[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]







       BUDGET AND SPENDING CONCERNS AT HEALTH AND HUMAN SERVICES

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 9, 2012

                               __________

                           Serial No. 112-142






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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire       MIKE ROSS, Arkansas
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey                Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
              Subcommittee on Oversight and Investigations

                         CLIFF STEARNS, Florida
                                 Chairman
LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
SUE WILKINS MYRICK, North Carolina     Ranking Member
JOHN SULLIVAN, Oklahoma              JANICE D. SCHAKOWSKY, Illinois
TIM MURPHY, Pennsylvania             MIKE ROSS, Arkansas
MICHAEL C. BURGESS, Texas            KATHY CASTOR, Florida
MARSHA BLACKBURN, Tennessee          EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California         GENE GREEN, Texas
PHIL GINGREY, Georgia                DONNA M. CHRISTENSEN, Virgin 
STEVE SCALISE, Louisiana                 Islands
CORY GARDNER, Colorado               JOHN D. DINGELL, Michigan
H. MORGAN GRIFFITH, Virginia         HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)




























                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Cliff Stearns, a Representative in Congress from the state 
  of Florida, opening statement..................................     1
    Prepared statement...........................................     3
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     4
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     5
    Prepared statement...........................................     6
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     7
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     8
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     8
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................    64

                               Witnesses

Norris Cochran, Deputy Assistant Secretary, Office of Budget, 
  U.S. Department of Health and Human Services...................    10
    Prepared statement...........................................    13
    Answers to submitted questions...............................    78
James C. Cosgrove, Director, Health Care, U.S. Government 
  Accountability Office..........................................    18
    Prepared statement...........................................    20
Carolyn L. Yocom, Director, Health Care, U.S. Government 
  Accountability Office..........................................    18
    Prepared statement...........................................    20

                           Submitted Material

Article entitled, ``Official: No taxpayer funds went to neuter 
  Tenn. dogs,'' The Hill, May 9, 2012, submitted by Mr. Stearns..    65
Flyer from Nashville Humane Association, submitted by Mr. Stearns    67
Recovery.org report entitled ``Grants--Award Summary, Nashville & 
  Davidson County, Metropolitan Government of,'' submitted by Mr. 
  Stearns........................................................    68
Graph entitled, ``Rising Budget Authority and Full-Time 
  Equivalents at HHS: FY 2007-2013, submitted by Mr. Stearns.....    77

 
       BUDGET AND SPENDING CONCERNS AT HEALTH AND HUMAN SERVICES

                              ----------                              


                         WEDNESDAY, MAY 9, 2012

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:07 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Cliff 
Stearns (chairman of the subcommittee) presiding.
    Members present: Representatives Stearns, Terry, Burgess, 
Blackburn, Scalise, Barton, Schakowsky, Christensen, and Waxman 
(ex officio).
    Staff present: Sean Bonyun, Deputy Communications Director; 
Mike Gruber, Senior Policy Advisor; Carly McWilliams, 
Legislative Clerk; Andrew Powaleny, Deputy Press Secretary; 
Krista Rosenthall, Counsel to Chairman Emeritus; Alan Slobodin, 
Deputy Chief Counsel, Oversight; Sam Spector, Counsel, 
Oversight; John Stone, Counsel, Oversight; Roger Stoltz, 
Detailee-Oversight (GAO); Tim Torres, Deputy IT Director; Alex 
Yergin, Legislative Clerk; Alvin Banks, Democratic 
Investigator; Brian Cohen, Democratic Investigations Staff 
Director and Senior Policy Advisor; and Matt Siegler, 
Democratic Counsel.

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

    Mr. Stearns. Good morning, everybody.
    We convene this hearing, the Subcommittee on Oversight and 
Investigations, on ``Budget and Spending Concerns at Health and 
Human Services.''
    This is our fourth in our series of oversight hearings on 
the federal budget. This hearing aims to determine the results 
of the Department of Health and Human Services efforts to 
identify wasteful, duplicative or excessive spending and to 
assist in finding more spending cuts and savings, pursuant to 
the President's ordered line-by-line review.
    HHS is the largest agency, by budget, under this 
committee's jurisdiction and is second only to the Department 
of Defense. The President's fiscal year 2013 budget requested 
$941 billion in outlays and $77 billion in discretionary budget 
authority for Health and Human Services, an increase of nearly 
8 percent over last year's outlays and a slight increase over 
last year's discretionary budget. This increase is in addition 
to the $140 billion in Recovery Act funds provided to Health 
and Human Services programs.
    HHS, as recently as 2009 fiscal year, was an agency of 
nearly 80,000 Federal employees. According to fiscal year 2010 
Office of Personnel Management data, these include 91 of the 
federal government's top-100 highest-paid civil servants and 
651 of the federal government's top-1000 highest-paid civil 
servants. And Health and Human Services continues to grow. 
Between fiscal year 2007 and 2013, the number of full-time 
equivalents rose from 64,000 to 76,000, an increase of about 20 
percent.
    At an agency as large as HHS, opportunities are ripe for 
wasteful and duplicative spending. It is clear that HHS has a 
long way to go to streamline its many, many multi-billion-
dollar programs and restore trust in its management of our tax 
dollars. For example, HHS, just like DOE, failed to heed the 
President's April 2009 order to Cabinet secretaries to identify 
a combined $100 million in budget cuts by July 2009. And there 
is clearly waste.
    The Centers for Disease Control's Communities Putting 
Prevention to Work program, for which the Recovery Act made 
hundreds of millions of dollars available, has paid for signage 
to promote recreational destinations, intergenerational urban 
gardening and community bike-sharing programs around the 
country. CDC's Web site even boasts that money under this 
program was provided to Kauai, Hawaii, ``to develop remote 
school drop-off sites to encourage students and staff to walk 
farther distances to school entrances.''
    Perhaps HHS is telling Congress that we should eliminate 
mass transit as part of our war against obesity. Incredibly, 
this same program also funded free pet spaying and neutering. 
While a laudable goal, the Department of Health and Human 
Services should focus its limited resources on human health.
    Now, my colleagues, just last month, GAO released a report 
on the Medicare Advantage Quality Bonus Payment Demonstration 
program, which it estimated will cost $8.35 billion over 10 
years. Secretary Sebelius says that she intends to go forward 
with this project despite the fact that GAO concludes that it 
is unprecedented in size and scope and that its design 
``precludes a credible evaluation of its effectiveness.'' 
Obamacare stipulates cuts in Medicare Advantage funding. 
Therefore, the Wall Street Journal has suggested that the 
purpose of the demonstration project is to give a program that 
is popular with seniors a temporary reprieve past Election Day. 
And I think the Wall Street Journal is right.
    When we are borrowing 40 cents of every dollar we spend, we 
need to ensure that the American taxpayer is getting the proper 
value for their tax dollars. In order to learn more about 
Health and Human Services' efforts, we will take testimony 
today from the Deputy Assistant Secretary for Budget at HHS, 
Norris Cochran, and Directors of Health Care at GAO, Carolyn 
Yocom and James Cosgrove, who will be providing joint 
testimony, and I welcome these witnesses this morning.
    I would point out that the HHS Office of the Inspector 
General declined the Subcommittee's invitation to testify at 
this hearing, noting that due to statutory mandates and funding 
streams, it spends 80 percent of its limited resources on 
fighting fraud, waste and abuse in the Medicare and Medicaid 
programs. The IG also confirmed that it has not done any 
significant recent work looking at duplicative programs within 
HHS, nor does it have plans to conduct such a review in the 
near future.
    For this reason, only GAO will be present at the hearing to 
provide an independent, outside assessment of Health and Human 
Services' efforts to identify wasteful, duplicative and 
excessive spending within the agency. In the absence of the IG, 
this Subcommittee's role in providing much-needed oversight of 
HHS spending and operations becomes all the more crucial and 
important.
    This Subcommittee, and the Committee as a whole, must 
remain deeply and regularly engaged with the agencies within 
its jurisdiction, including HHS as they define their 
priorities, identify their needs and set their goals for the 
years ahead.
    [The prepared statement of Mr. Stearns follows:]

                Prepared statement of Hon. Cliff Stearns

    We convene this hearing, the fourth in our series of 
oversight hearings on the federal budget. This hearing aims to 
determine the results of the Department of Health and Human 
Services' efforts to identify wasteful, duplicative, or 
excessive spending and to assist in finding more spending cuts 
and savings, pursuant to the president's ordered line-by-line 
review.
    HHS is the largest agency, by budget, under this 
committee's jurisdiction and is second only to the Department 
of Defense. The president's Fiscal Year 2013 Budget requests 
$940.9 billion in outlays and $76.7 billion in discretionary 
budget authority for HHS, an increase of nearly 8 percent over 
last year's outlays and a slight increase over last year's 
discretionary budget. This increase is in addition to the $140 
billion in Recovery Act funds provided to HHS programs.
    HHS, as recently as FY 2009, was an agency of nearly 80,000 
federal employees. According to FY 2010 Office of Personnel 
Management data, these include 91 of the federal government's 
top-100 highest-paid civil servants and 651 of the federal 
government's top-1000 highest-paid civil servants. And HHS 
continues to grow. Between FY 2007 and 2013, the number of 
Full-Time Equivalents, rose from 63,748 to 76,341, an increase 
of about 20 percent.
    At an agency as large as HHS, opportunities are ripe for 
wasteful and duplicative spending. It is clear HHS has a long 
way to go to streamline its many multi-billion dollar programs 
and restore trust in its management of our tax dollars. For 
example, HHS, just like DOE, failed to heed the president's 
April 2009 order to cabinet secretaries to identify a combined 
$100 million in budget cuts by July 2009. And there is clearly 
waste.
    The Center for Disease Control's Communities Putting 
Prevention to Work program, for which the Recovery Act made 
hundreds of millions of dollars available, have paid for 
signage to promote recreational destinations, intergenerational 
urban gardening, and community bike sharing programs around the 
country. CDC's Web site even boasts that money under this 
program was provided to Kauai, Hawaii ``to develop remote 
school drop-off sites to encourage students and staff to walk 
farther distances. . .to school entrances.'' Perhaps, HHS is 
telling Congress that we should eliminate mass transit as part 
of our war against obesity. Incredibly, this same program also 
funded free pet spaying and neutering. While a laudable goal, 
the Department of Health and Human Services should focus its 
limited resources on human health.
    Just last month, GAO released a report on the Medicare 
Advantage Quality Bonus Payment Demonstration, which it 
estimated will cost $8.35 billion over 10 years. Secretary 
Sebelius says that she intends to go forward with this project 
despite the fact that GAO concludes that it is unprecedented in 
size and cost and that its design ``precludes a credible 
evaluation of its effectiveness.'' Obamacare stipulates cuts in 
Medicare Advantage funding. Therefore, the Wall Street Journal 
has suggested that the purpose of the demonstration project is 
to give a program that is popular with seniors a temporary 
reprieve past Election Day. And I think the Wall Street Journal 
is right.
    When we are borrowing 40 cents of every dollar we spend, we 
need to ensure that the American taxpayer is getting the proper 
value for their tax dollars. In order to learn more about HHS' 
efforts, we will take testimony today from the Deputy Assistant 
Secretary for Budget at HHS, Norris Cochran; and Directors of 
Health Care at GAO, Carolyn Yocom and James Cosgrove, who will 
be providing joint testimony. I welcome the witnesses.
    I would point out that the HHS Office of the Inspector 
General declined the subcommittee's invitation to testify at 
this hearing, noting that due to its statutory mandates and 
funding streams, it spends 80 percent of its limited resources 
on fighting fraud, waste, and abuse in the Medicare and 
Medicaid programs. The IG also confirmed that it has not done 
any significant recent work looking at duplicative programs 
within HHS, nor does it have plans to conduct such a review in 
the near future.
    For this reason, only GAO will be present at the hearing to 
provide an independent, outside assessment of HHS efforts to 
identify wasteful, duplicative, or excessive spending within 
the agency. In the absence of the IG, this subcommittee's role 
in providing much-needed oversight of HHS spending and 
operations becomes all the more crucial.
    This subcommittee, and the committee as a whole must remain 
deeply and regularly engaged with the agencies within its 
jurisdiction, including HHS, as they define their priorities, 
identify their needs, and set their goals for the year ahead.

    Mr. Stearns. With that, I recognize Ms. Jan Schakowsky, the 
ranking member who is substituting, as I understand, for Ms. 
DeGette.

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

    Ms. Schakowsky. Thank you, Mr. Chairman. It is my honor to 
be sitting in for Congresswoman Diana DeGette this morning as 
ranking member.
    Led by my Republican colleagues, we are here to talk about 
spending priorities in the Health and Human Services' budget. 
Given the substantial short- and long-term deficit challenges 
we face, I understand the need to root out wasteful spending, 
and I am sure that every agency is being fiscally responsible. 
Because our test is to address those challenges while 
simultaneously constructing a strong foundation for a healthy 
and bright economic future for our country, I must point out 
what I see is the misplaced focus of my Republican colleagues. 
In March, the Republicans passed an irresponsible budget that 
will only make things worse for the middle class and those who 
aspire to it. The Republican budget makes it clear that their 
party puts the very richest Americans as the top priority and 
makes everyone else bear the burden.
    The Republican budget would do nothing to address income 
inequality. Instead, it would make it worse by increasing 
defense spending while slashing investments important to job 
creation, seniors, children and the middle class. The 
Republican budget mandates additional cuts to discretionary 
programs like Medicaid, food stamps, the Social Services Block 
Grant and the Prevention and Public Health Fund to insulate the 
Department of Defense from spending cuts triggered by the 
failure of the Joint Select Committee on Deficit Reduction.
    Our committee was directed to find at least $97 billion in 
cuts, nearly half of which came from public health programs. 
The committee has lost valuable time--time that we could have 
spent discussing ways to get needed health care to Americans 
who have lost their health insurance along with their jobs, who 
cannot afford costly insurance premiums. Instead, my Republican 
colleagues have repeatedly attacked Obamacare and once again 
they seek to repeal the law in their budget. We should be 
working to lower health care costs by improving efficiency and 
providing access to prevention.
    Instead, my Republican colleagues have railed against the 
Prevention and Public Health Fund and repeatedly used its 
funding to force choices we shouldn't and don't have to make, 
like the choice between the elimination of funding for the 
Prevention and Public Health Fund or relief for students who 
are saddled with student-loan debt.
    If we want to build a healthier, economically strong 
America, we must maintain our investment in prevention. 
Understand what the fund is about: It is about preventing 
diabetes, heart disease, cancer, and it is about getting money 
to State and local governments and organizations so they in 
turn can put prevention programs in place that are designed to 
meet the needs of their communities. This is about keeping 
America healthy.
    My colleagues on the other side of the aisle lose sight of 
this goal when they try to rile people up by labeling the 
Prevention and Public Health Fund as a slush fund. It isn't. 
Under the President's 2013 budget, the fund would support 
breast and cervical cancer screenings. Americans know that 
mammograms and pap smears are not slush. They are basic, 
routine and often lifesaving services for women. Cutting 
funding for prevention programs like breast and cervical cancer 
screening now will only lead to increased costs down the road.
    I have to say, I am really disappointed that some of my 
colleagues continue to that the CDC funds or the Prevention 
funds are used to spay and neuter dogs. They are not. HHS has 
confirmed it. Yet the same talking point that was used in 
committee making this claim was used on the floor during the 
student loan debate.
    The late Senator Moynihan said, ``Sir, you are entitled to 
your opinion, not your own facts.''
    And Mr. Chairman, the priorities in the Republican budget 
are deeply flawed. They do not reflect the priorities of 
everyday Americans.
     While I believe the focus of this hearing is misplaced, I 
still hope that we can have a serious discussion about reducing 
our deficit without hurting the programs that benefit low-
income families, children, seniors and individuals with 
disabilities.
    I yield back the balance of my time.
    Mr. Stearns. I thank the gentlelady.
    I have here the recovery.gov Web site that confirms that 
the spay and neuter and wellness clinics for cats and dogs have 
been received in zip codes with higher rates of animal nuisance 
reports. And also, it was included in the Department of Health 
and Human Services as part of the Metro Public Health 
Department's Community Putting Prevention to Work campaign.
    With that I look at the chairman emeritus of the full 
committee, the gentleman from Texas, Mr. Barton.

