“Some troubling questions about our government’s ability to manage a medical bureaucracy.”

by Jeffrey H. Anderson

The Weekly Standard – link to original article

Nov 5, 2009

According to 60 Minutes, cocaine trafficking has now given way to Medicare fraud as the number-one illicit enterprise in South Florida. Both 60 Minutes and the Washington Post report that nationwide Medicare fraud now costs American taxpayers $60 billion a year.

The 60 Minutes story is fully of juicy anecdotes about government incompetence. There’s the criminal who says that stealing from Medicare is so “easy” that “it was ridiculous.” There’s the lady who for six years has been telling Medicare officials that strange and extravagant charges keep showing up on her explanations of Medicare benefits–charges that officials still have yet to prevent from accruing, and from being paid by tax dollars. And there’s the man on Medicare who used his own hands and arms to open up his explanation of benefits, only to read that Medicare had been billed–and had paid–for two new (prosthetic) arms on his behalf.

Even 60 Minutes says that the rampant nature of Medicare fraud raises “some troubling questions about our government’s ability to manage a medical bureaucracy.”

Given all of this, it’s no wonder that since 1970 the costs of Medicare have risen over 25 percent more, per patient, than the combined costs of all other health care in America. And that’s even without counting the Medicare prescription drug benefit.

Sixty billion dollars in Medicare fraud is a lot of money, but how can we really put it into perspective? President Obama talks a lot about insurance companies and their “record profits.” Let’s compare those numbers.

Fortune 500 tallies show that last year’s profits for the ten largest private insurance companies in America were $8 billion–combined. Even the single most profitable insurance company didn’t make five percent as much as what Medicare lost to fraud.

It may be surprising that you could multiply the profits of America’s ten largest private insurance companies seven-fold and that Medicare would still have managed to lose more money than they make. But try this one on for size: The Washington Post reports that a high-school dropout in Miami submitted false Medicare claims from her laptop across four years, bilking Medicare out of $105 million. Four of the ten largest private insurance companies failed to make $105 million in combined profits. That’s right: A lone criminal grossed more from Medicare fraud than four out of the ten largest private insurance companies collectively netted in profits.

All of this is important because, as everyone knows by now, the Democrats want to grant the federal government far greater control over our nation’s health-care system, while Republicans want to leave that control in private hands. It turns out that the difference in costs between these two approaches is even greater than the difference between the $60 billion that Medicare loses to fraud and the $8 billion that private insurers make in profits.

The massive Democratic bills in the House and Senate would each cost in the range of $1 trillion. The Republican small bill, similar to the small bill proposed in these pages, would cost about $60 billion–about seven percent as much. The Democratic bills would increase taxes and penalties on Americans by over half a trillion dollars. The Republican bill wouldn’t raise taxes at all. The Democratic bill would be paid for largely by siphoning about $400 billion out of Medicare. The Republican bill wouldn’t touch Medicare.

But these tallies aren’t all that is different between the bills. The Democratic approach is to increase access to health care by imposing government mandates, which in turn would raise costs. The Republican approach is to lower costs, which in turn would increase access. Thus, the Republican bill would meet both of the widely stated goals of health-care reform: It would decrease the number of uninsured and lower the costs of health care. The Democratic bills would address the number of uninsured at the expense of exacerbating health costs.

The 1,500-plus-page Democratic bills would result not only in higher taxes but higher insurance premiums. The 219-page Republican bill would make health insurance more affordable for everyone, across the board.

It would do so by allowing Americans to purchase health insurance across state lines and letting them shop for the best values from coast to coast; allowing small businesses to pool together to buy insurance; allowing private entities to follow the Safeway cost-cutting model of offering lower premiums for healthier lifestyles (which the federal government currently–amazingly–limits); and by preventing the runaway malpractice lawsuits that force doctors to practice costly defensive medicine. Despite felling forests of trees, the Democratic bills would do none of these four things.

The Republican bill would “allow” where the Democratic bills would “require.” The former would increase personal freedom; the latter would restrict it.

