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Thursday, February 26, 1998.






    Mrs. NORTHUP [assuming chair]. Good afternoon. We'll get this hearing going. I am Anne Northup and I am sitting in for the Chairman.

    We're going to pick up on the second hearing for the General Accounting Office, the Department of Health and Human Services.

    Mr. Hembra.

    Mr. HEMBRA. Good afternoon.

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    Mrs. NORTHUP. Good afternoon.

    Mr. HEMBRA. I have a few brief remarks to make and then Mr. Scanlon, Ms. Steinhardt, and myself will be happy to answer any questions you might have.

    The focus of our statement is, of course, on Health and Human Services and the Government Performance Results Act. I would like to make a few remarks about the value of measuring for results within this Department, and I would also like to make a few comments that look at the importance of coordinating and fixing accountability for the multitude of programs that the Department has, ensuring that the Department has the right type of information systems to manage and evaluate its programs, and that it is in a position to deal with programs that are vulnerable to fraud, waste, and abuse.

    I think it is very important when you think of the Results Act and look at HHS. This is a Department, as our chart shows, that its fiscal year 1997 budget outlays were almost $340 billion, it has a workforce of some 57,000 people, and it has responsibility for some 300 programs. It is the largest grant-making agency in the Federal Government. It makes grants up around 60,000 a year. Its Medicare program is the Nation's largest health insurer, last year handling some 900 million claims for about 40 million beneficiaries. Its Medicare programs are our Nation's health care safety net for some 35 million people. And, of course, its other agencies deal with research, assuring the safety of drugs and medical devices, providing support to needy children and families, and a host of other health and social services.

    If you look at the Results Act, it required HHS, like other Federal departments, to prepare a multiyear strategic plan that was to include a mission statement, long-term goals and objectives, the approaches for achieving them, linkages between both the strategic goals and setting up annual performance goals, the impact of key external factors that would affect the goals, and, of course, evaluations that would position them to determine how their programs are doing.
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    The Department did submit its plan on time, the end of last September, and it recently submitted its performance plans which we are in the process of reviewing. To its credit, the Department has with its strategic plan a good management framework for determining whether its programs work as intended. However, we have found in looking at the strategic plan that it doesn't always discuss the effectiveness of outlying strategies, it doesn't always discuss the resources required to implement those strategies, there is little discussion of how it intends to address key external factors that could get in the way of it achieving its objectives, and while it talks about management and information systems, it doesn't really say much about the potential solutions. As you're well aware, this Department has some major problems with its information management systems.

    When you turn to look at coordination and accountability, it's a real challenge for the Department. A number of its programs relate closely both to other HHS programs as well as programs run by other Federal agencies. Many of its programs are operated by States, localities, and nongovernmental organizations. It desperately needs access to good information, good data about its programs, data that are both accurate, reliable, and timely. And, of course, while HHS is working to assure that its systems will work smoothly through the year 2000, HHS has over 1,000 system applications and less than 25 percent of its mission-oriented systems have been converted.

    HHS also relies a lot on surveys, and its surveys suffer from both data reliability and analytical timeliness problems. That reliability, timeliness, and consistency of data problems also extend to data that are driven by both States and localities.

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    Finally, I'd like to point out that HHS, as you're well aware, must always be vigilant in protecting its programs from fraud, abuse, mismanagement, and waste. Medicare, of course, is a prime example. In the case of Medicare, we have two recent pieces of legislation—the Health Insurance Portability and Accountability Act of 1996 and the Balanced Budget Act—which have given the Health Care Financing Administration additional authority and additional resources to reform Medicare and strengthen that program. However, that's only going to be as effective as HCFA and HHS are in designing a good implementation strategy and carrying it out.

    So, in conclusion, while GAO certainly does not question HHS' commitment to carrying out its missions, the fact is that for years and years we and others have found, and we continue to find, the same type of problems with HHS' programs. I think the good news is if HHS can be held accountable, the Results Act can, in fact, be a powerful tool to bring a more disciplined, efficient, and effective approach for delivering our Nation's health and human services.

    With that, I will stop and we can respond to any questions.

    [The prepared statement follows:]

    "The Official Committee record contains additional material here."

    Mr. PORTER [resuming chair]. Mr. Hembra, I apologize for being delayed in a meeting in my office. I appreciate your opening statement which I will have to review from the written testimony.
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    I want to thank my colleague, Mrs. Northup. When I left at noon she was in the Chair, as well as when I came back. I hope you got lunch in between.

    Mrs. NORTHUP. A few things.

    Mr. PORTER. Would you like to proceed right now?

    Mrs. NORTHUP. That is fine, Mr. Chairman. Thank you.

    Mr. Hembra, you ended your statement by saying if HHS can be held accountable, the Results Act can make quite a difference. Who holds them accountable? Them, being the whole agency.

    Mr. HEMBRA. It's an interesting Department and it's probably unlike any other in the Federal Government. HHS is often referred to as a holding company. It has a number of operating agencies, some of which are some of the biggest and dwarf many of the other Federal departments in the Federal Government.

    I think, first and foremost, the Office of the Secretary as well as the heads of the individual departments within HHS have to take primary responsibility for accountability. I would take you to their strategic plan, I would take you to their core values, the things that are important to that Department. One of those core values is accountability stewardship for the efficiency and effectiveness of its programs. I would point out that while that Department has always had that core value, I think its track record would show that it has not performed that well.
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    The other point of accountability has to be the Congress. If you stop and think about it, the whole reason behind GPRA was the frustration that the Congress felt with the inability of our departments and agencies to demonstrate good, solid management. And if a department was not going to do that, it was going to have difficulty doing it, I think out of frustration they felt that you could legislate it and it would happen. But I think history shows that the oversight committees, the appropriations committees, the authorization committees have to be in there constantly, as this subcommittee has done, constantly posing the question to the departments, how are you doing?

    Mrs. NORTHUP. The concern I think is, in part, because HHS has such an effect on the people that live in our neighborhoods and our cities everyday, people we know, people we talk to. So many of its programs make a profound impact on the quality of life, the ability to become independent, the ability to grow and develop despite adverse circumstances. Sort of the only helping hand for many of the disadvantaged people in our communities, and not just the disadvantaged, the seniors. But there is also a sense that particularly in that agency programs start to take on lives of their own. I sort of say this in some jest.

    But, for example, if I thought maybe a critical time is seventh grade, boys seem to be more risk-takers than girls, and kids in the urban area seem to be most at-risk, so I start an urban seventh grade at-risk boys' program, it can all be targeted in the right direction, it can have all the right ideas, but it's operated by local communities. So you go from 10, to 50, to 200 local community programs and then they start the association of directors of seventh grade at-risk urban programs, and then the program sort of has a life of its own. I worry about the Secretary being able to impact it, whether it is to combine it with another program, or maybe to decide that its outcomes haven't been so strong.
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    One of the things that I've noticed the most difference between State programs and Federal programs is that if, at the State level, the governor makes a decision, those are actually his employees that carry it out. But if the President or his Secretary makes a decision, those are the State agencies that are operating it and they don't feel constrained at all to abide by that decision or to make that effort to change or to support it politically or otherwise.

    I just wondered if you had any thoughts on HHS' ability to change? If I've put my finger on the problem and any thoughts on how you overcome it?

    Mr. HEMBRA. I think there are two issues. When you look at programs, especially those which account for most of HHS' programs, those have been devolved to some extent down to the States and localities. First off, you have with regard to a number of broad programs a host of programs that the Federal Government has put into place. If you look at at-risk and delinquent youths, there are a number of programs. Early childhood, there are a lot of programs. Substance abuse, a lot of programs. Employment training, I think 163 programs. So that's one issue. You would expect that the department heads would make an effort to assure themselves and assure the taxpayer that that plethora of programs are under control and there isn't duplication. So that's one issue.

    As you look at the programs as they move down to the State and local level, I think what you have to assure yourself is that you have built in a proper balance between flexibility so States and localities don't feel like they are handcuffed and can't meet within the parameters of the program special needs and circumstances, but you have to balance with that accountability. There has to be some degree of accountability.
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    The same holds true for HHS itself. The Secretary will say HHS is a decentralized Department, that a lot of autonomy has been given to its individual agencies. And the fact of the matter is that's true. But with decentralization there has to be some degree of accountability. There has to be a role, in the case of HHS, for the Office of the Secretary to play that holds these agencies accountable and, in turn, these agencies hold the recipients of Federal funds accountable to some extent. Once again, I think that's where the Results Act can be a powerful tool, because part and parcel of that is to assure that there is accountability regardless of which issue you look at when you have those types of programs.

    Ms. STEINHARDT. Can I add to that?

    Mrs. NORTHUP. Yes, please.

    Ms. STEINHARDT. I would say that another aspect that you put your finger on has to do with a sort of loss of focus in programs as they evolve over time. In our statement, we talk about a number of programs that were developed originally to improve access to care for underserved populations, people who lacked access either because they lived in rural areas or something like that, and we started more than 20 years ago with very noble and worthwhile aims. But as the programs developed, they never really kept track of what they were trying to accomplish.

    Today, 90 percent of the counties in the United States have designations that include underserved areas becausewe've never gone back and taken a second look at where underservice actually occurs, what does that mean, how do we measure it, what are we trying to accomplish, where are we today, where are we next year, where are we the year after, are we meeting our targets—the kinds of tools I think that the Results Act now requires agencies to do—instead of letting things kind of keep going without returning to see whether we're really doing what we set out to do.    Mrs. NORTHUP. Have I used up my time, Mr. Chairman?    Mr. PORTER. You can have all the time you want.    Mrs. NORTHUP. I'll just take two more.    When you talk about so many job training programs, so many other programs that sort of overlap, do you make any recommendations about maybe a more effective way? Block grants sometimes by this agency have been very unpopular when Congress has imposed them. But it does strike me that job training is unique to every city and State, that the needs that exist in Louisville probably aren't the same needs that exist in Chicago, and so does it make sense to put some of these programs together? And is there any effort within the Administration that you could see in the strategic planning where that was happening, or does this need to be done from the outside by the Congress?    Mr. HEMBRA. Part and parcel of the Results Act is that the Department and departments that have responsibility for similar programs would look at the potential for duplication and overlap. Has that happened? Not very much. Usually when it has happened, the degree to which it happened, usually the source comes out of the legislative branch when questions are raised and mandates are placed on the agencies to take a look at it. Under the National Performance Review, there was some attention paid to overlap and redundancy and there were some programs at the margin, different areas that kind of disappeared or were not funded. But for the most part, once a program has been in place, that program is in place.    What we know, what our work has shown—and we have done work on employment training, we have done work on early childhood, substance abuse—is that there are a multitude of programs that provide similar services to similar populations. What is missing right now is some analytical depth being given in terms of pursuing whether or not the opportunities are there to do some further consolidation and eliminate some of the redundancy and overlap. But we certainly can provide the subcommittee with that work that we have done over the last couple of years that highlight some of those different areas for you, including work on block grants and the whole issue of balancing accountability and flexibility. We would be happy to provide you with those reports.    Mrs. NORTHUP. I'd be very interested in that.    [The referred to information can be found in the Committee files.]
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    Mrs. NORTHUP. Thank you, Mr. Chairman.    Mr. PORTER. Thank you, Mrs. Northup.    Ms. Steinhardt, as I listened, you were saying 90 percent of the counties are now including underserved.    Ms. STEINHARDT. Designations.    Mr. PORTER. Yes, designations. I think the reason for that is probably not the lack of oversight but the politics of getting everybody aboard. What I've been saying since I've been Chairman for the last three years is we have to get beyond that need to spread out our resources all over the place in order to get the votes to get a program adopted. If the program can't stand on its own merits, it shouldn't be adopted. We ought to target our resources where they're truly needed and not just spread them willy-nilly across the country simply because that gets us more votes to get the program adopted or changed. I think we are getting beyond that old political need and into what gets us results for people and what people really need help from the Government, putting our resources where they can get the job done. I hope so.    I think this is in a way very similar to the line of questioning that Mrs. Northup just proceeded with. But let me see if we can examine this a little bit further. You have a lot of programs that are administered within the Department of Health and Human Services and then you have a lot of similar programs in other departments. HHS, for example, has several different childcare programs and substance abuse programs. There are similar programs in other departments. We pay for health care in several programs, including the Indian Health Service, and then we do a lot of the same things in the VA, the DoD to other eligible populations. We provide women's reproductive health services through Title X Family Planning, the Maternal and Child Health block grant, STD clinics, community health centers, Medicaid.    What successes, in your opinion, has the Department and the Administration had in assuring that the measures for effectiveness for these various programs compare with one another? In other words, are we adopting in one department in one program a different measure of effectiveness than we are for a very similar program conducted by another department or even within the same department?    Mr. HEMBRA. I think to a certain extent that remains to be seen. We're in the process of reviewing the Departments' performance plans, not only the ones for HHS, but, for some of your examples, the Department of Education, the Department of Labor. Those three departments have a number of programs that are similar. So, at this point in time, I'm not sure we can answer that definitively.    I'm going to go out on a limb a little bit and suggest that based on what we have seen and what we have looked at initially, it suggests this is an area where it is probably not likely you're going to see a lot of attention paid. There is better coordination now probably than there has been in the past. But I'm not sure I would give coordination that good a grade.
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    Mr. PORTER. In other words, this may be the secondary approach, that once we get the first cut, we begin to look at things like this in a much broader government-wide context?    Mr. HEMBRA. Yes. And without being overly critical of HHS, I think they have a really difficult challenge. The Performance Plans I'm going to venture to guess are going to focus much more on process measures and output measures as opposed to outcome measures. Part of the reason links to the absence of the type of information systems, the reliability of the data, the consistency of the data that would help them with their performance measures.    Mr. PORTER. I think that would be a huge mistake, because we're not looking at those things anymore. We're looking at outcomes. We're looking at how do we get resources to change people's lives in a positive way. How do we get results for people.    Mr. HEMBRA. Right.    Mr. PORTER. If we're going to look at the data you suggested, it seems to me we're going right back to wherewe've been, and that is not a good place to be.    Mr. HEMBRA. Oh, no. In fact, I think if you look at the welfare reform legislation and the requirements placed in it in terms of information, what that suggests, what the recent legislation on Medicare suggests, and what the Results Act requires is this Department and other Departments to really go back and revisit the type of data that are being generated that will position them to be able to determine whether or not their programs are working as intended and whether they are achieving the results that they were seeking.    That is not the situation today. I think the Department of Health and Human Services would admit to you that it does not have those types of information systems. As a result, while I think there's going to be an honest effort on the part of the Department to develop some outcome related measures, I still think you're going to see the early performance plans more heavily ladened with process and output.    Ms. STEINHARDT. If I might just add. Actually, the Department in some areas, compared to other Government agencies, is further ahead in having measurable kinds of objectives. The Health People 2000 project is probably a model in many respects and that applies to all agencies of Government who play a part in achieving those goals.    But, as Rich was saying, I think a big problem, and the Department knows it, is the fact that they just don't have the data to be able to track against all of those objectives. For about 30 percent of the Healthy People 2000 objectives there is no data by which they can measure the achievement of those objectives.    Mr. PORTER. Well, maybe one of their goals and part of their strategic plans ought to be that they develop the systems to give us that data, and that that be the central focus of what their plans aim to do.    Ms. STEINHARDT. And to its credit, the Department's strategic plan actually acknowledged the problems with the kinds of information systems they have. What wasn't in the plan was a plan for addressing those gaps.    Mr. PORTER. Now I know what my opening question for Donna Shalala will be. [Laughter.]    I think this is exactly where the rubber hits the road. I think if you aren't aiming at the right target and you don't have the information to tell you when you hit it or not, you're going off in the wrong direction.    Ms. STEINHARDT. Exactly.    Mr. PORTER. I think that would be a terrible mistake for everyone.    Let me go on to the next question. Due to multiple programs and subactivities within larger programs, it is almost impossible to find out how much the Federal Government is spending on such activities as childcare, disease related research, health services for children, or virtually any other specific activity. I find it difficult to understand how a secretary can assemble a budget and how we can appropriate intelligently without that specific information. What recommendations has GAO made to assure that procedures and systems are in place to determine that this essential data is available during the budget process?    Mr. HEMBRA. The answer is, first and foremost, you're absolutely right. I think this is critical information. Work that we have done in GAO for several years would suggest there were recommendations directed at trying to get the agency moved in that direction, with more specificity to the resource issue. We can provide you with reports that would show you that.    I think probably the greatest lever that has been put in place to force the agencies to finally do that is, once again, contained in the Results Act. Part of the critical piece of information is the resource question. The Results Act, in fact, is a budgeting tool. It is quite appropriate for appropriations committees to be a key point of oversight with regard to the Results Act because, if it is working properly, you should be able to demand and get from the Department that information with that degree of specificity.    Now, it remains to be seen whether the discipline is there yet. But the framework is in place, and I think that's important. The Results Act I think recognizes, both with the strategic plans as well as the annual performance plans, that this is going to evolve over time and that if we stay on the departments, they should continue to get better. What they don't have this year, they'll be closer to the following year, and the year after that. But someone has to stay on them.    Mr. PORTER. I would like to right now ask both you and my staff if we can't make this annual pre-hearing review with GAO permanent, in the sense that we stay with you and you stay in touch with them so that we can see whether we're making that kind of progress and have the right questions to ask them when their hearings occur. Because I think if we don't do that, we'll lose it in our procedures and they will simply ignore it. I don't want that to happen, obviously. In other words, I would like to make this an ongoing process. Is that possible?    Mr. HEMBRA. Well, it's not only possible, it's going to happen. GAO is integrating the Results Act, the Clinger-Cohen Chief Financial Officers Act, all of the management pieces of legislation that have been created over the last few years, integrating them into what we call our issue area work. So for the agencies that you have responsibility for and that I have responsibility for, you will see that. And we would be in a position at any point in time, whether it is done annually or more frequently, to be able to sit down and talk about where HHS is, where the Department of Labor is, and where the Department of Education is.    Mr. PORTER. That's wonderful.    Mr. Hembra, I've been particularly concerned with the PATH audits which deal with the criteria and supporting documentation that must be submitted to allow teaching physicians to bill for services under Medicare. One of the realizations I come to is that there is a substantial variation in the definition of benefits, documentation requirements, and the enforcement of rules from Medicare carrier to Medicare carrier. This variation is not only a characteristic plaguing the PATH audits, it seems to pervade all decisions made by local carriers and intermediaries.    How can we sustain a national Medicare program in which a service is reimbursed in some areas and not in others, where there is wide variations in documentation requirements, and in which each carrier or intermediary has broad discretion to interpret the rules?    Mr. SCANLON. We are actually doing some work on the PATH audit now for the House Ways and Means Health Subcommittee looking into part of the issue that you've raised, which is the differences in regional interpretations of the Medicare statute.    We started Medicare with the idea that we weren't going to interfere with the local practice of medicine, and, therefore, endowed within the contractors certain discretion. While the goal of not interfering with the local practice of medicine is admirable, there are times at which we need to consider the balance that comes about through standardization. We have at various times pointed that out and encouraged the Health Care Financing Administration to consider what they can learn from the practices of different contractors and to disseminate that information nationwide so that we would have a more reasonably balanced program.    There are some efforts underway of that type, but not nearly as much as we think there should be. The PATH audits I think illustrate some of the consequences of the differences in information that come from the carriers. As you know, the General Counsel of the Department recommended that a certain number of the audits be stopped because basically the providers had been confused by information that they received from the contractors.    Mr. PORTER. Absolutely.    It is particularly difficult to establish performance measures for science. I would be interested in your views on that subject. At the subcommittee's direction, NIH has completed a review of its overall administrative and support processes and costs. Are you familiar with this review? What is your reaction to it? What role should administrative standards of performance play in an overall performance plan?    Mr. HEMBRA. Let me first speak to the issue of performance measures in a research environment. I've been thinking, as many have, about how you pull that off. I think it is recognized, it was recognized when the legislation was created, that probably perhaps the greatest challenge in terms of developing performance measures would be found in trying to develop them for the research community. There have been a lot of folks that have looked at it. I think the good news is the National Academy of Science, the National Academy of Engineering, the Institute of Medicine currently has a project underway that was started last month and is supposed to conclude a year from now that will address that issue and, hopefully, finally shed some light on how to get at outcome related measures in research.    In the interim, we should not give the research community a break and say don't worry about performance measures, let's wait and see what the National Academy has to say. I think what you have to look at is the type of research you're talking about—basic, applied—and perhaps early on be satisfied more with output and process related measures until we can work through some common definitions and framework for developing outcome measures. But in looking at the paper on the project that is now underway, I think it's going to be able to shed a lot of light on that. But we could be a year from knowing how best to frame the outcome related measures associated with research.    Mr. PORTER. Mrs. Northup, if you have questions, just seek recognition and I'll be happy to recognize you.    Mrs. NORTHUP. I do have one, Mr. Chairman.    Mr. PORTER. Please.    Mrs. NORTHUP. I have a final question about the fraud and abuse questions. How would you suggest that the Secretary proceed? As we implement public policy based on waste and abuse, that then, of course, comes back—there are always going to be people in the system who have the very difficult stories as you try to apply standards, I guess I'd say. I'll give you an example.    Last year, in the Balanced Budget Act we changed the standards for home health care. I believe those were based on GAO's and the Inspector General's recommendations from HHS. Today, in many of our districts, we have people that are complaining about, for example, the venipuncture requirement. Would you just say we made a mistake there and that we should change it? Is it that that standard was sort of the gate that opened up for the great expansion of home health and we should hold our ground? How do you proceed? Would you make any recommendations, since our original bill was based on some of GAO's recommendations.    Mr. HEMBRA. Let me make a general comment and then Bill can jump in with more specifics. There was a lot of thought given to the provisions worked into both the Health Insurance Portability and Accountability Act of 1996 and the Balanced Budget Act, and we appreciate very much that our work was reflected in those provisions. I will tell you that some of GAO's work that was reflected in the legislation reflected recommendations that we had made as much as a decade ago—as much as a decade ago—that the Department did not act on.    So, if you want to do something about the vulnerability with regard to fraud, waste, and abuse, the Department has to take the lead. The Department should not be sitting back waiting to learn that you have a situation in Medicare where you could be losing tens of billions of dollars a year and then have someone legislate that they take action, first and foremost.    Mrs. NORTHUP. Let me make sure I understand your point. Is your point that the gate got open, the expectations became higher and higher that we would fund services, and that now as we try to retract them in an area that it is harder to do without them?    Mr. HEMBRA. I think we're learning that in an attempt to fix a problem, especially when it comes with regard to health, that oftentimes when you allow a benefit people are going to figure out ways to take advantage of it in a monetary sense and you're going to have to go back and revisit it.    Bill, do you want to talk about that?    Mr. SCANLON. Yes. I think you've hit upon an aspect of this, which is the fact that the benefit expanded greatly and it is always difficult to reduce something after that's occurred. Medicare never intended to be providing a long-term care benefit. That was very clear from the original legislation and how the program operated through 1989. At that point in time, as a result of a court case, there were restrictions placed on Medicare's review of claims and the result was we've had an incredible expansion of services.    Including people that will be affected by this provision in the Balanced Budget Act are people whose only need for a skilled service is that they have blood drawing, and then by virtue of having that need, which may happen only once a month or once every six weeks, they are entitled to aides services several times a week. The issue here is that they are maybe in need of the aides services but they are not in need of very much in the way of skilled care. They have a very limited sort of need for skilled care. And bringing them into Medicare seems to be somewhat contrary to the original intent of the legislation. So, in some respects,you are restoring some of that original purpose behind the home health rules.
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    Frankly, we are looking now into the question of how many people have only the need for venepuncture as a skilled service. Because if you think about it, an individual who is supposed to be eligible for home health services is homebound. They are people that have conditions that are serious enough to restrict their ability to leave home. And if the only sort of skilled service they need is venepuncture, it suggests something about their condition that we don't quite understand. We think that most people that are homebound are probably going to have other skilled needs as well. So we're not really sure of the magnitude in terms of the number of people that are not going to get services any longer under Medicare because of this provision.

    Mr. PORTER. Thank you, Mrs. Northup.

    Mr. Hembra or Mr. Scanlon, you indicate that inherent in Medicare's fee-for-service program is the risk that some providers will deliver more services than necessary. Could you describe exactly what you mean by that statement.

    Mr. SCANLON. It has been perceived that the incentive under a fee-for-service system where you're paid for every service that you provide, and where the customer, in this case the beneficiary, has very limited obligations in terms of the cost they're going to pay, that a provider can ask you to come back for additional visits, can offer to do additional tests, and you as a consumer are going to be much less likely to question the need for those kinds of services. So it's not just a question of Medicare, but it's a question of all of health care.

    We've organized a system where we pay every provider for every service that they offer and we don't have consumers be sensitive to the costs of those services. Now in fairness to consumers, we have to deal with the reality that most of us do not have the information to challenge a physician about a recommendation for a service because we do not have the knowledge whether or not a service is truly needed in our circumstance.
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    Mr. PORTER. Could you then make the argument that many of the findings of GAO and the Inspector General concerning waste, fraud, and abuse are not the result of executive branch management failures but are inherent in the structure of the program itself?

    Mr. SCANLON. The fee-for-service system certainly encourages people to test the limits in terms of submitting claims for services that are either wasteful, fraudulent, or abusive. The issue is in recognizing that as an inherent part of the structure of the program, it becomes the executive branch's responsibility to try and put in the safeguards to detect as many of those fraudulent or abusive claims as you possibly can.

    The other thing that is happening today——

    Mr. PORTER. Are they doing that now?

    Mr. SCANLON. We don't think they're doing it nearly as much as they should. One of the positive things that's happened over the last two years is the passage of the Health Insurance Portability and Accountability Act and the Balanced Budget Act which not only gives the department sort of guaranteed funding for trying to prevent fraud and abuse, but also gives them some new authorities in terms of being able to gather information from providers and being able to impose penalties on providers. That should be helpful. These kinds of things would be potentially effective in reducing some fraud and abuse.

    Mr. PORTER. This would go something like if a particular provider is providing a volume of services quite different from what the average provider does, then you begin to look into why is this so?
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    Mr. SCANLON. That's correct. We have argued on many occasions that the targeting of reviews on providers who are aberrant in terms of the claims that they submit is really a very cost-effective way to identify providers who are participating in fraudulent or abusive activities.

    One of the problems for Medicare is that the volume of claims that are being reviewed to determine whether the services were medically necessary has dropped dramatically. In the case of home health, in the mid-1980s we used to review 60 percent of the claims being submitted. Today, we review about 2 percent of the claims being submitted. In reviewing them, the follow-up may be that the claim is simply returned to the provider. It is not an issue of that becomes then sort of a marker that we need to be vigilant about this provider, it is simply that the provider didn't get paid for that claim but on another claim that's equally abusive the provider would potentially be paid 98 percent of the time.

    Mr. PORTER. Why don't we privatize this and allow the private sector to uncover the fraud and keep a percentage of it?

    Mr. SCANLON. Well, we in some respects have privatized the review function with respect to having hired the contractors to administer the program. One of the things that we've argued is that the contractors need to be held more accountable for performance standards that we would like them to achieve. And the ability to detect fraudulent and abusive claims should be one of those performance standards.

    One of the advantages of GPRA is if we start to take the systematic view of the operations of not only the Department, but of the Health Care Financing Administration, that we establish the performance goals and that they will, in turn, sort of require us to establish performance goals for entities like the contractors and they will have to be held accountable if the Department is to succeed in terms of what its goals are.
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    Mr. PORTER. The only reason I raised that particular question is I talked to a private sector individual and he believes that he can review some twenty times as much as is being reviewed right now if he can be allowed to be compensated on the basis of how much fraud he finds. That seemed to me to be a pretty good deal for everyone—except for the people who are defrauding the Government. I don't know the truth of this, obviously, but it seemed intriguing to me. We might be able to privatize some of this and do much better.

    Mr. SCANLON. It is certainly a possibility. One of the things that we've looked into is the issue of commercial software that is used to detect patterns of abusive claims or aberrant claims that then need following up on. We've recommended that HCFA pursue the use of that commercial software in the Medicare program. They've tested it and found that it could be successful, yet they have not yet adopted that kind of software. We think it is something that is potentially useful.

    One of the concerns that is expressed at times about being aggressive in this regard is that there is a lot of gray area in terms of what is a medically necessary service,and that as HCFA becomes aggressive, providers who in all sincerity believe that a service is appropriate are going to be forced to justify each and every service. The concern would be sort of what kind of an outcry will you hear from them in that kind of a circumstance.

    Mr. PORTER. Mr. Hembra, many of the concerns you raise with respect to HCFA and other areas in the Department are expensive to address. Information systems to improve management effectiveness in Medicare and Medicaid and to track the implementation of programs such as TANF are costly. Implementation of new programs such as welfare reform and recent significant changes to Medicare are also expensive.
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    Is it your view that these concerns can be met within existing resources provided by the subcommittee in salary and expense accounts? If you think they can be carried out within existing resources, can you tell us what the agencies are now doing that they can stop? And if you feel they need more funding, can you tell us how much?

    Mr. HEMBRA. It seems like a fairly simple question. [Laughter.]

    No, we can't, not at this point in time. I think the more important issue is how the Department is coming before you and justifying what its needs are. I know Bill can speak to what's happening with HCFA, especially with the additional authorities that have been laid on that with regard to HIPAA and BBA.

    But generally speaking, if we are really serious about more efficient and effective management in the Federal Government, if we recognize, as HHS does, that it has an information systems problem and in order for it to really begin to shift from just how many people have we written a welfare check for and how many people have we paid for health care service to understanding and giving focus to outcomes, we have to have that information. There has to be a strategy that the Department has in place to help you understand what its approach is going to be to position that Department to have the information systems it needs. It is not something that has been done in the past. It is not something that has been well-thought through. I think, as a result, no one is in a position right now to give you that answer.

    I think that's unfortunate. I think that says something about the management of the Department. If the Department is that dependent, which it is, on information that is reliable, accurate, timely, and consistent, especially with regard to the demands of information that is going to be generated up from States and localities, the Department should be in a position to do that.
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    Now to its credit, I think with what has happened with the Medicare Transaction System that it is rethinking and, in fact, putting together a strategy for how to turn things around on its information systems. But I don't think it has a price tag to give you. And it is certainly something though that they should be able to do.

    Ms. STEINHARDT. Can I just add. It actually relates to your first question to Secretary Shalala. Part of this is just the cost of moving to a results oriented focus now in Government. All the systems, no matter how well or poorly they now work, all of the major administrative systems that the Department has have been really oriented to tracking inputs and outputs not results. So it really requires a whole different kind of sets of information. And even where the Department now has some excellent data sources, data sets, they are usually on a national basis so there isn't the kind of information that you would need to be able to focus in on a particular area and look at results there.

    So, it is a huge challenge for the Department, but it is not unique. It is going to be a big challenge for the entire Federal Government. If you look at private industry, this is exactly what is happening there as companies have to invest now their capital needs in information systems because this is the way we're now managing in this country, in the world.

    Mr. PORTER. Thank you.

    You indicate in your testimony that Head Start is an example of the difficulty in implementing the Results Act for certain types of grant programs. You indicate that Head Start was designed for maximum local autonomy and the data reported to the Department is self-reported. I gather from your testimony that much of the data reported is input; i.e., the meeting of standards. Of course, the ultimate test is how well Head Start students do in school years after they graduate from the program. Measuring these outcomes involves major efforts to track students, develop measures of success, and to create methodologically sound control groups.
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    Given GAO's strong support for the Results Act, can you give the subcommittee some indication of how GAO recommends the agency approach these difficult issues, and how much it will cost to obtain such information in a timely manner?

    Mr. HEMBRA. A couple of years ago we went back and began to revisit Head Start as an expensive program, one that is viewed as one of the most successful Federal Government programs, a very popular program, serves a lot of young kids, and most people view it as successful. When you look at the evaluations that have been done of the Head Start program, little, if any, were impact evaluations. We have a report that we issued I think within this last year, Mr. Chairman, and we can provide you a copy, where we discussed and actually had an interesting discussion that is contained in the report with the Department with regard to the importance of impact evaluations.

    [The referred to information can be found in the Committee files.]

    Mr. HEMBRA. They strongly disagreed. I think the reason the Department disagreed with the importance we were placing on them building into their evaluation package impact evaluations was that it was difficult setting up control groups and evaluating that program over a period of time, tracking kids, and coming up with the right outcome measures to determine whether or not that program really makes a difference.

    Since that time, there are a couple of evaluations now ongoing, which we can provide you with some information for the record, that hopefully will shed a little bit more light on it. But right now there is not a good research base there that can tell you what the impact of Head Start has been. And these types of evaluations are, by the way, quite expensive also and they take a lot of time.
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    [The information follows:]

    Mr. HEMBRA. According to Head Start, the Family and Child Experiences Survey project will provide information on the overall effectiveness of Head Start by collecting data to assess childrens' cognitive, physical, emotional, and social development and parents' goals in becoming economically and socially self-sufficient. Data will be collected from a sample of 2,400 families with children enrolled in 160 randomly selected centers in 40 Head Start programs across the country. Data will be collected through a variety of methods, including assessments, questionnaires and interviews.

    Four Quality Research Centers (QRC), located in four different universities across the country, make up the Head Start Quality Research Consortium. Each QRC is involved in two research initiatives: (1) to link quality practices in Head Start programs to outcome measures and to subsequently develop new instruments for measuring outcomes and (2) a center-specific initiative reflecting that center's individual expertise.

