Government auditors say Medicare tops improper payment list

The program reported $48 billion in improper payments in 2010, leading a list of 70 federal programs, a GAO report says.

By Charles Fiegl — Posted Aug. 8, 2011

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Improper payments made under the Medicare program represented nearly 40% of all government waste reported by federal agencies in 2010. But officials with the Government Accountability Office warned that the percentage could be much higher because the Centers for Medicare & Medicaid Services has not tracked improper payments under its outpatient prescription drug program.

CMS calculated that Medicare made $48 billion in improper payments out of the $516 billion it paid to physicians, hospitals and other health professionals in 2010. Medicare led a partial list of 70 federal programs in terms of bad payments, according to a July GAO report. Estimates for improper payments under the fee-for-service program totaled $34.3 billion, and Medicare Advantage made up the rest.

Members of the House Oversight and Government Reform Committee criticized CMS during a July 28 hearing for failing to compile a composite error rate for the $59 billion Part D program, which has provided Medicare drug coverage since 2006. Error rates for four components of the drug program, ranging from $45 million to $5.4 billion a year, were calculated separately by CMS in 2010, according to the GAO.

CMS Deputy Chief Operating Officer A. Michelle Snyder told lawmakers that the Medicare agency is developing a composite error estimate for Part D beginning with the 2011 fiscal year, which ends Sept. 30.

Any improper payment made by the Medicare program is unacceptable, she said. But Medicare pay errors often are the result of billing and administrative mistakes and not outright fraud. Snyder outlined four common reasons for payment being designated as improper:

  • Documentation for a service by a health professional was insufficient.
  • Services provided to a patient were not deemed reasonable and necessary.
  • Claims for services were coded incorrectly.
  • Services were billed with no documentation to support the claim.

RACs still hunting for overpayments

CMS has launched a number of financial management tools to help lower payment error rates, including recovery audit contractors operating in all 50 states. RACs identify overpayments and underpayments in the Medicare program and receive contingency fees based on the amount returned to Medicare. In the case of underpayments, contractors are compensated when money is recovered for physicians.

Contractors recovered $237.8 million in overpayments and $35.7 million in underpayments between October 2010 and March 2011.

Rep. James Lankford (R, Okla.) questioned witnesses at the committee hearing on the impact of the audit program on health care professionals and hospitals. He said his constituents watch auditors visit their facilities and dig through medical records looking for minor mistakes, such as a nurse forgetting to write a date on a form.

"It is a bounty hunter coming through their door," Lankford said. "They are determined to find something wrong, and they will."

He reported that at least one hospital in his district has added compliance staff because of the time it takes to meet audit demands. The new staff isn't preventing fraud, but monitoring for small missteps by doctors and other health professionals, he said.

The Dept. of Health and Human Services Office of Inspector General will be reviewing the RAC process and CMS oversight of the program, said Inspector General Daniel Levinson. RACs are part of a pay-and-chase model to reduce overpayments, but it is a model the government is trying to move away from, he said. CMS aims to be more proactive in preventing improper payments from going out the door in the first place.

Meanwhile, RACs are expanding their scope to investigate payments under Medicare Advantage and Part D plans. In a February letter, the American Medical Association urged CMS to have RACs identify areas where plans are receiving federal payments and patient premiums but are not delivering medically necessary services due to coverage limits.

"Plan policies that create barriers to, and denial of, medically necessary care represent an immediate overpayment to plans as well as a hidden long-term cost to the Medicare Trust Fund," the AMA said.

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Where the waste lies

The Medicare program isn't the only federal entity susceptible to waste, fraud and abuse, although it did top the list when it came to improper payments last year. In 2010, 70 government programs reported $125.4 billion in improper payments, an increase of $16.2 billion from 2009.

Program Improper payments
Medicare fee-for-service $34.3 billion
Medicaid $22.5 billion
Unemployment insurance $17.5 billion
Earned income tax credit $16.9 billion
Medicare Advantage $13.6 billion
Supplemental Security Income $4.8 billion
Old Age Survivors' and Disability Insurance $3.2 billion
Supplemental Nutrition Assistance $2.2 billion
National School Lunch $1.5 billion
Pell Grants $1.0 billion

Source: "Recent Efforts to Address Improper Payments and Remaining Challenges," Government Accountability Office testimony, April 15 (link)

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External links

"Improper Payments: Reported Medicare Estimates and Key Remediation Strategies," Government Accountability Office, July (link)

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