Detailed Information on the
Medicare Assessment

Program Code 10001060
Program Title Medicare
Department Name Dept of Health & Human Service
Agency/Bureau Name Centers for Medicare and Medicaid Services
Program Type(s) Direct Federal Program
Assessment Year 2003
Assessment Rating Moderately Effective
Assessment Section Scores
Section Score
Program Purpose & Design 80%
Strategic Planning 100%
Program Management 72%
Program Results/Accountability 67%
Program Funding Level
(in millions)
FY2007 $439,786
FY2008 $461,171
FY2009 $483,853

Ongoing Program Improvement Plans

Year Began Improvement Plan Status Comments

Continuing more effort to link Medicare payment to provider performance. This effort is represented through the following demos/initiatives: Physician Quality Reporting Initiative, Physician Group Demo, Electronic Health Records Demo and Premier Hospital Quality Incentive Demonstration.

Action taken, but not completed Physician Quality Reporting Initiative: 1/1/08 Begin 2008 Reporting Period 8/31/08 Complete 2007 Bonus Payment. Physician Group Demo: FY 2008 - Reconcile incentive payments from 2nd year results. Electronic Health Records Demo: FY 2008 - Public recruitment activities begin. Premier Hospital Quality Incentive Demonstration: FY 2008 ?? Demonstration continuing; process incentive payments for 3rd demo year

Continuing timely implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Action taken, but not completed For CY 2009 MA and Part D: By 12/31/2008, rates published, contracts awarded, comparative data published, open season held.

Continuing greater emphasis on sound program and financial management.

Action taken, but not completed CMS continues to successfully implement HIGLAS at the Medicare FFS contractor sites. During FY 2008 and FY 2009, CMS will continue efforts toward accomplishing the MAC/HIGLAS workload splits to allow for successful future transitions. Also, since piloting and finalizing the administrative program accounting (APA) business solution footprint, CMS continues implementation of the APA financial statement functionality, as well as the non-Treasury disbursement option functionality, into HIGLAS.

Completed Program Improvement Plans

Year Began Improvement Plan Status Comments

Timely implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.


Greater emphasis on sound program and financial management.


Program Performance Measures

Term Type  
Annual Outcome

Measure: Protect the Health of Medicare Beneficiaries by Optimizing the Timing of Antibiotic Administration to Reduce the Frequency of Surgical Site Infection

Explanation:Increase over baseline

Year Target Actual
2001 Baseline 57.6%
2002 N/A - Trend 60%
2003 60.5% 61.6%
2004 66.6% 68.2%
2005 72.5% 77.5%
2005 New Baseline 77.5%
2006 75.4% 83.1%
2007 82.0% Jun-08
2008 85.0% Jun-09
2009 87.0% Jun-10
2010 TBD TBD
Long-term Outcome

Measure: Maintain CMS' Improved Rating on Financial Statements

Explanation:Maintain a "clean" unqualified opinion on CMS's financial statements.

Year Target Actual
1998 Baseline Qualified opinion
1999 Unqualified Opinion Met
2000 Unqualified Opinion Met
2001 Unqualified Opinion Met
2002 Unqualified Opinion Met
2003 Unqualified Opinion Met
2004 Unqualified Opinion Met
2005 Unqualified Opinion Met
2006 Unqualified Opinion Met
2007 Unqualified Opinion Met
2008 Unqualified Opinion Nov-08
2009 Unqualified Opinion Nov-09
2010 Unqualified Opinion Nov-10
2011 Unqualified Opinion Nov-11
2012 Unqualified Opinion Nov-12
2013 Unqualified Opinion Nov-13
Annual Outcome

Measure: Percent of Medicare beneficiaries receiving influenza vaccination; pneumococcal vaccination.

Explanation:Increase percentages over baseline

Year Target Actual
1994 Baselines 59%; 24.6%
2001 72%; 63% 67.4%; 63.3%
2002 72%; 66% 69%; 64.6%
2003 72.5%; 67% 70.4%; 66.4%
2004 72.5%; 69% 72.8%; 67.4%
2005 72.5%; 69% 65.2%; 68.4%
2006 74%; 69% 78.4%; 69.6%
2007 74%; 69% Dec-08
2008 79%; 71% Dec-09
2009 80%; 72% Dec-10
2010 TBD TBD
Long-term Outcome

Measure: (1) Number of questions about Medicare out of 6 answered correctly; (2) Percentage of Medicare beneficiaries who are aware of the 1-800-MEDICARE toll free number

Explanation:Increase numbers and percentages of (1) and (2), respectively

Year Target Actual
2000 Baseline 2.75; 53%
2001 Develop survey Goal met
2002 Set baseline/target Goal met
2003 Monitor data Goat met
2004 3.50; 65% 3.11; 62%
2005 Maintain targets 3.73; 67%
2006 Goal discontinued N/A
Long-term Efficiency

Measure: Reduce the Percentage of Improper Payments Made Under the Medicare Fee-for-Service Program

Explanation:Reduce percentage from baseline

Year Target Actual
1996 Baseline 14%
2002 5% 6.3%
2003 5% 5.8%
2004 4.8% 10.1%
2005 7.9% 5.2%
2006 5.1% 4.4%
2007 4.3% 3.9%
2008 3.8% Nov-08
2009 3.7% Nov-09
2010 3.6% Nov-10
2011 TBD TBD
2012 TBD TBD
2013 TBD TBD
Annual Outcome

Measure: Percent of women who receive a biennial mammogram.

Explanation:Increase percentages over baseline

Year Target Actual
2001 Baseline 51%
2002 Trend 51.6%
2003 51.5% 51.3%
2004 52.0% 51.3%
2005 52.5% 52.1%
2006 52.5% 52.7%
2007 52.5% Aug-08
2008 53.0% Aug-09
2009 53.0% Aug-10
2010 TBD TBD
Long-term Outcome

Measure: Percent of diabetic beneficiaries who receive diabetic eye exams.

Explanation:Increase the percentage over baseline

Year Target Actual
2001 68.3% 69.2%
2002 68.6% 69.6%
2003 68.9% 69.3%
2004 69.9% 69.1%
2005 70.1% Data unavail-not met
2006 Goal discontinued N/A
Annual Outcome

Measure: Reduce the Medicare Contractor Error Rates

Explanation:Increase from baseline

Year Target Actual
2005 25% 89.6%
2006 50% 81%
2007 75% 78.7%
2008 85% Nov-08
2009 90% Nov-09
2010 95% Nov-10
2011 TBD TBD
2012 TBD TBD
Annual Outcome

Measure: Percent of beneficiaries in: (1) Medicare Advantage and (2) fee-for-service who report access to care; access to prescription drugs.

Explanation:Increase percentage over baseline

Year Target Actual
2001 Baselines 90.5,83.7;92.8,82.8
2002 Collect/share data Goal met
2003 Collect/share data Goal met
2004 Collect/share data Goal met
2005 93,86;95,85 90; 93 Goal not met
2006 MMA Survey Fieldtested-Goal met
2006 Base.MA/FFS-Care;Rx 89.9/90.8%;92.7/91%
2007 '06 baselines/target Goal met
2008 90%/90%;91%/90% Dec-09
2009 90%/90%;91%/90% Dec-10
2010 TBD TBD
Annual Outcome

Measure: Improve the care of diabetic beneficiaries by increasing the rate of hemoglobin A1c and cholesterol (LDL) testing

Explanation:Increase percentages over baselines to be developed.

Year Target Actual
2005 Baselines - A1c; LDL 84.3%; 78.1%
2006 Devbaselines/targets Goal met
2007 85.0%; 80.0% Sep-08
2008 85.5%; 80.0% Sep-09
2009 86.0%; 80.5% Sep-10
2010 TBD TBD

Questions/Answers (Detailed Assessment)

Section 1 - Program Purpose & Design
Number Question Answer Score

Is the program purpose clear?

