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Dr.r~ART,V, ENT OF HEALTH & HU~A~N SERV!C.E$ FOR RELEASE ONLY ON DELIVERY STATEMENT BY RICHARD S. SCHWEIKER SECRETARY OF HEALTH AND HUMAN SERVICES BEFORE THE SUBCOMMITTEE ON LABOR, HHS, EBUCATION AND RELATED AGENCIES APPROPRIATIONS HOUSE OF REPRESENTATIVES TUESDAY, MARCH 24, 1981 T!04230967

DEPARTMENT OF HEALTH AND HU~IAN SERVICES OVERVIEW OF THE FISCAL YEAR 1982 BIIDGET LIST OF WITNESSES RICHARD S. SCHWEIKER~ SECRETARY T!04230968

MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE: IT IS A PLEASURE TO APPEAR BEFORE YO{! TODAY TO DISCUSS THE PRESIDENT'S BUDGET PROPOSALS FOR 1981 AND 1982 FOR THE DEPARTMENT OF HEALTH AND HUMAN SERVICES. THIS BUDGET FOR 1982 TOTALS $255.3 BILLION IN BUDGET AUTHORITY AND $250.7 BILLION IN OUTLAYS, INCREASES OF $27.5 BILLION AND $21.5 BILLION RESPECTIVELY ABOVE 1981. WHILE THIS BUDGET CONTAINS INCREASES AND DECREASES, THIS NET INCREASE IS NECESSARY TO PRESERVE AND MAINTAIN THIS DEPART~IENT'S COMMITMENT TO SOCIAL SAFETY NET PROGRAHS. PROVISION OF THESE BENEFITS TO THOSE MOST IN NEED IS ONE OF THE PRESIDENT'S HIGHEST PRIORITIES. As YOU KNOW, THE HHS BUDGET CONSISTS OF AUTHORITY TO SPEND TRUST FUNDS, WHICH IS NOT SUBJECT TO THE APPROPRIATIONS PROCESS, AS WELL AS REGULAR APPROPRIATIONS REQUESTS. OUR APPROPRIATIONS REQUEST FOR 1982 is $65.6 BILLION FOR THE DEPARTMENT'S PROGRAMS CONSIDERED BY THIS COM~IITTEE, A NET INCREASE OF $q-9 BILLION OVER THE 1981 LEVEL. OUR BUDGET IS AN ESSENTIAL PART OF THE PRESIDENT'S PROGRAM FOR ECONOMIC RECOVERY. As WE DISCUSS THE SPECIFIC PROPOSALSp WE ~UST KEEP IN MIND THE IMPORTANCE OF THIS PROGRAM -- THE TOTAL PACKAGE OF INITIATIVES DESIGNED TO RESTORE THE HEALTH AND VIGOR OF THE NATIONAL ECONOMY. WE ~UST NOT LOSE SIGHT OF THE BENEFITS THAT WILL ACCRUE TO ALL CITIZENS WITH ENACTMENT OF THE PRESIDENT'S PROGRAM. FOR THIS PROGRAM TO SUCCEEDp BUDGET CONTROL IS ESSENTIAL- T104230969

-2- THE REVISED BUDGET FOR THIS ~EPARTHENT IS CONSISTENT WITH THE PRINCIPAL GOALS OF THE PRESIDENT: 0 FIRST, IT MAINTAINS OUR NATION'S COMMITMENT TO PROTECTING BENEFITS FOR RETIRED WORKERS AND ASSISTING THOSE MOST IN NEED OF SUPPORT FROM THE FEDERAL GOVERNMENT~ O SECOND, IT SLOWS THE GROWTH OF FEDERAL SPENDING TO MOVE TOWARD A BALANCED BUDGET~ AND 0 THIRD, IT RESTORES THE STATES AND THEIR LOCAL GOVERN~IENTS TO FULL AND EFFECTIVE PARTNERSHIP IN THE FEDERAL SYSTEM. THE BIIDGET I PRESENT TODAY REFLECTS THE SIGNIFICANT POLICY CHANGES NEEDED TO ACHIEVE THESE GOALS- OUR BUDGET AND LEGISLATIVE PROPOSALS EMPHASIZE: O PRESERVATION OF THE SOCIAL SAFETY NET THAT PROVIDES RETIREMENT INSURANCE BENEFITS FOR THE ELDERLY AND INCOME SUPPORT FOR DEPENDENT FAHILIES, THE ELDERLY AND DISABLED- THE 1982 OUTLAYS FOR THESE PROGRAMS INCREASE BY $22.7 BILLION, 10-5 PERCENT OVER 1981- T!04230970

