[Congressional Record Volume 143, Number 152 (Tuesday, November 4, 1997)]
[Extensions of Remarks]
[Page E2181]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




CBO ANALYSIS OF KYL-ARCHER AMENDMENT: BAD NEWS FOR SENIORS AND DISABLED

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                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Tuesday, November 4, 1997

  Mr. STARK. Mr. Speaker, last week, the Congressional Budget Office 
made public its analysis of the budget impact of the Kyl-Archer 
amendment which will make it much easier for doctors to charge Medicare 
beneficiaries anything they want, anytime they want.
  The Kyl-Archer amendment effectively ends Medicare insurance. There 
is no insurance if you never know whether the doctor is going to reject 
your Medicare card and ask you to pay the whole bill out of your 
pocket.
  CBO describes a scary Halloween trick for the Nation's seniors and 
disabled. Doctors will be able to hold sick patients hostage for higher 
payments, fraud will increase, total national health care spending--
already by far the highest in the world--will increase. It will be a 
treat for doctors, but the end of insurance peace of mind for seniors.
  The full CBO letter analysis follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, October 30, 1997.
     Hon. Bill Archer,
     Chairman, Committee on Ways and Means, House of 
         Representatives, Washington, DC.
       Dear Mr. Chairman: At your request, the Congressional 
     Budget Office (CBO) has reviewed H.R. 2497, the Medicare 
     Beneficiary Freedom to Contract Act of 1997, as introduced on 
     September 18, 1997. (S. 1194, an identical bill, was 
     introduced in the Senate on the same day.)
       Direct contracting allows beneficiaries to make financial 
     arrangements with health providers outside of the established 
     Medicare payment rules. The direct contracting provision in 
     current Medicare law, enacted in the Balanced Budget Act of 
     1997 (P.L. 105-33), requires providers contracting directly 
     with patients to forgo any Medicare reimbursement for two 
     years. Under that condition, CBO expects that direct 
     contracting will almost never be used.
       H.R. 2497 would eliminate the two-year exclusion period, 
     allowing health providers to contract directly with their 
     Medicare patients on a claim-by-claim basis. For example, a 
     physician could bill Medicare for an office visit while 
     directly contracting with the patient for an associated test 
     or procedure.
       Enactment of H.R. 2497 would affect Medicare outlays. 
     Because of uncertainties about the number of claims that 
     would be separately contracted and about the effectiveness of 
     the regulatory oversight of those contracts by the Health 
     Care Financing Administration (HCFA), however, CBO cannot 
     estimate either the magnitude or the direction of the change 
     in Medicare outlays that would ensue.
       With Medicare's restrictions on balance billing--which 
     limit the amount beneficiaries must pay for services covered 
     by Medicare--providers may in some cases receive lower 
     payments than what their patients would have been willing to 
     pay out of pocket. The bill would allow physicians and other 
     health care providers to increase their incomes by 
     negotiating direct contracts that included prices in excess 
     of Medicare's fees, effectively bypassing the limits on 
     balance billing. For some services, CBO believes that such 
     contracting would not be very widespread because few 
     beneficiaries would be willing to pay the entire fee (not 
     just the difference between the provider's charge and what 
     Medicare would have paid). For other services--such as those 
     where the need for timely medical treatment might increase 
     patients' willingness to pay--direct contracting could become 
     much more common.
       If direct contracting continued to be rarely used, there 
     would be no changes in benefit payments, no additional 
     difficulties in combating fraud and abuse, and no major new 
     administrative burdens placed on HCFA.
       If direct contracting were extensively used, however, 
     Medicare claims could be significantly reduced. At the same 
     time, HCFA's efforts to screen inappropriate or fraudulent 
     claims could be significantly compromised because it would be 
     difficult to evaluate episodes of care with gaps where 
     services were directly contracted. Furthermore, HCFA would be 
     unlikely to devote significant administrative resources to 
     the regulation of direct contracting. HCFA's efforts to 
     administer other areas of Medicare law, including many of the 
     new payment systems envisioned in the Balanced Budget Act, 
     will continue to strain the agency's resources. Without 
     adequate regulatory oversight, unethical providers could bill 
     Medicare while also collecting from directly-contracted 
     patients.
       Although the impact of H.R. 2497 on the federal budget is 
     uncertain, the bill would almost certainly raise national 
     health spending. Even if direct contracts were rarely used, 
     payments made under those contracts would probably be higher 
     than what Medicare would have paid, and Medicare's efforts to 
     combat fraud and abuse would probably be hampered to some 
     extent.
       If you have any questions about this analysis, we will be 
     pleased to answer them. The CBO staff contact is Jeff 
     Lemieux.
           Sincerely,
                                                  June E. O'Neill,
                                                         Director.

     

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