|OMIG and the Urban Legend of 10% Medicaid Fraud|
|Saturday, 27 February 2010 06:37|
I don’t know about you, but I feel guilty every time I go to the doctor… or whenever I fill a prescription or get a root canal. Since everyone knows that 10% of all health care expenditures are out-and-out fraud while another 20-30% are waste and abuse, I’m pretty sure that I must be participating in some type of elaborate scheme cooked up by my physician… or the Price Chopper pharmacy …to defraud the federal government. It just makes sense. If 30-40% of all health care spending is crooked or wasteful, I’ve got to be part of it. And, so must you!
How do we know the system is this corrupt? The New York Times, of course.
Back in 2005, the Times reported that “New York Medicaid Fraud May Reach into Billions”. The article quoted James Mehmet, a former “chief state investigator of Medicaid fraud and abuse in New York City”, who said that he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were “siphoned off” by unnecessary spending that might not be criminal. “So we’re talking about 40 percent of all claims are questionable -- an amount that would approach $18 billion a year,” Mehmet said.
That series in the Times has had some significant consequences for healthcare providers – including mental health, substance abuse and MRDD services – in New York State. Medicaid Inspector General James G. Sheeham – the OMIG – credits his office’s very existence to the furor created by the Times’ articles. As NYNP readers might remember, many service providers are now trembling in terror before the OMIG who has a budgetary mandate to recoup some $1.2 billion in State Medicaid payments next fiscal year – as much as $3.0-$4.6 billion in total funds -- through fraud and abuse audits, third-party collections or otherwise.
But, where do these estimates come from? Like George W. Bush and the Weapons of Mass Destruction, Mehmet was not alone in his assessment. Watchdogs and hyperventilating politicians have been tossing the “10% fraud” figure around since as far back as 1992 when the U.S. General Accounting Office (GAO) cited it with virtually no documentation whatsoever. “Though no one knows for sure, health industry officials estimate that fraud and abuse contribute some 10 percent to $700-plus billion in U.S. health care spending,” said the GAO report.
Who are these health industry officials and how did they arrive at these figures? Surprisingly, it now turns out, Jim Sheehan – the OMIG himself – was one of them.
At a recent hearing before the NYS Senate Committee on Investigations and Government Operations, Sheehan was asked about the ubiquitous 10% fraud estimate.
“There is an urban legend quality to some of these percentages,” he acknowledged. “I was there at the beginning of one of them and I take my share of responsibility for it.”
Sheehan, a former Board Member of the National Health Care Anti-Fraud Association (NHCAA), went on to explain that back in the mid-1980s the group was looking for a number to use in communicating the size of the health care fraud problem. “So, we went round the table,” he says. “The consensus was 6%. It got picked up by the media and by the GAO.”
The OMIG recognizes that this wasn’t a particularly well constructed survey. “We all have biases,” he explains. “These were law enforcement people and special investigations people from insurance companies. We call it a consensus view but a consensus not of the world as a whole but of the people who specialized in that area.”
Sheehan offered a similar critique for Mehmet’s 10% fraud estimate in the Times article. “He worked for the predecessor of OMIG and was working in New York City on cases that involved significant fraud,” says Sheehan. “We would say that he didn’t have a statistically random sample of the population to draw from. He was looking at the bottom ‘x’ percent.”
In fact, the NHCAA itself has now backed down from its original “consensus” position and “estimates conservatively that 3% of all health care spending… is lost to health care fraud.”
Conservative or not, this estimate by the leading health care fraud control association is less than one-third the 10% fraud figure which continues to dominate headlines …as well as highly political policy making processes in Washington, Albany and state houses across the nation.
The implications of this misinformation are significant and dangerous. Just look at OMIG’s proposed budgetary target for Medicaid recoupment in the coming fiscal year. The $1.2 billion target as measured in State funds is likely to equal between $3.0 billion and $4.6 billion in total recoupments and collections on an all-funds basis -- frighteningly close at the high end to 10% of the total projected Medicaid expenditures of $51.5 billion for the year.
No one denies that Medicaid fraud, abuse and waste are very serious and very large challenges which need to be addressed. However, overestimating the size of this problem -- imagining fraud, waste and abuse in situations where none exists -- is just as dangerous as underestimating it. Many New York State providers would argue that the OMIG is already exaggerating the meaning and significance of individual audit findings to maximize recoupments and collections – in line with ballooning budget targets.
In this case, the consensus estimate among provider agency executives is that the policy will seriously damage the nonprofit service delivery network and, therefore, clients who need those services.