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Hearing Of The Senate Finance Committee - The President's Fiscal Year 2011 Health Care Proposals


Location: Washington, DC

Chairman Baucus, Senator Grassley, and Members of the Committee, thank you for the
invitation to discuss the President's FY 2011 Budget for the Department of Health and
Human Services (HHS).
Last week, in his State of the Union, President Obama laid out an aggressive agenda to
create jobs, strengthen opportunity for working families, and lay a foundation for long-
term growth. His fiscal year (FY) 2011 budget is the blueprint for putting that vision into
At HHS, we are supporting that agenda by working to keep Americans healthy, ensure
they get the health care they need, and provide children, families, and seniors with the
essential human services they depend on.
Our budget will make sure that the critical health and human services our Department
offers to the American people are of the highest quality and are directly helping families
stay healthy, safe, and secure--especially as we continue to climb out of a recession.
It promotes projects that will rebuild our economy by investing in next generation
research and the advanced development of technology that will help us find cures for
diseases, innovative new treatments, and new ways to keep Americans safe, whether we
are facing a pandemic or a potential terrorist attack.
But this budget isn't just about new programs or new priorities or new research. It is also
about a new way of doing business with the taxpayers' money. Where there is waste and
fraud, we must root it out. Where there are loopholes, we must close them. And where
we have opportunities to increase transparency, accountability, and program integrity, we
must take them. These are top priorities of the President. They are top priorities of mine.
And our budget will make them top priorities for my department as well.
The President's FY 2011 Budget for HHS totals $911 billion in outlays, 90 percent of
which is within the jurisdiction of the Committee on Finance.
Reducing Health Care Fraud
When American families are struggling to make every dollar count, we need to be just as
vigilant about how their money is spent. That's why the Obama Administration is
cracking down on criminals who steal from taxpayers, endanger patients, and jeopardize
the future of our government health insurance programs.
Last May, President Obama instructed Attorney General Holder and me to create a new
Health Care Fraud Prevention and Action Team, which we call HEAT for short. HEAT
is an unprecedented partnership that brings together high-level leaders from both
departments so that we can share information, spot trends, coordinate strategy, and
develop new fraud prevention tools.
As part of this new partnership, we are developing tools that will allow us to identify
criminal activity by analyzing suspicious patterns in claims data. Medicare claims data
used to be scattered among several databases belonging to different contractors. If we
wanted to find out how many claims had been made for a certain kind of wheelchair, we
had to go look in several different places. But now, we are combining all Medicare paid
claims data into a single, searchable database. Which means that for the first time ever,
we'll have a complete picture of what kinds of claims are being filed across the country
and where they're being filed from.
Our FY 2011 Budget includes $1.7 billion in funding to fight fraud, including $561
million in discretionary funds, to strengthen these Medicare and Medicaid program
integrity activities, with a particular emphasis on fighting health care fraud in the field,
increasing Medicare and Medicaid audits, and strengthening program oversight while
reducing costs.
This investment, will better equip the Federal government to minimize inappropriate
payments, pinpoint potential weaknesses in program integrity oversight, target emerging
fraud schemes by provider and type of service, and establish safeguards to correct
programmatic vulnerabilities. This multi-year discretionary investment will save $9.9
billion over ten years.
The Budget also includes a set of new administrative and legislative program integrity
proposals that will give HHS the necessary tools to fight fraud by enhancing provider
enrollment scrutiny, increasing claims oversight and improving Medicare's data analysis
capabilities and will save approximately $14.7 billion over ten years.
Improving Quality of and Access to Health Care
At HHS, we continue to find ways to better serve the American public, especially those
citizens least able to help themselves. We are working to improve the quality of and
access to health care for all Americans by supporting programs intended to enhance the
health care workforce and the quality of health care information and treatments through
the advancement of health information technology (IT) and the modernization of the
health care system.
As Congress continues its work to provide security and stability for Americans with
health insurance and expand coverage to those Americans who do not have insurance,
HHS maintains its efforts towards achieving those goals through activities with the
Children's Health Insurance Program (CHIP), health IT, patient-centered health research,
prevention and wellness, community health centers, and the health workforce.
Additional resources distributed to States and Territories after the enactment of the
Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) resulted in
19 States expanding or improving child health coverage in FY 2009. Forty-seven States
now cover children in families with incomes at or above 200 percent of the Federal
poverty guidelines. In September of 2009, CMS awarded $40 million in grants to assist
in enrolling the over 5 million children who are uninsured but eligible for either Medicaid
or CHIP.
