Medicare Fraud in the USA - Term Paper Example

Medicare Fraud in the USA One of the most significant challenges facing the health care system of the United States is health care fraud. Nonetheless, there are no accurate estimates that indicate the cost of healthcare fraud, but experts estimate that the health care system losses hundreds of billions of dollars every year due to fraud. These figures are enormous considering the impacts they would have on the health care system with proper appropriation. The cost of Medicare fraud led to the intervention by the US government in the 1990s. President’s Clinton administration initiated health care reforms and placed enormous resources on stopping and preventing health care fraud in the Medicaid and Medicare programs. All forms of health care programs are prone to fraud, but Medicaid and Medicare remain the most vulnerable and most cited examples (Bennett and Medearis, 2003). The general use of the term “Medicare fraud” refers to corporations or individuals who seek to obtain reimbursement from the Medicare health care system under false pretences. This paper seeks to provide a comprehensive analysis of Medicare fraud, including the history, incidences, costs, and institutional remedies to combat the health care issue. Medicare fraud is synonymous to the acts of illegitimately collecting money from the Medicare program. In some instances, Medicare fraud is associated with abuse, though the latter has a different definition altogether. According to the Health Insurance Portability and Accountability Act (HIPAA),fraud refers to willful and knowingly attempts or execution of a scheme that intends to defraud the healthcare benefits program or to collect by false promises, representation, or pretenses any property or money owned by a healthcare benefits program (Shane, 2000). On the other hand, the definition of abuse uses terms of acts deemed inconsistent with sound or ethical business or medical practice. Nonetheless, abuse and fraud are similar, only that investigator cannot establish that the abuse was committed willingly and knowingly. Consequently, the term “intentional” is very important in defining abuse and fraud. There are no accurate records of when Medicare fraud initially begun, but scholars believe that it began as early as the implementation of the health care system in 1965. There are several reasons for this inconsistency. First, the definitions of the malpractice are broad. Estimation for the dollars misspent does not necessarily distinguish between error and waste payments from fraudulent payments. Alternatively, they may use a holistic approach on the entire healthcare system instead of Medicare fraud alone. Second, the stakes are becoming higher. In other words, the amount of dollars involved in a single fraud incident is significantly rising, with the US Department of Justice estimating these figures to be anywhere between $30 and $50 million dollars from the early estimations of just $1 million dollars. Third, majority of fraud incidents go undetected, thus the lack records (King, 2010). According to the Inspector of the Department of Health and Human Services, it is extremely difficult to determine the precise extent of fraud in Medicaid and Medicare. There are many forms of Medicare fraud, including the common ones such as phantom billing, patient billing, unbundling and up-coding schemes. Phantom billing involves presentation of bills by a medical provider for unperformed or unnecessary procedures, unperformed or unnecessary medical tests, unnecessary equipment, or billing used equipments as new ones. In patient billing, a patient is also part of the fraud scheme and offers their Medicare number for some kickback exchange (Bennett and Medearis, 2003). Consequently, the medical provider bills the Medicare number for any particular reason, with the patient consenting to the false administration of those medical treatments. In Unbundling and up-coding schemes, medical providers use billing codes that imply that the patient requires expensive medical procedures and treatment. Other Medicare frauds include completion of the Medical Necessity Certificate by an equipments or drug supplier instead of a physician, reflex testing where medical specialists automatically run after other tests fall within certain ranges, despite the physician not requesting for the test. There is also defective testing, where the part of the test or the whole test are skipped due to technical problems such as machine malfunction or destroyed/insufficient samples. Code jamming, or the jamming or insertion of fake diagnosis codes to attain Medicare coverage, is also common. Furthermore, there is double billing, where a medical provider charges the same service more than once, such as using a bundled or automated set of tests and again as an individual cost. Again, there is an improper cost report where medical providers submit false cost reports with the aim of receiving higher Medicare reimbursements (Jost and Davies, 2000). Others include phantom employees (expensing non-existing hours or employees worked), waiving patient co-payments routinely, and offering substandard nursing homecare and requesting for reimbursement. In the US, South Florida remains the epicenter of Medicare fraud. In 2008 alone, authorities estimated that more than $4oo million was lost in fraudulent Medicare bills. Still in the same year, authorities discovered