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Congressional Testimony
February 08, 2000
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 6840 words
HEADLINE:
TESTIMONY February 08, 2000 NANCY-ANN DEPARLE ADMINISTRATOR HEALTH CARE
FINANCING ADMINISTRATION HOUSE APPROPRIATIONS LABOR, HEALTH AND
HUMAN SERVICES, AND EDUCATION FISCAL YEAR 2001 BUDGET REQUEST
BODY:
Statement by Nancy-Ann DeParle February 8,
2000 Mr. Chairman and Members of the Subcommittee: I am honored to be here today
to present the Health Care Financing Administration's (HCFA)
fiscal year 2001 budget request. The past year has been an exciting and
challenging one for HCFA, full of many accomplishments. I'd like to tell you
today about some of those successes as well as some of the challenges that lie
ahead. I anticipate another busy and fulfilling year and look forward to
continuing to work with the Members of this Committee. As you know, HCFA is
responsible for overseeing the Nation's two largest health care
programs: Medicare and Medicaid. For a third of a century, these two programs
have met the basic health care needs of the most vulnerable
segments of our population: elderly, disabled, and low-income Americans. HCFA is
also responsible for the State Children's Health Insurance
Program, the Clinical Laboratory Improvement Amendments, the
Health Insurance Portability and Accountability Act, and
oversight of Medigap insurance. My goal as Administrator is to ensure that
HCFA's programs are responsive to our beneficiaries, strong, and well-managed.
Meeting the health care needs of more than 70 million
beneficiaries is HCFA's primary mission. We have an obligation to purchase
services that are appropriate, effective, and of high quality. This concept,
which we call "beneficiary-centered purchasing," is at the core of HCFA's
current and future direction and is the driving principle in our day-to-day
operations. HCFA has made great progress in meeting its many challenges. We
have: - Completed Y2K system certifications on time; - Received high scores in a
customer satisfaction survey, conducted under the auspices of the National
Partnership for Reinventing Government; - Cut the Medicare claims payment error
rate in half over the period FY 1996-FY 1998; - Fully implemented 70 percent of
the 335 BBA provisions affecting HCFA, with many more partially implemented; -
Successfully instituted several aggressive initiatives to improve State nursing
home inspections and enforcement, and to crack down on problem providers; -
Implemented a new national coverage policy-making process; Received the first
place Gold Award for the best government health care
website-www. medicare.gov-in the Healthcare World awards competition; -
Published, as part of our FY 2001 budget request, HCFA's first Annual
Performance Report under the Government Performance and Results Act statute.
While we have made significant progress, much work remains to be done. I have
made the fight against fraud, waste, and abuse in Medicare and Medicaid my
number one priority. Our goal is to pay claims correctly the first time around.
This means paying the right amounts to providers for covered, reasonable and
necessary services for eligible beneficiaries. The Health
Insurance Portability and Accountability Act (HIPAA) of 1996 provides us with a
mandatory funding source for fighting fraud and abuse. And, in 1997, the
Balanced Budget Act included several new authorities to help us in this effort.
Now, we can bar felons from ever participating in Medicare again, impose civil
monetary penalties on providers who take kickbacks, reform the payment system
for home health care, and obtain more information on providers
so that we can check their history and judge their suitability. Our efforts are
beginning to pay off. Over a two- year period, HCFA halved its payment error
rate for Medicare fee- for-service payments, from 14 percent in FY 1996 to 7.1
percent in FY 1998. We are working to further reduce the error rate by
continuing to focus our corrective actions on vulnerable areas identified by the
OIG, with a goal of reducing the error rate to 5 percent by FY 2002. Much of our
improvement can be attributed to HCFA's corrective action plan. HCFA also
remains committed to achieving, and keeping, a "clean" opinion horn the Office
of inspector General on the Chief Financial Officer's audit of HCFA's financial
statement. My second priority is oversight, including strengthening Federal
oversight of nursing home quality and safety standards, and improving oversight
of our Medicare contractors. The President's Nursing Home Initiative focuses
attention and resources on ensuring that beneficiaries in nursing homes receive
quality care in a safe environment. To this end, we will be working with States
to improve their nursing home inspection systems, to crack down on those nursing
homes that repeatedly violate safety rules, to publish nursing home quality
ratings on the Internet, and to reduce the incidence of bed sores, dehydration,
and malnutrition. On another front, we have developed a comprehensive approach
to improving performance among the private companies that, by law, process and
pay Medicare claims. Our strategy includes: standardizing and strengthening
contractor performance evaluation; building a business-like internal control
structure at the contractors, focused on financial management and electronic
data processing (EDP) internal controls; creating a team of over 100 financial
management experts at the contractors' sites to help ensure a consistent and
coordinated response to suspected instances of fraud and waste; and developing
an integrated, dual-entry accounting system that can ensure accurate reporting
and recording of financial data. I believe that a uniform accounting system with
general ledger capabilities will help HCFA. It will also standardize reporting
and facilitate error detection, thus enhancing prevention of fraud and abuse.
