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COST: The HEAT Is On For Fraud And Abuse

Would you pay $4,000 for a knee brace, shoulder brace, and a heating pad? Would you pay for physical therapy for an imaginary person? How about two knee braces for a patient with only one leg? Probably not -- which is exactly why federal prosecutors are cracking down on fraud and abuse in Medicare and Medicaid.

How much of health care spending consists of fraud and abuse? And what can we do to stop it? These questions were the focus of a Senate Judiciary Committee hearing, "Effective Strategies for Preventing Health Care Fraud."

Deputy HHS Secretary Bill Corr and Assistant Attorney General Tony West testified about their departments' joint task force on health care fraud. The National Health Care Anti-Fraud Association estimates that fraud makes up about three percent of total health care expenditures (more than $60 billion a year). Other estimates go even higher.

A recent study by health policy experts at George Washington University School of Public Health in collaboration with the National Academy for State Health Policy found that fraud presented a major challenge for both the public and private sector. The report recommends increased uniformity and transparency when fraud is reported. The lead author, Prof. Sara Rosenbaum, said in a news release that "it is difficult to fashion consistent policies to address fraud, a critical component of health reform." She cautioned against conflating payment errors with actual fraud. They are different problems, she noted, and required different solutions. 

In his testimony, Corr paid special attention to one of the task force's new initiatives, the Health Care Fraud Prevention and Enforcement Action Team (HEAT). It focuses on Medicare and Medicaid, and Corr estimated that related activities have returned about $13.1 billion to the Medicare Trust Fund.

Anti-fraud strategies utilized by the HHS and Justice include consolidating information (for real-time data sharing) and increasing their "on-the-ground presence," so officials are able to quickly detect, investigate, and prosecute fraud and abuse, said Corr. Officials are also placing an emphasis on preventing fraud before it gets out of hand. Anti-fraud task forces such as HEAT are "employing new methods of analysis...to use claims data to identify fraud, using investigators trained in health care fraud, working with DOJ prosecutors, and implementing new prevention techniques."

For example, anti-fraud strike forces train personnel to look for spending outliers among providers of durable medical equipment (DME). In South Florida, such fraud prevention efforts, plus strike force prosecutions, brought down DME claims by 63 percent (or approximately $1.75 billion) in a single year. Anti-fraud strike forces in other cities have had similar success, such as a recent bust in Houston, where a medical supply company made $840,000 worth of false claims.

Corr applauded the Obama administration for making fighting against waste and fraud a priority. Thanks to more rapid response, Corr estimates HHS Office of Inspector General fraud investigations have saved $4 billion, approximately $800 million more than last year. He said,

We are identifying perpetrators of fraud, recovering the money they stole, and removing them from federal health programs providing health care coverage to elderly, low income, and disabled beneficiaries. In the process, we are using new methods of data analysis and intelligence gathering to detect patterns of criminal activity, including regions of the country where they are most prevalent, and the types of payments from Medicare and Medicaid that are most vulnerable to fraud. Using this new information, we are pursuing policy changes and developing innovative methods of preventing fraud.

Corr and the HEAT task force would like to see this innovation continue. Corr recommended a national summit on health care fraud. "Collaboration and innovation are essential in the fight against fraud," Corr said. He believes these factors, which led to HEAT's success, could be applied more broadly at a summit where health care stakeholders  -- including private insurers, beneficiaries, law enforcement, and health care providers -- come together.

Though not all waste in the health care system comes from fraud and abuse, it's important to protect Medicare and Medicaid, which serve the frail, old, poor or vulnerable. As Tony West testified,

While most medical or pharmaceutical providers are doing the right thing, when Medicare or Medicaid fraud occurs, it costs the American taxpayer real dollars... those billions represent health care dollars that could be spent on services for Medicare and Medicaid beneficiaries -- on seniors, children, and families in need -- but instead are wasted on fraud and abuse.