Testimony before the Committee on Homeland Security and
Governental Affairs
United States Senate
Irr ....
"Oversight Challenges in the Medicare Prescription
Drug Program"
Testimony of
Robert Vito
Regional Inspector General for Evaluation and Inspections
Office of Inspector General
Department of Health & Human Services
....
March 3, 2010
2:30PM
342 Dirksen Senate Office Building
$'.i "RV~
l1" of:
Testimony 
Robert A. Vito
Regional Inspector General for Evaluation and Inspections
Health & Human Services
Offce ofInspector General, U.S. Departent of 
Good afternoon, Mr. Chairman and members ofthe Subcommittee. I am Robert Vito,
Regional Inspector General for Evaluation and Inspections in Philadelphia at the U.S.
Health & Human Services' (HHS) Office ofInspector General (OIG).
Deparment of 
The Medicare Par D prescription drug program is large and complex with both Federal
the program.
agencies and Federal contractors charged with protecting the integrty of 
With approximately $50 bilion at risk in the program each year, it is important that all of
us who have programmatic and oversight responsibilities work collaboratively to ensure
that program vulnerabilities are identified and resolved.
work to
Since the inception of  the Par D program in 2006, OIG has developed a body of 
review program integrty and payment accuracy safeguards that are in place to protect the
program from fraud, waste, and abuse. To date, OIG's work has demonstrated that the
Part D program oversight by the Centers for Medicare & Medicaid Services (CMS), the
Part D plan sponsors, and CMS's benefit integrty contractors has been limited. As a
result, the program is vulnerable to fraud, waste, and abuse. There are opportnities to
significantly enhance oversight of the Part D program, and on behalf of the Inspector
General, I would like to thank you, Mr. Chairman, for holding today's hearing on this
important topic.
the OIG and providing some background on
After briefly describing the oversight role of 
the Medicare Part D program, I wil summarize the Part D vulnerabilities we have
the Par D program.
identified and OIG recommendations to improve the integrty of 
I. OIG's MISSION TO PROTECT THE MEDICARE AND MEDICAID PROGRAMS AND
BENEFICIARES
OIG is an independent, nonpartisan agency committed to protecting the integrty ofthe
more than 300 programs administered by HHS. OIG fights health care fraud, waste, and
abuse through a nationwide network of investigations, audits, evaluations, and
more than 1,500
enforcement and compliance activities. OIG is comprised of 
professionals who perform comprehensive health care oversight and enforcement
activities, including:
~ Office of Investigations: conducts criminal, civil, and administrative investigations of
health care fraud, which result in convictions, civil and administrative actions, and
monetary recoveries;
Medicare and Medicaid
~ Offce of Audit Serices: conducts and oversees audits of 
payments and operations; identifies improper payments and program vulnerabilities;
and recommends audit disallowances and program improvements;
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and Interational Security: Hearng March 3, 2010 Page i ~ Office of Evaluation and Inspections: conducts evaluations of the Medicare and
Medicaid programs to identify program integrty vulnerabilities and make
recommendations to prevent fraud, waste, and abuse and to promote economy,
efficiency, and effectiveness; and
Counsel to the Inspector General: represents OIG in all civil and
~ Office of 
administrative fraud and abuse cases, and in connection with these cases, negotiates
and monitors corporate integrty agreements; provides guidance to the health care
industry to promote compliance; and provides legal support to OIG operations.
In FY 2009, OIG investigations resulted in $4 bilion in settlements and court-ordered
fines, penalties, and restitution, and in 671 criminal actions. OIG audits resulted in
almost $500 milion in receivables through recommended disallowances. OIG also
produced equally important but less quantifiable gains in deterrence and prevention of
these critical issues among
fraud, waste, and abuse. OIG also has raised awareness of 
policy makers, governent agencies, and the health care community at large. Moving
forward, OIG is committed to building on our successes and achieving even greater
results in protecting the integrty of governent health care programs and the health and
welfare of people served by them.
