Key Issues > Medicare Payment, Management, and Program Integrity
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Medicare Payment, Management, and Program Integrity

In 2013, Medicare covered approximately 51 million people at an estimated cost of about $604 billion. The Centers for Medicare & Medicaid Services (CMS), which administers Medicare, faces major challenges related to implementing payment methods that encourage efficient service delivery, managing the program to serve beneficiaries well, and safeguarding the program from loss due to fraud, waste, and abuse.

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Medicare has been designated as a high-risk program because its complexity and susceptibility to improper payments, added to its size, have led to serious management challenges. Addressing these challenges requires improvements to payment methods, program management, and program safeguards.

Reforming and refining payment methods to encourage efficient service delivery

  • CMS has continued to implement payment reforms in various parts of the program, such as for inpatient hospital and home health services, but other payment areas need further attention, including aspects of physician payment, end-stage renal disease, imaging, home oxygen, and preventive services.
  • CMS needs to better identify claims from physicians who self-refer services such as advanced imaging, anatomic pathology, and prostate cancer treatment; reduce payments for certain self-referred services; and, for prostate cancer radiation treatment services, disclose physicians’ financial interest to patients.
  • CMS pays plans in Medicare Advantage (MA), Medicare’s private plan alternative, a predetermined amount per enrolled beneficiary adjusted for health status, but the agency would improve the accuracy of its MA risk score adjustments and program savings by using the most current data available and incorporating adjustments for additional beneficiary characteristics.

Improving program management for efficiency and better service to beneficiaries

  • CMS has begun a Medicare Physician Feedback Program, but faces challenges in identifying physicians with inefficient practice patterns and helping them reduce their service costs.
  • More than 49 million Medicare cards display beneficiaries’ Social Security numbers and, although CMS has explored options for removing the numbers from those cards, the agency should move forward to identify a solution that would better protect Medicare beneficiaries from identify theft.
  • CMS has relied on three accrediting organizations establishing their own standards and auditing for safety and quality of advanced diagnostic imagining services, but their standards and audits vary. CMS should establish minimum national standards for the accreditation of advanced diagnostic imaging suppliers and develop an oversight framework to improve safety and quality.

Enhancing program integrity to safeguard Medicare from loss

  • CMS must sustain progress in reducing its payment error rates—in total more than $44 million in fiscal year 2012—to better ensure the integrity of the Medicare program.
  • CMS saved Medicare at least $1.76 billion in fiscal year 2010 through the use of prepayment edits, but those savings could have been greater had such edits been more widely used.
  • CMS has implemented a predictive analytics system—the Fraud Prevention System (FPS)—to analyze Medicare claims for potentially fraudulent behavior and provide leads to investigators, but CMS lacks information to determine the extent to which FPS is enhancing the agency’s ability to accomplish the goals of its fraud prevention program.
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