oversight

Medicare: HCFA Can Reduce Paperwork Burden for Physicians and Their Patients

Published by the Government Accountability Office on 1990-06-20.

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

                                United   States   General   Accounting   Office

                                Report to Congressional Requesters                ,.



;,. June 1990
_/
                                MEDICARE
                                HCFA Can Reduce
                                Paperwork Burden for
                                Physicians and
                i               Their Patients




                    RESTRICTED --Not      to be released outaide the
                    GeneraI Accounting Office unless speci&aQ
                    approved by the Oflke of Congressional
                    Relationa
Human Resources Division

B-239530

June 20.1990

Congressional       Requesters:’

In response to your request, this report addresses ways the Health Care Financing
Administration should reduce the Medicare part B paperwork burden on health care
providers and the elderly.

Unless you publicly announce the report’s contents earlier, we plan no further distribution of
this report for 30 days. At that time we will provide copies to the Secretary of Health and
Human Services, the Director of the Office of Management and Budget, and other interested
parties.

You may reach me on (202) 275-5451 if you or your staff have any questions. Major
contributors to this report are listed in appendix IV.

Sincerely yours,




Janet L. Shikles
Director, Health Financing
   and Policy Issues




‘The requesters of this report are listed in appendix 1.
Executive Surnm~


                   The paperwork required to process claims under the Medicare program
Purpose            is burdensome and confusing to many of Medicare’s beneficiaries, as
                   well as to providers of Medicare-covered services. A number of Members
                   of Congress asked GAO to study the paperwork required in the claims
                   process for Medicare part B. GAO reviewed the process to determine
                   whether

                   opportunities exist to help providers submit complete claims,
                   notices to beneficiaries explain claims decisions clearly, and
                   electronic services, such as electronic mail, could reduce paperwork.

                   GAO selected these areas for review because they showed significant
                   potential for (1) reducing Medicare paperwork and (2) improving com-
                   munications between beneficiaries, providers, and Medicare contractors.


                   Medicare insures 33 million elderly and disabled Americans and
Background         processes over 400 million part B claims annually. The Health Care
                   Financing Administration (HCFA) pays contractors to (1) process and pay
                   claims for Medicare benefits and (2) send benefit notices of payment
                   decisions to beneficiaries and providers.

                   Representatives of provider and beneficiary organizations have
                   expressed concern about the complexity and burden of the Medicare
                   claims process. The findings of government and provider organization
                   surveys indicate three areas of particular concern: First, there are indi-
                   cations that neither beneficiaries nor providers are clear about what
                   information is required on claims forms. If claims are not completed cor-
                   rectly before filing, contractors must ask claimants for additional infor-
                   mation, resulting in delays and more paperwork. Second, benefit notices
                   to beneficiaries, concerning actions taken on their claims, are unclear.
                   1Jnclear notices can result in increased frustration with the claims pro-
                   cess; they also redme the usefulness of the notice as an internal control
                   against provider frartd or error. Third, surveys have found that pro-
                   viders find communications with contractors, to obtain information
                   about their claims, frustrating and burdensome.


                   Millions of incomplete Medicare claims forms are filed each year, and
Results in Brief   HCFA'S contractors must ask providers or beneficiaries for the missing
                   information. Incomplete claims impose a paperwork burden on provid-
                   ers and beneficiaries. delay payments, and increase Medicare’s adminis-
                   trative costs. IICPXc.ould alleviate these problems by identifying


                   Page 2                         GAO/HRD-90-86   HCFA Can Reduce Medicare   Paperwork
                              Exwxtive   Summary




                              effective techniques for obtaining complete and accurate claims
                              information.

                              The benefit notices HCFA contractors send to beneficiaries, explaining
                              claims decisions, are ineffective-unclear     and lacking essential informa-
                              tion. As a result, (1) beneficiaries are poorly informed of the actions
                              Medicare contractors have taken on their claims and (2) the effective-
                              ness of the notice, as a means to detect provider fraud or error, is
                              diminished.

                              Electronic services, such as electronic mail and automated filing, could
                              help ease the paperwork burden and administrative costs to providers
                              and contractors; these sclrvices could also reduce payment time.



Principal Findings

Incomplete Claims             Each year, beneficiaries and providers file millions of incomplete claims
Increase Costs and            forms (45 million during fiscal year 1989) with HCFA'S contractors. Much
                              of the missing information is basic data that identify the beneficiaries or
Paperwork                     the services provided. Correspondence to obtain this information incurs
                              administrative costs, delays payment, and creates more paperwork. (See
                              pp. 13-14.)

                              The efforts of a IICFA contractor GAO visited suggest one way to address
                              the incomplete claims problem. This contractor targets its educational
                              program to providers that consistently file incomplete claims. The pro-
                              gram appears to have significantly reduced the number of incomplete
                              claims. (See pp. 14-l 5. j

                              Efforts to educate providers are all the more worthwhile in light of the
                              Omnibus Budget Reconciliation Act (OBRA) of 1989, which requires pro-
                              viders to complete and file all Medicare claims for their patients, as of
                              September 1, 1990. (See p. 15.)


Ineffective Benefit Notices   The Medicare benefit notices explain the following to beneficiaries: what
                              services the contractor approved; how much Medicare paid; and who
                              the payment is made to. GAOfound that descriptions of services were
                              vague; provider namtbs cm notices were not always specific enough to



                              Page 3                          GAO/HRD-90436 HCFA Can Reduce Medicare Paperwork
                          identify the actual provider; and other information was incomplete, con-
                          fusing, or unnecessary. As a result, beneficiaries do not always under-
                          stand what actions were taken on their claims and paperwork increases
                          if they request clarification. (See pp. 17-25.)

                          The benefit notices may be the first notices beneficiaries receive for
                          claims providers have filed; these notices therefore are an opportunity
                          for beneficiaries to verify that they received the services providers
                          billed. Moreover, many contractors do not send beneficiaries notices
                          when they approve payment on certain claims. As a result, the effec-
                          tiveness of benefit notices as a means to detect provider fraud or error is
                          undercut (See p. 25.)

                          HCFA  does not monitor the effectiveness of benefit notices. Without sur-
                          veying beneficiaries, for example, HCFA cannot ascertain the (1) clarity
                          of the benefit notices or (2) inclusion of information essential to benefi-
                          ciaries. In addition, contractor practices for notifying beneficiaries of
                          Medicare payments to providers are, in many cases, contrary to IICFA
                          policy. (See pp. 26-27.)


Reducing Costs and        By increasing electronic services, such as electronic claims filing, HCFA
Paperwork by Electronic   could reduce providers’ costs and paperwork, as well as Medicare’s
                          administrative costs. Contractors can process an electronic claim for 35
Services                  cents less than a paper claim. Because ORRA now requires HCFA to
                          encourage and develop a system that can pay electronic claims faster,
                          electronic filing should increase. In spite of the potentially high cost of
                          the computer systems needed to file claims electronically, GAO found
                          that some contractors and commercial insurers have already developed
                          systems that make electronic filing available to more providers. (See
                          pp. 29-31.)

                          HCFA  could also simplify the claims process by encouraging electronic,
                          rather than mail and telephone, communications between providers and
                          contractors. GAO found that some contractors already offer electronic
                          options, such as systems that allow providers to determine the status of
                          claims, thus reducing costs for correspondence, telephone inquiries, and
                          associated delays. HCFA, however, believes electronic communications
                          would be too costly. (See pp. 32-34.)




                          page4                           GAO/HRD-90-66HCFACanReduceMedicarePspenvork
                     ExecutiveSummary




                     GAO  recommends that the Secretary of Health and Human Services
Recommendations to   direct the IICFA Administrator to assume greater leadership in reducing
the Secretary of     the paperwork burden created by the Medicare claims process. (See
Health and Human     pp. 16, 27-28, and 35.)

Services

                     HCFA  agrees that reducing paperwork for physicians and their Medicare
Agency Comments      patients is a worthy objective and reported a number of steps it is plan-
                     ning or taking to clarify or reduce program paperwork. HCFA also agrees
                     that further automation of the claims process, through electronic com-
                     munications, will reduce paperwork for physicians; in addition, HCFA
                     noted a number of actions that will be taken to promote greater use of
                     electronic communications. (See app. III.)




                     Page5
Contents


Executive Summary                                                                                         2

Chapter 1                                                                                              8
Introduction              Background                                                                   8
                          Processing of Part B Claims                                                  8
                          Concerns About the Medicare Claims Process                                  10
                          Objectives, Scope, and Methodology                                          11

Chapter 2                                                                                             13
Helping Providers         Millions of Claims Incomplete and Require Additional                        13
                                Information
Improve Medicare          Targeted Education May Result in More Complete Claims                       14
Claims Submitted          Conclusions                                                                 15
                          Recommendation to the Secretary of Health and Human                         16
                                Services
                          Agency Comments and Our Evaluation                                          16

Chapter 3                                                                                             17
Benefit Notices Sent to   Notices Serve Several Purposes                                              17
                          Benefit Notices Do Not Clearly Communicate Claims                           18
Beneficiaries Need to          Decisions
Be More Clear             Carriers and Beneficiary Organizations Agree That                           26
                               Notices Are Confusing
                          HCFA Has Not Adequately Addressed Notice Problems                           26
                          Conclusions                                                                 27
                          Recommendations to the Secretary of Health and Human                        27
                               Services
                          Agency Comments and Our Evaluation                                          28

Chapter 4                                                                                             29
Expanded Use of           Increased Electronic Claims Filing Can Promote                              29
                               Efficiency
Electronic                HCFA Has Not Encouraged Electronic Links Between                            32
Technologies Could             Carriers and Providers
Streamline the Claims     Conclusions                                                                 34
                          Recommendations to the Secretary of Health and Human                        35
Process                        Services
                          Agency Comments and Our Evaluation                                          35

Appendixes                Appendix I: List of Congressional Requesters                                36


                          Page 6                       GAO/HRD96-66   HCFA Can Reduce Medim   Paperwork
          contents




          Appendix II: Scope and Methodology                                          38
          Appendix III: Comments From the Department of Health                        40
              and Human Services
          Appendix IV: Major Contributors to This Report                              46

Figures   Figure 1.1: Steps in the Part B Claims Process                              10
          Figure 3.1: First Example of a Benefit Notice                               20
          Figure 3.2: Second Example of a Benefit Notice                              23




          Abbreviations

          ASIM       American Society of Internal Medicine
          GAO        General Accounting Office
          IICFA      Health Care Financing Administration
          NEIC       National Electronic Information Corporation
          0BH.A      Omnibus Budget Reconciliation Act of 1989


          Page 7                        GAO/HRD.9o-66 HCFA Can Reduce Medicare Paperwork
Introduction


                       Medicare contractors annually process hundreds of millions of claims
                       from health care providers or Medicare beneficiaries. Providers and ben-
                       eficiaries report that paperwork involved in this process is often bur-
                       densome and confusing. A number of Members of Congress asked GAO to
                       (1) study the issue of the paperwork associated with the Medicare pro-
                       gram and (2) identify ways to streamline the claims process.’


                       Medicare is a federal health insurance program authorized by title XVIII
Background             of the Social Security Act (beginning at 42 U.S.C. 1395) that covers (1)
                       most Americans 65 years of age or older and (2) certain Americans
                       under 65 years of age who are disabled or have chronic kidney disease.
                       The Health Care Financing Administration (HCFA), in the Department of
                       Health and Human Services, administers Medicare and establishes the
                       regulations and policies under which the program operates.

