Medicare Automated Systems

GAO has included Medicare in its list of government programs at high risk for waste, fraud, abuse, and mismanagement. (See GAO/HR-97-10, Feb. 1997.) The Department of Health and Human Service's Inspector General estimates that Medicare overpayments totaled $23.2 billion in fiscal year 1996, or about 14 percent of total Medicare fee-for-service payments. Ongoing Medicare initiatives to combat fraud and abuse include (1) an arrangement with the Energy Department's Los Alamos National Laboratory in 1995 to research the potential identification of fraud and abuse patterns and, more recently, (2) an assessment of the feasibility of using commercial abuse-detection software. This testimony focuses on the Medicare Transaction System (MTS), the Health Care Financing Administration's (HCFA) principal information technology initiative to detect fraud and abuse, and recommendations GAO made to correct serious weaknesses in MTS management. GAO also describes the two continuing HCFA initiatives against fraud and abuse, including the agency's response to earlier GAO recommendations on the benefits of commercial abuse detection software. Finally, GAO frames the discussion in broader terms, examining underlying information technology management issues with an eye toward identifying causes and solutions so Medicare can use automated systems to successfully fight fraud and abuse.

GAO noted that: (1) to improve the efficiency and effectiveness of Medicare operations and better address fraud and abuse, HCFA planned to develop one unified computer system to replace the existing system, but the project encountered problems from the beginning; (2) HCFA assessed the project's viability and decided to terminate both the request for proposals for the MTS sites and the entire software-development contract; (3) HCFA has two other independent information technology initiatives in the areas of fraud and abuse that are continuing--analyzing the potential for using existing commercial software and exploring the possibilities for developing antifraud software; (4) HCFA did not begin to test the feasibility of using commercial code-manipulation software to process Medicare claims until about 1 year after GAO reported on its potential; (5) any positive results from this testing are not expected to be implemented nationally for at least several years; (6) HCFA chose to enter an agreement with Los Alamos National Laboratory that allowed it to explore developing such software; (7) results from this program appear to be years away because once the system's design is complete, HCFA would have to award another contract to a software developer to create from the Los Alamos design; (8) HCFA would have to acquire new computers to implement any Los Alamos-based fraud detection system because its approaches, which were originally to become part of MTS, are not designed to be integrated with the Medicare claims processing systems to which HCFA is transitioning; (9) HCFA's negative experience with its automation projects represents a pattern of weaknesses GAO sees throughout the federal sector; weaknesses in management that stymie effective systems development and implementation; (10) the Clinger-Cohen Act of 1996, the Paperwork Reduction Act of 1995, the Chief Financial Officers Act of 1990, and the 1993 Government Performance and Results Act, provide a powerful framework under which federal agencies have the best opportunity to improve the management and acquisition of information technology; (11) HCFA has recognized the need to more effectively manage its information technology acquisitions, and has taken several important steps, but much remains to be done to ensure that HCFA's initiatives are cost-effective and serve its mission; and (12) HCFA has not yet implemented GAO's recommendations in establishing investment processes that will allow it to maximize the value, manage the risks of its information technology acquisitions, and tightly control spending.