Jun. 17, 2011 11:56 AM ET

Medicare goes high-tech to head off fraud

RICARDO ALONSO-ZALDIVAR, Associated Press

WASHINGTON (AP) — Tired of paying bogus claims, then chasing the scammers afterward, Medicare announced Friday it is deploying screening technology similar to what's widely used by credit card companies to head off fraud.

Better late than never.

"More than 40 years into Medicare the government is starting to put in the program things it should have had, certainly by 30 years ago," said Patrick Burns of Taxpayers Against Fraud, a nonprofit that supports government whistleblowers.

Peter Budetti, Medicare's anti-fraud czar, said the new system expected to go into operation July 1 is a major step forward. "It will allow us to do some things we had not been able to do before," he said.

Up to now, Medicare has performed rudimentary fraud checks on individual claims before payment, officials said. For example, does the Medicare number on a bill for prostate cancer treatment belong to a male patient?

The new system will allow Medicare to monitor large numbers of claims using computer analysis to spot tell-tale patterns of potential problems. For example, does a storefront wheelchair retailer in Los Angeles have lots of customers in San Francisco, more than 350 miles away?

Looking at such variables as the beneficiary, the provider, the type of service and other patterns, the system will assign risk scores to claims. It will issue an alert when something looks like it might be off. Medicare officials will be able to investigate the claim before payment is sent out.

That should help address one of the major frustrations for health care fraud investigators. Because Congress has directed Medicare to pay claims promptly — usually within 14 to 30 days — fraudsters can make a quick bundle and drop off the radar at the first sign that the inspector general is on to them. That leaves investigators to play what they call a game of "pay and chase."

"We're getting ahead of the game here," said Medicare Administrator Don Berwick.

Health care fraud is estimated to cost taxpayers $60 billion a year, although its real extent is unknown. Medicare, the $500 billion a year insurance program for seniors and disabled people, is a prime target. With Medicare facing insolvency, combatting health care fraud has become a much more urgent priority for the government.

Officials said Medicare has awarded an initial $77 million contract for the new system to defense giant Northrup Grumman and a group of companies. "We will be able to translate their experience from the private sector into Medicare," Budetti said.

Time will tell if the dramatic benefits officials are promising actually do materialize. Government technology acquisitions can be notoriously buggy. Still, Medicare needs technological tools such as the new system to confront its fraud problem.

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