Office of Budget
2007 Budget Briefing
February 6, 2007
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MR. JOHNSON: --Johnson. I'm a new face to most of you. And you will acknowledge Kerry Weems, as I do. Kerry Weems has been at this podium in the past, and I'd like to thank you. He, he started this whole process with this year's budget. And I was selected to finish it. I'm delighted to be with you today.
I also would like to thank my staff who has spent an enormous amount of time with this budget. Many of them are not in this room. They're watching by closed circuit. And I'd like to just wave and thank them for their services.
I'm one that believes in a little bit of efficiency. And so we're going to structure this a little bit differently. The secretary will give remarks and he will answer three or four questions. Then, he will leave. In as much as a lot of questions center around Medicare and Medicaid, Dr. Mark McClellan will then come up and answer that series of questions. He will also leave. And at that point then I will ask the rest of our agency heads, who are seated in front of me, to join me at the podium, and we will field all of the rest of your questions and take it to that point.
So, Mr. Secretary, Michael O. Leavitt.
[Applause.]
SECRETARY LEAVITT: Well, good afternoon, and thank you for coming to discuss the President's budget for the Department of Health and Human Services for the fiscal year of 2007.
I'd like to express the appreciation I have to Charlie and all of those who have worked to prepare this budget. It's a fine team and a fine budget.
Over the past five years, this administration has worked to make America healthier and to make it safer. Today we're looking forward to be building on that record of accomplishment.
This budget represents a hopeful agenda for the upcoming fiscal year, one that strengthens America against potential threat. It heeds the call of compassion that we all feel. And it follows the wise fiscal stewardship that's necessary to advance our Nation's health.
To support these goals, President Bush has proposed a budget that is nearly $700 billion for the Department of Health and Human Services. This represents an increase of some $58 billion over the 2006 budget, which provides a 9.1 percent increase.
I want to tell you up front that this budget includes some reductions. There are, of course, two parts to our budget those that are entitlements and those that are part of the discretionary budget.
To meet the President's goal of cutting the deficit in half by 2009, discretionary spending will decline by about $1.5 billion over the fiscal year. We had to make hard choices, hard choices about very well-intentioned programs. I want to acknowledge that every program is important to someone. I want to recognize that that's true--that that's the way they got into the budget in the first place. If these weren't programs of value, they wouldn't be there. But hard choices had to be made. And this budget reflects our effort to make those in the wisest way.
Reasonable people always disagree on the conclusions about what programs are essential and which programs are not. And that's been true in every budget I've ever been involved in. And it is, of course, true today.
This budget reflects the areas that have, in our collective judgment, the highest potential pay off. I'd like to take you through the principles that we used to determine where the funds should be committed.
I want to also acknowledge that there are initiatives in this budget that are new, such as expanding the health information technology budget or our domestic HIV AIDS program. The testing and treatment program I'll speak briefly on later. We're also continuing to fund many of the commitments that the President previously has made, such as expanding dramatically the community health centers, access to recovery, bio terrorism and funding of pandemic flu preparation. We're also protecting programs in this budget that are in high demand or budgets that have proven to be highly effective. Head Start is an example, NIH, the Indian Health Service, are good examples of budgets that we have protected in significant ways.
We propose to pay for many of the priorities that I listed by reducing or eliminating funding from programs whose purposes are addressed in multiple agencies and by continuing the insistence that we have that budgets are based on performance. And some of the programs that you'll see eliminated are programs we identified in a previous budget year that were not, but we have continued to believe that they are less than optimal in their performance.
I want to characterize this budget as a responsible budget. It is--you will see laced through it a series of themes that characterize our intent. One theme is the need for us to protect the health of Americans against the threat of bio terrorism and pandemics, need to provide care for those who need it. The budget protects life. It protects family. It protects human dignity. It enhances the long-term health of our citizens. And it improves the human condition throughout the world.
Now, as we look at budgets, we must never forget that we are a Nation at war. We have seen the harm that can come from a single Anthrax laced letter. We have to be prepared to respond to that. We have to not only be able to respond to something that we have already experienced, but something new or even worse. So the President's budget calls for a 4 percent increase in bio terrorism spending for the fiscal year 2007. That will bring the total to $4.4 billion. And it's an increase of $178 million over last year's level. The funds will increase the medicines and supplies that are available in the strategic national stockpile. It will promote the advancement of bio defense counter measures that are being developed at the National Institutes of Health. It will support the transformation of the commission corps into a fully equipped force that can meet any public health emergency.
We must also continue to prepare against the possible--against a possible pandemic. This budget funds the goal that the President put forward, including the ability to provide pandemic influenza vaccine to every man, woman, and child within the United States within six months of detection of a human-to-human transmission of a pandemic virus. It also includes the necessary stockpiling in matters such as anti virals for 25 percent--supply sufficient to supply 25 percent of the entire population should a pandemic strike. It enhances the domestic and the international disease monitoring that's necessary for our preparedness.
