Medicare:

Issues Raised by Florida Health Maintenance Organization Demonstrations

HRD-86-97: Published: Jul 16, 1986. Publicly Released: Jul 16, 1986.

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GAO reviewed Medicare's health maintenance organizations (HMO) program to determine: (1) the adequacy of financial and quality-of-care safeguards for Medicare beneficiaries; (2) the reasonableness of Medicare payments to HMO; and (3) the effectiveness of Department of Health and Human Services (HHS) oversight.

GAO determined that: (1) in network-type HMO, the beneficiary protections concerning HMO financial solvency and enrollment were substantially limited, since HMO delivered many services through subcontractors; (2) although the subcontractors assumed most HMO financial risk, legislative safeguards did not apply to them and they received little federal or state oversight; and (3) Medicare's payments to HMO were too high because the program did not adjust rates for enrollees' health status. GAO found that: (1) HMO enrollees were healthier than the average beneficiary, as measured by mortality rates; (2) HMO enrollees generally would need less medical care and cost HMO less overall; and (3) the HMO program is unlikely to achieve the intended Medicare savings. GAO also found that no Florida HMO were fully complying with federal requirements to inform Medicare enrollees of their rights to grieve and appeal denied claims or services.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: HHS disagreed with this recommendation, stating that it had sufficient existing authority to terminate HMO that do not meet financial solvency requirements. GAO continues to believe that the recommended actions would enable HHS to better monitor HMO and better protect Medicare beneficiaries.

    Recommendation: The Secretary of Health and Human Services should issue regulations specifying standards for financial solvency and enrollment that HMO must require of those subcontractors, such as International Medical Centers, Inc.-affiliated providers, that bear substantial risk, particularly for services provided by others. At a minimum, the Secretary of Health and Human Services should require that an HMO contract with such risk-bearing affiliates provide HMO with annual audited financial statements for their use in managing the affiliates and assessing their own financial condition. Furthermore, these data should be made available to HHS upon its request for use in making qualification and compliance determinations related to the financial status of HMO and their affiliates.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Not Implemented

    Comments: HHS took exception to the GAO methodology as the basis for disagreeing. While the GAO methodology was not sufficient to decrease payment rates, it did strongly indicate rates were too high. HHS should determine the proper level of reduction. The issue is being addressed in other work, job 106335.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to reduce HMO payment rates to more accurately account for the health status of HMO enrollees, because the methodology used by HCFA to pay risk-based HMO currently overpays them on average.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Not Implemented

    Comments: In commenting on the draft report, HHS disagreed with this recommendation. While GAO believes the recommendation is valid, it does not believe HHS will act on it.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to consider the feasibility of reducing the adjusted average per-capita-cost administrative cost-loading factor to account for paying agents' continued involvement in processing HMO enrollee claims.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: HHS developed and implemented a standard protocol for monitoring HMO procedures and activities regarding claims transferred to it.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to test Florida HMO internal controls over claims transferred to them by the intermediaries and carriers. This could be accomplished by HCFA taking a sample of paid part A bills and denied part B claims recently transferred from its paying agents and verifying that they have been accounted for and appropriately acted upon by HMO's. Alternatively, the problem could be addressed by requiring the paying agents to obtain receipts for the documents transferred.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: HHS developed guidelines for HMO to use to improve beneficiary notification of appeal rights. HHS regional offices verify using a standard protocol, whether HMO comply with required grievance and appeal processes.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop a standardized explanation of the Medicare appeals process and provide it to HMO for inclusion in their handbooks or other documents provided to all Medicare enrollees.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: The Omnibus Reconciliation Act of 1986 required HCFA to reinstitute prior approval of HMO marketing materials and it has done so. This action meets the intent of this recommendation.

    Recommendation: The Secretary of Health and Human Services should require the Administrator, HCFA, to provide policy guidance to Tax Equity and Fiscal Responsibility Act HMO on marketing activities similar to the guidance furnished to the demonstration HMO in February 1984.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Implemented

    Comments: HHS has modified Medicare's HMO contracts to include prompt payment provisions, as required by P.L. 99-509. HHS also developed guidelines for monitoring HMO compliance.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop an HMO timeliness-of-payment standard either through regulations or by including it as a standard item in all Medicare HMO contracts.

    Agency Affected: Department of Health and Human Services

  8. Status: Closed - Not Implemented

    Comments: The Omnibus Budget Reconciliation Act of 1987, Public Law 100-203, eliminated the option B method. HHS collected data from the intermediaries on HMO previously using option B. The agency decided not to pursue collection because it believes that it would not be cost effective to correct inaccuracies in the data it obtained.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to collect from HMO payments due for administrative costs under the option B agreements because the intermediaries processed the claims.

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Implemented

    Comments: In June 1986, HHS informed IMC of the additional actions it needed to take to meet the 50-50 standard. On May 1, 1987, HCFA notified IMC that its contract was being terminated, in part due to the failure to meet the 50-50 standard. IMC was acquired by another company, which has been required to meet the 50-50 requirement in accordance with a schedule approved by HHS.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator of the Health Care Financing Administration (HCFA) to ensure that International Medical Centers, Inc. (IMC) is making reasonable progress in meeting the 50-50 composition-of-enrollment standard or take enforcement action if IMC is not making such progress.

    Agency Affected: Department of Health and Human Services

  10. Status: Closed - Implemented

    Comments: HHS developed guidelines for use by HMO regarding notification to beneficiaries of their grievance rights.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to give HMO guidelines establishing standards they must use in providing information on their internal grievance procedures to all enrollees.

    Agency Affected: Department of Health and Human Services

 

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