This final report points out that improvements are still needed in the Health Care Financing Administration's (HCFA) system for classifying beneficiaries enrolled in certain high cost categories such as end stage renal disease (ESRD). A limited review of 76 beneficiaries classified as ESRD disclosed that 14 beneficiaries (18 percent) were misclassified during 1997 resulting in $112,486 in gross payment errors. We found that 9 beneficiaries' ESRD status was terminated prematurely resulting in underpayments of $57,497, and 5 beneficiaries had no signs of renal failure resulting in overpayments of $54,989 to the MCO. We recommended that HCFA made procedural and systems changes to prevent further erroneous classifications of ESRD status and instruct all ESRD centers to verify the status of beneficiaries and to submit census data on a timely basis. The HCFA concurred with our findings and recommendations.