The President's budget also includes a new initiative to fight HIV AIDS. $188 million will be found in the budget. The funds go to a number of very important and noble goals, including the testing of some 3 million additional Americans for HIV AIDS and the treatment of those people who are currently on state waiting lists for AIDS medicine. There are obviously others who need care in our society. We look to promote the independence and the choice for individuals through vouchers and through increased access to substance abuse treatment.
In the area of entitlements, I'd like to begin by noting that Congress successfully enacted many needed reforms last week by passing the Deficit Reduction Act. The act brings us closer to achieving sustainable growth rates in important programs such as Medicare and Medicaid. It also strengthens child support enforcement and increases funding for child care.
The Deficit Reduction Act also achieves a notable accomplishment in re-authorizing the temporary assistance for needy families. Prior to that re-authorization, it had been continued through a series of short-term extensions, 10 of them in fact. So to have that now continued on a permanent basis or re-authorized is a significant step in our ability to care for those who are in need.
It also continued important reforms that will make Medicaid more sustainable. This budget will build, will build on those important reforms. Along with the sustainability of Medicaid, our budget will take steps to improve the long-term fiscal health of Medicare. We're proposing a number of adjustments that will produce substantial savings. For instance, the budget will allow Medicare to continue to grow, but at a slower rate.
And may I just say this is a subject that has been dealt with in previous administrations, but we must do our share as a generation. And this Administration chooses to do so. One need only look at the facts. Medicare, today, represents 3.4 percent of the entire gross domestic product of this Nation. Allowed to continue in the same rate by 2040, it would be 8.1 percent of the entire growth domestic product of our entire economic output as a Nation. By 2070, it would be 14 percent. No nation can sustain that level of growth and maintain any level of economic vibrance, economic vibrance that is absolutely necessary to produce the dollars required to care for those for whom we provide care. This is a necessity for us to maintain its sustainability.
We also have seen significant savings through and in Medicare because of market mechanisms. I raise in point the recent news last week that the new prescription drug benefit, Part D has seen substantial reductions over what was originally projected. It started out at $37 a month. It's down under $25 for prescription drugs per month. That's a very good example of the way an organized market will begin to drive prices down. For the first time in decades, we're seeing the prescription drug costs fall in that fashion.
The budget includes a package of Medicare legislative proposals that are designed to strengthen its long term viability. The proposals build on a long series of administrative priorities that are not new but are very important to restate. One is the need to improve and prevent our efforts in medical errors. Fewer medical errors mean fewer--less suffering, it means lower cost, encouraging efficient and appropriate payment services, fostering the kind of competition that I've just spoken of,, promoting beneficiary involvement in health care decisions.
As I've mentioned, the reforms that we're speaking of build on a series of reforms that have taken place in the first Bush Administration, George Bush 41, also President Clinton, also the Reagan Administration, and now this Administration. They will amount to reducing our growth rate by less than 1.5 percent. Under the current pattern, we would see spending at 8.1 percent over the next five years. Under this proposal, it would fall to 7.7 percent. As it's currently constituted, Medicare would continue to grow over the next ten years at 7.8 percent. Under this proposal, it would, it would continue to grow, but at 7.6 percent. Medicare will continue to grow, but at a slower rate.
The payment reforms that I'll refer to in just a moment reflect the recommendation of a bipartisan Medicare payment advisory commission. The commission very clearly believes and has put forward in a bipartisan way that the rates that are currently being paid are higher than necessary for access to quality. There are several initiatives that will be referred to in more detail later.
In addition to those related to Medicare, there are initiatives that protect life and family and human dignity. They include a new healthy marriage state grant program in ten of them. They include state grants to allow people with chronic illness to secure health insurance. The initiatives include grants that are aimed at delaying or preventing the need for seniors to enter long-term nursing facilities.
The last theme that I'd like to highlight today in today's preview is that these increases are increases in funding that will be focused very directly on assuring quality of health care that Americans will receive for years to come. A good example is one that I've already spoken of, and that is the initiative on health information technology. It increases the funding by some $60 million. By the end of this year, the American health information community will be producing real results that will fundamentally change the way health care is delivered with consumers. This is a momentum that we have moving. It is a momentum that needs to be kept and one that is by this budget.
The President's budget also increases funds for programs that we have initiated that will transform the way health care is delivered to individuals, programs that will make medicine more personalized, make it more predictive. It will make the way we practice medicine more preemptive. Let me just give you three examples. The genes and environment initiative being conducted at the National Institutes of Health is designed to identify the most common genetic factors of diseases of substantial public health impact. I'm talking about diseases like heart disease, diabetes, and cancer.
Later this week we will further demonstrate our commitment to this effort with an announcement of a new private/public partnership that's being formed to jumpstart the identification process.
A second example is the drug safety initiative that's conducted at the FDA. It's designed to provide emerging information about the risk and the benefits of medicine to health providers and to patients. The drug safety and oversight board is one of the cornerstones of that system. It is enabling FDA to ensure that drugs are safe and that they're an effective treasure to the American public.
