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Background. The Budget Enforcement Act provided that the baseline for the administrative expenses of three social insurance programs funded through trust funds, Medicare, Unemployment Insurance, and Railroad Retirement, be adjusted to reflect inflation Plus beneficiary growth. The reasoning behind the change is that since these programs are entitlements with participation levels that are increased by factors other than inflation, the baseline should be adjusted to reflect the additional cost of administering the programs due to the increased number of beneficiaries.

The budget adjusts upwards the domestic discretionary budget authority and outlay caps to reflect this baseline adjustment. However, the fiscal year 1992 level recommended for the Medicare administrative budget is 2.5 percent less than the fiscal year 1991 level. These increases were allocated elsewhere in the budget.

Answer. Including the contingency fund, the FY 1992 Medicare Contractor budget is actually slightly higher than FY 1991. It should be understood that the Medicare Contractor budget is a part of HCFA's total Program Management budget and accordingly must compete with all of HCFA'S administrative needs. In addition, HCFA must compete for administrative funds with other HHS components. This budget attempts to maintain claims processing times within statutory requirements, and fund payment safeguard activity at reasonable levels. There will be slippage in the processing of appeals and inquiries.


Question. Your budget cuts the funding level for answering Medicare beneficiaries' and providers' questions by over 50 percent. It is estimated that over 30 million questions will be asked either in writing or over the phone this year. However, the FY 1992 funding level assumes that only 1 out of 4 of these inquiries will be answered. In light of the fact than physician payment reform (PPR), the most sweeping change in Medicare payment policies since the DRG system, phases in beginning in January, wouldn't it have been prudent for the Administration to provide adequate funding for this program to aid in the smooth transition to the new reimbursement rules?

Answer. Claims processing and payment safeguards are the most important Medicare Contractor activities and receive the highest funding priority. Within a limited budget, careful decisions were made about the best way to distribute the remainder of available money. With the large number of systems changes needed to implement OBRA 89 and OBRA 90, less money remained to respond to beneficiary and provider inquiries.


Question. will the disputed claims be resolved on a first in/first out basis, or by amount in dispute, or some other standard?

Answer. The current policy is to process requests on a first in/first out basis. There are no plans to change this method at the present time.

Question. What will happen to the 7 million claims left unresolved during FY 1992? On average, how long will these disputes remain unresolved and how much money in claims will be in dispute?

Answer. The current estimate of the expected FY 1992 appeals backlog is 6.9 million cases involving approximately $1.3 billion in benefits payments. These appeals will be handled on a first-in/first-out basis as rapidly as our funding and overall capacity permit. At the present time, we expect appeals processing times to be extended as follows:

Part A Reconsiderations: from 27 days to 277

Part B Reviews: from 26 days to 276 days;

Part B Fair Hearings: from 81 days to 331 days.


Question. The President's budget freezes spending on payment safeguard activities which prevent erroneous or inappropriate payments from the Medicare Trust Fund. These activities now save Medicare nearly $4 billion every year, which could significantly increase with additional funding. However, the budget scorekeeping rules discourage Congress from providing additional spending since the funding levels are scored against the domestic discretionary spending caps, but the resulting savings that occur are not scored. Last year, two

important precedents were included in the budget legislation addressing adequate funding for administration expenses of the Veteran's Administration and the I.R.S. Since the savings from Medicare payment safeguard activities can be documented, shouldn't there be similar incentives to provide funding in this program?

Background. The Omnibus Budget Reconciliation Act of 1990 included a provision which allows the Secretary of the Veterans Administration to keep funds collected from secondary payers to be used directly by the VA to cover the administrative costs of collecting these payments.

The new Budget Enforcement Act includes a mechanism whereby the President can adjust the domestic discretionary spending caps to offset additional spending on 1.R.S. collection activities. (The President's FY 1992 budget utilizes this adjustment.) However, the Appropriations Committees are "charged" for providing adequate funding in the Medicare administrative budget for enforcement activities without getting credit for the savings. The new budget law, in essence, hold the Appropriations Committees "harmless" for providing increased VA and I.R.S. funding for enforcement activities, but not Medicare.

