Medicare Insured Groups

HEHS-96-93R: Published: May 1, 1996. Publicly Released: May 1, 1996.

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Pursuant to a legislative requirement, GAO examined Medicare Insured Groups, focusing on: (1) the status of the demonstration program and individual projects; and (2) efforts to establish a reliable payment system. GAO found that: (1) with the passage of the Omnibus Reconciliation Act of 1987, five groups had entered into agreements with the Health Care Financing Administration (HCFA) to operate Medicare Insured Groups; (2) HCFA expenditures for the agreements totalled $1.1 million over the last 8 years; (3) all of the agreements have been terminated due to concerns over the projects' financial viability; (4) HCFA terminated one of the projects after experiencing prolonged delays and problems with contract negotiations; (5) another company encountered delays in obtaining employer commitments and data needed for rate-setting analysis; (6) the most recent group to terminate had developed an operating plan and proposed a payment rate-setting method before experiencing lengthy delays and problems with payment update methodology; (7) the proposed payment methodology would have established a base rate using 1986 to 1990 claims data and updated the rate based on revised per capita costs; and (8) in using more recent claims data, groups would have faced financial risk, as well as additional time and expense.

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