Audit of Risk-Based Medicare Health Maintenance Organization Payments for Out-of-Area Beneficiaries

The amount of Medicare reimbursement for services provided a beneficiary enrolled in a health maintenance organization (HMO) depends, in part, on the beneficiary's county of residence. This final report points out that the Health Care Financing Administration (HCFA) made incorrect payments to a HMO chain (which had nine different Medicare HMO contracts in effect) on behalf of beneficiaries who were reported living out of the HMO's service areas. Specifically, for the two months reviewed, our statistical sample showed payments were incorrect or inconclusive for 158 of 200 beneficiaries (79 percent) who were reported living out-of-area. The effect of the address changes with regard to what the monthly Medicare payments should have been showed a net underpayment to the HMO of $47,619. The HCFA generally concurred with our recommendations specifying actions HCFA should take to preclude this problem in the future.