Regulatory overload could mean HCFA meltdown

Washington policy watchers are worried the Health Care Financing Administration (HCFA) may be on the edge of regulatory overload. Over the next year, HCFA must prepare and implement 226 changes in Medicare policy alone, mandated by Congress in last year's Balanced Budget Act.

There’s concern among Washington policy watchers that so many tasks could cause "regulatory overload" at HCFA, leading to bureaucratic gridlock hampering the agency’s ability to handle even routine functions, Robert Reischauer, senior fellow, of the Brookings Institution told the American Society of Internal Medicine’s October annual meeting in Washington, DC.

Funding contributes to problem

Reischauer, the former head of the Congressional Budget Office, said Congress has contributed to this potential problem by not providing HCFA with enough additional financial or staff resources to implement the reforms it has enacted. Mean while, recent budget estimates indicate the user fees intended to finance Medicare managed care beneficiary information materials and consumer outreach programs will be less than the $200 million figure contained in the budget reconciliation bill, say congressional sources.

In short, last summer’s Medicare reform bill may have "created conditions for a severe case of implementation overload," claimed Reischauer.

"If so, there is a very real danger that this legislation could do to HCFA what 84 years of increasingly complex tax legislation has done to the IRS. Deadlines might be missed, expected savings might not be realized, and confusion might reign," he predicted.

If so, Congress may become reluctant to make the next round of Medicare structural changes many feel are necessary to handle the pressure retiring baby boomers will begin putting on the system around 2010.

Reischauer’s answer to the problem is to eliminate fee-for-service in favor of a "full-fledged " competitive Medicare managed care framework with enough benefits to obviate beneficiaries’ need for supplemental coverage.

Markets also should be redefined from the current county-based system to metropolitan statistical areas or whole states in order to better organize plan competition and set federal premium levels at a percentage of some "accepted total premium level," he said.

Without such changes to counteract the possible increased risk segmentation hundreds of new capitated Medicare+Choice plans will bring, both fee-for-service costs and Medigap premiums are likely to rise dramatically.

The Congressional Budget Office’s most recent projections estimate Medicare’s trust fund will be solvent until 2007. HCFA predicts Medicare will go bankrupt in the year 2010, while Office of Management and Budget projections push back the date until around 2015.

"In one sense this is bad news, because it could relax the pressure now on policy-makers to act expeditiously to solve Medicare’s long-run problems," Reischauer said.

Indeed, if the newly appointed Medicare study commission is unable to make long-term system reform a central focus of the next presidential campaign, policy-makers "miss the demographic window of opportunity that will exist over the next decade," argued Reischauer.

Logical thinking says HCFA should make this a priority, although it already has a number of activities on its plate. An internal agency timeline notes that in 1998, the Health Care Financing Administration is required by law to:

• review its proposed rule implementing a new practice expense reimbursement formula;

• implement 7,000 new site of service reimbursement codes;

• publish a rule governing solvency standards for provider-sponsored organizations applying for waivers;

• publish a regulation for non-solvency standards for all Medicare+Choice plans;

• publish a legislative proposal for necessary technical changes that must be made to accommodate the new universe of Medicare+Choice plans;

• conduct an initial trial-run national managed care enrollment fair for 38 million seniors;

• add six new preventive benefits to Medicare’s basic benefits package;

• launch an informatics, telemedicine, and education demonstration;

• publish a report on the disproportionate share payment formula;

• identify through regulation the 10 DRGs affected by statutory changes in hospital discharges;

• establish a prospective payment system for skilled nursing facilities.

"It is clear that Congress has presented HCFA with a monumental implementation challenge," noted Reischauer.