Clinton’s Health System Would Aid Fraud Crackdown : Medicine: A simplified insurance billing scheme would make it easier to spot overcharges, abuses and kickbacks. Whistle-blowers would get rewards.

Like any self-respecting reformer who knows what fed-up voters like to hear, President Clinton promises a serious crackdown on fraud and abuse in the nation’s $900-billion-a-year health care system. And if Congress enacts his complex health care reform agenda, the President stands a good chance of delivering on that vow.

By proposing a vastly simplified insurance billing system--as well as expanding the law’s reach and toughening penalties--Clinton has a real opportunity to slash the estimated $100-billion-a-year tab in ill-gotten gains by those who overcharge for services, bill for drugs and treatments not provided, order unnecessary tests and procedures and accept kickbacks for patient referrals.

Although federal, state and local officials in recent years have stepped up their efforts against perpetrators, and with some notable successes, cracking down on such fraudulent practices remains extraordinarily difficult because of the patchwork of more than 1,500 government and private insurers, each one using a different set of billing forms.

But if Clinton’s overhaul proposals become law, the fight against medical fraud and abuse is likely to gain new momentum--thanks also to increasing use of an 1863 law that is making it highly lucrative for individuals and corporations to report such crimes.

According to a 239-page draft of the President’s overhaul agenda, Clinton will propose:

* A standard set of insurance claims forms--one for institutional providers, one for dentists, one for pharmacies and one for all other providers.

* New criminal penalties for health care fraud, such as bribes or gratuities to influence the delivery of services or coverage.

* New civil monetary penalties against providers who submit false claims.

* Tighter restrictions to eliminate referral kickbacks in the private sector. The President would expand the scope of the current law, which covers only Medicare and Medicaid, to include all health plans.

* Stricter standards barring doctors from prescribing services to be delivered by clinics or other institutions in which they hold a financial interest.

* Automatic exclusion from participation in health plans of any provider convicted of health care fraud.

Clinton also promises to increase funding and coordination between law enforcement agencies to fight health care fraud and abuse, with the departments of Justice and Health and Human Services jointly directing the effort.

Under the Clinton proposals, a trust fund would be created from fines, penalties, forfeitures and damages collected from perpetrators of fraud and abuse. The funds would be used to supplement the ongoing efforts to root out health care fraud and abuse.

Such a trust fund also was proposed this year by Sen. William S. Cohen (R-Me.), who said: “Consumers and businesses are paying dearly for these health care rip-offs in the form of higher taxes and skyrocketing insurance premiums. As the health care budget grows, the scams are growing dramatically bigger, bolder and more sophisticated. This is not a victimless white collar crime. We all end up paying the tab.”

Health care crimes have gained increasing visibility in recent years.

Just last month, the Justice Department won a $400,000 settlement from a West Coast neurologist charged with overbilling Medicare for diagnostic tests.

And in December, federal prosecutors in San Diego announced what they called the largest-ever settlement of a medical fraud case, involving National Health Laboratories Inc., a La Jolla-based chain of medical labs.

The firm was charged with billing government-funded insurance programs for unneeded blood tests and agreed to a $110.4-million refund.

In the 1980s, authorities cracked a $1-billion scheme involving mobile labs that conducted unnecessary and sometimes fake tests on unsuspecting patients in shopping malls, clinics and retirement homes. At one time, the scheme involved as many as 1,000 companies and 400 bank accounts worldwide.

More recently, in congressional testimony, one woman recounted a harrowing experience when she was referred to a psychiatric hospital after a psychotic reaction to pain medication. She said hospital personnel drugged her heavily and kept her isolated for three months while they tried to manipulate her insurance policy to collect the most money. She said they released her only after her coverage ran out.

Cohen emphasized that most providers are honest but noted that the rapid growth and sheer size of the nation’s health care system “greatly increases the opportunities for fraud. Much more coordination of enforcement efforts is necessary,” he added.

In addition to Clinton’s proposals to step up governmental crackdowns on health care fraud, help also is coming from individuals.

In the San Diego case, for instance, the initial tip against National Health Laboratories had come from Jack Dowden, former sales manager of a rival firm. Dowden received $15 million for the tip under an increasingly invoked 1863 law that allows whistle-blowers to file for rewards won by the government in such cases.

The law, the False Claims Act, was enacted 130 years ago to combat fraud against the Union Army. It allows any private party to file suit on behalf of the U.S. government against anyone who has allegedly made false claims against Uncle Sam.

If the government prevails, the whistle-blower is entitled to 15% to 30% of any recovery, plus legal fees.