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Testimony on FY 97 Labor/HHS/Education Appropriations 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
June 6, 1996

Good afternoon, Mr. Chairman and Members of the Subcommittee. Thank you for the opportunity to discuss President Clinton's FY 1997 Budget for the Department of Health and Human Services.

This budget is built on a remarkably strong foundation of accomplishments that have resulted from carefully chosen investments in the health and independence of all Americans. Time and time again these investments have paid off, and our optimism continues to grow.

For example, childhood immunization rates have reached an all- time high and the incidence of childhood infectious diseases is declining.

Welfare case loads are down by more than 1.4 million, a decrease of 10 percent, since March 1994; child poverty is down and child support enforcement collections are up.

Our investments in biomedical research have helped lead to the discovery of three genes linked to hereditary breast cancer.

We have also witnessed the first drug treatment for severe sickle cell anemia and the first treatment for the most common form of stroke.

And our investment in medicine has helped scientists win approval for five new anti-viral drugs for people living with HIV/AIDS, including three very promising protease inhibitors, two of which were approved in record time.

We have already granted waivers to 37 states that are now reforming welfare for 10 million parents and their children - that's 75 percent of all AFDC recipients nationwide. The President remains committed to working with the Congress to pass a bipartisan welfare reform bill this year that honors the values of work, responsibility, and family. In the meantime, we are building on what States are already doing to promote work and protect children, by addressing one of the key components of welfare reform parental responsibility. Recently, the President announced a new initiative, to ensure that teen parents who are receiving welfare stay in school, live at home, and take responsibility for their future.

With this strong foundation in mind, we have designed a budget to help Americans help themselves in pursuing more healthy and independent lives.

This FY 1997 budget requests a total of $222 billion in spending for programs that fall under the jurisdiction of this Subcommittee. Of this request, discretionary spending totals $31 billion, which is an increase of 5 percent over FY 1996.

The President believes that we can balance the budget by FY 2002, ensure fiscal accountability, reform welfare, and strengthen and improve Medicare and Medicaid.

Our budget for FY 1997 helps us do just that.

The President's Medicare plan reduces the growth of projected spending by a net $124 billion over seven years, and guarantees the solvency of the Hospital Insurance Trust Fund for more than a decade. We are reforming Medicare to make it more efficient and responsive to beneficiary needs, to give seniors more choices among private health plans, to attack fraud and abuse, to cut the growth of provider payments, and to hold the Part B premium to 25 percent of program costs.

The President's budget also reforms Medicaid the right way: it maintains a strong federal-state partnership, while giving states unprecedented flexibility to meet the needs of their citizens. The plan would save $59 billion over seven years while retaining nursing home quality standards, and maintaining Medicaid's national guarantee of health care for our most vulnerable citizens.

We also have a tough plan to guarantee program integrity and fiscal accountability in the Medicare and Medicaid programs.

In FY 1995, the HHS Inspector General (OIG), Health Care Financing Administration (HCFA), and the Administration on Aging teamed up with officials in five key states to crack down on health care fraud and abuse. This program is called Operation Restore Trust. We want to expand this program to every state over three years.

Our FY 1997 budget calls for an expenditure of $597 million to give HCFA and the OIG the secure and stable funding they need not only to punish health care fraud and abuse, but also to stop it before it occurs. Our budget would increase spending to eliminate fraud, waste and abuse with expected net savings to the trust funds of $3.4 billion over seven years.

Our budget also includes President Clinton's comprehensive welfare reform plan that promotes work and responsibility and achieves about $38 billion in program savings in addition to the $3 billion already enacted. The President's plan would replace the AFDC program with a conditional entitlement with tough time limits and work requirements, while retaining a strong national safety net for children.

Mr. Chairman, we're changing the way we do business at HHS - not only in Medicare, Medicaid and welfare but throughout the Department.

As part of the President's plan to dramatically shrink the size of the federal government, we reduced our staff by nearly 3,300 FTE, a full 5 percent, between FY 1994 and FY 1995 alone. To meet the goals of the President's plan, we have committed ourselves to a seven-year right-sizing effort that will reduce the department's personnel by 7,000 FTE (from the FY 1993 level) by the year 2000.

In March 1995, we successfully launched the Social Security Administration (SSA) as an independent agency, thanks to the careful planning of both HHS and SSA staff.

Following up on this change and on the implementation of the Vice President's Reinventing Government program, we have streamlined the structure of our Department. We merged some of our operations and eliminated entire management layers - we have freed the Assistant Secretary for Health from day-to-day management responsibilities in order to strengthen this absolutely critical leadership and policy role in the Department's public health and science agenda.

