Arizona Medicaid

Nondisclosure of Ownership Information by Health Plans Gao ID: HRD-86-10 November 22, 1985

In response to a congressional request, GAO reported on compliance with federal requirements for ownership information disclosure by prepaid health plans participating in the Arizona Health Care Cost Containment System (AHCCCS). AHCCCS is a Medicaid demonstration project set up to develop and test health care cost control innovations.

GAO found that many AHCCCS health plans have not complied with federal disclosure requirements intended to determine the appropriateness of ownership and control arrangements and related-party transactions, raising questions about: (1) the availability of federal funding for health plan operations during the periods of noncompliance; and (2) continued federal participation in AHCCCS health plans that have not complied. GAO also found that AHCCCS and the Health Care Financing Administration (HCFA) have not ensured compliance with the disclosure requirements before awarding and renewing contracts. Of the 19 health plans awarded contracts in the second year: (1) 3 did not disclose direct or indirect ownership; (2) 1 did not disclose officers or directors; and (3) 18 had their contracts renewed for a third year without assurance of compliance with disclosure requirements. GAO found that: (1) related-party transactions can enable health plans to divert program funds from their intended purpose to pay for unnecessary administrative costs or excessive profits; (2) none of the 15 plans required to submit disclosure statements on related-party transactions for the first year submitted them on time and only 4 submitted any at all; (3) 7 of the 18 plans required to submit statements for second-year operations failed to do so, and 8 that did submit them were late; and (4) federal financial participation was not denied in cases where health plans did not promptly disclose these transactions.

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.

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