THE FEDERAL BUDGET : Medical Insurers Cover Costs During Shutdown

Doctors are still getting paid, hospitals are being reimbursed and the nation’s 37 million Medicare beneficiaries are receiving their health services without interruption. But the federal budget impasse has left one important Medicare player holding the bag.

The health insurance industry, which contracts with the federal government to process Medicare claims, is spending about $28 million a week of its own money to keep benefits flowing smoothly during the government shutdown.

The money used to pay doctors and reimburse hospitals comes from special accounts that are not affected by the government shutdown and the budget impasse. But the money used to cover insurers’ administrative costs for handling the bills, disbursing the checks and answering inquiries from beneficiaries ran out on Dec. 29.

The administrative funds come from the Health and Human Services Department, which does not have a budget for the 1996 fiscal year.

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“We are not aware of any delays in claims processing,” Pam Drellow, spokeswoman for the Blue Cross and Blue Shield Assn., said Friday. Her group’s members handle 98% of hospital bills and 68% of doctor bills for Medicare beneficiaries. Other commercial insurers also are among Medicare contractors.

The “Blues” last year handled an aggregate 455 million claims and disbursed $140 billion in federal funds.

Companies are now using their own cash to assure that the paperwork is performed. Medicare “is a mammoth social program, and we have been involved with it since its inception,” Drellow said. Any decision to stop processing the bills, or delay payment “would have a very detrimental effect,” she said.

When the budget is eventually approved, the companies will be repaid for the money they have spent. But they will not receive any interest on that money--federal law forbids contractors from receiving interest.

“All people are in place and we are operating business as usual,” said Mike Odom, a spokesman for Blue Shield of California, which normally gets about $38 million a year for handling claims for payments to doctors.

The firm’s last payment from the government was received Dec. 15.

Blue Cross of California usually gets about $2 million a month for handling bills from hospitals, skilled nursing facilities and home health agencies. It has not received any reimbursement from the federal government for nearly a month.

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Blue Cross is continuing to handle the bills, make the payments and deal with beneficiary inquiries without any disruptions, according to Jacqueline Anderson, the general manager for Medicare and federal employee programs.

Although the insurance firms are big organizations, with billions of dollars in cash flow, they obviously cannot keep working indefinitely for the government without being paid.

The ability to answer questions from beneficiaries about bills and to check for mistakes and fraud may be curtailed. Companies are likely to devote fewer dollars to these tasks as they try to stretch out their own funds while waiting for the budget crisis to be resolved.