Medicare Advantage, Drug Plans Face Fraud Scrutiny in Budget

By Aliza Marcus
Bloomberg News
May 7, 2009

May 7 (Bloomberg) -- Health-insurance plans for the elderly will face stepped-up scrutiny for potential fraud under a budget proposal from President Barack Obama.

The administration's budget for the Health and Human Services Department calls for spending $1.72 billion over five years "to fight health-care fraud and reduce improper payments." The new spending will save $2.67 billion, according to the budget proposal submitted to Congress today.

Obama pledged during his campaign to squeeze savings out of Medicare Advantage, the government-subsidized health plan sold by UnitedHealth Group Inc., the largest U.S. health-insurance company, and smaller providers. In his February budget outline, Obama said he wanted the U.S. to respond "more rapidly" to fraud, with savings used to help extend health coverage to America's 46 million uninsured. The Senate already is looking at ways to prevent waste and abuse.

"We need to make sure that every dollar spent by a public or private health plan goes to quality health care," Senator Herb Kohl, a Wisconsin Democrat and chairman of the Senate Aging Committee, said at a hearing yesterday on fraud in government health programs. "Health-care fraud robs patients and providers of the previous resources they need."

The budget calls for spending $311 million in the first year of the "integrity" program in 2010. The money also will be spent to scrutinize Medicaid, the state-federal program for the poor.

Medicare Fees

The proposal for fiscal year 2010, which starts Oct. 1, also assumes that Congress will halt the scheduled cut in payments from Medicare to physicians. Obama proposed setting aside $11.7 billion to maintain doctors' fees at their current level in 2010.

Those fees from the government are supposed be cut almost 20 percent in 2010. Reductions are required under a formula Congress approved a decade ago to hold down spending by Medicare, which will spend about $440 billion this year caring for 44 million beneficiaries.

The formula has been set aside repeatedly in recent years, leaving physicians facing ever-larger cuts.

Obama proposed in a preliminary budget in February to change how Medicare pays hospitals and doctors.

"The current system is unsustainable in terms of costs," Kathleen Sebelius, the Health and Human Services secretary, told Congress yesterday. "We're not paying for quality now. We need to begin paying for outcomes."

Obama also has said he would save $175 billion over 10 years by changing how insurers bid for contracts to sell Medicare Advantage plans, which beneficiaries can buy in place of using the traditional Medicare program.

The plans, which the government estimates are paid an average 14 percent more than Medicare would spend to provide coverage itself, received about $100 billion last year for 11 million members, according to Medicare.

Obama is still seeking a $635 billion "down payment" on expanding health care.

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