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


 
  A REVIEW OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES FISCAL YEAR 
                              2009 BUDGET

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 28, 2008

                               __________

                           Serial No. 110-90


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                  JOHN D. DINGELL, Michigan, Chairman

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

                                 ______

                           Professional Staff

                 Dennis B. Fitzgibbons, Chief of Staff

                   Gregg A. Rothschild, Chief Counsel

                      Sharon E. Davis, Chief Clerk

                 Bud Albright, Minority Staff Director

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     1
    Prepared statement...........................................     2
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     3
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California..................................................     4
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey............................................     4
Hon. Sue Wilkins Myrick, a Representative in Congress from the 
  State of North Carolina, opening statement.....................     6
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     6
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     7
Hon. Eliot L. Engel, a Representative in Congress from the State 
  of New York, opening statement.................................     7
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     8
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................     8
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................     9
Hon. Hilda L. Solis, a Representative in Congress from the State 
  of California, opening statement...............................     9
Hon. Albert R. Wynn, a Representative in Congress from the State 
  of Maryland, opening statement.................................    10
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, opening statement.................................    10
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    11
    Prepared statement...........................................    12
Hon. Edolphus Towns, a Representative in Congress from the State 
  of New York, prepared statement................................    62

                                Witness

Michael O. Leavitt, Secretary, Department of Health and Human 
  Services.......................................................    13
    Prepared statement...........................................    14
    Answers to submitted questions...............................    63


  A REVIEW OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES FISCAL YEAR 
                              2009 BUDGET

                              ----------                              


                      THURSDAY, FEBRUARY 28, 2008

                          House of Representatives,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The committee met, pursuant to call, at 9:40 a.m., in room 
2123 of the Rayburn House Office Building, Hon. John D. Dingell 
[chairman of the committee] presiding.
    Members present: Representatives Dingell, Waxman, Markey, 
Pallone, Eshoo, Stupak, Engel, Wynn, Green, DeGette, Capps, 
Harman, Schakowsky, Solis, Gonzalez, Inslee, Barrow, Hill, 
Barton, Hall, Upton, Shimkus, Wilson, Fossella, Pitts, Terry, 
Ferguson, Myrick, Murphy, and Blackburn.
    Staff present: Bridgett Taylor, Purvee Kempf, Amy Hall, 
Yvette Fontenot, Hasan Sarsour, Melissa Sidman, William Garner, 
Jeanne Ireland, Jack Maniko, Jessica McNiece, Virgil Miller, 
Jodi Seth, Brin Frazier, Lauren Bloomberg, Jonathan Brater, 
Jonathan Cordone, Dennis Fitzgibbons, Ryan Long, Nandan Ken 
Kermath, Chad Grant, Melissa Bartlett, and Linda Walker.

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

    Mr. Dingell. Today the Committee will hear testimony from 
the distinguished Secretary of Health and Human Services in 
support of the Administration's fiscal year 2009 budget 
request.
    The Chair advises members that we will follow the usual 
procedures as prior full committee hearings have done with 
respect to opening statements and questions. In brief summary, 
members who are present when the committee is called to order 
will be recognized in order of their seniority on the full 
committee. Second, members who arrive after the committee is 
called to order will be recognized in the order that they 
arrive at the hearing. But all members in this category will be 
recognized after members who were present when the Chair called 
the committee to order, and the clerk will make the necessary 
notations.
    Without objection, the full statement of the Chair will be 
inserted in the record, and Mr. Secretary, we welcome you and 
thank you for being here. I would just say in my welcoming 
remarks, unfortunately, Mr. Secretary, you appear before the 
committee under circumstances I think neither of us would have 
sought and I would observe that the differences that are 
probably going to be existing between you and the members of 
the committee and the Chair will be related to activities of 
persons elsewhere rather than either of us.
    In any event, first on February 1, the Committee sent a 
detailed request for information regarding important programs 
administered by the Department including Medicare for seniors, 
SCHIP for children, Medicaid for low-income families and the 
safety of food and drug supplies. The response to that letter 
was received approximately 12 hours ago, I note not in 
sufficient time to assist the Committee in its inquiry today.
    Second, recently a distinguished panel of experts from FDA 
Science Advisory Board recommended the agency's non-user fee 
budget be increased by $375 million for 2009. That is 
regrettably seven times greater than the budgetary request that 
you have been permitted to submit to the Committee, Mr. 
Secretary.
    Third, over the next 10 years the budget proposal would cut 
Medicaid by nearly $83 billion, reduce Medicare spending by 
$576 billion and inadequately fund the State Children's Health 
Insurance Program below the levels of the discussion in the 
fight we had over this program last year and early this year. 
This is the very same program that we tried to improve on a 
bipartisan basis but was twice vetoed by the President.
    Fourth, the budget proposal would cut traditional Medicare 
providers while protecting the interests of private HMOs and 
fails to help physicians with a looming 10 % cut in their fees.
    Mr. Secretary, this Committee is going to have to continue 
its vigorous review of your department's programs to ensure 
that the American people are protected and that their 
government fulfills its promises to them to provide healthcare 
for its most vulnerable citizens. We look forward to your 
cooperation, and I know you share these objectives personally 
even if the evidence is available that the Administration does 
not.
    [The prepared statement of Mr. Dingell follows:]

                   Statement of Hon. John D. Dingell

    Today we are pleased to have Secretary Leavitt to discuss 
the President's Fiscal Year 2009 Budget for the Department of 
Health and Human Services.
    This year's budget request proposes significant cuts in 
vital health coverage and public health programs that would 
actually hurt efforts to provide health insurance to our 
Nation's children. It would not provide enough funding to 
preserve coverage for the children currently enrolled in the 
State Children's Health Insurance Program (SCHIP). It would 
unwisely eliminate SCHIP coverage for children in families with 
incomes above $44,000 a year, and it would restrict the ability 
of States to cover children in families with incomes above 
$35,200.
    Coupled with Medicaid cuts of nearly $83 billion over the 
next 10 years, and an unauthorized regulatory assault on the 
Medicaid program, it appears that the mission in the waning 
days of this administration is to shred the health insurance 
safety net. We have heard from several Governors that these 
regulations are excessively burdensome for the States and for 
Medicaid beneficiaries.
    This budget also proposes a reduction of $576 billion over 
the next 10 years in Medicare program spending. That is an 
astonishing figure, but what is more astonishing is that it 
proposes drastic cuts to traditional Medicare providers such as 
doctors and hospitals, while protecting private HMOs. Private 
HMOs in Medicare will continue to receive excessive payments at 
the expense of beneficiaries, other providers, and taxpayers.
    In order to protect special interests and advance its 
privatization agenda, the Bush Administration continues to 
ignore recommendations from outside experts that HMO payments 
be reduced. Under this budget, beneficiaries will lose their 
choice of doctor and hospital and be forced into HMOs. The 
vision in this budget, if it has one, is that traditional 
Medicare will, in the words of former Speaker Gingrich, 
``wither on the vine.''
    Beneficiaries would also take a direct hit from this 
budget. It would dramatically increase the number of 
beneficiaries paying a higher Part B premium, and it proposes 
tying Part D premiums to income.
    Finally, the President's budget does nothing to address the 
pending 10 % cuts to physician fees, a real failure of 
leadership. This decision, combined with the new cuts proposed 
for both Medicare and Medicaid, leaves little doubt that the 
Administration is dramatically unraveling our national 
commitment to provide health care to our most vulnerable 
citizens.
    Unfortunately, public health priorities in the President's 
FY2009 budget fare little better. Under the Administration's 
proposal, six of the eight Public Health Service Act agencies 
charged with protecting the Nation's health and well-being 
would receive critical cuts to their budget. As for the other 
two agencies, the National Institutes of Health (NIH) would 
receive flat funding and the Food and Drug Administration (FDA) 
increase is woefully inadequate.
    I am particularly disappointed in the level of increase 
that the Administration has allocated for the FDA FY2009 
budget. After the number of food and product recalls last year, 
many had hoped that the Administration would finally request 
the resources needed to ensure that the FDA could fulfill its 
mission to protect the public health. Unfortunately, that does 
not appear to be the case.
    In fact, the Chair of the recent FDA Science Board 
subcommittee report testified before the Subcommittee on 
Oversight and Investigation that FDA's science base and 
resources had eroded so much that the Science Board concluded 
that ``Americans lives are at risk.''
    Furthermore, the Administration budget proposes only flat 
funding for the NIH. This would further erode the Nation's 
premier biomedical research capacity, harming the health of 
Americans now and in the future. Because 80 % of NIH's annual 
funding goes out through grant, contract, and training awards 
to extramural scientists throughout the country, it provides 
important investment in many economically troubled regions of 
the country, including my State of Michigan.
    The Centers for Disease Control and Prevention (CDC), the 
premier public health disease prevention and control agency, is 
slated for a $433 million cut. This would threaten our Nation's 
capability to prepare, detect, and control infectious diseases. 
It would also threaten our capacity to adequately conduct 
bioterrorism preparedness. Finally, it would threaten our 
capacity to provide vaccines to children. Unfortunately, CDC is 
one of six public health agencies for which the Administration 
has proposed budget cuts.
    In closing, I would like to point out an inconsistency in 
the President's budget proposal. The President's budget would 
slash funding for many important health programs, and it would 
eliminate some altogether, such as the Prevention Block Grant 
and Health Professions programs.
    As justification, President Bush states that the programs 
are ``not based on evidence-based practices'' and, in another 
case, that ``evaluations have found these activities do not 
have a demonstrated impact.'' I am confused as to why the 
President does not apply these same standards to the 
``abstinence-only'' programs, for which he has proposed another 
huge increase of $28 million, despite the fact that study after 
study, including a 10-year study commissioned by the 
President's own Administration, has shown these programs to be 
ineffective at best, and in some cases actually 
counterproductive.
    Mr. Secretary, we have many questions about the 
Administration's budget for Fiscal Year 2009. The Committee 
welcomes you as we look to the Administration to explain its 
justifications for many problematic proposals.
                              ----------                              

    Mr. Dingell. Mr. Secretary, the Chair recognizes now our 
good friend, Mr. Upton.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman. I just want to 
say, I am not sure--I have got other committee business this 
morning. I may not be here, knowing that we have got a lot of 
questions that will be here. I welcome your attendance and I 
respect you quite a bit. I look forward to continuing to work 
with you.
    I just hope in your testimony you are able to talk a little 
bit about the Medicare physician fee schedule, which as you 
know expires or we come to a threshold decision date come July 
1. I note that there was nothing in the President's budget 
relating to that, and I sure would welcome in your testimony 
this morning ways for us to work together to address that. It 
is an urgent need certainly in Michigan where we see a number 
of physicians deciding not to accept patients if we don't deal 
with this issue, and again, I welcome you here today and I look 
forward to your testimony. I yield back.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes now the distinguished gentleman from 
California, Mr. Waxman.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Secretary, I want to welcome you to our committee. I 
wish you were here to give us better news about the budget that 
the President is proposing instead of what we will hear is that 
the most that an agency could hope for in this budget is to be 
flat-funded, and more typically, budgets were slashed.
    I am particularly concerned about the President's budget 
for FDA. The most recent of many reports indicating FDA is in 
serious trouble came from FDA's own Science Board. This chronic 
underfunding has jeopardized the FDA to the point that American 
lives are now at risk. We have asked the Science Board for 
their review of the budget. They told us FDA would need an 
increase of over 5 times what the President had requested. It 
is clear that Congress is going to have to adjust the 
President's budget proposals to reflect the realities of public 
health that we face.
    The budget also creates a crisis that doesn't now exist by 
including seven new Medicaid regulations that will go into 
effect. Just the other day we heard from governors on a 
bipartisan basis, they expressed their really enormous concern 
about those Medicare proposals. I hope we can discuss them 
further today and in the future, and I stayed a little bit 
within the 1 minute but exceeded it by a few seconds, but thank 
you very much.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes now the gentleman from Illinois, Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. I will defer for 
questions.
    Mr. Dingell. The gentleman waives. The Chair recognizes now 
the distinguished gentleman from New Jersey, Mr. Pallone.

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

    Mr. Pallone. Thank you, Mr. Chairman.
    The President intends to slash roughly $200 billion from 
the Medicare/Medicaid programs. He is proposing to do this by 
shifting costs to the States, providers and beneficiaries, and 
in the wake of an economic downturn, I can't imagine a worse 
idea. States are already struggling with a lack of funding. In 
my home State of New Jersey, for example, our governor had to 
freeze State spending in order to close our budget shortfall, 
and more and more hospitals are closing in New Jersey including 
Muehlenberg Hospital in my district, which announced its 
closing last week.
    The Bush Administration has launched an all-out attack on 
Medicaid over the last year. Two days ago we had a hearing in 
the Health Subcommittee to discuss some of the very harmful 
regulations that have been recently issued, and this budget 
proposal is no different. It includes $33 billion in cuts to 
the Medicaid program. For the Medicare program, the President 
has proposed $116 billion in cuts over 5 years, and these cuts 
are focused mostly on hospitals, nursing homes and healthcare 
providers, the exact services that our seniors need the most: 
access to healthcare, inpatient treatment and long-term care.
    Perhaps the most infuriating aspect about these Medicare 
cuts is that they will be used in part to finance overpayments 
to HMOs. MEDPAC, the Medicare Payment Advisory Commission, our 
expert advisory body on Medicare payment policy, recently 
reported that CMS is paying the private insurers on average 13 
% more than traditional Medicare pays for the same treatment. 
MEDPAC actually called for the elimination of these 
overpayments and, forgive me, but it seems wrong to cut funds 
for vital Medicare services that our seniors need to stay 
healthy in order to overpay insurance companies.
    Another alarming aspect of this budget proposal is the way 
the President has portrayed the request for CHIP monies as a 
funding increase. In his budget, however, the President only 
requests $19.7 billion for CHIP while the Center on Budget and 
Policy Priorities estimates that CHIP needs a funding increase 
of $21.5 billion to simply sustain the current programs.
    And finally, I would like to mention the funding for the 
FDA. Just a few days ago, the Energy and Commerce Committee 
received a report from the Science Board that estimated the 
cost of adequately funding the FDA. The FDA is in need of a 
serious infusion of cash and talent in order to fulfill its 
scientific and regulatory mission yet unfortunately the 
Administration shortchanges this critical agency, thus 
imperiling the public health.
    Now, Mr. Chairman, I have a lot of other concerns with the 
President's budget proposal, which I will get to during the 
questioning, but I think in the last few days between our 
Health Subcommittee hearing and these Medicaid rules and what 
we have heard in the oversight on FDA, we need to make a lot of 
changes. This budget really is a disaster, in my opinion, for 
the healthcare system.
    Thank you, Mr. Chairman.
    Mr. Dingell. The Chair thanks the gentleman. The Chair 
recognizes now the gentleman from Nebraska, Mr. Terry.
    Mr. Terry. I waive.
    Mr. Dingell. The gentleman waives. The Chair recognizes now 
the gentlewoman from California, Mrs. Eshoo.
    Ms. Eshoo. Mr. Chairman, thank you. I will defer for 
questions. Thank you.
    Mr. Dingell. The gentlewoman defers. The Chair recognizes 
now the distinguished gentlewoman, Ms. Myrick.

OPENING STATEMENT OF HON. SUE WILKINS MYRICK, A REPRESENTATIVE 
          IN CONGRESS FROM THE STATE OF NORTH CAROLINA

    Ms. Myrick. Thank you.
    Mr. Secretary, welcome, and I just want to echo Mr. Upton's 
comments relative to the doctor payments, and the only other 
thing I wanted to say is, I really hope that we can look at the 
Medicare issue in a broader context because we have got to deal 
with it and we just keep tinkering around the edges, which is 
going to cost us more in the long run. I am interested to hear 
what you have to say.
    Mr. Dingell. The time of the gentlewoman has expired. The 
Chair recognizes now the gentleman from Massachusetts, Mr. 
Markey.
    Mr. Markey. I would like to reserve my time.
    Mr. Dingell. The gentleman reserves his time. The Chair 
recognizes now the gentleman from Pennsylvania, Mr. Murphy.

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

    Mr. Murphy. Thank you, Mr. Chairman.
    As we look at this budget for health and all the areas it 
encompasses, I know you have continued to push for areas of 
transparency, and what I still believe in the coming months 
that can be done that I hope that we can make sure there is 
adequate funding for a few areas.
    Number one, we still face the problem with 90,000 deaths of 
a year, 2 million cases and $50 billion a year wasted on 
infections people pick up in the hospitals. We still have 
perhaps $28 billion or more a year we waste on people having 
prescription errors and the medication problems that come with 
that and we can move forward with electronic prescribing. We 
still have massive amounts of money, as you know, that we waste 
from not having electronic medical records whereby people have 
tests done and procedures done that we could bypass.
    I hope that you will continue to be highly energized on 
working on these issues because I believe, as I believe you do, 
that people have a right to know, and by engaging them with 
Medicare and Medicaid and every other branch that your 
department has, that we ought to be changing this. It still 
puzzles me that people can find out if they are going to leave 
the airport on time with their airplane but they can't find out 
if they are going to leave their hospital at all, and we have 
to change that and people have that right to know.
    Thank you.
    Mr. Dingell. The Chair recognizes now the distinguished 
gentleman from Michigan, Mr. Stupak.