                       Medicare part A, Hospital Insurance for the Aged and Disabled, prima-
                       rily covers services furnished by hospitals, home health agencies, and
                       skilled nursing facilities; part B, Supplementary Medical Insurance for
                       the Aged and Disabled, primarily covers physician services. In fiscal
                       year 1989, Medicare paid an estimated $58.4 billion for services under
                       part A and $37.5 billion under part B, insuring about 33 million people
                       in total.

                       We have focused our work on part B claims since they (1) involve a
                       higher volume of claims than part A and (2) affect more beneficiaries
                       and health care providers.


                       To administer Medicare part B, IKFA pays 34 contractors (consisting of
Processing of Part B   Blue Cross and Illuc Shield organizations and commercial insurance com-
Claims                 panies), referred to as carriers, to process and pay claims.’ These claims
                       are submitted in two ways: (1) assigned-that is, the physician or sup-
                       plier submits the claim and is paid by the carrier or (2) unassigned-
                       that is, the beneficiary or, sometimes, the physician, as a service to the




                       ‘Appendix 1 lists all n’questrrs

                       “Although some part H claims are processed by part A contractors, this report addresses the carrier
                       part B process only since m-rim process the vast majority of part B claims.



                       Page 8                                   GAO/HRD-90-86     HCFA Can Reduce Medicare       Paperwork
Chapter 1
Introduction




beneficiary, submits the claim to the carrier, which then pays the bene-
ficiary. In fiscal year 1989, about 80 percent of claims were assigned.:!

After a beneficiary or provider submits a claim, a carrier reviews it to
determine whether (1) the beneficiary is eligible for Medicare benefits
and (2) the services are covered and medically necessary. On the basis
of this review, the carrier determines whether (1) the claim should be
paid or denied or (2) more information is needed to make a decision. To
request this additional information, a carrier generally sends a letter to
either the beneficiary or the provider. When the carriers determine that
claims should be paid, they also determine the amount Medicare will
pay.

A carrier notifies the beneficiary and provider of the action taken on an
assigned claim, using the Medicare form “Your Explanation of Medicare
Benefits” (in this report, called a benefit notice) for beneficiaries and a
summary voucher form for providers. For unassigned claims, notice is
generally sent only to the beneficiary. In fiscal year 1989, carriers
processed 411 million claims, sending the beneficiaries benefit notices
for almost every one, thus making the notice one of the most prominent
parts of the paperwork in the Medicare program. This process is shown
in figure 1.1.




‘IJnder the Omnibus Budget Reconciliation Act (OBRA) of 1989 (P.L. 101.239), health care providers
will be required, beginning September 1, 1990, to complete and file all Medicare claims for their
patients, whether the claim is assigned or unassigned.



Page 9                                  GAO/HRD.96-86 HCFA Can Reduce Medicare Papwwwrk
                                         Chapter 1
                                         Introduction




Figure 1.1: Steps in the Part S Claims
Process




                                            Assigned Claims




                                           Unassigned Claims




                                         Recent studies raise concerns about the burden of paperwork in the
Concerns About the                       claims process for Medicare. First, there are indications that neither
Medicare Claims                          beneficiaries nor providers are clear about what information is required
Process                                  on claims forms. In September 1989, the Physician Payment Review
                                         Commission reported that of the nearly 2,000 beneficiaries who
                                         responded to its survey, about 9 percent had paid medical bills out-of-
                                         pocket during the past year rather than file a claim with Medicare.l For
                                         beneficiaries with unsubmitted claims exceeding $75 for the past year,
                                         the reason most often reported was that filing a claim is too complicated

                                         ‘Physician Payment Review Cmnmission, Background Paper 89.1-Assignment and the Pamcipating
                                         Physician Program: An Analysis of Fkneficiary Awareness. Understanding, and Experience
                                         (Sept. 1989).



                                          Page 10                             GAO/HRD-90-86   HCFA Can Reduce Medicare   Paperwork
                             Chapter 1
                             Introduction




                             and time-consuming. On the basis of a 1987 survey, the American Soci-
                             ety of Internal Medicine (ASIM) reported that about 71 percent of its phy-
                             sician members surveyed believed Medicare requires unnecessary
                             documentation.”

                             Second, the Medicare benefit notices sent to beneficiaries do not commu-
                             nicate information clearly. The Physician Payment Review Commission
                             reported in 1989 that beneficiaries were having difficulty understanding
                             the notices. The commission surveyed a sample of beneficiaries, sending
                             each a notice for an unassigned claim and asking questions about it. The
                             commission found that (1) 66 percent of the respondents could not
                             determine beneficiary liability; (2) 69 percent could not identify
                             whether the provider participated in the Participating Physician and
                             Supplier Program;i’ and (3) 43 percent could not figure out whether the
                             annual deductible had been met.

                             Finally, the 1987 ASIM survey indicates that communications between
                             carriers and physicians can be difficult and frustrating. Of the physi-
                             cians ASIM surveyed, about 76 percent reported difficulty reaching a car-
                             rier by telephone to obtain information; 63 percent reported incidents in
                             which carriers did not respond to letters within 6 weeks; and 60 percent
                             reported incidents in which carriers did not respond to letters at all.
                             Focusing on physicians that have decided to be nonparticipating physi-
                             cians, ASIM reported that a major reason for nonparticipation, many phy-
                             sicians said, was that inquiries and appeals are inefficiently handled.
                             Although ASIM has not updated its survey since 1987, an ASIM official
                             told us that many of the problems noted in the 1987 survey still exist.


                             As agreed with the congressional requesters, GAO’s overall objective was
Objectives, Scope, and       to identify ways to (1) clarify or reduce paperwork in the Medicare
Methodology                  part B program and (2) streamline the claims process. On the basis of
                             discussions with congressional staff, we agreed to determine whether

                         l opportunities exist to help providers submit complete claims;
                         . benefit notices sent to beneficiaries explain carrier decisions clearly; and
                         0 electronic services, such as electronic mail, could reduce paperwork.

                             ‘American Society of Internal Medwine. 1987 Carrier Accountability Monitoring Project: A Survey of
                             ASIM Members’ Experience With Medicare Carriers

                             “The Congress created this program under the Deficit Reduction Act of 1984 (P.1,. 98-369). In return
                             for agreeing to accept assignment, participating physicians and suppliers recewe faster payment
                             along with other benefits.



                              Page 11                                  GAO/HRD9@86 HCFA Can Reduce Medicare Paperwork
Chapter     1
Introduction




GAO       selected these three areas to examine because they showed signifi-
cant potential for realizing our objective. We reviewed the first area
because requesting additional information increases paperwork, delays
payment to beneficiaries and providers, and results in added costs to the
Medicare program. We reviewed the second area because beneficiaries
and organizations representing the elderly have cited the benefit notice
as a major reason for beneficiary confusion and frustration with the
Medicare program. When beneficiaries do not understand the actions
taken on their claims by carriers, they may write or call Medicare carri-
ers for clarification, thus increasing program administrative costs. We
reviewed the third area because electronic services could facilitate
paperless and more efficient communications between providers and
carriers.

We did our work at HCFA'S headquarters in Baltimore, three HCFA
regional offices, three Medicare carriers, and three commercial health
insurance companies. On certain aspects of the claims process, we also
solicited the views of the 31 Medicare carriers that we did not visit. In
addition, we contacted individual providers and groups representing
them or the elderly, hereafter referred to as provider or beneficiary
organizations.

During our work, we did the following: held discussions with officials of
HCFA, three carriers, and three commercial insurance companies;
reviewed HCFA'S guidance to its carriers; discussed HCFA'S monitoring of
carrier activities with IICFA officials; and analyzed carrier reports on
additional information requested from providers and beneficiaries. In
addition, we reviewed a random sample of benefit notices for assigned
and unassigned claims; because this sample was small in comparison
with the total volume of notices sent, the results of our analysis are not
generalizable. The details of the scope of our work and methodology are
presented in appendix II.

 We did our field work from May 1988 through September 1989, in accor-
 dance with generally accepted government auditing standards.




 Page 12                            GAO/HRD9@86   HCFA Can Reduce Medicare   Paperwork
Helping providers Improve Medicare
Claims Submitted

                       Each year, providers and beneficiaries submit millions of claims without
                       complete information. In order to process these claims, carriers fre-
                       quently need to request the missing information from beneficiaries or
                       providers, which increases administrative costs, delays payment, and
                       increases paperwork in the Medicare claims process. In fiscal year 1989,
                       45 million claims-about   1 out of every g-were incomplete.

                       The effectiveness varied for the techniques carriers use to reduce the
                       number of incomplete claims. One carrier targeted educational assis-
                       tance to providers who habitually submitted incomplete claims. This
                       targeting appeared to have substantially reduced the number of incom-
                       plete claims filed with this carrier. Since providers currently file at least
                       80 percent-soon they will be filing all-of Medicare claims for benefi-
                       ciaries, improving provider claims submitted is an important way to
                       reduce paperwork in the Medicare program. HCFA does not identify the
                       techniques that are most effective in reducing incomplete claims,
                       although it does give carriers funds for provider education,


                       In fiscal year 1989, providers or beneficiaries did not include all the
Millions of Claims     information carriers needed to make payment on about 45 million of the
Incomplete and         411 million claims processed.’ On about 28 million of these claims, the
Require Additional     carrier had to contact the provider, beneficiary, or other sources, and
                       these claims contributed to delays in payment and to the complexity and
Information            burden of the claims process. Moreover, incomplete claims involve more
                       carrier time and handling and, therefore, are more costly to process than
                       complete claims.

                       Of the data missing from incomplete claims, GAO found that much was
                       basic information required on the claims forms. Reports on requests for
                       additional claims information, prepared by two of the three carriers GAO
                       visited,’ showed that the information carriers requested generally fell
                       into one of three categories:

                     . beneficiary information, which is requested on the claim form, including
                       such data as the beneficiary’s name, the nature of the illness, and infor-
                       mation on any other health insurance;


                        ‘i\sailabIe data do not indicate whether claims Bled by providers or by beneficiaries are more likely
                       to contain incomplete data.
                       ‘HCFA does not require carriers to prepare reports on requests for additional information. The third
                       carrw we visited did not prepare these reports.



                       Page13                                     GAO/HRD90-86HCFACanReduceMedicarePapenvork
                         Chapter 2
                         Helping Providers    Improve   Medicare
                         Claims   Submilted




                     l service information, which is requested on the claim form, including
                       such data as the date(s) of service, charges, and the name and address
                       of the provider; and
                     . medical information, beyond that normally asked for on the form, gener-
                       ally including detailed information showing the need for the services
                       claimed.

                         GAO  found that a large percentage of requests related to beneficiary or
                         service information that should have been filled in on the original claim
                         form. For a 3-month period in 1989, the two carriers that prepared the
                         reports sent about 337,000 requests to beneficiaries and providers for
                         additional information. We analyzed about 225,000 of these requests-
                         90 percent of which were sent to providers and 10 percent to benefi-
                         ciaries. I We found that about 42 percent of requests to providers and 87
                         percent of requests to beneficiaries were for missing beneficiary or ser-
                         vice information. The other 58 percent of provider requests and 13 per-
                         cent of beneficiary requests were generally for medical information.
                         This indicates that a substantial portion of all requests sent by the two
                         carriers could have been avoided if claims contained all required infor-
                         mation when first submitted.