Finally, we must continue to implement the many new provisions in the
Health Insurance Portability and Accountability Act of 1996
(HIPAA), the Balanced Budget Act of 1997 (BBA), and, now, the Balanced Budget
Refinement Act of 1999 (BBRA). Both BBA and HIPAA require a concentrated and
coordinated effort to manage resources effectively. We have made tremendous
progress in these areas. With the exception of provisions delayed by Y2K and
those becoming effective in future years, HCFA has either completed or is well
on its way to implementing virtually all of the 335 BBA provisions. Our progress
with the national Medicare education campaign includes a new toll-free
Medicare+Choice telephone help line, informational materials on
health plans in both English and Spanish, a nationwide
community-based outreach campaign to help beneficiaries understand their
options, and an award-winning web site-www.medicare.gov- which provides
comparison and quality data on health plans. We have also made
great strides in implementing the State Children's Health
Insurance Program (SCHIP). All 56 States and territories now have approved SCHIP
plans in operation. During FY 1999, nearly 2 million low-income,
uninsured children were served. Much work remains. The BBRA of
1999 includes 133 provisions requiring HCFA implementation. We have developed a
schedule and a system to track our progress with this new workload. One of the
BBRA provisions, however, seriously jeopardizes our Medicare+Choice education
campaign. The BBRA significantly reduces the Medicare+Choice user fee, from $95
million in FY 2000 to $19.3 million in FY 2001, based on a formula in statute.
if HCFA is to meet the beneficiary information needs associated with the
Medicare+Choice program, we must continue to receive sufficient funds. This
budget includes a request for an additional $130.7 million in Medicare+Choice
user fees, consistent with our prior proposal to permanently increase the annual
authorization level for this user fee to $150 million. I respectfully ask for
the Committee's support for this proposal. In addition to the workload
challenges presented by HIPAA, BBA and BBRA, HCFA also recognizes that 35
percent of its current workforce is eligible to retire within the next five
years, taking with it valuable institutional knowledge. In an effort to meet
workload expansions and to integrate new staff now, this request includes an
additional 120 FTEs: 20 FTEs to implement the Nursing Home Initiative and 100
FTEs to improve Medicare contractor oversight. We are also developing and
integrating a workforce planning process into our overall agency planning
agenda. In order to meet its many challenges, HCFA is developing an initiative
to strengthen its management capacity. This initiative has five components: 1)
enhance management flexibility s; 2) increase accountability to constituencies;
3) improve program flexibility s; 4) institute structural reforms; and 5)
initiate contracting reform. Together, these reforms would give HCFA greater
flexibility s in a wide variety of areas including: increasing its ability to
hire the right skill mix for its mission; creating an advisory committee with
representatives from the private sector who have expertise relevant to HCFA's
business function; entering into more competitive purchasing arrangements with
providers; realigning the relationship between HCFA's regional and central
offices to ensure greater consistency in oversight and enforcement; and
expanding the pool of potential Medicare contractors. As HCFA continues to make
progress on management reform initiatives, we will also begin to explore a more
stable source of funding to help HCFA meet its challenges well into the future.
HCFA's FY 2001 budget request includes three accounts of interest to this
Subcommittee: Grants to States for Medicaid; Payments to the
Health Care Trust Funds; and HCFA Program Management. I will
briefly highlight the first two accounts and then discuss HCFA's Program
Management request in more detail since Program Management funds are key to
accomplishing our priorities. GRANTS TO STATES FOR MEDICAID In FY 2001, the
Medicaid program will serve almost 34 million eligible persons, not including
beneficiaries covered by the State Children's Health Insurance
Program. Federal Medicaid obligations for FY 2001 are estimated at more than
$124 billion, an increase of about 7 percent, or $8 billion, over FY 2000.
