Kusserow on Compliance: GAO reported continued fraud vulnerability under the Affordable Care Act

The Government Accountability Office (GAO) issued a report that the Affordable Care Act (ACA) marketplaces remain “vulnerable to fraud,” after the agency successfully applied for coverage for multiple fake people, who hadn’t filed tax returns for 2014 but were still able to get tax credits to help pay their monthly premiums for 2016 coverage. The GAO engaged in testing by using undercover attempts to obtain health-plan coverage from the federal marketplace and selected state marketplaces for 2015. The tests found the federal marketplace and selected state marketplaces approved each of 10 fictitious application for subsidized health plans. All 10 were approved, even though eight of these 10 fictitious applications failed the initial online identity-checking process.

Four applications used Social Security numbers that were never been issued. Other applicants obtained duplicate enrollment or obtained coverage by claiming that their employer did not provide insurance that met minimum essential coverage. Three of GAO’s applications were approved for Medicaid, although GAO provided identity information that would not have matched Social Security. For two applications, the marketplace or state Medicaid agency directed the fictitious applicants to submit supporting documents, and GAO provided fake information that resulted in the applications were approved. A third marketplace did not seek supporting documentation, and the application was approved by phone. CMS, California, Kentucky, and North Dakota, advised the GAO that they are only inspecting for supporting documentation that has obviously been altered; otherwise documentation submitted would not be questioned for authenticity.

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 © 2016 Strategic Management Services, LLC. Published with permission.

If enrolled in Medicaid, end marketplace coverage or lose subsidies, HHS warns

The government has run out of patience with individuals enrolled in both Medicaid and private coverage on the marketplaces paid for through federal subsidies established by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). HHS Secretary Burwell authorized the federal exchange to notify consumers with someone in their household receiving duplicate coverage to immediately end coverage with premium tax credits. The existence of impermissible duplicate coverage was uncovered by a Government Accountability Office (GAO) investigation.

GAO investigation

The GAO investigated of the possibility of obtaining duplicate coverage in states that use the federal marketplace, and found that CMS did not appropriately control the risk of coverage gaps and duplicate coverage for those transitioning between Medicaid and marketplace coverage. The GAO identified two specific issues that materially contributed to the problem. The federal exchange is operated by federal officials, but the Medicaid programs are operated by state. The GAO found a vulnerability involving communications between the two, as records for Medicaid enrollees switching to exchange coverage were not transferred as closely to real time as possible. CMS indicated its belief that states transferred records at least daily, but this was not the case for one of the four states investigated out of the 34 that use the federal exchange. Additionally, CMS did not strive to detect duplicate coverage. Although CMS intended to implement periodic checks by the end of July 2015, it had not established the frequency of the checks or a mechanism for monitoring how effective the checks were.

Duplicate coverage situations

The GAO found that three different scenarios involving duplicate coverage were occurring, and only one was authorized by federal law. When individuals transition from exchange coverage to Medicaid coverage, the effective dates of coverage may overlap. Exchange coverage can only be ended with at least 14 days of advance notice, while Medicaid coverage is effective no later than the date an eligibility change is reported. The term of duplicate coverage might be extended in cases where a Medicaid eligibility determination takes a longer period of time than anticipated. Because this type of duplicate coverage is caused by program design, it is allowable.

Two other instances of duplicate coverage were discovered. In one state, the GAO found that 3,500 individuals were covered by both Medicaid and marketplace insurance in a six month period, and that many individuals failed to end subsidized coverage through the exchange after becoming eligible for Medicaid.  The GAO also found that the reverse was true, as Medicaid enrollees also enrolled in subsidized exchange coverage. CMS received recommendations to strengthen its controls.


