How Ill Informed Are the Rowdy Town Hallers?

Do the folks who've created much sound and fury at town-hall meetings in recent weeks have a clue what they are talking about on health-care reform?Apparently not.

Consider the fellow who popped off at a town-hall meeting hosted by U.S. Sen. Ben Cardin (D-MD). The questioner was opposed to health-care reform because of a possible public option. With all of the fraud we have now in Medicare, he said, how much fraud would we have with a larger public program?

The questioner seemed to be a supporter of private insurance. But it apparently never occurred to him that a large portion of Medicare fraud is committed by private businesses, including insurance companies.

First of all, the Obama administration has started a major crackdown on Medicare fraud as part of its plans to reform health care. And much of that fraud is driven by the private sector. Consider this report from the Miami Herald:

On Friday, FBI agents arrested eight Miami-Dade residents on charges of bilking Medicare for $22 million by charging for nurses to treat mostly homebound diabetic patients--many of whom didn't have the disease or didn't receive the services.

FBI and HHS agents raided the suspects' two Miami-Dade businesses, ABC Home Health Care and Florida Home Health Care Providers, while prosecutors froze their bank accounts.

The prosecutions follow Medicare's suspension of billing privileges for 10 Miami-Dade home healthcare agencies that charged more than $100 million for suspicious services to treat homebound diabetic patients -- including false claims for nurses injecting their insulin shots twice a day.

Now consider the record of private insurers when it comes to Medicare fraud. Two employees at a Blue Cross/Blue Shield subsidiary in South Carolina recently received prison sentences for their roles in a fraud scheme.

The Blue Cross Blue Shield Association (BCBSA) has a long history of fighting health-care reform--and its affiliates have a long history of health-care fraud.

Consider this 1999 Government Accounting Office (GAO) report titled "Improprieties by Contractors Compromised Medicare Program Integrity." And who are those Medicare contractors? BCBSA affiliates, including Blue Cross and Blue Shield of Alabama, are among them.

What did the report find? Here is part of the summary:

Since 1993, criminal and/or civil actions have been taken against at least six Medicare contractors resulting from their performance under Medicare contracts. The alleged contractor activities addressed in those actions occurred during the calendar years 1984 through 1997. With respect to three of the six contractors--BCBS of Illinois, Blue Shield of California, and Pennsylvania Blue Shield--the contractors and/or some of their employees pled guilty to various criminal charges and agreed to pay criminal fines and/or civil penalties. Investigations of the three other contractors--BCBS of Massachusetts, BCBS of Michigan, and BCBS of Florida--resulted in civil settlements only. A total of over $261 million was assessed in criminal and civil penalties against these six contractors.

What kind of shenanigans were the "Blues" up to? The report gives examples:

1. improperly screened, processed, and paid claims, resulting in additional costs to the Medicare program;

2. improperly destroyed or deleted claims;

3. failed to recoup overpayments to Medicare providers within the prescribed time and to collect required interest payments;

4. falsified documentation and reports to HCFA (now Medicare and Medicaid Services) regarding their performance; and

5. altered or hid files that involved claims that had been incorrectly processed or paid.

What kind of culture has existed at the "Blues"? Again, from the summary:

The persons to whom we spoke also told us that these deceptions and improprieties became a way of doing business and continued for sustained periods without detection because HCFA, in its review of Medicare contractors, relied on information provided by contractors without independent verification. HCFA also gave contractors advance notice of the files that it intended to review, thereby allowing contractors ample time to "correct," delete, or hide claim-related documents or redo provider audits and related workpapers prior to HCFA's review. This system also resulted in contractors deviating from their normal operating procedures during HCFA evaluations in order to deceive HCFA about their accuracy and efficiency in claims processing and customer service. As a result, criminal and other improper activities were uncovered only after whistleblowers, or relators, filed qui tam complaints under the False Claims Act.

Blue Cross and Blue Shield of Alabama apparently has joined in the questionable activities. A former auditor named Frank E. Body alleged that the company had reimbursed Alabama hospitals for interest costs that were not authorized by Medicare regulations. The U.S. 11th Circuit Court of Appeals ruled that Body's whistleblower complaint must be dismissed on complex immunity grounds. But his complaint provides insight into the culture of Alabama's powerful "Blue."

Here is the gist of Body's allegations:

In August 1993, prior to the issuance of the OIG's final report, Body instituted this lawsuit for the United States as a qui tam relator under the False Claims Act. Body alleges that BCBSA has been reimbursing Alabama hospitals, in particular Baptist and Carrawatm for interest costs that are not chargeable to Medicare.

By the way, our research indicates that the 11th Circuit's interpretation of immunity issues in the Body case has not been adopted by any other circuit. And the opinion was authored by Gerald Bard Tjoflat, a Republican appointee who was on the three-judge panel that butchered the Don Siegelman appeal. In other words, it appears BSBSA drew favorable judges and got off easy in the Body case.

The GAO report and the Body complaint date back 10 to 20 years. But the recent case in South Carolina indicate that the "Blues" still have significant problems with fraud.

Here's something the town hallers don't care to recognize: History tells us that private insurers are not necessarily part of the solution; they are part of the problem. And if you really want to solve Medicare fraud, you had better not rely on private insurers to do it. In many cases, they are the ones committing the fraud.