Effort to cut Medicare fraud disappoints

Associated PressFebruary 24, 2012 

— Launched last summer, a $77 million computer system to stop Medicare fraud before it happens had prevented just one suspicious payment by Christmas. That saved taxpayers exactly $7,591.

Hoping for much better results, a disappointed Sen. Tom Carper, D-Del., said, "I wondered, did they leave out some zeros?"

Lawmakers had expected the system to finally allow Medicare to stanch a $60-billion-a-year fraud hemorrhage. Now they're worried about its future performance.

Medicare officials say it's unfair to grade the new technology on a single statistic.

"Suspending payments is only one way of stopping the money," says Ted Doolittle, deputy director of Medicare's anti-fraud program. "There's lots of ways of stopping the money, and we are using them all. Looking at payment suspensions only - that's an unsophisticated view that doesn't give you a full picture of our activities."

When other benefits of the system are taken into account, such as cases referred to investigators and changes to payment software that result in automatic denial of suspect claims, the potential savings in the first six months of operation easily exceed $20 million, Medicare officials indicated in a Jan. 27 letter to Carper. However, officials now acknowledge they don't know how much of that money has actually been recovered.

'Pay and chase'

Other experts point out that the mission of the new system was to stop bogus payments before they leave the Treasury's coffers, ending what's known as "pay and chase," where the agency automatically pays claims, even suspicious ones, and then reviews them weeks after the fact.

That can be a self-defeating way to do business. Law enforcement is usually several steps behind the fraudsters, who sometimes manage to flee the country with millions plundered from the government. The new computer system was meant to elevate Medicare's game, putting it in the same league as major credit card companies that can freeze accounts proactively.

Payment suspensions

Formally known as the Fraud Prevention System, the new screening technology was mandated by Congress.

The goal was to allow Medicare to analyze large numbers of claims and spot patterns of potential problems. Does a storefront wheelchair retailer in Los Angeles, for example, have lots of customers in San Francisco, more than 350 miles away?

In their letter to Carper, Medicare officials said screening technology is now being used to evaluate all Medicare inpatient, outpatient and medical-equipment claims before payment. But payment suspensions did not begin until December 2011 - nearly six months after the system was up and running.

Medicare awarded an initial $77 million contract for the new system to defense giant Northrup Grumman and a group of other companies. About $27 million has been spent out of a four-year budget that could reach $100 million. IBM is also a contractor.

Sen. Tom Coburn, R-Okla., has questioned whether Grumman has the financial services experience necessary to take the lead on the job.

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