HHS Secretary demotes himself

Not every Cabinet secretary volunteers to demote himself, but that is exactly what Secretary of Health and Humans Services Tommy Thompson is doing. Thompson announced Thursday that he plans to spend one week at the helm of each HHS agency in order to get a sense of how they operate and what improvements need to be made. His first assignment is no easy task--the Health Care Financing Administration, which is responsible for implementing Medicare and Medicaid. Thompson will spend the week of April 30 running the much-maligned agency. Even before he steps foot in the agency's Baltimore offices, Thompson has made HCFA reform one of his top priorities. The Bush administration has slated the agency for a 5 percent increase in its administrative budget. Thompson said it was a tough sell at the Office of Management and Budget, but he convinced budgeters that "to change HCFA, we need the money." A bulk of the increased funding would be used to update antiquated computer systems, most more than 30 years old. Nearly $53 million is allocated to developing an automated system for processing claims. "HCFA currently relies on several financial management systems to account for the hundreds of billions of dollars spent on Medicare benefits, and most contractors do not use double entry accounting methods or claims processing systems with general ledger capabilities," Thompson told the House Energy and Commerce Subcommittee on Health. A new financial management system would give the agency better data on how well contractors are performing, said Mike Hash, principal at Health Policy Alternatives and former deputy administrator at HCFA. Contractors, also known as fiscal intermediaries, process claims and essentially control the flow of Medicare dollars among health care providers, HCFA and beneficiaries. The agency paid out nearly $12 billion last year in improper claims. Thompson said he is also committed to expanding the pool of contractors in the Medicare system. By law, only insurance companies are eligible to act as contractors. A vast majority are Blue Cross and Blue Shield plans. Additionally, the law dictates that hospitals choose their own contractors, but the contracts don't establish fixed costs. Therefore, insurers can underestimate their expenses to win contracts and then get reimbursed for higher-than-expected expenses. Thompson believes HCFA, not insurance companies, should select contractors. The Clinton administration proposed the same idea for several years to no avail, and also wanted to expand the pool of claims processors to firms such as Visa and American Express. "Look for companies that handle major transaction systems," said Hash. "That's what Medicare is." Committee members on both sides of the aisle endorsed Thompson's push for HCFA reform. "In particular, I am very pleased to see, for the first time in a long time, an increase in the Health Care Financing Administration's administrative budget," said chairman Michael Bilirakis, R- Fla., adding that additional funding is only "part of the solution." Improving HCFA's management is becoming especially important as Congress and the Bush administration lay the groundwork for making changes to Medicare--including adding a prescription drug benefit. The Medicare program has been on the General Accounting Office's list of high-risk programs since 1990.