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





                 HEARING ON THE PRESIDENT'S FISCAL YEAR
                 2008 BUDGET FOR THE U.S. DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES

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

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            February 8, 2007

                               __________

                            Serial No. 110-7

                               __________

         Printed for the use of the Committee on Ways and Means





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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California        JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            DAVE CAMP, Michigan
JOHN LEWIS, Georgia                  JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York         PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee            JERRY WELLER, Illinois
XAVIER BECERRA, California           KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas                 RON LEWIS, Kentucky
EARL POMEROY, North Dakota           KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio          THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California            PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut          ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois               JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon              DEVIN NUNES, California
RON KIND, Wisconsin                  PAT TIBERI, Ohio
BILL PASCRELL JR., New Jersey        JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama

             Janice Mays, Chief Counsel and Staff Director

                  Brett Loper, Minority Staff Director

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hearing records of the Committee on Ways and Means are also published 
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                            C O N T E N T S

                               __________

                            February 8, 2007

                                                                   Page
Advisory of February 1, announcing the hearing...................     2

                               WITNESSES

The Honorable Jim McCrery, A Representative from the State of 
  Louisiana......................................................     4
The Honorable Michael O. Leavitt, Secretary, U.S. Department of 
  Health and Human Services......................................     7

                       SUBMISSION FOR THE RECORD

Crane, Barbara, and Laura Cohen, Clinician Task Force, Hartford, 
  CT, joint letter...............................................    46
National Coalition for Assistive and Rehab Technology, statement.    47
National Registry of Rehabilitation Technology Suppliers, 
  statement......................................................    48

 
                 HEARING ON THE PRESIDENT'S FISCAL YEAR
                 2008 BUDGET FOR THE U.S. DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES

                              ----------                              


                       THURSDAY, FEBRUARY 8, 2007

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:10 a.m., in 
room 1100, Longworth House Office Building, Hon. Chairman 
Rangel (Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS
                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 01, 2007
FC-8

Chairman Rangel Announces a Hearing on the President's Fiscal Year 2008 
      Budget for the U.S. Department of Health and Human Services

    House Ways and Means Committee Chairman Charles B. Rangel today 
announced the Committee will hold a hearing on President Bush's budget 
proposals for fiscal year 2008 for the U.S. Department of Health and 
Human Services. The hearing will take place on Thursday, February 8, in 
the main Committee hearing room, 1100 Longworth House Office Building, 
beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be limited to the invited witness, the 
Honorable Michael Leavitt, Secretary, U.S. Department of Health and 
Human Services. However, any individual or organization not scheduled 
for an oral appearance may submit a written statement for consideration 
by the Committee and for inclusion in the printed record of the 
hearing.
      

FOCUS OF THE HEARING:

      
    On February 5, 2007, President George W. Bush will submit his 
fiscal year 2008 budget to Congress. The budget will detail his tax, 
spending and policy proposals for the coming year, including his 
proposed budget for the Department of Health and Human Services. Many 
of the Department's programs B such as Medicare, efforts to assist 
those who lack health insurance, and Temporary Assistance for Needy 
Families and other income security efforts B are within the Committee's 
jurisdiction.
      
    In announcing the hearing, Chairman Rangel said, ``Congress and the 
Administration must work together to improve access to affordable, 
reliable health care and ensure income security for all Americans. I 
welcome Secretary Leavitt before the Committee and look forward to his 
views on these critical issues.''
      

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    Chairman RANGEL. Mr. Secretary, we are so awed and pleased 
by your presence that we really are trying to get organized. We 
recognize that you have one of the most overwhelming 
responsibilities in dealing with an issue that is as important 
to the nation, certainly, as the war.
    I can't over-emphasize the fact that Mr. McCrery and I 
still want to believe that it is possible for this Committee to 
tackle some of the most controversial subjects that are facing 
the nation and the Congress. We would like to do this with some 
help from the Administration. We may have our political 
differences, but we both believe that the problem is serious 
enough for us to do everything possible to try to find a 
bipartisan solution.
    I am very pleased with the tone of bipartisanship that has 
been set by the Administration, but I find very little 
substance in terms of giving us help--excuse me, please. I had 
better check my policy, my health policy.
    I thought, and you may disagree, that the President's State 
of the Union missed an opportunity to talk about areas that we 
could actually work in with bipartisanship. He sought, however, 
to bypass that. Then I thought perhaps if your office and 
others would have worked with our health Subcommittee, that we 
could have found out whether the President could have put 
something in here that would have indicated a way that we could 
have worked out some differences and agreed on some things.
    But just as private accounts emphasize the President's 
feeling about Social Security, it appears as though this budget 
message to us that we should cut Medicare by $76 billion over 5 
years and $250 billion over ten, and to protect the HMOs, these 
type of messages cause us to believe that the Administration 
truly is trying to eliminate entitlements, whether they are 
Social Security, Medicaid and block grants, or Medicare, and 
effectively says, if you don't like my plan, you come up with 
your plan, rather than seeing whether we can come up with our 
plan.
    I hope in the course of your remarks that you will share 
with this Committee what role, if any, you think the Federal 
Government should play, as opposed to the private sector, in 
providing the maximum benefits of good health care, at the same 
time trying to cap the soaring increasing costs of health care. 
We believe that rather than being annoyed by things that we 
resent politically, that we still have an obligation to work 
with you, and we look forward to that.
    I will be yielding my time to Mr. Stark. But since it is 
down to almost nothing, I think I will recognize Mr. McCrery 
first.
    Mr. MCCRERY. Thank you, Mr. Chairman. Welcome, Secretary 
Leavitt. I want to thank you for two things: number one, for 
all the attention you have paid to the plight of New Orleans in 
trying to rebuild its health care infrastructure following 
Hurricanes Katrina and Rita. Your efforts have been above and 
beyond what anyone could have expected from the Secretary of 
HHS at the Federal level. So, I want to thank you very much for 
your attention to those problems in the New Orleans area, and 
for your continued attention to those issues.
    Second, I want to thank you for playing a role in 
developing the President's budget in the area of health care, 
and for putting forth not a radical idea, not a new idea, but 
an idea that hasn't been discussed very much in the last few 
years, and that is your standard deduction for health care, 
which basically takes the health insurance out of the workplace 
into the hands of individuals, and more fairly distributes the 
tax benefits that are currently in the Code under the tax 
exclusion for employees for health care.
    As I have told you before, and others in the 
Administration, I think it is a very modest proposal. It 
doesn't go far enough, but it is a step in the right direction. 
At least it gets us talking here in the Congress about a 
concept that I think has a lot of merit, particularly as we are 
searching for ways to come up with funding to cover the 
uninsured in this country. So, thank you for both of those 
things, and I look forward to your testimony.
    Mr. Chairman, I have a more lengthy statement I would 
submit for the record, and ask unanimous consent to have that 
included in the record.
    [The prepared statement of Mr. McCrery follows:]
               Statement of The Honorable Jim McCrery, a
               Representative from the State of Louisiana
    Yesterday, we heard from OMB Director Rob Portman about the 
financial challenges facing the Medicare program. Director Portman also 
described the proposals in the President's budget that are intended to 
address some of these issues.
    We must deal with the challenges facing Medicare, and I believe 
these proposals are an important first step. I fear, however, that they 
do not do enough to secure the long term stability of this important 
program.
    I hope, Mr. Chairman, that we can work together with the Secretary 
to make the changes to the Medicare program that are necessary to 
improve the program, address the rising costs, and protect 
beneficiaries' access to care.
    I also want to take the opportunity to thank you, Mr. Secretary, 
for raising the issue of the uninsured. There are approximately 47 
million Americans who lack health insurance today.
    Our current health insurance system rewards the wealthy, penalizes 
the poor and discriminates against workers solely upon the basis of 
where they work. This makes little sense, given the demands of our 21st 
century economy, and I believe we need to develop a better system to 
provide health insurance for all Americans.
    For much of my tenure in Congress, I have tried to find a solution 
to this growing problem. I have had some successful talks in previous 
Congresses with some of my Democratic colleagues, and came very close 
to developing a workable compromise. Unfortunately, it has always 
seemed as though the political climate just wasn't quite right.
    Mr. Secretary, the climate seems to be changing. In recent days, 
newspapers across America are filled with stories about new proposals 
to cover the uninsured. Governors, both Democrats and Republicans, are 
introducing innovative ideas to address health care because they 
recognize that the current system isn't working.
    The changes proposed by President Bush in his State of the Union 
Address are a good starting point for these discussions. I am pleased 
that the Administration has chosen to concentrate on the issue of the 
uninsured by addressing the inequities in our current tax system. By 
leveling the playing field and offering tax relief to Americans who 
purchase health insurance in the private market, we can lower costs and 
improve access to affordable health insurance.
    I do not agree with all of the aspects of the President's proposal. 
In fact, I would do several things differently. However, I applaud the 
President and Secretary Leavitt for starting what will hopefully be a 
vigorous and thoughtful debate.
    In closing, let me also say that I believe that any reforms we 
enact need to give individuals more control over their health care 
choices. The current system mandates that we take what we get, whether 
we need it or want it. Personal choices in the healthcare marketplace 
will lead to smarter consumer decisions regarding preventative care and 
help to reduce the rapid growth in national spending on healthcare.
    Chairman RANGEL. Without objection.
    I would ask unanimous consent that Mr. Stark and Mr. Camp 
be given an opportunity to address themselves.
    Mr. Stark.
    Mr. STARK. Thank you, Mr. Chairman. Welcome, Mr. Secretary.
    I am going to quote an astute health economist, Uve 
Reinhardt, who said that a budget is essentially a letter to 
God. It is a listing of your priorities based on your core 
beliefs. It is clear from the President's budget that our core 
beliefs are very different, particularly in the health care and 
social services arena.
    You have cut some $300 billion out of Medicare and Medicaid 
over the next decade. Probably another 15 billion out of a much 
smaller budget for social services. It is all cuts. Just cuts. 
There is no place in the budget where we increase spending on 
Medicare, and this money, this 300 billion, obviously just 
leaves Medicare and goes to fund the war in Iraq or some other 
useless idea.
    The budget not only maintains but hastens the provisions of 
the Medicare Modernization Act, which was designed to privatize 
Medicare. There is no mistake that the Republican goal is to 
change Medicare from a defined benefit that seniors can count 
on and turn it into a defined contribution. But that won't take 
care of seniors and people with disabilities and health care 
needs.
    Your budget speeds up the impact of MMA, the part B income-
relating premium provision, and expands that policy to Part D. 
Well-to-do beneficiaries who already pay more for Medicare 
through the tax system, the most progressive tax--or regressive 
tax, I suppose; they pay more, they get $10 million in income, 
they pay the same tax and they get the same benefit as somebody 
at a minimum wage. To double up on them to me is only to turn 
them against the support, modest though it is, that we have had 
for the Medicare system.
    That is Medicare. I have not even begun to discuss the so-
called health reform proposal that the President puts down 
which would undermine the employer-based system which 160 
million Americans get their insurance from now. That plan would 
give a low-wage worker basically a voucher worth 1100, and give 
those of us who are Members of Congress a voucher worth about 
$6300. If that is equity, so be it. It also lowers Social 
Security benefits by about one-third for low income workers. 
Again, that doesn't seem to me to be something that we should 
be doing in this budget.
    I can't neglect under-funding the State Children's Health 
Insurance Program. The President spends $3.7 billion more for 
health savings accounts, which only go to the rich or benefit 
the rich, and he cuts 12 billion that is needed in SCHIP. He 
doesn't cut it, but he refuses to fund it, which is the bare 
minimum to maintain the coverage for those children who are in 
it today.
    We get then to the welfare issues. Child care funding has 
been frozen, and this will result in 300,000 fewer children 
receiving assistance by 2010. This is in addition to the 
150,000 children who have lost day care funding since 2000.
    We have frozen Head Start at 100 million less than the 
House-passed joint continuing resolution called for. We have 
got low income energy assistance, and it is cold out here 
today; I don't know what it is like it Oregon. But that is a 
$379 million decrease, mostly for poor, elderly people in the 
areas that are the coldest in this country.
    The social services block grant that pays for Meals on 
Wheels, Child Protective Services, disability services, has had 
a $500 million reduction. Now all we have got left is the most 
obscene grant to the Republicans, $28 million for abstinence 
education.
    That all goes to the Republicans, Mr. Secretary. Look at 
us, we are so ugly nobody would say yes to us. It is all these 
handsome Republicans that we have to train women to say no to. 
So, we have given the 28 million to them, and I think we had 
better rethink that.
    I will look forward to more comments with you later.
    Chairman RANGEL. Mr. Camp.
    Mr. CAMP. Thank you, Mr. Chairman. I think I want to say 
thank you to Mr. Stark, but I am not sure.
    Mr. Secretary, thank you for being here. I just want to say 
finding health insurance for people who don't have it I think 
is a goal that everyone on this Committee shares. I know you 
have been an outspoken advocate of reforming our health care 
system to make it easier for individuals without health 
insurance to buy it. There are a number of states taking the 
lead in this, and there are some policies in the President's 
budget.
    Could you please elaborate on those for us and the 
Committee?
    Chairman RANGEL. Well, this is not a question.
    Mr. CAMP. Oh, all right. I am sorry.
    Chairman RANGEL. This is a statement.
    Mr. CAMP. Thank you. Well, I will look forward to that when 
we get to that time. Thank you very much. I will yield back.
    Chairman RANGEL. Mr. Secretary, we anxiously await your 
report.

