United States General Accounting Office

GAO Health, Education and Human Services

Division

August 1995 Health Financing and

Public Health Issue Area

Plan

Fiscal Years 1996-98

GAO/IAP-95-34

Foreword

As the investigative arm of Congress and the nation’s auditor, the General

Accounting Office is charged with following the federal dollar wherever it

goes. Reflecting stringent standards of objectivity and independence, GAO’s

audits, evaluations, and investigations promote a more efficient and

cost-effective government; expose fraud, waste, abuse, and

mismanagement in federal programs; help Congress target budget

reductions; assess financial and information management; and alert

Congress to developing trends that may have significant fiscal or

budgetary consequences. In fulfilling its responsibilities, GAO performs

original research and uses hundreds of databases or creates its own when

information is unavailable elsewhere.

To ensure that GAO’s resources are directed toward the most important

issues facing Congress, each of GAO’s 35 issue areas develops a strategic

plan that describes the significance of the issues it addresses, its

objectives, and the focus of its work. Each issue area relies heavily on

input from congressional committees, agency officials, and subject-matter

experts in developing its strategic plan.

The Health Financing and Public Health issue area focuses on federal and

state financing and operations of Medicare and Medicaid—the insurance

programs for the elderly, disabled, and poor—and national and public

health issues associated with access to care and research and regulatory

activities. It also reviews programs and practices of the Health Care

Financing Administration (HCFA), the Food and Drug Administration (FDA),

and other Public Health Service agencies in the Department of Health and

Human Services (HHS).

GAO’s work on health financing and public health generally focuses on the

following issues:

• improving the management and financial integrity of the Medicare and

Medicaid programs;

• evaluating new approaches to current payment methods that could curb

Medicare spending growth;

• assessing how financing arrangements affect Medicare and Medicaid

beneficiaries’ access to quality care;

• identifying private and public sector efforts that offer lessons for the

Medicare and Medicaid programs and for the ongoing congressional

deliberations on insurance reform;

• determining if the Public Health Service agencies are meeting the public

health needs of the nation efficiently and effectively;

Page 1 GAO/IAP-95-34
Foreword

• evaluating the efficiency and effectiveness of the Food and Drug

Administration’s regulation of medical products; and

• identifying opportunities for improving the nation’s health care and

ensuring accountability for performance.

In the pages that follow, we describe our key planned work on these

pivotal issues.

Because events may significantly affect even the best of plans, our

planning process allows for updating and the flexibility to respond quickly

to emerging issues. If you have any questions or suggestions about this

plan, please call me at (202) 512-7119.

Sarah F. Jaggar

Director

Health Financing and Public Health Issue Area

Page 2 GAO/IAP-95-34
Contents

Foreword 1

Table I: Key Issues 4

Table II: Planned

Major Work

8

Table III: GAO

Contacts

10

Page 3 GAO/IAP-95-34
Table I: Key Issues

Issue Significance

Medicare and Medicaid management: What

actions are needed to improve the

management and financial integrity of the

Medicare and Medicaid programs?

Medicare and Medicaid are complex programs serving vulnerable populations and

reimbursing a wide variety of providers. Effective management and oversight are

essential to ensure that program dollars are well spent and that opportunities for fraud,

waste, and abuse are reduced. Both programs also face new challenges as more

beneficiaries enroll in managed care plans, which present a new set of incentives to

providers.

Medicare payment methods: What new

approaches and changes in current payment

methods hold promise for restraining

Medicare spending growth?

The demands of deficit reduction and Medicare’s large funding requirements underlie

the appeal of curbing Medicare’s 10-percent projected annual growth. Changes in

payment methods are one major tool for controlling spending.

Medicare and Medicaid access: How do

financing arrangements affect beneficiaries’

access to quality care?

Historically, providing beneficiaries with access to care of acceptable quality has been

difficult for Medicaid and, for some rural areas, for Medicare. The importance of this

issue is growing, as more beneficiaries in both programs enter prepaid health plans

with incentives towards limiting services.

Alternative delivery, benefits, and

financing models: What private and public

sector efforts offer lessons for Medicare and

Medicaid programs and for the ongoing

congressional deliberations on insurance

reform?

Congress is seeking alternative ways to provide Medicare and Medicaid benefits while

controlling the growth of the programs. Both private and public experience with more

effective models of financing and delivering of health care, as well as with the design of

benefit packages, can guide improvements in Medicare and Medicaid and can shape

incremental insurance reforms.

Page 4 GAO/IAP-95-34
Table I: Key Issues

Objectives Focus of work

—Improve the efficiency of Medicare claims processing and increase beneficiary

satisfaction.

—Identify methods by which HCFA and the states can minimize fraud, waste, and abuse

in the Medicare and Medicaid programs.

—Improve the oversight of managed care plans that serve Medicare and Medicaid

beneficiaries.

—Improve methods HCFA and state Medicaid agencies use to set capitated payment

rates.

—Improve HCFA’s approach to introducing new technologies as covered services in

Medicare.

—HCFA use of new technologies to improve

its Medicare claims processing

— HCFA and state oversight activities of

managed care plans’contracting

arrangements and administrative

procedures

— HCFA and state review of managed care

health plans’ financial solvency

— HCFA and state Medicaid agency

methods for setting capitated payment rates

for Medicaid managed care plans

— Medicare process for resolving

providers’ appeals

—Improve Medicare’s payment methods for providers and health plans. —HCFA efforts to reform Part A payment

methods

—Proposals to revise physician payment

methodology

—Proposals for setting health plan rates

competitively

—Methods of risk adjustment for HMO

payments

— Medicare payments for physical therapy

and other services for nursing home

residents

— Identify barriers to health care for Medicaid beneficiaries.

— Identify ways to improve information given to beneficiaries about the quality of health

care Medicare and Medicaid contract plans provide.

—HCFA efforts to develop measures of

Medicare and Medicaid access to quality

services for Medicare and Medicaid

beneficiaries 

—HCFA efforts to improve information for

Medicare beneficiaries in managed care

plans

— State activities to ensure access to health

care for Medicaid beneficiaries

— HCFA and state efforts to ensure

managed care plans comply with quality

assurance and operational requirements in

their Medicare and Medicaid contracts

— Inform Congress of alternative delivery, benefits, and financing models for federal

health care financing and insurance programs.

—Use of disease- and case-management

techniques to improve quality of care and

control costs

—Opportunities for using new technologies

to deliver Medicare services

Page 5 GAO/IAP-95-34
Table I: Key Issues

Issue Significance

Public Health Service: Are the Public Health Service agencies

meeting the public health needs of the United States efficiently and

effectively?

By October 1996, HHS’ Public Health Service intends to

implement major changes in the structure and organization of its

subagencies and programs. These changes are occurring within

the context of budget deficit reduction and reinventing

government. Specific HHS discretionary programs are to be

consolidated into performance partnerships or block grants. The

new budgetary situation raises concerns about future priorities

and capabilities of the Public Health Service agencies, as well as

mechanisms to ensure accountability by grant recipients.

Drug and medical device regulation:

Does FDA regulate medical products efficiently and effectively?

FDA’s regulatory responsibilities have continued to increase over

recent years. The drug, device, and biotechnology industries

have claimed that there is now excessive regulation and

unwarranted delays in product approvals, and they and other

critics are proposing fundamental changes in FDA’s role and

policies. In response, FDA is changing some procedures and

Congress is considering a wide range of reforms. 

Access and accountability in health service delivery: How can

the United States improve health care and ensure accountability for

performance?

As health care is increasingly taking place in a managed care

environment, there are increasing bipartisan concerns about

access to effective care, particularly for vulnerable populations,

and ways to hold plans accountable for performance. 

Page 6 GAO/IAP-95-34
Table I: Key Issues

Objectives Focus of work

—Assess the ability of Public Health Service agencies and

programs to conduct health service activities after organizational

and structural changes have been made. 

—Assess the need for and type of federal oversight and

accountability measures that can be used to ensure federal dollars

are effectively used under performance partnerships. 

—Identify ways to strengthen the National Institutes of Health’s

management and oversight of federally funded health research.

—The Centers for Disease Control’s capacity to respond to public

health threats

—Effectiveness of current federal organ allocation policy to

distribute organs equitably

—Development of performance measures for block

grants/performance partnerships

—Financial and scientific oversight of research projects of the

National Institutes of Health

—Assess changes in FDA’s processes for reviewing and approving

new medical products.

—Determine the adequacy of FDA’s post-market surveillance

programs in identifying and analyzing adverse product experiences.

—Provide a factual basis for assessing various regulatory reform

proposals.

—FDA’s regulatory standards and approval processes for new

medical devices

—Alternative approaches to expedite FDA’s approval of new

drugs while maintaining safety and efficacy standards

—FDA’s post-market surveillance activities for medical products,

including adverse reaction reporting processes

—Adequacy of surveillance and enforcement operations

associated with importation of drugs

—FDA’s regulation of the drug advertising and promotion

activities of pharmaceutical companies

—Provide Congress with an assessment of the impact of managed

care systems on access to services for special populations. 

