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R
H
CONNAUGHT
LABORATORIES INC
A PASTEUR MERIEUX COMPANY
ROUTE 611, P.O BOX 187, SWIFTWATER. PA 18370
GEOFFREY G. PETERSON
DIRECTOR OF GOVERNMENT AFFAIRS
AND PUBLIC POLICY
1401 EYE STREET, N.W., SUITE 200
WASHINGTON, DC 20005
202 . 898 3193
FAX 202
371
1107
GEOFFREY G. PETERSON
Jennifee
Thanks for taking The time to meet
with me. I look forward to working
with you to solve 5.th our froblem
and yours.
Perhaps There is something me can do
quietly Though Buyer on The mandator, state
parchase This year That wouldn't open Thos up
into a big political issue. Perhaps combining
That with some Clinton instantive Focussing on
Me so-called 15 pockets of need could be sold as
refinement to The program without going Then The
controvery a of hearings, investigations + Republican to grandstanding.
Just Thinking out loud. I look forward heary from Ju you
®
C
CONNAUGHT
LABORATORIES, INC.
A PASTEUR MERIEUX COMPANY
Fact Sheet
The Company
Connaught Laboratories, Inc. (CLI) is a leading developer and manufacturer
of vaccines and other biological products. The company is dedicated to the
prevention and treatment of important diseases throughout the world.
Connaught Laboratories, Inc. is a subsidiary of Connaught Laboratories Ltd.,
of Toronto, Canada, a member of the Pasteur Merieux Serums & Vaccins
(PMsv) family of companies. Rhone Poulenc, based in Paris France, owns
Institut Merieux, the parent organization of PMsv.
A Connaught/Merck partnership accelerates development of products that
combine a number of antigens to protect children against many common
diseases with a single shot.
Products
Connaught Laboratories, Inc. provides the broadest range of human
vaccines and biologicals commercially available from any single U.S.
company. It is a leading supplier of vaccines for children and adults,
including DTP, polio, Japanese encephalitis, yellow fever, meningococcal,
Haemophilus influenzae type b, rabies, influenza and typhoid fever vaccines.
Pasteur Merieux Serum & Vaccins S.A. provides the largest selection of
vaccines and biologicals commercially available in the world.
CLI was the first company in the world to receive FDA approval to study a
vaccine to prevent Lyme disease in humans. Connaught's Lyme Disease
vaccine Phase 3 efficacy trials involving more than 10,000 volunteers are well
underway.
-more-
TELEPHONE: 717
839
7187
TELECOPIER: 717
839
7235
ROUTE 611, P.O. BOX 187, SWIFTWATER, PENNSYLVANIA 18370-0187
CABLE ADDRESS: CONNAUGHT SWUD
1401 EYE STREET, NW, SUITE 200, WASHINGTON, DC 20005
TELEPHONE: 202
898
3193
TELECOPIER: 202
371
1107
CLI Fact Sheet -2-
History
CLI's Swiftwater, PA site has been home to vaccine companies for nearly
100 years.
Connaught Laboratories, Ltd. acquired the Swiftwater site from the Salk
Institute in 1978, thereby establishing CLI.
Pasteur Merieux Serums & Vaccins, S.A. acquired CLL and CLI in 1989.
People
CLI employs more than 600 people. Approximately 500 employees are based
in Swiftwater. More than 100 Biological Product Specialists bring the latest
product information to health professionals throughout the country. Since
vaccine production is seasonal, temporary workers also assist the company
during peak manufacturing times.
Employees with diverse backgrounds help develop, manufacture and
distribute Connaught's products. Types of employees include health
professionals (physicians, nurses), regulatory specialists, biochemists,
production specialists, administrative staff, engineers, Quality Assurance
experts and sales and marketing representatives.
Community Partnerships
Community Partnerships are valued highly by Connaught.
The company continually seeks new opportunities to support the
community with people, programs and financial contributions. Emphasis is
placed on programs to improve education, health and the environment.
Education has always been a high CLI priority. Community education is
supported through scholarships, internships, and speaking engagements.
Connaught employees are encouraged to support the community by getting
involved in a Speakers Bureau, volunteering to help local organizations and
participating on a Community Relations Team that guides these activities.
Mary Ann Chafee 1/26
Vaccine. at no cost for Medicard populations for docs
CDC price important. Merk replacement programs.
Problems in Medicaid - shown by diagnostic S tudies -
David Wood did
coverage worse in private doctors offices.
study for L.A.
430 M to do demos to fours on high risk areas -
Bumpers
Universal purchase - IF move to 70-80M0, concern.
Problem for Bumpers. Danforth was move interested
Mercer report - lost is to R D.
But doesn't sound were huge concern
Continued guar. for Medicaid / more generous reimb.
for docs - states buy at Public price for Med.
so free up B
Capped entitlement - but carrots to make sure they
spend it.
Formula based on # of kids at whatever poverty
level. This IS what we buy, and this is
what you can buy above that
States don't have any way of knowing what they need
Limitation on amount of vaccine.
