YOU CAN KISS MEDICARE GOODBYE

Here are some clips from the September report to the United States General Accounting Office:

If uncorrected, this problem could result in serious disruption to critical functions and services administered through HCFA's Medicare program, as well as to all programs governmentwide. For this reason, we included the Y2K computing problem in our high-risk series, published in early 1997. 1

For a program as large and complex as Medicarepaying about $207 billion in benefits for about 39 million beneficiariesaddressing the Y2K problem is a formidable task. The Medicare program uses 7 standard Medicare claims processing systems, over 70 private contractors, and financial institutions nationwide to process about 800 million Medicare claims each year for about 1 million hospitals, physicians, and medical equipment suppliers. Over 85 percent of these Medicare claims are submitted and paid electronically, which will require that electronic data exchanges also be assessed for Y2K compliance.

HCFA and its contractors are severely behind schedule in repairing, testing, and implementing the mission-critical systems supporting Medicare. HCFA has recently begun improving its management of Y2K matters, including establishing a Y2K organization and hiring independent contractors to assist in overseeing the Y2K work. However, because of the complexity and magnitude of the problem and HCFA's late start, its progress in repairing mission-critical Medicare systems for the year 2000 is far behind schedule. Specifically, in August HCFA reported that as of June 30, 1998, less than a third of Medicare's 98 mission-critical systems had been fully renovated, and none had been validated or implemented. The Office of Management and Budget (OMB) has established target dates of September 30, 1998, for completion of agencies' Y2K renovations; January 31, 1999, for validation; and March 31, 1999, for implementation of renovated and validated systems. Compounding this difficult task is HCFA's lack of key management practices necessary to adequately direct and monitor its Y2K project. To date, HCFA has not  developed an adequate overall schedule and a critical path that identifies and ranks Y2K tasks, and helps ensure that they can be completed in a timely manner,  implemented risk management processes necessary to highlight potential technical and managerial weaknesses that could impair project success, and  planned for or scheduled end-to-end testing to ensure that Medicare-wide renovations will work as planned.

HCFA has also not been effectively managing the identification and correction of its electronic data exchanges. It appears to have thousands of such exchanges, but HCFA does not know for sure because it has not yet identified the actual number. Neither has it determined whether needed agreements with data exchange partners have been made. This increases the risk that Y2K errors will be transferred through data exchanges from one organization's computer systems to another's. Given the magnitude of the task and risks ahead, and the limited time remaining, it is highly unlikely that all of the Medicare systems will be compliant in time to ensure the delivery of uninterrupted benefits and services into the year 2000. Accordingly, it is more critical than ever that HCFA have sound business continuity and contingency plans in place, which can be implemented should systems failures occur. However, HCFA is late in establishing its business continuity and contingency plans. It is relying on its Medicare contractors to develop plans for their own systems; several contractors told us they do not plan to begin developing their individual plans until 1999. Also, HCFA has not yet developed a Medicare-wide business continuity and contingency planning framework. It has only recently completed drafting a set of contingency planning guidelines, and does not plan to have its Medicare-wide plan completed and tested until June 20, 1999.

...detailed planning and careful project management will be required to manage the complex relationships between almost 1 million providers and over 200,000 reported data exchanges with the contractor systems. Finally, HCFA recently estimated that its internal and external Medicare systems contain about 50 million lines of computer code that must be assessed for Y2K compliance. On August 17, 1998, HHS reported that HCFA's estimated cost for its Y2K effort will range between $917 million and $1.3 billion.

