INTRODUCTION
Mr. Chairman and Members of the Subcommittee, I am very pleased to have this
opportunity to describe the Health Care Financing Administration's programs to
fight fraud and abuse in Medicare and Medicaid. As we stand on the threshold of
the twenty-first century, we are faced with the formidable task of ensuring the
solvency of the Trust Fund, and preserving Medicare for future generations. In
order to do this, we must begin by making sure that every dollar we spend for
our beneficiaries is well-spent, and that our goals of efficiency and cost-
effectiveness do not compromise the quality of their health care.
Why We Need to Pay Right the First Time
The annals of medicine are replete with case histories demonstrating that
prevention is the best antidote to illness. This is equally true in the area of
fiscal well-being: in order for our Medicare and Medicaid programs to remain
both solvent and strong, we need to prevent improper or fraudulent claims which
strain the fiscal and personnel resources of the system. By guaranteeing the
initial accuracy of both claims and payments, we avoid having to "pay and
chase," and we can prevent opportunities for fraud and abuse.
Incorrectly billed claims can stem not only from fraud, but from confusion
and misinformation about the proper billing procedures. For example, if there is
a payer primary to Medicare, the Medicare contractor will reject the claim and
submit it to the appropriate primary payer. Where Medicare is primary, the
Medicare contractor will make payment, then send the paid claims data to the
supplemental insurer. HCFA uses many pre-payment mechanisms to determine the
primary payer for benefits for a Medicare beneficiary and to ensure Medicare
pays in the right order of payers. These mechanisms are part of our Medicare as
a Secondary Payer (MSP) Activity, which I will describe in detail later in this
testimony. Currently, we are seeking legislation that would improve our ability
to verify whether Medicare is the primary or secondary payer.
OVERVIEW: THE ISSUES
The sheer complexity of the health care delivery system virtually guarantees
that there will be instances of unscrupulous claims billing. While some
high-profile examples of fraud and waste are well-known to the public because of
media attention, there are many less visible areas of concern. Some of these
include:
Abusive Billing in Nursing Homes --- Aside from the typical kind of fraud
that occurs in charging patients for services they have not received, there are
other, more difficult- to-detect abuses to which beneficiaries of nursing homes
are vulnerable. These include inappropriate designation of nursing home patients
as hospice patients, false patient census reports, improper billing of supplies
and services for patients eligible for both Medicare and Medicaid ("dual
eligibles"), unnecessary or inappropriate services being prescribed for nursing
home patients, and billing as therapy services for services paid in the nursing
home rate. Unnecessary medical supplies may be ordered for the unsuspecting
patient, such as several cases found by the DHHS Inspector General (IG), in
which thousands of dollars of surgical tape, hydrogel wound filler, and orthotic
devices were inappropriately ordered and made available to other patients. Also,
it has been estimated that as much as 32% of mental health services ordered for
Medicare nursing home residents were unnecessary or inappropriate. Part of the
problem stems from the fact that the nursing home itself is not responsible to
coordinate the services, which may be initiated and billed by an outside entity.
Home Health Fraud -- The "invisibility" of the home health setting invites
profiteers to prey on disabled and elderly patients who may often be isolated,
uninformed, and lacking the support of friends or family. We are finding
continuous problems with unnecessary home health services, especially those
provided to beneficiaries who are not homebound. Because of the difficulty in
monitoring these situations, the patient may be at the mercy of an unethical
provider or supplier. Over-prescription and overcharging of oxygen and tube
feeding supplies for home health patients have been found in bills submitted to
Medicare and Medicaid. Through HCFA's Operation Restore Trust (ORT), we have
located and penalized fraudulent home health agency owners across the Nation,
and saved millions of dollars.
The 1981 report issued by the Senate's Permanent Subcommittee on
Investigations identified several areas of Medicare and Medicaid home health
care needing better oversight, and recommended that HCFA notify home health
intermediaries in a timely fashion of any regulatory changes. We have acted on
this recommendation, and we have developed checks and balances that ensure that
this is done. Current HCFA procedures require that intermediaries have at
least 90 days to carry out any program actions that may be required of them.
Therefore, any legislative/statutory, regulatory, policy, or electronic system
changes that directly affect the contractors are published in a quarterly
release of HCFA's Task Management Plan, which is then distributed, along with
pertinent materials, to intermediaries with a minimum 90 days' implementation
deadline. This process alerts intermediaries that they must notify providers of
new or revised program procedures or requirements. Intermediaries are also
required to communicate program changes to their providers in a communique,
usually in the form of a bulletin or similar form of notification. These checks
and balances ensure accountability --- of both intermediaries and HCFA.