States shid pick up cost of delivery.
Flex. for states to work out replacement programs
farm w/ manufacturers.
WIC vouchers - Bumpers likes - must implement in
every WIL clinic
Georgia - clinic andet - perf. data on individual
providers
Distribution
-
replacement
- tap into fed. distribution contract
Vaccine cos. worried about block grants.
Bill Corr Questions
/
State entitlement for vaccine purchase -
spent only in context of State plan that
addresses 317 and VFC
2
universal purchase caps
3
explicit limit on 90 of CDC Purchase
NGA
Roundtable at WH 9:30-11:30 Monday
Potus address to plenary session 11:15 Tuesday
4:00 Monday
List of issues/timeline / who will tam to whom B when
Markg Ann Chafee
HOW WE CAN FIX THE VFC PROGRAM
Reallocate funds that would be spent on more federal
vaccine to activities we know will address the high-
risk population.
Amend OBRA as follows:
Strike authority to purchase vaccine under VFC and use
savings ($150M to $200M per year) to fund a capped
entitlement for immunization grants to states.
Half of each year's funds would be allocated to states
based on need; the remaining half would be allocated to
states based on performance (immunization coverage
rates).
States could use entitlement funds for any
"infrastructure" activity: registries, expanding clinic
hours and clinic personnel, tracking systems, parent
and provider education.
Include provision for "Medicaid replacement" to ensure
that all vaccine for Medicaid children is purchased at
the public price.
Grandfather universal purchase states to ensure that
such states can continue to buy all vaccine at the
public price.
The current 317 program would continue in place with
all children eligible for free vaccine in all public
clinics and health departments.
The political questions can be answered as follows:
The VFC program is being redesigned because, thanks to
better data collection and evidence from studies of
high-risk children, we now have a much better
understanding of the problem.
We haven't faltered in our commitment to ensure that
all our children are protected from preventable disease
-- we are all willing to spend money on the problem, we
are just targeting our efforts more effectively.
The VFC program is only one part of the President's
Childhood Immunization Initiative -- all other parts of
the CII will stay in place.
The President could take the lead on this -- Bumpers
and Danforth will carry it as an amendment to health
care reform, and credit will be given to the
Administration for its foresight in refining this one
component of the CII.
TO:
Hillary Rodham Clinton
FROM:
Jennifer Klein I M.
RE:
Call to Senator Bumpers
DATE:
12/28/95
Here are some talking points for a call to Senator Bumpers. I would recommend that
you make the call on Friday, December 29. Melanne will be seeing Senator Bumpers over
the weekend, so if you let her know if you've reached him she will follow up. He can be
reached at 224-4734.
The purpose of the call is to begin a process to work with him on changing the
Vaccines for Children program while ensuring that it guarantees immunizations to needy
children. We also plan to work with Senator Breaux and Congressmen Waxman and Dingell.
While the vaccine manufacturers and Republicans are continuing to push for repeal, four of
the five reconciliation bills (Daschle, Breaux/Chafee, Coalition Democrats and ours) leave the
program in place. (I'm not convinced. though, that this means too much. The Daschle and
Breaux/Chafee bills simply did not address VFC.)
I would recommend that you make the following points:
I know that you have had concerns from the beginning about the VFC
program.
I also know that you and I both want to make sure that kids get the vaccines
they need. I think the best way to do that is to protect assured funding for
immunizations for children.
We have made clear that we oppose repeal of the VFC program. We would,
however, like to work with you on some significant changes to VFC. We have
done a good deal of thinking about changes that would address the concerns
that you and others have raised -- like giving states more flexibility to tailor the
program to different needs and situations -- while ensuring that the cost of
vaccine does not prevent children from getting immunized.
Melanne Verveer and Jennifer Klein would be happy to work with your staff.
I have also attached a memo outlining options for the Vaccines for Children program
that Secretary Shalala sent to Leon. Option 3 is the most likely to appeal to Bumpers. Leon
has not made any decision on the memo, but based on my discussions with John Angell, I
think he would agree with option 3.
cc:
Melanne Verveer
-12-13-95 02:12PM FROM IMMEI OFFICE ASH
TO 94562878
P002
DETERMINED TO BE AN
ADMINISTRATIVE MARKING
CONFIDENTIAL
DRAFT
INITIALS: ms DATE: 4-24-14
This memorandum describes several options for addressing the
Congressional challenges to the Vaccine for Children (VFC)
program.
As you know, the VFC program provides all necessary childhood
vaccines to four groups of entitled children: Medicaid eligible,
American Indians and Alaskan Natives, unincured, and underinsured
(if they are served by a Federally Qualified Health Center).
Both House and Senate reconciliation bills repeal the VFC
program. Both bills would include in each state's "Medigrant"
the amount of federal Medicaid funds that were spent in the state
in FY 1934 (prior to VFC). The use of FY 1994 as the base
reduces federal funds for childhood vaccine purchase by
approximately $200 million each year during the period FY 1996
through FY 2002. The bills also include a requirement that each
state cover immunizations (as selected by the state) for children
made eligible by the state.
OPTIONS:
The VFC is a critical part of the President's Childhood
Immunization Initiative (CII) because it provides the funds to
purchase vaccine for low-income and, otherwise, needy children.
(The other four parts of the CII are infrastructure support,
education and outreach, monitoring and research on better
vaccines.) Without adequate funds for vaccine purchase, it is
unrealistic to expect the CII to reach its immunization goals for
1996 and 2000.
We need to develop a strategy to assure the continued
availability of needed vaccine. Here are three options that will
accomplish this objective, with the pros and cons of each.
OPTION #1: RETAIN THE VFC PROGRAM
PROS:
*
The VFC has been implemented and is doing well. The
VFC is in public health departments in every state and
in private doctors' offices in 42 states.
*
The VFC is not purchasing the large quantities of
vaccine initially projected by the states; therefore,
VFC costs are lower and the Impact on vaccine companies
is less than they claim.
CONS:
*
Opponents will insist on changes in VFC.
*
The VFC will continue to be controversial with
Congress.
12-13-95 02:12PM FROM IMMED OFFICE ASH
TO 94562878
P003
CONFIDENTIAL
DRAFT
*
Vaccine companies will continue to attack the program
claiming it erodes the private market.
OPTION #2: Significantly modify the VFC program while retaining
the individual entitlement. Changes would (1) establish a limit
on the total amount of vaccine CDC could purchase from vaccine
companies -- thereby guaranteeing the size and stability of the
private vaccine market; (2) eliminate coverage for underincured;
(3) eliminate authority of states to become universal purchase by
buying additional vaccine at capped price; and (4) if necessary,
eliminate current price caps on older but most critical vaccines
(OPV, MMR, DPT).
PROS:
*
Retains most important feature of VFC - guaranteed
vaccine for most needy children.
*
Addresses vaccine company concerns with regard to
market stability.
CONS:
*
Increases cost to states to continue their current VFC
programs - although we believe state health officials
are prepared to accept higher costs to eliminate
controversy about the program.
*
Vaccine companies would continue to oppose VFC due to
fear of future governmental restrictions to assure
entitlement costs do not grow excessively.
*
Opponents will not view as adequate compromise.
OPTION #3: Significantly modify the VFC program making it a
state entitlement. Option 3 would entitle the states to receive
But
sufficient funds to purchase all necessary childhood vaccines for
all children in families below a certain percent of poverty
1. Manuf. nervous level. States would receive funds only if they enter into a
about block
performance partnership agreement which would specify the state's
grant grant--use
plan (including its use of Section 317 appropriated funds for
317 a for
immunization) for reaching the 1996 and 2000 immunization goals.
States would be limited in the volume of vaccine that could be
purchase at
purchased through CDC. In effect, states would design their own
low price?
immunization programs with technical assistance from CDC.
2. Jurisdiction
PROS:
for this
program
*
Retains most important feature of VFC - - guaranteed
3. O.K. on ending
vaccine for most needy children.
univ. purchase
*
Could garner support from key Democratic supporters and
4. Keep public
states.
Purchase low
enough? 60-6590
Funding path for VFC?
5. Fit w| Medicard replacement !
(. Include WIC demonstration
12-13-95 02:12PM FROM IMMED OFFICE ASH
TO 94562878
P004
CONFIDENTIAL
DRAFT
*
May not be opposed by vaccine companies
*
By removing individual entitlement could improve
opportunity to reach compromise with Congressional
Republicans. Program would still accomplish
President's objectives.
CONS:
*
Pediatricians and other advocacy groups supporting an
individual entitlement may oppose, especially because
it sets precedent for rest of Medicaid.
*
Increases cost to states to continue their current
efforts -- although we believe state health officials
are prepared to accept higher costs to eliminate
controversy about the program.
HOW TO PROCEED:
Given the pending Congressional action, the VFC will be a major
factor in reconciliation negotiations between the Administration
and Congress.
Prior to engaging in any negotiation with Congressional
Republicans, we should develop an Administration position through
discussions with key Senate and House Democratic supporters - -
Senators Bumpers and Breaux and Congressmen Waxman and Dingell.
Those discussions would strengthen our position in negotiations
with Congressional Republicans and assure the support of these
key Democratic allies for our implementation of the program that
results.
I recommend that we select a preferred option and immediately
begin discussions with these kcy Democrate.
