High-Risk Series: Medicare

Published by the Government Accountability Office on 1997-02-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             High-Risk Series

February 1997

GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States

      February 1997
      The President of the Senate
      The Speaker of the House of Representatives

      In 1990, the General Accounting Office began a special
      effort to review and report on the federal program areas
      its work identified as high risk because of vulnerabilities
      to waste, fraud, abuse, and mismanagement. This effort,
      which was supported by the Senate Committee on
      Governmental Affairs and the House Committee on
      Government Reform and Oversight, brought a
      much-needed focus on problems that were costing the
      government billions of dollars.

      In December 1992, GAO issued a series of reports on the
      fundamental causes of problems in high-risk areas and, in
      a second series in February 1995, it reported on the status
      of efforts to improve those areas. This, GAO’s third series
      of reports, provides the current status of designated
      high-risk areas.

      This report discusses the challenges that the federal
      government faces in safeguarding Medicare, the
      government’s second largest social program. Since the
      issuance of GAO’s 1995 high-risk report, both the Congress
      and the Health Care Financing Administration, the agency
      responsible for running Medicare, have made important
      legislative and administrative changes addressing chronic
      payment safeguard problems. However, because of the
      hundreds of billions of dollars at stake, GAO believes that
the government will need to exercise constant vigilance
and effective management to protect Medicare from
waste, fraud, abuse, and mismanagement.

Copies of this report series are being sent to the
President, the congressional leadership, all other
Members of the Congress, the Director of the Office of
Management and Budget, and the heads of major
departments and agencies.

James F. Hinchman
Acting Comptroller General
of the United States

            Page 2                     GAO/HR-97-10 Medicare
Page 3   GAO/HR-97-10 Medicare

Overview                                       6

Background                                    12

Fee-for-Service                               15
Program Risks
Managed Care                                  38
Program Risks
What Needs to Be                              49
Related GAO                                   50
1997 High-Risk                                53

                   Page 4   GAO/HR-97-10 Medicare
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           Medicare provides health care insurance for
           nearly all elderly Americans (those age 65
           and older) and many of the nation’s disabled.
           It is one of the largest entitlement programs
           in the federal budget. In fiscal year 1996,
           federal spending for Medicare was
           $197 billion. Program expenditures have
           been growing at about 9 percent per year.
           While growth has moderated somewhat
           during the last 2 years, many view even the
           lower growth rates as unsustainable.
           Moreover, the trust fund that pays for
           hospital and other institutional services is
           projected to be depleted within 5 years. The
           Congress and the President have been
           seeking to introduce changes to Medicare to
           help control program costs. At the same
           time, they are concerned that significant
           amounts of these costs are lost to fraudulent
           and wasteful claims.

           Although no one can claim with precision
           how much Medicare loses each year, our
           work suggests that by reducing unnecessary
           or inappropriate payments, the federal
           government would realize large savings and
           help dampen the growth in Medicare costs.
           The hidden nature of improper billing and
           health care crimes precludes a rigorously
           quantified estimate of expenditures
           attributable to fraud and abuse. Estimates of

           Page 6                     GAO/HR-97-10 Medicare

the costs of fraud and abuse ranging from 3
to 10 percent have been cited for health
expenditures nationwide, so applying this
range to Medicare suggests that such losses
in fiscal year 1996 could have been from
$6 billion to as much as $20 billion.

Most Medicare services are provided
through the fee-for-service sector, where any
qualified provider can bill the program for
each covered service rendered. In recent
years, greater numbers of Medicare
beneficiaries have enrolled in health
maintenance organizations (HMO) to receive
covered services. The most recent figures
show, however, that almost 90 percent of
beneficiaries remain under the
fee-for-service program. Each of these
delivery systems has its unique set of

In 1992 and again in 1995, GAO reported on
Medicare as one of several government
programs highly vulnerable to waste, fraud,
abuse, and mismanagement.1 Since the first
report in the series, the Health Care
Financing Administration (HCFA), the
Department of Health and Human Services’
(HHS) agency responsible for running the

  High-Risk Series: Medicare Claims (GAO/HR-93-6, Dec. 1992) and
High-Risk Series: Medicare Claims (GAO/HR-95-8, Feb. 1995).

Page 7                                  GAO/HR-97-10 Medicare

           Medicare program, has made some
           regulatory and administrative changes aimed
           at curbing fraudulent and unnecessary
           payments. However, in recent years, sizable
           cuts in the budget for program safeguards,
           where most of the funding for the fight
           against abusive billing is centered, have
           diminished efforts to thwart improper billing

Problems   Problems in funding program safeguards and
           HCFA’s limited oversight of contractors
           continue to contribute to fee-for-service
           program losses. While HCFA expects a major
           system acquisition project to reduce certain
           weaknesses, the project itself has several
           risks that may keep HCFA from attaining its
           goals. In addition, the managed care program
           suffers from excessive payment rates to
           HMOs and weak HCFA oversight of the HMOs it
           contracts with. These flaws leave
           beneficiaries without information essential
           to guide their HMO selection and without
           assurance that HMOs are adequately screened
           and disciplined for unacceptable care.

Progress   Since GAO’s last high-risk report in 1995, the
           government has made important strides in
           efforts to protect Medicare from

           Page 8                       GAO/HR-97-10 Medicare

exploitation. Recent legislation—the Health
Insurance Portability and Accountability Act
of 1996 (P.L. 104-191), popularly known as
the Kassebaum-Kennedy Act—increases
funding for program safeguards, although
per-claim expenditures will remain below
the level of 1989 after adjusting for inflation.
Nevertheless, we expect that the increase, if
properly applied, can significantly improve
anti-fraud-and-abuse efforts. In addition,
HCFA anticipates that it will gain enhanced
oversight capacity and reduced
administrative costs when the
next-generation claims processing
system—the Medicare Transaction System
(MTS), now progressing through its design
phase—is fully implemented, which HCFA
expects to occur after the year 2000. Further,
the HHS Inspector General and other federal
and state agencies have banded together to
fight fraud in five states in an effort called
Operation Restore Trust. After the first year
of operation, the effort yielded more than
$40 million in recoveries of payments for
claims that were not allowed under Medicare
rules, as well as convictions for fraud,
impositions of civil monetary penalties, and
the exclusion of providers from the program.