Explanation: The purpose of the Medicare program is to finance health insurance for eligible individuals through a combination of social insurance and general federal revenues and by doing so, prevent beneficiaries from becoming impoverished.

Evidence: In 1965, about half of the elderly had health insurance for hospital services. Medicare's enactment extended health insurance coverage to nearly all of the nation's elderly. (see Title XVIII of the Social Security Act - www.ssa.gov/OP_Home/ssact/title18/1800.htm) Over the 38 years of Medicare's existence, poverty rates among the elderly have fallen from about 20 percent to about nine percent.

YES 20%

Does the program address a specific and existing problem, interest, or need?

Explanation: Prior to Medicare, many elderly and disabled individuals lacked access to health care, and there was a widely perceived market failure in health insurance for this population. The elderly have health care costs four times that of the under 65 population and the disabled also have high health care expenditures; Medicare provides a significant public subsidy to finance these health care costs. In the absence of the Medicare program, many elderly and disabled generally would not have sufficient resources to pay for their health care.

Evidence: Medicare's enactment led to: increased use of health care services by the elderly, especially minorities; lower poverty rates; longer life expectancy; and individuals with ESRD gaining access to life saving services (see Health Care Financing Review 35th Anniversary Issue Fall 2000: www.cms.hhs.gov/review/00fall/00fall.asp). See charts 1.21, 3.8, 3.12, 3.13, and 3.15 at www.cms.hhs.gov/charts/healthcaresystem. See also table 4.8 at www.cms.hhs.gov/mcbs/mcbssrc/ 1998/98cbc3d.pdf.

YES 20%

Is the program designed so that it is not redundant or duplicative of any Federal, state, local or private effort?

Explanation: Medicare is a national program to ensure that program beneficiaries receive medically necessary acute health care services. In most cases, Medicare is the primary payer and makes a unique contribution. Other sources of insurance, such as private sector supplemental insurance, employer retiree benefits and Medicaid, wrap around Medicare.

Evidence: Medicare is the primary source of health insurance coverage for most beneficiaries. Many beneficiaries also have a source of supplemental insurance to cover non-covered services as well as co-pays and deductibles. For information on supplemental coverage see: www.medicare.gov/mgcompare/home.asp and www.medicare.gov/mphCompare/home.asp. See evidence for questions 1 and 2 above.

YES 20%

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: Although CMS operates the Medicare program effectively within the benefits and payment systems established by statute, the program's benefits are no longer state of the art. Medicare's benefits and payments were modeled on the typical private-sector health insurance of 1965. Although a number of changes have been made to Medicare to reflect the changing needs of program beneficiaries and changes in health care delivery (e.g., coverage of hospice care, unlimited number of home health visits, and preventive benefits), the program again needs to be updated. For example, Medicare does not cover most outpatient prescription drugs. Medicare, however, is constrained to operate within existing statutory authority, meaning that legislation is necessary for broad changes. Recently enacted Medicare modernization legislation will give beneficiaries the option of a drug benefit beginning in 2006; it also makes other changes to the program. Future PART assessments of Medicare will likely revisit this question in light of the new law.

Evidence: Several features of the Medicare program reflect its outdated statutory design. For example, unlike most private health insurance, Medicare does not protect beneficiaries against high out-of-pocket costs - i.e., it does not provide catastrophic protection. Medicare sets reimbursement through administratively determined prices that do not always keep pace with advances in medical practices or changes in the health care market. Medicare cannot use modern acquisition practices, including those used commonly by other government agencies, to procure claims processing services. Updating the statutory design will allow Medicare to better serve beneficiaries.

