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Testimony on FY 96 Appropriations Bill Impasse by The Honorable Donna E. Shalala
U.S. Department of Health and Human Services

Before the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies
March 5, 1996

Mr. Chairman, Senator Harkin, and members of the Subcommittee: thank you for the opportunity to speak to you today about completing our appropriations bill for the 1996 fiscal year.

My message this morning Is simple and direct. Let's finish the appropriations process for 1996. Let's do it without any more continuing resolutions and without cutting the programs we all agree contribute to the health and well-being of our citizens.

I want to briefly review for you the year HHS has faced. We lost 3.5 million hours of work because of the shutdowns. We are working very hard to make up for the valuable time lost.

We are now operating under the ninth continuing resolution (CR) for 1996. Three HHS agencies - the National Institutes of Health, the Centers for Disease Control, and the Food and Drug Administration - have been funded for the entire fiscal year.

Only part of several other HHS agencies - the Indian Health Service, the Administration for Children and Families, the Health Care Financing Administration, and the Administration on Aging - are funded for the entire fiscal year, while the remainder of the Department is funded through March 15. Overall, only 58 percent of the HHS discretionary budget has been funded for a fiscal year that is nearly half over. Not only did the shutdowns create backlogs of work, but the multiple short-term CRs created additional burdens for HHS, for our state, local and nonprofit grantees, and ultimately for the citizens we serve. These CRs forced HHS to issue numerous short-term grants instead of single annual awards that normally are provided. Without knowing when or how much funds would be available to them, many grantees were forced to discontinue services, delay payments to contractors or forego essential planning activities.

For instance, when we think of Head Start, we most often think of a single local Head Start center in a nearby neighborhood. Head Start centers are operated by 1,400 individual grantees each year in neighborhoods all over the country and serve more than 750,000 children and their families.

Because of the short term CR and reduced funding, many local Head Start programs are having difficulty renewing annual contracts with vendors for services such as transportation, cleaning, and supplies. Arrangements are made on a weekly or monthly basis, rather than on a more economical annual schedule.

To adjust to these cuts, in Iowa, the Head Start program in Cedar Rapids is buying only minimal supplies, and training has been dramatically cut back. In addition, three sites in Linn, Benton and Johnson Counties are facing possible loss of their licenses unless needed facility renovations are made; yet, these renovations have been canceled because of funding uncertainties. The Head Start agency in Bucks County, Pennsylvania, has put a freeze on filling staff vacancies.

These disruptions and funding reductions undermine the considerable progress that this Administration and the Congress together have made in upgrading the quality of Head Start over the past three years.

Because of the lack of full year appropriation for the Ryan White program, which provides medical and support services for people with HIV and AIDS, 42 cities-that are existing grantees are presently receiving only about half the amount which they would normally have received at this time.

Many community and migrant health centers also have been hurt by the uncertainties and reductions caused by these short term CRs. The community and migrant health program is a network of 1,400 health centers that serve as the health care provider of last resort for the poor, for people infected with HIV, and for other vulnerable populations. Health centers are small businesses that must meet weekly financial obligations such as payrolls, hazard insurance premiums, and medical insurance payments. They are very vulnerable to acute cash flow problems and often operate with little or no reserves.

Some health centers normally are able to leverage their federal grants to obtain bank loans. But health centers now have reported that banks are declining their loan requests. For example, a Rhode Island bank withdrew a financial commitment previously made to a health center after a reduced federal grant left the center with inadequate collateral.

Clearly, the current funding uncertainties and reductions hurt many of the hard-pressed individuals and families who depend upon HHS programs.

On September 15, this Committee reported a discretionary total of $28.1 billion for HHS. Recently, budget talks on appropriations that have taken place between the Administration and Congress have suggested that this amount should be raised by about $600 million. So, as you finish the 1996 appropriations process, I want to remind you of the areas where the Senate bill falls short.

The Senate bill takes us in the wrong direction in a number of priority areas, but three in particular: Head Start, substance abuse and Ryan White programs. These are areas where we've made great strides, and we can't afford to lose ground.

Head Start

We are all aware of the positive impacts Head Start has on the lives of low income children as they begin their educational development. The President had proposed in his 1996 budget a path of investment in Head Start that would lead to a $1.5 billion increase by FY 2002.

The Senate bill doesn't go forward in building this program, but takes a step backward, cutting spending by $133 million below last year's level. This could reduce enrollment by 45,000 to 50,000 students if programs maintain their current level of quality.

We are proud of our FY'95 success in implementing the Early Head Start program which the President and the bipartisan Congress created to reach our youngest and most vulnerable infants, toddlers and their families. We must move forward in FY '96 to provide top quality comprehensive services for even more infants and toddlers who so critically need this early head start to reach their potential.

