GAO reports $48B in Medicare fraud in 2010

Roughly $48 billion of Medicare's $507 billion budget in 2010 went to fraudulent or improper payments, according to a report from the Government Accountability Office.

"Medicare remains on a path that is fiscally unsustainable over the long term," the report noted. "This fiscal pressure heightens (the Centers for Medicare & Medicaid Services') challenges to reform and refine Medicare's payment methods to achieve efficiency and savings and to improve its management, program integrity and oversight of patient care and safety."

The report, prepared for a House Energy and Commerce Oversight Subcommittee hearing on Medicare and Medicaid fraud, found that CMS has made strides to improve efficiencies, notably in its competitive bidding program for durable medical equipment and the transfer of fee-for-service claims administration to new Medicare Administration Contractors. But the GAO noted that a "greater concern is that GAO found pervasive internal control deficiencies in CMS' management of contracts that increased the risk of improper payments."

The report comes as President Barack Obama's administration has stepped up its fraud-fighting efforts over the past few years. In January, the Department of Health & Human Services released a report indicating  increased fraud prevention and enforcement recovered more than $4 billion in 2010, the highest amount recovered in a single year.

[See also: Attorney General announces 'largest Medicare fraud takedown in history'; Anti-fraud work yields $4B in savings for CMS]

"Our aggressive pursuit of healthcare fraud has resulted in the largest recovery of taxpayer dollars in the history of the Justice Department," said U.S. Associate Attorney General Thomas J. Perrelli. "These actions are in large part because of the great work being led by the Health Care Fraud Prevention and Enforcement Action Team. Through this initiative, we are working in partnership with government, law enforcement and industry leaders and the public to protect taxpayer dollars, control healthcare costs and ensure the strength and integrity of our most essential healthcare programs."

The Health Care Fraud Prevention & Enforcement Action Team (HEAT) was created in 2009 and is a joint effort of HHS and the Department of Justice.

Last year's record recovery of tax dollars is a small portion of the total improper payments made last year. Greater savings could be realized if CMS improved its internal controls both for managing contracts and conducting payment audits, the GAO report noted.

In testimony before the subcommittee, Kathleen King, the GAO's healthcare director, cited potential savings in how CMS pays for home oxygen for Medicare beneficiaries. In its 2011 report, the GAO noted that CMS could have achieved savings of about $670 million of the estimated $2.15 billion it spent on home oxygen in 2009 if it had used the methodologies and payment rates of the lowest-paying private insurer.

"Our examination of payment rates for home oxygen also found that although these rates have been reduced or limited several times, further savings are possible," said King.

Specific actions for CMS, recommended by GAO to refine payment methods and to encourage efficient provision of services include:

• Ensuring the implementation of an effective physician profiling system;
• Managing payments for services, such as imaging;
• Systematically applying payment changes to reflect efficiencies achieved by providers when services are commonly furnished together; and
• Refining the geographic adjustment of physician payments by revising the physician payment localities using an approach uniformly applied to all states and based on current data.

"Further action is needed by CMS to establish policies to improve contract oversight, better target review of claims for services with high rates of improper billing and improve the monitoring of nursing homes with serious care problems," said King.