On July 22 the president signed into law the Improper Payments Elimination and Recovery Act (yet another acronym to remember--IPERA), which will help achieve the new goal of reducing wasteful, improper payments by $50 billion between now and 2012 through increased recapture auditing and other payment monitoring.
Sound familiar? Citing the success of the Medicare RAC demonstration project, the new law states that federal agencies will be required to produce audited corrective-action plans with targets to reduce overpayment errors once they are identified. Federal agencies that spend more than $1 million will have to perform recovery audits on all their programs. Under the law, agencies will have to conduct annual risk assessments, and if a specific program is found to be susceptible to improper payments, the extent of the problem must be measured.
The new law also authorizes agency heads to expend recovered funds for uses other than those currently allowed, including spending them on items of initial intent or using them to improve financial management. Federal agencies that do not comply with IPERA will face penalties.
New Detection Tools
One of the tools to assist enforcement of the new law is new software that is being used to scan through programs and locate potential improper payments (again, sound familiar?) Peter Orszag, budget director for the Office of Management and Budget, introduced the new software during a June 18 news conference.
During a July 15 Senate Subcommittee hearing on "Preventing and Recovering Medicare Payment Errors," the bill's chief sponsor, Sen. Tom Carper (D-Del.) stated that "for years the private sector has been using these tools with great success to identify and recover improper payments ... the federal government has begun using these techniques on a limited basis in Medicare, and it has shown a great potential for saving taxpayer money." The day before, on July 14, the House passed the version of IPERA that the Senate had passed in June, with the president signing it a week later - a relatively quick turnaround for a bill in Washington, indicating that this obviously is a hot political issue.
Errors of $110 Billion
The legislation is in line with the Obama administration's aggressive push to cut down on fraudulent activities and improper payments in government programs. The White House says payments made in the wrong amount, to the wrong person, or for the wrong reason in 2009 totaled nearly $110 billion, the highest one-year amount recorded to date. The president also noted that this figure was more than the budgets of the Department of Education and the Small Business Administration combined, calling it "unacceptable."
In November 2009, Obama signed a presidential memorandum to direct federal agencies to "expand and intensify" the use of audits such as those performed by recovery audit contractors and Medicaid integrity contractors. The White House again specifically cited Medicare's RAC pilot program as a success story.
"We have to challenge a status quo that accepts billions of dollars in waste as a cost of doing business and enables obsolete or underperforming programs to survive year after year simply because that's the way things have always been done," Obama said during brief remarks in the State Dining Room. "When we continue to spend as if deficits don't matter, that means our kids and our grandkids may wind up saddled with debts that they'll never be able to repay."
The president long has advocated for more assistance for states facing budget shortfalls and to boost lending for small businesses while also showing a commitment to getting the nation's fiscal matters in order by establishing a bipartisan debt commission to look at ways to reduce the deficit. Those efforts were combined with a call for a three-year freeze on non-defense discretionary spending. President Obama said that the freeze would reduce such spending to its lowest percentage in 50 years, or as he stated, to the "lowest level since JFK."
Examples of the types of payments IPERA intends to stop include the $180 million in benefits paid out during the last three years to an estimated 20,000 deceased Americans, plus the more than $230 million in benefits paid out to roughly 14,000 fugitive felons or incarcerated people who were not eligible for them. Those payments range from outright fraud to checks issued to the wrong person or for the wrong amount due to a typo.
The endeavor to combat such spending was a true bipartisan effort, with the bill having been co-sponsored by two Democrat, three Republican and one Independent Senator.
About the Author
Carla Engle, MBA, is a product manger for MediRegs, a Wolters Kluwer company. Her background includes more than 20 years in hospital and physician practice operations, particularly in reimbursement and billing functions. Prior to joining Wolters Kluwer recently, she was the vice president of compliance for a national revenue cycle solutions company and prior to that was in the Reimbursement Training Department with HCA. For several years she headed up the Part A Fraud Investigation Unit for a CMS Program Safeguard Contractor (PSC) where she was successful in the prosecution of several national cases. In her revenue cycle compliance capacity, she worked with a number of clients in California and Florida with Recovery Audit Contractors (RACs) in setting up processes and appeals.
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