II. THE MEDICAR PART D PROGRAM
The Medicare Prescription Drug, Improvement, and Modernization Act of2003 (MMA)
established the Medicare Part D prescription drug benefit. Effective Januar 1, 2006,
Part D provides an optional outpatient prescription drug benefit to all Medicare
beneficiaries. CMS administers the Par D program and contracts with private
companies, known as plan sponsors, to provide Part D prescription drug coverage. Under
Medicare Part D, beneficiaries can enroll in a stand-alone prescription drug plan that
covers drugs only, or a Medicare Advantage prescription drug plan that integrates drug
coverage with other health care services.
The MMA required an extremely short implementation schedule for the Medicare Par D
prescription drug benefit. In the two years between the passage of MMA and the
the program, CMS and its Part D plan sponsors conducted
effective date of 
implementation activities, including the development of procedures, data systems, and
infrastrcture to carr out all the necessary functions. Beginning in November 2005,
after expeditious and extensive planning, CMS began enrollng beneficiaries for the 2006
Par D plan year.
the Part D program begins, there are approximately 27 milion
As the fifth year of 
beneficiaries enrolled in the program. More than 60 percent of the beneficiaries,
approximately 17 milion, are in stand-alone plans. Since the inception ofthe program,
Medicare has paid nearly $200 bilion, approximately $50 bilion each year, for the Par
D program.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Servces,
and International Security: Hearing March 3, 2010 Page  2 III. PART D PROGRAM INTEGRITY
Within the Medicare program, the responsibility for ensuring integrty in the Part D
program is shared between Part D plan sponsors, program integrty contractors, and
CMS. The plan sponsors serve as the first line of defense against fraud in the Part D
program and CMS requires that plan sponsors have compliance plans in place to protect
the program. CMS requires plan sponsors to include certain elements in
the integrty of 
their compliance plans. These elements include the designation of a compliance officer,
the establishment of effective compliance training for employees and contractors, and the
establishment of procedures for effective internal monitoring and auditing. CMS also
requires compliance plans to have measures to detect, correct, and prevent fraud, waste,
and abuse.
CMS contracts with Medicare Drug Integrty Contractors (MEDICs) to perform integrty
functions such as identifyng and investigating potential fraud, waste, and abuse in the
Part D program. MEDICs, which are the cornerstone ofCMS's program integrty efforts,
plan sponsors' compliance
are responsible for safeguard activities, including audits of 
plans and identifying fraud through innovative data analysis techniques.
As program administrator, CMS is ultimately responsible for safeguarding the Medicare
Part D program. As such, CMS is statutorily required to perform financial audits ofthe
Part D plan sponsors, which provide Part D benefits to Medicare beneficiaries. CMS also
can conduct a number of other types of audits of plan sponsors, including bid audits,
program audits, benefit integrty audits, and compliance plan audits.
Inspector General plays a
In addition to plan sponsors, MEDICs, and CMS, the Office of 
critical role in combating fraud, waste, and abuse in Medicare Part D. Through its
evaluations, audits, investigations, and enforcement actions, OIG has identified
significant vulnerabilities in the Par D program and has made numerous
recommendations to CMS to correct these vulnerabilities.! OIG also has performed
targeted followup reviews to determine whether the vulnerabilties were addressed.
IV. STRENGTHENING PART D OVERSIGHT
the Part D program indicate that CMS's program integrty
Overall, OIG's reviews of 
efforts have been limited in scope and may not suffciently protect the program. Lack of
effective oversight exposes the Part D program and Medicare beneficiares to a wide
range of fraud, waste, and abuse, including inappropriate bilings, payments for excluded
drugs, drug diversion, improper bid submissions, excessive premiums, and ilegal
marketing schemes. The failure to address these vulnerabilities puts the scarce resources
Part D program
of  the Medicare Trust Fund at risk. Below is a brief description of 
vulnerabilities identified through OIG's work.
i See Attachment A for a list of OIG's cornpleted, ongoing, and planned Part D work on program integrity,
payment accuracy, cost controls, beneficiary protections and access, prescription drug pricing, and
information technology systems.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearing March 3, 2010 Page  3 A. Early Challenges to Implementing a Comprehensive Safeguard
Strategy
Part D found that CMS implemented only limited safeguard activities
An early review of 
and further development ofthese activities was needed. In fiscal year 2006, OIG found
that while some of CMS' s safeguards had been functioning since Part D enrollment
began, other critical safeguards were implemented in limited capacity or had not yet been
put in place. 2 We also found that CMS relied largely on complaints to identify potential
fraud in Part D and not all of these complaints were investigated in a timely way. In
addition, we found that no significant data analysis had been conducted specifically to
detect or prevent fraud and abuse. One barer to conducting data analysis was that CMS
and its contractors lacked a centralized data repository that would enable proactive data
monitoring.
