Contractors do not review each of the millions of Medicare claims they process each year to determine if the services are medically necessary. Only 6 of the 17 contractors had prepayment screens to review chest X ray claims for medical necessity, although HCFA had alerted Medicare contractors that providers frequently bill for chest X rays that are not warranted by medical symptoms and are thus medically unnecessary. HCFA can take a more active role in controlling spending for widely overused procedures without intruding on the contractors’ responsibilities to establish their own prepayment screens. This has been an important step in promoting greater efficiency in developing local medical policies. More model policies can help contractors control spending for nationally overused procedures by providing them with generally accepted criteria for identifying and denying claims for unnecessary services. We also reviewed HCFA’s list of 200 medical procedure codes, ranked by total Medicare-allowed charges, and obtained Medicare contractors’ views on procedures that are likely to be overused. To estimate the Medicare payments for unnecessary services that could be prevented by broader use of prepayment screens, we tested autoadjudicated prepayment screens on claims paid by seven contractors in six states.
Why GAO Did This Study

GAO provided information on Medicare payments for unnecessary medical services, focusing on the: (1) extent to which Medicare contractors employ medical necessity prepayment screens for procedures that are likely to be overused; (2) potential impact of autoadjudicated prepayment screens on Medicare spending; and (3) federal government's role in reducing overused medical procedures billed to Medicare.

What GAO Found

GAO found that: (1) Medicare spending for unnecessary medical services is widespread; (2) more than half of the 17 contractors surveyed do not use prepayment screens to check whether claimed services are necessary; (3) seven of the contractors paid between $29 and $150 million for unnecessary medical services; (4) many Medicare claims are paid because contractors' criteria for identifying unnecessary medical services vary; and (5) the Health Care Financing Administration (HCFA) needs to take a more active role in promoting local medical policies and prepayment screens for overused medical procedures.