OMB taps extra funds to buoy harried HCFA

February 13, 1991

Signs that the Medicare program is sailing in troubled financialwaters have surfaced less than four months into the 1991 fiscalyear. The Health Care Financing Administration, which runs Medicare,has been forced to draw from a contingency fund set aside

Signs that the Medicare program is sailing in troubled financialwaters have surfaced less than four months into the 1991 fiscalyear. The Health Care Financing Administration, which runs Medicare,has been forced to draw from a contingency fund set aside by Congressto cover costs that exceed the $1.42 billion in administrativefunds appropriated in November.

HCFA administrator Gail Wilensky announced on Jan. 30 thatthe Office of Management and Budget (OMB), which controls thefund, had freed $75 million to cover the additional costs. Unanticipatedworkloads and an increase in the number of claims are being blamed.

"We're keeping our fingers crossed that we won't needall that money," said Maria Friedman, a HCFA spokesperson."Our projections look good and we believe that OMB agrees.That's why they released the money."

But OMB did not release all the money HCFA requested, and thereis more to why HCFA got what it did than just good-looking projections.

HCFA had asked for more than $100 million from the fund, arequest that OMB turned down flat. HCFA responded in January witha hardball of its own, warning the more than 80 insurance companiesthat serve as Medicare contractors to expect delays of a monthor more in processing their bills.

"We are mindful of the fact that such a cash flow situationcould have had a ripple effect," Friedman said. "Ifthe carriers were late, then the hospitals would be late and thephysicians would be late and so on, to the suppliers and on downthe line."

In addition to disrupting budgets and short-term planning throughoutthe medical community, the federal government would have beenliable for interest on late payments--$80 million by year's end.OMB chose the least expensive route and caved in to three-quartersof HCFA's request.

But that might not be the end of it. "We are going tohave to be very careful and prudent because of the increased workload,"Friedman said.

About 600 million Medicare claims will be filed in 1991, accordingto the Blue Cross and Blue Shield Association of Chicago. Thisrepresents an 8.1% increase in claims volume. Additionally, about40 changes to the Medicare program have been implemented, furtherexacerbating administrative costs.