[House Hearing, 112 Congress]
[From the U.S. Government Printing Office]



 
               REVIEWING THE PRESIDENT'S FISCAL YEAR 2013
                BUDGET PROPOSAL FOR THE U.S. DEPARTMENT
                      OF HEALTH AND HUMAN SERVICES

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 26, 2012

                               __________

                           Serial No. 112-60

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Robert E. Andrews, New Jersey
Todd Russell Platts, Pennsylvania    Robert C. ``Bobby'' Scott, 
Joe Wilson, South Carolina               Virginia
Virginia Foxx, North Carolina        Lynn C. Woolsey, California
Bob Goodlatte, Virginia              Ruben Hinojosa, Texas
Duncan Hunter, California            Carolyn McCarthy, New York
David P. Roe, Tennessee              John F. Tierney, Massachusetts
Glenn Thompson, Pennsylvania         Dennis J. Kucinich, Ohio
Tim Walberg, Michigan                Rush D. Holt, New Jersey
Scott DesJarlais, Tennessee          Susan A. Davis, California
Richard L. Hanna, New York           Raul M. Grijalva, Arizona
Todd Rokita, Indiana                 Timothy H. Bishop, New York
Larry Bucshon, Indiana               David Loebsack, Iowa
Trey Gowdy, South Carolina           Mazie K. Hirono, Hawaii
Lou Barletta, Pennsylvania           Jason Altmire, Pennsylvania
Kristi L. Noem, South Dakota         Marcia L. Fudge, Ohio
Martha Roby, Alabama
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on April 26, 2012...................................     1

Statement of Members:
    Kline, Hon. John, Chairman, Committee on Education and the 
      Workforce..................................................     1
        Prepared statement of....................................     3
    Miller, Hon. George, senior Democratic member, Committee on 
      Education and the Workforce................................     4
        Prepared statement of....................................     6

Statement of Witnesses:
    Sebelius, Hon. Kathleen G., Secretary, U.S. Department of 
      Health and Human Services..................................     8
        Prepared statement of....................................     9

Additional Submissions:
    Barletta, Hon. Lou, a Representative in Congress from the 
      State of Pennsylvania, questions submitted for the record..    70
    Foxx, Hon. Virginia, a Representative in Congress from the 
      State of North Carolina:
        Letter, dated March 6, 2012, from Congressman Boustany to 
          Secretary Sebelius.....................................    22
        Questions submitted for the record.......................    68
    Hinojosa, Hon. Ruben, a Representative in Congress from the 
      State of Texas, question submitted for the record..........    73
    Hunter, Hon. Duncan, a Representative in Congress from the 
      State of California, question submitted for the record.....    68
    Chairman Kline:
        Letter, dated March 8, 2012, to Secretary Sebelius from 
          U.S. Senator Tom Coburn, et al.........................    60
        Letter, dated March 27, 2012, to Senator Coburn from 
          Assistant Secretary George H. Sheldon, HHS.............    62
        Questions submitted for the record.......................    66
    Mr. Miller, questions submitted for the record...............    73
    Roby, Hon. Martha, a Representative in Congress from the 
      State of Alabama, questions submitted for the record.......    70
    Roe, Hon. David P., a Representative in Congress from the 
      State of Tennessee, prepared statement of Peter Demos, 
      Demos' Restaurants.........................................    64
    Secretary Sebelius, response to questions submitted for the 
      record.....................................................    74
    Walberg, Hon. Tim, a Representative in Congress from the 
      State of Michigan, questions submitted for the record......    69
    Wilson, Hon. Joe, a Representative in Congress from the State 
      of South Carolina, question submitted for the record.......    68
    Woolsey, Hon. Lynn C., a Representative in Congress from the 
      State of California:
        Letter, dated March 26, 2012, from Assistant Secretary 
          Jim R. Esquea, HHS.....................................    32
        Questions submitted for the record.......................    72


                       REVIEWING THE PRESIDENT'S
                    FISCAL YEAR 2013 BUDGET PROPOSAL
                       FOR THE U.S. DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES

                              ----------                              


                        Thursday, April 26, 2012

                     U.S. House of Representatives

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The committee met, pursuant to call, at 10:03 a.m., in room 
2175, Rayburn House Office Building, Hon. John Kline [chairman 
of the committee] presiding.
    Present: Representatives Kline, Petri, McKeon, Biggert, 
Wilson, Foxx, Roe, Walberg, DesJarlais, Hanna, Bucshon, Gowdy, 
Barletta, Roby, Heck, Ross, Kelly, Miller, Kildee, Andrews, 
Scott, Woolsey, Hinojosa, McCarthy, Tierney, Holt, Davis, 
Altmire, and Fudge.
    Staff present: Andrew Banducci, Professional Staff Member; 
Katherine Bathgate, Deputy Press Secretary; James Bergeron, 
Director of Education and Human Services Policy; Casey Buboltz, 
Coalitions and Member Services Coordinator; Molly Conway, 
Professional Staff Member; Cristin Datch, Professional Staff 
Member; Lindsay Fryer, Professional Staff Member; Ed Gilroy, 
Director of Workforce Policy; Benjamin Hoog, Legislative 
Assistant; Ryan Kearney, Legislative Assistant; Brian Newell, 
Deputy Communications Director; Krisann Pearce, General 
Counsel; Molly McLaughlin Salmi, Deputy Director of Workforce 
Policy; Mandy Schaumburg, Education and Human Services 
Oversight Counsel; Dan Shorts, Legislative Assistant; Todd 
Spangler, Senior Health Policy Advisor; Linda Stevens, Chief 
Clerk/Assistant to the General Counsel; Alissa Strawcutter, 
Deputy Clerk; Loren Sweatt, Senior Policy Advisor; Kate 
Ahlgren, Minority Investigative Counsel; Aaron Albright, 
Minority Communications Director for Labor; Tylease Alli, 
Minority Clerk; Ruth Friedman, Minority Director of Education 
Policy; Waverly Gordon, Minority Fellow, Labor; Brian Levin, 
Minority New Media Press Assistant; Richard Miller, Minority 
Senior Labor Policy Advisor; Megan O'Reilly, Minority General 
Counsel; Julie Peller, Minority Deputy Staff Director; Michele 
Varnhagen, Minority Chief Policy Advisor/Labor Policy Director; 
and Daniel Weiss, Minority Special Assistant to the Ranking 
Member.
    Chairman Kline. A quorum being present, the committee will 
come to order.
    Good morning, Madam Secretary, thank you for being with us 
today to discuss the policies and priorities of the Department 
of Health and Human Services.
    In his fiscal year 2013 budget, President Obama requests 
$932 billion for the Department of Health and Human Services, 
one of the largest allocations for any Federal agency. Nearly 
$70 billion of this request is dedicated to various social 
services programs, including Head Start and Community Services 
block grants.
    While they support families nationwide, such programs are 
also vulnerable to waste and abuse of taxpayer resources. For 
example, a 2010 report by the Government Accountability Office 
revealed fraud in the Head Start program, including misleading 
taxpayers about the number of children enrolled to inflate the 
amount of Federal funds received.
    Despite a lengthy delay, I am pleased the Administration 
finally took steps to implement a 2007 law to strengthen Head 
Start and protect taxpayer dollars by requiring the lowest 
performing programs to re-compete for funding. I hope the 
department will continue to improve the accountability of this 
and other Social Services' programs within its jurisdiction.
    While these programs and policies will be part of the 
discussion today, health care is undoubtedly at the forefront 
of the minds of many here. It is an issue continually raised by 
our constituents and inextricably linked to the strength of our 
economy. Congress continues to closely examine the 2010 health 
care law and its unprecedented regulatory process. What we have 
learned is deeply troubling. First, we have learned the law 
will fall far short of the President's promise to lower health 
care costs. By any basic standard, whether the premiums 
families and employers pay, or the cost leveraged on taxpayers 
to finance government programs, health care costs are going up.
    The average cost of a family health insurance plan 
increased 9 percent just last year. Charles Blahous, a public 
trustee of Medicare and Social Security, recently stripped away 
the budget gimmicks to reveal the law will add as much as $527 
billion to the Federal deficit over the next decade.
    Patti-Ann Kanterman, Chief Financial Officer of her family 
owned business in Pennsylvania, recently told this committee 
exactly what the law did not do, quote--``It did not reduce the 
costs of insurance. It did not reduce uncertainty of offering 
insurance.'' It is worthwhile to note the President's budget 
requests $111 billion increase for health insurance subsidies, 
perhaps an implicit recognition costs are accelerating faster 
than even he imagined.
    We have also learned the laws made it more difficult to 
hire new workers. According to the Congressional Budget Office, 
the law will cut 800,000 jobs from the nation's workforce. This 
reflects the concerns raised by employers like Gail Johnson, 
president of a small business that offers early childhood 
education to families in Virginia. Ms. Johnson told the 
committee the 2010 law will, quote--``slow or stall the growth 
of small and mid-size businesses as they struggle to absorb its 
new costs.''
    Finally, we learned the President's pledge to the American 
people that they could keep their current health care plan was 
nothing more than empty rhetoric. The Administration has made 
it virtually impossible for employers to maintain their 
grandfathered exemption, which means employers must choose 
between losing the ability to manage coverage on behalf of 
their workers or complying with the law's myriad requirements 
as costs skyrocket.
    The consequences of this health care law extend beyond an 
employer's bottom line. They have consequences for workers as 
well. Brett Parker, with Bowlmor Lanes in New York City, has 
testified his kitchen staff will have to accept part-time hours 
due to the law's employer mandate. Other workers confront 
similar changes, including lower wages and loss of coverage as 
employers grapple with the law's regulations and mandates.
    Pennsylvania employer Will Knetch echoed the concerns of 
many when he said the law provides so many unknowns for the 
business community, it is scary. With 13 million searching for 
work, our nation simply cannot afford policies that create 
uncertainty and fear. Folks like Gail Johnson, Brett Parker, 
Patt-Ann Kanterman, these are America's job creators and their 
personal experiences reveal the difficult reality now facing 
countless employers and workers.
    Madam Secretary, we realize your job is to administer 
Federal law to the best of your ability; however, Congress also 
has a responsibility to protect the best interests of the 
American people. Toward that end, we will continue to conduct 
aggressive oversight of the law and the related regulatory 
actions taken by the Administration. As such, effective 
oversight requires the timely cooperation of the 
Administration.
    It was disappointing to receive, just last week, answers to 
questions this committee asked 10 months ago. Adding insult to 
injury, the responses you provided are out of date and largely 
irrelevant to the current debate. If it takes this long for the 
Federal bureaucracy to answer basic questions, it is hard to 
believe it can effectively run our nation's health care system. 
I hope you can provide an explanation for the delay and commit 
to doing better in the future.
    With that, I will now recognize my distinguished colleague, 
George Miller, the senior democratic member of the committee, 
for his opening remarks.
    [The statement of Chairman Kline follows:]

Prepared Statement of Hon. John Kline, Chairman, Committee on Education 
                           and the Workforce

    In his Fiscal Year 2013 budget, President Obama requests $932 
billion for the Department of Health and Human Services, one of the 
largest allocations for any federal agency. Nearly $70 billion of this 
request is dedicated to various social services programs, including 
Head Start and Community Services Block Grants.
    While they support families nationwide, such programs are also 
vulnerable to waste and abuse of taxpayer resources. For example, a 
2010 report by the Government Accountability Office revealed fraud in 
the Head Start program, including misleading taxpayers about the number 
of children enrolled to inflate the amount of federal funds received. 
Despite a lengthy delay, I am pleased the administration finally took 
steps to implement a 2007 law to strengthen Head Start and protect 
taxpayer dollars by requiring the lowest performing programs to re-
compete for funding. I hope the department will continue to improve the 
accountability of this and other social services programs within its 
jurisdiction.
    While these programs and policies will be a part of the discussion, 
health care is undoubtedly at the forefront of the minds of many here 
today. It is an issue continually raised by our constituents and 
inextricably linked to the strength of our economy. Congress continues 
to closely examine the 2010 health care law and its unprecedented 
regulatory process. What we have learned is deeply troubling.
    First, we have learned the law will fall far short of the 
president's promise to lower health care costs. By any basic standard--
whether the premiums families and employers pay or the costs leveraged 
on taxpayers to finance government programs--health care costs are 
going up. The average cost of a family health insurance plan increased 
9 percent just last year. Charles Blahous, a public trustee of Medicare 
and Social Security, recently stripped away the budget gimmicks to 
reveal the law will add as much as $527 billion to the federal deficit 
over the next decade.
    Patti-Ann Kanterman, chief financial officer of a family-owned 
business in Pennsylvania recently told this committee exactly what the 
law did not do: ``It did not reduce the cost of insurance; it did not 
reduce uncertainty of offering insurance.'' It is worthwhile to note 
the president's budget requests a $111 billion increase for health 
insurance subsidies, perhaps an implicit recognition costs are 
accelerating faster than even he imagined.
    We have also learned the law has made it more difficult to hire new 
workers. According to the Congressional Budget Office, the law will cut 
800,000 jobs from the nation's workforce. This reflects the concerns 
raised by employers like Gail Johnson, president of a small business 
that offers early childhood education to families in Virginia. Ms. 
Johnson told the committee the 2010 law will ``slow or stall the growth 
of small and midsized businesses as [they] struggle to absorb its new 
costs.''
    Finally, we learned the president's pledge to the American people 
that they could keep their current health care plan was nothing more 
than empty rhetoric. The administration has made it virtually 
impossible for employers to maintain their grandfathered exemption, 
which means employers must choose between losing the ability to manage 
coverage on behalf of their workers or complying with the law's myriad 
requirements as costs skyrocket.
    The consequences of this health care law extend beyond an 
employer's bottom line; they have consequences for workers as well. 
Brett Parker with Bowlmor Lanes in New York City has testified his 
kitchen staff will have to accept part-time hours due to the law's 
employer mandate. Other workers confront similar changes including 
lower wages and loss of coverage as employers grapple with the law's 
regulations and mandates. Pennsylvania employer Will Knetch echoed the 
concerns of many when he said the law ``provides so many unknowns for 
the business community; it is scary.''
    With 13 million searching for work, our nation simply cannot afford 
policies that create uncertainty and fear. Folks like Gail Johnson, 
Brett Parker, Patti-Ann Kanterman--these are America's job creators, 
and their personal experiences reveal the difficult reality now facing 
countless employers and workers.
    Madam Secretary, we realize your job is to administer federal law 
to the best of your ability. However, Congress also has a 
responsibility to protect the best interests of the American people. 
Toward that end, we will continue to conduct aggressive oversight of 
the law and the related regulatory actions taken by the administration.
    As such, effective oversight requires the timely cooperation of the 
administration. It was disappointing to receive just last week answers 
to questions this committee asked 10 months ago. Adding insult to 
injury, the responses you provided are out of date and largely 
irrelevant to the current debate. If it takes this long for the federal 
bureaucracy to answer basic questions, it's hard to believe it can 
effectively run our nation's health care system.
    I hope you can provide an explanation for the delay and commit to 
doing better in the future.
                                 ______
                                 
    Mr. Miller. Thank you, Mr. Chairman, and I join you in 
welcoming Secretary Sebelius back before the committee.
    From educating our youngest children at Head Start, to 
ensuring seniors access to health care through Medicare, the 
Department of Health and Human Services administers programs 
that make our nation stronger and healthier. HHS is also 
playing an essential role in implementing the Affordable Care 
Act. Proper implementation of this historic reform is vitally 
important. It has been 2 years since the Affordable Care Act 
was signed into law and 2 more years before it will be fully 
implemented.
    We never said the change would be everything--that it would 
change everything that is wrong with our health care system or 
fix things that people--everything that people would like, or 
as fast as they would like. But we know the Affordable Care Act 
is already moving in the right direction. For decades, we 
debated about what to do about rising health costs faced by 
families, businesses and governments.
    I would remind Members and my colleagues that they have all 
been visited over the last decade of businesses, small and 
large, international and American-based, of which, complained 
about their dramatic rise in health care over that last decade. 
We think the Affordable Care Act will, in the long-term, lower 
those health care costs to businesses, families and to our 
economy and it will put American families back in charge of 
health care. But, for decades, we kicked the can down the road, 
costs continued to rise for millions of Americans lost access 
to the affordable coverage.
    The billion dollar insurance industry held American 
families hostage for too long. They denied coverage due to pre-
existing conditions and they rescinded coverage in the middle 
of treatment. They forced families with stricken loved ones 
into bankruptcy because those patients had reached their 
previously unknown, lifetime coverage limit.
    But that finally changed with reform. And now the early 
successes of the law cannot be denied. The national trends are 
positive. I am also encouraged that I have been hearing from 
providers, insurers, patients and health systems in my state 
and district. California is one of the most proactive states in 
implementing the reform. The state has already activated its 
exchanges, the Accountable Care Organizations are being 
embraced by physician groups and insurers as a way to better 
coordinate care, leading to healthier outcomes and lower 
overall costs.
    For example, Blue Shield of California announced in October 
they would give out $20 million in grants to 18 California 
hospital heath systems, clinics and physician groups to form 
accountable care organizations, the incentives to reduce 
unnecessary hospital readmissions and save California public 
employees retirement system $15 million in reduced insurance 
premiums. Across the country we have seen similar successes.
    The Affordable Care Act is already working to put Medicare 
on stronger financial footing. The law provides new tools to 
combat fraud and abuse in the Medicare and Medicaid systems. 
They have helped the government recover a record amount of 
money, over $4 billion since last year, in fraudulent payments.
    Additionally, the growth of Medicare costs have begun to 
slow. The average Medicare advantage premium is lower this year 
and the solvency of the Medicare Hospital Trust Fund has been 
extended until 2024. This is exactly the opposite of what 
opponents have predicted would happen. While there is more to 
be done to secure Medicare in the long-term, the Affordable 
Care Act has begun to show results--reforms should be allowed 
to work.
    Rather than ending Medicare guarantees, as my Republican 
colleagues have voted to do repeatedly, we must work to 
strengthen the program. Nor should we turn our backs on the 
reforms that are already directing the benefits of millions of 
Americans right now. Seniors are saving billions on 
medications, working families are no longer just one illness 
away from bankruptcy, because an insurance company drops 
coverage due to an arbitrary limit.
    Children with pre-existing conditions are no longer denied 
coverage and more than two and one-half million young adults 
who aren't offered coverage at work are now allowed to stay on 
their parent's health plan. All of these reforms would 
disappear if the law were repealed. Repeal means working 
families going bankrupt because insurance companies end 
coverage when they get cancer.
    Repeal means sick children being denied coverage. Repeal 
means young adults in jobs that don't offer health insurance, 
losing access to their parent's coverage. The repeal means that 
all other patient's rights set to go into law over the next 2 
years would never happen, like completely ending the use of 
pre-existing conditions to deny care or pricing Americans out 
of coverage; like ensuring all Americans have access to quality 
and affordable health insurance that is not dependent upon 
whether your employer offers it or not.
    Mr. Chairman, the Affordable Care Act is making a 
difference. America has tried to pass meaningful health reform 
for nearly a century but we couldn't make it happen until 
President Obama and the previous Congress made it a priority 
and got it done. Now is not the time to reverse course and go 
back to the days when the insurance companies were in charge. 
Our nation's businesses can't afford it, families can't afford 
it and our government can't afford it.
    Once again, Secretary Sebelius, thank you very much for 
making yourself available to the committee this morning and I 
look forward to your testimony.
    [The statement of Mr. Miller follows:]

