The Honorable Orrin Hatch
The Honorable Ron Wyden
U.S. Senate
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
We, the undersigned, representing a broad coalition of consumer advocate, senior protection, and free market groups, write to express our support for a legislative effort in your chamber to help combat fraud in government health care programs. We understand that several Members of the Committee on Finance are working on a Senate version of the bipartisan Fighting Fraud to Protect Care for Seniors Act of 2018 (HR 6690), which recently passed the House by voice vote. The Senate should make enactment of this bill in the remaining weeks of 2018 a priority. While we represent a diversity of views on the future direction of health care policy, all of us strongly believe that this legislation will bring an important private-sector fraud prevention tool more fully into public sector-service, thereby protecting vulnerable beneficiaries, improving the patient experience, and safeguarding taxpayer dollars.
Federal health care programs have long been plagued by improper payments, one component of which is attributable to fraudulent activities such as identity theft, billing for services never rendered, or falsifying patient records to obtain prescription drugs illicitly. A 2012 study led by former Director of the Centers for Medicare and Medicaid Services Donald Berwick pegged the fraud rate alone (as opposed to other types of improper payments) in Medicare and Medicaid at between 3 percent and 10 percent of all dollars spent. In 2016 GAO estimated that smart cards could have impacted roughly one in five of health care fraud cases it examined from 2010 on the federal level. Companies that have experience with developing smart cards provide much higher estimates of this salutary effect.
Even accepting Berwick’s or GAO’s lower-end calculations, however, it is clear that the federal government could realize reduced fraud costs of several billion dollars annually with an aggressive smart card initiative for Medicare and other federal health programs such as Medicaid and the Children’s Health Insurance Program. Instituting a pilot project for this technology, is an appropriate and proper place to begin this transformation.
A variety of responses are required to reduce improper payments in federal programs, but one of the more promising -- and least controversial -- remedies should be smart card technology. HR 6690 aims to create a pilot program within Medicare employing “secure, electronic authentication of the identity of a Medicare beneficiary at the point of service through a combination of the smart card and a personal identification number known by or associated with such beneficiary.” The result would be a system highly resistant to improper payments, with sufficient data capacity on each beneficiary’s card to significantly reduce other undesirable outcomes such as prescription abuse. In addition, adopting these innovative security tools will better equip seniors to protect themselves from the possibility of identity theft, a growing problem in an ever digitizing world.
To private businesses, smart card innovations have already made eminent sense. A 2010 Federal Reserve analysis pegged the rate of loss on U.S.-issued credit and debit cards at roughly $0.05 for every $100.00 of transactions. Since that time, such losses have likely remained under control, given that the financial industry increasingly embraced smart card features such as PINs and embedded chips. Meanwhile, Medicare Part A and Medicare Advantage have for several years struggled to bring their rate for improper payments of all types below $10.00 per $100.00.
Current improper payment reduction efforts will likely continue to produce only incremental gains for taxpayers. Meanwhile, consumers (especially seniors) will remain susceptible to financial and medical harm from insufficient information security in federal health care programs. The government must do better, and HR 6690 is one vital way of demonstrating this commitment. Accordingly, we ask that you give urgent consideration to a Senate companion for HR 6690, and move this critical reform to enactment as swiftly as possible.