Progress to Date in Implementing Certain Major Balanced Budget Act Reforms

T-HEHS-99-87: Published: Mar 17, 1999. Publicly Released: Mar 17, 1999.

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Pursuant to a congressional request, GAO discussed the implementation and impact of the Medicare provisions in the Balanced Budget Act of 1997 (BBA), focusing on: (1) the Medicare Choice program, particularly the payment method and consumer information efforts; and (2) prospective payment systems (PPS) for skilled nursing facilities (SNF) and home health agencies (HHA) in Medicare's traditional fee-for-service program.

GAO noted that: (1) changes of the magnitude of those in the BBA require significant efforts to implement well and are subject to continual scrutiny; (2) GAO recently reported that the efforts of the Health Care Financing Administration (HCFA) to put the BBA provisions in place have been extensive and noteworthy, and the agency has made substantial progress in implementing the majority of the Medicare-related BBA mandates; (3) at the same time, it has encountered obstacles; (4) intense pressure to resolve year 2000 computer compliance issues has slowed HCFA's efforts; (5) in undertaking certain major initiatives, the agency has had to cope with inadequate experience and insufficient information; (6) thus, achieving the objectives of the BBA will require HCFA to refine and build on its initial efforts; (7) reforms of the payment methods for Medicare Choice plans are under way; (8) the withdrawal of some managed care plans has raised questions about how to maintain desired access for beneficiaries while implementing needed changes to plan payments and participation requirements; (9) HCFA has also initiated an information campaign to provide beneficiaries with new tools to make informed health plan choices and create stronger, quality-based competition; (10) some aspects of the campaign have only been piloted and certain problems did develop; refining these efforts to make them more useful and effective for beneficiaries is now critical; (11) the BBA's mandate to replace cost-based reimbursement methods with PPS constitutes another major program reform; (12) the phase-in of the PPS for SNFs began on schedule on July 1, 1998; (13) design flaws and inadequate underlying data used to establish the payment rates may compromise the system's ability to meet the twin objectives of slowing spending growth while promoting appropriate beneficiary care; (14) GAO has not found evidence that the closures or the interim payment system has significantly affected beneficiary access to home health care; (15) GAO's monitoring of potential access problems is continuing as more data on any effects of the interim system become available; (16) the impact of BBA's significant transformations of Medicare could generate pressure to undo many of the act's provisions; (17) in this environment, Congress will face difficult decisions that could pit particular interests against a more global interest in preserving Medicare for the long term; and (18) GAO believes that it would be a mistake to significantly modify BBA's provisions without thorough analysis or giving them a fair trial over a reasonable period of time.

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