Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
MEDIC B I
  ENEFIT  NTEGRITY 
 
 
A M
CTIVITIES IN  EDICARE 
 
 
P C D 
ARTS   AND 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
January 2013 
OEI-03-11-00310   
   
EXECUTIVE SUMMARY:  MEDIC BENEFIT INTEGRITY ACTIVITIES IN MEDICARE 
PARTS C AND D  (OEI-03-11-00310)   
 
WHY WE DID THIS STUDY  
 
This report focuses on the one Medicare Drug Integrity Contractor (MEDIC) responsible for 
detecting and preventing fraud, waste, and abuse in Medicare Parts C and D nationwide.  The report 
provides an update on MEDIC identification of potential Part D fraud and abuse and is the first 
review of MEDIC antifraud activities for Part C.   
 
HOW WE DID THIS STUDY 
 
From the Centers for Medicare & Medicaid Services (CMS) and the MEDIC, we collected data on 
the MEDICs benefit integrity activities between April 2010 and March 2011.   
 
WHAT WE FOUND 
 
Although the MEDIC has benefit integrity responsibility for both Medicare Parts C and D, its Part C 
investigations and case referrals represented a small percentage of its benefit integrity activities.  In 
addition, a small percentage of the MEDICs investigations and case referrals resulted from 
proactive methods.  Moreover, barriers exist regarding data availability, access to information, and 
the recovery of inappropriate payments.  Specifically, the lack of a centralized Part C data 
repository hinders the MEDICs ability to identify and investigate Part C fraud.  Additionally, the 
MEDIC reported that it is prohibited from sharing specific information with other program integrity 
contractors.  Further, there is no mechanism to recover payments from Part C or Part D plan 
sponsors when law enforcement agencies do not accept cases involving inappropriate services for 
further action.  Other barriers remain, such as prescription drug event data limitations; the lack of a 
requirement for sponsors to refer incidents of potential fraud and abuse; and the MEDICs lack of 
authority to directly obtain information from pharmacies, physicians, and pharmacy benefit 
managers.  Also, CMS does not require the MEDIC to submit data elements that could help CMS 
oversee the MEDICs benefit integrity activities.   
 
WHAT WE RECOMMEND 
 
We recommend that CMS (1) provide the MEDIC with centralized Part C data to enable it to more 
comprehensively and proactively identify and investigate Part C fraud and abuse; (2) clarify its 
policy and instruct the MEDIC as to under what circumstances the MEDIC may share specific 
information with other entities, including Zone Program Integrity Contractors and State agencies; 
(3) explore methods to develop and implement a mechanism to recover payments from Part C and 
Part D plan sponsors when law enforcement agencies do not accept cases involving inappropriate 
services for further action; (4) amend regulations to authorize the MEDIC to directly obtain 
information from entities such as pharmacies, physicians, and pharmacy benefit managers; 
(5) amend regulations to require Part C and Part D plan sponsors to refer potential fraud and abuse 
incidents to the MEDIC; and (6) enhance monthly workload reporting requirements to improve 
CMS oversight of the MEDICs benefit integrity activities.  CMS concurred with the first, second, 
and sixth recommendations; partially concurred with the third and fifth; and did not concur with the 
fourth recommendation. 
   
   
 
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................6 
Findings........................................................................................................9 
Part C investigations and case referrals represented a small 
percentage of the MEDICs benefit integrity activities ...................9 
A small percentage of the MEDICs investigations and case 
referrals resulted from proactive methods .....................................10 
Barriers exist regarding data availability, access to information, 
and recovery of inappropriate payments ........................................12 
CMS does not require the MEDIC to submit data elements that 
could help CMS oversee the MEDICs benefit integrity  
activities .........................................................................................18  
Conclusion and Recommendations ............................................................20 
Agency Comments and Office of Inspector General Response .....23 
Appendixes ................................................................................................25 
A:  Types of Potential Part C and Part D Fraud and Abuse ..............25 
B:  Agency Comments  .....................................................................28 
Acknowledgments......................................................................................33 
 
 
 
   
   
OBJECTIVES 
1.  To determine the extent to which the National Benefit Integrity (NBI) 
Medicare Drug Integrity Contractor (MEDIC) performed Medicare 
Parts C and D benefit integrity activities.   
2.  To describe barriers the NBI MEDIC encountered in performing its 
Medicare Parts C and D benefit integrity activities and to determine 
whether MEDIC barriers identified previously have been resolved.   
3.  To identify workload data elements that could improve the Centers for 
Medicare & Medicaid Services (CMS) oversight of the NBI MEDICs 
benefit integrity activities.  
BACKGROUND 
The Office of Inspector General (OIG) issued a report in October 2009 
that identified barriers to the three regional MEDICs identification of 
potential Part D fraud and abuse during fiscal year (FY) 2008.1  Since 
then, Part D benefit integrity responsibilities have transitioned from three 
regional MEDICs to one national MEDIC and CMS has added oversight 
of Part C as a MEDIC responsibility.  This study provides an update on 
MEDIC identification of potential Part D fraud and abuse and is the first 
review of MEDIC antifraud activities for Part C. 
The Balanced Budget Act of 1997 established Medicare Part C in 
January 1999.  CMS contracts with private organizations under Part C to 
provide private health plan options, including managed care plans.  The 
Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 established Medicare Part D to provide prescription drug benefits 
under Medicare beginning January 1, 2006.  Beginning in FY 2007, CMS 
awarded contracts to three regional MEDICs to address potential fraud and 
abuse related to the Part D benefit.2, 3   
Since that time, MEDIC responsibilities and jurisdictions have been 
revised several times.  CMS did not renew the contract for one of the 
MEDICs for FY 2009, transitioning its responsibilities to the remaining 
 
1
 OIG, Medicare Drug Integrity Contractors Identification of Potential Part D Fraud and Abuse,  
OEI-03-08-00420, October 2009. 
2
 Section 202(a) of the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, enacted 
section 1893 of the Social Security Act, 42 U.S.C.  1395ddd, establishing the Medicare Integrity Program and 
providing the statutory basis for CMS to enter into contracts with entities to perform work to address potential 
fraud and abuse.  
3
 In FY 2006, CMS awarded a single MEDIC a national contract to monitor fraud and abuse related to Part D 
enrollment and eligibility issues.  In FY 2007, this MEDIC became a regional MEDIC. 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  1 
   
   
two MEDICs.  Additionally, in FY 2009, these two MEDICs were given 
oversight responsibility for Part C. 
For FY 2010, CMS realigned the regional MEDICs into two national 
MEDICs, one designated as the NBI MEDIC and the other as the 
Compliance and Enforcement (C&E) MEDIC.  The NBI MEDIC assumed 
responsibility for detecting and preventing Parts C and D fraud, waste, and 
abuse nationwide and transitioned its compliance workload to the C&E 
MEDIC.4  The C&E MEDIC assumed responsibility for performing 
compliance and enforcement activities nationwide and transitioned its 
fraud, waste, and abuse workload to the NBI MEDIC.   
For FY 2011, CMS retained the NBI MEDIC to detect and prevent fraud, 
waste, and abuse.  The C&E MEDIC received a task order requiring it to 
perform special and ad hoc studies for CMS in addition to providing 
ongoing technical assistance to CMS and the NBI MEDIC for fraud, 
waste, and abuse activities.   
As a result of these realignments, benefit integrity activities were 
performed primarily by the NBI MEDIC during FYs 2010 and 2011 for 
Parts C and D.  These programs involve significant benefit expenditures 
and a substantial number of beneficiaries.  In calendar year 2011, total 
benefit expenditures (excluding administrative expenses) for Medicare 
Parts C and D were $190 billion.5  As of March 2012, 33 million 
beneficiaries were enrolled in these programs.6  The NBI MEDIC received 
a total of $28.2 million to carry out its contractual responsibilities for 
FYs 2010 and 2011. 
Types of Fraud and Abuse 
According to the MEDIC Statement of Work, fraud is the intentional 
deception or misrepresentation that an individual makes, knowing it to be 
false or not believing it to be true, that could result in some unauthorized 
benefit to himself/herself or some other person.7  Abuse is, for example, 
billing Medicare for services that are not covered or are not correctly 
coded.  Types of Part C fraud include misrepresenting enrollment or 
 
