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 CONTENTS Edward A. Densmore, Associate Director, Division of Human Re- sources, Robert Hughes and Roland Miller, Social Security Ad- Thomas M. Tierney, Director, Bureau of Health Insurance, Millie Tyssowski and Lamont Williamson_. Blue Cross Association, Bernard R. Tresnowski_ Law, Prof. Sylvia, New York University Law School- STATEMENTS SUBMITTED FOR THE RECORD Aspin, Hon. Les, a Representative in Congress from the State of Wisconsin. 52 4ST XL 1 01/94 53-005-00 1080 MEDICARE ADMINISTRATIVE COSTS MONDAY, AUGUST 2, 1976 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT, 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 (1) |