    Mr. PORTER. On the other hand, the program is very expensive. If you don't evaluate it, you don't know whether the money is getting you anywhere.

    Mr. HEMBRA. That's exactly what our report says.

    Mr. PORTER. Oh, good. We agree on that.

    Ms. STEINHARDT. When we looked at a number of the training programs that are funded under Title VII and VIII of the Public Health Service Act, these are health professions training programs, we found that 6 of 23 programs that were established before 1990 have never been evaluated. There are a number of programs that do receive evaluations, but it is not built in to the way that the agency does its business.
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    Mr. PORTER. Do you recall which six those are?

    Ms. STEINHARDT. No. I could find out for you.

    Mr. PORTER. Could you provide it to us? We would be interested.

    Ms. STEINHARDT. Sure.

    [The information follows:]

    Ms. STEINHARDT. The following programs established prior to 1990 have not been evaluated:

    (1) Grants for Programs for Physician Assistants

    (2) Exceptional Financial Need Scholarships

    (3) Financial Assistance to Disadvantaged Health Professions Students

    (4) Health Professional Student Loan Program

    (5) Centers of Excellence

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    (6) Faculty Development for General Internal Medicine and General Pediatrics

    Mr. PORTER. Essentially, all of the activities within HHS funded in this bill are grants to States, localities, universities, or not-for-profit organizations. Your testimony indicates many of the difficulties which exist when a Department mission is carried out through broad-based, flexible grant programs. Can you discuss the kinds of measures proposed by the Administration for programs such as the Social Services block grant, the Maternal and Child Health block grant, and the Preventive Health block grant.

    If you are not satisfied with these measures, what effectiveness measures would you recommend? And how would you propose to gather the data? Mr. Hembra, is it not true that the paperwork and reporting requirements would increase substantially and the flexibility of these grants would decline markedly if specific outcome measures were to be defined by the Federal Government and measured in a methodologically rigorous manner?

    Mr. HEMBRA. Let me make a couple points. First, and it goes back to a discussion with Mrs. Northup, that on those types of grants you have to seek a balance between providing flexibility and building in accountability. And so to a certain extent does it impose some burden? The answer is yes. But we're talking about a lot of money and I think that if States and localities need that money, it is not unreasonable to ask that they work with, as a stakeholder, the Department in defining what would be acceptable in terms of measurements and what is acceptable in terms of providing information to help measure whether or not they are working towards the goals.

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    So this is not something that you should expect the Department to be doing unilaterally. That's the whole purpose of the Results Act is that you involve your stakeholders so that what ultimately comes out does not smack of being onerous on one particular stakeholder. Everyone has to be in the game. But none of us should sit here and suggest or think that meeting the requirements of the Results Act is going to be an easy road for anyone. It forces discipline. It forces discipline that has not been there before. And it does impose some burden. But I think with the money that is at stake, the obligation we have to the taxpayer, those that question, those that were behind to some extent the creation of the Results Act was that frustration that no one knew what was happening. So I'm not sure that's an unreasonable burden, especially if it is done consistent with the Results Act where stakeholders are working together to resolve those issues.

    Mr. PORTER. You indicated that the Centers for Disease Control and Prevention has a particularly good performance plan. What features make this plan so good? Are there elements in the CDC mission that make the preparation of a plan pursuant to the Results Act easier relative to other agencies?

    Ms. STEINHARDT. I'm trying to think about this because we haven't actually evaluated the performance plan for CDC. The responsibilities that CDC has, many of them relate to the kinds of objectives we set out in the Healthy People 2000 project. So I think, as I said before, we are kind of a step ahead there. But we will certainly be more than happy to share the results of our assessment of CDC's plan once we're finished with it.

    Mr. PORTER. So the question really is ahead of what you have actually evaluated?
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    Ms. STEINHARDT. Yes. We're not quite there yet.

    Mr. PORTER. All right. I think you've done an excellent job for us and you've certainly given us many questions to raise with the Department that have to be raised. I'm very encouraged that you will be working with us to keep the pressure on the whole process because I think you're exactly right, that if we don't do that, it is simply going to be an effort that will come and go and mean nothing. You can write all the laws you want and all the regulations pursuant to those laws, but if you don't ever see that they are carried out, why write them in the first place?

    So I think this whole effort is putting pressure in the right places. Our job is to bring very direct pressure upon

the departments and agencies under our jurisdiction and see that they follow through and that they develop over a period of time—because, as you point out, it is not easy or inexpensive to do all of this—the kinds of measurements where we can tell what we are getting for the money that is being spent and whether we really are helping to turn the corner on the problems that people face in our society who can't otherwise handle them themselves.

    So we thank you very much for your coming here today, for your extensive work in reviewing the Department, and we want to stay with you and make sure that this works in the long term sense. Thank you so much.

    Mr. HEMBRA. Thank you very much.
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    Mr. PORTER. The subcommittee stands in recess until 10:00 a.m. on Tuesday.

    [The following questions were submitted to be answered for the record:]

    "The Official Committee record contains additional material here."

Tuesday, March 3, 1998




Introduction of Witness

    Mr. PORTER. The subcommittee will come to order. Madam Secretary, I want to welcome you this morning. This is your seventh appearance before the subcommittee. Dr. Bowan was originally our longest serving Secretary, and then Dr. Sullivan, and now you are the longest serving Secretary, and I think that is wonderful, and it provides a good deal of stability to the Department. And I think your long tenure has been excellent for the Department and for the country. You have done a wonderful job there.

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    Secretary SHALALA. Thank you very much, Congressman.

    Mr. PORTER. We look forward to working with you on the fiscal 1999 budget.

    We, I think, have worked well together. We realize this is going to be a very short legislative year and we have a lot of work to do in a very short time. And as always, we appreciate the cooperation of you and your Department, and Dr. Williams, who serves both as an invaluable resource for the subcommittee and also a strong advocate for the Department's interests and concerns.

    I want to congratulate you on the budget. Obviously, there are areas where we disagree. I will have to give you my short sermonette and that is, it looks very, very unlikely that the revenues that the President has put in his budget will materialize and that means that a good deal of the spending that is supported by those revenues is going to be very difficult to achieve, given the fact that our budget allocation will probably be less than would otherwise be the case.

    Let me also comment on one other thing, if I may, before you begin your statement, and that is the, I think, irresponsible proposal regarding cancer research; not that it isn't necessary, not that it isn't of extreme importance, but I think it leads in a direction that I have tried to avoid and all of my predecessors on both sides of the aisle have tried to avoid, and that is setting one disease against another in the context of NIH-funded research.

    I think that is a Pandora's box that we never want to open, and while it is well for the President, for you and the Department to say this is a priority, I think the way it has been presented in the budget is not helpful at all, and it would lead in exactly the direction I think we have to avoid, and that is the balkanization of the NIH research budget, which I think would be a disaster for NIH and for the country and for research.
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    Having given you all my sermons now, I would be delighted if you would proceed.

Opening Statement

    Secretary SHALALA. Thank you very much, Mr. Chairman, and thank you for your kind words. I will dispense with my lengthy statement and read a much shorter statement.

    Let me say at the beginning of my full testimony, I pay tribute to a retiring member of this committee, Congressman Stokes. As you know, and as I have noted before, I have known Congressman Stokes since I was a child. My mother was a law school classmate of his in Cleveland, and he has been an outstanding member of this body and I make note of that at the beginning of my comments, and I did want to say it even though he is not here today.

    I am very pleased to appear before you today to discuss the President's fiscal year 1999 budget for the Department of Health and Human Services. Last year, we spoke at great length about the need to balance the budget. The President's 1999 budget achieves that goal, thanks to the extensive cooperation between Congress and the Administration last year. We proved that by working together, working out innovative solutions and working every dollar harder, we can continue to guarantee a better fiscal future for the people of this country. The President's new budget for HHS proves that with fiscal discipline we can address the needs of American families in the context of a balanced budget.

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    Let me just touch on the highlights beginning with our three new initiatives. Last month, the President announced the 21st Century Research Fund to launch a new era of path-breaking scientific inquiry. HHS will play the largest role, with new resources for our constellation of stellar research agencies, the CDC, AHCPR and NIH.

    Indeed, NIH will receive its single largest budget increase in its history, $1.1 billion next year, a down payment on an historic 5-year, 50 percent expansion.

    The new resources will allow NIH, CDC and AHCPR to attack our most defiant diseases in a coordinated, integrated way, and speed research results from labs into the clinics and hospitals. We also propose giving every Medicare patient the chance to participate in a cancer clinical trial so each can benefit and perhaps benefit others.

    The second major new initiative in this budget is the President's child care initiative. In millions of families, both parents must work to support their children. Inmillions of other families, single parents work doubly hard to support their children. The President's child care initiative will help families find and afford the quality child care that they need. It includes $24 billion over 5 years in block grants to States, tax credits for families, tax incentives to businesses, and resources to help States enforce their child care quality standards. This budget also advances the President's commitment to bring a million children into Head Start by the year 2000, and more infants and toddlers into Early Head Start.

    The third new initiative in this budget is the Medicare buy-in plan. It answers the question troubling millions of aging Americans: What if I lose my health coverage before I am 65? The buy-in plan would allow those age 55 and over to breathe a little easier.
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    In addition to these new initiatives, this budget also advances the fight against our most pressing public health challenges, with 165 million new dollars for Ryan White treatment activities for HIV and AIDS; with 25 million new dollars to develop and expand national early warning systems against food-borne illnesses and infectious diseases; with 200 million new dollars for the Substance Abuse Performance Partnership Block Grant to help States and communities to strengthen their control and treatment efforts; with 200 million new dollars to fight tobacco's impact on public health and keep it out of children's hands.

    Mr. Chairman, let me take this opportunity to voice the President's strong desire to work with Congress to protect our children from tobacco. To do that, we must have comprehensive tobacco control legislation, comprehensive, not piecemeal, that includes the President's five key principles, and a large price increase.

    As we advance our public health promises, the President's budget, for the first time, addresses the serious inequalities in health services and health status for minorities. All Americans must have an equal opportunity for a healthy future.

    This budget includes $80 million to address several areas of disparity: Diabetes, infant mortality, breast and cervical cancer, heart disease, stroke, HIV/AIDS and child and adult immunization. We must correct this disparity so that all Americans have an equal opportunity for a healthy future.

    Finally, Mr. Chairman, I am proud of how this budget makes every dollar work harder. First, there are no better investments than fraud busting. Last year, our Inspector General's crackdowns on Medicare fraud returned almost $1 billion to the Medicare Trust Fund. Our new budget includes another $138 million to fight fraud, and we are offering new fraud-busting legislation that would return another $2.4 billion to Medicare.
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    In addition to fraud-busting, we have proposed $264.5 million in new user fees. These user fees are not only smart government, they are also crucial for HCFA to meet its obligations under the Balanced Budget Amendment and the Health Insurance Portability Act. But, speaking of smart government, we have sent you our first Government Performance Results Art (GPRA) annual performance plans which we developed in collaboration with Congress, with States and local and tribal governments, as well as our private partners. To us, GPRA is more than an acronym. It is a way to ensure that the line items in our budget truly serve to bring America's promise to all Americans.

    Mr. Chairman, members of the committee, I believe this is a historic budget for HHS that launches a new era at the Department, a new era for health and social policy. It proves that with innovation and discipline we can take strong steps for family health and well-being and physical health and well-being. We have much to accomplish together.

    I would be happy to address any questions you may have.

    [The prepared statement follows:]

    "The Official Committee record contains additional material here."

Tribute to Mr. Stokes

    Mr. PORTER. Madam Secretary, Lou slipped in right after you started, and I think you ought to repeat what you said now that he is here.
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    Secretary SHALALA. Mr. Stokes, it is very nice to see you, Congressman Stokes. I wanted to begin my testimony today by paying tribute to you, to a beloved and highly respected member of this subcommittee, my fellow Ohioan, Congressman Lou Stokes.

    As I indicated, I have known Mr. Stokes since I was very young. He was a law school classmate of my mother's. And observing his growing legacy in Washington over the years, I have been inspired by his devotion to bring America's promise to all Americans.

    A few weeks ago, when Dr. David Satcher was sworn in as Surgeon General, he closed his comments by a quote by the educator and reformer Benjamin Elija Mays. He said, if it falls to your lot to touch the lives of others, then be sure to touch them in such a way that you leave them better than you have found them.

    Few have done more than Mr. Stokes to touch the lives of others and to leave the health and well-being of our Nation better than he found it. So I think I can speak for all of us in the Administration when I say today is a very bitter sweet day. His gain of a well-deserved retirement is our loss of a great advocate.

    Mr. STOKES. Thank you very much. Thank you.


    Mr. PORTER. I have to say, Madam Secretary, we all agree with that. And that was even better than the first time, Lou.
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    As usual, we will go according to those who were present when we began and then add those who have arrived since that time. I will start the questioning and will operate under the 5-minute rule.

    Let me go back to the subject I opened with, Madam Secretary, at the start, and ask you was the earmark for cancer research part of the budget that you originally submitted to OMB in September?

    Secretary SHALALA. You know, we obviously negotiate our budget and collaborate with the White House. Let me simply say that all of us support the President's recommendations to this Congress. We do not believe that it is an earmark. I would rather describe it as an emphasis within the context of a 50 percent increase. As Dr. Varmus will testify, we believe that within the context of a 50 percent increase, emphasizing and resulting in a goal of 65 percent for cancer is not inappropriate, given where we think the breakthroughs are going to be in research. And, we believe that cancer is on the cusp of a series of major breakthroughs and that this additional investment will make a major difference in the quality of life.

    Mr. PORTER. Well, obviously, we agree with that very much. In fact, this subcommittee, many members of the subcommittee, have been very concerned about the allocations of funding by an institute that has seemed to have, in past years, shortchanged those diseases that affect the broadest populations in our country: cancer, heart disease, diabetes and the like. But how do you pull out cancer as opposed to heart disease? How do you pull out cancer as opposed to diabetes or Parkinson's Disease or Alzheimer's and say this one gets to the head of the line and we will make the judgment rather than having science make that judgment?
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    Secretary SHALALA. Well, I think that you will find that this conclusion is supported by science. Dr. Varmus will explain to this committee that the next dramatic transformation of medicine through, genetics and molecular biology, is indeed likely to occur in the study of cancer. I will leave it to him to make the scientific explanation.

    Let me also point out that we are not talking about 65 percent for the National Cancer Institute. This is for cancer research across the institutes. And it is important that we see this for what it is, an emphasis, a goal. We believe, within the context of a 50 percent increase, that it is appropriate.


    Mr. PORTER. Well, Madam Secretary, let me just say, finally, that we believe—and since you didn't submit it in the original budget, we assume that this came out of the White House. We believe that cancer is a very high priority, but we also believe that the decisions as to where the allocations ought to be made should be made by science and by scientific opportunity, and we are very careful not to ourselves change the allocations by institute that are suggested by NIH, and we think that the White House ought to be just as careful in that regard and not set one disease against another.

    As you know, the Community Health Center Program is strongly supported by this subcommittee. However, a recent article in the Washington Post outlined the substantial decline in utilization in several community health centers as a result of indigent patients moving into managed care. The article indicated that nationally the number of Medicaid patients who visited community health centers declined by 11 percent.
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    When Maryland moved its Medicaid patients to managed care, the center in Baltimore lost 25 percent of its patients. In the month when New Jersey moved its Medicaid patients into managed care, the number of Medicaid patients visiting the Newark clinic declined by 50 percent.

    Madam Secretary, are the number of patients visiting community health care centers increasing or decreasing? Do you view the movement of Medicaid patients into managed care as being essentially a positive or a negative trend, and what can be done to help these centers better compete against Medicare and others for the work of serving the poor?

    Secretary SHALALA. Thank you for the question.

    That depends on where you live. This has also been a phenomena in some public hospitals around the country. They are seeing less Medicaid patients because the Medicaid patients have signed up for HMOs, and the HMOs are steering them to other hospitals. So it is a phenomena of a changing market, particularly as the States move people into managed care. But it really depends on where you are in the country.

    I was in Texas last year, and the community health centers have contracted with HMOs to service those patients so they are being reimbursed directly. What we did, earlier on in this Administration, is give the community health centers resources to put their houses in order in terms of their business offices so that they could, in fact, have a system in place to get those reimbursements.

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    They also need to change their culture and not do business as usual, because they are now a part of this larger health care market in terms of competing.

    The kinds of subsidies the government has continued to give them are very much for people who don't have health insurance and for those people with Medicaid. They need to build relationships with the HMOs so that they can continue to service a population they have serviced before, but also new people that are coming in. So I think the answer to the question is, we don't know where this is going to end. We have to continue our support for community health centers, but continue to work with them so that they can change and adjust to this new market. They are better, for instance, for people who speak little or no English, and they can provide more culturally-sensitive services.

    I have encouraged the HMOs to work with community health centers. I have encouraged the States to design plans. When we gave the waivers, we included community health centers so that they see their health care system as an integrated whole. So we have, in fact, done some things. We will see these changes occurring in different parts of the country. We will have to watch them, but continue to give technical assistance and to work with community health centers.

    Mr. PORTER. This looks like the same kind of problem that we face with our academic medical centers, teaching hospitals, where the populations that are being served by HMOs are no longer utilizing those facilities. We are going to have the same kind of problem in reference to Medicaid in the community health centers apparently. I would like you to put in the record the magnitude of the problem, whether the number is increasing or decreasing, where the effects have been, if you would, and let us take a look at that.
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    Secretary SHALALA. Yes. It may be more descriptive than you like because our statistics will vary. It will show you that this is geographically based and it is, I think, important that we are seeing a snapshot of a changing system. Then, we have to figure out where we can target resources so we can be helpful to very important institutions——

    Mr. PORTER. Thank you.

    [The information follows:]

    "The Official Committee record contains additional material here."


    Mr. PORTER. Madam Secretary, you are asking for $1.8 billion in new funding for your child care initiative. However, as I understand it, the mandatory component of the child care block grant increases by $100 million in fiscal 1999 with an additional 60 to 70 million dollars in required State matching grants.

    More importantly, the decline in caseloads has, according to the Ways and Means Committee, freed up as much as $4 billion a year that can be used for child care if the States choose. That is, welfare caseloads, apparently. Funds from the new welfare-to-work can also be used for child care.

    Madam Secretary, with so much money available for childcare, why do we need a new program or even to expand existing ones beyond current law? States, I believe, have had no compunction about putting money into child care. Why do you believe that the States will not use their windfall from declining caseloads to fund this high priority?
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    Secretary SHALALA. Well, let me say that we are talking about two different populations. States' funds are focused on the welfare population. The President's initiative is focused on low-income workers, people who are already in the workforce. This group of people has been left out. Their incomes are not high enough to take good advantage of tax credits and yet their incomes are too high to qualify in many States for child care subsidies.

    The States have fully drawn down the child care subsidies that were allocated under the TANF plan. We are talking about a different group of people, working parents who need subsidies, that's number one. Number two—we need to give parents choices. That includes parents who choose to stay at home. Parents need quality choices. So this money is also an investment in quality, which we do not have. As more parents go into the workforce, they need to be assured of the quality of the child care they are getting. But the fundamental point is we are talking about a working population, not about the welfare-to-work population. And we do believe that an additional investment is needed. I think the parents believe this also. We have talked to them around the country.

    Mr. PORTER. Thank you, Madam Secretary.

    Mr. Stokes.


    Mr. STOKES. Thank you, Mr. Chairman.

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    Madam Secretary, let me personally say that by virtue of being the Ranking Member on the VA–HUD Subcommittee, I was required to be there this morning. We started at 9:00. So, that is why I was late getting here to hear your presentation. I am sorry to have put you through that tribute you paid to me twice, but I am glad at least I was here to hear it.

    I want to thank you very much. The special friendship that you mentioned that I have had with you and your mother over the years is something that I cherish. As everyone knows, I have great respect and admiration for both of you. I thank you again for your kind remarks.

    Let me start with a question regarding welfare reform. How well is welfare reform, in operation, measuring up to the criteria that it must move people from welfare to work, provide adequate education, training and child care to enable welfare recipients to become self-supporting, encourage parental responsibility, protect the health and nutrition of children, and enhance State flexibility?

    Secretary SHALALA. Congressman Stokes, we don't know the answers to those questions yet. What we do know is that a combination of welfare reform, waivers we have granted, and particularly a very good economy, have caused the rolls to be reduced dramatically. We have significantly fewer people on welfare than we have had in a couple of decades. Because welfare reform has just begun, we have no national statistics. We cannot determine: the permanency of these placements; whether people are getting jobs that they could move up in; what is happening to their children and to the cognitive development of children. There are lots of studies out there that will give us some of these answers. The Congress has mandated a massive collection of statistics that will give us much more sensitive information.
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    We know some other things, other than welfare rolls dropping. We know that the predictions that there would be a race to the bottom, that the States would pull their money out very fast and that they would lower their benefits and not help people make the transition have not come true. In fact, there are a number of States that have added more money and taken advantage of the flexibility in welfare reform to add more money to the system.

    There are a number of States who have allowed current welfare recipients to keep more income as they make the transition from welfare to work, and that prediction is not based on geography. You will find States as enthusiastic about doing that in the South as in the North, in the Midwest, and in the West.

    So the early indications are that people are, in fact, split between those that are getting jobs and those that are leaving for other reasons because they have other sources of income. For instance, they may get married or someone may take financial responsibility. We know that child support payments are up and that's good. We know that teen pregnancy is down. It is too early to come to a conclusion about the questions that you have asked, which are the appropriate ones: What has happened to the children? Are people really better off? Does work pay? We will have those answers, but we don't have them at this moment.


    Mr. STOKES. Madam Secretary, let me ask you this, and this, of course, is something I have spoken with both you and all of your predecessors about for a number of years. In 1985, then Secretary of the Department of Health and Human Services, Secretary Heckler, commissioned a report to study health care in the United States. That report told us that there was a great disparity between minority health and majority health in this country. It listed six specific areas, starting with heart attacks, stroke, cardiovascular disease and so forth, where there is a wide disparity between majority health and minority health. That task force made certain recommendations.
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    In 1995, there was a 10-year update by the Department of Health and Human Services relative to this disparity in minority health.

    Now, of course, you have an initiative known as Healthy People 2000. Considering the fact that we are about to enter the year 2000, the new millennium, my question to you is: How far have we come with respect to closing the minority health disparity gap?

    Secretary SHALALA. We have made progress. For instance, there has been an increased number of mammograms taken by African-American women. We have made remarkable progress in immunizations, where 90 percent of the kids now in this country are immunized. The group that increased the fastest consisted of minority kids because those were clearly kids that were left out of the system. Our massive effort to increase childhood immunization rates really did make a difference.

    But we haven't come far enough, in the judgment of the President and obviously of me. You will remember that under the Department's goal setting in Healthy People 2000, and all previous goal setting, we have set separate targets for minorities and for the white population.

    The President announced 2 weeks ago that in the major priorityareas that you identified, infant mortality, cancer screening and management, cardiovascular disease, diabetes, HIV/AIDS, infection rates and child and adult immunization, we continue to have gaps in almost all the minority communities; whether it is American Indians or African-Americans or Hispanic or Asian Americans, these are big areas. We will no longer set separate goals that are lower than the broader population. We will remove our safety net and go with a new initiative in which I would describe the $80 million we have asked for in this budget as glue money and mobilize this country to close those gaps.
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    We will no longer be satisfied with lower targets. We will try to close those gaps. This is an extraordinary and historic effort, which we have put in the context of the President's race initiative. This is one of the largest public health steps that we have ever announced. In this budget is $80 million, which I would describe as the glue money that would allow us to put together the various initiatives. This effort will be administered by the new Surgeon General. His co-leader will be Dr. Peggy Hamburg, who is here, and is the new Assistant Secretary for Planning and Evaluation. Dr. Hamburg was the New York City Health Commissioner, and knows well the difficulty of closing gaps on the ground.

    She made a historic effort, successfully, for instance, to reduce the tuberculosis incidents in New York City. She knows exactly how tough this is to do. She will head the interagency group to try to do this. But we have removed any protections that we may have and made a big commitment.


    Mr. STOKES. HIV/AIDS also continues to have a disproportionate impact on the African-American community. What does this year's budget request do to make sure that the investment in AIDS treatment, prevention and control follows the trend of the disease, especially in high risk populations?

    Secretary SHALALA. We have identified HIV/AIDS. As you know, racial and ethnic minorities constitute approximately 25 percent of the total U.S. population. Yet they account for nearly 54 percent of the AIDS population and, therefore, the new resources that we are asking for, including some of our increase for Ryan White, will be targeted toward this population. Congresswoman Pelosi has led this effort.
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    We need to begin to shift our money to target the population. We are making an effort to do that, with a special concentration on reducing differences through the race and health initiative that we have announced.

    Mr. STOKES. Thank you, Madam Secretary.

    Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mr. Stokes.

    Mr. Miller.

    Mr. MILLER. Good morning.

    Secretary SHALALA. Good morning.


    Mr. MILLER. Let me start with some questions about Medicare. I have several seniors in my district in Florida, so it is an issue in which I have a great deal of interest. One section in the balanced budget agreement last year was the new Medicare choice plan, which is rather exciting. I think it is maybe one of the most significant changes in Medicare in the 30 years of the program.

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    But a key part of that is the consumer education effort, and I know HCFA will be coming forward here and we will get some more details.

    Secretary SHALALA. Right.

    Mr. MILLER. But it is a giant task that you have, and HCFA has to help educate the seniors when this information comes out. Are you confident in your ability to do this? Have you funded it properly?

    Secretary SHALALA. Well, this is our first time out——

    Mr. MILLER. Yes.

    Secretary SHALALA. It would consist of educating consumers on the choices that people are going to have, and of course it has to be regionalized. We would obviously put out a Medicare handbook for the whole country.

    This is different, because we are going to have to break it down in a way in which people receive information about their own communities, and what health plans they can choose among in their home communities. So for the Department this will take an extraordinary effort. And using modern technology and working with seniors groups, we have a multifaceted, comprehensive plan to get the information out, to make it interactive, to train large numbers of people, and to work with seniors as they make these choices.

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    It is our first time out doing this. I think we have very good people and they have very good ideas about how to do this. We obviously will have an advertising component to it, but we are going to mobilize communities to work with us to get this information out in a way that people can actually use it. It has to be very user-friendly.

    Mr. MILLER. Yes. It is a marketing effort. Having taught marketing at the college level, I certainly understand what a giant marketing effort it will be.

    Secretary SHALALA. Well, we would appreciate your advice, Congressman Miller.

    Mr. MILLER. You need to recruit consultants who are able to design forms, that don't look too much like government forms. It is a great opportunity, but it is going to yield a lot of confusion. It is scheduled to roll out in November and you are right, regionalization of it makes it even more complicated.

    Secretary SHALALA. And we will have an 800 number. There will be all sorts of ways. A number of us intend to get on the other end of the phones ourselves to see how it is working and to work with the programs.

    Mr. MILLER. It is something that we will work on together.

    Secretary SHALALA. It is a big effort, but we would be happy to have any marketing advice.

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    Mr. MILLER. Obviously, we all need to work together on this one because we all agreed to it last year.

    Secretary SHALALA. We would be happy to give you an individual briefing if you would like to see more details of the program.


    Mr. MILLER. We will be sure to address it when HCFA comes in here.

    Under Medicare you have user fees that have been increased and it is my understanding that the Ways and Means Committee doesn't like the idea of user fees. A lot of sources of user fees are providers and if they are cost reimbursed, doesn't that really mean we are going to pay for them anyway? If they are not cost reimbursed, it is not a problem but, if you charge for surveys, that is part of their cost structure, isn't it?

    Secretary SHALALA. Well, I will check on that.

    Mr. MILLER. Okay.

    Secretary SHALALA. We are not going to do a cost reimbursement on it so they will absorb it as part of their overall costs. We are asking them to pay for audits and other kinds of things that require special efforts.

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    Mr. MILLER. Again, the Ways and Means Committee has to handle that, not us, but you are spending the money that—you think the Ways and Means Committee is going to approve, and I think it causes problems when we start addressing spending the money if the revenues aren't going to be there. I have a problem if you are going to mandate we have to be audited and we are not going to reimburse you to be audited. There is a fairness issue so we will have to see how Ways and Means addresses the issue. It causes a problem for us if we don't have the revenue.     Secretary SHALALA. Well, and that has always been true in the appropriations process. Obviously, there has to be coordination between the finance—the appropriate tax and finance committees, and the Appropriations Committees. But let me say about user charges. There is the question of who pays. They are making money on these programs. Medicare is now a very good payer in this country. When I first came here, everybody was complaining and stating that they were going to get out of Medicare because we weren't paying very well.

    Given the enormous discounts that corporations have negotiated with their HMOs, we are now a good payer and we pay on time and we think it is not inappropriate to have those institutions that are doing very well pay.


    Mr. MILLER. Well, some providers don't feel as comfortable, but you are correct in some areas. Let me switch to another area and that is NIH, which as you know, this committee has been very strongly supportive of. But a lot of it is related to the tobacco settlement. Now, I am not pro tobacco, so I should be able to support any strong tobacco program. If we don't get a tobacco settlement, where are we going to get the money to pay for NIH?
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    I don't think the Administration has provided the necessary leadership, and I don't see it coming out of Congress.    Secretary SHALALA. Yes. Well, I think we have provided the leadership. We began with our FDA regulations——

    Mr. MILLER. But you haven't submitted a plan.

    Secretary SHALALA [continuing]. Which the President has put in place. The President has submitted principles under which he would approve pieces of legislation that would come forward. We have already indicated that a bill that has been introduced on the Senate side, which will soon be introduced on the House side, meets the President's principles. We will review every bill that is introduced in that regard.

    We have provided technical assistance to any group of legislators that are drafting bills in this area.

    Mr. MILLER. Why don't you submit a bill?

    Secretary SHALALA. We have made it very clear that we will support comprehensive legislation. We believe we can get comprehensive legislation, that it will be bipartisan, because as you indicated, there is bipartisan support for comprehensive legislation in this area.

    Mr. MILLER. Right.
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    Secretary SHALALA. It is not necessary that all of you submit a bill. There are bills up here that are acceptable. We have outlined in some detail what the elements of those bills would have to be for us to support them and we will work very closely with this bipartisan effort in Congress to pass legislation.

    Mr. MILLER. I wish there was more leadership from the Administration. I think it is a very complicated situation because you have the Judiciary Committee and the Commerce Committee involved. You have the agriculture people, and the vending machine people upset because they are being put out of business. I get concerned about spending money before we have it, and that is what we are talking about doing with the tobacco company money, aren't we? That extra billion dollars is really coming out of tobacco.

    Secretary SHALALA. Obviously, the tobacco legislation will need to be passed. We are working very hard to make sure that that happens. There should be no reason, in this Congress, that we can't pass bipartisan tobacco legislation. It is a very important public health step. There already is bipartisan support to do that.

    There are bills up here which are acceptable to the Administration. We are working closely with committees that are working on bills, and there is good reason to take this very large public health step. Remember that for us, reducing smoking among kids is the point here.

    Mr. MILLER. Right.

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    Secretary SHALALA. And that will have an impact on the budget in the long run. But it is not unusual for us to recommend revenue sources and then target those revenue sources to pay for the budget that we have submitted.

    Mr. MILLER. Thank you.

    Mr. PORTER. Thank you, Mr. Miller.

    Ms. Pelosi.


    Ms. PELOSI. Thank you very much, Mr. Chairman.

    Madam Secretary, thank you for your excellent testimony. The priorities of the Clinton Administration are commendable and your efforts to make every dollar count, of course, are just music to our ears here. The initiatives, the 21st Century Research Fund, is the very least we can do; hopefully we can find the money. I hope that that will include investment in the National Institute for Nursing as well, because as we make progress in all of these other areas, we must not forget where we have contact with the patients.

    The child care initiative is excellent, and the Medicare buy-in is quite a step forward, as well as the other priorities that you presented.

    I wanted to also commend your excellent leadership, as demonstrated by your ability to attract the talent that you have in your Department across the board. I want to join in welcoming Peggy Hamburg. I know her experience and her talent will serve us all very well.
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    I wanted to follow up on a couple of the questions posed by my colleague, Mr. Stokes, in relationship to welfare reform. Clearly, welfare reform has led to important changes in the lives of many families. We have read reports of lower caseloads across the country, though it is less clear what the outcomes have been for some who have left public assistance.

    I wonder if you could tell us about your research in this area. Your research program allows you to track outcomes for families formerly on Federal assistance. I am interested in the research and evaluation efforts that the department has under way.

    Secretary SHALALA. Well, the Congress authorized a huge data collection effort, and in addition to that, gave us a number of million dollars to launch a research effort, which will include both case studies and the development of outcome measures.

