the provisions in the affordable care act that would, over time, close the so-called part d donut hole. is that done the same this year as last year? >> in the budget assumes that all of the expansions in medicare, pardon me, in the affordable care act, are repealed. >> so, just to be clear, that obviously includes the prescription drug donut hole, i assume that includes the coverage of annual wellness visits and the other preventative services in the affordable care act? >> we assume the repeal of all of the expansions in the affordable care act. >> got it. what does your budget do with respect to what we call around here the doc fix, do you fix it as part of your budget? >> there's a reserve fund in the budget resolution that provides for as long as the fix to the

doc fix or the sustainable growth rate formula is done in a deficit neutral manner it allows the chairman to adjust allocations and aggregates to accommodate a fix for the sgr. >> so i understand, i think fixing the sgr is somewhat north of $300 billion for 10 years. as i understand what you're saying is you haven't identify add way but you have a reserve fund that says if you go out and find $300 billion of savings elelsewhere in the budget you can use that for the purpose of fixing sgr. >> correct. >> and do you limit the areas in the budget where those $300 billions in savings can be found? >> no. >> if i could ask you with respect to medicaid. first of all, do you dispute the cbo analysis that shows when

it's fully phased in over time that it would cut the medicaid budget, baseline budget, by 75%? >> if you're talking about the baseline budget we would not dispute that. of course the baseline has a huge amount of growth going into the medicaid program. it's under current law it's growing 7 or 8% and there's also a beneficiary expansion under the recovery act of about a third. so yes, relative to the expansion there is a large reduction. >> the growth rates -- we won't go there right now. let me ask you with respect to -- there seems to be -- not a discrepancy but there is a difference in the amount of savings you achieve in the bmt in certain functions, and the amount of savings you call for through the reconciliation

process. for example, in medicaid, while your budget cuts medicaid by over $800 billion over 10 years, your reconciliation instruction to the energy and commerce committee which has jurisdiction over medicaid is $97 billion. what is the reason for the difference? >> the approach on reconciliation was to replace the sequester. under the chairman's mark, the total discretionary level would be reduced from 1047 to 1028. that's $19 billion. the remainder you need to get to replace the sequester in 2013 for discretionary spending is $78 billion. the deficit impact of the sequester, $78 billion in budget authority but the actual savings in the first year about $45 billion in outlays from that. so the chairman's mark was to

achieve as much savings as possible in the early part of that window but to cover over the 10-year period at least the $78 billion and a growing share. so we did not assume the reconciliation of all of the mandatory savings assumed in the resolution. instead what we did was assume that we got as much as we possibly could, about 40% of the deficit impact of replacing those savings in the first year, and then over time we get multiples of what those savings are by virtue of reconciliation. we did not reconcile all of our assumed savings in medicaid or other areas of the budget. >> and let me ask you with respect to how this sequester dealt with medicare. do you assume the medicare savings that would result from that sequester? >> we started in terms of building the budget resolution we started with cbo's baseline,

cbo has the medicare sequester in its baseline. again, that would be something the committees would have to deal with in as they go through their process of implementing it. our overall numbers, i went through some of the assumptions in terms of what our savings are. >> so -- >> we do not have assumption for reconciliation fixing the medicare sequester. >> if we could turn to income security function 600. before i go there i want to ask any other members of the committee if you want to -- you have questions now? because i can come back to the remainder. >> i appreciate members' questions overlap with a couple of things. i want to clarify, make sure i heard what your answer to a

couple of these questions and ask another one. again, because the budget repeals the health law we passed, affordable care act, the opportunity that is already taking place to close the donut hole, the prescription drug coverage, and seniors have been getting, first they got actual check to cover $250, now it's $500 this next year. and gradually over time close that entire gap in prescription drug coverage because the budget assumes repeal of that, that would go away. those dollars, that cost would be shifted back to seniors. is that correct? >> the assumptions are that the savings from the affordable care act in the medicare should not have gone to expansions in other entitlement programs, instead should be -- >> that's the same entitlement program.

>> no. should be the savings in medicare should not have been in medicaid. they should be devoted to the solvency of medicare. to achieve that the budget assumes the expansions in the affordable care act are repealed. in terms of the other assumptions, how that's exactly implemented beyond that or what congress may do that will be up to the ways and means and energy and commerce committees. >> they could decide that they are going to find money elsewhere in the budget that would meet the additional expansion as you say of coverage for medicare beneficiaries, seniors in this country, three very specific expansions as you call it under medicare. one was the donut hole was going to be closed and they got real benefits, additional expansion as you call it benefits for prescription drug coverage. they no long ver to pay the 20% copay for preventive primary

care. that you consider an expansion and goes away. the patient centered homes, those are additional dollars, an expansion under medicare so those three in particular, there are others you say you consider expansions, inappropriate, they are going away, sometime in the future the committees could change their mind and reinstate that if they find the money. under this budget the assumption is that's an expansion, it goes away. >> yes. the chairman's mark assumes the affordable care act is repealed. in terms of -- >> those benefit goes away. >> in terms of the specifics we can go through the individual assumptions but the budget committee doesn't determine what happens with the donut hole and these very specific assumptions. we set a number or the committee through the resolution sets overall numbers. the committees of jurisdiction determine the details. >> right. but again, because the health law will be, the affordable care

