In the ongoing process of revamping our national healthcare system, the payments end has been neglected. Yet if we continue to move toward a true national system, then converting to electronic payments should be part of the equation.
The problem is that simply moving money from an insurer (or a nationwide Medicare) to a provider is not all that is involved in the payment process.
The sad fact is that fraud has long been one of the issues that insurance companies have had to manage. This is a major reason for the slowness of calculating and processing payment.
Bills submitted by policyholders are almost always checked against requested verification from the healthcare providers. Other bills may be flagged for any one of a laundry list of reasons.
Fraud is not a penny-ante business. Medicare has been notorious for lacking funding for proper fraud-checking mechanisms and recovery. Only in 2009 did Congress allocate an extra $200 million for Medicare anti-fraud efforts, an amount sure to return much more than that to the kitty. On average, each dollar spent on anti-fraud efforts returns $17 to the program, according to the agency’s Office of Inspector General. Yet estimates of total losses to fraud range all the way from $11 billion to $60 billion.
Startling cases have come to light. The Benitez brothers of Miami operated a chain of storefront clinics in Florida — all fake. They were eventually indicted for fraud but not till they had collected $84 million from Medicare coffers.
Money that they collected for phony medical treatments was found to have been spent on the good life: horses, a helicopter, tourist hotels, and even a rental car agency. The U.S. government has been working to seize these properties and liquidate them for reimbursement.
Medicare fraud had become viewed as such a low-risk proposition that even cocaine dealers were diversifying into it.
Certain cities have become known as Medicare fraud hot-spots: Los Angeles, Detroit, and Houston. But now roving teams of auditors make unannounced visits to clinics, and pore over bills for excessive home visits. Computer software has been upgraded to flag suspicious bills.
So knowing that fraud has become a multi-billion-dollar problem is the core obstacle to instituting quick and easy payment systems. Medicare was targeted in the first place because there was little likelihood of human intervention in processing the submitted bill.
Nevertheless, payment processors are itching at the chance to handle billions of dollars in transactions. It seems incredible but the majority of medical bills are paper-based and manually processed.
Some insurers process the paper claims into electronically-processed images and key them into billing software, and some providers fax their claims rather than mail the paper forms. Yet the majority of the bills enter the payment system on paper.
This is why the average cost of processing insurance check payments is $9, by contrast, an ACH debit transaction costs a mere 80 cents.
Other obstacles to converting to electronic payment are the fact that many providers do not know how much the final bill will be. They of course know how much their office charges, but with the plethora of insurers and in-network and out-of-network contracts, the amount the insurer will pay can vary tremendously. Nevertheless, most providers can obtain a good estimate at the time of service.
Some healthcare providers are contracting with billing services to manage billing account security now that many transactions are based on credit and debit cards. Some vendors who specialize in managing medical payments are iStream Financial Services, based in Brookfield, WI, Preferred Health Technology Inc of Carrollton, TX, Celent of Boston, mPay Gateway (which services providers in the Allscripts program), HealthRails.com (whose merchant processor is surprise, surprise, PayPal), Heartland Payment Systems Inc, and Herae LLC (which uses ChainDrugStore.net’s services).
The modus operandi in most of these services is that the biller obtains credit card numbers from the patients so that settlement can be made when the final amount is known. Consumers naturally resist this but the billers, having obtained a preliminary estimate from the insurer, give a maximum amount that the customer would be be billed. In the event that the insurer pays less than estimated, the patient will receive a second bill for the balance. Consumers have accepted this arrangement without a hitch.
If a transition to a completely government-paid healthcare system becomes reality, then of course the process of billing and payment is greatly simplified and accelerated. Fee schedules should become more transparent and predictable, and patients will know what their liability is at the time of service.
Call to report Medicare fraud at 1-800-447-8477
A Difficult Delivery in Health-Care Payments, Lauri Giesen, Digital Transactions, November 2009.
Busting Medicare Fraud, Jay Weaver, AARP Bulletin, November 2009.