Hearing Of The Labor, Health And Human Services, Education, And Related Agencies Subcommittee Senate Appropriations Committee - Fiscal Year 2010 Budget For The Department Of Health And Human Services


By:  Kathleen Sebelius
Date: June 9, 2009
Location: Washington, DC

Chaired By: Senator Tom Harkin (D-IA)

Witnesses: Kathleen Sebelius, Secretary, Department Of Health And Human Services

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SEN. HARKIN (D-IA): The Subcommittee on Labor, Health and Human Services, Education and Related Agencies will come to order.

Madam Secretary, I welcome you to your first hearing with this Appropriations Subcommittee. You have a challenging job ahead of you, arguably the most challenging job, I think, in the Cabinet, but also, I think, the best job in the Cabinet.

Your responsibilities include not only comprehensive health reform, preparing for a possible pandemic influenza, addressing costs of entitlements, but also biomedical research, substance abuse, drug safety and quite a few others. I certainly look forward to working with you cooperatively in any way that I can.

Now, this hearing will focus on your discretionary budget, but I'd just like to mention what we're doing on comprehensive health reform. I know that you feel very strongly that prevention in public health must be at the heart of any serious reform of the healthcare system, and I commend you for your work in that area.

I also believe that any reform of the healthcare system must address the injustice of people with severe disabilities for being forced to spend their lives in nursing homes because they are not provided an option of home-based services for the severely disabled. That's why I have introduced the Community Choice Act, which President Obama strongly supported during the campaign and which he cosponsored when he was here as a member of this committee. So I look forward to working with you on this issue.

Today, we just want to talk about the FY 2010 budget, also about the funding included in the Recovery Act or the stimulus that we passed that included $10 billion for NIH, $1.1 billion for comparative effectiveness research, $700 million for prevention and wellness activities and $2 billion for discretionary health information technology activities, as well as funds for Head Start, child care, community services block grant and health professions. So we'll cover as much as we can.

Again, we welcome you to the subcommittee. I'll leave the record open here for a statement by Senator Cochran. And I would then recognize you, Madam Secretary. Your statement will be made a part of the record in its entirety.

And matter of introduction, Kathleen Sebelius became the twenty- first Secretary of the Department of Health and Human Services on April 29th of 2009. In 2003, she was elected as governor of Kansas. And I thank you for coming up to Iowa many times. I always enjoyed seeing you in Iowa and working with you. She served in that capacity until her appointment as secretary.

Prior to her election as governor, she served as Kansas state insurance commissioner. A graduate of Trinity, Washington University and the University of Kansas. Madam Secretary, since --

SEN. COCHRAN (R-MS): Well, Mr. Chairman, I'm happy to join you in welcoming the secretary to the hearing. Thank you very much.

SEN. HARKIN: Thank you, Senator. I left the record open for your statement.

Madam Secretary, welcome, and please proceed as you so desire.

SEC. SEBELIUS: Well, thank you, Chairman Harkin and Senator Cochran, members of the committee. I want to thank you for the invitation to come and discuss the 2010 budget, and first start by thanking you for your hard work and leadership on a whole variety of health issues. We certainly face great challenges in the country today, and I look forward to working with you to tackle those challenges together.

Health reform is one of the issues, I know, that is front and center in the Senate and the House right now, and I think that there is great agreement we can't continue with the status quo. The president is committed to health reform.

I think we've seen businesses and governments and families and providers come together to acknowledge that crushing costs are influencing families' bottom line, the competitiveness of our businesses, and we have to find a way to deliver higher quality healthcare for all Americans.

I do agree with you, Senator, that prevention and wellness are an essential component of that transformational health policy, and some of those building blocks, as you say, have already been provided. But I look forward to being part of that discussion as it moves forward in terms of health reform.

Now, I think the budget we're considering today puts us on the path to health reform and adheres to the principals outlined by the president, building on the investments in a 21st Century health system.

The American Recovery and Reinvestment Act funded some priority areas, including making a substantial down payment on health reform. There's a focus on fraud, which is costing taxpayers billions of dollars each year, and we intend to do more to crack down on individuals who currently cheat the system.

So the attorney general and I, first time ever at a Cabinet- level, announced an interagency effort to fight Medicare and Medicaid fraud through improved data sharing, real-time information that will be available, and increase the number of strike forces that have been successful in a couple of areas and we'd like to see them increase their operations. And the budget includes some recommended increase to help Health and Human Services achieve our part of the bargain.

We also have initiatives in the budget to move toward a central goal of health reform, improving the quality of care. The patient- centered research that is funded in this budget helps give doctors and patients access to better information and better treatments, helps empower consumers and providers. So we hope that not only will we -- looking at some cost savings strategies, but improve the quality of healthcare for everyone.

The budget invests $354 million in target activities to combat health disparities.

