IG: Medicare Paid Twice for Up to $420 Million Worth of Drugs

Medicare maintains existing measures sufficient to curb duplicate payment

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In the final year of the Obama administration, Medicare paid twice for between $160 million and $420 million worth of drugs for terminally ill patients because it failed to address a redundancy government watchdogs had identified years earlier, according to a new government report.

The office of inspector general for the Department of Health and Human Services audited drug purchases from 2016 and found that the Obama administration had not properly documented payments to providers. The overpayments cost taxpayers at least $160 million, but regulators noted Medicare may have double-paid for up to $420 million worth of drugs. 

"The drugs were essentially paid for twice: once through the per diem payments made to Part A hospice organizations and once through Part D," the audit found. "Additionally, hospices or hospice beneficiaries likely should have paid for the remaining $261.9 million in Part D total cost."

Medicare Part A refers to taxpayer-funded hospital insurance that pays hospices to buy most of the medications taken by terminally ill patients. Medicare Part D, meanwhile, refers to an optional federal program that pays for retail drugs that are not covered by other Medicare programs.

In theory, Part D should not pay for drugs used by patients in hospice care because Part A already pays hospices to cover those medication costs. But since 2012, the inspector general's office has warned that Part D was making redundant payments for hospice beneficiaries' drugs even though hospices already received money for the medications, the report said. 

Centers for Medicare and Medicaid Services (CMS), which is responsible for both programs, rebuffed those concerns in 2012, and again in 2018, denying the inspector general found "conclusive evidence" that double payment happened. The department questioned the reliability of the audit's methodology.

"It is possible Part D may have paid for drugs that were already covered under the per diem payments made to hospice organizations, but we would need conclusive evidence that such an issue exists before making payment readjustments [of Part D]," the CMS said in response to a 2012 inspector general audit.

In response to these misgivings, the inspector general launched another audit. Investigators asked hospices whether the providers should have paid for any of the 200 Part D drug purchases that were covered by the federal government. Hospices acknowledged that they should have paid for 86 of the sampled drug purchases; the watchdog used this result to extrapolate that Medicare paid twice for $160 million worth of drug purchases through Part D. 

The report argued a considerable portion of the rest of the sampled drug purchases—108 of the 200 sampled—probably should have been liable to the hospices despite their denials. The inspector general estimates that those cases of redundant payments represent a $420 million cost to taxpayers. While hospices rejected financial responsibility for the drug purchases, the report said CMS repeatedly told hospices they were responsible for treating most of their patients' medical conditions, including conditions other than the primary diagnoses that landed patients in beneficiary care.

"Part D payment for drugs would be rare once an individual elects hospice care," the report said, citing statements by CMS. 

Drawing on these results, the inspector general said "CMS must do more to avoid paying twice for the same drugs." It recommended the agency "develop proper controls" to prevent future double payments.

CMS disputed those recommendations, saying it had proper controls in place to protect taxpayers.

"While CMS agrees with the importance to avoid duplicate payments to Medicare Part D drug plan sponsors and hospices, we maintain that CMS's current efforts will address the issue and help ensure there is no disruption in beneficiary access," CMS administrator Seema Verma responded. She added that current outreach efforts to patients and hospices are sufficient to reduce double payments.

The inspector general's office responded that such efforts have been in place since at least 2012, but failed to curb double payments in the hundreds of millions of dollars. 

"Duplicate payments persist. We continue to recommend that CMS develop controls to stop the duplicate hospice drug payments," the inspector general's report said.