The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Medicare Fraud: All Talk, No Action

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact

The Medicare Trust Fund, which is in the red and on track to reach insolvency by 2026, needs every penny it can get.  Thanks to the Recovery Audit Contractor (RAC) program, $8.2 billion in improper Medicare payments has been recovered since its nationwide implementation in 2010.  RACs operate on a contingency fee basis, so their work does not cost taxpayers a dime.  Rather than celebrate this successful program, members of Congress, the Centers for Medicare and Medicaid Services (CMS), and special interests, particularly the hospital trade associations, are conspiring to kill it.

Beginning in October 2013, in three consecutive steps, CMS suspended 80 percent of the program’s post-payment auditing for an entire year.  CMS also barred the RACs from reviewing retroactive claims, even though federal law allows the RACs to look at claims going back five years.  The one-year suspension of claims reviews means that the Medicare Trust Fund will hemorrhage about $4 billion in overpayments to hospitals.  Between them, Medicare and Medicaid have the worst improper payment rates in the federal government. 

In 2009, President Obama issued Executive Order 13520, ordering CMS to cut the Medicare fee-for-service improper payment rate of 10.8 percent in half by 2012.  Under the RAC program, the error rate dropped from 10.8 in fiscal year (FY) 2009 to 8.5 percent in FY 2012, but since CMS began constricting the RACs, the error rate jumped back up over 10 percent in FY 2013.  Medicare made $34.6 billion in improper overpayments in FY 2013, and there is every reason to expect that number to continue to rise. 

When executive branch agencies refuse to follow the rule of law, Congress is expected to mandate compliance.  However, in the case of RACs, Congress has sided with powerful special interests, particularly the state and national hospital associations, over their duties to taxpayers and the senior citizens who count on Medicare.  In March 2013, Rep. Sam Graves (R-Mo.) introduced H.R. 1250, which would in effect cripple all Medicare oversight by subjecting providers to auditing only if their estimated billing error rates exceed 40 percent.  Under this scheme, in other words, providers would be permitted to improperly bill Medicare up to 40 percent of the time before federal integrity watchdogs could even begin to look at claims.

Hospitals argue that the RAC program is burdensome; the bill’s sponsors have responded to their complaints by including a cap on the number of medical records a RAC may request from a healthcare provider.  However, RACs are the only post-payment program integrity contractors that already are subject to such a cap, which is a mere 2 percent of a hospital’s Medicare claims volume.   The consolidation provision would impose the 2 percent cap collectively across all audit program integrity efforts, virtually eviscerating the RACs’ ability to review medical records for improper payments, the key to identifying waste, fraud, and abuse in the most cost-effective manner.

Medicare fraud and improper payments are a scourge on the program.  The OIG has documented hundreds of millions in specious claims, including from ostensibly distinguished hospitals.  For example, in May 2013, the OIG reviewed a sample of claims from Cedars-Sinai in Los Angeles, California and found an error rate of 84 percent, which equaled $2.2 million in overpayments to the hospital.  A June 2012 compliance review of Tufts Medical Center in Boston, Massachusetts documented errors in 92 percent of the 117 sampled claims, which amounted to $1.1 million in overpayments.  In January 2014, the Department of Justice joined eight whistleblower lawsuits against Health Management Associates for fraud involving the use of kickbacks to push doctors to hold patients longer than medically necessary and overbill Medicare and Medicaid.  Since RACs flag these types of patterns of abuse in their audits, and auditing has been halted, rampant waste, fraud and abuse will persist until the RACs are fully back in business.

The landscape for the RAC program, and taxpayers, became exponentially worse on Thursday, March 27, 2014, when the U.S. House of Representatives moved to address Medicare’s Sustainable Growth Rate (SGR) issue, popularly known as the “doc fix.”  In 1997, Congress established the SGR, which was supposed to peg the amount of money for Medicare reimbursements to physicians to economic growth.  Almost immediately, Medicare spending began outpacing economic growth, which would have triggered reductions in the reimbursement rates.  Since physicians are increasingly refusing to take on new Medicare patients, cutting reimbursement rates only accelerates their exodus from the program.  Since 2003, Congress has passed temporary patches 17 times to prevent the SGR cuts from going into effect.  Faced with a March 31, 2014 deadline, the latest “doc fix” patch was a must-pass legislative vehicle and was, inevitably, laden down with all sorts of other provisions, including language that would suspend all RAC audits for another six months. 

When some members of Congress balked at taking a public roll-call vote that would enable billions of dollars in improper payments to flow out of the Medicare Trust Fund, House Republican leadership engaged in a stunning and outrageous procedural gimmick.  Collaborating with House Democratic leadership, as well as Senate Majority Leader Harry Reid (D-Nev.), they quietly jammed the bill through a virtually empty House chamber by voice vote.  The House’s procedural skullduggery guarantees that this highly successful anti-waste program will remain vulnerable to future political manipulation by members from both sides of the aisle.    

RACs will now be barred from post-payment reviews of improper hospital claims for 18 months, which means that the Medicare Trust Fund will lose at least another $2 billion in improper payments.  This is especially ironic, given the fact that on the same day as the “doc fix” bill was passed in the House, CMS finally released its long-overdue FY 2012 RAC Report to Congress, which detailed the stunning success of the program. 

In FY 2012, RACs recovered $2.3 billion in Medicare overpayments, 91 percent of them from in-patient hospitals; only 7 percent of all RAC audits were appealed and overturned; and of the claims appealed, RAC decisions were upheld in 73 percent of the cases.  RAC contractors achieved accuracy ratings from CMS of between 92 and 97 percent.      

Despite the enactment of two improper payment improvement laws since 2010, hundreds of politicians from both sides of aisle (many of whom claim to be staunch opponents of government waste), are colluding with CMS bureaucrats to allow the Medicare program to bleed billions at a time when taxpayers and seniors finally have an effective tool to stop the hemorrhaging.  Instead of expanding the RAC program and broadening its scope, a very successful oversight program has been inexplicably benched.       



Sign Up for Email Updates!Click Here!

View Archives

Posts by Tag

Big Government (151) Waste (72) Obamacare (65) Budget (64) Healthcare (61) Congress (59) Uncategorized (56) Telecommunications (49) Debt (43) Technology (42) Deficit (42) Internet (41)