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The Miami Herald - Medicare's New Order For Claims: First Weigh, Then Pay

News Article

Location: Miami, FL

By Jay Weaver

The behemoth Medicare bureaucracy will have to act more like a credit card company in flagging suspicious bills under a new federal law that could save taxpayers billions of dollars a year in wasteful government healthcare spending.

The anti-fraud provision, tucked into the Small Business Lending Act that became law Monday, would force Medicare to end its 45-year-old policy of paying claims quickly without verifying them.

That antiquated billing system, designed to keep the wheels of public healthcare spending going full speed, has led to an estimated $60 billion-plus a year in Medicare fraud -- with South Florida recognized as ground zero.

The Centers for Medicare and Medicaid Services, which pays out $500 billion yearly for elderly and disabled Americans, would have to adopt new billing software with ``predictive modeling'' by next year. Such analytical technology enables the credit card industry to detect questionable bills for, say, a flat-screen TV purchased outside a cardholder's immediate area so that companies can notify the customer and stop payment if fraud is a factor.


Sen. George LeMieux, R-Florida, who sponsored the anti-fraud bill, said he has been frustrated watching Medicare continue to pay billions to dubious healthcare providers for unnecessary or bogus services -- only to witness the Justice Department chase after the criminals to recover a fraction of the money.

``Amazingly, they will tell us they're doing everything to stop fraud,'' Le-Mieux said of the Medicare system. ``But they're not doing anything about this. They're losing one of every $7 to fraud.''

The cost of rolling out the new billing technology would reach an estimated $930 million over the next decade, but LeMieux said the anticipated savings would far exceed that expense.

A senior Medicare official said Wednesday that the agency has already started a pilot billing program with predictive capabilities for suspicious claims, providers and facilities. Among the targeted areas: Miami-Dade.

``The truth is, we already have the authority to use predictive analysis and we're already doing some of this,'' said Peter Budetti, Medicare's Baltimore-based deputy administrator for program integrity. ``We have every intention and interest in going forward.''

Under LeMieux's legislation, signed into law by President Barack Obama, Medicare has to start competitive bidding for ``predictive modeling'' software contractors by January and implement the billing technology in the 10 worst fraud states by July.

Medicare's billing contractors would use the new technology for processing claims for both hospitalization and outpatient services, the bulk of the program's costs.

After the first year of operation, the Department of Health and Human Services' inspector general's office would report to Congress on the actual savings. If the savings are significant, some of the money would be used to expand the program to 10 more states.

The crisis of Medicare fraud -- through scams involving medical equipment, HIV infusion, home diabetic services, physical therapy and mental health counseling -- has spun so out of control that the U.S. government held the nation's first healthcare fraud summit in Miami in July.

That same day, more than 350 law enforcement officers arrested 94 suspects in Miami, Detroit, Brooklyn, Baton Rouge and Houston, all accused of scheming to bilk $251 million from the taxpayer-funded program. It was the nation's largest criminal healthcare takedown.


Top Health and Human Services and Justice Department authorities have acknowledged that the so-called ``pay and chase'' system has largely been a failure.

``I would say that that world is coming to an end,'' HHS Secretary Kathleen Sebelius told The Miami Herald during the fraud summit.

``When we see this amount of fraudulent activity, it's no longer going to be assumed that we start with the premise that everybody is on the up and up,'' Sebelius said. ``We actually have to get more stringent. That's a very different way of doing business than assuming everything is OK and then looking back and finding out that it really isn't.''

Sebelius and others said that Medicare has previously adopted new technological tools to fight fraud, by screening Medicare providers, red-flagging certain claims and imposing payment restrictions in certain regions of the country, such as Miami-Dade.

But those fixes haven't gone far enough, critics say.

The new Affordable Care Act should help. It promises healthcare for more than 30 million uninsured Americans, and includes tougher penalties for offenders, expanded administrative powers for Medicare and $350 million to combat healthcare corruption over the next decade.

Under the Act, Medicare officials this month unveiled proposed regulations that call for suspending payments to a provider if there has been a ``credible allegation'' of fraud, including tips from consumers. The rules also require inspectors to visit more medical facilities to ensure they are legitimate and rating them by their risk for fraud.

But developing an advanced billing system that can pinpoint suspicious claims right away may be the greatest technological challenge for the massive Medicare system.

``The contractors all use technology that is geared to process claims as quickly as possible,'' Marc Smolonsky, HHS associate deputy secretary, said at the fraud summit. ``There is nothing inherent in that technology that prevents fraud.''

But he vowed: ``We're not going to keep paying these claims and it's going to stop now.''

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