Progress is also being made in addressing
program management issues. For example,

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                  the Health Insurance Portability and
                  Accountability Act gives additional flexibility
                  to HCFA to contract with firms specializing in
                  utilization reviews and makes more severe
                  the penalties for Medicare fraud. In addition,
                  HCFA is improving its credentialing process
                  for Medicare providers and is currently
                  evaluating commercially available software
                  for its potential to screen out some types of
                  inappropriate claims. Finally, the new Health
                  Insurance Portability legislation and several
                  planned consumer information efforts offer
                  the potential for improved HCFA oversight of

Outlook for the   Many of Medicare’s vulnerabilities are
Future            inherent in its size and mission, making the
                  government’s second largest social program
                  a perpetually attractive target for
                  exploitation. That wrongdoers continue to
                  find ways to dodge safeguards illustrates the
                  dynamic nature of fraud and abuse and the
                  need for constant vigilance and increasingly
                  sophisticated ways to protect against gaming
                  the system. Judicious changes in Medicare’s
                  day-to-day operations entailing HCFA’s
                  improved oversight and leadership, its
                  appropriate application of new
                  anti-fraud-and-abuse funds, and the
                  mitigation of MTS acquisition risks—these are

                  Page 10                     GAO/HR-97-10 Medicare

necessary ingredients to reduce substantial
future losses. Moreover, as Medicare’s
managed care enrollment grows, HCFA must
ensure that payments to HMOs better reflect
the cost of beneficiaries’ care, that
beneficiaries receive information about HMOs
sufficient to make informed choices, and
that the agency’s expanded authority to
enforce HMO compliance with federal
standards is used. To adequately safeguard
the Medicare program, HCFA needs to meet
these important challenges promptly.

Page 11                   GAO/HR-97-10 Medicare

             Congressional attention has recently been
             focused on the impending depletion of
             Medicare’s Federal Hospital Insurance Trust
             Fund. Payroll taxes credited to the hospital
             trust fund finance the bulk of Medicare’s
             “hospital insurance,” or part A, which covers
             nursing facility, hospice, and home health
             care in addition to inpatient hospital
             services. Current projections by the fund’s
             trustees indicate that, absent action, it will
             be insolvent by 2001. Beneficiaries’ premium
             contributions and general revenues finance
             Medicare’s “supplementary medical
             insurance,” or part B, which covers
             physician and outpatient hospital services,
             diagnostic tests, and ambulance and other
             medical services and supplies. Although the
             part B trust fund’s link to the Treasury
             shields it from the danger of bankruptcy,
             part B expenditures comprise a growing
             share of the federal budget.

             HCFA administers Medicare largely through
             an administrative structure of claims
             processing contractors. In 1965, when the
             Medicare program was enacted, the law
             called for insurance companies—like Blue
             Cross and Blue Shield, Travelers, and
             Aetna—to process and pay claims because
             of their expertise in performing these
             functions. As Medicare contractors, these

             Page 12                     GAO/HR-97-10 Medicare

companies use federal funds to pay health
care providers and beneficiaries and are
reimbursed for their administrative expenses
incurred in performing the work. Over the
years, HCFA has consolidated some of
Medicare’s operations, and the number of
contractors has fallen from about 130 to
about 70 in 1996. Generally, intermediaries
are the contractors that handle part A claims
submitted by “institutional providers”
(hospitals, skilled nursing facilities,
hospices, and home health agencies);
carriers are those handling part B claims
submitted by physicians, laboratories,
equipment suppliers, and other practitioners.

HCFA’s efforts to guard against inappropriate
payments have been largely
contractor-managed operations, permitting
the carriers and fiscal intermediaries broad
discretion in acting to protect Medicare
program dollars. As a result, there are
significant variations in contractors’
implementation of Medicare’s payment
safeguard policies. In 1996, the budget for
contractors to administer Medicare was
approximately $1.6 billion, with 24 percent
devoted to payment safeguard activities.

From a management perspective, Medicare
consists of two programs—fee-for-service

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and managed care. The fee-for-service
program covers most of the program’s
beneficiaries—almost 90 percent, or
33 million individuals in 1996. Physicians,
hospitals, and other providers submit claims
to Medicare to receive reimbursement. In
contrast, Medicare’s managed care program
covers a much smaller number of
beneficiaries—nearly 5 million in 1996. It is
funded from the part A and part B trust
funds. The managed care program consists
mostly of risk contract HMOs,2 which enrolled
about 4 million Medicare beneficiaries in
1996. Physicians, hospitals, and other
providers serving these HMOs’ enrollees do
not submit a per-service claim for
reimbursement. Instead, they are paid by the
HMO, which in turn is paid a monthly amount
by Medicare for each beneficiary enrolled.
This amount is fixed in advance. In this
sense, the HMO has a “risk” contract because
regardless of what it spends for each
enrollee’s care, the HMO assumes the
financial risk of providing health care within
a fixed budget. HMOs profit if their cost of
providing services is lower than the
predetermined payment but lose if their cost
is higher than the payment.
 Other Medicare HMOs include cost contracts and health care
prepayment plans. Cost contract HMOs allow beneficiaries to
choose health services from an HMO network or outside providers.
Health care prepayment plans may cover only part B services.
Together, they enroll fewer than 2 percent of the Medicare

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Fee-for-Service Program Risks

             The depletion of Medicare’s hospital trust
             fund and the projected growth in Medicare’s
             share of the federal budget have focused
             congressional attention on making broad
             program reforms. Although the consensus to
             make changes is clearly building, there is
             less agreement about what the changes will
             be, when they will be implemented, and
             whether they will be comprehensive or
             incremental. For the near term, Medicare’s
             current structure is likely to remain in place;
             therefore, we have made the existing
             program’s day-to-day management the focus
             of this report.

             Certain factors make Medicare’s
             fee-for-service program inherently high risk.
             For one thing, health care consumers are
             less alert to provider charges when a third
             party pays most of their bill. In Medicare,
             even when patients receive a notice of what
             services their provider billed, the
             computer-generated notices can be difficult
             to follow.

             In addition, guarding against waste, fraud,
             and abuse in a program the size of Medicare
             would task any payer: fee-for-service
             Medicare serves about 33 million
             beneficiaries and processes a high volume of
             claims—over 800 million in 1996—from

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                   hundreds of thousands of providers.
                   Individually, the claims tend to be for
                   relatively low dollar amounts, so balancing
                   the extent of scrutiny given each claim
                   against the costs and benefits obtained is

                   Compounding these difficulties has been a
                   pattern since 1989 of unstable funding for
                   anti-fraud-and-abuse activities. However,
                   passage of the Health Insurance Portability
                   and Accountability Act adds new
                   funds—starting in 1997—to fight fraud and
                   abuse. By 2003, funding for anti-fraud-
                   and-abuse activities will have increased over
                   the 1996 level by about 80 percent. This
                   increased funding offers the promise of
                   much-needed improvements.

Decline in Funds   Since 1989, the number of Medicare claims
for Safeguarding   has climbed 70 percent to 822 million in
Payments           1996. During that same period, however,
Weakened Efforts   resources committed to claims review, both
to Deny Improper   before and after payment, without adjusting
                   for inflation, grew less than 11 percent.
Claims, Deter
                   Under these circumstances, the amount
Abuse              contractors could spend for reviewing
                   claims shrank from 74 cents to 48 cents per
                   claim, at a time when payments for part A
                   benefits more than doubled. In 1995, only

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Fee-for-Service Program Risks

about 3 percent of Medicare’s part A claims
on average received more than superficial
screening before being paid. This scarcity of
resources seriously hampered the Medicare
contractors’ efforts to (1) conduct various
reviews of claims to verify beneficiaries’
needs for the services billed and (2) audit
providers’ cost reports to ensure that
reimbursed costs meet standards for
reasonableness and appropriateness.

The inadequate funding of Medicare’s claims
scrutiny activities has hurt contractors’
efforts to review the medical necessity of
services billed to the program. Contractors
review some portion of their total claims
volume at both the prepayment stage—while
the claims are being processed—and at
postpayment—after the payment checks
have been sent out. Medicare’s review of
home health claims illustrates the effect of
reduced review that resulted from
constraints on the contractors’ payment
safeguard budgets since 1989.

In 1985, legislation more than doubled the
funds available for reviewing home health
and other claims. Contractors reviewed for
medical necessity 62 percent of home health
claims processed in fiscal years 1986 and
1987. In contrast, since 1989, contractors’

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Fee-for-Service Program Risks

claims review target was lowered to 3.2
percent (or even lower, depending on
available resources, to a required minimum
of 1 percent). At the same time, the home
health claims volume more than tripled
between 1989 and 1994, from 5.5 million to
16.6 million.

In 1996, we reported that, because of the
small number of claims selected for review,
home health agencies billing for noncovered
services were less likely to be caught.
Besides covering so few claims, prepayment
reviews of home health claims done at the
contractor’s office are simply paper reviews
and, therefore, limited in their ability to
detect noncovered care. If billing codes
appear valid, forms appear to be filled out
correctly, and the services billed have not
been flagged for additional attention based
on the results of other analyses, the claim
goes through without further scrutiny. In the
case of a large home health organization we
investigated, claims passed review scrutiny
even for visits never made, because
company staff allegedly falsified the medical
records. Contractors have also noticed
instances where the wrong diagnosis has
been put on the claim form to give the
impression that beneficiaries are sicker and

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Fee-for-Service Program Risks

in need of more care than is actually the

The lack of adequate resources also
prevented contractors from conducting
effective postpayment reviews of home
health claims. In Medicare, comprehensive
medical reviews are an essential component
of postpayment reviews of home health
agencies and entail evaluations of claims and
medical records, such as plans of care and
documentation of visits. In 1994, fewer than
1 percent of all Medicare-certified home
health agencies received on-site
comprehensive reviews. Because these
reviews are resource intensive and because
contractors are required to do only 10
annually for all provider types combined—
including outpatient, skilled nursing, and
rehabilitation facilities—a contractor may
not do any for home health agencies if they
account for a relatively small portion of the
contractor’s total claims volume. In fiscal
year 1994, for example, the number of
on-site audits ranged from none to 15 among
the nine contractors responsible for
reviewing home health claims. Declines in
funding also weakened the efforts of
contractors to do prepayment reviews of
part B claims. In 1991, HCFA required
contractors to conduct prepayment reviews

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of 15 percent of part B claims, whereas by
1995 the required level had sunk to
4.6 percent.

A successful HCFA demonstration project,
which we reported on in 1994, helps explain
how adequate funding of part B contractors’
claims review activities can reduce program
losses. In the demonstration, HCFA gave three
part B Medicare carriers a 12-percent
increase in funds to do claims review
activities, while two “comparison” carriers
received no additional funding. Over the life
of the project, each demonstration carrier
saved about twice as much as the two
comparison carriers in the project, or $2.84
per claim compared with $1.34 per claim.
The financial investment in claims review
permitted the demonstration carriers to
employ over twice the number of claims
review staff employed by the comparison
carriers and to employ staff technically
qualified to do data analyses, use four times
more computerized controls to flag
questionable claims for review, and review
before payment nearly four times the volume
of claims.

Another payment safeguard activity impaired
by funding declines involves cost report
audits, which are Medicare’s principal

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Fee-for-Service Program Risks

weapon to fight the shifting of inappropriate
or unnecessary costs to the program.
Providers paid under Medicare’s cost-based
reimbursement systems—such as hospital
outpatient departments, skilled nursing
facilities, and home health agencies—are
reimbursed not on the basis of a fee
schedule or the charge for a service but on
the basis of the actual cost to provide the

Reimbursement to institutional providers
occurs in several steps. First, Medicare
contractors make periodic “interim”
payments based on the provider’s historical
costs and current cost estimates. These
payments help defray the ongoing costs of
providing services to Medicare beneficiaries.
Second, at the end of each year, the
providers submit reports that detail their
operating costs throughout the preceding
year and specify the share related to the
provision of Medicare services. Using this
information, intermediaries make tentative
settlement payments or recover excessive
payments based on the total amount claimed
and the amounts already paid in interim
payments. Third, the intermediary can
conduct a more detailed review of the cost
reports to determine the appropriate final
settlement amounts, but in practice, only a

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                  Fee-for-Service Program Risks

                  fraction of providers is subject to such
                  reviews and the number has declined in
                  recent years. Between 1991 and 1996, the
                  chances, on average, that an institutional
                  provider would be subject to a detailed
                  review fell from about 1 in 6 to about 1 in 13.

                  Furthermore, because of the time needed to
                  schedule and conduct audits, intermediaries
                  can take 2 years or more to make this review
                  and final settlement. Tentative settlements
                  that differ substantially from the amount
                  ultimately determined to be due a provider
                  cause underpayments or excessive payments
                  that can remain outstanding for 2 years or
                  more. When excessive payments occur,
                  Medicare loses interest income because it
                  has less surplus trust fund money to invest in
                  government securities.

