Related Items Full Coverage: White House Releases New Budget

By Katherine E. Harris
LEGI-SLATE News Service
Monday, Feb. 2, 1998

Department of Health and Human Services Secretary Donna Shalala discussed her department's fiscal year 1999 budget Monday by comparing it to a newly renovated car full of new, crowd-pleasing features.

"We're completely reconfigured for today's needs – we're strengthened, streamlined and modernized," Shalala announced at a briefing for reporters. "And with the president's budget plan, we'll also have some new features."

But to pay for the shiny extras, like an ambitious federal child care program, Shalala and other Clinton administration officials are banking heavily on tobacco-related revenues that may not materialize.

Indeed, President Clinton's $380.8 billion budget for the department is chock-full of politically popular initiatives that rely heavily on congressional approval of the so-called tobacco dividend from a massive out-of-court settlement between dozens of states and the nation's cigarette makers. The settlement of the states' lawsuits seeking recovery of Medicaid costs for tobacco-related illnesses would require a cash payment by the tobacco firms of $65.5 billion over five years.

The Clinton health budget also assumes other tobacco-related funds – coming from a $1.50 hike in cigarette taxes – would yield $10 billion in 1999 alone and almost $66 billion over five years. Just last year, federal lawmakers voted to gradually raise cigarette taxes from 24 cents to 39 cents per pack, with the proceeds paying for a new child health initiative.

Aside from the proposed expansion of the Medicare program to seniors aged 55 to 65 (which would be self-funded), tobacco-related revenues would pay for most of the new spending, including $30 billion for federal tobacco programs (including research and teen-smoking prevention), $7 billion to help less-affluent families afford child care, a hefty boost in medical research support and more subsidies to help HIV/AIDS patients to receive new but expensive drug therapies.

Although many congressional leaders have downplayed the chance of congressional approval of the controversial settlement this year, Shalala defended her budget's dependence on the funding sources.

"Make no mistake – we want Congress to pass it," she said of the tobacco settlement. "We expect they will. The American people demand it."

But Shalala noted that the president will fight for the increased spending whether Congress approves the agreement or not. "Even if the tobacco legislation doesn't pass – and we think it will – these are still the priorities of the president, and we will look for the money elsewhere," she said.

The secretary cited the expected federal budget surplus – the first surplus in three decades – as another eagerly awaited funding source. White House economists estimate the budget surplus will be $9.5 billion next year and over $200 billion over the next five years – fully $1 trillion over the next 10 years.

The new child care initiative would spend $21.7 billion over 5 years to award $7.5 billion more in grants to help lower-income parents pay for child care and to boost the Dependent Care Tax Credit tax break $5.1 billion over five years for children enrolled in child care centers. It would also attempt to improve the quality of care through grants to child care providers and consumer education efforts.

HHS officials said that expansion would make more child care assistance available for 3 million families with incomes below $59,000.

The Republican-led Congress has countered these initiatives by pushing its own child care plans, which are mainly a collection of tax breaks. But unlike the president's program, the congressional plans would give aide to aid to families with a stay-at-home parent as well as families that use commercial child care.

Shalala defended the decision to target funding to parents using child care centers. "Our proposals are focused on working families ... for the vast majority of families in this country, there is no choice, they need two incomes," Shalala explained. The Republican's tax breaks would not help those families with little or no tax liability, she added.

In addition, the Food and Drug Administration would receive an 18 percent increase in funding from last year – up to $972 million in outlays in 1999. The funding boost would pay mostly for a beefed up food safety initiative ($50 million more) and a program to prevent youth smoking ($100 million more to pay for education and enforcement efforts).

The president's budget would also include a large boost in medical research, including a $1.15 billion increase in funding for the National Institutes of Health, up to $14.8 billion. It would also mean a $4.7 billion jump over five years for cancer research at the NIH – a popular move on both sides of the aisle. The new cancer-related revenues represent a 65 increase in funding over the next five years.

The blueprint also calls for a three-year demonstration project related to clinical trials involving patients with cancer. The experimental program would involve an agreement between two HHS agencies – the NIH and the Health Care Financing Administration, which runs the Medicare program – and would provide Medicare coverage of patient care costs associated with NIH cancer treatment clinical trials.

Under current Medicare policy, there is no coverage for patient costs if a beneficiary chooses to enroll in a clinical trial; beneficiaries are required either to pay for their own care or to forego the clinical trial as a treatment option.

This proposal is budgeted at $750 million, which would be paid from tobacco revenues.

In addition, funding for the Agency for Health Care Policy and Research would increase by $25 million to a total of $171 million. Within AHCPR, funding for health care quality improvement would double from $15 million to $30 million.

This increase will help carry out the recommendations for scientific research that will be released soon by the highly touted Presidential Advisory Commission on Consumer Protection and Quality in the Health Care Industry.

"The president has given strong support to a patient bill of rights," Shalala said, adding that the boost in AHCPR funding is an "investment in quality."

The budget plan provides $1.3 billion for the Ryan White AIDS treatment activities, a 14 percent increase from last year. It also allots $385 million for new drug therapies for people with HIV/AIDS, more than double the 1997 figure. And the blueprint calls for a 10 percent boost in money for the Housing Opportunities for People with AIDS program.

"We are heartened that the administration has heard the message of the HIV and AIDS community and is asking for a significant increase for these programs," said Winnie Stachelberg, political director for the Human Rights Campaign, the nation's largest national gay organization.