Copyright 2000 Federal News Service, Inc.
Federal News Service
February 23, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 4743 words
HEADLINE:
PREPARED TESTIMONY OF ROBERT R. WALLER, M.D. PRESIDENT EMERITUS, MAYO FOUNDATION
CHAIRMAN, THE HEALTHCARE LEADERSHIP COUNCIL ON BEHALF OF THE HEALTHCARE
LEADERSHIP COUNCIL
BEFORE THE SENATE COMMITTEE
ON FINANCE
BODY:
Good morning Senator Roth,
Senator Moynihan, and members of the Finance Committee. I want to thank you for
your invitation to appear here today to convey the views of the Healthcare
Leadership Council on the very important issue of improving and prolonging the
Medicare program. I would also like to thank this committee and it's Chair for
the extensive leadership and dedication to this issue you have provided over the
past several years.
The Healthcare Leadership Council (HLC) represents a
comprehensive spectrum of innovators in the health care sector. Because of this
broad representation, what I convey to you today can be considered a unified
position of a variety of the nation's most respected leaders in the delivery of
health care services and products: We support comprehensive Medicare reform. The
HLC is also an active member of the Alliance to Improve Medicare (AIM), a broad
based coalition representing seniors, small business, hospitals, researchers and
others who support comprehensive Medicare reform.
The HLC has been
committed, since its inception, to advancing a health care system that values
innovation and provides affordable, high- quality health care in a
patients-centered environment. I would like to emphasize these desirable
features because I believe they are the same that we should strive for in a
reformed Medicare program: (0 INNOVATION, (2) QUALITY DRIVEN, (3)
PATIENT-CENTERED, and (4) AFFORDABLE. The HLC envisions these goals as
achievable in Medicare through the same tools that have been used to achieve
them in model private sector health care systems: efficiency, choice,
competition and patient education.The HLC believes that Medicare is a valuable
social program. For 35 years, since President Johnson signed it into law, the
Medicare program has broadly impacted the health and financial security of all
Americans, young and old. It provides health coverage to almost one of every ten
Americans. And it relieves millions of the elderly's children from what could be
catastrophic medical expenses.
Today's Medicare, however, has some very
real problems that must be fixed. No single source is to blame for the
inefficiencies of the current Medicare program. And the fact that the Medicare
population is about to double requires that we must own up to a joint
responsibility and do what is necessary to ensure that the program will be there
-- not only for generations to come - but for beneficiaries here and now. With
Medicare bankruptcy insolvency looming just 15 years away at most, it is
possible that 70-year-old seniors in Medicare today, could still see a
disruption in their benefits during their lifetimes.
But longevity of
the trust fund is not the sole rationale driving the need for Medicare reform.
Today's Medicare was built for another science in another time. Simply put,
those Medicare beneficiaries who cannot access pharmaceutical drugs or the
latest innovation in care are receiving sub-quality health care from a program
that is capable of delivering, and needs to deliver, so much more.
Comprehensive reform is necessary to ensure that beneficiaries have a
Medicare program that provides choices and is flexible enough to accommodate
advancements in health care. Traditional Medicare's fundamental benefit design,
financing, and government-management model has remained essentially unchanged
since 1965 and does not adequately meet the needs of today's beneficiaries. For
example, the current program exposes Medicare beneficiaries to significant
out-of-pocket costs. Because it is unrealistic to expect the federal government
to finance a comprehensive program under its current structure, Medicare must
embrace the innovations in health care delivery, benefit design, and cost
management techniques that have occurred in the private sector in order to best
serve its beneficiaries.
You have specifically requested that I discuss
reform of the Medicare program within the context of the most current proposals
being considered for reform: S. 1895, introduced at the end of the last session
by Senators Breaux, Frist, Kerrey, Hagel and Landrieu, as well as the Medicare
proposal forwarded to Congress this month by the President. Therefore, I would
like to proceed with this analysis by discussing how these proposals fare
according to each of the important tools of reform I mentioned a moment ago:
efficiency, choice, competition and beneficiary education.
Before I
begin, I would like to compliment Senator Breaux and Senator Kerrey, as I would
Senator Frist if he were here today, on your proposal which is a substantial
effort that will pave the way toward a healthy future for Medicare
beneficiaries. I know that it took a great deal of courage, hard work, and
vision to be one of the first to come forward with a plan to reform this major
social program which was considered -- as of even just a couple of years ago --
to be untouchable.
I. Let me begin with EFFICIENCY. A Medicare system
that is run efficiently will be dedicating its time to patient care, not to the
administration of regulations. And such a system will be free of the inflated
costs that are associated with inflexibility and burdensome micromanagement.