Significant       As we noted in reports and testimonies in
Management        recent years, HCFA has been less than
Problems          aggressive in managing the Medicare claims
Remain,           processing function. HCFA has not taken a
Independent of    leadership role, for example, in managing
                  how contractors select the criteria used to
                  identify claims that may not be eligible for
Adequacy Issues   payment or in assisting contractors in this
                  task. In addition, HCFA’s acquisition of a
                  major new claims processing system has

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                     Fee-for-Service Program Risks

                     several flaws that, if not corrected, put the
                     system at risk of not meeting touted
                     expectations. Interim information
                     management activities also pose certain

Absence of           Generally, when contractors process
Coordinated Claims   Medicare claims, the claims are run through
Screening Strategy   computerized screens, or edits, to detect
                     such problems as incomplete or inaccurate
                     provider billing numbers and beneficiary
                     identification numbers, duplicate claims, and
                     beneficiary ineligibility. Contractors have
                     additional “medical necessity” screens that
                     flag claims for not meeting certain diagnosis
                     or frequency-of-treatment criteria and
                     suspend payment until further review. The
                     criteria are established in contractors’
                     medical policies, which, with some
                     exceptions, are developed locally and vary
                     greatly among contractors.

                     HCFA has not systematically aggregated
                     information on contractors’ medical policies
                     or their related use of prepayment screens.
                     As a result, HCFA has not adequately assessed
                     the relative performance of contractors or
                     helped share with all contractors the
                     experience of some in using effective claims
                     screening controls. HCFA’s current approach

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Fee-for-Service Program Risks

is to rely on contractors to focus their
reviews on overutilization problems that are

Our 1995 review of 17 contractors’ use of
medical necessity screens for Medicare’s
high-volume medical procedures illustrates
HCFA’s lack of a coordinated approach. For
example, 10 of the 17 contractors reviewed
lacked screens for echocardiography, which
in fiscal year 1994 was the most costly
diagnostic test in terms of total Medicare
payments and which increased in use
nationwide by over 50 percent between 1992
and 1994. Eleven of the contractors were not
screening colonoscopy claims by the end of
1994, despite the advice of the HHS Inspector
General in 1991 to monitor the use of
colonoscopies and deny claims that were not
indicated by medical symptoms or supported
with documentation. We estimated that
Medicare could have denied at least
$10.5 million in echocardiography payments
and $5.8 million in colonoscopy payments
made in 1993 if just seven contractors that
did not screen these procedures had applied
the medical necessity screens used by the
other contractors. We also estimated that
medical necessity screens for all six
procedures tested—eye exams, chest X rays,
yttrium aluminum garnet (YAG) laser surgery,

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                    Fee-for-Service Program Risks

                    and duplex scan of extracranial arteries in
                    addition to echocardiography and
                    colonoscopy—could have saved Medicare
                    from $29 million to $150 million in payments
                    made by these seven contractors for services
                    that may have been medically unnecessary.
                    The range reflects the variation in
                    contractors’ criteria for identifying medically
                    unnecessary services.

Implementation of   We have also reported in recent years on
Major Claims        HCFA’s acquisition and development of a
Processing System   claims processing system called the
at Risk             Medicare Transaction System. HCFA intends
                    MTS to replace the nine different claims
                    processing systems it currently uses by the
                    year 2000. The goals of MTS are to provide
                    enhanced claims processing capabilities,
                    increased levels of beneficiary and provider
                    service, and greater capabilities to provide
                    program safeguards. Overall, HCFA expects
                    the system to process over 1 billion claims
                    and pay $288 billion in benefits in the year

                    In January 1994 and November 1995, we
                    reported on risks associated with the MTS
                    project. In response to our work, HCFA
                    revised its initial MTS approach from
                    developing and installing the system in a

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Fee-for-Service Program Risks

single stage to developing, testing, and
implementing MTS through a number of
clearly defined system releases, thereby
reducing the potential for problems
stemming from large-scale system failures.
While this new approach should facilitate
managing the MTS project, we identified
critical management and technical risks that
could result in a system that does not meet
HCFA’s needs. First, difficulties in defining
requirements have led HCFA to redirect its
approach to this effort twice. HCFA is now
working to completely define its
requirements. Inadequately defined
requirements could cause technical
problems. Second, HCFA’s MTS development
schedule showed significant overlap among
the various system-development phases.
Progressing with succeeding phases before
the previous phase has been completed also
increases the risk that technical problems
will occur. Finally, our previous review of
HCFA’s cost benefit analysis of MTS found it
flawed and warranting corrections before
HCFA can use it to make effective
management decisions.

HCFAis working on the reported deficiencies.
We plan to evaluate HCFA’s efforts after it
completes this work.

Page 26                         GAO/HR-97-10 Medicare
                    Fee-for-Service Program Risks

Other Potentially   Before MTS is completed, HCFA must oversee
Troublesome         several essential information management
Information         transitions in the Medicare claims
Management Issues   processing environment. One transition
                    involves the shifting of claims processing
                    workloads, either because a contractor, for
                    business reasons, has opted to leave the
                    program or because HCFA will have closed
                    some claims processing sites and moved the
                    work to remaining sites in an upcoming
                    effort to consolidate claims processing. In
                    1992 and 1994, we reported on the
                    consequences of poor planning when HCFA
                    shifted an outgoing contractor’s claims
                    processing workload to another contractor’s
                    automated system. There were serious
                    disruptions in getting claims processed and
                    payments made to physicians, an increase in
                    erroneous payments, and a decrease in
                    payment safeguards that may have resulted
                    in overpayments. In a second transition, to
                    facilitate the implementation of MTS while
                    reducing system maintenance costs, HCFA is
                    planning to convert the contractors’ claims
                    processing systems—currently three part A
                    and six part B systems—into a single part A
                    system and a single part B system. This will
                    involve several major software conversions.
                    A third transition involves the “millennium”
                    problem—revising computerized systems to
                    accommodate the year-digit change to 2000.

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                    Fee-for-Service Program Risks

                    HCFA  does not yet have plans for monitoring
                    contractors’ progress in making their
                    systems “millennium compliant.” Each of
                    these information management transitions
                    will require HCFA’s careful planning and
                    focused attention.

New Health          The outlook for Medicare’s program
Insurance Act,      safeguards budget appears brighter largely
Other Initiatives   due to gradual funding increases provided
Improve HCFA’s      for in the 1996 Health Insurance Portability
Arsenal for         and Accountability Act. In addition,
                    Operation Restore Trust, an HHS antifraud
Fighting Fraud
                    initiative, has been implemented to identify
and Abuse           and recover overpayments from providers
                    who improperly billed Medicare. Other
                    changes underway include HCFA’s improved
                    screening of Medicare providers and more
                    focused attention on both hardware and
                    software aspects of Medicare’s claims
                    processing system. (See table 1.)

                    Page 28                         GAO/HR-97-10 Medicare
                               Fee-for-Service Program Risks

Table 1: Summary of Major Government Initiatives to Improve Medicare
Problem area         Actions taken
Budget for anti-fraud-   Health Insurance Portability and Accountability Act: increases
and-abuse activities     funding to investigate Medicare fraud and abuse and pursue the
                         recovery of inappropriate payments.