12-21-95 06:33PM FROM IMMED. OFFICE ASH
TO 94562878
P001
OFFICE OP THE ASSISTANT SECRETARY
FOR HEALTH
HEALTH HUMAN SERVICES USA
716 G - HHH BUILDING
200 INDEPENDENCE AVE., S.W.
:
WASHINGTON, D.C. 20201
HEALTH SERVICE
DIPARTMENT
FAX: (202) 690-6960
PHONE: (202) 690-7694
1798
HEALTH "FAX"
TO:
FROM:
Jennifer Klein
Bill CORR
FAX NUMBER: 456-2878
MESSAGE:
PLEASE CALL FTS
ASK FOR
IF ANY PROBLEMS WITH TRANSMISSTON
NUMBER OF PAGES 2 (NOT COUNTING COVER PAGE)
12-21-95 06:33PM FROM IMMED OFFICE ASH
TO 94562373
P002
501-664-1156
301-229-4906 301
TALKING POINTS FOR CONVERSATION WITH SENATOR BUMPERS
*
I would like to talk with you about the Vaccine for
Children Program (VFC). I hope this will be the first of several
discussions.
*
As you know, the Administration has taken a firm position
on retaining the Medicaid entitlement. In stating our position,
we have made clear that the VFC program should not be repealed.
We were pleased to see that the budget proposal from the Blue Dog
Democrats also does not repeal the VFC.
(JENNIFER: WE ARE STILL CHECKING ON SENATE PROPOSALS)
* I want you to know that while we are vigorously opposing
repeal, we would like to work with you to see if we can agree on
some significant changes in the VFC. Our goal in making these
changes would be to avoid in the future the disagreements and
controversies that have surrounded the VFC.
*
We have done a great deal of thinking about potential
changes. I believe we could develop a proposal with you that
would be widely accepted by other Members and interested parties.
*
I believe we can meet your concerns with the VFC while
accomplishing our goal of a nation-wide immunization effort with
assured funding for necessary vaccines for needy children.
12-21-95 06:33PM FROM IMMED OFFICE ASH
TO 94562878
P003
Q. Our immunization coverage rates for two-year old
children are now at historic highs. What role did the Vaccine
for Children Program play is our current rates?
A. The VFC plays an essential role in our current childhood
immunization system. Unfortunately, the impact of the VFC on
immunization rates has not yet been recorded.
Our immunization goal is for children to have all their
shots by age two. Our survey, therefore, questions the
immunization status of two year old children (the actual survey
questions the status of children 19 to 35 months old). Our most
recent survey covers calendar year 1994. Since the VFC began in
October, 1994, the 1994 immunization rates include only a few
children who may have received one of their recommended shots
with VFC purchased vaccine.
Even SO, there is much to say about the essential role the
VFC plays in our current immunization system.
*
By providing guaranteed funding for all necessary
vaccines for virtually all needy children, and by assuring that
important future vaccines are automatically included, the VFC is
a critical component of a nation-wide immunization system and
infrastructure that will enable us to keep our rates at high
levels. Without the organized system, our country could easily
slip back into the same complacency that resulted in the measles
epidemic of 1989 - 1991.
*
We know that millions of children who are poor and on
Medicaid or uninsured or who are American Indian or Alaskan
Natives have received tens of millions of doses of childhood
vaccines paid for through the VFC.
+
The VFC has paved the way for an enduring partnership
between private physicians and public health. This new
relationship will have a lasting effect on our ability to assure
that all children are protected against vaccine preventable
diseases.
*
The VFC has already made it possible for several new
immunizations to be added to our childhood schedule (for example,
Hepatitis E for adolescents and varicella), and for a substantial
increase in the number of children who receive a second dose of
measles vaccine. These additions are evidence of the commitment
embodied in the VFC that all necessary childhood vaccines will be
available to all needy children.
CLOSE
HOLD
January 3, 1996
Health Division
Office of Management and Budget
Executive Office of the President
Washington, DC 20503
Please route to:
Richard Turman
Decision needed
Please sign
Mark Miller
Bc
Per your request
Please comment
Barry Clendenin
For your information
Nancy-Ann Min
With informational copies for:
Subject:
Answering Your Questions on VFC Repeal
HPS Chron, HD Chron
From:
Gordon Agress and Nikki Highsmith figh
Phone:
202/395-4926
Fax:
202/395-3910
Room:
#7026
Attached please find our memo answering your questions on State purchase rights and Section
317 funding levels in the event of VFC repeal. We have structured the memo to answer your two
questions and placed other information in Appendices. The first appendix addresses the
possibility that States may shift payment of Medicaid children's immunization from Medicaid to
Section 317, and the second appendix shows several possible compromise positions on VFC
short of full repeal.
Attachment
EXECUTIVE OFFICE OF THE PRESIDENT
STATE STATE UNITED OFFICE
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
Memo To:
Nancy-Ann Min
JAN
3 1996
Through:
Barry Clendenin
Richard Turman
3C
Mark Miller
Subject:
Impact of VFC Repeal on State Purchase Rights and Section 317 Funding Levels
From:
Gordon Agress and Nikki Highsmith for yA
You asked us, if VFC is repealed: 1) "What to do about State access to the contract price for
vaccine?"; and, 2) "What is the proper level for Section 317 vaccine purchase?" In short, we
suggest:
Answer 1: Getting States purchase rights to as much contract-price vaccine as possible,
probably by using some version of the Breaux formula; and, grandfathering universal
purchase States.
