Forbes: To Cut Spending Waste, Congress Should Restore Medicare RAC Programs

From Forbes.com:

To Cut Spending Waste, Congress Should Restore Medicare RAC Programs
February 23, 2015

If a corporation discovered it had made thousands of dollars in improper payments, it would, not doubt, undertake every step to stop the wasted money and collect the improper payments. The federal government, however, acts under a different set of rules.

During each of the last five years, agencies have doled out more than $100 billion in erroneous payments from various major benefit programs. Improper payments include overpayments to people or vendors, spending without sufficient documentation, or checks sent to the wrong people – even dead people). The program that is now being put under the microscope is Medicare and Medicaid, which paid out an estimated $60 billion in improper payments during 2013 alone. Much of those payments have been to hospitals like LifePoint Hospitals LPNT +0.91%, Community Health Systems (CYH), HCA Holdings HCA +0.81% and Universal Health UHS +0.53% (UHS) among many others.

Federal auditors have flagged Medicare’s Fee for Service as its error rate jumped to 12.7% in 2014 up from 10.1% in 2013 and 8.5% in 2012 according to the Department of Health and Human Services Inspector General.

Congress sought to address this issue back in 2006 when it passed the Tax Relief and Health Care Act requiring the secretary of Health and Human Services (HHS) to establish a program to reduce waste, fraud and abuse in Medicare spending. Centers for Medicare Services (CMS) created the Recovery Audit Contractor (RACS) program, dividing the country into four regions and awarding competitive contracts to recovery audit contractors. Contractors are rewarded on a contingency fee basis — if they find and collect instances of waste and fraud, they receive a reward payment. In 2012, RACs recovered $2.3 billion in Medicare overpayments, 91% of which was from in-patient hospitals.

Under the RAC program, the error rate dropped from 10.8% in 2009 to 8.5% in 2012 with $8.2 billion in improper Medicare payments recovered back into the Medicare Trust Fund since the program’s inception in 2010. One would think success would beget success, but when you constrict the flow funds or ask for ill-gotten gains to be returned there tends to be some backlash. Never underestimate the power of a lobbying group or industry trade association, particular one that donated tens of millions of dollars over the last few years like the American Hospital Association has in various political campaigns.

Unsurprisingly, in 2013, the Centers for Medicare and Medicaid Services (CMS) suspended the bulk of the program’s post-payment auditing for an entire year. CMS also prohibited the RACs from reviewing retroactive claims despite federal law allowing RACs to look at claims going back five years. Also in 2013, H.R. 1250, which would in effect cripple all Medicare oversight by subjecting providers to auditing, only if their estimated billing error rates exceed 40%, was introduced.

The net effects saw a dramatic fall in improper payment collections to just $192 million for the fourth quarter of 2014, down sharply from $1.5 billion in the fourth quarter of 2013. For the hospitals, hundreds of millions of dollars are at stake. When one Tennessee hospital negotiated a settlement on overpayments, it put $25 million in their pockets. Multiple that by thousands of hospitals and we see what is at stake.

So much Executive Order 13520 that ordered CMS to cut to cut the Medicare fee-for-service improper payment rate of 10.8 percent in half by 2012. For a White House that prides itself on cutting wasteful spending and modernizing “how government operates to save money and improve performance.” One might hope the White House would look to address such a wide miss, but then we have to remember the support given to healthcare reform by the American Hospital Association.

Congress needs to act. If it is serious about trying to end government waste, restoring RACs would be a good first step.

Read the full article here.

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