HHS FY2016 Budget in Brief

Topics on this page: CMS Program Integrity Budget Overview | CMS Program Integrity Programs and Services | Health Care Fraud and Abuse Control (HCFAC) Funding | New Affordable Care Act Programs | Fraud Prevention System | Medicare Strike Force Success | Medicaid Integrity Program | Program Integrity Legislative Proposals | FY 2015 Program Integrity Legislative Proposals

Centers for Medicare & Medicaid Services (CMS): Program Integrity

The Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.

CMS Program Integrity Budget Overview

(Dollars in millions)

Table Footnotes

1/      The FY 2014 and FY 2015 mandatory base include sequester reductions.

2/      Does not include Deficit Reduction Act funding for the Medicaid Integrity Program, which is discussed in this chapter but is in the State Grants and Demonstrations account. 

CMS Program Integrity Programs and Services

The FY 2016 Budget supports fraud prevention and the reduction of improper payments, which are top priorities of the Administration.  For FY 2016, the Budget includes an additional $201 million in mandatory and discretionary investments to address healthcare fraud, waste, and abuse.  Together the program integrity investments in the Budget will yield a $21.7 billion in savings for Medicare and Medicaid over 10 years.  The Budget also proposes legislative changes to give HHS important new tools to enhance program integrity oversight and cut fraud, waste, and abuse in Medicare, Medicaid, and Children’s Health Insurance Program (CHIP).

Health Care Fraud and Abuse Control (HCFAC) Funding

The FY 2016 Budget proposes to build on recent progress by increasing support for the HCFAC program through both mandatory and discretionary funding streams.  The FY 2016 HCFAC program level is $2.1 billion.  Of the total FY 2016 program level, $1.3 billion is mandatory funding and $706 million is requested in discretionary funding.

HCFAC Discretionary Funds: The Budget requests $706 million in discretionary HCFAC funding, which is $34 million above the FY 2015 enacted. Consistent with the Budget Control Act of 2011 and FY 2015 policy, the Budget requests base discretionary funds of $311 million plus a discretionary cap adjustment of $395 million.

Within discretionary funding total, $474 million is allocated to CMS program integrity activities, $113 million to the Department of Justice, and $119 million to the Office of Inspector General.  Relative to FY 2015, the request includes more funds from the cap adjustment for law enforcement to expand Strike Force capacity, support rigorous data analysis and an increased focus on civil fraud, such as off label marketing and pharmaceutical fraud.  The request also includes $25 million to monitor and prevent fraud, waste and abuse in the private health insurance market, including Marketplaces.

The HCFAC investment also supports efforts to reduce the Medicare-fee-for service improper payment rate, reinforced oversight of both Medicare and Medicaid managed care, and strengthen the Health Care Fraud Prevention Partnership among the federal government, private insurers, and other stakeholders.  CMS will also make further investments in innovative prevention initiatives, such as the Fraud Prevention System. 

HCFAC Mandatory Funds: The $1.3 billion in mandatory base funds for FY 2016 are financed from the Medicare Hospital Insurance Trust Fund.  The funding is allocated to: the Medicare Integrity Program; the HCFAC Account, which is divided annually among the HHS OIG, other HHS agencies, the Federal Bureau of Investigation, and DOJ. These dollars fund comprehensive efforts to combat health care fraud, waste, and abuse, including prevention-focused activities, improper payment reduction, provider education, data analysis, audits, investigations, and enforcement.

Return on Investment: Program integrity returns on investment are measured by program area and separately reported by activity type.  Programs supported by HCFAC mandatory funds have a proven record of returning more money to the Medicare Trust Funds and the Treasury than the dollars spent.  There are three key ways in which returns from program integrity activities are described.  First, the most recent estimate of the Medicare Integrity Program 3-year average return on investment is 14.4 to 1, and the program has yielded an average return of $10 billion annually from recoveries, claims denials, and accounts receivables over the past decade.  

