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Subject: Strengthening and Improving the Medicare Program
Before: Committee on Energy and Commerce
U. S. House of Representatives
Witness: Tommy G. Thompson, Secretary
Department of Health and Human Services
Testimony before Committee on Energy and Commerce
U.S. House of Representatives
July 26, 2001

Chairman Tauzin, Congressman Dingell, and distinguished Committee members, thank you for inviting me to appear before the Committee today. I am delighted to have the opportunity to discuss President Bush's framework for strengthening and improving the Medicare program so that it can fulfill the promise of providing health care security for America's seniors and people with disabilities in the coming decades. This framework is based upon ideas developed over long years of dedicated work by many people including many Members of this Committee. It recognizes the need to improve the current benefit package so that it better meets the needs of seniors including the addition of a prescription drugs benefit. It also seeks to place the program on a secure financial footing for future generations. The President is committed to working with Congress on a bipartisan basis to meet these shared goals. To this end, he has put forth eight principles that together form the basis of a framework for strengthening the Medicare program. Working together we can ensure that Medicare keeps it promise not only to today's seniors but also the seniors of tomorrow.

For 36 years, Medicare has been successful in helping America's seniors achieve the promise of secure access to needed health care. Yet as medical practice has improved dramatically in the past decades, the Medicare benefit package and delivery system have not kept pace. When Medicare was created in 1965, the benefit package was based on the most popular private health insurance packages offered at that time. Since then, the health insurance options available to most Americans have changed as the practice of medicine has changed but Medicare has in many ways remained rooted in the 1960s. As you all know, one of the most glaring omissions is the lack of prescription drug coverage in Medicare's benefit package. But even when benefits are covered, Medicare's patchwork benefits leave serious gaps, as too many seniors discover when they experience serious illnesses. These problems are illustrated not only by prescription drugs, but also by other types of care such as preventive medicine.

Additionally, Medicare's current cost sharing structure does not include protections for the most vulnerable beneficiaries - those with the highest medical costs. For example, individuals who need hospital care face deductibles of almost $800 for each hospital stay, as well as additional cost-sharing requirements. While most private health insurance plans include stop-loss limits to provide protection against very high out of pocket medical expenses, Medicare has no such protections. And finally, even the limited benefits now available to our seniors are not secure in the coming decades with the retirement of the Baby Boom generation.


Medicare must be strengthened and improved now if it is to meet the needs of the nearly 80 million Americans who will be beneficiaries of the program by 2030. The President has worked with members of Congress from both parties to develop a framework to guide legislative reform efforts to modernize the Medicare program and to keep Medicare's benefits secure.

We believe that Medicare improvement should be guided by the following set of eight principles:

  1. All seniors should have the option of a subsidized prescription drug benefit as part of modernized Medicare.
  2. Prescription drugs are an essential part of the health care system for Medicare beneficiaries. One recent study found that while Medicare beneficiaries make up about 14 percent of the population, they accounted for 40 percent of prescription drug spending. Yet, over one-quarter of beneficiaries have no prescription drug insurance and must pay for drugs entirely out of their own pocket or go without necessary medications. Worse, this financial burden falls heaviest on those least able to afford it. Of beneficiaries with incomes below poverty, those with drug coverage filled nearly twice as many prescriptions in 1998 as those beneficiaries without coverage (29 prescriptions compared to 15). A prescription drug benefit will do more than protect beneficiaries from the risk of high prescription drug expenses. Quality private-sector prescription drug benefits also help make prescription drugs more affordable through the use of innovate tools to reduce drug costs. Private insurance plans usually work with pharmacy benefit managers to negotiate volume discounts. They also improve the quality of prescription drug use by working with pharmacists and physicians to provide individualized information on more effective, and lower-cost, drug options. Their computerized support systems can help avoid adverse drug interactions, which are far more common in seniors than in any other part of the population.

    Medicare's subsidized drug benefit should protect seniors against high drug expenses and should give seniors with limited means the additional assistance they need. All seniors should have the opportunity to choose among quality private plans. Further, the drug benefit should be implemented in such a way as to encourage the continuation of the effective coverage now available to many seniors through retiree health plans and private health plans. While we must support these continuing options, we should encourage a multiplicity of new choices. The new drug benefit should be available through Medigap plans and as a stand-alone drug plan for seniors who prefer these choices. When Medicare implements the drug benefit, states should not face maintenance of effort requirements for their own drug programs outside of Medicaid.

