Legend has it that when asked why he robbed banks, Willie Sutton replied, "Because that's where the money is." If the original Slick Willie were still around and in business today, he'd likely be going after some bloated federal government program instead of banks. He'd find it far more lucrative, and by all appearances thieves almost never get caught. A brief examination of Medicare and Medicaid proves the point.
One of the more contentious issues in the healthcare reform bill has been the elimination of more than $500 billion in future Medicare spending in order to claim that the bill was paid for. At the same time that these cuts (portrayed by the administration as "savings") were announced, congressional democrats were assuring seniors that no decreases would be made in coverage or services. And so it goes: The shell game accounting scam that has defined the Affordable Care Act continues.
A better option to balancing the numbers might have been to stanch the hemorrhaging from the gaping hole in the program that results from rampant fraud and abuse – an approach that may well deliver the same amount of "savings". Moreover, the unfettered outpouring of fraudulent Medicare payments, and the government's historical ineptitude in controlling this enormous problem, ultimately begs the credibility of the federal government as a competent steward of the people's money.
Although estimates vary somewhat, Republicans and Democrats alike acknowledge that Medicare fraud accounts for between 10 and 30 percent of the total program spending.
This is not a new revelation; In 2007, the Department of Justice and the Department of Health and Human Services formed the Medicare Fraud Strike Force, a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing. Strike Force teams were established in seven cities believed to host significant fraudulent schemes: Miami, Los Angeles, Detroit, Houston, Brooklyn, Tampa and Baton Rouge. Despite the Strike Force's best efforts, fraud and abuse have continued to escalate.
In 2009, Tom Coburn opined that nearly 20% of Medicare's $500-plus billion annual spending is for fraudulent claims. The senator said, "If you look at Medicare and Medicaid, both vital programs today, they're highly inefficient. People claim that they're efficient. Medicare has at least $80 billion worth of fraud a year. That's a full 20 percent of every dollar that's spent on Medicare goes to fraud".
With some minor variations, the Congressional Budget Office concurs. CBO actuaries reported that total Medicare spending was $528 billion in 2010, and that $47.9 billion was determined to be for "improper payments", aka fraud.
Like Medicare, Medicaid has also been a target for egregious fraud and abuse. The Medicaid program is administered by the states, and fraud has become a major problem for all of them. New York State, for example, has a total budget of $116 billion, $50 billion of which was spent on Medicaid in 2011. According to actuaries, as much as $18 billion of that amount – more than one-third - is fraudulently claimed.
Apparently, ripping off Medicare and Medicaid is so lucrative that a number of organized crime families in the U.S. and abroad have diverted efforts towards it in preference to more traditional and more dangerous organized crime pursuits.
The fact is that the Medicare program is a prime target for fraud because it is based on the "honor system" of billing. It was originally established to assist physicians who provided medical care to the needy. In an attempt to prove efficiency, there were few safeguards to identify and eliminate false claims. Claims are paid automatically and with minimal review in what is known as a "pay and chase" model, because the goal of Medicare is not to root out false claims, but to pay claims quickly and smoothly.
Now, to be fair, the Obama administration has not completely ignored the continued fraudulent siphoning of monies from the Medicare coffers. The Affordable Care Act of 2009 provides an additional $350 million to pursue physicians who are involved in both intentional and unintentional Medicare fraud through inappropriate billing.
In 2011, Federal authorities were successful in recovering $4.1 billion from fraudulent Medicare activity, but they spent millions of dollars to recover it. Likewise, states recovered $1.7 billion in fraudulent Medicaid payments in 2011; the bad news is that the government had to spend $208 million in the process.
Just last week the Government Accountability Office reported that the National Medicaid Audit Program spent $102 Million of taxpayers' monies since 2008 in order to identify less than $20 Million in overpayments. With returns on investments like these, it's no wonder that people are questioning whether the Center for Medicare and Medicaid Services (CMS) should really hold the keys to the till.
It's a recurring theme: The additional anti-fraud provisions baked into the healthcare reform bill simply allow the government to spend significant sums of money in an attempt to recoup fraudulent payments that may well be less than what it costs to recoup them. Furthermore, they still lack a clear process to assure that the problems are actually resolved. ObamaCare is spawning bureaucratic offshoots aimed at plugging holes in a highly riddled system. In this case, layers of additional bureaucracy are being added to an already bloated system, in hopes that additional tax dollars and more government involvement will somehow render the system less prone to fraud.
Ultimately, the problem is that the government shouldn't be running healthcare in America, because it simply can't do it efficiently, cost effectively or with reasonable oversight. Let's face it; the types of losses regularly sustained by Medicare and Medicaid would never be tolerated by the private sector. These types of losses are frowned upon in real businesses operating in the real world.
Conventional wisdom suggests that prior performance and a demonstrated history of responsible and successful appropriation of funds are worthy attributes in a potential management vehicle. Few would feel comfortable giving carte blanche authority to a private entity to administrate a half trillion-dollar program if that entity routinely posted losses of 20 to 30 percent due to "improper payments".
Pompous overconfidence that "government knows best" and stunning inability to control and manage spending have served as the leitmotif for this entire administration. Perhaps the flagrant fraud and abuse in the Medicare system should provide the final evidence that the private sector, not the government, is best equipped to manage the people's money.