Senators, I just came from a dialogue with close to 30 stakeholders representing various minority populations and communities who are very interested in working on closing the gap on quality of healthcare delivered across America, the gap that exists for hiring -- Americans versus lowering -- Americans, and certainly the gap that we see persistent in ethnic minorities and low-income and advantaged populations, and that is a continued priority with the department.

We have included over $1 billion in HRSA, in the Health Resources and Services Administration, to support a wide range of programs dealing with work-force issues. Clearly, a critical component of health reform is having enough providers to deliver the care to all Americans.

So the funding will enhance the number of nurses and doctors, the number of dentists and mental-health professionals, and particularly also targets minority and low-income students to encourage more access to the medical profession, and an increased emphasis that makes sure seniors get the care and treatment they need.

And, finally, the budget will support our work at the department to protect public health and the safety of our citizens. As the chairman has recognized, we are not only dealing with an ongoing presentation of the H1N1 flu virus, but also the ongoing preparedness and operations to respond to whatever outbreaks may strike next and threaten the health of the American people.

There's no question that the investments made in pandemic planning and preparation by this committee and Congress over the years has allowed our department to respond efficiently. But we need to continue those efforts and make sure that we are well prepared.

We don't know what the next steps of this virus might be when it comes back in the fall in this country or what will happen exactly this summer when it presents itself in the southern hemisphere in conjunction with their flu season. So the president has submitted supplemental requests to support the federal response to the recent outbreak. And the funds, in addition to those provided in the 2010 budget, will allow our department to continue to be the primary health agency responding to this outbreak and remain prepared to protect the American people.

So, Mr. Chairman, the president is committed to a safer, healthier and more prosperous America. And we feel this budget will help achieve those goals investing in reform, improving on the quality of care and continuing to provide essential services that so many families depend on.

So I look forward to taking your questions and those from other committee members, and, more importantly, to work with you on these important goals.

SEN. HARKIN: Madam Secretary, thank you very much for a good summation. And, as I said, that will be made a part of the record in its entirety.

Madam Secretary, there was an article in The Post this morning on health care and all the costs and what we're looking at. And it pointed out two important things. It said here pockets of medical excellence dot the landscape, but at least 100,000 people die each year from infections they acquired in the hospital, while 1.5 million are harmed by medication errors.

And down here -- the Institute of Medicine estimates that one third of all medical care is pure waste, such as duplicate X-rays, repeat lab tests and procedures to fix mistakes.

So as we look ahead for healthcare reform, people wonder how we're going to pay for all this. Well, if one third, according to the Institute of Medicine, is pure waste, that must come out to be about $700 billion a year. I don't know if that's right or not, but even if it's half that, it seems to me that's an area where we could work together -- with the IG's office and others -- to really begin a really concentrated, concerted effort to look at where it is that we might make changes, you, in your capacity as the secretary, or that we might be able to work with you in finding those areas where we can cut down on the waste and what we can do to cut down on the number of infections that people acquire in a hospital. It's becoming dangerous to go to the hospital. More and more people are getting sicker in hospitals.

And so I just throw that out as saying that I hope that you'll be looking at this. You've just come on board. I know you've only been there a month-and-a-half now, two months.

SEC. SEBELIUS: Six weeks.

SEN. HARKIN: Six weeks. Okay. Something like that. But I would hope that you and your staff would get together and look at this and see what it is that you can do or what we can do together to really go after both of those elements.

SEC. SEBELIUS: Well, Mr. Chairman, let me just say I appreciate that concern and share it. We have already issued a challenge to the American hospitals to work in conjunction with our department to reduce by two thirds the number of hospital-related infections.

It's been proven that using a fairly simple hospital check list has a dramatic impact on hospital infection. So we are using some of the funding provided by Congress in the Recovery Act to do just that, to challenge hospitals, and also increase the state capacity to do inspections. That's one area.

I don't think there's any question that we know where there are -- as you say -- pockets of high-quality, lower-cost medical care being delivered day in and day out, but they haven't been scaled across the country. And there's a lot of excessive and redundant care right now that is probably not only costly, but doesn't really add anything to the health outcome. So that's another area of concern.

The comparative effectiveness research will help promote the best practices and share that patient-centered research about what helps and what is most cost effective. But I can guarantee that in the department, we are very focused on trying to identify what does work in a cost-effective manner and what draws the best health outcomes and hopefully share that across the country.

Health information and technology, again, funded in the Recovery Act, will have a -- I think -- a dramatic impact on lowering medical errors and sharing best protocols and putting some transparency behind what is effective and so. So you've already started down the pathway with the funding provided in the Recovery Act. There are some more investments in this budget that we hope move forward.

SEN. HARKIN: Madam Secretary, thank you for that response. As long as we're talking about the Recovery Bill, a top priority for me was the prevention and wellness fund. You mentioned some of it. Actually, we got $5.8 billion in the Senate bill -- The final amount was $1 billion, but that's okay. We got it -- $650 million was dedicated to proven strategies to reduce chronic diseases.

And we could have, obviously, specified exactly where we wanted all of this to go, but we left it sort of open, expecting that your department and us here on this appropriations committee would have an ongoing dialogue about what was the best strategy.

I've heard vague plans about a national media campaign. I don't know what diseases or conditions are being considered. I understand there may be community grants, but I don't know what's being targeted.

I guess what I'm saying is we need some more specifics about how you're planning to allocate the prevention and wellness fund. And I would like to have your assurance that you would consult with us and have an opportunity for us to have meaningful input into this before it goes to OMB.

SEC. SEBELIUS: Well, Mr. Chairman, you have my assurance of that. As you know, Tom Frieden, who was named as the new director of the Centers for Disease Control, came on board on Monday, yesterday. And I think that this is one of the significant investments in the Recovery Bill, and the most significant investment in prevention, granted significantly under where you hoped it would end up, but still the most significant investment in prevention and wellness, I think, in the history of the United States.

So the leadership at the department felt it was very important to collect a broad array of ideas and input. And I can assure you that no final plans have been made. We wanted to get the leadership on board.

And we would be absolutely not only willing but delighted to consult with you as we move forward, because sharing your expertise -- I know this is an area you are passionate about and have a lot of expertise to share. So we would very much look forward to coming back to you before a plan is finalized.

SEN. HARKIN: Outstanding. Look forward to it. Thank you, Madam Secretary.


SEN. HARKIN: Senator Cochran.

SEN. COCHRAN: Mr. Chairman, thank you. Madam Secretary, one of the other responsibilities I've had since being in the Senate is to chair the Agriculture Committee, in addition to this Appropriations Committee. And it occurs to me, as we look at things that are done in the rural areas of the country, your department and the Department of Agriculture share a lot or have some overlapping responsibilities.

I wonder if you'd thought about how maybe these can be coordinated and improve efficiencies or in other ways make available needed benefits like health screening, vaccinations, feeding programs. I just thought of those. The WIC Program administration, for example. In the case of a flu-virus outbreak it would be an important resource for making available vaccinations.

Do you have any thoughts about whether we need to improve the efficiencies of these programs by maybe combining that into one department rather than having a division of responsibility between the two departments now?

SEC. SEBELIUS: Well, Senator, I can tell you that in my short tenure here at the department, I've already had a number of conversations with the Secretary of Agriculture, Tom Vilsack, who I served with as governor in neighboring states in Senator Harkin's home state. And Tom Vilsack was the two-term governor, and he was actually governor when I got elected, helped me get elected. And I've learned a lot from him.

So there is a lot of collaborative discussion underway on everything from food-safety issues, as we redesign the food-safety initiatives under the FDA. They're looking at obesity, clearly a program, food nutrition in classrooms. A couple of the programs that you've mentioned, we haven't had on our radar screen yet, but I think we definitely need to add those.

The president is very interested and committed to having Cabinet secretaries work in a very interagency fashion leveraging the assets of the agencies and not replicating or duplicating programs that work well in one area, but borrowing good ideas and trying to work together in a collaborative fashion. So I think you've made some important suggestions, and I will certainly circle back with those with the secretary of Agriculture.

SEN. COCHRAN: The president's budget request creates a -- or suggests that there should be created a new mandatory -- program with a trigger mechanism for automatic increases in energy assistance. Under the current formula, these funds are distributed more to cold- weather states than they are warm-weather states, at least that's my observation.

When the new -- program is designed how do you intend to address the funding disparity that endangers low-income residents in rural states in the south?

SEC. SEBELIUS: Well, Senator, I have to tell you that I wasn't aware of the disparity until I began some of the visits in preparation for my confirmation hearing, and it was raised by a number of warm- weather senators that the money runs out before it gets hot in the summertime.

And what I said at that point, and I intend to continue to do, is take a look at the way the funds are distributed, because I agree with you, people are in jeopardy if they're sitting in hundred-degree homes, the same way they are if they're in 30-degree homes, and the same kind of impact is had on vulnerable populations.

So I can assure you that we would not only appreciate your input, but that I will certainly take into consideration and ask the folks who are administering the program if we are looking at the issues of warm-weather states, because I think it is of concern.

SEN. COCHRAN: Thank you. I have a couple of more questions, but I'm going to yield to other senators who are here.

SEN. HARKIN: Senator Kohl.

SEN. KOHL (D-WI): Thank you so much. And, Secretary Sebelius, welcome.

SEC. SEBELIUS: Thank you.

