Legislation Aimed at the Root Causes of Medicare and Medicaid Fraud

Recently the Health and Human Services Office of Inspector General issued a report A-17-17-52000-  U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES MET MANY REQUIREMENTS OF THE IMPROPER PAYMENTS INFORMATION ACT OF 2002 BUT DID NOT FULLY COMPLY FOR FISCAL YEAR 2016.

In the report, OIG recommends that HHS focus on the root causes of the improper payment rate percentage and evaluate critical and feasible action steps to decrease the improper payment rate percentage below 10%.  Advanced statistical systems, marketed under the name of “predictive modeling” don’t address any root causes.  Their value is picking up patterns of existing frauds.  Now, there is a bill in Congress which may go a long way to responding to this longstanding need.

HR 4554, the Medicare Common Access Card Act of 2017, directs CMS to initiate pilot programs to test smart cards for prevention, detection and deterrence of Medicare fraud.  In 2016, the GAO published GAO-16-216 HEALTH CARE FRAUD Information on Most Common Schemes and the Likely Effect of Smart Cards to report to Congress whether smart card technology can affect the root causes of frauds.  The answer is yes.

Criminal activity of all kinds thrives in the dark.  Because healthcare claims are basically paid without any verification that the services were ever rendered.  Payers do not know where they were rendered if the patient was at the office on the day the claim says they were- even that the provider of services was in the country on that day.  Media stories often document the “25-hour day” where legitimate provider billings would require that long a working day based on the procedures billed in the claims paid.  This root cause is a fundamental enabler of fraud in Medicare, Medicaid and private insurance fraud.  Capturing vital data at the point of care with multiple points of authentication, such as included in HR4554, would provide CMS and other payers the ability to shed light on the times, locations and actions that truly occur in provider offices, home care, and transportation claims, and reduce the ease with which many frauds are committed.

The GAO report estimated that smart cards can attack 22% of fraud.  We at Castlestone don’t completely agree their methodology, which included civil settlements against pharmaceutical companies in the universe of frauds measured.  Even so, using the way we implemented a smart card anti-fraud solution, the costs are about 1% of the 22% fraud number computed by the GAO.  Fraud in Medicare and Medicaid alone is estimated to be $120-$150 billion per year.

This is not the first time that the Medicare Common Access Card has been submitted to Congress.  Representative Peter Roskam of Illinois has diligently tried to get this passed in at least 3 previous sessions of Congress, and in the US Senate, the FAST Act and PRIME Act, led by former Senator Tom Coburn of Oklahoma, could not get enough votes in Congress.

Given that Medicare and Medicaid now cost over $1 Trillion per year (yes, with a “T”), which is $400 Billion more than it was 10 years ago when we started developing our smart card solution to Medicare and Medicaid fraud, it begs the question why this hasn’t been done years ago.

Along with technologies like those proposed in HR4554, policies that encourage increased spending and Federal reimbursement, and discourage fraud prevention and reduction must be reversed.  This combination will ensure that taxpayers are getting the healthcare they pay for.

Jeff Leston, CEO Castlestone LLC.

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.