In a pro forma House session today, U.S. Representative John Carney (D-DE) introduced bipartisan legislation to fight Medicare fraud, a problem that is conservatively estimated to cost taxpayers $50 billion annually – 10 percent of the total cost of Medicare.

Rep. Carney’s bipartisan reform solution, H.R. 3399, the Fighting Fraud and Abuse to Save Taxpayer Dollars Act (FAST Act), would strengthen Medicare by expanding inter-government fraud data sharing,  stopping physician identity theft, enacting tougher Medicare fraud penalties, and using predictive modeling technology to stop paying fraudulent Medicare claims. 
 
“It’s easy for politicians to talk about eliminating waste, fraud, and abuse in the Medicare system as a way to reduce the deficit. We need to replace that talk with action,” said Rep. Carney. “The FAST Act is a real solution that addresses the problem. This bipartisan legislation will make it much harder to commit Medicare fraud, and will in turn save billions in Medicare costs without cutting benefits to seniors.”

The FAST Act is co-sponsored in the House by Rep. Roskam (R-IL). Senators Tom Coburn (R-OK) and Tom Carper (D-DE) introduced this legislation earlier this year in the Senate. It is supported by a strong coalition of healthcare, tax, and government watchdog groups, including AARP, Citizens Against Government Waste, National Taxpayers Union, and America’s Health Insurance Providers. 
 
“At a time when the federal government is borrowing 40 cents on every dollar and Medicare fraud is costing America’s elderly a staggering $50 billion annually, it’s hard to overstate the need for reform,” Rep. Roskam said. “This solution would put in place valuable preventative fraud-check measures to strengthen Medicare, saving taxpayers billions. Stopping Medicare fraud won’t be the cure-all of our country’s fiscal woes, but it is a commonsense bipartisan solution to save taxpayers billions and help strengthen Medicare.”

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Background
Medicare & Medicaid Fraud/Waste Facts
• Medicare Parts A&B had estimated improper payments of almost $47.9 billion for fiscal year 2010.
• Medicare Advantage (Medicare Part C) had additional improper payments of $13.6 billion. 
• The total improper payments estimates is, therefore, more than $70 billion, which does not yet include an estimate for the Medicare prescription drug program (Medicare Part D).
• The improper payments estimate for Medicaid is $22.5 billion. 
• Generally, fraudulent payments are considered as in addition to the estimates of improper payments.  U.S. Attorney General Holder estimates that Medicare and Medicaid fraud totals as much as $60 billion dollars each year. Other estimates suggest the number is much greater.  However, there is no reliable estimate of fraud because it is only determinable when a fraud event is identified, and it is well accepted that not all health care fraud can be identified. 
• Both Medicare and Medicaid continue to be on the Government Accountability Office’s (GAO’s) list of government programs at “high risk” for waste, fraud and abuse—as they have been for years. President Obama and Secretary Sebelius have set a goal of reducing the Medicare fee-for-service improper payment rate by 50% by 2012.

Provisions in the FAST Act to Address Medicare & Medicaid Waste & Fraud

• Requires Valid National Provider Identifiers of Prescribers on Pharmacy Claims. Requires that Prescription Drug Plan (PDP) sponsors obtain valid prescriber identifiers on all pharmacy claims under Medicare Part D, and requires the provided prescriber identifiers be validated. Requires that National Prescriber Identifiers be adopted by Centers for Medicare and Medicaid Services (CMS) as the only allowed prescriber identifier for the Medicare prescription drug program. HHS OIG reported that $1.2 billion in Part D drug claims in 2007 contained invalid prescriber identifiers, representing more than 18 million drug claims.

• Encourages the Establishment of State Prescription Drug Monitoring Programs
GAO identified 65,000 Medicaid beneficiaries that were visiting 6 or more doctors to obtain prescriptions for 10 frequently abused controlled substances, incurring $63 million in Medicaid drug costs.  The National All Schedules Prescription Electronic Reporting Act was signed into law in 2005 but has never been appropriated the funds to function. This section authorizes the Secretary of HHS to award grants (subject to appropriations) to States in order to establish a state administered controlled substance program allowing the timely dissemination of prescription information to providers with the intent of allowing them to better monitor and look for patterns of addiction in their patients.

• Requires Updating of DEA Database of Controlled Substances Providers.  Currently, the DEA has approximately 1.3 million registrants for the prescription or distribution of controlled substances. But DEA currently only matches its database of controlled substances prescribers on a monthly basis against the death records maintained by SSA in order to reconcile these databases and curb healthcare fraud.  This Act would require the DEA to update daily with the Death Master File of the SSA to ensure provider and distributor numbers are accurate and valid.

• Requires Medicare Administrative Contractor Error Reduction Incentives. In 2010, Medicare reported $34.3 billion in improper payments in its Fee for Service program, a 10.5% error rate. This section requires HHS to establish a plan to provide incentives for Medicare Administrative Contractor (MAC)’s to reduce their improper payment error rates.