—Identify lessons from private sector approaches for enhancing

cost-effectiveness that have implications for the management of

federal health insurance programs. 

—Access to specialty services in managed care plans

—Impact of Medicaid managed care on access to services for

low-income children and other special populations

—Health plan accountability in the Federal Employees’ Health

Benefits Plan

—Cost-effectiveness of the gatekeeper approach for resource

allocation in managed care organizations

Page 7 GAO/IAP-95-34
Table II: Planned Major Work

Issue Planned major job starts

Medicare and Medicaid

management

•Examine managed care contracting and subcontracting arrangements where management and

other intermediate entities receive funds, but pass the financial risk of health care along to

providers.

•Review states’ activities and ability to monitor and affect managed care plans’ financial

solvency and administrative costs. 

•Review states’ activities and ability to promote competitive Medicaid managed care markets

and secure efficient capitated reimbursement rates.

•Examine potential duplication of payments by Medicare for certain home health services.

•Review HCFA efforts to collect payments from other insurers in the Medicare Secondary Payer

program.

•Examine Medicare Part B appeals.

•Examine the potential for duplicate payments by Medicare and Medicaid for services received

by beneficiaries in nursing facilities.

Medicare payment methods •Assess HCFA’s efforts to reform Medicare Part A payment methods.

•Examine how the use of current Part B payment methods has affected the volume and mix of

services for Medicare.

•Examine alternative methods for reimbursement of Part B home health services.

Medicare and Medicaid access •Examine the adequacy of HCFA’s processes for reviewing new Medicare managed care plan

applications.

•Review states’ ability to monitor quality of Medicaid services.

•Review managed care programs for chronically ill Medicaid beneficiaries and those with

special needs, focusing on access to quality care.

•Examine differences in care Medicare beneficiaries in traditional and managed care plans

receive from integrated delivery networks.

Alternative delivery, benefits, and

financing methods

•Identify private and public sector techniques to negotiate with managed care plans and

determine their applicability to federal health programs.

•Examine disease management approaches of pharmaceutical firms to determine their

applicability to federal health programs.

Page 8 GAO/IAP-95-34
Table II: Planned Major Work

Issue Planned major job starts

Public Health Service •Evaluate management and priorities of the Centers of Disease Control in responding to public

health threats.

•Assess the effectiveness of current federal organ allocation policy to distribute organs equitably.

•Review the development of performance measures for block grants/performance partnerships.

•Examine financial and scientific oversight of research projects of the National Institutes of

Health.

Drug and medical device

regulation

•Assess FDA’s regulatory standards and approval processes for new medical devices in

comparison to the European Union approach.

•Analyze alternative approaches to expedite FDA’s approval of new drugs while maintaining

safety and efficacy standards.

•Assess FDA’s post-market surveillance activities for medical products, including adverse

reaction reporting processes.

•Evaluate the adequacy of surveillance and enforcement operations associated with importation

of human drugs.

•Review FDA’s regulation of the drug advertising and promotion activities of pharmaceutical

companies.

Access and accountability in

health care delivery

•Evaluate access to specialty services in managed care plans, particularly for vulnerable

populations.

•Review gatekeeper mechanisms in health plans in the Federal Employees’ Health Benefits

Program.

•Analyze cost-effectiveness of the gatekeeper approach for resource allocation in managed

care organizations.

•Examine use of federal practice guidelines in federal employees health plans to ensure access

to quality care.

•Assess cost-effectiveness of federally funded rural and other underserved area programs.

•Evaluate impact of Medicaid managed care on access to services for low-income children and

other special populations.

Page 9 GAO/IAP-95-34
Table III: GAO Contacts

Director Sarah F. Jaggar (202) 512-7119

Associate Directors Mark V. Nadel (202) 512-7125

Jonathan Ratner (202) 512-7107

William J. Scanlon (202) 512-4561

Assistant Directors Kathryn Allen

James Cosgrove

Thomas Dowdal

Jerry Fastrup

John Hansen

Michael Gutowski

Rosamond Katz

Bruce Layton

Rose Martinez

James McClyde

Scott Smith

Barry Tice

Boston Field Office William Reis

Chicago Field Office Paul Alcocer

Seattle Field Office Frank Pasquier

Page 10 GAO/IAP-95-34
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