    In addition, there are numerous private sector efforts. The major foundations in this country are alsomaking an effort to both collect data and to analyze it. So I see this as part of a much larger whole to study—this is probably going to be the most studied piece of social policy in American history given the resource commitments.    The kinds of outcome measures, we all are interested in is whether people are fundamentally better off. Does work pay in a way that lifts people out of poverty? Are their kids doing better in school? Are they able to take advantage of the educational and training opportunities that we have put in place? Are they staying in their jobs, not necessarily the first job, but are they getting settled into a job? How is the interaction between their child care and some of the other programs that we have put in place working? Are they able to keep their Medicaid?    One of the great concerns that the governors and I have is the place where we registered people for Medicaid was in welfare. Once people move off of welfare, they need to be told that they can keep their Medicaid for a certain period of time; every State, for at least a year, most of them for 2 years. And then their children can keep health insurance forever, because Congress has put in place a new children's health initiative. People need to know what they are eligible for, and it is complicated.    We are requiring a change in culture. The culture of the welfare office is turning into an unemployment office. How is this working? How do employers feel about it? Working with Congress, we have put a lot of welfare-to-work resources in the Labor Department; big initiatives by the private sector. These are new initiatives related directly to low-income workers: The earned income tax credit, raising the minimum wage, all of these things to try to make work pay so people are, in fact, better off in the workforce.    But it is going to take a little time to find out whether they actually are better off; tracking them, getting the States to collect the information while they are making all of these other changes.    Ms. PELOSI. I appreciate that.    Secretary SHALALA. It is a big challenge.    Ms. PELOSI. I appreciate that and the fact that the economy is doing so well, of course——    Secretary SHALALA. Absolutely.WOMEN'S HEALTH    Ms. PELOSI [continuing]. To help some of these people off of Federal assistance as well.    I was particularly interested in what the research and evaluation effort is. It sounds to me as if it is something that is being developed and will be public/private service.    I wanted to move on to women's health issues. I want to commend the work of the NIH Office of Research on Women's Health and other women's health research at NIH. You are all doing an important job to address the particular needs of women, including research on breast cancer, microbicides, health care delivery, targeted prevention, many other areas that can help improve outcomes for women. Could you bring us up to date on some of the current work at NIH addressing women's health issues?    Secretary SHALALA. Well, you have identified the major initiatives, and the importance of the 50 percent increase for NIH can't be underestimated in terms of its impact on women's health. Particularly in the area of cancer, where we are really on the verge of breakthroughs, because of genetics in molecular biology. This is an opportunity to lower mortality rates and to develop strategies for treatment. The NIH has been a leader, not only in breast cancer research, but in cervical cancer. We have work going on, as you pointed out, in the Institute of Nursing in the treatment of patients. So I would identify all of the diseases, impacting on women as actually getting a push; including major breakthroughs in AIDS treatment.    As you well know, the AZT international trials were stopped because we believed that we have now found a way to reduce the number of children who are born with AIDS by using a much cheaper treatment protocol. It was possible to stop the clinical trials as the first ones that came on line were analyzed. We are in the process now, with our international partners, of trying to put the resources together to make sure that we literally save millions of lives around the world. That is the result of a major investment from NIH, which will affect women and children around the world.AIDS DRUG ASSISTANCE PROGRAM (ADAP)    Ms. PELOSI. Thank you, Madam Secretary. The internationalizing of the effort is very, very important, and I think the Clinton Administration is to be commended for it and I will have more questions when Dr. Varmus comes before us on that issue.    I wanted to thank you for the requested $100 million increase in the ADAP funding now that we are on to the subject of AIDS.    As you mentioned, more people are living with HIV/AIDS. As Mr. Stokes pointed out, more of these are women and people of color. And the Ryan White programs across the country continue to be critically important.    I wonder if you could comment on how we can ensure that the comprehensive service systems built by the Care Act that facilitate access to AIDS drugs and primary care remain strong and able to help people with AIDS? And while I am at it, I will include, because of the time, my concern about the flat funding for the prevention. I think that our best dollar spent is on the prevention of HIV. Thank you also for requesting increased funding for research and treatment.    But in terms of prevention and care, if you could comment.    Secretary SHALALA. Yes. I think that what you are seeing is the maturity of the programs. There is much better coordination at the State and local level and at the community level, in particular. While some things in this budget had to be flat-funded, the importance of the increase of $165 million cannot be underestimated—whether it is emergency relief or the comprehensive care grants that will go up. We need to make sure that we get the social support systems in place and well-coordinated with the medical services. And, make sure that home and community-based care and health insurance, continuation programs, continue.    The Title II grants are expanded by 23 percent. I think that that improves coordination.    On the prevention side, communities are getting much more active in prevention activities, but not enough for any of us. There are more actors in the prevention world than there have been before. We have identified the priority areas that will improve local coordination and local commitments, as well as to make surethat drugs and medical services are available in communities. These increases will take care of that. Hopefully, during the course of the year, we also will have these research components, and the investments in them, resulting in help in this area.    Ms. PELOSI. Thank you, Madam Secretary.    Thank you, Mr. Chairman.    Mr. PORTER. Thank you, Ms. Pelosi.    Let me remind committee members that we go back and forth from Republican to Democratic for those Members who are present at the start of the hearing, and then from that point on we recognize those in order of arrival, and we make an exception for Ranking Members or subcommittee chairmen who specifically request that they go out of order. We are operating currently under the 8-minute rule.    Ms. DeLauro.QUALITY IMPROVEMENTS IN CHILD CARE PROGRAMS    Ms. DELAURO. Thank you very much, Mr. Chairman.    Madam Secretary, thank you. As a cancer survivor, I thank you and the administration for the cancer research initiative. I think that we know that the opportunity to do research in one area also has a payoff, if you will, in other areas in looking at other illnesses and diseases.    Let me make a comment first on the chairman's question of why we need to deal with a new child care initiative and why we need the present child care initiative. Just two quick points. In the State of Connecticut, State child care is so oversubscribed they can't take any more folks in the program. There has been an open enrollment period of 2 days in the last 2 years.    We have had 800 families who applied for child care so there are thousands of others who cannot avail themselves of the child care.    As I understand, the State block grants require that welfare recipients be treated first in the priority and then the working poor second. The working poor are being left out of the equation and they, in fact, do not have the opportunity to avail themselves of tax credits or of child care.    So, again, I applaud the child care initiative. Long overdue.    A couple of questions. In 1994, I was proud to vote for the child care expansion and the Quality Improvement Act, which reauthorized Head Start. We are dealing with both quality and expansion, which need to go hand in hand. Without that, the public isn't going to provide the support we need on the program. We have got the scientific research on children's brain development and the importance of putting emphasis on the highest possible quality in all of our early childhood programs.    Can you describe for us the steps proposed in the budget to further improve quality in both the Head Start and in the Early Head Start programs?    Secretary SHALALA. Well, as you know with Head Start, we will be going through the reauthorization process. In this child care fund that the President is recommending is a major new commitment to improve the quality of child care, and not just institutionalized child care.    It is important that we establish quality networks in communities for children that are taken care of in small groups in individual homes. In my own hometown of Madison, Wisconsin, there is a model program for home-based care in which there is a network and there is training and opportunities to upgrade skills for those who are caring for small groups of children in homes, where many people place their children.    In addition, we have included in our recommendations, for mothers who choose to stay at home with their young children, an opportunity for them to get some support and to learn things that will help them with their children.    We consider the quality investment not just as an institutional investment, but in the variety of child care options that we want to give parents, each one of these require an investment.    The big issue is access, clearly, because there are not enough resources for low-income working parents. But it is also quality. Parents are concerned about where their children are placed, how to judge quality, and about working on ongoing relationships with the people who take care of their children, in this country. And, I would add to that, not anticipating Mr. Hoyer asking me a question, this also has resources for the coordination between schools and child care and we are now rewarding, through financial systems, child care centers and Head Start centers that build collaborations. And, all of this will help.    We are moving to a new era in this field that increases choice, increases options, supports people in the placement of their children, and improves quality across the board, and uses existing institutions to make it better.    Ms. DELAURO. And we have an opportunity to learn from what we have done in Head Start because there has been a close look at Head Start in evaluating Head Start to see what works and what doesn't work so that when we move to the early childhood programs, the zero to three programs, that we are not making, if you will, the same errors.    Secretary SHALALA. Well, that's exactly right. Head Start itself is changing. We made the commitment some time ago, to this committee, to improve the quality of Head Start.    The zero to three age group is a perfect example. There is almost no infant care out there. If someone asked me, is there enough welfare money out there to pay for child care, the answer is, no. There is very little money out there to help develop quality infant care. Parents are desperate. We need to help develop quality infant care. The zero to three initiative becomes very important as part of this. But, again, we need to give parents choices.    If they choose to stay home, if they choose to work part-time, or if they have the choice to work full-time, there should be quality places for them to place their children while they are at work.    Ms. DELAURO. Another question, but first a final comment on that. I believe that we are not serving the people we represent well if we do not take the studies that have been produced on when we know the children are learning from zero to three. We have got the information. We don't need any further studies. We have got to try to provide the opportunity to impact our kids from zero to three so that they can have a successful life.    I was recently contacted by a grandmother who lives in my district.    Ms. DELAURO. In her letter to me, the overworked grandmother told me that her daughter was able to get off of welfare, get a job, until the State of Connecticut's delay in paying the child care provider forced the provider to close. When the constituent's daughter lost her child care, she also then lost her job. Because she wasn't working, she lost her welfare check. This is a woman from Clinton, Connecticut. I have the letter right here.    This is the kind of administrative snafu that has a real effect on people's lives. In my view it is unacceptable. What kind of oversight does your Department have to ensure that States are dispersing Federal child care funds efficiently? Is there anything that we can do at this level to make sure that this doesn't happen in Connecticut or elsewhere since people are getting off of welfare, and are trying to find jobs, but they are getting caught in an administrative nightmare?    Secretary SHALALA. Well, we do have oversight authority and there are rules about how fast States should be reimbursed. I'm not familiar with this specific case. We have moved to a more businesslike system.    The States have expanded rapidly. They are getting systems in place to make payments, but I have heard some stories around the country about payments. Medicare is a perfect example. We pay faster than the private sector does now—in terms of reimbursing for bills. The Federal Government has rules in terms of how fast we have to pay. We are paying so fast that we are not catching some mistakes—which I am concerned about at the same time. But, we need to recognize that these child care centers are places where working parents are placing their children and they can't be without those options.    We would be happy to look into that particular case and to talk to the State of Connecticut.    I don't think we need any additional authority. I think simply communicating with the States, that they need to get their own houses in order in terms of payments so that people don't go out of business. But it tells you something about how fragile the child care industry is and how delayed payments really affect places where parents can't pay very much money. People that work there aren't being paid very much.    These are small businesses that need to make sure that their cash flow remains consistent. The government should be the last place that isn't being supportive of small businesses, it seems to me.    Ms. DELAURO. Thank you, Madam Secretary.    Thank you, Mr. Chairman.    Mr. PORTER. Thank you, Ms. DeLauro.    Ms. Lowey.FOOD SAFETY INITIATIVE    Mrs. LOWEY. Thank you, Mr. Chairman.    Welcome. It is always a privilege for me to have the opportunity to talk with you and work with you and I applaud the administration's overall agenda on health and social issues and we can all be proud that you are leading the way. And I want to join my colleague in welcoming Peggy Hamburg here. It is a pleasure to have you as a part of the team, which is certainly a very distinguished one. I thank you very much. Good to have you here with us today.    A couple of points. First of all, I want to associate myself with my colleague, Ms. Pelosi's leadership, on AIDS issues, and I am very pleased in looking at your request that, in addition, to the important allocation of funds towards the new drugs, that you also understand that emergency assistance to communities with a high number of AIDS cases is absolutely critical, certainly in the areas that I represent.    Second, I also want to applaud the administration's proposed increase of 10 percent for cancer research. Certainly our chairman and this committee have been very strong supporters of the National Institutes of Health, and I wish we could see increases even in addition to the cancer research and to the other illnesses as well, and we would certainly work with you towards that end.    I was very pleased to see the administration's emphasis in the budget again this year on improving the safety of our Nation's food supply. This is an area where I know we share concerns. Could you discuss with us how the CDC's food safety initiative will add to the cooperative efforts?
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    Secretary SHALALA. Well, there are a number of aspects of the food initiative. The CDC has asked for a $5 million increase. We are going to increase Federal support of 22 State health departments to detect food borne illnesses. It is the infrastructure that CDC is concerned about, and the quality of the surveillance system in the United States. That's where we are investing.

    There is also an investment in FDA inspections; particularly in inspections abroad. Again, they are part of a surveillance system, and we will have investments there. We are also going to improve coordination between State and Federal agencies in food handling practices and food borne disease outbreaks because some of the problems are just communication—so that we can quickly identify the problems. We are going to make another investment in research in this area.

    Let me also say that we have a two-pronged or a three- or four-pronged strategy. Obviously, the research and the surveillance systems, are expanding our oversight and coordination. But, in addition to the technical and the scientific work that we are doing, we are translating that evidence into everyday activities. We believe that there should be a high tech and a low tech strategy with the food companies in this country—the private sector—we have launched a campaign to get Americans to prepare their food correctly, using cutting boards and cleaning them; separating their foods; to get everybody in the family to wash their hands before they eat. Basically it is a combination of food preparation and making sure that our hands are clean before we go to eat. These are the fundamental public health pieces, which the CDC and FDA are both concerned about, and are working with the Department of Agriculture. This is a massive effort to rebuild the infrastructure and at the same time to remind everybody that we have to do the fundamentals.
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    I was at an elementary school in Cleveland, talking to a first grade class. I asked the kids, what should I tell the President? And, the first message was tell him to wash his hands before he eats.

    Mr. HOYER. Everything I needed to know I learned in kindergarten.


    Mrs. LOWEY. I thank you very much, and I just want to emphasize again that I am particularly pleased that there is a cooperative effort. When you go to the supermarket, or the local food store these days, you see products from every place in the world. Certainly FDA's responsibilities are critical in inspecting these products at the source and working with CDC. I am hoping that we can continue to make progress. I would be remiss, since I do ask you to share with us every year an update on the administration's efforts regarding breast cancer. I do believe this administration has taken the lead. We have seen some important successes. We know we have a lot more progress to make.

    Could you share with us the administration's initiatives for this year towards our goal of ending the scourge of breast cancer?

    Secretary SHALALA. Yes. And this includes the action plan for breast cancer. Our future priorities will be focused on minority communities where there is less participation in mammography and in treatment and in services.
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    There will be an enormous effort in taking the evidence that we have and making sure there is larger participation by women and minority communities in the services that are available.

    In addition to that, we intend to continue the research priorities that the National Cancer Institute and the other institutions that are doing cancer research. I expect that in treatment and identification, moving more people to earlier detection, that we will continue to make progress in these areas.

    Communications, alone, has started to make a difference. The special resources that Congress put into CDC to conduct outreach to low income women has begun to close the gaps between African-American women and the general population. It is important to have the prevention pieces and the research pieces together. I think that the Department has the best coordination we have ever had in this area.


    Mrs. LOWEY. In another area, with the time that's remaining, in looking at your statement I am very pleased that the administration continues to place a high priority on reducing fraud and abuse in the Medicare and Medicaid programs, so we can reprogram those dollars and use them efficiently and effectively.

    Could you share with us which initiatives you think are the most effective, what antifraud and abuse activities are you going to highlight this year? In other words, what is working?
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    Secretary SHALALA. Well, what seems to be working is Operation Restore Trust; and the new combination of the FBI, the U.S. Attorneys, the States attorneys general. Their coordinated efforts are expanding across the country.

    Last year, these efforts resulted in settlements and penalties that brought a billion dollars back into the trust fund—the largest amount of money ever put back into the trust fund in the history of the Medicare program.

    I think that indicates that the combination of a team effort—as opposed to competing with each other—of identifying systemic fraud in the system, as well as getting new rules in place, has made a difference.

    The new legislation as part of the balanced budget legislation will obviously help us in a number of areas, including blocking people from becoming Medicare providers who have previous felony convictions. We have asked for some additional legislation. Unfortunately, people are starting to use bankruptcy laws as a way of getting out of these investigations. We need to close those gaps. We have submitted legislation in that regard. We are putting in place some of the strongest rules we have ever had in our history. As part of a huge campaign, senior citizens are urged to look at their own records and report to us if they think there is something unusual about their bills.

    We are training people in senior citizens centers to be our eyes and ears. The other day in New York a woman walked up to me and said, I am one of your fraud busters. It turns out she lives in Florida. She is one of the people that has been answering the 800 number and have been following up with her fellow senior citizens in this area. We will be announcing some expansions of these efforts.
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    Everybody groaned and moaned because they are used to officers coming in andsaying, oh, we are taking care of this because this is fraud. We have brought money back to the treasury. We said that we were going to do it if you gave us the resources to invest, and we have done it. We are asking for another $138 million this year. It will pay off tenfold. We now have coordinated systems in place and everybody is out there working.

    Mrs. LOWEY. I think my time is up, but I just want to thank you and say that Eleanor Guggenheimer, who you know in New York is very much following this, and her program is very enthusiastic because they see some results.

    So I thank you, Mr. Chairman. Thank you.

    Mr. PORTER. Thank you, Mrs. Lowey. Under the rules, Mr. Hoyer would be next, but he is yielding.

    Mr. Wicker.

    Mr. WICKER. Thank you, Mr. Chairman. I appreciate my colleague from Maryland yielding.

    Madam Secretary, let me join the other members of this subcommittee in welcoming you back this year. Your testimony is always very helpful.

    Secretary SHALALA. Thank you.
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    Mr. WICKER. It is a pleasure to visit with you.

    Last year, we had a discussion about what some members of this subcommittee felt was an unacceptably low proposed level of spending for NIH.


    Secretary SHALALA. Yes.

    Mr. WICKER. I notice in this year's budget it mentions that NIH is a flagship of the President's Research Fund for America, and I just would simply say that that didn't seem to be much of a flagship last year, but I am glad that the administration was willing to work with this committee and plus-up the funds for this very important program.

    I want to follow up, first of all, on what Mr. Miller was asking. He was asking about the additional $1.15 billion proposed by the administration for NIH, and about the role of the tobacco settlement in this. The conversation sort of moved to the administration's leadership in the tobacco settlement. And I notice in the latest issue of the CQ—what do I have here, Congressional Quarterly Monitor, that congressional Democrats said yesterday they believe tobacco legislation may have a shot at becoming law this year, a long shot, but they wonder what role, if any, the Clinton administration plans to play in that issue.

    Let me just make sure that I understand the administration's position. The additional $1.15 billion increase in NIH is contingent, is it not, on the tobacco settlement?
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    Secretary SHALALA. We believe that a tobacco settlement will pass this year; that it has bipartisan support; that we can work out a good, strong piece of legislation; and we have submitted a balanced budget, and it is paid for. That legislation that will be passed in this Congress, and would be the source for funding the NIH increase. Let me make it very clear, we are committed to the NIH increase as a priority of the President. Like every other priority of the President, we work with this Congress to identify revenue sources to pay for those increases. However, we believe that the revenue source we have identified—part of a comprehensive piece of tobacco legislation—can be passed this year with very strong bipartisan support.

    Mr. WICKER. Well, perhaps you are right. But it does seem to me that without that tobacco tax, the money is not going to be there. Do you support the $1.15 billion in the event you are mistaken in the tobacco settlement and the tobacco settlement is not culminated?

    Secretary SHALALA. I don't think I am mistaken in the ability of this Congress to enact a bipartisan piece of legislation.

    Mr. WICKER. But suppose——

    Secretary SHALALA. We support it. Independent of identifying the source of funds, yes, absolutely, we support it. And, we will work with this committee.

    Mr. WICKER. Well, boy, I sure do, too.
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    Secretary SHALALA. And I am sure you do, too.


    Mr. WICKER. I certainly do.

    Let me ask—you know, we fund the HCFA administration out of discretionary funds, and I noticed that your proposal for fiscal year 1999 for HCFA is $2.1 billion. If the administration's proposal to expand Medicare to include people as young as 55 is enacted, will that figure be enough to adequately fund HCFA so that it can handle the increased workload?

    Secretary SHALALA. Yes, the answer is yes. The actuaries have estimated we are talking about 300,000 people that would participate in these programs. Some of them would be simply buying back into the COBRAs. We are talking about probably over 200,000 additional clients that HCFA would have to handle. HCFA manages a program that includes over 30 million people. Two hundred thousand is a very small number. The administrative structures already exist. People walk into their Social Security office and can register for the program. We anticipate the participation of a tiny number of people, and the infrastructure to accommodate them already exists.


    Mr. WICKER. All right. Finally, Public Law 104–134, the Balanced Budget Downpayment Act, signed by the President in 1996, instructed you to provide for a study concerning the implementation of a process under which skilled nursing facilities would be deemed Medicare compliant if they become accredited by a national accreditation body.
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    I understand that you were required to submit to Congress a report on this study by July 1, 1997. Where is this report?

    Secretary SHALALA. I don't know and I will get back to you.

    Mr. WICKER. Well, do you have any opinion about how much money we might save if this type of independent body, such as perhaps the Joint Commission on Accreditation of Health Care Organizations, could provide this service as anticipated by Public Law 104–134?

    Secretary SHALALA. Well, I think the answer is——

    Mr. WICKER. Is my question arcane enough?

    Secretary SHALALA [continuing]. We expect to have the report completed and submitted in the spring. It is apparently a very complex issue. We have been advised by both the nursing home reform advocates and the industry itself that a more comprehensive report would be more useful. Unfortunately, a comprehensive report takes more time to complete. So, it is our intention to submit the report in the spring and then we will talk to all of you about whether you want us to go back and do something far more comprehensive.

    The one thing I have learned, regarding HCFA, isnever to guess at what the cost of anything should be. So, I would not guess. But I think that this committee should take a look at the report and let us know what you think we should do. I would be happy to discuss it with you at that time.
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    Mr. WICKER. But your notes indicate that this might be ready by spring?

    Secretary SHALALA. It will be ready in the spring.

    Mr. WICKER. This year?

    Secretary SHALALA. This year.

    Mr. WICKER. Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mr. Wicker.

    Mr. Hoyer continues to yield. Mrs. Northup.


    Mrs. NORTHUP. Thank you, Mr. Hoyer.

    Secretary, thank you very much for being here today. I think we all have so many questions about all the programs and all the differences you make in the lives of the people that live in our district.

    I would like to start by just asking you to give me a better insight into what your role is in dividing up NIH funds, and in particular, by disease or by institute.
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    And if you would allow me just to preface my question with saying that we are often sort of bombarded on this committee by people that have specific concerns. Obviously, if you have Parkinson's, there is not another more serious disease in the world than Parkinson's. I mean, it is so serious and so terminal.

    And we have tried to let the scientists designate funds, both because they know what the research capabilities or maybe impending breakthroughs are and also because I think it is the Chairman's wisdom, I have been very appreciative of it, that the last thing this committee ought to do is become captive to all the political forces that might direct research dollars.

    And I guess my question to you is: Are you also bombarded by the same types of pressures? And what your role is and whether—you know, what you think is appropriate in trying to provide these answers and designate money?

    Secretary SHALALA. I am bombarded by so many people on so many issues. I am, like everyone else, lobbied heavily not only on NIH but on a variety of different issues.

    I think what we are talking about is the emphasis that the President has put in this budget, which expands the NIH base by 50 percent over 5 years, and recommends a goal for cancer research, not for the National Cancer Institute, of 65 percent.

    Dr. Varmus will have more to say about that I indicated, before you came in, that we are on the verge of cancer breakthroughs, because of molecular biology and genetics, and we believe this investment would make some sense. As to the normal internal process of allocation: once this committee has made a decision and the Congress has passed the budget, the Director of the National Institutes of Health follows the internal allocation process which involves the institute directors. I am not involved in that process.
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    Mrs. NORTHUP. Are you involved in the proposals that you all make? For example, do you look at any of the charts that are available that show we spend this much for one particular disease, another amount for another particular disease?

    I was particularly impressed last year by the autism community that came and talked to us, and I think their complaint was that there might be fewer proposals that were even proposed to NIH because the beginning research, the sort of seed type of research, hadn't been available. And I am wondering at what level we address those issues and who is involved in answering those questions?

    Secretary SHALALA. I think that the increase of 50 percent over 5 years gives NIH the opportunity to explore areas that have not necessarily been the highest priority for their scientists. It allows them, as NIH is very good at doing, to put resources in diseases in which there is not necessarily a lot of patients.

    I think you should see the 50 percent increase as an opportunity in many ways for every disease to get a boost and to get an additional investment. We are not simply talking about increases. We are talking about the steadiness. The things that are important to scientists and to this generation of scientists is some assurance of what the spending level is going to be over a substantial period of time so that they can make investments in terms of their own careers and the direction of their scientific investigations.

    This committee, the leaders of this administration, and the scientific leaders in this country are very concerned that we are deterring some of the brightest young scientists in the country from going into research because of our inability to assure them that training funds and research investments are going to be there for their entire careers, if they do first rate work.
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    Mrs. NORTHUP. Well——

    Secretary SHALALA. I think that is very much a part of the investment that the President has decided to make.


    Mrs. NORTHUP. Well, I understand that, and I share my colleague's observation that we are glad that the President has converted to that since last year's proposal. But I think that in a sense by most of us, that most choices would all be solved if there would be a new stream of revenue. We have to at least ask the questions, if that funding stream doesn't exist, what our other options are.

    I would like to ask another question about HCFA. And I appreciate the fraud initiatives that have been ongoing. I am somewhat confused about the balanced budget bill last year that included some fraud provisions, and whether or not we are prosecuting fraud under those or going back to old statutes. I have had a number of hospitals in particular complain that the Department of Justice has been very aggressive about saying, settle and pay up this fine now and we won't prosecute you at a much higher level when, actually, their HCFA advisor, their intermediary, has approved their processes in the past. They have said, yes, this is an appropriate code and now the Department of Justice says it isn't. And they have like 30 days to respond and settle, or else they are going to be prosecuted at a higher level. And I wonder if that's appropriate and, whether you make that decision or the Department of Justice or HCFA, that that is who will prosecute the case?
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    Secretary SHALALA. No. The decisions on prosecution are made by the Department of Justice. That question should beaddressed directly to them.

    Mrs. NORTHUP. Did my alarm go off?

    Mr. PORTER. No. You have about another minute.


    Mrs. NORTHUP. One more question, about SAMHSA. I have been surprised that SAMHSA hasn't been more highly profiled in the discussion of how we approach children with respect to smoking, and in portioning out funds from the tobacco settlement. I think we all agree there are some public policy changes needed. There may need to be an increase in price, but certainly appealing to the heart and mind of children through media, through education, is very important. And I haven't felt that there has been a significant amount of the money given, or directed in that area. SAMHSA has been the lead agency in getting to our young people, regarding other health needs, drugs and other alcohol, and I have just been surprised that we haven't involved them more in the prevention.

    Secretary SHALALA. They have been the lead on the Synar amendments. They have done a very good job. All States are in compliance with the Synar amendments, and it could be that because FDA has been so visible. They are very much an integral part of the team and to the extent that people think there is a relationship between substance abuse in general and other kinds of things, they have been integral. So it has been CDC, FDA, SAMHSA and the rest of the Public Health Service, and I will take your comments to heart.
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    Mrs. NORTHUP. How much of the tobacco settlement will actually go to them?

    Secretary SHALALA. CDC is leading this through the Office of Smoking Prevention. That is the way it has been historically allocated. SAMHSA has the lead on the enforcement of the Synar regulations. They have just submitted a comprehensive report to Congress on that.

    There are different roles for different folks and historically, the CDC has had the Office of Smoking Prevention located in that office. I can assure you, SAMHSA has been at every table in every discussion.

    Mrs. NORTHUP. Thank you, Mr. Chairman.

    Thank you, Mr. Hoyer.

    Mr. PORTER. Thank you, Mrs. Northup.

    Mr. Hoyer.

    Mr. HOYER. Thank you very much, Mr. Chairman.

    Madam Secretary, I join my colleagues in welcoming you to this committee.

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    Mr. Chairman, I asked the staff to look at the record. This department was formed in 1953, as we currently know it, and obviously there were other appropriations put in in earlier years but in that 45 years Secretary Shalala is the longest serving Secretary of the Department, in looking at the record.

    I make this observation because I believe that one of the problems we have had in high levels of government since I have been on this committee, in the Congress, is the very rapid turnover, average 2-year stay, as Secretary of the Department. It is very difficult to get a handle on a department as complex and as large as the Health and Human Services Department and harder still to implement policy in that short period of time.

    I want to congratulate President Clinton for choosing Secretary Shalala. I do not know that I have served with a more knowledgeable, energetic, focused, effective Secretary. We have had some good Secretaries. That is not to denigrate any of the Secretaries. It is a good company in which I make this comparison and I want to congratulate you, Madam Secretary. You have been absolutely extraordinary in my opinion——

    Secretary SHALALA. Thank you.

    Mr. HOYER [continuing]. Of your grappling with the problems of the Department and even in engaging with the Congress on jointly solving those problems and funding our priorities.

    Mr. OBEY. What do you expect? She is from Wisconsin.

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    Mrs. LOWEY. But we claim her in New York.

    Mr. HOYER. That is why I was so surprised, Madam Secretary.

    But you have overcome whatever obstacles have been placed in front of you.

    Ms. DELAURO. And your association.

    Mr. OBEY. How are the Terrapins doing?


    Mr. HOYER. Not bad, as a matter of fact. The only team to beat two number one teams this year, I might say.

    I don't know how we got sidetracked into that, Madam Secretary. But Madam Secretary, I want to congratulate you and the President. The investments that this administration has proposed were supported by 77 percent of America. You don't get a much better democracy than that.

    I know this committee, in a bipartisan way, will support many, many of those alternatives. I support, as well, a tobacco settlement. I want to say I was in a very interesting meeting with Governors Hunt and Patton, who both said very strongly that they were in favor of a tobacco settlement and the Congress adopting legislation, which I thought was very interesting, and they thought it was the moral and right thing to do for this Nation. I hope we do it.
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    You anticipated, of course, my question because I have been focused on this for many years, coordinated services. And I am pleased to see that you are rewarding collaborative services. Madam Secretary, I would ask you to bring me up-to-date on how you see our progress? I have historically talked about Labor, Education and Health and Human Services. I would add to that, Madam Secretary, HUD and USDA. As I have thought about this question and talked to you and Secretary Riley and Secretary Reich and now Herman about it, it occurs to me that USDA and HUD are absolutely critical components if we are going to have full family service centers. Joy Dryfoos refers to them as full service schools., But they are school-based and complimentary at school sites or co-located sites. Can you tell me what progress we are making in this area? You have already mentioned it, but I would like you to be broader in your answer, if you could be.

    Secretary SHALALA. Well, if the question is specifically on the early childhood programs, what I noted was that, as we expanded Head Start, we gave priority to applicants that formed operational and funding partnerships with other community-based early childhood programs. I took some flack from some more traditionalists who didn't want to do this kind of—or were afraid of doing this kind of reaching out, but it actually allowed Head Start to focus more on full-day, full-year services to accommodate the needs of low-income working parents in particular. So I think we moved that.

    In addition, we provided grants to all 50 States, plus the District of Columbia and Puerto Rico, to establish new Head Start collaborative projects. This was done to coordinate early childhood programs in the State. This meant that they had to meet with other agencies at the same time. So we didn't just try to do it with new initiatives at the local level.
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    We also gave grants to the States and said, it is time you move ahead in this area.

    We are also coordinating school-age care, and that involves all the agencies that you have indicated in the child care initiative. We are all going to work to coordinate and avoid duplication in the after-school programs.

    As you know, the President's investments include $800 million for after school programs designated for the Department of Education. We believe, after school programs need to be coordinated with other programs. We have already started that process in meeting with other agencies.

    In terms of trying to increase the amount of one-stop shopping, there str crosscuts going on between the agencies. I agree with you. I was once at HUD early in my career as an assistant secretary, and HUD is very much a player here in terms of getting these activities coordinated. USDA works with us on a number of different issues, particularly related to early childhood, because of the WIC and the other programs that they have made investments in.

    Mr. HOYER. Madam Secretary, I will be writing to you and the four other secretaries of the departments I mentioned, asking you for advice on what we might do in this bill to facilitate and encourage the integration of programs at the Federal level so that accessing them at the local level in a family service center setting would be assisted.

    Secretary SHALALA. Okay.
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    Mr. HOYER. I would appreciate your help on that.

    Your department has been vigorous in enforcing Head Start quality and shutting down programs that can not do what we need for kids. The committee members don't know this—I am sorry all our Republican—Majority Members have left. This is the first Secretary—not you, Mr. Chairman.

    Mr. PORTER. I am still here.

    Mr. HOYER. Mr. Chairman, I think of you as sort of the speaker in this. You are with all of us.

    Ms. PELOSI. Above the fray.

    Mr. HOYER. You are with all of us.


    Mr. HOYER. The fact of the matter is, this is the first Secretary of Health and Human Services who has looked Head Start providers in the eye and said, we expect outcomes, not just process. The first time that any Head Start grantees have been cancelled since 1965.

    I am not in favor of cancelling Head Start programs. We are for expanding them and improving quality and access. But the fact of the matter is, if they don't do the job, we are kidding the parents and the kids and ourselves.
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    I want to congratulate you on that.

    The Early Head Start program, what steps are being taken to ensure that we do not have the same kind of quality problems with Early Head Start expansion that we did with Head Start expansion?

    Secretary SHALALA. Because we have the quality money to invest in Early Head Start, as we have put those programs in place, we have also put the outcomes measures and a lot of technical assistance on the front end. After all, there is very little infant care in this country. There is not a lot of experience, but there is a lot of research in the area. So, again, as Congresswoman DeLauro pointed out, we need an evidence-based system.

    Second, the new child care initiative the President has laid out has a quality investment as part of it; and, increasingly, it seems to me, we have to do this in an integrated manner. We have got to bring the evidence to bear on the design of programs and on the ongoing management of programs.

    Mr. HOYER. Thank you. I have other questions, but I will do it on the second round. Thank you very much, Madam Secretary.

    Mr. PORTER. Thank you, Mr. Hoyer. There will be a second round after Mr. Obey's questions. I will ask members if they intend to stay for the second round, and then we will divide up the time.

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    Mr. Obey.


    Mr. OBEY. Thank you, Mr. Chairman.

    Just a couple of questions, Madam Secretary.

    A while back, we heard a lot of news about the outbreak of a new flu-like virus in Hong Kong. In the past, we have had concerns expressed about things like Ebola. I mean, the world is a smaller and smaller place, given the way people travel routinely around the world almost on a weekly basis. What do you see as the most urgent threats in emerging infectious diseases and how do you and CDC plan to deal with them?

    Secretary SHALALA. Obviously, the flu-like viruses that we are beginning to see—and the avian flu in Hong Kong was an example of that, hantavirus, Ebola, AIDS and all sorts of diseases of which we haven't named yet—and the CDC, thanks to this committee, is starting to get the kinds of investments it needs.

    There is another round of investments that we have requested in this budget for emerging and infectious diseases. In addition, we need to build up the U.S. infrastructure, so we have much quicker turnaround times so that we can make the diagnoses much quicker, we can track these diseases much faster and get at them much quicker. That is part of the overall strategy of this budget.

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    And, third, our international investments, as I indicated to you at the State of the Union, I consider the nomination of Dr. Grobroton of Norway as the new head of the World Health Organization (WHO) a major step in the right direction for the world in terms of upgrading the quality of the WHO.

    Mr. OBEY. Very good.

    Secretary SHALALA. I hope that the appropriations process will recognize that the international health investments that we make. Because taking someone of her caliber for that position—the U.S. will vote in May, and we will be voting for her—is a critical step and will dovetail with the kinds of investments we are making in CDC.

    We are also concerned about the old diseases. I have just finished a trip the end of last year to the east. Tuberculosis, in India, and, encephalitis in Japan, and AIDS continues in that part of the world. There are a whole range of diseases without emphasis on infrastructure, tracking systems and early reporting.

    We are trying enthusiastically, with great help of the Rotary Clubs, to eliminate polio by the end of the century, perhaps by 2002. But we have got a lot of work to do, and these investments and CDC's prominence is critical.


    Mr. OBEY. What about the problem of diseases that are increasingly becoming resistant to antibiotics, TB, the practice of feeding agricultural animals antibiotics on a routine basis? I mean, what——
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    Secretary SHALALA. That is part of it.

    Mr. OBEY. I mean, what are we doing and what do we need to do in order to deal with that problem?

    Secretary SHALALA. I think we need to do two things.

    One problem is the tendency to overmedicate in both this country and abroad and the inappropriate use of antibiotics. We started a conversation about an evidence-based system, and we need to be as careful about overmedication, as we are about the undermedication in this world.

    Second, because we are getting drug-resistant strains, we need to do much more work in many parts of the world to develop vaccines and other treatment strategies to overcome that kind of resistance.

    You might get Dr. Varmus into a conversation about malaria—still a disease that kills millions and millions of people and a disease that we need to pay attention to again.

    We have 19th century diseases that have returned in full force, and we need to make sure that the no-named diseases aren't the first ones we attack. But that we, have a designed strategy for attacking the problem. I think that you will find both in Dr. Varmus' testimony and the CDC's testimony a reflection of our own internal strategies. We fought hard for these relatively small amounts, compared to other things, in the laboratories, as well as the funding for the Centers for Disease Control, NIH and FDA.
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    Mr. OBEY. Let me ask you a different question and play devil's advocate.

    I don't know if you ever read Canticle of Lebowitz, a book that was out 25 years ago. I just read it again and another one by the same author. And you get all sorts of holy of holies, all kinds of burning of incense at the altars of whatever mystical group society is supposed to follow this year. I have got some honest questions about whether or not NIH in the outyears can absorb the kind of money that we are talking about putting into their budgets.

    You know, I know that 20 years ago we had a race between both parties to show who is most against cancer. I would guess the next 5 years we will have a race between the parties to see who is most for NIH research.

    But, I mean, does NIH really have and does the scientific community really have the capacity to take the kind of money, additional money we are talking about, in the fourth and fifth year of this ramp-up? How high do we want to get in the percentage of grants we are actually funding before we are running out of quality science? Are we going to be seeing NIH want to proceed with a bunch of new buildings, either on the Bethesda campus or another campus?     I mean, I don't have any doubt that they can absorb some money in the first couple of years; but, beyond that, how much of the money that we are throwing at that wall is really going to stick?
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    Secretary SHALALA. I think those are very important questions to ask not only me but the Director of the National Institutes of Health and, in fact, the scientific community.

    I would point out that some of this money is clearly catch-up. We would like to fund, initially, a third of all of the grants; and we have laid out a strategy to do that. The scientific community has had a pretty good consensus on that.

    In addition, some of the money is for training for the next generation of scientists and to make sure that we have enough training dollars to finance the next generation of scientists.

    Mr. OBEY. Well, what kind of request do you think we are going to wind up getting for brick and mortar?

    Secretary SHALALA. There is no significant request in what the President is putting forward for bricks and mortar, beyond the commitments we have made. We, obviously, will have some replacement costs, but we have no plans for a huge expansion of the NIH campus.

    As you know, we have been shifting money to the research universities in this country; and I believe that both the scientific community as well as the director of NIH are prepared to answer this.

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    Mr. OBEY. That is what I am getting at. There isn't a week that goes by that some university walks into my office and wants some special treatment to get money earmarked for this or for that; and I am simply wondering, with the significant ramp-up that we get at NIH, how much more are we going to be stimulating universities to be coming to us to help fund buildings which they are going to say they need in order to fund the research which is being farmed out by NIH to the units to do the work?

    Secretary SHALALA. Well, Congressman Obey, as you well know, it doesn't take much stimulus for the universities to come and ask you for buildings.     Mr. OBEY. But I hate to give them a gold-plated invitation.

    Secretary SHALALA. Right. We did have an initial conversation about the infrastructure of the universities, about their laboratories and the need for changes in their laboratories. And, as you know, there are major reports from the National Academy of Sciences, from the NSFmost recently, about the research infrastructure needs.

    The President's 1999 budget submission does not anticipate that request as part of our overall money, and we have not put it in any of the materials that we have transmitted to you.

    I can answer the specific question about how the scientific enterprise will ramp up and I can answer the question about the NIH campus. We have, under Dr. Varmus' leadership, put a higher percentage of the money out onto the research campuses around this country, as opposed to vast expansion.

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    As you know, the regional requests for the cancer clinical center was much larger than we ended up with. We worked through a process to get us there. I think it worked out very well for everyone involved. So I think we are going to be wary and very disciplined.

    It is not that we are unexperienced in this area, but we will have to work very closely with you, and we have got to be prepared to answer your very tough questions.

    Mr. OBEY. Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mr. Obey.

    Do I assume that all members that remain have additional questions?

    Mr. HOYER. Yes.

    Ms. PELOSI. Yes.


    Mr. PORTER. There are five of us. Let's try three minutes each.

    Madam Secretary, your budget proposes to delete the Hyde language on the use of Medicaid funds for abortion with a footnote saying the administration will work with Congress to address this issue. As you know, we spent—and I give tremendous credit to Mr. Hyde and Mrs. Lowey of this subcommittee, who spent literally hour after hour in intense negotiations to arrive at new revised Hyde language last year, that was reflected in our bill.
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    Do you really think we ought to revisit this issue? And, if so, other than the overall objection that you have philosophically to it, what objection do you have to the revised Hyde language that was hammered out in a very, very difficult compromise?

    Secretary SHALALA. Yes. Mr. Chairman, we have done this every year. We have always put a footnote in because the President's fundamental position has not changed. He believes, as many members of this committee do, that abortion should be safe, legal, and rare; and that individuals have the right to complete and accurate medical information and unharassed access to safe, legal, medical services.

    We have always opposed restrictions on the use of Federal funds for the exercise of a woman's constitutional right to obtain an abortion. What we say here is that we have implemented the Hyde amendment in the past because it has been the law of the land, and what we said in the footnote is that we will work with the committee. We have not submitted our own language, obviously, but that we will work with the committee. That is consistent with what we have done in previous budgets.


    Mr. PORTER. All right. Madam Secretary, in your testimony you state that the 21st Century Learning Fund solidifies the foundation for a coordinated biomedical research system. Other than a mechanism for displaying an increase in funding, what specific administrative processes are part of the learning fund to coordinate research?

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    Secretary SHALALA. Well, we believe that sorting out the research portions from the prevention portions from the—from translating this material into practice is very much reflected in this budget.

    Did I bring my chart? I want to give you a sense of that; and that is why we included, Mr. Chairman, the NIH, the CDC and AHCPR, to give you a sense of how we are using the circle of the research fund on a specific disease.

    For diabetes, the basic science and treatment research would be done at NIH. The prevention research on the techniques to identify undiagnosed diabetes and encourage life-style changes would be at CDC. And, AHCPR would do the cost-effectiveness on how the appropriate screening reduces the health costs.    Mr. PORTER. This is what we do already, though.

    Secretary SHALALA. Well, the point of integrating everything into a research fund is to actually, for the first time, bring in all the scientific research components that are nondefense and to see if we can get better coordination among them.

    This should occur not only inside the Department but also with the NSF and with some of the other research enterprises of the government. I think we will be able to give more coherence and certainly we would identify the source of funding to do that.

    Mr. PORTER. Well, that certainly is a worthy goal; and I understand what you are attempting to do.

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    Ms. Pelosi.


    Ms. PELOSI. Thank you, Mr. Chairman.

    Mr. Chairman, I want to join my colleagues and again commend the Secretary for her tremendous leadership and for the vitality of this proposal that she is putting forth today in terms of priorities and process and savings.

    I think the Medicare buy-in is very important. We have so many subjects to talk to you about, but that could have such a remarkable impact on people in our country, and is one of the areas that has not received as much attention this morning, as much commendation to the administration as is due. Could you elaborate on this for a moment? Why do you think the buy-in will self-finance and remain riable?

    Secretary SHALALA. Well, we have presented a self-financing mechanism. Our actuaries have evaluated what they think the costs would be and who would enter the program. It is not a subsidized program.

    Let me talk about the 62 to 65 program, which would allow those who don't have health insurance between those ages to have an early buy-in to Medicare. We have assumed that sicker patients will enter that program and we have set the premium for that age group so that people who come in early will pay a little more after they turn sixty-five to overcome whatever additional costs there may be.
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    Now who are we talking about? We are actually talking about a lot of women. Men of a certain age will tell you that the thing to do was to marry—when you were a senior in high school and after you graduated—was marry someone they had met who had been a sophomore while you were a senior. There are a lot of marriages where men have retired at 65, they enter Medicare, their wives are a little younger and they lose their health insurance because their husbands' companies covered them and the rest of their families.

    So to allow people, particularly—and we have met numerous people now who have a preexisting condition. There is no market for them. If you are 62 years old in this country and you have a preexisting condition or if you don't have a preexisting condition, the private insurance industry isn't announcing that they have an insurance plan for these people.

    It is paid for. It allows people to enter early. It is in this country's health interest to have more people covered with health insurance. It is not a subsidized program. We have a mechanism for delivering it administratively. The offices are already set up. So we believe we ought to move forward and we ought to move forward now on this program.

    Ms. PELOSI. It is such a good idea. It is a wonder someone didn't come forward with it sooner, but maybe the time is right now.

    In closing, Mr. Chairman, I want to again mention how pleased I am to hear the Secretary say over and over again how we have to internationalize our efforts in terms of prevention of disease and our efforts in terms of prevention and care in terms of AIDS.

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    Thank you again, Madam Secretary.

    Thank you, Mr. Chairman.

    Mr. PORTER. Thank you.

    Ms. DeLauro.


    Ms. DELAURO. Thank you, Mr. Chairman.

    Another area that I think is very forward looking that we haven't talked much about this morning is the whole issue of the administration's proposal on after-school care. We focused in on Head Start and early childhood, but yesterday I was with about 100 young people, juniors and seniors in high school, who are part of something that I have had in existence since 1993 called the Anti-Crime Youth Council.

    I have talked with kids from the inner city, from West Haven and New Haven, as well as from the shorelines of Madison and Guilford, Connecticut; and, all of them were talking about the fact that they don't have access to after school programs, and they would love to be in after school programs.

    And FBI statistics show that most juvenile crime occurs after the kids get out of school and into the early evening.
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    How would the after school programs work? Who is eligible to apply for funds? And who would determine the curriculum and activities in the program, Madam Secretary?

    Secretary SHALALA. The budget is $800 million. It is actually given to the Department of Education to coordinate with us, and I think the President is particularly concerned about adolescents. As we expand child care and after school programs for younger children, we need to worry about what our adolescents are doing between the time they get out of school and when their parents arrive home. And adolescents, in particular, need choices; and that is the reason for the investment. We need to develop some choices.

    The money will go probably to the school districts. You need to ask the Secretary of Education about that. But, some of it will go to community organizations; obviously, boys and girls clubs and other kinds of community-based organizations will want to participate in after-school programs.

    I think that, particularly when we are thinking about adolescents, you have got to think of something other than doing your homework after school. They have to be kept busy; have some choices. We have reduced clubs out of high schools in this country because we haven't had the resources. Sports and intramural sports have been cut out. We have to give the kids choices other than staying in their classroom after school and getting their homework done so they have a mix of things to do.

    It is common sense; and it is time that we reassured parents. Just because the kids are a little older doesn't mean they don't need caring adults in their lives until their parents get home.
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    Ms. DELAURO. Thank you, Madam Secretary.

    Thank you.

    Mr. PORTER. Thank you, Ms. DeLauro.

    Mr. Hoyer.


    Mr. HOYER. Thank you. I agree 100 percent with the last point you made. I was shocked to hear that most teenage pregnancies occur in the afternoon. I don't know why I was shocked, because that is reasonable. Obviously, most juvenile crime is committed between 3:00 and 8:00 at night. So your point is well taken. If we had full service schools, we could give more choices.

    How is the Department of HHS progressing with the coordination between Job Corps and Head Start? We know that one of the big problems that we have with Job Corps is young children, mothers of young children in particular, and we have talked about a coordinated effort between Head Start and Job Corps. Can you tell me where that stands?

    Secretary SHALALA. I don't know the answer to the question, but I would be happy to provide it for the record.

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    [The information follows:]


    Secretary SHALALA. The Directors of the Head Start Bureau and the Job Corps have worked together to develop strategies that will encourage local Head Start programs and local Job Corps sites to work collaborate. Head Start programs continue to expand enrollment at a time when many Job Corps trainees face the need for child development and child care services for their pre-school children who have accompanied the trainees to Job Corps sites. Information is being provided to Head Start programs about the opportunities they have to develop local collaborations. This is discussed in the request for proposals to expand Head Start enrollment in fiscal year 1998.

    We also support the effort to get the Head Start programs on the site of Job Corps Centers, and encourage our local Head Start grantees to develop such co-located facilities in instances where it meets local needs and priorities. Our competitive announcements on Head Start expansion encourage this effort. Examples of successful collaborations exit in Flint, Michigan and San Diego, California where Head Start programs provide services to trainees in child care facilities on Job Corps campuses.

    Mr. HOYER. Mr. Chairman, I will finish with that.

    It is very good to have you here. I think your testimony has been excellent.

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    One of the exciting things about the President's proposal, particularly as it relates to the broadening of family services, is that it really falls right in with what you and I have been talking about. Nita Lowey is not here, but Mrs. Lowey in particular has been talking about this as well. Rosa and I have a bill. Obviously Nancy has been talking about the health services which are critical to young people. And the school construction program that we now are going to have. All of this ties in to the fact that we co-locate these services to make them more accessible to families and children and that we have a full spectrum, because families live differently. Secretary Riley talks about it. You talk about it.     Parents go to work. They have to be at work at 8:30 in the morning or so. Because it is an hour or 45 minutes to get to work, they have to leave the children at 7:00 or 7:30 in the morning. We just need to utilize our school buildings much more than we do.

    I am convinced by Secretary Riley. We have got to do this in an encouraging fashion, not a mandatory fashion. If communities don't want coordination to work, it is not going to work. But, with this increased investment, I am going to push very hard—and I have talked to the President and the First Lady about it—very, very hard to see if we can escalate our encouragement, not just in the areas that you have talked about——

    Secretary SHALALA. Right.

    Mr. HOYER [continuing]. But across the spectrum——

    Secretary SHALALA. Right.

    Mr. HOYER [continuing]. With all those departments, nutritional programs, health programs, social service programs, job training programs for moms of young kids.
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    You know, I have mentioned the Jessie Jackson analogy of the mom taking the child by the hand and getting on the school bus and going to the school. Both get services. They come home. Both think this is an important place to be, and it is really helping them in their lives.

    So I think this program is so in tune with that concept that I would hope we could, in all the departments, focus on it. As Al Gore has talked about in terms of reinvention, maximize the return we get on the investment we are going to make.

    Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mr. Hoyer.

    Mr. Obey.

    Secretary SHALALA. I have a response to the Job Corps question. We do have a collaborative arrangement with the Department of Labor. We are starting to locate Head Start centers on Job Corps campuses as part of this overall strategy; and we can give you some examples of that.

    On the issue of model programs, I think Dr. Hamburg and I would love to show you the program the Children's Aid Society has in New York at a high school where all the services are a part of that, including the health services and the child care services, right in the facility.
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    Mr. HOYER. You have been to our retreat on a number of occasions.

    Secretary SHALALA. Yes.

    Mr. HOYER. We had Dr. Veda Johnson from the Whiteford Clinic in Atlanta, who came up with a similar concept. She is a pediatrician herself, and I would like to go to New York and see that.

    Secretary SHALALA. Right.

    Mr. PORTER. Thank you, Mr. Hoyer.

    Mr. HOYER. Thank you very much.

    Thank you, Mr. Chairman.

    Mr. Chairman, by the way, I want to thank you. Because in terms of the Job Corps/Head Start program, you and this committee were very important——

    Secretary SHALALA. Right, absolutely.

    Mr. HOYER [continuing]. In engendering that initiative. Thank you, sir.
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    Mr. PORTER. Madam Secretary, I have two housekeeping matters that I have to bring up, if you will permit me.

    For over 30 years, HHS has been asked by the subcommittee to provide a series of tables and reports that we refer to collectively as the Moyer reports. Our staff relies on these reports for many purposes, including preparing the budget hearings.

    Unfortunately, the Department has found it increasingly difficult to provide these reports in a timely fashion. This year is no exception. The House report requested that the Moyer material be provided on January 1st, and the Senate requested it on February 1st. Unfortunately, it has not yet appeared.

    Madam Secretary, these are some of the few crosscutting tables done for Federal spending; and they are very useful to the subcommittee. Would you please give this matter your personal attention and either now or for the record provide us with a date when we can expect these reports this year and your commitment to timely filings in future years?

    Secretary SHALALA. I will.

    Mr. PORTER. Finally, Madam Secretary, I have a problem in my own district concerning the Community Action Project, CAP. CAP facilitates applications for Federal grants primarily involved in serving children and the disadvantaged.

    CAP had the opportunity to purchase a church and to expand its Head Start program, but for two and a half years the Department would not make a decision on whether CAP could purchase the building. I believe that if the Department has appropriated funds to award to qualified programs then they should, as an agency, work with applicants to successfully complete the grant process. In other words, the problem here isn't whether they denied it; they simply never came to a decision.
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    I would like to speak with you further on how the Department will work to facilitate the grant process in the future.

    Secretary SHALALA. I would be happy to do that.

    Mr. PORTER. Thank you, Madam Secretary. You are doing a wonderful job. We appreciate your appearance for this seventh time and your wonderful, continuing service to our country.

    Secretary SHALALA. Thank you very much, Mr. Chairman.

    Mr. PORTER. Thank you.

    [The following questions were submitted to be answered for the Record:]

    "The Official Committee record contains additional material here."

Tuesday, March 3, 1998.



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    Mr. PORTER. The subcommittee will come to order.

    Our hearing is on the Department of Health and Human Services, continuing with the Office of Inspector General. And we are pleased to welcome Mr. Michael Mangano, the Principal Deputy Inspector General. If you would introduce the gentleman to your right and then proceed with your statement, please.


    Mr. MANGANO. Thank you very much, Mr. Chairman. With me today is Dennis Duquette, who is the Deputy Inspector General for Management and Policy.

    Simply put, the mission of our office is to help protect the programs of the Department of Health and Human Services against fraud, waste, and abuse by conducting independent and objective audits, evaluations, and inspections. I would like to focus my remarks this afternoon on three areas: one, to give you an idea of some of the recent projects that we have been working on; secondly, to look at some new ways that we are doing business; and third, focus in on our budget requests for the appropriations in 1999.

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    1997 was really an exciting and challenging year for us, and I would like to give you four examples of projects that we undertook this year to give you an idea of the range, the kinds of things that we were involved with. First, we basically concluded in this last year a multiyear effort, taking a look at abusive marketing and billing practices by some of the Nation's largest laboratories. These investigations resulted in about $800 million being returned to the taxpayers for fraudulent practices.

    Second, the Health Education and Assistance Loan Program provides loans to students seeking education in health-related fields. Some, however, when they complete their education, refuse to repay their loans. When that happens, we get involved in that particular case and move to exclude them from the Medicare and State health care programs. At the end of last year, 789 of those persons, rather than being excluded, had entered into repayment programs with the government. Our actions over the last several years have resulted in about $48 million being repaid to the government.

    Third, we initiated about 250 investigations of parents who cross state lines to avoid paying their child support payments. As a result of that, we got 65 arrests, 41 convictions, and over $5 million is now being repaid to the custodial parent.

    And fourth, required by the Government Management Reform Act, we completed the first-ever complete review of the financial statements of the Medicare and Medicaid programs. In addition to finding some of the things with regard to accounting system problems, we discovered in doing that review that about $23 billion was improperly paid by Medicare in fiscal year 1996. Almost more important than that, the Health Care Financing Administration has developed an action plan to address each of the problems that we raised.
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    In recent years, our interest and emphasis on interdisciplinary teamwork within our organization in greater collaboration with other Federal and State agencies has led to what we believe is a more effective and efficient approach to addressing the problems of fraud and abuse, and I will give you three examples.

    First, jointly with the Department of Justice, last year we initiated the Health Care Fraud and Abuse Control Program required by the Health Insurance Portability and Accountability Act of 1996. What this was was a coordinated interdisciplinary and intergovernmental attack on fraud against all Federal health care programs. In the first year, we think we returned substantial amounts to the Medicare trust funds, recovering almost a billion dollars as a result of restitutions, fines, judgments, settlements and administrative actions.

    Second, in order to increase our coverage of the Medicaid programs, we formed partnerships with 19 State audit agencies and 11 State Medicaid agencies, the Medicaid agencies to conduct thorough audits of State health care programs. I can tell you, as a result of those, about $140 million was identified for potential recovery by those States in Federal and State money, as well as for future savings.

    Third, together with HCFA, the Department of Justice, and the health care industries themselves, we have begun a series of voluntary compliance guidelines. These are plans to help health care providers make sure that their claims against the government are true and accurate and stay out of trouble. These guidelines are designed to prevent false claims, detect them when they occur, and resolve them early. We completed two of them within the last year, one for the laboratory industry and one for the hospital industry. And we are working on other ones over the next 6 months to 12 months looking at home health care, hospice, durable medical equipment, and some other areas.
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    Finally, let me make a couple of comments on our funding request for fiscal year 1999. Our funding sources are two, basically. The Health Care Fraud and Abuse Control Program funds all of our Medicare and Medicaid work. The discretionary appropriation before this committee funds our work with all the other programs of the Department, namely public health, children and families, aging, and departmental management.

    For fiscal year 1999, the Health Care Fraud and Abuse Control Program would appropriate between $90 and $100 million for our work in Medicare and Medicaid. Our discretionary budget request is for $29 million. Mytestimony describes a number of projects we would undertake in 1999 with this money. While our Medicare and Medicaid work tends to get far more public attention than our work in these other areas, we believe this work is just as important to be done, particularly for effective program oversight.

    Mr. Chairman, I appreciate the opportunity to testify on our appropriations today, and I would be happy to answer any of your questions.

    The prepared statement follows.

    "The Official Committee record contains additional material here."


    Mr. PORTER. Thank you, Mr. Mangano.

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    You mentioned guidelines. Can you tell me a little bit more about that?

    Mr. MANGANO. Absolutely. We started an effort about a year ago to work with the health care industry to come up with a series of guidelines which are basically some principles that we think are important to ensure that particular health care providers do not get into trouble by submitting false claims. These involve things like, one, having a compliance officer; two, providing training to people on staff as to what is proper and what is not proper. Another facet of it would be doing some self-monitoring and self-auditing.

    Mr. PORTER. But what I am most interested in is, what do you do with those guidelines? In other words, first of all, do you have authority—I assume you have authority to do that, but then who you provide them to?

    Mr. MANGANO. Okay. The last one I will use as an example. We worked with the hospital industry to come up with a model compliance plan for the hospital industry. These plans are completely voluntary on anybody's part. We provide them as standards which we say, if you were to adopt all of these kinds of standards in your hospital, this would help prevent you from getting into trouble in the future.

    We understand that one size doesn't fit all; so we asked them to review these, and, if they can come up with a better plan, by all means do it. We don't require these, but when hospitals do have an effective compliance plan in place, that will be taken into consideration if they do get into trouble later on.

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    Mr. PORTER. You probably realize that my first question is going to be about the PATH audits.

    Mr. MANGANO. Yes, sir.

    Mr. PORTER. You and I and Inspector General Brown and others had a lengthy discussion last year about so-called ''PATH audits'' at teaching hospitals. We included report language about this in our report accompanying the House bill last year. And basically that language asked you to stop the PATH audits, pending resolution of certain issues by the GAO and the authorizing committee.

    Can you bring us up to date on exactly what you are doing in this area, and are you just continuing on the same track?

    Mr. MANGANO. Actually, after hearing the concerns that you, other Members, and other people in the private sector had about this project, we undertook last spring a complete review of this entire project. It took us a number of months to go through that. We went through every document that we could find in law and regulation as well as policy statements that HCFA had issued, contractor statements, et cetera.

    At the conclusion of that, we took a look at what we had, and basically we found that the Medicare program was providing about $8 billion to hospitals to provide for the training of residents and interns. Some of that training included the general supervision of those physicians.
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    We then looked for what would be required of teaching hospitals in this setting. We reviewed the 1967 regulation stating that physicians, in order to be able to bill for a Part B service—this is a patient visit—needed to provide personal identifiable direction.

    Over the next few years, HCFA began to interchange that designation with personal identifiable services. We looked at every document that HCFA had issued during that time, and we found that the overwhelming majority of those documents instructed their regional offices and the contractors that the physician had to deliver the service either himself or herself, or to be present when the resident performed that service.

    Not every document, though, was that specific. We did not come across a single document, though, that said that you could bill Medicare and not be present during the service. So we then took a look at the contractors who have the responsibility to disseminate that information to the health care providers in their local community. We found that, the overwhelming majority of those, in their guidance to health care providers, indicated that in order to provide a service—in order to provide a personal identifiable direction—you had to, among other things, be physically present when the resident provided the service, or provide it yourself.

    We did find some contractors, though, that did not give that specific advice; they were either silent on the issue or were not as clear as most of the others. So what we decided to do was to say, in order to be absolutely fair in this, we will only pursue those reviews where it was clear from the contractor providing information to the health care providers in those communities, through policy directives from them, or audits that were conducted with the hospital where they had pointed those things out in the past. So where there was confusion, we have not pursued it. We only pursued it where we believed that the contractors did an effective job in those communities.
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    Mr. PORTER. And that is, in the time frame, what years to what years?

    Mr. MANGANO. Our reviews right now are covering the time period July 1995 through June 30th of the next year.

    Mr. PORTER. And how many audits do you have open at the present time?

    Mr. MANGANO. We have about 40.

    Mr. PORTER. About 40. Okay.


    Let me get back here. Your budget for the current fiscal year is about $116 million, about 72 percent of which comes from money that is outside the annual appropriations process. Most of your money comes now from funds that were appropriated a couple years ago in the Kennedy-Kassebaum health care bill. That part of your budget has been growing pretty rapidly, about 20 percent in fiscal year 1998, and you expect another 15 percent increase in 1999.

    Since these funds do not come through the Appropriations Committee, who actually determines how much you will get each year from this funding source?

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    Mr. MANGANO. By law, the Attorney General and Secretary of HHS consult with one another and determine how much would be appropriated to the OIG.

    Mr. PORTER. Last year, when you were here testifying on your fiscal year 1998 budget, you told the committee you expected to receive $80,500,000 from the Kennedy-Kassebaum bill for 1998 and that it would fund 691 FTEs. Now we see this year that your 1998 estimates have been revised upwards, so that you expect to get $84,650,000 and 851 FTEs.

    This is an increase of 160 FTEs over what you originally told the committee, or nearly 25 percent. How do you explain that very significant difference in your FTE estimate?

    Mr. MANGANO. The Secretary and Attorney General decided that much later than the time that we had testified at the Appropriations Committee. At the time of the hearing, we were using figures that represented the minimum amount of money. The minimum amount of money that we could be receiving this fiscal year would have been $80 million; the maximum would have been $90 million. The Secretary and Attorney General didn't determine what the specific amount would be until much later.


    Mr. PORTER. We have been talking with GAO, as you know, about GPRA and the departments that we fund. Give us your overall assessment of where the Department of Health and Human Services stands with respect to implementation of GPRA. Are they doing a credible job at the Department?
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    Mr. MANGANO. I think this is a terribly difficult process for agencies to be going through. And this is the first year that the Department has come up with this schedule. I think it is a good first start. It is not where they want to end up. It is not where we would, I think, want to see them end up or where you would want to see them end up.

    We see encouraging signs. There are a number of very good outcome-oriented performance centers. I can recall some in the Centers for Disease Control where they talk about reducing the incidence of particular diseases by certain percentages—very specific figures. There are other areas of the plan that are much softer.

    We will be looking at a few of these performance plans in the agency. But we really haven't conducted any reviews ourselves of the standards that have now been published. But we think the Department will get better each year.

    Mr. PORTER. I think that answers the question.

    Ms. Northup.


    Ms. NORTHUP. Thank you. I would like to go to some of your hospital audits that are being conducted that are not along the PATH reviews. I don't think that is what they are. I certainly have a number of hospitals I've talked to concerned.

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    First of all, it is my understanding that over the years the hospitals have used the compliance officers at HCFA to say, okay, is this bill incorrect? Is this proper? Is this right? And they have received answers that what they are doing is correct.

    Now, it is my understanding that they are being contacted by the Department of Justice with a charge that they have billed fraudulently in the past billing procedures that were approved by the compliance officer, and that the approach is along the lines of, if you pay this fee now and if you plead guilty to something, we will, close the record.

    Does that sound familiar to you?

    Mr. MANGANO. What you have stated sounds familiar, but I think I would take a different view of it. In the past, hospitals, health care providers in all fields would rely on the Medicare contractors to provide them guidance on what was an appropriate bill and what was not. I think the results that we had from taking the first review of the HCFA financial statement showed us how enormous the problem of improper payments was.

    I mentioned $23 billion. $23 billion is a lot of money. That $23 billion would pay for every one of the Public Health Service agencies' budgets for this particular year. It would be an amount equal to almost twice the amount of budget for NIH.

    Now let me return to this. The Department of Justice has a responsibility to review the facts in the situation and to determine whether a false claim has been submitted. Our job is to do investigations and audits and to present that information back to the Health Care Financing Administration and ask them to take an overpayment. Or, if we see a situation of abuse, we turn it over to the Justice Department.
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    I will give you one example of that. One of the projects that we are operating is what is commonly referred to as the 72-hour project. This project is designed to see that hospitals have accurately billed for services of inpatients in the hospitals.

    Under the prospective payment system, the DRG system that they operate, a person's bill is to be covered by one DRG based on the patient's diagnosis. That bill is to cover all nonphysician services provided from 3 days prior to their entry into the hospital, and including through the hospital stay. So the DRG payment is a one-payment-pays-everything.

    What we began to find out in the late 1980s was that hospitals were submitting bills for the DRG, but were also billing for outpatient services, for example, for X-rays taken the day before the patient was admitted to the hospital. We conducted four audits in this area over a series of 4 or 5 years. Every one of those audits found that hospitals were billing outside the DRG.

    We turned our information over to HCFA. HCFA went back and took an overpayment. There was over $100 million that was at fault here.

    After the fourth audit, we concluded there could not be a hospital in this country that did not know that this was inappropriate. We then started turning that information over to the Department of Justice who found it to be a violation of the False Claims Act. They began negotiating with hospitals across the country to get a repayment.

    Ms. NORTHUP. How many hospitals would you say across the country are currently—right now being approached by theDepartment of Justice?
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    Mr. MANGANO. There would be quite a few. As of October 1st, there were 380 hospitals that had entered into a repayment program.

    Ms. NORTHUP. But there are far more than that that haven't entered into a repayment program?

    Mr. MANGANO. As of October, I believe most were pretty much opting into the program because the program was a graded penalty. If it was the first time for the hospital or their errors were very low, all we asked was that they repay what they had overbilled the Medicare program. But if they were repeat offenders, the penalties increased.