SEN. KOHL: As you know, the waiver for Wisconsin's senior-care program is scheduled to end on December 31st this year. Currently, this program provides over 100,000 seniors in my state with high- quality, cost-effective prescription-drug coverage, as I presume you are aware. According to the CBO, it does so while achieving ongoing savings to the federal government at the same time.

I understand that Governor Jim Doyle, who I know you're very familiar with, Governor Doyle has applied for a waiver to extend senior care through 2012, which would allow this very successful program to continue. Can you tell me the status of the waiver application and whether or not we can hope to achieve that waiver?

SEC. SEBELIUS: Well, Senator, as you know, that 1115 program is the only one left in the country where the state's only drug program is being conducted. And I know it's wildly popular, and I know it's been enormously successful.

You'll be pleased to hear that not only did my good friend, Jim Doyle, apply for the waiver continuation before I got to the office, but he was in my office three days ago amplifying that request to make sure I did not forget.

And, as you might be aware, the president is going to Green Bay, Wisconsin, on Thursday to talk about health reform, and I don't doubt he's going to hear a little bit of something about this popular program.

It's my understanding that we're in the final stages of review, that people in the agency are aware of not only how popular it is, but how successful it's been. And I'm hopeful that we will be able to give you news in the very near future.

SEN. KOHL: Well, I'll take that as a somewhat positive indication.

SEN. SEBELIUS: I just don't have the definitive answer today. I'd hoped I'd have it by today, but close.

SEN. KOHL: Okay. I happen to be giving a speech Monday in Wisconsin to 400 people who are involved in issues that apply to seniors all across our state, and I had something like a dozen applause lines written into my speech. The only one that really got any applause --

SEC. SEBELIUS: (Laughter.)

SEN. KOHL: -- was my reference to the senior-care program and how effective it's been.

SEC. SEBELIUS: Well, I can tell you in the discussions that I've been involved in in health reform, I have asked our folks -- just because I've -- before I came to this position, as a governor and as someone who shared ideas with other governors -- not only did I have our state looking at how successful Wisconsin had been and what kind of things we could do to mirror it, but the health-reform team has the whole program and we want to look at it as a possibility to include it as one of the options. So it definitely has caught the attention of lots of folks outside of Wisconsin.

SEN. KOHL: Thank you. Senator Sebelius, lately, as I'm sure you're very much aware, there's been much media attention on how it costs two to three times as much to fund a Medicare recipient in some locales across our country than it does in others.

We've seen articles in several publications come to the conclusion that healthcare quality does not increase with higher spending.

In fact, The Washington Post reports that healthcare costs in a place in my state, La Crosse, are much lower than the national average, and yet quality is much better than the national average.

I'm sure this is one of the most tough problems that you are going to be confronting in your time as secretary. Do you have some initial thoughts on what we can do to take advantage of those areas that are doing a great job in controlling costs and extend it across the country to those areas that are not?

SEN. HARKIN: Well, Senator, I think you've just very adeptly defined the challenge is how to take what is happening in pockets, as Senator Harkin said earlier, across the country and sort of scale up, so not only do we reduce overall costs, but we increase quality.

Someone said to me the other day there's a lot of discussion about rationing healthcare, and this expert said he thought what we were doing currently in America was rationing quality, which I thought was an interesting lens.

But we do -- you know, I think the comparative effectiveness research that was funded, $1 billion worth in the Recovery Act, is a big step in that direction to inform doctors and consumers, patients what is happening and what the best practices are. I think there are certainly NIH studies which can lend to that, and CDC is looking at areas that we can improve quality. But part of it is learning from the folks who are running the health systems that have been identified as delivering high-quality care at a much lower cost.

We have some improvements currently proposed in the budget and some Medicare demonstration projects. One of the areas we know is very erratic is what happens to a patient when you get released from a hospital. Right now, 20 percent are readmitted, and a lot of evidence leads to the fact that that's because of a lack of follow up, a lack of follow-up care, which is very expensive and certainly not great for the patient. So we're trying to expand best practices in that area.

Looking at bundled payments, so providers are more concerned with ultimate outcome and not with contacts with patients. We think that will be an effective strategy, and really driving, encouraging some voluntary collaboration with single-practice docs, so they have a more coordinated care strategy.

So trying to take what we think is working and encourage others to follow that practice and use some of the Medicare both incentives and payments to enhance and accelerate quality care for all Americans.

SEN. KOHL: Thank you very much. Thank you very much, Mr. Chairman.

SEN. HARKIN: Thank you, Senator. Senator Alexander.

SEN. ALXANDER (R-TN): Thank you, Mr. Chairman. Madam Secretary, welcome. Glad you're here. The president sent a letter to Senator Baucus and Senator Kennedy saying that -- on June 2nd -- saying that healthcare reform must not add to our deficits over the next 10 years. And, today, he made a speech about PAYGO, saying that we should only spend a dollar that you save, or, I might add, tax a dollar.

