VS HULOSA. INTUVUKA 10 alm 11. Furumi matching Jainkontinger in Asement is virtanen 19SLILA sers, zimu seres ind hoɔme & LUTION 11 de enero e meurt after the fne bi cat sa ni fu ar genen i 1 neora a reduction stund semente 1 mestim de te ins. 91 out of a 1 a skilled 14. £ L 11 3-ten meg mert aber 90 days of fars & tætt a Fe many far an scational 2 sure of orng a mo' intime at sy for the bamentary 1 compute & de FT difen fremusement purposes den wien melled voreng unus aut are netust sat inclizes 18 Dese changes in traer a more effecque vizet inured facines ant ve BOSS DEVs if service. To achieve * p** * provoking meet Feer many ir neatent, clinic WAG NOMA NARCt amuse to medicage the States u provide esis and *ANMARKA „com, prononcive series and kenties care and MANY 1992 o de seen for the use of ILJALI SETINS. bra grepet parts a me mri of Sat I peers and TB hospitals * Gangat to medonge the trasfer of pads to kepenate facilities. They Tamas ka pasumption than treatmen in are surowice is generally of short 4ation, rang bi cate bat patience realno i manching for skilled nursing homes will enkairage, whatarer spproprase any trader of patents to siterative and lower * 2 intermediate care facilitie The provision granting authormy to the bemetary to compite for reimbursement purposes a reasonable cost differential between cost of exiled nursing home services and cost of intermediate care facuties will aware that supporting care in these institutions results in decrcased egste. These provisions reflect the Department's concern that many patientes remain in skilled nursing homes longer than necessary, and that as a result program coate are unnecessarily increasing. Our proposed limitations on the length of stay in mental institutions reflect the assumption that medical treatment of mental disease inpatients generally does not exceed three months, and for patients over 65 rarely continues beyond one year AUTOMATIC PROVISIONS IN THE BILL Senator CURTIS. Now, in reference to your statement concerning the automatic increase in benefits, I favor an automatic increase in benefits. I think it is a good idea. Will that increase be brought about by a percentage increase? Secretary RICHARDSON. You mean in the withholding rates? Necretary RICHARDSON. No. It would be financed entirely Nonator CURTIs. No, no, not financed. Will it be triggered by an Secretary RICHARDSON. Oh, by the Consumer Price Index? Nonator Curris. No, I have not stated it correctly. How do you tabulate the merense? Is it a percentage increase? Will social security benefits, when this is triggered, go up, say 3 percent or 5 percent? Nocretary RiCHARDSON. Yes. sonator CURTIS Or will it be in straight dollars? Noerotary RicHARDSON. No, it will be a percentage increase. If the Comeamer Price Index rose in a given year by 3 percent, then an across the board increase in benefits of 3 percent would follow. If it hop by 4 percent in a year, then the across-the-board increase would be 4 percent Im a given year, it rose less than 3 percent, there would be no across-the-board increase in that year. But suppose it rose by 2 percent in 1974 and by 2 percent again in 1975. Then, effective for January, 1976, there would be an across-the-board increase of 4 percent. WAGE BASE INCREASE Senator CURTIS. Now, the increase in the wage base would work similarly? Secretary RICHARDSON. It would be related to increases in average wages. Senator CURTIS. I understand that, yes. Secretary RICHARDSON. But instead of going into effect on an annual basis, the adjustment would be made no more often than every 2 years. Senator CURTIS. And the same percentage Mr. VENEMAN. Senator, it would be in proportion to the increase in earnings of workers who are covered under social security. Senator CURTIS. Now, that will bring an increased benefit to those who are above the existing wage rate base? Secretary RICHARDSON. In effect, it would. The bill proposes an increase of the wage base to $9,000. The next increase that would take place under the proposed automatic increase provision would be to $9,600 when the average wages of covered workers had risen enough to require such an increase. Senator CURTIS. Now, in applying the formula to determine someone's benefit, the amount of the covered wage is an important factor, is it not? Secretary RICHARDSON. Yes, it is. Senator CURTIS. So when you increase the wage base, even though there is a time lag, you increase the benefits for those higher paid workers who are affected by the increase in wage base, do you not? Secretary RICHARDSON. Yes. Senator CURTIS. So as the House has written their bill, as these two automatic provisions apply, the higher paid will get two automatic raises one of them; there is a considerable time lag-and the lower paid, those, say, under the present ceiling now, they will get one automatic increase? Secretary RICHARDSON. The difference is in the kind of increase. The rise in the Consumer Price Index would bring about an increase correlative with the cost-of-living increase itself for all benefits at all levels. The rise in the average wage level would, in effect, permit a higher maximum benefit related to the increase in the wage level. When an individual eventually retires he would get a higher benefit related to the higher earnings on which he contributed. So he would be credited, in effect, during his working lifetime, with a larger year-by-year contribution to the system, and his ultimate benefits would be based on his higher earnings. And