Fiscal Year 2010 Budget in Brief

Program Management

(dollars in millions)

	2008	2009	2010	2010 +/- 2009
Discretionary Administration
Medicare Operations	2,159	2,266	2,364	+98
Federal Administration /2	636	641	698	+56
Survey and Certification	281	293	347	+54
Research	31	30	57	+27
High-Risk Insurance Pools /3	49	--	--	--
Total, Discretionary	3,157	3,230	3,466	+235
Mandatory Administration
Medicare, Medicaid, and SCHIP Extension Act	115	--	--	--
Medicare Improvement Patient and Provider Act	20	183	35	-148
Children's Health Insurance Program Reauthorization Act	--	5	--	-5
State High Risk Pools	--	75	--	-75
American Recovery and Reinvestment Act	--	142	140	-2
Total, Mandatory	135	405	175	-230
Reimbursable Administration (non-add) /4	572	209	430	+221
Subtotal, Discretionary and Mandatory	3,292	3,635	3,641	+6
Proposed Law Mandatory User Fee
Survey and Cert. Revisit and Recert. User Fees	--	--	9	+9
Total, Proposed Law Mandatory	--	--	9	+9
FTE /5	4,483	4,461	4,717	+256

^1/ Numbers may not add due to rounding
^2/ FY 2008 Federal Administration level includes $5 million from the FY 2008 Supplemental Appropriation.
^3/ State High Risk Pools recategorized as mandatory Program Management in 2009 and transferred to the State Grants and Demonstrations account as mandatory funding in 2010.
^4/ Includes Clinical Laboratory Improvement Amendments of 1988, sale of research data, coordination of benefits for the Medicare prescription drug program, MA/prescription drug program information campaign, and recovery audit contracts. These amounts do not affect CMS's program level because the activities they fund are fully reimbursed.
^5/ FTE totals include HCFAC and State Grants funded FTEs. CMS will fund the following FTEs from the HCFAC and State Grants accounts: FY 2008 - 164 FTEs; FY 2009 - 183 FTEs; FY 2010 - 215 FTEs. CMS also plans to fund 50 FTEs in FY 2009 and 100 FTEs in FY 2010 to implement the Recovery Act.

The FY 2010 discretionary budget request for CMS Program Management is $3.5 billion, an increase of $235 million over FY 2009. The Budget includes mandatory proposed user fees on health care facilities for recertification and revisit surveys. With the funding requested for FY 2010, CMS will achieve its priority goals: implement Medicare contracting reform; sustain beneficiary education efforts; increase survey frequencies; make targeted investments in information technology (IT); administer new legislation; augment its research agenda; and administer basic operations.

BUDGET ACCOUNT SUMMARIES

Medicare Operations: The Medicare Operations budget request is $2.4 billion, an increase of $98.1 million, or 4.3 percent, above FY 2009. The bulk of the CMS Program Management budget, or 68 percent, is spent on Medicare Operations. The Medicare Operations budget funds mission-critical contractor and IT activities necessary to administer the Medicare program and implement activities required by legislation. Top priority activities for FY 2010 include:

Contracting Reform: The Budget requests $65.6 million to implement contracting reform, a reduction of $43.3 million below FY 2009. CMS is winding down transitions and on track to complete contracting reform before the 2011 target set in the MMA.

Contracting reform will transform Medicare claims processing from 40 cost-based contracts to 15 performance-based, competitive contracts (plus four specialty contractors). In 2009, CMS awarded the last of the 19 competitive Medicare Administrative Contracts (MACs). In FY 2010, CMS plans to finish transferring the remaining Medicare claims workloads to these new contractors.

Contracting reform is projected to generate significant administrative savings to the government and providers by reducing the cost of processing Medicare claims, and yield $3.1 billion in Trust Fund savings over the next five years (FY 2009 – FY 2013) through more accurate and appropriate payments.

MIPPA Implementation: The Budget requests $81.6 million to implement the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA). This funding will supplement the appropriation provided in the mandatory legislation for implementation. The complexity and volume of provisions in MIPPA require additional administrative investment. Specifically, the request will allow CMS to implement ESRD pay for performance.

Ongoing Contractor Operations and Support: About half, or $1.049 billon, of the FY 2010 Medicare Operations request supports ongoing contractor operations, 1.5 percent above the FY 2009 level. Contractors will process an estimated 1.2 billion fee for service claims in FY 2010, a 2.6 percent increase over FY 2009.

Beneficiary Education and Outreach: The Budget includes $315.6 million for mandated and other beneficiary education and outreach activities through the National Medicare & You Education Program (described in a later section).

Healthcare Integrated General Ledger and Accounting System (HIGLAS): The Budget requests $161.0 million for HIGLAS, a state-of-the-art accounting system for CMS. HIGLAS is an important fiscal and program integrity tool, necessary to achieve a clean statutorily-required audit opinion and process 100 percent of CMS payments through a single system by 2012. Of the HIGLAS total, $125.3 million supports ongoing HIGLAS operations at 23 contractors that will be “operational” at the end of FY 2010. The remaining $35.7 million will be used to develop additional HIGLAS functionalities, such as incorporating Medicare Part C and Part D accounting transactions. HIGLAS has already yielded significant savings and efficiencies through more rapid recovery collections, resulting in a projected $390 million total interest earned through FY 2011.

IT Systems and Other Supporting Activities: The Budget includes $691.4 million for other IT systems and support. This investment includes funding for systems to manage and administer Medicare Advantage and the new Part D benefit, CMS’s data center and telecommunications infrastructure, and other funding for HIPAA, qualified independent contractor appeals, and the CFO audit.

This amount also includes $62.5 million to begin converting to ICD-10, a classification system of diseases, injuries, and medical conditions developed by the World Health Organization. The ICD-10 code set, currently used by much of the industrialized world, will make it easier to determine if a claim was appropriately billed, provide more specific data necessary for value-based purchasing, and prevent fraud and abuse. Regulations promulgated on January 2009 require CMS and other insurers to convert to ICD-10 by October 1, 2013.

Federal Administration: For FY 2010, the President's Budget requests $697.8 million for CMS Federal administrative costs, a $56.4 million or 9 percent increase over FY 2009.

Of this total, $565.9 million will support a Full Time Equivalent (FTE) complement of 4,276, an increase of 159 FTE over 2009. This staffing increase will allow timely implementation of numerous program changes enacted in recent reconciliation bills, and position CMS for health care and entitlement reform.

Survey and Certification: The FY 2010 Survey and Certification budget request is $347 million, a $54 million, or 18 percent, increase over FY 2009. At this funding level, CMS will establish more frequent surveys of health facilities. Survey frequencies have steadily declined in recent years, potentially compromising the safety and quality of care provided to beneficiaries.

All facilities participating in the Medicare and Medicaid programs must undergo an inspection when entering the program, and on a regular basis thereafter, to ensure compliance with Federal health, safety, and program standards. CMS contracts with State agencies to conduct these inspections.

States will inspect long-term care facilities and home health agencies at their statutorily mandated frequencies. Survey frequencies for all other facility types will increase to no less than once every six years (see table this page). This funding is essential to improve the quality of care in nursing homes through rigorous survey and enforcement processes and ensure adequate oversight of all other provider types, where quality of care concerns have been increasing.

CMS expects States to complete 25,300 certifications and over 58,000 complaint visits in FY 2010, an increase of approximately 13,000 visits over the FY 2009 level. Between FY 2003 and FY 2010, the number of Medicare certified facilities increased by 19 percent. The FY 2010 Budget includes $9.4 million from two user fees to finance survey and certification activities. Permanent authority is requested for both fees, to ensure that survey and certification activities have an adequate and stable funding supply in future years.

Revisit User Fee: CMS would charge revisit user fees to health care facilities cited for deficiencies during initial certification, recertification or substantiated complaint surveys. These facilities would finance the full costs associated with revisit surveys to ensure corrective actions have been implemented. This fee will build greater accountability into the survey and certification program and create an incentive for facilities to correct deficiencies and ensure quality of care. This fee is expected to provide $9.4 million to support this survey and certification activities in FY 2010.

Recertification User Fee: CMS would charge user fees to all participating health care facilities at the time of their periodic recertification surveys. The surveyed health care facilities would partially finance the costs associated with these surveys, with fees phased-in over three years to a level equal to 33 percent of costs, on average. Charging for program participation surveys is consistent with the fee-based approach for other services, and reflects the fact that recertification gives providers the opportunity to continue to participate in Medicare. Due to the time required to draft a regulation and implement the fee, no funds will be collected in FY 2010.

Research, Demonstrations and Evaluation: The FY 2010 Research, Demonstrations and Evaluation budget request is $57.0 million, a $27.0 million increase over FY 2009.

Of this total, $30 million will be dedicated to expanding the Medicare and Medicaid research agenda. CMS will develop new demonstration and pilot projects that will focus on payment reforms such as better aligning provider payments with costs, providing higher quality care at a lower cost, and improving beneficiary education. Research projects undertaken with this new funding will lay the groundwork for long term reform of the health care system.

The Medicare Current Beneficiary Survey (MCBS) is fully funded at $14.8 million within the request. The MCBS, a continuous, multi-purpose survey that represents the Medicare population, aids CMS in monitoring and evaluating the Medicare program. The Budget also includes $2.5 million to fund Real Choice Systems Change grants. The grants will assist States in designing and implementing improvements to community-based support systems that enable people with disabilities and long-term illnesses to live and participate in the community.

The remaining $9.7 million supports ongoing basic research, such as monitoring prospective payment systems and evaluating demonstrations and pilots.

OTHER CMS ADMINISTRATIVE ACTIVITIES

The National Medicare & You Education Program (NMEP): The total FY 2010 program level for NMEP is $400.4 million, a decrease of $2.0 million from the FY 2009 level. The NMEP program level includes funding from Program Management, Medicare Advantage/Prescription Drug Program user fees, and QIOs. Beneficiary education remains a top priority for CMS, as recent enhancements to Medicare have given beneficiaries more responsibility for making their own health care decisions.

Of the total, $265.4 million, or 66 percent – supports 1 800 MEDICARE, which provides customer service in English and Spanish. Compared to the FY 2009 level, the call center request is $1.8 million lower. CMS anticipates approximately 28.1 million calls in FY 2010 and aims to increase call center efficiencies.

The remaining NMEP funding supports other important beneficiary education activities. About $54.1 million will be used to distribute more than 44 million Medicare & You handbooks, approximately 1.1 million more than in FY 2009. Another $20.6 million will support 460 million page views at www.medicare.gov, 13 million over FY 2009. As one-on-one counseling is the best method to help beneficiaries navigate their health plan options, the Budget allocates $40.0 million for State Health Insurance Assistance Program (SHIP) grants. More than 12,000 counselors in over 1,300 community based organizations will provide one on one assistance to beneficiaries on complex Medicare related topics. Finally, NMEP includes $17.1 million, an increase of $2.8 million, for a multimedia campaign, including paid advertising and a mobile office tour.

 

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