BUDGET SUMMARY

linkage of performance goals, program activities, and dollar amounts. These linkages ensure that in setting performance goals, CMS selects goals that are representative of the full range of Agency activities and resources.

Beginning in FY 2004, agency budgets will focus on results-oriented government guided by performance. The Office of Management and Budget developed the Program Assessment Rating Tool (PART) to evaluate programs in a systematic and objective manner, using numeric scores which rate overall program effectiveness and highlight strengths and weaknesses. In 2002, two of CMS's programs, the Medicare Integrity Program (MIP) and the State Children's Health Insurance Program (SCHIP), were assessed using the PART. Both programs received high scores. As a result of the PART process, CMS has included in its FY 2004 APP two new program integrity goals measuring the Medicare contractor error rate and provider compliance rate.

The overall number of goals has remained relatively stable. CMS has increased the proportion of outcome-oriented goals that speak to fundamental program purposes and to the agency's role as a steward of taxpayer dollars. CMS's total number of FY 2004 goals in the APP is 37, with reporting on 35 FY 2002 goals.

Multi-Year Revitalization Plan

The Medicare program has undergone extensive changes since 1965 when it was designed as an acute care, fee-for-service, health insurance program. Over the last 35 years, it has grown from 40 million claims and $3.3 billion in benefit payments to an estimated one billion claims and $279 billion in benefits in FY 2004. The health care industry has also changed drastically, with providers emphasizing preventive services and the use of pharmaceuticals, and insurance companies diversifying and moving into managed care. Congress has made dramatic changes to the program as well, adding some preventive benefits, enacting a managed care option, and changing benefit payment policies.

In spite of all these changes, the legislative framework of CMS's program administration has remained unchanged. CMS has struggled to make this work under demands not anticipated when Medicare was created. However, operations have become increasingly fragile.

Over the past few years, CMS has taken steps towards revitalizing its operations, such as reducing the number of standard fee-for-service claims processing systems. However, an overall revitalization cannot be accomplished without some fundamental infrastructure improvements. In particular, CMS's systems infrastructure was not designed to keep pace with recent changes in the program or to handle today's massive claims volume, much less the increase in claims volume that will come as today's "baby boomers" become eligible for Medicare. CMS has a window of opportunity over the next few years in which to make the changes needed to continue to meet the demands of the Medicare program and provide quality service to Medicare beneficiaries, but a significant investment is required.

BUDGET SUMMARY

To begin to meet this challenge, CMS is requesting a multi-year investment fund, with $65 million in 2-year money to be appropriated in FY 2004. In the first year, the plan will focus on systems-related activities. A more detailed description of the proposed activities is included in the Program Management section of this document.

CONCLUSION

The CMS FY 2004 current law appropriation request represents a 5.7 percent increase over the comparable FY 2003 President's budget level. This budget will meet CMS's basic operational needs while supporting the goals of the Administration and the Secretary. It will allow CMS to continue beneficiary education efforts, improve financial management processes, improve relations with stakeholders, increase access to care, provide health care choices for beneficiaries, and increase efficiencies. CMS believes that we can continue to make meaningful changes to the programs we administer within these funding levels. The justifications in the following pages reinforce this commitment to our stakeholders and highlight our program administration plans for FY 2004.

PROGRAM MANAGEMENT

Program Management
Appropriation Language

For carrying out, except as otherwise provided, titles XI, XVIII, XIX, and XXI of the Social Security Act, titles XIII and XXVII of the Public Health Service Act, and the Clinical Laboratory Improvement Amendments of 1988, not to exceed $2,733,507,000, to be transferred from the Federal Hospital Insurance and the Federal Supplementary Medical Insurance Trust Funds, as authorized by section 201(g) of the Social Security Act; together with all funds collected in accordance with section 353 of the Public Health Service Act and section 1857(e)(2) of the Social Security Act, and such sums as may be collected from authorized user fees and the sale of data, which shall remain available until expended, and together with administrative fees collected relative to Medicare overpayment recovery activities, which shall remain available until expended: Provided, That all funds derived in accordance with 31 U.S.C. 9701 from organizations established under title XIII of the Public Health Service Act shall be credited to and available for carrying out the purposes of this appropriation: Provided further, That $65,000,000, to remain available until September 30, 2005, is for contract costs for CMS's Systems Revitalization Plan: Provided further, That $56,991,000, to remain available until September 30, 2005, is for contract costs for the Healthcare Integrated General Ledger Accounting System: Provided further, That not less than $129,000,000 shall be for processing Medicare appeals: Provided further, That the

PROGRAM MANAGEMENT

Secretary may use alternative mechanisms in lieu of Administrative Law Judge review: Provided further, That the Secretary of Health and Human Services is directed to collect fees in fiscal year 2004 from Medicare+Choice organizations pursuant to section 1857(e)(2) of the Social Security Act and from eligible organizations with risk⚫sharing contracts under section 1876 of that Act pursuant to section 1876(k)(4)(D) of that Act.

Note.-A regular 2003 appropriation for this account had not been enacted at the time the budget was prepared; therefore, this account is operating under a continuing resolution (P.L. 107-229, as amended). The amounts included for 2003 in this budget reflect the Administration's 2003 policy proposals.