Medicare Plagued by Waste, Fraud, and Abuse

Preface: One of those seldom little secrets no one talks about is this: to minimize Medicare fraud and abuse, now estimated at $60 billion a year, Medicare will have to adopt private health plan tactics. This is ironic because the Obama administration has portrayed private plans as the arch villains behind health care inflation. The source of what follows is John Goodman of the National Center of Policy Analysis abd Thomas Cheplick, "Medicare Plagued by Waste, Fraud, Abuse," Heartland Institute, December 2009.

Cost savings through reduction of waste, fraud, and abuse in the Medicare system being offered as a key funding source for health care reform currently under consideration on Capitol Hill. Eliminating this corruption could require Medicare to adopt private-sector reforms, says the Heartland Institute.

The proposal authored by Sen. Max Baucus (D-Mont.), currently pending in the Senate, relies on such reductions for more than $400 billion in funding over the coming decade.

"Officials estimate that Medicare is annually cheated out of some $60 billion in improper claims payments -- an eighth of its entire budget," says Kevin Wrege, regional state affairs director for the Council for Affordable Health Insurance in Alexandria, Virginia:

o Fraud is rampant and unchecked throughout the Medicare system, while private carriers do a much better job of preventing it.

o Private carriers spend a lot on efforts [to prevent fraud,raising their administrative expenses in the process.

o By contrast, the Medicare program does not regularly review bills for accuracy and to prevent fraud.

Medicare typically pays claims in full, and the Department of Health and Human Services' Office of Inspector General (OIG) operates as a post-claim payment cop, flagging and investigating only those that appear suspicious, Wrege notes.

"Recovered funds, if any, are often only a fraction of the often millions of dollars taken," Wrege added.

Many Medicare abuses happen in the market for durable medical equipment (DME), such as wheelchairs and oxygen equipment. A draft OIG audit released in August 2008 flagged almost a third of the 2006 DME claims sampled as having been improperly reimbursed.

According to a July report by the Government Accountability Office:

o Medicare paid as much as $92 million since 2000 for equipment purportedly prescribed by doctors who were dead.

o Claimants have submitted counterfeit documents, forged doctors' signatures, and filed bills on behalf of patients who were dead or had never been seen by the prescribing physician.