Though difficult to pinpoint an exact dollar amount associated with this waste, there is a longstanding estimate that 10% of all healthcare dollars come from fraud and abuse, based on a 2009 Government Accountability Office (GAO) report. Applying this percentage to the $1.06 trillion figure, fraud and abuse accounts for upwards of $100 billion. Inclusive of waste, in addition to fraud and abuse, we at the Center for Health Transformation believe that this number could easily go above $120 billion per year. Detailed below is how we arrived at those staggering numbers.

 

o       July 2008 Senate Republican Conference report estimated improper Medicare spending could be costing taxpayers $60 billion a year. 

o       January 2009 GAO report found that, during 2007, CMS issued over $32.7 billion in improper payments.

o       November 2008 CMS report showed improper payments for the following programs: Medicare fee-for-service - $10.4 billion in FY 2008; Medicare Advantage in CY 2006 - $6.8 billion; Medicaid - $32.7 billion in FY 2007; and SCHIP - $1.2 billion in FY 2007.

o       July 2005 New York Times article estimated that questionable Medicaid claims approached $18 billion per year – and that is in the state of New York alone. Although waste is more egregious in this state than the average, multiplying only a fraction of the $18 billion by all 50 states leads to an incredible number.

o       July 2008 GAO report estimated that almost $1 billion in annual Medicare payments for durable medical equipment is improper. GAO highlighted this by setting up 2 sham companies. A March 2007 DHHS report found that 31% of DME suppliers in South Florida did not maintain a physical facility or were not open and staffed during unannounced site visits. A further 14% were open and staffed, but didn’t meet at least one of three additional requirements: having posted hours of operation, a visible sign, or a listed telephone number. This means that only 55% of DME suppliers in South Florida were compliant.

o       September 2008 Senate Permanent Subcommittee on Investigations report found that, in Medicare claims data from 1995 through 2006, there was over $4.8 billion in payments made on durable medical equipment with diagnosis codes that were invalid, blank, or unprocessable – almost $440 million per year.

o       September 2008 Senate Permanent Subcommittee on Investigations report found that, of bill submitted by medical suppliers from 2001 through 2006, over $1 billion were questionable claims. For example, there were hundreds of thousands of claims for diabetes-related glucose test strips for patients who were diagnosed with the bubonic plague, leprosy, and cholera. This study also found walkers being issued for patients whose diagnosis codes included sinus congestion, paraplegia, and shoulder injuries.

o       July 2008 Senate Permanent Subcommittee on Investigations report reviewed claims from 2000-2007 and found significant payments for medical services ordered by deceased doctors – up to $92 million, an average of over $13 million per year.

o       August 2008 Miami Herald investigation found that, in Southern Florida, dozens of clinics and doctors billed Medicare for more than $1.1 million in false claims for obsolete HIV-infusion therapy for a single Miami-Dade County patient, who then collected thousands of dollars in kickbacks for selling his government-issued healthcare number to them. This specific patient then used that money to buy crack cocaine. In fact, according to a 2007 DHHS report, Florida accounted for 72% of the drugs billed across the U.S. for Medicare beneficiaries with HIV/AIDS, even though the region had only about 8% of eligible patients.

o       The Department of Justice has set up a Medicare Fraud Strike Force in Miami. In 2007, this team indicted 74 cases and 120 defendants – contributing to a drop in Medicare billing of $1.4 billion compared to the previous year. South Florida is rampant with fraud – stolen Medicare IDs which are used to bill Medicare for care and equipment patients never got and didn’t need, particularly DME.