    I think the highest penalty anybody would have received from this would have been triple damages. But that would have been a hospital that was a repeat offender and one with high errors.

    Ms. NORTHUP. Let me back up a minute.

    First of all, I think in the beginning I asked the question, whether or not compliance officers had told the hospitals that these were correct billing procedures.

    Is your evidence that they are correct, that these compliance officers had accepted these as correct billing procedures?

    Mr. MANGANO. That is not my understanding. But to be honest with you, I haven't looked at that particular issue as to whether the compliance officers said the billing was correct.
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    What we would basically do would be to go back to the Medicare contractors who had serviced that particular hospital or physician or whatever, and we would ask what they told the hospitals. It has been our experience that on this 72-hour window project, for example, that HCFA has been very consistent in saying that you may not bill in this manner. That concept was inherent in the development of the DRG system.

    Ms. NORTHUP. Would you agree that a hospital that had gotten information from a compliance officer that said this is a correct billing procedure, that they shouldn't be prosecuted by the Department of Justice?

    Mr. MANGANO. Well, you know, that is a decision that the Department of Justice has to make. What we would look at would be the underlying facts of the situation.

    Ms. NORTHUP. Wait, let me back up a minute.

    It is in HCFA. Now, how does it get to the Department of Justice?

    Mr. MANGANO. If we believe that a false claim has been submitted and it is an abusive situation, we would take our audit findings and turn them over to the Department of Justice and say, we believe that abuse has occurred here. You review this data and see if you agree with us. If you agree with us, then you determine what action is needed.

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    Ms. NORTHUP. Well, first of all, you know, I notice that the Secretary today said that over $1 billion, I think, has been recovered. And she said it has been returned to the trust fund, and I guess I would just assume that she meant that was the Medicare Trust Fund. But from looking at the information in front of me, it looks to me like it goes into a special account, the Health Care Fraud and Abuse Control account, that then funds additional—in other words, there is every incentive to turn everything over, to demand a quick plea of guilty, and to pay the fine so that you put it back in your account and pay your salary and start the next one. It doesn't go back into the Medicare Trust Fund.

    Mr. MANGANO. Yes, it does. The money is returned back to the Hospital Insurance Trust Fund, all of it, almost $1 billion last year, to help guard against this very issue.

    Ms. NORTHUP. Wait a minute. I am confused. Here it says it is deposited in the Federal Hospital Trust Fund, but that there is a separate expenditure account.

    Mr. MANGANO. I want to get into that, and I will explain it because I think I can clear this up.

    When the framers put this legislation together, one of the things that they were concerned about was a bounty system; that is, that it may unleash Federal Inspectors General, the FBI, and the Department of Justice to just go after people so they can increase their budgets each year. So one of the protections that they built into that legislation was to say that regardless of what you put back into the trust fund, we are going to tell you up front for the next 7 years exactly how much money you are going to get back from the trust fund. So they give us ranges.
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    This particular year, fiscal year 1998, our range was between $80 and $90 million. It wouldn't have mattered whether we put a billion dollars in or $100 million into the trust fund in terms of the amount of money that we would get. So the money goes back into the trust fund, and the amounts that we get are set within a range for each year.


    Ms. NORTHUP. How do you decide between whether or not to apply the Medicare fraud bill that was passed last year or the False Claims Act?

    Mr. MANGANO. You are talking about the Health Insurance Portability and Accountability Act from 1996?

    Ms. NORTHUP. Yes.

    Mr. MANGANO. That bill basically set up a mechanism here to create a Health Care Fraud and Abuse Control Program. What the designers had in mind was that the Department of Health and Human Services Inspector General would work with the Attorney General's office to develop a comprehensive program to attack fraud and abuse across the country, and that is what that program is designed to do.

    One of the weapons that the Department of Justice has, among many others, is the False Claims Act; the False Claims Act originally passed in 1863, and was amended in 1986. It is designed to appoint penalties for those persons who knowingly and in reckless disregard of the truth, of the law, falsely bill the Medicare program and any other Federal program.
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    Ms. NORTHUP. It was 1863, so I think it was before we had Medicare. But has any other administration ever applied this law to Medicare claims before this administration?

    Mr. MANGANO. Oh, sure, absolutely. The False Claims Act? Yes, absolutely.

    Ms. NORTHUP. Okay.

    Mr. MANGANO. In fact, it became a very helpful device in 1986, when the Congress built in some Qui Tam provisions, which basically said that if a whistle-blower comes to the government and uncovers a case of fraud, that whistle-blower, in exchange for coming forward and presenting the facts of the matter, can also reap some benefits in terms of money in those provisions. And actually, since 1986 to now, the number of Qui Tam suits that people have been filing with the Department of Justice has increased quite dramatically.

    Ms. NORTHUP. Well, in conclusion, I am sure my time is up is, so let me just say that I think my concern is that in Kentucky, and especially in the rural parts, there are nonprofit hospitals, hospitals that have used, many of them, the same consultants who have come in to help them, yes,maximize their Medicare money and they have advised codes, codes that have been approved by compliance officers.

    I mean, obviously these rural, nonprofit hospitals are barely getting by, and maximizing Medicare is legitimate. I mean, they certainly can't provide services and underbill either. So they have used these consultants; they have gotten compliance officers to approve them. Now they find themselves in a position of being asked to pay enormous funds or being subject to prosecution by the Department of Justice, which includes criminal prosecution, three times the billing. Obviously, it is not considered excessive because they are just being asked to repay, dollar for dollar.
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    And one hospital in fact became concerned and did their own audit. Secretary Reno encouraged the hospitals to self-report, promising that they would be very carefully taken care of and would only repay what they owed, no fine on top of it.

    Instead, they got a wall-to-wall audit, subject to double and triple for anything else that they found, which wasn't excessively in the big picture, in the global of all they billed, but for this hospital it was enough to make them close their doors. And it has a ring of the IRS to me, and of maximizing not who misbehaves, which of course is our goal—to target those people who have any sort of criminal intent—but rather to be overaggressive in a type of society—that we would expect in something other than a democracy. And that is a concern to me.

    I have talked to the authorizing committee. I am hopeful that there will be some hearings on this. But I am very concerned about excessive force and abuse of laws in a way they haven't been applied in the past.

    Thank you, Mr. Chairman.


    Mr. PORTER. Thank you, Ms. Northup.

    Mr. Mangano, we are a little confused about how you are funding your work under the Medicaid program. The Kennedy-Kassebaum law clearly states that the funds available under that act were available for both Medicare and Medicaid activities. Yet, we have been told by some that you are funding Medicaid activities out of your discretionary budget and not from Kennedy-Kassebaum funding. The budget documents clearly imply that you are using the Kennedy-Kassebaum money for Medicaid purposes.
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    If this is not the case, can you explain all this to us?

    Mr. MANGANO. Sure. We fund all of our Medicare and Medicaid work out of the money that we receive through the Health Insurance Portability and Accountability Act. The discretionary money is used for all other purposes.


    Mr. PORTER. That is straightforward enough.

    The budget request for the part of your work load that is not related to Medicare or Medicaid is going down in 1999. This is the part of your budget that is handled through the normal appropriations process.

    Is your other work load declining or have you made a decision to put a lesser priority on your other responsibilities?

    Mr. MANGANO. I am very much aware that the President has very difficult choices to make in how to determine how much money people get to do the activities of their office. I know he has to consider the concerns of the health agencies in our department and the children and families programs.

    The President has decided to reduce our budget for this year by $3 million, and we will produce the best possible results for the $29 million that we receive.
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    Mr. PORTER. Actually, the President only puts together a budget that everybody reads and looks at and talks about, but it is never adopted. So we have to worry about the real world.

    He worries about the press and the groups that are interested in the budget.

    How is the Inspector General's Office itself complying with the Results Act? How did you establish the actual performance goals for your own office?

    Mr. MANGANO. We produced a strategic plan back a number of years ago. 1994, I think, was the first year we produced it; and we had three goals. Our performance standards then relate to the three goals.

    In our congressional justification, we included what our goals were and the standards that we would use to work against that.

    The first goal was to have a positive impact on HHS programs, and we thought that one of the performance indicators we ought to use or the most important was return on investment. If we are doing our job right, we ought to be returning money to the taxpayers in two ways: the first would be through expected recoveries through our investigations and our audits and the second through savings against future expenditures.
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    We make a number of recommendations on the basis of our evaluations and audits each year that will help prevent the expenditures of money that shouldn't be spent. We were very pleased, for example, in the Balanced Budget Act of 1997 that many of the recommendations we had made were adopted by the Congress and will save a great deal of money.

    So the first important performance indicator we had was on the basis of return on investment.

    We had two other areas. The second area was managing effectively and efficiently, and here we concentrated on a couple of different performance measures that we thought would be effective. One was to have 90 percent of our reports produced within 1 year from the time we started it. An effective and efficient organization ought to be able to do that over time.

    We also felt it was important to make sure that our employees had the tools that were needed to do their job. So we are holding ourselves to 100 percent responsibility there.

    The third area was in attracting and retaining a diversified, committed staff; some of the indicators we are using, include our average training per employee per year and the percentage of employees that file grievances. We also do an employee survey every 3 years that looks at how satisfied they are with the job. We have tried to balance out the results of our office with some internal process planning.

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    Mr. PORTER. I don't know of any other office—maybe I just simply don't know—that measures employee satisfaction.

    Why did you look at this when others aren't?

    Mr. MANGANO. Well, when the Inspector General came here 4 years ago, she was concerned that we may not be doing the best job that we could be doing; and one of the ways to find out how well we are doing is to survey the employees. We did one about 4 years ago; and then we did a follow-up a year or two after and asked the employees lots of questions about how they do their work including how well management is doing, are we paying attention to poor performers, and do they have the tools to do their job.

    We found that that information was extremely useful for us. It gave the managers feedback that they wouldn't have necessarily gotten if they just called people into their office and asked them and gotten a direct, honest answer. So it was valuable to us.


    Mr. PORTER. Now, who looks at your performance under GPRA?

    Mr. MANGANO. The Inspector General's performance?

    Mr. PORTER. Yes.
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    Mr. MANGANO. Well, I am assuming that the Congress clearly will look at it and this committee and the Senate Appropriations Committee will look at it.

    Mr. PORTER. You look at the department's.

    Mr. MANGANO. Yes, I know.

    Mr. PORTER. Who looks at yours?

    Mr. MANGANO. You look at ours; and, of course, the Secretary will look at ours. The General Accounting Office is also looking at many of the things that are in ours, and they will be doing that every year now.

    Mr. PORTER. They are. We have asked them to; and they have been here to testify for the whole Department, including the Inspector General.

    Mr. Mangano, thank you very much for your very direct and good testimony this afternoon, for the good job that you are doing. We appreciate very much your coming to testify.

    Mr. MANGANO. Thank you very much.

    Mr. PORTER. Thank you. The subcommittee will stand in recess until 10:00 a.m. tomorrow.
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    [The following questions were submitted to be answered for the record:]

    "The Official Committee record contains additional material here."

Wednesday, March 4, 1998.





    Mr. PORTER. The subcommittee will come to order.

    Our hearings on the budget for the Department of Health and Human Services continues this afternoon with the Health Care Financing Administration. We are very pleased to welcome Nancy-Ann Min DeParle, Administrator of HCFA; accompanied by Elaine Raubach, Director of the Budget and Analysis Group of the Administration.


    Ms. DEPARLE. Thank you, Mr. Chairman.
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    Mr. PORTER. Would you please proceed with your statement?

Opening Statement

    Ms. DEPARLE. Yes, I would. And in the interest of time and assuming that you probably have some questions for me, I am going to just highlight a few of the issues in our budget.

    I have been at the Health Care Financing Administration now for about three-and-a-half months and before that was at the Office of Management and Budget and enjoyed working with your staff. I look forward to working with the members of this committee on important issues for our Nation's Medicare and Medicaid beneficiaries.

    As we look forward to the future, nothing is clearer than the need to ensure that Medicare and Medicaid are strong, well-managed, and responsive to our beneficiaries. We call this management concept ''beneficiary-centered purchasing'' and it is at the core of our mission at the Health Care FinancingAdministration.

    Our 1999 budget request reflects our commitment to aligning the agency's top priorities with the changes in the health care market place that will take Medicare and Medicaid into the 21st century. As the first chart shows, Mr. Chairman, these priorities include implementation of the nearly 300 provisions of the Balanced Budget Act in a timely and efficient manner, which is a top priority.

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    It is an enormously complex and demanding undertaking and it includes implementing two brand new programs, the Medicare Plus Choice program which will provide beneficiaries with more health planning choices, and the Children's Health Insurance program which is the second item on my priority list and which will extend health insurance to millions of uninsured children around the country.

    The third priority that I would mention to this committee today is strengthening our ability to fight waste, fraud and abuse in Medicare and Medicaid. The new budget law that you enacted last summer includes a variety of provisions that will help us in our effort to improve our program integrity and the President has also asked for additional tools in his new budget proposal.

    And finally, the fourth item on our list of priorities is that we are hard at work in making sure that the data systems that manage Medicare and Medicaid payments are millennium compliant. In other words, that we are ready for the year 2000.

    So, even though those are just four priorities that are very simple to state, I think that you can understand that they are going to be difficult to achieve and we will need to work closely with the Congress in trying to do that.


    I want to spend the bulk of my time talking about the HCFA Program Management account which supports the priorities that I have mentioned. I also will talk this afternoon about the user fees on which our request depends and as well, I will touch on the Medicare Integrity Program.
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    Our request for Program Management shows that it is possible for a government agency to handle massive national health benefit programs with increasing efficiency and productivity. Our request supports the President's commitment to a balanced Federal budget, even in the midst of the most sweeping changes since Medicare and Medicaid were begun over 30 years ago.

    Indeed, for the past several years, we have been making tough decisions in financing program and administration from an essentially flat base in constant dollars as shown in the second chart. However, I think that, now more than ever, all of us would agree that it is very important to maintain adequate resources to ensure that these programs are strong, well-managed and providing beneficiaries with the best possible service.

    We are actually, Mr. Chairman, requesting less than 1 percent of total program outlays for Program Management funding. And I think this administrative cost compares favorably to the private sector. For example, the Blue Cross and Blue Shield Association's advertised administrative costs are 12.5 percent of benefit payments.

    We expect Medicare and Medicaid benefits, including the Children's Health Insurance Program to total over $329 billion in the fiscal year 1999. However, none of those mandatory benefits can be paid without the completion of activities funded from this program management discretionary account.

    Our Program Management request totals $2.1 billion and consists of the program management appropriation request of $1.7 billion, proposed discretionary user fees of $264.5 million, and current law user fees of $195 million. So, in total, the request reflects an increase of $254.5 million from the fiscal year 1998 program level.
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    I want to talk next about funding through user fees because I know that is a controversial topic in this committee and I want to talk about why I think it makes sense in our program, in particular. Our budget request relies upon the enactment of $264.5 million in proposed discretionary user fees, and $195 million in current law user fees that together will finance almost 22 percent of our budget request, as shown in the third chart.

    Full funding of these fees is crucial to our ability to maintain our priority program operations, as well as our new responsibilities, such as implementing the new Medicare+Choice program that will give beneficiaries more health care options.

    We recognize the importance of controlling discretionary spending if we are to achieve a balanced Federal budget. We also recognize the equally compelling need for adequate administrative spending to effectively manage Medicare and Medicaid.

    We have attempted to reconcile these two goals through a proposal of alternative user fee funding mechanisms to make needed funds available. These user fees will support ongoing Medicare+Choice information campaign activities nationwide. And, as you know, last year your committee enacted the first tranche of those user fees, the $95 million for our first fiscal year 1998 activities.

    The user fees will also strengthen the effectiveness and efficiency of our program management operations and they cover provider and supplier enrollment registration, managed care application and renewal, initial provider certification, provider recertification, paper claims submission and duplicate or unprocessable claims submission.
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    A significant portion of our budget depends on the enactment of these user fees and I think they are fully justified. One example, Mr. Chairman, is that in our programs with all the providers we have, we have not charged any sort of an application fee to those providers. And, you know, maybe we would all like to have programs where we did not have to charge a registration fee, but in HCFA I think it makes sense given the number of dollars that are coming through our programs and the responsibility that I think you rightly place on us and that you want to hold us accountable for managing those trust fund dollars and making sure that our programs have integrity.

    We have not, up until this year, even done a required site visit for all the suppliers that we do business with, like, in the durable medical equipment supply business. And I think you have probably heard some of the horror stories of things that we have found from our own suppliers, some of whom were pretending to do business from the sixth floor of a five-story building and things like that. There are certain activities that I think we need to engage in, in order to run a prudent business-like operation. And the user fees that we are requesting will enable us to do that.

    We need full funding of these user fees to avoid significant disruption of our operations that could delay the implementation of the Balanced Budget Act and our other

priorities, and we are eager to work with this committee and the authorizing committees to enact this critical source of funding. And I know we will have a number of conversations about that.

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    I now want to talk very briefly about two of the specific accounts that comprise Program Management—Medicare contractors and Federal administration. Contractor functions, first, are at the heart of the Medicare program. In fiscal year 1999, Medicare contractors will process an estimated $935 million claims, almost a 5 percent increase over fiscal year 1998.

    Our Medicare contractors request includes an increase of around 6 percent or $54.2 million above the fiscal year 1998 appropriated level for basic claims processing activities. Our 1999 request for Medicare contractors is $1.3 billion and consists of the appropriation request of $1.1 billion plus $165.5 million in proposed discretionary user fees. This funding level accommodates the expected increase in the claims workload and provides resources sufficient to ensure integrity in claims processing operations as well as allow for other critical operational support, including Year 2000 compliance.

    In the past few years we have made great strides in improving efficiency in the area of claims processing through productivity investments, including the transition of contractors to selected standard claims processing systems and customer service improvements. We want to work with the Congress and continue to improve efficiency in these areas.


    In the Federal Administration area, that portion of our Program Management account that supports the day-to-day operations of HCFA's headquarters, as well as our ten regional offices. The fiscal year 1999 request of $455.8 million consists of our appropriation request of $419.1 million, plus $36.7 million in proposed discretionary user fees. The request includes $322.6 million to fund 4,217 FTEs, including 190 additional FTEs to support the implementation of the Balanced Budget Act, and 65 additional FTEs to support activities attributable to the Health Insurance Portability and Accountability Act.
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    These additional resources are paramount to the successful implementation of this legislation, especially in the Medicare+Choice managed care provisions and activities to assist States as they implement insurance reform that the Congress enacted. The request also includes funding to ensure millennium compliance of Medicare systems at the HCFA data center in Baltimore.


    Finally, on the Medicare Integrity Program, Mr. Chairman, in fiscal year 1999 we will continue to implement the provisions of HIPAA, the Health Insurance Portability and Accountability Act, including measures to prevent fraud and penalize wrong-doers in the fraud and abuse area. The Medicare Integrity Program (MIP) will help us target fraud and abuse resources at the most vulnerable areas to maximize our return on investment and to protect scarce taxpayer dollars. And we hope to protect the fiscal integrity of the trust fund so that Medicare is available not only to those who need it today but also to those of us in the next century.

    This budget proposes $395 million in mandatory user fees in the Medicare Integrity Program, which together with the mandatory MIP funding level of $560 million will mean a total investment of $955 million. These proposed user fees will bolster our flexibility to focus on areas expected to yield the greatest return on investment.

    Although this user fee is not subject to appropriations we want to work with this committee, as well as the authorizing committee to enact our entire user fee program.

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    Our fiscal year 1999 budget request was formulated to be both flexible and responsive to the changes in Medicare and Medicaid. I think that our budget request will allow us to respond quickly and effectively to the needs of our Nation's rapidly changing health care system.

    I appreciate the opportunity to be here with you today to present our budget request and I look forward once again to working with this committee and would be happy to respond to any questions that you might have.

    [The prepared statement follows:]

    "The Official Committee record contains additional material here."

    Mr. PORTER. Ms. DeParle, my first question is, are you enjoying this job? [Laughter.]

    Ms. DEPARLE. Are we having fun yet? Well, it is, I suspect it is a little like being the Chairman. There are days when it is fun and there are days when it is not fun. We have a lot of challenges ahead of us, but certainly this committee and your staff have tried to make it as enjoyable as possible and I appreciate that.

    Mr. PORTER. Well, we are delighted that you have undertaken it. Obviously, you are very well prepared for it. I think you have one of the toughest and biggest jobs in all of Government. It is good that you are there, and I think you are going to do a superb job. We look forward to working closely with you and making certain we have the resources you need to do the job right.
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    Ms. DEPARLE. Thank you. I appreciate that.

    Mr. PORTER. Can we talk about user fees for a minute? As you said in your oral testimony, the Program Management budget depends on two funding sources: what you receive through appropriations and the enactment of user fee authority. The user fee proposal was submitted to Congress just this past Friday. Have you been in contact with the authorizing committees to determine how

receptive are they in taking up this proposal?

    Ms. DEPARLE. Well, you have touched on a very difficult area, Mr. Chairman. I knew and I think the Secretary knew in sending this request forward that it creates difficulties because we are working with two committees here and we know that is an awkward and cumbersome process.

    But I do believe that there is a good justification for each of the fees that we have proposed and I also think that if we are trying, as you, in the Congress and we, in the Administration, have committed, to work within a balanced budget, there are some areas where maybe user fees would not make sense. In the HCFA Program Management area and in our programs I think they do make sense.

    We have begun discussions with the authorizing committees. Now, that we have the legislative language we intend to go back and work with them and I am sure it will be a long process.
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    But I do think that frankly, because of the additional responsibilities that they have given us number one—with the enactment of the Balanced Budget Act, which is critical to doing what we all know we must do, which is extending the solvency of Medicare—we have to get the job done on enacting those provisions in order to make good on the promise.

    And they realize that. They also, I think, recognize that as our program has grown and the number of claims, for example, in Medicare, has grown that we have not kept pace with the amount of oversight that we needed to do in order to be sure that our error rate would not increase.

    And, you know, you heard about our audit that was done last year. I am not happy with a 14 percent error rate. I am not satisfied with that. We have to do better. And until we figure out a way on a prepayment basis to know which claims are not good and which claims are, the only answer to that is to do audits and these user fees help to support us in that activity.

    So, I believe our authorizers are open to discussions with us and we know that we have, I know that I have some persuading to do and I appreciate your having an open mind as much as you can.

    Mr. PORTER. Well, I hope they are as reasonable as you think they are. What happens if you get the authority—how long will it take to write the rules and regulations and how much could you collect in the first year? Are we not looking kind of a fair way off before you could get the authority and actually begin to use it?

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    Ms. DEPARLE. Well, with the Medicare+Choice user fees, which your committee appropriated for us last year and worked with the authorizers on, we have already begun collecting money under those. We have already collected, I think, $38 million or so.

    I would never want to make promises about time frames within which things can get done because I have learned from my experience that things always take longer than you think but this would be a major priority to us and we would get it done as quickly as we could.

    Mr. PORTER. This is the Commerce and Ways and Means Committees in the House.

    Ms. DEPARLE. Yes, sir, and Finance on the Senate side.

    Mr. PORTER. I would imagine that this would work out if the authorizing committees are convinced that our bill would become the vehicle to enact them because I do not think they are going to put out a separate vehicle this year in any case.

    Ms. DEPARLE. I do not think they are either.

    Mr. PORTER. Which means that time is kind of the essence here. There are not many legislative days scheduled. Appropriations is moving very fast. I do not know how fast the budget will move, but we would target a markup, assuming we have a budget, for early May. So, the faster you can talk to the authorizers the better off we will be.

    Ms. DEPARLE. I hear you. I appreciate your advice.
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    Mr. PORTER. Let me ask one more question now and we will have an additional round later. There is a provision in the Balanced Budget Act that takes effect on October 1st that has caused some concerns in the health community. The provision has to do with the status of patients transferred from a hospital to a rehabilitation facility.

    Apparently, after October 1st, patients who are transferred will be considered a transfer patient rather than a discharged patient. This status impacts the level of funding that hospitals receive as a result.

    Are you familiar with this issue and have you looked into the concerns that have been raised?

    Ms. DEPARLE. Yes, sir, I am both familiar with it and have had a recent discussion with the American Hospital Association and the Tennessee Hospital Association and the California Hospital Association. It is their top priority as you know. They are very concerned about it.

    Like every issue, it has two sides. The thing that motivated the Administration to request a provision in the Balanced Budget Act to try to address this problem was the problem we were noticing through Operation Restore Trust, our anti-fraud and abuse initiative, as well as just from our own numbers that there seemed to be a lot of hospitals that were discharging patients and then the next day the person would be in their home health unit, and it looked like they were trying to get the full DRG and then put them in another facility eligible to receive additional payments, in some cases. Unfortunately these kind of examples are the things that catch people's eye—but in the Wall Street Journal last year there was an example of a hospital that was discharging folks after they had gotten the full DRG and then basically wheeling them down the hall to their skilled nursing facility units. Then they could charge reasonable cost for a day and, thus, augment the bill. So, that is the problem this was designed to correct.
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    The original proposal was much broader and in working with your colleagues in the Ways and Means Committee it has been narrowed so that what they have told us to do is to focus on ten DRGs that seem to be the ones that are most frequently the problem and to come up with a proposal related to that. And we are moving forward with that but we are talking to the various hospital associations and we are aware of their concerns.

    Mr. PORTER. Thank you very much.

    Ms. Lowey?

    Ms. LOWEY. Thank you, Mr. Chairman.

    And I just wanted, Mr. Chairman, before I move on, to associate myself with your last question because this problem has been brought to my attention, as well, by several of the hospitals in my district and they, you know, felt that although they understand why we made that decision what it does is it encourages hospitals to keep someone there formore than 10 days, so, I am delighted to know you are working on it. Because many of us have been concerned about that issue and we thank you.

    I want to welcome you.

    Ms. DEPARLE. Thank you very much.

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    Ms. LOWEY. And I thank you. You have inherited an enormous responsibility and we all wish you good luck. Certainly your credentials are very impressive and we all look forward to working with you to make sure the Medicare and Medicaid programs are protected and continue to serve the public.

    A couple of questions particular to New York. As you know, I and a number of other members of the New York delegation have expressed deep concern about the methodology HCFA used when it developed new Medicare payment caps for care provided by inpatient psychiatric and rehabilitation units. Specifically, HCFA did not address the caps for legitimate cost differences between geographic areas of the country, contrary to past practices in what is understood to be Congressional intent.

    It is vitally important that these new caps be adjusted so that health care services in the metropolitan areas are not harmed but payments to the truly inefficient hospitals can be reduced and we understand that.

    Unfortunately, these wage caps, as they are now, are the same regardless of where a hospital is situated. In New York City the caps will harm care for Medicare beneficiaries in need of psychiatric or rehab services, including services to treat severe burn victims.

    As you know, psychiatric care is already under a lot of financial pressure because it has been difficult to get managed care and other insurers to provide adequate reimbursement. And many of our urban hospitals are just being pushed to the breaking point. In my meetings with them, they make this very, very clear.
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    Could you discuss with us what HCFA plans to do to respond to this problem and give us some idea of when we can expect HCFA to take appropriate action?

    Ms. DEPARLE. The issue that you have identified is one that came to my attention in January and I think you wrote me and Mr. Rangel has also written me about this and certainly from the standpoint of the New York delegation, there is no question about what you intended in the law.

    Unfortunately though, our lawyers advise me that the wage adjustment mechanism was written into other parts of the statute. It was not referred to at all in this section of the statute about these caps. And, so, what they contend is that we do not have the discretion to just read that into the law, because where it has been specifically referred to in other areas and it was not referred to here, the inference is that if Congress had wanted us to do that they would have told us to do it.

    As I said, I have no doubt of what you want or what your colleagues from New York want, but there is this issue of legal interpretation. I certainly can tell you that we agree that, in general, it makes sense to adjust for differential wages. And we would be happy to provide technical assistance or to do anything we can to help move it in that direction. But at this point, my lawyers have told me that they do not think I have the discretion.

    So, I think we have a meeting scheduled to talk more about this and I will go back and make sure that everyone is looking at every single angle on it. And I am aware of the problem.
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    Ms. LOWEY. I would appreciate that. And I am glad you said it is legal interpretation and not the law, which makes me think that maybe there are some questions because you can get other legal interpretations as you well know, you have received them on this issue, and we appreciate that you are continuing to work with us. And I look forward to the meeting and I hope we can resolve it because there are different interpretations of the law and there are people who feel very strongly about this and it severely impacts the industry.

    Ms. DEPARLE. Yes, I know.

    Ms. LOWEY. So, I thank you very much.


    Another area facing New York, another serious issue facing New York has been brought to my attention. And this issue relates to the ability of community health centers to survive under Medicare managed care. I understand that New York State is in the process of implementing an 1115 waiver which HCFA approved but which waives so-called cost-based reimbursement for New York's community health centers.

    Twenty members of the New York delegation have written to you on this issue as well expressing our opposition to this treatment to health centers. If this waiver is allowed to stand, it is estimated that community health centers in New York will lose a minimum of $220 million over the next five years.

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    And this certainly is money that our health centers could use for upgrading their facilities, so that they can compete in the managed care market place, or it is money that they certainly could use to care for the uninsured which is a major part of their responsibility. This cutback could force health centers to reduce services or even to close.

    Now, my understanding is that Congress expressed the intent that health centers receive cost-based reimbursement by enacting a six-year wrap-around payment for the health centers in the Balanced Budget Act of 1997. There are differences of opinion on this, but this is absolutely vital to our community health centers.

    Unless the six-year wrap-around payment is respected and implemented, it would really kill these centers that are providing such vital services. Could you give us an understanding of whether you intend to enforce the six-year wrap-around payment in New York?

    Ms. DEPARLE. I do not have an answer for you today. I can tell you that I think I have met with every health center in New York now in three-and-a-half months. I am teasing, but I have met with at least 20 of them about this issue.

    And again, there are questions here, as you pointed out, of legal interpretation as we move away from cost-based reimbursement, which the New York centers understand. They are very realistic about where the world is today. What they tell me is they just want to be in a position to compete fairly and they are concerned about having a transition to the new system. Which is, I think, what Congress was also concerned about.

    And, so, we are taking that into account and trying to develop the policy that we will be applying with respect tothis. And I would like to get back to you with a report on it because this is an issue that, I think, you will be glad to know is not just a HCFA issue. It is an issue the Secretary cares a lot about and it is an issue that our colleagues in the Department, particularly in the Health Resources and Services Administration care a lot about.
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    So, we are working together on what is the best policy and I would like to get back to you with a more specific answer about New York.

    Ms. LOWEY. Well, I certainly appreciate that. Certainly the Secretary is very well aware of the invaluable services of the community health centers and, again, they just want to be competitive and get fair treatment.

    So, I thank you. What is our time like, Mr. Chairman?

    Mr. PORTER. You have 26 seconds left. [Laughter.]

    Ms. LOWEY. Well, maybe I will just congratulate you on your waste, fraud and abuse program. I asked Secretary Shalala the same question, but I have been impressed with what I have heard. And certainly in New York, Operation Restore Trust has been doing an excellent job. I continue to be amazed that it still is what, 14 percent, $14 million? More than that?

    Ms. DEPARLE. That was our error rate. It is more than that I am afraid. The percentage is right, the dollars are a little bit bigger.

    Ms. LOWEY. Oh, the error rate was 14 percent.

    Ms. DEPARLE. No. The error rate is 14 percent and that was an analysis of 5,000 claims and if you extrapolate that over our entire fee-for-service base, it is $23 billion.
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    Ms. LOWEY. Well, what we will do if we have another round is give you the opportunity to tell us what wonderful things you are doing.

    Thank you.

    Ms. DEPARLE. Well, and if I can get the user fees we can do even more. [Laughter.]

    Ms. LOWEY. Thank you.

    Mr. PORTER. Mr. Wicker, for 480 seconds.

    Mr. WICKER. Thank you, Mr. Chairman.

    Ms. DeParle, I am delighted to meet you. I was interviewed by your husband.

    Ms. DEPARLE. I was going to say my husband is a fan of yours. I think you know that.

    Mr. WICKER. And I hope that the next time he visits Mississippi, you will come with him and have dinner with me.

    My first two questions are sort of particularly Mississippi questions. One is about oncology drugs and the other to give you a heads-up about the occupational mix reclassification. But first to the oncology drugs.
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    Our entire delegation wrote you a letter last November and the concern was the inconsistency of care which exists between different States, in particular, the Medicare coverage termination process allows certain carriers to deny reimbursement for one oncology drug when a neighboring State with another barrier does reimburse it. Why does this problem exist and what can we do to limit the gray area which allows these inconsistencies?

    Ms. DEPARLE. The problem exists because of the way the Medicare program was designed. And it is just like when I talked about our contractors here today and the money that we need for them.

    When Congress set up Medicare, they wanted it, they decided not to go the route of Social Security and not to have a big agency with 60,000 employees, but rather to have a small agency and to do a lot of the work through contractors, through Blue Cross/Blue Shield and various other insurance companies that would pay the claims and would do all of those things for us.

    So, what happened was these contractors around the country— and I think we are down to approximately 70, they often make decisions that relate to coverage of, in this case, these oncology drugs that you and I have corresponded about.

    What we are trying to move toward is a process for making decisions that would be evidence-based—in other words, based on what the science shows about what a particular device or drug or whatever it is, could do for our beneficiaries—and that would be more national in scope.
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    But getting from where we are today to there is hard. We had a process that was being used to make so-called national coverage decisions which was sort of a hybrid process and basically was not an open process. And, so, when I was briefed on this back in December, I decided we needed to change that. And we just had a meeting yesterday about how can we put together a process that allows it to be more open and allows us to make decisions on more of a national basis?

