Deeper Than the Headlines: OIG Medicare Testimony

A few weeks ago, we reported on testimony the OIG provided on Capitol Hill regarding Medicaid overpayments and fraud.

More recently, the OIG has provided more testimony once again. This time, the topic was combating fraud in Medicare. Gloria L. Jarmon, Deputy Inspector General for Audit Services with the OIG provided this testimony to the United States House Committee on Ways and Means on July 17, 2018.

Medicare spending represented more than 15% of all Federal spending in 2017. Annual spending on Medicare’s 59 million beneficiaries is $700 Billion. Even if fraud only represents 1% of payments, that is $7 Billion a year which could be spent on much-needed healthcare.

Medicare and Medicaid accounted for $88.6 billion, or about 98 percent, of the $90.1 billion in improper payments that HHS reported in its fiscal year (FY) 2017 Agency Financial Report. Traditional Medicare fee-for-service accounted for $36.2 billion, or about 40 percent, of the improper payments that HHS reported. As a percentage of total Medicare fee-for-service payments, about 9.5 percent was improper. HHS attributed about 66 percent of Medicare fee-for-service improper payments to errors associated with insufficient or no documentation. For these claims, the medical records do not support that the billed services were provided, were provided at the level billed, or were medically necessary. Medical necessity errors accounted for about 18 percent of the errors. Medical necessity errors occur when the billed services were not reasonable and necessary as required by Medicare coverage and payment policies. Although improper payments may occur in all types of health care, home health, skilled nursing facility (SNF), and inpatient rehabilitation facility (IRF) are areas of concern, representing 33 percent of the overall estimated improper payment rate for Medicare fee-for-service in FY 2017.

Ms. Jarmon testified that “The schemes to steal money from Medicare take many forms. They can be as simple as billing for services not provided or as complex as identity theft, kickbacks, and money laundering. The perpetrators of fraud schemes range from highly respected physicians to individuals with no prior experience in the healthcare industry and organized criminal enterprises. Regardless, they are all motivated by greed and often put profit before patients’ health and safety, creating potentially dangerous patient care environments.”

One of the tools the OIG uses to combat fraud is advanced data analytics. They use data analytics to analyze millions of claims and billions of data points. At the macro level, OIG analyzes data patterns to assess fraud and other types of risk across Medicare services, provider types, and geographic locations to prioritize their work and more effectively deploy their resources. At the micro level, OIG uses data analytics, including near real-time data, to identify potential fraud suspects for more in-depth analysis and to efficiently target investigations.

OIG also feels that integrating risk management practices improves decision making in governance, strategy, objective setting, and day-to-day operations. OIG uses risk assessments to develop and prioritize their oversight work to maximize the positive impact for HHS beneficiaries and taxpayers. The risk factors related to fraud are based on the Government Accountability Office’s “A Framework for Managing Fraud Risks in Federal Programs” and the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO’s) Fraud Risk Management Guide.

OIG also considers other areas based on COSO’s updated Enterprise Risk Management—Integrated Framework, including:

• governance and culture
• strategy and objective setting
• performance
• review and revision of practices to enhance entity performance
• information, communication, and reporting.

To assess the severity of identified risks, OIG generally evaluates the likelihood of a risk occurring and the potential impact or result of the risk. For example, rapid growth in program authority or spending may signal a greater likelihood of fraud, waste, or abuse. The number of beneficiaries affected by the rapid growth may be an indicator of impact. Risks may be categorized in a variety of ways.

For example, the tool OIG developed to manage reported recommendations uses strategic, financial, informational, operational, and compliance risks to assist in evaluating the potential impact. An audit ranked as high risk may be the target for a follow-up audit to ensure management has taken corrective action.

An analysis of the high-risk recommendations for an HHS agency or program may lead the OIG to new audit areas. To focus the Department’s attention on the most pressing issues, each year OIG identifies the top management and performance challenges facing the Department. These challenges can affect one or many HHS programs and cover a range of critical HHS responsibilities that include delivering quality services and benefits, exercising sound fiscal management, safeguarding public health and safety, and enhancing cybersecurity. Ensuring program integrity in Medicare remains a top management challenge for HHS.

In conclusion, Ms. Jarmon said the OIG will continue to develop and use cutting-edge tools and technology to provide Medicare oversight that prevents and detects fraud, waste, and abuse, and take appropriate action when they occur. Specifically, OIG will continue to perform audits and evaluations aimed at recommending improvements to the Medicare Program and reducing improper payments. By leveraging advanced data analytic techniques and using risk assessments in their work planning, OIG will detect potential vulnerabilities and fraud early and better target their resources to those areas and individuals most in need of oversight. Finally, OIG will continue to focus on the principle of enforcement, holding accountable those who commit fraud and building on successes such as the takedown that occurred in late June.