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. In 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 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 Americans 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. HEARINGS BACKLOG 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. [Chart.] 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. 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. USER FEES 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 |