September 24,1999

Roth Urges President Clinton to Address BBA 97 Medicare Changes through Administrative Adjustments

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today said that the Executive Branch has the authority to make needed adjustments to the Medicare program reforms enacted in the Balanced Budget Act of 1997, and urged the White House to go forward with them.

In a meeting today with representatives from the White House, Finance Chairman Roth suggested that the Clinton Administration address a number of areas of concern in the Medicare program administratively. He outlined his suggestions in a document entitled, "Administrative Adjustments to Improve Medicare Provider Payment Equity, and to Stabilize the Medicare + Choice Program." The document lists administrative changes for hospitals, skilled nursing facilities, physician payments, home health agencies, ambulatory surgical centers and Medicare + Choice.

"Our review indicates that several areas of legitimate concern could clearly be addressed by the Executive Branch administratively, thereby freeing the Congress to concentrate on those matters which can only be addressed legislatively," Roth stated in a letter to President Clinton.

"It is my intention to propose shortly a package of legislative adjustments in areas where steps must be taken to improve payment equity to providers and to protect the availability of privately offered Medicare + Choice plans."

A copy of the letter and enclosure are attached.

# # #

September 24, 1999
The Honorable William Jefferson Clinton
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear Mr. President:

During the 105th Congress, you provided leadership and worked successfully with Congressional leaders to enact the Balanced Budget Act of 1997 (BBA 97). That law helped put the federal government on a course of fiscal discipline that is resulting in major economic dividends benefitting all Americans. With respect to the Medicare program, we collaborated on the most significant set of reforms in payments to providers and private health plans that has occurred since the program was first enacted. These changes had the salutary effect of temporarily stabilizing the rates of growth in Medicare spending and extending the solvency of the Part A Hospital Insurance Trust Fund.

As is occasionally the case with major legislation, we have learned that there are some unintended consequences. As a result, certain provider and health plan payment adjustments may be required under Medicare in order to protect beneficiaries' access to quality health care services and plans. It is my intention to propose shortly a package of legislative adjustments in areas where steps must be taken to improve payment equity to providers and to protect the availability of privately offered Medicare+Choice plans. In this regard, although you did not specify policies, it was helpful that the Administration's recently released Medicare reform proposal set aside $7.5 billion over 10 years to address concerns in these areas.

Our review indicates that several areas of legitimate concern could clearly be addressed by the Executive Branch administratively, thereby freeing the Congress to concentrate on those matters which can only be addressed legislatively. I urge you to review the enclosed list of administrative adjustments and advise me of your willingness to take steps within the Administration to address these matters. As necessary, the Congress can and will act on other related matters. However, I am confident that in the spirit of the BBA 97 agreements, including a shared concern for fiscal responsibility, you will want to collaborate with us in resolving these concerns. Thank you for your consideration.

Sincerely,

William V. Roth, Jr.
Chairman
Enclosure


Administrative Adjustments to Improve Medicare Provider Payment Equity, and to Stabilize the Medicare+Choice Program

Hospitals

Proposal -- Fair Transition for Outpatient Payment Changes: Develop and administer a budget neutral, multi-year transition method for implementation of the hospital outpatient prospective payment system (scheduled for July, 2000), including a policy to maintain the scheduled reductions in beneficiary cost-sharing liabilities for services received in hospital outpatient departments.

Obtain an expert and independent evaluation of the clinical soundness and payment equity implications of the proposed Ambulatory Payment Category (APC) system, including its appropriateness for unique categories of providers, such as cancer hospitals. If a delay in implementation or exemption of certain classes of providers is warranted under the review, inform the Congressional Committees of jurisdiction by June, 2000.

Explanation: The Balanced Budget Act of 1997 (BBA) required the Secretary to implement a prospective payment system (PPS) for hospital outpatient department services by January 1, 1999. The proposal issued by the Administration represents a major change in Medicare payment policy for outpatient services and may result in significant changes in hospital payments. This requested adjustment is needed to provide hospitals a reasonable period to adjust operations to meet these funding changes, while maintaining corrections to the amount that beneficiaries are required to pay in coinsurance for hospital outpatient services.

There is also concern about the methodology of the proposed APC classification system. Before such drastic changes to current payment policy are implemented, an independent review of the proposal is appropriate.

Proposal -- Limit Scope of Hospital Transfer Policy: Freeze the payment policy for hospital transfers at the current set of 10 Diagnosis Related Group categories.

Explanation: The BBA gave the Secretary of HHS authority to classify discharges from acute-care hospitals to post-acute care facilities within a group of 10 Diagnostic Related Groups (DRGs) as "transfers." Beginning in 2001, the Secretary would have authority to expand this policy to more than the initial 10 DRGs. As other payment policy changes from the BBA continue to be monitored, it is unnecessary to expand the transfer policy in the foreseeable future.

Skilled Nursing Facilities

Proposal -- Higher Payments for Complex Cases: Establish payment refinements to selected Resource Utilization Groups as the Skilled Nursing Facility (SNF) PPS is implemented. These changes should be targeted to improve reimbursement for medically complex cases, with special attention to the unique problems of patients requiring complex treatments and prosthetics.

Explanation: The BBA phases in a PPS that pays for covered SNF services on a per diem rate. The General Accounting Office has indicated that the current rate may not adequately reimburse for services provided to medically complex patients.

Physician Payments

Proposal -- Corrections Due to Erroneous Spending Projections: Provide immediate advice on administrative options for improving annual updates in payment for physician services to correct for erroneous projections.

Explanation: Implementation of new payment methodologies established in the BBA produced inappropriate payment reductions to physicians due to failures to adjust for erroneous administrative projections used to set rates. This particular problem could be remedied through changes in the year-to-year administrative payment projection and adjustment process.

Home Health Agencies

Proposal -- Proration of Payments: Relieve home health agencies of the inappropriate responsibility for tracking patients that secure services from more than one agency in order to prorate payments.

Explanation: New home health payment systems created by the BBA called for tracking the number of home health services beneficiaries receive from different facilities, so that payment amounts could be prorated. However, the BBA does not specify that this tracking is the responsibility of the agencies. Such responsibility would be more appropriately assigned to the fiscal intermediaries.

Proposal -- Equitable Recovery Schedules for Overpayments: Provide for extended repayment schedules for agencies that incurred significant Medicare overpayments due to difficulties in adjusting to major BBA 97 payment system changes.

Explanation: There is recognition of the need for more flexible overpayment schedules for certain home health agencies facing large overpayment amounts due to the changes in payment systems contained in the BBA.

Ambulatory Surgical Centers (ASCs)

Proposal -- Fair Payment for ASCs: Do not implement payment policy changes for ASCs until 1999 industry survey data is analyzed and properly incorporated into any proposed changes.

Explanation: In a proposed rule, the Administration is proposing changes to the payment policy for ASCs based upon 1994 survey data. It would be more appropriate to implement proposed changes after the 1999 survey data is complete.

Medicare+Choice

Proposal -- Fair Transition for Health Plans: Revise phase-in schedule for risk-adjusted payments to extend the transition by at least two years and to prevent any single plan from experiencing more than a 5-10% shift in Medicare payment rates attributable to the risk-adjuster in any single year.

Explanation: The BBA required HCFA to develop and implement a health-based risk-adjustment system by January 2000 to increase payments to plans that enroll sicker patients and to decrease payments to plans that enroll healthier patients. The implementation may cause significant changes in the annual payments to plans and thus the premiums beneficiaries would be charged. This proposal would provide for a more gradual transition to risk adjustment and protections for both beneficiaries and plans.