The notification letters indicate that CMS followed the GAO’s recommendations to identify those with duplicate coverage. The New York Times reported that the letters boldly warned that someone in the recipient’s household may lose their exchange subsidy. Anyone in the household that is enrolled in either Medicaid or the Children’s Health Insurance Program (CHIP) is instructed to immediately end subsidized coverage. Failure to do so will result in immediate cessation of any financial assistance for premiums, deductibles, and other costs. By taking these actions, the government is attempting to avoid paying its portion of Medicaid coverage, as well as offering tax credits for marketplace coverage.

Kusserow on Compliance: GAO issues report critical of Medicare appeals process

The Backlog Saga Continues

The Government Accountability Office (GAO) conducted a review of the appeals process for Medicare fee-for-service (FFS) claims and issued a report in June 2016 that was highly critical of the Medicare appeals process. The process consists of four administrative levels of review within HHS, and a fifth level in which appeals are reviewed by federal courts. Appeals are generally reviewed by each level sequentially, as appellants may appeal a decision to the next level depending on the prior outcome. Under the administrative process, separate appeals bodies review appeals and issue decisions under time limits established by law, which can vary by level. They have not been meeting those deadlines for years. In fact, they have 700,000 pending appeals that would take years to clear up, even if new appeals were not filed.

The GAO found that CMS and two other components within HHS that are part of the Medicare appeals process have not made available full-use data collected in three appeal data systems to monitor the Medicare appeals process. It also found variations in how appeals bodies record decisions across the three systems, including the use of different categories to track the type of Medicare service at issue in the appeal. Absent more complete and consistent appeals data, the ability to monitor emerging trends in appeals is limited and is inconsistent with federal internal control standards that require agencies to run and control agency operations using relevant, reliable, and timely information. The GAO recommended that HHS take four actions, including improving the completeness and consistency of the data used by HHS to monitor appeals and implementing a more efficient method of handling appeals associated with repetitious claims.

Following the release of this report Nancy Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals (OMHA), and Constance B. Tobias, Chair, Departmental Appeals Board (DAB), reported submitting a Notice of Proposed Rulemaking (NPRM) on changes to the Medicare claims appeal process as part efforts to eliminate the backlog of appeals currently pending at the OMHA and the DAB. The proposed changes designed to reduce the number of pending appeals and streamline the Medicare appeals process. They also sought increases in the budget for FY 2017 to add resources to work on the backlog problem.

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2016 Strategic Management Services, LLC. Published with permission.

DEA has much to do to fully address recent GAO recommendations

Recent testimony before the Senate Judiciary Committee by Diana C. Maurer, Director of Homeland Security and Justice at the Government Accountability Office (GAO), indicated that while the Drug Enforcement Administration (DEA) has taken some steps to address 2015 GAO recommendations, it still has work to do regarding its administration of the controlled substance quota process, efforts to address controlled substance drug shortages, providing information and guidance to DEA registrants, and complying with guidelines for overseeing confidential informants.

The Controlled Substance Act (CSA) requires the DEA to set quotas that limit the amount of certain controlled substances that are available in the United States. The CSA also requires those handling controlled substances to register with the DEA. In addition, the DEA works to disrupt and dismantle major drug trafficking organizations and uses confidential informants to help facilitate its investigative efforts.

On February 2, June 25, and September 15, 2015, the GAO issued reports related to these DEA practices. In those reports, the GAO made 11 recommendations to the DEA. Maurer testified that, to date, the DEA has taken some actions to address these recommendations but has fully implemented only two of them.

Quota process

The GAO made four recommendations regarding the DEA’s administration of the controlled substance quota process: (1) strengthen its internal controls of its Year-End Reporting and Quota Management System (YERS/QMS), (2) establish performance measures related to quotas, (3) monitor and analyze YERS/QMS data, and (4) develop internal policies for processing quota applications and setting quotas.

Maurer testified that the DEA has implemented the first recommendation but has not been fully responsive to the second recommendation. She further testified that the GAO is awaiting further documentation from the DEA regarding the third and fourth recommendations and will update the status of these recommendations at that time.

