	Missed Opportunities for Savings in Medicare

In the past several years, we have made a number of recommendations  for CMS to address missed opportunities for savings in the Medicare  program, which the agency has not fully implemented. These include  recommendations related to the Medicare fee-for-service (FFS) and  Medicare Advantage (MA) programs. Medicare Fee-for-Service

Minimizing improper payments and fraud. We  recommended that CMS require its contractors to develop automated  prepayment controls to identify potentially improper claims when billing  reaches atypical levels. In 2009, we reported that fraudulent and abusive  practices in home health agencies, such as overstating the severity of a  beneficiary’s condition, contributed to Medicare home health spending   To strengthen controls on improper payments in home  and utilization.health agencies, we recommended that CMS amend current regulations  to expand the types of improper billing practices that are grounds for  revocation of billing privileges. In 2010, we recommended that CMS designate responsible personnel  with authority to evaluate and promptly address vulnerabilities identified to  reduce improper payments. Enhancing payment safeguard mechanisms. In 2008, we reported on  rapid spending growth for advanced imaging services. Aligning coverage for services with clinical recommendations. To better align preventive service use with clinical  recommendations, we recommended that CMS provide coverage for  Task Force recommended services, as appropriate, given cost- effectiveness and other criteria. Medicare Advantage

Better reflecting beneficiary health status in payments to MA plans. In 2010, the federal government spent about $115 billion on the MA  program, a private plan alternative to the Medicare FFS program. In  January 2012, we reported that CMS could achieve billions of dollars in  additional savings by more accurately adjusting for differences between  MA plans and Medicare FFS providers in the reporting of beneficiary  diagnoses.construct a risk score for each beneficiary. To improve  the accuracy of the adjustment made for differences in coding practices  over time, we recommended that the Secretary of HHS direct the  Administrator of CMS to incorporate the most recent data available in its  estimates; identify and account for all years of diagnostic coding  differences that could affect the payment year for which any adjustment is  made; account for the upward trend of the annual impact of coding  differences in its estimates; and to the extent possible, account for all  relevant differences in beneficiary characteristics between the MA and  Medicare FFS populations. We  recently reported that CMS could achieve billions of dollars in savings by  canceling the MA Quality Bonus Payment Demonstration—which CMS’s  Office of the Actuary has estimated will cost more than $8 billion over   10 years.in the 2010 Patient Protection and Affordable Care Act (PPACA), as  amended, CMS is conducting a nationwide demonstration to test whether  a scaled bonus structure would lead to larger and faster annual quality  improvement for MA plans at various performance levels. Need for Additional Oversight of Medicaid

We have conducted a substantial body of work on Medicaid program  management. Improving oversight of supplemental payments. We have recommended  that CMS adopt transparency requirements for non-DSH supplemental  payments and develop a strategy to ensure that all state supplemental  payment arrangements have been reviewed by CMS. CMS has taken  action to address some of these recommendations, but we continue to  believe additional action is warranted. Consequently, we  referred this to Congress for consideration. However, no changes are  planned in the methods used to determine budget neutrality of  demonstrations to ensure that demonstrations do not increase the federal  financial liability. Improving rate-setting methodologies. HHS has implemented many of our  recommendations that have proven to be financially beneficial while also  enhancing program management. HHS has made clear that it is  committed to improving the nation’s health and well-being while  simultaneously contributing to deficit reduction. We therefore urge HHS to  expedite action on our open recommendations to further advance its  performance and accountability.
Why GAO Did This Study

HHS manages hundreds of complex programs benefiting the health and well-being of Americans, accounting for a quarter of all federal outlays. For fiscal year 2012, HHS is responsible for approximately $76 billion in discretionary spending and for an estimated $788 billion in mandatory spending. The size and critical mission of the two largest HHS programs, Medicare and Medicaid, make it imperative that HHS is fiscally prudent yet vigilant in protecting the populations that depend on these programs. In recent years, GAO has identified shortcomings and recommended actions to enhance operations and correct inefficiencies in Medicare and Medicaid, and HHS has implemented many recommendations, resulting in billions of dollars in savings. Because agencies now must do more with less, recommendations not yet implemented are opportunities for further conserving HHS funds and strengthening oversight of programs serving the nations most vulnerable populations.
GAO was asked to testify on issues related to HHSs budget. This statement draws from GAOs prior work, including work on these two high-risk programs, in which GAO made recommendations related to (1) the management of Medicare and (2) the need for additional oversight of Medicaid. To the extent information was available, GAO updated the status of these recommendations.

What GAO Found

Over the past several years, GAO has made a number of recommendations to the Centers for Medicare & Medicaid Services (CMS)an agency within the Department of Health and Human Services (HHS)to increase savings in Medicare fee-for-service and Medicare Advantage (MA), which is a private plan alternative to the traditional Medicare fee-for-service program. Open recommendations that could yield billions of dollars in savings remain in many areas, such as the following:
Minimizing improper payments and fraud in Medicare. GAO recommended that CMS require contractors to automate prepayment controls to identify potentially improper claims for medical equipment and supplies, expand current regulations to revoke billing privileges for home health agencies with improper billing practices, designate authorized personnel to evaluate and address vulnerabilities in payment systems, and enhance payment safeguards for physicians who use advanced imaging services.
Aligning coverage with clinical recommendations. GAO recommended that CMS provide coverage for services recommended by clinical experts, as appropriate, given cost-effectiveness and other criteria.
Better aligning payments to MA plans. To ensure that payments to MA plans reflect the health status of beneficiaries, GAO recommended that CMS more accurately adjust for differences between MA plans and traditional Medicare providers in reporting beneficiary diagnoses. GAO also recommended that CMS cancel the MA Quality Bonus Payment Demonstration because its design precludes it from yielding meaningful results.
GAO has made recommendations to CMS regarding Medicaid program oversight. Open recommendations remain in many areas, such as the following:
Improving oversight of Medicaid payments . GAO recommended that CMS adopt transparency requirements and a strategy to ensure that supplemental payments to providers have been reviewed by CMS. These supplemental payments are separate from and in addition to those made at states regular Medicaid rates.
Ensuring Medicaid demonstrations do not increase federal liability. GAO recommended that CMS revise its approval process for demonstrations to ensure they are budget neutral, which GAO subsequently referred to Congress as a matter for consideration.
The size of Medicare and Medicaid requires CMS to focus continually on the appropriateness of the methodology for payments that these programs make and the pre- and postpayment checks that can help ensure that program spending is appropriate, overpayment recovery is expedient, and agency practices with regard to operations for these programs are efficient. Therefore, GAO urges HHS to ensure action is taken on open recommendations to advance its performance and accountability.