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2013 Medicare Improper Payments Were $100 Billion!

2013 Medicare Improper Payments(July 14, 2014): According to a new report released by the Government Accountability Office (GAO), the amount of 2013 Medicare improper payments made were $100 billion.  What is especially troubling, however, is that this figure could be even higher.  And the largest sources for improper payments?  That would be government health care programs, such as Medicare’s Fee-for-Service program.  As background, the Improper Payments Information Act of 2002 (IPIA) – as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA) and the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA)[1] – requires that all federal executive branch agencies: (1) Review all programs and activities; (2) Identify those that may be susceptible to significant improper payments; (3) Estimate the annual amount of improper payments for those programs and activities;  Implement actions to reduce improper payments and set reduction targets; and (4) Report on the results of addressing the foregoing requirements. A key player in this oversight of government-side improper payments is the Office of Management and Budget (OMB).  In fact, OMB has set a goal where the government-wide improper payment error rate would be 3% or less by the end of FY 2016.  OMB has also established guidance for federal agencies on reporting, reducing, and recovering improper payments as required by IPIA and IPERA, as well as on protecting privacy while reducing improper payments with the Do Not Pay Initiative[2].  IPERIA requires that OMB issue guidance to agencies for improving estimates of improper payments.

I.  What the GAO Found with Respect to 2013 Medicare Improper Payments:

Overall, Federal agencies reported an estimated $105.8 billion in improper payments in FY 2013.  Despite this high figure, this was actually a decrease from the prior year revised estimate of $107.1 billion. This decrease is attributed in significant part to decreases in reported error rates for FY 2013 for the Department of Health and Human Services’ (HHS) Medicaid and Medicare Advantage (Part C) Programs.

The 2013 estimate came from improper payments made on behalf of 84 programs managed by 18 Federal agencies. Nevertheless, five of these 84 programs accounted for a majority of the $105 billion estimate in improper payments. In particular, these 5 programs accounted for about $82.9 billion or 78% of the total estimated improper payments agencies reported for 2013.

Additionally, of this nearly $83 billion figure, HHS’ Medicare Fee-for-Service program accounted for $36.0 billion in reported improper payment estimates. OMB also reported that this risk-susceptible program to have an improper payment error rate of 10.1%. Under IPERA, an agency reporting an improper payment rate of 10% or greater for any risk-susceptible program or activity must submit a plan to Congress describing the actions that the agency will take to reduce improper payment rates below 10%.

Fortunately, the report also indicates that federal agencies have maintained their efforts to recover improper payments, for example through recovery audits. OMB reported that federal agencies recovered over $22 billion total in overpayments through recovery audits and other methods in 2013.

II.  The GAO’s Estimate of Improper Payments Made by Medicare May be Understated:

Yet, the $105.8 billion figure may not even be the extent of the improper payment. The GAO indicates that the Federal government was unable to determine the full extent to which improper payments occur and could not reasonably assure that appropriate actions are taken to reduce them as a material weakness in internal control.  The GAO also identified existing internal control weaknesses at the agency level which continued to increase the risk of improper payments occurring.  But these problems are not new and the GAO has identified them for some time.

III.  Strategies to Help Reduce Improper Payments by Medicare:

The GAO has also previously identified several different government strategies that could help reduce the occurrence of improper payments.  These include:

  • Analyzing the root causes of improper payments in order to help agencies target effective corrective actions.

The GAO noted that some agencies reported root causes of improper payments using three error categories required by OMB (documentation and administrative, authentication and medical necessity, and verification). However, because the three categories are general, more detailed analysis to understand the root causes could help agencies identify and implement more effective corrective actions. An example of this strategy comes from HHS’ corrective actions. In 2013, HHS reported diagnosis coding errors as a root cause of improper payments in its Medicaid program and cited corrective actions related to provider communication and education.

  • Designing and implementing strong preventive controls to help defend against improper payments.

This strategy could increase the public’s confidence and avoid the difficult “pay and chase”[3] aspects of recovering improper payments. Preventive controls involve activities such as up-front validation of eligibility through data sharing, predictive analytic tests, and training programs. For example, HHS’ Centers for Medicare & Medicaid Services (CMS) uses analytic technology – referred to as predictive analytic technologies – to identify and prevent improper payments in the Medicare Fee-for-Service program. CMS uses these predictive analytic technologies to analyze and identify Medicare provider networks, billing patterns, and beneficiary utilization patterns and detect those that represent a high risk of fraudulent activity. With this, CMS then identifies unusual or suspicious patterns or abnormalities and prioritizes additional review of suspicious transactions before payments are made.

