Testimony of:  
Daniel R. Levinson 
Inspector General  
U.S. Department of Health & Human Services  
______________________________________________________________________________ 
 
Good morning, Chairman Platts, Ranking Member Towns, and other distinguished Members of 
the Subcommittee.  I am Daniel Levinson, Inspector General of the U.S. Department of Health & 
Human Services (HHS or the Department).  Thank you for the opportunity to testify about the 
HHS Office of Inspector Generals (OIG) efforts to monitor and make recommendations to 
reduce Medicare improper payments.  OIGs mission is to protect the integrity of HHS programs, 
as well as the health and welfare of program beneficiaries.  In fulfillment of this mission, we 
recommend program safeguards, follow up on those recommendations, promote provider 
compliance, and investigate and hold accountable those who defraud and abuse the Departments 
programs.  My testimony will describe the scope of the problem, OIGs oversight of the 
Departments measurement of Medicare improper payments, and OIGs role in preventing, 
detecting, and reducing improper payments. 
  
Improper Medicare Payments Cost Taxpayers Billions of Dollars Each Year 
 
In 2010, the Centers for Medicare & Medicaid Services (CMS) reported Medicare improper 
payments totaling $47.9 billion.  Of that total, $34.3 billion is attributable to Medicare Fee-for-
Service (10.5-percent error rate) and $13.6 billion is attributable to Medicare Part C (14-percent 
error rate). 
  
Some but not all improper payments are the result of fraud.  Improper payments can also result 
from medically unnecessary claims, miscoded claims, eligibility errors, or insufficient 
documentation.  Examples of improper payments include payments made to an ineligible 
recipient, duplicate payments, or payment for services not received.  For example, my office 
recently identified $3.6 million in improper Medicare Part D payments on behalf of deceased 
beneficiaries. 
 
OIG has long been at the forefront of measuring, monitoring, and recommending actions to 
reduce improper payments, including developing the first Medicare payment error rate in 1996, a 
time when there were few existing error rate models in Government.  OIG identifies improper 
payments for specific items and services, assesses internal control and payment vulnerabilities, 
and makes recommendations to reduce future improper payments.  To maximize the impact of 
these reviews, we assess program risks and employ data analysis to target our audits, evaluations, 
and investigations. 
 
OIG Reviews the Measurement of Medicare Improper Payment Rates 
 
Measuring error rates is key to monitoring program integrity and the scope of inappropriate 
payments.  In 2003, CMS assumed responsibility for, and OIG began providing oversight of, the 
error rate process.  CMS established the Comprehensive Error Rate Testing (CERT) program to 
produce a Medicare fee-for-service error rate.  
 
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 OIG reviews CMSs estimates of improper payments and has analyzed the error rate by types of 
providers and by types of error.  This analysis supports CMSs efforts to reduce the error rate by 
identifying what types of errors are most frequent and which provider types are committing those 
errors, so that CMS can refine and target its remediation efforts accordingly.  For example, OIG 
found that in the fiscal year (FY) 2009 CERT, inpatient hospitals, durable medical equipment 
suppliers, hospital outpatient departments, physicians, skilled nursing facilities, and home health 
agencies accounted for 94 percent of improper Medicare payments.  We also found that 
insufficient documentation, miscoded claims, and medically unnecessary services and supplies 
accounted for about 98 percent of the improper payments attributable to the six types of 
providers.  OIG is also planning audit work to follow up on error-prone providers, i.e., 
individual providers with erroneous claims in each of the past four CERT cycles, to test those 
providers claims and identify improper payments. 
 
OIG Reviews Identify Improper Payments and Recommend Corrective Actions 
 
OIG conducts targeted reviews to determine the scope of improper payments for specific service 
types and recommends actions to improve program safeguards.  By reviewing medical records 
and other documentation associated with a claim, we identify services that are undocumented, 
medically unnecessary, or incorrectly coded, as well as duplicate payments and payments for 
services that were not provided.  In doing so, we uncover systemic payment vulnerabilities and 
make recommendations to address them. 
   
Medically unnecessary services are particularly concerning as beneficiaries may be subjected to 
tests and treatments that serve no purpose and may even cause harm.  Further, because 
beneficiaries are generally responsible for a 20-percent copayment for items and services 
provided under Medicare Part B, beneficiaries may pay unnecessary or inflated copayments 
when they receive items or services that they do not need, or more expensive versions than they 
need.  For beneficiaries who are eligible for Medicare and Medicaid, their Medicaid programs 
may bear the costs of these copayments.  
  
For example, we reviewed claims for certain types of support surfaces used to prevent and treat 
bedsores and found that more than 1 in 5 claims were medically unnecessary.  In a review of 
power wheelchairs, we determined that 9 percent of claims were not medically necessary and the 
records for an additional 52 percent of claims did not contain sufficient documentation to 
determine whether they were medically necessary.  Improper payments for these wheelchair 
claims totaled $95 million over a 6-month period.  To address these and other types of errors, we 
recommended that CMS take a variety of actions to ensure that claims are paid appropriately, 
including conducting additional prepayment and post-payment medical reviews. 
 