Durable Medical Equipment --- There is widespread concern that Medicare's
payments for durable medical equipment are excessive. Medicare payments for DME
are based on a fee schedule methodology established by Congress in Omnibus
Budget Reconciliation Act (OBRA) 1987, and these fee schedule amounts were based
on supplier's "reasonable charges" in the mid-1980s. Unless otherwise specified
by Congress, these amounts have been increased annually by the Consumer Price
Index-Urban (CPI-U) as required by statute. This statutorily prescribed payment
methodology does not consider changes in technology or any other factors
impacting suppliers' costs and as a result HCFA's payments for DME are often
excessive.
Problems with the durable medical equipment (DME) industry have resulted in
stricter controls over who can apply for, and receive, a license as a DME
provider. A Notice will be issued this summer by HCFA that will require that DME
providers meet certain criteria, including putting up a surety bond for
licensure, and greater proof of the bona fide existence of the business. This
win prevent abuses such as the case of the Florida man who received a DME
license, despite the fact that the only actual supplies he had in stock were
stuffed alligator heads and other souvenirs he sold from his garage. He had
applied for a DME certification to sell wheelchairs to complement his
brother-in- law's business of installing wheelchair lifts in cars. Examples like
this are a good argument for DME bonding.
Fraudulent Billing Practices --- Complex claims billing procedures offer
multiple ways of cheating the system, from overt inflation and exaggeration of
the level of services provided "upcoding") to blatantly false cost reports
submitted for reimbursement. A Maryland nursing home operator was prosecuted for
adding his personal entertaining and decorating expenses to the facility's
Medicaid bill, including a charge for services rendered by the operator's
relative who was actually in jail at the time. In another case reported by the
GAO, a supplier for a long-term care facility was forging physicians' signatures
on certificates of medical necessity, and then billing for items that were
either unnecessary, had already been provided to the patient, or were in fact
never delivered. The President's FY98 Budget includes provisions to develop
prospective payment systems for several services in Medicare. PPS pays a set
rate according to the characteristics of the patient, and removes many of the
incentives for providers to provide excessive services or submit fraudulent cost
reports to receive high reimbursement.
Kickbacks - Providers such as laboratories, ambulance companies, and
pharmacies may enter into unethical agreements with nursing home owners and
clinical psychologists that may include kickbacks in exchange for being allowed
to provide services to the nursing home residents. HCFA's State Medicaid Fraud
Control Units have found cases of nursing home owners authoriziny lucrative, with charges as high as $1000
per day. Also, patients hospitalized in psychiatric facilities are sometimes
billed for unnecessary and unordered services. The President's FY98 budget has a
provision to make Medicare payments less lucrative for these situations;
ceilings would be established on reimbursements, so that facilities could not be
reimbursed for these costs, if they were much more expensive than other
psychiatric hospitals,
This is a particular area of concern for HCFA because of the potential for
coercive hospitalization under some State laws, such as a case recently reported
in Massachusetts. A child who had been taken to a hospital for a medication
adjustment for his epilepsy was forcibly hospitalized, against his parents'
wishes, in a psychiatric hospital. Although this situation was due in part to
Section 12 of Massachusetts State law, it raises disturbing questions about lack
of oversight in psychiatric hospitalizations.
Marketing Abuses - Questionable sales techniques are sometimes used in the
marketing of health insurance, especially when the potential customers are
elderly and may be ill-equipped to make informed choices. Some marketing
representatives may use fear tactics to persuade beneficiaries to sign up for
benefits they don't need and can sometimes ill afford. In response to these
abuses, HCFA will be issuing National Managed Care Marketing Guidelines this
summer, to assure that marketing materials present balanced and accurate
informationy lucrative, with charges as high as $1000
per day. Also, patients hospitalized in psychiatric facilities are sometimes
billed for unnecessary and unordered services. The President's FY98 budget has a
provision to make Medicare payments less lucrative for these situations;
ceilings would be established on reimbursements, so that facilities could not be
reimbursed for these costs, if they were much more expensive than other
psychiatric hospitals,
This is a particular area of concern for HCFA because of the potential for
coercive hospitalization under some State laws, such as a case recently reported
in Massachusetts. A child who had been taken to a hospital for a medication
adjustment for his epilepsy was forcibly hospitalized, against his parents'
wishes, in a psychiatric hospital. Although this situation was due in part to
Section 12 of Massachusetts State law, it raises disturbing questions about lack
of oversight in psychiatric hospitalizations.
