HHS FY2015 Budget in Brief

Centers for Medicare & Medicaid Services
Centers for Medicare & Medicaid Services (CMS): Program Integrity

The Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.

CMS Medicare Budget Overview

(Dollars in millions)

Budget Authority




2015 */- 2014

HCFAC Discretionary /1 /2





HCFAC Mandatory /3





Affordable Care Act (nonadd)





Total, Budget Authority






1/ The FY 2015 President's Budget provides $319 million for HCFAC through discretionary appropriations. The Budget also proposes additional mandatory funding beginning in FY 2015. 

2/ The FY 2013 discretionary base and FY 2013 and FY 2014 mandatory base include sequester reductions.

3/ Does not include Deficit Reduction Act funding for the Medicaid Integrity Program, which is discussed in this chapter but is in the State Grants and Demonstrations account. 

CMS Program Integrity Activities

The FY 2015 Budget supports fraud prevention and the reduction of improper payments, which are top priorities of the Administration. For FY 2015, the Budget invests a total of $428 million in new Health Care Fraud and Abuse Control Program (HCFAC) and Medicaid program integrity funds. Together the program integrity investments in the Budget will yield $13.5 billion in gross savings for Medicare and Medicaid over 10 years. The Budget also proposes legislative changes to give HHS important new tools to enhance program integrity oversight; cut fraud, waste, and abuse in Medicare, Medicaid, and Children’s Health Insurance Program (CHIP); and generate an additional $1 billion in program savings over 10 years.

Health Care Fraud and Abuse Control Funding

The FY 2015 Budget proposes to build on recent progress by increasing support for the HCFAC program through both mandatory and discretionary funding streams. The FY 2015 HCFAC program level is $2 billion. Of the total FY 2015 program level, $1.7 billion is mandatory funding and $319 million is requested in discretionary funding.

The Budget includes $697 million in HCFAC program funding in FY 2015, $294 million in base discretionary funding, $25 million in new discretionary funding, and $378 million in proposed new mandatory funding. Starting in FY 2016, the Budget requests all additional HCFAC funds as mandatory, instead of through the discretionary cap adjustment included in the Budget Control Act (BCA). This approach will provide a dedicated, dependable source of additional resources to perform program integrity activities and make certain that only accurate payments are made to legitimate providers for appropriate services for eligible beneficiaries. All proposed HCFAC program investments, including gradual growth over time, are consistent with BCA levels.

HCFAC Multi-Year Investment and Savings

The $1.3 billion in mandatory base funds for FY 2015 are financed from the Medicare Part A Trust Fund.

This funding is allocated to the Medicare Integrity Program (MIP) and the HCFAC Account, which is divided annually among the HHS Office of Inspector General (OIG), other HHS agencies, and law enforcement partners at the Department of Justice (DOJ) and the Federal Bureau of Investigation.

PROGRAM HIGHLIGHT -- Power Mobility Devices (PMD) Prior Authorization Demonstration
CMS implemented a Prior Authorization process for scooters and power wheelchairs in seven states with high populations of fraud- and error-prone providers (CA, IL, MI, NY, NC, FL and TX) starting in 2012. This demonstration is an approach drawn from the private sector, and is designed to ensure that Medicare only pays for PMDs that meet longstanding coverage guidelines, thereby reducing improper payments and reducing fraud, waste and abuse.

In September 2013 CMS released positive findings for the first year of implementation. Based on the initial report, in 2012 Medicare PMD expenditures per month dropped significantly in demonstration states and non-demonstration states. Additionally, CMS reported positive feedback on prior authorization from the industry because it helps reduce subjecting providers and suppliers to future post-pay audits and ensures a predictable cash flow related to billing. Finally, in the first year of implementation there were zero beneficiary complaints about the process.

The Budget proposes to expand prior authorization not only to PMD services but also to certain high risk Medicare fee-for-service categories.

These dollars fund comprehensive efforts to combat health care fraud, waste, and abuse, including prevention focused activities, improper payment reductions, provider education, data analysis, audits, investigations, and enforcement. The additional FY 2015 Budget request of $697 million of discretionary and additional mandatory funding is allocated between CMS ($476 million), OIG ($113 million), and DOJ ($108 million). These funds are part of a multi-year program integrity investment of new mandatory funding to combat health care fraud in Medicare, Medicaid, and CHIP. To help ensure the prudent use of federal funds, the Budget includes $25 million of discretionary HCFAC funding for program integrity activities in private insurance, including the Health Insurance Marketplaces.

