HHS Officials Explain $47.9B in Improper Medicare Payments

The federal government issued $47.9 billion in improper payments to Medicare fee-for-service and Medicare Advantage in fiscal 2010, and Thursday officials from the Office of Inspector General, the Centers for Medicare & Medicaid Services, and the Government Accounting Office went before a House subcommittee to explain why. The House Subcommittee on Government Organization, Efficiency, and Financial Management heard testimony attributing the improper payments to a number of causes, primarily improper documentation.

"Some but not all improper payments are the result of fraud," Daniel R. Levinson, OIG's Inspector General told the subcommittee, in prepared remarks.

Levinson said improper payments can result from:

• Unnecessary claims
• Miscoded claims
• Eligibility errors
• Insufficient documentation

"Examples of improper payments include payments made to an ineligible recipient, duplicate payments, or payment for services not received," he added. "For example, my office recently identified $3.6 million in improper Medicare Part D payments on behalf of deceased beneficiaries."

Of the total $47.9 billion in improper payments identified, $34.3 billion were attributed to Medicare fee-for-service, representing a 10.5% error rate. The remaining $13.6 billion was attributed to Medicare Advantage, representing a 14% error rate, Levinson told the committee.

Overall, Medicare paid $516 billion in 2010 for medical services for 47 million Americans, according to government estimates.

Michelle Snyder, deputy COO at the Centers for Medicare & Medicaid Services, told the subcommittee that "like other large and complex Federal programs, Medicare is susceptible to payment, billing, and coding errors."

"It is important to clarify what these billing anomalies are – and are not," she said in prepared remarks.

Snyder said circumstances that lead to billing and coding errors can result from:

• Services with insufficient documentation,
• Provided services that are not determined to bereasonable and necessary
• Incorrectly coded claims
• Services with no documentation

"Further, improper payments do not mean an item or service was not needed. These payments are not necessarily fraudulent; rather, they tend to be an indication of errors made by the provider in filing a claim or inappropriately billing for a service," Snyder told the committee.  

Kay L. Daly, director of Financial Management and Assurance at the Government Accountability Office told the subcommittee that the estimate for improper payments was "incomplete" because it has yet to provide an improper payment estimate for Medicare prescription drug payments, which totaled $59 billion in fiscal year 2010.

Daly said her office has identified five strategies to help reduce fraud, waste, and abuse, and halt improper Medicare payments.  Not all have yet been acted upon:  

1.)   Strengthen provider enrollment standards and procedures. Strong standards and procedures can help reduce the risk of enrolling sham providers. CMS has implemented provisions of the Patient Protection and Affordable Care Act that screen providers by levels of risk and provide a stringent review of high-risk providers, but has yet to implement certain GAO recommendations in this area.

2.)    Improve prepayment reviews. Prepayment reviews of claims help ensure that Medicare pays correctly the first time. As of July 1, 2011, CMS has begun applying predictive modeling analysis to claims and plans to expand Medicare prepayment controls. CMS has not implemented GAO's recommendation to improve prepayment reviews.

3.)   Focus post-payment reviews on vulnerable areas. Post-payment reviews are critical to identifying payment errors and recouping overpayments. In March 2009, CMS began instituting a national recovery audit contractor program to help the agency supplement its post-payment reviews. CMS has also developed information technology to help it better identify claims paid in error, but GAO recently reported that the systems are not being used to the extent originally planned and made several recommendations to address the issues.

4.)   Improve oversight of contractors. CMS has taken action to improve oversight of prescription drug plan sponsors' fraud and abuse programs, which addresses GAO's recommendation, but is still developing specific performance statistics.

5.)   Develop process to address identified vulnerabilities. CMS has not developed a robust corrective action process for vulnerabilities identified by Medicare RACs as GAO recommended.

OIG: Medicare Advantage Prepayments Cost CMS Millions