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

    Mr. Stupak. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. The Subcommittee on Oversight and 
Investigation has held five hearings on food safety in this 
Congress, most recently our hearing on Tuesday with 
representatives from the companies that have issued food 
recalls. Americans have witnessed one food safety disaster 
after another with 91 recalls over the past 14 months. Each 
year 76 million Americans will suffer from foodborne illnesses, 
325,000 will require hospitalization, and at least 5,000 will 
die. In fact, during our food safety hearing on Tuesday, FDA 
announced two more recalls, one on crackers and another on 
dried fish coming from Asia. The FDA's Science Advisory Board 
has acknowledged that the FDA's current condition is putting 
American lives at risk.
    I was looking forward to see what the Administration 
planned to do to fix this fragmented food and drug safety 
system in its fiscal year 2009 budget. Needless to say, I was 
disappointed. Unfortunately, I don't believe this 
Administration is serious about protecting the safety of our 
food and drug supply.
    My time is up, and I look forward to hearing your answers 
to our questions. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Dingell. The Chair thanks the distinguished gentleman. 
The Chair recognizes my distinguished friend and colleague, Mr. 
Pitts.
    Mr. Pitts. I reserve my time.
    Mr. Dingell. The gentleman reserves his time. The Chair 
recognizes now the distinguished gentleman from New York, Mr. 
Engel.

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

    Mr. Engel. Thank you very much, Mr. Chairman.
    I am dissatisfied with the budget. It clearly is intended 
to achieve cost savings by any means regardless of the damaging 
health outcomes, but I want to, Mr. Secretary, highlight an 
issue of very big importance to us in New York but really for 
the whole country, and that is, following the terrorist attacks 
on September 11 and the collapse of the World Trade Center 
towers, hundreds of thousands of people including responders, 
area residents, workers and students were exposed to toxins, 
pulverized building materials and other environmental 
contaminants. These people are suffering, they are dying, and 
we need a national response.
    I am angered that this proposal includes a 77 % funding cut 
for September 11 healthcare programs from $108 million 
appropriated for fiscal year 2008 down to $25 million for 
fiscal year 2009. This is a disgrace. Last month New York 
delegation members sent a letter to the President asking him to 
ensure that 9/11 health clinics, which are expected to need 
more than $200 million this year alone, are fully funded in his 
fiscal year 2009 budget and I would hope that you could achieve 
that, Mr. Secretary. We were told by Christie Todd Whitman at 
the time that the air was okay to breathe. We were lied to by 
the government. This is an attack on America, not a New York 
issue. Every district has people living in it that had first 
responders and we really need to act, and this budget doesn't 
do it.
    I was there with the President 3 days after September 11 
when he had the bullhorn and he said that we would never forget 
what happened and never forget the people. This budget forgets 
the people and we need to have money appropriated so that our 
first responders are not sick and dying and that the government 
takes care of them, so I would hope that we can talk a little 
more about that later on. Thank you.
    Mr. Dingell. The Chair thanks the gentleman. The Chair 
recognizes now the distinguished member, Ms. Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Ms. Blackburn. Thank you, Mr. Chairman, and Mr. Secretary, 
welcome. We are delighted you are here.
    I am looking forward to talking with you and continuing to 
work with you on a couple of issues: Number one, the trajectory 
that Medicare and Medicaid spending is on, going from 4\1/2\ % 
of our GDP to when you look at 2050 and the outlying years the 
%age, 22 % of the GDP, the Medicare trigger and what we are 
going to do about that as it is projected to exceed 45 % of 
general revenue by 2012. That is of tremendous concern to me. I 
think we need to look at some long-term reforms.
    I am also a bit concerned about SCHIP and the $19 billion 
for expansion there. Of course, you and I have visited many 
times about our experience in Tennessee. We have learned a lot 
of lessons there and I hope that those lessons are not lost on 
us as we look at the SCHIP program and how to properly deliver 
the services for the intended recipients. But welcome.
    Thank you, Mr. Chairman. Thank you for the time and I look 
forward to continuing the conversations.
    Mr. Dingell. The Chair thanks the distinguished 
gentlewoman. The Chair recognizes now the distinguished 
gentlewoman from Colorado, Ms. DeGette. Not here? Okay. The 
Chair recognizes now the distinguished gentlewoman from 
California, Ms. Capps.

   OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Capps. Thank you, Mr. Chairman, and welcome, Mr. 
Secretary.
    I am sad to say this budget reflects a complete disconnect 
with reality as far as the true healthcare needs of this 
country are concerned. The priorities are just so wrong. I can 
only chalk it up to this Administration being a lame duck. I am 
of course horrified by the proposed cuts to nursing education 
by 30 % and eliminating children's hospitals' graduate medical 
education altogether. This budget doesn't hesitate to cut 
funding from patients, from doctors or nurses but heaven forbid 
we should stop overpaying Medicare Advantage plans run by 
companies with multi-billion-dollar profits. With the Medicaid 
rules looming over us, how can we fulfill our moral obligation 
to serve our neediest families with a budget that fails on so 
many levels?
    I am also concerned of course about the need for fixes for 
the Geographic Practice Cost Index and the flawed Recovery 
Audit Contractor Program moving forward and the wasteful 
spending on ineffective abstinence-only education, but the 
rules only allow me 1 minute and so I will just urge my 
colleagues to reject this budget proposal and work together to 
pass a budget that reflects commonsense investments in our 
Nation's health infrastructure.
    Thank you, Mr. Chairman.
    Mr. Dingell. The Chair thanks the gentlewoman. The Chair 
recognizes now the distinguished gentlewoman from California, 
Ms. Harman.

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

    Ms. Harman. Thank you, Mr. Chairman.
    Secretary Leavitt, we met when you were involved with the 
Markle Foundation in a major project on homeland security. I 
know you understand the threats we face from terror attacks 
including biological attacks like pandemic flu. My district in 
California surrounds the top terror targets in Los Angeles 
including LAX, Los Angeles International Airport, and the ports 
of Los Angeles and Long Beach. The only level I trauma center 
and the closest hospital, Harbor UCLA, has been cited for 
overcrowding in its emergency room. Harbor is also a national 
teaching hospital. In my view, Mr. Secretary, this budget takes 
us backwards and makes us less safe. It won't cover a surge in 
mass casualty care. It is a purge in mass casualty care. I look 
forward to hearing what you have to say about this and hearing 
how we are going to protect America's communities.
    I yield back.
    Mr. Dingell. The Chair recognizes now the gentlewoman from 
California, Ms. Solis.

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

    Ms. Solis. Thank you, Mr. Chairman.
    I too am very concerned about the programs that we are 
going to see reduced, especially when we are talking about--and 
I have heard the Secretary this time and again about 
eliminating healthcare disparities. Again, Latino families that 
we represent in areas like mine are going to have a hammer to 
their heads about where they are going to find relief in terms 
of better healthcare.
    I am also disturbed with respect to the August 17th 
directive. The other day we heard from some of our governors, 
both Republican and Democrat, who said that they were not in 
agreement with the new directive that has been placed upon them 
to try to enroll more low-income children in the SCHIP program 
without having the ability to actually do outreach and 
recruitment to get more families involved. I hope you can take 
a second look at that.
    The other part we heard from was the Medicaid citizenship 
documentation, that it is actually costing more States more 
money just to implement auditing procedures to go through to 
find out and potentially weed out people who are not eligible. 
We found hearing from the governor of Washington State, Mrs. 
Gregoire, that they only found one person out of over 300 cases 
that were examined and it cost the State, I think it was $5 
million. I mean, that is horrendous. That money could be used 
for better healthcare services. So I hope you will reexamine 
that.
    The other thing is that I know HIV and AIDS is a continuing 
epidemic, especially in the Latino community, but more 
importantly in the territory of Puerto Rico. So I would like to 
hear what your intentions are there and how we can mitigate 
those problems.
    So thank you, Mr. Chairman, for having this hearing this 
morning.
    Mr. Dingell. The time of the gentlewoman has expired. The 
Chair recognizes now the distinguished gentlewoman from New 
Mexico, Ms. Wilson. Does the gentlewoman desire to waive?
    Ms. Wilson. Yes.
    Mr. Dingell. Her time is waived and she will be recognized 
later. The Chair recognizes now the distinguished gentleman 
from Texas, Mr. Gonzalez.
    Mr. Gonzalez. I waive opening.
    Mr. Dingell. The gentleman waives. The Chair recognizes now 
the distinguished gentleman from Maryland, Mr. Wynn.

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

    Mr. Wynn. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I want to first join my colleagues 
in expressing my extreme disappointment with this budget, 
particularly with respect to SCHIP. In the case of my own State 
of Maryland, I don't believe the funding level that is in this 
budget will allow us to maintain our existing programs. It 
certainly will not allow us to expand and this is compounded by 
the fact that the President is objecting to any attempt to 
provide health insurance to families making over $35,000 a 
year, so basically moderate-income families are not going to be 
helped by this budget.
    Second, I am very concerned about the problem of dental 
care and the cuts in the dental program. We had a tragedy in my 
district. This budget doesn't respond to that.
    And third, I would note that federally qualified health 
centers are only increased by 1 %. This is absolutely critical 
when you consider that one in five citizens in America don't 
have reliable access to healthcare. Community-based health 
centers are absolutely critical, and it is unfortunate that 
this budget doesn't recognize that reality and provide more 
funding for community-based health centers.
    Thank you, Mr. Chairman. I relinquish the balance of my 
time.

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

    Mr. Dingell. The Chair thanks the gentleman. The Chair 
recognizes now the distinguished gentlewoman from Illinois, Ms. 
Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I ask my colleagues to take a look at this budget through 
the eyes of seniors and children and pregnant women, people 
with disabilities, hardworking families. People are looking for 
help so that they can lead healthy and productive lives, and 
from a fiscal perspective, cost-effective programs with low 
administrative costs like Medicare and Medicaid are being cut 
while bureaucratic and costly private insurance are being 
hyped, and in terms of priorities, more than $10 million an 
hour for Iraq and cuts in children's health. What you will find 
are significant cuts in Medicare and Medicaid, the failure to 
fix the Medicare part D program, eliminate the donut hole, 
provide for our children through adequate SCHIP funding and a 
failure to provide needed resources for the NIH, CDC and SAMSA.
    Mr. Chairman, it is my hope that this Committee will work 
to reject these cuts, reject any budget that prioritizes a 
misguided war and tax cuts for the wealthy over meeting the 
needs of American families. Thank you, Mr. Chairman.
    Mr. Dingell. The time of the gentlewoman has expired. The 
Chair recognizes now the distinguished gentleman from Georgia, 
Mr. Barrow.
    Mr. Barrow. Thank you, Mr. Chairman. I will waive opening 
and reserve my time.
    Mr. Dingell. The gentleman waives. The Chair recognizes now 
the distinguished gentleman from Texas, Mr. Green.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman, and I want to welcome 
the Secretary here, and we are trying to go through as quickly 
as we can so your time is valuable like everyone else's. But I 
have to say, I am concerned because over the past 8 years the 
Administration has continued to make cuts in HHS budget. The 
trend of the Administration has been to cut funding for 
programs that need the support such as SCHIP and Medicaid to 
fund costly programs that aren't necessarily working. 
Unfortunately, this year's budget is no different than previous 
years. It is disheartening, to say the least.
    The budget abandons the most vulnerable members of our 
population, children and the elderly. Don't let the 
Administration fool you. This budget is not the solution to 
healthcare issues we are facing on our way to balance our 
budget. In my opinion, the budget focuses on across-the-board 
reductions in the most needed programs over continued funding 
the Administration's projects such as privatize healthcare and 
shifts costs to the States. In fact, a GAO report released 
today found that the private Medicare plans such as Medicare 
Advantage cost beneficiaries more than traditional Medicare yet 
the Administration continues to push the low-income population 
to privatized health plans that cost more, deliver less and 
continuing the trend of passing on costs to the States and the 
taxpayers.
    I and many of my colleagues disagree with the 
Administration's budget request for LIHEAP. This is not the 
time to cut another 22 % out of this vital program which serves 
at-risk households with senior citizens and disabled Americans 
and the very young children. With sufficiently funded LIHEAP, 
we can save lives in Texas and across the Nation. LIHEAP's 
funding shortfall is so serious that in my own State we reach 
just 6 % of the eligible families. LIHEAP reform needs to be 
permanent and not episodic.
    This budget does nothing to reduce the number of insured 
children. In Texas, 1.5 million children are uninsured. This 
budget proposes a slight increase in funding to SCHIP. However, 
it offsets that increase by forcing States to take more of the 
costs of SCHIP which really is no increase at all and does 
nothing to reach the number of uninsured children in my State. 
Not only that, the budget reduces funding for physicians for 
the children's graduate medical education program. The child 
population is rising and the elderly need more healthcare but 
this budget wants to reduce the number of pediatricians, 
pediatric specialists, and again SCHIP. So where do we expect 
our children to receive healthcare?
    I would like to discuss all the shortcomings but my time is 
short. If we continue to underfund programs like Medicare and 
Medicaid and SCHIP, we are going to have a terrible burden and 
leave one heck of a mess for future generations.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Green follows:]

                      Statement of Hon. Gene Green

    Thank you, Mr. Chairman, for holding this hearing today on 
the HHS budget. I'd like to welcome Secretary Leavitt to the 
committee and thank him for appearing before us today.
    Over the past 8 years the Administration has continuously 
made cuts to the HHS budget. The trend of this Administration 
has been to cut funding for the programs that need the support 
like SCHIP and Medicaid to fund costly programs that aren't 
necessarily working.
    Unfortunately, this year's budget is no different than in 
previous years, which is disheartening to say the least. This 
budget abandons the most vulnerable members of our population: 
children and the elderly.
    Don't let the Administration fool you- this budget is not 
the solution to the health care issues we are facing or a way 
to balance the budget.
    In my opinion, this budget focuses on across the board 
reductions in the most needed programs only to continue 
overfunding the Administration's pet projects, push privatized 
health care, and shift costs to the States.
    In fact, a GAO report released today, found that Private 
Medicare Plans such as Medicare Advantage cost beneficiaries 
more than traditional Medicare. Yet, the Administration 
continues to push the low income population to privatized 
health plans that cost more, deliver less, and continuing the 
trend of passing on costs to the States and taxpayers.
    I and many of my colleagues disagree with the 
Administration's budget request for LIHEAP. This is not the 
time to cut another 22% out of this vital program, which serves 
at-risk households with senior citizens, disabled Americans and 
very young children.
    When sufficiently funded, LIHEAP can save lives in Texas 
and across our nation. LIHEAP's funding shortfall is so 
serious, that in my State, we can reach just six % of eligible 
families. LIHEAP reform needs to be permanent--not episodic.
    This budget does nothing to reduce the number of uninsured 
children. In Texas, 1.5 million children are uninsured. This 
budget proposes a slight increase in funding to SCHIP; however 
it offsets that increase by forcing States take on more of the 
costs of SCHIP, which is really no increase at all and does 
nothing to reduce the number of uninsured children in my state.
    Not only that, but the budget reduces funding for 
physicians and for the Children's Graduate Medical Education 
program. The child population is rising and inevitably they 
will need medical care, but this budget wants to reduce the 
number of pediatricians, pediatric specialists, and SCHIP. Just 
where do we expect our children to receive medical care and 
from whom?
    I would like to discuss all of the shortcomings of the HHS 
budget, but my time is limited so I will conclude with this 
point. If we continue to underfund programs like Medicare, 
Medicaid, and SCHIP we are going to leave a terrible burden and 
one heck of a mess for future generations to clean up and that 
just isn't fair.
    Thank you Mr. Chairman, I yield back my time.
                              ----------                              

    Mr. Dingell. The time of the gentleman has expired. Are 
there other members desiring recognition at this time? The 
Chair hears none.
    Mr. Secretary, thank you for being with us. We recognize 
you and will hear such statement as you choose to give.

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

    Secretary Leavitt. Thank you, Mr. Chairman. You are always 
gracious and fair, despite our occasional disagreements. In the 
spirit of short opening statements, I will just summarize the 
statement that has been provided to the members.
    This budget will recognize four basic objectives. The first 
one of course is carrying out our crucial mission of helping 
those in our country in hardship but it does recognize the need 
for us to balance the budget and focuses intensely on doing so 
by 2012. A third objective is to make the entitlements upon 
which so many in our country rely sustainable and also making 
certain that premiums that are charged to those who are 
beneficiaries are affordable.
    My opening statement expresses grave concern about Medicare 
and Medicaid, and I do not suffer the illusion that this budget 
will be received with enthusiasm by many, but I hope they will 
receive it as a warning because at some point in time decisions 
like those made in this budget will have to be made by someone, 
no matter what party is in control. This has to be dealt with, 
and I express in my opening statement the view that at the 
heart of the problem is a system that is essentially planned 
and priced at a government price setting. I believe that we 
would be far better if we could begin to move toward a system 
where we reward value and not volume, and I hope we will have a 
chance to talk about that, Mr. Chairman.
    In the spirit of briefness, I will leave it at that and 
look forward to interacting with you and other members of the 
Committee.
    [The prepared statement of Mr. Leavitt follows:]

