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Statement by
Kathleen Sebelius
U.S. Department of Health and Human Services (HHS)

The President's Fiscal Year 2013 Budget 

Committee on Appropriations
Subcommittee on Labor, Health and Human Services, Education, and Related Agencies
United States House of Representatives

Tuesday March 6, 2012

Chairman Rehberg, Ranking Member DeLauro, and Members of the Subcommittee, thank you for the invitation to discuss the President’s FY 2013 Budget for the Department of Health and Human Services (HHS).

The Budget for the Department of Health and Human Services (HHS) invests in health care, disease prevention, social services, and scientific research. HHS makes investments where they will have the greatest impact, build on the efforts of our partners, and lead to meaningful gains in health and opportunity for the American people.

The President’s fiscal year (FY) 2013 Budget for HHS includes a reduction in discretionary funding for ongoing activities, and legislative proposals that would save an estimated $350.2 billion over ten years. The Budget totals $940.9 billion in outlays and proposes $76.7 billion in discretionary budget authority, including $69.6 billion under the purview of this Subcommittee. This funding will enable HHS to:  Strengthen Health Care; Support American Families; Advance Scientific Knowledge and Innovation; Strengthen the Nation’s Health and Human Service Infrastructure and Workforce; Increase Efficiency, Transparency, and Accountability of HHS Programs; and Complete the Implementation of the Recovery Act.


Delivering Benefits of the Affordable Care Act to the American People:  The Affordable Care Act expands access to affordable health coverage to millions of Americans, increases consumer protections to ensure individuals have coverage when they need it most, and slows increases in health costs. Effective implementation of the Affordable Care Act is central to the improved fiscal outlook and wellbeing of the Nation. The Centers for Medicare & Medicaid Services (CMS) is requesting an additional $1 billion in discretionary funding to continue implementing the Affordable Care Act, including Affordable Insurance Exchanges, and to help keep up with the growth in the Medicare population. 

Expand and Improve Health Insurance Coverage:  Beginning in 2014, Affordable Insurance Exchanges will provide improved access to insurance coverage for millions of Americans. Exchanges will make purchasing private health insurance easier by providing eligible individuals and small businesses with one-stop shopping where they can compare benefit plans. New premium tax credits and reductions in cost-sharing will help ensure that eligible individuals can afford to pay for the cost of private coverage through Exchanges. FY 2013 will be a critical year for building the infrastructure and initiating the many business operations critical to enabling Exchanges to begin operation on January 1, 2014. The expansion of health insurance coverage for millions of low-income individuals who were previously not eligible for coverage also begins in 2014. CMS has worked closely with states to ensure they are prepared to meet the 2014 deadline and will continue this outreach in FY 2013. 

Many important private market reforms have already gone into effect, providing new rights and benefits to consumers that are designed to put them in charge of their own health care. The Affordable Care Act’s Patient’s Bill of Rights allows young adults to stay on their parents’ plans until age 26 and ensures that consumers receive the care they need when they get sick and need it most by prohibiting rescissions and lifetime dollar limits on coverage for care, and beginning to phase out annual dollar limits.  The new market reforms also guarantee independent reviews of coverage disputes. Temporary programs like the Early Retiree Reinsurance Plan (ERRP) and the Pre-Existing Condition Insurance Plan (PCIP) are supporting affordable coverage for individuals who often face difficulties obtaining private insurance in the current marketplace. Additionally, rate review and medical loss ratio (MLR) provisions helps ensure that health care premiums are kept reasonable and affordable year after year. The already operational rate review provision gives states additional resources to determine if a proposed health care premium increase is unreasonable and, in many cases, help enable state authorities to deny an unreasonable rate increase. HHS reviews large proposed increases in states that do not have effective rate review programs. The MLR provisions guarantee that, starting in 2011, insurance companies use at least 80 percent or 85 percent of premium revenue, depending on the market, to provide or improve health care for their customers or give them a rebate.

Strengthen the Delivery System:  The Affordable Care Act established a Center for Medicare and Medicaid Innovation (Innovation Center). The Innovation Center is tasked with developing, testing, and—for those that prove successful—expanding innovative payment and delivery system models to improve quality of care and reduce costs in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). Since the Innovation Center began operations it has undertaken an ambitious agenda encompassing patient safety, coordination of care among multiple providers, and enhanced primary care. These projects can serve as crucial stepping stones towards a higherquality, more efficient health care system.

