The HHS OIG has released a report recommending that CMS grant the Medicare Drug Integrity Contractor (MEDIC) wider latitude in pursuing potential fraud and abuse by Medicare Advantage plans.  The report found that the MEDIC, which is responsible for investigating fraud and abuse by Medicare Advantage plans and Part D drug plans, as well as by providers participating in such plans, devoted nearly all of its investigations to Part D plans.  The MEDIC conducts its own investigations and refers its findings to law enforcement agencies such as OIG and the Department of Justice.  More than 90 percent of the MEDIC’s referrals from April 2010 through March 2011 involved Part D plans.  OIG believes that structural reforms in the MEDIC program are necessary to pursue what OIG believes are unearthed instances of fraud and abuse by Medicare Advantage plans, such as misrepresenting enrollment or encounter data to increase payments, receiving duplicative copayments or premiums from beneficiaries, and submitting claims for services not provided.

Among its recommendations, OIG believes that the MEDIC should commence investigations of Medicare Advantage plans at its own initiative, rather than relying on referrals and tips from external sources—CMS, other law enforcement agencies and Medicare Advantage plans themselves.  OIG believes that the MEDIC should use “proactive methods” to initiate investigations, including reviewing claims data in real time for questionable billing patterns.  To that end, OIG recommends that the MEDIC have access to a “centralized Part C data repository” rather than continuing its current practice of requesting encounter data directly from Medicare Advantage plans.  (The MEDIC has a centralized data source of Part D encounter and billing data.)  Second, OIG recommends that the MEDIC have a greater ability to share its specific findings with other program integrity contractors, such as ZPICs.  Unlike with law enforcement, the MEDIC is only able to share “information about fraud schemes and summary data with other program integrity contactors.”  The report notes that the MEDIC “is prohibited from sharing specific details, such as a beneficiary’s or a provider’s billing history.”  Third, OIG recommends that CMS develop administrative mechanisms to recoup overpayments from Medicare Advantage plans when law enforcement agencies do not pursue the MEDIC’s referrals.  Under the current system, the MEDIC simply refers potential investigations to other law enforcement agencies.  If those agencies do not accept the case, or close the case without ordering a recoupment, the MEDIC must close its investigation.  OIG believes that CMS should institute other methods for recovering overpayments from Medicare Advantage plans when law enforcement agencies do not pursue a case.  Finally, OIG also recommends that CMS amend its regulations to compel Medicare Advantage plans to refer potential fraud and abuse by providers to the MEDIC when the plans learn of such incidents.  OIG finds that CMS’s current instruction that plans “are encouraged—but not required—to refer incidents” is insufficient.

An appendix to the report includes CMS’s official response to OIG’s recommendations, with which CMS mostly agreed.  CMS agreed that it would establish a central Part C data repository and provide the MEDIC with access to it.  CMS also stated that it would clarify its policies about when the MEDIC may share specific details regarding its investigations with other program integrity contractors and State Medicaid agencies.  CMS did not agree with the recommendation that the MEDIC have the ability to recommend collection of Medicare Advantage overpayments.  Given the nature of Medicare Advantage plan payments (i.e., on a capitation basis rather than a claim-specific basis), CMS believes that overpayment recoupment as currently conducted by Medicare contractors and other administrative agencies is inapplicable to Medicare Advantage plans.  Rather, CMS will continue its oversight and review of Medicare Advantage plans to identify fraud and abuse.  CMS also did not agree with OIG’s recommendation that CMS require Medicare Advantage plans to report potential instances of provider fraud and abuse to the MEDIC, noting that the agency’s current policy is likely sufficient in light of the additional workload burdens an express requirement would impose.

The OIG report is available by clicking here.

Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253, ckenny@kslaw.com.