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

    Mr. Barton. Thank you, Mr. Chairman, for holding this 
hearing along with the ranking member, Ms. DeGette.
    Department of Health and Human Services is an agency that 
spends over a trillion dollars. A trillion dollars is more than 
the entire federal budget spent the first year I was in 
Congress in 1985. A trillion dollars is more than the total GDP 
of almost every nation in the world. A trillion dollars is so 
much money that we can't even get our hands on it. It is 
obvious that HHS can't their hands on managing it either.
    The Inspector General at HHS declined to testify, admitting 
to subcommittee staff that the Department was so big and their 
resources so constrained that they have to focus everything 
they are doing on two programs, obviously, the two biggest, 
Medicare and Medicaid. Obviously, HHS has a huge mission to 
protect the health of the American people. This is a daunting 
challenge. Having said that, it doesn't mean that we just throw 
up our hands and throw money at the problem. There are over 
80,000 employees at HHS. There are about 40,000 cardiologists 
and neurologists in this country, so we have two HHS two 
bureaucrats for every cardiologist and neurologist that are 
actually trying to provide health services to the American 
public.
    President Obama has talked a good game about trying to 
manage the agencies better but HHS is one of the agencies that 
when the President specifically directed that certain steps be 
taken to eliminate waste, fraud and abuse and to cut overhead, 
HHS didn't provide a program, didn't even attempt it.
    So Mr. Chairman, here we have an agency that has a huge 
mission, admittedly, but their answer to ever problem is to 
create more bureaucracy that is more unmanageable and more 
uncontrollable. Hopefully this subcommittee on a bipartisan 
basis will first determine what the facts are and then perhaps 
we can get with the Health Subcommittee and start some sort of 
a reauthorization to put into statute some of the things that 
need to be done.
    With that, I thank the chairman.
    [The prepared statement of Mr. Barton follows:]

                 Prepared statement of Hon. Joe Barton

    Thank you Mr. Chairman. The Department of Health and Human 
Services (HHS) has been growing, expanding, and spending its 
way to an annual budget of 941 billion dollars in entitlements 
and 76.7 billion dollars in discretionary spending, which is 
over a trillion dollars. And, the agency received over 140 
billion dollars in Recovery Act funding.
    The core mission of HHS is to protect the health of the 
American people. I understand that this is a challenging 
objective to meet, however, at a time when the federal 
government is borrowing over 40 cents of every dollar it 
spends, unemployment is over 8 percent, and medical and 
insurance costs are increasing, it is imperative that we 
maintain stringent oversight of these dollars to ensure that 
this money is working for the public to protect both their 
physical and economic health.
    During my congressional service, I have remained a strong 
advocate for systematic reform within HHS and its operating 
divisions. Bureaucracy has exploded at HHS, especially since 
the passage of President Obama's health care law. This is 
evident on their organizational outline posted on their Web 
site. In the immediate Office of the Secretary alone there are 
six different chains of command.
    After that, there are seven Assistant Secretaries to the 
Secretary and they each have an office and support staff, the 
Deputy Assistant Secretary of the Office of Budget is a witness 
today. In addition, there are another 9 different official 
Offices and Departments complete with their own staffs, like 
the Office for Civil Rights and the newly created Office of 
Consumer Information and Insurance Oversight. All of this is 
within the single Office of the Secretary, under her control, 
and so far with inadequate oversight.
    On top of this HHS Secretary-level bureaucracy, there are 
eleven different Operating Divisions under HHS, the largest 
being the Centers for Medicare and Medicaid Services, and 
including the Food and Drug Administration, the Centers for 
Disease Control and Prevention and the National Institutes of 
Health. HHS employs nearly 80,000 people, many of whom fall 
under the Title 42 program enabling them to earn more than 
$200,000 a year. According to the American Medical Association, 
there are only about 16,000 Neurologists and around 23,000 
Cardiologists practicing in the United States. So, there are 
five times as many HHS employees as there are Neurologists and 
three and a half times as many HHS employees than 
Cardiologists.
    The Government Accountability Office and the HHS Inspector 
General's Office have commented on the perpetual financial 
managements problems that are endemic at this agency. Today, I 
hope we illustrate to HHS and this
    Administration that we are serious about conducting 
meaningful oversight of federal agency budgets financed on the 
backs of hardworking American taxpayers.

    Mr. Stearns. I thank the gentleman.
    The gentleman from Texas, Dr. Burgess, is recognized for 2 
minutes.

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

    Mr. Burgess. I thank the chairman for the recognition.
    We are today focusing in the discretionary budget 
authorities within Health and Human Services, and recognize it 
represents almost a quarter of all federal outlays. President 
Obama has proposed $76 billion in discretionary spending for 
fiscal year 2013 in Health and Human Services.
    Now, both as an agency working on public health and 
administering public health programs, it has got to be, it has 
to be the center of universe in government integrity efforts. 
If we cannot get it right at HHS, where can we get it right? 
And if we get it right at HHS, everything else looks easy by 
comparison.
    On November 14, 2011, the Inspector General of Health and 
Human Services, Inspector General Levinson, notified Secretary 
Sebelius that an independent audit of Health and Human 
Services' fiscal year 2011 financial statements found that 
``weaknesses continue to exist in financial management 
systems.'' The Inspector General also confirmed that it has not 
done any significant recent work in looking at duplicative 
programs within Health and Human Services.
    So I guess we have to ask ourselves, how much fraud is 
enough for the government to take notice? I will tell you the 
answer. The answer is zero, and it must be zero, and that must 
be the focus at Health and Human Services, but really, the lack 
of internal oversight, the lack of prosecutors with a 
background in health care law really compromises our abilities 
to actually get anything done.
    So we are comfortable with the current situation? I can't 
believe that we would be, and if we are not, when are we going 
to correct it? And that applies to the committee, both sides of 
the dais, and it applies to the agency, everyone from the 
Secretary on down.
    Health care expenditures are going to go nowhere but up, 
and Health and Human Services' work in public health is going 
to continue to rise. Developing new and innovative approaches 
must make sure that every dollar is spent where it belongs, and 
that is delivering services to the people.
    I yield back.
    Mr. Stearns. The gentleman's time has expired, and our side 
is complete. Oh, Mrs. Blackburn. I am sorry. The gentlelady 
from Tennessee is recognized for 1 minute.

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

    Mrs. Blackburn. Thank you, Mr. Chairman. I thank you for 
the hearing. Welcome to our witnesses. We are glad that you are 
here.
    As you have heard, this is a necessary hearing. It is our 
fourth in a series to look at waste, fraud and abuse, and the 
reason we are doing this is because our constituents come to us 
and they let us know they are taxed too much, they are tired of 
it and they are frustrated with seeing the waste in our federal 
bureaucracies. HHS employs over 80,000 federal workers, and you 
do have a large portion of our budget that you are expending 
every day.
    Mr. Cochran, specifically for you, I want to hear about the 
steps that HHS has taken to comply with the President's call 
for agencies to identify $100 million worth of administrative 
savings nearly 2 years ago, see where you are in that process. 
Additionally, let us quantify generated savings from the 
President's Executive Order 13589 from November 9, 2011, and I 
want to know what is actually savings and then where you have 
double counted or used funds to justify your cost increases or 
activities.
    Finally, after our experience with the Department of Energy 
and Solyndra, I have very real concerns about similar financial 
mismanagement at HHS as brought to our attention by Ernst and 
Young, and we will explore that a bit today, and I yield back.
    Mr. Stearns. I thank the gentlelady and now recognize the 
ranking member of the minority, Mr. Waxman from California.

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

    Mr. Waxman. Mr. Chairman, wasteful federal spending should 
be eliminated. Fraud and abuse should be wiped out. I have long 
supported bipartisan efforts to cut spending and reduce waste 
and fraud. But we must recognize that HHS and the agencies 
contained in the department have a vital, lifesaving mission: 
providing health care to millions of Americans; investing in 
disease prevention and scientific research; keeping the food 
and drug supply safe. We must be smart about how we achieve 
savings or we put these important programs at risk.
    Mr. Chairman, if you want to learn how to cut the budget in 
a sensible way, I would suggest you take a look at the work we 
did in the Affordable Care Act. A Democratic Congress, working 
with President Obama, passed into law provisions that cut waste 
and abuse from Medicare and Medicaid. We gave HHS important new 
authority and power to identify and prevent Medicare and 
Medicaid fraud. The net result is hundreds of billions of 
dollars in savings without the need to cut Medicare benefits or 
erode the core promises of the program.
    Unfortunately, the cuts in the Republican budget passed by 
the House don't meet this standard. They take direct aim at our 
Nation's commitment to provide health care to seniors and our 
most vulnerable citizens. The Republican budget would repeal 
the Affordable Care Act, end the basic Medicare guarantee by 
turning the program into a voucher system, directly cut 
seniors' benefits by increasing the Medicare eligibility age, 
and slash funding for Medicaid, breaking the social safety net. 
The Republican budget would also deny coverage to 33 million 
Americans and allow the worst abuses of the insurance industry, 
like denying coverage to those with preexisting conditions, to 
continue, and it would cut off benefits like coverage of young 
adult children and closing the Part D drug donut hole that 
millions of Americans are enjoying today.
    The Republican budget's Medicare cuts would eliminate the 
program's basic guarantees. They would increase costs for 
seniors, according to CBO, by up to $2,200 per beneficiary 
starting in 2030. This is not holding down costs. This is 
simply shifting costs. And the Republican budget would increase 
the Medicare eligibility age from 65 to 67, meaning millions of 
older Americans would be stuck waiting for Medicare with no 
employer coverage or inadequate coverage.
    The Republican budget also cuts Medicaid by a stunning 
amount--$1.7 trillion over the next decade--turning the program 
into a block grant and threatening access to health care for 
millions of low-income children, families, pregnant women, and 
seniors in nursing homes.
    And Mr. Chairman, the Republican budget does more than 
devastate Medicare and Medicaid. FDA, NIH, CDC, and the Head 
Start program are all part of HHS. The Republican budget would 
hurt all of them. The Republican budget cuts non-security 
discretionary spending for all government agencies, including 
HHS, below levels agreed to under the Budget Control Act, by 5 
percent in 2013 and by 19 percent in 2014 and beyond.
    The Republican budget lacks specific details, but the 
implications are clear: cuts in the FDA budget for food safety 
and inspection, cuts in the NIH budget for basic science 
research, reduced capacity for CDC to respond to emerging 
diseases, fewer kids who are eligible for Head Start, less 
money to fight Medicare and Medicare fraud. These cuts in basic 
health programs would be a huge mistake. They would be 
pennywise and pound foolish, costing our Nation more money and 
more in terms of human suffering than they could possibly save.
    Mr. Chairman, I hope we can find a way to work together to 
find bipartisan solutions to cutting waste, fraud and abuse at 
HHS and at other agencies in the federal government. But the 
Republican budget proposal is not the answer. It cuts Medicare 
and Medicaid, eliminates health care coverage for 30 million 
Americans under the Affordable Care Act, and includes 
devastating cuts to basic programs at FDA, NIH, CDC, and 
throughout HHS. I hope the Republicans will rethink that 
approach, and I yield back my time.
    Mr. Stearns. I thank the gentleman. I just remind him, we 
are looking at budget and spending----
    Mr. Waxman. I am going to reclaim my time and say that I 
don't think it is appropriate for the chairman to comment on 
each Democratic statement. We have 5 minutes each side.
    Mr. Stearns. I know.
    Mr. Waxman. If somebody on your side wants to yield you 
time----
    Mr. Stearns. Well, I appreciate what you are----
    Mr. Waxman. But I do want to point out that I don't 
understand this business of neutering dogs. Is this an anti-
abortion issue? Is it a family planning issue? Is this 
something where we have--is this waste, fraud, and abuse?
    Mr. Stearns. It certainly----
    Mr. Waxman. I would like to yield to the chairman unlimited 
time, because I don't have the power to do that.
    Mr. Stearns. Well, I have given you the brochure just to 
corroborate my opening statement and also to point out we are 
talking about budget spending concerns at HHS.
    With that, let me introduce our witnesses. Mr. Norris 
Cochran, Deputy Office Secretary, Office of Budget, the United 
States Department of Health and Human Services; Ms. Carolyn L. 
Yocom, Director, Health Care, U.S. Government Accountability 
Office; and Mr. James C. Cosgrove, Director, Health Care, U.S. 
Government Accountability Office. And I understand the two of 
you, there will be a joint statement from the two of you. Is 
that correct?
    As you know, the testimony that you are about to give is 
subject to Title XVIII Section 1001 of the United States Code. 
When holding an investigative hearing such as this committee is 
doing, the Committee has a practice of taking testimony under 
oath. Do you have any objection to taking testimony under oath? 
The chair then advises you that under the rules of the House 
and the rules of the Committee, you are entitled to be advised 
by counsel. Do any of you wish to be advised by counsel? In 
that case, if you would please rise and raise your right hand, 
I will swear you in.
    [Witnesses sworn.]
    Mr. Stearns. We now welcome your 5-minute summary, and we 
will start with you, Mr. Cochran.

TESTIMONY OF NORRIS COCHRAN, DEPUTY ASSISTANT SECRETARY, OFFICE 
OF BUDGET, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; JAMES 
      C. COSGROVE, DIRECTOR, HEALTH CARE, U.S. GOVERNMENT 
 ACCOUNTABILITY OFFICE; AND CAROLYN L. YOCOM, DIRECTOR, HEALTH 
          CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                  TESTIMONY OF NORRIS COCHRAN

    Mr. Cochran. Thank you, Chairman Stearns, Representative 
Schakowsky, members of the subcommittee. Thank you for the 
opportunity to speak about the Department of Health and Human 
Services' stewardship of the resources provided by Congress.
    In my role as the Budget Director at HHS, I oversee the 
formulation of our annual budget. I and my colleagues in the 
Department are committed to efficiently achieving the outcomes 
intended by Congress. I will keep my initial remarks brief and 
respectfully request that my written testimony be incorporated 
into the record.
    Mr. Stearns. So ordered.
    Mr. Cochran. I will briefly summarize key aspects of the 
President's fiscal year 2013 budget request for HHS including 
the use of unobligated balances and highlight efforts to 
improve program performance and integrity and to achieve 
savings.
    The fiscal year 2013 budget for HHS totals $932 billion in 
budget authority and $941 billion in outlays. It is comprised 
of many types of funding including Medicare, Medicaid and other 
entitlements and other mandatory spending, discretionary budget 
authority, user fees, and funding made available through 
transfers from sources such as the Prevention and Public Health 
Fund, and the Public Health Service Evaluation set-aside.
    As HHS develops the annual budget request, we conduct a 
thorough review of our ongoing activities and eliminate or 
reduce funding for outdated, duplicative and low-performing 
programs. The HHS discretionary budget request includes more 
than $2 billion in reductions and eliminations across HHS's 
many components. These reductions and terminations are informed 
by analysis of impact and performance data and the setting of 
priorities in a tight budget environment. These reductions are 
enabling HHS to propose a discretionary budget that is cut 
overall by $218 million while still making priority investments 
in key areas including biodefense to protect the safety of our 
Nation through the development of medical countermeasures, the 
Indian Health Service to address extreme health disparities 
experienced in Indian Country, and the Centers for Medicare and 
Medicaid Services to keep up with beneficiary growth and 
implement the Affordable Care Act.
    In addition, HHS proposes net mandatory savings of $366 
billion over 10 years. These savings include $303 billion in 
Medicare, $56 billion in Medicaid, program integrity savings, 
as well as mandatory investments to strengthen child support 
enforcement, child care and foster care, and to continue TANF-
related activities.
    In developing our annual budget, HHS with OMB also assesses 
whether the presence of unobligated balances enables the 
Department to request less funding from Congress than would 
otherwise be needed. For example, the budget request this year 
for bioterrorism and emergency preparedness assumes the use of 
more than $400 million in unobligated balances to achieve our 
preparedness goals.
    As HHS components execute the budget, we continually work 
to eliminate unnecessary costs. For instance, HHS is currently 
in the process of reducing our spending in targeted categories 
such as travel and supplies by more than $800 million.
    HHS program and policy leaders also monitor the outcomes of 
the programs we administer and make needed adjustments to 
improve program performance. This is exemplified by regular 
data-driven meetings chaired by our Deputy Secretary during 
which senior officials review progress and key next steps for 
achieving measurable priority goals. In the areas of program 
integrity and budget execution, HHS benefits from the expertise 
of the HHS Office of Inspector General and the Government 
Accountability Office. For instance, before we spent funding 
from the Recovery Act, we worked with our OIG colleagues to 
better prevent waste, fraud and abuse with those investments.
    With respect to program integrity, we are particularly 
proud of a joint effort with CMS, the Office of Inspector 
General and the Department of Justice through which multi-
agency teams of federal, State and local investigators combat 
Medicare fraud. Just last week, charges were made against 107 
individuals for their alleged participation in Medicare fraud 
schemes involving approximately $452 million in false billing, 
which represents the largest single takedown in the history of 
this effort.
    In conclusion, Mr. Chairman, thank you again for inviting 
me to testify about HHS stewardship of taxpayer resources. I 
look forward to answering your questions.
    [The prepared statement of Mr. Cochran follows:]

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    Mr. Stearns. I thank the gentleman.
    Mr. Cosgrove, your opening statement, please.

                 TESTIMONY OF JAMES C. COSGROVE

    Mr. Cosgrove. Chairman Stearns, Ms. Schakowsky, members of 
the subcommittee, I am pleased to be here with my colleague, 
Carolyn Yocom, as you discuss budget considerations at HHS, 
which is responsible for both discretionary spending and 
mandatory spending. These funds support a variety of important 
activities. However, the overwhelming share goes to Medicare 
and Medicaid, and for that reason, our remarks today focus on 
HHS's responsibilities for those two programs, which are 
administered by the Department's Centers for Medicare and 
Medicaid Services.
    Over the past several years, GAO has recommended that HHS 
and CMS take a variety of actions to enhance agency oversight 
of Medicare and Medicaid and foster more prudent spending. We 
are pleased that many of our recommendations have been 
implemented, saving money for taxpayers and beneficiaries. For 
example, CMS saved at least $3.4 billion over 5 years from 
implementing multiple recommendations on the oversight of 
Medicaid supplemental payments.
    However, some of our recommendations remain unaddressed and 
so today we want to focus on those key recommendations made 
within the last 6 years where HHS has not taken action or only 
partially addressed the recommendation. Some of our still open 
recommendations would help reduce improper payments and enhance 
payment safeguards in traditional fee-for-service Medicare. For 
example, we recommended that CMS require its contractors to 
identify potentially improper claims when billing reaches 
atypical levels. CMS agreed, but has not implemented our 
recommendation. We recently noted that CMS could better screen 
providers to avoid enrolling those who are intent on committing 
fraud.
    To enhance payment safeguards, in a 2008 report, we 
recommended that CMS adopt front-end approaches such as 
considering requiring prior authorization for certain 
diagnostic imaging services. Although not implemented, the 
President's 2013 budget does call for such an approach.
    We also believe that HHS needs to address certain issues 
related to the Medicare Advantage program. Approximately one in 
four beneficiaries are enrolled in private health plans that 
participate in Medicare Advantage. These plans are popular 
because relative to traditional Medicare, they typically cover 
more services and cost beneficiaries less. However, Medicare's 
payments to these plans, specifically, the adjustments for 
beneficiaries' health status, could be improved and a billion 
or more dollars could be saved annually. We recommended 
specific steps that CMS could take to better ensure the 
accuracy of its required payment adjustment. CMS commented that 
our findings were informative but it did not indicate that it 
would implement our recommendation.
    We also recommended that HHS cancel its Quality Bonus 
Payment Demonstration for MA plans. This demonstration, 
estimated to cost more than $8.3 billion, is poorly designed 
and unlikely to yield meaningful results. Although intended to 
encourage high-quality health care, most of the money will go 
towards plans of average quality. Moreover, because of design 
shortcomings, it will be nearly impossible to evaluate whether 
the $8.3 billion influenced the quality of care provided. We 
therefore recommended that HHS cancel the demonstration and 
implement instead the quality bonus payments provided for by 
PPACA, which pays bonuses only to plans that achieve above-
average quality levels.
    Our substantial work on the Medicaid program has also 
resulted in numerous recommendations to improve program 
management, several of which remain open. For example, gaps 
remain in the oversight of State supplemental payments to 
hospitals and other providers for uncompensated care. We 
recommended that CMS make such payment arrangements transparent 
and ensure that the agency has reviewed and approved these 
arrangements. CMS has acted on some of these recommendations. 
We believe additional action is warranted.
    Several times we have reported that HHS had approved State 
Medicaid demonstrations that could increase federal costs 
despite a policy against such increases. HHS has since reported 
taking certain steps such as monitoring the budget neutrality 
of ongoing demonstrations. However, no changes are planned in 
the methods used to determine budget neutrality and ensure the 
federal government's financial liability is not increased.
    CMS has been inconsistent in reviewing States' rate setting 
for compliance with Medicaid managed care actuarial soundness 
requirements. In 2010, we found that one State received 
billions of federal dollars that had not been certified by an 
actuary, and another State's rates hadn't been fully reviewed 
since the requirements went into effect. We recommended that 
CMS improve its oversight of State rate setting, and while HHS 
agreed with the recommendations and has taken steps to improve 
its oversight, it has not yet completed actions that would 
ensure the quality of the data or develop guidance for 
reviewing the rates.
    In conclusion, given the size and scope of the programs for 
which it is responsible, HHS must be vigilant in seeking ways 
to reduce spending, prevent improper payments and improve the 
efficiency of operations. We look forward to working with this 
committee to help the Department further advance its 
performance and accountability. We are happy to answer any 
questions you might have.
    [The prepared statement of Ms. Yocom and Mr. Cosgrove 
follows:]

