Congress needs to give CMS the authority to conduct prepayment reviews

The Centers for Medicare & Medicaid Services (CMS) recently issued a final rule (CMS-4182-F) that updates the Medicare Advantage (MA) and Medicare prescription drug benefit program (Part D). This will provide incentives to encourage fraud reduction activities defined as the prevention, identification and recovery of fraud.

CMS notes that reducing fraud can improve patient safety, deter the use of medically unnecessary services and can lead to higher levels of health-care quality. We agree. We also support CMS’ assertion that fraud reduction activities are particularly important given the financial challenges facing the Medicare Trust Funds, which are supported by taxpayer dollars.

By CMS’ own admission, this change will likely result in prepayment fraud prevention efforts and in response to public commentary acknowledged, “that any increase in provider burden as a result of newly-implemented prepayment fraud prevention practices could potentially be offset by a reduction in the provider’s burden associated with the need to contest efforts from health plans to recover claims already paid.”

We commend CMS for taking this step forward as it relates to Parts C and D, but we call on both them and Congress to ensure prepayment reviews occur not only in Parts C and D, but also in Parts A and B (Medicare Fee-for-Service) which provides coverage to approximately 65 percent of all Medicare beneficiaries today.

Most would consider prepayment reviews to be a very common sense billing practice, requiring that provider claims be examined for billing accuracy before they are paid. However, historically, Medicare has relied on more reactive methods, broadly paying provider claims first and later reviewing a very small percentage for billing accuracy (for example, currently only 0.5 percent of Medicare FFS claims are reviewed).

If a reviewed claim is found to have been paid improperly, the provider is required to either reimburse Medicare the difference or alternatively, receive reimbursement from the program to resolve an underpayment. The clear downside to reviewing only a small number of claims on a post-payment basis is that most claims receive no oversight at all, which has caused more than $200 billion in scarce Medicare FFS resources to be overpaid in error during the past five years.

Therefore, it’s very encouraging to see CMS undertake these important efforts that have been shown to improve the quality of care provided while also targeting the system-wide problem of improper payments. In their announcement, CMS shared that these proactive Medicare Advantage and Part D waste and fraud reduction practices “can lower the cost of care and reduce trust fund expenditures and thereby potentially provide value to beneficiaries, the government, and taxpayers.”

Clearly this very positive change would also benefit Medicare FFS — which has been cited for losing more funds to improper payments than any other program government-wide.

In fact, RAC prepayment claim reviews have already been tested and found to be very successful. In FY2012, CMS launched a Medicare FFS Prepayment Review Demonstration project to allow RACs to review certain error prone claims within 11 states before they were paid.

The short program was deemed greatly successful, with RACs preventing more than $192 million in improper payments from leaving the program in error. Prepay claim reviews were completed accurately and quickly, within just 30 days, significantly reducing the burden providers say they endure via “pay and chase” efforts.

Interestingly, the Government Accountability Office (GAO) reviewed the results of the Medicare RAC Prepayment Review Demonstration Project and found that “using prepayment reviews to deny improper claims and prevent overpayments is consistent with CMS’s goal to pay claims correctly the first time and can better protect Medicare funds because not all overpayments can be collected.”

For the past three years, the GAO has consistently recommended, both in reports and before Congress that CMS implement a permanent Medicare Recovery Auditors (RAC) prepayment review program within Medicare FFS.

The GAO stated, “Although CMS considered the Prepayment Review Demonstration a success, and having the RAs conduct prepayment reviews would align with CMS’s strategy to pay claims properly the first time, the agency has not requested legislative authority to allow the RAs to do so. Accordingly, CMS may be missing an opportunity to better protect Medicare funds and agency resources.”

The current RAC contracts already provide for a Medicare FFS prepayment review program. Those same contracts hold recovery auditors to very strict quality and accuracy measures, while also providing incentives to ensure accountability and thereby reduce provider burden. All that is needed is for Congress to give CMS the authority to implement RAC prepayment reviews.

Doing so will improve patient safety, deter the use of medically unnecessary services, lead to higher levels of health care quality, while protecting taxpayer and Medicare Trust funds — the very same principles driving this change to the MA and Part D programs.

Kristin Walter is a spokesperson for The Council for Medicare Integrity.

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