4
 According to the NBI MEDICs transition and technical assistance task order, the compliance workload 
transferred to the C&E MEDIC is defined as: (1) non-fraud, -waste, and -abuse complaints and investigations 
against agents and brokers involving potential violations of Medicare regulations or guidelines; (2) referrals  
to State Department of Insurance; and (3) all work associated with the CMS Program Compliance and 
Oversight Group. 
5
 The Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds, 2012 Annual Report, page 10.  Accessed at http://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2012.pdf  on April 24, 2012. 
6
 CMS, Monthly Contract and Enrollment Summary Report, March 2012.  Accessed at 
http://www.cms.gov/MCRAdvPartDEnrolData/MCESR/list.asp#TopOfPage on March 31, 2012. 
7
 CMS, MEDIC Statement of Work, section 2.1, July 2009. 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  2 
   
   
  encounter data to increase payments, receiving duplicative copayments or 
premiums from beneficiaries, and submitting claims for services not 
provided.  Part D fraud includes billing for drugs not provided, altering 
prescriptions to obtain higher payment amounts, and using another 
persons Medicare card to obtain prescriptions.   
NBI MEDIC Activities 
As detailed in the MEDIC Statement of Work and NBI MEDIC task order, 
the responsibilities of the NBI MEDIC (hereafter referred to as the 
MEDIC) include, but are not limited to: 
  identifying and investigating potential Part C and Part D fraud and 
abuse,  
  referring cases and making immediate advisements to the 
Department of Health and Human Services OIG, and 
  fulfilling requests for information from law enforcement agencies. 
Identification and Investigation of Fraud and Abuse.  The MEDIC is 
required to identify potential fraud and abuse by means of proactive 
methods as well as through external sources.  Examples of external 
sources of fraud leads include beneficiaries, law enforcement agencies, 
Part D plan sponsors, Medicare Advantage (MA) plan sponsors (also 
known as Part C plan sponsors or MA organizations), and CMS.  
Examples of proactive methods for identifying potential fraud include 
developing projects for analyzing claims data and conducting Internet 
searches to identify leads.  Using ideas from external sources to look for 
unidentified billing aberrancies is also considered a proactive method.  
According to the MEDIC Statement of Work, the MEDIC is required to 
access data from a variety of sources and its ability to apply innovative 
analytical methodologies is critical to its success in benefit integrity 
activities.   
When the MEDIC receives an allegation of fraud from an external source 
or proactively identifies potential fraud, it conducts an investigation to 
determine the facts and the magnitude of potential fraud.  Investigations 
may include a review of claims, prescriptions, or cost reports.  The 
MEDIC is required to prioritize its investigation workload to ensure that 
investigations with the greatest program impact and/or urgency are given 
the highest priority.  The MEDIC also is required to consult with OIG to 
determine whether an investigation should be further developed for 
possible case referral to OIG.    
Case Referrals and Immediate Advisements.  According to the MEDIC 
Statement of Work, a case exists when the MEDIC has substantiated and 
referred a fraud allegation to law enforcement.  This includes, but is not 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  3 
   
   
limited to, documented allegations that a provider, beneficiary, pharmacy, 
pharmacy benefit manager, Part D plan sponsor, or MA plan sponsor has: 
(1) engaged in a pattern of improper prescription writing or billing, 
(2) submitted improper claims with actual knowledge of their falsity, or 
(3) submitted improper claims with reckless disregard or deliberate 
ignorance of their truth or falsity. 
According to the MEDIC Statement of Work, OIG has 90 calendar days to 
accept or reject a case referred by the MEDIC.  If the MEDIC does not 
receive a response from OIG within 90 calendar days and its attempts to 
determine the status of the case are unsuccessful, the MEDIC may then 
refer the case to the Federal Bureau of Investigation (FBI) and/or another 
investigative agency with interest in the case. 
The MEDIC refers certain allegations directly to OIG without first 
conducting an investigation.  These are called immediate advisements and 
include, for example, allegations by current or former employees of the 
following entities suspected of fraud:  (1) providers, (2) Part D plan 
sponsors and/or their subcontractors, or (3) MA plan sponsors and/or their 
subcontractors.  Allegations involving entities that OIG is already 
investigating for fraud are also referred directly to OIG as immediate 
advisements. 
Requests for Information.  Law enforcement agencies may request 
beneficiary and provider information from the MEDIC to further their 
investigations or fraud prosecutions.  These agencies include OIG; the 
Department of Justice (DOJ); and other entities, such as State survey and 
certification agencies and Medicaid Fraud Control Units.  OIGs requests 
for information generally fall into one of two categories.  Priority I 
requests are top-priority requests for which the information is essential to 
the prosecution of a provider and the data are obtained from the MEDICs 
files. Priority I requests require a response within 30 days whenever 
possible.  Priority II requests are less critical and may require, for 
example, soliciting information from other sources.  Priority II requests 
require a response within 45 days whenever possible.  
Medicare Drug Integrity Contractor Reporting Requirements 
According to the MEDIC Statement of Work, the MEDIC is required to 
submit a monthly status report to CMS.  As part of its monthly reporting, 
the MEDIC provides data on its investigations, immediate advisements, 
case referrals, proactive data analyses, and requests for information. 
Previous Office of Inspector General Work 
MEDIC Identification of Fraud and Abuse.  In October 2009, OIG issued 
a report on the three regional MEDICs identification of potential fraud 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  4 
   
   
and abuse in Part D during FY 2008.8  This report highlighted MEDICs 
minimal use of proactive methods.  The report also described problems 
that MEDICs encountered with accessing and using data that hindered 
their ability to investigate potential fraud and abuse incidents.  In addition, 
MEDICs lack of authority to directly obtain information from 
pharmacies, pharmacy benefit managers, and physicians also hindered 
their ability to investigate potential fraud and abuse.  Furthermore, the 
report found that the MEDICs may not have been aware of some potential 
fraud and abuse incidents because plan sponsors were not required to refer 
them.   
In the 2009 report, OIG recommended, in part, that CMS (1) ensure that 
MEDICs have access to accurate and comprehensive data to assist them in 
identifying and investigating potential fraud and abuse and conducting 
proactive data analysis; (2) authorize MEDICs to directly obtain 
information that they need to identify and investigate potential fraud and 
abuse from entities, such as pharmacies, pharmacy benefit managers, and 
physicians; and (3) require plan sponsors to report to MEDICs all potential 
fraud and abuse incidents that sponsors refer to law enforcement agencies.   
Plan Sponsor Identification of Fraud and Abuse.  An October 2008 OIG 
report examined the extent to which Medicare Part D plan sponsors 
identified and took steps to address potential fraud and abuse in the first 
6 months of 2007.9  The report found that over a quarter of plan sponsors 
did not identify any incidents of fraud and abuse.  The report also found 
that a few plan sponsors identified most incidents of potential fraud and 
abuse.  Even the sponsors that identified such incidents did not always 
conduct inquiries or take corrective actions.  Just two plan sponsors made 
89 percent of all referrals of incidents to MEDICs.   
A February 2012 OIG report examined the extent to which MA 
organizations (i.e., MA plan sponsors, also known as Part C plan sponsors) 
identified and took steps to address potential fraud and abuse in 2009.10  
That reports findings on MA organizations were similar to those from the 
October 2008 report on Part D plan sponsors.  The February 2012 report 
found that 19 percent of MA organizations did not identify any potential 
fraud and abuse incidents related to their Part C health benefits or Part D 
drug benefits.  Three MA organizations identified 95 percent of the total 
 
8
 OIG, Medicare Drug Integrity Contractors Identification of Potential Part D Fraud and Abuse,  
OEI-03-08-00420, October 2009. 
9
 OIG, Medicare Drug Plan Sponsors Identification of Potential Fraud and Abuse, OEI-03-07-00380,  
October 2008. 
10
 OIG, Medicare Advantage Organizations Identification of Potential Fraud and Abuse, OEI-03-10-00310, 
February 2012.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  5 
   
