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On Waste, Fraud And Abuse, Rank Hypocrisy By Medicare and Medicaid

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A little known effort to cripple a system that would recover millions of taxpayer funds that were made in wrongful payments to Medicaid and Medicare is being thwarted.

Image source: Medicare.gov

One of the least well-understood scandals of the Obama era is the effort to cripple the auditing system for Medicare payments, allowing sectors of the healthcare industry that helped get Obamacare passed into law to reap billions of dollars in profits from wrongful payments.

In the past several years, the Centers for Medicare and Medicaid Services has taken repeated, aggressive actions to limit the ability of auditors to review the payments, for example drastically limiting the number of documents that must be produced by hospitals and other mega-contractors.

Image source: Medicare.gov Image source: Medicare.gov

Unsurprisingly, fraud has exploded under President Barack Obama's administration. There is an appalling amount of brazen, easily detectable fraud, like “doctors” registering restaurants, convenience stores and airports as the sites of their medical clinics. But the real money is in accounting gray areas that are ruthlessly exploited by many big-name providers.

And real money it is: roughly $60 billion a year, or $114,000 for every minute of every day of the entire year.

The Government Accountability Office has been sounding the alarm about this fraud, and even some of Obama's own top aides have urged in isolation for the agency to implement stronger measures to prevent it. Instead, the agency has worked doggedly to cripple the only deterrent that has shown any efficacy: the Recovery Audit Contractors program.

The “RACs,” as they are called, are paid a portion of the wrongful payments they identify, if those payments are successfully recovered by the government. In other words, unless the agency takes the evidence of the RACs and agrees with their findings, no action is taken against the hospitals.

The program has always been in something like pilot mode, they've never been unleashed on the entire pie at CMS, let alone other agencies where the same structure could be successfully replicated.

The problem, at least from the perspectives of a powerful hospital lobby, is the RACs have been too successful at identifying fraud, helping the government claw back over $10 billion in wrongful payments.

Good bureaucrats are good infighters, and one reason the issue has attracted less attention than say, the individual mandate, is that CMS has provided several fig leafs to obfuscate their general direction.

The latest of these is the agency's move to “open” Medicare Advantage to RAC auditing. In late December, CMS issued a regulatory notice it was considering what is being described as an “expansion” of the RAC program.

Unfortunately, the notice comes after CMS has already thoroughly crippled the RACs auditing powers, like sharply limiting the portion of financial documents they are afforded the right to review to less than one percent of available documents.

Outside of the mob, any accountant would scoff at such practices, but such is the arrangement struck by an administration that appears to be rewarding its political allies.

Additionally, buried in news reports about the move are indications the agency, which is supposed to audit Medicare Advantage plans itself as well, has been lagging far behind in its efforts.

The agency is essentially sending the RACs, hands tied behind their backs, to take care of auditing it can't be bothered with.

Last year, the Wall Street Journal recounted how a constellation of well-connected players in the health care industry had made billions of dollars by betting on Obamacare. What many people don't realize is that unfettered access to a $60 billion pool of fraud seems to be part of the package as well.

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