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Medicare, Accountability, and Structural Reform

Publication Date
Sep 4, 2000

Members of Congress and others have expressed frustration over the slow progress of the Medicare + Choice program, which makes managed care options available to senior citizens. In particular, critics have been disappointed by the low penetration rate for Medicare managed care. Some critics have blamed the Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) (HCFA(now known as CMS)) for the slow movement towards managed care for seniors. They contend, for example, that HCFA(now known as CMS) has micromanaged Medicare + Choice, demonstrating a bias in favor of fee-for-service medicine.

In fact, the changing economics of managed care and highly specific statutory requirements imposed by Congress have made it extremely difficult for HCFA(now known as CMS) to generate enthusiasm for Medicare managed care among health maintenance organizations (HMOs). Also, many senior citizens remain very nervous about managed care.

Nevertheless, it is appropriate for policymakers to ask whether HCFA(now known as CMS) is the right agency for this job and whether structural reform is advisable. This paper addresses these questions by dissecting the concept of accountability and by asking what kind of accountability several leading reforms would promote. Among the reforms considered are: a reconstituted HCFA(now known as CMS), a single- headed agency outside of HCFA(now known as CMS), and an independent board or commission.

In thinking about accountability, it is useful to consider sources of control (internal vs. external); the degree of control (catalytic vs. hortatory vs. coercive); the timing of control (ex ante vs. ex post); and the focus of control (process vs. results). It is also useful to consider empirical evidence on the behavior of boards and commissions (including both advisory boards and those with operational responsibility) and on the consequences of administrative reorganization (aimed at promoting hierarchical, professional, legal, or political accountability). That evidence, summarized below, suggests that boards often struggle to secure a firm footing and that boards with relatively narrow jurisdictions sometimes behave in dysfunctional ways. As for administrative reorganizations, the one certainty is that they cause short-term disruption. Another finding is that externally imposed reorganizations are generally less successful than those generated from within the bureaucracy.

Leading reform proposals differ in key respects. If one seeks political accountability, one might consider creating an independent Medicare Board with operational responsibility. If one prefers professional accountability, one should consider strengthening and deregulating HCFA(now known as CMS). If one favors hierarchical accountability, one should consider putting the Office of Personnel Management in charge of Medicare managed care or creating a Medicare Benefits Administration within the Department of Health and Human Services or creating a Managed Care Office within HCFA(now known as CMS). But these reforms are not interchangeable; each involves a different mix of control properties.

Students of public administration and public management often argue that a key problem with contemporary bureaucracies is poor coordination, which limits the bureaucracys ability to engage in holistic thinking and coherent policymaking. Any proposal that transfers responsibility for Medicare managed care from HCFA(now known as CMS) to some other agency must confront a key question: are the advantages of reform compelling enough to warrant an increase in fragmentation? Any reform proposal must also confront a basic question: what exactly is the kind of accountability needed to improve prospects for Medicare managed care? Answers to these questions will help policymakers to decide which, if any, reform to pursue.