Fraud and abuse continue to dog Medicare’s popular prescription drug program, despite a bevy of initiatives launched to prevent them, according to two new reports by the inspector general of Health and Human Services.

Their release follows the arrests of 44 pharmacy owners, doctors and others, who last week were accused of bilking the program, known as Part D.

The two reports issued Tuesday provide more insight into the extent of the fraud, as well as steps federal regulators should take to stop it. The first report, which covers data from last year, found:

• More than 1,400 pharmacies had questionable billing practices last year in the drug program. Some billed for extremely high numbers of prescriptions per patient and others billed for a high proportion of narcotic controlled substances. Collectively, they billed Part D $2.3 billion in 2014.
• Prescriptions for commonly abused opioids continue to rise, despite warnings about inappropriate use. Between 2006 and 2014, Medicare’s spending on them grew to $3.9 billion from $1.5 billion, a 156 percent increase. By comparison, spending for all drugs in the program, including expensive specialty medications, grew by 136 percent during the same period. More than 40 percent of Medicare beneficiaries in Alabama, Tennessee, Oklahoma and Alaska filled at least one prescription for a narcotic in 2014, compared to 32 percent for the nation as a whole.
• New York and Los Angeles remain hot spots for questionable prescribing, with far higher use of expensive drugs associated with fraud than other parts of the country. The New York metropolitan area, for instance, accounted for half of all prescriptions for the expensive topical ointment Solaraze last year, a disproportional rate. The drug is used for lesions formed as a result of overexposure to the sun. New York and Los Angeles also stood out for prescribing of two omega-3 fatty acids, used to help reduce very high triglyceride levels. The two regions accounted for nearly half of all prescriptions for Vascepa and about a third of those for Lovaza.

The inspector general’s findings come two years after ProPublica reported on how weak oversight by the Centers for Medicare and Medicaid Services (CMS) allowed abusive prescribing and outright fraud to proliferate in Part D. Medicare promised a more aggressive approach to analyzing its own data.

People can use Prescriber Checkup, a tool created by ProPublica, to look up doctors and see how their prescribing patterns compare to peers in the same specialty and state.

Medicare Part D provides drug coverage for 39 million seniors and disabled people, at a cost of $121 billion in 2014. It is the fastest-growing component of the Medicare program. Part D is administered by health insurers under contract with the federal government, but CMS is responsible for overseeing it.

For years, the inspector general, an internal watchdog that evaluates HHS programs and investigates wrongdoing, has dinged Medicare for its failure to keep a close enough eye on doctors, pharmacies, beneficiaries and even its fraud contractors. That’s beginning to change, officials say.

“CMS has made progress on a number of recommendations we’ve made, as well as on the initiatives that they’ve had,” said Jodi Nudelman, regional inspector general for evaluation and inspections in the New York office. “They’re starting to use data to drive their strategies.”

At the same time, she said, “There are still concerns. More needs to be done. We can’t stop here.”

A second report from the inspector general says that Medicare needs to adopt a number of reforms that it has so far resisted. They include:

• Requiring health plans to report all potential fraud and abuse to CMS and its fraud monitoring contractors. Right now, the agency encourages plans to voluntarily report suspicions of fraud but it doesn’t mandate it. Last year, the inspector general found that less than half of Part D insurers voluntarily reported data on potential fraud and abuse.
• Expanding reviews for questionable drug prescribing beyond controlled substances to other commonly abused drugs, including antipsychotic medications, respiratory drugs and those for HIV.
• Restricting patients suspected of doctor shopping—visiting multiple doctors in search of controlled substance prescriptions—to a limited number of doctors and pharmacies. CMS said it doesn’t have legal authority to do this, but the inspector general said it should seek the authority, which is commonly used by private insurance companies and state Medicaid programs for the poor.

During last week’s Medicare fraud takedown, 243 people total were arrested, including 46 doctors, nurses and other licensed health professionals. Forty-four of the people arrested were charged with fraud related to Part D.

In Miami, for example, a number of pharmacy owners were charged with health care fraud and conspiracy to commit fraud. In one case, the government charged several people with paying Medicare beneficiaries for their personal identification numbers, which they used to file fraudulent claims for drugs that were never dispensed. They worked with a clinic owner, who forged and altered prescriptions and sold them to the pharmacies. This scheme alone defrauded Medicare of $21.2 million, the government alleges.

Last year, CMS announced that it was granting itself potent new authority to expel physicians from Medicare if they are found to prescribe drugs in abusive ways. The agency also said it would compel health providers to enroll in Medicare to order medications for patients covered by Part D. Currently, that isn’t required.

The changes were supposed to take effect on June 1, but have since been delayed twice, most recently until January 1.

CMS spokesman Aaron Albright said Monday in a written statement that Medicare “works diligently with our law enforcement partners to prevent fraud in the first place and to recover payments for wasteful, abusive or fraudulent services.”

In addition to requiring 400,000 prescribers to enroll in Medicare by next year to order to retain the ability to prescribe in Part D, Albright said, officials are helping health plans decrease overuse of dangerous drugs and taking action against providers and pharmacies with potentially fraudulent billing practices.

In April, CMS launched a web-based tool to allow CMS, law enforcemen, and health plans to share information and coordinate actions against pharmacies deemed high risk. CMS also said it is monitoring potentially fraudulent activity in geographic hot spots like the ones identified by the inspector general.

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Terri Anderson signed up for California’s Medicaid program earlier this year, hoping she’d finally get treatment for her high blood pressure. But the insurer operating her Medicaid plan assigned the 57-year-old to a doctor across town from her Riverside, Calif., home and she couldn’t get there.

