Waste and fraud still plague Medicare, but oversight is improving, officials say

Medicare remains vulnerable to waste and fraud, but a pilot program has helped reduce errors, according to witnesses testifying on Capitol Hill on Thursday.

The Centers for Medicare and Medicaid Services operated a three-year demonstration program that identified more than $1 billion in erroneous payments between 2005 and 2008, according to a report from the Office of the Inspector General at the Health and Human Services Department. That program, which since has been expanded to more states, employed recovery audit contractors; a provision in the 2010 health care reform law that mandates the expansion of that initiative by the end of the year to include the Medical Advantage program, Medicare Prescription Drug program and Medicaid.

The recovery audit contractors' program also has identified 58 areas where the Medicare payment system is most vulnerable to improper spending, and 23 of them already have been addressed, according to Kathleen King, director of health care at the Government Accountability Office. The use of invalid prescriber identifiers on claims for prescription drugs remains a significant source of improper spending, Robert Vito, HHS regional inspector general for evaluations and inspections, said on Thursday. According to Vito, Medicare paid $1.2 billion in claims in 2007 that supplied improper prescriber identifiers.

OIG has focused its attention on oversight of specific geographic regions with high rates of invalid claims as well as claims including drugs that are susceptible to abuse.

The Medicare program has been on GAO's high-risk list for two decades for fraudulent claims and wasteful spending. Federal estimates for Medicare payment errors in fiscal 2009 ranged between $36 billion and $60 billion. The Office of Management and Budget reports CMS contractors are charged with handling 4.5 million claims every day.

Deborah Taylor, director and chief of the Office of Financial Management at CMS, said the agency has created a database to address all potential vulnerabilities identified by the recovery audit contractors' program by categorizing and comparing denied claims, according to provider and provider type. Sen. Tom Carper, D-Del., chairman of the federal financial management subcommittee, asked Taylor and King to report back with specific timelines on when the weaknesses would be addressed.

"As a recovering governor, I understand the unique challenges that come along with running a major program," Carper said. "But Congress must ensure that the more than $460 billion we spend through Medicare to address the health care needs of our nation's seniors is spent efficiently and effectively."