In January 1994, HCFA entered into a contract to develop a claims processing system that would have significantly reduced the amount of work necessary for it to address the Medicare Y2K problem. Called the Medicare Transaction System (MTS), the project was intended to be a single government-owned system that would replace the existing, two standard part A and five standard part B claims processing systems currently being used by Medicare contractors. HCFA intended to develop MTS as a Y2K-compliant system and have it in place and operational before 2000. However, the MTS project encountered problems from the very beginning. It was plagued with schedule delays, cost overruns, and the lack of effective management and oversight. We repeatedly reported that HCFA was not applying effective investment management practices in its planning and management and, as a result, had no assurance that the project would be cost-effective, delivered within estimated time frames, or even improve the processing of Medicare claims.7 Given the magnitude of these problems, along with continually increasing costs, HCFA terminated the MTS contract on August 15, 1997. The failure of MTS cost HCFA about $50 million for the software development contract alone. While MTS provided HCFA with a learning experience about the difficulty of acquiring such a large system and a better understanding of the requirements for developing a Medicare claims processing system, the project did not result in a new, integrated, Y2K compliant claims processing system.

HCFA Has Mobilized for Action, but Its Y2K Effort Is Severely Behind Schedule

In our May 1997 report on MTS, we stated that unless timely and effective Y2K changes are implemented, HCFA may be unable to process Medicare claims.8 We identified serious problems with HCFA's oversight of its Medicare contractors' Y2K remediation efforts, as well as problems with its own Y2K activities. For example, HCFA had not planned to establish legal agreements with its contractors specifying how or when the Y2K problem would be corrected, had no plans to independently validate contractors' strategies and test plans, had not approved their approaches for addressing data exchange issues, and had not developed contingency plans in the event that the Medicare systems fail.

HCFA Lacks an Adequate Overall Y2K Program Schedule and Critical Path for Its Medicare Mission-Critical Systems

HCFA does not yet have an adequate overall schedule showing how all Y2K tasks are interrelated and prioritized, or a critical path to establish the sequence in which tasks must be completed to ensure that this complex project can be finished on time. Without a complete, overall project schedule, HCFA cannot effectively prioritize its remaining work to accomplish the most within the time remaining. Without a critical path, it cannot judge the likelihood of completing its most critical remediation efforts before the year 2000.

To ensure uninterrupted Medicare claims processing beyond 1999, it is imperative that HCFA prepare and test business continuity and contingency plans. However, HCFA has only recently begun establishing guidelines for such plans, is relying on its contractors to develop reliable plans for the external systems, and has yet to develop a comprehensive business continuity and contingency plan for the full Medicare program. HCFA completed a draft set of guidelines for contingency planning in June 1998, and officials told us that they expect an initial set of contingency plans will be completed by the end of this calendar year. HCFA's guidelines, currently under development, are primarily for internal systems' maintainers, and are only suggested as guidance for contractors' external systems.

Several contractors told us they have not yet scheduled detailed contingency planning activities as part of their efforts. They said that their systems remediation tasks alone are so overwhelming that they do not anticipate beginning to prepare and test their business continuity and contingency plans until 1999. Finally, HCFA does not intend to have its Medicare-wide claims processing contingency plan developed and tested until June 20, 1999, thus potentially leaving insufficient time for implementation. For example, HCFA may include in its business continuity and contingency plan an approach to transfer the workload of any contractor not Y2K compliant by July 1, 1999, to a contractor certified as Y2K compliant. However, both contractor and HCFA officials told us that, at a minimum, it requires 6 months to a year to transfer the claims processing workload from one contractor to another. At its current rate of plan development, HCFA has no assurance that its plans will be developed and tested before they may be needed on January 1, 2000.

-- James Chancellor (publicworks1@bluebonnet.net), October 22, 1998

Answers

James:

Thanks for the run-down. I went to the GAO Web site and grabbed the whole report. Failures at HCFA would not only hurt the beneficiaries, but also put a dent in the health care industry. The benefits paid out help support the people who provide the goods and services upon which the recipients depend. Some health care agencies might be put out of business if HCFA were unable to pay. In spite of all the press about Medicare fraud, there are plenty of good non-profit agencies out there operating on tight budgets that would not exist without Medicare. The health care workers could probably find new jobs after a while. But who will care for their clients if HCFA drops the ball?

-- Mike (gartner@execpc.com), October 22, 1998.

On Nightline, John Koskinen said the fed would be OK. So this report, apparently, is simply not true. My Grandmother has nothing to worry about. The czar said so.