Ensuring Access to Quality Care for Vulnerable Populations:  Health Centers are a key component of the Nation’s health care safety net. The President’s Budget includes a total of $3 billion, including an increase of $300 million from mandatory funds under the Affordable Care Act, to the Health Centers program. This investment will provide Americans in underserved areas, both rural and urban, with access to comprehensive primary and preventive health care services. Together with 2012 resources, HHS’ budget will create more than 240 new access points for patient care.  Overall, HHS’ investment in health centers will provide access to quality care for 21 million people, an increase of 300,000 additional patients over FY 2012. The Budget also promotes a policy of steady and sustainable health center growth by distributing Affordable Care Act resources over the long‐term. This policy safeguards resources for new and existing health centers to continue services and ensures a smooth transition as health centers increase their capacity to provide care as access to insurance coverage expands.

Improving Healthcare Quality and Patient Safety:  The Affordable Care Act directed HHS to develop a national strategy to improve health care services delivery, patient health outcomes, and population health. In FY 2011, HHS released the National Strategy for Quality Improvement in Health Care, which highlights three broad aims:  Better Care, Healthy People and Communities, and Affordable Care. Since publishing the Strategy, HHS has focused on gathering additional input from private partners and aligning new and existing HHS activities with the Strategy. HHS will enhance the Strategy by incorporating input from stakeholders and developing metrics to measure progress toward achieving the Strategy’s aims and priorities. Already, the Strategy is serving as a blueprint for quality improvement activities across the country. 

Investing in Innovation:  HHS is committed to advancing the use of health information technology (health IT). The Budget includes $66 million, an increase of $5 million, for the Office of the National Coordinator for Health Information Technology (ONC) to accelerate the adoption of health IT and promote electronic health records (EHRs) as tools to improve both the health of individuals and the health care system as a whole. The increase will allow ONC to provide more assistance to health care providers as they become meaningful users of health IT. Furthermore, through the Health Information Technology for Economic and Clinical Health Act (HITECH) provisions of the American Recovery and Reinvestment Act, CMS is providing hospitals and medical professionals who participate in Medicare and Medicaid with substantial incentive payments for the adoption and meaningful use of EHRs. As of February 1, CMS had made incentive payments to more than 23,600 providers who have met the objectives for meaningful use in the Medicare EHR Incentive Program and more than 19,600 providers who have adopted, implemented, or upgraded EHRs, or met meaningful use objectives in the Medicaid EHR Incentive Program. By encouraging providers to modernize their systems, this investment will improve the quality of care and protect patient safety.


Healthy Development of Children and Families:  HHS oversees many programs that support children and families. The FY 2013 Budget request invests in early education, recognizing the role highquality early education programs can play in preparing children for school success.

Investing in Education by Supporting an Early Learning Reform Agenda:  The FY 2013 Budget supports critical reforms in Head Start and a Child Care quality initiative that, when taken together with the Race to the Top Early Learning Challenge, are key elements of the Administration’s broader education reform agenda designed to improve our Nation’s competitiveness by helping every child enter school ready for success.

On November 8, 2011 the President announced important new steps to improve the quality of services and accountability at Head Start centers across the country. The Budget requests over $8 billion for Head Start programs, an increase of $85 million over FY 2012, to maintain services for the 962,000 children currently participating in the program. This investment will also provide resources to effectively implement new regulations that require grantees that do not meet high quality benchmarks to compete for continued funding, introducing an unprecedented level of accountability into the Head Start program. By directing taxpayer dollars to programs that offer highquality Head Start services, this robust, open competition for Head Start funding will help to ensure that Head Start programs provide the best available early education services to our most vulnerable children.

The Budget includes $300 million for a new child care quality initiative that states would use to invest directly in programs and teachers so that individual child care programs can do a better job of meeting the early learning and care needs of children and families.  The funds would also support efforts to measure the quality of individual child care programs through a rating system or another system of quality indicators, and to clearly communicate program-specific information to parents so they can make informed choices for their families.  These investments are consistent with the broader reauthorization principles outlined in the Budget, which encompass a reform agenda that would help transform the Nation’s child care system to one that is focused on continuous quality improvement and provides more lowincome children access to highquality early education settings that support children’s learning, development, and success in school.

