[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
PATIENTS FIRST: A 21ST CENTURY PROMISE TO ENSURE QUALITY AND AFFORDABLE
HEALTH COVERAGE
=======================================================================
JOINT HEARINGS
before the
SUBCOMMITTEE ON HEALTH
and the
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 1, APRIL 4, and MAY 10, 2001
__________
Serial No. 107-23
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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71-492CC WASHINGTON : 2001
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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_______________________________________________________________________
_______________________________________________________________________
COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health
MICHAEL BILIRAKIS, Florida, Chairman
JOE BARTON, Texas SHERROD BROWN, Ohio
FRED UPTON, Michigan HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania TED STRICKLAND, Ohio
NATHAN DEAL, Georgia THOMAS M. BARRETT, Wisconsin
RICHARD BURR, North Carolina LOIS CAPPS, California
ED WHITFIELD, Kentucky RALPH M. HALL, Texas
GREG GANSKE, Iowa EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia FRANK PALLONE, Jr., New Jersey
Vice Chairman PETER DEUTSCH, Florida
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi GENE GREEN, Texas
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan,
ROBERT L. EHRLICH, Jr., Maryland (Ex Officio)
STEVE BUYER, Indiana
JOSEPH R. PITTS, Pennsylvania
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
Subcommittee on Oversight and Investigations
JAMES C. GREENWOOD, Pennsylvania, Chairman
MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida
CLIFF STEARNS, Florida BART STUPAK, Michigan
PAUL E. GILLMOR, Ohio TED STRICKLAND, Ohio
STEVE LARGENT, Oklahoma DIANA DeGETTE, Colorado
RICHARD BURR, North Carolina CHRISTOPHER JOHN, Louisiana
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
Vice Chairman JOHN D. DINGELL, Michigan,
CHARLES F. BASS, New Hampshire (Ex Officio)
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(iii)
C O N T E N T S
__________
Page
Hearings held:
March 1, 2001................................................ 1
April 4, 2001................................................ 89
May 1, 2001.................................................. 215
Testimony of:
Becker, David, on behalf of the Pinellas County Medical
Society.................................................... 126
Bradley, Jyl D., Administrator, Dunning Street Ambulatory
Care Center, Associates in Surgery and Gastroenterology, on
behalf of Medical Group Management Association............. 129
DeParle, Nancy-Ann, former Administrator, Health Care
Financing Administration................................... 244
Dziuba, Kathleen............................................. 21
Friedman, Harvey, Vice President, Medicare and Seniors
Program, Blue Cross Blue Shield Association................ 143
Goodman, Clifford, Senior Scientist for Medical Technology,
The Lewin Group............................................ 52
Kang, Jeffrey, Director, Office of Clinical Standards and
Quality, accompanied by Mark Miller, Acting Director,
Center for Health Plans and Providers, Health Care
Financing Administration................................... 47
Latulippe, Donald............................................ 27
Linkletter, Art, National Spokesperson, United Seniors
Association................................................ 11
Mangano, Michael, Acting Inspector General, Department of
Health and Human Services.................................. 120
Miller, Mark, Acting Director, Center for Health Plans and
Providers, Health Care Financing Administration............ 113
Popma, Jeffrey J., Director, International Cardiology,
Brigham and Women's Hospital............................... 23
Roper, William A., Dean, School of Public Health, University
of North Carolina at Chapel Hill........................... 226
Ross, Murray N., Executive Director, Medicare Payment
Advisory Commission........................................ 59
Shreve, Paul, Director, General Nuclear Imaging Section,
University of Michigan Medical Center...................... 15
Vladeck, Bruce C., Senior Vice President for Policy,
Institute for Medicare Practice, Mount Sinai School of
Medicine................................................... 240
Wilensky, Gail R., John M. Olin Senior Fellow, Project Hope,
Chair, Medpac.............................................. 233
Wood, Douglas L., Vice Chair, Department of Medicine, Mayo
Foundation................................................. 136
Material submitted for the record by:
Advanced Medical Technology Association, prepared statement
of......................................................... 80
American Association for Homecare, prepared statement of..... 192
Center for Patient Advocacy, prepared statement of........... 81
Grealy, Mary, President, Healthcare Leadership Council,
prepared statement of...................................... 196
New Mexico Association for Home Care, letter dated April 3,
2000, to Hon. Heather Wilson............................... 198
Steinwald, Bruce, prepared statement of...................... 83
(v)
PATIENTS FIRST: A 21ST CENTURY PROMISE TO ENSURE QUALITY AND AFFORDABLE
HEALTH COVERAGE
----------
THURSDAY, MARCH 1, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health, joint with the
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittees met, pursuant to notice, at 10:07 a.m.,
in room 2123, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman, Subcommittee on Health) and Hon. James C.
Greenwood (chairman, Subcommittee on Oversight and
Investigations) presiding.
Members present Subcommittee on Health: Representatives
Bilirakis, Upton, Greenwood, Burr, Whitfield, Wilson, Shadegg,
Bryant, Pitts, Tauzin (ex officio), Brown, Barrett, Capps,
Deutsch, Eshoo, Stupak, Engel, Wynn, and Green.
Members present Subcommittee on Oversight and
Investigations: Greenwood, Bilirakis, Burr, Whitfield, Tauzin
(ex officio), Stupak, and Rush.
Staff present: Tom Giles, majority counsel; Marc Wheat,
majority counsel; Kristi Gillis, legislative clerk; Amy
Droskoski, minority professional staff; and Bridget Taylor,
minority professional staff.
Mr. Bilirakis. Good morning. I now call to order this first
joint hearing in this 107th Congress of the Health Subcommittee
and the Oversight Investigation Subcommittee, and I would like
to start, of course, by welcoming our witnesses and all of the
members of both subcommittees. I particularly appreciate this
opportunity to work with the Oversight and Investigations
Subcommittee and its chairman, Jim Greenwood, as well as the
ranking member, my Florida colleague, Congressman Peter
Deutsch.
Today, along with Mr. Brown, we launch the first hearing in
a series entitled ``Patients First: A 21st Century Promise to
Ensure Quality and Affordable Health Coverage.''
Millions of seniors rely on Medicare for their health care
needs, but few are familiar with the agency that administers
this important program, and that is the Health Care Financing
Administration, or HCFA, as we fondly refer to it. And yet this
agency has a very real and sometimes negative impact on the
quality of care delivered to patients through Federal health
programs.
Reform of the agency that administers Medicare is a
critical step in our efforts to protect and strengthen this
vital program for the future. Too often HCFA is inflexible and
unresponsive to patient needs.
A recent report by the Lewin Group indicated that
beneficiaries have been denied access to some medical
technologies for up to 5 years or more after approval by the
Food and Drug Administration.
HCFA's processes for determining coverage, assigning
billing codes, and setting payment levels are causing serious
delays in the availability of these breakthrough treatments for
patients. These delays cause serious harm to patients in need
of treatment, and patient care will continue to suffer unless
HCFA's coverage policies are reformed.
We will address those issues today while recognizing that
we must constantly keep the fiscal health of the Medicare
program at the forefront of all of our efforts. Today, an
estimated 130,000 pages of laws and regulations govern the
Medicare program. Many providers are forced to spend as much
time negotiating the maze of HCFA's bureaucracy as they do
treating patients.
To improve the quality of patient care, therefore, we must
first conduct a top to bottom review of HCFA's structure,
operations, and regulations. A similar effort by our committee
to overhaul the Food and Drug Administration led to enactment
of the Food and Drug Modernization Act in 1997. This critical
measure removed bureaucratic obstacles which had blocked the
timely approval of life-saving medications and medical devices
for patients.
Under the leadership of our new full committee chairman,
Congressman Billy Tauzin, we will now tackle an even greater
challenge: ensuring quality and affordable health coverage for
patients through Federal health programs. Together, we have
launched an ambitious initiative to reform HCFA and to put
patients first.
On February 13, I had the opportunity to visit HCFA's
facilities in Baltimore with Chairmen Tauzin, Greenwood, and
several committee members. The tour underscored the agency's
complexity and the incredibly broad range of its
responsibilities. Our discussions with HCFA staff were
productive, and we did have frank conversations about the
problems facing the agency.
Following our visit, Chairman Tauzin, Chairman Greenwood
and I wrote to Health and Human Services Secretary Tommy
Thompson to underscore our commitment to improving patients'
access to quality health care through Federal programs.
As a former Governor, Secretary Thompson will bring a
wealth of practical experience to bear in solving this problem,
and we have solicited his active participation in support of
this initiative.
Clearly, patients deserve better access to the most
technologically-advanced devices and services. This is just one
example of the many areas in which we will focus over the next
several months. We will work to ensure patients receive quality
affordable health care through Federal programs. I am confident
that we will succeed in our efforts to put patients first.
The Chair will recognize Mr. Brown, Mr. Greenwood and Mr.
Deutsch for the usual 5 minute opening statements, and then,
with unanimous consent, I would like to either limit other
members' opening statements to 1 minute or else they may choose
to defer their opening statements until after we have completed
this first panel. That being the case, the Chair now recognizes
Mr. Brown for an opening statement.
Mr. Brown. I thank the chairman. I am pleased to welcome
our witnesses this morning. This is an important hearing
because there are questions about certain aspects of Medicare
coverage and payment rules. If these rules are inappropriately
delaying or restricting access to certain medical devices, we
must do something about it.
This hearing is also important because it is the first of
several focusing on HCFA operations, and it happens to be
taking place at a critical point in the history of Medicare.
Before we get started, I believe it is important to clarify our
intentions for this and for future HCFA hearings and place our
review of HCFA operations in the proper context. Otherwise, our
decision to focus on the details of HCFA's current operations
could be misperceived as a statement for or against complete
overhaul of HCFA or as a statement for or against Medicare
privatization. As I understand it, that is not what these
hearings are about.
Last year, the chairman and I along with other subcommittee
members met with then acting HCFA Administrator Mike Hash. We
asked him to tell us what HCFA could do and what Congress could
do to improve program operations and ensure that beneficiaries
are protected. As I see it, identifying what Congress can do
and what HCFA can do to improve program operations and keep our
promises to seniors is the sole purpose of these hearings.
The goal is not today, should not be today, to demonize
HCFA. If we are going to dole out blame for incremental
problems in the Medicare program, Congress, not HCFA, should
bear the brunt of it. The goal is to make sure that the program
is running as smoothly as possible. That means looking at each
of the major variables that influence operations.
Last Friday, four HCFA administrators representing both
Democratic and Republican administrations participated in a
roundtable discussion about HCFA. All four administrators
agreed on two points: the Health Care Financing Administration
is severely overburdened and chronically underfunded.
When managed care plans were asked to share data on how
they spend the billions of Trust Fund dollars that Medicare
pays them each year, they screamed too complicated, too much
work, overregulation. HCFA is not allowed to scream when we
codify arcane details about how providers are to be paid
without regard to the operational requirements of those payment
systems, without regard to the resources and time needed to
fulfil those requirements, and sometimes frankly without regard
to logic.
When over a 3-year period, Medicare Plus Choice plans
systematically and unceremoniously dropped 1.7 million Medicare
beneficiaries from coverage instead of cross-subsidizing
between more and less profitable counties and staying in,
remaining in those counties and serving those seniors, when
they underprojected the cost of providing supplemental
benefits, made bad business decisions, under projected the cost
of providing supplemental benefits like prescription drugs, and
then they blamed their missed profit goals on a shortfall on
reimbursement for basic benefits, what did Congress do?
Nothing.
Did we discuss overhauling the Plus Choice program or
abandoning it in favor of the more stable and reliable Medicare
fee-for-service program? No. In the great old big government
tradition, this government, this Congress, threw money at the
Plus Choice plans. We did not even require that they address
beneficiary concerns as a condition of receiving the money.
As we scrutinize HCFA's overtaxed and underfunded
operations, maybe, just maybe, we should think about giving
HCFA the resources it needs to do its job. Maybe we should see
about removing statutory constraints that hold the agency back.
This is not to say that HCFA is perfect and could not benefit
from close evaluation of its practices. But in doing so, HCFA
and Congress must work together to perform a better balancing
act, making sure beneficiaries are getting quality care,
protecting the program from fraud, and ensuring that the
program is responsive and responsible. In this context, Mr.
Chairman, this hearing is a positive step. I thank the
chairman.
Mr. Bilirakis. I thank the gentleman. Chairman Greenwood.
Mr. Greenwood. Thank you, Mr. Chairman. I would ask
unanimous consent to submit my written statement for the
record.
Mr. Bilirakis. Without objection, the written statements of
all members of the two subcommittees may be made a part of the
record.
Mr. Greenwood. And I would like to forgo my written
statement, in part, to respond to Mr. Brown's comments, if I
may.
Mr. Bilirakis. Yes.
Mr. Greenwood. In part to set the tone for what is going to
be a series of these hearings on the Health Care Financing
Agency. I hope none of us or none of the witnesses demonize
HCFA, nor the extraordinary people who work for HCFA. That
would be a mistake. They have had, I think, 17 directors in 23
years, and frankly it has been the senior staff of HCFA that
has been trying to make a go of it.
And what we are all about here is trying to figure out in
the interest of the 70 some million Medicare and Medicaid
beneficiaries and the kids in the CHIP program whether there is
a better way after 23 years of HCFA to structure it, to
organize it to make it respond to the needs of the seniors and
kids and the others and the disabled in the country. And that
is what we ought to be about, particularly as a health
subcommittee and as an oversight subcommittee.
I think it is equally destructive and nonproductive to
demonize the Medicare Plus Choice plans, and, frankly, I think
that is what you are doing a little bit there, Mr. Brown.
We should not demonize HCFA. We should not demonize the
plans. I do agree with you that the reason the Medicare Plus
Choice plans have not functioned very well is our fault. It is
the Congress' fault. We did not give them enough money. We
should not expect them to provide a service that we are not
willing to pay for. So I am hopeful that in this hearing today
and in the hearings that follow, let us not demonize anybody.
Let us not demonize HCFA. Let us not demonize the Medicare Plus
Choice plans. Let us do what we get paid to do, and that is to
constructively oversee this agency and see if we can come up
with a better result. I yield back, Mr. Chairman.
Mr. Bilirakis. And amen to those comments. Mr. Deutsch.
Mr. Deutsch. Thank you, Mr. Chairman. Mr. Chairman, today's
hearing is about how to bring certain reforms to the Health
Care Financing Administration's efforts to bring new medical
technologies to market. While I do not dispute the importance
of today's topic, and I fully believe that you and the rest of
the committee members on this panel appreciate its importance
as well, I am concerned that it is somewhat premature for the
Oversight and Investigations Subcommittee to be holding this
hearing at this time.
As you know, the oversight panel is an investigatory body.
We do investigations. We are set up to conduct lengthy
examinations designed to explore not only what is dysfunctional
about a particular government program, but also to explore what
possible solutions might be used to address whatever
shortcomings are uncovered.
But we generally do our investigation first, then hold a
hearing to report what we have found. What is somewhat
frustrating about today's meeting is that we have not yet
completed or even really begun a cursory investigation into
this matter.
Instead, what we are doing in this room is really a process
of opinion gathering. But it should not be construed as a
presentation of the subcommittee's investigative findings.
Consider the resources or lack thereof that we have dedicated
to the investigating of this matter thus far.
To my knowledge, there has not even been a single
bipartisan staff interview with HCFA officials in an attempt to
examine what is broken at the agency as it relates to today's
topic. Moreover, we are at this hearing with virtually no
agency documents because thus far we haven't sent out a request
to HCFA for such information.
That information is critical if we are going to
independently assess whether the agency is doing a competent
job or incompetent job at bringing new technologies to Medicare
beneficiaries. In virtually every other investigation conducted
by this subcommittee involving the previous administration, we
made numerous document requests, often highly burdensome ones
at that, but why not here?
Is it because we are just starting out with investigation
or is it because we already know the conclusions of the
inquiry? I do not know, but it leaves me and I would guess some
of my colleagues in a rather awkward position. It is awkward
because we have not conducted our own careful analysis of these
matters. Instead, we have spent much of this last week
scrambling to find last minute information to pull together
this hearing, which is not a very satisfying process.
Mr. Chairman, please do not think I am trying to be
partisan or even unconstructive here. That is not my intent. I
am indeed committed to working with you on this and other
important issues, but what I do not want to see is a
continuation of a practice that sometimes occurred in the last
Congress, which was to hold an oversight hearing prematurely
before an investigation was complete or noteworthy findings
made.
In other words, if you want support from our side, we
should work together to conduct a detailed subcommittee
investigation. Then, put our heads together to determine if we
are ready to schedule a hearing.
Let me give you an example of what I mean. The last hearing
involving the oversight investigation staff examined whether TV
networks deliberately biased the coverage of the 2000
Presidential elections. That investigation alone involved
hundreds of subcommittee staff hours and took several months'
work.
It also required document reviews and countless staff
interviews, many of which required staff travel. It was not
until considerable work was undertaken and significant analysis
expended that this hearing was even scheduled. I would only
hope that if this subcommittee now finds this subject as
important, it will dedicate the same amount of resources and
attention.
Mr. Chairman, let me underscore again that I am willing to
support you in making all necessary document requests to HCFA
or the providers regarding the subject. To that end, let me
also say that I will support you in conducting whatever
meetings are necessary at the staff level with HCFA or industry
officials.
I will even support you in requesting that the General
Accounting Office assist us should we find it necessary. But if
we are going to investigate the processes and procedures HCFA
uses to approve or reject certain medical technologies for
Medicare beneficiaries, a highly complex and technical matter,
then we need to spend significantly more time behind the scenes
before we gather in this room.
That being said, Mr. Chairman, let me conclude by saying
the following: I do want to stress the importance of improving
access to medical technologies for our seniors. Overall, our
country's health care system has gone from one of intervention
to one of prevention. The entrance of new medical technologies
into the health care arena is allowing millions of Americans to
live longer, healthier lives.
It is imperative that our seniors have access to these same
innovations in a timely fashion. We in Congress must ensure
that the system designed to provide this access works in the
most expedient and efficient manner possible. I look forward to
learning more about HCFA's role in this process and ways in
which we can better the system to take advantage and give
advantage to the nation's seniors.
Again, Mr. Chairman, I look forward to working with you
constructively in the future and I hope you will take my
concerns into consideration. With that, I welcome our witnesses
and I thank them in advance for their thoughtful testimony.
Mr. Bilirakis. The Chair thanks the gentleman and
recognizes the chairman of the full committee, Mr. Tauzin, for
an opening statement.
Chairman Tauzin. Thank you, Mr. Chairman. Mr. Bilirakis and
Mr. Greenwood, let me congratulate you on this, the first of, I
hope, what will be many efforts of joint O&I and substantive
subcommittee work at examining the problems that the Federal
agencies which do govern some of the most important programs
that provide health care services to patients across America.
Let me comment quickly on what I know and what I hope this
effort will achieve. Let me first indicate that we could wait
until we do a great deal more investigation on a staff level.
We could have many meetings with HCFA. We could have many
exchanges of letters. We could do a lot of things, but the
first and most important thing we do is gather, as members of
these two subcommittees, and begin to take testimony on the
record so that we can get into these subject matters as quickly
as possible.
I want to commend you for not waiting but moving. This
committee has waited too long. There have been too many months
and too many years where this committee has not engaged the
serious concerns of Americans as we have heard them in letters
and calls to this committee regarding the administration of
these vital programs.
And I am pleased that the focus is going to be on patients
first. I am pleased that you are going to put a human face on
this question: how well are patients in America being served by
the Federal bureaucracies that manage these critical programs
that are critical to their lives, that make a great difference
in how long and what kind of quality of life Americans enjoy?
And this objective, to make sure that seniors will have
access to the best technologies that our country can offer,
that the government is not standing in the way but always
assisting in moving new technologies out into the marketplace
where they have been properly tested and properly prepared to
save lives and extend the quality of life, and I want to again
commend you for not waiting but for moving.
And I want to commend all of you on the two committees for
taking this as seriously as I know you are. This is serious
business, and it is not, I hope, going to bog down in partisan
concerns and complaints or fingerpointings. We are not here to
score points at each other's expense. We are here to learn, to
learn what is wrong with the system, what is right with it, and
then to fix those things that are wrong, not in the interest
again of politics, but in the interest of patients, and the
fact that you have put patients first in this inquiry, in this
project, is something I know Americans will appreciate.
And the fact that the two of you can cooperate in this
inquiry, because there will be many hearings before we are
through--a lot of cooperation is going to be required between
O&I and the committee you chair, Mr. Bilirakis--as chairman of
the full committee, I want to thank you.
The full committee will appreciate the work you do. We look
forward to the results of your hearings of what you find out.
We do not come with preconceived notions about what is right
and what is wrong and what can be fixed and what cannot be
fixed. We come with a very open mind and open inquiry, and I
hope that is the way all of us approach it on both sides of the
aisle.
This committee, as I said in the first organizational
meeting, is going to be a very key and active player in the
very important health care decisions that are being made in the
Congress in the next 2 years. This set of inquiries will set
the stage for us, will tell us what we in Washington can do to
make sure that the best health care delivery system in the
world is even better because we have put patients first. Thank
you, Mr. Chairman.
Mr. Bilirakis. And I thank you very much, Mr. Chairman, and
I would like to suggest that it is not just the two of us, but
the four of us in terms of working together and, of course, the
members of both subcommittees on both sides of the aisle.
Mr. Linkletter will have to leave at 11 o'clock, we are
advised. That being the case, I have already received unanimous
consent that members can have the choice of either limiting
their opening statement to 1 minute now, if they choose to do
so, or else deferring their opening statement until after this
first panel has been completed.
That being the case, I will go right on down the aisle. Mr.
Bryant, what is your choice?
Mr. Bryant. Mr. Chairman, I will defer.
Mr. Bilirakis. Defer. Ms. Capps?
Ms. Capps. Defer.
Mr. Bilirakis. You will defer. Mr. Shadegg?
Mr. Shadegg. Defer.
Mr. Bilirakis. You will defer. Let us see who is next here.
Mr. Rush?
Mr. Rush. Defer.
Mr. Bilirakis. You will defer. Mr. Pitts? One minute now or
defer your opening statement until later?
Mr. Pitts. Thank you, Mr. Chairman. I will submit my
written statement for the record, but, first of all, Chairman
Bilirakis and Chairman Greenwood, I would like to than you for
undertaking----
Mr. Bilirakis. One minute, please, sir.
Mr. Pitts. I understand--such in-depth review of HCFA's
major programs, policies, and operations. I think the review is
long overdue, but with your strong leadership, I think that
will start us on the path of improving the quality of care for
our nation's beneficiaries.
I am pleased with the topic of the first year, which will
look into the complexities of the Medicare system. I look
forward to learning more about the processes for reimbursement
for medical devices and new technologies, and how these
processes will affect patient care.
I have one company, Centocor, in my district that has had a
lot of experience with a drug called ReoPro through the years.
It was approved by FDA in 1994. There have been problems,
roadblocks that have delayed access, so I am looking forward to
the information we receive in the hearing. Thank you.
Mr. Bilirakis. And I thank the gentleman. Mr. Engel, 1
minute now or defer?
Mr. Engel. I will take the minute now, Mr. Chairman.
Mr. Bilirakis. Take the minute now.
Mr. Engel. Thank you, Mr. Chairman. There are so many areas
in which we need to improve how we care for our nation's
seniors, one of which is to provide beneficiaries with the most
advanced medical technologies when they become available. The
fact that many are suffering simply because of the lengthy
Medicare approval process is just not tolerable.
New technologies are emerging everyday that enhance the
quality of life for so many. New medical treatments and devices
are eliminating the need for intrusive surgery or painful
procedures. However, many seniors do not have access to these
new methods even though they have been approved by FDA because
Medicare will not pay for them.
We will hear testimony today illustrating the fact that
many seniors are denied access to specific treatments, for
several years in some instances, due to the lengthy Medicare
approval process. In some cases, physicians may not offer new
services despite the benefit to patients because of the
administrative burden in dealing with HCFA.
Without an improved process that allows companies to get
their new devices on the market in a timely manner, we run the
risk of discouraging research and development into new
technology. So I am glad we are doing this today. I welcome the
panel, particularly Mr. Linkletter, who has been a hero of mine
for so many years. I want to thank the panel for coming and I
thank you, Mr. Chairman.
Mr. Bilirakis. And I thank the gentleman. Mr. Upton?
Mr. Upton. Defer.
Mr. Bilirakis. Defer. Mr. Stupak?
Mr. Stupak. Defer.
Mr. Bilirakis. Defer. Mr. Whitfield?
Mr. Whitfield. Defer.
Mr. Bilirakis. Defer. Mr. Green?
Mr. Green. Mr. Chairman, I will take my 1 minute and I will
submit my total statement. Like my colleagues, I want to
welcome, Mr. Linkletter. I rode over on the train with you or
walked over with you and it is good to have you here.
Mr. Bilirakis. The gentleman has 1 minute.
Mr. Green. I agree with Mr. Greenwood that hopefully our
effort is to modernize HCFA and to provide the resources for
HCFA to be able to put these technologies on the market
quicker, provide not only resources, but also I noticed, and if
the witnesses will address it, it is not just with Medicare, it
is also with third-party reimbursement, but also private
insurance for some of the new technologies, and so it is not
just HCFA that is a problem. I think it is lots of third
parties. Thank you, Mr. Chairman. I yield back.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Mr. Speaker: Thank you for holding a hearing on the need to create
a stronger and more efficient Health Care Finance Administration. I
have heard from a number of doctors in my district about the problems
they have encountered with the agency, and am eager to discuss ways to
resolve those problems.
HCFA approval and coverage for new technologies is a timely issue.
Congress has debated for years the need to modernize Medicare to
include a prescription drug benefit. But we cannot stop there. The
program must be modernized to utilize the best of all technologies--not
just prescription drugs.
Health care technologies have improved the quality of our health
care for all Americans. Advancements in medical technology have had
many benefits, from providing information systems that monitor patient
treatment data, to new diagnostics tests that detect diseases at
earlier stages, when they are less expensive to treat, and more likely
to be cured.
I am troubled by reports that new technologies are taking too long
to approve. None of us would want to wait 3 to 5 years for a life-
saving technological advancement, and we don't want our seniors to wait
that long either.
Like my colleagues, I am committed to streamlining HCFA's process.
This hearing presents an excellent opportunity to examine the problems
that exist and discuss solutions for them.
I look forward to the testimony of our witnesses, especially our
physicians who are working with new technologies. Houston Medical
Center is near my district, and I am constantly amazed by the work that
they are doing at the various hospitals there.
______
Prepared Statement of Hon. Joseph R. Pitts, a Representative in
Congress from the State of Pennsylvania
Thank you Mr. Chairmen.
Chairman Bilirakis and Chairman Greenwood, I would like to thank
you for undertaking such an in depth review of HCFA's major programs,
policies, and operations. This review is long overdue; but with your
strong leadership, will start us on the path of finally improving the
quality of care for our nation's beneficiaries.
I am pleased with the topic of the first hearing in this series,
which will look into specific complexities in the Medicare system. I
look forward to learning more about Medicare's processes for
reimbursement of medical devices and new technologies, and how these
processes affect patient care.
In fact, Centocor, an innovative biotechnology company based in
Chester County, Pennsylvania, has a perfect example of how frustrating
it is to have new drugs and technologies adopted and reimbursed by
HCFA.
Centocor manufactures the drug ReoPro, part of a class of platelet
inhibitors. ReoPro was approved by the FDA in 1994, and its clinical
effectiveness is unquestioned.
However, it seemed that HCFA consistently created roadblocks that
delayed access to this breakthrough therapy.
Over a period of years, HCFA insisted that it would not create a
tracking code for platelet inhibitors. This means that costs for
angioplasty cases in which ReoPro was administered could not be tracked
for purposes of assessing the appropriate diagnostic related group
(``DRG'') these cases should be in for payment purposes. After
significant Congressional pressure, HCFA finally began to grant
tracking codes for these drugs. ReoPro's code was effective October 1,
1998--three years after it should have been, had HCFA responded more
reasonably.
Even with a tracking code, it takes HCFA at least two years before
making a DRG reclassification based on its own data. Therefore,
pursuant to its own policy, HCFA would not make a reclassification for
angioplasties with platelet inhibitor therapy until FY 2001 at the
earliest. This is a six-year delay for a drug approved in 1994.
Because HCFA's originally failed to grant tracking codes for drugs,
and because of the extended delay as HCFA waited for its own data on
use of these codes, Congress twice urged HCFA to consider outside data
in making DRG reclassifications. (First in BBA 97 Report Language and
second in the FY 1999 Senate HHS-Labor Appropriations report.)
Centocor was one of the first to submit outside data to HCFA under
this authority. The data showed that Medicare beneficiaries are 15
percent less likely to get the drug, and charges for Reopro cases are
consistent with charges in DRG 116 and not its current DRG 112.
Nonetheless, HCFA rejected the data submitted to them.
To this day, if ReoPro is used during angioplasty in a hospital
inpatient setting, hospitals are not receiving the extra payment for
it. This seems to mean, Mr. Chairman, that hospitals have a
``disincentive'' to use ReoPro, as they won't receive proper payment
from Medicare.
Further, failure to resolve this issue in FY 2000 seems to sends a
message that HCFA will not utilize outside data.
Chairman Greenwood and Chairman Bilirakis, this is only one small
example from my district--but I fear that many other new drugs and
technologies are experiencing similar delays as they move through
HCFA's coverage, coding, and payment processes.
This causes me to question how many years HCFA will be content to
delay Medicare beneficiaries' access to new technologies.
Again, Mr. Chairman, thank you for holding this hearing. And I
thank the witnesses for sharing with us today. I look forward hearing
your testimony.
Mr. Greenwood I believe everyone has either been recognized
or deferred; is that correct? Okay. For those of you who are
witnesses and wondering why the chairman and I just changed
places, I am the chairman of the Oversight and Investigations
Subcommittee, and I think you are aware that the committee is
holding an investigative hearing and that when doing so has had
the practice of taking testimony under oath. Do any of you have
objections to testifying under oath?
[No response.]
Mr. Greenwood. Let me introduce to the audience, first, who
our witnesses are before I swear them in. Mr. Art Linkletter is
the national spokesperson for United Seniors Association and a
hero to all of us who grew up watching him on television. I was
going to say ``Subcommittee chairmen say the darndest things''
this morning, but I chose not to.
Dr. Paul Shreve is the Director of General Nuclear Imaging
Section at the University of Michigan Medial Center in Ann
Arbor. He is accompanied by Ms. Kathleen Dziuba.
And Dr. Jeffrey Popma is the Director of Interventional
Cardiology at Brigham and Women's Hospital in Boston,
Massachusetts, accompanied by Mr. Donald Latulippe.
Mr. Latulippe. Latulippe.
Mr. Greenwood. Latulippe. Okay. And do we swear in all five
of these witnesses, as they may all be testifying? Okay. The
Chair then advises you that under the rules of the House and
the rules of the committee, you are entitled to be advised by
counsel. Do you desire to be advised by counsel during your
testimony today?
[No response.]
Mr. Greenwood. I will take that silence as a no.
In that case, if you would please rise and raise your right
hand, I will swear you in.
[Witnesses sworn.]
Mr. Greenwood. Very well. You are now under oath and you
may give a 5-minute summary of your written statement. I will
excuse myself while I go introduce my Governor at another
hearing and turn the meeting back to the chairman.
Mr. Bilirakis. Your written testimony is already a part of
the record, so we would hope that you would complement that. I
will set the clock at 5 minutes, but obviously if it looks like
you are rolling pretty well and will not take too much very
much longer, we will let you go a little while longer. Mr.
Linkletter, you are first in our hearts and first here this
morning. So please proceed, sir. Make sure you have that mike
close to you and on. I guess it is on. Is it on?
TESTIMONY OF ART LINKLETTER, NATIONAL SPOKESPERSON, UNITED
SENIORS ASSOCIATION; PAUL SHREVE, DIRECTOR, GENERAL NUCLEAR
IMAGING SECTION, UNIVERSITY OF MICHIGAN MEDICAL CENTER,
ACCOMPANIED BY KATHLEEN DZIUBA; AND JEFFREY J. POPMA, DIRECTOR,
INTERNATIONAL CARDIOLOGY, BRIGHAM AND WOMEN'S HOSPITAL,
ACCOMPANIED BY DONALD LATULIPPE
Mr. Linkletter. I have had a little experience with these.
Mr. Bilirakis. Yes, you have had.
Mr. Linkletter. Since 1933. Mr. Chairman and members of the
committee, thank you very much for inviting me to be here with
you today to testify on behalf of the United Seniors
Association. It is a nationwide grassroots senior advocacy
group. We have over 550,000 members.
I have struck out already?
As we were saying earlier in the program, I am Art
Linkletter and I am the National Spokesman for United Seniors.
It was founded in 1991, and, as a matter of fact, I was with
Senator Murphy at the Bohemian Club in San Francisco before he
even began to think of founding USA, which is for the purpose
for letting the seniors of America, a large and growing group,
to express their opinions. And now our present president and
CEO, Charlie Jarvis, is a powerful voice in Washington and
across the Nation to bring hope and prosperity and health and
freedom for all Americans who believe in lower taxes, smaller
government, a strong free enterprise system, and the power of
united generations, not just old, but old and young.
And I might add I am not here only as a spokesman and a
member of the USA, but I am past president of the Center on
Aging at the UCLA Geriatric School. I am the chairman of the
board of the John Douglas French Alzheimer's Research
Foundation, an international fundraising group for the
Alzheimer's group. I have been a spokesman for Humana, a large
HMO, and a PPO called PAP Care, and I lecture across the
country at senior citizen places, bringing information and
asking questions of seniors across the United States.
I am also a Medicare beneficiary, and like all other
members of USA, we are concerned about the long-term solvency
of the program. But USA members are not only worried about the
fiscal health of the program. According to the Mayo foundation,
this taxpayer-funded program has now amassed over 130,000 pages
of laws, rules, regulations, guidelines and paperwork. And this
crushing regulatory burden makes care more costly and delays
patient access to the new diagnostic tests and treatments.
I am very pleased today that this committee is reviewing
the policy and procedures which govern how the new and
innovative medical technologies are adopted by Medicare. USA
members appreciate your attention to these processes, and as a
person who has been witnessing a lot of them lately at our
advanced technical places at UCLA, I can assure you that we are
at a gigantic revolutionary moment in the history of medicine.
Just a week ago, 2000 scientists met in San Francisco to
discuss how the gene program is going to revolutionize medicine
in the next few years, and it is so startling that I can't even
believe what I heard.
But we are concerned that today's Medicare program remains
a structure made for another time and an earlier understanding
of Medicine. The program has changed little in the 35 years
since it began and it has not kept pace with profound
advancements. It couldn't. It is impossible. And yet these very
advances will play an important role in keeping Medicare
solvent.
Think of DNA-based tests to detect diseases before they
even appear in the body, take the tissue engineered
technologies to replace failing hearts and livers, the less
invasive surgeries that let people get back to work, and palm-
held computers to reduce medical errors and information
technologies to streamline administration.
Now, ladies and gentlemen, seniors are aware of these new
technologies, like the PET scan, the Positron Emission
Tomography, which I have seen work, and which can detect
diseases earlier when they are cheaper and more effective to
treat. And then new devices like pacemakers, neural brain
stimulators, allowing seniors to live productive, happy
retirement days. Progress in surgical options like angioplasty,
being coupled with new devices like stents, which allow doctors
to address a deadly blocked artery through a very tiny
incision. Now, these advances are not only amazing, they are
less invasive, less painful, less expensive, staving off long
hospital stays.
I am not an expert on the coverage and coding process for
the new medical technologies and treatments, but over my TV and
radio days and in writing my many books, one thing I know
something about is people, especially seniors. In writing my
most recent best seller, Old Age is Not for Sissies, I travel
all over the country with focus groups, trying to understand
the world in which we seniors live today, and I know that
seniors greatly appreciate the Medicare program, but they worry
about a myriad of Medicare-related issues, especially coverage
issues.
Now, as Members of Congress, who have probably gotten
dozens of calls from concerned seniors, you here at the
committee could probably help me put together a new television
special called ``HICF Does the Darndest Things.''
I have read briefly through the summary of the Lewin Report
that Mr. Goodman will testify about in the panel today, and I
while I have not memorized the complexities of the coding
systems or the various steps in the coverage program, I am
struck by the fact that it can take 15 months to 5 years or
longer for HCFA to integrate new medical technologies.
As a matter of fact, as an owner and a partner in a new
chain of new ideas on curing incontinence, I just went through
the bankruptcy of our program 2 months ago due to problems we
had with payments and okays and delays by Medicare, so I am
speaking from the purse now, not from the mind.
Truth be told, it is not all HCFA's fault that the system
has difficulties in deciding how to handle all this new stuff.
Some of these technologies not only did not exist when the
program began, they were not even imagined. It is not
unimaginable that the current processes for reviewing these
miracles of science and medicine need to be updated to allow
the hardworking people at HCFA to integrate them into the
Medicare program.
Now, I know that the oversight plan for this committee for
the year outlines how you will all continue efforts to identify
and expose instances or patterns of waste, fraud, and abuse in
the Medicare and Medicaid programs, or opportunities for
activities due to inadequate policies or procedures or
controls.
The coverage, coding and payment process system is ripe for
review, and USA, our group, thanks all members of the committee
who are working to make the process and the program overall
more efficient and effective for America's 39 million Medicare
beneficiaries.
One more word on behalf of all of us seniors that I would
like to have you remember: it is better to be over the hill
than under it.
Thank you.
Mr. Bilirakis. Some of us need to be reminded of that, Mr.
Linkletter. Thank you, sir. Thank you for testifying and, of
course, for having served all of us in so many happy ways over
the years. You are continuing to do so now in your later years,
and may God bless you for it.
[The prepared statement of Art Linkletter follows:]
Prepared Statement of Art Linkletter on Behalf of the United Seniors
Association
Mr. Chairmen, Ranking Members, and Members of the Committee, thank
you very much for inviting me to be here with you today to testify on
behalf of the United Seniors Association, a nationwide grassroots
Senior advocacy group with over 550,000 members.
I am Art Linkletter and I am the National Spokesman for United
Seniors Association (USA). USA was founded in 1991, and under the
leadership of President and CEO Charles W. Jarvis, provides a powerful
voice in Washington, D.C. and across the nation to bring hope,
prosperity, and health freedom for all Americans who believe in lower
taxes, smaller government, a strong free enterprise system, and the
power of united generations.
But I am here today not only as the spokesman and member of USA. As
a senior American, I am also a Medicare beneficiary myself. Like all
other members of USA, we are concerned about the long-term solvency of
the program, as well as patient choice and access within the system.
USA members are not only worried about the fiscal health of the
program. According to the Mayo Foundation, this tax-payer funded
program has amassed over 130,000 pages of laws, rules, regulations,
guidelines and paperwork. This crushing regulatory burden makes care
more costly for everyone, and frequently delays patient access to
important new diagnostic tests and treatments.
I am pleased that today the Committee is reviewing the policies and
procedures which govern how new, innovative medical technologies are
adopted by Medicare. USA members appreciate your attention to these
processes, because we believe that seniors should have timely access to
many of the lifesaving and life-enhancing advances that are being
developed today.
We are concerned that today's Medicare program remains a structure
made for another time and an earlier understanding of medicine. The
program has changed little in the 35 years since its inception and has
not kept pace with profound advancements in health care technology or
delivery.
Yet these very advances will play an important role in keeping
Medicare solvent. A host of exciting new breakthroughs will improve the
efficiency and effectiveness of our health care system:
Technologies like DNA-based tests to detect diseases before
they even appear,
tissue-engineered technologies to replace failing hearts and
livers,
less-invasive surgeries that allow people to return to work
quickly, and
palm-held computers to reduce medical errors, information
technologies to streamline health care administration.
Seniors are aware of the new technologies--like the PET scan
discussed here today, which can detect diseases earlier, when they are
cheaper and more effective to treat. New devices, like pacemakers and
neural brain stimulators, are allowing seniors to live productive,
happy retirement days. Progress in surgical options, like angioplasty,
are being coupled with new devices like stents and allow doctors to
address a deadly blocked artery through a small incision! These
advances are not only amazing--they are less invasive, less painful,
and often less expensive to the overall health care system by staving
off long hospital stays and rehabilitations.
I am not an expert on the coverage and coding process for new
medical technologies and treatments, but over my television and radio
days, and in writing my many books, one thing I do know about is
people--including seniors. In writing my most recent best seller, ``Old
Age is Not for Sissies,'' I spent a lot of time trying to understand
the world in which we seniors live today. I know that seniors greatly
appreciate the Medicare program, but do worry about a myriad of
Medicare-related issues, especially coverage issues.
As Members of Congress who have probably gotten dozens of calls
from concerned seniors and baffled health care providers trying to
navigate the Medicare system, you could probably help me put together a
television special entitled ``HCFA Says the Darndest Things.''
I've read briefly through the summary of the Lewin Report that Mr.
Goodman will testify about in the next panel today. While I have not
memorized the complexities of the coding systems or the various steps
in the coverage process, I am struck by the fact that it can take 15
months to 5 years--or longer--for the Health Care Financing
Administration (HCFA) to integrate new medical technologies into
Medicare. As major consumers of health care services, it is
disconcerting that a senior may have to wait 5 years to have access to
a technology that is already saving lives in other healthcare settings.
As we stand at the forefront of amazing advances in health care, we
cannot even imagine what medical miracles will emerge in the coming
years. But we do know that money spent researching and developing all
the latest advances is money well spent--whether it helps find a drug
to cure Alzheimer's, track medications to prevent a patient from mixing
deadly combinations for differing ailments, or a mechanical heart to
save the life of someone on a transplant list.
And, truth be told, it's not all HCFA's fault that the system often
has difficulties in deciding how best to handle new technologies. Some
of these technologies not only didn't exist when the program began,
they weren't even imagined! It is not unimaginable that the current
processes for reviewing these miracles of science and medicine need to
be updated to allow the hardworking people at HCFA to effectively
integrate them into the Medicare program.
I know that the oversight plan for this committee for the year
outlines how you will all continue efforts to identify and expose
instances or patterns of waste, fraud, and abuse in the Medicare and
Medicaid programs, or opportunities for such activities due to
inadequate policies, procedures, or controls. The coverage, coding and
payment process seem ripe for review and USA thanks all members of this
Committee who are working to make the process, and the program overall,
more efficient and effective for Americas 39 million Medicare
beneficiaries.
Again, thank you for your work on these important issues, and for
inviting me to speak on behalf of USA today.
Mr. Bilirakis. Dr. Shreve and Ms. Dziuba. Please proceed,
Doctor.
TESTIMONY OF PAUL SHREVE
Mr. Shreve. Thank you. It is a pleasure to be here this
morning. I did not realize I would have a hard act to follow
here, but I am certainly pleased to be here. My name is Dr.
Paul Shreve, and I am a diagnostic radiologist at the
University of Michigan Health System.
This morning I would like to discuss a medical imaging
technology known as Positron Emission Tomography, or PET. In
the last decade, this technology has become an indispensable
tool in medical diagnostic imaging, yet it remains unavailable
to Medicare patients for many key indications still.
All of us here this morning are well aware of the
remarkable advances in medical technology. This U.S. Congress
continues a long and noble tradition of medical research
funding that has made our nation the world leader in medicine.
I am sure that we can all agree that our goal is to bring these
lifesaving medical advancements to patients as quickly and
efficiently as possible.
PET is an example of a major advancement in medical
technology, an outgrowth of federally supported medical
research, that has been kept from our patients for too long due
to disorganized and indifferent Federal agencies. PET scans
like CAT scans are cross-sectional images of the body. Unlike
the CAT scans and MRI scans you may be familiar with, however,
PET scans are images not just of the body's internal anatomy
but of tissue, organ and biochemistry. PET images are literally
slices of life.
This is the molecular imaging for the era of molecular
medicine. With PET we can identify cancer earlier and with
greater certainty than any other imaging technology. We can
determine when a cancer is responding to therapy before the
tumor shrinks. We can even diagnose Alzheimer's disease before
it can be done by clinical exam.
PET is a prime example of what is right about Federal
support of research. We have taken a basic understanding of the
molecular basis of disease in the laboratory at the bench and
moved it to the patient at the bedside, something we refer to
as from bench to bedside.
Yet for the past 10 years, PET has largely been on hold due
to regulatory and reimbursement issues centered largely here in
Washington. While private insurance carriers began paying for
PET scans over 10 years ago, consideration of payment by HCFA
remains stalled.
First, it was not clear which government agency should
regulate the production and compounding of the molecular probes
known as positron radiopharmaceuticals used in the PET scans
and exactly how the production and use of these agents would be
regulated.
Without FDA approval, a positron radiopharmaceutical use
for PET imaging was considered experimental by HCFA and not
eligible for reimbursement consideration. A single very limited
indication of heart disease made it through the regulatory
morass only by the mid-'90's. It literally took an act of
Congress, the Food and Drug Administration Modernization and
Accountability Act of 1997 to clear this impasse.
Repeated efforts to bring PET to Medicare beneficiaries
have been met with delay and indifference from HCFA. Each small
increment in coverage has required pressure from Congress. In
1998, we finally received limited coverage for lung cancer.
Three more cancers were introduced a year later after continued
pressure from Congress. This past fall, a massive document
requesting broad coverage of PET for cancer diagnoses of all
cancers and for coverage of such important diseases as
Alzheimer's disease was submitted to HCFA.
This included analyses of over 400 published articles in
some 15,000 patients that underwent PET scans. The request for
broad coverage was strongly supported by the National Cancer
Institute of the NIH. The FDA itself had concluded broad
indications for FDG used with PET scans were justified. Some 19
senators from both political parties urged broad coverage by
HCFA in a letter to Secretary Shalala.
The final coverage decision announced in December provided
additional coverage for two more cancers, limited coverage for
refractory seizures and myocardial viability under certain
circumstances. Coverage of breast cancer and Alzheimer's
disease was referred to the MCAC Diagnostic Imaging Panel for
review this May.
We find ourselves now in a disturbing situation. While
Medicare coverage for several cancers now exists--a total of
six actually--no cancers uniquely affecting women are covered.
Breast cancer is not covered. Ovarian cancer is not covered.
Cervical cancer is not covered nor is uterine cancer.
Alzheimer's disease is not covered. How many iterations must we
go through with HCFA to get coverage for these important
diseases? How long will this take? How many more years will
women covered by Medicare have to wait before they can add PET
to their battle with diseases they must fight?
HCFA has not established clear standards which new
technologies must meet for reimbursement so decisions become
arbitrary and painfully slow. I believe we all want to ensure
quality and affordable health care for all Americans. We should
not fear new technology, reflexively seeing such as expensive.
As a practicing physician, I can assure you that it is
mistakes that are expensive. It is the missed diagnosis and the
missed diagnoses that end up costing everyone. All Americans
should benefit from the knowledge and technology our federally
supported medical research provides. Everyday now at our
medical center we are avoiding unnecessary surgery, invasive
procedures, and useless treatments due to the improved accuracy
possible with PET.
We are more accurately directing therapies using PET.
Medicare patients should not have to wait 10 years to have
access to PET. Women today should not have to wait additional
years for HCFA coverage of diseases they must battle. The road
from the laboratory research bench to the patient's bedside
should not be filled with potholes, detours and dead ends.
Technology as groundbreaking and useful as PET should not be
held back for years because HCFA has not established standards
which new technologies must meet and consequently must resort
to decisions which are often arbitrary.
We must untangle the web of regulations and agency
infighting and establish a clear intent within our Federal
Government to improve patient access to new technologies in the
Medicare program. I should like to urge the committee today to
take steps to require HCFA to integrate PET and other new life
saving technologies into Medicare on a timely basis. Thank you.
[The prepared statement of Paul Shreve follows:]
Prepared Statement of Paul Shreve, Director, General Nuclear Imaging
Section, University of Michigan Medical Center
Thank you for inviting me to testify before The Committee on Energy
and Commerce of the U.S. House of Representatives. My name is Dr. Paul
Shreve, and I am a diagnostic radiologist at The University of Michigan
Health System, where I am Associate Professor of Radiology and Director
of the Clinical PET Imaging Service. I am trained in both diagnostic
radiology and nuclear medicine, and have been in practice for nearly 10
years. This morning I should like to discuss a medical imaging
technology known as Positron Emission Tomography, or PET. In the last
decade this technology has become an indispensable tool in medical
diagnostic imaging, yet it remains unavailable to Medicare patients for
many key indications due to regulatory overlap among government
agencies and lack of clear standards and standardized mechanisms
governing coverage decisions in the Health Care Financing
Administration.
All of us here this morning are well aware of the remarkable
advances in medical technology. Many of these advances originated in
academic laboratories here in the United States supported by federal
research funding over the years. This U.S. Congress continues a long
and noble tradition of medical research funding that has made our
nation the world leader in medicine. I am sure we can all agree that
our goal is to bring these life saving medical advancements to patients
as quickly and efficiently as possible.
PET is an example of a major advance in medical technology, an
outgrowth of federally supported medical research, that has been kept
from our patients far too long due to disorganized and indifferent
federal agencies such as HCFA. First allow me to explain what PET is,
and why it represents a major advance in medice. I am sure most of you
are familiar with a CAT scan. This is a type of X-ray machine that
makes pictures of the body's internal anatomy, which are not unlike a
series of slices of bread. This technology has become common in medical
practice today, as are other methods of medical imaging such as
ultrasound and magnetic resonance imaging (MRI). All of these methods
largely depict only the internal anatomy of the body and have become
immensely useful in medical practice. Prior to such cross-sectional
imaging technology, we were often left with only the option of surgery;
literally cutting people open to see what was going on inside. These
methods of making pictures of the body's internal anatomy began with
Roentgen's discover of the X-ray, and served us well in the last
century given our crude understanding of biology and human health and
disease. I say crude because we are now on the verge of a revolution in
biology and medicine, the beginning of an era of molecular medicine.
Health and disease in the post human genome project era will be
assessed, diagnosed and treated at the molecular level. PET is a method
of molecular imaging, a medical technology for 21st century medicine.
PET scans of the body actually look somewhat like CAT scans, except
the PET scans depict the body's tissue metabolism, not just the
anatomy. The images are literally ``slices of life''. Images of the
biochemical and fundamental molecular events of organs and tissues
reveal disease at their earliest, and hence, most curable stages.
Equally important, there are numerous abnormalities inside our bodies
detected by conventional medical imaging, which are inconsequential,
but often indistinguishable from serious disease. A significant
contribution to accelerating health care expenditures is the
``diagnostic detour'' frequently pursued as a consequence of the
exquisitely depicted, but frequently non-specific abnormalities we find
when we put patients in a CT or MRI machine. PET allows us to avoid
many of these expensive detours because PET directly depicts the
underlying biological basis of disease.
This ``biological imaging'' has been under development for over
twenty-five years. The ability to perform the ``molecular assays'' of
the research laboratory in a living human subject safely and non-
invasively using short lived positron radioisotopes began in the 1970s
with the construction of full ring PET scan devices and the application
of molecular imaging probes such as fluorodeoxyglucose (FDG). This
early work occurred almost exclusively in U.S. government and academic
research laboratories, funded by federal research grants from agencies
such as the NIH and DOE. As one would expect, the initial focus of PET
imaging was scientific research. PET allowed us to answer many
fundamental questions regarding the true nature of human health and
disease by looking directly at the molecular events as they occurred in
the patient. By the 1980s, it became increasingly clear to physicians
and scientists this molecular imaging approach would be a powerful
diagnostic tool in the clinic, allowing for earlier and more accurate
imaging diagnosis of cancer, heart disease and neurologic diseases.
By the early 1990s, clinical research studies using PET, many again
funded by federal research dollars, had shown remarkable advantages
over conventional medical imaging in the detection of cancer,
reversible heart failure and even Alzheimer's disease. For example, our
medical imaging approach to cancer in the chest and abdomen until then
had been essentially based on size. If something is abnormally enlarged
on CAT scan, it may be bad, maybe even cancer, while if it is small, it
more likely is not cancer. It sounds crude because it is, and
consequently limited. Cancer starts out small--nothing abnormal on
conventional medical imaging--but that is precisely when it is most
curable. Further, we all have things in our bodies that get a bit out
of proportion as we age--but by and large we live with this. By making
images of the fundamental biochemical abnormalities that underlie most
cancers, PET allows us to diagnosis cancer very early, before it
becomes an identifiable mass. Further, PET allows us to determine which
of those masses we may have inside our bodies really are serious, and
which are best left alone. Another example is Alzheimer's disease. CAT
scans and MRI scans of the brain show us remarkable anatomic detail,
yet these images of the brain of a normal patient and a patient with
Alzheimer's disease of roughly the same age are indistinguishable at
any given time. Changes in the biochemistry of the brain occur very
early in Alzheimer's disease in a predictable pattern; this has been
known for nearly twenty years now. We now also know these changes can
be clearly depicted by PET. PET can detect the disease up to 3 years
before diagnosis by any other means.
In many ways PET represents what is right and what is wrong with
our federal government's involvement in medicine. PET embodies a
central principal of modern medical research, pioneered in this
country, known as the ``from the bench to the bedside'' Basic medical
research performed at the laboratory bench is eventually transferred to
patient care, to the bedside. Federally supported basic research has
given us extraordinary insights into the molecular basis of disease,
and a tool, PET, to bring this insight to patient care. Yet due to
regulatory overlap and uncertainty, a lack of clear standards and
standardized mechanisms governing coverage, and an absence of timely
decisions, many Medicare patients have been denied access to PET for a
decade.
For the past 10 years, however, PET has largely been on hold due to
regulatory and reimbursement issues, centered largely here in
Washington. While private insurance carriers began paying for PET scans
over 10 years ago, consideration of payment by HCFA remained stalled.
First it was not clear what government agency should regulate the
production and compounding of the molecular probes known as positron
radiopharmaceuticals used for PET scans, and exactly how the production
and use of these agents would be regulated. Without FDA approval, a
positron radiopharmaceutical used for PET imaging was considered
experimental by HCFA, and not eligible for reimbursement consideration.
In a single very limited indication of heart disease made it through
the regulatory morass by the mid 1990s. It literally took an act of
Congress, The Food and Drug Administration Modernization and
Accountability Act (FDAMA) of 1997, to clear this impasse. Once
directed to understand the unique nature of PET and the positron
radiopharmaceuticals used in PET imaging, the FDA made rapid progress
in its regulatory oversight duties. Indeed, after a recent review of
the world's scientific peer-reviewed literature covering the clinical
use of PET, FDG, presently the most important radiopharmaceutical used
for PET imaging, has been broadly approved for all cancers, as well as
certain cardiovascular and neurologic disorders.
Despite FDAMA, HCFA, there was an addition reluctance for HCFA to
approve reimbursement for PET. PET was viewed as ``high tech'' medical
imaging, perceived as expensive and likely to further drive up health
care costs. HCFA had been criticized for what, in retrospect, appeared
to be a pre-mature approval for payment for MRI scans in the 1980s, and
did not want to repeat such a scenario. Finally, with increasing
coverage by private insurance carriers, particularly for lung cancer,
and pressure from members of the U.S. Congress, HCFA developed coverage
policies for two limited indications in cancer: the evaluation of the
solitary pulmonary nodule, and the initial staging of non-small cell
lung cancer, effective January 1998.
The broad use of FDG PET in cancer diagnosis, staging, and re-
staging for several major cancers was already widely established in the
medical literature. Ironically, due to the slow movement of PET from
the ``bench to the bedside'' here in the U.S., a good deal of the
application of PET to routine patient care in the later 1990s was
occurring in Europe and Asia. Motivated by the need to bring the
advantages of PET to their patients, various medical and surgical
specialties presented data in support of reimbursement of additional
indications in oncology and for Alzheimer's disease at a HCFA Town Hall
Meeting held in Baltimore, Maryland in January of 1999. In July of
1999, HCFA did finally develop coverage policies for three additional
limited indications: the detection of colorectal cancer with rising
serum CEA, detection of recurrent melanoma, and the staging and re-
staging of lymphoma.
Still, so many other cancers where PET was making a difference in
patient's lives remained not covered. For example, while some women
fighting breast or ovarian cancer could get PET scans paid by private
insurance, Medicare beneficiaries would have to pay out of pocket or
forgo the advantages of an earlier and more accurate diagnosis using
PET. Early memory problems common to both Alzheimer's disease and
depression could be sorted out using PET for those with the money to
pay for the scans (about the same cost as an MRI), but not those
covered by Medicare. Again, various medical and surgical specialties
made a case to HCFA to expand the coverage of PET, and bring the full
benefits of this technology to those covered by the Medicare. A massive
document requesting broad coverage of PET for oncology, cardiovascular
disease, epilepsy and Alzheimer's disease was assembled which included
analysis of approximately 450 scientific articles involving studies of
16,000 (now 27,000) patients. Among the findings overall, for cancer
diagnosis in general FDG PET is 8 to 43% more accurate than CT or MRI,
and depending on the clinical question, PET changes treatment decisions
in 15-50% of patients over existing diagnostic imaging methods. It is
also notable that neither CT nor MRI, used and reimbursed routinely for
evaluation of a patient suspected of Alzheimer's disease, can provide a
diagnosis; these anatomy based methods can only rule out a mass or
bleed as a source of a patient's cognitive problems. In contrast, FDG
PET has a 93% accuracy 3 years before the clinical diagnosis of
Alzheimer's can be established. A town hall meeting was again convened
by HCFA in Baltimore on November 7, 2000 and included many
representatives from both physician and patient advocacy groups as well
as representatives from HCFA and the Executive Committee of HCFA's
Medicare Coverage Advisory Committee.
This request for broad coverage was additionally strongly supported
by NCI of the NIH. Indeed, the NCI has identified molecular imaging as
an area of ``extraordinary opportunity'' warranting special funding.
Committed to moving medical discoveries from the bench to the bedside,
the physicians and scientists of NCI strongly supported the broad
coverage request for PET scans of all cancers. The FDA had concluded
broad indications for FDG used with PET scans were justified. Some 19
U.S. Senators from both political parties urged broad coverage by HCFA
in a letter to Secretary Shalala dated December 5, 2000. The final
coverage decision, announced December 15, 2000 provided coverage of for
diagnosis, staging, and re-staging of six cancers, including non-small
cell lung cancer, esophageal cancer, colorectal cancer, lymphoma,
melanoma, and head and neck cancers excluding thyroid and CNS.
Refractory seizure and myocardial viability assessment were also
included. Coverage of breast cancer and Alzheimer's disease were
deferred to the MCAC Diagnostic Imaging Panel for review in May 2001.
Because broad coverage, the same coverage we have had for years for
CAT scans and MRI scans, for example, was not given, for all cancer and
the evaluation of Alzheimer's disease, we find ourselves in a
disturbing situation. While Medicare coverage for several cancers now
exists, no cancers uniquely afflicting women are covered. Breast cancer
is not covered, ovarian cancer is not covered, cervical cancer is not
covered, nor is uterine cancer covered. Too, Alzheimer's disease
afflicts women much more commonly than men owing to their longer
average lifespan, and women are disproportionately burdened by the care
of relatives with this devastating disease. Alzheimer's disease is not
covered. How many iterations must we go through with HCFA to get
coverage? How long will this take? How many more years will women
covered by Medicare have to wait before they can add PET to the battle
with diseases they must fight? HCFA has not established clear standards
which new technologies must meet for reimbursement, so decisions can
become arbitrary and painfully slow.
I fully understand HCFA's concern over payment for new and
``expensive'' technologies, and the need to fully access such before
payment decisions. There is endless talk of technology assessment and
cost effectiveness analysis as if these were mature, fool-proof
disaplines. They are not. Different ``experts'' routinely come to
different conclusions. For example this past fall, a group of
``technology assessment experts'' hired by HCFA to analyze the broad
coverage request document came to a completely different conclusion as
the FDA technology assessment team and the NCI technology assessment
experts. Perhaps even more important, and frequently overlooked, is the
reality that in the five years or so that a comprehensive multi-center
evaluation of a medical technology is completed and published, the
technology in question has changed to such a degree, and the
applications expanded or shifted, that the conclusion of the study
becomes largely irrelevant. In the meantime, our Medicare patients have
been waiting 10 years for PET. It is noteworthy that currently one the
biggest purchasers of PET scanners is U.S. Oncology, a private
capitated provider of cancer treatment that is convinced by its own
analysis that PET is an essential cost-effective tool in the overall
delivery of care to cancer patients.
I believe we all want to insure quality and affordable health
coverage for all Americans. We should not fear new technology,
reflexively seeing such as expensive. As a practicing physician, I can
assure you that it is mistakes that are expensive. It is the
misdiagnosis, and the missed diagnosis that end up costing everyone.
All Americans should benefit from the knowledge and technology our
federally supported medical research provides. Everyday now at our
medical center we are avoiding unnecessary surgery, invasive proceeds,
and useless treatments due to the improved accuracy of PET. We are more
accurately directing treatments by using PET. Medicare patients should
not have had to wait 10 years to have access to PET. Women today should
not have to wait for more years for HCFA coverage of the diseases they
must battle. The road from the bench to the bedside should not be
filled with potholes, detours and dead ends. Technology as
groundbreaking and useful as PET should not be held back for years
because HCFA has not established standards which new technologies must
meet and consequently must resort to decisions which are often
arbitrary. We must untangle the web of regulations and agency
infighting, and establish a clear intent within our federal government
to improve patient access to new technologies in the Medicare program.
I should like today to urge this Committee to take steps to require
HCFA to integrate PET and other new, life saving technologies into
Medicare on a timely basis.
Mr. Bilirakis. Thank you very much, Dr. Shreve.
Mr. Bilirakis. Dr. Popma. Well, Ms. Dziuba, do you have a
very brief supplementary statement to the doctor's?
Ms. Dziuba. Yes.
Mr. Bilirakis. Please make it brief, though, because the
intent was it would be a 5-minute total for the both of you.
TESTIMONY OF KATLEEN DZIUBA
Ms. Dziuba. Good morning.
Mr. Bilirakis. Good morning.
Ms. Dziuba. My name is Kathy Dziuba. I live in Rochester
Hills, Michigan.
Mr. Bilirakis. Please pull that closer.
Ms. Dziuba. And I am a breast cancer survivor. I feel
honored to speak to you this morning. I ask that as you listen
to my testimony, you keep in mind that this is more than a one
woman's story with breast cancer. There are thousands of women,
young or old, perhaps your wife or daughter, who will be
diagnosed with breast cancer this year alone.
What is even more frightening is that there are women who
have cancer and don't yet know it. I hope that by sharing my
experiences with you, that you will be able to soften the blow
and decrease the pain of which these women will experience in
their life long battle with breast cancer.
In 1992, I was diagnosed with breast cancer. My treatment
consisted of a bilateral mastectomy. My doctors and I hoped at
that time that I had been cured. Unfortunately, that was not to
be. In 1998, I discovered a lump in my breast in the same area
where my previous cancer had resided. A biopsy proved this to
be a recurrence of the cancer. A more intensive treatment
program of chemotherapy and radiation was recommended.
At that point, I chose to pursue my care at the University
of Michigan. My oncologist utilized PET scanning at the outset,
as his primary diagnostic tool, to determine the extent and
spread of my cancer. My doctor explained to me that PET
scanning displayed images of the biology of the disease rather
than pictures of my anatomy. It guided him in selecting the
best treatment and protocol for me.
I then undertook a series of chemotherapy and radiation
therapy sessions lasting 8 long months. During this process,
PET scanning was used to monitor the effectiveness of my
treatments. There is nothing experimental regarding the use of
PET scanning in my care. It has been integral, valuable and
vital.
It continues that way through today. In the summer of 2000,
I had an MRI scan which revealed abnormalities in my right
lung. It was a real concern that the cancer had metastasized.
The conventional approach, I was told, was to have a thoracic
surgeon perform an exploratory operation and biopsy. This is a
painful, expensive procedure, which requires a long
recuperation period. My doctors at the University of Michigan
were able to utilize PET scanning to identify that my lung
abnormality was due to my radiation treatment and not a spread
of my cancer. I did not have to undergo surgery, which would
have disabled me from my work and removed me from my family.
The inaccurate results of my MRI have continued to cause
great anxiety and doubt in my mind. I will continue to be
forever grateful for my physicians who possess the savvy,
foresight and belief in the diagnostic capability of PET
scanning to accurately identify my state of remission. I am
currently on medication and considered cancer free. I have no
guarantees about my future. I have been told that I am in a
phase of my illness where I am at high risk for return of
cancer. PET scanning is now used in my treatment to monitor for
recurrence and metastasis.
In my opinion, breast cancer is not simple, common or
predictable. It does not necessarily respond logically to
treatment. There is not yet a blueprint for women to follow to
assure that they will remain cancer free in their lifetime.
Sure, we talk about healthy diet and exercise, not smoking, and
just living a healthy lifestyle. Unfortunately, many breast
cancer survivors who have followed these guidelines are asking
themselves where did I go wrong? What did I do to receive a
diagnosis of breast cancer?
Until we have answers to these vital questions, this
disease will continue to haunt us. It is because of the
uncertainty of the disease, and having asked myself these same
questions, that I again ask that Medicare provide reimbursement
for advanced diagnostic testing, including PET scans, in the
standard treatment of breast cancer patients. My hope is that
from today forward, you will put your faith in the physicians
we call upon when encountering life threatening illnesses such
as cancer and allow them to use the skills and knowledge they
possess to effectively treat all women's cancers regardless of
insurance. Thank you.
Mr. Bilirakis. Thank you very much, Dziuba. I am very happy
and pleased that we allowed you to give your statement.
Ms. Dziuba. Thank you.
[The prepared statement of Kathleen Dziuba follows:]
Prepared Statement of Kathy Dziuba
Good morning, my name is Kathy Dziuba and I live in Rochester
Hills, Michigan. I am a breast cancer survivor, and I feel honored to
speak to this committee on how PET scanning, continues to play a life
saving role, in my battle with breast cancer. I ask that as you listen
to my testimony, you keep in mind that this is more then a one woman's
story with breast cancer. There are thousands of women, young and old,
perhaps your wife or daughter, who will be diagnosed with breast cancer
this year alone. What is even more frightening, is that there are women
who have cancer, and don't yet know it. I hope that by sharing my
experiences with you, that you will be able to soften the blow and
decrease the pain, of which these women will experience, in their
lifelong battle with breast cancer.
In 1992, I was diagnosed with breast cancer. My treatment consisted
of a bilateral mastectomy. My doctors and I hoped at that time that I
had been cured. Unfortunately, that was not to be. In 1998, I
discovered a lump in my breast in the same area where my previous
cancer had resided. A biopsy proved this to be a recurrence of the
cancer. A more intensive treatment program of chemotherapy and
radiation was recommended.
At that point, I chose to pursue my care at The University of
Michigan. My oncologist utilized PET scanning, at the outset, as his
primary diagnostic tool, to determine the extent and spread of my
cancer. My doctor explained to me that PET scanning displayed images of
the biology of the disease, rather than just pictures of my anatomy. It
guided him in selecting the best treatment protocol for me. I then
undertook a series of chemotherapy and radiation therapy sessions
lasting eight long months. During this process, PET scanning was used
to monitor the effectiveness of my treatments. There is nothing
experimental regarding the use of PET scanning in my care. It has been
integral, valuable and vital. It continues that way through today.
In the summer of 2000, I had a MRI scan which revealed
abnormalities in my right lung. There was a real concern that the
cancer had metastasized. The conventional approach, I was told, was to
have a thoracic surgeon perform an exploratory operation and biopsy.
This is a painful, expensive procedure, which requires a long
recuperation period. My doctors, at the University of Michigan, were
able to utilize PET scanning to identify that my lung abnormality was
due to my radiation treatment and not a spread of my cancer. I did not
have to undergo surgery which would have disabled me from work and
removed me from my family.
The inaccurate results of my MRI have continued to cause great
anxiety and doubt in my mind. I will continue to be forever grateful
for my physicians, who possess the savvy, foresight and belief in the
diagnostic capability of PET scanning, to accurately identify my state
of remission.
I am currently on medication and considered ``cancer free''. I have
no guarantees about my future. I have been told that I am in a phase of
my illness where I am at high risk for another return of cancer. PET
scanning is now used in my treatment, to monitor for recurrence and
metastasis.
In my opinion, breast cancer is not simple, common or predictable.
It does not necessarily respond logically to treatment. There is not
yet a blueprint for women to follow, to assure that they will remain
cancer free, in their lifetime. Sure we talk about healthy diet and
exercise, not smoking, and just living a healthy life style.
Unfortunately, many breast cancer survivors, who have followed these
guidelines, are asking themselves where did I go wrong? What did I do
to receive a diagnosis of breast cancer? Until we have answers to these
vital questions, this disease will continue to haunt us. It is because
of the uncertainty of the disease, and having asked myself these same
questions, that I again ask that Medicare provide reimbursement for
advanced diagnostic testing, including PET scans, in the standard
treatment of breast cancer patients.
My hope is that from today forward, you will put your faith in the
physicians we call upon when encountering life threatening illnesses,
such as cancer, and allow them to use the skills and knowledge they
possess, to effectively treat all women's cancers regardless of
insurance.
Thank you
Mr. Bilirakis. This is very helpful.
Dr. Popma.
TESTIMONY OF JEFFREY J. POPMA
Mr. Popma. Thank you, Mr. Chairman, and I appreciate the
opportunity to speak before this committee about the need for
governmental and third-party payers, and in particular
Medicare, to fund proven life saving medical procedures that
have become available as a result of advances in new
technology.
I have submitted an extensive written statement. I will be
very brief in my summary comments and I will use some specific
examples here, if I may?
Mr. Bilirakis. Please do.
[Chart shown.]
Mr. Popma. I would like to focus on one new technology,
that is the use of radiation therapy for the patients who fail
stent implantation, as one therapy that is approved by the Food
and Drug Administration, but is not currently funded under the
Medicare system.
This year we will perform 750,000 angioplasty procedures in
this country to relieve obstructive disease that causes
patients to have symptoms of heart disease. Of these, 70 to 80
percent of the patients will receive a new coronary stent.
The left panel shows the regulatory and reimbursement
process that has resulted as a result of new stents. We
received, based on randomized clinical trials, FDA approval in
1994 to implant stents in patients. There was a series that
lasted over 3 years, during which time a code was developed and
a differential reimbursement was developed for the stenting
procedures which average between three and $5,000 a procedure.
During this period of time, hospitals were strapped for
finances. They were strapped for finances because these
incremental costs were not reimbursed under the Medicare
system. Now stents have worked and they have worked extremely
well in our patients, but they sometimes fail. And in the 20
percent of patients or so that develop a failure of a stent due
to scar tissue formation within the stent, we need other
therapies. We have used balloon angioplasties. We have used
drills. We have used a variety of different techniques, none of
which have been effective in reducing the recurrence in the
subset of patients who develop a failure of their stents.
We now have five randomized trials performed, presented to
the FDA, and performed and resulted in the approval of two of
these devices that have demonstrated that radiation therapy for
patients that have stent restenosis is effective in reducing
the recurrence rate by 30 to 50 percent.
[Chart shown.]
Mr. Popma. On the right panel shows a diagrammatic example
of the radiation catheter that is inserted into the coronary
artery and delivers radiation over a three to 20 minute period
of time, and then this catheter is removed from the body. This
therapy works. We use it now in our patients. It is not
reimbursed under the Medicare system.
In the table that I provided in my table outlines the
incremental costs that our radiation oncology group has put
together for our costs for doing these procedures. It ranges,
depending upon the estimates, between three and $5,000. These
numbers are summarized on the panel.
This is not reimbursed under the current systems and the
hospitals are expected to take the loss. Now, I am very
fortunate to be at the Brigham and Women's Hospital. We are a
tertiary referral center, we are a teaching hospital for
Harvard system, we have not turned away therapy at our hospital
as a result of not being reimbursed by Medicare.
But what is assumed is that we will not be reimbursed and
we have to bury these costs in the rest of our operational
expenses. And while we can do that in our individual teaching
hospital, this is not smart fiscal policy and certainly cannot
expand. And you will hear in just a moment Mr. Donald
Latulippe, one of my patients, who has experienced this from a
personal level.
I would like to summarize. I do think that the dedicated
staff at HCFA are working on this problem, and I agree with all
the comments that say this is not something that we should be
ascribing blame to one area or the other. I think the staff at
HCFA is working on this, but the time delay is too long. It
allows us to lose money, to not be able to effectively care for
patients today, when the reimbursement processes may last up to
2 or 3 years more until we get adequate reimbursement.
I would have three suggestions for how this process might
be improved. There needs to be better communication between the
Food and Drug Administration and HCFA and there needs to be a
better identification of which therapies are truly advances,
truly things that will differentiate how we care for patients
in the future. Those therapies need an expedited process.
Today, we need to have newer codes. We need to utilize the
codes that are currently in place to allow there to be
reimbursement for these newer therapies, and this is going to
take some innovative work on the part of HCFA. And finally,
wearing my teaching institution hat, I am just pleading to you
that we are already operating on very marginal budgets, and to
ask the teaching institutions and other tertiary referral
centers at this point to bear the cost of the new technology I
think is something that we cannot have for the long term, and
with that, I would like to turn this over to my patient, Mr.
Donald Latulippe.
[The prepared statement of Jeffrey J. Popma follows:]
Prepared Statement of Jeffrey J. Popma, Director, Interventional
Cardiology, Brigham and Women's Hospital
I appreciate the opportunity to speak briefly with you this morning
about a critical aspect of health care, namely the need for
governmental and third-party payers, and in particular, Medicare, to
fund proven, life-saving medical procedures that have become available
as a result of new technological advances. As an cardiologist who
performs angioplasty and stenting in patients on a daily basis, I can
tell you that it is critically important for Medicare to streamline its
procedures for reimbursing hospitals and physicians for new technology
that is available to treat patients with heart disease. I hope that
after hearing my testimony today that you will share my sense of
urgency about this problem.
To focus my discussion, I would like to provide you with one brief
example of a new FDA approved technology that is not currently covered
by HCFA, that is, radiation therapy for the treatment of patients who
have failed a coronary stent procedure, but I should note that there
are also other new technologies that should also undergo expedited
reimbursement review by Medicare. I would hope that the current process
for HCFA reimbursement for new technologies could be carefully
examined, and that the reimbursement process for truly life saving
therapies would be accelerated. I hope that this testimony will provide
you with the understanding that this accelerated process is extremely
important for patients and for the hospitals and physicians who care
for them. The discussion will also focus on the reimbursement process
for the technical aspects of the procedure--I would also state a review
of the professional reimbursements for the physician who provide these
highly specialized services will also be needed.
The State of Coronary Angioplasty. Cardiovascular disease is the
major cause of death in this country. We have made many advances of the
past decade--we have better medicine, more prevention, and we have
developed newer methods to treated blocked coronary arteries. As a
result, the mortality rate for coronary angioplasty has dropped 20%
over the past 10 years.
One of these methods is called coronary angioplasty, or PTCA. Over
three-quarters of a million patients in this country will undergo a
coronary angioplasty this year, 50% more that the number of who will
undergo coronary bypass surgery. Coronary angioplasty now often
involves the use of coronary stents, which are small metal sleeves the
are placed inside the artery and keep the artery wall from collapsing
over time. Coronary stents are beneficial in preventing the chest pain
and heart attacks that result from blocked coronary arteries. Through
stenting, we have cut in half the number or patients whose arteries
reclose after being opened with balloon angioplasty.
I should note that hospitals went through a similar reimbursement
``crisis'' when coronary stents became available in 1994. On average,
the use of coronary stents cost the hospitals $3,000-5,000 more per
procedure than a conventional balloon angioplasty. Because physicians
felt that stents were so beneficial, they used the stents in patients,
and one Midwest hospital reported that approximately $2 million was
lost one year because of inadequate reimbursement for the use of
coronary stents. This ultimately resulted in the creation of a new DRG
code, DRG 116, which provides higher reimbursement for patients who
receive a coronary stent.
Despite their benefit, the stents form scar tissue inside the metal
sleeve in approximately 20% of patients, and when this occurs, it
requires re-treatment with another angioplasty or with coronary bypass
surgery. The recurrence rate with so called ``in-stent'' restenosis is
higher than after the first time stent placement, and may occur in 30-
80% of patients, depending on the degree of the scar tissue within the
stent. Thus far, we have been unable to lower this recurrence rate with
medicine, drilling devices, or additional stents. The impact on the
lives of those patients who develop ``stent'' restenosis is profound
and you will hear the testimony of one of my patients, Mr. Donald
Latulippe, in just a moment.
Over the past 3 years, a new therapy has been developed for
patients whose stents have failed. The therapy involves the use of
delivering a small plastic tube into the coronary artery from the leg,
and treating the artery with a brief exposure to radiation. To date,
there have been five randomized clinical trials that have each
demonstrated that this therapy reduces the recurrence rate by 30-50% in
patients with this disease. Patient treated with this therapy require
less repeat angioplasty, less hospitalization, less bypass surgery than
if they are not treated with the radiation. These are real benefits to
patients. Radiation therapy, or brachytherapy as it is know as, is
different than a standard angioplasty procedure, as it involves
additional specialized equipment and personnel, including the radiation
source, a radiation oncologist, a radiation physicist, and a radiation
safety officer to make certain that our personnel are not exposed to
radiation. These impressive clinical results with radiation therapy
resulted in the approval by the Food and Drug Administration this fall
of two radiation systems. Currently at the Brigham and Women's
hospital, we are treating between 5 and 10 patients per week with this
radiation brachytherapy for in-stent restenosis.
Our problem is the following. Despite more intensive personnel
requirement, catheters costs, and the specialized training that is
needed to provide this therapy, there is no additional reimbursement by
HCFA for this therapy. The hospital currently bill under DRG 112, which
is the one used for a standard coronary angioplasty. We have estimated
the approximate costs of the radiation procedure in Table 1. These
estimates have also been validated in a randomized trial of radiation
brachytherapy. At the current time, the hospital is simply expected to
absorb these costs.
We have been fortunate so far in that the Brigham and Women's
Hospital, as tertiary referral center and teaching hospital for Harvard
Medical School, has allowed us to more forward with this program,
despite its impact on the hospital's ``bottom line''. But it is clear
that continuing to perform under-reimbursed procedures is not a healthy
fiscal policy for the hospitals. We very much need to have
reimbursement by HCFA and other third party payers for the costs
associated with this type of programs. We believe that our patients
deserve this in our health care system.
Table 1: Vascular Brachytherapy Costs
(Estimates Five Cases Per Week)
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Salaries and Fringe Benefits
Physician Salary............................................. $32,000
Physicist Salaries........................................... 1,200
Technical Physics............................................ 21,000
Nursing...................................................... 14,400
Brachy Coordinator/Scheduling................................ 8,000
Admin Exp (Chief of Physics, Admin Director)................. 13,750
Fringe Benefits.............................................. 28,884
----------
Total Salary & Fringe Benefits per Year.................... $149,234
Other Expenses
Catheters ($2,500 per case).................................. $650,000
Isotope Sources (Beta & Gamma)............................... 72,000
Miscellaneous (chambers, jigs, etc........................... 2,000
Overhead..................................................... 52,232
----------
Total Other Expenses....................................... $776,232
----------
Total Expenses............................................. $925,466
----------
Total Cases per Year......................................... 260
----------
Cost per Case.............................................. $3,559
------------------------------------------------------------------------
There is no question in my mind that the dedicated staff at HCFA
are working diligently on this process right now, but the current cycle
of review for financial reimbursement of these new therapies is long,
and as you know, and it may take up to two more years before this
reimbursement is available to hospitals. Yet our patients need the
therapy today. I urge you to make certain that this remains a high
priority for them.
I would emphasize that it is these kind of technologies that will
support a continued decline in the death rate for heart disease, that
improve the health care productivity, and enable patients to live
active productive lives. As a practicing physician, I believe that we
can't afford NOT to make these therapies available to patients who need
them.
I have three suggestions for you to expedite this process. First,
there needs to be effective pathways for HCFA to interact with the FDA
to understand earlier about the cost-effectiveness and potential
benefits of new technologies early in the process. Not all new approved
FDA approved therapies are major advances in medicine. Some are small
steps, but others, like radiation therapy in this example, are big
steps forward and need to be available to patients. Second, Medicare
needs to issue codes for new technologies in a more timely fashion.
Temporary reimbursement should also be provided to cover the costs of
important new advances in medicine. Finally, you no doubt understand
that there are simply no margins left in the hospital budgets,
particularly for teaching hospitals. We are doing our best to provide
high quality, state of the art care for our patients--care that they
deserve for living in this country. It is difficult, if not impossible
for us to do so if there are not sufficient funds, particularly for our
elderly population. We truly need your help.
Thank you for your attention.
References:
1. Fischman DL, Leon MB, Baim DS, et al. A randomized comparison of
coronary-stent placement and balloon angioplasty in the treatment of
coronary artery disease. Stent Restenosis Study Investigators. N Engl J
Med 1994;331(8):p496-501.
2. Serruys PW, de Jaegere P, Kiemeneij F, et al. A comparison of
balloon-expandable-stent implantation with balloon angioplasty in
patients with coronary artery disease. Benestent Study Group. N Engl J
Med 1994;331(8):p489-95.
3. Erbel R, Haude M, Hopp H, Franzen D, et al. Coronary-artery
stenting compared with balloon angioplasty for restenosis after initial
balloon angioplasty. N Engl J Med 1998;339:1672-8.
4. Simes PA, Golf S, Myreno Y, et al. Sustained benefit of stenting
chronic coronary occlusion: long-term clinical follow-up of the
Stenting in Chronic Coronary Occlusion (SICCO) study. J Am Coll Cardiol
1998;32(2):p305-10.
5. Savage MP, Douglas JS, Jr., Fischman DL, et al. Stent placement
compared with balloon angioplasty for obstructed coronary bypass
grafts. Saphenous Vein De Novo Trial Investigators. N Engl J Med
1997;337(11):p740-7.
6. Grines C, Cox D, Stone G, et al. Coronary angioplasty with or
without stent implantation for acute myocardial infarction. N Engl J
Med 1999;341:1949-1956.
10. vom Dahl J, Dietz U, Silber S, et al. Angioplasty versus
rotational atherectomy for treatment of diffuse in-stent restenosis:
Clinical and angiographic results from a randomized multicenter trial
(ARTIST Study) (abstr). J Am Coll Cardiol 2000;35:7A.
11. Leon M, Teirstein P, Moses J, et al. Localized intracoronary
gamma radiation therapy to inhibit the recurrence of restenosis after
stenting. N Engl J Med 2001;344:250-256.
12. Teirstein PS, Massullo V, Jani S, et al. Catheter-based
radiotherapy to inhibit restenosis after coronary stenting. N Engl J
Med 1997;336(24):p1697-703.
13. Waksman R, White R, Chan R, et al. Intracoronary gamma-
radiation therapy after angioplasty inhibits recurrence in patients
with in-stent restenosis. Circulation 2000;101:2130-2133.
14. Waksman R, Bhargava B, Chan RC, et al. Late total occlusions
following intracoronary radiation therapy for patients with in-stent
restenosis. Circulation 1999;100(18):1-222.
15. Erbel R, Verin V, Popowski Y, et al. Intracoronary beta-
irradiation to reduce restenosis after balloon angioplasty: Results of
a multicenter European dose-finding study (abstr). Circulation
1999;100:1-154.
TESTIMONY OF DONALD LATULIPPE
Mr. Latulippe. Good morning. I am very honored and thrilled
to be here. I really am honored because I have never been in
such a situation. I saw the McCarthy hearings when I was 18
years old, and that was it.
But, however, and I am thrilled because I am alive. I will
give a quick history and I won't take a long time. When I was
53 years old, I had my first bypass operation at Massachusetts
General Hospital. I thought that was it. My father died at age
55 of this disease, my brother at 43, and my grandfather at 41.
So I fully expected by the age 60 not to be here.
And I have been through three bypass operations, one 7
years after the first, and the last 5 years ago. After these
operations, there is not much more they can do except what
doctor just told you, to put in these graph stents, which I
have five of them, and also if they get scar tissue, which they
have, there is not much they can do, until just recently.
Now, the past year, I have been through five angioplasties
at New England Medical Center. My only salvation was to go
through the therapy that doctor talked about with the
radiation. I am very happy to say that by this time, since my
last treatment with the radiation, I would have known if they
were filling up again, and I am very happy to say that I outdid
him walking here today. And I am feeling great and I am feeling
just marvelous.
