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Eight Ways Baucus Bill Would Root Out Healthcare Fraud

Cheryl Clark, for HealthLeaders Media, October 7, 2009

In the last six months with HealthLeaders Media, I've written and read a fair amount about allegations of fraud and abuse among Medicare and Medicaid providers.

Durable medical equipment charge irregularities, nursing home billing errors, fabrication of services, referral kickbacks, hospital upcoding claims, imaging overcharges, and exaggerations of patient severity are some of the recurring themes found in audits and inspection reports.

The current version of the Senate Finance Committee's America's Healthy Future Act seeks to put a stop to a very large amount of that fraud. The proposal includes 13 pages of measures that will not just recover money after it has been fraudulently billed and erroneously paid out, but would keep scheming crooks from participating in federal programs from the start.

No one really knows the dollar amount in fraud, abuse, or false claims. And no one knows whether stopping all that billing mischief could ever be enough to bend the cost curve. Estimates range from 3% to 10% of healthcare dollars spent, depending on the program and the agency.

But is $500 billion–the amount of fraud, waste, and abuse that some believe can be sliced from federal programs without hurting quality–a realistic number?

There are concerns that if federal agencies go deeper in their effort to find more fraud, they will end up spending a lot more on the effort than it recovers. And what would be the cost of prosecuting these scofflaws, and perhaps putting them in jail for a long time? What's the return on investment for the taxpayer?

The National Health Care Anti-Fraud Association thinks a huge amount of fraudulent spending is there for cost-effective recovery, if not the entire $500 billion, some significant portion of that.

Its executive director, Louis Saccoccio, says that of the $2.26 trillion spent on healthcare, "conservatively" 3% or $68 billion "is lost to fraud." And that's not even considering what might be further categorized as waste or abuse, he says. Just talking fraud, he says, some recovery efforts recapture $17 for every $1 spent.

The federal Office of Inspector General's policy does not give out any such estimates.

However, it does boast successes every year. For the fiscal year ending Sept. 30, 2008, the Department of Justice says it recovered $1.34 billion in fraud and false claims, bringing the total to $21 billion recovered since 1986. An official with the agency, who asked that he not be quoted, said that internally, federal agents believe that's "the tip of the iceberg."

New numbers reflecting fraud and false claim recovery for the 2009 fiscal year will be released next month.

So it's natural that in health reform, a big effort will be made to recover dollars from fraud, waste, and abuse.

In the Senate Finance Committee's America's Healthy Future Act , "Title V – Fraud, Waste and Abuse," the following measures are among those that would tighten control of federal spending and keep crooks from participating in the program from the start.

1. Certain groups of providers and suppliers of healthcare services and goods would be subject to screening measures, such as fingerprinting, criminal background checks, and multistate data base inquiries before being able to bill Medicare. Surety bonds of up to $500,000 may be required. States would be given similar authorities for Medicaid programs. And states that fail to create effective screening programs would have their Federal Medical Assistance Percentage reduced.

2. Current provider databases would be greatly expanded and integrated to allow data sharing between multiple government agencies. The databases would include information on providers' quality of care under managed care, fee for service and waiver programs, Medicaid encounter data, health plan performance, survey and certification, resident or patient neglect or abuse, adverse actions, site visits, penalties and settlements, and results from other program monitoring.

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