As the agency responsible for administering Medicare, CMS contracts with a number of private entities to conduct program integrity activities. Reviewing claims for medical necessity. Once these contractors identify suspected fraud, they refer the cases to Medicare administrative contractors (MACs) to recover overpayments and, where appropriate, to the Department of Health and Human Services Office of the Inspector General (HHS/OIG) and the Department of Justice (DOJ) for further investigation and prosecution. The Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. Beginning in FY2009, Congress approved additional discretionary investments of $198 million for FY2009, $311 million for FY2010, and $311 million for FY2011 to further enhance Medicare's program integrity efforts. This report presents an overview of Medicare program integrity activities including the following major areas: an introduction to Medicare health care fraud; a description of CMS's program integrity activities; a discussion of the roles played by private contractors and federal law enforcement agencies in maintaining Medicare program integrity; details on federal anti-fraud funding; analysis of CMS's Medicare program integrity activities; and a summary of recent program integrity initiatives. Although some program management activities, such as provider enrollment and information technology infrastructure, can affect program integrity, in general program management does not include program integrity. Estimates of the dollar amount lost just to health care fraud vary. Medicare Program Integrity Overview

In Medicare, program integrity typically encompasses two types of activities: (1) processes directed at reducing abuse, such as payment errors or improper payments; and (2) activities designed to prevent, detect, investigate, and ultimately prosecute fraud. Since 1990, the Government Accountability Office (GAO) has designated Medicare as a federal program at high risk for fraud and abuse due to its size, complexity, scope, and decentralized administrative structure. Since 2004, GAO has issued 12 products (including reports and testimony) that have identified strategies to reduce Medicare fraud and abuse. Medicare Vulnerability to Fraud and Abuse

As GAO and other analysts have noted, several Medicare characteristics make the program particularly vulnerable to fraud and abuse. Pay and Chase

The need to pay a large number of claims quickly, sets up what has been described as a pay and chase dynamic. Cost reports contain information on providers' service cost allocations. Program Integrity Funding

Medicare program integrity and anti-fraud activities are funded through the HCFAC and MIP programs. Health Care Fraud and Abuse Control (HCFAC) Program

The HCFAC program is jointly administered by the Secretary and the Attorney General and has the following purposes:
1. coordinate federal, state, and local law enforcement efforts directed at controlling health care fraud and abuse; 2. conduct investigations, audits, evaluations, and inspections related to health care delivery and payment; 3. facilitate the enforcement of criminal and civil monetary penalties applicable to health care fraud; 4. provide for the establishment of safe harbors, advisory opinions, and fraud alerts; and 5. support the reporting and disclosure of adverse actions against health care providers. Other Program Integrity Activity Funding Sources

In addition to HCFAC and MIP mandatory and discretionary funds, each year Congress appropriates other discretionary funds to support administration and oversight of Medicare, Medicaid, and the state Children's Health Insurance Program (CHIP). 111-148)

The Patient Protection and Affordable Care Act (PPACA, P.L. As shown in Table 8 , PPACA increased appropriations for HCFAC by a total of $350 million over the period FY2011-FY2020. Congressional Action, Proposed Legislation: Budget Control Act of 2011 (BCA, P.L. 112-25 ). The implementation of HCFAC and MIP in 1996 provided CMS and Medicare enforcement agencies with dedicated funding to coordinate health care fraud-fighting activities.
Since 1990, the Government Accountability Office (GAO) has identified the Medicare program as at risk for improper payments and fraud, and, since 2004, has issued 12 products documenting various program vulnerabilities. As noted by GAO and other public and private analysts, Medicare's vulnerability to fraud and abuse arises from the program's size, complexity, decentralization, and administrative requirements. Although a good estimate of the dollar amount lost to Medicare fraud and abuse is open to discussion, analysts agree that billions of dollars are lost. Administering the volume of claims (more than 4.5 million per work day) from Medicare's many providers and suppliers (over 1 million) is a daunting task. Requirements to process and pay provider reimbursement claims quickly have set up a "pay and chase" approach that complicates program integrity efforts.
In general, initiatives designed to fight fraud and abuse are considered program integrity activities. These include processes directed at reducing payment errors as well as activities to prevent, detect, investigate, and ultimately prosecute health care fraud. The Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services (HHS) responsible for Medicare administration and program integrity, oversees private contractors that perform activities such as provider audits, reviewing claims for medical necessity, and conducting investigations. These contractors develop and refer suspected fraud cases to the HHS Office of the Inspector General (HHS/OIG) and the Department of Justice (DOJ) for further investigation and prosecution.
CMS has made considerable progress in improving program integrity oversight as well as in reporting on Medicare program integrity. With increased mandatory and discretionary funding, CMS's ability to wage a consistent, coordinated program integrity campaign has improved. Nonetheless, some issues remain, including the need to further improve the identification, monitoring, and reporting of fraud and abuse, and to provide more information on program integrity resource allocation decisions and results.
Medicare program integrity activities are funded in statute, largely through the Health Care Fraud and Abuse Control (HCFAC) and Medicare Integrity Programs (MIP), which were both established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191). HIPAA provided CMS and federal law enforcement agencies with dedicated funds to coordinate federal, state, and local activities to fight health care fraud. Beginning in FY2009, Congress approved additional discretionary funds to enhance these efforts. Further HCFAC funding was provided under health care reform—the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148 as amended). PPACA increased HCFAC mandatory funding by $350 million over the period from FY2011 to FY2020. PPACA also strengthened and added a number of new tools for CMS to help bolster Medicare's program integrity activities.
This report provides an overview of Medicare program integrity. A description of key program integrity activities is presented as well as a discussion of the role that private contractors and law enforcement agencies play in maintaining Medicare's integrity. Detailed information on federal funding for program integrity efforts also is presented. The report concludes with a summary and analysis of Medicare's program integrity oversight and a discussion of recent initiatives, including program integrity provisions in the Budget Control Act of 2011 (BCA, P.L. 112-25), which became law on August 2, 2011.