Independent Review of Medicare Integrity and Compliance

In brief

In November 2022, the Commonwealth Government commissioned health economist Dr Pradeep Philip to conduct a limited review of Medicare in response to media reports of extensive fraud, non-compliance and overservicing.^[1]

The resulting report entitled ‘Independent Review of Medicare Integrity and Compliance’ was published on 4 April 2023 (Report) and made a number of findings and recommendations in relation to the Medicare payments system. It made a finding that a reasonable lowest estimate of non-compliance in the Medicare payments system was $582 million per annum but suggested that a focus on this figure should be limited. Rather, the main focus should be on structural controls and how to ensure trust is fostered in the Medicare system. The Report suggests that the primary leakage in the Medicare payments system is non-compliance errors rather than pre-meditated fraud.

The Report also made high-level recommendations aimed at strengthening compliance monitoring and fraud detection in Medicare, which the Government has indicated it is considering. A comprehensive response from the Government is yet to be released.

Fraud or unintentional non-compliance?

Given the Report was commissioned in response to reports of very significant non-compliance, it discussed the methodologies used to estimate non-compliance and noted that estimates of waste in Medicare were hugely varied, from $366 million to $10 billion. It indicated that a key contributor to the variance is differences of opinion regarding what is considered fraudulent or non-compliant claiming. The higher estimates include behaviours which, while legally compliant, reflect suboptimal healthcare (such as overservicing). It also suggests that a significant source of non-compliance is unintentional on the part of practitioners and a result of the complexity of the system, with 6,000 items currently on the Medicare Benefits Schedule (MBS). Interestingly, underbilling was also recognised as a feature of the system, potentially due to the complexities of the MBS and the fear of the Professional Services Review (PSR) process.

The Terms of Reference for the Report sought a methodology to assess the potential value of fraudulent, non-compliant or overservicing risks in Medicare. Ultimately, the Report set out a figure for leakage in Medicare of $582 million, based on an extrapolation of risks currently identified by the Department of Health and Aged Care (Department). The Report acknowledged the limitation of this figure in that the Department’s current compliance activities rely heavily on tip-offs and that non-compliance will be missed through a lack of systemic monitoring. As a result, the Report acknowledges that the true value of non-compliance could be ‘multiple times higher’, and that an estimate in the range of $1.5 to $3 billion is feasible.

However, the quantum of waste in Medicare was only one part of the Terms of Reference and the recommendations of the Report focus on opportunities for improvements to be made to the governance structure and operations of Medicare to better monitor compliance and detect fraud. It noted that “[m]ost health practitioners and staff within the system are dedicated to the public good”,^[2] but that the current system lacks the tools to detect and address non-compliance and fraud.

Recommendations

The Report grouped its recommendations into four categories, which are set out below.

Governance and structure

The Report recommends the governance model overseeing Medicare be strengthened to address a ‘governance gap’ by the establishment of an oversight committee. The committee would consider reporting of key performance and risk indicators with a view to ensuring continuous improvement regarding fraud and non-compliance detection. It is envisaged that the oversight committee would be comprised of agency stakeholders as well as independent experts from industry. While agency stakeholders would provide information about performance and fraud detection from an operational point of view, the industry experts would be expected to provide information on best practices in non-compliance detection from a wider perspective. The oversight committee would report to the Secretaries of the relevant agencies.

Operational processes

The Report recommends enhancements to the claiming process to enable continuous monitoring of all claims. A continuous monitoring system would use analytics to detect anomalies. The Report considers that an overhaul of operational processes and business rules which consider non-compliance risks (and which would guide the analytics) is urgently required. The Report envisages that the technology to facilitate continuous monitoring would allow departmental officers to appropriately monitor all actors, claims and payments in the Medicare scheme in an efficient and effective manner.

There is also a large focus on education in the Report which recommends increasing education and awareness amongst practitioners as well as corporate entities and administrative staff involved in claims. The Report expresses a view that a significant driver of non-compliance is the complexity of the current system and suggests that increased education of system participants would be an effective compliance tool.

Modernising technology

The Report recommends a redesign of the Medicare payments system including to:

• increase data checks and compliance in practice management software; and
• implement pre-payment checking and validation of MBS claims.

It suggests that a strategic review of the data assets held and what additional data may be required to enable the detection of fraud or non-compliance should be conducted.

The Report highlights that, currently, claims are facilitated through several different channels which causes difficulties in harmonising data, and is noted to be a contributing factor to unintentional non-compliance. Poor quality and unharmonised data also limit the ability of data analytics to detect fraud to be conducted.

Strengthening legislation

The Report recommends an ongoing review of the enabling legislation to achieve the goals set out in the remainder of the Report as well as the inclusion of additional enforcement powers. The Report did not identify any fundamental issues with the current compliance model but suggested there was a lower level of capability maturity in its systems and processes when compared to other legislative regimes, such as the NDIS, where more modern legislative frameworks have been established.

What's next?

The Terms of Reference seek an assessment, at a high level, of integrity risks for the Medicare payment system. The recommendations are similarly high level and their implementation would require significant resourcing, including to produce actionable policy proposals and conduct stakeholder consultation. This reflects the reasonably short time frame given for completion of the Report. The Report acknowledges that to implement its proposals would be a 10-year journey.

In response to the Report, the Government stated that it is, “considering the recommendations … and will now work closely with health professionals, patients and peak bodies to develop a comprehensive response”.^[2] There is no indication whether the Government will implement the wide ranging structural overhaul recommended by the Report. A structural overhaul of Medicare was not part of the policy platform of the Albanese Government and it remains to be seen if this will be made a priority. There are already significant legislative reforms being undertaken by the Department including the re-drafting of the Aged Care Act which is comparatively advanced and may take priority over the recommendations in the Report.