These firms generally focus on overpayment identification but will also collect identified overpayments. These activities are described below: Postpayment medical review. HCFA and its contractors use a variety of techniques to find MSP cases. HCFA Lacks Information to Measure Effectiveness of Overpayment Identification Activities

HCFA currently has limited information available to measure how effective the contractors are in identifying Medicare overpayments. Overpayment Identification Efforts Used by Recovery Auditors Mirror HCFA’s Current Efforts

We found that the techniques used by recovery auditors were similar to those already employed by HCFA’s contractors in their postpayment review, MSP, and other program safeguard activities. While the techniques are similar, the specific application—such as what factors trigger a more affect how well overpayments are identified. While it is difficult to isolate the dollar savings attributable to a single year’s funding, based on HCFA estimates for fiscal year 1999, MIP saved the Medicare program more than $17 for each dollar spent—about 55 percent from prepayment activities and the rest from postpayment activities. Because of problems like these, HCFA does not have reliable data on how well it collects debt transferred to it by contractors. To assist them, both the Program Support Center and Treasury contract with private collection agencies that are paid contingency fees for their collection efforts. For providers still in the Medicare program, claims administration contractors can simply withhold funds from future payments. However, there is evidence that HCFA could do more—either in-house, or through its contractors—to identify overpayments, if it had additional resources. Administrative Burden Associated With Recovery Auditors

The potential administrative burden that recovery auditors would place on current claims administration contractors and providers has also been raised as a concern similar to the situation HCFA faces as it integrates the PSCs into Medicare’s integrity activities. In an effort to tackle its outstanding overpayment problem, some have suggested that HCFA use the services of recovery auditors to supplement its program integrity activities. That is not to say that Medicare could not benefit from a stronger focus on postpayment activities to identify additional overpayments. Since its enactment, HIPAA has provided HCFA with increased and assured funding for program safeguards, but funding is still less than what was available in 1989 on a per-claim basis. While this funding is due to increase in the next several years, it will only keep pace with expected growth in program expenditures and amounts to little more than one-quarter of 1 percent of program expenditures. Under its two pilot projects, HCFA is focusing on transferring some Part A debt of significant value that may be as old as 6 years; its plans to expand the pilots to all contractors will still exclude debt that falls below HCFA’s minimum thresholds. Matters for Congressional Consideration

The Congress should consider increasing HCFA’s MIP funds to allow an expansion of postpayment and other effective program safeguard activities, and require HCFA to report on the financial returns from these and other program safeguard investments. Recommendations

To improve overpayment identification and collection, we recommend that the Administrator of HCFA require that the effectiveness of prepayment and postpayment activities be evaluated to determine the relative benefits of various prepayment and postpayment safeguards.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on efforts to recover Medicare's overpayments, focusing on: (1) how the Health Care Financing Administration (HCFA) and its contractors identify potential overpayments, and whether techniques used by recovery auditors would improve overpayment identification; (2) how well HCFA and its contractors collect overpayments once they are identified, and whether the services of recovery auditors would improve HCFA collection efforts; and (3) what challenges HCFA would face if it were required to hire recovery auditors to augment its overpayment identification and collection activities.

What GAO Found

GAO noted that: (1) despite HCFA's efforts to pay claims correctly in its $167 billion fee-for-service Medicare program, several billions of dollars in Medicare overpayments occur each year; (2) it is therefore critical that HCFA undertake effective postpayment activities to identify overpayments expeditiously; (3) HCFA's claims administration contractors use several postpayment techniques to identify overpayments; (4) these include medical review to ensure reports for providers that are paid on the basis of their costs, and reviews to determine if another entity besides Medicare has primary payment responsibility; (5) the contractors identify and collect billions of dollars through these activities, but how well each contractor performs them is not clear because HCFA lacks the information it needs to measure the effectiveness of contractors' overpayment identification activities; (6) while recovery auditors may also save money for clients, such as state Medicaid agencies, by identifying overpayments, the identification techniques they use are generally similar to those already used by HCFA and its contractors; (7) this does not mean that HCFA could not benefit from a stronger focus on specific postpayment activities; (8) however, doing so may require additional program safeguard funding so as not to shift funds away from HCFA's other efforts, such as prepayment review to prevent overpayments; (9) Congress has given HCFA assured funding for program safeguard activities; (10) however, the funding level is about one-third less than it was in 1989 and, although it will increase until 2003, it will only keep pace with expected growth in Medicare expenditures; (11) for fiscal year 1999, based on HCFA estimates, the Medicare Integrity Program saved the Medicare program more than $17 for each dollar spent--about 55 percent from prepayment activities and the rest from postpayment activities; (12) because these activities can bring a positive return, GAO suggests that Congress consider increasing HCFA's funding to bolster its postpayment review program; (13) HCFA plans to expand its pilot projects from some to all of its claims administration contractors; and (14) however, it has established minimum thresholds for referrals for collection that are higher than the Department of the Treasury and debt collection center will accept because HCFA says that it does not have the resources needed to pursue collection on the large volume of debt below its thresholds.