This suit that I am wearing, ladies and gentlemen--I don't
want to be dramatic--I bought a year ago for my burial, and I
am wearing it today never expecting to wear it in Washington,
DC.
I have grandchildren that I love very dearly and I am
trying to tell all my children, my own children and my
grandchildren, about their diet and so forth because most of my
problem is heredity. And you know a year ago, I was hoping to
live to see the year 2000 and the Millennium. I saw it. I saw
my birthday. That was the next goal. In July I turned 70. I
can't believe I am 70, but here I am, and talking to you fine
folk. I thank the government. I thank Medicare for its help
because without it I would have been dead long ago.
And I am very happy to live in the Boston area because we
have great medical facilities there, and I am very proud and
happy again to be here this morning. Thank you.
[The prepared statement of Donald Latulippe follows:]
Prepared Statement of Don Latulippe
I am a 70 year old male and have been in perfect health all my life
except for plugged arteries to my heart. I have been very careful about
my diet thru the years and doctors have discovered that my problems are
created by my self. My Grandfather died at age 41, my father at age 55
and my younger brother at 43, all of the same thing. In 1983 I went
through my first by-pass operation at the Massachusetts General
Hospital in Boston. I had a second by-pass operation in 1990 at the
same hospital. The third by-pass operation was performed at the New
England Medical Center in 1995. Two years ago I volunteered for a new
research procedure being done at the New England Medical Center by Dr.
James Udelson, head of cardiology at the hospital. It was the growing
of new veins around the heart with the introduction of some sort of
stimulant. When the doctors were giving me the angioplasty that would
lead to the injection of this substance they all agreed that the stints
were the way to go for me. The study said that if there was any other
way, then they had to go that way. So they performed angioplasty. Since
that time I have been in the hospital 4 or 5 times to have further
stints put in or the cleaning out of what is in there. I now have five
stints. Up until recently I would start to have slight angina about a
month after the angioplasty procedure. I really didn't think I was
going to see the year 2000. I was hoping to live that long. I am
totally resigned to my passing and have made all arrangements so that
my family will not have to be concerned with that. I have also told my
doctors that if my body can be of use in further research than its all
theirs after my passing. My family know this. I had as many angioplasty
procedures that I think are safe for me and my doctor at New England
Medical Center suggested I go through the radiation treatment at
Brigham and Women's Hospital in Boston. I did that and it was a
wonderful experience.
By this time I should have felt some angina, slight at least, but
haven't. So I am convinced that this new procedure has given me more
time and a new outlook on life. My brother in Naples, Florida has asked
me to visit him and I have decided to do that next week. Under ordinary
conditions I wouldn't think of it because I didn't want to be that far
away from my doctors in Boston. With this new treatment I feel very
confident and I am going next week for ten days. My doctors know all
about this and have given me the okay. I do want to thank Medicare for
all the help I have received. I waited until I was 65 to take Social
Security and Medicare and worked up until the day I received it. I am
still working part time, on call and weekends at a Boston Radio
station. I do an interview program in Boston and hope to have the
doctors in this project on my program very soon. They are busy people.
I also do a cable tv show in the Boston area that is seen in about 30
communities. This keeps me busy as I live alone, my wife passed on a
few years ago of cancer. I don't want to marry again, so being busy is
sweet. This new radiation procedure has given me a new outlook on life
and with their help and God's will I now expect a few more years to my
life. I will do anything to further their cause because it may help
others, including my own children and Grandchildren.
Mr. Bilirakis. Thank you, sir. That was good.
Well, I am going to start off the questioning. Dr. Shreve,
you stated that women under Medicare still do not have access
to PET scans for many uses. So what exactly are the women's
health uses for which PET scans are not covered that are
covered by private plans? I assume many of them are covered by
private plans but not covered by Medicare. What are some of
those?
Mr. Shreve. Currently, Medicare covers, they have approved
six cancers: lung cancer, esophageal cancer, colon cancer,
melanoma, lymphoma, and head and neck cancer, with certain
restrictions. They have not approved breast cancer, cervical
cancer, uterine cancer or ovarian cancer. Both breast and
ovarian, we do quite frequently on patients that have private
insurance, and find it very useful, and increasingly with
cervical cancer.
What was requested was broad coverage so that PET would be
covered just like MRI and CT, and what has happened is we have
had to nitpick disease by disease and that is how we got to
where we are where only certain cancers are covered and not
others.
Now, the arguments are, well, we don't have a huge
convincing body of scientific literature. That is debatable,
but the point is that you never can break it down disease for
disease, indication for indication, and have complete
comprehensive literature. There is some point where you make a
broad coverage decision. You certainly don't make it at the
onset when you have just shown you can make nice pictures.
But by the time you have four or 500 scientific articles
predominantly covering cancer applications of PET, and I think
in the latest revision, we have 20 some thousand patients in
our review, you really are at that point of making a broad
coverage decision. And the problem has been HCFA really doesn't
have a guideline or a road map on how to do this, and so things
have been touch and go, back and forth, and helter-skelter, and
that is very frustrating when a patient comes in with ovarian
cancer and we know that PET works just as good for that as it
does for melanoma or colon cancer, why is this not covered by
Medicare?
Mr. Bilirakis. And can it get covered by many private
plans?
Mr. Shreve. Depending on the private carrier. Sometimes it
is a case by case. Sometimes flatly covering. Some of our
carriers now flatly cover breast cancer for any indication. As
you know, there is an interplay between HCFA and the private
carriers. Some of them simply say, well, when HCFA pays for it,
we will. That is an easy out.
Mr. Bilirakis. Yes. Ordinarily it is that way.
Mr. Shreve. Yes. In other cases, Blue Cross/Blue Shield was
always about a year ahead of HCFA in approving these
indications.
Mr. Bilirakis. With this process that is taking place, do
you have----
Mr. Shreve. About 10 years.
Mr. Bilirakis. [continuing] any idea how long women may
have to wait before that coverage is available?
Mr. Shreve. That was my question. I don't know. We look at
that it took 10 years to get here. I would imagine it is going
to be more than 6 months. It could be years depending on
whether they say, well, we need more papers and more outcome
studies.
Another thing to keep in mind is it is very fashionable to
talk about outcome studies and technology assessment, but in
many areas of medicine, No. 1, that is not an exact science,
and No. 2, the technology evolves so fast that by the time you
do a comprehensive technology assessment, the technology has
changed so much, it becomes irrelevant, and as we heard
earlier, we really need a way to look at true advances, true
fundamental advances and get them in an expedited means of
reimbursement and dissemination in the population or we can be
waiting.
The PET scanners haven't changed in 10 years. I mean they
are just as capable now as they were 10 years ago. Now with
some evolving reimbursement, that technology is starting to
advance so we can find smaller cancers earlier, study more
cancers and so on. That is really what we want is to move that
technology forward, as I said from the bench to the bedside.
We have an explosion of molecular knowledge coming out now.
PET is just one of the tools to apply that from patients, but
we can't wait 10 years to apply that knowledge.
Mr. Bilirakis. When we finish up here, we will ask all of
you to feel free, in fact, we would encourage you, to submit to
us suggestions in writing as to what we can do to streamline
the process. Hopefully you will take advantage of that, all of
you, and submit it to us.
Dr. Popma, regarding the cardiac procedure that you shared
with us, is there pressure building to cut back on the
performance of the procedure because of its inadequate
reimbursement?
Mr. Popma. Mr. Chairman, it would probably be in the
opposite way. As these new therapies become available, they
begin to roll out into the community, and the cost
considerations are definitely a factor in providing this
therapy to further patients. They begin in a small circle of
sites that did the investigative studies, and they slowly begin
to move out into the community. And I think it is fair to say
that there is a hesitation to adopt these in the community.
It simply means that patients are treated in a conventional
way, and in that sense, they are denied the access to that.
Mr. Bilirakis. And because they are treated in a
conventional way and because maybe they are not caught early
enough and additional problems develop, might it not be costing
Medicare a lot more than it would cost if the program had
covered it initially?
Mr. Popma. Mr. Chairman, that is an excellent point because
the cost effectiveness analyses have suggested that by avoiding
the repeat procedures in the future that these therapies are
truly cost effective and would save Medicare less in the
future.
Mr. Bilirakis. There you go. All right. I am now going to
yield to Mr. Brown for questions. I would just say that I know
that the sounding of these buzzers seems very rude, but it
means there is a vote on the floor. So right after Mr. Brown
finishes his inquiry, we are going to break for a few minutes
to run over to cast our votes and then return. Please proceed,
sir.
Mr. Brown. Thank you very much. Both Ms. Dziuba and Mr.
Latulippe, thank you for your very, very moving testimony. Mr.
Latulippe compared--I think he compared this panel to his
younger days of watching McCarthy. I wonder if you have no
decency saying such a thing, Mr. Latulippe?
Mr. Latulippe. No.
Mr. Brown. Those of you who don't remember the McCarthy
hearings----
Mr. Latulippe. It was my first experience in Washington.
Mr. Brown. No. I understand.
Mr. Latulippe. I am very lucky. At 18, I got a job in a
radio station, like Mr. Linkletter, in Quincy, Massachusetts,
and the owner wanted me to carry his tape recorder, and we came
during the Eisenhower administration to Washington, and I was
thrilled--18 years old, come on. And staying at the Mayflower
Hotel and all that jazz; it was great. I met John Cameron
Swayzie. Hey. And I was very impressed, and we popped into the
hearings. And Joe Welch was there, and, you know, he used, Mr.
Senator, can you--you know, it was a wonderful experience.
I have had a great life. I am 70 years old. I have been all
around the world with radio.
Mr. Brown. I knew I shouldn't have asked you about this.
Mr. Latulippe. You know I have had a great life. And so I
just--no, no mention of the committee compared to this one.
Mr. Brown. No, I know.
Mr. Latulippe. I am just saying it was a great experience.
Mr. Brown. We are not nearly as powerful either.
Mr. Bilirakis. The gentleman's time has expired.
Mr. Brown. For asking such a stupid question. Never give a
guy from Boston that opportunity with an open mike; right, sir?
No. Thank you very much for your testimony. I appreciate
what you said about the role of government and the role of
Medicare because some people in this Congress want to see this
program privatized. They want to turn it over to insurance
companies. Some of them didn't believe in Medicare when it
passed in 1965 and don't believe the government can do things
well, and I think that your testimony really did illustrate how
important a program like that is.
I want to make one other comment before asking the two
physicians a question. My friend from Pennsylvania, the
chairman of Oversight and Investigations, made a comment about
demonizing HCFA, demonizing Medicare Plus Choice, and my role
is to do neither, as is his isn't. But I support the oversight
and the examination of HCFA because I think the two physicians
and the two patients brought up very real problems where HCFA
does need to improve its operations. There is no doubt. I hope,
though, we go over with the same fine-tooth comb an examination
of managed care and Medicare Plus Choice where Congress threw
$11 billion in Medicare Plus Choice without real oversight on
what we are getting back for that $11 billion.
If we had thrown $11 billion, just a little extra here, for
HCFA to run its programs, I think this Congress would have been
looking at HCFA doing oversight after oversight after
oversight. So I just hope we apply the same standards, not to
demonize either, but to learn something from them, and maybe
not make some of the mistakes we have made in all cases, in
both parties, and all of that for managed care and for
traditional fee for service.
Dr. Shreve and Dr. Popma, I would like to hear your
comments on both. You are advocating specific changes in
coverage or payment with respect to a very particular procedure
or service. What exactly at HCFA is broken regarding the issue
of new technology approval? How do we make this better? Tell us
that.
Mr. Shreve. I think there is two issues. One is, as we
mentioned earlier, and I don't mean to demonize HCFA either,
that they are overburdened and there are no clear guidelines,
and so it is difficult for them to put together a
straightforward and consistent mechanism. There also are other
agencies in the government, the FDA, for example, that approve
both drugs and devices and analyze the data.
And there there are branches of the National Institutes of
Health. As I mentioned, the National Cancer Institute was quite
enthusiastic that PET be approved broadly for cancer to
expedite its use in a variety of cancers as well as more
clinical research.
So there are two things. One is there has to be a degree of
reorganization or clearly defined areas of expertise. When we
presented our document to HCFA, they farmed out an analysis of
our analysis by a private group out of Boston, I think it was,
and they came to completely different conclusions than the NCI
did or the FDA did. So when you go to these experts, you get
different answers, and sometimes you can kind of pick the
experts and get the answer you want.
There has to be a consistent way of evaluating new
technologies, and as we mentioned earlier, the second point is
you have to make a distinction of some slightly new gizmo, some
variation on a theme, and technologies that really are
revolutionary, really are significant and a substantial
departing from existing technologies, and those need to be
pushed and encouraged.
The National Institutes of Health has been actually very
responsive and very good at this. They have identified areas
for research which they consider areas of extraordinary
opportunity and they have been very good at pinpointing those
areas and supporting those. Molecular imaging such as PET is
one of those, but there are many others.
So some agencies in government have really come to grips
with the pace and the dynamic range of medical research that is
accelerating right now, and have been able to identify true
advances and target those. And so that is the other thing that
needs to be done.
Mr. Brown. Yes, Dr. Popma.
Mr. Popma. I will just give you a very brief answer, and
that is that there is a time lag between the statement this
therapy is safe and effective and then when we say this therapy
has a mechanism for payment. And that time lag between the Food
and Drug Administration accepting as safe and effective the
therapy and the time that the governmental agencies will
recommend payment for that can be up to 3 years.
I would certainly hope that with any kind of reform of HCFA
that the questions about safe and effective and how are we
going to pay for this are done simultaneously, which I think is
a critical piece of the process.
Mr. Brown. Thank you.
Mr. Bilirakis. All right. We are going to break now to cast
these votes.
[Brief recess.]
Mr. Greenwood. We'll reconvene the hearing now, please. The
witnesses could return to the witness table, and the spectators
could return to their seats, members to their seats. And I
believe that where we are in the process is that Mr. Brown has
completed his questioning, and the Chair will now take his 5
minutes, and I would like to direct my questions to Dr. Shreve,
if I could.
In your testimony, you talk about PET imaging technology,
which is Positron Emission Tomography. It is called PET. My
understanding is that that was developed as a direct result of
work at the National Institutes of Health; is that correct,
sir?
Mr. Shreve. Yes. And at Malinkrat Institute under federally
sponsored research.
Mr. Greenwood. So we in the Congress can take some pride in
the fact that our funding of NIH has paid off in this respect
and we have produced some pretty good technology that is
instrumental--I think you called it indispensable medical
tool--in medical diagnostic imaging?
Mr. Shreve. Yes, and you can take credit for more than
that. I mean the revolution in medicine and biology is largely
because of this and preceding congresses' support of basic
research, and PET is one facet of this revolution of molecular
medicine that is now upon us. It is the way we look inside the
body now at molecular processes rather than the old way which
is to basically look at lump and bumps inside.
Mr. Greenwood. Dr. Shreve, for how long have you considered
PET imaging technology to be state-of-the-art important,
critical that you would use it on your patients with whom you
practice?
Mr. Shreve. I have been in practice, in academic practice,
now about 10 years, and I would say beginning about 5 or 6
years ago, it became very clear that this was what we needed to
make up for the shortcomings in CT and MR in certain given
indications, but increasingly more and more and more
indications.
Mr. Greenwood. And have you found, sir, that most of the
private insurers covering your patients have covered the use of
this technology?
Mr. Shreve. It depends on the insurer. They have
increasingly been covering. Some cover without question. Some
cover on a case by case. Some look to HCFA, quite frankly, in
their coverage. Blue Cross/Blue Shield's advisory board
nationally has generally been a year ahead of HCFA in terms of
reviewing indications. We have some private insurers now that
pay for just about any indication.
It is variable. As you know, there are many insurers, and
that is one of the complexities we have to deal with. We have a
full-time staffer who just takes care of reimbursement, that
gets the request for the scan, calls the insurance company to
figure out if it is really covered or not, and if it is not, we
send them a letter, and usually they will cover it.
Probably one of the most telling things, I think, is a
major provider of oncology services, a company called U.S.
Oncology, is right now one of the biggest purchasers of PET
scans. Now they operate on a capitated basis. They contract to
take care of patients for a fixed price. They have become
convinced that it is such an advantage in managing their cancer
patients that it actually saves them money. They have just
unilaterally made the investment. They are one of the largest
purchasers of scanners right now.
Mr. Greenwood. Okay. Now, as you know, the central purpose
for these hearings is to try to figure out how we can create a
new paradigm, modernize the Health Care Financing Agency, and
so this is a case example that causes us to wonder, causes me
to wonder, why it is that you have known for 5 or 6 years and a
number of insurers have known that is it not only the best
state-of-the-art technology to diagnose the patient, avoid
surgical procedures, basic procedures, and, as you just
indicated, it has become obvious to certain insurers that it is
in their economic interest.
We expect HCFA to have a fiduciary responsibility. We
expect them not to carte blanche approve every technology
because it may not be the most cost effective, and that is not
prudent for the taxpayers, but, in your view, what is it about
the way that HCFA operates that has caused this delay so that,
in essence, the outcome is that Medicare patients have second-
class health care compared to your patients who are able to
have access to this technology?
Why has it taken them so long? And do you have any
suggestions about how they could speed up the process?
Mr. Shreve. Well, I don't pretend to understand the mind of
HCFA, but one of the problems is the role of different
agencies. You know, as was mentioned earlier, when the FDA
approves something safe and effective, that really doesn't mean
much to HCFA in terms of reimbursement. HCFA has increasingly
taken on the task by itself of evaluating technology as to
whether not only is it reasonable to use, but beyond that is it
cost effective?
Now there are two problems with that. That is a complicated
thing to do and, as I mentioned earlier, it is not an exact
science, the notion that you can give a panel of experts a
problem and they will tell you, yes, it is cost effective or
not cost effective. It is a lot like economics. It is kind of a
dismal science, I am afraid.
So, in many cases, I think it comes down to a political
decision, look, this might cost us money; we can't really
divine whether it is going to save us money by eliminating
other procedures; we just don't want to pay for it. And I
understand that. I understand there is a fiscal responsibility,
but, surely, we have a great deal of problems with fraud and
abuse, with self-referral, where new technologies are kind of
ordered by the doctors that do them, and you suddenly see an
explosion in utilization.
We don't want those problems to hold back technology that
really is better for the patient and ultimately saves money in
the long run in patient care. That is really the dilemma, and I
don't propose to have a blueprint for that, but we have to have
a clear delineation of what branches of government do what. And
when, for example, the National Cancer Institute tells HCFA,
look, you should pay for this for all cancers, don't nickel and
dime for cancer, that should have some weight. And HCFA should
say, well, you guys are the cancer experts; Okay.
I am not sure exactly how that works, but there has to be
clear delineations of who does what and there has to be a
notion that there are new breakthrough technologies that are
fundamentally different that have extraordinary promise, and
those have to be put in a separate track versus something that
is, say, a little bit better CAT scan or a little bit better
surgical instrument.
Mr. Greenwood. Thank you, sir. My time has expired, and the
Chair recognizes the gentleman from Florida, the ranking member
of the Oversight and Investigations Committee, Mr. Deutsch.
Mr. Deutsch. Thank you, Mr. Chairman. For each of the
witnesses, if you could respond do you believe that HCFA has
enough money to obtain the necessary resources to properly run
the agency, and if no, what should they have, and if yes, what
are you basing that conclusion on? Let me just go down the
panel. Dr. Shreve.
Mr. Shreve. You ask some pretty tough questions, sir.
Again, I do not know. I am not intimately familiar with HCFA,
but my guess is they are underfunded to do what they are being
asked to do. I don't know what the numbers should be. I do know
that they need some direction from Congress as to exactly what
their role is. And is it a technology assessment agency? Is it
a health insurance agency? Just what is their role? And then
the proper funding to carry out that role needs to be provided.
Ms. Dziuba. May I?
Mr. Deutsch. Yes.
Ms. Dziuba. My thought is do they have the money? I think
they do. My other thought----
Mr. Greenwood. Excuse me. Could you pull your microphone
forward and make sure it is turned on, please?
Ms. Dziuba. I am sorry. My other thought would be that not
to open it up carte blanche to have all hospitals, all
physicians doing PET scans, because it is advanced technology,
and I certainly would not want my internist to be recommending
a PET scan for me.
However, when we are dealing with life threatening
illnesses such as cancer, it is a totally different situation,
and that is why I switched to the University of Michigan, which
is, you know, an accredited cancer center, and I have to put my
trust in what they say. I mean obviously they have given me
options, but my question is, and it would be the same to you,
if your wife, mother, daughter had cancer, wouldn't you want
her to have the best in terms of a diagnostic technology?
Would you want to send her for a CAT scan when really what
she needs is a PET scan? Would you want to send her for a
mammogram when really what she needs is a PET scan? Would you
want her to have exploratory surgery when you can tell if she
had cancer if she had a PET scan and then maybe we would move
forward with that?
So, I guess, again, certainly not being a physician, but
from a personal experience, I would not agree that all
hospitals, all institutes, should be able, should have PET
scans, or should be able to receive reimbursement for them. But
I do think that these type hospitals should.
Mr. Deutsch. Dr. Popma, in response to the HCFA financing?
Mr. Popma. I have a puzzled look on my face here because I
actually don't know what the right answer to your question is.
I certainly think that every agency that has identified
problems with efficiency and expedited process needs more
money. But I am not sure--I think my statement would be that I
am not sure it is solely a money problem. I think it may be a
process problem, and I am not sure that you can solve the
solutions that we are talking about today simply by just upping
the budget for the whole HCFA agency, although that certainly
would help, I am sure.
What we need to do is reexamine the process. We need to
reexamine exactly what interactions occur early within the
stage of the cycle. When does the FDA begin to speak with HCFA
about the potential benefits of this therapy? When do we begin
discussions about reimbursements for these techniques that are
clearly safe and effective benefits to patients?
And so I think in addition to money, which everything
always comes down to, you can do more with more money than what
you currently have, much more important is going to be a
fundamental change in the process. And I hope that would be as
result of this hearing.
Mr. Deutsch. Did you want to respond as well?
Mr. Latulippe. I can't add much to that, but all I can say
is that the radiation therapy works. I am a living example of
it, and if I can help in future funding of it through my fine
doctor and so forth, I am all for it. I wouldn't be here now if
it wasn't for that treatment.
Mr. Greenwood. The time of the gentleman has expired.
Mr. Deutsch. Okay.
Mr. Greenwood. The Chair recognizes the gentleman from
Pennsylvania, Mr. Pitts.
Mr. Pitts. Thank you, Mr. Chairman. Dr. Shreve, setting
aside the funding issue, in your testimony you state: ``Once
directed to understand the unique nature of PET and the
positron radiopharmaceuticals used in PET imaging, the FDA made
rapid progress in its regulatory oversight duties.'' Could you
please expand on that? How can we bring such efficiencies which
did not previously exist in FDA to HCFA?
Mr. Shreve. Just to clarify, what I was talking about
there, prior to the modernization act, the FDA had to approve
these radiopharmaceuticals we use in PET, in particular, FDG,
fluorodeoxyglucose. The FDA saw that as a drug, did not
understand exactly what was involved in making these. These are
made locally and compounded and used regionally, not sent out
over the whole country. And so there was a big battle over
whether the FDA had jurisdiction or it was considered the
practice of pharmacy regulated by states.
With the act, and I think it was 1997, the FDA was forced
to actually talk to the PET community and find out exactly what
we were doing. They visited our facilities. They saw just
exactly what the technology was and what we were using, and
that changed everything. They said, oh, now we understand what
you are doing and why you said it was absurd to handle these as
conventional drugs.
And we are still working with the FDA right now to write
down the regulations for PET radiopharmaceuticals. They have
had a 4-year period under the law to do that. And it is not a
perfect process, but without that, we would have gotten nowhere
because they would have just said, well, this is a drug, you
got to handle it just like a drug.
Now, how that can be applied to HCFA, I am not sure, but I
think there has to be a distinction, as I mentioned earlier,
between evolutionary technologies that cost more money, say,
and major revolutionary changes in the way we do things,
because those things are going to be happening more and more
rapidly with this revolution that this Congress has brought us
with post-genomic medicine in the next 20 years.
And we really have to have a mechanism to look at things
that are new and different and fundamentally revolutionary and
get that through the regulatory process so that technology can
evolve, and it doesn't evolve until it gets into practice and
industry starts making investments and so on. And that is when
the real benefit comes to patients.
Mr. Pitts. You also indicated that PET can actually reduce
health care costs. Can you elaborate on how it does that?
Mr. Shreve. Well, there are many publications referenced in
the document we sent to HCFA. Basically, as I say in my written
testimony, and as I said in my oral testimony, it is mistakes
that are expensive. As a radiologist, I am always finding
things on CAT scans that really aren't a problem, it is not
cancer, but I can't be sure, and so we have to do a biopsy or
do surgery, and so we go on these diagnostic detours, which are
very expensive, because our technology is imperfect.
The more accurate your diagnostic technology, the fewer of
those detours and mistakes you make. This saves a lot of money.
In the last week, we found metastacies in a patient with
esophageal cancer that would have made major surgery fruitless
and we prevented that surgery and that expense from happening.
Another patient with colon cancer, with rising serum
markers, we found a single metastasis in one part of the liver,
completely not seen on CT, that allows us to take that little
part out and substantially prolong that patient's life. Had the
metastasis been elsewhere, it would be a waste of time. So that
increment--and PET isn't perfect; it has limitations, too, like
anything--those increments in accuracy have an enormous effect
on the downstream costs and on patient's lives. So it is not
perfect, but each major increment can make a substantial
difference in cost.
Mr. Pitts. Thank you, Mr. Chairman.
Mr. Greenwood. Thank the gentleman. I believe we should
next recognize the gentlelady, Ms. Capps.
Ms. Capps. Thank you, Mr. Chairman, and I want to thank our
witnesses for their testimony today, and you, Chairman
Bilirakis, for holding this hearing. The relationship between
HCFA's policies and new medical technologies is indeed a very
important one. Medicare is a sacred program to many seniors and
people with disabilities, counting on Medicare for their health
care, and we want them to be able to do that.
Administering Medicare involves HCFA in a delicate
balancing act. We don't want HCFA to compromise patient care or
medical advances with excessive regulation, but we also want to
make sure that the agency preserves the high level of program
integrity and works to reduce fraud, waste and abuse.
That being said, I know there are many areas that need
improvement when it comes to Medicare's management, and am
particularly concerned, as you are, about patient access to
medical technologies. I have heard so often from device
manufacturers who are unhappy with HCFA's coding and payment
system. These systems make it difficult for beneficiaries to
gain access to innovative technologies and procedures, even if
Medicare covers these therapies. The concern is that
technologies are reaching Medicare patients much too slowly.
This really troubles me. I believe we are standing in the
way of lifesaving treatments that are already available being
able to be used. Everyday new technologies come along. Many
companies have already spent years navigating the rigorous FDA
approval process. Then to be subjected to long and unnecessary
waiting periods by HCFA for administrative reasons, to me,
seems wasteful, at the least, and potentially irresponsible in
terms of health care.
Sadly, by the time they are registered or given approval,
many of these devices and technologies are already out of date
and have been superseded. Overregulation hurts the
manufacturers, but in the end it really does hurt patients. I
am committed to working closely with HCFA to create an
environment in which medical device manufacturers and
entrepreneurs can bring safe and effective devices to the
public.
We have to keep pace with innovation. Not to do that is to
shortchange patients across this country. But I want to see if
you will--I know you have been responding already to many
concerns--but the very topics that you brought up, the PET
scan, and my own daughter's experience with lung cancer, and
then to see it being denied, I can't stress enough, also the
devices used in the cardiovascular arena, that these are often
cost-saving devices. The very mechanism put in place by HCFA to
prevent waste is a barricade to saving, to not just saving
lives but saving costs, too.
You were eloquent, both of you, in your testimony, and I
want to see if you would explore for me just briefly how you
see Medicare's denial affecting other health care providers,
the effect, the trigger effect that it has on that? I have had
some impressions on it myself, but if you would answer, please.
Mr. Popma. We would certainly encourage all the third-party
payers to understand the cost effectiveness of these new
therapies, and ultimately I suspect that they will understand
the cost effectiveness of the new therapies, particularly if it
truly prevents subsequent procedures for us, whether they be
diagnostic procedures or whether they be invasive procedures.
It is a slow process and I have to say that HCFA really
leads the way with a lot of these things, and I think the
example that you can set in place by helping HCFA reform and
expedite that will clearly have secondary benefits to the other
managed care payers.
You would certainly not want to have a competitive
framework at least in our Boston environment where the coverage
was better for Medicare patients than it was for the third-
party premium payers, and I think that they will follow an
example that you would provide for them with what happens with
HCFA.
So I would agree with your statement that these therapies
oftentimes are cost effective, if not cost savings, although
that is always a risky word.
Ms. Capps. Yes.
Mr. Popma. But they could potentially be cost savings for
the health care payers, and we would hope that they would
follow the example of what is put in place here with HCFA.
Ms. Capps. In other words, do you see HCFA or Medicare
reimbursement as being a standard then? That the third-party
payers are watching to see if HCFA will cover it, and if they
don't, then they won't either?
Mr. Popma. I can't speak for that in a specific example of
our radiation therapy programs per se. Certainly, there has
been no third-party payer that has come forth today and said we
are going to pay an incremental cost for these. We are hopeful
that--this is new therapy--this will evolve. But I think the
example can be put in place with HCFA.
Ms. Capps. Okay. Thank you.
Mr. Greenwood. The Chair recognizes the gentleman from
North Carolina, Mr. Burr.
Mr. Burr. I thank the chairman. I apologize to the panel
for my tardiness, but I have had an opportunity to go over
testimonies. Let me ask you, Dr. Shreve, what impact do you
think technology will ultimately have on health care,
especially as it relates to medical devices? Where do you see
this going? Where is the endpoint?
Mr. Shreve. Could you repeat that just one more time, a
little more specific?
Mr. Burr. What impact is technology going to have on health
care in general and technology specifically as it relates to
medical devices? Where is the endpoint? What are we ultimately
going to see?
Mr. Shreve. We are going to see far less hospitalization,
far less morbidity, that is people that can't function in their
daily lives be it because of a bad joint or severe ischemic
heart disease or even Alzheimer's disease. I mean the goal, as
we understand it in the medical community, of the continued
funding for medical research is to have people live very
healthy lives late into their expected lifetime and then die
and not spend a lot of time dying slowly of chronic diseases.
That is the ultimate goal.
Mr. Burr. Layman's terms of what you said is that the
quality of care will be better, and because there is less
hospitalization, the cost will be significantly less?
Mr. Shreve. The key word is understanding diseases at a
fundamental level allows us to treat diseases at a fundamental
level. So understanding them and detecting them early, if you
detect cancer early enough, you can cure it. That saves a lot
of money and it makes lives better.
If you can prevent atherosclerotic disease, you can prevent
coronary heart/ischemic heart disease, and if you can prevent
degenerative diseases of the brain, if you understand it, you
can prevent Alzheimer's disease. So that is our goal is to
prevent these diseases or cure them in a very early state,
treat them at a very early state, even before they become
apparent.
As I said earlier, we can see the metabolic profile of
Alzheimer's disease on a PET scan before it is really obvious
clinically.
Mr. Burr. Dr. Popma--is it Popma?
Mr. Popma. Yes.
Mr. Burr. Is it safe to say that the culture within our
reimbursement system today cannot evaluate long-term savings
versus initial costs as it relates to devices?
Mr. Popma. If I understand your question, is it fair to say
that the long term--over the period that we see long term in
our trials is 1 year to 2 years, and you may be thinking about
long-term in terms of decades--we certainly know that over the
past 10 years, there has been a 20 percent drop in the
cardiovascular mortality rate, that we know that that has a
long-term benefit for patients because they are living longer.
We attribute those better mortality rates over the long
term to two factors. One factor is early detection and
treatment. So we want to support new technologies that will
allow us to detect disease, particularly atherosclerotic
disease, at an early stage.
Mr. Burr. Do you ever envision possibly a non-invasive way
to remove artery blockage?
Mr. Popma. I do think that these therapies are certainly
being developed; they are being discussed. There is a whole new
industry that is being created around the vulnerable
atherosclerotic plaque. People, not patients, who are in their
20's and 30's begin to have these atherosclerotic narrowings,
and there is an industry that is developing about detecting
these in their early stage.
Mr. Burr. If that were developed and we were able to
eliminate the hospitalization of bypass surgery or
catheterization, and we were able to eliminate the recovery
time, from a quality of care standpoint, would one not have to
assess the initial cost of that non-invasive procedure in
relation to what the savings are----
Mr. Popma. Absolutely.
Mr. Burr. [continuing] per incident rate?
Mr. Popma. We have a specific example of that, and that is
a cholesterol lowering therapy in patients who have heart
disease, and that therapy is likely beneficial in an absolute
level at age 20 or 30, just to lower the cholesterol as low as
we can to prevent the heart disease.
But its highest cost effectiveness ratio, where it really
benefits people the most, are in people who have established
disease and you are describing a gradient of threshold about
how much we put in at this point in time with how much we will
gain in the future, and there are numbers for that.
Mr. Burr. Is the culture such that that assessment can be
made today in the process that they go through at the Health
Care Financing Administration?
Mr. Popma. I think the answer to your question is yes, that
there are models that can be created. If you are asking me are
there specific data----
Mr. Burr. Could be, but does the model exist today?
Mr. Popma. Most of our models now, most of our clinical
trials now, when we evaluate the safety and efficacy of our new
therapies, incorporate a cost effectiveness limb to that, where
the hospital bills, the true hospital costs, the utilization of
resources are collected prospectively as part of the clinical
trials. And one of the radiation trials that was done was done
with very effective, if you will, cost effectiveness analysis
that was done prospectively.
So the short answer to your question is, yes, I think this
data is available. We certainly will be able to understand the
short-term costs, the costs over 1 to 3 years. It is a little
bit more difficult to predict what our costs are going to be
like 10 to 20 years later.
Mr. Burr. My time has run out and I guess my question
should have been do they use that data to go through the
calculations at HCFA that they do today? I just want to read
for the record--Mr. Chairman, I had the opportunity to talk to
a number of physicians before this hearing in North Carolina. I
want to read one of their quotes. I won't tell you who it was.
And it dealt with Medicare reimbursements, device
reimbursements.
And it said, ``Medicare might as well put an asterisk by
reimbursement, and the asterisk will read if you hold your
breath, stand on the moon on Monday, you will be reimbursed.''
And the purpose for reading that is to say that if we are
to enjoy the benefits that technology can bring to devices or
pharmaceuticals or to any area of the health care industry,
there has to be a belief within the ranks of the individuals
who will discover that new technology that they will go through
a predictable approval process, that their products will be
reimbursed fairly, and that as long as we put an asterisk by it
that you have to hold your breath and stand on the moon on
Monday and hope for reimbursement, we will not have the type of
effort that we could have in health care developing new
technologies that do save us money and do increase the quality
of care.
Mr. Popma. I agree.
Mr. Burr. If you disagree with that, I would be glad for
you to state it.
Mr. Popma. No.
Mr. Burr. Thank you, Mr. Chairman.
Mr. Greenwood. The gentleman's time has expired and the
Chair recognizes the gentlelady from California, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman. Let me start out by
congratulating you on chairing this very important
subcommittee. You know I respect you, we are friends, and I
wish you every success in your leadership here. Together with
our distinguished ranking member, Sherrod Brown, we can really
make a difference in some areas, given the jurisdiction and the
role of this subcommittee.
So thank you for holding this hearing. I think it is a very
important one. As the co-chair of the Medical Technology Caucus
here in the House of Representatives, I have a strong interest
in medical technology issues, and I am committed to improving
patient access to the marvels of modern medicine, as we know
them today. Of course, several members have made reference to
several parts of our health care system, and the breakthroughs
in technology that represent the high end of our health care
system and make us second to none in the world today.
Over the past couple of years, I have repeatedly expressed
my concern that bureaucratic barriers at HCFA are inhibiting
access to new technologies. According to the Lewin Group, it
often takes as long as 5 years for a product to make its way
through the HCFA maze, yet it only takes now 18 months to get
FDA approval.
The Federal Government can determine whether a product is
safe and effective in 18 months, but it takes 5 years to decide
whether we are going to pay for it. And delays are really not
the only problem. Illogical coding decisions are commonplace.
Over the last handful of months alone, I have had to intervene
repeatedly at HCFA to address coverage decisions that didn't
make sense and inhibited access.
One example was the pass-through payment list. In putting
together the list, HCFA listed specific product brands rather
than categories. And they really got themselves into a mess by
doing it this way. The result was that one company got lucky
because their product got reimbursed while their competitor's
product was not.
In another example, HCFA mistakenly crosswalked a test for
preterm labor to the wrong code, which resulted in an
unreasonably low reimbursement rate. My staff and I have spent,
again, an inordinate amount of time calling and writing HCFA
about these kinds of problems, and rather than continuing to
micromanage the agency, what I think we should be doing is
addressing the structural inefficiencies that produce what I
just described.
I led the effort in this committee last year to include in
the BBA give-back package two provisions aimed at streamlining
the coverage process at HCFA. I am very pleased that we were
successful in that effort, but it wasn't enough obviously. More
work needs to be done. I am committed to taking a comprehensive
approach to streamlining HCFA in much the same way that we did
with FDA in 1997.
It is a source of pride to me the work that not only the
Commerce Committee did, the work I was able to achieve as the
Democratic lead on the FDA reform bill along with Joe Barton
and many other members of the committee. Prior to that
legislation, FDA had many of the same problems that HCFA
currently suffers from. By modernizing the agency in a very
comprehensive way, we were able to dramatically improve the
approval times.
So, again, this is a source of pride. For those that say it
can't be done, it can. There are fiscal funding problems with
HCFA which we need to recognize, but I don't think the money
should come first. I think that we should streamline and
modernize the agency and then look at what that streamlining
actually is going to cost. Then the Congress needs to step up
to homeplate to provide the funding. I don't think it should be
done the other way around.
I don't think that we can continue to allow a two-tiered
system of health care where senior citizens are concerned. They
just shouldn't be subjected to that in the autumn of their
lives. The technologies that are coming out today are really
quite revolutionary. So if, in fact, they are not paid for,
they are not quote ``reimbursed,'' it is a double whammy for
them.
So I think that we have a ways to go. I have spent a lot of
legislative time and energy on these issues, and I really think
that this hearing and whatever else the I&O Subcommittee can
do, Mr. Chairman, in this area is going to serve the full
committee and its members really very well. I look forward to
working with you, our ranking member, and all the members here,
on this. I think this is an exciting time to be on the
committee and to move ahead with this. I think we are ready for
prime time on it. Thank you.
Mr. Greenwood. I thank the gentlelady for her comments and
for her general good nature, and the Chair recognizes the
gentlelady from New Mexico, Mrs. Wilson.
Mrs. Wilson. Thank you, Mr. Chairman. I also wanted to
thank you for holding this hearing, and while I was not able to
be here the first hour, I have read your testimony, which I
find interesting and also troubling, but the sad thing to me is
that the examples that you give of PET scans and radiation
therapy are not the exceptions. They are the rule, and I see it
in my own district.
I recently visited Rio Grande Medical Technologies, which
had developed detection technology for glucometers, for people
who have diabetes, and there are 7 million diabetics in this
country, more and more instances of juvenile diabetes and Type
II diabetes at younger ages. At least in my State of New
Mexico, with a high percentage of Hispanic Americans and Native
Americans, we are disproportionately affected by diabetes in
New Mexico.
That is 7 million people who are pricking their fingers
everyday when they don't need to, and maybe for adults that is
not a big deal, but if you have a child with diabetes, that
daily or twice daily or even three times daily pricking of your
fingers, to find one that doesn't hurt today so that you can
take that blood sample, matters. And it matters financially as
well.
The cost of diabetes in this country is astronomical, and
yet it takes forever to get a non-invasive infrared scanner
that looks through the tissue with an infrared beam that has
been approved by the FDA, to get a code from HCFA to be able to
use it. People spend $400 a year just on those little glucose
strips that you have to put the blood on. We should be able to
do this.
And the same is true for other technologies that are just
on the cusp and being developed even in my district in Sandia
National Laboratories and being transferred to the private
sector. We are about to be able to have smart scalpels that
will be able to detect cancerous cells from non-cancerous cells
while the surgeon is doing his surgery. What a marvelous
advance in health care, but we can't get HCFA to move fast
enough to give us the codes.
[Chart shown.]
Mrs. Wilson. There is a chart I think the staff has, and
the thing that concerns me about this is that HCFA and Champus
seem to use one of the same organizations--it is called TEC--to
evaluate the effectiveness of certain medical technologies, and
it is also used, interestingly, by private industry, Blue
Cross/Blue Shield, Prudential, Humana, all the major health
insurance companies, and they also use the same studies to
decide whether to cover it in private insurance.
Certainly, this will be a question for HCFA, but from your
perspective why is it--why is it--that HCFA takes so much
longer to approve a new technology than its counterparts in the
private sector? I mean from your perspective in working with
these folks, why?
Mr. Shreve. I think part of the answer is they haven't been
told they have to do that, that Congress has to tell them,
look, this is important, this is important for Americans on
Medicare, you have to come up with a streamlined way of doing
this and you have to make it work. If you are not told to do
it, you are not compelled to do it. It is not simple; this
business of technology assessment, as I said, is not an exact
science, and it is in evolution. But if there is a mechanism of
recognizing new technologies, in moving that through, similar
to what was done with FDA, and the FDA reform. I mean it was
done there. HCFA may be more complicated. I don't know. But we
know we can do this and we know we can streamline and get
technology and drugs to the market faster, to the patients
faster.
Mr. Popma. I am risking being at odds with some of the
members with this because I actually think that the process is
a quantitative process that was based on sound reason about why
one would establish a code, accumulate what physicians are
doing and what the incremental costs of hospitals are, and then
prospectively reimbursing that.
I don't disagree personally with that concept of paying the
hospitals back for the codes based on their incremental
benefit. Where I think we would all agree the problem has been
is in how rapidly the codes are established, how rapidly there
is a provisional reimbursement for codes based on our best
guess, and whether or not there can be a reevaluation system as
time goes on about whether that truly reflects the incremental
costs that the hospitals are actually bearing.
So I think, to answer your question, there is a delay, and
it can't go on for--my opinion--and it has to be expedited in a
very, very rapid way, and there are some temporary measures
that I think we would all like to propose to do that.
But the process has been a quantitative one that has been
based on the real hospital expenditures, not on the value of
the agents, but what has been spent with that money. And I
think it would be not correct to criticize HCFA for what they
have done in the past because that process has been set up to
be fair and to be quantitative and to reimburse the hospitals
exactly what they spent.
I think the only criticism that I could personally make is
that the time lag has been entirely too long, and we need some
immediate relief, almost within the timeframe of the FDA
approval, to provide reimbursement, but I think a reevaluation
process almost similar to what HCFA has established is not
necessarily a bad thing.
Mrs. Wilson. Thank you.
Mr. Greenwood. The Chair recognizes the gentleman, Mr.
Whitfield, for questions.
Mr. Whitfield. Thank you very much, Mr. Chairman. This
question is for Dr. Shreve regarding PET. Now, it is my
understanding that utilizing PET in helping to diagnose certain
women-exclusive diseases like breast cancer, ovarian cancer,
cervical cancer, so forth, is not covered by Medicare; is that
correct?
Mr. Shreve. Not by Medicare, yes.
Mr. Whitfield. But there are certain diseases that both men
and women contract that is covered?
Mr. Shreve. Yes, there are currently six cancers that are
covered which are relatively common cancers to both men and
women.
Mr. Whitfield. Okay.
Mr. Shreve. They are major cancers, and for that reason,
there is more data on those cancers. By major, I mean they----
Mr. Whitfield. And I notice that you say that HCFA has
deferred to the MCAC Diagnostic Imaging Panel for review in May
of 2001 the use of this for Alzheimer's disease only? Is that
right?
Mr. Shreve. And breast cancer.
Mr. Whitfield. And breast cancer.
Mr. Shreve. They picked two out. We asked for broad
coverage for cancer, for example.
Mr. Whitfield. Right.
Mr. Shreve. And we are still on this path of cancer by
cancer. So let us say they approve breast cancer in the spring
of 2001, we will not really have coverage probably toward the
end of the year. It usually takes them awhile to get to the
point, okay, reimbursement starts. Then how long is it going to
take for ovarian cancer?
You see the biological principle of PET is the same. I mean
these are different cancers from different parts of the body,
but the aberrations in metabolism are the same. So in practice,
I mean I use PET for ovarian cancer all the time.
Mr. Whitfield. Right.
Mr. Shreve. Just like I do for colon cancer so this doesn't
make sense that we have all of this information dating back
over two decades of the basis of metabolism changes in cancer.
We have a technology that detects that. So there is this
commonality to these cancers, and we proposed that to HCFA. We
said, look, we can't spend 10 years going disease by disease by
disease by disease. We have to reach a point somewhere, not
when you make the first picture, not when you do the first
hundred patients, but somewhere, and we thought 15 to 20,000
patients was a pretty reasonable number, where we say, look,
the general underlying principles here indicate this should be
used for all the cancers.
Now, it doesn't work in every cancer. I already know that.
There are certain cancers that PET doesn't work very well, at
least with FDG. But we already know where that principle
applies with FDG. And another thing is with reimbursement, the
technology starts to evolve. The scanners get better. We have
tracers now that are better for breast cancer than FDG that we
are working on. All of this is accelerated, and instead of
waiting 10 years for an improvement in diagnosing breast
cancer, it could be 3 years.
So that is the real problem. These breakthrough
technologies, we cannot wait for this slow process. This road
from bench to bedside cannot be curvy with detours and
potholes. We got to get there because this really changes
people's lives.
Mr. Whitfield. Well, in these co-called breakthrough
technologies that you and Dr. Popma have both referred to,
while it may be breakthrough technology, it is relatively old
now in both instances, I assume. I mean PET has been used--
what--10 years or so?
Mr. Shreve. Well, yes and no. I mean the principle is old.
The principles of biochemistry we have understood for quite
awhile. The scanner technology has been basically going nowhere
for 10 years. The scanners have not changed much because
industry didn't feel like it was worth investing.
Mr. Whitfield. Right.
Mr. Shreve. Now, already with some reimbursement,
investments are being made and the capability of these devices
will move to much higher levels and give us much more accuracy.
Furthermore, at least with PET, because it is a molecular form
of imaging, it is not just FDG, this one tracer, that we are
using in general for cancer. We can look at virtually any
metabolic pathway, and so with investment there are other
tracers and other things we can look at in other diseases.
For example, Parkinson's disease, we can detect it very
early and detect the effective treatment. So, again, a
breakthrough technology is something that is a fundamentally
new principle. And once you have identified that, you have
identified there is tremendous potential. The National
Institutes of Health has said molecular imaging such as PET is
an area of extraordinary potential, and so they set aside a lot
of money for research.
The NIH has been able to do this. And if HCFA could do this
and streamline this process, there would be tremendous benefits
for the whole country.
Mr. Whitfield. Like we said, a lot of private insurance
companies reimburse for the use of this technology. So I would
not be oversimplistic in saying that perhaps one reason HCFA is
not doing it is simply cost?
Mr. Shreve. That is probably a reasonable assumption. As I
said in my written statement, there is a problem of we view
anything ``new'' expensive, as something that will cost more,
and I can understand that, because there is what we call the
``woodwork effect'': when something new comes out, everybody
wants it. And there is a piling on effect, at least in my
specialty, where we tend to do one thing and add something on
and add something on, and sometimes it doesn't make sense.
But there are bigger problems in self-referral and fraud in
terms of costs. Please don't slow down the movement of new
technology into patient care just because it is perceived as
being expensive. There are other places where there is an awful
lot money to be saved.
Mr. Whitfield. Did you want to say something, Dr. Popma?
Mr. Popma. I was just going to note that the radiation
brachytherapy piece is relatively new technology in terms of
its advancement. The stents that we have been using now, we
have really only had available for the last couple of years,
and this therapy has been only available for 6 months.
We do need immediate relief for this therapy because before
it is implemented within programs outside of the initial sites
that did this as investigation, it has to make sense
financially for the hospitals to invest in this program and
currently right now it doesn't make sense to do that.
Mr. Whitfield. Yes.
Mr. Popma. So I think patients are, in fact, being denied
care because the institution of these programs has not been
forthcoming. So I think that they may be two technologies that
are different, PET versus radiation brachytherapy. Radiation
brachytherapy is new and I think that we do need immediate
relief for that.
Mr. Whitfield. Thank you.
Mr. Greenwood. The Chair thanks the gentleman. The Chair
thanks the panelists for your testimony and hope that you feel
assured that we will use the testimony that you have offered
today and the answers to the questions you have provided to
helpfully improve HCFA. And you are dismissed.
And we would call forward the second panel. It consists of
Dr. Jeffrey Kang, Director of the Office of Clinical Standards
and Quality at the Health Care Financing Administration; Murray
N. Ross, Ph.D., Executive Director of Medicare Payment Advisory
Commission; and Clifford Goodman, Ph.D., Senior Scientist for
Medical Technology at the Lewin Group.
Good afternoon, gentlemen. Thank you for your presence. I
am assuming that you are aware that the committee is holding an
investigative hearing and in doing so has had the practice of
taking testimony under oath. Do any of you have objections to
testifying under oath?
[No response.]
Mr. Greenwood. And I notice, Dr. Kang that you have with
you Dr. Miller who is not on the witness list. Dr. Miller, will
you be testifying as well?
Mr. Miller. I will be taking questions, yes.
Mr. Greenwood. You will be taking questions. Then you have
no objection to being sworn in as well.
Mr. Miller. No, I don't have an objection.
Mr. Greenwood. The Chair advises you that under the rules
of the House and the rules of the committee, you are entitled
to be advised by counsel. Now do you desire to be advised by
counsel during your testimony today?
[No response.]
Mr. Greenwood. I take that as a negative. In that case,
would you please rise and raise your right hand and I will
swear you in.
[Witnesses sworn.]
Mr. Greenwood. Thank you. You are now under oath and you
may now give your 5 minute summary of your written statement,
and we will begin by Dr. Kang. Thank you for being here.
TESTIMONY OF JEFFREY KANG, DIRECTOR, OFFICE OF CLINICAL
STANDARDS AND QUALITY, ACCOMPANIED BY MARK MILLER, ACTING
DIRECTOR, CENTER FOR HEALTH PLANS AND PROVIDERS, HEALTH CARE
FINANCING ADMINISTRATION; CLIFFORD GOODMAN, SENIOR SCIENTIST
FOR MEDICAL TECHNOLOGY, THE LEWIN GROUP; AND MURRAY N. ROSS,
EXECUTIVE DIRECTOR, MEDICARE PAYMENT ADVISORY COMMISSION
Mr. Kang. Chairman Greenwood, Chairman Bilirakis, Mr.
Brown, Mr. Deutsch, distinguished committee members, thank you
very much for inviting us here today to discuss Medicare
coverage issues. Ensuring beneficiaries have access to high
quality health care including access to new, proven, medically
beneficial technologies is a key goal for our agency.
And I want to assure you that we at the Health Care
Financing Administration care deeply about our beneficiaries.
On a personal note, that is especially true for me as a
practicing geriatrician of 10 years from Boston at the Harvard
Medical School at Beth Israel Hospital.
We know that as we have heard from the previous testimonies
that there is very real impact to every decision that we make,
and I want to thank each of them for personally sharing their
stories.
Our goal in the Medicare coverage process is that it is
evidence-based, as well as more open, understandable and
predictable for beneficiaries, providers, manufacturers,
Congress and the public. We are proud of the success that we
have achieved thus far in achieving that innovations in health
care are readily available for our more than 39 million
Medicare beneficiaries, and we look forward to working
cooperatively with Congress as we implement important
modifications to the Medicare coverage process that were
recently enacted in the Benefits Improvement and Protection Act
last year.
We face a difficult challenge as we strive to assure high
quality health care for our beneficiaries. We must balance
multiple and sometimes competing interests as we work toward
this goal. We must act as a prudent purchaser on behalf of our
beneficiaries and hundreds and millions of taxpayers. We must
pay providers adequately and fairly under the law while
protecting the Medicare trust funds and ensuring quality care
for the Medicare beneficiaries.
We also must consider and incorporate the views and
interests of many stakeholders. At the same time, we must
carefully assess the potential impact of our coverage
decisions. For example, we must ensure that decisions do not
discourage the use of valuable new technology or, on the other
hand, encourage the use of technologies that are unproven,
ineffective or harmful. And we must be careful to ensure that
decisions do not create unique advantages or financial
incentives that encourage the use of a particular technology
simply because it is new.
We firmly believe that Medicare's coverage process must be
clear and understandable to beneficiaries, providers,
manufacturers and the public, and we have taken a number of
positive steps in the last 2 years in achieving this shared
goal. They include creating new administrative procedures,
allowing any member of the public to request a national
coverage policy decision, and instructing our contractors to do
the same.
I have attached for the committee's consideration a list of
the 23 national coverage decisions that we have made under this
new process that has been in existence for the last 1\1/2\
years.
We also established a Medicare Coverage Advisory Committee
consisting of 100 members including nationally recognized
experts in a broad range of medical, scientific and
professional disciplines as well as consumer and industry
representatives. The committee helps us facilitate public input
as well as scientific and medical expertise into our national
coverage decisions, particularly on very complex issues.
Finally, we created an internet website where the public
can get updated information on the status of any pending
national coverage decision including information when a
determination is expected and the rationale behind every
coverage decision.
We firmly believe that Medicare coverage process must be
clear, understandable and predictable for all those involved.
We continue to make important progress toward this goal and we
look forward to continuing to work cooperatively with all of
you on this critical issue.
We thank you for holding this hearing, and we are happy to
answer any of your questions. I will answer the coverage and
clinical questions, and Dr. Mark Miller, the Acting Director of
our Center for Health Plans and Providers, will answer
questions related to coding and payment.
[The prepared statement of Jeffrey Kang follows:]
Prepared Statement of Jeff Kang, Director, Office of Clinical Standards
and Quality, Health Care Financing Administration
Chairman Bilirakis, Chairman Greenwood, Ranking Member Brown,
Ranking Member Deutsch, thank you for inviting me here today to discuss
Medicare coverage policy. I appreciate the opportunity to discuss with
you this critically important aspect of the Medicare program. Ensuring
beneficiaries have access to high quality health care, including access
to new, proven, medically beneficial technologies, is a key goal for
our Agency.
Many medical device manufacturers and providers have complained
that our coverage process has failed them and we are preventing
beneficiaries from getting the best care available. They see it as
being slow, unresponsive, and full of unnecessary barriers. We
recognize that our process is not perfect and in the past we have, at
times, been slower than necessary to incorporate new technology into
the Medicare program. We also know that our contractors' involvement in
the coverage process has been closed, confusing, and contradictory. We
have listened to these criticisms from the provider community and
Members of Congress. As a response to these critics, we evaluated where
the coverage process was difficult to understand or unpredictable and
have taken appropriate steps to address these criticisms.
Our goal is a Medicare coverage process that is evidence-based, as
well as more open, understandable, and predictable for beneficiaries,
providers, manufacturers, Congress, and the public. We are proud of the
success we have achieved thus far in assuring that innovations in
health care are readily available for our more than 39 million Medicare
beneficiaries. In addition, we will be implementing important
modifications to the Medicare coverage process that were included in
the recently enacted Medicare, Medicaid, and State Children's Health
Insurance Benefits Improvement and Protection Act of 2000 (BIPA). We
look forward to working cooperatively with the Congress as we implement
these improvements.
background
Medicare law provides for broad coverage of many medical and health
care services. Rather than providing an all-inclusive list of covered
medical devices, surgical procedures, or diagnostic services or those
that are excluded from coverage, the law generally provides for broad
coverage of categories of services and excludes only those items or
services that are ``not reasonable and necessary'' for the diagnosis
and treatment of illness or injury for Medicare beneficiaries.
In most instances, new medical technologies are integrated
seamlessly into existing Medicare payment systems as soon as the
technologies are approved by the Food and Drug Administration and
available in the marketplace. Most new technologies are similar to
existing technologies, or are considered integral to existing
procedures and, therefore, do not require new coverage decisions or new
coding mechanisms for payment. Providers use already established codes
to bill for the item or, under Medicare's prospective payment systems,
the cost of the technology is simply accounted for in the bundled
payment amount made to the provider. Bundling of services provides
flexibility to practitioners and other providers in choosing the most
appropriate technology based on the patient's needs within the payment
amount. And it encourages practitioners and providers to use the most
efficient technology available when the available clinical options
might similarly benefit the patient.
For a small number of new technologies, the item or service may be
a ``breakthrough technology'' and be clinically different from existing
treatment options. There are certain limited instances when these
breakthrough technologies are subject to our coverage, coding, and
payment determination processes. Generally, this more thorough review
occurs when there are clinical questions about these technologies that
are of particular significance to the Medicare population, and warrant
a more careful evaluation. However, these questions are usually raised
only if there is a need for a new code for the technology or there is a
question as to whether the cost of the new technology exceeds the
payment provided under the existing coding structure.
balancing interests and ensuring access
We face a difficult challenge as we strive to assure high quality
health care for our beneficiaries. We must balance multiple, and
sometimes competing, interests as we work towards this goal. We must
act as a prudent purchaser on behalf of our beneficiaries and hundreds
of millions of taxpayers. We must pay providers adequately and fairly
under the law while protecting the Medicare trust funds and ensuring
quality care for Medicare beneficiaries. We also must consider and
incorporate the views and interests of many stakeholders, including
beneficiaries, providers, manufacturers, private health plans,
taxpayers, Congress, and others.
At the same time, we must carefully assess the potential impact of
coverage decisions. For example, we must ensure that decisions do not
discourage the use of valuable new technology or, on the other hand,
encourage the use of technologies that are unproven, ineffective, or
harmful. Furthermore, we must be careful to ensure that decisions do
not create unique advantages or financial incentives that encourage the
use of a particular technology simply because it is new.
incorporating new technology
To the extent that the incorporation of a new technology or service
requires a coverage decision under Medicare, the vast majority of these
decisions regarding coverage are made locally by our contractors--the
private companies that, by law, process and pay Medicare claims. New
technologies flow easily into the Medicare system through the
flexibility the coverage process affords to the local contractor
medical directors. In the absence of a national coverage determination,
these local medical directors have the discretion to make local
coverage decisions about particular technologies. Local coverage
policies are developed and set by the contractor's medical directors
with the support and input of provider and supplier representatives.
They may result in approval of individual claims for new technologies
or the establishment of a local coverage policy. In November 2000, we
issued instructions to our contractors standardizing the process for
making local coverage policies and ensuring that the process is open
and includes input from the public.
We also have the authority to set national Medicare coverage
policies, but the actual number of these decisions is quite small.
National coverage decisions can be conclusive and cover or not cover
medical items or services. Alternatively, they can leave coverage
decisions for medical items or services to local contractors. Finally,
they also can put evidence-based limits on coverage, for example,
limiting coverage to particular clinical conditions or situations. When
a national decision is issued, it is binding on all Medicare
contractors, Medicare+Choice plans, peer review organizations, and
Administrative Law Judges. Importantly, the locally based decision-
making process allows payment for new technologies to continue at the
local level, while decisions are being considered or implemented for a
particular technology or service at the national level.
ensuring appropriate coding systems
The vast majority of new technologies are incorporated into
Medicare's existing coding structure. However, in some instances,
either as a result of a national or local coverage policy for a new
technology or because the cost of a covered new technology is not
adequately captured in the existing codes, the creation of new codes is
necessary. We recognize the desire of manufacturers to receive more
rapid assignment of codes for emerging technologies, but it is equally
important to recognize that many other stakeholders are involved in
assigning national codes and computing national payments.
The need for more rapid assignment of permanent codes must be
carefully balanced with the interests of our provider partners,
particularly hospitals and physicians offices, which seek stability in
coding and payment. Frequent changes and updates to codes can disrupt
claims processing systems, raise potential compliance issues for
providers and claims processors, increase costs to physician offices
and hospitals for re-training and system maintenance, and create
general uncertainty in overall payment levels. In addition, we must
ensure that coding systems used by providers are clinically coherent
and appropriate. We also must be certain that the private and public
insurers, who have historically relied on shared systems for coding and
payment, have an appropriate level of stability in coding and payment.
These multiple interests prevent us from unilaterally assigning
permanent codes for new technologies and require that we work
cooperatively with the many stakeholders as coding changes are made.
Moreover, the Health Insurance Portability and Accountability Act will,
in the near future, require greater standardization and consultation
across the health care industry. Therefore, we must be careful to
develop processes that meet these future requirements, as well as the
ongoing needs of our beneficiaries and health care partners.
improving the coverage process
We firmly believe that Medicare's coverage processes must be
transparent and understandable to beneficiaries, providers,
manufacturers, and the public. We have taken a number of positive
steps, over the last several years, in achieving this shared goal. And
we are making solid progress, including:
Creating a Clear and Open Process. In April 1999, we
established new administrative procedures that allow any member
of the public to request a national coverage policy decision.
Action is taken on most requests for a national coverage
determination within 90 days of the request and the public is
kept informed of progress in making determinations through our
coverage website. In November 2000, we instructed our
contractors to institute a similarly open process for
developing local coverage policies. A list of the 23 national
coverage decisions we have made under this new process is
attached to my testimony.
Establishing the Medicare Coverage Advisory Committee (MCAC).
The committee, established in June 1999, is made up of over 100
members, including nationally recognized experts in a broad
range of medical, scientific, and professional disciplines, as
well as consumer and industry representatives, who serve a
vital role in making the coverage process more open and
accountable. Through open meetings, information sharing, and
dialogue, the committee helps facilitate public input, as well
as scientific and medical expertise, into national coverage
policy determinations on particularly complex issues.
Creating an Internet Website. Our new coverage website
(www.hcfa.gov/coverage) gives all members of the public,
including beneficiaries, providers, and manufacturers, ready
access to up-to-date information on the status of any pending
national coverage decision, including information such as when
a determination is expected, as well as the rationale behind
each coverage decision. The website also provides detailed
records of the issues considered for each coverage decision,
including all of the evidence and the major steps taken in the
review process.
Developing New Coverage Criteria. Working with the public, we
are developing new criteria that will serve as a framework for
health care sector-specific guidance on Medicare coverage
policy. These criteria will help providers and our contractors
more easily determine whether a given treatment or service is
``reasonable and necessary'' and, therefore, covered under
Medicare. In May 2000, we published a Notice of Intent
regarding a proposed regulation on the new criteria. And, in
September 2000, we held a Town Hall meeting for providers to
share opinions, information, and advice with us. Taking the
valuable suggestions we have received, we are continuing to
work on a proposed regulation, on which we will again invite
public comment, before we issue the final criteria.
recent legislative changes
The recently enacted BIPA, includes important changes to the
Medicare coverage process for beneficiaries, manufacturers and
providers. For example, it enhances the fee-for-service appeals process
for beneficiaries and provides an avenue to appeal both local and
national coverage decisions. In addition, BIPA modifies the outpatient
prospective payment system pass-through mechanism for devices, a
mechanism that was created in the Medicare, Medicaid, and State
Children's Health Insurance Program Balanced Budget Refinement Act of
1999 (BBRA). BIPA changes the ``device-specific'' pass-through, as
called for in BBRA, to one based on ``categories'' of devices. We are
currently consulting with the device industry and providers on drafting
the initial list of device categories, and we expect to meet the April
1 deadline for finalizing this list. We are aware of Congress' concerns
regarding the operational difficulties of the pass-through and look
forward to working with you to address any needed changes.
conclusion
We recognize that there is considerable concern regarding the way
in which HCFA and its contractors oversee the coverage process. Many of
these concerns are well founded. However, we hope that our new
processes and provisions of the new BIPA legislation will improve our
administration of this critical part of the Medicare program. And of
course, as we begin the process of modernizing Medicare, we are going
to carefully examine ways to make the program more responsive to
advances in technology and medical practice, to ensure beneficiaries
get the highest quality care.
A clear, understandable, and predictable Medicare coverage process
for beneficiaries, providers, manufacturers, Congress, and the public
is critically important. We continue to make important progress towards
this goal and we look forward to continuing to work cooperatively with
all of you on this critical issue. We thank you for holding this
hearing, and we are happy to answer your questions.
Mr. Greenwood. Dr. Kang, thank you for your testimony.
Dr. Goodman, please.
TESTIMONY OF CLIFFORD GOODMAN
Mr. Goodman. My name is Cliff Goodman, and I am with the
Lewin Group, a health care policy and management consulting
firm, based on Falls Church, Virginia.
The Medicare program exerts significant influence on
patient access to new medical technologies. Contrary to common
perception, approval of a new technology by the FDA does not
guarantee that it will be available to Medicare beneficiaries.
By controlling coverage--that is whether or not payment will be
made--and reimbursement, which is the level of payment,
Medicare can facilitate or impede patient access to new
technology.
Figure 1, seen to your right, only hints at the complexity
of the process. Gaining market approval for these technologies
from the FDA requires meeting that agency's generally stringent
criteria for safety and efficacy. Now, the FDA may be the
toughest regulatory agency around, but there is only one FDA.
In contrast, new technologies face many government and private
sector payers who make largely independent payment decisions.
Now, Medicare is not a single entity. In fact, most
coverage decisions are made by local Medicare contractors
including about 36 Part A Fiscal Intermediaries and about 42
Medicare Part B Carriers.
HCFA makes certain national coverage decisions that
supersede any local coverage decisions. HCFA may elect to make
a national coverage decision when a technology is costly and/or
has a large impact on the Medicare program, or when there is
significant variation in local Medicare coverage policies.
As shown in Figure 2, to your right, the pathway to market
can be time consuming as well. For the premarket approval, or
PMA, devices which typically include the more advanced ones,
the time from product to concept to FDA market approval can
take several years or more. Following that, securing Medicare
payment involves really three types of steps: coverage, coding,
and reimbursement.
Now, for many devices that resemble existing ones, for
which appropriate codes do exist that are adequately
reimbursed, these steps can be perfunctory. But it is just
those more advanced technologies that offer greater benefits
and that don't fit existing molds that are more likely to
encounter the higher hurdles to patient access and adequate
payment.
With Medicare, the systems for making decisions about
coverage, coding and reimbursement are separate and really
largely uncoordinated, and as a result, yes, it can take 15
months to 5 years, and in some cases longer to add new
technologies to Medicare.
It is important to note that some of the coding systems
used in Medicare that you have heard about today are managed
fully or in part by organizations outside of HCFA, for example,
the CPT codes for medical procedures that are developed by the
American Medical Association. Coding matters. It is a dry
subject, but it matters.
Assigning an effective technology to a code whose payment
is less than the cost of providing the technology in the first
place can discourage the use of the technology and discourage
further innovation. When this arises for a technology, for
instance, in the inpatient prospective payment system, we call
it a DRG loser.
There are reasons why, and there are truly reasons why FDA
approval is not necessarily accepted as sufficient for payment
by Medicare or other payers. For example, the technology may
not fall under a covered benefit such as when screen
technologies in general aren't covered by quite a few payers,
or the beneficiary population, for example, the elderly and
Medicare in this case, may not have been adequate represented
in existing clinical studies on the technology. Also, any
health benefit of a new technology might not be worth its
additional cost in the view of the payer.
Now, here are four overarching observations of the current
Medicare process:
(1) The Medicare process for coverage, coding and payment
for many medical technologies can be inefficient and
unnecessarily time consuming, particularly for the novel or
more breakthrough technologies.
(2) HCFA's redesigned national coverage process does offer
some important and welcomed improvements in transparency and
responsiveness, and the gentleman to my left, Dr. Kang, has had
much to do with these improvements. However, the process
including the function and reporting of the Medicare Coverage
Advisory Committee, or the MCAC, is really still under
construction and remains unpredictable.
(3) Medicare evidence requirements and coverage criteria
are increasing in general and remain unpredictable or ambiguous
in certain important ways. Now, evidence-based coverage policy
is--is--absolutely necessary, but the current ground rules,
including as provided by HCFA in the notice of intent issued
last May, are insufficient.
(4) While its transparency and openness could be improved,
the local coverage process by the Part A Fiscal Intermediaries
and the Part B carriers that I mentioned still remains a
critical avenue for obtaining coverage, particularly given the
uncertainty about the national coverage process as it now
stands.
Let us be clear about it. Evidence-based decisionmaking for
medical technology can be complex. You cannot make responsible
coverage policy overnight for, say, use of PET scans for
diagnosing multiple types of cancer, at different potential
levels of severity, in diverse patient populations, and for
which the existing clinical evidence may be, in fact, weak or
inconclusive.
Nevertheless, it remains incumbent upon payers, including
Medicare, to establish evidence requirements and related
coverage criteria that are appropriate for different types of
technology, and transparent, and implemented consistently in a
timely manner. Now that is a tall order. But it is your order
if you are responsible for health care coverage for nearly 40
million people at nearly $260 billion a year. It is also our
responsibility.
There are in place--this is the good news--certain building
blocks or models for a smoother, more predictable transition of
new technology from investigational to covered status.
One is the 1995 Interagency Agreement between FDA and HCFA
that makes certain Category B investigational devices eligible
for Medicare payment during clinical trials. Good move.
A recently implemented executive order provides Medicare
payment for the routine patient care costs of beneficiaries
enrolled in clinical trials of new technologies.
Third, the BBRA of 1999 established temporary pass-through
payments for certain new technologies under the outpatient
prospective payment system.
And four, the Benefits Improvement and Protection Act, or
BIPA, 2000 requires HCFA to establish a mechanism to adopt new
medical services and technologies under the inpatient
prospective payment system.
What do these have in common? They all provide conditional
or temporary payment for promising health care technologies
while evidence can be collected to support well-founded
coverage coding and reimbursement policies.
In closing, here are five ways to buildupon ongoing efforts
to improve the Medicare coverage process in the way it
deserves.
First, FDA and HCFA should work closely on better alignment
of the evidence requirements for market approval by the FDA and
payment by Medicare. This greater alignment can reduce costs
and the time line for making new technologies available to
patients.
Two, HCFA and its MCAC should work with industry and others
to develop evidence requirements and coverage criteria that are
appropriate for different types of technologies.
Three, HCFA and the MCAC, and this is very important,
should move promptly to establish clear and accountable lines
of authority and review tracks.
Four, the process for assigning and updating codes should
be made more frequent and adaptive to the diversity and costs
of new technologies. Remember, HCFA cannot do this alone.
And five, HCFA should devote sufficient resources and
expertise to technology assessment for the big job of
assembling and interpreting evidence in support of Medicare
coverage decisions.
Well, the Health Care Financing Administration is the
world's single largest payer for health care--the world's.
Recent improvements notwithstanding, this most influential
gatekeeper for new technology must strengthen and streamline
its process on behalf of its beneficiaries and the nation.
Thank you.
[The prepared statement of Clifford Goodman follows:]
Prepared Statement of Clifford Goodman, The Lewin Group
Good afternoon, Chairmen Bilirakis and Greenwood, Ranking Members
Brown and Deutsch, and other Members of the Committee. My name is Cliff
Goodman, and I'm a senior scientist at The Lewin Group, a health care
policy and management consulting firm based in Falls Church, Virginia.
Complex and Time-Consuming Pathway to Patient Access
As the nation's largest health care payer, the Medicare program
exerts significant influence on patient access to new medical
technologies. Contrary to common perception, approval of a new
technology by the Food and Drug Administration (FDA) does not guarantee
that it will be available to Medicare beneficiaries. By controlling
coverage (whether or not payment will be made) and reimbursement (the
level of payment), Medicare can facilitate or impede patient access to
new technology.
Continued growth in demand for health care and for cutting-edge
technologies in particular are focusing national attention on the
pathway to patient access. Figure 1, attached, only hints at the
complexity of this process. Gaining market approval for these
technologies from the FDA requires meeting that agency's generally
stringent criteria for safety and efficacy. The FDA is one of the
toughest regulatory agencies around, but there is only one FDA. After
overcoming that regulatory hurdle, new technologies face not one, but
many government and private sector payers who make largely independent
coverage and reimbursement decisions affecting access.
Of course, Medicare is not a single entity. In fact, most coverage
decisions are made by local Medicare contractors, including about 36
Part A Fiscal Intermediaries (FIs) and about 42 Part B Carriers,
including four Durable Medical Equipment Regional Carriers (DMERCs).
National coverage decisions are made by HCFA and must be observed
by all Medicare Carriers and FIs. National coverage decisions supersede
any local coverage decisions. HCFA may elect to make a national
coverage decision when a given technology is costly and has a
significant impact on the Medicare program, or when there is
significant variation in local Medicare coverage policies.
As shown in Figure 2, the pathway to market can be time consuming.
For Premarket Approval (PMA) devices, which typically include the more
advanced ones, the time from product concept to FDA market approval can
take several years or more. Following that, securing Medicare payment
involves three types of actions: coverage, coding, and reimbursement.
For a new device that resembles an existing one for which an
appropriate code exists that is adequately reimbursed, these actions
can be perfunctory. But it is those more advanced technologies that
offer greater benefits and don't fit existing molds that are more
likely to encounter higher hurdles to patient access and adequate
payment. Within Medicare, the systems for making decisions about
coverage, coding, and reimbursement are separate and largely
uncoordinated. As a result, it can take 15 months to 5 years, and in
some cases longer, to add new technologies to Medicare.
A complicating twist here is that some of the coding systems used
in Medicare are managed fully or in part by organizations outside of
HCFA, for example, the Common Procedure Terminology (CPT) codes for
medical procedures that are developed and maintained by the American
Medical Association.
Whether it be CPT codes for physician services, diagnosis related
groups (DRGs) for the inpatient Prospective Payment System (PPS), or
ambulatory payment classification groups (APCs) for the outpatient PPS,
coding matters. Assigning an effective technology to an inappropriate
code, or to a code whose payment is less than the cost of providing the
technology, can discourage use of the technology, limit patient access,
and discourage further innovation. In fact, when this arises for a
technology in the inpatient PPS, we call that technology a ``DRG
loser.''
FDA Approval Not Sufficient for Payment
To be sure, there are reasons why FDA approval is not accepted as
sufficient for payment by Medicare or other payers. These may include
the following.
The technology may not fall under a covered benefit (e.g.,
screening procedures may not be covered).
Payers care not just about efficacy (``Can it work under ideal
circumstances?'') but about effectiveness (``Does it work in
actual clinical settings?'').
The beneficiary population may not have been adequately
represented in existing clinical studies.
Clinical studies done for FDA approval may have compared the
new technology to placebo (or no intervention), instead of to
the existing standard of care.
Follow-up times may not have been sufficient to capture
natural disease episodes and potential adverse events.
Any additional health benefit of a technology might not be
worth its additional cost.
Even if covered, a technology might not be medically necessary
for particular patients.
Overarching Observations of the Medicare Coverage Process
Based in part on a study that we conducted recently at the request
of AdvaMed, here are five overarching observations of the Medicare
coverage process.1
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\1\ The Lewin Group. Outlook for Medical Technology Innovation. The
Medicare Payment Process and Patient Access to Technology. Washington,
DC: AdvaMed, 2000.
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1. The Medicare process for coverage, coding, and payment for many
medical technologies can be inefficient and time-consuming,
particularly for novel or ``breakthrough'' technologies.
2. HCFA's redesigned national coverage process offers some
important and welcomed improvements in transparency and responsiveness.
However, the process, including the function and reporting of the
Medicare Coverage Advisory Committee (MCAC), is still under
construction and remains unpredictable and time-consuming.
3. Medicare evidence requirements and coverage criteria are
increasing in general, and remain unpredictable or ambiguous in certain
important ways. Evidence-based coverage policy is absolutely necessary,
but the ground rules, including as provided by HCFA in the Notice of
Intent issued in May 2000, are unclear and insufficient for the
diversity of new technology.
4. While its transparency and openness could be improved, the local
coverage process by Part A FIs and Part B Carriers remains a critical
avenue for obtaining coverage, particularly given uncertainty about the
national coverage process.
5. Problems inherent in the Medicare coverage, coding, and payment
systems can influence provider behavior, impede patient access to
health care technology, and affect the course of innovation.
Let's be clear about it; evidence-based decision making for medical
technology can be complex. Even setting the matter of cost aside, you
don't make responsible coverage policy overnight for, say, the use of
PET scans for diagnosing multiple possible types of cancer, at
different sites in the body, at different potential levels of severity,
in diverse patient populations, and for which the existing clinical
evidence may be weak or inconclusive. Then consider that many of the
PET scans will generate the need for more invasive tests, and that
treatments for these cancers may have limited effectiveness and severe
side effects.
Nevertheless, it remains incumbent upon payers to establish
evidence requirements and related coverage criteria that are
appropriate for different types of technology, transparent, and
implemented consistently in a timely manner. That is a tall order. But
if you're responsible for health care coverage for nearly 40 million
people at $257 billion per year, it's yours. And ours.
Build Upon Encouraging Developments
Historically, the coverage of new technologies has been, at least
officially, characterized by a great binary divide: coverage or non-
coverage. The Catch-22 has been that payers would not cover a new
technology until there was enough patient data on which to base an
informed coverage policy; however, it is difficult to accumulate such
data unless a payer is covering the technology. The good news is that
there are now in place certain building blocks or models for a
smoother, more predictable transition for new technologies across that
binary divide.
The 1995 Interagency Agreement of FDA and HCFA makes certain
``Category B'' investigational devices eligible for Medicare
payment during clinical trials being conducted toward FDA
approval.
There are selected instances of conditional coverage, in which
research organizations and payers coordinate and pay for
clinical trials of new technology, such as the National
Emphysema Treatment Trial involving the National Heart, Lung
and Blood Institute, HCFA, and the Agency for Healthcare
Research and Quality (AHRQ).
The recently implemented Executive Order for HCFA provides for
Medicare to pay for routine patient care costs of beneficiaries
enrolled in clinical trials of new technologies.
The Balanced Budget Refinement Act of 1999 (BBRA) established
temporary pass-through payments for certain new technologies
under the outpatient PPS.
The Benefits Improvement and Protection Act of 2000 (BIPA)
requires HCFA to establish a mechanism to adopt new medical
services and technologies under the inpatient PPS.
All of these have one thing in common: they provide conditional or
temporary payment for promising health care technologies, while
evidence can be collected to support well-founded coverage, coding, and
reimbursement policies.
It should be noted that conditional coverage at a national level
that allows payment only to specified providers can override local
coverage that provided access to some patients. As these arrangements
evolve, policy makers and industry should closely monitor their
implications for access.
Avenues for Improvement
Building upon ongoing efforts, HCFA and Congress should consider
the full process, leading up to and including coverage, coding, and
reimbursement. Here are some approaches.
1. FDA and HCFA should work closely on better alignment of evidence
requirements for market approval and payment for new technology.
Without compromising the respective missions of these agencies, greater
alignment will reduce the costs and timeline for making new
technologies available to patients.
2. HCFA and its MCAC should work with industry and others to
develop evidence requirements and coverage criteria that are
appropriate for different types of technology. It is impractical and
inefficient to apply the same types of evidence requirements to
technologies used in prevention, screening, diagnosis, and treatment.
3. HCFA and the MCAC should move promptly to establish clear and
accountable review tracks and lines of authority involving HCFA, MCAC
and its components, and any outside review groups.
4. The processes for assigning and updating codes should be made
more frequent and adaptive to the diversity and costs of new
technologies. HCFA cannot do this alone; it must work with the
organizations that manage these systems.
5. HCFA should devote sufficient resources, expertise, and
organizational cooperation to technology assessment for assembling and
interpreting evidence in support of Medicare coverage decisions. Aside
from continuing to strengthen its capacity from within, HCFA should
establish efficient, timely relationships with AHRQ, other federal
agencies, and qualified technology assessment organizations in the
private sector.
The Health Care Financing Administration is the world's single
largest payer for health care. Recent improvements notwithstanding,
this most influential gatekeeper for new technology must strengthen and
streamline its process on behalf of its beneficiaries and the nation.
[GRAPHIC] [TIFF OMITTED] T1492.037
Mr. Greenwood. Thank you, Dr. Goodman, for your statement.
Dr. Ross, your statement, please.
TESTIMONY OF MURRAY N. ROSS
Mr. Ross. Good afternoon, Chairman Greenwood, Chairman
Bilirakis, Mr. Brown, Mr. Deutsch, members of the
subcommittees. I am Murray Ross, Executive Director of the
Medicare Payment Advisory Commission, and I am pleased to be
here at this joint hearing, to discuss access to new technology
and the role of Medicare payment policy. My written testimony
draws heavily on a chapter from MedPAC's newly released March
2001 report to the Congress.
Medicare handles new technology in two broad steps. The
first step, of course, is deciding what to cover and we have
heard a lot about that this morning. The second step is seeing
to it that Medicare's payment policies provide sufficient
resources for health care providers to adopt new technologies
without spending more than necessary and without introducing
unnecessary complexity into the program.
The second step is the focus of my testimony. Medicare now
pays prospectively for most services provided in hospitals.
This raises questions about whether the program recognizes the
introduction of new technologies quickly enough to ensure
needed access for beneficiaries and whether the payment systems
account adequately for new technologies.
In looking at both the inpatient and the outpatient
prospective payment systems, MedPAC has concluded that the
Secretary should develop formal procedures for assigning codes,
updating relative weights and investigating the need for
service classification changes to recognize the costs of new
and substantially improved technologies.
To avoid unnecessary spending and complexity in these
payment systems, additional or pass-through payments should be
both budget neutral and limited to technologies that are new or
substantially improved and that it adds significantly to the
cost of care.
Prospective payment was adopted by Medicare to promote
efficiency in the provision of services and thus protect
beneficiaries and taxpayers from unnecessary treatments and
spending.
By setting payment rates in advance, Medicare gives
hospitals a fixed payment that ideally reflects an efficient
provider's costs. Hospitals are placed at financial risks for
the costs above the payment amount and rewarded if they keep
their costs below it.
By its nature, prospective payment provides financial
incentives to adopt new technologies that lower costs. However,
the payment system should also provide mechanisms to account
for the cost of new technologies that enhance quality even if
they increase costs. The payment system should maintain
neutrality regarding clinical decisionmaking including adoption
of new technology.
It should not favor the use of one procedure or technology
over clinically appropriate substitutes, but pay the cost of an
efficient provider for all options, leaving clinicians to make
decisions given individual circumstances. A balancing process
is needed to ensure that payments are sufficient to maintain
access to needed services, but without spending more than
necessary.
Further, payment mechanisms should be administratively
feasible from both the perspective of HCFA and hospitals using
the most reliable data sources available.
The outpatient system pays for new technology in two ways:
by defining new technology, ambulatory payment classification,
or APC groups, and by making pass-through payments to provide
additional funds for specific drugs, biologicals and medical
devices. The new APC groups aim to ensure timely payment for
technologies that represent new services distinct from the
existing groups.
HCFA established 15 new groups with cost ranges from zero
to $50 to between $5,000 and $6,000; payment rates for these
groups will be at the midpoint within each group. This approach
is most applicable to a system with a narrow unit of payment
and limited bundling, as is the case in the outpatient payment
system.
One difficulty with this approach, however, is that it uses
a temporary payment rate, the new technology APC group rate,
while data on costs are being collected to set a permanent
rate. Data derived in this way are not easily verified and may
not represent hospitals' operational costs.
The pass-through payments seem to ensure adequate payment
for new technology is used as inputs to an outpatient service
rather than as distinct services themselves. Pass-throughs for
certain drugs, biologicals and medical devices were authorized
under the Balanced Budget Refinement Act in response to
concerns that the 1996 data used to calculate base payment
rates did not adequately reflect costs in 2000.
However, the Benefit Improvement and Protection Act of 2000
removed the criterion that technologies be underrepresented in
the 1996 data. All medical devices described by A Category will
receive pass-through payments regardless of when they were
first used in the outpatient setting.
By paying hospitals' incremental costs for new devices at
the claim level, these pass-through payments encourage their
adoption and diffusion. However, they also dilute the ability
of the outpatient payment system to provide incentives for
efficiency and cost control. In effect, this provision will
result in unbundling payments and providing cost-based pass-
through payments for most medical devices.
Introducing cost-based pass-through payments gives
manufacturers and hospitals an incentive to increase prices for
them. Pass-through payments for drugs and biologicals will be
based on average wholesale prices with similar incentives for
manufacturers to increase prices. These inflationary trends
will also increase future payments as the pass-through costs
are incorporated into the base.
