the hospital 
where we just fill them with antibiotics and hope that they are 
okay.
    We have had vets, a lot of people. There is a lot of talk 
about honoring our vets and that. When we built the Chippewa 
Center, we talked to the Veterans Affairs person there, and he 
said he gets 10 calls a week from veterans of all wars who 
cannot get dental care because, of course, it is not service-
related.
    And job services agencies, we spend a lot of money trying 
to help low income people get better, pick themselves up by 
their bootstraps, get better education and get into a job. Yet, 
in Clark County, a county of 33,000, they tell me there is 100 
adults a year that they cannot place in jobs because of rotten, 
broken and missing teeth.
    Why do we tolerate that? I mean we can fix that. Community 
health centers can fix that if we get enough capacity.
    I do not care where you go on the life scale, sometimes it 
is jobs. In my written testimony, we talked about a 20 year old 
who came in depressed, with horrible oral health. She did not 
have a job. She was going nowhere.
    It turned her life around. She has a job now. She is 
feeling better about herself.
    I could go and on. There are so many examples. If anybody 
talks to you like that, I would invite you to invite them to 
our centers and have them sit down and talk to some of the 
people.
    When I was in Ladysmith, we had a fellow from Chippewa 
Falls, 55 miles south, before we built the Chippewa Falls 
clinic. He saw somebody with a suit walking around, and he 
asked the dentist who was working on him, who is that? Oh, that 
is the director, Well, have him come in here. I want to show 
him my mouth.
    Soda drinker since age six, this person is going to be a 
denturist at the age of 20, but he had to get from Chippewa 
Falls to Ladysmith. It was a great burden for him to get there, 
and we could not do this all at once. So he was saying, can you 
please get care closer to home which is one of the reasons we 
built.
    I told him, I do not need to embarrass you by looking in 
your mouth. We are already working on it.
    The disability community has two or three strikes against 
them. Dentistry is largely a small for profit, solo enterprise. 
If you want to entertain and take care of intellectually and 
neural developmentally disabled people, you cannot do it in a 
standard office. You got to have a larger space. You got to 
have wheelchair lifts and special equipment, and it takes three 
times as long to take care of standard work.
    So it is expensive to take care of them. It takes longer 
for all those reasons. You need special facilities. They do not 
get care. Some of the people who are traveling the furthest to 
get to us are the people for whom travel is the most difficult, 
people with severe disabilities.
    Mr. Obey. Thank you.
    One last question, then I will pass the witness until the 
bells ring. If you were to pick out the top three or four 
things that this Committee ought to do or the top three or four 
places where we ought to put additional resources to deal with 
the issue of access, just very quickly, where would you put it?
    Mr. Nycz. I have great ideas on this: increasing community 
health centers. We are asking for funds that are not in excess 
of what we can achieve. It is a planned growth strategy.
    There is plenty of research that shows health centers save 
money, and there is plenty of research that shows where you 
build primary care infrastructure, the costs--Winberg's work 
and so forth--even for the Medicare program where you have an 
oversupply of specialists relative to primary care, less 
quality, higher costs.
    So you guys are actually building primary care 
infrastructure and building that infrastructure is, in a sense, 
a core healthcare reform that may allow us, when we get to 
universal health insurance, to afford it better. So I would say 
absolutely that, and then the National Health Service Corps has 
to come hand in hand because we have to be able to staff those 
facilities.
    And, if I get another one, I would say Telehealth is 
something that does help in the remote, rural areas, and 
definitely we are finding it very helpful.
    Mr. Obey. How about the rest of you?
    Mr. Popper. I would just say in terms of what this 
Committee could do is the high risk pool funding that has been 
provided, which we really appreciate, has not been provided 
consistently.
    There has been some move on the part of Congress in 
authorizing it to try to target it and put in incentives, so 
the money is used to expand access or reduce member cost which 
Maryland has no problem with. That is the way we use it. But if 
it is not provided consistently, it is hard.
    We talked earlier about insurance plans not being able to 
predict. Dr. Chollet talked about not being able to plan next 
year. If we do not get the funding consistently, it is hard to 
insure, as we did in Maryland, 300 more people in our low 
income program, offering really low premiums. Then the money is 
not appropriated next year, and then the premiums go up or we 
cannot sustain it.
    So in insurance, for us, and I know you have a lot of 
people asking for funding, but if it could just be consistently 
provided, that would be very helpful to the pools to make sure 
we sustain the affordability and access goals that this 
Committee wants us to sustain by providing us the funding.
    Ms. Chollet. I would second both of those statements. I 
think there would be three places that I would focus on, and 
the first would be community health centers. I think they are 
essential, and they have been under-funded. There is no 
replacement for them.
    Second is an issue we talked about before, which is 
effectiveness research and not just any effectiveness research 
but effectiveness research that is really targeted to helping 
health plans and health programs prioritize delivery of 
services.
    Oregon did this decades ago or 15 years ago and still 
stands out as a unique model of a State that actually examined 
the relationship between illnesses and services and decided on 
what was effective and what was not and actually prioritized 
what would be funded by their Medicaid program and were able to 
remove categorical eligibility rules so that everybody under 
poverty is eligible for the program and eligible for services 
that are deemed effective across the provider community.
    And, finally, in the area that Mr. Popper referred to, 
assistance to the States and helping them maintain and build 
new programs. It is not only the administrative cost assistance 
that was given to the high risk pools but the State Health 
Planning Grants that you sponsored, Mr. Obey, to help States 
plan for a better system and to maintain capacity for that 
level of planning and public discussion in lean economic times.
    I think in the absence of those State Health Planning 
Grants, we would not have seen the leader States that I 
mentioned in my written testimony. They relied on those funds 
to have a public discussion and to build and maintain the 
capacity that was needed in the State to enact those pieces of 
legislation.
    Mr. Obey. Thank you, Mr. Popper.
    Ms. Lambrew. Going last is hard because they said 
everything I want to say as well, but I will say in addition to 
the workforce and comparative effectiveness research, two 
different things on prevention and on the State planning 
grants.
    On prevention, I think we should look hard at how we spend 
our money, how it is divided up within CDC programs, within the 
block grants because I think if we did a rackup and then tried 
to figure out how would we think through potentially pooling, 
redeploying and then increasing the amount of public health 
spending on it, it is a little bit more dramatic.
    It is not just increasing the spending. It is thinking 
about the spending. I think it might be a good time to do it if 
we are on the verge of a national debate.
    The second thing I would say is with the State planning 
grants, it did certainly help people. Hands down, States did 
things they would not have otherwise done without it.
    But it also created a set of really engaged people who are 
advocates now, who have moved through different levels of 
government. Some of them have come to Washington, and others 
have gone everywhere else.
    That is a human workforce capital investment that is not in 
the provider community but in the policy community. I do not 
know if there is anything else we could do with that, but I 
cannot begin to tell you how many times I have spoken with a 
group and worked with different States. Some real smart people 
have come into this field as a result of those grants.
    How we can think about workforce investment and policy is 
something I think you ought to pursue.
    Mr. Nycz. I would like to say something about NIH because 
that is obviously a big part of what you fund every year. I 
think the NIH roadmap and the push to try to move knowledge 
into communities and to get things flowing is really a good 
trend.
    Again, I will come back to community health centers. As a 
community health center director, I view myself as a consumer 
of research results, to try to translate those results and put 
them into practice.
    I think societal investments that we make as a society in 
research. The outcomes of those investments should be available 
to everyone in that society, and health centers are helping to 
do that.
    The CTSA programs now and their roadmap where they are 
trying to build translational research support in 60 major 
health science institutions--Madison, U.W.-Madison School of 
Medicine and Public Health has received one of those grants. 
They are reaching out to community health centers and trying to 
establish what I call kind of knowledge pipelines that will 
help us translate data.
    The work that is coming out sooner and the people who bear 
the disproportionate burden of disease are the folks we serve, 
are the poor. We have to find a way for them to capitalize on 
the research. I think the roadmap and some of the move to 
translational research should be applauded.
    Mr. Obey. Thank you.
    Mr. Walsh. Thank you, Mr. Chairman. Mr. Nycz, the Federal 
budget provides about $2,000,000,000 for community health 
centers, but the actual budgets--costs to maintain, to run, to 
provide services at those clinics--is roughly about 
$9,000,000,000. Where does the rest of that money come from?
    Mr. Nycz. A big part of it is medical assistance. Because 
of where we are located, we serve a lot of medical assistance 
patients.
    Mr. Walsh. Can you be more specific on medical assistance?
    Mr. Nycz. When we serve Medicaid patients, we bill for 
those services and we receive payment. So that is a huge chunk.
    Mr. Walsh. So, Medicaid payments.
    Mr. Nycz. Medicaid payments. A smaller chunk but more 
active in the rural areas is we also serve low income Medicare 
patients, and we get money for that.
    Plus, in the community health center program, pretty much 
everybody, unless you are in abject poverty, pays something on 
a sliding fee. For example, in our center, we get over a 
million dollars a year in sliding fee payments. That helps us 
with our programming.
    Mr. Walsh. Thanks.
    The two ladies who spoke more on the macro level, the idea 
that the western democracies in Europe are basically 
government-run healthcare systems. I am told that creates two 
tiers of healthcare, the healthcare for everybody and then the 
healthcare that individuals who have means go outside of that 
system.
    Is that, in fact, true? If so, what does that do the 
overall quality of healthcare in those countries, first. 
Second, does that create a more positive healthcare system for 
those countries?
    Ms. Lambrew. I will let Dr. Chollet talk in a second, but 
in terms of, I will just take on three issues.
    One is this idea of waiting lists and queues and what are 
the data showing on that. I think what happens here is that we 
do have our own type of queues. If you are low income, 
uninsured, you have a different system and often find yourself 
waiting, not getting access to care that you need for delays 
and money reasons.
    We also, interestingly enough, for our insured population, 
our delivery system is stressed enough that same day access to 
healthcare is worse here than in European nations. So if you 
are insured and you need to see your doctor today for an urgent 
need, you are more likely to wait here than most, not all, 
other nations.
    So we see that their triage system is more for 
discretionary service, kind of oriented things. We have here a 
socioeconomic kind of triage system as well as one that because 
of our delivery system stress and lack of a system, we have 
people waiting for urgent care.
    On tiering and two tier systems, I do not know that there 
is any country that is so government-run that there is no such 
thing as an outside system. Canada has been debating whether or 
not they allow for private insurance on top of their provincial 
insurance. But, for the most part, every system allows it 
because they want to be able to have a system where people have 
the basics and then people who have means get more.
    Mr. Walsh. What percent of the people take advantage of 
those second tiers, third tiers?
    Ms. Lambrew. I am just going to say offhand that we looked 
at this two years ago. At the low end of the scale, it is a 
couple percentage points, I think, in Britain and in--I am 
trying to think what other nation.
    Australia has been trying to promote it because Australia 
kind of has a basic Medicare program. They want to be able to 
have more in a second tier than they have now, but they have 
not had very much success with it. So it depends.
    Mr. Walsh. What is the overall impact on healthcare because 
of that second tier or third tier?
    Ms. Lambrew. You know it is hard to find. As Senator 
Daschle, whom I work with, says often, we have islands of 
excellence in a sea of mediocrity.
    We have some excellent healthcare. We have some outcomes 
that cannot be beat.
    But there are very few studies that say systematically when 
you look at across not just our statistics on our health but 
our outcomes, survival from different types of treatment. When 
you have cancer, what are your odds of survival? These are the 
sorts of statistics that for people in the system, are they 
getting the kind of quality care, and we just do not rank at 
the top.
    Part of it access. It cannot all be access, but it is the 
area that distinguishes us.
    Ms. Chollet. Just in answer to your question, what is the 
impact of the private sector tier, if you will, on the public 
program, there is not enough of the private sector tier to wag 
that dog, if you will. The public program really defines the 
quality of care and access to care in the nation, and the rest 
of it sort of sits on top and does not do significantly other 
than what the public system does.
    What it does is allow a different system of triaging, but 
it does not allow a different quality of care per se.
    Mr. Walsh. Thank you both very much.
    Mr. Obey. Mr. Honda and Mr. Ryan, we have five minutes.
    Mr. Honda. Listening to you, it sounds like some of the 
opportunities that are out there could be taken up by school 
districts too, where they use their school facilities like the 
district office and co-locate social services, health services 
and things like that.
    I was reminded of when we put our new district office 
together for the Franklin-McKinley School District, we put a 
doctor's office in to make sure that all the kids were up to 
date on their shots, and then a dental office to make sure that 
the youngsters were getting good dental care.
    10 years ago, I first heard that we saved a kid from dying 
of dental infection. I had never thought about that before; 
hearing what you are saying now just brings it even up to a 
higher level of urgency. So I appreciate all of your work and 
your input.
    Mr. Ryan. Yes, I have one question that I would be 
surprised if you had the answer to. One of the issues, the core 
issues in our Country is the level of stress that we live under 
in the United States as opposed to some of the European 
countries.
    I know I jokingly mentioned smoking, but to watch, as you 
all do and as we do from our levels and at the local level, the 
amount of stress that the families go under that are dealing 
with these healthcare situations.
    I was just having a conversation with a friend of mine the 
other day whose wife had a premature delivery, one pound, two 
ounces, a year or two ago. Now she is in the second pregnancy, 
has had surgery and obviously had one premature birth and is 
going through all these surgeries and everything. The insurance 
company says to the family, this is not pregnancy-related, so 
we will not cover it.
    Whether it is the dental or any situation that you guys are 
dealing with in the trenches, have we been able to measure the 
effects of stress in our society and how this just exacerbates 
a lot of these health issues that are being dealt with?
    Mr. Nycz. I am not familiar with that research, but I will 
tell you in kind of linking back to the schools, that we have 
programs that work in after school time. One of the 
observations we have had where we have 300 some kids in high 
need. We work on homework. We do all kinds of things with them.
    One of the observations that came out of that is it lowers 
the stress in the families because their children have a place 
to go. Frequently, mom and dad are both at work. Then when they 
come home and they are tired from the end of the day, the kids' 
homework is done. They are doing better in school.
    I was surprised myself to learn about this when we were 
looking at the impacts of our after school programs. The 
schools love it. They refer to these programs, and they are now 
working on trying. They would like us and the United Way may 
help us at some point to put in a dental facility right there 
where these kids are coming in.
    I mean we have had actual examples in terms of there are 
some simple things you can do. You know where your kids are. 
They are in a good program. They are eating right. There is 
recreation. There is a gym there. They are learning homework. 
Many of them come back to volunteer.
    The surprise was in the family surveys that it alleviated 
family stress.
    Mr. Ryan. This is almost directly related to a lot of the 
mental health promotion that we talk about here.
    Ms. Lambrew. I will just add quickly. Last year, there was 
the Child Health Summit or Child Summit that you had here at 
the House, and there was a scientist who is beginning to look 
at some of the clinical research on prenatal stress and how 
that could affect the child.
    We had some clinical linkages, but I think also there is a 
growing body of research that says in addition to our kind of 
obvious mental health problems, behavioral problems like 
alcohol use, drug use, and even obesity. Obesity may be self-
medication for families under stress.
    If we cannot figure out the role of stress in some of 
behavioral as well as our clinical settings, we are going to 
continue to have, I think, this chronic disease epidemic. 
[Laughter.]
    Mr. Honda. I think that when we talk about being more 
efficient and saving time, we do not use the time that we save.
    Mr. Walsh. You need to add an iPod to that, and it will 
calm it right back down.
    Ms. Lambrew. We will have NIH fund the study of getting rid 
of BlackBerrys, iPods and cell phones in how to reduce stress.
    Mr. Ryan. I want to volunteer for that study if I can. 
Thank you very much.
    Mr. Obey. Thank you all. We appreciate your time.
    The Committee will resume at 2:00 in the full Committee 
hearing room.

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                                           Tuesday, March 11, 2008.

