Obama Plans to Sign Executive Order to Target Medicare Waste, Fraud

More than $98 billion in taxpayer money spent by government agencies was wasted in fiscal 2009—with nearly half of it ($54 billion) coming from improper payments related to Medicare fee-for-service, Medicaid, and Medicare Advantage, according to government findings released Tuesday night by the White House.

President Obama is expected to sign an executive order within the week that will focus on eliminating government waste and fraud, particularly in Medicare and other benefit programs. In 2009, the government reported questionable Medicare payments of roughly $36 billion. However, that amount is expected to be revised upward to about $48 billion next year when the Department of Health and Human Services (HHS) converts to a new methodology that will use stricter documentation requirements.

Under the executive order, explained Peter Orszag, director of the Office of Management and Budget (OMB), all federal agencies will maintain a Web site to track improper payments, error rates, and outstanding payments. If an agency fails to meet targets for reducing error rates for two consecutive years, the agency director will be required to directly report to OMB about what new actions they will take to prevent it.

The Obama administration also has indicated that it will seek to impose penalties on government contractors who receive improper payments—giving them incentives to return the money, Orszag said.

The White House announcement came a day after Sen. Charles Grassley (R-IA) introduced legislation addressing Medicare fraud. It calls for giving the federal government more time to pay Medicare providers when waste, fraud, and abuse are suspected.

The current federal law requires that Medicare send payment within a short timeframe—even when there is risk of fraud, waste or abuse, Grassley said in a statement when introducing the bill. "Because of this prompt payment rule, the government puts itself in a position of having to pay and chase Medicare fraud, instead of working to prevent it in the first place."

Grassley estimated that of the $470 billion spent on Medicare, about $60 billion of that spending each year is lost to fraud, waste and abuse. And Medicare expenditures are projected to increase at an average annual rate of 7.1% this year, that rate will grow as well, he said.

Under the bill, called the "Fighting Medicare Payment Fraud Act of 2009," the HHS secretary would be given authority to extend the time period in which payments must be made under the prompt payment rule if it is determined there is a likelihood of fraud, waste or abuse. With this additional time, HHS would be required to conduct closer reviews of the claims in question to make certain they are legitimate.