  • Implementing effective detection techniques to quickly identify and recover improper payments after they have been made.

While preventative controls are a vital tool to prevent improper payments from occurring, these controls cannot prevent every overpayment. As a result, effective detection techniques are necessary to assist in quickly identifying and recovering those overpayments that do occur. These measures can also identify why these payments were made and identify where agencies can implement stronger preventative controls. Detection activities include data mining and recovery audits.  Federal health care agencies have already implemented these tools. CMS has a data mining program called One Program Integrity, which provides CMS staff and contractors access to a single source for Medicare and other data needed to help detect improper payments as well as tools for analyzing those data.  Moreover, HHS’ Medicare Fee-for-Service recovery audit program[4] has identified approximately $4.2 billion and recovered $3.7 billion in overpayments by the end of 2013.  Additionally, the federal government could provide greater incentives to encourage and support states in their efforts to implement effective preventive and detective controls in state-administered programs.

V.  Final Remarks:

Improper payments have become an increasingly problematic issue for the federal government as Congress continues to slim agency budgets. “Nobody knows exactly how much taxpayer money is wasted through improper payments, but the federal government’s own astounding estimate is more than half a trillion dollars over the past five years,” said Rep. John Mica, R-Fla. “The fact is, improper payments are staggeringly high in programs designed to help those most in need — children, seniors and low-income families.”

GAOs’ 2013 Medicare improper payments report signifies that the Federal government has a significant, continuing problem with improper payments.  Therefore, health care providers should not shirk their own responsibilities to ensure that their claims qualify for coverage and payment. Providers have an affirmative duty to refund any overpayment from a Federal health care program[5].  This situation is generally seen with “reverse false claims” – a situation where a party had previously obtained money from the Federal government to which it was not entitled, and subsequently used false statements or records to conceal the overpayment and wrongfully retain the money. Setting aside the possibility of criminal sanctions, providers who fail to repay an identified overpayment severe civil monetary penalties.  This penalty is three times the aggregate amount of the false claims, plus civil monetary penalties of $5,500 to $11,000 per claim.

Have you identified an overpayment amount that you are not entitled to and don’t know what to do?  Even if the answer is “no”, as indicated above, the Medicare Recovery Audit Program has increased its efforts to combat fraud, waste, and abuse in this program.  If you have been audited by one of these contractors, it is imperative that you hire experienced legal counsel to assist you in this complicated and time-consuming process.  Even if you have not been audited yet, it is just a matter of time before you will.  Please do not hesitate to give us a call today and we would be more than happy to assist you in your fight.  Call 1 (800) 475-1906

Healthcare AttorneyRobert Saltaformaggio, Esq., serves as an Associate at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with Medicare audits by ZPICs and other CMS program integrity contractors.  The firm also represents health care providers in HIPAA Omnibus Rule risk assessments, privacy breach matters, State Medical Board inquiries and regulatory compliance reviews.  For a free consultation, call Robert at:  1 (800) 475-1906.

[1] IPIA, Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002), as amended by IPERA, Pub. L. No. 111-204, 124 Stat. 2224 (July 22, 2010), and IPERIA, Pub. L. No. 112-248, 126 Stat. 2390 (Jan. 10, 2013), and codified as amended at 31 U.S.C. § 3321 note

[2] The DNP is a web-based, centralized data-matching services that allows federal agencies to review multiple databases to determine a recipient’s award or payment eligibility prior to making payments. This initiative was enacted into law by the IPERIA and its purpose was to reduce improper payments by intensifying efforts to eliminate payment error, waste, fraud, and abuse in the major programs administered by the Federal Government. Available at (last accessed on July 7, 2014).

[3] GAO uses the phrase “pay and chase” to refer to the “labor-intensive and time-consuming practice of trying to recover overpayments once they have already been made rather than preventing improper payments in the first place.”

[4]  Medicare recovery audit contractors are paid on a contingency basis, based on both the percentage of overpayments collected and underpayments identified. As noted in previous articles, this may incentivize these contractors to miss-identify (or over-identify) improper payments when no such instances occur.

[5] The Fraud Enforcement and Recovery Act of 2009, which made significant changes to the Federal False Claims Act, 31 U.S.C. § 3729 et seq., by imposing liability on any person who fails to make timely repayment of any “obligation to pay or transmit money or property to the Government.”

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