Merritt Personal Lines Manual: The Effects of Medicare on Certain Services and Claims
Medicare dominates the market for many medical services. Some insurance experts argue that to dominate the way that the entire health care market pays claims.
The Health Care Financing Administration (HCFA), the government agency responsible for administering Medicare, uses six regional claims processing contractors (which are insurance companies) to process and pay home health claims.
These contractors pay the claims submitted by home health agencies on the basis of the costs they incur, subject to predetermined payment limits. They are also responsible for ensuring that Medicare does not pay claims when beneficiaries do not meet Medicare's coverage criteria, when services claimed are not reasonable or necessary or when the volume of services exceeds the level called for in an approved plan of treatment. They carry out these responsibilities through medical reviews of claims, performed either before or after a claim is paid and occasionally through site visits to the agencies.
In August 1998 congressional testimony, William J. Scanlon of the General Accounting Office said:
Whether the payments to individual agencies will reflect legitimate differences across agencies is more difficult to determine. Costs vary widely across agencies, which reflects differences in patient mix and levels of efficiency. In protecting legitimate cost differences across agencies, the interim system may unavoidably reward some inefficient agencies. Furthermore, the interim system may also be too restrictive for agencies with costs that legitimately increase more rapidly over time. Because the interim payment system will be used for a longer period than originally intended, we believe it is even more important to better take account of appropriate variation in agency costs.
In a study [complete recently], we selected a sample of high-dollar claims that had been paid without any review. After they were examined by an intermediary at our request, it turned out that a large proportion of them should not have been paid. More recently, the Office of Inspector General in its annual audit of HCFA estimated that 12.5 percent of Medicare home health spending in fiscal year 1997 was inappropriate because the services were not medically necessary or lacked supporting documentation.
So, if anything, the bureaucrats who run Medicare feel they need to crack down even more strictly on claims. This isn't good news for the growing number of the people in the system.