Are we to assume, then, that so-called PAYGO should apply to the healthcare reform bill that we are considering in Congress?

SEC. SEBELIUS: Well, I think, Senator, certainly the estimates over a 10-year period of time are a bit difficult to reach. And I think one of the ongoing concerns -- and it's something that I think the chairman shares -- is that currently, there is no scoring, for instance, for any prevention and wellness strategy.

I'm not sure there's an expert who believes that it won't save money, and yet it is not scored. So whether or not the kind of transformational health reform will actually have a dollar-for-dollar set off on day one, I can't tell you, because I think that's --

SEN. ALEXANDER: So PAYGO does not apply to the healthcare reform bill we're considering?

SEC. SEBELIUS: Senator, I think it does. I haven't seen the outlines of exactly what the president is proposing to Congress. I know there was some discussion of whether or not -- what is year 10, for instance, for the health reform bill? Is it 10 years from the date it starts? Is it 10 years from the day it passes? And if there is a lively debate about prevention and wellness strategies and whether that can be scored, at least in out years?

SEN. ALEXANDER: But would you agree that it might be a good idea to see the details of the proposal and to hear from the Congressional Budget Office what the scoring might be before making a decision about going forward, in light of the president's concern about PAYGO?

SEC. SEBELIUS: Well, I think certainly it's a discussion to have. I'm not sure that the Congressional Budget Office is going to score prevention, although I think they're dead wrong in not assuming that there will be a savings and cost effectiveness related to shifting a health system to a wellness-prevention --

SEN. ALEXANDER: Well, without being overly redundant, if the president's going to write us a letter and say don't add to the deficit and give us a lecture about PAYGO, shouldn't it apply to the healthcare reform bill, which is variously estimated between $1 trillion to $2 trillion in new costs over the next year Let me ask you this: If it does cost between 1 (trillion dollars) to $2 trillion, depending upon whether it's the Kennedy Bill or the bill being considered by the Finance Committee, what new taxes or what new savings would the administration recommend to make sure that we don't add to the deficit?

SEC. SEBELIUS: Well, Senator, as you probably know, in the 2010 budget, the president recommended about $630 billion worth of both savings and revenue enhancements. We've also suggested after reviewing the overall Medicare programs, that within the Medicare program, we think another $200 (billion dollars) to $250 billion is possible in terms of savings. There's no question that the additional and enhanced efforts on fraud and abuse will generate some additional savings and he has had lively discussions with members of the House and the Senate about their ideas for funding the remainder of the program. But, I think the good faith effort by the president -- and it's demonstrated in this budget and moving forward -- to come in with a substantial investment in reform moving forward and then, hopefully, engaging Congress in that very discussion.

SEN. ALEXANDER: But, you would agree the investment is only a beginning of the amount of money that we may need?

SEC. SEBELIUS: Well, $634 billion plus another $200 billion is $800 (billion dollars) and if it's in the trillion to trillion two range, that's a pretty good investment.

SEN. ALEXANDER: That's a pretty good investment, so it would be important to know the details of the proposal and the cost of the proposal before we vote on the proposal and act on the proposal if we were to show respect to the president's desire for PAYGO and not adding to the deficit.

SEC. SEBELIUS: Well, and hopefully as members of Congress engage in this discussion as the bill is written in the Finance Committee and the Health Committee, the three committees dealing with it, and the House will engage and just those paying for health reform will be a critical part of this dialogue moving forward.

SEN. ALEXANDER: Does the president or the administration support the government-run insurance plan proposed by Senator Kennedy in his legislation? I note that the president in his letter said that he wanted to see a public or government-run option as a part of the plan.

SEC. SEBELIUS: Well, I think the president has maintained from the outset, during the course of the campaign and in the letter that you received, that in a Health Insurance Exchange -- a marketplace where consumers would have choices and options for coverage if they want to choose new coverage -- that a public option is very important. In many parts of the country, there is not a choice of private plans. There is a dominant carrier, a monopoly carrier.

SEN. ALEXANDER: (Crosstalk).

Does he support or not support Senator Kennedy's --

SEC. SEBELIUS: I have not seen the specific language that you're referring to.

SEN. ALEXANDER: So, he'd want to read it, understand it, maybe see the cost of it before he made that decision.

SEC. SEBELIUS: You'd have to ask the president that.

SEN. ALEXANDER: Well, you represent him. Would you want to read it and understand it --

SEC. SEBELIUS: And I will.

SEN. ALEXANDER: -- and know the cost of it before you decided whether you supported it.

SEC. SEBELIUS: I'm sure we'll have that dialogue.

SEN. ALEXANDER: Does that mean you would or you wouldn't?

SEC. SEBELIUS: I said I will read it. Yes, sir.

SEN. ALEXANDER: So, you'd want to read it and understand the cost before you decide whether to support it.