Marketing Abuses - Questionable sales techniques are sometimes used in the
marketing of health insurance, especially when the potential customers are
elderly and may be ill-equipped to make informed choices. Some marketing
representatives may use fear tactics to persuade beneficiaries to sign up for
benefits they don't need and can sometimes ill afford. In response to these
abuses, HCFA will be issuing National Managed Care Marketing Guidelines this
summer, to assure that marketing materials present balanced and accurate
information to beneficiaries and to discourage fraudulent or deceptive
representation of health plans or services.
HCFA'S CURRENT INITIATIVES AGAINST FRAUD AND ABUSE
This Administration is seriously committed to aggressively prosecuting and
preventing all forms of waste, fraud, and abuse. Toward this goal, we worked on
a bi-partisan basis with the Congress to develop the necessary legislation. The
Health Insurance Portability and Accountability Act of 1996 (HIPAA), which was
enacted last year, contained important provisions to aid us in our war on
waste, fraud and abuse in the Medicare program. Two of the most significant
provisions for the Health Care Financing Administration (HCFA) were the
implementation of the Medicare Integrity Program (MIP) and the Fraud and Abuse
Control Program.
Medicare Integrity Program (MIP)
This program authorizes the Secretary to promote the integrity of the
Medicare program by entering into contracts with eligible entities to carry out
program integrity activities such as audits of cost reports, medical and
utilization review, and payment determinations. MIP provided a stable source of
funding for HCFA's program integrity activities, and provided us with the
authority to contract for these activities with any qualified entity, not just
those insurance companies who are currently our fiscal intermediaries or
carriers.
The Medicare Integrity Program (MIP) was enacted to strengthen the
Secretary's ability to deter fraud and abuse in the Medicare program in a number
of ways. First, it created a separate and stable long-term funding mechanism for
program integrity activities. Historically, Medicare contractor budgets had been
subject to fluctuations of funding levels from year to year. Such variations in
funding did not have anything to do with the underlying requirements for program
integrity activities. This instability made it difficult for HCFA to invest in
innovative strategies to control fraud and abuse. Our contractors also found it
difficult to attract, train, and retain qualified professional staff, including
clinicians, auditors, and fraud investigators. A dependable funding source
allows HCFA the flexibility to invest in new and innovative strategies to combat
fraud and abuse. It will help HCFA shift emphasis from post- payment recoveries
on fraudulent claims to pre-payment strategies designed to ensure that more
claims are paid correctly the first time.
Second, by permitting the Secretary to use full and open competition rather
than requiring that we contract only with the existing intermediaries and
carriers to perform MIP functions, the government can seek to obtain the best
value for its contracted services. Prior law limited the pool of contractors
that could compete for contracts, thus, we were not always able to negotiate the
best deal for the government or take advantage of new ways to deter fraud and
abuse. Using competitive procedures, as established in the Federal Acquisition
Regulations System (FARS), we expect to attract a variety of offerors who will
propose innovative approaches to implement MIR.
Third, MIP permits HCFA to address potential conflict of interest
situations. We will require our contractors to report situations which may
constitute conflicts of interest, thus minimizing the number of instances where
there is either an actual, or an apparent, conflict of interest. By invoking the
FAR in establishing multi-year contracts with an expanded pool of contractors,
we will be able to avoid potential conflicts of interest and obtain the best
value. Also, by permitting us to develop methods to identify, evaluate and
resolve conflicts of interest, we can create a process to ensure objectivity and
impartiality when dealing with our contractors. This is a concern particularly
when intermediaries and carriers are also private health insurance companies
processing Medicare claims.
To ensure that our resources are used as wisely as possible, we will also
gradually reduce the number of contractors performing payment safeguard
activities. Prior to the passage of HIPAA, all 72 contractors performed all
aspects of program integrity work. With highly specialized contractors focusing
solely on fraud and abuse prevention and detection, we will gain a
cost-effective and efficient pool of contractors. We plan to focus contractors
on program integrity activities for a geographic area, rather than by provider
type, as is current practice. That way, contractors will have a more
comprehensive picture of activity, and will be able to monitor whether doctor
bills match hospital bills, in terms of procedures performed and dates of
service. Furthermore, the reduction in the number of contractors performing
activities such as medical and fraud review as well as audit does not mean that
local presence will be eliminated. Medical directors will continue to play an
important role in benefit integrity activities, and we intend to retain
locally-based Medical directors as well as to continue our relationship with
local physicians by using groups like Carrier Advisory Committees.