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    Mr. Stearns. Thank you.
    And with that, I understand, Ms. Yocom, you are here to 
assist if we have any questions. You are sort of a detail 
expert?
    Ms. Yocom. That is correct.
    Mr. Stearns. Let me start by--Mr. Cochran, I think you just 
heard Mr. Cosgrove indicate in his opening statement many 
things he has recommended you have not done. Isn't it true that 
the President has committed to conducting an exhaustive line-
by-line review in the spending budget to reduce unnecessary 
waste, fraud and abuse? Isn't that true? Yes or no.
    Mr. Cochran. Yes. We go through an exhaustive review each 
year.
    Mr. Stearns. And the idea was to increase efficiency and to 
overall provide ways to do better with less. I think that was 
the idea, and in fact, that is what the GAO had indicated to 
you, that we want to do more with less. I think we have a hard 
realizing--the statistics I gave you this morning in my opening 
about the huge number of employee increase and the amount of 
money you have got, it doesn't appear that you are actually 
doing more with less. And when I hear Mr. Cosgrove talk, he 
noted that they have implemented some of the recommendations 
but not all the GAO recommendations to conserve HHS funds and 
strengthen the oversight of the program. So I guess the 
question is, why haven't you implemented many other detailed 
recommendations that he mentioned including one that caught my 
eye was dealing with bonuses that he brought to bear on your 
watch. So I guess the main question is, considering what we see 
here, for instance, canceling the MA Quality Bonus Payment 
Demonstration program. Why haven't you implemented all the 
other things that he suggested?
    Mr. Cochran. Well, CMS has leadership for managing Medicare 
and Medicaid, and as we heard, has made progress on a number of 
the recommendations. We have also incorporated a number of 
recommendations and findings in our annual budget request such 
as in the area of medical devices. We are finding efficiencies 
through identifying discretionary programs----
    Mr. Stearns. No. The question is, why haven't you 
implemented the other recommendations? You have implemented 
some, is what Mr. Cosgrove said, but the ones he outlined, why 
haven't you done those?
    Mr. Cochran. There are----
    Mr. Stearns. You don't have the money?
    Mr. Cochran. Well, there are different reasons. Again, this 
is managed principally by CMS at the operating division level. 
In some cases, it could be an issue of whether or not they have 
existing authorities. In other cases CMS continues to work with 
and talk to GAO.
    Mr. Stearns. OK. So you are working on them? Is that what 
you are saying?
    Mr. Cochran. In a number of areas.
    Mr. Stearns. Now, canceling the MA Quality Bonus Payment 
Demonstration, there is an estimate, it could save $8 billion 
over 10 years. Are you familiar with that recommendation?
    Mr. Cochran. I am familiar with the----
    Mr. Stearns. Is there a reason why you didn't implement 
that recommendation from the GAO?
    Mr. Cochran. The Secretary, as she has testified to the 
House, has indicated that HHS has made a policy decision to 
continue that demonstration.
    Mr. Stearns. Even though the GAO said it should be 
canceled, you have agreed to override their recommendation. Is 
that true?
    Mr. Cochran. The position of the Department as articulated 
by the Secretary is to continue----
    Mr. Stearns. So you are going to override their 
recommendation? I understand. I just want to understand that if 
they make a recommendation you don't agree with, you are just 
not going to implement it.
    I have a slide here that if possible I would like to bring 
out. The number of full-time equivalents, or FTEs, at HHS has 
been rising over the past several years. Is that true? Yes or 
no. I mean, you just confirmed to us that the budget continues 
to grow as does the number of full-time equivalent employees. 
In fact, the President's request of Congress for HHS funding 
from year to year continues to rise. Isn't that true?
    Mr. Cochran. The areas where we have had FTE growth are 
principally in the Food and Drug Administration, which is 
funded both by budget authority provided by the Congress and by 
user fees from industry as well as the Indian Health Service, 
which provides direct medical care to Indian Country and those 
populations.
    Mr. Stearns. Mr. Cochran, the HHS was apparently absent 
from the list of the 15 agencies that were heeding the 
President's April 2009 order to Cabinet secretaries to identify 
a combined $100 million in budget cuts by July 2009. Wasn't 
that true that you were absent from that?
    Mr. Cochran. HHS identified savings in two areas. That 
process is managed by OMB. You are correct that it was not 
carried in that memo. The two areas at HHS identified 
subsequent to the delivery of the memo are in data centers 
where we have consolidated data centers in CDC and FDA starting 
in fiscal year 2009, and the migration from paper to electronic 
filing principally in FDA but as well as CDC and ACF.
    Mr. Stearns. Well, I think you can realize from this 
standpoint, it just seems odd that given the President has 
instructions in April 2009 in his first major attempt to 
demonstrate a serious effort to cuts budgets and to streamline 
federal spending and at the same time HHS was apparently absent 
from the list of the 15 agencies that were heeding the 
President's April 2009 order to Cabinet secretaries. So we just 
find that a little puzzling.
    And my time is expired. I recognize the ranking member, Ms. 
Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I would like to ask the witnesses some questions about 
Medicare's fraud prevention efforts. Reducing fraud has been an 
Obama Administration priority, and we are seeing significant 
taxpayer savings as a result of these efforts. The 
Administration's antifraud efforts recovered a record $4.1 
billion, taxpayer dollars, last year. It is the second year in 
a row for a new record. The Administration has recovered a 
total of $10.7 billion over the past 3 years. Prosecutions are 
way up from 797 in fiscal year 2008 to 1,430 in fiscal year 
2011, a more than 75 percent increase. So the Affordable Care 
Act gives HHS a broad range of new tools to reduce waste, fraud 
and abuse, a national screening program, and I heard Mr. 
Cosgrove talk about pre-screening for providers, enhanced 
screening for providers in high-risk areas like durable medical 
equipment and home health care, required disclosure of prior 
association with delinquent providers and suppliers, onsite 
visits as part of the enrollment process, new CMS powers to 
enact a moratorium on enrolling new providers, and new funding 
to fight fraud.
    So Mr. Cochran, can you offer some perspective on these new 
tools and how will they help CMS cut fraud?
    Mr. Cochran. Yes. As you know, this has been a major area 
of focus for the Administration. The number of recoveries has 
increased dramatically, as you note, in the last 3 years alone 
totaling $10.7 billion. Some of the authorities that CMS is now 
using that come specifically from the Affordable Care Act 
include efforts to create a risk-based screening process for 
new and enrolling providers. Also, importantly, CMS now has the 
express authority to suspend payments to a provider or supplier 
pending an investigation wherever there is a credible 
allegation of fraud. In addition, the Act, for example, 
requires face-to-face encounters between patients and 
practitioners prior to a physician certifying eligibility for 
Medicare's home health, and the Act also provides resources 
that are available to CMS and our Office of Inspector General 
where we partner with the Department of Justice in our health 
care fraud and abuse control areas.
    Ms. Schakowsky. Mr. Cosgrove, would you agree that these 
new authorities under the Affordable Care Act will help HHS 
fight fraud?
    Mr. Cosgrove. With your permission, I would like to see if 
Carolyn Yocom could address the question. Carolyn is an expert 
both on the Medicaid program and on the overall program 
integrity efforts.
    Ms. Yocom. Good morning. We would agree that there is more 
work for CMS to do and some elements of PPACA do help provide 
aspects of improvement. Our three areas where we would suggest 
that CMS continue to work have to do with the provider 
enrollment, making sure that those enrollments are strengthened 
and that there are core elements for provider compliance in 
place.
    A second area would be looking at post-payment claims 
review and also pre-payment claims review, which prevents the 
money from even going out the door until it is certain that it 
should. We have ongoing work in those areas.
    And then lastly, to look at weaknesses within identifying 
known vulnerable areas, and again, we have ongoing work in this 
area that we expect to be reporting on.
    Ms. Schakowsky. Thank you.
    The CBO has estimated these changes will save more than $7 
billion over the next 10 years, so clearly, and I think that 
CMS agrees, more needs to be done, but would you say that what 
is happening right now is a step in the right direction?
    Ms. Yocom. Yes, it is a step in the right direction. We 
have not done work looking at the savings. That is CBO's 
jurisdiction.
    Ms. Schakowsky. And Mr. Cochran, in your testimony, you 
noted something that many of us saw on the news just last week, 
107 people were charged in a $450 million Medicare fraud 
scheme, the largest Medicare fraud ever. What can you tell us 
about the Administration's efforts that resulted in this bust?
    Mr. Cochran. Well, one key aspect in this effort is a 
collaboration between HHS and the two components, principally 
being the Centers for Medicare and Medicaid Services and our 
Office of Inspector General, and the Department of Justice. 
Another key aspect is that it involves both taking intelligence 
from headquarters but also importantly, focusing with agents 
and experts on the ground in nine key areas, strike forces, 
they are called, in higher risk areas and that has enabled HHS 
and DOJ to really step up enforcement by having more direct 
involvement where we face the greatest amount of fraud.
    Ms. Schakowsky. Mr. Chairman, I know my time is up, but I 
went out on a drive-around with the strike force and I would 
recommend that it is very worthwhile for members in those areas 
to do that. Thank you.
    Mr. Stearns. The gentlelady's time is expired.
    Mr. Terry from Nebraska is recognized for 5 minutes.
    Mr. Terry. Thank you, Mr. Chairman.
    Continuing with you, Mr. Cochran, so I better understand 
our efforts on waste, fraud and abuse, there is nothing that 
frustrates our constituents more than abuse of something so 
sacrosanct as our Medicare and Medicaid programs. Especially, 
seniors really feel cheated when somebody is stealing from the 
program. They feel like they have been stolen from. Of course, 
there are different levels. There is outright fraud, there is 
improper payments, which may not be fraud but still payments 
that shouldn't have been made.
    So I want to break this up into a couple different areas. 
First of all, on page 2 of your statement, Mr. Cochran, when I 
was reading it, you mentioned that you seek opportunities or 
the agency seeks opportunities to make investments that will 
yield greater returns in the future such as the Health Care 
Fraud and Abuse Control program that has returned over $20 
billion to the Medicare trust fund since 1997 and then has a 
return of investment of 7.2 to 1 but yet we are hearing today 
from statements that there has been hundreds of billions saved 
in the last 2 years and $42 billion saved over the last 2 
years. So that begs the question of whether there are more 
health care fraud and abuse control programs that weren't 
referenced in your statement.
    Mr. Cochran. The initial description of recoveries to the 
trust funds including the $10 billion over the last 3 years is 
in reference to the work that we are doing with DOJ in health 
care fraud and abuse. The larger numbers, if I understand your 
question, relate to not necessarily fraud and abuse. Some of 
the savings in the 2013 budget as well as the Affordable Care 
Act relate to fraud and abuse. Others are reductions in 
payments again often informed by GAO's analysis as well as 
efforts to improve quality.
    Mr. Terry. It is reduced payments. Is that an issue of 
correcting improper payments? Because reduction just means you 
are paying somebody less.
    Mr. Cochran. Well, in the area of improper payments, there 
can be----
    Mr. Terry. No, I am just asking for further clarification 
when you said that those further savings came from reductions 
of payments. I want to know if those were improper payments 
that were pulled back or just simply a reduction like a doctor 
was paid $48 instead of $50.
    Mr. Cochran. I see. Yes. My reference to reduced payments 
relates to areas where CMS, GAO, in some cases OIG, and we also 
work closely with the Office of Management and Budget in this 
area where we have found that reimbursements are sort of out of 
balance or exceed what should arguably be provided for the 
level of service. Through legislative changes and budget 
proposals, those reimbursements are----
    Mr. Terry. Well, let us follow up on that, Mr. Cosgrove. 
GAO has designated Medicare and Medicaid as high-risk programs 
due to their susceptibility for improper payments estimated to 
be about $65 billion in fiscal year 2011.
    Mr. Cosgrove or Ms. Yocom, does HHS appear to be doing 
everything it can to address the enormity of the improper 
payments issue?
    Ms. Yocom. There is always more to do. Any improper payment 
rate that is as high as it is right now, there is more work to 
be done.
    Mr. Terry. Specifically then, can you outline what their 
efforts have been in the last 2 years?
    Ms. Yocom. I can give you a general sense of some places 
where CMS has moved forward. They have strengthened some 
elements of their provider enrollment. They have designated 
risks across the levels of providers so they have a sense of 
who to keep the best eye on.
    Where they need to do more work has to do with 
fingerprinting those providers, making sure that there are 
final regulations to ensure disclosure, and then also some core 
elements for provider compliance programs. That would allow 
them to strengthen more. That is one example.
    Mr. Terry. I am just confused. If I could have another 5 
seconds? Fingerprint our providers? Our doctors have to be 
fingerprinted to be reimbursed?
    Ms. Yocom. For criminal background checks.[The reference to 
fingerprinting was made in conjunction with the statement 
regarding the level of risk associated with different 
providers. In 2012, GAO reported on CMS's plans to subject 
high-risk providers and suppliers to fingerprint-based 
background checks.]
    Mr. Stearns. The gentleman from Texas, Mr. Barton, is 
recognized for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman.
    We have all seen the reports in the last several months 
about some of these abuses of public funds, the GSA and their 
trips to Las Vegas, the Secret Service and their escapades in 
South America. We all hope that those are exceptions and not 
the rule, that not everybody in the government behaves that 
way.
    But I look at HHS, and by the admission of the Inspector 
General, he doesn't phrase it quite this way but it is an 
agency that is almost not controllable because it is so big. So 
this subcommittee hopefully on a bipartisan basis is going to 
begin a process to determine what, if anything, can be done if 
we need to change statutory authority to regain control. Staff 
has indicated to me that at HHS, this is just a small example 
but it is big enough to have significance, that not just the 
travel budget at HHS but that the international travel budget 
is between $56 and $67 million per year, and then it has gone 
up 15 percent between fiscal year 2009 and fiscal year 2011. 
Why in heaven's name, Mr. Cochran, would international travel 
be over $50 million a year and why would it be going up 5 to 10 
percent a year? International. This is health domestically, 
Health and Human Services domestically.
    Mr. Cochran. The travel in 2011, as you noted, is $65 
million. It was $57 million in 2010, $67 million in 2009. So 
relative to 2009, it is down just a little bit. But more to 
your question, the areas within HHS where there is the greatest 
amount of international travel are the Centers for Disease 
Control and Prevention, which operates directly funded programs 
in HIV/AIDS as well as global immunization areas like polio as 
well as executes on behalf of the Department of State major 
portions of the President's emergency plan for AIDS relief.
    The second primary areas for international travel include 
the National Institutes of Health that does scientific work 
globally as well and the Food and Drug Administration.
    Mr. Barton. Could we invite those people to the United 
States and have them pay their dime to come see us since we are 
the experts? Do we have to go overseas? I understand there 
needs to be some. I am not saying zero. But if the 
international travel budget is $50 million a year, it is good 
to know that it has gone down a little bit. Do you happen to 
know what the Secretary's travel budget is?
    Mr. Cochran. I do not. We would be happy to get back to you 
on that. The Office of the Secretary overall has a smaller 
travel budget, and especially international travel budget. 
Within the Office of the Secretary, the main travel costs are 
the Office of Global Affairs, which again in partnership with 
CDC, NIH and FDA helps implement some of our Congressionally 
funded international missions, but I don't know off the top of 
my head what----
    Ms. Schakowsky. Would the gentleman yield for one sentence?
    Mr. Barton. Sure.
    Ms. Schakowsky. The CDC and the FDA have both made clear, 
their travel budgets are down compared to those of the second 
term of the Bush Administration, so the trajectory is correct.
    Mr. Barton. Well, that is good information. Let us keep it 
going that way. Let us keep the trend going. That is good to 
know.
    I have got one minute left. This is a standard question 
that I ask every agency that comes before us. Mr. Cochran, can 
you tell me of the 80,000 employees at HHS, how many of them 
have a government credit card?
    Mr. Cochran. I do not have that information with me or off 
the top of my head, but we would be happy to get back to you.
    Mr. Barton. Do you have a government credit card?
    Mr. Cochran. Yes, I was issued a credit card. I myself 
don't travel, it is not in the nature of my work, so I haven't 
used it for quite some time.
    Mr. Barton. So you have one but you don't use it?
    Mr. Cochran. I don't use it often. That is correct.
    Mr. Barton. Well, if you have it, you should be allowed to 
use it.
    Mr. Cochran. I just----
    Mr. Barton. I want the record to show, I have a government 
credit card issued to me by the United States Congress for 
travel, and I use it to put gasoline in my leased vehicle and I 
use it, as he said, on occasion when I travel domestically 
outside my district for airfare or hotel. I am not saying it is 
illegal or immoral to have one but I am saying that we ought to 
have an accountability protocol, and most of the federal 
agencies tend to issue them fairly liberally and tend not to 
oversee them, if at all. That is a standard question.
    My time is expired, Mr. Chairman. I yield back.
    Mr. Stearns. I thank the gentleman, and the gentlelady from 
Tennessee, Ms. Blackburn, is recognized for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    I want to thank our witnesses for being here. I think as 
you can hear from the questions that we are asking, it does 
appear that HHS is now too big to control, and listening to the 
GAO report certainly lends an understanding of that. You can go 
look after a couple of programs but you have got all this other 
spending that is going on that you can't seem to get your hands 
around, as Mr. Barton said, the travel budget, and you have to 
say why in this time when our constituents are saying the 
federal government takes too much out of our pockets and it 
wastes money that we don't have and it spends money on programs 
that we don't want. Certainly, there is a disconnect between 
what the citizens want and what you all thing you have the 
right for whatever reason you feel entitled to spend money, the 
taxpayers' money.
    Ms. Yocom, I wanted to come to you. In reading the 
testimony that you and Mr. Cosgrove had for us today, and in 
looking at how you have gone into look at the payments, the 
fraudulent payments, etc., in working with the States, have you 
all looked at the TennCare payment structure for Tennessee as 
you have audited the different states?
    Ms. Yocom. We have looked at Tennessee with regard to the 
actuarial soundness requirements for Medicaid managed care but 
we haven't done an intensive look at the rate-setting 
methodology itself.
    Mrs. Blackburn. OK. Thank you. I would be interested at 
some point when you all do that to know if you do look at that 
methodology, and since it is one of the early waiver programs 
and is kind of the test case for what is now Obamacare or 
managed care, I would be interested to see what you found. I 
know what my experience was as a Tennessee State senator and 
how the program failed to live up to what the promises were.
    Going back to Mr. Terry's question, you mentioned some of 
the core elements that were needed for some fiscal soundness. 
Are you looking at implemented new technologies that will help 
with the tracking and the payments and the disbursements and 
there is a way to put some more transparency into this process? 
Either of you.
    Ms. Yocom. I want to make sure I understand. In terms of 
the review of payments within CMS and HHS?
    Mrs. Blackburn. Correct.
    Ms. Yocom. There is, I think it is called IDR, and then 1-
PI, one program integrity, which is a set of electronic review 
systems that look at claims overall in an attempt to combine 
them. This is important with respect to Medicare and Medicaid 
to get those claims in one place so they can do reviews and 
look for indications that there could be improper payments.
    Mrs. Blackburn. Patterns?
    Ms. Yocom. Yes, patterns.
    Mrs. Blackburn. All right. And is that widely used?
    Ms. Yocom. It is being used on the Medicare side. Medicaid 
is not yet up and running. We do have recommendations aimed at 
CMS putting a plan in place to make this more broadly 
available.
    Mrs. Blackburn. What kind of timeline is that installation 
moving forward on?
