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September 11, 2001


Chairman Johnson, Representative Stark, distinguished Subcommittee members, thank you for inviting me to discuss our efforts to streamline the Medicare program. Many physicians, health plans, providers, and Members of Congress, have raised concerns about Medicare, particularly Medicare’s regulatory and paperwork burden and the cost of doing business with the Medicare program. We appreciate these concerns, and are making every effort to identify and address areas where improvements can be made. Physicians and other health care providers play a critical role in ensuring that Medicare beneficiaries receive quality health care. We know that in order to ensure beneficiaries continue to receive the highest quality care, we must streamline Medicare’s requirements, bring openness and responsiveness into the regulatory process, and make certain that regulatory and paperwork changes are sensible and predictable. In addition, we must reform the way we contract with the private entities that process and pay Medicare claims.

We also know how important these issues are to this Subcommittee. We have worked with you for months now to make Medicare a more "user-friendly" program. I especially want to commend you, Chairman Johnson and Representative Stark, as well as the other members of Subcommittee, for your leadership and dedication to improving the Medicare program. Your demonstrated commitment to the best interests of our nation's seniors and disabled is laudable, and I applaud the bipartisan manner in which you have approached modernizing Medicare’s management. In particular, I appreciate your introduction of the bipartisan Medicare Regulatory and Contracting Reform Act of 2001 (H.R. 2768), which is intended to streamline the Medicare program. This Subcommittee has clearly dedicated a great deal of thought and energy toward these issues, and this bill represents a good first step toward improving Medicare and reforming the way Medicare contracts with entities to process and pay claims. I look forward to continuing to work with you to achieve this critical goal. As we discuss legislative efforts to improve Medicare, I also appreciate the chance to discuss the aggressive administrative actions that we have already begun taking to improve the program. As we work to reduce Medicare’s regulatory and paperwork burden and further improve our provider education efforts, we look forward to our continued partnership with Congress and the physician and provider community.


This year, Medicare will pay approximately $240 billion for the health care of nearly 40 million beneficiaries, involving nearly one billion Medicare claims from more than one million physicians, hospitals, and other health care providers. CMS strives to ensure that Medicare pays only for the services allowed by law, while making it as easy as possible for qualified health care providers to treat Medicare beneficiaries. We have to carefully balance the impact of Medicare’s laws and regulations on physicians and other providers with our accountability for billions of dollars of Medicare payments.

Medicare’s requirements, as outlined in the law, generate many of the concerns that our constituents bring to your attention and to mine. Of course, there is a genuine need for clear rules in a program this large and complex. But rules should exist to help, not hinder, our efforts to assist seniors and the disabled, help control costs, and ensure quality, while remaining consistent with our obligation and commitment to prevent fraud and error. When regulations, mandates, and paperwork unnecessarily hinder the services providers are trying to give, those rules should be changed. And so I am working with the Secretary to reform the way Medicare works, making it simpler and easier for everyone involved. We are listening closely to Americans’ concerns and learning how we can do a better job of meeting patients' and providers’ needs to serve beneficiaries in the best way we can. In many areas, we can be less intrusive to the providers who participate in Medicare and more responsive to the beneficiaries who depend on Medicare. Many of these changes can be achieved administratively; however, there are other important areas, such as reforming Medicare’s contracting system, where we need your help.


I am pleased that the Medicare Regulatory and Contracting Reform Act of 2001 includes provisions to improve Medicare's outdated contracting requirements, which make it more difficult for providers and beneficiaries to work effectively with the Medicare program. In order to continue to manage the Medicare program efficiently and effectively and to fully implement our business strategy, we must fundamentally change our relationship with the Medicare fee-for-service contractors. I firmly believe that the Medicare fee-for-service contracting work should be awarded competitively to the best-qualified entities, using performance-based service contracts that include appropriate payment methodologies. This is something that current law does not allow.

I believe these contracts should result in contractors receiving returns that reflect their relative performance. We must be able to maximize economies of scale and improve the level of service to our beneficiaries and providers. We are working cooperatively with our existing contractors to get to this goal, but these changes still require legislative action. I know you recognize this, too, and I want to work with this Committee and the contractors, including the Blue Cross plans, who have been very responsive to our requests for reform, to reach a consensus for a better contracting system.