Combined Federal and State Medicaid expenditures are projected to reach $219
billion in FY 2001, of which the Federal share is about 57 percent. We are
committed to continue working with the States to encourage efficiency in the
Medicaid program, as well as innovative expansions of health
care coverage, particularly through the State Children's Health
Insurance Program. PAYMENTS TO HEALTH CARE TRUST FUNDS Our FY
2001 request of $70.4 billion includes a Federal general revenue contribution to
the Supplemental Medical Insurance (SMI) Trust Fund of $69.8 billion, an
increase of $4.7 billion over the expected FY 2000 Federal SMI contribution. The
major factors driving the increase in the FY 2001 Federal contribution for SMI
are: growth in program outlays due to medical service price inflation; increased
utilization of medical services; and demographic growth in the beneficiary pool.
PROGRAM MANAGEMENT Our FY 2001 Program Management request of $2.3 billion
supports the President's commitment to a balanced Federal budget, even in the
midst of implementing the most sweeping changes since the Medicare and Medicaid
programs were begun over 30 years ago. Excluding Medicare Contractor funding,
our FY 2000 appropriation exceeded our request by $8.7 million. We greatly
appreciate the Committee's support. I believe that all of us would agree with
the importance of maintaining a stable and adequate level of resources to ensure
that HCFA's programs are strong and well- managed, and that they provide our
beneficiaries with the best possible service. To put our Program Management
request in perspective, it is actually less than I percent of total program
outlays. This compares very favorably to the Blue Cross and Blue Shield
Association's advertised administrative funding rate of 12.2 percent of benefit
payments. Payments for Medicare and Medicaid benefits, including the State
Children's Health Insurance Program, are expected to be $359
billion in FY 2001. However, none of those mandatory benefits can be paid
without the activities and initiatives funded from this discretionary account.
In FY 2001, HCFA requests a current law discretionary program level of $2,150.7
million. This includes a Program Management appropriation of $2,086.3 million-an
increase of $93.0 million, or 4.7 percent, above the FY 2000 appropriation, net
of the 0.38 percent rescission-plus collections of $64.4 million from estimated
current law user fee receipts. In addition to $64.4 million in current law user
fees, we are proposing a $355 million increase in user fee collections-$224.3
million 'in new user fees and $130.7 million in existing user fees-through
authorizing legislation that makes both the fee collection and spending
contingent on approval by the Appropriating Committees. The new user fees
include $220 million in Program Management collections. Since this amount is
already reflected in HCFA's FY 2001 current law appropriation request of
$2,086.3 million, the enactment of these proposals would offset the
appropriation, reducing HCFA's request to $1,866.3 million. We are also seeking
$4.3 million in new user fees associated with operating the nursing home patient
abuse registry and $130.7 million from a proposed increase in the authorization
level for Medicare+Choice. These collections are not reflected in the current
law appropriation request. In total, HCFA's program level request is $2,285.7
million. Before I discuss the line items or "accounts" that comprise Program
Management, I would like to describe HCFA's user fee proposals. FUNDING THROUGH
USER FEES To find the stable administrative resources necessary to manage our
responsibilities effectively without drawing on scarce discretionary budget
resources, the Administration is again proposing user fees. Our FY 2001 program
level budget request includes $419.4 million in user fees-$355 million in
proposed user fees and $64.4 million in current law user fees-that will finance
almost 20 percent of our budget request. HCFA is committed to maintaining a
balanced Federal budget. At the same time, there is a compelling need for
adequate administrative spending to manage the Medicare, Medicaid, and SCHIP
programs effectively. These user fees will support ongoing Medicare+Choice
information campaign activities nationwide, as well as strengthen the
effectiveness and efficiency of HCFA's Program Management operations. The new
user fee proposals include managed care application and renewal, initial
provider certification and provider re-certification, paper claims submission,
and submission of duplicate or "unprocessable" claims. The costs of these
activities are currently absorbed in HCFA's Program Management budget. We
believe that these user fees are sound policy that could affect positive change
in the Medicare program. For example, the duplicate and "unprocessable" claims
fee will deter providers from submitting these time-consuming, wasteful claims.