  3. Modernized Medicare should provide better coverage for preventive care and serious illness.
  4. Medicare's existing coverage should be improved so that its benefits provide better protection when serious illnesses occur and provide better coverage to help prevent serious illnesses from developing. Medicare has been slow to cover proven treatments for preventing illnesses and saving lives. Coverage often comes long after preventive treatments are widely available in private insurance plans and the cost sharing required to receive these preventive benefits may discourage many from seeking potentially life saving tests. This Congress understands the value of Medicare preventive benefits and crafted important legislation in 2000 to expand preventive benefits for Medicare beneficiaries. Yet gaps remain. For example, colorectal cancer is the second leading cause of cancer death and more than 90 percent of cases occur among individuals over the age of 50. It is also one of the most treatable forms of cancer if it is detected early. However, at the present time, less than 40 percent of colorectal cancer cases are detected early. While Medicare covers colonoscopy for high-risk beneficiaries, the most complete form of screening for this disease, coinsurance requirements may pose a barrier to early detection. Coinsurance for a colonoscopy can range as high as $130 (assuming the beneficiary has already met their Part B deductible). If a beneficiary is at average risk for colorectal cancer, a colonscopy is covered once every ten years. For an individual at high risk, the procedure is covered once every two years.

    Advances in medical technology have made it possible for more seniors to survive illnesses that would have been fatal only a few years ago. Unfortunately, the sickest Medicare beneficiaries are likely to pay the most for their health care costs - exactly the opposite of the way that logical insurance plans should work. For example, Medicare copayments related to serious illnesses such as complex chemotherapy treatments for cancer may exceed 40 or 50 percent. Indeed, the sickest beneficiaries, those who incur over $25,000 in program costs (about 730,000 individuals in the most recent year for which figures are available) averaged more than $5,000 in cost sharing payments alone. This figure does not include items and services such as prescription drugs that are not covered by the program. Beneficiaries within this group include individuals requiring intensive life support following major heart attacks or breast reconstruction surgery following a mastectomy. In general, for patients with multiple hospital outpatient visits and procedures, the costs quickly add up. To protect beneficiaries when they need help the most, private insurance plans generally include "stop-loss" limits. Stop-loss provide guaranteed protection against very high medical expenses. Despite its important coverage gaps, Medicare has no stop-loss protection.

    We believe that Medicare's existing coverage should be improved so that its benefits provide better protection when serious illnesses occur and provide better coverage to help prevent serious illnesses. These changes should not reduce the overall value of Medicare's existing benefits. Medicare's preventive benefits should have zero copayments and should be excluded from the deductible; Medicare's traditional plan should have a single indexed deductible for Parts A and B to provide better protection from high expenses for all types of health care; and Medicare should be provide better coverage for serious illnesses, through lower copayments for hospitalizations, better coverage for very long acute hospital stays, simplified cost sharing for skilled nursing facility stays, and true stop-loss protection against very high expenses for Medicare-covered services.

  5. Today's beneficiaries and those approaching retirement should have the option of keeping the traditional plan with no changes.
  6. Many people in Medicare today, and others, who are approaching retirement, have good supplemental coverage for prescription drugs and other medical expenses. If they wish to continue in the traditional Medicare plan with no changes in their premiums, benefits, or supplemental coverage, they should be able to do so. Beneficiaries who opt for the improved Medicare benefits should be allowed one year to switch back to the original plan.

  7. Medicare should provide better health insurance options, like those available to all Federal employees.

Medicare beneficiaries do not have access to the same range of choices available to most Americans with private health insurance. The Federal government, many state governments, and most large private employers help their employees get the care that is best suited to their needs by offering them several health care plans, along with useful information to help them choose the best one for their budget and needs. The contrast is most striking here in our Nation's capital. Federal employees and Members of Congress living in the Washington area have twelve different health plans to choose from, including a variety of fee-for-service plans, and health maintenance organizations (HMOs). But their neighbors with Medicare have only two choices - the traditional fee-for-service plan and a single HMO. This pattern occurs throughout the country. For many beneficiaries, particularly those in rural areas, Medicare offers only one health insurance plan - it is strictly one-size-fits-all. Previous legislation to address this problem, including the establishment of the Medicare+Choice program, has not had the intended effect of providing more reliable health insurance options for all Medicare beneficiaries. Currently, no senior has access to any of the new kinds of private insurance that have become popular with other Americans, such as point of service plans that give beneficiaries the cost savings of networks of providers along with the flexibility of coverage for services from all providers.

