2014 Top Management & Performance Challenges: OIG Annual Report

The Office of Inspector General (OIG) issued its annual summary of the most significant management and performance challenges facing the Department of Health and Human Services (HHS). This report, referred to as Top Management Challenges (TMC), is mandated by the Reports Consolidation Act of 2000, Public Law 106-531. It is the mechanism by which the OIG meets its obligation to not only identify the Department’s management challenges but also assess the Department’s progress in addressing each challenge. This year’s report includes the following areas:

1. Implementing, Operating, and Overseeing the Health Insurance Marketplaces  (Marketplaces), also known as Health Insurance Exchanges, is critical for the Affordable Care Act. In 2014, CMS’s operation of Marketplace functions on behalf of 36 states created significant challenges that include: ensuring accurate eligibility determinations; processing enrollments, re-enrollments, and qualifying life change events; and communicating timely and accurate information to health insurance issuers (issuers) and consumers. CMS must also facilitate Medicaid enrollment between and among all internal and external parties with the Internal Revenue Service (IRS). The OIG cites progress, but notes additional work is needed.

2. Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid. CMS provides prescription drug coverage for 37.4 million Medicare and 59.4 million Medicaid beneficiaries with a combined prescription drug expenditures of $93 billion. The OIG notes questionable utilization and billing patterns for HIV drugs, drug diversion and abuse of controlled and non-controlled substances as a rapidly growing trend. Many cases involve pharmacies billing federal programs for expensive brand-name medications that were never dispensed.

3. Protecting an Expanding Medicaid Program from Fraud, Waste, and Abuse. Enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) increased by 8.7 million people under the Affordable Care Act, increasing the urgency to find ways to control inappropriate spending. However, the OIG finds existing national Medicaid data incomplete, inaccurate, or untimely and that it will need additional data to conduct national Medicaid program integrity activities. There is also a challenge in identifying and recovering improper payments, with the 2013 rate estimated at 5.8%. Furthermore, with almost three quarters of Medicaid beneficiaries enrolled in managed care, it is a challenge to ensure program integrity.

4. Fighting Waste and Fraud and Promoting Value in Medicare Part A and B. It is estimated that 30 percent of U.S. health spending (public and private) or roughly $750 billion is wasted. The OIG calls for additional focused attention to reduce improper payments through using contractors; better prevention of and responding to fraud; fostering more economical payment policies; and transitioning from volume to value-based payments.

5. Ensuring Quality in Nursing Home, Hospice, and Home-and Community-Based Care. HHS faces challenges in ensuring that beneficiaries who require nursing home, hospice, or home- and community-based services (HCBS) receive high quality care. To correct this challenge, they cite enforcement actions with the DOJ and others against those that render substandard care. The OIG also cited new legislation to assist in this effort.

6. The Meaningful and Secure Exchange and Use of Electronic Health Information. The increased reliance upon health information technology (health IT) as well as the electronic exchange and use of health information has created challenges in protecting health information. HITECH requires adopting, implementing, upgrading, or demonstrating meaningful use of EHRs. Furthermore, it established a variety of grant programs to encourage widespread adoption of EHRs and the reporting of unsecured protected health information breaches. The OIG cited a number of challenges that have also arisen from these new requirements.

7. Effectively Operating Public Health and Human services Programs to Bet Serve Program Beneficiaries. HHS funds and operates public health and human services programs that promote health, economic, and social well-being. Key challenges include: (1) ensuring effective preparedness and responsiveness to current and future public health emergencies; (2) protecting the health and safety of America’s vulnerable populations; and (3) ensuring access and delivery of quality services to ensure beneficiary needs are met.

8. Ensuring Effective Financial and Administrative Management. The huge number of HHS programs creates a major stewardship obligation. The agency is supported by a financial management and administrative infrastructure that employs appropriate internal controls that minimize risks to the programs and safeguard resources. Financial statement audits are crucial to this effort. A major focus of the audit effort must be on improper payments. Improper payments cost federal programs an estimated $65 billion overall with $50 billion from the Medicare program alone.

9. Protecting HHS Grants and Contract Funds from Fraud, Waste, and Abuse. HHS is the third largest grant-making and contracting organization in the federal government with over $389 billion in grants and $20 billion in contracts last year. The OIG noted weaknesses in the oversight of grantees demonstrated by late or absent financial and related reports; insufficient documentation on progress toward meeting program goals; and a failure to ensure that grantees obtain required annual financial audits.

10. Ensuring the Safety of Food, Drugs, and Medical Devices. HHS, through the FDA, is responsible for protecting public health by ensuring the safety, efficacy, and security of drugs, medical devices, biologics, dietary supplements, tobacco, and much of our nation’s food supply. It must ensure that once a drug, biologic, or device has been approved for use, it conducts effective post-market monitoring. OIG work has revealed weaknesses in FDA’s ability to adequately oversee the safety of drugs, biologics, medical devices, and food. The OIG cited particular problem areas including drug compounding, importing of modified drugs, food safety problems, dietary supplements, and marketing abuses.