act will be repealed for now the assumption has to be that those expansions -- you answered the question but it's clear that those will be repealed and again, committees could decide to do something other. just on that, the budget also assumes the $500 billion in savings under the affordable care act. sometimes referred to as cuts to medicare. they remain in the budget, they are accounted for in the budget as savings at 500 billion. >> we assume those, we devote them to deficit reduction, instead of covering the expansions. >> but they stay in place. and there has been some confusion about that in the public so i wanted to be clear that remains. and i did have wanted to be -- to follow up from the chairman asked about the 1% increase, if

medicare goes above the 1% increase you point out if in this competitive system the private insurance companies decide to spend more, charge more, than the 1% of gdp, the government would no longer pay more than 1% of gdp, that you would cap it at 1%. who would pay that difference then? government wouldn't. it saves dollars but who would pay those assume it's not defined in the budget who would pick up the difference? is there anything in the bng that doesn't allow those private insurance companies to charge more to beneficiaries or it's silent on that? >> the assumption is the competitive bidding would bring us well within the .5 percent. >> if it didn't -- >> the premium support payment would be capped. it's the same thing how the

president's program works. it has the same issue. it's not clear how the ipab is going to achieve those. >> you also embrace this notion of that 1% cap on government spending and the potential exists for the shift to be made to individual seniors. if insurers decide they are going to charge more, that shift is made to our seniors. i have to field back. >> thank you. >> assumptions are that the

medicare savings go to solvency of the program and deficit reduction, not expansions. yes, sir. >> thank you. mr. van hollen, mr. chairman. i'm just -- i want to understand how you treat transportation, under this bill. can you get a sense of exactly how much is going to be available if this were somehow to be enacted, would be available for the transportation functions? >> yes. the transportation function, we can make comparisons overall. the largest program in the transportation function is the highway program, the transit programs. they are financed by a trust fund. under current law that trust fund is going to become insolvent for 2013, covered by the budget resolution. as a result, the budget reflects

a policy that fund for the highway programs and transit programs should be as it was intended when the program was first created was to be user fee financed. we start with that assumption that we're going to rebalance highway expenditures with the revenues coming into the highway program. next we do three things. we assume three things. if first is recently there have been general fund transfers that amounted to $35 billion into the highway trust fund. right now those aren't recorded as a cost. we think they should be. they would be recorded as a cost going forward. the second thing we do, the budget resolution assumes expansion in oil and gas leasing on federal lands. the u.s. has huge resources, energy resources and the federal

government is the largest land holder in the united states. we assume the additional proceeds from that exploration activity will go into the highway trust fund. >> how much is that assumption? >> we rely on cbo estimates, my recollection it's $4 billion over the 10-year period. because those eowe tak-- takes for the land to become available and cbo is conservative, there is still going to be a large shortfall which is in the program, so as a result we create another mechanism. the chairman has the authority to adjust the aggregates, the committee allocations and so forth to ensure that if legislation comes along and finds ways of offsetting he can adjust the allocations to

provide additional funds to the highway and transit program. >> i'd like to understand is how much money under this proposal would be guaranteed for the transportation functions next fiscal year. >> total level fiscal 2013, $57 billion. total outlays are $49 billion. rounds to 50 billion for 2013. >> how does that compare to what we spent this year? >> current spending for -- $89 billion in budget authority, and

$92.7 billion in outlays. >> 92 billion this year in outlays. 89 billion budget authority. you would take that down to 57 billion in authority, and about 50 billion in outlay? >> yes, sir. >> thank you. >> thank you. this is one of the areas of the budget that we were confused about so i want to make sure i understand it. so, your budget presumes that compared to the level of transportation funding in this fiscal year, in outlays, you will reduce that by 40, $50

billion in the next fiscal year. is that correct? >> yes, sir. >> have you done any analysis on what impact that would have on projects that are on going? >> the trust fund has a -- right now expenditures are well above revenues. it's going to go bankrupt in fiscal year 2013 if congress doesn't take action, it's going to start having to make dramatic reductions under current law to rebalance, to bring spending down in line with revenues. as i mentioned before, there are a series of policies to deal with that. one is a reserve fund that allow congress finds additional savings that can be used to avoid these reductions from occurring. so i understand your budget

presumes those changes will not occur. right? >> the levels reflect current law. the the budget resolution's policies are provide new source of revenues, oil and gas, it will take time before that shows up. and it provides a mek fix if there are additional savings they coop be used, to continue at whatever level congress deems the appropriate level. >> but it assumes for purposes of this budget that there will be the 5 billion for oil and gas you assume will be available. >> yes. that is 4 or 5 billion. that goes to the highway program and officesets the shortfall. partly. i shouldn't have said that.

