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MEDICARE ADMINISTRATIVE COSTS

94-2

HEARINGS

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

NINETY-FOURTH CONGRESS

SECOND SESSION

AUGUST 2 and 27, 1976

Printed for the use of the Committee on Ways and Means

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U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1976

76-614

COMMITTEE ON WAYS AND MEANS

AL ULLMAN, Oregon, Chairman WILBUR D. MILLS, Arkansas

HERMAN T. SCHNEEBELI, Pennsylvania JAMES A. BURKE, Massachusetts

BARBER B. CONABLE, JR., New York DAN ROSTENKOWSKI, Illinois

JOHN J. DUNCAN, Tennessee PHIL M. LANDRUM, Georgia

DONALD D. CLANCY, Ohio CHARLES A. VANIK, Ohio

BILL ARCHER, Texas OMAR BURLESON, Texas

GUY VANDER JAGT, Michigan JAMES C. CORMAN, California

WILLIAM A. STEIGER, Wisconsin WILLIAM J. GREEN, Pennsylvania

PHILIP M. CRANE, Illinois SAM M. GIBBONS, Florida

BILL FRENZEL, Minnesota JOE D. WAGGONNER, JR., Louisiana

JAMES G. MARTIN, North Carolina JOSEPH E. KARTH, Minnesota

L. A. (SKIP) BAFALIS, Florida
OTIS G. PIKE, New York

WILLIAM M. KETCHUM, California
RICHARD F. VANDER VEEN, Michigan
J.J. PICKLE, Texas
HENRY HELSTOSKI, New Jersey
CHARLES B. RANGEL, New York
WILLIAM R. COTTER, Connecticut
FORTNEY H. (PETE) STARK, California
JAMES R. JONES, Oklahoma
ANDY JACOBS, JR., Indiana
ABNER J. MIKVA, Illinois
MARTHA KEYS, Kansas
JO ΕΡΗ FISHER, Virginia
HAROLD FORD, Tennessee

JOHN M. MARTIN, Jr., Chief Counsel
J. P. BAKER, Assistant Chief Counsel
JOHN K. MEAGHER, Minority Counsel

SUBCOMMITTEE ON OVERSIGHT

CHARLES A. VANIK, Ohio, Chairman SAM M. GIBBONS, Florida

DONALD D. CLANCY, Ohio OTIS G. PIKE, New York

L. A. (SKIP) BAFALIS, Florida
RICHARD F. VANDER VEEN, Michigan JAMES G. MARTIN, North Carolina
J.J. PICKLE, Texas

JOHN J. DUNCAN, Tennessee
HENRY HELSTOSKI, New Jersey
CHARLES B. RANGEL, New York
FORTNEY H. (PETE) STARK, California
JAMES R. JONES, Oklahoma

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MEDICARE ADMINISTRATIVE COSTS

MONDAY, AUGUST 2, 1976

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON OVERSIGHT,
COMMITTEE ON WAYS AND MEANS,

Washington, D.C. The subcommittee met at 10:05 a.m., pursuant to notice, in the committee hearing room, Longworth House Office Building, Hon. Fortney H. Stark presiding.

Mr. STARK. I think if the clerk is ready, we will bring this meeting together. Chairman Vanik may come along in a while, but we will proceed, if the witnesses are ready.

The subject of today's hearing is medicare administrative costs, and in particular, the role of private, generally tax-exempt intermediaries in managing the $15.5 billion medicare program.

The issue is of double interest to the committee, since we are concerned with the efficient administration of medicare and with the laws governing the tax-exempt organizations.

Earlier this year and at my request, the Ways and Means Oversight Subcommittee staff collected information about certain medicare administrative expenses.

With almost no searching at all, we have found medicare intermediaries running up huge bills for executive luxuries such as limousines and private aircraft and billing portions of those costs to medicare.

At my request, the HEW audit agency-sort of an inspectorgeneral group separate from social security--has reviewed information we provided and as a result, it is recouping $23,786 from five different intermediaries--not a tremendous amount of money, but maybe just the harbinger of more to come.

We will hear today from the audit agency on these findings and the process by which they help audit intermediary claims.

At a time when health insurance costs are skyrocketing to catastrophic heights, I find it shocking

that these intermediaries--most of which are nonprofit, tax-exempt, Blue Cross plans-would have any luxury expenditures whatsoever.

I do not understand how a Blue Cross plan can have a fleet of luxury cars or a private airplane and yet advise its subscribers that it will not pay “for personal comfort, such as radio, television, and telephone” in a hospital.

I recognize that in the $120 billion health sector of our economy the cost of a Cadillac or a private plane is barely noticeable.

Indeed, an intermediary who prevents three or four unnecessary surgery procedures or the unnecessary expansion of a hospital bed

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