Editor’s Corner: CMS probably didn’t save $42B through fraud prevention

headshot of Evan Sweeney

By now you’ve probably seen that glorious $42 billion figure that the Centers for Medicare & Medicaid Services is touting. That’s how much the agency says it saved over a two-year period thanks to advanced fraud prevention efforts.

Pretty impressive, right?

More like “sort of” impressive. The problem with CMS’ $42 billion figure is that most of it is imaginary--rooted in some strategic guesswork and finished with a dash of marketing.  

Nearly $27.8 billion of that figure is linked to estimated prevention savings, according to an annual report to Congress--money that Medicare didn’t end up paying out to providers because of actions taken by the agency. Basically, “here’s what we probably would have spent on fraudulent claims if we didn’t catch this provider.” For example, CMS estimated that it saved more than $1.4 billion in fiscal years 2013 and 2014 by removing providers who were no longer qualified to bill Medicare (something that CMS is pretty bad at to begin with, by the way).

CMS attributes a large chunk of that savings ($24.8 billion) to prepayment reviews initiated against providers who demonstrated unusual billing patterns. As the agency explained in a recent post attributing $1.5 billion in savings to its Fraud Prevention System (FPS), data analytics identified certain billing patterns that triggered possible fraud concerns. Those providers were often put on prepayment review, and later pulled from Medicare altogether.

But there is plenty of uncertainty surrounding those estimates. Earlier this year, the Government Accountability Office (GAO) reported that it was unable to verify the savings generated by prepayment reviews in 2013 and 2014, in part because Medicare Administrative Contractors (MACs) varied wildly in the way they reported projected savings. For example, two MACs used the amount providers bill to Medicare to calculate savings, even though those figures can be “three to four times higher than allowable amounts.” And nine MACs calculated prepayment savings based on the allowed amount, even though that is “marginally higher” than what Medicare actually pays.

CMS concurred with the GAO’s recommendation to develop a uniform method for calculating prepayment savings, but there's no indication that was resolved in time to adjust the latest $42 billion figure. CMS also linked more than $6 billion in savings to recovery auditors in FY 2013 and 2014, apparently ignoring the backlog of more than 800,000 appeals that had stacked up as of 2014.

A similar discrepancy happened last year when CMS touted a 10-to-1 return on investment linked to the FPS in 2014. But the OIG certified just $133 million in adjusted savings that can be “reasonably can be expected to be recovered or avoided,” knocking that ROI down to less than 3-to-1. The OIG recognized $454 million in unadjusted savings, but clarified that figure “may not be recovered or avoided." And yet, that was the figure that ended up at the top of CMS’ press release.

CMS is well aware of these nuances--the agency gave a thorough explanation of “adjusted” versus “unadjusted savings” in its 2015 report to Congress--it just conveniently ignores those distinctions when it’s promoting its antifraud programs.

This isn’t meant to be an indictment against CMS. If anything, it speaks to the difficulty in putting a definitive dollar sign on fraud prevention. The fact is, the agency is facing plenty of pressure to justify the cost of fraud-fighting initiatives, particularly the new FPS. Lawmakers are asking for an ROI when, by its very nature, a preventive system doesn’t necessarily lend itself to that kind of cut-and-dry calculation.

That doesn’t mean CMS should be absolved of all accountability when it comes to quantifying fraud prevention efforts, but it needs to offer some more context to that big, gleaming number--one that appears a lot larger than it really is.