Medicare Financial Management

Although the Health Care Financing Administration (HCFA) is supposed to ensure that the billions of dollars spent on Medicare each year are managed in a fiscally responsible way, it has yet to establish adequate accountability and control over the program's financial operations. HCFA's financial management activities--from evaluation and follow-ups on audit findings to contractor monitoring and financial reporting--fall short in addressing weaknesses repeatedly cited in audits and other reviews. Unless these weaknesses are resolved, the government is at risk of substantial losses. Financial statement audits have long criticized claims contractors for internal control and financial reporting weaknesses, including failure to safeguard checks received from providers for overpayments and incorrectly recording billions of dollars owed to Medicare for such overpayments. However, HCFA's procedures for following up on audit findings and evaluating corrective actions remain insufficient. Poor monitoring of contractors' financial activities is another problem. Audit reports have also cited HCFA for inefficiencies in its internal control financial reporting practices, including a lack of documented policies and procedures. These deficiencies call into question the reliability of the data that Congress and HCFA use to track Medicare program costs and make decisions about future funding. HCFA officials have launched several initiatives to strengthen the agency's control and accountability, such as hiring outside consultants to evaluate the contractors' internal controls. However, the agency still lacks a comprehensive strategy to ensure successful implementation of these initiatives, direct financial management activities, and sustain improvements in the long term. Without such a strategy, billions of dollars will remain vulnerable to fraud and abuse and HCFA's financial management problems will likely persist. GAO summarized this report in testimony before Congress; see: Medicare Financial Management: Further Improvements Needed to Establish Adequate Financial Control and Accountability, by Gloria Jarmon, Director of Accounting and Financial Management Issues, before the Subcommittee on Government Management, Information, and Technology, House Committee on Government Reform. GAO/T-AIMD-00-118, Mar. 15 (22 pages).

GAO noted that: (1) although HCFA is responsible for ensuring that the billions of dollars expended for Medicare each year are managed in a fiscally responsible way, it has not yet established an adequate foundation for control and accountability over the financial operations of the Medicare program; (2) HCFA's financial management activities are insufficient to resolve the internal control and financial reporting weaknesses identified through audits and other reviews; (3) while HCFA set and achieved goals for improving its audit opinion, many long-standing financial management weaknesses remain; (4) HCFA received an unqualified or clean opinion on its fiscal year (FY) 1999 financial statements, and its audit report was issued on time; (5) the audit report on HCFA's FY 1999 financial statements highlighted that many of the underlying control weaknesses reported in previous audits still exist; (6) financial statement audits have repeatedly cited claims contractors for internal control and financial reporting weaknesses; (7) despite the impact that these and other financial management weaknesses have on HCFA's ability to safeguard Medicare assets, HCFA's procedures for following up on audit findings and evaluating corrective actions to ensure they are appropriate and effectively implemented are insufficient; (8) HCFA's monitoring of contractor financial activities is also insufficient; (9) until recently, the scope of HCFA's oversight was limited, focusing mainly on contractor compliance with administrative budgets, which total about $1.6 billion annually, instead of focusing on the significant financial activities related to the approximately $170 billion expended to pay Medicare health benefit claims each year; (10) audit reports have also cited HCFA for inefficiencies in its internal financial reporting practices, including a lack of documented policies and procedures; (11) HCFA officials have begun several initiatives to enhance HCFA's ability to establish better control and accountability, such as hiring outside consultants to evaluate contractor internal controls; (12) however, HCFA does not have a comprehensive strategy to ensure successful implementation of the improvement initiatives, direct financial management activities, and sustain improvements in the long term; and (13) HCFA lacks long- and short-range plans that provide a basis for prioritizing financial management initiatives, clearly defining goals and objectives, establishing timeframes for completing initiatives, assigning responsibilities, and measuring performance.

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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