Waiver of Medicaid Freedom-of-Choice Requirement

Potential Savings and Practical Problems Gao ID: HRD-82-90 July 20, 1982

GAO reviewed the Medicaid freedom-of-choice requirement to determine whether savings can be achieved and to identify the practical problems that may be encountered if freedom of choice were eliminated and the services were furnished by lower cost providers.

GAO found that the amount of savings that could be realized depends on the extent of physician and hospital acceptance. In the two States that were used as test areas, GAO identified similar potential savings and circumstances. Both areas were concerned about physician participation in the program, primarily because of low Medicaid reimbursement rates. To implement the waiver of the freedom-of-choice provision, States are required to document cost effectiveness, the effect on recipients' access to care, and the projected impact of the program; the States under review identified several related issues on which GAO feels guidance would be beneficial in designing waiver requests. Restricting a recipient's freedom of choice for nonemergency hospital services could potentially result in significant Medicaid savings. However, practical problems associated with implementing such restrictions could substantially erode savings or have other undesirable impacts on the program. Restricting freedom of choice for other types of services could have similar problems. Current regulations contain little guidance on the standards the Department of Health and Human Services will apply in evaluating whether States' requests for waivers of recipients' freedom of choice meet the requirements contained in the law. Further guidance on this should assist States in planning for and preparing waiver requests and help ensure that the requirements of the law permitting such waivers are met.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.