-- Steve Hartsman (hartsman@ticon.net), October 22, 1998.

Another very interesting article re Medicare from Gary North's site today. Their computer history is bad. Sounds like they are trying to improve.

Hurdles in Medicare's Race for Y2K Fix

Hurdles in Medicare's Race for Y2K Fix
After a Failed $50 Million Plan, Corrections Appear to Be Nearly Complete

By Stephen Barr, Washington Post Staff Writer, Monday, January 4, 1999; Page A17

At the start of 1994, Medicare officials thought they had found a solution to many of the program's computer problems, including the worrisome Year 2000 glitch. A new, superior system would allow Medicare to switch its focus from paying doctor and hospital claims to meeting the challenges of a changing health care economy, officials said.

But the computer system--a 10-year, billion-dollar project called the Medicare Transaction System--was never built. It faltered because of poor management, schedule delays and cost overruns, congressional investigators found. After spending $50 million, the Clinton administration killed the project in August 1997.

The Health Care Financing Administration, which oversees Medicare, has been playing catch-up on the so-called millennium bug ever since. Other agencies, including the Defense Department and Internal Revenue Service, also have scrambled to fix their computers for the 2000 date conversion.

Congressional and industry critics have been skeptical of the government's ability to beat the Jan. 1, 2000, deadline because of past problems with computer modernization.

The skepticism seemed to apply to HCFA. Focused on the computer modernization project for too long, the agency was off to a late start mobilizing for Year 2000 repairs. The agency also was coming off a tough reorganization that led to morale problems.

In addition, there was change at the top of HCFA. In autumn 1997, Nancy-Ann Min DeParle, who had been in charge of federal health programs at the Office of Management and Budget, became the new administrator.

The prospect that the Year 2000 glitch, popularly known as Y2K, could disrupt or paralyze Medicare pushed virtually every other issue off DeParle's desk.

"I think the turning point was, for me, when I got here and realized that not much had been done at all. And I was terrified, frankly, about the prospect of how much had to be done," she said.

The scope of the repair job quickly grew. DeParle learned that HCFA's staff had earlier overlooked about 20 million lines of computer code. Only after bringing in a consultant did HCFA discover it had 49 million lines to sift through for Y2K problems.
....
By the summer of 1998, HCFA's technical problems became political problems. In July, DeParle told a House Ways and Means subcommittee that Medicare claims payments could be delayed if the agency's computer systems were not Y2K ready. Without repairs to the computers and related data exchange systems, HCFA said, hospitals might face cash-flow problems, benefit enrollment systems could malfunction and the elderly and disabled might be denied treatment if eligibility questions were not resolved.

Congressional Republicans, in particular, were angered to learn that Medicare would miss several statutory deadlines set out as part of the balanced-budget agreement because of Y2K problems. One of those changes, to start in 1999, would have reduced the amounts that elderly patients pay for hospital outpatient services.

HCFA, meanwhile, had joined the Defense Department at the top of the White House Y2K worry list. The General Accounting Office, in a report issued in September 1998, said HCFA was "severely behind schedule." The GAO added, "It is highly unlikely that all of the Medicare systems will be compliant in time to ensure the delivery of uninterrupted benefits and services into the year 2000."

As the nation's largest health care insurer, Medicare serves about 40 million Americans--providing coverage to persons 65 and over and to the disabled. It pays about $200 billion in benefits, using seven standard processing systems that handle about 800 million claims each year for about 1 million hospitals, doctors and medical equipment suppliers.

DeParle, from almost the start, pushed HCFA computer experts and the 70 contractors that operate 78 different Medicare payment systems to step up the pace of their repair work. Many contractors are insurance companies, like Blue Cross and Blue Shield, and DeParle's tough stance caused some tension.

Some contractors did not like the tone of a November 1997 DeParle memo that elevated the importance of their Y2K repair effort. Failure might be grounds for dismissal and "successful completion of millennium compliance will be a strong determination in awarding other lines of Medicare business in the future," it said.

