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REMARKS BY:
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TOMMY G. THOMPSON, SECRETARY OF HEALTH AND HUMAN SERVICES
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PLACE:
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Opening statement before the Senate Budget Committee
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DATE:
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February 12, 2004
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The President's Fiscal Year 2005 budget request for HHS
Mr. Chairman, Senator Conrad, and members of the Committee: thank
you for inviting me to discuss the President’s Fiscal Year
2005 budget for the Department of Health and Human Services.
In my first three years at the Department we have made tremendous
progress in improving the health, safety, and independence of the
American people. We continue to advance in providing health
care to seniors and to lower-income Americans, in improving the
well-being of children, in strengthening families, and in
protecting the homeland.
We are building a new public health infrastructure to give doctors
and hospitals the tools they need to respond to any public health
emergency. We have reenergized the fight against AIDS at home
and abroad. We increased access to quality health care,
especially for minorities, the uninsured, and the underinsured.
And, with your help, two months ago President Bush signed the most
comprehensive improvements to Medicare since it was created nearly
four decades ago.
To expand on our achievements, the President proposes $580 billion
for HHS for fiscal year 2005 – an increase of $32 billion, or
6 percent, over fiscal year 2004. Our discretionary budget
authority is $67 billion, an increase of $819 million, or 1.2%,
over fiscal year 2004, and an increase of 26% since 2001.
We look forward to working with this Committee and governors to
improve and modernize Medicaid and SCHIP by giving state
governments greater flexibility to use consumer-directed services
and to coordinate with free market providers.
We propose promoting home and community based care as an
alternative to institutionalization for disabled Americans through
the President’s New Freedom Initiative, and I look forward to
working on a bipartisan basis to get this important legislation
introduced, passed, and signed into law this year.
President Bush seeks to build on the success of the 1996 welfare
reform law by reauthorizing the successful TANF program to help
more welfare recipients achieve independence through work and
protect children and strengthen families. I hope that Congress will
take the next step in welfare reform and complete the TANF
reauthorization. We can – and we should –
accomplish this critical goal this year.
We are also working to protect our most vulnerable children.
The Federal government will spend nearly $5 billion this year for
foster care. We would fund existing adoption bonuses as well
as the new bonuses Congress approved last year with $35 million for
2004 and $32 million for 2005. And to support our commitment
to helping families in crisis and to protecting children from abuse
and neglect, President Bush has requested full funding – $505
million – for the Promoting Safe and Stable Families
program.
Working with governors, we've made tremendous progress in
providing millions of children with needed health coverage.
I'm delighted to announce today that about 5.8 million children
who would not have had health coverage were enrolled in the State
Children's Health Insurance Program at some point during
2003--a nine percent increase from 2002.
Over the past three years, we have approved Medicaid waivers and
state plan amendments to allow the states to expand access to
health coverage for more than 2.6 million people, and to expand the
range of benefits offered to 6.7 million other Americans.
And of course, the new Medicare modernization act is a significant
accomplishment for our Department. Adding these benefits and
choices and educating seniors about them will be a significant
challenge. You and your fellow lawmakers were right to follow
the CBO score in making decisions. And when CBO scores the budget
we submitted last week, it would be expected that their estimate
would reflect their original score of $395 billion or close to that
number.
As you know by now, in late December our actuaries came out with a
final score showing they believe the Medicare bill will cost $534
billion. I thought it might be helpful to break down the
difference between the CBO projections and the HHS projections to
explain why we differ by $139 billion. I’ve instructed
our actuaries to make it a top priority to fully examine why their
estimates differ from those set forth by the Congressional Budget
Office and then to begin to work to reconcile those
differences. That project is just beginning – but here
is what we know so far.
$100 billion of the difference is attributable to title 1 of the
bill – the title that creates the new drug benefit.
Most of the title 1 difference can be traced to differences in
take-up rates. HHS actuaries estimate higher overall participation
in the drug plan than CBO does, for a difference of $32 billion.
Our actuaries also believe more individuals will
qualify for the low-income subsidy and will have higher drug costs
once enrolled – accounting for another $47 billion of the
difference. $18 billion can be traced to different
assumptions regarding Medicaid’s Pharmacy Plus Waivers and to
varying assumptions regarding the “woodwork effect.”
These assumptions attempt to estimate how many people currently
eligible for, but not enrolled in, existing programs will be
discovered as they apply for the new drug benefit. Another $3
billion can be traced to technical differences regarding the state
“holdback” as the federal government assumes
responsibility for drug costs for the dually eligible.
Title 2 represents $32 billion of the difference between HHS
actuaries and CBO. $30 billion of that relates to different
assumptions regarding participation in private health plans.
HHS believes that by the end of ten years 1/3rd of
Medicare beneficiaries will be enrolled in private plans and will
receive enhanced benefits, reduced premiums and lower
cost-sharing. CBO believes that only around 14% of Medicare
enrollees will be in private plans. HHS actuaries also assume
that use of the stabilization fund to preserve beneficiary choice
will account for $2 billion of the difference.
The final $7 billion represents technical differences in the
remaining 10 titles of the bill, largely stemming from differing
estimates of how many beneficiaries will be served through the
traditional fee for service program as opposed to the new Medicare
Advantage plans. I hope as our actuaries and CBO experts
continue to work together, they will be able to bridge some of the
differences in their assumptions so that future estimates will be
more in line.
As you know, Mr. Chairman, seniors can begin enrolling in the drug
discount card by June of this year. We will add transparency
to the prescription drug market by making available the price of
drugs under each card. Competition among the cards will drive
down drug prices, probably very significantly, as people compare
the prices each card offers for the drugs they typically take.
So, a senior citizen, let’s call her Mrs. Jones, can sit down
with all of her prescriptions in front of her and call
1-800-Medicare. Our representative will review with Mrs.
Jones the discount cards in her area, and tell her the exact price
she will pay for her prescriptions under each card. Mrs.
Jones can choose the card that will give her the best deal for the
prescriptions she’s taking. If Mrs. Jones has a
computer, she will be able to go to our web site and get the exact
same information.
We are also currently reviewing the new benefit proposals submitted
by health plans. It appears that more than half of current
enrollees will see better benefits and that almost half will see
reduced premiums or out-of-pocket savings. The average premium may
decrease by as much as a third. The bottom line is that the
extra payments are providing more to beneficiaries – just as
was intended by the Medicare Modernization Act.
We look forward to working with Congress, the medical community,
and all Americans as we implement the new Medicare law and carry
out the initiatives President Bush is proposing to build a
healthier, safer, and stronger America.
I look forward to discussing this budget with you.
Last Revised: February 12, 2004
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