FY 2007 Budget Announcement

Good afternoon. Thank you for coming to discuss President Bush�s budget for the Department of Health and Human Services for fiscal year 2007.

I am joined by our agency heads and our Assistant Secretary for Budget, Technology and Finance, Charlie Johnson. Charlie, I am grateful for the dedicated efforts that you and your team have put into assembling this budget. Thank you for your hard work.

Over the past five years, this Administration has worked to make America healthier and safer. Today, we look forward to building on that record of achievement.

The President and I are setting out a hopeful agenda for the upcoming fiscal year, one that strengthens America against potential threats, heeds the call of compassion, follows wise fiscal stewardship, and advances our Nation�s health.

To support those goals, President Bush proposes total outlays of nearly $700 billion for Health and Human Services. That is an increase of more than $58 billion from 2006, or more than 9.1 percent.

I will tell you up front that the budget also has reductions. To meet the President�s goal of cutting the deficit in half by 2009, discretionary spending will decline by about $1.5 billion in the next fiscal year.

We had to make hard choices about well-intentioned programs. I recognize that every program is important to someone. That is how they get into the budget in the first place. But the choices still had to be made.

Reasonable people can come to different conclusions about which programs are essential and which ones are not. That has been true with every budget I�ve ever been involved with. It is true again today.

There is a tendency to assume that any reduction constitutes a lack of caring. But reducing a program does not imply an absence of compassion.

When there are fewer resources available, someone has to decide that it is better to do one thing rather than another, or to put more resources toward one goal instead of another. Our budget reflects the areas that have the highest pay-off potential.

I�d like to take you through the principles we used in determining where funds should be committed.

• We funded new initiatives, such as expanded Health Information Technology and domestic HIV/AIDS testing and treatment;
• We continued funding for Presidential initiatives, including Community Health Centers, Access to Recovery, bioterrorism and pandemic flu; and
• We also protected programs that are in high demand and have been proven to be extremely effective, such as Head Start, NIH and Indian Health Services.

To meet our goals, we found resources by:

• Reducing or eliminating funding for programs whose purposes are addressed in multiple agencies (such as Rural Health in the Health Resources and Services Administration), given the CMS/MMA increases for rural areas; and
• Continuing performance-based reduction proposals contained in previous budgets.

I would like to spend the next several minutes highlighting five important themes from our responsible budget.

• It protects the health of Americans against the threats of both bioterrorism and a possible influenza pandemic;
  
• It provides care for those who need it;
  
• It protects life, family, and human dignity;
  
• It enhances the long-term health of our citizens; and
  
• It improves the human condition around the world.

We must continue to prepare against two terrible threats -- that of bioterrorism and pandemic influenza.

We are a nation at war. That must not be forgotten. We have seen the harm that can be caused by a single anthrax-laced letter, and must be ready to respond to a similar emergency -- or something even worse.

So the President�s budget calls for a four percent increase in bioterrorism spending in FY 2007. That will bring the total budget up to $4.4 billion, an increase of nearly $178 million over last year�s level.

Among other things, the funds will:

• Increase the medicines and supplies in the Strategic National Stockpile;
• Promote the advanced development of biodefense countermeasures through NIH, which can then be purchased for the Strategic National Stockpile; and,
• Support the transformation of the Commissioned Corps so that it is fully equipped to meet any public health emergency.

We must also continue to prepare against a possible pandemic. This budget funds the goals of the President�s plan including:

• Being able to provide pandemic influenza vaccine to every man, woman, and child within six months of detection of human-to-human transmission of a bird flu virus;
• Accessing enough antiviral treatment courses sufficient for 25% of the U.S. population; and
• Enhancing domestic and international public health infrastructure and preparedness.

The budget also includes more than $350 million for ongoing activities like:

• Safeguarding the Nation�s food supply (FDA);
• Global disease surveillance (CDC); and
• Accelerating the development of vaccines, drugs, and diagnostics (NIH).

The President�s budget includes a new initiative of $188 million to fight HIV/AIDS. The funds will go to a number of notable goals such as:

• The testing of 3 million additional Americans for HIV/AIDS; and
• The treatment of those people who are on state waiting lists for AIDS medicine.