The Budget includes $3.6 billion to strengthen the ability of the Centers for Medicare &
Medicaid Services (CMS) to meet current administrative workload demands resulting
from recent legislative requirements and continued beneficiary growth. The funding
provides targeted investments to revamp IT systems and optimize staffing levels so that
CMS can meet the future challenges of Medicare and Medicaid while being an active
purchaser of high quality and efficient care.
For example, $110 million will support a comprehensive Health Care Data Improvement
Initiative to transform CMS's data environment from one focused primarily on claims
processing to one also focused on state-of-the art data analysis and information sharing.
These changes are vital to modernizing the Medicare and Medicaid programs by making
CMS a leader in value-based purchasing, improving systems security, and increasing
analytic capabilities and data sharing with key stakeholders.
Everyone agrees that the scheduled Medicare physician payment cuts are not sustainable
and would likely impact access to care for our Medicare beneficiaries. We look forward
to working with Congress to reform Medicare's payment policy and give physicians
incentives to improve quality and efficiency. The Budget assumes a zero percent update
for physician payments. This is not a proposed policy but an honest and transparent
budget display reflecting the Administration's best estimate of future Congressional
action based on what Congress has done in recent years for physician payments.
The Budget includes $995 million for the Health Resources and Services Administration
(HRSA) for a wide range of programs to strengthen and support our Nation's health care
workforce. This funding will enhance the capacity of nursing schools, increase access to
oral health care through dental workforce development grants, target minority and low
income students, and place an increased emphasis on ensuring that America's senior
population gets the care and treatment it needs.
The Budget includes an increase of $290 million to ensure better access to health centers
through further expansions of health center services and integration of behavioral health
into health centers' primary care system. This funding builds on investments made under
the American Recovery and Reinvestment Act (Recovery Act) of 2009 and will enable
health centers to serve more than 20 million patients in FY 2011, which is more than 3
million patients than were served in FY 2008.
The President is committed to improving health outcomes and reducing health disparities
for American Indian and Alaska Native communities. The Budget includes nearly
$5.4 billion in budget authority and collections, an increase of $354 million, enabling the
Indian Health Service (IHS) to focus on reducing health disparities, supporting Tribal
efforts to deliver high-quality care, ensuring that IHS services can be supplemented by
care purchased outside the Indian health system where necessary, and funding health
facility and medical equipment upgrades.
The Budget advances the President's health IT initiative by accelerating health IT
adoption and electronic health records (EHRs) utilization -- essential tools for
modernizing the health care system. The Budget includes $78 million, an increase of $17
million, for the Office of the National Coordinator for Health Information Technology
(ONC) to continue its current efforts as the Federal health IT leader and coordinator.
During FY 2011, HHS will also begin providing an estimated $25 billion over 10 years of
Recovery Act Medicare and Medicaid incentive payments to physicians and hospitals
who demonstrate meaningful use of certified EHRs, which will improve the reporting of
clinical quality measures and promote health care quality, efficiency, and patient safety.
To continue to fulfill the President's commitment to ensuring access to health care for
millions of Americans, the Budget includes a proposal to extend by an additional
six months, through June 2011, the temporary Federal Medical Assistance Percentage
(FMAP) increase provided by the Recovery Act. The extension will result in an
additional $25.5 billion to States and Territories for maintaining support for children and
families helped by Medicaid and promoting economic recovery by helping State budgets.
The Budget supports HHS-wide patient-centered health research, including $286 million
within the Agency for Healthcare Research and Quality (AHRQ). HHS also continues to
invest the $1.1 billion provided by the Recovery Act to improve health care quality by
providing patients and physicians with state-of-the-art, evidence-based information to
enhance medical decision-making.
Promoting Public Health
Whether responding to pandemic flu or preventing food-borne illness, HHS will continue
its unwavering commitment to keeping Americans healthy and safe.
The President is committed to securing our Nation's food supply by transforming and
improving our food safety system. The Budget includes $1.4 billion, an increase of
$327 million, for food safety efforts that will strengthen the ability of the Food and Drug
Administration (FDA) and the Centers for Disease Control and Prevention (CDC) to
prioritize prevention, strengthen surveillance and enforcement, and improve response and
recovery -- key priorities of the Food Safety Working Group the President established in
March 2009.
