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HOUSE ENERGY AND COMMERCE COMMITTEE
SUBCOMMITTEE ON HEALTH AND THE ENVIRONMENT
OF HEALTH AND HUMAN SERVICES
Good Morning Mr. Chairman and members of the Sub-Committee.
I am honored to appear before you today to discuss the President’s
FY 2003 budget for the Department of Health and Human Services.
I am confident that a review of the full details of our
budget will demonstrate that we are proposing a balanced
and responsible approach to ensuring a safe and healthy
The budget I present to you today fulfills the promises
the President has made and proposes creative and innovative
solutions for meeting the challenges that now face our nation.
Since the September 11th attacks we have dedicated
much of our efforts to ensuring that the nation is safe.
HHS was one of the first agencies to respond to the September
11th attacks on New York City, and began deploying medical
assistance and support within hours of the attacks. Our
swift response and the overwhelming task of providing needed
health related assistance made us even more aware that there
is always room for improvement. The FY 2003 budget for the
Department of Health and Human Services builds on President
Bush’s commitment to ensure the health and safety of our
The FY 2003 budget places increased emphasis on protecting
our nation’s citizens and ensuring safe, reliable health
care for all Americans. The HHS budget also promotes scientific
research, builds on our success in welfare reform, and provides
support for childhood development while delivering a responsible
approach for managing HHS resources. Our budget plan confronts
both the challenges of today and tomorrow while protecting
and supporting the well being of all Americans.
Mr. Chairman, the HHS budget request for FY 2003 totals
$488.8 billion in outlays, an increase of $29.2 billion
or +6.3 percent over the comparable FY 2002 budget. The
discretionary component totals $64.0 billion in budget authority,
an increase of $2.4 billion , or +3.9 percent over FY 2002.
Let me now discuss some of the highlights of the HHS budget
and how we hope to achieve our goals.
PROTECTING THE NATION AGAINST BIOTERRORISM
Mr. Chairman, as you know, the Department of Health and
Human Services is the lead federal agency in countering
bioterrorism. In cooperation with the States, we are responsible
for preparing for, and responding to, the medical and public
health needs of this nation. The FY 2003 budget for HHS
bioterrorism efforts is $4.3 billion, an increase of $1.3
billion, or 45 percent, above FY 2002. This budget supports
a variety of activities to prevent, identify, and respond
to incidents of bioterrorism. These activities are administered
through the Centers for Disease Control and Prevention (CDC),
the National Institutes of Health (NIH), the Office of Emergency
Preparedness (OEP), the Substance Abuse and Mental Health
Services Administration (SAMHSA), the Health Resources and
Services Administration (HRSA) and the Food and Drug Administration
(FDA). These efforts will be directed by the newly established
Office of Public Health Preparedness (OPHP).
On January 31, 2002, HHS announced plans for making $1.1
billion available to States. This funding is available for
hospital preparedness, laboratory capacity, epidemiology,
and emergency medical response. Approximately 20 percent
of this total either has already been provided (or
will be provided within the next few weeks) for immediate
expenditure to all eligible entities in base
awards that will be used to establish core programs and
address current needs for bioterrorism preparedness. The
remaining 80 percent will be made available for expenditure
once the Secretary has approved the States’ work plans
for their awarded funds. States will submit plans which
will be reviewed by the HHS staff to ensure that
funding is used wisely for bioterrorism efforts.
In order to create a blanket of preparedness against bioterrorism,
the FY 2003 budget provides funding to State and local organizations
to improve laboratory capacity, enhance epidemiological
expertise in the identification and control of diseases
caused by bioterrorism, provide for better electronic communication
and distance learning, and support a newly expanded focus
on cooperative training between public health agencies and
Funding for the Laboratory Response Network enhances a
system of over 80 public health labs specifically developed
for identifying pathogens that could be used for bioterrorism.
Funding will also support the Health Alert Network, CDC's
electronic communications system that will link local public
health departments in covering at least ninety percent of
our nations’ population. Funding will be used to support
epidemiological response and outbreak control, which includes
funding for the training of public health and hospital staff.
This increased focus on local and state preparedness serves
to provide funding where it best serves the interests of
An important part on the war against terrorism is the need
to develop vaccines and maintain a National Pharmaceutical
Stockpile. The National Pharmaceutical Stockpile is purchasing
enough antibiotics to be able to treat up to 20 million
individuals in a year for exposure to anthrax and other
agents by the end of 2002. The Department is purchasing
sufficient smallpox vaccines for all Americans. The FY 2003
budget proposes $650 million for the National Pharmaceutical
Stockpile and costs related to stockpiling of smallpox vaccines,
and next-generation anthrax vaccines currently under development.
