Medicaid Block Grants Are Breeding Grounds For Fraud

"What exactly is a Medicaid (or Medicare) Outlier?" I am sure this question is surging through your minds right about know.

Well, an outlier is something that does not fall within the range of the norm, or beyond the threshold of the amount a hospital gets to cover cases, where cases mean sick people.

If anyone is following the politics of health care, you will know that there is a movement to set Medicaid up as a Block Grant and get rid of the reimbursement formulas. This would mean the states get an annual lump sum payment.

Now, let's look at this from a logical perspective of reality: people get sick.

The story will go something like this. The feds will give each state a lump sum for the year to take care of sick people in the hospitals. Doctors nor the States can predict what types of sicknesses will occur in that fiscal year or the costs of curing. Sometimes there are lots of sick people with bad sicknesses like cancer. Cancer costs more. When the lump sum is gone because there were either more sick people and/or more sick people with bad sicknesses, the hospitals have to get paid to keep taking care of sick people. Since there is no more Medicaid Block Grant...voila...there will be Medicaid Hospital Outlier Payments.

And of course, with these Medicaid Hospital Outlier Payments, let's say this all together now,

there will be fraud, waste and abuse.

Simple enough for ya?

Medicaid Hospital Outlier Payments

According to this report:

In 2003, CMS modified relevant Medicare regulations after reporting that from Federal fiscal years (FY) 1998 to 2002, it paid approximately $9.0 billion more in outlier payments than intended because the outlier calculation overestimated costs for hospitals that increased their charges faster than actual costs.

If you think that $9 billion in excessive Medicare outlier payments is alot, consider the fact that the audit was done for 1998 to 2002, long before IT as we know it today. What do you think the numbers look like for 2003 until know. You do the math.

For all hospitals in seven of the eight States, Medicaid outlier payments increased from approximately $913.0 million in FY 2004 to approximately $1.2 billion in FY 2006. During this period, Medicaid outlier payments increased substantially faster than Medicaid DRG base payments and Medicare outlier payments.

This occurred because the eight State agencies (1) used outdated cost-to-charge ratios to convert charges to estimated costs and (2) did not reconcile Medicaid outlier payments upon cost report settlement.

No. This occurred because the State Medicaid Fraud Control Units do nothing.

Go ahead and deregulate. Go ahead and lump soothsayer appropriations for Medicare and Medicaid and watch the creation of highly sophisticated revenue-maximization schemes pop up where it will take another decade to find out that Medicaid [and Medicare] Black Grants are breeding grounds for fraud.