The Price of Fraud

With any organized government program, there’s an opportunity for fraud, and it didn’t take long for scammers to come up with ways to steal from the Medicare system.

“From the very beginning of the Medicare program, CMS (the Centers for Medicare & Medicaid Services, formerly the Heath Care Financing Administration) has conducted anti-fraud activities, including medical review and provider enrollment oversight,” said Medicare spokesman Peter Ashkenaz. “However, it wasn’t until the Health Insurance Portability and Accountability Act of 1996 created the Medicare Integrity Program that CMS was given a stable source of funding to conduct additional efforts to enhance its anti-fraud activities, including hiring special anti-fraud contractors.”   

But it hasn’t been enough. In an article he co-wrote for the Wall Street Journal, Kerry Weems, who led the CMS from 2007 to 2009, complained that Congress “turned back Medicare’s pleas for $579 million of additional antifraud funding.” CMS has continued to struggle with fraud, and Weems says “the total amount of Medicare fraud is unknown.”

In 2002, the Improper Payments Information Act required all executive branch agency heads to report on significant improper payments and what actions they have taken to reduce them. Now, Weems wrote, “The government does not measure or estimate fraud in its programs; instead, it measures payments made ‘in error.’”

Despite the back-door approach, the numbers still tell the story. According to the 2009 U.S. Government Accountability Office report, “improper payments” throughout government cost the U.S. Treasury $72 billion in 2008—and 50% of that occurred in Medicare and Medicaid. Medicare’s Fee-for-Service program saw $10.4 billion in improper payments, and Medicare Advantage program, $6.8 billion. And this doesn’t even include figures for the Medicare Prescription Drug Benefit program, which spent $46 billion in 2008 but did not report its error rate to the GAO. (The rest, $18.6 billion, came from Medicaid.) “Improper payments have been a long-standing, widespread, and significant problem in the federal government,” the report acknowledges.

The Office of Inspector General (OIG) has been tracking the performance of the SMP program since 1997. Its May report notes that, although the numbers were down for 2008, over its 12-year history, SMP workers have helped to recover $4,521,399 in Medicare funds, $545,801 in Medicaid funds, and $3,167,543 in actual savings to beneficiaries. In addition, SMP efforts have resulted in $97,488,145 in savings to other payers, such as supplemental insurance and Social Security, for a total program savings of more than $105 million.

“The real value of the program cannot be measured only through savings achieved, but through the sentinel effect,” said Dieker, which is the amount of fraud that has been prevented because of Medicare beneficiaries who learned through the SMPs how to scrutinize their statements and report anything suspicious. Those numbers are tough to track, but the OIG report credits that as well.

Their success is great news. But in dollars, it’s still not enough.