Medicare Contracting Reform: CMS's Plan Has Gaps and Its Anticipated Savings Are Uncertain

GAO-05-873 Published: Aug 17, 2005. Publicly Released: Aug 17, 2005.
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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) significantly reformed contracting for the administration of claims for Part A, Medicare's hospital insurance, and Part B, which covers outpatient services such as physicians' care. The MMA required the Centers for Medicare & Medicaid Services (CMS)--the agency within the Department of Health and Human Services (HHS) that administers Medicare--to conduct full and open competition for all of its claims administration contracts and to transfer the work to Medicare administrative contractors (MAC) by October 2011. The MMA required the Secretary of HHS to submit a report to the Congress and GAO on the plan for implementing Medicare contracting reform and for GAO to evaluate the plan. To address this mandate, GAO reviewed the extent to which (1) the plan provides an appropriate framework for implementing Medicare contracting reform and (2) the plan's cost and savings estimates are sound enough to support decisions on implementation.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare and Medicaid Services To better ensure the effective implementation of Medicare contracting reform, CMS should extend its implementation schedule to complete its workload transitions by October 2011, so that the agency can be better prepared to manage this initiative.
Closed - Not Implemented
CMS did not concur with this recommendation. It stated that it is in the best interest of Medicare beneficiaries, providers, and the Government to assertively procure and transition claims administration workload to the Medicare administrative contractors (MACs), because the agency will be able to realize operational efficiencies and Trust Fund savings more quickly than if the schedule was extended.

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