Medicare covered approximately 54 million beneficiaries in fiscal year 2014 at an estimated cost of $603 billion. The program consists of four parts, Parts A through D. In general, Part A covers hospital and other inpatient stays, and Part B covers hospital outpatient and physician services, durable medical equipment, and other services. Together, Parts A and B are known as traditional Medicare or Medicare fee-for- service. Part C is Medicare Advantage, under which beneficiaries receive their Medicare health benefits through private health plans, and Part D is the Medicare outpatient prescription drug benefit, which is administered through private drug plans. Medicare beneficiaries who enroll in Part C or Part D plans receive separate cards from those plans, in addition to their traditional Medicare card. Generally, an individual’s eligibility to participate in Medicare is initially determined by the Social Security Administration, based on factors such as age, work history, contributions made to the programs through payroll deductions, and disability. Once the Social Security Administration determines that an individual is eligible, it provides information about the individual to CMS, which prints and issues a paper Medicare card to the beneficiary. Providers must apply to enroll in Medicare to become eligible to bill for services or supplies provided to Medicare beneficiaries. CMS has enrollment standards and screening procedures in place that are designed to ensure that only qualified providers can enroll in the program and to prevent enrollment by entities that might attempt to defraud Medicare.providers bill Medicare by submitting claims for reimbursement for the services and supplies they provide to beneficiaries. Providers are not issued identification cards, but instead use an assigned unique provider Under Medicare fee-for-service, identification number—their National Provider Identifier (NPI) number—on each claim. Electronically readable cards could be implemented for a number of different purposes in Medicare. We identified three key proposed uses: Authenticating beneficiary and provider presence at the point of care. Beneficiary and provider cards could be used for authentication to potentially help limit certain types of Medicare fraud, as CMS could use records of the cards being swiped to verify that they were present at the point of care. Using electronically readable cards for authentication would not necessarily involve both beneficiaries and providers, as cards could be used solely to authenticate beneficiaries, or solely to authenticate providers. Electronically exchanging beneficiary medical information. Beneficiary cards could be used to store and exchange medical information, such as electronic health records, beneficiary medical conditions, and emergency care information, such as allergies. Provider cards could also be used as a means to authenticate providers accessing electronic health record (EHR) systems that store and electronically exchange beneficiary health information. Electronically conveying beneficiary identity and insurance information to providers. Beneficiary cards could be used to auto- populate beneficiary information into provider IT systems and to automatically retrieve existing beneficiary records from provider IT systems. For example, an electronically readable Medicare beneficiary card could contain the identity and insurance information printed on the current paper Medicare cards—beneficiary name, Medicare number, gender, Medicare benefits, and effective date of Medicare coverage. The primary purpose of this potential use would be to improve provider record keeping by allowing providers the option to capture beneficiary information electronically. The use of electronically readable cards for health care has been limited thus far in the United States. According to stakeholders, the limited use is due, in part, to reluctance among the insurance industry and health care providers to invest in a technology that would depend on a significant investment from both parties to implement. However, some health insurers, including a large insurer, have issued electronically readable cards to their beneficiaries, and some integrated health systems have issued cards to patients to help manage patient clinical and administrative information.cards have been used as health insurance cards for decades. For example, France and Germany have used smart cards in their health care systems since the 1990s. Appendix II includes additional details about France’s and Germany’s use of smart cards. Although there is no reliable measure of the extent of fraud in the Medicare program, for over two decades we have documented ways in which fraud contributes to Medicare’s fiscal problems. Preventing Medicare fraud and ensuring that payments for services and supplies are accurate can be complicated, especially since fraud can be difficult to detect because those involved are generally engaged in intentional deception. Common health care fraud schemes in Medicare include the following: Billing for services not rendered. This can include providers billing for services and supplies for beneficiaries who were never seen or rendered care, and billing for services not rendered to beneficiaries who are provided care (such as adding a service that was not provided to a claim for otherwise legitimately provided services). In some types of fraud schemes, individuals may steal a provider’s identity and submit claims for services never rendered and divert the reimbursements without the provider’s knowledge. Fraudulent or abusive billing practices. This can include providers billing Medicare