HEALTH CARE FINANCING ADMINISTRATION STATEMENT OF GAIL R. WILENSKY, ADMINISTRATOR ACCOMPANIED BY: LEE MOSEDALE, ACTING DIRECTOR, OFFICE OF BUDGET AND ADMINISTRATION ELIZABETH CUSICK, OFFICE OF THE ASSISTANT SECRETARY FOR MANAGEMENT AND BUDGET, DHHS PREPARED STATEMENT Senator HARKIN. The subcommittee will now hear testimony from the Health Care Financing Administration and the Social Security Administration. From HCFA we have Dr. Gail Wilensky, Administrator, accompanied by Mr. Mosedale did I pronounce that right?- Acting Director of the Office of Budget and Administration for HCFA. Dr. Wilensky, welcome to the subcommittee. Your statement will be made a part of the record in its entirety. And if you could highlight it, I would sure appreciate it. Thank you. [The statement follows:] (235) STATEMENT OF GAIL R. WILENSKY I am Mr. Chairman and Members of the Subcommittee, pleased to present to you today the Fiscal Year 1991 budget request of the Health Care Financing Administration. As I begin my appointment as Administrator of HCFA, I am mindful of the many tasks before us. The past year has been one of both change and continuity for the agency. Significant changes in the Medicare and Medicaid programs have resulted from such major legislation as the Medicare Catastrophic Repeal Act and the Omnibus Budget Reconciliation Act of 1989. the same time, the unabated growth in national health care costs continues to pose serious, unresolved challenges to the Congress and to the Administration in our concerted efforts to constrain expenditures while ensuring quality of care. At The FY 1991 HCFA request outlines our agency-wide proposals to help meet these challenges through more effective and efficient management of Medicare and Medicaid. These initiatives include the introduction of new approaches to our programmatic responsibilities, as well as refinements of present administrative practices. In our primary program management proposal, we seek to consolidate all Medicare and Medicaid State Certification activities in a new Survey and Certification Revolving Fund, and to make this account self-sustaining through the assessment and collection of user fees. This proposal is a logical extension of the laboratory inspection funding mechanism mandated by the Congress in the Clinical Laboratory Improvement Amendments of 1988. It is an effort to equitably assign costs to those parties who most benefit from participation in the Medicare and Medicaid programs. This policy has only a modest effect on the Federal deficit, as Medicare and Medicaid will continue to pay their fair share for these important activities. Our request also puts forth a number of proposals to slow the escalation of Medicare benefit outlays and to enhance the roles of Medicare and Medicaid in the managed care arena. Under current law and without Catastrophic Health Insurance, Medicare benefits are expected to grow by approximately 10 percent in FY 1991. Our proposals would hold this rate of growth to less than 5 percent, for a total savings of $5.5 billion. At this time, I would like to briefly discuss each of the respective accounts under the purview of this Subcommittee: Grants to States for Medicaid, Payments to the Health Care Trust Funds, Program Management, and the proposed Survey and Certification Revolving Fund. GRANTS TO STATES FOR MEDICAID During FY 1991, Medicaid is expected to serve more than 26 million recipients, an increase of approximately 4 percent over the previous year. Under current law, we request a total of $45 billion for the Federal share of Medicaid benefits and administrative costs. This is an increase of $4.8 billion, or nearly 12 percent, over FY 1990. Much of this increase is due to the impact of recent legislation and to the steeply rising costs of institutional services. The Administration is proposing a package of Medicaid managed care initiatives that will better integrate services, help to control unnecessary utilization, and improve both access to and quality of care. These enhancements are expected to cost $25 million. As part of our survey and certification proposal, we propose to transfer all Medicaid State Certification responsibilities to the new Revolving Fund. This would reduce the Grants to States for Medicaid appropriation by more than $113 million in FY 1991. PAYMENTS TO THE HEALTH CARE TRUST FUNDS The Payments to the Health Care Trust Funds account incorporates several distinct Federal contributions to the Medicare Trust Funds. By far the largest of these is the Federal general revenue subsidy of Supplementary Medical Insurance. This subsidy currently finances more than 75 percent of Part B expenditures. Because of the substantial Part B savings which would be realized through passage of the Administration's legislative proposals, our proposed law request of $35.1 billion is $2 billion less than under current law. PROGRAM MANAGEMENT The Program Management request