GAO Finds Smart Cards Won't Stop Most Healthcare Fraud

Regardless of one’s political affiliation, the elimination of fraud from government healthcare programs is an issue universally supported. In 2014, the Department of Justice spent $571 million to find and prosecute fraud and recover $3.3 billion in settlements.

A proposed solution to cutting fraud is incorporating technology. Recently, the Government Accountability Office conducted study examining whether electronically readable card technology, or “smart cards,” could weed out fraud by properly identifying beneficiaries or providers at the point of care.

In the report, the GAO found that smart cards could spot some types of fraud, but not most. This is because the vast majority of cases involve schemes in which the beneficiaries or the providers—or both—were complicit in the action.

GAO ran tests of 739 fraud cases from 2010 to determine whether the use smart cards would have made a difference. The results were not promising: in only 165 cases (22%) would smart cards have been able to prevent fraud.

The investigators gave several reasons why smart cards are not a cure-all for Medicare and Medicaid fraud. The most common fraud schemes involve billing for services that were not provided (43%) or for medically unnecessary services (25%), and in the case of Medicare especially, the patient may not even be aware that the service is not needed. Other schemes involve falsifying records to support fraud (25%) and fraudulently obtaining controlled substances or mis-branding prescription drugs (21%).

In sum, GAO finds that when it comes to fraud, providers are complicit 62% of the time, while beneficiaries are at fault 14% of the time.  

The original article by Mary Caffrey can be found at the following address: http://www.ajmc.com/focus-of-the-week/0216/smart-cards-wouldnt-stop-most-healthcare-fraud-gao-finds?utm_source=Informz&utm_medium=AJMC&utm_campaign=MC%5FMinute%5F2%2D24%2D16

Omnibus Continues Tax Breaks for Blue Cross and Blue Shield Insurance & Ups Spending to Detect Healthcare Fraud and Abuse

The 2015 Fiscal Year Omnibus Appropriations Bill provides just over $1 trillion in discretionary spending in compliance with the Murray-Ryan budget agreement and funds the majority of the federal government through Sept. 30, 2015. 

Nongermane Riders

The New York Times reports that "Steve Ellis, vice president of Taxpayers for Common Sense, a nonprofit research group that tracks federal spending, said the bill bestowed favors on all sorts of constituencies.

“Authors of the bill and lobbyists behind these provisions know they are in there,” Mr. Ellis said. “But the public will not find out about most of them for weeks or months, if ever.” Congress supposedly forswore spending earmarks several years ago, after federal largess led to several scandals. But lawmakers can still steer money in less conspicuous ways."

One example of a nongermane rider that went into the bill without public debate provides relief to nonprofit Blue Cross and Blue Shield plans, which have special tax breaks that may have been threatened by provisions in the Affordable Care Act. While Blue Cross is not mentioned by name in the legislation, the deduction is only available to Blue Cross and Blue Shield plans. Blue Cross and Blue Shield have been lobbying Congress for a clarification since the Affordable Care Act was signed in 2010.

Fraud Prevention

The Committee on Appropriations executive summary also explains that the bill provides $1.484 billion for cap adjustment funding to prevent waste, fraud, abuse and improper payments in the Medicare, Medicaid and Social Security programs. This is a $560 million increase in funding from last year's level.

A significant portion of those funds, $672 million, are dedicated to the Health Care Fraud and Abuse Control program at the Centers for Medicare and Medicaid Services. That amount more than doubles the level enacted in fiscal year 2014. One reason for the increase is that preventing fraud creates a significant savings for the government. The latest data shows that for every $1 spent on fraud and abuse control, $8.10 is recovered by the Department of Treasury. That recovery ration is the highest three-year average return on investment in the entire 17-year history of the Health Care Fraud and Abuse Control program.

Further Information

For a more comprehensive discussion of nongermane riders passed in the Omnibus see this New York Times article, "In Final Spending Bill, Salty Food and Belching Cows are Winners." The Senate Committee on Appropriations executive summary of the bill can be found here.

ICD-10 Transition Date Finalized for October 2015

The Centers for Medicare and Medicaid Services announced last week that the final deadline to comply with the ICD-10 implementation requirement is October 1, 2015. The tenth edition of the International Classification of Diseases is widely viewed as a significant change in the way claims that are submitted to Medicare and private insurance payers are classified. 

These changes enable providers to coordinate patients care over distance and time, improve the accuracy of patient records with more detailed patient history coding, and reduce fraudulent claims. CMS also believes that the ICD-10's granular classifications will improve the data and analytics related to public health research, surveillance, and reporting. The more specific classifications found in ICD-10 represent, in part, the evolution of diagnosis and the modern developments in medicine and medical technology used to treat patients. 

CMS released an online resource designed to help providers in small practices make a timely transition to ICD-10. The "Road to 10" is an online resource available here. The  Road to 10 breaks allows providers to select a profile based on their expertise that is specifically tailored to each speciality's common codes, clinical documentation procedures, and clinical scenarios. Additionally, the Road to 10 gives users the opportunity to create an ICD implementation action plan specifically suited to the needs of their small practices. 

Study Finds Copy-Paste Function in Electronic Health Records Leads to Medicare Fraud

A report released by the Department of Health and Human Services (HHS) Wednesday outlined more flaws in the government oversight of adopting electronic health records. This is the second report issued by the HHS that specifically criticizes the CMS oversight of the federal program created to convert paper patient records to an electronic format. 

The report specifically points to the lack of clear "program integrity practices" to provide guidelines on the proper use of copy-paste, or cloning function, in updating electronic health records and recording new office visits and treatments. Doctors and hospitals use the feature to reduce the time it takes to input patient data. Many say that without this function the health practitioners would drown in the patient input process, to the detriment of the treatment quality for their patients. 

However, the report finds that widespread indiscriminate use of the cloning function may lead to the input of more extensive treatment and tests than actually occurred. This, in turn, leads to doctors overcharging Medicare for care that was not actually provided. There is also concern that without proper oversight this type of fraud may grow exponentially in the coming years with the implementation of electronic health records nationwide. 

The report issued by the Office of the Inspector General for the Health and Human Services Depart is available here.

Media coverage of the report is available at:

• New York Times, "Report Finds More Flaws in Digitizing Patient Files." 

Enrolling for Coverage in Health Insurance Marketplaces: Tax Credits, Fraud, and the IRS

Many individuals will qualify for tax credits to purchase the required health insurance from the health insurance marketplace in 2014. The Internal Revenue Service is responsible for calculating the tax credits accurately. 

The IRS will use a software program to verify tax credit calculations and assess penalties prior to issuing them to health insurers. However, there is concern about fraud because the agency has not completed a fraud mitigation strategy to prevent people that underestimate their incomes from fraudulently collecting health subsidies. As currently established, the IRS would issue the tax credits prior to verifying income.


The IRS has outlined tax provisions related to the Affordable Care Act here.

The report from the Treasury Inspector General for Tax Administration is available here.