Improper Medicare Payments Are Still Being Made for Deceased Beneficiaries

Deceased Beneficiaries

(November 20, 2013): While most health care providers and suppliers are diligent in their efforts to ensure that Medicare services are submitted appropriately, mistakes and other improper billings still take place. Two areas of continuing concern involve providers and / or suppliers who submit fraudulent claims to Medicare seeking reimbursement on behalf of deceased beneficiaries or individuals who are unlawfully-present in this country. Despite numerous safeguards put into place by the Centers for Medicare and Medicaid Services (CMS) and its various contractors to prevent these types of inappropriate payment, these problems remain. Two recent reports published by the Department of Health and Human Services, Office of Inspector General (OIG) found that Medicare has continued to inappropriate pay for services allegedly provided to ineligible beneficiaries. In response, a series of steps have been recommended to improve CMS' payment safeguards in this regard.

I. Medicare Coverage and Payment Requirements

The federal Medicare program consists of two primary components: hospital insurance, or Part A, and supplementary medical insurance programs, which consists of Parts B and D. Part A services are generally furnished by organizational providers, such as hospitals, home health agencies, skilled nursing facilities, and hospices. In contrast, a majority of Part B services are provided by individual providers (e.g., physicians).

Medicare also has Part C (i.e., Medicare Advantage), which is an alternative to the traditional fee-for-service approach of Parts A and B. For Part C, beneficiaries may enroll in Medicare Advantage plans (e.g., health maintenance organizations, preferred provider organizations), which are offered by private insurance companies. Individuals who are eligible for Part A may enroll in Part B or join Medicare Advantage. Additionally, beneficiaries enrolled in Part A, Part B, or Medicare Advantage are eligible for the prescription drug coverage under Part D.

For certain Part A and B services and items, providers must order, refer, or certify the service or item for the beneficiary. To process and pay these claims, CMS heavily relies on the efforts of private sectors contractors, known as Medicare Administrative Contractors (MACs). After receiving a claim, these Medicare contractors run each claim through a system of "edits" (system processes), which are designed to detect possible billing errors or other potential problems before authorizing a claim for payment. Unfortunately, the edit process is far from perfect. It may incorrectly deny a claim that should be paid. Alternatively, it may not screen out all of the improper claims for which it was designed.

For parts C and D, CMS makes payments on behalf of beneficiaries directly to Medicare Advantage organizations and prescription drug plan sponsors. Payment amounts may differ for each enrolled beneficiary on the basis of demographic and health status information. CMS calculates payment amounts using the most current information available, which usually comes from the Social Security Administration (SSA). If CMS receives demographic or health status information that would increase or decrease previous monthly Part C and / or D payments, it makes retroactive adjustments to correct the payment amount. For deceased beneficiaries, CMS corrects the payment amount for the months in which the individuals had, before their deaths, been enrolled in the Medicare Advantage plan or prescription drug plan.

However, Medicare will not reimburse health care providers, suppliers, Medicare Advantage plans, or prescription drug plans for expenses incurred for items or services that are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.[1] Because services can no longer be deemed medically necessary after a beneficiary has died, any payment made after this date is inappropriate.

Furthermore, Medicare benefits are generally allowable when provided to a beneficiary who is either a U.S. citizen or a U.S. national or to an alien who is lawfully present in the United States. If an alien beneficiary is present in the United States on an unlawful basis (i.e., unlawfully present), however, Medicare benefits are not allowable.

II. Medicare’s Safeguards Against Improper Payments to Deceased Beneficiaries

Previous HHS-OIG studies and audit reports have discovered that the Medicare program continues to incorrectly make payments on behalf of deceased beneficiaries. In response, the Centers for Medicare & Medicaid Services (CMS) have implemented numerous safeguards to address this liability. For example, to identify and prevent payment for Part A and B services after beneficiaries’ dates of death, CMS implemented an “informational unsolicited response” process in April 2011. This process reviews all Part A and B claims approved for payment in the claims history and identifies claims with service dates up to 3 years after the beneficiary’s date of death.[2] Medicare’s claims processing contractors also receive a report of identified claims for deceased beneficiaries on which they are required to take action and perform additional reviews, if necessary, to determine whether payment was inappropriate.

When a beneficiary is enrolled in Parts C and D, the last payment is generally made in the month in which the beneficiary died. CMS’s systems will then automatically dis-enroll deceased beneficiaries to prevent improper payments to Medicare Advantage organizations and prescription drug plan sponsors for the months following the deaths of enrolled beneficiaries. CMS then recoups any payments made to those organizations and sponsors on the behalf of deceased beneficiaries for those months.

III. Medicare Continues to Make Inappropriate Payments on Behalf of Deceased Persons

Despite its safeguards, a recent report reflects that Medicare inappropriately paid tens of millions in 2011 for claims that occurred after beneficiaries had died. The OIG identified Medicare beneficiaries who had passed away from 2009 to 2011. The agency also compared the date-of-death information from SSA’s Death Master File and CMS’s Enrollment Database for each beneficiary. The OIG then identified Medicare Part A and B claims as well as Part C and D payments from 2011 associated with these deceased individuals. OIG also assessed paid and unpaid Part B claims with service dates after the beneficiaries’ deaths to identify providers and suppliers associated with the high numbers of these particular claims.

The study indicates that Medicare inappropriately paid $23 million in 2011 for claims with service dates after beneficiaries' deaths. These improper payments in 2011 only constitute less than one-tenth of a percent of total Medicare expenditures. While the results may seem insignificant, they are still alarming given that this problem has been identified on several previous audits and CMS is supposed to have effective safeguards in place.

More specifically, the study demonstrated that 86 percent ($20 million) of the improper payments were made under Part C. Medicare Part D accounted for an additional four percent. As a result, 90 percent of improper payments were made to private Medicare advantage plans or prescription drug sponsors. This is particularly troubling since, for Parts C and D, Medicare automatically dis-enrolls a beneficiary from a Medicare advantage plan upon his or her death. The safeguards for these parts were nevertheless unable to prevent all of the improper payments.

Moreover, 11% of these improper payments resulted from missing or incorrect dates of death in CMS’ Enrollment Database in 2011. HHS-OIG found that these dates of death were incorrect due largely to:

  1. No date of death being listed for a deceased beneficiary, or
  2. The date of death was incorrectly verified as being accurate.

Specifically, CMS did not have the dates of death for 375 deceased beneficiaries, which resulted in $2.5 million in improper Medicare payments.

Finally, OIG identified 251 providers and suppliers that had high numbers of paid and / or unpaid Part B claims with service dates after the beneficiaries’ deaths. For example, the report reflects that 65 providers and suppliers had 10 or more paid Part B claims with service dates after the beneficiaries’ deaths for 2011. These claims represented over $100 thousand in inappropriate payments. Additionally, in 2011, 190 providers and suppliers had over 100 unpaid Part B claims with services dates after the beneficiaries’ deaths.

IV. OIG’s Recommendations for Improving Safeguards to Prevent Improper Payments:

While CMS’s safeguards have prevented or recovered a vast majority of Medicare payment made on behalf of deceased beneficiaries, they have fallen short of 100 percent prevention. Therefore, OIG made four recommendations on how to improve payment safeguards in this area and to address providers and suppliers identified by OIG with high numbers of claims with service dates after beneficiaries' deaths. Specifically, OIG recommended that CMS:

  • Improve existing safeguards to prevent future improper Medicare payments after beneficiaries’ deaths, including determining why existing safeguards did not prevent all improper payments;
  • Take appropriate action on the $23 million in improper Medicare payments made on behalf of deceased beneficiaries and correct inaccurate dates of death;
  • Monitor both paid and unpaid Part B claims with service dates after beneficiaries’ deaths to identify providers and suppliers associated with high numbers of such claims; and
  • Take appropriate action on the 251 providers and suppliers that had high numbers of paid and/or unpaid Part B claims with service dates after beneficiaries’ deaths.

CMS concurred with all four of OIG’s recommendations. CMS emphasized its ongoing commitment to prevent and recover Medicare payments made on behalf of deceased beneficiaries.

VI. Medicare Requirements for Prescription Drug Coverage Payments:

In order to receive payment for Medicare Part D, every time a Medicare beneficiary fills a prescription covered under Part D, the sponsor must submit a "Prescription Drug Event" (PDE) record to CMS. PDE records (which are collectively referred to as “PDE data”) include drug cost and payment information that enables CMS to administer the Part D benefit. Sponsors are paid prospectively and must submit final PDE records to CMS within 6 months after the end of the coverage year. CMS makes final payment determinations each year by adjusting the sponsors’ payments using information from the PDE records.

However, CMS has specifically implemented a policy that bars any payments for health care services, including covered prescription drugs, provided to unlawfully present beneficiaries in Medicare Parts A and B. Furthermore, an individual is eligible for Part D benefits if he or she is entitled to Medicare benefits under Part A or enrolled in Part B and lives in the service area of a Part D plan. Thus, Federal law prohibits Part D payments for prescription drugs provided to unlawfully present beneficiaries.

Accordingly, CMS set forth a Program Memorandum with the following payment policy: "Make no payments for Medicare services furnished to an alien beneficiary who is not lawfully present in the United States.[3] CMS also implemented a system edit to automatically reject Parts A and B claims for beneficiaries who are unlawfully present, according to its Medicare Enrollment Database. However, CMS did not have a policy addressing payments for unlawfully present beneficiaries under Medicare Part D equivalent to its policy under Parts A and B. Specifically, CMS did not have any internal controls to identify and dis-enroll unlawfully present beneficiaries and to automatically reject PDE records for those individuals.

