Defense Health Care:

Improvements Needed to Reduce Vulnerability to Fraud and Abuse

HEHS-99-142: Published: Jul 30, 1999. Publicly Released: Jul 30, 1999.

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Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) health care system, focusing on: (1) DOD's estimates of the extent of health care fraud and abuse; (2) DOD's efforts to reduce health care fraud and abuse in civilian settings; and (3) initiatives and incentives that could improve DOD's antifraud efforts.

GAO noted that: (1) it is impossible to precisely quantify the amount lost to health care fraud and abuse given the nature of such activities, but there is general consensus in DOD and the health care industry that fraud and abuse could account for 10 to 20 percent of all health care costs; (2) given TRICARE managed care contract expenditures of $5.7 billion between 1996 and 1998, DOD could have lost over $1 billion to fraud and abuse during this period; (3) in addition to the financial loss, health care fraud and abuse can also adversely affect the quality of care provided and may cause serious harm to patients' health; (4) DOD and its contractors have had limited success in identifying TRICARE fraud and abuse; (5) for example, contractors have identified a negligible number of potential fraud cases; (6) this low level of fraud identification has occurred, in part, because DOD contracts do not require contractors to aggressively identify and prevent fraud and abuse; (7) during this same period, DOD recovered about $14 million in fraudulent payments out of the $5.7 billion spent; (8) to its credit, DOD recognizes the need to reduce its vulnerability to fraud and abuse and has identified a number of revisions it could make to its antifraud policies and requirements; (9) however, it has been slow to implement these policy revisions, which collectively would require contractors to put into place a more aggressive fraud and abuse identification program; (10) once these revisions are implemented, existing contracts can be modified to include specific results-oriented goals and performance measures, thus putting DOD in a better position to evaluate contractors' progress in identifying and reducing fraud and abuse; (11) given the magnitude of potential financial loss and harm to patients' health, it is important that DOD place a high priority on, and establish a concerted strategy for, reining in health care fraud; and (12) DOD's strategic plan for the military health system, prepared in response to the Government Performance and Results Act of 1993, provides an appropriate vehicle for articulating DOD's strategy and establishing how the agency will identify and prevent TRICARE fraud and abuse.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The DOD/TMA point of contact stated that TMA has visited each managed care contractor to ensure that this recommendation has been implemented. Specifically, each contractor has installed antifraud (artificial intelligence) software. TMA, with the help of the local Assistant U.S. Attorney's Office and DCIS, has provided on-site antifraud training. Regarding contractors developing a corporate antifraud training program, they are now all in compliance (two previous deficiency notices have been lifted). Additionally, the contractors are required to issue an annual corporate antifraud strategy via their web site or by letter of assurance. GAO's point of contact stated that all contractors have complied with this requirement.

    Recommendation: To reduce TRICARE's vulnerability to fraud and abuse, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to expedite implementation of TRICARE Management Activity's revised antifraud requirements, including the requirements that contractors develop a corporate antifraud strategy, utilize new antifraud software, and develop an antifraud training program.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In its comments, DOD stated that, while establishing specific results-oriented goals and performance measurements for contractors is desirable, it was not aware of any methodology that would allow DOD to establish such goals without also creating perverse incentives. While DOD did not agree to adopt this recommendation, it stated it will continue to look for a way to increase appropriate efforts by its contractors to reduce fraud and abuse.

    Recommendation: To reduce TRICARE's vulnerability to fraud and abuse, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to modify contracts to establish specific results-oriented goals and performance measures for contractors.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: In commenting on a draft to this report, the Assistant Secretary for Health Affairs stated that DOD completely concurred with the recommendation and noted that DOD has included a section on how it plans to combat fraud and abuse in the TRICARE Management Activity (TMA) strategic plan.

    Recommendation: To reduce TRICARE's vulnerability to fraud and abuse, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to include in DOD's military health system strategic plan how DOD will combat health care fraud and abuse and an assessment of DOD's performance in combating such activity.

    Agency Affected: Department of Defense

 

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