A third example I'll cite is what we call the critical path to personalized medicine. This is an effort that spans many agencies here at HHS. And it's being directed by the Food and Drug Administration. It is a collaboration and a vision among all of the divisions here at HHS that are involved in research and evaluation, approval or the delivery of drugs. In the future we'll see people like you and people like me who will be able to--will have access to drug therapies, that are preemptive, that are preventative, and that, in fact, help us personalize in a very direct way the type of treatment that we receive. It's a very exciting frontier. It is the new frontier of medicine and one in which this budget focuses very heavily on. Those are just highlights of the budget.
Before I take a few questions, let me just say in closing, I'm an optimist. The President of the United States is an optimist. We're confident that we can continue to help Americans become healthier, help them become--to live longer and to live better lives. Budgets are investments in the future. This is a responsible, forward looking budget that reflects our hopeful outlook. And it sets us on a path to get there.
And now I'd be very happy to take a few questions. And then I'll ask my colleague. Charlie Johnson, to conduct the balance of the business.
QUESTION: [Inaudible] certain spending threshold is reached?
SECRETARY LEAVITT: The details, obviously, will still need to fleshed in with a cooperative way with the Congress. But it operates on a very clear principle. And that is that we establish an acknowledgement that Medicare will, in part, be funded by taxpayer funds and part by those who are contributed by, by participants or beneficiaries. We see that, in Part B of Medicare, for example, in 2007 for the first time we'll begin to see Medicare contributed to more by those who are making in excess of $80,000 or $160,000 as a couple. That recognizes that in order to keep that balance, that if it goes above 45 percent, that will trigger a series of actions that would keep it at 45 percent and would at that point then have to be acknowledged with a series of actions, either by Congress, or in other ways.
The details of it will be fleshed out and detailed at a future time. But that's how the basic mechanism works.
QUESTION: [Inaudible.]
SECRETARY LEAVITT: The two, as you know, there is a, what's referred to sometimes as a soft trigger in the 2003 Medicare Modernization Act, which requires the administration to make a recommendation should it exceed 45 percent. That is to say, if taxpayer funds would exceed 45 percent. This would harden that requirement and create a level of discipline. As I said, I believe the details of that will come forward in future days.
QUESTION: [Inaudible.]
SECRETARY LEAVITT: Well, I believe they are detailed. If you go through, you'll see that the Medicare, as I recall, amounts to I think $2.8 billion this year and the 39 being--thirty what?
MR. : 36.
SECRETARY LEAVITT: 36 over five years. And then you can look at the balance and you can see it spread among a lot of other programs.
I will tell you that, you know, a $700 billion budget is a large budget that has lots of detail to it. When I sat down with our team to say on the discretionary side we need to reduce this by a billion and-a-half dollars, we established a set of principles that were followed through all of the operating divisions.
Basically, I told them I want to give emphasis to those programs that are targeted and not just general reductions. I want to favor programs that are preventative and are not simply treating treatment after people are ill. I want to focus on prevention because it's a far more efficient and humane way of approaching our human service efforts.
Third, I wanted to focus during a tight budget year on offering treatment and not just building infrastructure. Fourth, I told them I believe that the market is a better determiner--determinant in a--than government. And if we can find places where government--or where markets are making decisions, those are more efficient. And I want to concentrate on those programs.
I also believe that it's true that people, that consumers make better choices often, almost always than government. That we ought to be investing in new technologies, not just the technologies that have run their course. And I also wanted to emphasize programs on which there was a broad, department-wide effort, as opposed to those that were in silos. And the most basic measure is can we demonstrate those that are having a positive impact? If we can, let's continue to fund them. If they're clearly positive, let's continue to fund them. But if we can't demonstrate those, then I don't think we should continue to fund them.
I'll give you one example that I believe will be prominent in your question. A lot of the block grants go to states. Now, I've just come off of 11 years of being a governor. As chairman of the National Governor's Association on many different occasions, I would come to Congress particularly during the 2001/2002 period when state budgets were so dramatically affected by economic cutdowns after 9-11. Congress was very generous in being able to appropriate to states various block grants. And frankly, governors really liked those dollars because they're highly flexible.
The problem, there are two problems. One is that there is no way to demonstrate how effective they are. We don't know how effective they are. And during a period of substantial deficit reduction, those have to be visited. They may be important during a period when we have the capacity to do it and the states are struggling. But I can tell you that my former colleagues as governors are in far better times right now. Most states are experiencing substantial increases in their revenues. There are exceptions to it. And those can be dealt with as exceptions, particularly places like Louisiana and Mississippi because of the impact of Katrina. We can respond to those.
But as a general matter, you will see that many of the reductions come in places where, frankly, we are just not in the position to help the states as much as we were before. And gratefully, they're in a position to be more helpful to themselves because their tax revenue collections are substantially better.
Yes sir?
MR. : We'll take one more and then--
SECRETARY LEAVITT: My independence is going to show. I was going to take two more.
MR. : That's what I was going to suggest.
SECRETARY LEAVITT: Yeah. I thought that--
[Laughter.]
QUESTION: Mr. Secretary, on page 56 you talk about expanding pay for performance in Medicare. And I wondered if that has any savings or spending associated with it? And connected with that, I guess, is the position update for 2006 that sums up on page 55 that the 4.4 percent update that was just rescinded. What's, what's in store for 2007 in that regard? Thank you.
