Medicare fraud, waste and abuse exposed in report

"If you you think health care is expensive now, wait until it's free." - P.J. O'Rourke

While the rampant fraud, waste and abuse in government health care programs such as Medicare and Medicaid are widely believed, that knowledge did little to halt the passage of the biggest government takeover of health care in U.S. history.

Since 1990, the Government Accountability Office (known then as the Government Accounting Office) has designated Medicare as a high-risk program, in part because the program's size and complexity make it vulnerable to fraud, waste, and abuse.

Fraud represents intentional acts of deception with knowledge that the action or representation could result in an inappropriate gain, while abuse represents actions inconsistent with acceptable business or medical practices. Waste, which includes inaccurate payments for services, also occurs in the Medicare program.

Fraud, waste, and abuse all can lead to improper payments, overpayments and underpayments that should not have been made or that were made in an incorrect amount. In 2009, the Centers for Medicare & Medicaid Services (CMS) -- the agency that administers Medicare -- estimated billions of dollars in improper payments in the Medicare program.

The GAO identified challenges and strategies in five key areas important in preventing fraud, waste, and abuse, and ultimately to reducing improper payments. GAO has made recommendations in these areas and CMS has made progress in some of these areas, and recent legislation may provide the agency with enhanced authority.

However, CMS faces continuing challenges:

1. Strengthening provider enrollment process and standards. Checking the background of providers at the time they apply to become Medicare providers is a crucial step to reduce the risk of enrolling providers intent on defrauding or abusing the program. In particular, GAO has recommended stricter scrutiny of providers identified as particularly vulnerable to improper payments to ensure they are legitimate businesses.

2. Improving pre-payment review of claims. Pre-payment reviews of claims are essential to helping ensure that Medicare pays correctly the first time. GAO has recommended that CMS further enhance its ability to identify improper claims through additional automated pre-payment claim review before they are paid.

3. Focusing post-payment claims review on most vulnerable areas. Post- payment reviews are critical to identifying payment errors and recouping overpayments. GAO has recommended that CMS better target claims for post payment review on the most vulnerable areas.

4. Improving oversight of contractors. Because Medicare is administered by contractors, overseeing their activities to address fraud, waste, and abuse is critical. GAO found that CMS's oversight of prescription drug plan sponsors' compliance programs has been limited. However, partly in response to GAO's recommendation, CMS oversight of these programs is expanding.

5. Developing a robust process for addressing identified vulnerabilities. Having mechanisms in place to resolve vulnerabilities that lead to improper payment is vital to program management, but CMS has not developed a robust process to specifically address these. GAO has recommended that CMS establish an adequate process to ensure prompt resolution of identified improper payment vulnerabilities.