Medicare:

Further Changes Needed to Reduce Program and Beneficiary Costs

HRD-91-67: Published: May 15, 1991. Publicly Released: Jun 14, 1991.

Additional Materials:

Contact:

William J. Scanlon
(202) 512-7114
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO provided information on Medicare's efforts to reduce its program and beneficiary costs.

GAO found that: (1) the growth in Medicare hospital payments averaged 15.7 percent annually in the 3 years before it established the prospective payment system (PPS), resulting in 6.3-percent annual growth rate since 1983; (2) additional Medicare PPS payments would not necessarily guarantee rural hospitals' financial viability; (3) Medicare should reduce PPS payments to teaching hospitals by a third to more accurately reimburse hospitals for their indirect medical education costs; (4) the Health Care Financing Administration (HCFA) should continue to refine the diagnosis-related groups to reduce wide variations in treatment costs; (5) continued inadequate funding by the Medicare program could compromise the successful implementation of physician payment reform; (6) if HCFA eliminated the link between anesthesia time and payment levels, Medicare could save $50 million annually; (7) reducing payments for laboratory services could save Medicare $150 million annually; (8) to reduce Medicare costs, HCFA should consider developing a procedure for redetermining payments as new technologies mature and associated costs fall; (9) technical corrections to the payment calculation for ambulatory outpatient surgery would reduce Medicare payments and beneficiary costs; (10) despite some potential advantages, there were persistent problems with health maintenance organization (HMO) payment methods and program oversight; and (11) consideration should be given to modifying the method to fund increased expenditures for Medicare safeguard activities.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress has not yet taken action. Reforms for managed care initiatives are being considered in the context of broad-based health care reform.

    Matter: Congress may wish to consider directing HCFA to test and assess alternative ways to market HMO that serve Medicare beneficiaries. Specifically, Congress could direct that HCFA conduct demonstrations to test-market HMO through independent third-party organizations operating under HCFA direction.

  2. Status: Closed - Not Implemented

    Comments: Congress has not yet taken action. Reforms for managed care initiatives are being considered in the context of broad-based health care reform.

    Matter: Congress should consider broadening HCFA sanction authority, for example, by authorizing civil monetary penalties when HMO do not comply with peer review organization review requirements.

  3. Status: Closed - Implemented

    Comments: Recently passed legislation (Health Insurance Portability and Accountability Act of 1996) provides new funding mechanisms for program safeguard activities.

    Matter: Increasing funding for payment safeguard activities, and thereby preventing inappropriate program payments, could help lessen the need for the difficult across-the-board cuts to all providers that Congress is faced with annually. Consequently, Congress should consider appropriating additional funds for contractor safeguard activities.

  4. Status: Closed - Not Implemented

    Comments: Several bills have been introduced to implement this recommendation, but none have been enacted. Given rigorous budgetary constraints and competing demands, Congress is not likely to enact this recommendation.

    Matter: Because of the strong potential for a net reduction in federal spending, Congress should consider establishing a similar means of facilitating increased expenditures to fund Medicare administrative costs.

 

Explore the full database of GAO's Open Recommendations »

Apr 13, 2018

Apr 9, 2018

Apr 5, 2018

Mar 29, 2018

Mar 28, 2018

Mar 23, 2018

Mar 19, 2018

Mar 8, 2018

Looking for more? Browse all our products here