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    Mr. Dingell. Mr. Secretary, thank you. I am going to be 
asking most of these questions to get a yes or no answer simply 
because there is so little time here and we want to respect 
your time and the time of the other members. So Mr. Secretary, 
isn't it correct that the President's fiscal year 2009 budget 
targets traditional Medicare providers with cuts of $576 
billion over 10 years?
    Secretary Leavitt. The 5-year number is the one I am more 
familiar with. It is $183 billion, so I don't have a 10-year 
number.
    Mr. Dingell. We will hold the record open so that if that 
statement is incorrect, you may correct me on that.
    Secretary Leavitt. Mr. Chairman, may I acknowledge that 
when we use the word ``cuts,'' we both mean it is a reduction 
in the growth rate. We are reducing the growth from 7.2 % down 
to 5 %. Medicare will grow during that period by more than 5 % 
but we are in fact proposing a reduction in the growth rate.
    Mr. Dingell. Now, Mr. Secretary, the budget does absolutely 
nothing to reduce Medicare overpayments to Medicare Advantage 
insurance plans or the HMOs. That is true, is it not?
    Secretary Leavitt. Mr. Chairman, Medicare Advantage was 
designed to do three things. One was to establish the option 
and choice among people on a----
    Mr. Dingell. No, but it does nothing to cut back on those 
payments to that particular category of recipient?
    Secretary Leavitt. None of our reductions really focus on 
beneficiaries. They do focus on----
    Mr. Dingell. I am talking about Medicare Advantage plans. 
They continue to receive no cuts and they cut their payment at 
exactly the same level, yes or no?
    Secretary Leavitt. As we both understand, the design on 
Medicare Advantage is slightly different and----
    Mr. Dingell. Mr. Secretary, with all respect and great 
affection, I have got limited time.
    Secretary Leavitt. I always feel your affection, Mr. 
Chairman.
    Mr. Waxman. In a limited way.
    Mr. Dingell. Mr. Secretary, the commission which is 
authorized by Congress to do an independent review of Medicare 
payment rates, MEDPAC, now tells us that we are paying these 
HMOs 113 % of traditional Medicare for every beneficiary who 
enrolls. Is that true or false?
    Secretary Leavitt. The Congress has in fact authorized a 
different reimbursement arrangement.
    Mr. Dingell. And in some instances, that average is 
exceeded by some of those being paid 130 % of costs. Is that 
correct?
    Secretary Leavitt. That is not a familiar number to me. I 
am aware that there is a differential in reimbursement but the 
number I have is less than that.
    Mr. Dingell. Now, the Congressional Budget Office advises 
us that these overpayments will cost Medicare over the next 5 
years alone $54 billion. Is that correct?
    Secretary Leavitt. I have not seen that report. I read 
about it this morning but I have yet to receive a copy of it.
    Mr. Dingell. Now, today Mr. Secretary, we will be releasing 
a new report from the Government Accounting Office which sheds 
light on these HMOs and how they are spending these 
overpayments. The title of the report is ``Medicare Advantage: 
Increased spending relative to Medicare fee for service may not 
always reduce beneficiary out-of-pocket costs.'' I would note 
that according to GAO, nearly a third of the beneficiaries 
enrolled in these Medicare HMOs find that the plans spend more 
than 15 % of the Medicare payments on overhead, administration 
and profits. Is that true or false?
    Secretary Leavitt. Again, I have not seen that study.
    Mr. Dingell. Mr. Secretary, proponents of the excess 
spending at Medicare HMOs have said that these plans are 
important because they provide seniors with extra benefits. 
Now, are you aware that according to GAO, this report says that 
``relatively little of the overpayments are being spent on 
extra benefits.''
    Secretary Leavitt. Again, I have not seen the report. Our 
information is that about 80 % of them are being spent on 
additional benefits.
    Mr. Dingell. And in point of fact, Mr. Secretary, the GAO 
found that the plans spent only 11 % of extra payments on extra 
benefits for seniors. The plans charge beneficiaries increased 
premiums to finance extra benefits so in spite of the fact that 
the plans are getting overpayments, they are still charging 
beneficiaries for extra benefits that Medicare has paid for. Is 
that true?
    Secretary Leavitt. Again, our information is that 80 % of 
it is being spent on extra benefits. I do have the view that 
there are things that can be done to Medicare Advantage that 
would expand the competitiveness of it and would I believe 
improve it, but I think it is a very good thing in general and 
it has been successful in the way that Congress designed it.
    Mr. Dingell. Now, Mr. Secretary, it is a fact, I believe, 
that according to GAO, one in five beneficiaries is in an HMO 
that charges more than Medicare fee for service for home health 
services and roughly one in six beneficiaries is in a plan that 
charges more than Medicare for hospital service. This means to 
me that beneficiaries who are in poor health find that the 
plans wind up costing them more than if they were in regular 
Medicare. Is that statement true or false?
    Secretary Leavitt. Well, it would be contrary to what we 
have found. It has been wildly popular among beneficiaries, 
particularly those in low-income areas and those in ethnic 
communities, ethnically diverse communities.
    Mr. Dingell. Mr. Secretary, are you aware also that 
according to GAO, the plans did reduce beneficiary cost 
sharing. One-third of that reduction was financed by additional 
beneficiary premiums. So essentially what these plans are doing 
is shifting costs, making more profits and seeing to it that 
the beneficiaries pay additional premiums for the benefits that 
they achieve. Is that statement true or false?
    Secretary Leavitt. I have not seen the study. As far as I 
know, it hasn't even been released. I have heard that it will 
be released today but I do not have a--I have not had a chance 
to review it. Therefore, it is difficult for me to respond.
    Mr. Dingell. Mr. Secretary, with all affection and all 
respect for you, and I think you are a fine public servant I 
grieve that you and I differ on this, I find that what we have 
been afflicted here with is that our government is quite 
frankly paying fat cats in the HMO and insurance business 
excessive profits and benefits and quite frankly cutting back 
significantly on services and benefits to recipients of these 
programs. I think this is unconscionable. I regret that we have 
this disagreement on it. My time is expired.
    The Chair recognizes now my good friend and colleague, Mr. 
Upton, for 5 minutes.
    Mr. Upton. Thank you, Mr. Chairman.
    Again, Mr. Secretary, welcome to the Committee. As you 
know, in my opening statement I referenced the Medicare 
physician pay fix. As you know, it expires--the current 
temporary stopgap expires July 1, and if we fail to do 
anything, we are going to see a 10 % reduction, which as you 
must know is pretty unpalatable on both sides of the aisle, let 
alone in the physician community, as well as the patient 
community. We received quite a bit of letters from all sides on 
this. Where do we need to go? July 1 is not that far away. 
Pitchers and catchers are already reporting. The first 
preseason games are this week, and that will be about the All 
Star break in Major League Baseball so we are really pretty 
close. What should we be doing and where is the Administration? 
If we come up with just a temporary fix extended through the 
end of the fiscal year, stick something into a CR later on. 
What is the Administration's view as to the billions of dollars 
that will be in additional spending just to come up with a 
stopgap which takes us through the end of the year?
    Secretary Leavitt. I will give you my own view. The system 
in fact----
    Mr. Upton. OMB is not here. They are not watching.
    Secretary Leavitt. They are always watching. This system is 
a figment of a government-regulated price-controlled system 
that will always oversubsidize the wrong things and that will 
routinely underpay the right things, and until we wrestle with 
that fact, we are going to continue to have this dilemma. One 
option that many will advocate, particularly in the medical 
family, will be that Congress write a check for a couple of 
hundred billion dollars and just solve this. I would suggest to 
you that that would potentially be a short-run solution but it 
is a long-term disaster. We have to fix this system, and part 
of the solution needs to be a system that will begin to 
recognize value and not just volume. Whenever we begin to 
ratchet down the payments, whether it is 10 % or 1 %, 
miraculously what happens is, we end up seeing more procedures. 
So in a system like this where we reward volume, we are just 
going to get more volume and we need to begin looking at what I 
refer to as the four cornerstones of a value-based competition 
system where people have electronic medical records, where we 
can gather information, where we have quality measures, where 
people know what the quality of their care is, what the price 
of it is so that people can begin to deal with healthcare in a 
way that will give them a sense of what their value is, not 
just how much volume----
    Mr. Upton. We have had some incentives in past years as 
related to the IT industry. Is that not right, with electronic 
records? Wasn't that part of some of the solution?
    Secretary Leavitt. Well, we are making progress but we need 
to move even more aggressively as a Nation. In the 1 minute, 51 
seconds we have left, I would love to tell you a little bit 
about that but I recognize you may have other questions. Let me 
just suffice to say we are making serious progress and we need 
to make more.
    Mr. Upton. Well, thank you. It is an issue that I think 
this Committee and subcommittees need to deal with. I was 
pleased to see that the budget did include $66 million for the 
Office of National Coordinating for Health IT. Where are we in 
developing additional standards to give healthcare providers 
more confidence in implementing electronic health record 
systems and electronic prescribing systems probably along the 
lines of what the VA is already doing?
    Secretary Leavitt. Let me say that 3 years ago, there were 
no standards for electronic medical records that would make 
them interoperable so we could weave our healthcare sector into 
a system. I am happy to report to you, Congressman, that we now 
have 75 % of the medical records systems for practices that are 
being sold with what is known now as the CCHIT certification. 
It is a seal of approval that says if you buy a system like 
this, you are on a pathway to interoperability. The standards 
didn't exist 3 years ago. They now exist. We have a system in 
place and we are making progress.
    As to e-prescribing, may I say the time has come. We need 
to begin to insist that physicians and their practices adopt e-
prescribing. The money is--there is money savings. There are 
lives that will be saved by it. It is just time. I would 
suggest in June when we do deal with the SGR that we look at 
allowing Medicare the capacity to reimburse physicians at the 
highest possible rate when they use e-prescribing. It is when 
we begin to use that kind of incentive that we will see e-
prescribing and its savings and its health benefits fully 
realized.
    Mr. Upton. I appreciate your being here, and my time is 
expired. I yield back.
    Thank you, Mr. Chairman.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes now the distinguished gentleman from New 
Jersey, Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
    Mr. Secretary, I have to say it is incredible to me--I want 
to talk about these Medicaid rules that are going into effect, 
and we had a Health Subcommittee hearing 2 days ago and we have 
governors here in the aftermath of the governors conference, 
both Democrat and Republican, and all we heard from those 
governors was that these Medicaid rules, in effect the cuts 
that would come out of them, you know, we have had several over 
the years and we have more that were just announced a couple 
weeks ago, that they are going to cause real and profound harm 
to covered services and access for the country's most 
vulnerable populations, whether it was the disabilities 
community or it was the graduate medical education or was the 
increased co-pays from one of the rules that we announced a 
couple weeks ago, how is it that--I mean, you were a governor. 
How is it that your former colleagues who run these programs 
are so concerned about these cuts that would come from the 
Medicaid rules but yet you and the Department dismisses them? I 
mean, I know you were a governor at one time. I think you 
supported--you know, you expressed some of those same concerns 
with the cuts in the Medicaid program when you were governor. I 
mean, it just seems there is a total disconnect here and I 
just--if you would just explain that. I mean, it would seem to 
me you probably should get the governors together before you 
even put some of these rules out and talk to them about it and 
what the impact would be. Does the Department even do that?
    Secretary Leavitt. Mr. Pallone, I appreciate a chance to 
respond to this. As you point out, there is probably no one in 
this room who understands better the different perspectives 
that governors and the Federal Government might have on this, 
having served in that role myself for 11 years. Medicaid is a 
partnership between the Federal Government and the States. It 
is a partnership where both are expected to contribute, and if 
I could just characterize these in unvarnished terms, I think 
what we have right now is a dispute between partners.
    Let me describe for you how I think that dispute comes 
about. There are seven ways in which we believe, I believe that 
the States are using ambiguities in our regulations to unfairly 
increase the amount of the share that the Federal Government is 
paying in our partnership.
    Mr. Pallone. But Governor, I don't want to stop you. I want 
you to continue, but, you know, one of the things that Chairman 
Dingell and I and other members of the subcommittee have 
advocated is increasing enhanced payments for Medicaid, you 
know, an FMAP proposal which was actually utilized the last 
time we had a recession or economic downturn, and the governors 
all said they were in favor of that and I believe you were in 
favor of that, you know, a few years ago when we had an 
economic downturn and we actually did an FMAP increase to the 
States. I mean, I understand there is this--you are the Federal 
Government, they are the States now, but I mean, you know, why 
not do something like that to help the States out?
    Secretary Leavitt. Well----
    Mr. Pallone. I mean, the Administration has been opposed to 
it. Do you oppose that?
    Secretary Leavitt. What we support and what I support is a 
partnership where both sides are putting out what they agreed 
to, and I would like to just acknowledge that I believe this is 
being driven primarily by the fact that there are contingent-
fee consultants who go from State to State looking for any 
breadth of ambiguity and they have absolutely no incentive but 
to push and push and push and to drive and drive and drive on 
the basis that anything the Federal Government can pay is good.
    Mr. Pallone. But the problem is, we have an economic 
downturn now, Mr. Secretary, and, you know, in my own State the 
governor just announced a freeze on spending, literally a 
freeze, not even taking into account inflation. I mean, I 
understand what you are saying. I am not disagreeing that there 
may be some problems there but we are going in the exact--the 
Administration is going in the exact opposite direction of 
where the country is going. There is an economic downturn. 
There is more need for Medicaid, for SCHIP. We have talked as 
Democrats and Republicans with this bill that I mentioned about 
giving more enhanced match to the States and the Bush 
Administration wants to cut back. I mean, even if what you are 
saying is true, that there are these ambiguities, the fact of 
the matter is that right now the States are hurting and people 
need the Medicaid program. So I would think that right now you 
would say okay, maybe there are these ambiguities but we have 
got a problem here that is just unique to the times and let us 
not make it even more difficult for States to operate.
    Secretary Leavitt. If that is the case, it is a decision 
that Congress ought to make. It is our view that this is--that 
they are exploiting in ways that are unfair ambiguities that in 
most cases don't exist, and I can give you lots of examples, 
and I believe it is my responsibility to maintain the integrity 
of this program to push back and to make certain that they are 
putting up their part of it. Now, again, I have been a 
governor, I understand, but when you get into this, we find out 
that there are--that many of the things we are trying to--most 
everything we are trying to close has no medical relevance. 
This is different programs like education and other parts of 
State government trying to put a tap into the vein of Medicaid 
in order to supplement State budgets, and if the Congress 
decides that they are going to assist States in this way, fine. 
However, I don't believe it ought to be done with contingent-
fee consultants who exploit ambiguities and then benefit from 
it by pushing and pushing and pushing with no resistance. I 
believe this is good management, and it is important to the 
balance of the partnership that we have. If we are going to be 
partners, let us be partners. You put up your share, States, 
and we will put up ours. Now, again, I have been in this 
position.
    Mr. Pallone. Well, I know my time is expired. Thank you, 
Mr. Chairman.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes now the gentleman from Nebraska, Mr. Terry, 
for 6 minutes.
    Mr. Terry. Thank you, Mr. Chairman. I appreciate it.
    I just basically have two questions. The first one is going 
to be on our Medicare part D, an issue that has arisen in my 
district when I have suggested that people who are hitting the 
gap between the basic and catastrophic coverage, which is 
called the donut hole, that very limited number of 
opportunities of buying coverage in that it is basically all 
generic if you can even find one. Has there been any discussion 
in the agency about ways to provide incentives or what we can 
do to make sure that there is more, a wider variety of gap 
coverage opportunities?
    Secretary Leavitt. Congressman, others would likely be able 
to respond to that better than I at CMS but I will tell you 
that it is my impression that some kind of quote, donut hole or 
gap coverage, is available in nearly every State. It is more 
expensive if you want brand-name drugs but the fact that it 
exists in every State and that you can buy it I think is an 
important advance and I think one of the reasons that 86 % of 
the people who have a Medicare Advantage plan are happy with 
it. Now, we probably ought to get more detail on that----
    Mr. Terry. Yes, in Nebraska right now, there is not an 
opportunity to buy one that has name brand in it, and I have 
been hearing that that is occurring in other States now and 
that is--this is the first year that that has happened and so I 
just want to put it on your radar screen because I think that 
is an issue that we may have to deal with, and if we can get 
your input.
    Let me shift gears then to what you and I usually discuss, 
and that is electronic medical records. Your agency has 
developed a pilot program that I think is probably in about 1 
year around the country and I just wanted to get an update from 
you how those are going, what we are learning in the pilot 
programs on electronic medical records. I know it is in its 
infancy but are there any initial lessons that we are learning 
from those?
    Secretary Leavitt. Let me give you a 2-minute report or 
less. First, we have made substantial progress on creating 
standards for interoperability, which is a fundamental basic 
requirement of a system of electronic medical records. We 
created what is known as CCHIT. It is a seal of approval. It is 
now driving the market. It is a 3-year certification but we 
update it every year and a number of providers decided they 
would wait until the third year. Well, the market suddenly 
started moving to those who were updating annually and now most 
everyone is beginning to update annually. In other words, we 
now have a process that is driving the market towards 
interoperability. I will tell you that I think our biggest 
challenge still is the fact that we have a mismatch in the 
market, particularly among small- and medium-size physician 
practices. The mismatch is, they make the investment. Most of 
the benefit comes from the--goes to consumers and/or the 
payers. We are looking to learn how we can manage that and the 
macroeconomics shift. We have just announced a Medicare pilot 
wherein 12 medical markets around the country, we will appoint 
up to 100 small- and medium-sized practices. It will cover 
1,200 practices in total. We expect that we will see 3.6 
million patients covered under it. In addition to that, we are 
working hard right now, and I will be myself in 40 different 
cities over the course of a 3-month period to meet with the 
medical family where we are asking them to take efforts that 
they are currently using to define quality and begin to 
standardize and harmonize the way we are measuring quality.
    I like to point to four different things that have to 
happen for our medical system to emerge. The first is medical 
records. The second is measures of quality. The third is price 
groupings where people, ordinary people can have buckets of 
care, they can compare and make a judgment as to value. And 
then the last is finding ways to assure that everyone has a 
motivation to increase quality and cut costs, and that system 
is beginning to emerge, and the root of it of course has to be 
electronic medical records, and I am happy to report to you we 
are making substantial progress.
    Mr. Terry. The 12 cities, did you say, that you are doing a 
consortium----
    Secretary Leavitt. We refer to them as communities. It 
could be a State or it could be a city or it could be a 
metropolitan market. We have got some that are applying that we 
think will--and the way it works, it is very simple. The first 
year we are going to compensate them if they have a CCHIT 
system a little bit more on their Medicare payments. In the 
second year, we are going to compensate them more if they will 
use that system to report quality data. The third, fourth and 
fifth year, we will pay them more if they can demonstrate that 
they are in fact producing quality outcomes for their patients. 
This is a means by which we can begin to demonstrate a way to 
share the benefit of electronic medical records among not just 
the payers and not just the consumers but with the physicians. 
Until we can see that macroeconomic shift occur, it is 
difficulty to persuade a small- or medium-sized physician 
practice that they ought to make that investment.
    Now, another very important thing I have already spoken of, 
and that is the need for e-prescribing to become the standard. 
We have e-prescribing technology in most pharmacies. It is now 
the--we now need to get down to the hard business of just 
making the sociology shift. It is not the technology here that 
limits us, it is the sociology, and I believe it is time for 
Congress to say and allow Medicare to say if you want to be 
reimbursed at the highest level, you need to use e-prescribing. 
We have seen this happen in almost every other instance, and if 
someone would like to ask me another question, I have got some 
more to say about that.
    Mr. Terry. Thank you.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes now the distinguished gentleman from 
California, Mr. Waxman, for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    Secretary Leavitt, I want to follow up on these Medicaid 
proposals. You indicated that there are problems and that 
Congress ought to decide the issue but you haven't recommended 
to Congress to make changes. You haven't identified the 
problems and said make the appropriate programmatic changes in 
the statute. The Administration is proposing to put into effect 
these new rules without intervention from Congress.
    Secondly, I want to indicate to you that when our Oversight 
