Medicare Made About $20B in Erroneous, Questionable Payments Last Year, CMS Report Says

Private companies that process health care claims from Medicare beneficiaries made almost $20 billion in erroneous or questionable payments in fiscal year 2004, according to a CMS report, the AP/Las Vegas Sun reports (Sherman, AP/Las Vegas Sun, 12/13). The net $19.9 billion in questionable payments includes $900 million in underpayments to providers because of errors made by insurers and $20.8 billion in overpayments to providers, according to the report (CMS, "2004 Improper Medicare Fee-For-Service Payments Report," 12/13). The report is based on a survey of 160,000 of the more than one billion claims processed annually. Errors included claims that were paid despite being medically unnecessary, inadequately documented or improperly coded. The survey did not measure instances of alleged fraud, the AP/Sun reports. Last year, Medicare reported that the error rate for FY 2003 was 5.8%. However, that figure was adjusted to exclude "a high proportion of claims" in which a provider did not respond to Medicare's request for medical records to support the claims, the AP/Sun reports. The unadjusted rate was 9.8%, slightly higher than this year's unadjusted 9.3% rate. Medicare officials said they decided not to include the adjustment because the analysis was larger and included greater detail, according to the AP/Sun.

Reaction
In response to the survey, CMS hopes to cut the rate of questionable Medicare payments by more than half to 4% by 2008, Administrator Mark McClellan said. He added that CMS will conduct more extensive payment reviews and implement other quality controls to reach its goal. "The main objective here is to pay it right," McClellan said. Sen. Chuck Grassley (R-Iowa), on Monday said, "With an improper payment amount of nearly $20 billion and an error rate approaching double digits, there is clearly an unacceptable problem here" (AP/Las Vegas Sun, 12/13).

The report is available online. Note: You need Adobe Acrobat Reader to view the report.

GAO Comptroller Calls for Reform To Address Budget Deficit
Government Accountability Office Comptroller General David Walker on Monday cautioned that the federal government will have to restructure Medicare, Social Security and other government programs to "deal with the mushrooming budget deficit," CongressDaily reports. The federal budget deficit currently makes up 3.6% of the gross domestic product. Walker said the deficit is "unacceptable, outrageous and irresponsible," adding that Medicare and Medicaid spending are the biggest drivers of the nation's rising debt. "If there's one thing that can bankrupt this country, it's health care," Walker said. He noted that $28 trillion of the United States' unfunded obligations are the result of the recent expansion of Medicare. Walker also said that policymakers will have to reconsider the goals of government health care spending and that individuals eventually will have to shoulder a larger portion of their medical costs. "We have to look at what is the difference between broad-based societal health care needs and individual wants," Walker said, adding, "People think, 'I don't care what it costs as long as someone else is paying for it'" (Heil [1], CongressDaily, 12/13).

Major Cuts in Medicare, Medicaid?
Meanwhile, congressional aides said that Congress could be forced to consider "[m]ajor cuts" in Medicare, Medicaid and other federal entitlement programs when the Bush administration issues its budget reconciliation instructions, but such changes "might prove politically difficult," CongressDaily reports. The Bush administration might ask lawmakers to reduce Medicare and Medicaid spending by $82 billion over five years, Mark Hayes, a Republican aide for the Senate Finance Committee, said Friday at a briefing sponsored by the Alliance for Health Reform. He added, "The budget is going to be the real backdrop to next year. A return to fiscal discipline is going to occur." Republicans and Democrats in Congress agree that they must address Medicare payments to physicians, which are scheduled to be reduced by more than 5% beginning in 2006 if lawmakers do not take action. "I think everyone agrees [the 5% cut is] unsustainable," Chuck Clapton, a Republican staffer for the House Energy and Commerce Committee, said. However, increasing payments would be expensive, and there are "no cheap easy fixes," Clapton said. Aides also noted that there could be bipartisan agreement on other issues, including tying physician payments to quality improvements, increasing use of health information technology, improving patient safety and restoring $1.1 billion in unspent SCHIP funds, which reverted to the Treasury Department in September. Congress also is expected to address proposals for controlling Medicaid spending (Heil [2], CongressDaily, 12/13).

A HealthCast of the briefing is available online at kaisernetwork.org

Senate Democrats To Hold Hearings
In related news, the Senate Democratic Policy Committee in January will launch a series of "wide-ranging hearings to examine Bush administration policies and conduct" on such issues as the cost estimates for the new Medicare law and operations in Iraq, Senate Democrats announced Monday, the Washington Post reports. The Democrats said the hearings are necessary because Republicans have failed to provide adequate oversight of the Bush administration. Committee Chair Byron Dorgan (D-N.D.) and new Senate Minority Leader Harry Reid (D-Nev.) said that Republicans will be invited to the hearings, and the committee will not conduct hearings on topics that a GOP-controlled committee decides to address in its own hearings (Dewar, Washington Post, 12/14). According to the New York Times, "there are questions about how much Democrats can expose by holding hearings," particularly because the policy committee has no subpoena power. However, Dorgan said, "Frankly, my experience has been there are plenty of whistleblowers who are very interested and anxious to find a forum in which to tell their story" (Stolberg, New York Times, 12/14).