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Management Issue 6:
Ensuring Efficiency and Effectiveness of Medicare and Medicaid Program Integrity Contractors

Why This Is a Challenge

CMS relies on a number of program integrity contractors to identify and respond to fraud, abuse, and improper payments in the Medicare and Medicaid programs. These contractors include Medicare Drug Integrity Contractors (MEDIC), Program Safeguard Contractors (PSC), Zone Program Integrity Contractors (ZPIC), RACs, Review Medicaid Integrity Contractors (MIC), and Audit MICs. OIG work has raised concerns about contractors' performance in protecting Medicare and Medicaid from fraud, waste, and abuse and has identified barriers that may limit their ability to perform successfully.

Questionable Contractor Performance. Recent OIG reports examining early MIC efforts revealed limited success and negative return on investment. Review MICs initially identified over 113,000 providers with potential overpayments of $282 million, but after performing audits, the Audit MICs found actual overpayments to only 25 of these providers, totaling less than $300,000. In FY 2010, CMS paid MICs more than $32 million, but MIC efforts in 2010 yielded less than $14 million in identified overpayments. Similarly, in 2007 and 2008, CMS spent $60 million on the Medicare-Medicaid Data Match program (Medi-Medi Program), administered by the PSCs, but the program recovered or avoided expenditures totaling just under $58 million.

OIG work has also raised concerns about the variability in performance results among integrity contractors, which was not necessarily linked to relative budget size or oversight responsibilities. In addition, OIG found that RACs made few fraud referrals to CMS under a demonstration project, despite having identified more than $1 billion in improper payments.

Inadequate Program Data. The integrity contractors rely heavily on data to conduct program integrity tasks, yet OIG work has found significant limitations in the Medicare and Medicaid data available to contractors. For example, the MSIS is the only national database of Medicaid claims and beneficiary eligibility information. However, OIG has found that MSIS data are not complete, accurate, or timely and do not capture all data elements that can assist in the detection of fraud, waste, and abuse. These factors contributed to MICs' misidentification of potential overpayments and the Medi-Medi Program's limited identification of Medicaid overpayments and potential fraud. Furthermore, ZPICs' and MEDICs' lack of access to Medicare claims data and, in the case of MEDICs, to medical records and prescriptions has hindered or delayed their ability to identify possible fraud and abuse.

CMS Oversight Challenges. OIG has also identified weaknesses in CMS's management and oversight of its integrity contractors. For example, CMS uses contractor-reported workload statistics to oversee performance. However, the data contractors report is not always accurate or uniform, hindering the ability to make meaningful comparisons. In addition, CMS has not always held contractors accountable for the tasks outlined in their contracts.

Progress in Addressing the Challenge

CMS has made some progress toward addressing the above challenges as it works with its contractors to implement the new anti-fraud authorities provided in the ACA and the Small Business Jobs Act of 2010. Additionally, several information technology initiatives aim to improve the quality, availability, and meaningful use of data, including the FPS and the recently launched pilot project to improve Medicaid data, the Transformed MSIS initiative. CMS has also reported actions to improve the Medi-Medi and MIC programs consistent with OIG recommendations, such as assigning more Medicaid audits through the collaborative process, which showed greater success than the traditional process. Further, CMS told OIG that it is realigning Review MICs, enabling it to discontinue three of five Review MIC task orders for options years that were scheduled to be renewed at the end of FY 2012.

In addition, MEDICs now have access to Part D data to conduct analyses and to identify and investigate potential fraud. CMS has also increased the quantitative data it collects on contractors; however, inaccuracies and inconsistencies in reporting persist.

What Needs To Be Done

As its programs continue to expand, CMS must do more to ensure that integrity contractors are fully equipped and are performing at levels that do not waste taxpayer dollars. OIG has offered a number of recommendations to CMS about improving the quality, accuracy, and availability of data, particularly for the Medicaid program. CMS's initiatives offer promise and will require sustained focus and resources at the Federal and State levels to deliver improved results.

CMS should continue to build on its progress in addressing contractor performance and oversight challenges. For example, OIG continues to recommend that CMS pursue authority to allow MEDICS to collect information directly from pharmacies, pharmacy benefit managers, and physicians. CMS should also continue to improve contractor performance data so that they are accurate and consistent and then use the data to more effectively evaluate contractor performance.

Key OIG Resources

Management Issue 7: Grants Management and Administration of Contract Funds

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