Wednesday, October 07, 2009

How Do We Keep Gov't. Honest? Medicare Denies More Insurance Claims Than the Private Sector

The purpose of the American Medical Association's "2008 National Health Insurer Report Card" is to provide physicians and the general public a reliable and defensible source of critical metrics concerning the timeliness, transparency and accuracy of claims processing by the health insurance companies that are responsible for paying these claims. Billions of dollars in administrative waste would be eliminated each year if third party-payers sent a timely, accurate and specific response to each physician claim.

An analysis of almost 10,000,000 insurance claims by the AMA to seven private insurance companies and Medicare between March 2007 and March 2008 reveals that more than half a million (574,591) claims were denied, and the chart above displays the percentage of claims denied by each insurer during that period. Medicare led the group with the greatest percentage of insurance claims denied (6.85%), more than double the denial rate for private insurers like UHC (2.7%), Coventry (2.9%), Humana (2.9%) and CIGNA (3.4%).

David Weinberger writes yesterday on the
The Heritage Foundation Blog that:

The Obama administration repeats ad nauseum that we need a government option to “keep insurance companies honest” and to make sure they don’t deny anyone coverage. Well what does one say about the fact that Medicare denies more claims than private insurers?

Update: Details on "Denial of Claim":

Description: What percentage of claim lines (i.e., records) submitted are denied by the payer for reasons other than a claim edit? A denial is defined as: allowed amount equal to the billed charge and the payment equals $0.

19 Comments:

At 10/07/2009 11:33 AM, Anonymous Anonymous said...

Interesting numbers, but meaningless without a definition of denying a claim. There is a big difference between never paying the claim and not paying it on first submission.

 
At 10/07/2009 11:46 AM, Blogger Bill Hartman said...

Very Good Point on Previous Comment:

Interesting numbers, but meaningless without a definition of denying a claim. There is a big difference between never paying the claim and not paying it on first submission.

But that goes for everybody! Not Just Medicare Denials. Working with Medicare and Private Insurance for over 25 years. I've seen more headaches and problems the more government gets in involved.

 
At 10/07/2009 11:55 AM, Anonymous Anonymous said...

Medicare denials are not high enough! I'm wondering if comparing managed care to medicare is like comparing apples to oranges.

Here's why: managed care works on the principal of requiring pre-approval or following a protocol before a procedure would be authorized. In other words, there is a pre-screening before there is even a denial--some things never happen because they do not fit in the managed care protocol.

Medicare works differently. Doctor manages the care and medicare pays. There is no pre-screening and prior approval or protocol.

That is why it is surprising to me Medicare denials are not higher.

Now, if you want to talk about reform, one of the proposals is pay for performance. Rather than paying doctors and hospitals for procedures and pay them based on DRG, you pay them for outcome: if a patient presents him/herself with condition x, you get payment y no matter how many, or how few, procedures, so long as the outcome is w.

And, by the way, many Blue plans are the managers of medicare. It is not the government, it is a subcontractor.

 
At 10/07/2009 12:15 PM, Anonymous Anonymous said...

Is it possible that this is because Medicare gets more fraudulent claims than the private insurers ?

 
At 10/07/2009 1:09 PM, Blogger Pranav said...

Anonymous, how about other reforms, such an getting rid of mandated insurance by government? Excess insurance - to pay for even colds - is not really insurance at all. One insurance employee for every two doctors in the US is a huge overhead to support, costing $500 per person annually.

In addition, doctors are incented to perform extra procedures to avoid lawsuits and increase revenues, but enabled largely because the patient doesn't care - insurance is paying. Overuse drives cost. And we know we have overuse of health care. In no other industry does this happen, and in no other industry do costs rise as quickly.

We might also try to get rid of government involvement if only because it attracts special interests and corporations who use it to protect its market share:
NYT: http://www.nytimes.com/1986/06/29/business/curbing-the-supply-of-physicians-who-said-we-have-too-many-doctors.html?scp=3&sq=ama%20restricts%20doctors&st=cse

Internal Memo Confirms Big Giveaways In White House Deal With Big Pharma http://www.huffingtonpost.com/2009/08/13/internal-memo-confirms-bi_n_258285.html

The Health Insurers Have Already Won: How UnitedHealth and rival carriers, maneuvering behind the scenes in Washington, shaped health-care reform for their own benefit
http://www.businessweek.com/magazine/content/09_33/b4143034820260.htm

We can't afford such corruption. The CBO has said that the "reform" is not deficit neutral but increases costs, and the Fed has said that our debt is already $1.3m for a family of 4. Government's $100T debt, equivalent to $1.3m per family of four.
From FED on ~$100T unfunded liability http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm

More government is just not sustainable.

