April 28,2000

Committee to Look at HCFA's Role and Readiness in Medicare Reform

WASHINGTON -- The Senate Finance Committee will meet on Thursday, May 4 at 9:30 am in room 215 of the Dirksen Senate Office Building to consider the Health Care Financing Administration's role in and readiness for reform of the Medicare program.

The following witnesses are expected to testify before the Committee:

I. Panel I

Nancy-Ann Min DeParle, Administrator, Health Care Financing Administration (HCFA), Washington, DC

Ed Flynn, Associate Director of Retirement and Insurance Services, Office of Personnel Management (OPM), Washington, DC

II. Panel II

Bill Scanlon, Director, Health Financing and Public Health, United States General Accounting Office (GAO), Washington, DC

Rogelio Garcia, Specialist in American National Government, Government and Finance Division, Congressional Research Service (CRS), Washington, DC

Gail Wilensky, John M. Olin Senior Fellow, Project Hope, Bethesda, MD

Judith Feder, Professor and Dean of Policy Studies, Georgetown Public Policy Institute, Georgetown University, Washington, DC


This hearing will be the fifth in a series of Medicare reform hearings this year. The Committee will look at the challenges involved in administering a modernized Medicare program.

The Baltimore-based Health Care Financing Administration (HCFA) is the federal agency responsible for administering the Medicare program. HCFA's other responsibilities include providing federal oversight of the Medicaid program; conducting surveys and certification of certain health care facilities nationwide; enforcing federal health insurance portability laws; and preventing health care fraud and abuse.

Certain reform ideas for the Medicare program raise broader questions about the mission, roles and effectiveness of HCFA. For example, should HCFA be reorganized, or should new entities, such as a Medicare Board, be established in the Executive branch to implement Medicare modernization proposals? Can Medicare be redesigned to be more like the Federal Employees Health Benefit Plan? What would be required to effectively implement an outpatient prescription drug benefit?

To place this in context, the Medicare program currently provides health care coverage for 39 million Americans and is expected to spend $218 billion in fiscal year 2000 on health care services for beneficiaries. In addition to the 4,437 persons currently employed by HCFA nationwide, the Agency contracts out major Medicare program administrative functions, such as claims processing. In fiscal year 2001, Medicare contractors will process nearly 1 billion claims for hospital, physician, home health care and other covered services. At present, HCFA also manages the participation of 263 privately-administered Medicare+Choice plans in the program.

Modernization of the program, while necessary, will provide major challenges. In previous hearings this year, the Committee was told that the addition of a prescription drug benefit to the program could nearly double the number of claims processed annually, as well as introduce new oversight functions that differ significantly from what is done today by HCFA. Further, new models for participation of Medicare+Choice plans would also introduce changes in workload and management approaches. Such substantial changes in the workload assigned to the Agency could substantially add to the already substantial workload of the agency, if appropriate governance mechanisms are not enacted along with reforms. Moreover, as the dynamics of the beneficiary population and health care delivery system continue to evolve, it is important to more broadly reassess the functions and role of HCFA in the future of Medicare.

Testimony to be provided at the May 4 hearing will examine what needs to be done to ensure that HCFA is ready to administer a modernized Medicare program.