We are currently developing regulations to implement MIP, and we are also
working on a scope of work for competitive contracts. As we transition work from
one of our contractors, Aetna (which is terminating its Medicare work), we are
testing a new contracting relationship in several Western States that will
separate out (and consolidate) payment integrity activities from claims
processing. This will give us valuable experience as we prepare to implement
MIP.
Operation Restore Trust (ORT)
The Operation Restore Trust (ORT) project was the first comprehensive effort
at collaboration between HCFA and law enforcement agencies. This two-year
demonstration project, which was launched by the President in May 1995 and
concluded on March 31, 1997, was designed to demonstrate new partnerships and
new approaches in finding and minimizing fraud in Medicare and Medicaid. As a
demonstration project, ORT targeted four areas of high spending growth: home
health agencies, nursing homes, DME suppliers, and hospices. Since more than a
third of all Medicare and Medicaid beneficiaries are located in New York,
Florida, Illinois, Texas, and California, ORT efforts were targeted at these
five states.
Fraud and Abuse Control Program
The program integrity activities of the Medicare contractors initiate many
of the cases subsequently developed by the Office of Inspector General and
Federal Bureau of Investigation, and support their prosecution by the Department
of Justice. Using monies made available through the Fraud and Abuse Control
Fund, established in HIPAA, we expanded our successful ORT efforts using the
State survey agencies to be our "eyes and ears" in the field and to report back
to the contractors whether providers are meeting Medicare billing as well as
quality requirements. We have used this model successfully with our expanded
home health surveys in the 5 Operation Restore Trust (ORT) States.
Through HCFA's expanded efforts, approximately $1.8 million has been
allocated to HCFA for "Project ORT" through HIPAA's Fraud and Abuse Control
Program, to enhance the program integrity activities that involve collaboration
with State certification agencies. Eighteen States win participate in a total of
26 HIPAA funded projects, allowing us to survey approximately 300 providers for
both certification and reimbursement issues. These enhanced surveys will be made
of providers of home health services, skilled nursing services, outpatient
physical therapy services, and laboratory services, as well as psychiatric
services in both hospitals and community mental health centers. Many of these
surveys will be modeled after the home health agency and skilled nursing
facility surveys conducted during ORT. This collaboration, which is being
institutionalized through the Fraud and Abuse Control Program established in
HIPAA, establishes a funding stream for health care fraud and abuse activities,
and requires DoJ and HHS to establish priorities jointly.
Medicare as a Second Payer (MSP)
This "front end" activity takes a proactive approach to identifying the
correct payer before the claim is processed, so that Medicare does not pay
inappropriately or unnecessarily. There are multiple areas that are scrutinized
to ensure that the appropriate payer is billed:
Initial Enrollment Questionnaire (IEO) - The IEQ is used to gather Medicare
Secondary Payer (MSP) information for most new beneficiaries approximately three
months before they become entitled to Medicare. For beneficiaries who do not
apply for Medicare entitlement until after becoming eligible, HCFA conducts MSP
development at the time the Medicare application is filed. This function is
currently performed by an independent contractor.
First Claim Development - For all claims, the individual completing the
Medicare claim for payment should indicate if there is other insurance that is
primary to Medicare. If the beneficiary has not responded to the IEQ, and MSP
information is not included on the first claim submitted for that beneficiary,
the Medicare contractor submitting the first claim is responsible for mailing a
questionnaire to the beneficiary or the provider to gather the required
information. This function is currently performed by all Medicare fiscal
intermediaries (FIs) and carriers.
Trauma Code Development - When a claim is received for Medicare primary
payment and the claim contains one of certain specific trauma codes (which could
indicate Worker's Compensation, automobile accidents, or other liability
situations), the claim is scrutinized to determine if another insurer is the
correct primary payer. Currently, this function is performed by the Medicare FIs
and carriers.
MSP Litigation Settlement - HCFA has entered into agreements to settle MSP
litigation with several health insurance companies. As part of these
settlements, the affected private health care plans are required to periodically
submit MSP information on their enrollees to HCFA. This activity is estimated to
result in additional $540 million in MSP savings for Fiscal Year 1997. The
settlement agreements require tins mandatory reporting for 5 years. GM a
Medicare Part B carrier, is currently processing this information to the Common
Working File (CWF).
Internal Revenue Service (IRS)/Social Security Administration (SSA)/HCFA
Data Match - Information on employers and employees provided by the IRS and SSA
is analyzed by HCFA for use in contacting employers concerning possible
insurance coverage of Medicare beneficiaries.
