Medicare should review provider claims for accuracy before they are paid

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Medicare has one of the highest rates of wasteful spending government-wide, losing more than $200 billion over the past five years to provider billing errors. Keep in mind that number does not include fraud, which is accounted for separately. That $200 billion is directly attributed to very preventable billing errors and a lack of compliance with Medicare billing rules. 

The fact that the loss of approximately $40 billion in tax dollars each year is tolerated is mind blowing enough, but when you add in that Medicare is facing a serious financial crisis that will lead to reduced health coverage and higher out-of-pocket costs for seniors, it’s even more unbelievable that the government is willing to turn a blind eye to this wasteful spending year after year.

{mosads}Interestingly, in 2016 the Government Accountability Office (GAO) issued a report proposing a very common sense solution. The GAO recommends Medicare begin reviewing provider claims before they are paid, to protect program funds and help ensure claims are paid properly the first time.


Most people are unaware that the Medicare Fee-For-Service program pays provider claims, then later allows a mere 0.5 percent of those claims to be reviewed for accuracy. This means that 99.5 percent of Medicare provider claims are paid without any oversight — leading the program to overspend by billions each year.

The GAO recommendations are based on their analysis of the Recovery Auditors (RAC) which allowed auditors to review a subset of claims before they were paid to test the efficacy of prepayment review. The demonstration was conducted in 11 states during which claim reviews were quickly and efficiently completed within 30 days of receiving the documentation.

As a result, RACs prevented $192.8 million in improper payments from leaving the program in error, claims were paid in a very timely manner and providers were paid correctly the first time.

In fact, according to the GAO’s report, “Officials we interviewed from health care provider organizations told us that providers generally respond to prepayment and post-payment reviews similarly, as both types of review occur after a service has been rendered, and involve similar medical documentation requirements and appeal rights.” So, adding prepayment reviews should not disrupt the current claim review process or inconvenience providers.


The GAO believes that “using prepayment reviews to deny improper claims and prevent overpayments is consistent with CMS’s goal to pay claims correctly the first time and can better protect Medicare funds because not all overpayments can be collected.”

In 2017 before the House Budget Com­mittee, U.S. Comptroller General, Gene Dodaro reit­erated previous GAO urgings that CMS should implement a permanent Recovery Audit Contractor Prepayment Review Program. The comptroller general testified, “We recommend that CMS seek legislative authority to allow RAs [risk assessment system] to conduct prepayment claim reviews. HHS did not concur with this recommendation, stating that CMS has implemented other programs as part of its efforts to move away from the pay and chase process of recovering overpayments. We continue to believe that seeking authority to allow RAs to conduct prepayment reviews is consistent with CMS’s strategy to pay claims properly the first time.” 

Despite the demonstrated success of the prepay review pilot, to date, the Centers for Medicare & Medicaid Services (CMS) has not implemented a permanent nor national program — leaving much-needed Medicare funding on the table and falling further behind private sector best practices.

To put this into perspective, private insurance companies require that nearly 100 percent of provider claims be reviewed for billing accuracy both before and after they are paid. And most would argue that ensuring a bill is correct before paying it would be a very basic tenet of any successful business.

I’d go even one step further to charge that officials at CMS work for the people and are responsible for the effective and efficient stewardship of our tax dollars. This would mean that they should be working in our best interests to safeguard scarce Medicare resources and ensure the program is on a positive path that can support health coverage for future generations of retirees.

We strongly recommend that Congress not only re-start the RAC Prepayment demonstration, but extend it to become a national demonstration program while permanent legislative authority is pending. Doing so would allow for immediate savings particularly as Trust Fund solvency concerns loom and budgetary challenges cause lawmakers to consider significant programmatic cuts.  

The nearly $40 billion spent in error each year can be stopped through a national RAC Prepayment program that is timely, provider sensitive and a common sense business practice protecting much needed Medicare funds.

Kristin Walter is a spokesperson for The Council for Medicare Integrity.

Tags CMS health care billing Medicare Medicare billing

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