Medicare goes high-tech to head off fraud

Tired of paying bogus claims, then chasing the scammers, Medicare announced Friday it is deploying screening technology similar to what's widely used by credit card companies to head off fraud.

Tired of paying bogus claims, then chasing the scammers, Medicare announced Friday it is deploying screening technology similar to what's widely used by credit card companies to head off fraud.

Up to now, the $500 billion-a-year government health program for seniors has basically paid claims first and asked questions later in a system dubbed "pay and chase."

The technology upgrade should help deter flagrant abuses such as the small clinic that suddenly starts billing more for a particular outpatient procedure — intravenous infusions, for example — than major hospitals in its area. But it's not likely to help crack sophisticated schemes that involve outwardly respectable companies with the expertise to cover their tracks.

Medicare "is putting in place the kind of computer program it should have had in 1980 or earlier," said Patrick Burns of Taxpayers Against Fraud, a nonpartisan group that supports whistleblowers who expose corporate scams against the government. "The bad news is that the largest Medicare and Medicaid frauds are designed at the highest levels of companies, with accountants, billing experts and salespeople smoothing over the paperwork so that it will slide past all the proctors."

Health care fraud is estimated to cost taxpayers $60 billion a year, although its real extent is unknown. Medicare, which covers 47 million seniors and disabled people of any age, has long been a prime target. But with the program facing insolvency, combatting health care fraud has become a much more urgent priority for the government.

Medicare anti-fraud czar Peter Budetti said the new system expected to go into operation July 1 is a major step forward. "It will allow us to do some things we had not been able to do before," he said. The hope is that Medicare will no longer be an easy mark.

Up to now, the program has performed rudimentary fraud checks on individual claims before payment, officials said. For example, does the Medicare number on a bill for prostate cancer treatment belong to a female patient?

The new system will allow Medicare to monitor large numbers of claims using computer analysis to spot tell-tale patterns of potential problems: Does a storefront wheelchair retailer in Los Angeles have lots of customers in San Francisco, more than 350 miles away?

Looking at such variables as the beneficiary, the provider, the type of service and other patterns, the system will assign risk scores to claims. It will then issue an alert when something looks like it might be off. Medicare will be able to investigate the claim before payment is sent out.

That should help address one of the major frustrations for health care fraud investigators. Because Congress directs Medicare to pay claims promptly — usually within 14 to 30 days — fraudsters can make a quick bundle and drop off the radar at the first sign that law enforcement is on to them. By the time the chase is on, the lawbreakers have usually absconded with the loot.

"We're getting ahead of the game here," said Medicare Administrator Don Berwick.

Officials said Medicare has awarded an initial $77 million contract for the new system to defense giant Northrup Grumman and a group of companies. "We will be able to translate their experience from the private sector into Medicare," Budetti said. Other major companies participating in the contract include National Government Services and a Verizon subsidiary named Federal Network Systems.

Time will tell if the dramatic benefits officials are promising actually do materialize. Government technology acquisitions can be notoriously buggy. Still, Medicare needs technological tools such as the new system to confront its fraud problem.

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