SECRETARY LEAVITT: I'll invite you to get a lot of detail on this from Dr. McClellan. But let me just acknowledge the fact that I believe that this is a very important long-term initiative because it is the means by which we can continue to pay physicians and providers that which they need in order to make their practice run at the same time be able to increase the quality and get what we pay for and have the right treatment the first time.
The heart of pay for performance, however, is the need to measure it and measure it well. And at the heart of being able to measure it is health information technology. That is a theme that continues to come up. Our need to be able to gather information in a highly efficient way that allows us to measure quality and begin to pay on the basis of value added as opposed to just the number of procedures.
This goes back to a fundamental theme that you'll see through this entire budget. Health care must be viewed as a means of keeping people well, not simply treating them after they're sick. Dr. McClellan can give you more detail on that.
Yes?
QUESTION: I have a question about the NIH budget. As you know, this Administration over the saw the completion of the doubling, five-year doubling of NIH's budget. When you take into account bio medical inflation, it has now been four years--four years of cuts. And this year is a flat budget.
What is the rationale for doubling an agency's budget over five years and then cutting it in subsequent years?
SECRETARY LEAVITT: That doubling took place as an important national commitment. And it has been completed. And we need to continue to enhance it. But you'll see in this budget the fact that we are at a time when we're working to reduce our deficit. And we're not in a position to do as much as any of us would like to do this year. However, we have targeted very carefully and begun to put into place some very important principles. That is the need for collaborative work among the institutes at NIH. Dr. Zerhouni [ph.] has been brilliant in my judgment in the way he has been able to put forward the road map which begins to take some basic technological and scientific research that is common to all of the institutes. He's put forward a process by which we can bring all of the institutes together to select scientific priorities. When you have 27 institutes, each with their agenda, it's important to have that kind of leadership.
You will see represented in our research budget, efforts to assure that--I mentioned the effort on genes and environment. Every one of the institutes will benefit from that. All of the, we'll be focusing on the ten most sub--diseases that have the most substantial impact on public health. The entire institute, the entire Nation will, in fact, benefit from that effort. You'll begin to see us focus on those that are most preventative, those that--those sciences that will allow us not only to be preventative but also to be very personal and to reinvent the way we use science in the treatment.
It goes back, again, to the concept of let's change the way we view health care from how we keep people well--rather change it from just treating them after they're sick to keeping them well.
Mr. Johnson, I turn the podium to your able hands.
MR. JOHNSON: Thank you, Mr. Secretary.
Those were obviously good questions and we're delighted that you could get the Secretary's response.
As I indicated at the outset, we'd like Dr. McClellan now to come before you and speak in more detail to the Medicare and Medicaid issues.
Dr. McClellan?
DR. McCLELLAN: Thanks, Charlie.
Thanks, to all of you for coming this afternoon. And just to give you an update on where you can get some more information about numbers and technical details in the Medicare and Medicaid and S-shift [ph.], budgets, we're going to have a follow-up briefing in my conference room, the FEMA administrator's conference room at 2:00 o'clock. So any specific questions, technical questions, I'll be there as well as some of our senior technical staff. But if there are any important issues right now I'll be happy to address them. Yes?
QUESTION: A lot of the Nation's emergency rooms already say they're under siege. Hospitals say they're under siege. How can they be better prepared for, those and other crises if they receive less money under this budget than they currently get?
DR. McCLELLAN: Well, they are going to be getting a lot more money under this budget. As the Secretary mentioned, Medicare spending is projected to increase and under the President's budget it will still increase. It will increase slightly less rather than 8.1 percent per year for the next five years, 7.7 percent per year. And the changes in payments are in areas where the Medicare payment assessment commission, and other independent expert groups, have identified ways in which Medicare payments are not right. They're not at the appropriate level for providing access to quality care. So we are following along those recommendations for hospitals in many cases.
At the same time, as you know, there has been recent legislation, like the Deficit Reduction Act, that takes another big step forward toward enabling us to pay more for better care rather than more services. We have recent results from our performance-based payment demonstration with the premiere hospital group, for example, that shows that when you add in money for payment based on quality, you get better quality, fewer complications, and lower costs freeing up more resources for hospitals to use to do what their professionals wan to do. And that's delivering high quality care that gets it right the first time.
So those kinds of steps will be incorporated in the budget as we build on the recommendations of expert groups.
Yeah, Robert?
QUESTION: Could you tell us what is the first year that the trigger could reduce provider payments under the long-term proposal?
DR. McCLELLAN: Well, as you know, there is a soft trigger under current law. And in the actuary, the actuary trustee's report, actuary analysis for the Medicare trustees report for last spring, they forecasted in 2012 would be the first year in which the 45 percent so-called trigger would be reached. With the proposals in the President's budget, that date is pushed back significantly back to 2017.
And that's the point of the approach that we're taking in this budget. If we start taking incremental steps now, important steps, but incremental steps, we can make Medicare more sustainable while continuing to support high quality care, providing even better support for high quality care, and moving Medicare into a position where it can finance the needs of babyboomers for the long run.