SEC. SEBELIUS: Yes, I will read it.

SEN. ALEXANDER: Thank you, Mr. Chairman.

SEN. TOM HARKIN (D-IA): I just want to share my colleague from Tennessee, who's also a member of the Authorizing Committee, I believe -- Are you? Yeah. -- that we're going to have a walk through with our bill starting tomorrow, both Republicans and Democrats, that the Senator will have every opportunity to amend, offer, discuss these different things. I can tell you right now that we're on this public option plan, that we're leaving it blank because we want to have a discussion on it and we want to have ideas that come forward and see where the votes are. I think that's the fair and honest way to do that.

And so, we're not coming out with anything and saying "Here it is. Take it or leave it". We're kind of leaving it open for discussion and then we'll see where the votes are on it. I think that's the best way to proceed and then, after that, whatever we decide to do. Then the administration can tell us what they think, but it's our deal. We have to do it.

SEN. ALEXANDER: I thank the Chairman. I just want to establish the principle that's usually a good idea to read, understand, and know the cost of a proposal before we ask to make a decision about it.

SEN. HARKIN: Well, I think that will happen in the next couple of months.

SEN. ALEXANDER: Thank you.

SEN. HARKIN: Senator Pryor.

SEN. MARK PRYOR (D-AR): Thank you, Mr. Chairman, and thank you Madame Secretary for being here. Let me start if I may with the issue of Comparative Effectiveness Research. My understanding is that this research has great potential to empower patients and physicians to choose treatments that offer the best benefit. However, some have attacked this initiative, claiming that it could be used to ration care. Do you mind talking to the committee for a few minutes about Comparative Effectiveness Research and why you think the Department is in a better position than the private sector to ensure this research is performed?

SEC. SEBELIUS: Well, Senator, I think that first of all, to the point you made citing detractors who are fearful that this will lead to rationing care. There is a provision in the funding of the research that prohibits Medicare from using Comparative Effectiveness Research to make cost decisions. I think that is clear in the law and, certainly, the folks at GMF intend to follow the law.

We're very encouraged by the opportunity to learn from what's happening in this rapidly evolving area of medical care and certainly what's happening to produce high-quality, low-cost care in various parts of the country and to help drive those best practices across the country, so all Americans have access to that care.

And I think the investment that Congress made in Comparative Effectiveness Research gives the opportunity to do that, to tie in what strategies lead to better health outcomes and lower costs, which are again in places in pockets around the country, but not everywhere. And, I think the fears that somehow this will drive rationing of care, I would suggest it will raise quality of care in a very effective manner.

SEN. PRYOR: Let me ask another question, something I know that's important to you, being from a rural state, like I am. And that is, we have a real challenge in our state, as well as other Senators do in their home states, where we just don't have enough doctors in rural America. And, you know, my sense is that, you know, one reason is is because a rural setting and the challenges for a rural practice just isn't that appealing for a lot of people coming out of medical school, but also I think there's a practical part of this and that is the Medicare reimbursement rates are often much lower in a state like Arkansas, and maybe your home state, and elsewhere than they would be otherwise.

SEC. SEBELIUS: I like to call you Arkansas.

SEN. PRYOR: I understand. I understand. We got that a lot from Kansas, by the way. But, we do share that and so, my question for you is: What's the best way to ensure that people in rural America have not access to coverage, but actually access to care in their home communities?

SEC. SEBELIUS: Well, I think it's a great question and certainly one that I worked on as governor in Kansas and share your concerns about the distribution of health care providers and the incentive to stay in practice in a rural community and certainly, continuing to examine the pay differentials of Medicare is a piece of the puzzle and one that I take seriously and will make sure that we continue to look at whether or not that provides disincentives or all kinds of things.

There are people who suggest that there are also disincentives for lower cost care to be delivered in some areas, because then they turn around and get penalized with lower reimbursement rates. I think there's a lot and the investment that you made in health technology can also do to enhance rural practitioners by connecting with telemedicine to specialists and consultation experts who may be hundreds or even thousands of miles away, but can be very much part of their practice in an ongoing basis.

And certainly the investment in the expanded Commission Corps to look at underserved areas is a help, as well as the money -- we just announced a couple of days ago, pushing out the door, some of the Recovery Act money which will help pay student loans and I know at least in our state, and I'm sure in Arkansas, the payment strategy for underserved areas has been particularly effective in having young providers locate. And once they're there, they don't leave, has been our experience. So, I think we've got to use a whole variety of incentives, loan repayment, telemedicine, but to make sure all Americans have high-quality care.

SEN. PRYOR: Well, and I do appreciate the president and you putting into the budget the improved Rural Health Care Initiative. So, I think that's a step in the right direction. Thank you for your answers. Mr. Chairman.

