Reports Highlight Improper Payment Issues in Medicare, Medicaid

The federal government made $62.2 billion in improper Medicare and Medicaid payments in 2013, accounting for most of the estimated $105 billion in inappropriate payments it made last year, according to a report released Wednesday by the Government Accountability Office, The Hill reports (Viebeck, The Hill, 7/9).

GAO said the actual overall amount of improper payments likely is even higher, because of possibly inaccurate agency estimates (Ohlemacher, AP/Sacramento Bee, 7/10).

The data were unveiled during a House Committee on Oversight and Government Reform Subcommittee on Government Operations hearing that focused on inappropriate government spending.

According to The Hill, improper payments are considered to be any payments that were made for incorrect amounts or that should not have been paid (Viebeck, The Hill, 7/9). The report highlighted issues including:

• Families receiving tax credits for which they did not qualify; and
• Medicare payments for treatments that likely were unnecessary (AP/Sacramento Bee, 7/10).

Subcommittee Chair John Mica (R-Fla.) linked the improper payments with the "staggering cost of health care" in the U.S.

According to GAO, a large majority of the improper payments were overpayments made through the Medicare and Medicaid programs. HHS payment error rates ranged between 10% for Medicare fee-for-service payments and 5.8% in Medicaid payments (Viebeck, The Hill, 7/9).

In total, Medicare accounted for about $50 billion in inappropriate payments last year, the most of any program, GAO said (AP/Sacramento Bee, 7/10).

A CMS official said that payments distributed without correct documentation accounted for most of the inappropriate payments.

Still, Obama administration officials noted an overall reduction in the amount of improper payments, which peaked at $121 billion in 2010. According to GAO, improper Medicaid payments declined from $23 billion in 2012 to $14.4 billion in 2013 (Viebeck, The Hill, 7/9). In addition, White House Office of Management and Budget Deputy Director Beth Cobert said federal agencies recovered more than $22 billion in overpayments in 2013 (AP/Sacramento Bee, 7/10).

Senate Calls for New Focus on Reducing Improper Payments

Meanwhile, a bipartisan Senate Special Committee on Aging report released Wednesday showed that the rate of improper payments in Medicare's fee-for-service program increased from 8.5% in fiscal year 2012 to 10.1% in FY 2013, or $50 billion, Modern Healthcare reports.

The committee released the report for a roundtable discussion on improving payment audits.

According to the report, improper Medicare payments increased despite CMS hiring additional recovery audit contractors to investigate health care providers that might be overbilling the program.

During the discussion, lawmakers pointed to the RAC program's incentive structure -- in which agents receive a percentage of the funds they recover -- as a disincentive to reduce the rate of improper payments. They recommended that CMS move away from a focus on recovering improper payments to concentrating on preventing such payments (Dickson, Modern Healthcare, 7/9). To do so, the committee suggested:

• Placing more focus on providers that have submitted inappropriate claims in the past;
• Tying recovery agent's compensations to their abilities to prevent improper payments; and
• Bolstering the agency's ability to track claims that already have been audited (Al-Faruque, The Hill, 7/9).

The American Hospital Association, which participated in the discussion, suggested that CMS also levy financial penalties on recovery agents when payment denials are overturned on appeal, placing a check on the financial incentives (Modern Healthcare, 7/9).

Committee Chair Bill Nelson (D-Fla.) said, "The bottom line is, despite doing more audits than ever before, Medicare just isn't getting the job done when it comes to preventing payment errors." He added that CMS "must change the way it pays its providers so that the cheats are getting caught and the honest providers are getting paid" (Al-Faruque, The Hill, 7/9).

According to Modern Healthcare, CMS did not participate in the roundtable (Modern Healthcare, 7/9).

Providers Say Millions Tied Up in Appeals

Meanwhile, health care companies said that duplicative Medicare payment audits mean that millions of dollars in potential payments are tied up in appeals, the AP/Miami Herald reports.

According to a letter to federal health officials included in the Senate report, the Medical Equipment Suppliers Association said that some providers undergo between 24 and 228 audits in one year.

For example, Ascension Health had 66,613 claims audited, half of which were alleged improper payments. According to the company, nearly $200 million in payments were withheld while it appealed the recoveries. The report noted that less than one-quarter of the appeals were upheld (Kennedy, AP/Miami Herald, 7/9).