Keeping America Healthy:  The President’s Budget includes resources necessary to enhance clinical and community prevention, support research, develop the public health workforce, control infectious diseases, and invest in prevention and management of chronic diseases and conditions.

Tobacco Prevention Activities:  Tobacco use kills an estimated 443,000 people in the United States each year. Despite progress in reducing tobacco use, 1 in 5 high school students and adults continue to smoke, costing our Nation $96 billion in medical costs and $97 billion in lost productivity each year. The Budget includes $586 million in funding from the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), and the Substance Abuse and Mental Health Services Administration (SAMHSA) to further help reduce smoking among teens and adults and support research on preventing tobacco use, understanding the basic science of the consequences of tobacco use, and improving treatments for tobacco-related illnesses. HHS is striving to reduce adults’ annual cigarette consumption in the United States from 1,281 cigarettes per capita to 1,062 cigarettes per capita by 2013.

Million Hearts Initiative:  The Million Hearts Initiative is a national publicprivate initiative aimed at preventing 1 million heart attacks and strokes over 5 years, from 2012 to 2017. It seeks to reduce the number of people who need treatment and improve the quality of treatment that is available. It focuses on increasing the number of Americans who have their high blood pressure and high cholesterol under control, reducing the number of people who smoke, and reducing the average intake of sodium and trans fats. To achieve this overall goal, the Initiative will promote medication management and support a network of electronic health record registries to track blood pressure and cholesterol control, along with many other publicprivate collaborations.  In FY 2013, the Budget requests $5 million for CDC to achieve measurable outcomes in these areas.

Preventing Teen Pregnancy:  The Budget includes $105 million for the Office of the Assistant Secretary for Health for teen pregnancy prevention programs. These programs will support community-based efforts to reduce teen pregnancy using evidence‑based models and promising programs needing further evaluation. The Budget also includes $15 million in funding for CDC teen pregnancy prevention activities to reduce the number of unintended pregnancies through science-based prevention approaches. Additionally, the Budget would repurpose unobligated funds to create a new teen pregnancy prevention program specifically targeted to youth in foster care, who are at particularly high risk of becoming teen parents.

Protect Vulnerable Populations:  HHS is committed to ensuring that vulnerable populations continue to receive critical services during this period of economic uncertainty. For example, the ACF Budget requests includes a $7 million increase in funding for the Family Violence Prevention programs in order to expand shelter capacity and services and to support higher call volume to the Domestic Violence Hotline.

Preventing and Treating HIV/AIDS:  The FY 2013 Budget includes $3.3 billion for domestic HIV/AIDS activities to increase the availability of treatment to people living with HIV/AIDS in the United States, improve adherence to medications, and support prevention programs in states and communities. This total investment includes $1 billion, an increase of $67 million, to increase access to life‑saving treatments through the AIDS Drug Assistance Program, and $236 million, an increase of $20 million, to support care provided by HIV clinics across the country.

This total also includes $826 million for CDC’s domestic HIV/AIDS prevention activities, an increase of $40 million above FY 2012, to support grants to health departments to reduce new HIV infections, identify previously unrecognized HIV infections, and improve health outcomes. In addition, funds will support research, surveillance, evaluation, and implementation of high-impact prevention programs among HIV-affected populations. In FY 2013, CDC will award grants to 69 state and local health departments to implement HIV/AIDS prevention programs according to a revised funding algorithm instituted in FY 2012, which better aligns the distribution of prevention resources with the disease burden rather than with historical AIDS data. CDC will also support up to 36 jurisdictions for an expanded testing initiative to focus on groups at highest risk for acquiring HIV such as men who have sex with men, African Americans, and injection drug users.

Refugee Transitional and Medical Services:  The Budget requests $805 million to provide time‑limited cash and medical assistance to newly arrived refugees, helping them become self-sufficient as quickly as possible, and to provide shelter for unaccompanied alien children until they can be placed with relatives or other sponsors, repatriated to their home countries, or receive relief under U.S. immigration law. Additional funding will primarily cover rising medical costs—many refugees have spent their lives in camps where medical care is limited or non‑existent—and serve the growing number of unaccompanied alien children made eligible for benefits under the Trafficking Victims Protection Reauthorization Act of 2008.