Answer 2: Funding Section 317 vaccine purchase at $205 to $227 million in BA in FY
1997 to cover HHS estimates of uninsured and underinsured children losing Federal
entitlement to immunization in VFC repeal. Estimates for any given year would depend
on the date and conditions of VFC repeal.
The most recent data available show immunization rates in 1994 approaching the
Administration's goals of 90% immunization of two-year olds with the initial and most crucial
doses of vaccine. In that same year, States had less access to the contract price for vaccine than
suggested in Answer 1 above, and Section 317 had funding comparable to that suggested in
Answer 2. Thus the above suggestions will make Federal immunization programs even stronger
than they were in 1994 when those high immunization rates were recorded.
(HD staff note that if the repeal of VFC results in State Medicaid programs paying some portion
of the costs of immunizing Medicaid children (as opposed to VFC's 100% Federal payment),
States will have an incentive to shift the cost of immunizing those children to Section 317 --
which is also 100% Federally funded. Such potential cost shifting is the basis for manufacturers'
concerns and the Breaux formula, and could increase the demand for Section 317 funds. We
recommend considering reducing this incentive to shift by requiring States to contribute to
Section 317 vaccine purchase costs as they do for Medicaid [or some variation thereof].
However, States are likely to object, since Section 317 has never been subject to such a match.
For simplicity, this memo assumes no match; however, the attached Appendix One provides our
analysis and recommendation on shifting and a State match.)
1
Your questions probably require different answers in scenarios short of full VFC repeal, since
State Medicaid programs could bear fewer costs if some portion of VFC is retained. For
example, scaling VFC back to coverage of only Medicaid children while retaining 100% Federal
payment of these children's immunization would substantially reduce States' concerns about
access to contract price vaccine while increasing demand for Section 317 vaccine purchase
funding. For simplicity, this memo assumes full repeal of VFC. The attached grid (please see
Appendix Two) outlines potential compromises short of full VFC repeal.
Question #1: VFC Repeal Imposes New Costs on States
For States, one of VFC's key features is its 100% Federal payment for the immunization of
Medicaid children. Repeal of VFC would restore State matching payments for Medicaid children
and repeal their right to purchase vaccine at the discounted CDC contract price -- imposing new
costs on States and raising the price they pay for vaccine at the same time. States would prefer to
retain VFC's purchase rights to minimize these new costs while manufacturers prefer to
minimize the amount of vaccine sold at the discounted price.
Senator Breaux compromised with manufacturers to achieve some State purchase rights for
Medicaid children. The Breaux amendment to the Senate reconciliation bill allowed States to
purchase vaccine at the contract price for their Medicaid children, adjusted by the assumption
that 75% of Section 317 funds paid for Medicaid immunizations.¹ Staff from the Association of
State and Territorial Health Officers (ASTHO) told HD staff that manufacturers were willing in
principle to sell States vaccines for Medicaid children at the contract price. Manufacturers
wanted the limitations in the Breaux amendment, because allowing States to buy contract price
vaccine for all of their Medicaid children -- without adjustment for Medicaid children immunized
under Section 317 -- would allow States to purchase more vaccine at the contract price than they
actually need to immunize Medicaid children. ASTHO staff say that the Breaux amendment's
assumption that 75% of Section 317 funds covers Medicaid children is too high, and that the
adjustment should be 25%. HD staff know of no data to evaluate these numbers.
Recommendation, Question #1: We recommend using some variation of the Breaux
formula to obtain the best deal (e.g. as much vaccine at the contract price as possible) you
can on State purchase rights for Medicaid children. Without better information, HD staff
cannot say what the right number is. We recommend that a compromise include provisions to
ensure the development of better information -- States should report enrollment of Medicaid
children, how many of these children were immunized on Medicaid, and how many children
were immunized on Section 317. Purchase rights should be adjusted annually for these levels.
HD staff also suggest seeking to grandfather the contract price purchase rights of the existing 15
universal purchase States now purchasing at the contract price. (Please see Appendix One for
recommendations on preventing such shifting in the first place.)
1
The amendment was dropped in conference and was not included in the vetoed reconciliation bill.
2
Question #2: Section 317 Funding Levels
Estimates of Section 317 funding levels in the event of VFC repeal depend on what policy the
Administration pursues. They are also complicated by poor data about which groups are
currently immunized under Section 317 and uncertainty about the effective date of any VFC
repeal. We lay out three general options below. For simplicity, HD staff estimates are for FY
1997, assuming that this could be the first full program year, after VFC has been fully phased
out; we used data from FY 1994 and FY 1995. These estimates will change as we obtain new
data from HHS. Estimates for any given fiscal year would also depend on when VFC was
repealed and how it was phased out.