MedPAC recommends that in the outpatient payment system
pass-through payments for specific technologies be made only
when technologies are new and substantially improved to avoid
double counting those costs that are already in the base, and
only when they add substantially to the cost of care in an
ambulatory payment classification group to avoid introducing
unnecessary complexity to the payment system.
We recommend that pass-through payments be made on a
budget-neutral basis, but that the aggregate costs of new or
substantially improved technologies be factored into the update
to the outpatient conversion factor. This gives policymakers
control over how much to increase payments.
I would like to touch briefly, even though in it is in a
different jurisdiction, on inpatient. Prospective payment for
inpatient services has been in effect since 1984. BIPA changed
Medicare's payment approach to new technology by formalizing
methods that HCFA already had in place and requiring additional
payments for the cost of new technologies.
We support having HCFA formalize its procedures and offer
some guidelines for implementing these additional payments.
The additional payments for new technologies on the
inpatient side are essentially pass-throughs, but several
reasons make them less appropriate there than they are in the
outpatient setting. First, new drugs, devices or services make
up a much smaller share of cost for a discharge than for an
outpatient service.
Second, neither patients' classification nor recalibration
of payment weights depends on assigning new codes.
Third, we lack reliable data on which to base payments.
Fourth, we face difficulty in predicting how often new
technology will be used, and thus the reduction in the base
payment rates needed to make the pass-through funding budget
neutral.
And, finally, the adjustments will introduce administrative
complexity, again for HCFA and for hospitals alike.
Our recommendations on the inpatient side combine aspects
of the previous system and the provisions of the Benefit
Improvement and Protection Act. First, the Secretary should
develop formal procedures for expeditiously assigning codes,
updating relative payment weights, and exploring the need for
changes in patient classification.
Second, additional payments should be limited to new or
substantially improved technologies that add significantly to
the cost of care in a diagnosis-related group and should be
made on a budget neutral basis. And again, we would recommend
accounting for the aggregate impact of new technologies through
the update.
That concludes my testimony and I will be happy to answer
any questions.
[The prepared statement of Murray N. Ross follows:]
Prepared Statement of Murray N. Ross, Executive Director, Medicare
Payment Advisory Commission
Chairman Bilirakis, Chairman Greenwood, Members of the
Subcommittees. I am Murray Ross, executive director of the Medicare
Payment Advisory Commission. I am pleased to be here this morning to
discuss Medicare beneficiaries' access to new technology and how
Medicare payment policy can help to continue ensuring access. My
testimony draws heavily on a chapter from MedPAC's March 2001 report to
the Congress.
Medicare needs to take two steps in ensuring beneficiaries' access
to new technology. The first step is determining what to cover. The
second step is seeing to it that Medicare's payment policies provide
both incentives for health care providers to adopt new technologies and
sufficient resources for them to do so. This second step is the focus
of this testimony.
Most services provided in hospitals are now paid for prospectively.
Recently, concerns have arisen regarding the treatment of new
technology under prospective payment. Does Medicare recognize the
introduction of new technologies quickly enough to ensure access for
beneficiaries? Do payment rates adequately reflect the costs of new
technologies? The Balanced Budget Refinement Act (BBRA) of 1999
addressed this issue for the outpatient prospective payment system
(PPS) by establishing pass-through payments for certain types of new
technology. The recently enacted Benefits Improvement and Protection
Act (BIPA) of 2000 requires HCFA to develop new mechanisms to pay for
technological advances under the inpatient PPS.
We conclude that under both the inpatient and the outpatient
prospective payment systems, the Secretary should develop formalized
procedures for expeditiously assigning codes, updating relative
weights, and investigating the need for service classification changes
to recognize the costs of new and substantially improved technologies.
Also, to avoid unnecessary spending and complexity in these payment
systems, additional or pass-through payments should be both budget-
neutral and limited to technologies that are new or substantially
improved and that add significantly to the cost of care.
In support of these conclusions, this testimony considers how new
technology should be defined, what payment principles should apply to
the treatment of it, and how prospective payment systems for hospital
services should account for new technologies.
defining new technology
In the most basic sense, technology is the practical application of
knowledge. In the health sector, this may include: drugs; devices,
equipment, and supplies; medical and surgical procedures; support
systems; and organizational and managerial systems. Some of these
technologies, such as drugs or surgical procedures, affect identifiable
services and individual patients. Others, such as new diagnostic
equipment, may be used for an array of services and multiple patients.
Still others, such as information systems or improved management
techniques, affect all services provided in a hospital.
When defining new technologies, both new types of technology and
substantial improvements to older technologies may be considered.
Within a payment system, a technological advancement might be
application of an existing technology to new clinical situations, such
the broadening use of PET scans. Although the overall effect of
technology has been to increase costs, specific new technologies may
increase or decrease costs.
The mechanisms used to account for the costs of new technology in a
payment system depend, in part, on the kind of technology considered.
Recognition of the costs of a device used in a particular procedure,
such as coronary stents used in angioplasty, may be reflected in the
relative weight assigned that procedure or through an additional
payment. The costs of broader technologies, such as capital equipment
or information systems, however, are more easily treated through
updates to the base payment rate. In some cases, such as the inpatient
PPS, changes in relative weights are made in a budget-neutral fashion.
In that case, the payment system still needs to account for the cost-
increasing nature of technology through the update process.
prospective payment and the treatment of new technology
Prospective payment was adopted by Medicare to promote efficiency
in the provision of services and thus protect taxpayers and
beneficiaries from unnecessary treatments and spending. By setting
payment rates in advance, Medicare gives hospitals a fixed payment that
ideally reflects an efficient provider's costs. Hospitals paid
prospectively are placed at financial risk for costs above the payment
amount and rewarded if they keep their costs below it.
By its nature, prospective payment provides financial incentives to
adopt new technologies that lower costs. However, the payment system
should also provide mechanisms to account for the costs of new
technologies that are enhance quality, even if they increase costs.
A PPS should maintain neutrality regarding clinical decisionmaking,
including adoption of new technology. The payment system should not
favor the use of one procedure or technology over clinically
appropriate substitutes, but pay the costs of an efficient provider for
all options, leaving medical personnel to choose what is clinically
optimal given individual circumstances. Payment rates are set for a
given output, but the number and mix of inputs used to create the
output is left to the clinical judgment of the provider.
A balancing process is needed to ensure that payments are
sufficient to maintain access to needed services without spending more
than necessary. The calculation of adequate payment rates must be
administratively feasible, using the most reliable data sources
available. Limited data and predictable variations in costs across
providers also imply that payment adequacy be determined at a broad
level, with payment adjustments such as those given to teaching
hospitals used to account for predictable variations in costs among
types of providers.
components of prospective payment systems
PPSs have certain common elements, including a patient or service
classification system and a unit of payment. They also have a process
for updating both the relative payment weights and base payment
amounts. The way these elements are treated has implications for the
treatment of new technology under a given PPS.
Classification system
The classification system, which groups services for payment, may
influence how technology is defined and how new technology is treated.
A narrow payment system--such as the outpatient PPS which groups
services based on a single service or small bundle of services--may
target a specific device or drug by using additional payments or other
mechanisms. Basing the classification system on diagnosis--as is done
in the inpatient PPS--can make it more difficult to tie a specific
technology to a given case.
Unit of payment
The unit of payment determines which services are bundled for
payment purposes. The outpatient PPS relies on a limited bundle:
payment is for the inputs required for a narrowly defined procedure,
such as a diagnostic test, an outpatient surgical procedure, or a
clinic visit. In contrast, the inpatient PPS encompasses a broad
bundle: all services provided during a hospital stay. In general, the
broader the bundle, the more room for efficiency enhancements at the
provider level, but the greater the opportunity for withholding
services.
The unit of payment influences how a payment system captures the
costs of new technologies. If the unit of payment incorporates a large
bundle, increased costs in one area, such as a new-generation medical
device, may decrease costs in another area, such as length of stay,
causing total payment for the bundle to stay the same or decline. For a
narrow bundle, however, there is less scope for offsetting
efficiencies, and the costs of new technologies may need to be taken
into account more explicitly.
Updating relative payment weights
Updating codes and payment weights (which account for differences
in the resources needed to furnish care) provides another way to
account for the costs of new technology. Introducing new codes can help
account for the cost of innovative procedures. Recalibrating payment
weights for services takes into account how new technologies, increased
productivity, and other factors change the costs of services in
relation to one another. The frequency with which codes and weights are
revised affects the length of time before appropriate payments are made
for new technologies. However, multiple priorities must be balanced,
including the integrity of the coding and payment systems, disruption
to providers from revising their billing processes to reflect new codes
and new weights, data availability, and administrative requirements.
Payment updates
Finally, updates to base payment rates, which account for changes
over time in the efficient costs of providing care, may also reflect
the cost impacts of new technology. Some updating approaches--such as
the update framework MedPAC developed for updates for the inpatient PPS
and other fee-for-service settings--explicitly consider the effect of
quality-enhancing but cost-increasing technologies on costs, and
increase payments accordingly. Of course, when new technologies
increase efficiency and decrease costs, payment updates should also
reflect those trends. For the inpatient PPS, the Congress legislates
the update annually, with guidance from MedPAC and Secretary of Health
and Human Services. For the outpatient PPS, the Congress has set the
update to the conversion factor through 2002. The updating process for
future years has not been fully developed by the Health Care Financing
Administration (HCFA). For the present, no explicit mechanism accounts
for the cost impacts of new technology in updating the outpatient
conversion factor.
treatment of new technology in the outpatient payment system
The implementation of the outpatient PPS on August 1, 2000, marked
a move away from primarily cost-based payment for services provided in
hospital outpatient departments. This section describes the outpatient
PPS and MedPAC's recommendations for improving how the system pays for
new technology.
Structure of the outpatient payment system
The outpatient PPS classifies services based on their HCFA Common
Procedure Coding System (HCPCS) code into ambulatory payment
classification (APC) groups. The unit of payment for the outpatient PPS
is the individual service. Payment for a service in an APC group
includes limited bundling of ancillary services and supplies considered
incident to the primary service. The most extensive bundling occurs for
outpatient surgery. Payment for outpatient surgery covers the
hospital's costs for the operating and recovery rooms, anesthesia, most
drugs, and most surgical supplies used during the surgery.
Responding to technology costs
The outpatient PPS pays for new technologies in two ways: by
defining new technology APC groups and by making pass-through payments
that provide additional reimbursement for specific drugs, biologicals,
and medical devices. The new technology APC groups aim to ensure timely
payment for technologies that represent new services, distinct from the
existing groups. The pass-through payments aim to ensure adequate
payment for new technologies that are inputs to an outpatient service,
rather than a distinct service. A pass-through payment is a cost-based
payment that supplements the standard APC payment when a specific
technology is used.
Coding and classification issues
Industry has expressed concern that delays in the coding and
classification processes hamper the diffusion of new technologies,
although there is no clear evidence of access problems. In the
outpatient PPS, the process for handling new technologies includes
assigning codes to new services and procedures, updating the
classification (APC) weights, and investigating the need for new or
restructured service classification groups. MedPAC recommends that the
Secretary develop formalized procedures to expedite this process.
Timely development of payment codes is especially important in the
outpatient sector, where payment bundles are small and most procedures
require a code for hospitals to be reimbursed. New outpatient codes are
assigned by HCFA and/or the CPT Editorial Panel. In addition, to
implement the outpatient technology provisions of the BBRA, HCFA has
developed a system for assigning codes for pass-through payments,
including setting aside a block of temporary codes to be assigned
quickly.
In addition to assigning codes, HCFA must also review the
outpatient payment weights on an annual basis and restructure the APCs
as needed, although the process for doing so has not been fully
detailed beyond establishing an external advisory committee.
New technology ambulatory payment classification groups
In developing the outpatient PPS, HCFA created separate APC groups
to classify new technology services that do not qualify for pass-
through payments. These groups contain services that are similar in
cost, but are not necessarily clinically similar. The agency
established 15 new technology groups, with cost ranges from $0-$50 to
$5,000-$6,000. The payment rate for all the services or items within a
particular group will be the midpoint of the group's cost range.
To qualify for classification within a new technology APC, a
service must be covered by Medicare, be underrepresented in the 1996
data used to set payment rates, have a HCPCS code, and be deemed
reasonable and necessary for treating an illness or improving an
impaired function. HCFA will group qualifying new technologies or
services within new technology APC groups for at least two but no more
than three years before assigning the services to an existing or new
standard APC group. This mechanism will allow HCFA to pay for new
technologies shortly after they become available and qualify for
Medicare payments. It also allows the agency to collect clinical and
cost data to refine and update the APC classification system.
This approach to accounting for new technology is most applicable
to a PPS with a narrow unit of payment and limited bundling, as is the
case in the outpatient PPS. One of the difficulties with this approach,
however, is that it uses a temporary payment rate--the new technology
APC group rate--while data on hospital costs are being collected to set
a permanent rate. HCFA uses an application process to gather cost data
to place services within the new technology APC groups, but data
derived in this way are not easily verified and may not be
representative of hospitals' operational costs.
Pass-through payments
Pass-through payments for certain drugs, biologicals, and medical
devices were authorized under the BBRA to ensure that payments under
the outpatient PPS adequately accounted for the costs of new
technologies. The policy responded to concerns that the 1996 data used
to calculate base payment rates did not adequately reflect the costs of
certain new technologies. However, BIPA removed the criterion that
technologies be under-represented in the 1996 data. All medical devices
described by a category will now receive pass-through payments,
regardless of when they were first used in the outpatient setting. In
effect, this provision will result in unbundling payments and providing
cost-based pass-through payments for most medical devices.
By paying hospitals' incremental costs for new devices at the claim
level, pass-through payments encourage their adoption and diffusion.
For drugs and biologicals, additional payments are set at 95 percent of
average wholesale price. For medical devices, pass-through payments are
based on each hospital's costs (as determined by adjusting charges
using a cost-to-charge ratio). For example, when a pacemaker is
implanted, a hospital receives a base payment for costs associated with
performing the procedure and a pass-through payment based on the costs
of the device. In principle, the amount of the pass-through payment
will be offset by subtracting the estimated cost of the device it
replaces from the base payment rate. However, HCFA has not yet been
able to identify the cost of most devices in the underlying payment
rates.
Pass-through payments will be paid for two to three years until
standard payment rates can be modified to incorporate the costs of new
devices. Data collected during the transition will be used to modify
the standard payment rates. Total payments under the pass-through
provision are limited to 2.5 percent of total program payments through
2003, and 2 percent thereafter. If this limit is exceeded, all pass-
through payments are to be reduced. Additionally, total payments must
remain budget neutral, meaning that the conversion factor will be
reduced to account for the cost of the pass-through payments. In
effect, the provision redistributes payments among services.
In our June 2000 report, MedPAC noted that although transitional
pass-through payments may help to ensure access to new and innovative
technologies, they may also dilute the ability of the outpatient PPS to
provide incentives for efficiency and cost control. Introducing cost-
based pass-through payments gives manufacturers and hospitals an
incentive to increase prices for these items. Pass-through payments for
drugs and biologicals will be based on average wholesale prices, which
are also subject to manipulation. Inflationary trends in the pass-
through payments will also increase future standard payment rates as
the pass-through costs are incorporated into the base.
The cap on total payments--2.5 percent of total program payments
through 2003 and 2 percent thereafter--and proportional reductions of
all pass-through payments if the cap is exceeded is meant to prevent
increases in overall spending due to the pass-through payments.
However, the cap will not be applied in 2000 and 2001, and program
spending will increase despite the cap. Whether or not the limit will
be exceeded in the future depends, in large measure, on the definition
of what qualifies for pass-through payments. HCFA has expanded its
definition numerous times since releasing the final rule--more than
1,000 items were eligible on January 1, 2001--and BIPA will lead to
further expansions.
In considering pass-through payments, two principles should be kept
in mind: minimizing interference with in clinical decision-making, and
ensuring that mechanisms are in place to limit the program's exposure
to cost-based payment. Balancing these potentially conflicting notions
requires consideration of the eligibility criteria for pass-through
payments. MedPAC recommends that in the outpatient payment system,
pass-through payments for specific technologies should be made only
when a technology is new or substantially improved and adds
substantially to the cost of care in an ambulatory payment
classification group. We also recommend that pass-through payments be
made on a budget-neutral basis and the costs of new or substantially
improved technologies should be factored into the update to the
outpatient conversion factor.
Limiting pass-through payments to new and substantially improved
technologies protects the program and beneficiaries against unnecessary
exposure to cost-based payments. It also eliminates the potential to
pay for technologies twice: once in setting the initial payment rates
(which include older technologies) and again through a pass-through
payment. For this reason, the definition of ``new'' should not include
items whose costs were reflected in the 1996 data used to set payment
rates. Limiting pass-through payments to those new or substantially
improved technologies that add substantially to the cost of care limits
the program's exposure to the administrative burden of special payment
provisions and the introduction of cost-based payment for technologies
that compose a small part of overall payment.
Budget neutrality--when implemented--will protect against the
inflationary pressures of cost-based pass-through payments. This
mechanism will reimburse hospitals for the increased costs of specific
technologies when they are used, but will not account for the overall
cost-increasing nature of new and substantially improved technologies.
Therefore, in a manner similar to the inpatient PPS, the costs of these
new technologies should be brought into the system through the update
to the conversion factor. However, any increase to the update for new
technology should not include the costs of technologies in use prior to
1997 because their costs are already accounted for in the base.
Similarly, the update should not factor in the costs of new procedures
that are part of the new technology APC groups. The costs of these
services are covered directly as each unit is paid for, leading to
increases in total spending.
treatment of new technology in the inpatient payment system
Medicare's PPS for acute inpatient services has been in effect
since 1984. The process for annually changing its payment rates already
includes a set of largely informal procedures for responding to the
costs of new technology. BIPA enacted a method to account directly for
the costs of new services and technology, patterned somewhat after the
outpatient technology pass-through provision discussed above.
Structure of the inpatient payment system
The unit of payment in the hospital inpatient payment system is the
case, or inpatient discharge, as classified by diagnosis related group
(DRG). This unit of payment is broader than that of the outpatient APC
system, encompassing all routine nursing, support service, and
ancillary costs incurred in patients' stays. The payment system
comprises:
operating and capital base payment rates, which reflect the
national average costliness of Medicare cases, adjusted for the
relative input prices of the hospital's local area;
case weights, which account for the relative costliness of
each DRG compared with the national average Medicare case; and
special adjustments, such as outlier payments for unusually
costly cases.
Responding to technology costs
The BIPA changed Medicare's approach to new technology in the
inpatient PPS by formalizing some methods already in use by HCFA and
mandating new payment adjustments for inpatient care. We support having
HCFA formalize its procedures for responding to new and substantially
improved technologies and offer guidelines for implementing the
technology pass through mandated by BIPA.
Previous methods
Technology has been addressed in Medicare's inpatient PPS in four
ways. The first component of HCFA's system is a technical advisory
panel that assigns ICD-9-CM codes to new technologies and deletes codes
for outdated procedures.1 The process of assigning codes has
no fixed timetable, but generally takes at least a year.
---------------------------------------------------------------------------
\1\ The ICD-9-CM acronym stands for International Classification of
Diseases, 9th Revision, for Clinical Management.
---------------------------------------------------------------------------
Second, HCFA staff analyze variation in the costliness of cases
within DRGs, primarily in response to suggestions by industry
representatives that the costs of certain types of cases are
systematically higher than the applicable DRG average. Based on these
analyses, HCFA periodically reassigns certain types of cases to a
different DRG or splits DRGs into two or more new groupings and
modifies the case weights accordingly.
The third way in which HCFA responds to new technology is by
recalibrating the DRG case weights. Recalibration is done annually and
reflects the relative costliness of cases in the most recent year's
claims file. Although annual recalibration plays an important role in
maintaining accurate payment relatives, it can only reflect the current
degree of dissemination. If only a few hospitals are using a new
technology, their charges will have only a small effect on the DRG rate
and they may continue to be underpaid pending the next recalibration.
The final mechanism for responding to technology changes is the
annual update to the base payment rates. Since the early years of the
inpatient PPS, Congress has legislated updates for operating payments,
while HCFA has set the updates for capital payments through an annual
rulemaking process. Congress rarely indicates the factors it has taken
into account in making an update decision, but both MedPAC and HCFA
develop recommendations on the basis of an update framework. MedPAC's
framework specifically addresses technology costs through a scientific
and technological advancement factor, which is intended to account for
the impact of quality-enhancing but cost-increasing new technologies
and is offset at least partially by a negative productivity adjustment,
which captures the effects of cost-decreasing new technologies.
Provisions of the Benefits Improvement and Protection Act of 2000
BIPA mandated that HCFA develop a process to incorporate new
medical services and technologies expeditiously into the clinical
coding system for inpatient hospital services; collect data on the
costs of new technologies for a period of 2 to 3 years and assign cases
using the technologies into new or existing DRGs that have case weights
derived from the new data; and provide for additional payment to cover
the costs of each new technology during the study period. This payment
could be in the form of new technology groups or it could be an add-on
or adjustment to the normal DRG payment for cases where the technology
is used.
The first two provisions serve to formalize, and perhaps expedite,
procedures that HCFA already uses. The third provision, implementing
what amounts to an interim payment for specific new technologies,
represents a sharp departure from current policy. Like the outpatient
technology pass through, the Secretary is expected to implement the
provision on a budget-neutral basis. This means the effect of the
additional payments for specific new technologies would be entirely
distributional; the provision would not affect the need to account for
the cost-increasing impact of new technology in annual payment updates.
The additional payments for new technologies are pass-throughs in
the sense that HCFA must establish rates that cover the estimated cost
of each technology. However, the inpatient pass-through provision
differs from the outpatient one in that it is based the average cost of
a technology rather than each hospital's costs. Thus, hospitals will
benefit financially if they can negotiate a purchase price that is
beneath the national average, and vice versa.
The reason for a technology pass-through for acute inpatient care
is ensuring that inadequate payment for specific DRGs or cases within
DRGs does not provide a significant disincentive for hospitals to adopt
new services and technologies. However, two reasons make this advantage
less compelling for inpatient care than for outpatient services. First
is the broader construct of DRGs, such that a new drug, device, or
service is likely to make up a much smaller portion of overall costs.
The second reason is that, unlike in the outpatient PPS, neither
patients' DRG classification nor the process for recalibrating the DRG
weights is dependent on HCFA assigning codes to new services or
procedures. New codes serve only to facilitate analyses that might lead
HCFA to restructure DRGs.
Several other problems cited above for the outpatient technology
pass through will also likely apply to an inpatient pass through. These
include a lack of reliable data on which HCFA can base an appropriate
interim payment adjustment for a technology before hospitals have much
experience in providing it, the difficulty of predicting how frequently
new technology will be used and thus the reduction in base payment
rates needed to make pass-through funding budget-neutral, and the
administrative complexity of the process for HCFA and hospitals alike.
Our recommendations envision taking the best aspects of the
previous system and the provisions of BIPA to develop a system that
accounts for the costs of new technology for inpatient hospital
services. First, the Secretary should develop formalized procedures for
expeditiously assigning codes, updating relative weights, and
investigating the need for patient classification changes to recognize
the costs of new and substantially improved technologies. Second,
additional payments should be limited to new or substantially improved
technologies that add significantly to the cost of care in a diagnosis
related group and should made on a budget-neutral basis.
Although annual recalibration of inpatient payments has an
established track record, the other two processes--code assignment and
patient classification changes--are somewhat informal and perhaps not
completed as quickly as they could be. For example, the ICD-9-CM
Coordination and Maintenance Committee only meets twice per year to
consider potential code changes. In addition, there are no established
procedures for affected parties to request DRG restructuring, and no
fixed process or timetable for HCFA staff to respond to such requests.
With these changes to formalize the system for assigning codes to
new services and procedures and investigating the need for DRG changes,
we believe that the inpatient payment system would have responded
adequately to the costs of new technology. In contrast to the
procedure-based system for outpatient payment--which makes it difficult
to respond to the introduction of new technologies without using pass-
through payments--the inpatient PPS makes it easier to ensure an
appropriate distribution of payments while accommodating technological
advances.
BIPA, however, requires that a payment adjustment be made. The
``substantial impact'' provision would provide a temporary boost in
payments when the impact of a new technology on its early users is the
most severe, while minimizing interference with clinical decisionmaking
at the local level. Budget neutrality would limit the pass through to
influencing the distribution of payments, leaving decisions regarding
changes in the overall level of payments to the annual updating
process.
Mr. Greenwood. Thank you, Dr. Ross, for your very thorough
testimony.
The Chair recognizes himself for 5 minutes for questioning
and would direct a question to Mr. Kang for starters. Mr. Kang,
today is, I believe, March 1, and my understanding of the
practices at HCFA are that if today HCFA decided to approve a
particular technology or device for coverage, that pursuant to
its procedures the reimbursement would not be available until
180 days following the next quarter. That would take us to July
1 plus 6 months so the end of the year. So you could decide
today that PET imaging technology should be covered. It
wouldn't be reimbursed for 9 months till the beginning of next
year.
No. 1, in fact, have I accurately described your process?
If no, please correct me. If so, please explain why such an
arbitrary system is utilized.
Mr. Kang. Mr. Chairman, what you are actually asking me is
when my office has already made the coverage decision, and then
about assigning the coding and payment, and that is actually
Dr. Miller's area so I will let him respond to that.
Mr. Greenwood. Very well.
Mr. Miller. Is this one on?
Mr. Greenwood. Yes.
Mr. Miller. There are a couple of things going on there
that explain the 180 days. The first thing that comes into play
here is that HCFA makes system changes, and these are
legislative changes, coding changes, and any changes in policy
that it makes, go into its computer system on a quarterly
basis. These are large quarterly updates of any changes, that
is how they get into the system, and there are sort of four
major changes in the system.
Mr. Greenwood. Let me interrupt you there. I am not a
computer expert. What I am trying to understand is if you
made--what you are telling me is if you have made a coverage
decision today on March 1, that would be entered in on July 1,
and if made a coverage decision on June 30, that would also be
entered on July 1?
Mr. Miller. No. It is 180 days from when the decision is
made and what is happening is that you have quarterly updates
and you are trying to catch the next quarter update or the next
quarterly update after that. We set the 180 days as a goal.
Now, generally we make that. Sometimes we make it sooner.
Sometimes it is a little bit after that.
But what is happening, so that you understand why it cannot
happen instantaneously, is that a code needs to be created and
a payment needs to be created. Then that needs to be
communicated to the carrier so that they can do the
programming. Then you need to educate the providers, ``here is
how you change your payment,''--I mean, ``here is how you
submit bills under the new form,'' and then the system goes
into effect in the computer system so that people can bill for
it. I also am not a computer expert.
The other thing I will say about this is when a national
coverage decision is made, at the local carrier level,
decisions can be made to say in the interim I will give you a
temporary code and a payment during this period if the carrier
medical director so chooses.
But the direct answer to your question is fundamentally
there are four periods where we try and make all the system
updates on an orderly basis, and that is why the 180 days.
Mr. Greenwood. Okay. But I am trying to understand why it
is not done on a constant rolling basis as opposed to these
quarterly demarcations?
Mr. Miller. That is a fair question, and I think there are
fundamentally two answers to that question. The first answer is
that, as I said, it is not just there is one code, let us make
this change. What is happening, for example, what is happening
in the agency right now is the provisions that were passed as
part of the Benefits Improvement and Protection Act, the BBRA,
the BBA, those provisions are all being programmed and put into
the system, so there is all kinds of changes that occur, and it
is a fairly complex problem to define the policy, define the
computer code. And so on a quarterly basis, that is how we try
and do it to make sure that the systems don't just come down
around us.
The second reason is I think if you made these changes on,
let us say, a daily basis every time a new technology, a new
code--and let us say we could move that fast--I think you also
have to be conscious of the burden on providers. Every time we
change a code, hospitals, physicians' offices, suppliers have
to change their computer systems, have to change their billing
practices, have to educate their coders and billers, and that,
you know, we try and have some regimen to that so that we
change the code and educate people in an orderly fashion.
Mr. Greenwood. Dr. Kang, you wanted to comment?
Mr. Kang. Mr. Chairman, just one other observation.
Actually when I was up in Boston, I was the medical director of
a couple of managed care organizations or insurance
organizations, and this issue of periodic updates of the
system's changes and the time it takes to do this is actually
reasonably consistent with what happens in the rest of the
insurance industry. It takes time to get all this done.
Mr. Greenwood. If I may, of course, it takes time, and no
one is arguing that. What we are trying to find out if there is
something that arbitrarily adds to the timeframe, and, for
instance, just from the top of my head, if I were a hospital
administrator, and I had to upgrade my computer, it would seem
to me I would have--if, in fact, I was getting daily data from
HCFA instead of quarterly data, I could make a decision. I
could choose to do that on a quarterly basis. I could let it
mount and then do it on a quarterly basis, or I could do it on
a daily basis at my option rather than have only the one
choice. But if you want to quickly respond, Dr. Miller, you
may, but my time has expired.
Mr. Miller. No, that is fine.
Mr. Greenwood. And with that, the Chair recognizes and
turns the Chair over to Mr. Bilirakis.
Mr. Bilirakis. Thank you. And the Chair now recognizes Mr.
Brown to inquire.
Mr. Brown. Thank the chairman. Dr. Goodman, we have heard
different people talk about making sure that HCFA has adequate
resources to do its job. How does HCFA compare to other
industrialized countries in terms of resources available for
payment and coverage functions for making some of these
decisions?
Mr. Goodman. Yes, let me think for a moment. I guess the
answer is a bit surprising. If you look at United Kingdom, for
instance, United Kingdom, on the coverage question, this
coverage function, has a special agency just devoted to it. It
is called the National Institute for Clinical Excellence,
interestingly enough the NICE. They just upped their budget
this year to the equivalent of about maybe $16 or $18 million.
That is for the UK. It is a smaller country than ours, and I
believe the Coverage and Analysis Group, which has the similar
function at HCFA, may be $3 million. I will say $3 million. Is
that about right? Or I would say at the outside maybe $4
million, but it is a few million dollars.
And then I am familiar with in the country of Sweden,
Sweden has got 9 million people. They devote almost as much as
Dr. Kang does to coverage questions and related technology
assessment as HCFA. So much smaller country spends about what
we do, what Medicare does.
And finally, if you look in the United States, the big
payers, some of the big Blue Cross/Blue Shield plans, United
Health, some of the other bigger payers, they spend $4 or $5
million or more on this function. So, again, as I said before,
if you are responsible for 40 million beneficiaries and, you
know, $270 billion a year, you might want to spend more than $3
million on the coverage function.
Mr. Brown. So the question that my friend from New Mexico
asked of the first panel, why does the private sector do it so
much more quickly, implying that they always do--I don't think
they do--but why they would do it more quickly than HCFA might
be that the private sector spends more money in carrying out
these functions; correct?
Mr. Goodman. Yes, sir. In part, it is because they have
just as much or more money. It is also in part because when you
are making a coverage decision in the private sector, you don't
have to do everything in public and you don't have to have a
committee of 120 people kind of trying to manage things with
you. So they have that advantage.
The other thing is that sometimes private sector payers can
cover something, say that we will pay for a certain procedure,
but they have more utilization review at the time a procedure
is offered for a given patient, and so it is at that later step
that they might be able to deny coverage. Even if they cover it
in general, they might not think that the patient's indications
meet the situation for that person.
Mr. Brown. I am just intrigued by your answer because I
have been on this subcommittee for 8 years, and I have heard
members of this, and we have had a significant number of
hearings, particularly in the last 6 years, critical of HCFA,
and we blame HCFA for all, not all, many of the problems that
Medicare faces as some strive to privatize Medicare, and then
we don't appropriate HCFA enough money to do its job when
Congress is ultimately responsible, and I am just sort of
intrigued by that.
Dr. Kang, Medicare decides what to cover. Insurance
companies privately decide. Private insurers decide what to
cover. When a new drug or device is approved by FDA, do either
insurance companies or Medicare automatically approve them? I
mean is that sort of an automatic kind of thing?
Mr. Kang. The answer is no. The quick answer is no.
Mr. Brown. When would it not be? Give me some examples of
when they would not automatically cover something. This morning
in the earlier panel, obviously there is something that those
are pretty useful medical devices and medical procedures, but
when would they not?
Mr. Kang. There are several places. One very good example
actually is when, in fact, it is not a benefit. So, for
example, in the Medicare program, oral drugs are not a benefit.
It has been approved by the FDA, but Medicare has no authority
to cover that.
The second would be many times the FDA approval is based on
what we call efficacy. The lab test, for example, tells you
what the selenium level is. What we have to ask as an insurer
is, ``is that clinically useful information? Do we care? Does
that help the beneficiary's health outcome?''
It may be nice to know the test measures the selenium
level, and I am just making this up, you know, but the question
really for us as an insurer is that useful information and does
that improve the patient's care?
And then the third major area really is the FDA does not
look at what is called comparative effectiveness; so they
compare versus placebo. What we are very interested in is, ``is
the new technology better than what we are currently
covering?'' So there may be a new technology, but, let us say,
for example, it is inferior to what we are currently covering,
I would imagine as a prudent purchaser, I am not sure why we
would want to cover that. So those would be three quick
reasons. And there are many others.
Mr. Miller. Could I also respond to that? The one other
aspect of this that I just think we should focus on--I think
what Jeff is referring to--is breakthrough technology. I
believe that the overwhelming majority of technology when it is
approved gets into the payment systems. They are prospective
payment systems. It is a covered benefit. Payment is there for
it. It moves right in. HCFA is not involved in the
decisionmaking process at all.
The clinicians on the ground, in the hospital or whatever
the provider settings are make the decision to use it or not. I
think what we are talking about here is when this is something
brand new, not covered, no code, or something like that.
Mr. Bilirakis. What happened to the gentleman from North
Carolina, the vice chairman of the committee? Well, he is not
here. Mr. Pitts.
Mr. Pitts. Thank you, Mr. Chairman. Dr. Goodman, as you may
know, Congress twice has urged HCFA to consider outside data in
making DRG reclassifications, first in the BBA 1997 report
language, second in the fiscal year 1999 Senate Labor HHS
Approps Report.
My question is can you relate your understanding of HCFA's
use of non-MedPAR data in the adoption and adequate payment of
new drugs and technologies in the hospital inpatient system?
Mr. Goodman. That was for me? Yes. I am not the world's
expert on MedPAR, but what I do know is this: for many new
technologies the evidence is somewhat limited and it is often
difficult to conduct strong clinical trials to get data, and I
think that it is probably a mistake to be very narrow in the
sorts of data selected to help support a DRG decision. I think
we need to look outside to experience among other payers
elsewhere in the country, similar populations, in order to pull
together as much data as we can on some of these new
technologies so that we will have a strong enough evidence base
upon which to base a DRG update decision. Being too narrowly
focused on any particular data base may be shortsighted.
Mr. Pitts. Anyone else like to add to that? Dr. Kang, do
you agree?
Mr. Kang. I think this would actually be more Dr. Miller's
area.
Mr. Miller. I don't have a lot to add to it. My
understanding is that since the Congress has encouraged us to
consider outside data, we have not had many instances where
people have asked us to consider it, and the kinds of things
beyond using additional data are, you know, sample sizes to
assure that it actually represents something that is happening
in the population, and whether the population it is being drawn
from is representative of the population that would actually
end up using the service. But I don't necessarily have anything
to add to his comment.
Mr. Pitts. All right. In its proposed fiscal year 2000
Inpatient PPS Rule, HCFA outlined criteria for the submission
and use of third-party data to allow for quicker access of new
technologies for Medicare patients. To your knowledge, is this
criteria reasonable, especially for smaller companies?
And second, have you had any knowledge that third-party
data has been successfully submitted to HCFA, then actually
used by the agency to recalibrate the DRG payments?
Mr. Miller. I think I would like to answer your question
for the record because I don't think I have the specific answer
to whether, how data has been collected and used in that
instance. I believe we have only received a couple of
submissions from outside data. And they have generally--I
believe they have not been used to make the decision, and that
is either because the sample size wasn't large enough or some
characteristic of the data. But I would rather answer your
question for the record because I think I don't necessarily
have this in detail in front of me.
[The following was received for the record:]
I believe the criteria for the submission and use of third-party
data are reasonable for small and all other sizes of companies. As
indicated in the FY 2000 Inpatient PPS rule, we remain open to
considering third-party data in the diagnosis-related group (DRG)
reclassification and recalibration process as long as the data are
reliable and validated.
We also established and published a timetable for submitting data.
We request at least a representative sample of data by the August, and
a complete database by the December prior to the publication of the
proposed Inpatient PPS rule in the spring. The Medicare Payment
Advisory Commission agreed that this timetable is ``a valid basis for
assessing the feasibility and appropriateness of using outside data.''
Additionally, we are open to receiving data in various formats, as long
as we are able to verify and validate the data, consistent with the
language of the Conference Report that accompanied the Balanced Budget
Act of 1997.
This past summer, we met with individuals representing four
different new drugs or technologies, and discussed issues pertaining to
inpatient payment, including the submission of outside data. We
received data from one of the four representatives this past December.
Although we reviewed the data, they were not submitted in time for us
to verify the Medicare discharges prior to the upcoming publication of
the FY 2002 proposed Inpatient PPS rule.
We remain open to working with representatives of the medical
device and pharmaceutical manufacturing community to receive and
analyze third-party data. We are committed to expediting the
introduction of new technology, while continuing to uphold our
obligation to pay appropriately for all DRGs.
Mr. Pitts. Dr. Goodman.
Mr. Goodman. Yes. Adding to what Dr. Miller said, one of
the aspects of medical devices in some populations is that a
device that can be very, very effective may only be useful in
small numbers of people, small populations, and it makes it
that much more difficult to gain, as Dr. Miller said, a big
enough sample size upon which to draw conclusive findings, but
my point is this: that the sorts of criteria used to evaluate
technologies and to make these kinds of decisions or updates
need to be adapted to the technology at hand and the population
at hand.
It is not enough to say, well, the population is so small,
we can't get good data. We need a better answer than that,
which is we need to adapt and be flexible with these criteria
to get the best data we can and make the most informed decision
that we can.
Mr. Pitts. All right. Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman. The vice chairman of
the full committee, Mr. Burr.
Mr. Burr. Thank you, Mr. Chairman. Let me just direct this
to HCFA and Dr. Goodman and Dr. Ross. I will give you a
scenario and just tell me whether this is possible to happen
under the current system of approval.
This is from a doctor at New Hanover Hospital, a
cardiovascular surgeon. He said there is new vascular stent
technology. He used it in radiology and trauma cases. The first
38 cases, he lost $14,000 per case because of inadequate
reimbursements. The only factor that changed was the device he
used. Medicare reimburses the vascular stent with the regular
stent payment. Trauma cases left the hospital with this new
stent within 24 hours with the vascular stent. Without the
vascular stent, they spent 3 to 5 days. He has since stopped
using the stent because he can't afford what he is losing in
the procedure.
Dr. Kang, can that be an accurate statement of a new
technology?
Mr. Miller. I think I will take this one.
Mr. Burr. Dr. Miller.
Mr. Miller. Payment.
Mr. Burr. Sorry you missed Monday.
Mr. Miller. Yes, I heard you were there. I was getting
ready for this.
To answer your question, and I was listening also when you
were asking your other questions because I think this kind of
cuts into the cost issue, prospective payment systems are
designed to put a dollar amount out, let the clinicians decide
how to mix the services that they provide to help the patient,
whether it is technology, numbers of days in the hospital,
nursing, whatever the case may be.
That issue that you have raised and the issue that Dr.
Popma was talking about is the issue that when something is new
and introduced, the actual DRG, you can get reimbursed for it,
but the incremental difference may not fully cover the cost of
the new device, in this instance, the stent.
The other part of your point I think is relevant here
because what is also happening in that case, if I followed your
point, is that a length of stay was being reduced as a result
of that. In the DRG system, both of those behaviors should be
reflected, the bump up for the technology and the collapsing in
the length of stay. And as we collect cost data, that is
precisely what happens to the calibration of the DRG. It does
get adjusted. It does take time and that is your point.
Mr. Burr. Yes, how much data are you going to be able to
collect given that he did 38 and stopped? I mean there is a
point where in his surroundings, a decision was made I can't
lose money anymore. Now, to the next developer of the next
generation of stents that may make the procedure easier,
faster, more effective, what incentive have we given the person
who is going to lay on the line the capital that it takes to
develop that that it is worthwhile, that there is some point
where they will be rewarded for their investment?
Mr. Miller. And your point is taken. The philosophy behind
the prospective payment systems are that those decisions are
not only case specific, but what we are doing is paying for all
admissions on an average basis. On some, they get money. On
some they lose money, and the ideal situation is they make
those economic decisions across a series of admissions. But
that is not--your point is still taken. There is a specific
case and on a specific case basis, it may be that the DRG has
not caught up.
If I could just make one other point on this, there is--the
system contemplates situations where, when the cost exceeds by
a large margin the amount that the DRG pays, it does fall and
begins to get outlier payments where additional payments can be
made. But I fully acknowledge that there is a threshold there
and sometimes cases don't make it up to it.
Mr. Kang. Mr. Burr, if I may, just because maybe I am not
sure I am understanding the example, but if we are paying a
hospital a DRG, and this device actually saves 2 or 3 days on
the admission, in fact, the saved cost on the hospital side
more than usually offsets the actual technology or device. And
that is actually what the----
Mr. Burr. That is certainly the assumption that HCFA works
under. I am not certain that that is the reality of the real
world. But I think that is what we are here to uncover, and
before Dr. Goodman and Dr. Ross have an opportunity to respond
to this, in the culture of this model that we have got that we
go through to determine reimbursements, you make numerous
references that if it is like a previous product, we just put
it into that category. We put it into that code. Forget the
fact that it may be substantially different in the cost of that
particular product for its usage.
So the system that we have does not evaluate it necessarily
based upon the technology that has gone into it. I question
whether it evaluates it based upon the long-term savings per
incident, as well, but we tend to hide under the DRG. That it
is for a broad sense and if you go outside on this side or if
you stay under it on this side, you make a little bit here, you
lose a little bit over here. As we head into the age of where
technology is going to play in devices and pharmaceuticals,
when you go outside of the umbrella, you are losing a lot.
The net result is that people stop using it, that the
quality of care goes down, but more importantly, and this is
the point I want to make, the cost to us for health care
continues to go up. We don't reap the benefits of any of the
technological breakthroughs. We can't reverse this and
ultimately find----
Mr. Bilirakis. The gentleman's time has long expired.
Mr. Burr. Can I allow Dr. Goodman to----
Mr. Bilirakis. Only if you have a very few words' in
response to that.
Mr. Ross. Yes, I would like to respond actually very
quickly, if I could.
Mr. Bilirakis. Quickly.
Mr. Ross. Not to the larger question of technology in the
future. The first is it is hard to respond to any specific
instance or any specific DRG, but if we want to be assured that
we always pay for everything, we had a system that did that. It
was called cost-based reimbursement. It had unsustainable
spending growth and we very deliberately chose to move to
prospective payment, and that gets us to a fundamental tradeoff
between trying to accommodate quality-enhancing, cost-
increasing new technology while at the same time making sure
that they are fiscally prudent.
We typically as a commission recommend putting funds into
the base with each coming year to try and adapt for
technologies we see coming down the pike. I would also add that
Medicare as a program makes a number of payments over and above
what it costs for basic patient, the so-called indirect medical
education adjustment for inpatient care, pumps a fair amount of
money to recognize the higher cost in teaching hospitals where
a lot of the investigational work is done and where a lot of
the new technology is being adopted and diffused.
It is not showing up at the basic DRG rate, but it is
definitely showing up in their payments for discharges.
Mr. Bilirakis. Mr. Whitfield to inquire.
Mr. Whitfield. Mr. Chairman, thank you. In the question and
answer series with Mr. Brown, there was some discussion that in
Great Britain and in Sweden, the amount of money available for
coverage determination is much larger than in the U.S. per
person, but it is my understanding, and you all correct me if I
am wrong, that HCFA like Blue Cross/Blue Shield and a lot of
other private companies used the same, in fact, used the
Technology Evaluation Center under contract to make the
coverage determination. Is that correct or is that not correct?
Mr. Goodman. Yes, sir. HCFA as well as payers in other
countries do look to outside sources and organizations for
support and technology assessment. But even if you add all that
up, I believe we would find that the resources available to
HCFA to do the work internally as well as externally would fall
short of those other countries.
Mr. Whitfield. Okay. Because I was sort of under the
impression that you all were making the argument that the
coverage determination was being delayed because of lack of
funds, but I guess what really is happening is making the
coverage effective is what is being delayed.
Mr. Goodman. Well, yes, sir, I believe, as Ms. Eshoo said
before earlier today, the first thing to do is get the thing
streamlined, get the coding situation straightened out, get the
relationship with the MCAC straight with the reporting
relationship and so forth. If you don't do that, additional
funds aren't going to help at all.
However, and this concerns me, the new technology pipeline
is as busy and as full as it has ever been in history and it is
going to get more so. Whether it is HCFA, for that matter, or
the FDA, we need the expertise and resources to accommodate the
new technology pipeline. Without those resources and expertise,
we just will not be able to process these technologies fast
enough, and just in answering Mr. Brown's question, it is
interesting that other countries who are industrialized spend
more than we do. It is just an interesting point of resource
allocation.
Mr. Whitfield. But the private companies in the U.S. would
just have more resources and expertise than what is available
at HCFA?
Mr. Goodman. Interesting point. The outside organizations
can provide analyses in support of a coverage decision. It is
still the payer's responsibility, whether it is HCFA or another
payer, to look at that information and say how does that apply
to my Medicare beneficiary population? You still have to make
the policy, interpret the data, and make the policy, even when
you get good support from outside sources.
Mr. Whitfield. Because I was given an example that in the
transplantation procedure relating to liver, that the year that
it was approved by Blue Cross/Blue Shield Technology Evaluation
Center was 1986. It was approved by Blue Cross/Blue Shield the
same as the coverage determination was made by the Technology
Center, and yet it was first covered by Medicare in 1992, 6
years later. And that would be because of?
Mr. Goodman. Well, I am sure the information was available
to all parties. There may be multiple reasons why HCFA took
longer. One may have been that HCFA had to understand how the
available information about liver transplantation applied not
just to anybody, but to elderly people, and it may not have
been as good a match, and perhaps HCFA may have been wanting to
wait for data to support that, because there is a downside to
providing technologies for people in whom they have not been
adequately tested to date. I would hope not in this situation,
and it wasn't borne out that way, but that is a caution that a
prudent purchaser of health care has to consider.
Mr. Whitfield. Right. Now, it is my understanding that
someone testified that Part A had 36 contractors nationwide and
Part B 42?
Mr. Goodman. Yes, sir.
Mr. Whitfield. And if HCFA makes a national determination
for coverage, then every contractor is subject to that
decision. They must honor that decision?
Mr. Goodman. Yes, sir.
Mr. Whitfield. Okay. And then there is a statement in here
that says that in the absence of a national coverage
determination, local medical directors, I guess of the
contractors, have the discretion to make local coverage or not;
is that correct?
Mr. Goodman. Yes, sir.
Mr. Whitfield. So if you have not made a national coverage
determination, any local contractor can approve it on their
own?
Mr. Goodman. That often happens, and there is an advantage
to that for technology diffusion.
Mr. Whitfield. Okay.
Mr. Bilirakis. The gentleman's time has expired. Very
quickly, Ed, go ahead.
Mr. Whitfield. One other question. I mean that creates a
lot of disparity around the country, though; right?
Mr. Goodman. It does, but, sir, it may be helpful because
in the absence of a national coverage decision, technology can
be used in certain regions of the country by choice of those
medical directors, which is well-founded, and we accumulate
data and evidence that may be used subsequently to put in place
a national coverage decision. That is an important avenue for
technology evaluation and diffusion.
Mr. Whitfield. Thank you.
Mr. Bilirakis. Thank you. The Chair now will inquire and
yield 30 seconds of his time to Mr. Burr.
Mr. Burr. I thank the chairman for that generous
opportunity. Dr. Kang, I just wanted to clarify one thing that
you said in your opening statement that I couldn't find in your
written testimony. You were referring to assessing new
technologies and you went on to say that you had to make sure
that they weren't unproven, ineffective or harmful. Did I
understand that correctly?
Mr. Kang. That is correct.
Mr. Burr. Is that not the process that the FDA goes through
when they approve a device or pharmaceutical for their approval
process?
Mr. Kang. In some situations, yes. In some situations, no.
Mr. Burr. There are some situations where the FDA does not
approve the safety and efficacy of a device or pharmaceutical?
Mr. Kang. That is correct.
Mr. Burr. Can you give an example of that?
Mr. Kang. Frequently in the 510(k) process for devices,
what they are really looking at is whether it is similar to a
predicate device or not. That would be the first example. The
other example is----
Mr. Burr. And under a 510(k), you feel that they have not
given a stamp of approval to safety and efficacy?
Mr. Kang. Actually, though under the B, IDE devices, we are
okay with those, and we end up covering those. It would be the
A's.
Mr. Miller. Category A.
Mr. Kang. It is Category A's.
Mr. Miller. Which are the more novel technologies.
Mr. Kang. Which are the more novel ones. The other place is
many times the FDA approval is for specific indication. What
they are asking for is what in the parlance would be called an
off-label indication, and they have not then looked at that
issue.
Mr. Burr. I thank the chairman.
Mr. Bilirakis. Well, I appreciate the gentleman raising
that point. I have always felt that is the particular function
of FDA, and once it reaches your point, the efficacy and the
safety has already been decided. With the exception, I suppose,
of applying those particular devices or drugs to seniors, I can
see where there might be a little bit of a difference there.
You know, we visited Baltimore the other day, and Dr.
Miller and others were very kind and helpful. We emphasized
then, and we try to emphasize today, that we are not trying to
demonize HCFA. We are trying to help, and I can't imagine that
Dr. Miller or any of the good civil servants at HCFA who have
been there for years and have been faced with problems of
turnover at the top, I can't imagine that they are happy with
taking 3\1/2\ years longer than Blue Cross/Blue Shield for new
transplant procedures, 5 years or more in some instances.
So we have to talk here. I have heard all kinds of reasons
why these problems exist and why the delays take place. But let
us see if we can reduce the delays. Let us see if we can
improve the process. That is the idea. It is not to demonize.
It is trying to improve the process. And what we asked of you
all the other day up there is to help us help you, so that we
can help the people that really count, the patients.
And Mr. Brown has made a lot out of the funding. I don't
know that I can recall many, if any, instances over the years
that HCFA has come here and testified and said, we need more
money, and if you assure us that we will receive more money, we
are going to do a better job, speed up the process, and speed
up the coding.
So, let's get back to the point that Dr. Shreve was making
in the first panel, the women's health uses, the use of the PET
scan. In some cases the PET scan is covered, the reimbursement
is covered for some diseases and for women, and some diseases
it is not, in spite of the fact that there is coverage for
those using the PET scan for those diseases by private plans.
What is the reason for something like that? Can you tell us? I
can't imagine.
One of you all made the comment earlier--certainly you are
right--HCFA is kind of looked upon as the leader by the private
sector in terms of coverage. Ordinarily that is the way it
takes place, and yet here we have cases where private plans
cover and HCFA does not. Explanation?
Mr. Kang. I actually think that----
Mr. Bilirakis. I say explanation and I hope we are not
talking about rationale.
Mr. Kang. I think that we appreciate being here because
there does need to be improvements and I would like to point to
the improvements that we have made in the last 2 years that you
heard in my testimony that were very welcomed.
Some of the other things that we are working on, and in
part precipitated by the PET issue, for example, we have
published recently a guidance document on criteria and
standards for diagnostic imaging and that I think is something
that was definitely needed. That will help in the future for
future innovators to really understand what sort of information
we are looking for for diagnostic imaging.
The other thing that we are doing with NCI and the FDA is a
special bio-imaging panel which really is trying to look at
frontloading all of the questions that we are asking for at the
initial design of trials. So, for example, let us see----
Mr. Bilirakis. So they could be taken care during that
process before they----
Mr. Kang. That is right.
Mr. Bilirakis. Okay.
Mr. Kang. Instead of answering the NIH question first, then
the FDA question, then the HCFA coverage or other insurers'--
quite frankly, this is the same as other insurers--question
third, we actually say can we design a trial that answers those
questions for all three parties? And we are doing this with the
industry. It is the National Electronic Manufacturers
Association, FDA, NCI and HCFA. And it has been very welcomed.
And these are the kinds of processes that I heard referred to
this morning that we need to work on.
Mr. Bilirakis. You know much of the problems that we have
here legislating, besides a lack of bipartisanship and things
of that nature, is these turf fights over jurisdiction. Do you
run into that also, vis-a-vis FDA, for instance?
Mr. Kang. I don't want to--it is human nature.
Mr. Bilirakis. You are under oath, I guess.
Mr. Kang. I mean I think I don't want to point fingers, but
this is human nature.
Mr. Bilirakis. Yes, it is.
Mr. Kang. But I think that over the last 2 years, we have
made significant inroads, all three of our agencies, and in
large part because we really want to serve the beneficiaries
and improve their care and make sure the technology diffuses.
So there have been significant inroads.
Mr. Bilirakis. Okay. Well, one of the things that we are
going to certainly concentrate on is trying to improve the
coordination and the relationship. I appreciate your having
told me what you just did, because I feel that in the process,
the FDA process, much of the testing, the analysis that you all
do, has got to be pretty duplicative, and can be done during
that particular FDA process.
My time has really expired. Dr. Goodman, you look like you
want to say something, but please keep it brief.
Mr. Goodman. I would prefer to emphasize the building
blocks that we have in place rather than the divisive ones. The
FDA-HCFA Interagency Agreement of 1995 is a great example of
the alignment we need. The current relationship between the
National Heart, Lung and Blood Institute and HCFA on funding a
clinical trial of a highly advanced left ventricular cyst
device--it is called the rematch trial--is a great example of
interagency collaboration that will speed up getting
information about technology that will make a more definitive
coverage decision. We can build on things that we know already
work.
Mr. Bilirakis. All right. Well, let us hope so. The hearing
is now over. I do want to ask you if you would be willing to
respond to written questions? You know we usually have some
after the hearing concerned is over. We are trying to work
together, and you have given us a lot of ideas. There are
plenty more I am sure you can give us.
To our HCFA witnesses, we have constantly over the years
asked your agency for help, help us to help you to make your
job easier. Some things you can do to improve the process, you
have the authority to do it. Some things you don't have the
authority and you need some legislation. We have asked for
those ideas, and frankly we have not been receiving them.
Thank you very much. Thank you, Mr. Brown.
[Whereupon, at 1:20 p.m., the subcommittees were
adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Advanced Medical Technology Association
AdvaMed is the largest medical technology trade association in the
world, representing more than 800 medical device, diagnostic products,
and health information systems manufacturers of all sizes. AdvaMed
member firms provide nearly 90 percent of the $68 billion of health
care technology products purchased annually in the U.S. and nearly 50
percent of the $159 billion purchased annually around the world.
AdvaMed strongly believes that Medicare should be encouraged to
capitalize on advanced technologies, which have revolutionized the U.S.
economy and driven productivity to new heights and new possibilities in
many other sectors. Significant advances in health care technologies--
from health information systems that monitor patient treatment data to
innovative diagnostics tests that detect diseases early and lifesaving
implantable devices--improve the productivity level of the health care
delivery system itself and vastly improve the quality of the health
care delivered. New technologies can reduce medical errors, make the
system more efficient and effective by catching diseases earlier--when
they are easier and less expensive to treat, allowing procedures to be
done in less expensive settings, and reducing hospital lengths of stays
and rehabilitation times.
AdvaMed applauds Congress for the steps it took in the Balanced
Budget Refinement Act of 1999 (BBRA) and the Benefits Improvement and
Protection Act (BIPA) of 2000 to begin to make the Medicare coverage,
coding and payment systems more effective and efficient. In addition,
the Health Care Financing Administration (HCFA) has recently made some
changes to modernize its coverage and payment systems.
Despite these efforts, however, current policies still fail to keep
up with the pace of new medical technology. Serious delays continue to
plague the amount of time it takes Medicare to make new medical
technologies and procedures available to beneficiaries in all treatment
settings.
As Cliff Goodman from the Lewin Group will explain today, Medicare
delays can total from 15 months to five years or more because of the
program's complex, bureaucratic procedures for adopting new
technologies. Keep in mind that all this is after the two to six years
it takes to develop a product and the year or more it takes to go
through the Food and Drug Administration (FDA) review. In addition,
these delays are even more pronounced when you consider that the
average life span of a new technology can be 18 months.
The impact on patients has been dramatic. As witnesses today will
explain, cancer patients have had to fight for years to get Medicare to
cover positron emission tomography, a potentially lifesaving scanning
technology that has been broadly available to people under private
health insurance for a decade. Tens of thousands of seniors and people
with disabilities have not been able to receive advanced technologies
like coronary stents (which reopen blocked arteries), cochlear implants
(which restore hearing) and heart assist devices (which keep patients
alive while waiting for a heat transplant).
These delays stem from the fact that for a new technology to become
fully available to Medicare patients, it must go through three separate
review processes to obtain coverage, receive a billing code and have a
payment level set. Serious delays in all three of these areas create
significant barriers to patient access.
While HCFA has improved the transparency for making national
coverage decisions and attempted to instill timeframes within the
process, timeliness is still a major problem. Under the current
national coverage process framework, HCFA has 90 days to determine
whether it will make a coverage decision or refer the request to either
the Medicare Coverage Advisory Committee (MCAC) or an outside health
technology assessment (HTA) group--or sometimes even to both. These
outside assessments take between 3 and 12 months each. HCFA then has 60
days to review the recommendations of the MCAC or HTA, and should a
positive coverage determination be made, it takes 180 days from the
first day of the next calendar quarter to issue a code and set a
payment level.
The coverage process should be streamlined and made more
accountable, timely and transparent. Steps should be taken to reduce
redundancies in the MCAC panel and HTA reviews. In addition, the focus
of the MCAC panels should be directed toward gaining practical clinical
advice from the medical experts on its panels.
After coverage is approved, there are three separate coding
processes that determine how a device or procedure is identified and to
which payment bundle it is assigned. Each of these coding systems have
significant time-lags in assigning and updating codes. Under the new
hospital outpatient perspective payment system (PPS), HCFA now assigns
and updates codes on a quarterly basis. To reduce coding delays of 15-
27 months, HCFA should use the outpatient PPS system as a model for
applying similar systems to other settings, such as the inpatient
hospital setting and doctors' offices.
Coverage and codes mean very little, however, if the associated
payment level is inadequate. HCFA's procedures for updating relative
payment weights and reassigning technologies and procedures are
informal and infrequent. For example, it took HCFA 5 years to
ultimately decide that the applicable diagnosis related group (DRG)
should be split into two DRGs for angioplasty with and without stent.
During those 5 years, hospitals took significant losses on each stent
procedure and the diffusion of this cost-saving technology was
hampered.
As required by BIPA, HCFA should develop formalized procedures for
expeditiously assigning codes, updating relative weights and
reassigning technologies to recognize the value of new and
substantially improved technologies. HCFA should also fully implement
the BIPA requirement to provide a transitional payment mechanism for
new technologies where the DRG payment is inadequate.
Again, AdvaMed applauds Congress for recognizing the value of
technology in improving the quality and efficiency of the health care
system, and taking steps to reduce the barriers patients face to
accessing these innovations. Recent reforms continue to improve the
system and AdvaMed encourages additional changes to make coverage,
coding and payment decisions more predictable, transparent and timely.
______
Prepared Statement of The Center for Patient Advocacy
The Center for Patient Advocacy is pleased to submit written
testimony to the House Energy and Commerce Subcommittee on Health and
the Subcommittee on Oversight and Investigations as you seek to improve
seniors' access to quality health care in this country. We commend the
subcommittees for conducting this hearing and for demonstrating an
early commitment in the 107th Congress to ensure that our nation's
seniors continue to have access to top quality health care.
Founded in 1995, the Center for Patient Advocacy is a private, non-
profit, grassroots organization representing the interests of patients
nationwide and dedicated to ensuring that patients have timely access
to state of the art, quality health care. With a grassroots coalition
of thousands of ``citizen lobbyists'' across the nation, the Center has
brought the patient's perspective to a number of critical issues that
Congress has considered in recent years, including managed care reform,
biomaterials reform, and FDA modernization. In all of our endeavors,
our goal has been and continues to be to ensure that health care
policymakers recognize and address patients' needs and concerns.
Too often, economic, administrative, or other concerns dominate
health care policy discussions, and patients, many times, become an
afterthought. We must constantly remind ourselves that all health care
begins and ends at a single point--the patient. To a sick patient and
his family, access to life-saving and life-enhancing therapies is all
that matters. The title of your investigation--``Patients First: A 21st
Century Promise to Ensure Quality and Affordable Health Coverage''--
demonstrates that you understand the real challenge of health care
reform--insuring patient access to high-quality care. By keeping the
focus on patients, this committee has great potential to achieve their
goals. You are off to a great start by considering ways in which the
Federal Government can improve access to new treatments and
technologies for Medicare beneficiaries.
Since its enactment as part of the Social Security Amendments of
1965, the Federal Government has provided health care coverage for
senior citizens and the disabled through the Medicare program. The
program is administered by the Health Care Financing Administration
(HCFA), which is also responsible for administering the federal portion
of Medicaid and the State Children's Health Insurance Program (SCHIP).
Currently, Medicare serves approximately 40 million beneficiaries at a
cost to the taxpayer of about $300 billion each year.
In spite of the best efforts of Congress and HCFA, it has become
increasingly clear to patients and patient advocates that the Medicare
system and the HCFA infrastructure on which it relies for
administration have lost step with the dramatic pace of medical
discovery and treatment options now available to patients. Though many
of HCFA's current guidelines represent good faith efforts by the agency
to meet the needs of Medicare patients, to follow the law, and to
reflect accurately congressional intent, the unfortunate end result for
many Medicare patients is the denial of needed care.
A telling example of Medicare's problems with which many of the
committee members are already familiar relates to the establishment of
the prospective payment system (PPS) for Medicare outpatient care. One
way that Congress has sought to keep down Medicare costs is by
reimbursing providers a predetermined amount for all patients having a
particular diagnosis or treatment regimen rather than reimbursing
providers according to their costs. While the PPS appears to be a
reasonable approach to controlling costs and has succeeded to some
degree in the inpatient setting, the outpatient PPS has failed to meet
its first responsibility--providing Medicare patients with timely
access to top quality care.
The bureaucratic outpatient PPS processes established by HCFA as a
result of the Balanced Budget Act of 1997 exemplify the way HCFA's
policies and procedures have delayed access to treatment and hurt
patients. Under the original PPS rule, after an outpatient therapy was
approved by the FDA, HCFA would then determine if it would be included
in the Medicare coverage portfolio. Sometimes this process was
conducted quickly at the local level, resulting in unequal coverage
across the country (some jurisdictions providing coverage while others
did not). Alternatively, sometimes a national determination was
required, and these coverage decisions could take as long as 3 years.
Next, the therapy would be assigned a procedure code for providers to
use in billing Medicare. This would often take another year or more.
Finally, HCFA would determine how much it would pay for the procedure
by placing into an ambulatory payment classification (APC), a system by
which similar procedures with similar costs are categorized. A single
price is set for each category, rather than for each specific
procedure. All told, however, the lag time between the FDA approving a
therapy and Medicare providing access to it was sometimes as long as 3-
5 years. Unfortunately, Medicare patients do not have 3-5 years to wait
for an effective treatment.
Recognizing the difficulties and delays caused by the outpatient
PPS, Congress went back to the drawing board and created a
transitional, cost-based, ``pass-through'' payment system for newer
therapies. Under the pass-through system, newer therapies (mostly those
approved after 1996) are reimbursed at 95% of the average wholesale
price (AWP). This system was put in place to guarantee Medicare
patients access to new therapies while HCFA completed the coding and
payment processes. Full pass-through payments were initially to
continue through 2001. HCFA, however, moved late last year to reduce
pass-though payments by 50%, again threatening Medicare patients'
access to care. Such a reduction would render it financially infeasible
for providers to continue to provide new therapies to their patients,
as the costs of providing treatment would far exceed reimbursement
levels. Thankfully, with the help of Congress and the pressure of
thousands of citizen lobbyists from around the country, HCFA finally
agreed to maintain pass-through payments through 2001, allowing both
Congress and the Bush Administration time to reconsider the problem in
hopes of developing a more workable payment methodology for emerging
therapies.
Medicare patients with cancer have been particularly vulnerable to
flaws in the outpatient PPS, as many cancer therapies are now
frequently provided in outpatient facilities rather than in hospitals.
Now that new and more effective cancer therapies are receiving quicker
approvals from the FDA (thanks to the previous work of the Commerce
Committee and the Congress), we must make every effort to streamline
the processes by which these therapies are made available to Medicare
patients with cancer. Furthermore, we must insure that once a therapy
is added to the Medicare coverage portfolio, reimbursement levels are
sufficient to allow providers to use it and, therefore, allow patients
to access it. Recognizing that cancer patients are often have the most
difficulty accessing the treatments they need, in 1999 the Center for
Patient Advocacy launched a new division of the Center, the Access to
Cancer Care Alliance (ACCA), which is actively addressing access and
quality care issues for cancer patients.
Finally, it is vital that Congress and HCFA approach this new
reform effort with an eye to simplifying the Medicare system. Doctors
now must contend with over 130,000 pages of Medicare and Medicaid
regulations. That is about 6 times the size of the confusing and
unwieldy Internal Revenue Code that Congress is now trying to simplify.
Not only does compliance with these regulations cost physicians
valuable time and money, but it also costs Medicare patients access to
care as doctors choose no longer to participate in the Medicare system.
And when physicians or their staffs make honest mistakes in complying
with Medicare coding or claims, they are suddenly treated as criminals.
It's time for Congress and HCFA to remove these dangerous disincentives
to providing care to Medicare patients.
Thank you again for the opportunity to provide testimony today. The
Center for Patient Advocacy looks forward to continuing to work with
Members of Congress, the administration, and the members of the
healthcare community to ensure that our nations Medicare program is
responsive to the patients it serves, and that it provides patients
with timely, state-of-the art care that they need and deserve.
Advancements such as the mapping of the human genome promise to
accelerate scientific research even further, and it is imperative that
Congress act now to insure Medicare patients full access to state-of-
the-art care.
______
Prepared Statement of Bruce Steinwald, Member, Committee on Medicare
Payment Methodology for Clinical Laboratory Services, Institute of
Medicine/National Academy of Sciences and Independent Consultant in
Health Economics
Good morning, Chairman Greenwood, Chairman Bilirakis and members of
the Subcommittees. My name is Bruce Steinwald and I am an independent
consultant in health economics in Washington, DC. I served as a member
of the Institute of Medicine (IOM) Committee on Medicare Payment
Methodology for Clinical Laboratory Services. The IOM is an arm of the
National Academy of Sciences, chartered by Congress in 1863 to advise
the government on matters of science and technology.
Background:
Recognizing that Medicare's payment system for clinical laboratory
services may have to be modernized, Congress mandated in the Balanced
Budget Act of 1997 that the Secretary of the Department of Health and
Human Services arrange for the IOM to review the current Medicare
payment methodology for outpatient clinical laboratory services and
make recommendations to improve the system. The Department's Health
Care Financing Administration (HCFA) contracted with the Institute of
Medicine in 1999 to conduct the study. To meet this charge, the IOM put
together a 12-member panel of experts composed of laboratorians,
physicians, economists, and health care policy and management experts.
We met five times between January and August 2000 to gather
information, deliberate over findings, and formulate recommendations.
As a result of the study, the IOM released our report, Medicare
Laboratory Payment Policy: Now and in the Future, in December 2000.
The focus of the IOM study was different from the current hearing.
We examined a wide range of issues related to the Medicare payment
methodology in addition to new technology, but our focus was limited to
the Medicare Part B fee schedule for outpatient clinical laboratory
services only and did not include other types of services or providers.
When examining any health services payment methodology, however, one
must consider how it incorporates new technology, since that is a
crucial factor that affects the adaptability of the payment methodology
for the future. In this statement I will briefly put Medicare clinical
laboratory payments in context and summarize the key findings and
recommendations of the Committee's report, particularly as they relate
to new technology. In addition, I will include a copy of the full
report and a short summary of it.
Background:
Clinical laboratory tests are a key component of modern health
care. Laboratory tests represent a small share of total health care
spending, but play a complementary and an integral role in good medical
care by helping physicians to diagnose and treat patients.
Technological changes in laboratory testing, both those in the pipeline
and those anticipated in the near future, offer the prospect of new
opportunities for diagnostic, monitoring, and screening improvements.
Medicare is the largest payer of clinical laboratory services. It
pays 29 percent of the nation's laboratory bill of $30 to $35 billion
for inpatient and outpatient laboratory services. The Medicare Part B
fee schedule for outpatient clinical laboratory services, the subject
of our study, accounts for approximately one-third of what Medicare
spent for laboratory services, or 1.6 percent of its total annual
budget, in 1998. While this is a small proportion of overall Medicare
spending, maintaining beneficiary access to laboratory services is
essential. In addition, there is evidence that Medicare payment policy
influences other payers' policies for laboratory services.
The incentive for manufacturers to develop new laboratory
technologies and the ability of Medicare beneficiaries to have access
to them are affected by Medicare's payment policy. Medicare's current
system of payment for laboratory services in outpatient settings was
designed in the early 1980s. Although specific payment rates have
changed over the past 20 years, the basic payment methodology has not.
The introduction of new technologies and changes in regulations and the
laboratory marketplace have had a significant impact on the structure
of the laboratory industry during the past 20 years. Even in the face
of these changes, the committee did not find a lack of interest in or
adoption of innovation, up to this point in time. It did conclude,
however, that current Medicare payment policy for outpatient clinical
laboratory services seems not only outdated, but also irrational.
Unless it is changed, the committee was concerned that the current
payment system could eventually inhibit innovation and reduce
beneficiary access to care. Inadequate payment rates could slow the
industry's ability to develop and disseminate new technology and
laboratories' willingness to adopt valuable but more expensive
technologies.
Technology Trends:
The laboratory environment has been characterized by ongoing rapid
and dramatic innovation since the 1980s. There has been remarkable
growth in the range and complexity of available tests and services,
which is expected to continue. Laboratory technology is often at the
forefront of medical advances. In some cases, testing techniques to
diagnose or screen for a particular condition are available before
effective treatment. Innovation in laboratory technology, which
includes both new tests and advances in equipment and testing
techniques, has made testing more efficient and automated. Information
technology has revolutionized the transfer of data by decreasing the
time it takes to order and receive test results and by creating
opportunities for research on large datasets. New technology is
positively associated with increased efficiency, reduction in errors,
and improved quality in the delivery of health care services.
While efforts to automate central laboratories are likely to
continue, trends appear to indicate that much routine testing in the
future could be delivered through point-of-care testing at the
patient's bedside and home-based testing. Centralized laboratories are
likely to concentrate more on rare and complex tests. The mapping of
the human genome and other scientific advances lead laboratory experts
to expect major advances in clinical tests and methodologies in the
near future, particularly in the areas of genetic testing, surface
markers to identify specific types of cancers, pharmacogenomics to
individualize drug treatments, and molecular-level tests. Whether new
technologies are implemented may depend on their impact on laboratory
costs and, if they are more costly, on payers' willingness to pay for
them.
Current Medicare payment system:
Medicare currently pays for outpatient clinical laboratory tests
using a prospective payment system established in 1984. Payments for
1,100 tests are set separately in fee schedules for each of 56
geographic jurisdictions, limited by national fee caps called National
Limitation Amounts. Payments are based on what laboratories charged in
1983, updated periodically for inflation. For each test, the median of
the 56 fees is taken and reduced by 26 percent to calculate the
National Limitation Amount. Most fees currently are constrained by the
National Limitation Amount. Laboratories accept Medicare fees as full
payment; there is no beneficiary cost sharing. The Health Care
Financing Administration, which administers the Medicare program, and
its private contractors, known as carriers and fiscal intermediaries,
make and interpret policy, set prices, and process claims.
Many tests resulting from new technological developments have been
added to the fee schedule since 1983. Decisions about how much to pay
for new tests are made both by the carriers and by HCFA. There are two
different procedures to set the fees for new tests called cross-walking
and gap-filling. Cross-walking is designed for new tests that are
similar to existing tests, and gap-filling is designed for breakthrough
technology. The choice of which procedure to follow is made by HCFA,
based largely on how the new technology is handled by the American
Medical Association's panel that assigns Current Procedural Terminology
codes for new tests.
When a new technology is similar to an existing test, it is
assigned an existing identifying code and the payment amount that is
attached to that code will apply to the new technology. Alternatively,
if HCFA determines that the new technology is similar to ``old''
technologies described under two or more existing codes, it may average
the existing payment amounts for those codes and apply it to the new
test.
The determination of which new tests can be cross-walked to which
existing codes is made internally by HCFA, based on AMA advice about
CPT codes. There are no published criteria guiding this process, no
public description of the process, and generally no participation by
the public or stakeholders other than medical organizations. There is
no official process for stakeholders to challenge these decisions.
When a testing product is so radically new that there is little
relevant experience upon which to base payment, the payment amount for
the test is determined through gap-filling. There is no standard data
source to provide comparison prices when creating the base fee for such
new tests. HCFA relies on the carriers to set their own fees for the
first year after the new test has been approved for coverage. HCFA
specifies which new CPT codes are to be gap-filled by the carrier
(usually more than a dozen new codes) with the issuance of the new
annual fee schedule, but it does not tell the carriers how to calculate
the payment amount. There is much flexibility in the way each carrier
collects information and sets its fees. All 56 carriers go through the
gap-fill exercise separately in order to develop their area-specific
fee for the test.
There are two distinct problems with gap-filling that can sometimes
lead to setting inappropriate payment levels. First, carriers set their
fees based on historical experience, current cost data, and analysis,
but unless they inflate the fees before the National Limitation Amount
is applied, the cap could create payments that are substantially below
costs. This occurs because of the nature of the mandated payment
formula, which sets the level of the national cap at 74 percent of the
median of the carriers' fees. We understand that legislation passed
after our report was released, the Benefits Improvement and Protection
Act of 2000, eliminates this reduction of the median for setting the
National Limitation Amount for new tests and services. The second
problem is that there is no mechanism for reassessing the
appropriateness of the new fees and cap once they have been set. Even
if the cost of the new test drops significantly after it comes into
common use and may become easier to conduct, or even if the gap-fill
fee is so low it could limit beneficiary access, there is no routine
and practical method for changing it. Hence, neither HCFA nor the
carriers regularly look back at fees to see if they are still
reasonable.
Assessment of the current Medicare payment system:
The committee defined goals that we believe should guide payment
policy. Then we conducted an extensive examination of the current
Medicare payment system for outpatient clinical laboratory services and
assessed the methodology according to those goals. We examined:
Beneficiary access--The committee found no evidence that
beneficiaries currently have difficulty obtaining outpatient clinical
laboratory services, including STAT tests.
Flexibility--The committee concluded that existing mechanisms for
keeping payments up to date are inadequate. The existing methodology
does not provide adjustments to accommodate changes needed in payment
levels for specific, individual tests. The process for integrating new
technologies into the payment system, including determinations of
coverage, assignment of CPT billing codes, and development of
appropriate prices, is slow, administratively inefficient, and closed
to stakeholder participation. These problems are likely to become
increasingly important with the anticipated changes in laboratory
technology and medical practice.
Transparency--We concluded that the current payment system lacks
``openness'' and adequate procedures for stakeholder involvement. Clear
and consistent information on how the system works and opportunities
for the public and stakeholders to have input into decision processes
are limited.
Value--The committee found it had little data with which to judge
whether Medicare spending in aggregate is too high or low, whether
Medicare is paying reasonable amounts for individual tests and
services, or whether physicians are ordering tests appropriately.
Administrative simplicity and efficiency--We concluded that the
system, with 56 separate fee schedules and 56 separate processes for
coverage determination, is unnecessarily complex and inefficient,
particularly in the way the system incorporates new technologies and
determines whether or not a laboratory's claim should be paid.
Recommendations:
Based on our analysis of the current payment method and alternative
approaches, the committee reached consensus on 12 recommendations for
improving Medicare's payment system for outpatient clinical laboratory
services. Our choices were guided by the previously stated goals.
Because many of the changes could require new legislation,
implementation of the committee's recommendations will entail
congressional action. The committee recommended that HCFA, the
administration, and the Congress work together to develop the necessary
enabling authority and support.
The committee's first six recommendations are interrelated, focus
specifically on payment methodology, and broadly define the preferred
payment system and specific elements of the system and its
implementation. The final six recommendations focus on problems in the
current system and can be implemented independently or concurrently
with the first six. I will not go into detail here on all the
recommendations, since they are included in the committee's report that
I have submitted along with this statement, but I will call attention
to the key ones relating to new technology.
The committee's key recommendation was that Medicare payments for
outpatient clinical laboratory services should be based on a single,
rational, national fee schedule. In effect, there is already a national
fee schedule, since most services are paid at the National Limitation
Amounts rather than by carrier-specific fees. A national fee schedule
means a single set of payments (instead of 56 fees), with adjustments
for differences in local labor costs, prices for goods and services the
laboratory purchases, and other relevant factors. The long-term goal of
a national fee schedule is to establish relative payment amounts that
accurately reflect the relative resource requirements of providing
services, minimizing the financial incentives to overuse or underuse
services. The committee considered this important for promoting the
clinically appropriate use of all laboratory services, both new and old
technologies, and ensuring that beneficiaries continue to have access
to services.
We recommended that, on an interim basis, relative payments for
Medicare outpatient clinical laboratory services should be based on the
current National Limitation Amounts. This is an appropriate starting
point for the national fee schedule because it formalizes current, de
facto Medicare payments and should minimize dislocations and
disruptions for laboratories, beneficiaries, and contractors.
Nevertheless, HCFA should move quickly to refine the fees, based on a
data-driven consensus process. The fee schedule should be updated
periodically. HCFA should explore alternative methods for gathering
data to be used in the process.
We recommended that, to incorporate new tests into the Medicare
laboratory fee schedule, there should be an open, timely, and
accessible process that is subject to challenge. The process and fees
produced should not impede clinical decision making that is essential
to providing appropriate care. The committee concluded that a
consistent, public process for developing interim values for new
laboratory services is essential for an effective payment system. HCFA
should create a committee of laboratorians, pathologists, other
physicians and scientific experts, health care policymakers, and
economists to advise on setting interim relative values or national
fees for new technologies. After interim relative values or fees for
new services have been established, Medicare should allow time for
diffusion of the new technology and stabilization of costs. The interim
relative values for these new services should be reviewed and revised
as necessary. Once they are ``official,'' these services would be
included in the periodic review of relative values for the full fee
schedule.
The committee recommended that HCFA should review alternatives to
the current system for coding outpatient clinical laboratory services
for claims processing. More accurate, open, and timely coding processes
for new technologies as well as tests and services should be sought.
The committee heard testimony form several sources that the application
process for a new Current Procedural Terminology (CPT) code often adds
to the time required to incorporate new technologies into the Medicare
laboratory payment system. There are also problems with the inadequate
specificity of the codes. Coding, the Medicare coverage process, and
payment determinations are closely intertwined; tend to lack
transparency; and can add considerably to the time required to
incorporate a new test, new equipment, or a new testing methodology.
The rapid development of anticipated new technologies will exacerbate
this problem. HCFA should examine how to reduce coding delays within
the current system and should explore alternative coding systems.
As we seek to reform payment policy for clinical laboratory
services, it is important to assess the impact these changes have,
particularly on both beneficiary access and the diffusion of new
technologies. The committee, therefore, also recommended that HCFA
collect data to monitor and assess the impact of new policies as they
are implemented.
Conclusion:
We believe Congress and HCFA have the opportunity to fix the
current payment system for clinical laboratory services, averting the
possibility of a crisis in the future. Payments for some individual
tests likely do not reflect the cost of providing services and
anticipated advances in laboratory technology will exacerbate the flaws
in the current system. Problems with the outdated payment system could
threaten beneficiary access to care and the use of enhanced testing
methodologies in the future, however, the committee found no evidence
of this now. Although radical changes are not called for at this time,
implementing the committee's recommendations will likely improve the
efficiency of the system and ensure that Medicare beneficiaries
continue to have access to high-quality laboratory services.
Thank you for the opportunity to testify and I would be glad to
answer any questions you might have.
PATIENTS FIRST: A 21ST CENTURY PROMISE TO ENSURE QUALITY AND AFFORDABLE
HEALTH COVERAGE
----------
WEDNESDAY, APRIL 4, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health, joint with the
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman, Subcommittee on Health) presiding.
Members present, Subcommittee on Health: Representatives
Bilirakis, Greenwood, Deal, Burr, Norwood, Wilson, Shadegg,
Bryant, Ehrlich, Brown, Strickland, Barrett, Capps, Deutsch,
Stupak, and Green.
Members present, Subcommittee on Oversight and
Investigations: Representatives Greenwood, Bilirakis, Stearns,
Burr, Bass, Deutsch, Stupak, Strickland, and DeGette.
Staff present: Tom Giles, majority counsel; Joe Greenman,
majority professional staff; Kristi Gillis, legislative clerk;
Chris Knauer, minority professional staff; and Bridget Taylor,
minority professional staff.
Mr. Bilirakis. We are going to start. Generally, I don't
like to do it unless we have a member of the minority in the
room, but we are already running late, and we have a vote
coming up in just a few minutes on the floor, I am advised. So,
hopefully we can get two or three opening statements in before
then.
Today, I am pleased to convene this second hearing in our
ongoing Patients First initiative. Along with Chairman
Greenwood, of the Oversight and Investigations Subcommittee, I
am pleased to continue our review of the Health Care Financing
Administration and administrative issues surrounding the
Medicare, Medicaid, and SCHIP programs.
Today's hearing will focus on how HCFA interacts with
providers regarding the rules and regulations that guide the
Medicare program. Our Patients First initiative builds on a
hearing and subsequent roundtable discussion held last year by
the then Health and Environment Subcommittee. And as I said
last year, this project, and I quote myself, ``is especially
significant, because any effort to reform Medicare must include
a careful review of the agency that administers the program.''
``I don't intend to bash HCFA;'' we have made that point, I
think, many times so far this year. ``But rather we want to
conduct a thorough examination of the Health Care Financing
Administration, its regulations, policies, and interactions
with stakeholders, as well as the impact of congressional
mandates.''
So it is important that all Medicare providers understand
the rules of the road within the Medicare system. I have heard
often and forcefully from constituents that honest, law-abiding
providers have a difficult time understanding the rules, let
alone following them. I know other members have heard similar
views from providers in their districts.
Today's hearing provides an opportunity for us all to
better understand the nature and source of these concerns. At
the same time, I want to emphasize that this committee supports
the efforts underway to curtail fraud and abuse in government
health care programs. Providers who knowingly attempt to
defraud the Federal Government through the Medicare Program
should be identified and punished. However, there are many
instances of honest providers trying to make a living
practicing medicine who don't fully understand the coding
process or specific rules and regulations that govern the
Medicare Program. Sometimes these honest mistakes cause undue
suffering and hardship. The intent of this hearing is to find
out how the information flow occurs and how it can be improved.
I am pleased that Dr. David Becker, a gastroenterologist
from Clearwater, Florida, is able to join us today. As I said,
I have heard often from providers in the 9th Congressional
District of Florida, most notably from the Pinellas County
Medical Society, which is represented today by Dr. Becker, and
the Pinellas County Osteopathic Medical Society, under the
leadership of Dr. Ken Webster.
As we will hear from Dr. Becker, providers want a system
that they can understand, as well as clear explanations and
training for coding and documentation. I have heard from
providers back home who feel strongly that communication and
education will do more to improve the system than regulation
and retribution. And I hope that this hearing and the testimony
of Dr. Becker and the others will help us to understand the
flow of information and how to improve the administration of
the Medicare Program.
I do want to thank all of our witnesses for their time and
effort in joining us today. I am hopeful, as I think all of us
are, that this hearing will lead to improvements in operations
of the Medicare Program and ultimately to improvements in the
quality of care for Medicare beneficiaries. That should be our
focus and I would like to think our shared objective.
The Chair now yields to Mr. Brown.
Mr. Brown. I thank the chairman. I apologize for being
late. For some reason, I had 2218 as the room, and I don't know
why that would be, but anyway, I apologize.
Mr. Bilirakis. There must be some Greek in your genes,
because Greeks are known to always be late.
