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Hello, and welcome to health affairs this week. I am your host, Jeff Byers. We're recording on on January 9th 2025. Before we begin the show, we have some housekeeping. We published a new issue this week with focuses on Medicare, Medicare Advantage, and more.
Jeff Byers:We also released our health affairs best of 2024 list where we highlighted the most read journal and Forefront articles. Check those links out in the show notes. We also announced this week a refresh of our insider program. So you may know that Insider is our membership program. And this year, we are revamping some of its features based on, user feedback.
Jeff Byers:Some of the big things that we are rolling out this year, as new products are deep dive reports on noteworthy and emerging health policy topics, as well as access to health policy leaders through a new virtual office hours event. So that's in addition to the events and newsletters that you may know and love. This year in the newsletter space, we have on deck Brent Fulton, writing about antitrust and markets competition, Stacy Dusetzina on drug policy, David Simon discussing the economy, and our own Lara To land and Ryan Tanap writing about health spending and health equity respectively. We also have some new benefits planned for later in the year, but that's what's immediately in store for you. It's exciting, and I hope you'll join Health Affairs Insider.
Jeff Byers:Check out the links in the show notes if you'd like to join. Going back to the new issues, speaking of Medicare, today we are talking about Medicare fraud with my colleague, Rob Lott. Rob, how are you?
Rob Lott:Hey, Jeff. I'm good. Thanks.
Jeff Byers:So, Rob, looking at Medicare fraud, when president-elect Donald Trump nominated doctor Mehmet Oz to lead the, Centers For Medicare and Medicaid Services. Trump made a point in saying in his statement that Oz would, and I quote, cut waste and fraud within our country's most expensive government agency, unquote. Of course, he isn't the 1st official to highlight the need to tackle Medicare fraud, but it got me wondering exactly how big of an issue is Medicare fraud. Is it an easy target to blame, or is it a genuine problem? Like, where where are we on this?
Jeff Byers:Is it a straw man or argument?
Rob Lott:Yes and yes, Jeff. I think, the answer is yes to both. It certainly is an easy target to blame. You don't find a lot of defenders of fraud out there, at least in the abstract, but it also is a really big problem. I think it's worth starting with the fact that Medicare is just a huge target.
Rob Lott:You remember what, notorious thief Willie Sutton once said about why he robbed banks,
Jeff Byers:Jeff? No.
Rob Lott:He he said because that's where the money is. And, in our world, Jeff, of course, Medicare is where the money is. It's just a huge program. In 2023, Medicare spent over a $1,000,000,000,000 in the, national health expenditures report that health affairs published last month. Medicare represented 21% of total national spending on health.
Rob Lott:It serves 66,000,000 beneficiaries. And so if you're up to no good and, looking to make some trouble in the neighborhood, Medicare, would be a good place to start. In fact, the, Center For Program Integrity, which is CMS's sort of fraud patrol, they estimated that improper payment rate for Medicare was 7.6% or $31,000,000,000 in fiscal year 24. The rate was a little lower in Medicare Advantage, but still came in at about $19,000,000,000.
Jeff Byers:Rob, have you ever seen the movie The Other Guys? Yes. Where they go after the cops pension fund?
Rob Lott:Yeah. That's it. Yeah. Exactly. Easy target.
Jeff Byers:So maybe a fictionalized version of Will Ferrell and, Mark Wahlberg should be,
Rob Lott:That that's right. I'll I'll be Mark Wahlberg in this Yeah. In this scenario.
Jeff Byers:Okay.
Rob Lott:I'll be Will Ferrell.
Jeff Byers:So going to improper payments, what does that mean? Yeah. What's an improper payment? Like, we love definitions.
Rob Lott:Yeah. Of course. So it's it's broader than just fraud. It's really outright criminal behavior as well as abuse, people taking advantage of loopholes, and also simple errors just from the the sheer complexity of some of the systems at play here. But that kind of squishy term really does underscore how complicated things are, and how there are really a lot of different kinds of fraud and abuse in Medicare.
