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Accountable Care May Mean Less Fraud

November 8, 2016

The lead story in Friday’s Boston Globe was about a “massive change” coming to the Commonwealth’s Medicaid program, known as MassHealth.  The Globe story discussed the federal government’s approval of an overhaul of MassHealth. From a fee for service model, to an accountable care model.  Little noticed by the Globe, this accountable care model could decrease fraud and abuse in the health care system.

Traditional Medicaid Fee for Service vs. Accountable Care

As many of you know, the states and federal government jointly fund Medicaid, the federal health insurance program for the impoverished, but the states administer it.  So there are 50 Medicaid programs, each run a little differently from each other, based upon local conditions.

Traditionally MassHealth used a traditional “fee for service” mode of payment.  Under this system, a doctor submits a bill to MassHealth for a service he/she has rendered. Now MassHealth will utilize an “accountable care” model. This means that doctors and hospitals will receive a set amount of money to care for a population of patients with complex medical needs.  Private health insurance companies and Medicare have already taken steps in this direction. The article missed an important aspect of this change.

Fee For Service Models Are Vulnerable To Fraud

Health insurance programs, particularly the Medicaid and Medicare programs, utilize an “honor system.” Under this system, the insurer pays claims before it fully verifies them.  The programs process millions of claims per day. They would break down if they had to fully verify each claim before paying.  So the programs pay the claims and chase problems later, the so called “Pay and Chase” model.

Well it turns out that the combination of “fee for service” and these honor systems creates a kind of perfect storm for fraud.  It’s just too easy to do.  Pad a claim here, up-code a claim there; pretty soon it’s real money.  Tens of billions per year by the time you add it all up.

By taking out the fee for service component of some of these reimbursement formulae, we remove a lot of the built-in temptation for fraud.  In other words, when it’s easy for providers to over-prescribe and increase their levels of compensation, it will happen.  By providing incentives to avoid over-prescribing, you slow down the temptation to pad bills and engage in self-enrichment behaviors.

This will be interesting to watch.  Health care is complicated.  Thwarting the pernicious creep of fraud and abuse is complicated, too.  But perhaps this notion of “accountable care” will turn out to have another layer of accountability:  a slowdown in health care fraud and abuse.