Medicare Claims Billing Abuse: Commercial Software Could Save Hundreds of Millions Annually

GAO discussed the use of commercial technology to detect Medicare billing abuses and the Health Care Financing Administration's (HCFA) efforts to develop its own capability to detect billing abuses. GAO noted that: (1) based on a statistically selected sample, commercial technology could have saved Medicare and its beneficiaries $603 million and $134 million, respectively, in fiscal year (FY) 1993, and $640 million and $142 million, respectively, in FY 1994; (2) private and public insurers have successfully used commercial detection systems to reduce overpayments; (3) commercial systems can be customized to meet the needs of individual users; (4) most Medicare providers will not be affected by improved billing abuse detection, since 92 percent of these providers bill Medicare appropriately; (5) 8 percent of Medicare providers defraud Medicare by miscoding their services; (6) although HCFA has initiated actions to improve its detection of miscoded claims, its narrowly focused efforts will not match commercial system capabilities and potential savings; (7) commercial systems are more likely to keep current with code changes than a HCFA-developed system and are cost-effective; and (8) HCFA is exploring the feasibility of using commercial systems, but it needs to explore several issues before mandating such use.