The budget blueprint crafted by Paul Ryan, passed by the House of Representatives, and voted down by the Senate would essentially give Medicare enrollees a voucher to purchase private coverage, and would change the federal government’s contribution to each state’s Medicaid program from an unlimited “matching” grant to a fixed “block” grant. These reforms deserve to come back from defeat, because the only alternatives for saving Medicare or Medicaid would either dramatically raise tax rates or have the government ration care to the elderly and disabled. What may be less widely appreciated, however, is that the Ryan proposal is our only hope of reducing the crushing levels of fraud in Medicare and Medicaid.
The three most salient characteristics of Medicare and Medicaid fraud are: It’s brazen, it’s ubiquitous, and it’s other people’s money, so nobody cares.
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Consider some of the fraud schemes discovered in recent years. In Brooklyn, a dentist billed taxpayers for nearly 1,000 procedures in a single day. A Houston doctor with a criminal record took her Medicare billings from zero to $11.6 million in one year; federal agents shut down her clinic but did not charge her with a crime. A high-school dropout, armed with only a laptop computer, submitted more than 140,000 bogus Medicare claims, collecting $105 million. A health plan settled a Medicaid-fraud case in Florida for $138 million. The giant hospital chain Columbia/HCA paid $1.7 billion in fines and pled guilty to more than a dozen felonies related to bribing doctors to help it tap Medicare funds and exaggerating the amount of care delivered to Medicare patients. In New York, Medicaid spending on the human-growth hormone Serostim leapt from $7 million to $50 million in 2001; but it turned out that drug traffickers were getting the drug prescribed as a treatment for AIDS wasting syndrome, then selling it to bodybuilders. And a study of ten states uncovered $27 million in Medicare payments to dead patients.
These anecdotes barely scratch the surface. Judging by official estimates, Medicare and Medicaid lose at least $87 billion per year to fraudulent and otherwise improper payments, and about 10.5 percent of Medicare spending and 8.4 percent of Medicaid spending was improper in 2009. Fraud experts say the official numbers are too low. “Loss rates due to fraud and abuse could be 10 percent, or 20 percent, or even 30 percent in some segments,” explained Malcolm Sparrow, a mathematician, Harvard professor, and former police inspector, in congressional testimony. “The overpayment-rate studies the government has relied on . . . have been sadly lacking in rigor, and have therefore produced comfortingly low and quite misleading estimates.” In 2005, the New York Times reported that “James Mehmet, who retired in 2001 as chief state investigator of Medicaid fraud and abuse in New York City, said he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were siphoned off by what they termed abuse, meaning unnecessary spending that might not be criminal.” And even these experts ignore other, perfectly legal ways of exploiting Medicare and Medicaid, such as when a senior hides and otherwise adjusts his finances so as to appear eligible for Medicaid, or when a state abuses the fact that the federal government matches state Medicaid outlays.
Government watchdogs are well aware of the problem. Every year since 1990, the U.S. Government Accountability Office has released a list of federal programs it considers at a high risk for fraud. Medicare appeared on the very first list and has remained there for 22 straight years. Medicaid assumed its perch eight years ago.
How can there possibly be so much fraud in Medicare and Medicaid that even the “comfortingly low” estimates have ten zeros? How can this much fraud persist decade after decade? How can it be that no one has even tried to measure the problem accurately, much less take it seriously? The answers are in the nature of the beast. Medicare and Medicaid, the two great pillars of Pres. Lyndon Johnson’s “Great Society” agenda, are monuments to the left-wing ideals of coerced charity and centralized economic planning. The staggering levels of fraud in these programs can be explained by the fact that the politicians, bureaucrats, patients, and health-care providers who administer and participate in them are spending other people’s money — and nobody spends other people’s money as carefully as he spends his own. What’s more, Medicare and Medicaid are spending other people’s money in vast quantities. Medicare, for example, is the largest purchaser of medical goods and services in the world. It will spend $572 billion in 2011. Each year, it pays 1.2 billion claims to 1.2 million health-care providers on behalf of 47 million enrollees.
If Social Security does such an awesome job at fraud prevention and part of the problem with Medicaid fraud is the myriad of programs and providers (not an issue in SS) why isn't this an argument for single payer health care?
@David Holland: The author noted that the reason Social Security had a better record with regard to fraud prevention was not that it was centralized, but that it processed fewer transactions. A centralized, single-payer system would actually process more transactions than Medicare does now, opening and even wider avenue for fraud.
Social Security has lower fraud rates than Medicare and Medicaid because Social Security is simply a cash transfer system. Once you reach age 62 or 65, you get a check. No need to get third parties involved. Medical care will ALWAYS involve a third party (doctors) and there incentive to commit fraud within it will always be present, regardless of whether the system is single-payer.
But I do like how your solution to Medicare and Medicaid is to have us go single-payer, and not in the opposite direction where everyone pays for their own care. After all, the problem with Medicare and Medicaid is that participants are spending other people's money, but that point was already stressed by Mr. Tanner.
Medicaid is refused by most private practice physicians as the pittance it reimburses for a charge is ridiculous. Couple that with the submission criteria for patient billing and rejections,and any Medicaid patient is charity work for Doctors.
Already some private practice Dr.'s are not billing Medicare, but insisting their Medicare patients self-insure instead. Welcome to the future of government run medicine.
