Focus on Medicare
Fraud crackdown continues in 1999
Even small potatoes’ could reveal a pattern
President Clinton recently suggested changes that promise to save the federal government $2.1 billion by cracking down on waste, fraud, and abuse in the Medicare program. His announcement echoes the round of regulatory oversight that was kicked off about a year ago — the one that led to model compliance programs for hospitals as well as for other segments of the health care industry.
Clinton’s new plan advises Medicare contractors to ferret out fraud and refer suspicious providers to the OIG, even if the cases involve small amounts of money, on the supposition that those cases can add up to significant amounts or could reveal a pattern of fraud. The new initiative contains the following elements:
• It prevents providers from billing Medicare for services that were not provided.
• It requires private health insurers to report which Medicare beneficiaries they insure to prevent providers from billing Medicare for those claims. The Baltimore-based Health Care Financing Administration (HCFA) would have the authority to recover twice the amount owed by insurers that allow Medicare to pay claims they owe and would impose fines for failing to report legal settlements from which Medicare should have been reimbursed.
• It gives HCFA authority to oversee the performance of contractors and to terminate those who perform poorly.
• It allows HCFA to begin competitive bidding this spring to decrease Medicare payments for hospital beds and other durable medical equipment.
Controlling drug prices
An important part of the new package of initiatives is elimination of mark-ups in the prices the agency pays for drugs. Under the plan, Medicare would pay what manufacturers charge instead of reimbursing pharmacies for filled prescriptions.
A study conducted by the Office of Inspector General (OIG) compared drug purchasing practices of Medicare with those of the Depart ment of Veterans Affairs (VA). The report revealed that mark-ups for 22 drugs cost Medicare hundreds of millions of dollars annually because the agency paid more than twice the average wholesale price. In one instance, Medicare paid roughly 10 times the wholesale price.
Medicare could have saved $1.03 billion last year if it had reimbursed for 34 prescription drugs according to the VA’s Federal Supply Schedule. "That savings represents almost half of the $2.07 billion in reimbursement that Medicare and its beneficiaries paid for those 34 drugs in 1997," according to the report.
The VA purchases prescription drugs in bulk from manufacturers and obtains large-volume discounts. Medicare, on the other hand, reimburses pharmacies for individually filled prescriptions and pays up to 16 times more than the VA for some pharmaceuticals.
The president’s money-saving initiative also reduces reimbursements for the drug Epogen to reflect market prices. The Inspector General found that the current reimbursement rate for Epogen is about 10% higher than its cost.
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