Stop healthcare fraud. Criminal fraud accounts for as much as 10 percent of all healthcare spending, according to the National Health Care Anti-Fraud Association. That is more than $200 billion every year. Medicare fraud alone could account for as much as $40 billion a year. This crime, enabled by our current paper-based system, can be detected, eliminated, and prevented with the right kind of electronic resources, such as enhanced coordination of benefits, third-party liability verification, and electronic payment.
Cut waste. If our healthcare system moved from manual paper and phone processes to electronic administration, we could save an estimated $30 billion a year. For example, today 90 percent of all medical claims are paid by printing a paper check and mailing it through the U.S. Postal Service. Electronic payment through direct deposit—think PayPal for health—could alone save an estimated $11 billion every year.
We should migrate all payers and providers to fully electronic processes for administration, including claims submission, insurance eligibility verification, claims status inquiry, claims remittance, and electronic payment. All payers—CMS, state Medicaid programs, and private plans—must lead by making a real investment in their own electronic processes building on claims submission, followed by rewarding and then requiring their use.
Eliminate junk lawsuits to reform civil justice and eliminate defensive medicine. Last year President Obama pledged to consider civil justice reform. We do not need to study or test medical malpractice any longer: the current system is unarguably broken. States across the country—Texas in particular—have already implemented key reforms including liability protection for using health information technology or following clinical standards of care; caps on non-economic damages; loser pays laws; and new alternative dispute resolutions where patients get compensated for unexpected, adverse medical outcomes without lawyers, courtrooms, judges, or juries.
Move from paper-based care to modern, electronic tools. The 2009 stimulus allocated tens of billions of dollars toward encouraging physicians and providers to adopt twenty-first century tools such as electronic prescribing and electronic health records. While I opposed the inclusion of this investment in the stimulus bill, these are valuable tools nonetheless. We have a new book at the Center for Health Transformation entitled Paper Kills 2.0, edited by David Merritt, that proves conclusively that technology saves lives and money. Updated, accurate, and comprehensive patient information at the point of care will prevent medical errors and will allow physicians, nurses, and providers to make better, more informed decisions. Electronic access to information will reduce duplicative and unnecessary tests and treatments. Automating cumbersome, manual processes will streamline workflow, eliminate inefficiencies, and lower costs. We must continue striving to get these technologies into the hands of doctors and nurses and to ensure that information is portable, accurate, secure, and protected.
The solutions presented here can be the foundation for an individual-centered system. We must insist that our elected leaders have the courage to embrace them.
A TIME TO CHOOSE
President Obama’s healthcare reform will raise taxes, destroy jobs, and allow Washington bureaucrats to make decisions that ought to be made by individual Americans together with their families and doctors. At a time when we are already suffering from over-taxation, high unemployment, and excessive regulation, it’s the last thing America needs.
We can create a better system, one that prioritizes individual health and wellness, delivers personalized, best practice care, and insures every American. The changes and solutions outlined in this plan are the right reforms to build such a future. By addressing health, quality, costs, and coverage:• We will not need to raise taxes. We can bring down healthcare costs and save hundreds of billions of dollars by focusing on the right priorities.
• We will not need to introduce a government-run plan into the private insurance market. Choice is more powerful than a single government plan. Tax fairness, open markets, and access to insurance for all will deliver many more choices at lower cost.
• We will not need nor should we ever resort to government rationing of healthcare. More choices and higher quality will lower costs and empower consumers.
• We will not need to cut Medicare. We can save future generations from crushing debt by focusing on health, quality care, and efficiency.
• We will not need to mandate that employers, including small businesses, provide health insurance. The right reforms that balance a robust private sector with effective public programs will give all Americans the financial means and choices to get the coverage that is best for them and their families—without saddling small businesses with debt.
