Medicare Program Integrity and Efforts to Root Out Improper Funds, Fraud, Waste and Abuse

Medicare, the federal medical insurance program for individuals ages 65 and older and other people below 65 with long-term disabilities, covers 68 million individuals and represents 15% of all federal spending – practically $1 trillion {dollars} in 2024. The Medicare program has greater than 1.4 million suppliers and greater than 20 totally different fee methods. As a result of complexity and dimension of this system, Medicare faces risk of improper payments and some vulnerability to fraud, waste, and abuse, although many actions have been taken through the years to cut back improper funds in this system and to root out fraud.

President Trump has established a authorities cost-cutting initiative often known as the “Department of Government Efficiency” or DOGE, which has set about to dramatically overhaul the dimensions and scope of federal authorities spending. The chief of DOGE, Elon Musk, just lately claimed that “big money fraud” is occurring on the Facilities for Medicare & Medicaid Providers (CMS) and that “the waste and fraud in entitlement spending, which is most of the federal spending, is entitlements, so that’s the big one to eliminate.”

Strengthening program integrity and tackling fraud, waste, and abuse in Medicare, in addition to in different authorities applications, has been a precedence throughout prior administrations. Throughout President Obama’s administration, President Trump’s first time period and through President Biden’s administration, the Department of Health and Human Services (HHS) budgets included proposals to enhance program integrity, together with for Medicare and Medicaid, scale back improper funds for these and different applications, and supply extra funding to fight fraud, waste, and abuse.

CMS, primarily by the Heart for Program Integrity (CPI), performs a key position in efforts to advertise program integrity in Medicare. As well as, the HHS Workplace of Inspector Common (HHS OIG), usually in collaboration with the Division of Justice (DOJ) and different businesses, displays and combats fraud, waste, and abuse to enhance the effectivity of Medicare by conducting audits, evaluations, and investigations, and finishing up enforcement actions, which in some situations have resulted in felony or civil penalties. Regardless of the HHS Inspector Common taking part in a key position in offering oversight of program integrity efforts for Medicare and different HHS applications, President Trump fired the HHS Inspector Common and a number of other different Inspectors Common simply days after taking workplace for his second time period.

This transient explains fraud, waste, abuse, and improper funds in Medicare and describes actions to make sure Medicare program integrity.

Fraud, waste, abuse, and improper funds are sometimes used interchangeably however have distinct meanings within the context of Medicare.

Improper funds. Improper funds are defined in law as “any fee that ought to not have been made or that was made in an incorrect quantity, together with an overpayment or underpayment, below a statutory, contractual, administrative, or different legally relevant requirement; and contains: any fee to an ineligible recipient; any fee for an ineligible good or service; any duplicate fee; any fee for or service not obtained, apart from these funds the place licensed by regulation; and any fee that doesn’t account for credit score for relevant reductions.”

Improper funds within the Medicare program, each overpayments and underpayments, may end up from fraud, waste, and abuse in addition to errors. For instance, improper funds might be as a result of documentation errors or omissions, resembling lacking signatures, which can happen with in any other case applicable claims and funds.

Improper funds usually get conflated with fraud, and whereas they might be associated, they don’t seem to be the identical. As the Government Accountability Office (GAO) explains on the relationship between fraud and improper payments, all fraudulent funds are thought of improper, however not all improper funds are the results of fraud. Due to this fact, estimates of improper payments should not be considered estimates of fraud.

Fraud. According to CMS, Medicare fraud occurs when a provider knowingly submits false information to the federal government to receive Medicare payments. Medicare fraud can embrace knowingly billing for the next degree of complexity of providers than the extent that was really supplied, knowingly billing for providers not supplied, together with falsifying information of offering such providers, and knowingly ordering medically pointless gadgets or providers. Committing Medicare fraud is illegitimate and should result in imprisonment, fines, and penalties. There are not any estimates of how a lot Medicare particularly loses to fraud.

One latest instance of Medicare fraud concerned a $17 million Medicare hospice fraud dedicated in opposition to the federal authorities, by which a person plead responsible to well being care fraud, aggravated identification theft, and cash laundering. On this case, the person engaged in a scheme to function a sequence of sham hospice corporations and submitted fraudulent claims to Medicare for providers that weren’t medically needed and never supplied, together with for individuals who weren’t terminally ailing and those that by no means obtained care from these sham hospices. One other instance is a supplier who was discovered responsible of well being care fraud and different prices, who submitted over $24 million in fraudulent claims to Medicare, involving kickbacks and bribes for authorizing medically pointless most cancers genetic lab checks, prolonged workplace visits that had been by no means supplied to sufferers, and medically pointless orthotic braces.

Abuse. According to CMS, abuse occurs when providers or suppliers perform actions that directly or indirectly result in unnecessary costs to the Medicare program. Abuse contains any observe that doesn’t meet professionally acknowledged requirements. Examples of abuse are billing for pointless medical providers, charging excessively for providers or provides, or upcoding claims, which is when a supplier makes use of an inaccurate billing code for a medical process that will increase reimbursement. As CMS explains, “the distinction between “fraud” and “abuse” is determined by particular details, circumstances, intent, and information,” however fraudulent exercise might be characterised by its intentional nature leading to some “unauthorized benefit.” Finally, CMS notes that suppliers who interact in abusive billing practices, like upcoding, or fraudulent exercise, like charging for providers that weren’t delivered, might be topic to civil and felony penalties.

Waste. CMS defines waste as the overuse or misuse of resources that directly or indirectly result in unnecessary costs to the Medicare program. Examples of waste embrace conducting extreme workplace visits, prescribing extra medicines than needed, and ordering extreme or duplicative laboratory checks. Whereas the excellence between waste and abuse shouldn’t be all the time clear, each lead to pointless prices to the Medicare program.

CMS’s formal definition of waste differs from different views of waste, which can embrace value judgements of how the federal government ought to or shouldn’t be spending taxpayer cash. As one instance of this, MedPAC, an unbiased company that advises Congress about Medicare fee, estimates the federal authorities pays insurers 20% more for Medicare Advantage enrollees than it pays for related individuals in conventional Medicare, which quantities to $84 billion in extra annual spending in 2025 alone. Some would possibly argue that this additional spending is wasteful whereas others would possibly argue it provides worth to the Medicare program by offering additional advantages to Medicare Benefit enrollees.

The overwhelming majority of Medicare funds are made correctly, though improper funds are an ongoing concern.

The overwhelming majority of funds below conventional Medicare, Medicare Benefit, and Half D are made correctly (Determine 1). CMS identifies, studies, and estimates improper funds for Medicare in addition to different authorities applications, as required by the Payment Integrity Information Act of 2019 (PIIA) and as a part of its integrity programs for Medicare. The improper fee fee was first measured in traditional Medicare starting in 1996 and for Medicare Advantage starting in 2008.

The Trump administration recently cited an estimate of $140 billion in improper funds made by CMS in 2024, however based mostly on the quantities derived from every a part of Medicare (as described beneath), improper funds for the Medicare program totaled considerably much less – $54.3 billion in 2024, in keeping with GAO. Even throughout all CMS applications – Medicare, Medicaid, CHIP, and the Inexpensive Care Act Well being Insurance coverage Change Advance Funds of the Premium Tax Credit score (APTC) applications, the overall quantity of improper funds is lower than the overall cited by the administration – totaling $87.1 billion in 2024, in keeping with CMS. Authorities-wide, 16 federal agencies across 68 programs, reported improper payments of $162 billion in 2024, a lower of $74 billion from 2023, in keeping with GAO. Once more, estimates of improper funds described right here usually are not the identical as estimates of fraud.