Another important aspect of preparedness is the response
capacity of our nation’s hospitals. Our FY 2003 budget provides
$518 million for hospital preparedness and infrastructure
to enhance biological and chemical preparedness plans focused
on hospitals. The FY 2003 budget will provide funding to
upgrade the capacity of hospitals, outpatient facilities,
emergency medical services systems and poison control centers
to care for victims of bioterrorism. In addition, CDC will
provide support for a series of exercises to train public
health and hospital workers to work together to treat and
control bioterrorist outbreaks.
The FY 2003 budget also includes $184 million to construct,
repair and secure facilities at the CDC. Priorities include
the construction of an infectious disease/bioterrorism laboratory
in Fort Collins, Colorado, and the completion of a second
infectious disease laboratory, an environmental laboratory,
and a communication and training facility in Atlanta. This
funding will enable the CDC to handle the most highly infectious
and lethal pathogens, including potential agents of bioterrorism.
Within the funds requested, $12 million will be used to
equip the Environmental Toxicology Lab, which provides core
lab space for testing environmental samples for chemical
terrorism. Funding will also be allocated to the ongoing
maintenance of existing laboratories and support structures.
The FY 2003 budget also includes $60 million for the development
of new Educational Incentives for Curriculum Development
and Training Program. The goals of this program will be
the development of a health care workforce capable of recognizing
indications of a bioterrorist event in their patients, that
possesses the knowledge and skills to best treat their patients,
and that has the competencies to rapidly and effectively
inform the public health system of such an event at the
community, State and national level.
INVESTING IN BIOMEDICAL RESEARCH
Advances in scientific knowledge have provided the foundation
for improvements 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 (NIH).
Our FY 2003 budget enhances support for a wide array of
scientific research, while emphasizing and supporting research
needed for the war against bioterrorism.
NIH is the largest and most distinguished biomedical research
organization in the world. The research that is conducted
and supported by the NIH offers the promise of breakthroughs
in preventing and treating a number of diseases and contributes
to fighting the war against bioterrorism. The FY 2003 budget
includes the final installment of $3.9 billion needed to
achieve the doubling of the NIH budget. The budget includes
$1.75 billion for bioterrorism research, including genomic
sequencing of dangerous pathogens, development of zebra
chip technology, development and procurement of an improved
anthrax vaccine, and laboratory and research facilities
construction and upgrades related to bioterrorism. With
the commitment to bioterrorism research comes our expectation
of substantial positive spin-offs for other diseases. Advancing
knowledge in the arena of diagnostics, therapeutics and
vaccines in general should have enormous impact on the ability
to diagnose, treat, and prevent major killers-diseases such
as malaria, TB, HIV/AIDS, West Nile fever, and influenza.
The FY 2003 budget also provides $5.5 billion for research
on cancer throughout all of NIH. Currently, one of every
two men and one of every three women in the United States
will develop some type of cancer over the course of their
lives. New research indicates that cancer is actually more
than 200 diseases, all of which require different treatment
protocols. Promising cancer research is leading to major
breakthroughs in treating and curing various forms of cancer.
Our budget continues to expand support for these research
endeavors. The FY 2003 budget also includes a total of $2.8
billion for HIV/AIDS-related research. NIH continues to
focus on prevention research, therapeutic research to treat
those already infected, international research, and research
targeting the disproportionate impact of AIDS on minority
populations in the United States.
PRESCRIPTION DRUG USER FEES
As a result of our investment in biomedical research through
the NIH, new breakthrough drugs and medical treatments will
be discovered to treat and cure serious diseases afflicting
millions of Americans. A major mission for the Food and
Drug Administration is to determine which of these therapies
are safe and effective and to get these on the market quickly.
The Prescription Drug User Fee Program known as PDUFA, enacted
by Congress in 1992, has been enormously successful in speeding
up drug approval times. This program is due for reauthorization
this year and is one of the top priorities of the Administration.
I commend you, Mr. Chairman, and the Members of this Committee,
for your leadership in this area and we appreciate your
bipartisan commitment to act quickly to reauthorize this
key program during this fiscal year and to ensure that enactment
of this legislation is not put at risk by the inclusion
of controversial provisions.
As you are aware, the FDA and the drug and biologics representatives
have agreed upon a blueprint containing the proposed specifications
for the reauthorization of PDUFA III with input from consumer
and patient groups, health professionals, and other organizations.
This proposal calls for significant increases in user fees
to put the program on sound financial footing and make the
collection of fees more predictable. The proposed drug user
fee amount would be $222.9 million in FY 2003 with increases
in the out years to $259.3 million in FY 2007. The FY 2003
request is approximately a $90 million increase over the
$133 million that was collected for FY2001. The PDUFA III
proposal includes several important new initiatives. One
of the more significant among these is the agreement to
use industry fees to significantly expand the capacity of
FDA to conduct risk management activities during the first
few years after drugs are approved. We expect that this
will lead to more targeted and effective drug prescribing
patterns by physicians and fewer adverse effects for patients.
SUPPORTING HEALTHY COMMUNITIES
The FY 2003 budget includes $25 million
for a Healthy Communities Innovation Initiative -
a new interdisciplinary services effort that will concentrate
Department-wide expertise on the prevention of diabetes
and asthma, as well as obesity. Of this amount, $20 million
is available in HRSA. The purpose of the initiative is to
reduce the incidence of these diseases and improve services
in 5 communities through a tightly coordinated public/private
partnership between medical, social, educational, business,
civic and religious organizations. These chronic diseases
were chosen because of their rapidly increasing prevalence
within the United States. In addition there is $5 million
in CDC for a national media campaign to promote physical
fitness activities, with an emphasis on families and communities.
More than 16 million Americans currently suffer from a
preventable form of diabetes. Type II diabetes is increasingly
prevalent in our children due to the lack of activity. In
a recent study conducted by NIH, participants that were
randomly assigned to intensive lifestyle intervention experienced
a reduced risk of getting Type II diabetes by 58 percent.
HHS plans to reach out to women and minorities to help make
this initiative a success.
INCREASING ACCESS TO HEALTHCARE
Of all the issues confronting this Department, none has
a more direct effect on the well being of our citizens than
the quality and accessibility of health care. Our budget
proposes to improve the health of the American people by
taking the steps to increase and expand the number of Community
Health Centers, strengthen Medicaid, and ensure patient
Community Health Centers provide family oriented preventive
and primary health care to over 11 million patients through
a network of over 3,400 health sites. The FY 2003 budget
will increase and expand the number of health center sites
by 170, the second year of the President’s initiative is
to increase and expand sites by 1,200 and serve an additional
6.1 million patients by 2006. We propose to increase funding
for these Community Health Centers by $114 million in FY
2003. Our long-term goal is to increase the number of people
who receive high quality primary healthcare regardless of
their ability to pay. With these new health centers, we
hope to achieve this goal.
In addition to expanding Community Health Centers, we are
seeking to expand the National Health Service Corps by $44
million. Currently, more than 2,300 health care professionals
are providing service to health centers patients and others
in under-served communities.
The Medicaid program and the State Children’s Health Insurance
Program (SCHIP) provide health care benefits to low-income
Americans, primarily children, pregnant women, the elderly,
and those with disabilities. The FY 2003 budget we propose
strengthens the Medicaid and SCHIP programs by implementing
essential reforms in the way we pay for prescription drugs,
by extending expiring SCHIP funds, and by testing solutions
to barriers in community living for disabled children and
We propose to extend coverage of Medicare Part B premiums
for people with incomes between 120 and 135 percent of the
Federal poverty level, also known as Qualifying Individuals
(QI-1s), for one year until September 2003. Currently, States
through the Medicaid program must pay for the Medicare premiums
and cost sharing for certain low-income Medicare beneficiaries.
The funding to pay for Part B premiums for QI-1s expires
in September 2002. This proposal would ensure no interruption
of current benefits while discussions take place about how
better to integrate the QI-1 programs with other Medicaid
programs that also pay Medicare premiums.
For FY 2003, we propose to continue Transitional Medicaid
Assistance for an additional year and provide families with
an important incentive to work. Currently, States are required
to provide up to one year of Medicaid for families who,
due to work, would otherwise lose Medicaid eligibility.
The provision is due to expire in September 2002. We propose
to allow families to continue to take those first steps
toward self-sufficiency – often in jobs without health insurance
– without fear that their medical bills will leave them
worse off than before. The initiative would cost $350 million.
