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Medicare Program Integrity: Overview and Issues

Marjorie Kanof, M.D.Managing Director, Health Care

U.S. Government Accountability Office

February 22, 2007

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Overview

• Introduction to Medicare• What is Program Integrity?• Who Does What?• Funding• Role of GAO• Issues

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Introduction

• Federal program; over $380 billion in fiscal year 2006

• Serves over 42 million beneficiaries

• Administered by the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS)

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Introduction

• Medicare has 4 parts:• Part A: Hospital Insurance• Part B: Supplementary Medical Insurance• Part C: Medicare Advantage• Part D: Outpatient Prescription Drugs

• Large and complex program--extremely vulnerable to improper payments.

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Introduction

• Distribution of Medicare spending, fiscal year 2006(Spending for Part C is shown under benefit totals for Parts A

and B)

49%

41%

8% 2%

Part APart BPart DAdministration

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What is Program Integrity?

• Activities aimed at protecting Medicare from:• Mistakes• Abuse• Fraud

• In November 2006, CMS estimated that Medicare improperly paid providers about $10.8 billion in the fee-for-service part of the program—4.4% of all such payments.

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What is Program Integrity?

• Improper payments occur throughout Medicare

• Part A and Part B payments to institutional providers, including hospitals & skilled nursing homes—$6.4 billion in improper payments

• Durable medical equipment, prosthetics, orthotics and supplies (DMEPOS)—small portion of Medicare payments, but high rate of improper payments—7.5 percent ($0.7 billion)

• Other Part B services—includes physicians, laboratory, and ambulance services—$3.7 billion paid improperly

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What is Program Integrity?

• Program integrity is ensuring correct and proper payment to a legitimate provider for reasonable, medically necessary services that are covered by Medicare and are provided to an eligible beneficiary.

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What is Program Integrity?

Activities to ensure program integrity focus on:• Preventing mistakes, abuse and fraud; • Detecting problems once they occur;• Educating providers on proper billing;• Recovering overpayments;• Investigating and prosecuting intentional

wrongdoers

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What is Program Integrity?

• Provider education to inform providers of Medicare’s rules and appropriate billing practices

• Medical review of claims before or after payment

• Audits of cost reports that hospitals and other institutions submit annually to CMS

• Medicare secondary payer determinations

• Benefit integrity to identify and investigate potential fraud

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What is Program Integrity?

• Distribution of program integrity funding, fiscal year 2005

29%

23%21%

17%

10%

AuditMedical reviewSecondary payerBenefit integrityProvider education

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Who Does What?

• The CongressResponsible for providing direction to the Medicare program

through formal and informal means:

• Develops legislation on all aspects of the program• Through committees of jurisdiction, provides oversight

of the program• Holds hearings and investigates areas of concern• Requests briefings and other information/documents to

assure that various parts of the program are running smoothly

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Who Does What?

• CMS’s Program Integrity Group (PI)—has primary responsibility for coordinating CMS’s program integrity activities for Part A and Part B

• CMS’s Center for Beneficiary Choices (CBC)—has primary responsibility for Part C program integrity activities

• PI and CBC share responsibility for Part D program integrity activities

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Who Does What?

• Other parts of CMS also play a role--Examples:

• The Center for Medicare Management• develops payment policy and • oversees contractors that review and pay claims

• CMS regional offices• performs outreach with providers and helps law

enforcement develop fraud cases

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Who Does What?

• Contractors process Part A and Part B claims, and conduct certain program integrity activities:

• Currently, fiscal intermediaries process most Part A claims• Currently, carriers process most Part B claims

• Under contracting reform, transitioning to:• Medicare Administrative Contractors (MACs) to process

both Part A and B claims in a particular region• Three Durable Medical Equipment Medicare

Administrative Contractors (DME MACs) process DMEPOS claims—one more will be added.

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Who Does What?

• Program Safeguard Contractors (PSCs)• Conduct activities to ensure the integrity of paid claims by

reviewing claims, analyzing data, and detecting and deterring fraud and abuse

• Quality Improvement Organizations (QIOs)• Review utilization, appropriateness and quality of care in

hospitals

• Data Analysis and Coding (DAC) contractor• Analyzes durable medical equipment payments to identify

patterns and trends

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Who Does What?

• National Supplier Clearinghouse (NSC)• Enrolls durable medical equipment suppliers and ensures

they meet Medicare standards

• Coordination of Benefits (COB)• Identifies payments that were the responsibility of another

insurer

• Medicare Rx Integrity Contractors (MEDICs)• Monitor and analyze date to identify fraud• Provide tips to consumers to protect them from fraud• Work with law enforcement to enforce Medicare rules

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Who Does What?

• Contracting reform—mandated in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003—must be completed by 2011

• A/B MACs will monitor service use across Parts A and B to spot inappropriate claims

• So far, 1 region has transitioned to an A/B MAC, and 3 regions to DME MACs

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Who Does What?

• Other entities responsible for identifying and investigating potential Medicare fraud:

• HHS Office of Inspector General (OIG)

• The Federal Bureau of Investigation (FBI)

• The U.S. Attorneys, within the Department of Justice (DOJ), prosecute Medicare fraud cases.

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Funding

• The Health Insurance Portability and Accountability Act of 1996 (HIPAA)

• Established the Medicare Integrity Program (MIP)

• Provides dedicated funding to safeguard Medicare

• HIPAA designated $720 million for MIP in fiscal year 2006; Deficit Reduction Act of 2005 (DRA) increased this amount by $112 million

• Uses funds for five main activities, plus support such as information technology and storage of records

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Funding

• HIPAA authorized the Health Care Fraud and Abuse Control (HCFAC) program

• Under joint direction of HHS and DOJ• Coordinates federal, state and local law enforcement

activities to address health care fraud• Funds investigations, audits, and other activities

• In FY 2005, $240 million appropriated from HCFAC for program integrity activities

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Role of GAO

• The Government Accountability Office (GAO)

• Performs financial and programmatic audits of pertinent issues in Medicare

• Provides the Congress with policy options in addressing Medicare fraud, waste and abuse

• Testifies at Congressional hearings on the status of the government’s efforts to safeguard Medicare

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Issues

• Measuring the error rate of improper payments (GAO-07-92, GAO-06-300)

• Due to methodology changes, unclear the degree to which CMS and its contractors have decreased improper payments

• Allocation of MIP funding (GAO-06-813)• CMS lacks a means to measure the relative

effectiveness of its various program integrity activities

• Instead of distributing funds based on contractor workload or programmatic risk, uses historical basis

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Issues

• Quality Standards for DMEPOS Suppliers (GAO-05-656)• Medicare has lacked strong standards to prevent

unscrupulous suppliers from enrolling in the program.• But new quality standards and accreditation requirements

may help.

• Competitive bidding for DMEPOS items (GAO-04-765)• Will require CMS to use competition to select suppliers• Efforts being phased in beginning in 2007• Could lead to reductions in improper DMEPOS payments.

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Contact Information

• Marjorie Kanof, Managing Director(202) 512-7114 or kanofm@gao.gov

• Sheila K. Avruch(202) 512-7277 or avruchs@gao.gov

• Visit our websitewww.gao.gov