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Health Reform Should Begin with Ending Fraud

Health Reform Should Begin with Ending Fraud

By Tom Coburn and Jim Frogue - September 15, 2009

During his recent primetime address, President Obama said health care in America is "a system that is currently full of waste and abuse" where "too much of the hard-earned savings and tax dollars we spend on health care don't make us any healthier... is also true when it comes to Medicare and Medicaid." In fact, he said that there are "hundreds of billions of dollars in waste and fraud" in Medicare that "don't improve the care of seniors." We agree.

We believe that fraud constitutes at least ten percent ($100 billion) of the nearly one trillion in taxpayer dollars that Medicare and Medicaid will spend this year. That is likely a conservative estimate. Harvard's Dr. Malcolm Sparrow, author of the seminal book "License to Steal," estimates that the losses could easily be in the 20 percent or 30 percent range, even as high as 35 percent, but he insists that we ought not to have to guess. He believes the government should measure the losses and report them accurately.

The American people firmly support anti-fraud efforts. Eighty-eight percent in a July 2009 poll by Zogby identified, "eliminate fraud" as their preferred way to pay for modernizing our health care system. "Reduce medical errors" came third on that list with only 72 percent support. Moreover, an Insider Advantage poll also from July found that by a margin of 61-27 Americans believe the issues of fraud and waste in Medicare and Medicaid should be addressed prior to the creation of a new government-run health program.

The story of convicted murderer Guillermo Denis Gonzalez illustrates the vulnerability of government run health programs to fraud. Gonzalez was released from prison in 2004 after serving a twelve year sentence for a murder conviction. Two years later he bought a Medicare-licensed equipment supply company and duly notified Medicare authorities that he was the new owner. In 2007 he submitted $586,953 in false claims to Medicare and got paid for some of them. In 2008 he is alleged to have killed and dismembered a man.

The fact that a convicted murderer with a seventh grade education could so easily become a supplier to our largest health program and begin defrauding it illustrates how pervasive fraud is in America's government-run health care programs. If only the Gonzalez case were an isolated incident.

Miami Dade Country is notorious for health care fraud. There are more licensed home health agencies in Miami Dade County than the entire state of California. In 2005, billing submissions from Miami Dade to Medicare for HIV infusion therapy were 22 times higher than the rest of the country combined. New York also has a serious problem with fraud. A private study of New York's Medicaid in 2006 found that one-quarter of that then-$44 billion program cannot be explained.

In August, Medicaid's internal inspector said Medicaid's current data gathering capabilities are not timely, accurate or comprehensive for detecting waste, fraud and abuse. Essentially, one the largest government-run health programs admits that they have no idea how much fraud occurs as a result of their antiquated computer systems and collection methods.

The Government Accountability Office reported in January of this year that 10 percent of Medicaid payments made in 2007, or $32.7 billion, were improper. Last summer, Senator Charles Grassley and a group of leading Senators estimated that there is $60 billion waste, fraud and abuse in the Medicare program.

For years, Congress has known that the problem of health care fraud, particularly in Medicare and Medicaid, is massive. Yet, instead of targeting the crooks who are stealing from poor and elderly Americans dependent on Medicaid and Medicare, Congress routinely deals with runaway Medicare and Medicaid outlays by slashing payments to honest doctors and hospitals. That is a long term recipe for total collapse of our health care system.

This past May, I (Senator Coburn) introduced a health reform bill, the Patients' Choice Act along with Senator Richard Burr (R-NC) and Representatives Paul Ryan (D-WI) and Devin Nunes (D-CA). Besides increasing patient choice, lowering costs, saving states $960 billion, and putting government health spending on a sustainable course, the Patients' Choice Act would use private sector technologies to significantly reduce waste fraud and abuse. This could save taxpayers about $100 billion a year.

Members of Congress should look to the credit card industry as a model of fraud containment. It processes over $2 trillion in payments every year from 700 million credit cards being used at millions of vendors to buy countless products. Fraud in that industry is one-tenth of one percent while fraud in Medicare and Medicaid at least 100 times higher.

At the very least, Congress should require that authentication of new suppliers to the Medicare program be done by Visa, Mastercard, or American Express. No more proof is needed that the bureaucrats currently in charge of Medicare and Medicaid have failed to combat the fraud that exists in those programs today. Expanding the role of government in health care without combating fraud will only guarantee more of the same.

Tom Coburn is a family doctor and Republican Senator from Oklahoma. James Frogue is Vice President of the Center for Health Transformation and editor of the new book  “Stop Paying the Crooks.”

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