Rob Lott:I think the kind that most people go to, or that they think about most obviously is the idea of providers billing for services that they never rendered. So for example, a provider submits a claim for a knee brace or a COVID test or a wheelchair on behalf of a Medicare beneficiary that was never actually provided. One at a time, these are pretty small small beans, small poultry sums, but in examples of major operations carried out using these kinds of claims at a huge scale. Last year, we learned about a group of companies that was charging Medicare for catheters that they never supplied. Together, 7 suppliers were responsible for about $2,000,000,000 in suspicious charges just for those catheters.
Rob Lott:And, you know, medical supplies in particular are a frequent entry point for these fraudsters. It's easy to set up a a front, a storefront, a billing code. And once you acquire a bunch of patients' Medicare numbers, it's not hard to file these kinds of claims.
Jeff Byers:Okay. So lies being fraud, that's pretty straightforward concept. I think we can all get behind that. That's fraud. Right?
Jeff Byers:Or understand that the how that might be defined as fraud. But for maybe something like upcoding, where you're charging $650 for a Band Aid in a health care setting, like, is that considered fraud, or what are other types of fraud that's happening?
Rob Lott:Yeah. It it is. And it get it does get complicated, and there's, like, a lot of different ways to kinda slice and dice it. At its very core, fraud is really basically misrepresenting reality. That's that's sort of the the core concept.
Rob Lott:And so
Jeff Byers:And this is assuming perception is reality. We're all under the same perception. Right?
Rob Lott:Yeah. I think, you know, I'm no lawyer, but, you know, the question is sort of what's reasonable and what's not. And so, for example, if a medical transport company claims that it traveled more mileage than it actually did in reality, that's fraud. You've got kickback schemes where individuals who refer patients to a particular hospital or doctor get money in return. You know, we've seen corrupt doctors splitting fees in return for referrals like that in the form of rent or cash payments even and taking money as a result.
Rob Lott:You've got double billing, submitting claims to, like, different payers for the same service. And a big one here also is unbundling, in which basically provider separates a single procedure into multiple procedures, which they bill separately, and then get overall higher reimbursements than they would for that single procedure. So there's lots of different variations, but at the end of the day, this is people sort of taking advantage of the sheer size of the program to to leach it, really, of of funds for them for their own benefit.
Jeff Byers:Gotcha. And I know how the fairs published an article in the way back time of, 2019 outlining the breadth of this, but what's changed since 2019? I I know fraud has been talked about for as long as I can remember looking into this.
Rob Lott:Yeah. I mean, you're exactly right. And it's hard to say if things are getting better or not, you know, compared to past years. Although, I am drawn to that rate I, quoted you earlier, Jeff, of 7.6% in Medicare, improper payment rates. It's been at that level for a few years, but in the past, it's been as high as, 10% or more.
Rob Lott:So that alone is a good sign. And the truth is that, you know, I think Medicare fraud is a bit like a mutating virus As we develop new tools to fight it, new opportunities to cheat come up as well, and the fraudsters are basically developing new ways to make the most of those opportunities. For example, Jeff, you know, it's pretty easy to imagine areas like COVID, coming up that obviously, you know, wasn't an issue 5 or 10 years ago. Suddenly, we've got examples of criminals filing false claims for COVID tests. Or think about the flexibility around telehealth and the opportunities that that might create for fraud.
Rob Lott:And then you've got, you know, new treatment and care options developed around artificial intelligence. You can certainly imagine how the kind of black box within that technology might lead itself to abuse as well. On the other hand, just as, you know, opportunities for fraud have evolved, so if our efforts on the so called program integrity side right? The old model, was often described as pay and chase. Right?
Rob Lott:Medicare would pay out all the claims, then they'd go back and review. And if they saw something suspicious, they'd look for clues of malfeasance and track down the bad guys after the fact, you know, to simplify it dramatically. But, you know, that's sort of the the old school approach.
Jeff Byers:Yeah. It sounds simple.
Rob Lott:Well, about 15 years ago and by the way, about 15 years ago, marked the passage of the Affordable Care Act, March 23, 2010. Jeff, can you believe it?
