By Stephen Barr
Washington Post Staff Writer
Monday, August 3, 1998; Page A10

The Health Care Financing Administration oversees one of the government's most popular programs, Medicare. But the agency relies on 60 private insurance companies to process health care claims electronically and pay doctors and hospitals for services provided Medicare beneficiaries.

The complexity of that network and the political importance of Medicare has made the HCFA the No. 1 worry this summer for the White House council handling Year 2000 issues, known as Y2K.

"We aren't going to leave anything to chance," said Nancy-Ann Min DeParle, HCFA administrator. "We are developing contingencies, and I'm personally managing this within the agency. There is no more serious concern."

If the constellation of computers used to manage Medicare cannot properly handle dates after Jan. 1, 2000, federal officials said that a raft of bad things could happen: Medicare enrollment systems might not function; beneficiaries could be denied services if doctors and hospitals cannot confirm eligibility; and hospitals could have cash-flow problems because of delayed payments.

To avert computer chaos, DeParle informed Congress last month that the HCFA expects to delay scheduled payment increases to physicians and hospitals that occur from Oct. 1, 1999, to April 1, 2000, because Y2K work must take precedence over program changes that require software reprogramming.

The HCFA's current Y2K problems can be traced back to the days when Medicare operated in a paper world, with more than 100 contractors handling claims. As office automation evolved, contractors took different paths in buying computers, establishing disparate ways of processing claims.

About five years ago, the HCFA began urging contractors to move toward standardized systems. Seven such systems are in operation today, but information exchange problems persist. Further consolidation has been delayed pending a resolution of the Y2K computer problem.

Not only must contractors repair or replace hardware and software to become Year 2000 "compliant," but Medicare's extensive files must also be amended to be certain dates can be read after the turn of the century.

The HCFA and its Medicare contractors expect to begin testing Y2K fixes this fall. By year's end, they will reassess the task at hand.