Medicare Improper Payments

This report provides information on proposals by the Health Care Financing Administration (HCFA) to measure Medicare improper payments and how these proposals and initiatives will enhance HCFA's ability to comprehensively measure improper Medicare payments and the frequency of kickbacks, false claims, and other inappropriate provider practices. A recent study by the Inspector General at the Department of Health and Human Services concluded that eight percent of the $169.5 billion Medicare fee-for-service claim payments in fiscal year 1999 was paid improperly. Because of the breadth of health care fraud and abuse, HCFA uses various detection methods and techniques, such as contacting beneficiaries and providers and performing medical record reviews, data analyses, and third-party verification procedures. HCFA has begun three projects to measure the extent of Medicare fee-for-service improper payments--two to improve the precision of future improper payment estimates and help develop corrective actions to reduce losses and the other to test the viability of using various of investigative techniques to develop a potential fraud and abuse rate. GAO believes that HCFA's efforts to measure Medicare fee-for-service improper payments can be further enhanced with the use of additional fraud detection techniques and makes several recommendations to that effect.

GAO noted that: (1) since 1990, GAO has designated Medicare as a high-risk program, recognizing that the size of the program, its rapid growth, and its administrative structure continue to present vulnerabilities that challenge HCFA's ability to safeguard against improper payments, including those attributable to fraud and abuse; (2) due to the broad nature of health care fraud and abuse, a variety of detection methods and techniques--such as contacting beneficiaries and providers and performing medical records reviews, data analyses, and third party verification procedures--are being utilized to uncover suspected health care fraud and abuse; (3) efforts to measure the extent of improper payments, and ultimately to stem the flow of Medicare losses, depend upon the use of an effective combination of these techniques; (4) the Office of Inspector General's study to measure the extent of Medicare fee-for-service improper payments was a major undertaking and, as GAO reported, the development and implementation of the methodology it used as the basis for its estimates represent significant steps toward quantifying the magnitude of this problem; (5) it is important to note, however, that this methodology was not intended to and would not detect all potentially fraudulent schemes perpetrated against the Medicare program; (6) HCFA has initiated three projects designed to enhance its ability to measure the extent of Medicare fee-for-service improper payments; (7) two of these projects are designed to improve the precision of future improper payment estimates and help develop corrective actions to reduce losses--however, like the current methodology, they are not specifically designed to identify and measure the extent of improper payments attributable to potential fraud and abuse; (8) the third project, while still in the concept phase, will test the viability of using a variety of investigative techniques to develop a potential fraud and abuse rate; (9) determining the most appropriate combination of improper payment identification techniques to incorporate into measurement efforts requires careful evaluation; and (10) some techniques may be challenging to implement, such as contacting beneficiaries due to difficulties in locating them.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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