For the small minority of Americans who are uninsured because they have prohibitively expensive preexisting conditions–last estimated in a federal government survey as well under one percent of the population–the Republican plan would create Universal Access Programs to expand and reform state-run high-risk pools. Such programs would guarantee that all Americans, regardless of preexisting conditions or past illnesses, would have access to affordable care, without needlessly raising health-care premiums across the board.

Furthermore, the Republican bill would start right away. The Democratic bills wouldn’t kick in until after the next presidential election–although their “10-year” costs include the three years during which they would lie dormant. (So the Democrats are really offering seven years for the price of ten.)

The massive Democratic bills would entrust an entity that can’t keep an eye on $60 billion with much greater control over our entire health-care system.

The Republican small bill, on the other hand, wouldn’t dramatically increase government spending or control; wouldn’t raise taxes, deficits, or insurance premiums; and wouldn’t siphon money out of Medicare. Instead, it would keep our privately run health-care system in place, provide sensible and targeted reforms, and adhere to a guiding principle of medicine: first, do no harm.

If anyone doubts whether the Republican tally of $60 billion in new spending is enough to address our nation’s pressing health-care concerns, remember this: That’s seven times more than the combined annual profits of America’s ten largest insurance companies. You can do a lot with $60 billion a year–if you don’t lose it.

Mr. Anderson, director of the Benjamin Rush Society, was the senior speechwriter for Secretary Mike Leavitt at the U.S. Department of Health and Human Services

Many doctors refuse Medicare patients because payments are so low.

Wall Street Journal – SEPTEMBER 10, 2009, – link to original

By GRACE-MARIE TURNER AND JOSEPH R. ANTOS

Also see Medicare for Dummies – link to original

Democratic leaders at both ends of Pennsylvania Avenue continue to battle over whether a new government-run health plan, modeled after the popular Medicare program for seniors, must be included in health-reform legislation.

President Barack Obama told a New Hampshire town-hall meeting last month that “if we’re able to get something right like Medicare, then there should be a little more confidence that maybe the government can have a role.” Did the government really get Medicare right? Here are the top 10 reasons this program should not be a model for reform, and why it would be dangerous for the federal government to be put in charge of any more of our health sector:

1) Medicare is going bankrupt. The Medicare Trustees estimate that the program will run short of money starting in 2017. Medicare will drown in a sea of red ink, with spending over the next 75 years outpacing dedicated revenues by nearly $38 trillion.

2) Private payers are bailing out Medicare. According to Milliman, an independent actuarial firm, Medicare—and to an even greater extent, Medicaid—underpays doctors and hospitals, shifting costs to private insurers. Milliman estimates that the average family in a private PPO health plan pays an additional $1,788 a year to compensate for underpayments by Medicare and Medicaid, representing a “hidden tax” on commercial payers totaling $89 billion a year.

Providers could not keep their doors open without the higher payments from private insurers. A recent letter to Congress from 13 leading health-care delivery organizations, including the Mayo Clinic, said “many providers suffer great financial losses associated with treating Medicare patients.” They said that if these rates were expanded to patients who currently have private insurance, the result “will be unsustainable for even the nation’s most efficient, high quality providers, eventually driving them out of the market.” That means we would say goodbye to some of the best health-care systems in the country.

3) Expansion of entitlement programs threatens our economic security. Congressional Budget Office Director Douglas Elmendorf broke the bad news in July. Reform legislation before Congress would worsen the federal government’s already bleak budget outlook, increase the deficit, and drive the nation more deeply into debt. Instead of bending the cost curve down, Mr. Elmendorf told senators their reform proposal would “significantly increase” costs.

4) Low administrative costs are a mirage. The claim that Medicare’s administrative costs are only 3% is fantasy. If all Medicare costs—such as revenue collection, personnel and enforcement—were accounted for, its administrative expenses would be at least twice as high. And it still wouldn’t be providing services private insurers do, such as nurse hotlines, decision-support tools and fraud detection, or paying the income, property and provider taxes that private plans must pay.