   
1.4 million reported incidents.  Although CMS requires MA organizations 
to initiate inquiries and corrective actions when appropriate, not all MA 
organizations took such steps in response to incidents they identified.  
Overall, in 2009, MA organizations sent 2,656 referrals of potential fraud 
and abuse incidents to other entities, including MEDICs and OIG, for 
further investigation.  These 2,656 referrals included 1,728 Part C referrals 
and 928 Part D referrals.   
Questionable Part D Billing.  A May 2012 OIG report identified over 
2,600 retail pharmacies that had questionable Part D billing in 2009.11  For 
example, almost 800 pharmacies billed extremely high dollar amounts per 
beneficiary and 850 pharmacies billed extremely high dollar amounts per 
prescriber.  OIG recommended, in part, that CMS (1) strengthen the 
MEDICs monitoring of pharmacies and ability to identify pharmacies for 
further review and (2) require sponsors to refer potential fraud and abuse 
incidents that may warrant further investigation.   
METHODOLOGY 
Scope 
We reviewed Part C and Part D benefit integrity activities conducted by 
the MEDIC between April 1, 2010, and March 31, 2011.   
Data Collection  
From CMS, we collected workload data related to the MEDICs benefit 
integrity activities between April 1, 2010, and March 31, 2011.  The data 
included information on the number of new investigations, case referrals, 
immediate advisements, proactive data analyses, and requests for 
information handled by the MEDIC.  Additionally, we asked CMS about 
the MEDICs responsibility regarding recommending administrative 
actions, such as the recovery of inappropriate payments.    
We also sent a survey request to the MEDIC.  Because the workload data 
we received from CMS were not separated into Part C-related data and 
Part D-related data, we requested that the MEDIC provide the separated 
data.  We also requested that the MEDIC provide the number of new 
investigations and case referrals that resulted from proactive methods and 
external sources.  We asked the MEDIC to indicate the types of Part C and 
Part D fraud and abuse that its investigations and case referrals involved.  
Additionally, we asked the MEDIC to describe the types of proactive 
projects that it developed and to provide data on the number of proactive 
projects started during the review timeframe.   
 
11
 OIG, Retail Pharmacies With Questionable Part D Billing, OEI-02-09-00600, May 2012.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  6 
   
   
We requested information from the MEDIC about any issues or barriers it 
encountered in performing its benefit integrity activities.  We also asked 
the MEDIC for an update about barriers identified in our MEDIC report 
issued in October 2009, hereafter referred to as our previous MEDIC 
report. 12  We followed up with the MEDIC to obtain clarification on its 
responses.  We conducted data collection and followup between 
August 2011 and June 2012.   
Data Analysis 
We compared the workload data submitted by CMS to the data submitted 
by the MEDIC in its survey response to determine whether the data 
matched.  We identified some discrepancies through this review and 
followed up with the MEDIC to obtain the correct data.   
After obtaining these data, we calculated the percentages of new 
investigations initiated, cases referred, and immediate advisements sent for 
Part C only, Part D only, and Parts C and D.  We also calculated the 
percentages of investigations and cases that were initiated from proactive 
methods and external sources.  Additionally, we compared the numbers of 
investigations initiated and cases referred during our review timeframe to 
those from our previous MEDIC report.  We aggregated the number of 
requests for information received and completed for OIG, DOJ, and other 
law enforcement agencies for Part C only, Part D only, and Parts C and D.  
We also reviewed the template for the MEDICs workload data to 
determine whether any data elements were needed that could improve 
CMSs oversight of the MEDIC.   
We reviewed the types of Part C and Part D fraud and abuse that the 
MEDICs investigations and case referrals involved.  Using the number of 
investigations and case referrals for each type of fraud and abuse, we 
ranked the types to determine which were most prevalent among the 
MEDICs Part C and Part D investigations and case referrals.   
We summarized the MEDICs survey responses regarding issues and 
barriers that it encountered in performing its benefit integrity activities, 
such as investigating potential fraud and abuse and obtaining data.  We 
also summarized the MEDICs responses regarding the status of barriers 
identified in our previous MEDIC report and used this information to 
determine whether the barriers had been resolved or still remained.   
   
 
12
 OIG, Medicare Drug Integrity Contractors Identification of Potential Part D Fraud and Abuse,  
OEI-03-08-00420, October 2009.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  7 
   
   
Limitations 
The workload data and survey information included in this report were 
self-reported by the MEDIC.  Although we asked the MEDIC to reconcile 
inconsistencies between the workload data that CMS provided and the 
data that the MEDIC provided in its survey response, we did not 
independently validate the information.     
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency.   
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  8 
   
   
FINDINGS 
Part C investigations and case referrals represented a 
small percentage of the MEDICs benefit integrity 
activities  
Although the MEDIC is responsible for conducting investigations and 
referring cases and immediate advisements involving both Part C and 
Part D, most of the MEDICs workload involved Part D.13  The MEDIC 
opened a total of 2,277 new investigations between April 2010 and 
March 2011.  Of these new investigations, 8 percent involved Part C only, 
79 percent involved Part D only, and 13 percent involved both Parts C 
and D.  The types of fraud and abuse that the MEDIC most often 
investigated were suspect billing for Part C and inappropriate prescribing 
for Part D.  Appendix A provides a complete list of the types of potential 
Part C and Part D fraud and abuse.  
As with investigations, most case referrals involved Part D.  The MEDIC 
referred a total of 245 cases to law enforcement between April 2010 and 
March 2011.  Of those cases, 8 percent involved Part C only, 91 percent 
involved Part D only, and 1 percent involved Parts C and D.  Table 1 
shows the numbers and percentages of new investigations and case 
referrals by type of service between April 1, 2010, and March 31, 2011.  
Most of the MEDICs cases92 percentwere referred to OIG.  Not all 
cases referred to OIG are accepted for further action.  The remaining case 
referrals were sent to other agencies, such as DOJ and/or FBI; State and 
local law enforcement; and the Internal Revenue Service.  The types of 
fraud and abuse cases most often referred by the MEDIC were those 
involving beneficiary or provider identity theft for Part C and 
inappropriate billing for Part D.   
Table 1:  MEDIC Investigations and Case Referrals by Type of Service From 
April 1, 2010, through March 31, 2011 
Number   Percentage   Number of  Percentage 
Type of Service  of New  of New  Case  of Case 
Investigations  Investigations  Referrals  Referrals 
Part C only  177  8%  19  8% 
Part D only  1807  79%  223  91% 
Both Parts C and D  293  13%  3  1% 
     Total  2,277  100%  245  100% 
  Source:  OIG analysis of MEDIC survey data, 2011.   
 
13
 CMS tasked the MEDIC with fraud and abuse oversight for Part D beginning in FY 2007 and added Part C in 
FY 2009.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  9 
   
   
The MEDIC also referred a total of 112 immediate advisements.  
Immediate advisements bypass a MEDIC investigation and involve, for 
example, complaints from former employees of a provider suspected of 
fraud.  Twenty-four percent of the immediate advisements involved Part C 
only, 72 percent involved Part D only, and 4 percent involved both Parts C 
and D. 
A small percentage of the MEDICs investigations and 
case referrals resulted from proactive methods  
Of the 2,277 total investigations that the MEDIC opened, 10 percent (219) 
were initiated through proactive methods; the remaining 90 percent were 
from external sources, such as complaints.  Of the 219 investigations that 
the MEDIC initiated proactively, 10 involved Part C only, 184 involved 
Part D only, and 25 involved Parts C and D.   
In addition to using proactive data analysis, the MEDIC reported using 
other proactive methods, such as holding liaison meetings with plan 
sponsors; pharmacy benefit managers; and Federal, State, and local law 
enforcement agencies, as well as conducting online searches for 
information on providers.  Table 2 shows the numbers and percentages of 
new investigations that were from proactive methods and external sources.   
Table 2:  Numbers and Percentages of New Investigations From Proactive 
Methods and External Sources From April 1, 2010, Through March 31, 2011 
Number  Percentage  Number  Percentage 
Total  
Initiated  Initiated  Initiated  Initiated 
Number  
Type of Service  Through  Through  Through  Through 
of New  
Proactive  Proactive  External  External 
Investigations 
Methods  Methods   Sources   Sources 
Part C only  177  10  6%  167  94% 
Part D only  1,807  184  10%  1623  90% 
Both Parts C and D  293  25  9%  268  91% 
     Total  2,277  219  10%  2,058  90% 
  Source:  OIG analysis of MEDIC survey data, 2011.   
Of the 245 total cases the MEDIC referred to law enforcement,  
9 percent (21) were based on investigations initiated through proactive 
methods and 91 percent (224) were based on investigations initiated 
through external sources.  Of the MEDICs 21 proactive case referrals,  
2 involved Part C only and 19 involved Part D only.  There were no case 
referrals involving both Parts C and D from proactive methods.   
Table 3 shows the numbers and percentages of case referrals that were 
from proactive methods and external sources.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  10 
   