  Prepared Statement of Hon. George Miller, Senior Democratic Member, 
                Committee on Education and the Workforce

    Good morning Mr. Chairman. I join you in welcoming Secretary 
Sebelius back to the committee.
    From educating our youngest children in Head Start to ensuring 
seniors' access to health care through Medicare, the Department of 
Health and Human Services administers programs that make our nation 
stronger and healthier.
    HHS is also playing a central role in implementing the Affordable 
Care Act. Proper implementation of this historic reform is vitally 
important. It has been two years since the Affordable Care Act was 
signed into law. And there are two more years to go before it is fully 
implemented.
    We never said we could change everything that's wrong with our 
health care system, or fix things as fast as people would like. But we 
know the Affordable Care Act is already moving us in the right 
direction.
    For decades, we debated what to do about rising health costs faced 
by families, businesses and government. We debated how best to put 
American families, instead of insurance companies, back in charge of 
their health care.
    But, for decades, we kicked the can down the road. Costs continued 
to rise and millions of Americans lost access to affordable coverage.
    The billion-dollar insurance industry held American families 
hostage for too long. They denied coverage due to pre-existing 
condition. They rescinded coverage in the middle of treatment. They 
forced families with stricken loved ones into bankruptcy because those 
patients had reached a previously unknown lifetime coverage limit.
    But that finally changed with reform. And the early success of this 
law cannot be denied.
    The national trends are positive.
    I am also encouraged with what I am hearing from providers, 
insurers, patients and health systems in my state and district.
    California is one of the most pro-active states in the country 
implementing reform.
    The state has already activated its exchange.
    Accountable Care Organizations are being embraced by physician 
groups and insurers as a way to better coordinate care, leading to 
healthier outcomes at lower overall costs.
    For example, Blue Shield of California announced in October that it 
will give out $20 million in grants to 18 California hospitals, health 
systems, clinics and physicians groups to form an Accountable Care 
Organization.
    And incentives to reduce unnecessary hospital readmissions saved 
the California Public Employees Retirement System $15 million in 
reduced insurance premiums.
    Across the country we have seen similar successes.
    The Affordable Care Act is already working to put Medicare on 
stronger financial footing.
    The law provides new tools to combat fraud and abuse in the 
Medicare and Medicaid systems.
    These have helped the government recover a record $4 billion last 
year in fraudulent payments.
    Additionally, the growth of Medicare costs has begun to slow. The 
average Medicare Advantage premium is lower this year. And the solvency 
of the Medicare hospital trust fund has been extended until 2024.
    This is exactly the opposite of what opponents predicted would 
happen.
    While there is more to be done to secure Medicare for the long-
term, the Affordable Care Act has begun to show results. These reforms 
should be allowed to work.
    Rather than ending the Medicare guarantee as my Republican 
colleagues have voted to do repeatedly, we must work to strengthen the 
program.
    Nor should we turn our backs on the reforms that are also directly 
benefiting millions of Americans right now.
    Seniors are saving billions on their medications.
    Working families are no longer just one illness away from 
bankruptcy because of an insurance company that drops coverage due to 
an arbitrary limit.
    Children with pre-existing conditions are no longer denied 
coverage.
    And more than 2.5 million young adults who aren't offered coverage 
at work are now allowed to stay on their parents' health plan.
    All of these reforms would disappear if the law were to be 
repealed.
    Repeal means working families going bankrupt because of cancer and 
an insurance company that ends coverage.
    Repeal means sick children being denied coverage.
    Repeal means young adults, in jobs that don't offer health 
insurance, losing access to their parents' coverage.
    And repeal means that all the other patient rights set to go into 
law over the next two years would never happen.
    Like completely ending the use of preexisting conditions to deny 
care or pricing Americans out of coverage. Like ensuring all Americans 
have access to quality and affordable health insurance that is not 
dependent on whether your employer offers it or not.
    Mr. Chairman, the Affordable Care Act is already making a 
difference.
    America tried to pass meaningful health care reform for nearly a 
century but we couldn't make it happen until President Obama and the 
previous Congress made it a priority and got it done.
    Now is not the time to reverse course and go back to the days where 
insurance companies were in charge.
    Our nation's businesses can't afford it. Families can't afford it. 
And our government can't afford it.
    Once again, thank you, Secretary Sebelius, for making yourself 
available to the committee.
    I look forward to your testimony.
                                 ______
                                 
    Chairman Kline. I thank the gentleman.
    Pursuant to Committee Rule 7(c), all committee members will 
be permitted to submit written statements to be included in the 
permanent hearing record and, without objection, the hearing 
record will remain open for 14 days to allow statements, 
questions for the record and other extraneous material 
referenced during the hearing, to be submitted in the official 
hearing record.
    According to my script, it is now my time to introduce our 
witness. I think this is, indeed, one of those cases where our 
witness needs no introduction; everyone knows the Honorable 
Kathleen Sebelius, the Secretary of Health and Human Services. 
She has been before this committee before. We welcome her back 
again.
    I am also supposed to remind everybody of the lighting 
system, which is there in front of you, Madam Secretary. It is 
the old green, yellow and red light system. Please give your 
testimony, in its entirety, of course. Everything will be 
submitted to the record--your entire written testimony.
    For my colleagues up here, however, once again, I will be 
making every effort to hold us to the 5-minute rule so that all 
members have a chance to engage in the discussion.
    And, with that, Madam Secretary, you are recognized.

       STATEMENT OF HON. KATHLEEN G. SEBELIUS, SECRETARY,
          U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Secretary Sebelius. Well, good morning, Chairman Kline and 
Ranking Member Miller and members of the committee. And I want 
to start by thanking you for the invitation to discuss the 
President's 2013 Budget for the Department of Health and Human 
Services.
    Our budget helps to create an American economy built to 
last by strengthening our nation's health care, supporting 
research that will lead to tomorrow's cures, and promoting 
opportunity for America's children and families, so everyone 
has a fair shot to reach their full potential. It makes the 
investments we need right now, while reducing the deficit in 
the long-term, to make sure that programs that millions of 
Americans rely on will be there for generations to come.
    I look forward to answering your questions about the budget 
but, first, I want to share a few highlights. Over the last 2 
years, as Congressman Miller said, we have been working to 
deliver the benefits of the Affordable Care Act to the American 
people. Thanks to the law, more than 2.5 million additional 
young Americans are already getting coverage through their 
parent's health plans.
    An estimated 32.5 million beneficiaries with Medicare have 
taken advantage of the recommended preventive services without 
co-pays or co-insurance. Small business owners are taking 
advantage of tax breaks on their health care premiums that 
allow them to expand the care and hire more employees. This 
year we will build on that progress, continuing to support 
states as they work to establish affordable insurance exchanges 
by 2014.
    Once these competitive marketplaces are in place, they will 
ensure that all Americans have access to quality, affordable 
health coverage. But we know that the lack of insurance is not 
the only obstacle to care, so our budget also invests in our 
health care workforce. The budget supports training more than 
7,100 primary care providers and placing them where they are 
needed most.
    It also invests in America's network of community health 
centers. The budget will help health centers provide access to 
quality care for 21 million people, 300,000 patients more than 
what could be served last year. The budget ensures that 21st 
Century America will continue to lead the world in biomedical 
research by maintaining funding for the National Institutes of 
Health.
    This budget also continues our Administration's commitment 
to high-quality early education programs that put all of our 
children on a path to school success and opportunity. Increased 
funding for the 962,000 children in Head Start and the 1.5 
million children in federally funded childcare assistance 
program is not only an investment in higher test scores and 
graduation rates, we know it leads to more productive adults, 
stronger families and more secure communities.
    And our investments also support critical reforms in both 
Head Start and childcare programs to raise the bar on quality. 
For example, this year, for the first time, we will require 
Head Start programs that don't meet important quality 
benchmarks to compete for funding. In order to make these vital 
investments, the budget recognizes the need to set priorities, 
make difficult trade-offs and ensure we use every dollar 
wisely; that starts with continuing support for President 
Obama's historic push to stamp out waste, fraud and abuse in 
the health care system.
    Over the last 3 years, every dollar we have put into health 
care fraud and abuse control has returned more than $7.00. Last 
year alone, those efforts recovered more than $4 billion. Our 
budget builds on those efforts by giving law enforcement the 
technology and data to spot perpetrators early and prevent 
payments based on fraud from going out in the first place. The 
budget makes smart investments where they will have the 
greatest impact, helping to build a stronger, healthier and 
more prosperous America for the future.
    I want to, again, thank you, Mr. Chairman, for inviting me 
here this morning and I look forward to our conversation.
    [The statement of Secretary Sebelius follows:]

      Prepared Statement of Hon. Kathleen G. Sebelius, Secretary,
              U.S. Department of Health and Human Services

    Chairman Kline, Ranking Member Miller, and Members of the 
Committee, thank you for the invitation to discuss the President's FY 
2013 Budget for the Department of Health and Human Services (HHS).
    The Budget for the Department of Health and Human Services (HHS) 
invests in health care, disease prevention, social services, and 
scientific research. HHS makes investments where they will have the 
greatest impact, build on the efforts of our partners, and lead to 
meaningful gains in health and opportunity for the American people.
    The President's fiscal year (FY) 2013 Budget for HHS includes a 
reduction in discretionary funding for ongoing activities, and 
legislative proposals that would save an estimated $350.2 billion over 
ten years. The Budget totals $940.9 billion in outlays and proposes 
$76.7 billion in discretionary budget authority. This funding will 
enable HHS to: Strengthen Health Care; Support American Families; 
Advance Scientific Knowledge and Innovation; Strengthen the Nation's 
Health and Human Service Infrastructure and Workforce; Increase 
Efficiency, Transparency, and Accountability of HHS Programs; and 
Complete the Implementation of the Recovery Act.

Strengthen health care
    Delivering benefits of the Affordable Care Act to the American 
People: The Affordable Care Act expands access to affordable health 
coverage to millions of Americans, increases consumer protections to 
ensure individuals have coverage when they need it most, and slows 
increases in health costs. Effective implementation of the Affordable 
Care Act is central to the improved fiscal outlook and well-being of 
the Nation. The Centers for Medicare & Medicaid Services (CMS) is 
requesting an additional $1 billion in discretionary funding to 
continue implementing the Affordable Care Act, including Affordable 
Insurance Exchanges, and to help keep up with the growth in the 
Medicare population.
    Expand and Improve Health Insurance Coverage: Beginning in 2014, 
Affordable Insurance Exchanges will provide improved access to 
insurance coverage for millions of Americans. Exchanges will make 
purchasing private health insurance easier by providing eligible 
individuals and small businesses with one-stop-shopping where they can 
compare benefit plans. New premium tax credits and reductions in cost-
sharing will help ensure that eligible individuals can afford to pay 
for the cost of private coverage through Exchanges. FY 2013 will be a 
critical year for building the infrastructure and initiating the many 
business operations critical to enabling Exchanges to begin operation 
on January 1, 2014. The expansion of health insurance coverage for 
millions of low-income individuals who were previously not eligible for 
coverage also begins in 2014. CMS has worked closely with states to 
ensure they are prepared to meet the 2014 deadline and will continue 
this outreach in FY 2013.
    Many important private market reforms have already gone into 
effect, providing new rights and benefits to consumers to put them in 
charge of their own health care. The Affordable Care Act's Patient's 
Bill of Rights allows young adults to stay on their parents' plans 
until age 26 and ensures that consumers receive the care they need when 
they get sick and need it most by prohibiting rescissions and lifetime 
dollar limits on coverage for care. The new market reforms also provide 
for independent reviews of coverage disputes. Temporary programs like 
the Early Retiree Reinsurance Plan (ERRP) and the Pre-Existing 
Condition Insurance Plan (PCIP) are supporting affordable coverage for 
individuals who often face difficulties obtaining private insurance in 
the current marketplace. Additionally, rate review and medical loss 
ratio (MLR) provisions help ensure that health care premiums are kept 
reasonable and affordable year after year. The already operational rate 
review provision gives states additional resources to determine if a 
proposed health care premium increase is unreasonable and, in many 
cases, help enable state authorities to deny an unreasonable rate 
increase. HHS reviews large proposed increases in states that do not 
have effective rate review programs. The MLR provisions guarantee that, 
starting in 2011, insurance companies use at least 80 percent or 85 
percent of premium revenue, depending on the market, to provide or 
improve health care for their customers or give them a rebate.
    Strengthen the Delivery System: The Affordable Care Act established 
a Center for Medicare and Medicaid Innovation (Innovation Center). The 
Innovation Center is tasked with developing, testing, and--for those 
that prove successful--expanding innovative payment and delivery system 
models to improve quality of care and reduce costs in Medicare, 
Medicaid, and the Children's Health Insurance Program (CHIP). The 
Innovation Center began operations in November 2010 and has undertaken 
an ambitious agenda encompassing patient safety, coordination of care 
among multiple providers, and enhanced primary care. These projects can 
serve as crucial stepping stones towards a higher-quality, more 
efficient health care system.
    HHS is also working to ensure that the most vulnerable in our 
Nation have full access to seamless, high-quality health care. The 
Affordable Care Act established a new office to more effectively 
integrate benefits and improve coordination between states and the 
Federal Government for those who are eligible for both Medicare and 
Medicaid. While Medicare-Medicaid beneficiaries make up a relatively 
small portion of enrollment in the two programs, they represent a 
significant portion of expenditures. HHS is currently supporting 15 
states as they design models of care that better integrate Medicare and 
Medicaid services and is designing additional demonstrations to 
continue to improve care.
    CMS is currently offering three initiatives that will help spur the 
development of Accountable Care Organizations (ACOs) for Medicare 
beneficiaries. ACOs are groups of health providers who join together to 
give high-quality, coordinated care to the patients they serve. If an 
ACO meets quality standards, it will be eligible to share in savings it 
achieves for the Medicare program, and may be subject to losses, 
offering a powerful incentive to restructure care to better serve 
patients.
    Ensuring Access to Quality Care for Vulnerable Populations: Health 
Centers are a key component of the Nation's health care safety net. The 
President's Budget includes a total of $3 billion, including an 
increase of $300 million from mandatory funds under the Affordable Care 
Act, to the Health Centers program. This investment will provide 
Americans in underserved areas, both rural and urban, with access to 
comprehensive primary and preventive health care services. This funding 
will create 25 new health center sites in areas of the country where 
they do not currently exist and provide access to quality care for 21 
million people, an increase of 300,000 additional patients over FY 
2012. The Budget also promotes a policy of steady and sustainable 
health center growth by distributing Affordable Care Act resources over 
the longterm. This policy safeguards resources for new and existing 
health centers to continue services and ensures a smooth transition as 
health centers increase their capacity to provide care as access to 
insurance coverage expands.
    Improving Healthcare Quality and Patient Safety: The Affordable 
Care Act directed HHS to develop a national strategy to improve health 
care services delivery, patient health outcomes, and population health. 
In FY 2011, HHS released the National Strategy for Quality Improvement 
in Health Care, which highlights three broad aims: Better Care, Healthy 
People and Communities, and Affordable Care. Since publishing the 
Strategy, HHS has focused on gathering additional input from private 
partners and aligning new and existing HHS activities with the 
Strategy. HHS will enhance the Strategy by incorporating input from 
stakeholders and developing metrics to measure progress toward 
achieving the Strategy's aims and priorities. Already, the Strategy is 
serving as a blueprint for quality improvement activities across the 
country.
    CMS will continue funding for the Partnership for Patients, an 
initiative launched in April 2011 that sets aggressive targets for 
improving the quality of healthcare: reducing preventable hospital-
acquired conditions by 40 percent and preventable readmissions by 20 
percent by the end of 2013, as compared to 2010.

Support American families
    Healthy Development of Children and Families: HHS oversees many 
programs that support children and families, including Head Start, 
Child Care, Child Support, and Temporary Assistance for Needy Families 
(TANF). The FY 2013 Budget request invests in early education, 
recognizing the role high-quality early education programs can play in 
preparing children for school success. The request also supports TANF 
and proposes to restore funding for the Supplemental Grants without 
increasing overall TANF funding.
    Investing in Education by Supporting an Early Learning Reform 
Agenda: The FY 2013 Budget supports critical reforms in Head Start and 
a Child Care quality initiative that, when taken together with the Race 
to the Top Early Learning Challenge, are key elements of the 
Administration's broader education reform agenda designed to improve 
our Nation's competitiveness by helping every child enter school ready 
for success.
    On November 8, 2011 the President announced important new steps to 
improve the quality of services and accountability at Head Start 
centers across the country. The Budget requests over $8 billion for 
Head Start programs, an increase of $85 million over FY 2012, to 
maintain services for the 962,000 children currently participating in 
the program. This investment will also provide resources to effectively 
implement new regulations that require grantees that do not meet high 
quality benchmarks to compete for continued funding, introducing an 
unprecedented level of accountability into the Head Start program. By 
directing taxpayer dollars to programs that offer high-quality Head 
Start services, this robust, open competition for Head Start funding 
will help to ensure that Head Start programs provide the best available 
early education services to our most vulnerable children.
    The Budget provides $6 billion for child care, an increase of $825 
million over FY 2012. This funding level will provide child care 
assistance to 70,000 more children than could otherwise receive 
services without this increased investment; 1.5 million children in 
total. In addition to providing funding for direct assistance to more 
children, the Budget includes $300 million for a new child care quality 
initiative that states would use to invest directly in programs and 
teachers so that individual child care programs can do a better job of 
meeting the early learning and care needs of children and families. The 
funds would also support efforts to measure the quality of individual 
child care programs through a rating system or another system of 
quality indicators, and to clearly communicate program-specific 
information to parents so they can make informed choices for their 
families. These investments are consistent with the broader 
reauthorization principles outlined in the Budget, which encompass a 
reform agenda that would help transform the Nation's child care system 
to one that is focused on continuous quality improvement and provides 
more low-income children access to high-quality early education 
settings that support children's learning, development, and success in 
school.
    Improve the Foster Care System: The Budget includes an additional 
$2.8 billion over ten years to support improvements in child welfare. 
Additional resources will support incentives to states to improve 
outcomes for children in foster care and those who are receiving in-
home services from the child welfare system, and also to require that 
child support payments made on behalf of children in foster care be 
used in the best interest of those children. The Budget also creates a 
new teen pregnancy prevention program specifically targeted to youth in 
foster care.
    Strengthen TANF and Create Jobs: The Budget would provide continued 
funding for the TANF program and would fund the Supplemental Grants for 
Population Increases. When Congress takes up reauthorization, we want 
to work with lawmakers to strengthen the program's effectiveness in 
accomplishing its goals. This should include using performance 
indicators to drive program improvement and ensuring that states have 
the flexibility to engage recipients--including families with serious 
barriers to employment--in the most effective activities to promote 
success in the workforce. We also want to work with Congress to revise 
the Contingency Fund to make it more effective during economic 
downturns.
    Keeping America Healthy: The President's Budget includes resources 
necessary to enhance clinical and community prevention, support 
research, develop the public health workforce, control infectious 
diseases, and invest in prevention and management of chronic diseases 
and conditions.
    Preventing Teen Pregnancy: The Budget includes $105 million in the 
Prevention and Public Health Fund for the Office of the Assistant 
Secretary for Health for teen pregnancy prevention programs. These 
programs will support community-based efforts to reduce teen pregnancy 
using evidence-based models as well as promising programs and 
innovative strategies. The Budget also includes $15 million in funding 
for CDC teen pregnancy prevention activities to reduce the number of 
unintended pregnancies through science-based prevention approaches.
    Protect Vulnerable Populations: HHS is committed to ensuring that 
vulnerable populations continue to receive critical services during 
this period of economic uncertainty.

