Report: Medicaid, Medicare Wasted at Least $55 Billion in 2009
Nov. 18, 2009 – U.S. taxpayers paid at least $55 billion more than necessary for federal Medicare and Medicaid programs during the 2009 federal fiscal year, according to a federal report released yesterday.
The report issued by the U.S. Office of Management and Budget indicates the federal government wasted a total of $98 billion on improper payments to third parties contracted to provide various federal services. Medicare and Medicaid programs accounted for at least $55 billion and more than 56 percent of total funds wasted by the federal government in 2009. The federal government wasted about $72 billion on all programs in 2008, according to the report.
While some might find alarming the reported amount of waste, a federal lawmaker says the actual amount wasted each year could be much greater.
“Unfortunately, these numbers may still be just the tip of the iceberg since they don’t even include estimates for several major programs, including the Medicare prescription drug plan,” U.S. Senator Tom Carper said in a statement. “It goes without saying that these results would be completely unacceptable in the private sector, as they should be in government, especially at a time of record deficits.”
The Office of Management and Budget report comes as federal lawmakers debate various health care reform measures in the U.S. House of Representatives and Senate. Medicare generally provides health care services for elderly U.S. citizens while Medicaid provides health care services for the poor.
The report indicated the error rate for payments made through the federal Medicare Advantage program increased by about 50 percent, rising from a 10 percent error rate in 2008 to a 15 percent rate costing about $12 billion in waste during fiscal year 2009. The Medicare Advantage program allows private insurers to provide Medicare coverage to qualifying individuals.
Some of the increase in wasteful spending is attributed to more stringent reporting requirements and increased government spending on federal programs due to the recent recession partly explain the increased waste in 2009, according to the federal report. Fraud also was cited among reasons for the increased waste, but federal officials said they have no idea to what extent fraud occurs.
Federal lawmakers are weighing various reform measures and penalties to reduce the amount of waste and fraud tied to Medicare, Medicaid and other federal programs. Penalizing individuals and organizations knowingly accepting improper payments for federally contracted services are among reform measures being considered, according to Reuters. Currently, no penalties exist for accepting improper payments, and federal law only requires funds be returned when excess payments are received.
New York Auto Insurers Claim Fraud, Abuse Are Driving Up Medical Costs
Nov. 13, 2009 – Fraud and abuse of the state of New York’s no-fault auto insurance law has driven up average medical claims costs for accident victims by about $3,133 and 56 percent over a five-year period.
Auto insurers in New York on average paid out an average $5,615 toward medical care per auto insurance accident claim in late 2004, according to the non-profit Insurance Information Institute. But during the second quarter of 2009, New York’s auto insurers paid out an average $8,748 in medical costs per accident claim – a steep increase since 2004 and more than double the current national average.
“In less than five years, New York’s auto insurers have seen an extraordinary 56 percent increase in the average cost of no-fault claims – to a great extent the result of abuse and outright fraud in the system,” said Robert P. Hartwig, president of the Insurance Information Institute. “The costs of fraud and abuse of the state’s no-fault system ultimately are borne by New York’s honest policyholders. New York’s no-fault claim costs are now the second highest in the country and are 111 percent higher than the U.S. average of $4,152.”
“No-fault” auto insurance refers to any statewide auto insurance program allowing policyholders to be reimbursed for financial losses and medical costs from their own auto insurance provider no matter who was at fault in an accident. Several states have no-fault auto insurance laws, which are designed to decrease the number of accident-related disputes that wind up in court and reduce costs.
But instead of saving money through tort reform, New York’s auto insurance companies have been subject to an increasing amount of auto insurance fraud – particularly after the recent economic meltdown has boosted unemployment and poverty in the Empire State.
In a report published last year, the New York Insurance Department’s Frauds Bureau claimed a 22 percent increase in fraud tied to no-fault auto insurance claims since 2006, which has spurred a subsequent increase in the number of auto insurance fraud investigations conducted by the state. Prior to 2006, reports of insurance auto insurance fraud had declined by 35 percent since 2003.
With the recently steep increase in auto insurance fraud rates being reported in New York, state officials are weighing several measures designed to curb the rising trend.
Potential reforms include establishing guidelines for treating specific types of injuries sustained in auto accidents. New York’s current no-fault auto insurance law allows insurers to pay health care providers up to $50,000 without requiring any type of review to prevent fraud.
New York officials also might require arbitration proceedings to resolve disputes and avoid potential court trials that cost much more. Although no-fault insurance laws are designed to reduce the number of court battles over vehicular accidents, the state’s courts have a more than one-year backlog and are scheduling cases as far off as 2011.
State officials also are considering requiring plaintiffs produce at least one witness with “personal knowledge” of relevant facts in order to determine the plaintiff’s right to receive no-fault auto insurance benefits, according to the Insurance Information Institute. Statements regarding medically necessary treatments wouldn’t be accepted unless made by licensed medical professionals or witnesses with personal knowledge of the incident in question.
New York law currently only requires medical services providers prove auto insurers received a bill for medical services in order to receive payments from insurance companies regardless of whether or not fraud may have occurred. Auto insurers are held to a much higher standard and must produce witnesses, including at least one qualified medical professional, indicating a treatment was not medically necessary to deny a potentially fraudulent claim.
State officials also might increase the penalty for third parties acting as liaisons to enable fraudulent insurance claims. Known as “runners,” they facilitate fraudulent insurance claims by acting as the middle man between medical professionals and attorneys intent on committing insurance fraud. If implemented, new state regulations would make it a felony instead of a misdemeanor for facilitating fraudulent insurance transactions.
Report: U.S. Health Care Wastes up to $850 Billion a Year
Oct. 26, 2009 – As federal lawmakers wrangle over a proposed revamping of the U.S. health care system, Thomson Reuters today reported up to $850 billion is wasted each year, suggesting meaningful health care reform begins with tort reform and eliminating existing waste rather than expanding a flawed system.
The report authored by Thomson Reuters vice president of health care analytics, Robert Kelley, says between $505 billion and $850 billion are wasted each year on health care costs in the United States. The largest source of waste is a practice of over-medicating and overly treating patients to prevent potential medical malpractice, according to the report.
Because medical professionals are so concerned about being sued for medical malpractice, many will engage in unnecessary medical treatment, such as overly prescribing antibiotics and ordering useless laboratory tests, the report claims. And many health care providers refuse to share information on patients, often resulting in duplicate work being done. Up to $300 billion per year is wasted by medical professionals as concerned about avoiding a malpractice lawsuit as patient health.
The at least $700 billion cited as wasted every year amounts to about a third of total health care spending each year in the United States, according to Kelley. While the largest chunk generally is wasted on useless medical procedures, fraud accounts for the second-largest portion of health care waste in the United States with an annual tab of about $200 billion, according to the Thomson Reuters study. Fraud generally occurs in the form of fake Medicare and Medicaid claims and medical professionals being paid bribes for performing useless medical procedures and prescribing useless drugs, among other forms of fraud.
Although no dollar amount was affixed to it, the Thomson Reuters study suggests about $150 billion in annual health care system waste arises from administrative inefficiency and duplication of paperwork. The report claims U.S. hospitals on average spend about one-fourth their annual budgets on administrative costs – about double the average in Canada.
Medical errors account for between $50 billion and $100 billion in annual health care waste. And the failure to preventively treat diabetes and similar afflictions costs between $30 billion and $50 billion per year, according to a 2003 study conducted by Harvard University researcher Dr. Steffie Woolhandler.
The Thomson Reuters’ study was conducted recently by its health care analysis unit and culled through several years’ worth of health care studies and reports.
With about a third of the annual health care costs in the United States arising from waste, the Thomson Reuters report clearly illustrates the need for cleaning up the current system rather than expanding it to cover tens of millions more Americans. If the waste can be reduced, most likely more Americans would feel better about federal lawmakers promising to lower costs while further extending a blatantly flawed national health care system.