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The huge task of fixing a failing agency

Washington Bureau Chieffritz
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© St. Petersburg Times, published March 12, 2001

WASHINGTON -- The Internal Revenue Service is no longer the most hated agency in the federal government. The current contender for the title is the Health Care Financing Administration, which administers the Medicare and Medicaid programs.

Sen. Pete Domenici, R-N.M., who leads the Senate Budget Committee, says he has grown weary hearing complaints against HCFA from every nurse, doctor and hospital administrator he meets. They tell him "the application of the rules is so inconsistent and (they) treat people so shabbily."

"And then HCFA officials say, 'We'll change it,' but they're going to change it in six months and some of the agencies that get money go broke while they're waiting around for a change in the rules," Domenici notes.

Sen. Bill Frist, R-Tenn., a surgeon, concurs.

"HCFA -- 130,000 regulations, 10,000 different codes, 3,000 different communities, all to govern the doctor-patient relationship," Frist says, obviously disgusted. "It's absurd. It can't be done. The paperwork, the micromanagement coming out of Washington. . . . It's inefficient and it wastes money."

Indeed, the history of HCFA is a classic tale of bureaucratic overload.

It started as a tiny agency, and then Congress increased its responsibilities without providing adequate resources. While it has grown to become the biggest regulatory agency in the federal government, it is not equipped for the task.

"The bookkeeping system is bad, the computer system is bad, the contracting system is bad, and we have to inculcate a new attitude," explained Health and Human Services Secretary Tommy Thompson, who oversees HCFA.

HCFA also has been saddled with two competing and contradictory goals -- law enforcement combined with helping the sick. It biggest recent failure was reflected in the decision of many HMOs to withdraw from providing care for Medicare patients, some of them in Florida.

To show you just how bad things are at HCFA, Congress recently applauded the agency for making a mere $11.9-billion in improper Medicare payments last year. That was praiseworthy only because it was less than half the estimated amount of improper payments during the previous year.

With all the brash confidence of a newly minted cabinet secretary, Thompson has promised Congress that he will clean up the agency. As a former governor, he is sympathetic to those who are frustrated with HCFA.

"We recognize that patients, providers and states have legitimate complaints about the scope and complexity of the regulations and paperwork that govern these programs," Thompson told Congress recently. "We will consider any and all options for improving the agency and making it a more responsive and effective organization."

Congress has its own plans for HCFA. Many members want to make drastic bureaucratic changes as part of their effort to reform the Medicare program. One option would be to have two separate agencies administer Medicare and Medicaid.

President Bush, meanwhile, is preparing to appoint a hospital lobbyist to assume the job of reforming HCFA. He is Thomas A. Scully, 43, president of the Federation of American Hospitals. Scully has been chosen over a number of other candidates, including Florida's Reuben King-Shaw.

Under normal circumstances, Scully's appointment might be viewed as an example of the old trick of putting the fox in charge of the henhouse. But there is unlikely to be any such criticism on Capitol Hill, where he is well-known and highly regarded as a man who understands the agency.

Scully, a veteran appointee of the first Bush administration, faces a daunting task.

Not only will he be taking over one of the most screwed up agencies in the federal government, he will also be doing it at a time when Congress is determined to make changes. And the prospects of legislative change will make management of the agency even harder.

But Scully is not unaware of the difficulties.

According to the New York Times, he once described HCFA as "a giant walled fortress with a moat around it." The question is: Can he lower the drawbridges without being overrun by marauders?

- Sara Fritz can be contacted by e-mail at or by telephone at (202) 463-0576.

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