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Office of the Press Secretary

For Immediate Release September 17, 1993

                          The Briefing Room

2:55 P.M. EDT

MS. MYERS: The following is an ON-THE-RECORD briefing. The topic is administrative simplification. No mult? No mult. Alright, I will continue with this riveting introduction while you guys fix the technical problems.

Tim Hill, who is health policy analyst at HHS will give an overview. He's chair of the administrative simplification group on the task force. John Silva, a practicing physician in DOD specializing in information technology. Rick Kronick, Senior Health Analyst, advising the administration; and Lynn Margherio, Senior Policy Analyst for the Domestic Policy Council will be available for questions. So without further ado.

MR. HILL: Good afternoon. My name is Tim Hill. I work for the Health Care Financing Administration. We run the Medicare and Medicaid program. We've been working on the task force for about the last six months, putting together a proposal for the President to help us cut through some of the paperwork and administrative burden that we're faced with here in the health care system.

I want to start off by saying thank you for putting this on camera. We're all kind of wet; it's nice to have the lights and dry us off a bit.

Q We're glad to serve.

MR. HILL: This is -- it's wonderful. We're focusing here on the administrative simplification part of the President's health care plan on reducing confusion for consumers, freeing up care providers -- doctors, nurses, alternative practitioners -- to provide care, not to be performing administrative tasks, and to reduce some of the, or most of the confusion and complexity with respect to what providers have to face to get reimbursed for health care services.

Q Why don't you do it for Medicare right now?

MR. HILL: We've taken a long, hard look at where the government fits in. We recognize that Medicare and Medicaid and the other government programs are, in effect, part of the problem and they will be included in the simplification measures we're going to talk about. As a matter of fact, there's been consideration given to the fact that Medicare can start things earlier than the rest of the plan just because it's authorized already.

I want to talk a little bit about how we got to where we are and the problem that we're trying to solve. What we have now with respect to reimbursement is the federal government and private insurers setting up elaborate rules and requirements for providers to follow in order to get reimbursed for health care services.

These providers must follow and keep track of all the various requirements and differences among health care plans in order to get reimbursed. They have to hire staffs and have clerks to insure that they know what health plan A and Medicare and Medicaid all require with respect to information before they can get paid.

What were once small back offices have grown into huge utilization review offices coding medical records and billing departments. They spend countless hours determining whether an individual has health care coverage, which company is the primary payor, what services are covered, what codes to use, and how much to charge.

What we've sort of come up with to address this issue with respect to the health care plan are a number of very broad sort of initiatives that we hope, taken together, will bring us to a situation where a lot of the administrative burden is going to go away. First and foremost, every American is going to get coverage. Guaranteed universal coverage will virtually eliminate the hassle of determining and tracking coverage for providers. Providers will no longer be saddled with the problem of determining whether or not any individual patient has health care coverage and finding that person.

The introduction of a standard comprehensive benefit package will eliminate the needs for providers to go back and forth with health insurance plans and the government trying to understand whether or not a procedure is covered, and at what level it's covered, and how it will be paid.

Under reform, covered services do not vary from plan to plan and standard costs sharing rules will simplify accounting for providers. A single standard reimbursement form and standardized reporting requirements will replace the hundreds of different claim forms and reporting requirements that exist by insurance companies today. Furthermore, promotion of the electronic exchange of this information will further reduce provider hassle and cost.

A national quality program will be developed that stresses results over process. We're going to get utilization review firms and the government out of the back offices of doctors, and allow them to provide care without worrying about punitive responses to potential quality problems. We'll focus on education and results.

Furthermore, the regulation of clinical lab testing will be refocused to emphasize quality protection and reduce administrative burden on providers. A coordinated inspection process for facilities will replace the multiple inspection processes that currently exist in hospitals and doctor offices.

And finally, the Medicare program will be simplified and streamlined with respect to its reimbursement claims and certification processes. Specific reforms under Medicare and all the government programs are aimed at rebuilding the trust between hospitals, doctors, patients, and the federal government.

John Silva will now sort of talk a little more specifically about some of the things that I've mentioned.

MR. SILVA: Thank you, Tim. I'm John Silva, I'm a physician in the Department of Defense and specialize in information technology. And what I thought I'd like to do is give you a brief synopsis of many of the individuals that we talked to and interviewed and had come to Washington to present their case to us as we put the framework together for administration simplification.

This morning you heard Dr. Beard complain about the amount of time that she spends in filling out all of the paperwork. Nurses, consumers, patients -- one hospital vendor told us that it cost him $5 million a year just to build the tables and files for all of the different changes in all of the various forms that go on.

So our administrative simplification program really looked at articulating standards that would be uniform across the country. Of all of the vendors, all of the individuals that we talked with over the last six months, have clearly indicated that when we asked them, what would you like the government to do for you, they all said, please establish some standard that we can all build towards, that we can use, recognizing that that's the beginning of a long process.

So standardized forms, standardized clinical encounters, standardized insurance reimbursement forms, that permits the automation of those insurance transactions and the resultant reduction in administrative overhead costs. It will also allow us to simplify coordination of benefits, and you'll see that in our administrative simplification part of the plan.

Lastly, it will also enable us to work towards building a unique identification for consumers, for physicians, for plans and alliances, and for employers so that the 150 or so different places and different identifiers that make if very difficult today will be by the board.

I think that the key issue from an information technology perspective is the standardization of the information contained within those forms. That's going to permit us to be able to go across the country and do a lot of the analysis that Tim talked to you about earlier. And I think we'll be glad to answer your questions.

Q Are you going to be using the Social Security computers? Is that the --

MR. SILVA: The question is regarding the unique identification number. The Social Security number has been one that has been proposed. We believe that a public-private forum really needs to be established to identify all the pluses and the minuses for using that particular number.

Now, whether it's the Social Security number or yet another number that's created specifically for that purpose --

Q I don't mean the number, I mean the computers -- a system that's already set up basically that touches every American.

MR. SILVA: Yes. Tim, do you want to --

MR. HILL: I think it's unclear exactly how we're going to identify all the Americans with respect to getting a unique number and understanding where folks reside. But clearly the Social Security Administration is one place where that information resides and where we'll be able to use as a base to understand who are exactly the folks that need to be covered.

Q Will alien immigrants get a card?


Q Alien residents? I mean legal residents, is what I meant.


Q They will get it.


Q Is this a reform that you put in place regardless of what happens with the rest of the President's package?

MR. HILL: Absolutely.

Q So, if the Congress wanted to go to more incremental kind of changes in the health care system, this is one of the things they could do --

MR. KRONICK: My name is Rick Kronick. Parts of the reform, certainly the single claims form could be done without universal coverage, but some of the savings come from eliminating the need for wallet biopsies when we walk into provider offices. And those savings will only come with universal coverage. And that's a very significant cost for many providers.

Some of the savings come from standardized benefit package, not needing to check the policy that each of us have to see whether a particular service is covered. And that will only come when all Americans have a guaranteed benefit package.

So some of the streamlined reimbursement single claims form could come in the absence of broader changes, but significant parts of the savings are dependent on the rest of the package.

Q My understanding, the previous administration, under Secretary Sullivan, launched a project to get the industry -- the insurance industry to come together on standardized claim forms and simplified forms. And the industry seems to think that they're pretty far along on that. Why do we need to write this into legislation?

MR. HILL: I don't think we're going to write anything into legislation that is going to be contrary to what the industry agrees on, both industry -- public-private partnership, which is what was started under the previous administration. But I think there is a need to ensure that what is developed is, in fact, used so that we're not in a situation in 10 years where we've developed a standard and nobody's using it. So the progress that's been made to date won't be thrown aside just for the sake of putting something into legislation.

Q These are waste figures. Our administrative paperwork waste figures seem to run all over the lot from 10 percent to 20 percent, from $40 billion to $100 billion. Can you clarify that for us?

MR. KRONICK: Only to some extent. They do run all over the lot. And one person's administrative waste is another person's unnecessary information gathering. But I'll try to help you some.

One area where I think the savings figures are clearest is probably in the administration of insurance policies. Right now small group and nongroup insurance policies are often sold with administrative overheads of up to 40 percent with averages probably close to 30 percent. But a large employer -- when a large employer buys insurance, is often paying in the five to eight percent range for the administrative costs of processing insurance. And there will be significant savings as small employers are pooled together and the costs of insurance for them are closer to the costs for large employers today.

On the administrative costs of providers -- of hospitals and physicians, you're right; the estimates are all over the lot. You see some estimates as high as 25 percent of all the costs in hospitals and physicians' offices are administrative costs and that you might have very large reductions in that as the system is simplified.

Our own estimates are, like many others have a broad range. And at the low end of the range would probably be at least $10 billion of savings -- reductions in administrative costs in physicians' and hospital offices. And, as I say, I think those are quite conservative. Many other people would estimate much, much higher savings as possible.

