by Deb Cupples | As my co-blogger Damozel discussed yesterday, Treasury Secretary Tim Geihtner says that Medicare is in crisis, partly because health care costs are expected to rise (yet again).
One thing troubles me: the lack of attention to what drives up health care costs. It's not some magical effect of physics: our nation's health care costs have skyrocketed because of choices made by major government and health-industry players -- choices that, coincidentally enough, were quite personally lucrative for those players.
If U.S. government officials really want to solve Medicare's cost-related problems (at least partly), I suggest that they address at least the following two contributing factors:
2. Health-care contractor waste, fraud and abuse.
Remember when President Bush and a Republican Congress voted to make it illegal for Medicare to negotiate with drug companies for better drug prices? In terms of sound business-practices, it was an insane move.
Said insanity was part of the so-called Medicare Modernization Act of 2003, a law that bestowed the added benefit of making the Medicare drug program a twisted, hard-to-navigate mess for our nation's seniors (including my mom).
After the Democrats took control of the House in 2007, the House passed a bill that would make it possible for Medicare to (again) negotiate better drug prices. Senate Republicans, following Mr. Bush's cues, blocked the bill.
The upshot: some of our representatives in government actually and intentionally stopped Medicare officials from engaging in sound business practices (i.e., from using its high-volume buying power to negotiate drug discounts).
It was a bad move for us taxpayers, and it was very anti-free market -- meaning that some Senate Republicans were switching to the hypocrisy hat.
Finally, in January 2009, another bill was introduced that would allow Medicare to negotiate drug prices. I don't think it has been passed yet.
First things first: Congress and the President should use all due speed to give back Medicare's ability to negotiate drug prices.
Second, Congress and the President should use all do speed to start competently, diligently, and ethically dealing with our nation's dealings with health-care contractors.
Every tax dollar devoted to contractor waste or fraud is one less dollar for legitimate healthcare services. Contractor waste or fraud seems to be a leading cause of Medicare's increasing costs.
In 2003, the Department of Justice (DoJ) said that healthcare contractors' settlements were the "lion's share" of fraud-suit settlements from 2000-2003 (larger, even, than defense contractors' settlements).
Since 2000, America's two largest for-profit hospital chains (HCA and Tenet) settled massive DoJ fraud suits over conduct that had allegedly occurred for years. Contractors tend to settle fraud suits without admitting guilt, because if contractors are found guilty of fraud, the government can bar them from receiving lucrative contracts.
Below are more than a dozen examples of health-care contractors that faced lawsuits or prosecution, their alleged conduct, and the outcomes. Notice that Medicare is mentioned in many of the examples below.
Hospitals
In 2006, Tenet Healthcare (America's second largest for-profit hospital chain) settled DoJ suits for $900 million after allegedly false billing of Medicare and other federal programs. The alleged conduct included: "upcoding" patient diagnoses (billing for more expensive treatment than was done or called for), unreasonable inflation of charges, and illegal kickbacks to doctors.
In 2005, Health South settled DoJ suits for $327 million after (among other things) allegedly charging for false claims for outpatient physical therapy, over-billing Medicare for hospital costs, and billing Medicare for unallowable costs (like employee travel, entertainment, and an administrator's meeting at Disney World).
By 2003, HCA (America's largest hospital chain) had agreed to pay $1.7 billion to settle DoJ suits. The alleged conduct included: falsifying hospital-cost reports, charging Medicare for unallowable costs, and giving doctors illegal kickbacks for patient referrals. Some of the alleged conduct dated back to the 1980s.
Drug Companies & Pharmacies
In 2005, GlaxoSmithKline settled a DoJ suit for $140 million after allegedly submitting false claims to Medicare and other federal programs by falsely reporting inflated drug prices -- "knowing that those prices would be used by federal programs to set reimbursement rates."
Retail pharmacies Wal-Mart (2004) Rite Aid (2004), Eckerd (2002), and Walgreen (1999) settled unrelated DoJ suits for a combined $23.4 million after allegedly charging federal healthcare programs full price for partially filled prescriptions. Federal programs including Medicare, Medicaid and TRICARE (military health) were affected.
In 2003, AstraZeneca settled DoJ suits for $280 million after, among other things, allegedly conspiring with health care providers to charge federally funded insurance programs for free samples of a prostate cancer drug.
Laboratories
In 2003, Abbott Laboratories settled DoJ suits for $382 million after getting snared in a federal undercover investigation called “Operation Headwaters." Apparently, a division of Abbot had offered kickbacks to federal agents to buy the company’s products, then “advised them how to fraudulently bill the government for those items.”
In 2002, four individuals in Florida were sentenced to prison and ordered jointly to pay a total of $11.7 million after conspiring to defraud Medicare and Medicaid by submitting false claims for laboratory tests that were not actually performed.
In 1997, SmithKline Beecham laboratories settled a DoJ fraud suit for $325 million after allegedly over-billing Medicare and other federal programs by: double billing for tests for kidney dialysis patients; paying illegal kickbacks to doctors; and billing for tests that weren’t done, weren’t medically necessary, or weren’t ordered by a doctor.
HMOs & Insurance Companies
In 2002, General American Life settled a Medicare-fraud case for $76 million after allegedly failing to perform its contractual duties to the Centers for Medicare and Medicaid Services (CMS). The duties included assessing eligibility and processing claims submitted by Medicare beneficiaries and healthcare providers. General American allegedly failed to process claims, submitted false information to CMS, failed to report errors, and disguised true error rates by deleting claims selected for CMS-review.
In 2002, PacifiCare Health Systems agreed to pay $87 million to settle allegations that it (and its predecessor companies) had inflated insurance claims while contracted to provide government-employee benefits under the Federal Health Benefits Program.
In 2004, Lovelace Health Systems, (a Cigna-owned hospital and HMO) settled a DoJ suit for $24.5 million after allegedly falsifying Medicare cost reports for ten years. Among other tactics, the company reportedly shifted the costs of its HMO patients to Medicare.
Equipment Suppliers
In 2000, an Ohio medical supplier was ordered to pay $15.1 million and sentenced to 70 months in prison after pleading guilty to defrauding Medicare by billing for urinary incontinence supplies that were not provided and by falsifying paperwork to hide the schemes from Medicare.
In 1997, Olympus of America settled a DoJ suit for $22.8 million after allegedly overcharging the Department of Veterans Affairs (VA) for medical-imaging equipment. After the VA negotiated to receive the best discount that Olympus offered to private businesses, Olympus reportedly told the VA that it gave no discounts to private businesses (when Olympus did give discounts), thereby overcharging the VA according to the contract's terms.
Doctor Fraud
In 2004, a Connecticut pediatrician pleaded guilty to fraud and agreed to pay back $548,000 after billing Medicaid and other insurance programs for childhood vaccines that the doctor had received free-of-charge via the joint federal/state Vaccines For Children program. The doctor reportedly carried out the scheme from 1997-2002.
In 2000, a Texas doctor and his lawyer brother were convicted and sentenced to prison after carrying out a "sophisticated scheme to defraud local, state and federal heath programs and private insurers of over $46 million from 1986 to 1998." In the process, the doctor upcoded his services, falsified medical reports and engaged in multiple billing. During 1994, he would have had to work for 90 hours a day to accomplish the number of office visits he'd billed for. The scheme's other participants included an accountant, a physician's assistant, a physical therapist, and multiple office managers.
In 2001, a U.S. doctor was sentenced to 10+ years' prison after conspiring to dispense/distribute controlled substances, committing Medicare fraud, and taking illegal kickbacks. He was also ordered to pay $229,384 in restitution. Reportedly, the doctor routinely wrote large quantities of prescriptions for highly addictive pain medication, billed Medicare for services not provided, and upcoded office visits. A pharmacy owner was also convicted, sentenced to 16 years' imprisonment and fined $56,400.
.
In 2004, four California defendants were convicted after participating in a scheme to defraud Medicare of $2.6 million for equipment -- including motorized wheelchairs, accessories, and hospital beds -- that were not medically necessary or were not delivered. The defendants included a doctor, a wheelchair store owner, and a wheelchair repair-shop owner.
I could go on and on (and on) with examples, but I think the point is made: our government officials should spend more energy trying to resolve real root issues -- instead of posing and posturing and prattling on about broad strokes and bull.
Side note: the Atlantic's Megan McCardle recently weighed in on the Medicare-crisis. As usual, this young woman firmly expresses opinions but seems fond of sticking to vague images, labels and broad strokes -- instead of grappling with substance. BUT she also said something interesting:
"if there is some political or institutional barrier which is preventing you from controlling Medicare cost inflation, than that barrier probably is not going away merely because the program covers more people."
Now that's something we need to talk about: political and institutional barriers to the effective and efficient use of our tax dollars in the health-care system (and other areas of government, for that matter).
Memeorandum has commentary.
Related Buck Naked Politics Posts:
* Insurance Companies Get Away with Overbilling
Medicare
* Private
Insurers Milking Medicare (i.e., Seniors & Taxpayers)
* Smoke & Mirrors: Health Care Industry Pledges to "Stem" Cost Increases?
*
* Drug Companies Scammed Taxpayers, Cancer Patients, Others
* Death by Hospital (Infection), Consumers Union Wants Congress to Act
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Deb I'm beginning to question if u truely do have an understanding of sound business principles/ the REAL economic cause and effect of legislation. Hate to break it to you but that 2007 House Bill on medicare that got blocked wasn't all that great. If you overgeneralize and only look at the surface, sure I can see how it appears that preventing price negotiation seems counter intuitive but if you operate in the real world eg... the details of the bill/ the real world consequences of it I doubt you'd chalk it up as another "good" bill for the Dems.
What you failed to realize/research/ or just flat out ignored is that independent analysis from the Congressional Budget Office found that the 2007 proposal would not result in cheaper drugs unless Congress tweaked the program, likely creating less access and choice for beneficiaries. If government was directly involved in the negotiation of drug prices they could only force lower prices through practices like price ceilings, reference pricing, or reimportation.
Even though I'm only 23 even I know that price ceilings when set below the market equilibrium rate (which is what govt would surely do in the name of helping the people) create a situation where demand exceeds supply hence shortages. The same thing happened in the 80's when Carter tried to apply the same principle to gas prices. As far as reference pricing is concerned it gives more incentive to the generic companies that copy a drug than the companies that originally innovated them, in the long run that creates a situation that cuts into drug company profits thus weakening their incentive to put newer innovative drugs on the market. As far as reimportation is concerned part of the reason prices are higher in the US is because it's the only place drug companies are getting close to market prices for the high demand level we have. Reimportation essentially piggybacks off the socialist price policies of other nations that have actually worked against many consumers. Drug companies have begun pulling their drugs from pharmacies in Cananda because at such low prices it simply isn't profitable. In other countries they would leave if it weren't for the fact that compulsory license allows those governments to steal their patents if they aren't locally produced, so they are forced to take the hit. In essence from the perspective of the producer the price for success is martyrdom.
I don't think generic drug companies should be given further incentive at the expense of the real innovators but much of the cost associated with drug prices is the fact that some medicare recipients simply don't get the generic of older drugs that have been out for a while thus voluntarily paying more to get the same thing. Of the seven top-selling prescription drugs for chronic disease, six generic US versions cost significantly less than their Canadian equivalents (FDA 2003). A Canadian study of 27 top-selling generic prescription drugs concluded that three-fourths of those drugs cost less in the US, and Canadians could save millions by access to the US versions.
So in essence supporting that bill is supporting low prices in the short run at the cost of shortages, restricted access, and less innovation....How American of you
Posted by: Steve B. | May 14, 2009 at 04:08 PM