Medicare Integrity Program:

CMS Used Increased Funding for New Activities but Could Improve Measurement of Program Effectiveness

GAO-11-592: Published: Jul 29, 2011. Publicly Released: Aug 29, 2011.

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The Medicare program makes about $500 billion in payments per year and continues to have a significant amount of improper payments--almost $48 billion in fiscal year 2010. The Centers for Medicare & Medicaid Services' (CMS) Medicare Integrity Program (MIP) is designed to identify and address fraud, waste, and abuse, which are all causes of improper payments. MIP's authorizing legislation provided funding for its activities and subsequent legislation provided additional funding. GAO was asked to report on how effectively CMS is using MIP funding to address Medicare program integrity. GAO examined (1) how CMS used MIP funding to support the program's activities from fiscal years 2006 through 2010, (2) how CMS assesses the effectiveness of MIP, and (3) factors CMS considers when allocating MIP funding. GAO analyzed CMS budget and other documents, interviewed CMS officials, and examined the agency's method of calculating return on investment (ROI), a performance measure used by CMS to measure the effectiveness of MIP activities.

CMS used the increase in total MIP funding received, from $832 million in fiscal year 2006 to $1 billion in fiscal year 2010, to expand MIP's activities. The additional funding supported oversight of Medicare Part C (Medicare benefits managed through private plans) and Part D (the outpatient prescription drug benefit) and agency efforts to examine the claims of Medicare beneficiaries who also participate in Medicaid--a joint federal-state health care program for certain low-income individuals. CMS officials also reported that CMS was able to move some funding from activities, such as provider audit, to other activities because of savings achieved from consolidating contractors. The largest percentage increase from this redistribution went to benefit integrity activities, which aim to deter and detect Medicare fraud through proactive data analysis and coordination with law enforcement. Although CMS has reported that the agency measures MIP's performance with goals related to reductions in the improper payment rates for Medicare fee-forservice, Part C, and Part D, CMS officials with direct responsibility for MIP generally do not connect measurements of effectiveness of MIP activities with the CMS goals of reducing improper payments. These goals to reduce improper payments, which were reported as goals previously and for fiscal year 2012, are particularly important in light of the President's Accountable Government Initiative, which aims to reduce overall improper payments by $50 billion by the end of 2012. In interviews with GAO, CMS officials with direct responsibility for implementing MIP activities generally did not connect the measurement of effectiveness of MIP activities with these CMS goals to reduce improper payments and instead cited other measures of effectiveness. This suggests that CMS has not clearly communicated to its staff the relationship between the daily work of conducting MIP activities and the agency's improper payment reduction performance goals. Because MIP will be central to CMS's efforts to reduce Medicare improper payments, MIP staff need to understand how their work supports these goals. In addition, the Patient Protection and Affordable Care Act requires CMS to report annually on the use of funds for MIP and the effectiveness of the use of those funds. One way that CMS already measures MIP effectiveness is ROI, which CMS calculates as savings from an activity in relation to expenditures. CMS calculates ROI for most of its MIP activities, but the data it uses have two flaws. First, ROI calculations are not updated when program expenditure data, a key component in the ROI calculation, are updated, which may lead to an incorrect ROI. Second, CMS does not have reliable information to determine the amount of MIP spending by activity for one type of contractor that received about 22 percent of total MIP funding in fiscal year 2010. It will be important for CMS to correct these flaws to ensure reliability in ROI reporting. CMS considers a variety of factors when allocating MIP funding. Based on a review of the documents submitted to justify funding of specific MIP activities, CMS may consider the prior year's funding level, the consequence of not funding, and the performance goal that the activity is intended to meet. GAO recommends that CMS communicate the linkage between MIP activities and the goals for reducing improper payments and that CMS expeditiously improve the reliability of data used to calculate ROI. The Department of Health and Human Services concurred with these recommendations.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To enhance accountability and sharpen the focus of the agency on reducing improper payments, the Administrator of CMS should clearly communicate to staff the linkage between Government Performance and Results Act (GPRA) and Patient Protection and Affordable Care Act (PPACA) performance measures related to the reduction in improper payments and other measures used to determine the performance of Medicare Integrity Program (MIP) activities.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Open

    Comments: In its comments on our draft report, CMS concurred with our recommendation to clearly communicate to staff the linkage between GPRA and PPACA performance measures related to the reduction in improper payments and other measures used to determine the performance of MIP activities. CMS has drafted a strategic plan for its program integrity efforts, which agency officials indicated had performance measures related to integrity activities. Agency officials indicated in August 2013 that the plan had not been released.

    Recommendation: To enhance the reliability of data used to calculate the MIP ROI, the Administrator of CMS should periodically update ROI calculations after contractor expenses have been audited to account for changes in expenditure data reported to CMS and publish a final ROI after data are complete.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Open

    Comments: In its comments on the draft report, CMS concurred with our recommendation to periodically update ROI calculations after contractor expenses have been audited to account for changes in expenditure data reported to CMS and publish a final ROI after data are complete. According to CMS, the agency will update the ROI when there has been a material change in the data used in the calculation and, at a minimum, will revisit the ROI annually to account for revisions in contractor cost reports and updated savings information. CMS indicated that it had reviewed the data used to calculate the fiscal year 2011 ROI and developed a revised ROI, which was under review as of June 2012. However, CMS did not indicate that it intended to regularly update its ROI after contractor expenses had been audited.

    Recommendation: To enhance the reliability of data used to calculate the MIP ROI, the Administrator of CMS should expeditiously complete the implementation of data system changes that will permit CMS to capture accurate Medicare administrative contractor (MAC) spending data, thereby helping to ensure an accurate ROI.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Open

    Comments: In its comments on our draft report, CMS concurred with our recommendation to complete the implementation of data systems changes that will permit CMS to capture accurate MAC spending data, thus helping to ensure the accuracy of the ROI. CMS stated that the agency will convene an internal work group consisting of staff from several components to explore more efficient ways to accumulate MAC cost data and calculate ROI performance statistics. CMS also noted that some changes to the cost reporting system for contractor cost submissions have already been completed, particularly in the area of medical review cost reporting. However, the agency plans to pursue a full assessment of the costs reported across all of the MIP functions performed by the MACs to ensure that any additional changes are identified and implemented. As of June 2012, CMS indicated that the work groups were still meeting.

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