Congress and sustainable growth rate formula - a temporary reprieve

Key Points

Just before Christmas, Congress approved a $636.3 billion defense appropriations bill that includes a delay of a scheduled 21.2 percent Medicare physician payment cut until Feb. 28, 2010. The cut had been scheduled to take effect Jan. 1.

At press time, major medical groups were urging Senate Majority Leader Harry Reid, D-N.V., to pursue substantial Medicare payment reform, and said a delay such as approved by the House could provide time for such action.

Groups representing physicians, including dermatologists, continued to seek a solution. The fact that the Senate healthcare reform legislation that was being debated did not solve the physician payment issue, as well as some other significant concerns, prompted the American Academy of Dermatology to withhold support for that legislation.

Financing the 'doctor fix'

Meanwhile, as Congress searches for ways to finance the "doctor fix" or help pay for broad healthcare reform, a Department of Health and Human Services (HHS) 2009 financial report in mid-November reveals that more than $47 billion in questionable Medicare claims were paid over the past year.

The report, by auditing firm Ernst & Young, claimed HHS had inadequate financial controls, and stated the Centers for Medicare and Medicaid (CMS) should institute improvements to reign in fraudulent payments. It acknowledged, however, that the agency has developed controls to prevent fraud and waste from occurring and to uncover instances that had already occurred.

While the reported level of improper payments has increased over previous years, it is unclear whether it is a result of improved documentation requirements, or an actual increase in fraudulent activity - or both.

"CMS, as the steward of the Medicare and Medicaid programs' administrative and financial operations, has a fiduciary responsibility to ensure that the program funds are spent in the best interest of the beneficiaries and the American taxpayers," the auditors stated in their report.

Targeting fraud

CMS issued a statement Nov. 18 stating that as part of the Obama administration's goal of reducing waste, fraud and abuse in Medicare, HHS and CMS have revised and improved calculations of Medicare fee-for-service (FFS) error rates in 2009, reflecting a more complete accounting of improper payments than in past years.

Using a baseline of 12.4 percent in improper FFS payments, HHS is setting targets of reducing fraud and waste to 9.5 percent, 8.5 percent and 8 percent, respectively, for fiscal years 2010 through 2012. According to a report by the Associated Press, records show that CMS for three years ignored internal watchdog warnings about fraudulent activity involving several Medicare programs.

"The Obama administration is committed to strengthening and improving the Medicare and Medicaid systems and doing everything we can to be responsible and vigilant stewards of these programs that millions of Americans rely upon," HHS Secretary Kathleen Sebelius said. "This year, we made the call to stop calculating our error rate in fee-for-service Medicare the way the previous administration did, and to start using a more rigorous method in calculating this rate, in keeping with our mandate to root out errors and fraud."

Realistic approach

In its Nov. 18 statement, CMS said that while improper payment rates do not necessarily indicate fraud in Medicare or any other federal healthcare program, they do provide a more complete assessment of how many errors need to be fixed.

"If we aren't honest about the problem, there is no way we can get to a solution," Sebelius said, pointing out that the change in calculating the error rate is just one part of the administration's broader effort to reduce waste, fraud and abuse in healthcare.

In a joint effort with the Justice Department, HHS created a Health Care Fraud Prevention and Enforcement Action Team (HEAT) to combat Medicare fraud, and has expanded strike force team sites from two (South Florida and Los Angeles) to four, adding Detroit and Houston.

In addition, a new interactive Web site has been created at http://www.hhs.gov/stopmedicarefraud/, at which suspected instances of Medicare fraud can be reported.

Bob Gatty, former congressional aide, covers Washington for businesses specializing in healthcare and related issues. Contact him at bob@gattyedits.com