We also have merged the operations of the Assistant Secretary for Management and Budget with the Assistant Secretary for Personnel Administration. The final result of these reorganizations is a lean, tightly organized Office of the Secretary.

We also have created an innovative new agency, the Program Support Center (PSC), whose sole purpose is to provide administrative services on a fee-for-service basis for HHS and other federal agencies. This agency is internally financed and competitive, and it is offering its services on a low-cost fee-for-service basis. Fees and service levels will be approved by a Board consisting of representatives of both customers and service providers. After a nationwide search, I have just appointed Lynnda Regan as the first Director of the PSC. Ms. Regan is a highly respected executive from Westinghouse and brings to the Department valuable private sector knowledge and experience. With Ms. Regan's leadership and the management structure we have created, the PSC is really a model built for the future. It represents our fundamental commitment to business-like management throughout the Department.

Mr. Chairman, perhaps most important, our FY 1997 budget continues its wise investment in the future health and well-being of all Americans.

Today's young people are tomorrow's leaders. Thus, we are committed to the goal of building Strong Foundations and providing Safe Passages for all children and youth. Strong Foundations are the building blocks of success for children and families, while Safe Passages provide some of the tools for navigating the often turbulent journey from childhood to young adulthood.

One such Strong Foundation is our Head Start program. Head Start is a program that, when done right, works to give children who are most at-risk a hand up on the educational ladder and a hand up in life.

Let me take a moment to tell a story about Head Start that I think best exemplifies the kind of vision and tough-minded management approach that we've brought to this department during the past three years.

At the beginning of our Administration, we discovered that in some communities, Head Start wasn't always being done right.

So, we brought in the best experts in the country - and asked them for a candid assessment of what needed to be improved. And then, we rolled up our sleeves and got right down to work. With those experts and bipartisan support in Congress, we set quality standards, provided resources to help centers meet these standards, and enforced strict penalties for those who fail.

Since 1993, we've helped loo grantees improve their programs and provide quality services to their children.

Our philosophy concerning Head Start is that we reward and demand quality from all of our programs. For those that can't, or won't meet these demands, we will close or reform their programs. Indeed, since October 1993, approximately 40 grantees have been terminated for failure to meet quality standards or have relinquished their grants.

For FY 1997, we have proposed an increase of $447 million over the FY 1995 level to serve 46,000 more children than we served in FY 1995. As part of this enrollment increase, between FY 1995 and FY 1997 an additional 7,400 infants and toddlers will be able to participate in the Early Head Start program.

The President believes strongly that the best safety net for our children is - and will always be - strong families. And, whether they're struggling to get jobs or keep them, we know that families need good child care to keep their children safe.

That's why the President is requesting over $1 billion for the Child Care block grant - so that more children from low-income families can have high quality child care and their parents can have peace of mind while they work, train or go to school.

We've all heard the horror stories: abused children; neglected children; forgotten children. The President wants to work with states and communities to stop these tragedies. That's why he's requesting $419 million in discretionary spending to help abused and.neglected children - by encouraging parental responsibility when possible and providing foster care and adoption when necessary.

Our commitment to children doesn't stop there. The President believes that we must help parents guide their children along the right path - the healthy path - the safe path - in life.

That means increasing our investment in AIDS prevention by $62 million. It means building on the President's historic children's tobacco initiative by supporting innovative community partnerships that give children the facts about a deadly addiction that could take years off their lives.

It means working with the White House Drug Policy Coordinator, General Barry McCaffrey, to ensure that all engines of our drug strategy - prevention, treatment, research, interdiction and law enforcement - are working together.

And, when it comes to preventing teen pregnancy, it means building on our success, from targeted demonstration grants to the President's recent initiative to require teen mothers on welfare to stay in school and live with a responsible adult.

To help ensure a clear message of abstinence and responsibility, while simultaneously addressing the broader health, social, education and employment needs of young people, our budget includes a new $30 million initiative that will help communities all over America implement local strategies with promising track records of reducing teen pregnancy.

A second key component of our FY 1997 budget is to maintain cutting edge health and science programs. To that end, we have requested $310 million for a revitalized Warren G. Magnuson Clinical Center at the National Institutes of Health (NIH).

This new state-of-the-art clinical center will house nearly half of all clinical research beds in the country and provide new and promising research opportunities for intramural and extramural scientists.

Our budget also provides $6.6 billion to NIH to fund a record total of 25,400 extramural research grants. With regard to AIDS research, we request a separate appropriation of $1.4 billion, nearly 34 percent over 1993 levels, which the Office of AIDS Research will direct to the most promising areas of scientific inquiry.