In order to facilitate enactment of the user fees, we have proposed authorizing
legislation which makes both the fee collection and spending dependent on action
by the Appropriations Committees. Since our FY 2001 request reflects our total
funding needs, the enacted user fees would offset our appropriation by the
amount of the proposal. We are eager to work with this Committee to ensure that
HCFA's funding level is sufficient to meet its program responsibilities. I would
now like to discuss briefly the four items or "accounts" that comprise Program
Management: Research, Demonstrations and Evaluations; Medicare Contractors;
Medicare State Certification; and Federal Administration. RESEARCH,
DEMONSTRATIONS AND EVALUATIONS The FY 2001 Research and Demonstrations request
is $55.0 million, a decrease of $6.8 million from the FY 2000 appropriation, net
of the 0.38 percent recession. The request consists of $34.0 million for the
continuation of ongoing research activities, including $11.4 million to continue
the Medicare Current Beneficiary Survey, the data from which support HCFA
researchers in many studies of health care financing delivery
mechanisms. The remaining $2 1.0 million consists of $9.0 million for the
implementation of new projects, such as Vulnerable Populations Research which
includes the Violence Against Women Initiative, and $12.0 million for activities
that support the Balanced Budget Act of 1997 such as demonstrations and
evaluations of medical savings accounts and competitive pricing. MEDICARE
CONTRACTORS Our request for the Medicare contractors continues to emphasize
improvements in customer service and claims operations, while investing for
future increases in productivity. The FY 2001 Medicare contractor budget request
of $1.3 billion reflects an increase of $57.3 million over the FY 2000
appropriation level. This request includes $136 million in proposed user fees
that would charge providers $1.00 for submitting paper claims, or duplicate or
unprocessable claims. The three key contractor activities are claims processing,
beneficiary and provider services, and productivity investments. In FY 2001, we
propose spending $812.5 million for claims processing activities, a slight
increase of $2.9 million over the FY 2000 appropriated level. This increase
reflects the inclusion of additional funding for a systems security initiative
and needed systems maintenance, offset by a slight decrease in estimated claims
volumes-from the 925 million estimate in the FY 2000 President's budget request
to the 919 million projected for FY 2001. We are asking for $294.2 million for
beneficiary and provider services including funds to process appeals, respond to
inquiries, educate and train providers, and support the National Medicare
Education Program. This request is the same level as FY 2000 but does not
include the $ 10 million for a one-time long- term care national education
campaign included in the FY 2000 appropriation. The FY 2001 request is needed to
cover escalating inquiry workloads, the by-product of Medicare+Choice and
Medicare Integrity Program activities. The request also allocates $149 million
for productivity investments including the redesign of HCFA's existing managed
care system; the enhancement of our customer- oriented, toll-free telephone
service; the implementation of administrative simplification provisions of the
HIPAA, primarily the development of national identifiers for providers and
health plans; a new contractor oversight initiative which
includes a contractor performance evaluation program, the development and
implementation of internal controls, and a new integrated general ledger
accounting system; and the continuation of transitions-now that Y2K compliance
has been achieved-to one of three standard Medicare claims processing systems.
The request also includes $40 million to implement BBA provisions, primarily the
collection of encounter data. MEDICARE STATE CERTIFICATION The Medicare State
certification program ensures that facilities participating in Medicare meet
Federal health, safety and program standards. The Medicaid
survey and certification counterpart is funded through the grants to States for
Medicaid. State survey and certification activities seek to secure quality
services for all Medicare and Medicaid beneficiaries. The FY 2001 Medicare State
certification budget request is $234.1 million, including $63 million in
proposed user fees. The request includes $182.3 million for direct survey
activities, $3.1 million over the FY 2000 appropriated level. The FY 2001
request also includes $29.7 million for the Administration's Nursing Home
Initiative, an increase of $11.3 million over FY 2000. Lastly, $22.1 million is
requested for support contracts, an increase of $15.1 million over FY 2000. This
funding level will provide the necessary resources to keep pace with the
continuous growth in the program, while allowing us to continue key provisions
of the Nursing Home Initiative. Senator Breaux of the Special Commission on
Aging recently complimented HCFA's efforts on this enormous undertaking, citing
favorable comments by many consumers and the advocacy community. The request
will support inspections of all facilities seeking to participate in Medicare
for the first time, as well as statutorily-mandated re-inspections of all
currently participating nursing homes and home health agencies.
Also, the request supports inspections of approximately one-third of end- stage
renal disease facilities and non-accredited hospitals, up from 15 percent in FY
2000, and 15 percent of all other non- statutorily mandated facilities.
