Last One Out, Please Turn Off the Lights

Washington Report – November, 2004

Bill Finerfrock

Capitol Associates

Last One Out, Please Turn Off the Lights

The exodus of Bush Administration appointees from the first term continued through the month of November. For HBMA members, the most significant resignation was that of HHS Secretary Tommy Thompson (see discussion following this story).

All told, 9 cabinet Secretaries have submitted their resignations. These include:

StateAgriculture

Homeland SecurityCommerce

EducationVeterans Affairs

JusticeEnergy

Health and Human

Services

To date, 6 Secretaries have been asked to continue on in the second Bush term. These are:

DefenseHousing & Urban Development

InteriorLabor

TransportationTreasury

It should be noted that departures after serving a full-term are neither unusual nor unexpected. Service in a Cabinet position, while prestigious, can be very demanding for the individuals and their families. While no further Cabinet resignations are expected, changes at the Undersecretary and Assistant Secretary levels will now begin.

Thompson Out, Leavitt In

It had long been expected that HHS Secretary Tommy Thompson would resign at the end of the first Bush term. Although there was some speculation that the President would prevail upon Thompson to extend into the first year of his second term, those rumors proved unfounded. Although several names were rumored to be under consideration for the HHS position, CMS Administrator Mark McClellan was considered to have the inside track.

While the Thompson rumors proved true, the McClellan rumors proved false. President Bush has nominated former Utah Governor Mike Leavitt to be the next Secretary of Health and Human Services. Leavitt was nominated and confirmed earlier this year as EPA Administrator. He will now leave that position upon confirmation by the Senate as HHS Secretary.

Before joining the Environmental Protection Agency in November 2003, Leavitt, 53, was governor of Utah for 11 years.

Leavitt was sworn in as the 10th Administrator of the United States Environmental Protection Agency on November 6, 2003. Prior to leading the agency, Leavitt served as Utah’s 14th governor for three terms and was a national leader on homeland security, welfare reform and environmental management. In addition, he improved child welfare services in Utah and made strides toward expanding access to health care for children.

During Leavitt’s administration, Utah was named one of the best managed state governments in the country. Leavitt also led his state during the 2002 Olympic Winter Games.

Born February 11, 1951, in Cedar City, Utah, Leavitt graduated with a bachelor’s degree in economics and business from Southern Utah University. After earning his degree, he eventually became president and chief executive officer of a regional insurance firm, establishing it as one of the top insurance brokers in America. He is married to Jacalyn S. Leavitt; they are the parents of five children.

Secretary Thompson made the following statement upon the announcement that Governor Leavitt would be nominated as his successor:

“Governor Leavitt has a compassion for the hopes and health of people, which makes him a strong fit to lead what we call the Department of Compassion. He will be a willing partner with state and local governments to better the lives of our citizens.”

In addition, Secretary Thompson sought to address obvious questions about the expected appointment of CMS Administrator Mark McClellan as Secretary. When discussing the staff the new Secretary will inherit, Thompson said this,

“One of the strengths Mike will inherit is the leadership of Dr. Mark McClellan at the Centers for Medicare and Medicaid Services. Mark is doing a remarkable job of implementing the Medicare Modernization Act so that seniors can fully benefit from

new coverage for prescription drugs and preventive services. And he is implementing important improvements to Medicaid to better help Americans in need. It is essential to have a leader of Mark's caliber in the critical position of CMS Administrator.”

Administrator Leavitt will be charged with a broad agenda for the health and safety of the American people, including implementation of the first-ever prescription drug benefit for seniors under Medicare. He will also be charged with expanding federal cooperation with faith-based groups that provide essential services, such as counseling and treatment for addictions; continuing to pursue the promise of medical research, always ensuring that the work is carried out with vigor and moral integrity; and protecting the American people from disease, and the use of disease as a weapon against us.

It appears that McClellan’s ascendancy to the HHS position was hindered by two factors.

First, McClellan’s departure from CMS at this time would have left a significant void at the top of the agency at a time when it is struggling to implement the most sweeping changes in the Medicare program since its inception. By most accounts McClellan and his team are making progress and Administration officials did not want to disrupt that progress by moving him to the HHS position.

The second factor has to do with the speed with which McClellan has raised through the HHS ranks. Originally appointed and confirmed as FDA commissioner, McClellan left that position for the CMS job after just over one year at FDA. Now, after just more than a year at CMS, McClellan would have been moving to a new job again. Some in Congress and the Administration felt that this movement was just too swift and, while McClellan is bright and energetic, some felt that he needed a bit more seasoning before taking on the HHS job.

