Posts Tagged ‘Health Care Financing Administration’

Federal Initiative Combats Medicare and Medicaid Fraud


Two programs—Medicare and Medicaid—provide the majority of acute medical and long-term nursing care for America’s senior citizens. In fact, those two programs provide over one third of all medical care for Americans of all ages. With the total cost of those two programs approaching $400 billion per year, efforts have intensified to cut the cost of medical care for the poor and elderly.

Health care rhetoric frequently focuses on fraud in the Medicare and Medicaid programs. Estimates of the extent and cost of fraud are difficult to come by, but range as high as $33 billion per year (see, for example, the National Center for Policy Analysis website at

In response to concerns about fraud in federal health care programs, the Administration in 1995 announced the formation of a program to find and eliminate fraud. Named “Operation Restore Trust,” the initiative claimed almost $25 million in returned program dollars in its first year of operation. Originally focused on the five most populous states, the program was soon expanded into smaller states, including Arizona. Other states and agencies have also begun concerted anti-fraud efforts.

The State of New Mexico, for example, recovered almost $2 million over a six-year period from a program focusing on criminal investigations and prosecutions. A single nursing home prosecution in 1997 returned over $100,000.

Much of the fraud uncovered by federal and state investigators is subtle. Earlier this year, for example, federal prosecutors in Florida indicted Jack Campo and five other men for allegedly participating in an illegal “kickback” scheme. Doctors are accused of accepting fees for referring patients for unnecessary tests and procedures; the total loss from the actions of the defendants is alleged to be over $1 million.

Fraud in Medicare and Medicaid is not always subtle. Operation Restore Trust has unearthed instances such as a van service billing $62,000 to transport a single patient 240 times in a sixteen-month period. In another case, a single psychiatrist billed an average of 26 sessions per day, each lasting 45 to 50 minutes.

This year, Operation Restore Trust will turn its focus to fraud in nursing home care. Four years of publicity and prosecutions may have caught some of the most flagrant instances of abuse, and deterred others who now fear the possibility of public exposure and prosecution.

For more information on fraud in the Medicare and Medicaid programs, visit the Health Care Financing Administration’s internet website at or the Administration on Aging’s site at (the AoA is a division of the Department of Health and Human Services).

Bipartisan Commission Fails To Propose Medicare Reforms

MAY 17, 1999 VOLUME 6, NUMBER 46

The National Bipartisan Commission on the Future of Medicare sounded like a good idea. Seventeen Commission members met for the first time in March of last year, and were scheduled to make a truly bipartisan recommendation on how to “save” the Medicare program by March of this year. On March 16, 1999, the Commission held its final meeting, and failed to make any recommendations at all.

The idea of a bipartisan approach to Medicare reform was written into the Balanced Budget Act of 1997. Its seventeen members included five U.S. Senators, four members of the House of Representatives, and a collection of doctors, nurses, health insurance industry leaders, lawyers and businesspersons. The final proposal was based on a concept of “premium support”–an idea that would require private providers and the existing Medicare program to bid for Medicare dollars, and guarantee Medicare recipients only so much coverage as the average bid would provide.

Although the final Commission report was not adopted, a majority of the Commission supported the premium support idea. Because Congress wanted to ensure that any recommendation was truly bipartisan, the Commission’s rules required eleven votes to adopt any proposal. Ten members supported the final report, so the idea of premium support might be expected to resurface in future Congressional actions. As Commission member Dr. Bruce Vladeck says: “In Washington, D.C., no bad idea ever truly dies.”

Critics of the premium support approach to Medicare reform sharply questioned projections of substantial savings from the proposed change to Medicare. Most economists challenged the assumptions on which the savings were based, and the Health Care Financing Administration (the government agency in charge of Medicare and Medicaid) estimated that the Commission’s approach would save no more than 2.5% of the future cost of Medicare–far short of what will be needed to avoid huge predicted shortfalls early in the next century.

Huge (and unanticipated) budget surpluses in the last two years have led some to question whether Medicare reform is such a pressing need. Nonetheless, the evidence indicates that legitimate concerns about Medicare’s future arise from expected demographic and financial changes, including:

Medicare’s Part A fund (which pays for beneficiaries’ hospitalization costs) is projected to “go broke” in 2008.
Annual Medicare spending, now at just over $200 billion, will rise to between $2 and $3 trillion by 2030.
Medicare beneficiaries are now paying just under one-third of the cost of their medical care. In 1995, that amounted to an annual average of $2,563 per beneficiary. That figure is expected to rise dramatically over the next few decades, and to rise more quickly than increases in the general cost of living. Incidentally, private employers and so-called “Medigap” insurance policies are currently paying about one-tenth of the beneficiaries’ share.
77 million “Baby Boomers” (those born between 1946 and 1964) will begin to qualify for Medicare in 2011. The total number of Medicare recipients will double, to over 80 million in 2040.
If no other action is taken, the Medicare payroll tax will have to increase from its current 2.9% to 5.6% by 2030.

Congressional Report Criticizes Monitoring Of Nursing Homes

MARCH 29, 1999 VOLUME 6, NUMBER 39

There are over 17,000 nursing homes in the United States, housing more than 1.6 million residents. The federal government will contribute $39 billion to the care of those nursing home residents in 1999. Recently, the U.S. Congress’ General Accounting Office (the GAO) was asked by five Democratic members to look into how well governmental monitoring works to ensure quality of care in those nursing homes.

The GAO looked at the database maintained by the Health Care Financing Administration’s (HCFA), the agency in charge of Medicare and Medicaid. The GAO also picked out 74 individual nursing homes in Pennsylvania, Michigan, Texas and California; each had received at least one referral to HCFA for failures in the past, and the GAO wanted to assess how well HCFA’s monitoring and compliance functions were working.

Each year, serious deficiencies in quality of care are reported in more than one-fourth of the nation’s nursing homes. The most frequent violations reported by HCFA include inadequate prevention of pressure sores, failure to prevent accidents and failure to assess residents’ needs and provide appropriate care. Even more alarmingly, 40% of the homes in which such problems were noted at the beginning of the study period still demonstrated similar problems three years later.

Although HCFA has the power to fine or otherwise sanction nursing homes, its practice is to give the nursing home an opportunity to first correct the problems. If a fine is actually levied, HCFA can not collect the fine during an appeal. The GAO described the usual scenario: HCFA notifies a nursing home of failures and threatens to impose a fine, but allows the nursing home to demonstrate that it has corrected its deficiencies. Then, on the next review, HCFA discovers that the nursing home has returned to its previous pattern of failures.

HCFA has a number of options for dealing with nursing homes which fail to meet standards. In addition to ordering a plan of correction, HCFA can fine a nursing home up to $10,000 per day, or can (working with state government) place a state-selected monitor in the nursing home to help ensure that the home complies with standards. At the extreme, HCFA and the state have the power to impose a substitute manager on the nursing home, or to deny Medicare and Medicaid payments for residents in noncompliant nursing homes.

Despite HCFA’s broad authority to force nursing homes to comply with minimum standards, the GAO report found that few sanctions are actually administered. Even when fines are levied, the nursing home can appeal the sanction and avoid payment until the administrative process is completed. The high volume of appeals (coupled with a shortage of hearing officers) has led to a backlog of over 700 cases, some dating back over three years. One single Texas-based nursing home chain, the GAO noted, has appealed 62 of 76 fines levied against its homes, for a total of $4.1 million.

The GAO report recommends that HCFA take several steps to improve its oversight of nursing homes. In addition to speeding up appeals , the GAO suggests that HCFA should terminate non-compliant homes from Medicare and Medicaid, and more closely monitor those homes readmitted to the programs.

A copy of the entire GAO report can be obtained online at, or by contacting the General Accounting Office.

Guardianship Fees Deducted From Patient’s “Share of Cost”


Mary Perry was admitted to a Massachusetts hospital in 1991. After treatment was completed, the hospital sought her discharge to a nursing home that November. Unfortunately, Ms. Perry lacked both capacity and resources.

The Massachusetts court appointed a guardian to make placement decisions for her, and she was promptly placed in an appropriate nursing home. A Medicaid application was completed, and Ms. Perry qualified for government assistance with her nursing home expenses.

Once Ms. Perry’s care was arranged and eligibility obtained, the Medicaid agency turned to the question of how much Ms. Perry would need to contribute (from her monthly Social Security check) toward her care. Ms. Perry’s “share of cost” was calculated, and payments began.

Meanwhile, Ms. Perry’s guardian sought approval of the fees and costs incurred in securing the guardianship, making (and implementing) the placement decisions and applying for Medicaid coverage. The Massachusetts court approved the guardian’s fees, and ordered that payments could be made from her monthly Social Security check.

Unfortunately, Ms. Perry’s personal needs allowance (the state Medicaid program was leaving her only a small amount each month) was insufficient to both provide for her personal needs and pay the accumulated guardianship fees. Ms. Perry’s guardian therefore applied for a reduction in the “share of cost” amount to permit the guardian’s fees to be paid. In support, the guardian argued that the fees were required to obtain medical care, and that medical expenses may be deducted from the share of cost amount.

Massachusetts’ Medicaid agency denied the request, citing HCFA (Health Care Financing Administration) regulations categorizing guardianship expenses as not related to medical costs. The guardian appealed to the state courts.

The Massachusetts judge has now ruled that guardianship costs are “necessary medical expenses” when they are required to obtain consent to medical treatment. Under the law of informed consent, Ms. Perry’s treatment could not be undertaken without approval from a surrogate; since she had made no provision for surrogates herself (such as by executing a power of attorney for health care), the guardianship was required before treatment decisions could be made. Perry v. Bullen, Mass. Super. Ct., May 31, 1996.

Arizona law is similar to Massachusetts’ provisions, and a similar result might be expected. ALTCS regulations provide that the share of cost may be reduced by a “noncovered medical or remedial expense” incurred during the three months before application, but then makes a list of allowable expenses. Not surprisingly, guardianship (or legal) fees are not included. ALTCS does permit “other non-covered medically necessary services which the member petitions AHCCCS for and which the Director approves,” (ALTCS Eligibility Policy and Procedure Manual §1016.2.C.2.b.vii) but it seems unlikely that would quickly concede the point.

Nonetheless, guardianship may legitimately be required before nursing home placement can be secured and an ALTCS application completed. How can these expenses be paid if the ward has no assets? One obvious choice is to make a referral to the Public Fiduciary’s office, but if family are actively involved they may be instructed to initiate their own proceeding. If family members are reluctant (or have insufficient resources to pay for the guardianship themselves), the facility may find itself at an impasse.

Relying on the logic of the Perry case, an argument can be made that the costs of securing the guardianship should be paid from the patient’s ultimate share of cost calculation. While this result might not be easily obtained, Perry gives valuable support.

Court Denies Family Claim For Unwanted Medical Treatment


When Edward H. Winter was hospitalized with heart problems in 1988, he told his doctor he did not want to be resuscitated if he suffered cardiac arrest. Mr. Winter had watched his wife slowly deteriorate and die from a heart condition a few years before, and he was adamant that he did not want to suffer the same fate.

Mr. Winter’s doctor agreed with his wishes, and took care to note on the hospital chart that no extraordinary life-saving procedures should be administered to Mr. Winter. Then his treatment at Franciscan Hospital in Cincinnati, Ohio, continued.

Shortly after his admission, Mr. Winter’s heart slipped into a potentially fatal arrhythmia. A nurse revived him with a defibrillator, and his heart rate was stabilized. Two days later, Mr. Winter suffered a stroke. His right side paralyzed and requiring total care, Mr. Winter lived for two more years.

Mr. Winter’s daughters sued the hospital for the $100,000 his two months of hospitalization after the stroke had cost. The trial court agreed, and awarded the family damages for the aftermath of the unwanted treatment. Franciscan Hospital appealed.

Ohio’s Supreme Court reversed the judgment, and ordered that the family should receive no damages. Although the court agreed that resuscitating Mr. Winter had been in violation of his wishes, they ruled that “there are some mistakes that people make in this life that affect the lives of others for which there simply should be no monetary compensation.”

The Ohio court decision was not unanimous. Three of the seven justices disagreed. Still, the result was described by the daughters’ attorney as showing that “the right to refuse treatment is a joke.”

