[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
DEPARTMENT OF HEALTH AND HUMAN SERVICES BUDGET PRIORITIES FOR FISCAL
YEAR 2005
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, FEBRUARY 26, 2004
__________
Serial No. 108-21
__________
Printed for the use of the Committee on the Budget
Available on the Internet: http://www.access.gpo.gov/congress/house/
house04.html
______
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COMMITTEE ON THE BUDGET
JIM NUSSLE, Iowa, Chairman
CHRISTOPHER SHAYS, Connecticut, JOHN M. SPRATT, Jr., South
Vice Chairman Carolina,
GIL GUTKNECHT, Minnesota Ranking Minority Member
MAC THORNBERRY, Texas JAMES P. MORAN, Virginia
JIM RYUN, Kansas DARLENE HOOLEY, Oregon
PAT TOOMEY, Pennsylvania TAMMY BALDWIN, Wisconsin
DOC HASTINGS, Washington DENNIS MOORE, Kansas
ROB PORTMAN, Ohio JOHN LEWIS, Georgia
EDWARD SCHROCK, Virginia RICHARD E. NEAL, Massachusetts
HENRY E. BROWN, Jr., South Carolina ROSA DeLAURO, Connecticut
ANDER CRENSHAW, Florida CHET EDWARDS, Texas
ADAM PUTNAM, Florida ROBERT C. SCOTT, Virginia
ROGER WICKER, Mississippi HAROLD FORD, Tennessee
KENNY HULSHOF, Missouri LOIS CAPPS, California
THOMAS G. TANCREDO, Colorado MIKE THOMPSON, California
DAVID VITTER, Louisiana BRIAN BAIRD, Washington
JO BONNER, Alabama JIM COOPER, Tennessee
TRENT FRANKS, Arizona RAHM EMANUEL, Illinois
SCOTT GARRETT, New Jersey ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina DENISE MAJETTE, Georgia
THADDEUS McCOTTER, Michigan RON KIND, Wisconsin
MARIO DIAZ-BALART, Florida
JEB HENSARLING, Texas
GINNY BROWN-WAITE, Florida
Professional Staff
Rich Meade, Chief of Staff
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S
Page
Hearing held in Washington, DC, February 26, 2004................ 1
Statement of:
Hon. Tommy G. Thompson, Secretary, Department of Health and
Human Services............................................. 6
Alan R. Weil, Director, Assessing the New Federalism, the
Urban Institute............................................ 52
Prepared statement and additional submission of:
Questions for the record from the Hon. Denise Majette, a
Representative in Congress from the State of Georgia....... 4
Mr. Thompson:
Prepared statement....................................... 8
Response to Mr. Scott's question regarding the Faith-
Based Legislative Initiative........................... 42
Letters for the record from Hon. Rosa L. DeLauro, a
Representative in Congress from the State of Connecticut... 37
Mr. Weil..................................................... 54
DEPARTMENT OF HEALTH AND HUMAN
SERVICES BUDGET PRIORITIES FOR FY 2005
----------
THURSDAY, FEBRUARY 26, 2004
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:10 a.m. in room
210, Cannon House Office Building, Hon. Jim Nussle (chairman of
the committee) presiding.
Members present: Representatives Nussle, Shays, Gutknecht,
Ryun, Hastings, Putnam, Wicker, Tancredo, Bonner, Garrett,
Barrett, Spratt, Moran, Hooley, Baldwin, Moore, DeLauro, Scott,
Capps, Thompson, Baird, Cooper, Emanuel, Davis, Majette, Kind,
and Edwards.
Chairman Nussle. Good morning and welcome, everyone, to
this hearing in the Budget Committee. I am pleased to have with
us today the Secretary of the Department of Health and Human
Services for a return visit, the Hon. Tommy Thompson, to
discuss the key elements of the Department's request for this
year's budget.
Secretary Thompson, welcome back to the Budget Committee,
and we are honored to have you with us today. We know that you
have a prior commitment, that you need to leave at noon; making
a very important journey, as I understand it, to Iraq. So it is
important that we have a chance to visit with you and let you
get on to some other important business.
While the Department of Health and Human Services has a
long list of responsibilities and certainly numerous agencies
within its jurisdiction, there are three areas that I believe
are important to focus on today: Medicare reform and
prescription drugs; the health savings accounts, and, of
course, the new efforts with regard to counteracting
bioterrorism.
Last year the Congress and President Bush accomplished a
feat that policymakers have struggled with for years. We
enacted legislation to strengthen Medicare and include a first-
ever prescription drug benefit. While the new law may not be a
perfect solution to the many challenges that confront the
Medicare program, it is without question a truly historic first
step in strengthening the program, which has really lagged
behind private health insurance since its enactment in 1965.
The benefits of this action are really already on their
way. According to the Centers for Medicaid and Medicare
Services, in just 4 months all beneficiaries will have access
to a Medicare discount card that will result in about 10 to 15
percent savings for the average beneficiary, and up to about a
25-percent savings on certain prescription drug costs. Low-
income seniors will also be receiving a $600 subsidy in
conjunction with their prescription drug discount card, which
is really welcome relief to so many, I know, of my constituents
that I met with this last week during the President's Day
recess.
In addition to the inclusion of the prescription drug
benefit, there are a host of other positive changes to Medicare
that I think are worth noting. We strengthened its financing by
addressing waste, fraud and abuse, which I am proud to say was
an effort that at least had some of its beginning and momentum
from this committee last year as part of our budget process;
reforming the regulatory structure to ease the burden on
Medicare providers, making it easier for generic drugs to enter
the marketplace; and, finally, addressing the payment and
equity that has been there with regard to rural and urban areas
that certainly you, as Governor of Wisconsin, and I know well
from Iowa, it is an issue of particular concern to many of us
on this committee. And I have seen some studies that finally
show Iowa out of last place, which I can tell you my
constituents were very happy about.
As part of the improvements in both benefits and the way
Medicare program does business, the Congress and the President
have also enacted transformation in the way that we can manage
health care needs. Now, much like Americans save for their own
and their family's future through IRAs and 401(k)s and
education savings accounts and the like, we have enacted the
opportunity for people to save for their own medical needs
through health savings accounts. These accounts will not solve
every problem in health care, certainly, but it will allow for
two very important changes. First, they will restore to
consumers the ability to plan for and make their open choices,
which is huge in health care for so many people. And secondly,
it will help address some of the long-term demographic and
financial problems facing the Medicare program.
While a discussion of these changes will likely consume the
bulk of the hearing, I don't mean to forget probably one of the
most important new roles and expanding roles for the
Department, as we are all aware of the ongoing threat to our
Nation from a potential and continuing bioterrorist attack.
Secretary Thompson, you and your Department have been
charged with ensuring that we are prepared with the necessary
training, supplies, and vaccines to protect our citizens in the
event of such an incident. Mr. Secretary, I am eager to hear
about the progress that the Department has made on these fronts
in the past few years and also your thoughts on what also may
need to be done to ensure our safety.
I want to also ensure that we talk about Medicare
enactment, and if there are challenges or changes that we need
to be working on in order to ensure that the Medicare changes
that we have enacted last year can be put into effect as
quickly as possible so that we can make sure that the benefits
from this act are able to be taken advantage of as quickly as
possible.
So I appreciate you being with us today. Your entire
testimony will be made part of the record, and at this point I
would turn to Mr. Spratt for any comments he would like to
make.
Mr. Spratt. Mr. Secretary, thank you very much for coming
and discussing one of the biggest components on the domestic
side of our budget--probably the biggest--and for taking time
out of what has to be a phenomenally busy schedule to answer
our questions about this program.
Mr. Secretary, one of the surprises in the budget this year
was the revelation that the Medicare prescription drug benefit,
passed just a few months ago with a basically Republican
majority, was going to cost $534 billion, $139 billion more
than was advertised at the time it was passed.
Had that cost estimate been disseminated and available to
Members of the House of Representatives, particularly on the
other side of the aisle, I don't think it would have passed,
not at $539 billion.
And had that price for the rather meager coverage been
advertised, then I think everybody might have been compelled to
go back and look at the bill and look at one extraordinary
provision in that bill which prohibited the government from
negotiating drug prices with pharmaceutical firms. For the
first time in the 21 years I have been in Congress, this bill
contained a provision which said to offices of the government,
you don't have the obligation, indeed you are not allowed to go
seek the best price for the U.S. Government. Not only is it bad
policy, it is expensive policy, and it is certainly not a
precedent we want to follow elsewhere.
Now we received word recently, the Wall Street Journal had
a story of which I am sure you are aware, indicating that
several States who are in the business of buying drugs for
Medicaid--I think the drug bill for all the Medicaid, State and
Federal, is $27.5 billion last year, a big number--they are out
trying to form purchasing pools themselves, among themselves,
using pharmacy benefit managers so that they can negotiate down
with the prices. And they have been called to account and told
that this might not conform to Federal law. Well, great. I
would like to see--we want clarification of that today.
And probably the only way to break the phalanx and the
existing circumstances of these prices is to allow some
importation so there is some competition for the domestic
prices, but we don't have much assurance that that is going to
happen either. Surely we don't want to add to all of the other
aspects of this problem a prohibition on the States. We ought
to be encouraging the States, telling them to get out and
negotiate lower drug prices, that we will readily approve any
kind of reputable and well-set-up proposal.
Let me show you just a few charts to get the debate going,
Mr. Secretary, that we will be talking about today. The
President's budget, as this chart shows, a simple bar graph
that the President's budget will cut HHS, your Department, by
about $1 billion this year, for next year.
Next chart. Here are some of the allocations. NIH, a few
years ago we resolved, House and Senate, both sides of the
aisle, that we would double the budget for NIH over a period of
5 years, and we did it. Now we are beginning to see NIH barely
grow with the rate of inflation, and that is bound to have an
impact on medical research and breaking the new frontiers of
medical research.
FDA, vitally important role. It would be one of the
overseers, if we did allow importation to get some drug price
competition going, just a 2-percent increase.
And then HRSA, which is basically the community health side
of the HHS, this is the organization that provides for
community health centers and public health--these are the
people who don't have anything, and have to go to the
government as a last resort for their health, -2.28 percent. It
is a cut over the period of 5 years.
And then the CDC, which was mentioned indirectly by the
chairman when he referred to bioterrorism, after 9/11 a number
of Members went down to Atlanta to see CDC; and, Mr. Secretary,
frankly they were shocked at the condition of some of the
facilities there, both in terms of what we can do for this
BioShield-type initiative that we are taking and also in terms
of what might be mispriced, misallocated or pilfered from that
operation down there and put to dangerous uses in our economy.
So we have got a lot to talk about, Mr. Secretary, and I
know you have got limits on your time, I don't want to stretch
them. But these are some of the things that we want to touch
upon, and I hope that is all responded to in the course of the
statements you are about to make. Thank you again for being
here.
Chairman Nussle. Thank you, Mr. Spratt.
I ask unanimous consent that all members be allowed 7 days
to submit statements for the record and also, as we have done
in the past, as well, questions if we don't get to members, so
that the Secretary may, because of his time constraints, answer
them in writing.
[The information referred to follows:]
Questions for the Record offered by Hon. Denise L. Majette, a
Representative in Congress From the State of Georgia
Thank you Secretary Thompson for coming before us today. You have
had a tough time today defending the President's abysmal budget
request. It is impossible to defend a budget that shortchanges our
children today and our grandchildren tomorrow.
The President's proposal fails to meet today's urgent domestic
priorities including making sure our children receive a good education
and adequate health care. And as Chairman Greenspan testified
yesterday, it will leave our children with crippling deficits far into
the future and a truly staggering debt.
This is an irresponsible budget that shortchanges our children's
education and health, and then leaves them to pay the check for over 7
trillion in debt. Our children deserve better.
But beyond the big picture Mr. Secretary, I do have some specific
questions.
Question No. 1:
Mr. Secretary, as you know, the CDC is based in my district, and
like all Americans I am committed to ensuring that this critical agency
is adequately funded to perform all that we are asking these
professionals to do. This includes their role in public health research
and implementation as well as their increasing role in responding to
the threat from terrorism.
Our current total national healthcare expenditure (private,
federal, state) this year is $1.6 trillion. With the aging baby boomer
population and the financial strain of Medicare and Medicaid this
number will double by 2012. Chairman Greenspan warned yesterday about
the stifling effect increased Medicare spending could have in the
future. In light of this, it makes sense to invest more in research and
in proven prevention programs to lower these costs.
And in terms of the CDC's other role in fighting biological
threats, yesterday CIA director Tenet testified that Al-Qaida's program
to produce Anthrax is one of the most immediate terrorist threats we
are likely to face.
And yet, the President's budget cuts the CDC's funding by over $400
million this year--furthermore, they would be below today's funding
levels 5 years from now. Mr. Secretary, will you support CDC Director
Julie Gerberding's professional judgment request, made in May 2003,
that CDC's budget should instead be doubled over the next 5 years to
fulfill these dual roles?
Secretary Thompson's Written Response
Thank you for the question, Congresswoman Majette. Now, and in
future years, I remain fully committed to supporting the important work
of the Department's Centers for Disease Control and Prevention. With
regard to CDC's fiscal year 2005 budget request, increases of $341
million in various programs were offset by funding of:
Buildings & Facilities (+$81.5M) to continue construction
of the Roybal East Campus Consolidated Laboratory Project (Bldg 106),
which will replace and consolidate infectious disease laboratory and
vivarium facilities and to complete the Fort Collins Vector Borne
Infectious Disease Laboratory which includes insectary, vivarium and
diagnostic laboratories (-$179 million below fiscal year 2004 enacted);
One-time congressional projects (-$44M);
Extramural prevention research (-$15M) CDC has a growing
commitment to extramural public health research broadly, not only
research confined to prevention efforts. In an effort to avoid
duplication, CDC aims to continue to invest in the extensive rubric of
public health research on a coordinated, agency-wide basis.);
Youth Media Campaign (-$30.8M) The President's fiscal year
2005 budget request for the VERB campaign is $5 million. The fiscal
year 2004 funding of $36 million will be used to extend the phase 3
media buy (fiscal year 2003 funds) for the VERB Campaign. In effect,
the fiscal year 2004 appropriation increases phase 3 from a $51.3
million to an $87 million campaign and this will also help to ensure
continued added value (in-kind) commitments from media partners.); and
Terrorism redirection (-$130M) Monies that were previously
allocated directly to states (-$105 million), for upgrading internal
CDC capacities (-$15 million), and the culmination of a seven year
research project around anthrax vaccine (-10 million), will be used to
fill a preparedness gap in early attack warning and surveillance. The
benefits of the new BioSense program, of expanding quarantine stations
at US airports, and of enhancements to the Laboratory Response Network
will be felt in all state and local health departments. The Nation as a
whole will be better prepared to respond to a bioterrorist attack and
surveillance and lab capacities at CDC and in the states will be
greatly improved.
Question No. 2:
Mr. Secretary, another investment in our future that I would like
to address is our investment in education, specifically early childhood
education.
Head Start is underfunded this year alone by $1.5 billion and more
than a third of eligible children are still being left behind.
And the President's budget will not increase the number of children
served by this crucial program.
I'd like to remind everyone, Mr. Secretary, of a few facts about
Head Start. Participants in Head Start are:
Less likely to be held back in school.
Less likely to be placed in special education classes.
More likely to succeed in school.
More likely to graduate.
More likely to be rated as behaving well in class and
being better adjusted in school.
And five times less likely to end up in jail as adults.
Mr. Secretary, Head Start saves us more than it costs by reducing
incarceration rates. Will you join me in fighting to increase funding
for this critical program?
Secretary Thompson's written response
The administration agrees that Head Start is a valuable program
that has served our Nation's children well over the last four decades.
Funding for the program has increased $750 million over the last 4
years. Nevertheless, we believe that it is critical to continue to
improve the quality and effectiveness of the program to ensure that
every child enters school ready to learn. This can be done by ensuring
that all Head Start teachers are trained in the most up-to-date,
research-based methods for helping children develop early literacy and
numeracy skills that they need in order to be successful in
kindergarten. In fact, the Administration has implemented an aggressive
plan to make this happen. Over 50,000 Head Start teachers have received
training in early language and literacy development and early literacy
teaching strategies through our STEP program. Moreover, for the first
time, an outcomes-based system of accountability has been implemented
so that weaker programs can be identified and provided with the
training and technical assistance that will result in improved
language, cognitive, and early literacy outcomes for children
participating in those programs. These improvements will not be made at
the cost of sacrificing the comprehensive services that are being
offered to close to 920,000 children in the program.
However, I disagree with your assertion that nearly a third of
eligible children are being left behind, because many families chose
other options for their children, including placing the child in State-
run pre-K programs, day care centers, or in at-home education with
their parents or other family members. Additionally, many Head Start
programs have experienced problems in maintaining their funded
enrollment levels. In fact, self-reporting by Head Start centers
indicates that on average a typical grantee has an enrollment level of
only 93.1 percent of funded slots. Nationally, that means that 62,000
eligible children are not receiving Head Start services, yet they
should be given current funding levels. The President's fiscal year
2005 budget has proposed a solution by requesting $45 million to fund a
demonstration program allowing up to eight States the option of greater
coordination between Head Start, State-run pre-K, and child care. This
could result in significantly fewer programs with under-enrollment
problems and more children receiving a high quality preschool
education. Additionally, the fiscal year 2005 budget would provide for
an increase in Head Start enrollment of nearly 10,000 children by
reallocating a percentage of Head Start discretionary training and
technical assistance funding. Together, these efforts will help more
children around the country prepare to enter school healthy and ready
to learn. We urge Congress to act on both of these requests.
We appreciate Congressional concern on this issue and look forward
to working with your Committee to continue to strengthen the Head Start
program.
Mr. Secretary, welcome. Your entire statement will be made
part of the record, and you may summarize it as you feel
necessary. We are welcome to receive your testimony.
STATEMENT OF HON. TOMMY G. THOMPSON, SECRETARY, DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Secretary Thompson. Thank you very much, Mr. Chairman. I
applaud you and your leadership and thank you so very much for
giving me this opportunity to come in front of you. And if in
fact we don't finish up when I have to leave, I would be more
than happy to come back if you so desire.
Congressman Spratt, thank you for your leadership as well.
I appreciate your figures. I appreciate your comments, and I
would like to address several of the things that you have
raised in your opening remarks.
I also want to thank all members of the committee for your
responsibility and your dedication and your friendship. Thank
you for inviting me to discuss the President's fiscal year 2005
budget for the Department of Health and Human Services.
In my first 3 years at the Department, we have made
tremendous progress in improving the health, the safety, and
the independence of the American people. We continue to advance
in providing health care to seniors and to lower-income
Americans and improving the well-being of children,
strengthening families, and protecting the homeland. We have
reenergized the fight against AIDS at home and abroad. We
increased access to quality health care, especially for
minorities, the uninsured and the underinsured. We are helping
smokers free themselves from this debilitating habit through a
national quit line which we funded internally in the Department
at my request. And with your help, 2 months ago President Bush
signed the most comprehensive improvements to Medicare since it
was created nearly four decades ago.
To expand our achievements the President proposes $580
billion for HHS for fiscal year 2005, an increase of $32
billion, or 6 percent over fiscal year 2004. Our discretionary
budget authority is $67 billion, an increase of $819 million,
or a 1.2-percent increase over fiscal year 2004, but an
increase of 26 percent over fiscal year 2001 when I took over.
In order to strengthen our bioterrorism preparedness and
Public Health System, we have requested $4.1 billion, up from
$300 million, in 2001.
I would like to ask all of you and encourage you to take me
up on it, to come over and see the war room that we have built
at the Department of Health and Human Services. Emanuel has
been over and Tammy Baldwin has been over and a couple of you
have been over, but it is very visionary. It is probably the
most exciting thing for communications and for tracking
diseases and storms in the world. And I would invite you to
come over at any time. It would be very revealing and would
help you in your discussions, I am confident.
This investment will improve preparedness for bioterrorist
attack or for any public health emergency. We have already seen
your investments pay off in CDC's leadership in fighting the
SARS outbreak last year and a coordinated public health
response to the West Nile virus. It even helped to deal with a
particularly hard flu season this year.
We have also launched our steps to a healthier U.S.
campaign--I happen to be passionate about prevention--in order
to encourage Americans to improve their health and avoid
disease by practicing healthy habits and avoiding risky
behaviors.
As you know, I am a big proponent of information
technology. That is why we provided a computer language
program, SNOWMED, to providers at no charge. We are leading the
way in developing standards for electronic medical records. And
yesterday morning I announced an FDA rule to prevent medication
errors by requiring bar codes on all medicines and blood
products and to incorporate preventative practice into
Medicare. I worked with members of the committee and with the
rest of Congress to provide the most comprehensive update to
Medicare since it was created in 1965.
We have preserved the Medicare program and built upon it
with better benefits and more choices. These better benefits
include prescription drug coverage to save seniors money,
improvements in preventative care, which I believe is very,
very important, and better access to the doctors and medical
care that seniors want.
In many cases benefits will be enhanced immediately. We are
already reviewing the new benefit proposals which were
submitted by Medicare advantage plans. Let me give you a few
examples. Independent Health and Universal Health Care will
reduce premiums for Medicare Advantage Plans in New York by 13
to 50 percent. Independent Health also expects to enhance
benefits. In Massachusetts, Tufts is cutting premiums from $147
to $80. And members of the Medicare Blue Value Plan of Horizon
Blue Cross/Blue Shield of New Jersey will no longer pay the $52
premium.
Overall, we expect 2 million Medicare Advantage
beneficiaries will pay lower premiums, 2 million will save
money on cost sharing, and 3.4 million will get enhanced
benefits. The new law is already at work saving seniors money
and increasing their access to modern medicine.