Substance Abuse Treatment and Prevention

The Senate bill would provide only $1.7 billion (aside from the proposed $200 million transfer from the Department of Education) for SAMHSA - our primary agency supporting the prevention and treatment of substance abuse and vital mental health programs. At this level, we would be forced to cut programs 23 percent from the FY 1995 enacted level. Particularly troubling is the devastation to SAMHSA's demonstration programs - over a 70 percent reduction in one year. The effect of these cuts is staggering. The proposed $200 million transfer from the Department of Education would somewhat ameliorate these cuts, but it is not a good solution because it would fund SAMHSA at the expense of another Administration priority - the Safe and Drug Free Schools program.

Programs that reach an estimated 100,000 high risk youth annually would be jeopardized. These programs have been shown to have substantial benefits delaying the onset of alcohol and drug use, and lowering the rates of cigarette and marijuana smoking.

Treatment programs that have shown great successes would also be terminated. In Colorado a follow-up study found that of the clients who had been arrested in the two years prior to treatment admission, 94 percent had not been rearrested for driving under the influence and about 80 percent had no arrests for other offenses during the follow- up period. In another case, the Miami Coalition for a Drug Free Community used SAMHSA funds to support collaboration between law enforcement and family/neighborhood task forces that were instrumental in reducing crime by 24 percent, making over 8,000 arrests and identifying and destroying crack houses.

Ryan White

The HIV epidemic is a growing public health problem and the leading cause of death among Americans between the ages of 25 to 44 years. The Senate funding level for Ryan White activities of $656.5 million - $67 million less than the President's budget - will adversely affect communities already facing an overwhelming demand for services.

The Senate committee level will mean:

  • over 75,000 fewer office based medical care visits, and 38,500 fewer home health care visits In title I cities;

  • over 46,000 fewer office-based medical care visits and over 66,000 fewer home health care visits under title II;

  • 10,000 fewer clients with HIV and 10,500 fewer clients at risk of HIV infection receiving community based early intervention services.

Pediatric projects will be unable to expand ZDV therapy to reduce perinatal transmission; expand outreach, counseling and testing and care for women and infants by 15 sites; or develop new comprehensive HIV care programs for youth with or at risk of HIV infection.

In addition, up to 10 more cities are eligible to receive title I awards in FY 1996. Reduced funding will force us to dilute awards as the number of cities grow.

At the same time, the need for added Ryan White funds will increase as a result of recent approval of a new class of AIDS drugs called protease inhibitors, which have shown promising results. Under current funding, many states will be unable to expand drug coverage for the new and promising new drugs.

Administration on Aging

Chairman Specter and Senator Harkin, there are other funding shortfalls in the Senate bill which deserve attention.

Our 1996 budget made a strong commitment to the needs of low- income and frail elderly through nutrition and social services programs funded by the Administration on .Aging (AOA). We proposed increased funding for aging research to strengthen the infrastructure for home and community-based care for the elderly. The Senate, however, reduced spending for these activities by 91 percent. This will seriously limit AoA support for state and community efforts to improve the well-being of older persons.

Senate proposed cuts would also curtail ombudsman and preventive health programs. AoA now has 565 ombudsman programs across the country that serve as a front line of defense against elder abuse in our nursing homes. In 1 994 alone, ombudsmen processed 207,000 complaints of elder abuse, neglect and resident problems in nursing homes and helped resolve 74 percent of these complaints.

An AoA ombudsman in Pennsylvania found that an elderly nursing resident had spent all of her savings on nursing home care. The nursing home mistakenly began discharge proceedings for non-payment. The ombudsman intervened with state authorities and she was able to stay in the nursing home.

The ombudsman program has also made a difference in Iowa. For example, an 88 year old resident was placed in a nursing facility against her wishes. The state's ombudsman was called by the patient's daughter who had made appropriate arrangements to accommodate her mother but who was told by the nursing home that her mother could not leave without her doctor's permission. The ombudsman educated the daughter on the rights of the resident and the ways in which the family could ensure that those rights were respected. The patient was removed from the facility two days later and is now being cared for by her daughter at home.

Agency for Health Care Policy and Research

The Senate recommendation of $127 million for the Agency for Health Care Policy and Research (AHCPR) is a considerable improvement over the House-passed level of $66 million. If AHCPR research funding streams are suddenly curtailed, important clinical guidelines for the medical community and critical research projects will be curtailed. However, we recognize that AHCPR will at least be able to do much more with the Senate appropriations than it would be able to do if the devastating House cuts were imposed.

