Monitor Improper Payments for Part C and Part D with Medicare Audit and Monitoring Software

The monthly premium for Medicare Part B rose 14.5%, from $148.50 in 2021 to $170.00 in 2022, which is partly offset by a cost-of-living increase of 5.9% in Social Security benefits. By law, the Medicare Part B monthly premium must equal 25% of the estimated total Part B costs for enrollees age 65 and over. The Centers for Medicare & Medicaid Services (CMS) has to establish an annual Part B premium that will adequately fund projected Medicare spending and maintain an adequate reserve in case actual costs are higher than estimated. The premium increase in 2022 was widely known to be attributable to the potential use of the Alzheimer drug, Aduhelm™ (aducanumab) by Medicare beneficiaries. A Medicare audit and monitoring software package can help health plans identify these areas and design corrective action plan(s).

Medicare Advantage Organizations (MAO) submit annual bids to CMS to cover their projected costs of providing Medicare allowable Part A and B services for an average beneficiary and their profit margins. The bid is prepared from credible baseline pricing data. CMS computes a benchmark rate based on projected average spending for beneficiaries in traditional Medicare in the same region. Since 2017, benchmarks have been rising and in 2019, Medicare spent $321 more per person for MA enrollees than it would have spent for the same beneficiaries under traditional Medicare fee-for-service (FFS). In fact, spending per enrollee in MA plans is projected to grow 5.3% annually on average between 2021 and 2029 compared to 4.4% average annual growth projected for beneficiaries in traditional Medicare FFS. Multiple reasons accounted for the rising expenditures for MA beneficiaries which will be subject for a different blog.

Since pricing data provide the foundation for bids, it is in the financial interests of MAOs to manage payments for procedures including Part B drugs. Making proper payments for Part C and D services is also a statutory requirement. Improper payments can be overpayments and underpayments. Overpayments put an MAO at risk in a bid and a one-third financial audit while underpayments consume valuable staff time in resolving provider disputes and can also be a jeopardy in a one-third financial audit. The need to identify improper payments necessitates monitoring. Manual monitoring is time-consuming and limited in scale. A software application can cover large data sets, save human resources and even preemptively identify improper payments. Programming and system configuration is a one-time investment followed by some nominal maintenance costs. Examples of improper payments include:

  1. Unusual quantities or administration frequency of Part B drugs;
  2. Drugs for non-FDA approved indications (e.g., antibiotics and antifungals in footbaths as preventive measures rather than treating an active disease are not medically accepted indications as reported by CMS in a February 2021 announcement);
    • CMD announces 2022 Medicare Part B premiums
    • As reflected in Medical Loss Ratio (MLR) and administrative costs. The Affordable Care Act has a minimum MLR requirement.
    • Unlike payments for Part D, Part C does not have an annual revenue reconciliation. Part C capitation payments vary only with risk scores of the enrollees in an MAO. [1] Payment Integrity Information Act of 2019 (PIIA) requires government agencies to identify, report, and reduce improper payments in the government’s programs and activities
  3. Incorrect Medicare fee schedules for service dates (Medicare revises fee schedules regularly);
  4. Insufficient documentation for procedures (lack of or insufficient documentation has been cited as a root cause for Medicare improper payments of $23 billion);
  5. Inappropriate billing codes/modifiers resulting in improper payments; and
  6. Suspect billing trends. For instance, CMS reported a scheme where the drug manufacturer has established a network of pharmacies and is engaged in marketing activities directed at physicians. The marketing activities involve telling the physicians that certain drugs can only be dispensed by a specific network of pharmacies. As a result, prescriptions for those drugs are being routed to those pharmacies. In addition, the allegation indicates the manufacturer is also involved in directing a separate network of pharmacies to handle the prior authorization process for these drugs, if necessary, without the knowledge or involvement of the prescriber.

In November 2021, CMS announced a Part C improper payment rate of 10.28% ($23.19 billion in gross dollars) and 1.58% ($1.37 billion in gross dollars) for Part D in CY 2019, most recent data available for both Parts C and D.[9]

Time is right for you to find out if you have incurred any amounts of improper payments for Part C and/or Part D.

Achieve CMS Program Audit Readiness with Inovaare’s Medicare Audit and Monitoring solutions.

Since 2008 Inovaare has provided healthcare organizations with cost-effective quality services to help them comply with Medicare regulations and improve their operations, thereby saving costs. We can work with your organization to create a comprehensive plan that ensures you are following all the right steps and complying with all regulatory guidelines for all functional areas – formulary administration, Part C and D coverage determinations and data mining, Call Center, Appeals and Grievances. Contact us today to explore how we may be able to support your needs, improve your bottom line and your healthcare organization’s compliance processes.

For more details, please contact us at or 408-850-2235