Q That's for all of the changes, not just the single uniform standard form?

MR. KRONICK: That's right.

MS. MARGHERIO: I'd like to just point out an example from Children's Hospital. They actually went through the process of determining how much could be saved under the reforms that the administration is talking about implementing. And they estimated that patient-related administrative costs in their hospital were about $11 million, and they figured that they could -- they estimated that they could save about 12 percent just through standardization. And their estimated costs were $1.2 million.

So these costs vary institution by institution. Some of them depend on how automated the billing processes are, how many insurers they work with. So there is a broad range of estimates out there.

Q Could you all elaborate on what -- how this would affect Medicare beneficiaries? Somebody mentioned that it would affect people more quickly if they were in Medicare.

MR. HILL: Well, to the extent that there's standardization and a lot of the confusion is eliminated, it will be a boon to Medicare beneficiaries. We don't anticipate -- and, in fact, an explicit sort of goal of the plan is not to make things worse for folks. We're up here trying to make things a little better. So, as I pointed out before, all the reforms that have are going to be part of the total package will apply to Medicare as well. So I --

Q You said -- I thought you said it could affect them more quickly or something like that.

MR. HILL: Well, to the extent that Medicare is a program that already exists and we don't need a law to create it, to those things that we could do administratively I think we're going to try and move to do administratively.

Q What have you learned from Medicare in addition to -- is this the bureaucracy and the overweight and the --

MR. HILL: Well, the one thing that we've learned from Medicare that I think is a good thing is on the standardization and the automation side. The Medicare program is far and away ahead of most of the private insurance with respect to submitting claims electronically and exchanging information in an automated standard fashion, and have -- save just tremendous amounts of money on their administrative budget. And, clearly, that's something we want to try and mirror.

Q You're talking about computerizing --

MS. MARGHERIO: Could I add some things to the Medicare and what we have learned from the experience in Medicare. What we've found actually is that Medicare is very efficient at the federal government level. The problem is that a lot of what happens -- nurses -- the time that nurses spend filling out forms, the time that doctors spend filling out forms -- those are a lot of costs that don't get captured. And what we're going to be doing through requiring -- through having Medicare go through this same standardization with the same forms, the same rules as the private insurers -- we expect that that's going to streamline things tremendously.

We are also having -- we're reviewing the cost reporting process for -- the reconciliation process that hospitals have to go through. They've got to look at how much they billed for inpatients, how much they billed for outpatients. And it's a very elaborate process. So we are going through and we're having a group of outside advisors as well as -- it's an interdepartmental group -- look at how we can streamline that process.

As far as what the consumers see, today there is a problem -- I mean, consumers have to figure out and doctors get involved in sort of the back and forth. Well, who's the primary payor, who's the secondary payor. And we're going to do all that for the patients behind the scenes. So they don't have to get involved in figuring out am I covered under this program? Am I covered under that program? How much do I have to pay? And it's going to be very -- they're not going to have as many bills to look through, to wade through, and as much fine print as they do today under the current system.

Q A lot of the costs, or a lot of the forms that people have to fill out today are not just from health insurers, per se, but also from consultants and people like that who are asking doctors to verify that procedures are necessary and so forth. And that seems to be like the growth field in terms of document production these days. What does your plan do to that kind of health forms, or does it affect it at all? Because those forms are actually aimed at reducing costs, so don't you lose some control?

MR. HILL: I understand what you're getting at and we agree that a lot of what providers complain about with respect to the forms is not the claim, it's what the insurance company or the utilization review firm requires after the claim has been submitted. But as an underlying premise, we sort of assert that a lot of the information that is required could be made standard and that there is no reason that utilization review firm A and self-pay plan B has to require two wholly separate sets of things to pay for the same procedure.

Some plans require that you submit the whole medical record after a claim. Other plans require that you've just got the emergency room notes. And so while there is a need -- and that the use of that information is to control benefit costs, the outlay -- we think we can still do that, not lose control of how we're controlling the benefit costs and standardizing information that needs to be required from providers.

Q Specifically in Medicare, that's what doctors complain about -- not that they have to fill out forms, but they have to spend hours playing telephone tag with nurses on the -- at the blue, or whatever the local administrator is, on utilization review -- pre-certification of conditions. What are you doing to get that out of the doctor's hair?

