Alleged Questionable Actions by Electronic Data Systems Federal Corp. To Reduce Its Claims and Correspondence Backlogs Under Its Medicare Contract in Illinois

GAO was requested to report on several allegations of questionable actions by an Illinois Medicare carrier to reduce backlogs of pending claims and correspondence. One category of the allegations involved the actions taken by the carrier during the last quarter of 1979 to deal with the problem of a large backlog of pending claims. Another category of allegations involved the actions taken by the carrier during the first several months of 1980 to dispose of a significant backlog of unanswered correspondence.

GAO was able to substantiate most of the facts surrounding the allegations. While some of the actions were inconsistent with the contract requirements, the carrier did not evade contract penalties. Carrier employees were acting in a high pressure environment brought on by a workload crisis that arose partly because of the carrier's inexperience as a Medicare carrier. Similar problems are likely to occur in the future if the agency continues to limit its contract monitoring to a preset evaluation plan without regard to the potential problems raised by a contractor's actions when it is forced to deviate from its normal procedures to handle crisis situations. Due to complaints from beneficiaries, GAO reviewed allegations concerning the carrier's handling of fair hearing requests. Resumes of the hearing officers showed that none were attorneys and only three had college degrees; thus, the carrier's staff qualifications were far below those stated in its technical proposal. The agency should assess the backlog problem, as well as review the normal workload of fair hearing requests. A review of 6 cases showed that proper decisions were rendered in each case, but each used poor rationale, poor literary composition, and had incomplete files. The agency needs to take action to bring the carrier into compliance with the standards on documentation for system overrides and system edits, identify and evaluate the reason for the carrier's high volume of undeliverable mail, and provide continual oversight of the carrier's handling of reviews.