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U.S. Department of Health and Human Services
May 2, 2001 Contact: HHS Press Office 202-690-6343

Reducing Payment Errors and Stopping Fraud in Medicare

Overview

The Department of Health and Human Services (HHS) plays a critical role in ensuring that beneficiaries and taxpayers get their money's worth from the Medicare program. Each year Medicare spends more than $220 billion on health care benefits for nearly 40 million senior citizens and other Americans with disabilities. As steward of the Medicare program, the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) (CMS) is responsible for ensuring Medicare pays correctly for covered services. CMS implements the coverage and reimbursement policies that Congress establishes in the law.

To achieve this goal, HHS has expanded efforts to help doctors and health care providers understand and follow Medicare law and regulations. CMS also is working to simplify requirements and modernize its accounting systems to further reduce payment errors. These efforts are showing significant results. Medicare's estimated error rate has fallen by more than half, from 14 percent in fiscal year 1996 to 6.8 percent in fiscal year 2000, according to annual independent reviews conducted by the HHS Office of Inspector General (OIG). The error rate measures payments made by Medicare which are not properly supported by health care providers' documentation or which otherwise do not meet Medicare reimbursement requirements.

In cases where evidence may suggest fraudulent billing practices, the OIG works closely with other law enforcement agencies and CMS to investigate and enforce the laws in order to protect beneficiaries and taxpayers. Health care providers are not subject to civil or criminal penalties for innocent errors, as the laws only cover offenses involving actual knowledge, reckless disregard or deliberate ignorance of the falsity of claims. As a result of law enforcement activities, the federal government recovered $1.2 billion in fines, settlements and judgements during fiscal year 2000.

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Background

In 1996, Congress enacted the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which created stable funding to protect Medicare's program integrity. The law dedicated funding for HHS and the Department of Justice to support efforts to reduce payment errors and to combat fraud and abuse in the Medicare program. The law authorized $680 million to CMS for support of its Medicare Integrity Program activities in fiscal year 2001, including efforts to prevent unnecessary payments and to educate providers. The law also authorized $130 million to the OIG to investigate and prevent Medicare and Medicaid fraud and abuse in coordination with the Department of Justice. HHS' strategy to reduce Medicare payment errors and curb fraud includes efforts to modernize Medicare's management and financial controls, to simplify Medicare requirements to make unintentional errors less likely, to help doctors and health care providers understand Medicare's coverage and billing requirements, and to aggressively pursue evidence of actual fraud.

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Modernizing Medicare's Financial System

HHS' efforts to improve Medicare's financial controls and management systems have helped reduce Medicare's estimated payment error rate in half, from 14 percent in fiscal year 1996 to 6.8 percent in fiscal year 2000. Although Medicare pays virtually all claims correctly based on the information submitted, payments are considered "improper" if they lack sufficient documentation, if the service provided is found to have been unnecessary, or if payment is coded improperly by a physician or other health care providers. Medicare's "improper payment" estimate is not a measure of fraud, though it may include fraud. Ongoing efforts to further reduce errors include:

Strengthening oversight of private contractors
By law, Medicare must rely on private insurance companies to process and pay Medicare claims. In 1999, CMS created national review teams to evaluate contractors' fraud and abuse identification efforts and other key functions, using standardized reporting and evaluation protocols. These teams cut across regions and use their specific expertise to assure more effective evaluations of contractor performance. CMS continues to develop additional defined, measurable standards to support consistent reviews of specific areas of contractor performance.

Upgrading Medicare's accounting systems
Medicare's claims-processing contractors do not currently use a uniform financial management system, increasing the risk of administrative and operational errors and misstatements. HHS' proposed fiscal year 2002 budget includes $53 million to continue to develop state-of-the-art accounting systems for Medicare. The funding would help to develop both an Integrated General Ledger Accounting System for CMS to replace the fragmented, outdated systems now in use by CMS's claims-processing contractors, and a new Financial Accounting and Control System to improve internal financial management controls.

Targeting program vulnerabilities
Since 1999, CMS has used special contractors with program integrity experience to target problem areas, such as reviewing claims for therapy services and developing data analysis centers to identify and stop payment errors and possible fraud. These contractors give CMS the flexibility to meet emerging challenges. Expanded activities planned for 2001 include assessing the accuracy of information used to establish nursing home payments and conducting nationwide statistical analysis that identify program vulnerabilities.

Developing contractor-specific error rates
In 2000, CMS began developing error rates for each of the private insurance companies that pay Medicare claims. Over time, these error rates will guide error-prevention efforts, such as education and program integrity efforts, at each contractor in more detail than Medicare's overall report can.

National coordination-of-benefits contractor
In 1999, CMS hired a national contractor to streamline efforts to ensure that Medicare does not pay claims that are the responsibility of private insurance companies. The contract uses private-sector expertise to build on the roughly $3 billion Medicare saves each year by ensuring that private insurers pay their share of beneficiaries' health care bills.

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Clarifying Medicare Requirements

Clarifying and streamlining Medicare rules represents another significant way to further reduce Medicare payment errors. HHS is committed to taking steps to make Medicare more understandable and user-friendly to help physicians and other providers avoid unintended errors. These efforts include:

The Physicians' Regulatory Issues Team (PRIT)
In 1998, CMS created the PRIT to improve the agency's responsiveness to the daily concerns of practicing physicians as the agency reviews and creates Medicare requirements. The team, which includes physicians working throughout CMS, seeks to make Medicare simpler and more supportive of the doctor-patient relationship. Ongoing PRIT initiatives include consulting physicians about proposed program changes and researching physician concerns to find ways to simplify or eliminate unnecessary requirements.

