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Office of the Press Secretary

For Immediate Release December 7, 1998
                           December 7, 1998

Today, President Clinton will announce new steps to fight fraud, waste, and abuse in the Medicare program, building on the Administration's longstanding efforts in this area. The President will unveil a legislative package that will save Medicare over $2 billion. He will also announce new administrative measures to crack down on fraud, including efforts to make Medicare contractors more effective and accountable. In an event today with the Administrator of the Health Care Financing Administration (HCFA), the HHS Inspector General, Senator Tom Harkin, the Immediate Past President of American Association of Retired People, and the Executive Director of the Older Women's League, the President will:

ANNOUNCE NEW LEGISLATIVE PACKAGE THAT WOULD SAVE MEDICARE OVER $2 BILLION BY COMBATING FRAUD, WASTE, AND ABUSE. President Clinton will send Congress a comprehensive legislative package to fight fraud, waste, and abuse in the Medicare program as part of his FY2000 budget proposal. These proposals will give HCFA more tools to root out fraud, abuse, and waste in Medicare. They are consistent with recommendations made by the HHS Office of the Inspector General (OIG) in recent reports, and some have been recommended to Congress before. The proposals include:

Eliminating Excessive Medicare Reimbursement for Drugs. A recent report by the OIG confirmed that Medicare currently pays hundreds of millions of dollars more for 22 of the most common and costly drugs than it would if it used market prices. For more than one-third of these drugs, Medicare paid more than double the average wholesale price, and in one case paid ten times the amount. This proposal would base Medicare payments on the actual acquisition cost of these drugs to the provider, eliminating current mark-ups and thereby substantially reducing Medicare costs.

Ending Overpayments for Epogen, a drug used to treat anemia related to chronic renal failure. An OIG report found that the current reimbursement rate of $10 per 1,000 units of Epogen exceeds the current cost of the drug by approximately 10 percent. The Administration's proposal reduces Medicare reimbursement to reflect current market prices.

Preventing Abuse of Medicare's Partial Hospitalization Benefit. A recent OIG report found that providers are abusing Medicare by billing for partial hospitalization services that were never given or provided to many fewer patients than were billed for. This proposal would ensure that Medicare reimburses only for services actually given by placing stricter controls on the provision of these services.

Ensuring Medicare Does Not Pay for Claims Owed by Private Insurers. Private insurers of working Medicare beneficiaries are required under law to be the primary payor of health claims. These insurers, however, do not always pay the claims for which they are responsible. This proposal prevents this abuse by requiring private insurers to report all Medicare beneficiaries they insure to HCFA. This proposal also would give HCFA greater authority to fine private insurers, including the authority to recoup twice the amount owed if insurers intentionally allow Medicare to pay claims for which they are responsible.

Empowering Medicare to Purchase Cost-Effective High-Quality Health Care. Medicare now has limited demonstration authority to contract out with institutions that have a track record of providing exceptionally high-quality care at a reasonable price, called centers of excellence. This proposal would expand this authority to urban areas that have multiple providers, thereby enabling the Medicare program to provide higher quality health care at less cost.

Requesting New Authority to Enhance Contractor Performance. HCFA still does not have the authority it needs to terminate more expeditiously contractors who do not effectively perform their duties. This proposal would give HCFA authority to contract with a wider range of carriers to administer the program, and then to terminate them if they fail to perform effectively. The proposal would give HCFA greater authority to oversee contractor performance of such functions as enrolling providers, investigating fraud, and collecting overpayments.

TAKE NEW ACTIONS TO HELP ENSURE MEDICARE CONTRACTORS FIGHT FRAUD, WASTE, AND ABUSE. Today, the President is also unveiling new administrative efforts to ensure contractors are cracking down on fraud and abuse. These include:

Contracting with Special Fraud Surveillance Units to Ensure Detection of Fraudulent Activities. OIG reports have shown that many Medicare contractors do a poor job of investigating fraud, in part because they have a wide variety of other functions, and in part because they have multi-faceted relationships with providers that may create conflicts of interest. The Administration fought to include in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) new authority to contract with specialized fraud, waste, and abuse surveillance units or "fraud fighters," which are better equipped to audit cost reports and conduct activities that are vital to the detection of fraud, waste, and abuse. The first fraud surveillance units will begin their efforts this spring.

Implementing the Competitive Bidding Demonstration for Durable Medical Equipment. The OIG recently found that Medicare rates for hospital beds are substantially higher than rates paid by other payers. HCFA will begin a demonstration this spring that will use competitive bidding to decrease Medicare payment for hospital beds and other durable medical equipment, thereby lowering program costs.

Requiring Contractors to Report Fraud Complaints to the Inspector General Right Away. Many contractors now defer reporting cases of suspected fraud to the OIG when the dollar amounts are low, even though these reports could show significant patterns of fraud. This month, HCFA will send program memorandums to all contractors requiring them to refer suspected fraud to OIG immediately, regardless of the amounts involved.

Announcing That A New Comprehensive Plan to Fight Fraud and Abuse Will Be Completed By Early Next Year. To improve efforts to cut down on fraud and abuse, HCFA will release a new Comprehensive Plan for Program Integrity early next year. This plan will outline new strategies to fight fraud, including enhanced use of audits and improved management tools.

BUILD ON LONGSTANDING COMMITMENT TO FIGHTING FRAUD, WASTE, AND ABUSE. The new steps the President will take today build on the Administration's longstanding commitment to crack down on fraud, waste, and abuse. Since 1993, the Administration's efforts have saved taxpayers more than $20 billion, with health care fraud convictions increasing by more than 240 percent. The Administration has assigned more federal prosecutors and FBI agents to fight health care fraud than ever before. HIPAA created, for the first time ever, a stable funding source to fight fraud and abuse, and in FY1997 alone -- the first full year of funding under HIPAA -- nearly $1 billion in fraud and abuse savings was returned to the Medicare Trust Fund.