SEN. HARKIN: Thank you, Senator. Senator Specter.

SEN. ARLEN SPECTER (D-PA): Thank you, Mr. Chairman. Madame Secretary, thank you for taking on this difficult job, doing what you did for the state of Kansas --

SEC. SEBELIUS: Our home state. I share with the Senators, yes.

SEN. SPECTER: Today has been a Kansas day of Appropriation hearings. Secretary Gates testified this morning. He's from Wichita.

SEC. SEBELIUS: Yes, indeed.

SEN. SPECTER: And went to a very distinguished grade school. I'd like your attention, Mr. Chairman.

SEC. SEBELIUS: (Laughter). We're talking about Kansas. It's important.

SEN. SPECTER: I know I have Senator Cochran's attention. He went to a very distinguished grade school. It's called College Hill. It only went to the sixth grade and I went there, not quite at the same time, but the same school and governors from Kansas and a town not too far from Russell -- (inaudible). So much for the pleasantries, Governor. Now on to your thoughts. (Laughter).

To have a NIH budget of $442 million is a sharp retreat from what the chairman used to insist on $3.5 billion a year increases. Senator Harkin wouldn't settle for any less than that or most of a decade. Oh, I guess that's not entirely true. Occasionally he settled for $3 billion (dollars). But, if you take a look at the cost of living adjustments -- the inflation rate, about 3.3 percent -- that's a billion. Now, I know you don't construct the budget all by yourself. OMB, there are lots of constraints, but I would urge you to take another look at that figure. We can offer amendments, of course, staying within the budget, but I would appreciate it if you'd take another look at it.

The ten billion dollars which was added in the Stimulus Package has created an enormous wave of excitement among young people. We're in jeopardy of losing a generation of young research scientists and I think we have to maintain the growth rate. We talked about cutting down the cost of health care. What better way on the cost factor, than to prevent illness and during a period of time when Senator Harkin had his way, increasing from $12 (billion dollars) to $30 billion, the death rate for --

SEN. HARKIN: I was ranking member then.

SEN. SPECTER: What's that?

SEN. HARKIN: I was ranking member at that time.

SEN. SPECTER: Now, come to think of it, he didn't have all that much to do with it. (Laughter). We used to trade gavels with some frequency, but on to the serious note, the death rate from strokes went down, from heart disease, improvements on cancer and we just have to find somewhere to do better and I hope that the budget calls for $268 million for cancer and $19 million for research in Autism. That isn't changed from what we have always done.

We have endeavored not to politicize the allocations by leaving it to the scientists and one year the chairman of the appropriations committee, who had suffered from prostate cancer, wanted to add $150 million to prostate cancer and he was unsuccessful in doing that. So, I'd like you to take another look there, too, with a focus. I know you can't focus on all these matters, and you don't have a long history like this subcommittee does as to whether you really want to initiate a policy of picking and choosing.

My yellow light is on, so I'll make only one further comment. I want to express my thanks to you for meeting with a group on May 20th on the Biodefense Initiative from the University of Pittsburgh, UPMC. Do you have any initial thoughts on that subject? I know you haven't had time to go through it in details, but any preliminary thinking? I don't get calls from UPMC, more than twice a day, so when I have you here, I thought I'd ask.

SEC. SEBELIUS: Well, Senator, I thought, first of all, the presentation was very impressive and certainly the notion that we should have a facility dedicated to production of a rare variety of vaccine lines is also incredibly timely and something that I think should be part of our preparedness arsenal.

I think the issue that we're facing right now, as you well know, is whether we can adequately prepare for the uncertainties that still may be confronting us in the very near future with the novel H1N1 stream and the potential massive vaccination program and production costs and continue with the preparedness underway and then add an additional factor to that. But, I don't think there's any doubt about the importance of that being part of the strategy moving forward, but how quickly that can be implemented, I can't tell you right now.

SEN. SPECTER: Well, we would appreciate your informing us at the earliest that you can.

SEC. SEBELIUS: I will. Thank you.

SEN. SPECTER: Thank you, Madame Secretary. Thank you, Mr. Chairman.

SEC. SEBELIUS: And, Senator, may I just respond briefly to the research questions, because I just want to tell you I share both the concern that we continue to invest in science and research and I have already heard enormously positive feedback about the investment from the Recovery Act and the, as you say, the excitement of a new generation of researchers and we are recommitting to research funding. I do think in putting together the 2010 budget, there was a recognition that the Recovery Act funds really will fund 2010 and some of the 2011 strategies, but working with you, Senator -- not only Senator Specter, but the chairman, who I know has enormous interest in this research area -- on future years, I think will be very important to make sure that we don't reach a cliff and fall off the edge of the cliff because we want to continue this multi-year research investment.