                         Operation Restore Trust: multiagency antifraud effort targeting
                         high-use services provides increased funding for a 2-year period.
Prepayment,              HCFA’s contract to acquire commercially developed software:
prevention, and          explores whether the Medicare program can apply off-the-shelf
utilization review       software designed to detect unacceptable or inappropriately
efforts                  coded claims.

                         Los Alamos interagency agreement: the Department of Energy’s
                         Los Alamos, New Mexico, National Laboratory is to provide
                         HCFA with analytical and computer support to develop fraud and
                         abuse detection methods, including enhancements in
                         prepayment claims screening and postpay analyses.

                         National Provider Identifier: HCFA has assigned numbers to
                         every Medicare provider and supplier; effective in 1997, these
                         numbers will be required for Medicare billing purposes.
Contractor               Health Insurance Portability and Accountability Act: makes
management and           HCFA’s authority explicit to contract with companies that
oversight                specialize in utilization review, provider audit, and other
                         safeguard activities to perform these functions for Medicare.

Health Insurance               Most significantly, the Health Insurance
Portability and                Portability and Accountability Act increases
Accountability Act             the funding level for pursuing health care
of 1996                        fraud and abuse, including HCFA’s audit and
                               related activities. For fiscal year 1997, the act
                               boosts the contractors’ budget for program
                               safeguard activities to 10 percent higher than

                               Page 29                              GAO/HR-97-10 Medicare
Fee-for-Service Program Risks

in 1996; by 2003, the level will be 80 percent
higher than for 1996, after which it remains
constant. These additional amounts,
however, will leave per-claim safeguard
expenditures at about one-half the level of
1989 after adjusting for inflation (see fig. 1).

Page 30                         GAO/HR-97-10 Medicare
                                     Fee-for-Service Program Risks

Figure 1: HCFA’s Actual and Projected Per-Claim Program Safeguard Spending,
FYs 1989-2003

100   Costs per Claim (in Cents)











  1989          1991          1993             1995       1997          1999          2001            2003

  Fiscal Year


                                     Source: Justification of Estimates for Appropriations
                                     Committees, Fiscal Year 1996, HHS, HCFA (Washington, D.C.:
                                     1996), section III, p. 58 and Economic Report of the President
                                     (Washington, D.C.: 1996), table B-56, p. 343.

                                     In addition to funding, the act has several
                                     other provisions to improve vigilance over

                                     Page 31                                   GAO/HR-97-10 Medicare
    Fee-for-Service Program Risks

    Medicare benefit dollars, including the

•   It allows HCFA to use additional contractors
    to perform utilization review, provider audit,
    and other safeguard activities as functions
    distinct from basic claims processing
    activities. The act permits HCFA to use
    separate claims processing and utilization
    review entities to avoid any conflict of
    interest and is intended to increase
    accountability and enhance data analysis
•   It establishes a program run jointly by the
    Department of Justice and HHS to coordinate
    federal, state, and local law enforcement
    efforts against fraud in Medicare and other
    health care payers. The program is to be
    funded by a new subaccount in the Medicare
    trust fund and the expenditure offset by
    having fines, forfeitures, and damages
    received as a result of the coordinated
    anti-fraud-and-abuse efforts transferred into
    the trust fund.
•   It calls for greater information-sharing on
    health care fraud and abuse, including the
    establishment of a national health care fraud
    data collection program.
•   It establishes enhanced penalties and
    specifies health care fraud as a separate
    criminal offense.

    Page 32                         GAO/HR-97-10 Medicare
                    Fee-for-Service Program Risks

Operation Restore   Operation Restore Trust is a 2-year antifraud
Trust               initiative involving three HHS agencies—the
                    Office of the Inspector General, HCFA, and
                    the Administration on Aging—as well as the
                    Department of Justice and various state and
                    local agencies. HHS has designated an
                    interdisciplinary project team of federal and
                    state government representatives to target
                    Medicare abuse and misuse in California,
                    Florida, Illinois, New York, and Texas—
                    states that together account for over
                    one-third of all Medicare beneficiaries. The
                    team has focused on three of the fastest-
                    growing spending components: home health,
                    nursing homes, and medical equipment and

                    In its first year, Operation Restore Trust
                    reported recovering $42.3 million in
                    inappropriate payments: $38.6 million were
                    returned to the Medicare trust fund and
                    $3.7 million to the Treasury as a result of
                    these efforts. It also resulted in 46
                    convictions, imposed 42 fines, and excluded
                    119 fraudulent providers. Inspector General
                    officials believe that the major achievement
                    of this initiative will be continued
                    coordination among the various agencies
                    involved and a heightened awareness of the
                    effectiveness of constant vigilance. For
                    example, as a result of improved

                    Page 33                         GAO/HR-97-10 Medicare
                    Fee-for-Service Program Risks

                    coordination between HCFA contractors and
                    state surveyors in the project’s several
                    states, many of the targeted home health
                    agencies were decertified and substantial
                    sums in inappropriate payments were
                    recovered. Operation Restore Trust is
                    scheduled to be closed out as a
                    demonstration project in May 1997.

HCFA’s Efforts to   HCFA  has taken several actions to improve
Adopt Fraud and     Medicare’s fraud detection activities. In a
Abuse Detection     1995 study, we found that commercial
Software            systems, which analyze paid claims for
                    patterns that identify potentially fraudulent
                    providers, could significantly improve HCFA’s
                    ability to detect and prevent potential
                    Medicare fraud. Our study found that
                    Medicare’s largest part B contractor had
                    acquired this type of commercial antifraud
                    technology and identified over $6 million in
                    potentially fraudulent payments. We also
                    noted that although this technology had
                    potential benefits, it was not being widely
                    used in the Medicare program. Recently,
                    HCFA expanded the use of commercial
                    antifraud systems by providing about
                    $1 million to fund this technology at three
                    additional Medicare contractor sites.

                    Page 34                         GAO/HR-97-10 Medicare
Fee-for-Service Program Risks

HCFA  is aggressively pursuing another effort
to strengthen Medicare fraud detection. This
initiative, intended to reduce Medicare’s
vulnerability to fraud, involves an
interagency agreement with the Department
of Energy’s Los Alamos National Laboratory.
This 2-year $6-million interagency agreement
specifically calls for the development of
prepayment antifraud methods that could be
used to produce software suitable for
inclusion in MTS. Because this effort is not
expected to be completed until
September 1997, it is too early to determine
its effect on reducing Medicare fraud.

