Charles Rowley's Blog

Because that was where the money was!

When searching for fraud in government spending programs, public choice reminds us to keep Willie Sutton firmly in mind. Look for where the loot is located and you will find the fraudsters.

Which brings me to Medicare and Medicaid, two of the nation’s largest sources of potential loot.  More specifically, focus attention on the intersection between the two programs and, voila mes amis, we need look no further. The intersection between Medicare and Medicaid is a Willie Sutton paradise!

This intersection comprises the people who receive both Medicare – the program for those 65 and older or disabled – and Medicaid – the program for the poor – 9.7 million ‘dual eligibles’ as they are called. The statistics for this group are stark and revealing.  They comprise 16 per cent of Medicare enrollees, but 27 per cent of the program’s total spending.  They comprise 15 per cent of Medicaid’s enrollees, but 39 per cent of the program’s total spending.  To put the Willie Sutton opportunity into perspective understand that in 2009, total Medicare spending was $502 billion, total Medicaid spending was $374 billion for a grand total of $876 billion; of which the dual eligibles received $300 billion.

Chronic diseases and an exceptionally heavy use of nursing homes in this older population account for much of its outsize cost.  But this is far from the whole story.  A close examination of how the bills are divided up between the two programs for these joint users tells us a great deal how the fraudsters operate across the intersection, lifting their loot while exacerbating waste and mismanagement across  this  poorly supervised interface.

The two programs are separately funded. The federal government foots the entire bill for Medicare but splits the funding with the states for Medicaid, picking up on average 57 per cent of the total bill itself.  The programs were never designed to work together, and provide tempting opportunities for thieves and fraudsters to thrive along their tangled borders.

The first sign that something might be amiss is the differential characteristics  of Medicare dual eligibles and Medicare  only eligibles. Let me count the ways:

Cognitive or mental impairment: dual eligibles 55 per cent; sole eligibles 6 per cent.

In fair or poor health: dual eligibles 54 per cent; sole eligibles 24 per cent.

Nonelderly disabled: dual eligibles 41 per cent; sole eligibles 11 per cent.

Long-term care resident: dual eligibles 15 per cent; sole eligibles 2 per cent.

So we now understand that dual eligibles are an unhealthy segment of the elderly population, characterized by high rates of diabetes, cardiovascular disease, Alzheimer’s and depression.  Three in five dual eligibles have multiple ailments and more than two in five are mentally impaired.  What a feasting ground for the Willie Sutton’s of this world!

It turns out, unsurprisingly, that the dual eligibles are exceptionally heavy users of health care services.  Again, let me count the ways:

One or more visits per annum to the E.R.:  dual eligibles 44 per cent; sole eligibles 26 per cent.

One or more in-patient stays per annum: dual eligibles 29 per cent; sole eligibles 19 per cent.

One or more home-health visits per annum: dual eligibles 13 per cent; sole eligibles 7 per cent.

Average annual Medicare spending: dual eligibles $14,000; sole eligibles $6,000.

So evidently dual eligibles are where the money is.

To illustrate how the fraudsters operate let us focus attention on nursing homes.  When a Medicare patient transfers from a hospital to a nursing home, Medicare reimburses the nursing home at an average rate of $422 a day for 100 days. After that, if the patient is a dual eligible, the nursing home is paid by Medicaid at an average rate of only $172 a day.  The nursing home now has a clear incentive to return the patient to hospital for spurious tests and care. Once the patient returns to the nursing home, the Medicare payments again kick in for another 100 days. No wonder that many dual eligibles are in regular transit between hospitals and nursing homes!  Hospitals, nursing homes and states all benefit from shuffling patients in and out of hospital at 100 day intervals.

So if the Department of Health and Social Security truly desires to beat the bushes for program fraud, that is the intersection where it should focus its best weapons. Do not hold your breath, however, that such will be the case.  For where the Willie Suttons of this world thrive, so the interest groups that live well off their loot also thrive.  Dirty dollar bills wash there way through the U.S. Congress, the White House and the state capitols to make sure that the dual eligibles market grows without limit and that taxpayers continue to be ripped off by the unscrupulous Willie Suttons who prey on public resources dedicated, in principle, to the support of those who are mentally, physically  and materially impoverished.

Source: Janet Adamy, ‘Overlapping Health Plans Are Double Trouble for Taxpayers’, The Wall Street Journal, June 27, 2011

Tags: DHSS should know where to look, DHSS will never look in those crannies, dual eligibles attract the thieves, Medicare/Medicaid frau thrives at the intersection

This entry was posted on June 27, 2011 at 8:22 pm and is filed under budget deficits, economics and public choice, health care legislation, political corruption, relevance of economic knowledge, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.