Insurance Fraud Mushrooms

As was predicted here in April, insurance fraud is now mushrooming, with new schemes popping up to scam the American consumer in 24 states. Section 1322 of the Patient Protection and Affordable Care Act mandated that states create co-ops. Under this legislation, private insurers or related entities in existence before July 16, 2009, cannot qualify as health insurance issuers in co-ops. The co-op provision in HR 3590 necessitates that a number of new nonprofit companies will pop up and apply for startup loans and grants from the federal government.

Who exactly will these new nonprofits be? After paying their premium dollars, will customers get the services they expect? Apparently not, according to a Reuters article published on Tuesday:

“The Federal Trade Commission said on Wednesday it is working with 24 states to crack down on sellers of medical discount plans that market them as health insurance that covers doctors, hospitals and other services. Such scams have increased in the wake of the health care reform law…, said David Vladeck, director of the FTC's Bureau of Consumer Protection…"The uncertainty about the benefits that will be available under the new federal insurance program and the fact that the budget doesn't kick in until 2014 is going to give scammers very fertile ground for this," Vladeck told reporters in a conference call. "They're going to try to capitalize on uncertainty."


…"Health discount plans are not insurance. They don't pay your medical bills," said Minnesota Attorney General Lori Swanson, who has filed three lawsuits. She added that continued job losses are fueling the scams since most Americans who have insurance get it through their employer. The companies targeted by the FTC and states are mostly privately owned. They include Health Care One, Consumer Health Benefits Association, and United States Benefits. So far, 54 lawsuits and other civil enforcement actions have been taken by the FTC and the states, officials said. New York's insurance superintendent, James Wrynn, said some of the discount plans do offer some limited payments for some healthcare expenses such as medical tests or short hospital stays, "but when you find out the extent of the coverage, there is for all intents and purposes, no coverage."

Expect even more fraud in the next few years. Given the state budget deficits most states are facing and ever deepening economic recession/depression, there will be even less resources available to combat it in the future.

As always - let the buyer beware!

Electronic Medical Records:Marginal Quality of Care & Length of Stay Benefits

Today's New York Times contains an article about Boston area hospitals entitled “Little benefit seen so far in electronic patient records.” At present, less than 2% of hospitals and less than 13% of offices have electronic medical resords (EMR) systems. Few of these are comprehensive systems with scheduling, patient intake information, consult notes, nursing notes, labs/diagnostics and billing, etc. The federal government has designated $19 billion in TARP money to help physicians and hospitals make the conversion claiming cost savings and improved patient care.

It seems finally we have the empiric evidence to support what medical professionals have long suspected – that EMRs do NOT translate to better hospital care or shorter lengths of stay. So why should a doctor's office spend $40-60 thousand plus $20 thousand annually in licensing fees for such a system? Why should a hospital system spend tens of millions and up to $100 million to implement such a system? Where is the return on investment?

There are four main issues in implementing electronic medical records.
1.These systems cost a lot of money.
2.The purchasers of EMRs are not the ones to reap the benefits of the system; benefits accrue to the patients, employers, insurers and government.
3.There is no readily exchangable format, as there is no off-the-shelf Microsoft Office version of EMRs that works well for the various specialties and levels of hospital care.
4.There is no means of readily assembling the patient's complete medical record from all sources from which they have sought care when they are sitting on the examining table in front of you.

The benefits of EMRs often touted are elimination of waste, fraud and abuse of the healthcare system. Yes, EMRs could decrease the costs of defensive medicine, estimated at 5-9% of total medical expenditures. They could decrease the need for repeated testing , lower perscription expenditures, facilitate authorization for procedures, verify services provided, shorten payment time, etc. But this does not necessarily occur just because an office or hospital has an EMR in place. There must be a way to access and assemble a complete record when needed. We don't need necessarily EMRs, what we really need is an electronic medical filing cabinet. Similar to the way the credit bureaus assemble financial records, we need a way for verified credentialed providers of healthcare to access the system when a patient is biometrically identified in their office. While the intricate details are too much for a blog, suffice it to say it could be done for the price of a print scanner and biometric scanner at a penny or so per transaction. [See Chapter 5 of Healthcare Solved, if you are curious for more details.]

Co-ops: Real or Phoney?

In addition page 4 of the October CBO letter to the Senate Finance Committee Chair states the Baucus Bill will “provide start-up funds to encourage the creation of cooperative exchange plans (co-ops) that could be offered through the exchanges; existing insurers could not be approved as co-ops.”

Let’s think about this for a minute. Present day insurers are entirely shut out of the game. (You can almost hear the politicians say, “We showed them.” ---but is it a pyrrhic victory?)

Whatever you think about insurers, these are the people who actually know how to do the job. They have the systems and processes in place to service the needs of their customers, send them insurance cards, provide a network of providers and pay claims. This little provision means a lot of “newbie” nonprofit companies will be popping up, by necessity.

Who are these companies? Are they reputable? Do you believe your claims will be paid in a timely manner? What is their track record? Will you get the service you expect? What assurances do we have that they will be there tomorrow to pay claims after giving them your premium dollars? Do you think this opens the public up to a lot of potential fraud? Are state regulators going to be able to handle the job, given the number of new entities that will no doubt arise due to the amount of money at stake?

Of course, we can rely on the government to protect us from the hucksters, can’t we?