What steps might Mr. Winter have taken to ensure that his wishes were honored? Apparently, he had discussed the matter with his physician, but that was not enough. Hospital staff should have been brought into the discussion as well. Perhaps the physician on call needed to be specifically advised.

Would the same result occur in Arizona? Very likely, unless Mr. Winter was adamant, his family was involved and the medical staff had been given clear and unequivocal instructions.

New ALTCS Eligibility Numbers Released

The Health Care Financing Administration has released new Medicaid long-term care (ALTCS) income eligibility figures for 1997. After January 1, applicants will be permitted to have income of up to $1,452 per month before becoming ineligible for long-term care. Last year’s eligibility number had been $1,410.

The new figures mean that a married couple can have up to $2,904 in monthly income and still have either spouse qualify for ALTCS eligibility. Of course, if the institutionalized spouse’s income is less than $1,452, he or she will still qualify regardless of the income of the community spouse.

Several other eligibility numbers will also change effective January 1. Those interested in more detail on ALTCS eligibility, the new figures and the application process (along with Medicare, guardianship and conservatorship and other legal issues) should consider the Arizona Long Term Care seminar presented by HealthEd, LLC.

PA Federal Court Settlement May Affect Arizona’s ALTCS


A settlement finalized last month in a Pennsylvania Federal Court may have some effect on Arizona’s ALTCS program. The settlement was reached in a three-year-old class action filed by Medicaid long-term care recipients and their non-institutionalized spouses.

Under federal Medicaid law, the non-institutionalized spouse of a Medicaid recipient is entitled to retain sufficient income to ensure basic necessities of life. Currently, this means that the community spouse is entitled to at least $1,295 per month; if the community spouse’s own income does not reach that amount, he or she is entitled to special treatment in the application process.

Pennsylvania previously interpreted that Federal provision the same way as Arizona currently does: when the community spouse’s income is insufficient, he or she was permitted to retain a portion of the institutionalized spouse’s income to make up the difference. The lawsuit challenged that approach. Instead, argued lawyers for Pennsylvania Medicaid recipients, the community spouse should be first permitted to retain additional assets (beyond those already permitted by separate Medicaid provisions, usually referred to as the “Community Spouse Resource Allowance”). The additional assets should be sufficient, they argued, to provide the required additional income. Only if the couple’s total assets were insufficient to ensure the $1,295 per month to the community spouse should the institutionalized spouse’s own pension income be tapped.

The effect of this approach would be to permit the spouses of many Medicaid applicants to retain significantly larger portions of their joint assets. In cases where the institutionalized spouse is the first to die, this would also help the surviving, community spouse to afford living expenses after Medicaid eligibility no longer made any difference.

Pennsylvania’s Medicaid agency has now admitted that its approach to calculating the “share of cost” (which was identical to Arizona’s methodology) was incorrect. Instead, community spouses will be entitled to keep sufficient assets to purchase an annuity large enough to make up the difference in income between the community spouse’s pension and $1,295. Hurly v. Houston, U.S. District Court, Eastern District of Pennsylvania, July 1, 1996.

Increases in Health Care Spending Slowed in 1994

Federal figures for 1994, recently released, show that the cost of medical care continue to rise at a rate faster than inflation. Still, the good news is that the increase was the smallest in three decades.

According to HCFA Review, the quarterly journal of the Health Care Financing Administration, the 1994 increase in medical costs was 6.4%. The smaller increase, however, was larger than the general increase in cost of living, with the result that the portion of our Gross Domestic Product devoted to health care also increased slightly, from 13.6% to 13.7%.

Of the $949.4 billion spent on health care in 1994, the federal-state Medicaid program accounted for $122.9 billion (or about 13%). Of that figure, the federal government contributed $78.4 billion and the remaining $44.5 billion came from state governments.

While overall health care costs increased 6.4%, Medicaid costs increased by 7.7%. This figure, like the overall health care costs, represented a decrease in the growth rate. Medicare, the federal insurance program for health care for the elderly and disabled, increased its outlays during the same period by 11.4%.

The 1994 figures represent an expenditure of $3,510 by each American on health care costs.

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