The HCFAC investment supports efforts to reduce the Medicare fee for service improper payment rate and initiatives of the joint HHS DOJ Health Care Fraud Prevention and Enforcement Action Team task force, including Strike Force teams in cities where intelligence and data analysis indicate high levels of fraud, and the Health Care Fraud Prevention Partnership between the federal government, private insurers, and other stakeholders. CMS will also make further investments in innovative prevention initiatives, such as the Fraud Prevention System that analyzes all Medicare FFS claims using sophisticated algorithms to identify suspicious behavior. In FY 2015 and beyond, CMS will continuously refine these technologies to better combat fraud, waste, and abuse in Medicare, Medicaid, and CHIP. Finally, these funds will support more rigorous data analysis and an increased focus on civil fraud, such as off label marketing and pharmaceutical fraud.

Return on Investment: Programs supported by HCFAC mandatory funds have a proven record of returning more money to the Medicare Trust Funds than the dollars spent.

The 3 year rolling average return on investment for HCFAC law enforcement activities is a record 8.1 to 1. From 1997 to 2013, programs supported by HCFAC have returned over $25.9 billion to the Medicare Trust Funds. In FY 2013 alone, $4.3 billion was recovered, including $2.85 billion returned to the Medicare Trust Funds and $576 million in federal Medicaid recoveries returned to the Treasury. CMS actuaries conservatively project that for every new dollar spent by HHS to combat health care fraud; about $1.50 is saved or avoided. Based on these projections, the $697 million in additional HCFAC funding, as part of a multi year HCFAC investment included in the Budget, will yield additional Medicare and Medicaid savings of $7.4 billion over 10 years. Further, the HCFAC return-on-investment demonstrates that in recent years the actual recoveries from HCFAC law enforcement efforts have far exceeded the projected savings.


New Affordable Care Act Authorities

The Affordable Care Act includes an additional $350 million in program integrity resources over 10 years, plus an inflation adjustment. It provides unprecedented tools to CMS and law enforcement to protect Medicare, Medicaid, and CHIP from fraud, waste, and abuse. (See “Program Integrity Enhancements Authorized by the Affordable Care Act” for further details.) These program integrity tools fight fraud and safeguard taxpayer dollars while ensuring patient access to care is not interrupted.

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Fraud Prevention System

In 2013, CMS completed its second year of full implementation of the Fraud Prevention System (FPS), marking a significant shift from a pay and chase model to a prevention approach using technology similar to the credit card industry. The FPS screens all Medicare Part A and Part B, including Durable Medical Equipment (DME), claims using a series of predictive models to identify suspicious billing activity and emerging fraud trends. The system prioritizes leads for CMS’s program integrity contractors to investigate and determine whether to stop payment or make a referral to law enforcement.

Medicare Strike Force Success

The Medicare Fraud Strike Force is a partnership between HHS and DOJ in nine health care fraud hot spots around the country. Strike Force teams use advanced data analysis techniques to identify high billing levels so that interagency teams can target emerging or migrating schemes and chronic fraud by criminals masquerading as health care providers or suppliers.

Since its inception, Strike Force prosecutors filed more than 788 cases charging more than 1,727 defendants who collectively billed the Medicare program more than $5.5 billion. Strike Force prosecutors secured 1,137 guilty pleas and 148 others were convicted in jury trials, and 1,087 defendants were sentenced to imprisonment for an average term of nearly 4 years.

Medicaid Integrity Program Multi-Year Investment and Savings

Medicaid Integrity Program

The Medicaid Integrity Program was established by the Deficit Reduction Act of 2005, which appropriated $75 million in FY 2009 and for each year thereafter. The Affordable Care Act later increased appropriations for FY 2011 and future years by inflation.

States have the primary responsibility for combating fraud, waste, and abuse in the Medicaid program, but the Medicaid Integrity Program plays an important role supporting state efforts, including through contracting with eligible entities to carry out activities including reviews, audits, identification of overpayments, education activities, and technical support to states. The Medicaid Integrity Program works in coordination with Medicaid program integrity activities funded through the HCFAC program. This program includes a collaborative effort across CMS to transform the Medicaid data enterprise through the Medicaid and CHIP Business Information and Solutions program.

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Program Integrity Legislative Proposals

The Budget includes legislative proposals to further strengthen program integrity for Medicare, Medicaid, and CHIP, saving $1 billion over 10 years.