The problem is, even Dr.s don't know how to fix Medicare, but they know how to creat work-arounds. Unfortunately, health care or SS, work-arounds are typically very expensive and ineffective.
In spite of all the arguments about Medicare/Medicaid, the facts are simple: (1) there is no incentive to prevent fraud in the system; (2) the nature of the system is such that it is practically impossible to prevent fraud by willing fraudsters; (3) ultimately, the system must be gradually and radically changed, not to a single-payer system (for that would greatly exaggerate the fraud), but to market-based solutions.
It took only 46 years (maybe even less than that) for Medicare and Medicaid to reach this depraved state. Maybe it can be reversed in the next 46 years. But it won't happen overnight.
It may not rise to the level of fraud, but the "ailment of the moment" phenomenon has resulted in incredible levels of unnecessary spending. How many "cpap" sleep machines sit in closets collecting dust? How much did Medicare spend on them? And that is just one example.
It's also important to remember that the two programs, particularly Medicaid, pay pennies on the dollar compared to private insurance (at least for specialists). In order to get privileges at a hospital in many places, you must take a certain number of Medicaid patients, plus anyone that happens to come through the ER. Given that for a specialist, Medicaid often doesn't even cover overhead for the visit, much less the doc's time, there is a powerful, built-in incentive to try to game the system for the maximum possible payoff. This is true even for providers who are not engaging in fraud. Every possible (and legal) test. Make sure you're doing what is required to code it as a more remunerable visit, etc.
The leap from this to fraud is a short one that apparently gets crossed quite a bit. The same is true for Medicare to a lesser extent, as it pays more than Medicaid (but still considerably less than private insurance in most cases).
One aspect of fraud that is never talked about is patient fraud. I tried to find out how to report a patient known by an employee to be an illegal alien. There was a 24 hour 800 number to report medicaid doctor fraud, but no way at all to report fraudulent patients.
The other day I saw a commercial for one of those power stair-lift things you can have installed in your home so people in wheelchairs can get up and down the stairs...and it was supposedly "covered by Medicare!" All I could think was, why does someone who can't climb stairs live in a two-story house to begin with? Is it really too much to ask that the "consumer" make some common-sense efforts on his own behalf before asking this overwrought bureaucratic machine to provide him with an overwrought stair-climbing machine?
A generation ago, people would have converted one of the downstairs rooms to a bedroom, so the elderly wouldn't have to climb the stairs anymore.
Don't forget those powered chairs they are always advertising. They promise to bill Medicare on your behalf and they also promise that Medicare will pick up the entire cost.
This article doesn't cover even 1% of the fraud that occurs... most of which happens before any claims, real or invented, by eligible recipients are made.
The patient Protection and Affordable Care Act (aka Obamacare) imposes an 80% medical loss mandate on private insurers. That means that 80% of that insurers revenue must be spent to pay for medical claims. The insurers are meeting that mandate easily while and maintaining profitability AND paying what the doctors actually charge.
The UMMC, on the other hand, realizes less than 30% medical losses. This while claiming (as we all remember from the debate leading to the passage of Obamacare) that it already pays for half of all the medical procedures in the country.
The fraud that needs to be addressed most isn't perpetrated by providers. It is perpetrated by politicians that manage the program, misappropriating our well-intended monies to do other things than our benevolence intended. IF they had the same mandate as private insurers had, they would be paying for all the medical procedures in the country at 60% merdical loss, and the remaining 20% of their mandate would cover all of the formerly uninsured and any transients (foreign visitors, illegal migrant workers, whomever) that happened to be around, too.
To quote Ronald Reagan, "The government IS the problem."
If we just imposed that same mandate on the UMMC, all medical expenses would be paid for using the funding levels the UMMC had in 2007.
Quoth Mr. Cannon: “For providers, Medicare is like an ATM: So long as they punch in the right numbers, out comes the cash.”
The corollary: “Practitioners who don’t punch in the ‘right numbers’ receive uneconomic compensation.” When dealing with an inept and unfair system, the rational response is fire-with-fire. If this be fraud or abuse, make the most of it.
Loved (and was disturbed and disgusted by) this article when I read it in print. My question: Where is the "like" button so I can share it with my friends?
Private insurers have fraud units, and are in fact obligated by many states to investigate known instances of fraud. They are getting fairly good at detecting it - not perfect, but better than governments who lack incentive to do so. We'll never get past the debate about single payor vs private insurer until people realize that the profit motive has beneficial effects. Let the insurers file and justify the rates they charge for healthcare for all regardless of age. You will find that private companies will not only make money for investors but also be able to serve customers while being regulated fairly by states - but only if the federal gov't stays out of it.
I remember the case of a doctor in Washington, DC, who billed Medicaid for an average of 145 patients per day. His waiting room was used for unwed mothers with their kids as a social meeting room. The doctor's receptionist would just gather their names and then would submit those names to Medicaid office for billing. In an 8-hour workday that would allocate about 3 minutes and 20 seconds per "patient". No investigation was performed and the billings continued. That "practice" has since been extended nationwide.
No mention was made in the article of the widespread SSI fraud. Legal immigrants bring their aged parents here and put them on SSI. In schools kids are taught to disrupt their classes in order to be "diagnosed" with "attention deficit disorder" and put on SSI.
