Medicare Part B

To determine whether Medicare carriers in various parts of the country differed significantly in denying coverage for medical treatment they consider unnecessary, GAO analyzed Medicare Part B data on claims processed by six Medicare carriers for 74 services that were either expensive or heavily used. The carriers GAO studied included California Blue Shield, Transamerica Occidental Life Insurance, Connecticut General Life Insurance Company, Blue Shield of South Carolina, Illinois Blue Cross and Blue Shield, and Wisconsin Physicians' Service. GAO found that the magnitude of carrier denial rates for Medicare Part B claims was generally low and persistent for two consecutive years, although rates for some services shifted. Medical necessity denial rates for 74 services across six carriers varied substantially. The main reason was that some carriers used computerized screening criteria for specific services while others did not. Further, a small proportion of the providers accounted for half of the denied claims. To a lesser degree, the varying interpretation of national coverage standards across carriers, differences in the way carriers treated claims with missing information, and reporting inconsistencies also explained the variation in carrier denial rates. GAO summarized this report in testimony before Congress; see: Medicare Part B: Factors That Contribute to Variation in Denial Rates for Medical Necessity Across Six Carriers, by Terry E. Hedrick, Assistant Comptroller General for Program Evaluation and Methodology, before the Subcommittee on Regulation, Business Opportunities, and Technology, House Committee on Small Business. GAO/T-PEMD-95-11, Dec. 19, 1994 (17 pages).

GAO found that: (1) in 1992 and 1993, denial rates for lack of medical necessity for 74 expensive or heavily utilized services were generally low, but the six carriers reviewed varied significantly in their denial rates; (2) denial rates for the 74 services varied from zero to over 100 per 1,000 services allowed; (3) in general, the carriers' denial rates remained stable for two-thirds of their services in 1992 and 1993; (4) the Medicare program has traditionally allowed carriers to include regional variations in medical practice standards in their criteria for determining allowable claims; (5) the Health Care Financing Administration (HCFA) has developed initiatives to promote consistency in medical policy across carriers; and (6) variations in carrier denial rates stemmed from carriers' differing prepayment screens, varying interpretations of certain national coverage standards, carriers' differing treatment of incomplete claims, and reporting inconsistencies.

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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