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Getting better with age: 50 years of Medicare fraud prevention


Everyone celebrates his or her birthday in a different way. Some opt for a full-blown bash, telling everyone within earshot a detailed story of their birth. Others jump to the other end of the spectrum: Tell no one and pretend it doesn't exist. If I don't acknowledge it, I'm not getting older. That's how it works, right?

As you may have heard, Medicare and Medicaid turned 50 last month. I know this because it seems as though everyone is screaming it from the rooftops, followed by a constant stream of opinions exulting or bemoaning the program's health.

 "Look how good Medicare looks!" someone gushes. "So comprehensive and well-managed."

"I don't know," says another. "Looks awfully bloated to me. Maybe it's time to get some work done?"

"Shouldn't we start looking at nursing homes?" another chimes in.

Since Medicare and Medicaid are multibillion-dollar government programs, they don't get much choice in how they celebrate. Rather, their birthday serves as an opportunity for us to nitpick the last 50 years, while making wild predictions about the next five decades. So much for silent introspection.

I'm not one to miss out on a party, especially one that quickly transforms into a feeding frenzy. I don't have any answers regarding the viability or longevity of the Medicare and Medicaid programs, but the discussions over the last month made me wonder: How has fraud prevention evolved since President Lyndon B. Johnson established the program in 1965?

What I found is that while fraud prevention has evolved dramatically in the last 50 years, the fraud schemes themselves aren't drastically different. According to a 1976 hearing by the Senate's Special Committee on Aging, the first signs of healthcare fraud emerged in the late 1960s when investigators estimated overpayments to New York City nursing homes had reached $70 million over a five-year period. Months prior, another hearing had exposed the danger of "Medicaid Mills," medical offices established in poor areas of the country that were at the core of emerging fraud schemes. Fifty years later, the only difference is fraudsters sometimes ply the poor with sneakers.

Interestingly, Johnson and his cohorts never really addressed fraud prevention in the Social Security Act Amendments of 1965 that officially established the Medicare and Medicaid programs. In fact, the law included just one provision that prohibited providers from making false claims to the program. Translation: "Don't do it... Please."

Essentially, that was the only fraud enforcement during the first 12 years of the program's life until concerns surrounding Medicaid Mills and nursing home overpayments crescendoed to a roar, prompting Congress to pass the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977. Prior to that, prosecutors relied on the Social Security Amendments of 1972, which established the original anti-kickback statute. But it wasn't until 1976, when then U.S. Attorney Samuel Skinner—referred to at the time as "the most active U.S. attorney in terms of Medicaid fraud prosecutions"—litigated the first convictions under the law.

But the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977 was the first legislation to establish a more rigorous—although voluntary—means of Medicaid fraud prevention by providing each state with federal funding to establish a Medicaid Fraud Control Unit (MFCU). By the following year, 17 units were federally certified. It wasn't until 1995 that states were required to establish MFCUs.

At the same time, Congress established the Department of Health and Human Services (HHS) Office of Inspector General (OIG) to oversee fraud and abuse within both healthcare programs. For the first time, Medicare and Medicaid had a watchdog to look over their spending.