indeed, we think that this is a very desirable feature of the automatic provisions in the bill because it would in effect assure younger workers now covered by the system that their ultimate benefits will be increased in proportion to the increase in their covered wages. Senator CURTIS. I am merely at this time asking for the mathematics. I am not objecting to them. FORMULA FOR DETERMINING SIZE OF SOCIAL SECURITY PRIMARY BENEFIT Briefly, what is the formula for determining the size of the social security primary benefit now? Secretary RICHARDSON. I think I had better ask Commissioner Ball to answer that, Senator. Mr. BALL. Senator, as you know, the amount of primary insurance benefits is related to the average monthly earnings, which are defined in a rather detailed way in the law. Then, for each average monthly wage there is a primary insurance amount shown in a table in the law. If you were to write the table as a formula showing the relationship of the benefit to the average wage at each benefit level, you would have a very complicated formula. In the present law, Senator, the primary benefit is approximately 81.83 percent of the first $110, plus 29.76 percent of the next $290, plus 27.81 percent of the next $150, plus 32.69 percent of the next $100. As you can well see from those figures, the table was not derived in terms of a formula. It is the result of various percentage increases that the Congress has voted on top of a formula that was in effect a long time ago. Senator CURTIS. Mr. Chairman, my time is up, but I would like just to ask two brief questions so these figures will connect. DETERMINING AVERAGE COVERED WAGE In determining the average covered wage, state that as briefly as you can, how it is done. Mr. BALL. For almost all workers under the program now, the average is arrived at by taking earnings from 1950 up to the yearfor men-in which the beneficiary attained age 65, died, or became disabled, and then dropping out the 5 years of lowest earnings. If he has earnings in a year after age 65 and they are higher than earnings in an earlier year, he can substitute the earnings of the higher year in computing the average. Now, for women, the provision is the same except that the average is from 1950 up to the year in which she becomes 62. We are proposing to change that, you know, Senator, so the computation will be the same for men and women-up to age 62. Senator CURTIS. Equal rights for men? Mr. BALL. Yes. Senator CURTIS. I am for that. INCREASE IN MINIMUM BENEFIT My last question is how does this automatic increase affect the minimum benefit? Mr. BALL. The minimum just rises in the same proportion as all other benefits. I mean that if the increase in the Consumer Price Index called for an increase of 3 percent, the minimum benefit would go up 3 percent; if it called for an increase of 5 percent, the minimum benefit would go up 5 percent. We have no recommendation in this provision for anything special to be done to the minimum benefit. Senator CURTIS. Does the House increase the minimum? Mr. BALL. It applies the 5-percent across-the-board increase to the present minimum. There is no increase in the minimum beyond that. Senator CURTIS. That is all. I thank you, Mr. Chairman. The CHAIRMAN. Senator Bennett? UTILIZATION REVIEW REQUIREMENTS Senator BENNETT. Thank you, Mr. Chairman. I appreciate your reference on page 17 to the program we are trying to work out as a recommendation for a new system of utilization review. I realize that any questions about that idea are at the moment premature. But I would appreciate it if for the record, so that we and the staff may have the information as we try to develop our alternative, would you describe exactly what utilization review requirements are now applicable to physicians, hospitals, nursing homes, and home health agencies, and whether or not you have added any new requirements since you testified here in Februare? We would like to have this for the record. Secretary RICHARDSON. We will be very glad to do that, Senator. (Information supplied at this point follows. Hearing continues on page 86.) UTILIZATION REVIEW REQUIREMENTS APPLICABLE TO PHYSICIANS, HOSPITALS, NURSING HOMES, AND HOME HEALTH AGENCIES TITLE XVIII With respect to physicians' services, Title XVIII of the Social Security Act states that one of the functions of carriers will be utilization review. The law requires carriers to assist providers of services in the development of procedures relating to utilization practices, to make studies of the effectiveness of such procedures and methods for their improvement, to assist in the application of safeguards against unnecessary utilization of services, and to provide procedures for and assist in arranging the establishment of groups outside hospitals to make reviews of utilization. Under the current contract, carriers are required to establish methods for identifying utilization patterns, and to institute utilization safeguards to assure that payments made are for covered services which are medically necessary, adjusting or denying the claim if the services are not medically necessary or if the claim improperly reflects the services rendered or the amount charged. In order to implement this requirement, carriers are required to have available the services of a duly licensed medical practitioner. Since we testified in February, additional instructions have been issued to carriers to establish in their claims processing systems prepayment and postpayment computer controls to detect the possible overutilization of medical services. Prepayment controls would reject for further analysis claims where services exceeded a carrier-established parameter; postpayments controls would identify physicians with unusual patterns of practice, whose claims would then be flagged for additional review prior to disposition. These controls were instituted effective July 1, 1970. Carriers are also required to establish a quality control system. One aspect of this system is a carrier review of the various segments of its claims process. In reviewing the claims process, carriers are to review their utilization control, looking at the guidelines themselves, the methods employed, and the use made of them by the claims processors. Carriers will also conduct a postpayment audit of cases. This involves taking a random sample of completed cases and having a quality control check made of all the actions taken on the claim, including the application of utilization safeguards. The third part of the quality review system is the external audit. The purpose of this is to verify that the services alleged on the claims form were rendered, that the charges shown were those agreed on between the patient and physician, and that payment was received by the proper party. This audit is conducted by contacting the patient or physician, as appropriate, either by mail, in person, or by telephone. With respect to hospitals and extended care facilities, the law establishes as a condition of participation that they have in effect a utilization review plan. This plan must apply to at least all Medicare beneficiaries in the facility and must provide for a properly established committee which includes at least two physicians, to conduct two types of case reviews. In one type, cases selected on a sample or other basis are to be reviewed with respect to medical necessity for admissions, lengths of stays, and the professional services furnished in the institutions. These reviews are intended to identify patterns that reflect the effectiveness of the facility in delivering health care services. A second type applies only to those cases which reach an extended duration point, which point must be defined each provider's utilization review plan. In these reviews the utilization review committee determines whether, as of the day of the review, continued stay is required in the institution. On the basis of this finding, the committee may terminate covered care after proper notification to the institution, the beneficiary, and the attending physician. Regulations promulgated under this title give further details on the conduct of the utilization review programs and the objectives of the reviews. We have also issued supplemental instructions to clarify the roles of State agencies and intermediaries in administering the utilization review provisions. Additional instructions provide guidelines for determining coverage of care in extended care facilities and assure payment to facilities having an effective utilization review mechanism and where the facility and the admitting physicians demonstrate their understanding of what constitutes covered care. We are developing comparative utilization data on all short-stay hospitals participating in the Medicare program. These data reflect the average length of stays of Medicare beneficiaries in individual hospitals. For comparison purposes, an adjusted length of stay has been derived to allow for certain variables affecting lengths of stays over which the hospital has no control. This adjusted figure is being used as an indicator of the utilization of a facility. State agencies and intermediaries, as well as the providers, will use these data in their reviews and analyses of Medicare utilization. Home health benefits can be paid under either part A or part B. Under both parts, the law requires that a plan of treatment be established by a physician and that this plan of treatment be periodically updated and reviewed. In addition, a physician must certify that a patient is confined to his home. Besides the requirement set forth in the law, the administration has issued instructions to its intermediaries defining skilled nursing care as it applies to the home health benefit. Instructions have also been issued to intermediaries on how to distinguish covered home health services as opposed to noncovered home health services. UTILIZATION Review of Care and SERVICES UNDER TITLE XIX Requirements for utilization review, as they now exist, are set forth in section 1902 (a) (30) of the Social Security Act (as amended). That section stipulates that State plans must include safeguards necessary to prevent unnecessary utilization of, and payment for, care and services available under the plan. These payments cannot exceed reasonable charges. SRS regulations to implement this section were published in the Federal Register on March 4, 1969, a copy of which is attached. No new requirements on utilization review have been instituted since that time. [From the Federal Register, Mar. 4, 1969] Title 45-PUBLIC WELFARE CHAPTER II-SOCIAL AND REHABILITATION SERVICE (ASSISTANCE PROGRAMs), DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE Part 250-Administration of medical assistance programs SUBPART A-GENERAL ADMINISTRATION Utilization review of care and services Interim Policy Statement No. 5 setting forth regulations to implement the provisions of section 1902 (a) (30) of the Social Security Act as amended, with respect |