NO 0%

Is the program effectively targeted, so program resources reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: Medicare is an entitlement program for elderly and disabled individuals, as well as individuals with ESRD. In order to receive benefits under the program, individuals must meet statutorily defined eligibility criteria. Medicare funding is spent for program purposes, not diverted to other purposes.

Evidence: The Social Security Act defines the eligibility criteria for Medicare. (See title XVIII of the Social Security Act, Sec. 1811 and Sec. 1831, at www.ssa.gov/OP_Home/ssact/title18/1811.htm) Virtually all eligible beneficiaries participate in Medicare. The Medicare error rate, less than 6 percent, is at an historic low and indicates that program funding is not being misspent or misdirected.

YES 20%
Section 1 - Program Purpose & Design Score 80%
Section 2 - Strategic Planning
Number Question Answer Score

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: Performance measures have been established that analyze both health-care/clinical and management/efficiency aspects of the program. These measures focus reflect the purpose of the program.

Evidence: Some evidence comes from CMS sources, such as the FY 2004 Annual Performance Plan and Report and the Medicare Current Beneficiary Survey (MCBS). Other evidence comes from external sources, such as Healthy People 2010 and reports issued by the Medicare Payment Advisory Committee, using MCBS and other program survey data. Goals and targets are listed in the Measures tab.

YES 14%

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Targets and timeframes are ambitious.

Evidence: Some evidence comes from CMS sources, such as the FY 2004 Annual Performance Plan and Report and the MCBS. Other evidence comes from external sources, such as Healthy People 2010 and reports issued by the Medicare Payment Advisory Committee, using MCBS and other program survey data. Goals and targets are listed in the Measures tab and set high standards for the program.

YES 14%

Does the program have a limited number of specific annual performance measures that demonstrate progress toward achieving the program's long-term measures?

Explanation: Medicare has annual performance measures that will track progress on the program's long-term goals. These measure track financial management, access to quality health care, beneficiary satisfaction, and administrative efficiency.

Evidence: Refer to "Measures" tab for listing of pertinent annual goals.

YES 14%

Does the program have baselines and ambitious targets and timeframes for its annual measures?

Explanation: Medicare has targets and baselines for most of its goals. Meeting these goals will improve the operation of the program and yield meaningful improvements for beneficiaries. For some areas Medicare needs to establish performance measures, such as cost-efficiency of claims processing and the quality of care for chronic diseases.

Evidence: Refer to "Measures" tab for listing of measures, baselines and targets.

YES 14%

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, etc.) commit to and work toward the annual and/or long-term goals of the program?

Explanation: CMS establishes annual performance standards for fiscal intermediaries and carriers that are consistent with applicable GPRA goals and strategic program goals. Key performance indicators are used to measure the success of CMS business partners in achieving program goals. Partners commit to these performance standards through the annual contract renewal process. The leadership of the Medicare contractor community, through the Contractor Consultation Group, participates in monthly discussions on program objectives with CMS leadership, and CMS holds bi-annual executive meetings with contractor leadership to discuss these goals. Medicare would benefit, however, from additional flexibility to select and reward contractors for high performance. This increased flexibility would provide better incentives for contractors to support the performance goals of Medicare. In addition, Medicare managed care plans are required to conduct annual quality improvement projects on a variety of health issues to improve the quality of health care services.

Evidence: CMS conducts performance reviews of its Fee-For-Service (FFS) contractors in areas of high importance. The most critical standards are measured for all contractors and other functions are reviewed based on risk levels, contractor historical performance, and exposure. SAS-70 reviews of internal controls are also conducted in high risk areas. Deficiencies are carefully monitored and contractors are required to submit Corrective Actions Plans (CAPs) if needed. Other CMS partners, such as 1-800-MEDICARE and managed care contractors, are evaluated in terms of stakeholder approval via customer satisfactions surveys, particularly the Consumer Assessment of Health Plans Survey (CAHPS). CMS does not yet have quality data from Medicare managed care plans. CMS based the 6th Round quality improvement organization (QIO) contractor performance evaluation on QIOs' ability to improve Statewide performance on various quality measures. Articles published in JAMA (October 2001 and January 2003) provide information on the baseline data collection for identified quality measures for the QIO Program.

