Making bad government a little better

For proponents of a more responsible government, this week offered both good and bad news. The good news: on Wednesday, a Detroit Free Press article noted that since 2007 “Medicare fraud task forces operating in Detroit and eight U.S. cities with high rates of health care fraud have charged 1,300 defendants with more than $4 billion in false claims.”

From the article:

Federal officials said today’s arrests should serve as a warning that the strike forces are watching the health care industry very closely.

“We want providers to know that we are scrutinizing billing records to root out fraud,” U.S. Attorney Barbara McQuade said in announcing today’s arrests.

Unfortunately, the bad news: in addition to Erika’s post on Monday regarding $14 billion in fraud by unemployment benefit recipients, on Tuesday the Washington Post reported that companies contracted to prevent Medicare fraud have a high rate of conflicts of interest:

Firms that are paid tens of millions of dollars to root out Medicare fraud are bidding on contracts to investigate companies they are doing business with — sometimes their own parent companies, according to a government report released Tuesday.

Two-thirds of the companies that bid on contracts during a nearly year-and-a-half time period beginning in October of 2010 had financial ties to claims processors — and in some cases also processed Medicare claims themselves, according to the study by the U.S. Department of Health and Human Services’ inspector-general. The report blames what it calls a flawed bidding system and an inadequate conflict-of-interest policy.

The study looked into bids from about 100 potential contractors and subcontractors and found nearly 2,000 relationships that posed potential conflicts. For example, one company submitted a bid to investigate Medicare fraud even though its parent company provided two types of Medicare coverage in all 50 states.

When it comes to balancing the federal budget, many conservatives focus on the need to eliminate fraud/waste/abuse/duplication, worth a minimum of tens of billions of dollars annually and potentially as much as 20% of the federal government’s spending per year. Yet the challenge in fixing this problem is not in clawing back the money afterwards, or spending money up front for preventive measures that save far more than is spent. The actual problem is often simply finding where the inefficiencies are and changing the process itself, both significant challenges in a federal government as large and complex as ours.

As a conservative, I support a simple solution: eliminate the problem by eliminating or shrinking departments. This would have the bonus of shrinking the size and scope of the federal government and saving a lot of tax dollars. However, since this is not going to happen in today’s political climate, I’ve found the next best thing: two bills introduced by Senator Tom Carper (D-DE) aimed at preventing Medicare and Medicaid fraud and preventing improper payments. (Carper was also one of three Democratic senators whose efforts led to the aforementioned study on conflicts of interest within companies bidding for anti-fraud contracts within Medicare and Medicaid.)

The Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayer Dollars Act (FAST Act) was introduced in June 2011, and has a number of co-sponsors, including original co-sponsorship by Senator Tom Coburn (R-OK). This legislation requires, among other things, greater inter-agency coordination, pre-payment review, and annual reports on vulnerabilities to fraud. With Medicare possessing an estimated $60 billion in fraud, and Medicare and Medicaid combined having $70 billion in improper payments per year, there is clearly much improvement needed to keep taxpayer dollars spent more honestly and wisely.

Carper also introduced the Improper Payments Elimination and Recovery Improvement Act of 2011 approximately a year ago. This legislation is a bit less complicated than the FAST Act, and focuses primarily on the Office of Management and Budget coordinating different agencies more efficiently, establishing a Do Not Pay list, and aim to recover improper payments from at least 10 agencies.

Improper payments, which are typically done with no ill intent and through simple error, are a relatively simple way to prevent future inefficiencies. According to a Senate staffer I met with to discuss how to diminish fraud, waste, abuse, and duplicity, a large part of the solution is simply instituting standardized oversight throughout each federal agency and implementing an effective Do Not Pay list. While the staffer said only 50% of improperly paid funds would be likely recoverable, this would prevent over $60 billion annually in spending (improper payments totaled $115 billion in 2011, or about three percent of spending, but that number does not include a number of federal agencies, including the Defense Department, so I suspect the actual amount improperly spent is much higher than $115 billion). Not a lot compared to our budget, but certainly not a drop in the proverbial bucket.

Inefficiently spent dollars are not going to prevent a fiscal collapse, especially when legislation mostly consists of clawing back money after the fact or using technocratic methods for prevention. Again, the most effective way to prevent improper payments, fraud, duplication, etc. is to eliminate the problem, in this case the relevant department or agency. In absence of this, Carper’s efforts should be commended, and in fact Carper notes that the FAST Act has bipartisan support among activist groups, including AARP, Citizens Against Government Waste, Center for American Progress, the National Taxpayers Union, and Taxpayers for Common Sense.

Unfortunately, it appears neither bill has moved since their introduction, so even these modest measures to bring down the deficit are unlikely to happen without a great deal of support from grassroots Americans. They both have House companion bills, and at least one has had a hearing in the House, but with fewer than 15 legislative work days until the August recess, and scant few between the end of the recess and the election, the odds of passage in the 112^th Congress aren’t good.

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