"Bush Administration Medicare Reform Goals
and Congressional Response"

March 30, 2001

AIM and the Progressive Policy Institute (PPI) co-sponsored a March 30 briefing on the Bush Administration's goals and priorities for Medicare and HCFA reform. Speakers included Sally Canfield, Counselor to Health and Human Services Secretary Tommy Thompson, Liz Fowler, Democratic Chief Health Counsel, Senate Finance Committee, and Jeff Lemieux, Senior Economist, Progressive Policy Institute. Finally, Tracey Moorhead, AIM Director, provided opening remarks and an overview of AIM's principles for comprehensive Medicare modernization.

Ms. Canfield outlined the recent report of the Medicare Board of Trustees and cautioned that, while it is tempting to look only at the program's improved financial health, the report includes clear warning signs that the program must be modernized soon to ensure health care coverage for seniors. Ms. Canfield stated that the program's deeper trends of an aging population and rapid Part B expenditures growth cannot be ignored in favor of the projected 2029 solvency date. She also discussed the Bush Administration's goals for Medicare reform including HCFA modernization and improvement in the current benefit package. Ms. Canfield acknowledged HCFA's "tremendous challenges" as an agency and stated the need for "a thorough examination of its mission, competing demands and available resources" to ensure the agency has the tools necessary to streamline oversight and reduce administrative burdens on both patients and providers. Specifically, Ms. Canfield noted the need to change the agency's culture, standardize communications, and invest in the agency's technology infrastructure.  Ms. Canfield also acknowledged the "systemic limitations of the current benefit package and the financial implications" of the baby boom generation retirement.  She stated that the Bush administration wants to work with Congress to modernize Medicare to offer seniors a range of health plan choices similar to the Federal Employee Health Benefits Plan (FEHBP). 

Ms. Fowler stated that none of the current Medicare reform proposals adequately address Medicare program solvency and noted that Congress must carefully consider which problems must be addressed now to preserve the program and extend solvency. She outlined three main issues identified by Senator Max Baucus (D-MT), Ranking Democratic Member, Senate Finance Committee: 1) Medicare+Choice program competition; 2) fee-for-service reforms; and 3) HCFA reforms.  Ms. Fowler reported that Senator Baucus is interested and supportive of increased competition in the Medicare+Choice program but that his first priority is to protect fee-for-service beneficiaries. According to Ms. Fowler, Senator Baucus recognizes the inefficiencies in the Medicare+Choice system and believes the Breaux-Frist II proposal and President George W. Bush's proposal are worthy of review.  Ms. Fowler also reported that Senator Baucus is willing to consider fee-for-service modernizations to address inadequate payments and benefits and that HCFA reform is also a priority. Finally, Ms. Fowler stated that she and other Finance Democratic staff members are working closely with Finance Chairman Grassley's staff and hoping to develop a bipartisan proposal to address these reforms.

Mr. Lemieux agreed that competitive reforms discussed by Ms. Canfield and Ms. Fowler are very important to address the problems evident in the Medicare+Choice program. He also acknowledged both the importance of giving Medicare+Choice plans confidence that a role exists for them within the Medicare program and the need to set up a new administrative structure which understands the needs of competitive health plans. Finally, Mr. Lemieux questioned the adequacy of President Bush's proposed budget of $153 billion over ten years for Medicare reform.

In response to a question about Democratic support for President Bush's Immediate Helping Hand proposal, Ms. Fowler stated that Senator Baucus' overriding principle is to support a universal drug benefit. Ms. Fowler stated the need to consider middle income beneficiaries and beneficiaries with high drug expenditures in addition to low income beneficiaries. She also noted a concern that the proposal would preempt existing state prescription drug programs.  Mr. Lemieux responded that the proposal would be time consuming to implement and that a broader, universal benefit could be implemented in the same time frame.

In response to a question about restructuring HCFA through internal, administrative measures or through legislative action, Ms. Canfield stated that Secretary Thompson supports both avenues but hopes to take most actions through administrative means. She also acknowledged the need to streamline procedures for approval and coding of new technologies.