Collaboration in Civic Spheres

OIG report: ignored reforms could save HHS $23B yearly

by Matt Rosenberg January 7th, 2013

The federal government could save more than $23 billion per year and hundreds of billions in the next decade if its Medicare and Medicaid programs and lawmakers acted on ignored audit and efficiency recommendations, some of them now decades old, according to a December 2012 summary report from the Office of the Inspector General of the Department of Health and Human Services. The report is titled “Compendium of Unimplemented Recommendations.”

Dollar-wise, the biggest take-away is that an average of $17.7 billion per year could be saved over each of the next 10 years if Medicare curbed over-reimbursement of managed care providers in its Medicare Advantage program. The problems stem from several factors including overly-generous coverage of administrative costs for providers, and a baseline per-patient charge or “capitation fee” that was formulated in a year (1997) with an excessively high, 14 percent, fee-for-service error rate. A 2010 HHS budget proposal would have allowed the market rather than Medicare to set repayment rates for Medicare Advantage beneficiaries, and is the basis for the estimated savings. But the proposal didn’t gain necessary approvals.

Other big-ticket savings jump out of the report.

Between $2.36 and $3.59 billion could be saved on average annually over the next 10 years if the Centers for Medicaid and Medicare Services (CMS) lowers from the current 70 percent to 25 percent its reimbursement rate to Medicare service providers stuck with bad debt from patients. This “would prevent the wasteful Medicare spending that occurs when hospitals fail to make a reasonable effort to collect unpaid deductibles and coinsurance from Medicare beneficiaries who can afford to pay or to collect from other sources (such as beneficiaries other insurance or Medicaid) that would pay the payments on their behalf,” the report says.

Lack of cost-sharing by beneficiaries on lab tests needs to be rectified because currently Medicare pays 100 percent unlike the lesser shares paid for most other of its benefits. The savings would reach $2.4 billion per year and nearly $24 billion over 10 years if the costs were partly covered by Medicare’s deductible and 20 percent coinsurance, the report says. Awareness of the problem goes back to at least 1990 when an HHS OIG report found Medicare was paying much more in reimbursements to doctors for lab tests than doctors were paying to have the tests done for patients.

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Another $1.1 billion per year and $11 billion over 10 years could be saved if Medicare reduced to 13 months from the current 36 months the rental period for oxygen equipment for beneficiaries. A 2006 OIG report found that Medicare was allowing rental fees totaling $7,216 over 36 months “for concentrators that cost only $587, on average, to purchase.” It has not only been taxpayers who’ve taken a hit. “Beneficiaries would pay $1,443 in coinsurance paid for the same $587 concentrators,” the report said.

Unwarranted bill-padding by Medicare providers for “global surgery fees” or non-surgical “evaluation and management” services that come before and after surgery – such as diagnosis, treatment, counseling and evaluation – are costing the system at least $97.6 million per year and these fiscal abuses should be curtailed, the report states. The amount could be higher because the estimate of waste is based on a specific 2009 OIG probe into 2005 “global fees” for eye surgeries only.

More than $66 million per year could be saved if state child support enforcement agencies made good on their obligations to collect Medicaid costs for children from non-custodial parents with the ability to pay their mandated share.

Community safety-net facilities such as health centers, children’s hospitals and critical access hospitals known as 340B entities are being overcharged to the tune of $3.9 million a month or almost $48 million per year for prescription drugs reimbursed by HHS’s Health Resources and Services Administration, the report says, citing a 2005 OIG report.

An average of $24 million per year could be saved over the next 10 years if Medicare more closely scrutinized for medical necessity the cost reimbursement claims submitted and paid for power wheelchairs, the report stated. A 2011 OIG report “revealed that on the basis of medical record reviews, 61 percent of claims Medicare allowed for power wheelchairs provided in the first half of 2007 were not medically necessary” or lacked related documentation. They’re allowed when a manual wheelchair, cane or scooter won’t provide mobility for the patient.

Lower limb prostheses must to a very large extent replace the actual “function of a missing limb” but many for which Medicare has provided reimbursement aren’t needed for that purpose, and the related annual savings could be $43 million if qualification requirements were followed, the report says.

Other unimplemented recommendations in the report don’t have an immediate cost-savings attached but would benefit patient care.

Some states are getting special supplemental or “enhanced” federal Medicaid reimbursements that are supposed to be carefully targeted “to pay for daily needs of Medicaid beneficiaries…for medical services and room and board expenses for food and for personnel salaries” in facilities “identified as having serious deficiencies in patient care.” But “some or most of the funds” are ultimately ending up with the states for other health-care services, not the needy facilities serving the targeted patients.

Important improvements could also be made by states in providing Medicaid-funded medical, vision and hearing screenings for children covered under the program; in strengthening protection against abuse and mistreatment of disabled patients in residential care facilities; and by the Indian Health Service in providing access to mental health and dialysis services for American Indians and Alaska Natives.

Additionally, states and cities need to continue to step up their preparations for a “medical surge” or intensified demand for facilities, services, volunteers and information coordination that would accompany a major pandemic such as H1N1 influenza, the report says.

The OIG year-end report also urges greater transparency from the Food and Drug Administration to protect the public in the wake of “adverse events” of life-threatening malfunctions of medical devices; and recommends that a division of HHS plus the National Insititutes of Health should continue efforts underway to correct underreporting of medical malpractice cases to the National Practitioner Data Bank.


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