Committee had a hearing on this issue, the gentleman from CMS 
could not tell us what the consequences would be if these 
changes were put into place for the States. Now, this is a 
partnership, a federal and State partnership, and as you 
indicated, both sides are supposed to put in their share to 
make the partnership work. Well, the Federal Government now is 
saying we are not going to put in the full amount that we put 
in in the past, and I might indicate that what we put in the 
past was put in to the States to use under Democratic and 
Republican administrations. The National Governors Association 
on a bipartisan basis has asked us to reject these Medicaid 
proposals. We at our committee are trying to find out what they 
cost, what the impact will be on the States since the 
Administration can't even give us those figures. I can't 
imagine a partnership where one side says we are going to put 
the burden on you at a time when there is a recession but we 
don't even know what the consequences are going to be. That 
isn't the integrity of the program. That is lack of integrity 
and concern about what the impact will be on the beneficiaries. 
So we sent out a letter to the individual Medicaid directors of 
the States and asked them to tell us what the financial impact 
will be on them. We are putting together a report. We are going 
to release it next Monday but I am going to get it to you in 
advance because I want you to look it over and evaluate what 
they are saying. I want you to see what the impact will be as 
they describe it, and if they are right, I hope you will 
reconsider these series of regulations.
    The other thing I want to indicate to you is that 
California, for example, told us the regulations combined would 
result in a $10.7 billion loss of federal Medicaid funds over 
the next 5 years. That is just California. It is a big State. 
But when you look at it in Los Angeles, which is not only my 
district but one of the major cities in this country where 
millions of people come every year as tourists, people expect 
those who live there and those who visit that if there were a 
terroristic attack or some terrible accident that the 
healthcare system would be able to deal with an emergency. 
Well, I am going to give you a letter. I think we have already 
given you a letter from Bruce Chernoff, the chief medical 
officer of L.A. County, and he wrote that like many local 
governments that operate hospitals, L.A. County is facing 
serious financial pressures that are already destabilizing the 
emergency rooms. Emergency rooms have been closing. Hospitals 
have been closing. With these further cuts in the federal 
Medicaid budget, it is going to mean even a greater problem on 
a safety net to deal with any emergencies, so I want you to 
look at that as well.
    In the few moments I have remaining, I do want to indicate 
to you my concern about the FDA cuts, in no small part due to 
your leadership in food safety. We are going to try to address 
these problems that are on the minds of our constituents about 
food safety, but as I look at it, the Administration is talking 
about a $42 million increase for overall food safety, but when 
you look at the FDA inflation rate of 5.8 % and with FDA's 
unique needs for maintaining high-caliber scientific staff and 
facilities, so 5.8 % and the $42 million you tout as an 
increase, there is not much left over. In fact, our people look 
at it and say there is only going to be $2 million left. How is 
the agency going to be able to do more in the area of food 
safety if--I know the cuts are on the increases for inflation 
but after that there is not much of an increase to do the 
additional work, and if they are pretty much using the same 
amount as last year, it didn't cut it last year and it is not 
going to cut it for next year. How do you respond to that?
    Secretary Leavitt. Congressman, as you indicate, I have 
made a substantial investment in this issue personally and feel 
deeply that FDA has a role to play. I will tell you that I 
worked hard for that $42 million and felt good about it in the 
context of a budget clearly intended to balance the budget by 
2012. There are substantial demands on FDA. We have to think 
about this in a different way. We have got to be smarter. I 
believe the $42 million is an important step forward. May I say 
that we have added 1,000 people at FDA over the course of the 
last 2 years? There is a limit to the speed with which we can 
accomplish the mission that I am anxious to see accomplished. 
It never happens fast enough for me but I believe the budget is 
an important step forward.
    Mr. Waxman. Thank you.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes now the distinguished gentleman from Texas, 
Mr. Barton, for 5 minutes.
    Mr. Barton. They may be 5 imperial minutes, you know, 5 
Speaker minutes or something like that. No, I am just teasing. 
I apologize, Mr. Chairman, and I apologize, Mr. Secretary, for 
not being here at 9:30. For some reason I thought this started 
at 10:00 and if I got here by 10:15 I would be on time. So Mr. 
Dingell started apparently right at 9:30, which is to his 
benefit.
    It is good to have you here. I know it is kind of 
contentious and I haven't listened to too many of the questions 
but my guess is, the Majority has been castigating you for 
various foul deeds or not doing as much as you should, and 
hopefully us in the Minority have been at least patting you on 
the back every now and then before we kick you in the pants.
    My question to you, as you well know, under the current 
Medicare law, when the expenditures of the trust fund begin to 
exceed a certain percentage in terms of general revenue being 
spent on Medicare, it has a trigger that requires the President 
to report to the Congress that fact and to present a plan to 
get the general revenue share of Medicare back below, I believe 
it is 45 %. You sent us a letter last week or the week before 
last because the Medicare trigger has been triggered 2 years in 
a row. What part of that--the part of the program about health 
IT, I think Title I, would seem to me to be something that we 
could actually do. Would you care to elaborate on that?
    Secretary Leavitt. Thank you. I would be pleased to. First, 
let me say that I think this is a very important warning. While 
remedying the warning does not fix Medicare's problems, I fear 
that Medicare warnings have become like the blooming of the 
cherry blossoms in the spring. We just hear them and we don't 
pay much attention to them. We need to start paying attention. 
This is a serious problem and we need to focus on it. Title I 
essentially lays out a pathway where we could begin to 
reimburse on the basis of value, not volume, where we could 
begin to see some consumer and competition in Medicare that we 
believe would drive quality up and costs down. It essentially 
recognizes four needs we have in order to have our medical 
sector now become woven into a medical system, and that would 
be electronic medical records, the capacity to measure quality, 
the ability to compare practice and incentives where everybody 
gains if they increase quality and decrease cost. Title I of 
that trigger would essentially lay out benchmarks that would 
hasten the day when that market system could exist.
    Mr. Barton. On Medicaid, as part of Medicaid budget 
reconciliation several years ago, at the request of bipartisan 
taskforce of governors, we put more flexibility for States to 
use their Medicaid funds. There is apparently a move afoot to 
prevent that flexibility being utilized. Would you care to 
comment about that?
    Secretary Leavitt. Well, we had a brief conversation 
between Mr. Waxman and also Mr. Pallone and I about Medicaid. I 
was a governor for 11 years. I found the flexibility to be 
extraordinarily helpful. I think one thing you can count on--
two things you can count on from the States. One is that they 
will use flexibility and innovation, and the second is, they 
will do everything they can to get the Federal Government to 
pay every bit of it.
    Mr. Barton. But Democrat governors want flexibility too. It 
is not just Republican governors.
    Secretary Leavitt. A very important point about this 
relationship, a very important point, is that the partnership 
and disputes that happen in the partnership are not between 
Republican and Democrat governors. They pretty well agree on 
two things: innovation and flexibility are good, and the more 
you can get the Federal Government to pay is good. The dispute 
is between partners. The partners are the Federal Government 
and the State governments and we do have a series of ongoing 
disputes where we believe that the States are in fact using 
ambiguities to try and drive their ethic of getting--and no one 
can blame them for doing anything else. But somebody has got to 
stand up and say if we are going to have integrity in our 
partnership, we need to deal with this, and you asked me more 
about flexibility but I wanted to talk a little bit about who 
the partnership is between and where the disputes are.
    Mr. Barton. And finally, I want to compliment you and the 
President for funding the common fund at the NIH. The NIH 
reorganization reform bill that we passed last year or the year 
before last I think is one of the more significant reform 
packages that the Congress has done in the last 20 years, and a 
big part of that reform was a common fund where various NIH 
researchers would compete for funds across various departments, 
and that has been funded. I wish you all had funded NIH a 
little bit more but you did fund the common fund, so I 
appreciate that.
    Last, Mr. Dingell and myself and Mr. Stupak and Mr. Shimkus 
have sent you a letter, and I would assume you have read it, 
about a request for information that so far you and the 
President have refused to give to the Committee. You are not 
claiming executive privilege or anything. I would certainly 
encourage you to look at the letter we sent you. We are 
trying--to his credit, Chairman Dingell, and Chairman Stupak, 
are trying to find a way to accommodate some of the concerns 
that you and the President have announced, but Mr. Shimkus and 
myself are just as committed as Mr. Dingell and Mr. Stupak to 
getting information that is important to the Committee and to 
the people for some ongoing investigations at the FDA, and I 
don't want to have to stand up on the Floor and support a 
contempt citation for you or the President. I don't want to do 
that, but if I have to, I will. So I would encourage you to get 
with your general counsel, read the letter. We have sent, I 
think, a good-faith effort to try to find a way to accommodate 
the legitimate needs of the Administration but also the 
legitimate needs of the Congress, and it is just not a fun 
thing when we start having to file contempt of Congress 
resolutions on the Floor of the House. So if you need to talk 
off camera about that to me any time, I would like you to do 
that, but I believe you have got until the end of this 
afternoon to comply with that letter.
    Secretary Leavitt. Mr. Barton, let me say that I share your 
view on how little fun is involved in anything related to such 
a citation, and I also want to acknowledge the important role 
of investigation and oversight, and we want to be both 
respectful and cooperative and I feel--I did receive the letter 
this morning and I have had a chance to review it briefly, and 
as I mentioned to Mr. Stupak, we will work with this and I feel 
optimistic we can resolve it. This is the type of dispute that 
existed for centuries in our government and we want to work 
cooperatively to resolve it.
    Mr. Barton. Okay. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Dingell. The time of the distinguished gentleman has 
expired. The Chair recognizes now the distinguished gentleman 
from Massachusetts, Mr. Markey, for 6 minutes.
    Mr. Markey. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary.
    Secretary Leavitt. Thank you.
    Mr. Markey. Mr. Secretary, the NIH budget in its capacity 
to actually purchase more research capacity has actually 
declined 13 % since 2003, and the President keeps talking about 
the National Institutes of Health and the research that they do 
in the most positive of terms. In order to keep the NIH 
spending just level with last year, it will require a 3.5 % 
increase in the NIH budget for the 2009 fiscal year. Do you 
support a 3.5 % increase in the NIH budget just to keep it even 
with this year's spending ability?
    Secretary Leavitt. Mr. Markey, I am going to tell you I 
feel very good about the fact that we did achieve level 
funding. I fought hard for that in a competitive budget. I 
would also just acknowledge one other thing. We all want more 
money for medical research. When you look at this budget, not 
just the Administration, when you look at the situation, the 
money for medical research is going one place and that is to 
healthcare costs. If we begin to focus on Medicare, making it 
sustainable and starting to turn that growth rate down, it is 
going to create more opportunity for medical research. So while 
I recognize that we would all be prepared to sign up for more 
if we had more, level funding was a good outcome in this budget 
and I am anxious to----
    Mr. Markey. So you do support a 3.5 % increase?
    Secretary Leavitt. I support the President's budget, which 
brings it even with the 2008 budget. Now, would we like to have 
more? Of course we would, but we are focused on balancing the 
budget by 2012, and I am admitting to you I felt pretty good 
about the outcome because I fought hard for it.
    Mr. Markey. Now, we are going to in this Committee be 
moving health IT legislation in the relatively near future. 
Chairman Dingell, Chairman Pallone, Mr. Barton and I, we feel 
very strongly about privacy issues and the role which they play 
in this new modern era as medical research are taken out of 
doctors' and nurses' cabinets and they are put online. So we 
are going to consider provisions here, protections which are 
central to the protection of the most intimate secrets of 
American families. So my first question to you is, would you 
support that individuals are notified if their personal 
information within a health IT system is or is believed to have 
been exposed to unauthorized users such as cases of a breach of 
the system's security?
    Secretary Leavitt. Mr. Markey, I believe that patients 
should control their medical records.
    Mr. Markey. So if their information is compromised, do you 
think they should be notified that the information has been 
compromised?
    Secretary Leavitt. I want to be careful on commenting on 
specific provisions of bills that I have yet to see, but let me 
just--I think I can be responsive to your question in this way. 
I believe that the consumer, the patient ought to both have 
access to their medical data in a way that is convenient to 
them. I also believe that no data should be shared with others 
if in fact it is not done with the permission of the patient.
    Mr. Markey. Okay. So you agree then, if I may, that 
patients should be able to decide for themselves before their 
most personal information, their medical records are put into 
the electronic databases and health systems, that they should 
have to get--that their permission should be obtained before it 
is put into that database?
    Secretary Leavitt. I believe that medical practices have 
the right and the need to have electronic medical records for 
their own clinical uses. However----
    Mr. Markey. Are you saying even without the permission of a 
patient, they should be able to put it into an electronic 
database?
    Secretary Leavitt. I do not believe a patient's information 
should be sharable with anyone without the patient's 
permission.
    Mr. Markey. So you are saying that--just so I can follow, 
you are saying that their records should be able to be placed 
inside the electronic record even without the permission of the 
patient but that once it is inside the electronic record that 
no information can be disclosed for specific purposes once the 
patient is inside the system without getting the permission of 
the patient?
    Secretary Leavitt. Mr. Markey, you and I both understand, 
A, the importance of this, and B, the sensitivity of it, and I 
am reluctant to respond to a series of do-you-believes without 
understanding the context, and I am not being--I am not 
resisting the conversation. I just want to state in as clear a 
principle as I can what I believe. Now, I believe that there is 
a need for patients to control their data. Now, whether or not 
there is an opt-in or opt-out, I haven't given that enough 
thought to be responsive to it but I believe in the context 
that you are placing this, we are agreeing that consumers, 
patients should have control of their data and that no data 
should be shared with others without their permission.
    Mr. Markey. And one final question. Despite the efforts by 
the--thank you for that answer. Despite the efforts by the CDC, 
the White House removed the following statement from a 
statement that Julie Gerbeting was making about climate change, 
and here is the statement: ``The CDC considers climate change a 
serious threat.'' That was deleted from her testimony. Do you 
believe it is a serious threat, and if it is a serious threat, 
what is HHS doing in the public health sector in terms of 
climate change?
    Secretary Leavitt. As you know, I headed the Environmental 
Protection Agency prior to being here and I came to understand 
the importance and the sensitivity of this issue and I came to 
understand very clearly that the atmosphere of the Earth is in 
fact--the temperature is increasing and I think it is clear 
that man has had some impact on that and that we are now 
sorting through exactly how to respond to it. In the 36 seconds 
that we have left, I don't think I am going to be able to lay 
out a full policy position of the Administration but it is 
clear that anything that causes the spread of disease is of 
importance in the health community.
    Mr. Markey. Thank you.
    Thank you, Mr. Chairman.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair recognizes--oh, before I do. Mr. Secretary, the sound 
system in this place is not very good. Would you pull it closer 
to you, please, because your comments are very important and--
--
    Secretary Leavitt. Thank you. Oh, I can hear myself now and 
you can hear me too.
    Mr. Dingell. I think it is important for you to hear 
yourself but it is even more important we hear you.
    Secretary Leavitt. You never know when I might disagree 
with myself, so that is good.
    Mr. Dingell. I will you, Mr. Secretary, in the midst of a 
campaign, I get pretty tired of listening to myself.
    The Chair recognizes now the distinguished gentleman from 
Illinois, Mr. Shimkus, for 6 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for being present. I am going to try to go through 
these pretty quick.
    The welcome to Medicare physical exam--you know, I am a big 
believer in wellness, preventative care. I think it helps the 
livelihood of individuals. You identify illnesses early, plus 
it is a huge cost savings to be preventative versus dealing 
with catastrophic failures. The utilization of this program is 
low. What do you attribute this to and what can we do to up the 
utilization of the welcome to Medicare physical?
    Secretary Leavitt. I don't think people know about it. We 
have a campaign on right now to expand people's knowledge of 
the benefits that were offered under the Medicare Modernization 
Act. People tend to think about that as the prescription drug 
benefit but there were a whole series of screening and the 
welcome to Medicare physical. We have a bus tour that is going 
around the country. We have public service announcements. We 
have lots of different things that are going into 
correspondence with Medicare beneficiaries, and so I will just 
concur with you that there is great value and I hope people 
will hear and use them.
    Mr. Shimkus. Let me follow up with two other issues that 
are similar. Gene Green and I worked on the AAA bill, the 
abdominal aortic aneurysm, the prescreening for this. Same 
premise, lower utilization. You know, what can you tell me 
about the utilization on that program, and it just kind of 
segues into the same point. What are we doing budgetarily as 
far as education for both these programs?
    Secretary Leavitt. I am not able to respond at that level 
of granularity on the budget or on the utilization factors. It 
is something I would be happy to respond to you in writing if 
you would like, but as you point out, it is the same principle. 
Part of the modernization of Medicare was to recognize that it 
is prevention, prevention, prevention, that every dollar we put 
into prevention we get a big payback in terms of less 
utilization and we get people who are healthier and that is 
after all the goal of Medicare and that is healthier Americans.
    Mr. Shimkus. And I hesitate to move in this direction 
because we have had discussions before on the Medicaid AMP 
provisions. It is my contention along with a lot of my 
colleagues and some independent observers that we don't pay 
full costs or we don't pay costs to the physicians who are 
doing the Medicare, especially generic drugs, delivering that 
service to the seniors. You have before disagreed with that 
assumption, I think, and I would just use this opportunity to 
give you another chance to disagree and then tell me why.
    Secretary Leavitt. Well, now that the microphone is fixed, 
I won't be disagreeing with myself. My position remains the 
same, Congressman. We think the plan is working. We think there 
are negotiations that take place between plans and pharmacies 
and physicians, and I mentioned earlier in a related area that 
I am very anxious to see us begin to use e-prescribing and that 
we could potentially begin to utilize that as a method of being 
able to change that equation if it isn't working for others, 
but I don't have the concern that you expressed.
    Mr. Shimkus. Let me move forward to FDA extraterritorial 
jurisdiction. Can we get your assistance to work on legislation 
to kind of address this concern that is coming up through the 
Committee?
    Secretary Leavitt. I think this is a legitimate question 
and one that I would like to work on with you. We are seeing 
more and more of the goods we consume, particularly food and 
medicines, coming from outside the country, and if people 
violate the laws of our country or theirs, we obviously have 
the sovereignty issues that have to be dealt with but we can 
also move rapidly to cut off access to American consumers, and 
we should. This is a big concern to me. I recently returned 
from India where I had a chance to see as many as 80--I didn't 
see them but I was told that there were between 80 and 100 
facilities that are generating vaccines and medicines for 
American consumption. We need to have a bigger presence there. 
We need to begin to recognize that that part of our world is 
changing and that we need a means of being able to rapidly 
respond when goods or medicines or devices come into this 
country that don't meet American standards. We need to send a 
very clear and unambiguous signal to the world that if you want 
to produce for American consumers, you have to meet our 
standards.
    Mr. Shimkus. And I can't speak for the chairman or the 
Majority but I think your assistance in working through this on 
the health and safety and the welfare of our citizens would be 
well received and hopefully would allow us to move something in 
a compromised fashion that would help us reach those goals.
    Let me also move quickly to, the Minority staff issued a 
report on debarred individuals and our concern that actions not 
be taken aggressively to keep debarred individuals from being 
involved in some of the processes. Would you consider posting 
each of these lists? There are two separate lists. We found, 
you know, one from HHS, one from--one on the FDA, one in the 
CMS. Marion Illinois is a veteran hospital in my district in 
which because of the lack of information they hire doctors who 
are having issues in other States, and it affected the health, 
welfare and safety of individuals being served in Marion. Our 
concern is if there is no clear transparency on the debarred 
aspect of these folks, we need to help clear that out. I think 
it was a great work by the Minority staff and we would like 
your help in doing that.
    Secretary Leavitt. Thank you. I can't respond on the 
specifics because frankly this is a new idea to me, but I will 
tell you at a principle level, I firmly believe in transparency 
