GAO: Failure to Curb Improper Payments Puts Medicare at ‘High Risk’

WASHINGTON — Medicare as managed by the Centers for
Medicare and Medicaid Services is on a “fiscally unsustainable”
path, making it a “high-risk” program, a top official with the
General Accountability Office told members of a House subcommittee
last month.

“We have designated Medicare as a high-risk program because its
complexity and susceptibility to improper payments, combined with
its size, have led to serious management challenges,” Kathleen
King, director of health care for the GAO, told members of the
Committee on Energy and Commerce Subcommittee on Oversight and
Investigations March 2.

While CMS has made some inroads in cutting improper payments,
those actions have not been significant enough to stabilize the
program, according to King. “CMS needs a plan with clear measures
and benchmarks for reducing Medicare’s risk for improper payments,
inefficient payment methods and issues in program management and
patient care and safety,” she told the subcommittee members.

King said that Medicare covered 47 million beneficiaries in 2010
and had estimated outlays of $509 billion. CMS has estimated $48
billion in improper payments, which did not include those in its
Part D prescription drug benefit. Those have not yet been
estimated, King said.

“This fiscal pressure heightens the need for CMS to reform and
refine Medicare’s payment methods to achieve efficiency and
savings, and to improve its management, program integrity and
oversight of patient care and safety,” King said.

One of the GAO’s suggestions toward that target: cut oxygen
reimbursement further, which warranted a separate report
released in February.

“Our examination of payment rates for home oxygen also found
that although these rates have been reduced or limited several
times, further savings are possible,” the health care director
said. She repeated the GAO’s findings that if Medicare adopted
payment rates of the lowest-paying private insurer studied in the
report, it could have saved about $670 million of the estimated
$2.15 billion it spent on home oxygen in 2009.

Also, she told the subcommittee, Medicare could save money by
not automatically paying for oxygen refills. 

“We … recommended that CMS remove payment for portable
oxygen refills from payment for stationary equipment, and thus only
pay for refills for the equipment types that require them.”

King noted that CMS had implemented its DMEPOS competitive bidding
program and its transfer of fee-for-service claims workload to
Medicare Administrative Contractors after some delays —
namely, halting the initial Round 1 in 2008 — but said the
GAO still had concerns.

“The GAO found pervasive internal control deficiencies in CMS’
management of contracts that increased the risk of proper
payments,” King said. “While the agency has taken actions to
address some GAO recommendations for improving internal controls,
it has not completely addressed recommendations related to
clarifying the roles and responsibilities for implementing certain
contractor oversight responsibilities, clearing a backlog of
contracts that are overdue for closeout and finishing its
investigation of over $70 million in payments GAO questioned in
2007.”

King lauded CMS for already taking some actions, such as
implementing the Recovery Audit Contractor program to analyze paid
claims and identify overpayments for recoupment. But the agency
also needs to have corrective action processes in place, she
said.

“CMS did not develop an adequate process to address the
vulnerabilities to improper payments identified by the RACs and we
recommended that it do so,” she said, “Without a corrective action
process that uses information on vulnerabilities identified by the
agency, its contractors and others, CMS will not be able to
effectively address its challenges related to improper
payments.”