YES 14%

Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Medicare is perhaps one of the most-studied federal programs in existence. In addition to work supported by CMS and the Department of Health and Human Services, many independent analysts and organizations study the Medicare program each year.

Evidence: Among the numerous sources of Medicare analysis are the Medicare Payment Advisory Commission (www.medpac.gov), the National Academy of Social Insurance (www.nasi.org), the Kaiser Family Foundation (www.kff.org), the American Enterprise Institute (www.aei.org), the Heritage Foundation (www.heritage.org), the Center on Budget and Policy Priorities (www.cbpp.org), the Commonwealth Fund (www.cmwf.org), the Center for the Study of Health System Change (www.hschange.org), and Mathematica Policy Research (www.mathematica-mpr.org). Many of these organizations' reports spur programmatic changes in Medicare. For example, MedPAC recommendations are often the basis for legislative and regulatory changes, and Mathematica evaluations help refine Medicare demonstration projects.

YES 14%

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The answer to this question is an NA because Medicare is a mandatory program and its budgetary resources are not driven by performance goals.


NA 0%

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: In Spring 2001, the CMS Administrator targeted three areas for improvement: agency responsiveness, health care quality, and consumer information, as these are directly linked to CMS's ability to set program goals and establish measures. CMS is reaching out to partners to improve agency responsiveness, working with providers to publish state of the art information on health care quality, and working to provide Medicare beneficiaries with additional information to support informed choice of health plans and providers. Going forward, CMS should strengthen its capabilities in forecasting health care trends and developing long-term policy analysis and options for the Medicare program.

Evidence: Responsiveness: Open door initiatives are available at: www.cms.hhs.gov/opendoor/; since October 2001, more than 15,450 people have participated in these forums. The quarterly provider update gives providers regular and predictable information on program changes (see www.cms.hhs.gov/providerupdate). Quality: Home health agency and nursing home quality indicators are public and efforts to add hospitals and physicians are underway. Quality information on the web includes: www.cms.hhs.gov/quality/hhqi/; www.cms.hhs.gov/quality/hospital/; www.cms.hhs.gov/providers/nursinghomes/nhi/; www.cms.hhs.gov/quality/doq/. Consumer Information: CMS has developed an enhanced Medicare & You campaign, including a web-based personal plan finder.

YES 14%
Section 2 - Strategic Planning Score 100%
Section 3 - Program Management
Number Question Answer Score

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: CMS regularly collects data to measure beneficiary satisfaction. Information from the MCBS, which combines survey data with data from CMS's administrative systems, gives a detailed portrait of health care use, expenditures, and financing by subpopulations of beneficiaries. This information is used to implement strategies to meet the needs and demands of its beneficiaries. CMS constantly monitors FI & carrier contractor production, as well as quality and cost data (includes claims processed, appeals workload, and beneficiary/provider inquiries). Information from FIs and carriers is collected no less than monthly and compared to other time periods to determine trends early so program resources can be allocated appropriately. In addition, CMS reviews managed care plan marketing materials, audits their operations, reviews financial reports and monitors HEDIS, HoS, CAHPS, and disenrollment survey data.

Evidence: FFS contractors are required to regularly submit production and cost information to CMS for review. Reports are complemented by on-site reviews by headquarters and field staff. Based on information from these sources, CMS issues formal directives to address emerging issues, concerns of the agency, or changes in agency priorities. Through the Comprehensive Error Rate Testing (CERT) program, CMS gathers data to support its efforts to counteract fraud, waste, and abuse. Clinical Data Abstraction Centers provide data (acquired primarily through abstraction of medical records) to both QIOs and CMS to assist in the assessing individual QIO and overall program performance. In addition, data on national and state-specific clinical quality of care measures is also obtained from various sources. For example, data on low immunization rates among the Medicare population spurred administrative changes to facilitate vaccination rates among institutionalized beneficiaries.