B. MEDICs Have Not Conducted the Full Range of Safeguard Activities
Planned
i. MEDICs have relied mainly on external rather than proactive
sources to identify fraud
play a key role in CMS' s strategy to protect the Part D program from fraud,
MEDICs 
using new and innovative
waste, and abuse. This is especially true in the area of 
techniques to monitor and analyze data to help identify fraud. Using data analysis tools
the most important elements ofCMS's safeguard
to proactively detect fraud is one of 
strategies.
MEDICs' responsibilities, OIG found in
While proactive data analysis is a key element of 
its October 2009 report that MEDICs identified most incidents of potential fraud though
the
external sources, such as beneficiary complaints, rather than proactive methods.3 Of 
4,194 potential fraud and abuse incidents MEDICs identified in 2008, 87 percent were
identified through external sources and only 13 percent were identified through proactive
the 1,320 investigations MEDICs
methods, such as data analysis. In addition, of 
conducted, 96 percent involved incidents identified through external sources.
u. Limited data access has hindered MEDICs' fraud detection efforts
CMS's strategy called for the use of data analysis to combat fraud and abuse. However,
MEDICs reported that barrers hindered their ability to consistently conduct
comprehensive data analysis to detect and prevent potential fraud and abuse. These
barrers included delays in receiving access to the necessary CMS claims and Part D
prescription drug event (PDE) data. MEDICs reported that they needed both PDE data
2 OIG, CMS's Implementation of  Safeguards During Fiscal Year 2006 to Prevent and Detect Fraud and
Abuse in Medicare Prescription Drug Plans, OEI-06-06-00280, October 2007.
3 OIG, Medicare Drug Integrity Contractors' Identifcation of Potential Part D Fraud and Abuse, OEI-03-
08-00420, October 2009.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearng March 3, 2010 Page  4 and Part B data to effectively identify and investigate potential fraud and abuse incidents.
However, MEDICs did not receive access to PDE data until August 2007; nearly a year
after their contracts began. Once they received access to PDE data, MEDICs found that
there were significant limitations in the data and important variables were not available or
were stored incorrectly. In addition, two MEDICs were not given access to Part B data
(physician services) until the fall of2008 and the third MEDIC did not receive access to
Part B data before its contract ended.
In addition to limited access to data, MEDICs' lack of authority to directly obtain
information, such as prescriptions and medical records from pharacies, pharmacy
benefit managers, and physicians hindered their ability to investigate potential fraud and
abuse incidents. Also, MEDICs may not have been aware of some potential fraud and
abuse incidents because plan sponsors are encouraged to refer potential fraud and abuse
incidents to MEDICs but are not required to do so.
il. MEDICs were not given approval to conduct compliance plan
audits
plan
OIG also found that CMS did not give MEDICs approval to conduct audits of 
the MEDICs, all three
sponsors' compliance plans in 2008. During OIG's evaluation of 
MEDICs indicated that they were prepared to conduct compliance plan audits in 2008
but were not given approval by CMS to do so. Between October and December 2008,
two years after MEDICs' regional contracts began, the two remaining MEDICs did
plan sponsors' compliance plans.
receive approval from CMS to begin 10 audits of 
December 2009, CMS had not issued final reports on any ofthese
However, as of 
compliance plan audits.
In November 2009, after the issuance of our evaluation report, CMS restructured the
these two
MEDIC program. There are now two instead of  three MEDICs. One of 
MEDICs, the Compliance and Enforcement MEDIC, focuses solely on compliance
activities of plan sponsors, including compliance plan audits and monitoring
inappropriate agent/broker activity. The second MEDIC, the Benefit Integrty MEDIC,
concentrates on fraud, waste, and abuse efforts including investigating potential fraud and
conducting data and investigative analysis. As Part D program integrty efforts continue
these
to evolve at CMS, OIG wil continue its review to ensure the effectiveness of 
efforts.
