[Congressional Record (Bound Edition), Volume 145 (1999), Part 9]
[Extensions of Remarks]
[Page 12307]
[From the U.S. Government Publishing Office, www.gpo.gov]



    INTRODUCTION OF MEDICARE MODERNIZATION NO. 9: MEDICARE FLEXIBLE 
                          PURCHASING AUTHORITY

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Wednesday, June 9, 1999

  Mr. STARK. Mr. Speaker, I am pleased today to introduce the ninth 
bill in my Medicare modernization series: the ``Medicare Purchasing 
Flexibility Act of 1999.''
  Medicare, the cornerstone of retirement for Americans, is in need of 
some improvements. When it was first created in 1965, Medicare was 
modeled on indemnity health insurance prevalent at the time. Since 
then, the health and medical fields have undergone significant change; 
both for the better and for the worse. But Medicare has largely lagged 
behind these trends. The problem is that Medicare's current 
administrative structure doesn't encourage testing or adoption of 
innovative market strategies. Instead, Medicare officials have to ask 
Congress to approve even the smallest change in administrative 
function, subjecting what should be common sense business strategies to 
the most rigid political battles.
  While Medicare has successfully provided health insurance to the 
elderly and disabled for nearly thirty-four years, it faces a financial 
shortfall due to rapid population growth. By 2035, Medicare will 
provide health insurance for twice as many retirees as it does today. 
Additional revenues will be needed in order to provide quality care for 
80 million retirees.
  In the past, policy makers have focused on two ways to increase 
Medicare revenues: raising taxes or cutting benefits. Recently, 
however, Dan Crippen, Director of the Congressional Budget Office, 
alluded to a possible third way: creating administrative efficiencies. 
Dr. Crippen believes that substantial savings can be achieved by making 
Medicare more flexible and efficient. With these changes, Medicare will 
be able to improve the quality of services, while shoring-up savings 
for the long run.
  The private sector has adopted a number of cost saving mechanisms 
that have helped control health care inflation. Medicare should be 
given the same flexibility to keep up with these trends, and improve 
overall administrative efficiency.
  This bill grants the Secretary greater flexibility to administer the 
Medicare program including the following five provisions:
  First, expanded demonstration authority. Promotes high-quality cost-
effective delivery of items and services by enabling the Secretary to 
test innovative purchasing and administrative programs within Medicare. 
The Secretary may use case management, bundled payments, selective 
contracting, and other tools she deems necessary to carry out 
demonstrations. If demonstration projects are successful, the Secretary 
is authorized to permanently implement programs. This section of the 
bill adopts language proposed by the National Academy of Social 
Insurance in their January, 1998 report, entitled ``From a Generation 
Behind to a Generation Ahead: Transforming Traditional Medicare.''
  Second, sustainable growth rate (SGR). Gives the Secretary authority 
to adjust payment updates based on target growth rates and to apply 
such adjustments by geographic areas. This antigaming initiative would 
enable Medicare to control unjustified program inflation by region and 
by service (MedPAC recommendation).
  Third, outpatient payment reform. Allows the Secretary to pay the 
lower of hospital outpatient or ambulatory surgical center rates to 
ensure services in most appropriate setting.
  Fourth, most favored rate. Inherent reasonableness authority granted 
in the BBA is expanded to allow any amount of adjustment that the 
Secretary finds, after appropriate research, is appropriate to 
eliminate overpayments. The Secretary shall have the authority to 
request the ``most favored rate'' in cases where Medicare is the volume 
buyer in the market and other efforts at achieving a market price are 
not available.
  Fifth, use of appropriate settings. Allows the Secretary waive 
requirements which discourage or prevent treatment in a nonhospital or 
noninstitutional setting if she determines that an alternative setting 
can provide quality care and outcomes. For example, today Medicare does 
not cover care in a skilled nursing facility unless the patient has 
first had a 3-day hospital stay. Under this provision, if the Secretary 
finds that treatment of a particular disease or condition can be 
handled, with quality, in a SNF, she can waive the 3-day 
hospitalization requirement, thus ensuring treatment in a setting \1/2\ 
to \1/3\ less expensive.
  Medicare has been extremely effective in providing health insurance 
for the elderly and disabled, a population the private sector has 
refused to cover. In fact, over 30 years, its cost inflation has been 
less than that in the private sector and its benefit package has been 
improved. This social insurance mission must be preserved--and in the 
face of a doubling of the population it serves, we must do more to keep 
Medicare efficient and effective. By implementing the modernizations 
included in this bill, Medicare will be able to adapt and grow in the 
changing health care marketplace.

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