Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

 

MEDIC BENEFIT INTEGRITY

ACTIVITIES IN MEDICARE

PARTS C AND D 

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 MEDIC’s 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 MEDIC’s 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 MEDIC’s 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 MEDIC’s 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 MEDIC’s 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 MEDIC’s 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 MEDIC’s benefit integrity activities ...................9 

A small percentage of the MEDIC’s 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 MEDIC’s 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 
 

MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310) 1 

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 MEDIC’s

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) 2 

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 MEDIC’s 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-andSystems/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) 3 

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 

person’s 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) 4 

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. OIG’s 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 MEDIC’s 

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) 5 

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 report’s 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) 6 

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 

MEDIC’s 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 MEDIC’s 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 MEDIC’s 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) 7 

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 MEDIC’s workload data to

determine whether any data elements were needed that could improve 

CMS’s oversight of the MEDIC. 

We reviewed the types of Part C and Part D fraud and abuse that the 

MEDIC’s 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 

MEDIC’s Part C and Part D investigations and case referrals. 

We summarized the MEDIC’s 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 MEDIC’s 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) 8 

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) 9 

FINDINGS

Part C investigations and case referrals represented a 

small percentage of the MEDIC’s 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 MEDIC’s 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 MEDIC’s cases—92 percent—were 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

Type of Service

Number 

of New 

Investigations

Percentage 

of New 

Investigations

Number of 

Case 

Referrals

Percentage 

of Case 

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) 10

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 MEDIC’s 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

Type of Service

Total 

Number 

of New 

Investigations

Number 

Initiated 

Through 

Proactive 

Methods

Percentage 

Initiated 

Through 

Proactive 

Methods 

Number 

Initiated 

Through 

External 

Sources 

Percentage 

Initiated 

Through 

External 

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 MEDIC’s 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) 11

Table 3: Numbers and Percentages of Case Referrals From Proactive 

Methods and External Sources From April 1, 2010, Through March 31, 2011

Type of Service

Total 

Number of 

Case 

Referrals

Number 

Initiated 

Through 

Proactive 

Methods

Percentage 

Initiated 

Through 

Proactive 

Methods 

Number 

Initiated 

Through 

External 

Sources 

Percentage 

Initiated 

Through 

External 

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 well—from 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 decreased—from

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: 

FY 2008

New Investigations: 

April 2010 to 

March 2011

Case Referrals: 

FY 2008

Case Referrals: 

April 2010 to 

March 2011

Number Percentage Number Percentage Number Percentage Number Percentage

Proactive 

Methods 50 4% 219 10% 13 20% 21 9%

External 

Sources 1,270 96% 2,058 90% 52 80% 224 91%

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) 12

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 

beneficiary’s 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 MEDIC’s 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 

MEDIC’s 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 CMS’s 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) 13

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. CMS’s 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 MEDIC’s 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 CMS’s 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) 14

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 contractors—e.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 beneficiary’s or provider’s 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 MEDIC’s 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) 15

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 MEDIC’s 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 

MEDIC’s 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 MEDIC’s response below. 
 

MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310) 16

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 provider’s 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 MEDIC’s 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) 17

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 

encouraged—but not required—to 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 encouraged—not required—to 

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 MEDIC’s increased 

collaboration with plan sponsors has aided its efforts, the barrier remains 

regarding the MEDIC’s directly obtaining information from these entities. 
 

MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310) 18

CMS does not require the MEDIC to submit data 

elements that could help CMS oversee the MEDIC’s

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 MEDIC’s 

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 MEDIC’s 

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 MEDIC’s 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) 19

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) 20

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 MEDIC’s 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 OIG’s 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 

MEDIC’s 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 CMS’s requirement for Part C plan

sponsors to begin submitting encounter data in 2012 will enhance the 

MEDIC’s 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) 21

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 

MEDIC’s 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 MEDIC’s 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 MEDIC’s 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) 22

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 encouraged—not required—to 

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 MEDIC’s 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) 23

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 MEDIC’s 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) 24

warrant further investigation. OIG continues to recommend that CMS 

amend current regulations so plan sponsors are required—not just 

encouraged—to refer potential fraud and abuse incidents to the MEDIC. 

By not requiring reporting, CMS limits the MEDIC’s 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 

MEDIC’s 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) 25

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 

Contractor’s (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 MEDIC’s

Investigations and Case Referrals

Types of Part C Fraud and Abuse Number of 

Investigations1 

Number 

of Case 

Referrals1 

1. Suspect billing - Examples include (a) questionable or suspicious billing practices 

and (b) overutilization. 150 4 

2. Billing for services never rendered - Provider submits claims or encounter data 

for services that were never provided to beneficiary. 95 10

3. Attempts to steal beneficiary’s identity/money - Examples of this include (a) an 

individual or organization steals beneficiary's identity or money and (b) an individual 

uses or steals another person's Medicare or Medicare Advantage (MA) card.

49 12

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 

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). 

49 1 

5. Marketing schemes - Plan sponsor, first-tier entity, or downstream entity violated 

Medicare marketing guidelines or other Federal or State laws, rules, and regulations 

to improperly enroll a beneficiary in an MA plan.

38 2 

6. Billing for ineligible consumers - Misrepresentation of beneficiary's eligibility 

information, medical condition, or plan enrollment information. 29 1 

7. Inducements, bribes, or kickbacks - Examples include inappropriate discounts, 

support services, educational grants, or research funding. 23 1 

8. Double billing - This occurs when the provider receives more than one payment 

for the same service and keeps the money. 20 0 

9. Overcharging the beneficiary - Examples include (a) charging the beneficiary 

improper coinsurance or premium amounts, or (b) billing the beneficiary directly for 

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.

19 0 

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 

signature; forged or altered prescription for durable medical equipment. 

19 2 

11. False-front provider - Fallacious companies created to submit fraudulent billing 

for services not rendered. 14 10

12. Telemarketing schemes - Contacting beneficiaries to obtain personal identifying 

or protected health information. 11 2 

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 

is required to provide under law or under the contract, and that failure adversely 

affects, or is substantially likely to affect, the beneficiary.

9 0 

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 

per-patient capitation fees.

4 0 

15. Identity theft - Use of provider’s credentials to submit fraudulent claims/bill for 

services not rendered. 4 12

continued on next page
 

MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310) 26

Table A-1: Types of Potential Part C Fraud and Abuse Associated With the NBI MEDIC’s

Investigations and Case Referrals (Continued)

Types of Part C Fraud and Abuse Number of 

Investigations1 

Number 

of Case 

Referrals1 

16. Tax evasion/fraud. 0 1 

17. Health Insurance Portability and Accountability Act (HIPAA) violations - Privacy 

violations and misuse of protected health information. 0 1 

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 MEDIC’s 

Investigations and Case Referrals

Types of Part D Fraud and Abuse Number of 

Investigations1 

Number 

of Case 

Referrals1 

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 

controlled substances—physician being identified as prescribing high volumes of 

controlled substances.

589 64

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 billing—the 

provider receives more than one payment for the same service and keeps the 

money.

547 84

3. Forged or altered prescriptions or other documents - Prescriptions are forged or 

altered by someone other than the prescriber or pharmacist without prescriber 

approval.

466 71

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 

(b) beneficiary is asked to sell Medicare card for purpose of obtaining prescriptions.

402 69

5. Diverting prescriptions - An individual obtains prescription drugs and gives or 

sells this medication to someone else. 366 46

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 

game her/his drug coverage by obtaining and storing large quantities of drugs and 

then disenrolling.

314 38

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 

to believe a drug will cost one price, but at point of sale, beneficiary is charged a 

higher amount. 

281 2 

8. Inappropriate prescription dispensing - Examples of this include (a) dispensing 

expired or adulterated prescription drugs; (b) dispensing without a prescription; or 

(c) splitting - pharmacist or mail order pharmacy splits prescription to receive 

additional dispensing fee.

213 3 

9. Identity theft or use of provider’s identifying information, such as National 

Provider Identifier (NPI) or Drug Enforcement Agency (DEA) numbers. 146 27

10. Marketing schemes - Examples include (a) misrepresentation of plan benefits or 

(b) inappropriate soliciting. 92 4 

continued on next page
 

MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310) 27

Table A-2: Types of Potential Part D Fraud and Abuse Associated With the NBI MEDIC’s 

Investigations and Case Referrals (continued) 

Types of Part D Fraud and Abuse Number of 

Investigations1 

Number 

of Case 

Referrals1 

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 

unlawful payments in order to steer a beneficiary toward a certain plan or drug, or for 

formulary placement.

84 9 

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 

desk or in-store audit request. 11 0 

15. Failure to provide medically necessary prescription drugs - Plan sponsor, health

care provider, or other entity fails to provide medically necessary prescription drugs 

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.

9 0 

16. HIPAA violations - Privacy violations and misuse of protected health 

information. 5 1 

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.
APPENDIX B 

Agency Comments 

/.P.'""-.._ l-4--	 Centers lor Medicare & Medicaid Services DEPAR'IMENT OF HEALTH & HUMAN 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 
 

MEDIC Benefit Integrity Activities in Medicare Parts C and D (OEI-03-11-00310) 29
 

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 OIG’s 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.