Statement by
Tommy G. Thompson Secretary Department of Health and Human Services
President's FY 2004 Budget for Department of Health and Human Services
before the
U. S. Senate Labor/HHS/ED Appropriations Subcommittee

March 19, 2003

Good morning Mr. Chairman, Senator Harkin and members of the committee. I am honored to be here today to present to you the President's FY 2004 budget for the Department of Health and Human Services (HHS). I am certain you will find that, viewed in its entirety, our budget will help improve the health and safety of our Nation. Before I discuss the FY 2004 budget, I would like to thank the committee for its hard work and dedication to the programs at HHS.

Our FY 2004 request totals $539 billion in outlays, approximately 7.3 percent over the FY 2003 budget. The discretionary budget authority portion of the HHS budget, before this committee, totals $60.7 billion, which is an increase of approximately $1.5 billion, or 2.6 percent over the FY 2003 President's Budget and an increase of approximately $514 million, or 0.9 percent over the FY 2003 enacted appropriation. Mandatory outlays for HHS total $475.9 billion in this budget proposal, an increase in excess of 7 percent.

The budget proposed by the President for HHS will enable the Department to continue its important work with our partners at the State and local levels and the newly created Department of Homeland Security. Working together, we will hold fast to our commitment to protecting our Nation and ensuring the health and well-being of all Americans. Many of our programs at HHS provide necessary services that contribute to fighting the war on terrorism and provide us with a more secure future. And, I am particularly focused on preparedness at the State and local level, HHS's ability to respond rapidly to a bioterrorist attack, research on and development of vaccines and other therapies to counter potential bioterrorist attacks, and ensuring the safety of our food supply.

The President's FY 2004 budget request also continues to support the needs of the American people by strengthening and improving Medicare and Medicaid; enhancing Temporary Assistance for Needy Families (TANF) and Foster Care; strengthening the Child Support Enforcement Program; and furthering the reach of the President's New Freedom Initiative.

The support of your committee is vital to achieving many of the Administration's most important priorities. I am grateful for the close partnership we have enjoyed in the past, and I look forward to working with you again on an aggressive appropriations agenda to advance the health and well being of millions of Americans. Today, I would like to highlight for you the key issues in the President's budget.

Supporting the President's Disease Prevention Initiative

One of the most important issues on which we can work together is chronic disease prevention. We all have heard the disturbing news about the prevalence of diabetes, obesity, and asthma that could be prevented through simple lifestyle changes. The statistics, I am sure, are as alarming to you as they are to me. For example, the incidence of diabetes and obesity among Americans is up sharply in the past decade, putting millions more Americans at higher risk for heart disease, stroke and other related medical conditions.

Diabetes alone costs the Nation nearly $132 billion each year in direct medical costs and in indirect economic costs, including disability, missed work, and premature death. Medical studies have shown that modest lifestyle changes -- such as getting more exercise and losing weight -- can reduce an individual's risks for developing this serious health conditions.

The HHS budget, consistent with the President's HealthierUS effort, proposes a coordinated, Department-wide endeavor - Steps to a HealthierUS - to promote healthier lifestyles emphasizing prevention of obesity, diabetes, asthma, heart disease, stroke, and cancer. The FY2004 budget includes an investment of $125 million for targeted disease prevention.

Improving the Nation's Health

Of all the issues confronting this Department, none has a more direct impact on the well being of our citizens than the health of our Nation. Our budget makes a concerted effort to improve the health of the American people by taking significant steps that include: reducing prescription drug-related medical costs, financing vaccines, investing in hospital information technology, and continuing the effort to increase and expand the number of Health Centers.

The budget includes initiatives that will carry out the Best Pharmaceuticals for Children Act (BPCA) and alleviate drug-related medical costs. My budget request for NIH includes an additional $25 million, for a total of up to $50 million, to improve information available for prescribing pharmaceuticals to children. NIH is focusing its efforts on drugs that are no longer under patent. The request for the Food and Drug Administration (FDA) includes $12.3 million to increase Americans' access to safe, effective, and less expensive generic drugs and a $1 million increase to expand the range of drugs available over-the-counter.

