CMS Brings in Even Bigger Dogs to Fight Fraud in 2012

President Obama in 2010 announced three significant goals for cutting improper payments by 2012: (1) reducing overall payment errors by $50 billion; (2) cutting the Medicare fee-for-service error rate in half; and (3) recovering $2 billion in improper payments.

 CMS has announced the launch of several demonstration projects for January 2012 that it expects to significantly help to save money with Medicare and Medicaid by targeting some of the common factors leading to improper payments.

The Recovery Audit Prepayment Review Demonstration is a three year demonstration that will expand prepayment review of Medicare claims. It will allow Medicare Recovery Auditors to conduct prepayment claim reviews which will assist in lowering the improper payment rate and will identify potential fraud and abuse, as opposed to the traditional “pay and chase” method. The demonstration will run from January 1, 2012 through December 31, 2014 and be implemented in 11 states. States were chosen based on their high level of fraudulent claims and providers (FL, CA, MI, TX, NY, LA, IL) and based on having high claims volumes for short inpatient hospital says (PA, OH, NC, MO).

Another three year demonstration will help ensure that Medicare only pays for power mobility devices (PMD) that are medically necessary under existing coverage guidelines, limiting fraud, waste and abuse. The Prior Authorization for Certain Medical Equipment Demonstration will be conducted in two phases, in seven states that have high rates of Medicare fraud (CA, TX, FL, MI, IL, NC, and NY). During the first three to nine months, Medicare Administrative Contractors (MACs) will conduct prepayment reviews on certain medical equipment claims. And for the remainder of the demonstration, MACs will implement prior authorization, a tool utilized by private-sector health care payers to prevent improper payments and deter the fraudulent provision of items or services. This plan does not actually require any extra documentation, merely that the documentation be submitted earlier in the process. According to CMS, this prepayment review and prior authorization combined will affect approximately 325,000 PMD claims over the course of the three-year demonstration.

 CMS’ Part A to Part B Rebilling Demonstration will allow participating providers to receive 90 percent of the Part B payment for Part A inpatient short stay claims that are denied on the basis that the inpatient admission was not reasonable and necessary. According to CMS, the Rebilling demonstration should reduce the need for a claims appeals process, and allows CMS to compensate providers for providing needed care to Medicare patients. CMS believes it will also effectively lower the improper payment rate, as payments that would be allowable under Part B if the patient was originally treated as an outpatient rather than admitted as an inpatient will no longer be considered in error.

CMS is also announcing ways they have decided to build onto project started in 2011, such as focusing more intently on payment rates for Medicare and Medicaid. While improper payment rates are not necessarily an indicator of fraud in Medicare, Medicaid or CHIP, the information provides a more complete assessment of factors leading to error rates and new ways to help prevent them.

 The 2011 Medicaid improper payment rate is 8.1 percent. The weighted national error components rates are as follows:  (1) Medicaid Fee-for-Service was 2.7 percent; (2) Medicaid managed care was 0.3 percent; and (3) Medicaid eligibility was 6.1 percent. These figures reflect a three-year weighted average of the 2009, 2010, and 2011 rates that were 8.7 percent, 9.0 percent and 6.7 percent respectively.

For the first time, beginning in 2012, a baseline composite improper payment rate for the Medicare Part D prescription drug program will be reported. Based on payment year 2009, the improper payment rate is 3.2 percent, or $1.7 billion. The Part D payment improper payment rate combines five component payment error measures:

  • (1) Medicare Advantage prescription drug payment system error;
  • (2) payment error related to low income subsidy status;
  • (3) payment error related to incorrect Medicaid status;
  • (4) payment error related to prescription drug event data validation; and
  • (5) payment error related to direct and indirect remuneration.

Four of the five measures were reported as individual component estimates in prior fiscal years. The fifth measure is being reported for the first time this year. 

For fiscal year (FY) 2011, CMS is reporting a Medicare Advantage Part C composite improper payment rate estimate of 11 percent, based on CY 2009 payments. This rate represents a three percentage point reduction from the FY 2010 Part C composite improper payment rate of 14.1 percent. CMS states that this improvement can be attributed to the Administration’s emphasis on contract-level risk adjustment data validation audits designed to recover overpayments to Part C plans.

 The improper payment rate for the Children’s Health Insurance Program (CHIP) will not be published until 2012. CMS was just allowed to begin these improper payments in 2011.

These demonstration projects and data reviews certainly underscore the Obama administration’s strength of focus on meeting it’s goal of curbing improper payments. And will the next three years be enough to reveal significant cost savings achievements? Time will tell.