Second, the 3-year average return on investment for HCFAC law enforcement activities is a record 8.1 to 1.  From 1997 to 2013, programs supported by HCFAC have returned over $25.9 billion to the Medicare Trust Funds.  In FY 2013 alone, $4.3 billion was recovered, including $2.85 billion returned to the Medicare Trust Funds and $576 million in federal Medicaid recoveries returned to the Treasury.

Third, CMS actuaries conservatively project that for every new dollar spent by HHS to combat health care fraud about $2 is saved or avoided.  Based on these projections, the $4.9 billion in additional discretionary HCFAC funding, as part of a multi-year HCFAC investment included in the Budget, will yield additional Medicare and Medicaid savings of $9.7 billion over 10 years.  Further, the HCFAC return-on-investment demonstrates that in recent years the actual recoveries from HCFAC law enforcement efforts have far exceeded the projected savings.

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New Affordable Care Act Programs

The Affordable Care Act included an additional $350 million in program integrity resources over 10 years, plus an inflation adjustment.  It provides unprecedented tools to CMS and law enforcement to protect Medicare, Medicaid, and CHIP from fraud, waste, and abuse.  (See “Program Integrity Enhanced Provider Screening” for one example of expanded authorities.)  These program integrity tools fight fraud and safeguard taxpayer dollars while ensuring patient access to care is not interrupted.

Open Payments: The Affordable Care Act created the Open Payment Program which collects and publicly reports information about financial relationships between the health care industry, physicians, and teaching hospitals. Payments and other transfers of value, such as research, consulting, travel, and gifts from manufacturers of drugs and devices to physicians and teaching hospitals are reported. In September 2014, CMS released data from transactions that occurred between August and December 2013. CMS released more records in December 2014.  The data contain over 4.4 million payments valued at nearly $3.7 billion and attributable to 546,000 individual physicians and almost 1,360 teaching hospitals. Future reports will be published annually and will include a full 12 months of payment data for 2014, beginning in June 2015. 

Fraud Prevention System

In its second year of implementation, the Fraud Prevention System prevented or identified $210 million in inappropriate billing in the Medicare program, which is almost twice the amount of identified savings yielded in the first year of the program.  This system to the credit card industry. 

The system screens all Medicare Part A and Part B claims, including claims for Durable Medical Equipment, using a series of predictive models to detect suspicious billing activity, focus on emerging fraud trends, and identify patterns of improper payments.  The system prioritizes leads for CMS’s program integrity contractors to investigate and determine whether to stop payment or make a referral to law enforcement.  

Medicare Strike Force Success

The Medicare Fraud Strike Force is a partnership between HHS and DOJ in nine health care fraud hot spots around the country.  Strike Force teams use advanced data analysis techniques to identify high billing levels so that interagency teams can target emerging or migrating schemes and chronic fraud by criminals masquerading as health care providers or suppliers. This Budget allows HHS and DOJ to continue strengthening Strike Force presence across the country.

Since its inception, Strike Force prosecutors filed more than 788 cases charging more than 1,727 defendants who collectively billed the Medicare program more than $5.5 billion.  Strike Force prosecutors secured 1,137 guilty pleas and 148 others were convicted in jury trials, and 1,087 defendants were sentenced to imprisonment for an average term of nearly 4 years.

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Medicaid Integrity Program 

The Medicaid Integrity Program was established by the Deficit Reduction Act of 2005, which appropriated $75 million in FY 2009 and for each year thereafter.  The Affordable Care Act later increased appropriations for FY 2011 and future years by inflation.  

States have the primary responsibility for combating fraud, waste, and abuse in the Medicaid program, but the Medicaid Integrity Program plays an important role supporting state efforts, including through contracting with eligible entities to carry out reviews, audits, identification of overpayments, education activities, and technical support.  The Medicaid Integrity Program works in coordination with Medicaid program integrity activities funded through HCFAC.  This program includes a collaborative effort across CMS to transform the Medicaid data enterprise through the Medicaid and CHIP Business Information and Solutions program. 

