Medicare Fraud Puts 'Waste Patrols' on Alert

First comprehensive report shows as much as $23 billion of waste and fraud each year

Sen. Joseph Biden (D) of Delaware says he rarely goes to a town meeting in his small state without a senior citizen standing up to complain about something wrong in his or her Medicare bill.

Once, a woman in Middletown brought in the bill from her husband's 21-day hospital stay. The hospital had incorrectly billed Medicare for 36 major X-rays. "And Medicare paid it," Senator Biden says.

So he wasn't surprised when an audit of Medicare by the inspector general of the Department of Health and Human Services (HHS) - the results of which were released yesterday - found that between 11 percent and 14 percent of the Medicare fund is lost each year to payment mistakes and outright fraud. That's between $17 billion and $23 billion, higher than earlier estimates.

The audit - the most comprehensive ever of the Medicare program - is likely to add fuel to the emotional debate over how best to save the Medicare trust fund, which is headed for bankruptcy at the turn of the century if current trends continue. Opponents of Senate-proposed changes will argue that recouping $23 billion annually would make those changes unnecessary.

In addition to proposing specific reforms to target waste, lawmakers and HHS are trying to harness vigilance by senior citizens to fight abuses. They've authorized pilot "Medicare Waste Patrols" in 12 locations, enlisting retired accountants, health professionals, and businesspeople to help other seniors identify problems in their Medicare bills and report them.

"Perhaps our strongest allies are the seniors," says Sen. Jack Reed (D) of Rhode Island, one of the sites for the experiment. "Frankly, they know where [fraud] happens and they'll be able to help us."

The inspector general's audit sampled 5,300 claims paid in 1996 from all 10 regions of the country and for a range of services. It found that 1 out of every 3 claims contained a mispayment; the average error was $670.

The errors were not all simple mistakes by health-care providers. Forty-six percent of the bad claims were improperly documented; 36 percent involved services that were not medically necessary; and 8 percent were caused by providers using the wrong billing code.

"The CIA has a secret budget, a black budget - and now it seems Medicare has a black-hole budget," says Sen. Tom Harkin (D) of Iowa, who has long fought Medicare waste.

As a short-term fix, the balanced-budget deal calls for $115 billion in cuts in projected Medicare spending over five years - equivalent, coincidentally, to the amount the report suggests would be lost through waste and fraud in the same time period. It also calls for transferring most of the increasingly costly home-health-care program to that part of Medicare that is paid for from general revenues and beneficiary premiums.

But the Senate-passed bill implementing the agreement goes further: It proposes gradually raising the Medicare eligibility age to 67, increasing premiums on wealthier recipients, and instituting a $5-per-visit premium for home health visits.

The report plays into the argument between the defenders of health-care providers - often Republicans - and those of beneficiaries - often Democrats - about who should bear the increased burden of saving the program. Many Republicans say providers have been squeezed so much by reductions in their payments that they have little left to give. Opponents of the Senate bill say the findings prove that, in Biden's words, "the first place to start is right here.... Start with the payments for things that should not receive payment."

Eliminating fraud, however, will not solve the long-term crisis that the retirement of the baby-boom generation between 2010 and 2030 will cause. That, observers say, will force structural changes in Medicare even more profound than those in the Senate bill.

Meanwhile, the senators make these proposals to combat the waste:

* Make it harder for would-be providers to get an ID number that allows them to bill Medicare by requiring a $50,000 surety bond. Currently, "it's easier to get a Medicare number than a credit card," Senator Graham complains. Florida has used bonds to greatly reduce fraud, he says.

* Allow Medicare to engage in competitive bidding. Current law allows the Veterans Administration to buy medical supplies and equipment through competitive bids, but does not allow Medicare to do so.

* Strengthen HHS's ability to combat fraud through sufficient funding of antifraud measures and increased numbers of auditors. A pilot program, Operation Restore Trust, is already operating in five states. The American Hospital Association recently complained that hospitals are under siege from law enforcement and asked HHS to back off. The department rejected the request.

* Give seniors better information about how to check their bills, and ensure that they get fully itemized bills so they can spot errors or fraud.

"There should be no more excuse for this problem," Graham says."

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