Strengthen the nation's health and human service infrastructure and 
        work force
    Investing in Infrastructure: A strong health workforce is key to 
ensuring that more Americans can get the quality care they need to stay 
healthy. The Budget includes $677 million, an increase of $49 million 
over FY 2012, within HRSA to expand the capacity and improve the 
training and distribution of primary care, dental, and pediatric health 
providers. The Budget will support the placement of more than 7,100 
primary care providers in underserved areas and begin investments that 
expand the capacity of institutions to train 2,800 additional primary 
care providers over 5 years.

Increase efficiency, transparency, and accountabiliy of HHS programs
    Living Within our Means: HHS is committed to improving the Nation's 
health and well-being while simultaneously contributing to deficit 
reduction. The FY 2013 discretionary request demonstrates this 
commitment by maintaining ongoing investments in areas most central to 
advancing the HHS mission while making reductions to lower priority 
areas, reducing duplication, and increasing administrative 
efficiencies. Overall, the FY 2013 request includes over $2.1 billion 
in terminations and reductions to fund initiatives while achieving 
savings in a constrained fiscal environment. Many of these reductions, 
such as the $177 million cut to the Children's Hospital Graduate 
Medical Education Payment Program, the $452 million cut to the Low 
Income Home Energy Assistance Program (LIHEAP), and the $327 million 
cut to the Community Services Block Grant (CSBG) were very difficult to 
make, but are necessitated by the current fiscal environment.
    The Administration remains supportive of CSBG's important goals and 
the services it provides to low-income Americans. We have had to make 
tough choices to meet current fiscal targets. The 2013 Budget provides 
$350 million for CSBG, and proposes to strengthen the program to make 
sure that we are getting the most out of every dollar we spend. The 
Budget proposes that entities receiving funding from CSBG meet certain 
performance standards, and compete for funding if they fall below those 
standards.
    Regarding LIHEAP, the Administration proposes to adjust funding for 
expected winter fuel costs and to target funds to those most in need. 
The request is $3 billion, $452 million below the FY 2012 level and 
$450 million above both FY 2008 and the 2012 request. With constrained 
resources, the Budget targets assistance where it is needed most. The 
request targets $2.8 billion in base grants using the state allocation 
Congress enacted for FY 2012. The request also includes $200 million in 
contingency funds, which will be used to address the needs of 
households reliant on home delivered fuels (heating oil and propane) 
should expected price trends be realized, as well as other energy-
related emergencies.
    In September 2011, the Administration detailed a plan for economic 
growth and deficit reduction. The FY 2013 Budget follows this blueprint 
in its legislative proposals, presenting a package of health savings 
proposals that would save more than $360 billion over 10 years, with 
almost all of these savings coming from Medicare and Medicaid. Medicare 
proposals would encourage high-quality, efficient care, increase the 
availability of generic drugs and biologics, and implement structural 
reforms to encourage beneficiaries to seek value in their health care 
choices. The Budget also seeks to make Medicaid more flexible, 
efficient, and accountable while strengthening Medicaid program 
integrity. Together, the FY 2013 discretionary budget request and these 
legislative proposals allow HHS to support the Administration's 
challenging yet complementary goals of investing in the future and 
establishing a sustainable fiscal outlook.
    Program Integrity and Oversight: The FY 2013 Budget continues to 
make program integrity a top priority. The Budget includes $610 million 
in discretionary funding for Health Care Fraud and Abuse Control 
(HCFAC), the full amount authorized under the Budget Control Act of 
2011 (BCA). The Budget also proposes to fully fund discretionary 
program integrity initiatives at $581 million in FY 2012, consistent 
with the BCA. The discretionary investment supports the continued 
reduction of the Medicare fee-for-service improper payment rate; 
investments in prevention-focused, data-driven initiatives like 
predictive modeling; and HHS-Department of Justice Health Care Fraud 
Prevention and Enforcement Action Team (HEAT) initiatives, including 
Medicare Strike Force teams and fighting pharmaceutical fraud.
    From 1997 to 2011, HCFAC programs have returned over $20.6 billion 
to the Medicare Trust Funds. Approximately $4.1 billion was recovered 
last year in FY 2011, including $2.5 billion returned to the Trust 
Funds, and the current three-year return-on-investment of 7.2 to 1 is 
the highest in the history of the HCFAC program. The Budget proposes a 
10-year discretionary investment yielding a conservative estimate of 
$11.3 billion in Medicare and Medicaid savings and 16 program integrity 
proposals to build on the Affordable Care Act's comprehensive fraud 
fighting authorities for savings of an additional $3.6 billion over 10 
years.
    Additionally, the Budget includes funding increases for significant 
oversight activities. The request includes $84 million for the Office 
of Medicare Hearings and Appeals, an increase of $12 million, to 
continue to process the increasing number of administrative law judge 
appeals within the statutory 90-day timeframe while maintaining the 
quality and accuracy of its decisions. The Budget also includes $370 
million in discretionary and mandatory funding for the Office of 
Inspector General (OIG), a 4 percent increase from FY 2012. This 
increase will enable OIG to expand CMS Program Integrity efforts in 
areas such as HEAT, improper payments, and focus on investigative 
efforts on civil fraud, oversight of grants, and the operation of new 
Affordable Care Act programs.
    Additionally, Durable Medical Equipment (DME) Competitive Bidding 
is providing competitive pricing, while continuing to ensure access to 
quality medical equipment from accredited suppliers, which will save 
Medicare $25.7 billion over 10 years and help millions of Medicare 
beneficiaries save $17.1 billion in out-of-pocket costs over 10 years. 
The Budget proposes to extend some of the efficiencies of DME 
Competitive Bidding to Medicaid by limiting Federal reimbursement on 
certain DME services to what Medicare would have paid in the same state 
for the same services. This proposal is expected to save Medicaid $3.0 
billion over 10 years.

Completing implementation of the Recovery Act
    The American Recovery and Reinvestment Act provided $140 billion to 
HHS programs, of which $110 billion had been spent by grant and 
contract recipients by the end of FY 2011. The vast majority of these 
funds helped state and local communities cope with the effects of the 
economic recession.
    Thousands of jobs were also created or saved, including subsidized 
employment and training for over 260,000 people through the Temporary 
Assistance for Needy Families (TANF) program Emergency Contingency 
Fund.
    The Recovery Act provided states fiscal relief through a temporary 
increase in Federal matching payments of $84 billion for Medicaid and 
foster care and adoption assistance.
    HHS Recovery Act funds are also making long-term investments in the 
health of the American people and the health care system itself. 
Beginning in FY 2011 and continuing for the next few years, HHS will be 
investing more than $20 billion to support implementation of health 
information technology in the health care industry on a mass scale. 
This effort is expected to significantly improve the quality and 
efficiency of the U.S. health care system. In addition, $10 billion in 
Recovery Act funds were invested in biomedical research programs around 
the country, including a major effort to document genomic changes in 20 
of the most common cancers and to build research laboratory capacity. 
Of more immediate impact, $1 billion has been supporting prevention and 
wellness programs, including projects in 44 communities with a total 
combined population of over 50 million aimed at reducing tobacco use 
and the chronic diseases associated with obesity.
    HHS has also met the challenges of transparency and accountability 
in the management of its Recovery Act funds. More than 23,000 grantees 
and contractors with Recovery Act funding from HHS discretionary 
programs have submitted reports on the status of their projects over 
the last 10 quarters. More than 99 percent of the required recipient 
reports have been submitted on time and are available to the public on 
Recovery.gov; non-filers have been sanctioned. Finally, HHS Recovery 
Act program managers are working hand-in-hand with the Secretary's 
Council on Program Integrity to ensure that risks for fraud, abuse, and 
waste are identified and steps are taken to mitigate those risks.
    Thank you for the opportunity to testify. I will be happy to answer 
any questions you may have.
                                 ______
                                 
    Chairman Kline. Thank you, Madam Secretary. The health 
reform law, which we have just been discussing here, cuts $200 
billion out of the Medicare Advantage program. As a result of 
these cuts, the Congressional Budget Office has estimated that 
5 million fewer seniors will be enrolled in Medicare Advantage 
plans during the next decade. And that was a matter of some 
concern during the debate leading up to the passage of this 
bill.
    And, now, just this week, we have seen an alarming report 
from the Government Accountability Office, suggesting the 
Administration viewed these cuts to the health care of millions 
of seniors as a vulnerability and created a so-called 
``demonstration project,'' to temporarily avert the damage. The 
GAO criticized the $8 billion program that will delay the 
impact of these cuts until next year. The GAO also reports that 
such a national program in size and cost is unprecedented and 
its design, quote--``precludes a credible evaluation of its 
effectiveness.''
    The Wall Street Journal picked up on this and ventured that 
the purpose of the project is to, quote--``give a program that 
is popular with seniors a temporary reprieve past election 
day.'' It is in the interest of every single member of Congress 
to make sure that taxpayer dollars aren't being spent to 
protect certain political interests.
    Madam Secretary, the GAO called on you to cancel this 
demonstration project. Is that your intent or are you going to 
continue forward with this project?
    Secretary Sebelius. Mr. Chairman, we have no intention of 
cancelling the project. And I think the good news is that 
Medicare Advantage programs are stronger than ever and, 
actually, cheaper than ever. We have more seniors enrolling in 
Medicare Advantage this year than ever before. We have more 
programs in the marketplace than ever before. Medicare 
Advantage programs, when the Affordable Care Act was passed, 
were paid at about 114 percent of fee-for-service Medicare.
    So the Affordable Care Act, over time, reduces that 
overpayment. We are now down to 107 percent, so rates, indeed, 
have come down in Medicare Advantage program. That not only 
benefits the seniors who choose those options, because they pay 
lower co-pays, but they have more options. And, for the first 
time ever since Medicare Advantage programs were created, we 
have instituted a demonstration to inform seniors about 
quality.
    Some of these plans are very high quality, others are not. 
And we have a 2-year demonstration plan running and I think the 
good news is we are seeing seniors migrate away from the lower 
quality plan to the higher quality plan. We are on track to 
totally eliminate the overpayment to Medicare Advantage Plan, 
as promised with the Affordable Care Act. Again, a benefit to 
seniors while keeping the choice that seniors have throughout 
this country.
    Chairman Kline. The GAO pointed out that the demonstration 
project, rather than emphasizing those highly successful 
programs and rewarding them, basically was making the money 
available to everybody, which would help provide those costs 
and encourage people to stay in. What is your response to that?
    Secretary Sebelius. Well, it is just not accurate. The 
plans are rated one through five stars. The three, four and 
five-star programs have gotten some additional incentives to 
offer quality outcomes. I think the bad news for America's 
seniors is that for years not only did Medicare Advantage 
programs charge 14 percent more than fee-for-service, which 
added costs to every Medicare beneficiary, but there was no 
quality difference in health care outcomes.
    What we are determined to do is not only lower the costs 
but, actually, to make it very clear to the plans operating in 
the private marketplace that quality is important and that 
seniors should know which plans actually offer better outcomes 
than others.
    Chairman Kline. Clearly, sharp differences between the 
Government Accountability Office and the Department, which we 
will continue to explore. I am about to run out of time and I 
just want to move quickly to another subject. The 2010 Head 
Start Impact Study found the advantages children gain from Head 
Start yielded only a few, significant, outcomes that lasted 
through the end of the first grade.
    Now, the third grade follow-up study was set to be 
completed last September. It has been delayed until later this 
year. Considering the data for this third grade study was 
completed in the spring of 2008, what is the cause for the 
delay and what are your expectations?
    Secretary Sebelius. Well, Mr. Chairman, I know that the 
study is underway and that we anticipate completion on the 
timetable that you have just suggested. We think it is 
important to continue to monitor what is happening with 
outcomes. What we know is Head Start does make a difference and 
it does make a difference not only in the families, but in the 
children able to start school ready to learn.
    And we were really pleased to have an opportunity to work 
on additional curriculum issues with the Department of 
Education. I think, also, Mr. Chairman, for the first time ever 
in the history of the program, we felt it was important to 
recognize that Head Start programs operate in a variety of ways 
and some are lower performing and that is not good for our 
kids.
    So, for the first time ever, we have instituted a program 
where Head Start programs in the bottom quarter of the programs 
in the country are re-competing for funding, recognizing that 
we want all of our children in the highest quality programs 
possible.
    Chairman Kline. Thank you, my time has expired.
    Mr. Miller?
    Mr. Miller. Thank you very much.
    Madam Secretary, just to follow up on the Head Start 
question--one, thank you for pushing forward on the re-
competing. I know it has been controversial and, in my case, it 
turns out it cuts very close to home. It is still the right 
thing to do. I think we will end up with better quality care. I 
think we will end up with more diligence by the Head Start 
providers knowing that this process is in place.
    And I think both the development of the children and the 
safety of the children will be dramatically improved because of 
that. I appreciate that some providers don't like--they think 
they have the premier program. They don't like the idea that 
they, somehow, are missing the mark and have to re-compete but 
I think that is important.
    I would also say that for years, you know, we have gone 
back and forth about what the improvement is in children's 
ability to learn and the development of children in Head Start, 
but we also know that, very often, we take those children and 
we put them into an elementary system in first grade and we 
measure them at the end of first grade and we measure them at 
the end of fourth grade.
    And much of what we thought was the advantage is lost. And 
there is a pretty significant body of evidence suggesting that 
it was lost in first, second and third grade. They came there 
reasonably well prepared to learn but not much happened when 
they got to the public school system. And there is some 
concerns about that so I would just put that into the mix.
    I want to go back. I mentioned the development of the 
Accountable Care organizations. First, what I am quite 
surprised at, the extent to which in our area of California, 
Northern California, that these programs have been embraced by 
the insurers, by the big medical centers, the hospitals, both 
private and public, and large medical groups of doctors, 
specialists and across groups with a broad practice in this 
effort.
    The one that was run by CalPERS that we have pointed out--
it reduced the number of patients hospitalized for 20 days or 
more by 50 percent and it reduced hospital admissions by 17 
percent. It reduced the total number of inpatients' days by 14 
percent and produced a savings of, as we said, over $15 
million. I think some $60 million was returned to ratepayers in 
that instance.
    And, now, Blue Cross, Blue Shield and others are trying to 
set these up in other parts of the state. And both hospitals 
and physicians are coming to those, understanding that this 
provides for an improved coordination of care, better care, and 
drop in readmissions.
    Also, in the area, you have put forth this program to deal 
with the medical errors and falls and accidents, again, 
sponsored by a--participated in by a small group of hospitals. 
Now, almost all of the hospitals in the area have joined 
because of the dramatic savings.
    Just in respiratory complications, in terms of keeping the 
bed properly elevated, dramatically dropping. Pneumonias and 
complications and deaths from pneumonias, the trips and falls--
dramatically reducing the number of falls, which end up in 
broken hips and bones and, in some case, death.
    So we see this joining and this rush into this process in 
terms of trying to develop better practices for patient care 
and cost in terms of taxpayers or families who are paying these 
premiums. So I, really, welcome what is taking place here.
    I put an amendment in the bill before Medicare had to pay 
certain providers within 30 days. I think that probably came to 
us by all the people that sell things to Medicare; they 
insisted they be paid in 30 days. And what we saw in some 
regions of the country, you had people who were billing 
Medicare off of fraudulently obtained lists and we were paying 
them within 30 days. And we didn't even know who the hell they 
were.
    I put in that you had to time to do due diligence--who is 
this person and are they really selling wheelchairs to people 
who need them or walkers to people who need them or what have 
you--and, of course, it turns out--and you have recovered, not 
just because of my amendment, but you have forestalled the 
payment of people and recovered almost $4 billion, which, I 
think, is a record in the Medicare program.
    I think we got a long ways to go but I am certainly 
encouraged by the trend line that we have seen over the last 
couple of years. And I have used up almost all your time but I 
think he is going to let you have a little bit more.
    [Laughter.]
    He is nicer to the witnesses than he is to us so----
    Chairman Kline. Did you have a question?
    Mr. Miller. Yes, I would like a response----
    Secretary Sebelius. Well----
    Mr. Miller [continuing]. On the fact that people are 
joining these accountable care and trying to initiate 
Accountable Care Organizations all across the country. But, 
certainly, dynamically, in California.
    Secretary Sebelius. Well, I think you raised two aspects of 
the bill which aren't focused on as much, I think, as some of 
the insurance issues. One is the whole delivery system changes 
and the encouragement to use the best practices and, actually, 
try and take them to scale around the country.
    So the Partnership for Patients, which is, kind of, the 
umbrella title for two efforts that are underway right now: 
reducing the number of preventable readmissions by about 20 
percent and reducing the number of hospital-required infections 
and errors by 40 percent. Those two efforts over the next 5 
years not only save lives but reduce health costs dramatically.
    We already have over 3,500 hospitals who are participating 
in those two efforts around the country, as well as doctor's 
groups and employer groups and others, who are really excited 
about this focus. And this affects everybody, regardless of 
what kind of insurance you have. If you are in the hospital, 
100,000 people a year die from what happens to them in the 
hospital; not what brought them to the hospital but what occurs 
while they are there.
    So lowering hospital-acquired infections and preventing by 
wraparound care, bundled care, coordinated care--people from 
having to cycle back into the hospital is good news, lower 
rates, lower costs and more patient care.
    And, Mr. Chairman, you also--I mean, Congressman Miller, 
you also mentioned the issue around the improper payments and 
our tools, now, to really look at what is happening in the 
fraud scene. We have a whole new predictive modeling technology 
built--the kind of technology that has been in the private 
sector for a very long time but missing from the public sector, 
which allows us not only to calibrate risk, but really watch 
what is happening.
    We have re-credentialed providers in the most likely areas 
for fraud; durable medical equipment, home health services. We 
are really watching billings very carefully and that has 
allowed us to be much more timely not only in stopping payments 
from going out the door so we don't do the old pay and chase, 
but actually discontinuing fraudulent providers from ever 
billing Medicare again.
    So it is a system that should have been in place a long 
time ago; it is now built and up and running. And I think it is 
going to yield huge results in the long term.
    Chairman Kline. Thank you, Madam Secretary.
    The gentleman's time has expired.
    Mrs. Biggert?
    Mrs. Biggert. Thank you, Mr. Chairman.
    Madam Secretary, many, many years ago I volunteered in 
Chicago on the Head Start program. It was the first year that 
it was in existence so it was a--and so I have always had a 
soft spot for Head Start. And I think that it has been a really 
good program.
    And I know that there has been problems with it and, 
recently, the Inspector General's Office audited several of the 
Head Start facilities, resulting in a report that there are 
numerous violations of the Health and Safety requirement. In 
one case there were toxic chemicals that were found within 
reach of children. Another there was a machete; I don't know 
what a machete was doing there but it was found on the stairway 
near the children's play area.
    Why are there these problems not complying with the health 
and safety within the Head Start Program?
    Secretary Sebelius. Well, Congresswoman, I can assure you 
that we take the health and safety of the children in Head 
Start Programs or our childcare programs, or any place across 
the country, very seriously. There are thousands of Head Start 
Programs operating. As I say, some are enormously high-quality; 
others are not serving our children as well as they could, 
which is one of the reasons for the re-compete this year, for 
unannounced visits that we are making as a result of some of 
the issues GAO had found, programs not operating as well as 
they could.
    We have made about 172 unannounced visits at Head Start 
centers to really be able to monitor more closely what is going 
on a regular basis with these variety of sites. We have 
instituted new training guidelines, new updated rules and regs. 
So we are trying to identify issues that either would cause 
children to be in unsafe conditions or, certainly, to be in 
conditions where they are not being well prepared for a 
rigorous school curriculum, and move to correct those along the 
way.
    Mrs. Biggert. Thank you. Then, another issue--the diesel 
industry is responsible for thousands of jobs and is 
represented in my district. Are you concerned that incomplete 
information surrounding the diesel exhaust in miners study 
could unfairly harm this important industry?
    Secretary Sebelius. Well, I share your concern about jobs 
in any industry. And, as you know, there has been an 18-year 
study on diesel exhaust and the impact on miners, to evaluate 
lung cancer from diesel. We have in an unusual situation in 
this study, where there has been a court intervention that 
allowed certain, publically released, information to only be 
released after it was submitted to Congress and reviewed.
    We have complied with all of that information. So the 
studies are finally being published--peer review studies and 
journals. But, I think, the scope of this study is pretty 
extraordinary in terms of the length of time that they followed 
and the peer reviewers are looking at the scientific data and 
reviewing that data. So I think that people will be able to 
make a judgment based on the publication of the data and look 
at what the science has found over that 18-year period of time.
    Mrs. Biggert. Well, I hope that there will be the full 
transparency--I yield back, Mr. Chairman.
    Chairman Kline. Thank the gentlelady.
    Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman and Madam Secretary. As 
you both know, one of the strengths of Head Start is the close 
involvement of parents to the program to ensure that they have 
the tools they need to be their child's first and best teacher.
    Can you tell the committee the current status of family 
literacy training and technical assistance, as required by the 
Head Start Act? What the department and the Office of Head 
Start are doing to promote and support family literacy, in the 
context of Head Start, so that multiple generations might 
benefit in the years to come.
    Secretary Sebelius. Well, Congressman, I think there is no 
question that the involvement of family in their child's 
earliest, outside the home, educational opportunities has been, 
as you said, one of the real strengths of Head Start from the 
outset. And we are, certainly, proceeding in the family 
literacy program and involving family members.
    And I would tell you that, for the first time ever in a lot 
of the other early learning settings, there has been an 
incorporation of some of the hallmarks of the family 
involvement from Head Start into those programs. So we have 
been working closely with the Department of Education around 
everything from the race to the top for early learning 
challenges to looking at guidelines across the way.
    And, I think, there is a recognition that a curriculum for 
young learners is important to acquire the skills for school 
readiness but so are social, emotional, family skills, so is 
health care. And that, for the first time, is being 
incorporated across the board, regardless of the setting where 
the child would be involved.
    So I would say that not only is family involvement 
incredibly important in the Head Start Program, but it is 
beginning to be very recognized in all of the early childhood 
programs, whether they are run by the Department of Education 
or in a childcare setting or in a Head Start setting.
    Mr. Kildee. Thank you, Madam Secretary. Another interest of 
mine--I was pleased to see that the fiscal year 2013 budget 
included an increase of $116 million for the Indian Health 
Services, to improve health outcomes of American Indian 
communities. What steps has your department taken to implement 
the Indian Health Care Improvement Reauthorization and 
Dissention Act that was included in the health care reform law?
    Secretary Sebelius. Well, Congressman, I know this is a 
strong priority of yours and one that we have taken very 
seriously in this Administration. The health gaps between the 
first Americans and the rest of the population are still 
staggeringly bad and we have focused additional resources, time 
and attention--and, I think, Dr. Roubideaux heading the Indian 
Health Service has been a terrific leader.
    We are now making investments in the contract service area. 
We have new health care facilities coming on line, and staffing 
coming on line, with the health services. We are continuing 
with some facilities construction, including an IHS facility, 
which comes on line this summer in Barrow, Alaska. We are doing 
active budget consultations and very much involved in the 
Indian Health Improvement Act.
    It has been the involvement of tribal leaders, as we begin 
to implement the Affordable Care Act, because there are a 
number of tribal members who live on Indian land and use, and 
access, the Indian Health Services facilities. But there are 
lots of first Americans who live in urban settings, and live 
all over the country, who are eager to take advantage of the 
advantages of the Affordable Care Act that they have coming on-
line.
    So we are working actively on everything from diabetes 
control, focus on suicide prevention, which is a huge issue in 
Indian country, new facilities, new contract services. And, as 
you say, this Administration has made an historic investment in 
the budget for the Indian Health Service.
    Mr. Kildee. Thank you, Madam Chair, and I appreciate your 
commitment.
    Chairman Kline. Thank the gentleman.
    Dr. Foxx?
    Ms. Foxx. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for the morning here today. 
Good morning. Madam Secretary, in February, you testified 
before the Ways and Means Committee about the Class Act. And 
you told Congressman Boustany that you had ``no idea'', quote--
``whether HHS secretly negotiated changes to the Class Act in 
early 2010, because there was certainly nobody from our 
department involved.''
    But, then, when the department's report on the Class Act 
came out, it admitted that there were backroom negotiations 
with the advocacy groups to try to make the Class Act solvent. 
Could you tell me and this committee why you stated that the 
department was not involved in the backroom negotiations on 
Class, when your own department's report admitted those 
negotiations took place? I assume you weren't deliberately 
trying to mislead the Congress.
    Secretary Sebelius. Congresswoman, I never misled the 
Congress at all. The question dealt with--were there secret 
negotiations during the passage of the Affordable Care Act that 
involved Class. And my answer is absolutely accurate.
    We were charged, as you know, in the Affordable Care Act, 
with setting up a program that would have provided much-needed 
services and supports for those individuals who wanted to set 
aside a portion in their income and provide their own payment 
for home-based care. We were also charged with not beginning 
that program unless it was possible to certify to Congress that 
the program would be solvent for 75 years.
    During the course of the time between the time that the 
Class Act was passed and the time that we announced that we 
could not make that certification, there were numerous 
negotiations with all kinds of stakeholders, not just advocacy 
groups but insurers and actuaries, looking at all sorts of 
modeling possibilities for whether or not there was a scenario 
under which we had both a legal authority and could justify the 
financing that would, indeed, allow this program to be up and 
running.
    They were fully reported to the committee when those 
studies were concluded. We did not make reports before the 
studies were concluded because, frankly, we didn't know what 
the conclusions were. I think they're very transparent, very 
above board. And, at the end of the day, without major 
legislative changes what we concluded was that the program 
designed to help people who wanted to stay in their own homes 
and provide their own care services out of a stream of income, 
was not able to be either certified as solvent or if, indeed, 
the premiums were high enough to make the program solvent, it 
wouldn't serve the people it was designed to serve.
    So that is the report I made to Congress; it is the report 
I made to the President. And I don't think there is anything 
inconsistent about either of those statements.
    Ms. Foxx. Well, I also understand that Congressman Boustany 
sent you a letter, which I am going to make a part of the 
record here, asking for a correction of the record of those 
statements and that you have not yet replied. It appears that 
you have a pattern, is this--as the Chairman said in his 
opening comments; it has taken us 10 months to get an answer 
from your department on information.
    What do you see as the responsibility of the Executive 
Branch to respond to members of Congress? And what do you think 
is a reasonable time, given the huge bureaucracy that you have 
here, to submit answers to questions that are given to you on 
things that should be readily available?
    Secretary Sebelius. Well, Congresswoman, we make every 
effort to respond in a fashion and, also, to gather the 
information requested. It probably doesn't come as a big 
surprise that we get hundreds and hundreds of requests, often 
for thousands of pages of documents, and we have a lot of staff 
who do nothing else but gather documents, look at documents, 
try and be responsive.
    So we are on a full-time, 24/7, trying to be responsive as 
questions come in the door. And make sure that the answers that 
we get you are accurate information. And we will continue to do 
that.
    Ms. Foxx. Thank you, Mr. Chairman.
    Chairman Kline. Thank the gentlelady.
    I understand she was requesting to enter Dr. Boustany's 
letter for the record.
    [The information follows:]

