Lawmakers seek competitive bidding for Medicare

Two bills moving through Congress give the Centers for Medicare and Medicaid Services (CMS) flexibility to expand its pool of contractors. Both bills-one of which is before the House Ways and Means Health Subcommittee, while the other was introduced today by a bipartisan group from the House Energy and Commerce Committee-would open Medicare to competitive bidding for the first time in the program's history. Currently, only insurance companies, mainly Blue Cross and Blue Shield plans, are legally allowed to review, process and pay Medicare claims. They process nearly 900 million Medicare claims annually. CMS has had a difficult time ensuring that contractors are paying providers appropriately. In fiscal 2000, improper payments totaled $11.9 billion, or about 6.8 percent of fee-for-service Medicare payments. Both pieces of legislation would allow CMS to open contracting to other bill processors, something every CMS administrator for the past several years has wanted to do. The bills also call on the agency to establish performance criteria for contractors. Whether Congress specifies the performance measures or leaves them up to CMS is an unresolved issue, according to Rep. Pat Toomey, R-Pa., a sponsor of both bills. The bills also seek to ease the regulatory burden on health care providers. For instance, they prohibit the agency from enforcing new policy changes until 30 days after a regulation is finalized. During a Sept. 25 congressional hearing, CMS Administrator Thomas Scully said the provision would allow some contractors to "take advantage" of Medicare. Providers claim they need extra time to gear up for changes in regulations. Nonetheless, the administration is generally supportive of the legislation. The bills have also drawn praise from a variety of health care provider groups, including the American Medical Association and the Federation of American Hospitals. CMS is also taking steps to improve its financial management system. On Sept. 27, the agency awarded PricewaterhouseCoopers, Oracle Corp. and Electronic Data Systems a five-year, $328.4 million contract to develop a new accounting system. It will replace the 53 different systems currently used by Medicare contractors. The project will integrate the new system with Medicare's three existing computer systems. In addition, the current mainframe-based financial system will be replaced by a Web-based system.
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