April 13, 2001
Bush's Budget Outlines Reforms For Medicare, Medicaid and HCFA
President Bush's FY 2002 health care budget highlights his priorities to reform the Medicare and Medicaid programs as well the Health Care Financing Administration (HCFA). Major initiatives include modernizing Medicare to fund a prescription drug benefit for low-income seniors; providing greater flexibility to states to administer the Medicaid program; and improving the way HCFA operates to better serve beneficiaries and providers.
The president's budget includes nearly $3 billion in FY 2002 (and $153 billion over 10 years) to reform Medicare and provide immediate prescription drug coverage to low-income seniors and those with high out-of-pocket drug costs. The "Immediate Helping Hand" prescription drug proposal is funded from general revenues and surpluses, "not Medicare Trust Fund dollars." The budget outlines the president's principles by which the Medicare program should be reformed -- including creating a comprehensive measure to assess the overall financial picture of Medicare -- but does not speak to additional Medicare cuts to providers beyond current law.
For Medicaid, the budget proposes to save $606 million in FY 2002 (and $17.3 billion over 10 years) by "taking further steps to restrict the Medicaid 'upper payment limit' (UPL) loophole." Specifically, the proposal would prohibit new hospital UPL plans approved after Dec. 31, 2000, from receiving the higher upper payment limit proposed in the final rule. The final rule allows local government-operated hospitals to receive up to 150 percent of what Medicare would pay for the same services. The budget also emphasizes that the administration will "explore a range of options for reforming Medicaid and the State Children's Health Insurance Program (SCHIP) to improve the way these program provide health care to the poor and near-poor." Specifically, the budget identifies giving states expanded flexibility to promote health insurance, control costs, and ensure the "fiscally prudent management of these programs."
Several budget initiatives are designed to strengthen operations at HCFA to better serve its beneficiaries and providers. One HCFA program management priority identifies investing in and integrating HCFA's accounting system to strengthen operations. The budget would invest $53 million in FY 2002 to create a state-of-the-art uniform accounting system. The budget also proposes two user fees -- a $1.50 fee on provider claims not submitted electronically and a $1.50 fee for duplicate or unprocessable provider claims -- "to improve the efficiency and lower the cost of processing Medicare claims."
Another HCFA management proposal targets simplifying the "too complex and too centralized" Medicare programs. "Reforming HCFA will include employing every strategy appropriate to enhance quality health care options for beneficiaries rather than relying on increasingly punitive regulations, arbitrary and multiple pricing systems, and delays to maintain the status quo."
Information: Lynne L. Davis, AAMC Office of Governmental Relations, 202-828-0526.
