HCFA Management

The Health Care Financing Administration (HCFA) pays for health care coverage for nearly a quarter of the population. Two programs that HCFA administers -- Medicare and Medicaid -- cost taxpayers about $370 billion in fiscal year 1998. Over the years, GAO has reported on problems in HCFA's management that have weakened the fiscal integrity of HCFA programs, leading to increased monetary loss from fraud, abuse, and erroneous payments. GAO has included Medicare on its list of government programs that are especially vulnerable to waste, fraud, abuse, and mismanagement. (See GAO/OCG-99-7, Jan. 1999.) Medicare's long-term financial condition is now one of the nation's most pressing problems. Recent legislation gave HCFA substantial new authorities and responsibilities for reforming Medicare in order to extent the solvency of Medicare's Hospital Insurance Trust Fund beyond 2008. The legislation also established the Bipartisan Commission on the Future of Medicare to develop more long-term solutions for further ensuring Medicare' integrity and solvency. This testimony updates GAO's assessment of HCFA's progress in implementing these new authorities and administering its programs. Specifically, GAO reviews HCFA's progress in (1) addressing its most immediate priorities and (2) strengthening its internal management to effectively discharge its major implementation and oversight responsibilities.

GAO noted that: (1) HCFA is facing an unprecedented set of challenges; (2) the immediacy and resource demands associated with meeting the year 2000 computer system challenges--coupled with HCFA's late start in addressing them--have put a tremendous burden on the agency this past year and have affected the timing and quality of its work on many other projects; (3) it has also slowed efforts to improve the oversight of ongoing operations, such as financial management and Medicare fee-for-service claims administration, which desperately need attention; (4) even where HCFA has made progress--such as in implementing a number of the mandated Health Insurance Portability and Accountability Act of 1996 and the Balanced Budget Act of 1997 requirements--GAO believes that more work, and many refinements, are still needed; (5) HCFA must meet these challenges with an aging workforce; (6) HCFA has taken a number of steps internally to capitalize on its staff's strengths to deal with a rapidly changing health care marketplace and growing responsibilities; (7) for example, HCFA has developed a strategic plan that better articulates its future direction, has progressed in its customer-focused reorganization by moving staff to their new organizational units, and has hired more staff with needed skills; (8) on the other hand, in focus groups GAO conducted, HCFA managers and staff discussed issues that continue to hamper effective agency operations; (9) to further strengthen HCFA's ability to effectively manage its employees and programs, the administration has proposed new authorities for contracting and new flexibility in hiring in the President's budget for fiscal year 2000; (10) it also proposes new mechanisms to enhance agency accountability, with biannual reports to Congress and an advisory board to help the agency streamline internal and program management; (11) HCFA senior officials have taken concrete steps to improve agency management this year but will need to maintain the momentum over the next several years to overcome the agency's current and future challenges; and (12) this will be especially difficult in an agency that for years has been plagued by external pressures and management problems.