Also, we propose to work with stakeholders to develop legislative
proposals that build on the Health Insurance Flexibility
and Accountability (HIFA) demonstration in order to give
states the flexibility they need to design innovative ways
of increasing access to health insurance coverage for the
uninsured. The Administration’s plan also would allow at
State option those who receive the President’s health care
tax credit to increase their purchasing power by purchasing
insurance from private plans that already participate in
their State’s Medicaid, Children’s Health Insurance, or
State employees’ programs. This could help keep costs down
and provide a more comprehensive benefit than plans in the
individual market. Further, this will give tax credit recipients
a range of choices among insurance products, which the new
tax credit program will make affordable.
Additionally, as part of the New Freedom Initiative, a
nationwide effort to support community based models of care
that help remove the barriers of equality that face individuals
with disabilities, we propose four demonstrations to test
solutions to many of the barriers to community living for
disabled children and adults. Two demonstrations will provide
Medicaid respite services to caregivers of disabled adults
and to caregivers of significantly disabled children. A
third demonstration will allow home and community-based
services as an alternative for children receiving care in
a residential treatment facility. All three of these demonstrations
will help the Administration evaluate the feasibility of
providing such services under the Medicaid program. A fourth
demonstration will address the shortage of direct service
We also need to make an effort to narrow the drug treatment
gap. As reflected in the National Drug Control Strategy,
Substance Abuse and Mental Health Services Administration
estimates that 4.7 million people are in need of drug abuse
treatment services. However, fewer than half of those who
need treatment actually receive services, leaving a treatment
gap of 3.9 million individuals. Our budget supports the
President’s Drug Treatment Initiative, and to narrow the
treatment gap. We propose to increase funding for the initiative
by $127 million. These additional funds will allow State
and local communities to provide treatment services to approximately
546,000 individuals, an increase of 52,000 over FY 2002.
The FY 2003 budget dedicates $190 billion over ten years
for immediate targeted improvements
and comprehensive Medicare modernization, including a subsidized
prescription drug benefit, better insurance protection,
and better private options for all beneficiaries. Last year,
President Bush proposed a framework for modernizing and
improving the Medicare program that built on many of the
ideas that had been developed in this Committee and by other
Members of Congress.
That framework includes the principles that:
- All seniors should have the option of a subsidized prescription
drug benefit as part of modernized Medicare.
- Modernized Medicare should provide better coverage for
preventive care and serious illness.
- Today’s beneficiaries and those approaching retirement
should have the option of keeping the traditional plan
with no changes.
- Medicare should make available better health insurance
options, like those available to all Federal employees.
- Medicare legislation should strengthen the program’s
long-term financial security.
- The management of the government Medicare plan should
be strengthened to improve care for seniors.
- Medicare’s regulations and administrative procedures
should be updated and streamlined, while instances of
fraud and abuse should be reduced
- Medicare should encourage high-quality health care for
The President’s FY 2003 Budget also includes a series of
targeted immediate improvements to Medicare, which can be
implemented as part of comprehensive Medicare legislation,
to provide both immediate benefit improvements for seniors
and to help implement a Medicare drug benefit and other
long-term improvements more effectively.
The improvements the President and I have proposed include
not only a subsidized drug benefit as part of modernized
Medicare, but also providing better coverage for preventive
care and serious illness. The program’s lack of drug coverage
is just one example of its outdated benefits and it will
have even more difficulty giving beneficiaries modern and
appropriate treatment for their health problems in the future.
We propose that preventive benefits have zero co-insurance
and be excluded from the deductible. We must
make these improvements to more effectively address the
health needs of seniors today and for the future.
Let me assure you, the President remains committed to framework
he introduced last summer, and to bringing the Medicare
program up to date by providing prescription drug coverage
and other improvements. We cannot wait: it is time to act.
Recognizing that there is no time to waste, the President’s
Budget also includes a series of targeted immediate improvements
As you know, last year the President proposed the creation
of a new Medicare-endorsed prescription
drug card program to reduce the cost of prescription drugs
for seniors. This year, HHS will continue working to implement
the drug card, which will give beneficiaries immediate access
to manufacturer discounts on their medicines and other valuable
pharmacy services. The President is absolutely committed
to providing immediate assistance to seniors who currently
have to pay for prescription drugs.
Assistance, however, will not come only through the prescription
drug card program. The budget proposes several new initiatives
to improve Medicare’s benefits and address cost. This budget
proposes additional federal assistance for drug coverage
to low-income Medicare beneficiaries up to 150% of poverty
– about $17,000 for a family of two. This policy
would eventually expand drug coverage for up to 3 million
beneficiaries who currently do not have prescription drug
assistance, and it will be integrated with the Medicare
drug benefit that is offered to all seniors once that is
in place. This policy helps to establish the framework necessary
for a Medicare prescription drug benefit and is essentially
a provision that is in all of the major drug benefit proposals
to be debated before Congress. That is, the policy provides
new Federal support for comprehensive coverage of low-income
seniors up to 150 percent of poverty. And in all the proposals,
the Federal government would work with the states to provide
this coverage, just as we are proposing with this policy.