“It was just too far away,” says Anderson, adding that she cares for her 90-year-old ill father and can’t leave him alone to make an hour round-trip drive to the doctor. Now she’s crossing her fingers that a health clinic near her house will accept her new insurance.

She’s not alone. In an effort to control costs in its rapidly expanding Medi-Cal program, California has relied heavily on managed care insurance companies to treat patients like Anderson.

The state pays insurers a fixed amount per enrollee and expects the companies to provide access to doctors and comprehensive care. But a scathing state audit released last Tuesday shows that California is failing to make sure those plans deliver. Many enrollees have insurance cards but often have trouble getting in to see a doctor.

The state didn’t verify that insurers’ directories of doctors were accurate, the audit found, or that the plans had enough doctors to meet patients’ needs. The state Department of Health Care Services also didn’t do its own required annual audits of the plans.

And thousands of phone calls to an ombudsman’s office — created to investigate complaints — went unanswered every month.

The audit focused on three health plans, but underscores a broader problem in California: the lack of sufficient oversight of a program that now serves about 12 million beneficiaries, three quarters of whom are in managed care. Advocates and analysts say the state has moved too quickly to shift enrollees into managed care plans and given too much unsupervised responsibility to the companies.

While people enrolled in the old, fee-for-service Medicaid system sometimes had difficulty finding doctors, especially specialists, the difference is the managed care plans have a legal responsibility to provide sufficient access to their consumers.

The sheer number of enrollees, along with the complexity of their health care needs, means the state needs to do a better job tracking the plans responsible for caring for them, said Gerald Kominski, director of the UCLA Center for Health Policy Research.

“The audit indicates now that so many Californians are enrolled, how important it is for the state to have adequate oversight,” Kominski says. “The state has a long way to go to reach that goal.”

Aimee Mejia, a single mother in South Gate, just a few miles southeast of downtown Los Angeles, said finding specialists to treat her diabetes and psoriasis was challenging. Some didn’t accept her Medi-Cal insurance and others were too busy to see new patients. She finally found doctors, but driving to one takes about 40 minutes and the other, more than an hour.

“I thought that was normal, to be rejected by doctors or to wait for care,” Mejia says. “But there is something wrong here.”

New proposed federal regulations designed to improve Medicaid managed care could help by requiring states to ensure that patients have enough access to doctors and hospitals. The regulations also would limit profit margins and establish a quality rating system for plans. In addition, a proposed bill in California would require plans to provide accurate and up-to-date provider directories.

Officials at the state’s Department of Health Care Services say they already have made some changes and are monitoring doctor networks more thoroughly than the audit found.

But even if oversight improves, many argue that the only way to get more doctors and other providers to participate in Medi-Cal is to increase payments. A coalition of unions, doctors and hospitals are pushing to raise rates in California. If that doesn’t happen, more regulation will only go so far, says Sean Wherley, spokesman for SEIU-United Healthcare Workers West.

“If there still aren’t doctors taking new Medi-Cal patients, how is that any better for patients?” he said.

The issue of managed care oversight isn’t limited to California. Several states have transferred responsibility to managed care insurers but aren’t closely tracking whether Medicaid patients are getting the care they need, says Joan Alker, executive director of the Georgetown University Center for Children and Families.

“This is a national problem,” Alker says. “More beneficiaries with chronic and difficult health conditions and more public dollars are going into managed care. We absolutely need more accountability.”

Oversight has been hurt by state budget cutbacks and the loss of seasoned employees, Alker says. In addition, for-profit companies running managed care plans have a responsibility to return profits to their shareholders. “That comes up against the responsibility of dealing with a population of people who have a lot of health care needs,” Alker said.

California has been moving large numbers of poor patients into managed care for decades. Over the past few years, however, the pace has accelerated. Many newer beneficiaries, including seniors and people with disabilities, have multiple chronic illnesses. And people who gained Medi-Cal coverage through the Affordable Care Act also may have gone without treatment for a long time and have serious health needs.

Each transition has been rocky, with patients and advocates raising concerns about patients’ inability to find primary care doctors or specialists.

Linda Lindsey, 60, lives in Weaverville, a rural town outside Eureka in far northern California that has a limited number of doctors. Lindsey says she was moved into a Medi-Cal managed care plan a few years ago, and has even fewer options for doctors and pharmacies than she did before.

At one point, Lindsey, who has Crohn’s disease, said she drove about 50 miles to see a specialist only to be told that the office didn’t accept her plan. “I was upset, to say the least,” she said.

Some of the issues have arisen because Medi-Cal grew much faster and bigger than anybody predicted, says Stan Rosenstein, a consultant and former chief deputy director at the state health care services department. The numbers jumped from 6.6 million enrollees in 2007 to 12.2 million to this year.

But caring for people through managed care is a vast improvement over the old fee-for-service system, Rosenstein says. In that, doctors got paid per visit. In managed care, he says, “There is a lot more measurement, a lot more accountability and a lot more contractual requirements than there ever had been.”

There are numerous laws on the books requiring state monitoring and sufficient access to doctors. For example, California is required to determine that plans have enough doctors and that patients don’t have to travel too far to reach them. State officials also must do regular assessments of plans to determine whether they can meet their contractual obligations.

But just having laws isn’t enough to ensure that patients’ needs are met, says Abbi Coursolle, a staff attorney at the National Health Law Program. “Those standards are only as good as the state’s ability to enforce them,” she said.

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