Adding fuel to the growing political bonfire over healthcare fraud and supporting efforts to constrain Medicare payments, a report released last week by HHS' inspector general's office said Medicare shouldn't have paid 14% of the claims submitted to the program in federal fiscal 1996.
Extrapolated out to all Medicare spending that year, the report's findings suggest Medicare may have overpaid providers by as much as $23 billion. That figure happens to match the annual Medicare savings target included in federal balanced-budget bills pending in Congress.
Those bills seek to slow Medicare spending growth by about $115 billion over five years.
HHS officials characterized the report as the most comprehensive effort by federal officials to quantify errors in claims submitted to Medicare by providers. The HHS inspector general was required to conduct the billing audit under a 1994 law called the "Chief Financial Officer Act."
In its report, the agency reviewed 5,300 claims and found that 1,577, or nearly 30%, contained errors.
Of the suspect claims, some 46% were considered errors because they were not documented properly. Another 36% were claims for services that were not medically necessary. Some 8% included billing codes that overstated the severity of a patient's reason for treatment. The remaining 10% of the cases were called errors for a variety of other reasons.
Of the claims in error, 35% were submitted by hospitals; 22% by physicians; 16% by home-care agencies; 10% by skilled-nursing facilities; 6% by laboratories; and the rest by other types of providers.
Although the findings themselves don't prove a deliberate attempt by providers to defraud the government, many lawmakers not surprisingly used the report to suggest just that.
A group of Democratic senators immediately announced their own push to combat Medicare fraud.
They called on HHS to develop a plan within 30 days to recover the overpayments identified in the report. They also said HHS should perform more audits and pay for them by charging providers who submit inappropriate claims.
The agency's report said the books and records of HCFA, which oversees Medicare payments to providers, were so poorly kept that they could not be reviewed properly. The agency also criticized HCFA for not having a system to detect improper billings.
HCFA Administrator Bruce Vladeck said his agency is implementing a program to reduce improper billings, including performing more on-site audits of provider records.
But GOP lawmakers criticized HCFA's efforts and said the high rate of error shows that the Medicare program needs an overhaul.
"This is a startling, dramatic indictment of this government-run healthcare program," said Rep. Nancy Johnson (R-Conn.).
Ironically, Congress is threatening to cut funding to a HCFA initiative that could help the agency straighten out its billing woes (See story, p. 14).