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 Program Integrity Budget Overview
(Dollars in millions)
|Budget Authority||2015||2016||2017|| 2017
|HCFAC Discretionary /1||672||681||725||+44|
|HCFAC Mandatory /2||1,273||1,279||1,324||+45|
|Affordable Care Act (non-add)||152||156||151||-5|
|Total, Budget Authority||1,945||1,960||2,049||+89|
1/ The FY 2015 and FY 2016 mandatory base include sequester reductions.
2/ 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.
The FY 2017 Budget supports fraud prevention and the reduction of improper payments, which are top priorities of the Administration. For FY 2017, the Budget proposes $199 million in new mandatory and discretionary investments to address healthcare fraud, waste, and abuse. Together, the program integrity investments in the Budget will yield $23.8 billion in 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 and cut fraud, waste, and abuse in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).
Health Care Fraud and Abuse Control Funding
The FY 2017 Budget proposes to build on recent progress by increasing support for the Health Care Fraud and Abuse Control (HCFAC) program through both mandatory and discretionary funding streams. The FY 2017 HCFAC program level is $2 billion. Of the total FY 2017 program level, $1.3 billion is mandatory funding and $725 million is discretionary funding.
HCFAC Discretionary Funds
The Budget requests $725 million in discretionary HCFAC funding, which is $44 million above the FY 2016 enacted level. Consistent with the Budget Control Act of 2011, the Budget requests base discretionary funds ($311 million) plus a discretionary cap adjustment ($414 million). The discretionary funding is allocated to CMS program integrity activities ($487 million), the Department of Justice (DOJ) ($116 million) and the HHS OIG ($122 million). Relative to the FY 2016 enacted level, the request includes more funds from the cap adjustment for HHS’s law enforcement partners to expand Strike Force capacity and support rigorous data analysis and increase focus on civil fraud, such as off‑label marketing and pharmaceutical fraud. The Budget request also seeks the authority to use HCFAC discretionary funds to prevent fraud, waste, and abuse in the private health insurance market, including the Marketplaces.
HCFAC Multi-Year Investment and Savings (in millions)
|Total Program Level /1||1,960||2,049||2,097||2,144||2,195||2,236||10,721||22,760|
|Savings from Discretionary Investment /2||-749||-795||-844||-894||-947||-991||-4,471||-10,155|
1/ Total Program Levels may not add due to rounding.
2/ Savings are the gross savings attributable only to the discretionary investment above the base discretionary funds ($311 million annually). Savings are not scorable under PAYGO.
The HCFAC investment also supports efforts to reduce the Medicare fee-for-service improper payment rate, increase oversight in both Medicare and Medicaid managed care, and strengthen the Health Care Fraud Prevention Partnership among the federal government, private insurers, and other stakeholders. CMS will also make further investments in innovative prevention initiatives, such as the Fraud Prevention System and Medicare prior authorization.
HCFAC Mandatory Funds
The $1.3 billion in mandatory base funds for FY 2017 are financed from the Medicare Part A Trust Fund. The funding is allocated to: the Medicare Integrity Program; the HCFAC Account, which is divided annually among the HHS OIG; other HHS agencies; DOJ; and the Federal Bureau of Investigation. These dollars fund comprehensive efforts to combat health care fraud, waste, and abuse, including prevention-focused activities, improper payment reduction, provider education, data analysis, audits, investigations, and enforcement.
Expanding Program Integrity Efforts in Key Areas
CMS is applying lessons learned from successes in Medicare fee-for-service program integrity efforts to Medicaid, private insurance programs, and Medicare Parts C and D:
- In Medicaid, CMS is increasing efforts to work with states to prevent fraud and to keep fraudulent providers from enrolling in Medicaid, including plans to facilitate states’ provider enrollment and provider screening efforts by making state Medicaid and CHIP provider enrollment data available to all states as part of upgrades to the Provider Enrollment, Chain, and Ownership System.
- CMS is also applying lessons learned from past data analytics and data matching projects to available Marketplace data and having regular discussions with State-based Marketplaces around best practices to detect and prevent fraud, waste, and abuse.
- The Budget also supports CMS’s continued efforts to enhance Part D program integrity, including a proposal to suspend coverage and payment for drugs prescribed by providers who have been engaged in misprescribing drugs.
