Cutting Payment Safeguards Will Increase Program Costs

T-HRD-89-6: Published: Feb 28, 1989. Publicly Released: Feb 28, 1989.

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GAO discussed: (1) Medicare claims processing contractors' payment safeguard functions; and (2) the fiscal year (FY) 1990 budget request for Medicare contractors. GAO found that: (1) Medicare program costs have increased at an average annual rate of 12.4 percent since 1980; (2) the contractors' claims processing and payment safeguard functions need adequate funding to ensure that Medicare pays only for medically necessary care at the rate authorized by law and that the program is protected from fraud and abuse; (3) without the combined control mechanisms provided by the claims processing and payment safeguard functions, Medicare costs would have been at least $20 billion higher in FY 1988; (4) the FY 1990 budget request proposed a 4-percent decrease in the amount allocated per claim for the claims processing activity and a nearly 50-percent decrease in the payment safeguard function; and (5) the proposed $134-million reduction in payment safeguard funding would not be cost-effective, since it could result in an increase of $1.1 billion in erroneous benefit payments.

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