    IMPLICATIONS OF A WEAKENING ECONOMY FOR TRAINING AND EMPLOYMENT 
                                SERVICES

                               WITNESSES

SANDI VITO, ACTING SECRETARY, PENNSYLVANIA DEPARTMENT OF LABOR AND 
    INDUSTRY
BRUCE WYNGAARD, VICE CHAIR, OHIO WORKFORCE POLICY ADVISORY BOARD
ANDREW SUM, DIRECTOR, CENTER FOR LABOR MARKET STUDIES, NORTHEASTERN 
    UNIVERSITY
LARRY E. TEMPLE, PRESIDENT, NATIONAL ASSOCIATION OF STATE WORKFORCE 
    ADMINISTRATORS
    Mr. Obey. Well, good morning, everybody. Thank you all for 
coming.
    As I think people are aware by now, we have been holding a 
number of hearings to discuss not only what the cost of doing 
certain things is but what the cost of not doing some things 
also winds up being.
    At one of our recent hearings, Harold Meyerson cited the 
decline in benefits, pensions and income experienced by many 
workers. And he concluded, quote, ``We are no longer a nation 
of good jobs.'' I hope that is not true, but I know it 
expresses a disquiet that a lot of people have.
    Jared Bernstein of the Economic Policy Institute told us, 
quote, ``Working families are working harder and smarter, but 
real incomes are down and poverty is up.''
    Let me simply note, with respect to that, that, in his new 
book, Paul Krugman makes the following statement: ``if gains in 
productivity had been evenly shared across the workforce, the 
typical worker's income would be about 35 percent higher now 
than it was in the early 1970s, but the upward redistribution 
of income meant that the typical worker saw a far smaller 
gain.''
    Then he talks about the period after 1973, and he points 
out that only the top 1 percent has done better since the 1970s 
than it did in the generation after World War II. Once you get 
way up the scale, the gains have been spectacular. The top 10th 
of a percent saw its income rise fivefold. The top 100th of 1 
percent of Americans is seven times richer than they were in 
1973.
    We are going to be talking today about the folks who do not 
fall into that category and who need some help to get back on 
track.
    On Friday, the Bureau of Labor Statistics released 
information that we had lost 101,000 private-sector jobs in 
February, the third consecutive month of that decline. Over the 
past year, the number of unemployed has risen by 544,000. Yet, 
there are 4,900,000 part-time workers who also cannot find 
full-time work, an increase of about 637,000 from the year 
earlier. More workers are discouraged and are dropping out of 
the workforce. The February report showed that 1,600,000 such 
workers have suspended their job search or believe that no jobs 
are available to them. That is the most recent snapshot that we 
had from the agencies.
    As I told Secretary of Labor Chao last week, I am not much 
interested in trying to place blame for any economic slowdown 
or for any economic problems that occur. I do not think that is 
very helpful. But I do think that we need to have a clear idea 
of what the facts are, and we need to get some pretty good 
advice about what it is that we ought to be trying to do about 
those facts.
    If we take a look at the administration's budget, the 
Workforce Investment Act has cut over 500,000,000 opportunities 
for low-income youth. The Job Corps, Youth Build and the 
Reintegration of Ex-Offenders Program are all reduced. The 
Migrant and Seasonal Farm Worker Program is eliminated. The 
Title V program that provides minimum-wage part-time employment 
to low-income seniors is slashed by 33 percent. Perkins Career 
and Technical Education grants are eliminated. State grants for 
the Employment Service are also terminated.
    We have with us today four witnesses who, I hope, will give 
us their views of the situation and some suggestions about what 
this committee could do to deal with the situation. We have 
Sandi Vito, Acting Secretary of the Department of Labor and 
Industry, Pennsylvania Department of Labor and Industry; Bruce 
Wyngaard, Vice Chairman of the Ohio Workforce Policy Advisory 
Board; Andrew Sum, Director of the Center for Labor Market 
Studies, Northeastern University; and Larry Temple, President 
of the National Association of State Workforce Administrators.
    Before I call on each of you to summarize your statements--
and we will put your entire statements in the record, 
obviously--I would like to call on Mr. Walsh for whatever 
comments he might have.
    Mr. Walsh. Thank you, Mr. Chairman. Thank you for holding 
this hearing today.
    I would like to welcome the witnesses. Thank you for coming 
today. I understand some of you had difficulty getting into the 
building. That just goes to show our national security is 
getting stronger every day.
    Mr. Chairman, this Nation has just experienced a period of 
nearly unprecedented expansion. Since 1945, the economy has 
endured 10 cycles. On average, periods of contraction have 
lasted about 10 months, versus expansionary periods lasting 57 
months. So our economic cycles have trumped Newton's law. 
Indeed, for every action, there has not been an equal and 
opposite reaction.
    Our last period of economic contraction was in 2001, 8 
years ago. Given that prolonged period of expansion and 
historical precedent, a correction was imminent. This 
correction, however, has been emphatically punctuated by truly 
unusual events--the crash of the subprime lending market, and 
the historically high gas and oil prices continue to rise. None 
of this is good news and is frightening to the public. But 
couldn't this slowdown be a function of the economy's natural 
cycles of checks and balances?
    During times of uncertainty, the American public looks to 
their leaders for guidance and for encouragement, not for 
speeches of gloom and doom. Many on the left are calling this a 
full-blown recession. Our presidential candidates are exciting 
the grassroots by assailing the economy, and the media only 
amplifies it. Secretary Vito's prepared remarks today state 
that we are, quote/unquote, ``on the precipice of an economic 
slowdown.'' So even our own recognized experts are not in 
agreement.
    Indeed, it is not all bad news. Positive indicators do 
exist. According to the Bureau of Economic Analysis, real gross 
domestic product, the output of goods and services produced by 
labor, in the United States did, in fact, increase in the 
fourth quarter of 2007. This, the Bureau notes, is primarily 
due to positive contributions from personal consumption 
expenditures. I think this is a telling reality.
    In February, 63,000 jobs were lost in manufacturing, 
construction and retail trades. One job equals one person, so 
any job loss is troubling, but this represents .0005 percent of 
the total job market of 138,000,000 jobs. Job growth increased 
in health care, in food services and in leisure and 
hospitality. Average hourly earnings rose by 5 cents over the 
last month. During Secretary Chao's testimony 5 days ago, the 
Chairman cited January unemployment figures of 7,600,000, or 
4.9 percent. February numbers show that that number has fallen 
to 7,400,000, or 4.8 percent.
    Now, the traditional explanation of that is that people are 
so frustrated that they are not seeking jobs anymore. There is 
another explanation, possible explanation; that is, that 
younger workers, seeing the difficulty of finding good job 
opportunities, are going back to school and they are going back 
into training.
    Mr. Chairman, the economy is contracting, I think we all 
agree, but I remain confident and optimistic that the American 
people will again provide the stimulus to overcome this 
temporary slowdown. I am delighted that Congress and the 
administration acted quickly to provide a stimulus package. My 
view was that the fact that we did something together is 
probably more important than what we did, but we did something, 
and I applaud that.
    So, Mr. Chairman, I look forward to the discussion and to 
the testimony. I yield back whatever time I have remaining.
    Mr. Obey. Thank you.
    Why don't you proceed, Ms. Vito.
    Ms. Vito. Good morning, Mr. Chairman and Congressman Walsh. 
Thank you for the opportunity to speak with you today about the 
Nation's workforce system.
    Mr. Chairman, as you noted in your opening remarks, we face 
a very different economy than the economy of even a generation 
ago. Workers and businesses have to contend with rapidly 
changing technologies, and if they do not keep up with those 
technologies, they are likely to either go out of business or 
to be pushed out of the labor market. Because we compete, as 
you know, in a global marketplace. Businesses have to be more 
innovative than ever before, and workers need higher levels of 
skill to help those businesses innovate.
    Not too long ago--and this is particularly true in States 
like Pennsylvania--a high school diploma was assurance of a 
middle class, but today, most jobs require education beyond 
high school. The labor market can be a very difficult place to 
navigate. Gone are the days when someone graduated from high 
school, got their first job and worked up the career ladder. 
Those types of career ladders are very scarce today. On 
average, people change jobs once every 4 to 5 years.
    Against this backdrop, we face an economic slowdown. As 
Congressman Walsh noted, last week's jobs report is clearly not 
good news, but there is not general agreement.
    And, Congressman Walsh, I would hardly call me an expert on 
the economy.
    Mr. Walsh. I could do that.
    Ms. Vito. Nonetheless, we face some economic uncertainty, 
and it does seem clear that we are on the precipice of an 
economic slowdown. Whether that is a recession, how long and 
how deep that will be is of some debate.
    Reducing workforce spending at a time when we have not 
fully transitioned to a knowledge-based economy, in terms of 
preparing our workforce, being able to compete in the global 
economy, at the same time that we are facing new economic 
hardship is very counterintuitive.
    Without a doubt, as Secretary Chao I think noted, our 
workforce development system is not perfect. But I would urge 
the committee to consider improvements to the system and not 
funding cuts.
    The Workforce Investment Act--which Larry Temple, who is 
here today, has noted has not had, really, the time to mature--
was created to grapple with the needs of our changing economy. 
In Pennsylvania, we take very seriously that challenge. And we 
have worked in innovative ways, I think, to bring together 
disparate resources, ranging from higher education, economic 
development, and traditional workforce programs, as well as 
career and technical education. All of that is designed in 
Pennsylvania to specifically address the needs of industry for 
a skilled workforce and the needs of our residents for 
increased economic opportunity.
    We enacted, in 2005, Job Ready PA. The cornerstone of that 
is something that the workforce development literature calls 
``workforce intermediaries.'' We call them ``industry 
partnerships,'' because, really, who would know what a 
workforce intermediary was? They bring together businesses in 
economic sectors that are similar, have similar supply chains, 
needs for labor force, and, whenever possible, they bring labor 
unions to the table as well. Then they aggregate the demand for 
training, and then we redesign training to that industry 
demand.
    It saves businesses money. We have economies of scale, and 
it enables us to engage smaller and mid-sized businesses. It is 
designed to do one of the key challenges that you addressed, 
Mr. Chairman, which is improve job quality by improving human 
resource practices.
    Through these partnerships, which are largely run by our 
workforce investment boards, we have seen increased outcomes of 
the businesses that participate, which are nearly numbering in 
6,000. Eighty-three percent have shown increases in 
productivity gains.
    In addition to the first goal, which is bringing businesses 
together, we have also worked to increase educational 
opportunities. We have created new programs, particularly 
designed for folks who are already in the workforce, to upgrade 
their skills.
    The thing that I think people forget about when they talk 
about Pennsylvania's reforms is that most of it was designed to 
realign the existing system, to really work to improve the 
quality of services from the existing system. And cuts to the 
Federal funding would severely undercut any progress we have 
made in Pennsylvania and in other States.
    Ten percent of all workers seek assistance from public 
employment and training programs at some point in their 
careers. In Pennsylvania, that is just over 800,000. And almost 
50,000 employers use our system each year.
    Funding cuts would decrease not only our ability to provide 
those services, but on top of what we have already had, which 
is a 12 percent cut over the last year, combined with the 
original reduction in funding and then the two recisions, one 
which is pending, that is a total of a 12 percent cut. Of the 
22 local workforce investment boards, 13 of them in 
Pennsylvania have reported that they will significantly need to 
cut staff. Thirteen have also reported that they will run out 
of training money before the end of the year.
    If we face continued cuts, here are some of the choices we 
have to face. We would need to close one-stops, potentially lay 
off workers, certainly leave positions vacant. We would have 
fewer training opportunities for our residents. There would be 
significant cuts in the number of summer and year-round 
internships for our youth. And there would be fewer personnel 
qualified to work with employers, meaning that we would have 
many employers who we are just reaching out to now who would 
still be looking for and not have the ability to match their 
needs to the workforce--all of this at the same time when we 
are seeing increased demand.
    The second proposal that is, sort of, before the Congress 
is to entirely eliminate the Wagner-Peyser funding. In 
Pennsylvania, employment services that are funded by Wagner-
Peyser are really the cornerstone of our one-stop operation. 
Without it, the other funding streams would be forced to pick 
up the burden, which they can ill afford to do. Moreover, the 
employment services' staff have a long and, I think, rich 
tradition of serving the job seekers as well as the employers 
in Pennsylvania, and we would lose their quality and knowledge 
and tradition. In fact, what we would end up with is a system 
that would be greatly overburdened as well as a system without 
very much training.
    Because we have integrated services, it would really impact 
the rest of the services that we provide, including our 
services to vets. In Pennsylvania, we have integrated those 
services. So, in fact, many of our vet representatives are 
funded half-time by Wagner-Peyser and by our DVOP line. So the 
elimination of the Wagner-Peyser funding would essentially 
dismantle our one-stop infrastructure.
    Many States, I think, are very willing to work with 
Congress to improve the system and to create challenges both to 
our immediate needs, where we face a weakening economy, as well 
as a longer-term challenge of creating a skilled workforce. I 
would submit that, in a time of economic uncertainty, more 
resources are needed for workforce development.
    With new resources, we think should come challenges to the 
system. For instance, we could create a funding stream for the 
workforce intermediaries that we have described that work that 
we use in Pennsylvania. Again, 73 percent of the participants 
who get training through those intermediaries have gotten wage 
increases. On average, those wage increases are 13 percent, 
some higher, some lower.
    In addition, whether we have a corrective action, as 
Congressman Walsh has suggested, or have a full-blown 
recession, we should be looking at using this as an opportunity 
to upgrade the skills of our workers. If it is a corrective 
action, we should use the opportunity to create more training 
opportunities so that, as we come out of whatever slowdown, 
more businesses have access to the skilled workers they need 
and our citizens have access to better-paying jobs because they 
have the skills to compete for them.
    Community colleges and higher ed have an important role to 
play in all of this, but so does the public workforce system. 
They are the entity that creates transparency.
    So we look forward to working with you and having a 
meaningful discussion. We believe that, with sound and 
predictable Federal support, much is possible. Without it, we 
have no foundation on which to build.
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    Mr. Obey. Thank you.
    Is it Mr. ``Win-gaard'' or ``Wine-gaard''?
    Mr. Wyngaard. ``Wine-gaard.''
    Mr. Obey. The dean of the reporting corps in the Wisconsin 
legislature was a man by the name of John Wyngaard.
    Mr. Wyngaard. The same spelling?
    Mr. Obey. The same spelling.
    Mr. Wyngaard. Wow.
    Mr. Obey. He was not only respected, he was greatly feared.
    Mr. Walsh. So you learned how to pronounce his name right.
    Mr. Obey. Why don't you go ahead?
    Mr. Wyngaard. Okay, thank you.
    Mr. Chairman and members of the committee, thank you for 
inviting me to testify today on behalf of 10,000,000 members of 
the AFL-CIO.
    My name is Bruce Wyngaard, and I am the Vice Chair of the 
Ohio Workforce Policy Advisory Board. I am also an official of 
the Ohio Civil Service Employees Association, which is an 
affiliate of AFSCME. I have 25 years of experience working in 
the Nation's employment and training system, and I appreciate 
the opportunity to talk about the importance of training and 
employment services in this weakening economy.
    As you know, there are some very serious economic times 
looming, and certainly we are at a precipice in the immediate 
future. The national economy lost 63,000 jobs last month, and 
many economists have concluded that we are already in a 
recession. The ranks of the unemployed and the long-term 
unemployed are growing rapidly.
    At the national level, manufacturing jobs have been 
battered. The Nation has lost nearly 3,500,000 manufacturing 
jobs since 2000, many lost because of huge trade deficits to 
countries that don't play by the rules or respect workers' 
rights.
    In Ohio, we have experienced these harsh economic 
conditions, and at an extreme level, and this places severe 
strain on our State budget. Ohio lost 224,000 manufacturing 
jobs between 2001 and 2007. Many are auto-related production 
that have been affected by NAFTA and the movement of facilities 
to Mexico or to Canada.
    As the number of unemployed has increased, tax revenues 
have plummeted, home values have declined, property taxes are 
off, home foreclosures have devastated entire neighborhoods in 
Cleveland and in other cities. Now the Governor projects a 
budget shortfall of at least $233,000,000 and is contemplating 
a variety of cuts in social services, including cuts to 
programs that serve our unemployed citizens.
    In the harsh economic environment, it is extremely 
counterproductive for the administration to be proposing the 
elimination of the Employment Service and the massive cuts in 
job training programs funded by the Workforce Investment Act.
    There has been steady disinvestment in employment services 
for more than 20 years. In fiscal year 1985, $777,000,000 was 
appropriated by the Employment Service. In real dollars 
adjusted for inflation, $1,400,000,000 was needed in fiscal 
year 2008 to maintain level funding. Instead, $703,000,000 was 
appropriated--a cut of nearly 50 percent, again, in inflation-
adjusted dollars.
    The Wagner-Peyser system is the cornerstone of our Nation's 
public labor exchange infrastructure. It provides a host of 
essential services: job search and placement assistance; skill 
assessment; job counseling; providing labor market information; 
rapid response to workers affected by plant closings; and case 
management and job referrals for persons eligible for trade 
adjustment assistance.
    It is the Wagner-Peyser operations and staff persons who 
provide the one-on-one services to workers affected by trade 
policy. And the number of potentially affected workers 
increased very rapidly in fiscal year 2007. In recent years, 
many Wagner-Peyser staff work out of the State's network of 
one-stop centers. In fact, the Employment Service and the 
Wagner-Peyser funds provide the core service delivered at these 
one-stop centers.
    Abolishing the Employment Service would undermine our 
entire federally funded employment training system, leading to 
many of these one-stop centers to close. Eliminating the 
Employment Service would have a devastating effect on our 
efforts to work with dislocated workers and others made jobless 
by trade policies, as well as unemployment insurance claims and 
veterans, who make up the core focus of the Wagner-Peyser 
system.
    It is inconceivable that a limited number of vouchers, as 
the administration has proposed, would ever take the place of 
the personal, one-on-one employment services provided by the 
Wagner-Peyser system. It is the statewide service capacity that 
is particularly important. I can talk about that more during 
our time of questions and discussion.
    The 2009 proposed budget also calls for enormous cuts in 
the job training programs supported by the Workforce Investment 
Act. The administration proposes to zero out seven programs, 
and this would hurt dislocated workers, young people, migrant 
and seasonal farm workers, and disadvantaged adults.
    Again, the WIA system has been starved for resources for 
many years. In fiscal year 2001, in inflation-adjusted 2009 
dollars, $4,700,000,000 was available for WIA programs for 
targeted groups. The administration proposes to cut that to 
$2,800,000,000, a cut of more than $1,900,000,000 when 
inflation is factored in.
    These cuts would be disastrous for Ohio and other States 
struggling to cope with the deterioration of our manufacturing 
base. We simply do not have the capacity to deal with 
substantial job dislocation, especially in light of our 
significant budget shortfall. Losing any part of these Federal 
funds would have a severe blow on the people of Ohio.
    These proposed cuts come on top of cuts and a deep recision 
in the funding for WIA and employment services in fiscal year 
2008. In Ohio, we are grappling with how to absorb these cuts, 
and the State is facing a substantial retrenchment in personnel 
in our Department of Jobs and Family Services.
    The final point I would like to address is the underfunding 
of employment insurance operations. This is a serious concern 
as we head into a recession. There has been steady 
disinvestment in funds needed to operate the UI system. This 
problem is cresting this year as we brace for a surge in 
unemployment claims. The States are ill-prepared to handle the 
growing wave of UI claimants.
    Again, Ohio has seen the problem up close. Unemployment 
claims are surging. In February, Ohio had the largest number of 
planned workforce reductions in any State in the country. The 
demand for trade-related services is skyrocketing. The fiscal 
year 2008 appropriation for UI administration is simply not 
enough. States have documented a need for $2,900,000, while the 
current appropriation is only $2,400,000.
    On behalf of the AFL-CIO, I would urge members of the 
committee to support our Nation's public worker exchange system 
and to turn back the administration's attempt to dismantle it. 
In a time of economic crisis and beyond, the Nation needs the 
resources to begin rebuilding the system.
    We would also ask members of the committee to reject these 
cuts in the Workforce Investment Act resources and to support 
these essential services to dislocated workers, young people, 
farm workers, and adults needing retraining.
    Finally, we would urge the committee to provide adequate 
resources to administer their unemployment insurance programs 
during fiscal year 2008 and beyond.
    Thank you again for inviting me to testify today. I would 
be happy to answer your questions and to discuss whatever 
issues are on your mind.
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    Mr. Obey. Thank you.
    Mr. Sum.
    Mr. Sum. Thank you, Mr. Chairman. Let me also express my 
thanks for the opportunity to appear before you today.
    In comparison to the other three witnesses here, my focus 
is on youth and what has happened in our Nation to the labor 
market situation for teenagers and for young adults and what 
the workforce development policy can do to help address some of 
these problems in the year ahead.
    I know Congressman Walsh has said not all the news is bad. 
With respect to teenagers, not all the news is bad; some of it 
is worse. And the worst is yet to come. So let me lay out the 
main findings in each of these areas.
    On the one hand, we have talked about the decline in 
payroll employment in the country over the last few months and 
the rise in unemployment, but a recession or a near recession 
is not news to the Nation's teens. The Nation's teenagers have 
faced declining employment since the early summer of 2006. They 
experienced 4 years in a row of consecutive job declines from 
2001 to 2005.
    After barely a year of marginal improvement, the employment 
rate for the Nation's teens fell. Last year, the employment 
rate for our Nation's teenagers was 34.8 percent. That is the 
lowest rate we have ever had in the 60 years for which we have 
been collecting data on teenage employment.
    Since the fall, things have only gotten worse. The 
employment rate for the Nation's teens has fallen steadily for 
the last 7 months. Last month, only one in three teenagers 
across the country was employed.
    How low is 33 percent? It is 12 percentage points below 
where it was in 2000--12 percentage points below. I ask you: If 
the Nation's employment grade for all adults failed by 12 
percentage points, we would not call that a recession, Mr. 
Chairman; we would call it a depression. Our teenagers and 
young adults are facing a depression.
    These declines in employment rates have been across the 
board--across gender, age, race, ethnic group, family income 
group, geographic area of the country. There is no group that 
has been exempt from these declines. But the fact remains that 
the younger you are, the greater these declines have been. And 
for minority youth from low-income families, their ability to 
obtain jobs is only a fraction of what it is for white youth 
from affluent families. Last year, we estimate only one in five 
teenagers from low-income, minority families held any job.
    The summer situation has been a new all-time low for 4 
years in a row. And we project that this year will amount to, 
again, the lowest teen summer employment rate in our Nation's 
history in the absence of some response by the Congress to put 
large numbers of youth back to work--which I will, in one 
second, tell you what I think we can and should do about that.
    Now, some have asked, do teenagers really want to work? 
There are those who have suggested that teenagers are, as, 
again, Congressman Walsh suggested, back in school. It is true; 
some youth, in response to declining employment, have gone back 
to high school. Some have gone to college. Those are good 
things.
    The fact of the matter is going back to school could 
account for less than one-tenth of the decline in teen 
employment. Besides, work and school are some of the best 
options we could have for all young people across this country. 
So going to school and not working is an inferior outcome 
relative to going to school and working.
    We estimate that, at a minimum, there were 2,300,000 
teenagers last year who were either unemployed, underemployed 
or out of the labor force. Based on work that was done for the 
Department of Labor by Westat, we know those estimates are 
extremely conservative because they are based on interviews 
with parents. Mothers consistently underestimate the desire of 
their teenage sons and daughters to work. The true number of 
young people who are looking for jobs or who need jobs is in 
the magnitude of 3,000,000.
    Now, you might ask, why should we care about this? As long 
as young people are back in school, why do we care? There are 
seven main reasons why we ought to care. There are major 
consequences of not being able to work. They are simply the 
following.
    First, you cannot build strong related employment skills in 
the classroom. You cannot learn how to work by sitting in a 
classroom, whether it is a high school, whether it is college. 
The Nation's employers have consistently stated in the last 3 
years that they are extremely dissatisfied with the 
employability skills brought by new high school grads and new 
college grads to the labor market. The only way our young 
people are going to learn to work is to work.
    Second, those young people who work in high school also 
learn the value of the skills that we are trying to teach them 
in the classroom. School-to-work programs make young people 
more knowledgeable and aware of why they need to learn the 
skills they do.
    Third, and I would say most important, there is an 
extraordinary strong path dependence in teen employment. The 
more I work today, the more I work next year. The more I work 
next year, the more I will work the following year. The more I 
work as a teenager, the more I am going to work in my young 
adult years.
    As a country, in the last 7 years, we have not created one 
single net new job for 16- to 24-year-olds, not one. If we kept 
the employment rate for young adults at the rate it was in 
2000, we would have had two and a half more young people work 
last year. The only group that has gotten jobs in the American 
economy are illegal immigrants, the only group we have 
generated any jobs for under the age of 25.
    Fourth, if you want young people to move from high school 
to the labor market after graduation, the best thing you can do 
is have them work more. Those who work more are more likely to 
work steadily after graduation. That is true for high school 
and those going on to college.
    Fifth, research shows among disadvantaged youth, including 
males, black and Hispanic, work in school keeps you in school. 
It makes you more motivated to stay in school. It promotes 
school persistence. It promotes school graduation. It 
encourages you to attend college.
    Sixth, national research has shown young women who live in 
areas where there are more job opportunities for women are 
characterized by significantly lower pregnancy rates.
    Seven, the carryover from the more you work in school, the 
more you work as 20- to 24-year-olds. The labor market for 20- 
to 24-year-olds is extremely depressed, particularly for those 
with no college education.
    Last week, there was a report--some of you may have seen 
it--from the Pew Foundation, entitled ``One in a Hundred.'' One 
in a hundred U.S. adults 16 or older are in jail or in prison. 
That number is a bare shadow of what the case is among our 
young adults. Among 18- to 29-year-olds, three in 100 were in 
jail or in prison on a given day in 2006. Among male high 
school dropouts, 10 in 100 were in jail or prison. Among black 
male dropouts, 21 in 100 were in jail or prison on a given day.
    The situation among young adults is declining wages, 
declining employment, declining earnings, which have led to 
declining marriage rates. Last year, Mr. Chairman, was the 
first time in the postwar history that half of all the births 
to women under 30 were out of wedlock in this country.
    We gave the Oscar last year to a film called ``No Country 
for Old Men.'' We should have labeled that ``No Country for 
Young Families.'' This country has failed young families more 
than at any time in my entire history. When I left high school, 
we had out-of-wedlock births of six of 100. We have gone to 50 
out of 100. That is no country that has a future. We have to do 
something about it, and we cannot do anything about it until we 
restore the labor market for young people.
    Last, what can we do. We can do six things.
    At a minimum, no cuts for youth programs. We have got to 
restore all of the money that has been proposed for all WIA 
youth, for Job Corps, for Youth Build, and we should add to it.
    Secondly, we should reinstitute the Summer Youth Employment 
Program. We should have $1,500,000,000 set aside to put 
1,000,000 teens back to work. During the heyday of the 1970s 
when we had the Youth Summer Program, my good friend and 
colleague back here, Bob Taggart--we put 2,200,000 16- to 21-
year-olds to work during that time period. There is no reason 
why we cannot do it now. 1,000,000 jobs are a good downpayment. 
We should ask every WIA sponsor across the country to establish 
national goals to put teens and young adults back to work. Part 
of the money we give for youth employment should be set aside 
to create staff to put internships in the private sector to put 
our young people to work.
    Third, we should give additional tax incentives for our 
employers who hire teenagers. We ought to consider resurrecting 
the New Jobs Tax Credit that we had in the 1970s, which was 
very cost-effective in putting people to work, and give wage 
subsidies for young people. Congress and the President should 
promote the hiring of young people. When I was in Germany in 
the mid-1980s, Chancellor Kohl would get on TV and announce 
