HHS OIG Report Finds Part D Private Insurers Overcharged for Billions, Lack of CMS Oversight

According to a recent report by the Department of Health & Human Services, Office of Inspector General, private insurance companies that operate plans under the Medicare prescription drug benefit have overcharged Medicare beneficiaries and the program by several billion dollars since the program began in 2006.

According to the report, 80% of health insurers that operate plans under the Medicare prescription drug benefit overcharged the program by about $4.4 billion in 2006 alone. In addition, The McClatchy/Raleigh News & Observer reports that the Centers for Medicare & Medicaid Services (CMS) remains unaware of the total impact of the practice because of its failure to perform required audits.

The prescription drug benefit was established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Under the MMA, CMS contracts with private insurance companies to provide drug coverage to Medicare beneficiaries. Each insurer offers a bid, which represents the company's estimate of the average monthly revenue it would need to provide the basic prescription drug benefit to each beneficiary.

CMS is required to complete financial audits of at least a third of all the insurance companies that offer the prescription drug benefit to determine how they set their prices. For 2006, CMS was required to perform 165 audits. However, according to the report, the Inspector General found that, as of April, CMS had begun only seven, or 4 percent.

According to the report, there are 158 other audits from 2006 remaining to be done and audits for 2007 and 2008 waiting in the wings. It is estimated that problems found in the first year of the program aren't likely to be fixed before 2010.

In response to the Inspector General's findings, the News & Observer reports that Sen. Claire McCaskill, a Missouri Democrat, said:

"It shows a mind-set that could care less about wasting taxpayer money, that has no problem with padding profits of drug companies with hard-earned taxpayer dollars."

The Inspector General's report comes as Congressional Democrats last week introduced a bill that would allow Original Medicare to establish one or more plans to compete with private Medicare drug plans.

CMS Physician Quality Reporting Initiative, Experience

The American Association of Family Physicians (AAFP) has authored a somewhat disturbing article on the recent Center for Medicare and Medicaid Services (CMS) report “that examines participation data from its 2007 Physicians Quality Reporting Initiative, or PQRI, and also addresses physicians' frustrations with the program.”

According to the CMS report, Physician Quality Reporting Initiative, 2007 Reporting Experience

The Centers for Medicare & Medicaid Services (CMS) is working to transform the Medicare program from a passive payer into an active purchaser of high-quality care by linking payment to the value of care provided. Initially, CMS developed a voluntary quality reporting program in 2005, the Physician Voluntary Reporting Program (PVRP), to encourage physicians to report information on the quality of care they were delivering. As authorized by Congress, the PQRI builds on the PVRP by linking payments to reporting quality information. The PQRI is an important first step toward establishing a value-based purchasing program for physicians.

The Tax Relief and Health Care Act of 2006 (TRHCA), enacted on December 20, 2006, required the Secretary to implement less than seven months later by the start of the first reporting period on July 1, 2007, a system for the reporting of data on quality measures. CMS termed this system “PQRI.” This implementation schedule required rapid finalization of the detailed specifications for 74 clinical quality measures (covering hundreds of procedure and diagnosis codes), the development of an expanded infrastructure to support the reporting system and extensive outreach to more than 700,000 professionals about the requirements they needed to follow to submit data on quality measures.

Physicians who successfully submitted the quality information were eligible for an incentive payment capped at 1.5% “of total allowed charges for covered Medicare Physician Fee Schedule services.”

Not quite 16% of eligible physicians participated; of those who did participate, “Of the more than 14 million quality data codes submitted, 51.6 percent were submitted correctly; 48.4 percent of submissions were invalid.”

AAFP offers this summary of the Submission Data

· According to the new CMS report, the agency paid eligible providers slightly more than $36 million in incentive payments for the 2007 PQRI reporting period. The average bonus paid to individual providers was $635. The average bonus paid to practice groups was $4,700.
· Of the more than 14 million quality data codes submitted, 51.6 percent were submitted correctly; 48.4 percent of submissions were invalid.
· CMS says that nearly 16 percent of all eligible providers and groups submitted at least one quality data code during the 2007 PQRI reporting period. Of those 109,359 providers or groups,
· 92.5 percent submitted at least one quality data code that was valid;
· 64 percent correctly reported quality data on 80 percent of eligible cases for at least one measure;
· 52 percent earned an incentive payment by successfully reporting data on one to three applicable measures for 80 percent of applicable cases; and
· 1 percent were subject to the PQRI incentive cap.

In the report's executive summary, CMS says it is "committed to a successful PQRI program," and promises to "reduce or eliminate" the issues identified in the report. As such, among other modifications, CMS warrants to revise the analytics, redesign the physician feedback report system-- registration to which was "both cumbersome and time consuming," and increase educational outreach. In addition, “CMS has established new reporting options making it easier for EPs to participate in PQRI for 2008.”

AAFP reports that “Earlier this month AAFP Board Chair Jim King, M.D., of Selmer, Tenn., blasted CMS for its bungling of the distribution of PQRI bonus payments and told CMS Acting Administrator Kerry Weems that if problems weren't addressed, physicians might refuse to participate in the program.”

Read the full AAFP article here.