Clinton announces Medicare package to fight fraud, save tax dollars

Will the legislation just add another layer of regulators?

President Clinton announced in December a legislative package that he says will save Medicare $2 billion over the next five years by fighting fraud, waste, and abuse. The president also announced administrative efforts to ensure that Medicare contractors are cracking down on fraudulent activities.

"The current federal administration has certainly shown that it is serious about rooting out fraud and abuse so that the Medicare dollars can be well-spent on appropriate and much-needed health care," says Sue Prophet, RRA, CCS, director of classification and coding for the American Health Information Management Association in Chicago. "I’m not surprised that it is putting more efforts in place to do this."

Provider organizations, however, have been concerned that government fraud efforts might not make the distinction between billing errors and outright fraud. The president’s announcement renewed those concerns and added a few others, as well.

Pieces of the package

The president’s legislative package is part of his fiscal year 2000 budget. The president’s proposals include:

o Eliminating excessive Medicare reimbursement for drugs.

The administration’s proposal bases Medicare payments on the actual acquisition cost of these drugs to the provider, eliminating markups and substantially reducing Medicare costs. "Under current law, Medicare loses hundreds of millions of dollars each year by paying as much as 10 times more than the private sector does for certain drugs," Clinton said in his announcement. "It’s just wrong."

"I continue to find it offensive that the President lumps reimbursement issues with fraud and abuse, says Mary Grealy, JD, senior Washington counsel for the American Hospital Association’s (AHA) office in Washington, DC. "They don’t belong together."

o Eliminating overpayments for Epogen.

A report from the Office of Inspector General (OIG) found that the current reimbursement rate exceeds the current cost of the drug by at least 10%. This proposal reduces Medicare reimbursement to reflect current market prices.

o Preventing abuse of Medicare’s partial hospitalization benefit.

This proposal ensures that Medicare only reimburses for services actually given by placing stricter controls on the provision of services.

"We know [OIG] found some problems," Grealy says. "As always, we want to make sure they don’t go overboard and restrict access to what are necessary services. The services should be provided appropriately. That was an important benefit that served a critical need, and I hope they don’t wind up extinguishing it."

o Ensuring Medicare does not pay for claims owed by private insurers.

This proposal requires private insurers to report all Medicare beneficiaries they insure to the Health Care Financing Administration (HCFA) in Baltimore and gives HCFA greater authority to fine these insurers.

o Empowering Medicare to purchase cost-effective, high-quality health care.

Currently, Medicare has limited authority to contract out with institutions that have a track record of providing high-quality care at a reasonable price. This proposal expands this authority to urban areas that have multiple providers.

o Requesting new authority to enhance contractor performance.

This proposal would give HCFA authority to contract with a wider range of carriers and terminate providers they see necessary. HCFA also would have greater authority to oversee contractor performance.

The president’s announcements about administrative efforts to crack down on fraud and abuse include:

o Contracting with special fraud surveillance units to ensure detection of fraudulent activities.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) gave new authority to contract with specialized fraud surveillance units or "fraud fighters." The first fraud unit will begin investigating suspected offenders this spring.

"Our concern is that there seems to be a piling on, in a layer upon layer, of entities that will be auditing providers," Grealy says. "We’re beginning to worry that people are going to be asking for provider records left and right."

Coordinating the fraud fight

The AHA is also concerned that the fraud-fighting effort isn’t as coordinated as well as it could be. "It needs to be done in a targeted way as opposed to casting this wide net."

o Implementing the competitive bidding demonstration for durable medical equipment.

HCFA will begin a demonstration this spring that will use competitive bidding to decrease payments for hospital beds and other medical equipment.

o Requiring contractors to report fraud complaints to the OIG immediately.

Contractors often defer reporting cases of suspected fraud to the OIG when the dollar amounts are low. HCFA was to send memorandums to all contractors in December requiring them to refer cases of suspected fraud to the OIG immediately, regardless of the amount of money involved.

"The private sector health care contractors that are responsible for fighting waste, fraud, and abuse too often are not living up to their responsibilities," Clinton said in his announcement. "We recently learned [through an OIG report] that one-fourth of those contractors have never reported a single case of fraud, even though the Inspector General is quite certain that fraud is pervasive in this area."

"HCFA has over-responded to the report by saying that anything you find anywhere, any time must be reported immediately to the OIG. If you look at the OIG’s guidelines, I think they pretty clearly establish that there should be a minimum threshold, that it should be something material," counters Grealy.

Indicators of fraud, such as billing for services that have not been provided, should be referred to the OIG, she says. Otherwise, the fiscal intermediary should be responsible for recouping any overpayment.

"If they are talking about someone making an overpayment and now everything has to go to the OIG, I think that’s an inefficient way of doing business and it’s casting everyone as a fraudster when that should not be their intent. I don’t think it’s the Inspector General’s view, either," Grealy explains.

"If there is a pattern or some indication of fraud or abuse of activity, we would fully support any efforts to get rid of that," Prophet says. "But there always is the concern that inadvertent errors could be pulled into this process, as well. We don’t think people should be prosecuted for errors because there are going to be errors in any industry."

o Announcing a new comprehensive plan to fight fraud and abuse.

By early next year, HCFA will release a new Comprehensive Plan for Program Integrity to improve efforts to cut down on fraud and abuse. This plan will outline new strategies to fight fraud, including the enhanced use of audits and improved management tools.

Efforts aren’t always productive

Although media attention to fraud in the health care industry gives the impression that it is widespread, fraud investigators often don’t find that kind of abuse. In an outpatient and lab bundling investigation in Texas, where 400 demand letters were mailed to providers last year, all of the U.S. Attorneys decided to halt their investigation, Grealy says.

Hospitals that had settled with the govern- ment and had signed a Corporate Compliance Agreement had their money refunded and the agreement terminated. The financial details were turned over to the fiscal intermediary for whatever review or action, if any, it deemed appropriate.

"That’s where it should have been to begin with," Grealy says.

These investigations give the public the impression that most hospitals and physicians are trying to bilk the Medicare Trust fund, Prophet says.

"I don’t think that’s the case, and I don’t think that’s what the federal administration is saying. It’s important to recognize that the vast majority of health care providers are completely honest, are doing the right thing, and are not committing fraud," she explains.

'We are only talking about a small number of people or organizations. But it’s also important to recognize that those organizations could fraudulently bill for a significant amount of money," Prophet adds.