The GAO also made three recommendations regarding barriers to effective coordination between the DEA and the FDA to prevent future shortages of controlled substances: (1) that the DEA and FDA promptly update the memorandum of understanding (MOU) between the two agencies; (2) that either in the MOU or a separate agreement, the DEA and the FDA specifically outline what information they will share and the time frames for sharing such information in response to a potential or existing drug shortage; and (3) that the DEA expeditiously establish formal policies and procedures to coordinate with the FDA with respect to expediting shortage-related quota applications.

Maurer testified that, in March 2015, the FDA and DEA updated the MOU; however, the second and third recommendations still remain open.

Information to DEA registrants

The GAO reported that the DEA has provided information to its registrants regarding their roles and responsibilities for preventing abuse and diversion through conferences, training, and other initiatives. The GAO also reported that the DEA provided additional resources, such as manuals for specific registrant groups and the DEA’s Know Your Customer guidance for distributors. However, Maurer testified that many registrants are not aware of these resources or they would like additional guidance, information, or communication from the DEA to better understand their roles under the CSA. The GAO recommended three actions to address registrants’ concerns.

First, the GAO recommended the DEA identify and implement means of regular, cost-effective communication with distributor, pharmacy, and practitioner registrants, such as through listservs or web-based training. As of April 2016, the DEA reported that it was in the process of developing web-based training modules for all of its registrant population, and was considering the best way to implement a listserv to disseminate information to its various registrant types. Maurer testified that the GAO plans to continue to monitor the DEA’s efforts in this area, and this recommendation remains open.

Second, to help address the concerns raised by some distributor and pharmacy registrants, the GAO recommended that the DEA solicit input from distributors, or associations representing distributors, and develop additional guidance for distributors regarding their roles and responsibilities for suspicious orders monitoring and reporting. Thirdly, the GAO recommended that the DEA solicit input from pharmacists, or associations representing pharmacists, about updates and additions needed to existing guidance for pharmacists, and revise or issue guidance accordingly. With regards to the second and third recommendations, Maurer testified that some efforts have been make by the DEA, however, the GAO plans to continue monitoring the DEA’s efforts in these areas, and these recommendations remain open.

Confidential informants policy

The GAO reported that the DEA’s confidential informants policy required agents to consider most of the factors identified in the Attorney General’s Guidelines for conducting initial suitability reviews prior to using a person as an informant. The GAO also reported that the DEA’s policy was partially consistent with the Guidelines’ requirements to provide written instructions to an informant regarding the parameters of the authorized, but otherwise illegal, activity and to have the informant sign an acknowledgment of these instructions. Additionally, the GAO found that the DEA’s policy was consistent with the provision for revoking authorization in cases where DEA has reason to believe that an informant is not in compliance with the authorization. However, the GAO found that the DEA’s policy did not address circumstances unrelated to the informant’s conduct in which the DEA may, for legitimate reasons, be unable to comply with precautionary measures necessary for overseeing otherwise illegal activity.

In response, DEA officials told the GAO that they did not authorize informants to participate in otherwise illegal activity without agent supervision, and, therefore, this requirement would not be applicable to the DEA. In response, the GAO pointed out that the DEA’s policy did not explicitly state that direct supervision of an agent is required for all instances of an informant’s participation in otherwise illegal activity. Additionally, the GAO noted that the DEA’s policy did not require the informant to sign a written acknowledgment that the authorization had been suspended or revoked.

As a result, the GAO recommended that the DEA, with assistance and oversight from the Department of Justice (DOJ) Criminal Division, update its policy and corresponding monitoring procedures to explicitly address the Guidelines’ provisions on oversight of informants’ illegal activities. According to Maurer, the DOJ Criminal Division has reviewed a revised version of the DEA’s agents manual and has determined that the revised manual is fully consistent with the Guidelines policy regarding confidential informants. Maurer noted in her testimony that the GAO plans to review the updated DEA policy when finalized to determine if the DEA has fully implemented its recommendation.