[Weekly Compilation of Presidential Documents Volume 35, Number 42 (Monday, October 25, 1999)]
[Pages 2090-2091]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
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

[[Page 2091]]

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 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.