HHS says Medicare lost $20B to fraud, waste in 1997

Medicare lost about $20 billion last year to fraud, waste and simple error, according to an HHS audit released today at a hearing sponsored by three House subcommittees.

The estimated 11 cents squandered on every dollar spent in 1997 by the health care program for the elderly is down from 14 cents in 1996.

"Unnecessary or improper beneficiary payments continue to plague the Medicare program," HHS Inspector General June Gibbs Brown told the House subcommittees.

Nancy-Ann Min DeParle, head of the Health Care Financing Administration, which runs Medicare, said she was optimistic about being able to improve Medicare's finances.

"Our aggressive corrective actions are beginning to have an impact," DeParle said, adding that because of the audits, "we know what our problems are and we can go about attacking them."

But members of Congress believe Medicare's losses remain far too high. Rep. Joe Barton, R-Texas, said HCFA should try to reduce fraud, abuse and errors to one or two cents per dollar. HHS is aiming for 10 cents per dollar by 2002, which is not ambitious enough, Barton said.

The audit of Medicare's 1997 spending was conducted by HHS' inspector general, who reviewed a representative sample of bills.

Of the $177.4 billion that Medicare paid to doctors, hospitals, laboratories and other healthcare providers in 1997, auditors estimate about $20.3 billion was wasted. That compares with $23.2 billion in overpayments reported for 1996.

But because the auditor's conclusions are statistical estimates, improper payments for 1997 might have been as high as $28.4 billion or as low as $12.1 billion, the report said.

The audit covered only payments that hospitals and other providers received directly from Medicare, not those paid to health maintenance organizations, and did not distinguish whether overpayments were due to criminal fraud, more subtle gaming of the Medicare system, or honest errors in billing.

Doctors received 29 percent of improper payments. Hospital inpatient and outpatient services accounted for about 30 percent, and home healthcare agencies were responsible for 13 percent.

Congress and the Clinton administration have taken aggressive action against Medicare waste in recent years, dedicating $104 million in 1997 for new investigations by the HHS and Justice departments.

The extra money helped to increase the number of civil healthcare fraud cases pursued by the government last year by more than 60 percent. Nearly $1 billion was recovered from improper payments, the largest amount ever.

And compared with 1996, about twice as many individuals and companies were barred for misconduct from future participation in federal health programs.