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

    Secretary LEAVITT. Mr. Chairman, thank you. I have been 
thinking as I listened to your opening comments that it might 
be appropriate for me to set aside my prepared remarks and ask 
for you to adopt them into the record. Then I would like to 
respond to your invitation to talk a little bit about the way I 
feel, and I believe the way the Administration feels, about 
Medicare and other important safety net programs. Would that be 
appropriate?
    Chairman RANGEL. Without objection, Mr. Secretary.
    Secretary LEAVITT. Mr. Chairman, we are a compassionate 
nation. I think one very good indication of that is a widely 
held aspiration that every person in this country have access 
to an affordable basic insurance policy. If a person is elderly 
or poor, if they are disabled, if you are a mother who is low 
income and expecting a baby, if you are a child needing 
protection, we have as a country made a commitment that they 
will be cared for, and that we will provide them with health 
insurance and we will pay for most of it.
    We do that through Medicare and Medicaid and SCHIP. They 
are very important programs to us. They form the underpinnings 
of our social safety net. I believe Americans, and I am among 
them, feel a sense of appreciation for the fact that we have 
those.
    I sit before you today not simply as the Secretary of 
Health and Human Services, but with that duty comes the duty to 
be a trustee of those very important programs. Multiple times 
each year, I sit as a trustee and publicly pronounce the fact 
that the health of these very important programs is not what it 
needs to be. I believe there is an important need for all of us 
to be, in part, a physician to assure that they continue to be 
healthy.
    The budget that we have put forward is often--or is being 
looked at as an amputation. The reality is we are looking at 
ways to provide weight loss, to keep healthy. I hope that 
through the course of the day, we will have a chance to talk 
about the individual proposals that we have to stir the 
conversation about how we can keep these programs healthy.
    If we were to implement all of the ideas that we put 
forward in this budget, it would reduce the growth rate of 
Medicare from 6.5 percent to 5.6. There is no question that it 
would slow the growth. But all of them combined would still 
only preserve the sustainability of Medicare as a trust fund 
from 2018 to 2022. These are not cuts. These are intended to be 
ways of finding efficiencies, finding the best solutions to 
some problems that will allow us to sustain this.
    Now, I would like to continue on this line by indicating 
that in the area of health care, it is the aspiration of the 
President, it is my aspiration, and I believe a widely held 
aspiration of the American people that every person have an 
affordable basic insurance plan. I have indicated that those 
who are neediest are cared for through our safety nets. There 
are still others who have need, 47 million who do not.
    I am currently working with some 18 states, and I suspect 
there will be other states, who are putting proposals together 
to solve this problem in their state. However, there are some 
dilemmas that they alone cannot solve.
    In speaking with one Governor, he said to me, my problem is 
best typified by the person who works as a school aide but 
doesn't have enough hours to get benefits, and is married to a 
construction worker. The two of them make about $60,000 a year, 
but they can't--they don't get health insurance from their 
employer.
    So, in order to get it, they have to buy health insurance 
individually. They have to go to an individual market, and it 
is more expensive. Not only is it more expensive, but they have 
to pay their taxes before they can buy health insurance. As the 
Governor said to me, it is too heavy a lift. They just can't 
make it. We need the Federal Government to help us solve that 
problem so that I can provide an affordable basic policy to 
every person in my state. So, the President has put forward a 
proposal that would solve that dilemma.
    Now, in addition to that, it is very clear to us that many 
in states across this country will still not be able to afford 
even a basic insurance policy. For that reason, the President 
has proposed that the Federal Government use Federal funds to 
help states close that affordability gap. Therefore, we would 
be able to meet the aspiration of an affordable basic plan for 
every person.
    I hope that gives you a sense of what is in my heart as 
well as what is in our mind.
    [The prepared statement of Secretary Leavitt follows:]
             Statement of The Honorable Michael O. Leavitt,
        Secretary, U.S. Department of Health and Human Services
    Chairman Rangel and Congressman McCrery, thank you for the 
invitation to discuss the Department of Health and Human Services' 
budget proposal for fiscal year 2008.
    For the past 6 years, this Administration has worked hard to make 
America a healthier, safer and more compassionate nation. Today, we 
look forward to building on our past successes as we plan for a hopeful 
future.
    The President and I have set out an aggressive, yet responsible, 
budget that defines an optimistic agenda for the upcoming fiscal year. 
This budget reflects our commitment to bringing affordable health care 
to all Americans, protecting our nation against public health threats, 
advancing medical research, and serving our citizens with compassion 
while maintaining sensible stewardship of their tax dollars.
    To support those goals, President Bush proposes total outlays of 
nearly $700 billion for Health and Human Services. That is an increase 
of more than $28 billion from 2007, or more than 4 percent. This 
funding level includes $67.6 billion in discretionary spending.
    For 2008, our budget reflects sound financial stewardship that will 
put us on a solid path toward the President's new goal to achieve a 
balanced budget by 2012.
    I will be frank with you. There will never be enough money to 
satisfy all wants and needs, and we had to make some tough choices.
    We take seriously our responsibility to make decisions that reflect 
our highest priorities and have the highest pay-off potential. We 
recognize that others may have a different view, and there are those 
who will assume that any reduction signals a lack of caring. But 
reducing or ending a program does not imply an absence of compassion. 
We have a duty to the taxpayers to manage their money in the way that 
will benefit America the most.
    I would like to spend the next several minutes highlighting some of 
the key programs and initiatives that will take us down the road to a 
healthier and safer nation.

Transforming the Health Care System

Helping the Uninsured

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

Value-driven Health Care

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

Health IT

          The President's budget proposes $118 million for the 
        Office of the National Coordinator for Health Information 
        Technology to keep us on track to have personal electronic 
        health records for most Americans by 2014 by supporting our 
        efforts to:

         Implement agreed upon public-private health data standards.

         Initiate projects in up to twelve communities based on 
recommendations of the American Health Information Community. These 
projects will demonstrate the value of widespread availability and 
access of reliable and interoperable health information.

         Develop the Partnership for Health and Care Improvement, a 
new, permanent non-governmental entity to effect a sustainable 
transition from the AHIC.

Addressing the Fiscal Challenge of Entitlement Growth

    The single largest challenge we face is the unsustainable growth in 
entitlement programs such as Medicare and Medicaid. The Administration 
is committed to strengthening the long-term fiscal position of Medicare 
and Medicaid and to moderating the growth of entitlement spending. The 
FY2008 Budget begins to address Medicare and Medicaid entitlement 
spending growth by proposing a package of reforms to promote 
efficiency, encourage beneficiary responsibility, and strengthen 
program integrity.

Medicaid

    Medicaid is a critical program that delivers compassionate care to 
more than 50 million Americans who cannot afford it. In 2008 we expect 
total Federal Medicaid outlays to be $204 billion, a $12 billion 
increase over last year.
    The Deficit Reduction Act (DRA) that President Bush signed into law 
last year has already transformed the Medicaid program. The DRA reduced 
Medicaid fraud and abuse and also instituted valuable tools for States 
to reform their Medicaid programs to resemble the private sector.
    In FY 2008, we are also proposing a series of legislative and 
administrative changes that will result in a combined savings of $25.3 
billion over the next 5 years, which will keep Medicaid up to date and 
sustainable in the years to come. Even with these changes, Medicaid 
spending will continue to grow on average more than 7 percent per year 
over the next 5 years.
    Along with the fiscally responsible steps we are taking with 
Medicaid, we are following the same values in modernizing Medicare.

Medicare

    Gross funding for Medicare benefits, which will help 44.6 million 
Americans, is expected to be nearly $454 billion in FY 2008, an 
increase of $28 billion over the previous year.
    In its first year, the Medicare prescription drug benefit has been 
an unparalleled success. On average, beneficiaries are saving more than 
$1,200 annually when compared to not having drug coverage, and more 
than 75 percent of enrollees are satisfied with their coverage. Because 
of competition and aggressive negotiating, payments to plans over the 
next 10 years will be $113 billion lower than projected last summer.
    We also plan a series of legislative reforms to strengthen the 
long-term viability of Medicare that will save $66 billion over 5 years 
and slow the program's growth rate over that time period from 6.5 
percent to 5.6 percent.
    Similarly, we are proposing a host of administrative reforms to 
strengthen program integrity; improving efficiency and productivity; 
and reduce waste, fraud and abuse--all of which will save another $10 
billion over the next 5 years.

Promoting Health and Preventing Illness

    We are also taking steps in other ways to transform our health care 
system. Helping people stay healthy longer also helps to reduce our 
nation's burden of health care costs. The President's budget will:

          Fund $17 million for CDC's Adolescent Health 
        Promotion Initiative to empower young people to take 
        responsibility for their personal health.
          Strengthen FDA's drug safety efforts and modernize 
        the way we review drugs to ensure patients are confident the 
        drugs they take are safe and effective.
          Enhance FDA and CDC programs to keep our food supply 
        one of the safest in the world by improving our systems to 
        prevent, detect and respond to outbreaks of food borne illness; 
        and,
          Include $87 million to increase the capacity for the 
        review of generic drugs applications at the FDA and increase 
        access to cheaper generic drugs for American consumers.

Providing Health Care to Those in Need

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

Protecting the Nation Against Threats

    We must continue our efforts to prepare to respond to bioterrorism 
and an influenza pandemic.
    Some may have become complacent in the time that has passed since 
the anthrax-laced letters were delivered in 2001, but we have not. 
Others may have become complacent because a flu pandemic has not yet 
emerged, but we have not.

          The President's budget calls for nearly $4.3 billion 
        for bioterrorism spending.
          In addition, we are requesting a $139 million in 
        funding to expand, train and exercise medical emergency teams 
        to respond to a real or potential threat.
          Our budget requests $870 million to continue funding 
        the President's Plan to prepare against an influenza pandemic. 
        The budget requests funding to increase vaccine production 
        capacity and stockpiling; buy additional antivirals; develop 
        rapid diagnostic tests; and enhance our rapid response 
        capabilities.
          In FY 2008, the Advanced Research and Development 
        program is requested within the Office of the Assistant 
        Secretary for Preparedness and Response (ASPR). Total funding 
        of $189 million will improve the coordination of development, 
        manufacturing, and acquisition of chemical, biological, 
        radiological, or nuclear (CBRN) Medical Countermeasures (MCM).

Advancing Medical Research

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

Protecting Life, Family and Human Dignity

    Our budget request would fund $884 million in activities to help 
those trying to escape the cycle of substance abuse; children who are 
victims of abuse and neglect; those who seek permanent, supportive 
families through adoption from foster care; and the thousands of 
refugees that come to our country in the hopes of a better life.
    Our budget request also includes $ 1.3 billion to help millions of 
elderly individuals and their family caregivers to remain healthy and 
independent in their own homes and communities for as long as possible, 
including the $28 million for our Choice for Independence initiative 
that will help states create more cost-effective and consumer-driven 
systems of long-term care.

