    [Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (1999, Book II)]
    [October 19, 1999]
    [Pages 1827-1828]
    [From the U.S. Government Publishing Office www.gpo.gov]

    [[Page 1827]]

    Letter to Congressional Leaders on Medicare Reform
    October 19, 1999

    Dear Mr. Chairman:  (Dear Senator
    Moynihan:)
        It was a pleasure to meet with you and Senator Moynihan earlier this
    month to discuss our mutual commitment to strengthening and modernizing
    Medicare. It continues to be my hope that the Congress will take action
    this year to, at minimum, make a downpayment on needed reforms of the
    program. I look forward to working with you toward that end.
        In 1997, the Medicare trustees projected that Medicare would become
    insolvent in 2001. Working together across party lines, the Congress
    passed and I enacted important reforms that contributed towards
    extending the life of the Medicare trust fund to 2015. As with any major
    legislation, the Balanced Budget Act (BBA) included some policies that
    are flawed or have had unintended consequences that are posing immediate
    problems to some providers and beneficiaries. In addition, the program
    faces the long-term demographic and health care challenges that will
    inevitably result as the baby-boom generation ages into Medicare. As we
    worked together in 1997 to address the immediate threat to Medicare, we
    must work together now to address its short-term and long-term
    challenges.
        Preparing and strengthening Medicare for the next century is and
    will continue to be a top priority for my Administration. For this
    reason, I proposed a plan that makes the program more competitive and
    efficient, modernizes its benefits to include the provision of a long-
    overdue prescription drug benefit, and dedicates a portion of the
    surplus to help secure program solvency for at least another 10 years.
    However, I also share your belief that we need to take prompt action--
    whether in the context of broader or more limited reforms--to moderate
    the excessive provider payment reductions in the BBA of 1997. I believe
    that legislative modifications in this regard should be paid for and
    should not undermine the solvency of the Medicare trust fund.
        You have requested a summary of the administrative actions that I
    plan to take to moderate the impact of the BBA. In the letter that you
    sent to me last Thursday, you also asked about four specific issues
    related to payment for hospital outpatient departments, managed care,
    skilled nursing facilities, and disproportionate share hospitals.
        Attached is a summary of the over 25 administrative actions that my
    Administration is currently implementing or will take to address
    Medicare provider payment issues. The Department of Health and Human
    Services is taking virtually all the administrative actions possible
    under the law that have a policy justification, which will accrue to the
    benefit of hospitals, nursing homes, home health agencies, and other
    providers.
        We are finishing our review of our administrative authority to
    address the 5.7 percent reduction in hospital outpatient department
    payments. We believe that the Congressional intent was to not impose an
    additional reduction in aggregate payments for hospitals and I favor a
    policy that achieves this goal. The enactment of clarifying language on
    this subject would be useful in making clear Congressional intent with
    regard to this issue. I have attached a letter from Office of Management
    and Budget Director Jack Lew, which was sent at
    the request of Congressman Bill Thomas,
    detailing how such language would be scored by OMB.
        With regards to managed care, we share your commitment to expanding
    choice and achieving stability in the Medicare+Choice marketplace. The
    BBA required that payments to managed care plans be risk adjusted. To
    ease the transition to this system, we proposed a 5-year, gradual phase-
    in of the risk adjustment system. This phase-in forgoes approximately
    $4.5 billion in payment reductions that would have occurred if risk
    adjustment were fully implemented immediately. The Medicare Payment
    Advisory Commission and other experts support my Administration's risk
    adjustment plan. Consistent with this position, most policy experts
    believe that a further slowdown of its implementation is unwarranted.
    However, we remain committed to making any and all changes that improve
    its methodology. Moreover, as you know, any administrative and
    legislative changes that increase payment rates to providers in the fee-
    for-service

    [[Page 1828]]

    program will also increase payments to managed care plans.
        On the issue of skilled nursing facilities, we agree that nursing
    home payments for the sickest Medicare beneficiaries are not adequate. I
    intend to take all actions possible to address this. Administratively,
    we can and will use the results of a study that is about to be completed
    to adjust payments as soon as possible. While we believe that these
    adjustments must be budget neutral, we are continuing to review whether
    we have additional administrative authority in this area.
        Finally, it appears that there has been confusion about the current
    policy for disproportionate share hospital (DSH) payments. Hospitals
    across a considerable number of states have misconstrued how to
    calculate DSH payments. The Department of Health and Human Services
    (HHS) has since concluded that this resulted from unclear guidance.
    Thus, as reported last Friday, HHS will not recoup pass overpayments and
    will issue new, clearer guidance as soon as possible.
        We believe that our administrative actions can complement
    legislative modifications to refine BBA payment policies. These
    legislative modifications should be targeted to address unintended
    consequences of the BBA that can expect to adversely affect beneficiary
    access to quality care. I hope and expect that our work together will
    lay the foundation for much broader and needed reforms to address the
    demographic and health care challenges confronting the program. We look
    forward to working with you, as well as the House Ways and Means and
    Commerce Committees, as we jointly strive to moderate the impact of BBA
    on the nation's health care provider community.
            Sincerely,

                                                                Bill Clinton

    Note: Identical letters were sent to William V. Roth, Jr., chairman, and
    Daniel Patrick Moynihan, ranking member, Senate Committee on Finance.