Talking Health

As long as Medicare has been around, cost containment has been a
concern.  Since 1965, policy makers have tried to increase benefits
while decreasing regulation – a tricky juggling act.

Medicare spending has increased, but not as much as private health
care, which has seen double-digit increases over the last few years.
Medicare spending per capita increased 5.4% annually between 1975 and
2002, but 3.2% of that growth can be tied to a growing elderly
population and increased wages across the working population. The
remaining 2.3% is excess growth that’s primed for cost containment
measures.

Since 2002, Congress has voted every year to override a 21% cut to
Medicare physician payment rates. If 2010 is no different, projected
Medicare spending growth in 2010 is 6.4%.

Costs can be controlled administratively or legislatively. Both
avenues translate into changing governmental regulatory mechanisms,
which seem to have had limited success in the United States, but have
been particularly effective in other nations.

A consistent bugbear named by both opponents and proponents of
Medicare is administrative waste. This waste can be generated by
attempts to increase transparency or provide better benefits. Attempts
to innovate can puff up administrative costs. Two examples of
resource-heavy innovations are the bundling of fee-for-service
payments and competitive bidding for durable medical equipment.

Pharmaceutical prices have been escalating over the last few years,
but the parallel rise of generic options may provide an avenue for
reducing waste. Cutting the prices of other services—like ambulance
service—may also be a viable option. Unnecessary medical interventions
are another leak of health care dollars.

Past HMO cost-containment strategies—such as cutting back on services
and increasing generic pharmaceutical use—have had negative
consequences such as increased hospitalization rates. Hospitalization
issues are often considered to be a prime target for abuse and fraud.

The False Claims Act and the Medicare Integrity Program have tackled
fraud prevention and detection.

Medicare fraud is based around billing Medicare for services that were
not given or were unnecessary and/or for products that were not
received or were unnecessary.  The Department of Health and Human
Services offers extensive information about how to detect and report
Medicare fraud.  Medicare fraud causes Medicare premiums to rise.
Medicare is a $466 billion program, and it is estimated that Medicare
fraud totals $60 billion annually.

A prominent Medicare fraud story focused on unnecessary infusion
treatments for AIDS patients in southern Florida.  In 2007 Department
of Justice prosecutors issued indictments for 65 individuals and
health care entities that had fraudulently billed Medicare for $345
million.  Southern Florida received special attention because although
the state had fewer reported AIDS cases than California its Medicare
charges for AIDs patients were three times higher.  A big clue leading
to the detection of fraud was a spike in billing for infusion services
from 4.3% to 15% within one year.

In 2006 Medicare officials released a report that said they had
reduced fraud, but 2008 a confidential draft of a federal inspector
general’s report revealed that to be incorrect.  Medicare officials
instructed outside auditors to ignore government procedures in
matching bills from salespeople to the actual doctor’s records which
would have helped to reveal if patients had actually received the
products that Medicaid was being charged for.