It is impractical for the agency to rely on competition to determine prices. Management of Medicare Has Been a Mixed Success

Tasked with administering this highly complex program, HCFA has earned mixed reviews in managing Medicare. It implemented payment methods that have helped constrain program cost growth and ensured that claims were paid quickly at little administrative cost. In February 2000, the HCFA Administrator testified that more than a third of the agency’s current workforce was eligible to retire within the next 5 years and that HCFA was seeking to increase “its ability to hire the right skill mix for its mission.” As we and others have reported, too great a mismatch between the agency’s administrative capacity and its designated mandate could have left HCFA, and now CMS, unprepared to handle Medicare’s future population growth and medical technology advances. Agency Has Difficulty Holding Claims Administration Contractors Accountable

Constraints on the agency’s flexibility to contract for claims administration services have also frustrated efforts to manage Medicare effectively. HCFA took steps to address plans’ regulatory concerns modifying some requirements or delaying their implementation. At the request of the House Ways and Means Subcommittee on Health, we are evaluating Medicare+Choice requirements. However, the management of the program is not always responsive to beneficiary, provider, and taxpayer expectations. The agency will also need to do its part by implementing a performance-based management approach that holds managers accountable for accomplishing program goals. Medicare: Refinements Should Continue to Improve Appropriateness of Provider Payments (GAO/T-HEHS-00-160, July 19, 2000).
What GAO Found

Management of Medicare has come under increasing scrutiny. The Health Care Financing Administration (HCFA) has had mixed success running the program. The agency has developed payment methods that have contained cost growth, and HCFA has paid fee-for-service claims quickly and at low administrative cost. However, HCFA has had difficulty ensuring that it paid claims appropriately. In addition, Medicare claims administration contractors have done a poor job of communicating with Medicare providers. HCFA has taken important steps to address some of these shortcomings, including strengthening payment safeguards, but several factors have hampered its efforts. Despite its growing responsibilities, HCFA suffers from staffing shortages. The agency also continues to rely on archaic computer systems. At the same time, HCFA has faltered in its attempts to adopt a results-based approach to agency management. Constraints on the agency's contracting authority have limited its use of full and open competition to select claims administration contractors and assign administrative tasks. Rising expectations among Medicare beneficiaries and providers are putting pressure on the Centers for Medicare and Medicaid Services to modernize and improve agency operations. Such improvements will require HCFA to begin a performance-based management approach that holds managers accountable for achieving program goals. Congressional attention also appears warranted if Medicare is to meet the challenges of the 21st century.