In June 2009, the President signed the Family Smoking Prevention and Control Act,
providing FDA with new authorities and responsibilities for regulating tobacco use and
establishing the FDA Center for Tobacco Products. The Budget includes $450 million
from user fees to reduce tobacco use in minors by regulating marketing and distribution
of tobacco products, promote public health understanding of harmful constituents of
tobacco products, and reduce the toll of tobacco-related disease, disability, and mortality.
In addition, $504 million in funding for CDC, the National Institutes of Health (NIH),
and the Substance Abuse and Mental Health Services Administration (SAMHSA) will
further help reduce smoking among teens and adults and will support research on
preventing tobacco use, understanding the basic science of the consequences of tobacco
use, and improving treatments for tobacco-related illnesses.
The Budget includes over $3 billion, an increase of $70 million, for CDC and HRSA to
enhance HIV/AIDS prevention, care, and treatment. This increase includes $31 million
for CDC to integrate surveillance and monitoring systems, address high-risk populations,
and support HIV/AIDS coordination and service integration with other infectious
diseases. It also includes $40 million for HRSA's Ryan White program to expand access
to care for underserved populations, provide life-saving drugs, and improve the quality of
life for people living with HIV/AIDS.
Reducing the burden of chronic disease, collecting and using health data to inform
decision-making and research, and building an interdisciplinary public health workforce
are critical components to successful prevention efforts. The Budget includes $20 million
for a CDC initiative to reduce the rates of morbidity and disability due to chronic disease
in up to ten of the largest U.S. cities. These cities will be able to incorporate the lessons
learned from implementing evidence-based prevention and wellness strategies of the
Recovery Act's Communities Putting Prevention to Work Initiative.
The Budget also includes $10 million at CDC for a new Health Prevention Corps, which
will recruit, train, and assign a cadre of public health professionals in State and local
health departments. This program will target disciplines with known shortages, such as
epidemiology, environmental health, and laboratory science.
To improve CDC's ability to collect data on the health of the Nation for use by
policy-makers and Federal, State, and local leaders, the Budget provides $162 million for
Health Statistics, an increase of $23 million above FY 2010. This increase will ensure
data availability on key national health indicators by supporting electronic birth and death
records in States and enhancing national surveys.
There is $222 million, an increase of $16 million, included in the Budget to address
Autism Spectrum Disorders (ASD). NIH research will pursue comprehensive and
innovative approaches to defining the genetic and environmental factors that contribute to
ASD, investigate epigenetic changes in the brain, and accelerate clinical trials of novel
pharmacological and behavioral interventions. CDC will expand autism monitoring and
surveillance and support an autism awareness campaign. HRSA will increase resources to
support children and families affected by ASD through screening programs and
evidence-based interventions.
To support teen and unintended pregnancy prevention activities in the Office of Public
Health and Science and CDC, the Budget provides $205 million in funds.
To invest in innovative approaches to prevent and treat substance abuse through
evidence-based community prevention programs, a warning system to detect emerging
drug threats, and the expansion of drug courts capacity, the Budget includes $93 million
within SAMHSA.
The Budget includes $352 million, an increase of $16 million, for CDC Global Health
Programs to build global public health capacity by strengthening the global public health
workforce; integrating maternal, newborn, and child health programs; and improving
global access to clean water, sanitation, and hygiene. Additionally, the Budget includes
$6.4 million in the Office of Global Health Affairs to support global health policy
leadership and coordination.
Finally, for FDA's medical product safety initiative to increase inspections and invest in
tools that will enhance the safety of increasingly complex drugs, medical devices, and
biological products, the Budget provides $1.4 billion, an increase of $101 million above
the FY 2010 funding level.
Protecting Americans from Public Health Threats and Terrorism
Continued investments in countermeasure development and pandemic preparedness will
help ensure HHS's preparedness to protect the American people in natural or man-made
public health emergencies.