Improving the Human Condition Around the World

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

    Chairman RANGEL. Well, Mr. Secretary, it certainly does. 
But we have to be concerned as to what is in the beneficiary's 
mind, what is in the provider's mind, and we have to believe 
that the Administration did contact the hospitals and the 
doctors and the nurses and those that have a higher degree of 
obligation to take care of the nation's poor and sick and 
disabled.
    You are not a politician. We are, but we all are public 
officials. We can come up with these mechanical mathematical 
solutions. But at the end of the day, if the people you are 
trying to help believe that you are trying to hurt them, then 
we have an obligation to try to do better.
    It is for those reasons that I would think that in the 
future, you take into consideration what we have to do 
politically to take care of our constituents. Whether you agree 
with us or not, there are 435 of us over here that have to do 
the best we can.
    We are going to try to work together without the 
Administration. But it sure would be helpful if we knew, and if 
the nation knew, that we have sharp political differences, and 
the patients and the people of the United States are not going 
to fall between the cracks because of political differences. 
So, we are just starting, and I hope it works out. I would like 
to yield to Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman.
    Secretary Leavitt, please take my 5 minutes, and if you 
would, explain in detail the President's proposal in the budget 
for the standard health care deduction and how it is different 
from what people get today in terms of a subsidy for their 
health insurance.
    Secretary LEAVITT. Thank you, Mr. McCrery. I would like to 
begin by putting it into this context: It is our aspiration to 
provide every person in America with access to an affordable 
basic insurance policy. That requires that we as a Federal 
Government, working with the states, devise, as we have, 
programs that will care for those who are elderly and poor and 
disabled, those who are children needing protection. We do that 
through Medicare and Medicaid and through our SCHIP program.
    Our aspiration would be then for every state to assure that 
there is a basic plan that is affordable to the citizens of 
each state. As I indicated, I could go around and each of you 
have Governors who are working on various methods of doing 
that.
    However, there are two problems they are not able to solve 
on their own, and one is the problem that Mr. McCrery 
references. Currently, if a family--I will use the same 
example. You have a person who is working in a day care center 
married to a construction worker. Neither of them have access 
to a health insurance plan through their employer. But they 
need health insurance. They desire to have it. If they need to 
buy it, they have to then go to some outlet and buy it on their 
own.
    Inherently, insurance today that a person purchases in the 
``individual market,'' that is to say, not through an employer, 
it is more expensive because of various problems in pooling 
their risk with other people. So, they start off paying more 
money than people who in fact buy it through an employer.
    But then they have another serious problem, and that is 
that they have to pay their taxes before they are able to pay 
their insurance premium. That wouldn't be true for any of you 
or for me because we have our insurance provided through our 
employment, and as a result, we get a tax break.
    They don't get it. Now, frankly, it is indefensible for one 
group of our citizens to get a tax break for the purchase of 
insurance and for another group not to. So the President's 
proposal essentially says, we are going to give everyone the 
same tax advantage for having insurance. If you buy a basic 
insurance policy, we are going to give a family $15,000 as a 
standard exclusion. If you are an individual, you would get 
$7,500.
    So, the couple I have spoken of, the person who works in 
the day care center and a construction worker, now have a 
$15,000 deduction in the same way that they would if they were 
working as an employee receiving insurance. As for the 
employer, they are treated exactly the same under this 
arrangement as they would otherwise.
    Our effort here has been to create equity, to level the 
playingfield, to provide the same advantage for those who buy 
it through an employer and those who don't. It is a critical 
part of being able to assure that every person can have an 
affordable basic insurance policy.
    Mr. MCCRERY. So, in other words, Secretary Leavitt, the 
employer could continue to provide health insurance through the 
workplace to the employees. The employer would continue to get 
a deduction for the expenses of the employer in providing that 
health insurance.
    The employee, though, would not get a tax exclusion for the 
exact value of the provision of the health insurance from the 
employer. Instead, every employee, every person, would get a 
standard deduction of $15,000 per family or $7500 per 
individual. Is that correct?
    Secretary LEAVITT. That is correct. I might add, Mr. 
McCrery, that this proposal not only maintains the status quo 
for employers, it would benefit 80 percent of those who 
purchase health insurance through their employer and 100 
percent of those who have no health insurance at all.
    This is a very progressive tax policy. You have 
characterized it as timid, but it is a very progressive, and I 
might say important, step forward.
    Mr. MCCRERY. It is a very progressive step forward. It does 
not go far enough, in my view. I would put the cap much lower, 
frankly, to bring more awareness to individuals of the true 
cost of health insurance and health care. But it is a step in 
the right direction. It does provide much more equity in our 
tax expenditures than is currently present in the tax system. 
Thank you for explaining that.
    Chairman RANGEL. Mr. Stark may inquire.
    Mr. STARK. Mr. Secretary, I am not completely sure. But you 
have a definition of a basic insurance policy, and in it you 
have a minimum deductible for a family of $2200. Is that not 
correct?
    Secretary LEAVITT. It would be our view that the definition 
of what is basic should be determined by the state as well as 
what--the definition of affordability.
    Mr. STARK. I am sorry. But this is in your own information 
that you have issued. You have suggested that the minimum 
annual deductible to qualify should be $2200. Now----
    Secretary LEAVITT. I believe that was established as an 
illustration. Our policy would be to have the states make the 
determination as to how they define ``basic'' and how they 
define ``affordable.''
    Mr. STARK. So you are not going to federally define a 
benefit?
    Secretary LEAVITT. We believe that it is----
    Mr. STARK. Just yes or no: You are not going to define 
federally a basic benefit?
    Secretary LEAVITT. We believe--while there may be some 
guidelines, we believe the states should define it.
    Mr. STARK. You are going to give people money and then let 
the states decide what qualifies it?
    Secretary LEAVITT. We believe there should be a basic 
requirement for states.
    Mr. STARK. That is great. I mean----
    Secretary LEAVITT. That they should determine within that 
how the benefits are----
    Mr. STARK. Oh boy, oh boy, oh boy. Now, one other thing. 
Yesterday Portman was here, and your budget proposes 76 billion 
in Medicare cuts over five, 250 billion over ten. There is--
they all come from fee-for-service providers.
    Yesterday again Mr. Portman said he was unaware of MedPAC's 
recommendation to pay Medicare Advantage plans the same as fee-
for-service, which would save 50 billion. Also, your own Office 
of the Inspector General on page 22 of the Red Book says that 
the Medicare Advantage plans are overpaid by at least $3\1/2\ 
billion a year.
    Why were those savings not taken and why were all the 
savings taken out of fee-for-service?
    Secretary LEAVITT. We believe that Medicare Advantage is 
about integrating care, and that there will be efficiency and 
better quality----
    Mr. STARK. Do you have any proof of that?
    Secretary LEAVITT. Oh, I think we have----
    Mr. STARK. Or is that a faith-based issue?
    Secretary LEAVITT. No, no. We have--I think it is 
unquestioned that integrated care provides higher quality and 
patient----
    Mr. STARK. You can't prove that, and you have no figures to 
show that, and you are costing more money on these Medicare 
Advantage plans, and yet you take all the money out of fee-for-
service. Sounds to me like the for-profit plans that have been 
making huge campaign contributions have basically gotten to 
you.
    Now, one other question. In this faith-based nonsense, you 
spend $126 million, and yet the GAO has reported that it may be 
illegal, and you are not estimating whether they are doing any 
good. Is there some point when you intend to study the 
effectiveness of these plans and report back to us whether they 
are doing any good or whether you are just paying out a lot of 
money to a bunch of coats to do whatever they want to do that 
may be unconstitutional?
    Secretary LEAVITT. We need to hold them to a standard of 
accountability and performance----
    Mr. STARK. When do you plan to start doing that?
    Secretary LEAVITT. In the same way we do other programs.
    Mr. STARK. You haven't done it yet. If you are going to do 
it the same way you are doing other programs by ignoring them, 
as you have faith-based and abstinence training, it sounds to 
me like you are just giving money to Bechtel, as we have in 
Iraq.
    When do you intend to start supervising this money that you 
are spending and giving away to these groups?
    Secretary LEAVITT. I guess I never thought of Bechtel as 
faith-based. But Mr. Stark, we do in fact intend and continue 
to hold them accountable for results in the same way.
    Mr. STARK. But you don't. But GAO has said you haven't done 
that. When do you intend to start?
    Secretary LEAVITT. Well, it is a relatively new phenomenon, 
and we will be judging their effectiveness in the same way we 
do other programs.
    Mr. STARK. When? When?
    Secretary LEAVITT. On the same timelines.
    Mr. STARK. Which is never, so far. You can't tell me when 
you are going to start to look after this money that you are 
spending, 126 million on faith-based and 28 million on 
abstinence? That may not sound like much to you, but that is 
over $150 million a year that you have no idea what it is 
doing.
    Secretary LEAVITT. We have a standard practice with 
grantees who are faith-based, as well as those that aren't, 
that we evaluate the effectiveness of their performance----
    Mr. STARK. That is not what the GAO said. They said you 
haven't done anything to evaluate it.
    Secretary LEAVITT. Well, our practice is to do so.
    Mr. STARK. Well, I hope that your practice--I don't think 
you are telling us the truth, unless you want to challenge GAO. 
I will be glad to have you comment on the report. They say you 
have done nothing. I hope you will certainly start because the 
taxpayers deserve to see where their money is going.
    Secretary LEAVITT. There are times that we do disagree with 
GAO. But I will tell you that we--and if they are suggesting 
that we are not holding them accountable, that would be wrong.
    Mr. STARK. This was the report when they were still run by 
Republicans.
    Chairman RANGEL. Mr. Camp may inquire.
    Mr. CAMP. Thank you, Mr. Chairman. Again, welcome, Mr. 
Secretary.
    I just want to touch briefly on Medicare Advantage a little 
bit. My understanding, obviously, this is a plan that allows 
seniors the choice of receiving their Medicare benefits in a 
private health plan.
    These have grown considerably over the last few years, have 
they not?
    Secretary LEAVITT. They have. They present an opportunity 
for a person to have an integrated care, that is to say, have 
all of their care provided in the same basic facility in a 
managed way. People do both enjoy that, and they produce very 
good results.
    Mr. CAMP. Not just integrated, but they have better 
benefits in these plans, do they not?
    Secretary LEAVITT. They do. Because the care is integrated, 
they receive many benefits that others do not because of the 
cost savings and because of the value of the integration of 
their care.
    Mr. CAMP. Are these plans not now in more areas than they 
had been in the past? I understand on average there are 20 
Medicare Advantage plans available in each county. Is that 
accurate?
    Secretary LEAVITT. We have now achieved a ubiquitous 
coverage. In other words, there are plans available in every 
area of the United States, and I might add that we have seen a 
robust acceptance of them. We now have more than 7 million 
people who have opted on their own to make that decision. They 
have done so for the reasons that you have stated.
    Mr. CAMP. That is roughly 18 or 19 percent of all Medicare 
beneficiaries are now enrolled in Medicare Advantage?
    Secretary LEAVITT. Each one having made a decision on their 
own to do so.
    Mr. CAMP. These plans are saving seniors hundreds of 
dollars a year? The Medicare Advantage enrollees out-of-pocket 
costs are significantly lower than traditional Medicare 
enrollees. Is that correct?
    Secretary LEAVITT. They are. The benefits that come both in 
the form of savings, 25 percent of it inures to the Medicare 
Program and 75 percent would go to the beneficiaries 
themselves.
    Mr. CAMP. So their out-of-pocket costs are more than a 
third less, from what I understand.
    Also, these plans are important to underserved areas. I 
know many of us on this Committee, such as I, represent 
underserved areas and minority populations. Tell me about how 
Medicare advantage works in those areas.
    Secretary LEAVITT. Well, our aspiration and now our 
accomplishment is to have them available in every area. A 
person is able to select a plan. They are able to make 
decisions that will in fact guide their health care on their 
own. They are able to not only receive the capacity to make 
decisions, but they are also able to receive additional 
benefits.
    Mr. CAMP. These are important to low income beneficiaries. 
A significant number of the enrollees are low income.
    Secretary LEAVITT. A very high percentage of them. A 
significant percentage of them are from low income areas and 
from people with low income.
    Mr. CAMP. Thank you. I just also wanted to mention the 
President's proposal with regard to health insurance. I 
appreciate your testimony that just because you have a job that 
doesn't have employer-provided coverage, you shouldn't be at a 
disadvantage compared with someone who does.
    What projections do you have on the increase of the number 
of insured that would come about as a result of the President's 
proposal?
    Secretary LEAVITT. That will depend ultimately on the 
number of states who undertake the effort of creating an 
affordable choice in their state. I indicated that there are 
many states now who are working on such plans, some of which 
have been made public. Others have not.
    But you can take a state like Michigan, for example. 
Governor Granholm has put forward a proposal that would cover 
550,000 uninsured people in the state of Michigan alone with a 
basic plan. We are working with them to find a financing 
mechanism. The state of California. The state of Texas. The 
state of Indiana. You can go all the way down the line, and you 
will find that there are states all over the country who are 
now putting forward proposals.
    Most of the dilemmas they can solve on their own. Some of 
them they cannot. The ones that we have brought forward to you 
today, asking the Congress to assist, are those that they will 
find value in Federal action.
    Mr. CAMP. As you look at this proposal, I think earlier as 
we had a discussion, the question was raised: What about the 
unintended consequences of a proposal like this? Would there be 
people who would find themselves uninsured as they would lose 
employer coverage.
    Are there going to be people caught in the middle who lose 
that employer benefit but then don't go on to be able to afford 
coverages? Are there any ideas on that?
    Secretary LEAVITT. I find that argument misplaced. The 
average employer plan is $11,500 a year. The average exclusion 
that will be given--the standard exclusion would be 15,000. In 
other words, this will benefit 80 percent of those who are in 
employer plans and, I might add, 100 percent of those who have 
no coverage, 100 percent.
    Now, you combine that with our Affordable Choices 
initiative, and we will see millions of Americans who have 
health insurance who currently do not. That is our aspiration, 
every American having affordable basic insurance at their 
access.
    Mr. CAMP. All right. Thank you, Mr. Secretary. My time is 
expired.
    Chairman RANGEL. Mr. Secretary, how long can you be with us 
today?
    Secretary LEAVITT. I think 12:30 is the timeframe that----
    Chairman RANGEL. Well, there are about 30 Members here, and 
if we push that 12:30 a little bit, that would allow the 
remaining Members to have at least 3 minutes, those who 
persevere. If there is no objection, we will do that. I want 
the new Members to know that this is not the normal procedure, 
but the Administration has problems and so we have to 
accommodate them. I am trying to accommodate everybody.
    Secretary LEAVITT. Mr. Chairman, if it would be helpful for 
me to either come back on an informal basis, or I will make 
some--I will check to see if I can push a little. I want to be 
accommodating. I want to be here to be responsive to your 
questions and----
    Chairman RANGEL. See whether or not you can push. We do 
intend to have informal sessions where we can sit around and 
honestly discuss the differences. I appreciate that kind offer. 
It is accepted by the Ranking Member and I.
    Meanwhile, we will see how far we can go with this 
suggestion. Mr. Levin is recognized for 3 minutes.
    Mr. LEVIN. Thank you.
    Mr. Secretary, welcome. Quickly, in your opening remarks 
you instead of talking about the budget in detail talked about 
compassion. We respect that. But a crucial test of compassion 
is the extent of resources and the use of them.
    You say in your opening statement advancing medical 
research. What is being proposed for NIH is less than 
inflation, is it not?
    Secretary LEAVITT. It is.
    Mr. LEVIN. I just want to tell you straight out, I don't 
think compassion is reflected in resources when there is NIH 
funding less than inflation. It is not defensible to the people 
of this country.
    Then you say bringing affordable health care to all 
Americans. I think your proposals would add health care for 
about 3 to 4 million people.
    So, let me just talk to you about the standard deduction. I 
looked at the amount of employer contribution in the 
construction industry in southeast Michigan. The average--and 
these are average--is $7 an hour. If you do that by 40 hours, 
52 weeks, let's take a figure of the employer contribution is 
$15,000.
    You are providing a standard deduction--it is not an 
exclusion--of 7500, or maybe 15,000 if the total family is 
covered. That deduction is worth $4,000, more or less. So, 
essentially, you are saying to the construction workers, 
instead of having 12-, 13-, 14,000 that you don't pay taxes on, 
you are going to have a deduction of $4,000.
    How do you defend it?
    Secretary LEAVITT. I am not following your example. If a 
construction worker were making--how much did you say he would 
make?
    Mr. LEVIN. Look. The amount of health insurance is about 
13-, $14,000. That is what the employer is paying. A deduction 
of 7500 or 15,000 is worth, if it is 15,000, $4,000.
    Secretary LEAVITT. The average individual health insurance 
would be closer to $6,000. If you had a family----
    Mr. LEVIN. No, no, no. The deduction from the income tax is 
worth 4--to $5,000, sir.
    Secretary LEAVITT. Are we talking about a married person 
or----
    Mr. LEVIN. It doesn't really matter----
    Secretary LEAVITT. It matters----
    Mr. LEVIN [continuing]. I mean, because the deduction is 
going to be less than half of what he doesn't pay on the 
insurance contributions.
    Secretary LEAVITT. The issue is that there are many people 
who work construction who get no deduction and still have to 
buy insurance on their own. And----
    Mr. LEVIN. So, you are going to take from those who are 
getting this insurance and give it to those who do not bargain 
for any insurance?
    Secretary LEAVITT. I am going to make certain everyone is 
treated the same.
    Mr. LEVIN. Come to Michigan and I am going to set up a 
meeting with construction workers. Okay? Will you come?
    Secretary LEAVITT. I have been to Michigan twice recently, 
and I am sure I will be back again.
    Mr. LEVIN. I will set up a meeting.
    Secretary LEAVITT. Well, that would be good.
    Mr. LEVIN. I want you to defend your proposal.
    Secretary LEAVITT. Well, let me tell you about another 
proposal I am working on in the state of Michigan with Governor 
Granholm. Governor Granholm would cover 550,000 people with an 
affordable basic plan, a lot of whom are construction workers 
who don't have any insurance right now because they have to buy 
insurance after they pay their taxes. I hope we can meet some 
of them, too.
    Mr. LEVIN. I am in favor of that. Now, we are pushing you 
to do that. But I want you to come and talk to construction 
workers. Okay? I will set the meeting up.
    Chairman RANGEL. Mr. Herger.
    Mr. HERGER. Thank you, Mr. Chairman.
    Secretary Leavitt, you mentioned that the President's 
budget attempts to slow the growth of Medicare spending with 
several proposals that will save a total of $66 billion over 
the next 5 years. Since 2000, the monthly premiums for Medicare 
part B have more than doubled. Can you tell me how the 
President's budget proposals would affect the future growth in 
beneficiary premiums?
    Secretary LEAVITT. Anything we can do that will slow the 
growth of premiums without affecting directly beneficiaries 
will in fact have a beneficial effect on their premiums as 
well. What drives premiums to beneficiaries up are costs that 
are out of control.
    The sooner we act to begin to find ways in which we can 
reduce the growth rate, the less their increases will be over 
time. This is about not only keeping the trust fund 
sustainable; it is about finding ways to keep the premiums 
affordable.
    Mr. HERGER. So, you are saying you feel by doing this it 
would pull the costs of premiums down, or they wouldn't rise as 
rapidly as they are?
    Secretary LEAVITT. There is no question that if we are able 
to suppress the growth rates of Medicare, that beneficiaries' 
premiums will also be reduced.
    Mr. HERGER. So, you are saying that premiums under the 
budget would be less than they would be if we do not take 
action to slow the growth of Medicare?
    Secretary LEAVITT. In the long term, there is no question 
that if we allow these costs to go unchecked or un-dealt with, 
if we do not treat this patient in time, they will become 
substantially less well and beneficiaries will pay a higher 
cost.
    Mr. HERGER. Do you have an estimate of how much the average 
senior citizen would save on monthly Medicare premiums as a 
result of the reforms in the President's budget proposal?
    Secretary LEAVITT. I do not have that in front of me, but 
there is no question that that would be the case. If we allow 
these costs to continue to grow unabated, it will be harmful 
not only to the Treasury of the United States but also to the 
pocketbooks of consumers.
    Mr. HERGER. Well, Mr. Secretary, I want to thank you for 
your proposal. I want to thank you for not only going to 
Michigan, but also coming to California very frequently, 
including my northern California rural district. Thank you very 
much. I am very encouraged by what I hear you saying and the 
direction that we are attempting to move to get in control 
these out-of-control health care costs. Thank you very much.
    Secretary LEAVITT. Thank you.
    Chairman RANGEL. While you are taking these invitations, I 
don't think you are ready for my hospitals yet. But I will work 
on that.
    Secretary LEAVITT. I promised I would be there, Mr. Rangel.
    Chairman RANGEL. The chair recognizes my friend John Lewis 
from Georgia for 5 minutes--3 minutes.
    Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman.
    Thank you very much, Mr. Secretary, for being here. I like 
your words this morning. You said in your opening statement 
that we are a compassionate nation. You further stated that it 
is your aspiration, your hopes, your dreams, that everyone 
would have affordable health care, access to health care.
    Do you believe that health care is a right?
    Secretary LEAVITT. I believe that, as I suggested, it is 
certainly a need. It is one of those things that we aspire as a 
nation for everyone to have access to an affordable basic 
insurance policy. There are personal responsibilities that are 
involved in all of our needs.
    In a nation as compassionate as ours, when a person is not 
able to meet that individual responsibility, we find ways to 
help them. I believe that is the case with health care.
    Mr. LEWIS OF GEORGIA. Thank you, Mr. Secretary. Mr. 
Secretary, I want to talk about the shortfall in the SCHIP 
program for this year. In Georgia and 16 other states, we will 
run out of money to cover poor children. I just got word since 
this hearing that in the state of Georgia, on March 7th they 
will stop enrolling new participants.
    Is there something you can do? Can you and the 
Administration fix this problem, solve it right now 
administratively?
    Secretary LEAVITT. Unfortunately, Mr. Lewis, we cannot. 
That will require an act of the Congress. I will be in Georgia 
on Monday. I was on the phone yesterday with Governor Perdue. 
We are working to give Governor Perdue and all other Governors 
in this situation all the tools that we have available.
    Ultimately, the Congress will need to act if they are to 
meet those short-term needs as we move toward reauthorization 
of the program, which we believe needs to occur this year.
    Mr. LEWIS OF GEORGIA. It is my understanding, Mr. 
Secretary, that in the past, you have been able to fix it. Can 
you fix it one more time for the children in Georgia and the 16 
other states?
    Secretary LEAVITT. It is our information that there are 
five states who are facing difficulties. I do not have 
administrative authority. I think it is universally understood 
that the Congress would need to act in order to affect--we have 
proposed a way it could be done. It could change the law to 
allow a 2-year cycle of reallocation instead of a three. We 
would then be able to administratively fix it.
    Our objective is to help the states through this. We 
believe that as we reauthorize the program, we all ought to 
focus on the ways that we could keep it from happening the next 
time. In the meantime, we are doing all we can to give states 
tools. But the Congress will have to act to solve this problem.
    Mr. LEWIS OF GEORGIA. Thank you, Mr. Secretary.
    Chairman RANGEL. The chair recognizes Mr. Camp for 
questioning as the--he did? Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Mr. Chairman. Secretary Leavitt, 
good to see you again.
    As you know quite well, I am sure, according to SAMHSA, 
between 22 and 26 million Americans are suffering the ravages 
of chemical addiction, illegal drug addiction and alcoholism. 
Last year, according to SAMHSA, 150,000 people died as a direct 
result of this disease. According to a study by Brandeis 
University, it costs our GDP $400 billion in lost productivity 
and absenteeism.
    I don't think there is any question in my mind, at least, 
that chemical addiction is America's number one public health 
problem. Millions of Americans need but cannot gain access to 
treatment for their addiction. Last year 300,000 Americans were 
denied treatment.
    Many were discriminated by insurance companies and their 
health plans. Barriers were erected that made it impossible for 
them to get treatment vis-a-vis treatment for what are deemed 
more physical diseases. Medicaid funding was inadequate, and we 
all know the situation at our VA hospitals.
    This results in a tremendous burden, to say the least, to 
families, to taxpayers, through increased health care, criminal 
justice costs, social service costs. The average untreated 
alcoholic, for example, incurs health care costs twice as high 
as mine. I happen to be a grateful recovering alcohol of 25\1/
2\ years, and according to the statistics, the health care 
costs for someone who goes untreated are twice as high, 100 
percent higher than mine.
    Now, taking all this into account, I have got to say I am 
troubled to see that SAMHSA, the Substance Abuse and Mental 
Health Services Administration, in this budget is cut by $159 
million, from 3.2 to $3.05 billion. How are we going to tackle, 
how are we going to address, our Nation's number one public 
health problem by cutting funding for this critical agency?
    Secretary LEAVITT. Congressman, I think what you have 
suggested is right, that it is a very serious problem. We are 
working with the states. We are using the finances that are 
available to us to try to leverage them and to find more ways 
to do that. There is no question that doing so leverages those 
dollars.
    Mr. RAMSTAD. Do you agree that this is, if not America's 
number one public health problem, one of the most pressing 
public health problems, addiction, chemical addiction?
    Secretary LEAVITT. There are many that are in that 
category--obesity, childhood obesity, addictions, all of those. 
While I was the Governor of Utah, it became very clear to me 
that a very high percentage of those that we dealt with on our 
welfare rolls, for example, were there as a result. Our prisons 
were full of people who had started with a chemical addiction. 
There is no question that these costs go on and on and on.
    Mr. RAMSTAD. In fact, according to Columbia University, 82 
percent of all people in prisons and jails are there because of 
their addiction. We are not dealing with it as a nation, and I 
am really saddened and disappointed, and more than that, Mr. 
Secretary, to see this significant cut from SAMHSA.
    I hope the Congress will, in its wisdom, restore these 
cuts. I hope Health and Human Services will be more proactive 
in dealing with this epidemic of addiction in America. Thank 
you, Mr. Secretary.
    Chairman RANGEL. Mr. Neal is recognized for 3 minutes.
    Mr. NEAL. Thank you very much, Mr. Chairman. Thank you, Mr. 
Secretary.
    Mr. Secretary, could we begin with the acknowledgment that 
was offered yesterday by Rob Portman when he said that Social 
Security was one of the great achievements of American history?
    Secretary LEAVITT. Congressman, there is no question that 
it provides a social as well as financial foundation. I was in 
China recently and many other countries, and see how they 
wrestle with the potential of an aging population. We have 
challenges. They have even greater challenges. To have what we 
have is worth protecting, and making certain that we are able 
to sustain it over a long period of time.
    Mr. NEAL. Would you agree with the same premise that I 
offered about Medicare?
    Secretary LEAVITT. There is no question that Medicare is a 
fundamental part of the way we as a compassionate nation meet 
the needs of citizens that we all desire. There are ways we can 
improve both of those programs, but they are very important 
underpinnings of our society.
    Mr. NEAL. Thank you for that acknowledgment, Mr. Secretary.
    Let me take you to the more specific case that we addressed 
a bit earlier this morning, graduate medical education and how 
important that is, not only as offering first-rate training to 
arguably the best doctors in the world, but the role that it 
plays as an economic engine as related to the growth of 
biotechnology as well.
    In Massachusetts, as is the case in New York and California 
and New Jersey, what graduate medical education has done to 
promote economic growth is sometimes offered as a separate 
argument when the two are very much linked. I would urge you, 
as this budget is being offered, during the discussion of 
budget priorities to note just how important GME is not only in 
terms of first-class doctors, first-class health care, first-
class employment opportunities, but also the spinoff as it 
relates to the growth of biotechnology across America. Perhaps 
you could comment on that.
    Secretary LEAVITT. There is no question that we need 
graduate medical education. There is no question we need to 
have a means of financing it. I would argue, and our budget 
proposal clearly proffers, that using Medicaid, for example, or 
Medicare as the means of financing it is short-sighted, short-
sighted because what it means is we have fewer dollars 
available to us to meet the needs of the poor.
    We ought to find a way of financing medical that is overt, 
not covert. Medicaid, for example, was designed to help those 
who are disadvantaged because of low income. It was not put 
there to be the funding source for graduate medical. We ought 
to come up with a system that causes everyone to contribute, 
not just our programs for the low income.
    Mr. NEAL. Do you have any indication what percentage of 
Medicaid dollars? I think we have a pretty good idea of the 
Medicare supplement. But Medicaid dollars, what percentages go 
to GME?
    Secretary LEAVITT. I can get that. I don't have it on my--
--
    Mr. NEAL. All right. Thank you.
    Chairman RANGEL. The chair recognizes Mr. Becerra for 3 
minutes.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. Secretary, thank you very much for being here. As I 
said, I look forward to working with you, as I know my 
colleagues do, on some of these proposals.
    Actually, I want to sort of feed on what Mr. Neal was 
saying. The indirect medical education payments, it seems to me 
that in your proposals, the budget proposals you have that 
propose to eliminate IME payments to teaching hospitals, it 
appears that you are arguing that the teaching hospitals are 
already receiving these types of payments through the Medicare 
Advantage plans through a pass-through; that they will go 
ahead--these Medicare Advantage plans are paying teaching 
hospitals for some of the costs of teaching the next generation 
of health care providers, doctors, nurses, and so forth.
    But I am not sure if the evidence is out there that this is 
occurring. So, if we were to move forward with the proposal 
that the Administration has provided us to eliminate IME 
funding, indirect medical education payment funding, you are 
going to have a massive impact on a lot of these teaching 
hospitals that rely on those payments to help them sustain the 
work that they do in teaching the next generation of providers, 
of doctors and so forth, and also helps them sustain the level 
of care that they provide to many, many people throughout the 
country.
    I am wondering if you could tell me that you will provide 
us with the evidence that led you to make the cuts to IME, to 
these teaching hospitals, so we can know on what basis you are 
deciding to de-fund some of these teaching hospitals of moneys, 
resources they need to be able to provide not just health care 
but the teaching necessary to teach the next generation of 
health care providers.
    Secretary LEAVITT. You are right, we do believe that many 
of these expenses, including bad debt, are built into their 
rates. But it goes beyond that with graduate medical education. 
I dealt with this as Governor. There needs----
    Mr. BECERRA. Because I am going to run out of time, if I 
could just know, will you provide us the evidence that led you 
to this particular position on doing the cut on IME?
    Secretary LEAVITT. We will provide you with the information 
we have. But I do just want to make the point, Congressman----
    Mr. BECERRA. Certainly.
    Secretary LEAVITT [continuing]. That there is a need for us 
to rethink the way we do graduate medical--everyone in the rate 
system needs to be bearing some part of that cost because 
everyone gets the benefit. We are right now using Medicaid 
rates and Medicare rates as the means of doing it.
    If we are going to do it with Federal contributions, fine. 
But let's come up with a line item that says this is how we are 
going to do it. Right now we are leaving the vast majority of 
the entire system out of it. They should be paying their part.
    Mr. BECERRA. I think you will find a lot of support in 
reexamining how we do the payments because we need to have a 
solid base of funding for these institutions, these facilities 
that have committed to provide the next generation of health 
care providers to teach them, at their own cost. Because you 
can't go out there and attract as many people to your 
institution if you tell them that they are going to have a lot 
of students doing some of the work, that the residents are 
doing the work. Everyone wants that 20-year veteran to do the 
operation.
    So, I agree with you there and hope we can work on that. 
So, I thank you for your response and look forward to receiving 
the information.
    Thank you, Mr. Chairman.
    Chairman RANGEL. The chair would like to recognize Mr. 
English for 3 minutes.
    Mr. ENGLISH. Thank you, Mr. Chairman.
    You know, Mr. Chairman, I was listening to the gentleman 
from Michigan defining compassion maybe the way we sometimes 
all too often do, simply based on outlays. In my view, the true 
test of compassion is how effectively resources are used, and 
really it is only measured in results.
    Nevertheless, and I know the Secretary knows my district 
very well, we have people in my district in our hospital 
community who are achieving a great deal with a little, and are 
very dependent on the resource decisions that we make here in 
Washington.
    On that point, Mr. Secretary, the President's budget 
reduces payments to hospitals effectively by setting the annual 
update to the market basket minus.65 percent. Never mind that 
we are debating about an adjustment of an increase. This is 
very significant because last month, MedPAC recommended to 
Congress that it give hospitals a full market basket 
inflationary update for Fiscal Year 2008.
    Nearly two-thirds of America's hospitals lost money 
treating Medicare patients in 2005. MedPAC has estimated that 
overall hospital Medicare margins will drop to negative 5.4 
percent in 2007, and Medicaid hospital margins are even lower.
    I know the Secretary is intimately familiar with these 
facts. My question to you, Mr. Secretary, is: Do you believe 
that the President's proposal is adequate funding to allow 
hospitals in places like Erie, Pennsylvania and Sharon, 
Pennsylvania to meet the real challenges of new and costly 
pharmaceuticals, new technologies, labor shortages, preparation 
for pandemics, and simply making sure that the people who walk 
into the emergency room are taken care of?
    Secretary LEAVITT. Congressman, in the development of 
budget, we have to make certain assumptions and we have to make 
decisions. You know this. I looked at the hospitals as well as 
my colleagues and concluded margins in hospitals are strong 
right now. MedPAC themselves say it is about 13 percent.
    I see access to capital being strong. I see access to care 
being strong. So, I had to come up with a conclusion on how we 
would arrive at a figure. MedPAC is a recommendation. Congress 
in the past has met it, and other times they haven't. In fact, 
most times they haven't.
    I looked at the productivity figure that they provided, 
which was 1.3 percent, and said, if we are having a 
productivity increase of 1.3 percent, let's just split that. 
Let's have half go to the Federal Government and half go to--or 
to the beneficiaries, and half go to--or the taxpayers, and 
half go to the beneficiaries. That is how I arrived at the.65 
percent. That is, frankly, a better split than many Congresses 
have done in the past regarding MedPAC.
