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Senator HARKIN. Thank you, Dr. Wilensky for your statement. Let us first pick up on the backlog, because that is what I am sure I hear most about from people. And I would assume that others, my colleagues, would hear the most about that too.


Senator HARKIN. Looking at this chart here, we are seeing the growth in the

Senator REID. Turn that a little more, please. I cannot see it. Thank you. That is good.

Senator HARKIN. Everybody see that?

The President's budget estimates there will show you that we have, and I think you may have even mentioned it, no, I do not know if you mentioned this or not, 6.9 million net by 1992, with 3.3 million resolved.

Yet, the budget, Senator Reid, the budget for handling hearings and appeals is cut $47.5 million or 63 percent. It is cut 63 percent, yet projected workloads are expected to grow 5 percent in 1992, resulting in backlogs, as the graph will show you there, of 6.9 million cases by the end of 1992. It is further my understanding, which you might correct, I do not know, that it will take nearly 9 months, I think you said 250 days

Dr. WILENSKY. Nine months is accurate enough.

Senator HARKIN. It is close. To process most reconsideration hearing cases in 1992. That is up from 1 month, if I understand it, this year.

How acceptable is this to have a backlog of 6.9 million cases and they take up to 9 months for an appeals hearing?

Dr. WILENSKY. You wasted no time in getting to the crux of the matter. We were facing, as I indicated, some very difficult budget tradeoffs in a very lean year. It was our understanding that our foremost responsibility was to make sure that claims would be processed in a timely manner, making sure that we met the statutory requirement for timeliness of 17- to 24-day processing periods. We will fulfill this responsibility. We hope to be well within statutory limits, but we will certainly plan to be within them.

Our next most important activity had to do with maintaining payment safeguards to assure that we were making prudent use of the trust funds. I would like to have been able to allocate more funding to the hearings process. I do not want to say that these decisions will not impose any burdens, but we were faced with very difficult choices, and we put allocations where we thought they were most critical.

Senator HARKIN. Repeat that again? Where did you think it was most critical?

Dr. WILENSKY. The areas that we believe are most critical were, first and foremost, making sure that claims were processed in a timely way. The second area that we were concerned about has to do with the payment safeguards and, particularly, to make sure within the Medicare Secondary Payer Program we were being as prudent as we could. That meant that we were going to face a squeeze in the place that we thought we could tolerate it best, or where impact would be minimal, namely on the hearings process.

I do not want to indicate that I do not think this choice is a problem. I think we have found the most prudent way to spend our money. We need to put it in the areas that are most critical first. Senator HARKIN. It just seems to me that, again, if we go down this path next year, you are going to have overlap again into the year following.

Dr. WILENSKY. That is correct.

Senator HARKIN. And it is just going to continue to get worse.

Dr. WILENSKY. We are, however, as we speak, attempting to look at a number of activities that will not only help us to get more out of the money that we have available for our contractor budget, but, in particular, we will try to encourage the use of electronic claims processing. We think electronic processing is not only more timely, but, in fact, it is also more efficient.

We have been meeting and trying to go through a number of strategies that will take this exceedingly lean budget and allow us to get the most out of it that we can. And so, it is possible that we will find a little bit more that we can provide. But right now, this is our best estimate of how the allocation of dollars will occur if we are to put the money first and foremost in claims processing and, second, into payment safeguards.

Senator HARKIN. I hope you are right. But I just have a sense. My sense is telling me after having been here quite a while that, Senator Reid and Senator Gorton, if we go down this path, you better get your offices ready for the incoming fire that is going to be coming in from our States. Because when that hits, we are the ones that are going to feel it because they are going to be on us. Dr. WILENSKY. It comes this way, too.

Senator HARKIN. What?

Dr. WILENSKY. It comes this way, too.
Senator HARKIN. From us. [Laughter.]
That is right.