Return on Investment
Program integrity returns on investment are measured by program area and separately reported by activity type. There are three key ways in which returns from program integrity activities are described. First, programs supported by HCFAC mandatory funds have a proven record of returning more money to the Medicare Trust Funds than the dollars spent. The most recent estimate of the Medicare Integrity Program 3‑year return on investment is $14 to $1, and the Medicare Integrity Program has recently yielded a consistent return of over $10 billion in savings annually.
Second, the 3-year rolling average return on investment for HCFAC law enforcement activities is $7.7 to $1. In FY 2014 alone, $3.3 billion was recovered, including $1.9 billion returned to the Medicare Trust Funds and $523 million in federal Medicaid recoveries returned to the Treasury.
Third, CMS actuaries conservatively project that for every new dollar spent by HHS to combat health care fraud; about $2 is saved or avoided. Based on these projections, the $5.1 billion in additional discretionary HCFAC funding, as part of a multi-year HCFAC investment included in the Budget, will yield additional Medicare and Medicaid savings of $10.2 billion over 10 years. The HCFAC return on investment demonstrates that in recent years the actual recoveries from HCFAC efforts have far exceeded the projected savings.
Medicaid Program Integrity at a Glance
In 2015, state and federal program integrity officials worked together to successfully fight fraud, waste, and abuse, including the following activities:
- CMS partnered with states to avert $1.0 billion in questionable reimbursements and recovered $1.0 billion in questionable costs.
- The Medicaid Integrity Institute enrolled 1,073 employees from all 50 states, the District of Columbia, and Puerto Rico in 22 program integrity training courses, 1 workgroup, and 13 webinars.
- Collaborative audits with states identified $35.1 million in overpayments..
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 such as 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 HCFAC.
Successful New Tools for Combating Fraud and Abuse
Numerous program integrity enhancements enacted in the Affordable Care Act and subsequent legislation have allowed CMS to take the actions necessary to better ensure that the correct payment is made to the right provider for an appropriate medical service.
The Affordable Care Act
The Affordable Care Act included an additional $350 million in program integrity resources over 10 years, plus an inflation adjustment, and provided unprecedented tools to protect Medicare, Medicaid, and CHIP from fraud, waste, and abuse. These tools include enhanced provider screening, which has allowed CMS to deactivate 543,163 and revoke 34,888 providers and suppliers since 2011, ensuring that bad actors can no longer bill Medicare inappropriately. These enhanced tools have led to more than $2.4 billion in Medicare savings since 2010.
Small Business Jobs Act
In 2011, CMS began implementation of the Fraud Prevention System, which is a sophisticated predictive analytics tool, required by the Small Business Jobs Act. In the first 3 years of implementation, the Fraud Prevention System prevented or identified $820 million in inappropriate billing in the Medicare program, yielding a $10 to $1 return on investment. This system marks a significant shift from a “pay and chase” model to a prevention approach using similar technology used by the credit card industry.
The Medicare Access and CHIP Reauthorization Act The Act provides enhanced tools to reduce fraud and improve program integrity in Medicare, including the expansion of prior authorization in Medicare fee‑for‑service and the removal of Social Security numbers on Medicare cards to protect against identity theft. Additionally, the Act provides the authority to use a portion of recoveries from the Recovery Audit Program determinations toward efforts that reduce improper payments. Once implemented, the provisions included in this Act will likely have a significant impact on reducing the Medicare improper payment rate and preventing fraud and abuse in the Medicare program.
The Patient Access and Medicare Protection Act
This recently enacted law includes several provisions that were included in prior Budgets that will enhance Medicare and Medicaid program integrity. The Act provides new flexibility to the Medicaid Integrity Program with respect to using contractors and dedicated staff for specific activities. Additionally, the Act includes a provision that allows more flexibility in using the funds earmarked for the Medicare-Medicaid data match program, which will allow CMS to enhance collaborative efforts between Medicare and Medicaid to fight fraud, waste, and abuse.
Medicare Strike Force Success
The Medicare Fraud Strike Force is a partnership between HHS and DOJ currently 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. The HCFAC law enforcement partners plan to use the additional resources appropriated to enhance efforts in existing Strike Force cities and potentially expand into new service areas based on data showing high incidences of fraud.