YES 14%

Are Federal managers and program partners (grantees, subgrantees, contractors, cost-sharing partners, etc.) held accountable for cost, schedule and performance results?

Explanation: Statutory requirements make it hard to hold key partners accountable. Most reimbursement is based on estimates of procedure cost; high-quality providers receive the same reimbursement as low-quality providers. On the administrative side, outdated statutory requirements prevent use of modern procurement practices for hiring contractors to process claims. These obstacles impede the ability of Medicare to hold key program partners accountable for cost, schedule, and performance. Despite these challenges, Medicare has made significant progress in some areas. Several demonstration projects are experimenting with paying providers bonuses for meeting quality guidelines. Medicare has also made important advances with administrative partners, competing the Program Safety Contractors, and developing performance-based metrics for Quality Improvement Organizations (QIO) contracts. It will be difficult for Medicare to hold others accountable for program funds until legislative changes permit compensating efficient and high-quality providers and contractors.

Evidence: Medicare has launched demonstrations that reimburse health care providers for quality, but more than 99% of reimbursement is based on cost or a prospective payment system that does not reward high-quality care. For partners in the administration of Medicare, some important steps have occurred but more work remains. CMS has created performance agreements for senior staff and is expanding this practice to other staff. However, both GAO and HHS believe that the outdated contracting requirements do not allow sufficient incentives for contractors to provide high-quality service. Expanding the appropriate use of performance-based contracts will require a long-term commitment by HHS and other stakeholders in the Medicare program.

NO 0%

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Through the Financial Management Investment Board (FMIB), CMS has developed effective oversight of its Program Management funding. In FY 2002, lapse rates were: <0.2 of 1% for Program Management and <0.6 of 1% for HCFAC. In the last complete 3-year cycle of the PROs (now QIOs), <0.03 of 1% remained unobligated. Finally, the clean opinion on the agency financial statements and a lack of GAO/OIG findings in this area are evidence that the funds were spent as the Congress intended. The Medicare error rate, a related issue, is cited in Section IV.3.

Evidence: CMS Financial Report for FY 2002; CMS FY 2002 Annual Performance Report, as well as the Annual Performance Plans for FY 2003 and FY 2004. Data related to computing the lapse rates are available on the agency execution documents, e.g., forms SF-133, and the OMB report of the FACTS II single general ledger account balances.

YES 14%

Does the program have procedures (e.g., competitive sourcing/cost comparisons, IT improvements, approporaite incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Medicare has key indicators of efficiency for administrative and benefits expenditures, but still lacks measures for some key areas. For administrative expenditures, CMS tracks cost per claim, and has achieved some efficiencies through electronic claims processing. CMS plans to process the data gathered from managed care organizations (MCOs) through a performance assessment mechanism, in conjunction with other information, to determine the necessity and scope of audits. This will allow CMS to better utilize its limited resources. In addition, CMS awards QIO contracts for a 3-year term; during each renewal period, contractors failing to pass the performance evaluation are subject to full and open competition. However, CMS does not have a metric for measuring the effectiveness/efficiency of its allocation of federal staff to different Medicare program operations.

Evidence: Several management practices push administrative partners to operate efficiently. CMS measures the cost-per-claim and is starting a pilot of performance based contacting with three of its current contractors. Contractors strive to meet CMS performance objectives to secure contract renewal. For competitive sourcing efficiencies, CMS is in the process of completing cost comparisons as required by OMB circular A-76. Other initiatives (e.g., the Medicare managed care system redesign, and activities in the Revitalization proposal) are geared towards modernizing systems and infrastructure to take advantage of the efficiencies offered by modern technology and increase the timeliness and reduce the administrative burden of Medicare's accounting. Program safety contractors are held to performance-based contracts that provide incentives for effectiveness. In some areas, however, program partners are not held accountable for consistent business practices -- for example, the regional variation in claims processing decisions at different DME regional contractors.