MS. MARGHERIO: Actually, for that, the PRO --

Q Especially if you screw down on Medicare costs, try to control volume, and limit fees.

MS. MARGHERIO: What we're doing is we're taking a look a the quality system and how to revamp it so it is not a processdriven, very regulatory system. And we're focusing on outcomes and we're putting together a system -- we're going to be streamlining it through investments in outcome measures, as well as investments in effectiveness of different treatments, as well as investments in practice guidelines and broader dissemination of practice guidelines.

So we believe -- and these will be done in a standardized way so that insurers, health plans, doctors will have the same information, so they'll be working off the same kind -- they'll have the same information about what the effectiveness of various treatments are.

We are looking at phasing out the PRO system, which is I think what you're hearing a lot of the doctors responding to now, over time. Once the quality system that we're putting in place that is more consumer-driven -- we're getting consumer surveys, we're having consumers answer surveys to find out what do they think about the care that they're receiving; how long are they waiting in lines; how quickly are they able to see the doctor that they want to see; how responsive was the doctor to -- or the nurse -- to their concerns.

And so we're trying to back away from, reevaluate the processes that we've put in place today and say what can we do to reduce the administrative burden, the hassle factor for the doctors and the patients, and put in place a system that both ensures quality and reduces the administrative burden.

Q What does PRO stand for?

MS. MARGHERIO: Peer review organization -- I'm sorry.

MR. KRONICK: Let me add to that, that if you go to the American Society of Internal Medicine meeting or any specialty society meeting these days, you'll see usually long presentations on the hassle factor. And some of the hassle factor is directed at Medicare, but in many cases, there is as much or more directed at the private sector -- these myriads of utilization review professionals looking over the physician's shoulder -- much of which is done at arm's length in an adversarial kind of fashion, and arguably, much of which does not do much to improve the quality of care that's provided.

And in the structure of the reforms we're proposing, we expect to see a growth of more integrated systems over time in which the insurers and the providers, while still there are always going to be some portions of the relationship that are adversarial, but have more commonality of interests and have more intelligent tools than a nurse at the other end of a telephone line to try to make sure that resources are used well.

Q Briefers earlier this week about the quality system admitted that it was going to take quite a number of years to phase in all of the changes. So you're making it sound like you're going to just walk out the door and we'll have a new form and everything will get up to speed. How long do you actually anticipate it will take?

MR. HILL: I think we have to separate out sort of two sets of issues. On the reimbursement side and the sort of strictly administrative information that flows between insurance companies and providers we think we can act fairly quickly to standardize the information that has to happen. On the quality and sort of retooling the way we think about how we manage providers and understand quality, I think that we are looking at something that's a little more longer-term, but that doesn't mean that we can't begin to standardize some of what is required.

Q What does "fairly quickly" mean?

MR. HILL: The quality of information -- I mean, fairly quickly with respect to the reimbursement? January 1, 1995 I think we can --

Q That's the standardized form?

Q Can you clarify for me -- I got the impression from what the President said this morning that that single form would satisfy the needs of Children's Hospital, which he was specifically talking about it replacing 300 various forms they do. The form looks to me like a professional's form, not -- it looks more like a 1500 than a UV 92. Could you clarify what he means by single form?

MR. HILL: We need to be real specific. The form that we saw this morning and I think that most of you have is a prototype and is used to sort of illustrate how things could look. What will happen on January 1, 1995, as we currently envision it is that the two forms for reimbursement that are out there now -- the HCFA 1500 for physicians and the UV 82, soon to be 92, for hospitals -- will be mandated to be used by all health insurers, and mandated to be used in a standard way.

Q That's two forms, not one.

MR. HILL: It is two forms, but it is -- I agree --

Q Vastly different forms.

MR. HILL: Well, and they're used in vastly different settings as well.

Q The President talked about this form, which was essentially a professional form, in an institutional setting, which it will never be used in.

MR. HILL: I don't think that that's entirely accurate, because what -- the plan is, January 1, as soon as we can, we standardize, the National Health Board begins to evaluate and understand exactly what would be needed on an encounter-by-encounter basis, and then in an out-year, which I'm not quite sure of yet, one standard set of information, whether it be a paper form or an electronic transaction, will be mandated and in use by all actors.

And what's on the 1500 and what's on the UB 8292, while it looks different are, in fact, similar sorts of questions.

Q Two forms, right?

MR. HILL: Initially. In January 1, '95, initially. The goal is --

Q And what about the third form for dentists and the fourth form for pharmacists?