In June, we forwarded our contracting reform proposal to Congress. Through these legislative changes, CMS hopes to accomplish the following:

    • Provide flexibility to CMS and its contractors to work together more effectively and better adapt to changes in the Medicare Program.
    • Promote competition for contractors, leading to more efficiency and greater accountability.
    • Establish better coordination and communication between CMS, contractors, and providers.
    • Provide CMS flexibility to negotiate contracts with incentives that reward Medicare contractors that perform well.

These changes will enhance the Agency’s ability to more effectively manage claims processing for the Medicare program in the future, and ensure that the future changes to the Medicare program’s operating structure are free from unnecessary constraints. The Medicare Regulatory and Contracting Reform Act of 2001 is designed to accomplish these same goals.

We are continuing to proceed with the implementation of our long-range business strategy under our current authority. To capture the benefits of integrated data processing, we have begun to consolidate our claims processing workload among our existing contractors, and are moving to consolidate and standardize contractor claims systems. Our goal is to have one system for intermediary claims, one for carrier claims, and one for durable medical equipment claims. And we will continue to establish more direct control of our data centers, which should reduce costs and improve efficiency. This consolidation will allow us to make changes efficiently and consistently, and help streamline our information technology infrastructure. As we implement this long-range plan, I look forward to continuing to work with you to achieve this important legislative goal.


The other major elements of the Medicare Regulatory and Contracting Reform Act of 2001, is to provide regulatory reforms to the Medicare program while ensuring accurate and timely payments to providers and preserving our ability to collect overpayments and pursue fraud. I also share this goal of regulatory reform, and I believe changes in how we time the development and publication of regulations can best be addressed through administrative flexibility. As I mentioned, we already are taking aggressive steps to improve CMS’s responsiveness. In June, Secretary Thompson announced that, as a first step in reforming the Medicare program, we were changing the Agency’s name to the Centers for Medicare & Medicaid Services. The name-change is only the beginning of our broader effort to raise the service level of the Medicare program and bring a culture of responsiveness to the Agency. These are not hollow words: creating a "culture of responsiveness" means ensuring high-quality medical care for beneficiaries, improving communication with providers, beneficiaries and Congress, and redoubling our education efforts. To promote improved responsiveness, the Agency is:

  • Creating Open Door Policy Forums to interact directly with beneficiary groups, plans, physicians, providers, and suppliers, to strengthen communication and information sharing between stakeholders and the Agency. I recently designated senior CMS staff members as the principal points-of-contact for eight "Open Door Policy Forums," including physicians, hospitals, rural health, nursing homes, health plans, nurses and allied health care professionals, home health and hospice, and ESRD and dialysis centers. These open forums will facilitate information sharing and enhance communication between the Agency and its partners and beneficiaries. I chair two of these forums, nursing home and rural health, and they will focus on fixing obvious problems.
  • Enhancing Outreach and Education to beneficiaries, providers, plans, and practitioners, by building on the current educational system with a renewed spirit of openness, mutual information sharing, and partnership. We will start by educating seniors through a $30 million advertising campaign this fall to engage seniors in the program, combined with a massive enhancement of the 1-800-MEDICARE number. The toll-free lines will be expanded to 24 hours a day, seven days a week and the information available by phone will be enhanced, so that beneficiaries can obtain specific information about the health plan choices and costs. The Agency also is developing and improving training for physicians and providers on new program requirements and payment system changes, increasing the number of satellite broadcasts available to health care industry groups, and making greater use of web-based information and learning systems across the country.
  • Establishing Key Contacts for the States at the regional and central office level. Paralleling the senior staff contacts for industry and beneficiary groups, these staff members are assigned to work directly with the Governors and top State officials to help eliminate Agency obstacles in obtaining answers, feedback, and guidance. Each State now has one Medicaid staff member assigned to their region, and another in Baltimore, both of whom are accountable for each State’s specific issues.
  • Responding More Rapidly and Appropriately to Congress and External Partners by promptly responding to their inquiries. We are developing an intra-Agency correspondence routing system, and timeliness standards, to respond more efficiently and promptly to congressional inquiries. We also are also exploring ways to make data, information, and trend analyses more readily available to our partners and the public in a timely manner. In addition, CMS will make explicit, and widely publicize, the requirements for obtaining data and analyses from us, including protecting the confidentiality of the data.