Voluntary Insurer/Employer Reporting for MSP - As an alternative to
responding to the IRS/SSA/HCFA data match employer questionnaires, employers may
enter into a voluntary agreement with HCFA to report primary payer information
on a current basis. Likewise, other health insurance companies are encouraged
to report on their insured who are Medicare eligible on a current basis. HCFA
Central Office is currently negotiating its first such voluntary agreement.
Hospital Admissions Procedures Review - Institutional providers such as
hospitals, as part of their Medicare participation agreements, are required to
conduct admissions interviews to determine if another primary payer exists. FIs
are required to review a sample of their hospitals annually to determine if
their admissions procedures are complete and are routinely followed. MSP
information thus acquired during hospital intake ensures that Medicare pays in
the appropriate order of financial liability.
Claims Submission - Medicare claims submission instructions require that the
existence of a primary payer other than Medicare be indicated on the claim. This
information is also checked with HCFA's own insurance information obtained from
other sources.
DATA SYSTEMS TO FIGHT FRAUD AND ABUSE
Single Integrated Database System - HCFA is in the process of developing an
automated Medicare claims processing and information system, which will, among
other things, assist in our program integrity and provider exclusion efforts.
This integrated system is being designed to consolidate the currently fragmented
Medicare claims processing into one standardized system. Although we are
currently re-examining the specific implementation strategy for this system-4 we
believe a fully operational integrated system will assist us in preventing
fraud. A significant advancement for HCFA will be the use of advanced technology
to detect fraud and abuse at the outset -- before Medicare pays health care
providers. The single system will facilitate identification of data files
containing aberrant patterns and data discrepancies, and alert Medicare
contractors to review more cautiously selected Medicare claims.
Full implementation of an integrated database will aid us in preventing
fraud and abuse because it will greatly improve HCFA's ability to profile data
on a National or regional basis by type of service. We plan to use these
profiles to identify and review aberrant billing patterns and to prevent
inappropriate claim from being paid in the first place, thus avoiding the need
to chase down those fraudulent claims that have already been paid. The single
system will integrate data from Medicare Part A, Part B, and managed care and
provide the opportunity to have a comprehensive view of billing practices and to
incorporate new technology to facilitate innovative investigative techniques. We
plan to use artificial intelligence in an analysis of patterns of care,
auto-adjudication, and other analytic tools that will permit improved
identification of payments that should not be made -- prior to payment.
One way in which the new system will provide an enhanced ability to fight
fraud is through the use of the National Provider Identifier, which is an
industry wide unique identifier for providers and suppliers created under the
authority of the Health Insurance Portability and Accountability Act of 1996
(HIPAA). This identifier will be used to create an integrated database that will
contain a record of all providers and suppliers who are certified to bill
Medicare for medical supplies or equipment provided to our beneficiaries. The
integrated database will contain a record of all providers and suppliers who are
certified to bill Medicare for medical services or equipment provided to our
beneficiaries. Our legislative proposal for authorization to require social
security numbers from Medicare providers will enhance our ability to identify
fraudulent providers and keep them from further defrauding the program. If a
provider is excluded from the Medicare program, or has been identified as
fraudulent, that provider will be flagged in the database, which must be
accessed before the claim is paid. A single system will also enable us to flag
providers who are excluded from Medicaid and other Federal health programs as
well.
An integrated information system will improve our abienrollment data.
Los Alamos National Laboratories - In September 1996, HCFA signed an
interagency agreement with the Los Alamos National Laboratory (LANL) to develop
mathematical models which identify potentially fraudulent and abusive patterns.
The agreement, which arose out of Operation Restore Trust, is for the two-year
period, FY96 through FY97. Its purpose is to provide analytical and computer
support to develop improved approaches to operating the Medicare program. The
ultimate goal is the development of prepayment software to detect and deter
fraudulent and improper claims. To date, LANL has made considerable progress. By
the end of 1998, we will be able to better assess if their initial work with
specific beneficiary and provider populations can be repeated and applied more
broadly to other beneficiary and provider populations. LANL is also exploring
new ways their technology can assist in our fight against Medicare fraud and
abuse. Within the next few months, they will submit for our consideration a
proposal for future fraud detection work. LANL is also under contract with HCFA
to determine when the contractors and the computer systems should transition
into the integrated database environment.
Fraud Investigation Database - One of HCFA's most promising initiatives in
excluding fraudulent providers is the Fraud Investigation Database (FID). We
began implementing the FID in May 1996, and we have been pleased with the
success of the system. The FID is a case-tracking sysenrollment data.
