NCPA - National Center for Policy Analysis

Medicare Complexity Does No One Good

January 21, 2000

While several high-profile fraud cases may cause the public to think the health care system is rife with dishonesty, the answer may be simpler: health care regulations have become too complicated for anyone to understand. However, analysts note, politicians have played the fraud card, unleashing an army of investigators looking for alleged misdeeds. As a result:

  • Health industry firms are spending more time on compliance with ever-burgeoning Medicare rules than on their own financial reports.
  • Companies pay huge fees to outside compliance consultants whose only job is to help facilities understand impenetrable Medicare rules.
  • And for good reason: Medicare regulations take up more pages than the notorious Internal Revenue Code.

This unrivaled regulatory complexity was brought about by the complex nature of the transactions financed by Medicare and other health insurers.

  • Physicians recommend products and services to patients on the basis of partly subjective diagnoses.
  • The physician usually profits personally by producing some of the services, while the rest are referred to other facilities.
  • Commission payments to the referring physician are outlawed in the Medicare statutes, but the temptation to structure fiscal arrangements that reward such referrals is ever present.
  • Meanwhile, a geographically distant insurer is asked to pay for it all, often with scanty information.

For all these reasons, analysts say, it will never be easy for any third-party health care provider to devise a payment method that is fair, efficient and immune from abuse. A compromise must be struck between two extremes: rules so crude as to tolerate widespread abuse, and rules so finely honed as to be impenetrable.

Source: Uwe E. Reinhardt, "Medicare Can Turn Anyone Into a Crook," Wall Street Journal, January 21, 2000.


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