The choice is clear. We can implement transformative programs—for better health, more efficient delivery, sound public programs, and a competitive marketplace—that will assure that all Americans have access to quality healthcare that is available, affordable, and appropriate. Or we can accept the left-wing approach of ushering in a government-run system that will destroy our economy along with our health.
The choice is ours—and the time for choosing is now.
We should repeal the 2010 big-government act passed on a narrow partisan basis with extraordinary corruption and bribery, and start over in the right direction with the right policies.
CHAPTER SIXTEEN
Solutions for Stopping Healthcare Fraud
With Jim Frogue, Vice President of the Center for Health Transformation and Editor of Stop Paying the Crooks
Every year we taxpayers pay $70-120 billion to crooks through Medicare and Medicaid alone. This ought to be the first source of new money to pay for health reform.
Why raise taxes on honest people or cut health benefits for honest senior citizens or penalize honest doctors and hospitals when the system is run so incompetently that it currently gives billions to criminals every month?
This problem is so great that at the Center for Health Transformation, we have initiated an entire antitheft and antifraud project led by Jim Frogue, the coauthor of this chapter.
Fraud, waste, and abuse in our healthcare sector are more pervasive than people think—they constituted a third or more of the $2.5 trillion spent on healthcare services in 2009. To his credit, President Obama noted in his September 9, 2009 address to Congress there are “hundreds of billions of dollars in waste and fraud” in the system.
Other top officials and representatives have drawn attention to the problem as well. Health and Human Services secretary Kathleen Sebelius said at the January 28, 2010 National Summit on Health Care Fraud, “We believe the problem of healthcare fraud is bigger than government, law enforcement, or private industry can handle alone.”
At the White House Health Summit on February 25, 2010, Senator Tom Coburn suggested, “20 percent of the cost of government healthcare is fraud.” Senator Chuck Schumer of New York later responded, “I was glad to hear my friend Tom Coburn’s remarks. I think we agree with most of them, and particularly the point that about a third of all the spending that’s done in Medicare and Medicaid . . . doesn’t go to really good health care, goes to other things.”
Unfortunately, while clearly aware of this debilitating problem, Congress and the administration have not developed meaningful proposals to solve it. But this is an urgent issue requiring fast, effective action.
According to an October 2009 white paper by Thomson Reuters, the overall American healthcare system wastes $600-850 billion every year. Here’s the breakdown:1 • Unnecessary care (40 percent of healthcare waste): This includes defensive medical treatments whose primary purpose is to double cross every “t” and double dot every “i,” lest the trial lawyers come calling.
• Fraud (19 percent of healthcare waste): This is willful theft, such as billing Medicare, Medicaid, and private insurers for products and services not rendered.
• Administrative inefficiency (17 percent of healthcare waste): Duplicative paperwork limits the ability of healthcare profession
als to spend the appropriate amount of time with sick and injured patients. One study found some nurses must spend one hour on paperwork for every hour of patient care.
• Healthcare provider errors (12 percent of healthcare waste): Mistakes by physicians and support staff are tremendously costly both in terms of dollars and human suffering. Too many errors happen as a result of illegible handwriting and exhaustion with paperwork.
• Preventable conditions (6 percent of healthcare waste): The personal choices made around prevention and treatment of diseases account for at least 50 percent of one’s health status. For example, Type 2 diabetes is often preventable with the proper diet and exercise. Nevertheless, Type 2 diabetes now constitutes 90 percent of diabetes cases, accounting for tens of billions of dollars every year spent unnecessarily.
• Lack of care coordination (6 percent of healthcare waste): Better access to more accurate patient records via electronic health records and e-prescribing, with strong safeguards to ensure patient privacy, will improve health outcomes and eliminate unnecessary tests and contraindicated prescriptions.
