Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
June 10, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3071 words
HEADLINE:
TESTIMONY June 10, 1999 ROBERT A. BERENSON, M.D., SENATE
FINANCE MEDICARE FEE-FOR-SERVICE
BODY:
Testimony of
ROBERT A. BERENSON, M.D., DIRECTOR CENTER FOR HEALTH PLANS & PROVIDERS
HEALTH CARE FINANCING ADMINISTRATION on the BALANCED BUDGET ACTS IMPACT ON
FEE-FOR-SERVICE MEDICARE before the SENATE FINANCE COMMITTEE June 10, 1999
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 one-time
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
worked 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 work group 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 patients 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 years 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.
LOAD-DATE: June 11, 1999