Thompson said he will pay particular attention to the much-criticized Health Care Financing Administration (HCFA), which runs Medicare and Medicaid.
But while Thompson said HCFA needs an overhaul, he placed at least some of the blame for the agency's dysfunction at Congress' doorstep.
"Over the years, HCFA has not received the resources to modernize," he said.
Among the possibilities under consideration, he told the committee, is "reducing what HCFA does," perhaps by removing either Medicare or Medicaid from its purview.
Thompson also confirmed a report from Senate Finance Committee Chairman Charles Grassley, R-Iowa, that last year Medicare made improper payments totaling $11.9 billion.
While that is down from the estimated $13.5 billion in overpayments last year, and less than half of the 1996 total of $23.2 billion, "it is unacceptable," Thompson said, "to have error rates of 11 or 12 billion dollars in Medicare."