Medicare Improper Payments:

Challenges for Measuring Potential Fraud and Abuse Remain Despite Planned Enhancements

T-AIMD/OSI-00-251: Published: Jul 12, 2000. Publicly Released: Jul 12, 2000.

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Pursuant to a congressional request, GAO discussed the Health Care Financing Administration's (HCFA) efforts to improve the measurement of improper payments in the Medicare fee-for-service program.

GAO noted that: (1) because it was not intended to include procedures designed specifically to identify all types of potential fraudulent and abusive activity, the current methodology does not provide an estimate of the full extent of improper Medicare fee-for-service payments; (2) HCFA has initiated three projects designed to further its measurement efforts which offer some promise for determining the extent of improper payments attributable to potential fraud and abuse; (3) based on careful evaluation of their effectiveness, performing additional potential fraud identification techniques as part of its efforts to measure improper payments could assist HCFA in arriving at a more comprehensive measurement and, ultimately, develop cost-effective internal controls to combat improper payments; and (4) however, no set of techniques, no matter how extensive, can be expected to measure all potential fraud and abuse.

Status Legend:

More Info
  • 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 improve the usefulness of measuring Medicare fee-for-service improper payments, including those attributable to potential fraud and abuse, the Administrator, HCFA, should experiment with incorporating additional techniques for detecting potential fraud and abuse into methodologies used to identify and measure improper payments and then evaluate their effectiveness. In determining the nature and extent of additional specific procedures to perform, the overall measurement approach should: (1) recognize the types of fraud and abuse perpetrated against the Medicare program; (2) consider the relative risks of potential fraud or abuse that stem from the various types of claims; (3) identify the advantages and limitations of common fraud detection techniques and use an effective combination of these techniques to detect improper payments; and (4) consider, in consultation with advocacy groups, concerns of those potentially affected by their use, including beneficiaries and health care providers.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

    Status: Closed - Implemented

    Comments: Since GAO reported, the Centers for Medicare and Medicaid Services (CMS), formally know as HCFA, has experimented with various techniques for detecting potential fraud and abuse, including those identified by GAO as considered effective by health and fraud investigative experts. Specifically, CMS implemented the Statistical Analysis Center (SAC) pilot, a 2-year project ending in March 2002, that employed experts in statistical analysis to create a database of all claims for beneficiaries residing in three states and experiment with applying data mining, data sharing, and other innovative techniques to identify suspicious claims. According to CMS, the SAC pilot identified about $38 million in suspicious claims and demonstrated the benefit of applying statistical analysis to assess whether or not a potential pattern of abuse exists. As a result of the SAC pilot, CMS has gained experience with additional techniques that it can incorporate into its measurement methodologies to improve its analysis of underlying causes of improper payments and enhance future fraud and abuse detection.

    Recommendation: To improve the usefulness of measuring Medicare fee-for-service improper payments, including those attributable to potential fraud and abuse, the Administrator, HCFA, should include in the methodologies' design, sufficient scope and evaluation to more effectively identify underlying causes of improper payments to develop appropriate corrective actions.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

    Status: Closed - Implemented

    Comments: See related report (AIMD/OSI-00-281) for same recommendation. The Centers for Medicare and Medicaid Services (CMS) had planned to implement a Model Fraud Rate Project, designed to test the viability of identifying and measuring Medicare claims attributable to fraud and abuse. However, due to budget constraints, CMS has not implemented this project. CMS has however, created databases of sampled claims from its Comprehensive Error Rate Testing (CERT) program. CERT was established to produce an error rate for carriers, Durable Medical Equipment contractors (DMERCS), and fiscal intermediaries claims. The sampled claims can be used to evaluate underlying causes of improper payments including those claims that were paid incorrectly because of fraud and abuse. For example, CMS estimated that improper payments for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), were over $900 million in fiscal year 2004. CMS pays contractors to investigate suppliers and help determine the extent to which improper payments are due to fraud and abuse. Contractors have developed some cases that have been referred for law enforcement and prosecution. These actions have helped CMS in understanding the causes of payment errors including those attributable to fraud.

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