HHS has already completed 76 activities in implemented the
MMA, such as issuing the regulation for the discount card only
8 days after the bill was signed. Our centers for Medicare and
Medicaid Services have been working with State governments, the
Social Security Administration and other partners to identify
people eligible for the card, set up communication systems for
information sharing, create a price comparison Web site, and
review the card provider applications.
Seniors will be able to enroll in the card by May of this
year. We will add transparency as well to the prescription drug
market by making public the price of each drug under each card.
In fact, we will update the prices on our Web site each and
every week.
We expect competition among the cards will drive down drug
prices, probably significantly, as people compare the prices
each card offers for the drugs they typically take. We also
press forward with our initiative to improve health care
quality by adding home health agencies to the effort launched
in 2002 for nursing homes.
Americans can now get comparative quality information about
specific home health agencies and nursing homes, and hospitals
will be next. Speaking of hospitals, we have made it clear to
hospitals that they are welcome to provide discounts for the
uninsured and the underinsured.
Through intergovernmental transfers, State governments can
share their costs of the Medicaid program with local
governments. We believe the Federal Government should be
matching true expenditures. Restoring the matching requirements
would save $23 billion in the Medicaid program over the next 10
years. While these savings would be significant, that still
represents less than 1 percent of what the Federal Government
will spend over the next 10 years.
We look forward to working with Congress, the medical
community, and all Americans as we build upon our past
accomplishments and implement the new Medicare law and carry
out the initiatives that President Bush is proposing to build a
healthier, safer, and stronger America.
[The prepared statement of Secretary Thompson follows:]
Prepared Statement of Hon. Tommy G. Thompson, Secretary, Department of
Health and Human Services
Good morning, Mr. Chairman and members of the committee. I am
pleased to present to you the President's fiscal year 2005 budget for
the Department of Health and Human Services (HHS). I am confident you
will find our budget to be an equitable proposal to improve the health
and well-being of our Nation's citizens.
This year's budget proposal builds upon HHS accomplishments in
meeting several of the health and safety goals established at the
beginning of the current administration. This year, Congress passed the
comprehensive Medicare reform legislation, adding prescription drug
coverage for seniors and modernizing the Medicare program.
Since 2001, with the support Congress, the administration
has funded 614 new and expanded health centers that target low-income
individuals, effectively increasing access to health care for an
additional 3 million people, a 29-percent increase.
The Department established the Access to Recovery State
Vouchers program, providing 50,000 individuals with needed treatment
and recovery services.
To support the President's faith-based initiative, HHS has
created the Compassion Capital Fund for public/private partnerships to
support charitable groups in expanding model social services programs.
We awarded 81 new and continuing grants in 2003.
HHS initiated a new Mentoring Children of Prisoners
program to provide one-to-one mentoring for over 30,000 children with
an incarcerated parent in fiscal year 2004. The Department also created
education and training vouchers for foster care youth, providing $5,000
vouchers to 17,400 eligible youth.
In August 2001, the President and I invited States to
participate in the Health Insurance Flexibility and Accountability
(HIFA) demonstration initiative. States use HIFA demonstrations to
expand health care coverage. As of January 2004, HIFA demonstrations
had expanded coverage to 175,000 people, and another 646,000 were
approved for enrollment.
I could go on listing our achievements to you and the committee,
Mr. Chairman, but instead I have chosen to highlight a few that we are
most proud of.
For fiscal year 2005, the President proposes an HHS budget of $580
billion in outlays to enable the Department to continue working with
our State and local government partners, as well as with the private
and volunteer sectors, to ensure the health, well-being, and safety of
our Nation. Through the programs and services presented in the budget
plan of HHS, Americans will receive new health benefits and services,
be protected from the threat of bioterrorism, benefit from enhanced
disease detection and prevention, have greater access to health care,
and will see improved social services through the work of faith- and
community-based organizations and a focus on healthy family
development. This proposal is a $32-billion increase in outlays over
the comparable fiscal year 2004 budget, or an increase of about 5.9
percent. The discretionary request for the HHS budget totals $67
billion in budget authority, a 1.2-percent increase.
Allow me to draw your attention to several key factors of the HHS
budget so that we may continue to work together to address the needs of
our Nation.
medicare and medicaid reform/modernization
I am proud to have worked closely with so many members of the House
on the Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA), which President Bush signed into law December 8, 2003.
With the implementation of MMA, the Department faces many challenges in
the coming fiscal year. As the most significant reform of Medicare
since its inception in 1965, the law expands health plan choices for
beneficiaries and adds a prescription drug benefit. MMA will strengthen
and improve the Medicare program, while providing beneficiaries with
new benefits and the option of retaining their traditional coverage.
The HHS fiscal year 2005 budget request includes about $482 billion in
net outlays to finance Medicare, Medicaid, the State's Children's
Health Insurance Program, the Health Care Fraud and Abuse Control
Program, State insurance enforcement, and the Agency's operating costs.
drug discount card
MMA establishes a new, exciting Medicare approved prescription drug
discount card program, providing immediate relief to those
beneficiaries who have been burdened by their drug costs. From June
2004 through 2005, all Medicare beneficiaries, except those with
Medicaid drug coverage, will have the choice of enrolling in a
Medicare-endorsed drug discount card program. With the discount card,
beneficiaries will save an estimated 10 to 15 percent on their drug
costs. For some, savings may reach up to 25 percent on individual
prescriptions. A typical senior with $1,285 in yearly drug expenses
could save as much as $300 annually. To enroll, beneficiaries will pay
no more than $30 annually. Those with low incomes will qualify for a
$600 per year subsidy to purchase drugs. Medicare also will cover the
enrollment fees for low-income seniors.
voluntary prescription drug benefit
Responding to President Bush's pledge to add meaningful drug
coverage to Medicare, MMA establishes a new voluntary prescription drug
benefit under a new Medicare Part D. Starting in 2006, Medicare
beneficiaries who are entitled to Part A, or enrolled in Part B, can
choose prescription drug coverage under the new Part D. Under Part D,
beneficiaries can choose to enroll in stand-alone, prescription drug
plans (PDPs) or Medicare Advantage prescription drug plans (MA-PDs),
and will be able to choose between at least two plans to receive their
benefit. The law contains important beneficiary protections. For
example, while the plans are permitted to use formularies, they must
include drugs within each therapeutic category and class of covered
Part D drugs, allowing beneficiaries to have a choice of drugs. In
instances in which a drug is not covered, beneficiaries can appeal to
have the drug included in the formulary. To reduce the number of
prescribing errors that occur each year, HHS will develop an electronic
prescription program for Part D covered drugs.
medicare advantage
MMA replaces the Medicare+Choice program with a new program called
Medicare Advantage, which will operate under Part C of Medicare.
Starting in 2004, the new law changes how private plans will be paid.
In response to the increasing costs of caring for Medicare
beneficiaries, the law increases payments to managed care plans by
$14.2 billion over 10 years. These enhanced payments will allow private
plans to provide more generous coverage, including benefits that
traditional Medicare may not offer. Specifically in 2004, plans must
use these funds to provide additional benefits, to lower premiums and/
or cost-sharing, or to improve provider access in their network. This
increased compensation will also encourage more private plans to enter
the Medicare market, improving beneficiaries' overall access to care.
Under Medicare Advantage, local managed care plans will continue to
operate on a county-by-county basis. Beginning in 2006, Medicare
Advantage also will offer regional plans, which will cover both in-
network and out-of-network services in a model very similar to what we
in the Federal Government enjoy through the Federal Employee Health
Benefits Program. There will be at least 10 regions, but no more than
50. The regional plans must use a unified deductible and offer
catastrophic protection, such as capping out-of-pocket expenses.
The changes in the Medicare advantage program will provide seniors
with more choices, improved benefits, and provide beneficiaries a
choice for integrated care--combining medical and prescription drug
coverage. We project that 32 percent of Medicare beneficiaries will
enroll in Medicare Advantage plans by 2010.
providers and rural health
Recognizing geographic disparities in Medicare payments, MMA
provides much needed relief to rural providers by equalizing the
standardized amounts paid to both urban and rural hospitals. Along with
standardizing the base payment amounts to both urban and rural
hospitals, MMA reduces the labor share of the standardized payment
amount. In addition MMA increases payments for Disproportionate Share
Hospitals (DSH) and provides greater flexibility to Graduate Medical
Education (GME) residencies. The new law also increases flexibility for
hospitals seeking Sole Community Hospital (SCH) status and reduces the
requirements for achieving Critical Access Hospital (CAH) status.
Critical Access Hospital status will receive increased payments under
MMA, as the payment rate will be increased to 101 percent of allowable
costs.
Providers will see increased reimbursements under MMA. Physicians
practicing in defined shortage areas will receive an additional 5
percent payment bonus. Home Health Agencies in rural areas also will
receive a 5 percent bonus. In a change for rural hospice providers,
more freedom will be given to utilize nurse practitioners. The law also
creates an Office of Rural Health Policy Improvements and requires
demonstration projects involving telehealth, frontier services, rural
hospitals, and safe harbors.
preventive benefits
MMA expands the number of preventive benefits covered by Medicare
beginning in 2005. Through a particularly important provision, an
initial preventive physical examination will be offered within 6 months
of enrollment for those beneficiaries whose Medicare Part B coverage
begins January 1, 2005 or later. The examination, as appropriate, will
include an electrocardiogram and education, counseling, and referral
for screenings and preventive services already covered by Medicare,
such as pneumococcal, influenza and hepatitis B vaccines; prostate,
colorectal, breast, and cervical cancers; in addition to screening for
glaucoma and diabetes. Diabetes and cardiovascular screening blood
tests do not have any deductible or copayments, as Medicare pays for
100 percent of these clinical laboratory tests.
regulatory reform/contracting reform
MMA includes a number of administrative and operational reforms, as
well. For example, regulatory reform provisions require the
establishment of overpayment recovery plans in case of hardship;
prohibit contractors from using extrapolation to determine overpayment
amounts except under specific circumstances; describe the rights of
providers when under audit by Medicare contractors; require the
establishment of standard methodology to use when selecting a probe
sample of claims for review; and prohibit a supplier or provider from
paying a penalty resulting from adherence to guidelines. In addition,
MMA allows physicians to reassign payment for Medicare services to
entities with which the physicians have an independent contractor
arrangement. Under the new law, final regulations are to be published
within 3 years, and all measures of a regulation are to be published as
a proposed rule before final publication.
Also under the law, as Secretary, I will be permitted to introduce
greater competitiveness and flexibility to the Medicare contracting
process by removing the distinction between Part A and Part B
contractors, allowing the renewal of contracts annually for up to 5
years, limiting contractor liability, and providing incentive payments
to improve contractor performance. These changes will enhance HHS
efficiency and effectiveness in program operations.
Regarding Medicare appeals, MMA changes the process for fee-for-
service Medicare by requiring the Social Security Administration and
HHS to develop and implement a plan for shifting the appeals function
from SSA to HHS by October 1, 2005. MMA also changes the requirements
for the presentation of evidence. This also will enhance the efficiency
and effectiveness of the operation of the Medicare program.
medicare and medicaid estimates
Historically, HHS and the Congressional Budget Office (CBO) have
provided differing estimates of Medicare and Medicaid spending. It is
not uncommon for different assumptions underlying the respective
estimates to produce differences in cost projections. This year's new
estimates include the changes resulting from enactment of MMA.
When Congress considered this act, Mr. Chairman, CBO estimated the
cost of the bill at $395 billion from 2004-13. The HHS actuaries have
recently estimated the cost of the law as $534 billion from 2004-13.
The CBO Director told the House and Senate Budget Committees that CBO
has not changed its estimate and that they continue to believe that the
cost of the bill is $395 billion. Because the Medicare legislation
makes far-reaching changes to a complex entitlement program with many
new private sector elements, there is even larger uncertainty in these
estimates than usual.
The two sets of estimates provide a reasonable range of possible
future cost scenarios for Medicare spending. The tremendous uncertainty
surrounding estimates of the newly enacted Medicare law has resulted in
a plausible range of estimates of future cost scenarios for Medicare
spending, from the $395 billion estimate from CBO to the $534 billion
estimate from the Medicare actuaries. It should be noted that this
difference of $139 billion is approximately two (2) percent of the
projected $7 trillion in total Federal Medicare and Medicaid spending
over the same period, as projected by HHS.
additional mma changes
MMA addresses other issues facing the Medicare program including
the program's long-term, financial security. To contain costs in the
Medicare program, the law requires the Medicare Trustees, beginning in
the 2005 annual report, to assess whether Medicare's ``excess general
revenue funding'' exceeds 45 percent. As defined in the law, excess
general revenue funding is equal to Medicare's total outlays minus
dedicated revenues. The Medicare Trustees shall issue a ``warning'' if
general revenues are projected to exceed 45 percent of Medicare
spending in a year within the next 7 years. If the Trustees issue such
a warning in two consecutive years, the law provides special
legislative conditions for the consideration of proposed legislation
submitted by the President to address the excess general revenue
funding.
In addition to implementing MMA, the HHS budget request includes
provisions for the State Children's Health Insurance Program, the New
Freedom Initiative, and Medicaid.
state children's health insurance program (schip)
SCHIP was created with a funding mechanism that required states to
spend their allotments within a 3-year window, after which any unused
funds would be redistributed among states that had spent all of their
allotted funds. These redistributed funds would be available for one
additional year, after which any unused funds would be returned to the
Treasury.
On August 15, 2003, President Bush signed Public Law 108-74. The
law restores $1.2 billion in fiscal year 1998 and fiscal year 1999
SCHIP funds, and makes them available to states until September 30,
2004. The law also extends $2.2 billion in fiscal years 2000 and 2001
SCHIP funds, and revises the rule for the redistribution of the unspent
funds from these allotments. For fiscal years 2000 and 2001 allotments,
the law allows states that do not spend their entire allotment within
the 3-year period to keep half of those respective year's unspent
amounts. The other half would be redistributed to states that have
spent their entire amount of the respective year's allotments. The law
also extends the availability of funds from the fiscal year 2000
allotments through September 30, 2004, and the availability of fiscal
year 2001 allotment through September 30, 2005. The law gives some
relief to states that expanded their Medicaid programs to cover
additional low-income children prior to the enactment of SCHIP.
new freedom initiative
The administration is committed to ensuring that people with
disabilities and/or the long-term care needs receive the supports
necessary to remain in (or return to) the community as opposed to
remaining in an institutional setting. One of the administration's
priorities is relying more on home- and community-based care, rather
than costly and confining institutional care, for the elderly and
people with disabilities. The New Freedom Initiative signifies the
President's commitment to promoting at home and community-based care.
There are several components to this initiative, Mr. Chairman, which I
would like to bring to your attention.
Under the ``Money Follows the Individual Re-Balancing
Demonstration'' states could participate in a 5-year demonstration that
finances services for individuals who transition from institutions to
the community. Federal grant funds would pay for the home- and
community-based waiver services of an individual for one year at an
enhanced Federal match rate of 100 percent. As a condition of receiving
the enhanced match, the participating State would agree to continue
care at the regular Medicaid matching rate after the end of the 1-year
period and to reduce institutional long-term care spending.
The New Freedom Initiative is very important to me and to the
President, and we would like to work closely with Congress to secure
its passage this year. The administration recognizes the success of
consumer directed programs that give people the opportunity to manage
their own long-term care, as delineated by the development of its
Independence Plus Waivers. Thus, we propose allowing individuals who
self-direct all of their community-based, long-term care services to
accumulate savings and still retain eligibility for Medicaid and
Supplemental Security Income. Under current law, beneficiaries are
discouraged from accumulating savings because it could jeopardize their
eligibility for Medicaid and SSI. Under the Living with Independence,
Freedom, and Equality (LIFE) Accounts Program, individuals who self-
direct all of their Medicaid, community-based, long term supports will
be able to retain up to 50 percent of savings from their self-directed
Medicaid community-based service budget at year end, contribute savings
from employment, and accept limited contributions from others.
Ultimately, LIFE Accounts would enable individuals to save money to
reach long-term goals (for example, to purchase expensive equipment or
attain higher education) and to obtain greater independence.
The administration looks forward to working with Congress to pass
legislation authorizing me, as Secretary, to administer demonstrations
to assist caregivers and children with serious emotional disturbances.
Two demonstrations will provide respite services to caregivers of
adults with disabilities and to children with severe disabilities. A
third demonstration will offer home and community-based services for
children currently residing in psychiatric facilities. The fourth
demonstration will address shortages of community, direct-care workers
by providing grants to States to identify best practices and develop
models. Direct-care workers play an important role in providing care to
individuals living with disabilities in the community and this
demonstration should help address these workforce challenges.
medicaid and schip modernization
Medicaid spending continues to rise each year. Total Medicaid
spending for 2004 is projected to be $304 billion, nearly a tripling in
spending over 10 years. Medicaid--not Medicare--is currently the
largest government health program in the United States. Since Medicaid
expenditures are a large and growing proportion of most state budgets,
the Medicaid program is an area to which states turn to reduce costs
including dropping optional Medicaid benefits or limiting optional
groups from enrolling.
These concerns have fostered a dialogue between the Federal
Government and the states regarding ways to improve and modernize
Medicaid and SCHIP. Building on this dialogue, the administration will
continue to work with Congress and other stakeholders to seek new ways
to strengthen and improve the Medicaid and SCHIP programs.
In addition to structural reform, improving the fiscal integrity of
the Medicaid program will continue to be a priority for the
administration and HHS. Among these efforts, the administration
proposes capping the reimbursement level to individual state and local
government providers to no more than the cost of providing services to
Medicaid recipients and restricts the use of certain types of
intergovernmental transfers. The proposal would deem as ``unallowable''
certain Medicaid expenditures that result in Federal Medicaid and
disproportionate share hospital (DSH) payments returned by a government
provider to the state. The proposal would not affect legitimate
intergovernmental transfers that are used to help raise funds for the
state share of Medicaid costs. Rather, this proposal would only apply
to intergovernmental transfers that are used to recycle Medicaid
payments through government providers.
other medicaid legislation
Extension of the Qualified Individual (QI) Program
The administration is committed to helping low-income seniors
afford not only prescription drugs, but also health coverage through
Medicare. Under current law, as authorized by MMA, Medicaid programs
will pay Medicare Part B Premiums for qualifying individuals (QIs)
through September 30, 2004. QIs are defined as Medicare beneficiaries
with incomes of 120 percent to 135 percent of the Federal Poverty Level
and minimal assets. The HHS budget would continue this premium
assistance for one additional year.
Extension of Transitional Medical Assistance
As families make the transition from welfare to work, health
coverage is an important component to ensure their success in
contributing to, and remaining in, the work place. Transitional medical
assistance (TMA) was created to provide health coverage for former
welfare recipients after they entered the workforce. TMA extends up to
one year of health coverage to families who lose eligibility for
Medicaid due to earnings from employment. This provision will expire
March 31, 2004. The administration proposes a 5-year extension of TMA
with statutory modifications to simplify administration of the program
for states. States would have the option to eliminate TMA reporting
requirements; provide twelve months of continuous eligibility; and to
request a waiver from providing the mandatory TMA program in their
Medicaid program if their eligibility income level for families is set
at 185 percent of the Federal Poverty Level or higher.
partnership for long-term care
The budget request, Mr. Chairman, includes a proposal to eliminate
the legislative prohibition on developing more partnership programs for
long-term care (LTC). The partnership for LTC was formulated to explore
alternatives to current LTC financing by blending public and private
insurance. Four states currently have these partnerships in which
private insurance is used to cover the initial cost of LTC. Consumers
who purchase partnership approved insurance policies can become
eligible for Medicaid services after their private insurance is
utilized, without divesting all their assets as is typically required
to meet Medicaid eligibility criteria.
refugee exemption extension
Under current law, most legal immigrants who entered the country on
or after August 22, 1996, and some who entered prior to that date, are
not eligible for SSI until they have obtained citizenship. Refugees and
asylees are currently exempted from this ban on SSI for the first 7
years they reside in the United States. To ensure refugees and asylees
have ample time to complete the citizenship process, the President's
budget proposes extending the current 7-year exemption to 8 years.
special enrollment period in the group market for medicaid/schip
eligible
This legislative proposal would make it easier for Medicaid and
SCHIP beneficiaries to enroll in private health insurance by making
eligibility for Medicaid and SCHIP a trigger for private health
insurance enrollment outside of the plan's open season. This proposal
will help states implement premium assistance programs in Medicaid and
SCHIP.
marriage and healthy family development
This year the President is proposing a new marriage and healthy
family development initiative. This Initiative is supported by funding
increases in this Department's fiscal year 2005 budget, encompasses a
variety of new and existing programs, and impacts both mandatory and
discretionary programs.
I am very grateful to the Finance Committee for acting to advance
Temporary Assistance to Needy Families (TANF) reauthorization last
fall, and I look forward to working together as the bill is considered
on the Senate Floor in weeks ahead. Building on the considerable
success of welfare reform in this great Nation, the President's fiscal
year 2005 budget maintains the framework of the administration's
welfare authorization proposal. We are committed to working with the
Congress in the coming months to ensure the legislation moves quickly
and is consistent with the President's budget. The President's proposal
includes 5 years of funding for the TANF Block Grant to States and
Tribes; Matching Grants to Territories; and Tribal Work Program. A new
feature, intended to support the President's Marriage and Healthy
Family Development Initiative, is a proposal for increased funding for
two key provisions in our welfare reform package.
A cornerstone of the President's commitment to strengthen and
empower America's families through welfare reform provides targeted
resources to family formation and healthy marriage strategies.
Statistics tell us that children from two parent families are less
likely to end up in poverty, drop out of school, become addicted to
drugs, have a child out of wedlock, suffer abuse or become a violent
criminal and end up in prison. Building and preserving families are not
always possible. But it should always be our goal.