Los Alamos National Laboratories - In September 1996, HCFA signed an
interagency agreement with the Los Alamos National Laboratory (LANL) to develop
mathematical models which identify potentially fraudulent and abusive patterns.
The agreement, which arose out of Operation Restore Trust, is for the two-year
period, FY96 through FY97. Its purpose is to provide analytical and computer
support to develop improved approaches to operating the Medicare program. The
ultimate goal is the development of prepayment software to detect and deter
fraudulent and improper claims. To date, LANL has made considerable progress. By
the end of 1998, we will be able to better assess if their initial work with
specific beneficiary and provider populations can be repeated and applied more
broadly to other beneficiary and provider populations. LANL is also exploring
new ways their technology can assist in our fight against Medicare fraud and
abuse. Within the next few months, they will submit for our consideration a
proposal for future fraud detection work. LANL is also under contract with HCFA
to determine when the contractors and the computer systems should transition
into the integrated database environment.
Fraud Investigation Database - One of HCFA's most promising initiatives in
excluding fraudulent providers is the Fraud Investigation Database (FID). We
began implementing the FID in May 1996, and we have been pleased with the
success of the system. The FID is a case-tracking system to record and
disseminate information regarding exclusions, and contains extensive national
Medicare and Medicaid fraud data as well as comprehensive information on all
excluded providers. The database is intended to assist HCFA and our partners in
identifying excluded providers, as well as those who are allegedly defrauding
the programs. For example, a Medicare contractor in one area can use this
information to ensure that the providers it is reimbursing have not been
excluded through the actions of another contractor.
In an effort to enhance coordination of the exclusion process, the FID is
also accessible to the Medicaid anti-fraud agencies such as the Medicaid Fraud
Control Units and the Surveillance and Utilization Review Systems. We expect
very soon to be able to obtain data from these Medicaid entities on cases and
information related to the providers that they suspect to be fraudulent. The FID
is also designed to ensure the coordination of anti-fraud activities undertaken
by our law enforcement Partners and to facilitate the monitoring of cases
referred to the OIG, the FBI or the U. S. Attorneys.
As other Federal government agencies acquire access to the FID, we will be
able to prevent a provider who defrauds one Federal program from ever repeating
the fraud in another program.
Utilizing the combined forces of all of the programs and technology cited
thus far, HCFA has succeeded in preventing millions of dollars in Medicare and
Medicaid losses due to fraud and abuse. However, there are still some areas
where we can become more effective in these efforts, with the help of additional
legislation proposed by the President's Budget.
THE PRESIDENT'S LEGISLATIVE PROPOSALS
HIPAA provided a solid foundation on which to build program integrity
activities. The President is proposing a number of additional fraud and abuse
proposals in his FY98 Budget and the Medicare and Medicaid Fraud, Abuse, and
Waste Prevention Amendments of 1997.
THE PRESIDENT'S FY98 BUDGET
The President's budget contains a number of proposals to reduce waste, fraud
and abuse in the Medicare program. They include provisions to require insurance
companies to report the insurance status of beneficiaries to ensure that
Medicare pays appropriately. Private insurance is the primary payer when
Medicare beneficiaries have such coverage and Medicare is required to be the
secondary payer. Having insurance companies report information on Medicare
beneficiaries they insure would greatly reduce the costly "pay and chase" method
that we are forced to use.
In addition, we have several proposals to prevent excessive and
inappropriate billing for home health services. We are proposing to close a
loophole in the current payment calculation by linking payments to the location
where care is actually provided, rather than the billing location. When we
implement a home health prospective payment system (PPS), we are proposing to
eliminate home health agency (HHA) periodic interim payments, which were
originally established to encourage HHAs to join Medicare by providing a smooth
cash flow. Since over 100 new agencies join Medicare each month, such financial
inducements are no longer needed. We also propose to work with the medical
community to develop more objective criteria for determining the appropriate
number of visits for specific conditions, so that we can prevent excessive
utilization.
MEDICARE AND MEDICAID FRAUD, ABUSE AND WASTE PREVENTION
AMENDMENTS OF 1997
In March, the President presented an additional set of legislative proposals
titled the "Medicare and Medicaid Fraud, Abuse, and Waste Prevention Amendments
of 1997." Some of these proposals build on the provisions enacted in HIPAA.
Others seek to close loopholes or weaknesses in the Medicare statute that allow
providers to take advantage of Medicare payment. Some of the provisions in the
bill include:
vImproving the Provider Enrollment Process - We propose to clarify the
provider enrollment process, and strengthen HCFA's ability to combat fraud and
abuse by not allowing "bad actors" to become Medicare providers or suppliers.
