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GAO discussed the Health Care Financing Administration's (HCFA) management of the Medicare Program, focusing on Medicare contractors' payment safeguard activities. GAO noted that: (1) HCFA did not have an effective, national strategy to curb erroneous or wasteful Medicare payments; (2) contractor payment safeguard activities have returned more than $12 for every $1 spent; (3) safeguards included computerized prepayment screens and provider profiling for above average services billing, which were based on criteria under which Medicare will pay claims for certain medical services or procedures; (4) contractors had greater difficulty monitoring providers' billings due to the trend of providers using more free-standing, often self-owned facilities rather than hospitals to provide their services; (5) budget constraints have reduced Medicare safeguard activities funding by over 24 percent per claim since 1989, and therefore, contractors reviewed fewer claims and providers; (6) HCFA lacked adequate management information on contractors' payment controls and was often unaware of problems until they were widespread; (7) HCFA issued inadequate guidance to contractors on program controls, which led to the loss of millions of dollars in overpayments but has begun corrective actions on the problems; and (8) better HCFA management, including the development of a national strategy and increased program safeguard activity funding would lower the incidence of overpayments.

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