Start with fraud

Since the formation of the Joint Select Committee on Deficit Reduction was announced this summer, there has been no shortage of provider and industry groups vocalizing where Congress shouldn’t cut. As the “supercommittee” looks for ways to eliminate at least $1.2 trillion from federal spending, we’re witnessing unprecedented efforts by Washington special interests to cry “not me!” and announce the dire consequences of funding reductions.

As someone who has spent considerable time and effort investigating the extensive waste, fraud and abuse that permeates the Medicare and Medicaid programs, it seems this would be the logical place to start piling up the savings. The public is already there, as evidenced by a September Gallup poll showing that Americans think 51 cents of every federal dollar spent is wasted.

The facts about the slow drain of taxpayer dollars are disturbingly clear. Medicare and Medicaid continue to be victimized by fraud, abuse and improper payments (payments that should not have been made or were made in incorrectly), and the extent of the loss is enormous.

The Government Accountability Office (GAO) estimates that Medicare and Medicaid lost more than $70 billion to improper payments alone in fiscal 2010 ” equivalent to an estimated $900 billion over 10 years ” and some experts peg the losses even higher at $100 billion annually. No other government program is as rife with such erroneous, if not criminal, behavior. Harvard professor and author of License to Steal Malcolm Sparrow suggested in Senate testimony that fraud and abuse across our healthcare system could be a quarter of total spending.

Unfortunately, Medicare and Medicaid continue to engage in “pay and chase” efforts to deter fraud. This is the practice of investigating suspicious claims after they have been paid and then trying to track down the money with recovery efforts. The problem is that by the time the questionable claims are flagged and investigated, and attempts at recouping the losses are launched, the money is almost always long gone, and scammers have made off with billions of dollars.

Fortunately, there is a better way, and it involves the pre-payment examination of claims. This is the norm in the private health insurance industry, where the fraud rate is less than 1.5 percent. The credit card industry processes more than $2 trillion in annual transactions, making it twice the size of Medicare and Medicaid combined. There are 700 million cards in circulation and millions of vendors. Yet fraud in the credit card industry is one-tenth of 1 percent because it targets aggressively questionable behavior before the money goes out the door. Have you ever been asked by a clerk to show ID while making a purchase? That is a real-time pre-payment audit.

Meanwhile, a staggering 10 percent of all Medicare and Medicaid dollars continue to be lost to waste, fraud and abuse. The problem has become so bad that the HHS inspector general said Medicare fraud is more lucrative than the drug trade, with “easy money, less violence and lighter punishments.” Indeed, organized crime has flocked to Medicare fraud as documented by “60 Minutes” and other news programs.

The Patient Protection and Affordable Care Act (PPACA) included provisions to combat waste, fraud and abuse, yet those provisions have been projected to save American taxpayers just $7 billion over the next 10 years. That is less than one-tenth of 1 percent of the estimated total losses expected over that time span.

Fortunately, awareness of the size and scope of this problem is leading to some promising solutions. For example, Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.) have introduced the FAST Act to strengthen the Medicare and Medicaid programs as a whole. In addition, the home healthcare community has developed concrete reforms ” including pre-payment claims review ” to problems plaguing its specific benefit. And advocacy leaders like AARP have come together to urge Congress to make program integrity improvement its top priority.

The Joint Select Committee on Deficit Reduction has a formidable task before it, but also a remarkable opportunity. Americans ” taxpayers, voters and the seniors who depend on Medicare ” overwhelmingly agree that criminals should be targeted first.

Frogue edited the book Stop Paying the Crooks and is a partner at FrogueClark LLC and a consultant to the Partnership for Quality Home Healthcare.