>> so has cbo scored that particular proposal? >> we've been working with the congressional budget office, this is a complicated area in that the contract authority for program is controlled by the authoritying committees. it's a program that the states ultimately manage it. the outlays are controlled by the appropriations committee. they set gable -- week been trying to get a sense of what happens under current law and the budgetary impact and the cham's mark is to reflect that. >> i'm sklsing with respect to the revenue assert is generated from the oil and gas royalties,

whether cbo scored that. >> we gave them the estimates on our -- on oil and gas, exploration all based on estimates, based on the asum th thuns we gave. >> are those available? >> let me just quek. i want to curveball check in terms of what the specific areas are of where additional exploration would be. i want to double check on that. >> right. you understand what my question raises, there is a distinction between cbo looking at a policy proposal, and including what is reasonable amount of revenue general are ra generated and they calculate how much revenue is generated. there is a distinction between

those. >> i believe in the transportation bill that the committee reported, i believe the resources committee, had about 4 million. specific provisions of the bill that cbo scored. >> thank you. >> before we finish this, but it just -- it would be i think useful for us to probe a little bit here because my understanding is that there are, on the order of magnitude of $56 billion in outlays that are anticipated for 2013. these are already legally binding in transportation, and it goes beyond the highway trust fund.

there are a series of things. that no new contracts, no new projects, this agent would still be committed to 56.3 billion in commitments that have been made in prior years. >> in terms of exactly how executing a situation where the highway trust fund, the department of transportation, they are bound that they cannot spend more is available in the trust fund. until that's going to -- there are states, the federal government and so forth. >> i understand but i just want -- that there are in the department of transportation there are more commitments than the highway program. that you're allocating as i understand it, 50 billion. there are $56 billion of

outdelays. that are scheduled. so if you shut everything down, no new programs, not paying people, you don't have enough to satisfy the obligation. i mean, i just read analysis last night. i'd like some help to understand the situation we've got. >> there are other assumptions in the budget resolution in terms of reductions in the transportation function. by far the largest is this highway program. we resindh high speed rail money. overall we have assumption that the highway program would have to act very, very quickly to stop spending. that would throw through the entire system. for the programs they

administer. >> it will in fahammer people. there are projects that we've all dealt with. i'll give you a copy of the article because again, it's from transportation weekly, they line it out, they say that it's $56 billion already committed, and you're telling us that you will have less than $50 billion available to satisfy these obligations. i think we ought to know that. going forward. to be able to explain to our friends at home what the consequences are of this budget next year. because we're going into a construction cycle now. i hope against hope that the house would actually approve the bipartisan senate bill that is significantly above this develop

for the transportation side. that has god forbid new revenues that they have 3/4 of the senate approving so we'd be able to give people an answer as we're going into a construction cycle for the next year and a half. but if you have some of your team look at this article from transportation weekly, i would appreciate it. >> thank you so much. >> i thank my colleague and i think this committee will have an opportunity later on to take a position on what the gentleman talks about moving forward on that bipartisan transportation bill. if i could go back to asking some questions about the income security function. function 600 where there's a savings, showing a savings totaling $380 billion.

and i wonder if you could identify how you assume that savings will be achieved. >> the largest savings are in the mandatory area. the savings, the two largest items are food stamps, where or snap, the program's name is snap. we assume the program moves to a block grant in 2017 i believe -- 16, excuse me, and grows with eligible population and the food inflation adjustment after that. the other large savings is in the area of retirement reform for federal employees. civil employees. i believe we have $112 billion in 10-year savings in that, through reforms in that area.

we increased the match, our assumption we increased the match, federal employees pay the same level that the federal government pays for their retirement, contributions that are made. >> let me focus for a minute on snap. i know federal employees seem to be pay for it in every bill before the house these days. i think that's a huge mistake. but i'm just going to focus on the budget question with respect to snap. you block grant snap and make receiving it contingent on work or job training. how much do you assume would be saved by applying that condition? >> the two specific savings we have in the snap program beyond block granting are -- there's a provision now, i don't know if ted can join me and describe in

more detail, where if you qualify i believe for -- let me get ted to walk through this. >> there are two provisions outside of the block grachblt one we would end eligibility which allows for individuals to be automatically eligible for food stamps if they receive a funded service. that basically means if you receive a brochure or a 1-800 from the program be eligible for food stamps under less restrictive eligibility rule. this, the reform here requires individuals to be eligible for cash assistance, rather than broad based just general funded assistance. the other assumption is ending the practice known as heat and eat. certain states are providing individuals with de minimis checks and when they receive that the individuals receive

increased food stamp benefits. >> so let me break this down. how much are you assuming is saved just by virtue of the block grant itself? >> $133.5 billion. over 10 years. >> how much is saved by the tanif requirement. >> that's the total estimate. both the categoric le and the block grant. >> and since job training is a condition of receiving snap, am i right about that, that you do make that a condition? >> we wanted to replicate the reforms that were achieved in the welfare reform area in the 1990s, so we wanted to move more