Unbiased Analysis of Today's Healthcare Issues

How much money does Medicare waste?

Written By: Jason Shafrin - Sep• 09•12

The answer depends on who you ask.

  • According to the GAO, Medicare spent $48 billion in “improper payments,” which include fraud but also waste, eligibility errors, miscoded claims and insufficient documentation. GAO determined that Medicare’s traditional fee-for-service plan had a 10.5 percent error rate.
  • Attorney General Eric Holder, suggest there may be $60 billion in annual Medicare fraud, about 12 percent of Medicare spending.
  • In 2008 PricewaterhouseCoopers estimated there is between $21 billion and $210 billion of waste in health claims processing (all claims, not just Medicare).

Although there is substantial room for improvement, politicians who think that these overpayments will be easy to recover are partially misguided.  Every Presidential candidate in recent times has stated that we need to reduce “fraud, waste and abuse” in Medicare.  think that

Further, CMS has already taken action in some areas—for example, as required by law, it implemented a national Recovery Audit Contractors (RAC) program in 2009 to analyze paid claims and identify overpayments for recoupment.

However, many of these efforts are subpar and other efforts to reduce cost have not been implemented.

Merrill Matthews reports on Forbes that, “though the agency launched its antifraud computer system last summer, by Christmas it had only identified one suspicious payment: for $7,591.”

Some established opportunities for fund recovery have been developed.  In a February 2009 report, the Government Accountability Office (GAO) “….indicated that Medicare continued to pay some home health agencies for services that were not medically necessary or were not rendered. To help address the issue, we recommended that postpayment reviews be conducted on claims submitted by home health agencies with high rates of improper billing identified through prepayment review and that CMS require that physicians receive a statement of home health services that beneficiaries received based on the physicians’ certification.”

The GAO also recommends adopting additional automated prepayment controls to reduce waste.  Further, CMS only estimates improper payments for Medicare Parts A and B, CMS does not have estimates of improper payments for prescription drugs (i.e., Medicare Part D).

GAO also recommends:

  • Apply payment changes to reflect efficiencies achieved by providers when services are commonly furnished together
  • Refine the geographic adjustment of physician payments by revising the physician payment localities using an approach uniformly applied to all states and based on current data

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One Comment

  1. […] Medicare and the Sustainable Growth Rate, and another at The Healthcare Economist looking at efforts to curb Medicare waste; discussion of reform proposals from the left and right, courtesy of the Health Business Blog, […]

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