Fraud crackdown mandated under new law

The president challenges federal agencies to reduce improper payments by $50 billion by 2012, including cutting improper Medicare fee-for-service pay in half.

By Chris Silva — Posted Aug. 4, 2010

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President Obama on July 22 signed into law a bill that requires federal agencies to identify and recover improper payments and further cut down on waste, fraud and abuse in federal spending.

The bill was sponsored by Rep. Patrick Murphy (D, Pa.) and Sen. Tom Carper (D, Del.), who said the techniques and tools provided through the law were based partly on those used by Medicare on a limited basis in recent years. A three-year demonstration program that launched in California, Florida and New York in 2005 identified roughly $1 billion in Medicare overpayments, according to the Centers for Medicare & Medicaid Services.

The Improper Payments Elimination and Recovery Act requires federal agencies to identify and recover more of the estimated $98 billion of taxpayer dollars that are lost annually due to wasteful spending, Carper said. The law directs agencies to produce audited corrective action plans, mandates all agencies that spend more than $1 million to perform recovery audits on all programs and penalizes those that fail to comply with current accounting laws.

The administration in recent months has become more vocal about reducing improper payments. In fall 2009, a new executive order laid out a strategy to reduce improper payments by increasing transparency and boosting incentives for compliance. In March 2010, the president signed a memorandum directing all federal agencies to intensify their use of payment recapture audits. And on June 8, Obama announced that the administration would work to cut the improper payment rate in Medicare fee-for-service in half by 2012, a move that would eliminate more than $20 billion in payment errors.

Obama remarked after signing the bill that he's challenging federal agencies to reduce improper payments by $50 billion between now and 2012.

CMS currently is working to expand its recovery audit contractor program to all of Medicare and to Medicaid by the end of the year. RACs are third-party auditors hired by CMS to comb through Medicare claims from hospitals, physicians and others to identify improper payments.

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