In fiscal year 2006, the Centers for Medicare & Medicaid Services (CMS) spent over $51 billion on the Medicare Advantage program, which serves as an alternative to the traditional fee-for-service program. Under the Medicare Advantage program, companies wishing to participate must annually submit bids (effective with contract year 2006) that identify the health services the company will provide to Medicare members and the estimated cost and revenue requirements for providing those services. For 2001 through 2005, the submissions were called Adjusted Community Rate (ACR) Proposals. The Balanced Budget Act (BBA) of 1997 requires CMS to annually audit the financial records supporting the submissions of at least one-third of participating organizations. BBA also requires that GAO monitor the audits. In this report, GAO examined (1) whether CMS met the one-third requirement for 2001 through 2006, (2) what information the ACR audits provided and how CMS used it, and (3) what information the bid audits provided and how CMS used it.
Recommendations for Executive Action
|Centers for Medicare and Medicaid Services||1. To help fulfill CMS's responsibilities, the Administrator of CMS should finalize a decision and establish implementing procedures on how the prior adjusted community rate proposal (ACRP) audit results will be addressed and closed.|
|Centers for Medicare and Medicaid Services||2. To help fulfill CMS's responsibilities, the Administrator of CMS should finalize an approach for meeting the one-third audit requirement for contract year 2006 and subsequent years. This approach should clearly address (1) the procedures for annually identifying the organizations whose bid submissions and supporting financial records will be audited as part of the current Office of the Actuary (OACT) bid audits and those that will be reviewed as part of the planned financial reviews, (2) the supporting documentation that must be retained to show that the audit requirement was met, and (3) the procedures for conducting planned financial reviews that clearly identify how the reviews will provide results in a timely manner and how the reviews will be designed to identify misrepresentations and falsifications in the information furnished under the program.|
|Centers for Medicare and Medicaid Services||3. To help fulfill CMS's responsibilities, the Administrator of CMS should amend the implementing regulations for the Medicare Advantage Program and Prescription Drug Program to provide that all contracts CMS enters into with Medicare Advantage organizations and prescription drug plan sponsors include terms that inform these organizations of the audits and give CMS authority to address identified deficiencies, including pursuit of financial recoveries. If CMS does not believe it has the authority to amend its implementing regulations for these purposes, it should ask Congress for express authority to do so.|
|Centers for Medicare and Medicaid Services||4. To help fulfill CMS's responsibilities, the Administrator of CMS should develop, as part of its approach for meeting the one-third audit requirement, additional procedures for following up on results of the OACT bid audits and results of the financial reviews. These procedures should clearly address: (1) how CMS will annually ensure that findings and observations from the bid audits are addressed before the next year's bids are approved, (2) how CMS will annually ensure that findings from the financial reviews are addressed before the subsequent year's bids are approved, (3) the supporting documentation that must be retained to show that the findings and observations from bid audits and findings from the financial reviews were addressed, and (4) how CMS reviews audit findings to determine if intermediate sanctions are warranted.|
|Centers for Medicare and Medicaid Services||5. To help fulfill CMS's responsibilities, the Administrator of CMS should develop procedures to formalize the reviews and supporting documentation that must be retained to show that conflicts of interest arising from individuals or firms preparing, reviewing, or auditing the same bid have been addressed.|