AMA in Washington
The Congress
The White House
and Federal Agencies
AMA GrassrootsAction Center
AMA PoliticalEducation Programs
AMA Statement on HCFA's Ability to Manage the Medicare Program
Statement to the House Committee on Ways and Means Subcommittee on Health--February 11, 1999
of the
American Medical Association
to the
Committee on Ways and Means
Subcommittee on Health
U.S. House of Representatives
Re: Health Care Financing Administration's Ability to Manage the Medicare Program
February 11, 1999
The American Medical Association believes that Congressional intervention is needed to correct management problems at the Health Care Financing Administration (HCFA). These problems have been building up for many years. An ill-advised reorganization and a heavy workload from requirements of the Balanced Budget Act of 1997 (BBA) have overwhelmed the agency.
Consider the following examples:
- Three primary care physicians in Idaho Falls, Idaho, recently felt compelled to stop treating Medicare patients altogether in the wake of an overzealous and overly punitive effort by the local Medicare carrier to recoup thousands of dollars in payments due to differences of opinion about appropriate coding and documentation. A number of the disputed claims were for laboratory tests, which is all the more outrageous because, at the same time the carrier was making its recoupment demands, HCFA was engaged in a negotiated rulemaking process to determine what rules should guide its administration of Medicare's lab test benefit. Rather than face the prospect of civil fines of up to $10,000 per clerical error or billing mistake in the future, prosecutorial zealotry, and the associated legal costs, the physicians simply decided to discontinue their involvement with the Medicare program.
- While 85% of Medicare beneficiaries remain in the fee-for-service program, conflicting HCFA priorities and a high attrition rate among experienced staff have led to serious problems. For example, in setting the Sustainable Growth Rate for physician services, as required by the Balanced Budget Act, HCFA significantly underestimated Gross Domestic Product growth for 1998 and enrollment for 1999. So far, HCFA has made no effort to revise its estimates to reflect more up-to-date information. Physician payments for 1999 have already been underfunded by about $645 million due to these projection errors, and HCFA's continued use of the erroneous estimates could lead to steep payment cuts as soon as next year.
- In testimony before this Committee in January 1998, the General Accounting Office described numerous deficiencies in HCFA's oversight of its claims processing contractors, using as an example the region that formerly had six staff dedicated to contractor oversight but now has only two. This lack of oversight has allowed the Part B carriers to get away with establishing local coverage policies that parallel abuses of some managed care organizations:
¾In some localities, claims for the physical evaluation necessary to clear patients for anesthesia and surgery are being denied as noncovered because "Medicare does not cover screening services."
¾Similarly, it is standard clinical practice in urology to give a man who complains of lower urinary tract symptoms a PSA test, but in many localities patients have no idea if the test will be covered because carriers will not pay for the test if the diagnosis turns out to be enlarged prostate. When administered to diagnose lower urinary tract problems, the PSA test is clearly not a screening test.
¾Virtually no effort is made by the carriers to inform or educate physicians about Medicare's coding, payment, and coverage policies, nor are they provided with meaningful appeal options once the carrier has decided a problem exists.
¾Often, carriers themselves have little knowledge of appropriate coding practices. In one case, a carrier attempted to recoup more than $80,000 from a physician, but after the physician persistently and relentlessly sought a reevaluation, the amount owed was suddenly reduced to $2,000. In another case, during the audit process, the carrier auditor made written notes and verbal comments demonstrating he was unaware of the existence of the ICD-9 code book.
We believe that HCFA's problems will only get worse as the number of Medicare patients, claims, and health care delivery systems increase. To say that HCFA's current problems could lead to a crisis is an understatement.
The AMA believes that a crisis exists, and that this crisis is beginning to spill over into the actual delivery of health care to our nation's Medicare patients.
We believe that HCFA is currently traveling down the same road the Internal Revenue Service (IRS) was on before Congress heeded the demands of taxpayers and forced the IRS to restructure its policies. Just as the IRS is struggling to reinvent itself into a "customer" friendly agency, HCFA must, with a push from Congress and the Administration, reassess its role and relationships with medical professionals who care for Medicare patients.
