Administration of Contract Between HEW and Group Health Cooperative of Puget Sound

HRD-80-3: Published: Oct 15, 1979. Publicly Released: Nov 15, 1979.

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GAO examined a Seattle, Washington, health care cooperative's Medicare beneficiary enrollment practices and its receipt of an incentive payment for providing care to Medicare beneficiaries at a cost lower than the Department of Health, Education, and Welfare's (HEW) actuarial estimate of such costs. The investigation was made to determine if any part of the incentive payment could be recovered for failure to comply with "open enrollment requirements."

HEW requires contractors to hold annual 30-day open enrollment periods for Medicare beneficiaries and to advertise these periods in the public media throughout the enrollment area. The cooperative previously excluded Medicare beneficiaries living in certain geographic areas from their open enrollment program and used low-key (nonpublic media) advertising of these programs. It was determined that the cooperative did not fully comply with the regulations, and that HEW did not effectively enforce them. However, this was not considered to be a valid basis for recovering all or part of the cooperative's incentive payment. Cost adjustments for race were not considered in HEW actuarial estimates because cost differences are negligible and the private insurance business does not make this distinction. The cooperative's savings from inpatient hospital care was attributed to lower daily inpatient care costs and lowered use of inpatient care.

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