that Miami-Dade county charged almost six times higher than Los Angeles County which happens to have almost three times larger Medicare population (HHS, 2008). Additionally, Miami-Dade County recorded 72% of the entire nationwide Medicare claims for HVI/AIDS treatment. However, the biggest and most significant Medicare fraud scheme of all time was the Columbia/HCA fraud case. Beginning 1997, the Columbia/HCA case was under investigation by the federal government. The investigation, which took more than ten years, began in 1997 by a raid to the conglomerate hospital. The findings of the raid had serious impacts on the health care system of the US, bringing the attention of the federal government on the fraud schemes involving Medicare benefits to American citizens. The target, Columbia/HCA hospital situated in Florida, had defrauded the Medicare system of billions of dollars in false and fraudulent transactions and bills (Shane, 2000). This raid was an initiative of more than 30 whistleblowers lodging Qui Tam lawsuits. There were criminal complaints in five federal court districts against the company, all spelling an array of criminal activity. The main accusations included intentionally indentifying the marketing expenses of the hospital giant as reimbursable patients’ costs, striking illegal haggling deals with some home care agencies, and claiming reimbursement for the idle space within the hospital compound claiming it was for patient care. After thorough investigation, authorities found the hospital giant guilty of offering kickbacks to doctors in order to increase their referrals to the hospital. Additionally, authorities found the HCA hospital system guilty of winning doctors’ favor by arranging for loans without repayment expectations, free office remodeling, free pharmaceuticals drugs, and free rent. In another instance, the company bought one of the businesses owned by a group of doctors to gain their favor (Bennett and Medearis, 2003). In Tennessee, the hospital giant was guilty of up coding, inflating the medical bills of patients. More than 30 million medical bills were up-coded, at times with several factors higher than the competing medical providers were. In a second round of fraudulent charges, the hospital had three categories of accusation. The first and most significant was the intentional overstatement of the company’s expenses in government filings in order to increase their compensation from Medicare. The cost reports generated hundreds of millions of dollars per annually for the giant. The second category dealt with submission of expenses using the wound-care centers operated at HCA facilities by Curative Health Services, a medical provider from St, Louis Park, Minn. The government found that HCA had an agreement with Curative Health Care to submit medical bills for marketing and management services, not eligible for reimbursement (US Congress, 2011). The last category involved payment of kickbacks to doctors to induce referrals to facilities. Columbia/HCA and its accomplices were found guilty, but no individual was sent to prison. Instead, the government penalized the institutions (US$1.7 billion) and gave them a long repayment period that the effects of the penalties seem neutralized. The fact that this was merely one case is evident that Medicare frauds cause the government and taxpayers to lose hundreds of billions of dollars per year. However, there is no definite method of determining fraudulent Medicare bills and activities. The US government does not have control mechanisms to detect fraud due to the nature of the system, and largely depend on well-wishers and whistleblowers like in the Columbia/HCA case (HHS, 2008). Based on this, estimating the cost of Medicare fraud may follow two paths: estimates from whistle blowing organizations including wastes and without wastes. In the first group that includes wastes, there are several examples including a 2008 report by PricewaterhouseCoopers Health Research Institute that Medicare fraud costs about 1.2 trillion dollars. According to a report by Thomson Reuters in, the taxpayer loses between 600 to 850 billion dollars every year to wastes in the health care system, defining as the eliminable health care spending without reduction in quality of care. According to yet another report by White Office of Management and Budget in 2009, Medicare and Medicaid cost 54billion dollars (and the entire health care industry recording 98billion dollars) annually due to improper health care reimbursements. The report indicates that this figure is actually an increase of about 37.5% from the figures recorded in 2008 (Aldrich, 2011). Still in 2009, a report by the Centers for Medicare and Medicaid Services indicates that improper payments in excess of 24.1 billion dollars through the Medicare fee-for-service providers occured. These figures incorporate the 7.8% error rate. Furthermore, the HSS Office of Inspector in 2009 reported that there were Medicaid and Medicare audit disallowances of about 1.2 billion dollars in their 2008 financial year report, adding that the organization reclaimed about 662.5 million dollars of improperly paid disallowances within the health care system (Shane, 2000). Lastly, a 2007 report by the Comprehensive Error Rate Testing program claimed that more than 209 million dollars was lost to improper Medicare payments in the year 2007. In the second group that does not incorporate