   
Table 3:  Numbers and Percentages of Case Referrals From Proactive 
Methods and External Sources From April 1, 2010, Through March 31, 2011 
Number  Percentage  Number  Percentage 
Total  
Initiated  Initiated  Initiated  Initiated 
Number of 
Type of Service  Through  Through  Through  Through 
Case 
Proactive  Proactive  External  External 
Referrals 
Methods  Methods   Sources   Sources 
Part C only  19  2  11%  17  89% 
Part D only  223  19  9%  204  91% 
Both Parts C and D  3  0  0%  3  100% 
     Total  245  21  9%  224  91% 
  Source:  OIG analysis of MEDIC survey data, 2011.   
Between 2008 and 2011, the percentage of investigations from 
proactive methods increased but the percentage of cases 
referred from proactive methods decreased 
Compared to the results from our previous MEDIC report, the overall 
number of new investigations increased from 1,320 in FY 2008 to 2,277 
between April 1, 2010, and March 31, 2011 (hereafter referred to as the 
2010 to 2011 timeframe).  The percentage of investigations initiated by 
proactive methods increased as wellfrom 4 percent in FY 2008 to 
10 percent during the 2010 to 2011 timeframe.   
Additionally, the overall number of case referrals to law enforcement 
increased since our previous review of the MEDICs, from 65 in FY 2008 
to 245 during the 2010 to 2011 timeframe.  However, the percentage of 
case referrals initiated through proactive methods decreasedfrom 
20 percent in FY 2008 to 9 percent during the 2010 to 2011 timeframe.  
Table 4 compares MEDIC investigation and case referral data from 
FY 2008 to the 2010 to 2011 timeframe.   
Table 4:  MEDIC Investigations and Case Referrals by Method Initiated1 
New Investigations:   Case Referrals:  
New Investigations:  Case Referrals: 
April 2010 to   April 2010 to  
FY 2008  FY 2008 
  March 2011   March 2011 
Number  Percentage  Number  Percentage  Number  Percentage  Number  Percentage 
Proactive 
50   4%  219  10%  13  20%  21  9% 
Methods 
External 
1,270  96%  2,058  90%  52  80%  224  91% 
Sources 
Total  1,320  100%  2,277  100%  65  100%  245  100% 
Source:  FY 2008 data from OIG report entitled Medicare Drug Integrity Contractors Identification of Potential Part D Fraud and Abuse; 
April 2010 to March 2011 data from OIG analysis of MEDIC survey data, 2011.  
1 The FY 2008 data contain the number of Part D investigations and case referrals because the MEDICs had only Part D responsibility 
during that time.  The April 2010 to March 2011 data contain Part C and Part D numbers because the MEDIC had both Part C and Part D 
responsibility during that time.    
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  11 
   
   
Most proactive projects focused on Part D 
The MEDIC started 38 proactive data analysis projects during the 2010 to 
2011 timeframe.  Of those projects, 31 involved Part D only, 2 involved 
Part C only, and 5 involved both Parts C and D.   
Examples of proactive Part D projects conducted by the MEDIC included 
reviewing medications that were contraindicated on the basis of a 
beneficiarys gender, identifying top narcotic prescribers, and identifying 
claims involving deceased providers.  The Part C proactive projects 
included reviewing durable medical equipment services from selected 
Part C plan sponsors to detect services that were not provided and 
analyzing data from five Part C plan sponsors to determine whether 
laboratory services were unbundled to increase payment amounts.  
Examples of proactive projects that included both Parts C and D included 
looking for beneficiaries whose Medicare identification numbers were 
being improperly used and identifying duplicate billings of particular 
medications to Parts C and D.  
Barriers exist regarding data availability, access to 
information, and recovery of inappropriate payments  
Barriers include the MEDICs lack of access to centralized Part C data and 
its inability to share specific information with other program integrity 
contractors.  Furthermore, there is no mechanism to recover payments 
associated with improper Part C and D services when law enforcement 
agencies do not accept cases involving these services for further action.  In 
addition, all but one of the barriers identified in our previous MEDIC 
report remain.  We describe these barriers more fully below.   
Lack of a centralized Part C data repository hinders the 
MEDICs ability to identify and investigate Part C fraud and 
abuse 
The MEDIC reported that because of the lack of a central repository of 
Part C data, it was a challenge to undertake viable proactive Part C 
projects that would not be too labor intensive.  In contrast, for Part D, the 
MEDIC can use the Integrated Data Repository to access prescription drug 
event (PDE) records from all Part D plan sponsors to conduct proactive 
data analyses.14  These PDE records contain Part D prescription drug cost 
and payment data.   
The MEDIC reported that because it cannot access Part C data from a 
central source, it must request the Part C encounter data from individual 
 
14
 CMSs Integrated Data Repository is a data warehouse that contains Medicare Part A, Part B, and Part D 
claims.  
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  12 
   
   
plan sponsors.  Encounter data are records of items and services provided 
to Part C beneficiaries.  The MEDIC explained that to determine the 
potential financial impact of complaint-related claims, it requests 
providers payment information from the members of the Part C Fraud 
Work Group.15  The MEDIC further explained that because not all plan 
sponsors participate in the Part C Fraud Work Group, the MEDIC may 
miss some potential fraud and abuse.  According to the MEDIC, the Part C 
Fraud Work Group began with 16 Part C plan sponsors but grew to 
32 plan sponsors by April 2011.  In 2010, there were 174 Part C plan 
sponsors, which means that the MEDIC was requesting information from 
only 18 percent of Part C plan sponsors.16     
In January 2012, CMS required MA plan sponsors to begin submitting 
Part C data to its new Encounter Data System.  The MEDIC said it 
believes that this new requirement will allow it to undertake future Part C 
projects because all Part C encounter data will be contained in a 
centralized data repository.  CMSs goal is to produce analytic reports that 
reflect MA beneficiaries actual health care utilization by 2013.  However, 
CMS plans to validate the data before allowing it to be used as the basis 
for plan payments in 2014.  CMS has not reported when the centralized 
Part C data repository will be available for the MEDICs use.   
The MEDIC does not respond to Part C requests for information because 
it does not have access to centralized Part C data.  The MEDIC reported 
that it did not receive any Part C requests for information during the 2010 
to 2011 timeframe.  All of the requests that the MEDIC received were for 
Part D-related information.  The MEDIC received 273 requests for 
information from law enforcement and completed 288 such requests.17  
Most (78 percent) of the requests that the MEDIC received were from 
OIG; the remaining requests were from DOJ.   
The MEDIC explained that it did not receive or complete any 
Part C-related requests for information because it does not have access to 
centralized Part C data for responding to such requests.  The MEDIC 
further explained that it generally does not receive Part C requests, 
because it conducts outreach to law enforcement agencies to make them 
aware as to which data it possesses and which it does not, such as Part C 
data.  If law enforcement personnel request Part C data, the MEDIC refers 
 
