Medicare is Afflicted with Chronic Wasting Disease, and its Catchy | Citizens Against Government Waste

Medicare is Afflicted with Chronic Wasting Disease, and its Catchy

The WasteWatcher

All of the healthcare reform bills currently under consideration depend, to a significant degree, upon eradicating waste and abuse from Medicare in order to offset the costs of the new coverage package.  Squeezing waste out of Medicare is a laudable goal and an aggressive waste eradication campaign could yield savings of $40 to $50 billion annually (conservatively), or 10 percent, a much higher percentage of fraud than exists in private healthcare systems.  Unfortunately, it is a pipedream.  Administrations and Congresses going back decades have tried, and failed miserably, to eliminate the waste. 

Medicare has been, from its inception, a politicized program and, as such, is driven primarily by political power and influence, not increased efficiency, better access, higher quality or better health outcomes.  The program’s basic structure, its incentives, and its governance all encourage wasteful spending and fraud.  It is like “The Terminator,” built to withstand even the most modest attempts to cut fat and achieve efficiencies.  Regardless of the good government rhetoric emanating from Washington and somber promises to introduce a tsunami of competition and vanquish waste and abuse, the same structural rules will hold true for any future government-run health insurance option that Congress enacts. 

Medicare already has numerous agencies of the federal government looking over its shoulder, including the Centers for Medicare and Medicaid Services (CMS), the Department of Health and Human Services (HHS) Office of Inspector General (OIG), the Government Accountability Office (GAO), the Federal Bureau of Investigation (FBI), Department of Justice, the Office of Management and Budget, and House and Senate oversight committees, not to mention the state law enforcement agencies, all busily quantifying the mountains of waste and fraud.  What is woefully lacking is the political will to act upon those realities. 

The durable medical equipment (DME) industry is one of the most infamous sources of waste.  Medicare spends about $8.5 billion annually to DME providers who sell wheelchairs, diabetic test kits, oxygen concentrators, and other items to patients for Medicare reimbursement.  A July, 2008 GAO report stated that over a one-year period in 2006 and 2007, Medicare overpaid for DME claims by $1 billion.

In 2006, federal investigators for the OIG’s office busted a ring of criminals operating in South Florida who were fraudulently billing Medicare for phony HIV-infusions.  Of the 500 scam businesses uncovered in the dragnet and subsequently thrown off the Medicare provider roles, half appealed for reinstatement in the program and 90 percent of those appeals were successful because, according to the OIG, “there is no clear criteria regarding the types of evidence necessary to reinstate billing privileges.”  A July, 2008 GAO report identified serious weaknesses in Medicare’s provider screening process after the FBI set up bogus DME businesses and demonstrated that they were routinely able to obtain clearance from CMS. 

According to former HHS policy analyst Walton Francis in his new book Putting Medicare Consumers In Charge:  Lessons for the FEHBP, this is “the kind of problem that is inherent in the ‘any willing provider,’ ‘we pay all bills properly submitted,’ and ‘due process’ principles written into Medicare law, regulations, and practices….it is hard to believe that any private payer would have taken twenty days, let alone twenty years, to stop paying blatant fraud artists for nonexistent medical equipment sales from nonexistent businesses.”  

President Obama and supporters of the various healthcare bills have chattered incessantly about how their plan will introduce smart, private-sector-like competition into the healthcare markets to drive down costs.  In fact, the introduction of “competition” has been the rhetorical lynchpin of their fixation on creating a government-run health insurance option. 

Even the most casual observation of the government-run Medicare program and its history will expose that spin as sheer nonsense and the DME industry, once again, provides the lesson. 

In 2003, as part of the Medicare Modernization Act, partly as a reaction to the outdated and increasingly byzantine pricing rules for DME and partly as a bulwark against the ongoing pillaging of the program by scam providers, CMS took a swing at introducing some new competitive bidding rules for DME providers.  The new rules, which were projected to drive the cost of DME down by 26 percent, were scheduled to go into effect in July, 2008.  After 132 lawmakers complained to the House Ways and Means Committee and demanded that CMS delay the program for at least a year, it was suspended.  In exchange for the delay, the DME industry agreed to a temporary 9.5 percent cut in DME fees.  After extensive consultation with DME industry stakeholders, CMS announced on October 22, 2009 that it would relaunch the bidding program under new rules. 

Medicare costs about $500 billion annually.  It is riddled with what Walton Francis calls “government-administered allocation systems.”  It has become a miasma of complex, conflicting regulations that open it up to thievery on an epic scale.

Finally, congressional meddling in Medicare promulgates wasteful spending, rewards bloat and punishes inefficiencies. 

Medicare features a statutory requirement that physicians’ fees must never go above an overall spending ceiling.  When that occurs, the annual increase in physicians’ fees must be deferred or current fees cut.  Cutting physicians’ fees is not popular, nor is it smart.  It has the detrimental effect of driving physicians out of the Medicare program completely.  Perhaps more importantly for Congress, it has the effect of alienating the politically powerful doctors’ lobby. 

In every year since 2003, Congress has been faced with this potential cut in physicians’ reimbursement fees, and it has flinched, pushing the costs of inaction into the next fiscal year and promising to enact more draconian cuts to make up for the shortfall.  During the current debate over how to pay for the healthcare reform bills, several of the bills have resorted to budgetary kabuki-theater by using the phantom cuts in doctors’ fees (valued at approximately $250 billion over 10 years in the Baucus bill) to help offset the nearly trillion dollar cost of the bill. 

There is absolutely no indication that the reform bills currently under consideration would ameliorate these problems and every indication that they would be exacerbated.  A massive new fangled government-run healthcare plan would be the target for exactly the same sort of structural and political vulnerabilities as the current government-run plan, Medicare, only on a much larger scale. 

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