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Combating fraud, waste and abuse in health care and in other federal programs remains a popular refrain for reducing federal expenditures. In a survey conducted by AARP in September 2009, 80% of Medicare beneficiaries age 65 and older agreed that eliminating waste, fraud, and abuse in Medicare "should be at least one of the top priorities in health care reform."[1]

In March, members of the Senate Finance Committee asked for quarterly reports on efforts by the Department of Health and Human Services (HHS) to combat fraud, waste and abuse in Medicare, Medicaid, and other federal health programs.[2] And, in early May, Senator Patrick Leahy (D. VT) and Senator Chuck Grassley (R. Iowa), the chair and ranking member of the Senate Judiciary Committee, introduced legislation to further enhance efforts by the Justice Department to investigate and prosecute fraud, including health care fraud.[3]

The Affordable Care Act ("ACA"), the health reform legislation passed in 2010,[4] contains fraud, waste and abuse provisions to aid the federal government in combating improper payments in Medicare, Medicaid and the Children's Health Insurance Program ("CHIP"). The ACA increases screening requirements for providers that want to participate in Medicare, Medicaid, and CHIP; enhances penalties for violations; facilitates data sharing among various health programs; imposes new requirements for claims; expands the authority of the Recovery Audit Contractor (RAC); and appropriates additional funding for efforts to combat fraud.[5]  

ACA Requirements

The new ACA requirements on fraud, waste, and abuse include the following:

  • Vast overpayments to private Medicare Advantage plans are phased out to come more into line with traditional Medicare costs.
  • The Secretary of the Department of Health and Human Services (the Secretary) must establish screening procedures for medical providers and suppliers of medical equipment. Licensure checks, criminal background checks, fingerprinting, unscheduled and unannounced site visits, and database checks may be conducted.  Screening procedures may vary by category of provider. 
  • New providers and suppliers are subject to a provisional period of enhanced oversight that may last anywhere from one month to one year.
  • Beginning on January 1, 2011, if the Secretary believes there is a risk of fraudulent activity among durable medical equipment ("DME") suppliers, the Secretary must withhold payment "during the 90-day period beginning on the date of the first submission of a claim under such title for durable medical equipment furnished by such supplier."
  • Disclosure requirements are increased. A medical supplier or provider shall "disclose…any current or previous affiliation with a provider of medical or other items or services or supplierthat has uncollected debt, has been or is subject to a payment suspension under a Federal health care program," and has been excluded from participating in Medicare, Medicaid, or CHIP.  The Secretary has the authority to deny enrollment if the Secretary determines that previous affiliation poses "undue risk of fraud, waste, or abuse."
  • The Secretary is also allowed to impose a temporary moratorium on the enrollment of new providers and suppliers of services to combat fraud, waste, or abuse.
  • There is to be established a process for making available the name and National Provider Identifier ("NPI") of Medicare providers who were terminated from participating in Medicare within 30 days of termination.
  • States are allowed to engage in stricter provider and supplier screening and oversight activities than those followed by the Secretary.     
  • The Secretary must share and match data in the systems of records maintained by the Social Security Administration, the Department of Veterans Affairs, the Department of Defense, and the Indian Health Service.
  • The Secretary may impose an administrative penalty if a Medicare beneficiary or a CHIP or Medicaid recipient knowingly participates in a health care fraud scheme.
  • A provider, supplier, Medicaid managed care plan, Medicare Advantage plan or Medicare prescription drug plan that has received an overpayment "shall report and return the overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor," and report that the overpayment was returned within 60 days of when the overpayment was noticed.
  • A medical provider or supplier must place his or her NPI on all applications to enroll in Medicare, Medicaid or CHIP and on all claims for payment submitted to Medicare, Medicaid, or CHIP.
  • There are surety bond requirements for certain providers and suppliers of services. "The Secretary may require a provider of services or supplier…to provide the Secretary on a continuing basis with a surety bond in a form specified by the Secretary in an amount (not less than $50,000) that the Secretary determines is commensurate with the volume of the billing of the provider of services or supplier."
    • There are increased civil money penalties for anyone who is caught partaking in kickbacks and submitting false or fraudulent claims.  Some actions are made felonies subject to fines, imprisonment, or both.  
  • The Secretary may suspend Medicare and Medicaid payments pending investigation of credible allegations of fraud.
  • Additional funds are appropriated to the HHS, the Department of Justice, the Office of the Inspector General, the FBI, and the Medicare Integrity Program to fight fraud and abuse.
  • The Secretary is required to maintain a national health care fraud and abuse data collection program.  Duplication of data collection between the Healthcare Integrity and Protection Data Ban, and the National Practitioner Data Bank is eliminated.
  • The maximum period of time to submit a Medicare claim is reduced to no more than 12 months.  The Secretary has discretion to specify exceptions to the one calendar year period.
  • Physicians who order DME or home health services must be Medicare-enrolled physicians under the enrollment procedures in 42 U.S.C. §1395cc(j), as described above.
  • Physicians must provide documentation on referrals to programs which contain a high risk of waste and abuse.  The Secretary may revoke a physician's enrollment, for no more than one year, if a physician or supplier fails to maintain or allow the Secretary to access written orders or requests for payments for certifications for home health services, durable medical equipment, or other items.
  • As described in previous Alerts, there is a new face-to-face encounter requirement before a physician may certify eligibility for DME or home health services under Medicare.[6]
  • Penalties are enhanced for marketing violations by Medicare Advantage ("MA") organizations and Part D plans, for example, when plans enroll an individual in a plan without his or her consent, transfer an individual from one plan to another without the individual's consent, transfer an individual from one plan to another to earn commission, fail to comply with marketing restrictions, and contract with entities which perform illegal marketing behaviors. 
  • The recovery audit contractor program ("RAC") is expanded to Medicare Part C and D plans. Under Medicare Parts C and D, RACs will need to ensure that each plan has an anti-fraud plan in effect, to review the effectiveness of the anti-fraud plan, and to review reinsurance claims submitted by drug plans to ensure that they are within allowable reinsurance costs, and to review estimates submitted by plans of high cost beneficiaries and compare the estimates with actual enrollment. The Secretary is to submit an annual report to Congress on the effectiveness of the RAC program.
  • Additional Medicaid program integrity provisions include: termination of a Medicaid provider's participation in the program if the provider is terminated under Medicare or other state plans; requiring billing agents, clearinghouses, or other payees to register under the Medicaid program; expanding the information to be reported under the Medicaid Management Information Systems ("MMIS"); prohibiting payments to institutions located beyond the borders of the United States; extending the period for collection of overpayments due to fraud from 60 days to one year; and requiring states to comply with the National Correct Coding Initiative.


The federal government estimates that improper payments under Medicare and Medicaid totaled $70.4 billion in 2010. Approximately $34.3 billion in payments come from traditional Medicare (10.5% improper payment rate); another $22.5 billion in payments come from Medicaid (9.4% improper payment rate); and $13.6 billion (14.1% improper payment rate) from Medicare Advantage.[7]

The increased focus on fraud, waste, and abuse in federal health programs, including provisions of the ACA that have already been implemented, may be starting to bear results, however. In January 2011, the Secretary and the Attorney General announced that they had recouped $4 billion in Medicare and Medicaid fraudulent payments in 2010, a record high amount.[8]  It remains to be seen how implementation of additional ACA provisions and continued focus on fraud, waste, and abuse enforcement will affect unnecessary health care expenditures.

[1]"AARP Closer Look (SM) Survey of Experiences with Medicare Waste Fraud and Abuse." Gerard Rainville,
[2] Kaiser Health News (March 25, 2011), available at
[3]S.890, The Fighting Fraud to Protect Taxpayers Act of 2011.
[4] Health Care Reform consists of two separate laws, the Patient Protection and Affordability Care Act of 2010 (PPACA), Pub.L. 111-148  (March 23, 2010),  and the Health Care and Education Reconciliation Act of 2010 (HCERA), Pub. L. 111-152 (March 30, 2010).  The laws often are collectively referred to as the Affordable Care Act (ACA).
[5]ACA §§ 6401-6411, 6501-6508.
[6]See, e.g.,  "New Home Health and Hospice Face-to-Face Physician/Practitioner Encounter Requirement," (January 13, 2011),
[7]See, High-Error Programs, available at
[8]Federal Government Recoups Record Amount in Medicare Fraud (National Journal, Jan, 24, 2011), available at 

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