    Ms. Yocom. I think one of our--I am pretty sure that one of 
our recommendations has to do with CMS developing a timeline. I 
do not believe at this point they have one.
    Mrs. Blackburn. OK. Thank you for that.
    Mr. Cochran, I want to come to you on the co-op program 
that was established under PPACA. OMB says they expect that the 
taxpayers may lose $370 million in this program from unpaid 
loans to nonprofit insurers. The estimate is that as many as 50 
percent of the loans issued under this program may not be 
repaid. Are you familiar with these estimates?
    Mr. Cochran. I am not immediately familiar with the 
particular numbers you cite. We have them but I am familiar 
with the role and the process that OMB goes through for all 
loan programs to estimate a default rate that they use as a way 
of scoring the overall cost of the program. That then enables 
HHS to determine the number of loans that can be made within 
the appropriation that Congress provided.
    Mrs. Blackburn. Well, how can you know that you have them 
but you are not familiar with them when you are talking about a 
program that is expected to lose money? How can you be so 
dismissive of that? I mean, does that not concern me?
    Mr. Cochran. It was not my intention to be dismissive. I 
just don't want to misquote numbers that I don't have in my 
head, but I do know OMB plays a key role in setting those 
default estimates, which then informs HHS on the number of 
grants that can be made within the appropriation that is 
provided.
    Mrs. Blackburn. OK. Then let me ask you the question this 
way. How does stewardship of the taxpayer dollar figure in to 
the decisions, the departmental decisions, on the loans that 
you are going to approve or disapprove through this co-op 
program?
    Mr. Cochran. Well, we work with OMB on the establishment of 
that rate to determine what the default rate would be in order 
to----
    Mrs. Blackburn. So you are accepting of the premise of 
default?
    Mr. Cochran. In every program, there is some portion that 
for, you know, a variety of reasons----
    Mrs. Blackburn. OK. I am out of time. Can I ask Mr. 
Cosgrove to follow up on this?
    Do you all have any advice for best practices or due 
diligence that would help them? I find it a little bit 
perplexing that I have a department with a trillion-dollar 
budget. You are flying all over the world. OMB says your loan 
program is set up to lose $370 million, and you work with them 
to set a default rate and it seems like that that is kind of 
standard operating procedure. Are we missing something in this, 
Mr. Cosgrove? Do you have any guidance that you would provide 
to him for how they could go about not planning to fail? I want 
you to succeed when you are dealing with taxpayer money but let 
us not plan to fail.
    Mr. Cosgrove. I am leery about providing any explicit 
guidance. This is something that we haven't looked at before. 
We would be happy, but we haven't looked at it, so----
    Mr. Stearns. The gentlelady's time has expired.
    Ms. Christensen, are you ready, or do you want me to take 
one more on the right side?
    OK. I recognize Dr. Burgess for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    Clearly this is one of the most important hearings we will 
have all year. All of this information is important. I will 
never get to all the questions I have. I am going to submit 
some in writing, and Mr. Cochran, I trust that we will get 
those answers in a timely fashion. It is extremely important 
that we do. We have got some big decisions to make.
    In your testimony, you talked about unobligated balances, 
and I must tell you, I am concerned about that concept of money 
that was not spent for what it was intended and now we are 
using it just within the agency. And the reason it concerns me 
is, I don't know precisely what the discretionary appropriation 
was but for the past 3 years it has been about $60 billion to 
$70 billion a year, so we are looking at a figure around $200 
billion. You received money in the American Recovery Act? Is 
that right? In the stimulus bill?
    Mr. Cochran. HHS, yes, received----
    Mr. Burgess. How much?
    Mr. Cochran [continuing]. Appropriations in the stimulus 
bill. The largest----
    Mr. Burgess. Well, the aggregate number. It was well over 
$100 million, was it not?
    Mr. Cochran. Yes. Some of the major portions----
    Mr. Burgess. OK, $100 million, and in the Affordable Care 
Act, there was pre-program money coming to HHS for 
implementation, so is it fair to say another $100 million in 
the Affordable Care Act? We are looking at half a trillion 
dollars in discretionary appropriations to HHS in the last 3 
years. That is to say nothing of the mandatory money that you 
get to administer--to pay for the programs at Medicare and 
Medicaid.
    So this is an enormous amount of money that this agency 
has, and again, the concept of reprogramming money just bothers 
me. Either that should offset your next year's appropriation or 
it should be paid back to the federal Treasury to pay down the 
year's deficit. Why doesn't that happen?
    Mr. Cochran. That is what we are doing with the balances. 
My reference to using balances as a way to reduce the amount of 
new resources requested from Congress is specifically in areas 
where Congress provided them for a purpose and we are using 
those balances for that purpose.
    Mr. Burgess. Here is the problem that we have. It was 
pretty much in evidence on this travel question that came up. 
Look, I get the fact that if the CDC did not go over to Geneva 
and literally run the World Health Organization, an outbreak of 
a deadly disease could be a serious problem on American soil, 
so I get the fact that that is important. But we have no level 
of detail. When we ask for your travel, here is this volume of 
dollars that is given. We really need the breakdown. How much 
travel was for CDC, how much was for HRSA? HRSA has got no 
business going other places in the world, so if they have an 
international travel item, that may be a red flag that this 
committee would want to know. And I am not picking on you 
because this has been a historic problem in Health and Human 
Services and the EPA, trying to get the level of detail in a 
budget, a balance sheet, that any private corporation could 
provide us if we were to ask it of them. You guys can't do it, 
and I have this discussion with Mr. Larsen at CCIIO. We need a 
level of detail when we ask for budgetary information, so I am 
going to ask you, I don't expect you to have it today but I am 
going to ask you for the budgetary, the line item budgetary 
information on these reprogrammed or unobligated funds and 
whether they were stimulus monies, PPACA monies or just regular 
discretionary appropriation monies because, again, we can't 
know how to help you until we really understand where the 
problems are.
    Now, Ms. Yocom, you made a statement about the improper 
payment rate as high as it is now. How many dollars are we 
talking about in this improper payment rate?
    Ms. Yocom. I am not sure I can give you a specific----
    Mr. Burgess. Well, get one for me because I would like to 
have it, because this improper payment rate makes a big 
difference. We are struggling with what to do with the 
Sustainable Growth Rate formula. We would like to be able to 
offset that. If there is a 10-year budgetary window that equals 
or surpasses the amount of money it would take to place the 
Sustainable Growth Rate, we could solve a huge problem in 
Medicare, a huge problem for HHS. Why can't we have that 
information so we can solve that?
    Now, you referenced also the concept of, or I guess, Mr. 
Cosgrove, it was you when you talked about a red flag when 
billing reaches atypical levels. Did I hear you right when you 
said that?
    Mr. Cosgrove. That is correct.
    Mr. Burgess. So in other words, when the money going out 
the door is just clearly a red flag or an outlier, CMS should 
be able, or HHS should be able to say, uh-oh, we have got a 
problem here. Is that correct?
    Mr. Cosgrove. That is correct. We are recommending that 
they increase their ability to look for patterns so that----
    Mr. Burgess. OK. Here is a pattern for you. More money 
spent on cosmetic braces in the State of Texas in Medicaid 
dollars than the rest of the country combined. How is that not 
a red flag? What are all these great metrics that have been put 
in place and you didn't catch this? This was 2 or 3 weeks ago. 
These guys are laughing at you. You have got to do a better job 
with this.
    I know my time is expired, Mr. Chairman. I hope we will 
have an opportunity to go to a second round because this 
information is so critical, but I know Ms. Christensen just got 
here so I will yield back.
    Mrs. Blackburn [presiding]. The gentleman yields back.
    Ms. Christensen, you are recognized for 5 minutes.
    Dr. Christensen. Thank you, Madam Chair.
    We all recognize that we are in fiscally challenging times 
and the responsibility to ensure that we are making financially 
sound decisions is shared by all of us. But when it comes to 
health and health care, making financially sound decisions is 
more complicated than just slashing budgetary line items based 
on a price tag without any consideration really given to the 
long- and even the short-term economic consequences of those 
decisions.
    So Madam Chair, if we want to talk seriously about 
decreasing the long-term health care spending, we should talk 
about the cost controls in the Affordable Care Act and how we 
can build on them. So I would like to ask the witnesses some 
questions about just how we do that.
    Mr. Cosgrove, with a system that truly rewards doctors, for 
example, for quality and which decreases financial incentives 
to deliver unnecessary care, would that decrease Medicare 
costs?
    Mr. Cosgrove. That is definitely the direction that we need 
to be moving in. Right now, we have a system that pays for 
volume of services, and the more providers do and the more 
expensive the services they provide, the more they get paid, 
and that is the wrong incentive.
    Dr. Christensen. Right. Thank you. And the Affordable Care 
Act takes a big step in that direction with a number of 
delivery system reforms in order to make Medicare and in time 
the broader health care system pay for value. It develops 
accountable care organizations so Medicare will pay one 
provider to coordinate all of a senior's care rather than 
paying many providers, no matter what the cost. It experiments 
with bundled payments so that Medicare would pay a lump sum for 
quality care rather than separately for each treatment. Also, 
within the Affordable Care Act, it implements the Independence 
at Home Demonstration Project to bring home-based primary care 
to some of Medicare's sickest and most frail seniors who are 
unable to make it to a doctor's office.
    Mr. Cochran, these delivery systems reforms in the 
Affordable Care Act, are they projected to reduce the growth of 
Medicare expenditures?
    Mr. Cochran. Yes. The----
    Dr. Christensen. The accountable care and----
    Mr. Cochran. Yes. There are a number of quality provisions 
in the Act, there are payment reforms in the Act, there are 
program integrity reforms in the Act. That on total I believe 
CBO extended the Medicare solvency from 2016 to 2024.
    Dr. Christensen. Right. In fact, the Congressional Budget 
Office has estimated the Affordable Care Act will reduce the 
federal deficit by $210 billion this decade and more than a 
trillion in the following 10 years, and these are significant 
cost savings. We should be talking about how we can build on 
them instead of repealing the Affordable Care Act as the House 
Republican budget does.
    And Mr. Cochran, can you talk about what CMS is doing to 
make Medicare more efficient and save federal dollars?
    Mr. Cochran. There are a number of things that CMS is 
working on in the area of quality, there is the national 
initiative known as Partnership for Patients that is designed 
to improve safety and reduce readmissions, which both improves 
the quality of health as well as saves costs. There is a value-
based purchasing effort to reward quality and efficiency in 
hospitals as well as public transparency efforts to provide 
more information about quality for nursing homes and other 
providers as well as accountable care organizations that are 
just being launched to encourage coordination and preventive 
care and bring down costs and improve quality.
    Dr. Christensen. Thank you.
    These are all important steps, Madam Chair. These reforms 
all have one thing in common. They save taxpayer money and 
improve the quality of care without shifting costs to seniors 
or eroding the core basic benefits of the Medicare program, and 
in this way they stand in sharp contrast to the Republican 
budget. There is always a right way and a wrong way to cut the 
federal budget and reduce health care costs, and the Republican 
budget is exactly the wrong way.
    Mr. Cochran, I think I have a little more time. I wanted to 
ask you another question. The Joint Center for Political and 
Economic Studies released a report a couple years ago that 
found that eliminating racial and ethnic health disparities 
could save the Nation $1.24 trillion in direct and indirect 
medical costs over a 3-year period. In your testimony, you 
mentioned that one of your many responsibilities was to 
investigate a mix of investments that would improve the health 
and wellbeing of the Nation in a cost-effective manner. So 
given the extremely high costs to absorb every year that racial 
and ethnic health disparities are not eliminated, don't you 
think that the national strategy that the Department of Health 
and Human Services has developed and is implementing right now 
is another component that would help to achieve the larger 
objective to improve the health and wellbeing of the Nation in 
a cost-effective manner?
    Mr. Cochran. Yes. The work that the Office of the Assistant 
Secretary for Health and some of our key operating divisions 
are doing both to develop and implement the strategy is 
important as is the investments that the President's budget 
proposes in key areas including the Indian Health Service that 
I mentioned earlier, the Ryan White HIV/AIDS program including 
for drug treatment as well as a number of programs across HRSA 
and CDC that target those populations that are most vulnerable.
    Dr. Christensen. Thank you.
    Thank you, Madam Chair.
    Mr. Stearns. And I recognize for 5 minutes the gentleman 
from Louisiana, Mr. Scalise.
    Mr. Louisiana. Thank you, Mr. Chairman. I appreciate you 
having this hearing as we have had a number of hearings on the 
budgets of the various agencies and things we are trying to do 
to control spending in Washington, and unfortunately, we don't 
have enough people in Washington that are serious about 
controlling spending and that is why we have got over a 
trillion-dollar deficit again, and so I think it is important 
that we look at the budget and scrutinize it and ask some of 
the questions that our members have been asking.
    Mr. Cochran, HHS has requested a billion dollars in 
additional funding to implement the President's health care 
law, and that is in addition to the billion that has already 
been appropriated for implementation when it was originally 
enacted in March of 2010. First of all, why the need for an 
additional billion dollars on top of the billion that was 
already in the original bill?
    Mr. Cochran. The original bill does include a billion, and 
the Congressional Budget Office initially estimated that it 
would cost roughly $1 billion per year to implement the Act. We 
have to date obligated roughly half of that billion dollars. 
The 2013 budget projects using the remainder this fiscal year 
in 2012 and the investment in 2013, and the proposed increase 
within the Centers for Medicare and Medicaid Services is to 
continue that effort. A major component within that request is 
to launch the health insurance exchanges, and there is a need 
for investments in 2013 in order to launch the exchanges in 
2014 after which time they largely become self-sustainable.
    Mr. Scalise. So where did you get this billion dollars 
from? Did you just redirect it from other parts of the HHS 
budget? You had a billion dollars that was literally just lying 
around to go and take and move to to put in the area of the 
funding for Obamacare that was under, I guess underanticipated?
    Mr. Cochran. The original billion that was in the 
Affordable Care Act or the billion----
    Mr. Scalise. The additional billion, the additional billion 
dollars that has been requested.
    Mr. Cochran. So in formulating the annual budget, we go 
through each operating division and we work closely with the 
Office of Management and Budget to identify savings both to 
reduce the deficit overall but also to fund priority areas. We 
have identified roughly $2 billion in savings across HHS in our 
discretionary budget, which enabled us to invest proposed 
investments in the Indian Health Service, biodefense 
preparedness as well as CMS.
    Mr. Scalise. Have you all ever thought about investing in 
reducing the deficit if you have got too much money in your 
budget and you have gone through and you have identified areas 
where you can savings? You know, because one of the things I am 
looking at, the President issued an Executive Order directing 
you all to establish a plan to reduce 20 percent below 2012 
levels for costs associated with travel, employee information 
technology, printing, other things, and from what we are 
looking at here, the quote, unquote, savings that you identify 
here, it looks like you are using those to spend in other areas 
to absorb cost increases. So are you actually saving in terms 
of reducing the deficit or just moving money from one area of 
your budget to another area of your budget to keep spending at 
the same levels?
    Mr. Cochran. The 2013 President's budget includes savings 
of over $300 billion on the mandatory side by slowing the rate 
of growth in----
    Mr. Scalise. So not just actual cuts, you are just slowing 
the rate of growth? You are not actually reducing from prior 
levels?
    Mr. Cochran. It is reductions relative to the baseline that 
CBO establishes and then----
    Mr. Scalise. You know, in Washington, unfortunately, people 
use a different set of languages than American people use 
across the country. Our small business owners, families, when 
they sit at their kitchen table and they say we have to balance 
our budget, we have to cut because we have less money this 
year, they don't say well, instead of having a 10 percent 
increase, we will just spend 5 percent more and call that a 
cut. They don't call it a cut. A cut means if you were spending 
$50,000 one year and you got $45,000 the next year, that is a 
cut. You don't say well, we had $50,000 last year, we are going 
to get $55,000 next year and so that is a cut because we wanted 
60. I know that is kind of chic to use that around here but, 
you know, people back home don't get it when they hear wait a 
minute, the agency actually has more money and they are talking 
about how they reduced spending and they had less money than 
the proposal from the President's request. It is still more 
money, and they want to see--again, we are borrowing a trillion 
dollars than what we are spending.
    I want to ask a couple questions as I am running out of 
time. You know, I think some of the other members had asked 
some questions about travel and even fleet vehicles. If you can 
just get the committee the number of vehicles that you have 
that are assigned to employees that they are able to take home. 
Can you get the committee that number, how many vehicles HHS 
has throughout the agency that are allowed to be taken home by 
employees?
    Mr. Cochran. I can tell you that across HHS, our Program 
Support Center carries these statistics and reports there are 
4,900 vehicles across HHS. Those aren't all for the purpose of 
executive travel or vehicles that someone would take home 
necessarily. They are primarily in the areas for movements of 
providers in the Indian Health Service.
    Mr. Scalise. I am not asking you to give me the number. If 
you have the number here right now, that is great, but if you 
don't have the number, can you get the committee that number, 
the number of vehicles that are allowed to be taken home by 
employees?
    Mr. Cochran. Yes. Well, I can tell you that we have----
    Mr. Scalise. It is a yes or no question. I am just asking 
if you can get me that number.
    Mr. Cochran. I will certainly work--I guess my only 
hesitation is, I am not sure how we have the data in terms of 
whether it is coded as----
    Mr. Scalise. You are not sure how many people are taking 
home vehicles?
    Mr. Cochran. No, we know that there are 4,900 vehicles. We 
will do our best to provide the information you are requesting.
    Mr. Scalise. And if you can do the same thing on--we have 
talked about travel a bit and looked at the numbers on 
international travel. Can you give me within the travel budget 
how much was spent on first-class travel? Because there have 
been some outside reports that have looked at tens of millions 
of dollars in cost savings we can achieve just by having 
government employees when they are flying on the taxpayer 
nickel to fly coach, not economy, not business class or first 
class. And so if you can give me the amount of money that is 
spent on either first-class or business-class travel? Is that 
something you can get to the committee?
    Mr. Cochran. We will work toward that. Travel overall, we 
are reducing by 17 percent, and the vast majority of travel is 
coach now. I don't know that there is much first class or 
business class.
    Mr. Scalise. We have seen some outside agencies have looked 
at, some outside groups have looked at this and seen tens of 
millions of cost savings that they could achieve, and I am sure 
your agency is one like most agencies that have the ability to 
do that. I am just asking if you can get us that information.
    Mr. Stearns. The gentleman's time has expired.
    Mr. Scalise. Thank you, Mr. Chairman. I yield back.
    Mr. Stearns. If you could accommodate him, that would be 
helpful.
    We are going to do a second round of questioning, and I 
will start out. Mr. Cochran, there is a Health and Human 
Services Executive order. It is 13589. It proposed just under 
$900 million in cuts to administrative expenses. Is that true? 
Does that ring a bell?
    Mr. Cochran. Yes, sir.
    Mr. Stearns. OK.
    Mr. Cochran. The HHS target is $876 million.
    Mr. Stearns. OK. And it is noted in the budget of fiscal 
year 2013 that ``agencies are redirecting some savings to 
absorb other cost increases and fund priorities activities.'' 
Isn't that correct?
    Mr. Cochran. In some areas, our budget requests have come 
down----
    Mr. Stearns. Yes or no to that statement. Is that correct, 
that you in fact in your opening statement said, ``We are 
seeking opportunity to make investments today that will yield 
greater returns in the future such as the health care fraud and 
abuse control system has returned''--in other words, what I am 
saying is, that you have indicated that your agencies are 
redirecting some savings that you find here elsewhere. Isn't 
that true?
    Mr. Cochran. In some cases, that is correct. In other 
cases, we have reduced agency budgets, and that was made 
possible by----
    Mr. Stearns. OK, but in some cases--you are--OK. So I guess 
what we are concerned about that are you taking this Executive 
Order 13589 where you have roughly $900 million in savings or 
cuts in administrative expenses, are you considering that 
savings that you are redirecting elsewhere into other 
government programs? Is that true? Is that what is happening?
    Mr. Cochran. In some areas, take, for example----
    Mr. Stearns. So the answer is yes?
    Mr. Cochran [continuing]. Where we are investing that----
    Mr. Stearns. So the answer would be yes? Some would be yes, 
in some cases you are taking the so-called cuts and you are 
funneling them into other areas and you are considering them 
savings that you can use elsewhere. I am just trying to show to 
the committee here that the impact of these cuts are going to 
obviously be significantly less if you take that $876 million 
that you are saving in administrative costs and you are 
funneling it into another program, there won't be any savings.
    Let me move on to the next question. You are aware that 
Health and Human Services has the most highly paid civil 
servants anywhere in the federal government? Would that be yes? 
Would that be true?
    Mr. Cochran. Health and Human Services is subject to the 
same general schedule rules----
    Mr. Stearns. Well, let me just say, the fact is, you have 
the most highly paid civil servants anywhere in the federal 
government. For example, over 90 of the 100 most highly paid 
civil servants anywhere in the federal government work for 
Health and Human Services and these 90 are capped at $375,000 a 
year. Isn't that true? The cap is $375,000 a year?
    Mr. Cochran. That is in reference to a specific, what is 
called Title 42 authority.
    Mr. Stearns. The answer is yes, they have a $375,000 cap. 
That is true. That is correct, isn't it?
    Mr. Cochran. Under one specific authority. Most agency 
employees are under the----
    Mr. Stearns. And over 650 of the federal government's 1,000 
highest paid civil servants work at Health and Human Services 
and its component agencies. Isn't that true?
    Mr. Cochran. The majority of Title 42 employees that are 
under a different authority for a different salary level are at 
the National Institutes of Health and they are scientific--they 
are primarily scientific positions in----
    Mr. Stearns. Well, we have them including--these high-paid 
salary people are CDC, FDA, the Indian Health Service and NIH. 
Isn't that true where most of these highly paid civil servants 
are? Isn't that true?
    Mr. Cochran. Yes, the largest number are at NIH. You 
referenced the Indian Health Service. There are some providers, 
medical doctors----
    Mr. Stearns. And in 2009, more than 530 NIH employees 
appear to have earned salaries of over $200,000 and above, and 
that is more than the President's own Cabinet. Isn't that true?
    Mr. Cochran. Under this particular authority. The vast 
majority of HHS employees are under the same system.
    Mr. Stearns. So I think the dichotomy here is that the 
Cabinet officials are getting less than 530 of NIH employees, 
and then if you look at the salaries of these 90 of the most 
highly paid, which have a cap of $375,000, you see that these 
people are getting well paid even compared to some of their 
colleagues here, not to mention how they are well paid compared 
to the private sector.
    My last area of concern here is the--let us see. We have 
the Health Reform Implementation Fund. The President proposed 
an additional $1 billion in discretionary funding for the 
implementation of the PPACA through the Center for Consumer 
Information and Insurance Oversight at CMS. As of January 31st, 
we have some figures here that stop at January 31, 2012. I 
guess the question is, can you update this graph to take us up 
further beyond January 31st?
    Mr. Cochran. Yes, sir.
    Mr. Stearns. OK. Mr. Cochran, how has CMS used its 
resources from the implementation fund since January? Can you 
tell us that? Although we don't have the data, can you just 
maybe bring us up to speed on how much of the fund remains?
    Mr. Cochran. Of the billion, $471 million has been 
obligated as of February 29th. Some of that is for personnel. 
More of it is for contractual services and the expenditures 
have been for closing the Part D coverage gap, one of the key 
provisions in the Act, as well as developing the new value-
based purchasing models for Medicare providers that we talked 
about earlier as well as helping plan and prepare for the 
establishment of the State and federal exchanges.
    Mr. Stearns. All right. My time is expired.
    Ms. Schakowsky is recognized for 5 minutes.
    Ms. Schakowsky. I wanted to just set the record straight on 
a couple of things.
    Regarding the salaries under the Title 42 program, Dr. 
Harold Varmus, the Director of NIH under the Bush 
Administration, who now runs the Sloan-Kettering Cancer Center, 
said, ``If we don't pay enough to keep the best, we condemn 
ourselves to mediocrity.'' So my understanding, Mr. Cochran, 
is, we are trying to at least keep competitive to hire 
scientists that are required to have doctoral degrees in order 
to receive those high salaries. Is that not true?
    Mr. Cochran. Yes.
    Ms. Schakowsky. I also wanted to put into the record, Mr. 
Chairman, this is an article from Healthwatch, the Hill's 
health care blog, ``House Republicans who say taxpayer funds 
went to spay and neuter dogs in Nashville have the story wrong. 
There was a spay and neuter clinic but it was funded by a 
Touchmark charities grant to the Nashville Humane 
Association,'' said Alisa Haushalter, whose job includes 
directing a federally funded program in the city known as the 
CPPW. That is the one you were referring to here.
    So maybe the entire program--it says, ``As a partnering 
agency, we would have had staff members that were there 
greeting people at the event and so forth but the funding was 
not from us.'' So I would like to put that in the record.
    Mr. Stearns. By unanimous consent.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. We will also, if you have no objection, put in 
these two flyers that I have given you, the one on the 
temporary veterinarian clinic initiative as funded in part by 
the Department of Health and Human Services as part of the 
Metro Public Health Department's Community Putting Prevention 
to Work campaign, which shows and corroborates that, together 
with these two web pages, which also corroborate. We will put 
both of them in by unanimous consent.
    Ms. Schakowsky. OK.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. So ordered.
    Ms. Schakowsky. I wanted to talk about the Republican 
budget priorities and women. From Medicare and Medicaid to the 
Prevention and Public Health Fund, HHS is responsible for 
programs that millions of women rely on for critical health 
care needs, and I want to talk about some of the drastic 
changes to these programs that my Republican colleagues have 
recently endorsed through the budget and appropriations 
process.
    The House Republican budget would turn Medicaid into a 
block grant, repeal the important new benefits under the 
Affordable Care Act and cut federal funding for Medicaid by a 
staggering $1.7 trillion over the next decade.
    Mr. Cochran, am I correct that Medicaid covers more than 40 
percent of all births in the United States?
    Mr. Cochran. I don't have that statistic with me but that 
sounds roughly correct.
    Ms. Schakowsky. And so what Medicaid does is, it offers a 
solution for low-income pregnant women who can't afford private 
insurance by covering maternity and prenatal care. Dramatic 
cuts to the program truly would have a disastrous effect on 
women and their children.
    The Medicare program also provides important benefits for 
women. Mr. Cochran, am I correct that 56 percent of all 
Medicaid beneficiaries are women?
    Mr. Cochran. That sounds correct. Again, I am sorry, I do 
not have that data with me.
    Ms. Schakowsky. Well, the House Republican budget ends the 
guarantees we have made to our seniors by turning Medicare 
beneficiaries over to private insurers. It shifts costs to 
seniors. In fact, CBO has said that by 2030, beneficiaries 
could pay up to $2,200 more because of these changes, 
disproportionately falling on women because they have longer 
life expectancies.
    I am looking at you, Mr. Cosgrove. Did you want to say 
something in this regard?
    Mr. Cosgrove. No, I am simply acknowledging the fact that 
women do tend to live longer and so especially on the Medicare 
program you do expect to see more women, more older women.
    Ms. Schakowsky. Thank you.
    Mr. Cochran, can you tell us the purpose of the Prevention 
and Public Health Fund?
    Mr. Cochran. Yes. The Prevention and Public Health Fund, 
the primary purpose is to support programs, activities, 
interventions at the State and local levels to prevent chronic 
disease, to reduce the use of tobacco, prevent obesity, help 
communities target health issues in their area. It is also 
being used to support childhood immunizations as well as some 
activities in the infectious disease area like hepatitis C.
    Ms. Schakowsky. And isn't it also true that $140 million of 
the fund goes toward breast and cervical cancer screening 
services?
    Mr. Cochran. As proposed in the 2013 budget, the fund will 
support those activities, yes.
    Ms. Schakowsky. Which would help pay for 326,000 women to 
get breast cancer screening and for 284,000 women to get 
cervical cancer screenings and Republicans are voting to take 
it away.
    And Mr. Chairman, I would just say this is a sad example of 
how the Republican budget is dangerous for women, and I yield 
back.
    Mr. Stearns. The gentlelady yields back.
    The gentlelady from Tennessee is recognized for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    And Mr. Cochran, I wanted to come back to you, if I could. 
In my opening statement, I mentioned that I wanted to hear from 
you regarding the steps that you all had taken to comply with 
the President's call for agencies to identify $100 million 
worth of savings. Are you able to articulate that list or do 
you have a list?
    Mr. Cochran. Yes--at that time we identified savings in the 
area of data centers at CDC and FDA as well as the migration 
from paper to electronic filing primarily at FDA as well as at 
CDC and ACF. In addition, we have subsequently identified----
    Mrs. Blackburn. Hold on just a moment there. So you have 
identified CDC, FDA and the paper to electronic filing. So what 
portion, how much money from each of those?
    Mr. Cochran. Well, for the President's Executive order in 
these administrative areas, we are reducing spending by 21 
percent.
    Mrs. Blackburn. And the budget was increased how much prior 
to your making this reduction?
    Mr. Cochran. The 2013 budget, it is a decrease of $218 
million. It is roughly flat on the discretionary spending.
    Mrs. Blackburn. Your 2010 budget and the stimulus funding 
was a good percentage. I will get that number for you so that 
you have it. I don't have that exact number in front of me. So 
if you could submit in writing the answers to those, that list, 
that would be very helpful for us. We want to be able to see 
what you all have done to actually make these spending 
reductions and to live that.
    One other question for you along the same line. We are 
working through reconciliation looking at the sequestration and 
reconciliation, so what are you all at HHS doing to prepare for 
reconciliation and the reductions that are going to come?
    Mr. Cochran. Well, prepare for reconciliation or for 
sequestration? For sequestration, the Administration's position 
is that the 2013 budget provides specific savings proposals 
that if enacted would enable us to achieve the reductions to 
the deficit without relying on sequestration.
    Mrs. Blackburn. OK. So you feel like you are ahead of the 
game?
    Mr. Cochran. Well, the President's proposals overall, 
including HHS and other departments would enable savings with 
specific reductions----
    Mrs. Blackburn. Let us do this. Why don't you submit in 
writing what you all are doing to make preparations to meet the 
sequestration numbers and to meet the reductions that we are 
going to continue to bring forward? May I remind you, you are 
an agency that as we read your reports and as we hear from your 
Inspector General, who should be here with us today and is not, 
and as we listen to GAO, it is very evident to us that you all 
are too big to manage. You have gotten too unwieldy. You are 
into areas where you should not necessarily be. You are 
spending money in ways that you should not, ought not to be 
spending it, and it is our responsibility to come back and to 
exercise some oversight on that. That is what we are doing here 
today.
    And I know that maybe you weren't provided all of the 
information that you needed to have to handle this hearing 
today but even if you were not properly given the information, 
with all due respect to you, let us just be sure that we submit 
all of this writing because it is something that it is 
important to us. It is important to our constituents. It is 
important to the hospitals and to the providers that serve all 
of these individuals that walk through their doors every day 
wanting health care and we come up here and we talk to you all 
and we see a lot of the money that ought to be going out there 
to individuals, to enrollees, to the health care system is spun 
up, tied up, wadded up over here in HHS and it is something 
that we want to get our hands around and help you all be more 
efficient and do a better job for the taxpayers, and I yield 
back.
    Mr. Stearns. The gentlelady yields back.
    Ms. Christensen, I am glad you are here. Thank you. You are 
recognized for 5 minutes.
    Dr. Christensen. Thank you, Mr. Chairman.
    Before I ask my questions, Ms. Yocom and Mr. Cosgrove, I 
wanted to just highlight on page 5 part of your testimony on 
aligning coverage with recommendations of the U.S. Preventative 
Services Task Force. I am sure you are aware that there have 
been several recent recommendations coming from that task force 
that not only I but others consider questionable, and they 
don't take into account some of the outlying groups like racial 
and ethnic minorities. For example, in the breast cancer 
recommendations, black and Jewish women are at risk for breast 
cancer at early ages, it didn't seem to take that into account. 
And it didn't take into account the high prostate cancer 
incidence in African American men with their recent prostate 
screening recommendations. So at least think that to tie 
reimbursement too tightly to all of their recommendations can 
be harmful to some groups in our population and will deny them 
access to some needed care because they won't be able to afford 
it. So I don't know how you address it but I wanted to call 
your attention to that because some of their recommendations 
are very questionable and really don't take into account the 
entire population in the United States. Go ahead.
    Mr. Cosgrove. I just wanted to say that CMS has the 
authority to consider the recommendations of the task force 
when they are making coverage decisions. We didn't 
independently--because of that authority, we didn't 
independently go on and have experts that would look behind the 
task force recommendations.
    Dr. Christensen. But you still recommended CMS provide 
coverage for task force recommendation services, you do say as 
appropriate.
    Mr. Cosgrove. Correct.
    Dr. Christensen. OK. Thank you.
    But, you know, I listen to my Republican colleagues, and 
HHS houses agencies that Americans rely on every day to protect 
their health and keep them safe like the FDA, National 
Institutes of Health, Centers for Disease Control. The House 
Republican budget would result in drastic cuts and undercut the 
essential functions of these agencies, and I want to explore 
some of those implications of those cuts.
    So Mr. Cochran, my understanding is that the Republican 
budget would make across-the-board cuts in discretionary 
spending. Is that correct?
    Mr. Cochran. There are across-the-board cuts associated 
with sequestration that CBO estimates roughly 8 percent----
    Dr. Christensen. But they are going beyond that.
    Mr. Cochran. The House budget resolution does set spending 
levels not specific to HHS but government-wide that are below 
those established in the Budget Control Act for 2013 and 2014.
    Dr. Christensen. And I am correct that this discretionary 
spending is what provides a significant amount of budget to the 
agencies like the Food and Drug Administration, NIH and our new 
Institute of Minority and Health Disparities and CDC?
    Mr. Cochran. Yes. The majority of resources for our 
discretionary agencies outside of the entitlements is regular 
budget authority. Almost all of NIH's budget is provided that 
way. FDA is supported by a combination of budget authority and 
user fees.
    Dr. Christensen. So to single out just one, can we talk 
about what FDA's essential functions are? Can you tell us about 
what their essential functions are?
    Mr. Cochran. Yes. FDA's mission is to protect the public's 
health by ensuring the safety, the efficacy, the security of 
human as well as veterinary drugs. They work on biologics and 
devices. They also work to protect the U.S. food supply. They 
are having new responsibility over the regulation of tobacco 
products to reduce youth smoking. And they are working to 
accelerate the review and approval of medical countermeasures 
to protect the public against bioterrorism attacks.
    Dr. Christensen. Right, and these cuts would jeopardize the 
safety of our drugs, our vaccines and medical services. And 
then at NIH, the center of U.S. medical research, one of the 
greatest research institutions in the world, but that 
Republican budget would mean that NIH would have less money 
available for cutting-edge research into breast cancer, HIV, 
Alzheimer's and others and health disparities.
    So how much funding does NIH currently receive to conduct 
scientific research?
    Mr. Cochran. NIH's budget is $30.7 billion.
    Dr. Christensen. Thank you. And we know that that money is 
well spent. As a matter of fact, I believe it is level funded 
in 2013 and that does not allow them to really make the kinds 
of research investments that they need. Their studies have led 
to development of the MRI, how viruses cause cancer, the 
mapping of the human genome with all that is going to lead to, 
and they boost our economy through medical breakthroughs. 
According to one study, for every dollar of public funding for 
scientific research, the drug industry gets a $3 return. So 
deep cuts to NIH would be an irresponsible fiscal decision.
    So I appreciate your helping to explain the impact of the 
Republican budget, not just on Medicare and Medicaid but on 
other important government programs. So thank you for your 
testimony and your answers.
    Mr. Stearns. I think to the gentlelady, I would say that we 
are trying to control the budget. We will have to do some cost 
cutting somewhere if we are going to do that.
    The gentleman from Texas, Dr. Burgess, is recognized for 5 
minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    I do want to go on record as saying there has been no 
bigger critic of the Title 42 program than myself, but I 
understand the necessity of having a Title 42 program. If we 
have the best virologists on the face of the earth, we want to 
be able to pay him or her an amount commensurate with their 
ability. If we have the person who sequenced the human genome 
working at NIH, we want to be able to pay him or her to a 
degree commensurate with their ability. But we don't need to be 
paying entry-level biologists and chemists, and I won't say 
that HHS has been as guilty of that as EPA has been over the 
years but it just points out that this committee must have 
oversight. If we are willing to spend more money to have top 
researchers in their field, we must have oversight into how 
those dollars are spent.
    Off the editorial statement now. Let me just ask a 
question, Mr. Cochran. Dr. Christensen is very critical of the 
budgetary process. It is OK within her purview to do that. You 
may have heard or read in the papers the Supreme Court heard 
oral arguments about the Affordable Care Act at the end of 
March. Did you read about that?
    Mr. Cochran. Yes, I am aware.
    Mr. Burgess. And then there was a lot of chatter afterwards 
that maybe something might happen to the Affordable Care Act. 
Can't know, won't know for another 6 weeks. But are you doing 
anything within your agency to prepare for the Supreme Court 
voiding a portion or all of the Affordable Care Act?
    Mr. Cochran. The HHS again principally the Centers for 
Medicare and Medicaid Services as well as other components are 
focused on implementing the Act, which is the law of the 
Congress.
    Mr. Burgess. Focused? They are going on light speed. I am 
sorry. Continue on.
    Mr. Cochran. I mean, I will stop there. That is where we 
are putting our attention is to carry out----
    Mr. Burgess. So there are no contingency plans, what if 
this thing gets struck down by the highest court in the land?
    Mr. Cochran. The focus is on implementing current law.
    Mr. Burgess. So the answer is no, there are no contingency 
plans? We are not paying attention to current events 
surrounding our agency, and if the world comes crashing down 
around our ears on June 30th, so be it. Is that the impression 
you wish to give the committee?
    Mr. Cochran. I wouldn't phrase it that way. I would say 
that we are----
    Mr. Burgess. I am trying to help you.
    Mr. Cochran. We are focused on implementing--CMS is focused 
on implementing the Act that is current law.
    Mr. Burgess. So by inference, there are no contingency 
plans, and if your world comes to an end, then so be it.
    Well, let me just ask you this. We have heard all this 
great testimony about all the wonderful tools you have under 
