GAO Audit Reveals $90 Million in Questionable Medicare Payments

In a recently released report to Congress, the Government Accountability Office (GAO) reports that the Centers for Medicare & Medicaid Services (CMS) made approximately $90 million in questionable payments to contractors, which potentially represent improper, unsubstantiated or wasteful payments.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) established the Medicare Part D prescription drug program.  Congress appropriated $1 billion to CMS for start-up administrative costs associated with implementing the MMA provisions.  According to the report, CMS expended over 90 percent of the $1 billion by the end of December 2006.  Of that amount, about $735 million was paid to over 250 contractors and vendors for services (e.g., information technology, 1-800-MEDICARE help line support, and outreach and education).  The GAO also reports that CMS paid federal and state agencies for services (e.g., printing, mailing and educating the public).

Because Congress gave CMS broad authority on how to use the appropriation, the Senate Finance Committee recently requested that the GAO determine: how CMS used the $1 billion appropriation; whether CMS's contracting practices and internal controls were adequate to avoid waste and prevent or detect improper payments; and whether payments to contractors were properly supported as valid use of government funds.

According to the report, the GAO found that CMS did not allocate sufficient resources to keep pace with the contract awards and adequately perform contract and contractor oversight.  For instance, the GAO found payments for costs that did not comply with contractual terms or applicable regulations (e.g., travel costs in excess of allowable limits). In some instances, the GAO was also unable to obtain adequate documentation (e.g., vendor invoices or time sheets) to support billed costs.  In the report, the GAO makes a number of recommendations to improve the contracting process.

In a Press Release, Senate Finance Committee Chairman Max Baucus, Finance Ranking Member Charles Grassley, and Health Subcommittee Chairman Jay Rockefeller also urged CMS to correct the major structural deficiencies.