Unfortunately, this is not the case in today's Medicare. Under
Medicare's current structure, the federal government has been unable to manage
Medicare efficiently. The program is highly regulatory and inflexible, with over
a hundred thousand pages of regulations, rules, manuals, instructions, letters,
alerts, notices, etcetera. Carriers and intermediaries apply rules differently
in different locations. And there are often inconsistencies among these many
rules. In addition, HCFA's administrative process for modifying benefits and for
determining whether certain medical treatments or procedures merit coverage
under the Medicare benefits package is excruciatingly complex.
This
inefficiency within Medicare adversely affects its beneficiaries on many fronts.
First, Medicare cheats beneficiaries from being able to receive the best
care achievable when its regulations set standards that may be used by some
providers as "ceilings of care". Take for example Medicare's quality standards.
Quality improvement is a continuous process that should be incorporated into how
providers of care think, act, and feel. The goal is to constantly improve
patient care, not to achieve a defined regulatory standard. Regulating quality
essentially freezes in place today's best practice -- which may be a mediocre
practice one year from now.
Second, beneficiaries, as well as providers,
must wrestle with the ever expanding Medicare jigsaw puzzle. Beneficiaries must
piece together multiple health insurance plans in order to be comprehensively
covered and they must deal with the multitude of instructions and paperwork
associated with this piecemeal coverage.
Third, complex and burdensome
regulations sap time and financial resources that could be used more
productively in providing patient care or developing innovations to improve
patient care. In terms of financial resources, a more efficiently run Medicare
could perhaps even return to the beneficiary some savings to offset certain
medical expenses and other out-of-pocket costs.
Medicare's complexity
has also contributed to the continuing erosion of public confidence in our
health care system. The public has been led to believe that the Medicare program
is fiddled with fraud when, in actuality, complexity is the true root of the
problem.
And while it is true that there are occasionally bad
actors who are intent on defrauding the Medicare program, more often accusations
of fraud are the result of honest mistakes and differences in interpretation in
dealing with a labrynthian set of confusing and conflicting regulations. This
complexity actually undermines compliance.
Private health care plans
would not survive if they tried to place the same requirements on their
providers as Medicare does. The Mayo Clinic, like many members of the HLC, deals
with many private insurance companies and payers. We deal with them as partners,
through a process of negotiations, establishing goals for quality, cost, and
patient satisfaction, and monitoring the results. I do not know of a single
private contract to which Mayo is a party that tries to tell us how to document
the number of body systems we must examine to bill for a visit, or whether the
supervising physician must be in the same room when a nurse tests a patient's
pacemaker. Medicare, however, is currently trying to micromanage virtually every
aspect of the care we provide. This increasing level of micromanagement is
unnecessary and often counterproductive. We are happy to compete in a
marketplace on the basis of quality and cost, and to be held accountable for the
care we provide.
HLC has a vision for an efficiently run Medicare
program that will not steal time from patient care, will not be a hybrid of
uncoordinated health care programs, and will not have inflated costs because of
burdensome micro-management and heavy government regulation.
HLC's
vision for administering Medicare in this century is a management model that is
lean, efficient and independent, and able to adapt to innovation. Overall, the
model should operate in a manner similar to how the best large employer health
plans provide health coverage for their employees. The Health Care Financing
Administration's history as a heavy-handed regulator makes it ill- suited to be
the administrator of the next century's Medicare program. HCFA's penchant for
overregulation results in higher costs, lower quality, fewer choices, and
disincentives for innovation.
This model envisioned by HLC is already
working well for some 59 million Americans in large employer plans and the nine
million people in the Federal Employee Health Benefits Plan (FEHBP). Where the
government's micro-management and mandating of benefits is kept to a minimum,
consumers have better benefits, lower out-of-pocket costs, more choice, and
higher quality care. Medicare beneficiaries deserve the same quality
improvements that large employer health plans can achieve. This model will allow
the market to respond to changing beneficiary needs with a variety of products,
keeping pace with advances in health care.S. 1895 on Efficiency
-
Achieves maximum efficiency by comprehensively reforming the Medicare program:
- Establishes a management board external to HCFA and allows it
authority to adapt to changing practices without Congressional activity,
reducing the micro-management and heavily regulated environment of the current
Medicare program.
- Ensures a comprehensive benefit package that
includes drugs so that beneficiaries and providers do not have to rely upon
multiple, uncoordinated insurance policies and associated paperwork hassles.
- Injects competitiveness into the current non-competitive Medicare
program
- squeezing out excesses in the current program so those
resources can be put to better use in patient care. The President's Plan on
Efficiency
- Efficiencies are sought not through comprehensive reform of
an out- moded program, but rather through expansion of service by service
payment cuts such as (1) physician fee schedule and hospital payment reductions,
(2) competitive bidding on goods and services as may be directed by HCFA and (3)
new discretionary authorities to simply reduce any payment the Secretary may
deem as "inherently" too high.
- "Modernization" proposals are mostly
related to payment of isolated services, and do nothing to reduce the current
burdensome regulatory environment for providers. HCFA would continue to
micro-manage patient care through over 130,000 pages of regulation as in current
law.
- Adds a new drug benefit to the currently faltering Medicare
program which may serve to obstruct the way for comprehensive reform.
-
Continues the current administratively priced, highly bureaucratized approach to
coverage and payment for new technologies and drugs, impeding the integration of
leading edge products into the Medicare system., and failing to redeem excesses
in the program for other purposes.
II. CHOICE
In the Balanced
Budget Act of 1997 -- or the BBA, Congress made a good faith effort to expand
choices for Medicare beneficiaries through the new Medicare+Choice program. At
the time of passage, it was believed that Medicare+Choice would lead to more and
broader types of health plan choices for beneficiaries in all areas of the
country -- similar to what is now available for Federal employees nationwide.
Unfortunately, this has not been the case and even after only two years of
implementation some very obvious lessons have emerged.
Shortly after
Medicare+Choice was passed, the Congressional Budget Office reported that newly
allowed health plan choices, such as provider sponsored organizations (PSOs) and
Medical Savings Accounts, would lead to increased Medicare enrollment in private
plans from 14 percent of all Medicare beneficiaries in 1997 to 25 percent by
2002. CBO has since reduced the 2002 estimate from 25 percent to less than 18
percent, and as of now, enrollment is stagnating at 16 percent of all
beneficiaries.
At first it seemed that plans were very willing to give
Medicare+Choice a try. Forty new plans signed up in the first year following
passage. But plans began withdrawing once they had begun to decipher the massive
Medicare+Choice regulation published in 1998 and these withdrawals continued
when it was clear that the blended payment formula would not work as Congress
and the CBO had anticipated during its development. Now only 262 plans are
signed up with Medicare+Choice, down from a high of 346 at the end of 1998.
To add to the letdown, there are still virtually no new types of choices
beyond the standard health maintenance organization and there are still many
areas of the country where beneficiaries still do not have choice -- a stark
contrast from the FEHBP program which offers a variety of at least ten plans to
all federal employees even in rural areas.
These are obviously
disappointing results for those who viewed Medicare+Choice as an initial reform
step - the success of which would hasten the progress toward a fully reformed
Medicare program that could accommodate the health care needs of the retiring
baby boom generation.
What dampened the success of the Medicare+Choice
program and what, if anything can we learn from this experience as Congress
moves forward with new ideas to create more private choices for Medicare
beneficiaries?
During the creation of the Medicare+Choice law, and the
ensuing regulations, including the risk
adjustment methodology, a great amount of effort was
dedicated to perfecting the administered payments that would be made to the
plans, and to setting regulatory standards for protecting beneficiaries that
would be enrolled in the plans. But possibly overlooked was the need to secure
the interest of enough health care plans to enroll Medicare beneficiaries.
Lawmakers must consider, for the beneficiary's sake, what is necessary
to attract plan participation in Medicare almost as much as they need to
consider how to make health plans attractive to Medicare beneficiaries. In fact,
with more retirees having experienced managed care during their working years,
and with fewer employers offering retiree health benefits, Medicare
beneficiaries will be increasingly more willing to join private plans over time
- that is, if those plans are willing and available to serve them.
There
are many program features of the current Medicare+Choice program that have been
cited by plans as reasons for withdrawing from the program or for not
participating altogether. These claims are worth examining as public policy
officials try to move forward in developing a Medicare program that will more
assuredly yield choice and its associated advantages.
The most common
obstacle indicated by plans is the administered, formulaic payment system that
was set in the BBA. This payment methodology has turned out to be unstable and
unpredictable.
And in addition to the basic payment formula, the
new controversial risk adjustment methodology could decrease
payments by as much as 10 percent as unilaterally decided by HCFA. While we
acknowledge the importance of adjusting payments based on the health of a
beneficiary, we believe that any reductions in payment be fully maintained
within Medicare's private plan system to reward plans with the sickest
beneficiaries.
Another obstacle for private plans wanting to participate
in Medicare is that they are subject to the complex and administratively intense
requirements of the massive Medicare+Choice regulations. In addition, HCFA
obviously created this regulation with the standard HMO in mind. Its one-size
fits all nature is not easily adaptable to other varieties of health plans such
as Preferred Provider Organizations and Provider Sponsored Organizations, even
though Congress' intent was to facilitate the development of such plans.
