April 2001

Legislative Watch

By George G. Olsen, JD, and Evan L. Morris

At Long Last!

From modernizing its information technology to regularly scheduling rule issue dates, Congress finally gets serious about HCFA reform.

Once again, fundamental Medicare reform is high on the Congressional agenda. This time around, however, a new issue has assumed prominence—reform of the Health Care Financing Administration (HCFA). For the first time, there is broad recognition among members of both the House and Senate that HCFA must be modernized to better reflect the 21st-century health care marketplace, especially if a large new prescription drug benefit is to be added to Medicare. Furthermore, members of Congress are tired of hearing from providers and beneficiaries who are frustrated with the agency. This sentiment was expressed by Senate Budget Chairman Pete Domenici (R-NM) at a hearing on March 1, 2001, when he observed that HCFA has supplanted the IRS as the agency that generates the most constituent complaints.

Congress has discussed restructuring HCFA in the past, but frustration with the agency appears to be at an all-time high. Additionally, Medicare is on the brink of a major expansion as the Baby Boom cohort reaches Medicare eligibility, resulting in an increase in beneficiaries from 40 to 77 million over the next 30 years. Program spending is also expected to balloon from $216 billion in fiscal 2000 to $492 billion in fiscal 2011. Adding a drug benefit to Medicare will more than double the number of claims processed by HCFA each year—from 1 billion to 2 billion.

Legislators appear to have embraced President George W. Bush’s objective of modernizing HCFA. “I have never seen such a clarion call for changing HCFA as I have in these past few weeks,” Health and Human Services Secretary Tommy Thompson told the Senate Health, Education, Labor, and Pensions Committee at his January 19, 2001, confirmation hearing. He also recently testified before the House Budget Committee that “everybody loves to hate HCFA” and that he intended to make changes that will make the agency more “user friendly.” Thompson also has testified that HCFA’s infrastructure is outdated and inefficient and that several fundamental changes must be made including: establishing a new bookkeeping system; installing updated information technology; implementing a regular schedule for issuing rules; commissioning an independent group to determine if HCFA has too much responsibility, ie, should Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP) be run by HCFA; and examining the role and performance of administrative contractors.

The Reformation

Sentiment for HCFA reform is ubiquitous on Capitol Hill. On February 15, 2001, three senior Republicans on the House Energy and Commerce Committee announced that the committee would review all of HCFA’s “major programs, policies, and operations in an effort to improve HCFA’s health care delivery systems.” Plus, in a February 20, 2001, letter to Secretary Thompson, Committee Chairman Billy Tauzin (R-La), Health Subcommittee Chairman Michael Bilirakis (R-Fla), and Oversight and Investigations Subcommittee Chairman James Greenwood (R-Pa) said the committee would concentrate on “identifying and eliminating antiquated, anticonsumer regulations; improving the delivery of health care to Medicare, Medicaid, and SCHIP beneficiaries; and modernizing HCFA’s infrastructure.”

The House Energy and Commerce Committee is expected to hold 10 hearings on HCFA management in this session of Congress. The committee has named its initiative “Patients First: A 21st Century Promise to Ensure Quality and Affordable Health Coverage.” The committee will examine up to 15 issues regarding HCFA restructuring, including removing some programs from the agency. Among the matters the committee is expected to explore are regulatory barriers preventing new technologies and services from reaching Medicare beneficiaries quickly, ways to streamline the Section 1115 waiver process, improving the appeals process for services and new technologies, and improving HCFA’s information technology system. Also under review will be ways to improve the Medicare+Choice program, specifically its risk adjuster and regulatory structure. The first hearing in this series was held on March 1, 2001, and focused on access to new technologies. Hearings on the modification of HCFA are also likely to be held throughout the spring by the House Ways and Means and Senate Finance Committees. The Senate Budget Committee has also held a hearing to determine whether to pursue a Medicare drug benefit independently of overarching Medicare/HCFA reform.

The Bush Administration is also working to revamp HCFA. It is possible that many changes proposed in Congress could be made by the administration without legislation, including moving Medicaid out of HCFA.

Many Democrats in Congress have joined Republicans in calling for changes at HCFA. Members of both parties often stress, however, that they are not trying to punish the agency, just trying to modernize it. Sen Max Baucus (D-Mont), Ranking Member on the Senate Finance Committee, stated on February 14, 2001, that the committee will “take a good long look at HCFA...not to bludgeon or browbeat, but to address complaints that [fiscal] intermediaries and providers have with HCFA.”

STRUCTURE/GOVERNANCE EXAMINED

The National Academy of Social Insurance (NASI) has formed a panel to examine Medicare’s structure and governance. In the past, NASI recommendations have carried significant weight with Congress. The panel is planning to issue a final report later this year, and is likely to issue an interim report this spring.

The NASI group is considering several issues, including functions that must be executed to manage Medicare effectively, structural needs for Medicare now and in the future, institutional structures that would best serve beneficiaries, and lessons from public/private partnerships that might be instructive in restructuring Medicare’s operation. The panel also is examining the possibility of splitting up HCFA’s responsibilities, including moving out its oversight of HIPAA and SCHIP.

Legislative proposals to reform HCFA are beginning to emerge. On March 6, 2001, Rep Patrick J. Toomey (R-Pa) introduced HR 868, the Medicare Education and Regulatory Fairness Act of 2001. This bill would make the Medicare appeals process more equitable and expeditious for providers, prohibit random prepayment audits, ban statistical extrapolations for overpayment demands, and prohibit the recovery of past overpayments if an appeal is pending. Legislation such as this will undoubtedly garner great attention and, hopefully, support in Congress.

These developments give long-suffering providers some meaningful hope that HCFA will finally be reformed to alleviate the regulatory quagmire through which they must slog daily. All rehabilitation providers should contact their members of Congress in support of these efforts. This is a golden opportunity that should not be lost.

George G. Olsen, JD, is a partner of the firm Williams & Jensen, PC, Washington, DC. He is also legal counsel for the National Association of Rehabilitation Agencies. Evan L. Morris is a law clerk for Williams & Jensen and a law student at George Washington University, Washington, DC.

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