-3- SOCIAL SECURITY AND SUPPLEMENTAL SECURITY INCOME BENEFITS ARE CONTINUED WITH FULL COST-OF-LIVING INCREASES AND THE MEDICARE PROGRAM IS MAINTAINED AT CURRENT LEVELS WITH COSTS ADJUSTED FOR PROJECTED PRICE INCREASES- O REFORM OF ENTITLEMENT PROGRAMS TO ELIMINATE HNINTENDED BENEFITS AND TO AVOID UNNECESSARY COSTS. LEGISLATION WILL BE PROPOSED TO LIMIT UNCONSTRAINED GROWTH IN THE MEDICAID PROGRAM, TO ASSURE THAT THE AID TO FAMILIES WITH DEPENDENT CHILDREN (AFDC) PROGRAM IS AVAILABLE ONLY TO THOSE MOST IN NEED, TO ELIMINATE CERTAIN SECONDARY SOCIAL SECURITY BENEFITS, AND TO TIGHTEN ELIGIBILITY FOR DISABILITY INSURANCE. O CONSOLIDATION OF CATEGORICAL PROGRAMS INTO BLOCK GRANTS. THE BUDGET PROPOSES CONSOLIDATING 40 CATEGORICAL HEALTH AND SOCIAL SERVICE PROGRAMS INTO FOUR BLOCK GRANTS: HEALTH SERVICES, PREVENTIVE HEALTH SERVICES, SOCIAL SERVICES, AND ENERGY AND EHERGENCY ASSISTANCE. THESE PROPOSALS EMBODY OUR PHILOSOPHY THAT ASSISTANCE FUNDS CAN BE USED MOST EFFECTIVELY WHEN THE STATES HAVE THE FLEXIBILITY TO RESPOND TO STATE AND LOCAL CONDITIONS, AND THAT THE ~IOST EFFECTIVE FEDERAL ROLE IS TO SERVE THE STATES AND LOCALITIES IN THIS EFFORT THROUGH RESEARCH AND OTHER SUPPORT ACTIVITIES, Ti04230971

-4- THE PROPOSED 1982 FUNDING LEVEL IS 75 PERCENT OF 1981 CURRENT SERVICES. THE BLOCK GRANTS WILL RESULT IN A SIGNIFICANT REDUCTION IN FEDERAL ADMINISTRATIVE OVERHEAD. FUNDING FOR THESE BLOCK GRANTS IS BEING REQUESTED THROUGH THE APPROPRIATIONS PROCESS, CONCURRENT WITH CONSIDERATION OF PROPOSED LEGISLATION. APPROPRIATIONS WOULD~ OF COURSE, BE CONTINGENT UPON THE ENACTMENT OF NEW LEGISLATION- llO FUNDS ARE BEING SOUGHT FOR ANY OF THE PROGRAM AUTHORITIES BEING CONSOLIDATED- .RE.DUCTION~ ELIMINATION OR POSTPONEMENT OF PROGRAMS. EVERY PROGRAM IN THE DEPARTMENT HAS BEEN SUBJECT TO INTENSE SCRUTINY AND RECONSIDERATION, GIVEN THE OVERALL FISCAL SITUATION AND THE NEED TO REASSESS WHAT RESPONSIBILITIES PROPERLY FALL WITHIN THE PURVIEW OF THE FEDERAL GOVERNMENT- THE [IAJOR DECREASES RESULTING FROM THIS SCRUTINY INCLUDE THE CLOSURE OF THE PUBLIC HEALTH SERVICE HOSPITALS AND TERMINATION OF FREE GOVERNMENT ,HEALTH CARE FOR MERCHANT SEAMENI THE PHASE-OUT OF THE HEALTH PLANNING AND PROFESSIONAL STANDARDS REVIEW ORGANIZATIONS PROGRAMS~ THE PHASE-OUT OF GRANTS AND NEW LOANS FOR HEALTH MAINTENANCE ORGANIZATIONS BY THE END OF 1983J AND STREA[~LINING OF SUPPORT FOR HEALTH PROFESSIONS TRAINING. T104230972