    
    
    
    
    
    
                                ------                                

    Chairman Kline. Without objection, we will do that.
    Mr. Scott?
    Mr. Scott. Thank you, Mr. Chairman.
    Thank you, Madam Secretary. Madam Secretary, in the 
Chairman's opening remarks, he talked about the effect that the 
ACA has on small businesses and suggested that there would be a 
devastating impact on small businesses when it comes into 
effect. I thought small businesses were exempt from the 
mandates, is that right?
    Secretary Sebelius. Yes, Congressman, certainly businesses 
under 50 have no employer responsibility under the Affordable 
Care Act but they are eligible for tax credits. So they are--
many small business owners are taking advantage of the tax 
credits, which allow them to pay for employee-based health 
care.
    Mr. Scott. So, let us slow up a minute--first of all, they 
are exempt. But if they voluntarily elect to provide insurance, 
there are tax credits that they would not be eligible for, but 
for the ACA, is that right?
    Secretary Sebelius. There not only are tax credits but, in 
2014, when the new exchange markets are up and running, the 
estimate is that small business owners will be one of the major 
beneficiaries, given the fact that right now they are often 
paying 15 to 18 percent more in the private market for health 
insurance plans because they don't have the large numbers to 
negotiate rates.
    They will be able to pick and choose out of a plan that 
puts them in a much larger pool, without having to change 
anything.
    Mr. Scott. And, so, they are exempt. And, if they provide 
insurance, they have got tax credits. And, if they provide 
insurance, they will be able to get it at a cheaper rate 
because they will be in a--get the big group markets rather 
than the small business rate. And, if they elect not to provide 
insurance because they are exempt, would they have access to 
insurance that they would not have, since their employer 
doesn't provide it?
    Secretary Sebelius. Well, currently, as you know, 
Congressman, if an employer chooses not to provide coverage for 
employees, employees are, pretty much, on their own; they and 
their families are shopping in the individual market, the----
    Mr. Scott. That is today?
    Secretary Sebelius. That is today. In the future, after 
2014, those employees would be eligible, again, to participate 
in an exchange marketplace, be part of a larger pool, no pre-
existing condition limitations, able to take advantage of tax 
credits, depending on their income, to pay a portion of their 
health plan. Right now, those employees are paying 100 percent 
out-of-pocket, which is often why a lot of working Americans 
have no coverage at all.
    Mr. Scott. So you disagree with the idea that this is bad 
for small business and would, instead, say this is actually 
good for small business?
    Secretary Sebelius. Well, I think, that at least the--I 
have an opportunity to visit with small business owners around 
the country. And what I hear from them is that having health 
insurance is often one of the best ways to recruit and retain 
high-quality employees. And that, time and time again, they 
lose those employees to either larger competitors or folks who 
can afford a better plan and a better package.
    And I would say that the small business market has 
disintegrated and not because of the Affordable Care Act. But 
it is on a death spiral; more and more small business owners 
have dropped coverage as rates have skyrocketed. So that we see 
this as not only stabilizing of the market, but giving some 
advantage to the entrepreneurs and small business owners who 
currently are out on their own trying to negotiate rates.
    Mr. Scott. Thank you. As you know, we are going to consider 
the student loan interest rate and there is a proposal to cut 
prevention funding. Are you familiar with that proposal?
    Secretary Sebelius. I am.
    Mr. Scott. And exactly what would be cut if that offset is 
the one chosen?
    Secretary Sebelius. Well----
    Mr. Scott. And why is that important? Why is that funding 
important?
    Secretary Sebelius [continuing]. I think that the 
Prevention Fund is a long overdue investment in some of the 
most significant efforts to keep our country healthy and well. 
It is a significant program to immunize our kids. What we know 
is that is an investment that returns about $10.00 for every 
dollar invested. It is a public health investment with 
laboratory capacity at the state and local level.
    We know that public health officials around the country 
would be laid off, reduce the availability of mental health and 
substance abuse. Some of the efforts around tobacco prevention 
and cessation, which can save thousands of lives, would be 
eliminated and discontinued. And, you know, right now, 
Congressman, America spends about eighty cents of every health 
dollar on dealing with chronic disease and illness and about 
eight cents of every health dollar on any kind of preventive 
effort.
    I think we are a great country. I think we can educate our 
kids and invest in health at the same time. And I think failing 
to invest in long-term strategies that will lower our health 
care costs, doom future generations to paying higher and higher 
health bills and getting mediocre results.
    Chairman Kline. The gentleman's time has expired.
    Dr. Roe?
    Mr. Roe. Thank the Chairman and thank the Secretary for 
being here today.
    And I think you and I totally agree that the single biggest 
issue preventing people from buying health insurance in this 
country, or having health insurance, is cost. I saw it in my 
practice. And, then, we had a group of people in our nation 
that couldn't afford it because it cost too much. And that has 
been a great concern of mine is that--does this plan reduce the 
health care cost spending in the country?
    And we have held our Subcommittee on Health, Employment, 
Labor and Pensions--has held two subcommittee hearings, one in 
Evansville, Indiana and one in Butler, Pennsylvania, just a 
couple of months ago. And, let me share with you just some 
stories that I heard during these subcommittee hearings. And, 
really, someone from the Administration should attend these and 
listen.
    Just last week in my office, a young person, Peter Demos, 
from Murphysboro, Tennessee,--has five restaurants in his 
family and he has evaluated the Affordable Care Act and the 
Accountable Affordable Care Act. And he believes he has about 
100--150 employees per restaurant. He is thinking about opening 
another restaurant in Clarksville, Tennessee, where I grew up.
    He said because of the cost of this--and he has had it 
analyzed--he is not going to open his Clarksville shop until he 
finds out what the Supreme Court does. And he has two 
restaurants that are marginal; sometimes they make a little 
money, sometimes they don't. But the others have supported his 
business. He is going to close those two restaurants. So we are 
looking at three to four hundred jobs with one person that is 
going to go away.
    Another IHOP owner in Evansville--he had 12 shops, 800 
employees--``Dr. Roe,'' he said, ``What do I do here? If I buy 
the essential benefits package, of which we don't know what it 
is just yet, and I pay for that for all of my employees, I am 
upside down $7,000 per employee. But if I pay the penalty of 
$200,000, because I have more than 50 employees, which is not 
tax-deductible, it costs me $2,800. In this business,'' he 
said, ``I make $3,000 per employee,'' which is pretty good, I 
think, in that restaurant business, ``it cost me all my 
profit.''
    I didn't have an answer for him. Do you have an answer for 
either one of these owners? What do they do?
    Secretary Sebelius. Well, Dr. Roe, I think that there is no 
question that cost has eroded the private health insurance 
market over time. What we know is costs are up over the last 
decade about 115 percent, which is why more and more business 
owners have dropped coverage and, particularly, small business 
owners and individuals. It is why we have about 50 million 
uninsured Americans today.
    And those costs continue to skyrocket with----
    Mr. Roe. How do you----
    Secretary Sebelius [continuing]. No end in sight.
    Mr. Roe. How do you talk to these restaurant owners? We 
know all that--what you said are facts, I agree with that. But 
how do you--what do you say to these folks that own these--and 
I could go on and on with stories that I heard in these 
hearings that we held. I didn't have an answer for them.
    Secretary Sebelius. Well, I think, first of all, there is 
not a cost associated yet with the plans in the new exchanges 
because they haven't been priced and packaged. That is--I don't 
know what they are estimating but there is no costs. There is 
no----
    Mr. Roe. There is a cost but no one has said what it is 
yet.
    Secretary Sebelius. Well, we don't have a cost estimate by 
the insurance plans who will be offering these programs. That 
will become clear as we move forward. But, I think, the 
estimate is there is--based on no cost of doing nothing, there 
are employees right now who are opting in and out of these 
programs because of health insurance benefits that, often, 
these employers can't compete with. There are employees who 
can't come to work because they don't have access to health 
care----
    Mr. Roe [continuing]. I hate to interrupt you, but what do 
these folks say?
    Secretary Sebelius. Those costs are employer----
    Mr. Roe. Look, I am an employer. I have been an employer 
for over 30 years. I understand all that. And that is one of 
the things a good health insurance plan allows; people to come 
into your business and retract them and keep them. I certainly 
understand that but how do you answer these folk's questions 
that are going to close businesses and close down jobs?
    We will go on. The question I have, also, is why do you 
still think the majority of Americans oppose the Affordable 
Care Act? And, secondly, almost 80 percent oppose the mandate, 
why do you think that is?
    Secretary Sebelius. I think there are still lots of 
misconceptions about what the Affordable Care Act does and 
doesn't do that we are working to correct. I do think for a lot 
of people they have no idea what this is; they have health 
insurance, they are uncertain about how it is going to impact 
them and their family, and they really want to know ``what 
happens to me.''
    We have had some considerable success with seniors who 
were, frankly, terrified during the course of the debate, told 
that Medicare Advantage plans would be done away with, that 
their premiums would skyrocket, that they would lose their 
doctors, that they couldn't access hospital; none of that has 
happened; none of that is accurate and, in fact, they are 
beginning to take advantage of the benefits offered. And that 
begins to change people's minds.
    So, once people connect with the benefits--I can tell you 
parents across this country who have young adults who are on 
their family health plan know the benefits of the Affordable 
Care Act. There are moms I see every day who have a child born 
with a pre-existing health condition, who knows that that child 
will never be locked out of the insurance market again. And 
that has provided peace of mind to those parents.
    So, as people begin to connect with the benefits, we are 
finding that their attitudes dramatically change.
    Mr. Roe. Mr. Chairman, can I submit some questions to her 
that would be----
    Chairman Kline. For the record?
    Mr. Roe. Yes, sir, for the record.
    Chairman Kline. Yes, please, that would be fine.
    Mr. Tierney?
    Mr. Tierney. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for being here today.
    Secretary Sebelius. Good morning.
    Mr. Tierney. You are painfully aware, I am sure, this is a 
national debate that we are having with respect to the budget 
and reconciliation measures that are there, surrounded a lot 
about feelings that, you know, we can still give more money to 
the wealthy at the expense of struggling families, children and 
seniors. And not ask any in that category of ``wealthy'' to 
participate their fair share.
    And not look at the whole budget, just look at narrow 
portions of it, and not really focus on growth in jobs. And 
some, you know, have put forth this concept of subsidiarity or 
try to rationalize the Republican budget and some of these 
reconciliation bills. So I would like to read a letter into the 
record, if you will indulge me, and then ask you some questions 
about it.
    This is a letter from a sizeable number of theologians and 
religious scholars who were writing to the budget author for 
the Republican budget, Mr. Paul Ryan. They are welcoming him to 
Georgetown University, appreciating his willingness to talk 
about Catholic social teaching policy and dealing with urgent 
challenges facing the country.
    They cite themselves as members of the academic community 
at a catholic university. And they saw his visit, which was on 
April 26 for election series, as an opportunity to discuss the 
Catholic social teaching in a role of public policy because he 
had talked about subsidiarity.
    They go on to say, ``However, we would be remiss in our 
duty to you and our students if we do not challenge your 
continuing misuse of Catholic teaching to defend a budget plan 
that decimates food programs for struggling families, that 
radically weakens protections for the elderly and the sick and 
gives more tax breaks to the wealthiest few.''
    This United States Conference of Catholic Bishops has 
wisely noted, in several letters to Congress, quote--``A just 
framework for future budgets cannot rely on disproportionate 
cuts in essential services to poor persons.'' Catholic bishops 
recently wrote that the, open quote--``The House-passed budget 
resolution fails to meet these moral criteria.''
    In short, the letter says, ``your budget'', referring to 
Mr. Ryan, ``appears to reflect the values of your favorite 
philosopher, Ayn Rand, rather than the gospel of Jesus Christ. 
Her call to selfishness and her antagonism toward religion are 
antithetical to the gospel values of compassion and love. Cuts 
to the anti-hunger programs have devastating consequences. Last 
year, one in six Americans lived below the official poverty 
level and over 46 million Americans, almost half of them 
children, used food stamps for basic nutrition.
    We also know how cuts in Pell grants will make it difficult 
for low income students to pursue their educations at colleges 
across the nation, including Georgetown. At a time when 
charities are strained to the breaking point and local 
governments have a hard time paying for essential services, the 
Federal government must not walk away from the most vulnerable. 
While you offer an appeal that Catholic teachings subsidiarity 
as a rationale for cutting government programs, you are 
profoundly misreading church teaching.
    Subsidiarity is not a free pass to dismantle government 
programs and abandon the poor to their own devices. This often 
misused Catholic principle cuts both ways; it calls for 
solutions to be enacted as close to the level of local 
communities as possible, but it also demands that higher levels 
of government provide health subsidium, when communities and 
local governments face problems beyond their means, to address 
such an economic crisis--high unemployment, endemic poverty and 
hunger.
    According to Pope Benedict XVI, subsidiarity must remain 
closely linked to the principle of solidarity and vice versa, 
and it is signed by almost 90 people that are theologians and 
people----
    So, Madam Secretary, my question for you is--in the budget 
proposal by the Majority, I think voted on by all of their 
members, that would cut $1.5 billion, according to the Office 
of Management and Budget, from Head Start. In your estimate, 
would that cut 60,000 low-income children out of the program 
next year and 200,000 out of the program by 2014?
    Secretary Sebelius. Yes, it would, sir.
    Mr. Tierney. And in childcare, that budget would mean a 
substantial cut to childcare assistance for more than 1.8 
million, low-income, working families who depend on it to try 
to get and keep jobs. By your estimate, would that be 60,000 
families losing assistance next year alone?
    Secretary Sebelius. I think about 65,000.
    Mr. Tierney. And on the Social Service Block Grant, that 
bill eliminates funding that would provide services like Meals 
on Wheels and childcare to 23 million children and seniors and 
Americans with disabilities, is that your estimate as well?
    Secretary Sebelius. Yes, sir.
    Mr. Tierney. You know, the Childcare Tax Credit, which used 
to be a bipartisan measure, Republican bill would end the 
refundable tax credit for families of 3 million children and 
increase taxes for those families by an average of $1,800 a 
year. By your estimate, would that tax increase fall on the 
backs of children from low-income families?
    Secretary Sebelius. I think that is correct, sir.
    Mr. Tierney. And the Supplemental Nutrition Assistance 
Program, that bill--the Republican bill, would cut $33 billion 
from that program. Would that affect approximately 2 million 
individuals, disproportionately from working families and 
seniors?
    Secretary Sebelius. I would have to defer to Secretary--for 
those numbers; that is not in our budget. But that sounds about 
correct.
    Mr. Tierney. All right. And, if the health care budget were 
to be entirely--the Program B, be entirely repealed, as some 
propose, 32 fewer million Americans would get health insurance, 
is that right?
    Secretary Sebelius. That is correct.
    Mr. Tierney. And 2.5 million young adults who are now 
covered by their parent's plan would lose that coverage?
    Secretary Sebelius. Yes, sir.
    Mr. Tierney. And 105 billion Americans would, once again, 
be subject to lifetime limit caps on their health insurance?
    Chairman Kline. The gentleman's time has expired.
    Mr. Walberg?
    Mr. Walberg. Thank you, Mr. Chairman.
    And welcome, Madam Secretary. NIOSH and the NCI issued a 
press release addressing the results of the Diesel Exhaust and 
Miner Study; this study has been very controversial, I think we 
all could agree, especially some of its conclusions. I'm going 
to expand on what my colleague from Illinois addressed a bit 
earlier.
    This study concluded that diesel exhaust exposure of a 
surface mine produced higher risks of adverse health effects 
than to underground miners, with much higher levels of 
exposure. It also--and that is interesting that would be the 
case above-ground versus underground. It also concluded that 
heavy smokers, with the highest diesel exhaust exposures, have 
a lower risk for lung cancer than miners who didn't smoke; 
another peculiar finding of this study.
    This study was also the subject of a 2001 court order that 
requires the agencies involved to provide all data requested by 
this committee. Now, to date, this still hasn't happened, 
including requests made by Chairman Kline and myself, on three 
separate occasions, including at a hearing where you were with 
us almost a year ago.
    Furthermore, it took you an entire year to just reply, 
incompletely, to the question that we have asked last year. 
Now, these agencies have not provided all of the materials--
why, Madam Secretary?
    Secretary Sebelius. Well, Congressman, NIOSH is in 
compliance with both the court order and, my understanding is, 
what the committee has asked for. The underlying data has to 
be, according to the court order, submitted to the committee 
and then can be released. CDC and NIH will make the data 
publicly available after the 90-day review period of the 
committee is completed, in accordance with the court order.
    So we have published the first set of papers, delivered the 
underlying data--we now have, in the committee's hands--your 
hands, the second data request. We cannot make it transparent 
and public until the committee's review is completed.
    Mr. Walberg. Well, I, respectfully, beg to differ with 
that. As far as the information we have requested, it has been 
willfully incomplete and inadequate to address the concerns 
that we, respectfully, submitted to you. Let me----
    Ms. Woolsey. Will the Gentleman yield to your----
    Mr. Walberg. Briefly, I would yield.
    Ms. Woolsey [continuing]. Ranking member?
    Mr. Walberg. Briefly, I would yield.
    Ms. Woolsey. For the record, we do have a letter here that 
is dated March 26, from the department, responding to those 
questions, that I would like to introduce into the----
    [The information follows:]