These provisions would provide the Secretary the authority to deny Medicare
entry for those provider applicants who have been convicted of a felony, and the
authority to collect a fee for all Medicare and Medicaid applicants when they
apply for enrollment or re-enrollment. The fee would cover administrative costs
in processing applications and administering the HIPAA National Provider
Identification program requirements. If an application is denied, a six-month
waiting period must be completed before the provider could reapply.
This Subcommittee recommended in its 1981 Home Health Report that HCFA
develop a data bank of owners, principals, and related organizations. We
responded to this recommendation by developing a National provider enrollment
application (HCFA 855) that captures that specific data for all Medicare
providers, and the application will be available and effective on July 1, 1997.
In conjunction with this data collection, we also intend to implement an
electronic system (Provider Enrollment, Chain, and Ownership System) that will
consolidate data collected by the enrollment application from fiscal
intermediaries, carriers, and the National Supplier Clearinghouse. This system
will maintain all existing provider data in one National repository.
Value of Capital When Ownership of an Institution Changes- This proposal,
which would apply to all providers, would deem the sales price of an asset to be
its net book value. There have been instances in which SNFs or hospitals
currently game the system by creating specious "losses" in order to be eligible
for additional Medicare payments. For example, a seller might claim that a
significant portion of the purchase price of a hospital is attributable not to
the value of the hospital building and other capital assets, but to the value of
the certificate of need, the already assembled hospital staff, or some other
intangible asset. By minimizing the value attributable to the capital assets,
the seller is able to record a lower sales price, and a greater "lose' on the
sale. The seller is then entitled to partial reimbursement for the loss from
Medicare. This existing loophole is especially problematic in the case of
hospitals paid under PPS for capital because the prospective capital payments to
the new owner are unaffected by the low valuation of the hospital (prior to PPS,
the new owner would be somewhat disadvantaged by the gaming because their
cost-based capital payments would have been lower because of the low sales
price). Further, this proposal would eliminate the need for any payment
adjustments for gains or losses.
Bankruptcy Provisions - These proposals would protect the public's
interests in bankruptcy situations. - A provider would still be liable to refund
overpayments and pay penalties and fines even if it filed for bankruptcy.
Quality of care penalties could be imposed and collected, and Medicare
suspensions and exclusions (including educational loan defaults) would still be
in force even if a provider files for bankruptcy. Bankruptcy courts would not
be able to re-adjudicate our coverage or payment decisions.
Clarify the Definition of Skilled Service for the Purposes of Rome Health
Eligibility Venipuncture, which currently qualifies as skilled nursing care and
therefore meets the eligibility criterion for intermittent skilled nursing
services under the home health benefit, would be excluded. Under current law, if
the other criteria are met (homebound, etc.), then a beneficiary who only
requires venipuncture for the purpose of obtaining a blood sample as his/her
qualifying skilled need would be entitled to all of the other covered home
health services including home health aide services.
Hospice Benefit Modifications - This proposal would revise Medicare
hospice coverage and payment policies in certain cases. First, after the two
initial 90-day periods, this proposal would replace the current unlimited fourth
hospice benefit period with an unlimited number of thirty-day periods. This
change would help HCFA ensure that the hospice benefit is used for those
beneficiaries with a terminal illness, but it would not end hospice care for
those fortunate to survive longer than expected. Thirty-day re-certifications
would, in fact, help ensure that only terminally ill patients continue to
receive hospice care. Second, as the President's FY98 budget bill proposed for
home health, this proposal would fink payment for hospice services provided in
the home to the geographic location of the site where the service was furnished.
Third, this proposal would also limit beneficiary liability under hospice care.
Currently, the major cause for denial of hospice claims is the fact that the
beneficiary was not terminally ill within the meaning of the law (i.e., did not
have a prognosis of six months or less of life expectancy at the time the
services were rendered). If a hospice claim is denied because the patient was
not terminally ill, the patient's liability for payment would be waived and the
hospice would be liable for the overpayment unless it could prove that it did
not know or have reason to know the claim would be disallowed. The standard of
proof would be high since both the law and HCFA instructions are explicit as to
the requirement and there are well established protocols for documentation of
medical prognosis. Fourth, this proposal would create a new civil money penalty
for physicians who certify that an ineligible individual meets Medicare
requirements for hospice services eligibility, while knowing that the individual
does not meet the requirements.
