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installing 900 telephone lines to handle claims processing questions from physicians?

Answer. HCFA is currently considering a number of options as part of an overall effort to seek out efficient and equitable ways of reducing administrative expenses while maintaining the highest possible levels of beneficiary and provider services. HCFA is not yet far enough along in the policy development process to be able to discuss specifics. We will meet with you later to discuss the specifics if you wish.

POTENTIALLY NEGATIVE IMPACT OF USER FEES

Question. Won't such a user unfriendly system be counterproductive? If you erect barriers to information, won't you just increase claims processing inefficiency? Doesn't this strike you as absolutely contrary to how you would run a private insurance program? Are private insurers making deep cuts in beneficiary and provider service programs?

Answer. In evaluating various cost-saving measures, including some user fee mechanisms, HCFA will not select options which would have adverse effects on claims processing operations. Beneficiaries will not be charged a fee for initiating a review or reconsideration of a denied claim.

QUESTIONS SUBMITTTED BY SENATOR MARK O. HATFIELD

CATARACT DEMONSTRATIONS

Question. Dr. Wilensky, I understand the Administration is considering the implementation of a Medicare cataract Preferred Provider Demonstration Project. To what degree will the cataract demonstration tilt the playing field in favor of high-volume providers? will this create an anticompetitive atmosphere which will disadvantage small, high quality practices?

Answer. HCFA recognizes that the highest volume providers are likely to have a competitive pricing advantage as a result of economies of scale. HCFA will, therefore, consider favorably any proposals from large providers that incorporate a volumerelated discount to reflect the efficiencies they

expect to achieve. However, smaller volume providers should not be discouraged from proposing discounted prices reflecting potential efficiencies in their scale of practice. In addition to other criteria, HCFA expects to select designated providers based on several volume-related thresholds for pricing, anticipating larger discounts at higher volumes.

Participation in the demonstration, by both providers and beneficiaries, is completely voluntary. Those providers not participating in the demonstration, including those providers located in a demonstration area, will continue to treat Medicare beneficiaries and receive payment under the regular Medicare payment system. In turn, beneficiaries remain free to select the provider of their choice for cataract surgery.

Question. If implemented, how will establishing large volume urban providers impact upon residents of rural areas needing care? How will this affect the economic viability of rural ophthalmologists who will never have practices sufficiently large to qualify as preferred providers?

Answer. Volume-related thresholds for pricing will enable smaller volume providers to compete effectively in the application process. Given these relative pricing scales, combined with the fact that beneficiary participation is completely voluntary and that the demonstration is being conducted in metropolitan statistical areas, the demonstration's effect on the economic viability of rural ophthalmologists should be, at most, minimal.

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reduce Government involvement in the pricing of individual services in the providers' decisionmaking;

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provide insight into appropriateness indicators and effective quality assurance and utilization review mechanisms for cataract surgery; and

provide information regarding factors influencing providers' decisions to participate and beneficiaries' decisions to select designated providers under a demonstration that will be strictly voluntary.

Question. Is there a problem in the quality of cataract care being provided by local ophthalmologists?

Answer. In general, cataract procedures result in a relatively high rate of successful outcomes. In order to assure continued high standards of quality of care as well as to protect beneficiaries from unnecessary surgery, the demonstration incorporates a variety of safeguards. Criteria for selection of designated providers will emphasize appropriateness and quality indicators, and designated providers will be subject to more intensive prospective and retrospective assessment of the appropriateness and quality of surgery and follow-up care.

Question. If the problem is overutilization, hasn't the Congress demonstrated its commitment to attack the problem without having to resort to a procedure which discriminates against local providers?

Answer. Cataract surgery is performed over one million times a year at an estimated cost to the Medicare program of over $3 billion annually. The per-case cost of this procedure has not significantly decreased to reflect technological improvements, nor to take into account the shift in surgical setting-from inpatient to outpatient facility-- that has taken place during the past decade. Rather, costs have stabilized as a result of regulatory intervention and congressional mandates.

This demonstration project would be an opportunity to study efficiencies that can be achieved by managing an episode of care for cataract surgery, while maintaining high quality of care throughout the episode. This arrangement would combine the physician and facility services on the day of surgery, the intraocular lens, and various pre-and post-operative tests and visits into one comprehensive package and single negotiated global fee. In this manner it will:

allow providers flexibility in managing the mix and type of services used to accommodate their

practice style preferences; o provide incentives to manage patient care so that

cost efficiencies are realized while maintaining a high standard of quality of care,

SOCIAL SECURITY ADMINISTRATION

STATEMENT OF GWENDOLYN S. KING, COMMISSIONER
ACCOMPANIED BY:

DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET,

DEPARTMENT OF HEALTH AND HUMAN SERVICES
JOHN R. DYER, DEPUTY COMMISSIONER FOR FINANCE, ASSESS-

MENT, AND MANAGEMENT
LOUIS D. ENOFF, DEPUTY COMMISSIONER FOR PROGRAMS

BUDGET REQUEST Senator HARKIN. Our next witness is Gwendolyn King, Commissioner of the Social Security Administration.

Mrs. King, welcome again to the subcommittee.

In fiscal year 1992, the Social Security Administration will pay out $307 billion in benefits to 42 million Americans. Not only will 36 million elderly Americans receive payments, but 6 million disabled and blind Americans also receive the vital assistance they need.

The Social Security Administration reaches into almost every city, town, and village in America—1,300 field offices and a staff of 64,530. The budget request for administrative costs is $4.5 billion, an increase of $374.6 million over last year. A supplemental $232 million is also being requested to handle the surge of claims under the Zebley case.

Despite the additional resources being requested, it appears that services to the public are in danger of deteriorating. Telephone busy signals rates remain high, the backlog of disability cases continues to grow.

This, again, is an issue that Secretary Sullivan has acknowledged, but one for which the administration has not found the needed funds to remedy.

Commissioner King, again, we welcome you back to the subcommittee. In the interest of time, please summarize your budget request so that we can get to the questions more quickly. Of course, your entire prepared statement will be made a part of the record and please proceed as you so desire.

OPENING REMARKS Mrs. KING. Thank you, Mr. Chairman, and I appreciate very much your giving me this opportunity. We have submitted a longer statement for the record.

I would like to take a few moments to discuss our $4.5 billion request for SSA's fiscal year 1992 administrative expenses, as well as certain critical funding needs we have for the current_fiscal year, most notably, the $232 million supplemental for Zebley, which you mentioned in your opening remarks.

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