and that people ought to know if those who are producing drugs, 
those who are producing vaccines, those who are producing 
devices have done so in a way that does not meet our standards, 
people ought to know that. So on principle I am prepared to 
work on the specifics. I just need to have more information.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Mr. Dingell. The time of the gentleman has expired. The 
Chair thanks the gentleman. The Chair recognizes now the 
gentlewoman from California, Ms. Eshoo, for 6 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman, and welcome, Mr. 
Secretary, and thank you for being here.
    I just would like to make an observation, having listened 
to members' questions and statements and your responses. It 
seems to me that we all love our history once it has been made. 
We celebrate it, say isn't it extraordinary that at a given 
time in our country we took steps that would not only place us 
and our country in a real leadership position but then 
celebrate the outcomes of that. But we seldom I think have a 
deep appreciation that we are making history, and I think that 
is where we are with this budget. I think we are writing the 
wrong history for our country. At the beginning of this 
century, the 21st century, where science, technology, 
biotechnology and all of that is merging and America is on the 
threshold of not only merging these disciplines but supporting 
them and investing in them. I think it is a sad statement that 
the budget is making and I don't think that is Republican or 
Democrat. I think that the opportunity to do that and seize the 
opportunity to do that is so critical, and the budget doesn't 
reflect that. It doesn't reflect that. And so I think that we 
stand to lose as a country in merging these disciplines and 
investing in them. In fact, FDA Commissioner von Eschenbach 
told the Wall Street Journal yesterday that he needs more 
funding for his agency than what the President has responded 
to. So with all due respect to you, when you say, you know, I 
support that and I am for it, but there aren't dollars in the 
budget and they actually reflect a decrease, I think that is a 
really serious issue for our country.
    Now, having said that, you noted that there is a $66 
million investment in the Office of the National Coordination 
for HIT. I support your commitment to it, the dollars for it. 
The Commonwealth Fund reported last year that the economy could 
save nearly $90 billion in healthcare costs over the next 
decade if in fact we have widespread adoption of HIT. As you 
know, several organizations are supporting this issue including 
AARP, the Business Roundtable, SEIU, and they are calling for 
enactment of HIT legislation this year. We have sent over, 
Congressman Mike Rogers and myself, the legislation, the 
bipartisan legislation that we have put together and you have 
heard that the Committee may soon consider legislating this 
area. We want you to look at that legislation. We want to work 
with you on it, and I am just going to assume that you will 
work with us on it.
    On the issue of TB funding, tuberculosis funding, there is 
a real shortfall there. In Santa Clara County in my district, 
which is the whole Silicon Valley, there is unfortunately a 
real serious uptick of TB cases. They don't have the funds to 
address that so we want to work with you on what the Department 
can do. I am just pointing it out. But I think that is serious. 
I mean, how can it be that the home of Silicon Valley has more 
cases of TB reported and we don't have the funding for it? It 
just doesn't square off and it is serious.
    Now, I want to ask you something about SCHIP. In what I 
think are impossible requirements that the Department has set 
down, it includes the requirement that States have to first 
enroll 95 % of their children with families earning less than 
200 % of poverty in these programs. Does any State in the union 
currently meet these standards out of 50 States? Who does?
    Secretary Leavitt. Let me just--there are a couple of 
things you--let met just answer your first question and there a 
couple of things you talked about I would like to respond to.
    Ms. Eshoo. Well, I would like you to answer this one first. 
I mean, the others are more observations.
    Secretary Leavitt. We believe there are several who can and 
CMS----
    Ms. Eshoo. No, but are there any States----
    Secretary Leavitt. I don't know the answer----
    Ms. Eshoo [continuing]. That meet the requirement?
    Secretary Leavitt [continuing]. To that. CMS would need to 
respond to that.
    Ms. Eshoo. Okay. We will get the answer from you on that.
    Of the States that have enacted or have considered 
programs, you know, to reduce the number of uninsured, has the 
Department assessed the impact the August 17th guidance has on 
those States?
    Secretary Leavitt. Well, we feel confident it has caused 
people to focus on those----
    Ms. Eshoo. No, but I mean, have you actually assessed the 
impact on States? I mean, you have set down today that this is 
a partnership and while you are saying there are some 
ambiguities and have not requested anything from us, it seems 
to me that the Department has the responsibility in an unbiased 
way to study the impacts. That is why I am asking.
    Secretary Leavitt. Well, we think the ambiguities that we 
are speaking of are clearly defined in the law----
    Ms. Eshoo. Ambiguities are clear?
    Secretary Leavitt. Let me be more specific. For example, 
many States receive an additional payment for public hospitals. 
They are now appointing a lot of hospitals as public hospitals 
that really aren't public hospitals and then they are taking 
that extra payment and they are putting it into the general 
fund----
    Ms. Eshoo. Well, it seems to me, Mr. Secretary, that you 
having been a governor, now you are the Secretary, that before 
we get into the weeds with what is working, what isn't working, 
that there are some prior values in this, and that is the care 
of the people that are in your charge and my charge. That is 
the greatest and highest value of all. I think that these 
guidances that have been issued are really punitive. You know, 
I said, I think it was earlier this week, to whomever was here, 
if children were testifying on the next panel, they would say 
what did we do to you that you are doing this to us where, you 
know, children are going to be denied healthcare coverage, you 
know, for a year before they can enroll. I mean, where does 
that come from? Does that spring out of an ambiguity?
    Secretary Leavitt. No. We are in the business, all of us 
collectively, of choosing priorities and we believe that those 
who are under 200 % should have our first priority, and the 
August 17th----
    Ms. Eshoo. But you are forcing children who don't have 
insurance to wait a full year in order to get it. Is that an 
ambiguity? I mean, what does that come from?
    Secretary Leavitt. No child who doesn't have insurance who 
is under 200 % has to wait at all. We want to focus on those 
who are truly--who are in the lowest income categories before 
we start using money to help people cancel private insurance to 
have public insurance.
    Ms. Eshoo. Well, I think we have a deep disagreement on 
this, but in these other areas I hope that you can work with 
us. I think that we can make progress on HIT. It will make a 
huge impact in our country, and thank you for being here today.
    Secretary Leavitt. Thank you.
    Ms. DeGette [presiding]. The Chair recognizes the gentleman 
from Pennsylvania for 5 minutes.
    Mr. Murphy. Thank you, Madam Chairman.
    Mr. Secretary, some of the issues you have been speaking 
out today are some reform issues and I am a believer that we 
need to fix the system, not just finance it, but starting off, 
I believe there was something in the news the other day about 
Medicare costs are going to continue to climb. They are at that 
point now where they are exceeding half of tax revenues. Is 
that generally close to where we are?
    Secretary Leavitt. In time as they continue to go up, they 
will consume all revenues. But Medicare now has exceeded 45 % 
of its budget coming from revenues for the second year in a 
row.
    Mr. Murphy. So it continues to climb. Now, let us take a 
couple of these points you talked about today, for example, the 
costs to Medicare alone for prescription drug errors. I am 
assuming what you believe is that some of that can be fixed if 
we use electronic prescribing where it can automatically check 
the physician's prescription for the right doses, the spelling, 
all those things, that would save some money. Do we have any 
idea how much money that would save if we had these programs 
using electronic prescribing?
    Secretary Leavitt. I have seen figures public. I do not 
have recall of those. But one thing we do know and I think we 
can unequivocally agree, it will save money and lives. The 
technology is there and it is time.
    Mr. Murphy. Probably in the billions?
    Secretary Leavitt. Oh, it is probably closer to the 
hundreds of billions over time.
    Mr. Murphy. Okay. And with regard to eliminating nosocomial 
infections in hospitals, I know there have been some moves to 
say hospitals will stop paying for those, but when you list all 
them out, MRSA being that superbug, the killer, but also 
pneumonia, which many times people don't even realize you may 
get that from being in a hospital too long, urinary tract 
infections from having catheters in too long, do we have any 
idea of how much money is wasted in paying for these 
preventable illnesses and if we could stop that what we could 
save?
    Secretary Leavitt. Again, the number is not on the top of 
my head but we do know that it would save a lot and frankly it 
just violates common sense for hospitals to be paid for events 
that shouldn't have occurred.
    Mr. Murphy. Let me expand that also to disease management 
for chronic illnesses. I know some actions have taken place 
there, and the majority of healthcare dollars are spent on 
chronic illnesses and many of those for people with very 
complex cases, heart disease, diabetes, cancer, people don't 
live a long time but very complex, many doctors, many 
treatments. Are we moving forward in a direction here that is 
also saving money and do we anticipate we can continue to save 
money if we do this right?
    Secretary Leavitt. Well, this is the sweet spot because we 
know 75 % of all of expenditures come from chronic diseases 
which are both their nature both preventative and manageable, 
and this is the place where the use of quality measures, by the 
use of electronic medical records, eliminating medical mistakes 
that can come in the context of the treatment of chronic 
diseases clearly saves money, a lot of money, and I don't have 
the figure but this is exactly the kind of discussion we need 
to be having.
    Mr. Murphy. Well, then here is the trillion-dollar 
question, because we don't have that number here, because the 
way that Congress is designed, we can't get numbers on 
prevention and cost savings. Although CDC has told us it is $50 
billion wasted on nosocomial diseases and 90 million lives, 2 
million cases, and even though they said that probably $28 
billion a year is wasted on prescription errors with Medicare 
and the 75 % with chronic illness, maybe you can have more luck 
with finding someone who can actually give us some numbers 
because the way I see this, as a government what we oftentimes 
try and do is say well, we are spending too much so let us pay 
people less. Now, we are told the cost of a loaf of bread is 
going to climb quite a bit not only because of the cost of 
wheat but also the cost of transporting it, energy costs. I 
can't imagine people being told as they go to the grocery store 
well, even though a loaf of bread is going to jump from a $1.50 
to $3, we are just going to--we are not going to do anything 
about that. I mean, we find ways. We have to find ways. We have 
to find ways, and this too I just see, instead of us just 
saying let us pay doctors less and hospitals less, what can we 
do to make these fundamental changes and fix this system, not 
just finance it.
    Secretary Leavitt. Congressman, you have heard me say many 
times that I don't believe we have a healthcare system, what we 
have is a healthcare sector, and until we are able to organize 
it into a system, we won't be able to capture that, and the 
four things I mentioned a couple of times, electronic medical 
records, quality measures, price comparisons and structuring it 
so that everyone has a motivation to save money and to have 
higher quality, we won't see those. Now, as you said, there are 
many of those things that Congress doesn't choose to score. 
However, there are discernible savings and I am working right 
now on being able to determine what a reasonable person could 
expect or a reasonable society could expect over time once 
those are put into place.
    Mr. Murphy. Well, as we go back and forth on the budget 
that you are requesting, I hope that is something we can come 
together on that instead of necessarily making just cuts but 
looking at some real ways of saving lives and saving money so 
we don't have to be spending so much. It is out of control in 
the health sector and too many people are dying from it. Just 
in the 5 minutes that I have been speaking, another person has 
died from an infection they picked up from a hospital and it 
unconscionable to me that we are still not doing anything about 
it. But I thank you so much because I know you are really 
committed to transparency and a patient's right to know about 
these things, so thank you for that.
    Secretary Leavitt. Thank you.
    Ms. DeGette. The Chair recognizes the gentleman from 
Michigan for 5 minutes.
    Mr. Stupak. I thank the gentlewoman.
    Mr. Secretary, as Mr. Barton said, the concern we have over 
the subpoena, I did speak with you earlier. You indicated we 
would have this thing resolved and hopefully have it resolved 
by close of business tomorrow. That is what the letter says and 
we want to get this thing resolved. Both Democrats and 
Republicans want to see it resolved and hopefully our offices 
and work together and get this thing resolved.
    Let me ask you this question. You mentioned one of four 
issues that you think we can improve and help balance budgets, 
especially your budget, is through electronic medical records. 
Last year when you were here, Mr. Whitfield asked you about the 
NASPR program, a program both him and I and Mr. Pallone and 
others have supported that would save us money, and you said, 
and I quote, ``It is a program we support. It is a program we 
would gladly administer.'' However, you also said, ``It is the 
decision that was made at OMB last year not to fund it.'' So 
this year did you make a recommendation to OMB to fund NASPR 
for the 2009 budget?
    Secretary Leavitt. The first part of my statement still 
stands. We do support the program. We would be happy to 
administer it. Last year I did in fact make a request. OMB 
decided otherwise. This year we did not based on their decision 
last year.
    Mr. Stupak. Because they didn't fund it last year, you felt 
they wouldn't fund it this year?
    Secretary Leavitt. Well, I think isn't this a program that 
is either between us or----
    Mr. Stupak. Well, you never funded it last year and this 
year and actually we had a hearing on October 7 in which your 
staff, Dr. Wesley Clark, indicated that you strongly support 
it, it would save money, it is electronic, it cuts down on 
prescription duplications and deaths. So if it is one of your 
four tenets, why don't you support the program?
    Secretary Leavitt. Well, as I understand it, it was funded 
or proposed to be funded through the Department of Justice's 
budget, not ours, and the issue is one of jurisdiction between 
committees and----
    Mr. Stupak. But it is authorized under HHS, not under the 
Department of Justice.
    Secretary Leavitt. I can't reconcile that.
    Mr. Stupak. The Department of Justice has a Bell Rogers 
program, not NASPR. NASPR is found strictly in your budget, in 
our appropriations authorization, I should say.
    Secretary Leavitt. Congressman, I can't reconcile this for 
you. All I can tell you is that yes, we would support it. Our 
impression was we were supporting--that the Administration was 
supporting something very similar in the Department of 
Justice's program, or budget----
    Mr. Stupak. Our hearing on October 7, 2007, showed that a 
completely different program. One is extensive, the other one 
is not. One is all-inclusive, the other one is not. You know, 
we keep hearing you support it but no one will ever ask for the 
money or fund it.
    Secretary Leavitt. We did last year but it was an issue we 
didn't revisit.
    Mr. Stupak. Well, since we are talking about budget, the 
Administration states in its budget, this year's budget, that 
it is providing a net level increase of $130 million. Is that 
correct?
    Secretary Leavitt. To?
    Mr. Stupak. A $130 million increase in your budget for FDA.
    Secretary Leavitt. Oh, for FDA?
    Mr. Stupak. Yes.
    Secretary Leavitt. Yes, that is true.
    Mr. Stupak. Okay. Of that $130 million though, $79 million 
is estimated to be collected through user fees. This is money 
that must go directly into dedicated programs such as the 
Prescription Drug User Fee Act and the Medical Device User Fee 
Act authorized by Congress and this Committee. Is that correct?
    Secretary Leavitt. I believe that is right.
    Mr. Stupak. So if you subtract the $79 million from the 
$130 million, you really only have $51 million of new money for 
FDA programs. Is that correct?
    Secretary Leavitt. Whether or not coming from user fees or 
appropriated funds, they are still available to the FDA.
    Mr. Stupak. No, if it is coming from user fees, it must go 
to those programs. It cannot be used for other purposes in the 
FDA. So the new money for the FDA is actually $51 million when 
you back out the user fee money.
    Secretary Leavitt. Well, I don't want to argue over 
definitions but I would say that user fees are a different 
source of funds but they clearly go to the FDA for an FDA 
purpose.
    Mr. Stupak. For Prescription Drug User Fee Act and Medical 
Device User Fee Act to approve drugs faster and to approve 
medical devices faster. It doesn't go towards----
    Secretary Leavitt. The FDA----
    Mr. Stupak. As you testified earlier, when you were in 
India, all these other drugs, active pharmaceutical ingredients 
coming from other areas because the Science Board just 2 days 
ago said $51 million isn't going to make it; in fact, the FDA 
budget should be $375 million increase, 7 times more than what 
you are recommending. So how do you account for this disparity, 
$51 million versus $375 million your Science Board says you 
need?
    Secretary Leavitt. Well, I don't--I am not here to defend 
the Science Board's suggestion of our budget. I am here to 
defend the President's budget. I will tell you that like the 
Congresswoman said, FDA requested more money. That would be 
true of almost any agency or department in the Federal 
Government but part of making budgets is the process of going 
through and determining where the priorities will be and how 
much will be given to each. Now, we have added at the FDA 1,000 
people over the last 2 years. We have a strategic plan that 
will begin to change the way we think about things. I think we 
have had a chance to talk about that as I have with Mr. Waxman 
and also Mr. Dingell. Clearly, it is going to require more 
money, and I fought awfully hard to get the $42 million into 
food safety and the additional money for FDA and I felt good 
about it in the context of this budget.
    Mr. Stupak. But how do you do it when you said in your 
statement about India 80 different firms exporting active 
pharmaceutical ingredients here to the United States and you 
said they must meet our standards or they can't come in. We 
don't know where those 80 plants are. We don't know what they 
are exporting that we saw with heparin from China, and more and 
more are coming from overseas and we are inspecting those 
plants, according to our investigations and your own FDA, every 
40 to 50 years but yet we inspect pharmaceutical plants here in 
the United States every 2 to 3 years. You are encouraging 
people to go offshore. They are not going to be inspected. They 
can send garbage in because we don't have the inspectors and 
people are dying as in the heparin. You can't even tell us if 
that plant that made the heparin was ever even inspected. The 
FDA says we think we had the wrong address. That is not an 
excuse. Four people died, hundreds or more injured because of 
this drug and we don't even know if we inspected it.
    Secretary Leavitt. Madam Chairman, do you mind if I just 
take 1 minute to respond to this?
    Ms. DeGette. Mr. Secretary, please be brief.
    Secretary Leavitt. Okay. Our plan calls for us to start 
having U.S. presence in other countries. We started last year 
and moving forward to an office in China. We will get our first 
foothold here this year and I think expand next year. I am 
suggesting, I believe we need to start the same process in 
India and that needs to be contemplated in future budgets. Now, 
adding 1,000 people in 2 years, that is serious progress. 
Changing the nature of the way we look at these problems, that 
is--it doesn't happen fast enough for me but nevertheless, we 
are moving toward the right direction and we are going to take 
a very clear position that if people want to make products for 
American consumers, they need to meet our standards.
    Mr. Stupak. The Science Board says you need $375----
    Ms. DeGette. No, I am sorry, Mr. Stupak.
    Mr. Stupak [continuing]. Million, you bring $51 million. It 
doesn't look like you are serious about addressing the problem. 
That is our concern.
    Ms. DeGette. I am sorry. Your time is expired.
    Mr. Stupak. I realize that. Thank you.
    Ms. DeGette. And the Chair will announce that there are 
three votes on the Floor and there are 8 minutes remaining in 
the vote on the Floor. At the conclusion of the three votes, 
Mr. Secretary, we will reconvene for members who want to ask 
their questions. So I would ask members to come directly back 
from the Floor, and I will recognize the gentlelady from New 
Mexico for 6 minutes.
    Ms. Wilson. Thank you, Madam Chair.
    There are two issues that I would like to address before we 
break for questions. One is the Urban Indian Healthcare 
Program. Your budget has proposed to eliminate it for the past 
2 years and this will be the third year in a row when you do 
so. The Congress has not gone along with that. It is a fairly 
small program, $35 million. The Indian Health Service only 
earmarks 1 % of its $3.5 billion budget for urban Indian 
programs and yet 75 % of Indians live in urban areas. In the 
city of Albuquerque, it is about 50,000 people. Your department 
continues to propose that those folks be cared for by community 
health centers and yet the community health centers say they do 
not have the capacity to be able to absorb the increase in 
patient loads in the communities where we have high numbers of 
urban Indians. Why do you continue to propose to close this 
program when there is no alternative for the Indians who are 
being served there?
    Secretary Leavitt. If there is not a suitable alternative 
at a community health center, then we need to bolster the 
effort of the community health center. It just doesn't make 
sense to us to have two separate systems in metropolitan areas 
to serve populations. It does make sense to us to have a 
separate system in Indian tribal nations and on reservations 
where there isn't an alternative but where we have the 
alternative we think we ought to consolidate those efforts. You 
are right, we proposed it 2 years ago and it wasn't accepted 
and last year and it wasn't but we do again this year because 
we just think it makes sense.
    Ms. Wilson. Where do you see the efficiencies? Why do you 
want it shipped over to a community health center that--I mean, 
we have multiple community health centers in Albuquerque and 
two that are particular to Indian healthcare. Why do you think 
that it costs less money to shift them over to the community 
health centers and shift around these boxes?
    Secretary Leavitt. I think we ought to all recognize that 
when you have two systems, there is duplication, and we think 
the quality of both systems--I mean of the one system could be 
enhanced for both populations.
    Ms. Wilson. That assumes that you have a system and what 
you have is multiple community health centers, but we are going 