C. Sponsors' Compliance Plans Have Been Incomplete
CMS requires that plan sponsors have compliance plans in place to protect the integrty
of the program. An effective compliance plan helps plan sponsors protect the integrty of
Medicare funds by preventing and detecting fraud, waste, and abuse. CMS requires plan
sponsors to include certain elements in their compliance plans. These elements include
the designation of a compliance officer, the establishment of effective compliance
training for employees and contractors, and the establishment of procedures for effective
internal monitoring and auditing.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearing March 3, 2010 PageS OIG has conducted two evaluations, issued in December 2006 and October 2008, on
Medicare Part D plan sponsors' compliance plans.4 Plan sponsors are required to
implement compliance plans in order to detect, correct, and prevent fraud, waste, and
abuse. CMS' s Prescription Drug Benefit Manual outlines specific requirements that
sponsors' compliance plans must address to ensure that elements established by Federal
regulation are met.
OIG's 2006 review found that while all plan sponsors had compliance plans, these plans
did not fully address all of CMS' s requirements and in some cases, contained only the
broad outlines of a fraud and abuse plan and did not include descriptions of specific
compliance and anti-fraud processes.
D. CMS Has Not Finalied Audits of Plan Sponsors' Compliance Plans
PDP sponsors' compliance plans, we do not
Because CMS has not finalized any audits of 
know whether this key anti-fraud component is working at the plan level and what
improvements plan sponsors can make to improve program safeguards. OIG recently
completed an indepth audit of one plan sponsor's internal controls to detect, correct, and
prevent fraud, waste, and abuse in the Part D program during 2007 and 2008.5 This work
highlights that audits of individual plan sponsors can provide important insights into how
the Part D program is working at the plan level and what improvements plan sponsors
can make to improve program safeguards.
the plan sponsor's internal controls were
In our audit, we found that although most of 
adequate, it had several internal control weaknesses that compromised its ability to
detect, correct and prevent fraud, waste, and abuse in the Part D program. The plan
sponsor generally did not self-report potential fraud to the MEDICs as recommended by
CMS guidance. While the plan sponsor had written procedures requiring the self-
reporting of potential fraud to the MEDICs, the plan sponsor did not follow its own
procedures. We also found that the plan sponsor paid claims for prescriptions written by
physicians or other health care professionals who are excluded from Federal health care
programs. Furthermore, the plan sponsor did not have a procedure in place to track
complaints made against providers as recommended by CMS guidance. Based on these
findings, OIG recommended that the plan sponsor strengthen its internal controls and
establish and/or adhere to policies and procedures to address issues with payment
accuracy and complaint tracking. In response to our work, the plan sponsor outlined a
number of corrective actions it had implemented to address the vulnerabilities.
4 OIG, Prescription Drug Plan Sponsors' Compliance Plans, OEI-03-06-00100, December 2006 and
Oversight of Prescription Drug Plan Sponsors' Compliance Plans, OEI-03-08-00230, October 2008.
5 OIG, Review of  Script Insurance Company's Internal Controls to Guard Against Fraud, Waste and
Silver 
Abusefor the Medicare Part D Program, A-07-09-03124, Januar 2010.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and Interational Security: Hearing March 3, 2010 Page  6 E. Plan Sponsors Vary Widely in the Identifcation of Fraud
Plan sponsors are the initial gatekeeper protecting, the Part D program from fraud and
abuse. Although CMS requires that sponsors have measures to detect and deter fraud and
abuse, the specifics are left to each individual sponsor. However, CMS requires that plan
sponsors conduct inquiries and initiate corrective actions if there is evidence of potential
fraud and abuse. CMS recommends that after conducting inquiries, if plan sponsors
identify potential fraud and abuse, sponsors should refer the incidents to CMS or
MEDICs for further investigation.
In October 2008, OIG issued a report reviewing the extent to which plan sponsors
identified potential fraud and abuse during the first 6 months of 2007.6 We found that 24
of 86 sponsors of stand-alone plans did not identify any potential fraud and abuse
incidents, either from internal efforts or complaints from external sources. For the 62
plan sponsors that identified fraud incidents, the number of incidents identified ranged
from 1 to over 6,000. Ninety percent of all incidents were associated with only seven
plan sponsors. We also found that not all plan sponsors that identified potential fraud and
abuse incidents conducted inquires, initiated corrective actions, or made referrals for
further investigation.