Elder Justice:  The Budget includes $43 million for the Administration on Aging (AoA) to address the growing problem of elder abuse, neglect, and exploitation which affects more than 5 million seniors annually. Research indicates that older victims of even modest forms of abuse have dramatically higher morbidity and mortality rates than non-abused older people. To combat this abuse, the Budget provides $8 million for newly-authorized Adult Protective Services Demonstration grants, along with $9 million in ongoing funding for state grants to raise awareness of elder abuse and neglect and for resource centers and related activities that support nationwide elder rights activities. The Budget also includes $17 million for the Long-term Care Ombudsman Program to improve the quality of care for the residents of long-term care facilities by resolving complaints on behalf of residents.

Keeping People in Communities:  Part of HHS’ strategic plan includes enabling seniors to remain in their own homes with a high‑quality of life for as long as possible through the provision of home and community-based services, including supports for family caregivers. Some seniors, if unable to remain independent in the community, will be forced to move into a nursing home at a significant potential cost to Medicaid. The Budget includes $1.4 billion in AoA to help seniors stay in their homes through Home and Community-Based Supportive Services, Senior Nutrition Programs, and Caregiver Support programs. The Budget also proposes to transfer the Senior Community Service Employment Program from the Department of Labor to the Administration on Aging. This move provides greater alignment with the agencies that provide supportive services.

Community Services Programs: The Budget includes $400 million for Community Services programs. This funding level includes $350 million for the Community Services Block Grant, and proposes to use a system of standards and competition to target the funds to high-performing agencies that are most successful in meeting community needs. In support of the Healthy Food Financing Initiative, $10 million is available to fund community development corporations to eliminate food deserts by improving access to grocery stores, farmers’ markets, and other venues for healthy, affordable groceries. Additionally, $20 million is requested for the Community Economic Development program to sponsor enterprises providing employment, training, and business development opportunities for low-income Americans.

Vulnerable Youth: The ACF Budget includes an additional $5 million as part of a cross–agency effort to identify and test new ways to strengthen services for disconnected youth—14- to 24-year-olds who are neither working nor in school. This $5 million will be utilized in close cooperation with an additional $5 million requested by the Department of Education and $10 million from the Department of Labor. In addition to the funding request, the Administration proposes a general provision in the appropriations act to support a limited number of “performance partnerships” that would provide states and localities with enhanced flexibility in determining how services are structured in return for strong accountability for results.

Reduce Foodborne Illness:  The Budget reflects the Administration’s commitment to transforming our Nation’s food safety system into one that is stronger and that reduces foodborne illness and includes an increase of $17 million above FY 2012 to support CDC’s role in implementing the Food Safety and Modernization Act. HHS will continue to modernize and implement a prevention-focused domestic and import safety system. Collaboratively, FDA and CDC are working to decrease the rate of Salmonella Enteritidis illness in the population from 2.6 cases per 100,000 to 2.1 cases per 100,000 by December 2013. In FY 2013, CDC will enhance surveillance systems and designate five Integrated Food Safety Centers of Excellence at state health departments.


Biomedical and Behavioral Research: The FY 2013 Budget maintains funding for the NIH at the FY 2012 level of $30.9 billion, reflecting the Administration’s priority to invest in innovative biomedical and behavioral research that spurs economic growth while advancing medical science to improve health. NIH is generating discoveries that are opening new avenues for disease treatment and prevention and revolutionizing patient care. In FY 2013, NIH will seek to take advantage of such discoveries by investing in basic research on the fundamental causes and mechanisms of disease, accelerating discovery through new technologies, advancing translational sciences, and encouraging new investigators and new ideas.

National Center for Advancing Translational Sciences:  In FY 2013, NIH will continue to implement the new National Center for Advancing Translational Sciences (NCATS), established in FY 2012, in order to re‑engineer the process of translating scientific discoveries into new medical products. Working closely with partners in the regulatory, academic, nonprofit, and private sectors while not duplicating work going on in the private sector, NCATS will strive to identify innovative solutions to overcome hurdles that slow the development of effective treatments and cures. A total of $639 million is proposed for NCATS in FY 2013, including $50 million for the Cures Acceleration Network.

