CAGW Slams CMS for Gutting Recovery Audits, Costing Taxpayers Up to $4 Billion

WASHINGTON--()--Today, Citizens Against Government Waste (CAGW) expressed alarm over the Centers for Medicare and Medicaid Services’ (CMS) January 31, 2014 decision to extend by another six months to the current suspension of recovery audits of medically unnecessary and improper healthcare claims by hospitals. Under relentless pressure from hospitals, CMS officials instituted a three-month moratorium on oversight by recovery auditing contractors (RACs) starting on October 1, 2013, which was then extended to March 31, 2014.

During this time, CMS was supposed to clarify changes to rules related to Medicare Part A inpatient versus outpatient billing procedures, and claimed that RAC activity should be suspended while hospitals adjusted to the new rules. However, no such guidance has yet been issued. Friday’s announcement, buried on the CMS website, has essentially given hospitals a yearlong “oversight holiday,” during which taxpayers and the Medicare Trust Fund will hemorrhage up to $4 billion.

Medicare is plagued with the highest reported amounts of improper payments of any federal program. A December 16, 2013 Department of Health and Human Services (HHS) fiscal year (FY) 2013 Agency Financial Report documented that improper payments in Medicare rose by 12.7 percent, from $44.3 billion in FY 2012 to $49.9 billion in FY 2013. RACs, which are currently authorized to audit 2 percent of all Medicare claims, have recovered $4.8 billion since 2009 in improper payments to hospitals, a significant portion of which were related to improperly billed in-patient hospital stays.

According to the HHS Office of Inspector General (OIG), “In FYs 2010 and 2011, RACs identified half of all claims they reviewed as having resulted in improper payments totaling $1.3 billion. In FYs 2010 and 2011, RACs reviewed 2.6 million claims from approximately 292,000 providers. During this period, RACs identified approximately 1.3 million claims with improper payments (50 percent) that totaled nearly $1.3 billion.” The OIG documented that 88 percent of Medicare Part A improper payments identified by recovery auditors are submitted by in-patient hospitals predominantly in California and New York.

In a bipartisan effort to reduce improper payments and stave off the impending bankruptcy of the Medicare Trust Fund, Congress first implemented a recovery auditing demonstration project that ran from 2005 to 2008 and recovered more than $900 million in overpayments to providers. Congress made the program permanent and rolled it out nationwide as part of the Tax Relief and Health Care Act of 2006.

In an additional effort to reduce improper payments and eliminate waste in federal healthcare programs, and as one of the only true cost-saving provisions of the Affordable Care Act (Obamacare), the bill expanded the scope of RACs to include auditing for Medicare Parts C and D. The legislation also required states and territories to establish RAC programs for Medicaid, noting that the RAC program was a proven, valuable tool in reducing improper payments.

CAGW President Tom Schatz said, “Congress should not only buck the intense pressure to gut the RAC program, members should now step in to protect and safeguard the RACs from CMS. The agency is conducting a sub rosa campaign of regulatory nullification to destroy an auditing process that its own analysis proves is working exceptionally well. CMS has reported that the RACs have an accuracy rating of between 90.7 and 97.4 percent, which makes it far and away the most successful tool Congress has ever implemented to protect taxpayers and Medicare beneficiaries from rampant improper payments. The suspension of the RACs is a subversion of the will, if not the actual letter, of the law.

“At the same time HHS is being required by law to expand the use of RACs, CMS is undercutting the success of the current RAC program and costing taxpayers billions of dollars. While CAGW disagrees that the program needs to be suspended while the guidance is being modified, CMS has nonetheless given itself unilateral control over when the audits restart. By simply delaying its decision-making process, the suspension could continue past one year, and turn into two, three or four years. Each additional day will cost taxpayers nearly $11,000 and give hospitals the unfettered ability to continue to avoid these successful audits.”

Citizens Against Government Waste is the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

Contacts

Citizens Against Government Waste (CAGW)
Alex Booze, 202-467-5318
or
Leslie K. Paige, 202-467-5300

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Contacts

Citizens Against Government Waste (CAGW)
Alex Booze, 202-467-5318
or
Leslie K. Paige, 202-467-5300