• CMS Must Address Vulnerabilities Identified by Recovery Audit Contractors.  In their first year of national operations, RACs uncovered $92.3 million in improper payments and suggested a number of reforms for CMS to put in place in the future to cub these payments. The GAO found that CMS did not develop a process to take corrective actions to ensure the “most significant” RAC-identified vulnerabilities were addressed.   This section mandates HHS address overpayment vulnerabilities identified by RACs in a timely manner, by establishing a process for tracking the effectiveness of changes made to payment policies and procedures that address the vulnerabilities identified by RACs.

• Report on Senior Medicare Patrol and Fraud Reporting Rewards.  The Senior Medicare Patrol was established in 1997 to enlist seniors to assist in reporting Medicare fraud when they came across what they felt could be scam. A similar program within the IRS reports a much greater return on weeding out fraud. HHS shall develop a plan, under which HHS could revise the beneficiary incentive program to encourage greater participation in SMP.

• Prohibits the Display Of SSN On Newly Issued Medicare Identification Cards, Conduct Smart Card Pilot.   The DOD and VA do not list Social Security numbers on their identification cards. The Social Security Administrator has recommended not carrying your social security card on your person and yet CMS still has these numbers on the beneficiary ID cards. Not later than 2 years after enactment, HHS and SSA shall begin to eliminate the unnecessary collection, use, and display of Social Security account numbers of Medicare beneficiaries.   Not later than 3 years after enactment, new Medicare card will not display a Medicare beneficiary’s Social Security entire account number. 

• Requires Prepayment Review of Claims for Durable Medical Equipment at High Risk of Waste, Fraud, and Abuse. Abuse in the prescription and supply of durable medical equipment, often reported in power wheelchairs, has been a problem at CMS for nearly ten years, with Medicare payments for motorized wheelchairs increasing over time. HHS will put in place an electronic prior authorization review process for standard power wheelchairs and consult with stakeholders on a similar process for durable medical equipment at high risk of waste, fraud, and abuse.

• Improving Data Sharing Across Agencies and Programs. The various claims, provider, beneficiary and other databases maintained by CMS are critical for program integrity efforts.  However, these databases and related information technology systems are often antiquated and need substantial improvements.  HHS shall:  establish improved data sharing of claims payment data internally and with CMS oversight contractors;   require ongoing analysis of claims data by oversight contractors;  require provider database reviews and verification; require beneficiary data base review and verification; improve access to CMS databases by federal law enforcement; expand database access to appropriate state agencies; establish strong privacy protocols and security requirement; and report to congress on their implementation. From 2000-2007, Medicare paid 478,5000 claims that contained provider identifiers of deceased doctors—over $76.6 million in claims.

• Expand Automated Prepayment Review Of Medicare Claims. Currently the payment systems for Medicare Part A and Part B are not interoperable so claims cannot be cross checked to be sure the service was performed. The Act requires the Secretary to establish a prepayment review program to better verify payment between Part and Part B by September 30, 2012. There is also no process in place to track claims that are submitted and rejected via automatic edits prior to payment, so fraudsters can submit claims over and over again until one is accepted, but CMS has no ability to track this.  This section requires a process be established to address this shortcoming.

• Improving Medicare-Medicaid Data-Sharing.  Dual eligible beneficiaries are typically higher cost to Medicare and Medicaid, so the payment errors have corresponding higher dollar value. Medicare-Medicaid (Medi-Medi) is the combining and comparing of claims data from Medicare and Medicaid to detect potential fraud and abuse patterns that are difficult to detect when examined independently. This provision would allow for greater coordination between Medicare and state Medicaid programs in order to better identify claims for improper payments, and to determine whether the same service was paid for by both programs.

• Improving Claims Processing and Detection of Fraud within the Medicaid and CHIP Programs. HHS shall require that for payment to be made, each claim under Medicaid and the Children’s Health Insurance Program include a valid beneficiary identification number of an individual who is eligible to receive benefits and a valid National Provider Identifier for a provider that is eligible to receive payment.

• Separate Provider Enrollment and Screening from Medicare Administrative Contractors. Under current law, Medicare Administrative Contractors (MACs) perform both provider enrollment and paying provider claims.  In the President’s Budget for HHS for fiscal year 2011, the Administration proposed separating the functions of provider enrollment from paying provider claims.  This accomplishes that, and prevents a conflict of interest.

• Requires GAO Report On Effectiveness of Medicare Contractors and Development Of Measurable Performance Metrics.

• Increases Legal Penalties for the Illegal Distribution of a Medicare/Medicaid/CHIP Beneficiary ID or Billing Privileges. One reason for massive fraud is the penalties are too low.  The President’s Fiscal Year 2012 Budget proposed strengthening of penalties for the knowing distribution of Medicare, Medicaid, or CHIP beneficiary identification numbers. Any person who knowingly, intentionally, and with the intent to defraud, purchases, sells or distributes, or arranges for the purchase, sale, or distribution of beneficiary identification number or billing privileges faces stiffer penalties.