Kusserow on Compliance: OIG congressional testimony on Medicare Part D fraud

Representatives from the HHS Office of Inspector General (OIG) testified at a July 14 congressional hearing about vulnerabilities of the Medicare Part D program to fraud and abuse. The program currently has more than 39 million enrollees who obtain their prescription drugs at a cost of over $120 billion a year. In the last three years, the OIG reported that its investigations related to this program resulted in 339 criminal actions, 31 civil actions, and over $720 million in investigative receivables. Serious weaknesses in controls mean that fraud and abuse vulnerabilities still exist. The evidence of this has been reflected in recently released OIG reports on the subjects of Part D integrity and questionable billing, where the agency found:

  • spending for Part D drugs increased from $51.3 billion to $121.1 billion between 2006 and 2014;
  • costs for commonly abused opioids grew from $1.5 billion to $3.9 billion, driven by increases both in the number of beneficiaries receiving these opioids and the average number of prescriptions per beneficiary;
  • 1,432 retail pharmacies had questionable billing practices, which totaled $2.3 billion billed to Part D in 2014;
  • 468 pharmacies billed for commonly abused opioids at an extremely high rate, indicating billing for medically unnecessary drugs, those used inappropriately, or those drugs diverted and resold for profit;
  • 216 pharmacies billed for beneficiaries receiving an unusually high number of commonly abused opioids, suggesting “doctor shopping” to inappropriately obtain drugs;
  • 314 pharmacies billed for a high number of different types of drugs, per beneficiary, indicating billing for drugs that were never provided or were medically unnecessary; and
  • some pharmacies billed, on average, for more than 12 different types of drugs per beneficiary, which is double the national average.

As a result the OIG has been raising concerns about adequacy of oversight and made a number of recommendations to CMS to better safeguard the program and protect beneficiaries. Although, the OIG credited CMS with some progress, it called for CMS, its National Benefit Integrity Medicare Drug Integrity Contractor (MEDIC), and Part D plan sponsors to do more to protect the program. The OIG recommendations center around two themes: (1) leveraging Part D data to identify vulnerabilities; and (2) employing additional tools to enhance the oversight of the Part D program. The OIG called upon CMS to take action on certain unimplemented recommendations. In support of that recommendation, the OIG specifically stated that:

  • CMS needs to require plan sponsors to report the number of instances of potential fraud, waste, and abuse identified, or the actions taken to address these instances. Without this information, it is impossible for CMS to review the effectiveness of plan sponsors’ fraud detection programs.
  • CMS and plan sponsors need to monitor beneficiary utilization for a wider range of drugs susceptible to abuse than it currently does. This includes a recommendation to expand sponsors’ and CMS’s drug utilization review to cover certain non-controlled substances.
  • The MEDIC integrity contractor for Part D, which was found to only use proactive data analysis to initiate a small percentage of investigations and case referrals and to rely on external sources to identify most incidents of potential fraud abuse, should be more thoroughly investigating potential fraud and abuse.
  • CMS must exercise better oversight of both the plan sponsors and the MEDIC to ensure it is reducing the program’s vulnerability to fraud, waste, and abuse.
  • CMS, the MEDIC, and plan sponsors need to strengthen program oversight by employing additional tools, as the current tools are insufficient to meet the needs of the program.
  • Plan sponsors do not have adequate controls to prevent improper payments and CMS has not exercised sufficient oversight of them to prevent improper payments for drugs that are not covered by Part D.
  • CMS needs to provide additional oversight of plan sponsors to ensure effective implementation of compliance programs, one of the primary tools for Part D program integrity.
  • The MEDIC currently does not have administrative authority to recommend recoupment of payments for inappropriate services and CMS needs to establish a mechanism to allow them to do this in cases that have been declined by law enforcement agencies.
  • The law should be changed to more effectively deal with beneficiaries who may be abusing the program or inflicting harm on themselves by overutilizing drugs.
  • Beneficiaries should be restricted to a limited number of pharmacists or prescribers. This program, referred to as “lock-in,” has been successfully used by state Medicaid programs.

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 © 2015 Strategic Management Services, LLC. Published with permission.