                         To keep providers informed about the data that need to be filed with
Targeted Education       claims and about changes in Medicare policy, HCFA funds carriers for
May Result in More       provider education. IITFA does not, however, require carriers to submit
Complete Claims          information on educational assistance; consequently, HCFA does not learn
                         of programs that may result in more complete claims submissions and
                         fewer requests for information. Concerning educational programs for
                         the three carriers WCvisited, our review disclosed that some programs
                         may be more effective than others in improving the quality of claims
                         submissions.

                          One of the carriers we visited targets its provider education to providers
                          who consistently fail to furnish information needed to process claims.
                          The carrier identifies these providers by reviewing monthly reports of
                          requests to providers for additional information. Carrier staff conduct
                          training seminars on claims preparation for these providers, carrier offi-
                          cials stated, as well as offering personalized assistance to individual
                          providers and provider groups. The officials believe, they stated, staff




                          Page 14                                  GAO/HRD-W-86   HCFA Can Reduce Medicare   PapeMrork
                  Chapter 2
                  Helping Providen   Improve   Medicare
                  Claims Submitted




                  efforts improve the quality of provider-submitted claims. Neither of the
                  other two carriers targets its educational assistance to those providers
                  who most frequently submit incomplete claims. These carriers, carrier
                  officials told us, make available educational assistance that generally
                  includes answering telephone inquiries, conducting seminars and work-
                  shops, and sending providers newsletters to keep them aware of pro-
                  gram changes.

                  We compared data for the two carriers that prepare reports on requests
                  for additional information; we found evidence that targeting educational
                  assistance to selected providers may result in more complete claims:

              l The carrier that targeted educational assistance made about 3.6 requests
                per 1,000 claims processed for additional beneficiary or service informa-
                tion In contrast, the carrier that did not target educational assistance
                made about 23.5 requests for such information per 1,000 claims
                processed.
              . Only about 15 percent of requests directed to providers by the first car-
                rier involved missing beneficiary or service information, indicating
                providers generally submitted complete claims. For the other carrier,
                however, such requests accounted for about 72 percent of requests
                directed to providers, indicating that providers were less proficient in
                submitting complete claims.

                  Under the Omnibus Budget Reconciliation Act (OBRA) of 1989, beginning
                  September 1, 1990, providers must file all Medicare claims for benefi-
                  ciaries. Since all claims will be filed by providers, it becomes even more
                  important to develop effective programs to reduce the number of incom-
                  plete claims submitted.


                  Each year, millions of incomplet,e claims are filed; carriers must contact
Conclusions       beneficiaries or providers to obtain the missing information.
                  Correspondence to obtain this information increases administrative
                  costs, delays payment, and increases the burden on providers and bene-
                  ficiaries. One carrier targeted educational assistance to providers that
                  frequently submitted incomplete claims and believed targeting contrib-
                  uted to the carrier’s sending fewer requests for additional information to
                  providers. HCFA, however, has (1) not examined carriers’ provider educa-
                  tion assistance and (2) does not know what techniques carriers use to
                  reduce the number of incomplete claims or which ones are effective.




                  Page 18                                 GAO/HRLW@66   HCFA Can Reduce Medicare   Paperwork
                      Chapter 2
                      Helping Providers   Improve   Medicare
                      Claims Submitted




                      We recommend that the Secretary of Health and Human Services direct
Recommendation to     the Administrator of HCFA to (1) identify effective techniques for reduc-
the Secretary of      ing the number of incomplete claims filed by providers and (2)
                      encourage carriers to adopt these techniques when appropriate.
Health and Human
Services

                      HCFA  agreed that more can be done to reduce the number of claims need-
Agency Comments and   mg additional information before they can be processed. In its fiscal
Our Evaluation        year 1991 budget guidelines, HCFA specifically directs carriers to identify
                      problem providers in an effort to provide intensive training in claims
                      submission. In addition, IICFA will also consider studying “best carrier
                      practices” as a means to reduce the number of claims needing additional
                      information.

                      We believe that HCFA should study carrier techniques that reduce incom-
                      plete claims filed by providers. But in addition, HCFA should, in accor-
                      dance with our recommendations, identify effective techniques being
                      used by some carriers and encourage other carriers to adopt them.




                      Page 16                                  GAO/HRD90-86   HCFA Can Reduce Medicare   Paperwork
Chapter 3

Benefit Notices Sent to Beneficiaries Need to Be
More Clear

                         Improving the clarity of benefit notices sent to beneficiaries would make
                         the Medicare claims process less burdensome and frustrating for benefi-
                         ciaries. We found that significant changes in benefit notices are needed.

                         It is essential that a Medicare beneficiary understand the notice in order
                         to know the amount of the Medicare payment, who it was paid to, and
                         what services it covers. Currently, the notices create confusion for bene-
                         ficiaries. Service descriptions are vague, and individual provider names
                         may not be shown; other information given beneficiaries on notices is
                         contradictory and confusing. Requests for clarification of this informa-
                         tion adds to the paperwork burden for carriers and beneficiaries.

                          In addition to providing beneficiaries with information about their
                          claims for Medicare benefits, notices are a means of detecting whether
                          the services billed by providers were actually received. Messages that
                          are difficult to understand or vague dilute the usefulness of the notice
                          as a check on provider billings. Further, in some cases, carriers do not
                          send notices to beneficiaries, eliminating an opportunity to detect pro-
                          vider fraud or error.

                          Despite the importance of the notices to Medicare beneficiaries and the
                          program, HCFA has not routinely taken steps to assure that they are
                          clear. HCFA noted that these notices contain messages, intended to pro-
                          tect beneficiary rights in the appeals process, that are necessarily some-
                          what technical. IICFA can take steps, however, to improve clarity. For
                          example, the Social Security Administration has obtained beneficiary
                          views on the clarity of its notices, but HCFA has not. As to the use of the
                          notices as a means of detecting provider fraud or error, many carriers
                          do not send beneficiary notices when they approve payment on certain
                          claims-contrary     to IICFA policy.


                          Aft.er a beneficiary or provider files a claim, the carrier sends a notice to
Notices Serve Several     inform the beneficiary of its decision. Carriers send notices to benefi-
Purposes                  ciaries so that they

                        . know that their claims were received and acted on,
                        . know how much Medicare is paying them or their providers and for
                          what service(s),
                        a can determine how much they owe their providers, and
                        . can use the notices to file for supplemental insurance.




                          Page 17                        GAO/HRD-96.86   HCFA Can Reduce Medicare   Paperwork
                            Chapter 3
                            Benefit Notices   Sent to Beneficiaries   Need to
                            Be More Clear




                            During fiscal year 1989, carriers sent approximately 400 million notices
                            to Medicare beneficiaries, Specific information shown on a notice
                            includes the name of the physician or supplier who provided the service;
                            a description of the service provided; how much the provider billed and
                            Medicare approved; and, for assigned claims, the amount the beneficiary
                            owes the provider.

                            In addition to informing the beneficiary about the actions taken by car-
                            riers on their claims, the notices are an internal control mechanism to
                            detect and deter fraudulent or erroneous Medicare billings by providers.
                            All assigned claims are filed by providers, and payments are made
                            directly to them rather than to the beneficiaries. Since about 80 percent
                            of all claims are assigned, the beneficiaries are not involved in the
                            claims process for most claims until the carriers send notices to the ben-
                            eficiaries. At this point, t,he beneficiaries are able to (1) compare ser-
                            vices shown on the notices with their own records or experiences and
                            (2) identify situations in which Medicare has paid for services the bene-
                            ficiaries did not receive. Each notice encourages a beneficiary to contact
                            the carrier immediately if the beneficiary believes Medicare paid for a
                            service he or she did not receive.


                            At the three carriers we visited, we reviewed a sample of benefit notices
Benefit Notices Do Not      and found that beneficiaries can have difficulty understanding them.
Clearly Communicate         When the notices do not clearly present information concerning the deci-
Claims Decisions            sion made on a claim, a beneficiary may ask the carrier for clarification.
                            Beneficiaries made about 19 million inquiries to carriers-either     by tele-
                            phone, by mail, or in person-during      fiscal year 1989; confusion about
                            the information presented on the notices, several carriers said, was one
                            reason for these inquiries. Further, this lack of clarity, as well as the
                            fact that some carriers do not send notices in all instances, reduces the
                            usefulness of the not,icrs as an internal control against fraud or error.


Unclear Service             Our primary concern about the notices is that service descriptions and
Descriptions and Provider   provider names can be vague and general, making it difficult for a bene-
                            ficiary to identify the services involved. Such difficulty also creates
Names Make Comparing        problems for beneficiaries in (1) understanding the action taken and (2)
Information Difficult       determining whether Medicare has paid for the services received; in
                            addition, such difficulty greatly reduces the value of the benefit notice
                            as a deterrent to provider fraud.




                            Page 18                                     GAO/HRD-90-86   HCFA Can Reduce Medicare   Paperwork
Chapter 3
Benefit Notices   Sent to Beneficiaries   Need to
Be More Clear




A benefit notice contains general descriptions of the services benefi-
ciaries received instead of descriptions of the actual, specific services
(treatments or procedures). Even though there are approximately 7,000
medical procedures in HCFA'S common procedure coding system, HCFA
limits its notice descriptions to 2 1 service categories-such as office ser-
vice, inpatient visit, nursing facility, independent lab, and durable
equipment. The term “office service,” for example, may represent a
brief office visit, a chiropractic manipulation of the spine, or one of
numerous other services. These general service descriptions can make it
difficult for beneficiaries to identify the actual services that Medicare
pays. An example of a benefit notice is shown in figure 3.1; item A was
intended to describe two office services-one an office visit, the other
an immunization; both. however, are described as “office service.”




Page 19                                    GAO/HRDX-66   HCFA Can Reduce Medicare   Paperwork
                                         Chapter 3
                                         Benefit Notices        Sent to Ben&ciaries              Need to
                                         Be More Clear




Figure 3.1: First Example of a Benefit
Notice                                                                   YOUR EXPLANATION                         OF MEDICARE BENEFITS
                                                                              REAOVW NOVICECAtIEFULl.VAND KEEPIV FOR VOlJK RECORDS 363****“77
                                                                                             VIIIS IS NOV A BILL
                                                  KEALVH CARE FINANCING AGMlNlSlRATlGN                                       Jan IO, 1989              r*EOnB COP”+*
                                                                                                                       Need help7    Contact:
                                                                                                                       TRANSANERICA OCCIDENTPL LIFE INSURANCE
                                                                                                                       1149 South Broadway
                                                                                                                       P.O. BOX 30540
                                                                                                                       LCS Plngeies.   CA 90030-0540
                                                                                                                       Phone: 213 Area: 748-2311
                                                                                                                            Other A.‘sas:    t-800-252-9020

                                                      Participating              doctors    and suppliers     always                     accept           assignment
                                                      of   Medicare           claims.      See the back of this                         notice          for an
                                                      explanation             of assignment.      Write    or call                      us for          the name of
                                           CO1        a participating               doctor   or supplier     or for                     a free          list    of
                                                      participating              doctors    and suppliers.
                                                      Your doctor        or suppI ier did not accept assignment of your claim(r)                                        totaIling
                                                            542.00.      (See    (tern 4 on back.)

                                                                                                                                                              Billed                Approved

                                            [El       ESCONOIOO
                                                           I Officeservice                                                        oec    15.     1988     S         30.00       5      30.00
                                            IAl
                                                        I Office    Service                                              No” 03. I988   5                           12.00       s       0.00
                                                      Medicare     does not          pay for     immunizations  or other    routine and
                                                      preventive     sewices           except     for a pneumococcal   pneumonia
                                                      vaccination.


                                                      Total    approved   amount.               .      . . .        .             . .          . . .      .         .       .
                                                      fled~care    payment (80% of              the approved     amount).         .            . . .      .         .       .         SE:


                                                      Payment for a total    Of                 $24.00 was made to yw on check number:                              533575201.           If
                                                      you have Other i”*“ra”ce,                   it may help with the part Medicare did                            nrrt pay.

                                                      YOU are rerponsible    far a total   of       $18.00,     the difference      between the Billed
                                                      amount and The hedicare     payment (this      includes      services   that Pkdicarr   doer not
                                                      cover - shown as ‘$0.00’      in the approved       column).
                                                      You could have a”o,ded     paying       $0.00.      the difference      between the Billed    and
                                            ICI       Approved  amounts for all ccavered ser”iccs.           if the claim had been assigned.

                                                                                (You have met the deductible                for    1968)

                                                      If you need tp call.   may we suggest                    that   you avoid          the     peak hours
                                                      from ,,:oo a.m. thrwgh     I:30 p.m..




                                                      IMPORTAM:       If you do not agree                  with the amn~u”ts appro”ed   yw may art for a
                                                      review.    To do this. you mu*t u                     to us before  JuI 10. l98q.    (See item 1 on
                                                      the back.)

                                                      00 YOU HAVE A QUESTION ABOUT THIS NOTICE?   If you believe                                       Pl:dicare paid for                a
                                                      service  you did not receive. or there is an error, contact                                        us immediately.
                                                      Always giw   us the:

                                                      kdicare         Claim    No.                                                 Claim        Conrrof       No.         8355 477 460




                                                       Note: This example                has been reduced in size to fit on this page.



                                          Page 20                                                   GAO/HRD9@86              HCFA Can Reduce Medicare                               Paperwork
Chapter 3
Benefit Notices Sent to Beneficiaries Need to
Be More Clear




We believe that for common services, specific descriptions could be used,
but we recognize that it would neither be practical nor useful (because
of the technical nature of many procedures) to always furnish proce-
dure code descriptions on the notices. For example, HCFA data show that
in 1987, allowed charges for the top 20 types of physician services
accounted for nearly 45 percent of all allowed physician charges. Of the
top 20 types, the 4 accounting for the greatest percentage of allowed
charges were office visits, hospital visits, cataract surgery, and electro-
cardiograms None of these, however, were specifically identified as one
of HCFA'S 21 service categories that carriers are required to use on
notices.

The provider name appearing on a notice also may not be specific
enough to permit identification. To determine the provider name for the
notice, carriers use the provider identification number. These numbers
may be issued either to an individual provider or to a physician group;
for a group, the name of the physician who performed the services
would generally not appear on the notice. In figure 3.1, a member of the
“Escondido Family Practice Medical Group” treated the beneficiary;
because of apparent space limitations, the name was abbreviated
(item B) to “Escondido”-which      is also the name of the town in which
the practice is located. Accordingly, on this notice, the name of the phy-
sician or the physician group that provided the service is not shown.
HCFA recently required carriers to assign a unique identifier number to
each physician. We believe that carriers could use this number instead
of the provider number as a means to identify and show the name of the
specific physician furnishing services. HCFA currently has no plans, how-
ever, to use the identifier numbers for this purpose.

When services and charges are identical, a carrier will group these ser-
vices on the notice. But beneficiaries are not informed of this action.
I Jnder such circumstances, the notice sent to the beneficiary does not
(1) show the unit cost per service or (2) explain that the billed amount is
the total for multiple services. Conversely, a carrier sometimes splits
services on a notice if part of a billed service is not covered by Medicare.
Again, a carrier may not tell the beneficiary that it has done so. For
example, a physician billed Medicare $63 for a comprehensive eye
examination. The carrier split the claim, approving $50.40 for an “office
service,” but disapproving $12.60 for an “office service.” Medicare does
not pay for routine eye examinations, the notice stated, but contained no
further explanation.




Page 21                                GAO/HRlS90-86 HCFA Can Reduce Medicare Paperwork
                            Chapter 3
                            Benefit Notices   Sent to Beneficiaries   Need to
                            Be More Clear




Information on Notices      Notices often do not present beneficiaries with all the information
                            needed to understand the decisions made on claims. When a claim is
Can Be Incomplete,          denied, a notice may omit (1) the reason for denial or (2) the steps the
Confusing, or Unnecessary   beneficiary should take to seek payment. For example, two carriers
                            denied claims covering clinical or diagnostic laboratory services (which
                            Medicare pays only on assignment) because, in each instance, the pro-
                            vider did not indicate that assignment had been accepted. More than
                            half of all beneficiaries, a Physician Payment Review Commission sur-
                            vey said, do not understand the term “assignment.” In each instance, the
                            notice stated that “Medicare can only pay for laboratory tests when
                            assignment is accepted.” But the notice did not indicate what additional
                            steps the beneficiary could take to obtain payment. In denying pay-
                            ments on claims, all three carriers we visited use messages on the notices
                            simply stating that “Medicare does not pay for these supplies or ser-
                            vices” or “Medicare does not pay for the services provided by this phy-
                            sician (supplier).” These messages do not explain the specific reasons
                            for denials and, therefore, give beneficiaries little basis to challenge
                            denials or avoid similar denials on future claims.

                            The notices that we reviewed also contained messages that are confus-
                            ing and difficult to follow. For example, in explaining to the beneficiary
                            how it determined the amount Medicare paid, one carrier used the mes-
                            sage “minus your deductible remaining for this year” (see fig. 3.2, item
                            A), indicating that the deductible remaining for the year was $68. The
                            approved amount, $68.00, was not the deductible remaining for the
                            year. Actually, the carrier applied the $68 towards the $75 deductible
                            for the year.




                             Page 22                                    GAO/HRLWO.86   HCFA Can Reduce Medicare   Paperwork
                                          Chapter 3
                                          Benefit Notices   Sent to Beneficiaries         Need to
                                          Be More Clear




Figure 3.2: Second Example of a Benefit
Notice                                                               YOUR EXPLANATION                         OF MEDICARE BENEFITS
                                                                REAC TKS’NOTICE CAREFULLYAND KEEPIT FOR YOURRECOtl!JS 363*****96
                                                                                  THIS IS NOT A BILL
                                               HEALTHCARE FINANCING ADMINIS7l?ATION                hn 16, 1989      **EON COPY**
                                                                                                                      Need heILl    contact:
                                                                                                                      TRANSA,,ERICA OCCIDENTAL LIFE                               INSURANCE
                                                                                                                      1149 South BrO*dHay
                                                                                                                      P.O. BOX 30540
                                                                                                                      Los Angeles.    CA 90030-0540
                                                                                                                      the:     213 Area: 748-2311
                                                                                                                           Other Areas:      I-800-252-9020

                                                    Participating     doctors and suppliers     always accept assignment
                                                    of Medicare claims.       See the back of this notice for an
                                                    explanation     of assignment.   write   or  call us for the name of
                                                    a participating     doctor or supplier    or for a free list   of
                                                    participating     doctors and suppliers.
                                                    Your doctor or supplier did not accept assignment of your                                  claim(s)              totalling
                                                        $78.00.        (See Item    4 an back.)

                                                                                                                                                            Billed                APPVWd

                                                    OR JOROAN
                                                     I office  service                                                       NO" 08.       19as         5         40.00       s      30.00
                                                    Approved  amount limited          by item     5b on back.

                                                     1 surgery                                                               NO” 08.       1988         5         38.00       5      38.00


                                                    Total   approved      amount.                              .       . .      . .        . . . . , .                    .
                                            CA1 n.inus your deductible    remaining    for thi* year.     . . . .                                        . . . . .                  ;E:
                                                Amount remaining     after subtracting    rhe deductible amount ,                                        . . . .                     so:00
                                                hcdicare Payment(80% of the approvedamxnt remaining].           .                                        .       .                   $0.00

                                                    No payment is being made to you because the, total     amount was ap,,lied                                         toward your
                                                    an""al   $75.00 dCd"Cfible.  If you ilaw Other i"s"ra"ce.     if may help                                         with the
                                                    part tkdicare   did not pay.

                                                    You are res.ponsible  for a total   of     $78.00.    the difference      between the Billed
                                                    amount and the nedicare   ~avmenf.     You could have avoided        paying      SlO.00,  ttlc
                                                    difference  between the Billed    and Approved     amounts.    if the claim had been
                                                    assigned.

                                                                  (You have     now met $68.00     of   the        $75.00    deductible           for       1988)

                                                     If you need fo call,    may we suggest             rhat        you avoid      the     peak         hours
                                                    from 11:oo a.m. tllrwgtl    1:30 p.m..




                                                    00 YOU HAVE A QUCSSlON ABOUT THIS NOTICE?   If you believe                                    Medicare  paid for                  a
                                                    service  you did not receive, or there is an error, contact                                    us immediately.
                                                    Always give us the:

                                                    Medicare      Claim   NO.                                                  Claim      Contra,           No.        8355 371 400




                                                    Note, This example              has been reduced in size to fit on this page



                                          Page 23                                           GAO/HRD-90.86                   HCFA Can Reduce Medicare                              Paperwork
                           Chapter 3
                           Benefit Notices   Sent to Beneficiaries   Need to
                           Be More Clear




                           We also found instances in which notices included messages that were
                           not necessary. For example, on a notice for a claim processed in
                           January 1989, one carrier included the message “Effective October 1,
                           1982, inpatient radiology and pathology services are paid at 80 per-
                           cent.” Since Medicare pays 80 percent of the approved amount for most
                           covered physician services, this message seems unnecessary 6 years
                           after the change. In another instance, the three carriers we visited
                           included this message on notices: “If you have other insurance, it may
                           help with the part Medicare did not pay.” The notices also included a
                           second message, however, stating that the carriers had forwarded each
                           claim to the beneficiary’s supplemental insurer. Messages such as those
                           in figure 3.1, item C, are unnecessary on unassigned claims; when the
                           billed amount and the approved amount are the same, carriers describe
                           the participating physician program and advise beneficiaries that they
                           could have saved “$0.00” if the claim had been assigned.


Notice Contains Messages   The notice also contains messages about various topics beyond the ser-
                           vices Medicare pays for, who provided the services, and how much
That Make Locating         Medicare is paying. The notice has become a vehicle to provide general
Specific Claim Data More   program information in addition to claim specific information. Because
Difficult                  of the educational messages on a notice, beneficiaries receive a full page
                           of data for a relatively simple claim. The notice shown in figure 3.1, for
                           example, is in response to a claim submitted by a beneficiary for a phy-
                           sician office visit and an immunization.

                           Some educational messages are required by recent legislation, which
                           mandated that a message describing Medicare’s Participating Physician
                           and Supplier Program appear on all notices for unassigned claims. The
                           program, however, is described in full in the Medicare handbook each
                           beneficiary receives. The message appears at the top of the notice on
                           each of the millions of unassigned claims processed annually; it also pre-
                           cedes messages describing the action taken on the claim (see figure 3.1,
                           item D.)

                            Other messages have been included on the notice in response to the Gray
                            Panthers’ lawsuit.’ These messages let beneficiaries know why Medicare
                            did not approve the full amount the provider billed, giving the reason
                            (1) “the approved amount (is) limited by item 5(b or c) on back” or (2)

                            ‘In 1983, the Gray Pantluvx an advocacy group for the elderly, filed suit agamt the Secretary of
                            Health and Human Senv~~~ r~mcernmg, among other things. the fk-mat and mntent of the benefit
                            notice.



                            Page 24                                    GAO/HRD-90-86   HCFA Can Reduce Medicare     Paperwork
                          chapter3
                          Benefit Notices   Sent to Beneficiaries   Need to
                          Be More Clear




                          “a special method was used to set the customary or prevailing charge
                          (see item 5b/5c on back). The number of claims processed for this ser-
                          vice was not enough to set the charge in the usual manner.” These
                          messages refer the beneficiary to other messages printed on the back of
                          the notice; these messages explain why the amount Medicare approves
                          may be less than the amount billed and defines the “customary” and
                          “prevailing” charge levels that limit Medicare payments. How Medicare
                          computes the approved amount, however, is explained in the Medicare
                          handbook.

                          Although some of these messages are useful, other ways are available to
                          give this information. If beneficiaries need to be reminded of informa-
                          tion already provided in the Medicare handbook, periodic mailings or
                          separate inserts, included with the notice, could be used. Such alterna-
                          tives should ease understanding and decrease confusion and frustration,
                          but they may increase paperwork.


Use of Notices to Deter   In addition to showing beneficiaries the actions taken by carriers on
Fraud Has Been Hampered   their claims, the notices also serve as the only opportunity for benefi-
                          ciaries to verify that services billed on assigned claims were actually
                          provided. Thus, the notice is an important internal control mechanism to
                          detect and deter fraud in the Medicare program. Two factors undermine
                          its effectiveness in this role. First, as discussed earlier, the general
                          descriptions of beneficiary services received and the frequent lack of
                          specific provider names make it difficult for beneficiaries to compare
                          the services shown on the notices with their records. Second, we found
                          that many carriers do not send notices to beneficiaries under certain
                          conditions, denying them the opportunity to verify that they have
                          received the services paid by Medicare.

                          With one exception,’ ~IC‘E~  directs carriers to send notices to beneficiaries
                          for all claims. Of the 3 1 carriers that responded to our inquiry, however,
                          only 6 comply with IICFA’S guidance. The other 25 have adopted differ-
                          ent policies on when to withhold notices. For example, 9 carriers do not
                          send beneficiaries notices when the claims are assigned and the benefi-
                          ciaries are Medicaid recipients; 4 carriers do not send notices when the
                          beneficiaries have met the deductibles and the claims have been sent to
                          supplemental insurers. Of the 31 carriers, 9 reported that they always
                          send notices to the beneficiaries, even when HCFA directs them not to.

                          ‘The me exception involves clamps fur clinical diagnostic laboratory servers that have been paid in
                          filll, an? based WI a fee schrduk antI do not mvolve a deductible or coinsurance.



                          Page 25                                     GAO/HRBSO-86   HCFA Can Reduce Medicare      Paperwork
                           Chapter 3
                           Benefit Notices   Sent to Beneficiaries   Need to
                           Be More Clear




                           Carriers and beneficiary organizations have expressed concerns about
Carriers and               the notices; these concerns are similar to the problems we identified in
Beneficiary                our review. Problems with the content or readability of the notices, rep-
Organizations Agree        resentatives of 23 carriers and 10 beneficiary organizations said, include
That Notices Are       . services that are vaguely described, and provider names that are inaccu-
Confusing                rate or incomplete, make verification of information difficult;
                       . mathematical calculations and explanations of beneficiary liability that
                         are difficult to understand;
                       . reasons for service denial that are not precise or are difficult to under-
                         stand; and
                       . messages that are wordy, confusing, or unnecessary.

                           In 1988, the American Association of Retired Persons commissioned a
                           study of how to improve the benefit notice. This study contained com-
                           ments on benefit notice problems from about 50 Medicare advocacy
                           counselors who were community based. The principal concerns these
                           counselors expressed were these: (1) Nonspecific descriptions of ser-
                           vices prevented beneficiaries from comparing notices with providers’
                           bills. (2) Abbreviating provider names or using corporate names on
                           notices made it difficult for beneficiaries to identify the provider of
                           services.


                            HCFA   either develops individual notice messages or approves carrier-
HCFA Has Not                developed messages. HCFA, however, does not review completed notices
Adequately Addressed        to determine if messages are relevant or used in the proper context. In
Notice Problems             addition, HCFA staff do not determine if notices are understandable or
                            whether they confuse the reader with unnecessary information.:’ HCFA
                            officials do not, they said, routinely solicit or receive feedback from ben-
                            eficiaries concerning the clarity of the notices or individual messages.
                            Occasionally, from groups such as the American Association of Retired
                            Persons, HCFA will solicit feedback on how clear a new message is, but
                            this is not done for all new messages. In addition, these groups have not
                            been asked to comment on the overall clarity of notices. Notice problems
                            are not a HCFA priority; therefore, HCFA has not devoted resources to
                            addressing them, although it agrees that notice messages could be
                            improved.



                            -‘Although HCFA does not wwew notices to determine if they are clear and contain only necessary
                            information, HCFA does cxminc benefit notices for accuracy during Its evaluation of carrier
                            0pcTatmls.



                            Page 26                                    GAO/HRD9W36   HCFA Can Reduce Medicare      Papawork
                      Chapter 3
                      Benefit Notices Sent to Beneficiaries Need to
                      Be More Clear




                       In contrast to HCFA, the Social Security Administration implemented a
                       Clear Notices Project in 1984 so as to improve its service to the public.
                       Recognizing that unclear notices may confuse and frustrate clients, as
                       well as result in additional calls and visits by clients to its offices, Social
                       Security field tests proposed notice language using actual and potential
                       notice recipients.


                       The Medicare benefit notice sent to beneficiaries (1) notifies them of
Conclusions            claims decisions and (2) serves as an internal control against provider
                       fraud or error. To accomplish these tasks, the notices should clearly
                       show the services Medicare is paying for, who provided the services,
                       and how much Medicare is paying.

                       Henefit notices often do not clearly identify the services Medicare is
                       paying for or who provided the services. Unclear service descriptions
                       and provider names (1) make it difficult for beneficiaries to compare the
                       notices with providers’ bills and (2) limit the usefulness of the notice as
                       a deterrent to provider fraud. In addition, often because of legal require-
                       ments, notices contain confusing and unnecessary information that
                       makes it difficult for beneficiaries to locate claim-specific information.
                       Many carriers further reduce the notice’s effectiveness as an internal
                       control by not sending notices when Medicare payment has been
                       approved and HCFA instructions require that a notice be sent.

                       HCFA  acknowledges that the benefit notice could be improved, but, it
                       stated, Hut4 does not consider notice problems a priority. HCFA does not
                       (1) solicit feedback from beneficiaries and others on how well they
                       understand notices and (2) review the clarity of notices carriers pre-
                       pare. We believe that given the potential to reduce the burden and frus-
                       tration among Medicare beneficiaries and to improve internal controls,
                       H(:FA should establish notice improvement as a priority.

                     - -
                       We recommend that the Secretary of Health and Human Services direct
Recommendations to     the Administrator of HWA to initiate a concerted effort with carriers and
the Secretary of       beneficiaries to improve the quality of notices and messages. Specifi-
Health and Human       cally, HCF.~should
Services               establish a formal mechanism to solicit feedback from carriers and bene-
                       ficiaries on benefit notice problems and use the feedback to improve
                       notices and messages;



                           Page 27                            GAO/HRD-90-86 HCFA Can Reduce Medicare Paperwork
                        Chapter 3
                        Benefit Notices   Sent to Beneficiaries   Need to
                        Be More Clear




                      . during annual carrier evaluations, examine the messages used on benefit
                        notices to assure that information is clear and necessary; and
                      . monitor carriers to ensure that notices are sent to beneficiaries in all
                        required cases so that beneficiaries will have the opportunity to detect
                        potential payment errors or fraudulent claims.


                        HCFA  agreed with our recommendations and has taken, or plans to take,
Agency Comments and     a number of initiatives in this area. For instance, HCFA has convened a
Our Evaluation          work group to redesign the beneficiary benefit notice. The work group
                        will identify the changes needed to improve the notice, including its clar-
                        ity and design. 1~x4 will also study ways to be more specific about ser-
                        vice categories and develop explanatory language to increase
                        beneficiary acceptance. HCF.4 reports that during the planning and
                        assessment stages, the work group will obtain input from beneficiary
                        focus groups, carriers, and HCFA regional officials.

                        HCFA  acknowledged that benefit notices are not sent in certain cases
                        where there is no beneficiary liability; the practice was initiated as a
                        cost-saving measure. However, in light of concerns about program fraud
                        and abuse, HCFA said it would reevaluate the need to send notices in all
                        cases.

                         HCFA'S actions, with respect to the design and clarity of benefit notices
                         and the use of beneficiary focus groups to obtain input, should correct
                         many of the weaknesses we found during our work.




                         Page 28                                    GAO/HEDSOM-BG HCFA Can Reduce Medicare   Paperwork
Expanded Use of Electronic TechnologiesCould
Streamline the Claims Process

                               To reduce Medicare paperwork and increase efficiency in the claims-
                               processing system, HCFA could make greater use of electronic technolo-
                               gies to automate the process. Two ways in which we found that
                               increased automation could be beneficial were

                           . making it. easier for providers to file claims electronically rather than on
                             paper claims forms and
                           l establishing electronic communication links between carriers and pro-
                             viders rather than relying on mail and telephone.

                               HCFA  acknowledges that each of these technologies could offer advan-
                               tages to providers but, apart from requiring carriers to be able to receive
                               electronic claims, has taken few steps recently to facilitate electronic fil-
                               ing or encourage use of electronic links.

                                                    --__
                               Filing claims electronically rather than on paper claims forms has been
Increased Electronic           offered as an option to providers for several years. Carriers save on
Claims Filing Can              processing costs for each electronic claim; providers also save on
Promote Efficiency             purchasing and preparing paper claims forms.

                               OBRA  of 1989 requires HWA to encourage and develop a system that will
                               provide expedited payment for electronic claims, which should
                               encourage more electronic filing. We found that some carriers and com-
                               mercial insurance firms have developed systems that can make elec-
                               tronic filing attractive even to small-volume providers.


Electronic Claims Filing       Instead of preparing and submitting paper claims forms, providers can
Would Benefit Carriers         file claims by (1) sending magnetic tapes or floppy disks to carriers or
                               (2) using modems, which connect computers over normal telephone
and Providers                  lines. HWA requires that carriers be able to (1) accept claims on magnetic
                               tape and (a), unless carriers can demonstrate this would not be cost-
                               effective, receive claims through modems.

                               Filing claims electronically has significant advantages over paper filing,
                               say IK’FA officials. Electronic claims can be filed more easily, can be
                               processed more quickly and economically, and generate less paper in the
                               Medicare system. IICFXhas estimated that electronic filing saves carriers
                               an average of 3.5 cents per claim; each 1-percent increase in the number
                               of electronic claims filed annually would save carriers about $1.3 million
                               in processing costs.



                               Page 29                         GAO/HRD-90%   HCFA Can Reduce Medicare Paperwork
                             Chapter 4
                             Expanded Use of Electronic Technologies
                             Could Streamline the Claims Process




                             In addition to these advantages, providers who file claims electronically
                             incur no postage costs for submissions, have less chance of carriers los-
                             ing claims, and eliminate costs to purchase and prepare paper claims
                             forms. Electronic claims also eliminate errors sometimes made by carrier
                             personnel when entering data into carrier systems.

                             To reduce Medicare administrative costs, HCFA, for several years, has
                             required carriers to offer providers the option of filing Medicare claims
                             electronically. IJntil 1987, a national work group of HCFA central office
                             and regional office officials had established annual goals for the per-
                             centage of electronic claims it expected each carrier to receive. During
                             each annual evaluation, IICFA measured carrier performance against
                             these goals. But this is no longer done. In responding to this report, HCFA
                             told us that this group has identified incentives for providers to file elec-
                             tronic claims. HCFA has also established a work group of representatives
                             from each carrier that will identify incentives for electronic claims
                             submission.

                             During fiscal year 1989, the Medicare law prohibited carriers from pay-
                             ing claims earlier than 14 days after receipt; previously, electronic
                             claims had been paid in as little as 4 days. This delay in payment, IICFA
                             officials said, discouraged providers from filing electronical1y.l

                             To encourage physicians to file claims electronically, the Congress, in
                             OBRA  1989, directed IICFA to encourage the development of a system that
                             will provide expedited payment for electronic claims. In addition, the
                             Congress directed H(‘F.4 to make available to physicians the technical
                             information needed to enable them to file claims electronically.


Insurers See Potential to    Although the national average for claims filed electronically is 36 per-
Increase Electronic Filing   cent, some carriers have been considerably more successful than others
                             in encouraging providers to file claims electronically. During the quarter
                             ending June 30, 1989, Alabama Blue Shield received about 65 percent of
                             claims electronically. four other carriers received more than 50 percent
                             electronically. Some IICR\ regional offices have placed more emphasis on
                             electronic claim filing than others, HCFA officials said, and, therefore, the
                             carriers in these regions receive a higher percentage of electronic claims.



                             ‘This provision, effwtiu~ for a lP-month period beginning October 1. 1988, was adopted in the Omnl-
                             bus Budget Reconciliation ACt (111987 (El, 100-203)



                             Page 30                                   GAO/HRD-90.96   HCFA Can Reduce Medicare      Paperwork
Chapter 4
Expanded Use of Electronic Techmlo&s
Could Streamline the Claims Process




Many providers appear to have already acquired computer hardware,
despite the fact that the investment in the hardware required to file
electronic claims can be substantial. A survey taken by the Physician
Payment Review Commission found that about half of the 2,800 physi-
cians surveyed maintain office billing records electronically. Providers
that already own personal computers would only require (1) modems,
communications software, and data entry software to format claims
data in order to meet carrier requirements and (2) some staff training to
file electronic claims.

We identified privately developed initiatives allowing providers to file
claims using a standard record format rather than a unique format for
each insurer. This would simplify electronic filing for providers that
have purchased computer hardware. For example, the National Elec-
tronic Information Corporation (NEIC) acts as an electronic claims clear-
ing house: it accepts claims from providers in a standard electronic
format and then reformats the claims to meet the unique requirements
of each participating insurer.” Similarly, one carrier allows providers to
submit magnetic tapes containing claims for both Medicare and the car-
rier’s commercial insurance business and forwards the claims to the
appropriate department-Medicare         or commercial-for   processing.
Providers may not be able to justify the start-up costs of electronic fil-
ing, officials familiar with these initiatives explained, on the basis of
their claims volume for any one insurance program. A common claims
format for several insurance programs, however, may make these start-
up costs easier to justify.

Commercial insurers are also developing technology that could
 encourage the use of electronic filing by smaller providers that cannot
justify the acquisition of computer hardware for billing and claim filing.
 To enter claim information, three commercial insurers are testing a sys-
 tem that uses a device resembling a telephone keyboard with a message
 screen. This device will be substantially less costly than typical office
 computer systems.

HCFA  needs to once again encourage carriers to increase the number of
claims they receive electronically. OBRA 1989 offers providers an incen-
tive to file claims electronically; HCFA needs to identify and disseminate
information on those techniques that permit more providers, even those
with a comparatively low number of claims, to file electronically.

‘NEIC is owned by a group of orrr 30 commcrcnl ~~~rar~e companies that, said NEIC officials,
account for about 90 percent of wmmerr~al msurance clams dollars paid out annually



Page 31                                 GAO/HRD90-86     HCFA Can Reduce Medicare     Papenvurk
                         Chapter 4
                         Expanded Use of Electronic Technologies
                         Could Streamline the Claims Process




                         In addition to increasing electronic claims filing, IICFA could establish
HCFA Has Not             electronic communications links between carriers and providers to
Encouraged Electronic    reduce the current volume of mail and telephone communications. This
Links Between            has been endorsed by both carriers and provider organizations. But
                         offering electronic links, HCFA officials stated, would be too costly for
Carriers and Providers   HCFA. Some carriers and commercial insurers, however, have already
                         automated some aspects of provider communications.


How Carriers             In addition to filing claims and receiving payment, providers communi-
Communicate With         cate with carriers in other ways that generate substantial paperwork.
                         Carriers mail providers summary vouchers explaining actions taken on
Providers                claims, as well as requests for additional claim information. HCFA also
                         requires carriers to send providers newsletters at least every 3 months
                         to inform them of changes in Medicare policy and procedures; one car-
                         rier we visited generally mailed at least one planned bulletin and one
                         special bulletin to providers each month. Providers initiate inquiries-in
                         writing, by telephone, or in person-to obtain information about pro-
                         gram coverage, the status of claims, or payments. In fiscal year 1989,
                         providers initiated 3.3 million written inquiries and 5.2 million tele-
                         phone inquiries. Carriers believe that responding to these inquiries is
                          costly.

                          When providers are frustrated by their inability to readily obtain infor-
                          mation by inquiries about unpaid claims, some may simply resubmit
                          claims. During fiscal year 1989, carriers denied payment (in whole or in
                          part) for about 72 million claims, or about 17.5 percent of all claims
                          processed; about one-third of the payments denied involved duplicate
                          claims. In addition, about 8.4 percent of the payments denied were for
                          claims for ineligible claimants. By giving providers ready access to up-
                          to-date information on the status of claims and beneficiary eligibility,
                          we believe carriers could reduce the number of such denials.


Carriers and Providers    Carriers and provider organizations support electronic communication
Support Electronic        links as a useful alternative to current methods of communication
                          between providers and carriers. An electronic mail system-through
Communication Links       which providers would receive program bulletins, payment notices, and
                          requests for additional information-could     reduce program administra-
                          tive costs and speed up and simplify communications. In particular, an
                          electronic link, allowing providers to obtain accurate and current infor-
                          mation on claims status, could improve one of the more frustrating
                          aspects of communications between carriers and providers.


                          Page 32                                  GAO/HRD90-86   HCFA Can Reduce Medicare   Paperwork
                             Chapter 4
                             Expanded Use of Electronic Technologies
                             Cmuld StreamIine the Claims Process




                             Of the 31 carriers we contacted, 20 favored the use of electronic mail for
                             delivering payment notices and educational materials to providers; 1
                             also mentioned the possibility of using electronic mail to request addi-
                             tional information from providers. Of the 19 provider organizations, 5
                             advocated using electronic mail. The American Society of Internal
                             Medicine recently passed a resolution asking HCFA to offer an electronic
                             mail service to providers.

                             Of the 31 carriers we contacted, 21 favored developing a system to
                             allow providers to determine the status of their claims through elec-
                             tronic links; such a system, several carriers stated, could reduce the
                             number of provider inquiries and lower the cost of responding to these
                             inquiries. Of the 19 provider organizations, 13 favored such a system; 7
                             said that electronic inquiry would speed communications with carrier
                             officials; 5 said electronic inquiry would make it less frustrating for
                             providers to obtain information about their claims.

                             Electronic mail would have to be offered as an option for providers,
                             although carriers and providers generally endorse it. The cost to imple-
                             ment such an option is a primary concern to carriers and provider orga-
                             nizations; the cost of equipment needed to implement an electronic mail
                             system, several noted, could be prohibitive for some providers.


HCFA Considers Electron7ic   HCFA   agrees that the technology is available to electronically transmit
Communication Links          benefit notices and educational materials to providers. Requiring all car-
                             riers to offer electronic mail, HCFA officials believe, would be costly for
Costly but Insurers Are      HCFA, and the necessary resources are not available. Electronic links to
Implementing Them            respond to provider inquiries on the status of claims are feasible, HCFA
                             officials agree, and could result in fewer written inquiries. But a system
                             of electronic links, these officials say, is a costly service, and officials
                             are unwilling to invest in it. The system (1) may not significantly reduce
                             the number of telephone, as opposed to written, inquiries and (2) may
                             provide only general information, as existing systems do, rather than
                             specific reasons why a claim has not been processed. Further, MCFA is
                             concerned about safeguards to limit provider access to assigned claims
                             only.

                             In our contacts with carriers, we found that several had implemented
                             some form of electronic communication link for Medicare providers on
                             t,heir own initiative. The most common, reported by eight carriers, was
                             use of electronic mail to deliver payment notices to providers. For exam-
                             ple, Blue Cross and Blue Shield of Alabama reported that since 1980, it


                              Page 33                                  GAO/HRD90-86   HCFA Can Reduce Medicare   Payerwork
              Chapter 4
              Expanded Use of Electronic Technologies
              Could Streamline the Claims Process




              had offered electronic payment notices to providers who file claims elec-
              tronically. Other carriers that offer this service report that providers
              can use the electronic payment notices to automatically record Medicare
              payments in their accounts receivable records, saving substantial cleri-
              cal effort.

              Other types of electronic links were less common among Medicare carri-
              ers, but several carriers were considering or already offering them to
              Medicare providers. Three carriers reported offering Medicare providers
              an electronic link to determine the status of claims; one reported offer-
              ing an electronic link with Medicare providers that would be a helpful
              tool for requesting additional information. One carrier reported that it
              was studying an electronic bulletin board system for Medicare provid-
              ers; six reported they were studying electronic links as a way of
              allowing providers to find out the status of claims.

              To determine whether commercial insurers considered electronic links
              with providers useful in reducing administrative costs, we contacted
              selected commercial insurance firms. One said that it uses a telephone
              system that provides eligibility and benefit information to providers
              within 60 seconds; this has reduced the number of claims rejected on the
              basis of eligibility. NEIC is working with two commercial insurers to
              develop an electronic format for payment notices; NEIC has already
              developed an electronic system to respond to inquiries about claims sta-
              tus that six commercial insurers currently use. This system (1) reduces
              phone calls to determine the status of claims, (2) provides verification
              that the insurer has received the claim, and (3) reduces duplicate claims.


               Electronic technologies can reduce Medicare administrative costs and
Conclusions    alleviate the paperwork burden on providers. Carriers can process
               claims more cheaply if they are filed electronically rather than on paper.
               Carriers and commercial insurers are developing systems that can
               (1) make electronic filing accessible to more providers and (2) take
               advantage of electronic technology to alleviate the paperwork burden
               for providers. In particular, carriers and commercial insurers are experi-
               menting with syst.ems that require little investment in hardware and
               would appeal to providers with a smaller claims volume.

               HCFA, however, has done little recently to promote increased automation
               in the claims process. HCE'A has not pursued electronic communication
               links with providers, believing that the costs make this technology too
               expensive for carriers to offer. Some carriers have offered electronic


               Page 34                                  GAO/HRB90-86   HCFA Can Reduce Medicare   Paperwork
                          Chapter 4
                          Expanded Use of Eleftrmdc   Technologies
                          Cnuld Streamline the Claima Process




                          links on their own initiative; we believe this indicates electronic links
                          can be cost-effective.


                          We recommend that the Secretary of Health and Human Services direct
Recommendations to        the Administrator of HCFA to assume a leadership role in further auto-
the Secretary of          mating the claims process and specifically
Health and Human
                          identify the innovations in electronic claims filing systems and elec-
Services              l


                          tronic communications that Medicare carriers and commercial insurers
                          have instituted and
                      l   disseminate information on such innovations to carriers in order to facil-
                          itate their implementation throughout Medicare.


                                disagrees with our conclusion that the agency has not been active
Agency Comments and       HCFA
                          in promoting automation of the claims process. HCFA states that its elec-
Our Evaluation            tronic claims work groups have suggested incentives to increase elec-
                          tronic filing and that it will publish revised formats for electronic
                          claims, remittance notices, and status queries. HCFA also states that it is
                          considering electronic mail and automatic response units to transmit
                          beneficiary information. We believe these are positive first steps. In our
                          report, we discuss carriers and private insurers that have implemented
                          systems that allow (1) electronic filing without use of a computer and
                          (2) automated communication between providers and carriers. We con-
                          tinue to believe ACFA should take a leadership role in identifying such
                          systems and helping its carriers implement them throughout the Medi-
                          care program.




                          Page 36                                    GAO/HRD90%   HCFA Cm Reduce Medicare   Paperwork
List of CongressionalRequesters


                  Chester G. Atkins
U. S. House of    Helen Delich Bentley
Representatives
   -              Sherwood L. Boehlert
                  Robert A. Borski
                  Barbara Boxer
                  John Bryant
                  Ben Nighthorse Campbell
                  Jim Chapman
                  Peter A. DeFazio
                  E. (Kika) de la Garza
                  Butler Derrick
                  Julian C. Dixon
                  Bill Emerson
                  Lane Evans
                  Walter E. Fauntroy
                  Edward F. Feighan
                  Jack Fields
                  Claude Harris
                  Charles A. Hayes
                  Clyde C. Holloway
                  Larry J. Hopkins
                  Frank Horton
                  William J. Hughes
                  Henry J. Hyde
                  Jim Jontz
                  Marcy Kaptur
                  Robert W. Kastenmeier
                  Joe Kolter
                  Robert J. Lagomarsino
                  H. Martin Lancaster
                  John Lewis
                  Thomas J. Manton
                  John P. Murtha
                  Stephen L. Neal
                  Mary Rose Oakar
                  James L. Oberstar
                  Major R. Owens
                  Timothy J. Penny
                  John Edward Porter
                  Don Ritter
                   Robert A. Roe
                   Martin Olav Sabo
                   Dan Schaefer


                  Page 36                   GAO/IiRB96-86   HCFA Can Reduce Medicare Paperwork
                       Appendix I
                       List of Congressional   Requesters




                       Norman D. Shumway
                       David E. Skaggs
                       Louise M. Slaughter
                       Christopher H. Smith
                       Lawrence J. Smith
                       Olympia J Snowe
                       Charles W. Stenholm
                       Gerry E. Studds
                       Robert Lindsay Thomas
                       James A. Traficant, .Jr.
                       Fredrick S. Upton


                       Daniel K. Akaka
United States Senate   James M. Jeffords




                       Page 37                              GAO/HRBSO-36   HCFA Can Reduce Medicare   Paperwork
Appendix II

Scopeand Methodology


scope         In addition to working at HCFA'S headquarters in Baltimore and its
              regional offices in Boston, Chicago, and San Francisco, we did work at
              three Medicare carriers-Blue     Shield of Massachusetts, Transamerica
              Occidental Life Insurance Company (which serves southern California),
              and Blue Cross and Blue Shield of Indiana. These three carriers, which
              processed about 11 percent of all part B claims during fiscal year 1989,
              were selected to obtain (1) different geographical locations, (2) both
              Blue Cross and Blue Shield organizations and private insurers, (3) carri-
              ers with different assignment rates, (4) carriers receiving different pro-
              portions of electronic claims, and (5) carriers using different types of
               computer-based systems to process claims.

              We also met with officials of three commercial health insurance compa-
              nies-Aetna Life and Casualty Company, the Travelers Insurance Com-
              pany, and the John Hancock Mutual Life Insurance Company-to obtain
              information on services these companies offered their private customers
              that could be useful to Medicare beneficiaries or providers. We talked to
              officials of the Gray Panthers (see p. 24, fn. 1) to obtain information
              about their lawsuit against IICFA concerning the Medicare claims process.
              Finally, for the 3 1 Medicare carriers nationwide that we did not visit, we
              sent letters soliciting their views on certain aspects of the claims pro-
              cess; 28 of these responded to our letters. To obtain views on ways to
              clarify Medicare paperwork and simplify the claims process, we also
              spoke, by telephone, with 17 groups representing the elderly (benefici-
               ary organizations) and 19 providers or groups representing providers
               (both referred to as provider organizations).


              To determine whether opportunities exist to help providers submit com-
Methodology   plete claims, we (1) reviewed HCFA guidance concerning when and how
              carriers should obtain additional information needed to process claims
              and (2) discussed HCE&monitoring of carrier information requests with
              1~x4 officials. To ascertain what types of information carriers request
              and who the carriers ask (beneficiaries or providers) to furnish each
              type of information, we analyzed carrier reports on additional informa-
              tion carriers requested from beneficiaries and providers; we then dis-
              cussed our analysis with carrier and HCFA officials (one of the carriers
              we visited, Blue Cross and Blue Shield of Indiana, did not prepare these
              reports). Finally, we reviewed carrier efforts to inform health care prov-
              iders of the information the carriers needed to process claims. We solic-
              ited the views of carrier and IKFA officials on whether improved
              provider education could help reduce information requests.



               Page 38                        GAO,‘HRD-90-86 HCFA Can Reduce Medicare Paperwork
  Appendix II
  Scope and Methodology




  To determine whether the notices sent to beneficiaries explained carrier
  claims decisions clearly, we (1) reviewed HCFA guidance to carriers con-
  cerning the notice and (2) discussed with HCFA officials the development
  and approval of notice messages and beneficiary feedback on the clarity
  of notices. To determine whether the messages on notices were relevant
  and clear, we reviewed, at each of the carriers we visited, a random
  sample of 50 notices for assigned claims and 50 for unassigned claims.
  We discussed our review with carrier and HCFA officials. Because these
  samples were small in comparison with the total volume of claims
  processed, the results of our analysis are not generalizable. Finally, we
  discussed ways to improve the notice with carrier and IICFA officials, as
  well as representatives of beneficiary organizations.

  To determine whether electronic technologies-such          as electronic
  mail-could reduce paperwork, we

. interviewed officials of selected health insurance companies to obtain
  information on (1) services they offered that facilitate the claims pro-
  cess and (2) their opinions on how Medicare could improve services for
  beneficiaries and providers;
. discussed, with HCFA and carrier officials, the feasibility and potential
  savings, as well as advantages and disadvantages, of additional carrier
  services for beneficiaries and providers; and
. discussed additional carrier services with selected provider and benefi-
  ciary organizations.




  Page 39                        GAO/HRD-YOSti   HCFA Can Reduce Medicare   Paperwork
Appendix   III                                            -

Comments From the Department of Health and
Human Services


                    DEPARTMENT OF HEALTH & HUMAN SERVICES                                          Office01I”spectorGeneral




                                                                 APR 271990




                 Ms. Janet        L. Shikles
                 Director       for    Health    Financing
                  and Policy         Issues
                 United     States      General
                    Accounting         Office
                 Washington,         D.C.     20548

                 Dear    Ms.     Shikles:

                 Enclosed        are the     Department's       comments     on your       draft      report,
                 "Medicare:            HCFA Can Reduce      Papework        Burden     for     Physicians          and
                 Their      Patients."        The comments        represent      the tentative           position
                 of the      Department       and are subject          to reevaluation           when the        final
                 version       of this     report     is received.

                 The Department            appreciates          the opportunity        to    comment     on this
                 draft  report          before      its   publication.

                                                                   Sincerely      yours,




                 Enclosure




                        page40                                        GAO/HRD9086          HCFA Can Reduce Medicare Paperwork
      AppendixID
      Comments komtheDepartmenl               ofHealth
      and Human Services




               chm~nts   0f the Department      of Health   and Runan Services
                   on the General    Accounting    Office   Draft    Report,
                          "Medicare:   HCFACanRedUCe        Paperwork
                       Rurden for physicians      and Their    Patients"


Overview

we agree that reducing        the paperwork      burden for physicians          and patient.9    iS
a worthy   objective.      However,   increasing      legislative       requirements     within
the Medicare     program generate     the need for even IUDM infon%itiOn.
Virtually    all of these changes are aimed at protecting                  the liability      of
the Medicare     Trust   Funds and beneficiaries.            We agree that further
automation     of the claims     p-ss      by establishing        electronic     ccarmmications
between carriers       and providers    to reduce telephone          cammm ications      will
reduce the p.aperwork      burden for physicians.

GAO Recamnendation

we recamnend that       the Secretary      of Health   and. Human Services    direct             the
Administrator     of HCFA to identify        effective    techniques   for reducinrl             the-
nwlber    of incomplete    claims    filed   by providers     and encourage   carriers              to
adopt these techniques        where appropriate.

Department          conunent

We agree and are working              to accomplish       this   goal.      GAO emphasizes     the need
to improve       provider     claims     subnission     to reduce the nrrmber of claims
returned      for incomplete        information.        GAO found that 45 million           carrier
claims,      or 9 percent       of the total,       were returned       for incomplete      service
information.          According     to GAO, a large         percentage      of claims   lacked basic
information        required     on the claim form.            The above findings      werebasedon
the projection         from a 3-month sample of several                carriers.

 We question        both the percent        of claims       retuned     and the reasons associated
 with claims        returned.       Based on HCFA's Carrier            Workload     and Processing
 Time Report        for FY 89, only 7 percent             of all carrier       claims    were retuned
 for developmat.              This figure      includes     claims   that were returned        for
 non-basic      information        developoent       associated     with Medicare       Secondary   Payer
 first    claims      development.        Data mclwled         all claims     submitted    by all
 Medicare      carriers       in EY 89.

 In spite  of the questionable     data reported      by GAO, we agree that 1w3re can
 be done to reduce the number of claims         returned    for developrat.      For
 example,  we will consider    for implementation        in FY 91, GAO's suggestion
 that we study "best carrier      practices"    for professional      relations.




           page41                                        GAO/HRD-SO-86HCFACanReduceMedicarePapemork
                    AppendixIII
                    CommentsFromthcDrpnrTm~ntofH~alth
                    andHumanScrviccs




              Concerning     mandatory       claims     submissions,      we agree that provider               education
              is important.         In fact,      HCFA's &vi&r           Education       and Training        initiative
              is a major component           of the HCFA Physician            Wyment Reform implementation
              phi.       The PET initiative         will     feature   training       of providers        on the
              provisions     of payment reform            through    special    articles        in carrier
              bulletins,     carrier-sponsored            workshops    and seminars,          fort&%1 liaison          with
              State and local         medical     societies,       and through      participation          in meetings
              with physicians         sponsored     by State and local          medical       societies.

              Additionally,      when funding    for Professional        Relations     (I%) HBB restored                       to
              the FY 89 contractor       budget,    HCFA recomnended        in its budset guidelines
              that carriers      develop  a data-analysis      capability        to identify  and target                       PR
              needs.       Many carriers  adopted this     reccxmnendation.

              In our FY 91 budget guidelines,            we have specifically        directed  carriers                       to
              identify       and target    problem providers    in an effort       to provide  intensive
              training       in s&mission      of claims  which are complete,        well documented,                     and
              error    free.     This will     no longer  be an optional      task.

              Finally,     we would also like              to point       out that HCFA is conducting            a
              national      study to determine             whether      there     is a difference       between the
              error    rates of claims          filed      electronically           versus   the mDre usual Feper
              claim.      This study will           compare a sample of claims                 filed   in either   mode
              with the billing        entities'           supporting       docwnentation,          such as medical
              records.       lhe ultimate         purpose       for the study will           be to point     up any
              additional       claims  processing            safeguards        which may be necessary          as the
              volwne of electronically                billed      claims     increases.

              GAO Recommendation

              We recorrmend that the Secretary         of Health     and Human Services       direct  the
              Administrator       of HCFA to initiate      a concerted       effort with carriers    and the
              beneficiary      conxmmity    to imxove    the quality      of Bcplanation    of Medicare
              Benefits      IFX3lB) notices   and messages.      Specifically,      HCFA should

                     -- establish        a formal    mechanism to solicit          feedback    from carriers.
                        beneficiaries,          and other groups on IX?IB problems             and use the
                        feedback       to improve      the notice      and its individual        mz.sages;
                     -- examine carrier           compliance    with its guidance         concerning    ECi% format
                        and content         during   annual carrier       evaluations;       and
                     -- monitor      carriers      to ensure that E@IBs are sent to beneficiaries                in
                        all rewired           cases so that beneficiaries            will  have the opMrtunity
                        to detect        potenti&payment          errors   or fraudulent       claims.

               Department       ConEnent

               We agree      with     these   recommendations          and continue        to conduct       a number     of
               initiatives          in this   area.

Nowonp   18    Regarding   the seeming lack of clarity    of the EOMB referenced     on page 22,
               the language    used to develop and enhance the FXTIE was developed      with the
               approval   of the Gray Panthers  and other   senior citizen   groups.




                      page42                                            GAO/HRD-9086HCFACanReduceMcdicarePaperwork
                     Appendix ID
                     Comments From the Departmrnl                 of Health
                     and Human Services




               Page 3

               This language     is somewhat technical      in order    to protect      beneficiary        rights
               in the hearings      and appeals   process   and to provide      sufficient        information
               for other   insurers    to process    supplemental    benefits.

Nowonp   18    1n response      to paragraph     2 of pase 24 that IDiE& do not contain          enoush
               specific   information,       beneficiaries     can match the medical    services     listed
               on their   bills    with their      ECX+Bs to identify   services.   Carriers     are
               required   to specifically        identify   on the EC%B the -       of the provider         of
               services.

               We note that the ECMB is not the only tool                        for detecting        fraud and abuse
               in the Medicare          program.       Carriers      monitor     claims    of participating
               physicians        for evidence       of violation         of the Ixrticipation           agwxment..
               Further,      Congress      enacted     certain      charge    limits    and provisions       to protect
               Medicare      beneficiaries        treated      by non-participating           physicians.       Carriers
               monitor      the non-participating             physicians      to see that they adhere to these
               charge     limits.

               Additionally,          we would like        to point       out that GAO's statement                on pages 34
Now on p. 26   and 35 that HCFA ". . .does not review                         canpleted        WMBs to determine           if
               messages are relevant              or used in the proper                context."       is somewhat
               misleading.           Under the Carrier          &ality        Assurance        Promsmcaxlucted           ateach
               carrier       site    and by each regional            office,       the quality         of carrier     claims
               processing         is evaluated.         This includes           an examination           of the l?CMBs
               prepared        and sent by carriers            to determine          their     accuracy      and
               appropriateness.             Failure     to follow        the specific          instructions       issued by
               HCFA relative          to the format        and content          of these notices            will  result      in
               the assessment           of processing        errors.         Likewise,        an error      will  be charged
               if HCFA required           that an ECMB be sent but the carrier                          did not do so.
               Compliance         with claims       processing        requirements          is one of the areas
               considered         in determining        whether       or not to renew a carrier's                 contract       to
               process       Medicare     claims.

               GAO makes reference     that carriers     should      send an ExmB to beneficiaries         for
               each claim prccessed.       It is true that&enMedicare             pays 100 percent       of
               the approved    amount. to the physician       on an assigned    claim and the
               deductible   has been met, KPBs are not sent to beneficiaries.                  In this
               situation,   there  is no beneficiary      liability.       This practice    was initiated
               as a cost saving    measure.     In light    of the GAO's concerns        and the desire
               to reduce program fraud and abuse, we are reevaluating                the need to seai
               EcMBs in all cases.

                Finally,    a workgroup        has been convened within                HCFA to .re-design      the BJMB.
                This effort      will    coincide       with the implementatioi~             of physician    payment
                reform mandated by OKRA '89.                  The wor!group          has the following      objectives:
                (1) to determine         changes necessary            to improve       the EcTB, such as for added
                clarity;     (2) to studr        improvement        in ECMB design;          (3) to examine the
                pxsihility       of using descriptor             language       which explains      CR-4 procedure
                ccde~ on EcMBs; and (4) to develop                    explanatory        language   for nore
                widespread      beneficiary       acceptance.           During     the planning     end assessment.
                stages,    the workgroup         will     secure    input     from beneficiary        focus groups,
                carriers     und regional        offices.




                       Page 43                                             GAO/HRD-9@86          HCFA Can Reduce Medicare             Paperwork
                    Appendix llI
                    Comments From the Department                 of Health
                    and Human Services




               we re~anmendthat     the secretary0f                  Health   andliuren            Services    direct   the
               Ad&-dstrator     of BCFA to ass-                  a leadership      role       in    further    automating
               the claim9 -528s       and srecifically:

                    --     identify      the innovations         in electronic          claims     filing    SyStemS and
                           electronic       cmamm ications         that Medicare          carriers       and ccxmwcial
                           insurers      have instituted:          and

                     --    disseminate       information     on suoh         innovations       to carriers         in order      to
                           facilitate      their    imolanentation           thmuuhout        Medicare.



               We do not believe,         as the last paragraph         on page 38 suggests,         that only
               larger-volume    providers       will    file   their  claims    electronically.          In fact,    a
               high proportion     of Electronic          Media Claims     (FX)    for low-volrme        providers
               now cane through      billing      services     or organizations        which specifically         do
               m     billings.

Now on p. 30   Chpage       40, mention          is made that the HCFAEMZ workgmuphadnotpmFosed
               incentives         for electronic           claims      sutmission        at the time this report               Zws
               issued.        To present         a balanced        report,       mention      should be made that the
               HCFA ax: wxkgmup                 has suggested          incentives         for PIG.       HCFA will      publish
               revised      l4+2 formats         in 1990 which will              meet the needs of HCFA and other
               insurers.          l%ese      fonoats     were developed            by HCFA carriers          and
               representatives             of Medical        Gmup Fknagement              Association,       the Blue Shield
               Association,           and National         Electronic         Information        Corporation.          HCFA's
                leadership         in DK billing           is acknowledged            by the commercial           and Blue
               Shield      plans.        'Ihe revised        specifications           will    include     electronic
                remittance         notices      and status       queries.          HCFA is also considering
                electronic         mil     and the pilot          testing       of automatic         response     units     to send
                and receive          beneficiary       infomation.              Ihe issue of beneficiary               privacy,
                however,      is sensitive.             Information         on beneficiaries            is protected        by the
                Privacy      Act.       Any initiatives           undertaken         must be considered           within      this
                context.

Now on p. 34    On FL@ 47, Ciao condudes               that HCFA has not been active                   in pranoting
                autcswtion       in the claims       process.        CA0 states       that BCFA believes           that
                increases      in electronic       claims     filing    will   be limited           because of t,he high
                cost of computer         systems needed to support              this     initiative.         690's
                perception       of HCFA's attitude         and approach        to expanding           EMC is incorrect.
                We believe       R+X2 receipts     can be substantially             increased.           As evidenced    by
                our response       to this     report,     we are currently           working        to promote lM2 and
                will    continue     to do so.




                         Page 44                                          GAO/HRD-90-86            HCFA Can Reduce Medicare           Paperwork
                                                          ~__
                     AppendixIII
                     CommentsFromtheDepartmentofHealth
                     and HumanServices




                page5

                Technical    Caanents

                Part B claims   are processed   by m    carriers    and fiscal                intexmediaries.
Now on p. 8     The process   described   on page 10 is the carrier    process                only.

Deleted.        The quotation      in paragraph       1 on paBe 12 is       anecdotal.       Carriers    lnay &
                return  beneficiary-sutmitted           claims.

Nowonp     11   The bottom of page 12 refers             to a 1987 survey            by the American    Society   of
                Internal     Medicine     that c-nts          upon the difficulty           physicians   have in
                obtaining     information       from carriers       by telephone         or in writing.     Since
                that time, Medicare          has greatly      increased       its funding      of, and requirements
                for carriers       in the area of, professional               relations.       T&se requirerents
                include    timely     responses     to provider       inquiries.

Now on D 29.    On page 38, GAO states        that the cholibus Budget Reconciliation                   Act of 1989
                lOBRA '89) now requires         HCFA to pay electronic     claims     faster.            This
                reference  should be changed to indicate            that OEXA '89 actually               requires
                HCFA to encowa~e     end develop       a system which will      provide      for        expedited
                payment for electronically-sutmitted           claims.




                        page45                                      (;AO/HRD-90-86HCFACanReduceMedicarePapemork
Appendix IV

Major Contributors to This Report


                         Nicholas White, Assistant Director, (617) 565-7558
Human Resources          Monty Peters, Assignment Manager
Division, Boston

                         Robert Dee, Health Issue Area Manager
Boston Regional Office   Roland A. Poirier, Evaluator-in-Charge
                         Julia C. Svendsen, Evaluator          -
                         Pamela L. Milligan, Evaluator
                         P. Taylor McNeil, Evaluator
                         Georgia 0. Rowell, Evaluator
                         John Ficociello, Reports Analyst




(106339)                 Page 46                       GAO/HlW9O-g6   HCFA Can Reduce Medicare   Paperwork
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