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Answer. The President's Budget proposals would raise the Hospital Insurance (HI) Trust Fund's FY 1995 end-of-year balance from $205 billion to $244 billion. One should note that this $39 billion improvement in the trust fund's status results from both income and outlay proposals. Including all State and local government employees under Medicare ensures that these employees contribute their fair share to the HI Trust Fund. The President's Budget outlay proposals, by appropriately restraining growth in hospital and related Part A services, further improve the HI Trust Fund's projected balance.

The HI Trustees did not project the long-range status of the HI Trust Fund last year, primarily due to complications and delays in estimating the new Catastrophic income streams. Thus, the 1988 report you referred to contains the latest estimate of the trust fund's long-range solvency. A revised report on the status of the HI Trust Fund will be available in the upcoming 1990 Trustees' Report.


Question. You requested no funds for the rural health transition grant program. Your justification gave no indication as to why. Why do you propose no funding for the rural health transition grant program in FY 1991?

Answer. The original set of grants awarded in FY 1989 under the Rural Health Care Transition Grant program were made for a 2-year period as authorized by section 4005(e) of OBRA 87. The first year funding for these grants was made from the FY 1989 appropriation for this program and the second year continuation funding for these grants will be made from the FY 1990 appropriation for this program. The FY 1990 appropriation also permits the award of additional new 3-year grants as authorized by section 6003(g)(4) of OBRA 89 which amended section 4005(e) of OBRA 87. We intend to evaluate the impact of these grants and determine their effectiveness in preserving access prior to making funding decisions beyond FY 1990.

Question. Have any funds been included for rural transition grants in FY 1992 and beyond in the President's budget, or does the President propose to terminate the grants?

Answer. No decision will be made about future funding requests for this program until we complete our evaluation of its effectiveness.

Question. How many applications have you received for rural health transition grants? How many were denied? Were all those denied unworthy, or aren't there enough funds to pay for all the good requests?

Answer. As a result of our FY 1989 rural health care transition grant solicitation, we received 704 applications. With an appropriation of $8,892,000 and a limitation of $50,000 per grant we were able to fund 184 of the most worthy applications with 520 applications being disapproved. The 184 applications which were approved were both technically acceptable and geographically representative,



The National Committee to Review Current Procedures for Approval of New Drugs for Cancer and AIDS (the Lasagna Committee) has recommended that Medicare carriers' discretion be restricted in connection with coverage decisions about drugs.

Question. Does HCFA intend to follow this recommendation, and if not, why not?

Answer. Current Medicare policy provides for coverage of drugs (that is, drugs and biologicals) for indications approved by the FDA in the labeling. Carriers are therefore required to pay for labeled indications. They may decide, in addition, to cover a drug for an unlabeled indication based on medical practice in their respective locales, so long as such use is not specifically precluded by the FDA or HCFA. In connection with implementation of the Medicare Catastrophic Coverage Act of 1988 (MCCA), HCFA planned to mandate the use of the three major drug compendia for coverage of drugs as authorized by that Act. In that context, we were also studying the issue of national uniformity of drug coverage that remained outside of the coverage provisions of the MCCA. Since repeal of the MCCA, there is no specific statutory provision to use as a basis for mandatory uniform national drug coverage, but we continue to consider ways to achieve it.

Question. The Lasagna Committee also recommended that Medicare automatically cover any unlabeled drug indication recognized in one of the three major medical compendia. Does HCFA intend to follow this recommendation, and if not, why not?

Answer. As indicated in the answer to question 1, under the MCCA, we had clear authority to mandate the use of drug compendia for use in making coverage decisions about drugs covered by the MCCA. (In addition, in committee language, Congress indicated its intent that we consider use of the U.S. Pharmacopoeia, the AMA.Drug Evaluations, and the American Hospital Formulary Service.) In view of the repeal of MCCA, we are considering whether and to what extent, national uniformity can be promoted.


Question. Does HCFA have any data indicating the cost of the individualized carrier decisions with respect to coverage of unlabeled indications for drugs?

Answer. No.

Question. How does that cost compare with the savings realized from denial of coverage for these indications?

Answer. Data not available.

Question. Is there not a potential conflict of interest when such decisions are left to individual carrier discretion while at the same time these carriers, in their private business, have been increasingly restrictive in their own coverage decisions?

Answer. Carriers are left with considerable discretion on which indications to cover. The Medicare program has been designed from its inception in this manner. Individual Medicare coverage decisions are independent from a carrier's private business but are to be based on the current medical policy of the community. Often, this is reflected in what they are doing in their private business.

Question. I am very concerned about claims processing and want to be sure your budget request is adequate for the prompt processing of beneficiary claims. Your budget justification projects a decrease in the Part A claims workload from FY 90 to FY 91 and a very slight increase in Part B claims workload. In recent years, the annual increases in both Part A and Part B workload have been much greater than these modest projections. In fact, from FY 89 to FY 90, the Part A claims workload grew by 10.3% and the Part B claims workload by 13.6%. Please provide a detailed explanation of the projected workloads for FY 91.

Answer. In late FY 1989 a trend of declining growth in benefit payments emerged. In addition, claim receipts were lower over the last three months of FY 1989 than expected. These factors coupled with the repeal of catastrophic and the speed up of claims processing in FY 1990 lead us to believe that claims processed in FY 1991 may be much less than historic trends would indicate. As in previous years, we have requested that $100 million of the contractor contingency be reserved for unanticipated workload growth.




Senator HARKIN. We will now hear testimony from the Social Security Administration. And we welcome Gwendolyn King, the new Commissioner in her first appearance before the subcommittee.

For the first time in 5 years your agency is not requesting a staffing cut. Well, that is definitely a step in the right direction. But the bad news is the rate of telephone busy signals. Another piece of bad news is too many cases of wrongly removing SSI recipients from the roles and a persistent backlog in handling disability appeals-an area that you know I am very interested in.

It is not surprising that the survey your agency conducted last year revealed that most employees feel overwhelmed, that you face widespread morale problems. I can sure understand that. Projections of the elderly population indicate that the Social Security Administration's workload will continue to grow in the years ahead.

So, Commissioner King, welcome again to the subcommittee. Your statement will be made a part of the record in its entirety. I am going to ask you to highlight it, or to make those comments or statements that you think that we should pay the most attention to.

SUMMARY OF REQUEST Ms. KING. Thank you very much, Mr. Chairman. I do have a brief statement I would like to read.

I am pleased to be here today to present the fiscal year 1991 appropriation requests of the Social Security Administration. These requests total $20.2 billion in budget authority. Those moneys will be utilized to administer the old-age, survivors and disa ance programs, fund administrative costs and benefits under the Supplemental Security Income Program, provide special benefits for disabled coal miners and perform certain administrative functions for the Medicare Program.

In the full statement I have submitted for the record, I am providing the committee with the full breakdown of the appropriation requests. In the brief time I have I want to talk about the impact those funds will have on the Social Security Program and the millions of Americans who depend on it.

Social Security is unique among Federal programs because of the trust the public has invested in it, and because of the direct and vitally important effect it has on the lives and well-being of so many people. The Social Security Administration provides not only retirement support for Americans in their retirement years, but an entire package of social insurance protection. It provides protection against the financial hardship which can accompany a disability or the premature death of a household breadwinner; and economically disadvantaged elderly, disabled and blind people look to SSA for basic minimum financial assistance.

We have the responsibility to provide every one of our beneficiaries the kind of compassionate, courteous, considerate, efficient and accurate service he or she deserves. We have the responsibility to protect the American people's investment in the Social Security trust funds, and to instill public confidence in SSA's programs.

We also have the responsibility to create an environment that assures an SSA work force that is highly skilled, motivated and dedicated to meeting the public's needs. Fulfilling those responsibilities, Mr. Chairman, is my goal as Commissioner of this Agency.

This appropriation request reflects the minimum resources necessary to achieve that goal. The budget request I am submitting will stabilize SSA's employment at about 63,000 full-time equivalents. This figure represents the culmination of 6 years of dramatic downsizing during which FTE levels dropped by more than 17,000.

These employment reductions have saved the Government almost $2 billion and continue to save about $600 million annually. At the same time, though, public demand for service has increased, and new technology has been implemented to help meet those de mands.

Mr. Chairman, Social Security numbers are now issued in about 10 days, down from 6 weeks just a few years ago. Annual earnings items are posted to workers' records in about 5 rather than 15 months. And, by processing 95 percent of all benefit claims through the modernized claims system, payments are made more efficiently and in a more timely way.

This budget requests that SSA's employment be stabilized at 63,000 full-time equivalents. It also reflects continuing productivity improvement and initiatives to control spending and find more efficient ways to operate. This budget also reflects the fact that I will be asking SSA's employees to reach farther and break new ground in the service we provide. One major priority will be SSI outreach.

SSA's fiscal year 1991 systems budget focuses on critical needs, including improving the flexibility of the agency's programmatic software, automated data processing equipment and services for the State agencies which make disability determinations, and also basic support areas that have in recent years faced severe cutbacks.

And, Mr. Chairman, this budget enhances the nationwide tollfree telephone service SSA implemented in October of last year. While maintaining face-to-face service through our 1,300 field of fices that people have trusted for so many years, the 800 number provides another option for people who like to make appointments to file claims, or handle other routine business.

SOCIAL SECURITY TRUST FUNDS In closing, Mr. Chairman, I would like to say a few words about the Social Security trust funds. Administrative expenses remain a small fraction of the overall trust fund operations. For fiscal

year 1991, administrative expenses are estimated to be about eight

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