July 16, 2015

Congress Highlights Medicare Part D Plans’ Failure To Prevent Fraud

By Tim McCormack and Molly Knobler

Fraud in the Medicare Part D prescription drug program is getting the attention of not only the Department of Health and Human Services’ Office of the Inspector General (HHS OIG) but also watchdogs on Capitol Hill.  On Tuesday, July 14, 2015, the House of Representatives’ Committee on Energy and Commerce held a hearing to examine two recent reports from HHS OIG examining improper spending in the Medicare Part D program.  Fraudulent billing by pharmacies and physicians has historically been the focus of HHS OIG’s investigative efforts.  Tuesday’s hearing had a new target: the failure of the health plans that manage the Part D program.

“Medicare Part D is the optional prescription drug benefit for Medicare beneficiaries.  In 2013, over 39 million beneficiaries were enrolled in the program.  Private companies, known as plan sponsors, contract with Center for Medicare and Medicaid Services (CMS) to provide this benefit to beneficiaries who choose to enroll.  CMS relies on these plan sponsors to be the first line of defense against fraud, waste, and abuse in Part D.  Among other things, plan sponsors are responsible for monitoring pharmacies.  CMS also uses a contractor—the Medicare Drug Integrity Contractor (MEDIC)—to detect and prevent fraud, waste, and abuse in Part D.”  HHS OIG

But there are concerns the Part D plans are not living up to their obligations.  The HHS OIG reports found that the Part D program was susceptible to fraud, including practices such as: (1) billing for drugs that were not dispensed; (2) billing for drugs, especially opoids and other controlled substances, that were diverted to illegitimate purposes; (3) payment of kickbacks; and (4) identity theft.

Perhaps more troubling, though, the reports and the House hearing found efforts to fight this fraud are significantly hampered by inconsistent efforts by the Part D plans and the MEDIC.  In part because CMS does not require Part D plans to gather or report data on potentially fraudulent practices, less than half of them do so.  As HHS OIG noted, without information about what the Plans are doing to identify fraud and to address any potential fraudulent conduct that they find, “CMS cannot hold plan sponsors accountable for protecting Part D from fraud, waste, and abuse.”

This is not just a problem of lack of information; it is a problem of lack of action.  When HHS OIG pressed some of the plans for information about their fraud detection efforts, they found that a significant number of Plans (between 28% and 34%) identified no instances of fraud.  How could this be?  Were the patients, pharmacies and physicians in these plans models of virtue?  Or could it be that these plans found no fraud because they simply were not looking for it.  Unfortunately, the plans have little incentive to spend money to fight fraud because, due to the design of the Part D program, they can pass many of these inflated costs on to the Government.  If these Part D plans are to be trusted with our tax dollars, they need to show that they are worthy of that trust.

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