Feds Allege Medicare Hid Fraud

In a story broken by the New York Times, the Centers for Medicare & Medicaid Services (CMS) may have hidden more than $2.1 billion in fraudulent payments for durable medical equipment (DME). The Times holds a confidential draft of a report from the federal Office of the Inspector General alleging that CMS officials instructed Medicare's auditing program, the AdvanceMed Corporation, to forgo an auditing tactic that would have matched 2006 Medicare seller's claims against physicians' records, and instead to inspect only the seller's documents. Without the comparison of documents, false claims totaling some 24 percent of all Medicare claims went unaccounted for in the audit. Malcolm Sparrow, a Harvard University professor who focuses on health care fraud was quoted as saying, "The supplier has an incentive to supply fabricated documents or to imply that medical records support a purchase when they don't. If you don't ask the physician or ask for medical records, you can't really verify anything."

Bipartisan outcry in Congress has accompanied the story. "This agency is incompetent," said Representative Pete Stark (D-CA), a senior member of the Ways and Means Committee. He was also quoted as saying, "This report doesn't surprise me.... To look better to the public, you cook the books." Charles E. Grassley (R-IA), the top-ranking Republican on the Senate Finance Committee, called the situation "outrageous," and said, "If heads don't roll, you can't change the culture of this organization."

The Times stated that the official report--the draft of which spawned the story--will likely be published within the next week, and that the inspector general may edit the findings of the report before releasing it. It also stated that "Congressional staff said the Centers for Medicare and Medicaid Services--the agency overseeing Medicare--was lobbying the inspector to play down the report's conclusions."

Medicare spokesperson Jeff Nelligan was reported as saying that the CMS agreed that its reported level of improper DME billing should have higher, but that "Allegations of manipulation of this error rate are preposterous.... 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."