Fact Sheets



Today, the Obama Administration announced recovery of over $5.6 billion in fraudulent payments in fiscal year 2011, a 167 percent increase from 2008.  President Obama’s health care reform law includes new resources and tools to help fight fraud in Medicare and Medicaid, and to protect taxpayer dollars.  In addition, the Centers for Medicare & Medicaid Services (CMS) is taking steps to strengthen controls to identify and prevent prescription drug fraud and abuse in the Medicare Part D program.  


CMS released a notice to Part D prescription drug plan sponsors that contains information and guidance to immediately take steps to stop prescription drug misuse and fraud.  Pain killers like  OxyContin are the fifth most filled classes of drugs in Medicare, with spending in 2009 totaling $3.9 billion.  Recently, the Government Accountability Office identified evidence of fraud and drug abuse in Medicare for these types of drugs, which pose a threat to public health as well as the federal budget.  Among the messages conveyed to the plans:


Investigate and Stop Payment for Suspect Claims

  • Medicare’s requirement that pharmacies receive prompt payment for prescription drugs does not prevent sponsors from investigating suspect claims and withholding payment for fraudulent claims.
  • When a sponsor suspects fraud with respect to a particular claim, payment need not be made until the claim has been investigated further to determine that it is not fraudulent.


Use Tools to Help Manage Proper Utilization of Drugs

  • Prior authorization requirements are a common tool employed by Part D sponsors to ensure appropriate utilization and coverage under the Medicare Part D program.
  • Part D sponsors may implement reasonable prior authorization requirements for drugs, such as opioids, that are more susceptible to abuse and diversion.


Limit Prescriptions to 30-Day Doses

  • The guidance encourages Plan sponsors to work with doctors to prescribe less than 30 days supplies for drugs that are more susceptible to abuse or diversion.


CMS has also been proactive in identifying other opportunities to strengthen controls to stop fraud and abuse in the Part D program.  The agency is implementing additional controls on the use of prescriber identifiers submitted with Part D claims and has proposed to further strengthen the requirement in 2013.  CMS has also considered enhanced drug utilization tools and has engaged Part D sponsors to identify other approaches for appropriately identifying and controlling overutilization of pain medications.


These actions are designed to be transparent to the Medicare beneficiary and should not stop anyone from receiving the medications they need to maintain their health.


These efforts build on significant progress already made by the Obama Administration to fight fraud across the health care sector – progress that has been sped up by resources from the Affordable Care Act, the health care law of 2010.  This progress has contributed to the 167 percent increase in fraud recoveries since 2008.


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.


New Resources to Fight Fraud


The Affordable Care Act provides an additional $350 million over 10 years to ramp up anti-fraud efforts, including increasing scrutiny of claims before they have 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 CMS is using the kind of technology used by credit card companies to stop fraud.  Since June 30th of this year, CMS has been using this technology to help identify potentially fraudulent Medicare claims and uncover fraudulent providers and suppliers, flagging both for investigation and for referrals to law enforcement.  This new tool allows CMS for the first time to spot suspect claims and take action to stop fraudulent payments before they are paid.


Better Coordination across Government


Many of the Affordable Care Act provisions increase coordination between states, CMS, and its law enforcement partners at the Office of the Inspector General and the Department of Justice.

  • The law deters fraudulent providers and suppliers from moving from State to State or between Medicare and Medicaid by requiring all states to terminate anyone who has been terminated by Medicare or by another State.
  • Under the Affordable Care Act, CMS must work hand-in-hand with the Office of the Inspector General on suspending payments to suspect providers.  CMS is also helping to provide the Office of the Inspector General and the Department of Justice improved real-time data access to enable investigators and law enforcement agents to more quickly detect and prosecute fraud schemes. 
  • In addition, the Senior Medicare Patrol program, led by the Administration on Aging, empowers seniors to identify and fight fraud through increased awareness and understanding of Federal health care programs.  Since the program’s inception, the program has educated over 4 million beneficiaries in group or one-on-one counseling sessions and has reached almost 25 million people through community education outreach events.


Sharing Data across Government


Building on the Obama Administration initiatives to improve coordination across the agencies charged with stopping fraud, the Affordable Care Act requires certain claims data from Medicare, Medicaid and the Children’s Health Insurance Program (CHIP), the Veterans Administration, the Department of Defense, the Social Security Disability Insurance program, and the Indian Health Service to be centralized, making it easier for agency and law enforcement officials to identify criminals and prevent fraud on a system-wide basis. The health care law, and new initiatives like the interagency Health Care Fraud Prevention and Enforcement Action Team (HEAT) Task Force between DOJ and HHS, have already improved access to data for law enforcement.  DOJ and OIG continue to benefit from improved access to Medicare data to help identify criminals and fight fraud while protecting patient privacy.


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, Medicaid or CHIP.  Under the new law:

  • Providers and suppliers who lie on their application to enroll in Medicare, Medicaid, or CHIP 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 January 24, 2011, CMS announced some of the Affordable Care Act’s most powerful new fraud prevention tools, including new screening requirements for all Medicare, Medicaid, and 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, FBI criminal background checks before being allowed to bill the Medicare program. 


One of the most powerful new tools is the new authority to suspend Medicare payments to providers or suppliers while investigating 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 program and CHIP.  Already, revocations, payment suspensions and enrollment denials have taken place as a result of this increased scrutiny.


Targeting High Risk Entities


The Affordable Care Act also imposes more stringent payment and enrollment requirements to target high risk items and entities.  On November 17, 2010, CMS published final rules requiring a face-to-face meeting for Medicare home health and Medicare hospice.  On July 12, 2011, CMS published a proposal to expand the face-to-face requirement to Medicaid.  CMS also issued a final rule on May 5, 2010 to require providers and suppliers who order and refer certain items or services for Medicare beneficiaries to enroll in Medicare and maintain documentation on those orders and referrals. 



New Focus on Compliance and Prevention


Under the new law, providers and suppliers must establish compliance programs ensuring they are aware of anti-fraud requirements and good governance practices and have incorporated these into their operations.  Nursing homes are also subject to new compliance and ethics plan requirements.  Other preventive measures focus on certain categories of providers and suppliers that historically have presented concerns, including Home Health agencies, Durable Medical Equipment, Prosthetics, Orthotics, and Supplies suppliers, and Community Mental Health Centers.


Raising the Bar on DME Suppliers through Expanded Competitive Bidding and Prior Authorization

As part of competitive bidding, CMS is implementing new stricter requirements for DME suppliers, which have historically presented a high risk of fraud.  Last month, CMS announced that it is expanding the DME Competitive Bidding program to an additional 91 areas of the country, including 21 areas that are the result of an expansion of DME competitive bidding under the Affordable Care Act.  By 2013, the program will cover 100 areas of the country, and over 18 million Medicare fee-for-service beneficiaries living in these areas can save money through this new program, while continuing to have access to quality medical equipment from accredited suppliers they can trust.  The program is anticipated to save the Medicare program and beneficiaries approximately $28 billion over the next ten years.  This includes more than $17 billion in savings for Medicare, and over $11 billion for beneficiaries as a result of lower coinsurance and premium payments.


In addition, under a demonstration announced in November, Medicare will implement a prior authorization process for all power mobility device claims in 7 high risk states, guaranteeing that beneficiaries receive access to the services they need but preventing payment in cases where medical need is not established.  This will make it more difficult to get fraudulent claims through Medicare’s claims payment systems.