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Audit (A-17-12-52000)

03-14-2012
U.S. Department of Health and Human Services Did Not Fully Comply With Federal Requirements for Reporting Improper Payments

Executive Summary

OIG is required to review and report on the Department's annual Agency Financial Report (AFR) and Other Accompanying Information to determine compliance with the Improper Payments Information Act of 2002 (IPIA) as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA). OIG must review the AFR of the most recent fiscal year (FY) to determine whether the agency conducted a program-specific risk assessment to identify each program or activity that is susceptible to significant improper payments and reported specific information on those programs in its AFR, including whether the rate of improper payments was less than 10 percent. OIG must also evaluate the accuracy and completeness of agency reporting and evaluate agency performance in reducing and recapturing improper payments.

Nine programs were deemed by the Office of Management and Budget to be susceptible to making significant improper payments. For five programs (Medicare Fee-for-Service, Medicare Prescription Drug Benefit, Medicaid, Foster Care, and Head Start), the Department complied with the IPIA as amended by IPERA. For four programs (Medicare Advantage, Children's Health Insurance Program, Temporary Assistance for Needy Families, and Child Care Development Fund), the Department did not meet one or more requirements. For two of the four programs (Children's Health Insurance Program and Temporary Assistance for Needy Families), the Department did not report improper payment estimates, and thus could not meet other requirements. For the other two programs (Medicare Advantage and Child Care Development Fund), the Department reported improper payment rates that were greater than 10 percent.

Regarding the accuracy and completeness of Department reporting, for seven programs (Medicare Fee-for-Service, Medicare Prescription Drug Benefit, Medicaid, Foster Care, Head Start, Medicare Advantage, and Child Care Development Fund), we did not identify any inaccuracies or gaps in most of the information reported by the Department. However, for two programs (Children's Health Insurance Program and Temporary Assistance for Needy Families), the information reported was inconsistent or incomplete. In addition, we determined that the Department could improve the accuracy of its improper payment estimate for the Medicare Fee-for-Service program.

With regard to the Department's performance in reducing and recapturing improper payments, the Department reported reductions in rates for five of the seven programs (Medicare Fee-for-Service, Medicaid, Head Start, Medicare Advantage, and Child Care Development Fund) for which it reported improper payment rates and developed corrective action plans for all seven programs that, if implemented as designed, could be effective in further reducing improper payments.

We recommended that the Department improve its compliance with the IPIA as amended. Specifically, the Department should (1) address payment errors in the Medicare Advantage and Child Care Development Fund programs and reduce their improper payment error rates below 10 percent; (2) develop an improper payment estimate for the Temporary Assistance for Needy Families program and, if necessary, seek statutory authority to require State participation in such a measurement; (3) produce a Children's Health Insurance Program error rate for FY 2012; and (4) determine the feasibility of developing an estimate to adjust the Medicare Fee-for-Service Recovery Audit rate similar to the estimate used to adjust the Fee-for-Service improper payment rate. We also recommended that the Department maintain sufficient documentation to support the amounts reported in the AFR related to recapturing improper payments, which we were unable to evaluate.

In its comments on our draft report, the Department described the actions it was taking to address the first three recommendations. In response to our fourth recommendation, the Department pointed out that it did not believe an adjustment estimate was applicable because, unlike the improper payment estimate, the recovery audit rate is based on actual amounts identified and recovered. The Department did not comment on the recommendation to maintain sufficient supporting documentation. We recognize that developing an appeals adjustment estimate for the recovery audit rate may not be the only solution for recognizing the impact of successful appeals. Nonetheless, it is important that the Department inform financial statement users about the potential impact of appeals on the recovery audit rate, particularly if such appeals have a substantial impact on the rate.

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