15
 The Part C Fraud Work Group was initiated in March 2009 to inform Part C plan sponsors of fraud trends to 
help prevent erroneous payments.     
16
 We obtained the number of 2010 Part C plan sponsors from CMSs Health Plan Management System, 
Contact Information Extract, accessed March 23, 2012.  We excluded sponsors that had only stand-alone  
Part D, 1833 cost, demonstration, or Program of All-Inclusive Care for the Elderly (PACE) contracts.   
17
 The number of requests completed is greater than the number of requests received because the MEDIC could 
have completed requests that were received prior to April 2010.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  13 
   
   
them to the plan sponsors for assistance; however, the MEDIC does not 
track such requests.   
The MEDIC reported that it is prohibited from sharing specific 
information with other program integrity contractors 
In June 2012, the MEDIC reported that it did not have the authority to 
share specific information related to its investigations and cases directly 
with other program integrity contractorse.g., Zone Program Integrity 
Contractors (ZPIC)to help fight fraud and abuse in Medicare Part C and 
Part D.18  The MEDIC explained that it is allowed to share information 
about fraud schemes and summary data with other program integrity 
contractors.  However, it is prohibited from sharing specific details, such 
as a beneficiarys or providers billing history.  The MEDIC reported that 
sharing such information would help determine whether these 
beneficiaries or providers are affecting other areas of Medicare, such as 
Part A and Part B.  The MEDIC also explained that sharing data with other 
program integrity contractors and State agencies would allow it to build 
larger investigations and to strengthen potential referrals, giving them 
more prosecutorial merit.   
CMS acknowledged that early in the MEDIC program, MEDICs were not 
permitted to share Part D data with other program integrity contractors 
because of regulatory restrictions (42 CFR 423.322).  However, CMS 
stated that section 6402(b) of the Patient Protection and Affordable Care 
Act, enacted in March 2010, authorized the MEDIC to share specific 
information related to its investigations and cases with other program 
integrity contractors.  However, CMS reported that there is one ZPIC with 
an outstanding conflict of interest involving Part D and that the MEDIC 
has been instructed not to share specific claim information until the 
conflict of interest is mitigated.   
There is no mechanism to recover payments from Part C or 
Part D plan sponsors when law enforcement agencies do not 
accept cases involving inappropriate services for further 
action 
The MEDIC reported that it does not have administrative authority to 
recommend recoupment of payments associated with inappropriate 
services.  When law enforcement agencies do not accept MEDIC cases for 
 
18
 The MEDIC reported that CMS instructed that 42 CFR 423.322 limits the MEDICs ability to share 
information with other program integrity contractors.  Specifically, although the regulation allows use of Part D 
information for program integrity activities, the MEDIC reported that it is not able to share data with other 
program integrity contractors because these contractors efforts are not for the sole purpose of Part D program 
integrity.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  14 
   
   
further action, the MEDIC simply closes these cases.  However, when law 
enforcement agencies do not accept a case, it does not necessarily mean 
that there was not fraud.  Cases can be declined for a number of reasons, 
including lack of resources.   
Under its MEDIC Statement of Work, the MEDIC originally was tasked 
with providing recommendations to CMS to support administrative actions 
such as recovering overpayments, suspending enrollment, and imposing 
civil monetary penalties.  However, CMS instructed the MEDIC, first by 
verbal instruction and then through a contract change memorandum issued 
in January 2012, that the MEDIC is not required to recommend 
administrative actions.   
CMS staff explained that the MEDIC Statement of Work was modeled 
after the Program Safeguard Contractor Statement of Work and reflects a 
fee-for-service approach to administrative actions.  CMS staff further 
explained that the design of the Part C and D programs does not support 
the MEDICs recommending administrative actions and stated that CMS 
components fulfill this role.  CMS provided documentation of its 
components key responsibilities regarding administrative functions in 
Parts C and D; however, there is no mention of collection of 
overpayments.   
Under the fee-for-service payment methodology for Medicare Parts A 
and B, CMS pays providers directly and the ZPICs have the ability to 
notify claims processors of improper payments that need to be collected.  
However, under the capitated payment methodology for Parts C and D, 
CMS pays plan sponsors advance monthly payments and the plan sponsors 
pay providers for the services.  CMS does not have a mechanism to 
recover payments made to plan sponsors when law enforcement agencies 
do not accept cases involving inappropriate services for further action.   
All but one of the barriers previously identified by MEDICs 
remain   
As outlined in our previous MEDIC report, MEDICs described various 
barriers that impacted their ability to identify or prevent potential Part D 
fraud and abuse.  We asked the MEDIC about these barriers to determine 
whether they had been resolved or still remained.  We determined from the 
MEDICs response that one barrier concerning prescriber identifiers has 
been resolved and two barriers regarding PDE data remain.  Additionally, 
although the MEDIC reports improvement, two barriers remain 
concerning its ability to receive referrals from plan sponsors and 
information from pharmacies, physicians, and pharmacy benefit managers.  
We describe the barriers and the MEDICs response below.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  15 
   
   
Problem With Prescriber Identifiers.  As detailed in our previous MEDIC 
report, MEDICs reported issues with the prescriber identifier fields when 
accessing Part D PDE records through their data system, Cognos.  The 
issue was that different types of prescriber numbers were not stored in the 
correct fields, which affected the results of the MEDICs data analysis.  
For example, one MEDIC reported that when using Cognos to query 
records with a providers National Provider Identifier (NPI) number, it 
found that NPI numbers were incorrectly being stored in the field for Drug 
Enforcement Agency numbers.  The MEDIC explained that Cognos now 
has a single prescriber identifier field that contains all values submitted by 
the plan sponsor, so the MEDIC can query that field for any kind of 
prescriber identifier.  Therefore, this barrier regarding prescriber 
identifiers has been resolved.   
Access to Important Data Variables.  As described in our previous MEDIC 
report, MEDICs reported that PDE data did not include, or that MEDICs 
could not efficiently access, certain information vital to identifying and 
investigating potential fraud and abuse and to building case referrals.  
MEDICs had reported that it would be helpful for PDE data to include 
beneficiary demographic information, such as name and address, because 
law enforcement agencies often ask for this information when requesting 
information from the MEDICs.   
The MEDIC stated that to make data useful for law enforcement purposes, 
it still needs to augment the PDE data with other CMS data and data from 
third-party databases.  The MEDIC captures information such as 
beneficiary and prescriber name and address from other systems and 
merges this information with the PDE data to obtain the full information 
needed.  The MEDIC reported that having these additional data fields in 
the PDE data would enable it to respond more efficiently to requests for 
information.  The current lack of these fields in the PDE data necessitates 
the MEDICs obtaining these data elsewhere; therefore, the barrier 
regarding access to important data variables remains.   
Tracking Changes to PDE Data.  As described in our previous MEDIC 
report, MEDICs reported issues with not being able to see various 
iterations of a PDE record when accessing PDE data (i.e., if an adjustment 
was made, there was no record of the original payment amount).  One 
MEDIC reported that this information was vital in determining trends 
across multiple plans and in quantifying the amount of potential fraud for 
a particular pharmacy.  The MEDIC reported that it is still able to view 
only the most recent iteration of a PDE record.  Therefore, this barrier 
regarding tracking changes to PDE data remains.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  16 
   
   
Referrals From Plan Sponsors.  As described in our previous MEDIC 
report, MEDICs reported that they may not have been aware of all 
incidents of potential Part D fraud and abuse because plan sponsors are 
encouragedbut not requiredto refer such incidents to MEDICs.   
In July 2012, CMS issued an update to Chapter 9 of its Prescription Drug 
Benefit Manual and Chapter 21 of its Medicare Managed Care Manual 
regarding plan sponsors compliance program guidelines.  However, in 
these revisions, plan sponsors are still only encouragednot requiredto 
refer incidents of potential fraud and abuse to the MEDIC.  The MEDIC 
explained that through outreach and collaborative efforts, such as the 
Part C and Part D Fraud Working Groups, the relationship between the 
MEDIC and plan sponsors has become very collaborative.  The MEDIC 
reported that as a result, the number of referrals from plan sponsors has 
dramatically increased.  Nonetheless, the barrier remains regarding the 
lack of a requirement for sponsors to report incidents of potential fraud to 
the MEDIC.   
Authority To Directly Obtain Information.  As detailed in our previous 
MEDIC report, MEDICs reported that they did not have the authority to 
directly obtain information such as prescriptions or medical records from 
pharmacies, physicians, and pharmacy benefit managers and that this lack 
of authority hindered their ability to investigate potential fraud and abuse. 
MEDICs explained that because CMS contracts with plan sponsors, 
MEDICs had the authority to request information only from plan sponsors, 
and not directly from entities such as pharmacies and pharmacy benefit 
managers.   
The MEDIC reported that it is still prohibited from obtaining information 
such as prescriptions or medical records directly from these entities.  It 
explained that although it is still required to request this information 
through plan sponsors, the increased collaboration between the MEDIC 
and plan sponsors has resulted in a more timely response to its requests.  
The MEDIC requests the information from the plan sponsors, who request 
the information from the entities; the plan sponsors then forward this 
information to the MEDIC.  Although the MEDICs increased 
collaboration with plan sponsors has aided its efforts, the barrier remains 
regarding the MEDICs directly obtaining information from these entities.   
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  17 
   