Further, there is a growing sense among Medicare experts that HCFA is ready to collapse under the sheer weight of its administrative duties. This sentiment was clearly stated in a January/February 1999 Health Affairs article co-written by several of the nation's leading health economists, including three former HCFA administrators: "The mismatch between the agency's administrative capacity and its political mandate has grown enormously over the 1990s. . . .HCFA's ability to provide assistance to beneficiaries, monitor the quality of provider services, and protect against fraud and abuse has been increasingly compromised by the failure to provide the agency with adequate administrative resources." The AMA shares these sentiments and believes that HCFA needs additional resources to meet its continually expanding statutory requirements.
The AMA commends Congress for holding hearings last year to assess HCFA's initial implementation of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (P.L. 104-191), and the Balanced Budget Act of 1997 (BBA) (P.L. 105-33). However, many issues remain. We implore Congress, and particularly this committee, to hold additional oversight hearings to assess:
- the overly burdensome regulatory requirements placed on physicians, hospitals, and other health care providers;
- whether HCFA has remained within its statutory authority in the rulemaking process;
- HCFA's failure to distinguish inadvertent billing errors from intentional acts to defraud the government;
- HCFA's ongoing implementation of the Medicare+Choice program;
- the process HCFA utilizes to draft rules and regulations;
- HCFA's process for considering and responding to public comments on its rules and regulations; and
- HCFA's oversight of Medicare carriers and other contractors.
Beyond the critique of HCFA that will be provided by the General Accounting Office, Congress should consider the many ways in which HCFA's regulations for administering Medicare and Medicaid affect virtually every physician, hospital, and other health care provider in this country and their ability to care for Medicare and Medicaid patients.
The AMA also urges Congress to hold hearings to address the following critical issues:
Improving Medicare's SGR System
HCFA's mismanagement has had a deleterious effect on the Medicare fee-for-service (FFS) program as well as the more frequently discussed Medicare+Choice program, and the Sustainable Growth Rate (SGR) provides a good example. The SGR is a target rate of spending growth. Cumulative actual spending is compared to cumulative target spending, and payment updates are determined by whether actual spending exceeds or falls short of the target amount. The target is based on annual changes in: inflation, Medicare FFS enrollment, real per capita GDP, and spending due to law and regulation.
HCFA established a 1999 SGR of –0.3%, which became effective October 1, 1998 for fiscal year 1999. This negative growth target means that, unless total FFS physician spending is less in 1999 than it was in 1998, next year's physician payment update could actually result in a payment cut. A key HCFA assumption underlying the negative SGR is that the number of beneficiaries enrolling in Medicare+Choice plans will grow by 29% in fiscal 1999. With the recent HMO withdrawals from Medicare, this assumption seems seriously overstated and obviously erroneous. In fact, the rate of increase in managed care enrollment has been declining since July, and the most recent monthly data show an actual decline in managed care enrollment.
HCFA has already made one significant error in setting the first SGR for 1998. In October 1997, HCFA projected 1998 GDP growth of 1.1%, but 1998 GDP growth is now estimated to have been at least 2.8%. When combined with other, smaller projection errors in the 1998 SGR, HCFA made a net underestimate in the 1998 SGR of 1.5%. With Medicare spending on physician services currently at about $43 billion annually, the projection errors led HCFA to set the payment update for 1999 about $645 million lower than it should have been.
HCFA has acknowledged the projection error problem, stating that, "[w]hile we will use our best efforts to make estimates at the time the SGR is established, we are concerned that there will be differences compared to later estimates of some of the components of the SGR." In one regulation, HCFA also stated the errors would be corrected: "[d]ifferences between projected and actual real gross domestic product per capita growth will be adjusted for in subsequent years." But to date, HCFA has not revised its estimates to reflect the more accurate, updated information.
Because the SGR system is cumulative, if left uncorrected, projection errors will be compounded with each year's payment update calculation. To have the cumulative SGR become merely an accumulation of erroneous HCFA estimates would defeat the whole purpose of the spending target system. The level of underfunding of Medicare physician services due to these errors could grow to the $1-2 billion range as early as next year.
Program Integrity
The AMA is very concerned about HCFA's overly zealous implementation of its policies in addressing waste, fraud, and abuse. The Administration continually fails to distinguish between "genuine" fraud (knowing and willful) and legitimate billing issues, i.e., differences in medical judgment over one level of coding. There is a vast continuum of issues arising in Medicare claims (e.g., deficiencies in documentation, inadvertent coding and billing mistakes, intentional criminal fraud, etc.) that HCFA constantly lumps together in the catchall category of waste, fraud, and abuse. To date, HCFA has essentially taken a single approach in dealing with a whole range of problems.