that we need more apprenticeships for youth. Mr. Bush should be 
on television every night, and not at 2:30 in the morning like 
President Reagan did, but at 6 o'clock at night, letting the 
national news carry something that matters.
    We need to improve the school-to-work transition for young 
people. There are ways that we could do it. The evaluations of 
Career Academies by the MDRC, coming out this year, shows that 
those programs are extremely effective in raising the long-term 
earnings of young men for 8 years after graduation, adding 
$26,000 on average to their earnings.
    Last, we need to restore financial incentives for young 
people. What we should do is consider massively expanding the 
EITC for single adults. We should increase the phase-in range 
to put them to work. And we should allow young married couples 
to both be eligible for the EITC when children are present in 
the home, and not have the EITC be based on the earnings of 
those who make the most. Our young families are in need of 
income. We need to support the economic well-being of young 
families, and we need to start with the labor market.
    Thank you for your time and for giving me the opportunity 
to express my views with you here this morning. Thank you.
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    Mr. Obey. Thank you.
    Mr. Temple.
    Mr. Temple. I talk a little slower than my colleague here, 
so the reporter is going to have a break. I probably will not 
get as many pages. It is the downside from being from the 
South, I guess.
    Thank you, Mr. Chairman. It is a pleasure to be here today. 
My name is Larry Temple. I am the Executive Director of the 
Texas Workforce Commission, and I also have the honor of 
serving as President of the National Association of State 
Workforce Agencies, otherwise known as NASWA.
    I am testifying today in my role as President of the 
Association, an organization representing every State workforce 
agency in the Nation, men and women who administer assistance 
in times of need and help to prepare our workforce to compete 
in the global market and in our changing economy, whether it is 
assisting workers following a mass layoff, the September 11th 
terrorist attacks, Hurricanes Katrina and Rita or our returning 
veterans from Iraq and Afghanistan, something like 200,000 
servicemen and 90,000 reservists a year. Our Nation's workforce 
system is a vital part of our economy.
    Last week's press release by the Department of Labor, which 
has been referred to today, told us that the Nation's payroll 
job count declined slightly, and the news has been full of 
reports of a slowing, growing economy. But I also look at it 
from another perspective. While, on the net, there may be fewer 
jobs--minus 63,000 last month--there are many employers who are 
growing and who are adding to their workforce. Many more 
employers are looking for workers, skilled workers, to help 
them move their businesses forward. Data released in February 
from the Bureau of Labor Statistics showed that 4,600,000 new 
hires were reported, and that was for last month, for February.
    Our first line of defense is a workforce system that can 
help those individuals who were laid off find new employment as 
soon as possible so they can continue to support their 
families. Helping employers find qualified workers and helping 
unemployed Americans back to work are our ultimate goals.
    Through the Nation's network of 3,200 one-stop career 
centers and over the Internet, the workforce system provided a 
broad array of services to over 19,000,000 workers and as many 
as 7,600,000 employers with the Wagner-Peyser Act, the 
Workforce Investment Act and unemployment insurance funds.
    The unemployment insurance system will help stabilize the 
economy by providing temporary and partial wage replacement for 
workers suddenly out of work through no cause of their own and 
needing income support. Paying those benefits on time and 
accurately is a must.
    One of the most important services that NASWA provides is 
our new Job Central National Labor Exchange. This is the 
successor to America's Job Bank. We implemented this last year. 
It is a public-private partnership with DirectEmployers 
Association, a nonprofit organization with nearly 400 corporate 
members. As of today, some 44 States have joined the exchange 
since its inception last March. By the end of this year, we 
hope that all States will have joined.
    While the workforce system is fundamentally sound, it is 
also under stress. Despite the success in providing assistance 
to 19,000,000 American workers last year, it has become the 
target for budget cuts. Workforce programs have been cut 
several times since the year 2005, and States will have to 
comply with the $250,000,000 recision enacted in the fiscal 
year 2008 appropriations bill, and in addition to the 1.74 
percent across-the-board cuts. NASWA is disappointed. The U.S. 
Department of Labor's fiscal year 2009 budget will make further 
cuts amounting to $1,100,000,000, and we, as an organization, 
are opposed to these cuts.
    Mr. Chairman, our concerns are summarized as follows: The 
employment insurance system needs an immediate infusion in the 
year 2008 of up to $110,000,000. Unfortunately, the level of 
funding appropriated in the Consolidated Appropriations Act of 
2008 is not sufficient to meet the increasing jobless claims.
    NASWA strongly opposes the elimination of the employment 
service grants of States. These funds are critical to the 
infrastructure and to the services of one-stop career centers 
serving 13,000,000 workers last year. These services are 
certainly cost-effective. At around $52 per worker, these funds 
return to our economy about $2 for every $1 invested, in terms 
of increased earnings, reduced income support and more taxes 
paid.
    Eliminating funding for such a cost-effective program 
because of an alleged duplication of the services in a small 
minority of States does not make sense. With all due respect to 
Secretary Chao, over 35 States do not run a duplicative service 
between WIA and Wagner-Peyser, and there are plans, I know, in 
some States to consolidate these programs. So throwing the baby 
out with the bath water I do not think is going to be the best 
approach.
    NASWA also opposes a 14 percent reduction in the Workforce 
Investment Act programs for adult, youth and dislocated 
workers. These programs are effective, and they provide 
training and work support for many Americans.
    Mr. Chairman, the economy of each State is different. Even 
within each State, we have employers who are adding jobs and 
those who are losing jobs. A strong, adequately funded 
workforce system can meet both needs. In addition, differing 
needs from State to State also require flexibility in how we 
are allowed to administer these programs.
    The glass is half-full for our workforce programs, but the 
budget process is siphoning off critical resources. The system 
is performing well when compared to Federal goals, but the 
consequences of budget cuts are beginning to show. They include 
not only fewer American workers and veterans who are receiving 
services but also declines in program performance, starting 
with the unemployment insurance program. If the U.S. Department 
of Labor's proposed cuts are enacted, the situation will only 
get worse.
    Mr. Chairman, on behalf of all of the men and women who 
help make the workforce system work, we thank the subcommittee 
for its continued support. The system remains fundamentally 
sound, and it continues to be a lifeline to millions of 
hardworking Americans who need a little help to get them back 
on their feet.
    I can tell you that, in the event of any type of disaster 
or mass layoffs, the system will be there; we will have the 
unemployment insurance benefits issued. But when we have to 
start robbing Peter to pay Paul, something is going to pay the 
price. In that instance, it would be the integrity of the 
program. Overpayments, fraud will increase. So the infusion of 
more administrative dollars for the unemployment insurance 
grant is something that we are very concerned about and for 
which we would appreciate your support.
    Thank you.
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    Mr. Obey. Thank you very much.
    Mr. Walsh, I think, as long as we do not have everyone here 
this morning, I will yield people 10-minute blocks.
    Mr. Walsh. Great. Thank you, Mr. Chairman.
    Thank you all very much for your testimony.
    I would like to begin with--is it Professor Sum?
    Mr. Sum. Yes, sir.
    Mr. Walsh. You are an economist?
    Mr. Sum. Yes, sir.
    Mr. Walsh. Great. Now, here is the thing. When I was a kid, 
I worked in an apple orchard for a summer. I worked for about 2 
months. I carried irrigation pipe, pulled suckers, pruned--not 
pruned--but then I picked toward the end of the summer. There 
were a number of--four or five or six--other high school kids 
who worked on that apple farm.
    Now, as a Member of Congress, I have a district within 
which is Wayne County, New York, right along Lake Ontario. It 
is a great fruit-growing area. There are lots of apple farms, 
peaches, pears and so on. Those farmers tell me they cannot get 
high school kids to work for them. At the same time, they beat 
me about the head and shoulders because our immigration laws 
are so tough that the people who they were bringing in now 
cannot get there anymore, so fruit is rotting on the ground.
    So you are the economist; I am not. It seems to me that 
there is some sort of a disconnect here. If we are losing 
summer jobs or autumn jobs, part-time jobs for young people, is 
it the illegal immigrant influx that is driving the price of 
labor down? Is it the farmer who does not want to pay the 
American high school kid a proper wage? What is causing this?
    Those kids are the ones who you are talking about who do 
not have summer jobs.
    Mr. Sum. Congressman Walsh, the answer to that is probably 
mixed. When I was a teenager myself, I worked in just about 
every job, including some jobs of picking blueberries. I 
delivered paper routes and worked at U.S. Steel.
    If you look at the current situation today, though, 
however, you find something like the following. One is that, 
particularly when it comes to the agricultural thing, there are 
conflicts also with the school year that are important in many 
areas of the State, where students are let out for the school 
year relatively late in June and are asked to come back early 
in August. And a number of agricultural employers looking for 
workers are looking for people to start earlier and to stay 
later, and they find that many, many teenagers cannot 
necessarily fill that bill.
    When it comes time for the wage side--I mean, other 
individuals have said this--it is sort of like me going in and 
trying to get a plasma TV. See, I cannot get a plasma TV for 
$500. The average price is $5,000. I am willing to pay $500. If 
I went out and said there is a shortage of plasma TVs, I would 
expect to be laughed at. Well, if the employers are not wanting 
to pay a true market wage, Congressman Walsh, then the answer 
is there cannot be a shortage, and the wage should adjust. And 
if we believe in free markets, let the labor market adjust so 
the wages appear.
    The main thing, though, and what I would say, though, 
Congressman Walsh, is the following. When we ask young people 
about whether they are willing to work at jobs that pay the 
current prevailing Federal minimum wages, for many jobs, from 
department stores, to grocery stores, to even babies, the 
answer is we don't find that most teenagers come to that job 
asking for a wage that is anything above the existing minimum 
wage.
    So, while there are some pockets where people cannot find 
adequate numbers of people, particularly in high-seasonal 
periods, the answer generally seems to be that, at the going 
wage, far more young people wish to work than employers are 
willing to hire them. That gap is larger today than it has been 
at any time, sir, in the last 60 years.
    Mr. Walsh. Mr. Temple, you are from Texas.
    Mr. Temple. Yes, sir.
    Mr. Walsh. Mr. Wyngaard is from Ohio.
    Now, I am from New York, so our situation, economic 
situation, is analogous more to Ohio than it is to Texas. We 
have experienced the same dramatic loss of manufacturing jobs. 
We have had higher unemployment, historically. Although, it 
seems to be in sync now with the rest of the Nation, but we 
have made a transition from manufacturing more to service jobs, 
whereas Texas is growing jobs and growing manufacturing jobs.
    So would you say Texas is in a recession right now?
    Mr. Temple. No, sir. We have pockets of unemployment, but, 
generally, we added 28,000 jobs last month in Texas. It was 
down somewhat from the month before, but we are still seeing 
job growth, and in manufacturing as well.
    Mr. Walsh. So some States are doing well, and some States 
are not. And I have seen that in my own State. I have seen jobs 
going from New York to the South or other States. And I think 
it is a function of policy, of State government policy. Ohio 
and New York are very high-tech States.
    I am told Texas does not have an income tax; is that true?
    Mr. Temple. No, sir.
    Mr. Walsh. That is amazing. We do. Ours is about 8 percent.
    Mr. Temple. Keep it.
    Mr. Walsh. Keep it? Really?
    Mr. Temple. Yes.
    Mr. Walsh. Easy for you to say.
    Mr. Temple. Yes, they come our way.
    Mr. Walsh. Yes. Well, that is the problem. That is the 
problem. And corporate tax rates are higher.
    And we do provide better, I think, Medicaid coverage for 
people, better children's health plans for people. We used to 
brag that our education was better than the southern States. I 
am not sure that is the case anymore.
    But I would like to just have any of you comment on that 
fact, that the country itself may be teetering on recession but 
some places are doing better than others, and why is that? Why 
do we have better economic growth in some parts of the country 
than in others?
    Mr. Wyngaard. Well, I can make some comment about Ohio. One 
of the things that happened with Ohio is that it never 
rebounded after 2001. Our per capita income is clearly growing 
at a slower rate than the rest of the country. The amount of 
job growth is slower than the national rate. We have, as it 
turns out, as compared to other States, a lower average 
education, and that is one issue that we are working very hard 
on, to turn that around.
    The amount of manufacturing as a proportion of our sector 
or of our total production has been very significant. So the 
impact of lost manufacturing had a substantial impact on us. A 
typical manufacturing job, good benefits, a decent wage. And 
what growth we have are in sectors which don't provide, 
basically, that kind of family-sustaining work.
    So what we have here is a structural change that is taking 
place in our economy. And we have workers that don't have the 
skill sets for some of the kind of higher manufacturing or the 
higher tech-type work that is being created in Ohio. So, 
interestingly, we have a lot of mismatch between the existing 
workers and where some of the growth is taking place in the 
State.
    This is one reason why we believe the Wagner-Peyser and the 
WIA dollars are very important. Because it used to be that you 
would have a cycle of somebody losing their job and waiting for 
them to be re-employed. The reality is that the job doesn't 
return. That person needs to look for another job in their 
community or in a wider regional area.
    And we often find that there is not a match between what is 
available and the skill sets of those dislocated or those who 
are laid-off workers. So the necessity now is to work harder at 
identifying what those skill sets are and bringing them up to 
the level of--or up to the skill sets that are required for the 
jobs that are available.
    Mr. Walsh. How do you, sort of, look down the road and see 
where there will be opportunities for jobs in Ohio? How do you 
determine how those community college programs or BOCES 
programs or Workforce Incentive Act programs respond to that?
    Mr. Wyngaard. Well, we have done a number of studies using 
labor market information. A lot of it is queried with sectors 
of employers like manufacturing, plastics and that type of 
thing. We have a decent set of what are the demand-type jobs, 
those that are growing or there is a lot of replacement of 
workers taking place, and where we have a reduction.
    This is mostly regional. You cannot make assumptions on a 
statewide basis. You really have to look at your regional 
areas.
    One of the things that Ohio is doing is looking at skill 
banks, using a marriage between economic development resources 
and WIA dollars to basically focus on what are the kinds of 
demand occupations that local employers feel they are having 
difficulty hiring, and creating more focus and putting some 
resources in that area. So a lot of it is the local targeting 
of the kinds of jobs that remain unfilled.
    Mr. Walsh. Thank you very much.
    Is my time up?
    It is. Okay. Thank you.
    Mr. Obey. Before I yield to Mr. Ryan, let me simply observe 
that Mr. Walsh said that he thought that some of the problem of 
unemployment was simply due to the natural cycle of the 
economy. I am reminded of the comment by my own philosopher 
friend, Archie the Cockroach----
    Mr. Walsh. You have not heard from him in a while.
    Mr. Obey. Yes--who said there is always a comforting 
thought in time of trouble when it is somebody else's trouble.
    Mr. Walsh. I am not comforted by that at all.
    Mr. Obey. I just think it is important to understand that, 
whether the economy operates in cycles or not, it is our job to 
try to figure out how to minimize the damage when it occurs. 
And that is what we are doing.
    Mr. Walsh. Mr. Chairman, if you would yield, I do not 
disagree with you. The point is cycles do occur, and we cannot 
change the cycles. We can, obviously, try to react to them, but 
we cannot change them.
    Mr. Obey. Absolutely.
    Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    I want to thank Mr. Wyngaard for coming all the way from 
the great State of Ohio, and for your testimony. I have a 
question or two for you, Bruce.
    First, Mr. Temple, I read with great interest in the Wall 
Street Journal, I think it was a couple of days ago, where they 
had a comparison between Texas and Ohio. I guess the initiative 
for the article was the whole debate over NAFTA and how Ohio 
has obviously taken a hit, like upstate New York has taken a 
hit, because of globalization in general and how Texas has 
benefited from NAFTA in many pockets along the border and that 
it has led to economic growth.
    So this has been an interesting comparison to say, yes, 
there have been some areas that maybe have benefited from 
globalization, but there has also been this other side of it in 
that we all represent a lot of these areas and what are we 
going to do about it.
    There was a point brought up in the article that was just 
brought up here with regard to taxes. So this has absolutely, I 
don't think, much to do with the hearing today. But how does 
Texas fund their government?
    Mr. Temple. Well, we have a franchise tax that is paid by 
businesses. There is no personal income tax. And then there are 
local property taxes, but no local income taxes.
    Mr. Ryan. On the oil and all that, is there a tax on that?
    Mr. Temple. There are taxes on the natural resources as 
well.
    Mr. Ryan. Okay. I just wondered. I thought it was a bit 
unfair that, you know, Texas has all of this oil that they tax 
and make all of this money off of, and we are up in Ohio, 
saying, well, we do not have--you know, it gets a little more 
difficult. But I think it is enlightening for us, because, 
obviously, dealing with globalization is very tricky, because 
some areas have benefitted from it but some areas have been 
completely wiped out.
    Mr. Wyngaard, we had a little dust-up here in the committee 
a couple days ago with the Secretary of Labor, with regard to 
WIA funding and the zeroing out of employment services. We know 
in Ohio there has been a lot of job loss and, in many areas, 
mass job loss with the auto industry, the steel industry, the 
rubber industry, primarily in Akron. The Secretary said and 
argued last week that the resources from WIA, staff could 
handle the events of these mass layoffs at the one-stop centers 
and that we do not need the statewide capacity that the 
employment services provides.
    So can you just share with us what your experience has been 
with regard to these mass layoffs? Does the WIA funding satisfy 
the needs there?
    And secondly, what is the value that the employment 
services provide? Could you make an argument of why they are 
necessary?
    Mr. Wyngaard. Okay. Thank you.
    The Workforce Investment Act is primarily used for training 
investment of workers with respect to skill sets. The Wagner-
Peyser piece is, essentially, kind of like a glue that helps 
make the system work.
    When we think about one-stops, we are thinking about kind 
of a more local approach to dislocated workers. How Wagner-
Peyser is used in Ohio is that we basically look at the State 
as a whole, more in a regional way. What we are able to do is 
we are able to use the Wagner-Peyser dollars to kind of target 
specific populations. When you have dislocation that takes 
place in auto, you have all of the related suppliers that are 
affected by that as well. It has a regional effect, not just a 
geographic area around that plant.
    What the State has done is that the State basically uses 
its Wagner-Peyser capability to basically redeploy the 
workforce where those dislocations take place. And for those 
who are familiar with it, some of this is unpredictable. You 
know, it may be the northeast sector, it may be the northwest 
sector. And the local resources in that area that are allocated 
through WIA are not sufficient. So what the State does is that 
the State is able to bring in additional resources to deploy 
based on the needs of that dislocated worker situation.
    Essentially, where we are right now, we are currently 
significantly strained. I mean, essentially, what we have is, 
with respect to trade applications, we are well above--compare 
2006 to 2007, huge increases in trade applications. We actually 
have, for example, what we call BRIs. They are reviews and 
assessments that are requested by folks making an application 
for trade. They are up 85 percent from the previous year. What 
we use are--the Wagner-Peyser folks move in locally to kind of 
assist the one-stops with these burgeoning loads that they are 
not prepared to handle on their own.
    Mr. Ryan. Thank you, because that is what our sense was 
here, I think, in a bipartisan way on the committee.
    I am going to ask one final question and allow Mr. Wyngaard 
to respond. And then, Professor Sum, if you could maybe 
respond, too.
    One of the issues with regard to globalization in general 
and this kind of separation of benefits with regard to 
globalization, is how do we grow--and an example is, in 
Youngstown, Ohio, in Warren, Ohio, heavy auto. And the General 
Motors plant goes from 16,000 people down to 2,000. The Delphi 
Electric plant goes from--the old Packard Electric, Delphi 
now--went from 16,000 workers to, I think, 2,000 or 3,000. And 
it will be less than 1,000 by 2011. But in this community, we 
have the resources, the human capital, the intellectual capital 
of, for example, the engineers that used to work at Delphi that 
took buyouts.
    I use this as an example of an opportunity for, maybe 
through WIA, maybe not, but just to get your opinion on it, how 
do we take some of the talent base that is there, not to just 
retrain them to go work for someone else, but to have them, 
through maybe a business incubator or business accelerator, use 
that intellectual capital and for us to invest into that and to 
organize it to help them create more wealth?
    Mr. Ryan. It seems that it is you know as much as we need 
to train people and as much as we are not--we don't have people 
trained at the level to fill some of these jobs, at the same 
time, the mass layoffs that are happening, there is not enough 
growth to absorb the layoffs. And so if you could just comment 
and maybe give us some examples. And the one in Youngstown is 
we have a Youngstown business incubator, it is a business 
incubator, a computer software incubator that has grown 
companies in tremendous ways. One was the fastest growing 
computer software company last year grew at 3,800 percent. By 
Inc magazine standards it was the fastest growing. But here is 
an example of investing in these older communities, investing 
into the intellectual capital. And the average wage in the 
incubator now is $58,000 a year, which is not quite what the 
auto industry pays but it is certainly a heck of a lot better 
than retail.
    So if you could just comment and maybe give us some 
examples, would it be worth our investment to maybe not only 
train the workers but provide these little outlets such as a 
business incubator to try to create more wealth and use the 
intellectual capital that are located in areas like the one Mr. 
Walsh represents and like I represent and many of us.
    Mr. Wyngaard. Well let me approach it in two different 
ways. One is that all of those workers dislocated from those 
plants aren't going to be the scientists and the IT workers 
that you might want to grow. And they have choices that they 
need to make and they need a system where they can get the jobs 
that are available in their community or be connected to a 
system where they can get the kinds of supports or training 
necessary to meet those jobs. And that is essentially the role 
of the One-Stop, that is the big role that Wagner-Peyser plays 
in that local community.
    Now you speak to trying to grow other kinds of jobs through 
stimulus incubator and what have you. We have got two things in 
Ohio that kind of fall in that area. One is the third tier bond 
initiative, where there are specific investments, and 
particularly in the research area, with the hope that that will 
generate additional jobs in the manufacturing capacity in Ohio. 
And I think--although the signal seems to be good, it is going 
to take more time to kind of--to evaluate that. The second 
thing that is taking place in Ohio, which is just getting 
started, is this issue of looking at demand occupations in 
geographic areas and basically aligning the community college 
system with the employers who have demand occupations they are 
unable to fill. And basically by design, align the community 
college and 4-year college system to the requirements specified 
by employers. And this is kind of a new significant change in 
Ohio in part because the legislature has realigned the whole 
college system. It is now--used to be an independent regions 
chancellor and now that system is part of the Governor's 
cabinet. So the primary purpose here is to provide a primary 
alignment between educational resources that the State has at 
its disposal and the educational resources through the 
community college and 4-year programs. So that is a dynamic we 
are just getting started with.
    Mr. Ryan. I appreciate that. I don't want to cut you off, 
but I would like to give maybe Professor Sum an opportunity to 
comment if you would like, if you have anything to add.
    Mr. Sum. I would say this is not an area where I claim to 
be an expert. But I happen to have followed a number of 
attempts and I have done this in our own State with individuals 
who are laid off by information services and those who are laid 
off by apparel plants, whereby I support the notion that there 
have been a number of successful efforts where we have helped 
individuals develop new businesses, including oftentimes taking 
over the space that was taken over by shutdowns and closings. I 
saw that happen in my own hometown in Gary, Indiana, where the 
steel companies--in addition to my friends who I went to school 
with helped start new small businesses there. We have done that 
with information services in Massachusetts, we have done that 
in some ways with individuals in the pharmaceutical industries, 
having engineers transfer into retraining so that they can get 
work in pharmaceuticals, and then some of our own line 
manufacturing. We have restructured product lines to allow 
individuals to be more competitive in the international market 
and take on both new engineers and new production workers to 
retrain them for that side. So there are many areas where we 
clearly do need more jobs in order to put young people to work 
and put these displaced workers to work. And more 
experimentation with a wider array of incubators I think would 
be a very desirable thing for our country to pursue.
    Mr. Obey. Mr. Peterson.
    Mr. Peterson. Thank you, Chairman. I welcome the panel and 
specifically Ms. Vito from Pennsylvania. We have had a number 
of conversations and meetings over the years. Congratulations 
on your new job.
    Ms. Vito. Thank you, Congressman.
    Mr. Peterson. Good luck.
    Ms. Vito. Thanks.
    Mr. Peterson. One-Stop Career Centers, great idea. You 
know, I have been around government a long time, State 19, 
business two, employer two. So I think I understand the whole 
system. But my frustration with the career centers--and I have 
talked to many people who have been hired to run them--there is 
really nobody in charge, at least in Pennsylvania and Ohio. I 
was just discussing it with an Ohio friend. You have people who 
worked for the State, responsible Department of Labor. You have 
people that is hired by the local board and--but the 
frustration of potential users of the system is they will go in 
and there is a waiting list in the area they need expertise, 
and over on the righthand side there is people reading 
magazines, balancing their checkbook because they don't have 
any customers. Has any State been able to make it a system to 
where somebody is the boss, everybody is cross-trained and we 
serve people?
    Ms. Vito. Well, Congressman, let me answer that in a couple 
ways. What we have done in Pennsylvania I think, as you know, 
is create functional management arrangements. And it is 
relatively new. But we cross-hire the administrator of the One-
Stop. In your area, we were a little slower to do that than in 
other areas of the State. But so that the administrator is 
really funded both by Wagner-Peyser and local WIA funds and has 
functional management of the entire CareerLink. So we have 
integrated services.
    Mr. Peterson. Who is he responsible to or she?
    Ms. Vito. She is responsible to both the workforce 
investment board, the local workforce investment board and to 
the State. And we have created work teams to really address 
what are the regional work labor market needs, what are the 
best ways to serve the clients, and we have done a significant 
amount of professional development. I would suggest that, you 
know, sort of the subject of this hearing, cutting Wagner-
Peyser funding isn't necessarily the answer. It is finding 
better ways to integrate the services. And it is true that it 
is--I said this in my remarks--it is not a perfect system and 
we can and should make improvements. But what we need to do is, 
you know, the system--it is not just the Wagner-Peyser funding 
that is not--that has had this problem. You have a local 
workforce investment board and things have to happen 
regionally. But you also have at the State level a demand for 
quality services. And what we have done in Pennsylvania is take 
very serious that demand for quality services and created high 
performing WIB standards so that we actually are working with 
the local and regional folks to create better labor marketing 
information and serve their clients better.
    So I think it is, you know, to just say well, who do they 
report to, workforce development needs to be done just like the 
private sector. People work in teams.
    Mr. Peterson. Are they going to be cross-trained?
    Ms. Vito. Oh, they are cross-trained. We developed 
something that actually the U.S. Department of Labor is looking 
at in terms of using other places, a very detailed professional 
development program where everybody gets this first baseline 
training, folks get career counseling training and other folks 
get employment training. But it is not just Wagner-Peyser and 
WIA-funded staff. It is also the nonprofit funded staff, et 
cetera. I think that is one way to integrate the system.
    Mr. Peterson. He has been raising his hand.
    Mr. Temple. In several States, Texas, Florida, I think Utah 
and a couple others are moving this way. They have empowered 
their local workforce boards, they have taken the local control 
seriously. And they oversee the entire operation and everyone 
in the center reports to them, albeit the Wagner-Peyser people 
are State employees. But they answer to the workforce boards 
and the workforce boards, the local WIBs are accountable for 
that performance and their performance contracts. And quite 
frankly the reduction of funds over the last 3, 4 years has 
driven an integrated system to where you can't afford to have 
specialists, if you will. You have people that certainly have 
an expertise in youth or dislocated. But everyone is pretty 
much becoming cross-trained with the exception of the veterans 
program and their specific program that deals only with 
