Health Care Reform: Reducing Waste and Improving Efficiency in Today's Medicaid

As the nation’s largest health insurance program, Medicaid plays a huge role in the current health care reform debate. The program serves over 50 million people and has total outlays equaling over $280 billioni. Medicaid is much more than simply a program for the poor. It may also serve those who qualify for Supplemental Security Income (the elderly, blind and disabled), working parents, the medically needy, and mandatory groups with incomes above the poverty line. The program operates jointly within the federal government and the states, but the states have the main responsibility for funding the program and making sure that it is operating smoothly. Medicaid typically operates as a vendor payment program where states directly pay health care providers on a fee-for-service basis.

States may also pay for services through prepayment arrangements such as health maintenance organizationsii. To improve quality, most states use a managed care systemiii. One of the main questions in this debate is what to do with public programs like Medicaid and Medicare. If the private insurance market truly reforms, then will there be a need for these programs? The House Leadership Bill and the Senate Leadership Bill, which are the two main bills that are being considered, both seem to think that there will be. Both of these bills advocate for the expansion of Medicaid. Proponents of expansion generally state that Medicaid would be a simple way to extend comprehensive coverage. On the other hand, opponents are concerned about denying certain populations access to private insurance. Some states worry about their ability to pay for the program in the long runiv. But it seems like at least in this round of debates, expansion has won and now the issue is how that should happen.

Two central characteristics of reforming the Medicaid system are reducing waste, fraud and abuse within the system, as well as controlling costs while maintaining if not improving quality. Spiraling costs are one main reason for reform in the first place, and both of those characteristics tie into the high cost that our country pays for the program. Measures that will reduce waste, fraud and abuse, as well as create other ways to lower costs will positively impact the Medicaid program, as well as the health care system overall. If quality can be improved in addition, the United States will have a much stronger and more sustainable program than the costly, inefficient one that dominates the system today.

Reducing Waste, Fraud, and Abuse

The reduction of waste, fraud, and abuse in the Medicaid program is an important component of the health care reform debate. Because of our highly fragmented health care system, there are a huge number of providers and suppliers who operate independently, and it is imperative that the government have some sort of a method to make sure that all the business being done is legal, efficient and effective. There are a few ways that the government currently does this. Program integrity in general is the responsibility of the individual states, and Medicaid Fraud and Abuse Control Units are under state authority. Also, the Medicaid Integrity Program (MIP) was established by the Deficit Reduction Act of 2005v. This program was the first comprehensive federal strategy to prevent and reduce fraud, waste and abusevi. The MIP increases federal resources, as well as requires the Centers for Medicare and Medicaid Services (CMS) to devise a national strategy to combat Medicaid fraud, waste and abusevii. The CMS has two main responsibilities under the MIP. The first is to hire contractors to review provider activities, audit claims, identify overpayments, and educate providers and others on program integrity issues. The other is to provide effective support and assistance to states while they attempt to decrease provider fraud and abuseviii. Appropriations for the program are now at $75 million per yearix. Both the House Leadership Bill and the Senate Leadership Bill deal with this issue, and they support a continued effort to eliminate waste, fraud and abuse from Medicaid.

The House Leadership Bill discusses this issue in great detail. The bill requires providers and suppliers to adopt compliance programs as a condition for participating in Medicaid. It requires integrity contractors that carry out audits and payment reviews to conduct effectiveness evaluations on a regular basis and to provide annual reports. The bill also increases funding for the Health Care Fraud and Abuse Control Fund by $100 million, creates a comprehensive Medicare and Medicaid Provider/Supplier Data Bank to conduct oversight of suspicious activity, and creates a national pre-enrollment screening program which would be used to determine whether potential providers or suppliers have been excluded from other federal or state programs or whether they have a revoked license in any state. Other measures include enhanced oversight periods or suspended enrollment in areas deemed to be at high risk of fraudulent activity, new penalties for submitting false data on applications, false claims for payment, or for hindering audits or investigationsx.

The Senate Leadership Bill strives for the same goals as the House Leadership Bill, so many of the proposals are very similar. The Bill requires additional data reporting to Medicaid Management Information Systems to detect waste, fraud and abuse, as well as establishing procedures for screening, oversight and reporting requirements for providers and suppliers that participate in any public programs. It permits states to impose a moratorium on enrollment of providers or suppliers identified to be at a high risk for fraud, waste and abuse. It also increases funding for health care fraud and abuse control programs by $10 million per year and requires states to implement fraud, waste and abuse programs by 2011xi.

Controlling Costs and Improving Quality

One of the most obvious problems of the United States health care system as it functions today is the exponentially growing costs. Cutting these costs is a huge part of reforming the system. But if costs are drastically cut following reform, quality is another sector that must be looked at. If cutting certain costs is directly related to a decrease in quality, perhaps lower costs would not be a viable solution in that situation. Currently, there are a few measures that try to cut costs and meanwhile improve quality in the system. States are now allowed to perform health care reform demonstrations in order to test methods of covering uninsured populations and to test new delivery systems without incurring new costsxii. In regards to quality, the Centers for Medicare and Medicaid Services recently developed a Medicaid/CHIP Quality Strategy. Included in this strategy are evidenced-based care and quality measurements, quality-based payments, health information technology, partnerships, information dissemination, technical assistance, and sharing of best practices. This strategy involves specific ways that the CMS will assist states to improve the quality of their servicesxiii. Although it is quite obvious that these areas need much improvement. Both the House Leadership Bill and the Senate Leadership Bill discuss the topic of cost control and improved quality extensively.