Plan sponsors identified 26 different types of potential fraud and abuse, and of these, the
most prevalent type was inappropriate biling. The second most prevalent type was
"providing false information," e.g., misrepresentation of a beneficiary's plan enrollment,
and the third most prevalent was doctor shopping, i.e., a beneficiary consulting a number
of doctors for the purpose of inappropriately obtaining multiple prescriptions for drugs.
These types of suspicious behavior and potential abuse are consistent with the types of
vulnerabilities that we have identified in other prescription drug benefit programs.
F. Payment Accuracy Vulnerabilties
In addition to addressing the program integrty vulnerabilities identified above, it is
Part D payment accuracy. With costs for the
critical that CMS strengthen its oversight of 
Part D program approaching $50 bilion a year, it is imperative that Part D payments are
made accurately and are based on the best data available. Each year, plan sponsors' bid
amounts are the basis for determining the payments Medicare makes directly to plan
sponsors. The bid amounts also determine the monthly premiums that beneficiares wil
pay.
Medicare makes monthly payments to plan sponsors for providing Par D coverage to
beneficiaries. These payments are based on estimates that sponsors provide in their
approved bids. These estimates include sponsors' expected profits. After the close ofthe
plan year, CMS must reconcile the monthly payments with sponsors' actual costs. This
allows CMS to determine whether sponsors owe money to Medicare or if Medicare owes
6 OIG, Medicare Drug Plan Sponsors' Identifcation of  Potential Fraud and Abuse, OEI-03-07-00380,
October 2008.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearing March 3, 2010 Page? money to sponsors. In addition, CMS must determine whether risk-sharing payments are
required. Risk sharing requires the Federal Governent to share in sponsors' unexpected
profits and losses.
CMS's oversight is essential to reduce inaccuracies and errors in Part D sponsors' bids.
Inaccuracies in sponsors' bids have resulted in Medicare paying higher payments and
beneficiaries paying higher premiums than they should have. OIG has continually
recommended that CMS strengthen its oversight and enforcement approach to hold plan
sponsors accountable for their bids.
and 2007
i. The majority of Part D sponsors' bids in 2006 
overestimated the cost of providing the benefit
OIG assessed the estimated reconciliation amounts that Part D sponsors would owe to or
receive from Medicare for plan years 2006 and 2007. 7 In 2006, Part D sponsors owed
Medicare more than $4 bilion. Although the overall net amount that sponsors owed in
2007 was substantially lower at only $18 milion, we continued to find that most Part D
sponsors overestimated the costs of providing the benefit in their bids and made profits
large enough to trgger risk sharing. In 2007, 71 percent of sponsors made unexpected
profits large enough to trgger risk sharing. In total, they overestimated their bids by
more than $1 bilion, which triggered risk-sharing payments of$795 milion to
Medicare.s
These overestimates resulted in payments to sponsors by Medicare and by beneficiaries
that were higher than they should have been. Although Medicare was able to recoup a
risk-sharing requirements - there
portion of  the amounts that were overpaid - because of 
is no mechanism for seniors to recoup any of the money that they paid in higher
premiums.
Based on these findings, we recommended that CMS ensure that sponsors' bids
accurately reflect their costs of providing the benefit, and when sponsors fail to do so,
that CMS hold sponsors more accountable for inaccuracies in the bids. We also
recommended that CMS determine the appropriateness of any proposed changes to their
methods of calculating risk sharing.
7 OIG, Medicare Part D Sponsors: Estimated Reconciliation Amountsfor 2006, OEI-02-07-00460,
October 2007, and Medicare Part D Reconciliation Payments for 2006 and 2007, OEI-02-08-00460,
September 2009.
8 The increased direct subsidy payments resulting from these overestimated bids were generally offset by
reinsurance and low-income cost sharing subsidy payments that were too low, resulting in the lower net
amount owed to Medicare.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and Interational Security: Hearing March 3, 2010 Page 8 ii. CMS's Part D audit processes do not sufficiently ensure
accountabilty
The two audit mechanisms CMS has in place to ensure the accuracy of the bid, the bid
audit and the financial audit, are largely ineffectual for detecting and correcting
inaccuracies in the bid amounts.