Mr. Brown. You can always have an excuse.
Thank you. I thank the chairman, and thank the witnesses
for joining us this morning.
I am pleased we are focusing our attention today on
provider concerns and recommendations that can help us improve
the traditional Medicare Program. I read the testimony of the
witnesses last night, and there clearly are issues that we in
Congress have a responsibility to address.
There is a number of fundamental issues, I think, we in
this room can all agree on. Communications among HCFA, its
contractors, providers, and beneficiaries can and must be
improved. Providers and administrators should receive fair
notice about new policies and procedures, along with clear
instructions on how to implement them. And providers should not
have to wait for months before mistakes made by a contractor or
by HCFA are resolved. And they certainly should not have to
struggle just to find out whom they are to talk to about it.
I hope it hits home that the time providers and their
staffs spend on administration is not a throw-away commodity.
It is valuable. Every effort should be made to eliminate
extraneous, time-consuming paperwork.
Mr. Chairman, I have several goals for this hearing. First,
we need to listen carefully to providers' concerns and uncover
where the breakdown in communication and education is
occurring. Second, we need to figure out how to fix the
problems that we identify. Is the problem an administrative
issue? Is it a legislative issue? Is it a resource issue? Or is
it some combination of the three? And most important, third, is
that we do what it takes to make sure that traditional Medicare
remains a viable and important program that both providers and
seniors can depend on.
One thing that we will hear today is that this is, in part,
a resource issue. I want to submit two documents for the
record, Mr. Chairman. The first is a letter that Chairman
Dingell, Mr. Waxman, and Mr. Stark and I sent to Chairman
Regula and Ranking Member Obey, advocating a substantial
increase in HCFA's administrative budget.
Mr. Bilirakis. Without objection.
Mr. Brown. Thank you. The second is an open letter to
Congress written by a bipartisan group of health care experts.
Mr. Bilirakis. Without objection.
Mr. Brown. In that letter they, too, make the case for a
significant increase in HCFA funding. Congress just can't be
focusing, as we have in the last 2 or 3 years, on increases to
HMOs. We have to pay attention to the needs of the fee-for-
service side of the program too.
HCFA and its contractors have experienced a dramatic
increase in workload over the last 4 years. The BBA in 1997
alone added 350 new Medicare and Medicaid policies, many of
which were complex, and many of which required a significant
effort to implement in a short time period, like the hospital
outpatient department prospective payment system, home health
prospective payment system, and skilled nursing facility
prospective payment system, just to name three of the many. Yet
over the last decade, increases in HCFA's administrative budget
have been essentially flat during this period of significant
work growth. With just over 4,400 employees, HCFA's workforce
is smaller today than it was 20 years ago. Contractors, too,
must meet these increased demands, and they, too, have seen
their budgets remain essentially constant over this period of
time.
There are many consequences of this underfunding. The
agency has not been able to finance vitally needed customer
service and provider and beneficiary education improvements;
survey and certification of providers has lagged; and timely
responses to patient and family complaints have been
compromised. Lack of investments and information systems due to
resource constraints has prevented increased efficiency in
service improvements and constraints on funding for new staff
erode morale and make the agency less competitive in a tight
labor market. No insurer, whether it is HCFA, whether it is a
HCFA contractor or whether it is employer-sponsored health plan
can run on fumes.
HCFA's administrative budget is roughly 1.8 percent of
benefits. Compare this to Blue Cross Blue Shield plans that
have administrative costs, on average, of 12 percent of
benefits, or other commercial providers that have
administrative costs upwards of 25 percent. With such a limited
budget, the agency must make choices about how to allocate
resources. HCFA cannot make the choice to insure fewer
beneficiaries, to process fewer claims or to inspect fewer
nursing facilities. When funding is limited or reduced, the
agency and its contractors must make tough choices about where
to devote resources. If we believe that the concerns we raise
here today are serious and merit our attention, if we want to
listen to providers and make the traditional Medicare Program
work better for them and for seniors, then one of the things
that we need to is put our money where our mouth is, and give
HCFA and the contractors the resources they need to manage the
program effectively.
Earlier this year, at a public forum on the future of HCFA,
two former HCFA administrators--two Democrats and two
Republicans--were unanimous in a call for significant increases
in the agency's budget. I am working with the chairman to bring
these administrators before the subcommittee to further
underscore that point.
Again, I thank Chairman Bilirakis for holding today's
timely hearing. I look forward to working with the providers,
the agencies, and my colleagues across the aisle to find ways
to address the issues we will hear about today and improve
Medicare for beneficiaries and especially for the providers and
especially the beneficiaries.
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Mr. Bilirakis. I thank the gentleman. The Chair now
recognizes the co-chairman of this hearing and the chairman of
the Oversight and Investigations Subcommittee, Mr. Greenwood.
Mr. Greenwood. Thank you, Mr. Chairman. Chairman Bilirakis,
I am pleased to co-Chair this very important joint hearing of
the Health and Oversight and Investigations Subcommittees with
you today. Like many of my colleagues on both sides of the
aisle, I am concerned about ensuring that Medicare providers
are receiving clear and concise guidelines and information on
how to properly submit claims to Medicare.
Medicare is an essential program to the millions of seniors
and disabled who are served by it. It provides its
beneficiaries with the medical services and treatments
necessary for ensuring quality of life. The Medicare Program
relies on thousands of our country's highly trained and
extremely qualified medical providers to administer these
medical services and treatments. We are grateful to them for
participating, and we should do everything in our power, as
Members of Congress, to make serving Medicare beneficiaries an
opportunity for health care providers to spend with patients on
this important task of improving the quality of their lives.
Medicare's rules and guidelines should provide clear
directives to its contractors and providers on how to provide
an efficient health care delivery system. Clear and
understandable rules and guidelines are an absolute necessity
for guaranteeing accountability within the system. The better
that providers understand Medicare's rules and the better they
are crafted so that providers can consistently follow them, the
more accountability will be brought into their transactions
with the program.
Increased clarity will turn fears of being investigated
into clearer understandings of what is and what is not
allowable under Medicare rules and regulations. Today, we will
evaluate areas where Medicare is unclear or not easily
understandable for its providers and explore ways to improve
this process.
With these goals in mind, we should be mindful of the
progress that has been made over the last 5 years in curtailing
improper Medicare payments. The Department of Health and Human
Services Office of Inspector General has estimated that the
amount of improper Medicare payments has fallen from $23.2
billion in fiscal year 1996, down to $11.9 billion in fiscal
year 2000. To put it another way, the estimated amount in
improper Medicare payments has been cut by almost half.
This is a direct benefit to the current and future Medicare
beneficiaries. We have seen the estimated insolvency date of
the Medicare Trust Fund as recently reported by Medicare
trustees, pushed back another 4 years. The trustees cited
continuing efforts to combat fraud, waste, and abuse in the
Medicare Program as one of the main components that has slowed
Medicare spending.
It is my opinion that decreasing improper billing of the
Medicare Program and effective outreach to Medicare's providers
must go hand in hand. As I have already stated, increased
vigilance in monitoring fraud, waste, and abuse has had a
significant impact in reducing the rate of improper payments
made by Medicare. It may very well be the case that we are also
need to increase our diligence with regard to reaching out to
providers in an effort to alleviate areas of confusion or
misunderstanding regarding everyday compliance with Medicare
regulations. To that end, we are holding this hearing today.
In recent months, physicians have been voicing their
concerns regarding the complexity of dealing with the Medicare
Program. In a general sense, they are expressing their
frustration with a lack of clear and consistence guidance from
the Health Care Financing Administration and its contractors.
In many cases, this frustration has led to a fear on the part
of many providers that they could be unfairly penalized for
innocent mistakes in billing Medicare claims.
The Health Care Financing Administration is the Government
agency charged with administering the payment of Medicare
claims. In this capacity, it contracts with fiscal
intermediaries who process Part A claims and carriers who
process Part B claims. Providers get much of their information
on Medicare's guidelines and regulations from HCFA's
contractors.
Today, we will be examining how HCFA promulgates
information and guidelines from its headquarters in Baltimore,
Maryland to its regional offices, down through its contractors
and ultimately to Medicare providers. In the process, we will
get perspectives from various stakeholders on Medicare's
provider outreach process.
I would also like to thank Ranking Members Brown and
Deutsch for working with us on this issue in a bipartisan way.
I look forward to working with you and Chairman Bilirakis to
address the concerns of Medicare providers, find the
inefficiencies within the system, as it now exists, and work
with HCFA and others to fashion the solutions. And I thank in
advance all of the witnesses for their testimony today.
Mr. Bilirakis. The Chair thanks the gentleman. We are going
to try to go through here without having to take a break. The
Chair now recognizes Mr. Deutsch for an opening statement, and
then hopefully Mr. Norwood or Mr. Greenwood or I will be back
before--after we cast a vote. Maybe we can continue on.
Otherwise, we will have to recess. Mr. Deutsch.
Mr. Deutsch. Thank you, Mr. Chairman. And, again, I
appreciate the fact this is the second hearing designated to
focus on HCFA reform, and I am committed to working with you on
this project.
We ask that we make sure, though, that we get very precise
and specific information which details how management of the
Medicare Program is failing and then what must be done to
correct whatever is uncovered.
Mr. Chairman, it is critical that we proceed with this and
other related hearings, that we determine exactly what, if
anything, is broken at either HCFA, the carriers or the
providers themselves. We must get specifics. Mr. Chairman, we
also need to determine what specifically Congress can do to
address whatever shortcomings are identified by the witnesses
that are testifying today. Whatever we determine is broken, is
it fixable through legislation or is it a problem with
resources? Is it a combination of the two? I hope our
respective subcommittees intend to dig deep enough to determine
the answer to that question.
Is it not necessarily clear, however, that the problem
which will be voiced today by our witnesses can necessarily be
addressed through legislation alone. If these hearings are
going to be productive, then I believe it is critical that we,
as a committee, be responsive. That means we must not only
verify whether the problems do exist, as claimed by some, but
we must also analyze the root cause of these problems so we can
determine where corrective action is needed.
Then, provided that we agree that certain problems are in
fact evident, we must determine what we need to do to address
them. I am looking forward to the witnesses' testimony to hear
if they have specific ideas about what changes they will
suggest that HCFA make administratively or we make
legislatively. Thank you, and I yield back.
Mr. Bilirakis. I thank the gentleman. Ms. Capps, for an
opening statement.
Ms. Capps. Thank you. Thank you, Mr. Chairman, for holding
this important hearing today to discuss the relationship
between HCFA and the providers and carriers of Medicare.
Medicare is a sacred program to many of today's seniors.
They count on this program for their health care and should be
able to do so in the future. Managing Medicare is an enormous
challenge, and HCFA must engage in a delicate balancing act.
While we don't want to compromise patient care with excessive
regulation, we also need to make sure that the agency preserves
a high level of program integrity and works to prevent fraud,
waste, and abuse. If we don't do this, we won't be able to
guarantee Medicare's continued solvency.
That being said, I believe there are many areas that need
improvement when it comes to Medicare's management. I am afraid
the Congress has occasionally made this task harder, and so I
look forward to hearing specific ways we can help fix this
system. I know from my own district some of the difficulties
that have arisen.
Last December, I was contacted by a doctor in San Luis
Obispo, California who was having difficulty getting reimbursed
by the Medicare carrier for southern California. He had gone
for a month without receiving any payment or any
acknowledgement of his effort to be paid. This posed a serious
threat to his ability to treat patients and to health care
access for my constituents.
Dr. Palchek, the doctor in question, is the only medical
oncologist in the southern part of San Luis Obispo County.
Because of this failure on the part of the carrier, he was
unable to purchase chemotherapy, hormonaltherapy or
immunotherapy for his patients and was forced to send them to
the local community hospital. I soon discovered this problem
was not limited to Dr. Palchek and that many other providers in
my district were experiencing similar difficulties. Some of the
doctors offices that were affected were even forced to seek
bank loans to stay open and to stay in business.
I am pleased to say that after I intervened with the
carrier and with HCFA, this carrier has worked diligently to
resolve these problems. And since that time, the system has
been working better.
But the reason I raise this example is not to point a
finger at any particular person or entity but to illustrate the
consequences of the problems that can and do arise and to
remind us of what is at stake. Constituents, mine or anyone
else's, should never have to deal with this, and we on this
committee need to see that they and people like them across
this country do not have to face this kind of situation in the
future.
I am looking forward to hearing from witnesses today about
the particular difficulties they see in the way Medicare is
managed and the ways that we can work together to address them.
I hope we, as a committee, will take the time to really listen
to dig into what they have to say, to discover what we need to
do to improve on the current situation.
I suspect that we are going to discover that some of the
problems we see are due to HCFA's limited resources and that
some are due to the operation of carriers and that some are
even due to provider practices. When we have determined the
specific difficulties in our system that it faces, we can then
have a reasonable and bipartisan effort to correct the
situation without emasculating the Medicare Program or
disrupting the services it provides so well.
I believe in Medicare. I think we must commit ourselves to
the improvement of administering this program. We need to work
with HCFA to help them in their task of preserving program
integrity while ensuring adequate care. And so I look forward
to working with you, Mr. Chairman, with our colleagues on this
committee to do this in a very fair and sound way.
I yield back the balance of my time.
Mr. Bilirakis. Well said, and the Chair thanks the
gentlelady. We have run out of members of the subcommittee, so
I guess we are going to have to recess. Possibly we can ask the
witnesses to sort of take their positions while we are gone.
And as soon as either Mr. Greenwood or Norwood returns, we will
get started again. Thank you.
[Brief recess.]
Mr. Greenwood. We will reconvene, and the Chair recognizes,
for 3 minutes, for the purposes of making an opening statement,
the gentleman from North Carolina, Mr. Burr.
Mr. Burr. I thank the chairman. I thank my colleagues, and
I welcome our panel of witnesses. Mr. Chairman, I will try to
be brief. I want to take this opportunity to show the
bipartisan spirit I have always tried to approach O&I
investigations as well as Health Subcommittee investigations.
And to say that, as I prepared for this hearing yesterday,
there was only one testimony that we didn't have. That was the
testimony of HCFA. It came in after six last night. They have
had 10 days notice for this hearing. When there was a different
administration in, I was very quick on this committee to note
late testimony. We have changed administrations. I want to
continue to note late testimony, testimony that does not allow
us to prepare, testimony that is a great example of what many
of the people in this panel will explain as less than the best
from an agency that claims to have changed.
Let me read, if I could, Mr. Chairman, some of Mr. Miller's
testimony. ``We are continuing to pursue an open process as we
implement these new programs and policy changes seeking insight
and recommendations from physicians and providers, their
associations and other members of the public. This is far
different from the way many private insurers conduct their
business and greatly benefits everyone as we incorporate
stakeholder recommendations into our new policies and
regulations.''
Mr. Chairman, I won't be here for the whole hearing, but
let me highlight some of the testimony of three of our
witnesses. First is David Becker, County Medical Society, and
he says in his testimony, ``We need a system everyone can
understand. We need training from our HCFA carriers for correct
coding documentation. Communication and education, as opposed
to regulation and retribution will greatly improve today's
Medicare Program.''
Jyl Bradley, ``Not only did this communication breakdown
between HCFA, the carriers, and ultimately the providers result
in physician practices around the country having to submit
thousands of denied claims billed from October 30, 2000 to
February 8, 2001, it undermined the trust and credibility
necessary to preserve a good working relationship between
practices and carriers.''
Mr. Wood from the Mayo Foundation, ``The work of the staff
has been very gratifying, and it is clear from this example
that staff can make changes that are helpful not only to
physicians but beneficiaries. Field testing or simplified ABN
found better beneficiary response to new, simpler forms.
However, it is difficult for me to understand why it has taken
a decade to resolve an issue that required only a year of
development and testing. We should be able to make faster
progress than solving one problem every 10 years.''
``Unfortunately, HCFA staff members have informed PPAC
members that at least two of the issues important to physicians
and included on the PRIT physicians' issues list are nearly
impossible to resolve, notably, claims, resubmissions, and the
requirement for prior hospitalization for skilled nursing
facility placement.''
I am going to miss a lot of the testimony, so I wanted to
make sure that everybody here heard the quotes that you made
that I think fly in the face of some of the statements that
HCFA will make throughout this testimony about the
transformation they have gone through of openness,
communication, listening, reality. It is right in the opening
part of it: ``Our goal is to ensure that beneficiaries get the
care they need without imposing unnecessary burdens on
beneficiaries, physicians, and providers.'' That is their goal.
Clearly, that is not happening today. The purpose of this
meeting is to get us on the road to where we determine whether
statutorily they can do it or legislatively we have to do it.
Mr. Chairman, let me just share for the members, I hold in
front of me the list of forms required to be filled out on the
first home care visit. Let me restate that: This is the entire
packet of forms that must be filled out on the first home care
visit. I think this is a great place for us to start to figure
out how we reduce some of the burden that we have placed on
providers, and then we can start on dealing with the other
realities that we know, which may lead us to 130,000 pages of
regulations that we, in fact, deserve some credit for creating.
And I hope, in fact, we will deserve some credit for solving.
I thank the chairman. I yield back.
Mr. Greenwood. Chair recognizes the gentleman from Georgia,
Mr. Norwood, for 3 minutes, for an opening statement.
Mr. Norwood. Thank you, Mr. Chairman. In the interest of
getting to our witnesses, I will be brief, but I am going to be
to the point.
There is something very, very wrong with a system that is
so bureaucratic that it takes 130,000 pages of rules and forces
the doctor to spend more time and effort working for HCFA in
fear of going to jail than working for their patients. Now, if
you can't manage a system with less rules and regulations than
that, we are going down the wrong road with training, because
training is not the solution until we reduce the amount of
paperwork, as Mr. Burr just showed, and the amount of rules
these people have to deal with. That is if you want well
patients. There isn't a doctor in this country that deals with
Medicare that doesn't have some form of horror story about the
complexities of this process. These stories are very painful to
the providers and to the patients.
Now, I have not yet read the GAO report that praises the
work of the Department of Justice in implementing the False
Claims Act for Medicare, but it is strange credibility to say
that it is making things any easier for the providers of the
patients so that the patient may get well. Some may argue that
efforts to stop improper payments have saved the Government
money. And someone earlier pointed out how much money. But it
has also increased the level of anxiety amongst the Medicare
providers to the point that many either want to retire as quick
as they can or they want to stop seeing Medicare patients.
The question is, is the money that the Justice Department
says it is saving really, really from improper payments? With
130,000 pages of rules and regulations governing Medicare, my
suspicion is, and I am pretty sure it is more than just a
suspicion, that the providers are downcoding to save themselves
from ever hearing from the Justice Department or the Inspector
General.
Providers are forced to charge themselves less for fear of
the IRS, the FBI, and OSHA. There is something wrong with that
system, particularly in a system that pays fees typically at
cost and in some cases below cost, and the provider is forced
to downcode in order to keep them off their back.
Now, I didn't come here today to lay blame or point fingers
for the problems that providers face in dealing with Medicare.
Is it HCFA? Is it the carriers? Is it the providers themselves?
Have we constructed a Medicare system that necessarily breeds
this type of adversarial arrangement on purpose? I don't know
the answer today, but I do know this committee is going to find
the answer. Mr. Chairman, I believe we are going to make
changes in the way this system works so that these horror
stories are rare instead of regular, every day.
I thank you, Mr. Chairman, for having this hearing, and I
yield back the balance of my time.
Mr. Greenwood. Chair thanks the gentleman and recognizes
the gentlelady from Colorado for 3 minutes.
Ms. DeGette. Thank you, Mr. Chairman. Provider education
and training are key components of a strong, efficient, and
financially sound Medicare Program. If providers and
beneficiaries are properly educated, fewer mistakes will be
made, precious resources will be appropriately allocated, and
beneficiaries will be well-served. I think that that is a basis
we can all agree on.
What is more difficult to find agreement on, I think, is
the extent to which providers are not adequately educated, what
types of problems exist with regard to inadequate education and
training, who is to blame, and what could and should be done to
address those issues? For example, according to the testimony
we will hear from the Office of Inspector General this morning,
93 percent of all payments to providers were error-free. This
suggests, as the IG concludes, in part, that providers are
fairly well-educated about Medicare's rules.
However, many of the providers' representatives testifying
here today do not concur with that conclusion. Providers will
report that the current system does not offer the level of
education required to properly navigate the Medicare coverage
and billing maze, that they are frequently and consistently
left in the dark by HCFA and the contractors, and as a result,
fear criminal prosecution if they make honest mistakes.
Undoubtedly, there is disagreement about these matters, because
Medicare's rules are complex, and its administration is
complicated. There are a variety of reasons for the
complexities, including the fact that our Nation's health care
system is complex.
With regard to the Medicare Program, I don't think we can
underestimate the role that Congress has played in increasing
the program's complexity. Over the past few years, from the
passage of the Balanced Budget Act to changes in the law in
1999 and 2000, Congress has enacted hundreds of provisions
dealing with Medicare which in turn require the promulgation of
hundreds of regulatory rules. While much of what we did
strengthened the program's benefits and its financial health,
quite often we provided very little time to implement and test
the changes. This, I think, also contributes to confusion and
uncertainty around the laws and regulations. In addition,
HCFA's interpretation and its surrogates' application of the
laws and providers' willingness and ability to understand the
rules are factors in the equation.
It is my hope that in this and future hearings, we will be
able to identify specific problems and solutions to further our
understanding of the Medicare administration process and that
we examine the experience of the participants and the issues
before we rush to legislative solutions.
And I yield back the balance of my time.
Mr. Greenwood. Chair thanks the gentlelady and recognizes,
for purposes of an opening statement, the gentleman from
Tennessee, Mr. Bryant.
Mr. Bryant. Thank the chairman for yielding me time and for
holding this hearing. Recently, I was back in my district and
visited the University of Tennessee Medical School in Memphis
and one of the departments there, the School of Allied
Sciences, had a briefing that included the information that
many of their problems there are caused by a shortage of
students willing to go into these areas of study. Many of these
areas, including the laboratory technicians, are short. And one
of the reasons, I am told, is that the pay has gone down so
much or has not kept pace with other professions, largely due
to the low reimbursement rates that are available through the
Medicare Program.
Yesterday, I had a doctor in my office, also from the
laboratory side of medicine, and he provided me with a payment
policy and several recommendations that his association would
like to make to HCFA.
As Mr. Burr said, many of us are in and out today because
of different commitments and different hearings and so forth. I
want to ensure that I can provide these recommendations to Dr.
Miller on behalf of HCFA. And I will have this copied and given
to him, and I would like to make it a part of the record, if I
could, also. It is four pages, and it contains some 12
recommendations from that particular laboratory association of
doctors and so forth on how they view improvement could be made
to HCFA in the way business is conducted. I would like to ask
Dr. Miller, if you could, as a late filed exhibit to your
testimony today, if you could respond to these 12
recommendations and discuss those for me.
And with that, I would yield back the balance of my time.
Thank you.
[The material follows:]
[GRAPHIC] [TIFF OMITTED] T1492.035
[GRAPHIC] [TIFF OMITTED] T1492.007
[GRAPHIC] [TIFF OMITTED] T1492.008
Mr. Greenwood. Chair thanks the gentleman and recognizes
for 3 minutes the gentleman from Texas, Mr. Green.
Mr. Green. Thank you, Mr. Chairman, and I will submit my
total opening statement. But following a lot of my colleagues,
we know the frustration with providers, with HCFA, and
sometimes with the slow payment schedule, and not only the
amount of dollars but the slowness in responding. We have to
keep in mind that HCFA covers 39 million beneficiaries, and
they contract with 50 different intermediaries. And most of the
contractors do a pretty good job.
But there are a number of concerns, and HCFA can and should
provide more guidance to the contractors, improve the provider
education and simply existing forms and procedures and
streamline the communication. And I certainly heard from
providers, like my colleagues have, in my district who have
experienced difficulty with the system and feel they are
spending more time filling out paperwork than treating their
patients.
If there are problems in the current system, we need to
address it. And like my colleague said before, there have been
a great many additional burdens placed on--or responsibilities
placed on the Health Care Financing Administration in the last
few years, and it is amazing that in this time of surplus the
HCFA's budget was $2.2 billion in fiscal year 1995, and yet in
fiscal year 2000 it is actually $2.1 billion. So we need to
provide the resources to HCFA to be able to do that. Hopefully
have a speedy response to our providers.
And I yield back my time, Mr. Chairman.
[The prepared statement of Hon. Gene Green follows:]
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Mr. Chairman: Thank you for holding this second hearing on the
Health Care Finance Administration and its relationship with providers
and contractors.
HCFA has the unenviable task of administering the Medicare program
to over 39 million beneficiaries.
It is responsible for educating tens of thousands of health care
providers, processing claims, conducting audits for program integrity,
and ensuring the health and well being of Medicare beneficiaries.
For the most part, HCFA contracts most of these responsibilities to
fifty different fiscal intermediaries and carriers who are responsible
for the day to day operation of the Medicare program.
While most of these contractors do a good job administering the
Medicare program, there are a number of concerns that HCFA can and
should do more to guide contractors, improve provider education,
simplify existing forms and procedures, and streamline communication.
I have certainly heard from providers in my district who experience
difficulty with the system, and feel they are spending more time
filling out paperwork than they are treating patients.
If there are problems within the existing system, than we should
address them.
But I'd like to point out what I think is a rather obvious problem.
Since 1996, the Congress has passed many laws changing Medicare
payment policies.
This has resulted in a considerably larger workload for both HCFA
and the private contractors.
But there has been no corresponding increase in resources for HCFA
or its providers to execute those changes.
In FY 95, before passage of HIPAA, creation of the State Children's
Health Insurance Plan, or passage of the Balanced Budget Act, HCFA's
administrative budget was $2.2 billion.
In FY 2000, however, HCFA was appropriated even less money--only
$2.1 billion.
Mr. Chairman, I am very concerned that providers are experiencing
difficulty with HCFA.
But I fear that we in Congress are as much to blame about some of
the problems that exist as the agency is.
I look forward to the testimony of the witnesses, and really hope
that we are able to identify some problems within the agency, and reach
consensus on how to resolve them.
Thank you and I yield back the balance of my time.
Mr. Greenwood. Chair thanks the gentleman, and recognizes
for 3 minutes the gentleman from Florida, Mr. Stearns.
Mr. Stearns. Thank you, Mr. Chairman. I thank you and
Chairman Bilirakis for convening this joint hearing. I think
like in any bureaucracy, HCFA is so complex, and because of its
complexity, a lot of people inside and outside are having
trouble understanding all the regulations. And perhaps what we
need here is new, clear, and consistent guidance from HCFA so
that this perception can be cleared up. Because I think, like
many members hearing from doctors and others, they feel they
are unfairly penalized for innocent billing mistakes, and it is
causing a lot of the providers, particularly in central
Florida, to reconsider treating Medicare patients.
So I think this hearing is timely and hopefully we can
receive a response from the witnesses into how we can make HCFA
more effective and some of the subcontractors they use can be
more in line with the customers' attitude and response. And so
I think it is worthwhile to analyze HCFA.
I welcome this hearing, Mr. Chairman. I yield back the
balance of my time.
Mr. Greenwood. Chair thanks the gentleman and recognizes
for 3 minutes the gentleman from New Hampshire, Mr. Bass.
Mr. Bass. I thank the chairman, and I would like to
associate my remarks with those individuals who preceded me
about the importance of this hearing in providing a perspective
of the various stakeholders and the issue of delivery of
important health care services to Medicare recipients.
As a Member of Congress, I can't tell you how many issues
that we have internally, within my district, from folks who
have problems interacting with HCFA of one sort or another;
everybody from the insurance providers through some of the
folks who are testifying here today. And we have a pretty good
relationship with the agency in trying to ferret through
problems that occur. It is a very timely hearing, though, and
it is important, as we face the whole issue of reform, of
Medicare, preserving Medicare, that we address issues of
delivery of important health care services.
I also want to take a second to recognize one of my
constituents from Sullivan County, from Claremont, Jyl Bradley,
who is here today representing the Medical Group Management
Association. She has wonderful qualifications, not the least of
which having gotten a Master's Degree at Dartmouth College,
which is the finest college in the country. And I think that
her testimony will be very interesting and helpful to the
business of this committee.
And with, Mr. Chairman, I will yield back.
Mr. Greenwood. Chair thanks the gentleman and recognizes
for 3 minutes the gentleman from Michigan, Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman. I believe it is the
duty of this subcommittee to monitor and take necessary action
to improve Medicare and ensure its viability well into the
future. No one argues that the fact of the job of administering
Medicare is a tedious, thankless one. The Health Care Financing
Administration, HCFA, and its providers are responsible for
ensuring that Medicare runs smoothly, and in an ideal world,
Medicare would run smoothly. However, we are not in an ideal
world. And so we have this hearing today to ask HCFA and
private contractors to shed light on how to improve their
interdependent system.
I am pleased that HCFA has taken steps in the past few
years to improve their provider education, namely, installing a
toll-free hotline for provider inquiries, issuing handbooks on
the basics of Medicare for providers, satellite broadcasts of
seminars, and a medical resident and training program. I
believe that provider education is absolutely essential to
preventing possible costly mistakes. And it is certainly true
for provider education that an ounce of prevention is worth a
pound of cure.
At the heart of providing the optimum level of provider
education is the issue of resource allocation. In the interest
of making HCFA and Medicare run ever more smoothly, Congress
has heaped mandate after mandate upon HCFA, and at the same
time asked it to respond in a meaningful way, while keeping
their administrative budgets static. Although I do not
necessarily think throwing money at a problem is always the
cure, I do think that it is somewhat unreasonable to ask HCFA
to operate with a 2 percent administrative budget. In 1995,
prior to major program changes mandated by Congress and HIPAA,
HCFA's administrative budget was $2.2 billion. In 2000, HCFA's
administrative budget was only $2.1 billion.
I look forward to hearing from our distinguished panel of
guests and hearing their input on how and where to find to
address problems currently found within the Medicare system.
Mr. Chairman, thank you for holding this hearing. I yield
back any time I may have left.
Mr. Greenwood. Chair thanks the gentleman, and recognizes
for 3 minutes the gentleman from Maryland, Mr. Ehrlich.
Mr. Ehrlich. I will pass, Mr. Chairman.
Mr. Greenwood. Chair recognizes for 3 minutes the gentleman
from Georgia, Mr. Deal, who also passes.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Chairman Bilirakis and Chairman Greenwood, thank you for holding
this important hearing. This is the second in a series of hearings this
Committee is holding on the reform and modernization of Federal health
care programs.
At this morning's hearing, we will focus our attention on how the
Health Care Financing Administration informs and educates health care
providers about the regulations it promulgates. Specifically, I am most
interested in hearing how HCFA currently provides educational materials
to its regional offices, how that information is disseminated to
contractors and eventually to providers--those on the front lines in
providing care to patients. To the extent problems exist in that flow
of information, we must identify the problem, and work to find a
responsible solution, be it administrative or legislative.
For example, I have heard that an individual can call HCFA with a
question, and that answer may vary depending upon who answers the
phone. Is that possible? Is that what we want?
I have also heard that this is not a HCFA issue, but a contractor
issue. That is something we need to explore. But if I contract with
somebody to do work on my behalf, I am ultimately responsible. If
Congress has tied the hands of HCFA in terms of its ability to contract
to do this work, then we need to see how we can improve that process.
HCFA is ultimately responsible for ensuring that educational materials
are disseminated to providers and that providers know the ``rules of
the road.''
Education is critical. I would think that HCFA would consider it of
utmost importance. Unfortunately, I must question HCFA's stated
emphasis on education when I read in the October 31, 2000 Federal
Register a notice entitled ``Medicare Program; Criteria and Standards
for Evaluating Intermediary and Carrier Performance During Fiscal Year
2000.'' That notice states that the carrier's ``conduct of educational
and outreach efforts'' are functions that MAY be evaluated under the
criterion. Why would we not want this to be a mandatory criterion for
evaluation?
The need for guidance from HCFA to help providers understand the
rules of the road was made clear to me after reading the February 19,
2001 USA Today article entitled ``Rejections Rise for Medicare
Patients. Crisis Feared as More Urban Doctors Refuse Insurance Plan.''
The article is about physician dissatisfaction with the Medicare
program and points out that as a result, in part, of HCFA's burdensome
and confusing regulations, physicians across the country are beginning
to discontinue seeing Medicare Fee-For-Service Medicare patients. If
true, this is a serious problem that needs to be remedied quickly.
In addition, Dr. Becker, a constituent of Chairman Bilirakis and a
practicing physician before us today, stated in his testimony that
``Some doctors are limiting or no longer seeing Medicare patients for
fear of retribution in a system they don't understand. Doctors fear
legal liability for errors as simple as a keystroke mistake on a
computer that will miscode a charge or a diagnosis.''
I am concerned when I hear that physicians' fear of prosecution and
their inability to obtain adequate assistance from HCFA are causing
them to reconsider their commitment to Medicare patients. I am glad to
see the Office of Inspector General is here to clarify the type of
cases they pursue. However, the Committee needs to explore ways to
reduce the complexities of the Medicare program and identify ways to
educate providers about complying with existing rules and regulations.
As is the case with all of the hearings we will have on this topic,
I want to work to find solutions. I am not here to demonize any agency
or any party. I stand ready to work with anyone interested in rolling
up their sleeves and working hard to ensure that our Federal Health
care programs are providing quality, affordable health care to
patients. As I stated at the first hearing in this series, I pledge we
will do this together, on a bipartisan basis--not to score points at
one another's expense but to improve the lives of patients.
Chairman Bilirakis and Chairman Greenwood, thank you again for
holding this hearing. I look forward to hearing from the witnesses.
______
Prepared Statement of Hon. Eliot L. Engel, a Representative in Congress
from the State of New York
Chairman Bilirakis, Chairman Greenwood, I appreciate your efforts
in holding this hearing today. We are here to take a close look at HCFA
and its administrative process. Since 1996 Congress has placed several
mandates on HCFA to carry out changes and improvements and it is now
our responsibility to make sure that the new provisions were
implemented properly. Much of the focus during the last few years has
been aimed at preventing fraud and abuse. The result has been a
significant decrease in the number of improper claims paid. In fact,
the number has been cut in half, saving taxpayers over $11 billion
dollars. This is a significant achievement, but we now have to examine
the effect these provisions have had on the delivery of care and the
administration of HCFA.
We will hear many complaints today regarding the hoops that
providers must jump through to get reimbursed for routine visits or
procedures and the fear many have of the penalties associated with
billing mistakes. However, much of the problem is caused by the fact
that there is a lack of communication amongst HCFA, local carriers, and
providers. These misunderstandings are leading to fear and frustration
and many providers are fed-up with the administrative process and
simply want out. Better communication and education about billing and
coding and such can alleviate many of the concerns we hear about.
However, HCFA is ill equipped to increase educational efforts because
of budgetary constraints.
In fact, HCFA's budget has been static for the last 10 years. We
have not invested in the agency and that is now being reflected in its
administration. Mr. Chairmen, Congress asked HCFA to implement these
changes and today we are saying shame on you for what you are doing to
doctors and hospitals, and other providers. We need to examine the
problems the agency is experiencing and fix them so that providers can
be at ease and continue to render high quality care without feeling
like every action is under scrutiny by HCFA. I look forward to the
testimony from our panel, and I trust that we will use the information
gathered today in a constructive manner. Mr. Chairmen, I hope to work
with both of you and the other members of the committee to address
these issues further.
Mr. Greenwood. Are there any other requests for opening
statements? If not, the Chair calls the witnesses. They are
Mark Miller--Dr. Mark Miller, acting director of the Center for
Health Plans and Providers, from the Health Care Financing
Administration. Mr. Michael Mangano, the Acting Inspector
General, Department of Health and Human Services; Dr. David
Becker, from Largo, Florida, on behalf of the Pinellas County
Medical Society; Jyl Bradley, administrator, Dunning Street
Ambulatory Care Center, Associates in Surgery and
Gastroenterology of New Hampshire, on behalf of Medical Group
Management Association; Douglas Wood--Dr. Douglas Wood, vice-
chair, Department of Medicine of the Mayo Foundation in
Rochester; Mr. Harvey Friedman, vice president, Medicare and
Seniors Program, Blue Cross/Blue Shield Association of Chicago.
The witnesses, thank you for your patience. You are aware
that the committee is holding an investigative hearing and when
doing so has had the practice of taking testimony under oath.
Do you have any objections to testifying under oath?
The Chair then advises you that under the rules of the
House and the rules of the committee, you are entitled to be
advised by counsel. Do you desire to be advised by counsel
during your testimony today? Seeing no affirmative responses, I
would ask that you rise and raise your right hand, and I will
swear you in.
[Witnesses sworn.]
Mr. Greenwood. Thank you. You may be seated. You are now
under oath. You may give your written testimony. Ordinarily, we
ask witnesses to confine their remarks to 5 minutes. We have
one panel today. We have a great interest in your testimony. We
are going to give you 10 minutes to provide your testimony. If
you can do so in less than 10 minutes, you will get a gold star
next to your name in the official record.
And we will begin with Dr. Miller.
STATEMENTS OF MARK MILLER, ACTING DIRECTOR, CENTER FOR HEALTH
PLANS AND PROVIDERS, HEALTH CARE FINANCING ADMINISTRATION;
MICHAEL MANGANO, ACTING INSPECTOR GENERAL, DEPARTMENT OF HEALTH
AND HUMAN SERVICES; DAVID BECKER, ON BEHALF OF THE PINELLAS
COUNTY MEDICAL SOCIETY; JYL D. BRADLEY, ADMINISTRATOR, DUNNING
STREET AMBULATORY CARE CENTER, ASSOCIATES IN SURGERY AND
GASTROENTEROLOGY, ON BEHALF OF MEDICAL GROUP MANAGEMENT
ASSOCIATION; DOUGLAS L. WOOD, VICE CHAIR, DEPARTMENT OF
MEDICINE, MAYO FOUNDATION; AND HARVEY FRIEDMAN, VICE PRESIDENT,
MEDICARE AND SENIORS PROGRAM, BLUE CROSS BLUE SHIELD
ASSOCIATION
Mr. Miller. Chairman Bilirakis, Chairman Greenwood,
Congressman Brown, and Congressman Deutsch, distinguished
subcommittee members, thank you for inviting me to discuss
physician and provider education efforts here today. Medicare
is a vitally important program to millions of Americans,
elderly and disabled. Our partnership with physicians and other
providers plays a critical role in providing quality care to
beneficiaries, and our goal is to ensure that beneficiaries get
the care they need without imposing unnecessary burdens on
beneficiaries, physicians or providers.
We know that there is a lot of work that needs to be done.
We feel that we are making progress, and that progress is
outlined in detail in the written testimony that I submitted.
Medicare pays for the health care for 40 million
beneficiaries. It processes a billion claims a year on behalf
of 1 million physicians, hospitals, and other providers. Today
alone, more than $500 million will be paid out in claims, and
that happens every single day. This represents a tremendous
volume of billing and payment. Moreover, the program has
changed rapidly over the past 4 years.
As stewards of this program, we strive to ensure that
Medicare pays only for services that are allowed by law, while
making it as simple as possible for qualified health care
providers to treat Medicare beneficiaries. We are careful to
balance the impact of the laws and regulations on physicians,
while at the same time meet our responsibility to account for
more than the $210 billion that are paid out in Medicare
payments every year. We are committed to finding the right
balance between Medicare's rules, and we are committed to
finding the right balance and simplifying Medicare's rules,
reducing burden, and explaining requirements to physicians and
providers.
Over the last few years, we have made great strides in
reaching out to physicians and providers to help them bill us
appropriately. Working with our contractors, we have taken a
number of steps to ensure that information is consistent,
clear, and unambiguous. We are making materials available in
print, on the Internet, through toll-free telephone lines, via
satellite broadcasts, and developing new materials and local
and national education seminars. It is very critical that we
listen. And there have been several efforts that we are going
through to more clearly get the message from physicians and
providers. I want to highlight two here.
It is critical that we listen both to understand what
problems physicians and providers are encountering as well as
to determine what kinds of communication best suit their needs.
The two examples that I want to give here of how we are
listening to physicians in particular are the Practicing
Physician Advisory Council, that we work with at HHS on
precisely the issues that are being discussed here as well as a
team inside HCFA, which is the Physicians' Regulatory Issues
Team. These two components are just examples of how we listen
so that information we provide is sensible, reality based and
supportive of the care that they give to beneficiaries.
To talk for just a moment about the Physicians' Regulatory
Issues team, that is comprised of program staff and HCFA
physicians. It is led by a practicing physician, Dr. Barbara
Paul, who is here with me today. The purpose of the Physicians'
Regulatory Issues Team is to amplify the physicians' voice in
HCFA's decisionmaking processes as well as to pinpoint problem
areas and develop suggestions to solve those problems. For
example, through these two bodies, the Practicing Physician
Advisory Committee and the Physicians' Regulatory Issues Team,
we have been working with the physician community on new
guidelines for billing office visits, rewriting our manuals to
clarify billing instructions and enhance education, and
improving the enrollment process so it easier for physicians
and providers to participate in the program.
We share a common mission with our physicians and
providers, that is, ensuring high quality care for Medicare
beneficiaries. Communicating clearly with physicians and other
providers is an important aspect of administering the Medicare
program. While the focus of our discussion today is likely to
be physician issues, I also want to clarify that our education
efforts extend to the full spectrum, physicians, suppliers,
providers, institutions, and managed care plans.
Strong communication entails both delivering and receiving
information. We recognize that there are concerns in the way
that HCFA and its contractors interact with physicians and
providers. While we believe that the vast majority of the 1
billion claims transactions that occur each year occur smoothly
and positively, we are aware of delays and mistakes. I want to
assure you that we take these problems seriously because we
know that each transaction involves a physician or a provider,
but most importantly each transaction involves a beneficiary.
We believe that our education efforts will improve the
administration of the program and will improve our relationship
with physicians and providers. I appreciate you asking me here
today to talk about these issues, and I look forward to
answering your questions.
[The prepared statement of Mark Miller follows:]
Prepared Statement of Mark Miller, Acting Director, Center for Health
Plans & Providers, Health Care Financing Administration
Chairman Bilirakis, Chairman Greenwood, Congressman Brown,
Congressman Deutsch, distinguished Subcommittee members, thank you for
inviting me to discuss our physician and provider education efforts
with you. Medicare is vitally important to senior citizens and disabled
Americans, and our partnership with physicians and other providers
plays a critical role in providing quality care and services to
beneficiaries. Our goal is to ensure that beneficiaries get the care
they need without imposing unnecessary burdens on beneficiaries,
physicians, and providers. The Administration is reviewing regulatory
and legislative changes that may be needed to enable us to better focus
our efforts on achieving this goal. It also is clear that we must
reimburse physicians and other providers in a timely, efficient, and
fair manner. We know we need to continue to improve in this area, and
we are working to address this through the host of activities I will
describe today.
Over the last few years we have made great efforts to improve our
relationship with physicians and providers. Working with our
contractors, we have taken a number of steps to ensure the information
we share is consistent, clear, and unambiguous. We are making materials
available in print and on the Internet, by toll free telephone request,
and via satellite broadcasts, and we are developing new materials to
provide updates and clarifications about Medicare. We are reaching out
to physicians and providers with mailings and local and national
educational seminars. And, we are listening to them, so that the
information we convey is sensible, reality-based, and supportive of the
care they give to Medicare beneficiaries.
While we have made substantial progress, we know we still have
important work to do. We are looking to physicians and other providers
for their input so that we can better focus our education efforts and
make the rules required by Medicare more understandable. We have formed
a special team that is helping us to pinpoint problem areas for
physicians and develop suggestions to simplify Medicare requirements.
For example, we have been working closely with the physician community
to develop new guidelines for billing physician office visits under
Medicare. We are rewriting our manuals to clarify billing instructions
and enhance education. We also are improving the physician and provider
enrollment process so it will be easier to participate in the Medicare
program.
We share a common mission with our physicians and providers--
ensuring high quality medical care for Medicare beneficiaries. We look
forward to our continued partnership with the physician and provider
community, and Congress, to further improve the education, outreach,
and streamlining efforts that we will discuss today.
background
Medicare pays for the health care of almost 40 million
beneficiaries, involving nearly one billion claims from more than one
million physicians, hospitals, and other health care providers. As the
administrator of this program, the Health Care Financing Administration
(HCFA) must strive to ensure that Medicare pays only for the services
allowed by law while making it as simple as possible for qualified
health care providers to treat Medicare beneficiaries. We have to
carefully balance the impact of Medicare's laws and regulations on
physicians and providers with our accountability for more than $210
billion in Medicare payments, and we are committed to finding the right
balance.
The Health and Human Services Inspector General recently reported
that Medicare pays virtually all claims correctly based on the
information submitted; however, improper payments do occur for reasons
such as insufficient documentation, lack of medical necessity, and
improper coding. During the past five years, we have worked with
physicians and providers to improve their understanding of the process.
As a result, Medicare has reduced its payment error rate by half, from
14 percent in fiscal year 1996 to 6.8 percent in fiscal year 2000,
meeting our 2000 Government Performance Review Act goal and keeping us
on track for continued improvement. However, we realize that the volume
of laws and regulations covering Medicare's responsibilities is
substantial, so the need for balance has never been more compelling.
Over the last five years a number of new laws have dramatically
altered the Medicare program and the health care arena, including the
Health Insurance Portability and Accountability Act of 1996 (HIPAA),
Balanced Budget Act of 1997 (BBA), Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (BBRA), and Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000. Combined,
these laws contained hundreds of provisions that we have the
responsibility for implementing, such as new prospective payment
systems for numerous segments of the health care industry, including
home health, skilled nursing facilities, and emergency departments; new
preventive benefits; and new health plan choices for Medicare
beneficiaries. The number and complexity of these changes were greater
than any we had ever before experienced.
We are continuing to pursue an open process as we implement these
new programs and policy changes, seeking insight and recommendations
from physicians and providers, their associations, and other members of
the public. This is far different from the way many private insurers
conduct their business, and greatly benefits everyone as we incorporate
stakeholders' recommendations into our new policies and regulations.
But, as we implement these legislative and regulatory changes, we have
had to undertake the most extensive education program in our history,
including outreach to beneficiaries, physicians, and providers to help
them understand how the changes affect them.
outreach through our contractors
We primarily rely on the private insurance companies, who by law
process and pay Medicare claims, to communicate policy changes and
other information to the physicians and providers they serve. We
recognize that the decentralized nature of this system can result in
inconsistent communications, and we have taken a number of steps to
improve the educational process.
These efforts include:
Centralizing our focus for Medicare education. We have
centralized the majority of our educational efforts and their
oversight in our Division of Provider Education and Training,
whose sole purpose is educating and training our contractors
and the physician and provider community regarding Medicare
policies.
Providing consistency through contractor train-the-trainer
sessions. We are providing contractors with a standardized
training manual and in-person instruction regarding their
education of physicians and providers. These programs ensure
that our providers speak with one voice on national issues. For
example, coordinating with the Blue Cross/Blue Shield
Association, we developed train-the-trainer sessions for the
Home Health Prospective Payment System regulations. We then
developed a satellite broadcast, which was rebroadcast several
times prior to the effective date of the regulation. Following
the train-the-trainer sessions, we coordinated a town hall
meeting; and we participated in weekly conference calls with
regional offices and fiscal intermediaries to monitor progress
in implementing these changes and answer questions. We
performed similar activities for the Outpatient Prospective
Payment System (OPPS). We continue to refine this process on an
on-going basis by monitoring the training sessions conducted by
our contractors.
Improving contractor responsiveness. Our new Customer Service
Initiative is aimed at improving contractors' responsiveness to
the concerns of physicians and other providers. We are
evaluating contractors' customer service efforts and surveying
physicians and providers this year to see how the initiative is
progressing, and where we can make further improvements.
Working to improve contractor outreach. We also are
strengthening and standardizing the way in which our
contractors carry out education and customer service
activities. We require all contractors to provide information
via printed bulletins and newsletters, as well as via the
Internet. This includes requiring each contractor to link to
our website from its own website, giving physicians and
providers immediate access to our Medicare learning network.
And we are exploring the possibility of complementing our
national e-mail listservs, which deliver valuable information
as a broadcast email to thousands of providers, by making
listservs available at the contractor level to address local as
well as national concerns.
outreach through other channels
In addition to our contractors, we have a number of other channels
for communicating with physicians, providers, and their professional
organizations. We are:
Using our Regional Offices. The ten HCFA regional offices are
another key component of our outreach to physicians and other
providers of healthcare in this country. Our regional offices
oversee our contractors, assuring that contractual agreements
are met and helping with solving problems between the
contractor and physicians or providers. Most of our regional
offices now have a Chief Medical Officer. These physicians
serve as a liaison between HCFA and the local physician and
provider community. And most importantly, the regional offices
directly communicate with physicians, providers, and their
professional organizations on a daily basis. Via organized
meetings and through individual problem solving, they share
information about the Medicare program and bring the issues of
the physicians and providers in that region to the attention of
the Agency.
Conducting monthly conference calls with physicians. Each
month, we conduct conference calls with physician organizations
across the country to provide information and obtain feedback.
The calls are open to the representatives of more than 100
national, state, and specialty associations. Participating
associations often share information from these calls with
their physician members. HCFA staff, including our physicians,
also attend national, state, and local medical society meetings
to talk with physicians, to hear their concerns, and to explain
Medicare policies in greater detail.
Establishing toll-free information lines. In 2000, we
established toll-free lines for physicians and providers at our
Medicare claims-processing contractors. The numbers are listed
at www.hcfa.gov/medlearn/tollfree.htm. Each contractor also
maintains a Website and electronic bulletin boards to provide
information to physicians, providers, and their staff.
Distributing Medicare & You handbooks. Responding to physician
requests, we sent copies of the Medicare & You 2001 beneficiary
handbook to more than 500,000 individual physicians and group
practice offices this past winter. The handbook is updated and
mailed to all of the nearly 40 million Medicare beneficiaries
as an easy-to-understand guide on Medicare's benefits and
policies. In addition, we worked with the Interamerican College
of Physicians and Surgeons to coordinate the mailing of Spanish
versions of this handbook to more than 49,000 physicians.
Preventing errors through compliance guidance. We worked with
the HHS Inspector General to develop guidance for physicians
and providers on how to comply with Medicare policies, and
invited public comments on this guidance. Additionally, we are
sharing feedback with physicians and providers, both on an
individual and community level, about how to correct and
prevent the types of errors identified in medical review of
claims. This will help to reduce the number of improper claims
among the vast majority of physicians and providers who make
only honest errors.
Focusing on Medicare+Choice Organizations. We also are working
with managed care organizations that serve Medicare
beneficiaries. We are holding numerous educational training
conferences around the country for these organizations, as well
as attending industry conferences to learn first hand where
problems may be occurring and where there are areas of concern.
Additionally, we are sponsoring conference calls with managed
care organizations on specific subjects to provide guidance on
emerging issues and facilitate additional training. We are
reaching hundreds of managed care staff who participate in
these calls from their work sites. And we consult extensively
with the industry on the guidance we provide. For example, we
are sharing our draft manual chapters and other policy guidance
with our Medicare+Choice contractors to ensure that we fully
consider their concerns before final publication.
Publishing articles in the Journal of the American Medical
Association. We highlight news and issues of interest to
practicing physicians and others in the health care industry in
quarterly articles published on the Federal Page of JAMA. These
articles help to inform physicians on such topics as Medicare's
new preventive benefits, Medicare+Choice encounter data
collection, and Evaluation and Management Documentation
Guidelines.
medicare education and training: a priority
Through our contractors and a variety of other communication
channels, we work hard to get providers the information they need to be
reimbursed for caring for our beneficiaries. We communicate this
information through a number of different products that employ the
latest technologies and respond to the varying learning styles and
needs among physicians and providers. These include:
Creating a Web-based Medicare education site. We have a
variety of resources available on the Internet at the Medicare
Learning Network, www.hcfa.gov/medlearn. This Network provides
timely, accurate, and relevant information about Medicare
coverage and payment policies.
Providing free computer-based training courses. Doctors,
providers, practice staff, and other interested individuals can
access a growing number of informational computer-based courses
at the Medlearn website. Some courses focus on important
administrative and coding issues, such as how to check-in new
Medicare patients or correctly complete Medicare claims forms,
while others explain Medicare's coverage for home health care,
women's health services, and other benefits.
Issuing e-mail updates. As of February 2001, almost 10,000
listserv subscribers are receiving timely updates about the two
new prospective payment systems implemented in 2000 for
outpatient hospital services and for home health services. We
are exploring ways to provide similar listserv updates to
physician and provider organizations.
Sponsoring satellite broadcasts. We sponsor live, national
satellite broadcasts for physicians and other clinicians about
Medicare topics such as women's health, preventive benefits,
and preventing billing errors. The broadcasts can be viewed in
hospitals, medical schools, and virtually any other location
across the country through satellite television.
Creating a Resident Training Program. We are reaching out to
new physicians, making Medicare information available to
residents at teaching hospitals and medical schools to
introduce them to Medicare and ensure they have an
understanding of the program's policies early on in their
careers. This program, which is currently being pilot tested
and refined, includes an in-person training session, a video, a
computer-based training course, and a comprehensive manual
Creating a Frequently Asked Questions resource. We are
developing a system to capture and compile the many
individually answered physician and provider questions that
come into the Agency. We will incorporate them into an ongoing
compendium of Frequently Asked Questions (FAQ), and make them
widely available via our website, publications, speeches, and
other channels.
Creating a manual of Medicare basics. We are developing an
easy-to-use handbook of Medicare basics, which will be produced
both on paper as well as CD-ROM. It also will be able to be
downloaded from our website. The handbook will guide physicians
through relevant Medicare laws and regulations. We are aiming
to finalize and release the handbook by the end of this year.
program requirements that support physicians
The efforts described thus far highlight our communications efforts
with the physician and provider communities. Additionally, we
understand that the particular Medicare policy we are communicating
must be sensible and supportive of physicians in caring for patients.
In 1998, we created the Physicians' Regulatory Issues Team (PRIT) to
improve the agency's responsiveness to the daily concerns of practicing
physicians. This team is an agency-wide effort, and members include our
leadership, HCFA physicians, technical experts, and regional office
staff. The PRIT works in three broad ways. First, it has been
invaluable to the agency in amplifying the voice of practicing
physicians. The team has articulated for us the problem of excess
Medicare burden as seen through the eyes of practicing physicians.
Moreover, it has developed a vision for the agency in which Medicare
requirements are not only less burdensome, but truly supportive of
physicians in caring for patients. The strategy team members bring to
dozens of discussions across the agency every week is that improving
the integration of practicing physicians' input into our decision-
making will result in better policies.
Second, the team members work within the agency to serve as
catalysts and advisors to policy staff as changes and decisions are
discussed. Examples include:
Simplifying evaluation and management guidelines. These
guidelines are cited frequently by physicians as excessively
complex and fitting poorly with the way they provide care.
Therefore, in cooperation with the American Medical
Association, which develops the guidelines, we have undertaken
a major initiative to simplify them. Since sharing new draft
guidelines in a town hall meeting last summer, we have been
seeking and receiving broad input from organized medicine,
practicing physicians, and the Practicing Physicians' Advisory
Council (PPAC), a formal committee comprised of practicing
physicians who provide the Agency with a doctor's ``bedside''
perspective. We continue to refine the guidelines and are
preparing to pilot test them later this year. Prior to
implementation, we will educate physicians about the changes.
Streamlining Medicare forms. With extensive input from
physicians, providers, and their staff, we are developing
better procedures to reduce the burden of the Medicare
enrollment process on the large number of physicians and
providers who provide health care to our beneficiaries. And we
are exploring ways that we can use today's technology to
further facilitate the enrollment process. Additionally, we are
working to improve other Medicare forms, including our Advance
Beneficiary Notices and Certificates of Medical Necessity.
Improving operational policies. We are working to facilitate
physicians' care through supportive policies. For example, we
recently issued changes that allow physicians to fax their
orders and ``initial'' changes for patients to receive
wheelchairs and other needed equipment.
Paying for important services. One of our overarching goals is
to ``pay it right,'' and that includes making sure physicians
and other providers are compensated for the care they provide
as allowed under law and regulation. For instance, as of
January 1, 2001, we now pay physicians separately for their
work determining patients' eligibility for the Medicare home
health benefit.
Clarifying oversight policies. Last year we issued a Program
Memorandum that brings together in one place the processes for
contractors to use in conducting medical review. The Program
Memorandum responds to the comments from many practicing
physicians, including that physician education and feedback are
essential to the medical review process. In particular, we
describe the expectation for communications between contractors
and providers, noting that decisions to conduct medical review
need to be data driven, and highlighting that the amount of
review be only that necessary to address an identified problem.
Identifying and changing excessively burdensome requirements.
In a current initiative, the Physicians' Issues Project, we
have identified some specific Medicare requirements that
physicians frequently cite as problematic in their day-to-day
practices. We received extensive input on these issues from the
physician community at a recent PPAC meeting, and as a result,
have chosen seven requirements for immediate review. We intend
to change these requirements or reach out to physicians and
providers to improve the supportiveness of the Medicare
program.
Leveraging current channels of input from practicing
physicians. The PPAC is a valuable resource for information
regarding the impact of our regulations on practicing
physicians. Our staff has re-focused and re-energized our
efforts and the open forum this group provides. We ask for
their advice on specific issues in areas where we can benefit
from the ``bedside'' perspective of PPAC members, other
practicing physicians, and physician organizations.
Finally, the PRIT is responsible for several new initiatives aimed
at increasing agency understanding of the reality of practicing
physicians.
``Shadowing'' physicians. Working through our Kansas City
regional office and the Medical Society of Johnson and
Wyandotte Counties in Kansas, the PRIT has arranged for
approximately 12 senior HCFA staff to spend three days next
month observing primary care and specialist physicians. This
same regional office is working with the Nebraska Medical
Society and the National Rural Health Association to design a
similar program with a rural focus for our staff.
Sentinel Clinicians. We are designing a new process for
querying practicing physicians from time to time, which will
add to and complement our other information gathering efforts.
We will use this process to listen to practicing physicians,
asking them about aspects of their daily ``bedside'' experience
of caring for patients while trying to satisfy the requirements
of the Medicare program.
next steps
We are continuing our efforts to strengthen and improve our
physician and provider education programs, including the channels we
employ, the products we generate, and the underlying policies of the
program. We are delivering the information they need in a timely and
consistent fashion, but we need to do more. We are:
Developing a national network of ``Medicare Learning Centers''
to serve as host sites for satellite broadcasts, where
physicians, providers, and their staff can come to view our
satellite broadcasts in central locations.
Developing a Medicare Learning Network faculty, to be
available to develop and enhance our training resources. This
faculty will feature nationally recognized experts on distance
learning, professional education, and customer service.
Continuing to improve our Medlearn website by offering
convenient, one-stop information for Medicare physicians and
providers.
Developing special strategies for specific populations such as
new physicians and providers, those who submit a high volume of
claims, first time callers, and repeat callers.
Attracting a wider audience of clinicians by integrating
clinical topics with the billing and payment education aspects
of our training tools.
Upgrading our current computer-based training tools; including
continuing education credits for completing certain training
programs; and developing new web-based training tools.
Developing focus groups, surveys, and other evaluation
measures to help us understand how many physicians and
providers use our education tools, confirm what they gain from
the experience, and help us to improve continually.
conclusion
Physicians and providers play a crucial role in caring for Medicare
beneficiaries, and communicating clearly with them is an important
aspect of administering the Medicare program. As we all know, strong
communication entails both delivering and receiving information. We
recognize that there is considerable concern regarding the way in which
HCFA interacts with its providers and contractors. Many of these
concerns are well founded. However, we hope that our new processes will
improve our administration of the Medicare program. In addition, we
hope that we can improve our relationship with physicians and
providers. We have tried to improve our education efforts and share
important information so it is easier for physicians and providers to
follow Medicare's requirements. We have more work to do to ensure that
we are paying physicians and other providers timely and fairly, and
that they can understand Medicare's requirements. So we are actively
seeking the health care community's input, paying attention to their
concerns and suggestions, and working closely with our contractors to
ensure we listen and explain effectively. I appreciate the opportunity
to discuss our physician and provider education efforts with you today,
and I look forward to answering your questions.
Mr. Greenwood. Thank you, Mr. Miller.
And we will now turn to Mr. Mangano.
STATEMENT OF MICHAEL MANGANO
Mr. Mangano. Thank you, Mr. Chairman and members of the
Committee. I appreciate this opportunity to be with you here
this morning to talk a little bit about HCFA's activities
related to educating health care professionals regarding their
participation in the Medicare program.
HCFA administers this program with its contractors, and
sometimes that administration requires pre and post-pay audits.
Some of those audits have been reflected and are responsive to
abuses that the Office of the Inspector General has found in
doing our work.
When these pre-imposed pay audits uncover what they believe
to be suspected fraud, they are referred to our office and
that's when we begin our investigations. Clearly, the Medicare
program over the years has grown far more complex and there's a
number of reasons for it. There have been numerous amendments
with the accompanying regulations that go to implementing those
amendments, as well as the changes in the method of
reimbursement from a cost based and charge based sysytem to
prospective pay and fee schedules.
The structure of the healthcare delivery system has changed
quite dramatically with far more vertical and horizontal
integration, as well as the managed care initiatives that have
taken place over the last decade. Periods of transition, as we
all know, are more taxing and very uncomfortable for those
persons involved in it. Since the passage of the Health
Insurance Portability and Accountability Act of 1996 creating
the Health Care Fraud and Abuse Control Program, our office has
been seeking ways to help Medicare providers more accurately
bill the Medicare program.
And when they do, Medicare pays the right amount for a
covered service by a legitimate service provider to an eligible
beneficiary. That's why we work so very closely with all
sectors of the health care community to produce voluntary model
compliance plans. We have issued so far nine of these to a
variety of sectors in the health care community, including
hospitals, laboratories, nursing homes, and many others.
We were pleased, by the way, just recently to hear from the
Healthcare Compliance Association who completed their recent
annual survey and found that 71 percent of health care
organizations now have compliance plans in place. Other ways
that we provide useful guidance to the healthcare community
include our advisory opinions, fraud alerts, safe harbors and
our publicly available work plan and final reports. All of
these documents and many others are available on our OIG web
site. The web site address is available in my written
testimony.
I want to make it very clear that we believe the
overwhelming majority of healthcare professionals in this
country provide high quality care and are very honest in their
dealings with the Medicare program. When we talk about fraud in
the Inspector General's office, we are not talking about
providers that make honest billing mistakes, but rather those
very few who intentionally set out to defraud the Medicare
program or its beneficiaries.
The cumulative effect of the fraud and abuse initiatives of
HCFA, the Inspector General and others, has been the reduction
in the improper payment rate by half, saving about $11 billion
in the last 5 years, a decrease in the Medicare inflation rate
to its lowest level in the history of the program and an
extension of the solvency of the Medicare program by 30 years.
In our most recent improper payment audit, we found that 93
percent of all Medicare payments to healthcare providers are
free of error and for that we can all be thankful.
But our job is not finished. Healthcare providers have told
us and HCFA that they need more education and training and
timely responses to their inquiries. Each year we have issued
the improper payment report, as well as the individual reports
we issue throughout the year that deal with erroneous payments
of bills or troublesome regulations or report's, we have
recommended that HCFA increase its education and training for
its provider communities.
I am pleased to say that, at least in our view, HCFA has
significantly increased its provider education activities,
contributing to the 50 percent drop in the error rate.
Nevertheless, even more is needed. Providers remain concerned.
Their legitimate concerns about program complexity,
inconsistency, burdens and hassles need to be addressed. We
stand ready to help HCFA, healthcare providers and this
committee, to make Medicare a more understandable program and
free of the profiteers who seek to unjustly enrich themselves
at the expense of the legitimate providers and the taxpayers.
Thank you, Mr. Chairman, and I look forward to answering
any questions at the appropriate time.
[The prepared statement of Michael Mangano follows:]
Prepared Statement of Michael Mangano, Acting Inspector General, U.S.
Department of Health and Human Services
Good morning Mr. Chairman and members of the Subcommittees. I
appreciate the invitation to testify today on the important issue of
the Health Care Financing Administration's role and activities related
to educating health care providers and physicians regarding their
participation in the Medicare program.
office of inspector general
Let me first provide some background about the origin and purpose
of the Office of Inspector General (OIG) within the U.S. Department of
Health and Human Services (HHS). The HHS OIG, the first statutory
Inspector General in the Federal Government, was established in 1976
because of congressional concerns that fraud and abuse were improperly
inflating the cost of HHS health care programs, particularly Medicare
and Medicaid. The OIG's mandated mission is to prevent and detect
fraud, waste, and mismanagement, and to promote economy, efficiency,
and effectiveness in all HHS programs and operations.
The core mission of the OIG is carried out through a nationwide
program of audits, evaluations (called inspections), and investigations
related to the operations of HHS programs. The OIG is prohibited from
exercising specific ``program operating'' responsibilities. As part of
its statutory mandate, the OIG is obligated to keep
[T]he Congress fully and currently informed . . . concerning
fraud and other serious problems, abuses, and deficiencies
relating to the administration of programs and operations
administered or financed by [HHS], to recommend corrective
action concerning such programs, abuses, and deficiencies, and
to report on the progress made in implementing such corrective
action.
The Inspector General Act of 1978 (``IG Act''), Sec. 4.
health care financing administration (hcfa)
In contrast, HCFA with its contractors is responsible for
administering the Medicare program, including the review and payment of
claims submitted by health care providers, which may involve pre and
post payment audits. Some of HCFA's payment review activities are the
result of abuses identified in OIG audit and inspection reports. These
abuses threaten the financial stability of the Medicare program and its
beneficiaries. Where particular problems are identified which may be
indicative of fraud, they are referred to the OIG for investigation.
HCFA also has the primary responsibility for educating and working with
providers to inform them on its rules.
HCFA is the largest single purchaser of health care in the world.
With outlays of approximately $316.2 billion in FY 2000, HCFA is also
the largest component within HHS. Medicare and Medicaid outlays
represent 33 cents of every dollar spent on health care in the United
States in 1999. The Medicare program is inherently at high risk for
payment errors due to its size and decentralized operations (39.5
million beneficiaries, 890 million claims processed annually, 54
contractors).
the complexity of the medicare program and impact on patient care
Since the establishment of Medicare, numerous legislative changes
have been made and amendments added to Title XVIII of the Social
Security Act (the Medicare Program), which have led to a number of
substantive changes. With each legislative enactment, HCFA is required
to develop new regulations, as well as update its contractor and
provider rules and guidelines. To illustrate, the Balanced Budget Act
of 1997 contained 335 provisions related to the Medicare program,
including mandates for new prospective payment systems, requiring the
development of a substantial number of new regulations.
It must also be recognized that much of the complexity in the
Medicare program is not inherent in the program itself, nor the result
of legislative changes, but rather parallels the ever increasing
complexity of the nation's health care financing and delivery systems.
For example, the development of various forms of managed care and new
models for vertical and horizontal integration of providers have led to
the need for new Medicare rules and regulations.
Additionally, the way Medicare pays for health care has changed
over time, from primarily ``cost or charge based'' systems to new fee
schedule and prospective payment systems. For example, hospital
inpatient, physician, laboratory, and durable medical equipment were
the first Medicare coverage areas to be switched to prospective payment
or ``fee schedule based'' payment systems. More recently, skilled
nursing facility, home health, and hospital outpatient services have
been or are being revised to become prospective payment systems. This
transitioning from one type of payment system to another inevitably
results in an intensive and difficult learning period for HCFA, its
contractors, and health care providers. In the long run, it is hoped
that these new payment systems will simplify and reduce administrative
burden for providers.
While the focus of this hearing is HCFA's relationship with its
contractors and providers, I would like to take this opportunity to
briefly discuss the OIG's outreach activities.
health care provider compliance program guidance
The enactment of Health Insurance Portability and Accountability
Act of 1996 (HIPAA) established a national Health Care Fraud and Abuse
Control Program under the joint direction of the Attorney General and
the Secretary of HHS, acting through the OIG. This new program was
designed to coordinate federal, state, and local enforcement activities
with respect to health care fraud and abuse. Since HIPAA's enactment,
the OIG has embarked on a major initiative to promote voluntary
adoption of compliance programs by provider organizations. Our goal has
been to help health care providers bill the Medicare program more
accurately. When they do, Medicare pays the right amount for a covered
service delivered to an eligible beneficiary.
Through its audits, inspections, and investigations, the OIG has
confirmed that health care providers that have effective compliance
plans including internal audit procedures and comprehensive staff
training, not only provide quality services, but also have fewer
systemic billing errors. In order to encourage the adoption of
compliance measures by health care providers, the OIG has worked with
health care industry groups to develop model, voluntary compliance
plans. They identify steps that health care providers may voluntarily
take to improve adherence with Medicare rules.
The OIG guidances are very specific in identifying risk areas for a
particular health care industry sector. Since enactment of HIPAA, nine
health care industry sector compliance guidances have been issued,
including specific ones targeted to hospitals; home health agencies;
clinical laboratories; third-party medical billing companies; durable
medical equipment, prosthetics, and orthotics suppliers; hospices;
Medicare+Choice organizations; nursing facilities; and individual and
small group physician practices.
The OIG and the health care industry, through various organizations
such as the Health Care Compliance Association (HCCA) and the Council
of Ethical Organizations, have engaged in an ongoing dialogue on health
care compliance to better understand and resolve the challenges
associated with creating effective compliance programs. We were pleased
to read in the recent HCCA annual survey of health care compliance
professionals, that 71% of health care organizations now have ongoing
compliance programs in place.
health care industry guidance
An important core element of the new HIPAA fraud and abuse control
program is the provision of guidance to health care providers regarding
potential liability for activities which may be considered fraudulent
or abusive. Specifically, HIPAA requires that the OIG:
Issue upon request advisory opinions regarding the
applicability of the criminal and administrative sanction
provisions of the Social Security Act;
Issue special fraud alerts, upon request or otherwise,
advising ``the public of practices which the Inspector General
considers to be suspect or of particular concern under the . .
.'' Medicare or Medicaid programs.
Issue annually a public solicitation for proposals for
issuance of both new and modified existing ``safe harbor''
regulations regarding the applicability of the Medicare/
Medicaid Anti-Kickback Statute; and
The centerpiece of the OIG's implementation of the HIPAA guidance
provision has been the advisory opinion process through which parties
can obtain binding legal advice as to whether their existing or
proposed health care business transactions run afoul of the Medicare/
Medicaid Anti-Kickback Statute, the Civil Monetary Penalties Law, or
the program exclusion provisions. Congress recently extended the
authority for the ``advisory opinion'' process in the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000.
Over 50 formal advisory opinions have been issued since establishment
of this function in 1997. The advisory opinion process also serves to
improve the OIG's understanding of new and emerging health care
business arrangements and guide the development of new safe harbor
regulations, fraud alerts, and special advisory bulletins.
Since HIPAA's enactment, the OIG has promulgated nine new ``safe
harbors'' under the Medicare/Medicaid Anti-Kickback Statute, and
clarified or modified seven existing regulatory safe harbors. These OIG
issuances have all being published in the Federal Register and are also
available on the OIG's web site (www.dhhs.gov/oig).
In addition, all of the OIG's final audit and inspection reports,
as well as its annual workplan and other issuances are published on its
web site. Health care providers and other interested parties are
regularly advised of new OIG issuances through a free ``List Server''
on its web site which currently has approximately 9,000 registered
subscribers.
oig/health care provider partnership
The OIG is actively engaged in working with health care providers
and believe we are making good progress. We continue to believe that
most health care providers do their best to provide high quality care
and are honest in their dealings with Medicare. When we talk about
fraud, we are not referring to the vast majority of providers who make
innocent billing errors, but rather those unscrupulous few who
intentionally set out to defraud the Medicare program. The importance
of our ongoing work is to not only protect the integrity of the
Medicare program and ensure that high quality health care services are
furnished to Medicare beneficiaries, but to also make the Medicare a
program in which honest providers can operate on a ``level playing
field''--and not at a competitive disadvantage with those who choose to
defraud or abuse the program.
Continued participation of all types of health care providers--
hospitals, nursing homes, home health agencies, physicians,
laboratories, and suppliers--is critical to the continued success of
the Medicare program. All of these providers have been profoundly
affected by recent Medicare reforms. Their operations are also affected
by Medicare regulations and procedures.
Provider concerns relating to inappropriate investigations and
audits are unfounded and both HCFA and the OIG are reaching out to
provider groups to reassure them. Under law, physicians and other
health care providers are not subject to criminal or civil penalties
for honest mistakes, errors, or even negligence. The Government's
primary enforcement tool, the False Claims Act, covers only conduct
undertaken with actual knowledge, reckless disregard, or deliberate
ignorance of the falsity of a claim. The False Claims Act simply does
not cover mistakes, errors, or negligence. The other major civil remedy
available, an administrative remedy called the Civil Monetary Penalties
Law, has exactly the same standard of proof. For a criminal case, the
standard is even higher. As a result of the high standards of proof
needed to establish liability under current law, the number of criminal
and civil penalty actions initiated against physicians is very small.
results
OIG Medicare Fee-for-Service Audits
Over the past five years, the OIG has undertaken audits of
Medicare's fee-for-service claims to estimate the extent of the
resulting payments that did not comply with Medicare laws and
regulations. For FY 1996, we estimated that Medicare made improper
payments of approximately $23 billion, or about 14% of Medicare program
expenditures. Most of the identified improper payments resulted from
improperly documented claims, medically unnecessary claims, or
improperly coded claims. In FY 1997, after enactment of HIPAA, the
percentage of improper Medicare payments began to decrease. And most
recently, the OIG audit of FY 2000 claims (issued on February 5, 2001)
estimated that improper Medicare payments had dropped to $11.9 billion,
or about 6.8% of the $173.6 billion in Medicare payments. The improper
payment rate declined by over 50% or $11 billion in five years.
Medicare Inflation Rate
The decrease in improper payments has had a positive effect on
Medicare's financial situation. From 1991 to 1996, the Congressional
Budget Office (CBO) reported that Medicare's rate of inflation averaged
10.9% per year. In FY 1998, the rate of inflation for the Medicare fee-
for-service program dropped to the lowest in the program's entire
history (since 1965): 1.5%. Overall, CBO calculated the average
Medicare inflation rate for FY 1997 to FY 2000 at 3.2%. CBO commented
that: ``Most of the decline can be explained by a strong effort to
ensure compliance with payment rules.'' (The Budget and Economic
Outlook: Fiscal Years 2002-2011, CBO, January 2001).
Medicare Part A Trust Fund Solvency Projections
As of 1996, the Trustees of the Medicare Part A Trust Fund
projected that the Trust Fund would be insolvent in 1999. However, over
the past 5 years, the Trustees have extended their estimate of the
financial life of the Trust Fund by thirty years, from 1999 until 2029.
One of the primary contributing factors cited by the Trustees has been
``the continuing efforts to combat fraud and abuse.'' (Status of the
Social Security and Medicare Programs, Trustees Annual Report, March
1999).
We believe that these positive economic findings with respect to
the financial integrity of the Medicare program, which will positively
impact on both taxpayers and beneficiaries, are due in large part to
the fact that the vast majority of health care providers are engaged in
submitting accurate claims to HCFA and providing high quality,
medically necessary services.
future education and guidance activities
Obviously, more can be done to provide information to health care
providers and physicians regarding compliance with the laws, rules, and
policies governing their participation in and submission of claims to
the Medicare program. At an OIG physician roundtable in July 2000, a
number of concerns were raised by physicians regarding their inability
to receive comprehensive and timely responses to questions raised to
Medicare contractors. It was the general consensus of participants that
``education and training resources would be a key factor in
implementing an effective compliance program.'' To accomplish this
goal, further use of web-based technologies should be explored, making
them as ``user friendly'' as possible. This might include quarterly
updates from HCFA regarding new policies and interpretations.
Physicians also encouraged HCFA to reduce regional variations in
interpretation and enforcement as much as possible. 1Finally, I want to
also note that in the report relating to the OIG's recent Medicare fee-
for-service improper payment audit, we made the following
recommendations.
HCFA should continue to direct that Medicare contractors
expand provider training to further emphasize the need to
maintain medical records containing sufficient documentation,
as well as to use proper procedure codes when billing Medicare
for services provided;
HCFA should continue to highlight to Medicare providers
specific procedure codes and DRGs having the highest incidence
of error in our audits, as well as those codes and DRGs
identified by Medicare contractor payment safeguard projects;
and
HCFA should continue to refine Medicare regulations and
guidelines to provide the best possible assurance that medical
procedures are correctly coded and sufficiently documented.
We have made these same recommendations with each annual payment
audit, as well as with individual audits and inspection reports
identifying specific improper payments. We are pleased to say that HCFA
has quite dramatically increased its provider education activities over
the past few years leading to the dramatic 50% drop in improper
payments described earlier. Nevertheless, even more educational
initiatives are needed and sought by health care providers.
Are Medicare program rules and requirements too difficult for
providers to understand? In some cases our audits and evaluations do
indicate that some rules are unnecessarily complex and burdensome. In
such cases, we make recommendations for simplification. However, our
recent Medicare improper payment audit indicated that providers are
doing a very good job of negotiating their way through Medicare rules
and procedures, and we estimated that 93% of all Medicare payments to
health care providers were free of error. In the substantial majority
of cases, legitimate providers are billing appropriately for Medicare
covered services.
However, providers remain concerned. Their legitimate concerns
about program complexity, inconsistency, burdens, and hassles need to
be considered. Providers need reassurances that they will not be
assessed penalties for honest errors. I expect that ways will be found,
primarily through education and communication, to provide honest health
care providers with the understanding and assurances they deserve in
furnishing health care items and services to Medicare beneficiaries. We
look forward to working with HCFA and health care providers in finding
ways to do this.
At the same time, we must be vigilant in our efforts to protect the
integrity of the Medicare program. Due to the tremendous number of
claims and amount of federal dollars involved, there will always be
those who will continue to take advantage of program vulnerabilities
for their own unjust enrichment.
We stand ready to help the Subcommittees and all parties involved
in identifying better ways to administer the Medicare program. Thank
you for the opportunity to present the OIG's views.
Mr. Greenwood. Thank you.
Dr. Becker?
STATEMENT OF DAVID BECKER
Mr. Becker. Good morning Chairmen Bilirakis and Greenwood
and members of the Subcommittees. Thank you for the opportunity
to comment this morning.
The eloquent summary statements of the committee members
covered many of my issues, but allow me to illustrate some
points with examples. My name is David Becker. I am a
Gastroenterologist from Clearwater, Florida in a practice with
two partners. Medicare patients represent 50 percent of our
practice. Doctors provide precious care and support for people
in what are frequently their most desperate moments. Patients
come to us scared and anxious. We do our best to help them with
their illness, pain and worry. Accessibility to medical doctors
remains a vital national resource. Patients seeing a well-
trained, up-to-date physician continues to be the cornerstone
of the U.S. healthcare system.
There is a threat to this universal access for Medicare
patients. More and more of doctors' time is being consumed by
the morass of bureaucratically complex paperwork. Regulatory
compliance requires study and knowledge of over 100,000 pages
of rules and policies. A doctor's time is already restricted by
the essential activity of continuing medical education needed
to deliver excellent patient care. Learning a complex
bureaucracy takes time away from direct patient contact. In
fact, some doctors are limiting or no longer seeing Medicare
patients for fear of retribution in a system they don't
understand. Doctors fear retribution for errors as simple as a
keystroke mistake on a computer that will miscode a charge or a
diagnosis. These inadvertent and innocent errors can lead to
time consuming and costly investigations by Medicare carriers.
Medicare patients ultimately suffer when doctors and their
office staffs are diverted from patient care. Patients end up
waiting longer for appointments, may have shorter time with
their doctor, or in the worst care scenario lose their doctor
if she or he leaves the Medicare system. In my State for
example, a colleague from Deland received a notice from
Medicare of an alleged overpayment, requesting a refund in the
amount of $66,960 be paid within 30 days. Dr. Taylor sent the
refund in to Medicare, and requested in writing a fair hearing.
It was more than a year before the hearing date. Before Dr.
Taylor's hearing date, Medicare sent a letter to his patients
stating that they had been overcharged and a refund was due
them from the physician.
Of course, this had an extremely adverse effect of his
reputation and damaged his practice. After the hearing, it was
determined that all but 1 percent of the claims reviewed were
accurate and appropriate at the original time of filing and
that he was entitled to $66,357. It took another 15 months
before he received the refund. However, no letter was sent to
his patients correcting the mistake Medicare had made even
though he requested this in writing. Clearly, the Medicare
carrier infringed upon the relationship between Dr. Taylor and
his patients before any due process.
Another example is that of neurologist, Dr. Loh, in
Bradenton. Dr. Loh was a physician in good standing with the
Medicare program who practiced neurology in New York. He
relocated to Bradenton, Florida where he applied for a Florida
Medicare number. Dr. Loh has been dealing with Florida's
Medicare carrier for 4 months with no apparent progress in
obtaining a number to bill for neurology services. Sixty to 70
percent of his Florida practice is Medicare patients, and he is
slowly running out of startup capital. Medicare beneficiaries
will lose a needed, yet undeserved subspecialty practitioner if
Dr. Loh's practice collapses under the behemoth of Federal
regulation.
In my own practice, I brought a partner in 2 years ago who
simply moved from one Florida city to another. He moved up from
Key West, which may be considered another country by some, but
is still part of Florida as far as I know. And he could not see
Medicare patients for 4 months in our practice, which is what
it took the Medicare carrier just to change his address. This
was difficult for our group, but because we are a group
practice, we could sustain this. But clearly for individual
practitioners, this would be very difficult to sustain.
My final example involves a friend who is an internist from
Winter Park, Florida. Dr. Cecil Wilson gave influenza shots to
patients during the months of October and November, year 2000
during regular office visits. When his bills were filed with
the Medicare carrier of Florida, payment was received for the
shot, but the office visits were denied. The carrier was called
and Dr. Wilson was advised that the shots should have had a
modifier to be properly reimbursed. The carrier agreed that
this rule had not been advertised in Medicare publications. Dr.
Wilson asked the carrier if the charges could be resubmitted
using this modifier. And he was told they could not. In January
of 2001, Dr. Wilson's office manager attended a meeting at
which the Medicare staff person indicated that the action by
the carrier had been an error and a correction could be
obtained by calling the newly established physician phone line.
Ultimately, the payments were made in February, over 4 months
late for this individual physician.
Doctors are intelligent people. We have the intellectual
capacity to learn and comprehend as much of the labyrinth
regulatory system as anyone else. But we are not attorneys, we
are physicians. Our time is dedicated to patients. Doctors
should not fear that a computer keystroke error will miscode a
diagnosis, which will trigger an audit that can be
statistically extrapolated to a demand in the hundreds of
thousands of dollars. This prevents us from practicing our
chosen careers, and more importantly, denies our patient the
care they need in order to live a healthy life.
Many physicians have been ruined by this system. We need
due process for overpayment allegations consistent with the
ideals upon which the founding fathers built America. We need a
system that all parties can easily interpret. Training provided
by our HCFA carriers to ensure correct coding and documentation
would make an excellent start. Streamlining the mountainous
regulations would further simplify life for all concerned.
Communication and education as opposed to regulation and
retribution will is the best way to improve ourselves and our
system. Thank you.
[The prepared statement of David Becker follows:]
Prepared Statement of David Becker on Behalf of the Pinellas County
Medical Association
Good morning Chairmen Bilirakis and Greenwood and members of the
subcommittees. Thank you for the opportunity to comment this morning.
My name is David Becker. I am a gastroenterologist from Clearwater,
Florida in a practice with two partners. Medicare patients represent 50
percent of our practice
Doctors provide precious care and support for people in what are
frequently their most desperate moments. Patients come to us scared and
anxious. We do our best to help them with their illness, pain and
worry. Accessibility to medical doctors remains a vital national
resource. Patients seeing a well-trained, up-to-date physician
continues to be the cornerstone of the U.S. healthcare system.
There is a threat to this universal access for Medicare patients.
More and more of doctors' time is being consumed by bureaucratically
complex paperwork. Regulatory compliance requires study and knowledge
of over 100,000 pages of rules and legislation. A doctor's time is
already restricted by the essential activity of continuing medical
education needed to deliver excellent patient care. Learning a complex
bureaucracy takes time away from direct patient contact.
In fact, some doctors are limiting or no longer seeing Medicare
patients for fear of retribution in a system they don't understand.