encompasses three integral agency activities: Research, Medicare Contractors, and Administrative Costs. It anticipates that all State Certification activities and related administrative support presently included in the Program Management account will be transferred to the new Revolving Fund. Our request is $1.9 billion, comprised of $1.8 billion to be transferred from the Medicare Trust Funds and $90.1 million to be appropriated from Federal general funds. This is $41.4 million less than our FY 1990 appropriation, a reduction attributable to Catastrophic repeal and the transfer of survey and certification responsibilities to the Revolving Fund. I would now like to briefly highlight each activity of the Program Management account. Research Our request for Research activities is $36 million, $3.8 million more than the comparable FY 1990 appropriated level. As we intend to use the $17.8 million FY 1990 Rural Health Care Transition Grant appropriation in FY 1991 as well as in FY 1990, no such grant monies are requested for FY 1991. Our Research program will continue to concentrate on high-priority issues crucial to the agency mission. We propose to devote $6.0 million to studies of physician and ambulatory care payment systems, and $7.0 million to quality of care research. $16.2 million (or 45 percent) of the total request is required to fund projects mandated by Congressional legislation, including $5 million to carry on projects stipulated by OBRA 89. Medicare Contractors The Medicare Contractors request seeks funding for the operating costs of the private organizations that process claims, conduct Payment Safeguard activities, and provide program information to beneficiaries and providers. Our request is $1.58 billion, an increase of $129 million (or almost 9 percent) over the FY 1990 appropriated level. This includes a contingency reserve of $100 million, and $73 million earmarked for OBRA 89 activities. The responsibilities of the contractors are the core of the Medicare program, and therefore HCFA's quest to improve the management of Medicare must in large part be focused here. We request moderate increases over FY 1990 appropriated levels in each of the primary Contractor functions. Our request for an increase in Payment Safeguards activities is particularly notable, for it recognizes the significant trust fund savings produced by these investments. Payment Safeguards include provider audits, contractor medical and utilization reviews, and the Medicare Secondary Payer program, which identifies situations where other insurers have primary payment responsibility. Among the other highlights of the Contractors request is the full operation and planned enhancement of the Common Working File, an automated system which vastly improves claims processing operations through the institution of regional Medicare computer databases. In this and other initiatives such as shared systems maintenance and processing, our Contractors request vigorously pursues the promise which well-designed electronic data systems can offer. Administrative Costs The Administrative Costs activity of the Program Management account provides for the operating expenses of the Health Care Financing Administration. Our request of $285.3 million is $39.7 million (or 12 percent) less than the FY 1990 appropriated level. Similarly, our full-time equivalent (FTE) request of 3,577 is 440 positions under the FY 1990 level of 4,017. These reductions in funding and staffing reflect the effects of Catastrophic repeal, and the transfer of 380 Medicare and Medicaid Survey and Certification personnel to the new Revolving Fund account. Included in the Administrative Costs request are two management initiatives of special note. The first is the Project to Redesign Information Systems Management (or PRISM), which constitutes the agency's comprehensive effort to upgrade its internal information systems. The other is a Medicare survey, still in the developmental stages, through which we will gather feedback from beneficiaries about the nature and costs of services, out-of-pocket expenses, and the overlaps of Medicare with other coverage. This on-going survey will provide the timely, detailed information required by the Congress, and necessary to enlightened Medicare policy analysis and policymaking. SURVEY AND CERTIFICATION REVOLVING FUND The proposed Survey and Certification Revolving Fund consolidates in a single account the various facility survey functions of the Medicare and Medicaid programs, along with the new schedule of inspections required by the Clinical Laboratory Improvement Amendments of 1988. In essence, the total costs associated with direct surveys as well as corresponding Federal administrative expenses would be funded through user fees to be collected from all providers and suppliers. The entire survey and certification program would be self-financed, and would not require any appropriated |