DeParle told the contractors to finish their Y2K work by the end of 1998, even though the White House had set a government-wide deadline of March 31, 1999.

"We had such a massive undertaking that I thought it was prudent to hold ourselves to an earlier date so that we'd have plenty of time to fix any problems if they occurred," DeParle said.

Last week, DeParle said the Y2K push was paying off. The 25 most critical computer systems operated by HCFA have been renovated, tested and validated by outside experts, she said. Medicare contractors have finished work on 95 percent of their software code, and DeParle said she expected most contractors to report soon that they have finished a third round of testing to ensure that systems will operate smoothly in 2000.

One contractor that also maintains software for seven other contractors lags on Y2K repairs, however. As a group, they process about 15 percent of Medicare claims and HCFA computer experts are closely monitoring the repair effort.

Still, DeParle said, "I'm increasingly optimistic that we are going to not only meet the March 31 deadline but beat it."

This year, HCFA plans to divert its energies into developing 50 to 60 backup plans for 275 business functions and transactions that underpin Medicare. The agency also plans to spend more time working with states on potential Y2K problems involving systems for Medicaid, which provides health benefits to the poor.

Although HCFA computer experts do not anticipate large-scale problems, they expect that the Y2K bug, in some fashion, will erode Medicare operations.

Most health care providers file electronic claims, but a surge in paper claims next year could create backlogs. HCFA officials also worry that rural and inner-city hospitals, which started late on Y2K, may not have the staff or money to fix their systems.

Part of the agency's contingency planning will look at how to reroute Medicare claims if a contractor has computer problems or loses power or even phone service.

Much of the Y2K repairs at HCFA have been organized by Gary G. Christoph, who joined the agency shortly after DeParle. Christoph, who spent 15 years at the Los Alamos National Laboratory, became HCFA's first chief technology information officer.

How much HCFA's Y2K effort will cost is unclear. The agency, a part of the Health and Human Services Department, estimates the Year 2000 fixes will cost nearly $632 million under its "most likely" scenario. A more pessimistic scenario adds another $123 million.

If anything major goes wrong later this year or next, HCFA could need an extra $500 million to ensure that Medicare keeps operating, according to internal estimates.

HCFA's critics plan to review the agency's status in early 1999. Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Special Committee on Aging, plans to have GAO investigators look at whether the Y2K fixes ensure that the agency and its contractors will be able to process claims from start to finish in 2000.

DeParle said part of HCFA's past management problems can be attributed to "a wide chasm" between the staff that ran and operated agency programs and the staff that developed policy proposals.

"There's still a chasm, because I preside over the disagreement sessions," DeParle said. "That is where the policy people want to do something and the systems people say we can't do it because of Y2K.
"But they're working together now and they are speaking the same language, more or less. And that wasn't happening before. So if you want to look at sort of a silver lining here, that's one of them."
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-- Leska (allaha@earthlink.net), January 05, 1999.

I saw an article today on Medicaire that says their 25 most critical systems have had work finished on 95% of their software:

http://www.washingtonpost.com/wp-srv/WPlate/1999-01/04/1301-010499- idx.html

"Last week, DeParle said the Y2K push was paying off. The 25 most critical computer systems operated by the HCFA have been renovated, tested and validated by outside experts, she said. Medicaire contracters have finished work on 95 percent of their software code..."

My question is, how many mission-critical systems does Medicaire have? If they have, say, 75 mission-critical systems, then Medicaire could easily have more than half of their work ahead of them.

What's the title of this article?

"Hurdles in Medicaire's Race for Y2K Fix -- After a Failed $50 Million Plan, Corrections Appear to Be Nearly Complete"

-- Kevin (mixesmusic@worldnet.att.net), January 05, 1999.

For some reason the link doesn't work. I'll try again:

http://www.washingtonpost.com/wp-srv/WPlate/1999- 01/04/1301-010499-idx.html

-- Kevin (mixesmusic@worldnet.att.net), January 05, 1999.