veterans. But they too are very familiar with other services 
and vice versa. But you are seeing that more and more around 
the Nation.
    Mr. Wyngaard. The Ohio approach, essentially the agency 
jobs and family services negotiates agreements with the local 
boards. The boards basically have the authority to make 
decisions about what their priorities are in their local areas. 
So what we do is we actually negotiate agreements about what 
kind of staff and how many staff that are deployed in different 
parts of the State. And so what we have, however, is that we 
have different needs identified by our local boards. If you go 
to one board to the next, you are not going to get the same 
request about what kind of systems that local One-Stop is 
seeking. So we have tailored agreements. They are not cookie 
cutter arrangements.
    With respect to the cross-training, that is something we 
have done a long, long time ago. The other part that is 
important, I think the word ``integration'' is very apropos, 
that a lot of the success is the partnering that takes place 
among the partners at the One-Stop, not just between the State 
staff and the other folks providing services there. So there is 
really two levels of integration that I am actually referring 
to.
    Overall, the strain that we have seen is not about how much 
work or who is doing it. It is just simply the volume of work 
that is coming in that is creating the strain. It is not the 
distribution of work between Wagner-Peyser and some other folks 
who might work in a One-Stop.
    Mr. Peterson. Well, my frustration has been, is how much 
money we are spending and how many people we are training. I 
mean I am not talking about enrichment programs. I am talking 
about a certificate that for the rest of their life will tell 
some employer their skill level in a particular field, whether 
it is healthcare, whether it is manufacturing or whatever. And 
you know Blaine Child has the right goal, she said we are 
training 200,000 a year. I want to train 800,000 a year. How do 
we get there?
    Ms. Vito. Well, with all due respect, Congressman, I think 
we are trying to do that on the cheap. I think what we need are 
more resources for training. We can't--we have leveraged higher 
education resources in our public workforce development system 
to just sort of say, well, we should spend more money on 
education and cut out the public workforce system, assumes that 
no one--that the labor market is completely transparent, that 
no one needs assistance in understanding what type of training 
and what type of jobs are out there. I mean, as you know, we 
have made great efforts, for instance, to put more people into 
nursing training. Three years ago people didn't know that those 
were good high paying jobs. The public workforce system plays 
an important role. And if we don't put more money into training 
but rather just dismantle the existing system we can guarantee 
a couple things. One, there is going to be less training, and 
two, those employers and workers who need assistance will have 
nowhere to turn.
    Mr. Peterson. Well, you know, you work with both hands tied 
behind your back in Pennsylvania, in my opinion, from being 
there 15 years. You have an education system that is all about 
academics. Never been a priority for the last five Governors 
for technical education like it should be, in my opinion. You 
have a State with very few community colleges. I have 17 
counties. There is none. Think about training your workforce 
without community colleges and without emphasis at the State 
level of putting real money into technical education at the 
high schools. I mean I can prove all that. I deal with my 
schools every day. There is no incentives for them. And then we 
have Washington totally cutting out Perkins and trying to 
dismantle whatever little money we put in the technical 
education.
    So Pennsylvania works at a handicap. She has to really try 
to give certificated programs from expensive technical schools 
that are private, expensive. Do you want to react to that?
    Mr. Temple. Our membership tell us--and quite frankly the 
advent of the common measures to where across all these 
programs you can have one measure for entered employment, you 
can have one measure for served. And more and more States are 
opting into that. Unfortunately it costs money to automate 
those types of things. And with funding cuts, you don't have 
the money to do it. But where you can go with the common 
measures and less bureaucracy makes a lot of difference and 
flexibility among programs to be able to move money. Most 
States have taken advantage of what waivers are available but 
they are still limited. If you have got money sitting over here 
that you don't need in one silo but you need it over here to 
train individuals, you are stymied in that. So our members tell 
us more flexibility. And it is something that they would like 
to see between the programs.
    Ms. Vito. Let me just be clear for the record. Pennsylvania 
has more waivers than any other State in the country. So we 
have a lot of flexibility and we were the first ones to 
implement some of the measures. That is actually not our 
concern. The Congressman is right, we do not have community 
colleges in many areas of the State and that is a significant 
challenge. Nonetheless, you know we do need the public 
workforce system and we do need more and more training 
opportunities. And what that really requires--and I know we are 
all facing a very fiscally constrained environment. What we 
really need is to preserve and adequately fund our existing 
system and add in additional resources for training. I mean I 
know that is not a popular thing to say these days, but I think 
that is what is required.
    Mr. Peterson. Ohio.
    Mr. Wyngaard. We fortunately have a very good community 
college system.
    Mr. Peterson. I know you do. I was in it.
    Mr. Wyngaard. And it is extensive. We are learning how to 
use that better so that the community college system is more 
responsive to the workers' needs but more responsive to 
employers. What we are seeing in Ohio is the necessity of more 
emphasis between economic development and the workforce 
development. And this is a new theme here. I mean, it has been 
around for a long time. I am talking about acting on it. And 
making it very clear here that this is a step up and say, this 
is the kind of skill set that I need to maintain or grow my 
business. Now where does it come from? The kind of programs 
that we are talking about here are basically I would describe 
as foundation-type programs. Workers that perhaps don't have 
those skills or where we have got a sudden change with respect 
to a dislocation plant closing, what have you, where we have 
got underemployed folks or unemployed folks that need to find 
jobs. The kind of problem that you are describing is much 
bigger than what we are describing here. The resources that we 
have here don't solve the problem that you describe. But one of 
the things we are doing in Ohio with these resources is we are 
focusing more on using some of the WIA dollars and the Wagner-
Peyser staff to work specifically with employers. We have asked 
the Wagner-Peyser staff, for example, to get more involved with 
sharing the labor market information so they can understand 
occupational groupings, wages, the kinds of positions that are 
available to the local community. We have offered them 
opportunities to help hire staff for employers as an incentive 
for them to come to Ohio. We are using them in different kinds 
of ways and we are realizing that there are many services that 
can be available to employers, not just workers through Wagner-
Peyser dollars. So it is a very large problem.
    Mr. Peterson. But we--can I just have one second?
    Mr. Obey. Sure.
    Mr. Peterson. This system assumes that America has the 
training programs to train the workers that our manufacturers 
need today. Every company that I visit--and I visit a lot of 
them--that are growing are fighting for skilled workers, they 
are struggling to get skilled workers. And you know that, but 
the understanding of how we get those, you have to have the 
educational system that is about technology and skills and not 
all on academics to train the people to manage the company. We 
focus on the management. We don't focus on the worker. And 
because the job used to be simple, and the employer just taught 
you what to do. The companies that compete against cheap labor 
have very--you know, I toured first quality, four plants, they 
are building the fifth one, high-tech manufacturing, and they 
are competing. But they need skilled workers who can run these 
massive complicated systems and repair them. In my district you 
know every manufacturing plant has a PLC. Do you know what a 
PLC is? It is a computer, a program logic controller, that runs 
the machines. Everybody who competes has one on every machine. 
In my district, nobody teaches a high school student or an 
adult how to fix or repair a program logic controller. That 
tells you where we are at in my 17 counties. I have a high 
school that is going to start. Nobody teaches the basic repair 
and maintenance of a PLC, which is a computer that runs a 
machine. That is where we are at in America, and I am sure 
there are lots of parts of America the same way. That is my 
frustration. This system can only deliver if it has the 
training centers and the programs relevant to today's jobs. 
That is how we are going to compete against China and countries 
who are eating our lunch, training.
    Mr. Obey. As you can see, Mr. Peterson never gets excited 
about this subject.
    Mr. Udall.
    Mr. Udall. Very good, Mr. Peterson. I enjoyed that. And I 
think one of the reasons many of us on this committee don't 
support the cuts that have been proposed is because I think we 
could do things like you are talking about in our communities.
    Secretary Vito, last week Secretary Chao testified before 
this committee and repeatedly stated that the President's 
budget proposal for fiscal year 2009 to eliminate several 
employment and training programs and to drastically reduce 
funding was necessary because these programs are duplicative 
and because WIA had the capacity to handle the full national 
demand for training and referral. Keep in mind the President 
also slashed the WIA budget by more than $500 million. Many 
members of this subcommittee strongly disagree with her 
perspective and her approach.
    Now I mention that testimony because I want to put into 
context the difference between her testimony and your written 
testimony. You state a strong foundation of Federal support and 
mobilized broad community support can help to achieve 
systematic changes in ways that our public and private 
institutions do business around the youth workforce 
preparation. In other words, the programs this committee funds 
support not only workers but entire communities. Can you 
elaborate on that idea?
    Ms Vito. The Federal funding is the bulk of the State's 
workforce, of most States' workforce dollars. What the 
workforce dollars are intended to do, first, we have a One-Stop 
system. And for some reason, there are I guess a few States--
and Larry talked about that moments ago--people see them as 
duplicative or Secretary Chao talked about them as being 
duplicative. First of all, that is not the case. I mean people 
walk in and if you are served by somebody who is paid for by 
employment services, there is a lot of coordination with the 
WIA staff, with good will. I mean, we are mobilizing resources 
in the One-Stop specifically to serve that customer. Moreover, 
what we use our workforce investment boards for in Pennsylvania 
is to create industry consortia that identify higher skill, 
higher wage jobs. That information then gets sort of drilled 
back into our One-Stops so that we make sure that we are 
training for jobs that really exist. Then our Wagner-Peyser 
funded staff has that information. So this does mobilize 
community resources. Moreover, we then realign curriculum, 
whether it is in our proprietary schools or community colleges, 
in other parts of the State, such as the one Congressman 
Peterson is on, or whether it is our 4-year institutions. But 
we are getting more technical programs that are aligned to what 
businesses need and getting more placements because of this 
overall strategy. It does leverage outside resources, but it is 
the integration that is key. And what Secretary Chao said is 
that we would eliminate essentially one-third to one-half of 
the funding for our One-Stops and be expected to do the same 
job, which is impossible just at a time when we are seeing an 
increase in clients. So what would end up happening is if you 
got rid of that funding stream, we would have to take over all 
of the running of the One-Stops, which would mean there would 
be no money for training essentially.
    Mr. Udall. Mr. Temple.
    Mr. Temple. The Wagner-Peyser grants served approximately 9 
million workers last year. The WIA grants served 900,000 
individuals and under the very narrow definition of training 
labor 200,000 got training under their definition. I don't see 
how that program could possibly pick up the slack of 8.1 
million people. Another thing to consider is that Wagner-Peyser 
also helps fund infrastructure for the One-Stop Career Centers 
around the Nation. Those are where our returning vets are 
coming to get eyeball to eyeball help. The veterans service 
grants that we get from the Department of Labor is basically a 
personnel grant, a staffing grant, and it is not a brick and 
mortar grant. And so they piggyback on this system and it would 
be detrimental to the entire system if we lost the Wagner-
Peyser grant. I don't see how WIA could possibly pick up that 
slack and programs like the vet program and some of the other 
programs that piggyback on that. They pay their share but they 
certainly could not go out and be a stand-alone in the 
communities.
    Mr. Udall. So what would that do to the veterans programs 
then? It would just----
    Mr. Temple. They would have to shrink down. And 
unfortunately, the rural areas of the Nation are the ones that 
get the biggest brunt of that, mainly because they get fewer 
dollars and they have less infrastructure to help pick up the 
slack when those things happen. So----
    Mr. Udall. Thank you. Yeah. Please.
    Ms. Vito. Congressman, what doesn't make sense is where 
would the veterans--I mean, we are increasing funding at 
veterans services. Where would they sit? We would have to close 
half of our One-Stops. So there wouldn't be a physical place 
because Wagner-Peyser helps fund that infrastructure. So it is 
counterintuitive.
    Mr. Wyngaard. I have a similar comment. You know, Wagner-
Peyser, that is the infrastructure in most States. I know in 
Ohio that is what we rely on making the system work. Seventy 
percent of the staff's commitment to the One-Stops is Wagner-
Peyser in Ohio. They are the folks that are working with trade, 
working with UI, working with the assessments that we have 
described before. They are the kind of glue that makes the 
system work. They are the resources that the State commits to 
partner with local communities and local boards. You take that 
money away, the State isn't a player. There isn't a system. It 
is the fragmented parts of what is left over. If you look at 
the history of how the trade assistance, a lot of it was 
predicated in the fact there would be a Wagner-Peyser that 
could assist. If you look at some of the costs of UI 
administration, some of it is based on the fact that Wagner-
Peyser assists and we actually use Wagner-Peyser in our 
processing centers for UI, to help UI with UI. If you look at 
some of the other programs, it is predicated on the fact that 
there is an existence of Wagner-Peyser that is going to assist. 
You take that away, and it becomes kind of like a house of 
cards. There is no one there to be that intermediary to make it 
work. The State doesn't have a role. It doesn't have a 
commitment.
    Mr. Udall. Thank you very much. And I really appreciate the 
testimony of this panel. Thank you. Chairman Obey.
    Mr. Obey. Ms. Roybal-Allard.
    Ms. Roybal-Allard. I would like to focus a little bit on 
the most vulnerable population. Ms. Vito stated in her written 
testimony that the decrease in the Federal WIA funding is 
forcing States like hers to reduce services for vulnerable 
populations such as the homeless, people with disabilities and 
ex-offenders because it simply costs too much money to provide 
this particular population with the training that they need to 
succeed in the workforce. And I am wondering if this is a trend 
that in fact is being seen by other States? For example, Mr. 
Temple, are you seeing this in Texas?
    Mr. Temple. We have seen priorities having to change across 
not only in Texas but across all of our membership. And as I 
said earlier, when these cuts in funding come, it hits our 
rural areas even more, more than any place else. So what 
happens is that as centers close, people have to drive further 
to get to--even if the services are available, they are having 
to drive greater distances to get to them. So I think there is 
still--anybody walks in the door is going to get services, it 
is just, it is a longer walk to the door now.
    Ms. Roybal-Allard. Maybe you can elaborate a little bit. As 
I understand what you said in your written testimony, it seems 
to me that because of costs certain decisions have to be made 
and that the homeless, those with disabilities, and ex-
offenders are sort of being pushed aside or not getting what 
they need because of the cost. And there is focus on the 
population that we were talking about earlier, those that have 
lost their jobs. Is that correct?
    Ms. Vito. Yes. With fewer resources, we are able to serve 
fewer people. And the system is not set up in such a way where 
outcomes matter and they should. So if you have folks who have 
lost their jobs or dislocated workers, you are much more likely 
to serve and provide training for those most likely to succeed, 
which means that although we have had an aggressive ex-offender 
program, which we know reduces recidivism, the Wagner-Peyser 
staff as well as the WIA staff collaborated on that. As we see 
less and less funding, those are services that for instance 
going into the correctional facilities, we have less and less 
staff able to do that because frankly we have a nearly $8 
million deficit in our Wagner-Peyser funding.
    So we are not just talking about sort of a situation--and 
other States have had similar deficits, by the way. We are not 
just talking about a situation where you know we are facing a 
reduction and we were level funded. We are talking about 
reduction on top of reduction. So we are already looking at 
staff layoffs. Further reductions, we are going to only serve 
the mandated clients in the system.
    Ms. Roybal-Allard. Another vulnerable population are 
migrant and seasonal farm workers. How are these cuts impacting 
them?
    Mr. Temple. Well, again, those by definition generally are 
going to be in the more rural areas. So those cuts are more 
pronounced there than other places.
    Ms. Roybal-Allard. So basically they are just finding it 
harder and harder to be able to get the help and the training 
they need because of the cuts to the WIA programs; is that 
basically what you are saying?
    Mr. Temple. To some degree, yes, ma'am.
    Mr. Wyngaard. I would like to comment. I know in northwest 
Ohio we have a pretty large seasonal migrant worker base. And 
the One-Stops there kind of tailor their needs to that local 
community and the agricultural community in that area. Before 
the rescissions took place, it was always a straight kind of 
attempt to make this work. One of the things Ohio tried to do 
is kind of specialized and had some of its Wagner-Peyser folks 
be more familiar with that particular segment of the workforce. 
But frankly between the rescissions and what--if there is cuts 
like what is proposed here, that staff is going to have to be 
withdrawn. In the Jobs and Family Services Agency in Ohio, 
based on the economic downturn and reduction in revenue, there 
are a proposed 500 job abolishments in that agency alone. Now 
they haven't decided where or specifically what programs, but 
we are going to assume that the programs are going to be 
significantly impacted across the board. So that is in addition 
to the budget that we are talking about here. So many of these 
decisions are going to be locally borne. It will be up to the 
local boards to determine how to best reallocate what resources 
they have left.
    Ms. Roybal-Allard. Ms. Vito, in your testimony you state 
that today's worker can expect to change companies an average 
of once every 4 to 5 years. Is this number different when you 
measure just the low-income and minority workers?
    Ms. Vito. It is. And unfortunately I don't have that broken 
out by income. But just from anecdotal, our own anecdotal 
understanding, that is actually--and I will get you the source 
for that. I don't remember what it is, but it is an average. 
When you are at the lower end of the labor market what we see 
particularly with our TANF population is individuals coming 
into the labor market for short periods of time. They never get 
the requisite skills, so they often don't keep those jobs or 
they don't make enough money so they are not able to sustain 
their families. So the lower end of the labor market you see a 
lot of ins and outs. So there is probably even more job 
changes.
    Ms. Roybal-Allard. So it would be higher for that income?
    Ms. Vito. That is right.
    Ms. Roybal-Allard. What would that mean in terms of what 
their specific needs would be then in terms of training?
    Ms. Vito. Well, if we wanted to create a workforce 
development system that really was designed to both build the 
skilled labor force that businesses need and help our 
individuals rather than sort of suggesting that we dismantle 
this system, what we would do with those kinds of clients we 
are talking about is create much more blended approaches. So 
rather than requiring TANF recipients, for instance, to work 40 
hours a week, we create blended literacy, occupational, and 
work programs so that you are building skills and not just 
going to work at the local Taco Bell. I mean if we are really 
saying what we want is a skilled workforce, we have to invest 
in the literacy and occupational training, and you know 
Congressman Peterson raised that, it is very true, we need more 
training. And our One-Stops are the hub of how we do the career 
counseling and the wrap-around services. But there just simply 
is not enough training dollars in the system for at-risk 
individuals and high-need individuals.
    Ms. Roybal-Allard. Thank you.
    Mr. Sum. Could I just make one quick comment on that?
    Mr. Obey. Sure.
    Mr. Sum. If you look very carefully at the evidence on this 
issue, what you will find in the United States is that the less 
educated and less literate you are when you come to the job, 
the considerably less likely you are to receive any training 
from your employers. In the United States, we provide less 
training to our less educated workers on the front lines than 
any other country in the OECE network. As a result, the ability 
of these men and women once hired to move up in the job is 
substantially reduced. I think what we need to do is go back 
and put more money into the incumbent worker training, to beef 
up our ability to have more adults get access to training on 
the job, to allow them to experience the types of earnings that 
occur more normally for professionals in the United States. And 
I would strongly recommend as a country that this is one of our 
great failures in the workforce development system.
    Ms. Vito. Just to add to what Dr. Sum said, we actually in 
Pennsylvania allocated State resources for incumbent workers 
specifically for that reason. It is not enough obviously. But 
it is a start. So when we put people into placements, we are 
looking at what are the industry needs and what are the career 
ladders.
    Mr. Obey. Mr. Temple.
    Mr. Temple. Our system, our WIA system came on the heels of 
many other training programs that were really more supply 
driven than they were demand driven. And we are getting where 
we need to be. But we were training for the sake of training 
for way too long in this system. It was being dictated by--it 
was the tail wagging the dog, if you will, and listening to 
employers and only training what employers are looking for, and 
having an employer sign off not only on what type of training 
but signing off on the payment for the training, whether it 
would be community college or private entity or someone that 
they bring in, the things that we have seen around the Nation 
that have really been able to address the shortage of skilled 
workers, and people need to be able--you talked about labor 
market information. And being able to have that information to 
where job seekers can make educated choices about what type of 
training will yield jobs. And quite frankly, the States that 
are having the most success are those who are only paying for 
training that is tied to a job with a business because we don't 
have the funding to train for the sake of training anymore. And 
that is a slow boat, but it is turning around.
    Mr. Obey. Thank you. To emphasize the point that Mr. 
Peterson was making, I want to read another paragraph from Paul 
Krugman's new book. And he says this, ``Not surprisingly, both 
getting a high test score and having high status parents 
increases a student's chance of finishing college, but family 
status mattered more. Students who scored in the bottom fourth 
of the exam but came from families whose status put them in the 
top fourth, what we used to call the RDKs, or rich dumb kids, 
when I was a teenager, were more likely to finish college than 
students who scored in the top fourth but whose parents were in 
the bottom fourth.
    ``What this tells us is that the idea that we have anything 
close to equality of opportunity is clearly fantasy. It would 
be closer to the truth but not the whole truth to say that in 
modern America class, inherited class usually trumps talent.''
    I would like to think that is not true. But I don't. And I 
think it is why we are emphasizing the question we are 
emphasizing here this morning. Because it is important that 
people who have not necessarily been born on third base have 
every opportunity that they can to get a decent job and create 
a decent life for their families.
    I have forgotten the comment that was once made by the 
former Secretary of HHS which said that a family that--or he 
said that a country that prides its philosophy and looks down 
its nose at plumbing is a country that is likely to have 
neither good philosophy nor good plumbing. And I think we need 
to remember that.
    Dr. Sum, you said that working in school keeps you in 
school. What is the data that you would say to demonstrate 
that?
    Mr. Sum. There are a number of studies based on the 
national longitudinal surveys in which young people who have 
been tracked for long periods of time over their life, from the 
time they are teenagers to now--that group that we have been 
tracking in their 40s, we have a new group of longitudinal 
survey has shown that for those--particularly remember, I said 
it is for economically disadvantaged youth. That those who work 
in school are significantly less likely to drop out than their 
peers who do not work at all. For middle and upper middle 
income kids, there is not a strong relationship between 
dropping out and that, but it is very important for low middle 
and disadvantaged youth. And the results suggest that its 
results are more important for men as well as they are for 
women. But since men have become a disproportionate share of 
all dropouts, combining work with school would really be a 
desirable strategy to help keep the dropout rate among 
America's young males, whose economic future, Mr. Congressman, 
are seriously far worse than at any time in the last 30 years.
    I have just finished a long report on this for several 
States. But what it does show is that the average male dropout 
in the United States today will over his lifetime earn a third 
less than he would have back in 1979. It shows up in every 
social indicator that follows him, whether they marry, whether 
they stay married, whether they support their children, whether 
they raise their children, whether they go to jail. So keeping 
young people in school until graduation is more important today 
than at any time in the post-World War II American history.
    Mr. Obey. Thank you. When we talk about--you know, we are 
talking about having a stimulus package, a second stimulus 
package. And some people are talking about extending 
unemployment compensation in that package. Other people are 
talking about other solutions. What I get the most resistance 
from, from many people on the Hill, is the idea that we ought 
to be doing more for youth programs. There seems to be a great 
skepticism about the value of jobs programs for the young 
people. What do you think we know about what works in the field 
of youth training? And how should that shape our investment in 
programs like that? Any of you or all of you.
    Mr. Sum. I will give two quick answers. One is that the 
national evidence shows beyond a doubt a number of books that 
have been written on this topic on job creation shows--I will 
be glad--my paper cites several of these--that it is far more 
cost effective to create jobs for young people, particularly 
low income youth, than for any other group in the labor market. 
You could create jobs far more efficiently and far more cheaply 
for teenagers than you can for any group. The current fiscal 
stimulus package, God bless it, I hope it is more successful 
than we think. It will probably create more jobs in OPEC and 
China than it will for youth in the United States. So the 
evidence is overwhelmingly clear, if you want to put young 
people to work, do we know how to do it? Yes, we know how to do 
it. We know how to do it more efficiently than anything.
    Our record of employment and training for young people is 
much more mixed. I will agree. However, there are several 
studies, including one that will be forthcoming later this year 
from the MBRC on its career academies, that shows pretty 
clearly that young people who participate in these career 
academy programs in high school are no less likely to go on to 
postsecondary school, they are more likely to work, were more 
likely to earn more and earn substantially more to easily pay 
off the cost of that program.
    So we have programs out there, including, by the way, a 
number of very good second and postsecondary vocational 
education programs that also show that you get also very 
feasible payoffs from this. The Job Corps evidence is a little 
more mixed. For older Job Corps participants, the program pays 
off. For the younger participants, it doesn't seem to have paid 
off as well as we had hoped.
    Evidence for Youth Build, what we do have it seems that 
Youth Build seems to do a reasonably good job in helping young 
people get diplomas and get into jobs. So that while it is true 
that a lot of our old JTPA youth programs did not work, I would 
say this, if you look at the amount of money that we have 
invested in every young person in that evaluation, the answer 
is it is less than $1,200 per young person. In fact, nearly 40 
percent of all the people that were assigned to a job training 
program under that national evaluation never bothered to get 
one day of service under the program. So if I don't give to any 
service 40 percent and I give a fairly limited amount to the 
other group, given what we know about the extent to which you 
can find significant earning gains from a sample that small, 
the answer to that, would anybody be able to find any 
significant earnings gained would be beyond traditional, 
conventional, statistical wisdom.
    So the answer is, if we really want to change the lives of 
young people, you have to invest an adequate amount in young 
people. We have spent $150,000 to send a lot of people to a 4-
year college, and we want to turn a young person's life around 
with $1,400 under JTPA. Well, the answer is, you can only 
expect what you get. The old art critic from England, John 
Ruskin, once said that there is nothing that some man cannot 
make worse and sell at a cheaper cost but he who looks only at 
price makes a lawful prey of such a man. And that is one of the 
biggest problems in the employment training system. We are 
trying to save the world for $1,000 when we know that you can't 
save a middle-class young person's life unless you invest 
hundreds of thousands in it. Our lack of good sense in this 
area is astonishing. We have got to say, you only get what you 
pay for in life. That is the way the world works. If we don't 
want to invest more, don't expect any more than we get.
    Mr. Obey. Well, there are a number of other questions I 
would like to ask, but I think that is a terrific note on which 
to end this hearing. Let me thank all of you for coming. I 
think we have done a terrific job of demolishing the 
administration's claim that they were contributing to the 
economic health of the country by squeezing these programs. 
Thank you very much.
                                         Wednesday, March 12, 2008.

