Comparative Administrative Cost of Processing Medicare Claims

MWD-76-87: Published: Mar 1, 1976. Publicly Released: Feb 19, 1982.

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In response to a congressional request, GAO compared the cost of having Medicare part B claims processed by contractors that subcontract data processing with the cost of processing by those that do not.

On the average, claims processed in-house cost $0.17 per claim more than those claims processed by data-processing subcontractors. However, GAO stated that it is questionable whether the difference in cost is attributable to the use of a particular processing system or to the use of subcontractors. The larger carriers had comparable costs regardless of whether they processed in house or subcontracted. Two large carriers that have recently converted to in-house data processing anticipate considerable savings from doing so. Finally, GAO found no significant difference in reasonable charge reductions or denials between subcontracting carriers and those processing in-house. Therefore, GAO believes that converting to data-processing subcontractors would not necessarily result in lower Medicare benefit payments. Proposed actions which include the design of improved standards for carrier performance, the incorporation of appropriate accounting principles by carriers, and the standardization of cost reporting should permit a better evaluation of carrier performance and should pinpoint differences in costs for similar functions.

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