Clinton Plan Targets Surging Medicare Fraud

President Clinton on Monday announced a crackdown on Medicare fraud, targeting the burgeoning home health care market that accounts for a rapidly growing share of federal spending on the elderly.

Under the president’s plan, Medicare will stop signing up new home health care providers while the Health Care Financing Administration devises new regulations to better screen applicants.

“During this moratorium, we’ll develop tough new regulations to ensure that no fly-by-night providers enter or remain in the Medicare program,” Clinton said in a speech to the Service Employees International Union here.

The administrative action requires current providers to submit to a review process every three years to ensure they are in compliance with the new regulations. The number of government audits of providers also will be doubled to weed out offenders.

The president took the action in response to recent studies showing that fraud has reached alarming proportions in the home health care business, the fastest-growing segment of the $200-billion Medicare program.

The administration believes the government is bilked out of billions of dollars of Medicare expenditures every year.

A report released earlier this summer by the inspector general of the Health and Human Services Department concluded that a staggering 40% of services provided by home health care agencies in California and three other states should not have been reimbursed by Medicare. That represents $2.6 billion of the $6.7 billion spent on those services over a 15-month period ending March 31, 1996.

The government paid for an array of improper expenditures, the report showed, including excessive treatments, bills for services never performed and charges for patients who were not homebound and therefore not eligible.

The home health care industry has ballooned since 1989, when Medicare rules were reinterpreted and the federal government started paying for the services. Many Medicare recipients were eager to take advantage of the option of home health care, preferring it to institutionalization, and this fueled the growth in the industry.

Federal officials fear that unless the industry is better regulated, the costs to Medicare of providing home health care services could become astronomical as the baby boom generation ages.

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Clinton said the campaign to crack down on abuse will complement a broader effort to rein in Medicare spending under the balanced-budget agreement approved by Congress this year. Such steps are necessary, he said, to restore public trust.

“No matter what changes we make in the structure of the program, we can’t maintain it for what it should be if we tolerate unacceptable levels of fraud and abuse,” Clinton said.

The new measures are particularly important because the number of elderly people receiving home health care under the Medicare program has mushroomed in recent years, from 1.7 million in 1989 to 3.9 million in 1996.

Medicare outlays for home health care have grown even more dramatically over the same time, from $2.4 billion in 1989 to $17.7 billion in 1996. By the year 2000, home health care costs are expected to exceed $21 billion.

The extraordinary growth has created an intense demand for new Medicare-certified providers. The rush to satisfy that demand has left the program vulnerable to abuse and fraud.

Federal officials believe that unqualified entrepreneurs are swarming into the home health care business to reap potentially huge profits from Medicare. Because the services are provided in homes, verification is difficult. Until now, the certification process did not require basic safeguards such as background checks of an applicant’s financial history or criminal record.

Under the new regulations, which will become effective at the end of the six-month moratorium, home health care providers who want to be certified by Medicare must:

* Post surety bonds of at least $50,000.

* Show proof they have served a specified number of patients.

* Submit detailed information about their business operations.

The $50,000 bond requirement was part of the balanced-budget agreement Clinton completed with Congress last month. The other two requirements are new, White House officials said,

Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Special Committee on Aging, criticized the president’s actions as “just another in the line of quick fixes.” He said Clinton should have sought a comprehensive legislative solution instead, citing his committee’s past efforts to investigate the problem.

“The convicted home health care felon who testified at our hearing would have easily passed all of the proposed new requirements,” Grassley said. “So while Clinton’s plan to double the number of audits is fine, the quality of the audits is what needs to be improved. We need to make sure our auditors know as much about scamming the system as the problem providers do.”

Administration officials said the president intends to pursue legislative efforts in the future to combat fraud. In the meantime, they said, he wants to do what he can through administrative action rather than engage in a lengthy debate with Congress.

“To the extent that we can address the problem earlier, it would be fiscally irresponsible not to do so,” said Christopher Jennings, Clinton’s health care advisor.

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The home health care industry was quick to criticize the president’s initiative, saying it would cause unintended consequences, such as making it more difficult for agencies to start businesses in underserved, high-poverty and rural areas.

“It would put a lot of smaller agencies out of business,” complained Eric Sokol of the National Assn. for Home Care.

Sokol said home health care agencies agree there should be standards for certification and oversight of agencies already certified, but they contend the criteria should be based on knowledge of Medicare rules and competency, not the ability to pay a $50,000 surety bond.

The providers also fear that auditors will be given too much leeway to decertify agencies even if they do not have adequate proof of wrongdoing, Sokol said.

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The New Rules

The new guidelines apply to firms that provide medical and social services to home-bound elderly people.

Firms Must Now ...

-Post a $50,000 bond to ensure that the firm is financially sound.

-Have a minimum number of prior patients before enrolling in Medicare.

-Submit detailed information on all the other businesses they own.

--Reenroll every three years.

How It Has Grown

Home health care has become one of Medicare’s fastest-growing expenses:

Total home-care spending:

1989: $2.4 billion

1996: $17.7 billion

Medicare-certified agencies:

1989: 5,692

1996: 10,133

Visits per patient

1989: 27

1996: 72