Copyright 1999 Federal News Service, Inc.
Federal News Service
JUNE 10, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
3041 words
HEADLINE: PREPARED TESTIMONY OF
ROBERT
A. BERENSON, M.D.
DIRECTOR
CENTER FOR HEALTH PLANS & PROVIDERS
HEALTH CARE FINANCING ADMINISTRATION
BEFORE THE SENATE
FINANCE COMMITTEE
SUBJECT - BALANCED BUDGET ACT'S IMPACT
ON
FEE-FOR-SERVICE MEDICARE
BODY:
Chairman Roth, Senator Moynihan, distinguished committee members, thank you
for inviting us to discuss the impact of the Balanced Budget Act on Medicare
fee-for-service beneficiaries and providers. The BBA includes important new
preventive benefits and payment system reforms that promote efficiency and
prudent use of taxpayer dollars. These reforms are critical to strengthening and
protecting Medicare for the future. The Medicare Trust Fund, which was projected
to be insolvent by 1999 when President Clinton took office, is now projected to
be solvent until 2015.
We have implemented more than half of the BBA's 335
provisions affecting our programs, including the new preventive benefits such as
diabetes education, and a prospective payment system for skilled nursing
facilities. In most cases, the statute prescribes in great detail the changes we
are required to make. We are committed to affording providers maximum
flexibility within our limited discretion as we implement the BBA.
Change of
this magnitude always requires adjustment. It is not surprising that market
corrections would result from such significant legislation. Our first and
foremost concern has always been and will continue to be the effect of policy
changes on beneficiaries' access to affordable, quality health care. We are
proactively monitoring the impact of the BBA to ensure that beneficiary access
to covered services is not compromised. Our regional offices are gathering
extensive information from around the country to help us determine whether
specific corrective actions may be necessary. We should be cautious about making
changes to the BBA until we consider information and evidence of problems in
beneficiary access to quality care.
It is clear that the BBA is succeeding
in promoting efficiency and extending the life of the Medicare Trust Fund.
However, the BBA is only one factor contributing to changes in Medicare
spending. Our actuaries tell us that low inflation from a strong economy and
aggressive efforts to pay correctly and fight fraud, waste, and abuse are also
having an impact on total spending. We have significantly decreased the number
of improper payments made by Medicare. And, for the first time ever, the
hospital case mix index is down due to efforts to stop "upcoding," the practice
of billing for more serious diagnoses than patients actually have in order to
obtain higher reimbursement. It is also important to note that some of the
slowdown in spending growth results from slower claims processing and payment
during the transition to new payment systems.
The BBA also is only one
factor contributing to provider challenges in the rapidly evolving health care
market place. Efforts to pay right and promote efficiency may mean that Medicare
no longer makes up for losses or inefficiencies elsewhere. We are concerned
about reports about the financial conditions of some providers. However, it is
essential that we delineate the BBA's impact from the effects of excess
capacity, discounted rates to other payers, aggressive competition, and other
market factors not caused by the BBA.
New Preventive Benefits
One set of
significant changes brought about by the BBA is coverage of key preventive
health benefits. We have:
- expanded coverage for test strips and education
programs to help diabetics control their disease;
- begun covering bone
density measurement for beneficiaries at risk of osteoporosis;
- begun
covering several colorectal cancer screening tests;
- expanded preventive
benefits for women so Medicare now covers a screening
pap smear, pelvic exam and clinical breast exam every three
years for most women, and every year for women at high risk for cervical or
vaginal cancer; and, begun covering annual screening mammograms for all women
age 40 and over, and a onetime initial, or baseline, mammogram for women ages
35-39, paying for these tests whether or not beneficiaries have met their annual
deductibles.
Payment Reforms
The BBA made substantial changes to the way
we reimburse providers in the fee-for-service program. We have made solid
progress in implementing these payment reforms. For example, we have:
-
modified inpatient hospital payment rules;
- established a prospective
payment system for skilled nursing facilities to encourage facilities to provide
care that is both efficient and appropriate;
- refined the physician payment
system, as called for in the BBA, to more accurately reflect practice expenses
for primary and specialty care physicians; and
- initiated the development
of prospective payment systems for home health agencies. outpatient hospital
care, and rehabilitation hospitals that will be implemented once the Year 2000
computer challenge has been addressed; and,
- begun implementing an
important test of whether market forces can help Medicare and its beneficiaries
save money on durable medical equipment.
Monitoring Access
The payment
reforms have created change for many of our providers, even though the
percentage of providers who signed Medicare participation agreements increased
by more than 6 percent to a record 85 percent for 1999. As mentioned above, our
first and foremost concern continues to be the effect of policy changes on
beneficiaries' access to affordable, quality health care. We are proactively
monitoring the impact of the BBA to ensure that beneficiary access to covered
services is not compromised. In addition to these efforts, we are systematically
gathering data from media reports, beneficiary advocacy groups, providers, Area
Agencies on Aging, State Health Insurance Assistance Programs, claims processing
contractors, State health officials, and other sources to look for objective
information and evidence of the impact of BBA changes on access to quality care.
