Key Issues > Medicare
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In 2014, Medicare covered approximately 54 million people at an estimated cost of about $600 billion. The Centers for Medicare & Medicaid Services (CMS), which administers Medicare, faces major challenges related to implementing payment methods that encourage efficient service delivery, managing the program to serve beneficiaries well, and safeguarding the program from loss due to fraud, waste, and abuse.

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Medicare has been designated as a high-risk program because its complexity and susceptibility to improper payments, added to its size, have led to serious management challenges. Addressing these challenges requires improvements to payment methods, program management, and program safeguards.

Reforming and refining payment methods to encourage efficient service delivery

  • CMS has continued to implement payment reforms in various parts of the program, such as for inpatient hospital and home health services, but other payment areas need further attention, including aspects of physician payment, end-stage renal disease, imaging, and preventive services.
  • CMS needs to better identify claims from physicians who self-refer services such as advanced imaging, anatomic pathology, and prostate cancer treatment; reduce payments for certain self-referred services; and, for prostate cancer radiation treatment services, disclose physicians’ financial interest to patients.
  • CMS pays plans in Medicare Advantage (MA), Medicare’s private plan alternative, a predetermined amount per enrolled beneficiary adjusted for health status, but the agency would improve the accuracy of its MA risk score adjustments and program savings by using the most current data available and incorporating adjustments for additional beneficiary characteristics. CMS has taken steps to collect encounter data—information on the services and items furnished to enrollees—that are more comprehensive than the beneficiary diagnosis data the agency currently uses to risk adjust payments to MA organizations, and has reported that it will use these data in calculating risk adjustments. However, CMS has not fully developed plans for validating and using MA encounter data.

Improving program management for efficiency and better service to beneficiaries

  • CMS has begun a Medicare Physician Feedback Program, but faces challenges in identifying physicians with inefficient practice patterns and helping them
  • CMS has relied on three accrediting organizations establishing their own standards and auditing for safety and quality of advanced diagnostic imaging services, but their standards and audits vary. CMS should establish minimum national standards for the accreditation of advanced diagnostic imaging suppliers and develop an oversight framework to improve safety and quality.

Enhancing program integrity to safeguard Medicare from loss

  • CMS must sustain progress in reducing its payment error rates in total more than $60 billion in fiscal year 2014 —to better ensure the integrity of the Medicare program.
  • CMS saved Medicare at least $1.76 billion in fiscal year 2010 through the use of prepayment edits, but those savings could have been greater had such edits been more widely used.
  • The Patient Protection and Affordable Care Act (PPACA) provides CMS with certain authorities to combat fraud, waste, and abuse in Medicare. CMS should fully exercise its PPACA authority to require a surety bond for certain types of at-risk providers and suppliers; establish core elements of compliance programs for providers and suppliers; and publish a proposed rule for increased disclosure of prior actions taken against providers and suppliers.
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