Beginning in fiscal year 2005, the fiscal year 2005 budget would
provide an additional $20 million, a total of $120 million, under TANF
to support research, demonstrations, and technical assistance primarily
focused on family formation strategies and healthy marriages and an
additional $20 million for matching grants to States, Territories,
Tribes, and Tribal Organizations for innovative approaches to promoting
healthy marriage and reducing out-of-wedlock births. A dollar-for-
dollar match to participate in the grant program will be required,
generating another $20 million in matching State and local funds.
States can use Federal TANF funds to meet this matching requirement. In
total, $360 million in Federal and State funding would be available in
the fiscal year 2005 budget to broaden the administration's efforts to
support healthy marriages and promote effective family formation.
To reverse the rise in father absence and improve the well-being of
our Nation's children, the budget includes a total of $50 million for
grants for public entities; nonprofits, including faith-based; and
community organizations to design demonstration service projects. These
projects will test promising approaches to improve outcomes for
children by encouraging the formation and stability of healthy
marriages and responsible fatherhood, and to assist fathers in being
more actively involved in the lives of their children.
As the committee may remember, President Bush announced in his
State of the Union address a new initiative to educate teens and
parents about the health risks associated with early sexual activity
and to provide the tools needed to help teens make responsible choices.
To do this, the President proposes to double funding for abstinence
education activities for a total of $273 million, including a request
of $186 million, an increase of $112 million, for grants to develop and
implement abstinence educations programs for adolescents aged 12
through 18 in communities across the country; the reauthorization of
state abstinence education grants for 5 years at $50 million per year
as part of the welfare reform reauthorization; another $26 million for
abstinence activities within the Adolescent Family Life program; and a
new public awareness campaign to help parents communicate with their
children about the health risks associated with early sexual activity.
In addition, the budget provides for significant increases to two
State child abuse programs reauthorized this past year as part of the
Keeping Children and Families Safe Act of 2003. The increase for the
Child Abuse Prevention and Treatment State Grants will enable State
child protective service systems to shorten the time to the delivery of
post-investigative services from 48 to 30 days. The Community-Based
Child Abuse Prevention program will increase the availability of
prevention services to an additional 55,000 children and their
families.
child welfare
The administration is proposing a nearly $5 billion budget for
Foster Care. These funds will be used to support the President's child
welfare program option, which provides states more flexibility in both
the population served and allowable activities. The funds will be used
to provide payments for maintenance and administrative costs for more
than 230,000 children in foster care each month, as well as payments
for training and child welfare data systems. The HHS budget request
reflects savings associated with a legislative proposal to clarify the
definition of ``home of removal'' in the foster care program in
response to a court decision. The President's fiscal year 2005 budget
also requests $140 million for the Independent Living Program and $60
million for the Independent Living Education and Training Vouchers
program. Additionally, to support the administration's commitment to
helping families in crisis and to protecting children from abuse and
neglect, the President's fiscal year 2005 budget requests $505 million,
full funding, of the Promoting Safe and Stable Families program.
child support enforcement
The President's fiscal year 2005 budget, building on the high level
of success achieved by the Child Support Enforcement Program, focuses
on critical improvements in the arena of medical child support.
Legislation will be proposed to enhance and improve State's efforts to
collect medical support on behalf of children. These efforts include
providing Child Support agencies with notifications of lost coverage
(COBRA notices) so they can assist families in providing continuous
health care coverage. Additionally, legislation would require states to
consider both parents' access to health care coverage when establishing
child support orders, with the option of enforcing medical support
orders against both custodial and noncustodial parents. By assuring
that IV-D agencies receive notice of a child's loss of health insurance
coverage, and by seeking health insurance from either parent, more
children will have access to continuous health coverage, which will
result in healthier children and families.
These proposals build on the policies in the fiscal year 2004
budget that increase resources for the Access and Visitation Program to
support and facilitate non-custodial parents' access to visitation of
their children, and various proposals to enhance and expand the
existing automated enforcement infrastructure at the Federal and State
level. When combined with the opportunities to increase child support
outlined in the President's fiscal year 2003 budget, such as expanded
passport denial, the offset of certain Social Security benefits, and
the optional pass through of child support to families on TANF, these
proposals offer an impressive $8.1 billion in increased child support
payments to families over 10 years.
compassion and faith based agenda
Compassion Capital Fund
The fiscal year 2005 budget requests $100 million for the
Compassion Capital Fund, which creates public/private partnerships that
support charitable organizations in expanding or emulating model social
service programs.
Samaritan Initiative
The President's budget also continues and strengthens the
administration's commitment to end chronic homelessness by proposing
$70 million for the Samaritan Initiative, a new competitive grant
program jointly administered by the Departments of Housing and Urban
Development, Health and Human Services, and Veterans Affairs that
supports the administration's efforts to end chronic homelessness by
2012. These grants will support the most promising local strategies to
move chronically homeless persons from the streets to safe permanent
housing with supportive services. Of the $70 million for the program,
we are requesting $10 million at HHS for supportive services.
domestic and global health improvements
I would like to take a moment to share with the committee a few
other priorities that strengthen our efforts for a healthier U.S.
Building on the accomplishment of the 5-year doubling of the National
Institutes of Health (NIH) budget, this year's budget proposal includes
$28.6 billion for NIH. These funds will continue to support the long-
term stability of the biomedical research enterprise and ensure
continued productivity in all areas of research at NIH. To bring
medical research and advances to those who need it, $1.8 billion of the
HHS budget proposal provides health care services to 15 million
individuals through the Health Center program and an increase for the
National Health Service Corps to initiate recruitment of nurses and
physicians.
The President's budget proposal for fiscal year 2005 also strives
to meet the needs of our vulnerable populations. To protect our
children from preventable illness, the budget proposes improvements to
the Vaccines for Children (VFC) program to increase access to needed
vaccines for underinsured children. In an effort to ensure we have
enough vaccines when they are needed, the HHS budget request calls for
a 6-month stockpile of all regularly recommended vaccines for children,
as well as for a stockpile of influenza vaccine for next winter. In
addition to our Nation's children, we must not forget those struggling
yet who are ready to help themselves out of the cycle of addiction and
dependency. For fiscal year 2005, the President proposes to double the
Access to Recovery State Voucher program, for a total of $200 million,
to provide vouchers to approximately 100,000 individuals seeking
substance abuse treatment services.
Our Nation's health, Mr. Chairman, is not dependent solely on
access to care and treatment, but also on the security of our health in
a global context. Our Nation faces threats from bioterrorism, disease
outbreaks in other countries, and food-borne diseases and illnesses.
The HHS budget targets $373 million of investments to accelerate the
detection of and response to potential disease outbreaks of any kind,
regardless of whether the pathogen is naturally occurring or
intentionally released. The Food and Drug Administration (FDA) has
already expanded its work dramatically to prevent intentionally
contaminated foods from entering the U.S. The President's fiscal year
2005 budget takes the next step by making the needed investments in FDA
to expand substantially the laboratory capacity of its State partners,
and to find faster and better ways to detect contamination,
particularly at ports, processing plants, and other food facilities.
management improvements
Finally, I would like to update the committee on the Department's
efforts to use our resources in the most efficient manner. To this end,
HHS remains committed to setting measurable performance goals for all
HHS programs and holding managers accountable for achieving results. I
am pleased to report that HHS is making steady progress. We have made
strides to streamline and make performance reporting more relevant to
decision makers and citizens. As a result, the Department is better
able to use performance results to manage and to improve programs. By
raising our standards of success, we improve our efficiency and
increase our capability to improve the health of every American
citizen.
improving the health, safety, and well-being of our nation
Mr. Chairman and members of the committee, the budget I bring
before you contains many different elements of a single proposal. The
common thread running through these policies is the desire to improve
the lives of the American people. Our fiscal year 2005 HHS budget
proposal builds upon our past successes to improve the Nation's health;
to focus on improved health outcomes for those most in need; to promote
the economic and social well-being of children, youth, families, and
communities; and to protect us against biologic and other threats
through preparedness at both the domestic and global levels. It is with
the single, simple goal of ensuring a safe and healthy America that I
have presented the President's fiscal year 2005 budget today. I know
this is a goal we all share, and with your support, we at the
Department of Health and Human Services are committed to achieving it.
Secretary Thompson. Before I finish up, I just would like
to answer, Congressman Spratt--I know the Governor of Michigan
said that that was turned down. I don't know where she got her
information. It has not been turned down. We are reviewing it,
and we have given tasks and approval so far. So I don't know
where the Governor made the announcement. It was picked up by
the Wall Street Journal, but it was absolutely and completely
erroneous.
Chairman Nussle. Mr. Spratt.
Mr. Spratt. Do you expect to give approval to this and to
other similar plans so that States will be allowed to form
pools, purchasing pools?
Secretary Thompson. We are seriously looking at that, and
our preliminary indications are that we will be.
Mr. Spratt. Thank you, sir.
Chairman Nussle. Mr. Secretary, welcome, and thank you so
much for your testimony. I would like to maybe go away from
where I even said I was going to go and jump into--because of
time, maybe the last questions first, and that is health costs.
When we deal with the budget that has been presented, we
are dealing with the bill that is being presented, not what is
underlying the bill, what is driving the costs. We are just
getting presented the bill here; write the check. And part of
the challenge that we have got and part of the frustration that
we have with what happened from CMS and from the actuaries on
the different amounts that could be at least projected to be
for the costs of the Medicare bill is that we know that while
they are wrong, we are going to stick with CBO. CBO says that
it is $400 billion. There are going to be a number of
estimates. Certainly they took into consideration the estimates
or the projections of a number of different sources in coming
to their conclusion, including CMS. So we are going to stick
with the CBO numbers. Those are the best numbers that we have.
Having said that, though, I think what CMS is saying
through its actuaries, certainly what you have counseled in the
past and what many other quarters are suggesting, is that
unless we deal with the cost drivers in health care, who knows
what the price may be? It could be 534. It could be 834. It
could be 334. Who knows what the price is if we don't start
dealing with the driving costs? And this is one of the huge
unpredictable portions of our mandatory spending accounts which
are currently completely out of control.
Chairman Greenspan was here yesterday counseling us that we
have got to get into the mandatory side of the ledger and to do
a much better job of dealing with this. And certainly as you
look at the mandatory side of the budget ledger, health care
cost drivers are one of the most unpredictable volatile areas.
Would you please touch on your advice for how we move
forward, what you see some of the cost drivers to be and how we
can approach each one? And that is my only--that is a huge
question. I realize we could do an entire hearing just on that
subject, but if you could touch--and we should; you are right,
Mr. Gutknecht. If you would touch on that to begin with, that
is how I would like to use this time.
Secretary Thompson. Thank you very much, Congressman. I
appreciate the open-ended question and giving me the
opportunity to respond to something that I think we should. But
first let me quickly tell you about why our actuaries thought
it was going to be more costly for Medicare.
First off, our actuaries believe there is going to be a
much increased participation for low-income Americans, and that
is going to consist of $47 billion because of the subsidies;
those under 100 percent of poverty, 93 percent of the cost of
their drugs are going to be paid by the Federal Government. So
there will be an increased participation of $47 billion.
The second big one is $32 billion, and that is where our
actuaries believe that 94 percent of those individuals that are
eligible for Part D will participate. CBO believes only 87
percent, because they said only 91 percent of the people
participated in Part B; and if they don't participate in Part
B, why would they participate in part D? And then the other
increases are basically because of the woodworking effect at
the State level, there will be more individuals coming into the
program based upon our actuarial assumptions versus CBO.
But you have to base your figures on CBO. They are still at
395. We don't know if it is 94 percent participation or 87
percent participation, so nobody knows for sure. These are
assumptions by your CBO and assumptions by our actuary, but
that is the difference basically in the figures.
The second thing, how do we do this, how do we drive down
costs? We drive down costs by addressing where the costs are.
One hundred twenty-five million Americans right now suffer from
one or more chronic illnesses, and 70 to 75 percent of the
dollars go for chronic illnesses. Most of those are for
individuals that have more than one chronic illness, and it is
a very small percentage when you look at the total universe of
those individuals that are using the bulk of the dollars. So
how do we address it? Of that figure, $155 billion goes for
tobacco related illnesses, and last year 442,000 thousand
Americans died. If we are going to do something about expenses
in health care, we have to address tobacco-related illness.
The second one is diabetes, $135 billion. We have just gone
up from 16 million Americans to 18 million Americans right now
that have Type 2 diabetes. About one-third of those don't even
know it, and that is $135 billion, and it is a fast-growing
epidemic, especially with minorities. And we can address
diabetes very simply. NIH had a very exhaustive study. It was
going to last 5 years. We quit after 2\1/2\ years because it
was so complete, that if you lose 10-15 pounds and you walk 30
minutes a day, you can reduce the incidence of diabetes by 60
percent. And considering the fact that there are 16 million
more Americans that are prediabetic, that will double to $270
billion over 135 unless we start addressing diet and exercise.
The third one, and the fastest growing one of all of them,
is obesity and overweight. We spend $117 billion a year and
over 332,000 Americans died from some obesity-related disease
last year, mainly heart attacks, strokes, or hypertension. And
what we have to do in America is we have to start changing our
habits. And if we do that, we can address the three biggest
causes of increasing health care dollars: tobacco-related
illnesses and obesity, which has one-third of the cancer
directed to it, and diabetes. These causes are where you are
going to get it.
And as William Sutton said when asked why he robbed banks?
He said, ``that is where the money is.''
That is where the cost drivers are, and that is what we
have to address. We can do that by having a very aggressive
program. Medicare was the first time that we have ever
addressed this particular thing by putting in a baseline,
borderline fiscal examination for all those coming into
Medicare. And then we are going to start managing diseases.
Ninety-two percent of the costs of Medicare right now go into
waiting for people to get sick before we start treating them,
and only 8 percent of the current Medicare goes into
preventative illness. Under the new Medicare law with the
baseline physical, we are finally going to start addressing
people when they get sick, and start treating those sicknesses
before they become so serious that it costs us millions of
dollars to treat.
That is what we have to do as a country, Mr. Chairman, if
we are really going to start controlling health care dollars.
That is where the big drivers are.
Chairman Nussle. Thank you very much. Mr. Spratt.
Mr. Spratt. Mr. Chairman, I don't want to beat a dead
horse, but if I could just go back to the questions about the
State plan. As I understand it, it was not just Michigan, but
also Vermont; and is there an issue here about whether or not
States will be allowed to pool their efforts and bargain
collectively as opposed to allowing it to be done State by
State?
Secretary Thompson. It has never happened before. They have
applied for a waiver to do so, Congressman Spratt. We are
looking at that and reviewing that. A final decision has not
been made, but the preliminary finding is that we would accept
it.
Mr. Spratt. Can you give us an idea of what the criteria
will be? I have a State in particular that is considering
signing such a contract.
Secretary Thompson. The criteria is, is basically to make
sure that the States are going to willingly and voluntarily go
into the program. That has been basically the criteria.
Mr. Spratt. If this is done, are you concerned it may raise
a question, an uncomfortable question. The VA negotiates or
sets prices, the States negotiate and set prices. Why can't HHS
or why can't CMS, for 40 million beneficiaries?
Secretary Thompson. Let me tell you the rationale, not
necessarily that I agree with, but I am going to tell you what
the rationale is, Congressman Spratt.
Veterans hospitals negotiate and purchase drugs because
they are the end users. They use the purchase of their drugs in
the hospitals where they treat the patients. It goes to them.
HHS does not purchase the drug and give it to the patients. It
goes through an intermediary. It goes through a clinic or a
doctor or a hospital, and under the new Medicare Modernization
Act there is going to be PBMs or PPOs or HMOs that are going to
be negotiating directly with pharmaceutical companies to drive
down the prices.
The majority of the Members of the Congress felt that it
would be much better to have those individuals negotiating the
prices. They could do a much better job than the bureaucrats in
HHS, or me as Secretary. That is the argument.
Mr. Spratt. Here is the anomaly in Medicare. We set prices
for physicians.
Secretary Thompson. We do.
Mr. Spratt. We set prices for hospitals. But here is a
whole segment of health care that is increasing faster than any
other, and we have said, no, it is off limits, we will not
negotiate, we will not set prices, we will let them go up
pretty much as the providers determine. You have a problem with
that, obviously. You were giving me the rationale. You didn't
call it rational. You called it the rationale.
Secretary Thompson. I called it the rationale, Congressman
Spratt.
Mr. Spratt. Let me ask you another question about the
President's proposal for passing this year some health care tax
credits. In his inaugural--excuse me--in his State of the Union
he told us that his budget would be coming shortly, and when it
came there would be $65 billion for health care tax credits to
help mainly those who don't have coverage now with a tax credit
which would be refundable. When we got the budget, we found out
that, yes, indeed there was a proposal like that, but there was
also an asterisk attached to it, and when you read the footnote
and got the whole proposition in its full and proper context,
the administration is saying, ``but it has to be fully
offset.'' And you know and I know in a budget this tight,
coming up with $65 billion in offsets is a Herculean if not
impossible task.
I asked Mr. Bolten--since the President's budget indicated
that the executive branch would come over and work with us in
identifying those offsets so that these health care tax credits
could be passed--what he had in mind to start the bidding, what
were they proposing to put on the table. And what he said was,
we are going to take a good portion out of it, half of it as I
recall, out of Medicaid. I suggested to him I was borrowing
from one poor person to help another poor person. It was a net
sum, zero sum game.
Could you tell us what kind of Medicaid cuts are in store
or would be proposed in order to offset this health care tax
credit proposition?
Secretary Thompson. You are setting me up, Congressman
Spratt, because I was not privy to that. I don't know where
Josh Bolten was going to get $35 billion out of Medicaid. I
would have to recess the hearing to find out where he is going
to get it. I don't know what he is talking about.
Mr. Spratt. Could you give us an answer for the record,
then?
Secretary Thompson. I absolutely could. There are ways to
find offsets. I would be more than happy to work with you. But
under Medicaid, the IGTs are an area that there is abuse,
Congressman Spratt, that I would like to discuss in greater
detail with you and other members of this committee.
Mr. Spratt. Are you referring to disproportionate share
plans?
Secretary Thompson. No, I am talking about
intergovernmental transfers.
Mr. Spratt. But not in the form of DSH or in the form of
upper payment limits?
Secretary Thompson. No. I am talking about the way that we
reimburse under the formulas.
Let me give you an example. I will give you a couple
States' examples. State A made quarterly payments being
electronically transferred them to the nursing home bank
account. The State then immediately withdrew the amount of the
payment from the provider's account, less a $2,500
participation fee. The approximate amount of Federal Medicaid
payment returned to the State for the general treasury or to
knock down more Federal dollars was $191 million. The law says
that the intergovernmental transfers are legal if, in fact, the
payment stays with the provider. In this case, $191 million
stayed with the provider. It went back to the State to be used
for something else or to knock down further Federal dollars. It
is a big loophole. It is something I would like to discuss.
Mr. Spratt. Let me ask you this before you go on to that.
Is this a policy you have assumed and therefore put in your
baseline as savings that is already taken?
Secretary Thompson. No. No. It is not taken. It is
something that I inherited, and I am----
Mr. Spratt. But does your baseline for cost assume that
these changes will be made and therefore HHS will achieve some
savings already assumed in the budget?
Secretary Thompson. It is not in the baseline, Congressman
Spratt.
Mr. Spratt. It is not in the baseline. OK.
Secretary Thompson. Can I go into one more State?
Mr. Spratt. Yes, sir. Absolutely. Excuse me for
interrupting you.
Secretary Thompson. No, that is quite all right. You can
interrupt me anytime, Congressman. You are a perfect gentleman,
and I mean that.
Mr. Spratt. I appreciate it, sir.
Secretary Thompson. State B makes----
Mr. Spratt. As a South Carolinian, that goes straight to my
heart, sir.
Secretary Thompson. Your southern charm goes to mine.
State B makes supplemental payments to a county-owned
nursing facility. Upon receipt of the payments, the nursing
facilities are required to return 99 percent of the payment.
Mr. Spratt. Let me just leave you--these other folks here
have got questions to ask, and they are going to be as
pertinent as mine, but my State is one of the States right now
dealing with deferrals in the Medicaid program, where they have
been sending you bills that have been approved for years at CMS
and HCFA that are now being questioned; some of the
intergovernmental transfers you were just talking about, DSH,
upper payment limits, the administrative costs, stuff like
that.
And we had a conference in Charleston just a week ago, and
the folks there came away with the impression that HHS was
making Medicaid so onerous and so rigorous and so complicated,
so hard to deal with, that they would soon be pleading for a
block grant with a discounted level of funding; that it would
be better than this complicated, onerous program in putting up
with all these regulations that they have changed over time.
Is that the underlying strategy?
Secretary Thompson. Absolutely not, Congressman Spratt. And
let me quickly explain. Intergovernmental transfers are legal
if in fact the State gets the payment from a provider, from a
hospital, doctors, county institutions, whatever; but the
payment has got to go back. The Medicaid law says that 50
percent approximately--let's just use a figure. Fifty percent
of the money comes from the Federal Government, 50 percent
comes from the State. Using the intergovernmental transfers,
what the States are doing, they are taking the payments, asking
for a tax or a provider reimbursement from the local units of
government, taking that money and getting reimbursed from the
Federal Government, and then using that money for other
purposes, either general purposes--not the purpose for what
Medicaid is set up.
What I am trying to say and what we are trying to do with
our auditors is we are trying to say we want to help you, we
want to make sure that the intergovernmental transfer payments
in South Carolina are legal. Now, if we really want to be
serious about it--and I am talking now as the Secretary of
Health and Human Services--there is about 5 percent of the
total Medicaid program that is somewhat suspicious, and that
figures out to about $9 billion.
Now, some States take advantage of it. Other States don't.
Some of the smarter States are ones that have had individuals
out there saying, you cannot cheat but you can get some more
money from the Federal Government doing it this way. And other
States haven't done that.
If we want to be fair about it. Why don't we stop the
intergovernmental transfers across the board, and take that
money and put it into an increased payment for the Federal
Government? That would be much easier. It would be much cleaner
and much more honest, and all States would be treated equally.
