Pentagon officials kept millions in improperly-issued military health benefits out of an annual report by excluding payments that may have been lost to fraud.
The Department of Defense inspector general discovered officials had neglected to review $13.1 billion in healthcare spending for the risk of improper payments in their 2013 financial report, causing them to publish an improper payment rate that was three times smaller than the actual rate at which the agency handed out benefits that should not have been paid.
Instead, Defense Health Agency officials tested a select number of health contracts for their risk of improper payments and applied that rate to the entire benefits program, excluding more than 72 million claims from review.
DHA officials ignored “the inherently high risk of fraud in medical claims payments” when analyzing the expenses, relying on a contractor that made “no significant effort … to evaluate the potential for fraudulent activity,” the watchdog said.
Between three and 10 percent of all healthcare claims are fraudulent, according to the Federal Bureau of Investigation.
Joseph Marshall Jr., director of the Pentagon’s business support directorate, disagreed with the IG, saying “reporting of such information could and would expose investigative and litigation pending actions to public disclosure. DHA emphatically disagrees fraudulent activities should be considered as a risk factor/category when developing a methodology to assess risks for improper payments.”
In total, DHA lost roughly $213 million to improper payments in 2013, according to the IG’s calculations.
But DHA reported wrongly spending just under $68 million that year, excluding $145 million from its estimate, the report said.
Officials failed to list the full amounts of overpayment or funds recovered from all sources, the IG said.
For example, DHA officials didn’t report nearly $3 million in overpayments that their contractor uncovered during its evaluation.
Defense officials cited Office of Management and Budget requirements on the reporting of improper payments, which don’t compel agencies to “evaluate sampled payments to identify fraud or indicators of fraud.”
Although those rules require agencies to identify and report overpayments from all sources, DHA officials pointed to what they claimed was unclear guidance on the extent to which they should report on their recovery of fraud.
Reporting methods that “allow at-risk payments to be excluded from consideration increase the risk that improper payments may not be identified,” the IG said.
Marshall said the IG’s characterization of the reporting methods as “inadequate” was “misleading.” He argued the prior method “did not obscure any underlying weaknesses.”
Go here to read the full Department of Defense IG report.
