Medicare Part B

How fair is the process used by insurance companies to approve or deny Medicare Part B claims? In its review of four insurance companies, GAO found that the computer programs used to evaluate claims produced consistent results and were economical. The programs, however, were not equipped to handle claims involving more subjective criteria, such as deciding whether medical care is appropriate or not. These cases were delegated to claims examiners, typically high-school graduates with no medical background who were expected to decide whether doctors' services were "medically necessary" on up to 400 claims daily. GAO concludes that three factors taken together--the time constraints under which decisions about medical necessity were made, the decentralized way in which medical policies were being developed and instituted, and weaknesses in some quality control methods--raise doubts about the system's ability to treat Medicare claims consistently.

GAO found that: (1) carriers' methods for determining whether a Medicare Part B claim represents a reasonable and medically necessary expense vary because the Health Care Financing Administration (HCFA) gives carriers wide latitude in setting their criteria for such determinations; (2) claims for similar medical services are not treated consistently by all carriers; (3) HCFA policies encourage carriers to process claims quickly, which could lower the reliability of the determinations; (4) carriers will probably reduce their medical necessity reviews because HCFA has reduced the budget for such reviews in order to meet appropriation limitations; (5) carriers have consulted with their local medical communities to establish criteria for determining medical necessity, but they do not systematically assess their instructions for applying those criteria; and (6) carriers have internal controls for assessing the reliability of their claims review process, but their ability to detect ambiguity in medical policy is limited.