to have to deal with this again. I think your people need to 
come up and talk to us and show us where you think you are 
going to save money and where you are going to serve the people 
who need to be served because I haven't seen a proposal from 
you on it that will work.
    The second issue has to do with recovery audit contracts. 
They were supposed to go into effect. I understand they have 
done several States already and they are having problems. They 
are kind of set up as a bounty payment to go after possible 
overpayments. You talked about going after value and not 
volume, and I am very concerned that these kind of bounty 
hunter folks who are going out to look for audits and problems 
in billing are going to have a disproportionate impact on small 
providers in rural areas where there is--people make mistakes. 
It is not as though this is a simple system to navigate 
through, and I wonder if you would comment on where we are on 
that.
    Secretary Leavitt. The private contractors were used in 
three States that included California. They recovered over $400 
million, mostly from hospitals. California objected to the 
process. CMS is now negotiating with California. The program 
has been modified and Congress agreed to expand the recovery of 
audit to all 50 States. We think it is an effective way for us 
to recovery taxpayer funds when they have been improperly 
expended.
    Ms. Wilson. It is supposed to start in March in New Mexico 
and the contractor hasn't been chosen. Do you have any update 
on what is going to happen?
    Secretary Leavitt. I do not.
    Ms. Wilson. Thank you, Madam Chair. I yield back the 
balance of my time.
    Ms. DeGette. The gentlelady yields back.
    Mr. Secretary, we will recess until the conclusion of the 
third vote and then we will be back.
    [Recess.]
    Ms. DeGette. The Committee will come to order.
    The Chair will recognize herself for 5 minutes.
    Mr. Secretary, thank you for being with us this morning and 
for staying through these votes. I just want to ask you about a 
couple of issues and then one issue I would like to have your 
department get some more information because I know that you 
won't have the information at your fingertips. The 
Administration's budget cuts almost $1 billion for HRSA, which 
is the principle agency charged with increasing access to basic 
healthcare for the medically underserved. It eliminates funding 
for training physicians at children's hospitals, which my 
children's hospital is very concerned about, for $301 million. 
It cuts nursing workforce development including the Advanced 
Education Nursing Program and it also cuts the National Health 
Service Corps by $2.52 million. So my question to you is, if we 
have some kind of a bioterror incident or a pandemic or other 
kind of health emergency, I am quite concerned and other 
members of this Committee are that the public health workforce 
could be overwhelmed. But with these deep cuts to our training 
programs, I am wondering what this will do to the capacity of 
our public health workforce to respond to an emergency.
    Secretary Leavitt. One of the things that you mentioned 
that I want to make a specific reference to is the children's 
hospitals.
    Ms. DeGette. Yes.
    Secretary Leavitt. Years ago children's hospitals were in 
very serious peril and the Congress appropriately stepped 
forward and gave them a special allocation of graduate medical 
education funds. Since that time hospitals have been righted. 
The task has been accomplished and we believe that those are 
now duplication of the normal graduate medical education 
process. Now, I will tell you that I think the entire graduate 
medical education system should be thought through but that is 
the reason behind our reduction.
    Ms. DeGette. So I can--not to put words in your mouth. What 
you are saying about these specific cuts is that it is the view 
of the Administration that either those areas are duplicitous 
or that they are no longer needed? Would that be a fair----
    Secretary Leavitt. The original purpose of that stream of 
funding has been accomplished. Now, of course what happens is 
that when----
    Ms. DeGette. I have a couple of other questions. I am 
sorry. One of the things in the President's budget that you 
folks have done is eliminated some programs like the prevention 
block grant and health professions programs and as 
justification the President said the programs are not based on 
evidence-based practices and in another case the evaluation 
found those activities do not have a demonstrated impact. It 
kind of goes along with what you were just saying, and I agree 
with that. One of my pet peeves is government just layering on 
duplicitous program after duplicitous program, but as I think 
about that philosophy for budget, I am wondering why the 
President and the Department doesn't apply these same 
effectiveness standards to the abstinence-only sex education 
programs, because in the President's budget there is a proposed 
increase of $28 million to these programs but study after study 
including a 10-year study that just came out in April 2007 from 
you folks found there is no evidence that abstinence programs 
implemented in upper elementary and middle schools are 
effective in reducing the rate of teen sexual activity and the 
main objective of Title V, section 510, abstinence education 
programs, is to teach abstinence from sexual activity outside 
of marriage. The impact--I am quoting from the results--``The 
impact results from the four selected programs show no impact 
on the rates of sexual activity,'' and in fact last year for 
the first year in many years the rate of teen pregnancy did not 
go down in this country. So my question is, what is the 
rationale for cutting programs like the children's hospitals 
and the workforce development and all this but increasing 
abstinence-only sex education funding by $28 million?
    Secretary Leavitt. Madam Chair, it has been my observation, 
as I suspect it has yours, that when studies like that come 
out, everyone tends to interpret it according to whatever view 
they generally have, and I believe this is one of those. As we 
have reviewed that study, essentially what it says isn't that 
it doesn't work, it is that it is not distinguishable 
necessarily from the effect of other----
    Ms. DeGette. Well, actually that is not true, Mr. 
Secretary, and if you look at all of the other independent 
studies, they haven't shown that abstinence-only sex education 
works.
    Secretary Leavitt. What this study and I believe others 
indicate is that in their mind they could not distinguish its 
effectiveness----
    Ms. DeGette. So you think the abstinence--you have reviewed 
it and you think the abstinence-only sex education programs 
work about the same as the abstinence-based sex education?
    Secretary Leavitt. And we also believe there is something--
--
    Ms. DeGette. Is that a yes?
    Secretary Leavitt. We believe as the study does that they 
can have effectiveness but there are things we can do to 
improve them.
    Ms. DeGette. So that is what you are trying to do now is 
improve the abstinence-only?
    Secretary Leavitt. Well, we certainly believe that it is an 
important part of a sex education approach. We advocate it. We 
are budgeting more money for it and we also believe that----
    Ms. DeGette. Not to interrupt you, I am sorry. I am out of 
time.
    Secretary Leavitt. Yes, you are.
    Ms. DeGette. But I am wondering if there is someone from 
your office who you could have speak to my staff about the 
improvements that you guys think you can make to make these 
abstinence-only programs work.
    Secretary Leavitt. Yes, I think that is a fair statement. 
With the time constraint, that might be a more efficient way.
    Ms. DeGette. Thank you very much. Just one last question. 
This is the one that I know you won't have an answer to but I 
really would like a response. As you know, I worked on the 
embryonic stem cell legislation and I kind of got involved in 
thinking about some of these programs, and I found out that the 
Department has appropriated $10 million for this snowflake baby 
or the frozen embryo adoption program since 2002. Now, 295 
children have been born using this so-called embryo adoption, 
and I guess what I would like to know, if you think is a good 
use of money, if this fulfills the public health agenda, and 
how much money is in this year's budget for the embryo adoption 
and also how much money is in this year's budget for 
encouraging adoptions of, say, the 114,000 children in the 
United States who are already born who are waiting for 
adoption. Now, I don't want to get into an argument with you 
but this was one thing as sort of a budget hawk that really 
leapt out and struck me as well.
    Secretary Leavitt. Your assumption that I wouldn't have 
information today that would respond to your query is right but 
it is a legitimate question of importance and we will be 
responsive to you.
    Ms. DeGette. Thank you. I would appreciate it, Mr. 
Secretary, if we could have a response from your agency, say, 
by March 15. Would that be agreeable?
    Secretary Leavitt. Why don't I reference it and I will put 
a priority on it? I am not in a position at this point to--I 
don't know the complexity of the research you are asking for. I 
would like to--I will certainly respond by the 15th. Whether or 
not we have everything that you ask for is something I need to 
look at.
    Ms. DeGette. Thank you very much, and at this time I would 
like to recognize the gentlelady from North Carolina for 5 
minutes.
    Ms. Myrick. Thank you. I appreciate it.
    I wanted to ask you about the budget for mental health, and 
forgive me if while I was gone it was already asked. I know 
there is a reduction of, I think, $126 million for SAMSA this 
year in the President's budget, but my question is broader than 
that. Really what I am concerned about of course is access and 
really getting this right for the people who desperately need 
it, which is a lot of underserved population and, you know, it 
is kind of near and dear to my heart just from family issues 
that we have dealt with. So can you just give me a broader view 
of what the mission is and what you want to accomplish in the 
mental health area?
    Secretary Leavitt. It is very important first to 
acknowledge that the Federal Government pays in excess of 45 % 
of all mental health funds. Second, I would just also 
acknowledge that there is a need for us to resolve the issues 
regarding mental health and health insurance and there is 
moving through Congress right now bills that the Administration 
has spoken in favor of on mental health parity. So between our 
efforts to resolve those issues and also our continued funding 
through Medicare and Medicaid and other places where we pay 
about 45 % of all funding, we continue to make an effort and 
know it is an important area. I have had a special education in 
the last year and the President asked that I take a very deep 
look at the Virginia Tech shootings, and I went to 13 different 
communities where these kind of tragic events have occurred.
    Ms. Myrick. Right.
    Secretary Leavitt. Last weekend I attended the memorial 
service at Northern Illinois University where again we have 
seen the manifestations of some of these dilemmas. So it is 
something we will obviously keep working on and have a high 
interest in.
    Ms. Myrick. What about the relationship with the States? 
Because I know naturally the States pretty much control what 
they do with programming but a lot of them are having big 
problems in getting it right and making sure the services are 
delivered. Do you have any way that you work with them or, I 
mean, are they pretty much on their own?
    Secretary Leavitt. The biggest way we work with them is of 
course through Medicaid where I mentioned but also through 
SAMSA. Most of what we--most of the funds that we receive in 
SAMSA are delegated to the States in the form of grants and 
other programs and we do have an ongoing dialog. In fact, two 
years ago we put forward a matrix approach to the management of 
mental health, which has become a centerpiece not just for 
Federal Government and States but across the mental health 
community and how we approach and manage it.
    Ms. Myrick. Is it something you work with the governors on 
as well? I mean, is that another issue that you work with them?
    Secretary Leavitt. Well, it is with the State of course----
    Ms. Myrick. That is what I mean.
    Secretary Leavitt [continuing]. Along a plethora of issues 
that I deal with the governors on, that is one.
    Ms. Myrick. Well, you know, we see over and over again, and 
this is not your fault in any way. I mean, my thing is to 
figure out what is going to work so the person who needs the 
help can get it, and yes, the mental health parity bill is a 
part of that. I happen to support the Senate bill and not the 
House bill because I don't like mandates but the bottom line 
is, something should pass which will be helpful to people but 
the access problem and the way the systems are working at most 
of the local levels and all, it seems to be a real challenge 
today in people getting the help that they need. There is a lot 
of confusion and misdiagnosis and all that kind of stuff out 
there.
    Secretary Leavitt. Could I just mention one lesson that I 
learned after going to as many communities as I did and sitting 
down with the mental health community and with the education 
community and the law enforcement community and asking the 
question what should we be learning from these kinds of 
incidents? One of the lessons that became evident to me was 
that 25 years ago or 30 years ago we began to change our 
strategy based on the availability of new medications. Rather 
than have people in institutions, we began to 
deinstitutionalize and move people toward community care 
settings. We were very successful in deinstitutionalizing. We 
have not yet fully developed our community delivery system.
    Ms. Myrick. There is no question. They are on the street 
and good homes are a problem and you can't get them in 
communities and there is not money for them and all that kind 
of thing.
    Secretary Leavitt. If I were to look for an area of 
investment, from my own view, that would be it. Now, we 
supplement that through SAMSA but it is also a place, as you 
point out, that the States and local communities need to be 
focused, and one of the second lessons we learned is that we 
are very slow to share information that is perfectly 
appropriate to share. There are lots of places under HIPAA that 
information can and should be shared that people don't because 
they are afraid.
    Ms. Myrick. Well, with the shootings, that is part of the 
challenge you have there too because those people all had 
previous records and some way that could have gotten help maybe 
before if somebody had known about it. Anyway, I would be glad 
to work with you any way I can on that. Thank you for your 
answers.
    Ms. DeGette. The Chair recognizes the gentleman from New 
York, Mr. Engel, for 5 minutes.
    Ms. Engel. Thank you, Madam Chair.
    Mr. Secretary, I want to talk to you a lot about 9/11 but 
since the gentlewoman from North Carolina, Ms. Myrick, just 
spoke, I just wanted to briefly call your attention to a bill 
that the gentlewoman and I are sponsoring, which is a very 
strong bipartisan bill. We are really troubled by a lot of the 
damaging Medicaid regulations put forward by CMS with regard to 
public and teaching hospitals and we are asking for--our bill 
puts a moratorium for a year on these regulations being 
implemented. We hope our bill passes but it could simply--if 
you simply rescinded some of these regulations, there would 
really be no need for our bill. The Congressional Joint 
Economic Committee issued a study finding that Medicaid and the 
State Children's Health Insurance Program enrollment and the 
number of uninsured will rise over the next several months as a 
result of the current economic downturn and so I would just 
appeal to you to consider rescinding or postponing some of 
these regulations. The Joint Economic Committee specifically 
called upon the Administration to delay or cancel these 
proposed regulations that shift Medicaid costs to the States, 
so I am wondering if you could briefly tell me that you would 
consider rescinding this. It is again bipartisan. It hurts the 
States and we really would ask you to consider postponing it or 
rescinding it.
    Secretary Leavitt. Congressman, I understand your view. I 
expressed earlier, and I know you have a question so I won't 
let it go too long except to say we feel that the regulations 
are appropriate for reasons if you would like to take more time 
I would be happy to respond to but we likely will not be 
withdrawing those and I want to be straightforward about that.
    Mr. Engel. Then let me also say before I get to the 9/11 
things that I am very troubled by the budget slashing Medicaid 
and Medicare funding, particularly for teaching hospitals. 
Representing New York, our teaching hospitals train one in 
seven doctors nationwide and it is very, very troubling. This 
budget is very harsh in its treatment of teaching hospitals. 
The budget also slashes Medicare and Medicaid funding by $200 
billion over 5 years and we estimate in New York our hospitals 
and health systems will lose $1 billion in 2009 and $10 billion 
over the next 5 years. It is really very, very troubling, but I 
will follow up with you on these things.
    September 11, I mentioned it in my opening statement. This 
budget proposal increases a 77 % funding cut for 9/11 
healthcare programs from $108 million, which isn't adequate in 
itself, from fiscal year 2008, down to $25 million for fiscal 
year 2009. I would implore you to please consider at the very 
minimum restoring that to the level of the 2008 budget to $108 
million. We are not talking about lots of money here, and 
September 11 obviously is a tragedy for the country, not only 
for New York. We have our first responders who ran there, 
people who went there day after day trying to save lives are 
now dying. Some have already died or are sick for the rest of 
their lives. We are told that this impacts virtually every 
district across the country and it is unconscionable that the 
Federal Government is slashing funding and doesn't have a 
better response. We have a bipartisan bill sponsored by the 
whole New York delegation, Mrs. Maloney, Mr. Natham, Mr. 
Fossella on the Republican side, and we really think that we 
really need to step up with this. So I am wondering if you 
could comment on that, if you would consider restoring the 
money?
    Secretary Leavitt. Congressman, lest you would interpret 
that $25 million addition as being a lessening in our 
commitment, I want to disabuse that point. We currently have 
$175 million in unused appropriation that is available for the 
treatment of those authorized under the law, and our budget was 
put forward on the basis that we want to make certain there is 
adequate money to meet the demand, and at the point that there 
is more demand, then we will obviously be open to more 
appropriation.
    Mr. Engel. Mr. Secretary, would you agree to meet with some 
of us in the New York delegation to discuss this, to have a 
meeting to discuss this? I think it would be very helpful if we 
could go back and forth on this important issue of 9/11 first 
responders funding for health reasons.
    Secretary Leavitt. I am always available to have 
conversations that can lead to a positive conclusion. I do want 
to emphasize though that our commitment is there but we didn't 
feel the need to additional dollars, given the $175 million 
that currently resides in the funds that are available.
    Mr. Engel. So you will meet with us where we can discuss 
these issues?
    Secretary Leavitt. If it becomes important to meet with the 
delegation, I am happy to.
    Mr. Engel. Well, I think it is important. Will you give me 
a commitment to meet with us? I would appreciate it.
    Secretary Leavitt. I am very happy to meet with you.
    Mr. Engel. Thank you, Mr. Secretary.
    Ms. DeGette. The Chair recognizes the gentleman from New 
Jersey for 5 minutes.
    Mr. Ferguson. Thank you, Madam Chair.
    Thank you, Secretary Leavitt, for being here today. We 
appreciate your service. You have a very tough job and you 
discharge your duties with great skill and dedication and we 
certainly appreciate that.
    I have a couple of questions today, a third if I have time. 
The first two are on public safety programs, the National 
Strategy for Pandemic Influenza, we have talked about this many 
times, and the second is about the strategic national stockpile 
for anthrax vaccines.
    First I want to commend you and the Department on the great 
steps that you have taken to put into place all the key 
elements for the national strategy for pandemic influenza, the 
NSPI. In your budget is a request for the third year of funding 
which would complete the plan. One of the key parts of the 
strategy is making sure that in addition to the federal 
stockpiles that the States are also doing what they need to do. 
My understanding is that to date our Federal Government has 
purchased 50 million courses, which is recommended under the 
NSPI, while the States really haven't kind of stepped up to the 
plate as much yet. Some States have done great. Other States 
are sort of in the middle and some States really haven't done 
anything at all. My State, for instance, is getting close to a 
million courses in the stockpile. It is better than 90 % of 
what New Jersey is supposed to be doing. But it has been really 
kind of a mishmash of activity on the States' parts. What can 
we be doing to move the States along? How can we address this? 
Is this addressed in the budget request for this year and what 
can the Federal Government do, what can the Department be doing 
to move States in the right direction?
    Secretary Leavitt. Our pandemic plan proceeds as it was 
laid out originally. We have not had a new appropriation 
applied to that plan since 1986 and that is of great concern to 
me. We need to be successful on this budget to keep it moving 
forward. We are making substantial progress in the area of 
vaccines, particularly in the adjuvant or dose-sparing area. We 
are continuing to build our stockpile of antivirals, Tamifu and 
others that are appropriate. We have seen a robust response 
from most States but there are some who just made very 
deliberate decisions not to do it. I think that is the wrong 
decision but it is in fact their decision. We did pandemic 
summits in all 50 States and most of the territories and this 
issue was very put very squarely on the table and was talked 
about and some have made a decision not to do it. I think it is 
an error. We will continue to encourage them to prepare not 
just in the context of antivirals but in all aspects of 
community preparedness.
    Mr. Ferguson. I would encourage you to continue those 
efforts whether it is a carrot or a stick, however we need to 
do that, because that is obviously crucial because the plan 
really won't be effective as it has been designed until the 
States are doing frankly what the Federal Government, what you 
and the Department have already done, which is really step up 
to the plate and do what is necessary.
    Secretary Leavitt. We are encouraging people all over the 
country, whether they are a State government or a local 
government and for that matter those in private sector, to 
begin to prepare. One of the worries I will just express in one 
sentence is, I worry that while we are moving and working hard 
on this that sometimes our effort at the Federal level causes 
the State and local governments to not view this as a priority, 
and public health is fundamentally a local issue. We do a lot 
that they can't do but it is a local issue and they need to 
take responsibility and ownership for this.
    Mr. Ferguson. And if you ever have recommendations for us 
what we can be doing as representatives from all around the 
country and obviously we have a great deal of interest in what 
is going on in our individual States, we certainly would 
appreciate your advice and suggestions on that front.
    Let me please turn to the anthrax vaccine strategic 
national stockpile. Back in 2001, the Department established 
the need for 75 million doses of the anthrax vaccine, which 
would protect about 25 million people. The past 6 years HHS has 
procured closing in on 29 million doses, as far as I am aware, 
still short of the number that we are trying to reach. My 
understanding is that HHS is trying to procure this second-