Program Integrity Legislative Proposals

The Budget includes legislative proposals to further strengthen program integrity for Medicare, Medicaid, and CHIP.  These proposals include new investments in Medicaid and corrective actions stemming from Recovery Audit Contractor actions in program integrity that yield billions in net savings over ten years.

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Medicare:

Retain a Portion of Medicare Recovery Audit Contractor Recoveries to Implement Actions That Prevent Fraud and Abuse:  Under current law, CMS can use the recovered funds from Recovery Audit Contractors to administer the program but cannot use these funds to implement corrective actions, such as new processing edits and provider education and training, to prevent future improper payments.  This proposal removes this funding restriction.  [$2.7 billion in costs and $4.4 billion in non-PAYGO savings over 10 years]

Allow Prior Authorization for Medicare Fee-for-service Items:  Currently, CMS has authority to require prior authorization for Medicare Durable Medical Equipment service items.  This proposal would extend that authority to all Medicare fee-for-service items, particularly those that are at the highest risk for improper payment.  By allowing prior authorization on additional items, CMS can ensure that the correct payment goes to the right provider for the appropriate service, and prevent the need for targeted claims audits on those payments.  In addition, this proposal would require the Secretary to implement prior authorization in two service areas: power mobility devices and advanced imaging.  [$90 million in savings over 10 years]

Allow Civil Monetary Penalties for Providers and Suppliers who Fail to Update Enrollment Records:  Currently, providers and suppliers are required to update enrollment records to remain in compliance with the Medicare program.  This proposal would allow penalties if providers and suppliers fail to update their records, providing an additional incentive to report up to date information and helping reduce program vulnerability to fraud.  [$29 million in savings over 10 years]

Assess a Fee on Physicians and Practitioners Who Order Services or Supplies without Proper Documentation:This proposal would allow the Secretary to assess an administrative fee on providers for high risk, high cost claims that have not been properly documented. The proposal only applies when there is insufficient documentation and would not apply to the determination of whether a fully documented ordered item or service was reasonable and necessary.  The fee would be $50 per Part B item/service and $100 per Part A service. [No budget impact]

Establish a Registration Process for Clearinghouses and Billing Agents: This proposal would expand the provider screening authorities included in the Affordable Care Act by establishing a registration process for clearinghouses and billing agents that act on behalf of Medicare providers and suppliers.  This proposal would also allow CMS to obtain organizational information from clearinghouses and billing agents. [No budget impact]

Allow Collection of Application Fees from Individual Providers:  This proposal allows the Secretary to require a Medicare application fee for individual providers, similar to the existing fee on institutional providers.  The fee will start at $50 and be adjusted by inflation annually thereafter.  This fee would support provider screening by preventing bad actors from being in the program and improperly billing Medicare. [No budget impact]

Increase the Amount of Home Health Agency Surety Bond: The proposal would increase the required surety bond amount for Medicare home health agencies to an amount that is no less than $50,000 and commensurate with the volume of payments to the agency.  This policy would make home health consistent with the durable medical equipment surety bond requirement in current law. The Government Accountability Office and HHS Office of Inspector General also recommend implementation of a home health surety bond. A bond will ensure that any potential overpayments can be collected from new agencies with whom HHS has no prior payment history.  [No budget impact]

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Medicaid:

Expand Funding and Authority for the Medicaid Integrity Program:  This proposal increases the Medicaid Integrity Program by $580 million over ten years on top of the current funding level.  The additional investment would start with an additional $25 million in FY 2016 and increase gradually to an additional $100 million in 2025.  Thereafter, the total would be annually adjusted by the Consumer Price Index.  This funding will give CMS the ability to address additional program integrity vulnerabilities, including expansion of Medicaid Financial Management program reviews of state financing practices; critical updates to Medicaid claims and oversight systems needed to enhance auditing; and other efforts to assist states to fight fraud, waste, and abuse.  Over time, the inflation adjusted investment will support initiatives that respond to emerging vulnerabilities.  This proposal also expands the statutory authority for the Medicaid Integrity Program to increase program flexibility in protecting state and federal resources. [$580 million in costs and $850 million in non-PAYGO savings over 10 years]