A culture of responsiveness alone will not alleviate the regulatory and related paperwork burdens that for too long have been associated with the Medicare program. Thus, the Secretary has formed a new regulatory reform group to identify regulations that prevent hospitals, physicians, and other health care providers from serving Medicare beneficiaries in the most effective way possible. This group will determine what rules need to be better explained, what rules need to be streamlined, and what rules need to be dropped altogether, without increasing costs or compromising quality. To support this group, we have developed a program, focusing on listening and learning, to get us on the right track. This methodical, sector-by-sector approach will enable us to administer our health care programs as effectively and efficiently as possible.

Under the first aspect of the plan, CMS will conduct public listening sessions across the country. We want to hear directly from physicians and health care providers away from Washington, DC, and away from Baltimore -- out in the areas where real people live and work under the rules we produce and with people who do not have easy access to policymakers to voice their legitimate concerns. Most of you in Congress have these kinds of regular listening sessions with your constituents. We want to hear from local seniors, large and small providers, State workers, and the people who deal with Medicare and Medicaid in the real world. We want to get their input so we can run these programs in ways that make sense for real Americans in everyday life. We hear from some of these people now, but we want to get input from many, many more.

The second aspect of the plan, as I have already discussed, is to meet in open forums with the various health-sector representatives and beneficiary groups here in Washington. These forums provide us with an opportunity to hear ideas about how we can improve our interactions with physicians and providers and reduce regulatory complexity and burden. Regular input from providers can help to improve our oversight and management of Medicare, so that health care professionals can spend more time delivering the care for which they were trained, and so that beneficiaries can spend more time with their doctors and other caregivers.

Like the physicians, providers, and beneficiaries who live and work with Medicare every day, CMS staff have worked with managing the system for years, and they too have suggestions about how Medicare can operate more simply and effectively. So, the third aspect of our plan is to form a group of in-house experts from the wide array of Medicare’s program areas. I have asked a full-time practicing emergency room physician to chair this group and challenge our in-house experts to suggest meaningful changes. We will ask them to think innovatively about new ways of doing business, reducing administrative burdens, and simplifying our rules and regulations, without increasing costs or compromising quality. The complexity of the program even makes it difficult for those of us who administer it to keep up. It is difficult to educate beneficiaries, providers, and our business partners when there is so much complex information to explain. This group of in-house experts will look to develop ways that we can reduce burden, eliminate complexity, and make Medicare more "user-friendly" for everyone.

This will in no way diminish our interest in fighting waste, fraud, and error in the Medicare program. The vast majority of physicians and other health care providers are honest and want only to be fairly reimbursed for the quality care they provide. But for the small percentage of those who take advantage of the system, we will continue our aggressive efforts to protect the funds that taxpayers have entrusted to our use. It is important that the provisions of this legislation remain consistent with our efforts against fraud, waste, and abuse.

These outreach efforts will allow us to hear from all types of people who deal with our programs. We are going to listen and we are going to learn. But we also are going to take action. I am committed to making common-sense changes and ensuring that the regulations governing our program not only make sense, but also are plain and understandable. This will go a long ways in alleviating providers’ fears and reducing the amount of paperwork that, in the past, has all too often been an unnecessary burden on providers.

In addition to these efforts, we are taking concrete steps to streamline Medicare’s regulatory processes. We have developed a quarterly compendium of all changes to Medicare that affect physicians, and other providers, to make it easier for them to understand and comply with Medicare regulations and instructions. The compendium will be a useful document for predicting changes to Medicare’s instructions to physicians and providers, and will contain a list of all regulations we expect to publish in the coming quarter, as well as the actual publication dates and page references to all regulations published in the previous quarter. By publishing changes in the compendium, physicians and other providers will no longer be forced to sift through pages and pages of the Federal Register – or pay someone to do it for them – for proposed rules, regulations, and other changes that may affect them. There will be more notice and predictability. The compendium will generally include all program memoranda, manual changes, and any other instructions that could affect providers in any way. Additionally, we are moving towards the publication of all our regulations once a month, barring statutory deadlines. This monthly publication, along with the quarterly compendium, will provide predictability and ensure that physicians and other providers are fully aware of Medicare’s changes so they have time to react before new requirements are placed on them.

