	2011 High-Risk Series Update on the Medicare Program

As we report in our 2011 High-Risk Series update, Medicare remains on a  path that is fiscally unsustainable over the long term. 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. CMS has made some progress in these areas, but many avenues for  improvement remain. Reforming and Refining Payments

Since January 2009, CMS has implemented payment reforms for Medicare  Advantage (Part C) and inpatient hospital, home health, and end-stage  renal disease services. The agency has also begun to provide feedback to  physicians on their resource use and is developing a value-based payment  method for physician services that accounts for the quality and cost of  care. In addition, CMS has taken steps to ensure that some physician fees  recognize efficiencies when certain services are furnished together, but  the agency has not targeted the services with the greatest potential for  savings. Our work has also shown that payment for imaging services may benefit  from refinements. Improving Program Management

CMS’s implementation of competitive bidding for medical equipment and  supplies and its new Medicare Administrative Contractors (MAC) have  progressed, with some delays. Of greater concern is that we found pervasive internal control deficiencies  in CMS’s management of its contracting function that put billions of  taxpayer dollars at risk of improper payments or waste. However, CMS has  not made sufficient progress to complete actions to address  recommendations related to clarifying the roles and responsibilities for  implementing certain contractor oversight responsibilities, clearing a  backlog of contacts that are overdue for closeout, and finishing its  investigation of over $70 million in payments we questioned in 2007. Enhancing Program Integrity

New directives, implementing guidance, and legislation designed to help  reduce improper payments will affect CMS’s efforts over the next few  years. CMS has already taken action in some areas—for example, as required by  law, it implemented a national Recovery Audit Contractors (RAC) program  in 2009 to analyze paid claims and identify overpayments for recoupment. CMS has set a key performance measure to reduce improper payments for  Parts A and B (fee-for-service) and Part C and is developing measures of  improper payments for Part D. CMS was not able to demonstrate sustained  progress at reducing its fee-for-service error rate because changes made to  improve the methodology for measurement make current year estimates  noncomparable to any issued before 2009. Other recent CMS  program integrity efforts include issuing regulations tightening provider  enrollment requirements and creating its Center for Program Integrity,  which is responsible for addressing program vulnerabilities leading to  improper payments. 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. However, CMS has taken some actions to increase  it. Overseeing Patient Care and Safety

CMS’s oversight of the quality of nursing home care has increased  significantly in recent years, but weaknesses in surveillance remain that  could understate care quality problems. CMS’s current approach for  funding state surveys of facilities participating in Medicare is ineffective,  yet these surveys are meant to ensure that these facilities provide safe,  high-quality care. 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. One important step relates to our recommendation to develop an adequate  corrective action process to address vulnerabilities to improper payments. CMS has implemented certain recommendations of ours, such  as in the area of nursing home oversight. In addition, further action is needed by CMS to establish policies to  improve contract oversight, better target review of claims for services with  high rates of improper billing, and improve the monitoring of nursing  homes with serious care problems. Centers for Medicare and Medicaid Services: Deficiencies in Contract  Management Internal Control Are Pervasive. Medicare: Improvements Needed to Address Improper Payments in  Home Health.
Why GAO Did This Study

In the February 2011 High-Risk Series update, GAO continued designation of Medicare as a high-risk program because its complexity and susceptibility to improper payments, combined with its size, have led to serious management challenges. In 2010, Medicare covered 47 million people and had estimated outlays of $509 billion. The Centers for Medicare & Medicaid Services (CMS) has estimated fiscal year 2010 improper payments for Medicare fee-for-service and Medicare Advantage of almost $48 billion. This statement focuses on the nature of the risk in the program, progress made, and specific actions needed. It is based on GAO work developed by using a variety of methodologies--including analyses of Medicare claims, review of policies, interviews, and site visits--and information from CMS on the status of actions to address GAO recommendations.

What GAO Found

As GAO reported in its 2011 High-Risk Series update, Medicare remains on a path that is fiscally unsustainable over the long term. This fiscal pressure heightens CMS's challenges 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. CMS has made some progress in these areas, but many avenues for improvement remain. Reforming and refining payments. Since January 2009, CMS has implemented payment reforms for Medicare Advantage and inpatient hospital and other services, and has taken other steps to improve efficiency in payments. The agency has also begun to provide feedback to physicians on their resource use, but the feedback effort could be enhanced. CMS has taken steps to ensure that some physician fees recognize efficiencies when certain services are furnished together, but the agency has not targeted the services with the greatest potential for savings. Other areas that could benefit from payment method refinements include oxygen and imaging services. Improving program management. CMS's implementation of competitive bidding for medical equipment and supplies and its transfer of fee-for-service claims workload to new Medicare Administrative Contractors have progressed, with some delays. Of greater concern is that GAO found pervasive internal control deficiencies in CMS's management of contracts that increased the risk of improper payments. 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 contacts that are overdue for closeout, and finishing its investigation of over $70 million in payments GAO questioned in 2007. Enhancing program integrity. CMS has implemented a national Recovery Audit Contractors (RAC) program to analyze paid claims and identify improper overpayments for recoupment, set performance measures to reduce improper payments, issued regulations to tighten provider enrollment, and created its Center for Program Integrity. However, the agency has not developed an adequate process to address vulnerabilities to improper payments identified by RACs, nor has it addressed three other GAO recommendations designed to reduce improper payments, including one to conduct postpayment reviews of claims submitted by home health agencies with high rates of improper billing. Overseeing patient care and safety. The agency's oversight of the quality of nursing home care has increased significantly in recent years, but weaknesses in the survey methodology and guidance for surveillance could understate care quality problems. In addition, CMS's current approach for funding state surveys of facilities participating in Medicare is ineffective. However, CMS has implemented, or is taking steps to implement, many recommendations GAO has made to improve nursing home oversight. 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. Further, CMS's effective implementation of recent laws will be critical to helping reduce improper payments. CMS also needs to take action to address GAO recommendations, such as to develop an adequate corrective action process, improve controls over contracts, and refine or better manage payment for certain services.