Mr. Spratt. Thank you for your testimony, Mr. Secretary.
Chairman Nussle. Mr. Gutknecht.
Mr. Gutknecht. Thank you, Mr. Chairman.
And welcome, Governor Thompson. As you know, I am a big fan
of yours. I think a lot of the welfare reform----
Secretary Thompson. I always feel like that, that I have to
hang on to my wallet.
Mr. Gutknecht. Yeah. Hang on to your wallet. But I really
mean that. Welfare reform around this country happened largely
because of you and your leadership when you were Governor of
the badger State.
I am not here to badger you today, but there are some
things I want to talk about because I am not certain that you
have been well served in this inspired debate about health
care, health care reform, Medicare reform and ultimately about
prescription drugs, because I think there are people who
technically work for you who have not served you well in terms
of giving you good information.
Now, let me also start by saying I am not an economist and
I do not play one here on the Budget Committee, but I have
learned a lot about prescription drugs, and I think you will
agree with me that there are really only two ways to control
health care costs. One is by direct government control and the
other is by trying to create some kind of market mechanisms to
create a competitive marketplace.
Let me give you an example, and I want to show a couple of
charts. I think we have got them. If we can bring those up. The
first one is a chart--and these are not my numbers. These were
done at the Boston University in a study they released about a
year ago.
And let's just look at 2002. For every dollar that we pay
for name-brand prescription drugs in the United States, the
Swiss pay 63 cents. The folks in Great Britain pay 62 cents.
Canada 60 cents, and on down.
You know, it strikes me that if the people at the Boston
University know that and if I know that, it just seems to me
that people at the FDA should know that. And I am not certain
that they have done a great job of sharing that information
with you.
And let me give you a more specific example, and you have
had an awful lot of things thrust upon you as Secretary of
Health and Human Services, not the least of which is when we
had anthrax here in these buildings. And at that time you went
out and made a purchase from a German company called Bayer. At
that time they wanted something I believe like--and the numbers
may not be exact, but it worked out to about $3 per capsule for
CIPRO. You negotiated them down to about 80 cents. Were you
aware at the time--or did anybody at the FDA tell you that that
drug was available through the VA for 19 cents per capsule?
That is embarrassing to me, that the FDA doesn't know that and
doesn't share that information with you.
These are things that I think are important when we look at
the overall cost of health care; that if I can learn that with
a staff of one or two people, it strikes me that the FDA, with
staffs of hundreds of people, ought to be able to share that
information with the Secretary of Health and Human Services.
I want to show another chart, and this was something that
we did. We were in Munich, Germany--and I am sorry this is a
little hard for people to read, but I will go right to the
bottom line. On our way home we bought 10 of the most commonly
prescribed drugs in the United States, and we bought them at
the Munich airport pharmacy. And those of us who travel to any
extent know that if you buy--if you want to buy anything, you
probably don't go and shop at the airport. Generally the
airport has the highest prices. So I don't know what the prices
were downtown, but this was at the Munich airport pharmacy.
Those are the 10 most commonly prescribed drugs as far as we
know in the United States, and the total is $1,039.65. We came
back here to the States--I am sorry, the price in Munich was
$373 and change. We came back to the United States and we
priced those same drugs in drugstores here in Washington, DC,
same dosage, same everything. They were $1,039.65.
You know, again, I understand you have some openings on
this board that somehow was in the bill. I would volunteer to
serve on that board to do a little research on this, but it
just seems to me--and you don't necessarily have to respond
here--but at some point as the Secretary of Health and Human
Services, you have got to demand that people who work for the
FDA, and technically work for you, help you get that kind of
information, because it seems to me if we are going to be
offering this huge new entitlement--and it is massive, and
frankly I don't think it stops at $535 billion. My own view is
and the Congressional Budget Office tells us that over the next
10 years seniors will spend $1.8 trillion on prescription
drugs, and that number is going to grow. And so this is going
to be an enormously expensive thing, and I do say publicly I
don't think you have been well served by the folks who work
under you.
And, with that, if you want to respond, you are more than
welcome to, but I wanted that on the record.
Secretary Thompson. Well, thank you very much, Congressman
Gutknecht, and as you know you have been a friend of mine for a
long time, but let me go through several things.
First off, in regards to the CIPRO that I negotiated with
Bayer--and we also included in it 69 cents, by the way. We also
are paying for the management fee for managing the inventory,
which is not something the veterans do. That is point No. 1.
No. 2, we have set up a commission according to a provision
in the bill, and in regards to re-importation, we have got to
give a report back, back to every Member of the Congress by
December 1, this year. We are going to absolutely take
advantage of your knowledge on the subject, I don't know as a
member of the committee, but certainly as a witness and as a
resource person. And that is No. 2. And we will have that
commission report in for all Members of the Congress by
December 1, this year.
No. 3, the law right now on re-importation, as you know,
requires me to certify that the drugs coming into America are
safe. We had a target enforcement action twice this past year
and the first target was on July 29th to the 31st and August
5th to the 7th. The second one was in November of this year,
and 87 percent, approximately, of the drugs that came in were
somehow defective. And based upon that information, there is no
way that I can certify that all drugs coming into America are
safe.
Now, some of those drugs were packaging problems. Some of
them came in from different countries that said they were
coming from Canada. Some of those drugs were drugs that FDA had
not approved and were being sold in this country. Those are
things that we have to be concerned about. If re-importation is
going to go ahead, I think the best way to do it is to have
this commission complete the study and get the necessary
resources to FDA so that we can do it properly and safely.
Mr. Gutknecht. But in truth, most of the reason for that 87
percent was some of the language on the capsule, or on the
packages, were in foreign languages. They were still the same
drugs.
Secretary Thompson. Some were. There were some that were
not.
Chairman Nussle. The gentleman's time has expired.
Mr. Moran.
Mr. Moran. I thank you very much, Mr. Chairman, and you do
have fans on both sides of the aisle, certainly in terms of
your effectiveness as Governor of Wisconsin, Secretary
Thompson. I guess that is why we aren't hesitant to push you on
some of the things that we feel most important--that we feel
are most important to our constituents.
Obviously on Medicare, you are going to hear a lot about
the inability to negotiate for lower prices. Mr. Gutknecht did
a nice job of underscoring that. Mr. Moore has a bill that many
of us have cosponsored that is bipartisan, so I am going to
defer to him to push that, and I trust others are going to
raise the issue of the American taxpayer paying for these ads
promoting a bill that is as controversial as this one is, and
that would have failed in the House had it not been held open
for 3 hours.
But I am going to go on to another issue, because I was
concerned that in your testimony, Mr. Secretary, you didn't
mention another very serious national problem, and that is the
problem of the uninsured. During your watch, the number of
uninsured has increased by 2.4 million people. It is now close
to 44 million as you know, and during the course of a year,
about 75 million people are actually without health insurance
at some point during that year. About 4 million people have
lost their job-based health insurance over the past 2 years.
And so we would like to know what is your vision, what is
the administration's plan for addressing that? We can't be
paying for it out of local property taxes, when a hospital has
to take in indigent people that are uninsured through the
emergency room, and you know how ineffective and inappropriate
manner of health care that is.
There have been three proposals that have been made by the
administration. One is the tax credits. Another is the
associated health plans, and then you have got this deductible
proposal that----
Secretary Thompson. And health savings accounts.
Mr. Moran. The health savings accounts. Now, in terms of
the tax credit, it said in your mid-session review from last
year that this is when you lowered the cost of the proposal. It
said the proposed tax credit is now assumed to be implemented
more slowly and thus to cause less reduction in employer-
sponsored health insurance. But what struck us is that that is
the clear implication that the proposal does, in fact, lead to
a drop in employer-sponsored health insurance, which is only
rational.
Now, the second proposal you have, the associated health
plans, our estimate that we got from the most extensive
analysis--this was from the MIT guy--said it is going to save--
it is going to provide health insurance for about 330,000
people, which is good. I am a cosponsor of that legislation
actually, but it is a drop in the bucket in terms of addressing
the 44 million people who are uninsured.
And then in terms of those health savings accounts, the
fact is that the vast majority of people who are uninsured, in
fact 90 percent of the uninsured, were either in the 15 percent
tax bracket or had no tax liability. So I think it is a stretch
to suggest that these health savings accounts are going to help
anybody but those who are in relatively high brackets, who
likely have the least need for help in terms of paying for
health insurance. So I would like to give you an opportunity to
address how you realistically think we can reduce the number of
uninsured.
Secretary Thompson. Thank you very much, Congressman Moran.
And as you know, I temporarily live in your district, so I
appreciate----
Mr. Moran. That is one of the reasons I am being so kind.
Secretary Thompson. I assume that. I have a tremendous
amount of influence in several blocks in your----
Mr. Moran. Yes, I know. You live in Cameron Station. I am
very conscious of that, and I have ticked off too many
constituents that have been before me on this witness panel, so
I am going to try to be a little more----
Secretary Thompson. Congratulations on your engagement.
Mr. Moran. Thank you, Mr. Secretary, but I still need you
to answer the question.
Secretary Thompson. Well, let me answer your question in
several ways, because you have made several targeted
accusations that I want to rebut quickly.
No. 1, in regard to the Medicare ad, I am under the legal
responsibility under the act to promote and get out as much
information as possible. You and I differ as to the contents of
the ads, but I had the ad scrubbed with several different
groups, and all of those individuals independently from my
sources in the department. I personally went out and did this,
and they all indicated to me that they felt it was very
nonpolitical.
Secondly, in regards to you saying that the uninsured
increased under my watch and indicated maybe I had some
responsibility for that, they have increased; but I also want
you to know I have used the power of the Secretary to grant
waivers in which 2.4 million Americans across this country,
mostly low income and minorities, can now have health insurance
under the waiver process that I have. And I have expanded
benefits to 6.7 million other Americans. So I am using every
bit of power I possibly get to give insurance to those
individuals that need it, and we will continue to do so as long
as I am Secretary.
The third, I didn't mention the uninsured in my remarks
because I didn't have time. I would have loved to. There are
several things that I would like to see happen. I think the
President has laid out the tax credits, the association health
plans, the health savings accounts. I would like to take those
tax credits, Congressman Moran, and I would like to see some--
bipartisan support to do this. I would like to have this put
into a pool in which every State would be able to get their
portion. Virginia would get their portion. Wisconsin would get
their portion. Have the Governor and the State legislature set
up the uninsured into a pool, set up an insurance or insurance
commissioner to go then out and negotiate.
As you know, you have studied this, there is a good share
of those individuals, the uninsured, who are very strong
insurable risks, some of those individuals over $50,000 a year.
One third of them are very healthy. One third of them are under
the age of 29. So it would be a very good insurable risk. You
would put those into a pool and then you would allow for bids,
and then you would be able to cover a lot more individuals.
This is one way to do it.
Health savings accounts is another way that--I know you
disagree because you believe that it is only going to be a tax
reduction for the rich. I think it is a way for--maybe there
are ways to scrub it, but there are ways in which we can get
more people to really purchase insurance.
You could also use the health savings accounts as another
idea as to be able to allow for those individuals that purchase
a health savings account to be able to have a high deductible
and then be able to use some of the money for purchasing
medical provisions under the tax credits, and there are many
ways to do this.
And I would like to sit down with you and give you some
ideas on how we might be able to come up with a bipartisan bill
to expand insurance for the uninsured. I think we should do it.
I think there is some way to do it.
There are other ways you can do it. You can take a look at
the SCHIP program. There are $7.8 billion left in the SCHIP
program. You could find ways in which we could use that money
to develop a very good health insurance program, like we did in
Wisconsin, called ``Badger Care'' to give those individuals
coverage.
Mr. Moran. Thank you, Mr. Secretary.
Chairman Nussle. Mr. Hastings.
Mr. Hastings. Thank you, Mr. Chairman and Mr. Secretary, it
is good to see you again. And you have a very difficult job,
and I think you have performed your duties very, very well.
I want to kind of pick up on this whole notion of insured
and uninsured from maybe a different perspective. When we look
at health insurance in this country, that insurance is unique
compared to other insurance. And by that I mean in many cases
it is only available as a condition of employment. Somebody
doesn't go to work for X company because they offer good
property insurance, or at Y company because their car insurance
is better than somebody else. But health insurance falls into
that category as a result, rightly or wrongly, since the Second
World War when all of this came about. It tends to be arm's-
length, third-party pay and not an individual making those
decisions. And I happen to think that as a result, in many
people's minds, health insurance to them is prepaid insurance
or prepaid health care. And I would just make the observation
that there is a huge difference between prepaid health care,
because that implies you are paying something at some time, but
you are paying it in full, for the benefit to accrue when you
want that, or prepaid insurance in a classic insurance case
which you take care of the unexpected.
Now, with that in mind, the chairman in his opening remarks
was talking about controlling health costs, and Mr. Gutknecht
talked about finding some market mechanisms, albeit in
different ways, but nevertheless with health costs. It seems to
me that the concept of HSAs goes a long way to alleviating all
of this, simply because you are empowering people to make their
own decisions.
I happen to think that the HSAs within the Medicare bill is
one of those significant policy changes that we had made, and I
just wonder if you have any evidence, having noticed the
marketplace out there since HSAs have gone into place the first
of this year, if you are seeing a lot of activity in that area.
Secretary Thompson. We are seeing a lot of activity on all
aspects of the Medicare Modernization Act, much more so than we
ever thought possible. Health savings accounts is one of those,
Doc, that is receiving a lot of things--a lot of inquiries
coming in as to where they might be able to purchase this--into
the Department.
Secondly, on the card we expected maybe 50-60 applications.
We have 106. One has withdrawn, and one has merged. So we have
104 left; 55 across the country and regionally, and 46--48 are
from those individuals that are in HMOs and want to be able to
enroll their members. So there are a lot of inquiries, a lot of
telephone calls coming in to our 1-800-Medicare line. Our Web
page is just phenomenal, asking questions about the Medicare,
and when is it going to be implemented and how soon they can
start getting benefits.
So it is not only the health savings accounts. All aspects
of the Medicare Modernization Act are receiving overwhelming
kinds of inquiries at the present time.
Mr. Hastings. Well, I support it because of HSAs,
obviously, but also because of the reimbursement formulas for
rural areas. I come from a rural area, and I can tell you that
my providers are very pleased with that. And I gather you are
probably hearing the same thing.
Secretary Thompson. This was the best bill that rural areas
in America could have ever hoped to get. Thanks to Congressman
Nussle's leadership and Senator Grassley's leadership for a
long time, your leadership, Congressman, and so many people
that represent rural areas, this is an excellent bill for
reimbursements. To be able to reduce the wage disparities--
which makes up the high percentage of the reimbursement in the
market--from 72 cents down to 63 cents is a wonderful thing. To
allow for increased payments for doctors in underserved areas
and be able to increase the disproportionate shares by $6
billion. There is a total of $26 billion for rural areas and a
total of $36 billion for States that are going to get
reimbursed.
So I would compliment all of you who are a part of it,
because none of us--I have been fighting for this as Governor
of the State of Wisconsin for years. In fact, I brought a
lawsuit against--as a Governor, because of the disparity of
payments to the State of Wisconsin. We weren't quite as bad off
as Iowa, but we were right up there, and this bill was
exceptional for the States of Iowa, Wisconsin, Oregon,
Washington, the Dakotas, and Nebraska, Montana, and Wyoming.
And most rural States got a huge benefit.
Mr. Hastings. Thank you, Mr. Secretary. Thank you, Mr.
Chairman.
Chairman Nussle. Ms. Hooley.
Ms. Hooley. Thank you, Mr. Chair.
Mr. Secretary, welcome. I have to peek around other people
to see you.
I have a couple of very quick questions. One is, I am going
to go back to prescription drugs. That is an issue that all of
us have been talking about for a long time, the high cost of
prescription drugs. They just seem to be going up exponentially
each year. I think the increase is something like 14 percent
this year.
And I just have a hard time understanding your opposition
to negotiating prices. I mean, you negotiated with CIPRO. I
know you negotiated getting more flu vaccine. I mean,
everywhere that I know of in Federal Government, the VA
negotiates, everywhere in government, we negotiate for
automobiles, we negotiate for all kinds of equipment and office
supplies. What is your objection to negotiating the price of
prescription drugs?
Secretary Thompson. I will tell you the rationale again.
The Veterans Department has the power to negotiate and give the
drugs to individual patients in the veterans system, and we do
not purchase drugs and give the drugs away. We set prices. We
allow for the reimbursement formulas, but the actual payments
go to the fiscal intermediaries, the contract carriers. And
under the new Medicare Modernization Act, the new way to do it
was to be set up by PBMs and PPOs and HMOs to do the
negotiating. And the Congress in their wisdom thought that it
would be better for those individuals to have the power rather
than the Department.
Ms. Hooley. Another question just along those lines. Do you
have any kind of a program, for example, where you have
research done--independent research done on drugs that provide
the same benefit? For example, if you have arthritis you can
take Vioxx, you can take Celebrex, you can take ibuprofen, and
there are probably a whole bunch of others.
Secretary Thompson. We have----
Ms. Hooley. Where you look at all the drugs that do the
same thing for the disease or the condition, and that you have
some comparison then as to side effects and to the costs, so
that every doctor in their office will know that if a patient
comes in and they say, I have arthritis, that they can give
them some choices at least, or know which drugs cost the least
amount.
Secretary Thompson. We do, but not as complete as I would
like or, I am sure, you would like, Congresswoman. But let me
tell you what we are doing right now. We are setting up in CMS
a Web page in which, when the card rolls out, we will have
every card issuer and their prices on every drug and every
formula that they have, and we will have the prices on every
drug so that you will be able to look it up every single day.
It will be updated on a weekly basis, and every cardholder
will. And then we are going to give this information out. So if
you are a senior citizen, you call up 1-800 Medicare with your
list of prescriptions. You will call us and say, these are the
prescriptions. And we will say, how far do you want to travel
to your drugstore? And that information we will have online as
well. And then we will be able to compare every card issuer,
what they got in cost, and be able to tell your constituent,
that senior, Mrs. Jones, what she will have to pay and what
would be the best price, best deal for her.
On top of that, on the $600 credit for low-income seniors,
Merck has just announced that they are going to give away all
of their Merck drugs free of charge to that category of people
above the $600. So those individuals with under 135 percent of
poverty that are using America drugs will first get a $600
debit card and then they will get their Merck drugs free of
charge.
I think that is going to certainly encourage other
pharmaceutical companies to do the same thing. And what this is
going to do, this transparent Web page is going to have a
tremendous tendency to drive down prices not only for seniors,
but for States, for individuals, and for companies, because
they can look in and if they can see what the price is. They
are going to be able to say, Why can't I get that price?
Let's take three stabs, Lipitor, Zocor and Mevcor, and
right now Lipitor is the fastest and the largest selling drug
in America.
And mevacor and Crestor. And we will have information on
all three of those statins, plus the prices.
Now, Merck sells Zocor. For those under 135 percent of
poverty, it will be given free of charge. You can't get any
lower than that. And so I think it is going to have a tendency
on Pfizer, who sells Lipitor, that they are going to have to be
competitive; or mevacor, which is going to be sold by Astra
Zeneca, and I am using that as an example of what it is going
to do to drive down prices.
Chairman Nussle. Thank you.
Mr. Bonner.
Mr. Bonner. Thank you, Mr. Chairman.
Mr. Secretary, welcome. First of all, could you restate the
number of waivers that you have issued during your tenure as
Secretary?
Secretary Thompson. I have issued 3,600 State plan
amendments and waivers since I have been there, more than all
the 18 previous Secretaries combined.
Mr. Bonner. I would like to say thank you on behalf of one
you issued for a young man from my district in Alabama, Nick
Dupree. Nick's story is tragically familiar to a lot of
Americans. He is a quadriplegic. He lives every breath on a
ventilator. He graduated from Spring Hill College, and because
he reached the ripe of old of age 21, he was being forced into
a nursing home until your office intervened.
So I know it is easy to fire shots at you. I would like to
say thank you for what you did for Nick and 29 other people
from my State.
Some of my friends on the other side seem to want to----
Secretary Thompson. We approved that waiver in one day.
Mr. Bonner. I know that. It was right after I met with you
last year, and I want to say thank you.
Some of our friends on the other side seem to want to have
it both ways. They want to blast those of us in the majority
and the President for fiscal irresponsibility, and at the same
time seem to offer billions upon billions of dollars of
amendments that if they were in charge would spend even more
money.
And so my question to you is, according to CBO, last year's
Democratic alternative to the House-passed Medicare bill would
have resulted in direct spending outlays of $1 trillion over 10
years. In your view, what do you believe would have been the
implications to Medicare's financing over the long term if that
alternative had in fact made it into law?
Secretary Thompson. Well, it is obvious it would have been
more, because you are starting at a higher base. And when you
add on to that base increased expenditures, you are going to
have a much higher outlay than the bill that finally passed.
Mr. Bonner. That is all, Mr. Chairman.
Chairman Nussle. Thank you.
Ms. Baldwin.
Ms. Baldwin. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here. I want to delve a
little bit further into some of the discussion that has already
been prompted on the uninsured. As you know, it has been one of
my lifelong passions in politics, and I was very encouraged to
hear you talk about some of the ideas you have of where we
could go from here to tackle that problem.
Unfortunately, I think a number of those aren't yet
captured in the budget that is before us, but are really ideas
that you are opening up an invitation for bipartisan discussion
of where we go from here.
What I wanted to focus on a little are some serious
discrepancies in the numbers of how many people are estimated
to be impacted by the three major proposals that are contained
in the President's budget to address the uninsured, those three
proposals being, as Mr. Moran earlier outlined: the refundable
tax credit at a price tag, I think, of $70.1 billion, the
association health plans, and also specific tax deductions for
catastrophic health insurance. You added in there the health
savings accounts, but these are sort of the three that have
been put forth by this President.