We also are looking into developing a system of electronic rulemaking to make the rulemaking process more efficient and to reduce the flow of paper between providers and CMS. Today, in an effort to make updated regulations more readily accessible, we routinely post them on our website, These postings coincide with the display of these documents in the Federal Register and have been well received by providers and other interested parties. Over the next six months, we will further explore the use of emerging technologies and the electronic exchange of information, such as posting proposed rules and taking comments on-line. We will work closely with beneficiaries, physicians, providers, and plans, as well as with Congress and other parts of the executive branch, to better understand their needs as we move towards an electronic rulemaking environment.


As part of our efforts to reinvigorate the Agency and bring a new sense of responsiveness to CMS, we are enhancing our provider education activities and improving our contractors’ communications with physicians and providers. The Medicare program primarily relies on private sector contractors, who process and pay Medicare claims, to educate physicians and providers and to communicate policy changes and other helpful information to them. We have taken a number of steps to ensure the educational information our contractors share with physicians and providers is consistent, unambiguous, timely, and accurate.

We recognize that the decentralized nature of our educational efforts has, in the past, led to inconsistency in the contractors’ communications with physicians and providers, and we have recently taken a number of steps to improve the process. We have centralized our educational efforts in our Division of Provider Education and Training, whose primary purpose is to educate and train the contractors and the provider community regarding Medicare policies. We also are providing contractors with in-person instruction and a standardized training manual for them to use in educating physicians and other providers. These programs help ensure consistency so that our contractors speak with one voice on national issues. For example, in coordination with the Blue Cross/Blue Shield Association, we developed train-the-trainer sessions for implementing both the Hospital Outpatient and Home Health Prospective Payment System regulations, which included a satellite broadcast that was rebroadcast several times prior to the effective date of the regulation. Following these sessions, we held weekly conference calls with regional offices and fiscal intermediaries to enable us to monitor progress in implementing these changes. We are continuing to refine our training on an on-going basis by monitoring the training sessions conducted by our contractors, and we will continue to work collaboratively to find new ways of communicating with and getting feedback from physicians and providers.

We also are working to improve the quality of our contractors’ customer service to physicians and providers. Last year, our Medicare contractors received 24 million telephone calls from physicians and providers, and it is imperative that the contractors provide correct and consistent answers. Now that we have toll-free answer-centers at all Medicare contractors, the need is even more pressing. We have performance standards, quality call monitoring procedures, and contractor guidelines in place to ensure that contractors know what is expected and so that we can be satisfied that the contractors are reaching our expectations. This year, for the first time, Medicare contractors’ physician and provider telephone customer service operations are being reviewed against these standards and procedures separately from our review of their beneficiary customer service. During these weeklong contractor performance evaluation reviews, we identify areas that need improvement and best practices that can be shared among our other Medicare physician and provider call centers. As a result of the reviews, performance improvement plans will be instituted when needed, and CMS staff in our Regional Offices will continue to monitor the specific contractor throughout the year.

We also want to know about the issues and misunderstandings that most affect provider satisfaction with our call centers so that we can provide our customer service representatives with the information and guidance to make a difference. To improve our responsiveness to the millions of phone calls our call centers handle each year, we are collecting detailed information on call center operations, including frequently asked provider questions, the call centers’ use of technology, and the centers’ training needs. We will analyze this information so we can make improvements to the call centers and share best practices among all our contractors. We also developed a new Customer Service Training Plan to bring uniformity to contractor training and improve the accuracy and consistency of the information that contractor service representatives deliver over the phone. In addition, we are holding regular meetings and monthly conference calls with contractor call center managers to ensure Medicare’s customer service practices are uniform in their look, feel, and quality.

Just as we are working with our contractors to improve their provider education efforts, we also are working directly with physicians and other health care providers to improve our own communications and ensure that CMS is responsive to their needs. We are providing free information, educational courses, and other services, through a variety of advanced technologies. We are:

  • Expanding our Medicare provider education website, The Medicare Learning Network homepage, medlearn, provides timely, accurate, and relevant information about Medicare coverage and payment policies, and serves as an efficient, convenient provider education tool. The MedLearn website averages over 100,000 hits per month, with the Reference Guides, Frequently Asked Questions and Computer-Based Training pages having the greatest activity. I encourage you to take a look at the website and share this resource with your physician and provider constituents. We want to hear feedback from you and from your constituents on its usefulness so we can strengthen its value. In fact, physicians and providers can email their feedback directly to the medlearn mailbox on the site.
  • Providing free computer and web-based training courses to doctors, providers, practice staff, and other interested individuals can access a growing number of web-based training courses designed to improve their understanding of Medicare. Some courses focus on important administrative and coding issues, such as how to check-in new Medicare patients or correctly complete Medicare claims forms, while others explain Medicare's coverage for home health care, women's health services, and other benefits.
  • Creating a more useful Agency website through a new website architecture and tailoring it to be intuitive and useful to the physician user. We want the information to be helpful to physicians and their office and billing needs. The same design is being used in creating a manual of "Medicare Basics" for physicians. We just completed field-testing the first mock-ups for the project at the recent American Medical Association House of Delegates meeting. Once this new website is successfully implemented, we will move to organize similar web navigation tools for other Medicare providers.


As Medicare requirements frustrate plans, physicians, and providers, beneficiaries also have difficulty understanding the program’s benefits and options. We know, from our research and focus groups, that far too many Medicare beneficiaries have a limited understanding of the Medicare program in general, as well as their Medigap, Medicare Select, and Medicare+Choice options. We firmly believe that we must improve and enhance existing outreach and education efforts so beneficiaries understand their health care options. In addition, we will tailor our educational information so that it more accurately reflects the health care delivery systems and choices available in beneficiaries’ local areas. We know that educating beneficiaries and providing them more information is vital to improving health care and patient outcomes.

With that goal in mind and in an effort to ensure that Medicare beneficiaries are active and informed participants in their health care decisions, we will expand and improve the existing Medicare & You educational efforts with a new advertising campaign. We will launch a multimedia campaign using television, print, and other media, to reach out and share information and educational resources to all Americans who rely on Medicare, their families, and their caregivers. We are also:

  • Increasing the Capacity of Medicare’s Toll-Free Lines so that the new wave of callers to 1-800-MEDICARE generated by the advertising campaign receives comprehensive information about the health plan options that are available in their specific area. By October 1, 2001, the operating hours of the toll-free lines will be expanded and made available to callers 24 hours a day, seven days a week. The information available by phone also will be significantly enhanced, so specific information about the health plan choices available to beneficiaries in their state, county, city, or town, can be obtained and questions about specific options, as well as costs associated with those options, can be answered. Call center representatives will be able to help callers walk through their health plan choices step-by-step and obtain immediate information about the choices that best meet the beneficiary’s needs. For example, a caller from New Britain, Connecticut could call 1-800-MEDICARE and discuss specific Medigap options in Connecticut. Likewise, a caller from Fremont, California, could call and get options and costs for Medigap or Medicare+Choice alternatives in their areas. If requested, the call centers will follow up by mailing a copy of the information discussed after the call.
  • Improving Internet Access to Comparative Information and providing a new decision making tool on the Agency’s award winning website, These enhanced electronic learning tools will allow visitors, including seniors, family members, and caregivers, to compare benefits, costs, options, and provider quality information. This expanded information is similar to comparative information already available, such as Nursing Home Compare and ESRD Compare websites. With these new tools, beneficiaries will be able to narrow down by zip code the Medicare+Choice plan options that are available in their area based on characteristics that are most important to them, such as out-of-pocket costs, whether beneficiaries can go out of network, and extra benefits. They also will be able to compare the direct out-of-pocket costs between all their health insurance options and get more detailed information on the plans that most appropriately fit their needs. In addition, the Agency will provide similar State-based comparative information on Medigap options and costs.


Physicians and other providers play a crucial role in caring for Medicare beneficiaries, and their concerns regarding the program’s regulatory and paperwork burden must be addressed. We share these concerns. We have already taken some critical first steps to address these concerns and bring openness and responsiveness into the process. We also must make certain that regulatory changes and requirements are sensible and predictable. I want to commend the efforts of this Subcommittee in developing the Medicare Regulatory and Contracting Reform Act of 2001. This legislation represents a good first step in improving Medicare and reforming Medicare’s contracting system. We look forward to continuing to work with Congress and we will continue to seek input from the health care community, our beneficiaries, and partners in reaching our goals. I appreciate the opportunity to discuss these issues with you today, and I am happy to answer your questions.

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Last revised: September 14, 2001