    Mr. ENGLISH. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Chairman RANGEL. The chair recognizes Mr. Doggett for 3 
minutes.
    Mr. DOGGETT. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary.
    You surely share my view that tobacco is the deadliest 
legal product marketed today, killing over 400,000 Americans 
and millions worldwide. Can you assure me that during this 
month, you will be able to supply a complete response 
concerning the documents I have discussed with your staff that 
Chairman Waxman and I have requested to assure us that neither 
your department nor any other part of the Federal Government is 
promoting tobacco overseas?
    Secretary LEAVITT. I am informed this morning by my staff 
of those documents, and I am assured that they are doing the 
research necessary to give you those assurances. I have to tell 
you I would be stunned if we found any place, and I would not 
only stunned, I would be alarmed, and we would move rapidly----
    Mr. DOGGETT. I am glad to hear that. I hope you are being 
consulted because, sadly, I think there have been problems. I 
hope at the same time you supply the documents this month that 
you can tell us of anything that your department is doing to 
encourage the ratification of the Framework Convention on 
Tobacco Control by the Senate, which has been pending, as you 
know, since May of 2004. Can you do that?
    Secretary LEAVITT. I can give you an update. I am not----
    Mr. DOGGETT. Thank you. I will just ask you to submit that 
with the documents because I want to move to your testimony 
this morning.
    When did you and President Bush first decide that it would 
be necessary to raise taxes in order to address the problems of 
the uninsured in America?
    Secretary LEAVITT. The uninsured what?
    Mr. DOGGETT. When did you and President Bush first decide 
that you would have to have a tax increase, as you proposed 
this morning, to address the problems of the uninsured in 
America?
    Secretary LEAVITT. Well, there is no tax increase. There 
are----
    Mr. DOGGETT. Well, if I am a construction worker, as Mr. 
Levin talked about, or any person who receives a certain level 
of comprehensive health insurance, as you have testified this 
morning, as Secretary Paulson told me yesterday, you are 
planning to raise taxes on it.
    Secretary LEAVITT. There are no additional tax dollars 
raised by this proposal. Eighty percent of those who receive--
--
    Mr. DOGGETT. Well, your own budget proposal says----
    Secretary LEAVITT. Eighty percent of those who receive----
    Mr. DOGGETT. I understand that you think you help 80 
percent. But 20 percent of the people, under your analysis, 30 
to 38 million under the analysis of one independent consulting 
group, will have to pay the new Bush health insurance tax, the 
first major tax increase this Administration has proposed 
which, oddly enough, will fall on people who have committed the 
sin of having a comprehensive health insurance policy.
    You don't deny that you raise revenues, which most people 
call taxes, in this budget, do you?
    Secretary LEAVITT. I do. There is no----
    Mr. DOGGETT. You don't raise any taxes, as your budget 
document itself shows?
    Secretary LEAVITT. There are no new taxes raised by the----
    Mr. DOGGETT. You claim it is revenue-neutral. But the only 
way it can be revenue-neutral, when you add benefits to 
someone, is if you raise the revenue with someone else. Your 
proposal raises taxes on people who have comprehensive health 
insurance, Mr. Secretary. Surely you will acknowledge and admit 
that.
    Secretary LEAVITT. There is no provision acted on by this 
Committee or the Congress that makes a change to the Tax Code 
that does not affect some positively and some less positively 
or negatively. This proposal does not raise additional taxes.
    Mr. DOGGETT. That is a long way of saying, when you refer 
to negatively, as Secretary Paulson admitted yesterday, that 
you are raising taxes with this Bush health insurance proposal, 
this Bush health insurance tax, on millions of Americans. It is 
the first major tax increase this President has proposed. I 
agree we need more revenue, but I think this is the wrong 
target for your tax increase.
    Secretary LEAVITT. There is----
    Chairman RANGEL. You may complete.
    Secretary LEAVITT. Well, there is no--it is indefensible 
that this country provides a tax benefit to those who receive 
insurance through their employment and does not provide the 
same benefit to those who do not.
    This does not provide any additional taxes to the U.S. 
government. It benefits 80 percent of those who are currently 
in the system, and 100 percent of those who have no insurance.
    Mr. DOGGETT. That is why you are raising taxes on the other 
20 percent.
    Secretary LEAVITT. We will just have to disagree on that, 
Mr. Doggett.
    Chairman RANGEL. The chair recognizes Mr. Pomeroy for 3 
minutes.
    Mr. POMEROY. Thank you, Mr. Chairman.
    Mr. Secretary, what is the Administration's plan on the 
sustainable growth rate issue relative to physician 
reimbursements?
    Secretary LEAVITT. We look forward to working with the 
Congress to solve that very thorny problem that we seem to 
solve for 6 months at a time. We would like to solve it longer 
range.
    Mr. POMEROY. Is there a provision in the budget to solve it 
longer than the 6 month period at a time?
    Secretary LEAVITT. That is a conclusion that we believe we 
should reach collaboratively with the Congress.
    Mr. POMEROY. In other words, no.
    Secretary LEAVITT. We have not put forward a proposal, nor 
have we heard one from the Congress yet.
    Mr. POMEROY. Thank you. Your comments there remind me an 
awful lot of what the Secretary of the Treasury said, looking 
forward to working with us on fixing the AMT permanently, 
except there is no money in the budget to fix the AMT 
permanently. You want to work with us to fix the sustainable 
growth rate reimbursement issue on physician payments, except 
you put nothing in the budget to do it.
    I think it goes to show, really, a false dimension to this 
budget, a phony budget. I think some of the frustration, Mr. 
Secretary, you are finding from the majority side of the panel 
here is we really had been a little hopeful about more 
opportunity to work jointly in this budget. It looks to me 
somewhat like the same old stuff.
    Let me move to rural health care because you have indicated 
that the margins are strong with hospitals and that capital 
markets respond well to hospitals. In the nonprofit hospitals 
that I represent, especially those struggling to keep their 
doors open in these rural reaches, are not in that situation at 
all.
    There is one reckoning that they are taking about a $35 
million cut in the next 5 years alone under your proposal. 
These are for institutions right on the edge, just to take 
rural health care, which is extremely difficult to deliver in a 
rural setting.
    As I understand what you call--although you are not 
phrasing it as cuts, you go into the market basket, you reduce 
the adjustment that they are receiving to below what they are 
finding in terms of their costs, and actually freeze the market 
basket on home health care. These, without question, impact 
significantly the income received by these outfits that aren't 
making any money today.
    Do you have concern? How are you as Secretary going to deal 
with the plight of these rural institutions that are right at 
the waterline now, going under the budget proposals?
    Secretary LEAVITT. Mr. Pomeroy, I will confess to you that 
I think the way we reimburse health care generally could use a 
lot of tuneup. It is a witches' brew that very few people 
understand, and I think it does not allow for us to use the 
sensitivities that could be and should be used in creating 
formulas that can be more sensitive to those hospitals like you 
have described.
    I would tell you, on the point you made on the doctor 
reimbursement issues, I have strong feelings about how we 
should go about that. I mean, it is very clear to me that some 
portion of what we reimburse physicians with in the future 
ought to be based not just on the quantity but also on the 
basis of our ability to measure value.
    I believe that is one of the areas where there is a large 
land of agreement that could be worked on between the 
Administration and this Congress. I believe every patient 
deserves to have some kind of independent assessment of the 
quality they get, not just in doctors but also hospitals.
    I think every patient ought to be able to find out how much 
it costs, and we ought to be transparent about that. Part of 
that, part of finding the solution that you are referring to, 
is making our system more transparent where people can really 
understand it and make judgments based on value.
    Mr. POMEROY. Thank you. My time has expired. The prior 
secretaries have afforded the opportunity of the CMS director 
to visit North Dakota to look directly at our situation, meet 
with the providers. I will be advancing a request to the CMS 
director, but I alert you to it. I would hope that we can 
continue that under your leadership of HHS.
    Secretary LEAVITT. Thank you.
    Chairman RANGEL. The chair recognizes Mr. Hulshof for 3 
minutes.
    Mr. HULSHOF. Thank you, Mr. Chairman.
    Mr. Secretary, welcome. The distinguished gentleman from 
California, the health Subcommittee Chairman, challenged you on 
Medicare Advantage, challenged about savings on the integrated 
care. I think Mr. Camp, to underscore the point he made, is 
that these Medicare Advantage plans are available to seniors in 
many underserved areas.
    The fact that these plans save seniors, I think, an average 
of about $82 a month in reduced out-of-pocket experiences, I 
know the Chairman of the health Subcommittee has talked about 
trying to cut those payments.
    I guess if I were to engage in rhetorical grandstanding 
such as I have heard this week in this Committee, I would say 
how unkind and how uncaring, what an utter lack of compassion, 
to rob seniors of their current health care choices, forcing 7 
million seniors to reach deeper into their pockets, and 
exacerbating the headlong rush toward insolvency.
    But I won't go there. Instead, I do want to talk about 
something that Mr. Thompson and I have worked on, my good 
friend from California. Your budget--I want to applaud the fact 
that your budget embraces the goals of health information 
technology. I believe that there are--we haven't even begun to 
see the efficiencies yet of implementing health IT.
    One specific area that Mr. Thompson and I have worked on is 
in the area of telemedicine. Now, I am a bit biased because I 
think the University of Missouri is the national leader in 
telemedicine. But I would like to hear your view, Mr. 
Secretary, the expansion of origination sites, consulting sites 
that could be reimbursed by Medicare, things like remote 
monitoring conditions of cardiac arrhythmia, diabetes, 
consulting with the best medical minds in the country, all via 
technology.
    I personally believe we need to adjust fee schedules so 
that physicians and others have the proper incentives. Again I 
think we can save money. It is difficult to quantify sometimes 
savings from wellness and implementation of technologies. Just 
in the few seconds remaining, what is your view, especially as 
enacting legislation or reauthorizing telemedicine 
reimbursement on this issue?
    Secretary LEAVITT. Congressman, I will up the ante a little 
on you and say we talk about our health care system. I don't 
think we have a system. I have a credit card in my pocket. I 
got it from a bank. It is a different color than the one you 
have. Our banks competed to get our business, but they all use 
the same system to optimize the value they provide us.
    We don't have that kind of system in health care. Our 
system of health care needs to be built around connectedness. 
It needs to have quality measures. We need to be able to know 
the price and compare it to the quality. We need to be able to 
use those in creating incentives so that we know every person 
who touches our health has a reason to seek higher quality at 
lower cost. The key to that is a connected system of health 
information technology.
    Mr. HULSHOF. Thank you.
    Chairman RANGEL. The chair recognizes Ms. Tubbs Jones for 3 
minutes.
    Ms. TUBBS JONES. Thank you, Mr. Chairman.
    Good morning, Mr. Secretary. In the anteroom, we were 
having a discussion about the whole piece of the President's 
health care proposal. I have heard claims that the President's 
health proposal will require high income people to pay a larger 
share of the cost for their health insurance.
    But it is not really--that is not what happens. It is 
really that the proposal actually taxes higher cost health 
plans, not higher income people. Can you respond to that for 
me, please?
    Secretary LEAVITT. We believe it is just indefensible that 
we have a tax system that provides a tax benefit to those who 
get health insurance through an employer, but leaves out people 
who are uninsured and can't get it through an employer. We 
would like to level the playingfield. We would like to treat 
people the same. We think it solves a problem that has actually 
lingered for a long time.
    No Congress ever voted to have this system. This is a 
figment of the forties with wage and price controls. This 
system just evolved.
    Ms. TUBBS JONES. Mr. Secretary, I love your response. But I 
only have but 3 minutes, so don't give me a long answer. Give 
me a reduced answer. Go ahead, please, sir.
    Secretary LEAVITT. I think that is about as reduced as I 
can get.
    Ms. TUBBS JONES. Isn't it a fact that the health insurance 
premiums are based on the risk associated with the people 
covered by the policy, such that workers in West Virginia would 
likely pay more than an executive on Wall Street for the health 
care coverage? Wouldn't your proposal to cap the tax benefit 
for medical expenses harm middle income workers in hazardous 
industries?
    Secretary LEAVITT. Our proposal would take the radical step 
of treating everybody the same.
    Ms. TUBBS JONES. Except in the United States of America, 
everybody is not treated the same. We have workers who don't 
receive any kind of health care coverage. Then we have workers 
who receive coverage that is paid by their employer. We have 
workers who can afford to pay into a health savings account, 
and we have workers who can't afford to do that because their 
income doesn't allow them to do that.
    So, why would you treat them all the same?
    Secretary LEAVITT. Well, I guess that is the question. Why 
would we discriminate against people who, first of all, don't 
have an employer to help them and are in low income? That is 
what we are doing.
    We are essentially saying to people who currently have 
employment and currently have insurance and currently get it 
paid by their employer, we are going to give them an advantage. 
Then we are going to discriminate against people who don't have 
a job, who don't have insurance, and don't get any advantage.
    This is a very progressive policy to say, let's just level 
the playingfield and treat everybody the same.
    Ms. TUBBS JONES. It sounds really good.
    Secretary LEAVITT. It is really good.
    Ms. TUBBS JONES. But you understand--no. But you understand 
under the law, for example, in the discrimination, a policy 
that appears on its face to be neutral can have a disparate 
impact in its implementation.
    I would suggest to you that the health care proposal that 
you have put on the table may appear neutral on its face, but 
when it is applied to workers across the board, it has a 
disparate impact. I would ask that you go back and take a look 
at it and help the American people without any health care 
coverage.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Secretary, if the President's tax cuts 
which expire in 2010 are not renewed, would you consider that a 
tax increase?
    Secretary LEAVITT. If the President's tax cuts are not 
renewed, would I consider it a tax increase? Well, there is 
certainly no question about the fact that the Federal 
Government would receive more revenue, which would be different 
than the proposal that we are making.
    Chairman RANGEL. Well, that is a good answer to a question 
I didn't ask.
    Secretary LEAVITT. Sometimes that is a good thing to do.
    Chairman RANGEL. Very good.
    Mr. Thompson is recognized for 3 minutes.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Mr. Secretary, Mr. Hulshof touched on an item that is very 
near and dear to both of us. As he mentioned, we have been 
working on this for a long time.
    But the fact of the matter is since this Administration has 
been in office, telehealth has been cut by 81 percent. This 
year it is flat funded carrying that through. This runs counter 
to even reports coming out of your department in 2001 that 
stated that telemedicine had a great potential to increase 
access to health care and to reduce overall health care costs.
    I have seen this firsthand. They are good programs, and 
they deliver savings and good health care. So, I would like to 
get a commitment that you will work with myself and Mr. Hulshof 
so we can continue to make improvements in this area.
    Secretary LEAVITT. I am a big fan of telemedicine.
    Mr. THOMPSON. Is that a commitment?
    Secretary LEAVITT. Yes. That is a commitment.
    Mr. THOMPSON. Thanks so much.
    The other thing I wanted to talk to you about is yesterday 
Mr. Portman said that some of these hospital cuts, a tremendous 
amount of hospital cuts in this budget, would be offset by 
increased productivity.
    I represent hospitals and I represent areas. I have one 
county in my district that has lost two surgeons and ten 
primary care doctors in 2005 alone. The county is short on 
professionals. I would submit to you that there is no way that 
you can make this up in increased productivity.
    I am just glad my wife, the nurse, wasn't here when Mr. 
Portman said that yesterday, or any other nurse across the 
country, for that matter. It can't be done. I think these cuts 
are going to exacerbate already tough conditions. These tough 
conditions are really seen in rural communities. I want to go 
on record as saying that.
    In regard to the rural issue, in your prepared testimony 
you only use the word rural once, one time in the whole 
testimony. That was when you said that a cadre--you are talking 
about $2 million you have requested to bring a cadre of health 
care workers to the rural areas of Central America.
    At the same time, the budget zeroes out funding entirely 
for a host of rural programs in the United States, programs 
such as rural health flexibility grants, rural health network 
and outreach grants. This is going to be devastating to rural 
parts of the country, which are often underserved areas.
    I would like to know what you propose to do about that. It 
is not that I don't want to help Central America, but I think 
we have enough folks right here that need to be helped in rural 
areas and we need to focus on them.
    Secretary LEAVITT. Mr. Thompson, I would just remind you 
that I was Governor of a state where there are parts so rural 
you had to order a haircut through the catalogue. We had to 
deliver health care to them. I am a big--I understand this 
problem and I commit to work with you on this because----
    Mr. THOMPSON. Well, I appreciate that. I would just like to 
see more admitting of that problem in the document that lays 
out the priorities of our government and our country. We need 
to really double down our effort in this regard.
    Mr. THOMPSON. Our country did a good thing when we put into 
place the Medicare Modernization Act, which in essence doubled 
the $25 billion into rural health care. We need to figure out 
ways to use those resources in combination on things such as 
rural telemedicine. So, this is a subject we will work on.
    Chairman RANGEL. The chair recognizes Mr. Brady of Texas 
for 3 minutes.
    Mr. BRADY. Thank you, Mr. Chairman.
    I agree with our Democratic colleagues on reimbursements 
