Medicare Improper Payments:

While Enhancements Hold Promise for Measuring Potential Fraud and Abuse, Challenges Remain

AIMD/OSI-00-281: Published: Sep 15, 2000. Publicly Released: Sep 15, 2000.

Additional Materials:

Contact:

Linda M. Calbom
(202) 512-3000
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO provided information on the structural problems that exist in the Medicare claims processing system, focusing on: (1) what the Health Care Financing Administration (HCFA) proposals have been designed or initiated to measure Medicare improper payments; and (2) the status of these proposals and initiatives and how will they enhance HCFA's ability to comprehensively measure improper Medicare payments and the frequency of kickbacks, false claims, and other inappropriate provider practices.

GAO noted that: (1) since 1990, GAO has designated Medicare as a high-risk program, recognizing that the size of the program, its rapid growth, and its administrative structure continue to present vulnerabilities that challenge HCFA's ability to safeguard against improper payments, including those attributable to fraud and abuse; (2) due to the broad nature of health care fraud and abuse, a variety of detection methods and techniques--such as contacting beneficiaries and providers and performing medical records reviews, data analyses, and third party verification procedures--are being utilized to uncover suspected health care fraud and abuse; (3) efforts to measure the extent of improper payments, and ultimately to stem the flow of Medicare losses, depend upon the use of an effective combination of these techniques; (4) the Office of Inspector General's study to measure the extent of Medicare fee-for-service improper payments was a major undertaking and, as GAO reported, the development and implementation of the methodology it used as the basis for its estimates represent significant steps toward quantifying the magnitude of this problem; (5) it is important to note, however, that this methodology was not intended to and would not detect all potentially fraudulent schemes perpetrated against the Medicare program; (6) HCFA has initiated three projects designed to enhance its ability to measure the extent of Medicare fee-for-service improper payments; (7) two of these projects are designed to improve the precision of future improper payment estimates and help develop corrective actions to reduce losses--however, like the current methodology, they are not specifically designed to identify and measure the extent of improper payments attributable to potential fraud and abuse; (8) the third project, while still in the concept phase, will test the viability of using a variety of investigative techniques to develop a potential fraud and abuse rate; (9) determining the most appropriate combination of improper payment identification techniques to incorporate into measurement efforts requires careful evaluation; and (10) some techniques may be challenging to implement, such as contacting beneficiaries due to difficulties in locating them.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Since GAO reported, the Centers for Medicare and Medicaid Services (CMS), formally known as HCFA, has experimented with various techniques for detecting potential fraud and abuse, including those identified in GAO's report as effective by health and fraud investigative experts. Specifically, CMS implemented the Statistical Analysis Center (SAC) pilot, a 2-year project ending in March 2002, which employed experts in statistical analysis to create a database of all claims for beneficiary residing in three states and to experiment with applying data mining, data sharing, and other innovative techniques to identify suspicious claims. According to CMS, the SAC identified about $38 million in suspicious claims and demonstrated the benefit of applying statistical analysis to assess whether or not a potential pattern of abuse exists. As a result of the SAC pilot, CMS has gained experience with additional techniques that it can incorporate into its measurement methodologies to improve its analysis of underlying causes of improper payments and enhance future fraud and abuse detection.

    Recommendation: To improve the usefulness of measuring Medicare fee-for-service improper payments, including those attributable to potential fraud and abuse, the Administrator, HCFA, should experiment with incorporating additional techniques for detecting potential fraud and abuse into methodologies used to identify and measure improper payments and then evaluate their effectiveness. For example, visiting providers to verify their existence, collecting medical records and other documents supporting Medicare payments, observing the level of patient activity, and inquiring about the nature of the provider's operations with employees could provide valuable information to more accurately assess the appropriateness of claim payments and causes of improper payments. Likewise, inquiries with Medicare beneficiaries to verify receipt of and need for services or supplies could provide similar insights. In determining the nature and extent of additional specific procedures to perform, the overall measurement approach should: (1) recognize the types of fraud and abuse perpetrated against the Medicare program; (2) consider the relative risks of potential fraud or abuse that stem from the various types of claims; (3) identify the advantages and limitations of common fraud detection techniques and use an effective combination of these techniques to detect improper payments; and (4) consider, in consultation with advocacy groups, concerns of those potentially affected by their use, including beneficiaries and health care providers.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Implemented

    Comments: The Centers for Medicare and Medicaid Services (CMS) had planned to implement a Model Fraud Rate Project, designed to test the viability of identifying and measuring Medicare claims attributable to fraud and abuse. However, due to budget constraints, CMS has not implemented this project. CMS has however, created databases of sampled claims from its Comprehensive Error Rate Testing (CERT) program. CERT was established to produce an error rate for carriers, Durable Medical Equipment contractors (DMERCS), and fiscal intermediaries claims. The sampled claims can be used to evaluate underlying causes of improper payments including those claims that were paid incorrectly because of fraud and abuse. For example, CMS estimated that improper payments for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), were over $900 million in fiscal year 2004. CMS pays contractors to investigate suppliers and help determine the extent to which improper payments are due to fraud and abuse. Contractors have developed some cases that have been referred for law enforcement and prosecution. These actions have helped CMS in understanding the causes of payment errors including those attributable to fraud.

    Recommendation: To improve the usefulness of measuring Medicare fee-for-service improper payments, including those attributable to potential fraud and abuse, the Administrator, HCFA, should include in the methodologies' design, sufficient scope and evaluation to more effectively identify underlying causes of improper payments, including potential fraud and abuse, in order to develop appropriate corrective actions.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

Explore the full database of GAO's Open Recommendations »

Sep 20, 2016

Sep 6, 2016

Aug 19, 2016

Aug 12, 2016

Jul 29, 2016

Jul 28, 2016

Jul 13, 2016

Jul 11, 2016

Jun 13, 2016

Looking for more? Browse all our products here