As Medicare Part D grows, so does need for fraud audits

At a time when the cost of many prescription drugs is soaring, Medicare Part D helps beneficiaries pay for needed medications through private insurance plans that receive premiums from both enrollees and the government. Approximately 39 million beneficiaries receive Part D benefits through more than 2,000 plans sponsored by private companies, and payments for Part D drugs are approximately $121 billion per year.

As with any large, fast-growing government program, the possibility of fraud is always a concern.

“The Centers for Medicare & Medicaid Services relies on plan sponsors to be the first line of defense against fraud, waste and abuse in Part D,” according to the U.S. Department of Health and Human Services’ Office of Inspector General. “Plan sponsors are responsible for paying claims, monitoring billing patterns and establishing compliance plans that specify their procedures for preventing and detecting fraud, waste and abuse. Plan sponsors must also ensure that entities with which they subcontract meet regulatory and compliance requirements.”

CMS is required to audit the financial records of at least one-third of Part D plan sponsors annually. The Office of Inspector General conducts investigations, audits, evaluations and legal guidance related to Part D program integrity. This work has resulted in the prosecution of individuals accused of defrauding Part D, as well as identification of systemic program vulnerabilities that raise concerns related to quality of care and improper payments.

CMS also contracts with a private company to serve as the Medicare Drug Integrity Contractor (MEDIC) to detect and prevent fraud, waste and abuse in Part D. The MEDIC’s responsibilities include identifying and investigating potential fraud and abuse, referring cases to law enforcement and fulfilling requests for information from law enforcement. The MEDIC is required to investigate potential fraud and abuse referred to it through external sources, as well as through proactive methods, such as data analysis.

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Examples of Part D fraud include:

• Drug diversion. An individual obtains prescription drugs and gives or sells them to someone else.
• Doctor shopping. The beneficiary consults a number of doctors to inappropriately obtain multiple prescriptions.
• Inducements, kickbacks or bribes. A prescriber receives unlawful payments as inducement or reward for writing prescriptions.
• Inappropriate dispensing. A pharmacy dispenses expired or adulterated prescription drugs or dispenses drugs without a prescription.

“As the Part D program continues to evolve, the key to effective oversight is to monitor the program and establish methods to detect and prevent fraud, waste and abuse,” the Office of Inspector General concluded. “Those methods include more proactive use of data, as well as more rigorous oversight mechanisms. The Office of Inspector General has made recommendations to address vulnerabilities and in many instances, action has been taken to implement our recommendations and strengthen Part D program integrity. However, more work needs to be done to protect the program from fraud, waste and abuse.”