The Budget includes $476 million, an increase of $136 million, for the Biomedical
Advanced Research and Development Authority to sustain the support of next generation
countermeasure development in high priority areas by allowing the BioShield Special
Reserve Fund to support both procurement activities and advanced research and
Reassortment of avian, swine, and human influenza viruses has led to the emergence of a
new strain of H1N1 influenza A virus, 2009 H1N1 flu, that is transmissible among
humans. On June 24, 2009, Congress appropriated $7.65 billion to HHS for pandemic
influenza preparedness and response to 2009 H1N1 flu. HHS has used these resources to
support H1N1 preparedness and response in States and hospitals, to invest in the H1N1
vaccine production, and to conduct domestic and international response activities. The
Budget includes $302 million for ongoing pandemic influenza preparedness activities at
CDC, NIH, FDA, and the Office of the Secretary for international activities, virus
detection, communications, and research. In addition, the use of balances from the June
2009 funds, including approximately $330 million in FY 2011, will enable HHS to
continue advanced development of cell-based and recombinant vaccines, antivirals,
respirators, and other activities that will help ensure the Nation's preparedness for future
Improving the Wellbeing of Children, Seniors, and Households
In addition to supporting efforts to increase our security in case of an emergency, the
HHS Budget also seeks to increase economic security for families and open up doors of
opportunity to those Americans who need it most.
The Budget provides critical support of the President's Zero to Five Plan to enhance
quality early care and education for our Nation's children. The Budget lays the
groundwork for a reauthorization of the Child Care and Development Block Grant and
entitlement funding for child care, including a total of $6.6 billion for the Child Care and
Development Fund (discretionary and entitlement child care assistance), an increase of
$1.6 billion. These resources will enable 1.6 million children to receive child care
assistance in FY 2011, approximately 235,000 more than could be served in the absence
of these additional funds.
The Administration's principles for reform of the Child Care and Development Fund
include establishing a high standard of quality across child care settings, expanding
professional development opportunities for the child care workforce, and promoting
coordination across the spectrum of early childhood education programs. The
Administration looks forward to working with Congress to begin crafting a
reauthorization proposal that will make needed reforms to ensure that children receive
high quality care that meets the diverse needs of families and fosters healthy child
To enable families to better care for their aging relatives and support seniors trying to
remain independent in their communities, the Budget provides $102.5 million for a new
Caregiver Initiative at the Administration on Aging. This funding includes $50 million
for caregiver services, such as counseling, training, and respite care for the families of
elderly individuals; $50 million for supportive services, such as transportation,
homemaker assistance, adult day care, and personal care assistance for elderly individuals
and their families; and $2.5 million for respite care for family members of people of all
ages with special needs. This funding will support 755,000 caregivers with 12 million
hours of respite care and more than 186,000 caregivers with counseling, peer support
groups, and training.
The Head Start program, run by the Administration for Children and Families (ACF),
will serve an estimated 971,000 children, an increase of approximately 66,500 children
over FY 2008. Early Head Start will serve approximately 116,000 infants and toddlers,
nearly twice as many as were served in FY 2008. The Budget includes an additional $989
million for Head Start to sustain and build on these historic increases enabled by
Recovery Act investments. The increase includes $118 million in funds to improve
program quality, and the Administration plans to implement key provisions of the 2007
Head Start Act reauthorization related to grantee recompetition, program performance
standards, and technical assistance that will improve the quality of services provided to
Head Start children and families.
To continue to fulfill the President's commitment to improving the development, safety,
well-being, and permanency of children and youth in foster care, adoption assistance, and
guardianship assistance, the Budget includes a proposal to extend by an additional
six months, through June 2011, the temporary FMAP increase for foster care and
adoption assistance provided by the Recovery Act. This extension will result in an
additional $237 million to States for maintaining critical services to vulnerable children
and youth.
The Budget includes an extension of the Temporary Assistance for Needy Families
(TANF) block grant and related programs, including the Contingency Fund and
Supplemental Grants, through FY 2011. The Budget also incorporates the Healthy
Marriage and Responsible Fatherhood grant funding into a new $500 million Fatherhood,
Marriage, and Families Innovation Fund. The fund will provide competitive grants to
States to conduct and rigorously evaluate comprehensive responsible fatherhood
programs and new demonstrations geared towards improving child outcomes by
improving outcomes for custodial parents with serious barriers to self-sufficiency.
Because the TANF Emergency Fund helps States to create subsidized jobs for
unemployed low-income individuals, the Budget also includes an additional $2.5 billion
for the TANF Emergency Fund and makes several changes to facilitate State efforts to
create jobs and provide work supports for needy families.
The Budget includes a one-year, $669 million extension of the Federal match to States'
reinvestment of incentive payments into Child Support Enforcement programs. Without
this critical extension of resources, it is estimated that States would reduce program
expenditures by 10 percent. The Budget also includes two proposals focused on
increasing child support collections and a proposal to expand resources for non-custodial
parents' access to and visitation with their children.
