GAO Report Concludes Medicare Remains High-Risk Federal Program Due to Failure to Lower Rate of Improper Payments


On February 27, 2013, the Government Accountability Office (GAO) released its High-Risk Update for Medicare and Medicaid, stating that “CMS has not met GAO’s criteria to have the Medicare program removed from the High-Risk List.”  The report is available by clicking here.  Though GAO acknowledges improvements by CMS in “measuring and reducing improper payment rates in different parts of the program,” because CMS “has yet to demonstrate sustained progress in lowering the rates,” it remains on the List.

GAO’s high-risk report, updated for each session of Congress, focuses on government programs that have been recognized as high-risk due to their greater susceptibility to fraud, waste, abuse and mismanagement, or for their need to address economy, efficiency or effectiveness challenges.  GAO has identified Medicare as a high-risk program since 1990 due to its “complexity and susceptibility to improper payments, which, added to its size, have led to serious management challenges.”  According to GAO, the Medicare program’s reported improper payments were estimated at more than $44 billion in 2012. 

In its report, GAO acknowledges that CMS has made improvements in certain areas, such as:

  • reforming and refining payment systems in both the traditional fee-for-service  program and Medicare Advantage (MA) plans;
  • improving program management through such initiatives as the DME competitive bidding program and mandatory reporting of Medicare secondary payer situations;
  • improving CMS’s oversight of contracts;
  • reducing improper payments and strengthening program integrity;
  • implementing the Fraud Prevention System (FPS); and
  • improving nursing home oversight and rating systems.

However, CMS still fails to meet GAO’s criteria for removal from the High-Risk List, and “continuing to reduce improper payments in this program should remain a priority for CMS.”  Accordingly, GAO recommends that CMS take steps to:

  • implement an effective physician profiling system that uses value-based modifiers;
  • develop approaches to self-referred claims to ensure their appropriateness;
  • implement the quality bonus payment provisions in the ACA for MA plans;
  • improve the accuracy of MA plan payment adjustments for diagnostic coding differences;
  • improve prepayment control structure;
  • develop plans for information technology efforts related to improper payments and fraud, and determine the effectiveness of such plans; and
  • improve reliability of the nursing home complaint investigation database and improve the Five-Star System for rating nursing homes.

For more information, including GAO’s similar recommendations for Medicaid, click here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822,

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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