for physicians and other providers. It is a terrific problem 
that we need to address. I do disagree that it is up to you to 
find the solution. Since the cost and the complexity of finding 
the right reimbursements and the way to pay for them is really 
going to be a very difficult solution, I really think it is our 
responsibility in Congress to find that.
    I also admit I am not a big fan of the Medicare negotiation 
bill that passed the House recently. I see it more as a gimmick 
than a serious way to really help lower drug prices. I am 
hopeful that we can work together across the aisle on issues 
like making sure seniors can see doctors they know and who know 
them, make sure they can get cancer treatment in the most 
convenient settings for them, that they can get the MRIs and 
medical equipment in ways that are both cost-efficient for us 
as a government but effective for them as a patient.
    Let me ask you a specific question related to the issue of 
access to the lifesaving biological therapy known as IVIG. I 
know you are familiar with it. I am concerned Texas patients 
are suffering or even dying because they may not have the best 
access to this drug.
    I know you have heard from a number of Members, including 
me. I appreciate your willingness to work with us. The 
questions are: Do you know when we can expect completion of the 
Assistant Secretary for Planning and Evaluation's study on 
IVIG? Is the Administration planning any revisions in Medicare 
reimbursement policy for part B physician-administered drugs 
like IVIG either in this budget or in future rulemaking?
    Secretary LEAVITT. Mr. Brady, a specific answer to your 
question will require that I consult with others. It might be 
better for me to respond in writing, which I will----
    Mr. BRADY. That would be great. Or if I could call because 
the study--I think we are all anxious to see when that study 
will be done. Maybe I will follow up with one of your folks on 
the phone, and then go from there, if you don't mind.
    Secretary LEAVITT. Thank you.
    Mr. BRADY. Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you. Mr. Blumenauer, are you 
prepared to inquire? Mr. Kind? Mr. Pascrell for 3 minutes.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Mr. Secretary, I want to go to the heart of what is 
happening in New Jersey and then connect the dots back to what 
you are proposing. We have a report that is out of New Jersey 
that is not very positive. Federal guidelines say a family of 
four living on about 19,000 a year is poor, a salary that is 
not possible for anyone, especially in a state as expensive as 
New Jersey.
    In setting the qualifications for program participation, 
such as in Medicaid, based on national averages, how do you 
account for places, especially urban areas, with a much higher 
actual cost of living? The budget will limit SCHIP to children 
at or below 200 percent of poverty. Because of the high cost of 
living in New Jersey and many other states, the state currently 
serves children and their parents up to 350 percent of poverty.
    With this new rule that you have in this piece of 
legislation, thousands of New Jersey children are going to be 
dropped from that particular program. This is cruel and unusual 
punishment. The numbers are very clear. In the past 3 years in 
the state of New Jersey, children without health insurance have 
climbed appreciably. Between 2001 and 2005, it went up 9 
percent, and 2006 is another 17,000 more children who are 
uninsured. You are going in the wrong direction, Mr. Secretary. 
this doesn't even come close to covering the children that are 
needed, and I am only giving you one example in only one state.
    So, in order to qualify for Medicaid or nursing facilities 
or other long-term services, whether we are talking about kids 
or whether we are talking about older folks like myself, the 
allowable home equity amount is $500,000. States now have the 
option of increasing that limit to $750,000. New Jersey does 
this in part because of the high cost of housing. The 
President's budget seeks legislation that would cap the 
allowable home equity amount to 500,000 in all states. You are 
going to be hurting senior citizens.
    In a time when we should be working for more health 
insurance coverage, you are driving more folks out of coverage. 
What sort of mechanisms are in place that are going to take 
care of these people? I am giving you very specific examples in 
a very specific state on very specific parts of the population, 
children and seniors. What is your response?
    Secretary LEAVITT. Mr. Pascrell, I have some specific 
answers. First of all, with respect to children, our proposal 
would--our policy in pursuing the reauthorization would leave 
all children who are currently covered under SCHIP as covered. 
We would go beyond that. We believe we ought to be providing 
every American access to an affordable basic policy. I have 
known that----
    Mr. PASCRELL. Well, you are changing the threshold, Mr. 
Secretary. You are saying that the state cannot go to 350 
percent.
    Secretary LEAVITT. Going forward. But those who are covered 
would be covered.
    Mr. PASCRELL. You are still cutting out a lot of kids.
    Secretary LEAVITT. We believe we have got to use other 
mechanisms. I am currently working with Governor Corzine--I met 
with him last week; I will meet with him again, I think, on 
Tuesday--on his proposal to expand access to affordable basic 
coverage to every citizen of New Jersey, including all of the 
children, I might add. SCHIP needs to be a very important part 
of that.
    Mr. PASCRELL. Mr. Secretary, this is not only going on in 
the state of New Jersey. The rule applies to the entire nation, 
as you well know.
    Secretary LEAVITT. We are working with----
    Mr. PASCRELL. This is unacceptable. It is cruel and unusual 
punishment. We are talking about kids and seniors, least able 
to protect themselves. Least able.
    Secretary LEAVITT. May I respond, Mr. Rangel?
    Chairman RANGEL. Yes.
    Secretary LEAVITT. You think it is cruel and unusual policy 
for us to attempt to create an affordable basic policy for 
every American?
    Mr. PASCRELL. If that is what you were doing, I would agree 
with you. That is not what you are doing.
    Secretary LEAVITT. It is exactly what----
    Mr. PASCRELL. This is a shell game. You know it and I know 
it.
    Chairman RANGEL. Ms. Berkley is recognized for 3 minutes.
    Ms. BERKLEY. Thank you, Mr. Chairman. Thank you very much, 
Secretary Leavitt, for being here. The last time I saw you, we 
were on a panel in Las Vegas regarding the bird flu pandemic or 
potential of one.
    I was pleased to see that the budget contained information 
technology priorities. My husband's own practice just went to a 
paperless practice, and the costs of doing that are 
extraordinary. The costs of training older doctors is even more 
extraordinary because they are not used to that. So, I like the 
emphasis.
    But I want to talk to you about two issues that I think are 
very important, and that is my seniors and the children in my 
congressional district. I am sure you know my district very 
well, having been there. You know it is the fastest-growing 
area in the country. While our rapid growth has certainly led 
to a booming economy, it has given us a number of challenges.
    Because Federal funding is often dependent on population, 
since our growth is so extraordinary, we often lag far behind. 
So, the resources that are available, it hits--if there is a 
cut, or even if you keep funding level, where it was the year 
before, it hits my district in a disproportionately negative 
way.
    Now, there are two issues that I want to talk to you about. 
One is Medicare reimbursement, and I will be very happy to hear 
about your feelings that you discussed regarding quality of 
care and Medicare reimbursement. But I have a number of doctors 
that are contacting me quite often, telling me they can no 
longer afford to care for Medicare patients because they are 
not getting the reimbursement. If you lose money on each 
patient, believe me, you don't make it up in volume.
    So, when you talk about not addressing the Medicare 
reimbursement crisis in this country, you are going to be 
having a number of doctors who simply are not going to continue 
to provide services, medical services, for a growing senior 
population, particularly in my community. So, I see a looming 
crisis for my seniors not being able to get the medical 
attention that they deserve and that they need.
    Also, when it comes to SCHIP, 31 percent of the children in 
my state are uninsured. When you talk about SCHIP even staying 
level, knowing the number of children that I am getting into my 
congressional district, this is going to be a killer for them 
because OMB just said there are 400,000 children that will not 
be covered.
    What are we going to do about my kids when the SCHIP gets 
cut? What are we going to do about our seniors if we don't 
properly reimburse our doctors? How do we get a budget here in 
Congress that is--I won't call it fraudulent but it might as 
well be because it doesn't accurately reflect the costs of 
these programs.
    Secretary LEAVITT. First, let me just quickly say that 
physicians need to be reimbursed in a way that will cause them 
to continue to serve Medicare beneficiaries. If they aren't, I 
have got a big problem because I am in charge of 43 million of 
them.
    Second, on CHIP, I was here when we negotiated the last 
formula, and they are hard. My advice to you would be to make 
certain that growth states are treated well in that formula.
    Ms. BERKLEY. Thank you for your advice. But the reality is 
the budget that you are testifying for today does not take into 
account the needs of our seniors and needs of our children.
    Chairman RANGEL. Mr. Kind is recognized for 3 minutes.
    Mr. KIND. Thank you, Mr. Chairman. Mr. Secretary, thank you 
for being here and being so gracious with your time in the 
prehearing meeting that we had.
    I just want to reiterate, for a parochial concern in 
Wisconsin is the expiration of the Senior Care program later 
this summer. We look forward to working and talking with you, 
see what we can do to extend that program, which has proven 
very, very popular with our seniors in the state.
    I think it has been well crafted. It has had wide 
bipartisan support. I know the Administration has concerns 
about funding for Part D now in light of some of the state 
programs. But hopefully we can think creatively and 
imaginatively in how we can create a win/win situation.
    Another issue that Governor Doyle in Wisconsin is trying to 
move forward on as quickly as possible is major investment in 
health information technology and what we can do to ramp that 
up. The interoperable system, I think, is something we have got 
to strive for and create the right incentives.
    But right now there is no mandate. I would like to hear 
your viewpoint in regards to what we can do to further 
encourage the spread of health IT throughout the country so we 
have a better billing system that will be cost-effective, so we 
enhance quality care, have a better tracking system. I think it 
is obviously something whose time has come, and I think there 
are greater incentives we can be providing at the Federal level 
to see that that is done.
    Secretary LEAVITT. Very quickly, the first thing is adopt 
standards that everyone has the confidence, if they buy a 
system, they know it will be interoperable. That is number one.
    Number two, we need to drive adoption among providers in a 
number of ways. One is to make certain that as we contemplate 
fixes on reimbursement rates, that we are contemplating the 
need for their technology.
    But also, payors need to become clear that we are intending 
to make this a prerequisite. The Federal Government has now 
pledged that in the future, if you are doing business with us 
electronically, we expect you to do it on a system that is 
using standards that are compatible.
    We are making substantial progress in all of those areas. 
In the limit of time, I will look forward to an opportunity to 
talk with you in more specifics.
    Mr. KIND. Great. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman. Yield back.
    Chairman RANGEL. Mr. Blumenauer is recognized for 3 
minutes.
    Mr. BLUMENAUER. Thank you, Mr. Secretary. I appreciate your 
joining with us in this exercise today. I think in its own way 
it is worthwhile. I appreciate what you have done in the past. 
An area that I have been interested in has been livability and 
environment, and Envision Utah, in another career that you had, 
I thought was a very interesting exercise.
    I am hopeful that you will bring the same sort of 
creativity and interest and flexibility in the 30,000-foot view 
into this discussion today. I personally am intrigued with the 
opening that is presented in a couple of areas that you have 
characterized as seeking equity in coverage, the deduction 
potential limitation and shift to deal with it more broadly. of 
means testing--we have got resource issues, and ultimately 
these are going to be types of the solutions in the long run.
    There are consequences that some of my colleagues have 
mentioned, and I hope that we are able to sort of dive in and 
think through about how to move them forward. But I think that 
is a beginning.
    I hope it is done in the context of a broader resource 
question that we are going to have in other areas that are the 
responsibility of this Committee, and I hope it sets up a 
principle that we can explore further in other aspects of tax 
and revenue.
    I would just like to offer up one little area for your 
consideration in terms of getting the most out of resources and 
areas under your purview. I have been mystified in the past as 
I hear from people in the health care industry about some of 
the audit function, some of the people getting back in and 
dealing with compliance, where huge resources are devoted to 
relatively modest problems rather than focusing our resources 
on compliance on people who are the outliers.
    In almost every community, we can identify people who are, 
frankly, probably abusing the Medicare and Medicaid program, 
but having hospitals and experienced practitioners jump through 
hoops.
    Is there a way that we can work with you and the smart 
people who work with you to focus this compliance on the 2 or 5 
or 10 percent of the people who are truly questionable to stop 
abusive practices, to recover money, and to not abuse the vast 
majority of folks who are just sort of rolling ahead and doing 
their job? Maybe spot-check them, but focus where the problems 
really are. Is there a potential for us to do something like 
that?
    Secretary LEAVITT. That would be a mutual interest. This is 
not an easy proposition. We have contracted and continue to 
contract with people who can help us look at the streams of 
bills and claims that come in to Medicare and Medicaid to 
identify the trends not just as a matter of being able to 
prioritize but also to help us focus on the group that you have 
talked about.
    There are areas where we know that we need more resources. 
I was in Miami not long ago, and I went out to see a series of 
durable medical equipment dealers. It was the most 
disheartening experience of my career politically. I saw 
doorway after doorway after doorway where obvious fraudulent 
activity was taking place, where millions of dollars was being 
billed in a short period of time. I saw office buildings full 
of these places.
    I came back resolved that we were going to focus on those. 
We need more resources to do that.
    Mr. BLUMENAUER. Well, this is a special area I would love 
to----
    Chairman RANGEL. I would like to recognize Mr. Porter for 3 
minutes.
    Mr. PORTER. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary. Appreciate the opportunity to meet this morning in a 
bipartisan manner with Members of the Committee. To you and 
your family in Nevada, we appreciate it.
    We had a chance to speak this morning about a challenge we 
are having in Nevada that is parochial but very important. We 
have found serious challenges with our child welfare system 
because of the plan that you put into place to check the 
different programs across the country. I appreciate that HHS is 
going to be investigating that problem at home.
    Could you explain for me a little bit about the child 
welfare program option that is something for states? Do you 
know or do you have that available now? Could you help explain 
that to me?
    Secretary LEAVITT. I am not sure exactly what you are 
referencing. I can give you an overview how it works.
    Mr. PORTER. If you would, please.
    Secretary LEAVITT. That would be--the child welfare is 
essentially a state function. Our role as the Federal 
Government is to both set standards and then to provide some 
resources.
    While I was Governor, frankly, this is an area that I 
wrestled with the entire 11 years I was Governor. Within 2 
weeks of the time I was elected, we became the subject of a 
lawsuit because of, frankly, things that needed to be fixed. 
Through that entire period of time, we wrestled with this.
    One of the problems we had is that there were no standards 
federally that we could say, here are the things that have to 
be done to be considered a good program, and here's how we 
stack up. That has now been changed. There is a series of 
criteria that we are using to judge child welfare systems 
against so that they have a measure of their own quality.
    Those are the two major things. Now, some states have 
chosen to delegate that to a county level, and I think that has 
been the case----
    Mr. PORTER. Exactly.
    Secretary LEAVITT [continuing]. in Nevada. We work with the 
state, who then has a responsibility to oversee each of the 
counties. But our primary goal is standard-setting and resource 
development.
    Mr. PORTER. Mr. Secretary, I again want to thank you. 
Because of the guidelines you have put in place, we have found 
serious deficiencies in the Clark County system where children 
have been put at risk. So, I want to say thank you very much 
and appreciate your additional help.
    Secretary LEAVITT. Thank you.
    Chairman RANGEL. The chair recognizes Mr. Crowley for 3 
minutes.
    Mr. CROWLEY. Thank you, Mr. Chairman. So, much to ask and 
so little time to do so, Mr. Secretary.
    I just want to follow up very quickly on the Chairman's 
question to you before, and you attempted to answer before he 
asked the question. If someone has a tax benefit derived from 
an employee-sponsored health plan and that tax benefit is 
reduced or eliminated, do you believe that is a tax increase to 
that individual?
    Secretary LEAVITT. A tax increase is something that raises 
more revenue for the Treasury of the United States.
    Mr. CROWLEY. So, what I really think here is there is a lot 
of doublespeak that is going on. I think it is all a matter of 
size. If it is a big tax cut in the Bush tax cut plan, then 
yes, it is a tax increase. But if it is a smaller tax issue, 
then it is not a tax increase.
    But Mr. Leavitt, just to move on, the recent release of the 
President's budget has again zeroed out the Health Professions 
Account in the Title 7. In fact, in the HHS budget, you give 
this program a narrative rating of ineffective.
    I have been a long supporter of the Health Professions 
Account, as I believe it will address the impending shortage of 
doctors in our country. Some expect upward of a 30 percent need 
in the future. It creates a pool of new doctors, and allows 
students from under-represented racial and ethnic groups into a 
career of health beyond doctors, nursing and other fields.
    In essence, Title 7 and similar programs under it, 
including the Centers for Excellence and Health Careers and 
Opportunities programs, help address the serious and growing 
issues of minority health disparities in our country. I 
represent parts of the South Bronx where there is a tremendous 
need. Albert Einstein Medical School is one of the schools that 
participated in that program that will be cut now.