I know that you had a chance to testify not too long ago in
front of the Ways and Means Committee in which, in that
testimony, you gave an estimate that it was your hope that
those three proposals, sort of taken together, could extend
health insurance opportunities to perhaps half of those who are
uninsured. I heard the figure reported, 20 million was the
hope.
You are probably aware that a number of----
Secretary Thompson. If I said that--I don't believe I said
that. But if I did, I misspoke, because it does not cover that
many.
Ms. Baldwin. OK. My understanding was that that was your
testimony in front of the Ways and Means Committee, that these
policies would cut the ranks of the uninsured in half, a
reduction of roughly 20 million.
I would like to--would like a correction if indeed that
wasn't your testimony.
What I wanted to bring forth was the information that a lot
of us have looked at of late in evaluating these programs, a
professor, as you heard, from MIT estimated that the refundable
tax credit might extend health insurance to perhaps 1.9 million
people who would be currently among the ranks of the uninsured.
A CBO study indicated that the association health plans
might provide, modestly, 330,000-additional people health
insurance.
And there was difficulty in even getting a number estimate
on the third proposal.
But when you aggregate, you know, it is looking about 2.2
million, which is great. I would not want to criticize in any
way that type of extension of health care. But I have to
question the bang for the buck. And certainly there are other
initiatives that could be put forward where we would be making
a much bigger dent.
So if these three are the centerpiece proposals for
addressing our incredibly desperate problem with 43.6 million
uninsured individuals, that only counts, as you have heard,
those that have been uninsured for a full year, probably 75
million who have been episodically uninsured throughout a year.
To have three proposals that may help 2.2 million of those
75 million at a cost of close to 100 billion, I want to know if
your figures are different. And certainly if you want to
elaborate any more on problems that would--on proposals that
would get to a larger share of the uninsured, I would certainly
love to hear those ideas.
Secretary Thompson. First, the tax credit proposal that the
President has advanced, which I support, is supposed to cover a
little over 4 million people. I do not know the exact number. I
can look it up on the association health plans. We think it is
higher than what your figures are.
But--and the tax deductible one, I don't know if you can
quantify as to how many people that is going to help, but let's
say it is somewhere between--let's say you are at 2.5 million
and we are at 5 million. What I was saying in Ways and Means,
there are ways and proposals that we could come up with that,
could get a lot more, a higher percentage. And I said I would
hope that some day we could get to one-half.
Ms. Baldwin. Yeah. Just for clarification, I think
Congressman Levin asked concerning the administration's plan
and your response--somebody just gave me the transcript--was--
--
Mr. Shays [presiding]. You know, the gentlelady's time has
run out, and I really want to make sure that others on your
side get a chance to respond.
Secretary Thompson. I know your passion, Congresswoman
Baldwin, for this. I would love to work with you to come up
with ideas. I have some ideas, and I am sure that we can come
up and hopefully get together a bipartisan package that would
help the uninsured.
I would much rather--instead of arguing about it, I would
like to come up with policies which we could work on together
to get it done.
Mr. Shays. We are going to go to Mr. Hensarling and then to
Mr. Moore and then to Mr. Diaz-Balart and then to Ms. DeLauro.
Mr. Hensarling. Thank you, Mr. Chairman.
Good morning, Mr. Secretary. I learned a lot from your
presentation as far as some of the cost driver are concerned--
--
Secretary Thompson. Thank you.
Mr. Hensarling. In the provision of health care through the
Federal Government, I think you mentioned that 8 percent of the
budget is presently spent on preventative care.
Secretary Thompson. Medicare.
Mr. Hensarling. OK, on Medicare, preventative care.
In private insurance plans, quite often people are incented
to--financially--to engage in good, healthy behaviors. Many
private insurance programs obviously will lower your premium if
you are a nonsmoker. My observation is that the world works off
of incentives, what incentives do we presently have in the
system for people to be nonsmokers, to have reasonable diets,
to engage in reasonable exercise?
Secretary Thompson. We don't have much. We don't have much.
And that is something that this Congress, and I applaud you for
bringing up because we have to build in some incentives to
encourage people to practice good behavior, whether it be a
credit on your health insurance like, for example, if you are a
good driver, you usually get a credit on your automobile
insurance policy.
I have had the health insurance companies come in, and I
talked to them about putting on a credit on their health
insurance for practicing good behavior. So if you are
physically fit, you are exercising, watching your diet, you get
a credit on your health insurance. They liked the idea, but
they said there are too many rules and regulations and laws
that prevent them from doing it.
Now, that would be one thing right there that, if we wanted
to strike a blow for freedom, give health insurance companies
the opportunity to give health insurance policies with an
incentive to practice good behavior, which is going to save the
State and the Federal Government millions of dollars.
Mr. Hensarling. I would also like to strike a blow for
freedom, Mr. Secretary.
Secretary Thompson. Thank you.
Mr. Hensarling. I appreciate your bringing it to my
attention.
Speaking of regulations, I am under the impression that
there are roughly 130,000 pages of regulations and forms in the
Medicare program. I am also led to believe that the Federal
Employee Health Benefit Plan, which many would argue delivers
better health care at a less expensive price, has roughly 56
pages of regulations.
At what point does the regulatory burden become so large
that we provide a disincentive for companies to come in,
participate in Medicare, and create a more competitive
marketplace? And to what extent is the regulatory burden a cost
drivers in health care in America?
Secretary Thompson. I think they are tremendous. And what I
am trying to do is, I am trying to change that. What we need to
do, Congressman, is to start getting to a paperless system in
America in the delivery of health care dollars.
Grocery stores are more technologically advanced than
hospitals and clinics. And the regulations are required by laws
that you pass and the Congress passes and are signed into law
by the President.
We are trying to mitigate many of those rules and
regulations and make it easier. Like the privacy law; we had to
make many changes to that to make it meaningful.
But getting back, if you really want to get at this thing,
you could probably talk about somewhere between 25 to 50
percent of cost if we could get to a paperless system. And so
that you could have uniformity, I have requested the Institute
of Medicine to come up with a uniform patient record. We don't
even have a uniform patient record in America.
Second thing, we have hired--we have licensed what we call,
from the pathologists, SNOMED, which is the vocabulary of all
the illnesses in America, and we are going to give that out to
anybody that wants it free of charge.
Third, we are going to get uniform standards put in place
so that the hospitals and clinics in your district will know
that they have these kinds of standards to meet so that they
are going to purchase the kind of software and the kind of
computers that are going to be able to be compatible.
And then you know my ultimate goal is to be able to get a
chip developed so every one of us have a personalized chip with
our health medicine information that can be downloaded, and you
would then be able to have uniform patient records, uniform
lexicon and uniform standards on a chip. You could drive down
the cost and make this administration much easier.
Mr. Hensarling. Thank you.
Mr. Shays. We are going to try to make sure we go down this
list; and let me just tell you, we have Mr. Moore and then Mr.
Diaz-Balart and then we are just going to go down the
Democratic list, and I will say--and not ask questions, and you
can see we have more than six and we have to finish up in 35
minutes, so----
Secretary Thompson. I will make my answers shorter too.
Mr. Shays. Mr. Moore.
Mr. Moore. Thank you, Mr. Chairman.
Mr. Secretary, welcome. I want to recount for the committee
a conversation we had. In fact, the week of the vote on the
Medicare bill, Mr. Secretary, you met with the Blue Dog
coalition, had a discussion with that group, I think on
Tuesday.
Later that week--and I believe, Mr. Secretary, it was the
day before the vote--I got a call from you at my office and I
am going to recount this as accurately as I can, as I remember.
You said, Congressman, can you be with us on this bill?
And I said, Mr. Secretary, I really have not made up my
mind.
As you know, with any major piece of legislation, there is
some good news and bad news; and the good news in this bill is
catastrophic coverage and low-income coverage and the fact that
there is reimbursement for physicians and hospitals, Medicare
providers here. And I said, That is the good news.
In our discussion I think you said something like, ``What
is your concern?''
I said, ``Mr. Secretary, there are 25 million veterans in
this country and the Secretary of Veterans Affairs on behalf of
those veterans has the authority under Federal law to negotiate
lower prices, try to negotiate lower prices.'' I said, ``I wish
you had that authority.''
As I recall, Mr. Secretary, your response was something
like this. ``If I had that authority, Congressman, I would
gladly exercise it, but as you know, this bill prohibits
that.''
And I said, ``Mr. Secretary, that is my concern about this
bill and that is why I still haven't made up my mind.''
In fact, I ended up voting against the bill, even though I
was leaning to voting for it, because I think it failed to
address the cost issue.
Part of our discussion, I said to you also was, ``There are
40 million Medicare beneficiaries in this country, and right
now each of those persons is a one-person buying group. And if
we would lump 5 million, 20 million or 40 million people in a
buying group, there should be some leverage there for you or
somebody on behalf of those beneficiaries to negotiate lower
prices, again just as the Secretary of Veterans Affairs does.''
And I said, ``Our seniors pay, I believe, among the highest
prices in the world, and in effect, our seniors subsidize
people in Canada and Mexico where there are price controls.''
And I will tell you, Mr. Secretary, I do not believe in price
controls.
I want our pharmaceutical companies to make a profit and
continue to develop the world--these wonderful drugs that
provide quality of life and, in fact, keep people alive. On the
other hand, I don't want them to make their profits just on the
backs of American seniors.
So I introduced a bill with Jo Ann Emerson from Missouri.
And this bill would specifically repeal the one section of the
Medicare bill, H.R. 1, that was passed and give you specific
authority to negotiate, on behalf of 40 million Medicare
beneficiaries in this country, lower prices.
And my question to you is, if you had that authority, would
you exercise it, No. 1?
No. 2, if the bill passes--and we have 125 bipartisan
cosponsors right now--if this bill would pass, would you
recommend to the President that he sign it, sir?
Secretary Thompson. First off, even if I had the power, I
don't know whether or not it would be used very often, the
reason being because, right now, we don't purchase the drugs.
The Veterans Department does.
The PBMs are going to purchase the drugs, or the PPOs are
going to purchase the drugs, and the HMOs are.
But if I had the power, of course, I would use it. I have
never been reticent about using power. And so if I get the
power, I would use it. But I am just telling you, I don't know
whether or not it would be usable because of the way the system
is set up.
Second thing, you are absolutely correct, seniors pay the
highest amount of the drugs because nobody is negotiating for
them. Under the new bill, under the new Medicare bill, they
will be having people negotiate with them and the transparency
on the Web page is going to be very helpful. It was not only
the Republican bills that had this non-negotiable language, it
was the Democrat bills as well; and I just want to put that on
the record.
Mr. Moore. I appreciate that, but I want to say this. I
think and I hope that all of us in this room and in Congress
can get away from--this should not be about Republicans and
Democrats. This should be about American seniors and the
American people.
Secretary Thompson. I agree.
Mr. Moore. I know you do, Mr. Secretary. I absolutely
believe that you want the best for health care in this country.
I really believe that.
Secretary Thompson. I am passionate about it.
Mr. Moore. I know you are. I could tell in your opening
statement that you are. I know that.
One more question. I will finish very quickly here.
Mr. Shays. The gentleman only has 22 seconds.
Mr. Moore. I understand that, if I can finish, Mr.
Chairman.
Mr. Shays. Well you have got to leave him time to answer.
Mr. Moore. Well, then, I won't ask the question.
Mr. Shays. Let me just say I am just trying to accommodate
eight members so they get chances as well. We will go to Mr.
Diaz-Balart and then to Ms. DeLauro, and then we will go to Mr.
Scott, to Mrs. Capps, to Mr. Emanuel, Mr. Davis, Ms. Majette,
and so on.
Mr. Moore. May I submit the question to him in writing?
Mr. Shays. Sure. Absolutely.
Mr. Moore. Thank you.
Mr. Diaz-Balart. Thank you, Mr. Chairman.
Mr. Secretary, the programs within the Department of Health
and Human Services historically have been notorious for being
burdened with waste and fraud, and abuse. And nobody has done
more to fight waste, fraud, and abuse when you were Governor,
and now, as you have; and I think everybody understands and
applauds you for that, sir.
Can you discuss some of your successes in fighting waste,
fraud, and abuse within your Department? And also some of your
future plans to continue to fight what I know we all believe is
a major problem.
Secretary Thompson. The IGT is one area that we are looking
at right now. We have put in some new auditors that are going
to be able to, we think, modernize our system completely. We
have modernized our computer systems; that is badly needed
because some of our software is 30 years old in the Medicare
reimbursement system. Some of our software is older than the
technicians that we have hired to maintain it. So we are doing
some improvements there.
The third thing we are doing is, we are putting a lot of
emphasis on getting delinquent child support collected,
something that hadn't been done before. And we are increasing
the amount of money each year we take on waste, fraud, and
abuse. We just have made some huge cases and got some others
pending, and the amount of money that we take in on waste,
fraud, and abuse is going up each and every year.
Mr. Diaz-Balart. Mr. Secretary--and just for an example, I
am not picking on anybody. The NIH has received some, I think,
well-deserved criticism. We all know that they do some
essential things for the country, but they also have some
egregious examples of waste. For example, a recent NIH grant
funded research that observed--this true; I am not making this
up--observed individuals watching pornography while drinking
alcohol. When people found out about it, they all wanted to
sign up.
That is $470,000 just on that issue alone, and it seems to
me that people have to be held accountable for their actions.
And, everywhere if the people are not held accountable, you do
not get accountability.
Do you have any ideas, any steps that you are thinking of
taking to hold people accountable for such examples of waste
that are pretty obvious to--you know, do not pass the straight-
face test.
Secretary Thompson. Yeah. I have asked Elias Zerhouni, who
I think is one of the best NIH directors we have ever had in
this country. He is having a rigorous review of this stuff.
I don't want to get involved in reviewing scientifically
based things, because I am not a scientist. He is, and so he is
much better and more capable, and he is responsible for the
NIH. The same thing for Dr. Gerberding at CDC. They are
responsible for making sure that the grants that are given are
grants that are based upon good science, and they are doing
that.
As far as NIH, they are taking a look at the ways that this
story that was put in one of the California newspapers--they
are having a huge review. In fact, Elias Zerhouni was up here
and testified, I believe, in the Senate Appropriations
Committee about the review process he has done. He has set up
an independent investigation, and he has brought in some real
outstanding national and international scientists to review
what the allegations were and what is going on. And we will
make all of that information available to you and to every
Member of Congress.
Mr. Diaz-Balart. Thank you, Mr. Secretary. I think all of
us know that nobody has tried harder to make sure that the
taxpayers' money reaches those that are really most needy.
Thank you, and we want to thank you for those efforts.
Thank you, sir.
Secretary Thompson. Thank you very much, Congressman Diaz-
Balart.
Mr. Shays. I thank the gentleman.
Ms. DeLauro, you have the floor.
Ms. DeLauro. Thank you very much, Mr. Chairman.
Mr. Secretary, welcome. I will get another chance to ask
you some questions at Labor, HHS.
If you want the authority, we would like to give you the
authority. Cipro is produced at Bayer which, as you know, is in
the Third Congressional District of Connecticut; and we thank
you for driving that cost down. I didn't know it was 19 cents
from the VA.
But the authority can be had, and I believe that, in fact,
you would use it.
Let me move to a different area which has to do with the
prescription drug ads. I understand that late last night HHS
submitted the material to the GAO answering questions about the
potential misuse of government funds by the executive branch
for the publicity or propaganda effort around the Medicare law.
Can you get us those responses so that we can make it part
of this record, and can you get us a list of where the ads were
run?
Secretary Thompson. Sure.
[Secretary Thompson's response was sent to Representative
DeLauro's office 10/14/2004:]
Ms. DeLauro. Fine. Thank you.
And we also would like, for the record, Mr. Chairman, the
letters that many of us on the committee sent to the Secretary
and also to the IG, to make those part of the record.
Mr. Shays. Without objection, they will be part of the
record.
[The information referred to follows:]
Letters Submitted for the Record by Hon. Rosa L. DeLauro, a
Representative in Congress From the State of Connecticut
Hon. Tommy Thompson, Secretary,
Department of Health and Human Services.
February 4, 2004.
Dear Secretary Thompson: We are writing to express our outrage at
the administration's announcement of a massive taxpayer-funded
advertising campaign to promote its Medicare bill. Just 1 day after
presenting a budget that eliminates and cuts critical programs,
America's working families are being asked to foot the bill for the
administration's election year advertising.
Yesterday, the White House announced that it will use $9.5 million
from your Department for a television ad campaign to ``rebut criticism
of the new Medicare law''. In addition, $3.1 million will be used for
newspaper, radio and internet ads in both English and Spanish. This new
ad campaign raises serious questions about the administration using
taxpayer funds for political purposes. Accordingly, we would like you
to provide the following information:
The rationale for spending taxpayers' funds on this ad campaign. If
this is an effort to educate the public about the prescription drug
legislation, why does it advocate particular points of view that are
clearly controversial and that have already been challenged by senior
and consumer organizations as being inaccurate and misleading.
The total cost in appropriated and non-appropriated Department
funds dedicated to this ad campaign. Please identify the specific
accounts from which the funds are being drawn, and prepare an
additional separate breakdown of the cost associated with the
production of each television, print, radio and internet ad, and a
separate breakdown of the cost of placing the ads before the public.
The name of each business involved in producing or placing the ads;
how much each is being paid for their work; and whether the contracts
were put out for bid.
The names of the locations in which the ads are being placed.
An accounting of other instances in which the Department used funds
to advocate for a specific program or legislation.
During a time when we are asked to rein in spending and use
taxpayer money wisely, why is it acceptable to spend this money on an
ad campaign, particularly when it is discussing a benefit that will not
even be implemented until 2006?
American families should not have to pay for this sham advertising
campaign, especially for partisan political gain. We look forward to
your prompt response.
Sincerely,
Rosa L. DeLauro,
Member of Congress.
Frank Pallone,
Member of Congress.
Bernie Sanders,
Member of Congress.
Tom Allen,
Member of Congress.
Jan Schakowsky,
Member of Congress.
Rahm Emanuel,
Member of Congress.
Marion Berry,
Member of Congress.
Letter Submitted for the Record by Hon. Rosa L. DeLauro, a
Representative in Congress From the State of Connecticut
Dara Corrigan, Acting Principal Deputy Inspector General,
Department of Health and Human Services.
February 5, 2004.
Dear Ms. Corrigan: We are writing to request an investigation of
the Department of Health and Human Services (HHS) involvement in a
taxpayer-funded advertising campaign to promote the administration's
Medicare bill. Specifically, we are concerned that this effort is a use
of taxpayer funds for political purposes and that the administration
will be using its own campaign operatives to place the ads.
On February 3rd, the White House announced that it will use $9.5
million from HHS for a television ad campaign to ``rebut criticism of
the new Medicare law''. In addition, $3.1 million will be used for
newspaper, radio and Internet ads in both English and Spanish. Why
would the administration undertake this program 2 years before the
program is to even start.
It has also come to our attention that a media firm currently
working for the President's re-election campaign has been hired to
purchase the $9.5 million worth of television ad time for this new
commercial. National Media Inc. stands to make a windfall from this
campaign. This is the same company that has been repeatedly hired for
ad campaigns primarily funded by the Republican party and by the drug
industry. National Media Inc. has done ads for Citizens for Better
Medicare, a drug industry front group that has spent tens of millions
of dollars on ads attacking lawmakers interested in lowering the cost
of prescription drugs.
Therefore, we would like you to conduct an investigation that
focuses on the following:
Is it legal to use taxpayer money to fund this advertising
campaign?
Does the ad campaign violate Federal law under 31 USC 1301(a),
dealing with the appropriate application of funds, and 5 USC 7321(a),
dealing with political participation?
Has any other administration conducted an informational campaign 2
years prior to implementation?
Why was the decision made to purchase the time through National
Media, Inc., rather than through the firm that created the
advertisements? Was any individual from the White House involved in the
selection of National Media, Inc.?
Was the selection of the advertising firm competitively bid?
How were the media markets where the ads will run selected? And
what relationship do those markets have to the 2004 Presidential
campaign?
During a time when we are asked to eliminate or cut critical
programs, we want to ensure that the administration is not using
taxpayer money for partisan political gain. We look forward to you
investigating this matter promptly.
Sincerely,
Rosa L. DeLauro,
Member of Congress.
Frank Pallone,
Member of Congress.
Sherrod Brown,
Member of Congress.
Bernie Sanders,
Member of Congress.
Tom Allen,
Member of Congress.
Marion Berry,
Member of Congress.
Jan Schakowsky,
Member of Congress.
Rahm Emanuel,
Member of Congress.
Letter Submitted for the Record by Hon. Rosa L. DeLauro, a
Representative in Congress From the State of Connecticut
Mr. Leslie Moonves, President, CBS Television.
February 10, 2004.
Dear Mr. Moonves, We understand that CBS is currently running
advertisements produced by the U.S. Department of Health and Human
Services (HHS) on the subject of the recently enacted prescription drug
legislation. We urge the network to suspend airing these ads pending
the outcome of an ongoing General Accounting Office investigation into
the propriety of the Department's alleged expenditure of taxpayer funds
on these ads, which are essentially political in nature.
On February 3, the HHS revealed that it will use $9.5 million for a
television ad campaign to rebut criticism of the new Medicare law. At
this point in time, government investigators have questions about the
source of the funds used, and the means under which the production and
media contracts have been let.
In addition, it has come to our attention that the media concern
hired to purchase the air time is also employed by the President's
reelection campaign. It is well known that the firm in question,
National Media Inc., also does substantial work for the Republican
party and the pharmaceutical industry.
Because of these concerns, the General Accounting Office is
conducting an investigation into the matter, and a number of Members of
Congress have asked the HHS Inspector General for answers about it.
