Feature Deficit Reduction Act: Recent Developments and Implications for Providers By Frank Sheeder, Esq. and Keri Tonn, Esq. as Medicare and Medicaid. The idea Executive Summary behind the DRA is to decrease the defjcit, The Defjcit Reduction Act (DRA) seeks to combat fraud, waste and abuse in but with it has come a surge in efforts Medicare and Medicaid programs. The idea of the DRA is to curb inappropriate and funding to help curb Medicaid program expenditures through new initiatives and funding. Entities receiving $5 waste, fraud and abuse. Since the DRA’s million annually from Medicaid must establish certain policies for all employees, enactment, healthcare compliance contractors and agents in order to receive Medicaid reimbursement. Providers, programs have gained increased attention if they haven’t, should consider actions needed to comply with the employee and are no longer voluntary. The DRA education section and other applicable DRA sections. set forth conditions with which many entities must comply as a prerequisite Ongoing integrity program funding has been established along with hiring of new to receiving Medicaid reimbursement. fraud fjghters. The Payment Error Rate Measurement program has been expanded These conditions are set forth in Section and state error rates are being established. In some instances, providers must pay 6032 of the DRA, entitled “Employee back reimbursement for each error found, with no appeals available. Education about False Claims Recovery.” States will likely focus on charges, record keeping, quality failure and worthless The DRA also provided funding for the services. Data mining is under development. Providers will need to ensure their creation of a Medicaid Integrity Program compliance programs align with the DRA requirements and remain consistently and provided incentives for states to have effective. false claims acts that parallel the federal False Claims Act. As a result, there is now Background would decrease the opportunity for unprecedented attention and directed resources toward combating Medicaid Historically, the federal government has fraud and abuse, but this has not proven true. Third, the underinsured and the fraud, waste and abuse. not been heavily engaged in efforts to uninsured increasingly place signifjcant combat Medicaid fraud, waste and abuse. Employee Education: Policies and This is due to a variety of factors, such as demands on the Medicaid system. Training a lack of federal funding and data mining In light of the changing economic climate, capabilities. States were solely responsible Effective January 1, 2007, DRA Section Congress grew concerned about what for Medicaid enforcement activities. states were doing to curb Medicaid fraud, 6032, entitled “Employee Education Across the nation, states’ attention varied, waste and abuse and it stepped in to About False Claims Recovery” mandates but typically, Medicaid enforcement that each state Medicaid plan require encourage states to take action. The rules activities received low priority. entities that receive or make annual and policies that states implement over Within the past fjve years, however, Medicaid payments of at least $5,000,000 the next few years will impose substantial the economic climate has changed and legal risks to healthcare providers. to establish certain written policies Medicaid enforcement activities are now a top issue for lawmakers, the Medicaid is the largest health insurance program in the government and healthcare providers. There are many reasons for this shift. United States and it represents approximately one-third of First, Medicaid spending is growing many states’ budgets. faster than Medicare spending. In the fjrst half of 2007, there was a 10.7% jump in Medicaid costs. Medicaid is the largest Deficit Reduction Act of 2005 health insurance program in the United for all of their employees, contractors The Defjcit Reduction Act of 2005 1 (DRA) States and it represents approximately and agents. Entities must make these was signed by the President on February one-third of many states’ budgets. Second, changes as a prerequisite to receiving many people thought that the transition 8, 2006 and it seeks to control federal Medicaid reimbursement. States must to a Medicaid managed care environment spending on entitlement programs such require such entities to establish written 1 Defjcit Reduction Act of 2005, 42 U.S.C. §§ 1396 et seq. (2007). 20 New Perspectives Association of Healthcare Internal Auditors May 2008
policies that the entity provides to all As entities continue to make open questions in the DRA. This begs employees (including management) and organizational changes in response to the the question of what actions healthcare any contractor or agent of the entity. The employee education requirement of the providers should make to comply with policies must contain detailed information DRA, they will want to ask themselves the employee education section in the about state and federal laws (including the following questions: DRA. Providers should, at a minimum, whistleblower protection) and the role of make good-faith efforts, collaborate • Are we an “entity”? these laws in preventing waste, fraud and with contractors, consider including • What level of detail do we need to abuse in federal healthcare programs. The education in training courses and seek include in our policies? DRA left many organizations wondering guidance from the applicable Medicaid whether this Section applied to them • How do we disseminate the agency. and how far Congress intended it to information? Medicaid Integrity Program stretch. The DRA provides an expansive • How do we get our contractors to defjnition of an entity. A “contractor” The DRA also created the Medicaid adopt our policies? or “agent” includes any contractor, Integrity Program (MIP) with $50 million • How do contractors adopt policies of subcontractor, agent, or other person in funds for 2007 and up to $75 million in multiple providers? which or who, on behalf of the entity 2009 and each year thereafter. According • Are there any state plan amendments furnishes or otherwise authorizes the to a CMS press release, the MIP is based furnishing of Medicaid healthcare items about which we need to be aware? on four key principles: or services, performs coding or billing • National leadership in Medicaid functions, or is involved in monitoring program integrity of healthcare provided by the entity. Under the MIP, • Accountability for the program’s own It is the responsibility of each entity to regulators will establish and disseminate written policies. activities and those of its contractors If a healthcare provider to which this and the states suspend payments provision is applicable has not already • Collaboration with internal and to suspect identifjed or created these necessary external partners and stakeholders providers while policies, it should do so immediately. • Flexibility to address the ever- The entity must also have a specifjc section simultaneously changing nature of Medicaid fraud in its employee handbook that describes seeking recovery The MIP has multiple roles. First, applicable state and federal fraud, waste according to CMS, it will shine a of identifjed and abuse laws. The handbook should powerful spotlight on any entity seeking contain an explanation of employees’ overpayments. inappropriate payment from the Medicaid rights to be protected as whistleblowers program. Under the MIP, regulators will and a specifjc discussion of the entity’s suspend payments to suspect providers policies and procedures for detecting while simultaneously seeking recovery and preventing fraud, waste and abuse. There are no clear-cut answers to any of of identifjed overpayments. Second, the these questions. In fact, the Centers for Although the DRA refers to “any employee MIP will include referrals of suspected handbook,” there is no requirement that an Medicare and Medicaid Services (CMS) fraudulent practices and providers to entity create an employee handbook. has acknowledged that there are many federal and state enforcement agencies. Third, according to the MIP strategic plan, the MIP will serve as a “bully pulpit” to encourage states to enhance their program integrity efforts. Congress provided funding for at least 100 new federal full time staff designated to fjght Medicaid fraud, waste and abuse. With some of the funds appropriated to CMS through the DRA, CMS entered into contracts with Medicaid Integrity Contractors (MICs). The MICs will play a large role in Medicaid enforcement efforts; in turn, healthcare providers will need to take necessary steps to enhance their compliance programs continually. MICs will review the actions of those seeking payment from state Medicaid plans and audit claims. MICs began performing audits in September 2007. MICs will also provide education to providers and others with respect to payment and quality of 2 CTRS. FOR MEDICARE & MEDICAID SERVS., Press Release: CMS Launches Comprehensive Effort to Combat Medicaid Fraud and Abuse, www.cms.hss.gov/apps/ media/press/release.asp?Counter=1900 (last visited Jan. 10, 2008) May 2008 Association of Healthcare Internal Auditors New Perspectives 21
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