more than once for the same service; inappropriately billing Medicare and another payer for the same service; upcoding of services; unbundling of services; billing for noncovered services as covered services; billing for medically unnecessary services; and billing for services that were performed by an unqualified individual, or misrepresenting the credentials of the person who provided the services. Kickbacks. This can include providers, provider associates, or beneficiaries knowingly and willfully offering, paying, soliciting, or receiving anything of value to induce or reward referrals or payments for services or goods under Medicare. Among other processes, to detect potential fraud, CMS employs IT systems—including its Fraud Prevention System—that analyze claims submitted over a period of time to detect patterns of suspicious billing.CMS and its contractors investigate providers and beneficiaries with suspicious billing and utilization patterns and, in suspected cases of fraud, can take administrative actions, such as suspending payments or revoking a provider’s billing privileges, or refer the investigation to the HHS Office of Inspector General for further examination and possible criminal or civil prosecution. As we have previously reported, there are three potential factors that can be used to authenticate an individual’s identity: (1) “something they possess,” such as a card, (2) “something they know,” such as a password or personal identification number (PIN), and (3) “something they are,” such as biometric information, for example, a fingerprint, or a picture ID.Generally, the more factors that are used to authenticate an individual’s identity, the higher the level of identity assurance. For example, a card used in conjunction with a PIN provides a higher level of identity authentication than just a card, since the PIN makes it more difficult for individuals who are not the cardholder to use a lost or stolen card. NIST has issued standards for federal agencies for using electronically readable cards to achieve a high level of authentication, and those standards require robust enrollment and card issuance processes to ensure that the cards are issued to the correct individuals. These processes include procedures to verify an individual’s identity prior to card issuance to ensure eligibility and to ensure that the cards are issued to the correct individual. For example, verifying an individual’s address is an important practice for issuing cards by mail. If a significant number of cards are issued to ineligible or incorrect individuals, it undermines the utility of the cards for identity authentication. Practices that provide higher levels of identity authentication generally are more expensive and difficult to implement and maintain and may cause greater inconvenience to users than practices that provide lower levels of assurance. The level of identity authentication that is appropriate for a given application or transaction depends on the risks associated with the application or transaction. The greater the determined risk, the greater the need for higher-level identity authentication practices. The Office of Management and Budget and NIST have issued guidance defining four levels of identity assurance ranging from level 1—“little or no confidence in the asserted identity’s validity”—to level four—“very high confidence in the asserted identity’s validity”—and directed agencies to use risk-based methods to decide which level of authentication is appropriate for any given application or transaction. Additionally, authentication practices should take into account issues related to cost and user acceptability. CMS currently relies on providers to authenticate the identities of Medicare beneficiaries to whom they are providing care, but the agency does not have a way to verify whether beneficiaries and providers were actually present at the point of care when processing claims. At this point, CMS has not made a determination that a higher level of beneficiary and provider authentication is needed. The type of electronically readable card most appropriate for Medicare would depend on how the cards would be used. Three common types of electronically readable cards that could be used to replace the current printed Medicare card are smart cards, magnetic stripe cards, and bar code cards. The key distinguishing feature of smart cards is that they contain a microprocessor chip that can both store and process data, much like a very basic computer. Based on our analysis of the capability of the three types of cards, we found that while all of the cards could be used for authentication, storing and exchanging medical information, and conveying beneficiary information, the ability of smart cards to process data enables them to provide higher levels of authentication and better secure information than cards with magnetic stripes and bar codes. Our analysis found that smart cards could provide substantially more rigorous authentication of the identities of Medicare beneficiaries and providers than magnetic stripe or bar code cards (see fig. 1). Although all three types of electronically readable cards could be used for authentication, smart cards provide a higher level of assurance in their authenticity because they are difficult to counterfeit or copy. Magnetic stripe and bar code cards, on the other hand, are easily counterfeited or For example, officials in France told us that they chose to use copied.smart cards as their health insurance cards, in part, because they were less susceptible to counterfeiting, and reported that they have not encountered any problems with counterfeit cards.