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CMS Adopts 5-Part Strategy to Address Medicare Fraud, Waste, and Abuse

Analysis  |  By Christopher Cheney  
   October 28, 2019

CMS Administrator Seema Verma vows to take 'aggressive actions.'

The Centers for Medicare & Medicaid Services (CMS) have announced a five-part strategy to combat fraud, waste, and abuse in the Medicare program.

About 25% of U.S. healthcare spending is wasteful, according to a recent article published in the Journal of the American Medical Association. The JAMA researchers focused on six categories of waste: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity.

Administrative complexity accounted for the largest amount of estimated annual wasteful spending at $265.6 billion. Medicare has drawn criticism for decades over administrative complexity.

In a blog post published last week, CMS Administrator Seema Verma outlined the agency's five-part "program integrity strategy."

"CMS defines program integrity very simply: 'pay it right.' Program integrity must focus on paying the right amount, to legitimate providers, for covered, reasonable and necessary services provided to eligible beneficiaries while taking aggressive actions to eliminate fraud, waste and abuse," Verma wrote.

The five approaches to improve program integrity are stopping bad actors, preventing fraud, mitigating emerging programmatic risks, reducing provider burden, and leveraging new technology. Highlights of the strategies are below.

1. Stopping bad actors

Verma says several agencies are actively involved in identifying Medicare fraud and referring cases to law enforcement, including CMS, the Office of the Inspector General, the Department of Justice, and Unified Program Integrity Contractors. "We work with law enforcement agencies to identify and take action on those who defraud the Medicare program," she wrote.

For example, she says "healthcare fraud takedowns" in recent months targeting orthotic braces and genetic testing saved Medicare $3.3 billion dollars.

2. Preventing fraud

As opposed to Medicare's "pay and chase" model of combatting fraud in the past, CMS is developing approaches to prevent fraud, waste, abuse before claims are paid, Verma wrote.

"After we identify bad actors and their schemes, we make system changes to avoid similar fraudulent activities in the future. CMS' oversight, audit, and investigative activities allow us to analyze data to identify potential problem areas. We then work with our law enforcement partners to develop policies, regulations, and processes to prevent vulnerabilities from being exploited before claims are paid."

For example, CMS took measures to prevent fraud during the recent effort to send new Medicare cards to beneficiaries, she wrote.

"CMS implemented an enhanced address validation process to verify beneficiaries' identities and addresses against multiple information sources. This ensured that we mailed new Medicare cards to the right person at the right address. We reviewed over 61 million cards for address accuracy, which we estimate saved billions of dollars in fraudulent claim payments."

3. Mitigating emerging programmatic risks

As Medicare shifts from the program's traditional fee-for-service payment model to value-based payment models, CMS is committed to developing safeguards to ensure the integrity of the new reimbursement processes, Verma wrote.

"New payment models have been very beneficial but also have the potential to cause new challenges in identifying improper payments, beneficiary safety issues, and other program integrity concerns. CMS is continuing to explore ways to identify and reduce program integrity risks related to value-based payment programs by looking to experts in the healthcare community for lessons learned and best practices."

4. Reducing provider burden

While CMS steps up efforts to combat fraud, abuse, and waste, the agency is mindful that it should not create inappropriate time and cost burdens on healthcare providers, Verma says.

"To that end, we have increased efforts to educate providers in CMS program rules and regulations and remedy onerous processes to assist rather than punish providers who make good faith claim errors. That's the purpose of our Targeted Probe and Educate (TPE) program and our efforts to streamline our recovery audit processes. It's vital to separate providers who make clerical errors from truly nefarious actors."

Through the TPE program from October 2017 to February 2019, she says CMS provided one-on-one education for 20,000 healthcare providers and medical goods suppliers to decrease honest mistakes. "As a result, approximately 80% of those providers and suppliers were released from further review," she wrote.

5. Deploying new technology

CMS is committed to deploying new technology to boost the efficiency of fraud, waste, and abuse reduction efforts, Verma wrote.

"Today, the Medicare fee-for-service program relies on clinician reviewers—human beings—to review the medical records associated with items and services billed to Medicare. Providers also have to send us copies of medical records, which is time-intensive and burdensome. That is why we only review less than 1% of medical records. Looking forward, CMS is seeking new, innovative strategies and technologies, perhaps involving artificial intelligence and/or machine learning, which are more cost effective and less burdensome to both providers, suppliers and the Medicare program."

For example, CMS is hoping to upgrade the agency's Fraud Prevention System and case management systems, she wrote. "While these systems have helped us to obtain a positive return on investment, we believe that by adopting cutting edge technology—such as AI and machine learning tools—we can achieve greater savings for taxpayers and allow us to review more claims."

Comments on the CMS Center for Program Integrity initiative can be submitted electronically via email at Documents should be submitted in PDF format.

Christopher Cheney is the CMO editor at HealthLeaders.


A recent study estimated that about 25% of U.S. healthcare spending is wasteful.

A key element of program integrity for Medicare is to "pay it right," CMS Administrator Seema Verma says.

A common theme of CMS' new 5-part strategy to combat Medicare fraud, waste, and abuse is separating honest mistakes from nefarious activity.

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