Legislation Would Place One-Year Moratorium On Medicare Audit Program

Main Category: Medicare / Medicaid / SCHIP
Article Date: 04 Mar 2008 - 10:00 PST

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Rep. Lois Capps (D-Calif.) has proposed legislation (HR 4105) that would place a one-year, nationwide moratorium on the Medicare recovery audit program, CQ HealthBeat reports. The demonstration project, part of the 2003 Medicare law, uses recovery audit contractors to find overpayments and underpayments in Medicare fee-for-service reimbursements to health care providers. The program began in 2005 in California, Florida and New York and expanded in 2007 to Massachusetts, South Carolina and Arizona (Carey, CQ HealthBeat, 2/29). The pilot program will gradually be expanded nationwide, with 19 states being monitored by spring. In October, another five states will join the program.

The Office of Management and Budget estimates that about $10.8 billion of Medicare spending nationwide is in payment errors (Freking, AP/Long Island Newsday, 3/1). According to CMS, about 96% of errors found by auditors were overpayments to providers. In three years, the program has found about $440 million in improper payments (CQ HealthBeat, 2/29). Providers have appealed about 11% of overpayments uncovered through the program, and about 5% were fully or partially overturned. About $20 million has been paid to health care providers for underpayments.

Opponents of the program say that the contractors are given too much of an incentive to question payments because they receive about 20% of returned funds. In addition, health care providers say many appeals have not been completed, and many providers will not appeal claim denials because of the amount of money and time the process takes, the AP/Long Island Newsday reports (AP/Long Island Newsday, 3/1). Capps also has said that the program disproportionately harms inpatient rehabilitation facilities, which account for 88% of denied claims.

In a release on Thursday, acting CMS Administrator Kerry Weems said that the program "has proven to be successful in returning overpayments to the Trust Fund and identifying ways to prevent future improper payments" (CQ HealthBeat, 2/29). Weems said CMS has tried to address concerns about the program. When the program is expanded nationwide, all contractors will be required to have a medical director on staff, and CMS will limit to three years how far back into providers' records auditors can search for errors. In addition, records before Oct. 1, 2007, would be exempt from auditing. The agency also is developing regulations that would delay repayments until after the appeals process is completed. Currently, suspect payments are recovered immediately, and the funds are returned after an appeal is won (AP/Long Island Newsday, 3/1).

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Capps said, "As increasing numbers of [recovery audit contractors'] denials are overturned on appeal in favor of the health care providers, we are finding a program that is wasting perhaps as much taxpayer money as it is purportedly saving," adding, "Even worse, this whole process of denying payment for legitimately provided services is placing an enormous financial burden on health care providers that jeopardizes their ability to care for their patients" (CQ HealthBeat, 2/29).

Don May, vice president for policy at the American Hospital Association, said that there is a "lot of gray area" when determining whether a patient needs to be admitted to a rehabilitation facility or hospital. May said, "What we have here is bureaucrats and government contractors coming in and trying to second guess what doctors and nurses have done in a hospital setting" (AP/Long Island Newsday, 3/1).

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