Medicare Part D: Oh, I'm Sure We Don't Need to Check the Numbers...

The standard talking point about what’s wrong with the prescription drug program in Medicare Part D was that it was a “giveaway to the pharmaceutical and insurance companies.”  By that, I usually mean something specific – first, that Medicare Part D waived the right to negotiate through bulk purchases of drugs, meaning Medicare pays more for the same drugs than does the Veteran Affairs system because they get the bulk discount.  Second, Medicare could have set up its own public program, but instead created an overwhelming mass of private insurance options which the beneficiary had to navigate and choose.  The big winners were the pharmaceutical and insurance industry, but no one seriously meant the federal government was giving them money for free…

Well, scratch that.

McClatchy reports today that 80% of the insurance companies participating in Medicare Part D overcharged the federal government or beneficiaries… or sometimes both.  The overpayments are expected to be $4.4 billion for 2006 alone – the first year that the program was completely phased in.

At first blush, this may not be deliberate hanky-panky and may be a strange confluence of mistakes and administrative failure (I’m choking back the obvious joke about the efficiency of the free market).  But we honestly don’t know.  Why?  The Centers for Medicare and Medicaid hasn’t checked.  CMS is required to perform an audit on 1/3 of the insurance companies participating in Medicare Part D.  In 2006, they were targeted to complete 165 of them.  Instead, they had started 7 of them as of April 2008.  Keeping in mind how difficult it may be to set up an auditing protocol from scratch, it took 28 months for you to do 4% of the audits you were supposed to do?

Epic fail.

Keep in mind that the way the contracts are set up, the insurance companies will face no financial penalties for failing an audit (we negotiated that out of the program, too).  But at a bare minimum, we could learn where mistakes were occurring – if that’s all they are, or even if it’s not -- and correct them, saving both the taxpayer and the senior on Medicare from getting ripped off in the future.  You’d think an audit process would be a good thing – that you'd learn how to make a new, expensive, untried system better, figure out the efficiencies, reward good providers.  But the now departed Bush Administration clearly wasn’t interested in that level of learning and accountability (if you have any doubts, how did that first set of TARP money work out?)  Now it’s the Obama Administration's turn to look not just at what Medicare Part D does wrong but how we can fix it -- and not just for Medicare's sake.  If we pass universal health care, it will be increased spending on par with Medicare Part D.  It will also be an opportunity for waste, fraud, abuse and gaming the system, no matter which system we establish.  To be blunt, we have to figure out how not to get fooled again.

And that’s only going to start with a good audit.  Where are the hero accountants when we need them?

(Photo credit:  Breakmold on Flickr.)