I am committed to ensuring the quality of service provided

to the public through the large entitlement programs administered

by this Department

-

Social Security, Medicare and Medicaid.

fiscal year 1991, we are requesting increases for the Social

Security Administration and the Health Care Financing Administration which will enable us to continue managing these programs efficiently and effectively.

In

In

The budget includes full funding for Social Security, Supplemental Security Income and Black Lung benefits. addition, we are requesting $4.2 billion, an increase of $330 million, for the Social Security Administration to run these programs. These funds will allow SSA to stabilize staffing at about 63,000 and continue to invest in automation, thus ensuring high quality service to our public.

Our legislative agenda includes several initiatives which will encourage the provision of health services in managed care settings. We believe managed care is the best means of assuring quality service and appropriate care for Medicare and Medicaid

beneficiaries.

We are also proposing changes to the Medicare program which will save $5.5 billion. These changes are designed to make the Medicare program a prudent purchaser of services and to assure that current inequities in physician payments are not built into the new reimbursement system to be implemented in fiscal year 1991. With these proposals, Medicare expenditures will increase by 4.6 percent between fiscal year 1990 and fiscal year 1991. Without them, the inflation rate of this program would continue at more than double that rate, or at 9.9 percent.

You will note that in our budget, we are proposing to finance some of the services we provide through user fees. For example, my request includes $510 million, an increase of

$312 million over the 1990 level, for survey and certification of health facilities to ensure the safety and quality of care

provided. Following the lead of the Congress in the Clinical Laboratory Improvement Amendments of 1988, we propose funding all activities, including those previously funded by Medicaid,

through user fees.

Lastly, and perhaps most importantly, our budget honors the 1983 bipartisan promise to Americans that there will be sufficient funds for social security today and in the future. Further, we propose additional protection for future beneficiaries through a plan which would end the current practice of using reserves to mask the size of our deficit. contemplate any sort of action which will ultimately endanger the economic future of our children and our grandchildren.

Let's not

Thank you very much. I will now be happy to answer any questions you have about our request.

BIOGRAPHY OF DR. LOUIS W. SULLIVAN

Louis W. Sullivan, M.D., was sworn in as secretary of health and human services March 10, 1989, by U.S. Circuit Judge A. Leon Higginbotham Jr. He was nominated by President Bush Jan 20, 1989, and confirmed by the Senate March 1, 1989.

As head of the Department of Health and Human Services, Dr. Sullivan oversees the federal agency responsible for the major health, welfare, food and drug safety, medical research and Income security programs serving the American people.

Dr. Sullivan came to HHS from the Morehouse School of Medicine in Atlanta, Ga. In July 1975, Dr. Sullivan had become founding dean and director of the medical education program at Morehouse College. Since July 1, 1981, when the School of Medicine became independent from Morehouse College, he had served as its first dean and president. In April 1985, the Morehouse School of Medicine was fully accredited and on May 17, 1985, the school awarded the M.D. degree to its first 16 graduates.

Dr. Sullivan was born in Atlanta Nov. 3, 1933. He received a bachelor of science degree, magna cum laude, from Morehouse College, 1954; and earned his medical degree, cum laude, from Boston University, 1958. He did his Internship (1958-1959) and medical residency (1959-1960) at New York Hospital's Cornell Medical Center. After a pathology fellowship at Massachusetts General Hospital (1980-1981), Dr. Sullivan became a fellow in hematology at the Thorndike Research Laboratories of Harvard Medical School at the Boston City Hospital.

He was an Instructor in medicine, Harvard Medical School, 1963-1964, and an assistant professor of medicine, New Jersey College of Medicine, 1964-1966.

In 1966, he became co-director of hematology at Boston University Medical Center. From 1988 to 1975, he was, successively, assistant professor of medicine, associate professor of medicine and professor of medicine at Boston University School of Medicine. During 1972-1975, he also was co-project director and project director of the Boston Sickle Cell Center and director of Hematology at Boston City Hospital.

