Medicare Drug Fraud Too Easy

Watchdog report cites lack of detail, accountability
March 7, 2014 Updated: March 11, 2014

Medicare’s Part D pays for one out of every four prescriptions in the United States. But when there’s a potential violation of the program, most insurance sponsors choose not to share it.

Since 2006, Medicare Part D has been subsidizing the prescription drug costs of federal health care beneficiaries. By 2011, the program spent over $67 billion for a single year.

A recent report from the U.S. Department of Health and Human Services (HHS) watchdog finds that more than half of Part D sponsors did not report cases of fraud and abuse from 2010 to 2012. According to report author HHS Inspector General Daniel Levinson, Part D suffers from both a lack of details and accountability.

Oversight of Part D falls to the Centers for Medicare & Medicaid Services (CMS). Since 2008, the Office of the Inspector General HHS has repeatedly called for CMS to require Part D sponsors to report abuse when they suspect it, but the agency has been apprehensive. Instead, CMS requires that sponsors collect aggregate data on potential abuse, with the option to share data with the government and law enforcement if necessary.

However, the voluntary policy has fallen far short of expectations. The inspector general’s report suggests that sponsors may not even be collecting information on potential abuses, and cites two large insurers—representing four million members—that did not claim any fraudulent incidents in 2012.

Levinson once again recommended that the CMS require sponsors to report incidents that violate Part D rules, and also require more specific information, such as identifying who committed the potential fraud.

Levinson found wide variation among insurers for reporting fraud and abuse, and suggested that some sponsors might not understand what they should be looking for. The report recommended that the CMS provide insurance sponsors with distinct categories to identify red flags, and review data from Part D plan sponsors to determine why certain sponsors reported especially high or low numbers of incidents.

Poor Oversight

In a December 2013 joint report tracing the Medicaid prescription money trail, the NPR and ProPublica described Part D as “so convoluted and poorly managed that fraud flourishes, giving rise to elaborate schemes that quickly siphon away millions of dollars.” A ProPublica analysis found that Part D was characterized by weak oversight, where the CMS doesn’t even consider the prescribing data it does have to see if doctors are writing inappropriate prescriptions, or consistently favoring brand name drugs over generics, costing the program millions more than necessary.

The growing epidemic of prescription painkiller abuse has prompted the CMS to make more efforts to address Part D problems. In a Jan. 6, 2014, statement detailing its strategy, the CMS states that it “takes this problem seriously and is taking steps to protect Medicare beneficiaries and the Medicare Trust fund from the harm and damaging effects associated with prescription drug abuse.”


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