Private sector best practices can improve Medicare solvency

Last week, the Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma delivered a speech at the Commonwealth Club sharing that the agency has a long way to go to prevent Medicare waste, fraud and abuse.

She went on to say that the agency must learn from the private sector how to be more fiscally efficient.

Administrator Verma cited that the Medicare program only reviews three tenths of one percent of all claims for billing accuracy. That very small percentage of claims are among a narrow set of CMS-selected claim types and those claims are reviewed for billing accuracy only after they have been processed and paid.

In contrast, commercial payers review nearly 100 percent of submitted health care claims on both a prepayment and post-payment basis to confirm billing accuracy, adherence to contract terms and medical necessity. In addition, virtually no type of claim is restricted from review, nor are there any artificial limitations on the volume of claims that can be reviewed. Private insurers do not tolerate billing errors that negatively impact their bottom line, and as a steward of American tax dollars, Medicare shouldn’t either.

This lack of Medicare billing oversight is particularly problematic because the program has lost more than $200 billion in much-needed program funds over the past five years due to improper payments caused by very preventable billing errors. These billing mistakes, called improper payments, are made when a Medicare provider misbills a claim – often billing to the wrong code, duplicating the submission of a claim or even providing services that are not medically necessary.

In fact, Medicare Trustees report that at current high program spending levels and with the expected influx of new beneficiaries, the Part A (hospital coverage) program will no longer be able to fully cover the healthcare costs of American seniors after 2026. And, if Part A coverage decreases, seniors will need to shoulder more of the financial load associated with their future healthcare needs.

Back in 2009, Congress mandated a nationwide Recovery Audit Contractor (RAC) Program to review Medicare claims on a post-payment basis to identify improper payments and return those resources back to the Medicare Trust Funds. The successful work of Recovery Auditors (RAs) has thus far returned more than $10 billion and has extended Medicare solvency by two full years.

Despite the dire need to safeguard Medicare dollars and fend off future coverage cuts, providers have aggressively lobbied CMS to sideline the RAC program citing a “burden” they face when their bills are reviewed for accuracy.

Interestingly, these same providers consider the comprehensive billing reviews required by private sector payers to be a basic cost of doing business, while they publicly balk at the small fraction of billing audits conducted by Medicare.

Currently, within Medicare, a provider can bill erroneously 91 percent of the time and only have 5 out of every 100 claims reviewed for accuracy. Given that the program loses nearly $40 billion to preventable billing errors every year while careening toward insolvency, all stakeholders must come together and commit to prevent wasteful Medicare spending.

We agree with the assessment of Administrator Verma. Medicare must take a page from the handbook of the private insurance industry to protect our nation’s marquee health program. CMS has the same opportunity to use pre-payment audits to catch billing mistakes before claims are paid. And, adding pre-payment audits will greatly reduce provider perceived “audit burden” stemming from post-payment audits.

In FY2012, CMS launched a Prepayment Review Demonstration project to have RAs review certain error prone Medicare claims on a pre-payment basis. As a result of this short pilot program reviewing limited issues in only 11 states, RAs prevented more than $192 million in improper payments from ever leaving the Medicare Trust Funds. The program was so successful that the GAO recommended that “CMS should actively seek legislative authority to have RAs conduct prepayment claim reviews.”

We call on Congress to step forward to champion the use of these private sector best practices in Medicare by authorizing a prepayment recovery audit program. Pair that change with expanded Medicare claim auditing and we could absolutely extend existing health care coverage levels for millions of current and future Medicare beneficiaries.

Kristin Walter
Spokesperson
The Council for Medicare Integrity

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