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Report: Medicare Fraud Reduction Is Misleading

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The New York Times

Published: August 21, 2008

Medicare's top officials said in 2006 that they had reduced the number of fraudulent and improper claims paid by the agency, keeping billions of dollars out of the hands of people trying to game the system.

But according to a confidential draft of a federal inspector general's report, those claims of success, which earned Medicare wide praise from lawmakers, were misleading.

In calculating the agency's rate of improper payments, Medicare officials told outside auditors to ignore government policies that would have accurately measured fraud, according to the report. For example, auditors were instructed not to compare invoices submitted by sales representatives against doctors' records, as required by law, to make sure that medical equipment went to actual patients.

As a result, Medicare did not detect that more than one-third of spending for wheelchairs, oxygen supplies and other medical equipment in its 2006 fiscal year was improper, according to the report. Based on data in other Medicare reports, that would be about $2.8 billion in improper spending.

That same year, Medicare officials told Congress they had driven down the cost of fraud in medical equipment to $700 million.

Some lawmakers and congressional staff members said the irregularities that the inspector general found were tantamount to corruption.

"This is outrageous," said Sen. Charles E. Grassley of Iowa, the top-ranking Republican on the Senate Finance Committee, who has repeatedly credited the Centers for Medicare & Medicaid Services with reducing improper expenditures. "If heads don't roll, you can't change the culture of this organization," said Grassley, who had not yet received the full report from the inspector general but had been briefed on its contents.

The report - a draft of which was obtained by The New York Times - will probably be made public within the next week, according to federal officials. The inspector general may change or edit the findings of the report before it is officially released. Congressional staff said the Centers for Medicare & Medicaid Services - the agency overseeing Medicare - was lobbying the inspector to play down the report's conclusions.

A spokesman for Medicare said the agency agreed with the inspector general that the agency's reported level of improper billing for durable medical equipment, or DME, should have been higher. But Medicare says the $2.8 billion figure is unsupported.

"Allegations of manipulation of this error rate are preposterous," said the spokesman, Jeff Nelligan. "The agency has aggressively targeted fraud and improper payments in the DME program. We have a history of working closely with the inspector general and will continue to do so."

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