Inherent Program Risks and Management Challenges Require Continued Federal Attention Gao ID: T-HEHS-97-89 March 4, 1997

Federal spending for Medicare, one of the largest government entitlement programs, totaled $197 million in fiscal year 1996. Because of the program's size and mission, Medicare remains at high-risk for waste, fraud, and abuse. That wrongdoers continue to find ways to dodge safeguards illustrates the need for constant vigilance and increasingly sophisticated ways to protect against gaming the system. Better oversight and leadership by the Health Care Financing Administration (HCFA), the appropriate application of new anti-fraud-and-abuse funds, and the mitigation of risks involved in acquiring the Medicare Transaction System--a major claims processing system--should help reduce future losses. Moreover, as Medicare's managed care enrollment grows, HCFA must ensure that payments to health maintenance organizations (HMO) reflect the cost of care, that beneficiaries receive enough information about HMOs to make informed choices, and that the agency uses its expanded authority to enforce HMO compliance with federal standards.

GAO noted that: (1) it is not surprising that because of the program's size, complexity, and rapid growth, Medicare is a charter member of GAO's high risk series; (2) in this year's report on Medicare, GAO is pleased to note that both the Congress and the Health Care Financing Administration, the Department of Health and Human Services' agency responsible for running Medicare, have made important legislative and administrative changes addressing chronic payment safeguard problems that GAO and others have identified; and (3) however, because of the significant amount of money at stake, GAO believes that the government will need to exercise constant vigilance and effective management to keep the program protected from financial exploitation.

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