Medical Countermeasure Development:  The HHS Medical Countermeasure Enterprise includes initiatives across the Department covering the spectrum of medical countermeasure development, from early biological research to stockpiling of approved products. The FY 2013 Budget includes $547 million for the Biomedical Advanced Research and Development Authority, an increase of $132 million over FY 2012, to develop and improve next-generation medical countermeasures (MCM) in response to potential chemical, biological, radiological, and nuclear threats. The Budget also provides $50 million to establish a strategic investment corporation that would function as a public-private venture capital fund providing companies developing MCMs with the necessary financial capital and business acumen to improve the chances of successful development of new MCM technologies and products. Together, these investments will provide HHS with new tools to enhance the success of medical countermeasure development.

Enhancing Health Care Decision‑Making:  The HHS Budget includes $599 million for research that compares the risk, benefits, and effectiveness of different medical treatments and strategies, including health care delivery, medical devices, and drugs, including $78 million from the PatientCentered Outcomes Research Trust Fund established by the Affordable Care Act.  Evidence generated through this research is intended to help patients make informed health care decisions that best meet their needs. This level of funding will primarily support research conducted by NIH, core research activities within the Agency for Healthcare Research and Quality (AHRQ), and data capacity activities within the Office of the Secretary. Resources from the Trust Fund will support comparative clinical effectiveness research dissemination, improved research infrastructure, and training of patientcentered outcomes researchers. HHS core research will be coordinated to complement projects supported through the Trust Fund and through the independent PatientCentered Outcomes Research Institute.


Investing in Infrastructure:  A strong health workforce is key to ensuring that more Americans can get the quality care they need to stay healthy. The Budget includes $677 million, an increase of $49 million over FY 2012, within HRSA to expand the capacity and improve the training and distribution of primary care, dental, and pediatric health providers.  The Budget will support the placement of more than 7,100 primary care providers in underserved areas and begin investments that expand the capacity of institutions to train 2,800 additional primary care providers over 5 years. 

The FY 2013 Budget also supports state and local capacity for core public health functions. Within the Prevention Fund allocation, CDC will invest $20 million in new activities to coordinate with public health laboratories to improve efficiency through proven models, such as regionalizing testing in multi‑state laboratories. To ensure an effective public health workforce, the Budget requests $61 million, of which $25 million is through the Prevention Fund, for the CDC public health workforce to increase the number of trained public health professionals in the field. CDC’s experiential fellowships and training programs create a prepared and sustainable health workforce to meet emerging public health challenges. In addition, the Budget requests $40 million in the Prevention Fund to maintain support for CDC’s Public Health Infrastructure Program. This program will assist health departments in meeting national public health standards and will increase the capacity and ability of health departments in areas such as information technology and data systems, workforce training, and regulation and policy development.


Living Within our Means:  HHS is committed to improving the Nation’s health and well‑being while simultaneously contributing to deficit reduction. The FY 2013 discretionary request demonstrates this commitment by maintaining ongoing investments in areas most central to advancing the HHS mission while making reductions to lower priority areas, reducing duplication, and increasing administrative efficiencies. Overall, the FY 2013 request includes over $2.1 billion in terminations and reductions to fund initiatives while achieving savings in a constrained fiscal environment. Many of these reductions, such as the $177 million cut to the Children’s Hospital Graduate Medical Education Payment Program, the $327 million cut to Community Services Block Grants, and the $452  million cut to the Low Income Home Energy Assistance Program (LIHEAP) were very difficult to make, but are necessitated by the current fiscal environment.

Regarding LIHEAP, the Administration proposes to adjust funding for expected winter fuel costs and to target funds to those most in need.  The request is $3 billion, $452 million below the FY 2012 level and $450 million above both FY 2008 andthe 2012 request.  With constrained resources, the Budget targets assistance where it is needed most. The request targets $2.8 billion in base grants using the state allocation Congress enacted for FY 2012. The request also includes $200 million in contingency funds, which will be used to address the needs of households reliant on home delivered fuels (heating oil and propane) should expected price trends be realized, as well as other energy-related emergencies.

