EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C.

THE DIRECTOR

20503

February 26, 2015

The Honorable Sylvia Mathews Burwell
Secretary of Health and Human Services
Washington, D.C. 20201
Dear Madam Secretary:
As you know, the Administration has made reducing improper payments-payments
made to the wrong entity, in the wrong amount, or for the wrong reason-a key priority. Our
partnership with the Department of Health and Human Services (HHS) over the years has been
vital to these efforts. While some progress has been made on this front, we believe a more
aggressive strategy can be implemented to reduce the levels of improper payments we are
cmrently seeing.
HHS recently reported that, in Fiscal Year (FY) 2014, improper payments in the
Medicare Fee-for Service program increased by 2.62 percentage points, representing an improper
payment estimate that is $9.7 billion higher than last year. In addition, the Medicaid program
reported an improper payment amount that was $3.1 billion higher than last year. While
progress was made in FY 2014 with the Medicare Pati C program, the $12.2 billion improper
payment amount remains a concern.
We must continue to explore new and innovative ways to address the problem and
continue to attack this challenge with every tool at our disposal, including our recently revised
Appendix C to OMB Circular No. A-123, Requirements for Effective EsNmation and
Remediation ofImproper Payments. In addition, the FY 2015 enacted discretionary cap
adjustment for Health Care Fraud and Abuse Control (HCFAC) activities provides a significant
increase in funding to address program integrity vulnerabilities in Medicare and Medicaid.
OMB A-123, Appendix C provides guidance to agencies and Inspectors General on·key
improper payment activities, including risk assessments, estimating and reporting, recoveries,
and compliance reviews. This new guidance presents an oppmiunity to re-examine improper
payment reduction strategies on a number of fronts government-wide. By April 30, 2015, your
Senior Accountable Official should:
•

Review the new categories for reporting improper payments in Appendix C, fill out the
matrix found on page 25 of Appendix C based on the FY 2014 estimate for Medicare
Fee-for-Service, Medicaid, Medicare Pati C, and Medicare Part D, and submit the
completed matrix to OMB. While we are not requiring most agencies to complete this
matrix until FY 2015 reporting, we believe it will be crucial for OMB to have this level
of granularity for these select programs earlier to better inform a more effective strategy
for reducing the Depaiiment's level of improper payments.

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 •

Provide a comprehensive corrective action plan, which describes root causes and
establishes critical path milestones to meet improper payment reduction targets. We look
forward to working with the Department to align FY 2015 and 2016 HCFAC spend plans
with a corrective action plan. In addition, the Department should answer the following
questions for each of the four programs listed above:
o Which current corrective actions are the most effective in reducing improper
payments in the program?
o What are the one or two actions that you are not already engaged in (but could
realistically engage in) that would lead to a significant decrease in improper
payments in the program?
o What, if any, are the barriers preventing your agency from taking these actions,
and what would it take to overcome those barriers?
o If you implemented these actions, by how much could you reduce the improper
payment rate in the program?
o How has your agency advanced data analytics and improved technology to
prevent and reduce improper payments?

•

Develop plans to provide reasonable assurance that internal controls over improper
payments are in place and are working. The primary purpose of these plans is to provide
a thoughtful analysis linking agency efforts in establishing internal controls and reducing
improper payment rates.

In addition, HHS should consider engaging your Inspector General to develop a
Cooperative Audit Resolution and Oversight Initiative to obtain independent feedback and foster
continuous improvement in program integrity and to develop interim measures to gauge
progress.
Also, the integrity of the new Affordable Care Act (ACA) private health insurance
programs is a key priority for the Administration. The Department of the Treasury (Treasury)
and HHS each have responsibilities for ensuring payment accuracy in the ACA Marketplaces
and related programs created under the ACA. In FY 2015, both Departments will begin to
perform comprehensive risk assessments to determine areas that might affect payment
accuracy. HHS and Treasury staff are actively engaged in developing plans for these risk
assessments and we look forward to meeting with agency leadership in the near future. In the
interim, both Departments have established internal controls to provide for effective program
operations, reliable financial reporting, and compliance with laws and regulations.
As part of HHS' commitment to ACA Marketplace program integrity and in line with the
Administration's goal to more aggressively improve payment accuracy, the Department's Senior
Accountable Official should also submit a more detailed plan regarding its efforts to improve
ACA Marketplace program integrity, by May 31, 2015.

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 We expect that, working together, our effort will keep up the fight to prevent and reduce
improper payments. If you have questions concerning this request, please have your staff contact
David Mader, Controller OMB at 202-395-3895.

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