SEN. SPECTER: Well, Madame Secretary, may I suggest that the Stimulus Package and that $10 billion (dollars) ought not to be looked at for the regular funding? That is extra, designed to create the 70,000 new jobs and for the two-year period, with a specific target that the president asked for and that the Congress responded in an affirmative way.

I, perhaps, as much as any under the circumstances, casting the vote I did, and we were looking for that to stimulate the economy and for jobs. I couldn't tell you line by line on all the other budget items, but I believe that it was not the generalization that the stimulus would be used in place of future years' funding. So, we'd like to maintain NIH funding on its own, besides that. Thank you.

SEN. HARKIN: Madame Secretary, I just want to say that I fully concur with Senator Specter's views on this. We have worked in tandem on this for a long time and I can assure you that when it comes to NIH funding, regardless of which side of the aisle Senator Specter's on, he is going to be dogged in this, and I'm going to be joining with him on it. Senator Specter's absolutely right. We put that money in there in the Stimulus because it was stimulus for the two years and I am concerned about the cliff and the baseline and what happens to that baseline funding.

And, quite frankly, if you really look at it, Senator Specter, when we finished that building from about 2005 until now, basically our funding has been kind of flat. I think that in real dollars, we're about at where we were about 2005 if I'm not mistaken. So, to only put in $442 million doesn't do much for getting our baseline up.

SEN. SPECTER: Well, Mr. Chairman.


SEN. SPECTER: During the period of the last several years, you and I made a calculation. We went down 5.2 billion in real dollars --

SEN. HARKIN: Real dollars, yeah.

SEN. SPECTER: -- as a result of not having the cost of living adjusted for several years and then, -- (inaudible) -- catch a percent here and half a percent there, and a $30 billion allocation turns out to be less than 25 billion (dollars) and so, we're playing against that backdrop as well.

SEN. HARKIN: So, there's two things that I -- one thing that we can probably concur on. I don't know about the second, but the $442 million is, I think, inadequate. We'll see what we can do about that. I don't know, within our allocation, what all we can do. We don't have our allocation, yet. We'll have to see about that. But, we have a lot of demands for this and we'll just have to see what we can come up with.

But, within that 442 (million dollars), I am somewhat concerned that 268 million (dollars) was designated for cancer for the National Cancer Institute and I think, 19 (million dollars) for autism. So, over half of that for two institutes, for two diseases.

And, I mentioned this to the NIH acting director who was up here for looking at their budget, that I don't know that that is a good way to do things. To put all that money just in those two when there are a lot of other needs spread across an entire spectrum of research and I'm just thinking that perhaps we might have go for a better distribution of that money than just in those two areas and let the researchers at NIH decide where that money ought to go.

SEC. SEBELIUS: I appreciate that.

SEN. HARKIN: I don't have anything else, Madame Secretary.

SEN. THAD COCHRAN (R-MS): Mr. Chairman, I have another question if I may.


SEN. COCHRAN: Madame Secretary, I've been advised that fraud and abuse are draining about $60 billion a year from our health care system. This money could be going for patient care and to address other problems.

I've co-sponsored with other Senators, the Seniors and Taxpayers Obligation Protection Act, known as the STOP Act, which is designed to eliminate the use of social security numbers as the Medicare identifier, to help curb fraudulent services. I wonder if you agree that something like that is needed and, in view of the fact that your budget includes only 113 million (dollars) for Medicare safeguards, do we need to look elsewhere for ways and means of helping to curb Medicare waste, fraud and abuse?

SEC. SEBELIUS: Well, I certainly share your concern about waste, fraud and abuse, Senator, and any dime stolen from the program is stolen from not only the taxpayers, but from the delivery of health care services. And I think that's why the president was eager to have the Attorney General and I join together in a new initiative, sharing real data, rather than following what were sometimes years' old audits and trying to get out ahead of some of this effort by monitoring billing.

And I'm not familiar, specifically, with the legislation you mentioned, but I will certainly share those ideas with our folks and have them take a look at it, because I think anything we can do to discourage these practices before they occur and save those resources for the delivery of healthcare is incredibly important. People are stealing from the system and we want to make it more difficult, if not impossible, not easier. So, this is one strategy I'd love to take back to our CMS folks.

SEN. SPECTER: Thank you, very much. Thank you, Mr. Chairman.

SEN. HARKIN: Thank you, very much, Senator Cochran. Well, Madame Secretary, thank you very much for your appearance here and your leadership at the Department. We look forward to following up there. I'll leave the record open for any written questions that Senators who couldn't be here might want to propound and, again, I look forward to working with you on the recovery money that I talked about before that's going out for prevention.

SEC. SEBELIUS: Prevention. Absolutely.

SEN. HARKIN: Okay. Thank you, Madame Secretary.

SEC. SEBELIUS: Thanks so much.

SEN. HARKIN: The subcommittee will stand adjourned.


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