CMS depends on three approaches to measure improper payments for conventional Medicare, Medicare Benefit, and Medicare Half D utilizing totally different statistical strategies for every:

• The Comprehensive Error Rate Testing (CERT) program measures the improper fee fee in conventional Medicare. To find out if claims had been paid correctly, the CERT program critiques a random pattern of conventional Medicare claims – roughly 37,500 claims in 2024.
  • In 2024, conventional Medicare paid an estimated 92.34% of claims correctly, representing $382.02 billion in correct federal funds. The normal Medicare improper fee fee was 7.66% (or $31.70 billion in federal funds) in 2024.
• The Medicare Part C Improper Payment Measurement (Part C IPM) measures the improper fee fee in Medicare Benefit. This system verifies that analysis codes submitted for fee by a Medicare Benefit group are supported by medical file documentation based mostly on a random sample of about 1,000 beneficiaries.
  • In 2024, Medicare Benefit paid an estimated 94.39% of claims correctly, representing $320.87 billion in correct federal funds. The Medicare Benefit improper fee fee was 5.61% (or $19.07 billion in federal funds) in 2024. (These estimates of improper funds in Medicare Benefit don’t embrace estimates of upper spending in Medicare Benefit in comparison with conventional Medicare for related beneficiaries as mentioned above, that are also known as “overpayments”).
• The Medicare Part D Improper Payment Measurement (Part D IPM) measures error in funds as a result of inaccurate prescription drug occasion (PDE) information. The data is based on a randomly selected five percent sample of the Half D beneficiary inhabitants.
  • In 2024, Medicare Half D paid an estimated 96.30% of claims correctly, representing $92.95 billion in correct federal funds. The Medicare Half D improper fee fee was 3.70% (or $3.58 billion in federal funds) in 2024.

The speed of improper funds for conventional Medicare has decreased over time from 12.7% in FY2014 to 7.66% in FY2024. (Comparable tendencies usually are not included for Medicare Benefit and Half D as a result of methodological modifications within the calculation of the estimates over time.) Whereas improper fee charges for conventional Medicare have typically declined, the overall amount of improper payments have increased as Medicare spending has elevated over this era. Improper funds each negatively influence beneficiaries and scale back the solvency of the Medicare Hospital Insurance coverage (Half A) Belief Fund, which is projected to be depleted in 2036.

The first purpose for improper funds differs for conventional Medicare, Medicare Half D and Medicare Benefit.

In conventional Medicare, inadequate or no documentation was the most typical purpose for improper funds, accounting for 68% of improper funds, much like Medicare Half D (73%), whereas for Medicare Benefit, medical file discrepancies accounted for 85% of all improper funds (Determine 2).

In 2024, the most common reason for improper payments in traditional Medicare was inadequate or no documentation (68%), adopted by claims being medically pointless (16%), incorrect coding (10%),  and different causes (6%). Equally, for Medicare Part D, inadequate or no documentation (73%) was the primary purpose for improper funds, adopted by administrative or course of errors (15%) and drug or drug pricing discrepancies (12%). The first purpose for Medicare Advantage improper payments is medical file discrepancies, accounting for 85% of all improper funds, adopted by administrative or course of errors (10%) and inadequate documentation (6%). According to CMS, improper funds as a result of medical file discrepancies outcome when medical file documentation submitted by a Medicare Benefit plan doesn’t help funds obtained by the plan.

The variations in the primary drivers of improper funds in conventional Medicare, Medicare Half D and Medicare Benefit replicate partially how improper funds are calculated – for conventional Medicare, CERT evaluates claims submitted by suppliers, and for Half D, the Half D IPM evaluates errors in funds for prescription drug claims, whereas for Medicare Benefit, the Half C IPM evaluates whether or not submitted diagnoses codes for which Medicare Benefit plans obtained fee are supported by enrollees’ medical information. Improper funds can lead to both overpayments (financial loss) or underpayments (non-monetary loss).

CMS is answerable for many program integrity actions, together with conducting audits to establish and get well Medicare improper funds.

