1395u) of the Social Security Act, the Health Care Financing Administration (HCFA) contracts with 32 insurance carriers to process and issue benefit payments on claims submitted under Medicare Part B coverage. Carrier Denial Rates for 1992 and 1993 Were Stable for Most Services

The denial rates for at least two thirds of each carrier’s services did not significantly change between 1992 and 1993. Factors That Contributed to Intercarrier Variation in Denial Rates

The significant differences in denial rates for medical necessity across carriers give rise to the following question: What accounts for the variations in denial rates? Carriers Differed in How They Implemented Prepayment Screens

The Medicare program has since its inception acknowledged the existence of regional variations in medical practice standards and has sought to accommodate these differences in adjudicating claims. Medical necessity denial rates for 74 services across six carriers varied substantially. To a lesser degree, the varying interpretation of certain national coverage standards across carriers, differences in the way carriers treated claims with missing information, and reporting inconsistencies helped explain variation in carrier denial rates. No allowed services were found for this code.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed Medicare Part B claims processing, focusing on the: (1) differences in carriers' denial rates for lack of medical necessity; and (2) factors that contribute to intercarrier variations in denial rates.

What GAO Found

GAO found that: (1) in 1992 and 1993, denial rates for lack of medical necessity for 74 expensive or heavily utilized services were generally low, but the six carriers reviewed varied significantly in their denial rates; (2) denial rates for the 74 services varied from zero to over 100 per 1,000 services allowed; (3) in general, the carriers' denial rates remained stable for two-thirds of their services in 1992 and 1993; (4) the Medicare program has traditionally allowed carriers to include regional variations in medical practice standards in their criteria for determining allowable claims; (5) the Health Care Financing Administration (HCFA) has developed initiatives to promote consistency in medical policy across carriers; and (6) variations in carrier denial rates stemmed from carriers' differing prepayment screens, varying interpretations of certain national coverage standards, carriers' differing treatment of incomplete claims, and reporting inconsistencies.