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Obama Fraud-Fighting Effort Offers Payments for Detecting Fraudulent Claims

By John Reichard, CQ HealthBeat Editor

March 12, 2010 -- It may not spark spinoffs of the popular reality TV show "Dog the Bounty Hunter," but the Obama administration this week announced an expanded effort to fight fraud by paying contractors a percentage of improper federal payments.

The program builds on the "RAC" (Recovery Audit Contractor) program that once sparked complaints on Capitol Hill about the way contractors were going after provider claims, but the Centers for Medicare and Medicaid Services has made changes in the program since it began. It has gone from being a demonstration program in three states to going national last October.

President Obama said in a speech Wednesday in St. Charles, Mo., that the federal government makes an estimated $100 billion in improper payments and called for a far wider effort to audit payments.

Obama signed a presidential memorandum Wednesday that directs all federal departments and agencies to increase their use of "payment recapture audits," which "offer specialized private auditors financial incentives to root out improper payments, and have been demonstrated through pilot programs to be highly effective," the White House said in a news release.

In 2009, improper payments totaled $98 billion, with $54 billion stemming from Medicare and Medicaid, according to the release.

The program run by Medicare in California, New York and Texas from 2005 to 2008 recaptured $900 million for taxpayers, the announcement noted.

Obama said in his speech that "through this effort, we expect to more than double the amounts we would've otherwise recovered — a couple of billion dollars over the next few years."

The president also announced his support for a bipartisan measure (HR 3393, S 1508) that would expand the ability of government agencies to fund these specialized audits with recaptured payments. The ability to use those funds now is limited, the White House said.

Although a national program to use the technique in the traditional Medicare program was launched last fall, it's still at a stage where providers are being educated about the program and actual audits haven't begun. As part of this week's announcement, "the administration is pushing for faster deployment of audits of the Medicare claims," a CMS spokesman said.

In July 2008, leading House Democrats called on government auditors to review the RAC program. Lawmakers raised concern about the qualifications of those identifying faulty claims and whether claims reviews were inconsistent with Medicare policies. CMS said it learned lessons including hiring an independent contractor to review the determinations of RAC contractors, requiring reach RAC to hire a medical director and educating providers about the RAC program and appropriate billing.

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