Plans should be allowed to bid to provide Medicare's required benefits at a competitive price, and beneficiaries who choose less costly plans should be able to keep most of the savings - so that a beneficiary may pay no premium at all. In areas where a significant share of seniors choose to get their benefits through private plans, the government's share of Medicare costs should eventually reflect the average cost of providing Medicare's required benefits in the private plans as well as the government plan. Low-income seniors should continue to receive more comprehensive support for their premiums and health care costs. Beneficiaries should have access to timely and comparative information on the quality and total cost of all their health care coverage options.

  1. Medicare legislation should strengthen the program's long-term financial security.
  2. Since 1965, Medicare has provided a guarantee of health care coverage for more than 90 million seniors and people with long-term disabilities. Medicare has made the same promise to millions of Americans who are currently contributing their hard-earned dollars through payroll and income taxes. These Americans are counting on the financial stability and integrity of the Medicare program. But Medicare faces substantial financial challenges in the not-too-distant future. Within the next thirty years, the number of Medicare beneficiaries is expected to nearly double to almost 80 million people. As the number of beneficiaries rises, the payroll taxes of fewer workers will be available to support the program. Rising health care costs will also strain Medicare's resources.

    Careful planning is required to ensure that Medicare continues to keep its promises to future generations. We believe that legislation is necessary to improve the program's long-term financial security. To support good planning for the entire program, Medicare's separate trust funds should be merged to provide a straightforward and meaningful measure of Medicare's overall financial security that is not vulnerable to accounting gimmicks. Only by ensuring reliable data and planning ahead can drastic, undesirable changes in Medicare or other Federal programs be avoided.

  3. The management of the government Medicare plan should be strengthened so that it can provide better care for seniors.
  4. Medicare's traditional plan is falling short in important respects other than its benefits. It has not been able to use competitive approaches to keep its costs down. Its contracting requirements are outdated, making it more difficult to providers and patients to work effectively with a complex claim processing system. And perhaps most importantly, traditional Medicare does not provide integrated services for many seniors who need support for managing their illnesses, particularly in cases of chronic disease.

    Contracting reform should be implemented to improve efficiency and performance. Medicare is restricted o using certain insurance companies to process certain types of claims. Other businesses have the experience and capacity to provide these claims processing services but Medicare is prohibited by law from contracting with them. The program also cannot reward or penalize a contractor based on their performance. Medicare also does not have the authority to use competitive bidding tools to improve quality and reduce costs. Enrollees in traditional Medicare frequently require use of medical supplies such as hospital beds, wheelchairs, and oxygen equipment. Prices for these items are set by Medicare and are frequently higher than prices paid by private plans. A number of recent studies indicate that the cost of supplies could be reduced between 15 and 30 percent if Medicare used the same kind of competitive bidding tools that help reduce costs for non-Medicare patients. However, Medicare should not be allowed to create new price controls and should ensure that seniors continue to have choice of suppliers.

    Medicare also needs to reform its medical management tools. Many Medicare beneficiaries are among the sickest and most vulnerable individuals in our society, often suffering from numerous chronic conditions. Unfortunately, Medicare's traditional approach to paying only for discrete visits and services has denied many seniors the opportunity to take advantage of advances that have been pioneered by integrated health plans in coordinating care for complex conditions and chronic diseases. Private plans have developed disease management programs to improve the quality of care for individuals with specific conditions like heart disease, diabetes, asthma, and gastrointestinal disorders. These programs have the potential to increase quality of care and encourage appropriate health care utilization. While the elderly suffer disproportionately from these conditions, few of them have access to these innovative programs. We believe that beneficiaries who wish to participate in programs such as disease management and coordination of care should be able to do so. We also believe that Medicare's process for covering new technologies should be streamlined.

  5. Medicare's regulations and administrative procedures should be updated and streamlined, while the instances of fraud and abuse should be reduced.
  6. Medicare's system of regulations and administrative procedures is too complex, too variable and too inconsistent. Needed relief in regulation and oversight, including some bipartisan proposals from members of Congress, should be implemented. This will allow providers to spend more time and effort on patient care and less on paperwork and unexpected and complex rule changes. At the same time, we must continue to assure the integrity of Medicare's trust funds. Medicare's administration should be restructured so that program staff can work more effectively with beneficiaries, health care providers, and health plans.

