Eliminating unecessary health care spending on fraud and abuse are two leading candidates to reining in unsustainable growth in health care costs. Despite ongoing, concerted efforts, making meaningful inroads has not been easy. This policy brief focuses on eliminating fraud and abuse in Medicare and Medicaid and explores the challenges involved in putting the new tools into place.

“Fraud” refers to illegal activities in which someone gets something of value without having to pay for it or earn it, such as kickbacks or billing for services that were not provided. “Abuse” occurs when a provider or supplier bends rules or doesn’t follow good medical practices, resulting in unnecessary costs or improper payments. Examples include the overuse of services or the providing of unnecessary tests. (Another area, “waste,” refers to health care that is not effective, and is the subject of a separate Health Affairs/RWJF Health Policy Brief published on December 13, 2012.)

Endowed with new powers under the Affordable Care Act and the Small Business Jobs Act of 2010, the Centers for Medicare and Medicaid Services (CMS) has been adopting new tools to curb fraud and abuse in the Medicare and Medicaid programs. The new approach amounts to a paradigm shift from the earlier model, in which CMS paid providers first, then sought to chase down fraud and abuse after the fact—a process known as “pay and chase.”

 

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