We also must be on guard against new and emerging infectious diseases that threaten all of us - in our water, in our air, and in our food. Therefore, the President's budget almost increases to $88 million CDC's national research, surveillance and prevention efforts against such diseases in 30 states. We also request $4 million to renovate and repair critical containment laboratory space at the Centers for Disease Control and Prevention in Atlanta - laboratories that are the first line of defense against these deadly diseases.

Further highlights of our FY 1997 budget are as follows: Health Resources and Services Administration (HRSA) - The FY 1997 budget request for HRSA is $3.1 billion. A total of $807 million is proposed for Ryan White activities, a $69 million, or 9 percent increase over FY 1996. This will continue our commitment to improve the quality and availability of care for individuals and families with HIV and AIDS. The request for the Consolidated Health Centers cluster provides $757 million for grants to local health centers that serve vulnerable underserved populations, including migrant workers, homeless individuals, and residents of public housing. This funding level maintains our commitment to ensure that they receive quality health care. In keeping with the Department's strong commitment to investing in programs that support Strong Foundations and Safe Passages for our Nation's children, the HRSA budget supports funding for several programs with the sole mission of improving the health of women of childbearing age and their children. These programs include the Maternal and Child Health Block Grant ($681 million); and the Title X Family Planning program ($198 million).

The FY 1997 request for CDC provides a $2.3 billion level of spending. Of that amount, $488 million will be spent on CDC discretionary programs for childhood immunization to continue increasing the percentage of two-year-olds fully immunized, which has increased from 55 percent in 1992 to 75 percent in 1995. These funds, when combined with the Vaccines for Children (VCF) entitlement program brings the total HHS childhood immunization expenditures to approximately $1 billion. A total of $618 million, an increase of $34 million (6 percent) over FY 1996, is requested for CDC's HIV/AIDS prevention programs. In FY 1997, CDC will continue to identify interventions that work for specific populations and help states and communities better target their resources to where they will be the most beneficial.

National Institutes of Health (NIH) - The FY 1997 request for NIH totals $12.4 billion, an increase of $467 million, or 4 percent, over FY 1996. This includes an additional $274 million for facility construction and renovation, primarily for the Warren G. Magnuson Clinical Research Center and an additional $193 million for research activities. NIH has constructed its budget request to minimize the impact on research project grants of this one-time extraordinary facilities cost. An additional $99 million is requested for FY 1997 to emphasize research on the biology of brain disorders; on new approaches to pathogenesis, the study of disease origins and development; on new preventive strategies against disease; on genetics of medicine; and on advanced instrumentation and computers in medicine and research. The highest research priority of NIH is the support of basic biomedical research through investigator-initiated research project grants (RPGs). These grants support new and promising ideas cutting across all areas of biomedical research. In FY 1997, the NIH budget provides $6.6 billion to support a record total of 25,400 RPGs, including 6,827 new and competing RPGs. The FY 1997 budget request continues to include all of NIH's AIDS-related funds-$1.4 billion-in a single account for the Office of AIDS Research (OAR), as these funds were appropriated in FY 1995. The Director of OAR will transfer AIDS funds to the Institutes in accordance with the comprehensive plan for AIDS research developed by the OAR along with the Institutes. The Administration strongly supports a consolidated AIDS appropriation as a vital part of ensuring a coordinated and flexible response to the AIDS epidemic.

Substance Abuse and Mental Health Services Administration (SAMHSA) - The budget request for SAMHSA totals $2.1 billion. This request will provide important substance abuse and mental health services to thousands of pregnant women and their children, high risk youth, and other underserved Americans. This budget request for FY 1997 focuses on the treatment of chronic substance abusers who are responsible for most of the crime related to drugs and for the use of 75 percent of all illegal drugs brought into this country. An increase of $214 million is requested to treat and prevent mental illness and substance abuse, and therefore, addressing recent trends in these areas. Also proposed is $1.5 billion for both the Substance Abuse and Mental Health Performance Partnership state grants that give states maximum flexibility to develop treatment systems that ensure access, quality, and improved outcomes for substance abusers, particularly in areas of high incidence and prevalence of substance abuse.

Agency for Health Care Policy and Research (AHCPR) - The FY 1997 request for AHCPR provides a program level of $144 million. Consistent with a Department-wide HHS Survey Integration Plan, AHCPR will fully fund the Medical Expenditure Panel Survey (MEPS)-replacing the National Medical Expenditure Survey (NMES)-at $45 million, as well as continue to fund its highest priority ongoing research commitments, the Research on Health Care Outcomes and Quality program at $48 million, and the Health Care Systems Cost and Access program at $48 million.