In June 2015, this joint effort led to a nationwide takedown resulting in charges against 243 individuals for approximately $712 million in false billing. Since its inception, Strike Force prosecutors filed more than 963 cases, charging more than 2,097 defendants who collectively billed the Medicare program more than $6.5 billion. Strike Force prosecutors secured 1,443 guilty pleas and 191 others were convicted in jury trials, and 1,197 defendants were sentenced to imprisonment for an average term of nearly 4 years. This Budget allows HHS and DOJ to continue strengthening Strike Force presence across the country.
Program Integrity Legislative Proposals
The Budget includes legislative proposals to further strengthen program integrity for Medicare, Medicaid, and CHIP that will yield billions in net savings over 10 years.
Retain a Portion of Medicare 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 Contractors to administer the program and can use some funds to implement additional corrective actions, such as new processing edits and provider education to reduce improper payments. This proposal allows additional funding for corrective actions above the amounts made available for this purpose in the Medicare Access and CHIP Reauthorization Act. [$2.5 billion in costs and $3.3 billion in non-scorable savings over 10 years]
Suspend Coverage and Payment for Questionable Part D Prescriptions and Incomplete Clinical Information
This proposal provides the Secretary authority to suspend coverage and payment for drugs when those prescriptions present an imminent risk to patients or when they are prescribed by providers who have been engaged in misprescribing or overprescribing drugs with abuse potential. In addition, the proposal provides the Secretary authority to require additional clinical information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage. [$780 million in savings over 10 years]
Allow Prior Authorization for Medicare Fee-for-service Items and Services
Currently, CMS has authority to require prior authorization for specified Medicare fee-for-service items and services. This proposal extends that authority to all Medicare fee-for-service items and services, particularly those that are at the highest risk for improper payment. By allowing prior authorization on additional items and services, CMS can make sure in advance that the correct payment goes to the right provider for the appropriate service, and prevent future audits on those payments. [$75 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 allows penalties if providers and suppliers fail to update their records, providing an additional incentive to report up to date information and helping reduce program vulnerability to fraud. [$32 million in savings over 10 years]
Assess a Fee on Physicians and Practitioners Who Order Services or Supplies without Proper Documentation
This proposal allows the Secretary to assess an administrative fee on providers for claims that have not been properly documented for high risk, high cost items. The proposal only applies when there is insufficient documentation and would not apply to a determination that a fully documented ordered item or service was reasonable and necessary. The fee would be $50 per Part B item/service and $100 per Part A service. This proposal would be implemented after one year of instructional billing. [No budget impact]
Establish a Registration Process for Clearinghouses and Billing Agents
This proposal expands the provider screening authorities included in the Affordable Care Act by establishing a registration process for clearinghouses and billing agents that act on behalf of Medicare providers and suppliers. This proposal also allows CMS to obtain organizational information from clearinghouses and billing agents. [No budget impact]
Allow Collection of Application Fees from Individual Providers and Suppliers
This proposal allows the Secretary to require a Medicare application fee for individual providers in addition to the existing fee on institutional providers. The fee will start at $50 and be adjusted by inflation annually thereafter. This fee supports provider screening, which prevents bad actors from being in the program before they can improperly bill Medicare. [No budget impact]
Pay Recovery Auditor after a Qualified Independent Contractor Decision on Appealed Claims
The proposal allows the Secretary to withhold payment to a Recovery Audit Contractor if a provider or supplier has filed an appeal with the Qualified Independent Contractor and a decision is pending. Aligning the Recovery Auditor contingency fee payments with the outcome of the appeal will make sure that CMS has assurance of the Recovery Audit Contractor’s determination before making payment. [No budget impact]
Require a Surety Bond or Escrow Account to Cover Overturned Recovery Auditor Determinations
This proposal would require that payment to a Recovery Auditor must also include a surety bond to cover any potential costs associated with decisions overturned on appeal. This surety bond would apply even for decisions overturned after the conclusion of the Recover Auditor contract. The bond would protect the federal government from having to cover the costs of an overturned Recovery Auditor determination after that entity’s contract has expired. [No budget impact]
Expand Funding for the Medicaid Integrity Program
This proposal increases the Medicaid Integrity Program by $580 million over 10 years on top of the current funding level. The additional investment starts with an additional $25 million in FY 2017 and increases gradually to an additional $100 million in FY 2026. Thereafter, the total will be annually adjusted by the Consumer Price Index. This funding will be used to address additional program integrity vulnerabilities, including expansion of Medicaid Financial Management program reviews of state financing practices; critical updates to Medicaid claims and oversight systems needed to enhance auditing; technical assistance to states to address improper payments, and other efforts to assist states to fight fraud, waste, and abuse. Over time, the inflation adjusted investment will support initiatives that respond to emerging vulnerabilities. [$580 million in costs and $1.3 billion in non-scorable savings over 10 years]
Track High Prescribers and Utilizers of Prescription Drugs in Medicaid
This proposal requires states to 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 plans to reduce utilization and remediate any preventable episodes to improve Medicaid integrity and beneficiary quality of care. This proposal is part of the Secretary’s initiative for Preventing Opioid Abuse, Misuse, and Overdose, which is described in the Budget in Brief overview. [$770 million in savings over 10 years]
Strengthen CMS Compliance Tools in Medicaid Managed Care
This proposal augments CMS’s financial oversight and compliance tools in Medicaid managed care by providing CMS maximum flexibility to disallow and defer individual payments or partial payments associated with contracts with managed care organizations, prepaid inpatient health plans, and prepaid ambulatory health plans. This proposal allows CMS to tailor deferrals and disallowances to the severity and scope of specific violations, making these managed care compliance tools more effective and more consistent with similar authorities in fee‑for‑service Medicaid. [No budget impact]
Require States to Suspend Medicaid Payments when the Secretary Determines there is a Significant Risk of Fraud
This proposal requires state Medicaid agencies to suspend payments to providers when the Secretary determines that the providers pose a significant risk of fraud to the Medicaid program, unless the state agency demonstrates that the benefits of continuing payments to the provider outweigh the risk of losses to fraud. [No budget impact]
Expand Medicaid Fraud Control Unit Review to Additional Care Settings
Medicaid Integrity Program Multi-Year Investment and Savings
|Mandatory Base Funding /1||77||84||86||88||89||91||438||928|
|Proposed Mandatory Funding /1||-||25||30||35||40||50||180||580|
|Total Program Level||77||109||116||123||129||141||618||1,508|
|Savings from Mandatory Investment /2||0||-85||-90||-100||-105||-115||-495||-1,255|
1/ Funding numbers reflect sequestration of base funding for FY 2016 and include annual Consumer Price Index for All Urban Consumers adjustment.
2/ Savings are attributable only to the proposed Medicaid Integrity Program investment. Savings are not scored under PAYGO.
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 established in 1978, at a time when Medicaid services were typically provided in an institutional setting, but does not reflect the shift in delivery and payment for health services to in-home and community based settings. [No budget impact, but $72 million in non-scorable savings over 10 years]
Consolidate Redundant Error Rate Measurement Programs
This proposal alleviates state program integrity reporting requirements and creates 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 prevents states from using federal funds to pay the state share of Medicaid or CHIP, unless specifically authorized under law. [No budget impact]
Medicare and Medicaid
Allow the Secretary to Reject Claims from New Providers and Suppliers Located Outside Moratorium Areas
This proposal permits the Secretary to reject claims for unnecessary services furnished by newly-enrolled providers and suppliers in localities outside the moratoria areas to beneficiaries located inside that area. Using the authorities provided in the Affordable Care Act, CMS has imposed temporary enrollment moratoria designed to stem the overabundance of certain types of providers and suppliers and the overutilization of certain types of services within particular geographic areas. Some providers and suppliers are circumventing the moratoria by enrolling in localities just outside the moratorium area. [$50 million in savings over 10 years]
