Medicare fraud is rampant. The Government Accountability Office (GAO) estimates fraud compromises 8 percent of total expenditures, or $44 billion annually. Outside estimates are as high as $120 billion. A recent report from the Department of Health and Human Services Inspector General highlights just one of the many examples of waste, fraud, and abuse within the system: Medicare paying for drug coverage of deceased beneficiaries.
Medicare Part D provides prescription drug coverage to 39 million seniors costing taxpayers $59 billion annually, net of premiums paid by seniors. In 2013 Medicare paid for 1.2 billion prescriptions.
The Inspector General’s report details the fraud: “In 2012, Medicare paid for 348 HIV [human immunodeficiency virus] drugs for 158 deceased beneficiaries. The total cost for these drugs was $292,381.” The report studied HIV drugs as they are targets for abuse since they are so expensive.
These drug claims were not isolated instances. The IG found “each of the 158 beneficiaries had between 1 and 6 drugs dispensed after the date of death; most beneficiaries had at least 2.” Medicare spent $7,160 for three prescriptions for one patient’s drugs in Florida. They were approved on two separate occasions after his death. Medicare approved three prescriptions for a patient in Michigan costing $5,616.
Approvals occur because of a delay in receiving information about a beneficiaries death. This results in a period where the recipient is dead, but Medicare’s system still consider the patient to be alive.
This is not the first time that the Inspector General has criticized Medicare’s handling of deceased beneficiaries. In 2011 the Inspector General found that Medicare Part C and D paid $21 million for claims by deceased beneficiaries.
The Inspector General acknowledged that the total amount of fraud was miniscule compared to total Medicare spending. HIV drugs represent just one-quarter of one percent of Part D prescriptions. But the approval process is the same for all Part D drugs meaning other drugs are also vulnerable to improper payments for deceased individuals. The report says “A change in CMS’s practice would affect all Part D drugs, not just HIV drugs. Considering the enormous number of Part D drugs, a change in practice could result in significant cost savings for the program and for taxpayers.” An estimate of cost savings is not included, but it would likely be in the millions.
Medicare does plan to fix the system for dead beneficiaries, but with billions wasted on Medicare every year, stopping the tide of improper payments seems unlikely without major structural reform of the program.
Nicole Kaeding is a budget analyst for the Cato Institute and focuses on federal and state spending policy.