For some services, we have found pervasive documentation errors.  For example, we found that 
60 percent of Medicare claims for rehabilitation power wheelchairs did not meet all 
documentation requirements.  These claims accounted for $112 million in improper Medicare 
payments over a 6-month period.  We have also found significant rates of documentation error 
for certain types of pain management services.  We recommended that CMS take actions to 
address these errors, including improving controls, educating providers, and clarifying guidance. 
 
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In some cases, documentation or coding errors may signal broader vulnerabilities affecting 
patient care.  For example, we found that 82 percent of hospice claims for beneficiaries in 
nursing facilities did not meet all Medicare coverage requirements  requirements that are in 
place to protect beneficiaries health and wellbeing.  Problems included failing to establish plans 
of care and providing fewer services than outlined in beneficiaries plans of care, potentially 
putting the beneficiary at greater risk.  To prevent these problems from recurring and to better 
protect hospice patients, we recommended that CMS educate hospice providers about coverage 
requirements, provide tools to hospice providers (e.g., guidance, templates, and checklists), and 
use targeted medical reviews and other oversight to improve compliance. 
 
In addition to medical record reviews designed to flag individual improper claims, OIG also 
conducts data analysis to identify broader patterns indicative of improper payments and potential 
fraud and abuse.  For example, through data analysis we have identified outliers that bill for 
services at an unusually high rate, as well as patterns in which certain geographic areas exhibit 
unusual billing, and also have matched claims and other data to identify billing patterns that raise 
concern.  These types of analyses can generate leads for investigations, audits, and further 
medical record review.  In addition, these reviews can lead to recommendations to CMS to 
strengthen its program oversight activities and reduce future improper payments.  For example, 
OIG reviewed high-utilization claims for blood-glucose test strips and lancet supplies, and 
identified an estimated $209 million in improper Medicare payments for these supplies.  We 
recommended that CMS contractors implement various adjustments to its payment system, such 
as those to identify claims with overlapping dates of service. 
 
OIG Will Continue To Monitor and Recommend Actions To Reduce Improper Payments 
 
OIGs work helps CMS to better identify, track, and reduce improper payments.  For example, 
because of OIG concerns that the Medicare error rates for certain provider types may be 
understated, CMS made substantial changes in the CERT medical record review process in 2009.   
In addition, we have recommended that CMS enhance pre-payment review of claims, including 
the use of specific adjustments to address identified payment errors, and work with providers to 
educate and enforce program requirements, including documentation requirements. We also have 
made recommendations aimed at reducing improper payments for specific items and services, as 
described above. 
   
OIG currently is conducting a series of audits of hospital compliance with Medicare 
requirements.  Based on prior audit and enforcement work, we have identified 27 high risk 
hospital billing practices.  Using data mining, we further focus on potential problem areas in 
selected  hospitals, and then we select claims for testing.  We conduct hospital site visits to 
perform comprehensive reviews of billing and medical record documentation.  In addition to 
identifying and recovering improper Medicare payments, we are recommending improvements 
to internal controls to prevent future improper billings.    
 
OIG is also conducting in-depth reviews of claims for evaluation and management services, 
power wheelchairs, and Part A payments to skilled nursing facilities to determine whether these 
payments met Medicare coverage requirements.  In addition, we are conducting data analysis to 
identify potential improper payments in a variety of areas, including lower limb prostheses, Part 
D drugs, and home health care.  Other planned work includes a review of prior year improper 
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payment determinations that have subsequently been overturned on appeal and a pilot project to 
obtain missing documentation identified during the comprehensive error rate testing. 
 
OIG Also Leads the Fight Against Medicare Fraud 
 
Although not all improper payments are fraudulent, all payments resulting from fraud are 
improper.  There is no precise measure of the magnitude of health care fraud, but we know that it 
is a serious problem that demands an aggressive response. 
 
OIG has been leading the fight against health care fraud and abuse for more than 30 years.  
Although the majority of health care providers are honest and well-intentioned, a minority of 
providers who are intent on abusing the system cost taxpayers billions of dollars per year. During 
this FY, OIG has opened more than 1,700 health care fraud investigations. Additionally, our 
enforcement efforts resulted in more than 900 criminal and civil actions and $3.8 billion in court-
ordered fines, penalties, restitution, and settlements in FY 2010.  
 
We also work to help prevent fraud and promote compliance through guidance and outreach to 
health care providers.  This year, OIG conducted free training seminars in six cities to educate 
providers on fraud risks and share compliance best practices.  We also published a Road Map for 
New Physicians to provide guidance on complying with fraud and abuse laws. 
 
Conclusion 
 
Executive Order 13520 on reducing improper payments states that the Federal Government must 
make every effort to confirm that the right recipient receives the right payment for the right 
reason at the right time.  OIG is committed to this goal.  Thank you for your support of our 
mission.   
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