-5- O REDUCTION OF FEDERAL PERSONNEL COSTS AND ADMINISTRATIVE OVERHEAD- THESE PROGRAM REDUCTIONS AND TERMINATIONS WOULD RESULT IN A DECREASE IN ASSOCIATED FEDERAL STAFFING OF NEARLY 8,900 FULL-TIME PERMANENT POSITIONS FOR THE TWO YEARS ENDING IN iq82. IN ADDITION, TRAVEL, CONSULTANT SERVICES, EQUIPMENT PROCUREMENT, AND OTHER ITEMS OF OVERHEAD ARE ALSO BEING DECREASED. I WILL NOW DETAIL THE SPECIFICS OF THE BUDGETS OF EACH OF THE DEPARTMENT'S OPERATING COMPONENTS. ALTHOUGH PRIMARY EMPHASIS WILL BE PLACED ON ITEMS THAT COME BEFORE THIS SUBCOMMITTEE, I WILL DISCUSS OTHER ITEMS IN ORDER TO PUT THE HHS BUDGET IN A D]ORE COMPLETE PERSPECTIVE- PUBLIC HEALTH SERVICE FOR PUBLIC HEALTH SERVICE PROGRAMS WITHIN THIS SLIBCOMMITTEE'S JURISDICTION, WE ARE REQUESTING APPROPRIATIONS OF $6,460 MILLION, A DECREASE OF $394 MILLION FROM THE 1981 REVISED LEVEL. THIS BUDGET EMBODIES SIGNIFICANT REDIRECTION OF THE WIDE ARRAY OF DISCRETIONARY HEALTH PROGRAHS WHICH WERE DEVELOPED AND HAVE GROWN SUBSTANTIALLY OVER THE PAST DECADE. FOREMOST IS THE PROPOSAL TO CONSOLIDATE 26 CATEGORICAL GRANT PROGRAMS INTO TWO STATE BLOCK GRANTS -- HEALTH SERVICES AND PREVENTION. BY COMBINING THE CURRENT MIX OF COMPLEX AND OVER- LAPPING GRANTS INTO TWO COMPREHENSIVE FUNDING PACKAGES, STATES ~VILL HAVE THE MANAGERIAL AND POLICY FLEXIBILITY TO RESPOND T!04230973

-6- APPROPRIATELY TO THEIR MOST PRESSING HEALTH NEEDS. THE 1 82 BUDGET INCLUDES $1-q BILLION FOR THE TWO HEALTH BLOCK GRANTS: $1-1 BILLION FOR HEALTH SERVICES AND $0.3 BILLION FOR PREVENTION ACTIVITIES. A SECOND PROPOSAL IS TO ELIMINATE THE CIIRRENT SYSTEM OF PROVIDING FREE GOVERNMENT HEALTH CARE SERVICES TO MERCHANT SEAMEN AND THUS CLOSE THE PUBLIC HEALTH SERVICE HOSPITALS. AT PRESENT THE PHS OPERATES EIGHT GENERAL HOSPITALS AND TWENTY-SEVEN CLINICS, WHICH EMPLOY OVER 5,500 DOCTORS, NURSES, TECHNICIANS AND SUPPORT S~AFF TO PROVIDE THIS SUBSIDIZED CARE- THIS SYSTEM EVOLVED FROrl A TIME WHEN AMERICAN PORT CITIES HAD INADEQUATE MEDICAL SERVICE TO PROTECT THE PUBLIC FROM COMMUNICABLE DISEASES CARRIED BY SEAMEN. TODAY, THE HOSPITALS ARE UNDER-USED, AND MANY ARE LOCATED IN AREAS WITH AN EXCESS SUPPLY OF HOSPITAL BEDS. WE ARE SEEKING YOUR CONCURRENCE IN CLOSING THE HOSPITAL AND CLINIC SYSTEM BY INCLUDING IN APPROPRIATION LANGUAGE A PROVISION WHICH WOULD DELETE THE CURRENT STATUTORY MANDATE TO MAINTAIN SERVICES AT THE LEVEL PROVIDED IN 1973. ALSO, SEPARATE LEGISLATION TO ACHIEVE THIS PURPOSE WILL BE SUBMITTED TO THE CONGRESS. IN ORDER TO ELIMINATE UNNECESSARY FEDERAL SUBSIDIES, WE PROPOSE TO PHASE OUT THE FEDERAL GRANT AND LOAN SUBSIDY PROGRAM TO HEALTH MAINTENANCE ORGANIZATIONS (HMOs). THERE ARE NOW IN THE UNITED STATES 235 liMOs WITH 9 MILLION MEMBERS. OF THESE, ABOUT TWO-THIRDS HAVE BEEN INITIATED WITHOUT FEDERAL DOLLARS. THE T!04230974

