IRS has indicated that they will provide the initial match of spouses from 1987 and 1988 returns to SSA by June 1990. The statute provides SSA with an additional 120 days to identify those beneficiaries and/or spouses of beneficiaries with earnings.

In an effort to expedite the project, HCFA is requesting SSA to provide data on Medicare beneficiaries who are workers. In this way, we hope to begin development with employers by July 1990 on a phased basis, rather than awaiting for the completed IRS data exchange of beneficiaries and spouses. If we are successful in this effort, we expect to provide intermediaries and carriers with initial information on which to initiate recoveries of mistaken payments and identification of Medicare secondary payment (MSP) situations to avoid further mistaken payments beginning in September 1990.

We do not anticipate obtaining significant savings for fiscal year (FY) 1990. Although we expect some savings will accrue due to increased voluntary compliance with the MSP provisions arising from an awareness on the part of third party payers of the project, recoveries will not begin in FY 1990. However, we do anticipate significant savings for FY 1991. Our current estimates project $400 million in FY 1991 savings and $200 million in FY 1992 savings, before this provision sunsets. These savings estimates are related exclusively to recovery of mistaken Medicare primary payment. Further savings, although not specifically identifiable, will arise from avoidance of Medicare primary payments on current claims as a result of identifications made through the data match project.

STUDY ON PAYMENT SAFEGUARDS

Question. I believe we should have the best information possible on the marginal return and added funds going into payment safeguards activities. Will HHS and HCFA consider having a neutral outside consultant do a major study of the payment safeguard activity, so we could get a firmer idea about where the marginal return of these dollars is 1 for 1?

Answer. Yes, HCFA will consider having a neutral outside consultant do a major study of the payment safeguard activity.

HOSPITAL INSURANCE SOLVENCY

Question. The last long-range actuarial report (1988) we received for the Hospital Insurance Trust Fund indicated it would become insolvent by the year 2005 under the "II-B" assumptions. What effect would the adoption of the President's Budget proposals have on the solvency of the Medicare Hospital Insurance Trust Fund?

Answer. The President's Budget proposals would raise the Hospital Insurance (HI) Trust Fund's FY 1995 end-of-year balance from $205 billion to $244 billion. One should note that this $39 billion improvement in the trust fund's status results from both income and outlay proposals. Including all State and local government employees under Medicare ensures that these employees contribute their fair share to the HI Trust Fund. The President's Budget outlay proposals, by appropriately restraining growth in hospital and related Part A services, further improve the HI Trust Fund's projected balance.

The HI Trustees did not project the long-range status of the HI Trust Fund last year, primarily due to complications and delays in estimating the new Catastrophic income streams. Thus, the 1988 report you referred to contains the latest estimate of the trust fund's long-range solvency. A revised report on the status of the HI Trust Fund will be available in the upcoming 1990 Trustees' Report.

RURAL HEALTH TRANSITION GRANTS

Question. You requested no funds for the rural health transition grant program. Your justification gave no indication as to why. Why do you propose no funding for the rural health transition grant program in FY 1991?

Answer. The original set of grants awarded in FY 1989 under the Rural Health Care Transition Grant program were made for a 2-year period as authorized by section 4005(e) of OBRA 87. The first year funding for these grants was made from the FY 1989 appropriation for this program and the second year continuation funding for these grants will be made from the FY 1990 appropriation for this program. The FY 1990 appropriation also permits the award of additional new 3-year grants as authorized by section 6003(g)(4) of OBRA 89 which amended section 4005(e) of OBRA 87. We intend to evaluate the impact of these grants and determine their effectiveness in preserving access prior to making funding decisions beyond FY 1990.

Question. Have any funds been included for rural transition grants in FY 1992 and beyond in the President's budget, or does the President propose to terminate the grants?

Answer. No decision will be made about future funding requests for this program until we complete our evaluation of its effectiveness.

Question. How many applications have you received for rural health transition grants? How many were denied? Were all those denied unworthy, or aren't there enough funds to pay for all the good requests?

Answer. As a result of our FY 1989 rural health care transition grant solicitation, we received 704 applications. With an appropriation of $8,892,000 and a limitation of $50,000 per grant we were able to fund 184 of the most worthy applications with 520 applications being disapproved. The 184 applications which were approved were both technically acceptable and geographically representative.

QUESTIONS SUBMITTED BY SENATOR DALE BUMPERS

LASAGNA COMMITTEE

The National Committee to Review Current Procedures for Approval of New Drugs for Cancer and AIDS (the Lasagna Committee) has recommended that Medicare carriers' discretion be restricted in connection with coverage decisions about drugs.

Question. Does HCFA intend to follow this recommendation, and if not, why not?

