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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. În 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

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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


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.


Dr. Wilensky, one last question before I turn it over to Senator Reid. In previous year's hearings I have called attention to abuses in marketing reimbursement for certain pieces of durable medical equipment, such as seat lift chairs and the TENS units.


Senator HARKIN. I think progress is being made in correcting these abuses. Yet it just seems like every time we think we have gotten the lid on it, something else new turns up.

Consider for example a medical device called the Pocket Doppler or the Pocket Rocket. This is one right here. You have seen these, right? Or you have not seen them?

Well, this is a Pocket Rocket right here.

Senator REID. Where do you stick that?

Senator HARKIN. Do you want me to demonstrate? [Laughter.] Anyway, basically it is an ultrasound. It is used by physicians to check heartbeat, artery blood flow. It is a very simple device. It is used for diagnostic tests of lower limbs for blood flow.

I am told, Senator Reid, the cost to manufacture this device is about $40. They are sold to doctors for between $200 and $600. Do not shake your head yet. According to the inspector general's office, a 5-minute scan by a doctor using this costs Medicare $100; 5 minutes of using this, and doctors bill Medicare $100.

Now that is the kind of thing that keeps turning up all the time. When you are spending the billions of dollars we are, you ask: How can we possibly prevent these kinds of things from happening?

Just to show you, here is a picture of a machine that costs about $200,000. It looks like something out of Las Vegas. [Laughter.]

And I understand that for the diagnostic use of that you get a bill of about $100. So you get a $100 bill from a $200,000 machine and you get a $100 bill from something that costs $40 to make.

My point in showing these is again to bring home the idea that we just have got to keep vigilance in these areas. Up until last month, your agency made no differentiation in payments for tests by these inexpensive pocket rockets or the payments made by these machines.

I understand that you have now determined that tests with these pocket ultrasounds should be considered as a routine part of a doctor's examination and not receive any separate Medicare reimbursement at all.

Dr. WILENSKY. That is correct.

Senator HARKIN. Thank you. We appreciate that.

Dr. WILENSKY. We appreciate your bringing it to our attention. We have also asked our physician panel to review the medical appropriateness of the medical instruction on these ultrasound procedures so that we can provide guidance about when these devices should be used and the adequacy of existing procedure codes.

One of the reasons that we continue to try to pursue coordinated care and capitated systems of payment is because we are forever impressed by the ingenuity of various suppliers and various other parties in our health care system. Until we have bundled payments for sets of services, we will keep seeing this proliferation of new tests and new devices turning up. But again we appreciate your

bringing this to our attention, and we think a better decision has now been made.

Senator HARKIN. Again, my thanks to you for taking care of it. I am going to say this for the record and in public view. I will go to bat for the providers when, just like on the backlog of cases, most of this affects providers. We know that. We should not say well, it is providers so we do not have to worry about it. We should worry about it. That is money that they need that they put out of pocket.

But when it comes to things like this, I do not understand a doctor that would knowingly use one of these devices, it takes him 5 minutes, and turn around and bill Medicare $100.

Senator REID. One minute.

Senator HARKIN. It is about a 5-minute exam or something.

Senator REID. That is more reasonable.

Senator HARKIN. More reasonable? Wait a minute, I said doctors, not lawyers. [Laughter.]

I just do not understand them billing that, any reasonable person doing that. And then to see that it is manufactured for $40 and sold for between $200 and $600. Now you wonder why we are spending so much on health care in this country when we have got these kinds of things going on.

Again, we will keep vigilant. And thanks for paying attention to it and getting that taken care of.

Dr. WILENSKY. Alert us if you find some others. We will take care of it.

Senator HARKIN. We will, I am sure. I hope not, but I am sure we will.

Senator Reid.


Senator REID. Mr. Chairman, I have a couple of areas of inquiry. I will be relatively brief.

In recent months, Doctor, I have received, as I am sure other Members of Congress have, letters from seniors who tell me they have gone to doctor after doctor who refuses to take Medicare. Are you familiar at all with this problem?

Dr. WILENSKY. No; in fact, I am actually very surprised to hear that because both the number of visits that are being accepted on assignment, and the participating physician rate are at all time highs.

Senator REID. Do you think the southern Nevada area, the Las Vegas area would be unique? Will you check into that for me? Dr. WILENSKY. We will check into it.

I would not have thought so, but I certainly will go back. We have statistics by State and area and we will report back to you. [The information follows:]


The Participating Physician and Supplier Program was established to limit the impact of medical costs on Medicare beneficiaries by providing incentives to providers and suppliers to accept Medicare payments as their full fees. Participation rates among physicians in Nevada have exceeded comparable national rates as demonstrated in the two most recent periods of available data:

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