Summary: Fraud, waste, and abuse are contributing to the health care cost spiral confronting the United States. Medicare faces program losses because of exploitation by unscrupulous providers, erroneous payments, and excessive reimbursement rates. While the Health Care Financing Administration (HCFA) has generally tried to remedy identified weaknesses, the Medicare program remains vulnerable to unwarranted losses. Unless contractors have clear incentives to manage program dollars efficiently and effectively, it is unlikely that they will take the initiative to perform resource-intensive safeguard activities on their own--from investigating beneficiary complaints to reducing backlogs of identified overpayments. Contractors need some assurance that funding for safeguard activities will be stable and adequate so that they can hire and train necessary staff. Funding for these activities, however, has not been stable, especially when viewed in light of increased claims volume. Moreover, recent program changes require more resources from contractors. Consequently, GAO supports modifying the budget process to enable adequate and stable funding for Medicare program administration. GAO also believes that HCFA must be more aggressive in holding contractors accountable for their performance in program administration. To monitor and direct contractor actions, HCFA may need to develop better information systems, more focused performance measures, and stronger contractor guidance.
