GAO-03-151R, Medicare Financial Management: Significant Progress Made to Enhance Financial Accountability


This is the accessible text file for GAO report number GAO-03-151R 
entitled 'Medicare Financial Management: Significant Progress Made to 
Enhance Financial Accountability' which was released on October 31, 
2002.



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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).