The HHS budget includes a series of improvements in the financing of childhood vaccines to meet three goals -- 1) improve vaccine access for currently eligible children, 2) restore tetanus and diphtheria booster vaccines (Td, DT) to the Vaccines for Children (VFC) program, and 3) build a national stockpile of childhood vaccines. Legislation will be proposed to improve access to VFC vaccines for children already entitles to them. The budget proposes to expand the number of access points for underinsured children - those whose private insurance does not cover the immunizations - by allowing them to receive their VFC vaccines at State and local public health clinics. To help protect against future shortages, HHS will, starting in FY 2003, develop a stockpiling strategic plan and begin building a vendor-managed, 6-month supply of all childhood vaccines to be completed by 2006. The budget includes $707 million in FY 2003 to 2006 for the stockpile. Under current-law we can stockpile these vaccines. I also propose to restore the tetanus and diphtheria booster shots to the VFC program by removing outdated price caps that are so low for some vaccines that vendors will not bid on VFC contracts.

The budget also contains $100 million to ensure the nation has an adequate supply of influenza vaccine in the event of a pandemic. Due to the constant changes in the circulating influenza strains, we cannot stockpile influenza vaccine, and the current manufacturing methods could not meet the Nation's needs in the event of a pandemic. Funds will be used for activities to ensure a year-round influenza vaccine production capacity and the development and implementation of rapidly expandable production technologies. We will work closely with industry to accomplish these goals.

Senator Specter, you were instrumental in ensuring that patient safety is a primary focus of AHRQ's research portfolio. In FY 2001, we made awards to 94 grantees in five areas to begin the first of three years of research to improve patient safety across healthcare settings. Nearly half of these demonstration projects are focusing on the use of computers and information technology to prevent medical errors and to improve reporting of medical errors data Through these projects, grantees are piloting potential error-reducing technologies like personal digital assistants (PDAs) for electronic prescription writing, as well as Computerized Physician Order Entry (CPOE), a technology that helps to ensure that patients receive the right medication, at the right dose, at the right time. As a result of these projects, AHRQ's first step in improving patient safety has been to demonstrate the efficacy of certain interventions in reducing medical errors.

Our next step must be to take what we have learned and disseminate it to healthcare providers and networks. We are putting $50 million into a new program at AHRQ that will improve patient safety by increasing investments in hospital information technology. We are also making a commitment to help implement these technologies in health systems that otherwise may not be able to make the capital investment. A focus on small community and rural hospitals will help to bridge the so-called "digital divide" by helping these hospitals catch up with those that are further along.

AHRQ's budget proposal also includes $24 million for ongoing activities such as the work of the Patient Safety Task Force and the Patient Safety Data Reporting System integration efforts, as well as plans to initiate challenge grants and a patient safety improvement corps; a $10 million increase for the expansion and enhancement of information collected in the US Census Bureau's Current Population Survey; and a $2 million increase to improve the usability and timeliness of Medical Expenditure Panel Surveys (MEPS) data and help sustain prior year enhancements to the sample size and content of surveys that collect information from medical providers, insurers, and households.

We must do everything within our abilities to address the disparities in health care in this Nation. The FY 2004 budget proposes numerous activities to address and alleviate health inequities. Programs that cut across various HHS agencies strive toward bettering the health of our Nation.

The FY 2004 budget continues the third year of the President's multi-year initiative to expand access to care for millions of Americans especially those who are uninsured. The budget includes $1.6 billion, a $122 million increase, to provide primary and preventive health care services to nearly 14 million individuals. Almost 40 percent of the patients treated at health centers have no insurance coverage and many others have inadequate coverage. These health centers are located in our most underserved communities. Over half are in rural America. In support of the Health Center Initiative, the President is also seeking to expand the National Health Service Corps by adding $42 million to increase the number of health care providers in rural and underserved areas, to a total field strength of 4,300 people; and provide for 2,400 loan repayments and scholarships .

In addition to childhood immunization, the FY 2004 President's budget for the Centers for Disease Control and Prevention (CDC) requests programmatic increases in several areas. I am seeking a $12 million increase for the breast and cervical cancer program, which supports screenings for low-income, underinsured, and uninsured women between the ages of 50-64, and $5 million to expand School Health Programs to reduce health risks such as tobacco use, poor eating habits and obesity. The budget also includes an increase of $10 million for a Public Health Information Network (PHIN) to integrate and expand CDC's existing networks to establish a consistent exchange of information between public health partners.