    But I should be honest with you. It will be hard because we have now had 30-some years of operating where local carrier medical directors, like the one in Mississippi, can make these decisions on their own and sometimes they like it that way. Frankly, sometimes the companies like it that way because they can talk to a particular carrier's medical director and get him or her to agree with their position.

    So, I think where we want to move is to have more national consistency. And from your question it sounds like that is where you think we ought to be, too. But getting to there from where we are is hard.

    Mr. WICKER. I certainly hope that we can continue to work to move toward national consistency, as you say.

    I certainly am an enthusiastic supporter of the concept of Federalism. But human physiology does not change from State-to-State. And I hope you can understand the frustrations of the best oncologists in Mississippi being prohibited from using drugs that the best oncologists in Alabama and Georgia are allowed to use.
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    So, let us continue to make that a priority.

    Ms. DEPARLE. Yes. In the particular case you were talking about, we have spoken with the medical director and we have also surveyed the country and you are right, that particular one is prescribing something or agreeing to allow claims for something in a very different way than anybody else is. He has agreed to meet with the local oncology community and I think that is going on right now.

    Mr. WICKER. Well, perhaps that will address this specific issue.

    Ms. DEPARLE. I would like to not have a situation where Members of Congress feel like they have to carry the case for folks back home on an issue like this.

    And, so, I hope we can get there.


    Mr. WICKER. Now, to the occupational mix reclassifications, which has occurred for fiscal year 1999. I do not understand everything about this but what I do understand is that HCFA published a new rule and a lot of us were surprised that this particular mix was abolished.

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    I understand it was because the American Hospital Association was no longer collecting occupational mix data required for reclassification and what I really understand is that this action would cost four rural Mississippi hospitals several million dollars.

    Now, if we could persuade the AHA to start collecting this data again what would be your attitude toward reconsidering this rule?

    Ms. DEPARLE. I had never heard of this before you wrote me about it, I am not an expert on it. But I did read up on it after I saw your letter. It is my understanding that we did not have a policy basis for not continuing to use the data. It is just that the American Hospital Association said they were not going to collect it any more.

    So, if they were to collect it again, then I believe my reaction would be to use it if it helps us make a better policy.


    Mr. WICKER. Wonderful. Yesterday, I asked Ms. Shalala why the Department had not submitted a report which Congress had asked for in 1996. This report was due last July and was supposed to give Congress an idea of the viability of letting independent accredited organizations certify skilled nursing facilities.

    HCFA already uses the Joint Commission on Accreditation of Health Care Organizations to certify hospitals. So, could we ask you to submit, when do you expect to submit this report that was due last July, before you came into office, I might add. And would it make sense to try this approach of independent contractors before moving toward the user fees?
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    Ms. DEPARLE. Well, on the first part of the question, I am aware. of the report on so-called deemed status. And the simple answer is, it was not ready. I believe it was supposed to be due in July or so of 1997?

    Mr. WICKER. That is right, July of 1997.

    Ms. DEPARLE. And HCFA let the contract, as I understand it, for the outside contractor that was going to perform the study soon after the appropriations bill was done but it just was not finished.

    And last summer they considered sending up an interim report but, quite frankly, I looked at it and it did not really say anything. So, I was not sure that made sense to send you something that did not really say anything.

    I think it will be ready soon. I know there is a draft of it that is supposed to be coming to me. So, I would say, spring. It is almost spring now. I would say, soon.

    If you like, I can get back to your staff with a more specific date, I think it should be soon.

    Mr. WICKER. Okay. And did you want to comment about possibly holding off on user fees until we find out the feasibility of this approach?

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    Ms. DEPARLE. I am not sure how much money it would save to go to a deemed status approach, Representative Wicker. I am open to looking at it, but I can tell you that I do not think that we are necessarily doing the best job we could be doing right now in oversight of some of the facilities that we need to be overseeing like skilled nursing facilities, nursing homes.

    At least I am not comfortable with where we are. And that is what would make me a little bit concerned about moving to a deemed status. I can tell you this, I will look at the report and I will sit down and talk to you about it and remain open to it. But I can tell you that I am not convinced that we are doing the best job we need to be doing as it is.

    Mr. PORTER. Thank you, Mr. Wicker.

    Mrs. Northup?


    Mrs. NORTHUP. Thank you, Mr. Chairman.

    I do not know where to start. First of all, let me just ask you a quick question. The question of physicians have to include a copy of their license. Is that still part of you all's regulations or did you all reverse that maybe?

    Or was that a Senate bill that passed in the Senate?

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    Ms. DEPARLE. I am sorry. Including a copy of the license?

    Mrs. NORTHUP. That the requirement for the Medicare fraud, ''Providers must submit a notarized or certified true copy of their renewed medical license and if they do not, their claim will be denied.'' And, of course, providers are complaining that this is a lot of paperwork and I mean complaining bitterly about it. And I am sort of reaching back in my memory as to whether you have left that in place or whether there is actually a Senate bill that passed in the Senate.

    Ms. DEPARLE. I need to get back to you with an answer for the record. I can tell you, though, that just from my own experience I suspect you would be shocked at some of the things that some people who get into the Medicare program would do. I was just down in Miami looking at some of the fraud and abuse problems we have and went into clinics where there were people who were practicing as doctors who were not licensed doctors.

    So, if that is a requirement it must have been designed to get at that. Now, the issue is, is there a way to get at that without requiring a lot of extra paperwork out of doctors? So, what I would like to do is go back and look at that and get you a better answer for the record.


    Mrs. NORTHUP. That would be fine.

    Intermediaries. I asked this question yesterday and I am going to follow-up with you. The hospitals are concerned, they believe that the HCFA intermediaries have given approvals to certain billing codes that they rely on. Many of these hospitals, especially our rural hospitals—hospitals that Representative Lowey talked about feel like they are already at the breaking point—they hired consultants to help them. What they claim is that understanding the Medicare law is overwhelming, it is very difficult, it is sort of like the Tax Code for a person on the street.
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    So, they hire consultant companies that come in to help make sure they maximize their billing opportunities. They then have the intermediaries from HCFA that approve these codes, but now the hospitals are being contacted by the Department of Justice which is saying that those billings were improper. DOJ is either saying we will see you in court and sue for double the costs or triple the costs of over-billing, because these billings are not okay, or you could pay us right now, in 30 days, these enormous sums and plead guilty.

    All of these proposals are potential breakers for some ofthese hospitals. And they feel like that if they had the evidence that the intermediaries have given them, the information that these were correct billing codes that the intermediary should bear the burden of the costs.

    You know, it is one thing to say, you cannot do it any more; it is another thing to say, you did this for the last three years.

    Ms. DEPARLE. I understand your concern and, of course, I am not representing the Department of Justice. They make their law enforcement decisions. I can tell you that one thing that we are trying to do is to coordinate more closely with them and with the Inspector General because their work as partners in our efforts to prevent and stop health care fraud, waste and abuse is very important and we value their work.

    Mrs. NORTHUP. Yes.

    Ms. DEPARLE. But we want to work more closely with them so that they are targeting the things that we think are really the biggest problems for our programs. And I can tell you that from our perspective and certainly from the Secretary's perspective, we want our rules to be fair, and we want them to be fairly applied. We want to be fair with the providers, and we expect them to be fair with us. We are not looking for inadvertent mistakes or honest errors, for someone to be persecuted because of that. We want things to be clear and fair, and certainly in the cases that have been brought to our attention where that has been the case, we have pointed that out to our colleagues at Justice.
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    Mrs. NORTHUP. But it does not seem to get any response. I mean, I think their only complaint against HCFA is that they are now being held responsible for mistakes that were made by HCFA, but I think they feel like you all have stepped forward pretty fairly and said, Yes, this was a mistake.

    The problem is the Department of Justice does not care. They pursue the legal action—and it is substantial. How many hospitals are there in the United States—5,000?

    Ms. DEPARLE. More than that, but yes.

    Mrs. NORTHUP. I mean, right now, a high percentage of those hospitals already have been contacted, and they expect it to be every hospital.     Also, the Department of Justice Secretary Janet Reno said, If you self report, we will not charge out the double and triple overbid. However, when the hospitals have done that, Justice has done a wall-to-wall audit of every book, and to anything they found that was incorrect, they apply the highest penalties. And I guess I should ask do you all sit down and talk about this together? Maybe that is too casual.

    Ms. DEPARLE. Well, we actually are, and I do not think that is too much to ask. At my level, the Inspector General, the Deputy Assistant Attorney General who is responsible for this, and Eric Holder, the Deputy Attorney General—we are meeting on a regular basis to talk about the bigger picture and what the areas are that we should be focusing on. And through those discussions—and your concerns are some of the kinds of things we talk about—through those discussions, I hope this can be a smoother operation that will reflect what I think Congress wants, which is to make sure we are doing our job to protect these programs, but at the same time not doing so in an unfair fashion.
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    When I talk to the folks at Justice about those kinds of situations, what they say to me is that if the intermediaries have not been clear, that that is something they will take into account as they proceed with making decisions about a particular law enforcement action. And I would suggest that you talk to them as well about this.


    Mrs. NORTHUP. Are you under any sort of understanding that—first of all, I do not know how the Department of Justice becomes involved, and whether you refer a case. Yesterday, I understood that HHS actually refers the case to them.

    Ms. DEPARLE. What we are trying to do is to put the rules out and to audit claims and to make sure we are paying for things we are supposed to pay for and are not paying for things we should not be paying for. If we have a case, though, where it appears there has been a pattern, or it is more than just a minor thing, then we refer those kinds of things to the Inspector General. They investigate them to see whether there is anything to it more than just an honest mistake, and then they in turn could make a referral to the U.S. Attorney's Office, which actually does these prosecutions. That is how it works.

    Mrs. NORTHUP. In trying to understand the culture of this, would you say that for a number of years, firms sort of helped hospitals maximize and that now the understanding that you have to be self-controlling is taking hold—that the challenges are paying for the sins of the past?

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    Ms. DEPARLE. There was an article in the Wall Street Journal about this a few weeks ago, and it said it all, because it featured a guy who had made his career out of running what he called ''Medicare maximization'' seminars around the country that had dollar signs all over them and attracted hospitals folks in. And now he bills himself as a compliance person to protect them from getting in trouble.

    I think we have moved from a situation that was rather more fluid to one where we now have zero tolerance. Why is that? It is because of the need to manage these programs more efficiently. But it is difficult when you are caught in that transition.

    Mrs. NORTHUP. Well, especially if there was actually within HCFA somebody that was giving their blessing to this. I do not know whether you all can train your compliance officers more or whether you can assume more of the responsibility, or when there is evidence that compliance officers or managers approved it, but I think that is a real problem of fairness, and the Department of Justice seems to be keeping score about how many people—they may take it into consideration by offering an agreement, but it has not cost you.    Ms. DEPARLE. We need to do a better job of making sure that our intermediaries understand the policy and that they in turn convey that policy to the hospitals fairly, and certainly, if it is brought to my attention that there is a case where that was unfairly handled, I would certainly make that argument. But as you understand, and as I think the Secretary said, we are not the law enforcement officials.

    Mr. PORTER. Thank you, Mrs. Northup.

    Mr. Bonilla?
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    Mr. BONILLA. Thank you, Mr. Chairman.

    Good afternoon, Ms. DeParle. How are you?

    Ms. DEPARLE. Just fine, thanks.


    Mr. BONILLA. Just for the record, I want to follow up on what Ms. Northup brought up about billing disputes under the False Claims Act. This has been a big problem for a lot of hospitals in Texas, and Secretary Shalala was kind enough torespond to a letter with some questions I had about this problem just this week. Unfortunately, I did not get a lot of the answers I wanted to hear, because the Secretary referenced that it was a Department of Justice decision. Nonetheless, it is hurting a lot of small hospitals that can barely make ends meet as it is.

    I do not think anyone in the administration wants to put any greater burden on their backs than currently exists out there, and that is my concern. I just wanted to raise that and ask that you respond to some questions I will submit for the record.


    I would like to move now, if I could, to what I call the ''Medicare tax,'' the $95 million in user fees to disseminate new information to users, specifically a tax on those who choose to use managed care programs.
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    There was a great dispute about how much money should be spent on that last year, as you recall. We got the figure down to about $95 million. It was up in the neighborhood of $150 million that was proposed initially, if I am not mistaken.

    Ms. DEPARLE. $200 million.

    Mr. BONILLA. $200 million. And I think we had initially gotten it down to about $150 million and then lower. So we are glad that we have at least made progress in that area, because in my view, it does impose an unneeded burden on those who are using the Medicare program through managed care.

    My first question is this. Although HCFA currently conducts numerous beneficiary education and information dissemination activities, it has not elaborated on its plan to use existing infrastructure in meeting the Balanced Budget Act requirements for this education and information campaign. This Subcommittee encouraged HCFA to use a toll-free number and the Internet to provide information to beneficiaries. We all know there is a propensity among older Americans not to use computers at a higher rate than some other age groups.

    My question is will HCFA use some of its existing toll-free lines to offset the costs of its beneficiary information and education campaign?

    Ms. DEPARLE. We intend to set up a toll-free line, Mr. Bonilla, but not to use our existing toll-free lines. What I would like to do is provide you with a more detailed briefing about this, because I will not be able to do it justice this afternoon. But basically, the kinds of toll-free lines that we have are toll-free lines to our intermediaries and carriers for beneficiaries to call in their local areas to get answers to things. Those people are paying fee-for-service claims, and they would not be in a position to provide answers to questions about the managed care plans. So that for that, we are looking at a different kind of system, and we are close to having a plan and actually wanted to get up here soon to brief the staff of this committee, so I would like to provide you with a briefing on what our plans are there.
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    But as to whether we intend to use existing infrastructure, we certainly do, and in fact, back at my desk is a list of calls that my staff wants me to make that I have not gotten to yet, to all kinds of groups, groups like AARP, disease groups, church groups, all sorts of outside groups that we hope will disseminate this information in their newsletters and in their forms of media and on their computer web pages.

    We are also going to have a Medicare web page that we will be launching this month—we are now into March—that will have comparison information on it about the Medicare plans. That is something we are already in the midst of setting up, and that is part of our existing infrastructure.

    We are going to have to build on these outside things and other things because we will not have the resources to do everything within the $95 million. Just to send a postcard out to all of our 38 million beneficiaries with the new preventive benefits that you all enacted last summer would be very costly when I first got here, I thought, we ought to send out postcards to all the beneficiaries, telling them about the mammograms and the pap smears and all that. That was going to cost $11 to $12 million to do that, so we did not do that.

    Mr. BONILLA. Is that a First Class rate, or is that a bulk rate?

    Ms. DEPARLE. It's a bulk rate, and again, I can give you the details. I had the same reaction you did—how could it possibly be that much. It is expensive.
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    All that is to say that we heard the committee last summer and your views about how we should use this money, and I think you and I may disagree about the importance of informing beneficiaries about the new managed care plans. I think it is a very good thing for our beneficiaries and for the program and that we do need to do a very solid job of informing them; but we are not going to be doing a Cadillac here, I can tell you that, because we will not have the resources.

    Mr. BONILLA. My only concern at the beginning is not whether or not people should be informed—sure, they should be informed—it was about the astronomical figure that we started out with—and I appreciate your refreshing my memory—of $200 million.

    Ms. DEPARLE. It was $200 million, and we are doing it within $95 million. What that means is that you gave us last year a prioritization of the things you thought we ought to do with the money, and one issue was whether we should do health fairs in certain places around the country. I think that was the last thing on your list. So, in deciding how to spend this money, we are going to bear that in mind, because we only have a limited amount. And I think it is fair to say that we have to be accountable for that.

    Mr. BONILLA. I was concerned because at some point, you can only do so much to teach a person something.

    Ms. DEPARLE. Oh, I agree.

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    Mr. BONILLA. And with direct mail, as you were discussing earlier, it is very effective—that is one of the most effective ways to get anyone, and if they are concerned about health care, they are going to read it. And if you sent them three postcards, you would still be under the budget that you have here. So I appreciate the use of the Internet and the phone lines, but my concern initially was just to make it an efficient information dissemination and not just to roll out a $200 million program without any accountability.

    Ms. DEPARLE. I hear you. I think the constraint that you placed on us through the amount that you appropriated will guarantee that it will be done in an efficient way. But also, I do not think any of us know what is the best way to communicate, and it may differ in different parts of the country; in different cultural groups, there may be different ways of doing it. And one thing that I have talked with thestaff up here about is that we may want to try some different things in different parts of the country. There may be some places—in Mr. Porter's district, maybe a health fair would be great, and people would really like that and would really benefit from it; maybe in your district, it would be different. And if we can within the constraints of the dollars, by using local resources and local alliances and infrastructures, I would like to try some different things, too. Then we can give you more feedback about this works, this does not work, this is worth spending money on or it is not. That is how I would like to do it.


    Mr. BONILLA. I am going to run out of time soon, and I have a couple more specific questions that I want to ask.
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    Several health plans that operate toll-free lines to field pre- and post-enrollment questions reported a $5.50 or less per-call estimate. That includes the phone call itself, training, staffing and overhead. How does this estimate compare with HCFA's per-call estimate for the proposed new toll-free call centers?

    Ms. DEPARLE. I think that is probably a little more than half of what we estimate, and I think the information you are talking about might have been from Pacific Care, and I did take a look at that.

    As I said, maybe we should do a separate briefing on this, because it is complicated. But we think the kinds of calls we are going to get will be different from the ones that these managed care plans get. From my experiences—and I imagine you have them, too—talk about seniors, when they call in, and they want more general information about what does it mean if I go with one plan versus another. I do not think it is going to be just ''Is podiatry covered in your plan?'' It seems like the health plans that get calls, they seem to be more limited to that kind of question as opposed to ''Should I go on a managed care plan at all?''

    So we do not know, and we are going to find out. We are going to find out when we set this up, and we will be able to give you more exact details, but I think our estimates are that it would be more like $9 per call, and we are going to have to find that out.

    Mr. BONILLA. Okay. I have a handful of other questions, but the bell has run on me, so I cannot continue. But if I send those to you, would you get an answer to me as quickly as you can?
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    Ms. DEPARLE. I certainly will. Now that I know you are interested in and knowledgeable about this, I would be happy to spend some time talking to you about it.

    Mr. BONILLA. Thank you.

    Mr. PORTER. Thank you, Mr. Bonilla.

    Ms. DeParle, we have the Agency for Health Care Policy and Research (AHCPR) to also consider in this afternoon's hearing. The Chair would tell Members that I have a meeting that I must attend with the Speaker along with other subcommittee chairmen at 4 o'clock, but whoever would like to stay and chair can do so.

    I would like to beg the indulgence of the subcommittee to ask Ms. DeParle several more questions, and then we will hear from AHCPR.


    We received a supplemental package yesterday, and as you know, it contains $16 million for HCFA to support oversight and enforcement activities of the Health Insurance Portability and Accountability Act. You propose to pay for this increase with a limitation to Peer Review Organizations which is mandatory. Have you been in contact with the authorizers and do they support this offset?

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    Ms. DEPARLE. I have not been in contact with the authorizers yet, Mr. Chairman, and I will do so and get back to you about that. It seemed to be the best and most appropriate place to suggest an offset to us, but I will get back to you about that.

    Mr. PORTER. All right, thank you.

    There are companies that reaudit or recycle processed claims which were previously processed electronically. They have discovered significant errors and incorrect billings, which apparently resulted in recoveries of millions of dollars. This type of private sector company is then reimbursed a portion of the recovered overpayments as their fee for their work. Have you considered employing private sector contractors to assist not only in identifying fraudulent claims, but also claims which have errors?

    Ms. DEPARLE. When I was at OMB, I did meet with some companies about that idea, and I thought it had some appeal. At the time, I was told that we could not do it because we were limited under the Medicare statutes and the kinds of contracts that we could contract with.

    Under HIPAA, however, there has been an expansion where we can now use other kinds of private sector contractors other than just the Blue Cross/Blue Shield insurance company types of contractors. So perhaps that is an angle that we could look at, and I would be happy to explore it and get back to the chairman.

    Mr. PORTER. It seems to me that with some oversight, you could probably save a lot of money and it would not cost anything.
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    Ms. DEPARLE. It does not sound like we have much to lose, yes.

    Mr. PORTER. Another Balanced Budget Act authorization issue that was brought to my attention deals with the Medicare Interim Payment System for home health care. Some concern is being raised that this provision will force many elderly into more costly long-term care facilities and take away their choice to stay with their families and communities. Are you aware of these concerns and how do you respond to them?

    Ms. DEPARLE. Well, second only to the number of community health centers I have met with are home health companies around the country, and I am aware of that. Again, just to put it in context, as I am sure the chairman knows, home health was an area where we were growing 30, 40 percent a year for the last 6 or 7 years, until we are spending $17 billion a year.

    There have been a lot of concerns both in the administration and in Congress about fraud, waste and abuse in this area, based on our Operation Restore Trust. So what we did this past summer was work with Congress on a number of provisions. The thing that everybody agrees on is that we need to move to prospective payment, because the way we havebeen paying home health companies gives them no incentive to be efficient.

    We are moving to prospective payment. Everyone agrees with that, including the industry. But we are in a place right now where we are doing an interim payment system that essentially starts to move to prospective payment and starts to reduce payment on a per-beneficiary aggregate basis. What that should mean is that the company gets a payment that is big enough on average to cover everybody that they have in their caseload, but it certainly is a reduction for many of these companies, and that is what we are hearing.
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    We want to continue to monitor the situation, and as I said, just Monday, I was out with Chairman Barton down in Texas where I met with a number of home health companies. We will continue to monitor and report to the Congress if it turns out that there are problems.

    We do believe, though, that the payments are fair and that an efficient company ought to be able to continue to provide the kind of service they have been providing, and that it should not result in the horror stories that some of them are offering.

    Mr. PORTER. Thank you.

    Ms. Lowey, do you have additional questions?

    Ms. LOWEY. I will pass, Mr. Chairman. Thank you.

    Mr. PORTER. Mrs. Northup?

    Mrs. NORTHUP. Just briefly, I think the chairman brought up the reimbursement for the processing companies like Blue Crosses. This suggestion about going to a private contractor seems to me to then rule out the opportunity that Blue Cross and Blue Shield that they are the processor to participate, because maybe that would not be authorized.

    The question I have is in the bill that was passed, it is true that the authorizing committee required processing companies to meet fraud, abuse requirement, but the appropriations process is going to appropriate some money for the actual administration of that, and that the administration money did not go up, while the requirements by the authorizing committee for what they do in terms of processing and checking for fraud and abuse did go up?
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    Ms. DEPARLE. Well, it certainly is the case that the number of claims that come through Medicare review has gone up quite a bit, and that our funding both to pay claims through the contractor budget and also, until recently with the Medicare Integrity Program, to audit and to look at the claims, did not go up, so that is the case.

    When I was talking about the need for contractor reform, what we would like is to get to a place where there would be more competition both on the side of who pays our claims for us and also who reviews the claims and does the audits. And with the HIPAA bill, we were given the opportunity to do more bidding and to get more competitive on who monitors and who audits our claims, but under the law, we have not been able to change the fact that we have to deal with certain types of companies that are insurance companies to pay claims.

    We have a bill that is back up here again, I think, this year for contractor reform to allow us to use a broader group of companies.

    Mrs. NORTHUP. But besides doing that, doesn't it make sense to take out the administrative cost from the appropriations process for the processing of fraud and to actually do exactly what the chairman suggested, and that is provide a portion of what is recovered back to whomever processes it, whether it is a Blue Cross/Blue Shield—whether you have your processor doing the fraud and abuse or whether you have another company doing it, if both of them do not have the same incentive to check, you are going to have the same problem.

    Ms. DEPARLE. There are those who argue that, and I see what you are saying. Right now, we pay on a cost-plus basis for just processing the claims. Your argument would be that if they got an incentive for being more careful and for paying more correctly, then——
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    Mrs. NORTHUP. Exactly what he suggested, but make that available to everybody. And that would take a change in the law, but I just wanted to follow up on that.

    Ms. DEPARLE. Yes; I see what you are saying. Thanks.

    Mrs. NORTHUP. Mr. Chairman, thank you.


    Mr. PORTER. I have one final question—actually I have many more questions, but we do not have time for them. I sent a letter to Secretary Shalala back in September asking the Department to proceed carefully in implementing any final program memorandum that would change the way HCFA reimburses for the use of the drug erythropoietin in end-stage renal disease.

    There have been concerns raised by numerous groups over this change. I received a response back just last week from the Secretary. She stated that you were monitoring the effect of this policy change and would take appropriate steps once you reviewed the results of this monitoring effort. The change took effect on September 1, 1997, six months ago. When will you have the results on your monitoring efforts?

    Ms. DEPARLE. Soon. I have been looking at this, and I have gotten letters from both sides of the aisle and all over the country from Members, and I am concerned about it.
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    If the earlier policy was done too quickly, I do not want to make the same mistake here, so I have talked to my staff once, and I want to do so again, and I would be happy to letyou know when I am in a position to make a decision, which I hope will be very soon.

    Mr. PORTER. Ms. DeParle, how many of these people here work for you?

    Ms. DEPARLE. Four, it looks like.

    Mr. PORTER. Oh. I thought all of them did.

    Ms. DEPARLE. I am just happy they are all interested in our budget.

    Mr. PORTER. Yes. We really appreciate your very candid answers to our questions and your good testimony and the fine job you are doing at HCFA. We know it is a very, very tough job, and we are going to work very closely with you to give you the resources you need to do it.

    Ms. DEPARLE. Thank you, Mr. Chairman. I appreciate the time.

    Mr. PORTER. Thank you.

    The subcommittee will stand in recess for 3 minutes.
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    [The following questions were submitted to be answered for the record:]

    "The Official Committee record contains additional material here."

Thursday, March 5, 1998.





    Mr. PORTER. The subcommittee will come to order.

    We continue our hearings for the budget of the Department of Health and Human Services. We welcome Olivia Golden, the Assistant Secretary for the Administration for Children and Families.

    Nice to see you again. Why don't you proceed with your statement.

    Ms. GOLDEN. Mr. Chairman, thank you. I'm delighted to present the President's budget request for the Administration for Children and Families (ACF) for fiscal year 1999. I'm accompanied by Dennis Williams, the Deputy Assistant Secretary for Budget for the Department.
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    President Clinton has presented to Congress the first balanced budget in 30 years. It addresses the concerns of Americans, serves their interests, and creates opportunity. This budget keeps faith with the longstanding commitments of this Department. Even in this time of limited resources, the budget includes significant increases for several of our programs. In keeping with the Administration's policy to increase support for programs that promote economic security and independence as well as healthy development for our children, while working towards more efficient Government, our budget is targeted in areas that have produced significant payoffs.

    The fiscal year 1999 budget for the Administration for Children and Families is $40 billion, of which $21 billion is being requested in new budget authority. The remaining $19 billion is available through the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Entitlement programs represent approximately $31 billion of our $40 billion budget.

    While the Administration for Children and Families funds a wide range of programs, including Low Income Home Energy Assistance, community services, programs for persons with developmental disabilities, Native Americans, and refugees, over 65 percent of ACF's $8.7 billion discretionary spending supports programs serving young children through the Child Care and Development Block Grant and the Head Start Program. We are seeking increases for these two programs, as well as Adoption Incentives and Adoption Opportunities, programs for persons with developmental disabilities, and Violent Crime Reduction programs. I would like to highlight a few of our key programmatic initiatives in these areas.

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    The Clinton Administration has been committed to making work pay through a variety of supports for working families, including the Earned Income Tax Credit, Family and Medical Leave, and Child health insurance. In this year's budget proposal, the President is making the next installment on his commitment to working families with the Child Care Initiative. As the President said in his State of the Union Address, ''No American family should ever have to choose between the job they need and the child they love.'' This initiative supports parents' choices so that they will be able to find and afford quality child care.

    At the White House Conference on Child Care in October, we heard from people from all walks of life about the importance of high quality child care choices for parents who work. The experience of these parents, providers, health professionals, and others echoes the message that recent brain research has taught us: For children in child care, the quality of that care has a tremendous impact on their development and readiness to learn.

    In support of this initiative, we are requesting approximately $2 billion in increases for child care in fiscal year 1999. Of this amount, $1.8 billion is entitlement funding to expand child care subsidies to reach a million additional children by 2003 and to create the Early Learning Fund. This Fund will enable States to provide challenge grants to communities to protect the health and safety of the youngest and most vulnerable children in child care and promote their early learning and development.

    In addition, the Administration requests $180 million in discretionary funds for several programs targeted toimproving the quality of care. The funds will support a National Child Care Provider Scholarship Fund to improve provider training and reduce turnover, a Standards Enforcement Fund to allow States to enforce their own health and safety standards by hiring more inspectors and increasing the number of licensing visits to child care programs, and a Research and Evaluation Fund to provide research into child care issues for low-income working families, consumer education, and to establish a national hotline to link families with resources.
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    The Head Start program fosters the development of young children from low-income families and enables them to function at their highest potential. There is an increasing body of evidence which supports the advantages which accrue to disadvantaged children and families who attend Head Start. Studies demonstrate the Head Start programs produce immediate gains across a diverse range of areas, such as cognitive functioning, academic readiness and achievement, self-esteem, social behavior, and physical health. Studies also show that Head Start children have better high school attendance rates, are less frequently retained in grade, and have less need for special education.

    Because Head Start makes a difference, we are requesting $4.7 billion for fiscal year 1999, a $305 million increase. This level will support 30,000 to 36,000 additional infants, toddlers, and pre-school children and their families; moving towards the President's goal of providing services to 1 million children by the year 2002.

    Because early investment in children gives them the best chance of continued success, we will double the number of Early Head Start children served to a total of nearly 80,000 infants and toddlers by 2002. Our 1999 request will support nearly 50,000 infants and toddlers, an increase of 10,000 over the 1998 enrollment.

    We have made dramatic progress toward developing an outcome-oriented accountability system for Head Start which can be used to determine the quality and effectiveness of Head Start programs. The first results from our pilot give us reason for encouragement—the quality of classrooms is good, and, perhaps most important, program quality, including small class sizes, good adult to child ratios, and richer teacher-child interactions is related to children's outcomes, such as the development of language skills.
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    This budget reflects a strong Administration commitment to the safety, permanent placement, and well-being of children who have been abused or neglected or are in danger of abuse or neglect. Each year millions of children are the subject of a report of abuse or neglect. About 40 percent of these reports are substantiated, affecting nearly 1 million children a year. During 1995, over 450,000 children were in foster care, an increase of almost 42 percent since 1988. While many of these children will return home, nearly 100,000 will not. These are our most vulnerable children.

    In response to these staggering numbers, Congress enacted the Adoption and Safe Families Act of 1997. We are pleased that this budget includes increases of $20 million in the Adoption Incentive Program and $4 million in the Adoption Opportunities Program in order to implement the act. Our goal is to double the number of children who are adopted from the foster care system or placed in other permanent settings from 27,000 in 1996 to 54,000 in the year 2002.


    The fiscal year 1999 request includes $105 million to reduce the violence that threatens all of us and cuts short too many lives. In addition to the $15 million requested for the Education and Prevention Grants to Reduce Sexual Abuse of Runaway, Homeless, and Street Youth, these funds include $88.8 million for the Family Violence Program, and $1.2 million to continue the activities of the National Domestic Violence Hotline. Over 160,000 calls have been answered since the hotline became operational in 1996.
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    We are requesting a $5 million increase to implement the program authorized under the Families of Children with Disabilities Support Act. This demonstration authority offers States a small but crucial set of resources to assist these families to achieve self-sufficiency by addressing such problems as inadequate child care options, missed job training or job opportunities, and the loss of medical assistance.

    In conclusion, I would like to say that the agency's planning documents required under the Government Performance and Results Act (GPRA) and its budget are being displayed together for the first time. The Administration for Children and Families is committed to the achievement of results, to the measurement of results, and to working jointly with our State and local and nonprofit partners to achieve those results. The priorities reflected in our fiscal year 1999 budget support the strategic goals which have been developed in our performance plan and are consistent with the HHS strategic plan transmitted to Congress on September 30, 1997. Targets in the performance plan could change based upon final congressional appropriations action.

    We look forward to Congress' feedback on the usefulness of our plan, as well as to working with Congress on achieving the goals in the plan. Mr. Chairman, I wanted to say a particular personal thank you for your commitment to GPRA. We've been finding that it has really helped us focus on the work with our partners toward achieving results.

    Thank you, Mr. Chairman. I will be happy to answer any questions that you and the committee may have at this time.
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    [The prepared statement follows:]

    "The Official Committee record contains additional material here."


    Mr. PORTER. Thank you, Secretary Golden. Since you began with the President's budget, I have to begin with my sermonette, which goes something like this. The President's budget includes $100 billion in new revenue increases over the next five years in order to achieve balance. It is extremely unlikely that we're going to see this fiscal year any of that enacted into law. I may be wrong, but my read is that it is very unlikely that any of it will come about this year. Which means that the budget therefore overstates spending for the next five years, at least at this point, by the same $100 billion. Which makes it more difficult for us because our allocations will be lower to meet the kinds of suggested increases that the President has put into the budget. Obviously, we hope that we have more resources. But I think the reality of it is we probably will not and that will make it more difficult for us to fund the kind of priorities that you've mentioned so prominently in your testimony. That's simply a backgrounder.

