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Watchdog: CMS keeps bad Medicare administrators

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Managers of the traditional Medicare program may let bad program administration vendors keep their contracts just because changing vendors is so difficult.

Gloria Jarmon, an official at the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG), testified about “Medicare Administration Contractor” (MAC) procurement hassles Wednesday at a Medicare oversight hearing organized by the House Ways and Means health subcommittee.

Health policy specialists often refer to the traditional Medicare program as a “government-run” program, but the Centers for Medicare & Medicaid Services (CMS), the agency in charge of Medicare, hires private administrators — MACs — to administer the program.

When CMS hires a MAC, it agrees to use the MAC for one “base year,” and it offers to continue to use the MAC for four “option years.”

In theory, CMS can decline to use one or more contract extension options if a MAC fails to meet program performance standards.

When HHS OIG looked at how MAC contracts really work, they found that CMS had renewed the contract extension options for two MACs even though the MACs had consistently provided bad service.

“CMS told us that they considered not extending the options years, but the timeframe for renewal made the decision impractical based on the resources and risk involved in conducting an unforeseen procurement,” Jarmon said, according to a written version of her testimony posted on the committee website.

“CMS should see a legislative change to increase the time between MAC contract competitions, to give CMS more flexibility in awarding new contracts when MACs are not meeting CMS requirements,” Jarmon said.

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