The Practicing Physicians Advisory Council (PPAC)
The council, established by Congress in 1990, advises CMS on proposed changes in Medicare regulations and manual instructions related to physician services. A CMS physician leads the PPAC, and all 15 members are practicing physicians who bill Medicare and represent a wide variety of specialties and both urban and rural areas. More information about PPAC is available at http://www.hcfa.gov/medicare/ppacpage.htm.

Simplifying evaluation and management guidelines
CMS continues to seek and obtain broad input from practicing physicians on proposals to simplify documentation guidelines for physician office visits under Medicare. CMS continues to refine proposed new guidelines and is preparing to pilot test them in 2001. The goal is to develop guidelines that intuitively make sense to physicians while ensuring accurate payment for their services.

Emphasizing appropriate review
In 2000, CMS issued clear, unambiguous instructions to Medicare's claims-processing contractors about the appropriate approach to reviewing Medicare claims. Contractors are to use medical review primarily as an education tool for doctors and health care providers. When a doctor or provider is placed on medical review, contractors must tell the providers why they were selected, how to prevent the error in the future, and what they need to do to get off review.

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Educating Doctors and Providers

In order to reduce the chances of payment errors, HHS conducts extensive educational and outreach activities in order to assist doctors and other health care providers properly file Medicare claims. These efforts include:

The Medicare Learning Network
CMS has free information, educational courses, and other services available at the Medicare Learning Network at www.hcfa.gov/medlearn. The network provides timely, accurate and relevant information about Medicare coverage and payment policies. The online network includes computer-based training courses, relevant e-mail updates and satellite broadcasts to share information on important Medicare topics and issues.

Promoting voluntary compliance
With extensive input from health care businesses, the OIG has developed a series of voluntary compliance guidelines for hospitals, medical equipment suppliers, clinical laboratories, home health agencies, third-party billers, Medicare+Choice organizations, and other providers. These guidelines identify reasonable steps to take to improve adherence to Medicare and Medicaid laws, regulations and program directives.

Establishing toll-free information lines
As part of its increased commitment to customer service, in 2000 CMS required Medicare claims-processing contractors to establish toll-free lines for doctors and other health care providers. Each Medicare contractor offers the lines to answer billing and claims questions from physicians, hospitals, home health agencies, and other providers. The telephone numbers are listed at http://www.hcfa.gov/medlearn/tollfree.htm. Each contractor also maintains an Internet site with important Medicare information for doctors and other providers.

Improving customer service
CMS has expanded its efforts to assess and improve the customer service provided by the claims-processing contractors to ensure that they provide accurate, relevant information about Medicare coverage and billing to physicians and health care providers. CMS is now evaluating contractors' customer service efforts related to program integrity activities.

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Stopping Fraudulent Activities

The HIPAA legislation enacted in 1996 established the Health Care Fraud and Abuse Control Account, which dedicated money to help finance expanded activities to control Medicare and Medicaid fraud and abuse. HHS and the Department of Justice share these resources, which are used to coordinate federal, state and local health care law enforcement programs, conduct investigations, provide guidance to the health care industry, and support other anti-fraud efforts. In fiscal year 2001, the account totaled $182 million, including $130 million for OIG activities. This funding has helped to bolster HHS efforts to attack fraud and abuse in the Medicare and Medicaid programs.

Expanded OIG presence
HIPAA's guaranteed funding has enabled the OIG to expand its operations nationally by placing personnel in a total of 45 states, up from 26 prior to HIPAA's enactment. This expanded presence makes it easier for the OIG to carry out investigations and enforcement efforts.

Prosecutions and recoveries
During fiscal year 2000, the Department of Justice and the OIG conducted 414 criminal prosecutions involving health care fraud and recovered $1.2 billion in fines, judgements and settlements. In the four years since HIPAA's enactment, the federal government conducted 1,291 criminal prosecutions and recovered a total of $3.4 billion in fines, judgements and settlements.

Exclusions
Individuals and businesses who are convicted of Medicare fraud or patient abuse, or who engage in other specific activities, may be ineligible to receive payments from Medicare, Medicaid and other federal health care programs. During fiscal year 2000, the OIG excluded a total of 3,350 individuals and businesses. A searchable list of currently excluded entities is available at http://oig.hhs.gov.

Anti-fraud hotline
The OIG maintains an anti-fraud hotline to report potential fraud and abuse in the Medicare and Medicaid programs. The hotline, 1-800-HHS-TIPS (1-800-447-8477), provides assistance to callers in English or Spanish. Tips involving potential errors in beneficiaries' Medicare statements are generally referred to the claims-processing contractors for further review, while suspected fraud is referred to appropriate law enforcement agencies for investigation. The hotline received more than 500,000 calls last year and has fielded more than 1.5 million calls since its creation in 1995.

Senior Medicare Patrol grantees
The HHS Administration on Aging (AoA) provides grants to 48 local organizations to help older Americans be better health care consumers and to help identify and prevent fraudulent health care practices. These Senior Medicare Patrol projects teach volunteer retired professionals, such as doctors, nurses, accountants, investigators, law enforcement personnel, attorneys and teachers, to help Medicare and Medicaid beneficiaries to become better health care consumers. Since 1997, these projects and other AoA grants have trained more than 25,000 volunteers, conducted more than 60,000 community education events and counseled more than 1 million beneficiaries.

Note: All HHS press releases, fact sheets and and other press materials are available at http://www.hhs.gov/news.

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		Senior Medicare Patrols Fact Sheet

		HHS Programs and Initiatives for an Aging America

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