Summary: GAO reviewed Medicare health maintenance organizations' (HMO) adjusted community rates (ACR) process, focusing on HMO compliance with the Health Care Financing Administration's (HCFA) rate-setting guidelines and instructions.
GAO reviewed ACR data from 1985 through 1987 for 19 HMO, and found that: (1) 11 HMO based their ACR estimates in part on cost and utilization data for other HMO, which HCFA regulations did not allow; (2) only two HMO consistently followed HCFA rate-setting procedures; (3) four HMO used inconsistent source data; (4) one HMO overstated ACR by about $6 million in 1986; (5) HCFA did not consistently ensure that HMO complied with its approved methods for calculating and documenting ACR; (6) HCFA monitored only 29 percent of HMO risk contracts during a 3-year period; (7) HCFA lacked adequate mechanisms to gauge the reasonableness of HMO estimates, retroactively adjust HMO payment rates, or recover ACR overpayments; and (8) HCFA lacked authority to recover overpayments arising from inaccurate ACR.