    
    
    
    
                                ------                                

    Mr. Walberg. And I re-claim my time--I indicated that we 
received a response but, willfully, inadequate and incomplete. 
Let me go on to a next issue, Madam Secretary.
    I can't believe that you believe that it is appropriate for 
the diesel study author to travel to France to request 
international government organization, in this case IARC, which 
is International Agency for Research on Cancer, to issue a 
finding that diesel exhaust should be labeled as a known human 
carcinogen. Can I assume that to be an accurate understanding, 
that you wouldn't believe this would be appropriate for the 
author, an author of this study, to do such a thing?
    Secretary Sebelius. Congressman, my understanding is that 
the World Health Organization is organizing a meeting in 
France. The International Agency on Research on Cancer--I have 
no prior knowledge about what is the testimony that will be 
presented but I do know that the researchers have been invited. 
We are very committed to sharing information and research 
findings with the World Health Organization. The United States 
is a very active member of that organization so I assume the 
researchers will participate.
    Mr. Walberg. Recognizing the time here, the concern would 
be, for me, that the IARC's findings trigger automatic U.S. 
government regulatory consequences for employers that cost 
millions of dollars to comply with. And I find it very unfair 
that, when those same regulated entities, like small 
businesses, don't have a way to comment on IARC proceedings, 
that they are, in fact, blocked from participating, this is 
really back-door rulemaking. And can you condone the practice--
--
    Chairman Kline [continuing]. I am sorry; the gentleman's 
time has expired.
    Secretary Sebelius. But, Mr. Chairman, could I respond? 
Because what has just been stated is just absolutely not 
correct.
    Chairman Kline. Please.
    Secretary Sebelius. There is no international finding that 
automatically triggers anything. We have the responsibility, 
under the Centers for Disease Control and NIH, to produce 
findings about likely carcinogens and proven carcinogens. That 
doesn't even trigger an automatic finding; that, really, is 
within another department's jurisdiction. So we do the science, 
we publish the science. We have the responsibility for making 
that available.
    There are other agencies, the Environmental Protection 
Agency and others, who actually trigger the regulatory 
responses. And they are not automatically triggered; they go on 
that agency's line-up list. So I have no idea. The 
International agency for Research on Cancer, to my knowledge, 
Congressman, has no impact, whatsoever, on an automatic 
triggering on anything that would impose any regulatory 
requirement----
    Mr. Walberg. Mr. Chairman if you might indulge me, I 
disagree with that but I am willing to be proven wrong. But we 
will follow this up with the Secretary----
    Secretary Sebelius. I would be happy to.
    Chairman Kline. Thank the gentleman.
    Thank you, Madam Secretary.
    Mr. Holt?
    Mr. Holt. Thank you, Mr. Chairman.
    Thank you, Madam Secretary. It was earlier mentioned by one 
of our colleagues that there are so many uncertainties now in 
the health care field. I would just comment that the 
uncertainties that existed before the Affordable Care Act was 
passed were even greater. I mean, you know, where do 40 million 
people go for their health care and how will we redirect health 
care in America toward wellness and health outcomes? And how 
will we handle additional families trailing into bankruptcy by 
bad luck of illness or injury?
    But two things that were not uncertain before the health 
care law was passed was health care costs in America would go 
up 8 percent a year, or more, and insurance companies would 
spend a smaller and smaller fraction of the premiums that they 
collect on actually providing health care. And, with regard to 
the cost, there is an article by economist Peter Orszag in 
Bloomberg, that points out that health care spending in the 
past year rose by 4 percent. Now, that is high but that is half 
of what it used to be.
    And he says that this is not just because of economic 
reasons but it is because of structural reasons, with doctors 
and hospitals cutting back on unnecessary procedures, expanding 
their use of information technology, switching from fee-for-
service to compensation, aimed at maximizing quality of 
treatment, and so forth. Do you, in fact, see some changes in 
health care costs already because of the Act?
    Two other things that I would like to ask you about on this 
subject is--the health care law provides assistance to states 
in doing rate review. And I am wondering whether State 
insurance commissioners and others are beginning to use that 
information. Further, I would like to ask if you have data that 
show that this medical loss ratio of 80 or 85 percent is about 
right or is this subject to further review.
    I have other questions but if you could answer those 
quickly, I would appreciate it.
    Secretary Sebelius. Well, Congressman, I can tell you that 
the major program that we are in charge of, probably the 
largest insurance program in the world, Medicare, which has 
about 49 million beneficiaries, was on a trend line growing at 
about 8 percent a year. And that rate of growth definitely has 
been slowed in the last two years.
    We are now at about 6.3 percent and the Trustee has 
certified the fact that that trend line is largely due to 
changes in the Affordable Care Act. And I think we can monitor 
that very closely. We do know that the rate review efforts 
underway in states around the country have been very 
beneficial. Time and time again, not only have insurance 
departments taken advantage of the encouragement to use some of 
the rate review funding to hire additional actuary staff, go to 
their legislators to request additional ability.
    As a former insurance commissioner, I know how important it 
is to have prior approval authority. So a company has to come 
through an insurance department process and----
    Mr. Holt. And would you say these will begin to have a----
    Secretary Sebelius. They are having effects.
    Mr. Holt [continuing]. Noticeable effects?
    Secretary Sebelius. We are watching rates be reconsidered, 
pulled back, reduced in states. And the 80-20 Rule--the medical 
loss ratio, I think, we will have pulled that shortly. But we 
have been monitoring it closely and beneficiaries will be 
getting rebate checks this year from companies who have not 
spent 80 percent of their dollars on health care costs.
    Mr. Holt. Let me change to something else. In answer to Mr. 
Scott's question, you talked about the Prevention Fund. It has 
been called, by the Speaker, a ``slush fund.''
    Secretary Sebelius. Yes, yes.
    Mr. Holt. Could you specifically say what this means for 
CDC, what this means for actual treatment? And, I believe, 
there is a particular benefit for women.
    Secretary Sebelius. I am sorry, can you----
    Mr. Holt. Prevention Fund.
    Secretary Sebelius. Certainly. Well, I think, the 
Prevention Fund, again, is an enormously important effort that 
is long overdue. And you have talked about some of the--we have 
talked about some of the programs but, additionally, HIV/AIDS 
efforts have been enhanced; the, kind of, community 
transformation grants, which are really focused on systematic 
changes in 61 states and communities across the country; and a 
whole series of efforts to actually enhance critical programs 
to screen uninsured women for breast and cervical cancer; and 
tracking, and prevention of, birth defects, are part of the 
Prevention Fund efforts that are making a big difference.
    Chairman Kline. Thank you, Madam Secretary.
    The gentleman's time has expired.
    Dr. DesJarlais?
    Mr. Holt [continuing]. For the record, if I may?
    Chairman Kline. Yes, certainly.
    Mr. Holt. Thank you.
    Mr. DesJarlais. Madam Secretary, I really appreciate your 
being here today and appreciate this opportunity to speak with 
you about some very important issues. I know we have spent a 
lot of time, over the past two years, arguing whether or not 
``Obamacare'' is good, ``Obamacare'' is bad--you know, whose 
fault is it that various provisions aren't working out the way 
they are supposed to be.
    But what I would really like to discuss with you today, and 
see if you would agree on one fact--that Medicare, according to 
CBO, Republicans, Democrats, AARP, is going broke in 10 years. 
Can we agree on that fact?
    Secretary Sebelius. The Trustees Report said that the funds 
will be exhausted, which means they will only be about 70 
percent of the finances by 2024.
    Mr. DesJarlais. Okay, so you would say 12 years; that is 
not far off. We have another looming problem at the end of the 
year and that is the SGR, or the ``doc fix.'' We were looking 
at a 27 percent cut in pay to physicians.
    And I know, in my district, there are already concerns 
among seniors that it is getting more and more difficult to 
find access to physicians. And, in your opinion, what do you 
think will happen if that 27 percent cut is put in place next 
January?
    Secretary Sebelius. Unfortunately, Congressman, those 
numbers are a little low too; it is a 31 percent pay cut. And I 
think it would be enormously devastating to Medicare 
beneficiaries, who would lose their doctors, which is why the 
President has called for, every year, a permanent, long-term, 
fix to the SGR and would love to work with Congress to do just 
that, as opposed to kicking this can----
    Mr. DesJarlais. Okay.
    Secretary Sebelius [continuing]. Two inches down the road.
    Mr. DesJarlais. And it would cost about $300 billion to 
just bring us back to even from the plan's implementation back 
in 1997, is that right? We are about $300 in the hole?
    Secretary Sebelius. Yes----
    Mr. DesJarlais [continuing]. Okay, so we have got to come 
up with $300 just to pay for the past decade-plus. So, moving 
forward, not making that cut is going to be very expensive. We 
have got, about, a $500 billion cut to Medicare in the form of 
the IPAP. We are rapidly not looking very efficient and, yet, 
we have this huge, looming problem of, you know, 10,000 new 
Medicare recipients entering the program every day.
    I am talking with you today because we need to solve this 
problem. It doesn't matter which side of the aisle you sit on, 
we all have parents, grandparents, maybe we are of Medicare age 
ourselves. So you said the President wants to work on an SGR 
fix. I would be happy to work with you. Our doctor's caucus 
would be happy to work with you.
    We have got to solve this problem because these numbers are 
hard to even comprehend. And I just wondered what ideas you 
might have for us.
    Secretary Sebelius. Well, Congressman, I think that that 
would be encouraging. I think that, as you know, the SGR well 
pre-dates any discussion in 2010 and 2009 about an Affordable 
Care Act. It has nothing to do with it. It is based on the 
Balanced Budget Act. And, I think, fixing that in the long-
term, looking at new ways to actually pay docs, is an important 
thing going forward.
    I would also just suggest that the $500 billion is not a 
cut to Medicare; it is an estimated slowdown in the growth 
rate, which we are seeing right now. That is where the $500 
billion comes from. So Medicare costs will continue to rise, 
largely, as you say, because we have the beginning of the 
``baby boomers'' coming into Medicare, more beneficiaries than 
ever.
    Mr. DesJarlais. Okay, let us shift just for a minute 
because, you know, we are obviously not going to solve that 
problem. To the issue of employers dumping their employees into 
the insurance exchanges. I have visited with several businesses 
in my district and I will just give a quick example of Belmont 
Industries--has about 6,000 employees so they would fall into 
the $3,000 penalty.
    Right now, they pay about $12,000, per employee, for their 
health care benefits. So they would, literally, save about 
$9,000, per employee, and $34 million. You know, clearly, they 
would be rewarded for dumping these employers--or these 
employees into the exchange. What--what do you think the impact 
is going to be as we see this trend moving forward?
    Secretary Sebelius. Well, again, Congressman, the only 
real-life example that we have to look at has been the 
Massachusetts example, where the exchange program, the employer 
penalty and the subsidy, has provided a template for the 
Affordable Care Act. What happened in Massachusetts is more 
employers actually offer coverage today than did when the 
exchange started. They have not dumped employees. They have 
similar incentives in place.
    If one would speculate--we have a totally, as you know 
right now, voluntary market, where insurers--I mean, employers 
voluntarily are participating in an increasingly expensive and 
hard to predict insurance market. My sense is, based on the 
real-life model that is up and running, based on conversations 
with employers as we move along, that these same kind of 
incentives, keeping, retaining good employees around health 
care, will be in place in the future.
    And that employers will, actually, have an incentive to 
come back in the market because there will be a larger pool, no 
pre-existing conditions, they won't be penalized for being 
small employers, and they will have market rates that they can 
control.
    Chairman Kline. The gentleman's time has expired.
    Ms. Fudge?
    Ms. Fudge. Thank you, Mr. Chairman.
    And, thank you very much, Madam Secretary, for being here 
and to continue to show your knowledge of the Affordable Care 
Act and why it was so important that this Congress passed it. 
I, certainly, am concerned, though, about the recent reductions 
to Medicare payments and the effect that they will have on 
safety net hospitals, in particular. And the people that are 
served by safety net hospitals, of which, certainly, I have 
two, fairly large, ones in my district.
    The Middle Class Tax Relief and Job Creation Act was the 
latest piece of legislation to make it to the President's desk 
with significant reductions in Medicare payments for hospitals. 
And then there is the cut proposed in the President's budget, 
where the Administration proposes to reduce bad debt payment to 
25 percent of the current 70 percent for all--from the current 
70 percent for all eligible providers, including safety net 
hospitals.
    And this is done in order to save some $36 million over the 
next 10 years. The Medicare payment cuts included in the 
Payroll Tax bill and the payment cuts proposed in the 
President's budget, come on top of the sequester, where 
hospitals will see a 2 percent cut in their Medicare 
reimbursement for the next nine years.
    Safety net hospitals serve as America's first line of 
defense for treating low-income and uninsured patients. Without 
a doubt, these cuts will adversely affect already financially 
weak safety net hospitals and the people they serve. Metro 
Health, which is in my district, is a safety net hospital that 
needs our support and not cuts.
    So my question is--why does it seem as though the 
Administration and this Congress are targeting the health care 
providers that can least afford it? And I want to ensure that 
safety net hospitals will be able to continue to meet the 
health care needs of the communities they serve. So could you 
just elaborate for me the thought process here and what is the 
plan going forward for safety net hospitals?
    Secretary Sebelius. Well, Congresswoman, I share your 
interest and concern about safety net hospitals who provide 
critical care in some of our most underserved areas. I think 
that the President shares that concern and we want to find ways 
to both reduce health care costs but, at the same time, not 
jeopardize that critical safety net.
    I would look forward to working with you on some specific 
issues that you find troubling in the budget. I do think that 
we are trying to find a balance of areas where there may have 
been opportunities to reduce overall payment levels and not 
jeopardize the quality of care. And that is really what we are 
trying to find is that right balance. But, certainly, the 
provision of quality health care to underserved areas continues 
to be a very high priority.
    Ms. Fudge. I would, certainly, look forward to continuing 
the conversation with you. The second question is--there were 
workforce demonstration projects, of course, as a part of the 
legislation. Now, these projects will, in fact, help low-income 
individuals, receiving training and entering health care 
professions, which you mentioned earlier in your testimony.
    Can you update the committee on the progress that has been 
made as a result of these projects? And, if you would, please 
highlight any specific goals HHS has regarding increasing the 
number of health workforce professionals. And, finally, please 
update me on any other dedicated funding that will address 
health workforce shortages.
    Secretary Sebelius. Certainly, Congresswoman. I think that 
the President, from the outset, recognized that additional 
health insurance and more affordable, available health 
insurance was a piece of the puzzle. But, without a competent, 
trained and appropriately placed workforce, it would be a huge 
misconnect between people who now have access to health care 
and that access.
    So, from the outset, really starting with the Recovery Act, 
there has been an effort to look at workforce training. We have 
tripled the number of National Health Service Corps members in 
the last 3 years. And those members are nurse practitioners, 
docs, mental health techs, dentists, who are then placed in 
underserved areas in return for helping to pay down their 
student loans and student debt. A kind of win-win situation.
    There is a stream of funding specifically to recruit health 
workers out of minority communities that is new, thanks to the 
Affordable Care Act, and one that we are actively working on 
under the jurisdiction of the Health Resources and Services 
Administration. We are re-looking at what is defined as 
underserved areas to make sure that we have the most accurate 
data.
    So that, as new workers come around, we are working to re-
designate graduate education slots to focus on primary care and 
preventive care and gerontology, areas that have been missing, 
so that we will be training more docs. The Affordable Care Act 
contains a couple of years of funding increases for doctors who 
serve Medicaid patients, paying them at the rate for Medicare 
patients, again, recognizing that the pay differential often is 
discouraging to health care providers serving in underserved 
areas.
    So we are trying to look at everything from training and 
recruitment to slots to placement. The additional work, which 
is under----
    Chairman Kline. I am sorry to interrupt, Madam Secretary.
    The gentlelady's time has expired.
    Mr. Miller, you are recognized.
    Mr. Miller. Thank you, Mr. Chairman.
    And I would just like to take a moment to recognize the 
presence in our hearing room today of Mr. Bill Payne, the 
brother of Donald Payne, our colleague on this committee and 
our colleague in the House.
    [Applause.]
    Mr. Bill Payne is a distinguished public service as--
servant in his own right. Welcome, thank you so much and many 
of us had the opportunity--the Speaker sponsored a wonderful 
memorial service yesterday for Donald and many of us had the 
opportunity to participate with you and your family. And we 
grieve the loss of your brother.
    Chairman Kline. I thank the gentleman and I welcome Mr. 
Payne.
    I agree with Mr. Miller, the Ranking Member, it was, 
indeed, a moving and memorable service yesterday and we are 
very glad to have you here today.
    Dr. Bucshon?
    Mr. Bucshon. Good morning. The first question I have is can 
you--and, based on some previous questions, can you give me 
what you consider a definition of a ``small business,'' 
because, based on some questioning from the other side, it 
seemed to me that your interpretation is that is 50 employees 
or less.
    Secretary Sebelius. A small business is----
    Mr. Bucshon [continuing]. Well, because the question was 
asked what the effect on small businesses is with the 
Affordable Care Act, and you focused on the fact that employers 
with 50 or less employees would not be affected or have all of 
these credits and exemptions. So, based on that interpretation, 
I got the impression that you considered a small business 
people that have 50 employees or less. Because that is a 
different description of what constitutes a small business from 
what we all know is really the truth.
    Secretary Sebelius. I don't have any starting place of a 
definition. I think I was asked were employers under that level 
exempted. And my answer was yes.
    Mr. Bucshon. Well, the question was small businesses and so 
my argument is that, yes, that is true, what you said about 50 
employees or less. But I would argue that small businesses 
actually incorporates a much larger group of employers. And I 
can tell you from experience, talking to business owners in my 
district, that the Affordable Care Act will have a dramatic 
negative effect on businesses.
    And I know Dr. DesJarlais' questioning about employers 
dropping their insurance. At least in southwest Indiana, I talk 
to small business people all the time that provide health 
insurance and they all say they don't know anyone that they 
have talked to in southwest Indiana, I can speak for, that is 
not planning to drop their private health insurance for 
financial reasons and pay the penalty.
    The next question I have is--you talk a lot about quality 
when you are talking about savings rather than cuts. And, so, I 
wouldn't--as a physician, I would like you to, kind of, tell me 
how an insurance company controls quality of health care. 
Because in my view, the quality of health care comes at the 
provider level and the insurance company, essentially, pays the 
bill.
    And, so, when you talk about quality and making--you know, 
with these Medicare Advantage plans, and you are looking for 
quality plans, and that is why you are cutting payments to 
those; you are not saving anything, you are cutting payments to 
programs that seniors really like. How are these insurance 
companies improving the quality of the health care, itself? 
That is my question.
    Secretary Sebelius. Well, I would, certainly, not disagree 
that quality health care is at the provider level. I think that 
what we are trying to do is stop overpaying for plans that are 
currently paid at a rate of about 107 percent of fee-for-
service, with no differentiation in the outcome of those 
patients. So diabetes management is no different in a Medicare 
Advantage.
    They may get a gym membership, they may get free glasses, 
but there is no apples to apples comparison between patients; 
there is no differential. So the additional financing is not 
providing additional incentives to providers who, actually, 
manage chronic disease better or help reduce preventable 
hospital stays, bundle care, coordinate care.
    Mr. Bucshon. But you would have to agree that these 
Medicare Advantage plans provide a service that seniors want 
and that is why they enroll in them. So, yes, they do get more 
services and better--you know, as you know, a health insurance 
policy--one policy isn't the same as the next. They cover 
certain things, they have got different co-pays.
    I mean, you would agree, and I know being in the health 
care industry, it is a very, very complicated system that most 
of us don't really, truly understand. But I would argue that 
those programs provide more services, hence the reason that 
they are paid more. The last question is--can you describe your 
position on the ``doc fix,'' so to speak; the dramatic cuts in 
provider payment.
    But, then again, on your controlling the cost or savings, 
so to speak, you plan to limit reimbursement to providers based 
on, and I will read this, ``rate of growth and productivity in 
the economy at large''. So, if we would allow payments to go 
down under the formula, the SGR formula, or we cut payments--or 
allow the payments to come down, by limiting the growth, based 
on the general economy, I don't see the difference; it is the 
same thing.
    Chairman Kline. Excuse me; can we take that for the record, 
please? We are running--I am very mindful of your time, Madam 
Secretary. I have got other members to answer so if you could 
provide an answer to that for the record, please.
    Secretary Sebelius. Sure----
    Chairman Kline. Mrs. Davis?
    Mrs. Davis. Thank you, Mr. Chairman.
    And, Madam Secretary, thank you very much for joining us 
today. I wanted to turn to one area of disease prevention, 
where we know that trying to quantify the outcomes are very, 
very important. A bipartisan group of us in the House and 
Senate have been working on approaches to decrease instances of 
Type 2 diabetes.
    And, as you are aware, 79 million Americans have pre-
diabetes, which puts them at risk in developing Type 2. And 
complications cost our nation somewhere in the area of about 
$218 billion every single year in health care costs. With about 
25 percent population at risk, there is a national interest, I 
think, and I believe--I know how supportive you are in 
addressing these issues, in reducing the incidence of diabetes 
and having far better outcomes for people.
    The health bill included bipartisan legislation to 
establish the National Diabetes Prevention Program, which 
builds on evidence-based methods to give individuals at risk, 
guidelines on how to prevent Type-2 diabetes. And it is 
eligible for funding from the Prevention and Public Health Fund 
at HHS.
    Do you see continuing our combating instances of Type 2 
diabetes as a national priority? And do you see that funding 
for the National Diabetes Prevention Program must come out of 
the Prevention Fund? And, if that is the case, is it at risk if 
we, essentially, scrap funding for that Prevention Fund?
    Secretary Sebelius. Well, I think, Congresswoman, you have 
just identified one of the clearly looming health threats, and 
present health threats, that is, I think, a target of the 
Prevention Fund funding. And we think diabetes efforts and, 
certainly, focusing on pre-diabetes to try and ensure that more 
Americans don't end up with diabetes in the long-term, is an 
effort that not only lowers costs but saves lives in the long 
run.
    So we have, actually, not only invested--a number of the 
community transformation grant activities are focused directly 
on communities where there is a high prevalence of diabetes. 
And a number of the Beacon Community efforts, with some of the 
Electronic Health funding, are focused on diabetes efforts.
    We have special projects being run in tribal communities, 
where the diabetes rates are even higher than in the general 
population. And I would say that the Prevention Fund is an 
underlying health funding stream for just the kind of efforts 
