Auditors uncover fraud in federal benefit programs

Recent investigations into health insurance and prescription drug providers for federal employees have uncovered improper charges, illegal kickbacks and other cases of fraud, resulting in the recovery of more than $106 million for the Federal Employees Health Benefits Program.

The Office of Personnel Management inspector general's semiannual report, which was released on the agency's Web site last week, focused on health insurance and prescription drug abuse in FEHBP.

The largest case resulted in a $155 million settlement from Medco Health Solutions, which provides mail order prescriptions and related benefits to federal employees. The company settled a complaint that it paid kickbacks to health plans to gain their business, took money from drug manufacturers to favor their drugs and destroyed prescriptions to avoid penalties for delays in filling them.

Of the settlement amount, $137.5 million directly affected the FEHBP, of which $97 million went to the program's trust fund. The remainder went toward other programs that receive services from Medco, such as Medicare and the Defense Department's TRICARE health insurance program.

"This settlement represents the largest monetary settlement the Office of the Inspector General has generated as a result of a single investigation," IG Patrick McFarland said in a letter to lawmakers.

Medco did not acknowledge any wrongdoing, and in October, OPM promised not to bar the company from future participation.

Additionally, audits of health and life insurance carriers completed between Oct. 1 and March 31 uncovered $37 million owed to FEHBP, some of which has been recovered.

An audit of the Blue Cross Blue Shield plan, which insures nearly 60 percent of the enrolled employees, identified $9.8 million in overcharges to FEHBP. These stemmed from improper claim coordination between Blue Cross and Medicare. "As a result, the FEHBP incorrectly paid these claims when Medicare was the primary insurer," the report said.

The review found that 56 of the 63 Blue Cross sites reviewed by OPM did not properly coordinate claim charges with Medicare. In 86 percent of the cases, Blue Cross charged FEHBP because there was no information in the company's claims system to identify Medicare as the primary payer, auditors found. And even when the Medicare information was added to the system, Blue Cross failed to make retroactive adjustments in patients' prior claims to match the Medicare effective dates, the report said.

Another audit alleged $7.4 million in inappropriate health benefit charges by the MD Individual Practice Association, which provides medical services to members in the Washington, D.C., area. The company and OPM are in negotiations.

A separate audit of the Kaiser Foundation Health Plan, which also provides services to Washington, D.C., area employees, identified $4.7 million in overcharges and lost investment income, which represents the potential interest earned on the amount overcharged. Kaiser agreed with OPM's findings and returned the $4.7 million to FEHBP.