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Watchdog Finds 'Pervasive Deficiencies' in Medicare Contract Management

Watchdog Finds 'Pervasive Deficiencies' in Medicare Contract Management

Elizabeth Newell | Government Executive Magazine

November 30, 2009

The Government Accountability Office has again found widespread flaws in how the office administering Medicare and Medicaid manages contracts.

The watchdog agency studied a random sample of contract actions at the Centers for Medicare and Medicaid Services and estimated that more than 84 percent of fiscal 2008 contract actions had at least one instance where officials failed to implement a key internal control. GAO also determined that at least 37 percent of fiscal 2008 contract actions had three or more deficiencies.

“Internal control — the plans, methods and procedures used to meet missions, goals and objectives — is the first line of defense in safeguarding assets and preventing and detecting fraud and errors, and helps government program managers achieve desired results through effective stewardship of public resources,” GAO stated in its report.

CMS, which administers other programs such as the State Children’s Health Insurance Program, in addition to the high-risk Medicare and Medicaid programs, relies “extensively” on contractors, according to GAO. Contractors perform basic mission functions such as program administration, management and oversight of the health programs. They administer, oversee and audit Medicare claims; provide information technology systems and consulting services; and operate the toll-free Medicare help line. In fiscal 2008, CMS obligated $3.6 billion in contracts.

GAO gave a number of examples of deficiencies, including the use of cost reimbursement contracts without first ensuring the contractor had an adequate accounting system and failure on the part of project officers to certify invoices for payment.

The watchdog agency said the problems stemmed from “a weak overall control environment,” characterized by inadequate strategic planning for funding and personnel. The office also failed to fully collect data on its acquisitions, hindering its ability to identify areas of risk, according to GAO.

This is not the first time GAO has looked into contract management at CMS. The watchdog issued a report in 2007 recommending internal control improvements. CMS has failed to address most of those recommendations, GAO said in the new report. For example, CMS has not made progress clarifying the roles and responsibilities for certain contract oversight functions and, as of July, it had a backlog of contracts overdue for closeout. This backlog put the office at risk of not identifying and recovering improper payments or waste, GAO noted.

GAO made 10 recommendations for developing policies to improve oversight and strengthen the CMS control environment. The watchdog also reaffirmed seven prior recommendations that have not been fully implemented. CMS concurred with the new advice, but challenged GAO’s assessment of its progress on the prior suggestions.

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