Given the extremely questionable origin of the ads and the overtly
political nature of their content, we hope that as a matter of
fairness, your network will at least suspend running them until some of
these questions can be answered.
Thank you for your attention to this matter. We look forward to
hearing from you.
Sincerely,
Rosa L. DeLauro,
Member of Congress.
Rahm Emanuel,
Member of Congress.
Ms. DeLauro. Thank you. Media reports on this issue of the
ad campaign early on talked about the $9.5 million, quote, ``to
build public support for the new Medicare prescription drug
law, seeking to rebut or counteract criticism.'' And that was
the purpose of the ad campaign.
All of us in this business are subject to tremendous
criticism. Wouldn't it be nice if we had $9.5 million or $12
million in a fund to allow us to combat that? We don't.
You talk about the ad campaign as public information. My
question to you is, quite honestly, what kind of a public
information campaign leaves out critical information for
seniors?
Let me mention this. The ads don't tell seniors who enroll
that they will pay more in premiums in some instances than they
will receive in benefits. The ads do not educate seniors about
the gap in their prescription drug coverage.
The ads don't tell seniors that many medicines that they
take will not be included on the formulary of the plan in which
they enroll. The ads don't tell the seniors that the CBO and
independent budget analysts say that potentially almost 3
million seniors will lose coverage as a result of the
legislation.
The ads don't tell seniors or the disabled that with dual
eligibility for Medicaid and Medicare, they will be forced to
pay more for drugs. The ads do not tell seniors that they are
prohibited from using their money to buy supplemental coverage.
The ads do not tell them they will pay a substantial
penalty if they wait to enroll in the drug plan. And the one
piece of information that is in there on the discount cards,
quite frankly, doesn't even tell them that it does not provide
a discount for all medicines.
And this is a program that is going to start in the year
2006.
It seems to me that we are, in fact, rebutting criticism,
counteracting questions about the law, and we are not engaging
in a public information campaign. And I say to you, what kind
of a public information campaign leaves out this kind of
critical information for seniors?
Secretary Thompson. Well, Congresswoman, I can tell how
passionate you are against the ad, and all I can tell you is
that we had the ad reviewed by many different independent
groups before it was publicized.
Ms. DeLauro. Can you tell us who those groups are? Give us
a list of the individuals that the ad was scrubbed with.
Secretary Thompson. Sure. And these past 2 weeks, I am
entering into a new promotional program on prevention that we
are going to be rolling out in the month of March, that we are
raising the money privately for, as well as some other ways. I
had a bunch of individuals that I would say predominantly were
on your side of the aisle in my office, experts insofar as
advertising, and they all indicated the ad was very effective
and they did not see anything political about it; and I will be
more than happy to share that with you. We played the ad for
them, and I don't think there was a Republican in the group.
Ms. DeLauro. Same Medicare, more benefits. It really defies
imagination.
Thank you, Mr. Secretary.
Mr. Shays. Thank the gentlelady.
And at this time we will go to Mr. Scott, then Mrs. Capps,
and then Mr. Emanuel and Mr. Davis, and then Mr. Edwards.
Mr. Scott. Thank you. Thank you, Mr. Chairman.
And thank you, Mr. Secretary. As you know, I have an
interest in discrimination, and when you talk about religious
discrimination, it overlaps with race because some religious
organizations are all one race or another. Some churches are
all black, some are all white, so if you can discriminate based
on religion, you have the wherewithal to discriminate based on
race.
As you know, the Head Start bill that passed the House has
a provision in it that allows discrimination. And my simple
question to you is whether or not your position is that the
Head Start program needs to be amended so that a sponsor of a
Head Start program can tell a prospective teacher that you were
the best qualified, but we just don't hire Jews. Or you were
the best qualified, but we only hire people that belong to our
church, which everybody happens to know is all white.
Which way should the weight of government come down on?
Should it protect the minorities trying to get a job or the
sponsor trying to discriminate?
Secretary Thompson. Well, you know, Congressman Scott, that
I am absolutely opposed to any type of discrimination. As I
understand, this proposal was put in at the behest of a lot of
the religious, faith-based organizations because they want to
level the playing field.
Mr. Scott. They want to discriminate--the level playing
field is no discrimination on a Federal contract.
Secretary Thompson. Well, all I can tell you is, that was
the reason for the language. I will be more than happy to
review it again, but I was led to believe that there is no
discrimination whatsoever.
Mr. Scott. OK. So you have offered no support for the idea
that is responsible for----
Secretary Thompson. I support the reauthorization of the
Head Start bill.
Mr. Scott. But you don't believe that the sponsor of a Head
Start program should tell a prospective teacher that we just
don't hire Jews. You were the best qualified; we just don't
hire your kind.
I don't think that ought to be the new law.
Secretary Thompson. Well, I certainly would like to have
the opportunity to review that.
Mr. Scott. When you were Governor of Wisconsin, you
wouldn't allow that in Wisconsin, would you?
Secretary Thompson. I probably would have some second
thoughts.
Mr. Scott. I know you would.
Is it the policy of HHS to directly fund religious
programs, even if the religious program is not directly paid
for with Federal money? For example, if there is a drug
counselor program and the drug counselor is paid with Federal
money, can the pastor or choir director come in and conduct
worship activities during the government-funded program or not?
Secretary Thompson. I wish I had had some advance knowledge
of this. I would have been more up to speed on it.
All I can tell you, Congressman, is that the faith-based
organizations, I think in the past have been discriminated
against by legislation; and the President and this
administration want to give faith-based organizations an
opportunity to be able to apply and not be discriminated
against in getting grants.
Mr. Scott. Eight percent of the Head Start programs today
are run by faith-based organizations without allowing them to
discriminate and without funding religious activities. Catholic
Charities gets a billion dollars a year--before this
administration came in.
So if you are not prepared to answer, that is fine, because
it is a very specific question, and you can get in trouble if
you give the wrong answer.
Secretary Thompson. I would like to have you submit it, and
I will be more than happy to respond to it.
[The information referred to follows:]
Mr. Thompson's Response to Rep. Robert Scott's Question Regarding the
Faith-Based Legislative Initiative
preserving the integrity of faith-based organizations that receive
federal funds
It has been settled for more than 100 years that the Establishment
Clause does not bar the provision of direct Federal grants to
organizations that are controlled and operated exclusively by members
of a single faith. See Bradfield v. Roberts, 175 U.S. 291 (1899); see
also Bowen v. Kendrick, 487 U.S. 589,609 (1988). This long-standing
right was first codified in Title VII of the historic 1964 Civil Rights
Act, expanded by Congress in 1972, and unanimously upheld by the United
States Supreme Court in 1987. Justice Brennan wrote in upholding this
law, ``Determining that certain activities are in furtherance of an
organization's religious mission, and that only those committed to that
mission should conduct them, is * * * a means by which a religious
community defines itself.'' See Corp. of the Presiding Bishop of the
Church of Jesus Christ of Latter Day Saints v. Amos, 483 U.S. 327,342
(1987) (Brennan, J., concurring).
President Bush believes that when faith-based organizations receive
Federal funds, they should retain their right to hire those individuals
who are best able to further their organizations' goals and mission. An
Orthodox Jewish organization, for example, could lose its unique
identity as Orthodox Jewish if forced to hire evangelical Christians or
others who do not support their mission and beliefs. Forcing charities
to choose between cooperating with the government to help the poor and
maintaining their religious integrity is not a choice we should force
faith-based organizations to make.
Allowing faith-based organizations to hire on the basis of religion
when they receive government funds protects the same freedom of
association given other federally-funded organizations to define who
they are and choose employees dedicated to that cause. For example, an
environmentalist group that receives Federal funds can hire only
employees who support its position on environmental conservation. A
political party receiving government funds likewise can hire only those
that agree with its ideology and mission. These organizations' ability
to execute their goals hinges on whether they may choose to hire like-
minded people. President Bush believes that faith-based groups should
not be denied this same right to hire employees who are similarly like-
minded.
Head Start is one of the few Federal statutes that require faith-
based organizations to give up their protected religious hiring
autonomy as a condition of receiving Federal funds under that program
authority. The President's proposal for Head Start reauthorization
would prevent discrimination against faith-based organizations by
explicitly recognizing the right of faith-based groups participating in
the Head Start program to retain their religious hiring autonomy even
when accepting Head Start funds.
Protecting the rights of religious organizations in the proposed
Head Start reauthorization is part of the continuing effort to
encourage participation of faith-based organizations. In fact,
encouraging the participation of religious organizations in Federal
social service programs is not a new notion. Efforts to clarify
requirements that had inhibited participation of faith-based
organizations in Federal social services program were begun under the
previous administration. For example, the Public Health Service Act was
amended in 2000 to expressly permit religious organizations providing
substance abuse services to receive Federal financial assistance on the
same basis as any other nonprofit private organization without
impairing the religious character of such organizations or diminishing
the religious freedom of individuals. Furthermore, the four Charitable
Choice laws passed by a bipartisan Congress starting in 1996 and signed
into law by President Clinton explicitly protected religious hiring
rights.
In addition to recognizing the right of faith-based organizations
to take religion into account in making hiring decisions, the House
reauthorization bill would include in the authorization for the State
demonstration program a provision protecting the right of parents to
choose among pre-school providers participating in the program. In
communities in which faith-based organizations participate in a State's
demonstration project, parents will have a chance to enroll their
children in such programs. Parents would also have the opportunity to
enroll their children in a secular program.
Allowing faith-based organizations to complete for government funds
while maintaining their religious integrity is part of the President's
efforts to use every available resource to fight poverty and despair
among America's needy. Of course, the President's Faith-Based and
Community Initiative has worked hard to ensure that faith-based
organizations receiving Federal funds comply with the constitutional
parameters outlined by the Supreme Court. The administration, through
Executive Order, regulations and other statements, has repeatedly
explained that direct government funds cannot be used for inherently
religious activities, such as worship, religious instruction, and
proselytizing. Additionally, beneficiaries must have an opportunity to
receive federally-funded services regardless of their religion. We are
committed to removing barriers to the participation of faith-based
organizations in Federal social service programs and to ensure that
Federal funds are expended in ways consistent with the Establishment,
Free Exercise, and Free Speech Clauses of the First Amendment.
Mr. Scott. Thank you. The omnibus appropriations bill has a
provision funding Access to Recovery, a voucher program for
drug treatment. The language in the bill prohibits--requires
programs to meet licensing standards. Let me read the language:
``Conferees direct that all providers participating in the
Access to Recovery program should be held accountable to the
same standards of care, performance, licensure and
certification requirements as other licensed and certified drug
and alcohol programs in their respective States.''
Can you assure this committee that money budgeted for that
program will only go to those programs that meet State
licensing and certification requirements, as provided under the
law, and that you will monitor those activities?
Secretary Thompson. I happen to be a strict believer in the
law and will do everything the law tells me I have to do.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Shays. I thank the gentleman.
At this time we will go to Mrs. Capps.
Mrs. Capps. Thank you, Mr. Chairman.
And thank you, Mr. Secretary, for being here. Your agency
has approved a number of comprehensive Medicaid waivers, the
goal being expanded coverage. These waivers are a trade-off.
States are exempted from requirements and allowed to reduce
benefits and raise costs to certain beneficiaries, or current
beneficiaries.
In exchange, the States are supposed to increase the number
of people Medicaid covers. And HHS has announced in a press
release, which you referred to today, that waivers expanded
Medicaid coverage to an additional 2.5 million people. However,
a recent study by the nonpartisan Kaiser Family Foundation
estimated that the waivers only expanded coverage to 200,000
individuals, a tenth of the people HHS has claimed to be
covered.
I have a number of questions to kind of get at this issue
in our limited time. So you said you were going to be brief. I
think these are yes or no questions to start.
Are you familiar with the Kaiser analysis?
Secretary Thompson. No, I am not.
Mrs. Capps. Well, Kaiser says that the number of newly
insured individuals is only 200,000. And I am asking if your
estimate counts waivers that were approved but subsequently not
implemented.
Secretary Thompson. No, the difficulty is that we approve
the waiver based upon the information that the State gives us.
Now, the State may get in financial trouble and not implement
the waiver fully, or not implement the waiver at all and that
could be, certainly, a reduction in the numbers.
Mrs. Capps. OK. Kaiser did only count waivers that were
actually implemented, which would seem like a more accurate
analysis. And I am wondering then if your analysis counts
individuals that already had health insurance coverage under
other public programs, but were moved into the waiver program.
Secretary Thompson. We counted those that we approved in
State plan amendments as well, and this is a big difference
because Kaiser did not include the State plan amendments that
we approved. And in our press release we included the waivers
plus the State plan amendment that we approved that did expand
the coverage for uninsured Americans.
Mrs. Capps. And Kaiser only counted individuals who are
newly insured because to them and to me it seems a bit
disingenuous to claim credit for individuals who already have
insurance or already were insured; and I wonder if your
estimate counts States' projections of enrollment then, rather
than the actual number of people covered under these waivers.
Secretary Thompson. We do not collect information on one of
these--whether these individuals were previously insured. But
we base our information on, predominantly, the information that
the State submits to us.
Mrs. Capps. It would seem to me that a more accurate
account would only count the individuals already enrolled. And
it is a particularly relevant topic since a number of States
have only partially implemented their waivers or have frozen
enrollment in their waiver initiative. So when you look at the
actual number of people enrolled in these waiver initiatives
who were previously uninsured, the Kaiser Foundation, I think
it is hard not to believe that they are only counting the
coverage; and this is only 200,000 people, which is a far cry
from the administration's claim of 2.5 million people. It seems
to highlight a credibility gap for this administration, and I
think it raises serious questions about the waiver program.
I am concerned about the cuts in coverage that occur under
these waivers. More concerned, in fact, that they may not be
accompanied by coverage expansion that we were led to expect.
They are being highly touted, and I want us to really
understand what they are actually doing. I am also really
concerned about the States that don't fully implement the
expansions that they have promised to make and that they have
been given waivers for. For example, according to Kaiser,
Oregon was given a waiver that allowed it to cap enrollment in
Medicaid, increase programs and cost-sharing and reduce other
benefits. They implemented these cuts. But Oregon also was
supposed to cover parents and other adults below 185 percent of
poverty.
Now, Oregon isn't alone in this practice and I want to ask
very briefly, are you doing anything to make sure that the
States live up to their promises in the expansion programs, and
not using waivers simply to reduce their cost?
Secretary Thompson. Well, we don't use the waivers to
reduce the costs. We use the waivers as a way in which we
expand benefits.
Mrs. Capps. I know.
Secretary Thompson. That is the impetus.
Mrs. Capps. I understand your impetus, but I believe it
really----
Secretary Thompson. We monitor. We monitor these waivers.
But a good share--you know, we do a have shortage. We have got
a huge responsibility.
Mrs. Capps. I understand.
Secretary Thompson. But I just wanted to say that Kaiser
did not include a lot of the things that we approved in the
State plan amendment, which really makes a difference.
Mrs. Capps. I am just concerned that the most needy in our
society now may not be getting the services that they need, and
we need more oversight into this
Mr. Shays. I thank the gentlelady.
Mr. Emanuel. Excuse me--yes, Mr. Emanuel and then Mr.
Davis.
Mr. Emanuel. Thank you, Mr. Chairman.
Mr. Secretary, thank you and I know you have got the trip
and you are going to get ready for it. You are leaving real
quickly.
Three quick subjects: On the issue of prescription drug
prices and affordability, we have--I think there are two
methods on the table to deal with price. And I think, to be
truthful, the reason the bill that passed isn't popular and
isn't being embraced among seniors is because it fails to deal
with the fundamental issue about price and affordability.
Now one method, Congressman Gutknecht and I have led the
effort on his legislation allowing the market and competition
to give you choice. We would rather than pay 40 percent more,
through competition, prices would come down, we would stop
ending up subsidizing the French and German and Swiss, British
who are basically paying 40 percent less than we do.
The other method is create from Medicare a ``Sams Club''
and use the 40 million Americans to get the scale that they
provide to basically negotiate prices. Your own IG--and I don't
know if you know this and in following up on how Congressman
Gutknecht had brought to your attention some issues--your IG
testified in front of this committee on July 9, 2003. Studied
24 drugs--Medicare buys, veterans' buys--and under those 24
drugs, only 24 drugs picked by your IG, veterans saved 2
billion a year versus what Medicare pays. And quoting this
assessment, payment continues to grow as the amount paid by
Medicare grows larger; and that bill prevents you from doing
what private sector Sams clubs do. Everybody negotiates and
uses scale to get better prices.
Now I know what you said earlier. So you are in a box.
Maybe you would use the power. Maybe you wouldn't use the
power. Maybe if we withdrew competition, that is another
method. And even Mr. Scully, your own CMS director said that
relying on the private plans that you mentioned earlier has
never been tried and to quote him directly, It doesn't exist in
nature.
So that is a cop-out in my view. You could have the power.
We know it exists. It is being done by VA and other authorities
here in the U.S. Government to get the type of prices and to be
fair to our seniors and our taxpayers.
Two other things real quickly, and I will leave you time to
answer on your choices. One on the commission to study
reimportation, there are over 260 million Americans. I wouldn't
pick me to chair it, I am clear in my position. But I surely
wouldn't pick Mr. McClellan to chair it either, he is clear in
his position.
As far as I could tell, David Kay is available.
I mean, why of 260 million Americans you would pick him. He
has already said where he is on this, and if the commission is
sincere, it is always going to be questioned now that he chairs
it.
And lastly, on the issue of the uninsured, I have a bill.
Rather than using a tax credit--it is a bipartisan bill--
turning that tax credit into a voucher, allowing me to take
that voucher and go into a subsidiary of the Federal Employees
Health Benefit Plan and use that scale of 33 working uninsured
who have a voucher to go into a pool to get the economies of
scale; and I would love for you to look at it and work with
your staff if you are interested.
It is bipartisan. You can pick any one of them or ignore
them for all I care. That is not true, but go ahead.
Secretary Thompson. Well, I am not going to ignore them and
I will address all three of them.
First off, in regards to the--let's go to the third one
first. Absolutely. You know you have been over to see me. I
told you I had some ideas. You said you had some ideas. I said
I would love to work with you on a bipartisan basis to come up
with a program on the uninsured.
Mr. Emanuel. I will be waiting for you when you come back
from Iraq.
Secretary Thompson. And I will be more than happy to do
that, and let's see if we can come up with something. And
Congresswoman Baldwin and Congressman Gutknecht and anybody
else who wants to join us would be--I would appreciate.
Secondly, Mark McClellan, he is an expert. Everybody
realizes that. He is an outstanding individual. I don't think
that you have to worry one darned bit. But I understand your
criticism and your suggestions, and maybe we should have some
others. I will review that.
Mr. Emanuel. Thank you.
Secretary Thompson. I can understand where you are coming
from on that, but Mark was not that interested in doing it. I
wanted him to do it because I trust his judgment a great deal.
He is a fine individual.
Third, in regards to negotiations, right now even if I had
the authority and the power, Congressman, if the PBMs were
going to negotiate with the pharmaceutical companies, what
would I do? I mean, we don't know; you know, that is a new
system.
But seniors certainly need somebody to do the negotiating
for them. I think that the new PBM model is going to work
extremely well, and I think it is going to drive down the
prices.
Mr. Emanuel. I trust you more than I do the PBMs. You work
for the taxpayers. They are a private company.
Secretary Thompson. And I think the thing that is really
going to drive it down is this transparency that we are going
to put up on the Web page and that you can look at and that
everybody can watch.
Mr. Shays. Mr. Secretary, you have three members. You have
Mr. Davis, Mr. Edwards and myself. Are you able to stay till
about 10 after?
Secretary Thompson. Yes.
Mr. Shays. And your trip--I am not sure that was wise to
share with others--is out there, but we do want you to travel
safely.
Mr. Davis. I am sorry.
Mr. Davis. Thank you, Mr. Chairman.
And, Mr. Secretary, let me try to ask you two sets of
questions and give you a chance to respond to them. The first
one deals with what Mr. Emanuel was questioning you about at
the very beginning, the question of the negotiating authority
that the VA has right now.
One would think that we ought to be able to look at that
experience and make a set of conclusions whether or not the
VA's participation has somehow distorted the market or created
some untoward consequences that might tell us something about
what would happen if you had some of the negotiating authority.
So I want you to identify whether or not there have been any
imperfections in the market or any unusual things that have
happened that you think might be of any value to us from an
analytical standpoint.
And second of all, I want to ask you about a totally
different topic which is the corrected disparities report that
you are well aware of, involving racial disparities in this
country. And I certainly applaud you for acting to issue the
correct report and to alter the report language to acknowledge
that there is a significant disparity in the country between
the health care status of African Americans and Caucasians.
But I want to focus on, frankly, how we got to this point
in the first place from an internal standpoint. How did the
report get altered to start with? And then what does that tell
you about your internal processes at HHS that a document that
was prepared, presumably by bureaucrats, people who weren't
involved in the political process, had very critical language
taken out of it. How did it get sanitized and what steps have
you taken to address that problem?
You can answer both of those.
Secretary Thompson. I don't know any examples that there
are distortions in the marketplace right now because the VA is
purchasing drugs. I don't know of any. They have been doing it
for some time and very effectively. I think that everybody
recognizes the effectiveness of it.
Whether or not, if you teamed up with what the VA purchases
and what HHS would purchase, or could purchase under some new
authority, if you gave all the authority to purchase the drugs
under Medicare to one person or one department, whether that
would cause a distortion, it conceivably could. I can't
guarantee that or I can't tell you that it would. It
conceivably could.
In regards to the report, first off, the body of the
report, not one word changed in the body of the report. It was
the--as I understand it, it was the narrative about the report
that was changed to make it more positive. But the body of the
report, as I understand it, was not changed at all.
Mr. Davis. To cut you off one second, as I understand it,
it wasn't just to make it more positive. The conclusion was
removed from the report that stated that there were racially
identifiable disparities.
