The mother lode of waste, fraud and abuse

In a March 2010 report, the U.S. Government Accountability Office (GAO) designated Medicare and Medicaid as “high-risk programs because they are particularly vulnerable to fraud, waste, abuse and improper payments.”

The Office of Management and Budget tracks “high-error” government programs. All of the major health-care government insurance programs are listed: Medicare fee-for-service, Medicare Advantage, Medicaid and CHIP. Medicare Advantage’s improper payment rate was more than percent and the fee-for-service improper payments exceeded 10 percent.

According to The Centers for Medicare and Medicaid Services, Medicare improperly paid $48 billion, which amounts to about 9 percent of the program’s costs.

As an example, the GAO report pointed out that Medicare erroneously paid $3.1 million for clearly ineligible erectile-dysfunction medications such as Viagra and Levitra in 2007 and 2008.

The Dartmouth Atlas Project has tracked geographical variation in Medicare spending. Dartmouth researchers found that health-care providers in New York City spent more than $12,000 per capita on Medicare patients, compared with about $6,700 in Minneapolis. These differences could not be explained by sicker patients or better health outcomes. The researchers also found that physicians in higher-spending regions were more likely to recommend discretionary services and admit patients directly into intensive-care units, and were less likely to suggest palliative care with patients and their families. The researchers recommend Medicare payment policies that encourage high-cost regions to behave more like low-cost regions by adopting their practices.

In a June 2011 report to Congress, the independent Medicare Payment Advisory Commission said Medicare cannot control costs for two reasons. First, it pays a set rate for services so there is no incentive for a provider to be more efficient. Second, doctors who bill a greater volume of services – regardless of whether they improve outcomes – make more money than doctors who do not.

True Medicare reform will require that the program shift payment incentives away from quantity and toward quality, efficiency and evidence-based medicine. Otherwise, Medicare’s march to insolvency will continue without interruption.