5) Medicare is rife with fraud. According to the FBI, between 3% and 10% of all health spending is lost to health-care fraud. Despite the president’s promise this money could be recaptured to pay for his reform agenda, Congress has shown itself to be remarkably incapable of curtailing fraud and abuse in government health programs.

6) Medicare short­-changes seniors. Medicare exposes patients to unmanageable costs if they become seriously ill—even limiting the total number of days a patient may spend in the hospital. The program covers only about 50% of the health costs of seniors, and most have supplemental insurance to fill in the gaps. This is not a model for comprehensive coverage.

7) Medicare’s model is obsolete. Its basic benefit structure uses a fee-for-service model designed in 1965 which has not been altered since, except to add prescription drug coverage almost 40 years later. In contrast, private plans are continually evolving. They create incentives for patients to become more informed about their health choices, and offer innovative programs for disease management, wellness and prevention, and care coordination to improve quality and save money.

Payments are too low. Washington decides how much doctors, hospitals and other providers will be paid down to the smallest detail, with mountains of regulation and paperwork to track the politically driven process. Medical professionals are in a perpetual battle with Congress over their payment rates, and many physicians refuse to accept new Medicare patients because payment rates are so low. With few exceptions, Medicare’s solution to cost containment is the club of price-controls, not innovation and efficiency.

9) Medical decisions are made in Washington. Patients and their doctors are slowly losing the ability to decide what course of treatment is best. Medicare’s decisions to cut funding for the cancer drug EPO, implantable cardiac defibrillators and virtual colonoscopies, for example, have led to epic battles between providers and politicians, while patients and their doctors watch from the sidelines. Medical decisions, which should be made by doctors and patients, are being made by politicians.

10) No one is running the show. If the government is so good at running health-care programs, why has the Obama administration not yet nominated an administrator for the Centers for Medicare and Medicaid Services? These government health programs cover 100 million Americans—the largest health insurance plans in the country—and yet the top office is vacant.

Medicare has undeniably guaranteed that all seniors have health coverage, even if that coverage is not as good as advertised. But the program is in trouble. Even though it has a blank check funded by federal revenues, Medicare will not be able to pay all the hospital bills that come in eight years from now. If you think that’s bad, just wait until 70 million baby boomers turn 65 and drive federal budget deficits into the stratosphere.

Instead of pretending that Medicare is the best model for the country, policy makers should recognize that the program is as much in need of reform as the rest of the health system. Before we give the federal government authority over health coverage for tens of millions more Americans, shouldn’t the government prove it can do a better job with the “public plan” we already have?

Ms. Turner is president of the Galen Institute. Mr. Antos is a scholar at the American Enterprise Institute.

What is the yearly estimate of Medicare’s financial fraud?

a)    $19.2 million

b)   $85 billion

c)    $60 billion

d)   Opaque, approximately $250 billion

Answers:

A. This is the payments Medicare made for a single bogus claim to an individual in Miami (see to a Miami-based Medicare fraud ring busted)

B.  This is the correct answer. This is a figure derived from testimony before Congress by Harvard University’s Malcolm Sparrow, a specialist in health-care fraud, who thinks that as much as 20 percent of the federal health-care budget is consumed by fraud. (see Government health care is a target for massive fraud)

C .  This is Medicaid rip-offs which is expected to top $60 billion a year nationwide. (see Government health care is a target for massive fraud)

D.  No, this is not a healthcare-related figure; instead, it represents the problem with another mammoth government program. In this case it is TARP (Troubled Assets Relief Program). Elizabeth Warren, a Harvard Law School professor who chairs a TARP oversight panel created by Congress, concluded that much of the work by the Treasury and the Federal Reserve to implement TARP’s plans and policies has been opaque. In one case she found that Treasury had undervalued more than $250 billion in transactions. (see Doubts about oversight of bailout spending persist)

In summary what we see is that government does not like to implement the tough measures require to bring accountability and efficiency to any program.  As I have argued before (see Health-care system and “We the people”), there is a reason for this governmental indifference towards strict oversight of their programs, mainly they don’t want to alienate the voters since legislators primary goal in life is to get elected.   Given that the supervision necessary to control this financial drain will demand unpopular measures – such as filling-out forms, delay in payments to review information, etc – the legislators do not like their name associate with  such measures. Simply stated,  these oversight procedures do not attract voters, which means that legislators will not implement them.  That is what you can expect form government.

Jose A Hernandez, MD
elcubano@aol.com

Feds: Miami-based Medicare fraud ring busted – link to original article

In the latest Medicare fraud indictment, federal agents say bogus claims were filed for obsolete HIV therapy at a chain of clinics stretching from South Florida to four other states.

BY JAY WEAVER

JWEAVER@MIAMIHERALD.COM

Miami Herald June 23, 2009

Federal agents have dismantled a Miami-based ring they said schemed to defraud Medicare of $100 million by filing false claims for obsolete HIV therapy across five states — although two of the suspects who posed as clinic owners have fled to Cuba.

The eight-person organization, which was paid $30 million by the federal health insurance program, exported a fraudulent local business enterprise to Georgia, Louisiana, North Carolina and South Carolina by using empty storefronts and post office boxes, agents said.

The alleged conspiracy, outlined in a 20-count indictment unsealed Tuesday, exploited not only Medicare but also private insurers that administered the government entitlement program under the Medicare Advantage plan.

”These defendants have taken healthcare fraud to a new level,” said Acting U.S. Attorney Jeffrey Sloman. “The breadth and scope of the scheme is different than what we’ve ever seen before.”

Since 2005, the U.S. attorney’s office in Miami has charged about 800 suspects for filing a total of $2 billion in phony claims — accounting for one-third of all Medicare fraud cases brought nationwide.

Of those defendants, about 60 are fugitives who have fled to Cuba, Latin America and Europe.

The latest indictment comes as the Obama administration pushes to fight billions of dollars in Medicare fraud as part of healthcare reform that aims to include coverage for more than 40 million uninsured Americans.

The initiative established a joint task force between the Department of Justice and Department of Health and Human Services, and expanded federal strike forces in Miami, Los Angeles, Houston and Detroit.

Detroit is the latest city afflicted by Miami-style Medicare fraud, including HIV, medical equipment and home healthcare scams.

CHARGED

In the Miami-Dade indictment, Michel De Jesus Huarte, 38, is charged with operating six Miami-Dade clinics that submitted $50.2 million in bogus claims for infusion therapy to treat patients with cancer, HIV, AIDS, chronic pain and varicose veins.

But the infusion treatments, administered intravenously, were neither prescribed by doctors nor provided to patients, according to the indictment. And the infusion therapy for HIV/AIDS patients was obsolete, replaced by more effective antiretroviral drugs more than a decade ago.

Medicare paid Huarte’s six companies $19.2 million, according to the indictment.

Huarte recruited Cuban immigrants to pose as the owners of his businesses, ‘with the understanding that the `straw’ owners would flee to Cuba to avoid law enforcement detection or capture,” according to the indictment filed by prosecutor Ryan Stumphauzer.

Huarte is accused of recruiting Orlin Tamayo Quinonez, 35, and Juan Carralero, 56, as straw owners of a few of his clinics. They are suspected of having fled to Cuba.

Also among those said to pose as a straw owner: Madelin Barbara Machado, 35, who ran Zigma Medical in Miami-Dade.

In a separate indictment last year, she was charged with fraudulently billing Medicare $9.3 million for unnecessary HIV therapy and collecting $4.5 million. But Machado fled and is also believed to be in Cuba, according to the FBI.

BILLING BLOCKED

As Medicare cracked down on Huarte’s Miami-Dade network by blocking billing codes for false claims, the indictment said, he teamed up with co-defendant Ramon Fonseca in another alleged conspiracy to expand the infusion scam in South Florida and four other states. Together, the pair owned about 30 additional clinics, but this time they submitted $46.3 million in bogus claims to private insurers that operated under the Medicare Advantage plan, according to the indictment.

The private insurers were especially vulnerable because they were not accustomed to detecting phony Medicare claims. Medicare paid out $9.3 million to the clinics controlled by Huarte and Fonseca, according to the indictment.

Other members of the pair’s crew named in the indictment are Vicente Gonzalez, 38; Alyd Dazza, 45; Monika Blacio, 41, and Ricco Dazza, 41.

They are in custody along with Huarte and Fonseca.

According to the indictment, two of the organization’s clinics in New Orleans were empty storefronts with handwritten business signs.

The FBI investigation further showed that two other companies, Ziallet Services and Magestic Services, were post office boxes in North Carolina and South Carolina, respectively.

Huarte and Fonseca deposited millions of dollars in Medicare payments at two Miami-Dade check-cashing stores, Universal Money Fast and Rapid Trans Solution owned respectively by Dazza and Blacio, according to the indictment.

The owners would wait for the checks to clear, then deliver the proceeds to clinic owners, authorities said, with typical cash deliveries ranging between $30,000 and $80,000 multiple times a week

Stop the scams – link to original article

Miami Herald Editorial

August 16, 2009

OUR OPINION: Medicare must cut payments for fake diabetic treatments

   Some lucky ‘‘patients’’ get flatscreen televisions as gifts from home care providers. It’s the cost of doing business in South Florida — Medicare fraud that’s robbing taxpayers hundreds of millions, even billions, of dollars. 

    This particular scheme involves home visits to inject insulin for elderly patients with diabetes — a rare service in most of the nation. 

    But not in Miami-Dade, where such services are out of control. 

    Many of these patients don’t have diabetes — they’re not even sick. They were created by crooked providers who bribe doctors for referrals and then pay Medicare patients a kickback — anything from cash, groceries or fancy TVs — to use their Medicare ID. 

    Now, finally, Medicare plans to step up its enforcement — not after millions of dollars have been stolen in false claims, but at the front end of the billing process. The government wants to cap Medicare payments to 10 percent of the bill for agencies treating homebound diabetics starting in January. 

    That approach requires careful vetting. It’s a way to control fraud, but it’s not fair to the real diabetics, relatively few in number, who simply cannot treat themselves. They should not pay the price for the greed of others. 

    It’s way past time to get serious about Medicare fraud, particularly as Congress considers healthcare reform. If Medicare is an example of how a public option for insurance might work, then the federal government must first clean up Miami-Dade, which has become ground zero for fraud. Most of these ‘‘outlier patients,’’ as those who need the extra home visits are called, aren’t diabetic or if they are, they don’t need a nurse to inject them. They’re simply part of the scam. 

    Consider that nowhere else in the country are such billings as commonplace as in Miami-Dade even though there are fewer diabetic patients in this county by percent of population than in retiree-rich Palm Beach County or the Tampa Bay area. The average cost of home healthcare runs at $19,230 per patient in Miami-Dade. In Chicago, it’s $635. 

    The proposed national cap would save about $340 million a year in Miami-Dade — money that could be spent on truly sick patients. 

    Federal prosecutors have been cracking down on Miami-Dade’s $1.5 billion home health industry the past couple years. But until recently Medicare payments continued to flow to fraudulent providers because the government had only been checking suspicious claims after payments had been made and, often, the enriched scammers had fled. 

    Tougher scrutiny is warranted. The up-and-up providers that follow the rules and treat real patients will survive. For the others, good riddance.

Bigger Than Madoff

By Chris Edwards and Tad DeHaven

National Review – link

July 15, 2009.

Every year, criminals and cheats pilfer over $100 billion — that’s $40 billion more than Bernie Madoff scammed off his investors — in federal benefits to which they are not legally entitled. Medicare, Medicaid, food stamps, refundable tax credits, and many other programs are targets for looting. 