The Substance Abuse and Mental Health Services Administration's proposed budget is $3.4 billion, a net program level increase of $198 million over FY 2003. As part of the President's Drug Treatment Initiative, the budget includes $200 million in FY 2004, a total of $600 million over three years, to establish a new competitive State substance abuse voucher program. This program will assist 100,000 Americans in the first year in obtaining the critical alcohol and drug treatment services they need but lack access to. This effort complements existing alcohol and drug abuse treatment programs by providing consumer choice and broadening the base of treatment providers to include more faith-based providers. Through this new program individuals seeking drug and alcohol treatment and support services will be assessed and then receive a voucher to pay for appropriate community treatment programs. This program will require accountability by linking payment to providers to demonstrated treatment effectiveness measured by abstinence from alcohol and drug use after treatment.

The FY 2004 request also includes an increase of $31 million for the Substance Abuse Block Grant. The Block Grant will provide drug treatment services to 400,000 persons. In the area of mental health, we propose $107 million, an increase of $9 million, for Children's Mental Health Services to serve a total of 17,000 children and adolescents with serious mental and emotional disorders along with their families. We are also requesting $50 million, an additional $7 million, for Projects for Assistance in Transition from Homelessness to serve a total of 147,000 homeless individuals. These funds link efforts to move homeless individuals off the streets by providing them with mental health services and substance abuse treatment.


HIV/AIDS is one of the most serious challenges facing humanity. No country has been spared. Some have faced widespread devastation. All have citizens whose lives have been destroyed by this horrible disease. Our commitment to ending this pandemic is strong and unwavering. The FY 2004 budget for HHS includes $6.4 billion in discretionary funds within HHS to combat HIV/AIDS. Within this level is $680 million to support a variety of efforts to fight HIV/AIDS in developing nations. For example, our budget includes $150 million to support the Mother-to-Child transmission of HIV/AIDS prevention initiative. This initiative seeks to treat approximately one million women annually in developing countries in order to reduce transmission of HIV to their children by 40 percent. This is an integral part of the President's Emergency Plan for AIDS Relief, which seeks to stem the death toll from AIDS. Currently, demographers project that, absent strong action, life expectancy will fall from 66 to 33 years in Zambia and from 70 to 40 years in Zimbabwe.

The budget also, includes $2 billion for life sustaining care and services for over 530,000 Americans under the Ryan White CARE Act. The Ryan White programs target our resources toward the development of an effective service delivery system by partnering with States, heavily impacted metropolitan areas, faith-based and community-based providers and academic institutions. Our budget includes $739 million to provide drug therapies to approximately 159,000 individuals. These funds will provide Americans living with HIV/AIDS a lifeline to care who might otherwise have to choose between expensive medical treatments and other necessities. These funds will help eliminate those difficult decisions.

Maintaining our Investment in Biomedical Research

I commend you, Mr. Chairman, Senator Harkin, and this Subcommittee, for your unwavering commitment to doubling the budget for the National Institutes of Health. After five years of outstanding growth that doubled the NIH budget, the FY 2004 Budget provides a significant investment to ensure that the momentum gained over the last five years is sustained. We have developed a plan that would increase funding for on-going research by about $2 billion, approximately +7 percent. The FY 2004 budget totals $27.9 billion, a net increase of $718 million above the FY 2003 enacted appropriation. Within the NIH Budget, research grows much more rapidly, as a result of redirecting one-time project cost savings into new biomedical research funding. NIH will fund a record number of new and competing research grants. Advances in scientific knowledge have provided the foundation for improvement in public health and have led to enhanced health and quality of life for all Americans. Much of this can be attributed to the groundbreaking work carried on by, and funded by, the National Institutes of Health. Some additional highlights of NIH funding include:

  • Over $15 billion to fund an expected record number of research project grants (at least 10,500 for competing grants and a total of approximately 39,500 grants);
  • An increase of $25 million for a total of $50 million for pediatric drug use studies;
  • An increase of $50 million for Type 1 diabetes research ($150 million total in mandatory appropriation); and
  • An increase of $25 million for NIH's new strategic biomedical research "roadmap".

