CMS Proposes to Significantly Increase Reward for Reporting Medicare Fraud

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CMS expects proposed rule to help recuperate more Medicare funds.

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The Centers for Medicare and Medicaid Services (CMS) recently proposed a rule that would substantially increase the potential reward for individuals who report Medicare fraud. The current Medicare Incentive Reward Program (IRP) provides a maximum reward of $1,000 per identified case. Under CMS’s proposal, individuals would receive 15% of the total amount collected by the government in connection with a case of fraudulent activity, with a maximum award of $9.9 million per case.

CMS originally established its IRP in July 1998 to encourage individuals to provide the government with information about fraud perpetrated by Medicare suppliers and providers. According to CMS, examples of Medicare fraud include billing for services not rendered, billing for supplies never ordered, and offering cash to Medicare beneficiaries in exchange for their identification numbers. Under the IRP, the reporting individual is eligible for a reward only after the Medicare funds, fines, and penalties are collected, which takes three to five years on average.

Although a person does not need to be a Medicare beneficiary to receive an IRP reward, Medicare beneficiaries and their caregivers are presumably well-positioned to spot Medicare fraud. As CMS noted in its proposed rule, every fraudulent claim submitted to Medicare includes a beneficiary’s identification number. Thus, it is possible for Medicare beneficiaries to detect fraudulent conduct if they review their Medicare Summary Notices—the statements of Medicare benefits received.

In the past few years, CMS has taken steps to help Medicare beneficiaries and their caregivers recognize and report suspicious activity. CMS launched the Help Prevent Fraud Campaign in 2010 to train Medicare beneficiaries and their caregivers on preventing and detecting Medicare fraud. In 2012, CMS made the Medicare Summary Notices easier to read and added instructions on how to detect fraud.

CMS noted that it expects its proposed enhancement to the IRP reward to encourage more people to come forward with information, leading to an increase in the recuperation of health care fraud funds. This expectation is based on the success of an Internal Revenue Service (IRS) program that pays individuals for reporting IRS tax code violations. The IRS reward program—which pays whistleblowers 15–30% of the amount collected by the IRS for all claims filed after July 1, 2010 and pays 15% of the amount collected for claims under $2 million filed before July 2010—has both paid out more rewards and collected more money than the IRP. Since its inception in 1998, the IRP has paid out only 18 rewards, totaling $16,000 in reward payments and less than $3.5 million in collected funds. The IRS program, on the other hand, paid out approximately $193 million in rewards and collected almost $1.6 billion from 2007–2012. CMS did not comment on whether it believes there is a comparable level of Medicare and tax code fraud.

CMS based its new rewards formula on a flat 15% rate instead of the IRS’s current 15–30% reward range because CMS wanted to distinguish the IRP from the False Claims Act (FCA), which provides a reward of 15–30% of the amount collected by the government. Under the FCA, individuals may bring qui tam suits on behalf of the government against individuals who submit false or fraudulent claims to the government for payment.

According to CMS, Congress intended for the IRP to work parallel to, not as a supplement to, the FCA. To further distinguish the IRP from the FCA, CMS’s proposed rule explicitly states that individuals are not eligible for an IRP reward if the information they provided is “the same or substantially similar” to information that led to FCA liability or is the subject of a pending FCA case.

CMS has also stated that a flat percentage reward structure would be more efficient to administer than a reward range system. If CMS were to adopt a reward range, it also would have to implement an administrative process to determine the appropriate reward in each case.

CMS is accepting public comments on its proposed rulemaking until June 28, 2013.