HCFA Needs to Take Stronger Actions Against HMOs Violating Federal Standards

HRD-92-11: Published: Nov 12, 1991. Publicly Released: Nov 12, 1991.

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Leslie G. Aronovitz
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Pursuant to a congressional request, GAO examined media allegations regarding widespread compliance problems with Medicare's largest health maintenance organization (HMO) contractor, focusing on: (1) federal oversight of the contractor; (2) whether the Department of Health and Human Services (HHS) had identified the alleged problems; and (3) whether the Health Care Financing Administration (HCFA) took prompt and effective actions to resolve the alleged problems.

GAO found that: (1) HCFA identified the alleged problems and found additional problems; (2) HCFA found the contractor to be in violation of federal standards related to marketing, claims payment, beneficiary appeals processing, and implementing an internal quality control system; (3) the problems HCFA identified could have adverse effects on beneficiaries' out-of-pocket costs and their access to, and quality of, care; (4) HCFA requested the contractor to resolve its deficiencies in October 1991, but the contractor remained noncompliant in claims payment and beneficiary appeals; and (5) although HCFA has authority to impose intermediate sanctions on noncompliant HMO, it has been reluctant to do so due to the lack of HCFA regulations and policies covering the use of its authority.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The HCFA Office of Prepaid Health Care Operations and Oversight has issued policies setting forth the process for initiating sanctions. But, these policies do not clearly specify the circumstances under which the sanctions will be imposed. HCFA has no plans to further clarify its process for initiating sanctions.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to establish policies that specify the circumstances and timing regarding when it will impose sanctions on HMO with Medicare risk contracts that are violating Medicare requirements.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HCFA has issued standards which require contracting HMO to meet standards of accuracy as well as timeliness of payment.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop and publish standards that will enable HCFA to require contracting HMO to pay accurately as well as in a timely manner.

    Agency Affected: Department of Health and Human Services


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