Dr. Sullivan returned to Morehouse, his alma mater, In 1975 as professor of biology and medicine.

He is a member of the American Medical Association, the National Medical Association, Atlanta Medical Association, Medical Association of Atlanta, Medical Association of Georgia and the Georgia State Medical Association. He has been certified In Internal medicine and In hematology. His research Interests are in hematology.

Dr. Sullivan was the founding president of the Association of Minority Health Professional Schools. He is a former member of the Joint Committee on Health Policy of the Association of American Universities and the National Association of Land Grant Colleges and Universities.

Professional honors received by Dr. Sullivan Include election to Alpha Omega Alpha Honor Medical Society in 1957, election to the American Society of Clinical Investigation in 1970, to Phi Beta Kappa in 1974, to the Institute of Medicine (National Academy of Sciences) in 1975 and to fellowship in the American College of Physicians in 1980. From 1985 to 1987 he was vice chairman of the Commission on Health and Human Services of the Southern Regional Education Board.

He served as associate editor of Nutrition Reports International, 1969-1973; on the Editorial Board of the American Journal of Hematology, 1975-1977; and on the Editoria! Board of the Journal of Medical Education, 1977-1978. He has served as consultant and adviser to numerous organizations and agencies including several in HHS' Public Health Service and for the Veterans Administration. Prior to becoming Secretary, Dr. Sullivan was a member of the National Cancer Advisory Board of the National Cancer Institute, National Institutes of Health. He is a member of the boards of Friends of the National Library of Medicine and the Boy Scouts of America. He has been a member of the Atlanta Rotary Club since 1977.

Other honors received by Dr. Sullivan Include: Boston University Alumni Award for Distinguished Public Service In 1985; Honoree of the Year of the State Committee on the Life and Health of Black Georgians in 1983; the Drum Major Award by the Southern Leadership Conference in 1982; establishment of the annual lectureship at the Morehouse School of Medicine In his honor in 1980; the Outstanding Alumnus Award from New York University's Cornell Medical Center in 1984; honoree of the Nationa! Association of Minority Medical Educators (NAMME) for outstanding contributions to the education of minorities in medicine in 1984; the first Martin Luther King Visiting Professorship at the University of Michigan in 1986; the Equitable Southeastern Regional Black Achievement Award for Education in 1986; and the Atlanta Urban League Award for Outstanding Community Leadership in 1987. He was a member of then-Vice President George Bush's official 12-member delegation to seven African countries In mid-November, 1982.

Dr. Sullivan and his wife, Ginger, have three children.

HEALTH CARE COSTS

Senator HARKIN. Thank you for a very good, comprehensive, and straightforward statement. I appreciate it very much.

If I might cover a couple of general questions before I get into specifics. Mr. Secretary, in the State of the Union Message President Bush directed you to undertake a major study of health issues in the next few months. The Pepper/Rockefeller Commission will also be reporting on its recommendations.

The congressional debate is going to intensify over issues of longterm care, coverage of the uninsured, and soaring medical costs. It is the issue of soaring medical costs that I would like to discuss right now.

Skyrocketing national health costs are expected to reach $661 billion in 1990, close to 12 percent of our gross national product, twice the proportion of 1965 and the highest proportion for any developed nation.

We spend far more on health care per capita than our major industrial competitors throughout the world, which puts us at a grave disadvantage. It aggravates our efforts to control the deficit, it plays havoc with personal finances, especially for the elderly.

guess my question, Mr. Secretary, is one of broad, very broad policy. Why is our health care system so expensive? What, in a broad context, can we do to bring it under control?

Secretary SULLIVAN. Mr. Chairman, there are a number of reasons. First of all, there is no challenging the position that at its best the American health care system has no equal in terms of the power, technology, training of our health professionals and the variety of services that we can provide.

We can do a number of things now which were virtually unheard of when I was a medical student. Kidney transplants were just being tried when I was in medical school. Not only are we now doing kidney transplants, but heart transplants, bone marrow transplants, liver transplants, et cetera.

