Gaming the Medicare System

Medicare's Many Missions

Fraud aside, Medicare's main problems stem from the fast growth of absolutely legal activities and programs swiftly pushing up costs in recent years, a number of critics contend. These practices have helped propel Medicare's budget upward by as much as 10 percent a year -- while spending growth under private health-insurance plans has slowed to about half that pace.

These programs have created their own constituencies and lobbying groups, which have so far successfully thwarted efforts by Congress to cut the programs back and reduce overall spending growth, according to experts.

Here are some of the problem areas they cite:

  • Hospice care, meant to serve terminally ill patients, has been abused by some institutions to the point that patients with non-life-threatening conditions -- such as arthritis or dementia -- are being admitted.

  • Under new Medicare rules, hundreds of hospitals have recently converted part of their space into "skilled nursing facilities" which need not adhere to Medicare's standard flat rate reimbursement rules -- allowing the hospitals to collect as much as $700 a day in extra Medicare payments beyond the flat rate.

  • Congressional efforts to save $4.7 billion over five years by cutting down on this double dipping -- whereby hospitals were paid twice for a single patient's care -- were successfully opposed by hospital lobbyists.

  • Medicare is expected to pay $8.3 billion this year to teaching hospitals to train 80,000 residents -- an amount so generous that the hospitals have expanded their programs beyond the true market need for doctors.

Meanwhile, Medicare has begun a pilot program under which it will pay some hospitals to train fewer doctors, which has been likened to paying farmers not to plant crops.

The home health care program also illustrates how benefits beget abuses. By encouraging the frail elderly to stay home and be visited by nurses, rather than going to hospitals, Medicare launched a boom in the home care industry -- with 9,100 companies now billing Medicare for more than $18 billion a year. Since each visit can generate reimbursements of $40 to $90, some companies are visiting patients as often as 300 times a year. Medicare has reportedly been billed for home care to patients who are active gardeners and even horseback riders.

Medicare's budget last year was $194 billion -- up from $3.2 billion in 1967, its first year. According to Congressional Budget Office figures, if current trends continue, Medicare will run a $31 billion deficit in 2007.

Source: George Anders and Eva M. Rodriguez, "Never Mind the Fraud; What Ails Medicare is Often Perfectly Legal," Wall Street Journal, October 9, 1997.

Home | Support Us | All Issues | Social Security | Debate Central | Contact Us

Dallas Headquarters: 12770 Coit Rd., Suite 800 - Dallas, TX 75251-1339 - 972/386-6272 - Fax 972/386-0924
Washington Office: 601 Pennsylvania Avenue NW, Suite 900 South Building, Washington, DC 20004 - 202/220-3082 - Fax 202/220-3096
© 2001 NCPA