Congress tight with Medicare anti-fraud funds

Congress for years has turned a deaf ear to requests by the Medicare agency for money to fight fraud, which a Miami Herald investigation has identified as a threat to the federal health insurance program for the elderly and disabled.

08/11/2008 3:01 AM

08/15/2008 7:08 PM

For years, Medicare has begged Congress to help stop the loss of billions of dollars to healthcare scams from Miami to Los Angeles.

Congress' blunt response: Forgetaboutit.

Since 2006, Medicare administrators have asked Congress for $300 million to fight fraud, but Congress has refused to give them any money.

Why? Distrust of the agency that runs the federal health insurance program for the elderly and disabled. Political indifference to the Medicare fraud crisis itself. Plus, influential lobbyists and campaign donors who dislike government meddling in the huge healthcare industry.

All have undermined any attempts to cure what ails Medicare -- a 43-year-old program threatened by not only runaway costs but also unbridled fraud, as a Miami Herald series documented last week. It exposed rampant corruption in two regional healthcare fields -- medical equipment suppliers and HIV-infusion clinics -- which fuels South Florida's reputation as the nation's capital of Medicare fraud.

Among the findings: Dozens of clinics and doctors billed Medicare for more than $1.1 million in false claims for obsolete HIV-infusion therapy for a single Miami-Dade County patient, who collected thousands of dollars in kickbacks after selling his government-issued healthcare card number to them. The patient, Alexander McCray, who has a history of drug-possession arrests, used the taxpayer-funded proceeds for his crack-cocaine habit.

The series also showed that 36 Medicare fraud defendants, mostly Cuban immigrants who had come here during the past 15 years, have fled South Florida to Cuba, Mexico and the Dominican Republic -- including brothers Carlos, Luis and Jose Benitez, charged with defrauding the government program of $110 million.

The Miami Herald series underscored the failure by the Centers for Medicare and Medicaid Services to root out fraudulent claims -- leading to the annual loss of at least $2.5 billion in South Florida and an estimated $60 billion or more nationwide.


But not only Medicare is to blame. Congress keeps a tight cap on Medicare's administrative overhead, leaving the perennial ''high-risk'' entitlement program with an infinitesimal fraction of its current $456 billion budget to combat fraud.

Indeed, Congress has a history of running Medicare -- whose healthcare programs are funded by U.S. taxpayers -- on the cheap. That policy has contributed in part to a generation of scammers bilking billions out of Medicare, which critics describe as a flawed honor system that's more intent on paying claims quickly than on verifying them first.

''We need to focus on the front end to prevent the crime from happening,'' said Democrat Bob Graham, who was a U.S. senator from South Florida for 18 years. ``We are being a penny wise and pound foolish by not spending more on prevention.''

Enter Graham's successor in the Senate, Mel Martinez. The Orlando Republican warmed up to taking a lead role in fighting healthcare fraud after staring at the problem in his home state, where the U.S. attorney's office in Miami has brought one-third of all Medicare corruption cases in the country.

''It really opened my eyes,'' he said. ``This wasn't just a big national problem, this was a big problem in Florida.''

In June, Martinez joined U.S. Sen. John Cornyn, R-Texas, in sponsoring legislation that takes aim at fraud on major fronts:

The STOP Act would require the U.S. Department of Health and Human Services, which oversees the Medicare program, to eliminate the use of Social Security numbers as Medicare beneficiary ID numbers for 44 million recipients, to help prevent identity theft.

The legislation would also require Medicare and its private contractors to verify claims submitted by hospitals, doctors, medical equipment suppliers, healthcare clinics and others before reimbursing them.

In other words, Martinez wants Medicare to start operating more like a credit-card company, with sophisticated anti-fraud computer software programs to immediately detect suspicious use of a customer's card.

And he's willing to invest hundreds of millions of dollars in upgrading Medicare's antiquated system if it means catching more Medicare offenders at the front end.

''It's not just more government spending for the sake of government spending,'' Martinez told The Miami Herald, citing a U.S. Department of Health and Human Services finding that $1 spent on prevention would stop $10 in fraud. ``That's a pretty good return on your investment.''

Sen. Chuck Grassley, R-Iowa, the ranking member of the Senate Finance Committee, said Congress over the years strengthened laws to allow private citizens and government authorities to combat healthcare fraud -- including the 1986 False Claims Act Amendments, the 1996 HIPAA law and the 2003 Medicare Modernization Act.

But he acknowledged that legislation to help fortify Medicare's defense against fraud is overdue. ''I agree with its goals,'' he said.


Grassley, co-sponsor of the False Claims Act Amendments, said he still thinks Medicare isn't aggressive enough in scrutinizing fraudulent bills. But he admitted that Congress hasn't kept an eye on the agency either.

''Where Congress comes in is to keep on top of it,'' he said. ``From that standpoint, Congress bears some blame for the lack of oversight.''

Veteran Miami U.S. Rep. Ileana Ros-Lehtinen agreed. ''We haven't had any hearings on that at all,'' she said.

Ros-Lehtinen, a Republican, said there's no question that Medicare needs help to fight fraud. But politically, she said, it's always risky for lawmakers to be giving more money to an agency recognized for incompetence.

''If you increase the money for oversight, then it looks like you're fattening up the bureaucracy, even when it's really for oversight and fighting fraud,'' she said. ``It's a difficult choice.''

Her longtime Miami colleague, Lincoln Diaz-Balart, a Republican congressman, declined to be interviewed for this report.

The challenge of transforming any part of Medicare -- the government's second biggest entitlement program -- is all the greater because the system encompasses so many special interests.

Consider this telling example: Congress' recent delay of a new Medicare payment plan that would have drastically reduced government reimbursements for medical equipment by requiring providers to compete on pricing for motorized wheelchairs, hospital beds and other supplies.

The plan, designed to eliminate Medicare's practice of setting generously high prices, also would have required suppliers to go through accreditation to weed out suspicious businesses that fuel fraud.

But last month, just as the competitive-bidding program was rolling out officially in South Florida and nine other regions, Congress put it on ice -- for 18 months. The plan, which Congress had passed as part of the Medicare Modernization Act five years ago, fell victim to lobbying pressure from the medical equipment industry.

The delay was remarkable because that industry accounts for a tiny share -- 2 percent to 3 percent -- of Medicare's total budget.

It not only highlighted Congress' inability to grapple with ways to make Medicare operate more efficiently, but also exposed a political culture that continues to frustrate attempts to fix the flawed system.

''The more decisions are made out of Washington, the more stakeholders you have in what Congress says,'' said Elizabeth Wright, vice president for government affairs at the nonprofit Citizens Against Government Waste. ``I know a lot of these people at these trade associations. They don't like fraud any more than anyone else. But they're there to fight for their constituents and to make sure they get the good end of the lollipop.''

South Florida's Graham, who decried Congress' delay of competitive bidding, said: ``There are so many individual stakeholders who will oppose any reform if they think it will affect their interests adversely.''

The American Association for Homecare, a nonprofit organization that represents 600 members, including medical equipment providers, argued that Medicare's process of selecting competitive bidders was unfair because it left out hundreds of legitimate businesses.

'Our members called their congressmen and said, `This is going to put us out of business,' '' said Michael Reinemer, the group's vice president for communications and policy. ``It was an issue of fairness in allowing these providers to continue to serve their patients.''

People associated with that trade group, along with five large equipment suppliers, have given more than $427,000 to both Democratic and Republican campaign committees in 2007-08, according to Congressional Quarterly Today.

Those contributions are merely a fraction of the tens of millions of dollars that individuals, lobbyists and political action groups gave during the same period to politicians on congressional committees that oversee Medicare and other health issues, according to the nonpartisan Center for Responsive Politics.

Grassley, former chairman of the Senate Finance Committee, which oversees Medicare, said medical equipment suppliers hold sway with Congress because they represent small-business owners who are important constituents.

But Grassley said that he, current Finance Committee chairman Sen. Max Baucus, D-Mont., and other members of Congress found fault with how Medicare implemented the competitive-bidding program.

''It did harm to small-business people -- about two-thirds of the bids were thrown out because of technicalities,'' Grassley said. ``You got the feeling it was put together hastily and not well thought out.''

The economic reality is that medical equipment suppliers would stand to make less money if the competitive-bidding program takes effect -- and Medicare could save billions in the future.

For decades, Medicare has set generous rates of reimbursement for renting or buying medical equipment. For example, the program pays $4,023 for a powered wheelchair that can be purchased online for $2,174.


Kerry Weems, acting administrator of Medicare, said competitive bidding would dramatically lower government reimbursements for such products.

''The prices are too high,'' he said. ``Once you move it to a competitive marketplace, it's difficult to say that you're overpaying for this or underpaying for that, because it's not the government that's determining the price.''

Weems said Congress' vote to delay competitive bidding -- which was linked to a bill to block a 10.6 percent Medicare pay cut for physicians -- was classic Washington politics.

''Here is the important lesson to take away from this,'' said Weems, a veteran administrator at the U.S. Department of Health and Human Services. ``Changes that this program makes were fairly modest.

``If you look at the hoopla it has created -- then compare that with many of the statements we hear about the need for Medicare entitlement reform -- this shows how really, really hard entitlement reform could be.''

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