Additional confirmation of the scale of fraud and waste comes from the Government Accountability Office (GAO), widely regarded as the gold standard for investigating government-run programs. In a January 2009 report on “high risk” programs, GAO experts found in 2007, the Medicaid improper payment rate was 10 percent, or $32.7 billion (FN).2 This contrasts with the average improper payment rate of 3.9 percent across all government programs, according to the Congressional Research Service.3
So Medicaid has nearly three times the improper payment rate of all government. That is one reason the Left can tout low administrative costs for Medicare and Medicaid: they simply write checks without effective oversight. They pay more in fraud than they gain in lean administration.
In the Senate Finance Committee, Republican John Cornyn submitted an amendment to the Senate healthcare bill that made expansion of the Medicaid program contingent on GAO certifying that Medicaid’s improper payment rate was at or below the government average. The amendment was defeated on a party-line vote.
Consider this: the federal department that oversees Medicaid cannot even accurately measure the extent of the problem. A letter dated August 26, 2009, from Stuart Wright with the U.S. Department of Health and Human Services Office of Inspector General to Cindy Mann, Director of State Operations at the Center for Medicare and Medicaid Services (CMS), outlined how current data collection methods fail to generate accurate and timely data about the program. As the old saying goes, “You can’t manage what you can’t measure.” The conclusion to the 25-page letter reads:MSIS [Medicaid Statistical Information Statistics] is the only source of nationwide Medicaid claims and beneficiary eligibility information. CMS collects MSIS data directly from States to, among other things, assist in detecting fraud, waste, and abuse in the Medicaid program. Timely, accurate, and comprehensive MSIS data can contribute to more effective health care fraud, waste, and abuse identification and prevention.
We determined that during FYs 2004-2006, MSIS data were an average of 1½ years old when it was released to all users. In addition, CMS did not fully disclose or document information about the accuracy of MSIS data. Furthermore, MSIS did not capture many of the data elements that can assist in fraud, waste, and abuse detection.4
Medicare’s improper payment rate is equally bad. A November 2009 report admitted to $47 billion in improper payments, which is, like Medicaid, roughly 10 percent of that program. Examples included payments to dead doctors and people using Medicare ID numbers with or without the beneficiary’s knowledge to run up fake billing.5
An excellent segment on 60 Minutes in October 2009 estimates $60 billion of Medicare spending annually is fraudulent. Steve Kroft warns in the opening that the show will “make your blood boil.” The highlight of the piece is an interview with a convicted Medicare fraudster who explains how easy and lucrative it is to steal from Medicare. He made $20,000 to $30,000 a day, and he assures Kroft that, though he is behind bars, there are thousands of people like him stealing from the program.6 Consider this sampling of recent fraud in our healthcare system:g • Healthcare fraud is luring criminals with easy money and short prison sentences. These gangsters are forgoing violent crime for white-collar scams—bilking U.S. taxpayers out of millions of dollars with little risk. According to a recent Associated Press article, “A Medicare scammer could easily net at least $25,000 a day while risking a relatively modest 10 years in prison if convicted on a single count. A cocaine dealer could take weeks to make that amount while risking up to life in prison.”7
• So-called fraud “trouble spots” exist across the country. Federal agents recently arrested twenty-six people in three different states—Florida, New York, and Michigan—for Medicare fraud totaling more than $61 million. Accusations included faking medical certifications and bribing clinics to join the scams.8
• In 2005, South Florida clinics submitted $2.2 billion in HIV-drug infusion claims to Medicare, which is 22 times more than the rest of the country combined.9
• A Miami doctor falsely listed some of his patients as both blind and diabetic in order to bill Medicare for expensive twice-daily nurse visits. The doctor was arrested within weeks of the release of a DHHS report showing that Miami-Dade country received more than half a billion dollars in funding from Medicare in home health payments—more than the rest of the country combined.10 In 2008, the average cost for home healthcare patients in Miami-Dade ran $11,928 every two months, which is 32 times the national average cost of $378.11
