How to Invest in the New Medicare Audits

Posted on March 11, 2008
Filed Under General Rationing Issues, Wonkonian Rationing |

Several bloggers (including DB and Catron) have commented on the recent unleashing of Medicare’s “Recovery Audit Contractors.”

The RACs are a fun tidbit brought to us by the Medicare Prescription Drug Act of 2003. Under the RAC initiative, private contractors will soon be dispatched across the land to perform audits of billing already done by insurers, health plans and physicians. The objective is to find “overbillings,” which the providers will have to repay along with penalties. Further,the act explicitly allows for prosecutions to be brought for “fraud and abuse,” even if the providers have repaid any overbillings.

The purpose of the Recovery Audit Contractors will be, well, recovery. During the 3-year pilot of the RAC initiative, which took place in only 3 states, over $300 million were recovered. This wonderful success is the reason RACs are being turned loose everywhere.

The RACs are paid by commission. Essentially they are bounty hunters, and they get to keep 20% of whatever they collect. According to the Associated Press, hospitals and providers are just a tad worried that these contractors, being so generously incented, will prove a little overzealous in their enthusiasm to find fraud. But worried auditees should not look for sympathy from the public. “A little zealotry is what we’re looking for on the part of the taxpayers,” said Leslie Paige, spokeswoman for Citizens Against Government Waste. “We think it’s about time.” Indeed - everybody can get behind fighting fraud, which is what makes the fraud gambit such a powerful tool for covert rationing.

It is good to be an RAC, and, DrRich suggests, it would also be good to own stock in whichever companies are contracted to perform the audits. These outfits are about to harvest the vast bounty of obfuscation that Medicare has been carefully cultivating for 40 years, and has been carefully fashioning as fraud-traps for a somewhat shorter period of time.

DrRich has discussed on this site several of these fraud-traps. Boiling it down, NOBODY can interpret as a coherent document the 110,000 pages of turgid, incomprehensible, self-contradictory language that constitutes the Medicare regulations. And now, “nobody” officially includes Medicare itself.

This becomes apparent from a recent GAO report entitled “Improvements Needed in Provider Communications and Contracting Procedures.” The GAO report notes that the bulletins which Medicare carriers are required to send doctors periodically (to make sure they understand the regulations) are filled with dense, lengthy and poorly organized prose sufficient to make them unreadable. Even if they were readable, the GAO continues, these bulletins would do doctors little good since they routinely announce new regulatory policies well after the implementation date, when doctors will already have been guilty of violating such policies (and thus committing fraud). Finally, the GAO finds that when confused doctors contact the Medicare call centers for clarification on the regulations, they get the correct answer only 15% of the time. (Heck, even the IRS does substantially better than that.) And the Medicare websites, required under the regulations to clarify everything for the providers, universally lack “logical organization and navigational tools,” and as a consequence are nearly unusable.

So even when a doctor prospectively asks for instruction on how to comply with Medicare regulations (so as to avoid committing healthcare fraud and incurring huge fines and jail time) nobody is able to give him/her a straight answer. For, while it’s easy to look at a provider’s actions retrospectively (as the RACs are doing), and find something in the dense regulations that makes those actions imperfect, it’s not so easy to tell providers ahead of time how to navigate those regulations in pristine fashion. As the GAO report reveals, nobody knows how to do that.

This state of affairs is simply part of the covert rationing paradigm, of course. When your goal is to scare doctors into avoiding sticking their necks out for their patients, why would you want to give them a safe harbor for their actions?

So whoever you are, here’s a hot tip. Stop what you’re doing, find out which companies are doing these RAC audits, and buy their stock. These companies have a license to print money.

But DrRich is not here just to tell you what you already know. There’s a twist to this story you ought to take into account as you make your investments. Every time there’s an ostensibly cooperative effort between Gekkonians (in this case, the contractors doing the RAC audits) and Wonkonians (Medicare), there’s a back story that reflects the actual battle to the death in which these groups are engaged.

The RACs see the vast herds of providers (violators one and all) placidly grazing all across the fruited plains, just waiting to be harvested. Indeed, their chief problem will not be finding as much fraud and abuse as they want, but instead will be pacing themselves. If they harvest the herd with the enthusiasm of the Gekkonian buffalo hunters of the 1870s, then like those buffalo hunters, within a few years they’ll be out of business. On the other hand, killing off all the buffalo is just what the Wonkonians want them to do. Like their Wonkonian forebears of the 1870s, their real motive is to place the groups who depend on the buffalo for their survival in a state of penury, to break their independent spirit, to make them entirely dependent on the government, and at last bring them slouching onto the reservation. Once Wonkonians drive enough providers from the field, the beleaguered American patient and their remaining doctors will have no choice but to turn to the government for their healthcare. (A winning strategy here will obviously require the Wonkonians to vanquish all the private insurers before they cause all the doctors to leave medical practice, a strategy not without substantial risk. They will need to find ways of making it “inadvisable” for doctors to leave medical practice altogether; DrRich is confident they’ll be able to manage this aspect of the problem.)

In any case, if you do buy stock in the RAC companies, be sure to sell before the inevitable collapse.

Comments

One Response to “How to Invest in the New Medicare Audits”

  1. Dr. Val on March 11th, 2008 9:10 pm

    This is so depressing, Dr. Rich. Can you tell me a happy story before I resort to drinking on the reservation? ;p

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