    I have already begun to address the issue of regulatory relief. As I announced last month in Chicago, I am doing a top to bottom review of all Department agencies looking for opportunities to streamline regulations to streamline regulations without increasing costs or compromising quality. We look for regulations that prevent hospitals, physicians and other health care providers from helping people in the most effective way possible. This initiative will determine what rules need to be better explained, what rules need to be streamlined and what rules need to be cut altogether while still providing beneficiaries with high quality care and protecting the interests of taxpayers. To this end, we will listen to the public most affected by the results of our regulations - beneficiaries and providers. I am directing CMS to start holding listening sessions around the country, in the areas where people have to live and work under the rules we develop. I want our people in CMS to hear from local seniors, the disabled, large and small providers, State workers, and the people who deal with Medicare and Medicaid in the real world. I want to get their input so we can run these programs in ways that make sense for real Americans in everyday life. To ensure that CMS responds to these ideas and comments, we will assign a senior level staff person to work with each provider industry. We will also take advantage of the years of expertise developed by the Department's dedicated staff. We will encourage them to think creatively about how we can operate the Medicare program more simply and effectively without increasing costs or compromising quality.

    We will do more than listen -- we will take action. We are going to use all of this wonderful input, and we are going to improve the way we do business and make Medicare and Medicaid easier for everyone involved with them. This action has already begun. As I announced last week, I am seeking to eliminate unnecessary data that has been demanded of hospitals and skilled nursing facilities in their Medicare Cost Reports. There is a statutory requirement that, for payment, hospitals report their overhead for old capital costs and new capital costs. We will eliminate these reporting requirements for most hospitals as soon as we can after September 30, 2001, when they expire in law. This will shrink the cost report by about 10 percent. This is just the beginning - there will be much more to come.

  7. Medicare should encourage high-quality health care for all seniors.

For this Administration, there is no more important goal than ensuring that seniors and disabled Americans get the highest quality, error-free health care. Physicians and other health care providers unquestionably share this goal. But currently, there are too many instances where beneficiaries fail to get recommended treatments. There are too many instances where medical errors result in serious consequences for seniors.

The problems of benefit gaps, lack of coverage options, outdated management practices, and excessively complex administrative burdens undoubtedly contribute to these problems. There is also evidence that a range of private sector and public-private initiatives can help providers deliver better and safer care. For example, many hospitals and other health care institutions have launched collaborative efforts to use information related to quality, giving providers and patients information they can use without increasing data collection burdens on providers.

Medicare should revise its payment system to ensure that quality is rewarded without increasing budgetary costs. Medicare's risk adjustment system for private plans should reward health plans for treating the toughest cases and finding innovative ways to provide care and reduce complications for chronically ill, high cost patients, without creating added paperwork burdens.


In the context of these eight principles, the President is committed to working with Congress to strengthen and improve Medicare. We also intend to begin the reform process administratively - to take advantage of the flexibility that Congress has already provided to us to ease the regulatory burden facing program providers and to provide increased services to beneficiaries. As a first step, we are also taking immediate action to give all Medicare beneficiaries access to the kind of discounts on drug prices that Americans with private health insurance have available to them. These discounts are incorporated in all of the major Medicare drug benefit proposals pending before Congress.

Medicare RX Discount Card While Congress debates Medicare reform and the creation of a prescription drug benefit, Medicare beneficiaries without drug coverage continue to pay the full cost of their medications out-of-pocket. Because beneficiaries without coverage have no source of bargaining power, they also often pay higher retail prices for their prescriptions. Beginning this fall, all Medicare beneficiaries will have access to greater bargaining power. Beneficiaries will be able to choose among Medicare-endorsed Rx discount cards, offered by competing drug discount card programs. These cards will provide a mechanism for beneficiaries to gain access to the tools currently used by private health insurance plans to negotiate lower drugs prices and provide higher-quality pharmaceutical care. Discount cards are currently available in the marketplace through a variety of sources, including pharmacy benefit managers (PBMs), some Medigap insurers, and retail drugstores. Medicare Rx Discount card programs may use formularies, patient education, pharmacy networks, and other commonly used tools to secure deeper discounts for beneficiaries. People with Medicare would be able to use the cards when they buy prescriptions to get discounts of perhaps between 10-25 percent off retail prices.

We are moving to implement this program quickly Beneficiaries will be able to enroll in a program of their choice beginning on or after November 1,2001 with discounts scheduled to take effect no later than January 2002. Discount card programs endorsed by Medicare will conduct marketing and enrollment activities, with support provided by the Centers for Medicare & Medicaid Services (CMS). Enrollment is limited to Medicare beneficiaries and beneficiaries will be permitted to enroll in only one Medicare discount card program at a time.