In September 2011, the Administration detailed a plan for economic growth and deficit reduction. The FY 2013 Budget follows this blueprint in its legislative proposals, presenting a package of health savings proposals that would save more than $360 billion over 10 years, with almost all of these savings coming from Medicare and Medicaid.  Medicare proposals would encourage highquality, efficient care, increase the availability of generic drugs and biologics, and implement structural reforms to encourage beneficiaries to seek value in their health care choices. The Budget also seeks to make Medicaid more flexible, efficient, and accountable while strengthening Medicaid program integrity. Together, the FY 2013 discretionary budget request and these legislative proposals allow HHS to support the Administration’s challenging yet complementary goals of investing in the future and establishing a sustainable fiscal outlook.

Program Integrity and Oversight:  The FY 2013 Budget continues to make program integrity a top priority. The Budget includes $610 million in discretionary funding for Health Care Fraud and Abuse Control (HCFAC), the full amount authorized under the Budget Control Act of 2011 (BCA). The Budget also proposes to fully fund discretionary program integrity initiatives at $581 million in FY 2012, consistent with the BCA.  The discretionary investment supports the continued reduction of the Medicare feeforservice improper payment rate; investments in preventionfocused, datadriven initiatives like predictive modeling; and HHSDepartment of Justice Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiatives, including Medicare Strike Force teams and fighting pharmaceutical fraud.

From 1997 to 2011, HCFAC programs have returned over $20.6 billion to the Medicare Trust Funds, and the current threeyear returnoninvestment of 7.2 to 1 is the highest in the history of the HCFAC program. Last year these efforts recovered more than $4 billion. The Budget proposes a 10-year discretionary investment yielding a conservative estimate of $11.3 billion in Medicare and Medicaid savings and 16 program integrity proposals to build on the Affordable Care Act’s comprehensive fraud fighting authorities for savings of an additional $3.6 billion over 10 years. 

Additionally, the Budget includes funding increases for significant oversight activities. The request includes $84 million for the Office of Medicare Hearings and Appeals, an increase of $12 million, to continue to process the increasing number of administrative law judge appeals within the statutory 90‑day timeframe while maintaining the quality and accuracy of its decisions. The Budget also includes $370 million in discretionary and mandatory funding for the Office of Inspector General (OIG), a 4 percent increase from FY 2012. This increase will enable OIG to expand CMS Program Integrity efforts in areas such as HEAT, improper payments, and focus on investigative efforts on civil fraud, oversight of grants, and the operation of new Affordable Care Act programs.

Additionally, Durable Medical Equipment (DME) Competitive Bidding is providing competitive pricing, while continuing to ensure access to quality medical equipment from accredited suppliers, which will save Medicare $25.7 billion over 10 years and help millions of Medicare beneficiaries save $17.1 billion in out-of-pocket costs over 10 years. The Budget proposes to extend some of the efficiencies of DME Competitive Bidding to Medicaid by limiting Federal reimbursement on certain DME services to what Medicare would have paid in the same state for the same services. This proposal is expected to save Medicaid $3.0 billion over 10 years.

Consolidate and Improve Activities Related to Prevention and Behavioral Health:  The Budget includes $500 million within SAMHSA for new, expanded, and refocused substance abuse prevention and mental health promotion grants to states and tribes. To maximize the efficiency and effectiveness of its resources, SAMHSA will use competitive grants to identify and test innovative prevention practices and will leverage state and tribal investments to foster widespread implementation of evidence-based prevention strategies. 

The Budget also consolidates funding for initiatives aimed at addressing chronic disease prevention. Chronic diseases and injuries represent the major causes of morbidity, disability, and premature death and heavily contribute to the growth in health care costs. The Budget aims to improve the health of individuals by focusing on prevention of chronic diseases and injuries rather than focusing solely on treating conditions that could have been prevented. Specifically, the Budget allocates $379 million, an increase of $129 million over FY 2012, to a new integrated grant program in CDC that refocuses disease-specific grants into a comprehensive program that will enable health departments to implement the most effective strategies to address these leading causes of death. Because many inter‑related chronic disease conditions share common risk factors, the new program will improve health outcomes by coordinating the interventions that can reduce the burden of chronic disease.

Thank you for the opportunity to testify.  I will be happy to answer any questions you may have.

Last revised: June 18, 2013