The latest incarnation
of the government oversight came about in 2001, when Secretary
of Health and Human Services Tommy Thompson ended HCFA and formed
the new Centers for Medicare & Medicaid Services (CMS).
On July 1, 2001, the new CMS took over the programs.
The Bush administration's proposal reorganized the sprawling department
into three general divisions: the Center for Medicare Management,
which focuses on traditional Medicare programs and the governments
contracts with health care organizations; the Center for Beneficiary
Choices, which oversees programs like Medicare+Choice, Medigap
and other programs aimed at helping fill in the gaps left by the
traditional Medicare program; and the Center for Medicaid and
State Operations to facilitate the largely devolved Medicaid program
with state governments.
The new system reflected a program radically different
from the initial medical insurance program instituted in 1965.
The Center for Medicare Management focuses on the traditional
program: deciding what types of health policies the government
would support, setting the reimbursement rate for doctors and
managing the volumes of Medicare paperwork.
The second agency, the Center for Beneficiary
Choices, represents a major shift in the agency's direction. It
codifies and regulates what had been a growing menu of additional
programs aimed at adding coverage for items that traditional Medicare
Parts A and B do not cover. These programs, like Medigap insurance
and Medicare+Choice, could greatly expand a recipient's options,
but have been difficult for beneficiaries to understand.
"We need to make sure that the people who
are covered by Medicare know exactly what choices they have for
their health care coverage," said Tom Scully, Medicare &
Medicaid administrator, in announcing the new department.
"Too many consumers just don't understand
Medicare coverage options and the costs associated with them,
from their Medigap options to Medicare+Choice to the cost of prescription
drugs. We need to get that information to them and their family
members, while working closely with the doctors and other health
care providers who give them medical care."
The new agency focuses on public education and
the creation of new options under these programs. It also consolidates
the contracts the government enters into to provide the additional
services and manages consumer research and grievance and appeals
The final part of the agency focuses primarily
on running the Medicaid program. Following the 1994 Republican
takeover of Congress, the administration of many programs like
Medicaid and other welfare programs was provided to the states,
along with block grants to operate the new departments. The Medicaid
agency now sets standards for those state programs to achieve
and also approves individual state systems.
This section also administers several of the programs
critical to offering health coverage of poorer Americans. In addition
to Medicaid itself, this division oversees administration of the
State Children's Health Insurance Program (SCHIP), which provides
insurance for many of the nation's poor children and often their
Although the creation of the Baltimore, Md.-based
CMS helped reorganize the agency, some residual issues linger
for Congress and the federal agencies to rectify. One part of
the system that has remained under Social Security Administration
is the appeals process, under which a beneficiary contests a decision
by the Medicare system.
Since 1995, administrative law judges from the
SSA have heard all appeals to Medicare decisions. But the 2001
reorganization, under pressure from Congress, has moved to create
a system that would ensure an appeal would be dealt with within
90 days instead of the current 330. It would also move to establish
a separate set of administrative judges with a focus on health
policy, rather than Social Security. But the CMS needs additional
funds from Congress to establish and run a separate review division
and with current budget deficits, the money has been slow to materialize
and the backlog of cases threatens to swamp any new system.
"We believe that the Medicare hearing function
is more appropriately housed within CMS, and we are moving forward
to achieve this. However, this is an especially challenging time
for this workload," Thomas A. Scully, administrator Centers
For Medicare & Medicaid Services, told a House committee in
April 2003. "While we have agreed with SSA in principle to
assume responsibility for the Medicare hearings function effective
October 1, 2003, we are still working out the details of the workload