Editorial: Insurers’ frivolous expenses

Tuesday, Feb. 8, 2000 | 9:21 a.m.

Medicare HMOs have complained that the federal government isn't reimbursing them enough to cover their costs to provide health coverage. In some cases, Medicare HMOs have either reduced the benefits they offer or, in extreme circumstances, they actually have pulled out of some regions of the nation because they're losing too much money.

Some of these health insurers have a legitimate concern about adequate compensation, but a report released last week by the Department of Health and Human Services' inspector general raises questions about whether some HMOs might be improperly billing the government. For instance, the inspector general found that nine Medicare HMOs had sought reimbursement for lobbying, gifts and employee morale. One HMO treated customers, insurance brokers and employees to wine, flowers and other gifts totaling $37,303. Four health insurers tallied $106,490 for sporting events and theater tickets and another HMO leased a luxury box at a sports arena for $25,057. Meanwhile, one HMO spent $190,417 for that company's sales award meeting in Puerto Rico.

That's not all. In a separate report, Inspector General June Gibbs Brown also disclosed that in a review of 232 Medicare HMO plans there were extreme differences regarding administrative costs. For instance, during 1999 the average amount allocated for administrative costs by an HMO ranged from as low as 3 percent to as high as 32 percent. The inspector general contends that the Health Care Financing Administration, which administers the HMO Medicare program, should ask Congress to set a 15 percent cap on payment for administrative costs, a proposal that the inspector general believes could save $1 billion a year.

The Health Care Financing Administration, though, doesn't believe a ceiling is necessary, noting that the agency is implementing new requirements and that some HMOs may have higher administrative costs that are justified. At the very least, however, the Health Care Financing Administration should reconsider its philosophy of HMO Medicare oversight, and implement the inspector general's recommendation that it take a more proactive approach -- instead of reactive -- when dealing with health insurers.

This isn't just about taxpayers getting taken advantage of because Medicare HMOs are receiving government compensation for undeserving expenditures. As the inspector general pointed out, this also is about the quality of medical care that patients receive. If government funds are being misspent that means dollars either are being diverted from legitimate care patients need or that the premiums they currently pay are too high. Congress may need to do some fine-tuning on reimbursement rates to make sure that deserving HMOs aren't getting shortchanged, but at the same time stronger accountability measures need to be put in place so that some Medicare HMOs no longer are allowed to take advantage of patients and taxpayers.