-7- GROWING PUBLIC RECOGNITION ArID ACCEPTANCE OF HMOs, WHICH WAS AN UNTRIED APPROACH TO THE DELIVERY OF HEALTH SERVICES IN MANY PARTS OF THE COIINTRY UNTIL RECENTLY, ELIMINATES THE NEED FOR ADDITIONAL FEDERAL FINANCIAL INCENTIVES TO SPUR DEVELOPMENT OF THIS ONCE FLEDGLING INDUSTRY. To IMPROVE THE COMPETITIVENESS OF HMOs, WE WILL PROPOSE LEGISLATION TO MODIFY UNNECESSARILY RESTRICTIVE REQUIREMENTS FOR FEDERAL QUALIFICATIONS CURRENTLY FOUND IN THE HEALTH MAINTENANCE ORGANIZATIONS AcT. AS PART OF OUR GOVERNMENT-WIDE EFFORT TO STIMULATE GREATER COMPETITION WITHIN THE HEALTH CARE INDUSTRY, WE WOULD PHASE OUT THE FEDERALLY FUNDED HEALTH PLANNING PROGRAM- THE 213 LOCAL HEALTH SYSTEMS AGENCIES AND 57 STATE PLANNING ORGANIZATIONS HAVE IMPOSED ADDITIONAL REGULATORY BURDENS ON THE INDUSTRY WITH LITTLE APPARENT IMPACT ON CONTROLLING HEALTH COST INCREASES NATIONALLY. To PREVENT UNNECESSARY PROGRArl GROWTH AND COSTS, THE BUDGET fOR 1981 AND 1982 PROPOSES TO ELIMINATE FUNDING FOR NEW NATIONAL HEALTH SERVICE CORPS SCHOLARSHIPS- THE RECENT GROWTH IN THE AGGREGATE SUPPLY OF DOCTORS HAS CAUSED PHYSICIANS INCREASINGLY TO LOCATE NEW PRACTICES IN MANY UNSERVED OR UNDERSERVED AREAS. THiS HAS MITIGATED THE NEED FOR CONTINUED EXPANSION OF THE NATIONAL HEALTH SERVICE CORPS (NHSC) FIELD PROGRAM. THus, THE PROGRAM IS BEING LIMITED TO A FIELD STRENGTH OF 2,500~ AN INCREASE OF 450 ASSIGNEES ABOVE 1981, WHICH WOULD MEET THE NEEDS OF THE MOST CRITICALLY UNDERSERVED AREAS OF THIS COUNTRY INCLIIDING THOSE T104.230975

8 IN URBAN AREAS- SCHOLARSHIPS WILL CONTINUE TO BE AWARDED TO STUDENTS CURRENTLY RECEIVING THEM- THOSE STUDENTS ALREADY IN THE "PIPELINE" WILL BE SUFFICIENT TO MAINTAIN A CORPS OF 2,500 FOR THE NEAR FUTLIRE. THE FEDERAL GOVERNMENT IS THE PRINCIPAL'SOURCE OF FUNDING FOR BIOMEDICAL RESEARCH IN THIS COUNTRY. THE RESEARCH BUDGETS FOR THE NATIONAL INSTITUTES OF HEALTH (NIH) AND ALCOHOL, DRUG ABUSE AND IIENTAL HEALTH ADMINISTRATION (ADAIIHA) TOTAL $3.98 BILLION IN 1982, AN INCREASE OF $255 MILLION OVER 1981, AND REFLECT OUR COMMITMENT TO MAINTAINING A STRONG NATIONAL BIOMEDICAL RESEARCH ENTERPRISE- RESEARCH PROJECT GRANTS, THE PRIMARY VEHICLE FOR STIMULATING SCIENTIFIC DEVELOPMENT, WILL BE FUNDED AT $2.1 BILLION IN 1982. THIS WOULD PERMIT THE AWARD OF 4,900 NEW GRANTS IN NIH AND 545 IN A~A~HA. FUNDS ARE ALSO INCLUDED TO SUPPORT 11,310 RESEARCH TRAINEES; HOWEVER~ PAYMENTS TO TRAINING INSTITUTIONS FOR SUPPORT COSTS OVER AND ABOVE NORMAL TUITION, FEES, AND LIVING EXPENSES FOR THE INDIVIDUAL RECIPIENTS WOULD BE ELIMINATED- WE PLAN TO REFOCUS FEDERAL AID FOR THE TRAINING OF HEALTH PROFESSIONALS, AND THE BIIDGET FOR 1982 INCLLIDES $120 MILLION FOR THIS PURPOSE- LEGISLATION IS BEING PROPOSED TO TARGET LIMITED SUPPORT ON NATIONAL PRIORITY MEDICAL AND NONPHYSICIAN SPECIALITIES WHERE SHORTAGES PERSIST. THE SUPPLY OF HEALTH PROFESSIONALS HAS INCREASED SIGNIFICANTLY OVER THE PAST 20 YEARS~ AND THE NEED FOR FURTHER FEDERAL INCENTIVES TO INCREASE THE OVERALL NATIONAL SUPPLY NO LONGER EXISTS- T104230976