We are examining information available from the Securities and Exchange
Commission and Wall Street analysts on leading publicly traded health care
corporations. This can help us understand trends and Medicare's role in net
income, revenues and expenses, as well as provide indicators of liquidity and
leverage, occupancy rates, states- of-operation, lines of business exited or
sold by the company, and other costs which may be related to discontinued
operations.
We are monitoring Census Bureau data, which allow us to
gauge the importance of Medicare in each health service industry, looking at
financial trends in revenue sources by major service sectors, and tracking
profit margin trends for tax-exempt providers.
We are monitoring the Bureau
of Labor Statistics monthly employment statistics for employment trends in
different parts of the health care industry. Such data show, for example, that
the total number of hours winked by employees of independent home health
agencies is at about the same level as in 1996. That provides a more useful
indicator of actual home health care usage after the BBA than statistics on the
number of agency closures and mergers.
We are being assisted by our
colleagues at the HHS Inspector General's office. They have agreed to study the
impact of the BBA's $1500 limits on outpatient rehabilitation therapy. They have
also agreed to interview hospital discharge planners as to whether they are
having difficulty placing beneficiaries in home health care or skilled nursing
facilities. Results of that study should help provide information in addition to
surveys done for the General Accounting Office and the Medicare Payment Advisory
Commission of home health agencies. And, because home health beneficiaries are
among the most vulnerable, we have established a workgroup to develop an ongoing
strategy for monitoring beneficiary access and agency closures.
Specific BBA
Provisions
Home Health: The BBA closed loopholes that had invited fraud,
waste and abuse. For example, it stopped the practice of billing for care
delivered in low cost, rural areas for care from urban offices at high
urban-area rates. It tightened eligibility rules so patients who only need blood
drawn no longer qualify for the entire range of home health services. And it
created an interim payment system to be used while we develop a prospective
payment system. We expect to have the prospective payment system in place by the
October 1, 2000 statutory deadline. We expect to publish a proposed regulation
this October so we can begin receiving and evaluating public comments, and a
final rule in July 2000.
The interim payment system is a first step toward
giving home health agencies incentives to provide care efficiently. Before the
BBA, reimbursement was based on the costs they incurred in providing care,
subject to a per visit limit, and this encouraged agencies to provide more
visits and to increase costs up to their limit. The interim system includes a
new, aggregate per beneficiary limit designed to provide incentives for
efficiency until the prospective payment system can be implemented.
Last
year Congress raised the limits on costs somewhat in an effort to help agencies
under the interim system. We are also taking steps to help agencies adjust to
these changes, and in March we held a town hall meeting to hear directly from
home health providers about their concerns. We are giving agencies up to a year
to repay overpayments resulting from the interim payment system. And, effective
July 1, we are ending the sequential billing policy that had raised cash flow
concerns for some agencies. This rule was designed to help facilitate the
transfer of payment for care not related to inpatient hospital care from Part A
to Part B, but we have determined we can accomplish the transfer through other
means. At the same time, we are implementing the Outcome and Assessment
Information Set (OASIS). OASIS fulfills a statutory mandate for a "standardized,
reproducible" home care assessment instrument. It will help home health agencies
determine what patients need. It will help improve the quality of care. And it
is essential for accurate payment under prospective payment.
To date,
evaluations by us and the GAO have not found that reduced home health spending
is causing quality or access problems. However, as mentioned above, because home
health beneficiaries are among the most vulnerable, we are planning for ongoing
detailed monitoring of beneficiary access and agency closures.Skilled Nursing
Facilities: We implemented the new skilled nursing facility prospective payment
system called for in the BBA on July 1, 1998. The old payment system was based
on actual costs and included no incentives to provide care efficiently. The new
system uses mean-based prices adjusted for each patient's clinical condition and
care needs, as well as geographic variation in wages. It creates incentives to
provide care more efficiently by relating payments to patient need, and enables
Medicare to be a more prudent purchaser of these services.
The BBA mandated
a per diem prospective payment system covering all routine, ancillary, and
capital costs related to covered services provided to beneficiaries under
Medicare Part A. The law requires use of 1995 as a base year, and implementation
by July 1, 1998 with a three year transition. It did not allow for exceptions to
the transition, carving out of any service, or creation of an outlier policy. We
are carefully reviewing the possibility of making administrative changes to the
PPS, but we believe we have little discretion.
We held a town hall meeting
earlier this year to hear a broad range of provider concerns. There were
concerns that the prospective payment system does not fully reflect the costs of
non-therapy ancillaries such as drugs for high acuity patients. We share these
concerns and are conducting research that will serve as the basis for
refinements to the resource utilization groups that we expect to implement next
year. And we fully expect that we will need to periodically evaluate the system
to ensure that it appropriately reflects changes in care practice and the
Medicare population. We are concerned about anecdotal reports of problems
resulting from the prospective payment system. As stated earlier, we have asked
the HHS Inspector General to evaluate the situation.
