Stopping Fraud Before It Happens

Joe Pitts, Nov 30, 2012

How upset would you be if someone stole $350 million from you? Pretty angry, right? What if a whole bunch of people were stealing $60 billion?

Waste, fraud and abuse are rife in government health care programs. Annually, Medicare alone loses between $60 billion and $100 billion in "improper payments." This can include simple mistakes such as inadvertently billing a procedure twice, or it could be criminal schemes.

In the past few years, some major schemes have been uncovered. In May, the Justice Department brought charges against 107 individuals who had bilked a total of $452 million from Medicare. Earlier this year, charges were brought against a single doctor for over $350 million worth of fraud.

This is money that American citizens entrusted to the government to help pay their medical expenses. Every one of us is being robbed when individuals defraud Medicare. America’s seniors are counting on the government to manage the program wisely.

Why is it so easy to defraud Medicare? Right now, Medicare pays most claims on demand. If a health care provider is registered with the Centers for Medicare and Medicaid Services and fills out the reimbursement form correctly, they will be delivered a payment with few questions asked.

Months or years later, Medicare may discover that these payments were improper and decide to try to get the money back. This way of doing things is known as pay and chase.

Pay and chase doesn’t work out very well. Imagine if banks just left all their money out on the counter and waited a few weeks before trying to track down thieves. Criminals don’t keep their illicit gains in secure accounts. They spend the money. When the government does come calling, there may not be much left to recoup.

We have to vigorously prosecute criminals, but a better idea is to stop fraud before it happens. This week, I chaired a hearing of the Energy and Commerce Health Subcommittee to examine current anti-fraud measures in the Medicare program and to discuss potential new approaches. Medicare needs to move away from "pay and chase" and use approaches typically found in the private sector.

Various pilot projects within Medicare are already looking into using predictive analytics to flag possible fraud. This process uses computer algorithms to detect unusual claims.

If someone tries to use your credit card number to route large sums of money to Russia, your bank will probably give you a call and ask whether you are actually responsible for the charges. They notice a problem not because an individual is looking at every transaction, but because a computer program noticed activity that isn’t typical.

These systems have the potential to save a lot of money. Alanna Lavelle, Director of Special Investigations for private insurer Wellpoint testified that the return on investment for her company’s predictive analytics system is more than 15 to one.

Unfortunately, the government project appears to be falling behind schedule. The administration failed to file a report to Congress that was due in October, and we have no idea when it may finally be done.

We also discussed the possibility to creating a secure ID program for Medicare. This may help cut down on identity theft within the system. However, such a program has to be carefully considered and implemented. Dr. Kevin Fu, of the University of Massachusetts testified about the many ways that a modern smart ID program can still lead to fraud.

There are many other anti-fraud efforts Medicare managers aren’t taking advantage of. Government Accountability Office Health Care Director Kathleen King testified that the government has so far failed in, "strengthening the provider enrollment processes and standards, improving pre- and post-payment claims review, and developing a robust process for addressing vulnerabilities."

Republicans and Democrats agree that we are losing far too much to waste, fraud and abuse. I believe that this week’s hearing is the first step in constructing bipartisan legislation to step up implementation of smart strategies to stop people from robbing Medicare blind. As I continue to lead the Health Subcommittee next year, protecting Medicare will be one of my top priorities.

Congressman Joe Pitts, a Republican, represents Pennsylvania's 16th Congressional District, which includes Lancaster County and parts of Chester County and Berks County.

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