More Action Needed To Reduce Beneficiary Underpayments

HRD-81-126: Published: Sep 3, 1981. Publicly Released: Oct 1, 1981.

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GAO assessed the procedures for reviewing unassigned Medicare claims where significant portions were disallowed for payment. The assessment was undertaken to determine how the safeguards established by Medicare carriers to identify potential underpayments associated with reasonable charge reductions were being applied. This assessment was performed as follow-on work to an earlier report addressing four areas where Medicare beneficiaries were subject to inequitable out-of-pocket costs for services covered by Medicare. In addition, GAO assessed actions taken by the Department of Health and Human Services (HHS) on recommendations made in that report.

As of June 29, 1981, HHS had taken little action on GAO recommendations made in the earlier report. Claims that are subject to relatively large reasonable charge reductions often involve underpayments which go undetected because of poor claims review. The Health Care Financing Administration's (HCFA) Contractor Performance Evaluation Program (CPEP) provides for an annual evaluation of a carrier's operations in terms of specific performance criteria and statistical measures. A major component of CPEP, the Carrier Quality Assurance Program, assesses the quality of claims processing on a statistical basis. HCFA claims processing standards require that Part B carriers process reasonable charge reductions automatically when billed charges are in excess of reasonable charges within established safeguards. The safeguards are to identify for manual review and resolution those claims and related medical procedures where submitted charges are reduced significantly for payment purposes. CPEP does not address how well carriers review these types of claims. The HCFA Quality Assurance Manual provides for checking the sampled claims against the carrier's claims processing rules and standards. However, it does not specifically provide for determining adherence to a carrier's standards for identifying high reasonable charge reductions for resolution through special handling or manual review. GAO believes that this is a weakness in the Carrier Quality Assurance Program for measuring how well carriers adhere to their claims processing standards.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To provide greater assurance that safeguards for identifying potential underpayments are effective, the Secretary of HHS should direct the Administrator of the HCFA to modify the Contractor Performance Evaluation Program for Part B carriers to place additional emphasis on detecting and preventing underpayments. Specifically, the Quality Assurance Program should address, as a separate category of error, the quality of the review of claims that exceed the carriers' high charge reduction safeguards.

    Agency Affected: Department of Health and Human Services


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