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At this time, I would like to briefly highlight each of the accounts under the jurisdiction of this Subcommittee: Grants to States for Medicaid, Payments to Health Care Trust Funds, HCFA Program Management, and the proposed Survey and Certification Revolving Fund.

Grants to States for Medicaid

Medicaid is the largest source of funding for the health care needs of low-income Americans. The program will serve nearly 29 million citizens in FY 1992 -- almost 6 percent more than in FY 1991. Of this Medicaid population, approximately 13 percent are elderly; 15 percent are blind and disabled; 24 percent are other adults, primarily AFDC recipients; and nearly half are children.

The FY 1992 Medicaid budget request is $59.8 billion: $56.8 billion for benefit payments, and $3 billion for State administration. This request represents an increase of 16 percent over FY 1991. Although this rate of growth is very high, it is considerably lower than the FY 1991 increase, which is now projected at nearly 27 percent over FY 1990.

Our Medicaid request anticipates Congressional acceptance of the Administration's proposal to finance Medicaid State Certification activities through the user fee-financed Survey and Certification Revolving Fund. It includes $362 million associated with the program expansions mandated by OBRA 90. Also included in our request is the $300 million impact of the 1990 Supreme Court case, Zebley v. Sullivan, which

expanded the number of disabled children eligible to receive Medicaid benefits.

Our FY 1992 legislative program includes a proposal to allow States to expand medically needy eligibility for children and pregnant women. Currently, children and pregnant women with incomes even slightly above the poverty-related threshold must "spend down" -- in many cases well below poverty before they can qualify for Medicaid. By allowing States more flexibility in setting medically needy standards for these groups, we would remove an impediment to health care access for some of our

most vulnerable citizens.

Payments to Health Care Trust Funds

The Payments to Health Care Trust Funds account incorporates several distinct Federal contributions to the Medicare Trust Funds. By far the largest of these is the Federal general revenue subsidy of Supplementary Medical Insurance, Medicare Part B. This subsidy finances 75 percent of Part B expenditures.

Because of the substantial Part B savings that would be realized through enactment of the Administration's legislative proposals, our proposed law request of $38.5 billion is nearly $1 billion less than the current law projection.

Program Management The FY 1992 Program Management request encompasses three key agency activities: Research and Demonstrations, Medicare Contractors, and Administrative Costs. It anticipates that all State Certification and Clinical Laboratory Improvement Amendments (CLIA) activities presently incorporated in the Program Management account will be financed through the new Survey and Certification Revolving Fund. Our Program Management request is $1.9 billion, $57 million less than the comparable FY 1991 appropriation.

I would now like to discuss the highlights of the individual Program Management activities.

Research

HCFA Research, Demonstration, and Evaluation projects provide the Administration and the Congress with a continuous supply of the information required to make knowledgeable decisions on program policy. Our request for on-going Research activities is $36 million, the same level of funding provided in the FY 1991 appropriation.

More than 60 percent of our Research request is slated for projects and studies mandated by the Congress. All of the $6 million requested for new projects would be devoted exclusively to OBRA 90 mandates.

No funds are requested for Rural Health Care Transition Grants, or for the Essential Access Community Hospital and Rural Primary Care Hospital (EACH/RPCH)

programs. We are presently evaluating the impact of the Transition Grant program,

which received appropriations of $43 million in FYs 1990 and 1991.

Medicare Contractors

The Medicare Contractors carry out the Government's responsibility to pay beneficiaries

and providers in a timely and responsible manner. In FY 1992, they will process a

projected 669 million Medicare claims

77 million more than in FY 1991. Our

Contractors request is $1.56 billion, an increase of $5 million over the FY 1991

appropriation. This request includes a $ 100 million contingency reserve.

In the formulation of the Contractor budget, primary emphasis was placed on claims

processing needs. Our request will support the processing of claims within the statutory

timeliness standard of 17 to 24 days.

The decision to give funding priority to claims processing involved some unavoidable

trade-offs. In Contractor hearing and reconsideration workloads, we project FY 1992

delays of more than 250 days. During the current fiscal year, the Contractors are able

to process hearings within 30 days following request. The vast majority of Medicare

hearings and reconsiderations are provider -- not beneficiary -- appeals. We are

considering a legislative change that would allow the Contractors to effectively fulfill

their hearing responsibilities within the limitations of our FY 1992 budget request.

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FY 1992, we will also have limited resources to address inquiries directed to

Medicare Contractors from beneficiaries and providers. We project that during the

fiscal year, the Contractors will be able to answer less than one-third of new inquiries.

