Private sector auditors to root out fraud in Medicare and Medicaid: CAGW lauds decision

The nation’s premier taxpayer watchdog group, Citizens Against Government Waste (CAGW), today applauded President Obama for announcing that he will use private sector auditors to root out fraud in the country’s two massive government-run healthcare plans, Medicare and Medicaid. The practice of using private sector auditors to identify and recover improper overpayments to healthcare contractors and providers, technically called recovery audit contractors (RACs), has been a staple in the private sector for many years.

“Recovery auditing has been a critical tool in the government’s anti-waste arsenal for several years”

The Office of Management and Budget (OMB) reported on November 18, 2009 that federal improper payments across the board totaled $98 billion in fiscal year (FY) 2009, an increase of 38 percent over the $72 billion in FY 2008. Medicare and Medicaid accounted for $54 billion in improper payments. Even though a limited three-state Medicare RAC demonstration project implemented by the Centers for Medicare and Medicaid Services (CMS) between 2005 and 2008 initially encountered stiff resistance from hospital associations, some providers, and some members of Congress, the program was nonetheless rolled out nationwide by January, 2010.

Federal agencies such as the Defense Department have used RACs to recover as many overpayments as possible, with the individual company (in accordance with standard industry practice) retaining a percentage of funds recovered as payment. CAGW has vigorously supported the use of RACs.

“Recovery auditing has been a critical tool in the government’s anti-waste arsenal for several years,” said CAGW President Tom Schatz. “We are pleased to see the President publicly recognize its importance and advocate its use to claw back tens of billions of taxpayers dollars lost to waste and abuse. The recovered money for Medicare should replenish the program’s trust fund, which is already fiscally compromised and scheduled to go bankrupt in 2017.”

“Ironically, the President’s recognition of the need to root out the massive waste plaguing the government-run healthcare programs comes during his final campaign to enact an even bigger, more intrusive government-controlled healthcare regime. It seems incongruous, at best, to be talking about squeezing hundreds of billions of waste out of current government-run health programs, while pushing for the implementation of an even more monstrous government-run system,” added Schatz.

According to a June, 2008 follow up report by CMS on the RAC demonstration project, as of March 27, 2008, RACs had identified and corrected $992.7 million in improper overpayments. Of that amount, the RACs had “returned $693.6 million to the Medicare Trust Funds.”