The Budget proposes a new way to fund the Low Income Home Energy Assistance
Program (LIHEAP) to help low-income households heat and cool their homes. Our
request provides $3.3 billion in discretionary funding. The proposed new trigger would
provide under our current estimates $2 billion in mandatory funding. Energy prices are
volatile, making it difficult to match funding to the needs of low-income families, so
under this proposal, mandatory funds will be automatically released in response to
quarterly spikes in energy prices or annual changes in the number of people living in
poverty. The $2 billion estimate is based on current projections of Supplemental Nutrition
Assistance Program usage and energy prices.
Investing in Scientific Research and Development
The investments that HHS is proposing in our human services budget will expand
economic opportunity but another critical way to grow and transform our economy is
through a healthy investment in research that will not only save lives but also create jobs.
The Budget includes a program level of $32.2 billion for NIH, an increase of $1 billion,
to support innovative projects from basic to clinical research. This effort will be guided
by NIH's five areas of exceptional research opportunities: supporting genomics and other
high-throughput technologies; translating basic science into new and better treatments;
reinvigorating the biomedical research community; using science to enable health care
reform; and focusing on global health. The Administration interest for the high-priority
areas of cancer and autism fits well into these five NIH theme areas. In FY 2011, NIH
estimates it will support a total of 37,001 research project grants, including 9,052 new
and competing awards.
The additional $1 billion will enable NIH to capitalize upon recent successful
investments in biomedical research, such as the Human Genome Project, that have
provided a powerful foundation for a deeper level of understanding human biology and
have opened another window into the causes of disease. New partnerships between
academia and industry are working to revitalize the drug development pipeline. An era of
personalized medicine is emerging where prevention, diagnosis, and treatment of disease
can be tailored to an individual rather than using the one-size-fits-all approach that all too
often falls short, wasting health care resources and potentially subjecting patients to
unnecessary and dangerous medical treatments and diagnostic procedures.
To advance regulatory science at FDA, the Budget provides $25 million. This initiative
builds on the President's commitment to harness the power of science for America's
benefit and includes $15 million for nanotechnology related research, which holds great
promise for advances in medical products and cosmetics. The additional resources will
also enable FDA to update review standards and provide regulatory pathways for new
technologies, such as biosimilars.
Recovery Act
Since the Recovery Act was passed in February 2009, HHS has made great strides in
improving access to health and social services, stimulating job creation, and investing in
the future of health care reform through advances in health IT, prevention, and scientific
research. HHS Recovery Act funds have had an immediate impact on the lives of
individuals and communities across the country affected by the economic crisis and the
loss of jobs.
As of September 30, 2009, the $31.5 billion in Federal Payments to States helped
maintain State Medicaid services to a growing number of beneficiaries and provided
fiscal relief to States. The National Institutes of Health awarded $5 billion for biomedical
research in over 12,000 grants. Area agencies on aging provided more than 350,000
seniors with over 6 million meals delivered at home and in community settings. Health
Centers provided primary health care services to over one million new patients.
These programs and activities will continue in FY 2010, as more come on line. For
example, 64,000 additional children and their families will participate in a Head Start or
Early Head Start experience. Approximately 30,000 American Indian and Alaska
Natives' homes will have safe drinking water and adequate waste disposal facilities. HHS
will be assisting States and communities to develop capacity, technical assistance and a
trained workforce to support the rapid adoption of health IT by hospitals and clinicians.
The CDC will support community efforts to reduce the incidence of obesity and tobacco
use. New research grants will be awarded to improve health outcomes by developing and
disseminating evidence-based information to patients, clinicians, and other decision-
makers about what interventions are most effective for patients under specific
The Recovery Act provides HHS programs an estimated $141 billion for
Fiscal Years 2009 -- 2019. While most provisions in HHS programs involve rapid
investments, the Recovery Act also includes longer term investments in health IT
(primarily through Medicare and Medicaid). As a result, HHS plans to have outlays
totaling $87 billion through FY 2010.
This testimony reflects just some of the ways that HHS programs improve the everyday
lives of Americans. Under this budget, we will provide greater security for working
families as we continue to recover from the worst recession in 70 years.
We will invest in research on breakthrough solutions for healthcare that will save money,
improve the quality of care, and energize our economy. And we will push forward our
goal of making government more open and accountable.
My department cannot accomplish any of these goals alone. It will require all of us to
work together. And I look forward to working with you to advance the health, safety,
and well-being of the American people. Thank you for this opportunity to speak with
you today. I look forward to answering your questions.

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