Most Medicare Losses Are Unrecoverable, Panel Told

The government has no chance of recovering any significant amount of the $23 billion lost by Medicare each year through waste, fraud and abuse, the inspector general of the Department of Health and Human Services warned Thursday.

The department’s 590 Medicare auditors are far too few to cope with the 800 million Medicare bills that the department processes annually, June Gibbs Brown told a congressional hearing. She said the government would probably be able to retrieve “far less than 1%” of that money.

Congress reduced the number of auditors from 800 in 1991, according to HHS officials, even though Medicare is the government’s fastest-growing program. Only 8% of claims are audited, down from 16% a decade ago, Bruce Vladeck, the chief Medicare administrator, told the House Ways and Means subcommittee on health.

Medicare has recovered more than $187 million in the past two years through Operation Restore Trust, a special program to detect fraud, Vladeck said. But that is less than 1% of the overpayments to doctors, hospitals, home health agencies and medical laboratories as estimated by an audit conducted by the inspector general’s office.

“These improper payments could range from inadvertent mistakes to outright fraud and abuse,” Brown said. “We cannot quantify what portion of the error rate is attributable to fraud.”

Using sampling techniques, Brown’s office determined that overpayments last year ranged between $17.8 billion and $28.6 billion. The $23-billion estimate, the midpoint of that range, is fully 14% of the Medicare spending examined by the inspector general.

The HHS report covered the fee-for-service portion of Medicare, in which beneficiaries choose their health care providers and the providers are reimbursed by the government.

The results of Medicare’s first formal audit left subcommittee members angry and frustrated. The $23 billion in annual losses discussed by Brown is coincidentally equal to the amount of savings Congress is seeking to carve from Medicare spending for each of the next five years as part of its effort to rescue the program from potential bankruptcy and balance the federal budget.

Subcommittee Chairman William M. Thomas (R-Bakersfield) called the HHS audit “both shocking and sobering.”

Rep. Pete Stark (D-Oakland), the panel’s ranking Democrat, said the report “confirms what many of us have suspected for years--that fraud, waste and abuse is rampant in the Medicare program and that neither the Health Care Financing Administration nor its private contractors have the structure or the resources to deal with all of the criminals who see the Medicare program as an easy target.”

The HHS auditing staff, which must deal with the Medicaid program for the poor as well as Medicare for the elderly and disabled, shrank under the impact of federal budget cuts from 800 in 1991 to 516 at the end of last year. It has been increased to 590 now and will reach 614 by end of this fiscal year, according to current plans.

At the same time auditing staffs were shrinking, however, total spending for Medicare and Medicaid was growing from $181 billion in 1991 to $300 billion now. Medicare contracts with private companies--typically health insurance firms--to process the 800 million individual claims yearly and to attempt to detect errors and fraud.

Stark, a former banker, suggested that the government adopt for Medicare the financial procedures it uses in overseeing and auditing banks.

He also noted that the waste and fraud estimate did not include potential waste at health maintenance organizations (HMOs), which receive a flat monthly fee for caring for Medicare beneficiaries. The HMOs were not audited because the payment they receive is set in advance, regardless of the amount of services they provide.