Moreover, HCFA will continue to pursue increased program efficiencies and look
at ways to optimize our survey process, including development of a budgeting
method that will rationalize survey and certification costs. FEDERAL
ADMINISTRATION The Federal Administration portion of the Program Management
account supports the day-to-day operations of HCFA's headquarters, as well as
our 10 regional offices nationwide. The FY 2001 request of $495.9 million
includes $2 i.0 million in proposed user fees authorizing the collection of
initial registration and annual renewal fees from Medicare+Choice plans. The
requested funding level will allow HCFA to enhance program oversight activities
and improve the way we relate to our beneficiaries, providers, and other
stakeholders. This funding level, an increase of $13.0 million over FY 2000,
will pay for 4,353 FTEs, including 100 additional FTEs for Medicare contractor
oversight and 20 additional FTEs for activities attributable to the Nursing Home
Initiative. These resources are critical to HCFA's success in strengthening
oversight of Federal health facilities and improving oversight
of its contractors. MEDICARE INTEGRITY PROGRAM Although the Medicare Integrity
Program (MIP) is permanently funded through the Hospital Insurance Trust Fund,
we have included it in this statement because reducing fraud, waste, and abuse
is my top priority for HCFA. The FY 2001 funding level for MIP activities is
$680 million, an increase of $50 million above the FY 2000 level. Following the
approach in our Comprehensive Plan for Program Integrity, published in FY 1999,
we are directing our resources at the most vulnerable areas to maximize our
return on investment, to protect scarce taxpayer funds, and ultimately to
protect the fiscal integrity of the trust f1mds. Program integrity activities
include medical reviews, both random review and focused pre-payment; provider
audits; collaborative efforts with HCFA's partners, such as the OIG Hotline; and
the Medicare secondary payer program which seeks to ensure that payment is made
by the appropriate primary payer. Last year the Federal Government recovered
nearly $500 million as a result of health care prosecutions.
GOVERNMENT PERFORMANCE AND RESULTS ACT (GPRA) Our FY 2001 budget request
incorporates HCFA's annual performance plan (APP), as required under GPRA. The
plan sets out our specific performance goals for FY 2001 and describes the steps
planned and underway to accomplish each goal. We have based our performance
measurement approach on two principles: (1) the most important things to measure
relate to ensuring that beneficiaries receive the high-quality care they need,
and (2) we will pursue measures that are representative of program performance.
This plan is closely linked to the objectives set forth in the Department of
Health and Human Services and HCFA Strategic Plans. The APP is
also the first annual performance report in which HCFA is reporting on agency
performance on its FY 1999 GPRA goals. Overall, we experienced positive results
during our first reporting year. We have met or exceeded expectations with 9 of
the 12 goals for which we have complete data. Of the 18 goals in the FY 1999
performance plan, we have six goals for which we do not have complete data.
However, we expect to receive data on all six goals in 2000. Although we did not
fully achieve three of our goals, we made significant progress and narrowly
missed each of the targets. All of HCFA's performance goals relate to important
outcomes, such as improved beneficiary health and satisfaction,
sound fiscal management, and maximum use of appropriate technology to improve
service, achieve productivity improvements, and minimize cost. The FY 2001 plan
includes new goals relating to diabetic care; program integrity, including
Medicaid program integrity; beneficiary education; contractor oversight; survey
and certification; and program management. These goals, as well as a number of
goals carried over from FY 2000, represent an important step towards our
continued efforts to strengthen coordination with States and other partners and
reflect our efforts to improve service delivery to all of our beneficiaries.
Since performance targets in the APP are partially a function of the resource
levels requested in the budget, they could change based upon final Congressional
appropriations action. We look forward to receiving feedback from Congress on
our plan and to working with Congress on achieving our goals. CONCLUSION This
request-a modest 4.7 percent above the FY 2000 enacted level- builds on the
opportunities afforded us by the favorable appropriations we received in both FY
1999 and FY 2000. We are ready to face the challenges of a rapidly changing
health care arena given adequate resources. I am confident that
this funding level will provide us with the resources and the flexibility needed
to improve our business practices while carrying out our responsibilities. At
stake are the health care services and other vital programs
upon which so many millions of Americans increasingly rely. Thank you for the
opportunity to present HCFA's FY 2001 budget request. I look forward to working
with this Committee, and I would be happy to respond to any questions or
suggestions that you may have.
LOAD-DATE: February 9,
2000 