 STATUS OF THE WORLD TRADE CENTER 9/11 HEALTH MONITORING AND TREATMENT 
                                PROGRAM

                               WITNESSES 

JOHN HOWARD, M.D., DIRECTOR, NATIONAL INSTITUTE FOR OCCUPATIONAL SAFETY 
    AND HEALTH
PHILIP LANDRIGAN, M.D., M.SC., PROFESSOR AND CHAIRMAN, DEPARTMENT OF 
    COMMUNITY & PREVENTIVE MEDICINE, PROFESSOR OF PEDIATRICS, DIRECTOR, 
    CHILDREN'S ENVIRONMENTAL HEALTH CENTER, MOUNT SINAI SCHOOL OF 
    MEDICINE
DAVID PREZANT, M.D., PULMONOLOGIST, CHIEF MEDICAL OFFICER, OFFICE OF 
    MEDICAL AFFAIRS, NEW YORK CITY FIRE DEPARTMENT, CO-DIRECTOR, WTC 
    MEDICAL MONITORING & TREATMENT PROGRAMS, NEW YORK CITY, PROFESSOR 
    OF MEDICINE AT ALBERT EINSTEIN COLLEGE OF MEDICINE
JOAN REIBMAN, M.D., MEDICAL DIRECTOR, WORLD TRADE CENTER ENVIRONMENTAL 
    HEALTH CENTER, BELLEVUE HOSPITAL, HEALTH AND HOSPITALS CORPORATION 
    AND ASSOCIATE PROFESSOR OF MEDICINE AND ENVIRONMENTAL MEDICINE, NEW 
    YORK UNIVERSITY SCHOOL OF MEDICINE
JAMES MELIUS, M.D., DR.P.H., ADMINISTRATOR, NEW YORK STATE LABORERS' 
    HEALTH AND SAFETY TRUST FUND
    Mr. Obey. Let me apologize for being late; we had a little 
fun and games on the House Floor: Juvenile Delinquency Day. Now 
we can get down to business.
    Today we are turning our attention to the World Trade 
Center Health Monitoring and Treatment Program administered by 
the Department of HHS, and I will stipulate at the beginning I 
am extremely biased on issues like this. All of us bring to our 
jobs certain biases, and mine is because of my life experience.
    The very first day I served on this Subcommittee, I walked 
in late, like today, and I heard Dr. David Rawls from the 
National Institute of Environmental Health Sciences, who was 
testifying that a huge percentage of British shipyard workers 
who had worked with asbestos in World War II had contracted 
mesothelioma.
    That got my attention because I used to work with asbestos 
products in my dad's construction and floor covering business, 
and it was at that moment that I took an acute interest in 
occupational health issues and, more generally, in the question 
of exactly what compounds people are exposed to in their 
lives--most often involuntarily--which can lead to problems 
later in their lives.
    So that is why this hearing, to me, is of special import 
today.
    Since fiscal year 2002, this Committee has appropriated 
approximately $335 million to fund health monitoring and 
treatment for the heroic emergency response and recovery 
personnel whose efforts on September 11, 2001, and in the 
months following the attack have left them injured or ill.
    When the World Trade Center tower collapsed, approximately 
250,000 to 400,000 were exposed to a noxious mixture of dust, 
debris, smoke, and potentially toxic contaminants such as 
pulverized concrete, fibrous glass, particulate matter, and 
asbestos. Those affected included responders and people living, 
working, and attending school in the vicinity.
    In the immediate days after 9/11, the entire Country 
cheered people who were involved in that effort. Since that 
time, their actions have somewhat faded in public memory. They 
are no longer operating in front of the cameras, and we want to 
see to it that that media neglect is not accompanied by other 
neglect far more serious.
    Today we want to get a better understanding of the needs of 
the people who are still suffering adverse health effects 
related to those attacks. We want to obtain information 
directly from the clinicians and researchers who are providing 
medical care to responders and residents on the conditions that 
they are seeing and treating. We want to examine how the 
program to support their efforts is being managed at the 
Federal level. Finally, we want to learn more about what 
investments and changes to the program are needed to ensure 
that all of those exposed to the toxins at the WTC site are 
getting the care they need and deserve.
    Last year, the Administration requested only $25 million in 
the Department of HHS budget for health monitoring and 
treatment programs for emergency responders. We were told that 
this amount was just a placeholder until better information was 
developed, but we never heard anything more from the 
Administration on the issue.
    Nonetheless, this Subcommittee took action to ensure that 
the program for responders did not run out of funds by 
providing $50 million in the fiscal year 2007 supplemental. 
Further, we included an additional $108 million in the fiscal 
year 2008 Consolidated Appropriations Act and expanded the use 
of funds to ensure that, in addition to the emergency 
responders, residents, workers, students, volunteers, and 
others who were exposed to harmful toxins at and around the 
site could receive appropriate health monitoring and treatment.
    And to give us a complete picture of the funding needs and 
other issues, the Subcommittee also requested the HHS Secretary 
to prepare a report outlining a comprehensive Federal plan for 
monitoring, screening, analysis, and medical treatment for all 
individuals who were exposed to the toxins at the site. That 
report is due to this Committee next month.
    Despite the Committee's actions last year signaling that we 
believe that the WTC health monitoring and treatment program 
should be a higher priority, the Administration has again 
proposed only $25 million for the program in fiscal year 2009, 
a 77 percent reduction below the 2008 level.
    We are pleased to have with us today the Director of the 
National Institute for Occupational Safety and Health, and an 
expert panel of clinicians and researchers who are in the 
trenches providing medical care for respondents and residents 
in New York City.
    I want to note that in addition to the NIOSH Director, I 
requested that the Department send someone at the HHS 
departmental level to take part in today's hearing so that the 
Subcommittee could hear directly from HHS leadership on the 
actions they are taking to plan for a better Federal response 
to address the health problems experienced by September 11th 
responders and others. I essentially was told that there is no 
one in the Humphrey Building who is capable of providing 
knowledgeable testimony on this issue. I think that non-
response speaks for itself.
    We will start the hearing with Dr. John Howard, Director of 
NIOSH within the Centers for Disease Control and Prevention. 
Prior to his appointment as Director of NIOSH, Dr. Howard 
served as Chief of the Division of Occupational Safety and 
Health in the California Department of Industrial Relations 
from 1991 through 2002. Dr. Howard is board certified in 
internal medicine and occupational medicine, and has written 
numerous articles on occupational health, law, and policy. He 
is also the Chair of the Global Network of the World Health 
Organization Collaborating Centers in Occupational Health.
    Dr. Howard, because we want to hear from two panels today, 
I will ask you to summarize your remarks in five or ten minutes 
or so.
    And because of the delay in this hearing starting and 
because we have no way of knowing how many times extraneous 
roll calls are going to interrupt to destroy what is left of 
the hearing, I am going to ask that members keep their 
questions very limited, instead of doing the usual five minute 
rule, so that we can get to the second panel.
    Mr. Obey. With that, before we call on Dr. Howard, let me 
ask Mr. Walsh for any comments he might have.
    Mr. Walsh. Thank you, Mr. Chairman. I very much appreciate 
the fact that we are holding a hearing specifically on this 
matter. I would like to welcome the witness and all of the 
other witnesses today, and we welcome your testimony.
    Before I go much further, I would certainly like to 
recognize again the brave men and women of the New York City 
Fire Department and Police Departments, and emergency medical 
service and volunteers who responded so quickly, so bravely, 
resolutely to this terrible, terrible occasion in American 
history. Their heroism should never be forgotten. On that 
September morning, and the days and weeks to follow, thousands 
of brave Americans from all across this Country answered the 
call in New York, central Pennsylvania, and Arlington, 
Virginia. I, for one, am grateful for their efforts to help us 
to recover.
    I recall, just after September 11th, when the President 
went to New York, there was a group of delegational members of 
Congress, mostly New York delegation, who went with him, and I 
remember standing there and I could still smell the smoke, I 
could see the dust that covered everything. I remember very 
distinctly--I was a New York Telephone employee before I came 
to Washington. Right on West Street there is a New York 
Telephone building, and there were a group of the TelCo workers 
around, so I stood with them and just had an opportunity to 
talk a little bit. And one of the things they told me was 
people who work here are going to get sick. You need to think 
about that in the long term.
    These are linemen and repairmen and technicians who had to 
put that building back together while they were helping to 
volunteer, as many telephone company workers did from all over 
the country, to help to put the utilities back together at the 
World Trade Center.
    So they were right. People have gotten sick. People have 
lost their lives. And I remember, way back when, we talked 
about this, the need to monitor the health of all the people 
who worked on what was called then the pile. So we go forward 
and it is now 2008.
    And I know this all occurred, obviously, when Republicans 
were in control of the Congress, and I think the Republicans 
did a good job. It is now the Democrats who control the 
Congress, and they have done a good job. There is no 
partisanship in this. So people like Carolyn Maloney and Vito 
Fossella and our two New York State Senators I think really put 
their shoulder to the wheel to make sure that workers were 
continually monitored and that we have a sense of what has 
happened to them in their lives, and we need to help them.
    So, last year, this Subcommittee provided almost 
$110,000,000 to address the needs of those who are still and 
directly affected by the tragedy. Last year, in the President's 
budget, there was a $25,000,000 so-called placeholder, which we 
increased. We knew we would increase it, but, then again, this 
year the same $25,000,000 placeholder does not make sense. The 
need is established. It does not inspire confidence when it 
takes two years of placeholders to evaluate something that 
seems on its face to be pretty straightforward.
    I can expect that even if the Administration is not capable 
of giving us a firm estimate, the witnesses on our second panel 
have some insights on which we can base our judgment for 
funding this program in fiscal year 2009.
    So again, Mr. Chairman, thank you for holding this hearing. 
I think it is very, very important that we help the people who 
helped us in our time of greatest need. Thank you.
    Mr. Obey. Thank you.
    Dr. Howard, please proceed.