   
CMS does not require the MEDIC to submit data 
elements that could help CMS oversee the MEDICs 
benefit integrity activities  
Parts C and D and Proactive Data.  The workload data that CMS collects 
from the MEDIC does not separate, by Parts C and D, the data on 
investigations, case referrals, immediate advisements, proactive data 
analyses, or requests for information.  Although the MEDIC provided us 
with these data when we requested them, the information is not contained 
in the workload data provided to CMS.  Without these data, CMS is 
unable to determine on an ongoing basis how much of the MEDICs 
workload is associated with Part C and Part D.   
Additionally, the investigation- and case-referral-related portion of the 
workload data that CMS collects from the MEDIC does not provide the 
total number of investigations and case referrals that are based on 
proactive methods or external sources.  The investigation-related data 
contain a field for investigations based on proactive data analyses; 
however, the number reported in this field does not reflect the MEDICs 
total number of investigations initiated by all proactive methods.  
Moreover, the case-referral-related data do not contain any fields to 
indicate whether the referrals were based on investigations initiated 
through proactive methods or external sources.  Without these data, CMS 
is unable to determine how much of the MEDICs investigation and case 
referral workload results from proactive methods versus external sources.   
Reporting of Investigations.  We learned from the MEDIC that when it 
receives multiple complaints about a single provider, the MEDIC counts 
each complaint as a separate investigation.  The MEDIC explained that it 
tracks individual complaints in its case management system and that each 
of these is counted as a new investigation in the workload data submitted 
to CMS.  CMS acknowledged that the MEDIC counts one investigation 
per complaint and explained that this item is currently under review to 
assess the need for changes.  
A November 2011 OIG report on ZPICs determined that there were 
differences in the ways two ZPICs reported their new investigations in 
their workload statistics.19  One ZPIC included all fraud complaints in its 
number of new investigations reported to CMS, regardless of whether 
multiple complaints for a particular provider were merged into a single 
investigation.  However, the other ZPIC explained that if it received a 
complaint on a particular provider, started an investigation, and then 
 
19
 OIG, Zone Program Integrity Contractors Data Issues Hinder Effective Oversight, OEI-03-09-00520, 
November 2011. 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  18 
   
   
received another complaint on the same provider, the second complaint 
would not be counted as a new investigation in the workload statistics that 
this ZPIC reported to CMS.  Ensuring that the MEDIC counts 
investigations the way CMS intends for them to be counted is important to 
ensuring that this workload statistic is meaningful and that CMS can 
compare this statistic across its contractors.   
Requests for Information.  From April through July 2010, the MEDIC did 
not track requests for information by priority level (i.e., Priority I and 
Priority II).  A CMS review revealed that the MEDIC was not meeting its 
timeliness standards, and CMS put the MEDIC on a corrective action plan 
to address this issue.  The MEDIC began reporting by priority level in 
August 2010 and reported 100-percent timeliness during the remainder of 
our timeframe (August 2010 through March 2011).20  However, a review 
of the workload data revealed that although the MEDIC reported on the 
number of Priority I and Priority II requests completed within required 
timeframes, the workload report does not have fields to capture Priority I 
and Priority II requests that do not meet required timeframes.  To assess 
whether the MEDIC is meeting the established timeframes for Priority I 
and Priority II requests for information, it is important to ensure that the 
workload statistics are capturing the appropriate data.   
 
20
 Because of improvements the MEDIC made, CMS removed the MEDIC from the corrective action plan in 
December 2010.   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  19 
   
   
CONCLUSION AND RECOMMENDATIONS 
Over the past several years, MEDIC responsibilities and jurisdictions have 
evolved.  CMS added oversight of Part C as a MEDIC responsibility for 
FY 2009 and consolidated Part C and D benefit integrity responsibility 
into one national MEDIC for FY 2010.   
Although the MEDIC had been responsible for Part C for more than 
2 years by April 2011, its Part C investigations and case referrals 
represented only a small percentage of its benefit integrity activities.  In 
addition, the lack of a centralized Part C data repository has greatly 
limited the MEDICs ability to identify and investigate fraud and abuse in 
Part C.  Additionally, although CMS has stated that innovative analytical 
methodologies are critical to the success of a benefit integrity program, 
just a small percentage of MEDIC investigations and case referrals were 
from proactive methods.  Moreover, there is no mechanism to recover 
payments associated with inappropriate Part C or D services when law 
enforcement agencies do not accept cases involving these services for 
further action.  Furthermore, barriers identified in OIGs previous MEDIC 
report remain today.  These barriers include the lack of a requirement for 
plan sponsors to refer fraud and abuse incidents to the MEDIC and the 
MEDICs not being able to directly obtain information from pharmacies, 
physicians, and pharmacy benefit managers.   
The Parts C and D programs involve significant benefit expenditures and a 
substantial number of beneficiaries$190 billion in 2011 and 33 million 
beneficiaries in 2012.  CMS is relying on one contractor to perform 
benefit integrity functions for both these programs, and it is important to 
ensure that there is effective and proactive oversight of the programs by 
both the MEDIC and CMS.   
Therefore, we recommend that CMS:  
Provide the MEDIC With Centralized Part C Data To Enable It 
To More Comprehensively and Proactively Identify and 
Investigate Part C Fraud and Abuse  
Although the MEDIC stated that CMSs requirement for Part C plan 
sponsors to begin submitting encounter data in 2012 will enhance the 
MEDICs ability to conduct investigations and proactive data analysis, it is 
unclear how soon the MEDIC will have access to the centralized Part C 
data repository.  Until this centralized repository is available, CMS should 
advise the MEDIC to obtain Part C data from individual plan sponsors 
beyond the ones currently in the Part C Fraud Work Group.  Once the 
centralized repository is available, CMS should ensure that the MEDIC 
receives timely access to the data.     
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  20 
   
   
Clarify Its Policy and Instruct the MEDIC Under What 
Circumstances It May Share Specific Information With Other 
Entities, Including ZPICs and State Agencies  
Although CMS reports that the MEDIC may share specific information 
with other program integrity contractors when there is not a conflict of 
interest, the MEDIC reported in June 2012 that it is not authorized to share 
such information.  CMS should clarify its policy so that the MEDIC shares 
information to the fullest extent permitted, as this would improve the 
MEDICs ability to effectively identify and investigate potential fraud and 
abuse.   
Explore Methods To Develop and Implement a Mechanism  
To Recover Payments From Part C and Part D Plan Sponsors 
When Law Enforcement Agencies Do Not Accept Cases 
Involving Inappropriate Services for Further Action  
CMS currently does not have such a mechanism to help safeguard 
Medicare funds.    
Amend Regulations To Authorize the MEDIC To Directly Obtain 
Information From Entities Such As Pharmacies, Physicians, 
and Pharmacy Benefit Managers  
Because CMS did not concur with a similar recommendation in our 
previous MEDIC report, OIG continues to recommend that CMS allow the 
MEDIC direct access to these entities.  Current regulations allow 
sponsors contracts to specify whether CMS or its designees (e.g., the 
MEDIC) may obtain information directly from these entities or whether 
the plan sponsor will provide the information.  To improve the efficiency 
of the MEDICs work, CMS should amend current regulations to require 
that sponsors contracts specify that information from sponsors 
subcontractors, network providers, and other associated entities be 
provided directly to CMS or its designees.  To ensure that plan sponsors 
are aware of the MEDICs requests, CMS could require the MEDIC to 
inform plan sponsors when it intends to collect information directly from 
these entities.   
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  21 
   
