Fraud and Abuse: Stronger Controls Needed in Federal Employees Health Benefits Program

Highlights

Pursuant to a congressional request, GAO reviewed the Office of Personnel Management's (OPM) internal controls over the Federal Employees Health Benefits Program, focusing on whether those controls adequately protected funds from fraud and abuse within the context of the Federal Managers' Financial Integrity Act of 1982 (FMFIA).

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Office of Personnel Management	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to assess the adequacy and effectiveness of the financial and claims processing controls used within the plans when conducting FMFIA evaluations of the health insurance program. An alternative approach for doing this would be to require the carriers to conduct FMFIA evaluations of their plans' controls and provide the results of their evaluations for RIG review.	Closed – Implemented OPM developed minimum internal control and quality assurance standards for financial and claims processing controls for implementation by the carriers in May 1993. The standards are contained in the carriers' annual contracts with OPM.
Office of the Inspector General	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to assess the adequacy and effectiveness of the financial and claims processing controls used within the plans when conducting FMFIA evaluations of the health insurance program. An alternative approach for doing this would be to require the carriers to conduct FMFIA evaluations of their plans' controls and provide the results of their evaluations for RIG review.	Closed – Implemented OPM developed minimum internal control and quality assurance standards for financial and claims processing controls for implementation by the carriers in May 1993. The standards are contained in the carriers' annual contracts with OPM.
Office of Personnel Management	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to: (1) implement the program analysis and onsite visits RIG identified on December 31, 1989, as the corrective actions needed to address the problem of limited carrier oversight; and (2) further define what the program analysis is to entail and identify the financial and claims processing information it will need from the carriers on an ongoing basis to perform its analyses.	Closed – Implemented OPM is continuing on-site program analysis visits and will expand such visits as resources permit. OPM is also working with OMB on procedures to implement cost accounting standards in the program and intends to make them effective with the 1995 contracts.
Office of the Inspector General	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to: (1) implement the program analysis and onsite visits RIG identified on December 31, 1989, as the corrective actions needed to address the problem of limited carrier oversight; and (2) further define what the program analysis is to entail and identify the financial and claims processing information it will need from the carriers on an ongoing basis to perform its analyses.	Closed – Implemented OPM is continuing on-site program analysis visits and will expand such visits as resources permit. OPM is also working with OMB on procedures to implement cost accounting standards in the program and intends to make them effective with the 1995 contracts.
Office of Personnel Management	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to make the carriers accountable for implementing Inspector General audit recommendations for correcting internal control deficiencies and ensure that corrective actions taken by the carriers are timely and effective.	Closed – Implemented RIG integrated the followup of nonmonetary findings into the regular audit resolution process. RIG and the Office of the Inspector General (OIG) previously followed up specifically only on monetary findings.
Office of Personnel Management	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to develop and implement an aggressive program for preventing and detecting enrollee and provider fraud and abuse. In developing this program, RIG should determine the minimum claims processing controls that should be contractually required of the carriers. As a basis for making this determination, RIG should evaluate and compare the costs and results of the activities currently performed by the carriers and obtain information on the fraud and abuse prevention and detection activities used in other government and private-sector insurance programs.	Closed – Implemented OPM printed the OIG fraud hotline number in health benefits brochures and required the carriers to submit periodic reports on the number, type, and disposition of fraud and abuse cases pursued to help it evaluate the magnitude of the problem and develop a program to address it. In February 1993, OPM started an activity to prevent payments or contracts between debarred providers and carriers. OPM's RI also continues to assist OPM's IG with its sanction program.
Office of Personnel Management	To achieve the objectives of FMFIA within the Federal Employees Health Benefits Program, the Director, OPM, should require RIG to monitor the magnitude of enrollee and provider fraud and abuse in the program and the carriers' efforts to address the problem by, for example, requiring the carriers to submit periodic reports on the number, type, and disposition of the fraud and abuse cases pursued.	Closed – Implemented Carriers are required to provide recommended reports semi-annually. OPM plans to strengthen the fraud and abuse detection requirements of the carriers, especially the fee-for-service plans. Currently, fraud and abuse review is limited to receipt of semi-annual reports from the carriers on the number, type, and disposition of fraud and abuse cases pursued and in coordination with the OIG. In December 1993, OPM communicated a standard definition of fraud to the carriers for use in their semi-annual reports.
Office of Personnel Management	The Director, OPM, should determine where the responsibilities for implementing the authority to administratively penalize fraudulent and abusive providers should be organizationally placed within OPM, RIG, or the Office of the Inspector General (OIG) and require the responsible organizations to develop an action plan for implementing the authority as soon as possible.	Closed – Implemented Responsibility was assigned to OIG, which began operating an administrative sanctions program under the Nonprocurement Debarment and Suspension Common Rule in 1993. Instructions have been issued to carriers requiring them to develop and implement plans for withholding payments from debarred providers and to report to OIG semiannually the numbers of claims disallowed. OIG is continuing to explore opportunities for improving the sanctions program through legislation.
Office of Personnel Management	The Director, OPM, should include the weaknesses discussed in this report in the annual FMFIA report to the President and Congress until the above recommendations are implemented.	Closed – Not Implemented OPM program offices have determined that the weaknesses are corrected, but will continue to report the weaknesses within FEHBP. The Office of the Chief Financial Officer will validate the corrective actions before OPM formally recognizes resolution of this area.
Office of the Inspector General	The Inspector General, OPM, should identify and implement the actions needed to achieve its goal of a 3- to 5-year audit cycle for the fee-for-service plans.	Closed – Implemented OIG developed an action plan to reduce the audit cycle to 3 years by June 30, 1996. The plan called for additional staff, auditing technique revisions, and analysis of the present auditing program. It was expected that, if additional staff had been approved for the increments planned, the deadline would have been met. Future staff increases, however, remain unlikely given current budget scenarios. Consequently, OIG does not expect to make further significant progress toward reducing the audit cycle to 3 years. With present staffing, it would take about 9 years to audit each fee-for-service plan at least once. Due to prioritizing, some plans would be audited less frequently than once every 9 years, while others would be audited more frequently. In collaboration with program officials, OIG is exploring opportunities for improving carrier internal controls. Stronger carrier controls will reduce the resources needed to perform each audit, thereby increasing the frequency of audits.

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