wastes, there are also numerous examples. The Thompson Reuter report indicates that the health care frauds cost between 125 and 175billion dollars per year. The Federal Bureau of Investigation (FBI) estimates that about 75 and 125 billion dollars are lost to fraud, considering the fact that about 3 to 10 of all private and public health care bills are fraudulent. Yet another report from the National Health Care Anti-Fraud Association estimates this figure at 60billion dollars. GAO claims that 10% of all Medicare claims from states were improper in 2007, estimating the figure to about 32.7 billion dollars. Center for Health Transformation estimates that Medicaid/Medicare fraud costs the taxpayers about 100billion dollars per annum, while the Coalition against Insurance Fraud (an anti-fraud watchdog) estimates this figure is approximately 80billion dollars. Additionally, the American Association for Homecare estimates that Medicare fraud costs one billion dollars for the home health care section alone. Despite the differences in estimation, the cost of Medicare fraud is clearly very high and seems to skyrocket over the years. This issue is serious and needs government attention before it cripples the health care system (FBI, 2008). In the past, the government has enacted several rules and regulations that aim to combat health care abuse and fraud. In 1986, the federal government passed the False Claim Act (FCA) whose central focus was health care fraudsters. The act mandates the federal government to sue violators for damages, in addition to a fine of between 5500 and 11000 dollars for each false claim. Nonetheless, the problem became persistent; prompting the US Attorney General made tracking health care frauds and abuses the top priority in the Department of Justice (Aldrich, 2011). In 1996, the Health Insurance Portability and Accountability Act established the Health Care Fraud and Abuse Control (HCFAC). The attorney general and the HHS allocated more than 248million dollars to HCFAC in 2007. Estimates indicate that HCFAC collected more than 11.2billion dollars in fraudulent claims between 1997 and 2007, with 1.8billion dollars in 2007 alone. Despite this great achievement, the recovered claims from Medicare frauds make up about 5% of the losses each year (Aldrich, 2011). To enhance these preventing and recovery measures, there is need for other solutions. There are four viable solutions for this problem. First is offering training and education, with focus on the importance of appropriate coding and documentation in order to accurately identify the condition of a patient and provide effective and timely treatment. Accurate information deters fraud as well as provides patients with quality health care. Second, there is need to implement computer-aided coding, which automatically generates a series of medical codes for validation, use, and review based on clinical documentation of medical providers. Third, the Office of Inspector General and HHS needs to step up monitoring and control measures to deter Medicare fraud (Bennett and Medearis, 2003). Last, the federal government needs to develop a data modeling and data mining that assists analyzing and detecting abuse and fraud pattern. Medicare fraud remains the most significant issue in the health care system of the US. There are different forms of Medicare fraud, the most common being phantom billing, patients billing, and up coding and unbundling schemes. According to estimates, the cost of Medicare fraud is in the order of hundreds of billions of dollars per year to the taxpayers. These figures continue to increase over time. The federal government has enacted several regulations safeguarding the health care system, but due to the nature of the industry, they detect only a few (King, 2010). Whistle blowers and watchdog organizations assist the government in detecting these crimes. There is need to implement new solutions to combat these problems. References Aldrich, N. (2011). Medicare Fraud Estimates: A Moving Target? Retrieved on March 21, 2012, from http://www.smpresource.org/Content/NavigationMenu/AboutSMPs/MedicareFraudEstimatesAMovingTarget/Medicare_Fraud_Estimates.pdf Bennett R. S., and Medearis, D.M. (2003). Health Care Fraud; Recent Developments and Timeless Advice. Texas Medicine. 99: 50-56. Iglehart, John K. (2001). The Centers for Medicare and Medicaid Services. New England Journal of Medicine, 345, no. 26: 1920–24. Available at http://content.nejm.org/cgi/content/full/345/26/1920 Jost, T., and Davies, S. (2000). The Law of Medicare and Medicaid Fraud and Abuse. Minnesota: West Group. King, K. (2010). Medicare Fraud, Waste, and Abuse: Challenges and strategies for Preventing Improper Payments. Darby, PA: Diane Publishing. Shane, R. (2000). Detecting and Preventing Health Care Fraud and Abuse-We’ve Only Just Begun. American Journal of Health-System Pharmacy, 57: 1078-1080. Stanton, T. H. (2001). “Fraud-and-Abuse Enforcement in Medicare: Finding Middle Ground.” Health Affairs, 20:28-41. U.S. Department of Health and Human Services and Department of Justice. (2008). Health Care Fraud and Abuse Control Program Annual Report for FY 2007. Available at http://oig.hhs.gov/publications/docs/hcfac/hcfacreport2007.pdf. US Department of Justice. Federal Bureau of Investigation. (2008). Financial Crimes Report to the Public. May 2005. US Congress. (2011). Medicare Fraud: An Abuse. Detroit: BiblioBazaar. Read More