Statement of Alliance to Improve Medicare

Introduction

The Alliance to Improve Medicare (AIM) is the only organization focused solely on fundamental, non-partisan modernization of the Medicare program to ensure more coverage choices, better benefits (including prescription drug benefits), and access to the latest in innovative medical practices, treatments and technologies through the Medicare system. AIM coalition members include organizations representing seniors, hospitals, small and large employers, insurance plans and providers, doctors, medical researchers and innovators, and others.

The structure of the traditional Medicare program has changed little in more than three decades and, consequently, has not kept pace with many of the dramatic improvements in health care delivery. AIM is dedicated to achieving comprehensive modernization of the traditional Medicare program through policy research and educational programs for Members of Congress and their staff, the media, and the American public.

Key Principles for Medicare Modernization

AIM has identified seven key principles to guide Medicare modernization efforts. These principles seek to improve both the administration of the Medicare program and the benefits provided to program beneficiaries.

First, AIM supports improvement of health care coverage through better coordination of care including health promotion and disease prevention efforts. The traditional Medicare program has not kept pace with private sector benefits and plans offering preventive health care and screening measures such as annual physicals, hearing and vision tests, and dental care. Medicare beneficiaries, more so than other population age groups, can benefit from these preventive measures which can help reduce long-term costs and ensure appropriate, early treatment of health problems. Private sector Medicare providers should have the flexibility to incorporate these measures as part of basic health care services. Unfortunately, an act of Congress has previously been required to provide routine screening tests under the Medicare fee-for-service program. For example, health management programs are offered by a variety of health plans (including HMOs) and pharmaceutical benefit managers (PBMs), companies who supply and manage prescription drug benefits for health care companies. Health management programs reduce overall health costs and improve the quality of life by helping beneficiaries better understand and manage conditions such as asthma and diabetes.

Second, AIM supports improvement of health care coverage through increased consumer choice. Medicare beneficiaries should have the option to choose from a range of coverage options similar to those available to Members of Congress, federal employees and retirees, and millions of working Americans under 65 years of age who are covered by private plans. The Medicare managed care program, Medicare+Choice, seeks to provide these types of coverage options to seniors nationwide. Unfortunately, inadequate payments and excessive regulation of private sector providers participating in Medicare+Choice have seriously constrained the ability to expand coverage areas and have caused numerous plans to withdraw from coverage areas where reimbursement was inadequate to cover even the costs of basic care. Between 1998 and January 2001, these withdraws affected over 1.5 million beneficiaries. One Medicare+Choice program participant, Oschner Health Plan (OHP) of Louisiana, cited inadequate payments in July 2000 when announcing withdrawal from nearly 6,000 OHP Medicare+ Choice beneficiaries or16% of OHP's Medicare+Choice beneficiaries in Louisiana. OHP projected 2001 losses of nearly $6.8 million as a result of inadequate payment rates for basic coverage for these beneficiaries.

Third, AIM supports improving coverage through increased competition among all plans and providers in the Medicare program. Medicare's managed care option, the Medicare+Choice program, is an alternative to and competitor with traditional fee-for-service Medicare. The federal government, through the Health Care Financing Administration (HCFA,), currently regulates Medicare+Choice plans while also acting as a participant itself through the traditional fee-for-service program. AIM believes this dual role is anti-competitive. Medicare reform and modernization efforts must be evaluated based on success in increasing market competition and availability of basic, affordable coverage to Medicare beneficiaries, not on increasing HCFA's regulatory powers and oversight activities. The US General Accounting Office (GAO) and former HCFA Administrators have identified several areas of conflict between HCFA's broad responsibilities and management structure including the dichotomy of the traditional fee-for-service program with the Medicare+ Choice program. These conflicts include the lack of separate management offices and directors for each program.

Fourth, AIM believes prescription drug coverage should be provided to all Medicare beneficiaries as part of comprehensive, market based Medicare modernization. The opportunity for reform and modernization is presented by the recognized need to cover prescription drug benefits for Medicare recipients. Congress should take this opportunity and not simply layer a new, stand-alone drug program onto the traditional Medicare program without addressing the program's outdated and inadequate financial and structural systems. The program in its current form cannot meet the coming challenges presented by the retirement of the baby boom generation which will more than double the number of Medicare beneficiaries. Any Medicare reform proposal must address the real structural and financial problems of the Medicare program. For example, Medicare currently does not cover simple screening tests to detect high cholesterol among beneficiaries. Without modernization, Medicare will pay for only the drugs to treat high cholesterol but will continue to deny payment for detection of high cholesterol problems in seniors. Under a drug benefit as part of modernization, Medicare would ensure early detection and treatment, including drug therapy, as part of a comprehensive disease management approach.

Fifth, AIM urges Congress to continue to review and address the financial crisis facing health plans and providers. Adequate financing is necessary to establish a solid foundation upon which to build a better Medicare and ensure the long-term financial integrity and solvency of the Medicare program. Payment cuts in the Balanced Budget Act of 1997 (BBA '97) directly undermined patient care and progress toward a modernized program. These cuts were originally estimated to be $103 billion over five years but recent Treasury Department and Congressional Budget Office (CBO) reports project cuts of almost $300 billion- nearly triple what was intended. Health plans, hospitals and doctors have been hit hard and patient care has been and will continue to be affected. Congress recognized the damage caused by BBA '97 and has provided over $30 billion in restorations over the next five years. These small repayments represent a good start at addressing the financial crisis caused by the cuts. AIM encourages Members to ensure appropriate and timely payments for these providers and plans to ensure appropriate care for Medicare beneficiaries.

Sixth, AIM believes that the current rigid and outdated Medicare benefit structure and bureaucracy must be replaced. Program administrators must be provided with the flexibility to make new health care innovations and technologies more readily accessible to Medicare beneficiaries. Currently, Medicare beneficiaries wait a minimum of 15 months after patients in private health plans, including Medicare+Choice plans, to gain access to new medical devices and technologies, and sometimes the wait is as long as five years. HCFA's approval, coding and reimbursement procedures are largely responsible for this delay. Quality health care for Medicare beneficiaries requires these new technologies to be available for all patients. For example, more than half the patients who could use cochlear implants, which restore hearing to the profoundly deaf, are Medicare age. Unfortunately, few Medicare patients have received the device because HCFA hasn't updated its inadequate payment rate in 14 years. Current payment rates for cochlear implants cover less than half of actual costs.

Finally, AIM believes Medicare administrators must reduce excessive program complexity and bureaucracy caused by the more than 110,000 pages of federal rules, regulations, guidelines and mandates. While AIM supports the elimination of real fraud and abuse in Medicare, our members believe this can be achieved without relying on unnecessarily complex and heavy-handed regulation. Providers and plans must not be forced to divert resources from patient care in order to respond to ever-changing regulations. For example, Medicare+Choice plans announcing withdrawals in July 2000 frequently cited the large volumes of Operational Policy Letters (OPLs) as one reason for withdrawal. These plans reported increasing needs to devote additional employees to regulatory issues instead of health care delivery and management, increasing costs to plans at the same time as health care costs increased but payment rates from HCFA remained stagnant.

Conclusion

AIM urges the 107^th Congress to consider sensible, long-term solutions to the problems confronted by the Medicare program and by Medicare beneficiaries and we urge Members to work together on a bipartisan basis to achieve comprehensive Medicare reform. AIM appreciates the opportunity to submit this statement for the hearing record and we look forward to working with the Committee as they examine options for Medicare.