To Fix Health Care, Stop Fraud

THE federal health care programs - Medicare and Medicaid - are leaky vessels into which taxpayers will pour $262 billion this year. According to the General Accounting Office and the Department of Justice, up to 10 percent of Medicare and Medicaid spending is siphoned off by fraud and abuse. That's $26 billion this year, or up to $71 million stolen every day.

Leakage of this magnitude poses as real a threat to the solvency of the system as rising medical costs or a growing number of patients. Therefore, stopping fraud is essential to controlling the growth of Medicare and Medicaid. Unfortunately, the federal government has little assurance that individuals and organizations known to have committed fraudulent activities will not be in a position to defraud the programs again.

The financial incentives of fraud are great. The chances of getting caught are low. Penalties are mild and the system that assesses them is fraught with procedural delays. Enforcement resources are short, and there is virtually no adequate exchange of information between program administrators, insurers, or law enforcement officials.

The Medicare program is particularly vulnerable. Cheating the system has become a lucrative con game. Physicians, pharmacists, nursing homes, hospitals, and drug and device companies are looting the program through sophisticated billing schemes. They are drawn, like flies to honey, to Medicare's higher-than-market prices for many products and services and the knowledge that the chances of detection are remote.

A few recent examples:

*A Georgia health care company forced employees to make political contributions, then billed Medicare for reimbursement. The company also billed Medicare for golf trips, vacations, and a new car for the CEO's son. After indictment, the company declared bankruptcy. The court-appointed receiver is still receiving Medicare payments.

*A national health care company paid a record $379 million in fines, damages, and penalties for fraud, kickbacks, and abusive billing practices to Medicare and Medicaid. It is still billing Medicare and Medicaid.

*Nursing homes in North Carolina and Pennsylvania billed Medicaid for swimming pools, jewelry, and the family nanny.

What can be done? The Health Care Financing Administration (HCFA), the agency of the Health and Human Services Department (HHS) which oversees Medicare and Medicaid, must play a more aggressive role in stopping reimbursements for services to the "bad guy" providers who continue to milk and bilk the system. HCFA and the HHS Inspector General should use their authority to screen Medicare vendors, suspend payments, revoke provider billing numbers, and exclude providers who don't follow the rules. And the Department of Justice should not settle so many of these cases, permitting admitted violators to continue their schemes.

At the same time, Congress should consider proposals for:

*Tighter controls over certification of those who apply for a billing number in the Medicare and/or Medicaid systems.

*More and harsher exclusions or sanctions when providers are consistently abusive in their billing practices or admit to defrauding the government.

*Making sure that once convicted, an excluded provider does not reenter under an assumed corporate or personal name.

The threat and reality of a rigorous exclusion penalty would help keep many more providers honest and be a powerful force that could save taxpayers hundreds of millions, perhaps billions, of dollars each year.