Doctors fear legal liability for errors as simple as a keystroke
mistake on a computer that will miscode a charge or a diagnosis. These
inadvertent and innocent errors can lead to time consuming and costly
investigations by Medicare carriers.
Medicare patients ultimately suffer when doctors and their office
staffs are diverted from patient care. Patients end up waiting longer
for appointments, may have shorter time with the doctor or in the worst
care scenario lose their doctor if she or he leaves the Medicare
system.
My first case of the burdensome HCFA bureaucracy involves a Florida
physician from Deland who received a notice from Medicare of an alleged
overpayment, requesting a refund in the amount of $66,960.01 be paid
within 30 days. Dr. Taylor sent the refund in to Medicare, and
requested in writing a fair hearing. It was more than a year before the
hearing date. Before Dr. Taylor's hearing date, Medicare sent a letter
to his patients stating that they had been overcharged and a refund was
due them from the physician. Of course, this had an extremely adverse
effect of his reputation and damaged his practice. After the hearing,
it was determined that all but one percent of the claims reviewed were
accurate and appropriate and that he was entitled to $66,357.10 back.
It took another 15 months before he received the refund. However, no
letter was sent to his patients correcting the mistake Medicare had
made even though he requested this in writing as well, nor attempting
to correct the damage done to his reputation or his practice. Dr.
Taylor requested interest from Medicare on the fifteen months that his
funds were held by Medicare. Medicare's response was that they only
paid interest on ``clean claims'' that were not paid in a timely
manner. As the hearing proved, these were clean claims, thus the
refund. Medicare further stated that the Treasury Department has very
specific criteria outlined in their regulations on when interest can be
paid on claims, and that his situation did not fall into that criteria.
I might add that Dr. Taylor was prohibited from submitting electronic
claims for the first three months of this investigation also further
affecting the practice.
Another example is that of neurologist Dr. Loh in Bradenton. Dr.
Loh was a physician in good standing with the Medicare program who
practiced neurology in New York. He relocated to Bradenton, Florida
where he applied for a Florida Medicare number. Dr. Loh has been
dealing with Florida's Medicare carrier for 4 months with no apparent
progress in obtaining a provider number to bill for neurology services.
60-70% of his Florida practice is Medicare patients, and he is slowly
running out of start up capital. Medicare beneficiaries will lose a
needed, yet underserved subspecialty, practitioner if Dr. Loh closes
his doors.
In my own practice I brought a partner in two years ago who simply
moved from one Florida city to another. He could not see Medicare
patients for the four months it took the carrier to change his provider
number address--just the address. This was very harmful to our group
practice, and for solo-practitioners, this bureaucratic delay can be
devastating. From what I understand, HCFA is attempting to vastly
extend this provider enrollment process--we are very concerned that
this could lead to even more billing number delays for physicians
wishing to see Medicare patients.
My final example involves an internist from Winter Park, Florida.
Dr. Cecil Wilson gave influenza shots to patients during the months of
October and November of 2000 during regular office visits. Bills were
filed with the Medicare carrier of Florida. Payment was received for
the shot, but not the office visit. The carrier was called and Dr.
Wilson was advised that the shots should have had a .59 modifier to be
properly reimbursed. The carrier agreed that the rule had not been
advertised in Medicare publications, but was available from another
publication, the NCCI which is published by the National Technical
Information Service (NTIS) for which a one-year subscription is $265.
Dr. Wilson asked the carrier if the charges could be resubmitted using
the -59 modifier. The reply was no. Appeal. In January, 2001, Dr.
Wilson's office manager attended a meeting at which a Medicare staffer
indicated that the action by the carrier had been an error and a
correction could be obtained by calling the newly established physician
phone line. A call was made and subsequently the office manager faxed
the names of the denied claims, as there were too many to list over the
phone. In mid February payment was finally received.
Doctors are intelligent people. But we are not attorneys, we are
physicians. Doctors should not fear that a computer keystroke error
will miscode a diagnosis which will trigger an audit that a can be
statistically extrapolated to a liability in the hundreds of thousands
of dollars. Many doctors have been bankrupted by this system. We need
due process for overpayment allegations. We need a system everyone can
understand. We need training from our HCFA carriers for correct coding
and documentation. Communication and education as opposed to regulation
and retribution will greatly improve today's Medicare program.
Thank you for your time and attention and for the opportunity to
present my views.
Mr. Greenwood. Thank you, Dr. Becker.
Ms. Bradley?
STATEMENT OF JYL D. BRADLEY
Ms. Bradley. Good morning. On behalf of MGMA, I would like
to thank Chairman Bilirakis and Greenwood for convening today's
hearing on the health care financing administration's
relationship with providers and contractors. My name is Jyl
Bradley, the administrator of Dunning Street Ambulatory Care
Center, a Medicare licensed ambulatory surgery center located
in Claremont, New Hampshire.
I am a member of the Medical Group Management Association
and am the immediate past president of the New Hampshire MGMA.
MGMA members work on a daily basis ensuring that their
practices provide the best care possible to Medicare
beneficiaries, while at the same time navigating their medical
groups through a sea of complex and contradictory rules,
regulations, and policy memorandums. As a result, our members
are uniquely familiar with the administrative requirements of
Medicare's regulations.
I have worked in healthcare since 1973, managing special
team primary care practices ranging in size from three to 15
physicians. As a group practice administrator, I am charged
with many diverse responsibilities. I have detailed those
duties and those of my administrative team in my formal
testimony.
With three physicians and six administrative support staff,
our practice is representative of small group practices
nationwide, as well as those predominantly found in rural
areas. Generally, the ratio of administrative staff to
physicians ranges from two to 10 staff per physician. Small
practices, such as mine, struggle with limited resources to
deal with the magnitude and complexity of multiple Medicare
regulations as well as the difficulties caused by the program's
poor administration.
My comments today focus on the administrative ills of the
Medicare program and how they lead to inefficiencies in medical
group practices as well as in the Federal Government. While
MGMA agrees with the current and previous administrations that
additional HCFA funding is warranted, the efficiencies
resulting from improving HCFA's organization, communication and
responsiveness will vastly improve the system without creating
additional cost.
Let me provide you with examples of breakdowns in the
administration of Medicare. I begin my discussion with two
examples of problems experienced by my practice followed by
another experience by colleagues nationwide. Included in my
written testimony are many more examples, which I would be
happy to share with you during the Q&A.
My first example pertains to when our ambulatory surgery
center completely stopped receiving Medicare facility
reimbursements for services performed. After I placed numerous
phone calls to determine the source of the problem, a carrier
representative finally told me that our provider number had
been inactivated due to a mail return from our facility.
Without even so much as a phone call to my practice, all
reimbursements stopped. It took months of letters and telephone
calls to identify the appropriate person who had the knowledge
and the authority to correct this situation. During this time,
the financial hardship on our practice was enormous.
This was a simple mistake that should have had a simple
solution. Instead, it took approximately 6 months to resolve.
This problem highlights the inefficiencies within the Medicare
program whereby a seemingly small problem through a series of
carrier breakdowns resulted in a substantial cost to my
practice as well as that of the carrier.
My second example occurred when HCFA implemented new
Congressionally mandated regulations initiating coverage of
screening colonoscopies for Medicare beneficiaries with high
risk. The system developed by the carrier was not equipped to
handle the facility codes, which reimbursed costs to ambulatory
surgery centers. Claims were routinely denied. It took months
of telephone calls to the carrier and persistence to resolve
this matter, only then to lead to a different problem. That is,
claims for the anesthesia necessary for the procedure began
being rejected. In other words, a beneficiary could have a
colonoscopy, but only without anesthesia.
Our carrier was not prepared to handle these new rules. Now
I am concerned about the new rules that will take effect on
July 1, 2001, which expand the coverage for screening
colonoscopies for individuals with average risk. Based on my
prior experience, I can only imagine how long it will take
before this new coverage policy will be properly implemented.
This second example illustrates a routine program change
whereby the Medicare program failed to undertake a close
examination of the system changes necessary for proper
implementation. Again, this implementing breakdown caused
inefficiencies that resulted in a drain of resources for my
practice as well as that of my carrier, and ultimately the
program.
My third example pertains to the October 30, 2000 quarterly
update of the correct coding initiative, or CCI. Without any
prior notice to providers or carriers as to its contents, the
CCI disallowed the billing of over 800 procedures when
performed on the same day as 66 different evaluation and
management codes. Providers were never told that as a result of
this revision, they were required to use a 2-5 billing
modifier, or annotation. Implementation of the CCI update
resulted in thousands of claim denials. To further exacerbate
the situation, carriers denied claims that actually used the
correct modifier.
In a memo sent out to the provider community outlining the
problem in late January, HCFA admitted that unfortunately a
number of carrier processing systems do not recognize the 2-5
modifier with certain codes. While parts of the October update
were rescinded on February 8, 2001, the original implementation
occurred at a tremendous cost to both providers and carriers.
Not only did this communication breakdown between HCFA, the
carriers, and ultimately providers result in physician
practices around the country having to resubmit thousands of
denied claims billed from October 30, 2000 to February 8, 2001.
It undermined the trust and credibility necessary to preserve a
good working relationship between practices and carriers.
As a side note, if my, or any other practice, desires
access to the quarterly CCI update, it is only available for
purchase at a cost of $300 annually. There are many more
examples such as these that I could share with you as well as
possible solutions that MGMA has identified. However, for the
sake of brevity, I have included these in my written testimony.
As you continue your oversight of this program and developed
recommendations for improvement, I urge you to personally visit
a group practice in your district and discuss Medicare's
complexities with the practice administrator.
On behalf of the Medical Group Management Association, I
thank you very much for the opportunity to share our thoughts
with you today. MGMA realizes that both the carriers and HCFA
are called upon to accomplish an extremely difficult and
complex task. MGMA members and staff are available as resources
as you continue your examination of this critical issue. Thank
you.
[The prepared statement of Jyl D. Bradley follows:]
Prepared Statement of Jyl D. Bradley on Behalf of the Medical Group
Management Association
Good morning. My name is Jyl D. Bradley, MHP, FACMPE. I am the
administrator of Associates in Surgery and Gastroenterology, LLC, a
three-physician multi-specialty practice, and Dunning Street Ambulatory
Care Center, LLC, a Medicare licensed ambulatory surgery center located
in Claremont, New Hampshire.
I am a member of the Medical Group Management Association (MGMA)
and the immediate past president of the New Hampshire MGMA. I have a
Bachelor of Science in Health Care Administration from The University
of New Hampshire and a Masters in Health Policy from Dartmouth College.
I have worked in health care since 1973, managing specialty and primary
care practices ranging from three to fifteen physicians.
MGMA is the nation's oldest and largest medical group practice
organization representing more than 18,000 administrators working in
organizations in which over 176,000 physicians practice medicine.
MGMA's membership reflects the full diversity of physician
organizational structures today. MGMA members work on a daily basis
ensuring their practices provide the best care possible to Medicare
beneficiaries, while at the same time navigating their medical groups
through a sea of complex, and contradictory rules, regulations, and
policy memorandums. As a result, our members are uniquely familiar with
the administrative requirements of Medicare's regulations.
On behalf of MGMA, I would like to thank Chairmen Bilirakis and
Greenwood for convening today's hearing on the Health Care Financing
Administration's (HCFA) relationship with providers and contractors. My
comments today will focus on the administrative ills of the Medicare
program and how these problems lead to federal government and medical
group practice management inefficiencies, unnecessarily diverting
limited resources away from patient care. While MGMA agrees with both
the current and previous Administrations that additional HCFA funding
is warranted, the efficiencies resulting from improving HCFA's
organization, communication and responsiveness will vastly improve the
system without creating additional costs.
As a group practice administrator, I am charged with many diverse
responsibilities. The physicians in our practice rely on my expertise
to guide them through the innumerable and continually changing federal
rules and regulations, including coding, documentation, billing,
physician referral rules, Local Medicare Review Policies, physician
credentialing and assignment and reassignment of patient and physician
billing rights. As the physician's time is consumed by providing
patient care and documenting that clinical care, they depend upon my
business acumen to maintain smooth daily operations.
My tasks include but are not limited to: managing information
systems; serving as corporate compliance officer; monitoring and
negotiating contracts with our many private payers; staffing board
meetings; and developing relationships with lending institutions and
area hospitals. Furthermore, I am responsible for staff training and
development; facilities management; and the employee/physician
compensation and benefit plans. In addition to being responsible for
Medicare compliance, the typical administrator must also deal with a
host of other federal, state and local laws and regulations including
tax, CLIA, OSHA and other labor requirements.
My staff's responsibilities include managing patient flow,
submitting and monitoring claims, helping patients with insurance
questions, determining medical necessity of certain services such as
laboratory tests, and completing encounter and referral forms. These
are full-time tasks for myself and my administrative team--6 full-time
equivalent support staff including medical secretaries,
transcriptionists, billers, accounts receivables personnel and patient
coordinators.
With three physicians and six support staff, our practice is
representative of small group practices nationwide, as well as those
predominantly found in rural areas. However, our ratio of physicians to
administrative staff is extremely low. Based on the experience of MGMA
members, physician practices maintain anywhere from double to ten times
the number of administrative staff to support the physician workload.
Small practices, such as mine, struggle with limited resources to deal
with the magnitude and complexity of multiple Medicare regulations as
well as the difficulties caused by its, at times, poor administration.
There is a chasm between the amount and complexity of federal
regulations, the level of communication, organization, and
responsiveness of HCFA and its contractors to medical group practices
and the ability and time of most managers to understand these
regulations, much less to comply. Regulations such as the recently
released privacy rule create a gold mine for attorneys and consultants,
but an administrative landmine for our medical group practices.
Examples of Breakdowns:
Let me provide you with actual examples of breakdowns in the
administration of Medicare. I will begin my discussion with two
examples of problems I have personally had with HCFA and my particular
carrier followed by those experienced by my colleagues nationwide.
Through these examples, I hope to give you some insight into medical
group practice management and the constant battles and inefficiencies
in the Medicare system we struggle to overcome. As you continue your
oversight of this program and develop recommendations for improvements,
I urge you to personally visit a group practice in your district and
discuss Medicare's complexities with the practice administrator.
Lack of Organization and Responsiveness of Contractor: In
1998, our ambulatory surgery center stopped receiving Medicare facility
reimbursements for services performed. After many phone calls, I
discovered our carrier had received a ``mail return'' from our
facility. Without so much as a phone call investigating the matter, the
carrier automatically inactivated our provider number and halted
reimbursement. It took months of letters and telephone calls to correct
this situation, much of which time was spent merely trying to locate
the appropriate contact person. During this time, the financial
hardship on our practice was enormous.
Lack of Preparedness of Carrier to Handle HCFA Changes: In
January 1998, HCFA implemented new regulations initiating coverage of
screening colonoscopies for Medicare beneficiaries with high risk. When
the new regulations were introduced, our carrier created a ``special''
code for billing purposes. The physician component received
reimbursement with minor delays. However, the system developed by the
carrier was not equipped to handle the ``special'' facility codes which
reimburse overhead costs to ambulatory surgery centers. Claims were
routinely denied. It took months of telephone calls to the carrier and
persistence to resolve this matter--only then to lead to a different
problem. That is, anesthesia claims began being rejected when attached
to this ``special'' code. This problem has been extremely difficult and
time consuming and again was only recently resolved. Our carrier was
not prepared to handle these new rules and I am now concerned about the
upcoming rules that will take effect on July 1st 2001, making screening
colonoscopies a covered benefit for individuals with average risk.
Based on my prior experience, I can only imagine how long it will take
until this new coverage policy will be properly implemented.
Lack of Communication from HCFA to Contractors and in turn
to Providers as well as Ineffective Routine System Changes: On October
30, 2000, HCFA sent carriers an electronic quarterly update of the
Correct Coding Initiative (CCI). The CCI contains more than 121,000
pairs of codes that cannot be billed on the same claim to Medicare.
Each quarter it is ``updated'' to add or delete various code
combinations. Under the CCI, claims are scanned and scrubbed
electronically for ``disallowed'' code pairs, which are then
automatically denied.
Without any prior notice to providers or carriers as to its
contents, the October version of the CCI disallowed the billing of over
800 procedures when performed on the same day as sixty-six different
evaluation and management (E&M) codes. Providers were never told that
as a result of this revision, in order to bill for any one of the 800+
procedures on the same day as a physician visit or other E&M code, they
were required to use the ``-25'' billing ``modifier'' or annotation.
Implementation of the CCI update resulted in thousands of claim
denials. However, many carriers did not become aware of the cause of
the denials until the provider community notified them of the problem.
The carriers simply implemented the electronic edits received from HCFA
without knowing how the action would affect their claims processing
operation. To further exacerbate the situation, carriers denied claims
that actually used the correct modifier. In a memo sent out to the
provider community outlining the problem in late January, HCFA admitted
that, ``Unfortunately, a number of carrier processing systems do not
recognize the -25 modifier'' with certain codes.
While parts of the October update were rescinded on February 8,
2001, the original implementation occurred at tremendous cost to both
providers and carriers. Not only did this communication breakdown
between HCFA, the carriers and ultimately providers, result in
physician practices around the country having to resubmit thousands of
denied claims billed from October 30, 2000 to February 8, 2001, it
undermined the trust and credibility necessary to preserve a good
working relationship between practices and carriers. As a side note,
members of the Committee might be interested to know that if my, or any
other practice, as a participating provider in the Medicare program,
desires access to a copy of the quarterly CCI update, it is not
accessible online and only available through NTIS Products (HCFA's
authorized distributor) for an annual $300, four issue, subscription
fee or $85 per single update, plus shipping and handling.
Inconsistencies between HCFA manuals and Medicare Statute:
Frequently, the relationship between providers, carriers and HCFA is
strained due to the ambiguous and, at times, incorrect information in
the Medicare Carriers Manual itself. The Medicare Carriers Manual
contains HCFA's instructions to its carriers on how to administer the
program. The following technical, yet illustrative example shines light
on one such example of this problem. Under 1861(s)(3) of the Social
Security Act, ``diagnostic x-rays, diagnostic laboratory services and
other diagnostic tests'' are covered separately by Medicare from
physician services. However, section 2070 of the Medicare Carriers
Manual states ``for diagnostic X-ray services and other diagnostic
tests, payment may be made only if the services are furnished by a
physician or incident-to a physician service (which requires direct-
supervision by the ordering physician). This carrier manual provision
is contrary to the Social Security Act Section 1861(s)(3) coverage
provisions for these services and has caused numerous interpretive
problems between providers and carriers concerning the appropriate
level of physician involvement and supervision.
Lack of Notice to Medical Group Practices of HCFA's
Intentions to Change Billing and Payment Rules: Medical group practices
trying to play by the rules are often blindsided by policies
implemented without notice or input by the effected parties. For
example, in May of 1998, HCFA issued Transmittal No. 1606, which
drastically changed the rules for billing for allergy immunotherapy.
The new rule, which amended the definition of ``dose,'' meant that
physicians could, in most situations, only bill for half as many doses
as they had actually prepared. HCFA's interpretation went against
longstanding practice and was inconsistent with the Current Procedural
Terminology (CPT) Code definition and the American Medical
Association's CPT guidance. This change was announced with no notice to
the physician community. The effect of the adjustment reduced
reimbursement in half for allergy immunotherapy billed under CPT Code
95165. It took the affected physician practices and their
representatives two and a half years to get HCFA to see the error of
its policy. The policy was finally rescinded effective January 1, 2001
with the implementation of the 2001 Medicare physician fee schedule.
Carrier Mistakes Unresolved: While some Medicare carriers
and intermediaries are quite good, others are plagued with problems
that may take months to resolve. Prompt action by Medicare carriers and
intermediaries to resolve their own mistakes is critical to the
Medicare program. The following example from a colleague of mine
illustrates this point.
In September 1999, a large multi-site practice organized as a rural
health clinic, located in Michigan, received Medicare checks totaling
$1,260,184.84, far in excess of their billed charges. The management
service organization (MSO) that does billing for these clinics,
immediately notified United Government Services, LLC, (UGS) their
Medicare fiscal intermediary, about this overpayment and were told that
the intermediary would get back to them on the issue. The MSO asked if
they could return the checks but UGS instructed them to retain the
payment until the problem had been sorted out. The MSO contacted the
intermediary once a week for a month before they were told that there
had been a problem with UGS' processing system that had produced this
overpayment. UGS' Detroit office instructed the MSO to retain the money
and that it would be recouped via withholdings from future payments.
The MSO informed the Medicare intermediary that recouping the money in
this way would take a minimum of five years. UGS' response was that the
same type of erroneous payments had been sent to a number of other
physicians. These incorrect payments were direct deposited to the
physicians' accounts and as a result the physicians were drawing
interest on the money. The clinic in question's payment had been sent
in the form of a paper check and it did not want to cash it in the
first place.
To resolve this problem the MSO spent an extensive amount of time
attempting to obtain corrected explanations of benefits so that they
could ascertain what the correct payment should have been and then
return the difference. This process took months and involved a great
deal of back and forth between the MSO and the Medicare Intermediary.
Finally, on September 21, 2000, more than a year after the initial
overpayment by the fiscal intermediary, these problems appeared
resolved and the overpayment was returned to UGS the Medicare
intermediary.
The problem, however, was not resolved at this point. During the
year in which the clinic and its MSO billing entity had been attempting
to sort out the problem, UGS, the intermediary had, as they originally
proposed, been withholding Medicare payments due to the clinic to make
up for their original erroneous overpayment. When the MSO returned the
overpayment, UGS continued to withhold payment for current claims. To
date the withholding has not ceased and UGS now owes some $88,000 for
services provided by the clinic.
Lack of HCFA Oversight and Enforcement of its Requirements
Over Contractors: The Medicare Carriers Manual, under Section 1030.1
(enrollment instructions to the carriers) states ``absent extenuating
circumstances, [a carrier must] process an application for non-
certified providers within 45 calendar days of receipt of the
application. For certified providers, process the application within 30
calendar days, absent extenuating circumstances. If you need to review
the application for incomplete or missing information, the processing
time stops. Complete the review of the application and annotate what
information is missing prior to returning application (emphasis
added).'' In reality, this is not what occurs. If a carrier finds an
error in the application, it sends it back to the provider at the first
instance of an error taking place. Once corrected by the provider, the
application goes to the ``back of the line'' to begin the process anew.
Due to the complexity of the 34 page application and instructions, this
resubmission process sometimes may occur several times before a
physician is enrolled in the program. If a review was actually done in
a complete manner as per the Medicare Carrier Manual, and the
information annotated in its entirety, before being returned to the
provider for correction, the process would work much more efficiently.
Instead, it now may take up to 6 months to enroll a physician in the
program. During this time period, a physician can examine and treat
Medicare patients, but all claims resulting from those services cannot
be submitted for payment until the certification process is complete.
Situations like this are particularly aggravating given that the
physician enrollment process has no statutory foundation in the
Medicare Act and HCFA has spent years trying to develop regulations
governing the enrollment process.
Lack of Provider Education Tools and Recent Action in the
Wrong Direction: Education of providers concerning how to comply with
rules and regulations is fundamental to the efficient administration of
the Medicare program. I know of few, if any, physician practice
managers who also happen to be lawyers. What is needed in the Medicare
program are written materials and other unambiguous communications that
explain the rules and regulations in a clear and concise manner. It is
distressing to see directives from HCFA to its carriers that impede the
system's delivery of such necessary tools to its participating Medicare
providers. For example in a January 25, 2001 Program memo (AB-01-12),
from HCFA to its carriers, HCFA permits its carriers to charge a fee to
providers for ``reference manuals, guides, workbooks, and other
resource materials developed by the contractor designed to supplement
or provide easy reference to formal Medicare provider/supplier manual
and instructions.'' For practice managers, the idea that we may now
have to pay carriers a fee for access to simplified and reasonable
reference materials is difficult to understand. At a minimum, this type
of guidance is clearly the wrong direction to take in providing proper
education and communication between providers, HCFA and the carriers.
Proposed Solutions:
There are many more examples such as these that I could share. The
system is in dire need of change. But, instead, let me turn to
solutions. While these are far from exhaustive, attending to the
following would provide necessary first steps toward healing this
ailing program.
Congress should require the Secretary of Health and Human
Services (HHS) to publish in the Federal Register, on no less than a
quarterly basis, a notice of availability of all proposed policy and
operational changes which may affect providers and suppliers including
but not limited to changes to be issued through amendments to its
carriers manuals and other HCFA manuals, or program memoranda, program
transmittals or operational policy letters, and of all such policy and
operational changes issued in final form during the previous quarter.
Simultaneous with publication in the Federal Register, the Secretary
should transmit such proposed and final policy and operational changes
to its Medicare contractors. The Secretary should require that its
contractors notify all providers and suppliers in their service areas
of such changes within 30 days of this Federal Register notice. The
Secretary should further provide that any changes issued in final form
will take effect no earlier than 45 days from the date such final
change was noticed in the Federal Register. The Secretary should not
make a change in policy or operations that affects providers and
suppliers without going through the public notice process unless such
change is required to meet a statutory deadline or is otherwise
required by law. In that event, the Secretary must publish such change
in the Federal Register along with the Secretary's justification for
issuing such change in a manner other than that required.
Congress should require the Secretary of HHS to create and
distribute a user-friendly manual that contains all the information
necessary for Medicare compliance. The manual should be organized,
accessible (including on-line), free and up-dated quarterly. It should
contain, in addition to actual regulations and program memorandum,
etc., a summary of each issue, Q&A and other explanatory/supplemental
material. I would be remiss not to note that as part of its small group
compliance guidelines, the Office of Inspector General suggested that
small groups create such a document on their own. Can you imagine that
if HHS has not even accomplished this task with its many employees, how
medical group practices such as mine with only 6 support staff could
accomplish such a feat?
Congress should require the Secretary of HHS to develop a
site on the Internet, similar to what HHS has already developed for the
Health Insurance Portability and Accountability Act section of their
Web site, where Medicare providers and suppliers can post questions and
obtain feedback. Responses should be maintained on the Internet site
for reference.
Congress should require the Secretary of HHS to furnish
all education and training materials and other resources and services
free of charge for providers, eliminating all user fees. The education
materials should be drafted in easily understandable language with
contact information should questions arise. The materials should be
free and accessible on-line.
Congress should require the Secretary of HHS to make every
effort to educate not only the provider community but also its own
staff and those of its contractors.
Congress should instruct HHS to provide better oversight
of its contractors to ensure uniform application of national policies
and efficient administration of the Medicare program.
Congress should require the Secretary of HHS to enhance
and make public its contractor evaluations. The report should include
all components of training, education, auditing and payment. Medicare
providers and suppliers should be granted a formal process to provide
feedback on the evaluation directly to HCFA.
Congress should require the Secretary of HHS to annually
conduct a review of, and report to Congress on, the sources of
complexity in the Medicare program as is required of the Internal
Revenue Service in Section 4022 of the IRS Restructuring and Reform Act
of 1998.
Congress should provide the Secretary of HHS with the
resources necessary to adequately manage the Medicare program without
provider user fees.
On behalf of the Medical Group Management Association, I thank you
very much for the opportunity to share our thoughts with you today.
MGMA realizes that both the carriers and HCFA are called upon to
accomplish an extremely difficult and complex task. MGMA members and
staff are available as resources as you continue your examination of
this critical issue.
Mr. Greenwood. Thank you, Ms. Bradley.
Dr. Wood?
STATEMENT OF DOUGLAS L. WOOD
Mr. Wood. Good morning Chairman, Chairman Greenwood,
Chairman Bilirakis, Mr. Brown, and members of the
subcommittees. I am privileged to have this opportunity to
share with you my insights regarding the complexity of the
management of the Medicare program and in my short time, I hope
that I can give you a better understanding of the impact of
these actions on the daily practice of medicine.
My experience is over the last 10 years working in coding
and nomenclature activities, functioning as the Chair of the
Carrier Advisory Committee in Minnesota and my privilege to sit
as a member of the Practicing Physicians Advisory Counsel and
have given me a set of insights which I hope will be productive
in the discussion, especially listening to the opening comments
of many of the members of the Subcommittees.
Now there has been much made, even this morning, about the
complexity of regulations of Medicare including the thousands
and thousands of pages of regulations. But if you take even the
most conservative estimate, and that I think is HCFA's estimate
of 35,000 pages, and consider that the leading textbook of
cardiovascular diseases now has 2,000 pages in it, then it
means that I have to learn about the equivalent of 15 textbooks
of administrative rules and regulations for my practice. And
even just a few of these policies, when applied in an
inconsistent or an erroneous fashion by a Medicare carrier, can
have an even more deleterious effect on the daily practice of
physicians.
Indeed and perhaps most cases, the most adverse
circumstances that physicians encounter are those that come
more from the carriers in their attempt to interpret the rules
and regulations rather than from HCFA Central or even from my
colleagues at the OIG.
My written statement includes a number of detailed
descriptions of events that have surrounded the care and the
billing of patients in the Medicare program. And in one of
these circumstances, a colleague of mine who spent nearly 50
minutes counselling a patient with heart failure about changes
in medications is detailed. After a 2-year saga, including the
denial of payment and then finally ending up with a hearing in
which the service was downcoded, the physician now confronts a
circumstance where he still is considered to have filed an
erroneous claim. The error on the part of the carrier will
never be recognized.
And it is not hard, I submit, for you to imagine the impact
of this experience on the physician. The next time that he
confronts a patient like this, he will have several choices.
One choice is to spend less time with the patient.
Unfortunately, the result of this might be a hospitalization,
one that would have been preventable. At an average case cost
of $10,000, it is clear that HCFA cannot afford to have many of
these preventable hospitalizations when it would have been more
reasonable to pay the $100 office visit for the counseling
necessary to manage the patient's medications.
But more likely, what will happen is that the physician
next time will simply downcode the service to avoid an
interaction with the carrier and instead take care of the
patient in the most appropriate way. This is not how I believe
the Congress intended Medicare to work. Carriers often
implement local medical service or policies or local medical
review policies to address problems in variation of
utilization. Minnesota has some 100 of these policies,
Wisconsin next door has over 220. I can tell you that the
practice of medicine between these two States is not
sufficiently different to account for such a difference in
regulation.
My written statement also includes information to show you
that this regulation, this excessive regulation in one State,
does nothing to improve the quality of care, nor to have a
substantial impact on the spending for physician's services on
a beneficiary basis. Indeed, additional carrier decisions that
limit the payment for services for Medicare beneficiaries with
chronic diseases like cancer, heart disease, hypertension and
diabetes cause profound confusion for beneficiaries and
providers alike. And in that circumstance, this overemphasis on
regulation and the pressure to develop these policies then is
an unhelpful distraction that keeps us from devoting the needed
attention and resources to making sure that Medicare
beneficiaries around this country receive the best possible
care.
In my statement, I have summarized for you some specific
actions that I think should be taken in the short term to
improve this circumstance. HCFA should work as fast as possible
to develop national payment policies for some commonly
performed procedures that would reduce the necessary regulation
at a local level. HCFA should work with its carrier medical
directors to develop a uniform approach to payment for services
for patients who have chronic diseases like cancer, heart
disease, diabetes and hypertension.
HCFA must better supervise to the performance of the
carriers. There should be some different solutions for
providers to demonstrate their compliance with these
regulations as well as restore the ability of the physician to
become an advocate for the patient and being able to get the
most appropriate care. HCFA should aggressively pursue and
resolve all of these issues that have been identified by Dr.
Barbara Paul and her colleagues working as the physician's
regulatory issues team at HCFA. And their recent statement to
us that the PPac, it was indicated that limited resources meant
that they had to focus on only a few of those issues, although
I know that they have the interest in addressing all of them.
And the Congress should now allocate a reasonable
administrative budget for beneficiary and provider service and
have a greater expectation for service to beneficiaries and
providers. Recently, HCFA leadership has been criticized for
its inattention to PPAC recommendations, but my recent
experience demonstrates that PPAc can have a positive effect.
There, however, remains considerable opportunity for
improvement.
The comments that were made earlier and referred to in
testimony about the advance beneficiary notice are
illustrative. When I joined the Minnesota Carrier Advisory
Committee in 1992, the advanced beneficiary notice was one of
the first items on our agenda, and it has taken a long time to
get this particular problem solved. The changes that have
occurred at PPAC give me tremendous optimism for the future,
but there does remain a need for more effective leadership
within HCFA to try to more effectively get groups to work
together to achieve the goals of providing the best care to
Medicare beneficiaries, while at the same time doing everything
necessary to ensure the integrity of the program for future
beneficiaries.
It is simply too important that we all be successful in
meeting the increasing needs of our elderly that we risk
success in this endeavor by being unable to work
collaboratively to achieve these solutions.
I thank all of you for your concern and for your leadership
in pursuing Medicare Program improvements.
[The prepared statement of Douglas L. Wood follows:]
Prepared Statement of Douglas L. Wood, Mayo Clinic
Good morning Chairman Bilirakis, Chairman Greenwood, Mr. Brown, Mr.
Deutsch, and members of the subcommittees. I am privileged to have this
opportunity to share with you my insights regarding the complexity of
the management of the Medicare program and its adverse impact on the
care of Medicare beneficiaries. I will try, in my short time, to give
you a better understanding of the impact of actions of HCFA and the
Medicare carriers on physicians in the daily practice of medicine.
I am a practicing cardiologist at the Mayo Clinic in Rochester,
Minnesota, where I often care for elderly patients. For the last
decade, I have been involved in the work of coding and documentation,
interaction with Medicare carriers and with the Health Care Financing
Administration. I have served on the CPT Editorial Panel (where I
chaired the first ad hoc subcommittee on development of documentation
guidelines for evaluation and management services), and continue to
serve on the CPT Advisory Committee. I am a member of the Medicare
Carrier Advisory Committee in Minnesota and have been the physician
chair of this committee for the last four years. In this work, I have
direct interactions with the medical directors and staff of the
Medicare Carrier. I have worked with the PRO in Minnesota to improve
the quality of care for heart attack patients. And, for the last year,
it has been my privilege to serve on the Practicing Physician's
Advisory Council for HCFA.
introduction
Much has been made of the complexity of Medicare regulations by
reference to the sheer volume of regulations. The number of pages of
regulations is not as relevant to practicing physicians as the daily
impact of only a few of these policies and regulations. I hope to give
you a real and more practical understanding of the impact of
regulations by sharing recent experience with documentation guidelines,
local medical review policy and their impact on patient care. My
examples will be those of real patients and physicians. Then I will
speak about the Practicing Physicians Advisory Council. Last, I will
suggest to you several possible solutions to the problems we discuss
today.
documentation guidelines for evaluation and management services
Medicare has tried to develop guidelines for documentation of
physician visits since the current coding system was adopted in 1992.
Three separate attempts have been made since 1993 to develop a set of
guidelines that would be simple, not interfere with the process of care
and be useful for carriers in their administration of the Medicare
program. Unfortunately, none have been satisfactory to all users, and
so we are in the midst of yet another effort. It is not difficult to
imagine the cost of these repeated efforts, both for physicians and for
HCFA.
Consider this example. An elderly man with heart failure was seen
by his cardiologist in March of 1999 for evaluation of his progress
with his cardiomyopathy and adjustment of his medication. The physician
spent 50 minutes with the patient, the majority of which was devoted to
counseling the patient about his medications and changes in the
regimen. The physician billed Medicare for a level five visit based on
the counseling services and time required. The physician documented the
time spent delivering the service and his counseling, emphasizing that
``many questions were answered'', and consistent with HCFA
documentation guidelines 1 that the physician should
document the total time required and the nature of the counseling
service. However, this service was denied by the carrier in February
2000, and when the denial was appealed by the physician, a hearing
officer held that the coding based on time was irrelevant and thus
down-coded the service. This ruling (which came in March of 2001, two
years after the original service) was made despite a clear direction
from the Medicare Carrier's Manual that the carrier should pay for
counseling services when appropriately documented. Thus, in this case,
the physician provided a medically necessary and appropriate service,
documented the service according to existing guidelines and ultimately
required two years and a hearing to be paid even a part of what was
appropriately due the provider. Even worse, this obvious error on the
part of the carrier will not be recognized or used in the development
of improved review mechanisms. And, it will still ultimately be
considered that the physician made an error in billing when, in fact,
the carrier simply decided that it did not want to pay for the service.
More frustrating is that the physician has no other appeal rights since
the amount in dispute does not meet a $500 minimum for appeal to an
administrative law judge.
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\1\ 1995 Documentation Guidelines for Evaluation and Management
Services, http://www.hcfa.gov/medicare/1995dg.pdf. ``DG: If the
physician elects to report the level of service based on counseling
and/or coordination of care, the total length of time of the encounter
(face-to-face or floor time, as appropriate) should be documented and
the record should describe the counseling and/or activities to
coordinate care.''
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This example illustrates the adverse impact of a single set of
regulations developed at a national level, applied improperly by the
carrier on the local level and an unnecessarily burdensome and flawed
appeals process. One possible effect of this experience for the
physician will be to make him less likely to spend necessary time in
the counseling of patients in the future if he knows that the carrier
will not pay for the service and will consider that he codes
inappropriately. The other, and most likely, option for the physician
is simply to down-code his services, since the patient would be
otherwise poorly served. The latter option is occurring more often than
we might imagine; the frequency of this action is difficult to measure
with precision. It is not difficult to imagine that this physician
feels uncertain in his coding, and worried about what future sanctions
he might face. The more serious effect of this kind of activity is to
threaten the care of Medicare beneficiaries. Over 10% of hospital
admissions of the elderly are related to adverse drug reactions; most
of these hospitalizations are preventable with careful office
management of patients, involving counseling patients about their
treatment, dosage changes and possible medication side effects. The
application of a payment policy that discourages appropriate office
counseling will result in greater expense to HCFA because of the costs
of inpatient care, and greater risk to patients. This is not how
Medicare should work.
local medical review policy
Consider the example of local medical review policy. Local medical
review policies are often created in response to utilization variation,
and there seems to be some pressure from HCFA for carriers to
demonstrate their capability of implementation of such policy. These
local policies, however, serve mostly to create additional burden for
physicians (including risks for errors in coding and billing) and have
little apparent effect in controlling cost or improving care.
In the upper Midwest, four states are served by a single part B
carrier. There are 107 local medical review policies in Minnesota; but
244 local medical review policies in Wisconsin 2. It is not
likely that there is so much difference in medical practice between
these two states that one carrier should have twice as many medical
review policies that affect how physicians can bill for their services.
This discrepancy is even more dramatic if you consider carrier
differences for patients with heart disease; Minnesota has nine
policies for cardiovascular disease, Wisconsin has twenty-seven. None
of this has a direct positive influence on the quality of care or per-
beneficiary cost of physician services. Minnesota, in a study done by
Dr. Steven Jencks 3 and colleagues from HCFA, has the
highest quality performance of these Midwestern states (in fact,
Minnesota ranks fourth in the country in quality). This excess
regulation has not achieved a substantial reduction in spending; there
is only a 6% difference between Minnesota and Wisconsin in spending for
physician services. And, for the other two states, quality is worse
(both are below the national median) and per beneficiary spending is
even greater in the other states than in Minnesota.
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\2\ Wisconsin Physician Services. www.wpsic.com.
\3\ Jencks SF, Cuerdon T, Burwen DR et al. Quality of care
delivered to Medicare beneficiaries. JAMA 2000;284:1670-1676.
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carrier medical director decisions
Other problems created by carrier decisions may cause undue
distress for beneficiaries, providers, and even HCFA. Consider the
coverage of physician's services for patients with chronic disease.
Medicare does not pay for routine preventive visits. Most physicians
would consider this prohibition to apply to patients without an acute
or chronic medical condition who seek preventive services for an
undiagnosed condition. However, Medical director decisions in Minnesota
in the last two years that visits for routine care are not covered by
Medicare have caused considerable difficulty for Medicare beneficiaries
and physicians. Beneficiaries are confused and face more out-of-pocket
costs for care they and their physicians believe is appropriate for
their medical problems. Providers are confused and cannot understand
when visits are covered and when they are not. When a carrier makes a
decision to deny the claim after the fact as being non-covered, the
provider has no appeal right and must then re-bill the beneficiary.
Cancer, heart disease, hypertension and diabetes are common conditions
in elderly Americans. These conditions are often treated with
medications (the typical elderly patient fills 13 prescriptions a
year). In all of these conditions, the patient's status may remain
stable for months or years, but it is important to regularly evaluate
the status of a patient's disease and make certain that there is no
evidence of disease progression or a regimen of medications is
satisfactory to improve quality of life and/or likelihood of survival.
These services are, therefore, part of the continuing care of patients
with these chronic conditions and should not be subject to an arbitrary
local decision regarding coverage. I do not believe it is the intent of
the Congress, or of Medicare, to have coverage decisions for our
nation's elderly with chronic conditions subject to individual medical
director policy at a local level. A similar decision regarding coverage
of pre-operative evaluations caused similar confusion and has required
considerable effort by HCFA central staff to attempt to resolve. The
lack of a clear, consistent national payment policy creates this
unnecessary confusion in the local application of Medicare payment
rules.
impact on physician-patient relationship
Underlying these two examples is a fundamental change in the way in
which carriers seem to approach physicians. The intensity of efforts to
uncover fraud and abuse has disrupted relationships between physicians
and carriers, and, more worrisome, has begun to undermine the
physician-patient relationship. It is the responsibility of the
physician to be the patient's advocate in discussions with insurers
where there may be questions about payment policy that would adversely
affect a patient's care. But, in the Medicare program, the effects of
the examples I have cited are to create an uncomfortable situation
where the physician is supposed to be the agent of Medicare and is
fearful of making a mistake in billing or interpretation of policy. The
physician must know Medicare payment policy and inform patients when
services are not covered by Medicare; failure to do so has the
potential for significant adverse consequences. Thus, in my daily
practice, not only do I have to understand the myriad of Medicare
rules, but I must also be able to translate a local medical review
policy and to try to understand the case-by-case decision making of the
medical director. If I make a mistake, in addition to not being
reimbursed, I face the risk of other sanctions. This is a demanding
task for any reasonable human being. Perhaps more disconcerting is that
physicians and carriers are no longer working together to improve the
care of Medicare beneficiaries.
What are the contributing factors to this state of affairs and what
might be done to resolve these problems? A significant factor is the
loss of talent at HCFA and the carriers. For whatever reason, the
reorganization that occurred at HCFA was followed by the departure of a
number of very talented people from the agency. Reassignment of
remaining staff meant that people were placed in new areas having to
learn new jobs. Carriers around the country have had similar problems;
carrier changes and the lack of significant oversight of the carriers
by HCFA have allowed poor carrier performance to go on without
intervention to improve performance or service. Minnesota has had three
different part B carriers in the last five years (as well as 3 changes
in part A fiscal intermediary), and had no effective medical direction
in the part B carrier for nearly eighteen months. As a consequence,
medical record reviewers have been making decisions about payment and
coverage without medical oversight. The result has been an exponential
increase in pre- and post-payment reviews that consume excessive
resources for both the carrier and provider, resources that could have
been used more productively to provide better service to beneficiaries
and providers.
And, carrier efforts to reduce administrative expense may cause
other problems for beneficiaries and providers. The Minnesota part B
carrier recently announced a reduction in its budget for beneficiary
outreach after receipt of a communication from HCFA indicating that the
carrier should manage its telephone service lines to have at least a
ten per cent busy signal rate. Providers were told they might expect to
hear more questions from beneficiaries given the reduction in level of
service at the carrier. Providers should not be expected to provide
telephone backup service to the carrier.
recommendations for action
The Health Care Financing Administration can effectively reduce
regulatory burden and improve its relationship with providers. This
will require several actions, including more stringent oversight of
carriers, the most common point of contact between providers and HCFA.
The following actions are recommended:
1. HCFA should work as fast as possible to develop national payment
policies for commonly performed services that would eliminate
the need for local medical review policies along with the
confusion these policies create.
2. HCFA should work with its carrier medical directors to develop a
uniform approach to payment for services required in the care
of patients with chronic conditions like cancer, heart disease,
hypertension and diabetes.
3. HCFA should better supervise the performance of the carriers; too
often, carrier problems create unnecessary additional burdens
for physicians and beneficiaries, as well as for HCFA in
Baltimore.
4. Different solutions to allow providers to demonstrate their
compliance with regulation should be implemented that would
restore the ability of the physician to be an advocate for
patients.
5. HCFA should accelerate efforts to eliminate or simplify regulations
that affect physicians in daily practice by aggressively
pursuing and resolving issues that have been identified by its
Physicians Regulatory Issues team.
6. The Congress should allocate a reasonable administrative budget for
beneficiary service or have a greater expectation for HCFA
service to beneficiaries.
practicing physicians' advisory council
I am aware that HCFA has been criticized for its lack of
recognition of PPAC recommendations and for not effectively utilizing
the council. I have been a member of PPAC for one year and in these
months it is evident that HCFA is beginning to address some of the
problems I have described, as well as other chronic issues. Though
there is now evidence of progress, it is slow and could be considerably
accelerated. Let me illustrate with two examples.
First, the Physicians' Regulatory Issues Team (PRIT) has spent much
of the last year trying to understand issues that affect physicians and
has recently completed a survey of physicians to provide guidance in
prioritizing its work. The highest priority for regulatory relief in
the minds of American physicians is that of Advance Beneficiary Notices
(ABNs). A simpler and easier to use notice, free of derogatory language
about the provider, and some notification of the physician when a
patient decided not to have a recommended test or procedure have been
requested by providers for years. In fact, in 1992, in the first
meetings of the Minnesota Medicare Carrier Advisory Committee, this
issue was identified and a letter was sent to HCFA requesting these
improvements. In my first meeting of the PPAC, an ABN proposal was
presented to the Council and PPAC made many suggestions. To the credit
of the staff at HCFA, they changed their direction entirely, adopted
the suggestions of the council and moved forward to implement our
suggestions. The work of the staff has been very gratifying, and it is
clear from this example that staff can make changes that are helpful
not only to physicians but beneficiaries (field testing of the
simplified ABN found better beneficiary response to the new, simpler
form). However, it is difficult for me to understand why it has taken a
decade to resolve an issue that required only a year of development and
testing. We should be able to make faster progress than solving one
problem every ten years. Unfortunately, HCFA staff members have
informed PPAC members that at least two of the issues important to
physicians (and included on the PRIT physicians' issues list) are
nearly impossible to resolve (notably, claims resubmission and the
requirement for prior hospitalization for skilled nursing facility
placement).
Second, HCFA has asked PPAC to take a central role in the
supervision of the process to develop new documentation guidelines.
This is encouraging, and I hope this new effort will produce changes in
both coding and documentation that will solve problems that are also
ten years old. This will require a cooperative effort between HCFA and
the CPT Editorial Panel of the American Medical Association and
significant leadership on the part of both organizations. I do harbor
some concerns about our ability to resolve this problem because of
difficulties within HCFA. The group at HCFA with responsibility for
implementation of the guidelines proposes to undertake a series of
pilot projects to field test the new guidelines before national
implementation. However, such a trial will inevitably have a period
where there will be disagreements about interpretation and payment.
Physicians who participate in these pilots do not want to be exposed to
the current set of risks of making a mistake in coding (as in the
example I described earlier). However, Program Integrity staff seem
insistent that there can be no provision made for these pilot projects
and that any mistakes made must be aggressively pursued to make sure
that no improper payments are made. Unless Program Integrity staff,
Health Plans and Providers staff and carrier medical directors can
develop an effective structure for pilots that promotes the learning
necessary to successfully implement a new system that will be
effective, we will have gone through ten years of work in four major
efforts without being any farther than we were in 1993 when I chaired
the first ad hoc committee on the development of documentation
guidelines. If HCFA cannot reasonably consider the views of PPAC in a
process where its involvement has been specifically sought, then it
seems unlikely that PPAC will ever serve any useful purpose.
how could hcfa work better with ppac?
The examples I have cited indicate the recent efforts of leadership
within HCFA to use the PPAC effectively and demonstrate the utility of
PPAC. Though these changes give me optimism about the future role of
PPAC, there remains a need for more effective leadership to achieve
better coordination between groups within HCFA. These groups should be
working together to achieve the goals of HCFA to provide the best care
for Medicare beneficiaries in partnership with physicians and other
providers while working to assure the integrity of the program for all.
It is simply too important that we be successful in meeting the
increasing needs of the elderly that we risk our success by not being
able to work effectively together.
There must be an increased emphasis on resolving problems of
regulations. Proposed regulations are not regularly reviewed by PPAC to
understand their potential effect on practicing physicians; it is
extremely difficult to change regulations after they have been
implemented. HCFA could use PPAC more effectively to help it avoid
problems with regulations by making a more intensive effort to present
proposed regulations for review very early in the process of
development.
conclusion
I appreciate the opportunity to share my experiences with you this
morning and I hope that my observations and suggestions will be helpful
in making improvements in the administration of Medicare, a vitally
important program for our elderly. Thank you for your dedication to the
success of Medicare and for seeking ways to make it better for patients
and physicians.
Mr. Greenwood. Thank you, Dr. Wood.
Finally, Mr. Friedman.
STATEMENT OF HARVEY FRIEDMAN
Mr. Friedman. Thank you. Good morning. Mr. Chairmen and
members of the subcommittees, I am Harvey Friedman, the
Medicare contracting officer at the Blue Cross and Blue Shield
Association. The association represents 45 independent Blue
Cross and Blue Shield plans throughout the Nation. Together,
Blue Cross Blue Shield plans are, by far, the largest Medicare
fee-for-service contractors, as well as the largest Medicare
Plus Choice and Medigap insurers. I appreciate the opportunity
to testify before this joint subcommittee hearing on how
Medicare contractors communicate new rules and regulations to
providers.
I will make a brief oral statement at this time. My full
statement has been submitted for the record.
Medicare contractors have several areas of responsibility
on behalf of the Federal Government. Most relevant to the
purpose of this hearing, contractors are the main points of
routine contact with the Medicare Program for both
beneficiaries and providers. Contractors educate providers and
beneficiaries about Medicare and respond to about 40 million
inquiries annually.
I would like to focus on the following three areas in my
testimony today: How contractors communicate in the rules and
regulations to providers, challenges facing contractors, and
BCBSA's recommendations for improving the contractor program.
Contractors use several methods to communicate instructions
to providers. The process begins with the creation of an annual
provider education and training plan, so-called PET. This plan
is reviewed, typically quarterly, with a PET Advisory
Committee, consisting of representatives from State and local
medical societies, providers, and other entities that submit
Medicare claims.
Contractor communications with providers throughout the
year take the form of quarterly newsletters, special bulletins,
desk manuals, training seminars and publication of Internet web
sites. HCFA's own Internet web sites contain copies of all the
instructional program memoranda and transmittals which are sent
to the carriers and intermediaries, as well as some computer-
based training modules.
In fiscal year 2001, the Blue Cross Blue Shield Medicare
contractors have been funded with $16.5 million for Part A
provider education and training and $24.6 million for Part B.
Although this is less than we would like to have, which I will
address shortly, you can see that a considerable amount of
resource and effort goes into communicating new rules and
regulations.
The Medicare Program continues to grow more and more
complex. Furthermore, new rules are being changed with greater
frequency. In the Balanced Budget Act of 1997, Congress created
new payment mechanisms. Since 1997, Congress has acted twice,
in 1999 and 2000, to amend the Balanced Budget Act, requiring
additional major changes and creating additional confusion. All
of this translates into more change orders to the Blue Cross
Blue Shield contractors. Just as Members of Congress hear from
providers about the difficulties in understanding these new
rules, so too do contractors who must answer the questions and
concerns about new payment methodologies.
Medicare contractors were allocated about 6 percent less in
overall operating funds this year than they received in fiscal
year 2000. An area hit particularly hard was provider
education. Blue Cross Blue Shield plans estimate that fiscal
year 2001 funding for provider education is about 18 percent
below the amount they need to effectively educate and train
providers. And, frankly, the picture for fiscal year 2002 looks
even grimmer, although that budget is in process.
The fact is that when Medicare budgets are tight, provider
education is one of the first areas to be cut by HCFA. Over the
past 2 fiscal years, the customer service functions, including
inquiries, education, and outreach efforts have been
particularly hard hit. We urge Congress and the Administration
to explore new methodologies to develop Medicare contractor
budgets.
The Blue Cross and Blue Shield Association supports
congressional efforts to reform and improve the Medicare
Program. However, such efforts must have as one of its goals a
reduction in the complexity of the program. The program has
been micromanaged to the point where a clear and consistent
understanding of the rules and regulations is simply
impossible. Blue Cross Blue Shield plans constantly hear from
providers that the complicated payment rules and paperwork
required of them is overwhelming, and some are being driven out
of the program. BCBSA applauds the efforts of these
subcommittees to review and address this issue and we offer our
assistance in implementing improvements.
Finally, we recommend against awarding contracts in a way
that would fragment and weaken Medicare administration, as has
been proposed by HCFA in past reform plans. Competition does
not have to mean fragmentation. By breaking up contracting
functions and spreading them among a large pool of new
entities, many of whom would be inexperienced in Medicare, the
claims payment process would become fragmented. The Blue Cross
and Blue Shield Association cannot emphasize enough the
potential confusion and difficulty that would arise from using
a multitude of independent specialty contractors who share work
but do not share accountability for the outcome; that is, for a
correctly and efficiently processed claim.
In conclusion, Blue Cross and Blue Shield Medicare
contractors believe more can and should be done to improve the
communication among HCFA, contractors, and providers. However,
two considerable obstacles stand in the way of any significant
improvement: The complexity of the Medicare Program and
insufficient funding. BCBSA urges Congress to streamline the
Medicare Program, a goal we know these subcommittees share, and
provide adequate funding to Medicare contractors. BCBSA
strongly recommends against fragmenting contractor functions,
an action that would certainly lead to more confusion, more
inconsistency, and more delays in payment and customer service.
We look forward to working with the subcommittees and HCFA
to make these needed improvements. Thank you, and I would be
pleased to answer any questions.
[The prepared statement of Harvey Friedman follows:]
Prepared Statement of Harvey Friedman, Medicare Contracting Officer,
Bluecross and Blue Shield Association
Mr. Chairmen and members of the Subcommittees, I am Harvey
Friedman, the Medicare Contracting Officer at the Blue Cross and Blue
Shield Association (BCBSA). The Association represents 45 independent
Blue Cross and Blue Shield Plans throughout the nation. Together, BCBS
Plans are, by far, the largest Medicare fee-for-service contractors, as
well as the largest Medicare+Choice and Medigap insurers. I appreciate
the opportunity to testify before this joint Subcommittee hearing on
how Medicare contractors communicate new rules and regulations to
providers.
As background, the Medicare program is administered through a long-
standing partnership between the private health insurance industry and
the Health Care Financing Administration (HCFA). Since 1965, Blue Cross
and Blue Shield Plans have played a leading role in administering the
program. They have contracted with the federal government to handle
much of the day-to-day work of paying Medicare claims accurately and in
a timely manner. Nationally, 26 Blue Cross and Blue Shield Plans serve
as Part A fiscal intermediaries and/or Part B carriers and,
collectively, process about 90 percent of Medicare Part A claims and
about 60 percent of all Part B claims.
Medicare contractors have three major areas of responsibility on
behalf of the federal government:
1. Paying Claims: Medicare contractors process all the bills for the
traditional Medicare fee-for-service program. In fiscal year
2000, it is estimated that contractors processed over 900
million claims, more than 3.5 million every working day.
Contractors also process the initial appeals of adverse claim
decisions.
2. Special Initiatives to Fight Medicare Fraud, Waste, and Abuse: All
contractors have separate fraud and abuse departments dedicated
to assuring that Medicare payments are made properly. It is
estimated that these activities saved the government $11
billion in 1999.
3. Providing Beneficiary and Provider Customer Services: Most relevant
to the purpose of this hearing, contractors are the main points
of routine contact with the Medicare program for both
beneficiaries and providers. Contractors educate providers and
beneficiaries about Medicare and respond to about 40 million
inquiries annually.
With this as background, I would like to focus on the following
three areas in my testimony:
I. How contractors communicate new rules and regulations to providers;
II. Challenges facing contractors; and,
III. BCBSA's recommendations for improving the contractor program.
i. how contractors communicate new rules and regulations to providers
Contractors use several methods to communicate instructions to
providers. The process begins with the creation of an annual provider
education and training (PET) plan. The plan is reviewed with a PET
advisory committee consisting of representatives from state and local
medical societies, providers, and other entities that submit Medicare
claims.
Contractor communications with providers throughout the year take
the form of quarterly newsletters, special bulletins, desk manuals,
training seminars and publication of new instructions on contractor
Internet websites. PET advisory committees are often used to review
written communications and website changes for clarity.
HCFA's own Internet websites contain copies of all the
instructional Program Memoranda and Transmittals which have been sent
to the fiscal intermediaries and carriers, as well as some computer
based training modules. In particular, training modules for the new
outpatient prospective payment system and the new home health
prospective payment system were developed by the BlueCross and
BlueShield Association at HCFA's request, and are available on HCFA's
website.
In fiscal year 2001, the BCBS Medicare contractors nationally have
been funded with $16.5 million for Part A provider education and
training and $24.6 million for Part B provider education. Although this
is less than we would like to have--which I will address shortly--you
can see that a considerable amount of resource and effort goes into
communicating new rules and regulations to the provider and billing
communities.
ii. challenges facing contractors
Medicare contractors face two key challenges to success in
communicating with providers: 1) increasing complexity of Medicare
rules; and, 2) inadequate funding levels.
Increased complexity of Medicare rules: The Medicare program
continues to grow more and more complex. The new payment mechanisms for
outpatient departments, home health agencies, and skilled nursing
facilities, to name a few, are very complicated and require a great
deal of resources to implement. Just as Members of Congress are hearing
from providers about the difficulty in understanding these new rules,
so too are contractors who must answer their questions and concerns
about new payment methodologies.
Furthermore, the new rules are being changed with greater
frequency. In the Balanced Budget Act of 1997 Congress created the new
payment mechanisms listed above. Since 1997, Congress has acted twice--
in 1999 and 2000--to amend the Balanced Budget Act, requiring major
changes and reeducation of providers. All of this has translated into
more change orders. In calendar year 2000 contractors received 719
formal change orders--more than 2-1/2 times the number received in
fiscal year 1998. This fiscal year, through February, contractors have
already tracked 513 changes. If this rate continues, we will receive
more than 1,230 changes in fiscal year 2001--a 70% increase over last
fiscal year.
Exacerbating this problem is the fact that these rapidly
multiplying change orders are rarely accompanied by sufficient funding
or transition time for proper implementation. This leads to the second
challenge facing contractors.
Inadequate Funding Levels: Every change transmittal from HCFA must
be implemented by the contractors and then communicated to the
providers. This is a time-consuming and costly process and, frankly,
contractors have not been provided all the resources they need to
successfully carry out this important function.
In spite of a 9 percent increase in the overall Medicare Program
Management appropriation for fiscal year 2001, the operational budgets
of Medicare contractors have been cut 6 percent below fiscal year 2000
levels. An area hit particularly hard has been provider education, at a
time when so many changes resulting from the Balanced Budget Act and
the subsequent amendments are being implemented. BCBS Plans estimate
that fiscal year 2001 funding for provider education is about 18
percent below the amount they need to educate and train providers
effectively.
In response to this funding shortfall, BCBS Plans have been forced
to take such actions as eliminating opportunities for individualized
training, declining invitations to speak at conferences, and, in
general, cutting back on personal training interactions.
The picture for fiscal year 2002 looks even grimmer. Based on
conservative assumptions of workload growth, BCBSA estimates that a
funding increase of 7 percent above the fiscal year 2001 level will be
necessary to meet current obligations. This estimate does not include
the millions of dollars that will be necessary to implement privacy and
administrative simplification requirements that are on the horizon, or
the changes included in the Medicare Benefits Improvement and
Protection Act of 2000.
The fact is that when budgets are cut, provider education is one of
the first areas to be cut by HCFA. Over the past two fiscal years, the
customer service functions including education and community outreach
efforts have been particularly hard hit due to budget cuts and resource
constraints.
iii. bcbsa recommendations to improve the medicare contractor program
Blue Cross and Blue Shield Medicare contractors are committed to
achieving outstanding performance levels. We want to work with the
Congress and HCFA to attain this objective. We recommend consideration
of the following recommendations:
1. Reform the Medicare program: BCBSA supports congressional efforts to
reform and improve the Medicare program. Such efforts must have
as one of its goals a reduction in the complexity of the
program. Over the past 35 years federal policymakers have
micromanaged the program to a point where a clear and
consistent understanding of the rules and regulations is simply
impossible. BCBS Plans constantly hear from providers that the
complicated payment rules and paperwork required of them is
overwhelming.
BCBSA applauds the efforts of these Subcommittees to review and
address this issue and we offer our assistance in implementing
improvements.
2. Provide adequate and stable funding levels: Congress should provide
adequate funding levels to assure that contractors can perform
the range of functions necessary for the efficient operation of
the Medicare program. As highlighted earlier, funding has not
kept pace with programmatic needs--important functions such as
provider education and training are not being fully funded. We
urge Congress and the Administration to explore using a new
methodology to develop Medicare contractor budgets. This method
should assure that workload growth and the costs of claims
administration are reviewed annually and that each time a new
Medicare law is passed, there are sufficient administrative
resources to handle the new workload. While BCBS Medicare
contractors are committed to continually achieving greater
efficiencies, it is simply not realistic to expect contractors
to continue to attain outstanding performance levels with
greater workloads and tighter budgets.
It is imperative that Congress provides a stable and adequate
funding stream for all contractor activities. Underfunding
contractor activities can result in ineffective provider
education and training, as well as payment slowdowns to
providers and beneficiaries, deterioration in effective anti-
fraud efforts, and significant delays in responses to provider
and beneficiary inquiries.
3. Avoid counterproductive reforms: Finally, we recommend against
awarding contracts in a way that would fragment and weaken
Medicare administration, as has been proposed by HCFA in past
reform plans. Instead, potential contractors should compete on
a level playing field to be the single manager of a contract,
and--as needed--be held responsible for subcontracting more
specialized work to other entities. By breaking up contracting
functions and spreading them among a large pool of new
entities--many of whom would be inexperienced in Medicare--the
claims payment process would become fragmented. This is likely
to disrupt effective management of the program and exacerbate
current provider concerns. For example, if one e entity
received the contract to educate providers while another
received the contract to process claims there will undoubtedly
be more errors since educator will not be as familiar with the
policies of the processor.
In addition, fragmenting the claims payment process would destroy
the current single point of accountability now available to
HCFA, providers, and beneficiaries. BCBSA cannot emphasize
enough the potential confusion and difficulty that would arise
from using a multitude of independent specialty contractors who
share work but do not share accountability for the outcome
(that is, for a correctly and efficiently processed claim).
Such contractors may even consider themselves competitors to
each other and not work cooperatively. It is conceivable that
under HCFA's proposal that an individual claim could be handled
by three or more separate contractors before it is finally
processed. This fragmentation would increase claims payment
timeframes and remove the single point of accountability for
processing a claim properly--from beginning to end.
conclusion
Blue Cross and Blue Shield Medicare contractors believe more can
and should be done to improve the communication between HCFA,
contractors and providers. However, two considerable obstacles stand in
the way of any significant improvements: the complexity of the Medicare
program and insufficient funding. BCBSA urges Congress to streamline
the Medicare program and provide adequate funding to Medicare
contractors. BCBSA strongly recommends against fragmenting contractor
functions, an action that would certainly lead to more confusion, more
inconsistency and more delays in payment and customer service.
We look forward to working with the Subcommittees and HCFA to make
these needed improvements.
Mr. Greenwood. Thank you, Mr. Friedman. You reached for the
gold star. The Chair recognizes himself for 5 minutes for
purpose of questions.
My thinking has been on this issue that there probably
isn't much of a problem in terms of bad faith on the part of
HCFA, the providers or the physicians. It is a question of
systems and incentives that are difficult to work with. And the
question I want to start with Dr. Miller on is--and I should
know the answer to this, but I don't--can the health care
provider file a Medicare claim online today?
Mr. Miller. Most claims in Medicare are filed
electronically, and the vast majority are filed electronically,
if that is what you mean by online.
Mr. Greenwood. Explain to me how that works.
Mr. Miller. There are standard forms, 1500's, that is--
there is an interface between the provider, whether it is a
hospital or a physician's office. Information is put into the
forms, the I.D. of the provider, the I.D. of the beneficiary,
codes for services, and it is transmitted to the carrier along
telephone lines. I believe so, yes.
Mr. Greenwood. But that is not an interactive process, I
assume.
Mr. Miller. That is correct. I think if you are saying can
somebody log onto the Internet and see the status of their
claim at any given point in time, I don't believe that they can
do that, if that is your question.
Mr. Greenwood. Okay.
Mr. Miller. In terms of an interactive effect.
Mr. Greenwood. And has HCFA--what I have been grappling
with is the extent to which--and if your associate there would
like to speak for herself, she is welcome to do that as well.
Mr. Miller. She was saying that it is not interactive.
Mr. Greenwood. The next question then is, is that under
consideration? It would seem to me that in the information age,
with the information technology that we have, if I go to order
something from Amazon.com--if I were to file every request that
I ever made online to purchase a product, for instance and had
to wait until I received information back as to whether or not
I had done that accurately, I would probably be experiencing
some of these similar problems. The health care provider is
sending in a claim, waiting, and finding out I didn't--it was a
wrong keystroke or a mistake, and the we do it over again.
On the other hand, when I make a transaction online, it can
be interactive in that I can get instantaneous feedback as to
whether or not I made a mistake. And then I get some sort of a
clearance, ``Okay, your t's are crossed or i's are dotted,
claim is ready for acceptance,'' and I can get almost
instantaneous response. Is that kind of approach under
consideration by HCFA?
Mr. Miller. There have been discussions about that. There
was an article in the newspaper a few months back where some
private insurance firms were beginning to look at these types
of systems. And I know myself and a few other people within
HCFA noticed those, and there were discussions about it. But to
move to something like that, I think would require--and I am
not a systems person, so I am stepping out here a little bit--
would require, I think, a significant investment and
significant reconfiguration of our systems. So these are
certainly things we are aware of and are thinking about, but I
can't point to plans that say that this is going to happen
soon.
Mr. Greenwood. Well, okay. You don't have plans that it is
going to happen soon, but I think--let me refine my question.
It would certainly take a significant investment, but it would
seem to me that, in terms of both missions that we have
discussed this morning, that is preventing waste, fraud, and
abuse and having a workable, user-friendly relationship with
the providers, that such an interactive system could take us
down both of those paths simultaneously with fewer conflicts
between those goals. So if HCFA doesn't have such plans, is
HCFA engaged in a process of ascertaining whether that is
feasible, what it would cost, how long it would take to
implement so that HCFA could make an informed decision as to
whether that is where it can and should go?
Mr. Miller. Certainly, nothing in my answer was intended to
imply that we didn't think that this is a worthy idea to
consider. I think your point about being able to interactively
check where you are at any given point in time is well taken. I
just don't want to--and my understanding is in the private
sector, this is sort of just coming up to speed, just being
considered. And I could be wrong about that, but that is my
understanding.
HCFA, I think, can think about this, but I just don't want
to mislead you. We are not down the road to how feasible, how
much does it cost, those kinds of things, but we certainly
would be open to considering that.
Mr. Greenwood. Okay. My time has expired.
Mr. Miller. Can I just say one other thing?
Mr. Greenwood. Sure.
Mr. Miller. Apparently, you can log on and check online
where your claim stands, but it is not interactive. That is
true. But, apparently, you can log on and check the status of
your claim.
Mr. Greenwood. Well, my time has expired. The subtle
difference between there and being open to think about it is
important. What my recommendation to HCFA is, is that HCFA
ought to be completely engaged in the process of determining
whether that is--what it would take to do that, what it would
cost, what the timeframes would be, the feasibility, and
conferring with your providers to see how attractive that might
be to them.
Mr. Miller. Can I just say one other thing? Apparently, our
information systems people have been meeting with the private
sector to discuss the privacy issues associated with that
interactive issue, because you would have to have protections
in on that, just like Amazon.com has privacy protections. And
there is some discussion.
Mr. Greenwood. My guess is if Amazon.com can do it, the
United States of America could probably do it.
Mr. Miller. I would think so.
Mr. Greenwood. The Chair recognizes the gentleman, Mr.
Brown, for 5 minutes.
Mr. Brown. Thank you, Mr. Chairman. I am particularly
interested, Dr. Miller, in the area of HCFA's oversight of
contractors. Ms. Bradley had two interesting examples of areas
where a contractor, with respect to provider enrollment forms
and the provider overpayment, where a contractor appears to be
performing badly but apparently has no relation to HCFA
guidance. I am interested in your oversight of contractors. How
does HCFA hold contractors accountable in those areas?
Mr. Miller. There are a couple of things. There is a
process inside HCFA that is called contractor performance
evaluations, and there are a set of requirements that are given
to contractors regarding performance standards. And these have
to do with things like claims processing, customer service.
Customer service in this instance is how fast you answer the
phone, how accurate is the information that you give over the
phone, responding to inquiries--written inquiries, I am sorry,
how much time it takes to respond to those, those kinds of
things. There are also payment safeguard requirements, fiscal
oversight kinds of requirements.
There is at least an annual evaluation process that goes
on, and all of the carriers are ranked on their performance.
And then each of the contractors--and I won't describe this
really well, because, again, it is a slightly different area
than the one I deal with--but there are people in HCFA who are
responsible for each of the sets of carriers and go out
regularly and spend time with the carriers to look at how they
are performing, what kinds of problems are being encountered in
response to problems, working problems through with the
carriers, the intermediaries.
Mr. Brown. Putting aside funding for a moment, does HCFA
have the proper authority to do sufficient oversight of the
contractors?
Mr. Miller. I don't want to talk about proper. I just want
to talk about the authorities that they have. And I think what
your question is getting at is the question that was raised by
Blue Cross Blue Shield, the idea of additional flexibilities in
HCFA's contracting authority. In the past, there have been
proposals that have looked at contracting flexibility in a
couple of ways: Moving to performance-based contracting, which
is not allowed by law now, and also the ability to contract
with entities in addition to the ones that we are able to
contract with now. And then, finally, the idea of being able to
contract out for pieces of the work. So, say, for example, you
have some group in a given area who is particularly good at
customer service, the ability to go and contract separately
with them. Again, that is not something that we have the
authority to do at this point, if that is your question.
Mr. Brown. Mr. Mangano, would you talk about your view of
the authority, the need for contract reform, if there is a
need, your view of if the authority is sufficient that HCFA now
has to oversee contractors properly? Give us your rate on that.
Mr. Mangano. Our view is consistent with the positions we
have taken in the past, as well as today. It is that HCFA ought
to have the kinds of authorities they need to have to be able
to select contractors on whatever basis they deem appropriate.
Given that fact, we have strongly supported in the past HCFA
being able to select for part of the process, contractors who
are not insurance companies, to be able to competitively bid
and experiment with some other ways of doing it.
If we are going to hold HCFA responsible for the
performance of its contractors, they ought to have more say in
selecting who their contractors are and terminating contracts
when they deem it in the best interest of the Government.
Mr. Brown. What percentage--just a ballpark figure, what
percentage of carriers are or have recently been investigated,
either by OIG or by DOJ?
Mr. Mangano. Since 1993, we have reached either a criminal
conviction or a civil settlement with 13 contractors across the
country in which they ended up returning to the Medicare Trust
Fund $350 million. And today we have a number of others under
investigation as well.
Mr. Brown. This is money from the contractors or from
providers?
Mr. Mangano. This is from the contractors.
Mr. Brown. From contractors only.
Mr. Mangano. Yes. And for a variety of offenses, either not
being diligent in terms of how they bill providers, making
false statements to the Medicare Program, turning off edits,
which are designed to identify false claims, and a variety of
other----
Mr. Brown. Would some of that money then be recoverable by
the contractors from providers or typically no?
Mr. Mangano. Yes, it would. We recently had a case in which
a contractor in the Northeast basically was sending checks to
hospitals on the basis of improving their performance ratings.
This particular contractor was basically saying that they pay
bills very quickly, and they were paying money to hospitals
that shouldn't have been paid. We reached a settlement of over
$70 million with that particular contractor.
Mr. Brown. One last real quick question. The purpose of
paying these contractors, my understanding, these private,
generally for-profit contractors, is to safeguard tax dollars,
correct? And to administer the program, but ultimately to
safeguard taxpayers as they administer it.
Mr. Mangano. Sure.
Mr. Brown. Okay. Thank you.
Mr. Bilirakis. [presiding] We have more than one vote. So
it may be--Nathan, would you like to inquire for 5 minutes? We
could probably get you in.
Mr. Deal. I can do one real quickly, and I will try to get
a gold star and keep under the 5 minutes if I can.
I would just like to maybe get some broad parameters here,
because we all seem to be focusing on the same general issues,
but sometimes I think we lose sight of perhaps what the cost
is, what the overall objective might be. And let me start with
this, and it may be facts and figures that nobody has. If you
do not have, then I would like to ask if you could provide them
to me at a later date.
First question I would have is, considering the overall
Medicare budget, how many cents out of every Medicare dollar is
paid to medical providers?
Mr. Miller. Medical providers?
Mr. Deal. Yes. Doctors, hospitals--medical providers.
Mr. Miller. Well, I mean, virtually all of the Medicare
dollars go to payments to providers of one kind or another. Is
there a particular category you are looking for?
Mr. Deal. I said medical providers. I am not--I want to
know how much of the Medicare budget is syphoned off at HCFA
paying for things that are not for services rendered? How much
is syphoned off paying to carriers to administer the program?
How many cents out of every total Medicare dollar goes to
providers?
Mr. Miller. Okay. I think the two figures that you are
looking for are there is about $210 billion in payments made
every year, and HCFA's budget is $2.2 billion, of which
contractors receive about half of that. So $1 billion out of
$210 billion, if that is what you are asking.
Mr. Deal. One billion?
Mr. Miller. Out of $210 billion goes to the contractors.
And HCFA's total budget, when you consider the central office
and the regional office, is $2 billion, in round numbers.
Mr. Deal. Two billion?
Mr. Miller. That is correct. Out of $210 billion in
payments per year.
Mr. Deal. So we have $3 billion out of the $210 billion
that goes to things other than paying for medical services.
Mr. Miller. Yes. And I think if--you were saying how many
cents on every dollar, that is about two cents of every dollar.
Mr. Deal. Two cents of every dollar. All right.
Mr. Miller. If I understand your question.
Mr. Deal. I think you did. The next question, then, is at
the provider level, and Dr. Becker, you and Dr. Wood, I
suppose, would be--well, Ms. Bradley, you probably too--at the
provider level, how many cents out of every Medicare dollar
that you receive do you consider is spent in complying and, in
effect, getting the dollar in something other than paying for
time spent in providing care or medication or supplies related
to that care? Do you have any estimates?
Mr. Becker. Well, it would only be an estimate, but I can
tell you that in Florida, where we have a large HMO population,
the HMOs, in general, take 20 percent of the Medicare money
that they are given, which is strictly for administration. They
take 20 percent, and they pay out about 80 percent to
providers. Then out of that 80 percent, of course, for my
office administration, there is some percent that would go to
administration as well. That is probably a low figure, maybe
15, 20 percent also.
But a significant--once it leaves the carrier, and I have
understood the carrier cost also to only be around 2 percent,
which is fairly reasonable, I suppose, for a larger system, but
once it leaves the carrier, when it gets to an individual area
HMO, they usually take 20 percent, and then out of what I get,
which would be 80 percent of that, I will probably have to
spend another 20 percent for administration as well.
Mr. Deal. Assuming it is not an HMO situation but a direct
reimbursement, what percentage would you estimate would be
consumed?
Mr. Becker. Well, again, in my office, probably at least 20
percent of my expenses go for strictly administrative costs,
for dealing with the paperwork and bureaucracy, so to speak.
Mr. Deal. Is that comparable, do you think?
Mr. Bradley. All due respect to physicians, the
administrators are the ones who deal with this every day, and I
would say a considerable amount of our dollar is spent trying
to understand the rules and regulation, trying to get these
issues straightened out. So I would say it is well over 50
percent.
Mr. Deal. Fifty percent out of every dollar?
Mr. Bradley. Fifty, 5-0. Fifty cents, at least.
Mr. Deal. Out of every dollar that----
Mr. Bradley. That is correct.
Mr. Deal. Dr. Wood?
Mr. Wood. I think that figure is relatively reasonable. The
circumstances are that there are----
Mr. Deal. Which figure, the 20 or the 50?
Mr. Wood. The 50.
Mr. Deal. Okay.
Mr. Wood. Because you have a series of rules and
regulations from the carrier, and there are additional things
that you have to do for compliance. If you put all of those
together, it is a rather substantial number.
What your question perhaps doesn't represent very well is
what the impact is of having to deal with then audits and
payment reviews.
Mr. Deal. Which you are not compensated for.
Mr. Wood. Right. And it may cost $14, $15, $20 to pull the
record, get the record ready, send it to the carrier for
review. The amount in question for payment may be only $20 on a
low-level service. So from that circumstance, then, a physician
may decide do I just forgo the payment or do I just go through
all the administrative work to get a few dollars back?
Mr. Deal. Could I ask one very brief follow-up question on
that?
Mr. Bilirakis. Very quickly. We will have a second round. I
just wanted to advise those that are still here.
Mr. Deal. All right. Mr. Friedman, Blue Cross Blue Shield
is in the business of providing health insurance in a non-
Medicare environment. Do those percentages, are they comparable
in the non-Medicare health insurance area that Blue Cross Blue
Shield supervises? Are those percentages comparable?
Mr. Friedman. No insurance company would dream of trying to
administer a program for two cents on the dollar, because you
simply can't do a very good job. More typically, administrative
costs run 15 to 20 percent in administering insurance plans
other than Medicare, if I am understanding your question.
Mr. Deal. So you are saying, then, in the non-Medicare
environment that it would be more than the percentages we have
heard referenced here.
Mr. Friedman. Certainly in terms of the cost of
administration versus the cost of benefit payments, absolutely.
Mr. Deal. Then why do you ask to be an administrator in the
Medicare environment then?
Mr. Friedman. I think the question is perhaps best answer
historically. Going back to the beginning of the program, most
of the Blue plans who entered into these contracts saw it as
part of their community involvement, their community mission.
Mr. Deal. So your administration is community service.
Mr. Friedman. That is correct.
Mr. Deal. That is a unique answer, Mr. Chairman, unique.
Thank you.
Mr. Bilirakis. I thought his answer might be, ``Well, we
are probably asking ourselves that same question.''
We are going to recess until 12:45, because we do have
these two votes. That will give you an opportunity to grab a
bite for lunch. So we will recess until then.
[Whereupon, at 11:57 p.m., the joint subcommittees
recessed, to reconvene at 12:49 p.m., the same day.]
Mr. Bilirakis. Thank you for your indulgence, Ms. Bradley
and gentlemen. Those of you who have testified up here before
know what it is like. The rest of you probably feel that we are
very discourteous, but that is the name of the game up here,
votes left and right.
I would like to enter into the record, without objection, a
letter dated April 4 from Secretary Tommy Thompson to the
chairman of the full committee, Mr. Tauzin. The minority has
had a chance to look at the letter. And also a statement of Dr.
Kenneth Webster, executive director of the Pinellas County
Osteopathic Medical Society, and a statement of Randy O. Shuck,
Chairman of the Pinellas County Osteopathic Medical Society.
Without objection, those will be made a part of the record.
[The material follows:]
The Secretary of Health and Human Services
Washington, DC
April 4, 2001
The Honorable W.J. ``Billy'' Tauzin
Chairman
Committee on Energy and Commerce
House of Representatives
Washington, D.C. 20515
Dear Chairman Tauzin: Thank you for your letter concerning the
Health Care Financing Administration's (HCFA's) relationship with
physicians and other providers who participate in Medicare. I agree
with you that it is significant that the Medicare error rate, as
reported by the Inspector General, has continued to decline. While the
reduction is a good sign, the current error rate is still unacceptable.
The reduction of fraud and errors in Medicare is critically important
and we must continue to build on our success. I also share your concern
over the provider community's perception that Medicare rules are
burdensome and HCFA's oversight is intrusive.
With respect to reducing fraud and errors in the Medicare program,
more needs to be done, and the Department will make this a priority.
Let me assure you that we will work with you and members of your
committee on our plans in this area. Likewise, I support your efforts
to examine how best to educate our providers in order to make the
program work better. You are correct. If providers have the right
information from the start, then the whole process of submitting and
paying claims is greatly enhanced. HCFA has already begun a number of
ongoing Medicare provider education efforts that will help increase the
level of understanding in the provider community. But here again, more
needs to be done.
I understand that my staff has already begun this process of
consultation by providing a briefing for your staff covering many of
the issues raised in your letter. We will continue to work with your
staff to provide additional material in response to your specific
questions. Finally, I have asked HCFA to provide me with options that I
can use in working with you and others in Congress to further improve
on these provider education efforts.
Again, I look forward to working with you on these issues. Once our
new HCFA Administrator has been confirmed, I believe we can make
significant progress in improving the administration of the Medicare
Program. A similar response is being sent to the cosigner of your
letter.
Sincerely,
Tommy G. Thompson
______
Prepared Statement of Kenneth Webster, Executive Director, Pinellas
County Osteopathic Medical Society
I am Kenneth Webster, Executive Director of the Pinellas County
Osteopathic Medical Society. While I am appearing only on behalf of
that organization, I believe I can speak for all of the physicians--
D.O.s and M.D.s alike--who have found themselves caught up in a unfair
and unwarranted criminal investigation that threatens their reputations
and livelihoods.
There is ongoing a series of federal investigations and
prosecutions in the Middle District of Florida that should be of great
concern to anyone who takes the time to learn the facts. Over a dozen
physicians who, in the past, had modest or de minimus financial
relationships with health care service providers, to whom they referred
patients, have been indicted. They have had their ongoing Medicare
reimbursements suspended, causing them to declare bankruptcy or cease
practicing. Hundreds more have been threatened with indictment,
subpoenaed or otherwise targeted for criminal investigation. These
physicians collectively represent the core of the family and general
practitioners in three counties; their indictments or prosecutions and
resultant exclusion from Medicare and Medicaid have had and will have
enormous repercussions for the health care delivery system in an
extensive area of Florida. And worst of all, almost all of these
doctors were totally unaware that their conduct was improper, let alone
criminal. They were lied to by the real criminals--the service
providers--and lulled into a situation that the United States Attorney
for the Middle District of Florida proclaims to be a violation of the
Medicare anti-kickback law.
These doctors ordered medically necessary tests for actual
patients; the alleged crime is that the doctors sent the blood work to
a laboratory that improperly procured the work. The government
acknowledges that the doctor's activities here did not involve any harm
to patients and ``did not result[] in a loss to the Medicare program.''
The government has chosen to criminalize this conduct in only this one
federal district; no where else in the country has the government
indicted doctors who have made similarly-poor judgments about
relationships with Medicare referral recipients. The facts of these
cases under indictment, and the ones under investigation, simply do not
warrant ruining the careers of this large group of well-meaning family
practitioners.
I do not defend doctors who defraud Medicare. Like everyone, we
believe that doctors who willfully defraud Medicare, or knowingly
engage in financial relationships that induce unnecessary medical
services, are a stain on the profession and should be dealt with
appropriately. But these cases in Tampa do not involve doctors who
defrauded Medicare. None of the indicted physicians have had their
billings to Medicare challenged. The government has never claimed that
they ordered tests or services that weren't medically necessary or in
any way performed medicine inappropriately. Rather, the government has
criminalized the poor judgment of these doctors by charging them with
kickback violations--and suspending their wholly unrelated Medicare
payments--due to their acceptance of very modest payments from a
corrupt clinical laboratory for services that the doctors believed were
legal and appropriate.
The background to these cases needs to be understood to put these
matters in the proper context. The doctors in the Tampa area have been
caught up in a federal investigation known as ``Operation Takeback''
which apparently is part of the nationwide Operation Restore Trust
conducted by HHS. As part of Operation Restore Trust, HHS auditors
visited Clearwater Clinical Laboratories (CCL), a local clinical blood
lab, in January 1998. For years, CCL had a history of renting space
from doctors clinics in order to have strategically situated draw
stations and sub-leasing equipment from physicians that had previously
had small laboratory draw stations in their clinics. CCL had also
recruited doctors to be Medical Review Officers for each of the draw
stations to monitor lab tests and consult with other physicians on lab
results of blood drawn at the draw station for the other physicians'
patients. These practices, widespread in the industry, were especially
commonplace in the Tampa area, with a large Medicare population and
heavily subscribed to managed care. Many ancillary service companies,
such as home health and laboratories, rented space from physicians to
lower overhead and provide convenience to practitioners and patients.
