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Medicare HMO Institutional Payments: Improved HCFA Oversight, More Recent Cost Data Could Reduce Overpayments

HEHS-98-153 Published: Sep 09, 1998. Publicly Released: Oct 13, 1998.
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Highlights

Pursuant to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) oversight of Medicare payments to health maintenance organizations (HMO) for institutionalized beneficiaries, focusing on: (1) the criteria HCFA uses to determine a beneficiary's institutional status; (2) the methods HCFA employs to ensure that HMOs properly classify beneficiaries as institutionalized; and (3) whether the higher capitation rate for beneficiaries who live in institutions is justified by higher health care costs.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Health Care Financing Administration To better protect the integrity of Medicare capitation payments, the Administrator of HCFA should establish a system to estimate and recover total overpayments when institutional status data errors are detected.
Closed – Not Implemented
CMS is working with a program safeguard contractor to validate the institutional status data submitted by Medicare+Choice Organizations (M+CO). The contractor was initially tasked with studying the variation in the percentage of members classified by M+COs as living in institutions, but the project's scope was subsequently scaled back. As of September 2002, the contractor is preparing a final report to CMS. CMS recently awarded a contract to this same entity to process all retroactive payment adjustments, a responsibility previously held by the regional offices. Although CMS collects overpayments from M+COs when errors are identified, the agency currently has no plan to estimate and recover total overpayments based on the identified errors in submitted institutional status data. CMS believes that full implementation of the health-based risk adjustment system, which does not rely on institutional status information, will eliminate this issue as a concern.
Health Care Financing Administration To better protect the integrity of Medicare capitation payments, the Administrator of HCFA should allow HMOs to revise records and claim retroactive payment adjustments for beneficiaries with institutional status only when HMO records have been verified by an independent third party.
Closed – Not Implemented
No action is intended.
Health Care Financing Administration To better protect the integrity of Medicare capitation payments, the Administrator of HCFA should conduct timely follow-up reviews of those HMOs found to have submitted inaccurate institutional status data.
Closed – Not Implemented
According to CMS's written response as of July 2006, these findings are no longer relevant due to significant changes in payment methodology. CMS stated that no corrective actions will be taken on these findings and they should be closed.
Health Care Financing Administration To better protect the integrity of Medicare capitation payments, the Administrator of HCFA should use more recent cost data to calculate the institutional risk adjuster in the event HCFA continues to include institutional status as a part of its new risk adjustment methodology.
Closed – Not Implemented
The new risk adjustment methodology phases out institutional status.

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Topics

Eligibility determinationsExtended care facilitiesHealth care cost controlHealth care programsHealth maintenance organizationsHealth services administrationLong-term careMedicareOverpaymentsCapitation (medical care)