Fighting Bioterrorism

Mr. Chairman, as Americans confront the realities of terrorism and hostilities around us, it is imperative that the Federal Government be prepared to keep our citizens safe and healthy.

HHS's $3.6 billion bioterrorism budget substantially expands ongoing medical research, strengthens State and local preparedness and targets investments to protect our food supply. State and local public health preparedness activities funded by the Centers for Disease Control and Prevention (CDC) and hospital preparedness efforts supported by the Health Resources and Services Administration (HRSA) would receive a total of $1.5 billion. The President's proposal significantly increases ongoing biodefense research at the National Institutes of Health (NIH). The budget includes a total of $1.6 billion for basic research on the biology of microbial agents with bioterrorism potential and applied research on the development of new or improved diagnostics, vaccines, and therapies. We propose increasing support for bioterrorism education for clinicians by $32 million, for a total of $60 million, to provide incentives for 25 medical and health professions curricula reform projects and provide continuing education to 65,000 health care providers on the diagnosis, treatment, and reporting of diseases that can be caused by the intentional release of a biological agent. The bioterrorism budget also includes initiatives to improve food safety: $15.5 million targeted on newly authorized activities, including registration of domestic and foreign food facilities and State grants to improve state food laboratories, monitoring and inspections; and an additional $5 million for improving information exchange with State food laboratories on food pathogens.

HHS, in cooperation with the Department of Homeland Security, will spearhead the development of Project Bioshield. This project, which the President recently announced, will bring together the scientific and fiscal resources of the United States government in an innovative effort to develop medical countermeasures against bioterror before they are ever needed. Project Bioshield will have three (3) major goals:

  • To ensure that sufficient resources are available to procure the next-generation countermeasures. A guaranteed funding source must be available to enable the government to purchase vaccines and other therapies as soon as experts believe they can be made and will be safe and effective, and spur industry investment in the development of these vaccines/therapies..
  • To Accelerate NIH research and development. This involves providing more flexible contracting process and procurement authorities for critical biodefense work.
  • To make promising treatments available more quickly for use in emergencies. This means establishing a new FDA Emergency Use Authorization that would permit greater flexibility and latitude than the current Investigational New Drug (IND) authority in the use of promising medical countermeasures that are under development in emergency situations.

While funding for the next generation countermeasures will be in the new Department of Homeland Security (DHS), HHS will provide the scientific direction, and will be responsible for the actual procurements. Furthermore, HHS will continue to manage the Strategic National Stockpile and provide the scientific and public health direction needed to ensure that the pharmaceutical stockpiles include appropriate amounts of vaccines, other therapeutics and emergency equipment/supplies. New mandatory funding will also be included in DHS which will ensure that adequate resources are available to procure new medical countermeasures once sufficient research has been conducted to demonstrate that the products will be proven safe and effective. A guaranteed funding source must be made available to industry to stimulate interest and investment in the development of these products. This authority would be invoked only if there is no significant commercial market for the products.

Head Start

Never has there been such a clear commitment on the part of Federal and State governments to enhance the well being of children and families. Never have we known so much about what children need for healthy growth and development. Never have so many programs been focused on meeting these needs of our most vulnerable citizens. There are more resources currently available for low-income children and families than at any other time in our nation's history. The President's budget continues this commitment with a budget of $6.8 billion to provide 923,000 children Head Start services. However, not all the news is good. Children in Head Start enter school further ahead than other economically disadvantaged children. But unfortunately - even after 30 years - Head Start children do not enter school at the same level as more economically advantaged children.

To strengthen the Head Start program, improve services to low-income children, and promote the coordination and integration of comprehensive early care and education services, President Bush is asking Congress to include in the reauthorization of the Head Start Act a provision that will allow interested states to include Head Start in their preschool plans. Under the President's proposal, states are offered the opportunity to coordinate preschool programs with Head Start programs in exchange for meeting certain accountability requirements. States wishing to participate must submit a state plan that addresses several fundamental issues concerning preschool education.

Faith Based and Community Initiatives

In support of the President's Faith-Based and Community Initiative, the HHS FY 2004 budget supports programs that link faith- and community-based organizations, State and local governments, and Federal partners to provide effective substance abuse treatment and positive youth development.