The bid audit is focused on the actuarial assumptions that are used to calculate the bid
amount. For plan years 2006 and 2007, one-quarter of all bid audits identified at least
one material finding that, if corrected, would result in at least a I-percent change in the
bid amount or at least a 10-percent change in any bid element. However, the bid audits
are not designed to result in adjustments to bid amounts. According to CMS staff, one
bid audit material findings is problematic
reason that adjusting bid amounts as a result of 
is because the audits are completed after contracts have already been signed with plan
sponsors. Instead, CMS uses bid audits to influence the submission, review, and audit of
future bid amounts.
Financial audits verify the accuracy of the financial data that plan sponsors submit with
their bids. CMS is statutorily required to conduct a financial audit of at least one-third of
plan
plan sponsors annually. However, only 4 percent of  the required financial audits of 
2008. CMS's delays in conducting required financial
year 2006 had begun as of April 
audits of plans increases the risk that inaccuracies in the financial data underlying bids
wil go undetected and affect future bids.
V. RECOMMENDATIONS FOR IMPROVING OVERSIGHT
Oversight of the newest benefit in Medicare, the Part D prescription drug program, is
imperative. It requires focused attention and a commitment to remedying program
vulnerabilities and ensuring bid and payment accuracy. Ensuring that the Medicare Part
D program and its beneficiaries are paying appropriately for the benefit is imperative.
The program needs systems in place to prevent, detect, and respond to fraud, waste, and
abuse.
Below are specific recommendations that OIG believes wil improve the oversight and
integrty of the Medicare Part D program.
A. CMS Should Implement a Comprehensive Program Integrity Plan
That Includes Mechanisms to Ensure Oversight and Accountabilty
OIG believes that CMS must set out a comprehensive program integrty plan that
includes specific action items, target dates, and assigned staff for follow up. Having this
comprehensive plan would address the broad coordination needed between different
groups within CMS and contain details, deliverables, and timelines that would make it a
useful management tool.
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and Interational Security: Hearing March 3, 2010 Page  9 It also is crucial that audits are conducted in a timely manner and that mechanisms are
established to hold plan sponsors accountable for the problems identified. While only
financial audits are legislatively mandated, CMS established a comprehensive list of
audits it expected to perform on plan sponsors. CMS needs to perform more of these
audits and needs to perform these audits more timely. That way, vulnerabilities that exist
at individual plan sponsors can be remedied quickly and detected problems can also serve
as early warning flags for issues that CMS may need to address programwide.
CMS should also evaluate the performance ofthe plan sponsors by analyzing the number
of fraud and abuse incidents identified, the number of inquiries and corrective actions
initiated, as well as the number of fraud referrals made to law enforcement.
B. CMS Should Ensure That MEDICs Conduct More Rigorous
Oversight, Including Data Analysis, to Detect Potential Fraud, Waste,
Abuse
and 
Complaints from beneficiaries and others are a key part of detecting fraud. However,
individual complaints tend to focus on one specific circumstance, which is why the work
the Part D prescription
ofthe MEDICs is  so important. MEDICs' ability to review all of 
drug data and data from other Medicare programs allows for comprehensive analyses that
can identify global problems, aberrancies, and outliers across the program. MEDICs
need to perform more ofthese analyses as they allow for the identification of systemic
vulnerabilities in the program.
MEDICs also should be provided with the legal authority to obtain critical information
directly from pharmacies, pharmacy benefit managers, and prescribing physicians. Not being
able to directly obtain prescriptions and related medical information can hinder the
thoroughess and timeliness of  MEDICs' investigations of  potential fraud.
C. CMS Should Ensure That Plan Sponsors are Implementing Effective
Compliance Plans
Our ultimate goal is to address fraud as early as we can in the process. That is why
having comprehensive and successful compliance plans in place at the plan sponsors is so
essential. They are able see the prescription drug data in real time. By constantly
monitoring that data they can flag potentially fraudulent issues early on.