YES 14%

Does the program collaborate and coordinate effectively with related programs?

Explanation: CMS collaborates with a number of government agencies that also fund or provide services to Medicare beneficiaries. CMS also works closely with other federal and state agencies that provide important support functions or collaborative efforts that assist CMS in serving Medicare beneficiaries.

Evidence: CMS works with VA and DOD on improving quality and demonstrations. SSA and CMS work together in numerous areas, including initial enrollment of Medicare beneficiaries, back-to-work efforts for disabled beneficiaries, and Medicare appeals. CMS works with FDA, VA and NIH to better coordinate the review of new technologies. CMS cooperates with NIH and AHRQ on research and with IHS on Medicare payment issues. CMS participates in the National Quality Forum with many others. CMS coordinates with state agencies for Medicaid dual eligibles and survey and certification; and state insurance commissioners on Medigap. CMS collaborates with CDC and NIH on quality goals, including flu and pneumoccocal vaccinations, mammography, and surgical site infections.

YES 14%

Does the program use strong financial management practices?

Explanation: HHS received a clean audit for 2002, but problems with Medicare's accounting are a major factor in a material weakness cited by auditors. The antiquated accounting system Medicare currently uses cannot provide accurate program data in a timely manner. The inability to produce timely financial data makes it difficult to analyze expenditures and identify emerging trends in program spending. As a result, there are significant lags in data available to analysts, and the inability to quickly spot changes in expenditures increases the program's vulnerability to fraud, waste, and abuse. The deployment of a new accounting system will address some of these problems.

Evidence: The HHS FY 2002 Auditor's Report details material and other weaknesses in Medicare's accounting. The weaknesses include a lack of a general ledger for claims processing activities (which process over $238 billion in claims), and weak accounting practices at Medicare contractors. A recent example that demonstrates the program impact of inadequate financial information is the discovery that some hospitals were exploiting Medicare hospital outlier policy to gain significant, unwarranted increases in reimbursement.

NO 0%

Has the program taken meaningful steps to address its management deficiencies?

Explanation: Under the Federal Managers Financial Integrity Act requirement, CMS continually evaluates program operations to ensure that there are management controls to protect from fraud, waste, and abuse. Efforts to reduce the error rate have resulted in a new focus on provider education to ensure sufficient documentation of claims. In addition, CMS is planning many IT improvements designed to achieve efficiencies and cost effectiveness.

Evidence: As reported in the FY 2002 financial report, CMS assesses its management controls through reviews, the financial audit, OIG audits, management self-certifications, and other review mechanisms, such as Statement of Auditing Standards (SAS -70) internal control reviews. CMS also requires corrective action plans for material issues identified. A new accounting system (HIGLAS), the Medicare managed care system redesign, and the activities in the Revitalization proposal are all geared towards modernizing systems and infrastructure to take advantage of the efficiencies offered by modern technology and permit addressing our current business needs, which are dramatically different from those at the time of Medicare's inception.

YES 14%
Section 3 - Program Management Score 72%
Section 4 - Program Results/Accountability
Number Question Answer Score

Has the program demonstrated adequate progress in achieving its long-term outcome performance goals?

Explanation: The program demonstrates progress in achieving some of its long term goals. See data in measures tab.

Evidence: The MCBS and CAHPS demonstrate high levels of beneficiary satisfaction. The annual performance plan includes performance goals related to access and satisfaction (See p. VI-13 of FY2004 APP/APR, as well as the APP for goals related to Medicare payment systems at p. VI-155). Quality of care performance goals include increasing the percentage of beneficiaries who receive an influenza vaccination (p. VI-31, pp. VI-22-VI-41). Increasing beneficiary understanding of the Medicare program and providing beneficiaries with information to help them in their health care choices is accomplished through the Medicare and You Handbook and major media and outreach campaigns. CMS has targets for measuring improvement in beneficiary understanding of the basic features of the Medicare program (see APP p. VI-142).