Protect Program Integrity Algorithms from Disclosure
The proposal would protect anti-fraud and abuse algorithms developed for Medicare, Medicaid, and CHIP from disclosure. This will allow the Secretary and states to freely share algorithms developed through new predictive analytic tools. These algorithms are vital to uncovering fraud, waste, and abuse and serve as key intelligence for combating bad actors. Should various aspects of these algorithms become known, fraudsters could utilize the information to re-direct their schemes to other areas of the Medicare, Medicaid, and CHIP programs or adjust their schemes to avoid detection. Therefore, in order to ensure states and the Department can learn from each other’s experience in combating fraud, they need to do so without compromising the integrity of the algorithms. [$90 million in savings over 10 years]
Permit Exclusion from Federal Health Care Programs if Affiliated with Sanctioned Entities
This proposal expands 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. [$70 million in savings over 10 years]
Establish Gifting Authority for the Healthcare Fraud Prevention Partnership
This proposal gives the authority to accept gifts made to the Medicare Trust Funds for particular activities funded through the HCFAC Account, such as the Healthcare Fraud Prevention Partnership. Currently, the HCFAC account can only receive gifts that are made for an unspecified purpose. This proposal allows for gifts to be made to support the Partnership directly, and allows both public and private partners to support the anti-fraud program. [No budget impact]
Publish the National Provider Identifier for Covered Recipients in the Open Payment Program
This proposal allows CMS to publish the National Provider Identifier of covered recipients on the public Open Payments website. Adding this identifier to the published data made on the Open Payments website will make it easier for data users to connect Open Payments records with covered recipient information, allowing greater access and transparency of the data. This addition will not make public any data that is not already currently available to the general public. [No budget impact]
FY 2017 Program Integrity Legislative Proposals
Dollars in millions
(Non-Add: Proposed Law impacts incorporated into Medicare, Medicaid and State Grants and Demonstration Tables)
|Retain a Portion of Medicare Recovery Audit Recoveries to Implement Actions That Prevent Fraud and Abuse||130||1,010||2,520|
|Suspend Coverage and Payment for Questionable Part D Prescriptions and Incomplete Clinical Information||—||-280||-780|
|Allow Prior Authorization for Medicare Fee-for-service Items||-5||-25||-75|
|Allow Civil Monetary Penalties for Providers and Suppliers who Fail to Update Enrollment Records||-2||-13||-32|
|Assess a Fee on Physicians and Practitioners Who Order Services or Supplies without Proper Documentation||—||—||—|
|Establish Registration Process for Clearinghouses and Billing Agents||—||—||—|
|Allow Collection of Application Fees from Individual Providers||—||—||—|
|Increase the Amount of Home Health Agency Surety Bond||—||—||—|
|Expand Funding and Authority for the Medicaid Integrity Program||25||180||580|
|Track High Prescribers and Utilizers of Prescription Drugs in Medicaid||-30||-320||-770|
|Strengthen CMS Compliance Tools in Medicaid Managed Care||—||—||—|
|Require States to Suspend Medicaid Payments when the Secretary Determines there is a Significant Risk of Fraud||—||—||—|
|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||2017|| 2017
|Protect Program Integrity Algorithms from Disclosure||-9||-45||-90|
|Permit Exclusion from Federal Health Care Programs if Affiliated with Sanctioned Entities||—||-20||-70|
|Allow the Secretary to Reject Claims from New Providers and Suppliers Located Outside Moratorium Areas||-5||-25||-50|
|Establish Gifting Authority for the Healthcare Fraud Prevention Partnership||—||—||—|
|Publish National Provider Identifier for Covered Recipients in the Open Payments Program||—||—||—|
|Total, Program Integrity Legislative Impact||104||462||1,233|
|Subtotal, Medicare Impact [non-add]||111||612||1,443|
|Subtotal, Medicaid Impact [non-add]||-7||-150||-210|
|Savings from Discretionary HCFAC Investment||-795||-4471||-10,155|
|Savings from Retention of Medicare Recovery Audit Recoveries to Implement Actions||-20||-840||-3,320|
|Savings from Expanding Medicaid Fraud Control Units for the Territories||-6||-32||-72|
|Savings from Expand Funding and Authority for the Medicaid Integrity Program||-85||-495||-1,255|
|Savings from Social Security Program Integrity Investment||-60||-2,396||-9,027|
|Subtotal, Medicare and Medicaid Savings from Program Integrity Investment||-966||-8,234||-23,829|
|Total, Net Savings Program Integrity Proposed Policy||-862||-7,772||-22,596|
1/ 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.