This report summarizes GAO's findings on systems for measuring and monitoring the quality
of care provided to Medicare beneficiaries. As you requested, and as subsequently agreed
with your office, we have reviewed the Health Care Financing Administration's medical
review systems, examined available data and quality assessment methods, and determined
what could be done in the relatively short term to provide better information on Medicare
quality of care. We also reviewed quality assurance research and evaluation activities within
the Department of Health and Human Services and assessed the need for longer term
changes.

We make recommendations to the Department of Health and Human Services regarding the need for systematic evaluation of quality review methods, better coordination among the quality-related activities of Medicare contractors, and improvements to data systems designed to provide better information on the incidence and distribution of quality of care problems. In addition, the report includes a matter for consideration by the Subcommittee concerning the need to assign specific responsibility for quality assurance research and development.

We obtained official comments on the draft report from the Department of Health and
Human Services. The Department's comments and our response are presented in appendix
VII.

Copies of the report will be made available to the Department of Health and Human Services and any others who request them.

Executive Summary

Purpose

Background

Over 31 million elderly and disabled Americans depend on Medicare coverage for their health care. Very complex oversight systems have evolved within the Medicare program to review the services for which payments are made. Whether these systems can ensure the quality of care provided to program beneficiaries is the focus of this study. Requested by the Subcommittee on Health of the House Committee on Ways and Means on March 3, 1986, the study has two broad objectives. The first is to assess current systems for measuring and monitoring Medicare quality of care. This includes reviewing what the systems are intended to do, examining available data and quality assessment methods, and determining whether more could be done with existing data, in the relatively short term, to provide better information. The second is to review quality assessment research and evaluation within the Department of Health and Human Services (HHS), analyze its relationship to ongoing quality assessment functions, and assess the need for longer term changes.

The federal government spent over $70 billion in 1987 for health care
benefits for Medicare enrollees. Major program responsibilities for medi-
cal review and quality assessment are divided among three sets of orga-
nizations: (1) intermediaries and carriers, responsible for processing and
paying Medicare hospital insurance and supplementary medical insur-
ance claims; (2) Utilization and Quality Control Peer Review Organiza-
tions (PROS), currently responsible primarily for review of inpatient
hospital care; and (3) HHS's Health Care Financing Administration
(HCFA), which oversees these contractors and manages program data.

Until 1983, Medicare reimbursed most health care practitioners and sup-
pliers on a fee-for-service basis, and most institutionally-based provid-
ers on a cost basis. These payment methods generally provide incentives
to overuse services because the more services furnished, the more reim-
bursement received from Medicare. To help contain costs, however, HCFA
introduced a hospital payment system for Medicare based on prospec-
tively determined fixed payments and intensified efforts to promote
participation in prepaid health care plans. Under these arrangements,
the financial incentives could lead providers in some health care settings
to underserve beneficiaries. Thus, Medicare has created a mixed set of
reimbursement incentives for providers and practitioners that could
lead to inappropriate uses of health services, as well as to inappropriate
denials of services. Controlling against potential adverse consequences
of these incentives requires new approaches for quality assurance.