Medicaid System to Detect Fraud, Waste, and Abuse is Full of Holes

Cheryl Clark, for HealthLeaders Media , August 28, 2009

With serious implications for the government's ability to detect fraud, waste, and abuse in the Medicaid system, an Office of Inspector General report found a lack of timeliness, accuracy, and comprehensiveness of the federal database used for that purpose.

Key problems were found with the Medicaid Statistical Information System's (MSIS) tolerance for errors in the data submitted, which allowed certain claims filed by states seeking reimbursement "to clear quality review with an unknown number of errors," the report said. Error tolerance levels were frequently adjusted upward to allow 100% of errors to slip through so the claim could pass through quality review.

The MSIS is maintained by the Centers for Medicare and Medicaid Services for 57 million beneficiaries, at a cost of $308 billion in 2006, $174 billion of which was paid by the federal government.

The database has been seen as a key element to be used by the Health Care Fraud Prevention and Enforcement Action Team, (HEAT), created by the U.S. Department of Justice in May as an interagency effort to combat health care fraud.

Among other problems identified in the MSIS system:

It did not capture 55% of service provider identifiers that would assist in fraud, waste, and abuse detection. "For example, MSIS did not capture the referring provider's identification number," to indicate who ordered the medical procedure, product, or service. "Without the referring provider identification number, fraud analysts cannot use MSIS data to assess whether a qualified physician submitted the order as required to receive certain medical benefits."

In a 2002 report, the OIG used referring provider ID numbers to estimate that Medicare paid $61 million for improperly documented services in 1999.

It did not capture almost half of the procedure product and service description data elements. Such elements specify "the tooth number, quadrant or surface subject for dental procedures."

"Without these details, fraud analysts would have difficulty using MSIS data to detect fraudulent Medicaid claims for duplicate or medically unnecessary dental procedures," the report said. Incorrect information about the tooth surface subject to dental procedures contributed to an estimated $12 million in improper Medicaid payments in 2003.

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