Does the program (including program partners) achieve its annual performance goals?

Explanation: The Medicare program has reported positive results on its annual performance goals, see data in "Measures" tab, but still has areas in which improvements are needed.

Evidence: The CMS FY 2004 Annual Performance Plan and Report.


Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year?

Explanation: Medicare has made strides to achieve its goals, but work remains in some key areas. On the benefits side numerous observers (including the GAO and the IG) and Medicare's current leadership acknowledge that payment for Part B-covered drugs is inefficient and inappropriate when compared to the acquisition cost of these drugs and comparable payment in the private sector. Similar concerns exist with respect to Durable Medical Equipment (DME). On the administrative side, the erroneous payment rate has been reduced from 1996 levels, but Medicare has not achieved its annual target since 2000. On cost per claim, electronic processing yielded major efficiencies in the 1990s, but costs for some claims have been increasing in recent years.

Evidence: For information on Part B drugs, see, for example, GAO-02-833T and GAO-02-531T. Payment error rates were computed by the OIG at 6.3% for FY 2002 compared to 14% in FY 1996; the target rate, however, is 5%. Electronic claims now make up 98% and 85% of Part A and Part B total claims, respectively. Unit costs per claim have been cut nearly in half since FY 1989, but are creeping upward or remaining flat. For CFO audit results, see CFO Report 2002, APP p. VI-132. Other evidence: CMS 3/18 letter requesting suggestions on efficient study topics; Qualis' (WA QIO) contract to sponsor collaboratives (learning/information sharing sessions); MedQIC database.


Does the performance of this program compare favorably to other programs, including government, private, etc., that have similar purpose and goals?

Explanation: Medicare is unique in its scope and mission - it is the only community-rated social insurance program in the country. The beneficiary population is heterogeneous: diverse in income, race, health status, and geographic location, among other factors. Other federal health programs (e.g., the Department of Defense) serve far smaller and more targeted patient populations. Moreover, unlike private health insurance, Medicare premiums are not influenced by age or prior health status.


NA 0%

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: CMS routinely contracts out independent evaluations of key program features and uses the results of the evaluations to make improvements to the program. Recent examples of important evaluations include the Medicare & You education program and M+C disenrollment study. In addition, the National Academy of Social Insurance has a number of recent studies on facets of the Medicare program (fee-for-service, M+C, chronic care, and CMS as an agency) which find that the program is effective in providing program beneficiaries with access to affordable health care services. Provider performance on identified quality measures improved over the time period 1999-2002, thereby contributing to achieving program goals. Although this evaluation was not conducted by an entity independent of CMS, the information obtained was used to support program improvements and to evaluate the effectiveness of the QIO Program.

Evidence: MedPAC reports that the Medicare program is generally successful in ensuring that beneficiaries have access to high quality medical care, the primary goal at enactment. Even while celebrating the success of Medicare, the NASI reports (and the studies of other prestigious panels) make a number of recommendations for improvements to Medicare, see www.nasi.org/publications2763/publications_list.htm?cat=Reports; see Health Care Financing Review 35th Anniversary Issue Fall 2000: cms.hhs.gov/review/00fall/00fall.asp. A list of current CMS sponsored evaluations is in the Active Projects Report at cms.hhs.gov/researchers/projects/APR/ default.asp#theme1. CMS reviewed 311 reports from the GAO and OIG last year. After review, CMS takes needed corrective actions. CMS studies external analyses of Medicare to develop program improvements. Articles published in JAMA (October 2000 and January 2003) provide information on the baseline data collection for identified quality measures for the QIO Program and the remeasurement of those quality measures.

YES 25%
Section 4 - Program Results/Accountability Score 67%

Last updated: 09062008.2003SPR