Plans also cite unfair competition between fee-for-service Medicare and
Medicare+Choice plans in areas where the payment has been greatly reduced below
fee-for-service spending. And more recently fear of fraud and abuse accusations
as a result of the OIG's stepped-up efforts to examine and determine the
appropriate amount of care and services that should be delivered by
Medicare+Choice plans have been mentioned.
One might respond that these
are simply plan grievances that naturally would arise when the government
exercises its role to protect beneficiaries and the fiscal health of the
program. And I do believe there truly is a useful government role for setting
certain limits and standards for the purposes of beneficiary protection and
fiscal responsibility. However a balance must be struck so that such
intervention does not limit beneficiary choice - which in itself can be the most
effective regulator of cost and quality.
S. 1895 on Choice
-
Increases incentives for more private plans to participate in Medicare by
leveling the playing field between the traditional Medicare program and private
plans, by creating a payment system that is based on the cost of care instead of
a statutory formula, and by making the administration of Medicare benefits less
burdensome and more flexible.
The President's Plan on Choice
-
Offers no new choices for seniors, and creates new impediments for continuation
of existing non-traditional choices. For example, proposes that the
Medicare+Choice risk adjuster be implemented more quickly than agreed to in last
year's budget bill, a change which would reduce plan payments by more than 10
percent.
- Similarly, by not requiring traditional fee-for-service
Medicare to compete with private plans, and by continuing to allow the program
to be administered within the current complex regulatory structure, fewer
private plans may continue serving Medicare beneficiaries (13% of all plans
withdrew at the end of 1998 and 13% withdrew at the end of 1999).
III.
COMPETITION
The HLC firmly believes that Medicare beneficiaries stand to
win in a system where health plans are competing to serve them. We believe that,
like in the private health care system, a competitive Medicare system will
compel plans to vie for beneficiaries using innovative treatments and continuous
quality improvement at the most affordable price possible.
This was also
a belief held by the majority of the commissioners of the Bipartisan Commission
on the Future of Medicare. It is a belief held by several members of Congress
who have proposed Medicare reform plans premised on competition. And a
competitive premium system for Medicare was even proposed by the President in
his 2001 budget.
But designing a system of fair competition for Medicare
will be a challenge for lawmakers because competition based on value cannot take
place in an environment of price controls and inflexibility.
When
Medicare+Choice was created, it was believed that, even though the payment
amount was set by the government, Medicare+Choice plans would compete against
one another for Medicare beneficiaries. Unfortunately, though, Medicare+Choice
has not yielded enough participating plans to generate meaningful competition,
and this is largely due to the fact that plans have not been able to engage in
fair competition with their chief rival; the Medicare fee-for service program.
As the new BBA Medicare+Choice payment methodology has phased-in over
the last few years, the payment differential between what the traditional
fee-for-service Medicare program spends on a beneficiary in a given area, and
what a Medicare+Choice plan is paid to spend on a Medicare beneficiary in the
same area has increasingly widened. This has required Medicare+Choice plans to
reduce the extra benefits they offer to Medicare beneficiaries and to increase
beneficiary cost sharing.
I use Medicare+Choice as an example here
because it demonstrates the consequences of unbalanced competition. Many
lawmakers would design Medicare reform around the traditional fee-for-service
program, because of the political unpopularity of changing that very popular
program. And in truth, incorporating the Medicare fee-for-service program into a
level field of competition will be politically and technically a very difficult
task. But it will be absolutely essential for the success of reform and the
future of the program.
S. 1895 on Competition - Requires the Medicare
fee-for-service plan to compete for Medicare beneficiaries along with private
plans, leveling unfair competition which is currently stifling growth in
Medicare+Choice program.
- Payments to private plans would be based on
the average of all plan bids nationwide and these bids are based on the cost of
providing care instead of on a statutory formula, thus facilitating real
competition between plans for Medicare beneficiaries.
The President's
Plan on Competition
- Isolates competition only within private plans,
does not require the traditional fee-for-service program to compete.
-
Private plans would be required to bid against one another for beneficiaries but
the Medicare contribution would still be determined by Government price controls
- thus maintaining the same payment base that has proved unworkable today.
IV. PATIENT EDUCATION:
Educating Medicare beneficiaries will
help facilitate the transition to a newly reformed Medicare program and will arm
beneficiaries with tile information they need to challenge their health plans to
demonstrate the highest value.