Others also need our care.

We look to promote independence and choice for individuals through vouchers that increase access to substance abuse treatment.

In the area of entitlements, I�d like to begin by congratulating the Congress for having successfully enacted many needed reforms last week by passing the Deficit Reduction Act.

The Act brings us closer to achieving sustainable growth rates in our important Medicare and Medicaid programs. It also strengthens Child Support Enforcement and increases funding for Child Care.

The Deficit Reduction Act also achieved the notable accomplishment of reauthorizing Temporary Assistance for Needy Families (TANF), which had been continued through short-term extensions more than 10 times in recent years. Along with the sustainability of Medicaid, our Budget will take steps to improve the long-term fiscal health of Medicare.

Medicare is simply not sustainable in the long-term in its present form. So we have proposed modest steps to strengthen and modernize Medicare, and to reduce the burden of entitlement spending on future generations.

The budget will allow Medicare spending to grow at a slower rate, saving $36 billion over five years. Those savings represent less than 1.5% of total program spending. Medicare would continue to grow at a rate of 4.8% per year over five years and 6% per year over 10 years.

Slowing the growth of Medicare spending will not reduce the quality of care. The payment reforms in the 2007 budget reflect recent recommendations of the bipartisan Medicare Payment Advisory Commission. The Commission found that current Medicare payments are higher than is necessary for access to quality of care in a number of areas.

Our proposals build on long-term Administration priorities for Medicare including:

• Improving and preventing medical errors;
• Encouraging efficient and appropriate payment for services;
• Fostering competition; and
• Promoting beneficiary involvement in health care decisions.

We have already seen significant savings in Medicare thanks to market mechanisms. In the case of the drug benefit, competition is driving down costs of drug benefit by about 20% annually.

Dr. Mark McClellan will talk to you about this in more detail later today. I would also refer you to my progress report on the first month of the implementation of the Medicare drug benefit, which was released on February 1st.

The 2007 budget also includes several initiatives to protect life, family and human dignity, such as:

• New Family Formation and Healthy Marriage state grants in TANF;
• State grants to allow people with chronic illnesses to secure health insurance; and
• Grants aimed at delaying or preventing seniors from entering long-term nursing facilities.

The last theme I�d like to highlight from this year�s budget is that it increases funding for initiatives that are designed to enhance the health of Americans for a long time to come.

For instance, the President�s budget calls for an increase of nearly $60 million in the Health Information Technology Initiative. By the end of this year, the American Health Information Community will have deliverables. We need to keep the momentum they have developed.

The President�s budget also increases funds for programs we�ve initiated that will transform the way health care is delivered to individuals � programs that will make medicine personalized, predictive, and preemptive.

Despite tight bottom lines, we are calling for increased spending of nearly $60 million toward three important initiatives:

• The Genes and Environment Initiative (at NIH) is designed to identify the most common genetic factors for diseases of substantial public health impact such as heart disease, diabetes, and cancer. Later this week, we will further demonstrate our commitment to this effort with the announcement of a new public-private partnership formed to jump-start the identification process.
• The Drug Safety Initiative (at FDA) is designed to provide emerging information about the risk and benefits of medicine to health providers and patients. The Drug Safety and Oversight board is one of the cornerstones of the system, enabling the FDA to ensure the safety and efficacy of our medicines.
• The Critical Path to Personalized Medicine (which spans many agencies and is directed by FDA) envisions a new cooperative partnership among research, evaluation, approval, and delivery divisions here at HHS. In the future, we see people like you and me having access to the preemptive, predictive, and personalized treatments that this initiative advances.

Those are just some of the highlights of the budget. Before I take a few of your questions, I would like to close by making one last observation. I�m an optimist; so is the President. We believe that America�s best days are still before her.

We are confident that we can continue to help Americans become healthier and more hopeful, and live longer and better lives.

Budgets are investments in the future. This forward-looking budget reflects our hopeful outlook and it sets us on the path that will take us there.

Now, I will be happy to take a few questions.

Then I will hand off to Charlie Johnson and the rest of the agency heads who can provide much more detailed answers than I.

Last revised: February 6, 2006

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