In addition, I recently announced a model drug waiver program—Pharmacy
Plus—to allow States to reduce drug expenditures for seniors
and certain individuals with disabilities with family incomes
up to 200 percent of the federal poverty level. This program
is being done administratively. The Illinois initiative
illustrates how we can expand coverage to Medicare beneficiaries
in partnership with the federal government. The program
we approved will give an estimated 368,000 low-income seniors
new drug coverage.
The President’s budget also includes an increase in funding
to stabilize and increase choice in Medicare+Choice program
by aligning payment rates more closely with overall Medicare
spending and paying incentives for new types of plans to
participate. Over 500,000 seniors lost coverage last year
because Medicare+Choice plans left the program. Today close
to 5 million seniors choose to receive quality health care
through the Medicare+Choice program. Because it provides
access to drug coverage and other innovative benefits,
it is an option many seniors like, and an option
we must preserve. The President’s budget also proposes the
addition of two new Medigap plans to the existing 10 plans.
These new plans will include prescription drug assistance
and protect seniors from high out-of-pocket costs.
Some of these initiatives give immediate and tangible help
to seniors. But, let me make clear: these are not substitutes
for comprehensive reform and a universal drug benefit in
Medicare. They are immediate steps we want to take to improve
the program in conjunction with comprehensive reform, so
that beneficiaries will not have to wait to begin to see
benefit improvements. I want to pledge today to work with
each and every member of this Committee to fulfill our promise
of health care security for America’s seniors-
now and in the future.
IMPROVING MANAGEMENT AND PERFORMANCE OF HHS PROGRAMS
I am committed to being proactive in preparing the nation
for potential threats of bioterrorism and supporting research
that will enable Americans to live healthier and safer lives.
And, I am excited about beginning the next phase of Welfare
reform and strengthening our Medicare and Medicaid programs.
Ensuring that HHS resources are managed properly and effectively
is also a challenge I take very seriously.
For any organization to succeed, it must never stop asking
how it can do things better, and I am committed to supporting
the President’s vision for a government that is citizen-centered,
results oriented, and actively promotes innovation through
competition. HHS is committed to improving management within
the Department and has established its own vision of a unified
HHS -- One Department free of unnecessary layers, collectively
strong to serve the American people. The FY 2003 budget
supports the President's Management Agenda.
The Department will improve program performance and service
delivery to our citizens by more strategically managing
its human capital and ensuring that resources are directed
to national priorities. HHS will reduce duplication of effort
by consolidating administrative management functions and
eliminating management layers to speed decision-making.
The Department plans to reduce the number of personnel offices
from 40 to 4 and consolidate construction funding, leasing,
and other facilities management activities. These management
efficiencies will result in an estimated savings of 700
full time equivalent positions, allowing the Department
to redeploy staff and other resources to advance primary
HHS continues working to improve budget and performance
integration in support of the Government-wide effort. Although
we work in a challenging environment where health outcomes
may not be apparent for several years, and the Federal dollar
may be just one input to complex programs, HHS is committed
to demonstrating to citizens the value they receive for
the tax dollars they pay.
By expanding our information technology and by establishing
a single corporate Information Technology Enterprise system,
HHS can build a strong foundation to re-engineer the way
we do business and can provide better government services
at reduced costs. By consolidating and modernizing existing
financial management systems our Unified Financial Management
System (UFMS) will provide a consistent, standardized system
for departmental accounting and financial management. This
"One Department" approach to financial management and information
technology emphasizes the use of resources on an enterprise
basis with a common infrastructure, thereby reducing errors
and enhancing accountability. The use of cost accounting
will aid in the evaluation of HHS program effectiveness,
and the impacts of funding level changes on our programs.
HHS is also committed to providing the highest possible
standard of services and will use competitive sourcing as
a management tool to study the efficiency and performance
of our programs, while minimizing costs overall. The program
will be linked to performance reviews to identify those
programs and program components where outsourcing can have
the greatest impact. Further, the incorporation of performance-based
contracting will improve efficiency and performance at a
savings to the taxpayer.
WORKING TOGETHER TO ENSURE A SAFE AND HEALTHY AMERICA
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, 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.
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revised: March 13, 2002