To receive endorsement by Medicare, Medicare Rx Discount Cards would have to meet a number of qualifications:

  • No plan could charge an enrollment fee greater than 25 dollars. This would be a one-time fee to cover enrollment costs. Some plans might not charge any fee.
  • No plan could deny enrollment to any beneficiary who wished to participate.
  • Plans would have to provide a discount on at least one brand and/or generic prescription drug in each therapeutic class.
  • Plans would have to offer a broad national or regional network of retail pharmacies.
  • Plans would be required to offer customer service to participating beneficiaries, including a toll-free telephone help line.
  • Plans would have to participate in and fund a private consortium. The consortium will comply with all federal and state privacy and consumer laws and regulations and perform numerous administrative functions for the program.
  • All discount card applicants that meet the qualifying criteria would be endorsed by Medicare.

We believe this initiative will provide a number of additional benefits for seniors that many of them do not enjoy now:

  • First, we believe that providing comparative information to the elderly and disabled about actual drug prices will spur greater competition and lower prices than we see today. Because seniors can switch to a card that offers better pries and services, the discount cards will have strong incentives to get the best possible prices.
  • Second, we believe these cards will create market pressures that will allow Medicare beneficiaries to benefit from drug manufacturers; rebates - something most seniors cannot obtain currently in the discount card market now. Combined with existing retail pharmacy discounts, these rebates will help make prescription drugs more affordable to seniors.
  • Third, we believe these competitive pressures will lead to other innovations that improve quality and patient safety - like broader availability of the computer programs to identify adverse drug interactions, and better advice on how seniors can meet their prescription drug needs at a more affordable cost.

To make sure that beneficiaries understand the benefits of this program, CMS will include information about these cards in its extensive education campaign and we expect that the organizations endorsed by Medicare to offer Rx discount cards will conduct their own marketing campaigns. A primary goal of the initiative is to make sure that people with Medicare are fully aware of the program and what it offers. The education campaign will also make clear that the Medicare endorsed Rx discount card is not a Medicare drug benefit.

Regulatory Relief Ė As you know, I am taking aggressive steps to bring a culture of responsive to all of HHS. As part of this effort, I am taking several steps today that will highlight our commitment to improving our responsiveness to our stakeholders.


An important component to strengthening and improving Medicare for our seniors and disabled individuals is how we treat our providers in Skilled Nursing Facilities. Today, I am happy to announce that we issued the final Skilled Nursing Facility Prospective Payment System (SNF PPS), and it includes the SNF services provided by hospitals with swing beds. I have revised in the initial proposal in several ways that minimize paper work burden and support swing-bed hospitals in providing quality care white still maintaining the accuracy of Medicare payments.

Like all other providers under the SNF-PPS, swing-bed hospitals are require to submit various data to us in order to bill Medicare. Under our initial proposal, swing-bed hospitals would have had to complete the full six-page Minimum Data Set (MDS) that nursing homes complete, as well as other information. After reviewing comments on the proposed rule, I am establishing a unique MDS assessment tool for swing-bed hospitals, reducing the number of pages they have to complete from six to two. This represents a decrease in the number of data elements from approximately 400 to about 100. In addition, CMS will collect only those items it needs to pay these providers and analyze the quality of patient care in their hospitals. This should make these providers' interactions with Medicare simpler and less time-consuming. We are looking at the length and complexity of the MDS for all providers who use it.

I also am taking a number of other steps to reduce burden and provide education and assistance to hospitals with swing beds. I am pushing back the implementation date of this rule, to begin on the latest date permitted by the statue - that is, cost reporting periods starting on or after July 1, 2002. Additionally, CMS will develop and distribute a swing-bed manual that will include instructions on using the new MDS, as well as other information. CMS also is planning a series of training programs to help hospital staff understand how to complete the MDS and transmit materials electronically. In addition, CMS has committed to develop customized software that will be available free of charge to providers. We will establish Help Desks to respond to clinical and technical questions from hospital staff. These initiatives will reduce burden for swing-bed hospitals and make it easier for these providers to interact with Medicare, and for Medicare to pay them the right amount and on time. I am committed to ensuring that we minimize the disruption to swing-bed operations and provide needed support to these providers during the transition period to the SNF PPS.


