November 5, 2010

Paying the bills

President Obama called it a shellacking, but that doesn’t go far enough in describing the events of November 02, 2010. The leader of the Democrats had his chewed up ass handed to him in a sack. Various pundits have analyzed the reasons for this ad nauseum, so I will belabor only one… that which the right so fondly calls Obamacare, but more correctly known as the Patient Protection and Affordable Care Act, or PPACA.

We’ve discussed the bill as if it were healthcare reform, but in reality the crux of the bill addressed the public and private medical insurance systems. The only people in this nation who don’t feel like those systems need work are either insurance industry executives, people in the pockets of insurance industry, or partisan fools blindly parroting industry pawns.

We needed legislation that would restrain the careless, greedy practices of the private providers while maintaining the positive practices, that would reform the public insurers to better serve both the patients and the healthcare providers, and that would address fraud, waste and abuse of both private and public programs. What we got was the proverbial lipsticked pig.

A pig it may be… but this pig is not all pork. There are aspects of PPACA where the promise is coming true.

For many years now in this country there have existed certain groups of people who were perfectly satisfied with the pre-reform system. Insurance executives and stockholders, of course, but as bad as those guys behaved, they are not the truly bad guys. For the most part they have worked within the system, even if motivated by greed.

Greed is also a mark of con artists, fraudsters and organized criminal groups who really loved the ease with which the system could be scammed. Estimates in 2009 pegged the cost of fraud and waste to both private and public insurance systems at $100 billion. The private insurers are smaller and able to do a far better job policing claims, so the lion’s share of loss is bilked from the public coffers; an amount estimated somewhere between $60 and $80 billion annually.

Prior to PPACA, government enforcement efforts were sporadic and ineffective overall. This has since changed.

One of the main reasons fraudsters have found such an easy time with Medicare is the system's "pay and chase" system. Under current law Medicare must make payment for any claimed benefit within a very short time period, inhibiting any possibility of prior review. The process creates a system where the government finds itself reacting to fraud, rather than preventing the abuse before it happens... and in a swamped system the reactions are painfully slow.

Published reports late last year indicate about $47 billion was paid out in questionable claims. Some is simple billing mistakes, most of it is fraud, and very little will ever be recovered. Criminal elements have grown wise to the detection schemes and often disappear before any effort at recovery can commence.

This is where Obama’s reforms have started to play a role, and the efforts began even before PPACA was passed. The first administration effort to overhaul the health care system and stop the billions of dollars lost to abuse came in 2009 with the creation of the multi-agency Medicare Fraud Task Force (HEAT). In just over a year and a half the task force has racked up scores of indictments in 22 separate investigations over 11 states and the District of Columbia.

Next came the recovery audit contractors, of which there are two varieties.

Many improper Medicare and Medicaid claims are due simply to billing mistakes rather than fraud. To address this the administration created the Recovery Audit Contractors (RAC) program. The RACs provide valuable audit tools to combat overpayments and eliminate false claims. Since the providers targeted by the RACs are not considered criminal, certain limitations are imposed to ensure an audit does not negatively impact patient care.

RAC purview currently is only Medicare Part A and B, but PPACA reforms mandate them covering Part D prescription and Advantage plans by the end of next year. States will also be required to establish RAC contracts to address Medicaid claims.

Another layer of protection, one which is more geared toward fraud and intentional abuse, is known as a Zone Program Integrity Contractor (ZPIC). ZPICs have the authority to audit any Medicare or Medicaid related claim, and unlike the RACs who earn a paycheck based upon a percentage of recoveries, and are thus motivated to shoot for the stars, ZPICs are paid a a flat, annual contract rate and are thus motivated to find even small amounts of fraud. Their incentive is in maintaining a lucrative federal contract.

RAC and ZPIC audits may be triggered through data analysis, in response to complaints, or as a result of whistleblower information.

These new levels of integrity protection are already having profound impact. Within months of the establishment of these programs, a RAC initiated federal Qi Tam lawsuit accusing Dallas Fire Rescue of bilking Medicare by overbilling an estimated $41 million was filed by a whistleblower who once worked for the City. At about that same time, various ZPICs were working the lower end of the scale. In May, the Texas contractor identified $2.9 million is false claims filed by a home health provider. There have been scores of lesser audits all over the country revealing various levels of fraud. To date the ZIPCs have identified problem areas in 10 states, and audits are expanding into those areas.

President Obama identified the reduction of healthcare fraud and insurance abuse as a primary means of paying the price tag for PPACA. These three programs are showing good promise toward fulfilling that promise.