5 steps U.S. states can take to combat Medicaid fraud

By Clint Fuhrman
09:39 AM
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As states across the country work to expand Medicaid and build health insurance exchanges, one challenge they will surely face is fraud.

The numbers surrounding fraud in the federal government are almost too large to measure, but consider this one: the amount of fraud uncovered and returned by a single U.S. Department of Health and Human Services (HHS) program (the Federal Health Care Fraud and Abuse Control Program) averages more than $1 billion dollars a year.

[Commentary: Ryan VP nod reopens spigot of health lies, half-truths.]

To put that in perspective, the total annual profit for Facebook — which just passed 800 million users — is about the same. With more people entering the health care market and more money in the system, the opportunity for fraud will increase dramatically. Leaders must take steps today to make sure that people aren’t receiving benefits in multiple states, gaming the system or exploiting information gaps to their own advantage.

In the past, program integrity has been used as a political football. One team argues that benefits programs should be open and easily accessible to the citizen, while the other argues for greater efforts to prove eligibility and reduce fraud. Today, technology has resolved this contradiction, providing organizations with the tools they need to both improve the user experience and protect against abuse. Just as law enforcement agents can run background checks, technology is now available to test whether beneficiaries and providers are who they say they are, answering questions such as:

  • Where has this individual been covered before?
  • What might have occurred in other states of residence?
  • What are the risk factors?

Big data and the cloud enable these insights, but the key to this technology isn’t actually technology at all: it’s information. The issue with the Affordable Care Act and the Health Information Technology for Economic and Clinical Health Act (HITECH) is that information within their constituent parts is often siloed.

We all know what siloed information means for the citizen because we are citizens ourselves. You fill out a form with your insurance provider. And then a form at the doctor’s office. And then a form with your specialist. And another one for your treatment. Each form asks basically the same questions in the same guise, and each one is sending the same message: we don’t share information. Could you imagine this in other industries?

You walk into a restaurant and the waiter takes your order. Then the runner comes out and asks you what you ordered so he can fetch it from the kitchen. Then an attendant comes by and asks you what you ate so she can draw up the check. A meal like that would be a maddening experience, but it would also be prone to fraud, because nobody would know if you were telling the truth.

Health care today is similarly siloed. It is still too easy for fraudulent providers to move between states, and this problem will become even more pronounced as the health care law is implemented. To combat this, states should take the following steps:

  1. Think Comprehensively: The first impulse in tackling a complicated law like the ACA is to break it up into more manageable parts, dividing it among various stakeholders and tasking them with specific actions. States must first think comprehensively about how the various pieces of the system work together, however, so they don’t duplicate efforts.
  2. Avoid Silos: Security concerns and management divisions encourage organizations to put information in discrete silos. Unfortunately, the end result is often a lack of coordination and visibility, leading to greater instances of fraud. It’s critical that states make concerted efforts at this early stage to ensure that information standards are propagated across their health care systems, so that simple things such as file-format and data fields are machine-readable. Health insurance exchanges, for example, should not be set up independently but, instead, linked to Medicaid information systems.
  3. Reduce Complication: Have you ever gotten into an argument playing a board game and had to consult the back of the box? More complexity and more rules mean more opportunities to cheat. States should think from the user perspective and utilize technology to streamline the eligibility process while maintaining program integrity.
  4. Stop Pay-and-Chase: Hunting down fraudulent claims after they’ve been disbursed takes additional time and money. States should implement active claiming systems that analyze and model risk before payments go out the door, stopping the pay-and-chase model in its tracks.
  5. Make Analytics Count: Both the ACA and HITECH multiply the amount of data that states must manage. Creating systems that can handle these big data environments is only the first step. With the right data quality standards, states can leverage analytics to reduce costs across the system. They’ll be able to see where funds are being spent and better match treatments to real outcomes.

When the government becomes actively engaged in fighting fraud, the effects can be astounding. After widespread fraud was suspected in Medicare claims for durable medical equipment (DME) in Florida, for instance, a partnership of federal and state agencies launched the South Florida Strike Force in 2007. Not only did the program uncover nearly $200 million in fraud within its first two years, it drastically reduced the amount of claims submitted across the state – from $2.76 billion down to $1 billion in 12 months alone.

[Related: Public health's 5 big data hurdles.]

How did they do it? By sharing information across traditional silos and reducing program vulnerabilities. To a large extent, the ACA offers states a clean slate to design a system without these vulnerabilities. Leveraging the right technologies and sharing information allows states to turn what was a controversial law into a meaningful and effective health care system.

Clint Fuhrman is the director of government health care programs for LexisNexis Risk Solutions.