The Use of Competitive Fixed-Price Contracting in Medicare

GAO reviewed three State experiments with competitive fixed-price contracting under part B of Medicare. The objectives of the review were to follow up on the recommendations which GAO made in a previous report, evaluate the performance of the three experimental fixed-price contractors, and relate the results of the experiments to the legislative issue of competitive fixed-price contracting in Medicare. The major GAO emphasis was on the performance of the experimental contractor for a State where there were reports of beneficiary and provider dissatisfaction with the claims processing and related services provided by the contractor. The results of the three fixed-price experiments have varied. Contractor performance has ranged from satisfactory to unsatisfactory with performance in one State now considered satisfactory after an initial 6-month period of unsatisfactory performance. Different circumstances associated with each experiment weighed heavily on the results. GAO believes that the experiments are inconclusive as to whether the broad application of competitive fixed-price contracting in Medicare can produce administrative cost savings without unacceptable negative effects on program payments and services. To authorize the Department of Health and Human Services to use competitive fixed-price contracting in the Medicare program, except in experiments, Congress would have to enact legislation. Such legislation would be premature at this time. However, if and when a competitive fixed-price procurement approach can be designed and implemented to assure consistently acceptable or improved levels of performance in terms of beneficiary and provider services and accuracy of program payments, GAO would be willing to reexamine the issue. The Health Care Financing Administration should analyze the overpayment situations detected in the Illinois program through the quality assurance program to determine if some of the overpayments could be identified and recovered. GAO developed a computer model to demonstrate the feasibility of reviewing claims history to identify specific overpayment cases. It is reasonable to assume that, if the GAO model or a similar model was used to analyze the full beneficiary history, a number of duplicate payments could be found.