Methodology to Identify and Measure Improper Payments in the Medicare Program Does Not Include All Fraud

AIMD-00-69R: Published: Feb 4, 2000. Publicly Released: Feb 4, 2000.

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Gloria L. Jarmon
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Pursuant to a congressional request, GAO provided information on the methodology used to estimate the $12.6 billion in Medicare improper payments, as reported by the Department of Health and Human Services' (HHS) Office of Inspector General (OIG) for fiscal year (FY) 1998, focusing on whether the methodology included tests to detect improper payments resulting from fraudulent and abusive schemes in the Medicare program.

GAO noted that: (1) the HHS OIG developed an overall methodology to estimate the level of improper payments within the Medicare Fee-for-Service program; (2) the OIG developed and tested the methodology during its audit of the FY 1996 financial statements of the Health Care Financing Administration (HCFA); (3) previously, no overall methodology existed to estimate Medicare improper payments; (4) the methodology was a significant step toward quantifying Medicare improper payments; (5) its primary purpose was to provide users of HCFA's financial statements with an estimate of Medicare fee-for-service claims that were paid in error; (6) it was not designed to identify or measure the full extent of levels of fraud and abuse in the Medicare program; (7) the HHS OIG testified that the estimate of improper payments did not take into consideration numerous kinds of outright fraud such as "phony records" or kickback schemes; (8) the methodology assumes that all medical records received for review represent actual services provided; (9) in response to the increased focus resulting from HHS OIG's efforts in this area, HCFA is developing plans to enhance its efforts to identify or measure Medicare improper payments; and (10) GAO is reviewing these plans and will report to Congress separately on them.

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