                           Opening Statement

    Dr. Howard. Thank you, Mr. Chairman. As you alluded to, CDC 
began medical screening of World Trade Center responders and 
volunteers in 2002 with an initial Congressional funding of 
$12,000,000, added medical monitoring in 2004 with 
Congressional funding of $90,000,000, and finally added 
treatment services in 2006 with Congressional funding of 
$75,000,000.
    As you have also alluded to, in 2007, an additional 
$50,000,000 was appropriated for responder monitoring and 
treatment, and in 2008 an additional $108,000,000 was 
appropriated, both to continue screening and monitoring and 
treatment of emergency first responders, but for the first time 
to provide Federal funding for screening and treatment of 
residents, students, and others related to the World Trade 
Center attacks.
    At the end of 2007, just over 50,000 responders and 
volunteers have enrolled in the World Trade Center Medical 
Monitoring and Treatment Program. About 40,000 of those have 
had an initial medical screening either at the Fire Department 
of New York City or at a consortium of five medical centers in 
the New York City-New Jersey Metropolitan Area, known as the 
Mount Sinai Consortium. Of the 37,368 responders who have 
received an initial screening in the New York City-New Jersey 
area, about 10,000 are receiving treatment for physical health 
ailments, primarily respiratory and gastrointestinal, and about 
5600 are being treated for mental health conditions.
    Funding to support monitoring and treatment services for 
responders in the metropolitan area is provided through grants 
to FDNY and the member institutions of the Consortium. These 
grants expire in June of 2009. CDC will be issuing a 
competitively bid contract request for proposals to continue 
uninterrupted services to responders residing in the New York-
New Jersey Metropolitan Area.
    Responders and volunteers came from outside of the New 
York-New Jersey area to lend a hand in the aftermath of the 
World Trade Center. They also receive medical monitoring 
services funded by CDC through Mount Sinai and treatment 
services funded by the generosity of the American Red Cross. At 
the end of 2007, approximately 3,000 of these national 
responders have enrolled in monitoring and treatment programs. 
CDC is now preparing to issue a request for contracts to assure 
that medical monitoring and treatment for national responders 
remains uninterrupted, given the expected expiration of 
American Red Cross funding by June of 2008.
    As of this date, $50,000,000 of the fiscal year 2007 
appropriation and $108,000,000 of the fiscal year 2008 funds 
remains unexpended. Of the funds appropriate in fiscal year 
2003 and fiscal year 2006, about $26,000,000 and $38,000,000, 
respectively, remain available. Currently, then, about 
$221,500,000 remain available for screening, monitoring, and 
treatment services.
    Contracts for medical monitoring and treatment services for 
responders and volunteers both within and outside the 
metropolitan area will draw on the remaining balance of the 
$221,500,000, as well as the President's 2009 budget request 
for $25,000,000, if it is appropriated.
    Several quarters of demographic and financial data provided 
by the grantees indicate that, at this time, there are 
sufficient resources to support monitoring and treatment 
services for responders through fiscal year 2009.
    Finally, NIOSH is beginning to meet with stakeholders and 
potential providers in the metropolitan area to gather data and 
information needed to provide screening and treatment for 
residents, students, and others in the community affected by 
the World Trade Center disaster. We will be providing more 
information about the plan for a community program in the 
report that, Mr. Chairman, you alluded to, that is due on April 
27th.
    So I thank you very much for my time. Appreciate answering 
any questions.
    [The information follows:]

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    Mr. Obey. Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    I have several questions I would like to ask.
    Mr. Obey. Could I make a suggestion? Because we are going 
to have more votes around 2:30. This is going to be a very 
truncated hearing. When I get to my questions, I am going to be 
laying out a series of specific questions which I would like 
you to respond to for the record, without benefit of OMB 
interference, and I would urge other members, if they can sort 
out which questions can be asked for the record so that we use 
whatever time we have for the most important questions that 
need to be answered orally.
    Mr. Walsh. Mr. Chairman, you have always given us the 
courtesy of going before you. I would suggest that because of 
the lack of time, I would like to suggest that you go ahead and 
get your questions on the record, and then we will----
    Mr. Obey. I appreciate that, but I would rather members get 
at least a couple questions in on their own, and then I will 
get them in, do not worry about that.

                                 GRANTS

    Mr. Walsh. Okay.
    Mr. Howard, how much does it cost to screen one of these 
workers?
    Dr. Howard. The monitoring examination is averaging between 
$900 and $1,100 per monitoring exam.
    Mr. Walsh. How much does treatment cost, on average?
    Dr. Howard. That is the harder part. On average, we are 
looking at data that we are just generating from the grantees' 
treatment grants, and if you look at that initial data--because 
the program has only been going for a couple quarters in 2007--
it is about $8500. Now, that figure we are constantly 
assessing, so that figure may change through time.
    Mr. Walsh. How many people are we talking about?
    Dr. Howard. Right now, about 10,000 of the original cohort 
are undergoing either treatment for physical ailment or for 
mental health ailment.
    Mr. Walsh. My math is not that good, but is $25,000,000 
going to be enough?
    Dr. Howard. Well, if you look at $25,000,000 by itself, if 
that is all we had for 2009, no. But, we have carryover money 
from previous appropriations. If you look at that total plus 
the 50, plus the 108, that is the figure that I said, of 
$221,500,000.
    Mr. Walsh. That is available now?
    Dr. Howard. That is available now, today. Now, the grantees 
are spending money as we speak. So we are estimating, based on 
what we have seen in 2007--again, it is a year in which the 
program is not fully developed--a cost for the responder 
program of somewhere between $55,000,000 and $80,000,000.
    Mr. Walsh. In order to fully meet the needs of this, would 
you be disappointed if the Congress provided more money?
    Dr. Howard. Well, I certainly would not be personally 
disappointed.
    Mr. Walsh. Thank you.
    Mr. Obey. Ms. Lee.

                          NATIONAL RESPONDERS

    Ms. Lee. Thank you, Mr. Chairman.
    Good afternoon, Dr. Howard. Thank you for being here. 
First, let me just say that we all acknowledge and salute our 
first responders. They made many sacrifices. They put their 
lives on the line, and for that we are deeply grateful, and we 
have to do everything we can do to make sure that they are 
taken care of.
    One of the issues that I wanted to ask you about has to do 
with the first responders who left the State of New York and 
the type of treatment. I know you indicated that they are 
receiving the type of treatment they need through the Red 
Cross, but have we missed some people? How many do you think 
remain and that we have not identified? And if you have the 
number specifically for California, I would like to know how 
many returned to California.
    Also, some of these illnesses will never be cured and some 
will get worse, many, such as COPD, asthma, some of the 
depression that we have seen in terms of the mental health 
needs. How do we provide ongoing treatment? Hopefully, we will 
never run out of money, but how do we make sure that they are 
covered for life?
    Dr. Howard. Well, let me take your first question first, if 
I could, in terms of the national responders. As I mentioned, 
for monitoring, they are seen by providers managed by QTC Inc., 
which is funded by a contract that Mount Sinai has graciously 
done for us, which we hope to replace, as I said, with a 
contract from CDC directly to an administrator of monitoring 
services; and they are being treated, then, through the Red 
Cross by providers all over the United States.
    I wish I knew exactly how many of those people came to New 
York from all 50 States, helped out, and then returned to their 
native State. I do not. The estimate we have is a wide estimate 
of between 5,000 and 10,000. But we have not done as robust an 
outreach to determine those individuals, and have them come 
forward, because we have just recently done the pilot program 
for the national monitoring and the treatment program. Once our 
contract is in place for a national monitoring and treatment 
administrator, we will be able to do member services outreach, 
so we will be able to identify a lot more of those people.
    Right now, California, because of its population base, has 
the largest number of people that we are seeing in the current 
Red Cross-funded national treatment program.
    Ms. Lee. Thank you very much.
    Dr. Howard. Did I miss a question?
    Ms. Lee. No, no. I guess the long-term effect of some of 
these illnesses, how do we make sure they are provided care for 
life? And the longer we wait to identify these individuals, you 
know, some of these complications could get worse.
    Dr. Howard. Exactly. And that is why I think it is 
extremely important and the Congress appropriated money for the 
treatment services that we began in October 2006. That was the 
missing link, because to monitor people is just to identify 
problems. To treat them is actually to ameliorate their 
problems, especially with respiratory diseases and persistent 
mental health issues, hoping to get them back to baseline, to 
prevent disability and impairment from taking place, ruining 
their employability, etc.
    So that is the primary goal of the treatment program, and I 
think the grantees, the principal investigators you will have 
on the second panel, will be able to give you exquisite 
examples of how their work has led to ameliorating these 
conditions.
    Mr. Obey. Thank you.
    Dr. Weldon.

                         RESPIRATORY CONDITIONS

    Mr. Weldon. I just have a couple of quick questions, and 
maybe these are better addressed to the second panel.
    The respiratory conditions, I assume they kind of run the 
gamut. Are you selectively seeing bronchospasm or restrictive 
lung disease? And I am kind of curious. I assume they are doing 
screening for other causes of those symptoms, like smoking and 
things like that?
    Dr. Howard. Yes. Again, the grantees obviously would be 
able to tell you more specifically, but what we are seeing--
    Mr. Weldon. Yes, I probably need to ask them.
    Dr. Howard. That is fine, because this is all published 
medical literature. What we are seeing primarily--and it is 
really fairly consistent, and Dr. Reibman will talk about what 
she is seeing in the community population--is primarily we are 
seeing a collection of upper and lower respiratory conditions. 
Upper respiratory conditions like persistent sinusitis, 
laryngitis; lower respiratory conditions that could be airway 
disease, bronchospastic reactive airways disease, or 
inflammatory disease of the interstitial spaces, a variant of 
sarcoid--the Fire Department has reported on that--
granulomatous lung disease. And then again we have responders 
who have passed away with various lung diseases.
    So we have a consistent pattern, as you can imagine, of an 
inhalational exposure, a tremendous inhalational exposure, and 
the lung has certain ability to respond and to evacuate the 
material that it has inhaled, and those mechanisms may have 
been overwhelmed in this case in these individuals because of 
the large amount of dust. Then the specificity of the chemicals 
that are lodged there in terms of possible carcinogens, we do 
not yet know that because we have had a very short period of 
time. The grantees are looking at reporting that kind of 
literature on carcinogenic effects from some of those 
exposures.
    Mr. Weldon. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Obey. Thank you.

                             NON-RESPONDERS

    Ms. McCollum. Thank you, Mr. Chair.
    Sir, could you tell me why the decision was to continue not 
to include the non-responders? I mean, we heard Mr. Walsh talk 
about the folks who were standing around outside of the 
telephone exchange building. There were a lot of people who 
lived in the area, worked in the area. The EPA gave out 
conflicting statements about air quality afterwards. Can you 
tell me why we are not including the people whose lives were 
also at risk just from where they happened to either work or 
live?
    Dr. Howard. Well, we are now. The Congress appropriated 
money specifically for the non-responder, the community group 
in 2008. Prior to that, the group that was most exposed was 
physicians in New York City, some on this panel that you will 
hear from, saw effects in responders immediately. Dr. Reibman, 
at the Bellevue Hospital, New York University Medical Center, 
saw also community responders.
    There were individuals who cleaned up the site itself that 
were included as a Federal responder, if you will, in our 
program early on. But there were many cleanup workers who 
cleaned up other parts of Lower Manhattan, not necessarily the 
site, that were not included in our Federal program that she 
saw in the Bellevue Clinic, which is now founded by the City of 
New York. Those individuals in that clinic have formed the 
basis of the clinical information we have about the non-
responder group.
    Ms. McCollum. Sir, it is my understanding that the 2009 
budget does not fund non-responders.
    Dr. Howard. Oh, I see what you mean. Yes. As far as I know, 
those words are not in that.
    Ms. McCollum. So my question was why are we not taking care 
of that issue. Those people had just as much exposure; it 
wasn't their fault; they are just as much a victim. The EPA was 
giving out conflicting information on standards and what to do 
to protect yourself. People were following guidelines from the 
Federal Government. Who is their advocate over there?
    Dr. Howard. Well, I am, for one. I do not write the 
President's budget, though. But I would be happy to carry that 
issue back to the Department, the concern about the inclusion 
or the exclusion of community----
    Ms. McCollum. Why were they not included?
    Dr. Howard. I do not know.
    Ms. McCollum. If you are their advocate, why were they not 
included?
    Dr. Howard. The decision is made at OMB, I would imagine, 
the President's budget.
    Mr. Obey. Ms. Roybal-Allard.

                   WORLD TRADE CENTER HEALTH REGISTRY

    Ms. Roybal-Allard. First of all, let me associate myself 
with the comments that were made by Ms. Lee about our first 
responders and how much we appreciate the work and the 
sacrifice they made during this terrible time.
    My question is along the same lines as Ms. Lee and Ms. 
McCollum, having to do with the fact that there are a large 
number of people as far away as California that have enrolled 
in the World Trade Center Health Registry, and my question is 
what kind of outreach is being conducted to ensure that persons 
who are suffering from the WTC cough who live as far away as 
California know that it may be related to what happened in New 
York on 9/11? And do you have any information on any ethnic 
minorities and if they have been contacted with language and 
culturally appropriate materials both in New York and 
nationwide? And the third part of the question is are health 
providers nationwide being made aware of the 9/11-related 
health problems, and if you could talk about what kind of 
outreach is being done in those three areas.
    Dr. Howard. The World Trade Center Health Registry is 
funded by a contract from CDC to the New York City Department 
of Health and Mental Hygiene, and they do a tremendous job. 
There are 71,000 registrants in that registry. About 40,000 of 
those are non-responders and about 30,000 are responders. They 
have registrants in that registry from all over the United 
States, territories like Puerto Rico, and international 
countries where folks came to help.
    They did, in 2004, a baseline survey, found in that 
population of both responders, as well as non-responders, the 
same general kind of things that we are seeing in the responder 
population: respiratory disease, persistent mental health 
disease. They just finished their first follow-up survey in 
2007; we will have the results of that, I hope, by mid-year, 
although they may take a little longer.
    The WTC registry has a very rich website. All the 
registrants receive information from that registry about the 
conditions that are prevalent. It is not a clinical registry--
they are not examined clinically--but all of the resources that 
are available, both in New York City and across the Country are 
posted on the registry website. We recently sent a letter to 
all health department heads of all the States regarding the 
resources posted on the website. So the registrants have this 
website they can go to.
    The New York City Department of Health has produced 
clinical guidelines for physicians all over the United States, 
which we have sent from HHS to all the health departments and 
medical societies, about what to look for in someone who says I 
am a responder, but I left and I live in Cheyenne, Wyoming, 
today. So there is a lot of information that we get out through 
the registry to the nationally placed responders.
    Mr. Obey. I would like to get in Mr. Simpson's questions 
before we go to vote.
    Mr. Simpson. You got them in. I am just learning.
    Mr. Obey. I think those are the best questions you ever 
asked.
    [Laughter.]
    Mr. Simpson. Actually, I have to read the testimony.
    Mr. Obey. All right.
    Then, doctor, what I would like you to do is take out your 
pencil, or pen, if you are ill advised enough to use a pen.
    Dr. Howard. I think I will switch.

