Private Insurers Rack Up Billions in Overcharges to Medicare

Anyone who doubts that solving the health care crisis requires cutting the insurance industry out of the system should take a look at a new report from the Inspector General for the Department of Health and Human Services. The report looks at Medicare Part D, the prescription drug program created under the Bush administration, which unlike traditional Medicare, is run through private insurance companies. The HHS Inspector General found that a full 80 percent of these companies have been overcharging both seniors and taxpayers–to the tune of an estimated $4.4 billion for 2006 alone, and possibly much more. According to a McClatchy Newspapers story yesterday:

Medicare…doesn’t even know how much money the insurance companies owe taxpayers because it hasn’t begun most of the financial audits needed to determine that….

CMS contracts with private insurance companies to provide the drug coverage. Each offers a bid, which represents the company’s estimate of the average monthly revenue it would need to provide the basic prescription drug benefit to each beneficiary.

Medicare is required to complete financial audits of at least a third of all the insurance companies that offer the prescription drug benefit to determine how they set their prices.

For 2006, the first year of the program, Medicare was required to perform 165 audits. However, the inspector general found that, as of April, it had begun only seven, or 4 percent.

In response to the findings, the Medicare agency issued a statement indicating that as of Jan. 28, it had either begun or completed 103 of the 165 required audits for the plan in 2006.

Keep in mind that this is just the insurance companies’ share of the Part D rip-off. It doesn’t take into account the billions in inflated profits pharamceutical companies reap from the government, which is not permitted to directly negotiate drug prices for Medicare.

Senator Claire McCaskill (D-MO), a former state auditor and nobody’s fool, is on Medicare’s case. “It shows a mindset that could care less about wasting taxpayer money, that has no problem with padding profits of drug companies with hard-earned taxpayer dollars,” she said. McCaskill has demanded that Medicare explain how it plans to collect the billions owed the government by insurers.

Even if that happens, there’s little incentive for the insurance companies to change their ways, since there are no penalties for overcharges. “Bid audits are not designed to lead to sanctions,” the IG the report says. “However, without any consequences … their deterrent effect is limited.”

It makes you wonder why these agencies have Inspectors General at all. By law, they are supposed to act on IG recommendations within a year-but they often don’t. Last month, a report by the Democrats on the House Oversight and Government Reform Committee found that the Bush administration could have saved more than $25 billion over 8 years if it had implemented some 14,000 cost-saving measures recommended by its own inspectors general recommended.

2 responses to “Private Insurers Rack Up Billions in Overcharges to Medicare

  1. The drug companies claim they are raising prices because some of their patents will expire soon. However, it is convenient that they are doing so before the planned health insurance reforms go into effect. I recommend the following post: http://euandus3.wordpress.com/2009/11/16/drug-companies-as-feeding-machines/

  2. Carlton Sprow

    Received bill from Geisinger hospital for the following:
    Scope of throat 3/21 $859
    Dr. Visit 3/21 $885
    xray 3/25 $905
    Since the scope and Dr, visit was together feel that $1704 was way over charged for one visit.

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