Medicare Fraud, Abuse and Waste

Medicare Fraud, Abuse and Waste Senate Government Affairs Committee: Medicare Prescription Drug Program This memorandum is written with the purpose of exploring the Medicare prescription drug program that was enacted in 2003 under the Medicare Modernization Act. While the program has seen great success, with 85% of its participants believing that it is a good program, its complexity has made it vulnerable to fraud, waste, and abuse.

There have been claims that appropriate antifraud safeguards will be implemented to guard against these issues but the critical and basic antifraud safeguards are not yet in place despite the fact that this program has entered into its fifth year of service. It is imperative that plans to address waste, fraud, and abuse come to fruition and are implemented in a thorough and timely manner.

This is important not only to protect our financial interests but it also ensures that these programs are not utilized for criminal activities which causes harm to the system as a whole. This memo begins by outlining the history of the development of a prescription drug program for Medicare beneficiaries. It will then explore the waste, fraud, and abuse that exist in the program, and conclude by identifying how these issues can be addressed with Congressional support and action.

Medicare Part D: History and Implementation The Medicare prescription drug program arose out of the recognized need to increase prescription coverage beyond that of inpatient hospital stays and a few outpatient uses to the 40 million elderly and disabled persons who are enrolled in Medicare (Health Policy 2001). The rising costs of prescription drugs to Medicare recipients required Congress to contemplate the appropriateness of adding prescription drug coverage to Medicare benefits.

Persons without prescription drug coverage were found to pay the most for their prescriptions, 15% more than their insured counterparts, placing an already vulnerable population at increased risk (Health Policy, 2001). Most generally agreed that there was a need to find a way to implement prescription drug coverage into the Medicare system but what that should look like was less clear. Many Medicare beneficiaries had purchased prescription drug coverage from HMOs to help with the rising costs of pharmaceuticals as well as their continued health decline.

Yet there was still a large portion of the population, more than 9 million beneficiaries, which still did not have coverage (Health Policy, 2001). This was further compounded on January 1, 1998 when almost half of the HMOs providing coverage decided to stop providing this type of coverage claiming that they received inadequate payments from Medicare (King, 2010). There have been several attempts at proposals to increase prescription coverage to Medicare beneficiaries.

President George Bush proposed a two part strategy with initial implemented drug coverage to low-income beneficiaries coupled with a White House task force to develop a plan to reform Medicare (Health Policy, 2001). Under this plan beneficiaries with income 135% below the national poverty guidelines would be eligible for full prescription drug coverage and a sliding scale would be provided for those under 175% (Health Policy 2001). The most controversial aspect of these proposals was whether or not Medicare should remain a public insurance that is managed by the federal government.

Supporters felt that this program should continue existing programs in scope and nature while opponents claim that a program of this sort should exist in the private market. Proposals suggested that a national standard for drug benefits should be established with all beneficiaries being eligible for standard benefits and increased benefits being given to those who incur catastrophic expenses. The addition of a prescription drug benefit to Medicare, while providing seniors additional choices in how they receive their health services, is a critical modernization of the program.

In 2003 the Medicare Modernization Act (MMA) provided prescription drug coverage to Medicare beneficiaries. It is estimated that more than 40 million beneficiaries have chosen to enroll in this voluntary program since 2006 (Neuman & Cubanski, 2009). This Act provided two very important provisions the first being that beneficiaries with low income and assets would be provided with subsidies to offset.