Another important program that helps some of our most vulnerable children is the Mentoring Children of Prisoners program. We are asking for funds to be increased to a total of $50 million, which would in turn be made available to faith-based, community-based, state and local governments, tribes, and public organizations for programs that provide supportive one-on-one relationships with caring adults to children who are more likely to succumb to substance abuse, gang activity, early childbearing and delinquency. This down payment will help more than 30,000 adolescent children of prisoners receive guidance, have positive role models, and give them a fighting chance to succeed.

The President's budget also proposes $20 million for promotion and support of responsible fatherhood and healthy marriages. This funding will promote and support involved, committed, and responsible fatherhood and encourage the formation and stability of healthy marriages.

In addition, the budget request for the Compassion Capital Fund is $100 million, an increase of $65 million above the FY 2003 appropriation. These funds would continue to be used to provide technical assistance to faith- and community-based organizations to expand and emulate model social programs.

Strengthening and Improving Medicare

Even though Medicare is not under the jurisdiction of this Committee, we are all aware that our Nation's Medicare program needs to be modernized and improved to provide seniors with more choices and better benefits. While we remain steadfastly committed to ensuring that America's seniors and individuals with disabilities can keep their current, traditional Medicare, the President is dedicating $400 billion over ten years to provide access to subsidized prescription drug coverage, better private options for those beneficiaries who want them, full coverage for disease prevention, and better protection from high out-of-pocket costs.

Under the President's framework, seniors happy with their coverage under traditional Medicare will be able to keep it, with added protection against high out-of-pocket drug expenses at no additional premium. Seniors who want better coverage will be offered the same types of plan choices available to members of Congress and federal employees. Private plans will be available in each region of the country, including rural areas. Plans will provide full coverage of preventive care, protection against high out-of pocket medical costs, and cost sharing that does not penalize the sick. Comprehensive, subsidized prescription drug coverage will be available to those who want it for an additional premium. Low-income seniors will face no premium for drug coverage and will have only nominal cost-sharing requirements. Seniors who enroll in these plans will maintain the ability to choose any doctor and any hospital.

Seniors willing to accept a more selective provider panel will be able to enroll in the same type of low-cost, high-coverage managed care plans available today. These plans will offer a subsidized, comprehensive drug benefit, as well as all the additional benefits I just described. Plans can also offer extra benefits and broader coverage.

Strengthening and Improving Medicaid and SCHIP

State Health Care Partnership Allotments

Another of our mandatory initiatives that I would like to briefly highlight is our plan to strengthen and improve Medicaid and SCHIP. Building on the successes of the State Children's Health Insurance Program (SCHIP) and the Health Insurance Flexibility and Accountability (HIFA) demonstrations have shown in increasing coverage while providing flexibility and reducing the administrative burden on States, the Administration proposes optional State Health Care Partnership Allotments. Under this proposal, States would have the option of electing to continue the current Medicaid program or to choose partnership allotments. The allotment option provides States an estimated $12.8 billion over seven years in extra funding over the expected growth rate in the current Medicaid and SCHIP budgets. If a State elects the allotments, the federal portion of the SCHIP and Medicaid funding would be combined and states would receive two individual allotments: one for long-term care and one for acute care. States would be required to maintain their current levels of spending on Medicaid and SCHIP, but at a lower rate of increase than the federal allotment.

States electing a partnership allotment would have to continue providing current mandatory services for mandatory populations. For optional populations and optional services, the increased flexibility of these allotments will allow each State to tailor its provision of health benefit packages for its low-income residents. Let me stress that this is an OPTION we are proposing for States.

New Freedom Initiative

Promoting home and community-based care as an alternative to nursing homes for the elderly and disabled is a priority of this Administration. The New Freedom initiative represents part of the Administration's effort to allow Americans with disabilities to be more fully integrated into their communities. Under this initiative, we are committed to promoting the use of at-home and community-based care as an alternative to nursing homes. The Administration will invest $350 million in FY 2004, and $1.75 billion over 5 years on this important initiative to help seniors and disabled Americans live in the setting that best supports their needs.s.

