Medicare Advantage Plans' Fraud Oversight Weak, Says OIG

Federal inspectors are calling for tighter oversight of waste, fraud, and abuse in Medicare Advantage after a first-ever system-wide audit of the program found wide disparities in vigilance and reporting among the privately run plans.

"Our findings indicate that Medicare Advantage organizations lack a common understanding of key fraud and abuse program terms and raise questions about whether all Medicare Advantage organizations are implementing their programs to detect and address potential fraud and abuse effectively," the report said.

The audit  from the Department of Health and Human Services Office of Inspector General reviewed 2009 data from 170 of the 188 Medicare Advantage organizations that represented 4,547 plans nationwide and accounted for 94% of the 10.9 million Medicare Advantage beneficiaries in 2009.

The audit did not name the Medicare Advantage organizations.

Three Medicare Advantage organizations identified 95% of the 1.4 million incidents related to their Part C health benefits and Part D drug benefits that year, while 19% of the organizations reported no potential fraud and abuse. Overall, Medicare Advantage plans sent only 2,656 referrals of potential fraud and abuse for further investigation.

"Differences in the way organizations defined and detected potential fraud and abuse may account for some of the variability in the number of incidents they identified," the audit stated. "While CMS requires MA organizations to initiate inquiries and corrective actions where appropriate, not all MA organizations took such steps in response to incidents they identified."

Auditors recommended that the Centers for Medicare and Medicaid Services take action to ensure that Medicare Advantage organizations effectively monitor fraud and abuse.

Those steps would include:

• Determining why some plans reported especially high or low cases of suspected fraud and abuse;
• Developing guidelines for plans to define potential Part C and Part D fraud and abuse;
• Requiring plans to give CMS aggregate data related to Part C and Part D antifraud, waste and abuse activities;
• Requiring Medicare Advantage plans to refer potential fraud and abuse to CMS or other investigators.   

In a written response to the audit, CMS Acting Administrator Marilyn Tavenner agreed with most of the findings and noted that CMS has already begun enhanced auditing of Medicare Advantage organizations to detect fraud and abuse. Tavenner said, however, that CMS does not have the statutory authority to require mandatory self-reporting of fraud and abuse by Medicare Advantage organizations.

Medicare Advantage covers about 24% of Medicare beneficiaries and accounted for $115 billion of the total $504 billion in Medicare benefits in 2010, OIG said.

In an era of constrained budgets, however, the program and its mounting costs have come under more scrutiny from the federal government. The Medicare Payment Advisory Commission estimated that CMS spends about 10% more on beneficiaries Medicare Advantage plans than it does for beneficiaries in traditional fee-for-service Medicare.

HHS in its 2010 financial report identified a composite payment error rate of 14.1% for Medicare Advantage programs.

While 33 of the 170 organizations audited detected no fraud or abuse, another 24 organizations identified only Part C fraud incidences and 11 organizations identified only Part D incidents. These 68 organizations covered a total of 571,623 beneficiaries.

For the 137 Medicare Advantage organizations that reported fraud and abuse, the volume varied widely. Fourteen organizations each identified more than 1,000 incidents while 41 organizations identified fewer than 10 incidents, the audit said.

One organization accounted for 78% of the total 1.4 million incidents of potential Part C and Part D fraud and abuse. Excluding the 95% of all reported incidents that were linked to three Medicare Advantage organizations, 134 organizations identified a total of 73,499 potential fraud and abuse incidents in 2009. Of those, 83% were linked to Part C. Those 134 organizations covered 9.9 million beneficiaries in 2009.

Size apparently was not a factor in organizations' ability to monitor waste and fraud. "For example, an organization with more than 250,000 enrollees identified 37 potential Part C fraud and abuse incidents and 8 potential Part D incidents. Another organization, which had fewer than 5,000 enrollees, identified 7,787 potential Part C fraud and abuse incidents and 154 potential Part D incidents," OIG said.

The 134 Medicare Advantage organizations reported 32 different types of Part C incidents in 2009. The most common related Part C was improper coding of services. The organizations identified 25 different types of potential fraud and abuse related to Part D, and inappropriate prescription dispensing was the most common.