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Takeaway: The President's budget blueprint calls from shifting from "pay & chase" to pre-claim review where data are king

We rarely comment on the annual White House Budget. It is largely a political document and subject to much Congressional meddling. Its value is in expressing the priorities of the president and not much more.

This week, the White House released a Budget Blueprint to “make America great again” rather than the full White House budget normally released this time of year. The slimmed down approach is not unprecedented, especially for a newly sworn-in president. A full White House budget will be released in April.

The headline for health care spending was a reduction of $5.8 billion for NIH. This proposed spending cut represents an 18 percent reduction from approved 2017 levels. It also represents a radical departure from Congressional priorities which have increased NIH funding for the last several years as part of “new medicine” initiatives like 21st Century Cures and the cancer “moonshot.” In other words, good luck with that Mr. President.

More interesting to us is the second bullet of the budget blueprint which establishes fighting, fraud waste and abuse as a priority. Fighting fraud, waste and abuse is a long standing bipartisan goal. What is interesting about the president’s budget blueprint is the emphasis it places on shifting away from “pay and chase” programs to identifying and preventing fraudulent and improper payments before they are made. The budget blueprint calls for a $70 million increase in the Health Care Fraud and Abuse Control Program.

The vast majority of Medicare and Medicaid fraud and improper payment prevention efforts are “pay and chase.” The high profile Recovery Audit Program uses that model to identify improper payments and claw them back to the U.S. Treasury. HHS also relies on a variety of programs to identify fraudulent behavior, prosecute violators and assess fines and other penalties.

The efforts to prevent fraudulent and improper payments have been smaller and more targeted than the RAC program. The somewhat disastrous pre-claim review for home health is limited to a few fraud-prone states. Medicare Administrative Contractors have conducted pre-claim reviews for medical necessity on select claims types. The Health Care Fraud and Abuse Control Program that is the beneficiary of the budget boost has some predictive analytical capacity to anticipate bad actors and fraudulent activity.

So, it would appear that the administration would like to bring Medicare and Medicaid up to the standard of commercial payers who abandoned “pay and chase” years ago.

So, what does it mean?

  • This particular budget priority can be largely accomplished without the benefit of Congressional action.
  • The RAC program is required by law and probably won’t go anywhere anytime soon. HMSY, COTV and PFMT have signed contracts and are proceeding with rollout to providers.
  • The RAC RFP anticipated use of pre-claim reviews so we would expect a shift in that direction under the new contracts.
  • In pre-claim reviews, data are king. Auditors, whether they are MACs or RACs have to have strong data capabilities in order to accurately select claims for pre-claim review. The RACs have been accumulating that data for years and are probably in a better position to make the switch away from pay and chase.
  • The new HHS Secretary has, in the past, been critical of the RACs meddling in medical decisions so don’t look for the new RAC auditors to run as wide-open as they did in 2013 when they recouped $3.6 billion from health care providers, especially inpatient hospitals.
  • The MACs remain a big problem. The experience of the Illinois home health pre-claim review suggests that at least some of the MACs do not have the staff, the expertise or the data analytical capabilities to accomplish pre-claim review tasks. We may be surprised but if the administration decides to lean heavily on MACs to shift to a pre-claim audit model, the implications for providers are significant in terms of inappropriately denied claims and slow approval processes.
  • Finally, we expect that part of any shift away from “pay and chase” will mean tougher standards for granting Medicare and Medicaid billing numbers. The OIG and the GAO have repeatedly pointed out the lax standards of oversight when granting billing privileges especially to home health and DMEPOS providers in Florida, Illinois and Texas.

Call with questions. We would be thrilled at the opportunity to talk about something other than ACA repeal and replace.

Emily Evans

Managing Director

Health Policy

@HedgeyEEvans