Medicare: Opportunities Are Available to Apply Managed Care Strategies

GAO discussed expanding managed care under the Medicare program, focusing on Medicare's health maintenance organization (HMO) payment policy, quality assurance standards, and dissemination of consumer information. GAO noted that: (1) Medicare is highly vulnerable to waste, fraud, abuse, and mismanagement; (2) the Health Care Financing Administration (HCFA) has made various regulatory and administrative changes aimed at correcting flawed payment policies and weak billing controls, however, these changes are not sufficient to protect Medicare against continued program losses; (3) Medicare offers its beneficiaries the option of obtaining managed care from prepaid health plans or provider networks participating in its 15-state pilot program; (4) in the past 2 years, the number of Medicare HMO enrollees has grown 50 percent, from about 1.5 million to about 2.3 million beneficiaries, but this enrollment only represents about 7 percent of the Medicare population; (5) HCFA does not negotiate service rates with managed care providers, but sets its HMO rates county by county; (6) in some counties, Medicare HMO rates are too high for Medicare to realize potential savings from managed care; (7) although Medicare has a process to monitor HMO compliance with federal quality assurance standards, HCFA does not have the performance data beneficiaries need to differentiate between managed care and fee-for-service options; and (8) HCFA has shown its willingness to adopt managed care strategies, test new reimbursement techniques, and enforce quality assurance standards.