The Department of Health and Human Services (HHS) released its final rule for the Medicaid Recovery Audit Program to curb waste, fraud and abuse on Wednesday, September 14. This program comes as the Medicare Recovery Audit Program completes its second year of being used nationally.

HHS projects the program will save $2.1 billion over the next five years, of which $900 million will be returned to states, according to a news release issued today by the agency.

The announcement came at the same time as Vice President Joe Biden’s cabinet meeting, which he convened to discuss waste reduction at federal agencies as part of the administration’s Campaign to Cut Waste. The vice president  said the new program is based on the Medicare Recovery Audit Program, which, he noted, has already recovered nearly $670 million to date in 2011—increasing the $75 million recovered in 2010 by nearly 800 percent.

The new Medicaid Recovery Audit Program will help states identify and recover improper Medicaid payments. It will be largely self-funded, paying independent auditors a contingency fee out of any improper payments they recover that took place in the previous three years, said the Centers for Medicare & Medicaid Services (CMS).

Under these expansions, RACs will help identify and recover over and underpayments to providers across Medicare and Medicaid for the first time.

Other New Tools

HHS noted some of the accomplishments its new program-integrity tools have produced in preventing and fighting waste, fraud and abuse in these programs. These include the following:

New Resources to Fight Fraud

The Affordable Care Act provides an additional $350 million over 10 years and an annual inflation adjustment to ramp up anti-fraud efforts, including increasing scrutiny of claims before they’ve been paid, investments in sophisticated data analytics, and more “feet on the street” law enforcement agents and others to fight fraud in the health care system.

These efforts build on our recently awarded predictive modeling contract under which the Centers for Medicare and Medicaid Services (CMS) is using the kind of technology used by credit card companies to stop fraud. Since June 30 2011, CMS has been using this technology to help identify potentially fraudulent Medicare claims and uncover fraudulent providers and suppliers, flagging both for investigation and referrals to law enforcement. This new tool allows CMS for the first time to use real-time data to spot suspect claims and providers and take action to stop fraudulent payments before they are paid.

Tough New Rules and Sentences for Criminals

The Affordable Care Act increases the federal sentencing guidelines for health care fraud offenses by 20-50% for crimes that involve more than $1 million in losses, establishes penalties for obstructing a fraud investigation and makes it easier for the government to recapture any funds acquired through fraudulent practices. The law also makes it easier for the Department of Justice to investigate potential fraud or wrongdoing at facilities like nursing homes.

Enhanced Penalties to Deter Fraud and Abuse

The Affordable Care Act provides the Department of Health and Human Services’ Office of the Inspector General (OIG) with the authority to impose stronger civil and monetary penalties on those found to have committed fraud. The Secretary also is provided new authority to prevent problematic providers from participating in Medicare or Medicaid. Under the new law:

• Providers and suppliers who lie on their application to enroll in Medicare or Medicaid may be excluded from the programs;
• Providers who identify an overpayment from Medicare or Medicaid but do not return it within 60 days may be subject to new fines and penalties; and
• Providers who are terminated from Medicare, a State’s Medicaid program, or both will be terminated from Medicaid programs in other states.

Enhanced Screening and Other Enrollment Requirements

On Jan. 24, 2011, CMS announced some of the Affordable Care Act’s new fraud prevention tools, including new screening requirements for all Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) providers and suppliers. These new rules require all providers to go through licensure checks and subject those who pose higher levels of risk to undergo site visits and in some cases, criminal background checks before being allowed to bill the Medicare program. One of the new tools is the new authority to suspend Medicare payments to providers or suppliers when there is a credible allegation of fraud. The new rules also give the Secretary new authority to impose a temporary moratorium on newly enrolling providers or suppliers in certain geographic areas to prevent or combat waste, fraud and abuse. These new tools are also available to states to enhance their program integrity efforts in the Medicaid and CHIP programs. Already, revocations, payment suspensions and enrollment denials have taken place as a result of this increased scrutiny.