The government has recovered a record-breaking $10.7 billion in recoveries of health care fraud in the last three years, and contractor reform and new initiatives have contributed to that success. In 2009, the Department of Health and Human Services (HHS) and Department of Justice (DOJ) created the Health Care Fraud Prevention and Enforcement Action Team (HEAT). With its creation, the fight against Medicare fraud became a Cabinet-level priority. HEAT’s work is directed by the Secretary of HHS and the Attorney General. The Centers for Medicare & Medicaid Services (CMS) are also strongly committed to combating provider fraud, waste, and abuse through nationally coordinated strategies and new contractors focused on claims audit, investigation, and recovery.
In recent years, both states and CMS at the national level have increased their focus on coordinating fraud enforcement efforts.
The Medicare Integrity Program was established by the Health Insurance Portability and Accountability Act (HIPAA) of 1996 and later, the Medicaid Integrity Program was established by the Deficit Reduction Act (DRA) of 2005. These efforts, along with administrative contractor consolidation and implementation of new recovery contractors, led to record recoveries. Among other things, the high rate of recovery is due to the use of statistical overpayment extrapolation to assess damages.
The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 brought consolidation of the Fiscal Intermediaries and Carriers. They were consolidated into the new Medicare Administrative Contractors (MACs), which are
now processing both Part A and B claims. Contractor reform under the MMA also brought further consolidation with the
seven Zone Program Integrity Contractors (ZPICs), which took over the role of the Program Safeguard Contractors (PSCs) and are fraud-focused. Furthermore, MMA established the Medicare Recovery Audit Contractors (RACs), which work directly for CMS and are paid on a contingency basis. The RAC program was made permanent after a successful Demonstration program.
Four Medicare RACs are now fully operational in all states and actively auditing claims.2 These Medicare contractors are allowed to extrapolate overpayments that they identify, and have made this a part of their activities.
The Medicaid Integrity Program (MIP) is the first comprehensive federal strategy designed to prevent and reduce provider fraud, waste, and abuse in the $300 billion per year Medicaid program. It is outlined in the Comprehensive Medicaid Integrity Plan (CMIP) and managed centrally by the Medicaid Integrity Group (MIG) within the Center for Medicaid and State Operations (CMSO) at CMS. The Medicaid Integrity Contractors (MICs) include Review, Education, and Audit MICs. Audit MICs audit claims and are not paid on a contingency basis but are compensated differently. Although they do not participate in the recovery of the overpayments they identify, their responsibilities still involve discovering and recovering overpayments. Note that when HHS OIG audited the Audit MICs’ performance, it found that their performance was hindered due to poor data and target identification.3 The MIG used sampling and extrapolation during test audits and plans to systematically pursue greater use of extrapolation in the future, when the data are refined and a gold standard MIG sampling plan is developed.