Administration on Children and Families

The President had proposed $72.5 million for the new community schools program in FY 1996 to offer teenagers after-school activities including academic enrichment, tutoring, and mentoring to at-risk youth as part of our crime prevention efforts. However, the Senate has provided no funding for this program. As a result, we will lose the opportunity to give more than 110,000 youth the chance to escape the cycle of crime and violence that now plagues their lives.

Because of lack of funding in the House and Senate budgets, we have already closed two community-based youth programs: one in Chicago and another in Los Angeles. If funding is not appropriated for the Community Schools program, we will be forced to close crime prevention and youth development programs in four dozen more communities this year as well as fall to reach hundreds more communities that have applied for funding.

The President had also proposed $21 million in social services and child welfare research. Again, the Senate provided no funding for these important research and demonstration programs supporting welfare reform, child care, services for abused and neglected children and family development. This small investment has a great payoff in working with state and local government and private agencies by providing information on how to best serve those in need, and to enable our tax dollars for these programs to go further.

The President also had proposed $122 million for programs for developmental disabilities. The Senate reduced funding for these important programs by 8 percent. This reduction will hinder our efforts to support a wide variety of activities, such as protection and advocacy and university projects, which target assistance to individuals with developmental disabilities. The effects of the disrupted funding are already being felt. in Los Angeles, the protection and advocacy program has ceased taking new clients. The Illinois Developmental Disabilities Council has had to reduce projects targeted to minority groups in metropolitan areas that provided direct assistance for families.

Health Care Financing Administration

The Continuing Resolution and three years of nearly level funding in the Medicare Survey and Certification program have built up large backlogs. Nineteen states have informed us that they are no longer admitting providers requiring Survey and Certification into the Medicare program because of funding constraints and backlogs.

This activity assures quality standards in nursing homes and home health facilities. The Senate recommendation of $135 million will bring the program below the levels of the CR.

Chairman Specter, Senator Harkin and members of the Subcommittee, I know that you are concerned about making savings in our bill and holding down administrative costs, but let me put that in perspective for you.

Currently, our administrative costs are less than 2.5 percent of total HHS outlays. Moreover, we have committed ourselves to a seven- year right-sizing effort which will reduce the Department's personnel by over 7,000 FTE from FY 1993 levels by the year 2000. Last year, we made a substantial down payment on our right-sizing plan, reducing HHS staffing by nearly 3,300 FTE, or 5 percent.

In the 1996 budget, we recommended consolidating 108 programs into 16 clusters, saving $15 million in administrative costs and 230 FTE. This proposal still awaits Congressional action. Following the Vice President's reinventing government initiative, we have eliminated an entire management layer by consolidating activities of the office of the Assistant Secretary for Health into the Office of the Secretary, while retaining and enhancing the responsibilities of Dr. Phil Lee, our Assistant Secretary of Health.

We also have merged the operations of the Assistant Secretary for Management and Budget with the Assistant Secretary for Personnel Management, creating an agency whose sole purpose is to provide centralized administrative services on a fee-for-service basis. We can expect long-term savings from this innovative arrangement.

Finally, we have launched "Operation Restore Trust," a major initiative to attack fraud and abuse in Medicare and Medicaid. This five-state demonstration operates in New York, Florida, Illinois, Texas, and California where 40 percent of Medicare services are provided. It focuses on the three fastest growing services in the programs - home health, skilled nursing facilities, and durable medical equipment. Operation Restore Trust represents a new partnership of the HHS Inspector General, the Health Care Financing Administration, the Department of Justice and the Federal Bureau of Investigation, states' attorneys general, state Medicaid fraud control units, insurance companies, and Medicare contractors who are combining their efforts to crack down on fraud and abuse.


I am mindful of the very positive efforts that both you, Chairman Specter, and Senator Harkin have made to increase the 602(b) allowance for the Labor, Health and Human Services and Education Subcommittee which now stands at $62 billion. The Administration has recommended that this allocation be increased by $4.5 billion. This is necessary if we are to meet the President's funding requests for critical health and human services, education, and employment programs.

The Administration has supplied the Committee with a list of potential funding offsets, which should supply the additional $4.5 billion needed to fund the Labor-HHS Education bill for 1996.

Simply put, I believe it is time to finish the 1996 appropriations process so that we can manage our operations in the most efficient manner possible and fund the high-priority programs of this Department that have strong bipartisan support in the Congress. We must stop the "cash and carry" approach to financing vital health and human services programs.

Thank you, Mr. Chairman, for the opportunity to speak with the members of this Subcommittee this morning.

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