that you are describing. And, of course, it would be at risk if 
the Prevention Fund is eliminated because there are no funds 
available, often, at the state and local levels. So this would 
continue to be a huge problem.
    We also have a Million Hearts effort, where we are trying 
to have partnerships with not only health care providers but 
some of the major drug companies, and others, around disease 
management issues that we think could save people from strokes 
and heart attacks in the future if we focus on some of the 
underlying causes of blood pressure control and cholesterol 
issues, that often also present themselves in diabetes care.
    So having those strategies in place, having Medicare, 
frankly, invest in prevention efforts--Medicare used to, you 
know, pay for an amputation but not for diabetes screening. 
Those screenings are now available without co pays and, we 
think, that is a huge step forward.
    Mrs. Davis. Yes. If, in fact, we were to really target that 
fund, are there any other ways that those issues would be 
addressed?
    Secretary Sebelius. Well, I think that it is very 
difficult, often, to have people in particularly difficult 
budget times, but even in good budget times, look at 
investments in longer term strategies. It hasn't happened in 
the past. I am not very confident it would happen in the 
future, in spite of the fact that we pay the health results 
every day and we pay the costs for them.
    Mrs. Davis. I really appreciate that. I think one of the 
other things that we have seen on the Armed Services Committee 
is how important, just, preventive health care for young people 
is, actually, because if we are finding that far too many young 
people are not even able to be eligible for the military 
services today because of their health care.
    Secretary Sebelius. I think the data right now, which is 
really alarming, is about 30 percent of the age-eligible young 
men and women aren't, actually, physically eligible to even 
consider Armed Services as a possibility.
    Mrs. Davis. If you could help tie those issues together, I 
think that would be very helpful because I don't think we want 
to turn around and find that we really have totally ignored 
this problem in the future.
    Secretary Sebelius. Well, certainly, the effort that the 
First Lady is leading around childhood obesity, the community 
efforts underway to look at what happens if you increase 
exercise, have more access to fresh fruits, your efforts in 
Congress to change the child nutrition guidelines around school 
breakfast and school lunch, is a start of the kind of 
prevention effort that would, hopefully, produce a lot fewer 
diabetics when they get to be 50.
    Mrs. Davis. Thank you.
    Secretary Sebelius. Thank you, ma'am.
    Chairman Kline. The gentlelady's time has expired.
    Mr. Gowdy?
    Mr. Gowdy. Thank you, Mr. Chairman.
    Good morning, Madam Secretary.
    Secretary Sebelius. Good morning.
    Mr. Gowdy. With respect to the HHS mandate, the most recent 
mandate, you said, and I quote--``this decision was made after 
very careful consideration, including the important concerns 
some have raised about religious liberty. I believe the 
proposal strikes the appropriate balance between respecting 
religious freedom and increasing access to important preventive 
services.'' There are only three balancing tests that I am 
aware of when it comes to matters of Constitutional 
significance; there is the rational basis balancing test for 
economic legislation, there is the intermediate, or mid-level 
scrutiny for gender-related Constitutional issues, and then 
there is the heightened, or strict scrutiny, when fundamental 
rights are involved.''
    And, given the fact that I am sure you can see that 
religious liberty is a fundamental right, which of those three 
Constitutional balancing tests were you making reference to 
when you said you ``balanced'' things?
    Secretary Sebelius. Congressman, I am not a lawyer and I 
don't pretend to understand the nuances of the Constitutional 
balancing tests.
    Mr. Gowdy. But you would agree----
    Secretary Sebelius. I assume you are talking about the 
preventive services----
    Mr. Gowdy. You would agree it is a legal issue, right? I 
mean, are we going to wind up in this--last time I was at the 
Supreme Court, I think you and I were there the same day during 
the oral argument. This mandate is going to wind up in the 
Supreme Court.
    To me, it is--we can talk about the politics all we want 
to, I want to talk about the law. I want to talk about 
balancing religious liberty with whatever else you think it is 
appropriate to balance it with because you used the word 
``balance.'' Which of those three tests is the appropriate test 
for us to use when considering religious liberty?
    Secretary Sebelius. Again, Congressman, I am not going to 
wade into Constitutional law. I am talking about the fact that 
we are implementing the law that was passed by the Congress, 
signed by the President, which directed our department to 
develop a package of preventive health services for women. We 
have done just that with the advice of the Institute of 
Medicine and promulgated that rule.
    Mr. Gowdy. Do you agree with me that government cannot 
force certain religious beliefs on its citizens?
    Secretary Sebelius. Yes, sir.
    Mr. Gowdy. And why can they not do that?
    Secretary Sebelius. Why can government not----
    Mr. Gowdy. Yes.
    Secretary Sebelius [continuing]. Force religious beliefs?
    Mr. Gowdy. What is the basis of that?
    Secretary Sebelius. The separation of church and state.
    Mr. Gowdy. Well, it is the Constitution, right, the First 
Amendment? Can government decide which religious beliefs are 
acceptable and not acceptable?
    Secretary Sebelius. No, sir.
    Mr. Gowdy. And why can they not do that?
    Secretary Sebelius. It is part of our Constitution.
    Mr. Gowdy. It is a legal analysis. I mean, for me, this is 
not a political analysis; it is a legal analysis. So, before 
this rule was promulgated, did you read any of the Supreme 
Court cases on religious liberty?
    Secretary Sebelius. I did not.
    Mr. Gowdy. You would agree with me that our society has a 
compelling interest, not just an important interest, a 
compelling interest in having an educated citizenry, right?
    Secretary Sebelius. Yes, sir.
    Mr. Gowdy. Right. So when a state said you have to send 
your children to school until a certain age and a religious 
group objected because they did not want to send their children 
to school until that certain age, do you know who won? It went 
to the Supreme Court.
    Secretary Sebelius. I do not.
    Mr. Gowdy. The religious group won. I think the state has a 
compelling interest in banning animal sacrifice, whether it is 
compelling or just important is irrelevant for purposes of this 
discussion. When a state banned a practice of animal sacrifice 
and a religious group objected, it went to the Supreme Court. 
Do you know who won that?
    Secretary Sebelius. I do not, sir.
    Mr. Gowdy. The religious group won. I think the state has 
an important interest in having license tags on automobiles so 
law enforcement can know who they are dealing with. When a 
religious group objected to having a certain license tag on 
their cars, it went to the Supreme Court. Do you know who won?
    Secretary Sebelius. I do not.
    Mr. Gowdy. The religious group won. And, most recently, I 
happen to think government has a compelling interest in 
avoiding gender discrimination but this Administration took to 
the Supreme Court a case, Hosanna-Tabor, where a religious 
group wanted to decide who its teachers were, even if it meant 
gender discrimination. It was a nine to nothing opinion in 
favor of religious liberty.
    So when you say you balanced things, can you understand why 
I might be seeking a Constitutional balancing instead of any 
other kind?
    Secretary Sebelius. I do, sir, and I defer to our lawyers 
to give me good advice on the Constitution. I do not pretend to 
be a Constitutional lawyer----
    Mr. Gowdy. Is there a legal memo that you relied on, at 
least when a----
    Secretary Sebelius. I relied on discussions.
    Mr. Gowdy. At least when an Attorney General Holder made 
his--appointments, there was a legal memo that he relied on. Is 
there one you can share with us?
    Secretary Sebelius. Attorney General Holder, clearly, runs 
the Justice Department and lives in a world of legal memos.
    Mr. Gowdy. Do you have attorney----
    Chairman Kline. I am sorry, but the gentleman's time has 
expired. You can ask such a question for the record.
    Mr. Andrews?
    Mr. Andrews. Thank you, Mr. Chairman.
    Madam Secretary, you didn't score well on the pop 
Constitutional law quiz, I am sorry.
    Secretary Sebelius. I got a kind of drift that----
    Mr. Andrews [continuing]. But, more importantly, you did 
acknowledge the Constitutional principles that my friend just 
talked about because you put a religious exemption in the rule 
that you put forward. So we thank you for being sensitive to 
that.
    We have heard a lot of dark predictions this morning about 
terrible things that are going to happen as a result of the 
Affordable Care Act. And I think it is important that we get 
some context and look at the sources of those predictions and 
how they did on some of their prior predictions about the 
Affordable Care Act.
    We heard from your critics and critics of the Act that 
premiums would skyrocket in the private sector, as a result of 
the Act. But we hear from the Kaiser Family Health Foundation, 
this very morning, that the medical loss ratio provisions that 
you were overseeing will likely yield $1.3 billion dollars this 
year, in rebates to payers of health care premiums, because of 
the quality of the law.
    We heard it this morning, that the new IPAP would result, 
and I am quoting, in ``$500 billion in Medicare cuts.'' A more 
accurate statement is that if the growth of Medicare spending 
continues on the same, lower glide path that it has been on for 
the last 18 months, my understanding is the IPAP provisions 
would never kick in because we would be below the projected 
growth rate and there wouldn't be any IPAP decisions or 
recommendations.
    We heard, this very morning, that Medicare Advantage is in 
great peril and, literally, falling apart because of the 
Affordable Care Act. It is my understanding that your 
department released a report several weeks ago that said 
Medicare Advantage premiums are 7 percent lower than they were 
last year and enrollment is 10 percent higher than it was last 
year.
    And then, finally, although we don't hear much about them 
anymore, we heard for years about the death panels. Let me just 
ask you that question. Has your department formed a committee 
that votes on whether any person in this country gets medical 
care or not?
    Secretary Sebelius. No, sir.
    Mr. Andrews. Are you obligated to do so under the law?
    Secretary Sebelius. Absolutely not.
    Mr. Andrews. Okay, well, we heard, you know, for months, 
that this was eminent. So, now, we are hearing this morning 
about a prediction that, unfortunately, may come true if 
Congress makes the wrong decision this week. And that is that 
the Prevention Fund that you oversee would be drained in order 
to make this Hobson's choice between making college more 
affordable and making preventive health care available to 
people.
    Now, I want you to answer this question for us--if a young 
woman is at the age where she thinks it is the right time for 
her to start to get cervical and breast cancer screenings to 
take proper care of herself and she is uninsured, and she does 
not have a sufficiently high income in her pocket to pay for 
those tests and those screenings, is one of the sources that 
she might receive that screening from the Prevention Fund that 
we are talking about this morning?
    Secretary Sebelius. Yes.
    Mr. Andrews. What would she do if that Prevention Fund did 
not exist? Where would she get that cervical or breast cancer 
screening?
    Secretary Sebelius. It is possible that she could qualify 
for a program but what we know is, right now, unfortunately, 
there are millions of women in the situation that you have 
described and they go without the screening. What we know about 
breast cancer is that if it is found early, it has got a 90 
percent survival rate. If, indeed, it is found later in the 
disease progression, the survival rate drops to less than 30 
percent. So she would be in a very precarious situation, not 
being able to identify----
    Mr. Andrews. She, sort of, just opts for the malignancy 
lottery. She hopes that she gets a winning ticket and doesn't 
have that problem. Ten percent of the country's health care 
expenses are attributable to obesity and Type 2 diabetes. Are 
there preventive services offered for Type 2 diabetes under 
this Prevention Fund that we are talking about?
    Secretary Sebelius. Yes, there are.
    Mr. Andrews. And what would happen to people if that fund 
were removed? Where would they get their services to begin to 
manage their diet and their exercise and their blood sugar, to 
avoid further complications?
    Secretary Sebelius. Again, we don't have to look very far 
because the Prevention Fund is relatively new. So the kind of 
costs that not only are imposed upon people's shortened lives 
and their family for loss of a loved one, and their reduced 
productivity to their employer, but the kind of health care 
costs are a part of what is driving health care in this country 
on an ever-increasing pace.
    We pay lots of money, private insurers, public insurers, 
hospitals, taxpayers, for chronic disease and diabetes and 
obesity and smoking are underlying those chronic diseases. So 
we know that anything that can reduce those chronic disease 
onsets will, indeed, save money, save lives, save productivity, 
in the long run.
    Mr. Andrews. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Chairman Kline. I thank the gentleman.
    Dr. Heck?
    Mr. Heck. Thank you, Mr. Chairman.
    And, thank you, Madam Secretary, for being here. I have 
enjoyed the discussion this morning and appreciated you 
acknowledging the difference between access to health insurance 
and the access to health care, in the answer to the question 
from my colleague from Ohio; certainly the two are not 
synonymous. And, with fewer health care practitioners, true 
access to health care will, obviously, be impeded.
    As you know, the Association of Medical Colleges projects 
that, by 2020, the U.S. will be facing a shortage of 91,500 
physicians, both specialists and primary care docs. I am 
concerned that in a time when we need to grow the physician 
workforce, and we have heard you reference the investments in 
health care workforce in the Affordable Care Act, that the 
Administration is actually proposing cutting Medicare support, 
physician training and the critical services provided by 
teaching hospitals.
    It is estimated that the President's proposal to cut 
Medicare IME payments by 10 percent will cost America's 
teaching hospitals over $685 million annually and would 
severely impact their ability to train the next generation of 
physicians. So can you explain the Administration's rationale 
behind this cut when, throughout the debate on the Affordable 
Care Act, and here this morning, we have heard about the new 
investments in growing the health care workforce?
    Secretary Sebelius. Well, again, Congressman, I think that 
the workforce issue is one that we have tried to focus on well 
before, even, the debate on the Affordable Care Act began 
because it is a situation that was looming in this country with 
an aging population and not nearly enough health care 
providers.
    And, so, we are really reassessing all the tools that we 
have throughout the department with graduate medical education, 
with Medicare, with the National Health Service Corps, with 
training of community health workers around some medical home 
models, with a variety of strategies to try and increase the 
pipeline of medical providers. And, not only increase our 
pipeline, but try and refocus on primary care providers, 
gerontologists, nurse practitioners, and others, who will 
deliver the kind of primary and preventive care we think is so 
important.
    Mr. Heck. Well, and I appreciate using all those tools but, 
the fact is, cutting IME reimbursements to teaching hospitals 
cuts the pipeline. We can give Pell Grants to get them through 
college. We can get them into the health profession's Student 
Loan Re-payment Program after they are done but they still need 
to go to a residency program. And decreasing IME funding will 
result in fewer residency slots, which will result in fewer 
doctors.
    So, again, I am caught because there is a lot of talk about 
investing in health care workforce yet there is significant 
cuts to training the physicians of tomorrow.
    And, with that, Mr. Chairman, I would like to yield the 
rest of my time to my colleague from South Carolina, Mr. Gowdy.
    Chairman Kline. Let me interrupt for just a minute. We have 
had, apparently, an operator error in our light system. You 
have about 1\1/2\ minutes.
    Mr. Gowdy. I thank the gentleman.
    Madam Secretary, I think the last time you were here I 
asked you about tort reform. And I don't think it was the most 
recent State of the Union, it might have been the one before 
that, the President mentioned tort reform, specifically, in his 
State of the Union address. The House just passed H.R. 5, which 
is our version of tort reform.
    Do you know whether you or the Administration took a 
position on H.R. 5? And what forms of tort reform would you 
support?
    Secretary Sebelius. Congressman, I did not take a position 
on H.R. 5. I know that the President has said, from the outset, 
that he certainly opposes anything that imposes caps on injured 
patients and is also not supportive of programs that pre-empt 
the state court system.
    We have, underway, a series of efforts looking at 
strategies that both lower liability rates for practicing 
physicians, increase safety initiatives and compensate injured 
patients more promptly, that are yielding, actually, some very 
promising results. And I would be happy to provide that data to 
you. They are in place in hospital systems, in provider groups 
and in states across the country.
    Mr. Gowdy. What about tort reform for Medicare, Medicaid, 
Tri-Care, Federal Bureau of Prisons; things that are inherently 
Federal. I understand he doesn't want to take over the state's 
civil justice system but what about tort reforms? If 88 percent 
of all the payment comes from one of the Federal providers, 
what about tort reform that connects Medicare, Medicaid, Tri-
Care, Federal Bureau of Prisons?
    Secretary Sebelius. I have no idea what you are putting 
under an umbrella of tort reform so that is an impossible 
question for me to answer--court claims act----
    Mr. Gowdy. I am aware of that.
    Secretary Sebelius [continuing]. Where he provides a limit 
on any suit that is against a Federal entity so what----
    Mr. Gowdy. Are you opposed to caps for non-economic damages 
in all instances, pain and suffering caps?
    Secretary Sebelius. Again, Congressman, you show me the 
bill and I would be happy to take----
    Mr. Gowdy [continuing]. H.R. 5.
    Secretary Sebelius. We don't really deal in the tort reform 
arena; that isn't our area in Health and Human Services. We are 
trying to avoid errors to patients, though. We are trying to 
help hospital systems limit the number of cases where a lawsuit 
would be brought.
    I believe in prompt payment to victims. I, certainly, 
believe in helping health care providers have affordable rates 
in malpractice coverage. Most of that experience comes from 
former lives; it is not an area that I deal with day in and day 
out today.
    Chairman Kline. Sorry, the gentleman's time has expired.
    Ms. Woolsey?
    Ms. Woolsey. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, you are amazing. I know you 
know, and I am going to repeat what others have said; tomorrow 
the Republicans are going to bring to the floor legislation to 
postpone their student loan interest increase rate that is 
included in their Republican Ryan budget. That would raise the 
interest rate to 6.8 percent over the current 3.4 percent.
    In so doing--we are glad they want to postpone it--I am. 
But they want to pay for it out of the Prevention Fund; that is 
their offset. The Democrat offset would be to end tax subsidies 
for big oil companies. We think that is where you go for 
offsets, not from the people you are trying to help in the 
first place.
    Speaker Boehner refers to the Prevention Fund as a ``slush 
fund.'' Well, that slush fund is already--it is not a slush 
fund. That fund, that Prevention Fund, is already being 
accessed. And some of the--and you know what that fund provides 
for us. What I would like you to talk about--the other people 
have, kind of, missed this one. It is increasing child 
immunization and screening for newborns.
    What happens if these immunizations are not made available? 
What is going to happen to these children and our society at 
large? And what happens if newborns aren't screened? Why do we 
care?
    Secretary Sebelius. Well, Congresswoman, what we know is 
that the Children's Immunization Program, which is, I think, 
one of the great health successes of, frankly, the last 
century, to get our children into a situation where they now 
have resistance to a lot of deadly and infectious and 
preventable diseases. It is an investment that the health 
studies show returns about $10.00 for every dollar invested.
    It is significantly funded through the Prevention Fund; 
that plus the operators at--at the Centers for Disease Control 
and Prevention, who have public health laboratories in states 
across the country, to fund health professionals in states 
across the country so we can both track disease surveillance 
and prevent disease. It is a huge payoff. We know what happens 
in countries where the immunization rate is far lower and 
children die.
    Ms. Woolsey [continuing]. Children die. And, if newborns 
aren't screened, what do you find--what do we learn when 
newborns are screened?
    Secretary Sebelius. Well, again, I think the screening is 
advantageous because what it does is highlight, at the very 
beginnings of life, what are the issues that may be 
complicating that child's ability to succeed and have a healthy 
and prosperous life. So addressing it early, finding problems 
early is not only saving those children from potentially 
threatening disease but a lifetime of health issues.
    Ms. Woolsey. Thank you, and what impact would using that 
fund to offset--to do away with that fund, virtually, what 
impact would that have on community health centers?
    Secretary Sebelius. Well, I think that it has a significant 
impact across the board. And, I think, Congresswoman, your 
earlier issue raises just a false choice. In America, we should 
both invest in the education of our children and not allow 
student loan rates to double, as they are scheduled to do in 
July, which would make student loans far less affordable to 
working class families.
    And we would have kids drop out of school and not access a 
college degree. And choose between that and keeping our 
children healthy in the first place so they can get to college. 
So I think there is a choice here that is not--there are, 
clearly, ways that student loans can be funded other than 
destroying the Prevention efforts, which are finally underway 
in this country, after decades of talking about them.
    Ms. Woolsey. Well, thank you, because I agree with you, of 
course. You know, the Affordable Care Act provides states with 
millions of dollars in grants to strengthen statewide insurance 
review programs. My state of California has benefitted, with 
$5.3 million to fight unreasonable premiums.
    And the California department insurance recently reduced 
four rate increases, by an average of 9.65 percent, saving 
87,000 Californians; a total of $1.66 million, per month, in 
premium increases. I think----
    Chairman Kline. The gentlelady's time has expired.
    Mr. Ross?
    Mr. Ross. Thank you, Mr. Chairman.
    Madam Secretary, thank you for being here. You know, when 
the President started his campaign for health care reform, he 
talked about a health care crisis. Over time, when it didn't 
seem to be getting traction, it turned into a health care 
insurance crisis. And my question to you is--would you not 
agree that health insurance carriers are an indispensable 
party, in the aggregate, to the resolution of affordable and 
accessible health care in this country?
    Secretary Sebelius. That health care insurers are 
indispensable----
    Mr. Ross. Correct.
    Secretary Sebelius [continuing]. Is that the question? I 
think that is what the President believes, which is why he 
built the new system around the private health market.
    Mr. Ross. Well, I don't think he built it around the 
private health market because I want to make sure we 
understand. As much as I don't like writing my premiums and as 
much as I think insurance companies are their own worst 
enemies, health insurance, as in every insurance, is private 
capital backing a risk. When the government gets involved in 
the business, it's government dollars; it's taxpayer dollars, 
covering that same risk or being part of that same risk.
    My question to you is, in light of where we are with this 
health care reform now before the Supreme Court, should we find 
a mandate to be un-Constitutional--and you have addressed 
affordability and accessibility in your opening, and you talked 
about market forces. But would it not be in the best interests 
of every American to have interstate sale of health insurance, 
over policies that can meet the demands of individual choice? 
Would that not create a competitive environment that would 
bring price stability and keep the government out of being in 
the business of funding health care?
    Secretary Sebelius. Congressman, I have been involved in 
the health insurance market for decades and what we have is a 
private health insurance market that, frankly, is fully able to 
operate in market strategies and decreasing in members' year in 
and year out. The health insurance rates skyrocket, fewer 
people, particularly, young and elderly people drop out----
    Mr. Ross [continuing]. Right. We can do assigned risk pools 
to take care of pre-existing conditions.
    Secretary Sebelius. [Off mike]
    Mr. Ross. Yes, we can. We have done it in other areas. We 
can also require that there be more availability of choice to 
consumers by allowing for interstate sale. But, more 
importantly, we can incentivize wellness if we make it part of 
the choice that the consumer has.
    What we are doing here is the same thing we have done to 
the Student Loan Program and the health--we have nationalized 
it, suppressed the rates, and now we are telling the American 
public that if you want to have a student loan at all, you have 
got to come to the Federal government. We have taken away 
competition. We have taken away choice and we have taken away 
