Jeff Leston, the founder of Castlestone LLC, has provided TDMR with his take on how to improve government healthcare plans such as Texas Medicaid to reduce waste, fraud and abuse.
Castlestone is a company created to use the infrastructure of the payment (credit/debit) networks to deliver verified, real-time information about time, location and details of healthcare encounters without having to invest in large networks. Castlestone’s primary customer base are health plans looking to prevent, detect and deter fraud and abuse.
Here is what he has to say:
Over the last 8 years, I ‘ve have attempted to convince HHSC that fraud is a large problem and we have a cost-effective tool to help reduce it. My contact list looks like an HHSC employee directory, past and present, with Commissioners, Assistant Commissioners, Inspectors Generals including Milwee, Bevers, Truitt, Villareal, Wilson, Bowen, Heiligenstein Garza, Palmer, Traylor, and more.
We have had little traction. Thanks, Jack Stick and 21ct for poisoning the well for the rest of us.
Texas congressmen have wanted this for years
Here’s the interesting part. Members of the Texas Congressional Delegation have been asking the Centers for Medicaid and Medicare Services (CMS) for years to implement –and wondering why they haven’t – the anti-fraud structure and services we developed.
Ways & Means Committee Chairman Kevin Brady is a sponsor of the Medicare Common Access Card Bill, which includes a provision to use smart card technology.
Dr. Michael Burgess, in the Energy and Commerce Committee, asked why CMS can’t do what the credit card companies can do, and what Castlestone has presented to HHSC and other Medicaid plans. You can check this out at around the 11-minute mark in a video of a hearing almost four years ago.
Texas Congressmen Doggett and Johnson asked the Government Accounting Office (GAO) to address the issue of removing Social Security Number from Medicare cards and using machine-readable cards. Their report last year HEALTH CARE FRAUD Information on Most Common Schemes and the Likely Effect of Smart Cards (GAO 16-216) on smart cards concluded that 22% of fraud could be addressed by the technology we developed.
System is relatively inexpensive
And since we use the existing payment networks, our cost is about 1% of that 22%.
In Texas terms, $990 million of annual fraud in the Medicaid program can be directly addressed by $5 million per year to capture every outpatient encounter in real time, not the $90 million that was to be bestowed on 21CT.
We are wondering why we are having such a hard time with a compelling case.
But states not motivated to find fraud
TDMR referred me to an article about Reflective Medical and their efforts to reduce fraud in the Texas Medicaid program. Dr. David Gibson of Reflective Medical and I have come to the same conclusion, that the current structure encourages fraud and discourages diligent efforts to reduce it.
As long as the FMAP (Federal Matching Percentage) is greater than 50%, the more a state spends, the more they get.
Texas’ current rate is 56.18% which means that each dollar spent by Texas taxpayers will be supplemented by $1.28 from other taxpayers across the country. And for every $1 that is recovered by various authorities, HHSC would have to pay back the federal treasury $0.5618. With the costs of investigation and prosecution included, this is a money losing proposition for Texas (and all states).
The answer for state governments currently is just don’t spend a lot of time and money going after fraud. At least Texas isn’t in the 75% bracket. The lesson is that it is hard to turn down money from Uncle Sam. And it’s even harder to get someone to give it back.
Managed care to the rescue?
There has been a misplaced belief that handing the keys to managed care companies will rid state governments of the fraud problem.
Recent hearings in the Texas Legislature have shown otherwise. Managed care companies need providers in their networks, particularly in this era of exchanges and individual choice. We all want to have our doctors be “in network.”
A physician also recently told me that three of his colleagues recently resigned as medical directors of HMOs because they did not want to challenge their colleagues’ claims. And, the Affordable Care Act classifies anti-fraud expenses as administrative costs in Medical Loss Ratio calculations.
Payers have answered that by cutting the cost of fraud reduction and passing that cost along to the ultimate payer, the taxpaying citizen. The testimony in the Texas hearings said basically that the cost of fraud is baked into the capitation rate. In other states, the sum of cases referred to law enforcement or Medicaid oversight offices by managed care organizations for an entire fiscal year totaled one.
Something has to change
If this distorted incentive system remains in place, billions of dollars of fraud will persist and we will continue to read about preventable frauds.
It is time for legislators at the federal and state levels to demonstrate accountability for the $1 trillion we spend annually. It’s not that hard.