Medicare has been forced to handle greater responsibility with fewer resources during the past 10 years but needs a makeover rather than complete cosmetic surgery, a report has concluded.
Despite finding "no compelling need for a radical overhaul of Medicare's governance," a panel of industry experts said in its 80-page report that Medicare suffers from insufficient resources, outdated information systems and congressional micromanagement. In fact, those shortcomings and others have reached a "critical level," said panelists who researched the report for the Washington-based National Academy of Social Insurance, a not-for-profit think tank.
The report said chief among Medicare's problems is inadequate administrative funding for its growing responsibilities, although it did not recommend a specific level of increase. "Medicare must have more money for the heavy burden of administering such a complex program, including processing a staggering load of nearly 1 billion claims per year, communicating with beneficiaries and writing regulations for Medicare's payments to more than 6,000 hospitals," the institute said in connection with the report's release last Tuesday.
The 13 panelists who worked on the report starting two years ago included Gail Wilensky, former administrator of what was then called HCFA, now the Centers for Medicare and Medicaid Services, and former American Medical Association President Thomas Reardon, M.D. Sheila Burke, a Smithsonian Institution official and former Senate aide, chaired the panel.
The Robert Wood Johnson Foundation funded the study, which provides a defense of the CMS and reinforces the long-discussed need to modernize the critical but struggling government program, panelists and others contacted for this story said.
One significant finding for hospital administrators is a section of the report focused on fraud and abuse, said Thomas Oliver, associate professor in the Bloomberg School of Public Health at Johns Hopkins University in Baltimore, and one of the NASI panelists. That part of the report expresses concern about the federal government's increasingly aggressive pursuit of providers that are not often given "clear and concise explanations of coding and billing requirements."
Many members of the panel agreed fraud and abuse detection and prosecution have been an "effective and justifiable effort up to a point, but ... we were concerned as a panel that there be more careful weighing of who is being pursued and how they are being pursued," Oliver said.
The Health Insurance Portability and Accountability Act of 1996, which appropriated more funds to hunt down fraud and abuse, coupled with a dramatic expansion of the inspector general's office to all 50 states, has made a "delicate matter" of striking the right balance between effective fraud and abuse enforcement and "maintaining a positive relationship with the provider community," according to the NASI report.
Aside from law enforcement, the report said the CMS' bureaucratic obligations have grown over the past 10 years without a commensurate increase in funding. Benefit outlays increased 97% and claims volume increased 50% from 1992 to 2002 as management appropriations rose only 26%, according to NASI (See chart).
That represents "a serious mismatch between the agency's responsibilities and the resources allocated to fulfill them," the report said.
Congressional oversight of the CMS has contributed significantly to the difficulty of managing those responsibilities and the massive Medicare program itself, the report said.
"The Medicare program is inherently challenging and complicated, and a very daunting program to administer even in best of administrative times," Oliver said. Now, he added, public faith in government and its relationship with the healthcare provider community are "not as strong in this era as they were when Medicare was passed. Then there was much more cooperation, collaboration and trust."
Provider groups, which continually lobby lawmakers to get what they want from Medicare, disagreed with the assessment that congressional involvement harms the program.
"So-called micromanagement comes from the fact that the Medicare program is in need of fundamental change; the payment system is fundamentally broken," said Carmella Coyle, the American Hospital Association's senior vice president of policy. "That has led to an effort to fix and adjust the system in important ways for beneficiaries. We don't see that as micromanagement. Congress is responding to real needs."
As they reviewed potential ways to modernize Medicare, panelists considered new governance structures including one that would take the CMS out from under the HHS umbrella. Such a move could increase the CMS' "responsiveness and flexibility" but could also eliminate the valuable "political buffer" HHS provides, according to the report.
The NASI report included 12 recommendations for policymakers as they assess Medicare's ability to meet the needs of a rapidly growing beneficiary population.
Among the recommendations:
* Increase CMS funding so the agency can "fulfill its responsibilities;"
* Do not enact major policy changes in the near term that would further overwhelm the CMS;
* Improve information technology funding to replace computers and claims systems that "are vital to helping Medicare accomplish its core mission" but are "sorely in need of replacement;" and
* Improve communication with beneficiaries so they can make more informed choices about Medicare and Medicaid.