CMS, MEDICs, and plan sponsors need to perform innovative data analysis of claims
and payment information and embrace proactive methods of fraud detection. Data
metrics in conjunction with audit results can assist CMS in targeting their resources in the
areas that are most vulnerable to fraud, waste, and abuse.
VI. CONCLUSION
Par D provides a valuable prescription drug benefit to Medicare beneficiaries and all of
us who have programmatic and oversight responsibilities must be vigilant in safeguarding
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and Interational Security: Hearing March 3, 2010 Page 10 the program. OIG recognizes the immense effort that CMS put forth to develop and
administer the Part D benefit under such a tight timeframe. Now that the program is
entering its fifth year, it is time to use the lessons and experiences from its initial years to
Part D moving forward.
focus on strengthening program integrty of 
Protecting the Part D program from fraud, waste, and abuse wil involve ongoing
key partners, including CMS, plan sponsors, and
cooperation among a number of 
MEDICs. OIG has conducted reviews ofCMS's audit and oversight functions, on plan
fraud and abuse, and MEDICs' abilities to detect, investigate,
sponsors' identification of 
and refer fraud in the Part D program. All of the reviews have identified program
vulnerabilities and opportnities to strengthen these key partners' efforts to combat Part
D fraud and abuse.
CMS needs to ensure that there is adequate oversight of Medicare Part D payments and
beneficiary costs. It also needs to make sure that plan sponsors are held accountable for
the accuracy of their bid amounts and CMS needs a mechanism to address bid
inaccuracies in the current benefit year and not just futue years.
Our work in the Par D program continues. We are currently performing reviews on
questionable biling patterns, plan sponsors training programs regarding fraud, the status
and results of all audits of plan sponsors, Part D electronic prescribing initiatives, invalid
prescriber identifiers on prescription drug data, payments made to excluded providers,
reconciliation calculations, and Part D rebates and pharmacy discounts.
Clearly, there are many opportnities for CMS and its parners to strengthen Part D
the Part D program, and we stand ready to assist
safeguards to ensure the integrty of 
them in their efforts. I would be happy to answer any questions that the subcommittee
have.
may 
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearing March 3, 2010 Page 11 A
ATTACHMENT 
Part D Reports Produced by HHS DIG
. Review of SilverScript Insurance Company's Internal Controls to Guard Against
for the Medicare Part D Program, A-07-09-03124,
Fraud, Waste and Abuse 
January 2010.
. Midyear Formulary Changes in Medicare Prescription Drug Plans, OEI-OI-08-
00540, December 2009
. Medication Therapy Management Program: Controls Over Eligibilty and Costs,
A-04-09-06106, December 2009
. Review of Dual Eligibles' Part D Demonstration Project, A-O 1-09-0060 1, October
2009
. Medicare Part DE-Prescribing Standards: Early Assessment Shows Partial
Connectivity, OEI-05-08-00320, October 2009
. Medicare Drug Integrity Contractors' Identifcation of Potential Part D Fraud and
Abuse, OEI-03-08-00420, October 2009
. Medicare Part D Reconciliation Payments for 2006 and 2007, OEI-02-08-00460,
September 2009.
