OIG to CMS: Quit allowing drug costs for jailed beneficiaries

Medicare Part D overpaid almost $12 million for inappropriate, gross drug costs for incarcerated beneficiaries from 2006 through 2010, according to results of an Office of Inspector General audit. The overpayment resulted from weak internal controls at the Centers for Medicare & Medicaid Services.

Specifically, CMS accepted prescription drug event (PDE) records from Part D sponsors and used the records to erroneously determine payment for incarcerated beneficiaries who received prescription drugs. Further, "CMS did not provide sufficient and timely guidance to sponsors that would have allowed them to readily and accurately verify a beneficiary's incarceration status and dates of incarceration," the audit report states.

Prisoners aren't generally eligible for government program health insurance benefits, the OIG noted. And beneficiaries must live in a Part D plan service area to qualify for Medicare prescription drug benefits. These areas don't include prisons.

CMS accepted almost 1,300 PDE records for 49 of 100 beneficiaries, the audit revealed. Gross drug costs associated with these records topped $325,000. OIG used these sample costs to project a nearly $12 million overpayment for the audited time period.

Part D prescription drugs are a significant Medicare cost driver: Sponsors submitted about $256 billion in gross drug costs to CMS through final PDE records between 2006 and 2010, according to the OIG. The audit comes on the heels of a prior review exposing $33.6 million in Medicare A and B overpayments to healthcare providers for services to imprisoned beneficiaries. Moreover, a February 2011 OIG study exposed millions of dollars in Part D payments for invalid, illegal prescriptions.

The OIG recommended three corrective actions for CMS following the recent PDE audit:

  1. Resolve improper payments for Part D drugs provided to prisoners;  
  2. Strengthen internal controls to prevent future overpayments of this type; and
  3. Revise payment determinations for all periods before implementing new policies to heighten internal controls.

CMS accepted the first two recommendations but not the third, saying there was no effective way to recoup overpayments without first implementing new policies, procedures and systems changes.

For more:
- read the audit summary and report (.pdf)

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