Outpatient
Rehabilitation Therapy: The BBA imposed $1500 caps on the amount of outpatient
rehabilitation therapy services that can be reimbursed. We continue to be
concerned about these limits and are troubled by anecdotal reports about the
adverse impact of these limits. Limits on these services of $1500 may not be
sufficient to cover necessary care for all beneficiaries. Because of our
concern, our HHS Inspector General colleagues have agreed to study the impact of
the BBA's $1500 limit on outpatient rehabilitation therapy to help us judge
whether and how any adjustments to the cap should be made.
Hospitals: We
have implemented the bulk of the inpatient hospital- related changes included in
the BBA in updated regulations. We have implemented substantial refinements to
hospital Graduate Medical Education payments and policy to encourage training of
primary care physicians. promote training in ambulatory and managed care where
beneficiaries are receiving more and more services, curtail increases in the
number of residents, and slow the rate of increase in spending. We have
implemented provisions designed to strengthen rural health care systems. And we
froze inpatient hospital payments in fiscal year 1998, as required under the
BBA, resulting in substantial savings to taxpayers and the Medicare Trust Fund.
The BBA also called for a prospective payment system for outpatient care,
which we expect to implement next year. The outpatient prospective payment
system will include a gradual correction to the old payment system in which
beneficiaries were paying their 20 percent copayment based on hospital charges,
rather than on Medicare payment rates. Regrettably, implementation of the
prospective payment system as originally scheduled would have required numerous
complex systems changes that could substantially jeopardize our Year 2000
efforts. We are working to implement this system as quickly as the Year 2000
challenge allows. We issued a Notice of Proposed Rule Making in September 1998
outlining plans for the new system so that hospitals and others can begin
providing comments and suggestions. We are making data files available to the
industry, and we have extended the comment period until June 30, 1999 so the
industry and other interested parties will have sufficient time and information
to comment.
We do have greater concern for rural, inner city, cancer, and
teaching hospitals because our analysis suggests that the outpatient prospective
payment system will have a disproportionate impact on these facilities. We are
reviewing the many comments we have received on the proposed regulation and we
are continuing to develop possible modifications to the system for inclusion in
the final rule.Physicians: As directed by the BBA, we have begun implementing
the resource-based system for practice expenses under the physician fee
schedule, with a transition to full implementation by 2002 in a budget-neutral
fashion that will raise payment for some physicians and lower it for others. The
methodology we used addresses many concerns raised by physicians and meets the
BBA requirements. We fully expect to update and refine the practice expense
relative value units in our annual regulations revising the Medicare fee
schedule. We plan to include the BBA mandated resource-based system for
malpractice relative value units in this year's proposed rule. We welcome and
encourage the ongoing contributions of the medical community to this process,
and we will continue to monitor beneficiary access to care and utilization of
services as the new system is fully implemented.
We also are seeking
legislation to refine the BBA's Sustainable Growth Rate for physician payment.
Medicare payments for physician services are annually updated for inflation and
adjusted by comparing actual physician spending to a national target for
physician spending. The BBA replaced the former physician spending target rate
of growth, the Medicare Volume Performance Standard, with the Sustainable Growth
Rate (SGR). The SGR takes into account price changes, fee-for-service enrollment
changes, real gross domestic product per capita, and changes in law or
regulation affecting the baseline.
After BBA was enacted, HCFA actuaries
discovered that the SGR system is unstable, and would result in unreasonable
fluctuations from year to year. Also, the SGR target cannot be revised to
account for new data. The President's fiscal 2000 budget contains a legislative
proposal to deal with these issues.
CONCLUSION
The BBA made important
changes to the fee-for-service Medicare program to strengthen and protect it for
the future. These changes, along with a strong economy and our increased efforts
to combat fraud, waste, and abuse, have extended the life of the Trust Fund
until 2015. Change of the magnitude encompassed in the BBA inevitably requires
adjustment and fine tuning. It is not surprising that market corrections would
result from such significant legislation.
As always, we remain concerned
about the effect of policy changes on beneficiaries' access to affordable,
quality health care. We are proactively monitoring the impact of the BBA to
ensure that beneficiary access to covered services is not compromised. Our
regional offices are gathering extensive information from around the country to
help us determine whether specific corrective actions may be necessary. And we
welcome the opportunity to look at any new information regarding beneficiary
access to quality care. We are committed to looking at possible refinements to
the BBA that are within our administrative authority. However, we should be
cautious about making changes to the BBA until we consider information and
evidence of problems in beneficiary access to quality care. We look forward to
continuing to work with this Committee to identify issues of concern, and we
will keep you up to date on the status our of implementation of the BBA. I thank
you for holding this hearing, and I am happy to answer your questions.
END
LOAD-DATE: June 11, 1999 