• A La Quinta, California doctor was sentenced to fifteen months in jail and ordered to pay more than $600,000 in restitution for “subdosing” AIDS patients and billing insurance companies for the full dosages.12
• A Miami man was recently arrested on fraud charges, having submitted $55 million in false claims for bogus HIV and cancer services. He used the money he received to buy Lamborghinis, Bentleys, Mercedes Benzes, and horses. To pose as owners of the fake clinics, he recruited illegal Cuban immigrants who later fled to Cuba when the ruse was discovered.13
• A Philadelphia couple recently billed Medicare more than $1.2 million for power wheelchairs and other medical equipment that patients did not need. A U.S. Attorney said the case “involves breaches of trust at every level—from the medical office employees who sold patients’ identity information to the people charged . . . who used the Medicare Trust as their personal ATMs.”14 Separately, a Michigan businessman fraudulently billed Medicare for $18.4 million by submitting claims for non-existent therapy services. He also paid kickbacks to people for use of their Medicare numbers, another all-too-common fraudulent practice.15
• Owners of an ambulance service in Tennessee billed both Medicare and Medicaid for unnecessary and non-compliant ambulance rides for patients, using the proceeds to buy a Corvette and a Harley Davidson. Examples of their “service” include a patient riding in an ambulance jumping out to get take-out at a restaurant, and ambulances being loaded with a patient in both the front and back—“in effect acting as a taxi, charging the government in excess of $300 per round trip.”16
• The Senate Permanent Subcommittee on Investigations identified $60-92 million in Medicare payments for services ordered by more than 16,500 deceased doctors in 2000-2007. Some doctors had been dead for more than ten years.17
• Facilities in southern California allegedly churned thousands of indigents through their sites and billed Medicare and Medi-Cal for costly and unjustified medical procedures. These facilities ran street-level operations, where runners collected indigents for unnecessary hospital services, dropping them back off on skid row by ambulance.18
• In 2005, the New York Times estimated New York state Medicaid fraud reached into the tens of billions.19 That much abuse in a single state implies a mind-blowing amount of Medicaid fraud is occurring across the country. Some cases just in New York:
• A Brooklyn dentist billed as many as 991 p
rocedures supposedly performed in a single day.
• School officials enrolled tens of thousands of low-income students in speech therapy without the required evaluation, garnering more than $1 billion in questionable Medicaid payments. One school official sent 4,434 students into speech therapy in a single day.
• Several criminal rings duped Medicaid into paying for an expensive, AIDS-related muscle-building drug that was diverted to bodybuilders at the cost of tens of millions.
• James Mehmet, former chief state investigator for Medicaid fraud, reported that “40 percent of all claims are questionable.”
The staggering amount of fraud in healthcare simply does not exist in any other industry. That’s because the American healthcare system is mostly third party payer—the entity paying the bill for healthcare services is not the patient or doctor. That arrangement necessarily makes the patient and the doctor less concerned with using dollars efficiently for legitimate treatments and less interested in stopping fraud and abuse that may even be occurring in their name.
Another major reason for the abundant fraud is that the healthcare system is paper based. The bureaucrat is relying on out of date paper while the crook is using his Blackberry and iPhone.
HOW NOT TO PAY CROOKS
We at the Center for Health Transformation published a book in 2009 titled Stop Paying the Crooks featuring proposed solutions from a diverse group of experts to stop healthcare fraud, waste, and abuse. Here are some of their solutions:1. Patients and taxpayers have the right to know the cost and quality produced by every facility that receives taxpayer money and how and where scarce taxpayer dollars are spent. Thus, all Medicare and Medicaid claims and patient encounter data should be made public on a depersonalized basis. That data is the mother lode of everything you would ever want to know about both programs. We would be able track all the dollars as well as the health outcomes produced by every provider in the country that accepts Medicare and Medicaid—which is nearly all of them.Selected academics have access to Medicare data and have produced excellent reports such as the Dartmouth Health Atlas. Among their many key findings is that per capita Medicare spending by locality is inversely correlated with the likelihood of receiving recommended care.20
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