Secretary Thompson. All I can tell you is, when I heard
that, I said, we will issue it. It makes no sense.
Mr. Davis. How do you think it happened----
Secretary Thompson. I think people just wanted this to be a
more positive report and made that editorial position known,
and that is what happened.
Mr. Davis. Who do you think made that choice? You say
people.
Secretary Thompson. I am responsible because I am the
Secretary, so I am not going to say that, you know, this person
or that person--it was a mistake. I corrected it immediately
and now everybody knows that, and I will take the blame for it.
Mr. Davis. All right. I will yield back my time in the
interest of time, Mr. Chairman.
Mr. Shays. I thank the gentleman.
Mr. Edwards.
Mr. Edwards. Thank you, Mr. Secretary, for all the good
work you do and for being here today. I would like to revisit
the issue raised by Congressman Scott regarding the President's
faith-based initiative policy.
I absolutely accept your statement that you oppose
discrimination of any kind. So let me just ask this question in
terms of fact.
Isn't it a fact that this administration's policy is that a
group, a private group, may receive $5 million in Federal tax
dollars for drug counseling or to provide welfare reform
efforts to help in job training; and then with those tax
dollars, the administration says it is OK for that group to
say, I am not going to hire you for solely one reason--because
I don't like your religious faith.
My question is, isn't that a fact that the administration
supports that policy, the ability to discriminate in job hiring
even when using Federal tax dollars, based solely on an
American citizen's personal religious faith?
Secretary Thompson. The administration believes that faith-
based organizations have been discriminated against in the
past, and what they are trying to do is to correct that and
allow faith-based organizations to get grants and dollars equal
to what other organizations do and allow religious
organizations to hire people of that religion.
Mr. Edwards. Mr. Secretary, I don't think you directly
answered the question. I know you stated what the
administration's trying to do. So I will just make a statement
with the time I have.
The fact is, the administration is saying that it is OK for
a group to receive $5 million for a drug counseling program,
and then say to a job applicant, even when tax dollars are
involved, we are not going to hire you because you are Catholic
or Jewish, or we are not going to hire you because you don't
pass our personal religious test.
I find it extremely ironic that an administration claiming
that what we should try to do is stop discrimination against
faith-based groups, says it should be the policy of the U.S.
Government to subsidize religious discrimination and religious
bigotry.
Let me ask you--a second issue on that question of, is the
administration following through with what it says it believes,
the issue of ``no child left behind?'' Am I correct in looking
at some of the numbers put together by the Democratic staff of
the Budget Committee that this budget actually would cut
450,000 children off of child care services over the next 7
years?
Is it a 15 percent reduction in the real investment for
Federal child care programs? If so, how does that comply with
the philosophy of ``no child left behind''? That is a lot of
children being left behind.
Secretary Thompson. First off, I just wanted to point out
that the individual receiving the services is guaranteed to
receive all services.
Mr. Edwards. Right. But to clarify that, Mr. Secretary,
because I don't want this to be misunderstood, the fact is this
administration says if you are applying for a federally funded
job, a group may legally say that we are not going to hire you
because you are Catholic or Jewish or Methodist or Hindu, or
because you don't pass our private religious test. I find that
deeply offensive.
But go ahead and please answer the second question.
Secretary Thompson. The second one, in regards to the
projections out, these are projections made by OMB and these
are projections that are going to mathematically get to one-
half of the deficit by 2009.
But, you know, that the budget is submitted each year. I
didn't have any input into putting the long-range projections
in. I helped prepare the budget for 2005 for my Department. If
I am here in 2006, I will be putting together a budget based
upon the facts and figures and the evidence I have at that
time.
Mr. Edwards. I accept that. But just to make the facts
clear, if the administration is asking the American people to
believe the numbers they are presenting on their 5-year
budgets, I assume they are telling the American people these
are honest numbers factually. This is a 15 percent cut in child
care services that would result directly in 450,000 children
losing their care services.
I am not suggesting you support that policy, but that is
the fact of this budget proposal.
Thank you, Mr. Secretary, for all the good things that you
do.
Secretary Thompson. Thank you, Congressman Edwards.
Mr. Shays. Thank you, Mr. Secretary. I am the last one, and
then you are on your way.
I first want to say to you that in my judgment, you have
been the finest and most outstanding Governor that I have ever
seen in my political life, and the fact that we could get you
to serve as Secretary where you have been truly outstanding, I
just--I applaud you for what you have done as Governor and I
know that members on both sides of the aisle would join me in
applauding the job you have done as Secretary.
In dealing with this whole issue of whether or not you
could play a role in setting prices for prescriptions, when we
asked CBO to look at this, given this was designed to be a
private providing plan, they said, we estimate that striking
that provision which would have a negligible effect on Federal
spending because CBO estimates that substantive savings will be
obtained by the private plans and the secretary would not be
able to negotiate prices that further reduce Federal spending
to a significant degree. The whole logic was that we had these
private plans right now negotiated.
They have millions of members, and now we are going to add
the Medicare members on top of that. We think they are going to
be able to renegotiate prices, make them lower than they have
already made them, not just for Medicare, but for others that
they have in their plans. And so, there was no logic to put you
into this system, because we don't have one system for all.
Do you find anything that I said----
Secretary Thompson. Absolutely not. You are absolutely
correct, as you usually are, Congressman.
Mr. Shays. Thank you. But with regards to the whole issue
of the plan itself, isn't it true that we never promised that
this plan would solve everyone's problem?
Secretary Thompson. That is right.
Mr. Shays. We made it what we thought was affordable, and
even if I thought the estimates were $400 million--billion, I
always assumed they might be double. But I wasn't going to go
with a plan that started out at $800 million because I thought
that might go double.
So we have always anticipated this plan is going to cost
more.
But isn't it true, if we have the money, we can make it
more generous? All we simply have to do is pass legislation
that will make the plan more generous; isn't that true?
Secretary Thompson. It is in the power of the Congress to
do that at any time they want to.
Mr. Shays. Now, do you find it objectionable that we would
have this plan fully take impact on 2005--excuse me, at the
beginning of 2006, giving people time to understand this plan,
but that we start.
When Ms. DeLauro said the plan doesn't even begin until--
isn't it true that in the next few months people are going to
be given a card, that they are going to be able to take this
card and have major purchasing power and see their drug costs
go from 10 to 25 percent reduction?
Secretary Thompson. Absolutely. The cards are going to be
rolled out in May, and people start enrolling in May, and June
1, they can use their cards effectively. And we believe with
the transparency on the Web page that we put up, it is going to
have a huge tendency to drive down the prices. We think it is
going to be more than 10 to 25 percent.
Mr. Shays. So for $35 a year they will get a card that will
basically help reduce the price 10 to 25 or maybe even 35
percent?
Secretary Thompson. Absolutely.
Mr. Shays. Now even if they buy this card, they are not
locked into participating in the program because it is my
understanding--and I just want to make sure I am true--that
they have to make this decision next year, sometime in the
fall, and it will stretch into the next year?
Secretary Thompson. That is correct.
Mr. Shays. So--the end of 2005, end of 2006, so people have
lots of time to decide whether they want to be part of this
program and in fact they can still participate with the card.
Secretary Thompson. Absolutely. There is no preclusion
whatsoever. They can have that card immediately, and we want
them to have it. We want every senior to have it.
Mr. Shays. Now, let me just have you react to this final
thing. There are approximately 43 million Americans who are
uninsured. They get health care if they go to a hospital, but
they still are uninsured; and they might have people hound them
for their payments, and so that is not pleasant, to say the
least. But the statistics I look at that there are 7.3 million
or 17 percent of the uninsured who make over $75,000 dollars.
What does that tell you?
Secretary Thompson. It tells me and I believe it tells you
that those individuals have made a conscious decision that they
don't believe they are going to get sick and they don't need
health insurance and don't want it. We think it is 18 percent,
but 17 percent is great.
Mr. Shays. OK. Well, you know what, maybe my math was
wrong.
At any rate, wonderful to have you here. You have a very
large Department. You have done a great deal to get that
Department moving in a very effective way and we certainly
appreciate the work you have done.
Secretary Thompson. Thank you very much.
Mr. Spratt. I would only echo the chairman. Thank you for
coming and thank you for your forthright answers. We look
forward to working with you.
Secretary Thompson. Thank you very much, Congressman. All
of you, thank you.
Mr. Shays. And travel safe.
This hearing is adjourned.
Wait. I am sorry; we have second panel. I am very sorry. We
will just stand at ease a second.
[Recess.]
Mr. Shays. Mr. Weil, I would like to welcome you here. You
have given very good information to this committee, and I thank
you for waiting to be part of the second panel, but I guess if
you follow the Secretary, it is not a bad thing. So you have
the floor and you have the flexibility to make your statement
as you would like.
Mr. Spratt. Mr. Chairman, could I say one word of welcome
to him?
Mr. Weil, first of all thank you for coming. And secondly,
I am sorry that we don't have more here, but your statement is
excellent. I have read it as the hearing has gone on. We will
see to it on our side that copies of the statement are not only
entered in the record but made and given to the Democratic
members of the committee, because I think you have done an
excellent job. And you have got two members here who will be
listening very intently. So thank you very much for your
participation.
Mr. Shays. Actually, it is kind of my favorite when the
members leave and we get an opportunity to get into more depth.
So thank you.
STATEMENT OF ALAN R. WEIL, DIRECTOR, ASSESSING THE NEW
FEDERALISM, THE URBAN INSTITUTE
Mr. Weil. Well, thank you, Mr. Chairman, Congressman
Spratt, and I appreciate those words of welcome.
My name is Alan Weil. I am a researcher at the Urban
Institute here in Washington and former Director of the
Colorado Medicaid Agency. My remarks will focus on how the
proposed budget will affect Americans' health insurance, a
topic that you all spent some time on with the Secretary.
Last month the Institute of Medicine released a report
documenting the consequences of having 43 million Americans
without health insurance and calling for universal coverage by
2010. Unfortunately, the President's budget will move us away
from this goal.
I reach that conclusion for three reasons:
First, the proposed budget fails to provide the resources
necessary to increase health insurance coverage.
Second, the proposals included in the budget are not
directed at those who most need assistance and, in fact, may
undermine coverage that currently exists.
And, third, the budget ignores the critical role States
play in providing health insurance and puts States in a worse
position to meet their citizens' needs.
Now, the President's budget proposes a modest tax credit
for low-income people who purchase health insurance in the
individual market, although, as has been noted, the budget does
not identify a source of funding for this portion of the
proposal.
Appropriately designed tax credits could play a
constructive role if part of a comprehensive approach to
covering the uninsured, but the credits proposed in the budget
suffer from five problems.
The most serious problem with this tax credit is
availability. The proposed credits can only be used in the
individual market where insurers routinely deny coverage to
those with identifiable health problems and write coverage that
excludes certain conditions. Health insurance simply will not
be available to those who most need it, regardless of the size
of the tax credit.
The second problem with tax credits is adequacy. The $1,000
to $3,000 credit falls far short of the cost of an insurance
policy. Newly insured tax credit users will primarily end up in
plans with high deductibles and copayments, causing them to
defer needed care, risking bankruptcy if they get sick, and
continuing to burden the health care system with uncompensated
care.
The third problem with tax credits is the amount. Tax
credits suffer from what I call the Goldilocks problem. A
credit large enough to entice a significant number of people to
buy insurance is also large enough to disrupt the employer
coverage on which more than 100 million Americans rely. A
credit small enough to avoid harming the employer market is too
small to help the uninsured. In the end, there is no such thing
as a tax credit that is just right.
The fourth problem with tax credits is administration. Many
families will be unaware of the credit. They will fail to take
advantage of it, or they won't take it in advance because they
will worry about having to pay the government back.
And the fifth problem with tax credits is accountability.
When individuals face rising premiums, disputes over coverage,
or concerns about quality, there will be no one there to help
them.
Now, the President also proposes, as you have discussed, a
tax deduction for the premiums paid for catastrophic health
insurance coverage. But that provides no benefit to the vast
majority of people currently without insurance coverage. And
the budget encourages the formation of association health
plans, but they offer almost no benefits to the uninsured as
well.
Now, with respect to Medicaid, which is the cornerstone of
existing coverage for low-income Americans, the budget
resurrects last year's proposal to convert the entire program
into a block grant. Medicaid block grants are a bad idea, and
the Nation's Governors were right to reject them last year. The
premise of the block grant proposal is that Medicaid is
inefficient. But Medicaid's high costs are due primarily to the
complex needs of the elderly and disabled people it serves, not
to program inefficiencies.
The options States would gain through block grants to scale
back benefits and increase copayments will not generate
substantial savings. Block grants shift the financial risk of
meeting the most vulnerable Americans' needs to the States,
where revenues are more volatile and tax bases are narrower.
And block grants lock in current inequities across States.
I believe actually that Medicaid block grants would have
the ironic effect of reducing creativity and innovation at the
State level. Why? Because money is necessary for States to
undertake innovations, and the block grant structure, by
shifting costs and risk to the States, will end up making
States more conservative in their behavior.
Now, the President's budget also does not propose to extend
the enhanced Federal matching rate that was instrumental in
keeping Medicaid cuts to a minimum last year, and it fails to
extend the time States have to spend their SCHIP funds.
Meanwhile States are facing new administrative and programmatic
costs associated with the prescription drug bill. Together,
these provisions reduce the resources States have to meet the
health care needs of their residents.
In sum, the budget provides inadequate resources to address
the needs of the uninsured. The substantive provisions in the
budget offer benefits primarily to the healthy and wealthy and
take them away from the sick and the poor. And the budget
leaves States bearing a larger share of health care costs in
2005 than they did in 2004, even as State revenues remain
relatively flat. While States may ultimately wield the axe of
health insurance coverage cuts, this budget helps aim the
blade.
I encourage your critical review of the administration's
2005 budget for the Department of Health and Human Services so
we can make progress toward the goal of ensuring health
insurance for all Americans. I greatly appreciate the
opportunity to be here and would be happy to answer questions
that you might have.
Mr. Shays. Thank you very much, sir.
[The prepared statement of Mr. Weil follows:]
Prepared Statement of Alan R. Weil, Director, Assessing the New
Federalism, the Urban Institute
The views presented are those of the author and do not necessarily
represent those of the Urban Institute, its trustees or its sponsors.
Mr. Chairman, members of the committee, I appreciate the
opportunity to appear before you today to discuss the President's
proposed 2005 budget for the Department of Health and Human Services.
My name is Alan Weil and I direct the Assessing the New Federalism
project at the Urban Institute, a non-profit, non-partisan research
institute in Washington, DC before coming to the Urban Institute I was
executive director of the Colorado Department of Health Care Policy and
Financing, which is the state Medicaid agency.
While the HHS budget covers many topics, I will focus on how it
will affect Americans' health insurance coverage. Last month, the
Institute of Medicine (IOM), which, as part of the National Academy of
Sciences, has a charter granted by Congress to advise the Federal
Government on scientific matters, released a report calling for
universal health insurance coverage in America by 2010. The report,
which was the culmination of 3 years of study, documented the huge cost
to the nation, to communities, to families and individuals for leaving
this problem unaddressed. It called for leadership from Congress and
the administration to achieve the goal of universal coverage. Knowing
that solving this problem would take some time, the IOM also
recommended that existing sources of public insurance coverage be
maintained so the problem does not get even worse in the interim. And
the report reminded us that there are 43 million Americans without
health insurance--a figure that has grown by 3 million in the last 3
years.
Unfortunately, the proposed 2005 budget fails to provide the
leadership the nation needs in addressing the problem of the uninsured,
and it fails to protect the existing coverage most Americans have. This
budget represents a step backwards when it comes to one of America's
most important challenges: covering the uninsured.
There are three ways of considering how the President's budget will
affect the uninsured. First, the budget includes a few proposals
specifically designed to address this topic. Second, the budget
includes a number of provisions that affect Medicaid, which is the
cornerstone of coverage for low-income Americans who would almost
certainly be without insurance coverage if they did not have Medicaid.
Third, the budget affects the costs and funds states have available to
meet their residents' health care needs. I examine each of these areas
in turn to reach some overall conclusions regarding the effects of the
budget on the uninsured.
proposals for the uninsured
The President's budget proposes three policies specifically
targeted at the uninsured.
First, the President ``proposes'' a modest tax credit for low-
income individuals and families that purchase health insurance in the
individual market--that is, who buy it on their own and do not receive
it through their employer. I put ``proposes'' in quotation marks
because the budget does not include funding for this measure. This
makes it difficult to take the proposal seriously, since the
administration can only advocate for these provisions if they identify
offsetting savings--something they have thus far declined to do.
Appropriately designed tax credits could play a constructive role
if they were introduced as part of a comprehensive effort to provide
health insurance to all Americans and they were used in conjunction
with expansions of public coverage for low-income people. However, in
the President's budget tax credits stand alone and therefore must be
judged alone for their ability to meet the needs of the uninsured. Many
people have written about the shortcomings of tax credits as an
approach for reducing the number of people without health insurance.
Tax credits suffer from five problems--problems of availability,
adequacy, amount, administration and accountability.
Availability. The most serious problem with tax credits is that of
availability. Most tax credit proposals, such as the one offered by
President Bush, are designed to encourage people to purchase coverage
in the individual health insurance market. Insurers in this market
routinely deny coverage to those with any identifiable health problems,
or they write coverage that excludes conditions or body systems where
there is any history of medical problems. When coverage is offered,
rates are many times higher for older adults than for those who are
younger. Administrative costs routinely exceed 30 percent of the
premium. Given the current state of the non-group market, health
insurance simply will not be available to those who most need it,
regardless of the size of a tax credit.
Adequacy. The second problem with tax credits is that of adequacy.
The size of the credit--$1,000 for an individual and $2,000 to $3,000
for a family in the President's proposal--falls far short of the cost
of health insurance. Since few families of modest means can or will pay
the difference between the credit and the cost of a typical health
insurance plan, newly insured tax credit users will primarily end up in
plans with deductibles and copayments that run in the thousands of
dollars, with many excluded services or significant limitations on
coverage. These limited benefit packages will leave families in exactly
the position they find themselves today: deferring needed care because
of cost, at risk of bankruptcy if they get sick, and placing a
tremendous financial burden of uncompensated care on the entire health
care system.
Amount. The third problem with tax credits is that of the amount.
Tax credits suffer from what I call the goldilocks problem. That is, a
credit that is large enough to entice a significant number of people to
buy health insurance in the individual market is also large enough to
cause serious disruption in the employer market, thereby jeopardizing
coverage for a much larger number of people. A credit that is small
enough to avoid harming the employer market is too small to help very
many of the uninsured. Most tax credit proposals seek the middle
ground, but there is no such thing as a tax credit that is ``just
right.''
Another often ignored problem with setting the amount of the credit
is how it will interact with existing or potential state policy choices
with respect to public coverage through Medicaid and/or SCHIP. The
presence of a tax credit large enough to help an individual purchase
coverage will also reduce the incentives states have to retain or
expand optional coverage in public programs that require the state to
pay a portion of the bill. Faced with the choice between a fully
federally funded tax credit or a matching Medicaid or SCHIP program,
states have a clear incentive to rely upon the former. This scaling
back of state effort would yield fewer people with comprehensive
insurance coverage and a larger fiscal burden for the Federal
Government.
In short, it is impossible to set a credit amount that strikes some
theoretically correct balance between helping no one and undermining
the existing public and private health insurance system.
Administration. The fourth problem with tax credits is that of
administration. At a minimum, a tax credit must be refundable and paid
in advance if it is to help a working family purchase coverage.
Unfortunately, even with these provisions many families will be unaware
of the credit, fail to take advantage of it, or not take it in advance
because they will worry they will have to pay the government back if
they receive a small wage increase during the year.
Problems of administration arise in part from the desire to use the
tax system to effect a goal that is inconsistent with its primary
purpose. Although recent provisions, such as the EITC and the child
care credit, have included similar features of refundability, neither
of those credits involves the same complexity as that of the proposed
health insurance tax credit. For example, eligibility for the health
insurance credit is based upon the absence of something else--employer
sponsored insurance and public insurance--which must be verified.
Health insurance is bought by family units that do not necessarily
align with tax filing units. The tax code is very good for changing
marginal incentives but it is an awkward tool at best for achieving
health insurance coverage.
Accountability. The fifth problem with tax credits is that of
accountability. Most people rely upon their employer or a public agency
to provide them information about their health plan, assist with
problems, and monitor the quality of coverage. But people in the
individual market are on their own. If their coverage is cut, their
premiums rise, or there is a dispute over their benefits, they must
fend for themselves. If the Federal Government is providing financial
incentives to purchase coverage, individuals will expect the Federal
Government to address these problems. Consumer outcry among those who
are denied coverage or who feel mistreated by their health plan will
create immense pressure for the Federal Government to do something.
Overall, the President's proposed tax credits will only help a very
small number of people purchase health insurance, are inefficient as a
matter of health policy because they will mostly be used by people who
already have coverage, and they put at risk the coverage many people
now have through their employment.
The President's second proposal is to provide a tax deduction for
the premiums people pay for catastrophic health insurance purchased in
conjunction with the establishment of a Health Savings Account (HSA).
This proposal offers no new coverage for the uninsured and threatens to
increase costs for people most in need of coverage.
It can be debated whether HSAs will achieve their stated goal of
turning patients into price-sensitive, value-seeking consumers. What
cannot be debated is that every person who gives up comprehensive
health insurance coverage and shifts to catastrophic coverage is moving
from a broader risk pool to a narrower one. It can be debated whether
HSAs are only a good deal for healthy people. What cannot be debated is
that HSAs are a better deal for healthy people than they are for sick
people, and they are a better deal for wealthy people than they are for
poor people. Inherent in the HSA approach is the tendency to divide the
health insurance risk pool between high and low risks and between rich
and poor. While the extent to which this division will occur can be
debated, the tendency for it to occur cannot.