What we'd like to do is take these steps now, which pushes that date back four years, just with the steps we take here, and then continue to build on those steps with further proposals that would come from the bipartisan commission that the President announced and continued close and ongoing attention to making sure Medicare will be there for the people who are counting on it with up-to-date benefits and high quality care.
QUESTION: 1 percent reduction applies not to the first year of the window, but the year in which the--
DR. McCLELLAN: The trigger actually applies. So it would be 2017, with the President's budget proposals enacted, would be the first year that would happen. And again, if we take steps like we're proposing in our budget now, we can keep pushing that back and back just like we're doing in this year's budget.
Other questions?
[No response.]
DR. McCLELLAN: Okay. Thank you all very much.
Oh, sorry. I didn't see. Where?
QUESTION: Hi! Sorry.
Can you talk a little bit about the justification for the change in the high income beneficiary cost sharing? I guess you're taking the indexing off. Aren't you sort of creating another alternative minimum tax situation?
DR. McCLELLAN: Well, we're developing a proposal that would gradually increase the amount that wealthier beneficiaries would pay for their Medicare services. And the income-related premium, as it's enacted in the law now, applies to only a small fraction of Medicare beneficiaries who have substantial incomes, $80,000 for an individual, $160,000 for a couple.
By not indexing this proposal that--it will apply gradually to additional people, but only very slowly, so even by 2016, fewer than 8 percent of Medicare beneficiaries would be paying the additional premium. And even for those beneficiaries--this is very important, they are still getting large subsidies for their Medicare benefits.
They get the full Part A subsidies. They get the full Part D drug benefit subsidy, and they get continued subsidies for a large part of their Part B expenses. So they are continuing to get large and growing support from the Medicare program, but we are limiting the growth in those subsidies at the very high end; that's one more step to make Medicare sustainable for the longterm.
Yes, John.
QUESTION: A question on the bipartisan commission: What are you hopes as to when this would actually begin and when it would actually begin making recommendations?
DR. McCLELLAN: Well, that's something that we hope to start talking with the Congress about as soon as possible; that's why the President mentioned it in his State of the Union Report, and that's why we are proposing some steps in the interim that can get Medicare on a path toward more sustainability, and the bipartisan commission can add to that.
Again, if we take incremental steps now, steady steps now, we can make the program sustainable without having to go to drastic changes in taxes or drastic changes in benefits or other steps, and that's something that we think there should be strong bipartisan support for doing, so we're hoping the commission can get going soon.
Thanks. Last one. Yes, you.
QUESTION: With the Health Savings Accounts proposal, it looks like over the 10 years it's $87 billion or $89 billion cost. When would you expect those proposals to actually start saving money--that have cost--the health care systems--Health Savings Accounts would eventually drive down costs?
DR. McCLELLAN: Well, those are new subsidies for Health Savings; that's not a measure of what their impact is on the overall cost of the health care system. And what we're seeing already, among the more than 3 million Americans who have signed up on their own for a Health Savings Account, is that they're saving money.
They're getting the health insurance that they need at a lower cost; they are, in many cases, using less health care, because they're getting help in identifying ways to get the care they need at a lower cost, and so that's already contributing to a slowdown in medical expenditure growth.
This past year, for example, we've seen the lowest growth rate in prescription drugs in more than a decade as more people are switching to the more widely available generic drugs and finding other ways to save on their drug costs while still getting the prescriptions they need. So that's going to continue happening on out into the future, especially as more and more people go into HSA-type proposals, and that's what the administration's initiate would do.
And just from a Medicare and Medicaid standpoint, I want to highlight that one of the main concerns that people who have had HSAs have raised is that it can be difficult to get the kind of information they'd like, relevant information on the quality of care and the cost of care for the options that are available to them, for different providers, different choices of drugs or other medical treatments.
We are going to be doing a lot more work in CMS and throughout the administration in the coming year to make better and more useful information on quality and costs available. For example, in CMS, we're working to make information on patient satisfaction with hospital care available, information on hospital outcomes after surgery so that people can make very informed decision about getting the care that they need at a lower cost.
So those savings are going to start right away, and they're going to be--we're going to push them along further by the fact that more and more people are going to be joining plans and making use of information that can help them get the care they need at a lower cost.
Thank you all. And again, we'll have more technical briefing opportunities available at 2 o'clock.
MR. JOHNSON: Thank you, Mark.
I'm going to ask those on the front row to join me on the podium. While I'm doing that, let me say, Mark had indicated--Dr. McClellan had indicated that he will have--you will have access at 2 o'clock to the rest of the CMS budget group. I would like to say that all of the operating division heads that are joining me now on stage will also remain here and be available to you to the extent you don't get your questions asked or answered during this session.
So with that, I would like to open it up to general questions, and we'll--on the end over here--and let's make sure we get the microphones.
QUESTION: --the summary of the [inaudible} about this morning, first the President's initiatives to encourage states to use--or [inaudible] to use block grants for the ATR Program, and also, it says to look for new opportunities to expand choice and other drug treatment activities.
