As the White House prepared to wrangle senators into spending $848 billion in the next decade on new healthcare initiatives, budget chief Peter Orszag shared the news that $54 billion of what the CMS spent last year was paid in error.
To err is expensive
The CMS erroneously paid $54 billion in fiscal 2009, but trying to discern what is a legitimate claim isn't easy
The figure could create the impression that if the bill payers get their act together, the federal government could fund much of its plans to expand health insurance coverage with savings wrung from Medicare and Medicaid. Orszag said President Barack Obama within days would issue an executive order that would make the problem more transparent to the public and hold top officials accountable for fixing it.
“We need to protect taxpayer dollars because every dollar that goes to the wrong recipient or in the wrong amount” is a dollar that isn’t available to achieve the goals of the given government program, Orszag said in a conference call with reporters. The erroneous healthcare payments amounted to more than half the government’s fiscal 2009 blunders, totaling $98 billion. The portion attributed to fee-for-service Medicare was $24.1 billion, or 7.8% of all payments during the period.
That’s more than double the rate reported for 2008, largely because of a stricter review approach adopted midyear. Meanwhile, the CMS calculated an unofficial error rate of 12.4%, or $35.4 billion, which represents an attempt to estimate what the stricter approach would yield if applied retroactively. The number is statistically squishy but will be the baseline for measuring improvement in fiscal 2010.
What the number actually represents is complicated, but the CMS will be under pressure to reduce the number of payment errors while taking a broader view of what defines one.
The Medical Group Management Association said it would watch closely that the CMS offers adequate explanation and opportunities for input from providers as the agency goes about changing payment policies in order to combat the problem. “There are so many changes with little to no education,” said Robert Bennett, an MGMA government affairs representative for physician payment and quality issues.
Providers are now dealing with a variety of new government contractors—Recovery Audit Contractors, Medicare Administrative Contractors and Zone Program Integrity Contractors—all intended to help the CMS run a tighter ship and fight fraud. “You can call it program integrity,” Bennett said. “I call it treating the 98% of honest, law-abiding providers like the 2% of criminals that are out there.”
In May, HHS and the Justice Department announced a more collaborative and aggressive approach to fighting healthcare fraud, replicating the success of multiagency “strike forces” in South Florida and Los Angeles in other cities. Attempts to estimate how much the government loses to healthcare fraud reach equally troubling heights, generally thought to be tens of billions of dollars each year. But that’s not what the error rate measures.
What the government calls errors or improper payments aren’t all, or even mostly, cases in which the government succumbed to fraud or paid for services that weren’t needed by patients or appropriately provided by physicians, hospitals and suppliers. In a portion of the errors—though they persistently account for less than 1% of the sum—the government has paid too little rather than too much.
“It’s hard to say how many of these things are really bogus—it’s really just they didn’t comply with our rules,” said George Mills, director of the CMS’ Provider Compliance Group, a division that represents an organizational shuffling in response to pressure from HHS’ inspector general’s office to improve the error reviews.
Nearly all of the improper payments were correctly paid based on the claim submitted; that is, they could only be discovered by digging into the records, what the CMS calls “complex medical review.” “When you look at our data, when we pay a claim, we pay it right based on what’s on the face of the claim nearly 100% of the time,” Mills said. Similarly, the CMS finds claims with all the right documentation in place that are fraudulent, he said.
CMS contractors conduct complex medical reviews on a tiny number of claims before they’re paid out of about 4.4 million submitted daily. Sen. Chuck Grassley (R-Iowa) introduced a bill last week that would allow HHS to waive Medicare’s prompt-pay rules and delay payment for up to a year to allow more time for reviewing claims identified as vulnerable to abuse because they come from certain categories of providers, services or suppliers—nationally or in particular regions—and specific providers and suppliers.
The agency’s error-review process, however, is an attempt to figure out how many of the claims that were paid couldn’t be supported by the underlying records. A CMS contractor performs a review of a statistical sample of claims in order to calculate the rate.
The review had been yielding an error rate in fee-for-service Medicare that declined steadily from 14% in 1996 to 3.6% in 2008. In the course of assessing the validity of the review specific to claims for durable medical equipment, the inspector general’s office concluded that the CMS had been inappropriately instructing the contractor to make inferences based on billing histories rather than seek out the required documentation in medical records. The office issued additional reports on the error-rate process in May and September 2009.
At least some of the errors represent payments for claims that are fraudulent or bill the government for something that the program’s rules view as medically unnecessary or were provided in a more intensive and expensive setting than was warranted. It’s unlikely that the government would ever wring savings out of the truly bad claims if it fails to make sure that its rules are followed, said Joseph Vengrin, HHS’ deputy inspector general for audit services.
“That becomes very difficult if you don’t have a paper trail,” Vengrin said. “I think that just breeds a fraudulent environment.” In the inspector general’s review of a small subset of DME claims reviewed for the error rate in 2006, 11 were deemed potentially fraudulent and referred to the office’s investigators.
Mills, meanwhile, pointed out that many of the errors can be attributed to what he calls “penmanship”—physician signatures that are illegible—and that “the biggest issue is documentation is missing.” Many of the documentation problems, he added, involve services or supplies ordered by one person and delivered by another.
Often those claims are legitimate, Mills said, but under the new approach should be rejected or counted as errors if they’re paid. One error identified by the inspector general’s review of DME claims, Mills said, was a commode delivered to an 83-year-old woman just home from an inpatient rehabilitation facility after knee replacement. The physician’s documentation supporting the medical necessity was missing, but it was clear from the billing history that she was incontinent and couldn’t make it to the bathroom.
“We will work with the provider community and educate them about what the requirements are for documenting services because that’s where the problem is,” Mills said.
Providers, though, may have to brace for a government more aggressive than ever about evaluating claims in response to a White House that’s battling both the reality and impression of fraud, waste and abuse, as well as looking for reservoirs of cash to fund its policy objectives.
“Can the payers squeeze billions of dollars out of providers? Probably,” said Frank Sheeder, a partner in the law firm Jones Day and second vice president of the Health Care Compliance Association. “The definition of an error is in the eye of the beholder, as we see with the OIG’s disagreement about how to calculate the error rate,” Sheeder said, adding, “If there’s waste and inefficiency in the system, that’s something that starts with policy decisions in our government.”
The error rate for Medicare Advantage reported last week also carried political implications that grow murkier beneath the surface. Based on payments made in 2007—the most recent year for which the sponsoring insurance companies have relayed data to the government—$12 billion, or 15.4%, was paid in error. The Medicare Advantage figure reported in 2008 was 10.6%, which Orszag said could not be explained by changes in methodology used to crunch the number.
“This is one of the reasons as part of health reform we feel there are crucial changes necessary to the Medicare Advantage program,” Orszag said. Obama has consistently singled out federal subsidies to insurance companies through the Advantage program as a source of waste in the system that could fund his reform effort.
CMS spokesman Peter Ashkenaz, however, said the 2008 and 2009 Medicare Advantage rates are not comparable. The new number for the first time fully reflects risk adjusting—cases in which the plan can’t validate the diagnosis are categorized as errors—and a more aggressive audit process. The 2009 figure, Ashkenaz said, is the baseline for measuring payment accuracy in the program.
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