the Affordable Care Act for combating fraud and waste. A lot of 
this just sound like good management practices, and I suspect a 
lot of those were going on and we could study GAO reports from 
previous years and find that many of those things have already 
been going on. But if there are specific tools that you were 
granted under the Affordable Care Act, what happens July 1st if 
the Affordable Care Act is no more? Do you stop prosecuting 
fraud in the Department of Health and Human Services? Do you 
just give up?
    Mr. Cochran. CMS, our Office of Inspector General, DOJ, 
they have--CMS, for example, has tools that have been enhanced 
through the Affordable Care Act but they have been working in 
this area for a long period and have funding and authorities 
that preceded the Act.
    Mr. Burgess. So you wouldn't just throw up your hands and 
say we give up, fraudsters win, we are going to just hand the 
money over to the crooks, right?
    Mr. Cochran. This is one of the highest priorities of the 
Department and it is an area of great focus.
    Mr. Burgess. The loss of the Affordable Care Act would not 
inhibit your abilities to fight fraud. Is that correct? Is that 
a fair statement?
    Mr. Cochran. The law provides CMS with additional 
authorities that have enabled them to--that are enabling them 
to do a better job.
    Mr. Burgess. If I may, you wouldn't grind to a halt on July 
1st or 2nd if the Supreme Court so rules?
    Mr. Cochran. There are authorities and funds that precede 
the Act, and it is a major area of focus, a major priority for 
the Department.
    Mr. Burgess. Again, suffice it to say, fraud enforcement is 
not going to go away if the Affordable Care Act is struck down 
by the Supreme Court. You and I don't know the answer to that 
at this point so it is obviously a point of some conjecture.
    What is not a point of conjecture is the sequestration that 
is going to happen. I have to tell you, I was a little 
disturbed by your answer to Representative Blackburn's 
questions about sequestration. You are giving us the impression 
that the President's budget for 2013 actually included those 
sequestration cuts.
    Mr. Cochran. I am sorry, no. The President's budget 
includes specific targeted reductions that would make 
sequestration unnecessary to achieve the same end. 
Sequestration is an approach of across-the-board reductions----
    Mr. Burgess. Sequestration, you can't just say it is not 
necessary. I mean, it is a law. The President signed it. Surely 
he remembers that.
    Mr. Cochran. And the policy of the Office of Management and 
Budget and of the Administration is to work with the Congress 
to find specific reductions and avoid an across-the-board 
approach to finding savings.
    Mr. Burgess. Well, OK. Sequestration starts when? January 
1st of 2013? And what are the efforts that are ongoing now in 
working with the Congress to identify? You have 8 percent of 
your discretionary budget, if I understand things right. Does 
that sound right, 8 percent, that you have to cut?
    Mr. Cochran. CBO estimates, right, just roughly 8 percent 
would be not just--but across discretionary spending.
    Mr. Burgess. Well, that is a lot more than the reductions 
that are proposed in the President's budget for 2013, correct?
    Mr. Cochran. That is correct. The President's budget 
proposes a mix of--and not just in HHS but government-wide a 
mix of discretionary reductions, mandatory reductions, and 
other----
    Mr. Burgess. Well, correct me if I am wrong, but the way 
the law reads, the law that the President signed is that 
sequestration comes from HHS, right?
    Mr. Cochran. No, the law created a committee to find 
specific savings. Sequestration was a backstop to that. The 
Administration's position is to----
    Mr. Burgess. That was the Super Committee. They failed. We 
all got that. They fell to earth. So January 1st, you have to 
come up with 8 percent in cuts in your agency. How are you 
proposing to do that?
    Mr. Cochran. The way sequestration is modeled is to have a 
strict across-the-board reduction as opposed to the targeted 
savings that the Administration's budget proposals would----
    Mr. Burgess. And are you preparing for those across-the-
board reductions within your agency? You are the Budget 
Director, right, or the Assistant Budget Director?
    Mr. Cochran. I am, and the focus is on working with 
Congress to identify specific reductions as opposed to relying 
on across-the-board reductions.
    Mr. Burgess. So what specifically have you done to work 
with Congress? You have got 6 months before this thing kicks 
in.
    Mr. Chairman, I beg some indulgence. You have given other 
people extra time. This is of critical importance.
    Mr. Stearns. The gentleman asks for unanimous consent for 
another 30 seconds.
    Mr. Burgess. Would the gentleman please answer the 
question? What have you done to work with this committee, this 
Congress in order to avoid that 8 percent across-the-board 
reduction that you are going to see January 1st?
    Mr. Cochran. Well, the President submitted a budget in 
February that has a number of proposals and seeks to work with 
the Congress to have those proposals be enacted.
    Mr. Burgess. With all due respect, that budget was pure 
fantasy. It did not garner a single vote in the House of 
Representatives on either the Republican or Democratic side. I 
think we are going to have to do better than that. Would you 
not agree with that?
    Mr. Cochran. I would agree we have a long way to go and----
    Mr. Burgess. So what is your proposal to work with this 
committee and Congress to avoid the sequestration across-the-
board cuts to identify those areas of savings and/or cuts that 
can occur?
    Mr. Stearns. The gentleman's time has expired. You are 
welcome to answer the question, and if you can't, perhaps you 
could come back and provide us written material.
    Mr. Cochran. By the way, our jurisdiction is just within 
the Department of Health and Human Services. We have proposed 
over $300 billion in specific reductions on the mandatory side 
as well as specific discretionary reductions. We briefed the 
Appropriations Committee on the discretionary budget.
    Mr. Stearns. Would the gentleman from Texas like to go a 
third round? Because we could do that.
    Mr. Burgess. Yes, I would be happy to.
    Mr. Stearns. I am not sure we will all use it, but I think 
I will take a third round and perhaps the ranking member and 
then we will come back to the gentleman, and he may not need 
his full 5 minutes.
    I think the point that the gentleman from Texas is making 
is pretty important here, and I think as the Subcommittee on 
Oversight, we should have an understanding of what is going to 
happen with sequestration. The Impoundment Control Act and the 
Anti-Deficiency Act are going to complicate the budgeting 
process for your department. I think we all agree. The Act 
includes two main prohibitions. One, agencies can't spend more 
money than they have or spend money before they have it, and 
two, agencies cannot accept voluntary services. On the other 
hand, the Impoundment Control Act requires that agencies 
obligate the amount that Congress has appropriated. So in 
anticipation of the sequestration, what is the Department's 
plan to prevent violating these two laws?
    Mr. Cochran. For our discretionary budget, it has in pretty 
recent history often been the case that at the beginning of the 
fiscal year we are under a continuing resolution where we don't 
yet know what Congress will provide for that full year, and in 
those situations, we operate at a lower level with respect to 
not releasing all grant funds, and in particular in this case 
under a continuing resolution in the fall leading up to January 
would take the same approach.
    Mr. Stearns. Mr. Cosgrove, do you have any comments that 
you might have relative to the sequestration and what Mr. 
Cochran has said?
    Mr. Cosgrove. I don't specifically. My understanding is 
that agencies would need instructions from OMB, and those have 
not been provided, but I am not an expert on the sequestration 
law.
    Mr. Stearns. Ms. Yocom, do you have anything you might add?
    Ms. Yocom. I don't.
    Mr. Stearns. OK. Mr. Cochran, what percentage reduction 
amounts of cuts would hit HHS discretionary budget authority, 
for example, on NIH? Do you have any feel for that?
    Mr. Cochran. Under sequestration?
    Mr. Stearns. Yes.
    Mr. Cochran. CBO estimates sequestration would be roughly 8 
percent, 7.8 percent.
    Mr. Stearns. And that would be true on CDC too?
    Mr. Cochran. For the majority of funds, yes.
    Mr. Stearns. FDA?
    Mr. Cochran. For the majority of funds, yes.
    Mr. Stearns. OK. I think that is going to complete my 
comments.
    Ms. Schakowsky?
    Ms. Schakowsky. Thank you.
    I wonder if the gentleman and all those so interested in 
what HHS is doing to prepare for sequestration are equally as 
committed to the requirements for the defense budget under 
sequestration, which have been protested from day one on the 
Republican side of the aisle and have looked at the Prevention 
Fund as a way to help avoid cuts on the military side.
    All this focus, which I agree, we want to cut all waste, 
fraud and abuse, we want to be absolutely efficient, and that 
frankly is why we passed the Affordable Care Act, or as I 
fondly call it, Obamacare. Is it not true, Mr. Cosgrove or Ms. 
Yocom, that the projection in savings under the Affordable Care 
Act is $210 billion over the next 10 years and $1 trillion over 
the 10 years after that, that repealing it would in fact raise 
the deficit?
    Mr. Cosgrove. CBO did estimate savings associated with 
passage of the Act. Yes, that is correct.
    Ms. Schakowsky. And at the same time, the Republicans added 
a $400 billion drug benefit program, unpaid for and with a 
prohibition that Medicare could even negotiate with the 
pharmaceutical companies for lower prices and have consistently 
opposed efforts to reduce the Medicare Advantage overpayments 
to insurance companies. So I am more than willing to roll up my 
sleeves with you and with HHS to figure out the ways that we 
can achieve needed savings in our health care spending but I 
just really find offensive the selective criticisms. I want to 
repeat that the travel budget is down from the second year of 
the Bush Administration, that they see a 17 percent further 
cut. I don't object to asking for the details but the affect 
here that somehow there is a disregard for saving taxpayer 
dollars I think is really misspent. In fact, I think we can 
look at how the Republican budget would increase Medicare 
fraud, and I want to ask a couple of questions about that.
    The Republican budget repealing the Affordable Care Act, 
which contains significant new tools for fraud detection and 
prevention, new resources to fight Medicare and Medicaid fraud, 
and so while Dr. Burgess was saying you are going to still 
fight fraud, but doesn't the Affordable Care Act give you new 
tools to do that, Mr. Cochran?
    Mr. Cochran. It does.
    Ms. Schakowsky. And what is the typical return on 
investment for every dollar spent on Medicare fraud?
    Mr. Cochran. The return on investment for the last 3 years 
for our health care fraud and abuse account has been 7 to 1.
    Ms. Schakowsky. And would these significant budget cuts and 
eliminating the new authorities given to HHS to prevent fraud 
before it happens impact your agency's ability to fight fraud?
    Mr. Cochran. CMS is finding the new authorities to be 
helpful in moving away from what is sometimes called a pay and 
chase and toward being able to suspend payments before they are 
made whenever there is an investigation of a credible 
allegation of fraud. The resources that the Act provides are 
important for not only the work of CMS as well as our Office of 
Inspector General in our partnership with the Department of 
Justice.
    Ms. Schakowsky. And the Republicans' budget impact on 
preventing fraud in the Medicare program would also be 
profound. The Republican proposal to turn Medicaid into a block 
grant would result in dramatically decreased federal 
contribution to State Medicaid programs, a cut of more than 
$810 billion over the next decade.
    Mr. Cochran, wouldn't such a dramatic cut on the federal 
contribution mean that States' antifraud spending would be 
increasingly in competition with their spending on patient 
care?
    Mr. Cochran. In the context of reduced resources, that 
tradeoff is--I think it would be logical to expect that sort of 
tradeoff. The emphasis of the Administration on Medicaid is to 
find specific reductions and to retain its core function as a 
specific benefit for low-income populations.
    Ms. Schakowsky. Well, I think this is a powerful example of 
why the Republican budget is so misguided. It is pennywise and 
pound very foolish, making cuts that would result in increased 
Medicare and Medicaid fraud and cost taxpayers more in the long 
run, and I yield back.
    Mr. Stearns. The gentlelady yields back. She is one of the 
first Democrats to use ``Obamacare'' in a way that she is proud 
of, and I think that is something. I would say to her that the 
cost savings that she talks about obviously come from the 
reduction in Medicare by $500 billion.
    So with that, Dr. Burgess is recognized for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Cochran, a former Member of Congress, Charles Stenholm, 
Democrat from Texas, provided what I think is a very useful 
model, and I really do wish that Health and Human Services 
would look at this and follow this. He was trying to do with 
inappropriate transfers of funds within the crop insurance 
program because he was on the ag committee, and I think the 
senior Democrat on the ag committee at the time, and it 
occurred to him, even within his own district that there were 
crop insurance payouts that were far in excess of what would be 
expected in the area. So they developed a predictive modeling 
program with Dr. Bert Little at Carlton State University in 
Texas, a relatively small State university in Texas, and using 
this predictive modeling program were able to achieve 
significant savings in the crop insurance program, and what 
they found much to their surprise was, once they started 
looking, the problem diminished, that is, people were willing 
to perhaps make embellished reports as long as no one paid any 
attention to them. But when there was seen that in fact there 
was this increased scrutiny, the numbers dropped.
    So I would just suggest that to you. We are all looking at 
ways to find additional dollars, and again, the gentleman's 
name is Dr. Bert Little down at Carlton State. The crop 
insurance program that Mr. Stenholm developed through an 
earmark when he was in Congress turned out to be enormously 
helpful and protective of the program.
    Now, look, we have had a lot of discussion about a lot of 
different things. The Supreme Court is going to rule 
irrespective of the Republican budget. So forget for just a 
minute about any evil associated with the Republican budget. 
You have the Supreme Court going to rule. And you are telling 
me that you won't have the tools you need if the Supreme Court 
strikes down the entirety of the Affordable Care Act?
    Mr. Cochran. No, sir. There are important tools that are 
included in the Affordable Care Act as well as resources for 
CMS and the Office of Inspector General. There are tools that 
precede the Act and resources that precede the Act as well.
    Mr. Burgess. Very well, and they will continue to be there 
and be utilized, and if you need additional authority because 
the Affordable Care Act has vaporized overnight, you will be 
able to come back to Congress and ask for that authority. Is 
that not correct?
    Mr. Cochran. Well, the Administration's focus is on using 
the tools that are current law to carry that out.
    Mr. Burgess. I get it, but there is a court case out there. 
You admitted that you had read about it.
    Well, what you must be aware of, the law of the land is the 
Budget Control Act of last August, dreadful piece of 
legislation, but nevertheless, it is there and it proposes an 8 
percent across-the-board. You are developing your budget, your 
fiscal year 2014 budget now, are you not? You don't want until 
the last minute to develop that?
    Mr. Cochran. That is correct. We are just now starting to--
--
    Mr. Burgess. Are you taking into account that that 8 
percent across-the-board hammer is hanging over your head 
January 1st?
    Mr. Cochran. We formulated our budgets each year under the 
guidance that comes from OMB. We typically would get that over 
the summer. What we are doing now is looking at our performance 
information, looking at priority areas, identifying where we 
can find additional savings, and with that, the effort for the 
2014 budget formulation will become, you know, more fulsome 
once we get the guidance from OMB.
    Mr. Burgess. OK. Well, Ms. Schakowsky correctly pointed out 
how the Pentagon is actively engaged in what it will have to do 
to deal with sequestration and are there ways to avoid it. We 
don't hear much out of HHS, and you have got the same sword of 
Damocles hanging over your head as the Department of Defense.
    Let me just ask you this. Going back to the Affordable Care 
Act, and I know you don't want to think about the Supreme 
Court, but you have a Medicaid payment rate. In fact, there was 
a story out today on Politico Probe about the Medicaid payment 
rate which was just finalized, and it is going to pay Medicaid 
at the higher rate as authorized by Medicare. Are you prepared 
if that goes away July 1st? Are you prepared to step up to the 
plate to do something as far as provider payments in Medicaid 
or is that just tough luck for the docs?
    Mr. Cochran. For Medicaid, you mean with respect to the 
State-federal share?
    Mr. Burgess. No, I am talking about, there was an enhanced 
payment rate in Medicaid up to the level--in primary care up to 
the level of as reimbursed by Medicare currently so that there 
wasn't that discrepancy in the payment rates between Medicare 
and Medicaid. You guys are going to take are of the docs if 
this thing goes away?
    Mr. Cochran. Well, the emphasis for CMS as well as for the 
Department is to implement what is now current law and to carry 
out the provisions of the Affordable Care Act.
    Mr. Burgess. You have told me that before. You know, your 
authority to pay providers under Medicare and Medicaid may 
evaporate July 1st, according to some AP reports that were out 
last week. You have got to be having some contingency plans on 
what do you do to keep the Nation's doctors seeing your 
Medicare patients after July 1st in the absence of the 
Affordable Care Act. You just have to.
    Mr. Cochran. The emphasis of the Department and of CMS is 
carrying out current law.
    Mr. Burgess. This is the equivalent of taking the Fifth on 
this issue. You have to be preparing because, I mean, again, I 
didn't make up this AP report. It bothered me when I saw it as 
well. I think we should be doing some contingency planning at 
the committee level. We, after all, are the committee of 
jurisdiction over these programs but I cannot believe that your 
agency, that Secretary Sebelius and the Administrator at CMS 
are not sitting down and at least looking at some black and 
white numbers of what do we do to take care of our docs if they 
Affordable Care Act vanishes in the morning dew.
    Mr. Stearns. The gentleman's time has expired.
    Mr. Burgess. May the gentleman provide us a response? You 
have got to be doing some contingency planning.
    Mr. Cochran. The focus is on implementing what is current 
law, and at CMS, analysis that we are doing related to the Act 
has to do with----
    Mr. Burgess. Mr. Chairman, I am not going to get an answer 
but what I would like to suggest is that this committee request 
respectfully from the agency information regarding this, 
because it is important. If every doctor doesn't get a paycheck 
July 1st, we are going to be in a hell of a shape. Perhaps we 
could request meeting notes, emails. There is bound to have 
been some discussions that have gone on at CMS about what 
happens the day after the Affordable Care Act is--if the 
Supreme Court says it is unconstitutional.
    Mr. Stearns. I think that the gentleman is correct. I think 
the committee can formally request from you what actions your 
agency intends to take in the event of deferral of budget money 
because of sequestration, the tools you are going to use. I 
think that is a reasonable request in the event this occurs. I 
think your agency should get back to us, as Dr. Burgess pointed 
out, with some chronology of things and tools you are going to 
do, because for you to continue to say we are just going to 
implement Obamacare, it is like he said, you are taking the 
Fifth, and I think there is a point where Congress oversight, 
our responsibility under the Constitution, we have a right to 
ask this and ask what you are going to do. That is what I am 
requesting formally.
    We are going to wrap up this hearing. I have the 
opportunity to give some closing comments. You mentioned, Mr. 
Cochran, under Obamacare that Obamacare provides additional 
funding to fight waste, fraud and abuse in Medicare and 
Medicaid, I believe, but it is also true that there remains 
billions of dollars to be saved immediately only if Health and 
Human Services would simply implement all of the GAO's 
outstanding recommendations that were in Mr. Cosgrove's opening 
statement, that are in his written statement that he gave us. 
So I think before Health and Human Services goes around asking 
for more money in order to cut waste, fraud, and abuse, we 
should start with the savings that the GAO has presented here, 
clearly, abundantly as pointed out, and obviously, in our 
opinion, and I think it appears to be from the GAO, you have 
not implemented and responded to those recommendations and you 
in fact pointed out one of them that you are going to totally 
disregard in dealing with the bonus program.
    So that is the closing statement, and I thank the witnesses 
for the hearing. We want to put in by unanimous consent this 
little graph that we put on the slide. Without objection?
    Ms. Schakowsky. Without objection.
    Mr. Stearns. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. And in conclusion, I would like to thank the 
witnesses and members that participated in today's hearing. I 
remind members that they have 10 business days to submit 
questions for the record, and I ask that the witnesses all 
agree to respond promptly to these questions.
    With that, the subcommittee is adjourned.
    [Whereupon, at 12:20 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

