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Bipartisan Panel Says Medicare in Dire Need of Additional Resources, More Leeway from Congress

For Immediate Release: July 30, 2002
Contact: Jill Braunstein at (202) 452-8097

Final Report of the Study Panel on Medicare's Governance and Management—Matching Problems with Solutions: Improving Medicare's Governance and Management

WASHINGTON, D.C. - Medicare does a good job delivering health benefits to 40 million Americans, but the program's future is in peril because it needs more money for administration, better computer systems, and more administrative latitude from Congress, according to a report released today by an independent, bipartisan panel of experts convened by the National Academy of Social Insurance (NASI).

There is no compelling need for a radical overhaul of Medicare's governance, according to the NASI report. But Medicare must have more money for the heavy burden of administering such a complex program, including processing a staggering load of nearly one billion claims a year, communicating with beneficiaries, and writing regulations for Medicare's payments to more than 6,000 hospitals, 861,800 physicians, 168,300 clinical laboratories, and thousands of other providers, including health insurance plans, skilled nursing facilities, and home health care agencies,

“While the study panel identified a number of weaknesses in current program management, it wants to emphasize that Medicare has been, and continues to be, a very successful program and its shortcomings should be construed as opportunities for improvement, rather than indications of failure,” said panel Chair Sheila Burke, former Chief of Staff to Senator Bob Dole and Smithsonian Undersecretary for American Museums and National Programs.

The panel, which includes two former administrators of Medicare (Leonard Schaeffer and Gail Wilensky), acknowledged that there is often strong criticism of Medicare from beneficiaries, providers and members of Congress. However, they agreed that Medicare's governance needs repair rather than revolution.

The report notes the critical role Medicare plays in the nation's health care system. It is, in effect, a universal health safety net for older Americans—95% of those over 65 are enrolled. And it provides care for five million persons receiving disability benefits under Social Security. The program spent $238 billion in fiscal 2001. This accounted for 19.3% of all national health spending, and 11.7% of all federal outlays.

The panel's warnings about the hefty workload imposed on Medicare are being issued just as Congress is debating whether to add a new prescription drug benefit to the already complex structure. The panel cautioned that if Congress does pass a drug benefit, CMS will need to be given sufficient resources—both financial and human—to run the drug program effectively.

“Since 1996, several major pieces of legislation have given Medicare more than 500 mandates and directives from the Congress to carry out,” said Kathleen King, Study Director at the National Academy of Social Insurance. “And all this comes atop a rise in its basic responsibility.” From fiscal 1992 to fiscal 2002, benefit spending in real terms (dollars after adjustment for inflation) has soared 97% and the volume of claims has climbed 50%. But the amount of money appropriated by Congress to run the program has risen only 26% and the numbers of full-time equivalent employees on the Medicare payroll has increased only 12%.

The panel's role was to look at Medicare as a management challenge—to figure out ways to make it run better. Panel members began their consideration in 2000, met seven times over an 18-month period, and had the backing of staff and consultants.

The panel considered four different models as possible ways to run the Medicare program: an independent agency (Medicare is now part of the Department of Health and Human Services, HHS), a multi-member board, a government corporation, and a performance-based organization. There was no “consensus that the current governance structure is fatally flawed or that one of the alternative models should be adopted in its purest form,” but the study panel recommends that there should be further study on the experience of the Social Security Administration as an agency independent of HHS.

The panel acknowledged the flaws and inefficiencies in Medicare: the criticism of beneficiaries that they sometimes don't understand the program, the complaints of providers that rules keep changing, the insistence of some providers that the fraud and abuse regulations are enforced unfairly. But the bottom line, the panel said, is that Medicare is working reasonably well.

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The National Academy of Social Insurance (NASI) is a nonprofit, nonpartisan research and education organization made up of the nation's leading experts on Social Security, Medicare, and other social insurance programs. It does not lobby or take positions on policy issues. Matching Problems with Solutions – Improving Medicare's Governance and Management is the final product from a study panel convened as part of the Academy's Making Medicare Restructuring Work project. The panel is composed of 14 recognized experts with diverse philosophical backgrounds. The Robert Wood Johnson Foundation provided grant support for the project.

Final Report of the Study Panel on Medicare's Governance and Management—Matching Problems with Solutions: Improving Medicare's Governance and Management

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