    Can you please explain to me why your agency voted these 
health professional programs ineffective, and also explain to 
me, if they are ineffective, what other programs are included 
in the President's budget to address the growing issue of 
minority health disparities?
    Secretary LEAVITT. Mr. Crowley, any budget is a constant 
balancing against noble purposes. We had a conversation earlier 
about the times we agree with GAO and the times we disagree. 
This was a time we agreed with them. They viewed this as an 
under-performing program. We concluded that we ought to put 
more money into basic nursing and basic health professions.
    While I am on that subject, may I just say I am of the 
belief that if we are going to meet the needs of nursing and 
other allied health professions, we have to adopt a different 
model. If we are constrained by the bricks and mortar process 
that we have right now, even if we are running at full tilt we 
can't get where we need to go.
    I am hopeful that we could work to find ways to not only 
meet the needs of advanced nursing, but to expand by using the 
kind of hospital-based programs that you have spoken of.
    Mr. CROWLEY. Mr. Secretary, I have seen this program in my 
district. I have seen it work. I have seen it deliver health 
care to thousands of people in the Bronx and in the city of New 
York. So, I would hope that you will take another look at this.
    Finally, I am writing a letter to you and to HRSA 
Administrator Duke regarding extending the HCOP and COE 
programs designation so these hospitals and teaching schools 
can apply for NIH grants. This allows them to continue to apply 
-not asking for additional funding from you, but allows them to 
apply for grants.
    This will not burden the government any more than it has 
right now. I would hope that you would welcome that letter and 
would allow for that to continue.
    Secretary LEAVITT. I will look forward to receiving your 
letter.
    Chairman RANGEL. Ms. Schwartz is recognized for 3 minutes.
    Ms. SCHWARTZ. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate, I think, our shared 
aspiration, although we might state it more directly, to get 
more Americans health coverage. But you have heard several of 
us ask this question. I am going to try it in a different way, 
and I think you may be able to answer these in just yes/no 
questions.
    It does certainly appear and it is certainly clear that 
your plan is going to do a few things. It is going to create 
incentives, tax incentives, in a way, for employers to reduce 
their benefits. If they have comprehensive benefits for their 
employees, they are being encouraged--because there will a cap 
on how much tax deduction they will get--to reduce those 
benefits to a more basic level. Is that correct?
    Secretary LEAVITT. No.
    Ms. SCHWARTZ. Well, all right.
    Secretary LEAVITT. You wanted yes/no. That was no.
    Ms. SCHWARTZ. All right. That is fine. I disagree with 
that. There is no question, and Mr. Doggett talked about this, 
that 30 million Americans will, as you point out because that 
is the 20 percent, will have to pay more in taxes----
    Secretary LEAVITT. If they have choices.
    Ms. SCHWARTZ [continuing]. if their employers provide a 
more comprehensive package of benefits, so that the intention 
here is to drive down the package of benefits offered to 
employees from a more comprehensive to a more basic.
    Now, I think what you would say is that you are doing that 
to shift that to individuals, that cost, that tax increase for 
30 million people. That money will be used, theoretically, to 
enable individuals to be able to buy in the private marketplace 
if they can afford to do so. Right? That is the way it is going 
to work?
    Secretary LEAVITT. Well, you articulated my position well. 
But may I also say that they have choices. They can, obviously, 
look for a policy that will allow them to have a lowered 
premium.
    Ms. SCHWARTZ. That is right. So, it is more basic and more 
out of pocket so that more Americans, if they can find coverage 
in the individual marketplace, will be paying more out of 
pocket, getting a more basic, less comprehensive policy.
    Secretary LEAVITT. Ms. Schwartz, Governor Rendell is 
working very hard with us to try to find a means of making 
certain that every Pennsylvanian has access. He is going to run 
into a very serious problem, and it is the one we are 
describing, and we have got to find a solution to it.
    If this isn't the one, then let's find a solution to it. 
But we believe this offers a very viable way in which people--
where we can overcome a policy that is 75 years old, was never 
voted on, doesn't make any sense at all. It is indefensible for 
us to give this benefit to one group and not to another.
    Ms. SCHWARTZ. I think our time is up. But let me just say 
that many of us would agree that individuals need help if they 
are not covered under employers. There is no question about 
that. But how you do it actually seems to hurt more people and 
help very, very few.
    So, certainly we look forward to working together, if we 
can, to in fact make sure we are helping more Americans who 
can't afford health insurance.
    Secretary LEAVITT. That is the solution we are after.
    Ms. SCHWARTZ. Thank you for your indulgence, Mr. Chairman.
    Chairman RANGEL. Would Mr. Davis care to inquire?
    Mr. DAVIS. I would care to. Thank you, Mr. Chairman.
    Let me, Mr. Secretary, pick up on Ms. Schwartz's point and 
Mr. Levin's point and Ms. Tubbs Jones' point. One of the major 
arguments that we are having today deals with how progressive 
the President's proposal will amount to being in practice.
    The Ranking Member and I believe you made the observation 
during your opening statement that one of the salutary aspects 
of this plan is it will simply create liability on those who 
are well-heeled, those who are able to bear the burden. Several 
of my colleagues have made the point that it is not as simple 
as that. Ms. Tubbs Jones made the point that there may be 
certain low wage industries with high value plans because of 
the risk level of those industries.
    I would ask you this question: With respect to the 20 
percent that the Administration estimates will have a greater 
tax liability, what percentage of that 20 percent make over 
$100,000 a year?
    Secretary LEAVITT. First let me----
    Mr. DAVIS. Well, I have a limited amount of time. So, give 
me a number. What percentage make over 100,000?
    Secretary LEAVITT. I don't know the percentage. But may I 
just say that the assumption you are making of risk being 
higher in certain industries, that is true in worker 
compensation. But worker compensation claims are excluded----
    Mr. DAVIS. Well, again you are diverting a little bit from 
my question.
    Secretary LEAVITT. What was the question again? I just want 
to--I got diverted by----
    Mr. DAVIS. Right. Well, let me again try to frame it as 
succinctly as I can. The 20 percent that you estimate will pay 
higher taxes, give me a sense of their income. What percentage 
of that 20 percent make over $150,000 a year, for example?
    Secretary LEAVITT. If you divide income stratas into five, 
those who are in the bottom four income stratas will be 
affected positively. Those in the top strata would be the ones 
who are affected negatively. It is a progressive----
    Mr. DAVIS. What I think is problematic about that, Mr. 
Secretary, it is an assumption. I am not sure we have facts to 
bear it out because it stands to reason there are people who 
are making 50-, 60-, $70,000 a year--that is middle class 
today--who for whatever reason may be working for companies 
that give them very generous plans.
    So, I would ask you this question: If the Administration 
wants to make this plan as progressive as possible, why not 
simply do something analogous to what we do with Social 
Security? Why not tax health benefits for people making over a 
certain amount of money?
    Secretary LEAVITT. Our objective is to solve a problem that 
the states can't solve on their own.
    Mr. DAVIS. Wouldn't that enable you to solve the problem, 
and wouldn't it be more progressive than what you propose?
    Secretary LEAVITT. If you have got ideas on how to solve 
it, we welcome them. We have given you ours. We believe that it 
is indefensible for us not to be treating----
    Mr. DAVIS. Let me slip in one other quick question with the 
seconds left. Obviously, I am assuming the $15,000 exclusion 
will shift based on CPI every year. There is one problem with 
that, though, Mr. Secretary.
    If you look at what has happened to the value of plans in 
the last 10 years, you have had increases from $5700 per family 
to $11,500 per family, 2200 individual to 4400 individual. 
Obviously, the cost of medical inflation is greater than the 
normal CPI.
    So, whatever plan we were somehow to arrive at, I am sure 
you would acknowledge that we couldn't just use the normal CPI. 
We would have to have a special health care inflation index. 
Otherwise, we have got something like an AMT type scenario 
again.
    Secretary LEAVITT. I acknowledge the fact that medical 
inflation is different than CPI. We can argue as a policy 
matter whether that is right or wrong. What we both can agree 
is that we have got to--I hope that we can solve this problem 
to do away with this inequity so we can get on with the 
business of having Governor Rendell and Governor Riley come up 
with a plan that will insure every person in your state, and 
they won't have to be discriminated against in the way they are 
now.
    Chairman RANGEL. Dr. McDermott is recognized for 3 minutes.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Governor, I think it is always important not to forget 
where you came from. As I listen to this whole testimony today, 
I feel like you are in the position of Colin Powell when he 
went up to the United Nations, trying to carry out what the 
President said.
    The President said in the State of the Union that his goal 
was to care for the poor, the elderly, and the disabled. Then 
you look at this budget that you are up here trying to defend, 
and I realize as a former Governor it must be very difficult to 
sit out here and give these kinds of answers.
    You know about community development block grants. If you 
cut $500 million across the country, what do you say to the 
Governors about the money? Just raise it from somewhere else? 
It is not my problem? We don't care? What will be your line 
with them?
    Secretary LEAVITT. Well, I have actually had this 
conversation. I think the last time I was here, you had a 
letter from me as the head of the NGA saying, this is not a 
good idea. Yes. It has suddenly become a good idea. Here are 
the reasons. First of all----
    Mr. MCDERMOTT. You really have reversed your position 180 
degrees.
    Secretary LEAVITT. The circumstances have changed, not only 
my role but----
    Mr. MCDERMOTT. The President has sent you up to the United 
Nations defending it. Right?
    Secretary LEAVITT. At the time, when I was writing that 
letter as Chairman of the National Governors' Association, the 
states were in a much different financial situation than they 
were today.
    I have had this conversation with Governors, and I have 
pointed out to them that there are categorical grants in almost 
every area they are using it in. It is not the most efficient 
way for us to deal with states.
    Mr. MCDERMOTT. So, the answer is it is not the most 
efficient way, and so you are on your own? That is basically 
what you are saying on behalf of the President of the United 
States to the Governors.
    Secretary LEAVITT. Well, they are not on their own.
    Mr. MCDERMOTT. You are on your own to raise the money for 
these programs.
    Secretary LEAVITT. We are increasing money in areas that 
they do--I mean, we just gave them a lot of money with respect 
to pandemic preparedness, much of which displaced money that 
they were using their categorical grants for. We are giving 
them money in many different areas.
    This came in to--this is a decision that I ultimately made, 
that if we are going to be balancing the budget by 2012, and I 
am going to hit my balanced number, I have got to find the 
places that we are funding in duplicate in the system.
    Mr. MCDERMOTT. To heck with the program.
    Secretary LEAVITT. This is one.
    Mr. MCDERMOTT. Basically, what you are saying is you are at 
the county fair, and I have got a shell game here, and I am 
going to move some money from over here to over here. Those 
people over there, they are just--I am sorry, we have got to 
hit our budget number.
    Secretary LEAVITT. No. I am saying we will pay you once but 
we shouldn't pay you twice for the same thing. We are paying 
you twice for some of this. I recognize that it is a nice thing 
for Governors to get money from the Federal Government, but 
there ought to be a way that----
    Mr. MCDERMOTT. Give me one example where you are paying 
twice for the same thing.
    Secretary LEAVITT. I will give you--most of the money----
    Mr. MCDERMOTT. If you are leaving 300,000 children without 
child care in this budget because you are flatlining child 
care, what child are you paying twice for?
    Secretary LEAVITT. Well, the fact that we have half as many 
children now--let me restate that. We have now removed from the 
welfare rolls more than half the families, and we have twice 
the amount of money that we started with in 1996.
    Mr. MCDERMOTT. But the Governors say this is going to be 
300,000 people, 300,000 children, without child care.
    Secretary LEAVITT. I have not heard the Governors say that. 
What I have heard them say is that they would value having all 
the money they can get, and who wouldn't.
    Mr. MCDERMOTT. It is actually--I am corrected by staff. It 
is an estimate in your budget. Look at your budget. It says, we 
estimate 300,000 will not be covered.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Meek of Florida is recognized for 3 
minutes.
    Mr. MEEK. Thank you, Mr. Chairman. Mr. Secretary, thank you 
for coming before the Committee.
    I can say, of what I have seen of your testimony, that 
before you went a capella on how you felt at the top of the 
hearing about some of the comments that were made, I just--I 
really don't want to pose the question because I know there is 
a difference in opinion. My colleague just before me took the 
question the way of your previous life as a Governor and having 
to deal with the issue of the evolution of taxation.
    I would even--you know, when we cut taxes here, we put it 
on you and you have to balance. Then you have to pass it on to 
local government. Some of the issues that I am looking at here 
just in your budget, thinking about compassionate, programs 
that are funding that are proposed to be eliminated are things 
like emergency medical services for children. That is looking 
to--set to be eliminated or proposed to be eliminated in the 
budget.
    I am not even from the rural part of this country, but the 
budget slashes, Health Resources and Services Administration, 
rural health programs by $143 million, and moves on--also that 
slashes the children's hospital graduate medical education 
program by 187 million, there are a lot of issues here that can 
assist states.
    As a Member of--8 years in the state legislature in 
Florida, we had to try to kind of figure out, once we get this 
new method from or the philosophy from the Federal Government, 
how we are going to meet the needs of the people that live in 
our states and local communities.
    You mentioned at the beginning of your testimony of trying 
to deal with it like a leaner agency. This is something that is 
very difficult, I know, for you and also for the 
Administration. But it is going to be very difficult us to even 
try to work together.
    I am big on bipartisanship, and I am big on making sure 
that we can have a budget that everyone can vote on. I am 
hoping that it is not one of the most partisan votes that we 
take in the 110th Congress.
    But these ideas are something of grave concern to me. Even 
in Medicare, cutting back on the investment there over the next 
10 years by 252 billion. Can you kind of elaborate a little bit 
on how we make these choices?
    Secretary LEAVITT. Sure. Mr. Meek, you and I share having 
some time in state government. We probably even have some 
common friends from our days in state government. So my guess 
is you reflect back, as I do occasionally, and watch what they 
are doing.
    You are probably aware of the substantial surplus that 
Florida has this year in their budget, just like I am with the 
budget in Utah. I guess my point is, when we talk about these 
reductions, it doesn't necessarily mean that they are not--
these services aren't going to be provided. It is a question of 
who pays. What is the partnership? What is the percentage that 
comes from the Federal Government and what is the percentage 
that comes from the state?
    That is what this conversation is about. The same with the 
child care. It doesn't mean that child care isn't going to be 
funded. It is a function of who is going to pay for it.
    Mr. MEEK. Well, Mr. Secretary, in closing--I see the red 
light--I just want to say, as it relates to Florida, the issue 
of hurricanes, things of that nature, rainy day funds, I mean, 
if we are talking about folks going into emergency funds trying 
to meet the needs that we are cutting here, that is something 
for further review.
    But Mr. Chairman, I want to thank you for the latitude. Mr. 
Secretary, I look forward to working with you through this 
process.
    Secretary LEAVITT. Thank you.
    Chairman RANGEL. Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman.
    Secretary Leavitt, thank you once again for being with us 
today and persevering through 2 hours of questions from all our 
Members. We did get all our Members in, and we appreciate very 
much your staying around for us to complete that ask.
    I would just conclude, Mr. Chairman, by saying that there 
are--we have talked a lot about the Administration's proposal 
for the standard health deduction today. There have been some 
good questions asked by Members who have legitimate concerns 
about the application of that.
    I would add, though, that there are a lot of considerations 
that we did not talk about today. We should talk about those 
other considerations, which are--among those are cost of health 
care and cost of health care going up at a much faster pace 
than general inflation.
    A lot of these so-called comprehensive plans that some 
Members have talked about today are in union shops with big 
corporations. While those are great--they're wonderful to have, 
and I know that people who have those don't want to pay more 
taxes--the fact is that it is becoming more and more difficult 
for our American-based corporations to come up with the 
wherewithal to provide those comprehensive health benefits. 
They are becoming less and less competitive in the world market 
because of that burden that other countries don't put on their 
employer communities.
    So, those are all questions that are intertwined with this 
Administration effort to treat more equitably the tax benefits 
of health care in this country. So, it was a good discussion 
today. We need to have more and get into some other tangential 
areas that are certainly relevant to this discussion. Thank 
you.
    Chairman RANGEL. Well, the Secretary has certainly 
generously offered to meet with us without the benefit of the 
5-minute rule, which is restrictive. We accept that. As you 
well know, many of the Members had questions that they could 
not get answered today, and if the Secretary would agree, I 
would like the record to remain open until such time as you 
could respond to written questions from the Members.
    Secretary LEAVITT. Yes.
    Chairman RANGEL. We look forward to working with you. These 
are difficult times, but if you are willing, we are.
    Secretary LEAVITT. We are willing.
    [Whereupon, at 12:12 p.m., the hearing was adjourned.]
    [Questions submitted by the Members to the Witness follow:]
    Chairman RANGEL. Questions for the Record

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. PASCRELL. Questions for the Record

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    

    [Submissions for the Record follow:]

            Joint Letter of Barbara Crane, and Laura Cohen,
                   Clinician Task Force, Hartford, CT
                                               Clinician Task Force
                                              Hartford, Connecticut
                                                  February 13, 2007
House Ways and Means Committee

Dear Sirs:

    Clinicians (e.g. physical and occupational therapists) involved in 
the evaluation and recommendation of powered wheelchairs are very 
concerned with the Administration's proposed FY 2008 budget proposal 
that would change Medicare payment for powered mobility devices. 
Specifically, the proposed policy would eliminate the first month 
purchase option that beneficiaries typically exercise when they qualify 
for a power wheelchair.
    The Clinician Task Force is a group of 30 Physical and Occupational 
therapists and experts in Wheelchair Seating and Mobility. Clinicians 
are very concerned about the negative impact on patients that will 
result if this proposed provision in the Administration's FY 2008 
budget were implemented. Concerns are specifically related to the 
provision that would eliminate the option for beneficiaries to purchase 
power wheelchairs at the time they are initially furnished.

Beneficiary access to power wheelchairs will be substantially reduced

    Clinicians and beneficiaries are currently adjusting to significant 
changes and challenges as a result of recent changes to the Medicare 
power mobility device benefit, including new codes, new coverage rules, 
new documentation requirements and new fees. The provision in the 
President's proposed budget will result in inadequate access to 
appropriate power wheelchairs for Medicare beneficiaries with 
disabilities.
    Many power wheelchairs are individually configured to meet the 
specific needs of one individual. A significant amount of time is spent 
assessing the needs of the individual. Currently, other payers as well 
as Medicare, reimburse for these devices either as an upfront purchase 
or a day-one purchase option. Eliminating the first month purchase 
option would severely limit beneficiary access as the supplier will be 
unable to cover the significant upfront product and service costs 
associated with the provision of power wheelchairs for Medicare 
beneficiaries. It could conceivably take up to 10 months for the 
supplier to recover all of the upfront costs. The rehab technology 
industry cannot afford to absorb these costs and the high level of 
financial burden would be unsustainable.
    Under the proposed provision, the individual configuration for many 
power wheelchairs would result in the components of the powered 
mobility device package falling into two different payment categories. 
That is, part of the device would be paid in lump sum purchase amounts, 
and part would be paid in monthly rental installments. The power 
wheelchair base would be subject to the 10-month capped rental rule 
while all other components; i.e., cushions; back; powered seating 
options (like power tilt, power recline, etc) postural components and 
alternative controls would be categorized under the ``inexpensive or 
routinely purchased'' payment category for DME. The financial and 
logistical problems caused by this split in payment categories will 
further negatively impact suppliers.

Recommend Moving Power Wheelchairs to Different Payment Category

    The current requirement for items to be placed in the ``inexpensive 
or routinely purchased'' payment category is evidence that the item is 
purchased at least 75 percent or more of the time. Currently 100 
percent of rehab power wheelchairs, and over 95 percent of power 
wheelchairs overall, are purchased in the first month because 
beneficiaries who need these devices have a long-term (life) need for 
it. Medicare should either maintain the current first month purchase 
option for power wheelchairs or move them to the ``inexpensive or 
routinely purchased'' payment category for DME.
    Thank you for careful consideration of these comments. Please call 
upon us if we can provide any additional information.
            Sincerely,
                                      Barbara Crane and Laura Cohen
                        Co-coordinators of the Clinician Task Force

                                 

   Statement of National Coalition for Assistive and Rehab Technology
    The National Coalition for Assistive and Rehab Technology (NCART), 
on behalf of its provider and manufacturer members, appreciates the 
opportunity to submit a statement for the record regarding a proposal 
in the President's budget. NCART is a coalition of suppliers and 
manufacturers of assistive and rehab technologies. The coalition's 
mission is to ensure proper and appropriate access to rehab and 
assistive technologies, which CMS classifies under durable medical 
equipment (DME).
    The President's budget includes a recommendation that would 
``establish a 13-month rental period for power wheelchairs''. Currently 
Medicare beneficiaries are provided a choice between a day-one purchase 
option and a 13 month rental period when a physician prescribes a power 
wheelchair. Removing the choice of the day-one purchase has 
implications for the continuing ability of Medicare beneficiaries to 
access power wheelchairs.
    There are significant upfront costs associated with the provision 
of complex power mobility systems. Beneficiaries with disabilities 
often require wheelchairs that the supplier must individually configure 
to meet the unique needs of that beneficiary. These unique needs may 
arise due to anatomical anomalies, seating or positioning needs, or the 
need for alternative drive mechanisms for individuals who cannot use a 
traditional joystick. Assessing these unique needs entails a 
significant service component. Moreover, it is often necessary for the 
supplier to provide demonstration equipment to determine if the 
equipment meets the functional and medical needs of the beneficiary. 
These costs of assessing the beneficiary, providing the demonstration 
product and the actual equipment cost are significant and are borne by 
the supplier prior to submitting a claim to Medicare.
    New quality standards and recent changes to coverage guidelines for 
power mobility are increasing supplier costs. CMS has issued new 
quality standards that suppliers must meet in order to participate in 
the Medicare program, These quality standards mandate that in order to 
provide complex rehab and assistive technology to Medicare 
beneficiaries'' the supplier shall employ at least one qualified Rehab 
Technology Supplier (RTS) or be certified as a RTS per location. A 
qualified RTS is an individual that is or has one of the following 
credentials: Certified Rehab Technology Supplier (CRTS), Assistive 
Technology Supplier (ATS); or Assistive Technology Practitioner 
(ATP)''. In addition, The Rehab Technology Supplier shall have at least 
one or more trained technicians available to service each location 
appropriately depending on the size and scope of its business.
    CMS's coverage policy for power mobility devices (PMD) implemented 
last year requires that by November 2008 suppliers providing complex 
rehab power mobility products must have an ATS on staff that is 
directly involved in the selection of the wheelchair for the 
individual.
    NCART worked closely with CMS and its contractors to develop the 
quality standards and coverage requirements. We believe these 
requirements are essential in any effort to ensure the best clinical 
outcome for individuals who require the use of this technology. 
However, it is important to understand that these changes requiring 
specialized staffing will bring additional cost to suppliers of this 
technology.
    There have been myriad changes to the power mobility benefit over 
the last two years starting with the requirement in the Medicare 
Modernization Act (MMA) that beneficiaries have a face-to-face 
evaluation by a physician in order to qualify for a device. In 
addition, the new PMD policy requires that the beneficiary be evaluated 
by a physical or occupational therapist if they need a complex power 
mobility device. The supplier is required to perform a home assessment 
to ensure that the home is accessible for the recommended device. The 
supplier is also required to collect significant information from the 
patient's medical record to maintain on file and available to Medicare 
on demand. These changes have also increased the cost of providing 
power mobility devices.
    Additionally, the PMD policy implemented approximately 60 new HCPCS 
codes. CMS issued new Medicare fee schedules for these new codes. The 
result of the methodology used to develop the new fee schedule was a 
significant reduction in reimbursement for power mobility devices. 
Moreover, the coding changes have also required suppliers to provide 
substantial education to their referring physicians and clinicians in 
order to ensure that they understand the new coding and coverage 
guidelines and that the documentation developed is accurate and 
adequate to meet Medicare's coverage requirements.
    Medicare beneficiaries prefer to purchase their power mobility 
devices when their need is long-term. Historically, over 95 percent of 
Medicare beneficiaries chose to purchase their power wheelchair when 
given the option upfront. The current definition within the Medicare 
guidelines for the category ``inexpensive or other routinely purchased 
DME'' states, ``Routinely purchased DME is defined as equipment 
acquired by purchase at least 75 percent of the time. Data from the 
Statistical Analysis Durable Medical Equipment Regional Carrier 
indicates that power mobility devices exceed this requirement.
    Because of the numerous and significant upfront costs detailed 
above that must be borne by the rehab and assistive technology 
supplier, the supplier may be unable to provide the power wheelchair 
when reimbursement is spread over several months rather than when it is 
initially ordered. Suppliers would be unable to pay manufacturers for 
the power wheelchairs when invoices become due because of the delay in 
the purchase and receipt of money from the Medicare program. Suppliers 
would have to absorb significant upfront costs, as they would receive 
payment only over a 13 month period for their large initial investment. 
Thus, beneficiary access to power wheelchairs may be affected as 
suppliers will be unable to cover their significant upfront costs 
associated with providing power wheelchairs to Medicare beneficiaries.
    NCART strongly advises that the option to purchase power 
wheelchairs continue to be available to Medicare beneficiaries. If a 
13-month rental is mandated, access will be denied to the neediest of 
Medicare beneficiaries.

                                 

 Statement of National Registry of Rehabilitation Technology Suppliers
    The National Registry of Rehabilitation Technology Suppliers 
(NRRTS)) submits the following written comments regarding proposals 
contained in the President's budget for Health and Human Services for 
2008. NRRTS is a registration organization for professionals involved 
in the provision of direct care and service for rehab and assistive 
technology devices and services to people with significant 
neuromuscular and musculoskeletal disabilities.
    NRRTS is extremely concerned about a recommendation in the 
President's budget that would ``establish a 13-month rental period for 
power wheelchairs''. Currently Medicare beneficiaries are provided a 
choice between a day-one purchase option and a 13-month rental period 
when a physician prescribes a power wheelchair. Steps to remove the 
choice of a day-one purchase will be problematic for many Medicare 
beneficiaries.
    The best practice standard of our industry and profession is that 
custom Powered Mobility Devices (PMDs) and other Complex Rehab and 
Assistive Technology product are not rented to clients--they are sold--
including in the price the added value of appropriate evaluation, 
product selection, fitting, face-to-face delivery, follow-up and 
service. If the President's budget proposal is accepted as written, 
allowing for rental only for PMDs, then only the most generic products 
will be available that won't necessarily meet the complex needs of 
needs of Medicare beneficiaries with significant physical and 
functional impairments. Access to appropriate PMDs will inevitably be 
denied by this policy. We do not believe that this is the President's 
intent.
    Due to significant upfront costs and increased cost resulting from 
recent policy changes, Medicare beneficiaries will lack adequate access 
to power mobility devices if a 13-month rental is required.
    There are significant upfront costs associated with the provision 
of complex power mobility systems. Individuals with disabilities often 
require wheelchairs that are configured specifically to meet their 
unique needs. This need may arise due to anatomical anomalies, seating 
or positioning needs, or the need for alternative drive mechanisms for 
individuals who cannot use a traditional joystick. There is a 
significant service component associated with assessing an individual's 
needs. It can often involve simulation to ensure that the technology 
that is being recommended will adequately meet the needs of the 
individual. These costs plus the significant equipment cost is borne by 
the supplier prior to submitting a claim to Medicare.
    Recent changes to quality standards and coverage guidelines for 
power mobility are increasing supplier costs. These new quality 
standards mandate that in order to provide complex rehab and assistive 
technology to Medicare beneficiaries'' the supplier shall employ at 
least one qualified Rehab Technology Supplier (RTS) or be certified as 
a RTS per location. A qualified RTS is an individual that is or has one 
of the following credentials: Certified Rehab Technology Supplier 
(CRTS), Assistive Technology Supplier (ATS); or Assistive Technology 
Practitioner (ATP)''. In addition, The Rehab Technology Supplier shall 
have at least one or more trained technicians available to service each 
location appropriately depending on the size and scope of its business.
    The coverage policy for power mobility devices (PMD) implemented in 
November of 2006 requires that by April 2008 suppliers providing 
complex rehab power mobility products must have an ATS on staff that is 
directly involved in the selection of the wheelchair for the 
individual.
    Representatives of our industry and profession have worked closely 
with CMS and its contractors to develop these requirements and believe 
these requirements are essential in any effort to ensure the best 
clinical outcome for individuals who require the use of this 
technology. However, it is important to understand that these changes 
will bring additional cost to suppliers of this technology.
    There have been numerous changes to the power mobility benefit over 
the last 2 years starting with the requirement in the MMA that 
individuals have a face-to-face evaluation by a physician in order to 
qualify for a device. In addition, the new PMD policy requires that the 
individual be evaluated by a physical or occupational therapist if they 
need a complex power mobility device. The supplier is required to 
perform a home assessment to ensure that the home is accessible for the 
recommended device. The supplier is also required to collect 
significant information from the patient's medical record to maintain 
on file and available to Medicare on demand. These changes have all 
increased the cost of providing power mobility devices.
    Additionally, the PMD policy implemented approximately 60 new HCPCS 
codes and a new Medicare fee schedule was developed for those codes. 
The result was a reduction in reimbursement for power mobility devices. 
The coding changes have also required suppliers to provide substantial 
education to their referring physicians and clinicians in order to 
ensure that they understand the new coding and coverage guidelines and 
to ensure that documentation developed is accurate and adequate to meet 
Medicare's coverage requirements. Again, this has increased cost to 
suppliers.
    Medicare beneficiaries prefer to purchase their power mobility 
devices when their need is long-term. Historically, over 95 percent of 
Medicare beneficiaries chose to purchase their power wheelchair when 
given the option upfront. The current definition within the Medicare 
guidelines for the category ``inexpensive or other routinely purchased 
DME'' states, ``Routinely purchased DME is defined as equipment 
acquired by purchase at least 75 percent of the time. Statistical data 
from the SADMERC proves that power mobility devices exceed this 
requirement. Currently, Medicare beneficiaries have the option of 
renting their power wheelchair if they prefer.
    NRRTS strongly advises that the option to purchase power 
wheelchairs continue to be available to Medicare beneficiaries. If a 
13-month rental is mandated, access will be denied to the most needy of 
Medicare beneficiaries.

                                 
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