Medicare Spending

Medicare's vulnerability to billions in unnecessary payments stems from a combination of factors. First, Medicare pays higher than market rates for some services and supplies. For example, Medicare pays more than the lowest suggested retail price for more than 40 types surgical dressings. Second, Medicare's anti-fraud-and-abuse controls do not prevent the unquestioned payment of claims for improbably high charges or manipulated billing codes. Third, Medicare's checks on the legitimacy of providers are too superficial to detect the potential for scams. Various health care management strategies help private payers avoid these problems, but Medicare generally does not use these strategies. The program's pricing methods and controls over utilization, consistent with health care financing and deliver 30 years, have not kept pace with major financing and delivery changes. GAO believes that a viable strategy for remedying the program's weaknesses would involved adapting the health care management approach of private payers to Medicare's public payer role. This strategy would include (1) more competitively developed payment rates, (2) enhanced fraud and abuse detection efforts through modernized information systems, and (3) more rigorous criteria for granting authorization to bill the program.

GAO found that Medicare is vulnerable to billions of dollars in unnecessary payments, since Medicare: (1) pays higher than market rates for certain services and supplies; (2) anti-fraud and abuse controls do not systematically prevent the payment of claims for improbably high charges or manipulated billing codes; and (3) checks on the legitimacy of providers do not adequately detect the potential for fraud. In addition, GAO found that: (1) Medicare has not used the health care management strategies that have helped private payers alleviate weaknesses; (2) Medicare pricing methods and utilization controls have not adapted to current health care financing and delivery changes; (3) the uncertain line between adequate managerial control and excessive government intervention explains the differences in the ways Medicare and private health insurers administer their respective plans; and (4) Medicare should implement a strategy to remedy its weaknesses that includes competitive payment rates, enhanced fraud detection, and more rigorous criteria for granting authorization to bill the program.

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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