Experiments Have Not Demonstrated Success of Competitive Fixed-Price Contracting in Medicare
Experiments Have Not Demonstrated Success of Competitive Fixed-Price Contracting in Medicare

Author: GENERAL ACCOUNTING OFFICE WASHINGTON DC HUMAN RESOURCES DIV.

Publisher:

Published: 1981

Total Pages: 165

ISBN-13:

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At the request of Chairman Rangel, we have reviewed the three experimental fixed-price contracts in Medicare part B as a followup to our June 29, 1979, report to the Congress, 'More Can Be Done to Achieve Greater Efficiency in Contracting for Medicare Claims Processing' (HRD-79-76). As requested, our review focused principally on the experimental contract in Illinois. We also addressed the Health Care Financing Administration's progress in implementing contractor performance standards and in carrying out other recommendations in our June 1979 report. We requested comments from the Department of Health and Human Services, the Health Insurance Association of America, the Blue Cross and Blue Shield Associations, and the three contractors involved in the experiments. Written comments were received from all parties, except one experimental contractor, and were considered in finalizing the report.

Medicare
Medicare

Author: U S Government Accountability Office (G

Publisher: BiblioGov

Published: 2013-06

Total Pages: 108

ISBN-13: 9781289026561

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GAO evaluated the Health Care Financing Administration's (HCFA) management of Medicare claims processing under noncompetitive cost reimbursement contracts and eight competitively bid fixed-price contracts to determine whether: (1) the advantages of fixed-price competition justify broader use of this method of contracting; and (2) the Department of Health and Human Services' (HHS) current authority is sufficient to achieve increased administrative efficiency without a change in contracting methods. HHS was given legislative authority to experiment with fixed-price or incentive arrangements with contractors as a way of potentially reducing costs and improving program administration. The Deficit Reduction Act (DEFRA) gave HHS additional authority to use competition on a limited basis to remove poorly performing contractors from the program. GAO found that: (1) the competitive contracts have not demonstrated any clear advantage over cost contracts; (2) HHS has been successful in controlling administrative costs using cost contracts; (3) regular competition would probably increase contractor turnover and the problems associated with changing contractors, such as disrupted services and slower payments; and (4) competitive contracting requires more HHS management resources. However, GAO believes that limited use of competitive contracting would be useful, since it stimulates some cost contractors to improve performance and reduce costs. In 1985, because of budgetary shortfalls, HHS abandoned the traditional budget negotiation process and reduced the funds given to each contractor to carry out its claims processing functions. The cuts: (1) were made without consideration of individual contractor circumstances, since even the most cost-efficient contractors were required to reduce costs; (2) left inadequate funds to implement additional legislative requirements or process claims; and (3) were inconsistent with the congressional intent that cost-cutting measures not adversely affect program payments and the quality of service.