Make your own free website on
Recommended Resources Offshore havens, asset protection, global investing and other useful techniques.
The Year 2000 Bookshelf Books to help your evaluate the Y2K problems you face.

Gary North's Y2K Links and Forums - Mirror

Summary and Comments

(feel free to mail this page)




1997-05-26 00:00:00


Medicare: Government Reports on a Looming Crisis



The General Accounting Office is the Federal government's watchdog. It reports on and evaluates expenditures made by government agencies. In a May 16, 1997, report to Congress, the GAO warned of a looming crisis in the Medicare system.

The report went to the Committee on Government Reform and Oversight. It was presented to two subcommittees: the Subcommittee on Human Resources and the Subcommittee on Government Management, Information and Technology (Stephen Horn's subcommittee). Joel C. Willemssen signed the report. Its title: "Medicare Transaction System: Success Depends Upon Correcting Critical Managerial and Technical Weaknesses." It is a doomsday report.

It's long. His report is 62 pages. Then there is a 6-page response from the Department of Health and Human Services. It admitted that the GAO is basically correct on the details. There were several other brief appendixes.

The GAO's report concludes that there is no evidence to suggest that Medicare will make the year 2000 deadline. My conclusion: Medicare will NOT make the year 2000 deadline.

The full report can be downloaded if you have Adobe Acrobat. It's not in HTML or some other Web-accessible format.

Because you may not have Adobe, I will summarize some highlights.

* * * * * * * * * * * * * * * * *

The responsibility for implementing a new, $1 billion computer system, the Medicare Transaction System (MTS), belongs to the Health Care Financing Administration (HCFA). The Congressional committee asked GAO to evaluate MTS. GAO basically gave it a mid-term grade of F. (The final, of course, really is final.)

Medicare in the year 2000 is expected to process over 1 billion claims and pay out claims of $288 billion (p. 4). Some 38 million people are covered today (p. 11).

Today, HCFA manages the Medicare program through 70 private contractors at 45 sites nationally (p. 4). The new MTS system is designed to replace them (p. 4). But HCFA has delegated to these doomed contractors the job of making the new system Year 2000-compliant (pp. 7, 17). The report then states the obvious: ". . . contractors may not have a particularly high incentive to properly make these conversions, since HCFA plans to eliminate these contractors when MTS is fully implemented" (p. 17).

It gets worse: ". . . HCFA is not adequately overseeing this process and further is not requiring contractors to certify that they will correct the year-2000 problem" (p. 18). "To date, however, HCFA has not required systems contractors to submit year-2000 plans for approval" (p. 19).

The buck-passing has already begun: "HCFA has also not developed contingency plans in the event that year-2000 systems fail. HCFA officials are again relying on the contractors to identify and complete the necessary work in time to avoid problems. Yet, the . . . contractors not only have not developed contingency plans, they said they do not intend to do so because they believe this is HCFA's responsibility" (p. 19).

GAO warns: "Further, unless timely, effective systems changes are implemented as the year-2000 approaches, HCFA may be unable to process claims accurately and within required time frames" (p. 20).

How serious is this threat? Let GAO's mild-mannered language speak for itself: "The potential risks associated with not being ready for 2000 are serious, since virtually all Medicare transactions depend, to some degree, on dates to determine benefits eligibility -- dates of birth, medical procedure, other insurance coverage, and so forth" (p. 7). "The danger is that, if not corrected, systems could well read the computer-coded "00" as 1900, not 2000. All date-dependent calculations would therefore be affected, having an obvious impact on age and beneficiary claims" (p. 18).

* * * * * * * * * * * * *

What this report means is that if the contractors don't get this fixed before the HCFA fires them all, there will be up to one billion bad checks sent out -- assuming that the banks are still open -- in the year 2000 and thereafter, most based on bad data. A billion bad checks! That's over 80 million checks a month. From just one agency in just one country.

There is no way to confirm the accuracy of one billion claims a year. No army of clerks could confirm or reject them. On what would they rely for accurate information? Their computers will be useless.

This is why the death of the welfare State can be dated. Problem: every Western society has a significant percentage of its people as dependent on welfare checks as heroin addicts are dependent their daily fixes.

The day of reckoning is coming. All the happy-face, "no problem" PR handouts from bureaucrats and fund managers and corporate executives will not postpone the timetable by five nanoseconds. All their "we'll make it on time" promises will be worth no more than a bounced check, of which there will be up to a billion from this agency alone in the year 2000.

Note: the newly posted version of this document is nearly unreadable on-screen. You'll have to print it out. Also, the pagination has changed since my original summary was posted.


Return to Category: Welfare_Payments

Return to Main Categories

Return to Home Page