Medicare:

Issues Concerning the HealthChoice Demonstration Project

HRD-88-69: Published: Jul 20, 1988. Publicly Released: Aug 23, 1988.

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Pursuant to a congressional request, GAO reviewed a Health Care Financing Administration (HCFA) Medicare demonstration project to determine whether: (1) HCFA should have funded the project, which promoted private companies; (2) the contractor promoted all health maintenance organizations (HMO) equally; and (3) HCFA and the contractor properly safeguarded Medicare beneficiaries' names and addresses.

GAO found that: (1) the legislation which HCFA cited as its funding authority did not clearly authorize the project; (2) HCFA improperly paid for part of the HMO marketing costs, since HMO should pay such costs out of their Medicare reimbursements; (3) the contractor did not promote all HMO equally, since it provided little or no information to Medicare beneficiaries about nonparticipating HMO; (4) the contractor's use of a HCFA transmittal letter with its promotional mailings may have violated regulations against federal endorsement of HMO; and (5) although HCFA and the contractor did not follow applicable Privacy Act rules governing confidential beneficiary data release and disposal, there was no indication that the contractor used the information for any purpose other than to mail HMO promotional material.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department of Health and Human Services (HHS) stated that it had cited the wrong legislative authority for the project. Rather than section 402(a) of the Social Security Amendments of 1967, section 1875(a) of the Social Security Act should have been used.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, not to fund additional broker projects without first reviewing HCFA authority to do so.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Not Implemented

    Comments: HHS stated that it has no plans to fund additional projects similar to Health Choice and that the project has been concluded.

    Recommendation: To the extent that funding authority is identified and HCFA decides to authorize projects with similar objectives, the Secretary of Health and Human Services should direct the Administrator to either not fund projects that include marketing individual HMO, or ensure that any marketing component is distinct and funded solely by the participating HMO.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Not Implemented

    Comments: In commenting on a draft report, HHS stated that it believed that it should not endorse HMO enrollment and that the subject transmittal did not do so. The comments did not address what, if anything, HHS planned to do in response to the recommendation.

    Recommendation: To the extent that funding authority is identified and HCFA decides to authorize projects with similar objectives, the Secretary of Health and Human Services should direct the Administrator to preclude use of a HCFA transmittal letter by any project or effort involving the marketing of HMO.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: In January 1989, HCFA issued a Data Release User's Guide that describes the procedures for release and safeguarding of Medicare records. HCFA assigned responsibility for releasing data and obtaining appropriate release agreements to its Privacy Act Officer.

    Recommendation: To the extent that funding authority is identified and HCFA decides to authorize projects with similar objectives, the Secretary of Health and Human Services should direct the Administrator to establish written procedures for monitoring compliance with Privacy Act rules when releasing Medicare records. These procedures should assign responsibility for assuring that release agreements are properly completed.

    Agency Affected: Department of Health and Human Services

 

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