1983 Budget Proposals Relating to the Medicare Program

GAO discussed some significant cost-saving legislative initiatives related to the Omnibus Reconciliation Acts of 1980 and 1981, its views on selected Medicare cost-saving proposals associated with the 1983 budget, and some opportunities for savings through more effective administration of the program. The basic issues are where the savings will come from and whether and when they will materialize. The Department of Health and Human Services (HHS) has not been successful in implementing the Medicare cost-saving provisions of the 1980 and 1981 Acts, especially those provisions which would either decrease payments to providers or transfer costs to other insurers. Because five major provisions have not been implemented, an estimated savings of $370 million for 1982 did not materialize. GAO believes that the primary reasons for the difference in the time taken to implement legislative changes are the complexity of the subject matter and the degree of administrative discretion permitted in implementation. Changes affecting beneficiary cost-sharing increases have been relatively simple and have been implemented. The changes that have not been implemented are those which would affect providers and other insurers and those which would give the administrative agency wider latitude in implementation. GAO thinks that this pattern will continue with any cost-saving proposals enacted this year. However, it believes that some short-term savings could be realized by thoroughly enforcing current program requirements rather than by implementing complex new requirements. GAO noted that the administrative budget for Medicare has remained relatively static and that the Administration's budget for fiscal year 1983 proposed to maintain the budget at its current level. Due to inflation, the administrative budget in real dollars has probably decreased since 1980. GAO questioned the wisdom of limiting administrative costs at a time when numerous legislative requirements are supposed to be implemented. Additionally, an increase in provider audits would also result in short-term savings. Expanding prepayment utilization review activity at carriers with poor performance indicators and minimal utilization review effort should result in significant additional savings.