Medicare Financial Management: Significant Progress Made to Enhance Financial Accountability

Medicare 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.