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COMMITTEE CONSIDERATION

The Subcommittee on Health and the Environment met for 3 days, on June 22nd, 27th, and 28th, 1989, in closed session to discuss proposed Medicare and Medicaid reconciliation provisions. The subcommittee met in an open mark up session on June 29th, 1989, and ordered a Committee Print. On July 12th and 13th the committee met in an open mark up session and ordered the Committee Print with proposed amendments, transmitted to the Budget Committee by a recorded vote of 30 to 13, a quorum being present.

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 2(1)(3)(A) of rule XI of the Rules of the House of Representatives, no oversight findings or recommendations have been made to the committee.

COMMITTEE ON GOVERNMENT OPERATIONS

Pursuant to clause 2(1)(3)(D) of rule XI of the Rules of the House Representatives, no oversight findings have been submitted to the committee by the Committee on Government Operations.

COMMITTEE COST ESTIMATE

In compliance with clause 7(a) of rule XIII of the Rules of the House of Representatives, the committee believes that the bill will achieve budget savings in the Medicare program of $525 million in fiscal year 1990, and result in new Medicaid program outlays of $183 million in fiscal year 1990.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Hon. JOHN DINGELL,

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,
Washington, DC, August 1, 1989.

Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the attached cost estimate for the provisions relating to spending in programs within the jurisdiction of the House Committee on the Budget by the House Committee on Energy and Commerce, July 13, 1989.

The estimates included in the attached report represent the 1990-1994 effects on the Federal budget and on the budget resolution baseline of the committee's legislative proposals. CBO understands that the staff of the Committee on the Budget will be responsible for interpreting how the savings contained in these legislative proposals measure against the budget resolution reconciliation instructions.

If you wish further details on this estimate, we will be pleased to provide them.

CC.

Sincerely,

ROBERT D. REISCHAUER, Director.
Honorable Norman F. Lent, Ranking Minority Member.

HEALTH PROVISIONS OF 1990 RECONCILIATION BILL, ENERGY AND COMMERCE COMMITTEE

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NOTE: All estimates contained in this document are subject to the following caveats: (1) All estimates are relative to the CBO February 1989 baseline and (2) studies which have no direct spending impact are not listed in this table.

INFLATIONARY IMPACT STATEMENT

Pursuant to clause 2(1)(4) of rule XI of the Rules of the House of Representatives, the committee makes the following statement with regard to the inflationary impact of the reported bill:

SECTION-BY-SECTION ANALYSIS AND DISCUSSION

SUBTITLE A-MEDICARE

PART A-PROVISIONS RELATING TO PART B OF MEDICARE

Subpart 1-Payment for Physicians' Services and Related
Professional Services

Sec. 4001-Application of resource-based relative value scale to physicians' services

Section 4001 sets forth a systematic and comprehensive reform of the methodology used under Medicare to pay for physicians' services. This reform would be phased in over 4 years and would be budget neutral in each year, vis-a-vis the total expenditures that would have been made under Medicare for physicians' services in the absence of the reform. At the conclusion of the phase-in, physicians' services would be paid for under a fee schedule, rather than under the current "reasonable charge" methodology. The fee schedule would be based on a nationally uniform "resource-based relative value scale" ("RBRVS") and would use a national conversion factor that would be adjusted to take into account geographical variations in the costs of furnishing physicians' services.

This reform is one of the key elements in any strategy to improve the Medicare program. It will simplify the current, complex payment rules, thereby improving both the ability of the enrollees and physicians to understand the rules and the ability of the Medicare contractors to administer them. Moreover, by improving the equity among payments for these services, the committee believes this reform will contribute to a more appropriate mix and distribution of services than is now the case, which will greatly benefit the Medicare enrollees.

This reform, by itself, will not resolve broader, vitally important, issues regarding the appropriateness and effectiveness of the care delivered under Medicare or the continuing high rate of increase in Medicare expenditures. Additional measures are needed as part of a long term strategy, including those set forth in subtitle B of this bill dealing with research on patient outcomes and the development of clinical practice guidelines. Implementation of this reform can, however, facilitate the discussion and resolution of these issues, while helping to assure continuous access to quality care.

Background. Under current law, physicians services are typically reimbursed on a fee-for-service basis. The payment amount is based on a complicated method established when the program was enacted in 1965 and embellished over the years. Payment amounts are influenced by several factors, the most prominent of which are the historical pattern of charges billed by each physician and the Medicare economic index, which imposes a limit on the rate of increase in payment amounts from year to year.

The current methodology has numerous shortcomings and problems that are of grave concern to the committee. These include significant disparities among allowable payment amounts-for example, different payment amounts according to the geographical or institutional site of service, the physician specialty designation, or

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