Although it appears that McClellan will be staying on at CMS, don’t be surprised if he gets a new job in the next two years (either in government or the private sector).

OIG Says “Thanks but no Thanks”

In an effort to be both proactive and a leader in the effort to stem fraud and abuse in the Medicare program, HBMA leaders contacted the HHS Inspector General’s office in mid-October to encourage a review of the Third Party Billing Company Compliance document developed by the OIG in the late 1990’s. In a letter signed by HBMA President Tim Maher, Ethics Chair Ken Goodin and Government Relations Chair Randy Roat, HBMA recommended that after 7 years, it was time for the OIG to update and revise the compliance document originally developed with HBMA assistance in 1997.

OIG General Counsel Lew Morris responded to the HBMA recommendation in a letter to the leadership dated December 1, 2004. Morris said that while he welcomed HBMA’s initiative, no changes in the third party billing document were contemplated at this time. Specifically his letter states,

“… at this time, we have no plans to develop a supplemental guidance for third-party

billing companies. Should we consider such a supplement in the future, we will follow

our usual practice of publishing a notice in the Federal Register soliciting public comments

on the scope and content of the guidance. We would welcome your input at that time.”

HBMA President Maher, upon receiving Morris’ letter, had this to say, “While HBMA leaders were disappointed that the OIG has chosen not to focus on the third party billing compliance document at this time, we intend to continue to be proactive in our efforts to prevent fraud and abuse.”

Reminder – Medicare Deductible for 2005

The start of the new year not only means the making and breaking of resolutions, but also the application of Medicare deductibles. For 2005, the Medicare Part B deductible will be $110.00. This is the first increase in the Medicare Part B deductible since 1991.

There has always been a Medicare Part B deductible. Originally, the deductible was $50 and has been raised periodically by Acts of Congress. The following is a summary of the Medicare deductibles since the inception of the program:

For 2005, and until further notice, the deductible is $110.

From 1991 through 2004, the deductible was $100.

From 1982 through 1990, the deductible was $75.

From 1973 through 1981, the deductible was $60.

From 1966 through 1972, the deductible was $50.

In a release issued earlier this year, CMS wanted to remind physicians and other providers that “the date of service generally determines when expenses were incurred, but expenses are allocated to the deductible in the order in which the bills are received. Services that are not subject to the deductible cannot be used to satisfy the deductible.”

Election Changes on Horizon

The outcome of the November elections will precipitate some changes in key health Committees in Congress. While no jurisdictional changes are anticipated, the make-up of the Committees will change to reflect the changing majorities, retirements and defeats. During the month of December, Representatives and Senators begin jockeying for plum committee assignments. Historically service on the three key health committees has been considered a much sought after appointment.

House Committee Assignments

While the overall Committee ratio (number of majority and minority party seats) is determined by the majority party, individual membership on the Committees is tightly controlled by each party’s respective leadership.

In the House, the majority party exclusively sets Committee ratios. Although the minority party (regardless of which party is in power) argues for Committee ratios reflective of the overall House ratio, there is no requirement that the Committee ratios have any relationship to the size of the majority party’s margin. In fact, tradition has been that certain “major” Committees have so-called super majorities – majorities far higher than what the overall House ratio would seem to call for.

When considering Committee appointments, the respective party leadership attempts to maintain some regional balance within the Committee delegations. Thus, it is very difficult – although not impossible – for two Representatives from the same state and the same party to secure appointment to the same major committee.

As just noted, some Committees are considered “major” whereas others are considered “minor”. For example, a “major” committee is the Ways and Means Committee and a “minor” committee would be the Government Reform Committee. The significance of the distinction is that Members appointed to the Ways and Means Committee typically serve exclusively on that Committee whereas Members on the Government Reform Committee will typically serve on other Committees.

The historical rationale has been that the breadth and depth of issues assigned to the Ways & Means Committee are such that Members need to devote their full attention to the issues within the Committee’s jurisdiction in order to be effective Committee members. In addition to dealing with Medicare policy, the Ways and Means Committee handles legislation dealing with taxes, social security, welfare and trade.

House Committee assignments will officially be made beginning in January after the new Congress convenes, but a great deal of behind the scenes negotiating is going on as you read this report.

Senate Committee Assignments

As with the House, Committee assignments are made by the Senate Leadership. Overall Committee ratios are “negotiated” by the Senate Majority and Minority Leaders. The rules of the Senate give the minority party some leverage in securing more favorable ratios than are typically seen in the House. At the beginning of each Congress, the Senate must adopt an organizational resolution. Because this is a debatable resolution, it can be filibustered. If the minority party feels the resolution is unfavorable, they can stall the beginning of the work of a new Congress by engaging in a filibuster.

Because of the more favorable rules in the Senate, Committee ratios have traditionally been more reflective of the overall ratios in the Senate. The 109th Congress should be no exception.

Each party sets the guidelines it will use for filling Committee vacancies. The Republican Caucus in the Senate has traditionally used a seniority based system giving the most senior Senators first choice on Committee openings. By contrast, Senate Democrats have given great authority to the Democrat leader in filling Committee vacancies.

Because much of this process is based upon tradition rather than formal rules, it is always subject to change.

As with the House, nothing official will occur until after the new Congress convenes in early January. Despite that, there are rumors that the two expected Senate Democrat vacancies on the Senate Finance Committee will go to Senator Chuck Schumer (D-NY) and Senator Ron Wyden (D-OR). No worthwhile rumors on who will get the Republican openings on the Finance Committee have surfaced.

As with the House, certain Senate Committees are considered “major” or “A” Committees and others are considered “minor” or “B” or “C” Committees. Again, similar to the House, the number or type of Committee assignments is dictated by the type of Committee (A, B or C). For example, Senators are prohibited from serving on two “A” Committees. If a Senator is already on an “A” Committee and wishes to be appointed to another “A” Committee, he or she must resign from their old “A” Committee in order to accept the new “A” Committee appointment.

Once the new Committee assignments are official, the list will be distributed to the HBMA membership so you can see if any of your Representatives are on key health Committees in either the House or Senate.

CMS – We’re doing better

The Centers for Medicare and Medicaid Services (CMS) maintains that it has made significant improvement in the error rates for Medicare payments. In a press release issued by the agency, Administrator Mark McClellan said, “We have made significant strides in how we measure the error rate in Medicare payments and that will enable us to do even more to bring it down.” McClellan’s statement went on to read, “We have much better data that will help us pinpoint problems and allow us to work with the Medicare contractors and providers to make sure claims are submitted and paid properly.”

This past year, Medicare contractors processed approximately 1 billion claims. Of those, 160,000 were reviewed.

CMS reported that of the total payments sampled in 2004, results of the new measurement program indicated the following payment error traits:

*4.1 percent of payments had errors due to insufficient documentation being submitted (2.6 percent was reported in the 2003 analysis, which included much less information on fiscal intermediaries in 2003)

*2.8 percent had errors due to non-responses to request for medical records (an unadjusted 5.0 percent rate was found in 2003)

*1.6 percent had errors due to medically unnecessary services (1.3 percent in 2003);

*0.7 percent had errors due to incorrect coding (0.7 percent in 2003)

*0.1 percent had other errors (0.2 percent in 2003)

In addition to the ability to make an overall assessment, new data collection and reporting techniques allow CMS to assess contractor specific error rates. CMS maintains that the new contractor specific information will allow the agency to “…better manage our contractors, making them more accountable to taxpayers, beneficiaries, and providers and laying a foundation for further contractor reforms that we intend to implement in the next few years.”

HHS announces regions for new Medicare Advantage/PPO and Prescription Drug Programs

The Department of Health and Human Services and the Centers for Medicare and Medicaid Services announced the regions for the new Medicare Advantage/Preferred Provider Organization (MA) plans as well as for prescription drug plans (PDP). The Medicare Modernization Act of 2003 created these two new initiatives in the Medicare program. Participation in either program is voluntary for both beneficiaries and providers.

The Centers for Medicare & Medicaid Services (CMS) has established 26 regions for Medicare Advantage Preferred Provider Organizations and 34 regions for prescription drug plans.

According to a statement released by the Department, out-going HHS Secretary Tommy Thompson said, “The new regions were designed based on extensive public input and expert analysis in order to help people with Medicare get the best health care coverage options possible.”

Beginning in 2006, Medicare beneficiaries will have the option of remaining in traditional fee-for-service Medicare and receive prescription drug coverage through a separate prescription drug plan, or beneficiaries can enroll in a Medicare health plan. Beneficiaries are not required to enroll in a prescription drug plan or a Medicare health plan.

It is estimated that Medicare will cover about 75 percent of the beneficiary's premium regardless of which type of plan is chosen. As required by Congress, the prescription drug benefit program will rely on market competition to ensure beneficiaries have access to the drugs they need at the lowest possible cost. Beneficiaries who are enrolled in an employer-sponsored plan will also be able to remain in that plan.

To see which states fall into which MA or PDP regions (they are different) go to: