1. Review of Retiree Drug Subsidy Costs Reported by Massachusetts Bay Transportation Authority for Plan Years 2006 and 2007

For plan years 2006 and 2007, Massachusetts Bay Transportation Authority correctly reported drug costs to the Retiree Drug Subsidy program that were incurred under its qualified retiree prescription drug plan within the effective and termination dates of each qualifying covered retiree’s (1) plan coverage and (2) subsidy period approved by the Centers for Medicare & Medicaid Services.  Accordingly, this report contains no recommendations.

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2. Review of Retiree Drug Subsidy Costs Reported by Southeastern Massachusetts Health Group for Plan Years 2006 and 2007

For plan years 2006 and 2007, Southeastern Massachusetts Health Group correctly reported drug costs to the Retiree Drug Subsidy program that were incurred under its qualified retiree prescription drug plans within the effective and termination dates of each qualifying covered retiree’s (1) plan coverage and (2) subsidy period approved by the Centers for Medicare & Medicaid Services.  Accordingly, this report contains no recommendations.

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3. Follow-Up Review of the Medicaid Drug Rebate Program in Rhode Island

Rhode Island's Department of Human Services (the State agency) had not fully implemented the recommendation from their prior audit to establish written procedures for recording drug rebate transactions. The OIG’s prior audit determined that the State agency had overstated its total uncollected drug rebate amount by $4.7 million, had not resolved claims disputed by drug manufacturers, and had not established written procedures for recording drug rebate transactions. The State agency had established controls over collecting rebates on single source drugs administered by physicians.

The OIG reiterated their recommendation that the State agency establish written procedures for recording drug rebate transactions, and the State agency agreed with their recommendation.

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4. Review of Connecticut's Community Based Medicaid Administrative Claim for State Fiscal Year 2004

In their CMS-requested review of community-based Medicaid administrative costs that Connecticut claimed for State fiscal year 2004, OIG found that the State's $9.3 million claim may not have fully complied with Federal requirements.  The State claimed reimbursement from CMS for administrative case management activities provided by contracted organizations.  Because the State made omissions and deviations from acceptable practices when calculating its claim and was unable to provide adequate documentation, OIG was unable to express an opinion on the claim's allowability.

The OIG recommended that the State agency draft its future contracts to identify and properly value the amount of administrative case management activities and work with CMS to determine what portion of the $9.3 million was allowable under Federal requirements.  The State generally agreed with the OIG’s recommendations.

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5. Review of Medicaid Indirect Costs Submitted by the New York State Department of Health on Behalf of the Office of Mental Retardation and Developmental Disabilities

The New York Office of Mental Retardation and Developmental Disabilities (OMRDD) did not maintain documentation to support its indirect administrative cost rate calculations.  In addition, the New York State Department of Health (DOH) did not review OMRDD's administrative costs before claiming them on the Centers for Medicare & Medicaid Services Form-64.  As a result, $8.1 million ($4 million Federal share) of the $9.7 million ($4.8 million Federal share) in indirect administrative costs that DOH claimed from January 1, 2003, through June 30, 2006, was unallowable.  OMRDD provides services to individuals-both Medicaid and non-Medicaid beneficiaries-with mental retardation and developmental disabilities under a cooperative agreement with DOH, which administers the State's Medicaid program.  DOH reports the total of OMRDD's direct and indirect Medicaid administration costs for Federal Medicaid reimbursement.

The OIG recommended that DOH (1) refund $4 million to the Federal Government and (2) verify that Medicaid indirect costs billed by OMRDD are adequately supported.  In its comments on the OIG’s draft report, DOH concurred with their finding and recommendations.

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6. Effect of the Part D Coverage Gap on Medicare Beneficiaries Without Financial Assistance in 2006

Seven percent of Part D beneficiaries entered the coverage gap and did not receive financial assistance with prescription drug costs in 2006.  During the coverage gap, drug-purchasing behavior changed for almost all these beneficiaries.  Medicare Part D provides an optional drug benefit to Medicare beneficiaries.  During the coverage year, the financial responsibilities of beneficiaries, plan sponsors, and CMS vary during four distinct coverage phases:  annual deductible, initial coverage, coverage gap, and catastrophic coverage.  Some research suggests that beneficiaries who entered the Medicare Part D coverage gap may have changed their prescription drug use behaviors because they were responsible for 100 percent of their drug costs during the coverage gap.

Sixty-nine percent of beneficiaries decreased the average number of drugs they purchased during the coverage gap.  This decrease could have represented a strategy that beneficiaries used to reduce their financial burden during the coverage gap, or it could have represented appropriate reductions due to changes in beneficiaries' health status.  In addition, the greater the average number of drugs per month that beneficiaries purchased before entering the coverage gap, the more they reduced the average number of drugs per month that they purchased during the coverage gap.  Beneficiaries who purchased an average of at least nine drugs per month had the largest decrease at 18 percent. 

Based on these findings, OIG recommend that CMS support outreach and education activities targeted at beneficiaries who make more prescription drug purchases before entering the coverage gap.  To do this, CMS could encourage plan sponsors to augment current outreach and beneficiary education efforts and supplement plans' outreach and education efforts by working directly with beneficiaries to explore cost-saving strategies.  In addition, CMS should target low-income subsidy outreach to beneficiaries who entered the coverage gap in previous years without financial assistance.  CMS concurred with one of the OIG’s two recommendations.  CMS did not agree with their first recommendation.  The OIG continue to believe that targeting beneficiaries with more prescription drug purchases before the coverage gap for outreach and education will assist these beneficiaries in identifying cost-saving strategies.  CMS concurred with their second recommendation.  However, the actions CMS stated it would take may not fully address their recommendation to use drug utilization data to identify potential beneficiaries for the subsidy.

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7. Hospital Compliance With Medicare's Post Acute Care Transfer Policy During Fiscal Years 2003 Through 2005 (A-04-07-03035)

In the OIG’s nationwide review of hospital compliance with Medicare's post acute care transfer policy, OIG estimated that hospitals improperly coded 15,051 claims and that, as a result, Medicare overpaid $24.8 million to these hospitals for the 3-year period that ended September 30, 2005. Under the post acute care transfer policy, Medicare pays full prospective payments to hospitals that discharge inpatients to their homes.  In contrast, for specified diagnosis-related groups, Medicare generally pays a lesser amount to hospitals that transfer inpatients to certain post acute care settings, such as skilled nursing facilities or home health care.  Of the 150 claims in the OIG’s sample, 92 claims totaling $137,000 were improperly coded as discharges to home rather than transfers to post acute care.  

Most of the overpayments occurred because the Centers for Medicare and Medicaid Services (CMS) lacked adequate payment system controls before implementing a system edit on January 1, 2004, to detect transfers improperly coded as discharges to home.  Although overpayments were significantly reduced after implementation of the edit, the edit did not detect 12 overpayments.

The OIG recommended that CMS (1) instruct the fiscal intermediaries to recover $137,000 in overpayments identified in the OIG’s sample, review the remaining claims in their sampling frame, and identify and recover additional overpayments estimated at $24.7 million and (2) determine why the system edit did not detect 12 overpayments and amend the edit as appropriate.  CMS concurred with their recommendations. 

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8. Review of Medicare Payments to Managed Care Plans on Behalf of Deceased Enrollees

In a review of Medicare payments to Medicare Advantage organizations on behalf of deceased enrollees, OIG found that CMS paid approximately $4.4 million for coverage periods after the enrollees' months of death. Medicare Advantage organizations provide managed care to enrollees under Medicare Part C.  Pursuant to Federal regulations, after an enrollee dies, the last allowable payment is for the month in which the enrollee died.  CMS made improper payments for 2,657 of the approximately 1.7 million deceased enrollees (far less than 1 percent of the enrollees who died) between January 1, 2003, and April 30, 2007.  Although CMS had correctly stopped payments for the vast majority of the deceased enrollees, its systems did not identify and prevent all improper payments.

The OIG recommended that CMS recoup the $4.4 million in unallowable payments and implement system enhancements to prevent and detect improper payments in the future.  CMS responded that it had already recovered $3.5 million and would not recover the remainder, primarily because of limited resources.  CMS separately provided detailed descriptions of its procedures to prevent and detect improper payments.  The OIG revised their second recommendation after reviewing the procedures but continue to recommend that CMS recoup the full $4.4 million.

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9. Review of High Dollar Payments for Virginia Medicare Part B Claims Processed by TrailBlazer Health Enterprises for the Period January 1, 2003, Through December 31, 2005

During calendar years 2003-2005, TrailBlazer Health Enterprises, the carrier for Virginia, overpaid providers $154,000 for 15 high-dollar (greater than $10,000) Medicare Part B claims.  Three providers refunded six overpayments totaling $60,000 prior to the OIG’s audit.

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10. Comparison of Prices for Negative Pressure Wound Therapy Pumps

Suppliers paid an average of $3,604 for new negative pressure wound therapy pump models, compared to Medicare's purchase price of $17,165. Medicare reimbursed suppliers for these pumps based on this purchase price, which is more than four times the average price paid by suppliers.  On a monthly basis, Medicare reimbursed suppliers $1,716 for these pumps for the first 3 months.  At this rate, suppliers recouped the average cost of a new pump model in about 2 months.  Moreover, if a beneficiary were to rent the pump for all of the 13 months allowed by Medicare, the beneficiary's coinsurance alone ($3,599) would cover almost the entire average cost of a new pump model.  These pumps are portable or stationary devices used for the treatment of ulcers or wounds that have not responded to traditional wound treatment methods.

When Medicare first started covering pumps in 2001, it covered only one pump model, which was both manufactured and supplied by a single manufacturer.  Since then, a number of manufacturers have introduced new pump models in the market and are charging substantially less for them.

The OIG’s review also found that suppliers purchased three-quarters of the pumps that they provided to beneficiaries, while the remaining one-quarter were leased, rented, or exchanged.  Finally, OIG found that suppliers reported not communicating as required with almost one-quarter of beneficiaries' clinicians.  In the absence of clinician input, suppliers cannot determine whether there is a continued medical need for a pump.  Suppliers generally reported meeting other requirements, such as providing delivery, education, as well as maintenance and repairs when needed. 

Based on the findings of this report, OIG recommended that CMS reduce Medicare's reimbursement amount for pumps.  CMS should consider the following methods to reduce the reimbursement amount:  use its inherent reasonableness authority to reduce the reimbursement amount for pumps; and include pumps in the second round of the Competitive Bidding Acquisition Program.  In addition, CMS should continue to monitor the growth of the new pump market.  Lastly, CMS should educate suppliers of new pump models on the importance of communication with beneficiaries' treating clinicians and follow up on the claims that OIG identified that may be inappropriate.  CMS concurred with four of their recommendations and will consider the remaining recommendation about including pumps when designing the second round of the competitive bidding program.

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11. Review of High-Dollar Part B Claims Processed by CIGNA Government Services Carrier No. 05440 for the Period January 1, 2004, Through December 31, 2006

During calendar years (CY) 2004-2006, CIGNA Government Services Carrier No. 05440 (the contractor) overpaid providers in Tennessee $205,000. Generally, the contractor made the overpayments because the providers incorrectly billed excessive units of service.  In addition, the Medicare claim processing systems did not have sufficient edits in place during CYs 2004-2006 to detect and prevent payments for these types of erroneous claims.

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12. Follow-up Review of the Medicaid Drug Rebate Program in Ohio

In a follow-up review of Ohio's Medicaid drug rebate program, OIG found that, as of June 30, 2006, the State agency had implemented the recommendations from their previous audit related to the collection of interest and dispute resolution.  In addition, the State agency had established controls over collecting rebates on single source drugs administered by physicians.

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13. Review of Retiree Drug Subsidy Costs Reported by National Grid USA Service Company, Inc., for Plan Years 2006 and 2007

For plan years 2006 and 2007, National Grid USA Service Company, Inc., correctly reported drug costs to the Retiree Drug Subsidy program that were incurred under its Blue Cross Blue Shield of Massachusetts qualified retiree prescription drug plans within the effective and termination dates of each qualifying covered retiree’s (1) plan coverage and (2) subsidy period approved by the Centers for Medicare & Medicaid Services.  Accordingly, this report contains no recommendations.

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