The head of the Centers for Medicare and Medicaid Services outlined the Bush administration’s plans for helping to bring down costs to the system by creating incentives for efficiency of care at a hearing of a House Ways and Means subcommittee.

“Together with Congress, we have made great strides in modernizing and improving health care benefits, but there is more work to be done,” acting CMS Administrator Kerry Weems said in testimony submitted to the subcommittee. The budget request for fiscal year 2009, he said, “builds on these past efforts by updating and strengthening our payment systems, beginning to incorporate value-based purchasing strategies, improving quality and efficiency while restraining costs.”

However, Weems noted that the costs of the program remain significant, and that the legislative branch has not cooperated with every proposal put forth to reduce costs. The budget proposal for 2008 sought to address rising costs, he said, “but Congress did not act to curb spending” during its deliberations in 2007. “In fact, in some cases, Congress intervened to stop CMS from implementing savings proposals.”

Overall, Weems said the fiscal year 2009 budget request includes $486 billion in total gross mandatory spending for Medicare program benefits. Should the administration’s proposals to cut costs be enacted, he said, they would produce a net savings of $12.8 billion in fiscal year 2009 and $182.7 billion over the next 5 years while cutting the average annual growth rate of the programs from 7.2% to 5%.

“Make no mistake, this level of savings is not enough to shore up Medicare permanently,” he warned. “By extending near-term solvency, however, we do create opportunity to devise and enact the vital, more permanent reforms that are required.”

Among the reforms Weems said the administration is seeking the implementation of a value-based purchasing program that ties a hospital’s base payment for each discharge to a set of measures gauging their performance. “Hospitals would be provided an opportunity to achieve bonus payments for either improving performance on a set of measures or achieving a high level of absolute performance,” Weems said.

Additionally, the budget proposal would establish a requirement for facilities to report “never events,” which Weems described as “unambiguous, usually preventable, serious medical errors,” and would deny Medicare payment for services connected to such events. Any facility found to have failed in reporting such an event, he said, would suffer a 2 percentage point reduction to their annual update.

Weems also said the budget calls for extending the Part B income related premium adjustment into the Medicare Part D prescription drug program. “This proposal would increase premium amounts for the Medicare drug benefit for high income Medicare beneficiaries in a manner similar to what is currently applied in the Part B program.”

One of the more contentious debates between Congress and the White House during the past year has involved the extension of the State Children’s Health Insurance Program, or SCHIP. In his testimony, Weems maintained the administration’s argument that it is seeking to ensure that the program will remain focused on the poorest of children rather than the Congressional proposal that would have allowed states to extend the program to those over twice the federal poverty line.

The budget request, he said, would increase funding to the states by $19.7 billion over the next 4 years, with $450 million in outreach grants. “With this SCHIP reauthorization proposal, we are re-affirming our commitment to covering low-income uninsured children and promoting a fiscally responsible SCHIP program that will be available for the children who need it the most,” he said.