Medicare Asks Questions First, Pays Later

Beginning in 2011, new legislation requires the Centers for Medicare & Medicaid Services (CMS) to do away with its age-old fast food methodology of paying claims first and asking questions second—otherwise known as “pay and chase”—and adopt billing software designed with predictive modeling capabilities.

An anti-fraud provision of the Small Business Lending Act, signed into law Sept. 27, requires Medicare to flag suspicious claims using software similar to what credit card companies use to detect questionable charges. Medicare contractors are expected to begin processing hospital and outpatient claims using this billing software in 10 states with the highest Medicare fraud rates by July 2011.

After the first year of operation, the Office of Inspector General (OIG) will report to Congress on the actual savings. If the savings are significant, some of the money will be used to expand the program to 10 more states, according to a California Health Advocates (CHA) Oct. 4 blog entry.

The cost of the new billing technology could reach an estimated $930 million over the next decade, according to the Miami Herald, but Sen. George LeMieux (R-FL), who sponsored the anti-fraud bill, said the anticipated savings would far exceed that expense.

Peter Budetti, CMS deputy administrator for program integrity, told the Miami Herald, “The truth is, we already have the authority to use predictive analysis and we’re already doing some of this.”

According to the CHA blog, CMS has already started a pilot program with predictive capabilities for suspicious claims, providers, and facilities; and under the Patient Protection and Affordable Care Act, Medicare can suspend payments to a provider if there has been a credible allegation of fraud, including consumer tip-offs.

Two new fact sheets on outline Medicare fraud prevention and detection tools made available through health care reform, and discuss the higher penalties for fraud and the movement away from the “pay and chase” model.

  1. Fact sheet 1:  Summarizes the new tools to fight fraud.
  2. Fact sheet 2:  Focuses on prevention vs. pay and chase.

5 Responses to “Medicare Asks Questions First, Pays Later”

  1. JoAnn Kubica says:


  2. Patricia S says:

    Just another way they have created to stop paying and force the medical community to suffer. Maybe I should switch careers.

  3. sharonrose says:

    The article states after initial evaluation, they will expand the program to 10 more states; what states are they doing this pilot program???

  4. Carrie C says:

    I work for an IPA, and I see claims submitted all the time with unsupported E&M codes with same-day procedures, wrong CPT coding for skin biopsies, etc, etc, etc. If Medicare is paying these charges (as we have done in the past), there is a HUGE amount of money being paid erroneously. They SHOULD be looking at this VERY closely, as many billers/physicians simply submit wrong charges, whether through ignorance or intentional fraud.
    All of us pay the price for these overcharges in the end, as Medicare is a government run agency.

  5. Nicole A says:

    I agree with you Carrie C. What I do not understand is why they could not have been watching more closely to begin with? Of course when anyone breaks the rules everyone has to pay for it.

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