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GAO Reports on Improper Medicare Advantage Payments.

The Government Accountability Office (GAO) recently testified about improper payments made to Medicare Advantage Organizations (MAOs) before Congress.  The GAO’s corresponding report revealed that an estimated $16 billion (approximately 10 percent) of the Centers for Medicare and Medicaid Services (CMS) payments to MAOs were improper.  These payments combined with standard Medicare program overpayments total $60 billion.  The GAO reported several problems with CMS’s efforts to ensure proper payments in this program, which serves one-third of Medicare beneficiaries (approximately 19 million).  CMS pays MAOs a predetermined monthly amount for each enrollee, using a risk adjustment process to project each enrollee’s health care costs.  The risk adjustment process uses MAO diagnosis data and Medicare demographic data.  CMS also conducts risk adjustment data validation (RADV) audits of prior MAO payments to identify and recover improper payments.  RADV audits determine whether MAO’s diagnosis data are supported by a beneficiary’s medical record.

The GAO reported the following findings:

  • RADV audits did not target MAO contracts with the highest potential for improper payments. CMS’s method of calculating improper payment risk for each contract, based on the diagnoses reported for the contract’s beneficiaries, does not use other available data to select the contracts with the greatest potential for improper payment recovery;
  • CMS’s delays in conducting current RADV audits jeopardize its goal of conducting annual RADV audits; and
  • CMS had not expanded the use of Recovery Audit Contractors (RAC) to the MAO program, as required by law in 2010.

The GAO recommended that CMS:

  • Improve its methodology to more accurately identify MAO contracts with the greatest potential for improper payment recovery;
  • Modify the contract selection processes to focus on those most likely to receive improper payments; and
  • Improve the timeliness of the RADV audit process.

In July 2017, CMS reported that it had taken initial actions to address the GAO’s findings and recommendations, but none had been fully implemented.  CMS stated that it has begun to use encounter data, which are similar to fee-for-service claims data, with diagnosis data from MAOs to improve risk adjustment in the Medicare Advantage program.  This enhanced process should help ensure that federal funds are used properly.  The GAO reported that CMS had made limited progress in validating the completeness and accuracy of MAO encounter data; however, CMS must establish plans for using encounter data and thoroughly assess the data for completeness and accuracy before using it to risk-adjust payments.

The GAO report is available at: