GAO Sting Operation Reveals Ease of Medicare Fraud

Medicare Set-Aside Blog on August 6, 2008
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This week, the Government Accountability Office (GAO) issued a report which revealed some glaring problems with CMS’s ability to spot and avoid fraud in light of what has been deemed a pending solvency crisis.

The GAO created two fictitious durable medical equipment (DME) suppliers which spent the last year billing CMS for services and products despite that both “companies” did not provide complete documentation in their applications, owned no inventory, and served no clients. All three indicators should have provided ample evidence to CMS that further inquiry would have been appropriate. Although no CMS funds were misused in this experiment, the GAO stated that CMS has put “millions of dollars” at risk by failing to adequately verify supplier legitimacy. This should be a major concern for Medicare who has improperly paid over $1 billion for DMEPOS supplies between April 2006 and March 2007. CMS, while agreeing with the results of the study, issued a statement reminding concerned citizens and lawmakers that programs are being implemented to reduce what has recently become a major issue of Medicare fraud with initiatives such as the competitive bidding program for DMEPOS.

While CMS has established some programs and Congress has enacted statutes to protect its solvency (such as the Medicare Secondary Payer statute and the Medicare, Medicaid, and SCHIP Extension Act of 2007), this study proves that there continue to be many areas that the CMS administration overlooks. In fact, the GAO used words like “simple” and “easy” to describe the challenge to defraud Medicare for this study.

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