Members of Congress will soon be faced with very difficult decisions as they work to finalize the upcoming budget cap package. Some lawmakers have consistently floated the idea of leveraging entitlement reform – specifically broad cuts to Medicare – to address budget concerns. Cuts to the Medicare program will absolutely negatively impact beneficiaries, who will be forced to shoulder higher out-of-pocket medical costs.

It’s important for Congress to know that there’s another option that would strengthen the financial future of Medicare without negatively impacting beneficiaries or providers – improving Medicare billing oversight.

Medicare wastes more taxpayer dollars than any other program government-wide, with nearly $40 billion lost annually to very preventable billing errors. Keep in mind, this is not Medicare fraud, that’s accounted for separately.

Tens of billions of Medicare dollars are wasted each year due to rampant billing errors – coding errors, double billing, up-coding – issues that could be easily caught and corrected with more effective billing oversight.

In fact, over the past five years alone, avoidable billing errors have drained more than $200 billion from the Medicare Trust Funds. Preventing this wasteful Medicare spending is the low hanging fruit that can add billions back into the Medicare budget each year.

Recently, the Centers for Medicare & Medicaid Services Administrator Seema Verma shared that Medicare only reviews three tenths of one percent of all claims for billing accuracy. She went on to recommend that the agency must learn from private sector payers how to be more fiscally efficient.

Private insurance companies review nearly 100% of submitted healthcare claims on both a prepayment and post-payment basis to confirm billing accuracy, adherence to contract terms and medical necessity. In addition, virtually no type of claim is restricted from review, nor are there any artificial limitations on the volume of claims that can be reviewed.

Comparatively, the Medicare Fee for Service Program currently reviews just 0.5% of a small subset of particular claim types for billing accuracy only after claims are paid. This means that 99.5% of Medicare claims are currently paid without a review for billing accuracy. To better safeguard Medicare resources, CMS must ask Congress to boost billing oversight by authorizing a new level of resource protection – Recovery Audit Contractor (RAC) prepayment claim reviews.

Like private insurance companies, CMS can also leverage pre-payment audits to catch and correct billing mistakes before claims are paid. In FY2012, CMS launched a Prepayment Review Demonstration project to allow RACs to review certain error prone Medicare claims for billing accuracy before they were paid. As a result of this short pilot program RACs prevented more than $192 million in improper payments from leaving the Medicare Trust Funds in error. The program was so successful that the GAO recommended that “CMS should actively seek legislative authority to have RAs conduct prepayment claim reviews.”

Adding pre-payment audits would not only prevent the loss of billions of Medicare dollars each year, but will also reduce provider perceived audit burden stemming from the exclusive use of “pay and chase” methods of billing oversight.

Interestingly, the current RAC contracts already include language detailing the implementation of a prepayment review program for the Medicare Fee-for-Service program – that can begin upon activation by Congress. No contract negotiations would be needed to get a strong program up and running to better protect Medicare resources.

To be clear, Medicare prepayment reviews have nothing to do with prior authorization. The most fundamental difference is that prepayment reviews take place long after service is provided to the patient, so they never interfere with a patient’s access to care.  

Prepayment reviews are completed within 30 days of a provider submitting their claim and documentation to Medicare for reimbursement – ensuring that billing errors are corrected and providers are paid quickly and accurately the very first time.

Expanding the RAC program to begin reviewing claims for billing accuracy before they are paid would bring Medicare in line with private sector best practices, as Administrator Verma has championed. It would also allow Congress to achieve its goal of significantly reducing ongoing program spending without impacting provider reimbursement or causing future beneficiaries to shoulder the increased financial burden that will come from reduced Medicare coverage during their senior years.

So, while there are a lot of very tough financial decisions looming in order to address the federal budget, we ask Congress to make a simple one – please step forward and authorize a Medicare RAC prepayment claim review program. This one solution will infuse billions back into the Medicare budget and greatly reduce the need for broad cuts that will negatively impact the nearly 60 million Americans who depend on the program each day.

Kristin Walter is a spokeswoman for the The Council for Medicare Integrity.