MR. HILL: The 1500 we envision being used for dentists and for pharmacists.

Q So that's three, and then a fourth form was drawn up by the pharmaceutical people.

MR. HILL: That's two. That's the 1500 --

MR. KRONICK: For dentists.

Q 1500 for dentists, this for professionals of other types?

MR. HILL: No. That's a prototype what we view in the future would evolve once --

Q And what about the pharmacy form? Is that going to be a fourth form? The plan draft referred to all four. Now, the 1500's been for a number of years --

MR. SILVA: I think the issue here is, the President was referring to clinical encounter forms, the things that drive docs and everyone really crazy. Because, although there is just one form, as Tim described earlier, there are many, many rules depending on who is your insurer, what plan you're in. The goal was to simplify that to one form for inpatient institutions and one form for outpatient encounters.

MS. MARGHERIO: That all providers will use and all health plans will accept. That's what he was --

Q One form, okay.

Q The health plan allows for supplemental coverages -- correct me if I'm wrong, but both within the HPIC, i.e., your health plan can offer you a slightly richer package of benefits if they want above the standard, or you can buy a supplemental. How will those be handled in this standardization?

MR. KRONICK: Most of these supplemental coverages are not coverages that are going to affect the hospital or physician when the patient comes in and needs treatment, so that the statements that we've been making that say when you go into a physician's office, the physician doesn't need to spend, or the nurse at the front desk doesn't need to spend time looking through your policy book to see whether you're covered, is an accurate statement. If there is supplemental coverage for eyeglasses, for example, that's a kind of separate issue, really.

Q If I buy copay coverage? Say I want hospital copay. I'm not going to be paying that out of my pocket, as I would under this system? That's another something for the hospital to deal with.

MR. KRONICK: Right. But there will be a standardization of information on our insurance card as we go through the door. So that's a very simple piece of information to get.

MS. MARGHERIO: And there are only two supplemental insurance policies that will be available, and they'll be standardized. So it's not like we're talking about hundreds of different supplements -- all insurance policies that are available. We're talking about two.

Q Can I ask just a clarification of something that was said before? The story today that we're doing is on the paperwork savings. There was a figure in the handout that we got: "health care administration costs exceed $100 billion each year." Now, where do you get that statistic? And, also, what do you estimate would be the savings under the new regime, when you have your new plan?

MS. HEENAN: We've got asked that question this morning. We're looking into where Washington Monthly got that figure. That's where we pulled that from. These are all statistics we've pulled from other sources. So we'll give you the source if you call the press office later today on where the $100 billion figure comes from. There have been a lot of studies that documented as they said, all over the map. We'll get you the exact source of this study.

Q Well, when you mention a figure of saving at least $10 billion, though, then how do you get that?

MR. KRONICK: That's an estimate, as I say, a quite conservative estimate that on the hospital side, starts by looking at the costs in patient accounting and admitting functions, as reported in survey data that the AHA collects, the annual AHA panel survey. And making an estimate of the percentage of those costs that would be reduced with streamline administration and universal coverage. And, as I say, an estimate that's conservative, many people would argue that the estimate should be larger.

On the physician side, it comes again from estimating function by function using data from an AMA socioeconomic survey of physician offices that's done every year to look at the costs that physicians attribute to each function in their office, and making some estimate of the percentage of the costs that would be reduced in each functional area. And these estimates are -- a variety of analysts have tried to make these estimates. We don't know for sure, as in many other areas of health care, we've tried to err on the conservative side of estimates from other analysts, such as the Congressional Budget Office, VHI and others.

I should also say that those estimates don't include any estimates for an area, even though they mentioned earlier, we expect very large savings, and that's from reduction in the administrative overhead as we move from the high loads that are paid by small groups now in the direction of much lower administrative loads that are paid by large employer groups today.

Q Could you quickly tell us what the denominator is that gives you 20 percent, that indicates a $500-billion denominator, which is a lot less than total health spending?

MR. KRONICK: On the $100 billion, we'll get back to you on that later.

Q Twenty percent of X? I'm sorry, $100 billion is 20 percent of health spending. Health spending is more like -- a trillion, which would give you 10 percent. Is the 20 percent wrong, or is the $100 billion wrong, or what's wrong?

MR. HILL: We'll give you the base. We'll get the base.

Q I mean, it's written.

MR. KRONICK: You're certainly right, that $100 billion is 20 percent of $500 billion.

THE PRESS: Thank you.

END3:25 P.M. EDT