Guidance and Information Needed on the Use of Machine Readable Claims Under Medicare and Medicaid

HRD-82-30: Published: Dec 16, 1981. Publicly Released: Dec 16, 1981.

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GAO surveyed the: (1) extent that Medicare and Medicaid providers use machine readable claims and billing service companies; and (2) implications of their use on claims processing agent operations such as administrative costs, utilization and quality control reviews, and reimbursement determinations. GAO was also interested in whether there were any potential conflicts of interest between claims processing agents and billing service companies.

The Health Care Financing Administration (HCFA) needs to improve controls over machine readable claim systems in use under Medicaid and should obtain information so that it can develop policies for implementing the most effective and efficient systems for processing such claims. HCFA has established controls for the use of machine readable claims in the Medicare program, but not in the Medicaid program. In addition, it has not issued similar guidelines to state Medicaid agencies or assisted them in developing machine readable claims systems. State Medicaid agencies using fiscal agents could experience problems if fiscal agents have ownership interests in billing companies because potential conflicts of interest could arise from the relationship between the fiscal agent processing the claims and the billing company submitting them. Although there is no HCFA guidance for the Medicaid program on this conflict of interest issue, HCFA has developed a proposed new Medicaid Management Information System which requires states to be able to receive inpatient hospital claim data in the machine readable format required by the Medicare Program. However, the system's requirements will not establish any guidelines for the use of machine readable claims. HCFA needs to gather and analyze data on the benefits of machine readable claims. Limited available data show that machine readable claims offer significant potential savings to the federal government and the states.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HCFA contracted for a study of the various systems used by claims processing agents. Because of tight budgets, HCFA does not plan to encourage those agents to buy new systems.

    Recommendation: The Administrator, HCFA, should gather and analyze sufficient data on the different types of machine readable claims systems used by Medicare and Medicaid claims processing agents to determine their relative costs and benefits so that policies encouraging the most effective and efficient systems for Medicare and Medicaid can be developed.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Implemented

    Comments: HCFA established an acceptable error rate for Medicare part A claims, but does not intend to do so for Medicare part B nor for Medicaid.

    Recommendation: The Administrator, HCFA, should establish an acceptable error rate for machine readable claims and revise current policy on onsite verification audits to allow less frequent audits of providers demonstrating compliance rates that meet the established requirements. Medicaid requirements should be made compatible with Medicare requirements so that a single audit for both programs would be possible.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  3. Status: Closed - Not Implemented

    Comments: HCFA does not plan any action; however, GAO believes the recommendation is valid and implementation of it would provide more assurance that only valid Medicaid claims are paid.

    Recommendation: The Administrator, HCFA, should issue guidance similar to that under Medicare which will assist state Medicaid agencies in implementing machine readable claim systems and in establishing controls for their use.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

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