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The FAST Solution to Medicare and Medicaid Fraud

July 22, 2011
by: Erica Gordon

WasteWatcher, July, 2011

Each year, Americans lose tens of billions of their hard-earned tax dollars to Medicare and Medicaid waste, fraud, and abuse. The most recent estimates from the Centers for Medicare & Medicaid Services (CMS) indicate that there was nearly $48 billion in improper payments for Medicare and $22.5 billion in the federal share of improper payments in Medicaid in fiscal year 2010. These figures are just the tip of the iceberg and do not include the countless, undocumented occurrences of theft carried out by organized crime rings aimed at defrauding Medicare, the stealing and selling of beneficiary numbers on the black market, and the creation of front groups and fake doctors’ offices that cheat the system at the taxpayers’ expense.

Hundreds of news stories about individuals and fake organizations swindling money from Medicare and Medicaid coffers highlight the severity of the issue and the need for critical reforms. In June 2010, the New Jersey Medicaid Inspector General demanded that an adult medical day care center pay a $5.6 million civil penalty for submitting false Medicaid claims. The day care center allegedly pocketed $1.87 million for services that were never rendered. In October 2010, in what was described by the FBI as the “largest Medicare fraud scheme ever committed by a single enterprise,” 73 alleged members of an organized crime ring were charged with defrauding Medicare of more than $163 million by using stolen identities of several Medicare beneficiaries to bill for services that were never provided. The FBI’s investigation ultimately uncovered 118 phony clinics in 25 states.

In November 2010, a New Jersey pain management physician and anesthesiologist was arrested for submitting $52 million in false claims to Medicare and private insurers for both services that were never rendered and excessive billable hours, some of which exceeded 24 hours in a single day. In January 2011, a woman was found guilty of using a defunct business to submit fraudulent claims to Medicare of more than $5 million for psychotherapy sessions that were never provided. She ultimately defrauded the system of more than $1.25 million.

The fraudulent looting of Medicare and Medicaid is in part a result of poor monitoring and tracking of the programs. Medicare and Medicaid are in desperate need of tighter fraud detection, better claims processing, and stricter provider enrollment and screening processes. CMS needs to be granted the flexibility to share data internally with oversight contractors and externally with federal law enforcement and appropriate state agencies. Medicare contractors must be given incentives to reduce their improper payment error rates, which cost taxpayers a reported $34.3 billion in Medicare fee-for-service claims in 2010, a 10.5 percent error rate. Beneficiaries need to be made aware of the prevalence of stolen identities and encouraged to work with the Senior Medicare Patrol to detect and report instances of waste, fraud and abuse.

In March 2010, President Obama made an important decision to continue supporting a Bush-era initiative to use private sector auditors to root out fraud in the country’s two massive government-run healthcare plans.  The use of these recovery audit contractors has been successful in the private sector for many years. While this is an important tool, simply calling in auditors to verify the accuracy of payments is not enough. Medicare and Medicaid stakeholders must be given the authority not only to recover improper payments, but also to prevent duplicitous activities and shut out those who attempt to manipulate the system.

Senators Tom Carper (D-Del.) and Tom Coburn (R-Okla.) recently introduced the Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayer Dollars (FAST) Act. The FAST Act aims to curb improper payments, improve data sharing across agencies and programs, keep closer track of individuals and entities that commit fraud, and improve the contractor performance at CMS. The legislation would require Medicare Prescription Drug Plan sponsors to obtain valid prescriber identifiers on all pharmacy claims under Medicare Part D; enforce prepayment review of Medicare reimbursements before payments are made; encourage the establishment of State Prescription Drug Monitoring Programs; enforce closer tracking of controlled substance providers; prohibit the display of Social Security numbers on new identification cards; conduct a smart card pilot program; expand automated prepayment review of Medicare claims; and develop measurable performance metrics for Medicare contractors. These reforms are an important step toward mitigating the egregious exploitation of Medicare and Medicaid.

With a $14.4 trillion national debt, lawmakers can no longer afford to ignore ballooning entitlement costs. The Carper-Coburn legislation lays out commonsense solutions to rein in system abuses and protect taxpayers from having their Medicare and Medicaid funds pillaged. The time to implement these reforms is now.

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