Rural Health Clinic (RHC) Benefit Reforms - Recognizing the importance of
the rural health clinics, reforms are needed to strengthen Medicare policy and
better target assistance. It should be emphasized that the inclusion of RHC
proposals in the Fraud and Abuse Prevention bill is not meant to imply that we
believe these providers are engaged in fraudulent or abusive activities. We do
believe, however, that the RHC program could be better targeted to serve truly
under-served rural areas, and as such, we have included several proposals to
address this issue. These proposals would hold provider-based RHCs to the same
payment limits as independent RHCs. The Secretary would also develop a
prospective payment system for RHCs no later than December 31,2000. Under such a
system, beneficiary cost sharing would be based on 20 percent of the PPS amount.
Prior to the development of a PPS system, beneficiary cost sharing would not be
allowed to exceed 20 percent of Medicare's payment limit. The proposal would
also include provisions to better target the placement of RHCs in under-served
areas and still provide access to clinic services.
Clarify the Partial Hospitalization Benefit -- A partial hospitalization
program uses a multidisciplinary team to provide coordinated services within an
individualized treatment plan to severely mentally ill individuals; partial
hospitalization may occur in lieu of an inpatient psychiatric hospitalization or
continued psychiatric hospitalization. These intensive outpatient day programs
include individual and group therapy, family counseling, occupational and
activity therapy, diagnostic services, and drugs that cannot be
self-administered. These programs are intended for patients who would be likely
to be hospitalized without these services.
This proposal would establish Medicare coverage requirements and limitations
to minimize program abuse, and would also preclude providers from furnishing
partial hospitalization services in an individual's home or in an inpatient or
residential setting. It would provide the Secretary broad authority to establish
through regulation a prospective payment system for partial hospitalization
services that reflects appropriate payment levels for efficient providers of
service and payment levels for similar services in other delivery systems. The
current cost reimbursement system would stay in place until the Secretary
exercises this payment authority. In addition, this proposal would provide
authority for the Secretary to establish (through regulation) Medicare
participation requirements, such as health and safety requirements and provider
eligibility standards for community mental health centers (CMHCs). Additionally,
it would provide authority for CMHCs to be surveyed upon request by state
agencies to determine compliance with Federal requirements or investigate
complaints. It would also prohibit Medicare-only CMHCs. Finally, the bill
includes a provision (which parallels the authority created in HIPAA for false
certification of home health services) to penalize physicians for inappropriate
admissions to partial hospitalization programs; this provision would create a
strong incentive for physicians to certify need for partial hospitalization
services only for those individuals who meet Medicare requirements.
FUTURE CHALLENGES
Health care delivery systems, like every other aspect of society, evolve
over time. The current trend toward managed care as an alternative to the
traditional fee-for-service system is a phenomenon which promises to change the
face of the health care environment. This is because the type of integrated
health care network that managed care provides can be a boon --- or a bane ---
to elderly Medicare and Medicaid beneficiaries. Currently, we have only 12% of
our beneficiaries in managed care, but in the future we will need to take a
fresh look at our strategy to fight fraud and abuse, because the incentives are
different in this type of delivery system. The emphasis on cost-effectiveness
prevalent in managed health care delivery systems ensures fiscal soundness and
value for the customer, but in some instances, unethical plans and providers may
discourage or withhold needed care from beneficiaries.
In the same way, the growth spurt we are witnessing in the home health care
industry indicates that as innovative new health care arrangements flourish, so
will new opportunities for fraud and abuse. Growing numbers of the elderly, and
especially of dual eligibles, also means increasing opportunities for those who
seek to defraud Medicare and Medicaid patients, providers, and health plans. In
home health settings, the physical isolation of the beneficiary is often an open
invitation to unethical providers seeking ways to provide care based on
financial incentives, rather than care that is actually needed. Not
surprisingly, this problem also exists in nursing homes. The vulnerability of
home health and nursing home patients suggests that very ill or elderly patients
may be targeted because they may not be able to monitor their own bills for
fraudulent charges. There is evidence that wherever there are concentrations of
the frail elderly, there are providers seeking to provide unnecessary services.
CONCLUSION
The implementation of HIPAA has given us powerful weapons against waste,
fraud, and abuse. The work of this Committee and other Members of Congress on
HIPAA has been vital to this important legislation, which will increase our
ability to protect the integrity of the Medicare program, and to safeguard the
interests of our beneficiaries. Most importantly, the lessons and experience
gained from our efforts in the past few years will guide us as we put our new
legislative and administrative tools to use. By effectively utilizing the solid
partnerships between State and Federal agencies, the public, and private health
care organizations, we will preserve Medicare and Medicaid for future
generations.