While we have emphasized our high technology with spectacular results; we have developed a system that is very expensive. We have also neglected primary care, the fundamental bedrock of our system. We now have a system that is skewed.

We need to work very diligently to change the health behavior of our citizens. If you look at the major causes of death and disability in our population, they are conditions in which the behavior of the individual plays a major role. Our No. 1 killer is heart disease. That clearly is influenced by diet, exercise, smoking and other activities. High blood pressure and stroke also contribute.

SMOKING

The second major cause of death is cancer. The No. 1 type of cancer is lung cancer, which is directly a result of smoking. We have seen some success with the decline of smoking in white males in our society, and that decline in smoking is also now being followed by a decline in the rate of lung cancer in that population. However, white females have increased their smoking over the past 25 years and we now are seeing an increase in lung cancer in them. In 1985 lung cancer in women exceeded breast cancer as the No. 1 cause of cancer in women.

Senator HARKIN. When did that start?

Secretary SULLIVAN. Starting in 1985 lung cancer has beeen No. 1 in white females, and that clearly is related to smoking.

In December 1988 when President Bush nominated me to this position I indicated that one of my top priorities would be health promotion/disease prevention.

My reason is, we are not going to reach our goal of improving the health status of our citizens while controlling costs, if we do not have their active participation by changing their health behavior. We obviously also have problems with drug abuse that are destroying the future leadership in our society. Problems with AIDS also clearly related to personal behavior.

To make a short answer to your question, we need work at the Federal and State level to restrain costs; and we need to have the participation of our citizens. We have relied too much on a medical

model for our health care system; that is, treating conditions when they have risen. We need to move more toward prevention. It is this combination of working with our citizens, businesses, educational system and with our Federal and local governments that we are going to improve the health of our citizens and restrain costs. Senator HARKIN. Do you have any estimate on how much we spend in this country every year on health care as a result of smoking, like lung cancer and things like that? How much a year do we spend?

I heard a figure. I just wondered what-

Secretary SULLIVAN. Our Office on Smoking and Health has that data, and perhaps we might supply that for you.

[The information follows:]

SMOKING-RELATED HEALTH COSTS

The total societal economic impact of smoking in the United States is more than $52 billion annually. This averages to an annual per capita cost of smoking-related diseases of $221 nationally, ranging from a low of $56 per person each year in Utah to $284 in Rhode Island. Of this total $52 billion adverse economic impact, approximately $23.7 million, or 45.2 percent, is estimated to be due to direct health care costs of smoking-related illnesses.

SMOKING-RELATED COSTS

Senator HARKIN. I heard a figure around $60 billion, but I do not know if that is correct. It was somewhere around that, and I guess the question I have is I do not smoke, nor does anyone in my family smoke. Why should I have to pay for those people who decided to smoke all their lives and who now have to have all this high-cost medical care for lung cancer?

Senator BUMPERS. The rest of us do not drink and you do. That's the difference between us. [Laughter.]

Secretary SULLIVAN. I am glad you raised that.

Senator HARKIN. I do not mind him raising it. I do not know if I care for the way he raised it. [Laughter.]

Secretary SULLIVAN. Indeed, we have a number of problems that clearly are related to behavior. For example, as you know, we have had raging battles about whether people should use seat belts. Some people cite this as a first amendment privilege-not to use seat belts.

The fact is when people are killed in automobile accidents, we are deprived of their contributions to society, and we pay for uncompensated care that we provide.

Senator HARKIN. I am just wondering if you would be interested in making a recommendation that those who chose to smoke perhaps a dedicated increase of taxes on cigarettes that would go into a trust fund to pay for the care of those people that get lung cancer. If they want to smoke, let them pay for the health care that comes with it.

Secretary SULLIVAN. Mr. Chairman, we have a number of things under development within the Department on the problem of smoking and other health issues. We will be pleased to work with you on these.

Senator HARKIN. I also mentioned earlier-again, a broad policy question. Canada to the north, again, they are not that much dif