Based on documents seen by the auditors, a search warrant was
executed on CCL in June, 1998. Government agents seized numerous
contracts with physicians who referred their patient's blood work to
CCL. The owners and sales manager of CCL agreed to plead guilty and
told investigators that the contracts with physicians--for personal
services, equipment rental and space rental--were ``shams'' designed by
CCL to disguise CCL's corrupt purpose in proposing such contracts to
the physicians: to obtain their business. The doctors, of course, were
never told by CCL how it viewed these contracts; to the contrary, part
of CCL's marketing strategy was to tell physicians it approached that
the contracts were legal and supplied a written legal opinion to
support the claim. These physicians were asked by CCL to rent office
space for CCL to establish a draw station for blood collection, to rent
certain medical equipment, or to perform test interpretation services
as a Medical Review Officer (MRO) or a Test Review Officer (TRO). The
prosecutors acknowledge that a MRO or TRO can appropriately be employed
by a clinical lab; they chose to view these as ``shams'' based on the
CCL executives' confession of criminal intent as opposed to what the
doctors legitimately understood. The compensation provided by CCL to
the physicians under any of these contractual arrangements was very
modest--typically several hundred dollars monthly, with none exceeding
$1,500. None of these contracts required the physicians to refer their
patients' blood work to CCL. Some of the physicians were already doing
so, others did so after entering into the contract. Again, the
physicians were assured that these arrangements were legitimate
business relationships, and the March 1994 opinion letter from CCL's
lawyers, Conklin & Sauey, that these arrangements met the ``safe
harbor'' requirements of the law, appeared to be written confirmation.
Unfortunately, the doctors were too naive, and too trusting. CCL's
sales manager testified that one of the first physicians he enrolled as
a TRO was ``very naive and believed everything [we] told him about TRO
payments being in accordance with Medicare guidelines.'' One doctor,
now indicted and convicted, was concerned about the ethics of one
laboratory. Serendipitously, his office manager knew a FBI agent, who
offered to advise him of a reputable lab to use. The agent was the case
agent for ``Operation Takeback'', recommended CCL, and the rest is
history. In hindsight, these doctors should have aggressively pursued
independent advice as to whether the ``safe harbors'' of the Anti-
Kickback Act were met in all respects. But because they did not, and
because they entered into these contractual arrangements and received
modest payments from CCL for the services actually rendered or the
space and equipment rented--some as little as $14,000--14 of these
doctors were indicted on multiple felony count violations of the
Medicare Anti-Kickback Act. At the same time, their own Medicare
receipts--for their own patients, having nothing whatsoever do to with
CCL--were suspended. Under HCFA regulations, suspension decisions are
made without a hearing and are not appealable. These suspensions had
the effect of putting these physicians out of business, even before
trial. Those who are convicted, of course, will receive the mandatory
5-year exclusion from participating in Medicare and Medicaid, further
ensuring the end of their careers. All this for being naive, and for
receiving a few thousands of dollars for services actually provided,
when no one has ever challenged their billings or questioned the
quality of their care.
The real culprits in this story, of course, are CCL and their
executives. Not only did they engineer a corrupt scheme to obtain
referrals, but once having the business, the lab proceeded to implement
a scheme to defraud Medicare in two separate billing schemes:
unbundling requested tests to bill components separately and testing
for cholesterol or iron when they weren't ordered by the physician.
This isn't just my assessment; I'm quoting from the United States
Probation Office's Presentence Investigation Report. Medicare paid
hundred of thousands of dollars to CCL for fraudulently-billed tests.
While the government prosecuted CCL and its executives, they entered
into plea agreements that will result in minimal sentences by virtue of
their cooperation in testifying against the physicians they duped. They
will receive no jail time, they can continue in the industry, and no
restitution will be required for the massive fraud that CCL perpetrated
on Medicare.
And that is the real injustice here. The government lets the
masterminds off the hook with lenient treatment and goes after the
small fish with a vengeance. And it is a vengeance unique to the Middle
District of Florida, even though Operation Restore Trust is a
nationwide investigation. None of the doctors who had MRO or TRO
agreements with CCL, or leased space to CCL, who lived in the Southern
District of Florida were prosecuted by the United States Attorney in
that district. Moreover, I am reliably informed that none--or virtually
none--of the numerous physicians who received kickbacks from the many
other clinical laboratories that have plead guilty to kickback charges
elsewhere in the country have been charged. I am informed that the
government had evidence that some of those physicians received hundreds
of thousands of dollars in research grants, educational grants or
consulting agreements when little or no work was done. According to
statistics compiled by our local newspaper, this one federal prosecutor
in this one (out of 94) federal judicial district has accounted for 10%
of the Medicare kickback cases nationwide all by himself. Outside of
the Middle District of Florida, the government has exercised its
prosecutional discretion in these situations appropriately by
prosecuting the initiator of this conduct and the party truly
responsible--the laboratory or other service provider.
While all of us are pained mightily at what has happened, our
overriding interest is in preventing further repetition of this
tragedy. In July 1998, the prosecutor in charge of these prosecutions
in the Middle District of Florida stated that his plan was to
investigate approximately 400 physicians; his expectation was that he
would secure 100 criminal convictions, with an additional 100 doctors
who would not be criminally convicted but who would have to pay money
back to the government together with civil fraud penalties; 100
physicians who would have to repay the government without paying civil
penalties and the last 100 physicians who might get out without any
payments or criminal investigation. He appears to be implementing his
plan. According to local reports that appeared last October, more than
100 subpoenas have been issued to Tampa-area physicians for
documentation of any relationship they may have had with Home Health
Corp. of America, a Pennsylvania-based provider of home health nursing,
respiratory care, durable medical equipment and other services. We have
reliable information that subpoenas have been served on physicians that
did business with another service provider as well.
We do not think it fair that physicians in the Middle District of
Florida should be held to a standard that is applied no where else. We
do not think it fair that we appear to be the object of some vendetta
by a single prosecutor. If his performance in the CCL case is any
harbinger, we will have dozens--if not hundreds--more doctors in this
community singled out. Their reputations will suffer, and if an equal
number of prosecutions ensue, their wholesale exclusion from Medicare
will cause the entire health care delivery system in Tampa to be
affected. The core of family practitioners, who are the main medical
resource of the elderly population here, is in jeopardy.
We need to make known to the country at large what is happening in
Tampa. We need to restore some semblance of sanity. We need the
spotlight from outside the Middle District of Florida to shine into the
abyss that we find ourselves in. We need your help.
Thank you.
______
Prepared Statement of Randy A. Shuck, Pinellas County Osteopathic
Medical Society
Good morning Mr. Chairman, I am Dr. Randy Shuck, Chairman of the
Special Advisory Committee dealing with Medicare Fraud, to Pinellas
County Osteopathic Medical Society. I am a Doctor of Osteopathic
Medicine, a D.O., but I believe I can speak for all physicians both
D.O. and M.D. alike, who find themselves caught up in the unfair and
unwarranted criminal investigations that threatens their reputations
and livelihoods.
I am currently in private practice in St. Petersburg, Florida, and
I am at risk for being accused of Medicare Fraud. I say this because of
the trend affecting the ``middle district'' of Florida, under the
``Operation restore trust'' program supervised by US Attorney Bucella.
To date, 140 of my fellow physicians have been subpoenaed, 14 have been
indicted, and 2 have been tried and convicted. Based on the 2
convictions, the 14 indicted physicians have been goaded into accepting
pleas which effectively ends their medical careers. One of the indicted
physicians had an office 2 miles from my office. He has been stripped
of his dignity, financially bankrupted, and embarrassed publicly, by
being arrested in his office and handcuffed and paraded out through his
waitingroom full of patients. He has not been tried or convicted, but
his medical career is over. I am at risk of losing my practice just as
this physician if I am placed under suspicion. We practice medicine
largely by reputations based on ethics and moral behavior. If this
reputation is put in question, our ability to gain the trust of the
patient suffers.
I am further at risk of being charged with Medicare fraud because
of where I practice. The Middle District of Florida has the highest
number of inquires into Medicare fraud. This is not because there is
more fraud here than anywhere else but because of an aggressive
Prosecuting Attorney looking to make a name for himself at the expense
of the physician. This is based on questionable practices, threats,
extortion and misconduct that appears common place under the
supervision of USA Donna Bucella. Several high profile cases have been
overturned , and charges dropped due to prosecutors misconduct
according to an recent article in the St. Petersburg Times by Graham
Brink on 3/24/01. According to this article, The Aisenburg's case
charges that the investigators lied, fabricated evidence and raised
questions that the federal prosecutors knew, and intentionally mislead
the Grand Jury. There are similar issues raised by the lawyers
defending the physicians involved here as well.
The defense has stated that the physicians were ``duped'' into
questionable contracts. The prosecutors have questioned how intelligent
physicians could be ``duped''. In order to understand how this could
have occurred, you have to understand the practice of medicine in
today's HMO driven market.
I specialize in Family Practice. I usually work 12 to 16 hours each
day. I usually start with rounds at the local hospitals before office
hours. Office starts at 8:30 am, and I usually see on average 25-35
patients over the next 8\1/2\ hours. In-between seeing patients, I
answer questions from staff, answer telephone calls from patients and
other physicians, and see representatives of supply companies,
pharmaceutical companies, diagnostic testing services and facilities.
The average time I have to see these representatives is less than 10
minutes. In this 10 minute session, these rep's will try to sell their
services, by giving information, written material and supportive
evidence. This information is placed on the desk, and I move onto the
next patient or rep. My day usually ends as it starts, rounding at the
local hospital after office hours. The remainder of the day is on call,
knowing I could be called back to the hospital at anytime.
The physician does not have enough time to set up meetings or
verify every legal claim made by the reps. A great deal of trust is
placed in the rep, and other physicians with similar agreements. The
physicians who were prosecuted are similar to myself. They were in
private practice, without sufficient time to verify contracts proposed
to them. They also did not have the funds available to hire a lawyer
everytime a rep made a claim, or offered a contract. These physicians
did not enter into these contracts with any intent to defraud the
government. The basic premise was to take care of the patient. The
convience of a medical test, the ability to follow up immediately
allows the physician to take care of the patient.
A methodical, well thought out plan such as the one involved in
this case required time and planning. This was produced by the
businessmen working on the fringes of medicine. These individual
businessmen have no care for the patient, they only care about the
money.
I am not inferring that no physician has ever defraud Medicare, and
further I am not supporting any physician who has defrauded Medicare
not be punished. True justice protects the innocent and punishes the
guilty. It is equal and fair. It is not to advance one's career goals.
It does not cater to the ones with the most money, or the ability to
hire the most lawyers. It treats all suspects with respect and thinks
them innocent until proven guilty in a court of law, not the
prosecutor's office.
We ask that you look at the facts presented today both in testimony
as well as in the white paper prepared by our attorney. We wish to
ensure a spotlight shines into the abyss that we practice in today, so
that further lives are spared the indignity of being wrongfully
accused. We are only asking that fair and just measures are used to
enforce Medicare fraud. We ask that the physicians are treated with
respect, and allow them to take care of the patient. We ask that you
punish the true criminal no matter how layered they are with lawyers
and false companies. The physicians are easy targets, with the most to
lose, but the true losers are our patients. If you allow the current
standards of prosecution to remain, young physicians like myself, will
not be around to take care of the patient, and an already overburdened
system will deteriorate even faster.
We are asking for your help. Thank you for the opportunity to bring
these issues to light. We truly appreciate your diligent investigations
into this disturbing trend in the criminaliztion of medicine.
Mr. Bilirakis. I will go ahead and kick off my questioning.
I don't have to tell you good people that there is an awful
lot at stake here, and what is at stake, of course, is the
quality of medical care to our constituents. We hear these
stories. I don't know how many of them are isolated, although I
might tell you we hear an awful lot. As the good people from
HCFA might know, we have requested input from all the Members
of Congress regarding the problems some of the providers have
had. And once we get those, those will be a part of a
forthcoming hearing.
I would like to ask Dr. Miller and Mr. Mangano, you have
heard these other people testify regarding specific situations.
I am one of those people who feels that you are conscientious,
that generally HCFA officials are conscientious, they are
trying, they are working hard. I have said this before a few
times--I have been disappointed over the years when we have
asked HCFA officials to tell us what they need from us in terms
of changes in the laws and changes in authority so we can help
them do a better job. Really, not too much was forthcoming in
that regard.
Even from the money standpoint, I am not sure that I
remember anybody from HCFA specifically saying, ``Give us X
amount of millions of dollars or whatever the case may be, and
we will do a better job.'' If they would do that, I would like
to think that they would tie it into specific functions so that
we could have an idea of where the money might be going.
Let me ask you, Dr. Miller, we have worked together, but
some of these stories that you have heard from these good
people, are they acceptable? I mean are they acceptable from
the standpoint of where there are 1 billion claims transactions
in a year's time? Some of this conduct that they have talked
about, which can be multiplied many times, is that basically
acceptable from the standpoint of so many claim transactions
where a few things are going to fall through the crack?
Mr. Miller. They are unacceptable, and----
Mr. Bilirakis. They are not acceptable.
Mr. Miller. [continuing] and all of them are regrettable.
You are right. There is a billion claims. It does mean that
transactions will go off track at times. All of these, the
transactions that have occurred here, give us raw material to
listen and to make changes. The enrollment form was underlying
one of the problems or a couple of the problems that were
brought up today. We recognize that the enrollment form is
complicated, and there are several steps we are taking to make
that better.
We have broken the enrollment form out so that it is
specific to the type of provider. Before it was all together,
and that was confusing to people. We have put the instructions
with each of the items on the form, and we are moving to
setting strict timelines, that when a form comes in, all
questions must be dealt with a physician and the provider and
settled and the enrollment form done.
Another situation that has been discussed here is the
advanced beneficiary notice when a service is not going to be
covered so that the beneficiary knows that they may be liable
for it. And it may have taken a long period of time, but we
worked with the Practicing Physicians Advisory Council, and we
have designed a much more streamlined, single-page form to deal
with that, and that was done in consultation with the medical
societies--or with the physicians.
They aren't acceptable. These things need to be corrected.
We take all these transactions seriously, and when we are aware
of them, the regional office, the carrier, and HCFA central
office deal with these problems.
Mr. Bilirakis. Well, all right. Let us go into the carrier
or the contractor, whatever term might be used there. My
understanding that HCFA's authority over the carriers is very
limited?
Mr. Miller. Well, there are certain strict authorities in
the law about who we can contract with, in terms of our
contractors, carriers, and intermediaries.
Mr. Bilirakis. So we tell you who you can contract with.
Mr. Miller. That is correct. And I believe the contracts
are cost based so they are not performance based or
competitively bid. But then behind that, we have budgets that
we set, and we have criteria and performance standards for each
of the contractors, and we try and manage contractors through
those mechanisms. And then also some of the problems that have
been discussed here are issues of consistency, that you get the
same message from the same carrier and the same message from
within the same carrier or contractor. And the efforts there
are through education, standardized materials that we give to
carriers to, in turn, give to the physicians and other
providers to assure that that aspect of managing the carriers
results in consistent messages.
Mr. Bilirakis. I was told just this morning in a meeting by
a group of providers--one provider indicated that Medicare
reimburses a particular procedure in one part of the country.
Under a different carrier, and in another part of the country,
for exactly the same procedure, there is no reimbursement. Is
that true? Can that possibly be?
Mr. Miller. We had a hearing here a couple of weeks ago,
this same committee, you as the Chair, on coverage of
technology. And in fact, carrier medical directors do have
flexibility to cover procedures differently across the country.
And some of the logic behind that is the idea that different
marketplaces may be at different levels of development in terms
of procedures that are being used for their populations, and
that flexibility actually gives, again, information that can
then be used to make a national coverage decision, a national
payment decision, and a national coding decision. But the
answer is, yes, that can happen.
Mr. Bilirakis. The answer is yes. And it should be that
way, in your opinion.
Mr. Miller. There are people who argue that that
flexibility is necessary to assure that technology and new
procedures get to beneficiaries as quickly as they possibly
can.
Mr. Bilirakis. Thank you. Dr. Becker. Now, we have heard 50
cents on the dollar is basically spent to handle the
regulations, to learn about the regulations, and to complete
the paperwork. In terms of time, does that translate into 50
percent of a doctor's time?
Mr. Becker. Well, fortunately, it doesn't translate into 50
percent of the doctor's time, but what we end up doing is we
have to hire a staff to do that for us. So, generally, I would
say--and it does come out to about 50 percent----
Mr. Bilirakis. It does.
Mr. Becker. [continuing] because it turns out that I
probably have one administrative clerk for every one health
care providing staff on my staff. And so we have a staff of 10
people who are the team members in my office, about 5 of whom
provide health care and about 5 of whom do billing and
administrative bureaucracy.
For the physicians, as it turns out, where it encumbers our
time more than anything else because we have a dedicated
office, and we are going to do what we have to do for our
patients, it takes away time from my evenings and my family,
and it takes away time from me on the weekends with my family,
because I have to go down to the office and take care of
administrative responsibilities.
Mr. Bilirakis. I want to get back at that maybe in the
second round, but Mr. Stupak, you haven't had an opportunity to
inquire, I don't think, have you?
Mr. Stupak. Have not.
Mr. Bilirakis. All right. Please proceed.
Mr. Stupak. Thank you, Mr. Chairman. You know, in looking
at this whole situation here and some of the questions that Mr.
Deal asked I was quite interested in, because if you take a
look at the Balanced Budget Act of 1997 alone, Congress, us up
here, added 350 new Medicare and Medicaid policies, many of
them which were very complex and gave you a relatively short
time to implement it. But did you receive, Mr. Miller or Mr.
Mangano, whoever wants to answer, did you receive any extra
money to do these new 350 new programs, to administer them, to
contract out, whatever you did?
Mr. Miller. There was money included in the budget to try
and implement those programs, but your larger point is that the
responsibilities have been significant. I think the number is
900 provisions have been added over the last 4 years, and that
the resources are very strained now to try and implement.
Mr. Stupak. Well, for the last 4 years, you must be talking
about HIPAA then and children's health initiatives.
Mr. Miller. I am talking BBA, BBRA, the most recent
Benefits Improvement Act, and HIPAA.
Mr. Stupak. What do you do when you get those mandates like
that from Congress? Do you do them internally or do you
contract out?
Mr. Miller. The mandates? Perhaps one point that should be
made here is that you should understand, and perhaps you do,
that there is HCFA central office, HCFA regional offices, but
then there are 50 private carriers. These are private insurance
companies. And what happens at HCFA central office is you
define policy, you define procedures and how the program will
be implemented. That information is given to the carriers----
Mr. Stupak. And they do the implementation.
Mr. Miller. The systems and the communication, that is
correct.
Mr. Stupak. So even though you try hard not to, it is not
unusual then to get 50 different interpretations of your own
policy then.
Mr. Miller. The carriers?
Mr. Stupak. Sure.
Mr. Miller. From us?
Mr. Stupak. No. That they could interpret it--I mean you
give them as much structure as you can, but it is for them to
administer it, so it would not be unusual then to get different
administration of the same rule out in the field to the
doctors.
Mr. Miller. I wouldn't go to 50, hopefully.
Mr. Stupak. All right, 49.
Mr. Miller. I believe that with 50 different carriers, you
can get some variation. I think that has been obvious from some
of the comments here. But part of our education efforts are to
standardize the information that is given to the carrier so
that doesn't happen.
Mr. Stupak. Well, let me go to the carriers, Ms. Bradley
and maybe Mr. Friedman. You know, I have been on this what my
fourth term now going on this subcommittee and on Commerce
Committee where we deal with Medicare and Medicaid. Can anyone
just tell me in really simple terms--and maybe you can't, maybe
it is just too complex--but what really is broken? Whose fault
is it? Is it HCFA? Is it the carriers? And how do you fix it?
Try that one in 5 minutes.
Mr. Bradley. Well, I will start, because I am not a
carrier. I represent physician offices.
Mr. Stupak. All right.
Mr. Bradley. But MGMA represents--really has its pulse on
the physician offices across the country. And I believe that it
is a complex task, and it is accomplishable, but it does take
input from the providers. And just this communication that we
are having right now is a step in the right direction.
Mr. Stupak. How would you fix it? How would you fix the
problem?
Mr. Bradley. One step at a time.
Mr. Stupak. Okay. Give me a ``for instance.''
Mr. Bradley. For instance, if there were quarterly reports
from the Federal Register that we could depend upon, we knew
that they were coming every quarter with any changes that were
coming down the pike, if the Federal Government required the
contractors to notify providers and give us a time limit, we
would know at certain times check the Federal Register, check
with our carriers, let us know what is happening, and then open
up the lines of communication in that manner.
Mr. Stupak. But you would want the communications before
the changes were made, I would take it.
Mr. Bradley. Before the changes are made, that is correct.
Mr. Stupak. So in that quarterly report, you would like to
see here is the proposed change, certain time limit to respond,
and then finalize the rule?
Mr. Bradley. That is correct. Give us enough time to
implement the changes, give the carriers enough time to get the
system working correctly.
Mr. Stupak. How much time is usually that? I mean up here
we usually hear 180 days, things like that.
Mr. Bradley. I would say 45 days from the time of the
Federal Register publication, perhaps.
Mr. Stupak. Okay. Mr. Friedman, you want to add anything
there?
Mr. Friedman. Absolutely. From the carrier point of view,
the pace of change is probably the most difficult to deal with.
And the 180 days is a very different number. I don't want you
to think of that at all from what the carriers have to do. The
180 days comment was that--provided, a community would like 180
days to understand a new policy, but it takes much more than
180 days to change your electronic systems to actually process
a new policy. As a matter of fact, there is supposed to be
roughly 8 weeks of testing time for putting something of any
significance new into a system. That has never happened. We
have never gotten 8 weeks of actual testing time.
And so while you have got, on the one hand, lots of things
to do, on the other hand, very complicated things to do, you
don't, in the final analysis, get enough time to implement and
test what you are doing. And all of this becomes a vicious
cycle, because then the next set of changes come along.
The other area has to do with funding, but funding not in
the simple sense that you probably need a few more dollars
because you have got a few more claims. What has happened over
the last several years, because of dealing with less money, is
that the infrastructure is gone. It isn't so much that there
aren't enough people to process claims, but there aren't enough
people to stop and say, ``Are we doing it well?''
When you have to give things up, the things you give up
appear to be intangible, but they are very important in running
an organization from a quality point of view. And so we have
got to get back to the point where there is sufficient money so
that an organization can not only do what it has to do but look
behind itself and see that they are doing it well.
Mr. Stupak. Thank you, and thank you, Mr. Chairman. I see
my time has expired.
Mr. Norwood. [presiding] Thank you very much. I want to
first start by saying to all of you how much we appreciate you
being here, particularly those of you that have taken time away
from your practices and are here on your own buck. This is a
very, very important hearing, leading to, I hope, some very
important solutions.
Dr. Miller, I wouldn't have your job for anything on Earth.
I want to say to you that I have come to the conclusion that no
matter how many smart people you have an no matter how big your
computers are, this issue is out of hand and simply too
complex, I think, to deal with on the path that we have been
going over the last year.
And I also want to say to you that I think there is a lot
to be said--a lot of truth in the fact that Congress is
micromanaging. I think Congress certainly aids in many of the
problems that we see from HCFA today. We lay down laws, and you
lay down rules, and somewhere in the process we have all made a
large, large mess. Can you simply tell me how many new rules
and regulations that you have put out in the year 2000?
Mr. Miller. No, I can't. I can come back to you on that,
but, no, I don't know the answer to that.
Mr. Norwood. Would you care to even guess? Are we talking
about 3 or 30 or 500?
Mr. Miller. I couldn't hazard a guess, because I would say
two things in response to your question. Remember that there
has been several pieces of major legislation passed on a couple
of years, and so the volume of rules and instructions to
providers and so forth may be significantly more than it would
be in an average year, if such an average year exists.
Mr. Norwood. Well, when you come back with the answer of
how many in 2000, why don't you come back with the answer of
how many in 1990? Let us just see how this thing has grown over
the last 10 years.
[The following was received for the record:]
In 1990, we issued about 40 final rulemaking documents.
Similarly, in 2000 we also issued about 40 final rulemaking
documents. It is important to note that we counted only final
rulemaking documents, or substantive changes to final
documents, not proposals. Additionally, although these numbers
are similar, they do not reflect the breadth nor thr comlexity
of each final rulemaking document.
Mr. Norwood. Mr. Friedman, I thought I heard in your
statement something to the effect you put out a number or an
explanation of how many rules you as a contractor have had to
deal with in the year 2000.
Mr. Friedman. One of our contractors had put together--done
a count in 2000 that 719 significant change transmittals had
come through.
Mr. Norwood. The number again, please.
Mr. Friedman. Seven hundred and nineteen in the year 2000,
which was about 2.5 times what it was in 1998. I am talking
fiscal years, actually, Federal fiscal years. So it is growing
considerably.
Mr. Norwood. And those are simply rules you as a contractor
get, which typically you pass on to Dr. Wood, Dr. Becker, and
others. Is that correct?
Mr. Friedman. That is correct, sir. And also what it
doesn't really tell you is that some of them may be extremely
significant.
Mr. Norwood. Let me stop a minute and try to make sure we
get this record straight. I know everybody says there are a
different number of thousand rules. HCFA says they only have
35,000. I tend to say there is 130,000, and I am looking at it
from the point of view of not HCFA, but the provider that sits
there and has the 35,000, which is probably a conservative
number that could be questioned. And all the rules then that
come from all of the contractors for a physician who deals with
numerous contractors.
And the point I make here is about educating the provider.
That is a very interesting concept. Doctors spend 4 years in
college, 4 years in medical school, 1 year as an intern, 2 to 6
years as a resident. My understanding is that they deal with
the equivalent of about 12 dictionaries a year in terms of
their learning process all the time in medical school. And I am
saying a dictionary, perhaps, is 1,000 pages, for example.
Now, if we are going to educate the provider, that means
that the provider--if you take all your rules and regulations
and you put them into a textbook, the provider has to deal with
about 10 dictionaries a year to get educated. And I am
wondering do we need to add another year of medical school in
order for the provider to become educated with all the rules
and regulations?
A lot of our colleagues talk about educating the physician
who typically is fairly able to be educated. But the system, I
contend, is so out of hand that there is absolutely no way that
a doctor can treat his patients and tend to all the rules and
regulations. And Congress, through HCFA, has made it then even
that more difficult, because now if you don't pay attention to
the rules, we may put you in jail or we can make you have a bad
day. And this kind of situation has got to change.
Dr. Miller, you talked a lot about your emphasis on
provider education. Remember I ask you this question in the
context that we are looking at 10 dictionaries worth of
education. I see in this program memorandum that, quote,
``Provider feedback in education is an essential part of
solving problems,'' end quote. So my question is why, in the
October 31, 2000 Federal Register on critical standards for
evaluating carrier performance is, quote, ``provider education
optional,'' in that Federal Registry rather than mandatory? The
question basically is, if you really believe that we are going
to solve this problem by having another year of medical school,
and that is the only thing that is going to solve it, why is it
optional?
Mr. Miller. Just a couple things. On the 35,000, the other
thing to keep in mind there is those are not all for
physicians. That is 35,000 for all providers, so I wouldn't
expect that the physician would know all of that.
Mr. Norwood. So now we are back to eight dictionaries. I
mean, come on, you get the point of this.
Mr. Miller. I realize it, and page counts are not the point
here. Education and communication is the point, which I think
is your point, and I agree with you. I am not aware that
provider education is optional as one of the criteria for
carriers. We have budgets for the contractors to do education,
and my understanding is, is that they are all doing it.
Mr. Norwood. Well, look under the criteria standards in the
Federal Register and see if I am not right.
Let me ask Mr. Mangano?
Mr. Mangano. Mangano.
Mr. Norwood. Mangano. You said in your testimony that you
are really saving the Federal taxpayers all these billions of
dollars. And, certainly, none of the things you are dealing
with happens to be an honest billing mistake. That is not a
problem. Why don't you explain to us what happens if a
physician makes an honest billing mistake.
Mr. Mangano. If a physician makes an honest billing
mistake, what will happen in almost every case is that HCFA
will ask that provider to return the money. If the case happens
to be turned over to us in which we are asked to investigate it
and we discover it was an honest billing mistake, we turn it
right back to HCFA and just say, ``Repay the overpayment.''
Mr. Norwood. Sort of like they did with Dr. Becker's friend
after they wrote all of his patients and said, ``Geez, you are
going to a doctor that is overcharging you.'' I mean I expect
that from Blue Cross Blue Shield; I have been on that end of
it. But I don't expect that from the Federal Government.
Mr. Mangano. None of those cases were given to the
Inspector General.
Mr. Norwood. None of the cases that----
Mr. Mangano. Dr. Becker talked about.
Mr. Norwood. --Dr. Becker talked about.
Mr. Mangano. They all stayed within HCFA and its
contractors.
Mr. Norwood. But don't--first of all, if a mistake is made,
you don't know if it is honest or not.
Mr. Mangano. Well, I would just mention that for us to
prosecute someone criminally, we would have to prove criminal
intent to defraud the Medicare Program.
Mr. Norwood. I appreciate that, but this is more than just
prosecution. If a mistake is made, though inadvertent, you
don't know that, and that triggers an audit.
Mr. Mangano. If we were asked to go in and to take a look
at a provider because HCFA suspected, or its contractor
suspected, that they were overbilling the program
intentionally, we would go in and take a look at it, and review
the facts of the matter.
Mr. Norwood. Well, if they made a mistake, you don't know
if it is intentional or not, so therefore an audit is--you
either deny the payment or you have an audit, don't you?
Mr. Mangano. At the beginning of the process, if we were
involved in it, we obviously don't know what has happened. We
want to go in there and find out what the facts are.
Mr. Norwood. Which is an audit.
Mr. Mangano. It could be an audit or it could be an
investigation, depending on what the allegations are.
Mr. Norwood. All right. It is an investigation. Now, when
you start investigating people, if they are really, really nice
and cooperate in every way, how long is this type of thing? How
disruptive is this type of thing? How many patients aren't
treated while you are auditing or investigating?
Mr. Mangano. If we are doing an audit, we will draw a
sample of claims from that particular provider. We ask them to
send us the medical records so we don't even have to go in to
the office to do that. They send us the records, we review the
records, review any other information that is available around
the case. As we go through the records, if we find that there
has not been a problem here or that the problem is what we
believe to be an inadvertent billing error, we end it at that
point, give the records back to the health care provider, and
tell HCFA that they probably need to go collect an overpayment.
Mr. Norwood. I am not going anywhere. Please don't leave,
Dr. Wood and Dr. Becker. I have got a bunch of questions I want
to ask you two. My time has expired, and I believe, Sherrod,
you are next. Mr. Brown is next.
Mr. Brown. Thank you, Mr. Chairman. You know, I hear over
and over the threat of doctors going to jail, and I hear it
from my district, I hear it from committee members, that if
doctors make a mistake, they go to jail. I am just real
curious, Mr. Mangano, how many doctors have actually gone to
jail, and what do they go to jail for?
Mr. Mangano. Since I knew this hearing was going to be
dealing primarily with physicians, we went back and took a look
at our records for the last 3 years. In the last 3 years, we
criminally prosecuted an average of 18 physicians a year, out
of the 650,000 physicians.
Mr. Brown. Do all 18 of them--since I hear so much about
it--do all 18 live in my district?
Mr. Mangano. No, they don't. These are physicians that--I
will give you some examples. One case we had physicians that
were billing for acupuncture. They were claiming it was
physical therapy--1,300 times. It is interesting, because
Medicare doesn't cover acupuncture, but it does cover physical
therapy. Even when we got into the case, we found out something
even more interesting, that most of the patients weren't even
around when the physician said that they were around. Some of
them were in jail; some of them were in the hospital so they
couldn't have been treated.
We have physicians that are signing certificates of medical
necessity, which are required in order for a patient to get
durable medical equipment. The durable medical equipment
company would go to the physician and say, ``Sign this stack of
certificates of medical necessity, a whole stack of them. We
are going to give you $100 for every one you sign. And, by the
way, you are not going to see the patient.'' And then the
physician not only takes the kickback arrangement, but often
bills Medicare for office visits that never happened. This is
the kind of case that we deal with.
So 18 isn't a lot. We don't have enough investigators to go
out and look at every allegation, so we are picking what we
believe are the worst cases. In addition to the 18, we also
were successful civilly with another 20 on average per year.
There is not a lot of physicians that are coming under our
scrutiny.
Mr. Brown. Eighteen a year were criminally prosecuted
successfully?
Mr. Mangano. Correct.
Mr. Brown. And 20----
Mr. Mangano. Civilly.
Mr. Brown. [continuing] a year civil. How many of those
were criminally or civilly prosecuted for making what one might
call an honest mistake?
Mr. Mangano. None of them, because none of the criminal or
civil statutes would allow us to do that. It would be illegal.
Criminally, we would have to prove criminal intent to defraud
the Medicare Program. When we go after somebody on a civil
case, we have to prove that they had actual knowledge of the
false claim they had submitted or a reckless disregard for the
truth. So honest billing mistakes don't come under our purview.
Mr. Brown. If you were to explain each of those cases,
those 38, say, last year--18 and 20--to this whole panel, do
you think there would be any doubt that all of us--do you
believe that all of us would think that was a legitimate
prosecution?
Mr. Mangano. I believe so. We speak about 75 times a year
before professional organizations, compliance organizations,
and the bar that represents them. And every time we go out and
we talk about the kind of work that we would be doing. When we
get to specific cases, there is no argument over that. In fact,
we ask people to send to us examples of where they believe we
have misapplied our investigative resources for a particular
case of a physician or other health care provider they think we
should not have been investigating. And to this date, in the 20
some years that I have been in the Inspector General's Office,
no one has ever come to us with a case like that. Because when
you get to specifics, everybody realizes that these are bad
cases.
And what happens is, probably the worst damage of all is
that these few bad apples, these bad physicians, are tarnishing
their whole profession, because when the public sees in the
newspaper Dr. So-and-So was convicted of criminal fraud in the
Medicare Program, it tends to put a taint on all physician
practices, and that is unfair.
Mr. Brown. Do you ever prosecute anyone, a doctor, when he
or she gets conflicting information from carriers, and they
take the more lucrative choice, if you will?
Mr. Mangano. No. As a matter of fact, one of the first
things that we do in an investigation and in an audit, is to go
back and look at the information that was sent to them by the
contractors and we ask them about that: ``What information did
you have in terms of how to bill for this procedure?'' And when
the contractors says, ``Bill it this way,'' and they did, even
if they had conflicting arrangements, that is the end of it for
us.
Mr. Brown. So going back, that is 38 physicians out of how
many physicians in the United States?
Mr. Mangano. Six hundred and fifty thousand, approximately.
Mr. Brown. Okay. That is a better percentage than Members
of Congress, I would say.
Mr. Mangano. Every profession has bad apples.
Mr. Brown. Speak for yourself.
Mr. Mangano. Every profession has bad apples, and
unfortunately the medical community has theirs.
Mr. Brown. All right. Thank you.
Mr. Bilirakis. First, the February 4 letter from Secretary
Thompson that I inserted into the record is in response to a
March 22 letter sent by the committee to Secretary Thompson,
signed by Mr. Greenwood, Mr. Tauzin, and myself. So I would ask
unanimous consent that that letter be placed in the record. And
then there is a February 19, 2001 article in USA Today by Julie
Appleby and additionally an article in the Denver Post, dated
January 12, 2001, entitled, ``Doors Closing for Medicare
Patients.'' I would to, with unanimous consent, insert those
into the record.
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Mr. Bilirakis. Dr. Becker, you have heard the statistics--
18 convicted, 20 civilly. I think Mr. Mangano has told us. Have
you told us, basically, sir, that of those 18, or whatever the
case may be, are any of them technically wrong in terms of
billing mistakes, things of that nature or are they the onerous
type of situation that you shared with us?
Mr. Mangano. No, I believe they are the onerous conditions
that we talked about. As I said, the requirement for us is to
prove criminal intent to defraud for a criminal act, and,
civilly, to show actual knowledge of a false claim itself.
Mr. Bilirakis. Mr. Mangano, my concern in that regard is
that because of an honest mistake, not the types that you are
referring to, a provider's reputation might be soiled, as a
result. Can you address that?
Mr. Mangano. Well, you know, one of the things that we have
as a standard operating procedure, if we have somebody under
investigation, we make no public statements about that. So no
one in the outside world is going to know about that person
through any press release that we are going to put out in our
office. So they are protected that way.
When we serve search warrants, we try and do it with a
great deal of respect for the practice, so we often will go in
on a Saturday morning or ask the physician to stay at night
after his hours are over so that we go in so that we don't
interrupt any business there. At a hospital, it is the same
thing. We try and do it in as unobtrusive way as we possibly
can so we don't influence the practice that they have.
Mr. Bilirakis. All right. Dr. Becker, any comment?
Mr. Becker. Organized medicine certainly supports the
efforts to eliminate fraud and abuse from the system. We
certainly would not condone in any way fraud in the system.
What we are concerned about, of course, are inadvertent areas,
which really fall probably not in the jurisdiction of the OIG,
which looks at fraud, but really we are concerned about the
aggressive methods used by the carrier under HCFA's observation
about when physicians are alleged to have made overpayments,
and where it has become very burdensome for practices to deal
with those investigations.
Mr. Bilirakis. Well, do you know personally of any
instances where a physician falls in the category of a billing
mistake or something of that nature but nothing as onerous as
kickbacks, where a physician has been accused and whose
reputation was soiled? I realize that is a subjective issue.
Mr. Becker. Sure.
Mr. Bilirakis. Oh, you do?
Mr. Becker. Interestingly enough, when I first came to
Clearwater, and this is about 12 years ago now, the person who
brought me to town underwent an audit about 2 years after I was
there. He originally had an allegation of an overpayment of
$120,000. He is a busy physician who does a lot of work,
including a lot of work for Medicare, because Largo, Florida
has about 50 percent Medicare population.
Mr. Bilirakis. Is he still doing work under Medicare?
Mr. Becker. Still doing great work.
Mr. Bilirakis. He is? All right. Good.
Mr. Becker. He is a good physician; he is a smart guy, and
provides excellent care to Medicare beneficiaries.
It was an alleged overpayment of $120,000. Obviously, not
very many people have $120,000 in the bank. He had to take a
bank loan out to pay that overpayment. He went to his fair
hearing, which took months to arrange. He got the vast majority
of that back. I believe he got about $120,000 of $140,000 back.
So the vast majority he correctly billed initially, and that
was proven during his fair hearing.
But in the meantime, it cost him certainly the interest
that he had to borrow a bank loan on. It cost him lawyer fees,
because he had to hire health care lawyers to help him support
his case at the fair hearing. And it certainly was an
incredible intrusion and inconvenience to his practice.
Mr. Bilirakis. Was the community area aware of all this
having taken place?
Mr. Becker. At that time, the community area was not aware.
Now, obviously, there is one of the examples that I gave
earlier in my testimony of where--and I am guessing that must
be a new policy for the carrier to actually contact the
patients. In the practice I was involved in, they did not
contact the patients in that particular case. But they have in
subsequent cases, which, like I said, I think may be a newer
policy.
Mr. Bilirakis. I realize Dr. Becker's statement might be an
isolated case, but are there--do you know of doctors who have
been accused, who ultimately were not found to be guilty, whose
reputations maybe were soiled wrongly? I don't want to come
across as opposing the efforts on waste, fraud, and abuse.
After all, it was this subcommittee, which a couple years ago
kept emphasizing the need to do something about this. I am
concerned that these things be done in a correct manner, and I
am not saying that they haven't been, but we get an awful lot
of comments from a lot of providers to that effect.
Mr. Becker. The only case I am aware of is Dr. Taylor's
case where in fact the Medicare carrier did contact his
patients prior to his fair hearing. And so certainly there are
incidents where due process is the second consideration after
penalties are imposed.
Mr. Bilirakis. Dr. Miller, my time is up, but can you
respond to maybe the Dr. Taylor situation?
Mr. Miller. Yes. Yes, I can. We agree that--just a couple
of points first. When there is an overpayment, by law, Medicare
has to take it back. That is by law. It is correct that all
steps of the process, when the overpayment is taken, when there
is an appeal, and the adjudication of that appeal, that because
the beneficiary also has money involved in this, they should be
informed. In this instance, I believe that the case that he is
talking about this was not a good example. This is not how it
should have happened.
How it should happen is at each step of the process, the
beneficiary should be informed of what is going on. So on
appeal, when most of the money came back in this instance, the
beneficiary should have also been notified of that. And there
is a clarification of policy that is going out to make that
clear to carriers.
Mr. Bilirakis. That is going out? It is in the process of
going out?
Mr. Miller. I can't remember whether it is going out or
already out.
Mr. Bilirakis. Or already has.
Mr. Miller. But that is a specific issue that we became
aware and that we are----
Mr. Bilirakis. Thank you. Mr. Deutsch to inquire?
Mr. Deutsch. Thank you, Mr. Chairman. Mr. Mangano, Dr.
Becker makes a statement that I would like you to comment on.
He says in his testimony, I will quote, ``Doctors are
intelligent people, but we are not attorneys; we are
physicians. Doctors should not fear that a computer keystroke
error will miscode a diagnosis, which will trigger an audit
that can be statistically extrapolated to a liability in the
hundreds of thousands of dollars. Many doctors have been
bankrupted by this system. We need due process for overpayment
allegations; we need a system everyone can understand; we need
training from our HCFA carriers for correct coding and
documentation.''
Mr. Mangano, what are your thoughts on this? And what do
you believe is accurate here? And what, if anything, in this
statement could benefit from a bit more context?
Mr. Mangano. I believe everything in that statement is
accurate. Nobody should ever be prosecuted for innocent billing
errors. The worst that should happen in that case is if the
errors have occurred, they do an overpayment back to the
Medicare Program. Physicians, as with all other health care
providers, need to have the kind of educational and training
materials to understand the program as best as they possibly
can. So there isn't anything in that statement that I would
disagree with.
Mr. Deutsch. Can I ask two things about that? What about
the responsibility of HCFA to provide that training for
physicians?
Mr. Mangano. I believe it is their responsibility. I have
noticed over, say, the last 4 years a significant increase in
the amount of training that HCFA has been providing. In fact,
we have been on some of the panels when they have met with
physician groups nationally. I do know there is a lot of
materials going out from HCFA to its contractors, the
advancement of some of the web sites that they have, as well as
where the beneficiary can also contact Medicare directly and
ask questions about Medicare.
There is information on nursing homes. They have got a
system--we really are pretty impressed--if you have someone who
is about ready to go into a nursing home, you can call up the
Medicare web site and find out information about how that
nursing home stacks up. There is a lot of really good things
going on. That doesn't mean that more isn't needed, and clearly
much more is needed.
Mr. Deutsch. On the training side, though, if you can, if
you can sort of comment on any resource issues, in terms of
HCFA itself having the resources to provide that type of
training, specifically for physicians.
Mr. Mangano. I am glad I am not an appropriator----
Mr. Deutsch. Right, I understand.
Mr. Mangano. [continuing] but as a private citizen, HCFA
does not have the resources to carry out this program in the
way that I think you want it to be carried out or the health
care professionals in this country want it to be carried out.
We heard earlier in testimony the amount of money that HCFA has
in terms of its overhead costs of 2 to 3 percent. That is
really running this program on the cheap. Mr. Friedman, at the
end of the table, talked about 15 to 20 percent being more
adequate for their private-side business.
So I think the Congress, at some point, and the
Administration are going to have to come to the point where if
you want this program to operate properly, if you want people
to get the training they need, if you want them to pay all the
bills that are supposed to be paid, get all the information
out, turn the legislation into regulations that are
understandable, you have to pay for it.
Mr. Deutsch. Let me--and, again, because I want to get at
least one more question, if you can try to be a little bit
concise with the answer to this and specific if you can, and if
you can't, if you can provide us afterwards with the
information. Again, the statement talks about physicians being
bankrupt because of keystroke errors and a liability of
hundreds of thousands of dollars. How many physicians would you
say would be in that category over the last 12 months across
the entire country?
Mr. Mangano. With relationship to our office, there
shouldn't be any.
Mr. Deutsch. No, but how many were?
Mr. Mangano. I would have to ask that of HCFA, because
HCFA's contractors do an enormous number of--well, I won't say
enormous--do many audits across the country. I really don't
have that number.
Mr. Deutsch. Dr. Miller, would you want to respond to that,
just to give a ballpark type number?
Mr. Miller. Okay. I think what you are referring to are
physicians being audited.
Mr. Deutsch. Or audited with the results of what we just
said and with the information that is effectively a human error
that was a mistake that led to that result.
Mr. Miller. What I can tell you is three-tenths of a
percent of physicians are in audit in any given point in time.
That is about 1,900 physicians out of the 650,000. If I can
also say one other thing about this. Program integrity is not
my area, but I have been briefed for the purposes of this
hearing. The way this works is progressive corrective action,
and there is sort of three steps in it. If there is a small,
one-time error, it is education and recouping the money. If
there is a systematic problem, say, 75 percent of bills are
coming in and being denied, then there may be that the
physician is put on 100 percent review process to look at the
claims. And then, finally, it is only in the most egregious
cases, providing services that aren't covered or patients that
aren't present, that get referred to the Inspector General.
Mr. Deutsch. Thank you.
Mr. Bilirakis. I thank the gentleman. Mr. Deal to inquire.
Mr. Deal. Thank you, Mr. Chairman. Recently, my 94-year-old
mother received a notice from one of her physicians that she
was no longer accepting Medicare patients. Chairman Bilirakis
has recently just introduced an article from USA Today with
regard to this issue of certain parts of the country, in
particular, suffering physicians withdrawing from Medicare--as
Medicare providers. I suppose, Dr. Miller, I would ask you is
this perception that we are losing medical providers because of
the complexity and the fear of being prosecuted or being
harassed, is that real? And if it is, what, if anything, is
HCFA doing about it?
Mr. Miller. I don't believe that there is a widespread
problem where physicians are defecting from the Medicare
Program. I believe that there are physicians who do feel that
there are burdens, and it is too burdensome to deal with the
Medicare Program. We are aware of the situation in Colorado.
What Medicare is doing and what HCFA is doing, and much of
this is laid out in the testimony, but for just 2 seconds or
so, the kinds of things that we are doing: First and most
importantly, we are listening to physicians, and there are
several ways that we are doing that. I have mentioned the
Practicing Physicians Advisory Council; I have mentioned the
Physicians' Regulatory Issues Team. There are conference calls
with the medical specialties, I believe, on a monthly basis.
There are public meetings that we go to. There are
accumulations of frequently asked questions so that we can say,
``This is what they are confused by. We need to put out
information to clarify this.''
Then there is the issue of communicating information. We
are trying with the carriers to standardize our communications
so that there is not confusion across the carriers. So when we
have a new bulletin, we often put the bulletin out to the
carrier and say, ``This is the guidance. Put it out unchanged
to providers so that every provider gets it the same from every
carrier.''
We are doing things like that. We have national
publications. There was another question along the lines here
of medical school. We have a publication for interns and
residents that says, ``This is Medicare. This is what you can
bill for. This is how you bill for it.'' So, again, we can get
a standardized message out to the physician. We have toll-free
lines that we now have so that physicians can ask questions. We
have the web-based learning resources that Mike referred to.
These are the kinds of things that we are working on.
Mr. Deal. Dr. Becker, what is your impression of what is
happening in the physician provider community?
Mr. Becker. Well, I am in Florida, which is fairly--a
little different than the rest of the country. Fifty percent of
my practice if Medicare, and 50 percent of most physicians'
practices in Florida is Medicare, sometimes a much higher
percentage. It would be difficult for anybody in Florida to
pull out of the Medicare Program without considerably
sacrificing how busy you were going to be. So in Florida, it is
not happening very much. But I think it is a much bigger
problem around other areas of the country where there is a less
high percentage of Medicare patients in people's practices.
Mr. Deal. And in lower reimbursement rate areas, that
complicates it even further, I would presume.
Mr. Becker. I am sure it makes a difference. If you can get
a higher compensation from a private insurance company, then it
gives you less incentive to see a Medicare patient, for sure.
Mr. Deal. Could I ask what is done to coordinate the
reporting processes of those who are civilly and criminally
prosecuted? Is there any coordination with licensing boards and
their States with--in other words, does anybody ever lose their
medical license for defrauding Medicare?
Mr. Mangano. If you are convicted of a criminal statute,
you are automatically excluded from participation in any
Federal health care program by our office. We put together
lists, and they are available on the web sites, as well as
people who want to contact us through our other information
sources, to find out whether a physician or any other health
care provider has been excluded, and we provide that free of
charge.
Mr. Deal. Do you provide it to the State licensing board of
the state?
Mr. Mangano. That is correct. We also provide it to HCFA,
who sends it out to their contractors as well as to the State
Medicaid agencies.
Now, if you are--if we have a successful civil action
against you, in many of those cases, we have an opportunity to
have a permissive exclusion. We only take that exclusion in the
worst cases. We allow people to stay in business usually when
we have a civil action against them. If they are willing to
make some changes in the way they practice medicine, in many of
those cases, what we do is require what we call a corporate
integrity agreement. This is usually for large companies, in
which we ask them to put into place training and self-audits of
their billings to make sure that they stay good corporate
citizens in the future.
Mr. Deal. Thank you. I believe, Mr. Chairman, Dr. Miller
raised his hand. I don't know whether you have time for him to
respond.
Mr. Bilirakis. Quickly, if you would, Dr. Miller.
Mr. Miller. I was just going to say that that is also
coordinated with the carriers. When somebody is excluded, that
information is given to a carrier, and carriers are aware that
those providers are excluded.
Mr. Deal. Thank you, Mr. Chairman.
Mr. Bilirakis. All right. The Chair will recognize Mr.
Deutsch for his second----
Mr. Deutsch. Thank you, Mr. Chairman. I appreciate being
accommodated.
Ms. Bradley, in your testimony, you make the following
remarks: ``While MGMA agrees with both the current and previous
administrations that additional HCFA funding is warranted, the
efficiencies resulting from improving HCFA's organization and
communication responsiveness will vastly improve the system
without creating additional costs.'' What specific changes do
you believe we can make right now regarding HCFA's organization
and communication responsiveness that would make a substantive
difference but would not involve adding additional resources to
the agency?
Mr. Bradley. I believe that if claims can be processed
efficiently without having to wait months and months and
months, it won't tie up our staff, it won't tie up the staff at
the carrier. We can save monies that way. I believe also that
if you continue to offer free educational materials or if you
will at least offer free educational materials and educate the
provider community, we try to do what is right, we try to do a
good job. We need clear communication and clear direction from
HCFA and our carriers to do that.
The laws, however, need to be clear. Oftentimes there is a
Federal law, and then there is HCFA. There is a State law, and
they are hard to know which ones we should be following, what
is in the manuals different from a Federal law. So we are
caught in the middle, and as I said, we want to do what is
right. So if we could have manuals, for instance, that agree
with Federal law, that would save the system money.
Mr. Deutsch. Okay. Aren't most of the claims quickly
processed under the Medicare system, some automatically through
a wire transfer process at this point in time?
Mr. Bradley. I would say standard electronic claims, we are
paid in a prompt manner by Medicare, that is correct.
Mr. Deutsch. Let me just follow-up on the two things you
mentioned, and this sort of ties into my previous question. I
don't think anyone here would disagree with your statement that
there needs to be better communication with HCFA and
physicians. I don't think there is anyone at all who wants
physicians to not follow the procedure, to make inaccurate
mistakes. I guess part of it, though, at least there might be a
little bit of a difference amongst the panel up here in whether
HCFA has the resources to do that. And I guess at least that
aspect that you are describing, I don't personally see how HCFA
can do it under present resources. I think that they should be
doing more of it. I think it would have a cost-benefit effect
absolutely. But I don't see them presently being able to do
that under their existing structure. So I would agree with you
completely about that.
The other issue, though, and, again, I guess part of our
job in terms of our oversight responsibility on HCFA is
specifically to look at that time element. I mean could you
give some elaboration to that time element problem in terms of
the processing of the more problematic claims that they have, I
mean in terms of personal experience or others' experiences
that you can relate to us?
Mr. Bradley. Yes. The time element spent in my office as
well as spent with trying to----
Mr. Deutsch. Well, but also the reimbursement time element,
in terms of the processing issues on claims that are not being
reimbursed electronically.
Mr. Bradley. Claims that are not being reimbursed
electronically take longer. Problematic claims can take at
least 6 months.
Mr. Deutsch. Okay. And what does that mean as a practical
problem for you or other offices?
Mr. Bradley. It is a practical problem for me, because lots
of times I don't get any responses to my letters. I have to
have staff continually following the claims. We have to keep
calling on the telephone. All this time we would prefer to be
spending with our patients who might need our help, who often
need our help, for instance, in helping process their secondary
claims. We have a lot of patients who come into our office
asking for assistance in that manner, for instance.
Mr. Deutsch. And let me get one final question: How does
the claim processing time under Medicare compare to the claim
processing time under the strictly private side of the carrier
or the same carrier, for that matter?
Mr. Bradley. That is a difficult question to answer. They
both have their strengths and weaknesses. I would say that
Medicare probably has payments received as quickly as the
private payers for a standard routine claim.
Mr. Deutsch. Thank you, Mr. Chairman.
Mr. Bilirakis. Dr. Norwood, inquire?
Mr. Norwood. Dr. Wood, you stated in your testimony that
there was a need to get groups within HCFA to work together.
Would you expound on that for me just a little bit?
Mr. Wood. Gladly. The Health Care Financing Administration
is working on a new set of documentation guidelines to help it
in paying claims for physician office visits, hospital visits,
emergency room visits, and the like. In that process, it will
be critical to engage a large number of providers in a phase of
pilot testing. The difficulty, however, is that the program
integrity folks are insisting that there cannot be any sort of
a pilot where providers would be held harmless or given some
sort of protection as that pilot is developed.
It would be anticipated in the pilot that there should be
some areas where we would be learning, and there would be
differences of opinion about what an appropriate code would be.
And so despite all of the intense effort of the group that
works directly with physicians in that regard, that would be
the health plan provider section that Dr. Miller is leading,
they then encounter some difficulties with other parts of the
agency. And that is a particular circumstance where there will
need to be some significant leadership from the higher levels
of the agency to make a decision about how we are going to go
forward.
Mr. Norwood. PPAC has made a number of suggestions to HCFA
and a number of complaints to HCFA, in terms of them not
working as well with PPAC. Now, have those concerns been
addressed or do we still--where are we with that?
Mr. Wood. Well, from my position at PPAC, where I have had
the privilege to sit for the last year, there has been progress
made. I know that some of you are aware of Dr. Kuffner's
letter, Dr. Kuffner being the previous Chair of PPAC. And I do
believe that PPAC is making progress. In particular, some of
the work that has been done with the advance beneficiary
notices that Dr. Miller referenced earlier, very positive. It
has happened very rapidly, although it has taken a while to get
it to the point where something has happened. The documentation
guidelines, I think, are another positive sign that HCFA is
intending to work with physicians in a prospective manner; that
is, trying to work together and putting these guidelines
together before the fact, before they are published and before
they are implemented.
This will be, I think, the litmus test. If PPAC's
recommendations regarding a pilot project or some sort of a
demonstration project under the authority of the Secretary
cannot be implemented by the agency, then I believe that PPAC's
position as an effective advisory committee will have been
significantly weakened, and its future then would be in doubt.
Mr. Norwood. Well, it certainly is if they just totally
ignore any of your recommendations as if you--Dr. Miller, you
said overpayment, by law, you have to ask for it back.
Mr. Miller. That is correct.
Mr. Norwood. When that happens, the provider then can
appeal that case?
Mr. Miller. Yes.
Mr. Norwood. To whom do they appeal?
Mr. Miller. I am not sure I can describe this process in
the detail that you may want.
Mr. Norwood. Briefly.
Mr. Miller. I believe the appeal goes to the carrier first.
And then if there is not resolution there, it then begins to go
to an administrative law judge.
Mr. Norwood. Well, who determined that it was an
overpayment?
Mr. Miller. HCFA.
Mr. Norwood. HCFA?
Mr. Miller. The carrier.
Mr. Norwood. The carrier.
Mr. Miller. By HCFA and the carrier.
Mr. Norwood. Right. You two determined that it was an
overpayment.
Mr. Miller. That is correct.
Mr. Norwood. Then the provider can appeal that case.
Mr. Miller. That is correct.
Mr. Norwood. What happens when they appeal that case, and
they are found innocent, and it is not an overpayment?
Mr. Miller. The money is returned to the provider.
Mr. Norwood. Right. Now did the same people say it was an
overpayment who later, on appeal, said, no, it is not an
overpayment?
Mr. Miller. No, I believe it is--I am not sure I know the
answer to that question. I believe if it is appealed beyond the
carrier, it is a different group of people.
Mr. Norwood. So it is the carrier who denies the payment,
because it is an--or who says that it is an overpayment?
Mr. Miller. That is correct, based on the rules and
procedures that HCFA and the carrier have developed together.
Mr. Norwood. And then when you appeal, it goes back to
HCFA, and you say, ``Whoops, wait a minute. That wasn't an
overpayment.''
Mr. Miller. No. I think the appeal goes to the carrier
first, and then if the appeal goes beyond the carrier, it goes
to a different group. Actually, can I ask a question?
Mr. Norwood. Of course.
Mr. Miller. Okay. Thank you.
Mr. Bilirakis. Where does that overpayment go?
Mr. Norwood. Well, they demand that the physician send the
money back.
Mr. Bilirakis. Yes. But when the physician sends the
overpayment, the so-called overpayment money, who do they send
it to, the carrier or to HCFA?
Mr. Miller. Okay. Let me first get the answer to the first
question. It was roughly right but not quite. The appeal occurs
within the carrier. There is a different group within the
carrier that handles appeals. If it is not resolved there, as I
said, then it moves to an administrative law judge. If it not
resolved there, then it moves to a Department appeals board,
which is an HHS-wide group that deals with the appeals.
Mr. Norwood. Well, what happens to the poor guy sitting
down there who has just been told to send the $100,000 check
back, patients are written that he is a bad guy, and 2 years
later it is found that he didn't do anything wrong; he has just
been trashed real well?
Mr. Miller. That issue----
Mr. Norwood. What happens?
Mr. Miller. I am sorry; go ahead.
Mr. Norwood. Well, my question is, what do we do to do the
right thing at that point, other than say, ``Uh-oh, sorry.''
Mr. Miller. We addressed this question, or at least part of
this question, I think, you may have been out of the room when
it happened. I acknowledged that particularly the information
being sent to the beneficiary and indicating that there was an
overpayment on the part of the physician is necessary, I
believe, because both the Medicare Program and the beneficiary
have money that have gone to the provider. And so we feel it is
our responsibility to tell the beneficiary there may be an
issue here. What has to be done better is to inform the
beneficiary at each step of the process, ``This was in
question, it is now no longer in question.'' And there is
guidance to do that.
Mr. Norwood. Why couldn't we just get it right? Why have to
go say that this is an overpayment, go back through appeals,
and all that gobbledygook to find out you were wrong to start
with? Why couldn't we get it right to start with and not do
such harm to people?
Mr. Miller. I think there are two answers to that, and
obviously there is not--these issues do arise. Most claims
transactions are done correctly, the overwhelming majority of
them. Medicare relative to the private sector has the highest
percentages of electronic claims and processes claims between
14 and 30 days by law. Most claims are paid correctly on time.
The second thing is, my understanding is only 3 percent of
denials at the carrier level are appealed. So I think your
point is taken, we should get them all right, but there a
billion transactions a year; some of them will be wrong.
Mr. Norwood. You have to have a system that doesn't destroy
the lives of people. You say that only 38 people were
prosecuted last year, which I can't even do the percentage it
is so low. Only 38 were bad actors. Well, we want the bad
actors put away too. So does Dr. Becker and Dr. Wood. Everybody
does. But in the process of putting away 38 bad people, how
many lives do you destroy in that process, meaning physician
practices who are taking care of their patients? And if you
believe it is just Dr. Wood, Dr. Becker, Ms. Bradley, I can
line you up providers from here to Atlanta who will come tell
stories just like this.
Now, what you say is, ``Oh, the percentages are small.''
What I say is, it is American lives that you are messing with
out there, people that have spent all of their life trying to
be prepared to take care of patients. That is the problem with
this big, gigantic system we have. You just absolutely run
roughshod over--maybe you do it well, you only get 2 percent.
But if you are one of those 2 percent, this is major, major
stuff.
Dr. Wood, and I will----
Mr. Bilirakis. Your time has expired, but without
objection----
Mr. Norwood. Dr. Wood wanted to----
Mr. Bilirakis. Yes, I saw him motioning. Go ahead, sir.
Mr. Wood. I can describe for you the process by which a
provider may appeal a denial from the carrier. The first level
is what is called an informal review, which is handled within
the carrier, usually by people that work close to the group
within the carrier that denied the claim originally. Second
level is a fair hearing, which may be either by telephone or in
person, and is supposed to be handled by an impartial hearing
officer who is knowledgeable about the Medicare Program and who
does not work for the carrier.
Now, the rules from there are somewhat limiting, in the
sense that if a provider is in a circumstance that he or she
disagrees with the ruling at the fair hearing, there are no
other appeal rights if the amount in controversy does not
exceed $500. So the physician then is left not to appeal to a
higher level. If you have only one claim, it will be hard to
get to $500. It will take a lot of claims for especially office
services, which may be very small, especially if you are
appealing the difference between one or two levels of
evaluation in management services.
Now that being said, that actually is one of the reasons
that many people simply don't bother to appeal, because the
process is very time consuming. It takes a lot of time and
ultimately the physician has to come back to the fair hearing,
meaning that the physician takes time out of the practice to
participate in the fair hearing. And the yield for them may
simply be too low in a busy practice.
Mr. Norwood. Well, the more of those claims under $500 that
nobody can appeal or has time to anyway, how much of that is
the dollars we are talking about saving because of our great
program of waste, fraud, and abuse?
Mr. Wood. Well, I think you are actually very prescient in
that question, because I believe that a large amount of the
reduction in, quote, ``erroneous spending,'' is because of
changes in billing to avoid the difficulties that happen.
Mr. Bilirakis. Let me get back to the money that you
require the physician--the overpayment, where does that go? I
want to follow the money. Where does it go? Does it go to the
carrier, and is it held by the carrier, or does it go to HCFA?
Mr. Miller. I believe it is returned to the Medicare
Program and held by the Treasury, I believe.
Mr. Bilirakis. Well, that is--is that right?
Mr. Miller. Yes.
Mr. Bilirakis. So it doesn't go to the carrier.
Mr. Miller. No. I believe it comes back to the Medicare
Program and is held by the Treasury.
Mr. Bilirakis. One other point here. You said by law a
number of times, that in the case that you referred to, and Dr.
Taylor's case, et cetera, that the beneficiaries have to be
notified. And you said--well, did you not? I mean, if there is
an overpayment----
Mr. Miller. By law, we have to take the money back.
Mr. Bilirakis. Yes. And then what? Notify the
beneficiaries?
Mr. Miller. I was not saying that by law we had to do that.
What I was saying is, is that the beneficiary, particularly in
a physician's case, 80 percent from the program, 20 percent
comes from the beneficiary, the notice is to the beneficiary
that they, too, may have money involved in this. That is why
the beneficiary----
Mr. Bilirakis. You mean their 20 percent?
Mr. Miller. Correct. Also, you asked about----
Mr. Bilirakis. Boy, that sure does--you know, we are
talking about the image and that sort of thing. I mean that is
it right there. It gets out into the community, like Dr.
Taylor's case.
Mr. Miller. And as I said, the policy that we have moved to
as a result of these kinds of situations are that we inform the
beneficiary at each step of the appeals process so that the
beneficiary knows when something has been overturned.
The $500 that is being referred to is, in law, in terms of
what the appeal level that you can go above, and my
understanding is, is that you can accumulate claims to hit the
$500 target.
Mr. Bilirakis. Mark, a lot of damage can be done in that
case of notifying the beneficiaries. I don't know. We have got
to talk about that. Okay.
Mr. Norwood. Can I have one more little----
Mr. Bilirakis. Only if it is a short one. I have got a 2:45
meeting.
Mr. Norwood. I will sit there if you want me to. Let me
see, which one of you said no one should be prosecuted for
honest mistakes? I think it was you. And what you mean, I
presume, by prosecuted, they shouldn't prosecuted, meaning in
court. They shouldn't be investigated. Did you mean that too?
Mr. Mangano. No one should ever be prosecuted for an
innocent billing error. The problem with it is that when you
said investigated or audited, if there were aberrancies in
billing, if there were strange things that were occurring in
the billing process, what would normally happen is the
contractor would take a look at it first and only would refer
it to us if they suspected it went beyond billing----
Mr. Norwood. Well, the contractor can audit and
investigate----
Mr. Mangano. Yes, yes.
Mr. Norwood. [continuing] and you seem to say, ``We don't
want that to happen. Guys, that is terrible.'' The solution to
that, then, of course, is education. And I will conclude,
because the chairman is going to run me out there--the only
reason I am going to conclude--I will conclude with asking you
to at least admit today that all of this should not be put on
the back of the provider. It is not all just the provider needs
to be educated. It is equally as much you need to find better
processes. You need to have fewer, simpler rules and
regulations that a normal doctor can see their patients and
deal with you too. Now, will you just tell me that the solution
isn't all just educating the doctors?
Mr. Bilirakis. This hearing has to end sometime.
Mr. Norwood. Can he answer that? If they will just agree.
Mr. Bilirakis. It goes on and on. Dr. Miller?
Mr. Norwood. Just somebody tell me something besides laying
it on the doc.
Mr. Miller. That is correct. We are, and I have given
several examples today where we have tried to improve our
processes. You are right. We have to improve our processes.
Mr. Norwood. Mr. Mangano, I would love to hear from you.
Mr. Mangano. I would agree with Mr. Miller.
Mr. Norwood. Let the record show you do agree that----
Mr. Mangano. I agree that everybody that the process needs
to work better.
Mr. Bilirakis. Well, thanks so much. I think it has been a
good, educational hearing. And we will be sending you written
questions, requesting written answers. Please respond to those
as quickly as you can.
I might add that Dr. Norwood is leading a working group on
putting the patients first and HCFA modernization, trying to
help HCFA. That is what this is about, trying to help HCFA do
what I know they want to do, and that is a more efficient, fair
job.
I would ask all of you: please don't hesitate to volunteer
any advice, information, or any suggestions to us.
Thank you very much. The hearing is ended.
[Whereupon, at 2:01 p.m., the joint subcommittees were
adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of The American Association for Homecare
The American Association for Homecare (AAHomecare) appreciates the
opportunity to submit this statement for the written record to the U.S.
House of Representatives Energy and Commerce Subcommittee on Health and
Subcommittee on Oversight and Investigations. AAHomecare is a national
association that resulted from the merger of three smaller national
home health associations; the Home Care Section of the Health Industry
Distributors Association (HIDA Homecare), the Home Health Services and
Staffing Association (HHSSA) and the National Association for Medical
Equipment Services (NAMES). AAHomecare is the only association
representing homecare providers of all types including not for profit,
proprietary, facility based, freestanding, and government owned home
health agencies and medical equipment providers.
The members of AAHomecare would like to express their gratitude to
the Subcommittees for initiating an in-depth review and analysis of the
Medicare program and specifically the restructuring of the Health Care
Financing Administration (HCFA). This is an important first step toward
addressing inefficiencies existent within the current structure and
prescribing concrete solutions to promulgate more effective policy.
As Congress begins to explore possible approaches to HCFA reform,
AAHomecare has identified six broad areas that it believes should be
included in any HCFA restructuring proposal.
The six broad areas include:
Eliminating Unnecessary Regulatory Cost/Administrative
Simplification: The first step in any effort to improve the
efficiency of HCFA and providers would be to review all
regulations to determine their necessity for homecare services.
Regulations that are redundant or simply not needed should be
eliminated.
Consistent Interpretation: Consistent interpretations of
regulatory requirements by HCFA and Medicare contractors are
extremely important. Variations cause confusion among all
parties and make it very difficult to adhere to the rules and
regulations. Inconsistent interpretations are also costly to
the program, providers and patients. A system that would ensure
consistency of the interpretations and clear communication of
those interpretations needs to be developed. Further any
changes should be implemented prospectively rather than
retroactively.
Timely Appeals Process: Much of the time and energy of
providers includes lengthy appeals processes to determine
proper determinations. The appeals process increases costs,
energy and time for both providers and the Medicare
contractors. The delay in payment associated with prolonged
appeals also increases the cost of doing business with Medicare
and will continue to reduce the number of providers willing to
serve Medicare beneficiaries. An approach to expedite the
appeals process and make public appellate determinations would
be helpful.
Education/Communication: As new regulatory requirements are
implemented for healthcare providers, ongoing communication
between providers, government officials, and consumers must
exist. All parties should have the opportunity to discuss the
impact of additional regulations and new rules should be
subject to public notice and comment.
Prohibit Delegation of Policy Decisions: Medicare contractors
are often incentivized by economic considerations rather than
what is in the best clinical interest of the patient. HCFA
should not be permitted to delegate policy decisions to
government contractors in an effort to circumvent established
procedures intended to obtain input from effected parties.
Clinical/coverage decisions should be completed before economic
considerations are brought into the discussion of new policy.
Recognize Cost of Regulations: The government should recognize
the cumulative financial impact of new regulations on providers
and make sure sufficient reimbursement is incorporated into the
payment system to permit providers to be in regulatory
compliance as they provide services and products for patients.
Set out below are examples of regulatory problems faced by homecare
providers.
1. Eliminate Unfair Burdens In Documenting Medical Necessity
One regulatory burden that has caused particular consternation
among home medical equipment (HME) providers is the determination of
medical necessity. It highlights the need to evaluate the necessity
layers of burdensome requirements that HCFA has developed. The
certificate of medical necessity (CMN) is a form to document the
medical necessity of certain items of medical equipment. It is required
by statute, and was approved by the Office of Management and Budget
(OMB) in accordance with the Paperwork Reduction Act. The CMN collects
information necessary to determine whether the beneficiary meets
Medicare coverage criteria for the DMEPOS item. In order to receive
payment for a covered item of DMEPOS, a provider's claim (HCFA--Form
1500) must be accompanied by a CMN signed by a treating physician. The
original CMN must be maintained by the supplier and must be produced
upon the request of the DMERCs, HCFA, or the Office of the Inspector
General.
A supplier who submits a properly executed certificate of medical
necessity (CMN) has satisfied its legal obligation to document the
medical necessity for an item of durable medical equipment,
prosthetics, orthotics, or supplies (DMEPOS). HCFA should be prohibited
from requesting DMEPOS suppliers to provide documentation in support of
medical necessity beyond the scope of a properly executed CMN.
HCFA and the DMERCs ignore the original intent of Congress to
designate the CMN as a tool to determine medical necessity. The DMERCs
routinely require DMEPOS suppliers to submit documentation of medical
necessity in addition to the CMN. The requests for additional
documentation are unpredictable and often require information that
fails to be specified in current medical policy for the item.
Additionally, DMERC auditors often request additional documentation for
hundreds of claims simultaneously, creating an unreasonable
administrative burden for suppliers. The DMERCs also request
documentation supporting medical necessity from hospital and physician
progress notes although suppliers do not have access to a patient's
confidential medical records. Further, DMEPOS suppliers can be assessed
overpayments when they fail to produce portions of these records.
DMEPOS suppliers are even subject to overpayment demands when they
have obtained the appropriate medical documentation but the physician's
notes contained therein are deemed inadequate for corroboration, even
though the physician, by acting as signatory, expressly certifies that
the information on the certificate of medical necessity is ``true,
accurate and complete'' and acknowledges that any ``falsification,
omission, or concealment of material fact'' may subject him (the
physician) to civil or criminal liability. DMERC auditors also assess
overpayments for technical errors on CMNs even though these technical
errors have no bearing on the documentation of medical necessity for
the item.
The Association would recommend that HCFA use the CMN for its
original intent in assuring eligibility for the Medicare beneficiary,
and eliminate the unnecessary and unworkable requirements for
additional documentation.
2. Remove Non-Medicare and Non-Medicaid Patients from Participation in
OASIS
A second example of administrative requirements that need to be
simplified is the case-mix adjuster known as the Outcomes and
Assessment Information Set (OASIS) for home health services. Medicare
requires home health agencies to collect OASIS survey data from
Medicare and Medicaid beneficiaries. AAHomecare understands the need
for this uniform standard to measure homecare patient population
outcomes data. However, the Association fails to understand the
underlying HCFA rationale in determining that OASIS data must be
extended to include non-Medicare/Medicaid patients.
As currently structured, OASIS is overly burdensome in any context.
HCFA maintains that comprehensive OASIS data is needed to thoroughly
implement the prospective payment system (PPS) for home health
agencies. In actuality, approximately twenty questions are needed to
accurately reflect the payment category under PPS not the over eighty
questions required by HCFA. While AAHomecare strongly supports the need
for appropriate and accurate information to ensure quality care under
PPS, this is an example of the need to review the OASIS tool to
determine the specific questions that are relevant and necessary in
providing quality care to the beneficiaries.
AAHomecare is especially concerned about the expansion of the OASIS
data collection to private pay patients and the homecare consumers who
are not receiving payment from either Medicare or Medicaid. This adds
an additional burden to home health agencies to collect personal
information on all patients for submission to the government. Equally
important, the Association is concerned that the data collected may be
extrapolated by HCFA officials to make payment or policy changes in the
future. Medicare and Medicaid patients have specific eligibility
requirements that are not required of private pay patients. Likewise,
private pay patients may receive additional services that are not
benefits under the Medicare program. Comparing data from these groups
of patients is like comparing apples to oranges.
The length and overuse of the OASIS assessment tool has served as a
key factor resulting in the marked reduction of nurses interested in
entering the field of home health. Additionally, many nurses already
working in the industry are choosing to leave as a result of the
procedural burden being placed on them due to increased OASIS
requirements. These nurses cite they have become too far removed from
direct patient care and focus a majority of their time on compliance
with administrative matters. For example, nurses state that the OASIS
questionnaire for a patient takes between 20 to 45 minutes while in the
patient's home. The homecare industry is now faced with significant
losses of qualified nurses who had valued the direct patient care in
the home health environment and are now overwhelmed with paperwork.
The Association recommends that OASIS tool be streamlined and
applied only to Medicare and Medicaid recipients.
3. Revise/Eliminate the ``In the Home'' and ``Homebound'' Definitions
For durable medical equipment providers, patient eligibility is
limited to items deemed to be medically necessary for the patient to
independently perform the four activities of daily living within the
four walls of their home. Items that enable the beneficiary to move
about in the community are not covered creating an inherent conflict
among the government's policies. The ``in the home'' is not required by
statute, and conflicts with policies aimed at promoting independence,
productivity and integration of people with disabilities. This is
especially true since Congress has recently passed legislative
initiatives to expand a disabled person's opportunities. The
legislative initiatives include: the Americans with Disabilities Act
(ADA), the Work Incentives Improvement Act (TTW/WIIA) and the
Individual with Disabilities Education Act (IDEA). These three
initiatives were the direct result of Congress empowering people with
disabilities to seek employment while maintaining their benefits such
as Medicaid and Medicare services.
For home health agencies, one of the eligibility requirements for
Medicare home health services requires the Medicare beneficiary to be
``homebound.'' Last year, Congress broadened the definition of
``homebound'' by permitting the home health beneficiary to attend
religious services and adult day care facilities. Although the
broadening of the definition coincided with the other Congressional
legislative initiatives, it also increased the providers responsibility
to determine the patient's eligibility. The home health agency must
determine more closely if the patient leaves his/her home for the
purposes of religious services or adult day care or another event.
To the best of its ability, a provider may determine that a patient
meets ``in the home'' or ``homebound'' requirements but the Medicare
contractor may determine differently. The result may be lost
reimbursement to the homecare provider who is working with an arbitrary
definition or the provider may face endless appeals processes to prove
the appropriateness. Either process has negative implications to the
provider who had determined, to the best of its ability, that the
patient met the definition.
The Association urges Congress to direct HCFA to eliminate
arbitrary eligibility guidelines which incorporate the current ``in the
home'' and ``homebound'' definitions and develop policies which are
consistent with today's social policies and Congressional intent.
4. Clarify Use of the Home Health Advanced Beneficiary Notices
The Home Health Advance Beneficiary Notice (HHABN) is given to
Medicare patients when a home health agency believes that services
prescribed by a patient's physician will not qualify for coverage under
the Medicare home health benefit (65 Fed. Reg. 24217). AAHomecare
supports the use of these standardized notices as a mechanism to
accurately inform patients of their Medicare rights. However, the
Association has significant reservations concerning the applicability
of the Home Health Advanced Beneficiary Notice (HHABN) as it relates to
patients covered under both Medicare and Medicaid reimbursement
guidelines.
In certain states, Medicaid agencies have embarked on a Medicare
maximization policy. This process is known as ``third party liability''
(TPL) and essentially positions a home health agency as intermediary
between Medicare and Medicaid. Although there are significant issues
surrounding the HHABN, this is an excellent example of providers caught
in the appeals process because of inconsistent and conflicting
regulatory regimes.
In these instances and prior to processing reimbursement claims,
the state Medicaid agency will request that a home health contractor,
providing service to a dually-eligible patient who has been denied
Medicare coverage for a prescribed service resubmit paperwork for
coverage review. Thus, in order to be paid for service provided to a
dually eligible individual, a home health agency must submit patient
paperwork twice before being granted Medicaid reimbursement. In many
instances, agencies have been forced to hire a full-time staff person
just to address these Medicaid resubmission requests.
Although the provider was originally correct in the billing, the
third party liability permits the Medicaid and Medicare program to go
through extensive appeals to have a final judgement. As this process
continues, the burden is placed on the home health agency to provide
the patient's complete file and supporting documentation. At every
juncture through the process, the home health agency may be requested
to provide additional substantiating documentation.
The Medicare and Medicaid programs should determine a settlement on
cases that impact the home health agencies retroactively. As the
process moves forward, the HHABN should be properly clarified and used
as a tool to determine proper eligibility for possible dually-eligible
beneficiaries.
The Association recommends clarifying the use of HHABN to allow for
a determination by Medicare on the patient's eligibility. The
Association further believes that the Medicare and Medicaid programs
should resolve the retroactive cases through a sampling process to end
the on-going problem.
4. Eliminate Inconsistencies In Guidelines Issued By DMERCs
Home Medical Equipment (HME) providers supply medically necessary
equipment and auxiliary services that enable beneficiaries to
adequately meet their rehabilitative and/or therapeutic goals. Pursuant
to a physician's order, HME providers deliver medical equipment and
supplies to a consumer's home, set up this equipment, educate and train
the consumer and caregiver in its use, provide required maintenance
service, and assemble and submit the considerable paperwork needed for
third party reimbursement. HME providers also coordinate with
physicians and other home care providers thereby performing an integral
role in home health case management.
The Medicare durable medical equipment, prosthetic, orthotic and
supply (DMEPOS) benefit is administered through four specialized
regional carriers known as Durable Medical Equipment Regional Carriers
(DMERCs). AAHomecare's HME members routinely express their frustration
with the inconsistency of the guidelines issued by the four DMERCs and
the unpredictable manner in which national policy changes are announced
and implemented by these regional coordinators. Changes are often put
into effect without any consideration of the potentially significant
operational impact these changes will have on providers.
AAHomecare believes that many of the regulatory problems associated
with the Medicare DMEPOS benefit could easily be solved through
increased and improved education and communication efforts.
Specifically, AAHomecare recommends that HCFA:
Communicate with DMEPOS providers and provider groups prior to
implementing changes in coverage policy or claims processing
requirements.
Seek comments from the HME industry with respect to the
operational impact of proposed changes.
Standardize DMERCs documentation requirements.
Consider conducting pilot programs to ascertain the impact of
operational changes on DMEPOS community prior to nationwide
implementation.
Provide increased opportunity for regulatory education to the
DMEPOS community.
Conclusion:
AAHomecare looks forward to working with the subcommittees, HCFA
officials, the Medicare contractors, consumers, and other providers to
seek a collaborative and more streamlined approach to the delivery of
Medicare services. The Association believes that many of the regulatory
problems associated with the Medicare program could easily be solved
through increased and improved communication and educational efforts.
______
Prepared Statement of Mary Grealy, President, Healthcare Leadership
Council
The Healthcare Leadership Council applauds the Chairmen and Ranking
Members of the Subcommittees on Health and Oversight and Investigations
for holding this hearing and reinforcing the need for ongoing
improvement in the quality of care for Medicare beneficiaries.
We at the Healthcare Leadership Council believe that a Medicare
system with the highest quality of care 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 micro-management.
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. This
inefficiency within Medicare adversely affects providers and
beneficiaries on many fronts.
Complexity stifles innovation. 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.''
Medicare's extensive coverage process for new items and services can
leave beneficiaries behind the curve on advancements in health
technology. The administrative process used for modifying benefits and
for determining whether certain medical treatments or procedures merit
coverage under Medicare is extraordinarily complex, lengthy, and
sometimes irrational--resulting in the delay or denial of lifesaving
treatments.
One case in point is Hepatitis B liver transplants. Scientific
evidence had shown for some time that the outcomes for Hepatitis B
liver transplants were comparable to the outcomes of liver transplants
made necessary by other primary indications. However, Medicare did not
begin covering these transplants until very recently. In 1999, before
Medicare began covering Hepatitis B liver transplants, a survey by the
American Liver Foundation found that 99 private insurance companies, as
well as the Department of Defense, reimbursed for Hepatitis B
transplants. The survey also showed that most of the largest liver
transplant centers indicated that Medicare was the only carrier that
did not reimburse for these transplants.
Those Medicare standards of care that are prescribed in regulation
are often inflexible and often nonsensical. Efforts to protect the
program from fraud have led to tedious rules that reduce the quality of
a patient's interface with the medical system. For instance, Medicare
will not reimburse for physician visits and/or diagnostic tests that
occur more than once per day per patient. As a result, patient care may
be compromised, patients are inconvenienced, providers are unable to
run confirming or clarifying diagnostic tests, and the course of care
is disrupted.
Burdensome coding and documentation. Providers, as well as
beneficiaries, must wrestle with the ever-expanding Medicare jigsaw
puzzle. Medicare's many complex coding and documentation rules make
completing claim forms and ensuring appropriate coding extremely
burdensome and time-consuming. For example, drugs must be coded with a
Medicare-specific code, and the provider must adjust billed quantities
to comply with the code description. Private health plans, on the other
hand, use national drug codes assigned to all drugs approved by the
FDA. Furthermore, providers must consult not one source to ensure that
they are billing and coding correctly, but multiple manuals, letters,
bulletins, and updates. Even after poring through all of these
references, providers have learned that there is no guarantee they are
proceeding with documentation properly. To make things more difficult,
when providers seek clarification of billing and coding requirements
from HCFA, carriers and fiscal intermediaries, they often receive
different answers.
Medicare's documentation requirements also lead to redundant and
inefficient documentation practices. For example, physicians are
required to write all notes regarding patient assessment, regardless of
whether a registered nurse under his or her supervision wrote identical
notes at an earlier point in the day that concur with the physician's
view.
In addition, Medicare has inconsistent coverage policies based on
the specific site of care. As another example, a rule proposed in
1997--yet still not finalized--details physician supervision
requirements for numerous office procedures. The regulation actually
dictates during which procedures a physician must supervise from within
the examining room and which procedures the physician can supervise
from within the ``office suite'' but not necessarily within the
examining room. Such site of care standards are unnecessary
inconsistencies that take discretion away from professionals, reduce
the quality of care for beneficiaries, and simply lengthen the long
check list of rules that providers must remain wary of when treating
beneficiaries.
Time and financial resources wasted. 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. A recent survey of the Association of American
Physicians and Surgeons revealed that 22 percent of physician and
office staff time is devoted to compliance with Medicare regulations.
It also found that the processing costs associated with Medicare claims
are 26 percent higher than the costs associated with private claims. In
addition, Medicare's very lengthy appeals process can result in long
waits for needed care or for payments for services rendered long ago.
When Medicare carriers deny claims, there are several tiers of review,
the highest of which--review by an Administrative Law Judge--can take
up to four years to complete. In the meantime, either the beneficiary
is denied this care or a provider is denied payment.
