Improving Medicare and Medicaid Systems To Control Payments for Unnecessary Physicians' Services

GAO reviewed the Medicare and Medicaid programs to assess the mechanisms that paying agents under these programs are using to identify and prevent reimbursement to physicians and suppliers for medically unnecessary services and to recoup payments made for such services. The objectives of the review were to: (1) assess and compare the costs and benefits of the prepayment and postpayment utilization review (UR) functions and a representative number of carriers and state Medicaid agencies; (2) identify probable causes for the variations in the performance of these UR functions; and (3) evaluate the Health Care Financing Administration's (HCFA) role, particularly under Medicare, in providing direction to these activities.

The nine Medicare carriers GAO visited supplied information which showed that their prepayment UR activities were cost beneficial, but the performance in terms of cost/benefit ratios and other indicators varies widely. Those making extensive use of automated edits to identify unnecessary services generally performed better and saved comparatively more Medicare program dollars. There are also opportunities for increased effectiveness in the carriers' postpayment UR activities. HCFA policies and practices have tended to provide disincentives to carriers for performing effective prepayment UR. Medicare carriers are incurring extraordinary costs to continually review the claims of habitual overutilizers. GAO found that only 3 of the 11 state Medicaid programs it reviewed used automated prepayment edits to detect possible overutilization. Only one of these programs could provide enough information for GAO to estimate the costs and benefits of prepayment UR operations in Medicaid. Regarding postpayment UR, GAO could identify few tangible benefits resulting from medical necessity issues raised through this activity. Congress has given the states financial incentives to develop effective UR programs. However, neither HCFA nor the states have effectively implemented these incentives.

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: Michael Zimmerman Team: General Accounting Office: Human Resources Division Phone: (202) 275-6195