Beneficiary education will be a vital
requirement for successful reform of the Medicare program and education policies
should be developed with three major goals in mind.
First, Medicare
consumers must become knowledgeable about the Medicare world outside of the
traditional, HCFA-run Medicare fee-for-service program. Currently, only 16
percent of Medicare beneficiaries are in Medicare private plans. While this
relatively low number is due to a number of factors, an important one to
consider is that most beneficiaries do not have a clear understanding that they
even have options much less what those options are. It is hard for many
beneficiaries to distinguish a supplementary policy from a Medicare sponsored
private plan. All too often Seniors decline to consider Medicare+Choice plans
claiming that "I don't want to give up my Medicare".
The BBA required
HCFA to establish an annual Medicare beneficiary information campaign to inform
beneficiaries about their Medicare choices. But there has been controversy over
whether or not these campaigns have effectively and concisely carried out the
educational intents of the BBA.
Implementing a newly reformed Medicare
with what we hope will offer far more choices than are available today to
Medicare beneficiaries will present many challenges during the transition. The
most delicate of these will winning the approval of the program's constituents.
A major education effort - that includes understandable information on the
advantages and disadvantages of various Medicare plans - presented by a trusted
party without interests tied to the success of any particular Medicare plan,
including the traditional fee-for-service plan -must be a priority component in
the blueprints of Medicare reform.
Educating Medicare
beneficiaries and their families about the Medicare "universe" that is available
to them must be followed with an equally important education of how to navigate
that universe. Medicare consumers who are armed with the right information about
health plans and who are knowledgeable about how to use it are the fuel
necessary for making choice and competition work.
Knowledgeable
beneficiaries can influence the quality of their care by choosing plans that
demonstrate better outcomes. They can influence the value of their care by
choosing plans that demonstrate the best product for the lowest price. And
beneficiaries who are provided understandable, customized information can
influence efficiency in the overall Medicare program by reducing the need for
top-down micro- management by the government or managed care bureaucracies.
S 1895 on Patient Education
- Establishes independent Medicare
consumer coalitions to conduct local education activities and to provide
comparison materials for all plans in a designated area.
The President's
Plan on Patient Education
- Presumably, HCFA would continue mailing
beneficiary information booklets to Medicare beneficiaries from Washington, D.C.
These booklets have been controversial because of their expense and lack of
simplicity.
Before I conclude, I would like to say a few words on two
other very important requirements of success that are unique to the Medicare
program: accessibility and trust fund solvency.
- ACCESSIBILITY
Medicare's substantial deductibles and copayments create a significant
obstacle to care for near-poor Medicare beneficiaries. The Healthcare Leadership
Council strongly believes that low-income subsidies should be carefully targeted
to ensure that all Medicare beneficiaries have access to the same care and
services available to non-low-income.
S. 1895 on Access
-
Provides full and partial subsidies for high options plans for beneficiaries up
to 150% of poverty level.
- Concern that beneficiaries of all income
levels receive a 25% subsidy for high option plans and would prefer to see
subsidies targeted to only low-income individuals.
The President's Plan
on Access
- Would provide varying Medicaid assistance for pharmaceutical
benefits for low-income up to 150% of the poverty level.
TRUST FUND
SOLVENCY
I cannot conclude my statement without addressing the solvency
crisis of the Medicare program. Under current law, the Hospital Insurance trust
fund (Part A) is projected to be insolvent by the year 2015. The trust fund's
viability up until that date is in most part by far due to the fact that a large
responsibility of Medicare's financing was transferred from the Medicare trust
fund to the general revenue fund in 1997, and to the provider cuts that were
made in the Balanced Budget Act of 1997.
Attempting to address this
significant financial issue primarily through further reductions in payments to
providers will weaken the Medicare program and threaten the quality of care
beneficiaries receive. And continued infusions of large sums of money from the
taxpayer-funded general revenue fund will only provide false fuel to a program
that is in serious need of a more thoughtful and more comprehensive means for
preserving its future.
S. 1895 on Solvency
- According to the
Congressional Budget Office, HCFA and independent sources, the competition and
choice inherent in this plans could keep costs down and stem the long-term
growth rate of the Medicare program. Estimates indicate Medicare's growth rate
would decrease from between one and one and one-half percentage points per year.
The President's Plan on Solvency
- Maintains solvency in the
short term by continuing to cut provider and plan payments and by making large
payment transfers from the tax- payer-funded general revenue fund to the
Medicare trust fund.
It has been my pleasure to speak with you today on
this issue. The Healthcare Leadership Council stands ready and available to
assist this committee in any way we can in laying out details of a reformed
Medicare program.
END
LOAD-DATE: February 25, 2000