Members of the Committee, four years ago Congress took great
strides to overhaul the IRS and, in acknowledgment of the increasing
size and complexity of the tax code, make the agency and the process
more taxpayer-friendly. The hearings brought to the attention of
Congress not only the size of the Internal Revenue Code, but the
difficulty of navigating through it and the even greater difficulty of
getting help from the IRS when navigating through it results in
questions or problems.
Health care providers should be so fortunate as to have a billing
and coding system that resembles the much-maligned U.S. tax system. At
least taxpayers know that there is one book that details all the rules
for paying taxes. That book is about nine thousand pages long. Instead,
health care providers have over a hundred thousand pages to pore
through--pages that spread throughout multiple redundant and confusing
sources and that are constantly changing, yet often outdated.
The hearings on the IRS also revealed the cost of collecting taxes.
Many members were astounded and impressed by the amount of money that
is actually spent collecting taxes--astounded and impressed that there
were taxes that actually cost more to collect than were brought in at
the end of the day. Similarly, we ask that you consider the impact that
the costs--in time and money--of paperwork, regulations and delays have
on patients, providers and the quality of care in the Medicare system.
These complex and burdensome regulatory requirements 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. In the
meantime, the inefficiencies and complexities of this program are
keeping Medicare beneficiaries stuck in an outmoded and overburdened
health care program that could, and needs to, deliver so much more.
HLC is encouraged by the leadership of this Committee and its
efforts to work with providers in improving the quality of health care
that Medicare beneficiaries receive. We stand ready to assist this
committee in any way as you work toward solutions that will allow all
Americans to enjoy the benefits of our nation's health care system.
The Healthcare Leadership Council is a coalition of chief
executives from America's leading health care companies and
institutions, including hospitals, health plans, pharmaceutical and
device manufacturers, biotech firms and educational institutions.
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PATIENTS FIRST: A 21ST CENTURY PROMISE TO ENSURE QUALITY AND AFFORDABLE
HEALTH COVERAGE
----------
THURSDAY, MAY 10, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health, joint with the
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2322, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman, Subcommittee on Health) and Hon. James C.
Greenwood (chairman, Subcommittee on Oversight and
Investigations) presiding.
Members present, Subcommittee on Health: Representatives
Bilirakis, Upton, Greenwood, Deal, Burr, Whitfield, Bryant,
Pitts, Brown, Capps, Deutsch, Eshoo, Stupak, and Green.
Members present, Subcommittee on Oversight and
Investigations: Representatives Greenwood, Bilirakis, Stearns,
Burr, Whitfield, Bass, Deutsch, Stupak, and DeGette.
Staff present, Subcommittee on Health: Tom Giles, majority
counsel; Kristi Gillis, legislative clerk; Amy Droskoski,
minority professional staff member; and Bridgett Taylor,
minority professional staff member.
Staff present, Subcommittee on Oversight and
Investigations: Joe Greenman, majority professional staff; and
Chris Knauer, minority professional staff member.
Mr. Bilirakis. Good morning. I now call to order this third
joint hearing in the 107th Congress, of the Health Subcommittee
and the Oversight and Investigations Subcommittee. This the
third hearing of our series entitled Patients First: A 21st
Century Promise to Ensure Quality and Affordable Health
Coverage.
Patients First is an initiative launched by the Energy and
Commerce Committee to modernize and reform the Health Care
Financing Administration. To improve the quality of patient
care, we are conducting a top-to-bottom review of HCFA's
structure, operations and regulations.
Today's hearing will be especially useful to our process
because we are honored to have such a distinguished and
impressive panel. I would like to welcome to our hearing four
former Administrators of the Health Care Financing
Administration. Dr. Bill Roper, Dr. Gail Wilensky, Dr. Bruce
Vladeck, and Nancy-Ann DeParle have all had the daunting task
of running HCFA--and I emphasize ``daunting,'' and dealing with
Congress. I hope that today we will be able to have a candid
discussion with them about what works at the Agency and what
can be improved.
Our examination of HCFA will also be guided by the input
that we receive from stakeholders, most notably, the true
stakeholders, the beneficiaries and providers. To help us
understand their concerns, we have created surveys--or
``questionnaires''--to collect comments, concerns and
suggestions.
I would like to enter into the record a sample copy of each
of these surveys. I would note that the text of these surveys
can be reviewed on the Internet at the following address which
is up there on the board--http://hcfasurvey.house.gov.
Mr. Brown. Well done.
Mr. Bilirakis. We have undertaken an ambitious project to
reform HCFA and put patients first. Over the next several
months, we will work to ensure patients receive quality
affordable health care through Federal programs, and with the
help of our expert witnesses today, as well as the
beneficiaries, providers, and other stakeholders, I am
confident that we will succeed in our efforts to put patients
first. And I yield to Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. As we think about how
to strengthen Medicare, Medicad and S-CHIP and help HCFA
negotiate the challenges they have, we have a rare opportunity
to hear from four of the Nation's most highly respected health
policy experts, who also happen to be former Administrators of
the Health Care Financing Administration.
I would add that my health care policy person, Ellie
Tahoney, graduated--got a Master's Degree from Dr. Roper's
program in North Carolina, and she is very well trained. And
Dr. Roper, until today, was the only of the four that I was not
acquainted with, so welcome to him and the other three of you.
It is a thrill to have you here, and looks to be an exciting
day.
HCFA-administered health insurance programs--Medicare,
Medicaid and S-CHIP serve 80 million Americans. Those are just
the direct beneficiaries. When you factor in the positive
impact on families and communities, as well as the critical
funding stream for safety-net and other providers, these
programs benefit every one of us.
A great deal is at stake when we contemplate HCFA reform.
It doesn't mean we should shy away from changes when those
changes make sense. For example, it makes sense to adequately
fund HCFA. That would be a major change. As it stands now, we
expect HCFA to run on a hope and a prayer. Not only is the
Agency chronically under-funded, but we have no qualms about
increasing its workload without increasing its resources. Then
we whine in this Congress when HCFA fails to meet statutorily
imposed deadlines for resource-intensive systems changes.
Last year, we gave $11 billion to Medicare managed care
plans. They insure 16 percent of the Medicare population. HCFA
insures the rest. We didn't give HCFA a dime.
Over a 3-year period, HMOs have dropped 1.7 million seniors
from coverage. They have cut back on the very benefits that
attracted seniors to their plans in the first place. They claim
to be over-regulated, but we have no idea how they spend the
money we give them.
And this year we are focusing on HCFA reform, not
Medicare+Choice reform. Don't get me wrong, it is certainly
worthwhile to make direct improvements in HCFA, but we should
keep our concerns in perspective.
In terms of HCFA reform, it also makes sense to address
concerns raised by Medicare providers. There are clearly some
kinks in the policies and procedures under which HCFA, its
contractors and its providers operate. We should coordinate
with HCFA to make sure the necessary statutory, regulatory or
administrative changes are made to straighten these problems
out. But should HCFA undergo a massive reorganization? It would
certainly keep HCFA busy, as if the Agency weren't busy enough,
you know, it would be an excellent way to burn up extra
administrative dollars, if there were any. But does it make
sense? No. Reform should mean giving HCFA the tools and the
flexibility it needs to continuously improve its operations. It
should not mean restructuring the program, which implies either
an arbitrary and costly reorganization or, far worse, a 36-year
step backwards into the private insurance market.
In the latest issue of the Harvard Health Policy Review,
Bruce Vladeck and Harry Kane wrote opposing articles on
Medicare. Well, my views were certainly more aligned with Dr.
Vladeck's. His article is entitled ``Medicare Works,'' while
Dr. Kane's was entitled ``The Medicare Menace.''
There is a sentence in Dr. Kane's article that I want to
share with you, discussing a private sector alternative to
traditional Medicare, Dr. Kane wrote: ``The dynamics of a
market can still thrive, but that will always mean there will
be market frictions,'' he said. And he went on and said, ``Some
people will not do nearly as well as others in obtaining all
the medical services they want and need.'' Dr. Kane is
obviously comfortable with that, I am not. Enough said about
Medicare privatization.
Should Medicaid be removed from HCFA? If we want to make
HCFA work better, we need to give HCFA more resources, we need
to release our statutory stranglehold on them, and we need to
work with them to address provider concerns. We do not need to
arbitrarily create a new home for one of the three health
insurance programs which HCFA administers.
I will stop there, Mr. Chairman. I am looking forward to
getting the perspective of our four distinguished witnesses.
Mr. Greenwood. (Presiding) Thank you. This is a joint
hearing between the Health Subcommittee and the Oversight and
Investigations Subcommittee, and lest anyone think that
Chairman Bilirakis and I are being overly formal by trading
seats off and on, I need to swear in the witnesses, so that is
why I moved to the Chairman's seat.
Let me thank the four witnesses. This is a real special
occasion for us to be able to draw on your collective knowledge
and experience at HCFA to help us with our mission.
I think there are two ways that we could go wrong. One of
them is to do anything arbitrarily or make change for the sake
of making change. None of us wants to do that. And certainly
none of us is critical of anyone at HCFA, past Administrators,
current employees. I think everyone universally agrees that we
have been blessed with great Administrators. We have been
blessed with a whole slew of people at HCFA, all of whom are
very, very dedicated and very competent, but this is a vehicle
that was built in 1977, I think, and that has been asked to
carry a lot more weight over the years, and it does us well,
for the sake of the beneficiaries, to think through whether,
given today's management ideas, today's realities, today's
information systems, whether there are ways to improve the
system.
I think we should go into this process without any
prejudices, without any presuppositions about what we should or
shouldn't do, but rather do some real innovative, blue-sky
thinking, thinking about paradigms and how it is best to serve
these clients of ours in the 21st Century. And I would yield to
Mr. Green for an opening statement.
Mr. Green. Thank you, Mr. Chairman, for holding this
hearing, the third in a series on the problems facing the
Health Care Financing Administration. I especially am eager to
hear from our panel of witnesses since they have been working
on these issues for two decades. And like my colleague, Sherrod
Brown, having dealt with HCFA Administrators in our 8 years in
Congress, 9 years now, this is the third hearing we have had on
this issue, and we have already heard from providers,
contractors, insurers and others that have to work with the
Agency day in and day out. We have heard their frustrations,
their concerns, the problems they see with the Agency.
What we have heard from panelists at each hearing is that
HCFA is over-burdened and under-funded. The Agency is
responsible for administrating Medicare, Medicaid, State
Children's Health Insurance Programs, as well as the health-
related provisions of the Health Insurance Portability and
Accountability Act. Funding these programs is challenging
enough, but Congress makes the job harder for HCFA by
constantly moving the goalpost.
Congress' micromanagement of the Agency is a constant
problem for HCFA, forcing them to implement pages and pages of
new policies. The Balanced Budget Act alone created 350 new
Medicare and Medicaid policies. But before some of these
changes could be fully implemented, Congress revised the BBA in
1999 and again last year. Despite all these changes, Congress
has failed to provide HCFA with the additional resources it
needs to manage the increased workload.
The fiscal year 1995, before passage of HIPAA, before
creation of the Children's Health Insurance Plan, before
passage of the Balanced Budget Act, HCFA's administrative
budget was $2.2 billion. Yet, 5 years later in 2000, however,
HCFA was appropriated less money, $2.1 billion.
HCFA is the largest provider of health care in the country,
and probably in the world, yet we in Congress ask the Agency
year after year to operate on a shoestring budget. As Dr. Roper
states in his testimony, this low administration budget should
not be a source of pride, it should be a source of
embarrassment.
HCFA and Congress must work together to maximize its
efficiency, to modernize its operations to better serve the
beneficiaries and providers, and to reach our mutual goals of
providing our elderly and disabled populations high quality
health care.
I have read each of the witnesses' testimony. I am
interested in hearing about the ideas they share on how we can
improve this Agency. I am especially interested in proposals to
resolve some of the issues through the Administration. I am
afraid if we wait for Congress to do this, it will take much
longer than necessary, and we may not like what we end up
getting.
Mr. Chairman, I thank you for the time, and yield back.
Mr. Greenwood. Thank the gentleman. Mr. Deal, for an
opening statement.
Mr. Deal. Pass.
Mr. Greenwood. Mr. Deal passes. Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman. I will be brief, and
thanks for holding this hearing. This has been an ongoing
concern, and these hearings emphasize the need for action and
attention to HCFA.
As I am sure the previous Administrators in front of us
today are well aware, HCFA-bashing is a popular pastime up here
on the Hill. I and everyone else in this room today would like
to change that.
In reading the testimony, each of the previous
Administrators agree on a need for reform. So do I, and so do
many beneficiaries and providers in my district. The layers
upon layers of bureaucracy within HCFA is one area of concern.
Another is the lack of funding. Still another--and this list
could go on and on--is the sheer volume of mandates given to
HCFA by all of us here in Congress.
I have said this before and I will say it again--although I
don't believe in throwing money at HCFA as the solution to all
their problems, it certainly cannot continue running with
administrative costs of less than 2 percent. What this slim
budget translates into is a lack of adequate computer system
and information technology, a lack of adequate training for
staff, and a rather high turnover of HCFA Administrators.
I believe HCFA reform is an area that crosses party lines,
and this is proven by the similarities contained in the
testimony of our four witnesses, witnesses that know better
than anyone else exactly what problems affect the proper
running of HCFA.
I look forward to hearing each of their suggestions on how
best to make HCFA workable again. I will be in and out, Mr.
Chairman, because I have a couple of other things, but I am
looking forward to the witnesses, and it is good to see so many
old friends back here. Thank you.
Mr. Greenwood. Thank the gentleman. Ms. Eshoo.
Ms. Eshoo. Good morning, Mr. Chairman, and thank you. Good
morning to the distinguished panel. For sometime now, I have
been concerned that bureaucratic barriers at HCFA are
inhibiting beneficiary access to new technologies, and I think
the people that are going to testify today know this because
they have heard from me on it.
According to a Lewin Group study, it often takes as long as
5 years for a product to make its way through the HCFA maze,
yet it only takes 18 months to get FDA approval. It doesn't
make sense to me that the Federal Government can determine
whether a product is safe and effective in 18 months, but takes
5 years to decide whether we will pay for it or not.
As you know, Mr. Chairman, my Congressional District enjoys
the largest concentration of biotech companies in the country.
While this is a great source of pride to me, there is also a
burden that comes with it, and many of them are created, I
think, by the problems that are at HCFA.
We've spent an inordinate amount of time and resources
calling and writing the Agency about coverage delays, failures
to reimburse, and illogical coding decisions. Rather than
micromanaging the Agency, we should really address the
structural problems that produce the inefficiencies.
Last year, I led the effort in this committee to include in
the BBA give-backs package two provisions aimed at streamlining
the coverage process at HCFA. I am pleased that we were
successful in that, however, it wasn't enough and more work has
to be done.
So, I am committed to taking a comprehensive approach to
streamlining HCFA in much the same way that we did with FDA in
1997. Prior to FDAMA, FDA had many of the same problems that
HCFA currently suffers from. By modernizing the Agency in a
very comprehensive way, we were able to dramatically improve
approval times. I am proud of that work, and I think that we
need to apply the same model to HCFA.
We also have to combine these efforts in streamlining the
Agency with additional resources. At 2 percent, HCFA has one of
the slimmest administrative budgets of any Federal Agency. So,
as Congress continues to add new responsibilities to the
Agency, we have to make sure that the resources are there.
Otherwise, whatever our reforms are, we are not really going to
be able to be very proud of them because they won't be able to
handle them. They won't be able to implement them.
So, I am looking forward to working with all the members of
this committee and the Agency in making this happen, and I look
forward, of course, to hearing from the distinguished panel. As
Bart Stupak said, we have some good friends that are going to
be testifying today. Thank you.
Mr. Greenwood. Thank the gentlelady. The gentleman from
Michigan, Mr. Upton, for an opening statement.
Mr. Upton. Thank you, Mr. Chairman. I appreciate today's
hearing. I know that we are here today, and the HCFA staff on
the front lines, administrating the Medicare program, to share
the same goal and commitment--ensuring continued access to high
quality health care services for our seniors and disabled
beneficiaries, while guarding the integrity of the program and
the taxpayers' investment both now and in the future.
I am delighted to hear about the witnesses. I want to put
my full statement into the record. I know that we want this
program to run efficiently, and to do so, by hearing from the
former Administrators, I think that we will have some good
ideas in terms of where we need to go and what adequate level
of resources they need to do the job that we want them to do.
And I yield back the balance of my time so that we can listen
to their testimony. Thank you.
[The prepared statement of Hon. Fred Upton follows:]
Prepared Statement of Hon. Fred Upton, a Representative in Congress
from the State of Michigan
Mr. Chairmen, thank you for calling today's hearing. I think it is
an excellent idea to ask for the perspective of our four distinguished
witnesses. They've been in what is one of the hottest seats in our
government and can give first-hand insights on how the Medicare program
can be more efficiently managed in the short-term and the long-term to
address the mounting frustration we are hearing from Medicare
beneficiaries and health professionals alike. I want to personally
thank our witnesses for their willingness to be here today and give us
the benefit of their experience.
I know that we here today and the HCFA staff on the frontlines of
administering the Medicare program share the same goal and commitment--
ensuring continued access to high-quality health care services for our
seniors and disabled beneficiaries while guarding the integrity of the
program and the taxpayers' investment in it both now and in the future.
Congress and HCFA should be partners in this effort--not adversaries.
We have tended to rake the agency over the coals for its errors,
failures, and problems, and that is part of our oversight function. But
I don't think we've been as willing to be open to hearing from HCFA
about what it is the agency needs to perform more effectively and
efficiently and to go to bat for those changes. We need to change this.
For starters, we should go to bat for the funding HCFA needs to
administer the program efficiently and effectively. I think a cosigned
letter from us to our colleagues on the Labor/HHS/Education
Appropriations Subcommittee reflecting what we will learn today about
agency's needs would be a good place to start.
Our witnesses will give us differing visions for the future of HCFA
today, but they are very consistent in their recommendations for
reasonable, common-sense steps we can take now, over the short-term, to
help the agency function better from the perspective of beneficiaries
and health care professionals.
First, I think a lot of the dissatisfaction we are hearing from our
constituents, beneficiaries and providers alike, stems from the
contractor system that's been with us, relatively unchanged, since the
Medicare program's inception. Does it really make sense to have 50
separate contractors, or is this a recipe for miscommunication. Does it
really make sense to have a law on the books that prohibits HCFA from
competitively bidding for contractors? What an effective tool that
could be for improving contractor performance, particularly if part of
the evaluation for contractor renewal is beneficiary an provider
satisfaction.
Second, instead of having 50 different contractors making coverage
calls on new technologies, wouldn't it make sense to beef up and
streamline HCFA's national coverage policy process and give them the
authority to pay what they need to attract the expertise they need?
These are just two areas in which some common-sense reform would go
a long way. I'll focus on several others later this morning as we have
a dialogue with our witnesses.
Again, let's think in terms of forging the partnership we need to
achieve our mutual goals of ensuring beneficiaries' access to high-
quality care now and in the future.
Mr. Greenwood. The Chair thanks the gentleman. Without
objection, his written statement will be entered into the
record. The Chair recognizes the gentlelady from California,
Ms. Capps.
Mrs. Capps. I thank you, Mr. Chairman, for holding this
hearing, and I am impressed with our witness panel today, with
the expertise that will be at the table.
I am pleased we are looking at the Agency that manages
Medicare and hearing from those who know it best. As we listen
to their testimony and question them on possible reforms, I
hope we will remember the following: That Medicare is the most
successful government health program in history. It has ensured
the availability of health care for millions of older Americans
who had previously no options.
I have heard, as I am sure we all have, lots of loose talk
about reforming and privatizing Medicare. The idea of turning
this program over to the private sector is a bad one. The
marketplace can be a wonderful place of efficiency, but it is
also ruthless in its drive for profit, and we must not allow
health care decisions for our seniors to be strictly business
decisions, and we can see that danger clearly in some of the
excesses of managed care.
Government works best when it is harnessing the incredible
potential of the private sector, but softening some of its
harsher edges. To be sure, there may be room for more
businesslike efficiency in HCFA, and I am open to making those
very changes. For instance, we do need to modernize and
streamline the coding and coverage processes, especially for
new devices, treatments and technology. I echo my colleague,
Anna Eshoo, in stating that I wish we could modernize HCFA the
same way that the Food and Drug Administration--that we have
been able to do that with them, but it would be a terrible
injustice to our seniors to open Medicare, unshielded, to the
cruelties of the business world. Medicare is a sacred program
to many of today's seniors. They count on it, and need to be
able to do so in the future.
We as a society have made a pledge to them that they will
have health care, and we need to follow through on this pledge.
We should also take a moment to recognize how hard a task it is
that Congress has assigned HCFA. I personally want to thank our
four former Administrators here for the years of service that
you have given to this Agency. Balancing Medicare is an
enormous challenge and a delicate balancing act. While we don't
want to compromise patient care with excessive regulation, we
also need to make sure that the Agency preserves a high level
of program integrity and works to prevent fraud, waste and
abuse.
Often, this committee has sent contradictory messages to
HCFA about our priorities. We tell them to come down hard on
fraud, waste and abuse, and then the next day we are screaming
at them because they are being too aggressive. It is hardly
fair to put them through that and not clearly state our goals
and, also, to clearly examine the relationship between our
goals and the funding resources that we give the Agency to
operate.
I look forward to working with you on this, Mr. Chairman. I
hope that we can address these issues in a fair-minded and a
bipartisan way. Thank you.
Mr. Greenwood. The Chair thanks the gentlelady, and
recognizes the gentleman from Florida, Mr. Stearns, for an
opening statement.
Mr. Stearns. Thank you, Mr. Chairman, and good morning.
This is a conundrum, trying to figure out insight into this
Health Care Financing Administration, HCFA. I don't think any
of us feel comfortable that we know all the answers here. Lots
of times we criticize the Agency, but it is so important, so it
is nice also to find out ways we can improve it.
Interestingly enough, I had a constituent in my district
who was on Social Security Disability, and he turned 65 and he
wanted to convert to Medicare, and it was almost an
impossibility given all the paperwork. And as we sit here
today, my constituent has still been unable to convert his
Social Security Disability into Medicare. And we have helped
him. He has received forms. We filled them out. And what is
troubling is that he has been unable to use his secondary
insurance which he purchased at a total cost of $1200, to help
him. So we have been hassling this back and forth for over a
year, so I am interested to hear the testimony of the
witnesses.
Also, I would like to comment a little bit on Dr. Roper and
Dr. Wilensky's testimony, in which they reaffirmed their
support of reforming Medicare using the Federal Employee Health
Benefits Program as a model. I welcome their suggestions here.
I fully concur with what they spoke about, with all the changes
we have today in the program, and the complexity of it,
obviously we need an overhaul. How we do this, we don't know,
but maybe to use as a paradigm, the FEHBP is a good idea. This
is a program that has worked, it has had low inflation up to
this date, and I think if we provided that same kind of program
for the seniors, it would also provide them access to new drugs
and devices without a government-run program, but a private
sector program with competition.
So, I look forward to hearing from our witnesses, and I
thank both Chairmen for having this hearing.
Mr. Greenwood. The Chair thanks the gentleman, and
recognizes the gentlelady from Colorado, Ms. DeGette, for an
opening statement.
Ms. DeGette. Mr. Chairman, I have a very excellent opening
statement which I would ask unanimous consent to submit for the
record.
Mr. Greenwood. No, we insist that you read it. Without
objection, the gentlelady's opening statement will be entered
into the record, and the Chair recognizes the gentleman from
New Hampshire, Mr. Bass, for an opening statement.
Mr. Bass. Thank you, Mr. Chairman, and I just want to
associate myself with the remarks of my colleagues behind me,
and thank both you and Mr. Bilirakis for holding this series of
hearings which are not only timely and instructive, but also
very relevant to what will undoubtedly be one of the one or two
most important issues that this committee will address during
this Congress--the reform or review of the Medicare system in
general and, within that category, the provision of--or the
issue of providing a prescription drug benefit for seniors.
It is important to understand how this important and
substantial program is administered, what its problems are, and
what options we have available to us. So, I thank you for
holding this series of hearings, and look forward to hearing
from our witnesses. Yield back.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Chairman Bilirakis and Chairman Greenwood, thank you for holding
this important hearing. This is the third in a series of hearings this
Committee is holding on the reform and modernization of Federal health
care programs.
At this morning's hearing, we are honored to have assembled before
us the previous four Administrators of the Heath Care Financing
Administration. I can think of no better group of distinguished people
to bring before this Committee to talk about the issues facing HCFA.
I hope today to continue a process we began earlier this session,
beginning with our March 1st hearing on this topic, where Republicans
and Democrats work together to improve the lives of people
participating in these programs.
The objective of these hearings is clear: We want to ensure that
America's seniors will have access to the best health care technology
that our country has to offer. This will help Medicare patients live
longer and healthier lives.
HCFA has come under heavy criticism in recent years from both sides
of the aisle. We are not here today, nor are these hearings designed,
to bash HCFA. We want to hear your perspectives as Administrators who
ran this program about what you learned and what your thoughts are as
you hear all of the criticisms levied against this agency. Are they
justified? How should the agency be changed? Is it a cultural thing?
What are the resource needs of the Agency?
Dr. Vladeck, in your paper ``Making Medicare Work,'' your first set
of findings are that ``beneficiaries need better customer service;''
``beneficiaries face unintended financial liabilities;'' and
``beneficiaries are subjected to too much and confusing paperwork.''
That is concerning. Often times we hear these concerns as they relate
to providers. I am interested in your insights into these areas and
your suggested reforms to address them.
Dr. Wilensky, I am interested in fleshing out the fundamental
tensions you see existing at HCFA and seeing what we can do to improve
that dynamic. Ms. DeParle, I certainly appreciate your comments that we
all need a breather from more changes to the Medicare program. We made
major changes in the Balanced Budget Act of 1997, and I think it's time
we all assessed where HCFA is with implementing those provisions and
the impact that the work load had on your agency and your staff.
Dr. Roper, you served the earliest of any of the four here today
and therefore are the most removed from HCFA's current operations. Yet
as far back as 1986 when you started your tenure under President
Reagan, you say that HCFA was ``the favorite four letter word of people
in the health care industry.'' How do the issues we are confronting
today differ from those you faced fifteen years ago?
Clearly, there will always be some tension between HCFA as the
agency paying the bills, and the providers, who are the ones getting
paid. But when beneficiaries are affected and when people familiar with
the Agency say the culture is as bad now as it has ever been in recent
memory, we need to step back and ask how did we get here, and how can
we make it better. We owe at least that to the beneficiaries and their
families.
Chairman Bilirakis and Chairman Greenwood, thank you again for
holding this hearing. I look forward to hearing from the witnesses.
______
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
I'm pleased that all of you are here today. I've had the
opportunity to work with each one of you over the years as you served
as Administrators of the Health Care Financing Administration. I think
each of you personify the extremely high level of ability and
commitment that we have had in the persons serving at the leadership
level of the Agency.
It has been my experience--and I think each of you would echo this,
that in fact at all levels of HCFA, there are many, many public
servants who have shown unusual dedication and commitment. They have
done their jobs under extremely difficult conditions: a rapid expansion
of workload and no corresponding increase in resources--both in terms
of dollars and staff positions.
Further, they have operated during a period when we in the Congress
have made many complex changes in Medicare, when we have frequently
failed to resist micromanaging the agency, and when we have exhorted
the agency on the one hand to stop any incorrect payments--we call it
fraud and abuse--but criticized you when the steps taken to achieve
that goal have caused legitimate unhappiness in the provider community.
I want to make just a few points. One, clearly we need to do more
to give the agency the resources it needs. It is inexcusable that fewer
people work in HCFA now than were there than when Dr. Roper was there a
dozen years ago.
Two, we need to resist the idea that somehow we in Congress have a
magic bullet in terms of how to reorganize the agency that will somehow
solve these problems. Just setting up a Board, or chopping off vital
pieces of HCFA, or rearranging the boxes, not only won't solve the
problem indeed it may make it worse. Further we here in the Congress
are not in the best position to really know the implications of what we
may try to do. So I think we have to be very careful here.
Finally, I want to stress that I find the idea of moving Medicaid
out of the agency--and treating it even more like the forgotten
stepchild that we'd just as soon was someone else's responsibility--is
a serious mistake.
Medicare and Medicaid are both vital health care insurance
programs--and I emphasize that word insurance--that are depended on by
millions and millions of Americans. Medicaid now serves nearly 40
million people--at least as many as Medicare. It is approaching
Medicare in expenditures. It deals with the same population of
providers. And we have worked to establish the same standards for those
providers, including nursing homes, to name one particularly important
example.
The populations themselves overlap. In fact, I would argue that
Medicare only works for low-income elderly and disabled people because
Medicaid is there to supplement it--paying premiums, coinsurance,
providing long-term care, prescription drugs, and other additional
services.
It is a mistake to turn our backs on years of progress and return
to viewing Medicaid as a welfare program, or as a grant program to
states or organizations, as opposed to a program of insurance coverage
for beneficiaries.
Both Medicare and Medicaid are critical programs for the American
people. Both are vital to the health care system. Providers depend on
them. Aged, blind, disabled people, and low-income families and
children, depend on them. We need to work together to make them work
better for us all.
______
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
I am pleased to have such a distinguished panel assembled today.
Together, you have managed the Health Care Financing Administration
(HCFA) through more than a third of its existence. With that much
wisdom you are well suited to make recommendations to improve the
agency. I look forward to hearing your different perspectives on the
challenges facing HCFA and how we can help the agency best meet them in
the future.
One of the challenges facing the agency is the administrative
budget. HCFA has been entrusted with enormous responsibilities and
duties but given a meager allotment to perform them. It is a credit to
you all that HCFA has done so much with so little. How much does HCFA
need to effectively and efficiently meet its mandated goals?
Another key challenge is balancing the different roles that the
agency is often asked to play, as a regulator, as a purchaser, and as a
protector of those who depend on HCFA to guarantee quality health
insurance coverage. From my perspective, HCFA's number one priority is
to protect the millions of people who depend on its programs for their
health insurance. Part of that means ensuring that providers continue
to participate in the program, making the rules understandable, and
paying claims in a timely manner. Part of that also means being a
prudent guardian of public money and working to eliminate fraud and
abuse. These goals require careful, thoughtful, and open consideration
by the agency. How can the Congress help with this balancing act?
Often we in Congress hear the call for ``reform'' of the agency--
either from frustrated providers or from those with an ideological bone
to pick about the role of government in their lives. I don't hear
seniors calling for reform of HCFA--I hear them asking for assistance
with prescription drugs. I don't hear children, the elderly, or the
disabled calling for more flexibility in Medicaid--I hear them asking
for the government to protect the coverage they have. Therefore, what I
am most interested in hearing about today is the role of HCFA for
beneficiaries--the seniors, the disabled, children, families, and
others who depend on the programs HCFA runs. With a doubling of the
Medicare population expected in the next two decades and the desire to
continue to expand health insurance coverage through successful
programs like Medicaid and the Children's Health Insurance Program,
HCFA will be asked to protect an increasing number of Americans, both
young and old. What needs to be done to make HCFA work better for
beneficiaries?
One of the ideas I have heard floating around is that we should
separate the Medicaid program from HCFA and allow the agency to focus
solely on Medicare. While Medicare is a very important program, I am
concerned about what this approach might do. Medicaid, like Medicare,
is an insurance program which serves vulnerable populations. Many of
the same functions are performed for both programs and separating the
two would merely mean a duplication of bureaucracy. Further, I cannot
support any proposal that would place less importance on the 40 million
elderly, disabled, women, and children in Medicaid than those protected
by Medicare. We cannot allow either program to ``wither on the vine''
or to suffer from ``benign neglect.''
I thank the Chairman for holding what I believe will be a most
informative hearing. What the agency and its programs need at this time
is a firm commitment from Congress that will enable it to do a first
rate job of protecting and serving the millions of Americans that
depend on the health care they receive through the agency's programs.
Part of that is funding. Part of that is giving the agency the tools it
needs to perform its multitude of responsibilities. And part of that is
for us to foster a good working relationship between the agency,
Congress, providers, and beneficiaries to achieve our mutual goals.
Today's hearing should help.
Mr. Bilirakis. The Chair thanks the gentleman, and now
calls for the witnesses: Dr. William Roper, who is the Dean of
the School of Public Health, University of North Carolina at
Chapel Hill; Dr. Gail Wilensky, John M. Olin Senior Fellow at
Project HOPE and Chair of MedPAC; Dr. Bruce Vladeck, Senior
Vice President for Policy, Institute for Medicare Practice,
Mount Sinai School of Medicine, and Nancy-Ann Min DeParle,
Former Administrator of Health Care Financing Administration,
all for Administrators. As you are aware, this is a joint
hearing with the Oversight and Investigations Subcommittee and
the Health Subcommittee, and you understand that when we do
this, we have a practice of taking testimony under oath. Do you
have any objection to testifying under oath?
Mr. Roper. No.
Ms. Wilensky. No.
Mr. Vladeck. No.
Ms. DeParle. No.
Mr. Greenwood. According to the rules of the committee, you
are entitled to be advised by counsel. Do you care to be
advised by counsel?
Mr. Roper. No.
Ms. Wilensky. No.
Mr. Vladeck. No.
Ms. DeParle. No.
[Witnesses sworn.]
Mr. Greenwood. We are going to ask that each of you give a
10-minute statement. We are doubling the normal allotment of
time because we are so eager to hear your testimony, and we
will start with Dr. Roper.
TESTIMONY OF WILLIAM L. ROPER, DEAN, SCHOOL OF PUBLIC HEALTH,
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL; GAIL R. WILENSKY,
JOHN M. OLIN SENIOR FELLOW, PROJECT HOPE, CHAIR, MEDPAC; BRUCE
C. VLADECK, SENIOR VICE PRESIDENT FOR POLICY, INSTITUTE FOR
MEDICARE PRACTICE, MOUNT SINAI SCHOOL OF MEDICINE; AND NANCY-
ANN DePARLE, FORMER ADMINISTRATOR, HEALTH CARE FINANCING
ADMINISTRATION
Mr. Roper. Good morning, Mr. Chairman. It is an honor and a
privilege to appear before you. I am Bill Roper. I am Dean of
the School of Public Health at The University of North
Carolina. I was HCFA Administrator starting in 1986--actually,
I started 15 years ago this week. I served from 1986 to 1989,
and it is a pleasure to come back to talk with you and my
colleagues about this important program.
Following my time at HCFA, I was also Director of the CDC,
the Federal Public Health Agency in Atlanta, and served in the
private sector as a senior executive with a managed health care
company, so I think I have seen other aspects of the world that
HCFA touches and is touched by.
When I was at HCFA, I often jokingly remarked that HCFA was
the favorite four-letter word of providers in the health care
industry, but I think that those tensions, those concerns have
surely been heightened in the years to come. There are
significant improvements to be made in HCFA and we are going to
be talking about those today, but I would begin by saying the
fundamental problems we face are primarily problems of the
Medicare program itself, not primarily of the Agency that
administers it.
Having been head of both HCFA and the CDC, I used to say as
well that HCFA is a ``black hat agency'' whereas the CDC is a
``white hat agency''--that is, on most days, most people think
good thoughts about the Centers for Disease Control and
Prevention. On the other hand, on a good day HCFA makes only
half the people mad at it.
The essence of what HCFA does is saying ``no'' to people,
lots of people--the Congress, beneficiaries, providers, and so
on--and when you say no, you make people mad, and that is what
I think we all need to understand as we talk about this.
Many of the problems attributed to HCFA are not of its own
making. It exists and functions in a conflicted environment
where the Congress will often pass legislation with noble, even
lofty, goals, but that have internal challenges--for example,
the challenge for fiscal responsibility while at the same time
not saying no to beneficiaries when they believe they need
health care services, pushing for quality in health care
services while at the same time not upsetting doctors and other
providers. Those are surely challenges. I would say, in
general, it is difficult to be both customer-friendly and to be
a regulator.
There are some specifics, though, that I would like to talk
about, and I will do that quickly. The Medicare program itself
is sadly out-of-date, it needs to be modernized. It has failed,
and continues to fail, to take advantage of the innovations
that we have had in the private sector and, as was said
earlier, I am on record elsewhere as saying it ought to be much
more like the Federal Employee Health Benefits Program.
In general, beyond that point, new skills and expertise are
needed in the Agency's workforce. New tools and data systems
are needed to enable informed purchasing decisions and informed
assessments of quality and other important tasks. HCFA needs to
have explicit approaches to hiring staff with private sector
skills, and needs to realistically evaluate its resource needs.
It needs to be functioned more as a continuous quality
improvement agency and, as such, needs to be given much more
freedom to implement pilot studies or to test efforts to guide
improvements in services.
In the past, no one has ever accused HCFA of being too
nimble, and that need to innovate is at the forefront of this
problem. At present, we need a new approach to trying out ideas
on a short-turnaround time. Perhaps feasibility waivers could
be granted where something doesn't have to be researched to
death to demonstrate whether it works or not, but you can try
something for even a short period of time and, if it works,
spread it more broadly and, if it doesn't, abandon it and go on
to something else.
As I and others have previously said, it is important to
emphasize the need for more resources for HCFA itself. When I
hear people brag about how little Medicare spends on
administration, I cringe. That should be a source of
embarrassment, not of pride.
The Agency is under-staffed both in numbers and in the mix
of skills, and it is seriously hampered by inadequate systems.
There are actually fewer staff in HCFA today than when I became
Administrator 15 years ago, despite a tripling of the outlays.
The inadequacy of resources shows in the quality of the output.
Now nearly 25 years old, HCFA needs to be updated, however,
I believe a large-scale reorganization is not necessarily the
way to do it. As well-intentioned as it was, and it was, HCFA's
recent reorganization produced much chaos. It created mass
confusion in many respects. Accountability has been diffused
throughout the Agency at the regional and central levels.
Individuals outside the Agency are confused about who is
accountable for particular issues, and uniform implementation
of procedures and processes is largely absent. A confusing
organization might ease HCFA's essential dialog with the
private sector, which is already unsympathetic with HCFA and,
even more so, unsympathetic to the chaotic structure.
Rarely are problems solved by moving boxes around on the
organizational chart. I believe it is time to re-evaluate
Medicare's contractor system, the fiscal intermediaries and
carriers. We still have too many intermediaries and carriers to
be efficient. I believe there are 50 today--30 Part A, 20 Part
B. We could dramatically reduce the number of contractors and
improve the management of the program, while being more
efficient.
I would suggest the most significant problem Medicare and
HCFA faces is that is stuck firmly in a fee-for-service
mentality and modality. Integrated health delivery systems are
much more appropriate and responsive to the needs of seniors,
certainly far more promising than the Yellow Pages fee-for-
service approach of organizing care for seniors with serious,
complex, chronic illnesses.
I believe private plans, including managed care and
indemnity plans, should compete with the traditional program on
the basis of quality and cost but, unfortunately, the current
Medicare+Choice program brings together an inhospitable
environment with complex legislation and unrealistic rules that
have made the Government in a managed care setting undesirable
to the private sector.
The attitude among many private companies is that doing
business with the Federal Government in health care is a sure
way to lose your shirt. When I was HCFA Administrator, I got
many questions about ``can we depend on you, the Government, to
be a reliable business partner over time.'' I would have to say
that a fair reading of the last 15 years is, the Government is
not a reliable business partner, and we have to fix that if we
expect this program to grow.
One of the ideas that has gained some currency recently is
to remove the administration of the managed care portion of
Medicare from the fee-for-service part. I believe, on balance,
that both should remain within HCFA, but it surely makes sense
to develop a new, separate unit whose full-time assignment is
Medicare+Choice because HCFA staff are still largely fee-for-
service oriented. The new unit would need individuals from the
private sector with specific expertise in managed care, and
perhaps there ought to be designated a new Deputy Administrator
for Medicare+Choice, or an Associate Administrator for it.
I would also like to comment on another matter that has
received a fair amount of attention recently, the possible
creation of a Medicare Board. I believe the Secretary and the
Administrator of HCFA are the President's appointees charged
with responsibility for health care financing within the laws
enacted by Congress. The creation of a National Medicare Board
or similar organization would only serve to make more diffuse
the systems of management, of responsibility, and of
accountability that are necessary for the Agency to be
effective in its work. As some have pointed out, the notion of
a unitary executive--the President, the Secretary, the
Administrator--is one that I think we would be better served if
we follow in general rather than having independent boards and
commissions.
Finally, HCFA needs an administrative structure that
promotes internal accountability and responsibility, and that
is understood by all of HCFA's partners, public and private. It
needs to modernize and enhance its existing workforce with new
and different skills. It needs adequate personnel and systems
resources that reflect the enormous responsibilities it faces.
It needs new legislative and regulatory flexibility that allow
it to engage in different, innovative arrangements. And,
finally, and most importantly, I believe, HCFA needs to be able
to work in an environment of reasonable expectations from the
public, the Administration and the Congress.
I thank the committee for the opportunity to be with you
today.
[The prepared statement of William L. Roper follows:]
prepared statement of william l. roper, dean, school of public
healththe university of north carolina
Good morning Mr. Chairman and members of the Committee. I am
William L. Roper, Dean of the School of Public Health at The University
of North Carolina at Chapel Hill.
Before I assumed my current post at UNC Chapel Hill, I was senior
vice president for Prudential HealthCare where I was responsible for
medical management and other services supporting Prudential's health
plans nationwide, including what are now Medicare+Choice plans. In this
role I observed first-hand the Health Care Financing Administration's
regulatory processes and the challenges they can create.
Before my tenure at Prudential, I was Deputy Assistant to the
President for Domestic Policy, and then Director of the Centers for
Disease Control and Prevention under President Bush. Earlier, I served
as Administrator of the Health Care Financing Administration (HCFA)
under President Reagan (1986-89). At HCFA, I was responsible for
managing Medicare and Medicaid through a period of significant change
in these programs. I am pleased to be here today and to participate
with the other former HCFA Administrators.
When I was at HCFA, I would jokingly remark that HCFA was the
favorite four-letter word of people in the health care industry. Today,
those dissatisfied with HCFA include not only the industry, but also
large numbers of beneficiaries, the media, the population in general,
and in particular the Congress. It often seems that HCFA is second only
to the IRS as a target for criticism. Certainly, there are significant
improvements to be made at HCFA, and I will elaborate on these as I see
them. Let us be clear, however, that the fundamental problems I will be
speaking about today are primarily problems of the Medicare program
itself, not just the agency that administers it. Having been head of
both HCFA and the Centers for Disease Control and Prevention (CDC), I
believe one is a ``black hat'' agency and one is a ``white hat'' one.
You can reorganize HCFA all you want, and put all the bells and
whistles in its reporting channels you want, but the agency will always
have saying ``no'' as what characterizes it.
general context
In addition, many of the problems attributed to HCFA are actually
not of its own making. HCFA functions in a political environment where
the Congress will often pass legislation with very noble but
unrealistic or perhaps even conflicting objectives and expectations.
The resulting legislation may be unclear or unrealistic, but HCFA has
to figure out a way to implement it.
Consider the challenge faced by a well-meaning Congress that is
committed to fiscal responsibility, but must also balance the needs of
constituents, who will not sit still for denied hospital admissions.
Another example would be that all Americans want to receive the highest
quality of care possible, but many are uncomfortable with some of the
regulation, oversight or data acquisition activities that might be
needed to achieve that end.
I am by no means a proponent of additional government regulation.
On the other hand, to fulfill the objectives of many statutory
provisions there is often the need for more intervention or oversight
than you and the American people welcome. We need to recognize that
HCFA is quite often doing a difficult job in its effort to walk the
fine line between maintaining a focus on the good things you want to
come from the legislation you enact, and actually achieving those
objectives in a reasonable way. It is difficult at times to be both
customer friendly and a regulator.
Clearly, there are strong opinions about each of these issues, and
HCFA must contend with them all. We should all have a realistic vision
of HCFA and its potential within a politicized environment.
There are, however, a number of specific problems and issues that I
would like to address today.
need for innovation
The Medicare program is sadly out of date; it needs to be
modernized. It has failed--and continues to fail--to take advantage of
innovation in the private sector.
I am on record as strongly supporting a reform of Medicare, making
it much more like the Federal Employee Health Benefits Program.
In particular, change is much too slow under the burden of
excessively prescriptive legislation, which sometimes places impossible
burdens on the Agency. This includes dealing with innovation in medical
technologies, which can take years to gain approval for coverage under
Medicare, as well as innovation in management approaches, increased
emphasis on modern skills, and appropriate technology for an
increasingly complex health care financing market.
Although some improvements are being made, such as changes in
HCFA's customer service, e.g., the Medicare Helpline, technological
improvements are needed in HCFA's day-to-day implementation of
Medicare. It is not enough to strive to be customer friendly--HCFA must
view itself differently and become more forward-thinking in its world
view. For example, new skills and expertise are needed in the agency's
work force so that it can deal more effectively with complex approaches
to health insurance. New tools and data systems are needed to enable
informed purchasing decisions and assessments about quality of care.
In some ways, the agency and all of its customers need to recognize
that these are the activities for the future. For example, a worthy
idea today is paying more for higher quality. To pursue that approach,
HCFA needs to assure that it has all of the necessary tools and skills
at hand to assess quality in ways that would allow differential
payment.
These changes surely include re-training. They also mean that HCFA
needs to have explicit approaches to hiring staff with private sector
skills, and needs to realistically evaluate resource needs in terms of
number of staff, and quality and quantity of technological tools and
data systems.
In addition, while much of the world has successfully moved to use
the tools of continuous quality improvement, HCFA is mired in old
practices and is unable to move quickly to test and implement new
approaches. I suggest that HCFA should be given much more freedom to
implement pilot studies or test efforts to guide a movement to more
efficient service. Simply put, no one has ever accused HCFA of being
too ``nimble.''
Up until now, HCFA's way of trying out new ideas has been using the
waiver authority under Section 1115. That approach has evolved into
doing things under the clinical trials mindset: plan, execute for
several years, carefully evaluate. The cycle time is years. HCFA needs
a new approach to trying out ideas on as short a turn around as does a
well-run managed care company. These might be called ``feasibility
waivers'' or something without the word ``waivers'' in it where HCFA
tries out a new way of paying providers or contracting for services.
the need for new resources
As I and others have previously said, it is important to emphasize
the need for more resources for HCFA itself. When I hear people brag
about how little Medicare spends on administration, I cringe. That
should be a source of embarrassment, not pride.
The agency is understaffed (both in numbers and in the mix of
skills) and it is seriously hampered by inadequate systems. There are
actually fewer staff in HCFA today then when I became administrator 15
years ago, despite a tripling of the outlays. The inadequacy of the
resources shows in the quality of the output.
structural reorganization
Certainly, it is appropriate to look at HCFA at this time and to
consider reforming the Medicare program. Now nearly 25 years old, HCFA
needs to be updated. However, a large-scale reorganization is not
necessarily the way to do it. As well intentioned as it was, HCFA's
recent re-organization produced little effect but chaos. It was so
extensive--involving moving so many people and boxes on the
organizational chart--that it created mass confusion. I know that Bruce
worked very hard to get the best advice possible before launching the
new structure; however, experience shows that it did not work.
Accountability has been diffused throughout the agency at the
regional and central levels, individuals outside the agency are
confused about who is accountable for particular issues, and uniform
implementation of procedures and processes is largely absent. A
confusing organization muddies HCFA's essential dialogue with the
private sector, which is already unsympathetic to HCFA and even more so
to the chaotic structure. The private sector rightfully expects
corporate-type efficiency in their interaction with the agency. Rarely
are problems solved by ``moving the boxes around'' on an
organizational chart. There are a number of examples of problems
that I and others think are attributable to the recent reorganization
of HCFA. I will be happy to discuss these in the question and answer
period that will follow shortly.
reevaluate medicare's contractors
I believe it is time to reevaluate Medicare's contractor system--
the fiscal intermediaries and carriers. There has been a reduction in
the number of contractors over what formerly was the case .
I fear we still have too many intermediaries and carriers to be
efficient. And further, the large variations across them is not in the
best interests of beneficiaries or providers. With today's information
and communications technology, we could dramatically reduce the numbers
of contractors, and improve the management of the program while being
more efficient.
medicare managed care
I would suggest that the most significant problem of Medicare--and
thereby of HCFA--is that it is stuck firmly in a fee for service
mentality and modality. Despite efforts on the part of the Agency, the
managed care option for Medicare has not achieved its great promise. In
my opinion, integrated health delivery systems are much more
appropriate and responsive to the needs of seniors, certainly far more
promising than the ``yellow pages'' fee-for-service approach of
organizing care for seniors with complex, chronic illnesses.
Nonetheless, a hostile environment and ambivalence toward an
integrated, or managed care, approach, doomed its implementation. In
fact, the way it was created was directly linked to its downfall, as it
resulted in so many onerous regulations on health plans.
My thoughts about giving Medicare beneficiaries choices are long-
standing. In 1987, I wrote an article for the Wall Street Journal
editorial page on this subject entitled, ``Medicare's Private Option.''
My message was simple: keep traditional Medicare intact, but increase
choices available to Medicare beneficiaries by expanding the role of
private sector health plans. At that time I wrote--and still believe
today--that private plans, including managed care and indemnity plans,
should compete with the traditional program on the basis of quality and
cost. I oppose forcing older Americans to leave traditional Medicare in
favor of private health plans. What I support is giving them choice. Do
not take away the current Medicare system--just give beneficiaries more
choices.
When I served at HCFA, we believed that well-managed private health
plans offered an attractive alternative to traditional Medicare
coverage. We were committed to giving private health plans a fair
opportunity to compete and letting beneficiaries decide what option
would work best for them. Under this vision for Medicare reform, we at
HCFA advocated a Private Health Plan Option, or PHPO, based on five
goals:
(1) Ensuring appropriate access to quality care;
(2) Increasing incentives for efficiency;
(3) Reducing government's role in deciding how much to pay for
individual health care services;
(4) Reducing government's role in micromanaging medical practice; and
(5) Expanding the range of choices available to both Medicare
beneficiaries and health care providers.
However, what has happened is that an inhospitable environment has
combined with complex legislation and unrealistic rules to make working
with the government in a managed care setting undesirable to the
private sector.
For example, reimbursement rates can change every year. This kind
of uncertainty is unacceptable to most businesses, who would prefer a
longer-term arrangement. In fact, the attitude among many private
companies is that doing business with the federal government is a sure
way to lose your shirt. I suggest that a concerted effort to change
this attitude through a change in business approach is warranted.
For example, setting rates every two to three years would create
stability in the eyes of the private sector, and increase desirability
of participating in the Medicare managed care program, thus increasing
choice for seniors and competition to participate. The end result would
be that HCFA could be more discerning in their choice of contractors,
and operate more efficiently overall. I would suggest that you compare
the current Medicare+Choice program, which has not succeeded, to the
FEBHP, where managed care plans participate successfully alongside fee
for service plans and where real choice is thus available.
One of the ideas that has gained some currency is to remove the
administration of the managed care portion of Medicare from the fee-
for-service part. I believe on balance that both should remain within
HCFA, but that it makes sense to develop a new, separate unit whose
full-time assignment is Medicare+Choice. This is important in part
because HCFA staff are still largely fee for service oriented. The new
unit would need individuals from the private sector with specific
expertise in managed care programs.
a medicare board
I would like to comment on another matter that has received a fair
amount of attention recently--the creation of a Medicare Board. HCFA
has a difficult job--perhaps as difficult as any in government. Over
the 35 plus years since the creation of Medicare and Medicaid, HHS and
the Congress have worked to address program design and needs. The
Secretary of HHS and the Administrator of HCFA are the President's
appointees charged with responsibility for HCFA, within the laws
enacted by the Congress. The creation of a National Medicare Board, or
similar organizations will only serve to make more diffuse the systems
of management, responsibility, and accountability that are necessary
for the agency to be effective in its work.
summary
In summary, then, I would argue that several things must be in
place if HCFA is to succeed in fulfilling its job as the agency
entrusted with responsible management and leadership of the Medicare
program.
bHCFA needs an administrative structure that promotes internal
accountability and responsibility, and then translates that
accountability and responsibility into a structure that is
understood by all of the HCFA partners--both public and
private.
HCFA needs to modernize and enhance its existing workforce
with new and different skills that focus on the full range of
program responsibilities including prudent purchasing, quality
assurance, and innovative health insurance arrangements. HCFA
needs to be receptive to change as the world around it changes.
HCFA needs adequate personnel and system resources that are
reflect the enormous responsibilities involved in a $200 plus
billion program.
HCFA needs new legislative and regulatory flexibility that
would enable the agency to engage in different innovative
arrangements with health plans and others.
And finally, HCFA needs to be able to work in an environment
of reasonable expectations from the public, the Administration,
and the Congress.
It has been a pleasure to participate today with the other former
HCFA Administrators. I would also like to thank the Committee for
creating this forum and for bringing us together to discuss the many
important issues facing HCFA. I would be pleased to answer any
questions you might have. Thank you.
Mr. Greenwood. Thank you very much for your testimony. As
witnesses are undoubtedly aware, there is a vote in progress
right now, and I don't think the members who are here want to
miss the opportunity to hear from the ``Mount Rushmore'' of
HCFA here that we have assembled. So we are going to recess for
about 10 minutes.
[Brief recess.]
Mr. Bilirakis. Well, let us just go ahead and get started.
Dr. Wilensky, John M. Olin Senior Fellow with Project HOPE, the
Chair of MedPAC, located here in Bethesda, Maryland.
Dr. Wilensky, please proceed.
TESTIMONY OF GAIL R. WILENSKY
Ms. Wilensky. Thank you, Mr. Chairman. I was the HCFA
Administrator from 1990 to 1992. As you indicated, I have been
the Chair of the Medicare Payment Advisory Commission since
1997. It has given me an opportunity to see some of the effects
of the current statute and regulations in terms of
administering the Medicare program.
I am primarily going to give my remarks, though, as a
result of the experiences I had as HCFA Administrator and as a
health policy analyst.
There is no question that HCFA faces a fundamental tension.
The members have noted that, and Bill Roper has already. That
tension reflects the competing focus on establishing a user-
friendly Medicare program, assuring that seniors can get access
to high-quality care and being financially prudent with
taxpayers' money. And I think it is important that we recognize
that there is this fundamental tension that HCFA faces.
Nonetheless, it appears now that there is so much
frustration, particularly being reported by providers,
confusion over billing procedures, fears of making false
claims, that there is reason to be concerned that seniors will
have difficulty getting access to the high-quality care that
Medicare has always provided, if there isn't a way to make this
a more user-friendly program both for seniors and particularly
for providers.
In its March 2000 report, MedPAC reported some evidence,
although that evidence has not been continuing, of down-
coding--that is, providers billing for services that were less
complex than they had actually provided. You should not
countenance abusive behavior, and the Congress has been
appropriately concerned about up-coding in other types of
Medicare fraud and abuse. But I believe that the Government
should be equally concerned about evidence of down-coding. This
is troublesome, and it can't, in the long-run, be good for the
Medicare program or for the seniors that it serves.
There are a variety of places where we have frustration,
but as I talk to physicians and hospital administrators, home
care agency administrators, nursing home administrators, it
seems that the greatest sense of frustration revolves around
the contractors' performance, the so-called ``fiscal
intermediaries and carriers.''
When I was there, that same level of hostility and
frustration revolved around the PROs, the Peer Review
Organizations, and I am going to make a suggestion for some
changes that reflect some of the reforms that went on in the
early and mid 1990's, that I think have helped reduce the
tension between the provider community and the PROs.
In general, to reduce frustration, we need to make sure
that providers have better education, and seniors as well; that
there are clear billing procedures and protocols; and that
there are less frequent and more regularized periods when
changes are made. We need to make sure that HCFA is funded
appropriately. Thus far, Dr. Roper has said so, I am quite
certain that the other two HCFA Administrators will echo that
concern.
And, finally, you need to have a change in attitude by the
contractors. Right now, the default position--that is the
presumption unless proven otherwise--is that the bills are
submitted in an incorrect way, and that program integrity
requires reliance on documentation. Because there is limited
funding in addition, there is an attempt to use a series of
different automated strategies to deny claims. It is an attempt
to not get into a position of pay-and-chase--that is, pay the
bills and then only after-the-fact, if there is a problem, to
go after those particular providers.
A different default position would have a very different
attitude--to presume that bills that are properly submitted and
that can go through the screens are, in fact, proper, and then
to search for patterns of abuse, using statistical analysis.
This is very similar to the change that occurred with the PROs
in the early to mid 1990's--that is, before that time a PRO
would pick up a record on an after-the-fact basis and try to
decide if there was an untoward event, whether or not that
meant something. But, in fact, it was very difficult, in a
retrospective case-by-case review, to see whether it was, in
fact, a problem. There has been over the early to mid 1990's a
change in how the PROs respond in looking for patterns of care
that are problems and focusing on patterns of outcomes, and it
is precisely that change in position and default that I think
would change the attitude and change the behavior of the
contractors.
We also need to be very mindful of the burden that is
imposed on the providers by the various assessment and data
collection efforts, and to be sure that we are collecting data
that is needed only for purposes of payment or for purposes of
quality monitoring. When you look at the minimum dataset that
has been put together by HCFA, which I have, it is overwhelming
at the amount of time and the complexity that these data
collection efforts are asking the providers and the
administrators to make in filling out these claims, time that
would otherwise be devoted to patient care activities.
I believe that it would be helpful, although the timing is
a concern, to reorganize HCFA so that it focused on running a
modernized traditional Medicare program. I think that the
current combination of Medicare+Choice with traditional
Medicare is not a stable and viable long-term option. This is
clearly the subject of another hearing as to why the current
construction is not one that I believe is a stable combination.
I am on record as saying that I believe that a Federal
Employees Health Care Model is a good model for the future,
where traditional Medicare remains an important part of the
Medicare program, but there are a variety of other private
programs that are offered alongside traditional Medicare.
If this type of a reform is introduced, the question is
whether or not the traditional HCFA program ought to be in the
same administrative agency. Although I think there are
arguments that can be made on both sides, I would prefer to see
it in another part of HHS, or possibly in an expanded part of
OPM, the Office of Personnel Management, which is where the
actual Federal Employees Healthcare Plan is run. It is a hard
call because there are some discontinuities that could result
by having these programs split but, on balance, I think that
the expertise is not in HCFA and that the focus in HCFA is on
running a traditional Medicare program, and that is where it
should be. HIPAA ought to go the same place where this
administration occurs. So, if you do go with the Federal
Employees Healthcare Model, you have to make this decision
about inside HCFA or in another agency. I don't think the
Medicare Board is a proper source of accountability.
I also believe that the clinical and QA functions that are
now in HCFA could go to the CDC or the FDA, and at least the
moms and kids part of Medicaid could be combined with the
Children's Health Insurance Program and made a part of the
agency that runs TANF. I don't feel that this is the only kind
of reform that would work, but it is an attempt to try to allow
HCFA to focus on that which ought to be its main
responsibility--that is, running traditional Medicare. That is
a very major obligation, and one that takes a lot of focus.
The timing of making such a change is very important, and
it is possible that we have already past the point in early
administration where it makes the most sense to do this type of
reorganization. And being mindful of the fact that any type of
reorganization, even one that takes discrete pieces of HCFA and
attempts to move them elsewhere, runs the risk of having
further disruption.
So, in thinking about the reorganization, you need to
consider the types of reform that you want to put in place. You
ought to probably phase in these changes, and you need to think
about the timing very carefully. But I believe that this type
of reallocation of function so that HCFA is focusing on running
the very best modern of what we now call a traditional Medicare
program would help seniors get the kind of quality care we want
to see in the long-term.
For me, the bottom line is that there is currently a
serious mismatch between the responsibilities that the Congress
and the Administration have given HCFA, and the resources that
are made available to HCFA.
HCFA needs to function better. It needs to reduce the
burdens on providers. But, equally important, the Congress
needs to give HCFA more flexibility and more funding, and stop
the kind of micromanagement that all four of us have
experienced.
And while we are at it, HCFA could also use a new name.
Going around the country and trying to explain to people what
the Health Care Financing Administration meant was one more
burden on the Administrator that Administrators don't need.
Thank you very much, Mr. Chairman.
[The prepared statement of Gail R. Wilensky follows:]
Prepared Statement of Gail R. Wilensky, Ph.D. John M. Olin Senior
Fellow, Project HOPE
Mr. Chairman and members of the subcommittee: Thank you for
inviting me to appear before you. My name is Gail Wilensky. I am a John
M. Olin Senior Fellow at Project HOPE, an international health
education foundation and also a former Administrator of the Health Care
Financing Administration. My testimony today reflects my experiences as
a HCFA Administrator as well as my views as a health economist.
I am here today to discuss ways to improve the way HCFA functions.
The objective of the changes I am recommending is to improve the way
the Medicare program functions and to reduce some of the regulatory
burdens on providers without abdicating the fiduciary responsibility of
HCFA to be prudent stewards of the Medicare trust funds. I would also
like to discuss possible ways to reallocate some of the functions that
historically have been assigned to HCFA. Such a reallocation could make
the agency function more effectively by allowing HCFA to concentrate
its energies on running Medicare. I believe such a reallocation of
functions would be desirable, irrespective of other reforms to the
Medicare program but would be particularly important with some of the
reforms under consideration. I recognize, however, that the timing of a
reorganization would need to be carefully considered, in order to
minimize the potential for further disrupting the functioning of HCFA.
Fundamental Tensions Faced by HCFA
HCFA faces certain fundamental tensions with its goals of
establishing a user-friendly Medicare program and assuring that seniors
can get access to high quality health care while also being financially
prudent with the taxpayers' monies. The frustration being reported by
many physicians and other health care providers because of the
confusion about billing procedures and fears of being charged by HCFA
and/or the Inspector General with submitting false claims is, in part,
a reflection of these tensions. Some of the tensions are inherent in a
program as large and complicated as the current Medicare program but if
left unchecked, can mean an important diversion of time and energy away
from patient care and ultimately, become a threat to the future
availability of high quality care.
Last year, MedPAC reported evidence of some ``down-coding'' in both
the hospital and physician settings. Although there is not continuing
evidence of down-coding, the finding was consistent with reports by
various providers regarding their uncertainty about how to bill
Medicare appropriately and their concerns about being charged with
making false claims against the Medicare program. Government officials
should not countenance abusive behavior by providers, but it should be
equally worrisome to the Government that providers may be deliberately
under-billing Medicare in an attempt to stay clear of HCFA or the IG.
Such behavior will not be to the long-term benefit of Medicare or the
seniors it serves.
Strategies to Improve Functioning and Reduce Provider Frustration
Among the many complaints raised by providers, uncertainty about
proper billing and coding and discrepancies in treatment by various
contractors (called fiscal intermediaries and carriers) seem to be at
the top of most lists. Better education sessions, clearer billing
procedures and protocols, less frequent and more regularized periods
for changing billing procedures would represent important steps in
reducing these legitimate frustrations. As is true for many aspects of
HCFA reform, some of these changes will require greater flexibility
from the Congress than has usually been granted to HCFA.
Most of these changes can be carried out administratively, but
expanding the types of organizations that can be contractors will
require a change in legislation. And ultimately, a better functioning
system of contractors will require better funding of the contractors as
well. The mis-match between the administrative responsibilities and the
resources for administering Medicare has been noted by each of the
former Administrators. A former senior career HCFA employee summed it
up best when she said, the problem with the contractors is that they've
been asked to do ``too much, too fast in a system that's been overtaxed
and under-funded.''
Some of the problems associated with the contractors go beyond
uncertainties about proper billing and inadequate responsiveness to
queries raised by providers. These problems are associated with the
very divergent way Medicare, as a national program, is administered
around the country. The tension between the goal of national uniformity
for a Federal program like Medicare and the importance of allowing for
some local discretion to reflect the different ways medicine is
practiced around the country has been a part of Medicare since the
program began. The granting of limited discretion to local contractors
with regards to coverage and payment was a part of the original
Medicare legislation. This discretion makes Medicare less conservative
with regard to the coverage of new treatments and technology than would
occur with a program requiring national uniformity.
While local discretion in payment and coverage may be the cause of
some provider frustration, the more significant source of frustration
comes from discrepancies in the program integrity portion of Medicare.
Theses tensions occur because of the discrepancies in policies and
behavior between HCFA central-office, the ten regional offices and the
more than fifty private contractors that carry out the actual payment,
claims processing and audit operations for Medicare. Unlike
discrepancies in coverage, which are actually quite limited, these
discrepancies primarily involve differences in the amount, duration and
scope of covered benefits. They produce little gain and a lot of
provider confusion and frustration.
The importance of the program integrity activities has clearly
increased, partly as a result of recommendations from the OIG audit on
financial management and partly as a result of the Health Insurance
Portability and Accountability Act (HIPAA) and the Balanced Budget Act
(BBA). Both HIPAA and BBA focused attention on fraud and abuse and
provided increased resources for program integrity. But the increased
emphasis on program integrity didn't have to have produced the level of
frustration that has resulted. This frustration is more a reflection of
the prevailing attitude towards Medicare providers, namely that they
are not to be trusted and that the way to prevent improprieties is to
review first and pay later. With each contractor having its own notions
of proper payment and utilization, it is not surprising that
substantial inconsistencies have resulted and with them, substantial
frustration.
The default position of the current environment presumes billing
may be incorrect or inappropriate. In such an environment, program
integrity requires heavy reliance on documentation. This presumption
combined with limited funding for contractors has led contractors to
develop a series of automated strategies that deny claims. This has
limited the amount of editing that needs to be done after-the-fact and
also reduces the need to ``pay and chase.'' But it has also led to an
explosion of medical review polices, policies that differ from
contractor to contractor and with it, a heavy reliance on
documentation.
A different strategy, reflecting a different attitude and default
position, would be to pay properly submitted bills and search for
patterns of abuse based on statistical analyses. This change in focus
would mirror a change that began taking place with the Professional
Review Organizations (PRO's) in the early to mid 1990's. Prior to that
time, activities by the PRO's focused on a case-by-case, retrospective
review of medical records. The problem was that when a ``bad'' or
undesirable outcome occurred, it was very difficult to tell whether it
was a single, idiosyncratic occurrence or whether it indicated a
problem worthy of pursuit. This behavior limited the effectiveness of
the PRO's and made them intensely disliked by the physicians.
As part of a more general emphasis on quality improvement, PRO's
began to focus on patterns of care and patterns of outcomes, rather
than individual case review. Physicians and institutions that have
patterns of care and patterns of outcomes that differ from their peers
are more readily identifiable as potential problems and can be dealt
with more directly. A move to this type of model would have the
statistical-analyst contractors become the focus of program integrity
rather than the medical directors and carriers and have the medical
directors refocused on quality improvement efforts.
Another way to reduce provider frustration is for HCFA to be more
mindful of the time and burden imposed on providers by various
assessment and data collection efforts. The Beneficiary Improvement and
Protection Act (BIPA) required the development of patient assessment
instruments that use common data elements. This requirement provides
HCFA with an opportunity to focus on the development of instruments
that emphasize brevity and simplicity, collecting only those data
elements needed for payment or quality monitoring. It is not obvious
this requirement has driven past efforts. As an example, the MDS
(Minimum Data Set), developed to guide care planning for nursing home
resident care planning, has more than 350 items to be filled out.
Instruments of this nature may not only compromise data accuracy and
take valuable time away from patient care, but are also likely to
increase provider frustration.
In a similar vein, concern has been raised in MedPAC's March 2001
report about use of the Minimum Data Set for Post-Acute Care (MDS-PAC)
as the basis for collecting data for quality monitoring and payment
purposes across all post-acute care settings. While this instrument has
the advantage of potentially providing a more coordinated approach
across all post-acute care settings, which is clearly a plus, it has
the disadvantage of being lengthy and complex. MDS-PAC covers more than
400 items, with at least seven different time frames for patient
assessment. Collecting the same information in the same way across
settings is important, but focusing on the precise purposes for which
the data will be used and defining the minimum set of information
needed to accomplish this goal is equally important.
MedPAC will be issuing a report in December which looks at Medicare
burdens on providers and will lay out areas where productive reform
could be undertaken and suggest the principles that should underlay
such reform. MedPAC's March 2002 report will also include some focus on
contractor relations in Medicare.
HCFA's Current Functions
Reviewing HCFA's current responsibilities and reallocating some of
these functions to other parts of HHS represents another strategy that
may help HCFA focus on efforts to reduce provider burden and
frustration.
HCFA's foremost responsibility is administering the Medicare
program. Medicare covers 39 million people and is expected to cost
around $240 billion in FY2001. The agency employs approximately 4200
individuals in central and regional offices but has contracted
indirectly for the services of about 38,000 FTEs through its network of
over 50 private contractors who act as its fiscal intermediaries and
carriers. These include the people referenced earlier that actually pay
the bills and provide financial oversight for the services provided. In
addition, HCFA manages the participation of more than 260 plans
involved in the Medicare+Choice program. This makes HCFA bigger than
most cabinet level departments in terms of both money and personnel.
The proper oversight and administration of Medicare is a full-time
job for any agency. The problem is that HCFA is also responsible for
providing oversight to the Medicaid program, conducting surveys and
certification of certain types of health facilities, approving the
Children's Health Insurance Program (CHIP) proposals submitted by the
states, enforcing federal health insurance portability laws and some
fraud and abuse prevention activities. These activities require a wide
variety of talents, skills and experience and present a management
problem for even the most talented administrator. HCFA's problems will
only get worse as the baby-boomers start to retire and the number of
people on Medicare increases dramatically, making the world's largest
insurance company, HCFA, even more difficult to manage.
Administrative Issues Supporting a Reformed Medicare with Prescription
Drugs
Even in the absence of any type of Medicare reform, including the
adoption of a prescription drug program, a case can be made for
restructuring HCFA so that it can focus on running the Medicare program
more effectively. If Medicare is changed in any substantial way, the
administrative issues become even more important. Among the issues that
should be addressed are the functions that should be included in a
reorganized HCFA. How should HCFA be restructured so that it can
effectively manage a modernized fee-for-service Medicare program? What
type of administrative structure makes sense for the private plans that
participate in Medicare, either as Medicare+Choice or potentially as
separate prescription drug programs? What role will PBM's have in a
reformed Medicare program and how will they be administered?
A first logical step, at least in principle, should be to move all
or most non-Medicare related functions as well as some clinical and
quality assurance functions currently in HCFA elsewhere within the
Department of Health and Human Services. The functions relating to
conditions of participation and quality assurance such as the survey
and certification of nursing homes, the conditions of participation for
hospitals, and the certification of clinical labs should be housed
either in CDC or FDA.
The oversight of the Medicaid program is more complicated. Medicaid
has always been somewhat the stepchild of HCFA. At least the portion of
Medicaid relating to ``moms and kids'' should be moved elsewhere and
given appropriate resources and leadership. The part of Medicaid that
covers the aged and disabled is more complicated because of the overlap
with Medicare. If this portion of Medicaid is also moved, coordination
with Medicare could be provided through interagency agreements. Putting
together the ``moms and kids'' portion of Medicaid with the approval of
proposals submitted by states under CHIPs also makes sense. One
consideration would be to put these programs together with the
Administration for Children, Youth and Families, the agency that runs
the welfare program. Another consideration would be to put all of these
programs together in a new entity that also included other state health
programs like HRSA (Health Resources and Services Administration), and
SAMSA (Substance Abuse and Mental Services Administration).
HCFA needs to focus on running a modernized fee-for-service
program. A series of changes would be needed to modernize the
traditional Medicare program. These include the authority to use
selective contracting, centers of excellence, disease management
programs, best-practice programs and other changes commonplace in
better-run private sector plans. However, the desirability of some of
the specific authorities to be granted HCFA will depend in part on the
viability of the private sector programs offered to seniors. Selective
contracting, for example, may be a desirable option as long as there is
an active set private-sector plans but represent undesirable amount of
power to grant to government if traditional Medicare is effectively the
only Medicare program.
One question is whether HCFA will be given the power to administer
a modernized fee-for-service program. Will Congress allow HCFA the
flexibility that will be needed to run such a program and will Congress
and the Administration provide HCFA with the resources needed to carry
out such a task. History is not encouraging on either of these issues.
If HCFA or any governmental agency is to run a modernized fee-for-
service program, Congress will need to change its relationship with
HCFA and retreat from it very micro-prescriptive directives. Changes in
attitude and behavior will also be required from HCFA employees. HCFA
has been painfully slow to undertake demonstrations or adopt promising
ideas from the private sector. If HCFA is to run a modernized fee-for-
service program, the organization will need to be more responsive, more
pragmatic and more creative in its behavior than it has been in the
past.
The appropriate administrative structure for the private plans that
participate in Medicare in part depends on how Congress chooses to
further reform Medicare. I believe that the current combination of a
Medicare+Choice program, which provides a highly regulated environment,
with payments set independent from the traditional program and a
traditional Medicare program, is not a stable, long-term option. I am
already on record as supporting a reform modeled after the Federal
Employees Health Benefits Program. This type of program, particularly
if some provisions were made to protect the frailest and most
vulnerable seniors, would allow seniors to choose between competing
private plans and a modernized fee-for-service Medicare program for the
plan that best suits their needs.
I am well aware that the FEHBP model remains controversial among
some Members of the subcommittee. However, I think it's important that
committee members recognize that many of the most vexing issues that
need to be resolved for a premium support program must also be resolved
with Medicare as it is currently structured. These issues include risk
adjustment, providing understandable and user-friendly information to
seniors, assuring that quality care is being delivered, providing
safeguards for frail and vulnerable populations and given the strong
interest in prescription drug coverage, the design of a prescription
drug benefit that doesn't depend on administered pricing to moderate
spending.
Some attention has been given to the potential use of a Medicare
Board to provide oversight for private plans and to negotiate with
private plans as well as to provide the administrative structure for a
premium-support type of reform, if that is the direction of reform
Congress chooses to take. However, potential problems of accountability
of a board plus the difficulties of using a board-structure for an
entity that has significant administrative and operational
responsibilities make the Board concept a less attractive
administrative structure. A better choice would be a separate agency
within HHS, such as was proposed last year in H.R. 4680 or an expanded
version of the Office of Personnel Management, which negotiates with
health plans on behalf of the Federal Employees and resides in the
executive office of the President. The most important functions of this
new entity would be to review and approve benefit packages, make
payment modifications (to reflect risk adjustment, etc.), direct open
enrollment periods, provide information about plan choices and either
structure competitive bids or be empowered to negotiate premiums. This
new entity would also be an obvious place to put HIPAA
responsibilities.
I recognize this type of structure would divide the responsibility
of administering the overall program between two entities but I believe
this is far preferable than lodging both with HCFA. HCFA has little
experience in negotiating with outside entities. The functions and role
for government in running and monitoring competing private plans are
fundamentally different from the experiences and mind-set of HCFA
employees. Also, separating these functions would help HCFA focus on
administering a more modernized fee-for-service program.
Finally, we need to be clearer about the role PBM's will play in
administering the prescription drug program for traditional or
modernized Medicare and the type of leadership that will be needed to
manage such a program. Almost all of the prescription drug proposals
have invoked the concept of PBM's as the appropriate administrative
structure to administer an outpatient drug benefit. In large part, this
reflects the belief that administered pricing, the main instrument of
cost-containment for other parts of traditional Medicare, will not be
used for prescription drugs. Since PBM's have had some success
historically in moderating spending in the private sector, it has been
assumed that they will be able to do so in the public sector as well.
But many unanswered questions remain about how the PBM's will
function, how much independent power they will be granted and where the
government oversight function of the PBM's will be lodged. Will there
be competing PBM's within an area, how will they be chosen, how much
power will they have to devise formularies, encourage generics, impose
tiered co-payments, will they be allowed to take financial risk, will
they be encouraged to take financial risk and so forth. If there is a
new administrative agency providing oversight for private health plans,
that would be the logical place to provide oversight for the drug
benefit as well. In any case, the management of this benefit will
require leadership and private sector experience not currently
available in HCFA.
Getting From ``Here'' to ``There''
Historically, changes in Medicare reimbursement policy and
structure have been phased in over several years. This has helped to
cushion the disruption that abrupt changes could cause. It also makes
sense to consider phasing-in changes in the structure or organization
of a reformed Medicare program that requires substantially different
roles for government or substantially different roles for the
administrative institutions supporting the program. Any interest in
experimenting with various strategies for reform or the administrative
structures supporting reform makes it important that we begin the
process.
But the Congress needs to be clear that there are risks and
potential costs involved with any restructuring of HCFA. The
reorganization of HCFA several years ago affected most individuals
within the agency and caused significant disruptions in workflow.
Reorganizing HCFA would best be done at the beginning of a new
administration or at the end of a presidential term. The ideal time for
some of the reorganization may already have passed. Reorganizations
that move relatively separable parts of the agency will be less
disruptive than reorganizations that move large numbers to new
positions.
Whatever the decision on reorganizing and restructuring HCFA,
Congress needs to recognize that there has been a serious mismatch
between the responsibilities given to HCFA and the resources the agency
has been granted. HCFA needs to find ways to reduce the burdens being
placed on providers and to function better as an administrative agency.
Congress needs to be more realistic in terms of the demands it places
on the agency and with the support it provides. Both need to happen
together; neither is likely to happen alone.
Mr. Bilirakis. All four of you smiled at that suggestion.
Dr. Vladeck is the Senior Vice President for Policy with the
Institute for Medicare Practice of Mount Sinai School of
Medicine in New York.
Dr. Vladeck, please proceed, sir.
TESTIMONY OF BRUCE C. VLADECK
Mr. Vladeck. Mr. Chairmen, members of the committee, I am
very pleased to be here again back before you today to have the
opportunity to participate in this hearing. I am still weighing
in my mind the metaphor of ``Mount Rushmore'' and my comfort
level with that, but it is a whole new perspective on a variety
of things for me.
As I believe you know, I was Administrator of the Health
Care Financing Administration from 1993 through 1997. Prior to
that time, I spent 6 years on the Perspective Payment
Assessment Commission, one of the predecessors to MedPAC. And,
as Mr. Bilirakis well knows, right after I left HCFA, I was
appointed as a member of the National Bipartisan Commission on
the Future of Medicare, where I had the pleasure of serving
with the Chairman, which was one of the few pleasures I would
associate with that experience. So, I have been involved in
these issues in a number of ways. Of course, I am now employed
by a major academic Medical Center which has some sensitivity
to Medicare policy issues. As well, the committee staff knows,
and they have been very considerate and flexible, I returned
just last night from a very long trip abroad, which explains
the absence of an appropriate written statement on my part, and
I appreciate the committee's indulgence in its absence.
There was a report that we did at the Institute for
Medicare Practice on the future of Medicare that I asked be
distributed sort of in lieu of that, and I do want to make--I
was going to make just four points very quickly this morning,
but in response to Gail's comments and some of the others that
have been made recently, I would make a fifth.
I agree entirely on the name issue. I actually thought that
Medicare and Medicaid Administration, or ``MAMA,'' would be a
much friendlier name for the Agency. And I found when we
discussed internally, that every male member of the senior
staff was in favor of that renaming, and every female member
was opposed. And since we had more women in the senior staff of
the Agency than men in the senior staff of the Agency, that was
the end of that particular proposal, and also that
Administrator's willingness to float any specific proposals for
changes in name, but I would certainly applaud any efforts in
that regard. Almost anything would be better.
There are four other points that I want to make. First, I
used to teach that policy administration and public
administration were in some ways fundamentally inseparable, but
in some ways as well, they are not, and there are just some
basic administrative things that one needs to do anything in
terms of people and the right kinds of people, and money, and
information systems, and both of my colleagues who have spoken
already have spoken to it, and I know that Nancy-Ann would
agree.
I want to particularly emphasize the extent to which, in
provider communications and provider education, in fact, HCFA
is doing substantially less of that than it did a decade ago,
purely for budgetary reasons. Almost all of those activities
were historically funded through the contractors. As contractor
budgets were effectively frozen in the light of increasing
volume of claims processing activities and the statutory
requirements on timeliness of claims processing, those
functions gradually got squeezed out, and the level of service
or nonservice being provided to providers and beneficiaries
alike is woefully inadequate, we would all agree with that, and
that is a pure money issue. In fact, I think, as many private
sector organizations have learned over time, while there are
issues of management and training and staffing an organization,
at some fundamental level you get the level of customer
service, however you define your customers that you pay for,
and we are not paying for any under the administration of
Medicare and Medicaid at the moment, and it shows, but it can
be fixed.
The second point I would make is that when one seeks
greater flexibility and nimbleness, to use Dr. Roper's phrase,
on the one hand, simultaneously, with greater consultation, due
process, fairness and openness to a wide variety of views, we
have a flat-out contradiction. And this is a contradiction that
Members of Congress are familiar with in a number of ways, as
well as folks in the executive branch, and so forth, but I
think both that we need to recognize it relatively explicitly
and that we need to--I think the Congress needs to--take some
responsibility about making decisions about it.
We talk about greater authority to do things like disease
management or inherent reasonableness, as Dr. Roper described,
I would suggest that HCFA, as it has traditionally been
overseen by the Congress and traditionally responded to by
providers, could never in a million years get away with the
kind of flexibility and the kind of privacy of negotiations and
the kind of processes that go on between the Office of
Personnel Management and the plans that participate in the
Federal Employees Health Benefits Plan.
The outrage that one would hear from the provider community
and from the plans about secret negotiations, about
administrative discretion, about not having adequate
consultation, and so forth, would make the kind of negotiations
that drive the operations of the FEHBP simply impossible,
unless one were prepared to accept that large parts of the
Medicare program would be administered informally through a
discretionary negotiated process, largely in secret, which we
couldn't even do in particular markets for half-a-handful of
managed care plans without Congress intervening to reopen those
experiments.
Similarly, there is a flat-outright tension between
flexibility to respond to the enormous heterogeneity of the
health care system in the United States and the increasing
pressures to have uniformity and ``fairness'' in policy from
one place to another. Some of the so-called ``confusion'' or
lack of clarity that providers particularly, and manufacturers,
complain about in that a policy regional office in California
may interpret a policy differently from a regional office in
Texas, arises from the fact that those two regional offices are
trying to respond to very different local circumstances. This
is a very big, very heterogeneous country, with very big, very
heterogeneous health care systems, and the more uniformity you
have, the more instances you will have in which rules seem
particularly inappropriate or out-of-place in particular
communities, and that is just a constant tension that is built
into having national programs of this kind in a health care
system that is so heterogeneous, but we have to be explicit
about that.
The third point I would make is, I think HCFA is often
criticized for what are really policy failures, and I think
someday, if ever, someone writes an objective history of the
Medicare+Choice, in fact, they will applaud Nancy-Ann Min
DeParle and her colleagues who were then at HCFA for an
absolutely extraordinary job of bringing up an extraordinarily
complex set of legislative requirements, and a whole new
approach to beneficiary education and beneficiary choice, in a
remarkably short period of time, under a system of enormously
constrained resources.
I think the simple fact is that when we all worked together
on the Balanced Budget Act in 1997, we ended up with a payment
formula for managed care plans which established a level of
payment in 1998 and 1999 which, in most markets, most plans
could not effectively provide the benefits that they wanted to
provide and avoid losing money. I would specify--I would remind
you that the rates that are paid in every county in the United
States are established by a statutory formula. I think the
Congress, in the Balanced Budget Act, as we all said while we
were working on the Balanced Budget Act, tried to do a number
of mutually contradictory things simultaneously in the
establishment of those payment formulas, and they didn't work
because we were trying to balance too many conflicting
objectives at the same time in setting those payment levels.
The history of managed care participation in the Medicare
program, for which we now have more than 30 years of history,
is that there has never been a protracted period of time in
which the involvement of plans increased in terms of the number
of plans participating in the program and the number of
beneficiaries enrolled in the plans, and the programs saved
money. In fact, the two moved in opposite directions. When the
program was paying plans at a level that was costing the
program money, enrollments went up very substantially, as they
did during my tenure. When we changed the formula in the BBA to
limit the amount of overpayment to plans, enrollments dropped
and plan participation dropped, and we haven't solved that
policy problem. That's not an administrative or regulatory
problem.
Finally, I would just emphasize, as we think about
organizational structures of one sort or another, that Titles
18, 19 and 21 of the Social Security Act are relatively
complicated statutes that affect more than 80 million Americans
directly, and every American in one way or another, in a
variety of important ways, and the expertise and commitment and
dedication of the core staff of HCFA is really, in that regard,
an extraordinary national resource which is, in some says, very
fragile and would be very easy to lose or damage, and I think
we need to worry about it over time, just in terms of all of us
having a stake in and responsibilities for some very, very
important, very complicated programs, about which the level of
expertise or the number of individuals who have some sense of
institutional memory and know what is actually in the statute,
is probably diminishing over time, not increasing over time, as
the programs grow in the number of people they cover.
