Auditing The Auditors In Medicare And Medicaid

Abstract

Baker Surgical Supplies, a small company, went bankrupt after it could not repay a significant overpayment charge demanded by Medicare based on a statistical extrapolation of claims of overpayment. The case centered on whether the extrapolation process was justifiable and whether it was properly implemented.

This paper provides a description of the extrapolation process used by Medicare and Medicaid and presents the data and sampling procedure offered by Medicare and the statistical arguments offered by Baker. The case demonstrates some potential misuses of statistics in the auditing process. In shedding light on this issue, the analysis in this paper could prove to be instrumental in prompting significant improvements to the auditing process of Medicare and Medicaid.