Delays in Processing Medicare Beneficiary Claims in Texas

Because of unusual and serious delays experienced by Medicare beneficiaries and their physicians in getting Medicare claims processed and paid in an accurate and timely manner, GAO was requested to make an in-depth review of the processing of Medicare claims in Texas.

GAO found that the delays resulted from a substantial backlog of unprocessed claims which developed when the Medicare intermediary in Texas converted to a new computer system. The system was the first attempt to integrate the processing of both Medicare Part A and Part B claims into one system. The contracting agreement required that, before the new system's operational date, the contractor must demonstrate the ability to process claims through all of the required subsystems and that all of the required system features were satisfactorily implemented. If the system was not fully operational at the time specified, the contract provided for a daily penalty to be imposed on the contractor until the system was fully operational. Because the old system was being phased out, the new system was put into operation despite problems which adversely affected the timeliness of claims processing, and the normal level of backlog substantially increased. The quality of claims processing also deteriorated. GAO concluded that the carrier should impose the penalty payment on the contractor and reimburse it to the government and that the error rate should be brought down to an acceptable level.