According to the latest economic outlook report from the Congressional Budget Office, the 2018 federal deficit will total $804 billion – $139 billion more than the $665 billion shortfall recorded in 2017 – and is expected to grow substantially over the next several years.
What’s causing such rapid increases to the deficit? Mandatory federal spending continues to rise predominantly due to growth in Social Security and Medicare outlays. These increases are driven by the combination of Americans living longer and continuously rising healthcare costs.
In fact, over the 2019–2028 period, healthcare costs per beneficiary are projected to grow rapidly, contributing to increased spending by Medicare in particular. In the report, the CBO shares that Medicare outlays are projected to increase by an average of 7% per year, driven by the rising per-beneficiary costs of medical care. In addition, the number of people age 65 or older is now more than twice what it was 50 years ago. Over the next decade, as members of the baby-boom generation age and life expectancy continues to increase, that number is expected to rise by one-third, boosting the number of people receiving Social Security and Medicare benefits.
While Medicare spending is predicted to rise exponentially, the 2017 Medicare Trustees report predicts that without changes to program spending, the Medicare inpatient Trust Fund (Part A) will soon begin paying out more in benefits than it collects in payroll taxes from American paychecks. As a result, the Medicare Trust Fund will only be able to manage this gap until 2029, after that, Medicare Part A must scale back coverage to just 88% of what’s covered today.
These combined financial pressures make it more important than ever for lawmakers to ensure Medicare is spending every tax dollar as efficiently and effectively as possible.
Unfortunately, rampant improper Medicare billing is also threatening the financial future of the program – causing more than $200 billion in program dollars to be wasted over the past five years alone. Providers frequently misbill the program, submitting claims for services that are not medically necessary, that lack the proper documentation or that are coded improperly according to Medicare policy. These very preventable billing errors remove approximately $40 billion in much-needed Medicare funding from the Trust Funds each year, at a time when every tax dollar matters.
Preventing these improperly spent funds from leaving the program in the first place would go a long way to improving Medicare’s bottom line. To do this, Congress must authorize a permanent, nationwide Medicare Recovery Audit Contractor prepayment review program.
In 2009, Congress mandated the creation of a program that has proven to help significantly reduce annual Medicare spending. The RAC program reviews Medicare claims, identifies billing errors and returns improperly spent funds back to the program. To date, recovery auditors have successfully returned more than $10 billion back to the Medicare Trust Fund and extended the financial solvency of the Medicare program by two full years, all while reviewing a very small fraction of claims on a post-payment basis.
While post-payment reviews are indeed necessary, it’s vital that CMS add a new layer of financial protection to the program. By reviewing Medicare claims for billing accuracy before they are paid, the program could prevent vital funding from leaving the program in error in the first place.
In fact, RAC prepayment claim reviews have already been tested and found to be very successful. In FY2012, CMS launched a Medicare Prepayment Review Demonstration Project to allow RACs to review certain error prone claims within 11 states before they were paid. The short program was deemed greatly successful, with RACs preventing more than $192 million in improper payments from leaving the program in error. Prepay claim reviews were completed accurately and quickly, within just 30 days, significantly reducing the burden providers say they endure via “pay and chase” recovery efforts.
Interestingly, the Government Accountability Office reviewed the results of the Medicare RAC Prepayment Review Demonstration and over the past three years has consistently recommended, both in reports and before Congress that CMS implement a permanent RAC prepayment review program within Medicare.
The GAO stated, “Although CMS considered the Prepayment Review Demonstration a success, and having the RAs conduct prepayment reviews would align with CMS’s strategy to pay claims properly the first time, the agency has not requested legislative authority to allow the RAs to do so. Accordingly, CMS may be missing an opportunity to better protect Medicare funds and agency resources.”
The current RAC contracts already provide for a Medicare prepayment review program. Those same contracts hold recovery auditors to very strict quality and accuracy measures, while also providing incentives to ensure accountability and thereby reduce provider burden. All that is needed is for Congress to give CMS the authority to implement RAC prepayment reviews and stop improper payments.
Given the significant financial pressures facing our federal government and with the health and economic security of nearly 48 million American seniors on the line, Congress must act now to authorize CMS to review Medicare claims before they are paid and finally put an end to the rampant wasteful spending within the program.
Kristin Walter is the spokesperson for the Council for Medicare Integrity, a 501(c)(6) non-profit organization with a mission to educate policymakers and consumers about the importance of healthcare integrity programs that improve the financial future of Medicare.