Medicare Financial Management
Significant Progress Made to Enhance Financial Accountability Gao ID: GAO-03-151R October 31, 2002Medicare provided health care coverage to 40 million people age 65 and over and to qualifying disabled persons at a cost of $240 billion in fiscal year 2001. In 1990, GAO designated the program as "high risk" for fraud and abuse because of its vast size, complex structure, and program management weaknesses. GAO issued two reports in 2000 that discussed weaknesses in the Centers for Medicare and Medicaid Services' (CMS) oversight of Medicare contractors' financial operations and the guidance it provides contractors in carrying out Medicare financial activities. GAO also cited CMS for deficiencies in its accounting procedures and improper payment measurement projects. GAO determined that CMS implemented corrective actions to substantially address four of the eight recommendations included in the 2000 reports and has made good progress in addressing the remaining four. Actions taken by CMS include the implementation of more in-depth internal control reviews at Medicare contractors as well as the development of an accounting procedures manual to guide its financial management staff in consistent accounting and reporting for Medicare. CMS has also tested several innovative analysis techniques for identifying improper payments. These actions have helped CMS address some significant, long-standing financial management issues.
GAO-03-151R, Medicare Financial Management: Significant Progress Made to Enhance Financial Accountability
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October 31, 2002:
The Honorable Stephen Horn
Chairman, Subcommittee on Government Efficiency,
Financial Management and Intergovernmental Relations
Committee on Government Reform
House of Representatives:
Subject: Medicare Financial Management: Significant Progress Made to
Enhance Financial Accountability:
Dear Mr. Chairman:
Medicare provided health care coverage to 40 million people age 65 and
over and to qualifying disabled persons at a cost of about $240 billion
in fiscal year 2001. In 1990, GAO designated the program as ’high risk“
for fraud and abuse because of its vast size, complex structure, and
program management weaknesses.[Footnote 1] In March and September 2000,
we issued two reports, one on Medicare financial management and the
other on Medicare improper payments.[Footnote 2] These reports
discussed weaknesses in the Centers for Medicare and Medicaid Services‘
(CMS) oversight of Medicare contractors‘ financial operations and the
guidance it provides contractors in carrying out Medicare financial
activities. We also cited CMS for deficiencies in its accounting
procedures and improper payment measurement projects. We made eight
recommendations for CMS to improve its performance in these areas and
establish better financial control over the Medicare program.
At your request, we assessed CMS‘s progress in addressing these
recommendations. This letter summarizes the information provided during
our briefing to your staff on September 6, 2002. The enclosed briefing
slides highlight the results of our work and the information provided
at the briefing.
Results in Brief:
CMS has implemented corrective actions to substantially address four of
the eight recommendations and has made good progress in addressing the
remaining four. Actions taken by CMS include the implementation of more
in-depth internal control reviews at Medicare contractors as well as
the development of an accounting procedures manual to guide its
financial management staff in consistent accounting and reporting for
Medicare. CMS has also tested several innovative analysis techniques
for identifying improper payments. These actions have helped CMS
address some significant, long-standing financial management issues.
Despite this progress, CMS needs to take further steps to fully address
the remaining four recommendations. These steps include expanding its
analysis of contractor financial data, ensuring resolution of audit
findings, and enhancing detection of fraudulent and abusive Medicare
payments. CMS is in the process of developing and implementing such
actions.
Scope and Methodology:
To fulfill our objectives of assessing CMS‘s progress in addressing our
prior recommendations, we:
* reviewed CMS‘s audited financial statements for fiscal year 2000 and
2001, other financial reports, fiscal year 2001-2003 Annual Performance
Plans, and the Comprehensive Plan for Financial Management to identify
initiatives that address previously identified financial management
weaknesses, determine if plans included actions to address our
recommendations, and determine if the actions included were sufficient
to address our recommendations;
* obtained documentation on procedures implemented to address our
recommendations and observed CMS Office of Financial Management staff
while performing these procedures to determine if the procedures were
in place and operating effectively;
* performed tests of audit resolution activities to confirm that
procedures implemented to address our recommendations were in place and
operating effectively;
* used the Comptroller General‘s Standards for Internal Control in the
Federal Government[Footnote 3] to assess policies and procedures that
CMS developed to address our recommendations;
* used our guide on Strategies to Manage Improper Payments[Footnote 4]
to evaluate the three improper payment measurement projects and other
initiatives that CMS had under way or planned; and:
* held numerous interviews with the CMS Chief Financial Officer (CFO),
Deputy CFO, program integrity officials, and staff members in the
Department of Health and Human Services‘ Office of the Inspector
General to obtain an understanding of the actions taken to address our
recommendations.
We conducted our work from January 2002 through July 2002 in accordance
with generally accepted government auditing standards. We requested
comments on a draft of this report from the CMS CFO, Deputy CFO, and
senior Medicare program integrity officials. These officials generally
agreed with our findings as presented in the enclosed briefing slides,
and the oral comments that they provided have been incorporated, as
appropriate.
We are sending copies of this report to the Ranking Minority Member of
your Subcommittee and the Chairmen and Ranking Minority Members of the
Senate Committee on Governmental Affairs and House Committee on
Government Reform. We are also sending copies of this report to the
Secretary of Health and Human Services, Administrator of the Centers
for Medicare and Medicaid Services, and other interested parties.
This report is available at no charge on our home page at http://
www.gao.gov. If you have any questions about this report, please
contact me at (202) 512-8341 or Kimberly Brooks, Assistant Director, at
(202) 512-9038. You may also reach us by E-mail at calboml@gao.gov or
brooksk@gao.gov. Key contributors to this assignment were Johnny Clark,
Lisa Crye, Suzanne Murphy, Cynthia Teddleton, and Lisa Willett.
Signed byLinda M. Calbom:
Sincerely yours,
Linda M. Calbom
Director
Financial Management and Assurance:
Enclosure:
[End of section]
Enclosure: September 2002 Briefing on Progress Made to Enhance
Financial Accountability:
[See PDF for image]
[End of section]
FOOTNOTES
[1] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
01-263 (Washington, D.C: January 2001).
[2] U.S. General Accounting Office, Medicare Financial Management:
Further Improvements Needed to Establish Adequate Financial Control and
Accountability, GAO-AIMD-00-66 (Washington, D.C.: Mar. 15, 2000) and
Medicare Improper Payments: While Enhancements Hold Promise for
Measuring Potential Fraud and Abuse, Challenges Remain, GAO-AIMD/OSI-
00-281 (Washington, D.C.: Sept. 15, 2000).
[3] U.S. General Accounting Office, Standards for Internal Control in
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999).
[4] U.S. General Accounting Office, Strategies to Manage Improper
Payments: Learning from Public and Private Sector Organizations, GAO-
02-69G (Washington, D.C.: October 2001).
