Washington View: President turns to the private sector



President Obama and the newly appointed congressional federal debt reduction committee will need to look under every rock to find ways to save money and do things differently. Now, they’re getting some help from the private sector.

In June, the federal Centers for Medicare and Medicaid Services awarded a four-year $77 million contract to Northrop Grumman to develop a detection system capable of stopping fraud before it happens.

Based on systems used in the private sector to detect credit card fraud, the technology, known as predictive modeling, will help identify fraudulent claims before they’re paid. This is a major improvement over current efforts that often depend on a tipster making a phone call long after millions in bogus claims have been paid.

“A decade ago, bringing down a fraud scheme usually started with a tip from an informant,” noted Health and Human Services Secretary Kathleen Sebelius. “But with more than four and a half million claims being paid out every working day from Medicare alone, we can’t afford to sit around and wait for tips to come in.

“So we’re turning to state-of-the-art analytic technology to help predict and identify fraudulent claims as soon as they are submitted, so we can stop payments before they’re out the door.”

The stakes are enormously high, as the massive Medicare and Medicaid programs have become targets of professional thieves.

According to The New York Times last October, a “band of Armenian-American gangsters” billed Medicare for more than “$100 million by inventing 118 bogus health clinics in 25 states.” The gangsters made off with $35 million in cash that cannot be recovered. That’s $35 million in tax money that won’t be available to pay for our grandparents’ medications or treatment.

Fraud rampant

Fraud is rampant in Medicaid as well. According to the Manhattan Institute’s Steven Malanga, “Abuses of Medicaid alone eat up at least 10 percent of the program’s total cost nationwide — a waste of $30 billion a year. Unscrupulous doctors billing for over 24 hours per day of procedures, phony companies invoicing for phantom services, pharmacists filling prescriptions for dead patients, home health care companies demanding payment for treating clients actually in the hospital — on and on the rip-offs go.”

Preventing billions of dollars in fraud each year is a critical goal as the Senate debt reduction supercommittee, co-chaired by Sen. Patty Murray, D-Wash., tries to find $1.5 trillion in savings over the next decade. If seven of its 12 members can’t agree on a plan or if its suggestions are not approved by Congress, it would trigger major spending cuts, including big reductions in the nation’s $533.8 billion defense budget.

If the defense budget gets whacked, Boeing will feel the blow. In 2010, the company made $31 billion from the defense side of its business, according to Defense News.

Hopefully, the administration will continue to reach out to the private sector and apply successful private-sector solutions to government problems. Our market-based entrepreneurial spirit made America great and it can help make us great again.

Don Brunell is president of the Association of Washington Business, Washington state’s chamber of commerce. Visit http://www.awb.org.