VII. Prescription Drugs are being Improperly Provided to "Unlawfully Present Beneficiaries":

Because CMS did not have such a policy, CMS incorrectly determined that unlawfully present beneficiaries were eligible for Part D benefits and could not prevent payments to be made to these individuals. In fact, a second OIG report outlines just how inadequate CMS was in not preventing Medicare Part D payments to be made to unlawfully-present beneficiaries for calendar years 2009 through 2011. In order to conduct its review, HHS-OIG analyzed years 2009 and 2011, whereby sponsors submitted final PDE records to CMS with gross drug costs totaling approximately $227 billion.

Here, HHS-OIG’s study found that CMS inappropriately accepted 279,056 PDE records submitted by Part D sponsors with unallowable gross drug costs totaling almost $29 million on behalf of 4,139 unlawfully-present beneficiaries. CMS then used those records to make final payment determinations to sponsors.

VIII. HHS- OIG’s Recommendations for Preventing Improper Payments to Deceased Beneficiaries:

With regards to this problem, OIG has issued three recommendations. Specifically, OIG has recommended that CMS:

  • Resolve improper Part D payments made for prescription drugs provided to unlawfully present beneficiaries by reopening and revising CYs 2009 through 2011 final payment determinations to remove prescription drug costs for unlawfully present beneficiaries;
  • Develop and implement controls to ensure that Medicare does not pay for prescription drugs for unlawfully present beneficiaries by preventing enrollment of unlawful beneficiaries, dis-enrolling any currently enrolled unlawful beneficiaries, and automatically rejecting PDE records submitted by sponsors for prescription drugs provided to this population; and
  • Identify and resolve improper payments made for prescription drugs provided to unlawfully present beneficiaries by reopening and revising final payment determinations for periods after the period of this review but before implementation of policies and procedures.

In response to these recommendations, CMS concurred with the first two and described corrective actions that it planned to take. Specifically, CMS indicated that it would first address policy and system changes and would then reopen each year to recover improper payments. However, CMS did not concur with the third recommendation. CMS contended that there was no effective way to fully recover the improper payments in question without first implementing the appropriate policies and procedures, including the relevant systems changes.

IX. What do These Two OIG Reports Tell Us?

Based on the findings of these two reports, CMS has some further work to do in order to prevent unlawfully present individuals from receiving Federal health care benefits. CMS must begin to develop and implement controls to ensure that federal health care programs do not pay for prescription drugs under Part D for unlawfully present beneficiaries. The agency must prevent enrollment of unlawful beneficiaries, dis-enroll any currently enrolled unlawful beneficiaries, and automatically reject PDE records submitted by sponsors for prescription drugs provided to this population

On the other hand, CMS has enacted a fairly strong safeguard system to prevent improper payments to be distributed to otherwise deceased beneficiaries. While the system could not prevent all improper payments, these improper payments in 2011 constituted less than one-tenth of a percent of total Medicare expenditures. The agency must continue to build upon this success and improve its safeguards even further.

X. What Steps Should we Take?

It is imperative that all participating providers affirmatively review their practices to help ensure that all Medicare program billings are appropriately handled. Frankly, there is no valid excuse for the billing of services for a deceased Medicare beneficiary. While Medicare recognizes that "mistakes" happen, if your organization is audited and a Zone Program Integrity Contractor (ZPIC), Recovery Audit Contractor (RAC) or OIG finds that you have been billing for services allegedly rendered to deceased beneficiaries, the presumption will likely be that improper billings are more than a result of a mere mistake.

Unlike the first issue, you will likely find it more difficult to screen out services provided to beneficiaries that are allegedly not in this country legally. Nevertheless, this risk area should be incorporated into your Compliance Plan so that steps can be taken to avoid the submission of these improper billings.

Ultimately, each and every Medicare provider and supplier needs to develop, implement and adhere to an effective Compliance Plan. In doing so, you can better ensure that your continuing obligation to fully comply with applicable statutory and regulatory requirements are being met. Need help responding to an audit of your Medicare claims or in setting up your Compliance Plan? Give us a call.

Healthcare Lawyer

Robert W. Liles, Esq. serves as Managing Partner at Liles Parker, Attorneys and Counselors at Law. Liles Parker is a boutique health law firm with offices in Washington, DC, Texas and Louisiana. We represent health care providers and suppliers around the country in health law related matters and cases. For a free consultation, give us a call at: 1 (800) 475-1906.

  • [1] Social Security Act § 1862(a)(1)(A), 42 U.S.C. § 1395y(a)(1)(A).
  • [2] CMS, Change Request 7123, Transmittal 804, Pub. 100-020 One-Time Notification, November 2010. Accessed at on Nov. 19, 2013. The automatic adjustment process of the “informational unsolicited response” retroactively adjusts certain paid claims when subsequent claims or other subsequent actions are the first indicator that payment was inappropriate.
  • [3] CMS, Payment Denial for Medicare Services Furnished to Alien Beneficiaries Who Are Not Lawfully Present in the United States, Program Memorandum Intermediaries/Carriers, Transmittal AB-03-115 (Change Request 2825, August 1, 2003). This payment policy was incorporated in the Medicare Claims Processing Manual in September 2004 (Chapter 1, Section