I've got to tell you, I ask this question first because you are right, it gets to the crux of it. I am very uneasy about this. I understand you have hard decisions and choices to make. And I understand what you are saying about getting to the electronic claims processing to cut down on this kind of thing happening in the future.

But I just do not think you can cut back this severely in this area and not have some severe problems next year, and perhaps the year after.

We will be covering that in more detail as we go along.


The second area I want to cover, about as fast as this one, is user fees. Once again, you are proposing to offset your budget request by $286.4 million from the collection of user fees, to cover the cost of monitoring facilities, such as nursing homes, that receive funds from Medicare and Medicaid.

Of course, these were proposed last year and rejected by Congress.

Since this was rejected last year, why did you not just request the funding for the mandated inspections?

Dr. WILENSKY. There are several reasons. In the first place, we think that employing user fees makes a lot of sense, and that this

is an appropriate case for user fee collection. In the second place, we are planning to have more active discussions with the individuals who had seemed to regard user fees as not desirable last year to see whether or not we cannot, in fact, have the use of these fees in the future. We understand that we have got to do our homework better in order to come to agreement on employment of user fees. With regard to our discretionary spending, we are all under tremendous pressures: HCFA, the administration, and the Congress. We are hopeful that our discussions with the authorizing committee will be able to reflect this hope and permit use of what I believe is an exceedingly appropriate way to fund the costs of inspections and certifications.

I think user fees make a lot of sense when the amount that is collected is estimated in relation to the cost imposed by the type of facility and the type of testing that is going on. User fees represent a more appropriate way to finance these activities rather than use of the general fund.

We can make a very logical argument about why we want to finance inspections and certifications in this way. We are hopeful that the authorizing committees, if for no other reason than the fiscal constraints that we all face now, will reconsider their decision of last year.

Senator HARKIN. Two observations on user fees. Why do we inspect nursing homes? Is it for the benefit of the nursing homes or is it for the benefit of the general public that utilizes those nursing homes?

Dr. WILENSKY. Inspections benefit the people who are residents of the nursing homes. It is the users of those facilities who will gain from certification.

Senator HARKIN. Second, there is a philosophical issue. If you have inspections for the benefit of the general public, then it seems to me that it is the general public that ought to pay the bill for those user fees.

I have, in another area of jurisdiction which I serve, been fighting user fees for years. I do not know if this administration is proposing, but the last administration did for 8 years, to put user fees on meat inspection. We continue to block that because it is for the benefit of the public health that we have those inspections.

I have often raised this question: If the meat plants that slaughter the meat and process it, if they are paying for the inspectors, who do the inspectors work for? I raise the same question about nursing homes. If the nursing homes pay for the inspectors, for whom do the inspectors work?

Dr. WILENSKY. It is very clear that they work for the State and for us because we both provide funding. This funding mechanism focuses on who ought to bear the cost of inspections, and shows inspectors are not employees of these individual nursing homes.

Senator HARKIN. I understand who they are employed by. But who is paying their bill? The nursing homes are, because they are paying you the user fees. They are paying you to send the inspectors out.


But I have even a more practical question than the philosophical question. I understand these fees would range, I have been told, from $1,700 to $16,000.

Dr. WILENSKY. That is correct.

Senator HARKIN. And the fees go up for larger, more complex facilities. Is it true that the facilities could recoup these charges by billing Medicare and Medicaid for them as a cost of doing business? Dr. WILENSKY. They can recoup at least a portion of those charges, depending on how much of their business is Medicare and Medicaid.

Senator HARKIN. So you put user fees on, and then they can just bill Medicare and Medicaid for the user fees.

Dr. WILENSKY. But, again, Senator, while you can make some estimates as to what percentages of these facilities are financed by Medicare and Medicaid in the aggregate, there are exceptions in the specific. The fact of the matter is that there are some facilities that do little Medicare and Medicaid business. That is certainly true in nursing homes. There are other facilities that are skewed heavily toward Medicare and Medicaid. Whether or not the costs of user fees are passed on to Medicare or Medicaid will depend on the patient mix of the given facility. But that no way, in my mind, lessens the justification for having user fees, that they reflect the costs that are imposed for doing certifications and inspections. But I agree it is a philosophical difference.

Senator HARKIN. It is philosophical. It gets down to who pays. Your statement about not all nursing homes utilizing Medicare and Medicaid, well, do you have any data on that?

Dr. WILENSKY. In general, about one-half of nursing home expenditures are privately financed. Forty-five percent may be a closer estimate, but at least the other one-half is Medicaid. Medicare is only a few percentage points. Private insurance is a small but growing share. It will presumably get into costs now paid by individuals, as opposed to those which are now paid by Medicare and Medicaid. But roughly one-half of all nursing home expenses are not paid by Government, a substantial amount which sometimes is heavily evidenced in a particular nursing home, and other times a nursing home will have a broader mix of patients.

Senator HARKIN. Again, we think of our own instances in this area. I think of Iowa and I would be hard pressed to think of any nursing home in Iowa that does not have, well, maybe one-half. I guess you may be right, one-half would be Medicaid.

But it would seem to me that that is where they would load up. I would think that in this case where you put on user fees, you would have to, again, monitor very closely how much was Medicaid and not Medicaid if they can bill Medicaid or Medicare, just say Medicaid, that is the bulk of it, they bill Medicaid for the cost of the user fees. How are you going to know

Dr. WILENSKY. We have to worry about that in general. I mean, a general part of our problem is ascertaining what Medicaid's share is of food, of staffing, and operating expenses of all sorts when you have an institution that has all sorts of expenses that cover both Medicaid and non-Medicaid populations. I do not want to say it is

not a problem, but it is the same problem we have in gauging every other expenditure in the nursing home itself. I do not think it represents a special situation when related to survey and certification activities.

Senator HARKIN. I submit that of the $286.4 million that you are talking about, if you put the user fees on, I doubt that that offset is going to be that high. I mean, it is going to come right back around to Medicaid. Medicaid is going to pick up one-half of that bill.

Dr. WILENSKY. It is going to pick up roughly one-half, or 45 percent, of whatever portion represents Medicaid nursing home payments. However, the $286 million level is actually a net Medicare and Medicaid level. We plan to collect $333 million, of which approximately $46 million will be offset through benefit offsets.

Senator HARKIN. That is what I mean. So we are really not saving that money.

Dr. WILENSKY. But again, that statement is more true in the aggregate. For the specific nursing homes and facilities, savings will vary.

But this is really an issue of whether or not you think user fees as a concept make sense, and that if there are costs associated with certifying facilities in order to get a Federal seal of approval, that those costs ought to be regarded as costs of doing business. I think this is a cost of doing business, and, for reimbursement purposes, ought to be regarded and folded in to all of the other costs of doing business. You do have allocation expenses. But they are the same allocation problems you have when making sure that Medicaid only pays its share of costs associated with nursing homes serving more than just Medicaid patients.

I do not think this is a unique situation. But it is very much a philosophical issue of whether you think user fees are an appropriate financial strategy, aside from the complicating fiscal constraints that we are all now under.

Senator HARKIN. I understand. I just think that, I do not mean to have the last word on this, but it seems to me that on this user fee issue you are not going to save all that, because it is still going to go back to the taxpayer to the extent that it is Medicaid or Medi


As for the other 50 percent, or whatever is private, there are a lot of people that are in private nursing homes and are on that ladder going downhill toward poverty and will someday qualify for Medicaid. And you are just putting an extra burden on them. That is what the nursing homes will do, they will just pass it on to the private payers. That just means that that private payer may get down to the Medicaid level sooner than otherwise.

Dr. WILENSKY. As I know you are aware, user fees are the strategy we will use to finance inspections for laboratory inspections. So it is not that we lack a precedent and a statute for financing this type of inspection activity through user fees.

Senator HARKIN. I was unaware of that. I have to look at that. My staff has not actually started to yet.

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