HCFA's sole response to a broad range of complex problems has been to address each one in an aggressive and punitive manner. The blurring of the lines between waste and fraud has tremendous implications for HCFA's policies and programs, not to mention for physicians trying to follow all the rules to comply with the program. In response to the current environment, carriers are forced to pursue aggressive tactics. In this "gottcha" environment, both patients and physicians suffer.
Physicians want to provide quality care for their patients without running afoul of HCFA's labyrinth of complex and burdensome requirements. We have received numerous reports that carrier feedback is severely lacking. The AMA has repeatedly urged the Administration to increase its educational efforts to individual practicing physicians who may not be aware of their honest and inadvertent billing errors. We have argued strenuously to HCFA that when a carrier identifies that a physician has a billing problem, the carrier has an obligation to start a dialogue with the physician regarding the steps the physician can take to correct the problem.
The AMA has critical concerns about HCFA's post-payment audits. These audit procedures lack fundamental fairness. In order to avoid a total disruption of their practice, as well as expensive legal bills, physicians are frequently forced into civil settlements without the ability to appeal. In many cases auditors extrapolate hefty fines from a small sample of claims. At the hands of aggressive auditors, overpayments can quickly mount. We recommend that the Administration temper its rhetoric and refine its program initiatives so that those physicians honestly participating in the Medicare program are not subjected to the federal government's overly aggressive and punitive approach. The AMA urges the Administration and Congress to target their efforts toward ferreting out true fraud rather than penalizing honest physicians whose primary goal is to provide quality care to their patients.
Regulatory Relief
Physicians are voicing their growing concern about their Medicare and Medicaid patients access to quality health care services. Numerous unnecessary and unduly complicated administrative requirements interfere with the patient-physician relationship causing strain on both patients and physicians. These requirements increase the cost of care while reducing access for Medicare beneficiaries. If the Medicare program is to provide the nation's Medicare patients with greater access, greater choice and lower cost medical services, passage of regulatory relief legislation for physicians, hospitals, and other health care providers is a must. Examples include:
- Physician input should be considered in annual carrier performance reviews.
- Physicians should have an opportunity to provide substantive input before any "black box" commercial off-the-shelf software (COTS) is implemented by HCFA for code editing/bundling. These "black box" methods do not draw on physicians' expertise and practical knowledge of the services billed. Their use distorts the billing process, discourages correct coding, creates inefficiencies and often results in physicians being paid less than the physician's cost of providing the service.
- Carrier use of the extrapolation technique should be revised. The practice of determining Medicare's estimated overpayment to a physician based on a statistical sampling of a small number of disallowable claims is inequitable. Carriers should identify a problem and provide the physician with an opportunity for a telephone discussion or a face-to-face meeting, in which the carrier must adequately explain how to correct the billing problem in the future. If a physician's future billing activities are found in error, HCFA may recoup overcharges based on actual errors found.
- Carriers should be required to provide physicians, upon request and without charge, with carrier-generated information needed for the submission of claims. This information includes the identifier number or other code of a referring physician, a list of maximum allowable charges, and coding protocols needed by physicians to submit a claim for payment or to respond to a carrier inquiry.
- Carriers should compensate aggrieved individuals for violating Medicare policy. Any individual, including a physician, who is aggrieved by the failure of a carrier to carry out Medicare policy, and establishes that the individual has suffered damages aggregating at least $500 as a result of the failure, should be permitted a hearing before the Secretary of HHS. If the carrier were found to have such failure, it should be required to compensate the aggrieved individual for such failure.
- HCFA should develop and provide a Medicare compliance manual to all participating physicians without charge.
- Medicare should fund toll free lines used for the submission of electronic claims to the program. Payment for use of a telephone line to submit electronic claims to Medicare is de facto a user fee. Medicare formerly provided this service at no charge.
- Carrier medical review screens or associated parameters should be released before denial of physician claims.
Conclusion
HCFA's ability to adequately manage the Medicare program is an issue of great importance to Medicare patients and the physicians who care for them. We implore the Committee to hold additional hearings to further assess the issues raised in our testimony, and encourage all Members of Congress to contact the AMA for further elaboration on issues addressed in our statement.
Printer-friendly version
Published Feb 11 1999
Return to Medicare Reform