As you probably know, before I came to HHS, I was governor of Wisconsin for 14 years, and I used to have regular discussions with HHS trying to push through our Medicaid State waivers. Well, since I started here at HHS, we've been making sure that waiver applications that come in that are identical to waivers we have already approved for other States receive priority review, and we are looking at other ways to further improve the waiver application process. Today I am announcing that CMS will provide new techniques to assist States in developing and implementing changes to their Medicaid programs. And we are going to take advantage of the Internet to improve the waiver process. I am directing CMS to develop web-based templates for waivers and State plan amendments. These online templates will provide States with a clear, concise way to ensure they are providing all of the information the Agency needs for a State to apply for, and operate, a waiver or State plan amendment under Medicaid.

In addition, I want States to be able to learn from each other, so they know which waiver ideas are good ones that we can approve quickly, and which are not. As part of this initiative, CMS will integrate State-to-State learning and information sharing into the waiver application process through interactive templates. State officials will be able to go online and click on resource icons to receive more information on how other States have designed their waivers. They also will be able to interact directly with other States that have experience in designing innovative waivers. They also will be able to work directly with CMS staff for advice to design approvable waivers.

Not only is it important that we make it easier for States to apply for and operate waivers and State plan amendments, and it is important that States know how easy it is to provide Medicaid benefits to the people who need them - especially families with children. Toward this end, CMS is issuing a new guide, "Continuing the Progress: that highlights ways States can accommodate families with children, particularly working families, so they can more easily access and retain their Medicaid benefits. Federal law gives States a lot of flexibility to do this now. CMS's new guide features successful steps some States have taken, so other States might follow their example. For example, successful State practices highlighted in the guide include:

    · coordinating Medicaid enrollment with the school lunch program;

    · using community-based organizations to reach working parents;

    · reaching out to Medicaid-eligible families in the community;

    · establishing one-stop shopping for public benefits; and

    · making it easier for migrant workers, immigrants, and other families to apply for Medicaid.

Additionally, the guide explains how States can implement Federal policy options that allow families with two working parents to be eligible for Medicaid or that allow children as well as pregnant women to receive on-the-spot Medicaid benefits, through presumptive eligibility. Finally, the guide includes tables with comparable, State-by-State information on the application, enrollment, and renewal processes for children in Medicaid and SCHIP. It is not enough simply to give States ways to help people, we have to help them understand how to accomplish their goals, and we have to help States to share good ideas with one another so that we help as many people as possible.


Today I am announcing several initiatives to make the Medicare+Choice program more consistent with the private sector managed care plans and reduce regulatory burden. For example, CMS recently announced in a proposed rule that it plans to reduce the frequency of the Medicare+Choice provider credentialing process to make credentialing requirements consistent with those of States and private accreditation organizations. Previously, provider credentialing for Medicare+Choice had to happen at least every two years. Now, it will be required only once every three years. In addition, we are bringing a dose of common sense to the requirements we place on providers to participate in Medicare+Choice. We want these requirements to mirror those of the States and other credentialing organizations. For example, we will allow for pending Drug Enforcement Administration (DEA) numbers so physicians can provide care even if their DEA number is not yet finalized. In order to align M+Cís requirements with those of private accrediting organizations, CMS will allow new physicians and health care practitioners to participate once their training is complete as they await their official credentialing.

  • Additionally, in response to concerns raised by Medicare+Choice plans, we are committed to thoroughly reexamining the Medicare+Choice Quality Improvement requirements, commonly referred to as Quality Assessment Performance Improvement (QAPI) projects. These changes will decrease administrative burden, as well as allow for increased flexibility and reward high performance. Specifically, in judging whether a planís quality improvement is successful CMS has moved to an approach that is more consistent with the private sector. Finally, plans demonstrating high performance by meeting or exceeding a quality standard will be excused from participating in the national quality improvement project for that year.


While we believe that the Medicare Rx Discount Card is an important first step to provide immediate assistance to Medicare beneficiaries and to improve the program for them, I want to stress again the importance that the importance that the Administration attaches to the need for broader Medicare reform. The discount card is not intended as a substitute for a comprehensive prescription drug benefit combined with other needed legislative reforms. I am committed to working with you to strengthen and modernize the Medicare program, improve its benefit package, protect its financial future, and increase access to high quality, innovative treatments for our nation's seniors and disabled populations now and in the future. I hope that the eight principles I have outlined here will provide the basis for constructive dialogue to meet these goals that we all share.

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Last revised: July 30, 2001