Answer. Current Medicare policy provides for coverage of drugs (that is, drugs and biologicals) for indications approved by the FDA in the labeling. Carriers are therefore required to pay for labeled indications. They may decide, in addition, to cover a drug for an unlabeled indication based on medical practice in their respective locales, so long as such use is not specifically precluded by the FDA or HCFA. In connection with implementation of the Medicare Catastrophic Coverage Act of 1988 (MCCA), HCFA planned to mandate the use of the three major drug compendia for coverage of drugs as authorized by that Act. In that context, we were also studying the issue of national uniformity of drug coverage that remained outside of the coverage provisions of the MCCA. Since repeal of the MCCA, there is no specific statutory provision to use as a basis for mandatory uniform national drug coverage, but we continue to consider ways to achieve it.

Question. The Lasagna Committee also recommended that Medicare automatically cover any unlabeled drug indication recognized in one of the three major medical compendia. Does HCFA intend to follow this recommendation, and if not, why not?

Answer. As indicated in the answer to question 1, under the MCCA, we had clear authority to mandate the use of drug compendia for use in making coverage decisions about drugs covered by the MCCA. (In addition, in committee language, Congress indicated its intent that we consider use of the U.S. Pharmacopoeia, the AMA.Drug Evaluations, and the American Hospital Formulary Service.) In view of the repeal of MCCA, we are

considering whether and to what extent, national uniformity can be promoted.

COVERAGE OF UNLABELED INDICATIONS FOR DRUGS

Question. Does HCFA have any data indicating the cost of the individualized carrier decisions with respect to coverage of unlabeled indications for drugs?

Answer. No.

Question. How does that cost compare with the savings realized from denial of coverage for these indications?

Answer. Data not available.

Question. Is there not a potential conflict of interest when such decisions are left to individual carrier discretion while at the same time these carriers, in their private business, have been increasingly restrictive in their own coverage decisions?

Answer. Carriers are left with considerable discretion on which indications to cover. The Medicare program has been designed from its inception in this manner. Individual Medicare coverage decisions are independent from a carrier's private business but are to be based on the current medical policy of the community. Often, this is reflected in what they are doing in their private business.

Question. I am very concerned about claims processing and want to be sure your budget request is adequate for the prompt processing of beneficiary claims. Your budget justification projects a decrease in the Part A claims workload from FY 90 to FY 91 and a very slight increase in Part B claims workload. In recent years, the annual increases in both Part A and Part B workload have been much greater than these modest projections. In fact, from FY 89 to FY 90, the Part A claims workload grew by 10.3% and the Part B claims workload by 13.6%. Please provide a detailed explanation of the projected workloads for FY 91.

Answer. In late FY 1989 a trend of declining growth in benefit payments emerged. In addition, claim receipts were lower over the last three months of FY 1989 than expected. These factors coupled with the repeal of catastrophic and the speed up of claims processing in FY 1990 lead us to believe that claims processed in FY 1991 may be much less than historic trends would indicate. As in previous years, we have requested that $100 million of the contractor contingency be reserved for unanticipated workload growth.

SOCIAL SECURITY ADMINISTRATION

STATEMENT OF GWENDOLYN S. KING, COMMISSIONER

OPENING REMARKS

Senator HARKIN. We will now hear testimony from the Social Security Administration. And we welcome Gwendolyn King, the new Commissioner in her first appearance before the subcommittee.

For the first time in 5 years your agency is not requesting a staffing cut. Well, that is definitely a step in the right direction. But the bad news is the rate of telephone busy signals. Another piece of bad news is too many cases of wrongly removing SSI recipients from the roles and a persistent backlog in handling disability appeals-an area that you know I am very interested in.

It is not surprising that the survey your agency conducted last year revealed that most employees feel overwhelmed, that you face widespread morale problems. I can sure understand that. Projections of the elderly population indicate that the Social Security Administration's workload will continue to grow in the years ahead. So, Commissioner King, welcome again to the subcommittee. Your statement will be made a part of the record in its entirety. I am going to ask you to highlight it, or to make those comments or statements that you think that we should pay the most attention

to.

SUMMARY OF REQUEST

Ms. KING. Thank you very much, Mr. Chairman. I do have a brief statement I would like to read.

I am pleased to be here today to present the fiscal year 1991 appropriation requests of the Social Security Administration. These requests total $20.2 billion in budget authority. Those moneys will be utilized to administer the old-age, survivors and disability insurance programs, fund administrative costs and benefits under the Supplemental Security Income Program, provide special benefits for disabled coal miners and perform certain administrative functions for the Medicare Program.

In the full statement I have submitted for the record, I am providing the committee with the full breakdown of the appropriation requests. In the brief time I have I want to talk about the impact those funds will have on the Social Security Program and the millions of Americans who depend on it.

Social Security is unique among Federal programs because of the trust the public has invested in it, and because of the direct and vitally important effect it has on the lives and well-being of so many people. The Social Security Administration provides not only retirement support for Americans in their retirement years, but an entire package of social insurance protection. It provides protection