Support Medicaid Fraud Control Units for the Territories:  Medicaid Fraud Control Units in states have demonstrated success in recovering Medicaid dollars.  This proposal would encourage territories to establish Medicaid Fraud Control Units to protect their Medicaid programs by exempting federal support for these units from the cap on Medicaid funding for the territories and by exempting territories from the statutory ceiling on quarterly federal payments for the units.  [$10 million in costs and $2 million in non-PAYGO savings over 10 years]   

Expand Medicaid Fraud Control Unit Review to Additional Care Settings:  The Budget proposes to allow Medicaid Fraud Control Units to receive federal matching funds for the investigation or prosecution of abuse and neglect in non-institutional settings, such as home-based care—in which a beneficiary may be harmed in the course of receiving health care services.  The current limitation on federal matching was established in 1978, at a time when Medicaid services were typically provided in an institutional setting, but does not reflect the shift in delivery and payment for health services to in-home and community based settings.  [No budget impact, but $66 million in non-PAYGO savings over 10 years]

Track High Prescribers and Utilizers of Prescription Drugs in Medicaid:  This proposal would track high prescribers and utilizers of prescription drugs in Medicaid.  States are currently authorized to implement prescription drug monitoring activities, but not all states have adopted such activities.  Under this proposal, states will be required to monitor high risk billing activity to identify and remediate prescribing and utilization patterns that may indicate abuse or excessive utilization of certain prescription drugs in the Medicaid program.  States may choose one or more drug classes and must develop or review and update their care plan to reduce utilization and remediate any preventable episodes to improve Medicaid integrity and beneficiary quality of care.  [$710 million in savings over 10 years]

Consolidate Redundant Error Rate Measurement Programs:  This proposal would alleviate state program integrity reporting requirements and create a streamlined audit program by consolidating the Medicaid Eligibility Quality Control and Medicaid Payment Error Rate Measurement programs.  [No budget impact]

Prevent Use of Federal Funds to Pay the State Share of Medicaid or CHIP:  Federal regulations prohibit federal funds from being used as the state share for Medicaid unless authorized in federal law.  By codifying this principle in statute, this proposal would prevent states from using federal funds to pay the state share of Medicaid or CHIP, unless specifically authorized under law.  [No budget impact]

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Medicare and Medicaid:

Permit Exclusion from Federal Health Care Programs if Affiliated with Sanctioned Entities:  This proposal would expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by: eliminating the loophole in current law that allows an officer, managing employee, or owner of a sanctioned entity to evade exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity.  [$70 million in savings over 10 years]

Establish Gifting Authority for the Healthcare Fraud Prevention Partnership:This proposal would give the authority to accept gifts made to the Trust Funds for particular activities funded through the HCFAC Account, such as the Healthcare Fraud Prevention Partnership.  Currently, the HCFAC account can only receive gifts that are made for an unspecified purpose. This proposal would allow for gifts to be made to support the Partnership directly, and allow both public and private partners to support the anti-fraud program. [No budget impact]

Strengthen Penalties for Illegal Distribution of Beneficiary Identification Numbers:  In an effort to protect beneficiaries from illegal distribution of their personal identification numbers, this proposal would strengthen penalties for knowingly distributing Medicare, Medicaid, or CHIP beneficiary identification or billing privileges.  [No budget impact]

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FY 2015 Program Integrity Legislative Proposals

Dollars in millions

(Non-Add: Proposed Law impacts incorporated into Medicare, Medicaid and State Grants and Demonstration Tables)

Table Footnotes

1/    Includes non-PAYGO savings from increased program integrity investments in HCFAC, Medicaid Fraud Control Units, the Medicaid Integrity Program, and Social Security disability reviews above savings assumed in current law.

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Next:

• Overview
• Medicare
• Program Integrity
• Medicaid
• Children’s Health Insurance Program
• State Grants and Demonstrations
• Private Health Insurance Protections and Programs
• Center for Medicare and Medicaid Innovation
• Program Management

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