   
Amend Regulations To Require Part C and Part D Plan 
Sponsors To Refer Potential Fraud and Abuse Incidents  
to the MEDIC  
Although CMS has revised Chapter 9 of its Prescription Drug Benefit 
Manual and Chapter 21 of its Medicare Managed Care Manual, these 
revisions still state that plan sponsors are encouragednot requiredto 
refer incidents of potential fraud and abuse to the MEDIC.  Additionally, 
in previous OIG reports we have recommended that CMS require Parts C 
and D plan sponsors to refer potential fraud and abuse to CMS or other 
appropriate entities.21  However, because CMS concurred only partially 
with these recommendations, OIG continues to recommend that Parts C 
and D plan sponsors be required to refer potential fraud and abuse 
incidents to the MEDIC and that CMS amend current regulations to 
require these referrals.   
Enhance Monthly Workload Reporting Requirements  
To Improve CMS Oversight of the MEDICs Benefit Integrity 
Activities  
These MEDIC workload reporting requirements should include:  
(1) a separation of workload data by Parts C and D, (2) a breakout of 
investigations and cases initiated by proactive methods and external 
sources, (3) fields in the workload data to capture requests for information 
not completed within the required timeframes, and (4) clarification on how 
CMS intends for the MEDIC to report its number of new investigations in 
relation to the number of complaints received.   
 
 
   
 
21
 OIG, Medicare Advantage Organizations Identification of Potential Fraud and Abuse, OEI-03-10-00310, 
February 2012, and OIG, Retail Pharmacies With Questionable Part D Billing, OEI-02-09-00600, May 2012.    
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  22 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our first and second recommendations.  CMS stated 
that it expects to provide the MEDIC with timely access to Part C 
encounter data once the centralized repository is available.  Additionally, 
CMS stated it will provide guidance to the MEDIC on when it is 
appropriate to share information with other entities, including ZPICs and 
state agencies.   
CMS partially concurred with our third recommendation to develop and 
implement a mechanism to recover overpayments.  It concurred for Part D 
but did not concur for Part C because of the nature of Part C payments.  
For Part D, CMS stated that when the MEDIC develops adequate evidence 
of improper payments made to Part D plan sponsors that result from 
inappropriate billing by pharmacies or other providers, CMS would 
explore recovery of any improper payments if they are final reconciled 
payments.  Regarding Part C, CMS stated that when providers 
fraudulently bill Part C plan sponsors, there are no claim-specific 
Medicare payments implicated.  Additionally, CMS stated that to the 
extent that fraudulent billings are identified, the Part C plan, not CMS, 
would be entitled to any recovered amounts.  OIG understands that there 
are not claim-specific payments made to Part C plan sponsors by CMS 
because sponsors are paid a capitated rate.  However, to account for 
improper payments paid to providers, CMS should develop a mechanism 
to recover some portion of these improper payments from the capitated 
payments made to Part C plan sponsors.  To accomplish this, CMS should 
seek statutory authority if necessary.   
CMS did not concur with our fourth recommendation to amend 
regulations to authorize the MEDIC to directly obtain information from 
entities such as pharmacies, physicians, and pharmacy benefit managers.  
CMS stated that it believes the choice of how requested information is to 
be provided should remain with the sponsor and its subcontractors.  
However, to increase the efficiency of the MEDICs work, OIG maintains 
that CMS should amend current regulations to allow the MEDIC direct 
access to these entities.   
CMS partially concurred with our fifth recommendation to amend 
regulations to require Parts C and D plan sponsors to refer potential fraud 
and abuse incidents to the MEDIC.  CMS stated that it will explore the 
option of placing this additional burden on plan sponsors versus the value 
of the information to be gained in collecting such data.  CMS added that 
through guidance and education, it will continue to encourage plan 
sponsors to voluntarily refer potential fraud and abuse incidents that may 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  23 
   
   
warrant further investigation.  OIG continues to recommend that CMS 
amend current regulations so plan sponsors are requirednot just 
encouragedto refer potential fraud and abuse incidents to the MEDIC.  
By not requiring reporting, CMS limits the MEDICs ability to monitor 
fraud trends and identify problematic providers across the Parts C and D 
programs.     
CMS concurred with our last recommendation to enhance monthly 
workload reporting requirements to improve CMS oversight of the 
MEDICs benefit integrity activities.  CMS stated that MEDIC reporting 
responsibilities have changed since the end of our review; however, it is 
unclear if those reporting changes incorporate the enhancements we 
proposed in our recommendations (e.g., separating the reporting of 
workload data, such as investigations and case referrals by Parts C and D).  
We ask that CMS, in its final management decision, provide OIG with 
documentation of the new reporting requirements and indicate whether 
they incorporate the requirements proposed in the OIG recommendation.  
The full text of CMS's comments is provided in Appendix B.    
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  24 
   
   
APPENDIX A 
Types of Potential Part C and Part D Fraud and Abuse 
 
This Appendix provides information on the types of potential Part C and Part D fraud and 
abuse associated with the National Benefit Integrity (NBI) Medicare Drug Integrity 
Contractors (MEDIC) investigations and case referrals between April 1, 2010, and 
March 31, 2011.  The data are sorted by number of investigations.   
 
Table A-1:  Types of Potential Part C Fraud and Abuse Associated With the NBI MEDICs 
Investigations and Case Referrals  
Number  
Number of 
Types of Part C Fraud and Abuse   Investigations1  Roeff eCrarasles 1 
1.  Suspect billing - Examples include (a) questionable or suspicious billing practices 
150  4 
and (b) overutilization. 
2.  Billing for services never rendered - Provider submits claims or encounter data 
95  10 
for services that were never provided to beneficiary. 
3.  Attempts to steal beneficiarys identity/money - Examples of this include (a) an 
individual or organization steals beneficiary's identity or money and (b) an individual  49  12 
uses or steals another person's Medicare or Medicare Advantage (MA) card. 
4.  Improper coding  (upcoding and unbundling) - By using the wrong billing code or 
unbundling the codes included in a larger, more inclusive set of codes, the health 
49  1 
care provider can be reimbursed at a higher rate than if the correct billing codes 
were used and the services were billed together (i.e., were bundled). 
5.  Marketing schemes - Plan sponsor, first-tier entity, or downstream entity violated 
Medicare marketing guidelines or other Federal or State laws, rules, and regulations  38  2 
to improperly enroll a beneficiary in an MA plan. 
6.  Billing for ineligible consumers - Misrepresentation of beneficiary's eligibility 
29  1 
information, medical condition, or plan enrollment information. 
7.  Inducements, bribes, or kickbacks - Examples include inappropriate discounts, 
23  1 
support services, educational grants, or research funding. 
8.  Double billing - This occurs when the provider receives more than one payment 
20  0 
for the same service and keeps the money. 
9.  Overcharging the beneficiary - Examples include (a) charging the beneficiary 
improper coinsurance or premium amounts, or (b) billing the beneficiary directly for 
19  0 
the total amount of the bill, including the amount of the charge that the provider has 
agreed to write off after the MA organization has paid. 
10.  Falsification of records or other data - Examples include falsification of medical 
record or dates of service; member falsifying medical referral; forging a physician's  19  2 
signature; forged or altered prescription for durable medical equipment. 
11.  False-front provider - Fallacious companies created to submit fraudulent billing 
14  10 
for services not rendered. 
12.  Telemarketing schemes - Contacting beneficiaries to obtain personal identifying 
11  2 
or protected health information. 
13.  Failure to provide medically necessary services - Plan sponsor, health care 
provider, or other entity fails to provide medically necessary items or services that it 
9  0 
is required to provide under law or under the contract, and that failure adversely 
affects, or is substantially likely to affect, the beneficiary. 
14.  Improper cost reporting or cost shifting - Provider submits inflated reports of 
patient traffic and treatment costs in order to induce payers to increase future   4  0 
per-patient capitation fees. 
15.  Identity theft - Use of providers credentials to submit fraudulent claims/bill for 
4  12 
services not rendered. 
 
continued on next page
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  25 
   
   
Table A-1:  Types of Potential Part C Fraud and Abuse Associated With the NBI MEDICs 
Investigations and Case Referrals (Continued) 
Number  
Number of 
Types of Part C Fraud and Abuse   Investigations1  Roeff eCrarasles 1 
16.  Tax evasion/fraud.  0  1 
17.  Health Insurance Portability and Accountability Act (HIPAA) violations - Privacy 
0  1 
violations and misuse of protected health information. 
Total  533  59 
Source:  Office of Inspector General (OIG) analysis of MEDIC survey data, 2011.   
1 Total numbers of investigations and case referrals do not equal totals cited in the report text because each investigation and case may 
have involved more than one type of fraud and abuse.  Additionally, for three types of fraud and abuse, there were more case referrals than 
 
investigations.  This is because some case referrals may be associated with investigations begun before April 1, 2010. 
 