Transitional Medicaid Assistance (TMA)

TMA provides health coverage for former welfare recipients after they enter the workforce. TMA allows families to remain eligible for Medicaid for up to 12 months after they lose welfare?related Medicaid eligibility due to earnings from work. This budget proposal would authorize the TMA program for five more years, at a cost of $400 million in FY 2004, and $2.4 billion over five years. We are also proposing modifications to TMA provisions to simplify it and make it work better in coordination with private insurance. These modifications cost $20 million in FY 2004 and $290 million over five years.

Empowering America's Families

Reauthorization of Temporary Assistance for Needy Families (TANF) and the Child Care Development Fund

Building on the considerable success of welfare reform in this great Nation, the President's FY2004 budget follows the framework proposed in the FY 2003 request, which includes the reauthorization of TANF. We applaud passage of H.R. 4 and are committed to working with both the House and the Senate to ensure the legislation moves quickly and is consistent with the President's Budget. The President's proposal includes five years of funding for the TANF Block Grants to States, and Tribes; Matching Grants to Territories; and Tribal Work Programs at current levels. In addition, the Budget proposes to reauthorize state-based abstinence education grants for five years at $50 million annually, to further assist with reducing the number of out-of-wedlock births, reducing the spread of STDs among teens, and helping teens make healthy life choices.

Increasing Support for Children in Foster Care

In a continuing effort to improve the lives of children who are at risk of abuse and neglect, this Administration is proposing a child welfare program option that States can use to improve their child welfare service systems. This plan would allow States to choose a fixed allocation of funds over a five-year period rather than the current entitlement funding for the title IV-E Foster Care program. Participating States would receive their funds in the form of flexible grants which could be used for a wide array of child welfare-related purposes, such as child abuse and neglect prevention, maintenance and administrative payments for foster care, child welfare training, and family support. The flexible funding will allow States to develop innovative ways to ensure the safety, permanency and well-being of children, tailed to meet the needs of their child welfare populations. States which elect this option and experience emergencies affecting their foster care systems may access additional funding from the TANF contingency fund.

The Administration is proposing a nearly $5 billion budget for Foster Care in FY 2004, a $90 million increase over last year's request. Not only will these funds support a child welfare program option, but they also will be used to provide payments for maintenance and administrative costs for more than 240,000 children in foster care each month, as well as payments for training and child welfare data systems. The President's budget also requests $200 million for the Foster Care Independence Program.

Additionally, the Administration continues its commitment to the Promoting Safe and Stable Families Program by requesting to $505 million to assist States in coordinating services related to child abuse prevention and family preservation. This important program also promotes adoption and provides post-adoption support to families.

Child Support Enforcement

The President's FY2004 budget will build on the considerable success of the Child Support Enforcement program. Legislation will be proposed to enhance and expand the existing automated enforcement infrastructure at the Federal and State level and increase support collected on behalf of children and families. When combined with the opportunities to increase child support outlined in the President's FY2003 budget (expanded passport denial, offset of certain Social Security benefits, optional pass through of child support to families on TANF, among others) these proposals offer an impressive $7.5 billion in increased child support payments to families over 10 years. The budget also recognizes that healthy families need more than just financial support and increases resources for the Access and Visitation Program to support and facilitate non-custodial parents' access to and visitation of their children.

President's Management Agenda

I realize that as we work to improve the heath and well-being of every American citizen, we also need to improve ourselves. I am committed to improving the management of the Department of Health and Human Services. The FY 2004 budget supports the President's Management Agenda and includes cost savings from consolidating administrative functions; organizational delayering to speed decision making processes; competitive sourcing; implementation of effective workforce planning and human capital management strategies; and adoption of other economies and efficiencies in administrative operations. We have also included savings in information technology (IT) which will be realized from ongoing IT consolidation efforts and spending reductions made possible through the streamlining or elimination of lower priority projects. The IT infrastructure consolidation will further reduce infrastructure expenditures for several HHS agencies and should be fully implemented by October 2003.

Improving the Health and Safety of our Nation

Mr. Chairman, the budget I bring before you today contains many different elements of a single proposal. What binds these fundamental elements together is the desire to improve the lives of the American people. All of our proposals, from building upon the successes of welfare reform to protecting the nation against bioterrorism; from increasing access to healthcare, to strengthening Medicare; all these proposals are put forward with the simple goal of ensuring a safe and healthy America. I know this is a goal we all share, and with your support, we are committed to achieving it.