                        QUESTIONS FOR THE RECORD

    Mr. Obey. And I just want to give to you the questions that 
I want some answers to, and I want you to respond to them as 
though you were sitting in this room, not through any OMB 
filter. And if you feel the need to respond to any of them 
directly for a moment or two, that would be fine. We will quit 
here when it is about eight minutes left on the roll call.
    Let me just ask you these questions.
    According to the GAO, an estimated 250,000 to 400,000 
people in the vicinity were exposed to a noxious mixture of 
dust, debris, et cetera, et cetera, et cetera. Would you 
explain in greater detail what people, both at the site and in 
the broader New York City area, were inhaling following the 
collapse of the buildings?
    What is NIOSH's finding with regard to the health effects 
resulting from exposure to toxins dispersed by the collapse?
    How many people are sick and what are the predominant 
conditions experienced as a result of their exposure both at 
the site itself and in the New York City area?
    We will give you a copy of these questions, but just take 
note of anything you want to specifically respond to now.
    How many people have died as a direct result of their 
exposure to these toxins?
    What immediate responses and interventions should we be 
thinking about to make certain that emergency responders and 
other area workers are better protected against this level of 
exposure in the event of another type of emergency in the 
future?
    That is the first cluster of questions. The second is:
    We understand that administering a health monitoring and 
treatment service program is a somewhat new endeavor at NIOSH, 
because your agency's predominant work is in a different field, 
but as you have developed the program over the years, we would 
like to know what challenges you have experienced, what lessons 
have you learned from these challenges so that our response to 
problems like this in the future would be better.
    In your professional judgment, what changes need to be made 
to the program to ensure that the necessary health monitoring 
and treatment for all responders, including residents, workers, 
etc., is appropriately provided?
    Then the third cluster:
    We understand that the GAO and other sources have indicated 
that the majority of responders enrolled in the Health 
Monitoring and Treatment Program either have limited or no 
health insurance coverage, and I would like to know what 
implications you see in dealing with people because of that 
problem.
    Worker's comp programs face long processing delays, 
sometimes lasting years, and are not flexible enough to provide 
comprehensive medical support that is usually needed. I would 
like you to tell me if that is an accurate assumption and tell 
me what you think needs to be done to address the situation.
    The GAO has done extensive work and has recommended that 
the HHS Secretary take expeditious action to ensure the health 
screening and monitoring services are available to all people 
who responded to the WTC attack, regardless of where they 
reside. We understand that the Secretary convened a task force 
to examine both program financing and the evidence of health 
effects in September, and that task force completed its work 
and presented its recommendations to the Secretary in 2007. 
Yet, as of January 2008, HHS has not responded to GAO's 
recommendations. No information has been made available 
publicly as to the ideas presented by the task force. Can you 
simply tell us what has happened as a result of the efforts of 
this task force? What is the status of HHS's response to GAO's 
recommendations?
    And there are several other questions that we would like 
you to respond to for the record, but in the interest of time, 
let me simply shut up and see what it is you would like to say 
in response to some of these.
    Dr. Howard. Well, what I would like to say, which I have 
said before to other committees of the Congress, and that goes 
to your issue about the lessons learned, which, to me, are the 
most important. When we look at disaster preparedness and 
disaster management, we have to give responder safety and 
health as much importance as we do victim rescue and site 
recovery. We have to do that before they are deployed and 
during the time they are deployed. We have to get real exposure 
assessment of what they are exposed to at the time, as opposed 
to trying to figure it out afterwards--we need to know exactly 
who is on the site and when they leave and when they come to 
the site. We do not have that information for the World Trade 
Center response effort; I can only give you rough numbers. And 
after they are deployed, we need somebody to look at the 
exposures they experience and make a decision about whether 
they need to be screened medically and/or psychologically for 
the experiences that they had while they were responders.
    So I can answer that without much in the way of looking up 
anything. Some of the others I am going to have to look up.
    Mr. Obey. Okay. One other that I would like you to respond 
to for the record: We understand that the programs funded by 
both NIOSH and the Red Cross to assist the responders and 
rescuers living outside the immediate New York area are in 
jeopardy of being shut down, as we understand the situation of 
the program that provides diagnosis and treatment across the 
Nation is financed by the Red Cross and that those funds are 
scheduled to run out by June of 2008. We understand that a 
NIOSH-funded contract that Mount Sinai Hospital has with QTC 
also will expire in May of 2008. What steps are being taken to 
prevent the shutdown of medical monitoring and treatment 
services for 9/11 responders outside the New York area?
    Dr. Howard. I have assurances from the Acting Chief 
Operating Officer of the Centers for Disease Control and 
Prevention that the contract solicitation to ensure that those 
services, monitoring and treatment of national responders, 
remain uninterrupted; that that announcement will go out as 
soon as possible. We expect it to go out very soon. We will 
provide the Congress with that time line.
    Mr. Obey. All right, thank you very much.
    Let me tell the Committee that we are going to have four 
votes--is that not wonderful?--a 15 minute vote, a 5 minute 
vote, another 15 minute vote, and a 5 minute vote. So some time 
in this century we will be back for the next panel, and we will 
get back as soon as we can, if you will bear with us.
    Thank you, Dr. Howard.
    Dr. Howard. Thank you.
    [Recess.]
    Mr. Obey. We will now belatedly hear from our second panel.
    Dr. Phil Landrigan, a Professor and Chairman in the 
Department of Community and Preventive Medicine and Professor 
of Pediatrics and Director of the Children's Environmental 
Health Center, Mount Sinai.
    Dr. David Prezant, Pulmonologist, Chief Medical Officer, 
Office of Medical Affairs, New York City Fire Department and 
Co-Director, WTC Medical Monitoring and Treatment Programs, New 
York City and Professor of Medicine at Albert Einstein College 
of Medicine.
    Dr. Joan Reibman, Medical Director, World Trade Center 
Environmental Health Center, Bellevue Hospital, Health and 
Hospitals Corporation and Associate Professor of Medicine and 
Environmental Medicine, New York University.
    Dr. James Melius, Doctor of Public Health and 
Administrator, New York State Laborers' Health and Safety Trust 
Fund.
    I would ask each of you to take five to seven minutes, 
summarize your statements and, assuming we don't have more 
votes, we will have some questions for you.
    Dr. Landrigan.
    Dr. Landrigan. Thank you, Mr. Chairman. Thank you for 
having convened this hearing. Also, while I am here, let me 
thank you for your many years of dedication to protecting the 
health of workers against toxic chemicals and all your work in 
environmental health.
    Thanks also to Mr. Walsh for you many years service to New 
York and the Nation. So, thank you.
    I am the Chairman of Community and Preventive Medicine with 
the Mount Sinai School of Medicine in Manhattan. Our department 
hosts two closely interrelated programs that are involved in 
tracking the impacts on the health of workers of the disaster 
of September 11. First of all, we have the World Trade Center 
Monitoring and Treatment program and, secondly, we have the 
Data Coordination Center which takes the data from Mount Sinai 
and from the other institutions that are part of our consortium 
and puts those data together, subjects them to epidemiological 
analysis.
    In our work, we have now seen a total of more than 24,000 
patients at least once. More than 10,000 of these have come 
back for a second visit, and a smaller number have come back 
for a third visit. We also are providing medical treatment to 
approximately 10,000 of the 24,000 total whom we have seen.
    This is a very diverse group of people, as several persons 
have said already this morning, this afternoon. They came from 
all across the United States, from every one of the 50 States, 
from virtually every congressional district.
    They were diverse in their professional backgrounds: 
firefighters, police, construction workers, volunteers, nurses, 
paramedics, folks who just came because they wanted to help.
    They were exposed to an ungodly mix of toxic chemicals in 
the first 12 to 24 hours when the fires were raging. They were 
exposed to benzene and volatile organic solvents. So there is 
potential future risk of disease from those exposures.
    They were exposed to asbestos, dioxin, pesticides, furans, 
and two-thirds, fully two-thirds of the dust to which they were 
exposed consisted of finely pulverized concrete, cement, with a 
very, very alkaline, very caustic pH of 10 or 11, which meant 
that it was similar to inhaling powdered Drano. This was very 
potent, nasty dust that they inhaled and particularly for those 
that were caught in the actual cloud and those who were there 
in the first 24 hours or so.
    The concentrations of dust in the air were so very high, 
that they overwhelm the normal defense mechanisms we all have 
in our nose and throat and upper airways which are intended to 
keep toxic materials from entering the lung.
    The result is that these folks have had a lot of disease. 
We are upper airways disease, chronic sinusitis. We are seeing 
lower airways disease.
    It is reported symptoms such as cough and asthma, but it is 
also objectively documentable abnormalities such as 
abnormalities of pulmonary function, most notably restrictive 
lung disease in these workers.
    There is also serious mental health problems, and the 
mental health problems appear to be worse in the people that 
had no prior training in dealing with disasters. So, in other 
words, the cops, firefighters and paramedics are doing somewhat 
better than the people like construction workers and 
volunteers, but there is pain and psychological suffering in 
all those groups.
    The great need, the great need as we go forward here is for 
stable, multi-year, guaranteed funding that the medical 
institutions can count on, that the patients can count on as we 
work to protect these workers. It is very clear that there is a 
lot of disease, both physical disease and mental health 
problems, in these workers.
    Some, of course, are getting better, but in too many the 
disease is chronic. Moreover, there is the risk that new 
disease will arise in these workers as the years elapse and as 
biologic events that were triggered by exposures like asbestos 
have time to become manifest.
    So, in my opinion, as somebody who has been doing 
occupational medicine now for three decades, it is critically 
important that we continue to provide stable long-term care to 
these men and women.
    If the Federal Government is able to provide stable funding 
that can be counted on from one year to the next, several 
problems that have plagued the program will be eradicated. One 
problem that we have had is recruiting and retaining senior 
doctors and nurses because at the present time, with year to 
year funding and no guarantee of the year following, we are 
having trouble getting the best people because senior folks 
don't want to commit to such an unstable employment situation.
    Another problem that has been plaguing us is that the 
medical institutions don't want to commit millions of dollars 
to capital infrastructure, for example, new computer cabling, 
new examination rooms, electronic records, if there is no 
guarantee of funding.
    I think it is essential as we go forward that we continue 
to maintain the center of excellence model that has served us 
so well over the past six years. It is only in centers of 
excellence such as those that exist in the New York-New Jersey 
area and in a few places across the Country where you have 
doctors from multiple specialties, experienced in the 
management of disaster, all working together, that we can 
really provide the kind of state of the art care that these 
people need.
    A further benefit of having centers of excellence is that 
in the Data Coordinating Center, we have epidemiologists, we 
have statisticians who can analyze the data and publish the 
scholarly reports in the medical literature, such as we have 
published on numerous occasions already over the past few 
years, to document disease in these workers.
    It is important, finally, that we provide quality care not 
only to the workers, not only to the firefighters, the police, 
the construction workers, the other brave men and women who 
responded.
    We also need to provide care to the men and women and the 
children in New York City who were exposed. We have documented 
disease in the women and children. Dr. Reibman will speak in 
more detail about that. They were innocent bystanders, and they 
too need care.
    I will conclude by saying, Mr. Chairman, that I think it is 
our responsibility. This Nation has a responsibility to stand 
up for these men and women who stood up for us.
    Thank you.
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    Mr. Obey. Thank you. Dr. Prezant.
    Dr. Prezant. Well, thank you very much and good afternoon, 
Chairman Obey and Ranking Member Walsh.
    Thank you, Ranking Member Walsh, for talking to us several 
years ago when we came to first present our case from the Fire 
Department. I remember that meeting very well.
    My name is Dr. David Prezant, and I am happy to be the 
Chief Medical Officer for the New York City Fire Department. 
Along with Dr. Kelly who could not be here today, I am Co-
Director of the World Trade Center Medical Monitoring Treatment 
Program for the fire department, and I want to take this 
opportunity to update the Committee on the health of our rescue 
workers and the needs of our monitoring and treatment program.
    I would like to thank the Committee and the members of 
Congress for the extraordinary support that you have shown our 
members and our program. Federal support has been critical to 
our monitoring and treatment program. New York City can only do 
so much for our firefighters and, without this support, we 
would not be seeing retirees, we would not be seeing EMS 
workers, and the healthcare that we would be providing 
firefighters would be far limited than what we are able to do 
now.
    We anticipate that current funding for our program will 
last no longer than June, 2009. With the increases that we have 
seen over the last year in treatment, it may end much shorter 
than that.
    We need a long-term solution. As Dr. Landrigan has said, we 
have to plan for the future. We have to have stable funding 
year to year. Our members need to know what they can rely on in 
terms of our treatment program.
    We get frequently get the following response from a member 
in our program: Are our medications going to run out? You have 
given me a prescription for two, three months of medication. 
Should I take a little less because I have heard funding may be 
running out soon?
    We tell them right now that we have enough money for about 
another year.
    As you know, the fire department lost 343 members on 
September 11th when the twin towers fell.
    The collapse later that afternoon of World Trade Center 
Tower Number 7, 60 stories high, is never even mentioned. It is 
a footnote in the history of this event, and yet if that had 
happened in isolation in any city of the United States, that in 
itself would have been a major disaster.
    We had members exposed to that tower and the entire dust 
cloud which enveloped Ground Zero for days and weeks to come. 
Nearly 2,000 fire department rescue workers were there in the 
morning of 9/11 during the heaviest dust cloud, nearly 2,000.
    Over the next 36 hours, nearly 10,000 fire department 
rescue workers--that is EMS, firefighters and retired 
firefighters that came in to help--were there.
    Our entire department, nearly 15,000 people were there over 
the next weeks, months, until the site closed finally in July 
of 2002.
    They were constantly exposed. They were exposed on the 
first day, on the next days to the dust and then to the burning 
fires that went on to the mid of December and then during their 
rescue work when they were crawling in and out of holes. Even 
in the last month, they were being exposed to dust and the 
chemicals that Dr. Landrigan has mentioned.
    What is unique about our program is not only the massive 
exposure that, unfortunately, every one of our survivors had 
but the fact that we had pre-9/11 health data so that we could 
objectively compare and say to Congress, this is more than just 
symptoms. This is more than just disease that might have 
occurred at any point in time, but this is a dramatic change in 
their health compared to the year and years before 9/11.
    The next unique aspect of our program is that we have a 95 
percent participation rate. This is unheard of for any labor-
management initiative in the world. Ninety-five percent of our 
people have been there for at least one medical exam. That is 
14,671. We have 11,679 come in for at least two medical exams. 
That is 75 percent of our group.
    We started our third exam just about a year and a half ago, 
and right now we have nearly 7,000 people that have come in for 
that. By the end of our funding in June, 2009, we anticipate 
that we will have, once again, 80 percent or greater 
participation for multiple exams in our monitoring program, and 
we are soon to start a fourth exam.
    Because of this extensive participation rate and extensive 
medical information, we have been able to report to you, to the 
world, to our own members and to other healthcare providers 
exactly what is going on with these patients, and we have been 
able to work in partnership with the Mount Sinai consortium and 
with NYU Bellevue and when the Department of Health in 
publicizing this message.
    On average for our entire group, symptomatic and 
asymptomatic, we have found and published a 375 milliliter 
decline in pulmonary function for our responders in the first 
year after 9/11. What does that mean? That is 12 times greater 
than the average annual decline in pulmonary function that was 
happening in the years before 9/11 in this workforce, 12 times 
greater in 1 year.
    Over the next six years, we are about ready to publish our 
final longitudinal analysis, but in most it has leveled off. In 
some, it has improved. Unfortunately, for a few, their 
pulmonary function has continued to decline and this is despite 
aggressive treatment.
    More than 25 percent of our firefighters still have 
significant respiratory symptoms, still have airway hyper-
reactivity and asthma, and a few have the pulmonary fibrotic 
restrictive disease that Dr. Landrigan has just mentioned.
    We also use our program for disease surveillance, and we 
were the first to talk about the World Trade Center Cough 
Syndrome in the New England Journal of Medicine.
    We were the first to identify that sarcoidosis, a 
granulomatous disease, has been at an increased incidence in 
prevalence in our firefighters. We are very proud of the fact 
that we were able to publicize this and to work with both labor 
and management in an uncensored way to get this message out.
    Sarcoidosis or World Trade Center-like sarcoidosis is an 
autoimmune granulomatous disease that can affect every organ 
system in the body. It is known to be an occupational health 
disease. It occurs so commonly in beryllium workers that it is 
now called berylliosis.
    For most, fortunately, it is a stable disease with minimal 
impact on lifestyle, but for some it can cause severe pulmonary 
fibrosis.
    Then, our firefighters are always talking about cancer. To 
this date, we have not identified an increased incidence, but 
we are working very hard to make certain that we are able to 
report honestly what is going on there.
    Mental health is also a problem. We are seeing a lot of 
depression, post-traumatic stress disorder in about 20 to 30 
percent of our group. Because we have recently received 
treatment money from NIOSH, we have had an expansive treatment 
program.
    In the first 10 months following 9/11, using New York City 
dollars, we treated 2,791 patients for World Trade Center-
related respiratory disease and 1,500 patients for mental 
health issues. Since receiving financial dollars from NIOSH, in 
the last year, we have treated about 2,100 patients for mental 
health disease, 1,500 patients for respiratory treatment.
    With treatment, most of our members have been able to 
return to work, but 750 have developed permanent disabling 
respiratory illnesses, objective evidence of lung disease that 
has forced them to retire. This is a three to fivefold increase 
in what we normally saw in the five years prior to 9/11. This 
is three times the number of deaths that we had on 9/11, 
practically.
    As you can see, the need for our monitoring and treatment 
programs and services remains strong. Current Federal funding 
will last until June, 2009, at best for our program. As you 
know, in environmental occupational medicine that you have been 
a champion for, you really need to follow members for 20 to 30 
years out to be able to tell them what is going on and to be 
able to treat the diseases that go on after that.
    We will anticipate right now that we are spending $425,000 
a month on medications. By the end of 2009, we anticipate that 
to grow to $750,000 a month not due to new medications but just 
due to increased numbers of patients and needs.
    Finally, our treatment program requires about $9,000,000 
per year, currently. Over the next five years, we think it will 
grow about $1,000,000 to $2,000,000 per year.
    Our monitoring program, both our clinical and data center, 
also combined require about $9,000,000 a year, and we think 
that will grow about $500,000 to $1,000,000 per year. So for 
the next five years, we would need $90,000,000 to $100,000,000 
to fund our program again for both monitoring, data management 
and treatment.
    The commitment to that long-term funding for both 
monitoring and treatment is essential for our program to 
continue, not to grow but to continue to protect and improve 
the health of our workforce, both active and retired, 
firefighter and EMS, and also to help inform the other groups 
about what is going on and to work with them to learn about 
disease and treatment.
    I thank you very much for this time to talk to you.
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    Mr. Obey. Thank you.
    Dr. Reibman.
    Dr. Reibman. Thank you, Chairman Obey, Ranking Member Walsh 
and members of the Committee. It is really a pleasure to be 
asked to be here today.
    My name is Joan Reibman, and I am an Assistant Professor of 
Medicine and Environmental Medicine at New York University and 
an attending physician at Bellevue Hospital, a public hospital 
on 27th Street in New York City. I am a specialist in pulmonary 
medicine, and for the past 16 years I have directed the New 
York University Bellevue Hospital Asthma Center.
    Today, I am very pleased to be able to testify on behalf of 
the workers, residents, students and the cleanup laborers, all 
of whom were exposed to World Trade Center dust and fumes.
    You have heard, throughout most of today, testimony about 
the heroic rescue and recovery workers who were exposed to 
World Trade Center dust and fumes, but I am here really today 
to tell you about additional populations at risk.
    On the morning of 9/11, over 300,000 individuals were at 
work in the area or in transit to their offices. Many of these 
as we now call area workers were caught in the initial and 
massive dust cloud as the buildings collapsed. These are the 
thousands of individuals who we saw in the video and the still 
photographs who were coated in white, running for their lives.
    In the great outpouring of pride and patriotism after 9/11, 
many of these workers returned to work one week later, the 
massive World Trade Center dust cleanup and rescue operation 
still in full force and not all the buildings completely 
cleaned or decontaminated.
    As you also know, lower Manhattan is a major and dense 
residential community. Approximately 60,000 residents live 
below Canal Street or south of Canal Street alone. There are 
many residents who live north of Canal Street, who also had 
potential for exposure.
    These residents come from economically diverse backgrounds. 
Some of them come from public housing or federally-funded 
buildings. Others live in very fancy co-ops.
    Lower Manhattan is also an educational hub. We estimate 
that there are about 15,000 school children who were downtown 
at the time. There is also a large number of university 
students in surrounding community colleges and other 
universities in the area.
    The dust of the towers settled on streets, playgrounds, 
cars and buildings, entered apartments through building cracks 
and ventilation systems.
    Each of these groups had potential exposure to the original 
dust cloud, to the re-suspended outdoor dust that remained or 
was generated by the cleanup, to indoor dust and to fumes from 
the fires that continued to burn.
    What do we know about the health effects in these 
individuals? As pulmonologists in a public hospital, we sought 
to determine whether the collapse of the buildings posed a 
public health hazard, and our first step was to monitor the 
effect in local residents.
    Working with the New York State Department of Health, with 
funds from the Centers for Disease Control, we initially looked 
at the rate of new respiratory symptoms in local residents 
after 9/11 and completed this study a little over a year after 
9/11.
    We surveyed residents in buildings within one mile of 
Ground Zero. Because, unlike FDNY, we did not have preexisting 
information on our population, we surveyed individuals who 
lived approximately five miles away from Ground Zero as a 
control population and analyzed information on about 2,800 
individuals.
    This study revealed that new onset and persistent symptoms 
such as eye irritation, nasal irritation and sinus congestion 
was present in increasing numbers of individuals who lived in 
lower Manhattan after 9/11.
    New onset and persistent lower respiratory symptoms of any 
kind were present in 26 percent versus 8 percent of the exposed 
versus the control population. These symptoms included 
complaints of cough, shortness of breath and a six and a half 
fold increase in wheezing in this population.
    These respiratory symptoms also resulted in almost a 
twofold increase in unplanned medical visits, giving us some 
objective evidence, and an increase in use of medications 
prescribed for asthma in the exposed population compared to the 
control population.
    Our most recent analysis of the data also suggests that 
there is a dose response, that residents reporting longer 
duration of dust or odors or multiple sources of exposure had a 
greater chance for having these symptoms. These data are now 
confirmed or further supported by data from the New York City 
Department of Health, and they are documented in testimony 
provided by Lorna Thorpe.
    After 9/11, we began to treat residents who felt they had 
World Trade Center-related illness in our Bellevue Hospital 
Asthma Clinic. We were then approached by a community coalition 
and together began an unfunded program to treat residents.
    We were subsequently awarded an American Red Cross Liberty 
Disaster Relief Fund in 2005 to set up a medical treatment 
program for residents with World Trade Center-related illness, 
and a year later we received additional philanthropic funding 
and major and significant funding from the City of New York to 
provide evaluation and treatment of individuals with suspected 
World Trade Center-related illness.
    This program was initially awarded $16,000,000 over five 
years to Bellevue Hospital and, in 2006, in response to a task 
force, this program was expanded to involve two additional 
centers.
    We now have an interdisciplinary medical and mental health 
treatment program that has evaluated and is treating over 2,000 
patients.
    With little outreach, we continue to receive over 200 
inquiries each week. While most of these come from local 
people, we have received calls from individuals living in about 
20 other States. These calls to our hotline continue to result 
in over 30 new patients each week, demonstrating a continued 
unmet need.
    To enter our program, an individual has to have a medical 
complaint. We are not a screening program for asymptomatic 
individuals.
    To date, our patients are almost equally men and women of 
diverse race, ethnicity and many, although not all, are 
uninsured. We now have an expanding pediatric program.
    Some of these individuals have never sought medical care, 
many of them embarrassed to admit that they think they are sick 
from World Trade Center exposure. Others have been seeing 
doctors for years with a history of recurrent bronchitis, 
pneumonia and sinusitis.
    These individuals have a complex of symptoms that include 
persistent sinus congestion in 55 percent, asthma-like symptoms 
of cough, shortness of breath or wheeze in 40 percent, and acid 
indigestion for which they continue to need care more than six 
years after 9/11.
    Over 50 percent of our patient population has concurrent 
mental health issues including PTSD, depression or anxiety.
    We have heard from many individuals who were highly 
physically active, even training for marathons, who now require 
daily medication to allow them to walk a few city blocks. While 
many of them can be treated aggressively as if they have had 
asthma, the sickest among them now show a process in their 
lungs, as you have just heard from the firefighters, that may 
consist of a type of inflammation, a granulomatous process that 
is like an illness called sarcoid.
    Others have lung diseases that affect not only their 
airways or breathing tubes but also the air sacs that allow for 
exchange of oxygen and carbon dioxide. Some have pulmonary 
fibrosis, characterized as scarring or permanent damage, in 
their lungs.
    Many challenges remain, and it is clear that we will need 
to maintain our commitment to treatment as well as research.
    How many residents or workers or students are ill? We don't 
know the answer to that. The registry will help provide 
information on this, but clearly this reinforces our need for 
rapid early screening of all populations affected by any 
environmental disaster in the future.
    How can we determine whether an illness is World Trade 
Center-induced as was asked earlier today? We have no simple 
test to determine whether an individual's illness is related to 
World Trade Center exposure. What we have is six years of 
clinical experience in centers as you are hearing from today 
that have seen so many cases that we can now recognize a set of 
symptoms associated with World Trade Center dust.
    Our tools are the history of exposure, the temporal 
sequence of illness and a particular constellation of symptoms 
that are, by now, sadly familiar. Armed with these tools, we 
can more effectively differentiate such cases from illnesses 
that are unrelated. The registry provides us with a larger 
epidemiologic picture and context that inform our daily 
clinical practice and, working with the other centers, helps 
provide us with additional information.
    Why are some people, some of the residents, some of the 
workers, some of the students sick while others are well? We 
now suspect that while the level of exposure plays a role, so 
does individual susceptibility.
    This is similar to tobacco-induced disease. Some smokers 
remain healthy while, for others, tobacco causes lung disease, 
cancer and heart disease. Only through the existence of centers 
will there ever be sufficient data collected to attack such 
medical puzzles.
    What are these disorders and will they respond to 
treatment? Will there be late emergent diseases with cancers? 
For patients, these are the paramount questions, and we wish we 
could clearly answer them. Without centers, we will never have 
those answers.
    We now know from peer-reviewed published literature as well 
as our clinical experience that large numbers of residents and 
workers were subjected to environmental insults on a large and 
unprecedented scale and that these insults had measurable 
medical consequences. These men, women and children will 
require continued evaluation, screening and treatment for years 
to come.
    You, Chairman Obey, Ranking Member Walsh and all the other 
members of this Committee have been very supportive of our 
efforts, and we are very grateful. Our center is funded by the 
city with a commitment that will average $10,000,000 per year 
over 5 years, but the actual cost of the program continues to 
rise significantly and is projected to cost an average of 
$15,000,000 to $18,000,000 per year.
    Last year, for the first time, you made eligible for 
Federal funding the people that we treat: the residents, the 
local workers and the laborers hired to clean up residences and 
offices, the school children and those who just happen to be in 
the World Trade Center area on September 11th and immediately 
following.
    As you know, in fiscal year 2008, you provided $108,000,000 
for all those whose health was compromised by September 11th 
and its aftermath. We are extremely pleased that residents, 
workers, students are mentioned in that funding.
    We have not yet received funding for that at the 
environmental center at Bellevue. We have not been informed 
that we will receive any of these funds anytime soon.
    We need long-term stable funding as in the Maloney-Nadler-
Fossella bill. We know that many of these people are sick. We 
know that they will require long-term stable funding for 
treatment of all these individuals.
    Thank you very much.
    [The information follows:]

