Kusserow’s Corner: CMS Improperly Paid Millions of Dollars for Prescription Drugs Provided to Prisoners

The HHS Office of Inspector General (OIG) issued an audit (A-07-12-06035) to CMS, reporting that CMS inappropriately accepted prescription drug event (PDE) records submitted by Part D sponsors for prescription drugs provided to incarcerated beneficiaries and used those records to make final payment determinations. The report found that CMS accepted PDE records submitted by sponsors for prescription drugs provided to approximately half of incarcerated beneficiaries. The OIG was unable to verify the remaining half as being incarcerated on the dates in the CMS database. On the basis of its sample results, the OIG estimated the total gross drug costs were about $11.7 million for period (2006-2010) covered in the audit. The OIG explained that an individual is eligible for Medicare Part D benefits if he or she is entitled to Medicare benefits under Part A or enrolled in Part B and lives in the service area of a Part D plan. Federal regulations specify that facilities in which individuals are incarcerated are not to be regarded as being within service areas for purposes of Part D coverage. The OIG noted that during the period of the audit, the final PDE records to CMS with gross drug costs totaled $256 billion.

The OIG found that CMS had inadequate internal controls during the period of the review; and did not provide sufficient and timely information to sponsors to permit them to readily and accurately verify a beneficiary’s incarceration status and dates of incarceration. It recommended that CMS:

  1. Resolve improper Part D payments made for prescription drugs provided to incarcerated beneficiaries;
  2. Strengthen internal controls to ensure that Medicare does not pay for prescription drugs for incarcerated beneficiaries; and
  3. Identify and resolve improper payments found by the OIG auditors for prescription drugs provided to incarcerated beneficiaries, by reopening and revising final payment determination for all periods before implementation of the enhanced policies and procedures that would contribute to the strengthened internal controls.

CMS concurred with the first two recommendations but did not concur with the third recommendation. The OIG acknowledged that CMS is developing and implementing policies that would address enrollment of incarcerated beneficiaries. It agreed with the CMS approach would address the problems identified.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.