 
At 10/07/2009 2:15 PM, Anonymous Anonymous said...

Pranev,

Please don't ask me to pay for your healthcare. If you are sincere, please wear a non-removable titanium bracelet with the following inscription:

"If I do not pay you, you shall deny me treatment as I would deny others under the same circumstances."

If you have no insurance, right now I am paying for your healthcare with my insurance premiums.

The government should not have to mandate what people should do for themselves. Don't you agree? And, if they do not do it for themselves, they should suffer the consequences of their decision. Don't you agree?

 
At 10/07/2009 2:54 PM, Anonymous Kurt Brouwer said...

The definition of claim denial is in the report. Essentially, it is considered denied when the payment is zero.

The 2009 report is out and Medicare is #2, not #1. Medicare is also well above the private insurer average again.

 
At 10/07/2009 3:46 PM, Anonymous Anonymous said...

Went to the AMA paper to see what the reason was for denial of coverage. Afterall, a headline might not tell the full story. So, those of you who want to have medicare pay claims for the following, please raise your hands:
1. Claim not sent to the right payer; person not covered by medicare.
2. Patients name and insurance number do not match
3. Patient cannot be identified as being Medicare's insured
4. Patient enrolled in hospice (separate category of treatment)
5. Procedure not covered by Medicare.
6. Routine physical exam not covered by Medicare.

Alright, who wants to pay for this? Why should Medicare be criticized for denying these claims? And, by the way, the subcontractor who denies the claim is usually the Blue Cross plan which is the administrator for the government.

 
At 10/07/2009 3:53 PM, Anonymous Ab said...

anon,

The bulk of private claim denials also fit along the lines you just metioned.

 
At 10/07/2009 5:34 PM, Anonymous Dr. T said...

Most people do not realize that Medicare claims are not sent to a federal office in Washington. Medicare divided the country into regions, and each region has a third-party contractor that handles the claims and pays the valid ones. Each contractor has its own rules for reviewing claims, and is not required to tell providers what the rules are. Many claims are denied based on arbitrary formulas such as number of tests in a day. So, for example, if a dialysis patient has problems with potassium, the lab might get paid for the first two potassium tests but not the third (despite the test's medical necessity). In the laboratory world, Medicare denials greatly exceed those of insurers, because the Medicare contractors earn more money by allowing fewer claims. On low dollar amount denials such as lab tests, the Medicare payments would be less than the cost of fighting the denials, so the contractors get away with inappropriate denials.

Medicare saves money by screwing health care providers (who then have to raise their charges to everyone else to stay in business). This is an invisible tax known to only a few (exactly as the government wishes).

 
At 10/07/2009 10:47 PM, Blogger Pranav said...

Anonymous said: "If you have no insurance, right now I am paying for your healthcare with my insurance premiums."

Actually I do have insurance but funny, Anonymous, that you avoided the points I raised about the insurance mandates and corruption introduced by government interference in HC which reduces competition, eliminates the cost-reduction and quality improvement incentives necessary to make any free-market function, and dramatically increases costs so its next to impossible for individuals to pay for our own health the way we pay for most things - out of pocket. The "reform" being proposed would eliminate our ability to purchase catastrophic insurance. None of this prevents the government from providing vouchers for those in need. But it does suggest that the state should not run the health care system. Our inability to pay for it given that $100T unfunded liability is reason enough.

See if you can stay with me on this one without changing the topic as you did last time.

 
At 10/08/2009 9:10 AM, Anonymous Anonymous said...

Pranev,

Actually, I agree with some of the points you raised, but disagreed with anyone's right to get a free ride by not buying insurance.

Glad you have yours.

 
At 10/08/2009 9:29 AM, Anonymous Anonymous said...

Pranev,

Now that we agree on the need for everyone to have insurance, I do want to clear up one thing which always bothers me, not because there isn't some truth to it, but because people misunderstand the words and are twisted by it. And, that's the word "unfunded liability". First, before we get flamed on this, let's understand that we are running deficits. We have no disagreement there. But, as for future obligations (assuming they are not modified), ALL obligations--including military spending obligations--are unfunded in the same sense as other obligations: offsetting tax revenue has not come in yet. It's sort of like saying General Mills has "unfunded" bond obligations; yes, currently General Mills does "unfunded" bond obligations, as does any corporation which uses debt and which has not yet raised revenue, be it from selling Cheerios in the future, or collecting taxes on revenue (without changing rates) in the future. The real question that should be asked, before twisting peoples shorts with higher numbers, is what is the net unfunded liability. The problem here is that depends on growth rates, interest rates, etc. Not so exciting as using the big "unfunded" term as used in the first sense mentioned above, but far more important: if what we do leads to greater efficiency, lower costs, etc., the net result may be better. I don't know. But, that is how the debate should RATIONALLY
be conducted.

Now, as to mandates--requiring everyone to have insurance--we apparently have no disagreement that there should be no free riders. What concerns me about mandates is not that everyone have insurance, but a concern about what should be in the policy. What happens in public discourse is that people focus on one issue--mandatory insurance--while ignoring the less sexy issue of what is mandated coverage. Is it catastrophic, should it be coverage that exceeds your capacity to pay for claims from your own assets, should it include (God forbid) chiropractic care, etc.
Maybe those who want to see people distracted on side issues such as mandatory coverage are happy that no one is discussing the real issues. Maybe, as to the 'unfunded' point made above, people are happy that they can lead others by the nose because they do not understand, or have not considered, what the term is or how it is misused. All of this impedes rational discussion.

 
At 10/08/2009 9:40 AM, Blogger jakalant said...

Anonymous,

I agree with your conclusion, but how are you sure that it is the managed Medicare plan where many of the denials are occuring?

 
At 10/08/2009 11:22 AM, Blogger Pranav said...

Anonymous,

The net unfunded liability in May 2008 was almost $100T. Its worse now. Our demographics and economic expansion rates, along with a more competitive global economy are going in the wrong direction for us to ever pay for our military ambitions and entitlement programs (especially Medicare.) Our Ponzi scheme will run out. Companies do get taken over by creditors. There's no comfort to be taken in knowing that companies too have unfunded liabilities. I know you know this but I had to make the point.

Actually vouchers or any government assistance implies free riders (on the public purse) too. My preference is charity (free riders on the private purse) over government vouchers, which becomes feasible if you restore a competitive market through the elimination of government interference and advantageous treatment of powerful interests, and reduce taxes by first eliminating massive government costs imposed on the economy. Americans are already far better at charitable giving than Western Europeans, per The Economist. We'd only improve.

There *should* be mandate on how much coverage a person carries. Will this lead to some who don't have enough and need to rely upon private charity? Yes. Will it lead to massive abuse? History suggest otherwise.

 
At 10/08/2009 12:09 PM, Anonymous GregL said...

If you read the details, you will find that 2 frequent reasons for denial (#27 and #29) appear under private insurers and not under Medicare are:

#27: Expenses incurred after coverage terminated.

#29: The time limit for filing has expired.

This speaks directly to the private insurance providers known perpensity for simply not paying for covered health care.

 
At 10/08/2009 12:39 PM, Anonymous Anonymous said...

Jakalant,

From the AMA data I can't tell whether managed medicare falls under the insured category (United HealthCares, Aetna's program of managed medicare) or whether it falls under the category of Medicare. I suspect the former and not the latter, but have no factual support so that's where it is. But, it is also true that most of medicare is not managed medicare, and for that reason, the prescreening effect is likely dominant. Ah, the world is always complex, and it is good to have a discourse with those who realize it is.

 
At 10/08/2009 3:32 PM, Blogger Pranav said...

I meant to say "There should NOT be mandate on how much coverage a person carries." Compulsion is a poor method of choice and you can never have just a little bit.

 
At 10/08/2009 8:48 PM, Anonymous Roxanne said...

I don't know how? Whatever we do, humans as we are there is no trace of honesty in us unless we are God fearing and led by His words.

 

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