The only possible consequence of providing a tax subsidy for the
purchase of catastrophic coverage is to even further skew the benefits
of HSAs to the rich. After all, a tax deduction offers the most value
to people with the highest incomes, and is of little or no value to the
typical person without health insurance.
Thus, at best, the budget proposal helps the wealthiest Americans
while doing nothing for the uninsured. But at worst, the proposal
increases the incentive for healthy people to leave the broader risk
pool, thereby increasing premiums for everyone else, and making it
harder for employers to continue providing coverage to their employees.
This is a step in the wrong direction when it comes to addressing the
needs of the uninsured.
While not actually in the budget, the President also proposes to
permit the formation of Association Health Plans that can purchase
insurance coverage for a group while being exempt from state insurance
regulations. The best thing that can be said about this proposal is
that it does not cost any money. However, this proposal shares the
fundamental weaknesses of the other two proposals in the budget: it
encourages fragmentation of the risk pool and it does nothing to
address the fundamental reason so many people are without health
insurance, which is cost.
In sum, the three proposals related to health insurance coverage
represent a flawed and ineffective set of approaches to reducing the
number of Americans without health insurance. All three fragment the
risk pool, which means that, to the extent anyone benefits from the
proposals, the benefits will flow to people who are healthy and not to
those with the greatest need. Two of the three rely upon changes in the
tax code to encourage individuals to change their behavior, which has a
failed track record in the area of health insurance. And the only one
of the three that is funded directs its funds to higher income people.
Most disappointing is that elsewhere in the budget the President
touts the success of the State Children's Health Insurance Program
(SCHIP). While SCHIP has its limitations, it does provide a
comprehensive set of benefits to the neediest children and it does not
discriminate against those who are sick. Given the choice between
building upon programs like Medicaid and SCHIP that have a proven track
record of providing access to health care services to needy Americans,
and experimenting on the poor with new theories like tax credits and
tax-preferred savings accounts, this budget reflects the wrong choice.
medicaid proposals
In order to understand the implications of the President's budget
on the uninsured, it is also important to examine how the budget
affects the Medicaid program. Medicaid is the cornerstone of the
nation's policy on covering the poor, reaching 50.7 million people.
The President proposes a handful of changes in the Medicaid
program, many of which are small, but positive steps for the program.
However, there are two large proposals that would have more substantial
effects on the program.
The budget proposes changes designed to limit a series of
strategies states have used to obtain Federal matching funds. The
overall goal of improving Medicaid's fiscal integrity is a worthy one.
However, this initiative has two shortcomings.
First, barriers to state financing schemes can also impose undue
barriers to legitimate state efforts to finance their programs. At a
time when state resources are particularly tight, states can ill afford
to have the Federal Government block their appropriate efforts to
preserve the funding they need to administer their Medicaid programs.
Second, this initiative, if successful, will remove funds from the
Medicaid program at a time when the needs of that program are growing.
The President's budget does not propose to plow the savings this
initiative generates back into the Medicaid program or into other
efforts to meet the health care needs of low-income people.
The President's budget also indicates a continued interest in
converting the entire Medicaid program into a block grant, although
specific provisions to make this change do not appear in the budget.
The Nation's Governors were right to reject this risky and destructive
proposal last year. Another year's time having passed does not make
this proposal any better.
Many people have written about the damage Medicaid block grants
will cause to the millions of low-income people who currently are
enrolled in the program, and to the longer-term fiscal circumstances of
the states. In a paper I wrote with my colleague John Holahan we
discuss four reasons block grants for Medicaid are a bad idea: they
represent a misdiagnosis of the problems facing Medicaid, the
flexibility they create is unlikely to generate substantial savings,
they shift risk to a level of government less able to bear it, and they
lock in existing inequities.
Misdiagnosis. Medicaid is an efficient program. While the program
is expensive, this is primarily because of the population it serves. As
the President's budget shows, 69 percent of Medicaid spending is
attributable to people with disabilities and the elderly--groups for
whom private health insurance is not a realistic option. When comparing
similar populations, Medicaid costs per person are actually lower than
those for private insurance. Thus, the premise of the block grant
proposal--that Medicaid is inefficient and block grants would make it
efficient--is flawed.
Flexibility does not provide fiscal relief. Our analysis shows that
scaling back optional benefits and increasing cost sharing will not
generate substantial savings. Under current law states can eliminate
certain categories of eligibility and tighten eligibility standards.
Even in tough fiscal times states hesitate to take these actions
because they know that the Medicaid population has no other
alternatives. Block grants would give states the new option of creating
waiting lists, but there is little reason to believe states would find
this more appealing than the unpleasant options already available to
them under current law.
Shifting risk. The primary effect of a Medicaid block grant is to
shift the financial risk of meeting the health care needs of the
poorest and most disabled Americans to the states. State revenues are
more volatile than those of the Federal Government, their tax bases are
narrower, and they cannot run deficits. In tight times states are
likely to shift these risks to local governments and even to individual
enrollees. A health care safety net based on state and local financing
is less stable than one that assures Federal financial participation
when new needs arise.
Inequities. The current distribution of Federal funding to states
is inequitable when considering traditional measures such as poverty
rates or the number of people without health insurance. While States'
historical choices are responsible for many of these inequities, under
current law states that shift direction and cover a new population or
service can gain new matching funds. Block grants lock in existing
inequities, preventing states that have provided less coverage in the
past from being able to draw down additional Federal funds in the
future even if they wish to invest in new solutions to their health
care problems.
I conclude that Medicaid block grants would have the ironic effect
of reducing creativity and innovation at the state level. Why? Because
money is necessary for states to initiate real innovations, and the
block grant structure, by shifting costs and risks to the states, will
make states more conservative in their behavior.
The President's budget does reintroduce a number of proposals made
in prior years to strengthen the Medicaid program, and these deserve
your support. However, a simple calculation demonstrates how limited
these proposals are. Setting aside the continuation of expiring
programs, the budget for 2005 includes $182 million for new initiatives
in Medicaid, while it makes cuts of $1.9 billion. Thus, on net, this is
a budget that scales back support for Medicaid, which is a step in the
wrong direction if our goal is to preserve the coverage people
currently have.
resources for state health programs
The final aspect of the President's budget that will affect the
plight of the uninsured is proposals that affect state spending and
resources for health care overall. Each year states make key decisions
regarding coverage levels in Medicaid and other programs that aid the
uninsured. If the Federal Government shifts health costs to the states
or fails to support the programs it has created, states are left with
less money to meet these health care needs. The budget leaves states
with inadequate resources in two areas.
The new Medicare prescription drug law imposed new costs on states.
States face new administrative responsibilities and will undoubtedly
see higher levels of enrollment in the Medicare Savings Plans (what
were formerly called Qualified Medicare Beneficiaries and Specified
Low-Income Medicare Beneficiaries). These new responsibilities and
enrollees bring with them additional costs. While a well-designed
prescription drug benefit could provide fiscal relief to states by
reducing the share of drugs states pay for through their Medicaid
programs, the law as enacted seeks to recover most of these savings.
States face substantial budgetary uncertainty due to the so-called
``claw back'' provisions.
Meanwhile, the new Medicare law fails to reflect many of the
lessons states learned by implementing prescription drug programs in
the years before the Federal Government took action. States learned
that administrative simplicity in eligibility standards and benefit
design was an essential component of a successful plan. States learned
that they had to take an active role in reducing prescription drug
costs and not simply rely upon others to achieve savings. The new
Medicare drug program creates new gaps and complexities for some
Medicaid beneficiaries because it does not mesh well with existing
Medicaid policies with respect to cost sharing and formularies. The new
and remaining burdens states face as a result will make it harder for
states to fund assistance for people without health insurance.
Last year Congress, over the objections of the President, provided
fiscal relief for states, half of which came in the form of a temporary
increase in the Federal matching rate for Medicaid. This funding boost
came just in the nick of time and permitted many states to avert
substantial cuts in their Medicaid programs.
The President's budget does not seek the continuation of these
enhanced matching funds despite the fact that state fiscal conditions
have barely improved from last year. The budget also allows the
expiration of $1.1 billion of SCHIP money that could be allocated to
states seeking to cover more children.
In total, the President's budget projects Federal Medicaid spending
in 2005 that is 3.4-percent higher than in 2004. It would be nice if
this slow rate of growth reflected new efficiencies or expectations for
low health care inflation. But it does not. A major reason for the low
rate of growth is the expiration of the enhanced matching funds,
meaning that states will be expected to bear a larger share of Medicaid
costs in 2005 than they did in 2004.
While we cannot know in advance the precise effects of this shift
in costs from the Federal Government to the states, history provides us
with a guide. States will, out of necessity, scale back coverage,
eliminate categories of eligibility, and freeze already-low provider
payment rates thereby threatening access and quality. These are the
unfortunate, but predictable, effects of this budget.
conclusion
The administration's budget is a statement of the President's
priorities. The President periodically speaks of the need to address
one of the nation's biggest problems: the large and growing number of
Americans without health insurance. In evaluating this budget it is
necessary to ask whether the funding decisions reflected in it will
meet the nation's needs in this area.
Unfortunately, an examination of the budget makes clear that
enactment of this budget would be a step in the wrong direction when it
comes to the uninsured.
The budget provides no national vision of a solution to the
problem. The few proposals it makes in this area offer benefits to the
healthy and wealthy at the expense of the sick and the poor. These
proposals threaten to undermine the base of employer-sponsored health
insurance that covers the majority of Americans, and to unravel the
public coverage through Medicaid that is the rope out of which the
health care safety net for the poor is made.
In addition, the budget simply ignores the major role states play
in preventing the uninsured problem in this country from being even
worse than it is. This budget leaves states worse off than they were in
2004 while state revenues remain flat or very slowly recovering from
deep troughs. While states may wield the axe of health insurance
coverage cuts, this budget helps aim the blade.
Overall, this budget reflects an inadequate Federal commitment to
meeting the needs of Americans without health insurance coverage. I
encourage your critical review of the administration's budget for the
Department of Health and Human Services so Americans can benefit from a
budget that is more likely to meet their needs.
Mr. Shays. We are going to start with Mr. Spratt, and then
I will have some questions. Then we will go back.
Mr. Spratt. Thank you very much. Your statement makes a
good case for building on the system we have got, which is
often discredited and disdained, but as I understand it you are
saying we would be better off to use the Medicaid program and
expand it than we would to introduce a new payment device like
health insurance tax credits.
Mr. Weil. If we were to build a comprehensive approach that
covered everyone, I think we could try different ways of
reaching coverage. And the Institute of Medicine report lays
out four options, some of which are purely one model, some
purely another model. But in the range of options that are
under serious consideration, which are very incremental where
the resources are so limited, it is essential that you devote
those resources to the places that you are most confident you
will get your bang for the buck. And today we do have programs
like Medicaid and SCHIP with a proven track record of providing
coverage and access to low-income people, and then we have this
sort of theoretical idea that we are going to use tax credits
to try to reach people as well.
And I would argue that the risk of taking the tax credit
approach in an incremental world, which is the world you are
operating in, is very high. With limited resources, the first
dollars at this point ought to go into shoring up and expanding
the existing programs.
Mr. Spratt. Let's talk about some of the existing programs,
like the SCHIP program. On page 9--have you read the
Secretary's testimony?
Mr. Weil. Yes, sir.
Mr. Spratt. Page 9, he has a description of how SCHIP is
funded, how their allotments, then their excess funds, and then
these excess funds are redistributed among the States and there
is $2.2 billion from fiscal year 2000 and 2001 and $1.2 billion
in 1998 and 1999 funds. Could you make sense of all that for us
and tell us what is going on with SCHIP? What are these funds
being used for, and what is the potential use of those
remaining unobligated or unspent funds?
Mr. Weil. I will try to make sense of it. Basically when
the SCHIP program began, the authorized funding was at a level
that is appropriate to an ongoing program, but when the program
started up it was very small, and each year we have seen
enrollment go up by about a million people a year. States were
given 3 years during which they could spend the allotment that
they had, but over the course of those first 3 years, with the
growth path, States accumulated so much of the--so many unspent
funds, that the 3 years were up, and they were going to revert
to the Treasury.
There have been a number of efforts to give States longer
and to reallocate the unspent funds to other States that had
gone over their allotment. Now, in the end the question is, is
Congress going to continue to give States the opportunity to
cover as many children as possible with the funds that were
initially approved for this program? If you make that
commitment, given the start-up time in this program, you have
to give States a little bit more time. And I think it is fair
to say that this is a program with bipartisan support. It is a
program that the Secretary speaks highly of. The President's
budget touts the successes of this program. This is a
bipartisan program. When States are facing very tight budgets,
it seems like the wrong time to take away funds that otherwise
would have----
Mr. Spratt. Let me make an observation at this point. It is
also a program, interestingly enough, which was created in the
context of the balanced budget agreement of 1997. In other
words, we were able to balance the budget, actually put it in
surplus within a couple of years, but at the same time we were
able to say there are a few priorities that we are going to
squirrel funds away for. In this particular case, we raised the
funds with a cigarette tax and then committed it to this
particular program. But in any event, it shows that you can
still make progress in covering people with health care
coverage that they desperately need and at the same time
balance the budget. We did it in 1997.
Now, let me ask you also about page 12, if you would also
sort of tell us what is going on there with Medicaid. The
administration is proposing to cap reimbursement levels to
individual, State and local government providers to no more
than the cost of providing services to Medicaid recipients. I
understand that they are assigning a savings to that broad
statement there of about $23 billion.
Mr. Weil. The administration proposes--and the Secretary
spoke about efforts to improve fiscal integrity in the program,
and I don't think anyone would argue with the goal of improving
the integrity and making the matching formula that is the
underpinning of the program work.
The challenge is that although it is very easy to trot out
examples of States misusing the matching system, it is equally
easy to show examples where States are using the matching
system exactly as it was intended to function, by bringing
additional dollars in, having State and local governments and
local agencies contribute to the program, and obtain matching
funds to provide services to low-income families that need
health coverage. And in a perfect world, we would divide up
those that are legitimate and those that are illegitimate, and
we would stop the illegitimate and we would promote the
legitimate.
So I would endorse the general notion that the Federal
Government should attempt to improve the integrity of the
program. A number of the provisions set up administrative
burdens, auditing burdens for how States raise their funds and
how they move their money around that goes way beyond what I
think is appropriate if we don't want to get in the way of
States expanding coverage, as they should be permitted to do
under the Medicaid program.
I would also just add that if the administration is
expecting to be so successful that they can raise this kind of
money, I would like to see them propose to plow that money back
into insurance coverage, not to spend it on other priorities.
Mr. Spratt. One final question. You appear to take a rather
permissive view of program practices like DSH, disproportionate
share payments that States have used in various ways, ingenuity
in upper payment limits, simply on the grounds that this is,
after all, funneling more money into the Medicaid system and
serving a clear and desperate need. Am I reading you wrong?
Mr. Weil. I don't think I am a permissive commentator when
it comes to DSH. In fact, a lot of the evidence for and
analysis for the tricks and games that States have played with
DSH has come out of work that colleagues of mine at the Urban
Institute have done. It is not my work, but I would acknowledge
their work.
The point I am making is that if you go back to the
original DSH provisions, they were designed explicitly to
make--in fact, to require States to have mechanisms to help
those hospitals that provide care to a disproportionate share
of uninsured and Medicaid patients to get additional funding to
meet the burden of having a lot of patients who can't pay. And
that is a legitimate goal and one that we shouldn't throw out
just because States have figured out how to become more
creative.
Now, in my work and work with my colleagues--and I heard
the Secretary talk about it as well--I think we would be well
served to rethink how this program is designed so that the
benefits more closely target the original objectives of the
program.
The reason I made the comments I did is that there are many
safety net providers that rely very heavily on those funds, and
if all we do is say DSH is a failure or a game or
intergovernmental transfers have only been used for negative
purposes, we are going to pull a lot of money out from
legitimate efforts to provide care to people who otherwise
would not have it. And I would hate to see us overreact, but I
would not want to suggest that we should underreact either.
Mr. Spratt. Thank you very much.
Mr. Shays. I feel that since you have been so courteous
yourself to be a panelist and wait so long, that we should
advertise your book. Actually I am holding it up because--a
quote in it regarding the disproportionate share hospital
payments, or DSH. You say: Fiscal integrity in a matching grant
program can only be insured if the program has a defined
population, set of benefits and payment structure. DSH has
provided an opportunity for fiscal games, because it operates
outside such a structure.
Therefore my question is, should DSH be eliminated? And
what should take its place if it were eliminated?
Mr. Weil. I didn't realize there were such risks involved
in publishing my thoughts, but I appreciate the advertisement.
Mr. Shays. That is only if you become a judge. Otherwise it
is pretty harmless.
Mr. Weil. I do believe that a serious effort to
fundamentally redesign the DSH program would be valuable, but I
would again say that it would be a mistake to reach the
conclusion that all dollars flowing through DSH right now are
just games and ways for States to draw down additional funds,
because I think the evidence is clear that that is not the
case.
Mr. Chairman, I would say this, and to put a few more words
around those words that I wrote, I worry that the Federal
Government's efforts and the proposal in the budget focus on
trying to follow the dollars on the revenue side.
The intergovernmental transfer provisions, what is proposed
in the budget is to try to basically audit where the dollars
come from. As you know, in this committee, money is fungible
and following the dollars is a very hard thing to do. In the
long run--and the point I was trying to make in the words that
I wrote--it is much better to follow the spending. And if you
can build a program that defines who is eligible, for what
benefits they are eligible, and has an appropriate amount to
pay for those benefits, it is much easier to audit and feel
confident that those dollars are being well used than it is to
try to audit where the dollars are coming from. And so in the
end I think you are going to have more success if you go that
route.
But you will not hear me oppose any effort to try to
reconfigure the DSH program. I think its elimination without
replacing the objectives it achieves would, however, also be a
mistake.
Mr. Shays. Thank you. Let me ask you this. There are about,
approximately, 40 million under Medicaid, about 40 million
pretty much under Medicare, plus or minus.
Mr. Weil. Medicaid has now passed Medicare.
Mr. Shays. So a sizable number. Then we say there are under
43 million who are uninsured. They represent about 15 percent
of our population. And I saluted President Clinton for saying
we need to insure everyone. I didn't think his solution did it.
I am not sure he in the end felt it did either, but it sure
helped educate all of us. The sad thing is that we just gave up
and didn't keep trying to struggle and work through it.
We have, it is fair to say, an employer-based health
insurance system, except for the 80 million Americans who are
covered either under Medicare, Medicaid. Is that fair to say?
Mr. Weil. And excluding the uninsured, yes.
Mr. Shays. Right. And we have health care clinics. We have
about 10 million covered, getting up to $20 million. That is
part of the President's plan. And I am told about half, in
essence, are getting insurance under that. In other words,
there are uninsured who are getting coverage.
Tell me how I am wrong saying--maybe how I look at this
incorrectly--because my logic is originally 10 million under
the community-based health care clinics and about half of them
are uninsured and getting insurance--are getting coverage, even
though they don't have insurance, and we are going to go up to
20, where we think 10 of those million will be uninsured,
therefore getting health care coverage in the clinic.
Is it wrong for me to take the 43 million and then subtract
10 million and say we are really down to 33 million?
Mr. Weil. Congressman, I think it would be wrong. And the
reason is that despite the incredible positive role that
community health clinics play, they do not offer the full
continuum of services that people need. And particularly if you
speak with folks who run those clinics, and they are very
appreciative of the expansion of the resources that the
President has effected during his term, they have great
difficulty moving--they are very good at providing primary
care. They have great difficulty obtaining the specialty
services, the secondary and tertiary care that their patients
need. They also have difficulty providing some of the personal
care that is necessary to manage chronic illnesses which are
very common in the populations they serve.
We do know from the data that the uninsured, even if they
get care at clinics, are in poorer health than the insured,
controlling for their income and age and everything else, and
they get less health care than the insured. So I think it would
be correct to say--and it is one of the--this is a good-news
story--that moving people who are served in clinics to getting
the same health care as people who are insured isn't going from
a zero to a 1. It doesn't cost 100 percent of the cost of
coverage, because we are already providing services to this
population. But it is not the same as being insured.
Mr. Shays. Let me just ask you this final question then--or
this area.
If there are about 14 million Americans who are uninsured
who make $50,000 or more, and half of that number, about 7
million who make $75,000 or more, what does that tell you,
particularly about the 7 million Americans? Are they just, you
know, young kids who are making good money, not choosing to get
health care? Who are they?
Mr. Weil. We need to know more about them, but lets--two
things we should consider. First of all, these are people in
households with income more than X, not making more than X. So
when I graduated from graduate school and took my first job and
had three roommates and we were all working like your staffs
do, you know, not making a whole lot of money, and maybe didn't
have health insurance, we would be in a household that was high
income. So it is very important to look not just at household
income, but at family units or health insurance units, and I
think that will give you a different picture.
Second of all, $50,000 is above the median income in this
country, and it is a substantial amount of money to live on.
But family coverage in many parts of this country is running,
for an employer-sponsored plan, in the range of $9,000 a year.
So we are still asking a lot of those families--and some of
them, if they don't have coverage through an employer, have
been written out of the individual market because they have a
prior health condition and the insurer simply won't offer them
coverage. It is certainly the case that there are people who we
could reach, I think, without having to pay the full load to
bring them into the insurance market and insurance coverage,
but it is a small share of the uninsured.
Mr. Shays. Thank you. Is there anything you would like to
put on the record before we adjourn?
Mr. Weil. No. I just thank you for the opportunity. And my
written comments, I think, cover some of the other material.
Mr. Spratt. I would ask that his full statement be included
in the record.
Mr. Shays. It absolutely will be. Thank you, Dr. Weil, very
much. We appreciate it.
Mr. Weil. You are welcome.
[Whereupon, at 12:33 p.m., the committee was adjourned.]