My questions are: Won't using the block grant funds from more ATR (?) programs take away from other necessary programs? And could you elaborate on what other new opportunities, perhaps, there are to expand choice and treatment programs?
SECRETARY LEAVITT: Very good. The premise behind the use of ATR as an incentive to encourage states to consider using block grant dollars for vouchers is based on one, the principle of volunteerism; in other words, states will voluntarily come forward if they're interested in using more of their block grant dollars for vouchers.
There are states who have used block grant dollars for vouchers; nothing precludes that. We do not see it as taking away from treatment capacity issues, but it would be a different financing mechanism. And the way it would work is, we're looking to have $70 million out of the Access to Recovery dollars to be available for states to apply, and they will receive points for the percentage of the block grant that they would consider vouchering.
On the other hand, a state can apply and not put any of the block grant up for vouchering; the exception would be the current ATR (?) states. There would be an eligibility criteria that they would need to put 20 percent of their dollars or 20 million, whatever is left, up in order to be eligible to apply for further grant dollars.
So, one, it's voluntary; two, states who want to utilize choice and empower consumer decisions can step forward and will receive credit and recognition for that; and three, we see it, in fact, enhancing treatment capacity.
And your second part of your question?
QUESTION: [inaudible]
SECRETARY LEAVITT: I think the current budget pretty well describes those areas, and that's access to recovery and the opportunity to give incentive to states to utilize the block grant where they would see fit.
MR. JOHNSON: Might want to mention the aging program. It gives other people independence.
Josephina, (ph) would you respond to that question?
MS. : Part of the FY'07 President's budget and the aging line item includes a very new and exciting program called "Choices For Independence," in which it accelerates the ability to target systems changes to allow people to remain independent longer in the community by including our best science out of our institutes of health and putting that at the community level in the area of prevention; that means improving the outcomes of the prevention techniques used at the community level.
It also accelerates long-term care systems to give people the choice, broader choices to remain at home in the community and away from nursing homes. And it also informs people earlier on choices that they might need to do to plan ahead for their long-term care needs: housing, health care, and other supportive activities.
MR. JOHNSON: Let's see. Let's keep the microphone at the back at this point, right in the middle.
QUESTION: Thanks. Question for Dr. Zerhouni: If you could just clear up one thing about the genes (?) environment and health segment of the budget which is calling for an increase in 49 million, but the Secretary alluded to new programs being announced later this week. So how much of the 49 million is going to those new programs, and then how much is simply funding the existing gene environment and health programs through an [inaudible]?
And then the second question is about the bioterrorism allocation in your office for Project Bioshield. Part of that is for a third-generation anthrax vaccine, and I wonder if you could talk about the rationale for a third-generation anthrax vaccine when there are a lot of infectious disease [inaudible] there is no available vaccine. Thanks.
DR. ZERHOUNI: ? I'll address the Genes and Environment Initiative. As you know the haplotype map was completed in October of 2005. And one of the opportunities that has emerged through that research is the possibility of using many of the cohorts of patients that we've studied over the years and rapidly screening for the most common conditions, what genetic linkages can be found, which will really usher a new year of investigations.
We've had an example this year with age-related macular degeneration. By using this strategy, we found a completely unexpected gene that explains 50 percent of the cases of one of the most common causes of blindness in our seniors.
But this is what we're trying to expand, so all of the funds are going to be directed to two things: One, Genome Y (?) that association studies, and two, because measures of environmental exposures need to be performed at the individual level, we're going to have a program where we're going to develop completely novel ways of measuring exposures at the individual level; a little bit in line with what the Secretary's saying.
We really believe we're on the edge of a transformation where medicine is going to be predictive, personalized and preemptive. And as a stepping stone to that, we needed to do this on an accelerated basis.
In terms of the bioterrorism effort, the--remember that the dollars that are there are really for advanced product development. What is happening structurally is that you make discoveries in a laboratory, and then to really implement that and scale them up to a production level where they can compete for bioshield funds for procurement, you really have a gap between the two.
And that gap needs to be managed extremely actively, we believe, and it needs to be looked at depending upon what we call our threat matrix and understanding what the dangers are out there based on analysis that are performed, not just at HHS, but the Department of Homeland Security and other agencies.
And to be responsive to it, we really need to bring the know-how that comes from RND (?) to the intermediate phase, which is the scaling up and validation of an approach. The anthrax issue that you're raising, I'm not familiar with the details, but at 3 o'clock we have a session at NIH, and we'll be, certainly, happy to comment on specifics like that.
MR. JOHNSON: That's 3 o'clock this afternoon; is that correct?
DR. ZERHOUNI:? Three o'clock this afternoon.
MR. JOHNSON: Okay. Now we had two or three hands here. Yes. [inaudible]
QUESTION: Correct. Thank you.
Dr. Zerhouni, back to you. The Secretary described a focus on preventing diseases and on the most common diseases that affect Americans. Can you help us understand that initiative in the context of a $40 million cut, a National Cancer Institute cut for diabetes research; those are two that come to my eyes immediately.
And second question: Help us understand more broadly what your office is going to do with $140 million increase?
DR. ZERHOUNI: For Biodefense, you mean?
QUESTION: Office of the Director.
DR. ZERHOUNI: Okay. Right so, I think it's very clear that what you call cuts, if you will, if really what we have to recognize, and that is that you have to do prioritization. And I think the Secretary said it well. I think we need--we want to make platform investments that apply to all of the institutes.
For example, new investigator programs are important, so we have a New Investigators initiative that will fund 150, 200 new scientists who are coming to the field. And, in fact, when you have level of funding like this, one of the dangers that we identified at NIH and what we've been preparing for is the possibility that new entrants to the scientific field will get discouraged, so there is that program.
The second is a continuation of our investments in discovering the fundamental basis, the genetic basis and environmental factors that drive the development of many conditions not just cancer or heart disease, and that's the reason why you have that investment.
When you say $140 million in the Office of the Director, I think you can refer to two things: One, is this dollar amount that relates to advanced product development, which needs to be managed separately, because it needs to be tied in, both in RND (?) that's done across the institutes--and when you look at that it's nuclear, radiological, select agent threats as well as neurological threats they have researched in the institutes. You need to tie it to them the next step, which is bioshield procurement. So that needs to be done and managed in a way that I think is responsive to that next step.
In terms of the other dollars in the budget, as you know, we've planned a roadmap for the entire NIH over several years; in 2003 we announced that. And therefore there's a component of the budget which is in the Office of the Director, about $111 million, and the other component is $332 million that is in the institutes. And that's a common fund, if you will, that we have all managed jointly to sort of identify the most important areas of research that will be forgotten sometimes.
If you have tight budgets, what tends to happen is strategy gets forgotten for tactics, and this is not something we want to do; we want to continue the momentum that we've accomplished through the doubling through these sort of strategies that essentially focus on enabling research that enables progress across the board.
QUESTION: I have a question for Dr. Gerberding. It looks to me that you're getting about a $367 million cut this year, and if memory serves, CDC's proposed budget was reduced $500 million, in the administration proposal last year. Why is CDC getting cut year after year? Where are these going to come from?
MS. GERBERDING: Now let me clarify: The actual projected decrease in CDC's budget in FY'07 is $179 million. You're looking at the appropriated dollars, but some of those are offset by increases in other budget lines. For example, the Vaccine for Children program is actually going to increase, so the best estimate of our change in budget is $179 million.
We're doing the same thing that everyone is doing right now. We have to look at our programs and figure out where are the priorities for the agency; where are the opportunities for us to invest our resources to have the best possible impact on protecting people's health. And then we've got to look at some programs that have been around for a long time that may not be performing as well as they should or that were never funded to a level where they could possibly hope to achieve an impact.
And those programs need to be eliminated, and that is the genesis of some of the reductions in our budget. So it's really going to the same process of trying to be responsible about emphasizing the new things: the flu budget, the AIDS budget, the things that we know we need more investments in and finding resources from other parts of CDC as well as business efficiencies to try to offset some of these changes.
QUESTION: What are a couple of the $179 million-worth that you're eliminating?
MS. GERBERDING: Yes. One of the major components of that is there our Buildings and Facilities master plan. In the past, we've had about $215 million a year to support the development of CDC's buildings which were in a complete state of ruin over time; that's a 10-year plan, and we've made a lot of progress on it.
We won't have the appropriation to support the escalated transition to our new buildings with this reduction, but we are still on track with our master plan; we'll be able to open two more buildings next year.
MR. JOHNSON: Thank you.
QUESTION: Can you talk about some of the health care provider quality monitoring and publicizing efforts that are specifically funded in thing budget?
MR. JOHNSON: Health care provider issues, Dr. Clancy?
DR. CLANCY: I think you can see, and it would probably be wise to get more technical detail when CMS has their briefing at two, that the Deficit Reduction Act specifically calls for the continuation of the linking public reporting of hospitals performance, although to a larger set of measures. The MMA actually gave hospitals the opportunity to volunteer. If they didn't volunteer, they didn't get their .4 percent market update. And just about all hospitals did choose to volunteer for ten measures. The Deficit Reduction Act actually allows funding but is going to require 16 different measures.
QUESTION: [Inaudible.]
DR. CLANCY: There's not exclusive funding. There is some funding that is in support of it that's in the QIO budget, but I would refer you to CMS.
MR. JOHNSON: In the rear?
QUESTION: [Inaudible] you talked about some of the changes [inaudible] fatherhood [inaudible]?
MR. JOHNSON: Okay. Dr. Horn, would you please come forward?
DR. HORN: As you're aware, TANNA [ph.] was reauthorized in the Deficit Reduction Act. There are two major provisions in that. The first was an updating of the caseload reduction credit to 2005, which is effective come October 1, 2006. What that effectively does is it puts back into effect a meaningful work participation rate requirement for the states for the caseload reduction credit. Prior to TANNA reauthorization, the median work participation rate requirement on states as zero. Which meant that a state had to put zero percent of their caseload into work in order to satisfy the federal requirements.