Government fraud has been in the news lately because analysts are expecting major abuses of the Obama administration’s $787 billion stimulus plan. One Deloitte expert argued that “swindlers, con men, and thieves could siphon off as much as $50 billion” of stimulus funds, which are vulnerable because policymakers are under pressure to shovel it out the door quickly. 

Even more troubling is the potential for fraud and abuse created by President Obama’s other big spending proposals — particularly his giant health-care plan. Obama wants to inject hundreds of billions more tax dollars into federal health care instead of fundamentally reforming Medicare and Medicaid — broken programs that are already subject to Madoff-sized larceny. That is incredibly unfair to those of us paying the bills.

Take Medicare. The Government Accountability Office reports that the program makes about $17 billion in improper payments each year. And that doesn’t include problems in the new $60-billion-per-year prescription-drug plan, which is a juicy target for criminals. Harvard University’s Malcolm Sparrow, a specialist in health-care fraud, recently testified to Congress that official estimates are “lacking in rigor,” are “comfortingly low and quite misleading,” and exclude many kinds of fraud and abuse. He thinks that as much as 20 percent of the federal health-care budget is consumed by fraud, which would be $85 billion a year for Medicare.

Medicare makes a staggering 1.2 billion electronic payments each year, making it highly vulnerable to cheating by health-care providers and organized-crime rings. Criminals need only fill out the government forms carefully and the “claims will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all,” according to Sparrow. A perfect example is the recent case of a high-school dropout in Miami who was able to single-handedly bilk Medicare out of $105 million from her laptop by submitting 140,000 separate claims for equipment and services. 

Medicaid is also a huge abuse target. The GAO puts Medicaid fraud at $33 billion — 11 percent of state and federal spending on the program. Again, that is likely a substantial underestimate. A former Medicaid investigator believes that up to 40 percent of New York State’s Medicaid budget is siphoned off in fraud and improper payments, but New York probably has a worse problem than elsewhere. Using Sparrow’s 20 percent estimate instead, Medicaid rip-offs top $60 billion a year nationwide.

How does all this fraud and abuse occur? In many ways, including billing for services and medical equipment not provided, misrepresenting the services provided, and double billing. That last one is common. In one recent case, the University of Medicine and Dentistry of New Jersey double-billed Medicaid repeatedly over the years by directly submitting claims for outpatient physician services, even as doctors working in the hospital’s outpatient centers were submitting their own claims for exactly the same procedures. 

Another trouble spot is Medicaid’s nursing-home benefits, which are meant for people with low incomes and few financial assets. Since nursing homes are expensive, the program creates a big incentive for higher-income families to falsify their status and apply for the benefits. Indeed, a whole industry of financial consultants helps ineligible seniors hide their income and assets so that they qualify. The result is that the program loses about $10 billion a year to fraudulent claims.

The bottom line is that the enormous size and complexity of federal health programs results in a huge waste of taxpayer funds. The inspector general of the Department of Health and Human Services recently told Congress: “Although it is not possible to measure precisely the extent of fraud in Medicare and Medicaid, everywhere it looks the Office of Inspector General continues to find fraud against these programs.”

Medicare and Medicaid are the biggest fraud targets, but this problem plagues all government subsidy programs. Official loss estimates for other programs include: $12 billion for the Earned Income Tax Credit, $5 billion for Supplemental Security Income, and $14 billion for unemployment insurance. All in all, the cost to taxpayers is well over $100 billion a year, which translates into a theft of $1,000 or more from every household in America every year.

We think that there are good policy reasons to dramatically cut Medicare, Medicaid, and other benefit programs. But at the very least, the vast magnitude of graft in these programs should give every policymaker pause before pumping even more taxpayer money into the federal subsidy empire. 

— Chris Edwards is the director of tax-policy studies at the Cato Institute and co-author of Global Tax Revolution: The Rise of Tax Competition and the Battle to Defend It. Tad DeHaven is a budget analyst at the Cato Institute.