generation anthrax vaccine called RPA, which it hasn't been 
approved yet. It is not going to be available I understand for 
at least a few years if not several years. It has a short 
lifespan, a year-, year-and-a-half shelf life. We have other 
vaccines, proven vaccines which we have begun to stockpile 
already, they have a longer shelf life, they are proven, they 
have been in use. Why not continue to purchase and stockpile 
what we have available to us, what we know works and which 
frankly will last us longer in terms of shelf life than perhaps 
waiting for this second-generation vaccine which frankly we 
aren't even sure of its effectiveness yet?
    Secretary Leavitt. Well, as you point out, there is no such 
thing at this moment as a second-generation vaccine so we do 
continue to stockpile the first generation and we are building 
according to our goal. However, it is necessary that we get to 
the second generation, and what we are doing now is essentially 
research and development and we are asking for people to help 
us solve those problems.
    Mr. Ferguson. Thank you very much.
    Thank you, Madam Chair.
    Ms. DeGette. The Chair recognizes the gentlelady from 
California for 5 minutes.
    Mrs. Capps. Thank you, Madam Chair, and thank you, Mr. 
Secretary.
    Earlier this morning my colleague, Heather Wilson, brought 
up her great concern with the recovery audit contractor 
program. Secretary Leavitt, you claim that you have recovered 
over $400 but your own report that was released today disputes 
that assertion. I have here a summary of that report. Due to 
the high error rate, especially in California, that figure is 
actually lower because of all the claims that providers are 
appealing, and finally when they get to the third appeal before 
an administrative judge, they are winning. Eighty-eight % of 
the supposed overpayments have been recouped from inpatient 
claims yet your own chief financial officer yesterday in a 
briefing for committee staff, which my staff person attended, 
admitted that the program was fatally flawed when it came to 
inpatient rehab and said we shouldn't even bother using it as 
an example. With an error rate of over 40 % in California as 
proven by a third-party evaluation of the program, I don't 
believe we are ready to move forward with this program. I 
believe that evaluation is only the tip of the iceberg. 
Auditing is a critical part of safeguarding taxpayer dollars 
and none of the providers I have ever meet object to auditing 
but it must be done correctly, and all indications are that 
this program, the one we have experienced in California, does 
not meet the test. Here are three or four of my questions to 
which I hope brief responses will suffice.
    Do the figures in your evaluation reflect all of the money 
you are now accountable for returning to the providers because 
they have been winning their appeals?
    Secretary Leavitt. Congresswoman, I don't know that I have 
seen the report that you are referencing and I am not sure that 
from what I have heard about it that it reflects the 
conclusions that you have drawn. We believe that this is an 
important part of the way we can maintain program integrity. We 
also believe that it can be refined and improved. As you point 
out, it is a relatively new program. We have tried it a few 
places. We will do our best to improve it. I understand why a 
hospital would not like--as you say, they are willing to be 
audited but they really don't want to be collected, and----
    Mrs. Capps. Well, not if they are--they have to pay all 
along the way the costs of these appeals and then when they get 
to the end and it is overturned, they are still not recouping 
that money and that is----
    Secretary Leavitt. Sixty % of them aren't being overturned 
and 40 % we have got to get better at, if that is what the 
number is.
    Mrs. Capps. Okay. Well, you didn't have the facts for the 
first one, and the report was released today and your CFO was 
talking about it yesterday. Can you tell me how much in 
taxpayer dollars CMS is spending on these appeals?
    Secretary Leavitt. I don't have that fact.
    Mrs. Capps. Could we get these in writing? I understand if 
you haven't seen it but the first question I asked that you 
didn't know and this one that you don't have the information, I 
think it would be important for our records.
    Secretary Leavitt. I would be very happy to respond if you 
want to give me a question----
    Mrs. Capps. We will put it in writing to you, and I 
appreciate that.
    And finally I would like to know how much money of the 
recovered money has been paid to the private contractors which 
will never go back to the Medicare trust fund. In other words, 
they don't have to--if they are wrong at the end of the appeal 
process, there is no cost to them. They have already pocketed 
the money. That is how it was explained to us.
    Secretary Leavitt. Well, that would be one interpretation 
of it, but again, we view it as a program with a lot of 
potential that we can refine, but we will respond to your 
questions.
    Mrs. Capps. Thank you. Finally though, I want to get one 
more on the record if I could. According to the status update, 
the tables regarding appeals data doesn't reflect claim 
determinations of appeals filed on or before September 30, 
2007. Many providers didn't receive the decisions in their 
favor until after September 30 and now it has been validated by 
administrative law judges that they were in fact denied 
incorrectly. They have been filing many more appeals. Wouldn't 
this mean, if this is the case and many had not filed until the 
saw that the results were coming the way they were coming even 
though they believed they were wrongly censured. Wouldn't this 
mean that we are going to see much more money paid back to the 
providers and much less money saved by this program if this 
trend continues?
    Secretary Leavitt. Well, these are questions that would be 
better directed to CMS, and I would be happy to make certain 
that----
    Mrs. Capps. I am going to direct them to CMS, and I 
appreciate your hearing me out. We have had many concerns over 
many months that have not gotten answers that we wanted to. 
Therefore, I am happy to put them in writing to you and look 
forward to hearing back from you. Thank you very much.
    Ms. DeGette. The gentlelady yields back. The Chair 
recognizes the gentleman from New York for 5 minutes.
    Mr. Fossella. Thank you, Madam Chair, and thank you, Mr. 
Secretary for your patience. Let us jump right into 9/11 and in 
a way follow up on Mr. Engel's comments. You know this is an 
issue that we care deeply about and love to have, you know, 
everybody at the federal level working with local and State and 
everybody being on the same page. Even to this day it doesn't 
appear that that is the case despite maybe your personal desire 
and efforts. You mentioned about the $175 million left unspent. 
I understand it is obligated more for research grant 
applications. One of the reasons I think it causes us concern, 
for example, is the cancellation of the business center, the 
treatment business center in December. If you recall, that was 
really an HHS directive to create or to establish this business 
center, and almost without notice that program or that effort 
was terminated and we haven't gotten really I think a 
sufficient response. The ones we got have been all over the 
place, to be candid. So I would like to know your position on 
that and what is happening and the status of that business 
center.
    The other question, as you are probably aware, we have been 
told that as a result of that, within 2 weeks thousands of 
folks, responders, some suffering from mental trauma, will 
receive letters as required by HHS regulations that say the 
program is being terminated and that ultimately perhaps the 
care that they are receiving will be compromised. In addition, 
I know there is a $25 million placeholder in the budget but 
some of the services that are to be reduced, it is my 
understanding, would compromise the care to residents and 
children affected in the surrounding area that inhaled the 
toxins at the time.
    And finally, NIOSH itself developed estimates that put 
costs for running the current program at $218 million a year. 
You say there is $175 million yet unused or obligated unused. 
Why only the $25 million? We are still asking the question in 
many different ways and we would just love for HHS to really be 
taking the lead. New York City and New York State have been 
shouldering this burden I think disproportionately. The problem 
is only going to get worse. Every month there are 500 new 
people who sign up to be monitored. They are moving throughout 
the country, 2,000 zip codes in the country. This is really a 
federal responsibility to an attack on America. So those are 
several questions and I would love to hear your response, Mr. 
Secretary.
    Secretary Leavitt. Well, let me break them into two 
categories. First, with respect to the $175-plus million, that 
is not obligated for research, etc. It is there available for 
treatment and we want to be responsible in the treatment of 
those that the federal law allows us to be.
    With respect to the business center, that is something I am 
afraid I can't add a lot to the conversation on right now. I 
don't have the details. It is something that I am happy to try 
to respond to you in a written way but I don't have details 
that I can offer you today.
    Mr. Fossella. Well, let me just say this, if they can do it 
a little more expeditiously than last year. Two weeks ago, I 
think from February 8 we received responses to questions I 
asked last year at this time on this subject. It took almost a 
year to get a written response. So inasmuch as time is of the 
essence, can you promise me it will take a little less than a 
year at this time?
    Secretary Leavitt. I am always embarrassed when I hear that 
happening, so yes, I think we will do better on this one.
    Mr. Fossella. Thank you. With respect to the letters that 
may have to go out to the responders, I mean it is sort of 
related to the business treatment center. I mean, it is only 2 
weeks away. Is there any way you can ensure or guarantee that 
those letters will not go out? Can you envision being treated 
for mental trauma----
    Secretary Leavitt. It sounds like a matter with some 
urgency to it. I am not familiar with it, to be honest with 
you, and not because I don't care about it. It is just not an 
area that I manage directly, but I think we can get a response 
to you in the short term.
    Mr. Fossella. And finally, you know there has been 
legislation introduced. I would love for at least some comment 
as to maybe we can make it better if you don't support it in 
its current form. But if you recall, Dr. Ogwanobi promised a 
report on the data collected for the financial and health 
information needs of this program and we never saw the report, 
and that was last year.
    Mr. Fossella. That was never intended to be a report. It 
was a task group that was set aside to help me resolve some 
issues. The issues were resolved by Congress even before they 
finished their work and therefore a report was not required and 
won't be forthcoming because it was not the intention of 
putting the group together. The issues it was studying were 
resolved by Congress.
    Mr. Fossella. Thank you, Mr. Secretary.
    Ms. DeGette. The Chair now recognizes the gentleman from 
Texas, Mr. Gonzalez, for 5 minutes.
    Mr. Gonzalez. Thank you very much, Madam Chair. I know that 
I waived my opening remarks. I don't know if I can get an extra 
minute or not.
    Ms. DeGette. Yes, yes, 6 minutes.
    Mr. Gonzalez. I appreciate it.
    Secretary Leavitt, welcome, and I thank you for your 
patience. I have about four different areas. I want to start on 
what I think might be a simple one. I want to follow up on what 
Congressman Markey was making reference to regarding health 
information technology, electronic medical records or whatever 
we want to call it because I think we are all embracing the 
concept. We understand its benefits but we are very concerned 
about the privacy factor here. Would you agree with the 
statement that regardless of how medical records may be 
gathered, retained, stored, disseminated, that the principles 
of privacy that belong to that patient apply regardless of the 
technology that is being utilized?
    Secretary Leavitt. I believe that a patient has to right to 
assure that their medical information will not be transported 
to another party without their permission.
    Mr. Gonzalez. I am just saying, if we can all agree, 
because we have had this debate before regarding other methods 
of obviously keeping these records and sharing them, can we 
just not apply the same principles that have served us well to 
whatever technology we are utilizing?
    Secretary Leavitt. I actually have not found much 
difficulty in agreeing on the principles. I have found there to 
be some difference based on perspective on how those principles 
would be applied. There is a need for a position to be able to 
manage records that are important to the practice of that 
clinic or hospital in a way that is actionable on their part 
consistent with their procedure. It is very clear to me as well 
that a consumer, a patient ought to control the dissemination 
of that to any other party. Those are principles I believe we 
can agree upon and I look forward to a conversation on ways to 
advance it.
    Mr. Gonzalez. I am just saying that I think if we just 
start off with that basic proposition, we can get to trying to 
see how we can actually have with your pilot project and 
everything else. Otherwise if we start off from day one if 
there is a question about privacy, I assure you we are going to 
have a very difficult time so I think we need to be coming 
together real quick on those principles and then everybody that 
is involved with that technology can find a way to address 
them, I guarantee you, and it is not just medical records but 
it is everything else. Business models such as business 
technologies change doesn't mean that we forget about antitrust 
laws or anything. So I am just saying the concepts, principles, 
the very tenets of what we hold dear in this particular society 
carry over to any technology and I wish we would just come to 
an early agreement on that.
    Prescription drug reimbursement rate, my understanding, 
again, this is just with my conversations with my pharmacist 
back in San Antonio, that your reimbursement rate is predicated 
on the average manufacturer price. Now, my local pharmacist, 
the little guy on the corner, is having a real hard time on 
that reimbursement rate. Even my grocery store-situated 
pharmacist is having a real hard time because in essence you 
are reimbursing them at the same rate that you would reimburse 
what we refer to a prescription benefit manager, that obviously 
the amounts, the quantities that are being purchased may be one 
thing for the prescription drug management entity as opposed to 
the grocery store pharmacy base or the local pharmacist. What 
even I think aggravates the situation is that my little 
pharmacist, let us say a pharmacy in the deep west side of San 
Antonio, I would venture to guess it is 70 % of their customers 
are going to be Medicaid and Medicare so they are really 
impacted. How do you reconcile that? And I know that this is 
being contested and it is out there right now waiting for a 
decision.
    Secretary Leavitt. On Medicare part D, those reimbursement 
rates are negotiated between the plan and the pharmacy. On 
Medicaid, the reimbursement rates are actually negotiated 
between the State and--or in the State, and so, you know, I 
would say that if those are the two primary areas of your 
pharmacist's practice, that he really ought to focus his 
attention on Medicaid on the State of Texas and then 
negotiating agreements that he can feel good about with the 
plan.
    Mr. Gonzalez. Well, maybe I don't understand it as well as 
I should, but what is this average manufacturer price, how is 
it derived, who determined it, who set this particular 
standard?
    Secretary Leavitt. Well, it has gone through a lengthy 
process and it has been long debated and these are questions 
that might best be responded to by CMS as opposed to me. I have 
been taken through the exercise a number of times and I 
understand it when I hear it but I am not certain I would be as 
good at explaining it to you. But it is essentially the price, 
the lowest price that people buy that drug at. The obvious 
effort is to make certain that we are able to----
    Mr. Gonzalez. But we all know, I mean, just that numbers 
generally--if you are purchasing a lot of anything, generally 
you are going to get a better price. Does that mean everybody 
that doesn't have that kind of market share then suffers? And 
you are right, maybe I should discuss this with CMS and we 
will, and I have 45 seconds. One member of this Committee 
viewed your $19 billion, whatever it is for SCHIP as an 
expansion. Another member, Mr. Pallone, who happens to be the 
chair of the subcommittee, indicated that it is inadequate just 
to keep up with present needs. Who is right? What you have now 
in your budget for SCHIP, is it an expansion of SCHIP as 
represented by someone on the other side, or is Mr. Pallone 
correct to simply say just to stay up with what you have now?
    Secretary Leavitt. It very clearly would cover more 
children going into the future. It would focus on those 
children who are 200 % of the poverty level. We believe that we 
should focus on those before we begin to expand Medicaid into 
populations where people, many people have insurance and would 
likely cancel it in order to get government insurance. Our 
position has been very consistent. We have tried to fund in our 
budget the policy that was put into the expansion or the 
extension, the 18-month extension. The number is different than 
it was before because of--I think our time is up.
    Mr. Gonzalez. And I appreciate it, but I think what you are 
arguing here probably plays right to what Mr. Pallone 
represented. Thank you very much, and I yield back.
    Ms. DeGette. The Chair recognizes the gentleman from 
Washington State for 5 minutes.
    Mr. Inslee. Thank you, Mr. Secretary. You have said that 
your job is to defend the President's budget and I think that 
is a little bit like the job of a mob lawyer. It is difficult. 
It is busy, it is demanding and it is difficult, given this 
budget, and I want to ask you about it, because one of the 
things you said, I am not sure I agree with you. You said that 
you can always want more money, and I just want to point out, 
it is not a question of you wanting more money. It is a 
question of whether you have the money to do what you are 
charged to do, and it is very disturbing to see this letter 
from the scientific committee that says most of the programs 
are massively underfunded. If they are to carry out the public 
and Congressional expectations presented them, thus whether the 
subcommittee has reached a proposed number that is accurate to 
the dollar is not the issue. It is that the FDA needs a very 
substantial increase in resources if it is to protect us as the 
public expects and Congress demands, and I would suggest that 
the issue is what the public expects and what the law demands, 
not what you or I want.
    I want to ask you in specific reference to one of the FDA's 
jobs, which is to protect the public from these machines that 
are used to fool desperate people into thinking they have got a 
cure and these hoax machines, and this article by a Seattle 
newspaper, the Seattle Times, was really pretty stunning that 
they found in use like 40,000 of these machines, 10,000 of 
these EPFX machines, hundreds or thousands of the pap ion 
machines, and they told these horrendous stories of people in 
desperate conditions being defrauded out of money and hope that 
they might otherwise have by people using these scam machines, 
and we sort of looked into what the response has been and it is 
relatively negligible by the agency to be able to deal with 
this flood tide. I mean, these things are like, you know, 
almost one every street corner, it seems, and they are 
operating in wide-open advertising and they are not being shut 
down. So I guess the question is, does this budget allow you to 
fulfill the agency's responsibility to fulfill the public's 
expectation that you are going to shut down these bogus, 
fraudulent medical devices.
    Secretary Leavitt. Let me deal with your first point and 
then go to your second. If we made the assumption that there 
was an unlimited amount of money available, we would never have 
to choose a priority. We would never have to have competing 
noble causes which compete. We would never have to resolve 
those. But that is not the world that we live in and it is not 
the world at least in the budget philosophy of the 
Administration. We believe we don't have an unlimited capacity 
to tax people and therefore we take what we have and do our 
best to allocate it. Now, I will tell you frankly in a budget 
is intended to be balanced by 2012, I fought very hard to get 
that additional money into the FDA budget and I feel good about 
it. When you look at what has gone on, what we have to deal 
with to balance the budget, it is a clear mark of our intent, 
and I have said a couple of times, we have added 1,000 people 
at FDA over the last 2 years. There is a rate limiting capacity 
to manage that and that expansion in a way that is productive, 
particularly when we are trying to change the philosophy of 
what we do.
    Now, with respect to the medical device, FDA would be a 
better place to direct that. I don't know with any specificity 
on that device. Very clearly they have a role there. Their 
primary role, interesting enough, is to determine if a product 
is safe or not. There are both State and local responsibilities 
for people who are selling products but your point is, we have 
a responsibility, we need to meet it.
    Mr. Inslee. Well, I am not sure you and I are tracking 
because what I would expect the Secretary to come forward and 
say we have a statutory obligation, we have a public 
expectation, this budget will not meet either of those, which I 
believe clearly is the case as your own scientific review board 
indicates, but there just isn't enough money available to 
fulfill those. Now, that is what I would expect because I think 
it is a clear situation here and offer a rationale that there 
are higher priorities or you didn't want to close the tax 
loopholes of millionaires or you didn't want to close the tax 
loopholes on oil companies making $100 million a day or, you 
know, whatever, but just to come up and tell us that it is not 
going to what the Congress expects you to do, and I think that 
is absolutely clear.
    Secretary Leavitt. Well, let me make a comment about any 
scientific advisory board, which there are many, and the people 
who devote service and we respect it and value it. They are 
there to advise and to inform our judgments, not as a 
substitution for them, and any advisory, whether it is this one 
or another, offers a very important perspective but we do not 
advocate our need to make judgments and to set priorities to 
advisory committees. We are informed by their judgments but 
they do not substitute for our judgments.
    Mr. Inslee. Thank you.
    Ms. DeGette. The gentleman's time has expired.
    Mr. Secretary, thank you so much for making the time to be 
with us this morning. We are honoring our commitment to get you 
out of here by 12:45.
    Secretary Leavitt. Thank you. It looks like I wore 
everybody out.
    Ms. DeGette. Yes, you have worn us down to nubs. I would 
also look forward, I know both sides of the aisle would look 
forward to hearing the responses to the questions we have asked 
for follow-up on. Thank you very much.
    The meeting adjourned.
    [Whereupon, at 12:45 p.m., the Committee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                    Statement of Hon. Edolphus Towns

    Thank you, Chairman Dingell and Ranking Member. Welcome 
Secretary Leavitt. As the Congressman from the 10th 
congressional district of New York, I am profoundly 
disappointed with the Administration's proposed fiscal year 
2009 budget and CMS rules. They devastate kids, seniors, 
persons with disabilities, chronically ill individuals, 
students, research institutions, poison control centers, health 
care programs for 9/11 workers, and state budgets. It is with 
great sadness that I say this. Thank you Mr. Chairman, I yield 
back.

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