updated 11/15/2009 8:04:27 AM ET 2009-11-15T13:04:27

The government paid more than $47 billion in questionable Medicare claims including medical treatment showing little relation to a patient's condition, wasting taxpayer dollars at a rate nearly three times the previous year.

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Excerpts of a new federal report, obtained by The Associated Press, show a dramatic increase in improper payments in the $440 billion Medicare program that has been cited by government auditors as a high risk for fraud and waste for 20 years.

It's not clear whether Medicare fraud is actually worsening. Much of the increase in the last year is attributed to a change in the Health and Human Services Department's methodology that imposes stricter documentation requirements and includes more improper payments — part of a data-collection effort being ordered government-wide by President Barack Obama this coming week to promote "honest budgeting" and accurate statistics.

Still, the fiscal 2009 financial report — covering the first few months of the Obama administration — highlights the challenges ahead for a government that is seeking in part to pay for its proposed health care overhaul by cracking down on Medicare fraud. While noting that several new anti-fraud efforts were beginning, the government report makes clear that "aggressive actions" to date aimed at reducing improper payments had yielded little improvement.

Dead doctors
In recent years, the suspect claims have included Medicare prescriptions from doctors who were dead, and requests for payment for medical supplies such as blood glucose strips for sexual impotence and diabetic shoes for leg amputees. Patients, many of them new citizens who barely speak English, are sometimes recruited by brokers who go door-to-door offering hundreds of dollars for use of their Medicare numbers.

Obama is expected to announce new initiatives this coming week to help crack down on Medicare fraud, including a government-wide Web site aimed at providing a fuller account of health care spending and improper payments made by various agencies. The Centers for Medicare and Medicaid Services also will launch a Web interactive next month that will allow users to track Medicare payment information by categories such as state, diagnosis and hospital.

According to the report, the Bush administration from 2005-2008 reported improper payments of roughly 4 percent in the fee for service program, or about $17 billion total in 2008. Government officials at the time, however, typically did not consider a Medicare payment improper if the medical documentation was incomplete or a doctor's signature was illegible. Since these were flaws that ordinarily bar payment, that methodology drew complaints from government auditors that the figures were understated.

For fiscal year 2009, the Obama administration began counting those claims as improper, but was unable to complete an official tally based on the new methodology. As a result, it officially reported improper payments for its fee for service program at 7.8 percent, representing a partial tally under the new formula. But it considers the unofficial tally of 12.4 percent to be more representative.

Beginning next year, the 12.4 percent figure — or a total of $47 billion in improper payments when counting both Medicare fee for service and managed care — will be used as the baseline estimate. The federal report sets a target of reducing improper payments in the fee for service program to 9.5 percent by next year, which would represent a savings of roughly $9.7 billion.

The findings come as the Obama administration is making Medicare anti-fraud efforts an important priority. In recent months, HHS has said it was multiplying by 10 the number of agents and prosecutors targeting fraud in Miami, Los Angeles and other strategic cities where tens of billions of dollars are believed to be lost each year. The new partnership seeks to have better sharing of real-time intelligence data on health care fraud patterns.

Officials say they also want to increase training and outreach among Medicare providers to reduce documentation errors, while proposed health overhaul legislation would increase background checks on Medicare claimants and impose stiffer penalties for false claims.

Other findings:

  • In the Medicaid program for the poor, roughly $18.1 billion, or 9.6 percent of claims, are believed to be improper payments.
  • Using a baseline of 12.4 percent in improper payments in the Medicare fee for service program, HHS is setting targets of reducing fraud and waste to 9.5 percent, 8.5 percent, and 8.0 percent, respectively, for fiscal years 2010 through 2012.

Records released in the past week showed that CMS for three years ignored internal watchdog warnings about swindlers stealing millions of dollars by scamming several Medicare programs. The agency received roughly 30 warnings from inspectors but didn't respond to half of them, even after repeated letters.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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