How to Stop Medicare’s Fraud Siphon: View

Illustration by Bloomberg View Close

Illustration by Bloomberg View

Close
Open

Illustration by Bloomberg View

For more than two decades, the U.S. Government Accountability Office has designated Medicare a “high-risk program” because of its “susceptibility to mismanagement and improper payments.”

Criminal charges filed last month in Dallas in a $375 million Medicare fraud case suggest the program won’t be losing its “high-risk” designation anytime soon.

It’s difficult to understand how a criminal enterprise can bilk Medicare of a sum like $375 million (or $295 million, to take another recent example). At least part of the answer is that Medicare is where the money is -- lots of it. Medicare serves some 48 million older and disabled Americans at a cost of more than $500 billion per year, making it the third-largest federal budget item after defense and Social Security.

Actually, the system is a bit of a bureaucratic miracle, processing 4.5 million fee-for-service claims every business day, paying 95 percent of providers within 30 days of billing and doing all this with a fraction of the overhead of private insurers. It also loses a fortune to crooks.

The government estimates that improper payments, which include error and fraud, in the fee-for-service element of Medicare equaled $28.8 billion last year. Medicare Advantage, a supplemental program offered by private insurers, accounted for an additional $12.4 billion -- four times the annual budget of the National Park Service, which has 21,000 employees.

Yet neither Congress nor the Obama administration -- professed enemies of waste, fraud and abuse -- has taken up the cause with the urgency it requires. Overhauling Medicare’s payment system is a daunting task, in part because of the way it’s structured. The system was designed to correct errors, not root out fraud. Hospitals and doctors, politically powerful and perennially peeved at low Medicare reimbursement rates for their services, demand prompt repayment and minimal administrative hassles. The system largely delivers -- at least on the first part. But the cost of routine payment for service may be unsustainable. More scrutiny, inevitably resulting in more payment delays, is necessary to safeguard the public’s money.

In recent years, the Centers for Medicare & Medicaid Services has begun addressing the epidemic, gradually adopting more aggressive fraud detection efforts. The CMS says it is dedicated to supplanting its “pay and chase” model, by which it first pays the bills and later chases down overpayments and irregularities. Predictive technologies similar to those used in the credit-card industry now hunt for patterns of suspicious behavior and flag them for analysts. Private contractors who uncover fraud win a bounty.

These advances, while encouraging, remain unequal to the task. The vast data systems used by CMS are not coordinated across regions and functions, and integration with law- enforcement data is far from complete.

Meantime, old habits persist. For example, the way in which CMS corrects errors inadvertently shows criminals how better to exploit the system. If a fraudulent provider submits a claim for a patient who is already dead, for example, the system automatically denies the claim, flagging the error for the crook, who then knows to delete the name from a list of bogus patients. Thousands of phony claims can be promptly paid provided they conform to billing protocol; some frauds extend for years.

What can be done? We like legislation by Senators Tom Coburn of Oklahoma and Tom Carper of Delaware, which directs the government to increase its data integration by sharing information across federal and state law-enforcement agencies and including Medicaid data in the CMS Integrated Data Repository, among other efforts. The bill would also expand prepayment review of Medicare claims and mandate such reviews for claims for durable medical equipment, such as power wheelchairs.

Although large-scale fraud perpetrated by organized crime must be aggressively countered, Medicare can also take steps to address smaller crimes by individual doctors, hospitals and medical equipment and device suppliers. A good start would be to make it possible for private citizens and news organizations to determine which doctors are billing how much for which procedures. Such public disclosure is currently prohibited, but Senator Charles Grassley of Iowa and other lawmakers have expressed interest in changing the law.

Due to rising health costs and an aging population, Medicare spending will inevitably grow, increasing the burden on public finances. To protect both taxpayers and beneficiaries, Medicare must become a more efficient supervisor of health services. To do that, it’s going to have to become a better crime fighter, too.

Read more opinion online from Bloomberg View.

To contact the Bloomberg View editorial board: view@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.