A recent audit by the Office of the Inspector General for Health and Human Services found that in four out of five cases when elective surgeries were cancelled for one reason or another, Medicare still paid even though the claims submitted by the hospitals failed the "reasonable and necessary" standard. The OIG estimated that for the two-year period audited, the errors resulted in over $19 million per year in overpayments (emphasis added):
Most inpatient admissions related to short-stay hospital claims involving canceled elective surgeries were not reasonable and necessary. For 80 of the 100 claims in our sample, Medicare made payments totaling $345,717 for hospital inpatient claims involving canceled elective surgeries when a clinical condition did not exist on admission or a new condition did not emerge after admission that required inpatient care. Therefore, these inpatient claims did not satisfy Medicare’s requirements that the admissions be reasonable and necessary...
On the basis of our sample results, we estimated that Medicare made $38.2 million in Part A inpatient hospital payments in CYs 2009 and 2010 for short-stay, canceled elective surgery admissions that were not reasonable and necessary. Hospitals may bill Medicare Part B for services related to the incorrectly billed Medicare Part A admissions.
In its response to the audit recommendations, the Centers for Medicare and Medicaid Services noted that it may have difficultly researching and recovering the overpayments in full:
Of the 80 sampled claims with overpayments valued at approximately $345,717,27 representing a value of approximately $116,342 cannot be reopened as a result of the claims being beyond the four year reopening period or are uncollectible for other reasons.
For the remaining 10,915 claims not included in the audit, CMS noted follow up was unlikely due to "resource limitations."
With the increased responsibility the federal government will be assuming in 2014 with the launch of Obamacare, the results of this audit cast doubt on the ability of the government to keep up since "resource limitations" are likely to persist. And since the administration is counting on squeezing hundreds of billions in savings out of Medicare in the coming years, the 80 percent payment error rate found in this audit is anything but encouraging.