The CMS Heart for Program Integrity (CPI) primarily implements the Medicare Integrity Program, which is answerable for serving to to guard Medicare in opposition to fraud, waste, and abuse for varied components of the Medicare program. Program integrity actions inside CMS resulted in estimated Medicare savings of $14.9 billion in FY 2023 and produced a considerable return on funding (ROI) – for each $1 spent on program integrity efforts, Medicare saved $8.30.

Among the many many program integrity actions performed by CMS to root out fraud, waste, abuse, and handle improper funds in conventional Medicare and Medicare Benefit, audits are an necessary software, together with the Medicare Price for Service Restoration Audit Program and the Medicare Benefit Danger Adjustment Knowledge Validation audits.

• The Medicare Price for Service Restoration Audit Program. The Medicare Fee for Service (FFS) Recovery Audit Program’s mission is to establish and proper Medicare improper funds made on claims of well being care providers supplied to conventional Medicare beneficiaries and get well these improper funds. In FY 2023, Restoration Audit Contractors (RACs) recognized $353 million in overpayments and recovered $273 million. Restoration audits are distinct from CERT audits in that they search to each establish and get well improper funds, whereas the CERT audits present a nationwide estimate of improper funds in conventional Medicare.
• Medicare Benefit Danger Adjustment Knowledge Validation (RADV) audits. Medicare Benefit RADV audits have related aims to the Medicare Price for Service Restoration Audit Program and are the first means CMS identifies and collects improper funds in Medicare Benefit. As a part of RADV audits, CMS confirms that diagnoses submitted by Medicare Benefit organizations for threat adjustment are supported by enrollees’ medical information. Medicare Benefit organizations are held financially accountable when information submitted for threat adjustment functions don’t align with program guidelines. If Medicare Benefit organizations don’t agree with the audit outcomes, they may appeal these medical file evaluate determinations. RADV audits, performed by the CPI, search to each establish and get well improper funds from Medicare Benefit plans, whereas Half C IPM audits present a nationwide estimate of improper funds in Medicare Benefit.

In 2023, the Biden Administration finalized a rule, which was proposed in 2018 throughout the first Trump administration, to make changes to the RADV program. One of many main parts of the finalized rule was the choice to extrapolate funds, which is a method extensively utilized in conventional Medicare and different audits, to estimate values, resembling overpayments, based mostly on a statistically random pattern that will apply to the whole Medicare Benefit contract. The ultimate rule extrapolates contract-level findings for audits beginning in fee yr 2018. In September 2023, Humana sued the federal government over its methodology and a federal judge denied dismissal of the case in June 2024, however the ultimate end result of the case is still pending.

The HHS OIG, DOJ, and different businesses play a significant position in combatting Medicare fraud, waste, abuse and improper funds.

The HHS OIG, established through legislation in 1976, has performed a significant position in monitoring and combating fraud, waste and abuse to enhance the effectivity of Medicare and different HHS applications, with the majority of its resources going to oversight of Medicare and Medicaid. The HHS OIG has a variety of responsibilities together with conducting and supervising audits, investigations, and evaluations regarding HHS applications; figuring out systemic weaknesses that give rise to alternatives for fraud and abuse and making suggestions to stop them from reoccurring; main and coordinating actions to stop and detect fraud and abuse; and imposing administrative sanctions in opposition to suppliers of well being care below Medicare and Medicaid who commit sure prohibited acts. The HHS OIG additionally operates a fraud hotline the place it accepts ideas and complaints associated to potential fraud, waste, and abuse in HHS applications.