What this does is it updates it and it says that there shall be a 50 percent work participation rate requirement except that you will continue to get a credit, but not against a 1996 baseline, but against a 2005 baseline. So if a state reduces its caseload over the course of this year, '06, by 10 percent, then they wouldn't have a 50 percent work requirement, that work participation rate requirement, but a 40 percent.
Also, in the TANNA reauthorization, there was included $150 million for healthy marriage and responsible fatherhood program. At least $50 million--up to $50 million of that can be used for responsible fatherhood program. And the majority, most of the rest is used for healthy marriage initiative. The difference in the '07 budget is there is a competitive state grant program of $100 million as well. The $100 million that's in the Deficit Reduction Act for healthy marriage activities is a direct federal to grantee program that's left to the secretary's discretion in terms of who gets that money. Eligible recipients include faith-based, community-based organizations as well as state and local governments. The competitive state grant program would be open only to states and would require a dollar-for-dollar match in order to draw down those funds. That was, both of those components were included in the original Presidents TANNA reauthorization proposal. And this is simply asking in the '07 budget for the other piece of that.
QUESTION: I was wondering how FDA [inaudible] use the additional 50 million that's requested for management? I think this money is going to improve the review of pandemic flu vaccine. I was wondering how you plan to use that money, 50?
MR. JOHNSON: Yes. In this budget there is a $30 million allocation that we intend to apply to pandemic flu preparedness. And to do that in a very comprehensive way that moves across the continuum of not only vaccine development and the need to be responsive in accelerating that process in a facilitating way, but also with regard to the challenges in anti virals as well as diagnostic devices and including also our response to the animal issues and the veterinary medicine issues that would be potentially involved in a pandemic crisis.
Though it's a comprehensive program, we are particularly engaged in the facilitating of vaccine development initiative that the secretary alluded to and in collaboration with both NIH and CDC working across that entire continuum in multiple places in which FDA's regulatory function must go hand-in-hand with the development function. So it's comprehensive and it intends to really be responsive to the full continuum.
QUESTION: This question is for Dr. Zerhouni. I was wondering he mentioned briefly encouraging new investigators. And so far university researchers have been a little bit disappointed that NIH funding has stayed flat over the years. And I was wondering if you could talk a little bit about any changes in the number of competitive grants, especially as it bears to universities, graduate student researchers, in encouraging new investigators from universities?
DR. ZERHOUNI: Sorry. Could you repeat what it is that universities were disappointed with?
QUESTION: That the funding stayed flat after doubling. And some, some have been anticipating a decrease in the number of competitive grants this year.
DR. ZERHOUNI: Right. So this is exactly, I think, what the secretary said. This is the deficit reduction budget. You have to balance priorities. But one of the top priorities I've announced across NIH and directors and I have met January already was the forecasted impact on new investigators and our ability to maintain not only a vibrant research capacity, but also remember that we're entering new areas of science that we didn't really have to cover many years ago, computational biology being one, genomics, you just heard. So our strategy has been to be proactive in making sure that the number of competing grant pools does not get damaged.
So that's why this year we have asked for a 2.35 percent cut across all non competing grants. If you remember, that was our guidance a couple months ago. And the reason we are doing this is because we want to maintain a decent success rate in portfolio, if you will, that will allow us to maintain absolute numbers as much as possible the number of grants that we can offer to new investigators, to competing investigators. And in that, I really want to make as much effort as possible in maintaining the likelihood of having new investigators enter the field with new ideas and go to a percentage in the competing pool at least 25 percent over time would be new investigators. So that we maintain the vibrancy of that.
So, yes, our intent is to maintain the number of grants to the largest extent possible. And that's how we've made some choices in this budget to make sure that that happens.
MR. JOHNSON: We have agreed that this session would end at 2:00 o'clock, in time for those who want to go to the Medicare/Medicaid briefing that they could meet over here and they'd be escorted up. But we do have time for one more question, if someone has a question. Otherwise, our agency heads will be available to you for individual meetings. One last question, one last?
QUESTION: --viral, anti virals for pandemic flu. I'm not sure which official to direct this to.
MR. JOHNSON: [Inaudible.]
QUESTION: Okay. What is, I mean, Roche has been saying that there may be problems with delivering the supply. And there's a big line up of countries needing the drug. What do we know about their ability to deliver the drugs if we were able to purchase actually enough to cover 25 percent of Americans?
MS. : This is the expectation that we will purchase enough drugs to cover 25 percent of the population. The intent is to be able to support the development of that capacity domestically so that we're not dependent on drugs made elsewhere or raw materials being imported from elsewhere to support that supply chain. It takes time to convert to that. But the manufacturer has represented that they're willing to take those steps.
And the appropriation that we just received in the supplemental, plus the additional flu resources that we expect to support us in the future will really help set the stage for that to happen. I can assure you that we're buying Tamiflu as fast as it comes out of the manufacturer. And we've already been able to continue to expand the supply that we have on hand. And we'll continue to do that as the drug becomes available.
MR. JOHNSON: Thank you all for coming.
There will be many of us remaining here for as long as you have questions.
Thanks again.
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[END OF PRESS BRIEFING.]
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