At the beginning of the year, Congressional Republicans shared that they will focus on making broad cuts to America’s entitlement programs in an effort to reduce our nation’s deficit. The main focus of the reforms under discussion are cuts that serve to rein in Medicare spending.
Unfortunately, the Medicare program has been facing solvency concerns stemming from increasing healthcare costs and beneficiary populations. Medicare trustees report that without changes to program spending, Medicare Part A will start paying out more in benefits than it collects in payroll taxes from American paychecks. The Medicare Trust Funds will be able to cover the gap until 2029, but after that, the Part A program will be able to cover only 88% of what’s covered today.
President Trump’s proposed budget calls for $500 billion in cuts to Medicare over the next 10 years. These cuts to the Medicare budget are not likely to impact current American seniors, but they definitely would impact the generations that follow — those of us working now and paying into a system that will not provide the same healthcare coverage that our parents and grandparents received.
Interestingly, there is a much more efficient solution to reduce Medicare spending than the proposed broad cuts to the program budget. Medicare spends nearly $40 billion in error each year due to very preventable billing mistakes made by healthcare providers. In fact, over the past five years alone, Medicare has spent $200 billion on these errors — a fact that both Congress and the Department of Health and Human Services has done little to remedy. Recovering those improperly spent funds would greatly reduce any cuts needed to reduce overall Medicare spending.
In 2009, Congress mandated the creation of a program that has proven to help significantly reduce annual Medicare spending. The Recovery Audit Contractor (RAC) program reviews Medicare claims, identifies billing errors and returns improperly spent funds back to the program. More effective use of this demonstrated solution would also prevent increasing the cost burden on beneficiaries and allow Medicare to continue to provide access to current levels of care.
Unfortunately, provider groups have spent millions to lobby Congress and the Centers for Medicare & Medicaid Services to reduce the oversight of Medicare billing. Their efforts have chipped away at Medicare integrity programs and now, CMS allows only 0.5% of Medicare claims to be reviewed for billing accuracy. The programs that prevent wasteful spending have essentially been put on the shelf, preventing the recovery of billions in misspent Medicare funds.
To put this situation into further perspective, private insurance companies require that nearly 100% of provider claims be reviewed for billing accuracy both before and after they are paid. Interestingly, the same healthcare providers that bill Medicare comply without complaint with the much higher levels of auditing required by private health insurers. They consider it a cost of doing business. With Medicare however, providers aggressively fight even the lowest levels of billing oversight because the federal government has thus far allowed them great influence and, ultimately, permission to retain the revenue generated by overbilling the program.
This would never be allowed to occur in the private sector, where the bottom line determines the policy.
There is no doubt that the best way to reduce Medicare spending is by putting an end to the rampant wasteful spending within the program. We must expand the scope of review within the existing Medicare RAC program and block improperly billed funds from leaving the program in the first place.
To achieve reduced Medicare spending, Congress should require CMS to expand Medicare claim auditing far beyond the mere 0.5% of claims authorized for review today. In addition, while RACs currently review claims on a post-payment basis, CMS also has the opportunity to ask Congress to authorize a permanent RAC prepayment review programto catch provider billing errors and correct them before funds are improperly spent. In fact, the Government Accountability Office has twice recommended Congress implement a permanent RAC prepayment review program to prevent improper Medicare spending, but the Department of Health and Human Services (HHS) has thus far declined to move the program forward.
It makes no sense for the administration to undertake broad cuts to the Medicare budget without first addressing the significant amount of wasteful spending continuing within the program.
Expanding the RAC program to review significantly higher levels of claims both before and after they are paid would not only bring Medicare in line with fiscal best practices, it also would allow Congress to achieve its goal of significantly reducing ongoing program spending without causing future beneficiaries to shoulder the increased financial burden that would come from reduced Medicare coverage during our senior years.
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