Finally, HCFA has also taken the initiative to
strengthen Medicare’s payment controls by
awarding a $1.6 million contract to test
commercial software that detects billing
abuse. In another 1995 study, we reported
that commercially available software could
improve HCFA’s ability to prevent losses from
inappropriately coded claims submitted for
payment. In this study, a test using
commercial software programs to detect
code manipulation—one form of billing
abuse—estimated that these programs could
have reduced Medicare costs by over
$600 million annually for 1993 and 1994.
HCFA’s initial plans for this technology are to
assess, customize, and test a commercial

Page 35                         GAO/HR-97-10 Medicare
                    Fee-for-Service Program Risks

                    software package at the Iowa Blue Cross and
                    Blue Shield part B carrier to determine
                    whether the software meets Medicare’s
                    needs and should be considered for
                    inclusion at other sites and in MTS.

National Provider   HCFA  has taken another important step to
Identifier          reduce Medicare’s vulnerability to abusive
                    billing and prevent fraudulent or excluded
                    providers from continuing to bill the
                    program. In May 1996, HCFA extended its
                    existing system of physician identification
                    numbers and registration procedures to new
                    Medicare providers and suppliers. Medicare
                    contractors are now required to verify
                    professional and business license,
                    certification, and registration information,
                    and billing agency and subcontractor
                    agreements. Contractors must also check
                    each owning and managing employee against
                    the HHS Inspector General’s list of currently
                    sanctioned providers and suppliers. Our
                    earlier work identified problems with the
                    completeness of this list, but, if corrected,
                    this check should preclude fraudulent and
                    incompetent providers from billing
                    Medicare. HCFA will assign new identification
                    numbers—National Provider Identifiers—to
                    every provider and supplier in the Medicare
                    program and, effective February 1997, will

                    Page 36                         GAO/HR-97-10 Medicare
Fee-for-Service Program Risks

require the use of these numbers for billing
purposes. The numbers will be unique to
each provider or supplier and will stay with
them for the length of their Medicare
participation regardless of relocations or
changes in medical specialties.

Page 37                         GAO/HR-97-10 Medicare
Managed Care Program Risks

            Most recent legislative proposals to reform
            Medicare would expand the program’s use of
            prepaid health plans. Risk contract HMOs,
            Medicare’s principal managed care option,
            are one version of these plans. They
            currently enroll about 10 percent of
            Medicare’s population and have shown rapid
            enrollment growth in recent years. The
            Congressional Budget Office projects that,
            under one Medicare reform scenario,
            enrollment in risk HMOs and other prepaid
            plans could grow to 25 percent of all
            Medicare beneficiaries by 2002. Because
            prepayment of health benefits has helped
            private sector payers contain health care
            costs and limit the excess utilization
            encouraged by fee-for-service
            reimbursement, prepaid plans have
            cost-control appeal for Medicare, while
            offering potential advantages to

            However, our recent studies reveal
            shortcomings in Medicare’s risk contract
            program that affect both taxpayers and
            beneficiaries. First, due to difficulties in
            establishing capitation rates, Medicare each
            year overpays some HMOs, thereby needlessly
            spending at least hundreds of millions of
            dollars annually from the program’s trust
            funds. Second, HCFA has not adequately

            Page 38                   GAO/HR-97-10 Medicare
                Managed Care Program Risks

                enforced or kept beneficiaries apprised of
                HMOs’ compliance with federal standards and
                other pertinent information about HMOs.

Growing         The Medicare risk contract program is
Enrollment in   designed to limit the federal government’s
HMOs            financial liability for covering health care
Compounds       costs. To do this, Medicare pays the risk
                HMOs it contracts with a flat, per-beneficiary
Problem of
                fee, regardless of whether the HMO spends
                more or less for each enrollee’s care. This
Payments        capitated payment method breaks the
                linkage between payment and usage.
                However, a deficiency in Medicare’s formula
                for setting HMO payment rates keeps the
                government from realizing managed care’s
                potential savings. As with most financing
                problems, the devil is in the details; a
                simplified view of the problem follows.

                HMOs tend to attract Medicare beneficiaries
                whose need for costly care when joining is
                low. In this way, HMOs are said to attract a
                “favorable selection” of Medicare
                beneficiaries. The formula includes a crude
                “risk adjustor” to correct for favorable
                selection, but it is not precise enough to
                account for its full effect. HCFA analysts as
                well as independent researchers
                acknowledge this problem, and studies of

                Page 39                      GAO/HR-97-10 Medicare
Managed Care Program Risks

the favorable selection phenomenon have
been conducted for over a decade. However,
determining exactly how much less costly
new HMO enrollees are compared to fee-
for-service beneficiaries is difficult and
complicated, thwarting efforts to devise a
formula that will make adjustments precise
enough to reflect enrollees’ better health

When several studies reporting this problem
appeared roughly a decade ago, less than 3
percent of Medicare beneficiaries were
enrolled in risk contract HMOs. Today,
however, such enrollment is much higher
and in some parts of the country, growing
rapidly. In just 2 years—between
August 1994 and August 1996—the number
of risk HMOs nationwide rose from 141 to 229
and enrollment in these HMOs grew by over
80 percent, from about 2.1 million to
3.8 million beneficiaries.

Research on improved payment methods has
failed to develop an administratively feasible
system of adjusting payments to eliminate
the problem of excessive payments.
However, in a forthcoming report we discuss
a method that would at least lower the
excess payments made to some HMOs. Unlike
other formula adjustment methods being

Page 40                      GAO/HR-97-10 Medicare
                   Managed Care Program Risks

                   developed today, this method is one that
                   HCFA could implement right away. It is not
                   designed to eliminate all the excess paid to
                   each HMO for their healthier-than-average
                   beneficiaries. Therefore, HCFA’s
                   implementation of this method would not
                   likely result in underpaying any one HMO.
                   Immediate implementation could save
                   Medicare hundreds of millions of dollars

HCFA Has Been      In 1995, we reported on the need for HCFA to
Lax in Enforcing   be a more active agent for beneficiaries
HMO                enrolling in Medicare HMOs. Despite efforts
Requirements,      to improve its HMO monitoring, HCFA
While Not          conducted only paper reviews of HMOs’
                   quality assurance plans, examining only the
                   description rather than the implementation
Beneficiaries      of HMOs’ quality assurance processes.
Adequately         Moreover, the agency was reluctant to take
Informed           action against HMOs that subjected
                   beneficiaries to abusive sales practices,
                   unduly delayed beneficiaries’ appeals of
                   HMOs’ decisions to deny coverage, or
                   exhibited patterns of poor quality care.

                   Historically, HCFA has been unwilling to place
                   sanctions against HMOs, even those it cites
                   repeatedly for violations found during site
                   monitoring visits. In 1988, 1991, and 1995, we

                   Page 41                      GAO/HR-97-10 Medicare
Managed Care Program Risks

reported on the agency’s pattern of
ineffective oversight of HMOs violating
federal standards. In the case of one Florida
HMO, for example, HCFA found—in 1991, 1992,
1994, and 1996—some combination of
deficiencies in marketing, enrollment, quality
assurance systems, grievance and appeals
procedures, and access to health services.
Despite the repeated findings of standards
violations at this HMO, HCFA’s strongest
regulatory action was to require, after each
inspection, a corrective action plan.

HCFA  also misses the opportunity to
supplement its regulatory efforts by not
keeping the Medicare beneficiary population
well-informed about competing HMOs. As we
reported in 1996, HCFA has a wealth of data,
collected for program administration and
contract oversight purposes, that it does not
package or disseminate for consumer use.
For example, HCFA does not provide
beneficiaries with any of the comparative
consumer guides that the federal
government and other employer-based
health insurance programs routinely
distribute to their employees and retirees.
Such guides are typically summary charts
comparing the benefit packages and
premium rates of available area plans.
Instead, HCFA collects information only for

Page 42                      GAO/HR-97-10 Medicare
Managed Care Program Risks

its internal use—records of each HMO’s
premium requirements and benefit offerings,
disenrollment data (monthly reports
specifying for each HMO the number of
beneficiaries that joined and left that
month), records of enrollees’ complaints,
and results of certification visits to HMOs.

Public disclosure of such comparative
information as disenrollment rates could
help beneficiaries choose among competing
HMOs and encourage HMOs to do a better job
of marketing their plans and serving
enrollees. Because Medicare beneficiaries
enrolled in HMOs can, each month, switch
plans or return to fee-for-service, comparing
plans’ disenrollment rates can suggest
beneficiaries’ relative satisfaction with
competing HMOs. Our 1996 analysis of HCFA’s
disenrollment data showed that Medicare
HMOs’ ability to retain beneficiaries varied
widely among HMOs in the same market.

The substantial variation we found in the
rate at which beneficiaries disenrolled from
plans within the first 3 months of joining
suggested that some HMOs do a better job
than others of representing their plans to
potential enrollees. Similarly, the HHS
Inspector General found, in a 1991 study of
one market’s plans, that beneficiaries from

Page 43                      GAO/HR-97-10 Medicare
                    Managed Care Program Risks

                    the plan with the highest rate of
                    disenrollment within a year were much more
                    likely than other plans’ enrollees to
                    misunderstand either that they were in an
                    HMO or that they were restricted in provider

New Health          HCFA acknowledges the problems that persist
Insurance Act,      in Medicare’s risk contract program. To
Other Initiatives   tackle the difficulties in setting capitation
Intended to         rates, HCFA has been conducting several
Address Risk        demonstration projects that examine ways
                    to modify or replace the current method of
Contract Program
                    determining HMO payment rates. In addition,
Problems            the Health Insurance Portability and
                    Accountability Act amended HCFA’s sanction
                    authority in cases where HMOs have not
                    complied with federal standards. Finally,
                    HCFA is developing several consumer
                    information efforts, including the
                    dissemination of comparative information on
                    competing HMOs, a beneficiary satisfaction
                    survey, and a requirement for HMOs to report
                    on aspects of patient care.

                    Page 44                      GAO/HR-97-10 Medicare
                            Managed Care Program Risks

Table 2: Summary of Major Government Initiatives to Improve Medicare Managed
Problem area         Actions taken
HMO payment rates     HCFA demonstrations underway to improve risk adjustment or
                      find alternative HMO payment methods include (1) research on
                      two health status measures to determine their potential to
                      account more precisely for favorable selection and (2) proposed
                      use of competitive bids to establish HMO payment rates; now
                      seeking a test site.
Efforts to regulate   Health Insurance Portability and Accountability Act: clarifies and
HMOs                  extends the conditions under which HCFA can impose
                      intermediate sanctions.
Publication of        HCFA plans electronic posting of comparative information.
information           HCFA is developing standard member satisfaction survey that
on competing HMOs     some HMOs are required to administer as of January 1997.

                      Independent HMO industry organization has developed
                      Medicare-specific clinical effectiveness measures of HMO
                      performance; HCFA requires HMOs, as of January 1997, to
                      report data related to these measures; HCFA intends to publish

Health Insurance            The Health Insurance Portability and
Portability and             Accountability Act gives HCFA more flexible
Accountability Act          sanction authority while providing HMOs the
                            statutory right to greater procedural
                            safeguards. In addition to existing authority
                            to terminate an HMO’s contract if the HMO did
                            not meet requirements, HCFA now has the
                            option of imposing lesser sanctions, such as
                            suspending the HMO’s right to enroll
                            Medicare beneficiaries until the deficiencies
                            are corrected. Before imposing a sanction,

                            Page 45                              GAO/HR-97-10 Medicare
                        Managed Care Program Risks

                        however, HCFA is required to provide the HMO
                        with a reasonable opportunity to develop
                        and implement a corrective action plan.
                        Before the act made this a requirement, HCFA
                        routinely requested corrective action plans
                        of HMOs that violated federal standards.

Electronic Posting of   HCFA  has plans to produce HMO comparison
Comparative             charts that will initially specify HMO costs
Information             and benefits covered and later may also
                        include other plan-specific information—
                        such as the results of HMOs’ satisfaction
                        surveys. HCFA expects advocates and
                        insurance counselors, not beneficiaries, to
                        be the primary users of this information.
                        HCFA plans to make the charts “available to
                        any individual or organization with
                        electronic access,” because “the materials
                        will primarily reside in an electronic format,
                        which is easily updatable and economical.”
                        Providing the information in an electronic
                        format, however, rather than in print, may
                        make it less accessible to the very
                        individuals who would find it useful. The
                        information, according to HCFA, will have to
                        be “downloaded and customized for local

                        Page 46                      GAO/HR-97-10 Medicare
                      Managed Care Program Risks

Beneficiary           HCFA is developing a standard survey,
Satisfaction Survey   through HHS’ Agency for Health Care Policy
                      and Research, to obtain beneficiaries’
                      perceptions of their managed care plans.
                      This effort aims to standardize surveys and
                      report formats to yield comparative
                      information about, for example, enrollees’
                      experiences with access to services,
                      interactions with providers, continuity of
                      care, and perceived quality of care. HCFA
                      does not expect preliminary results before
                      the end of 1997.

Other                 HCFA   is working with the managed care
Consumer-Oriented     industry, other purchasers, providers, public
Information           health officials, and consumer advocates to
Initiatives           develop a new version of the Health Plan
                      Employer Data and Information Set (HEDIS
                      3.0) that will incorporate measures relevant
                      to the elderly population. The measures will
                      enable comparisons to be made among plans
                      of the enrollees’ use of such prevention and
                      screening services as flu shots,
                      mammography, and eye exams for diabetics.
                      As of January 1997, Medicare HMOs are
                      required, from the time they renew their
                      contract, to report on HEDIS 3.0 clinical
                      effectiveness measures. HCFA intends to
                      summarize the results and include them in
                      comparability charts being developed. HCFA

                      Page 47                      GAO/HR-97-10 Medicare
Managed Care Program Risks

is also working with the Foundation for
Accountability, an independent organization
composed of consumers and public and
private health care payers, to develop more
patient-oriented measures of health care
quality. This may require new data collection
efforts by plans, and its implementation may
therefore be years away.

Page 48                      GAO/HR-97-10 Medicare
What Needs to Be Done

            Adequate funding of anti-fraud-and-abuse
            activities coupled with strong HCFA oversight
            of its fee-for-service and managed care
            contracts constitute the foundation for
            managing a program that is permanently
            vulnerable to exploitation. The Health
            Insurance Portability and Accountability Act
            puts the cornerstone of this foundation in
            place by providing HCFA an opportunity both
            to stabilize its scrutiny of Medicare claims
            and more effectively regulate risk contract
            HMOs. In addition, the successful
            implementation of MTS is expected to help
            address various Medicare problems,
            including better controls over fraud and
            abuse. However, HCFA needs to mitigate the
            risks associated with the acquisition of this
            system. As HCFA faces this challenge as well
            as those presented by the growing and
            complex Medicare program, it needs to
            apply continued vigilance over day-to-day
            operations, make additional technological
            improvements, and exhibit strong leadership
            to effectively manage the program, thereby
            controlling the risks to both the taxpayers
            and beneficiaries.

            Page 49                    GAO/HR-97-10 Medicare
Related GAO Products

Medicare          Fraud and Abuse: Providers Excluded From
Fee-for-Service   Medicaid Continue to Participate in Federal
                  Health Programs (GAO/HEHS-96-205, Sept. 5,

                  Medicare: Private Payer Strategies Suggest
                  Options to Reduce Rapid Spending Growth
                  (GAO/T-HEHS-96-138, Apr. 30, 1996).

                  Medicare: Home Health Utilization Expands
                  While Program Controls Deteriorate
                  (GAO/HEHS-96-16, Mar. 27, 1996).

                  Medicare: Millions Can Be Saved by
                  Screening Claims for Overused Services
                  (GAO/HEHS-96-49, Jan. 30, 1996).

                  Fraud and Abuse: Providers Target Medicare
                  Patients in Nursing Facilities (GAO/HEHS-96-18,
                  Jan. 24, 1996).

                  Medicare Transaction System: Strengthened
                  Management and Sound Development
                  Approach Critical to Success
                  (GAO/T-AIMD-96-12, Nov. 16, 1995).

                  Fraud and Abuse: Medicare Continues to Be
                  Vulnerable to Exploitation by Unscrupulous
                  Providers (GAO/T-HEHS-96-7, Nov. 2, 1995).

                  Page 50                     GAO/HR-97-10 Medicare
Related GAO Products

Medicare Spending: Modern Management
Strategies Needed to Curb Billions in
Unnecessary Payments (GAO/HEHS-95-210,
Sept. 19, 1995).

Medicare: Antifraud Technology Offers
Significant Opportunity to Reduce Health
Care Fraud (GAO/AIMD-95-77, Aug. 11, 1995).

Medicare: Excessive Payments for Medical
Supplies Continue Despite Improvements
(GAO/HEHS-95-171, Aug. 8, 1995).

Medicare: Allegations Against ABC Home
Health Care (GAO/OSI-95-17, July 19, 1995).

Medicare: Commercial Technology Could
Save Billions Lost to Billing Abuse
(GAO/AIMD-95-135, May 5, 1995).

Medicare and Medicaid: Opportunities to
Save Program Dollars by Reducing Fraud
and Abuse (GAO/T-HEHS-95-110, Mar. 22, 1995).

Medicare: High Spending Growth Calls for
Aggressive Action (GAO/T-HEHS-95-75, Feb. 6,

Medicare: Inadequate Review of Claims
Payments Limits Ability to Control Spending
(GAO/HEHS-94-42, Apr. 28, 1994).

Page 51                     GAO/HR-97-10 Medicare
               Related GAO Products

               Medicare: Greater Investment in Claims
               Review Would Save Millions (GAO/HEHS-94-35,
               Mar. 2, 1994).

               Medicare: New Claims Processing System
               Benefits and Acquisition Risks
               (GAO/HEHS/AIMD-94-79, Jan. 25, 1994).

Medicare       Medicare: HCFA Should Release Data to Aid
Managed Care   Consumers, Prompt Better HMO Performance
               (GAO/HEHS-97-23, Oct. 22, 1996).

               Medicare Managed Care: Growing
               Enrollment Adds Urgency to Fixing HMO
               Payment Problem (GAO/HEHS-96-21, Nov. 8,

               Medicare: Increased HMO Oversight Could
               Improve Quality and Access to Care
               (GAO/HEHS-95-155, Aug. 3, 1995).

               Medicare: Changes to HMO Rate Setting
               Method Are Needed to Reduce Program
               Costs (GAO/HEHS-94-119, Sept. 2, 1994).

               Page 52                    GAO/HR-97-10 Medicare
1997 High-Risk Series

             An Overview (GAO/HR-97-1)

             Quick Reference Guide (GAO/HR-97-2)

             Defense Financial Management (GAO/HR-97-3)

             Defense Contract Management (GAO/HR-97-4)

             Defense Inventory Management (GAO/HR-97-5)

             Defense Weapon Systems Acquisition

             Defense Infrastructure (GAO/HR-97-7)

             IRS Management (GAO/HR-97-8)

             Information Management and Technology

             Medicare (GAO/HR-97-10)

             Student Financial Aid (GAO/HR-97-11)

             Department of Housing and Urban
             Development (GAO/HR-97-12)

             Department of Energy Contract Management

             Page 53                     GAO/HR-97-10 Medicare
1997 High-Risk Series

Superfund Program Management

The entire series of 14 high-risk reports
can be ordered by using the order
number GAO/HR-97-20SET.

Page 54                  GAO/HR-97-10 Medicare
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