In some ways, of course--and we haven't talked about it at
all up to this point in this hearing--the Medicaid program, and
the Medicaid statute is even more complicated than the Medicare
statute. And there is an awful lot of Federal dollars at stake
there, and there is the well-being and health care of even more
individuals than are covered under the Medicare program at
stake there. And the risk of diffusing or losing the kind of
just expertise and specialized knowledge that is contained
primarily in the career staff at HCFA, I think, would raise
some very significant concerns about their implications on the
Federal budget and, in the longer-term, for the well-being of
those 80 million beneficiaries.
Again, I very much appreciate the opportunity to appear
here today under these circumstances. I congratulate you on
asking us. I appreciate your asking us to come here, and I am
happy to respond to any questions.
Mr. Bilirakis. Thank you very much, Doctor. Ms. Nancy-Ann
Min DeParle is the immediate former Administrator of HCFA, who
has been pretty busy the last couple of years. She now is the
mother of two. I remember, it seems like yesterday when you
were going through your first one.
Ms. DeParle. It does. It does.
Mr. Bilirakis. It seems that way to me, anyhow. Please
proceed, Nancy-Ann.
TESTIMONY OF NANCY-ANN DePARLE
Ms. DeParle. Thank you, Mr. Chairman, and Chairman
Greenwood as well. I, too, appreciate the opportunity to be
with you this morning. It brings back some pleasant memories
and some difficult memories because I did serve at HCFA during,
I think, a very challenging time for all of us, with the
enactment of the Balanced Budget Act and the need to get the
Balanced Budget Act implemented so we could preserve the
solvency of the Medicare Trust Fund. And I think you saw in
that period the fullest manifestation of the difficulties that
HCFA faces in trying to work with providers and trying to
implement laws that are extremely prescriptive, often for good
reasons, but also in trying to be responsive to providers and
beneficiaries.
I provided a written statement for the record, so I am just
going to hit the high points, and many of the points I am
making have also been made by others here.
I identified two major problems at HCFA. The first is the
one you have heard, I think, from everyone this morning, and
from many of you as well, which is that the Agency has faced
dramatically growing responsibilities and inadequate resources
to handle those responsibilities. And, to me, one number sort
of says it all, which is that in 1998, which was the peak year
of the Balanced Budget Act--and not only was that a period when
we were writing regulations, which is the kind of thing that
you normally do to implement statutes, but I daresay that each
and every one of you had some specific issue with a provider in
your district or your community where you needed some special
help, helping them to understand things. So, there was a lot of
customer service work that we needed to be doing. And the FTEs
in that year were 3942 Full-Time Equivalents whereas in 1980
the FTEs were 4961. So, in a year when I think everyone would
agree our responsibilities couldn't have been greater, the
things we needed to be doing with the providers and just in
managing this transition to all of these changes that we did,
you know, couldn't have been greater, and yet we did not have
the resources to get it done.
The main example that I have cited is one that you heard
also, I think, especially from Dr. Roper, but also from Dr.
Vladeck, which is customer service. For example, I think every
provider should have a manual that they can look to. If you are
a home health agency, there should be a Home Health Manual that
you know all the rules are in there that you know apply for
Medicare, so that you know what to do as a physician. It turns
out that for physicians, it is different in every State, so
there would have to be 50 manuals, but whatever. In Michigan,
they should have a manual. That doesn't exist, and the Agency
was in the process of trying to come up with that--and it
should be online, too, by the way--but the Agency was in the
process of trying to come up with that when Dr. Vladeck left.
We then had to suspend work on it while staff worked on
implementing the Balanced Budget Act. And when we went back to
it to try to get people back involved in doing the manuals, we
saw that most of the work we had done was irrelevant because,
of course, we changed many of the payment systems. We just need
more staff to get these things done, to do the kind of customer
service that I think you want.
Many of you have also complained about the slowness in
answering the mail. You send a lot of letters to us. You get
very specific letters from providers in your district that get
into esoteric details about the wage index in a particular
district, or whatever. It is not something that you can just
send to a mail room and say ``Do a form response to this.'' It
takes analysis. It takes people spending time on it. And we
have had a very difficult time having the kind of staff that we
need to just get that done. You can't say you are doing proper
customer service, if you are not doing those sorts of things.
I want to mention one more example on the issue of
resources because it relates to a point that Ms. Eshoo made,
and Ms. DeGette, which is the coverage issue. We took some
steps forward in the last couple of years in making that
process more open and transparent. And I think if you talk to
the medical device community and the biotechnology community,
they will say that we did take some steps forward.
Now, any citizen can petition Medicare to make a coverage
decision and the Agency is trying to hold itself to timeliness
standards, but we simply don't have the kind of staff that we
need to make those decisions.
The FDA has hundreds of staff who are devoted to looking at
devices and deciding whether they are appropriate and safe and
effective, and I am not saying that that is the same judgment
that HCFA has to make, but you still have to have clinicians
who are able to look at something, to talk to other
professionals, to figure out if it works or not, is it
appropriate for the Medicare population.
We have a lot of trouble attracting people like that, and
we have a lot of trouble finding room for those FTEs in our
budget, and that is something that we really need to fix if we
are going to have the kind of Medicare program we want to have.
The second problem I identified is also something you heard
a lot about this morning, which is not enough flexibility. And,
again, it is not--I am sympathetic to why laws are written in
such a prescriptive fashion. Part of it is, frankly, just to
get scoring under the Budget Enforcement Act rules. It is not
just because people enjoy writing prescriptive laws, but when
they are written in that prescriptive way, then that means the
Agency's regulations need to be prescriptive and, after all, if
you are running a program for millions of providers and
millions of beneficiaries, you need to have some rules. But
then it is very difficult for us when, Mr. Greenwood, you have
a specific problem in Pennsylvania, to be as flexible as you
might like, to try to adjust, to have some discretion. And as
Dr. Vladeck suggested, there would be many who would say that
was unfair if we worked individually with providers. We
actually did quite a bit of that while I was there, trying to
help providers understand different provisions of the Balanced
Budget Act, or give them more time--home health agencies, for
example--to pay back money under the interim payment system.
But it is just very difficult, and there is an inherent tension
between those two roles, and I don't know what the answer is.
But I think a big part of the answer is more resources for the
Agency to do more customer service and more provider education.
You might not be able to change the fact that there is
going to be a tension between prescriptive laws and
prescriptive regulations and discretion, but if we could do
more customer service, then maybe there wouldn't be so much
concern about that in the provider community.
I also had two recommendations, and I am going to add one
more that I heard this morning from Dr. Roper. My first
recommendation is that we should provide HCFA with more
resources. Congress should be very clear about its priorities
among the many things that HCFA could be doing, and we should
give the new Administrator time to achieve them. And I went
into some detail about some of the authorities that I think the
Administrator needs to be able to do his job better.
Investing in HCFA now is critical, I think we all agree
with that, and I am very hopeful that this committee will be
able to do something about that.
Second, I recommend that you try to provide HCFA with
additional flexibility to do its work. Dr. Vladeck talked about
contractor reform and ways of modernizing that relationship and
holding the contractors more accountable. Dr. Wilensky also
talked about that. There are proposals that are here that we
could certainly talk about that would achieve that, and that is
something that is needed.
Finally, I want to associate myself with Dr. Roper's
remarks about the need to have reasonable expectations from
Congress and the public, and that is another recommendation, if
you will. I recently was speaking to a former colleague at the
Agency, and this person is not someone who is prone to feeling
a lot of pressure. And he said to me, ``You know, it is really
hard to be here when you feel like you are working so hard and
all you hear is that HCFA doesn't do a good job.'' And the tone
of this hearing today has not been that way, and I want to
thank you all for that. And I hope that in formulating your
recommendations for the future of HCFA, that you bear in mind
what a tremendous job the people who work there are trying to
do, and that the morale is very difficult right now, it is a
very challenging environment, and that whatever steps you take
should be constructive and should recognize the public service
that those people are providing. Thank you.
[The prepared statement of Nancy-Ann DeParle follows:]
Prepared Statement of Hon. Nancy-Ann DeParle, Former Administrator,
Health Care Financing Administration
Chairman Bilirakis, Chairman Greenwood, Congressman Brown,
Congressman Deutsch, and distinguished Subcommittee Members, thank you
for the opportunity to offer my perspective on how to strengthen the
Health Care Financing Administration (HCFA) so that it can better serve
Medicare, Medicaid, and S-CHIP beneficiaries and the American people. I
applaud the Committee's leadership in soliciting the views of the four
most recent HCFA administrators to provide insight into the challenges
we faced in trying to manage the agency and solicit advice about what
Congress can do to help.
I served as HCFA Administrator from November 1997 until October
2000, when I left to become a Fellow at the Institute of Politics and
the Joint Interfaculty Health Policy Forum at Harvard University. I am
now working as a health policy consultant and as a senior advisor at JP
Morgan Partners, LLC. Before coming to HCFA, I served for more than
four years as the Associate Director for Health & Personnel at the
White House Office of Management & Budget. I have also worked in state
government and as a lawyer in the private sector. The time I spent at
HCFA was the most rewarding professional experience of my life, and it
also was the most challenging.
background
HCFA is filled with talented, dedicated professionals who work hard
to carry out agency's responsibilities of providing healthcare to over
74 million Americans. Over the last several years, the agency's
workload has increased dramatically and its responsibilities have also
expanded to cover new areas. The following examples of the agency's
accomplishments over the last few years provide some context for this
Committee's deliberations in the hope that, when focusing on HCFA's
problems and developing ways to address them, you will also acknowledge
the agency's strengths.
Legislative Mandates, including the Balanced Budget Act:
Since 1996, HCFA has been responsible for implementing over 700
provisions from 5 major pieces of legislation: welfare reform, the
Health Insurance Portability and Accountability Act (HIPAA), the
Balanced Budget Act of 1997 (BBA), the Balanced Budget Refinement Act
of 1999 (BBRA), and the Benefits Improvement and Protection Act of 2000
(BIPA). I will focus my remarks on the BBA. HCFA staff worked hard to
implement the BBA and its some 335 provisions requiring changes, in
some cases major changes, to virtually every aspect of the Medicare
program, as well as substantial changes in Medicaid. For Medicare fee-
for-service, implementation has required designing complex payment
systems, writing or negotiating regulations that comply with the
Administrative Procedure Act, and providing guidance to the over 50
fee-for-service contractors around the country that pay Medicare claims
and interact with hospitals, physicians, home health agencies, and
other providers. Many changes also involved extensive changes to
Medicare's computer systems. This was a massive undertaking with many
deadlines that were difficult to meet and high stakes, because the of
the importance that we achieve the BBA's goal of extending the solvency
of the Medicare Trust Fund.
State Children's Health Insurance Program (S-CHIP): The
BBA also created the new State Children's Health Insurance Company,
which HCFA staff worked with the States and other stakeholders to
launch in a matter of months. Today, this program provides health
insurance to some 3.2 million children whose families cannot afford
private coverage but earn too much to qualify for Medicaid.
Fiscal Accountability: At the same time that HCFA staff
were working to implement the BBA, we were making major strides in
reducing the Medicare payment error rate. In 1997, the Inspector
General's first-ever audit of Medicare's books under the Chief
Financial Officer's Act had revealed a fee-for-service claims error
rate of 14 percent, which translated into $23 billion in erroneous
payments in 1996. By the 1999 audit, we had cut that rate in half, and
last year we received an unqualified or ``clean'' opinion from the
Inspector General's auditors, signifying that Medicare's accounting
records are now in order.
Y2K: Also, HCFA staff were working flat-out for two years
to ensure that computer systems were Y2K-ready both internally at HCFA
and at all of the over 50 claims processing contractors around the
country so that there would be no interruption in services to
beneficiaries or payments to providers.
Medicare+Choice and Beneficiary Education: The BBA created
the Medicare+Choice program, giving beneficiaries across the country
more health care choices. In addition to implementing these sweeping
changes, the agency launched the award-winning National Medicare
Education Program in 1999. This massive education effort includes a
beneficiary handbook, 1-800-MEDICARE toll-free line, and
www.Medicare.gov internet site. We conducted hundreds of town hall
meetings and focus groups with beneficiaries. In 2000, the agency
received a rating of 74 on the American Customer Satisfaction Index, a
benchmark for customer service quality that includes both the federal
government and private industry. This compares with the national
average satisfaction score of 72, and represents one of the highest
gains achieved by a federal agency that works directly with the public.
Nursing Home Initiative: Beginning in 1998, HCFA
implemented initiatives to improve the quality of care our most
vulnerable citizens receive in nursing homes and ensure that the
objectives of the nursing home reforms in OBRA 1987 are being achieved.
The General Accounting Office (GAO) has concluded that the agency has
made progress in improving the survey and certification process,
oversight of the states, and enforcement of the regulatory
requirements. in addition, HCFA launched the ``Nursing Home Compare''
website, which allows beneficiaries and their families to compare
nursing homes using a variety of quality indicators by zip code.
Coverage: Under the leadership of the new Chief Clinical
Officer, a geriatrician, HCFA revamped the process that the agency uses
to determine what Medicare covers to make it open, transparent,
evidence-based, and much more timely. As part of this effort, we
established the Medicare Coverage Advisory Committee, a group of over
100 experts including clinicians, researchers, device industry and
beneficiary representatives who advise the agency on coverage. Most
requests are acted upon within 90 days, and the public can track the
progress of each request on the internet. HCFA has made more than 20
national coverage decisions using this new process.
Management: We also took steps on a number of fronts to
manage the agency better and be more responsive to beneficiaries,
providers, and the Congress. For example, we examined the process that
we were using to oversee the contractors that process more than one
billion Medicare claims a year and serve as HCFA's face to the provider
community, and found it embarrassingly weak. We made tough decisions to
reallocate resources and strengthen oversight; for example, we imposed
customer service standards requiring contractors to answer 97.5 percent
or more of telephone calls within 120 seconds, and respond to 95
percent of written inquiries within thirty days. In addition, we made
changes in the Center for Health Plans and Providers to consolidate the
staff that make policy and oversee the Medicare+Choice plans, in order
to cut down on confusion and be more responsive to the health plans.
I am proud of what the agency was able to achieve during the three
years I was there, particularly in view of the difficult environment in
which we were operating. The BBA reduced Medicare payments to virtually
every hospital, physician, nursing home, home health agency, and other
health care provider in the country. On top of this, in the wake of
revelations by the GAO and the HHS Inspector General about program
integrity lapses in the Medicare program, the Clinton Administration
initiated a concerted attack on waste, fraud and abuse. Although HCFA
was still only auditing a very small percentage of Medicare claims,
there is no question we stepped up our efforts to ensure that Medicare
funds were not misspent, and several high-profile prosecutions
conducted by the Inspector General and the Justice Department
highlighted the Administration's focus.
The combination of the BBA and the fraud crackdown created a very
negative environment. In some instances, we probably tried too hard to
meet deadlines in the BBA and did things that, in retrospect, I would
have done much differently. (One example is the BBA's provision
requiring home health surety bonds, which was both a BBA requirement
and an element of our program integrity efforts). Simply put, the
thousands of providers affected by the BBA were very angry, and they
let you know it, and you let HCFA know it. While I am all too aware of
the difficulties the agency faces, I believe this context is a part--I
would argue a big part--of Congress's current unhappiness with HCFA. I
hope that the Congress will bear that in mind as it works to make
improvements and will take a constructive path to improving services
for beneficiaries, providers, and other customers.
what are hcfa's problems?
I believe that HCFA's problems are related to a few simple facts.
HCFA has growing responsibilities, insufficient resources to do them
all, and not enough flexibility to do them well.
Growing responsibilities and insufficient resources to
handle them. It is clear from this Committee's own legislative agenda
that HCFA's responsibilities have increased dramatically over the past
few years. The massive workload of the Medicare and Medicaid changes in
the BBA, along with the creation of the new S-CHIP program, and the
insurance reforms of HIPAA, have stretched the agency's staff and
contractor resources way beyond their limits. Neither the
Administration nor the Congress has provided adequate funding for HCFA
to meet these new responsibilities, much less carry out its other
duties in a responsible way. For example, in 1998, the peak year of BBA
implementation, HCFA had 3942 full-time equivalents (FTEs), compared
with 4961 in 1980. The 1998 staffing level was inadequate to write and
publish the dozens of regulations and notices mandated by the BBA (in
the end, HCFA managed to publish 39 regulations and 71 notices), much
less to satisfy BBA requirements and carry out the agency's other day-
to-day responsibilities.
customer service needs
Current resources are inadequate for HCFA to do its job the way
Congress and the agency staff want it to. Improving relationships with
beneficiaries, hospitals and physicians means having frequent and
regular communications with them (and not just their trade association
representatives) through ``town hall'' meetings, satellite broadcasts,
and other means. And it means having clear requirements and answering
questions.
The complexity of the Medicare statute and the need to spend Trust
Fund dollars prudently makes clear and specific program requirements
and intensive provider education a necessity. At present, the various
rules and regulations that providers need to know to stay in compliance
with Medicare are scattered through a dozen or more manuals (i.e.,
carrier manual, intermediary manual, etc.). In 1996, the agency
launched an effort to rationalize these manuals so that, for example,
home health agencies would have a manual (available both in hard copy
and online) that would contain everything they needed to know. A good
idea, but this work had to be interrupted so that staff could work on
implementing the BBA requirements and Y2K, and as they pointed out, the
BBA rendered much of the work they had done on the manual irrelevant
and out-of-date. It is simply not possible to do the kind of customer
service HCFA needs to do with the level of staffing and resources the
agency currently has.
And while the agency is often credited for its low administrative
costs (which hover around 1-2 percent of program dollars), it is
important to realize that this efficiency sometimes has been achieved
at the expense of sound management. For example, we have driven the
cost to process a Medicare claim down to about $1 per claim so the
contractor budget could be stretched further. We even eliminated the
toll-free lines that physicians used to call carriers with questions
about Medicare billing in order to accommodate increased spending on
other areas, including beneficiary education and outreach. (These toll-
free lines have been reinstated.) In short, the contractor budget must
be able to accommodate improved customer service and education for both
providers and beneficiaries.
One of the things I am not proud of is that during most of the time
I was there, we had trouble getting the mail opened and answered in any
sort of timely fashion. We spent considerable effort analyzing the
problems and making changes to try to improve our process, but the
bottom line is that we simply did not have adequate resources to
respond to, for example, 50,000 comments on the proposed hospital
conditions of participation regulation, and also answer hundreds of
pieces of incoming Congressional mail a week in a timely fashion.
staff resources
Further, even if the absolute level of staff were adequate to carry
out the agency's responsibilities, HCFA does not have the ability to
hire and retain staff with the skills it needs. This is a problem
shared by other government agencies, but I believe both the need and
the inability to meet the need are worse at HCFA. For example, the
agency made major changes in the Medicare national coverage process in
mid-1999, which were designed to create a process that is open,
transparent, dependable, and evidence-based. We modeled the new
coverage process after a similar advisory board process used by the
FDA; however, where the FDA has hundreds of clinicians and other
scientifically skilled personnel to evaluate new technologies, HCFA has
only 30. And it is not just the FDA. Other agencies, such as the Agency
for Health Care Research & Quality (AHRQ) have the ability to hire
staff for statistics and research at salaries which are above the
federal guidelines, but HCFA does not, despite the importance of its
mission.
As we all seek to improve customer service and move to being a
prudent purchaser of quality health care for beneficiaries as opposed
to simply a billpayer, HCFA needs to hire beneficiary counselors,
clinicians, and experts from private health plans and providers. The
agency has made some progress in hiring staff who have this type of
outside experience. However, valuable and qualified staff often leave
the agency because salaries are comparatively low and it is
demoralizing to try to carry out the agency's responsibilities in an
atmosphere of constant criticism and distrust.
Not enough flexibility
Medicare law has become more complex and prescriptive over time in
order to achieve savings that can be ``scored'' by the Congressional
Budget Office, as well as Congress' distrust of the agency's decision-
making capability. In addition, the Administrative Procedures Act, the
Federal Advisory Committee Act, and other statutes governing the way
HCFA and other agencies must behave, make it very difficult for HCFA to
relate to the public in the way the agency or Congress would like it
to. For example, if, in developing a regulation to implement a
provision of the BBA, HCFA finds that the payment methodology specified
in the law is mistaken and does not reflect Congressional intent--or
even that it does reflect Congressional intent, but it will have
unintended consequences that no one wants--there is nothing the agency
can do. I wish I had a nickel for every time a member of Congress
called me and asked me to ``fix'' this or that provision because it
adversely affected a provider in his or her district. They were almost
always incredulous when I advised them that, unfortunately, it was
unlikely that I had the authority to do anything.
And if, with respect to this hypothetical BBA provision, the agency
wanted to meet on a regular basis with industry representatives as it
was drafting the regulation to get their views and work out problems in
advance, the agency would be required to charter a Federal Advisory
Committee, complete with financial disclosure forms, Federal Register
notices, and the like. That process could take 6-8 months at the least,
and while I was there, it usually took almost a year because the total
number of committees government-wide was limited. Needless to say, this
has a chilling effect on communications with providers and the public.
Of course, these statutes are intended to protect the public from
agencies imposing regulations without authority, making deals with
special groups behind closed doors, or making policy without providing
affected parties an opportunity to comment. Nevertheless, my experience
was that these process rules often impeded, rather than promoted,
responsive good government.
A related problem arises when a statute specifies a precise way it
wants the agency to do something and then Congress gets frustrated if
it does not like the results. For example, the BBA specified in
extensive detail the new county-based payment formula for
Medicare+Choice plans. When this formula produced payment rates that
were lower than what was expected or desired, HCFA was criticized for
creating ``thousands of payment zones'' and then ``underpaying'' them.
A similar situation occurred after the agency spent almost two years in
a BBA-required negotiated rulemaking with the ambulance industry, and
several members of Congress sought to pressure HCFA to alter the rule
because ambulance providers in their states did not like the results of
the negotiation. In these situations, the agency cannot win; it is
extremely difficult to satisfy all members of Congress, especially if
they each have a different interpretation of what a statute directs the
agency to do.
recommendations
I would offer two recommendations to address these problems:
First, provide HCFA with additional resources, be clear about
Congress's priorities, and give the new Administrator the
authority and the time to achieve them.
The Bush Administration has requested an overall increase in HCFA's
budget of almost 5%, with about a 9% increase in the operating budget.
The budget proposal is a step in the right direction, but as my
statement makes clear, HCFA is so understaffed and under-resourced to
carry out its basic responsibilities that this does not go far enough.
Congress should put the agency on a track to double its administrative
budget over the next five years, with major improvements in information
technology, provider education, and customer service initiatives. And,
as it has done in at least one other case in creating a so-called
``performance-based organization'' at the student loan agency within
the Department of Education. Congress should be explicit about what it
wants the agency to achieve with the additional funding and provide the
agency head with authority to waive certain personnel rules so that he
can recruit and retain highly qualified staff without artificial FTE or
salary constraints and hold them accountable.
Currently, the HCFA administrative budget has to compete with
funding for the National Institutes of Health, Head Start, child care
and other health and education priorities for limited discretionary
appropriations. Congress should consider funding these administrative
costs similar to the way that the Peer Review Organizations (PROS) in
Medicare are currently funded. Funding for administrative expenses
would come from the Medicare Trust Fund, and would not have to compete
for limited discretionary appropriations. In order to maintain fiscal
discipline, these funds would be subject to OMB approval, and as I have
stated, HCFA should be held to certain performance standards
Second, provide HCFA with additional flexibility to do its work.
Because of the way the Medicare law is written, HCFA must rely on
private-sector contractors, mostly insurance companies, to do such
things as process claims, interact with hospitals, physicians, and
other health care providers, make local coverage policy, and many other
important tasks. Yet HCFA has its hands tied when it comes to selecting
those contractors and, to a great extent, in holding them accountable.
Medicare is unique in that the Federal Acquisition Regulations do not
apply to its contractors. For the past eight years, HCFA has sent
legislative language to the Congress that would change this and broaden
the pool of qualified private sector entities to do the job, permit
incentive based contracts, and allow consolidation to achieve economies
of scale. HCFA should also be granted greater flexibility related to
the Federal Advisory Committee Act and the Paperwork Reduction Act, as
well as greater flexibility in hiring and compensation of outside
employees, in exchange for greater accountability. In addition, HCFA
should be granted additional authority to implement care management
techniques that are standard in today's private sector healthcare
marketplace, like disease management and case management for Medicare
beneficiaries.
conclusion
Many, including some of my colleagues today, have argued for
structural changes and/or reorganizations within HCFA. While it may be
tempting to think that reorganizing or placing certain functions
elsewhere is the answer, I believe that the two recommendations I have
outlined above will address many of the problems that HCFA has.
Further, maintaining HCFA as a single point of accountability for all
Federal health insurance activities is important to ensure coordination
and integration.
We have just weathered a difficult and remarkable period in
Medicare's history, and we worked together on a bipartisan basis to
ensure that the Medicare Trust Fund would remain solvent in the
intermediate term, until about 2029. That is good news, and it provides
us with an opportunity that we should not miss, to consider the kinds
of long-term reforms that will best promote the kind of Medicare
program we want for the future. Investing in HCFA now is essential if
we are to be in a position to choose wisely among our options and if we
want to ensure that Medicare, Medicaid, and S-CHIP are effectively and
compassionately managed.
Mr. Bilirakis. Thank you. Well, we will go through a round
of questions with a very strict 5 minutes, and then afford the
panel an opportunity for a second round. We are going to be
able to get to that and release these good people in a
reasonable period of time only if we stick to the 5 minutes.
First, you do us honor in being here, and I mean that from
the heart, as you have done honor to the American people in
having served in that very tough job. What this committee is
trying to do--and I know that we don't always work in as
bipartisan a fashion as we should--is to help HCFA. HCFA
officials are the first to admit that the agency's image with
the public and providers is not a good one. We are trying to
help HCFA do a better job.
I would also like to announce that the Administrator-
Designate, Tom Scully, is here, and he has been here for some
time taking notes. Tom, I trust you are learning all that we
are.
Mr. Vladeck. I hope that we don't get him to reconsider.
Mr. Bilirakis. His face has just turned red. Well, there is
really so much to discuss. We have to talk about contractors. I
know we visited HCFA sometime ago, and that was part of the
emphasis in our discussions there. Apparently, there is a lack
of flexibility. I stand corrected and apologize if I am
mistaken--but I don't know that over the years that you all
have appeared before this committee, or even contacted us, and
said, ``We need more flexibility regarding the choice of
contractors and our ability to monitor them.'' So, it has been
a problem apparently, but I am not sure that we were as aware
of it as possible.
We are talking about constrained budgets, and the other
side constantly talks about the lack of money, and there is no
disagreement there. But, I am not sure that I have heard very
much emphasis on the part of HCFA officials testifying to that
effect. In fact, I raised the question at one of our prior
hearings, and one of the officials came up to me and said, ``We
tried to get additional money, but OMB shot us down, and
therefore we couldn't come in with a request for additional
dollars.'' So, apparently there hasn't been a proper emphasis
as far as that is concerned.
I am pleased to see that the President's budget this year
increases the money for HCFA tremendously over the prior fiscal
year, the current fiscal year. I think we are all very pleased
with that.
How aware are seniors of HCFA, its function, its
responsibility, how much it has to do--directly, with the
quality of health care? Do you have any opinions in that
regard?
Ms. Wilensky. I think because there is not the equivalent
of the Social Security Office, that most people do not
understand that there is a Federal agency that is taking on the
functions that Social Security does, except that most of the
actual day-to-day bill-paying is taken on through these
contractors. That was a deliberate decision that was made in
the mid-1960's, is rather than set up local or regional
offices, that it would be done in a contractual way.
Mr. Bilirakis. Is that a good idea, the contractor's
concept as against the local offices?
Ms. Wilensky. It is different. There was not adequate
recognition at the time, particularly with the advantage of
hindsight, that there are at least two very separate functions.
One is a claims processing function, and that there are a lot
of different types of organizations that could take on claims
processing. They could be either regionalized or they could be
centralized. And then there was the local function involved in
speaking with both seniors and providers and resolving
differences between them. I think those are really local, and
that whatever we were to do about changing who could be the
bill processors, which is a legislative issue and which HCFA,
at least over time, has approached various committees in
Congress about trying to have expanded. But to recognize that
there are these two functions and that there really is a
legitimate local function and that part of it is making sure
that the local presence persists in having a discussion about
how best to do claims processing in the 21st Century.
Mr. Vladeck. If I could just add a couple of points to
that. First, when Medicare was created, it was administered by
the Social Security Administration, and you had that pre-
existing field office structure, and that was the primary point
of contact for beneficiaries. A decision was made when HCFA was
created not to reinvent that wheel. And I am told that worked
reasonably well until the very significant cutbacks in Social
Security Administration staffing that took place in the early
1980's when, of course, the Agency was more willing to let go
of Medicare specialists than it was willing to let go of
income-related specialists.
But the second thing was that I think that there has always
been some ambivalence and confusion on the part of other folks
in the executive branch about the extent to which they were
prepared to have an identifiable entity within the executive
branch that administered the Medicare program because it was
something that was so popular--a program that was so popular
with the American public that they didn't want to have to share
credit in some basic ways. And we have recommended in another
setting, another context, that the whole issue of whether it
does Medicare any good, or Medicaid any good, to be part of the
Department of Health and Human Services at all.
I think it ought to be part of thinking about these
structural issues. Our rule-of-thumb--and I think it was true
under my predecessors from both parties--when there was good
news associated with something HCFA was doing, the Secretary
made the announcement, and when there was bad news the
Administrator made the announcement. And, certainly, the Public
Affairs Office in the Department of Health and Human Services
always worked under that rule. I think the Budget Offices
always worked under that rule as well. And we know from survey
data, the average Medicare beneficiary has no idea where in the
Federal Government responsibility lies for----
Mr. Bilirakis. My time is expired. Dr. Roper, I know you
wanted to add something, briefly.
Mr. Roper. To the narrow issue of was the decision in 1965
to go with contractors a wise one, I think it was at the time.
To refresh memories, what happened is, Medicare was set up very
much like BlueCross-BlueShield, and you had a contractor for
Part A and a contractor for Part B, so basically a hundred
contractors, 50 and 50.
What has happened over time is that number has been
whittled down a bit year-to-year. But it has been very
difficult to eliminate contractors. Basically, what we had to
do, each of us, is occasionally find some contractor that was
just doing a horrendous job and kick them out of the program,
so you went down from 49 to 48 to 47 and whatever.
Mr. Bilirakis. We have got to explore that area so much
more. Mr. Brown.
Mr. Roper. And what has not happened, if I could just add--
I will be quick--what has not happened is enlarge the pool to
go to different new organizations to start afresh in a green
field operation to create the kind of contractor that you
really want to have for the 21st Century.
Mr. Bilirakis. Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. I agree with Dr.
Wilensky and Dr. Vladeck about the good idea of a name change.
To show Chairman Bilirakis and incoming Administrator Scully
that I am a uniter, not a divider, I suggest the Ronald Reagan
Institute for Big Government Health Care.
Ms. DeParle said something at the conclusion of her
testimony about employee morale, and there is an awful lot
coming out of Congress, a sort of denigration of public
service, and it makes it harder for your employees at HCFA to
do their jobs, it makes it harder to attract young people to
public service. Part of it is the kinds of things we say in
this institution, part of it is the increased workload and the
continued mandates that all four of you spelled out. And the
one thread that very nonpartisanly ran through what all of you
said was the lack of resources. As Dr. Roper, almost the first
thing he said, there are fewer employees today than there were
when he was there. The flatline budget not even close to
accounting for inflation, the mandates we continue to give you.
Talk to us, each of us--and I guess this will probably take
all 5 minutes--I would like you to give us--and President Bush
has suggested we think a budget increase of 5 percent, although
I have also heard other numbers from the budget yesterday--but
give us a number, if you would, and how that money should be
used in sort of a nutshell, what we ought to be doing, where
this budget should go in the next year and in the next couple
of years.
Mr. Roper. I think where the money ought to is in enhancing
the expertise that HCFA has by hiring new kinds of people who
are familiar with how private health insurance markets work,
and new skills and communication. I think a large part of it
ought to go into, as others have said, enhancing communications
with beneficiaries and with providers.
What the right number is, just to pull a number out of the
air, I would say at least a 25-percent increase in the budget.
But I would hasten to add, it is simply unrealistic for me, or
anybody else--Tom or the Secretary or whatever--to advocate for
more money for HCFA at a time when we haven't yet agreed on
what it is we want HCFA to do because the right response from
the appropriators is going to be, ``My gracious, we are not
going to pour good money after bad,'' et cetera. And as long as
the mindset is that this is not money well spent, arguing for a
very substantial increase, which I am, is going to fall on deaf
ears.
Ms. Wilensky. The best way to get a proper number is to ask
the HCFA Administrator specifically what they want to do with
that money. My guess is you are talking about somewhere in the
neighborhood of 10 or 15 percent, but it is a guess because I
haven't tried to task out what needs to be done.
One of the reasons that I have suggested taking off areas
that I think are not inherently related to running a good,
traditional Medicare program in a modernized way and putting it
elsewhere is because I think it would allow the HCFA personnel
to focus on what they do best, and to do it within budget. Now,
this, of course, would increase some of the cost of some of
these other places that would take up some of these functions,
and that is why deciding exactly how you structure HCFA and
then how much money is needed is important.
But I believe if the law were changed to allow more
modernized bill processing groups to come compete instead of
the current limited pool who can actually be contractors, that
would allow you to do things a little more efficiently.
HCFA has been able to reduce the number of systems that are
used substantially more than the number of carriers and fiscal
intermediaries, so there will be some savings, but not as many
as people might think. But I do believe that if there were ways
to try to go out and have the people who do a lot of
transactions now, either the credit card people or other types
of people, in bidding in terms of some of the claims
processing, it could make a positive difference. But I am not
talking about a small change, not as large as the one you just
heard, but I am not talking about a small change.
Mr. Vladeck. I can't give you an exact number with all the
University of North Carolina and University of Michigan trained
staff around, I could suggest some parameters. I think there
ought to be a full-time, appropriately trained Medicare
specialist in every Social Security District Office, and you
can count the number and multiply it by a salary level for
that, and probably two in the bigger ones. And I think for
perhaps 35- or 40,000 institutional providers in the Medicare
program, on a ratio of 1-to-50 perhaps, you ought to have an
account executive type customer service function probably
within the contractors rather than within the executive branch
because the personnel systems of the contractors are more
flexible, to be a sort of one-stop phone number that people can
have to answer questions, to get problems resolved, and things
of that sort.
And you probably need a number of those on the Part B side
per State for physicians and some of the smaller, but more
numerous categories of providers as well. I think you are
talking primarily about half through the executive branch
budgets and about half through the contractor budgets.
Probably, if you are really going to do this customer service
right, a doubling of the number of people, but that would be
much less than a doubling of HCFA's administrative budget, the
largest single chunk of which goes to running computers to pay
claims. More than half of it is just the claims processing
function itself now, and you wouldn't need to increase that.
And I think Gail is right, you could actually reduce that.
The other thing that you need to do, and it is perhaps in
the way of a one-time expenditure than a continuing
expenditure, but I think the experience, again, of most of our
service industries under the private health insurance industry,
and certainly the private health care industry, is if you are
going to do high-quality customer service for both providers
and beneficiaries, you have to have the information technology
platform from which to do it. You can hire all the call center
people you want, you can hire all the field reps you want, but
unless they can sit down at a terminal which can give them
answers to the particular questions that the inquiry is
involved in, they are not going to be able to provide very
high-quality service.
To a large extent, we need, I think, a getting-over-the-
hump kind of investment in making available the kind of
information technology for the program that would permit you to
save on contractor cost, but would also permit you to do late-
20th Century level customer service, at least, within the
program.
Ms. DeParle. I think I represent the high-water mark
because I, perhaps reflecting on my recent experience, more
recent experience at the Agency under the Balanced Budget Act,
I think that you could easily double the administrative budget
of the Agency over the next 5 years and not run any risk of
misspending funds. And I think you could devote the additional
funds to the areas that we can all agree need to be
strengthened, without necessarily having to answer the question
of what is Medicare going to look like in the future. The
Agency is so under-staffed and so under-resourced that it has
to have investments now in information technology, as I think
everyone has agreed, in provider education which, frankly,
might have prevented some of the fraud and abuse problems that
we have had and that we have had to work through together, and
customer service initiatives, we have some of the
infrastructure for that with the Medicare+Choice, but we need
to devote more resources to it, and also coverage. That is an
area where we really need to make some investments, and the
current budget level doesn't allow the Agency to do that.
I agree with you that Secretary Thompson's request is a
step in the right direction, but I hope the Congress will be
able to do even better.
Mr. Bilirakis. Thank you. Mr. Greenwood to inquire.
Mr. Greenwood. Thank you, Mr. Chairman. Years ago, I read a
book called ``The Seven Habits of Highly Effective People.''
Maybe some of you have read it. I don't remember what they
were, which probably explains a lot, but the one thing I do
remember is that he had a little quadrant, and he had
``important things,'' ``less important things,'' and ``urgent
things,'' and ``less urgent things,'' and he talked about how
we all spend most of our time in the ``urgent'' and
``important,'' and a lot of time in the ``urgent while not very
important,'' and spend very little time in the ``not urgent but
important'' quadrant, which encompasses planning and sort of
thinking through into the future.
And the question I have for you--and thank you again for
all your help with this, and I hope we can continue to have
your help--is there any of that going on at HCFA? In other
words, has it been the case that you have been so busy putting
out fires and responding to congressional inquiries and new
statutes, that you haven't been able to have a segment of your
hierarchy or of your administration just sort of off, insulated
from the daily demands and being able to think through how
should we structure ourselves into the future, what is changing
in the world of technology and the world of health care, so
that we can really think into the future? Has HCFA such a
function and, if not, should it?
Ms. DeParle. I think the Agency has had that function at
various times, Mr. Chairman, and you and I talked about this a
little bit. I would have to say that over the last 3 years, I
think that being at HCFA was an experience of drinking out of a
fire hose, and you are not--occasionally, the senior staff
would have outside speakers come in and we would have an
exercise or we would think about the future. We have a
strategic plan and in doing that plan and updating it, we
sometimes did that. But it wasn't, frankly, as though we could
afford to devote the staff to just thinking outside the box or
thinking about the future. And I am sorry that we didn't have
the resources to do that, we weren't doing it.
Ms. Wilensky. My sense is that it became increasingly more
difficult for that to happen, as you and I had spoken on this
issue. When I was there, the major implementation was to
implement the relative value scale and to introduce capital to
perspective payment for the hospitals and to worry about
Medicaid provider and donation. Those were three major issues,
but nothing like the type of implementation burdens that Nancy-
Ann had to face and that Bruce got the beginning of in terms of
the Balanced Budget Act.
So, it is possible for an agency like HCFA to be able to
put some time into place, that was how we had the idea of
changing how we looked at the PROs and what it would take, and
beginning to think about the Medicare transaction system and
the fact that politically it was very difficult to reduce the
number of carriers and fiscal intermediaries, but if we could
get them to use the same system we could accomplish some of the
savings without as much political pain, but you can't do that
if you are drinking out of a fire hose.
So, I think that it is, in part, incumbent on the Congress,
particularly during periods when, for whatever legitimate
needs, it feels like it must have a lot of legislative change
to recognize that that increases the administrative burden of
the agency that will be implementing those legislative changes
and to respond appropriately, but that has been a very
difficult thing to have happen.
Mr. Greenwood. Let me pose a related question, and that is
another similar area, the whole question of wellness. How can
we, again, instead of constantly responding to health crises in
individuals, what should the Agency be doing with regard to
promoting wellness in the Medicare population, wellness in the
children's population, wellness in the Medicaid population, so
that health care costs the taxpayers less?
Is HCFA engaged thoughtfully in those processes, and what
are your thoughts about what we should do on that score?
Mr. Roper. Thank you for the question. I happen to chair an
organization called Partnership for Prevention that is focused
on advancing prevention and wellness and national policy in the
private sector and the public sector.
We have made some progress, but not nearly enough in this.
The root of the problem we face is that when the statutes were
passed in 1965, authorization was made for paying for treating
sick people, and the notion of paying for checkups or screening
or immunization or whatever, we have, one by one by one, added
some of those things through statute to the program, Medicare
and also Medicaid, but we need to do more of that.
Frankly, I don't want to divert the conversation, but just
to make the point, one of the attractions of prepaid capitated
plans is the incentive given for promoting wellness, et cetera.
If I could just add a quick response, I fully agree with
the point that we ought to invest more in learning new ways of
delivering health services, health policy, et cetera, whether
that is done inside HCFA or at the Agency for Health Care
Research and Quality. The investment in that kind of research
is tiny compared to the huge and important investment we make
as a Nation in fundamental biomedical research. There is just
no comparison.
Mr. Greenwood. Thank you.
Mr. Bilirakis. Mr. Deutsch to inquire.
Mr. Deutsch. Thank you, Mr. Chairman. And, actually, I was
just talking to staff because one of the things all four of you
have done as Administrators that has really been very positive
is, in fact, some of the initiatives that you started, but I
think patting ourselves on the back as well as some of the
initiatives on preventative care and, as much as we have done
on that, though, I was just asking the numbers, there is still
the utilization rate is just still amazingly so poor. And as
all of you are aware, I am sure, July 1st we go to a whole new
slew of Medicare wellness coverage.
I want to, at least in this round, focus on something that
this committee, both the Health Committee and the Oversight
Committee, has been dealing with over the last several months,
and that is the issue--and we have had anecdotal stories of
HCFA being too tough on providers in their efforts to police
against fraud, waste and abuse, in fact, creating really, at
least anecdotally, very unfair situations for providers.
I want to focus really actually on Ms. DeParle just because
I want to actually read and actually submit for the record a
U.S. News and World Report article, and it is somewhat dated,
1998, during your tenure, but as you well recall, our Oversight
Committee pulled you in front of it and questioned you about
why the Government wasn't doing a better job in fraud issues.
And let me just quote--and as I said, I will submit this for
the record--this is a quote from that story.
``Gabriel Hernandez is not your typical medical
practitioner. He couldn't tell an x-ray from an EKG. His sole
preparation for a career in the field was ten lucrative years
as a logistics coordinator for the Mendelin Columbia cocaine
cartel, a job that gave him plenty of cash, sleek power boats,
and 5 years in Federal prison. But shortly after his release in
1993, a crooked accountant tipped Hernandez to the largesse of
the Federal Medicare program, and his new career was born.
Hernandez set up more than two dozen phony medical clinics in
the names of friends and relatives, and applied for a provider
number, the code that doctors and companies use when they
submit bills to Medicare's computers. Florida's Medicare
Office, more than half funded by Federal Medicare, gave him his
provider number within 2 weeks. No one bothered to check his
clinics, his background, his list of patients. A few days
later, an assistant began billing the State via computer for
mythical checkups and procedures, and Medicare payment checks
began to flow in. In the course of 2 easy years, Hernandez
received checks totaling $1.7 million. ``The drug business was
very dangerous', he said with a charming smile, `but not health
care poor. It was easy money and there was no risk'. Hernandez,
authorities said, is only one of a horde of hardened criminals
who saw Medicare for what it really was, an unguarded $250
billion a year pile of cash just waiting to be had. Over the
past decade, many of the criminally inclined have moved out of
the drug trade to start careers in Medicare fraud, where
penalties are low and rewards are stratospheric. To realize
this windfall, they have set up thousands of phony clinics,
medical equipment outlets and laboratories, a vast underworld
of health care investigators find particularly difficult to
understand, let alone penetrate. Owners are shielded by layers
of cutout companies, lowly runners and mules are employed and
sometimes blackmailed to move the money. Profits flow through a
maze of bank accounts into offshore places like Liechtenstein,
the Kirks and Cacaos Islands and Cypress, and often back into
drug business. One Russian informer interviewed said Russian
groups cleverly serve up defunct companies to investigators,
diverting them from going forward. `We are always chasing
something that isn't there anymore', says Bruno Vinero, who
heads the New York Section of Department of Health and Human
Services Office of Inspector General.''
We have heard all this before, but this article was written
when you were HCFA Administrator. I think it important to
recall the environment we were in just a few years ago to put
some of these fraud and abuse complaints into at least some
context. So I have three questions for you.
First, can you comment on what your experiences were when
you were HCFA Administrators, regarding Congress' appetite in
going after fraud, waste and abuse?
Second, do you still believe that Medicare fraud is still a
serious problem plaguing the program today, and do you believe
the Government is doing enough to combat it?
And, third, do you think that during your tenure and the
other Administrators' tenures at HCFA was too aggressive in
going after Medicare fraud and abuse?
Ms. DeParle. Well, first, you asked about Congress' view
about this. As a matter of fact, I arrived at the Agency when
Dr. Vladeck was still there, to serve as his Deputy while I was
awaiting confirmation, and I believe it was the week that the
Inspector General's first ever audit of the Medicare program
came out, and it revealed an error rate of 14 percent in claims
that were paid inappropriately, which translated into $23
billion in Medicare funds that were misspent for, I guess it
was 1996, 1995 or 1996, and that was not a pleasant week at the
Agency. Congress was furious about that. We were not happy
about it. We needed to get on top of it. We needed to make sure
that Medicare wasn't wasting the taxpayers' dollars, and we
worked with the Congress--in particular, Mr. Greenwood's
committee was very interested in this issue--and the Congress
did give the Agency more resources and, in particular, gave
more resources to the Inspector General and to the Justice
Department, through the Health Insurance Portability and
Accountability Act, to use on program integrity.
In 2 years, we were able to cut that error rate in half. I
do think that it is unfortunate that a lot of what occurred
left providers with the feeling that the Agency, or the
Government, thought they were all crooks. And I think it is
important to make a distinction between the prosecutions that
occurred and the investigations that occurred, and the
appropriate role of HCFA.
My view is that, in general, program integrity should not
be a law enforcement function, it is a function of HCFA. HCFA
should be the steward of the Medicare Trust Fund. HCFA should
make sure that funds are spent appropriately, but to do that we
need an appropriate amount of resources. We need to be able to
do provider education.
We did launch, in fact, a project down in Florida doing
provider education down there to help physicians and others
understand how to bill Medicare. We started doing some things
like site visits before we let new equipment suppliers into the
Medicare program. But all those things cost money. So, we need
to continue to be vigilant, I think, there. I am not really
prepared to say whether the exact number is sufficient at this
point, but in everything else, Medicare is a growing program
and we need to continue to be vigilant.
Mr. Bilirakis. The gentleman's time is expired. Mr. Deal.
Mr. Deal. Thank you, Mr. Chairman. I want to thank all of
you for your testimony and, Dr. Vladeck, I want to express
appreciation to you in the way you have laid out your written
testimony here. One of the things that this committee has tried
to determine over a period of time is the kind of things that
need to be changed and whether they can be changed
administratively within the Agency, or whether they require the
action of Congress statutorily to make those changes, and I
appreciate the outline that you have given us, and you have
indicated those areas that are administrative and those areas
that are statutory, and I think that will be helpful to us as
we proceed through this, and I thank you for that.
One of the areas, of course, that all of you have alluded
to is the lack of adequate funding for administrative purposes.
One of the complaints we, of course, continue to hear is that
the reason that HCFA is ineffective in many regards is that the
staff is too large, that it takes too much time to make
changes, that flexibility, or the lack thereof, is in large
part because changes have to be vetted through so many
subcommittees and so many various divisions within the Agency,
and I have a concern that if we simply increase that, that we
are going to slow down the entire process and, even though we
may want to give flexibility, we may, in fact, do exactly the
opposite. Would you care to address that subject?
Mr. Vladeck. Well, I would make a specific proposal. I
would--and, again, this goes back to my concern about the
relationship between HCFA and the Department of Health and
Human Services--but I would suggest that the Congress might
mandate that for every increment of x-percent in the size of
the HCFA staff relative to rulemaking processes or other
regulatory roles, that the number of employees of the
Department of Health and Human Services who don't work for
HCFA, whose job it is to oversee and harass HCFA be reduced
proportionately. And we still have a very strong and under the
new Administration, I believe, an even strengthened Office of
Management and Budget that has the responsibility on behalf of
the whole executive branch for making sure that individual
agencies and individual parts of the executive branch are
responsive to the needs of consumers and the general public in
the regulatory process, that they are not too bureaucratic and
so forth.
What we have done within the executive branch over the last
decade or so is add several more layers of review so as
bureaucratic as HCFA may be, we have multiplied that by
entities outside HCFA, all of which have oversight on a piece
of HCFA's role. So, I think you could address some of those
issues.
Again, I would urge the committee at the appropriate time
to seriously consider the question of the relationship between
the Agency and the Department of Health and Human Services more
generally. I know that Secretary Thompson--for the first time
in quite some time, we have a Secretary who has shown a great
deal of interest in some of these administrative questions, and
maybe this is not a good time to talk about that, but I think
the relationship--if you think about levels of review and
levels of bureaucracy, once HCFA is done with a regulation or a
payment formula or so forth, the number of steps after the
Administrator signs a document, before it appears in the
Federal Register, before it appears in a HCFA Notice and so on
and so forth, has multiplied enormously over the last decade or
so, and I would say you ought to focus on reducing that while
not building it up within the Agency itself.
Mr. Deal. And I assume that would tie in, as you indicated,
to your suggestion that it be made an independent agency and
separate it?
Mr. Vladeck. That is right.
Ms. Wilensky. I think it is with the appropriate mindset of
an Administrator of understanding the need to have regulations
out in a timely way, there are always organizational changes or
requirements for accountability that can be introduced within
the Agency so that when you have conflicts arise when people
are putting together regulations, as inevitably happens, there
is a clear manner for resolving conflicts, and to the extent
that that can happen, you can keep the process flowing in a
reasonably timely way.
I appreciate the concern that Bruce has raised about the
fact that there are other levels outside of HCFA that typically
review regulation. ASPE, Assistant Secretary for Planning and
Evaluation, typically within the Department of Health and Human
Services, serves a coordinating function so that all of the
operating divisions can review regulations. It goes then
specifically to the Office of the Secretary, and then to the
Office of Management and Budget.
Having said that, I don't think the right response is to
make HCFA a separate agency. I think you will lose a lack of
accountability. I think the proper relationship that Dr. Roper
had mentioned earlier, of President and Secretary, HCFA
Administrator is a good one, and that there needs to be
appropriate pressures laid on the Secretary and the OMB
Director to make sure that their administrative functions occur
in a smooth way. These are not impossible to have happen, but
if left on their own regulations can circle almost indefinitely
within either HHS or between HHS and the Office of Management
and Budget.
Mr. Roper. If I could just quickly echo, I, too, would be
opposed to separating HCFA out from the rest of HHS. I believe
the primary thing that needs to be done is to put an
expectation--in addition to resources, an expectation that
decisions are going to be made and made expeditiously. It is
always easier when you are facing a difficult choice, to put it
on the back of your desk and come back to it later. And as
Bruce earlier said, in so many of these areas we face difficult
choices and tradeoffs, and I believe the most important thing--
again, other than resources--is for Secretary Thompson and Tom
Scully and everybody else to say, ``We are going to manage this
department, this agency.''
There has not been, over time, routinely the notion that
management is something that is worthy and important. Policy
considerations are usually a whole lot more fun and whatever,
but the day-to-day blocking-and-tackling of getting the job
done is just as important.
Mr. Deal. Thank you, Mr. Chairman.
Mr. Bilirakis. Mr. Green to inquire.
Mr. Green. Thank you, Mr. Chairman. Dr. Roper, I want to
reiterate some of the statements you made, and I agree, about
HCFA. In your statement about many of the problems attributed
to HCFA are actually not of its own making and created by
Congress passing legislation that is very notable, but often
unrealistic in objectives and its expectations. And, also, when
you talk about the need for new resources, you said it is
important to emphasize the need for resources for HCFA, and
what people brag about, and your quote is, ``When I hear people
brag about how little Medicare spends on administration, I
cringe. That should be a source of embarrassment, not pride.''
And the Agency is under-staffed both in numbers and mix of
skills, it is seriously hampered by inadequate systems and
actually they have fewer staff in HCFA today than when you were
Administrator 15 years ago, despite a tripling of the outlays
or the requirements. I think those are important.
Let me ask a question of both Dr. Vladeck and Ms. De Parle.
Both Drs. Roper and Wilensky have been on record, as mentioned
in their testimony, they support transitioning Medicare from
the traditional fee-for-service to a premium support program
that is more similar to what we have as Federal employees.
There is a number of us who have concerns about this--in other
words, mixing--I guess as a senior citizen we would pay more
than the amount.
Can you share a little bit your thoughts on a premium
support system compared to what we have today?
Mr. Vladeck. Well, maybe I can repeat some of the
conversations we had at the Bipartisan Commission or whatever.
The first thing I would say is, if you use the model of the
Federal Employees Health Benefits Program, if Medicare had had
the cost increases over the last 3 years that the FEHBP has
had, we wouldn't be talking about 25 years' remaining life on
the Trust Fund, we would be talking about an imminent emergency
in terms of the finances of the Trust Fund.
But I think the fundamental issue is the extent of who
bears the risk for increases in the cost of providing health
services and health benefits over a period of time, and I
think, again, we do have 25 years' worth of experience with the
participation of private plans on a capitated basis in the
Medicare program. And what that experience seems to suggest is
that you can save a substantial amount of money for the Federal
Government by shifting costs to beneficiaries, or you can
substantially increase the participation of private plans at
greater expense to the program, but that you haven't been able
to both reduce costs and increase the participation of private
plans without running into some of the problems that the
Medicaid program has had with some very low-cost providers in
terms of the availability of services and availability of the
benefits.
The notion that you can save money by the mere presence and
competition of private plans in the Medicare program, while
theoretically correct if you assume enough things about the
nature of how you would design your program, is just directly
contradictory to 25 years of empirical experience with the
participation of private plans in the Medicare program.
And if the point is not to save money but is to provide
opportunities to enhance benefits of one form or another, then
I think you have to deal with the issue of equity and
uniformity of a guaranteed benefit to all beneficiaries
everywhere in the country, and you can only do that by having a
base program, a core program, which has that level of benefits
and has that common definition of benefits everywhere in the
country.
Ms. DeParle. I agree with Dr. Vladeck. I have some concerns
about the Federal Employees Health Benefits Program as a model.
There are some appealing aspects to it. Allowing people to
choose and having education for the consumers is an appealing
thing and something that we have actually, I think, done a
pretty good job of in implementing the Medicare+Choice program.
But the populations in those two programs, the FEHBP and
Medicare, are very different, and the Medicare population is
much more vulnerable both in terms of their health status and
their financial status, and I think we should really think long
and hard about moving in that direction.
I do support the proposal that the Clinton Administration
put forward for a competitive defined benefit where there would
be market-based pricing, competitive pricing, for managed care
plans and where beneficiaries might have an incentive to go to
a less-expensive plan, but where the fee-for-service program
would be maintained because--I agree with Dr. Vladeck--the
experience so far is that it is very difficult both to save
Medicare money and increase access to these private plans in
many areas of the country. There may be areas of the country
where we will never have private plans in Medicare, and we need
to maintain a strong and effective and well-managed traditional
fee-for-service program for those areas.
Mr. Green. Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman. We now will start the
second round, so any further members coming in will be
inquiring as part of the second round, not as the first round.
I thought I would make that clear.
Mr. Green. Appreciate that guidance, Mr. Chairman.
Mr. Bilirakis. That guidance, unfortunately, is necessary.
On the contractors, please furnish us with your suggestions
on how that should be handled because apparently it is going to
take legislation to give you that flexibility.
On the point that Dr. Vladeck emphasized, the flexibility
versus uniformity, the opened or closed process, we would very
much like to hear more in that regard.
I would like to ask a question, though, regarding the FDA
approval which Ms. DeParle concentrated on. We were advised of
this to some degree when we went to HCFA in Baltimore back in
February. As Ms. Eshoo and Ms. DeGette mentioned, FDA spends
all of its time approving new drugs and devices. Does HCFA play
any part during that FDA approval process?
Ms. DeParle. No.
Mr. Bilirakis. They do not.
Ms. DeParle. No, sir. And it is a different question, but
they are both important questions, but the question that FDA
has in front of it is, is something safe and effective, and can
it be generally approved for the public to use?
The question that HCFA has with respect to Medicare is, can
and should Medicare cover this item or service? And as you well
know, there are many items and services that, by statute,
Medicare can't cover. Dr. Roper mentioned preventive benefits.
Medicare's own statute says it has to cover things only for the
diagnosis and treatment of a disease or a malformed body
member. It says nothing about preventive treatment. So, when we
have added preventive treatments, it has taken an act of
Congress to do that.
Prescription drugs is another example. Those obviously
aren't covered by statute by Medicare. Once the FDA has said
something is safe and effective, then the question for the
Medicare agency is, should this be covered for Medicare as
well? And that is where we made a change in the process a
couple of years ago, to create an open and transparent process
so that device companies, citizens, Medicare beneficiaries,
everyone, could petition for coverage of a new item. But there
might be some things what while the FDA would say they were
safe and effective, might not be appropriate for Medicare
coverage, or they might be appropriate only in certain
circumstances, and that is where we need the staffing to help
make those kind of decisions.
Mr. Vladeck. It might be helpful, Mr. Chairman, to actually
provide an example because, in the abstract, these things get--
but one subject of an oversight hearing when I was
Administrator, was on the issue of lymphedema pumps. Lymphedema
is a very common complication of surgery for breast cancer and
for other major surgery for treatment of cancer, that involves
accumulation of fluid and swelling that is very painful. It is
a very serious and very real condition. It is most common,
again, and the issue of Medicare payment arises most commonly
relative to breast cancer.
There were a number of clinicians within HCFA and elsewhere
within HHS who believe that physical therapy was the most
appropriate treatment for lymphedema for almost all
beneficiaries who experienced it, but there are two categories
of pumps that are actually applied to the extremities involved
in the swelling that have been approved by the FDA. One costs
about $400 and the other costs about $4,000 apiece. And we
found in the mid-1990's that 80 percent of the lymphedema pumps
being ordered in the Medicare program were of the $4,000
variety, not the $400 variety.
Now, the FDA is not statutorily in a position to say when
you should pay for the $400 pump and when you should pay for
the $4,000 pump. They were able to say that both were safe and
effective for the following kinds of indications. And what we
needed to do in the absence of some of the new coverage
processes which are desperately needed, is to say the $400 pump
is appropriate in these circumstances, and the $4,000 pump is
appropriate in these circumstances, and when the $400 is
appropriate Medicare shouldn't be paying for the $4,000 pump.
That is the kind of distinction that you need the processes and
the resources to be able to make, that the FDA is not in the
position, under its statute or its operating policies, to make.
Ms. Wilensky. That is a very good example, to think about
the difference between coverage and pricing, and sometimes they
have gotten confused and it has delayed a coverage decision
that needn't have been delayed.
When I was at HCFA, there was a decision that was requested
about having coverage for high and low osmolar density contrast
material, and they are very different in terms of the cost
involved.
We had some advice from the American College of Radiology
about eight or nine instances when the more expensive contrast
material was medically important, but the coverage was allowed,
and we weren't directing physicians or hospitals which of these
contrast mediums to use, it was the payment that would be
limited to the higher payment only at times when there was
clear medical benefit.
One of the issues--and I have had discussions with some of
the senior career people at HCFA and also with Nancy-Ann, at
her invitation--is to try to help HCFA understand that the
coverage decision may be easier. The pricing decision, which is
very important, might allow for things to move forward while
still being financially prudent. You obviously do want to do
the spirit of what was just mentioned.
Mr. Greenwood. There isn't any way to speed up that
process?
Ms. Wilensky. There are definitely ways to speed up, yes.
There are lots of ways to speed it up.
Mr. Greenwood. Is the answer additional dollars, additional
personnel?
Ms. Wilensky. It is that and, in fairness, while resources
will be important, having an expectation and accountability
within HCFA itself for being able to produce in an appropriate
manner--produce results, produce decisions, produce pricing--
decisions is going to be important and, in fact, without having
the Congress have some expectation that the increased money is
actually going to make a difference, it would be hard to expect
the Congress to act. And I think all of us understand there is
a little bit of a chicken-and-egg problem going on. HCFA
behaves and performs badly and makes it hard to want to have
Congress or the Administration give it lots more money. One of
the reasons HCFA has had trouble performing well is that there
has been this huge mismatch.
Mr. Bilirakis. think we have gotten that message--hopefully
we have. Dr. Roper, very briefly.
Mr. Roper. If I could add just one other thing. All too
often, we view the coverage decision as a yes or no, and you
need--we all need--to understand that it is much more a
question of for which patient under which circumstance is a
specific treatment or device or whatever appropriate, and that
subtlety is one that it is very hard for a national
organization with this kind of scrutiny and whatever to do
fairly and routinely and whatever.
I would just cite one example from my watch. When we began
to cover heart transplants under the Medicare program in 1986
or 1987 or thereabouts. Hugely expensive at the time, still
thought by some to be experimental. And what we decided was to
say that heart transplants would not be covered when done
anywhere around the country, but we would cover them in
specific centers where they were done with technical quality
and so on. And those kinds of subtleties and complexities are
much different than just a one-time, one-size-fits-all, ``Yes,
we will cover it today,'' we did not cover it yesterday for all
the beneficiaries all over the country.
Mr. Bilirakis. Thank you. Mr. Brown.
Mr. Brown. Thank you. Dr. Vladeck, each of the other
panelists gave a range or a specific idea about what number of
dollar, what percent of increase--Dr. Roper said 25, Dr.
Wilensky said 10 to 15--I understand these are very rough
estimates--Ms. DeParle said 100 percent over 5 years.
Could you give us a range, so we get an idea of----
Mr. Vladeck. Again, I would find a need to divide that into
three pieces, if I could. The first is, I think the core
administrative budget, which is now about $500 million a year,
which is most of the staff and direct operations of the Agency,
I would think over a 3-to-5-year period, we are probably
talking about a 50-percent increase, I would guess. But I am
still missing--on the contractors, the contractor budget is now
about $1.4 billion a year. I think several hundred million
dollars would rebuild, so that is 25 percent perhaps, would
rebuild a lot of that customer service function.
I am still missing from that 1500 staff in Social Security
offices--I don't know where that comes from--and a one-time
investment that I think probably runs to several hundred
million dollars over a period of years in a major, sort of
quantum modernization of information technology. But then,
again, I think you can get back to a steady-state that is lower
than that.
So, I would add those up and I guess it would come to
probably about a 50-percent increase, if you did the arithmetic
on all those parts, over several years.
Mr. Brown. Thank you. Most of your trips, each--at least
the two of you that came to the Hill since I have been here,
and Dr. Wilensky, too, in her trips not as the HCFA
Administrator--mostly they were about Medicare, and I want to
talk about Medicaid a little bit, not that you didn't come to
the Hill to talk about that, too, but much more often Medicare.
Medicaid, as you know, covers roughly the same number of
people, roughly 40 million, pays for health and long-term
coverage for 1-in-7 Americans, the country's largest health
insurer for children, six times the Children's Health Insurance
Program, single largest insurer for maternity care, 1-out-of-3
deliveries is Medicaid, single largest purchaser of nursing
home care, as you know, and the single most important source of
financing for hospitals like Metro in Cleveland, safety-net
hospitals, inner-city hospitals, public hospitals.
Some have suggested possibly separating--including Dr.
Wilensky--separating Medicaid out from HCFA and assigning its
responsibilities to another agency.
I have concerns about such proposals. First, that this may
have a negative implication for beneficiaries. We have worked
hard to sever the link between Medicaid and Welfare and
eliminate the Welfare stigma, placing that program in a part of
the Department of Health and Human Services that deals with
low-income programs, like they could potential stigmatize the
health care programs, stigmatize Medicaid. Placing the
program's administration with HRSA also sends the wrong
message, it is not a block grant but obviously an insurance
program, and HCFA runs insurance programs, Medicare obviously
as well as Medicaid. Additionally, many of the staff and
activities of HCFA work on both programs and perform functions
that serve both programs.
A question for Dr. Vladeck and Ms. DeParle, since you are
the only Administrators here who were here during and after
Welfare Reform, which really did sever the link between
Medicare and Welfare. Give us each your thoughts on moving
Medicaid out from HCFA's responsibility, if you would.
Mr. Vladeck. As I said in my statement, I think the trick
on Medicare--and it is a very, very difficult program for
anyone in the Federal Government to administer--is to recognize
the extent to which it is a partnership with the States in the
sense of the States having initiatives, but that there are very
powerful Federal financial risks and issues associated with it.
And, in fact, all of us were involved in quite intense debate
in 1995 and 1996 and 1997, about the extent to which the
Federal Government had a continuing responsibility to protect
beneficiaries directly rather than delegating that entirely to
the States.
And I think if you think about the history of the
regulation of nursing homes, which is the largest single thing
on which Medicaid spends its money in most of the States, if
you think about the controversy that you are going to have the
pleasure of dealing with and Mr. Scully is going to have the
pleasure of dealing with on the proposed rules for the
regulation of Medicaid managed care plans coming out of the
Balanced Budget Act, I think there are very sort of profound
issues of beneficiary protection that most of my familiarity
with the other organizations in town that might take
administrative responsibility for this make me very nervous
about. At the same time, there are very significant issues of
financial management in the Medicaid program, and if you didn't
have the expertise in HCFA you would have to reinvent somewhere
else or else be creating very substantial risk to the Federal
Treasury, I think.
Ms. DeParle. Just quickly, I always wished I had more time
to spend on Medicaid. I think you are right, it does cover
almost as many people, spends almost as many dollars now, and
the trends are going in that direction with Medicaid. I always
felt that I was struggling to keep up with the demands in
Medicare and not able to spend as much time on Medicaid as I
wished. And from talking to my fellow former Administrators, I
think they all felt that way.
Gail's approach to it is to try to separate it out, I
think, in the hope of giving it more attention. My concern
about that is I think you need a single point of accountability
for insurance programs in the Federal Government, and I think
you would lose some of the coordination that we have tried to
ensure between Medicare and Medicaid, if you were to do that.
So, that would not be the first place I would go.
Ms. Wilensky. It really has been the stepchild, though, of
HCFA. I appreciate your concern, having lived there, and I
guess I would invite you maybe to spend some time--it is a
frustration because it is such an important program, and it
gets so little of the attention. I mean, HCFA is really running
Medicare, it is a Federal program, but how you deal with the
State-run program with Federal guidelines and oversight is so
fundamentally different, although that is why I made the
distinction between the mom and kids part and the part of
Medicaid that overlaps with Medicare, which is fewer people but
large dollars, although that is probably the worst functioning
part of all the areas in terms of functioning, which is the
dual eligibles, in my opinion.
So, I appreciate the concerns that have been raised, I just
wouldn't want you to think that where it is now means it gets
anything like good attention. I mean, it really is the
stepchild of the Agency.
Mr. Roper. This is a classic case of the old expression,
``Some of my friends are for it, some of my friends are against
it, and I agree with my friends.'' I happen to disagree with
the notion of moving Medicaid out of HCFA, but to make Gail's
point, I think a fair estimation of my time as HCFA
Administrator, I spent about 15 percent of my time on Medicaid
and 85 percent on Medicare.
Mr. Greenwood. The gentleman's time has expired. The Chair
recognizes himself for 5 minutes.
Dr. Wilensky, you talked about what you referred to as the
pay-and-chase methodology. It seems to me some claims are paid
immediately without any question, some are delayed and then not
paid, some are delayed and then paid, some are denied right off
the bat, I assume.
Do we know anything about the percentages of claims that
are rejected or delayed because a ``t'' isn't crossed and then
the provider amends, corrects the claim, and then it is paid?
Do we know that, in fact, there is a substantial savings
resulting from the ones that are screened out before they are
paid?
Ms. Wilensky. I don't personally know that. This is
information that the Agency may be able to provide you. I don't
know whether it is readily available. But in some ways, it is
worse than that because--the reason it is worse than that is
that in order to try to not have to chase--because they don't
have any money, among other things--that you have a series of
automated screens and documentation requirements, and they
differ from contractor-to-contractor.
I think there are times when having different coverage
decisionmaking at a local level gives you a benefit because
medicine is practiced different ways around the country. This
kind of differentiation, which has to do with amount, scope and
duration, brings little gain and an awful lot of frustration,
but I don't know those numbers. I think that would be a
reasonable thing to ask the Agency to provide you with.
Mr. Greenwood. Thank you. Direct a question to Dr. Roper,
if I could. Several points in your testimony, you state that
HCFA staff are stuck in a fee-for-service mentality. Discussing
the managed care option for seniors, you state, ``A hostile
environment and ambivalence toward an integrated or managed
care approach doomed its implementation. In fact, the way it
was created was directly linked to its downfall as it resulted
in so many onerous regulations on health plans.'' Could you
elaborate on that?
Mr. Roper. Sure. I think that the point about the staff is
one that is a simple observation, that most of the people came
to the Agency at a time when it had responsibility that was
only fee-for-service. Their life experience and training and so
on is rooted in that, and that is important for the fee-for-
service part of Medicare. But there is this other part that
requires different understanding, different expertise,
different mindset, et cetera, and that is the argument that I
am making.
Just to add a point, it is going to be awfully hard to do
what I am suggesting because, to hire people from the private
sector at a time when the Agency is under fire, but also at the
pay levels in the Federal Government compared to what they can
make in the private sector, that is a real challenge. So, it is
glib to say what I am saying, but it is awfully hard to do it.
To the other point, Medicare+Choice, when it passed the
Congress, and the predecessor programs that went by slightly
different names, were the product of compromise, and the
legislative process brought to the eventual legislation lots of
built-in inconsistencies and things that were hard for anybody,
even very well-meaning colleagues that are here, to implement,
and those very inconsistencies were codified in the regulations
and the oversight and so on. And I think we have succeeded in
producing--collectively, we have succeeded in producing a
program that is almost impossible to administer, and surely not
attractive to the folks in the private sector.
Mr. Greenwood. I agree with Mr. Brown on the urgency of
fixing Medicare+Choice, I think it should be a very high
priority.
Let me ask a very, very specific question about AWP. In
looking at this issue, we have these drugs that are covered by
Medicare, that are reimbursed at statutorily determined phrase,
``average wholesale price,'' and yet it appears quite obvious
that there is nothing average or wholesale about that price and
it is based on absolutely nothing, it is a fiction. It appears
to be designed fundamentally to create the largest spread
possible between what the physician provider actually pays and
what Medicare is reimbursed in order to get market share, and
it is costing us billions of dollars. It doesn't reach the
pharmaceutical companies because they are not making any of the
money, it is enriching the providers. Anybody know how to fix
that? Obviously, we have to look at the whole issue of practice
expense, but I would appreciate anyone's thoughts on what to do
about this.
Ms. Wilensky. The real question is why you are not paying
actual acquisition, and the answer is only because of the
concern that too many physicians would drop out because they
are claiming they need the cost subsidy from average wholesale
price in order to continue participating.
There probably are some real problems in terms of the
practice expense portion, and perhaps even in terms of the
actual amounts we are paying physicians for administering
certain chemotherapies or other covered drugs.
It is hard to come up with a good rationale for why we
should do it by reimbursing at what we know, or what we have
good reason to believe, is not actually the acquisition price.
Mr. Greenwood. It is not even clinically right because it
is driving the use of particular products that may or may not
be indicated. It is driving the frequency that they are
administered.
Ms. Wilensky. It is a very clumsy way to fix what is an
issue that you need to look at at the same time. I don't want
to have it be the recommendation is actual acquisition price
and ignore the other issue. There is a serious issue, but what
we are doing now does not make much sense.
Mr. Greenwood. My time has expired. The gentleman from
Florida.
Mr. Deutsch. Thank you, Mr. Chairman.
Mr. Greenwood. Did anyone else want to respond?
Ms. DeParle. No, I think we all agree.
Mr. Greenwood. All agree. Okay, fine.
Mr. Deutsch. I wanted to shift a little bit and talk about
Medicare and the administration that you do, that all of you
have done. It is not an insurance plan. It functions in many
ways like an insurance plan, but it is still a Government plan
in terms of having public policy goals. And that changes. And I
want to focus at least in an area of screening and prevention.
And when you are making those decisions, you are not making
those--an insurance company would make those decisions and just
doing a cost-benefit analysis of it.
Each of you, independently, No. 1, are there goals, public
policy goals that we should be using HCFA Medicare for that we
are not using it for today, No. 1? And, No. 2, specifically in
the prevention side of the health care equation, what else can
we do? And, again, as all of you know--I mean, the utilization
is shockingly low, so what else can we do? And as part of that,
is it driven by reimbursement levels? So, if we can kind of
talk about--is there things that we can do with Medicare on the
public policy side of it, that we are not doing, and then, more
narrowly, within the area of screening/prevention, what else
can we do that we are not doing today?
Ms. DeParle. I think there is a lot we can do to promote
quality in the health care that Medicare beneficiaries receive,
and I will give you an example of that. In September of this
past year, the Agency published an article--some of the
clinicians in the Agency published an article in the Journal of
the American Medical Association, where they had looked on a
state-by-state basis and picked out some clinical indicators of
things that are beyond controversy among clinicians, things
that people who experience certain conditions need to receive--
beta-blockers after a heart attack, that kind of thing--and
then looked at all the data that Medicare has to see whether
they were receiving it or not, and there was quite a wide
disparity among the States as to whether beneficiaries in
certain States were getting it or not, and there is no reason
why that should be the case. Medicare covers these things.
So, what the Agency is trying to do now is to work with the
peer review organizations that Dr. Wilensky talked about, to
drive those numbers up and to make sure that beneficiaries are
getting the care that they need.
It could also be used in the medical error context, which
is something that Dr. Roper is working on, I know, through his
work with the National Quality Committee. What I have been
talking about are errors of omission, but there are also errors
of commission, and Medicare might be able to play a role there
as well in helping to reduce the number of medical errors. So,
I think there is a lot we could be doing in terms of quality to
make sure that having Medicare means more than just having the
health security, it means also improving your health status.
Mr. Roper. If I could just add, I strongly agree with the
need for a much more intentional focus on improving quality in
the program. I think we have begun to make some progress of
late. It needs to be extended.
On the prevention notion, the key obstacle, I think, to
further progress is we are locked in a process whereby changes
to the program, prevention in this case, are scored for their
short-term budgetary costs, and any longer-term cost-savings
that might accrue to the program are way in the outyears, and
with the current rules administered by CBO, whatever, we just
never can show the appropriate value to the program, the value
to American seniors. And, furthermore, I think we need to step
back and say, much of what is done in prevention is really not
about saving money, it is about improving people's lives and
the quality of those lives, and we ought to just admit that and
recognize that we are going to spend some more money in
accomplishing that.
Ms. Wilensky. Let me direct a comment or two--I think the
other part you address, which is the very low use of the
currently covered benefits because while I agree that we
certainly ought to be willing to have the discussion even if it
doesn't appear to be cost-effective in a reasonable timeframe,
is it appropriate to cover a preventive benefit because we
believe it will have an effect on quality of life? But we need
to give equal thought to actually making use. I assume you were
referencing to at least numbers that I have looked at, which
are the pitifully low use of mammography, which is--I think the
last time I looked it was about 32 or 33 percent--very low
rate, and that is, unfortunately, much harder than passing
legislation to provide a new benefit. And it may mean working
through either the AMA or some of the specific colleges, of
trying to do something that when advanced directives was passed
in the early 1990's, there was a big effort to have an outreach
to work with different groups that interact with seniors, to
try to encourage the use of some of these preventive benefits,
to make use of public service announcements in a way that has
coordination, as we do with some of the healthy baby PSAs that
are used. But I think we need to recognize that we have ample
documentation that coverage and the payment per se is a first
step, it doesn't seem to solve the problem particularly in some
of the efforts that have taken a lot of work by the Congress to
get covered.
Mr. Vladeck. I was going to say that Dr. Wilensky mentioned
earlier her efforts to reform the PRO program, which I think is
one of the more successful changes in HCFA in the last decade
or so. The only thing she didn't succeed was getting them to
overcome their extraordinary institutional aversion to publicly
reporting what it is they do, or taking credit for what they
do. But as this committee continues its oversight and
monitoring function, particularly around these issues of
quality but then into the issues of prevention and provider
education, I think there has been, over the last decade, an
awful lot more accomplished than anyone has acknowledged or
taken credit for, or talked about. And I would encourage you to
take a look at what, beginning in the first Bush Administration
through the Clinton Administration into this current
Administration, that part of the program has done, which no one
has given very much attention to but has been enormously
positive and sets the model, as Gail suggested, for some other
ways you might change the Agency in the future.
Mr. Deutsch. Mr. Chairman, I know we are on the last round,
could I just very quickly ask one final question?
Mr. Greenwood. You may.
Mr. Deutsch. Thank you very much. You have all talked about
this quality thing. While we are talking about it--obviously, I
can talk to you afterwards, but while we are in this setting--
you mentioned the betablocking specifically. It just seems
crazy, so how do we change it? I mean, you know----
Ms. Wilensky. This is not just a Medicare problem. The
first thing to recognize--and I will turn it over to the real
doctor on the panel--is that what we are aware of now,
increasingly aware of, is the systems and quality problems in
how health care is delivered in this country, and we spend a
lot of time sometimes worrying about whether things are
slightly better in fee-for-service or managed care, and not
focusing on that. In both of these places, six or seven out of
ten times, somebody might not get the care that is regarded as
appropriate by a clinical expert, so that it is a country-wide
issue of how to deal with getting the right care.
Mr. Deutsch. I don't want to take anymore time. I guess I
would just say, though, that one of the things that maybe we
have been thinking of, if we aren't reimbursing for the wrong
care, maybe providers would all of a sudden thinking pretty
quickly what is the appropriate care. I mean, in other words,
HCFA has been so incredibly creative in terms of getting people
to make choices based on incentives, and the success story of
all four of you has been an amazing success story. I mean, Dr.
Vladeck pointing out if HCFA was run the way the Federal Health
Insurance Plan, we would be at zero-life expectancy in the
plan. And all four of you, I think, have specific records that
you each can be very, very proud of in terms of. And I guess
maybe this aspect of health care in general--I mean, the
creative energies that you have had, you have used basically to
do cost-containment. I mean, that is where most of the creative
energies have been done. And I think maybe we really need to
shift some emphasis and use creative energies for quality of
care type issues and, beyond quality of care, prevention as
well.
Mr. Roper. I can't resist saying, in 30 seconds, you are
right and we need to do it. It requires much better information
systems, not just within HCFA but within our health care
system, broadly speaking, to accomplish that.
And the other thing it requires is that purchases of care,
especially in this case, public purchasers need to use their
clout to demand quality, and I think we need to, with your
prodding, get HCFA to be much more focused on that, but
recognize that what will happen is a push-back from the doctors
and others who are threatened by that.
Mr. Vladeck. This is a whole other debate, but purchasers
can leverage quality except at the margins. All the data we
have suggest doctors practice medicine the way they think they
ought to practice medicine, and they want to do a good job, and
there are techniques in terms of education and professional
communication and professional leadership some of them
developed in the PRO program, but you can't improve the quality
of medicine the way you want to through manipulation of
financial incentives. You have to appeal to the higher motives
which drive the decisionmaking of most physicians.
I think we have got a lot of experience in public and
private programs to that effect, and I think that is worthy of
another very big discussion because I think there are important
responsibilities. But at the end of the day, it is not payment
that is going to drive it, it is a whole set of different
incentives, which is why some people become doctors as opposed
to businessmen or other.
Mr. Greenwood. Mr. Pitts has arrived. Would you care to--
recognize Mr. Pitts.
Mr. Pitts. Thank you, Mr. Chairman. I am sorry I was in and
out. Dr. Vladeck, thank you very much for your report, it is
very helpful. You mention in your report how fraud and abuse
activities have created the impression of a police state.
Providers in my district have mentioned their concern that if
they make an honest mistake, they will be penalized or that
they are guilty until proven innocent. Certainly, no one in
this room would argue that we should not do everything in our
power to root out true fraud from the system, but do you think
that these efforts have gone too far, or that this is another
area requiring reform?
Mr. Vladeck. Well, again, I think we have spoken about this
already, and I think Ms. DeParle spoke to it effectively well.
The fact is that I think the large majority of physicians in
the United States believe that they are at risk of going to
jail if they fill out a Medicare claim incorrectly, and that is
simply not true. And so there is some basic educational
investments and basic informational investments that need to be
undertaken. They are to some extent resources, but to some
extent a matter of policy and approach.
I do believe that in a society like this one, in every
aspect of life, we have to strike a balance between having in
place the basic rules and the basic systems and the basic law
enforcement capabilities and the basic detection capabilities
to protect the overwhelming proportion of citizens who are
honest against crime, without becoming a police state. And that
is just a balance that you have to strike all the time. And I
think we have to be more open in our discussions about the need
to strike a balance like this relative to program integrity in
health care as well as everything else. You don't want a system
that is 100-percent foolproof because then nobody would ever be
able to have any time to see a patient. You don't want a system
that is as wide open as things were in the early 1990's in
parts of the Medicare program, where Mr. Deutsch read about
some of the experiences we had.
And I don't know that there is a clear answer to this, this
is just a constant balancing that all of us, I think, have to
take responsibility, and recognize there is a tendency to
oversimplify this, to put it all in rhetoric to say ``these
guys are all good guys, these guys are all bad guys.'' I think
particularly when you talk about issues of law enforcement and
so forth, the need to have sort of a reasoned balanced
discussion of it is often contrary to the dynamics of the
process, but that is where we need to come out. We are talking
about taxpayer dollars. We are talking about a track record
with very, very significant problems. On the other hand, we are
talking about no one disagreeing that the overwhelming
proportion of all providers in the system are basically well
motivated and honest, and you don't want to make their lives
anymore difficult than they already are, and I think the issues
of communication, education and openness of discussion are a
very important part of that process in dealing with that.
Mr. Pitts. Do you--and anyone on the panel can respond--do
you favor a more open or more closed process at HCFA?
Mr. Vladeck. Well, I would say again, I think we have to be
much more honest and more direct and open about these things.
Ms. Wilensky. I think one of the frustrations that I hear
about is that people can't--providers can't seem to get clear
answers of how do they bill, and there has been a lot of debate
about, well, if you told them various kinds of approaches or
screens, everybody would go up to the screen--it seems to me
that you ought to know how to bill and what the rules are, and
if you were to call in to your contractor's office four times
in a row, that you would get the same answer. What people claim
is that when that happens, they are subject to getting
different answers for the same kind of procedure, and that
while they may hate the decision of a private insurer on a
particular issue, they are quite confident that if they call in
four different times, they will get exactly the same hated
answer each of those four times.
So, I think there are ways that we ought to be able to have
the providers know, here are the rules, follow them. If you
don't, here are the consequences, and to have a clear
understanding about what those rules are.
Ms. DeParle. I just wanted to make one point about what Dr.
Wilensky said. There is software that the Agency uses to edit
claims, and there is one package of that software that was
implemented probably during Dr. Vladeck's tenure sometime in
the early to mid-1990's. At this committee's behest, Chairman
Greenwood's committee's request, we implemented another set of
what is called off-the-shelf software that contained additional
edits, and because we negotiated with a private sector company
to get those edits, we could not disclose them to the
physicians. But just to sort of complete the circle here, that
was at the behest of this committee, and I agreed to do it
because I thought we had such a severe problem that if there
were private sector alternatives, that we needed to use them.
So, we purchased this one, implemented it, but a condition of
it--and we worked with the committee staff on this--was that we
could not reveal the edits to providers whereas we had done
that before, and they didn't like it very much at all. They
felt that we should be telling them what the edits were. So,
that kind of brings us full-circle in the difficulties and the
tensions here.
Mr. Greenwood. Let the record show that I was not the
chairman of this subcommittee at the time.
Ms. DeParle. You were not.
Mr. Greenwood. Again, thank you, all four of the witnesses.
I am not sure if the Mount Rushmore analogy was appropriate,
but you really are a ``brain trust,'' and we are going to have
to rely on you because you know the system best of anyone else.
So, we look forward to working with you in the future. Thank
you again. The hearing is adjourned.
[Whereupon, at 12:55 p.m., the joint hearing was
adjourned.]