Insurers, Governments Partner to Fight Fraud

Since being sworn into office in January 2009, President Barack Obama has made revamping the healthcare industry a priority. Yet, his administration has said there is still a lot of work that needs to be done to reach their goals.

In late July, the administration took another step in addressing the problems, announcing a partnership between health insurance companies and federal and local governments to prevent healthcare fraud. The Patient Protection and Affordable Care Act (ACA) contained several provisions aimed at this issue, and the government has successfully limited Medicare fraud for the past few years.

Under the new plan, and for the first time, governments and private insurers will share claims and healthcare data in an effort to identify fraud in real time and stop illegal payments. Attorney General Eric Holder emphasized that the leaders will protect patient confidentiality.

Mr. Holder, Kathleen Sebelius, secretary of Health and Human Services (HHS), and Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, discussed the initiative on July 26 during a press briefing at the White House.

The partnership is still in its early stages, with small groups meeting in the next several weeks before gathering for the first formal meeting in September. However, numerous major organizations have already joined the effort, including government agencies, trade groups, and insurers such as Humana, UnitedHealth Group, and WellPoint.

Among the many issues to be settled is a new restriction placed on insurers under the ACA that requires them to spend at least 80% of the premiums they collect on medical care. According to Bloomberg, health insurance executives met with members of the Obama administration and asked that antifraud efforts, which are currently classified as administrative costs, in the same category as salaries, bonuses, and marketing expenses, be counted as medical costs.

“In our view, we are doing this and, now, we are all working together to do this because the cost of fraud is far more substantial than the matter of claims that should not have been paid,” Ms. Ignagni said. “It can cause real harm to patients who were intentionally exposed to radiation, invasive surgeries, and medications they did not need. Also, some patients will suffer the lasting consequences of receiving fraudulent diagnoses, which they will either never find out about or will follow them for the rest of their lives in their medical records. In our view, this partnership will be better than the sum of its parts.”

Ms. Sebelius and Mr. Holder both said President Obama has made fighting healthcare fraud a “cabinet-level priority.” As part of their efforts, HHS and the Department of Justice (DOJ) launched an initiative in May 2009, known as the Healthcare Fraud Prevention and Enforcement Action Team (HEAT), to strengthen federal, state, and local partnerships and deal with Medicare fraud.

There are now fraud enforcement teams consisting of officials from the DOJ, HHS, and Federal Bureau of Investigation in 9 cities: (1) Baton Rouge, Louisiana; (2) Brooklyn, New York; (3) Detroit, Michigan; (4) Houston, Texas; (5) Los Angeles, California; (6) Miami, Florida; (7) Tampa, Florida; (8) Dallas, Texas; and (9) Chicago, Illinois.

During fiscal year 2011, the federal government recovered nearly $4.1 billion in fraudulent Medicare payments. The ACA contained increased funding to combat fraud, including an additional $350 million toward the Health Care Fraud and Abuse Control Program, which was established in 1996 as part of the Health Insurance Portability and Accountability Act.

To date, the investment has paid off. In the past 3 years, for each dollar the government has spent on healthcare fraud, it has returned $7 to the United States Treasury, Medicare trust fund, and/or other programs, according to Mr. Holder.

“It is clear that our approach is working and that our investments and antifraud efforts are yielding really extraordinary returns,” Mr. Holder said. “But as [this] announcement proves, this is really only the beginning. The fraud prevention partnership underscores this administration’s determination to build on our most successful efforts by expanding engagements with industry leaders and experts and by working with them to hold criminals accountable and to seek justice for healthcare fraud victims.”

Ms. Sebelius said the government used to have a “pay and chase” model, in which it would pay Medicare claims first and then try to find the fraudulent ones. With newer technology, officials are now able to identify suspicious activity in real time, similar to the model that credit card companies use when they notice an unusual charge.

“Now, we are taking away crooks’ head starts,” Ms. Sebelius said.

Ms. Ignagni, the top lobbyist for health insurers, said many companies already have internal teams that attempt to identify fraud. By working together, Ms. Ignagni said health insurers and the government would be able to share information, identify fraud earlier and more quickly, and protect patients from inappropriate or substandard care.

“In our view, this is an unprecedented national collaboration,” Ms. Ignagni said. “It is a crucial step forward and will open up new approaches that have not been previously available.”