Estimate 1 funds Section 317 to cover uninsured and underinsured children, the groups most
affected by VFC repeal (Medicaid children would retain the Federal entitlement). Covering the
uninsured and the underinsured that were covered by VFC in FY 1995 would require roughly
$205-$227 million for
vaccine purchase after adjustment for new
Section 317 Vaccine Purchase:
vaccines (for a detailed analysis of this estimate,
Estimates of Funding Levels After VFC Repeal
(dollars in millions)
please see Appendix Three; for comparison with
FY 1995 BA
$152
other estimates, see table at right). Estimate 2
FY 1996 (Likely) BA
$152
simply adjusts FY 1994 appropriations for new
FY 1997 BA:
vaccines, which would result in a level of $234
Estimate 1: Cover VFC's uninsured and
$205-227
million in FY 1997. Estimate 3 uses HHS'
underinsured
informal estimate that Section 317 will require
Estimate 2: Restoration of FY 1994 Levels
$234
$317 million in vaccine purchase funds without
Estimate 3: HHS Estimate
$317
VFC. (However, HHS staff have discussed
neither what assumptions they made, nor what
fiscal year they have in mind.)
Recommendation, Question #2: We recommend planning for $205-$227 million for Section
317 vaccine purchase in FY 1997 if VFC is repealed, while we work with HHS to develop
more robust estimates. This would require $54-76 million over the Likely Level for FY 1996
and the RMO recommendation for FY 1997. These funds could be taken from the immunization
Performance Partnership Grant and the "other" Section 317 grants which grew substantially after
VFC was enacted and Section 317 funding for vaccine purchase was reduced (see Appendix
Four). We are seeking more information to improve these estimates. (Please note that if States
shift Medicaid children to Section 317, the requirements for Section 317 would rise above HD
staff estimates. Please see Appendix One for our analysis and recommendations on shifting.)
Attachment
3
Appendix One .. Reducing Incentives to Shift Payments from
Medicaid to Section 317
There is some evidence that, prior to VFC, States shifted payment for Medicaid children's
immunization to Section 317 because a State match was required under Medicaid and States paid
nothing under Section 317.2 Any repeal or amendment of VFC will restore this incentive.
Such shifting:
Reduces manufacturers' willingness to sell States contract price vaccine for Medicaid,
since it confirms their suspicion that States actually need less vaccine for their Medicaid
population that (question #1).
Increases the demand for Section 317 funding; the estimates above do not account for
shifting and would have to be revised upwards to do so (question #2).
Reduces the amount of Section 317 funding available for uninsured and underinsured
children.
Shifts payment for immunization of Medicaid children from a mandatory source to a
discretionary source. While Medicaid may be capped in some form, the proposals' caps
provide for some growth; most proposals for discretionary caps assume no growth or
annual reductions.
The incentive to shift could be reduced by requiring States to contribute to Section 317
vaccine purchases as they do to the Medicaid program, using similar rates as used for
Medicaid.³ This would impose new costs on some States, and would change the culture of
Section 317, which traditionally has provided vaccine for any child appearing at a public clinic.
However, HD staff analysis shows that States are already spending about as much of their own
funds on vaccine as they would contribute at Medicaid FMAP rates. (Please see the attached
table. Assuming States contributed according to the FY 1995 Medicaid FMAP, 32 grantees' FY
1995 expenditures would be an average of $211 thousand below their required contribution, and
23 grantees exceeded their requirement by an average of $321 thousand.) Vaccine purchased
with State contributions could still be distributed through private providers or State clinics, as the
States preferred. Even with State contributions, State public health clinics could continue to
immunize all children who come to clinics, but would have to determine whether a child's
immunization should be billed to Medicaid or Section 317. Such a requirement would seek to
2
We note that ASTHO staff agree that some portion of Section 317 funding went to Medicaid children,
though it says the proportion shifted was lower than Senator Breaux and the manufacturers thought (ASTHO says
that 26.8% were shifted, while Sen. Breaux and the manufacturers compromised at 75%). South Carolina
immunization officials say that Medicaid savings from VFC implementation were surprisingly low, even though
State immunization rates were quite high. This suggests that while South Carolina's Medicaid children were
immunized, their immunizations were paid for by some source other than South Carolina's Medicaid program.
The incentive to shift prior to VFC was exacerbated because Medicaid purchased vaccine at the undiscounted
catalog price; however, the incentive to shift children so as to pay nothing rather than pay some cost will exist even if
that cost is reduced by access to the contract price.
3
The authorizing language in Section 317 of the Public Health Service Act contains nothing inconsistent
with such a requirement, and some provisions that could be interpreted as allowing it; it is possible that such a
requirement could be established without amendment to the legal authority in Section 317.
4
preserve Section 317 funds for uninsured children and focus the program's vaccine purchases on
those children who have no other public recourse.
We suggest pursuing this possibility, since it reduces the difficulties addressed in question
#1 about purchase rights and question #2 about Section 317 funding levels.
5
Analysis of Potential State Contributions to Section 317
This table shows State contributions if States matched Section 317 funds as they do Medicaid expenditures, and compares
those contributions with current State purchases of vaccine with their own funds.