. Accuracy of Part D Plans' Drug Prices on the Medicare Prescription Drug Plan
Finder, OEI-03-07-00600, July 2009
. Reimbursement of State Costs for Provision of Part D Drugs, A-02-08-01007, July
2009
. Medicare Part D Payments for Beneficiaries in Part A Skiled Nursing Facility Stays
in 2006, OEI-02-07-00230, June 2009
. Efect of the Part D Coverage Gap on Medicare Beneficiaries Without Financial
Assistance in 2006, OEI-05-07-00610, March 2009
. Comparing Pharmacy Reimbursement: Medicare Part D to Medicaid, OEI-03-07-
00350, February 2009
. Comparing Special Needs Plan Beneficiaries to Other Medicare Advantage
Prescription Drug Plan Beneficiaries, OEI-05-07-00490, December 2008
. Centers for Medicare & Medicaid Services Audits of Medicare Part D Bids, OEI-
05-07-00560, November 2008
. Oversight of Prescription Drug Plan Sponsors' Compliance Plans, OEI-03-08-00230,
October 2008
. Medicare Drug Plan Sponsors' Identifcation of Potential Fraud and Abuse, OEI-03-
07-00380, October 2008
. Marketing Materialsfor Medicare Prescription Drug Plans, OEI-OI-06-00050,
September 2008
. Review of Medicare Part D Contractingfor Contract Year 2006, A-06-07-00082,
July 2008
. Medicare Drug Subsidy Payments for Dual Eligibles, A-05-02-00009, June 2008
. Role of Nursing Homes and Long Term Care Pharmacies in Assisting Dual-Eligible
Residents with Selecting Part D Plans, OEI-02-06-00191, June 2008
Senate Coinmittee on Homeland Security and Government Affairs
Subcommittee on Federal Fii;ancial Management, Goverment Information, Federal Services,
and International Security: Hearing March 3, 2010 Page 12 A
ATTACHMENT 
. Availability of Medicare Part D Drugs to Dual-Eligible Nursing Home Residents,
OEI-02-06-00190, June 2008
. Review of the Relationship Between Medicare Part D Payments to Local,
Community Pharmacies and the Pharmacies' Drug Acquisition Costs, A-06-07-
00107, January 2008
. Tracking Beneficiaries' True Out-of-Pocket Costs for the Part D Prescription Drug
Benefit, OEI-03-06-00360, December 2007
. Generic Drug Utilzation in the Medicare Part D Program, OEI-05-07-00130,
November 2007
. Medicare Part D Prescription Drug Plan Sponsor Internet Web Sites: Content and
Accessibility, OEI-06-06-00340, October 2007
Safeguards During Fiscal Year 2006 to Prevent and Detect
. CMS's Implementation of 
Fraud and Abuse in Medicare Prescription Drug Plans, OEI-06-06-00280, October
2007.
. Medicare Part D Sponsors: Estimated Reconciliation Amountsfor 2006, OEI-02-07-
00460, October 2007
. Retail Pharmacy Participation in Medicare Part D Prescription Drug Plans in 2006,
OEI-05-06-00320, June 2007
. Prescription Drug Plans Sponsors' Compliance Plans, OEI-03-06-00100, December
2006
. Identifing Beneficiaries Eligible for the Medicare Part D Low-Income Subsidy, OEI-
03-06-00120, November 2006
. Early Implementation of MMA: Status Report of the State Health Insurance
Assistance Programs, OEI-05-05-00190, March 2006
Commonly Used
. Dual Eligibles' Transition: Part D Formularies' Inclusion of 
Drugs, OEI-05-06-00090, January 2006
Part D Work Underway or Planned by HHS OIG
. Medicare Part D Reconciliation Calculations
. Medicare Part D Data Submitted by Sponsors for Reconciliations
. Medication Therapy Management Program
. Less-Than-Effective and Terminated Drugs in Part D
. Aberrant Part D Claims
. Medicare Prescription Drug Plans' Formulary Changes
. True Out-of-Pocket Costs for Part D
Drug
. Beneficiaries' Experiences With Low-Income Subsidies and Availability of 
Benefits
. Duplicate Drug Claims for Hospice Beneficiaries
. Bid Submission by Part D Sponsors
. Administrative Costs Included in Bid Submissions
Pharmacies
. Part D Sponsors' Audits of 
Deceased Beneficiaries
. Disenrollment of 
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearing March 3,2010 Page 13 ATTACHMENT A
 E-Prescribing in Part D
Pharmacy Benefit Managers
 Oversight of 
Prescription Drug Event Data
 Oversight of 
 Part D Drug Claims With Inactive or Invalid Physician Identifier Numbers
 Medicare Part D Payments for Drugs Prescribed or Provided by Excluded Providers
 Investment Income Earned by Part D Plans
 Part D Pharmaceutical Manufacturer Rebates
Part D Rebates
 Alternative Calculation of 
 Drug Costs Paid by Part D Sponsors Under Retail Discount Generic Programs
 Medicare Part D Program Audit Overview
 Medicare Part D Sponsors' Internal Controls for Fraud, Waste, and Abuse
 Medicare Part D Price Concessions
Senate Committee on Homeland Security and Government Affairs
Subcommittee on Federal Financial Management, Government Information, Federal Services,
and International Security: Hearing March 3, 2010
Page 14