Jeff Byers:Unfortunately. Yeah.
Rob Lott:Yeah. Anyway, since then, the feds have really focused on using things like, you know, complex surveillance algorithms to flag suspicious claims. The same way, like, my credit card company might send me a notice if suddenly, you know, 10 flat screen TVs appeared purchased in, you know, Pensacola, Florida, or something like that. They're doing the same thing, tracking, you know, Medicare claims. And they've off also invested in sort of building stronger ties between the Department of Justice and HHS.
Rob Lott:They've, created this thing called the Medicare Fraud Strike Force, which sounds like, like it might go well on a NBC procedural or something like that, but I'd watch that. I don't know about you.
Jeff Byers:Yeah. We can get some T shirts
Rob Lott:for it too. Anyway, there's a lot going on, but at the end of the day, it's it's a little bit of a game of whack a mole. Right? Things change, and so we've gotta change our enforcement strategies. And, the goal is really just to stay stay ahead of it if you can.
Jeff Byers:You you mentioned a bunch of, fraud fighting techniques. Did you notice if any in this investment made a difference?
Rob Lott:Yeah. Well, there's certainly a ton of bad guys that have been snared in these efforts, and that in turn has returned a lot of money. I mean, we're talking 1,000,000,000 to Medicare. So that's that's a good thing, at the end of the day. Whether or not it's actually reducing the overall level of fraud and abuse, that's really hard to say, Jeff.
Rob Lott:And I think, we can feel good that without those efforts, things would be a lot worse, but it's gonna be sort of a perpetual fight.
Jeff Byers:Gotcha. That makes sense. So, you know, what should we watch out for in the coming administration and policy on this? You know, with all this talk of bad guys, is it really just simply to, get deadly do right on a council?
Rob Lott:That that sounds like fun. Well, I if you start with the premise that it's important to reduce the overall level of spending or to slow the growth of spending in Medicare, and you don't wanna cut benefits because that would make beneficiaries angry, and you don't wanna cut payment rates because that would make providers angry, then targeting fraud seems like the perfect solution. That really won't make anyone angry, except, of course, again, those bad guys. And at 7% of total payments, that's a huge pot of potential savings to draw from. So all that is to say, if I'm coming in with a new administration, targeting fraud seems like an easy win on one hand.
Rob Lott:On the other hand, it's not like no one's thought about this before, and, the most obvious strategies have already been implemented. So, it's not maybe as easy as it might seem at first. And finally, Jeff, you know what I always say? It takes money to make money. Right?
Rob Lott:Right.
Jeff Byers:Right. Yeah.
Rob Lott:So in this case I was
Jeff Byers:I was hoping to, like, try to do that improv game where we just, like, say stuff so that we can say.
Rob Lott:I like that. Yeah. It takes money to make money. So, in this case, if the administration really wants to amp up its enforcement efforts, it's going to have to, spend money on things like, people to do the work. And so whether or not they'll have the foresight to make that investment remains to be seen.
Jeff Byers:Yeah. Yeah. Remains to be seen. Well, Rob, thank you for giving that great overview of Medicare fraud. I think, I feel a little bit more knowledgeable coming into the new administration about what could be in store and also, like, what they might be targeting, some targets and some techniques they might use.
Jeff Byers:And with that, is there anything else you wanna add before we we ship off?
Rob Lott:No. Thanks for the opportunity, and, happy New Year to you, Jeff.
Jeff Byers:Yeah. Happy New Year to you. And, for those still listening, you can catch Rob as the new host of a health policy coming up on our health policy channel, later either this month or early February. So, Rob, we look forward to working together on that channel as well.
Rob Lott:Absolutely. Really looking forward to that. Thanks, Jeff.
Jeff Byers:Yeah. Yeah. Well, thanks to you, the listener, for listening to this episode. If you enjoyed it, please send it to the, Bullwinkle in your life, and we hope you have a great day. Thanks and, have a great time.
Jeff Byers:Bye.