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Audits of Medicare Prescription Drug Plan Sponsors

We found that some stand-alone prescription drug plan (PDP) contracts were never audited during the first 4 years of the Part D program (2006 through 2009). CMS had 125 unique PDP contracts that were active over those years. Of these, 50 contracts covering 1.1 million beneficiaries were never audited in any way. PDP contracts were active for between 1 and 4 years. Of the 68 contracts that were active for all 4 years, 13 (19 percent) were never audited. CMS had no parameters regarding the number of audits it should conduct and did not complete any compliance plan audits during the 4-year period.

We focused on stand-alone PDPs because the majority of beneficiaries enrolled in the Part D program in 2009 were enrolled in them. We focused on the seven types of audits that different offices within CMS stated they planned to use in the first 4 years of the Part D program, with the exception of financial audits. We collected from CMS a list of all audits of PDPs completed for the seven audit types from 2006 through 2009. We also collected information from CMS on the audits that had identified problems. We then selected a sample from the audits that identified problems for a more detailed review.

We also found that 79 percent of the 245 completed audits identified problems. Two-thirds of the problems involved beneficiaries' coverage status or payment issues. We also found that CMS did not always have evidence to show that corrective actions were implemented for two audit types.

Although CMS is not required to conduct the seven types of audits in our report, it developed them to identify problems and correct deficiencies in the Part D program. Auditing is a way to identify problems that might not be detected through other forms of oversight. Therefore, we recommended that CMS establish a comprehensive Part D auditing strategy that ensures that each plan sponsor will be audited in some way within a certain timeframe and ensure that evidence is available to show that corrective actions have been implemented.

CMS partially concurred with the first recommendation, stating that it believes all sponsors should undergo a bid audit, and it plans to complete a bid audit of every PDP parent organization in the program since 2006 by 2013. CMS is not in favor of establishing a comprehensive Part D auditing strategy. It believes a comprehensive oversight strategy is more effective than an auditing strategy and believes that heavy reliance on monitoring to assess performance is the only efficient approach for assessing critical performance areas across all PDP contracts. OIG stands by its first recommendation, to establish a comprehensive Part D auditing strategy, as this is not meant to be a substitute for a comprehensive oversight strategy or a substitute for monitoring. CMS concurred with the second recommendation.