Senators Scold Medicare for Losing Majority of $70 Million in Overpayments

Senate Finance Committee members scolded the federal Medicare agency last Thursday for not doing enough to prevent overpayments following the release of a new report from the Department of Health and Human Services (HHS) Office of the Inspector General.

Medicare made nearly $70 million in overpayments to suppliers of durable medical equipment, and most of that will not be recovered, according to the bipartisan members of the Senate Finance Committee.

HHS needs to do more to recover overpayments, the report shows, including the use of surety bonds, said Senators Max Baucus (D-Mont.), Orrin Hatch (R-Utah), Tom Carper (D-Del.), and Tom Coburn (R-Okla.).


Surety bonds are issued by companies as guarantees that health care providers will pay the Centers for Medicare & Medicaid Services (CMS) for money they owe, such as for overpayments. However, since 2009, CMS has only required surety bonds worth $50,000 of coverage per location in order to recover debts owed to Medicare and protect against fraudulent suppliers, and that coverage in many cases is not enough.

“At a time when we’re scouring every nook and cranny of the federal budget for savings, we can’t afford to let tens of millions of Medicare dollars go to waste without a serious effort to recover it,” Chairman Baucus said in a statement.  “The reason medical suppliers carry surety bonds is to prevent lost Medicare overpayments, but that’s clearly failing.  The administration needs to do all it can to plug the leaks, and that includes making surety bonds a more effective tool of recovering lost funds.”

Many overpayments to suppliers exceeded $50,000—the maximum amount CMS can collect on a surety bond, the senators pointed out. One supplier alone, highlighted in the report, was overpaid by $5 million, with surety bonds covering only a “fraction” of that amount. 


Additionally, only $263,000 out of $50 million backed by surety bonds had been recovered, according to the Inspector General’s report, and CMS had inaccurate and incomplete bond information for many suppliers. About $20 million in overpayments were made to suppliers who had no surety bonds at all, and that money is likely to never be recovered.

The Affordable Care Act gives CMS the authority to increase the minimum amount covered by surety bonds, including the option of setting the bond minimum at an amount matching the supplier’s total billings, making all overpayments eligible for recovery.

“This report shows that thanks to the Affordable Care Act, we have a powerful new tool to prevent and recover waste and fraud from Medicare supply and equipment providers,” said Chairman Carper. “Already, surety bonds will help Medicare officials collect millions of dollars in overpayments from providers and this report has laid out a roadmap to make the program even stronger. I commend Medicare officials for taking action to address the problems identified by the inspector general and expect them to move quickly to recover the millions of dollars in funds already available for collection from the surety bonds.”

View the OIG’s report. 

Written by Alyssa Gerace