    Let's begin with what the General Accounting Office has testified before this subcommittee concerning the implementation of GPRA. They cited Head Start as being an example of a grant program that was very difficult to deal with under the Results Act. The program was designed for maximum local autonomy and the data that is reported to the Department is self-reported and unvalidated. It is primarily input data, that is, the meeting of standards and not outcome data. Of course, the ultimate test is how well Head Start students do in school in the years after they graduate from the program. This requires a major tracking and evaluation effort on your agency's part. That would seem to me to be an integral part of determining what difference Head Start makes in the lives of young children.
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    How are you approaching this major effort to track Head Start students after they leave the program? And how much is it going to cost you to do this in the right way?

    Ms. GOLDEN. I'm actually delighted to talk about this because I think it's a big success story. Now that you've highlighted that GAO, before they saw our plan, thought it was going to be a real difficulty, I actually think this may be a particularly important area that we may all want to highlight.

    Since the 1994 reauthorization where Congress told us to focus on measures and outcomes, we've been very serious about creating the ability to assess and report the outcomes for Head Start children. For example, we want to assess and report cognitive outcomes; the academics call it early numeracy and literacy, or the kinds of skills that you would see in a four year old that would make it likely they would succeed in school. We've put the investment into measuring those outcomes.

    You'll see in our GPRA plan that we completed a pilot last spring, which was a nationally representative sample. This year we're carrying out the first year work. Even from the pilot we learned a lot, because what we're doing is looking both at outcomes and at quality of the programs. In the past, we were able to look at quality but we didn't have the outcome information to see how they matched up. What we learned from the pilot is both that quality was good and that the outcomes looked good. We also learned that if you looked across programs, higher quality linked to better outcomes in the way you would hope was true, especially in terms of the language and literacy skills.

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    We've made the investment together with a range of researchers to go from the pilot to this year's sample. We're working with others in the Administration in our hope to have a sample that can continue so that we'll also be able to look at the children after they enter school. We are going to set the baselines and targets once we have this year's information.

    It sounded from the GAO comments before they saw this plan as though they thought it would be hard because of local autonomy. But I actually think that while Head Start programs care enormously about the ability to tailor services to the local community, they do share a conception of what quality is and what good results for children would be. We've done a lot of consultation and have had a real shared sense of excitement about being able to collect this information. We're very proud of that.


    Mr. PORTER. Let me have you respond specifically to some of the things that were in the GAO report and you can tell me whether they didn't have the plan or they're not thinking in the correct way.

    ''The body of research,'' this is from GAO, ''The body of research on current Head Start is insufficient to draw conclusions about the impact of the national program.'' ''No single study used a nationally representative sample, permitting findings to be generalized to the national program.'' ''Although the body of literature on Head Start is extensive, the number of impact studies was insufficient to allow us to draw conclusions about the impact of the national Head Start program.'' ''No completed large-scale evaluation of any outcome of Head Start that used a nationally representative sample was found in our review.'' ''Most of the research that HHS cited as evidence of Head Start's impact is outdated, however, and, as previously mentioned, insufficient research has been done in the past 20 years to support drawing conclusions about the current program.''
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    Those are fairly definitive statements made by GAO. Can you respond to them?

    Ms. GOLDEN. Sure. We believe that those statements are not correct. There is an important review of the literature that the Packard Foundation just did. Also there are also summaries of the literature done by the Advisory Committee on Head Start which included distinguished researchers, and was a bi-partisan group. I would say that the consensus of the researchers looking at the research is that there is clear evidence across a range of studies of the impact of Head Start on school readiness. There's a smaller pool of studies that address those impacts that appear later, such as reduced use of special education.

    GAO used criteria to select studies based on more narrow criteria than most of the distinguished researchers in the field have used. At the same time, I share their view that we should be continuing to seriously invest in research. That's why we've made the investment in outcome measurement. We're also doing an Early Head Start a research study that is a random assignment study and includes an extraordinary array of distinguished research partners. We're making a range of investments to extend what already exists to the next steps.


    Mr. PORTER. The Department's press release on the 1999 budget says with respect to Head Start that, ''Program qualities improved, including increased salaries for Head Start teachers, improved facilities for children, and safer and better equipment.'' These are not, of course, performance measures. Can you cite any empirical data to indicate that these inputs actually improve the readiness of children in Head Start for school and improve their success in school?
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    In looking at your annual performance report, you have about 15 or so performance goals listed for Head Start. It looks to us like 10 of these are simply listed with the phrase ''measure and baseline to be established by 1999.'' This does not seem adequate to us when we are looking at nearly a $5 billion request for the program. Don't you believe that Congress is entitled to more than this when you are asking us to appropriate that amount of money?

    Will you describe for us some of the principal performance goals in your annual plan for Head Start, how you went about establishing them, and how you intend to actually measure and validate results?

    Ms. GOLDEN. As I had the chance to explain a moment ago, the performance measures where the baseline is about to be established are ones where we've made the investment in collecting information for the first time from a national sample. We carried out the pilot last spring and we're carrying out the sample this year. I think it is a very exciting first. It is collecting information from a national sample on children's cognitive development, their development in terms of the pre-literacy skills, their social/emotional development, what teachers and parents assess about their development. We think that is very important. It adds to a range of other outcome measures we had before, for example, children's health. But we added to that by investing in collecting all of that outcome information.

    That outcome information provides one of the key empirical pieces of evidence that you asked me about at the beginning. One of the things we learned from the pilot, which is consistent with previous research—is that key process measures, teacher qualifications and retention, for example, do relate to the key outcomes. We're excited about that. I think it is consistent with what previous research shows. We think that it is centrally important to be carrying out that major outcome effort.
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    Just one other thing about why that investment in outcomes is so important. It is not only important for Head Start, it's important for child care and the education world because what we're doing is groundbreaking and it's of interest to the range of people in the education world and in the child care community who have also been looking for measurement strategies that would work in early childhood education. The GPRA legislation and focus as well as the 1994 reauthorization have really stimulated some important work.

    Mr. PORTER. Thank you, Secretary Golden.

    Mr. Hoyer.

    Mr. HOYER. Thank you, Mr. Chairman.

    Welcome, Secretary Golden. Good to see you.

    Ms. GOLDEN. Thank you.


    Mr. HOYER. How many Head Start programs are there now in the United States?

    Ms. GOLDEN. There are about 1,600 grantees. If you add in delegate agencies, I think it's probably over 2,000.
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    Mr. HOYER. If you add in what agencies?

    Ms. GOLDEN. If you add in delegate agencies, which are, for example, grantees working with other nonprofit agencies in their communitees to serve children.

    Mr. HOYER. Are we talking about 1,600 grantees with maybe 400 subcontractors?

    Ms. GOLDEN. Yes. I don't know the exact number of delegate agencies, but that's about right.

    Mr. HOYER. Is that the concept?

    Ms. GOLDEN. That's about right.

    Mr. HOYER. So we are talking about approximately 1,600 programs?

    Ms. GOLDEN. That's right.

    Mr. HOYER. As you know, I have had a discussion with Secretary Shalala and some of your predecessors over a long period of time and have talked about the fact that for 30 years we concentrated on process. How many Head Start grantees do we have on the list now?    Ms. GOLDEN. I don't know the exact number of seriously deficient grantees at this point. Typically, I think we've been dealing with 20 grantees at one time, something like that. The numbers aren't large but it's critically important to address them because you're both able to turn around quality in that program and send a signal to other programs. That's been very important.
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    One of the things we've seen over the last few years is that the quality of Head Start programs, as demonstrated by our monitoring, has gone up and the number of seriously deficient grantees has gone down as we've focused both on tough enforcement and on quality support.

    Mr. HOYER. How many grantees, if any, were canceled last year?

    Ms. GOLDEN. Certainly some were. I don't know the exact number for last year.

    Mr. HOYER. I would like the exact number of grantees that were canceled last year and I would like to know who they are for the record. I would also like the list of the at risk grantees.

    Ms. GOLDEN. I'll check. I'm sure that at the point where we've officially notified them it should become public.

    [The information follows:]

    "The Official Committee record contains additional material here."


    Mr. HOYER. As you know, I am very interested in coordinated services, particularly as it relates to children and families. What efforts are you making to coordinate within the Department of Health and Human Services, Department of Education, Department of Labor, USDA, and HUD? There may be other agencies that would be useful collaborative partners.
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    Ms. GOLDEN. Those are key. Actually I was at an Early Head Start program the other day which had collaborated with the Department of Defense. They were located in a Department of Defense child care center. The Department of Justice is sometimes a collaborator of ours as well. I would just underline my agreement with your commitment over the years to focus on collaboration. The only way to make services work for children and families is to put the pieces together.

    In my experience, we have to do that in two ways. One is in the community. We have to make sure that local child care and Head Start and Early Head Start programs have the flexibility as well as the clear direction and expectation that they'll reach out to other programs at the community level. And at the Federal level, we have to stress building those bridges.

    Just a couple of examples, and there are many. Last year we provided our Head Start expansion resources with a reward—with an incentive for those programs that were building links to child care. And as I've been travelling in the last few months, I have seen a lot of really interesting collaborations. The State of Maine has put together a statewide child care-Head Start collaboration in response to that initiative. I was just in Connecticut following a field hearing where I saw Congresswoman DeLauro and had the chance to meet with a group of people that put together a bipartisan initiative there which brought together the State Department of Education, local school systems, child care, and Head Start to focus on quality care for three and four year-olds. What they're doing, and this is an interesting innovation, is making the resources available to programs that will accept either the Head Start performance standards as the real gold seal of quality or NAEYC accreditation. And they're doing that with State resources. So those are just a couple of examples.
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    We've been trying with all of these agencies both to convene people at the local level and to try to build the bridges at the Federal level.

    Mr. HOYER. Madam Secretary, I have become convinced, and Secretary Riley, Secretary Shalala and others have convinced me, as well as practitioners on the ground who have tried to put these collaborative efforts together, that you have got to start from the ground up. Because if people don't want to do it at the local level, it's not going to get done.

    But, on the other hand, I am for mandating the Federal Government to better collaborate and overcome its turf and its geographic limitations so that federal agencies are articulating with our kindergarten and first grade teachers. There needs to be a collaborative effort there and a knowledge as to what is going on. What are we going to do to accomplish this?

    As you know, I was very concerned, and remain concerned, about the 1994 authorization for construction funds availability in Head Start. I am opposed to that, as you know, because I think it will utilize very scarce resources. We know we have schools that are collapsing. To build new Head Start and try to build new schools at the same time is a waste of money and does not effect the collaborative effort that I would like to effect.

    Ms. GOLDEN. It sounds as though the question really is about both what we're doing to force ourselves to collaborate and what we're doing in this particular example around construction.

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    On the broader question of what we're doing to force collaboration, I certainly wouldn't claim to you that it is perfect. But I think that both in the early childhood area and in the welfare-to-work area having, again, it's sort of the GPRA idea, having a clear sense of the results we're trying to accomplish, is pushing us all to collaborate in some powerful ways. Maybe I should give you one example in each area.

    On the early childhood side, one of the things we've done, and this is within our agency, Head Start and Child Care, we were encouraging local programs to collaborate. Sometimes they were running into bureaucratic rules or fiscal obstacles. So we just had a conference where we brought together our fiscal experts as well as the programmatic leaders and worked through systematically the sensible ways to do these things so you don't have to invent them over and over again each time. That's anexample.

    On the welfare reform side and the welfare-to-work side we collaborate with HUD, USDA, and Transportation as critical partners. We've been meeting at the Federal level in Washington. We have also been pushing our regional offices to bring people together. That's been very productive. Just one example. We've been finding that transportation is a major issue for families moving into the workplace, and having the Department of Transportation be at the table and encourage local transit authorities to be at the table has been enormously useful. So those are examples.

    On the issue of construction, we're still continuing to review individual examples. I would note that in the context of the Connecticut Initiative, where I met with people, constraints on school space came up as an issue. The idea that people should talk together about how to solve problems certainly was bubbling up. I don't think I have a comprehensive solution to report to you, rather sort of case by case attention to that issue.
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    Mr. HOYER. I would like you to provide me with a list of programs that were given construction authority. I know it was very few up until recently and I hope it remains very few.

    Ms. GOLDEN. We would be happy to.

    [The information follows:]

Table 1

    Mr. HOYER. I know I have gone over my time, but the Connecticut example is a perfect opportunity. There is school space constraint but I bet the school base has a cafeteria, janitorial services, and recreational facilities available in that school. If you took the Head Start construction money and built a facility adjacent to the school, accessible even in weather to the school, you save on nutritional services, on recreational services, and janitorial services while providing quality Head Start services. Then you have the articulation between the Head Start, the pre-K, K, and first grade teachers talking to one another about Sally and what is she doing at age three and four and what is she going to do at age five and six.

    Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mr. Hoyer.

    The Chair would note that the rule has motivated Democrats to arrive en masse this afternoon. We have four in a row before we get back to a Republican.
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    Ms. DeLauro.

    Ms. DELAURO. Thank you very much, Mr. Chairman.

    Thank you to you, Secretary, and I appreciate your coming up to Connecticut and participating in the field hearing. It was outstanding. I'm delighted that you got a chance to meet with some of the folks up there and see the kinds of things they are doing.

    Ms. GOLDEN. Thank you. I really appreciated the opportunity.


    Ms. DELAURO. I'm really very, very excited to see the proposed expansion of the Early Head Start program for children who are age zero to three. I think it is the direction that we have to move in. I think it offers an important opportunity for those youngsters who are able to participate. Even though we're looking at this expansion, we know that we're going to serve less than 2 percent of the eligible children.

    The question that I have moves in that direction and focuses in on quality. Given what we know about the importance of quality care for young children, what I think it's imperative for us to focus in on and make sure that the Early Head Start programs receive the training, the technical assistance, and the monitoring in order that we are providing the best possible care for these children. It is my understanding that in the Early Head Start the training and technical assistance contract envisioned a smaller number of programs and this may be stretching our resources here.
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    The first question is, how are we addressing that issue? And secondly, what kind of training is being given to Head Start staff in the regions so that, in fact, they're equippedto monitor Early Head Start programs that are serving infants and toddlers which, as we know, are different from the Head Start programs that are serving pre-schoolers?

    Ms. GOLDEN. I would start by underlining the fact that quality is critically important in Head Start as a whole. It is, if anything, more important for babies and toddlers because they're more vulnerable and because, as we know from the research, the changes that happen in children's brains in those years are critical. So I think there is nothing more important in all of my responsibilities or our responsibilities than making sure those programs are top quality.

    We've benefitted in Early Head Start by the lessons of Head Start; for example, having the set-aside resources for technical assistance. A quick sketch of what we've been doing in general and then let me answer your specific questions about being stretched. We've been focusing on a range of technical assistance activities. We have a new director's program at the time an Early Head Start program is selected. I think that's the one I was delighted to hear at that field hearing. She described the program as awesome, which was wonderful news for me. We're also doing on site training for staff, for teachers so that they get to receive intensive training. Consultants are available through the Technical Assistance Network.

    We also are monitoring, and you've highlighted that. This year we will be monitoring all of the programs that received grants in the first wave of Early Head Start. They've been operational for a year. We will be monitoring them in relation to the performance standards that went into effect January 1st of this year which were mandated by the Congress in the 1994 reauthorization. That's the first time there have been infant/toddler performance standards in Head Start and we're very proud of them. Those are some of the key steps.
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    We're taking very seriously the issue of how we enable this technical assistance system effectively move from working with 22,000 to almost 39,000 babies and toddlers. We'll be able to increase the investment because of the set aside approach in technical assistance. But we've also been trying to talk with some of the best and the brightest researchers about anything we should think about differently, what else should we be doing. We have had some very successful conversations. They've been highlighting ideas like spending even more time with people in initial planning so that they start off completely on the right foot, with the idea of having the technical assistance consultant be on site perhaps for periods of time.

    In terms of regional office staff and monitoring, we're having regional office staff receive training from one of the distinguished consultants, Ron Lally in the Southwest Institute. We also have been focusing on making sure that the monitoring teams have a mix of Federal staff, as well as distinguished peers and distinguished people in the field, which is what we do throughout Head Start. We're working very hard on effective monitoring and it is something that I think we have to keep paying attention to over the coming months and years.

    Ms. DELAURO. Just one final comment on this whole effort here. I'm always struck by the words of Dr. Comer, who was a pioneer in the efforts of child development, that it is the quality of the environment in which our children are in and, particularly in the zero to three, what we know that provides that atmosphere for development so that they can move forward.

    Ms. GOLDEN. Absolutely.
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    Ms. DELAURO. I was contacted, and I mentioned this when the Secretary was here, I was contacted by a grandmother who lives in Clinton, Connecticut, which is in my district, and just let me run through this very, very quickly. Her daughter was able to get off of welfare and get a job until the State's delays in paying the child care provider forced the provider to close. When my constituent's daughter lost her child care, she also lost her job. This is an administrative snafu. It has an impact on people's lives. In my view, that's not what we're trying to accomplish in welfare-to-work.

    What kind of oversight does your department have to ensure that States are dispersing Federal child care funds efficiently? Is there anything that we can do at the Federal level to make sure that this doesn't happen again, whether in Connecticut or anywhere else in the country?

    Ms. GOLDEN. I agree with you that that's absolutely the wrong thing to have happen. Let me say a little bit about the Connecticut example and then the broader one. Actually, that same day that I was in Connecticut with you at the field hearing I did have the chance to talk with some senior officials and I did have the chance, because I was aware that Connecticut had had some problems in terms of a contractor paying out on child care, to let them know how seriously I took it. I think they heard that message. And their perspective is that it has been addressed. I haven't checked back; you may have a better sense than I do. I think it's always possible for us to convey concern and the fact that it isn't the appropriate direction.

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    In terms of the overall Federal role, it is a block grant. We shouldn't be involved in with every piece. I do think though that if States have child care failures that interfere with their ability to enable families to move to work and to stay at work, that will harm them on the welfare reform side. As you know, for example, the Congress put into the welfare law incentive payments to reward States for high performance. And if States systematically are failing on the child care side, I think one thing we know is that they won't succeed at moving families to work and at having them stay at work. I think that's one area where we will have some leverage.

    Ms. DELAURO. Thank you very much.

    Mr. PORTER. Thank you, Ms. DeLauro.

    Mr. Stokes?


    Mr. STOKES. Thank you, Mr. Chairman.

    With regard to the Head Start Program, to what extent are we addressing the need for full-day and full-year child care services and partnershipping with local child care centers and family child care homes?

    Ms. GOLDEN. That's an enormously important issue. As I know you're well aware, as families move to work from welfare, as more low-income families are working, they need full-day services. As I was saying to Congressman Hoyer, last year we used our Head Start expansion resources in a way that encouraged those partnerships and we are seeing them around the country. I've had the chance to visit some and I actually had the chance a couple months ago to visit a program that is actually providing Head Start services in the evening for parents with shift work because that is startingto happen as well.
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    So I would say that there is enormous interest around the country, that there are a variety of partnerships, but we still aren't completely there. We do have parents who need longer hours than they're getting. But we are working hard to do everything we can do to make sure that programs can put those pieces together.

    Mr. STOKES. Can you tell us how many additional full-day/full-year slots will be provided by your Fiscal Year 1999 budget request?

    Ms. GOLDEN. We do not have an exact number for full-day and full-year slots. We'll be seeking applications, and putting out resources while encouraging applicants to include a community needs assessment and a look at collaboration. So I don't have an exact number for you. We should be able to report to you on the results from 1997 which would give you a sense of what we could expect in 1998.

    Mr. STOKES. Are you in a position to give us some indication, or some idea of how many children are in need of full-day/full-year services that you're not able to provide the service for?

    Ms. GOLDEN. Again, I don't think I have an exact number, although we will look for a number. I think my own sense as I travel and I talk with people is that there are considerable needs and they are getting greater as we're succeeding in terms of making the link to move families to work.

    I was, just for example, visiting an Early Head Start program. We're learning a lot on the Early Head Start side because those are programs that between the time they applied and now, have had to shift their planning because more families need longer hours. The program I visited serves families in a variety of settings. It has home visiting if it's a two parent family with a parent at home, it has family child care and it has child care centers for parents who work. They are finding that the distribution of needs is moving toward working families. I think that's probably the central message; there are more than there were and it is changing each day.
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    Mr. STOKES. As we now seek to strengthen families, it is becoming increasingly clear we must do more to help restore parent-child relationships. Today, we're seeing more attention being given to the working concept of responsible fatherhood. While there are a growing number of programs across the country that carry this mission, do we really know what is working in this area?

    Ms. GOLDEN. That's an interesting question. I was actually just talking with some of the children's experts in one of the States I was visiting about what we know. I think we're at the early stages. I don't think we have answers yet. We're funding some demonstration projects. Actually, one direction we address this issue is through our child support resources. There is the access and visitation project there that the Congress created and we've been trying to do some demonstrations there. In addition, a number of Head Start programs focus on fatherhood and male involvement.

    I would say that we certainly have some lessons we think are true. For example, reaching fathers at birth is also an important time. It's not only the mother for whom that moment is really important, and you have a good chance to keep a father engaged. We also know that reaching fathers and encouraging continued involvement is a way of contributing to continued economic support. I think we know some early lessons but I don't think we know the final answers yet. We need to try a range of strategies.

    Mr. STOKES. In terms of responsible father projects that you are currently knowledgeable of within your department, can you give us some idea of the total level of that investment?
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    Ms. GOLDEN. We could provide you with a list and with the dollars. There is some work that is going on outside my portion of the agency. But within ACF, we're investing through some of our research and demonstration resources in the child support area. A number of Head Start programs, in the Southern region in particular, have done some really important work on male involvement and father involvement. We've also had some outreach through some of the work with youth. I think there are several different places where we're putting those pieces together. In addition, some States may be choosing to create initiatives in that arena through the resources that we give to them.


    Mr. STOKES. Let me ask you about child abuse and neglect, which I think we can all agree is a very serious matter. What major prevention initiatives have you undertaken in this area?    Ms. GOLDEN. Yes. As you know, that's an enormously important arena. Prevention is critical because if you reach families early and can prevent children from going through the agony of abuse or neglect, you've made a huge difference to their lives. I would highlight several different initiatives. Essentially States and communities carry out the initiatives but we try to fund them, stimulate them, and provide leadership.

    Congress, in the Adoption and Safe Families Act, actually reauthorized some resources that are important to the prevention area, the family support resources. So that's one program focused on this area. Another program is the community-based family resource programs where States provide resources at the community level. A third place is Early Head Start. Early Head Start programs in some cases, like the one I visited, are doing home visiting programs that focus on children's development but also on the parent's learning and the parent's relationship to the child. It is another area where putting the pieces together at a local level is critical because you can have resources coming from several different places. And the fourth place that I would highlight is that the Congress has given us authority to authorize State waiver demonstrations in relation to child welfare. Several States that we've approved have wanted to focus on an early prevention approach as part of what they were doing. So there's a range of places that we're working on that relate to prevention activities.
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    Mr. STOKES. We've talked a little bit about welfare reform this afternoon. The Welfare Reform Act was enacted without the benefit of research conducted in the communities where welfare recipients are found in large numbers. So that the community-wide impact might be understood, is there a welfare reform research agenda? Can you talk about that a little bit for us?

    Ms. GOLDEN. Sure.

    Mr. STOKES. To what extent will research centers in Historically Black Colleges andUniversities and other minority institutions be involved in this effort.

    Ms. GOLDEN. Let me start by underlining your point that the research agenda on welfare reform is enormously important. You will see in our request that we believe it is important and we request the resources to support it. It is important because one of the things that welfare reform has done is decentralize, so there are different things going on in different places. In order to find the creative and effective ideas and to find those that aren't working, we need to be conducting research so we can offer you as policymakers the pertinent information.

    There is a set of key pieces to our agenda. One piece is our work with States around evaluations of particular policies, and we've supported some of those. We are focusing on making sure that those evaluations look at outcomes for children and for adults. And we have many more States that want to work with us than we have resources to work with them. A second piece is a range of evaluation projects with different researchers and community organizations that have projects. Last year, we did a general announcement for a range of issues and got approximtely 100 requests. We were able to fund 9 projects. There is enormous interest in welfare reform evaluation. A third piece, as you know, includes areas that may be particularly affected by welfare reform, including rural communities and inner-city communities. Those are all very important pieces of the research agenda. In addition, a final piece which links GPRA and a results focus is one that uses our research to help us think about the best measures to use in assessing State results. I think there is really an important agenda.
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    In terms of the involvement of Historically Black Colleges and Universities, I'm familiar with our work with Historically Black Colleges and Universities around the early childhood and Head Start agenda. I don't know whether any are currently involved in our welfare reform research agenda, and we'll get back to you with that information. There would certainly be important opportunities there.

    [The information follows:]


    There are currently no Historically Black Colleges or Universities that are receiving welfare reform research funds.

    Mr. STOKES. I would appreciate it if you would follow through on that for me. We must be sure to get that piece of information into the record.

    Ms. GOLDEN. I will do that, sir.

    Mr. STOKES. Thank you. Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mr. Stokes.

    Mrs. Lowey?

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    Mrs. LOWEY. Thank you, Mr. Chairman.

    Welcome, Madam Secretary.

    Ms. GOLDEN. Thank you.


    Mrs. LOWEY. I just want to say at the outset, as we read through the budget, the scope of the programs you administer are really extraordinary and I want you to know that you personally have my enormous respect. Just to keep track of it is amazing.

    Ms. GOLDEN. Thank you.


    Mrs. LOWEY. We certainly appreciate your detailed, knowledgeable presentation. One of the areas surrounding welfare that I've been particularly concerned with is the problems of welfare dependency and domestic violence, because, frankly, they're often intertwined. I certainly know that in my State there is great competition for the exemption because so many women have severe domestic violence problems.

    I noted in your budget justification that some domestic violence funds will be used to provide States with information on how to best assist these women on welfare who are also in domestic violence situations to become more self-sufficient. I'd be very interested to know what you're planning, what models will you be disseminating. It is an enormous challenge. How will you accomplish this?
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    Ms. GOLDEN. It is an enormous challenge and an important one. As was noted in the budget justification, we have gone to one of the experts in terms of national knowledge to collect models and information and provide training. I actually had the experience myself several months ago of visiting a program in Anne Arundel County in Maryland where both child support and welfare workers have received training through this strategy on domestic violence issues.

    I was very struck by the way in which the workers said it changed their way of dealing with parents and it also made them more successful at enabling mothers to move towards self-sufficiency. That is, in some cases a mother might need a strategy that would not let her move to work, but in other cases, if they ask the right questions and learned what she needed, she might need a security deposit and the first month's rent so that she could move. Then she might be able to take some steps toward work that shecould not have taken before.

    The workers learned understanding, sensitivity, and a knowledge about the resources in that community that were available for families. That changed their perspective dramatically.

    I think the critical things here are to learn about the knowledge that's out there in the domestic violence community, to collect best practices, to disseminate those, and to work with States on the training of people at the line level who are talking to families. I think that as long as it's theories it may not work for parents, but if people at the line level change their perspectives, that will make a difference.

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    Mrs. LOWEY. I've visited some of these shelters and, as you're saying, it's more than the lectures, more than the books, it's the people who are there on the front line, and the smaller the better. The most successful shelters, I don't know if you visited Langhouse in lower Manhattan, there are several very successful ones, are the ones that have maybe a dozen or more women, they have people there with specific responsibility to provide employment assistance, help with their children, and they are providing child care.

    Again, what I find amazing about so many of these difficult challenges we face, as Dr. Comer has found with the education system, a lot of this is not rocket science. He will often say what the child needs is a warm environment where they feel the teacher cares, the principal cares and they are helping to lift this child up to achieve their potential. In these shelters where they are most successful, there is someone at the top who cares and there are people in that center that are really focused on what each individual person needs beyond a safe environment so the abuser won't be following them.

    I feel very strongly that unless we are really learning, and that's why I was interested in how we're spending this money, unless we're learning from the successful models and trying to replicate them, it is not rocket science and I'm concerned that the money is just going to go to some person who is going to write some manuals. But what we really need is to replicate the successful models. I've seen some of the larger shelters and it is the impersonal nature of them that I think leads to failure.

    Ms. GOLDEN. I think that's right. I think we need to replicate success and we need to take those lessons and make them real for the range of people who will be working with families.
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    Mrs. LOWEY. I look forward to continuing to work with you on that.

    Another area. I've applauded the Administration's adoption initiative which is intended to move children more quickly out of foster care and into permanent homes. Could you discuss with us what you have found to be most effective in finding long-term placements for children, what initiatives would you be intending to replicate if the adoption request is funded, and why is it so important to fund this discretionary program.

    Ms. GOLDEN. Let me start with why it is so important to fund it and then talk to you about what we'll be funding. As you know, the Congress passed and the President signed the Adoption and Safe Families Act, responding to the fact that we need to put children's safety first and their permanence central, and that too many children linger in temporary settings for a long period of time. Carol Williams, who is the Associate Commissioner for the Children's Bureau, has a wonderful phrase for this. She says, ''When we carry out this legislation, everyone in the system will look at a child with a child's timeframe.'' Two years or three years or four years being in limbo can be very damaging to a child. And so the legislation is meant to ensure that children have a safe, permanent home.

    There are two sources of funding for this initiative: One, the adoption incentives program which reflects the focus on results by providing States with additional resources if they increase the number of children adopted from the foster care system; and the second program, which you've highlighted, is the discretionary adoption opportunities which provides resources for technical assistance and to enable States to reduce the barriers to adoption.
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    Let me give you some examples of barriers. I have been talking to States a lot about this as I've been traveling. One set of issues is about the court system—coordination with the court system, We anticipate about $5 million will go to States for a range of projects and activities to reduce these barriers. A second set of issues mentioned in the law has to do with geographic barriers. A State may have adoptive families waiting in one geographic area, an enormous number of foster care children in another, and not have figured out how to make a connection between them. People around the country have been trying to come up with some strategies to reduce such barriers. That is the kind of model you could replicate. Another thing, and this is another one of those things that's not rocket science but is very hard to accomplish, is concurrent planning. In some cases wishful thinking may be the reason that two, three, four years go by while the worker is trying to reunify a child with his or her parent. Sometimes a worker won't start the focus on adoption until there is no hope of reunification, when they could be planning for both possibilities from the beginning.     Mrs. LOWEY. Thank you very much. Thank you, Mr. Chairman.

    Mr. PORTER. Thank you, Mrs. Lowey.

    Mrs. Northup.


    Mrs. NORTHUP. Thank you, Mr. Chairman.

    Madam Secretary, I have some questions that take a little bit of a different tack. I think we all agree that the early years of every child's life are just so important as later years. It is very difficult to find the balance of right programs. Every family is different, every child is unique. Most parents benefit from constant encouragement, constant participation—and even every background, every level of experience, they all benefit from those.
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    I wanted to ask you about some of the recent studies that talk about the American family. They say that stress and sleep deprivation is a terrible problem for the parents, and that there is attachment disorder problems between many young children. I worry that as we try to provide better opportunities for our very young children that we might begin to so institutionalize it that we lose the benefits of what some families are providing now. I was surprised to read last week that 50 percent of all pre-school children right now are at home with their moms—that doesn't mean that 50 percent of moms are home, it means 50 percent of pre-school children arewith their moms—and that half of the children that aren't at home with their moms are with their grandmoms or with a relative.

    I had an experience, but I really want to protect the school and teachers. I do spend a great deal of time in the schools and there are fabulous teachers, but I had an experience also recently where a classroom full of learning disabled pre-school and first and second-graders were in a room with somebody who could have cared less about these children. There was no relationship. I felt like I should stay just to be there for a whole day with these children. And that's not the first example. Like I said, it is not the majority, it's just an example.

    When we consider that the institutionalization of what works best in providing, I'm worried that we will have probably less training for people that are in the system for zero through three, that we're already stretched too thin to provide always good experiences within our schools, and there are other opportunities to help stretch the dollars. Let me give you a couple of my concerns.

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    One of them is that in the minority community in Louisville, in several of the really inspirational faith-based efforts, they are finding that they have had started these wonderful programs, they have engaged the families, and now as the school system seeks to expand the Head Start and everything, it sort of preempts or negates their efforts rather than build on those efforts, rather than collaborate.

    We know that family literacy is extremely important and successful if the most at-risk children are going to read. Yet, there seems to be an effort by Head Start to exclude the family literacy. In fact, I had somebody recently that was involved in a program say to me, ''It is almost getting to be that the school system wants to take the child home from the hospital and provide full-day efforts.'' This isn't somebody that's in a church-based system or anything; this is somebody that is part of the system that is struggling with inadequate resources, tremendous needs for specific children. Unfortunately, an effort to create such a system that the individual needs and opportunities seem to be overlooked. I know that's a big picture, but can you respond to whether you're sensitive or concerned about that?

    Ms. GOLDEN. Let me try because I talk to a lot of parents. I think many of those issues are very broad issues; that is, what I hear you saying and what I hear a lot from parents' saying is that they have lots of different kinds of choices. And, when they need to work their wish is that their child can be with somebody who is warm, connected and responsive to their child. I do think, by the way, that one of the areas where we have a consensus from research and from what parents think is one that knows what quality is for babies and toddlers, and what those warm and responsive relationships are like. That's important.