Answer. We do not currently have plans to propose a change in Medicare Trust Fund scorekeeping like the one discussed above. We acknowledge that the number of programs that receive special scorekeeping treatment must be limited lest the efficacy of the caps on overall domestic discretionary spending be jeopardized. Additionally, we still need to determine when the point of diminishing marginal rate of return would be reached for payment safeguard activities in order to set optimum funding levels. However, we remain committed to protecting the Trust Funds, and to exploring new methods for providing incentives to Medicare contractors to maintain such protection through efficient payment safeguard activities.


Question. I've been concerned about the potential adverse impact on the access to clinical laboratory services, especially in rural areas, of HCFA's proposed regulations implementing the clinical Laboratory Improvement Act (CLIA). The Committee's report of last year directed you to provide us with an update of the five studies which were mandated by

CLIA. What is the status of these studies? The Committee report also asked that you provide adequate opportunity for public review of your revised regulations. What is the timetable you are working under for publishing the revised regulations?

Answer. The Public Health Service, specifically the Centers for Disease Control has responsibility for conducting these studies. The due dates were impossible from the start. The studies deal principally with the effects of certain requirements on quality of laboratory testing (for example, personnel requirements and proficiency testing). A proper study in these areas requires longitudinal data, including before and after analysis. Since there was almost no preexisting data in these areas on which to build, it is necessary to start from the beginning. Because final regulations have not yet been published, HCFA has not been able to collect user fees.

As a result, there are no funds available to conduct the studies.

CDC has used some of its own resources to give the Research Triangle Institute funds to develop the study designs. Contracts for the studies will be awarded in late FY 1991 or early FY 1992. We will begin collecting user fees in a few months, and we will provide the CDC with funds adequate to conduct the studies.

Implementation of the CLIA regulations is dependent upon final publication of four regulations. In all cases we have made provision for public comment on the regulation. We hope to have all the regulations published in final and the CLIA program ready for full implementation by the end of 1991.


Question. What steps have you taken to notify eligible women of the new mammography screening benefit under the Medicare program? What have you done to encourage the appropriate use of this benefit?

Answer. At the end of last year, just as the mammography benefit was to go into effect, the Health Care Financing Administration (HCFA) issued a press release announcing the availability of the new benefit. The information was carried on the major wire services and in major dailies throughout the country

Information about the benefit is also included in the Medicare 1991 Handbook, which is being mailed to all new beneficiaries and to anyone who requests the publication from HCFA or Social Security Administration (SSA) offices. We have also drafted a leaflet, Medicare 1991 Highlights, which we will be distributing to the public during the remainder of this year through supermarket displays and through our regular publication distribution channels.

HCFA's Office of Public Affairs has also been working with the National Cancer Institute, with whom we will distribute a package of information to organizations, senior centers, and appropriate news media, encouraging women to be screened for breast cancer and pointing out that the screening is covered by Medicare.


Question. The Committee's 1991 report urged that the Department conduct a demonstration project to test the feasibility of applying a regionalized approach to developing guidelines and carrier instructions with respect to one or more Medicare reimbursable services. This request was based on our concern that Medicare rules do not adequately account for local and regional differences. What have you done to implement this demonstration project?

Answer. When HCFA promulgates regulations we solicit comments from concerned parties. In that way we provide an opportunity for local and regional variation to be called to our attention and for modifications to the regulation to be considered. Although we believe consideration should be given to all concerned parties we do not believe it would be efficient to establish different rules and regulations for local and/or regional areas. In fact, this approach would lead to an increase in the inconsistency of program payments in different sections of the country. A practice that we have been criticized for and are working to correct.


The fiscal 1992 appropriation estimate for Medicaid is $59.8 billion, an increase of $8.2 billion over FY 1991. That represents a 16 percent increase for these entitlement benefits.

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