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    Mr. Obey. Thank you. Dr. Melius.
    Dr. Melius. Chairman Obey, Representative Walsh, I 
appreciate the opportunity to appear before you today.
    I have been involved in health issues with the World Trade 
Center responders since shortly after September 11th, over 
3,000 of our union members, laborers unions were involved in 
the rescue-recovery activities at the site, including many of 
them at the telephone building that, Representative Walsh, you 
mentioned earlier.
    The last four years, I have served as the Chair of the 
Steering Committee, helping to oversee and work with the 
various programs here today that are providing services to 
responders and others that are involved in these medical 
programs.
    Given the focus of these hearings, I am going to focus 
first on why so many of the participants need assistance in 
paying for their medical treatment. One could look for, I 
think, commonly two other sources that might be able to pay for 
that.
    One is health insurance coverage. The problem with health 
insurance coverage, certainly for the workers that were 
involved, is very simple. All health insurance programs exclude 
work-related illnesses. They will not pay.
    In fact, the common form that all physicians fill out, 
including for Medicare payments, you have to indicate whether 
or not the condition is work-related. If it is, then it is 
essentially, automatically not reimbursed by that health 
insurance company.
    Secondly, even if we were able to rely on health insurance, 
as has already been mentioned here today, many of the 
responders, people, do not have adequate health insurance, 
either high co-pays, high deductibles or no health insurance at 
all. Unfortunately, the sicker you are the more likely you are 
not to have health insurance coverage because many of the 
people, as you become disabled, you can no longer work and you 
lose your health insurance coverage or can no longer afford to 
keep it.
    Workers' compensation would seem to be another alternative 
that could help to support this program, but unfortunately the 
way that the workers' compensation system works in New York and 
at the Federal level and other States does not readily respond 
or handle the kinds of medical problems that are being treated 
in this program. These people require intensive treatment. It 
is changing, frequent visits and so forth.
    Workers' compensation and line of duty disability programs 
are better set up to deal with accidents, breaking a leg or a 
severe injury or something, a single event and follow-up 
medical treatment. The programs don't provide good coverage for 
medical health problems of the nature that are being seen by 
these programs.
    There are long delays in getting reimbursement and long 
delays in even getting coverage. The average time from when a 
person applies for workers' compensation until their case even 
gets recognized is over three years. Even then, that does not 
guarantee that the healthcare that they are receiving will be 
reimbursed.
    So I don't believe that one can rely on either health 
insurance or workers' compensation to cover the medical costs 
of this program. I think the best approach is to provide and 
continue the Federal support needed for comprehensive medical 
monitoring and treatment for people in this program.
    We can't rely on a system that would use some Red Cross 
money, some health insurance money, some line of duty or 
disability money, workers' compensation, whatever to fully 
cover and provide the kind of comprehensive treatment that 
people need.
    Now, fortunately, through your efforts and the efforts of 
others, the Federal Government has stepped in and provided the 
funding for the medical monitoring and treatment programs, the 
treatment program more recently, the medical monitoring program 
from fairly early on after 9/11.
    Although Dr. Howard and his staff, I think, have done a 
very good job in developing the program and getting the centers 
in place and so forth, I think what we have seen is a lack of 
commitment by the Department of Health and Human Services. I 
think that is exemplified by their recent decision to stop the 
procurement for the business processing center.
    In October, they had announced it. December, just a few 
days before the applications were due, they suddenly pulled 
that program, and that jeopardized the healthcare for everybody 
in the program, more particularly for those in the national 
program, those living outside of the New York City Metropolitan 
Area.
    In fact, if the Red Cross hadn't been able to step in late 
last week to say that they would provide coverage for treatment 
costs for some 700 responders across the Country through the 
end of June, as we sit here today, the institutions involved 
would be sending letters to people, these 700 people, telling 
them that their healthcare would be cut off for this program.
    Now we heard just today that Health and Human Services is 
committing to doing a new contract now that will provide 
medical monitoring and treatment for these national responders, 
but I think it is just emblematic of the lack of commitment by 
the Department and the uncertainty that all of the people 
providing the medical care face.
    As Dr. Landrigan and other people here today have 
testified, it is very difficult to develop and commit the 
resources to fully implement this program, to provide the care 
for everybody that needs the care, when you are uncertain from 
month to month whether you will have additional or sufficient 
funds to be able to do so.
    I think the need for stable funding and a stable 
administrative approach is really essential if we are going to 
provide everybody that needs the treatment and deserves the 
treatment with the kind of care that they need and if we are 
going to fully develop these programs.
    I think we have a good estimate of how much the program 
should cost if it is fully implemented, at least for the 
responders, something on the order of $225,000,000 a year at 
least based on what we know now about what it costs for medical 
monitoring and treatment.
    We also know that we can initiate and start a program that 
would at least start to be responsive to the community 
residents and other workers that Dr. Reibman has described with 
something on the order of $20,000,000 to $30,000,000 that 
would, at least for the first year or so of that program, would 
get it implemented. But I think that something like that is 
what we need.
    I think the harder question is given some of the 
difficulties that the programs have had, how much will they 
need year in fiscal year 2009? We have heard a claim just today 
from the Department that they will have over $220,000,000 or 
something like that left at the end of the year, which I really 
find hard to believe unless they are not going to do anything 
to fund these programs.
    I think if one looked at the two programs that have not 
been developed at all, not funded at all by the Federal 
Government to any significant level, that being the program for 
the national responders as well as the program for the 
community residents and downtown workers, I mean that should 
cost at least $50,000,000 this year.
    I am very disturbed when Dr. Howard speaks of the national 
program as a pilot program. Over six years after 9/11, we 
shouldn't be having a pilot program. As GAO has documented, we 
have had a number of problems to developing that program. It is 
difficult.
    The people in Syracuse, Wisconsin, California who came and 
helped out at 9/11 shouldn't be participating in a pilot 
program. They should have a full, fully developed program that 
provides all the services. There are over 5,000 of these 
people, we know.
    We know that many of them are sick. Seven hundred are 
already in treatment through the Red Cross program. There 
probably are more because we haven't done adequate outreach to 
them. Similar for the community residents and downtown workers, 
they need a program. We need to support and get that program 
going.
    We also know that all the current clinics need additional 
infrastructure. There are needs in terms of monitoring the 
program, providing better data. That can easily be done this 
year. Contracting should spend something on the order of 
$25,000,000 to $50,000,000 more.
    We also know that the number of people coming into the 
program is increasing. Mount Sinai and the other programs see 
300 or more new people every month. Roughly 25 to 50 percent of 
those require treatment. They are also referring over hundreds 
of new people each month from the current program.
    So we know that there is an unmet need for treatment, and 
we should appropriately fund that. Now I can't give you an 
exact number, but it is certainly the carryover into next 
fiscal year should not be anywhere near $200,000,000 if the 
Department does an adequate job of administering this program, 
allowing the clinics and other participating institutions to 
appropriately expand and to appropriately carry out the program 
that I think we all believe that these people deserve.
    Thank you and I would be glad to answer any questions.
    [The information follows:]

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    Mr. Obey. Thank you.
    Mr. Walsh.
    Mr. Walsh. Mr. Chairman, I understand that Dr. Lorna Thorpe 
from the New York City Department of Health has prepared a 
statement, and I would ask unanimous consent that her testimony 
be included in the record. I have it here.
    Mr. Obey. Without objection.
    [The information follows:]

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    Mr. Walsh. Mr. Chairman, I am so far behind today. I don't 
know which way is up. So I will submit questions for the 
record.
    I thank the witnesses for their testimony. It was very, 
very informative.
    The big question is where do we find the money that they 
need to help them, and I will just leave it at that.
    Thank you very much.
    Mr. Obey. Thank you.
    Let me simply say that I think in this situation, as is 
most often the case, the problem you face is not venality. It 
is simply indifference, and we will do our best to try to shake 
the tree on that score.
    But let me make another observation. I know that you are 
all interested in a stable long-term funding source. We are not 
in that business on this Committee. Appropriations are one-year 
appropriations. So much as we like to see that ourselves, the 
best that we can do at this point is to try to provide funding 
on a year to year basis which is as adequate as possible.
    That is going to be very difficult this year because if you 
take a look at the budget. We built about $9 billion into last 
year's budget resolution for an inflationary factor for this 
year, and what the President did was to take all of that and 
put it into the military side of the bag.
    He took last year's funding on the domestic side, about $26 
billion when you take into account the offsets that we used 
last year that are not available this year. So he has 
recommended this year in his budget that about $26 billion be 
cut from last year's appropriations, and last year's 
appropriations were $22 billion below the amount that we 
originally reported out of the House for domestic 
appropriations.
    When he makes a major reduction, as he has in this program, 
it is very hard to put that money back without hurting someone 
else who is equally deserving, which is why we are hoping that 
we can get the Administration to compromise on dollar levels. 
But if we can't, we will have no choice but to simply pass a 
continuing resolution through next February so that we can then 
deal with a White House that recognizes that in an adult world, 
people have to make compromises. So that is what we are faced 
with.
    You have answered many of the questions that we have had 
today, but let me ask a few.
    Dr. Reibman, I want to talk about the program to provide 
comprehensive assessment and treatment services for non-
responders. You have limited medical data on health problems 
among community residents, et cetera, et cetera.
    Presuming that Bellevue Hospital would receive Federal 
funding as the health program is expanded to include non-
responders, how could funding be used to further understand the 
extent and nature of the medical problems among that 
population?
    Dr. Reibman. We have some initial information. What we 
really lack is two questions: How many people are affected and, 
in a manner similar to what you are hearing with the major 
centers, what are the diseases that we are seeing?
    I think increased funding could be used in two ways: One, 
to understand what is really the prevalence of World Trade 
Center-related illnesses in these populations and, two, to work 
in a manner similar to what you are hearing with the other 
centers, to look at the data on our populations, what are their 
symptoms, how are they progressing, which ones are responding 
to therapy, which ones aren't and who is sick and why are they 
sick.
    So, in other words, for data coordinating as well as 
treatment programs.
    Mr. Obey. What would be the consequences of discontinuing 
or decreasing Federal support for health monitoring and 
treatment programs on all of those who are impacted by the 
Trade Center collapse?
    Dr. Landrigan. The big problem is that we would basically 
have to stop providing services. We would be in the terrible 
position that Dr. Melius alluded to just a few minutes ago of 
having to send letters out to our patients, informing that 
three months hence we are going to be closing our doors.
    Mr. Obey. Would you be willing to put the signature of the 
Secretary of HHS on those letters instead of your own since 
they and OMB are the folks responsible for that?
    Dr. Landrigan. We would certainly say in those letters that 
the reason that we are shutting the doors is that funding had 
been cut off from the Department of Health and Human Services, 
yes, sir, no question.
    Mr. Obey. Okay, let me see. Let me see which ones do you 
want. We have to take orders from headquarters here.
    Dr. Melius, what recommendations do you have to improve the 
Federal program?
    What could you offer as the program is expanded to include 
the residents, workers, volunteers, students, et cetera?
    Dr. Melius. I think that is certainly one of the major 
efforts that is needed to improve the program.
    The kinds of services that Dr. Reibman described in her 
testimony, I think, are the kind of services we need to make 
more available partly because of your last question. We don't 
know the extent. We don't know how many people are ill. We need 
to better understand that, given the large numbers.
    Second, is get a good national program. Every one of those 
5,000 or more people needs to receive the same level of service 
as the people in the New York City Metropolitan Area are 
getting.
    Third is make sure that Health and Human Services provides 
an administrative approach that will allow for full funding, 
allow these centers to expand appropriately, given what monies 
are available and budgets are available, and expand the 
services out so we can make them as readily available to people 
within the metropolitan area as we can.
    Mr. Obey. How would having a business processing center 
benefit the consortium's ability to provide services to 
responders?
    Dr. Melius. I will start with that. I think that is one of 
the administrative mechanisms that I think, at least to some 
extent, would help because it would provide greater flexibility 
in order to bring other centers in if that is needed, provide 
services closer geographically to where people live in the area 
as well as throughout the Country. That was the concept that 
Health and Human Services had, NIOSH had, that got stopped, 
unfortunately.
    Now it needs to be blended with core support for the 
centers of excellence that are already in place. They have a 
sort of core program that can provide all the support services 
needed.
    But for the basic medical reimbursement for the care, I 
think that is by far the most appropriate and easiest way to do 
it. That is the way most healthcare at Mount Sinai is currently 
received. You get reimbursement from an outside insurance 
company or whomever is paying. No reason it couldn't be done in 
this program.
    I think for the fire department it may be a little bit 
different because of the way they are set up administratively. 
I am not as sure about Bellevue and Health and Hospitals 
Corporation.
    But it would allow us to refer people better, to provide, I 
think, more flexibility and a greater scope of treatment for 
everybody involved while maintaining the centers of excellence, 
the good, high level, high quality care that all these people 
should be getting.
    Dr. Landrigan. I will just add. I will just add to that, 
Mr. Chairman, that this processing center needs to encompass 
two components. First of all, as Dr. Melius said, it needs to 
function as a clearinghouse that tracks medical monitoring, 
medical treatment and the expenses that are associated with 
monitoring and treatment.
    Then the second component is that it serves as a pharmacy 
benefit manager that tracks drug-related expenditures and sees 
to it that the people get the medications they need in a timely 
fashion and on a continuing basis.
    Dr. Prezant. The fire department made the point that we do 
not need the infrastructure of an external business center 
because we already have a business center, and NIOSH looked at 
that and finally agreed with that. It would be an extra cost to 
the Federal Government to have bill processing center for the 
fire department when the fire department already processes 
bills in a very routine way, using the city help.
    But what we need is the ability. If we were to lose 
funding, we would immediately need to stop seeing EMS workers, 
we would stop seeing retirees, and we would have to cut 
dramatically the health services, medications, et cetera, that 
we provide the firefighters.
    The other problem that we have in the fire department is 
that we have been caught between a rock and a hard place in 
terms of infrastructure. The dollar values that we are provided 
with by NIOSH are lower than the other consortiums because the 
fire department has preexisting infrastructure. That makes 
perfect sense.
    We don't get indirect overhead because the city doesn't 
charge indirect overhead. It makes perfect sense.
    But now five to six years later, actually six to seven 
years later, we have not reinvigorated the infrastructure. We 
have over-utilized the infrastructure. Our x-ray machine is 
about ready to break down. There is other infrastructure.
    We don't need to build a hospital for the fire department, 
but the standard type of outpatient infrastructure things are 
about ready to go, and those things need to be supported. Where 
that funding comes from is still being discussed.
    Mr. Obey. Has Bellevue established estimates for the annual 
cost of providing health monitoring and treatment for non-
responders?
    Dr. Reibman. To date, we have been provided by the city 
about $10,000,000 a year for over 5 years, but we anticipate 
that it will really need about almost $18,000,000 or more per 
year.
    Mr. Obey. Eighteen?
    Dr. Reibman. Eighteen, yes. Our costs at the moment are 
based on what we are seeing, which is actually with minimal 
outreach. We think that if we do major outreach, we will have a 
much larger number.
    Mr. Obey. Anything else that you would like to comment on 
before we shut her down?
    Well, I wonder if you would do me one additional favor. I 
wonder if each of you would submit for the record, what are the 
five questions that you think ought to be in people's minds 
about this issue and what are the answers to those questions 
that you think people ought to keep in mind, if you get them to 
us so we can put them in the record.
    I mean assume that you are dealing with skeptics and that 
you have to justify every last dollar of expenditure. What are 
the questions that a naysayer would ask and what is your 
response? Okay?
    Any more, Jim?
    Mr. Walsh. No. Thank you.
    Mr. Obey. Thank you very much. I appreciate it and sorry 
for the discombobulation.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Bernstein, Jared.................................................     1
Chollet, Deborah.................................................   309
Greenstein, Robert...............................................     1
Holzer, H. J.....................................................   189
Howard, John.....................................................   489
Lambrew, Jeanne..................................................   309
Landrigan, Philip................................................   489
Leigh, J. P......................................................    93
Lynch, R. G......................................................   189
Melius, James....................................................   489
Meyerson, Harold.................................................     1
Nyez, Greg.......................................................   309
Popper, Richard..................................................   309
Prezant, David...................................................   489
Reibman, Joan....................................................   489
Rudin, T. W......................................................   189
Spriggs, W. E....................................................   189
Sum, Andrew......................................................   403
Temple, L. E.....................................................   403
Thorpe, K. E.....................................................    93
Viard, A. D......................................................     1
Vito, Sandi......................................................   403
Weinstein, J. N..................................................    93
Wyngaard, Bruce..................................................   403