Medicare Fraud

Blanchard, TP . & Louis, UL. Medicare Medical Necessity Determination Revisited: Abuse of Discretion and Abuse of Process in the War against Medicare Fraud and Abuse, 1999.

Introduction

Medicare fraud is a major issue that has attracted the attention of physicians, hospitals, patients, insurers, policy makers, government agencies, and academics.

Theme

This entry defines Medicare fraud and Medicare abuse, describes the prevalence of Medicare fraud in the United States, discusses the common fraud victims and perpetrators, and reviews efforts to combat the problem. While fraud occurs throughout the Medicare system, fraud involving publicly funded federal Medicare programs has attracted the most attention because of its enormous cost. Expenditures for Medicare, the federal Medicare program for the aged, reached $431.5 billion in 2007; total outlays for Medicaid, the joint federal and state Medicare program for the poor, were $335.8 billion.

Research Questions

The research is based on the following research questions;

Define the Medicare fraud and their activities?

Describe Medicare abuse?

Describe the federal Medicare budget is lost to fraud?

Analysis

There is no concise definition of Medicare fraud ; it is a broad phrase encompassing a spectrum of activities in which money that is intended to pay for Medicare services is in some way diverted to private use. Fraud is a legal term that refers to actions taken with the intent to deceive, such as intentional misrepresentation of information that insurers and government programs rely on in making payment decisions. A physician who intentionally submits a bill for services that were never performed, for example, deceives the payer into making an improper payment.

Medicare abuse lacks this intent, and often involves taking advantage of ambiguity in payment rules to bill in ways that are not technically illegal, yet may violate the spirit of the law. A physician who performs two separate medical procedures (and receives two payments) when both could have been performed safely and more economically at the same time, for example, will profit at the expense of the Medicare system, which will then have fewer resources to expend on services for others.

The federal government has estimated that 10% of the federal Medicare budget is lost to fraud. Although useful for conveying the magnitude of the problem, this figure appears to have been derived more from anecdotal than from empirical evidence. Because successful schemes remain hidden, it is difficult to determine the full extent of fraudulent activities.

Audits can be used to estimate a program's “error rate.” In 1996, the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) found that Medicare had improperly paid out more than $23 billion that year. Since that time, the error rate has dropped each year. The Centers for Medicare & Medicaid Services (CMS), which took over the audits in 2003, found $10.8 billion in improper payments in 2007. However, erroneous payments do not equate to fraud. The audits also found errors in claims processing, inaccurate billing, and simple mistakes by Medicare providers. In short, these audits are not designed to measure Medicare fraud, and cannot be taken ...