That comparison shows that States are already spending most of what they would have to contribute if Section 317
were to have a matching requirement - and that many States' purchases currently exceed their contribution under
such a requirement.
Column 1 shows actual State purchase of vaccine with their own funds in FY 1995. Vaccine was distributed through private
providers and clinics.
Column 2 shows States' purchases of vaccine with Section 317 funds in FY 1995. Vaccine was distributed through clinics.
Column 3 shows total State purchases with Section 317 and State funds; no VFC purchases are included (i.e.
sums Columns 1 and 2)
Column 4 shows the rate of State contributions to Medicaid (i.e. the inverse of the FMAP).
Column 5 shows how much a State could be required to contribute if Section 317 had a contribution
requirement and they had to to pay using FMAP rates (shown in column 4) and they received the same volume
of 317 vaccine using FY 1995
Column 6 compares the State contributions in column 5 with States' actual expenditures in FY 1995 (i.e.
subtracts Column 5 from Column 1), and shows that while on average States currently spend more than they
would be required to contribute if Section 317 had a match, some States would have to spend somewhat more
than they do now.
Source: HHS Data
Dollars in thousands
FY 1995 actual
HD Staff Analysis of State Contributions
State Purchases
317 Purchases
Total Non-VFC
State Rate of
State share of total
State Share over/under
Purchases,
Contribution
purchase at Medicaid
State purchases in FY
Section 317 and
to Medicaid
matching rates
1995
State Funds
(per FMAP)
(Column 1)
(Column 2)
(Column 3)
(Column 4)
(Column 5)
(Column 6)
Total
$66,726
$82,278
$149,004
$63,318
$3,408
Alabama
$630
$2,980
$3,610
29.55%
$1,067
-$437
Alaska
$19
$810
$829
50.00%
$414
-$395
Arizona
$1,154
$1,817
$2,971
33.60%
$998
$155
Arkansas
$729
$1,108
$1,837
26.25%
$482
$247
AS
$68
$68
37.13%
$25
-$25
California
$1,955
$3,172
$5,127
50.00%
$2,563
-$609
Colorado
$912
$853
$1,765
46.90%
$828
$84
Connecticut
$3,905
$227
$4,132
50.00%
$2,066
$1,839
D.C.
$71
$43
$114
50.00%
$114
-$43
Delaware
$238
$238
50.00%
$119
-$119
Florida
$1,950
$6,292
$8,241
43.72%
$3,603
-$1,653
Georgia
$2,940
$2,856
$5,796
37.77%
$2,189
$751
GU
$161
$161
50.00%
$80
-$80
Hawaii
$174
S174
50.00%
$87
-$87
Idaho
$595
$1,163
$1,758
29.86%
$525
$70
Illinois
$5,339
$1,848
$7,186
50.00%
$3,593
$1,746
Indiana
$240
$2,033
$2,273
36.97%
$840
-$600
Iowa
$713
$270
$983
37.38%
$367
$346
Kansas
$1,266
$2,106
$3,372
41.10%
$1,386
-$120
Kentucky
$25
$2,196
$2,221
30.42%
$676
-S651
LA
$807
$807
27.35%
$221
-$221
Maine
$113
$690
$804
36.70%
$295
-$182
Maryland
$341
$2,367
$2,708
50.00%
$1,354
-$1,013
Massachusetts
$1,844
$2,862
$4,706
50.00%
$2,353
-$509
Michigan
$1,068
$3,918
$4,985
43.16%
$2,152
-$1,084
Minn
$1,439
$1,439
45.73%
$658
-$658
Mississippi
$1,979
$265
$2,244
21.42%
$481
$1,498
Missouri
$2,775
$1,890
$4,666
40.15%
$1,873
$902
Montana
$800
$800
29.19%
$234
-$234
Nebraska
$264
$1,125
$1,388
39.60%
$550
-$286
Nevada
$1,704
$23
$1,727
50.00%
$864
$840
New Hampshire
$662
$707
$1,369
50.00%
$684
-$23
New Jersey
$127
$1,804
$1,931
50.00%
$966
-$838
New Mexico
$940
$1,507
$2,446
26.69%
$653
$287
New York St
$6,231
$2,293
$8,524
50.00%
$4,262
$1,969
North Carolina
$4,183
$1,442
$5,624
35.29%
$1,985
$2,198
North Dakota
$590
$0
$590
31.27%
$184
$405
Ohio
$5,538
$1,885
$7,423
39.31%
$2,918
$2,620
OK
$1,115
$1,115
29.95%
$334
-$334
OR
$804
$804
37.64%
$303
-$303
Pennsylvania
$236
$1,434
$1,669
45.73%
$763
-$528
Puerto Rico
$907
$1,040
$1,947
50.00%
$973
-$67
Rhode Island
$496
$850
$1,346
44.51%
$599
-$103
South Carolina
$1,909
$1,350
$3,259
29.29%
$955
$954
South Dakota
$372
$904
$1,276
31.94%
$407
-$36
Tennessee
$1,022
$1,215
$2,237
33.48%
$749
$273
Texas
$3,667
$3,828
$7,495
36.69%
$2,750
$917
Utah
$843
$1,400
$2,243
26.52%
$595
$248
Vermont
$215
$540
$756
39.18%
$296
-$81
Virgnia
$1,315
$764
$2,080
50.00%
$1,040
$275
VI
$177
$177
50.00%
$88
-$88
Washington State
$2,459
$2,860
$5,319
48.03%
$2,555
-$96
West Virginia
$335
$696
$1,031
25.40%
$262
$73
Wisconsin
$2,138
$2,872
$5,010
40.19%
$2,014
$125
Wyoming
$16
$427
$442
37.13%
$164
-$149
Appendix Two: Potential Fallback Options Short of VFC Repeal
Potential Fallback Options for VFC in Medicaid Reform
Medicaid
317 Discretionary
Current Policy:
1) Retain VFC as a 100% Federally funded
1) Retain 317 funding at current law levels.
