Medicare Program

Why It's High Risk

GAO has designated Medicare as a high-risk program because its complexity and susceptibility to improper payments, added to its size, have led to serious management challenges. In 2010, the program covered 47 million elderly and disabled beneficiaries and had estimated outlays of $509 billion. Medicare had estimated improper payments of almost $48 billion in fiscal year 2010. However, this improper payment estimate did not include all of the program’s risk, since it did not include improper payments in its prescription drug benefit, for which the agency has not yet estimated a total amount. The Centers for Medicare & Medicaid Services (CMS), which administers Medicare, is responsible for implementing payment methods that encourage efficient service delivery, managing the program to serve beneficiaries and safeguard it from loss, and overseeing patient safety and care.

^ Back to topWhat We Found

The Medicare program remains on a path that is fiscally unsustainable over the long term. This fiscal pressure highlights CMS’s challenges to improve Medicare’s payment methods, management, program integrity, and oversight of patient care and safety.

• Reforming and refining payments. Since January 2009, CMS has implemented payment reforms in various parts of the program, such as for Medicare Advantage, inpatient hospital, home health, and end-stage renal disease services. The agency has also begun to provide feedback to physicians on their resource use and is developing a value-based payment method for physician services that accounts for the quality and cost of care. In addition, CMS has taken steps to ensure that some physician fees recognize efficiencies when certain services are furnished together, but the agency has not targeted the services with the greatest potential for savings. GAO’s work has also shown that payment for imaging services may benefit from more front-end approaches to better ensure appropriate payments, such as requiring physicians to obtain approval from Medicare before ordering an imaging service. For more information on key reports, see Reforming and Refining Medicare Payments.
• Improving program management. CMS faces challenges managing the prescription drug benefit (Part D) and the MA program. For example, CMS’s implementation of competitive bidding for medical equipment and supplies and its new Medicare Administrative Contractors (MAC) have progressed, with some delays. Regarding Medicare Advantage, CMS has not complied with statutory requirements to mail information on plan disenrollment to beneficiaries but did take steps to post this information on its Web site and took enforcement actions against at least 73 organizations for inappropriate marketing. CMS took several actions recommended by GAO to improve management of its contracting function, but other key recommendations were left unaddressed. Overall, GAO found pervasive internal control deficiencies in CMS’s management of contracts that increased the risk of improper payments. For more information on key reports, see Improving Medicare Program Management.
• Enhancing program integrity. CMS’s efforts to implement requirements of recent legislation, guidance, and directives aimed at reducing improper payments are likely to be very significant in the coming years. CMS has already taken action in some areas —for example, as required by law, it implemented a national Medicare Recovery Audit Contractors (RAC) program in 2009. CMS has set a key performance measure to reduce improper fee-for-service and Part C payments and is developing measures of improper payment for Part D. Other recent CMS efforts to increase the integrity of the Medicare program include issuing regulations strengthening provider enrollment and creating a Center for Program Integrity, responsible for addressing program vulnerabilities leading to improper payments. However, we found that CMS did not have a corrective action process to address the vulnerabilities identified by the RACs. Further, our February 2009 report on home health services found that Medicare continued to pay some home health agencies for services that are not medically necessary or not rendered. For more information on key reports, see Enhancing Medicare Program Integrity.

^ Back to topWhat Needs to Be Done

CMS has implemented certain GAO recommendations, but further action is needed to improve management of key activities, such as systematically improving payment efficiency for certain services, establishing policies to improve contract oversight, and improving the monitoring of nursing homes with serious care problems.

• For key recommendations related to refining and reforming payments see Reforming and Refining Medicare Payments
• For key recommendations on improving program integrity see Improving Medicare Program Management
• For key recommendations related to program integrity see Enhancing Medicare Program Integrity

^ Back to topKey Reports

Medicare Recovery Audit Contracting

Medicare Physician Payments

Medicare

Centers for Medicare and Medicaid Services

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