During last week’s announcement of the record-setting fraud bust that charged 301 individuals in schemes totaling $900 million, federal officials were quick to point out the number of schemes involving Medicare Part D. One-quarter of all cases filed targeted Part D and more than 60 individuals were involved in schemes were directed at the 10-year-old program.
During the press conference, a reporter asked the obvious question: "Why is Medicare Part D so susceptible to fraud?"
The government’s answer: It’s a new program.
“I think it’s a relatively new problem because Part D is relatively new in the grand scheme of things,” Assistant Attorney General Leslie Caldwell said. “But it is something that is privately administered so it’s susceptible to abuse.”
Department of Health and Human Services Secretary Sylvia Mathews Burwell doubled down:
“It’s a new program--relatively new,” she said, “It’s a program that’s growing, and it’s a program where the issues of high cost drugs exacerbates that there is money flowing in those spaces.”
Both Caldwell and Burwell are technically correct. In the grand scheme of things, 10 years probably qualifies as “relatively new," particularly when matched up against Medicare and Medicaid, which just celebrated 50 years. It’s also true that new programs can be more susceptible to fraud and abuse.
But the criminal attraction to Part D should come no surprise to federal authorities now--or even ten years ago--especially when you consider the fact that criminals have been targeting Medicare almost from the moment it was created. Pointing to Part D as a “new” program is an easy excuse, but one that only masks the fraud prevention and detection inadequacies that have plagued the program from the start.
Even the federal government recognized the potential for fraud and abuse within Part D well before the program went into effect. A CMS fact sheet released in 2005 outlined the agency’s three-pronged approach to fraud detection and prevention that included Part D plan sponsors that processed and paid claims, Medicare Drug Integrity Contractors (MEDICs) charged with overseeing the plan sponsors as well as investigating fraudulent activity, and CMS itself, which oversaw both the plan sponsors and MEDICs, along with overall program integrity initiatives. CMS boasted that it would use “new and innovative techniques to monitor and analyze data to help identify fraud.”
But that three-pronged approach crumbled almost immediately. An OIG report released in December 2016--just one year into the new program--found that just 15 of the 79 plan sponsors had compliance plans that addressed all 11 of CMS’s fraud recommendations. Additionally, 40 percent of plan sponsors did not have detailed information for six recommendations that focused on fraud detection, correction, and prevention procedures.
Less than two years later, another OIG report found that 24 of the 86 plan sponsors did not identify any potential fraud and abuse incidents, a little hard to believe given Medicare's double-digit improper payment rate. Of the 62 that did identify fraud concerns, only 17 conducted an inquiry, initiated corrective actions, and referred incidents for further investigation.
A subsequent report found that MEDICs--the second line of defense--were largely ineffective. After touting its “new and innovative approach,” just 13 percent of fraud incidents were identified through data analytics, and 96 percent of investigations came from external sources. OIG investigators determined the inefficiencies were linked to inaccessible data, and perhaps most importantly, the fact that plan sponsors were not required to report fraud and abusing incidents to MEDICs or CMS.
That last one is important. Last year, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) rounded up all of its Part D fraud concerns, collected over the past nine years, into one report. One thing that stood out was the fact that just 35 percent of Part D plan sponsors reported data on potential fraud and abuse in 2012, down from 40 percent in 2010. Although the OIG continues to recommend CMS amend its regulations to require fraud reporting, the agency has routinely disagreed. A recent anti-fraud bill that was introduced to Congress in May includes such an amendment.
At the moment, plan sponsors are essentially left to their own devices. Since plan sponsors are the “first line of defense” the other two legs of the tripod are predictably unsteady: Without this basic information, oversight from MEDICs and CMS is significantly weakened. And despite repeated recommendations from the OIG urging CMS to require fraud reporting, the agency stubbornly argues that it “would not necessarily yield a better outcome in terms of stopping Part D fraud.”
The OIG’s latest report, released last week, shows some disturbing spending trends--including a 3,466 percent spike in reimbursement for compounded pain creams from 2006 through 2015. Overall spending on compounded drugs increased more than 200% from 2013 through 2015. Only now are federal authorities catching up with those schemes.
Part D’s susceptibility to fraud is not because it’s a new program--it’s because its approach to fraud prevention is inherently flawed and hte fact that CMS never really established a solid foundation of fraud detection despite predictions that it would be a lucrative target. Attributing fraud vulnerabilities to the infancy of the program is like blaming a rash of burglaries on a newly constructed house, while ignoring the fact that there are no locks on the doors, and a well-worn welcome mat decorated with dollar signs.