The Department of Health and Human Services reports that the error rate for Medicare payments increased to 12.7% of total fee-for-service reimbursements last year. This is up almost 50% since 2012 and represents a $46 billion annual loss for the health program. Despite this, the Obama Administration has suspended an audit program that had already recovered more than $8 billion in improper payments.
The Recovery Audit Contractor (RAC) program, initiated in 2010, is charged with ferreting out waste and fraud in the giant Medicare program. The federal government contracts with private companies to investigate Medicare billing records and capture any improper payments. The companies are allowed to keep 9-12.5% of any money recovered, providing a market incentive to identify fraud. In 2012, before the Obama Administration put a hold on the program, RAC companies found $2.3 billion in improper payments.
In October 2013, the Obama administration undertook a series of steps to curtail the fraud recovery program. Over subsequent months, the administration suspended auditing activity and put a hold on awarding new contracts to police Medicare billing. Existing contracts have been extended only for “administrative and transition activities.” In other words, the audits are supposed to wind down.
The suspension of the audit program is a victory for the American Hospital Association, which has led a lobbying campaign against the program. In a series of letters, the AHA has not only lobbied against the RAC program, but even auditing efforts by the federal government’s own Office of the Inspector General.
“The OIG’s approach grossly exaggerates estimated Medicare overpayments, leads to excessive recoveries by Medicare contractors, and otherwise prejudices and burdens hospitals,” one of the letters argues. Apparently, any audit process is too much for the nation’s hospitals.
One piece of legislation, introduced by House Republicans, would block audits of Medicare providers unless their estimated error rate exceeded 40% of total billing. In other words, more than one-third of bills submitted to Medicare could be fraudulent before any audit threshold was triggered. Earlier this year, Congress passed legislation to suspend all audits for another 6 months.
In the 2012 fiscal year, federal health care programs, including Medicare, Medicare Advantage and Medicaid, spent more than $60 billion in improper payments. A big chunk of the federal budget deficit could be eliminated, simply by ensuring that federal health care dollars are spent properly. Even such an obvious action runs into a lobbying buzz saw in Washington, however.
If the nation isn’t serious about curtailing spending that, by law, shouldn’t exist, what hope is there to curtail the spending choices we’ve actually made?