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Why we didn’t need Obamacare.

In 1996 we had Kennedy-Kassebaum which was intended to fix the health care problem. It gave self employed the Medical Savings Account, a forerunner to the newer Health Savings Account. “They” were paranoid too many self employed would take advantage of this new tool, so they capped the number at 700,000 eligible participants in the country.

We never got near that much participation initially and they have tinkered with it ever since.

There are so many rules and regulations that continue to bog down “the system” and make it so honest men can’t comply.

Kennedy-Kassebaum Law Means Greater Fraud Scrutiny


On Aug. 21, President Clinton signed the Health Insurance Portability and Accountability Act of 1996 into law. HIPA is extremely significant for physicians and managed care organizations. I’m not referring to the portions of HIPA that gained the most press coverage–namely, the creation of an entitlement to (and mechanisms for) more affordable and portable health insurance. Rather, HIPA creates perhaps the most substantial and dramatic change to health care fraud-and-abuse laws since this category of legislation was created.

As we begin to explore these sweeping changes and their implications, I predict that we will draw three conclusions. First, HIPA makes the government more intrusive than ever in its commitment to seeking out health care fraud, and also makes the government more eager than ever to probe potentially unethical or illegal actions. Even when no fraud is found, the costs and burden from government and payer inquiries and investigations will be substantial for physicians, other providers and managed care organizations subjected to scrutiny. HIPA also creates an incentive for the government to seek financial settlement from many of the providers and managed care organizations that it investigates, even in circumstances where it previously would have walked away from the investigation because it was not likely to be worth the cost and effort of continued probing and/or prosecution.

Second, HIPA demonstrates that the federal government has become more responsive to the growth of creative and alternative systems and structures for delivery of health care services. Among these are alliances, management services organizations and integrated delivery systems. Some of this recognition, you will note, takes the form of new rules and means to fight fraud by these new systems and entities. Other rules reflect the converse: The government realizes that approaches that differ from “tried and true” methods do not necessarily indicate improper intent or encourage fraudulent activity.

The third conclusion reflects the first two: Every health care provider and managed care organization must put into place an appropriate health care fraud and abuse compliance program. At a minimum, every physician or physician group and managed care organization must undergo prompt and regular legal and financial analysis of its health care compliance activities, must correct deficiencies identified in that analysis and must implement a program to reduce the likelihood of these sorts of problems occurring. Period.

The question no longer is whether you can afford a health care fraud and abuse compliance program. Rather, it is whether you can afford not to have one.

Anyone may blow the whistle

Let’s start with one example. Section 203 of HIPA requires the secretary of health and human services to implement a program that will encourage people to report information about health care fraud. The program is quite broad. It encourages reports of improper activity in the past, even when it has stopped. It encourages people to report improper activity involving kickbacks, false claims, mail fraud, false billings or almost any other activity that relates to penalties under the Office of Inspector General’s areas of authority.

Longtime readers of this column know that one of my recurring themes is that our behavior is influenced by rewards, whether financial, egotistic, spiritual or other. HIPA also recognizes this observation about human behavior. It authorizes payment of a reward to anyone who reports information that leads to the collection of at least $100 under any of its law enforcement provisions except for the anti-kickback law. My understanding is that this reward program will be modeled on the Internal Revenue Service rewards for tax fraud tip-offs. IRS pays up to 10 percent of the amount recovered. When fine and penalty are added to overpayment, this can easily be very lucrative.

The new HHS program is dis- tinct from provisions of the federal false claims act that permit health care “insiders” who are aware of fraud in their organizations to undertake a lawsuit against the allegedly fraudulent providers on behalf of the government and collect part of the proceeds. The new HIPA incentive program, in contrast, permits any individual to obtain a reward. A beneficiary is eligible, a competitor is eligible and a health care adviser is eligible. (Note that the attorney-client privilege requires lawyers to maintain confidentiality about wrongdoing by their clients. But this does not apply to other health care business advisers!) Basically, if you are aware of the possibility of past or present fraud, you may receive a reward regardless of who you are.

Also, note that the law pays a reward simply for reporting information that leads to the collection of funds. The person does not have to sue the fraudulent provider. A physician would not, for example, need to risk becoming an outcast in the medical community, viewed as disloyal or greedy. Indeed, the reporter often will have no involvement beyond the initial conversation(s) with the government. And since the primary mechanism for this reporting will probably be some sort of hot line, the person may not even have to meet directly with government agents.

Are you your brother’s keeper? You betcha! And a darned lucrative job it can be, too!

Required: attention to detail

I don’t mean to be flippant. This system can go a long way to encourage people to report fraud that would otherwise never be reported. But I have had many clients suffer the burdens of government scrutiny without having engaged in fraudulent activity. This is especially true now that the government asserts that repeated billing errors may constitute a pattern of fraud. Thus, inattention to detail can easily subject a provider to a fraud investigation. HIPA will increase that danger.

Incidentally, note that Section 203 also requires physicians and other providers to give beneficiaries an “explanation of Medicare benefits” form for every item or service, even if there is no deductible or coinsurance payment required of the beneficiary. At present, EOMBs are issued only where the beneficiary will pay for part of the service.

This means that Medicare beneficiaries will know all charges claimed by health care providers. In theory, this will alert them to potential fraud. In practice, it will probably lead to a lot of complaints about $40 bedpans and $10 Ace bandages.

Are you getting a bit nervous? In another column, we will explore additional ways HIPA will affect you.

Neil B. Caesar is president of The Health Law Center (Neil B. Caesar Law Associates, PA), a national health law/consulting practice in Greenville, S.C.



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