Obama Admin: $20B in payment errors avoided, new pilots launched

Source: www.whitehouse.gov

Overall, $17.6 billion in improper payments were prevented in 2011, as part of President Barack Obama Administration’s Campaign to Cut Waste, fueled by decreases in payment errors in Medicare, Medicaid and food stamps. Combined with the improper payment cuts in 2010, agencies have avoided making more than $20 billion in improper payments in the two years since Obama issued an executive order initiating an aggressive campaign against wasteful payment errors, according to the Office of Management and Budget (OMB).

Obama has a directive to prevent $50 billion in payment errors by the end of 2012, said OMB Director Jack Lew. “This is a good step, but not the end.”

The 2011 government-wide error rate stands at 4.7 percent, a decrease from the 2010 error rate of 5.3 percent and the 2009 error rate of 5.4 percent. And, for the first time in six years, the total amount of improper payments reported declined from the previous year. The administration also has recaptured over $1.2 billion in overpayments from government contractors last year. When combined with the roughly $700 million in overpayments recaptured in the previous year, the government is very near to achieving the President’s mandate for saving $2 billion by the end of 2012.

To achieve these results, federal agencies are increasing scrutiny of payments by initiating more robust audits, leveraging new technologies and building partnerships with states focused on improved program integrity. For example, the Medicare fee-for-service error rate fell from 9.1 percent in 2010 to 8.6 percent in 2011. Since 2009, the error rate has fallen more than 2 percentage points. The overall error rate for Medicare programs fell from 10.2 percent in 2010 to 8.6 percent in 2011. Since 2009, the error rate has fallen nearly 3.2 percentage points. 

The error rate for the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) has reached an all-time low, falling to 3.8 percent this year, avoiding a projected $800 million in payment errors compared to before the President issued his directive.

The administration plans to continue its savings efforts through four new pilot programs:

Recovery Audit Prepayment Review: The Recovery Audit Prepayment Review demonstration will allow Medicare Recovery Auditors (RACs) to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments.

These reviews will focus on  seven states with high populations of fraud- and error-prone providers (Florida, California, Michigan, Texas, New York, Louisian and Illinois) and four states with high claims volumes of short inpatient hospital stays (Pennsylvania, Ohio, North Carolina and Missouri) for a total of 11 states. This demonstration also will help lower the error rate by preventing improper payments rather than the traditional “pay and chase” methods of looking for improper payments after they have been made.

Prior Authorization for Certain Medical Equipment: This will require prior authorization for certain medical equipment for all people with Medicare who reside in seven states with high populations of fraud- and error-prone providers (California, Florida, Illinois, Michigan, New York, North Carolina and Texas). It will focus on appropriate payments for certain medical equipment that has a high error rate. This demonstration will help ensure that a beneficiary’s medical condition warrants their medical equipment under existing coverage guidelines, and help ensure that Medicare beneficiaries receive quality products from accredited suppliers.

Part A to Part B Rebilling: This will allow hospitals to rebill for 90 percent of the Part B payment when a Medicare contractor denies a Part A inpatient short stay claim as not reasonable and necessary due to the hospital billing for the wrong setting. Currently, when outpatient services are billed as inpatient services, the entire claim is denied in full. This demonstration will be limited to a representative sample of 380 hospitals nationwide that volunteer to be part of the program.

This demonstration will allow hospitals to resubmit claims for 90 percent of the allowable Part B payment when a Medicare Administrative Contractor, RAC or the Comprehensive Error Rate Testing Contractor finds that a Medicare patient met the requirements for Part B services but did not meet the requirements for a Part A inpatient stay. In addition, this demonstration is expected to lower the appeals rate which will protect the trust fund and reduce hospital burden. Beneficiaries will be held harmless with respect to changes in hospital coinsurance liability.

The U.S. Department of Health and Human Services announced a pilot project under the Partnership Fund for Program Integrity Innovation in May that will test an automated tool to screen providers for the risk of fraud. Currently, HHS and states lack standardized Medicaid provider data, which hampers detection of potential fraud. If successful, this tool will help prevent improper payments by weeding out fraudulent providers and help states focus their resources where fraud is most likely to occur.