Medicare Integrity Program: Agency Approach for Allocating Funds Should Be Revised

GAO-06-813 Published: Sep 06, 2006. Publicly Released: Oct 06, 2006.
Jump To:
Skip to Highlights

Since 1990, GAO has considered Medicare at high risk for fraud, waste, abuse, and mismanagement. The Medicare Integrity Program (MIP) provides funds to the Centers for Medicare & Medicaid Services (CMS--the agency that administers Medicare--to safeguard over $300 billion in program payments made on behalf of its beneficiaries. CMS conducts five program integrity activities: audits; medical reviews of claims; determinations of whether Medicare or other insurance sources have primary responsibility for payment, called secondary payer; benefit integrity to address potential fraud cases; and provider education. In this report, GAO determined (1) the amount of MIP funds that CMS has allocated to the five program integrity activities over time, (2) the approach that CMS uses to allocate MIP funds, and (3) how major changes in the Medicare program may affect MIP funding allocations.

Skip to Recommendations


Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services To better ensure that MIP funds are appropriately allocated among and within the five program integrity activities, CMS should develop a method of allocating funds based on the effectiveness of its program integrity activities, the contractors' workloads, and risk.
Closed – Implemented
In its comments on the report, the Centers for Medicare & Medicaid Services (CMS) generally agreed with the recommendation. To address the issue of allocation of MIP funds based on workload and risk, CMS indicated that with contracting reform and the introduction of new contracts for Medicare Administration Contractors (MAC), CMS is distributing workloads more evenly and will be establishing performance goals based on the Medicare fee-for-service error rate in each region. Further, CMS also indicated that it is committed to identifying and investigating better approaches to allocate resources, including using its new contracting authority to introduce incentives for contractors. For example, CMS officials indicated that the agency is developing a strategy to use the new contracting authority provided by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) to include incentives into the Medicare fee-for-service claims processing contracts and the use of recovery auditor contracts. CMS is also consolidating its Medicare Secondary Payer activities to further achieve program efficiencies. CMS has taken steps to expand its oversight efforts of the Medicare Part D program by contracting with program integrity contractors, the Medicare Drug Integrity Contractors (MEDICs). These contractors will perform data analysis related to fraud and abuse, conduct fraud complaint investigations and refer cases to the appropriate law enforcement agency as needed. CMS is also taking steps to improve targeting of the activities of the Program Safeguard Contractors (PSC), which are dedicated to program integrity and enhanced data capabilities. While the level of funding for PSCs has not changed significantly since FY 2006, CMS is taking steps to improve the effectiveness of the utilization of that funding. With the current contracting structure of the PSCs, workloads vary between task orders. PSC task orders may include the review of Part A claims that cover inpatient hospital, skilled nursing facility (SNF), hospice and certain home health services (RHHI). The task orders may also include the review of Part B claims that cover physician and outpatient services, diagnostic tests, and other medical services and supplies. Some task orders review claims for durable medical equipment while others are limited to conducting cost report audits. Given the varying workload among task orders, CMS has made improvements for the allocation of funds to each PSC task order. In the past, funds allocated to PSC task orders were based on the escalation clauses in the respective contracts. Now, to improve the effectiveness of the Medicare Integrity Program, funds are allocated based on PSC performance, workload and Medicare program vulnerabilities.

Full Report