CONTRACTING AND ETHICS

Contracting and Ethics

Contracting and Ethics

Introduction

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress. Often called the “congressional watchdog,” the GAO investigates how the federal government spends taxpayer dollars. GAO's mission is to support the U.S. Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government. This includes performance and accountability related to federal health programs and spending in areas including public health, Medicare and Medicaid, defense healthcare, veterans health, long-term care, disaster preparedness, and pandemic health issues (Kaiser, 2007).

In its foray into managed care, Aetna had bad luck, made worse decisions, and had the worst of timing. Through the early 1990s Aetna was a venerable and profitable commercial carrier, providing indemnity services for employees and retirees of large, self-insured corporations. It avoided the individual insurance market, Medicare and Medicaid, capitation, utilization management, primary care gate-keeping, and network-based managed care products. It watched with dismay as diminutive HMOs converted to for-profit ownership; loaded up on equity capital; and launched into a self-reinforcing cycle of enrollment growth, better provider contracts, lower premiums, and further growth. Everyone from Wall Street to the White House believed that the future of health insurance would be everything Aetna was not. After nibbling at managed care through local acquisitions and lackluster HMO start-ups, the firm bet its balance sheet on the biggest, most expensive, and, in retrospect, most fateful acquisition in the history of the industry.

However, the President cannot remove the Comptroller General; only the U.S. Congress can through impeachment or joint resolution for specific reasons. GAO's main headquarters is located in Washington, D.C., and it maintains 11 field offices in various cities throughout the nation. It employees more than 3,100 individuals and has an annual budget of approximately $490 million (Trask, 2001).

Discussion and Analysis

The GAO is assigned to monitor various governmental agencies and their expenses. It studies the effectiveness of governmental expenditures, focusing primarily on the executive branch. The GAO seeks to make government more accountable and effective in managing programs and spending tax dollars. The current budget for the GAO is approximately $500 million per year, and the office has a staff of slightly more than 3,000 people.

Reliance on massive enrollment. The Aetna U.S. Healthcare managed care strategy relied above all else on massive scale, on millions in enrollment and billions in revenue to pressure physicians and hospitals to participate at low payment rates; cover the administrative overhead of utilization management; dilute adverse selection from weak underwriting; and spur continuous rounds of lower costs, lower premiums, and further growth. The firm took the HMO product to places it had never been before, aggressively pursued the small-group market, took on Medicare risk contracts, and committed itself to being not only the largest health plan nationally but a dominant plan in the most populous regions, including New York, the mid-Atlantic states, Florida, Texas, and California.

By the end of the decade, after absorbing the health business of ...