Medicare: High Spending Growth Calls for Aggressive Action

GAO discussed ways to control excessive and unnecessary spending in the Medicare program. GAO noted that: (1) the government faces many obstacles to bringing Medicare expenditures under control; (2) although broad-based payment system reforms have slowed aggregate spending, Medicare's spending growth rate remains high because inpatient and outpatient hospital, home health, skilled nursing, and physician care rates have accelerated faster than inflation; (3) although the Health Care Financing Administration (HCFA) has attempted to control service rates and encourage appropriate utilization, sweeping changes to payment and coverage policies for major services are unlikely; (4) the Medicare program could realize significant savings by adjusting certain reimbursement policies and correcting rate-setting methodology flaws; (5) Medicare's controls over fraudulent claims are weak because its funding structure does not allow it adequate staff for its claims processing operations; (6) HCFA does not have adequate staff to manage the amount of claims that need to be reviewed; (7) HCFA has established a data analysis requirement for contractors to better identify excessive spending and has developed a new claims processing system to address long-standing problems with inappropriate payments; and (8) HCFA and Congress could revise Medicare reimbursement policies and seek additional ways to make the government a more prudent purchaser of health services.