Health Care Financing Administration - HCFA is the largest purchaser of health care in the world. In FY 1997 Medicare and Medicaid expenditures will be about $319 billion for 72 million beneficiaries. The FY 1997 request for HCFA program management is $2.2 billion. Of this request, 73 percent will go to 77 private sector insurance companies throughout the United States who pay for the care given to Medicare beneficiaries. Only about 16 percent (i.e., $359 million) of the requested amount will go to fund federal employees and activities (about one tenth of 1 percent of total projected Medicare and Medicaid outlays). These activities will maintain and strengthen the Department's commitment to develop more efficient operating systems; manage programs to fight fraud, waste and abuse; and promote and monitor managed care spending and quality of care. To deal with the level of growth in the number of health care facilities, an additional $26 million is included in the request for the Survey and Certification program. - Administration for Children and Families (ACF) - ACF is the Department's lead agency for programs serving America's children, youth, and families. For FY 1997, we are seeking $7.7 billion for discretionary programs that promote healthy children, supportive families, and vibrant communities. Investing in Head Start and expanding enrollment are key Presidential priorities. The FY 1997 budget request of $3.98 billion for Head Start will serve an additional 46,000 children, establishing strong foundations for a total of nearly 800,000 children and their families. The budget request for the Child Care and Development Block Grant is $1.049 billion. This request is a component of the Administration's continued commitment to promoting family self-sufficiency by helping states fund child care services for more children from low-income working families. ACF is requesting $419 million for a range of discretionary programs that help states and local communities to protect children by strengthening families and preventing abuse; intervening when families are in crisis; and when necessary, making placement decisions to ensure children's safety.

Administration on Aging (AoA) - The FY 1997 budget for AoA provides $828 million for programs aimed at improving older Americans' quality of life. For FY 1997, AoA requests $451.2 million for Nutrition Programs, designed to continue providing the 240 million congregate and home delivered meals served to needy senior citizens. This request also includes $295 million to provide funding for a network of 57 state units, 670 Area Agencies on Aging, approximately 6,000 senior centers and more than 27,000 service providers, and $16 million for 21 5 Indian tribal organizations throughout the country. A total of $9.2 million is requested for in-home services for the frail elderly. The Long-Term Ombudsman Program will be funded at $4.5 million and will serve 1.5 million nursing home residents. To improve service and to streamline administration, the request provides for the transfer of USDA's Nutrition Program for the Elderly (NPE) and the Department of Labor's Senior Community Services Employment Program (SCSEP) to AoA.

Departmental Management (DM) - The DM budget includes requests for three separate appropriations-General Departmental Management ($145 million), Office for Civil Rights ($22 million), and Policy Research ($9 million)-that fund activities to provide leadership, policy, legal, and administrative guidance to HHS components; carry out the Department's civil rights and nondiscrimination enforcement programs; and support research to develop policy initiatives and improve existing HHS programs.

Office of Inspector General (OIG) - The OIG requests $75 million, a decrease of $4.2 million below FY 1996. OIG will focus its resources in the following areas: reviewing our efforts to improve children's welfare and child support enforcement collection initiatives; evaluating providers and services in the Medicare and Medicaid programs; ensuring the effectiveness of the public health delivery programs; auditing management control systems and financial operations; and the final phase of Operation Restore Trust. The Medicare Anti-fraud and Abuse Program (MAAP) is a proposed initiative to restore trust and accountability to the Medicare program. This initiative would build on the proven effective aspects of Operation Restore Trust, enhance general Medicare fraud protection activities, allow the OIG to pursue innovative antifraud initiatives, enhance data systems to assess trends and identify possible fraud and abuse, and expand OIG resources by retraining and adding staff to those parts of the country where fraud schemes are unfolding. Should this legislation be enacted, an additional $54 million in mandatory funding will be added to supplement OIG's current effort.

In summary, Mr. Chairman, we present a FY 1997 budget that:

  • builds on and maintains the President's commitment to balance the budget in seven years;

  • adheres to the goals of the Vice President's National Performance Review by "right-sizing" our management structure and developing new business approaches to delivering administrative services in a low-cost, efficient manner;

  • children and families; and

  • maintains our national commitment to cutting-edge health and science programs.

Our FY 1997 budget represents a strong, well thought out, and fiscally prudent blueprint to guide us into the 21 st century. It's about balancing the budget, being tough managers, and making a sustained investment in the health and human service programs that all of our citizens-from the youngest to the oldest-will need to thrive in the 21st century. We look forward to working with this Subcommittee on our FY 1997 budget requests. Thank you again, Mr. Chairman, for the opportunity to present our budget to the Subcommittee. I will be happy to answer your questions.

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