HCFA MANAGEMENT REFORMS
Overview: In carrying out its responsibilities, the Health Care Financing Administration (HCFA) pays more than $210 billion a year in benefits for nearly 40 million Medicare beneficiaries. This involves approximately 1 billion claims a year from more than one million health care providers and requires HCFA to oversee the work of more than 50 private insurance companies that process and pay Medicare claims. HCFA also provides nearly $100 billion each year in payments to state Medicaid agencies.
The agency's programs -- Medicare, Medicaid and the State Children's Health Insurance Program -- are providing more coverage, more health plan options, and more health care security to America's most vulnerable populations than ever before. The agency has undertaken new and much-needed initiatives to fight fraud, waste and abuse, and to improve the quality of nursing home care.
HCFA also has new responsibilities to protect private sector coverage for people with pre-existing health care conditions under the Health Insurance Portability Accountability Act (HIPAA), and to improve and protect health care data that is exchanged electronically. HCFA met one of the most important Year 2000 computer programming challenges in government. In addition, it is charged with implementing more than 300 individual provisions of the Balanced Budget Act (BBA) with savings that are critical to achieving a balanced budget and extending the life of the Medicare Trust Fund.
To meet these challenges, HCFA has taken steps to improve its management capacity and ability to serve beneficiaries through its recent reorganization. However, additional tools are needed to strengthen and modernize HCFA program administration.
The Administration is proposing a reform initiative to increase HCFA’s ability to operate as a customer-centered, prudent purchaser of health care and enhance the agency’s accountability to Congress and the public. The initiative will establish specific management reform milestones. As HCFA and the Department of Health and Human Services move down the road toward achieving fundamental reform and as some of these milestones are accomplished, the Administration will review legislative proposals to increase the stability of HCFA’s funding.
The Nation's Insurer.
HCFA is the nation's largest health insurer, providing coverage to about 74 million people, including nearly 40 million Medicare beneficiaries and 34 million Medicaid enrollees. Medicare alone processes some one billion claims each year. HCFA's programs are paying about $368 billion for health care services this year. For Medicare alone, HCFA pays more than $210 billion in claims to some 700,000 physicians, 6,000 hospitals and thousands of other providers and suppliers each year. The agency contracts with 55 private health insurers to process nearly 1 billion Medicare fee-for-service claims each year, and with 346 private health plans that provide managed care. The agency has developed innovations in quality improvement and prospective payment systems that promote efficiency and have been widely adopted by other insurers. However, as the number of beneficiaries, health claims, providers, and oversight responsibilities have increased dramatically, HCFA’s administrative resources have not kept pace.
HCFA spends less than two percent of Medicare benefit outlays on program management -- compared to Medicare+Choice plan administrative costs that average 11 percent and are sometimes 25 percent or more, and supplemental Medigap plan administrative costs that average 20 percent and are sometimes 40 percent or more. HCFA's administrative costs still compare favorably, even when adjusted to account for differences such as marketing expenses, profits, and other costs that private plans may incur.
New Management Organization.
Beginning in July 1997, HCFA underwent a comprehensive management reorganization. This effort modernized HCFA's organizational structure, reflected significant changes in the health care system such as increased participation in managed care, and created major offices dedicated to beneficiary services, states and providers of health care.
HCFA has since made further structural changes and hired additional expert personnel and key managers in an effort to better serve beneficiaries, the taxpayers, and the doctors, hospitals and other providers of health care. The Agency is conducting a comprehensive workforce assessment to guide hiring and training.
New Private Sector and Medical Expertise.
HCFA Administrator Nancy-Ann DeParle has increased efforts to recruit personnel with recent industry experience in the fast changing health care marketplace and new Medicare coverage options like managed care. HCFA has doubled the number of physicians in leadership positions, with physicians now in charge of the Center for Health Plans and Providers and the Office of Clinical Standards and Quality. A gerontologist with a background in communications is overseeing the Medicare beneficiary education campaign. By attracting the best and the brightest in the private and public sectors, HCFA continues to ensure that every decision puts Medicare beneficiaries first, as patient and consumer.
HCFA has put new focus on oversight and management of claims-paying contractors in response to increasing concern about their performance, which is critical to both beneficiaries and providers. A physician who has experience in program integrity work and as a contracting medical director manages Medicare's claims processing contractors, with a focus on ensuring that they do a better job of protecting Medicare funds. A new Medicare contractor oversight board, comprised of agency leadership, has been established to sharpen oversight of contractors, including their anti-fraud efforts.
Passage of the Government Management Reform Act in 1994 requires an annual audit of all government programs according to private sector accounting principles. These annual audits have given HCFA a new tool to measure its progress in combating improper payments to Medicare providers. Audits are conducted by the HHS Inspector General with HCFA’s full cooperation.
Over the past three years, the Inspector General found that the Medicare improper payments have declined by more than 40 percent. Medicare’s payment error rate declined from 14 percent for Fiscal Year 1996 to 7.97 percent for Fiscal Year 1999. HCFA is ahead of its Government Performance Review Act goal of 9 percent by 1999 and remains committed to its aggressive strategy to achieve a 5 percent error rate by 2002.
Management Reform Initiative.
Building on its previous activities to improve accountability and focus on results, the Administration has proposed a management reform initiative to provide needed flexibility.
That proposal provides for: