Inspector General Report Reveals Major Shortcomings in Medicare Oversight

Today, Sens. Tom Carper (D-Del.), Tom Coburn (R-Okla.), Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) responded to a Department of Health and Human Services Office of Inspector General (OIG)  report that raises strong concerns about the effectiveness of anti-waste and fraud efforts for two important parts of Medicare.

The report, “MEDIC Benefit Integrity Activities in Medicare Parts C and D” (OEI-03-11-00310), examined the oversight contractor responsible for identifying and preventing waste and fraud in both Medicare Advantage (Medicare Part C) and the Medicare prescription drug program (Medicare Part D).  According to the report, oversight work by the Medicare Drug Integrity Contractor (or “MEDIC”) has seen very little success in its proactive efforts to identify waste and fraud.  Expenditures for the 33 million enrollees for both programs was $190 billion in 2011. The MEDIC has an annual budget of approximately $14 million. 

Specifically, the OIG report found that only 223 investigations by MEDIC into waste and fraud in the Medicare prescription drug program resulted in referrals to law enforcement.  Worse, the vast majority of those investigations were discovered by “external” means, such as tips from the fraud hotline, rather than “proactive” methods such as research and analysis.  Although they should be a major effort of the MEDIC, only 21 referrals to law enforcement were discovered through these proactive means.  In 2008, the number was 13.  This week’s report also represents the first review of the MEDIC efforts to detect and prevent waste and fraud in Medicare Advantage, and according to the report, the MEDIC was not successful.  Only 19 cases of Medicare Advantage fraud were referred to law enforcement in 2011, with only two developed internally by the MEDIC oversight contractor, as opposed to through external sources.

Furthermore, the OIG report found that specific barriers exist for the MEDIC regarding data availability, access to information, and the recovery of inappropriate payments.  For example, Centers for Medicare and Medicaid Services (CMS) has yet to establish a database that would serve as a central repository of Medicare Advantage data that would allow the MEDIC to identify potential fraud.  Additionally CMS began collecting the required data last year, and is in the process of making it fully accessible for antifraud work.  In its report, the OIG recommends that CMS clarify its policies for MEDIC, improve access to data –particularly for Medicare Advantage– and enhance monthly workload reporting requirements to improve CMS oversight of the MEDIC’s benefit integrity activities.

“Over the past several years, our nation has been engaged in a conversation about our deficit and debt as well as the cost of federal programs,” said Sen. Carper. “Unfortunately, we’ve yet to reach a consensus on a comprehensive plan to extract the country from the serious fiscal challenges it faces. But there’s one thing, however, that I think we can all agree upon: We must stop the fiscal bleeding caused by waste, fraud, and abuse.  During the past few years, I have held hearings on the need to curb waste and fraud in the Medicare prescription drug program, examining the millions of dollars of pain killers and other abused prescription drugs stolen from Medicare each year.  Unfortunately, this report by the inspector general shows that we haven’t made enough progress in safeguarding Medicare by detecting and preventing waste, fraud and abuse.  I personally have a hard time believing that in the multi-billion Medicare Advantage program there were only 19 cases of fraud detected during the course of a year that warranted referring to law enforcement.  Perhaps even more troubling was that most of these apparent fraud investigations were initiated because of tips from outside sources. This lack of progress is deeply disappointing, but not necessarily surprising given that the oversight contractors charged with detecting fraud — and paid a pretty penny by the taxpayers to find it, I might add — lack access to basic data from the program. The bottom line is that we must have stronger measures in place to identify and prevent this abuse of a health care program vital to our nation’s seniors. I urge Medicare officials to quickly implement the Inspector General’s recommendations, and I will continue to work the Administration and my colleagues to ensure that we’re doing all that we can to protect taxpayer dollars and ensure the integrity our Medicare programs.”

“Every dollar wasted through Medicare fraud moves the program another step toward bankruptcy,” said Sen. Coburn. “Unfortunately, the Inspector General’s office has issued another warning that CMS is not doing enough to combat fraud in Medicare Parts C and D.  Despite spending more than $24 million over a two-year period, CMS’ contractor only discovered through their own initiative 21 cases of fraud that they referred to law enforcement.  All of the other cases came in passively from complaints.  Given Medicare Parts C and D’s $190 billion annual expenditures, CMS needs to be much more aggressive about detecting waste, fraud, and abuse.  I look forward to working with my colleagues to ensure CMS gets more value out of its program integrity contactors.”

“Budgets are tight and we can’t afford to lose taxpayer dollars to waste and fraud. Medicare’s efforts to crack down must deliver results. Investigators must be able to access the necessary resources to stop fraud before it starts,” said Sen. Baucus, the chairman of the Senate Finance Committee. 

“This report shows how poorly the federal government is at safeguarding taxpayer dollars,” said Sen. Hatch. “It is simply unacceptable that CMS does not have the tools in place to effectively weed out waste fraud and abuse within Medicare – a program whose fiscal future is already at risk. Implementing the Inspector General’s recommendations would be a strong step forward to better protect the American people’s money and shore up the Medicare program.”

In October of 2011, Senator Carper also chaired a hearing of the Federal Financial Management  Subcommittee that examined the diversion of drugs, including controlled substances such as painkillers, paid for by the Medicare prescription drug program.  During the hearing, the Government accountability Office testified about the millions of dollars in controlled substances diverted from the program through “doctor shopping” and other types of fraud.

A link to the report can be found here: