Members of the U.S. Senate and House of Representatives have introduced new legislation intended to further strengthen the effort to combat waste, fraud, and abuse in the government healthcare programs. The Preventing and Reducing Improper Medicare and Medicaid Expenditures Act (“PRIME”) contains a number of provisions that would increase rewards and incentives for those who uncover healthcare fraud, as well as heighten penalties for those who commit it. PRIME would establish stronger fraud and waste prevention strategies within Medicare and Medicaid to help phase out the practice of “pay and chase,” i.e., recouping monies already erroneously paid to providers instead of detecting problems on the front end. PRIME also would expand the fraud identification and reporting work of the Senior Medicare Patrol, and would take steps to help states identify and prevent Medicaid overpayments.

Although the effects of PRIME are potentially significant and far-reaching, there is little certainty as to whether PRIME will be enacted. In 2011, legislation with the same name and with largely the same provisions was introduced in the U.S. House of Representatives but died in committee. See H.R. 3474 (112th).

Potential Effect on the Enforcement and Recovery Process

Costs for providers associated with responding to government inquiries or enforcement efforts likely would rise if PRIME is enacted. The bill provides for enhanced rewards for individuals who report potentially fraudulent activity under the Senior Medicare Patrol program, which specifically includes rewards for beneficiaries who report information that leads to institution of an administrative action. PRIME also would extend this program to apply to Medicaid beneficiaries and funds. Because individuals would be eligible to receive greater rewards for providing a wider range of information, the number of reporting instances under the incentive program would be expected to rise, thereby increasing the number of inquiries to which providers would be forced to respond. It should also be noted that PRIME’s proposed enhancement of the incentive program is separate and distinct from a rule recently proposed by the Centers for Medicare & Medicaid (“CMS”) that would dramatically increase the payment to a Medicare fraud whistleblower under the Medicare Incentive Reward Program from a maximum of $1,000 to $9.9 million (the “Proposed Whistleblower Rule”).

Potential Effects on Compliance and Operational Matters

  1. NPI Use by Prescription Drug Plans

    PDPs”) sponsors from paying claims submitted to a PDP when those claims do not include a valid prescriber National Provider Identifier (“NPI”) number. Department of Health and Human Services (“HHS”) would be required to establish procedures that PDP sponsors could use to determine whether an NPI number is valid, as well as procedures for disclosing to both the HHS’ Office of Inspector General (the “OIG”) and other appropriate law enforcement agencies and oversight agencies information on which NPI numbers and pharmacy claims are determined to be invalid. In the event PRIME were to be enacted, each provider or supplier submitting claims to a PDP would need to adopt operational procedures to ensure that it provides a valid NPI number with its claims for payment in order to be paid promptly for valid claims and to minimize the likelihood of investigations by the OIG or other agencies.

  2. Medicare Administrative Contactor Error Reduction Incentives

    Perhaps the most significant practical effect of PRIME would be a move away from the government’s reliance on a recoupment model to one based more on fraud prevention at the initial payment stage. Rather than paying claims up front and then determining after payment is made whether a healthcare provider has received government funds to which it is not entitled, PRIME would seek to prevent improper payments from occurring in the first place.

    PRIME would create incentives for Medicare Administrative Contractors (“MACs”) to reduce overpayments by reducing payment error rates. While PRIME would not establish specific bonus payments, PRIME would allow for incentives that may include a sliding scale of bonus payments and additional incentives to reduce improper payment error rates to certain benchmark levels established by HHS. In addition, this incentives program must include “substantial” reductions in award fee payments under award fee contracts where a MAC is found to be on the upper end of an error threshold or other threshold to be established by HHS. With discretion left to HHS to establish specific bonuses and reductions as well as benchmark performance thresholds, it would be difficult to predict how MACs might respond specifically to these incentives.

  3. Reforming How CMS Corrects Vulnerabilities Identified by Medicare Recovery Audit Contractors

    PRIME also would require HHS to track and obtain information from Medicare Recovery Audit Contractors (each a “RAC”) regarding program vulnerabilities. HHS would be required to include in its annual report to Congress information on the types and financial costs to the Medicare program of improper payment vulnerabilities identified by the RACs. HHS also would be required to report on how CMS is addressing such vulnerabilities. In addition, HHS would be permitted to retain an additional portion, up to 25 percent of the federal government’s portion, of amounts recovered under the Medicare and Medicaid programs for improper payments to address problems that contribute to improper payments and fraud. Finally, 5 percent of the recovered funds would be retained for use by the OIG to carry out investigations related to improper payments and auditing internal controls.

    As a result of this increased focus on the results of RAC audits, HHS likely would adopt new regulations and policies to eliminate perceived vulnerabilities in the payment system. As with the incentives for MACs to reduce their payment error rates, such new regulations and policies likely would result in additional changes that would increase the detail and cost of claims submissions for providers and suppliers.

  4. Improvement of the Senior Medicare Patrol Program and Fraud Reporting Rewards

    As mentioned above, providers also should prepare for heightened scrutiny from patients who are Medicare and Medicaid beneficiaries. Within six months of the enactment of PRIME, HHS would be required to develop a plan to encourage greater participation by individual beneficiaries in reporting fraud and abuse against the Medicare and Medicaid programs. PRIME would require HHS identify ways to improve the incentive program for individual beneficiaries who report fraud and abuse. Pursuant to PRIME, HHS’ plan should include ways to enhance rewards for individuals reporting fraud, such as rewards for information that leads to an administrative action against a provider. In addition, PRIME would require HHS to extend the existing incentive program to Medicaid beneficiaries. Finally, HHS’ plan would be required to include recommendations for the use of Senior Medicare Patrols to conduct public awareness and education campaigns to further encourage participation by Medicare and Medicaid beneficiaries.

    This section of PRIME should be viewed in conjunction with the Proposed Whistleblower Rule and certain provisions of the Patient Protection and Affordable Care Act of 2010 (“PPACA”) that are intended to reduce improper payments. In particular, CMS announced on June 6, 2013 that, pursuant to PPACAs requirements, it has redesigned Medicare Summary Notices that are delivered to Medicare beneficiaries. These redesigned notices are intended to help beneficiaries better understand benefits and to identify claims for services that they did not receive.

    Providers and suppliers may wish to prepare for increased scrutiny by their patients by educating their patients on how claims will be submitted and how such claims will reflect the services rendered to the patient. Such an education effort likely will increase provider costs to collect payment for services, but may reduce government investigations based on reports of fraud from individual beneficiaries.


It is by no means a certainty that PRIME will be enacted into law. Providers, however, should keep a close eye on this proposed legislation and consider the impacts that PRIME would have on reimbursement and the government’s efforts at combatting waste fraud and abuse.