Allow Prior Authorization for Medicare Fee-for-service Items: Currently, CMS has authority to require prior authorization for Medicare DME service items. This proposal would extend that authority to all Medicare fee-for-service items, particularly those service items that are at the highest risk for improper payment. By allowing prior authorization on additional items, CMS can ensure in advance that the correct payment goes to the right provider for the appropriate service, and prevent future Recovery Audit Contractor audits on those payments. In addition, this proposal would require the Secretary to implement prior authorization in two service areas: power mobility devices and advanced imaging. [$90 million in savings over 10 years]

Allow Civil Monetary Penalties for Providers and Suppliers who Fail to Update Enrollment Records: Currently, providers and suppliers are required to update enrollment records to remain in compliance with the Medicare program. This proposal would allow penalties if providers and suppliers fail to update their records, give them an additional incentive to report up to date information (such as adverse legal actions), and help reduce program vulnerability to fraud. [$90 million in savings over 10 years]

Allow the Secretary to Create a System to Validate Practitioners’ Orders for Certain High Risk Items and Services: Many current systems for ordering services lack mechanisms to determine whether the service is medically necessary or if the patient has seen a practitioner. An electronic Medicare claims ordering system could result in significant savings by preventing improper payments. [No budget impact]

Increase Scrutiny of Providers using Higher Risk Banking Arrangements to Receive Medicare Payments: This proposal would require providers to report the use of sweep accounts that immediately transfer funds from a financial account to an investment account in another jurisdiction preventing Medicare from recovering improper payments, and permit enhanced review of reporting providers. [No budget impact]

Retain a Percentage of Incentive Reward Payment Recoveries: Under an incentive reward program individuals and beneficiaries reporting incidences of fraud, waste, and abuse are eligible to receive a percentage of the Medicare recoveries yielded from the tip up to $1000 reward. This proposal would work in conjunction with a proposed CMS rule expanding the program to allow CMS to retain a percentage of the recovery to administer the program. [No budget impact]

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Medicaid Integrity Program Investment and Expanded Authority: This proposal increases the Medicaid Integrity Program by $25 million per year (adjusted by the Consumer Price Index for All Urban Consumers). This proposal also expands the statutory authority for the Medicaid Integrity Program to increase program flexibility in protecting state and federal resources. These important reforms will support activities that protect the integrity and sustainability of Medicaid and will allow the program, in coordination with states, to strengthen initiatives that prevent fraud, waste, and abuse before it occurs. [$276 million in costs over 10 years]

Support Medicaid Fraud Control Units for the Territories: Medicaid Fraud Control Units have demonstrated success in recovering Medicaid dollars. This proposal would encourage territories to establish Medicaid Fraud Control Units to protect their Medicaid programs by exempting federal support for Medicaid Fraud Control Units from the cap on Medicaid funding for the territories and by exempting territories from the statutory ceiling on quarterly federal payments for the units. [$10 million in costs over 10 years]

Expand Medicaid Fraud Control Unit Review to Additional Care Settings: The Budget proposes to allow Medicaid Fraud Control Units to receive federal matching funds for the investigation or prosecution of abuse and neglect in non-institutional settings, such as home-based care—in which a beneficiary may be harmed in the course of receiving health care services. The current limitation on federal matching was logical when the program was established in 1978, at a time when Medicaid services were typically provided in an institutional setting, but has become outmoded as the delivery and payment for health services has increasingly shifted to in-home and community based settings. [No budget impact]

Track High Prescribers and Utilizers of Prescription Drugs in Medicaid: This proposal would track high prescribers and utilizers of prescription drugs in Medicaid. States are currently authorized to implement prescription drug monitoring activities, but not all states have adopted such activities. Under this proposal, states will be required to monitor high risk billing activity to identify and remediate prescribing and utilization patterns that may indicate abuse or excessive utilization of certain prescription drugs in the Medicaid program. States may choose one or more drug classes and must develop or review and update their care plan to reduce utilization and remediate any preventable episodes to improve Medicaid integrity and beneficiary quality of care. [$540 million in savings over 10 years]

Consolidate Redundant Error Rate Measurement Programs: This proposal would alleviate state program integrity reporting requirements and create a streamlined audit program by consolidating the Medicaid Eligibility Quality Control and Medicaid Payment Error Rate Measurement programs. [No budget impact]

Prevent Use of Federal Funds to Pay State Share of Medicaid or CHIP: Federal regulations prohibit federal funds from being used as the state share for Medicaid unless authorized in federal law. By codifying this principle in statute, this proposal would prevent states from using federal funds to pay the state share of Medicaid or CHIP, unless specifically authorized under law. [No budget impact]

Improvements to Program Integrity for Medicaid Drug Coverage: The President’s Budget includes four related proposals to enhance program integrity for the Medicaid drug rebate program. These proposals are detailed in the Medicaid chapter.

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FY 2015 Proposed CMS and State Medicaid Program Integrity Funds by Source


Medicare and Medicaid:

Retain a Portion of Recovery Audit Contractor Recoveries to Implement Actions That Prevent Fraud and Abuse: Under current law, CMS can use the recovered funds from the Recovery Audit Contractor program to administer the program but cannot use these funds to implement corrective actions, such as new processing edits and provider education and training, to prevent future improper payments. This proposal addresses this funding restriction. [$250 million in savings over 10 years]

Strengthening Program Integrity Tools
The FY 2015 Budget builds on the Affordable Care Act’s unprecedented fraud fighting authorities with program integrity legislative proposals. These proposals enhance pre payment scrutiny, increase penalties for improper actions, strengthen CMS’s ability to implement corrective actions, and promote integrity in federal state financing while saving Medicare, Medicaid, and CHIP $1 billion over 10 years.

Permit Exclusion from Federal Health Care Programs if Affiliated with Sanctioned Entities: This proposal would expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by: eliminating the loophole in current law that allows an officer, managing employee, or owner of a sanctioned entity to evade exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity. [$60 million in savings over 10 years]

Strengthen Penalties for Illegal Distribution of Beneficiary Identification Numbers: In an effort to protect beneficiaries from illegal distribution of their personal identification numbers, this proposal would strengthen penalties for knowingly distributing Medicare, Medicaid, or CHIP beneficiary identification or billing privileges. [No budget impact]

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FY 2015 Program Integrity Legislative Proposals

Dollars in millions

(Non-Add: Proposed Law impacts incorporated into Medicare, Medicaid and State Grants and Demonstration Tables)



2015 -2019

2015 -2024

Allow Prior Authorization for Medicare Fee-for-service Items



Allow Civil Monetary Penalties for Providers and Suppliers who Fail to Update Enrollment Records



Allow the Secretary to Create a System to Validate Practitioners’ Orders for Certain High Risk Items and Services

Increase Scrutiny of Providers Using Higher-Risk Banking Arrangements to Receive Medicare Payments

Retain a Percentage of Incentive Reward Program Recoveries




2015 -2019

2015 -2024

Support Medicaid Fraud Control Units for the Territories




Track High Prescribers and Utilizers of Prescription Drugs in Medicaid




Consolidate Redundant Error Rate Measurement Programs

Expand Medicaid Fraud Control Unit Review to Additional Care Settings

Prevent Use of Federal Funds to Pay State Share of Medicaid or CHIP



Medicare & Medicaid


2015 -2019

2015 -2024

Retain a Portion of RAC Recoveries to Implement Actions That Prevent Fraud and Abuse



Medicare [non-add]



Medicaid [non-add]



Permit Exclusion from Federal Health Care Programs if Affiliated with Sanctioned Entities



Medicare [non-add]



Medicaid [non-add]

Strengthen Penalties for Illegal Distribution of Beneficiary Identification Numbers

Medicare [non-add]

Medicaid [non-add]

Subtotal, Medicare Impact



Subtotal, Medicaid Impact




Subtotal, Program Integrity Savings





Program Integrity Investment /1


2015 -2019

2015 -2024

HCFAC Mandatory Investment




Conversion of Discretionary Base to Mandatory Funding (non-add) 



Net HCFAC Mandatory Investment (non-add) 




Mandatory Investment from Expanding Funding and Authority for the Medicaid Integrity Program




Total, Program Integrity Investment





Non-PAYGO Savings/2


2015 -2019

2015 -2024

Savings from Additional HCFAC Investment




Savings from Supporting Medicaid Fraud Control Units for the Territories



Savings from Expanding Medicaid Fraud Control Unit Review to Additional Care Settings




Savings from Additional Medicaid Integrity Program Investment



Savings from Social Program Integrity Investment



Subtotal, Medicare and Medicaid Savings from Program Integrity Investment




Total, Net Savings Program Integrity Proposed Policy




Impact Net of Conversion of Discretionary Base to Mandatory Funding (non-add)




1/ Totals reflect additional HCFAC mandatory investment proposed in the President's Budget, above the 2015 discretionary levels. The Budget no longer proposes discretionary HCFAC funding after FY 2015, and instead requests mandatory HCFAC funding.

2/ Includes non-PAYGO savings from increased program integrity investments in HCFAC, Medicaid Fraud Control Units, the Medicaid Integrity Program, and Social Security disability reviews above savings assumed in current law.


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