 
Table A-2:  Types of Potential Part D Fraud and Abuse Associated With the NBI MEDICs 
Investigations and Case Referrals 
Number  
Number of 
Types of Part D Fraud and Abuse  Investigations1  Roeff eCrarasles 1 
1.  Inappropriate prescribing - Examples include (a) physician writing prescriptions 
outside his/her scope of practice; (b) off-label prescribing of controlled substances; 
(c) prescriber being on the OIG exclusion list; or (d) inappropriate prescribing of  589  64 
controlled substancesphysician being identified as prescribing high volumes of 
controlled substances. 
2.  Inappropriate billing - Examples include (a) billing for brand-name drugs when 
generics are dispensed; (b) billing for noncovered prescriptions as covered items; 
(c) billing for prescriptions that are never picked up; or (d) double billingthe  547  84 
provider receives more than one payment for the same service and keeps the 
money. 
3.  Forged or altered prescriptions or other documents - Prescriptions are forged or 
altered by someone other than the prescriber or pharmacist without prescriber  466  71 
approval. 
4.  Attempts to steal beneficiary identity to obtain prescriptions - Examples of this 
include (a) individual uses another person's Medicare card to obtain prescriptions or  402  69 
(b) beneficiary is asked to sell Medicare card for purpose of obtaining prescriptions. 
5.  Diverting prescriptions - An individual obtains prescription drugs and gives or 
366  46 
sells this medication to someone else. 
6.  Doctor shopping or stockpiling - Examples of this include (a) beneficiary consults 
a number of doctors for the purpose of inappropriately obtaining multiple 
prescriptions for narcotic painkillers or other drugs or (b) beneficiary attempts to  314  38 
game her/his drug coverage by obtaining and storing large quantities of drugs and 
then disenrolling. 
7.  Overcharging beneficiary for prescriptions - Examples of this include (a) charging 
beneficiary for drugs beneficiary did not receive; (b) pharmacy asking beneficiary to 
pay uncompensated amounts; or (c) bait and switch pricing, i.e., beneficiary is led  281  2 
to believe a drug will cost one price, but at point of sale, beneficiary is charged a 
higher amount.  
8.  Inappropriate prescription dispensing - Examples of this include (a) dispensing 
expired or adulterated prescription drugs; (b) dispensing without a prescription; or 
213  3 
(c) splitting - pharmacist or mail order pharmacy splits prescription to receive 
additional dispensing fee. 
9.  Identity theft or use of providers identifying information, such as National 
146  27 
Provider Identifier (NPI) or Drug Enforcement Agency (DEA) numbers.  
10.  Marketing schemes - Examples include (a) misrepresentation of plan benefits or 
92  4 
(b) inappropriate soliciting. 
 
continued on next page
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  26 
   
   
Table A-2:  Types of Potential Part D Fraud and Abuse Associated With the NBI MEDICs 
Investigations and Case Referrals (continued)  
Number  
Number of 
Types of Part D Fraud and Abuse  Investigations1  Roeff eCrarasles 1 
11.  Inducements, kickbacks, or bribes - Examples include (a) prescriber is offered, 
is paid, solicits, or receives unlawful payments as inducement or reward for writing  
prescriptions for drugs or products; or (b) pharmacy benefit manager receives  84  9 
unlawful payments in order to steer a beneficiary toward a certain plan or drug, or for 
formulary placement. 
12.  Pharmacy submitting false claims under invalid NPI and/or DEA numbers.  18  37 
13.  Poor quality of care.  14  6 
14.  Pharmacy is unresponsive to audit request - Pharmacy does not respond to 
11  0 
desk or in-store audit request. 
15.  Failure to provide medically necessary prescription drugs - Plan sponsor, health 
care provider, or other entity fails to provide medically necessary prescription drugs 
9  0 
that the organization is required to provide under law or under the contract, and that 
failure adversely affects, or is likely to affect, the beneficiary. 
16.  HIPAA violations - Privacy violations and misuse of protected health 
5  1 
information.  
17.  Beneficiary travels an unusually long distance to obtain prescriptions.   4  7 
Total  3,561  468 
Source:  OIG analysis of MEDIC survey data, 2011.   
1 Total numbers of investigations and case referrals do not equal totals cited in the report text because each investigation and case may 
have involved more than one type of fraud and abuse.  Additionally, for two types of fraud and abuse, there were more case referrals than 
 
investigations.  This is because some case referrals may be associated with investigations begun before April 1, 2010.
 
 
 
 
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  27 
  APPENDIX B 
Agency Comments 
l-4--	
/.P.'""-.._ 
DEPAR'IMENT OF HEALTH & HUMAN SERVICES  Centers lor Medicare & Medicaid Services
Administrator 
Washington, DC 20201 
NOV 0 5 201Z
DATE: 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 M:Kifya'hvenner 

Acting .Adm\nistrator 

SUBJE<..1: 	 Office of Inspector General (OIG) Draft Report: "MEDIC Benefit Integrity 
Activities in Medicare Parts C and D'' (OEI-03-11-00310) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of Inspector General (OJG) draft report entitled, "MEDIC Benefit 
Integrity Activities in Medicare Parts C and D." The objectives of the draft report were to 
determine the extent to which the Medicare Drug Integrity Contractor (MEDIC) performed 
Medicare Parts C and D benefit integrity activities, describe barriers encountered by the MEDIC 
performing these activities, and determine if previous barriers were resolved. In addition, this 
report identified workload data elements to improve CMS's oversight of the MEDIC's activities. 
The MEDIC's responsibilities include, but are not limited to, identifying and investigating 
potential Part C and Part D fraud and abuse. To accomplish this task, CMS provides the MEDIC 
with the most comprehensive and updated data available to use in proactively identifying and 
investigating fraud, waste, and abuse. In addition, CMS and the MEDIC prioritize regular 
partnering with other contractors, Parts C and D plan sponsors, and law enforcement to ensure 
the most effective and efficient fight against Medicare fraud, waste, and abuse. 
Medicare Parts C and D plan sponsors are strongly encouraged by CMS to report fraud incidents 
to the MEDIC for further investigation and possible referral to law enforcement. CMS holds 
Part C and Part D plan sponsors solely accountable for compliance with program requirements, 
including the implementation of measures designed to prevent fraud, waste, and abuse. 
We would also like to express our gratitude to OIG for conducting this evaluation. CMS's 
responses to the OIG recommendations are below. 
OIG Recommendation I 
The CMS shall provide the MEDIC with centralized Part C data to enable it to more 
comprehensively and proactively identify and investigate Part C fraud and abuse. 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  28   
   
 
   
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MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  30 
   
   
 
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  31 
   
   
 
   
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)  32 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector General.   
Tara Bernabe served as the team leader for this study.  Other Office of 
Evaluation and Inspections staff from the Philadelphia regional office who 
conducted the study include Nancy J. Molyneaux and Sunil Patel.  Central 
office staff who provided support include Scott Manley, Christine Moritz, 
Tasha Trusty, and Rita Wurm.  
 
 
MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310)   33  
   
   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.