market forces that are absolutely necessary if the individuals 
are going to want to have the coverage they deserve at the 
price they want.
    Secretary Sebelius. Well, again, sir, I think you have 
mischaracterized what the new exchanges will do, which is offer 
competitive choice in a private market strategy around--it does 
get rid of some of the most onerous rules of insurance 
companies; they can't any longer kick people out because of 
pre-existing conditions.
    They can't charge women 15 to 20 percent more than they 
charge males for the same disease. They cannot operate with 
rules that rescind an insurance plan if you make a technical 
mistake. They can't put a lifetime limit on caps but they will 
compete on the basis of price and quality.
    Mr. Ross. How do I respond to my constituents who, back 
home, said, ``I was told I could keep my doctor but now my 
doctor won't keep me because of the reimbursement reductions 
that are being done in Medicare?''
    Secretary Sebelius. There have been no reimbursement 
reductions----
    Mr. Ross [continuing]. There will be. But we just argued 
over this 6 months ago, in trying to do a piecemeal approach to 
guaranteeing that our----
    Secretary Sebelius. A long-term approach would be much 
preferable and we would love to work with you around a long-
term approach.
    Mr. Ross. And what are you saying about giving student loan 
forgiveness, then, to physicians out of school, that decide 
they want to sign a contract with the Federal government to 
handle Medicare patients?
    Secretary Sebelius. I am sorry, say----
    Mr. Ross [continuing]. Incentivize medical students to have 
a loan re-payment program if they will commit so many years to 
taking Medicare patients.
    Secretary Sebelius. Well, sir, right now we have 98 percent 
of doctors involved in Medicare and it hasn't been a problem. 
The problem is that there is no long-term solution to the 
sustainable growth rate and that looms----
    Mr. Ross [continuing]. But I won't get into that now. I 
want to ask you real quickly because--CBO Director, Doug 
Elmendorf, testified that ``Obamacare'' would cost 800,000 
jobs. March 13th of this year, CBO released a projection that 
the new health care law will cost $1.76 trillion over the next 
10 years, nearly double the $940 billion estimate provided when 
it was signed into law.
    Have you or anyone in your administration discussed this 
with the President? And how do you reconcile this increased 
exponential cost, in light of the fact that this economy 
doesn't seem to be doing too well, either in revenue generation 
or in spending cuts?
    Secretary Sebelius. Sir, I am not sure of the precise 
quote. I know the 800,000 job loss is not, necessarily, a job 
loss; it was the projection by the Congressional Budget Office 
that more people would have the ability to retire earlier, 
choose other options, who are now job locked because they are 
terrified of losing----
    Mr. Ross. The cost was highly----
    Secretary Sebelius [continuing]. Health coverage. The cost 
differential, I can get the quote.
    Mr. Ross. [Off mike]
    Secretary Sebelius. The CBO continues to suggest that the 
Affordable Care Act will, indeed, reduce the deficit by over 
$100 billion the first decade and close to $1.1 trillion over 
the second decade; that is--those numbers continue to be 
updated and, so, I would be happy to respond in writing to 
what, exactly, you have quoted there. I don't know. But the 
$1.1 trillion deficit reduction is an updated number from CBO.
    Chairman Kline. The gentleman's time is expired.
    Mr. Hinojosa?
    Mr. Hinojosa. Thank you, Mr. Chairman.
    Secretary Sebelius, over the past 2 years, the Centers for 
Medicare & Medicaid Services, or CMS, have been working to 
implement new operating systems that will allow for CMS to 
process claims in compliance with the new HIPAA requirement. In 
January of this year, CMS began the processing of those 
electronic claims through HIPAA Version 5010.
    And it is my understanding from providers who have visited 
my office, that this change has been met with some 
reimbursement delays, in particular, for dual-eligible 
patients. Therefore, I would like to submit a question for the 
record to ask you to work with me and my staff to see what can 
be done to ensure these delays can be avoided in the future 
because they say that it has been, in some cases, taking 60 
days to get paid.
    Madam Secretary, the Prevention and Public Health Fund is 
an opportunity to invest in the health services before people 
are sick, instead of paying for more costly care. This is 
important for racial and ethnic minorities, who continue to 
have higher uninsured rates and are less likely to gain access 
to health care when they really need it. What are the specific 
ways in which the fund is being used to mitigate the impact of 
these differences in access?
    Secretary Sebelius. Well, Congressman, first of all, we 
look forward to working with you around the----
    Mr. Hinojosa. Thank you.
    Secretary Sebelius [continuing]. Delayed billing issue and 
take a strong look at it because, certainly, the health care 
to, particularly, the poorest, oldest Americans is a high 
priority. In terms of the Prevention Public Health Fund, you 
are absolutely right that identifying early, preventing causes 
and, even, dealing with disease at the earliest stage, is not 
only saving lives but saving dollars.
    So the Prevention Fund is investing in everything, as we 
have talked about, from immunization of kids to disease control 
to breast and cervical cancer screening for uninsured 
Americans; a whole series of strategies. Smoking cessation, 
which we know now that tobacco causes about 400,000 premature 
deaths a year in this country, has a huge toll on workforce 
productivity, and any effort to reduce the smoking rates pays 
off.
    I think, in the case of particularly the minority 
communities, the prevalence of chronic disease is significantly 
higher. Diabetes rates are higher, blood pressure issues are 
higher, obesity rates are higher. So efforts to, really, 
develop strategies that work, have access to prevention and 
care, supporting everything that we are doing, like public 
housing that gives, now, residents smoke-free options so they 
and their kids don't have to live in situations of secondhand 
smoke, delivering clinical preventive services in a much more 
user-friendly fashion, are all ones that will save lives and 
lower costs.
    Mr. Hinojosa. It is clear that health reform is making a 
difference for communities of color. Nearly 1.2 million young 
adults of a racial and ethnic minority background were able to 
get on their parent's plan because of this Affordable Care Act. 
And we are very happy about that. This includes, nearly, 
750,000 Latino adults under the age of 26. This is progress but 
we all know that an insurance card isn't always enough.
    In fact, the Agency for Health Care Research and Quality 
reported that disparities in health care treatment between 
whites and minorities have worsened every year since the report 
was first made public. What investments does the President's 
budget make to eliminate racial and ethnic disparities that 
affect access to quality care?
    Secretary Sebelius. Well, I think there is a series of 
strategies; more health centers in underserved populations, 
bringing health care providers to where people live, 
additional, I think, support for minority health workers, 
knowing that having culturally competent, language competent 
workers dealing with patients is incredibly important, 
certainly expanding insurance coverage.
    We know minority communities are far more likely to be 
uninsured than insured. So, looking forward to 2014, when there 
will be insurance coverage available at an affordable rate and 
that will have a huge impact on helping the health disparity 
situation. Additional research is in the budget on some of the 
health disparity strategies and, certainly, looking at the 
prevention, which now is available to seniors without co-pays, 
with Medicare it is available, with private insurance plans. So 
prevention will be front and center, in terms of health care 
responses.
    Mr. Hinojosa. Thank you----
    Chairman Kline. I am sorry to interrupt.
    We are, Madam Secretary, mindful of your hard stop at 
12:30. We have three more members with questions so we are 
going to be almost exactly on time.
    Mrs. Roby?
    Mrs. Roby. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for being here. As you may 
know, the Catholic TV station, the Eternal Word Television 
Network, EWTN, is located in my home state of Alabama. And EWTN 
does not fall under the small umbrella of the religious 
exemption of a religious employer, nor do many hospitals, 
charitable service organizations and universities. And I 
understand that you, along with the Administration, are working 
on a, quote--``accommodation'' for groups that fall in this 
category.
    But my question is--putting aside any future accommodation, 
why is EWTN, and similar religiously affiliated entities, not 
completely exempt from covering these services, especially when 
these drugs, such as the ``morning-after pill'' and services 
fundamentally contradict their moral belief?
    Secretary Sebelius. Congresswoman, the Affordable Care Act 
made it clear that, in the future, insurance policies should 
include health benefits essential to women's health care and, 
often, they are missing. And, so, we asked the Institute of 
Medicine to give us an analysis of what were the key preventive 
health services for women. They included everything from 
domestic violence screening to maternity care to contraceptive 
coverage.
    We then looked to state law; 27 states in the country have 
mandatory contraceptive coverage. And we looked at the various 
kinds of exemptions that were currently present in the majority 
of states around the country----
    Mrs. Roby [continuing]. Let me, maybe, ask----
    Secretary Sebelius [continuing]. That is why we developed 
the----
    Mrs. Roby. Right, let me get to it because I only have a 
short amount of time and this Chairman is pushing it. Why are 
you defining some religious organizations as acceptable for the 
full exemption and others as only religious enough to qualify 
under some other----
    Secretary Sebelius [continuing]. Again, we were guided by 
the exemption that was in place; we didn't invent this 
exemption. The exemption that was in place in the majority of 
states that had any religious exemption, and a number of them 
don't have any, is what we proposed, with an additional issue 
that we, in the year and in the ANPRM that we have just issued, 
we will provide a series of strategies for religious employers 
who currently do not offer contraceptive coverage as part of 
their health plan, to have the opportunity to employ one of 
these strategies.
    The mandate is not to the employer; it is to the insurance 
company. Insurance companies will offer preventive services to 
women, at no cost to those women, and religious employers will 
not have to purchase, or refer, or pay for, that coverage.
    Mrs. Roby. All right, well, let us--we have talked a lot 
this morning about the preventive care and, so, I just have, 
very quickly, a series of questions. And I want to make sure 
that we are very clear on those. And yes or no is good. Is your 
testimony that without the Preventative Fund, there would be no 
more screenings for children anywhere?
    Secretary Sebelius. Of course that isn't.
    Mrs. Roby. Okay. Isn't it true that the statute does not 
direct preventive funds to any specific program?
    Secretary Sebelius. It is the Prevention Fund and we have 
worked with bipartisan members of both----
    Mrs. Roby [continuing]. And isn't it also true that the 
President's very own budget made cuts to the Preventative Fund?
    Secretary Sebelius. The President's budget did recommend, 
over 10 years, a reduction in the Prevention Fund, certainly 
not an elimination of the Prevention Fund.
    Mrs. Roby. But there were cuts to the Preventative Fund----
    Secretary Sebelius [continuing]. There was a reduction in 
the Prevention Fund, made in the President's budget, which 
would still leave about a billion-plus dollars a year to invest 
in these critical health programs.
    Mrs. Roby. Okay. And, since I have a little bit more time, 
I am going to circle back. I wanted to make sure I got these 
questions in. All plans after 2014 are expected to include 
coverage for sterilization and contraception, including drugs 
that some believe can cause abortion, i.e. the ``morning-after 
pill'' that I have already mentioned. If an employer, such as 
EWTN, that I mentioned, the Catholic television station, has a 
moral objection to such coverage, what penalties will be 
imposed on the employers or, as you clarified, the insurance 
providers?
    Secretary Sebelius. Again, the mandate is not on the 
employer; this is a direct----
    Mrs. Roby [continuing]. What penalties will they suffer if 
these employers do not offer these services?
    Secretary Sebelius. Well, those plans won't be certified to 
be sold in the market.
    Mrs. Roby. Okay.
    Mr. Chairman, I yield back.
    Chairman Kline. I thank the gentlelady.
    Mr. Kelly?
    Mr. Kelly. Thank you, Chairman.
    Ms. Sebelius, thanks for being here today. I had a 
question--early on, Dr. Roe had asked you some questions. We 
held a hearing, back in western Pennsylvania, regarding lawyers 
and their approach to the Patient Protection Affordable Care 
Act and the costs that were going to be involved.
    And maybe I misunderstood, but you said that the reason 
that there is a--that the people don't know--there is a lot of 
misconceptions that are still out there. You still do believe 
there are a lot of misconceptions about the protection plan of 
the Affordable Care Act?
    Secretary Sebelius. I do.
    Mr. Kelly. Okay, why do you think there are so many 
misconceptions?
    Secretary Sebelius. Well, I think that there was about a 
year-and-a-half of mistruths and erroneous debate, that was 
driven by 24/7 news coverage, and people still believe that 
there are elements of the law that not only were never part of 
the law in the first place, but they believe that those will 
come to pass. I find people every day who----
    Mr. Kelly [continuing]. Yes, and I also do. And, maybe, 
part of reason is the rules haven't been written yet. Let me 
read to you a part of the testimony from Will Knetch, who is 
the President of Wendell August Forge: ``I believe that we, as 
a nation, are about to walk into an unknown abyss that, humbly, 
I believe our country will face with full force and effect, the 
implementation of the 2010 health care bill in 2013 and 2014. 
The sheer monstrous size of the bill intimidates most Americans 
and provides so many unknowns for the business community that 
it is scary.'' And to verify it, he quoted Speaker Pelosi, 
during the voting on the bill, ``We have to pass it so we can 
read it.''
    In other words, nobody really knows all the tentacles of 
this bill and that is bad for America and it is bad for 
business. Now, I would just contend to you that there is a lot 
of misconceptions, especially for people who have never run a 
business and, especially, for people who come here thinking 
that they know what is best for everybody at every step of the 
way.
    Is there some reason that, after 2 years, we still don't 
have the rules and regulations because you really--if there is 
a misconception, it would be because this Administration never 
really made it clear what the rules and regulations are going 
to be. So that is not a matter of people sticking pins in a 
voodoo doll; this is a matter of an Administration that has 
never clearly, never clearly, put out what the rules are and 
never, really, clearly told employers what it was going to 
cost.
    Now, I know a little bit about that because every 2 weeks I 
do have to make a payroll. And it is not funded by the American 
taxpayers; it is funded by the success of my business. I can't 
tell you how uncertain most employers are today as to what is 
it going to cost them as employers, as business owners. We 
still don't know, do we?
    Secretary Sebelius. Sir, I would just----
    Mr. Kelly [continuing]. Answer will be ``yes'' or it will 
be ``no.''
    Secretary Sebelius. We are writing rules and regulations--
--
    Mr. Kelly [continuing]. So we still don't have the rules 
and regulations 2 years after the bill was passed?
    Secretary Sebelius. Excuse me, we do not have every rule--
--
    Mr. Kelly [continuing]. Do not have the rules, is that the 
answer?
    Secretary Sebelius. We don't have 100 percent of the 
rules----
    Mr. Kelly. Okay, so we don't really know what the costs are 
going to be?
    Secretary Sebelius. That is exactly what----
    Mr. Kelly. So the misconceptions are based on the fact that 
the Administration has not yet come up with the rules and 
regulations? Passed the law, didn't need one Republican vote to 
get it passed--and I hear how terrible the Republicans have 
been----
    Secretary Sebelius. Well, there was a Republican vote but--
--
    Mr. Kelly. Okay, all right. You and I can, maybe, agree on 
a lot of things. I would agree on this and I would say that any 
business owner is scared to death of this. They have absolutely 
no idea what it is going to cost them. Now, it is going to cost 
the business owner one of two ways; either increased costs to 
him or increased taxes. Is that a given? I mean, this money 
isn't just going to fall out of the sky; this increased cost--
this health care bill is going to cost an awful lot of money.
    Secretary Sebelius. I think for any small business owner 
who currently is providing health coverage, the estimates are, 
by every economist who has looked at this, CBO, et cetera, is 
that costs will go down, not up.
    Mr. Kelly. We don't have the rules yet. We don't have the 
finals rules. We don't know. You can't draw a conclusion on 
something you don't know----
    Secretary Sebelius. I understand, but I keep being cited 
all kinds of people who have drawn all kinds of conclusions. We 
are working----
    Mr. Kelly [continuing]. My question to you is if there are 
no rules and regulations, how can you----
    Secretary Sebelius [continuing]. There are plenty of rules 
and regulations----
    Mr. Kelly [continuing]. Excuse me, I am in the automobile 
business. Do you know what you are asking people to do?
    Secretary Sebelius. I do----
    Mr. Kelly. You are asking people--I said I am in the 
automobile business. I would imagine that somewhere in your 
life you bought an automobile. Can you imagine walking into a 
place of business and saying, ``I want to buy a car,'' and the 
dealer saying, ``Okay, fine, I have got a car for you, can't 
tell you what is in it, can't say how much it is going to cost 
you, can't tell you how much the monthly payment's going to be. 
But I want to go ahead and start paying for it today and 4 
years from now you can take delivery.''
    Secretary Sebelius. And, well before people have access to 
the health care changes, they will know what they cost.
    Mr. Kelly [continuing]. I understand, but they don't know. 
It is 2 years later. I got to tell you, this is either inept, 
an inept Administration, or people who truly don't actually 
know at all how to treat the American people fairly. This is 
going to fall on the backs of the American taxpayers; that is 
who it is going to fall on.
    This is not some benevolent monarchy that supplies all 
these wonderful services to people. The American taxpayers are 
the ones that pay for this. And I have only been here 15 months 
but I have never seen such a disconnect to the real world, in 
the way that things work inside the Beltway. There is such a 
lack of understanding as to what people have to do, in order to 
pay their fair share, play within the rules, and live within 
their means. So----
    Chairman Kline. The gentleman's time has expired.
    Mr. Petri?
    Mr. Petri. Thank you very much, Mr. Chairman.
    I have a couple of questions. First, I have heard from a 
number of constituents, including employers, in the area that I 
represent in Wisconsin, about the importance of health savings 
accounts. And health savings accounts offer a more affordable 
option that puts the consumer in control of their health care 
plan decisions. So I am concerned that some of the regulations 
being written to implement the Affordable Care Act, most 
importantly the medical loss ratio regulations, could 
jeopardize consumer access to these types of plans.
    Do you think consumer access to health savings account-type 
plans is important? And, as you write regulations for medical 
loss ratio and other components of the Affordable Care Act, are 
you taking steps to ensure that health savings account plans 
are able to compete on a level playing field with other, more 
comprehensive, plans?
    Secretary Sebelius. Well, I think, Congressman, the impact 
that you may be referring to is on the so-called ``mini med'' 
plans, some of which are offered along with an HSA. There are 
no direct implications on the health savings account. But the 
``mini med'' plans, which do not offer a full package of health 
insurance, are not currently subject to the medical loss ratio 
but they will no longer be insurance plans post-2014.
    Mr. Petri. In another area, Section 9010 of the Act 
includes an annual fee on health plans. And I am concerned 
about two, possibly unintended, consequences of this fee. 
First, there are many managed care plans in my state and I am 
sure in others that serve exclusively to low-income individuals 
who are on Medicaid or who are dually eligible for Medicaid and 
Medicare.
    These types of plans were created to help coordinate care 
for these individuals, both to lower costs and to improve 
quality. Because the plan revenue comes directly from state 
Medicaid programs, the tax, as applied to these plans, will 
ultimately be paid by the state government and by the Federal 
government. So we are taxing ourselves, raising the costs of 
Medicaid. Are you concerned about this, sort of, anomalous 
situation?
    Secretary Sebelius. Well, certainly, Congressman, the 
access to health insurance for low-income Americans is in 
jeopardy. And we, certainly, don't want to compound that 
situation. I think that the fee that is being looked at is a 
partial offset to the millions of new customers that health 
insurers are looking forward to serving through the insurance 
exchanges.
    So, we think, on balance, the number of new customers will 
far outweigh the modest fee going into the plans, because 
currently they are really on a situation where they are losing 
customers day in and day out as health costs spiral. But they 
are looking forward to, you know, 15, 17 million Americans who 
will be signing up for health insurance.
    Mr. Petri. And, secondly, in connection with the fees, we 
have a lot of integrated health care providers in our state who 
offer their own health plans; Marshall Clinic and so on. These 
providers have been very effective at using their plans to 
coordinate care for patients to reduce costs and to improve 
quality.
    Concern is that this health plan fee will be 
disproportionately harmful to these plans because they are 
smaller and may be less able to absorb these additional costs. 
Do you have any concerns in that area?
    Secretary Sebelius. Well, I think that the kind of 
coordinated care strategy that often is available in an 
integrated health plan is exactly the kind of best practice 
that we are trying to encourage in systems across the country. 
And I have visited a number in your home state, which are some 
of the best, I think, in the country.
    On balance, I really think that the kind of more efficient 
care delivery is a strategy that, not only will pay off but--
right now, we have got the financial incentives in the wrong 
places for the very plans you have described. We pay on volume 
and not on outcome. So if you coordinate care, if you keep 
people healthier in the first place, if you reduce hospital 
admissions, you get penalized.
    I think what you will find is that those plans are exactly 
the strategies we are--in fact, they will be receiving enhanced 
payment through Medicare, through other strategies, going 
forward. So we are shifting a payment system that, I think, 
again, will not penalize those plans but, in fact, will 
appropriately pay for those plans for the first time.
    Chairman Kline. The gentleman's time has expired. It looks 
like the morning has expired.
    I want to thank the Secretary, again, for being here and 
sharing her time and expertise with us.
    I will recognize Mr. Miller for any closing remarks he may 
have.
    Mr. Miller. Thank you very much. I am sorry Mr. Kelly left 
the room. This year, the automobile manufacturers put 15 
million new cars on the road. I assume they didn't just simply 
dump those on the automobile dealers. I assume they took time 
to ramp up the service department, to ramp up the sales 
department, to ramp up the warranties, to change their 
policies, and they knew that those cars were going to come on 
line in a period of time.
    Had we dumped 40 million uninsured people into this system 
on one day after we passed the legislation, I think there would 
have been a howl. The fact of the matter is, I think your 
department has done an amazing job in working with patients, 
with insurance companies, with hospitals, with doctors, with 
specialty people, with general practitioners, with all the 
health services, with the education institutions, so that, 
hopefully, in 2014, this nation will be ready for this. I can't 
tell you, I hear all the time from people who are telling me, 
``Why did you wait until 2014?'' because they want to go start 
their own business but they can't risk health care for their 
spouse and their families. Maybe that is just in California, 
where we have a lot of innovative start-up companies, but I 
hear it all of the time from young people about job lock and 
that side. So I think you have done a very prudent job on that.
    We are out of time. You are out of time. I would just like 
to ask if I could prod you, in writing, for an update on how we 
are doing on complying with, and managing, mental health 
parity? I am getting more and more questions in the mental 
health community, and in my general community, about this. 
There is a great deal of concern. As you know, this was a very 
long struggle----
    Secretary Sebelius. You bet.
    Mr. Miller [continuing]. In the Congress to get this into--
--
    Secretary Sebelius. And I would be glad to respond in 
writing. Thank you.
    Mr. Miller. Thank you very much, Madam Secretary. Thank you 
for being here today.
    Chairman Kline. I thank the gentleman.
    Again, I thank the Secretary----
    Secretary Sebelius. Thank you.
    Chairman Kline [continuing]. For being with us today. I 
think we have made it with----
    Secretary Sebelius. It is brilliant.
    Chairman Kline [continuing]. Twelve seconds to spare. There 
being no further business, the committee stands adjourned.
    [Additional submissions of Chairman Kline follow:]