program at current law levels - either under
the POTUS plan or a block grant. Retain
State's access to contract price for
immunizations.
Middle Position:
2) Retain VFC as a 100% Federally funded
2) Increase Section 317 funding to cover
program - either under a per capita cap or a
uninsured and underinsured children. State
block grant; however, reduce current law
access to contract price for Medicaid children
spending by scaling back VFC to only cover
not an issue for States; attempt to grandfather
Medicaid children (i.e. do not provide
universal purchase States' option to purchase
coverage to uninsured and underinsured
vaccine at contract price.
children).
If VFC Disappeared:
3) Under a block grant approach, require
3) Obtain as much access to contract price as
States to provide matching payments for
possible for States. Increase Section 317
immunizations. Only cover Medicaid eligible
funding for uninsured and underinsured
children.
children. Possibly, use administrative
mechanisms and State matching payments for
317 to reduce States' incentive to shift
Medicaid children to 317 discretionary
program.
6
Appendix Three: Detail of Estimate 1 of Section 317 Vaccine
Purchase after VFC is Fully Phased Out
Generating Estimate 1 for Section 317 funding after VFC repeal
(dollars in millions)
Estimated Section 317 outlays on vaccine purchase, FY 1995
$
82
VFC outlays on vaccine purchase, FY 1995
$ 214
Uninsured children as % of total VFC Population*
35%
Underinsured as % of total VFC Population*
11%
Total percentage of VFC population losing coverage in repeal
46%
Medicaid,
VFC outlays on children losing coverage (obtained by multiplying
Am.
percentage by VFC spending on vaccine purchase)
$ 98
Indian
Total outlays on vaccine purchase, through Section 317 and by
VFC on children losing coverage
$ 180
5% adjustment for possible weaknesses in data on VFC
population
+/-$9
Estimate of Section 317 outlays after full phase out of VFC
Repeal, but using the current vaccine schedule
$ 171-189
Adjustment for New Vaccines**
20%
Estimate of Section 317 outlays after full phase out of VFC,
adjusted for new vaccines
$205-227
FY95 Appropriation (budget authority)
$ 152
Increase over FY 1995 Appropriation
$
54-76
96
* HHS estimates based on rough State reports.
** As estimated by CDC staff.
This estimate is based on rough outlay data for VFC and Section 317, since outlays are the only
VFC data that are available. They generate an outlay estimate of $205-227 million when VFC
repeal is fully phased in. Since we would need that much budget authority in some previous
years to generate these outlays, and discretionary programs are appropriated in budget authority,
for simplicity's sake we have assumed Section 317 would need $205-227 million in budget
authority in FY 1997 under this set of assumptions, though in the first years we could actually
make do with somewhat less than that since outlays lag budget authority. After transforming the
outlay estimates into budget authority and comparing that budget authority with the FY 1995
appropriated level for vaccine purchase (which is also the FY 1996 Likely Level and the FY 1997
RMO recommendation), we find funding is not far off -- only about $54-76 million would be
needed under this estimate.
7
Appendix Four: Immunizations Funding Table
Mandatory and Discretionary CDC Funding for Immunizations
Fallback
(dollars in millions)
FY 1993 FY 1994 FY 1995
FY 1996
FY 1997
Likely Request RMO Rec
Discretionary:
Infrastructure
45
163
141
141
0
0
Vaccine Purchase
191
187
152*
152*
166
152
205- 227
Performance
Partnership Grant
0
0
0
177
177
150
Other
105
178
170
170
145
136
110
Total Discretionary
341
528
464
464
488
464
Mandatory:
VFC
85
457
457
457
457
Medicaid
170
200
Total Mandatory
285
457
457
457
457
Total
511
813
921
921
945
922
* Reflects Congressional appropriation. In FY 1995 CDC spent $82 million on discretionary vaccine
purchase. Congress allowed CDC to shift up to $66 million to other activities if not needed for vaccine
purchase. Similar flexibility is expected in FY 1996.
ROD
registrier
polio
eradication
922 - ant of
underwind
8