Combating Health Care Fraud for Cost Savings

1. Program IntegrityHow much money can combating health care fraud and abuse save? Alliance for Health Reform March 5, 2012

2. Jim Frogue Partner FrogueClark, llc JIM@frogueclark.com www.frogueclark.com

3. How much fraud? • “Hundreds of billions of dollars in waste and fraud...” • President Obama speech to Joint Session of Congress. Sept 9, 2009. • “These schemes steal as much as $100 billion a year from Medicare and Medicaid.” • Newt Gingrich and AARP CEO Barry Rand. Orlando Sentinel. Sept 29, 2010 • “…health care fraud and abuse (is) hundreds of billions per year…” • Harvard Professor Malcolm Sparrow. Senate Judiciary Committee. May 20, 2009 • “Medicare fraud, estimated now to total $60 billion a year…” • Steve Kroft, 60 Minutes. October 25, 2009 • Institute of Medicine (2011) and Thomson Reuters (2009) suggest a third of all health care spending is fraud, waste and avoidable inefficiencies. • Americans think 51 cents of every federal dollar spent is wasted. • Gallup. September, 2011

4. Underestimating Fraud? • Many people with access to the information have strong incentives to underreport the prevalence of fraud. • Providers • Punishment = fines and/or jail imprisonment • Reduced payment rates • Academics • “One of my deep regrets is to discover that academia has paid almost no serious attention to this critical problem.” – Harvard Professor Malcolm Sparrow • State Health Officials • Admitting failure = loss of job and/or reduction funding • Avoiding unrealistic expectations ($X of spending is fraud = $X budget cut) • Returning funds to federal government that are not recoverable by state • Most funds are federal (90%-100% funding for expansion population is federal) • Prosecutions can cost more than the recoveries

5. The Fraud Continuum • Fraud • Deliberately false claims, identity theft, etc • Abuse • Upcoding, bill-splitting, excessive testing, etc • Waste • Coding errors, duplicate tests, prescription interactions, etc • Beneficiaries overusing free care in a third-party payer system. See, “Patients in Florida Lining up for All That Medicare Covers,” by Gina Kolata, New York Times. September 13, 2003.

6. Examples of Fraud • Texas doctor and five accomplices arrested and accused of bilking Medicare and Medicaid for $375 million over six years • February 28, 2012. USA Today • Medicare’s new $77 million computer system launched mid-2011 saved $7,591 in six months. Senator Carper: “Did they leave out some zeros?” • February 23, 2012. Washington Post • Medicare spending on artificial feet went up 58% ($35m) 2005-2010 while amputations were declining according to Avalere Health study • February 15, 2012. AP • Los Angeles minister sentenced to 15 years in federal prison for $14.2 million Medicare scam • January 6, 2012. CNN

7. Home Health Fraud Concentrated in 25 Counties

8. $100 billion annual Medicare/Medicaid fraud? What is detected What is prosecuted What is convicted What is recovered $4.1 billion

9. Supply Chain Management Expertise of World-Class Companies

10. Legislation • Fighting Fraud and Abuse to Save Taxpayer Dollars (FAST Act) introduced by Senators Carper and Coburn with 35 cosponsors. Introduced in the House by Congressmen Peter Roskam and John Carney. • Medicare Data Access for Transparency and Accountability Act (Medicare DATA Act) by Senators Grassley and Wyden • Medicare Common Access Card Act of 2011 by Senators Wyden and Kirk