Medicare

In fiscal year 1999, contractors collected $8.7 billion, or about 70 percent of the $12.6 billion in Medicare overpayments. HCFA and its contractors used identification techniques, such as medical reviews, to ensure service appropriateness, interim payments review and audits of cost reports for providers that are paid on the basis of their costs, and reviews to determine if another entity has primary payment responsibility. However, HCFA lacks information to measure the effectiveness of contractors' overpayment identification activities. Recovery auditors use identification techniques similar to those already in use. GAO suggests that Congress consider increasing HCFA's funding to bolster its postpayment review program. Contractors transfer overpayments they cannot collect to HCFA, which has had limited collection success. HCFA officials said that they do not have the resources needed to pursue collection on the large volume of eligible debt. GAO recommends that HCFA immediately refer overpayments as they become more than 180 days delinquent to a designated debt collection center or to the Treasury Department for collection. HCFA has already recognized that specialized contractors improve overpayment identification; it now has 12 firms to assist in its program safeguard efforts. HCFA is resolving complex challenges about how to compensate the firms, handle coordination and privacy issues, and oversee the firms' activities.

GAO noted that: (1) despite HCFA's efforts to pay claims correctly in its $167 billion fee-for-service Medicare program, several billions of dollars in Medicare overpayments occur each year; (2) it is therefore critical that HCFA undertake effective postpayment activities to identify overpayments expeditiously; (3) HCFA's claims administration contractors use several postpayment techniques to identify overpayments; (4) these include medical review to ensure reports for providers that are paid on the basis of their costs, and reviews to determine if another entity besides Medicare has primary payment responsibility; (5) the contractors identify and collect billions of dollars through these activities, but how well each contractor performs them is not clear because HCFA lacks the information it needs to measure the effectiveness of contractors' overpayment identification activities; (6) while recovery auditors may also save money for clients, such as state Medicaid agencies, by identifying overpayments, the identification techniques they use are generally similar to those already used by HCFA and its contractors; (7) this does not mean that HCFA could not benefit from a stronger focus on specific postpayment activities; (8) however, doing so may require additional program safeguard funding so as not to shift funds away from HCFA's other efforts, such as prepayment review to prevent overpayments; (9) Congress has given HCFA assured funding for program safeguard activities; (10) however, the funding level is about one-third less than it was in 1989 and, although it will increase until 2003, it will only keep pace with expected growth in Medicare expenditures; (11) for fiscal year 1999, based on HCFA estimates, the Medicare Integrity Program saved the Medicare program more than $17 for each dollar spent--about 55 percent from prepayment activities and the rest from postpayment activities; (12) because these activities can bring a positive return, GAO suggests that Congress consider increasing HCFA's funding to bolster its postpayment review program; (13) HCFA plans to expand its pilot projects from some to all of its claims administration contractors; and (14) however, it has established minimum thresholds for referrals for collection that are higher than the Department of the Treasury and debt collection center will accept because HCFA says that it does not have the resources needed to pursue collection on the large volume of debt below its thresholds.

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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