Because the variety of beneficiaries enrolled in Medicare Benefit has elevated, the HHS OIG has focused more of its efforts on addressing the dangers of fraud, waste, and abuse in Medicare Benefit and has developed a strategic plan for its oversight. One in all its predominant priorities is guaranteeing that funds to Medicare Benefit plans are correct. Similar to the RADV audits mentioned above which are performed by CMS, the HHS OIG frequently audits Medicare Benefit organizations to evaluate the accuracy of analysis codes since some diagnoses are at greater threat of being miscoded, leading to overpayments to those organizations. For instance, two of OIG’s recent audits launched in December 2024, discovered that Medicare Benefit plans had submitted analysis codes that didn’t adjust to federal necessities, leading to hundreds of thousands of {dollars} in estimated overpayments, although each plans disputed OIG’s findings and suggestions. HHS OIG audits don’t characterize ultimate determinations and CMS officers in the end decide whether or not the company will search to recoup overpayments in these situations.

The HHS OIG has additionally examined the usage of well being threat assessments (HRAs) and chart critiques in Medicare Benefit, producing multiple reports on how these actions can enhance threat scores and drive billions of {dollars} in extra funds to Medicare Benefit plans. As talked about above, MedPAC estimates the federal authorities pays more for Medicare Advantage enrollees than it pays for related individuals in conventional Medicare, at a price of $84 billion in 2025 – $40 billion of which might be attributed to coding variations that enhance funds to Medicare Benefit plans.

The HHS OIG usually collaborates with the DOJ to meet its duties. OIG works with DOJ, below the joint course of the Legal professional Common and the Secretary of Well being and Human Providers (HHS), to function the Health Care Fraud and Abuse Control (HCFAC) Program, which was established in 1996 as a part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) by the Clinton administration. The Program is tasked with coordinating federal, state, and native regulation enforcement efforts regarding well being care fraud for Medicare, Medicaid, and different well being care applications, conducting investigations and audits regarding the supply of and fee for well being care, and implementing treatments for fraud.

The DOJ and U.S. Attorneys perform enforcement actions in opposition to these suspected of participating in Medicare fraud, together with bringing felony and civil instances to cease ongoing fraud, deter future fraud, and get well funds wrongfully taken by fraud and false claims. In FY 2023, 476 defendants had been convicted of well being care fraud-related crimes, which incorporates however shouldn’t be restricted to Medicare. In its annual report on the Well being Care Fraud and Abuse Management Program, the OIG highlighted vital felony and civil investigations for Medicare and different federal well being care applications together with within the areas of ambulances, diagnostic testing, sturdy medical tools, house well being suppliers, hospice, and medical units, amongst others.

The DOJ has additionally been concerned in civil instances relating to Medicare Benefit insurers, usually in relation to allegations of false analysis codes submitted to inflate Medicare funds to plans by the danger adjustment system. For instance, the Justice Division is litigating actions in opposition to UnitedHealth Group, Elevance Health, and KaiserPermanente relating to the accuracy of their analysis information used for threat adjustment. In September 2023, Cigna paid $172 million dollars to the federal authorities so as to resolve False Claims Act allegations that it supplied inaccurate information on sufferers’ diagnoses to inflate funds, although there was no dedication of legal responsibility.

Throughout FY 2023, efforts by the Well being Care Fraud and Abuse Management Program for Medicare, Medicaid, and different authorities applications resulted in recoveries of $3.4 billion, of which the Medicare Belief Funds obtained near $1 billion. The ROI for the HCFAC program from 2021 to 2023 is $2.80 returned for each $1.00 expended towards addressing fraud and abuse.

The GAO, which examines how taxpayer {dollars} are spent and offers Congress and federal businesses with info to assist the federal government get monetary savings and work extra effectively, has undertaken a sequence of research these points within the Medicare and Medicaid applications. A recent report from GAO discovered that whereas CMS has carried out quite a few GAO suggestions to cut back improper funds in Medicare (in addition to Medicaid), there are extra alternatives to enhance program integrity in these applications and save billions of {dollars}. GAO additionally yearly publishes a high-risk series that identifies authorities operations susceptible to fraud, waste, and abuse, and Medicare has been on this list since 1990 as a result of dimension and complexity of this system. As well as, in 2015, GAO established a framework to handle fraud frisk in federal applications, which CMS makes use of for implementing its Medicare integrity applications.