In order to maximize the efficiency of our response efforts, and to minimize the

inconvenience that budgetary constraints will place on beneficiaries and providers, we

plan to increase the use of computerized audio response units to answer telephone

inquiries.

Our Payment Safeguards request includes an increase of 14 percent for Medicare

Secondary Payer activities, which have a greater return on investment than the other

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Payment Safeguards. We strongly support the targeting of scarce appropriated funding

to the activities with the highest yields.

Administrative Costs

The Administrative Costs budget provides for the operating expenses of HCFA. For

FY 1992, it anticipates the financing of survey and certification administrative costs and

FTEs through the new revolving fund. Our request is $298 million, an increase of

$28 million over the comparable FY 1991 appropriation. Approximately three-quarters

of the increase in Administrative Costs is driven by factors beyond our control, such as

inflation, postage, rental payments, and mandatory increases in personnel compensation.

Our request includes $7.5 million for the continuation of the Current Beneficiary

Survey. This undertaking will improve our ability to accurately assess and project the

impact of programmatic change on beneficiaries and on the budget. The Current

Beneficiary Survey will prove extremely useful to policymakers, including the Congress,

in evaluating the impact of proposed and enacted legislation.

We also request 6 new FTEs and an additional $1.1 million for the preparation of

audited financial statements. This initiative is part of the government-wide effort to

enhance Federal financial management practices, as directed by the Congress in the

Chief Financial Officer Act.

Survey and Certification Revolving Fund

The President's Budget includes a resubmission of the FY 1991 proposal to establish a

user fee-financed Survey and Certification Revolving Fund. This new account would

bring together the three HCFA health facility inspection programs: Medicaid State

Certification, Medicare State Certification, and inspections under the Clinical

Laboratory Improvement Amendments of 1988 (CLIA). No appropriation is requested

for these activities, all of which would be self-supporting under the Administration's

proposal. User fees would totally offset the projected $881 million in operating

expenses, including the administrative costs associated with a Federal staff of 550 FTEs.

If the Congress does not enact this user fee proposal, HCFA will require $286.4 million

in appropriated funding beyond our current request: $194.9 million in Program

Management, and $91.5 million in Medicaid.

Our Revolving Fund projections assume that CLIA implementation will begin in

early FY 1992, and that approximately one-half of the nation's estimated 312,000

laboratories will be surveyed during the year. If, for any reason, the necessary regulations do not become final until sometime later in the fiscal year, our funding and user fee collection projections will be adjusted downward. HCFA and the Department remain committed to responsible and full implementation of CLIA, and are diligently working to make this complex and massive program an operational reality as quickly as

possible.

Conclusion

Our budget request is the product of many long and deliberate discussions within the agency, the Department, and the Administration. It did not take us very long to discover that there are no easy answers to the looming question of HCFA budgeting, which is, "How can we best administer two of the largest and fastest growing Federal entitlement programs within the confines of a strictly limited discretionary budget?" I look forward to hearing your opinions, to answering your questions, and to providing as much help as I can to you, as you begin your deliberations on the FY 1992 HCFA budget.

BIOGRAPHICAL SKETCH OF GAIL R. WILENSKY

Gail R. Wilensky was sworn in as Administrator of the Health Care Financing Administration (HCFA) on February 5, 1990, after having been nominated by President Bush and confirmed by the United States Senate.

As HCFA Administrator, Dr. Wilensky directs the Medicare and Medicaid programs, which during fiscal year 1991 will help pay the medical bills of about 60 million America ns at a projected cost of over $155 billion. Dr. Wilensky also serves as a key health policy adviser to the Secretary of Health and Human Services and other top Administration officials.

Dr. Wilensky is a nationally recognized expert on a wide range of health policy issues, and has published extensively on health economics and health policy.

Dr. Wilensky came to HCFA from Project HOPE, where she was Vice President for the Division of Health Affairs. Previously, she was a senior research manager at the HHS National Center for Health Services Research, where she designed and directed the analysis of the National Medical Care Expenditure Survey.

Dr. Wilensky has served on the faculties of the University of Michigan and George Washington University, and held a senior research appointment at the Urban Institute. She is a member of the Institute of Medicine of the National Academy of Sciences, and was a member of the Physician Payment Review Commission and the Health Advisory Committee of the General Accounting Office.

Dr. Wilensky earned a Ph.D. in economics at the University of Michigan. She lives in Washington, D.C., with her husband, Robert Wilensky, a plastic surgeon, and has two children, Peter and Sara.

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