    I want to give you one example of what I think it means to respond to those concerns. I had the chance about two weeks ago to visit an Early Head Start program which is actually near here, in Northern Virginia. They have a home visit portion of the program which responds to parents who are at home. In their case, those are mostly immigrant families where the husband is working perhaps at different kinds of day labor or construction and the mother is at home. The home visitor is able to work with that family in the home. They have family child care and a small center child care program. I want to tell you the story of the family program because I think it helps you see how you can focus on quality in really informal settings, in a neighbor's home or a relative's home.
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    The mother there told me about the difference between having her child go to a family child care provider who had received support and training from Early Head Start versus what had happened before with their previous child care provider. She said ''Now my child is happy to go. She used to cry.'' She said, ''This woman is down on the floor with the kids playing with toys, playing with them, engaged with them. There is a schedule and structure but it is also responsive. Each of my children feels they get individual attention.'' And for me, that was a parent saying the abstract word ''quality'' that you people use means something real and I can see it through my child.

    I would say as we invest in Early Head Start, in Head Start, and in quality child care we need to make sure that we're helping parents find the choices that they need for their children. That's what this is all about—safe and healthy environments that are good for children and help them grow.


    Mrs. NORTHUP. I've talked to an organization in my district that was awarded a grant for the adoption opportunities. In fact, its whole focus is within the minority community. I'm sure that you understand that for many years the minority community was less engaged in going through formalized processes of adoption and going through the formalized processes at all. What that meant is that there were many minority children that were available for adoption but not necessarily minority families that were available to adopt these children despite the willingness and interest that might exist.

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    This agency was awarded a grant but it was unfunded. I know that last year we increased the amount of money that wefunded towards that. I wondered if your agency was making these grants available as quickly as possible, and if you anticipate that everybody that was awarded a grant will be funded?

    Ms. GOLDEN. I don't know the specific circumstances. An applicant was approved for funding and they were told they were awarded one but they hadn't received it yet; is that the situation?

    Mrs. NORTHUP. Well, then they were told that the funds—I guess you all awarded more grants than you actually funded. So they are on the list.

    Ms. GOLDEN. Okay. Why don't we look into that specific example and get back to you about what the circumstances are.

    Mrs. NORTHUP. All right. It is very important in my district. They are well known. They've been basically operating just from whatever resources they could pull together out of the community privately funded. But they really are in need of support and do a very good job.

    Ms. GOLDEN. We'll look into that example and let you know.

    [The information follows:]

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    The Kentucky One Church One Child, Inc. (OCOC) application received an average score of 85.0 which placed it in rank order as the fourteenth highest scored application in the ''approved/unfunded'' category. This is the category that is used for applications that are approvable and have no significant weaknesses that would prevent their being approved, but for which there are insufficient funds to be able to award a grant from the funds available to support a given priority area. Due to budget constraints the Children's Bureau was unable to fund new projects scoring at the level of 85.

    We will publish a new set of priorities in this fiscal year. We anticipate publishing the next announcement in the Federal Register by the Spring or Summer, 1998. The Kentucky OCOC program may wish to resubmit their application for funding consideration at that time.

    Mr. PORTER. Thank you, Mrs. Northup.

    Ms. Pelosi?


    Ms. PELOSI. Thank you, Mr. Chairman.

    Secretary Golden, thank you for your testimony and for the magnificent service you give to our country and our country's children and families and your enthusiasm for those children. I want to associate myself with the question of my colleague, Mr. Stokes, about the research agenda. I appreciate the answer that you gave and, as you get more information, I would be very interested in that. That was a question that I had for Secretary Shalala the other day.
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    I also appreciate the fact that my colleague, Mrs. Lowey, asked the question about domestic violence because that's an issue of great concern to me.

    I had a question about developmental disabilities. I'm aware that the developmental disabilities programs have provided for over 25 years necessary supports and protections for a very vulnerable population. How would people with developmental disabilities be affected if the program were limited in its ability to conduct system change activities?

    Ms. GOLDEN. I think the question is about the $5 million request for the investment.

    Ms. PELOSI. Yes, it is.

    Ms. GOLDEN. That's a very important item, as you know. Those resources would support State grants in order for those States to be able to demonstrate how they would build statewide systems to support families with children with disabilities. Let me be more precise.

    In many States many families are more often raising children with developmental disabilities at home. Service systems have changed, from welfare reform, which creates an added pressure and incentive for the parent to go to work, to changes in the health care system, such as managed care. We're hearing a lot from families, from communities, and from States that there is enormous interest in figuring out how to build effective supports around child care, around transportation, around job training, around health care that will enable those families to successfully be self-sufficient. We've heard a lot about specific rural issues as well as issues in urban communities.
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    For example, enormous interest was generated when we put out a little bit of money in the child care arena having to do with child care for children with disabilities. Interest was much more than we expected. That makes us believe that there is a particular need out there to focus some attention in particular States on looking across those systems to build supports for families, and that's what we would like to do. We think we'll learn a great deal that would add to the work that you highlighted, the really important work that the developmental disability networks have done on behalf of both adults and children with developmental disabilities.


    Ms. PELOSI. I'm very interested in that. Two children in our family are teachers of children with developmental disabilities. The impact on their families, especially, as you mentioned, with the addtional challenges preserved by welfare reform, is very important.

    I wanted to sing my same old song about child care that I say every now and then in this committee. And maybe I'm asking for your advice, Assistant Secretary Golden. It seems to me that a committee with the wonderful jurisdiction of ours, Labor, Health and Human Services, and Education—job training, opportunities for children from the earliest time in their lives, and education—it seems to me that this is the place where we could come up with an initiative that would address the child care issue head on, from the training of child care workers to the appropriate child care for children.

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    At the turn of the century or even a little later than that, we saw women get the right to vote, then during World War II women first really went into the workplace, and since then, of course, the higher education of women. Women became more seriously engaged in professions and in the workplace and

reaching their fulfillment outside the home, as well as inside the home. The bridge to all of these things that have happened which give women more options is child care. And for many people that piece is absent. Now that's not just a piece that's absent as far as women's options are concerned, but for families to be able to afford a standard of living that is appropriate for their children to reach their own fulfillment.

    Do you see a model someplace where we could, in this committee, look to something that says, in our job training section, we could support an initiative for training child care workers, or making it part of the curriculum of higher education if it's in the education function? We probably would be educating many of these same mothers who are looking for child care because that could become their profession. But it seems to me we have all three elements right here. Do you know of any model, or do you have any suggestion? Year in and year out we talk about not having enough money, or not enough slots, or not enough opportunity for children and their families. I salute the Administration for the initiative on child care that was presented in this budget. But I still think we're speaking incrementally and I think we've got to be thinking drastically differently about it.

    Ms. GOLDEN. In terms of models for going even another step, I think that you're right to think about how the training and higher education systems can support the child care agenda. I would highlight what I think we learned from the work leading up to the President's initiative and then maybe see if that offers any lessons.
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    First of all, I couldn't agree more that the message of how central child care is came through to us at that White House conference, not only from parents, not only from providers, not only from governors and State legislators of both parties, but also from private employers. It really struck me that the message about child care is both a message about work and the economy and the enormous needs that parents have and that employers have for parents to have good child care, and it is at the same time a message about children's healthy development and safety. The sense is that child care is a critical connection I think we heard from everybody at that conference.

    That's the reason that the President's proposal addresses not just one area, but affordability and quality and safety. It addresses some of the particular issues you've highlighted through the scholarship agenda, and it offers communities flexibility to make some of these connections through the Early Learning funds. So there may be particular States or communities that can take the next step that you've noted.

    I do think that the idea that you could go even further by more systematically engaging other players in the child care issue is worthy of thinking about. I think there is some foundation examples that are local, some foundations that have focused, for example, on after school care and brought lots of partners together. Those might be some places to look for additional lessons.


    Ms. PELOSI. I appreciate that. Thank you.
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    I understand that we needed to reform welfare and I don't think there was any disagreement on that fundamental point. But I still need you to explain to me why, when we have not prepared for this by having adequate child care, we are saying to mothers, ''don't take care of your children at home, go out and work in the TANF program—now you have to work, but we haven't figured out how we're going to take care of your children.'' It seems to me that should have come first before we insisted on mothers going out there. I say that with complete respect for the goal. The outcome that we wanted was to move people off welfare and give them the opportunity to go to work, but we don't have this piece in place.

    Do you see the child care infrastructure that we have now as a match for the TANF program?

    Ms. GOLDEN. I think that, first of all, the first thing I see is how critical child care is for mothers to go to work under TANF. I've been traveling a lot and talking with parents who have moved to work and I do hear their joy at having the dignity of that job, and I hear always, as I think you're suggesting, a sense of how critical the child care support is to make that possible. I just talked to a mother in New Hampshire the other day who talked to me at length about that.

    My sense of where the States are on child care for welfare families is that the fact the President and many people here focused on the fact that there had to be resources added to child care before the President signed the legislation, that that's been very important and the States are making those investments for welfare families. At the same time, and this is I think the critical reason that we need the next step that's in the President's child care proposal, making those investments for welfare families is enormously important for the reasons you highlight, but the next step, which you've also highlighted, is low-income working families who are struggling to keep a job.
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    And so what I've been seeing as I travel is that States are putting in the resources to enable welfare families to move to work, but that there's a critical need among working families. Nationally, about 10 million families would be under the income eligibility level for the Federal child care program but only a little more than 1 million of those were receiving assistance in 1995, the last year for which we have complete data. The President's proposal would take that up to something more than 2 million.

    So I guess I would say that there's been a key investment in the first piece, but the other piece is so critical because the last thing we want is for a family that is already working and getting by to have to lose that job and go to welfare because they were unable to find child care.

    Ms. PELOSI. Thank you. Mr. Chairman, I know my time is up, but I just want to say that it is reported to me that in my city of San Francisco we have 5,000 to 7,000 children on the waiting list for child care.


    Secretary Golden, I'm not going to use the remaining time today to discuss this with you, but I want you to know that the State of Illinois is continuing to have great difficulty in its dealings with the Office of Community Services over the approval of its fiscal year 1998 CSBG plan. I find this especially troublesome in light of the fact that the amendatory language suggested by the Office of Community Services was later rejected by that office and that there has been no response to further amendatory language submitted by the State of Illinois on February 11. I may need to discuss this matter with you further at a future date, but I hope it can be resolved, obviously.
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    Ms. GOLDEN. Thank you.

    Mr. PORTER. Let me finish with one concern. Unfortunately, we haven't had nearly enough time to discuss all the tremendously important responsibilities that you have. But going back to Head Start, I find it unacceptable that we have increased spending from 1993 to 1998 from approximately $2.7 billion to $4.3 billion and yet we're only serving about 100,000 extra kids. It was 714,000 children in 1993, it is 830,000 today according to our figures, yet we've put substantially more resources in this account. I realize that that is controlled by law and that you have no ability necessarily to change it. But I think that the Congress ought to change it. What we really ought to do is get more children served by the program, particularly now that we are monitoring the quality standards I think quite well. I hope that we can put additional resources here and that we can also put additional kids in the program and make it work for them, too.

    Ms. GOLDEN. I think that the reason the Congress made those commitments in 1994 was the commitment to quality and to results. And so, obviously, the Administration's perspective is that it continues to be critically important to make those quality investments that work for children. That's the reason that it has been centrally important to restore that quality and it will be important to continue that investment.

    Mr. PORTER. Secretary Golden, thank you. We have many additional questions for the record that we ask that you respond to.

    We thank you very much for your excellent testimony and your very direct answers to our questions.
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    Ms. GOLDEN. Thank you very much, Mr. Chairman.

    Mr. PORTER. Thank you.

    [The following questions were submitted to be answered for the record:]

    "The Official Committee record contains additional material here."

Thursday, March 5, 1998.





    Mr. PORTER. The subcommittee will come to order.

    Our hearings continue with the Administration on Aging, and we are pleased to welcome the Assistant Secretary for Aging, Dr. Jeanette C. Takamura, again, accompanied by Dennis Williams.

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    Secretary TAKAMURA. Thank you very much.

Opening Statement

    Chairman Porter, and members of the subcommittee, I truly appreciate this opportunity today to discuss the President's fiscal year 1999 budget request for the Administration on Aging.

    As you know, Mr. Chairman, I am really beginning my fourth month of service here in Washington, D.C., and, hence, this is the first time I'm appearing before your committee as Assistant Secretary.

    Let me note that I've submitted a full written text and will be extracting from it this afternoon.

    Mr. Chairman, I know that you are very well aware that America is blessed with the gift of longevity. Over just the span of this century, we have seen the human life span extend far more than it ever has over 4,000 years. It's quite a gift and it's quite a miracle. For the first time the average American can claim more living parents than children, and, as a result of that, it's no wonder that the U.S. Census Bureau is telling us that in two short years we will actually see four generation families in America.

    More than ever then, if support for older Americans is really support for America's families. Cognizant of all the new challenges and the new opportunities which lay ahead with American longevity in the new millennium, we have begun within the Administration on Aging to reorient our work to be able to address the emergent needs of older Americans in the 21st Century.
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    Our fiscal year 1999 budget request totals $871 million. As you know, it's the same funding level as in fiscal year 1998. This amount is dedicated to primarily two things—first of all, to improving the quality of life of older Americans; and, secondly, to helping older adults and their families remain independent and productive. Funding for the Administration on Aging's programs means, in concrete terms, at least one meal a day for some elders, and, in some instances, just one meal a day, period; the only hope of transportation to doctors and grocery stores; and the only hope of help and respite for many older Americans and their caregivers. With that, I would note that in many regards our caregivers are really bearing 24-hour concerns.

    From my every day experience both in Hawaii, as well as through my activities at the national level, I am fully cognizant of the extent to which caregivers often placethemselves at risk as they care for even more frail and vulnerable members of their families. These are 24-hour a day concerns.

    Briefly summarized—and I will be brief because I know that the afternoon is getting on—our $871 million request asks for support for nutrition services—a funding request of about $486 million; for supportive services about $300 million.

    Let me just back up a minute and note for you that two years ago we had a major evaluation undertaken focusing on our nutrition services programs. That evaluation concluded that our nutrition programs under the Older Americans Act are among the most effective, most efficient programs offered by the Federal Government.

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    What I would also then note is that there are supportive services programs under Title III(b) of the Older Americans Act. They provide 40 million rides annually to older people—to doctors, to grocery stores, to pharmacies, etcetera, and we are providing over 12 million responses to requests for information and access to vital services.

    In addition to that, of course, we are serving about a million people who have legal services related concerns. We are asking for $9.8 million for in-home services support, and this funding will help us to do a variety of things, including, for example, responding to needs for home visits and for telephone reassurance calls. We already know that in the past fiscal year there were 700,000 of these needs that the Aging Network met.

    We are also asking for $9.2 million to protect vulnerable older Americans. I'm sure that you are well familiar with what this funding actually covers. It includes, of course, our State long-term care ombudsman programs, as well as programs for the prevention of elder abuse and neglect. It also addresses State elder rights and legal assistance programs, and outreach, counseling and assistance.

    We also are asking for your continued support for training, research and discretionary programs. These monies have always been used to enable us to undertake some innovative work. I will note for you, that as we move into the 21st Century, we anticipate serving not just one cohort of older Americans, but more and more we are well aware of the fact that we will be serving three to four cohorts.

    Just yesterday my staff and I were determining how many cohorts. We went back to the year 1900 and figured out how many older American cohorts we need to address in the next millennium. It comes down to about three or four. Each of these is very different, each has different needs, different interests, different wants, if you will, and different levels of resources available to them.
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    We're asking you for your support for our budget also because we are very much engaged in Operation Restore Trust. Within the State of Illinois, you are linked in with this particular endeavor.

    Federal administrative funds are being asked to support 142 full-time equivalent positions in the Administration on Aging, and, of course, these 142 positions work with a vast network that we call the Aging Network. This includes 655 State units on aging—excuse me, area agencies on aging, 57 State units on aging, about 27,000 providers, 6,400 senior centers, and I hope I'm not forgetting anything else in the process. I would—oh, yes, 221 tribal organizations.

    Over the last several years we have been very cognizant of the need to be lean and mean. We actually reduced our staff by about 30 percent. This means we are not only lean and mean—we are hard-pressed to meet the requirements of the Older Americans Act and do the work that we need to do to address current needs, as well as to anticipate the needs we foresee in the next millennium.

    I would simply note for you, Mr. Chairman, that the Older Americans Act services have been and will continue to be the cornerstone of effective local systems of community-based services. We are proud to have provided leadership in this regard starting from 1965.

    It is because of the Older Americans Act that we have been able to leverage the coordination services funded through States, localities and other Federal sources. I will note for you, because of your continuing interest in GPRA that this year's budget request includes the first annual performance plan required under GPRA.
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    We welcome your reactions to our performance plan and are certainly committed to working with you and other members of Congress in achieving the goals that are identified therein.

    Our plan for 1999 relies on data which we have received from both States and area agencies on aging, from all levels of services, and I want to assure you that we are moving toward not just having service outcomes but also performance outcome measures.

    Let me just say, and I am attempting to move quickly through my testimony, that we anticipate very shortly that 76 million baby boomers will join the ranks of older adults. I am one of those. As one of the baby boomers, I not only know that we will comprise about one-third of the population, I not only know that we make up about half of the nation's households, but I know that one out of nine of us—and I certainly hope to be one of these people—will live to see at least 90 years of age. And the 100 year plus category happens to be the most rapidly growing segment of our older adult population.

    There is no doubt that America's gift of longevity comes with many, many challenges, but as many opportunities, and we would like to be able to take advantage of the opportunities.

    As we look ahead, it's very clear to us that there is a lot that we can do to prepare not only for America's longevity population, but also for the millennium, and I would suggest to you that, among other things, we must continue to stress the importance of healthy lifestyles through health promotion and disease prevention. We must help people to understand the complex maze of the health care and long-term care systems, and we must be sure that all Americans, regardless of age and, certainly those who are elders, who are confronted with lots of complex issues, know their rights as consumers whether they are consuming services from the public sector or the private sector.
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    We also know that it is important to encourage communities to develop and use home and community-based services, especially those that use strategic cost-saving technology. I would mention that we continue to feel it extremely important to encourage experimentation and testing of best practices.

    In this regard, I would suggest to you that we feel that we must modernize many of the Older Americans Act programs,as, again, we anticipate that we will be serving from three to four cohorts of older Americans in very short order.

    In closing, let me just summarize and emphasize some of the things that I view to be my priorities as the Assistant Secretary for Aging:

    First of all, we must, we absolutely must, because we do have the opportunity, ready America for longevity. It means making sure that our population understands the economic security requirements that people will have as they age. We must also ready America for longevity in terms of health and long-term care needs. We must modernize our Older Americans Act programs. We must continue to give even greater emphasis to consumer education and protection, particularly as it relates to health and long-term care. I am, and the Administration on Aging will always be, a strong supporter of public and private sector partnerships. And, as I have said already, we need to continue to pursue vigorous experimentation and testing.

    We certainly celebrate the introduction and implementation of GPRA requirements because we do feel that experimentation and testing and GPRA requirements go hand in hand.
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    The vision of the Administration on Aging is to ensure that we have an America ready for longevity. We don't want to walk into the 21st Century looking backward and regretting that we did not put into place the policy program, and service foundation that is necessary. It is really an America in which both present and future older Americans have an independent, productive, healthy and secure life. We think that the budget request submitted by the President will support the cornerstone of comprehensive and coordinated home and community-based services. We also expect that this request will permit us to build on our existing foundations and to underwrite the beginning steps that we need to take to implement our visions and to continue to be responsive and effective in serving our consumers and their families.

    I would like to thank you again for your time. I certainly would be happy to answer your questions.

    [The prepared statement follows:]

    "The Official Committee record contains additional material here."


    Mr. PORTER. Thank you, Secretary Takamura.

    Who do we define now as an older adult? [Laughter.]

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    Secretary TAKAMURA. Well, not you, not me and not any of the members of the Subcommittee. [Laughter.]

    Secretary TAKAMURA. I'm not sure. It's actually——

    Mr. PORTER. You said you are about to join the ranks of the older adults, and I don't know what that refers to.

    Secretary TAKAMURA. Right, that's right. Well, I'm a baby boomer born between 1946 and 1964, so I anticipate——

    Mr. PORTER. All those people are going to be joining the ranks of the older adults? Older than what?

    Secretary TAKAMURA. Beginning in the year 2011, they will begin to be 65 years of age plus. So this is quite—it's going to be quite a remarkable phenomenon. I would actually suggest that we're going to change the face of the earth.

    Mr. PORTER. As an older adult, I think we should make our categories a little more discrete and exclusive. [Laughter.]

    Secretary TAKAMURA. Anyone 100 plus.


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    Mr. PORTER. I'll tell you, my own personal goal in this area, and I think the United States, is now able to do this—we weren't certainly earlier able to do it, and I won't live to see it perhaps be completely implemented—but I think we are on the verge of being able to give every single American real retirement security where they own their own Social Security account and they make a lot more in terms of benefits than the system can produce today. I believe that this is entirely necessary given the fact that we are living longer, and they make a lot more in terms of benefits than the system can produce today. I believe that this is entirely necessary given the fact that we are living longer and we have fewer younger workers to support us under our old system, and it's time for the United States to turn the corner on this and devise the kind of public retirement program that we would have devised in the middle of the Depression if we had the resources to do it—that is, a fully vested, fully funded program. I think we are ready to do it, and that would not mean that we wouldn't need an Administration on Aging. Obviously, there's a lot of services that would still be needed, but if everybody had retirement security, economic security, in their advanced years that would certainly overcome a lot of problems.

    Secretary TAKAMURA. I would love to comment specifically on your specific proposal, but I think Ken Apfel would probably think that that is something to which he would like to respond.


    Mr. PORTER. You don't need to if you don't want.

    Let me ask you what legal assistance is provided? You mentioned that several times.
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    Secretary TAKAMURA. Yes, legal assistance is actually provided to older adults in part through the Older Americans Act. You know, one of the benefits of the legal services programs of the Older Americans Act is that in every State across the country, a lot of pro bono services are shaken out of the private bar that might otherwise not be available.

    The truth of the matter is that—let me give you a very simple example. Many people in planning for their own wills are unaware of the fact that there are specialty attorneys who know something about wills, trusts, real estate, probate, pension law, tax law, et cetera. And not knowing that, they go to a friend or a relative who is a corporate attorney and ask them to prepare their will.

    We feel that it is extremely important to give people information that gets them to the right people. We feel it's important to mobilize, galvanize, if you will, the resources that exist, and our legal services programs permit us to do that.

    Mr. PORTER. Thank you.

    As someone who has been on the job only three and a half months, you're entitled to a honeymoon of sorts and not be asked these kinds of questions, so please forgive me.

    Secretary TAKAMURA. That's all right. [Laughter.]


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    Mr. PORTER. The President loves to offer a budget that makes increases in many areas and then say what a champion he is of the areas where he is making increases. It seems to me that accountability demands that in those areas where he isn't making increases he takes blame for that.

    You're being level-funded. Does that mean that this Administration doesn't care about senior citizens in America?

    Secretary TAKAMURA. No, I don't think so. I think that we are working, as you well know, within a balanced budget environment, and I think the Secretary mentioned in her own press conference that there were some difficult choices to be made.

    Mr. PORTER. Except that you came up on the short end of the choices.

    I have to give you my sermon, although you might have heard it earlier, but we are going to have tough choices of our own, obviously, in the subcommittee and they're going to be tougher than the President's because he just added some revenues that aren't going to be there, I'm afraid. We are going to have to fit our spending within smaller allocations under the budget process than otherwise would be the case, and that's going to make it very difficult.


    What money are the States putting into older American programs, and what proportion of total spending on these programs comes from the Federal Government? Are the States carrying their fair share of the load?
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    Secretary TAKAMURA. The States are actually contributing a very large portion of the monies that go for aging services. They match the monies that are received from the Administration on Aging. I would say that most States recognize that there is a demographic revolution going on. One could call it a longevity revolution, and to the extent that they are able to put forward monies, State monies, if you will, toward meeting the needs of the older adult population we are seeing that happen, both for home and community-based care, as well as to support staff at the State level.


    Mr. PORTER. You have GPRA responsibilities like every other agency and department. Can you tell us with a greater degree of specificity where you are in all of that and where you get your data that would meet performance measures?

    Secretary TAKAMURA. Certainly, I would be happy to do that, yes.

    You know, we are very proud of the progress that was made in two areas—one, of course, is in the GPRA evaluation of the nutrition program, which suggested, as I said earlier, that our nutrition programs are among the most effective and efficient Federal programs that target people in need.

    The other area that we are very proud of is the evaluations that was conducted of our long-term care ombudsman program by the Institute on Medicine. We are currently in the process of developing the evaluation design and methodology for our Title 3(b) services. These services are a little bit more difficult to evaluate. Nonetheless, what we are very proud of is that we have been in communication, in discussion, in roll-up-your-sleeve work sessions, with representatives of both our State units on aging and our area agencies on aging.
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    We were able to convince two leading researchers in the country to donate their time almost pro bono to working with us to come up with a research design that will serve us well.

    So we feel that we are making significant progress in this area.

    I am also proud of the fact that in our designing our strategy and methodology for the Title III(b) evaluation, we are really giving a great deal of emphasis to the notion of partnership and collaboration.

    Mr. PORTER. Thank you, Secretary Takamura.

    I think the better answer to the question of the level funding at $871 million is that you weren't there to advocate because they were forming the budget before you got on the job.

    Secretary TAKAMURA. Thank you, what can I say? [Laughter.]

    Mr. PORTER. Mr. Stokes?

    Mr. STOKES. Secretary Takamura, welcome before our subcommittee.

    Secretary TAKAMURA. Thank you, it's an honor to appear before you. I know you are retiring—we'll miss you.
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    Mr. STOKES. Thank you so much.

    Mr. PORTER. No, no, he's going to join all those programs. [Laughter.]

    Secretary TAKAMURA. Well, I know. Actually, I was going to sign him up to be a volunteer in some of our programs.

    Mr. STOKES. If they're calling you—what is this term—an older adult, I don't know what they'll call me. [Laughter.]

    Secretary TAKAMURA. Grand older adult.

    Mr. STOKES. Longevity, Secretary Takamura, in your formal statement, you made a fascinating statement. You said for the first time the average American can claim more living parents than children.

    Secretary TAKAMURA. That's right.

    Mr. STOKES. And, it says that four generation American families will soon be the norm.

    Secretary TAKAMURA. That's right.

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    Mr. STOKES. That's a fascinating statement.

    Secretary TAKAMURA. Isn't it?

    Mr. STOKES. It really is.

    Secretary TAKAMURA. It's an indication of the gift of longevity because not every country in the world can say that. We are among a handful of countries, so it is a gift.

    Mr. STOKES. Even at the beginning of this century, we were quite a ways from that.

    Secretary TAKAMURA. I know, that's right. Forty seven years, average life span, at the beginning of the century and now we're up to 76 years or so.

    Mr. STOKES. That is right.

    Secretary TAKAMURA. Yes.

    Mr. STOKES. It shows we are making great progress in that respect.

    Secretary TAKAMURA. We are.

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    Mr. STOKES. Last year, Elderly Nutrition Program, though you were not here, I congratulated your agency on the elderly nutrition program evaluation.

    Can you talk to me, just a little bit, about the level of need in your nutrition program? Are you still having waiting lists and so forth?

    Secretary TAKAMURA. Well, Congressman Stokes, the waitlist question has been one that we have been wrestling with for quite a while. Part of the reason for that is that not every meal site actually has a wait list. There are some that have kept wait lists; and there are others that have not.

    We know that among those that have kept wait lists—again, because there isn't a set methodology for actually recording wait lists—that there are about 77,000 people every day who are purportedly on these wait lists, but, again, we feel that the data may be needing some validation. So we're not quite certain about that.

    Mr. STOKES. Well, will your budget address this level of need?

    Secretary TAKAMURA. Well, our budget, as it's currently submitted, will actually address—let me just say that from last year to this year, of course, we were very pleased to receive a three percent increase in our budget of about $35 million. That provides us with a new baseline for serving older Americans, and we hope to use that money to meet as many of the needs that exist as possible.

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    Mr. STOKES. Madam Secretary, let me ask you this—why do you feel the need to fund a separate title for health promotion, and what will that money be used for?

    Secretary TAKAMURA. Okay, I really love that question, and the reason I like that question—thank you for asking—is because longevity is a product of all the health promotion success that we've had in this country, in part. If you really look at how we can avoid the high costs of health care, or long-term care, over the long-term, one of the ways that we can do that is to ensuring that people receive good health promotion, disease prevention information, and also participate in activities that are targeted toward that.

    We think it's extremely important to emphasize the importance of health promotion and disease prevention.

    Mr. STOKES. Do you think that will make a difference in the lives of older Americans?

    Secretary TAKAMURA. Absolutely, absolutely. There have been recent studies that have shown that even people who are in their 80's and 90's are able to improve their health and improve their strength by doing weight-bearing exercises, as examples. This kind of information needs to be made more widely known. Our health promotion monies help us to address depression among the elderly, and what we know is that the more older adults are connected up to social networks and social systems, the less likely they will be depressed, the less likely they will end up in institutions.
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    I think it's extraordinarily important to do this for the long-term.


    Mr. STOKES. You mentioned a few moments ago that you fell into the category of being a baby boomer.

    Secretary TAKAMURA. That's right.

    Mr. STOKES. You also mentioned that in the year 2011 those baby boomers will hit 60.

    Secretary TAKAMURA. That's right, or 65.

    Mr. STOKES. How is the Administration on Aging going to work to meet the needs of the baby boomers, and will the Older Americans Act be able to meet the demand?

    Secretary TAKAMURA. We think that the Older Americans Act will meet the demands of our baby boomer population, but some of the work that we are preparing ourselves to do as we march toward the new millennium is to ensure that we decrease the number of people who really are going to be in need. Some of that we can do through good health promotion work.

    Another quite important initiative, quite frankly, is that we really need to continue to give support to our Eldercare Locator, to our National Aging Information Center, and other initiatives because we know that right now we have the eyes and ears of baby boomers. Many of them are being to face elder care responsibilities. Indeed, there is data to suggest that our families are increasingly more involved in elder care than any other kind of care.
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    Baby boomers, quite honestly, are looking for the services that they can utilize to help support their family members. We cannot underscore the importance of our elder care locator or our area agencies on aging as focal points, and our State units on aging for building the comprehensive health and long-term care systems that we need.


    Mr. STOKES. Right now, as we see this increase in longevity, one of the things that is apparent is women are living longer than men in our society.

    Secretary TAKAMURA. That's right.

    Mr. STOKES. Some of them have the advantage of Social Security, while some others don't.

    Is this something that your agency is perhaps looking at?

    Secretary TAKAMURA. We are very concerned about that. In my reading I ran across a very startling statement, and I wish I could remember the researcher who made this statement, but she said essentially that most married older women are one man away from poverty. We are indeed very concerned about. We think that the Social Security debate, which the Chairman mentioned earlier, is critical to this, but we also know that our pension counseling programs, which are operated currently in six States, can offer the kind of technical information that people often times don't have access to. We feel that's important and we also think that there's a lot of work that needs to be done to ensure that our population, young and old, is financially literate.
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    So, indeed, these are concerns of the Administration on Aging.


    Mr. STOKES. This is my last question, if I still have some time. How well is your agency doing in meeting the GPRA requirements mandated by Congress. I would appreciate it if you would take a moment to elaborate on this and tell us whether you are working on strengthening your partnerships.

    Secretary TAKAMURA. I think I noted just very briefly for you a few minutes ago that indeed we are doing exactly that. I would say just about three weeks ago we had an opportunity to meet with representatives from the States, as well as representatives from our area agencies, and we were pleased to have in that meeting as co-partners or leaders or collaborators, if you will, the National Association of State Units on Aging and the National Association of Area Agencies on Aging, and also two leading researchers who are well-known for their ability to work with quantitative and qualitative measures.

    Congressman Stokes, we started the day, by literally rolling up our sleeves and going to work and looking at some potential research approaches that we could take. I am very pleased to tell you that the conversations and the discussions were very candid. We movedthrough to designing some approaches so rapidly that by noon we were ready to get to specifics, and I think this is a first-time occurrence. I think it is a very heartening occurrence. We intend to work as closely with our partners in the future as we did that day. We consider that a real breakthrough.
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    Mr. STOKES. Madam Secretary, you're doing a good job, and we appreciate your answers.

    Secretary TAKAMURA. Well, you've done a great job.

    Mr. STOKES. Thank you.

    Secretary TAKAMURA. Thank you.

    Mr. PORTER. Thank you, Mr. Stokes.

    Secretary Takamura, we'll have additional questions for you, which we would ask that you answer for the record, and we thank you for your good testimony, your direct answers to our questions. We promise you that next year we will schedule you on a Tuesday or Wednesday afternoon when more members will be here——

    Secretary TAKAMURA. Well, thank you.

    Mr. PORTER [continuing]. Because your honeymoon will be over and all the tough questions will follow. [Laughter.]

    Secretary TAKAMURA. I need to talk to you about honeymoons because when I got married, I didn't have one. So I have yet to ever experience one. [Laughter.]

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    Mr. PORTER. Well, thank you for testifying, and we look forward to working very closely with you.

    Secretary TAKAMURA. Thank you very much.

    Mr. PORTER. The subcommittee will stand in recess until 10:00 a.m. Tuesday.

    [The following questions were submitted to be answered for the record:]

    "The Official Committee record contains additional material here."