               Prepared statement of Hon. John D. Dingell

    Mr. Chairman, thank you for holding this important hearing 
today. The Department of Health and Human Services is the 
agency that ensures the health and well being of our nation's 
citizens. If we do not have a healthy society as our base to 
build off of, nothing else really matters. If we have a sickly 
workforce, all the jobs bills in the world won't make a 
difference. This is why we have and will continue to fund this 
agency the best we can.
    The Department of Health and Human Services is responsible 
for implementing the Affordable Care Act. An Act that, if taken 
away, will take away health insurance from 33 million 
Americans. I realize these are difficult times and difficult 
decisions have to be made, but the propositions my friends on 
the other side of the aisle are putting forth are far from 
solutions, they are not even options. Mr. Ryan's budget, for 
all intents and purposes, gets rid of Medicare and Medicaid as 
we know it. I fail to understand how cutting programs that 
provide health care for those who need it most will save us 
money in the long run. Foresight does not seem to be a gift 
that the Republicans who drafted this budget have.
    HHS is clearly striving to streamline their budget and save 
taxpayer dollars. They are working hard to implement 
recommendations from GAO reports that will achieve savings and 
reduce Medicare fraud. And HHS is succeeding. Just last week 
the Medicare Fraud Strike Force took down over 100 individuals 
responsible for $452 million in false billing practices.
    Protecting and improving the public's health are vital 
goals of HHS and I know they work hard to meet these goals 
while using taxpayer dollars wisely. It would not be wise for 
Congress to wantonly disregard their important mission by 
indiscriminately cutting funding.
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