    
    
    
    
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    [Additional submission of Mr. Roe follows:]

    
    
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    [Questions submitted for the record and their responses 
follow:]



















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            Questions Submitted for the Record by Mr. Miller

    Secretary Sebelius, each year an estimated 40 million American 
adults suffer from some type of mental illness. That is why passage of 
the Mental Health Parity was so critical.
    1. Can you give me an update on what the Department is doing to 
ensure that health plans are complying with Mental Health Parity?
    2. Can you please provide an update on guidance HHS has or will 
prepare for states to assist them implementing and enforcing Mental 
Health Parity?
    During the April 26th hearing you were asked about the Diesel 
Exhaust in Miners Study that was conducted by the National Cancer 
Institute and the National Institute for Occupational Safety and 
Health.
    1. Could you please clarify when the peer reviewed study was 
published in scientific journals?
    Lastly, subsequent to the hearing on May 24, 2012, the Fifth 
Circuit Court of Appeals vacated and remanded a lower court order 
regarding the obligations of the Secretary to produce to the Committee 
certain documents and studies pertaining to the Diesel Exhaust in 
Miners Study.
    1. What did the Appeals Court find with regards to the Secretary's 
compliance with the previous court orders to provide studies to this 
Committee?
                                 ______
                                 
    [Secretary Sebelius' response to questions submitted 
follows:]



























































































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    [Whereupon, at 12:31 p.m., the committee was adjourned.]