Government Attempts to Measure Waste, Fraud and Abuse

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Government Attempts to Measure Waste, Fraud and Abuse

Taxpayers were shocked in 1996 when Medicare’s Inspector General estimated that 14%, or $23.2 billion, of Medicare claims were “improperly” paid. The Inspector General based the estimate on a sampling of claims, a common practice used by statisticians known as “extrapolation.” From 1996 through 2001, an estimated $93.6 billion in claims were improperly paid.

Leaders of organized medicine questioned the validity of extrapolation and lobbied against its use saying the claim reviews are based on a very limited number of samples. They argued that many payment errors are the result of Medicare billing complexity, vague rules, and “honest mistakes.”

By March, 2000, Medicare’s administrator testified that the improper payment rate had been cut to about 7.9% (for the government’s fiscal year 1999), but added, “Due to the limited size and variance of the sample, the true error rate could range from 5.4% to 10.6%.” Shortly thereafter, the Centers for Medicare and Medicaid Services revised its policy on medical reviews of physician’s claims. But instead of increasing the number of claims reviewed, fewer claims are now reviewed and assessments made on improper payments to physicians are smaller, making it likely that the rate of improper payments will appear lower than it actually is.

Rather than increasing the number of claims reviewed, more of the Medicare budget is expended on efforts to help doctors to file and document future claims correctly. Critics question whether the government is providing too much information. Unscrupulous providers can use such information to fabricate false claims and avoid detection, critics say, because Medicare’s automated systems only detect claims with errors but not false claims that are coded correctly. In the most recent audit for fiscal year 2001, the Office of the Inspector General found that $12.1 billion, or about 6.3% of all claims, were improperly paid.

Editor’s note: The high rate of improper payments directly contributes to rising costs of supplemental health insurance for retirees. Why should Medicare beneficiaries or their insurance company pay co-insurance for $500 when the real cost may be only $150? The argument over the fairness of “extrapolation” and overly complex billing rules would not even be an issue if Medicare carriers were required to perform far more routine, systematic reviews of claims than they do now. Let’s start checking the bills.

Source: “OIG: $20 Billion In “Improper” Medicare Payments,” by Sean Martin, “American Medical News,” May 11, 1998. “Testimony of Nancy-Ann DeParle, Administrator of Health Care Financing Administration on the Fiscal 1999 Audit before the Senate Appropriations Health Subcommittee, March 9, 2000. “Recent CMS Reforms Address Carrier Scrutiny of Physicians’ Claims for Payment,” U.S. General Accounting Office Report to Congressional Committees, GAO-02-693, May 2002.

For more on this topic, see “Medicare Waste: $12 Billion” at http://www.tscl.org/NewContent/101499.asp.

November 2002