Medicare could be losing up to $3 billion a year to non-compliance and fraud, an independent review has found.

The federal government commissioned health economist Dr Pradeep Philip to conduct the Review into Medicare Compliance and Integrity last November in response to what it said were concerning reports about potential rorting and fraud.

It’s the latest in a string of reports dating back to 2016 which have highlighted the loss of billions of dollars a year, authored by bodies including the national audit office.

Among them was a paper by researcher and Medicare expert Margaret Faux, who put the leakage at $8 billion a year.

Dr Philip concluded that “on a conservative definition of non-compliance and fraud it is entirely feasible the value of non-compliance could exist in the range of $1.5 billion to $3 billion”.

He also warned “there is real potential for the problem to scale to the order of magnitude in Dr Faux’s analysis should effective controls, systems and education not be put in place.”

Errors, rather than fraud

Dr Philip said key factors were a tangled, impenetrable compliance system and a lack of oversight.

“At the core of all this … lies the complexity of the system, the lack of clarity of many aspects of the compliance system … and lack of continuous monitoring,” he writes.

“Legislation, governance, systems, processes, and tools are currently not fit for purpose and, without significant attention, will result in significant levels of fraud.”

He also cited poor software accreditation, practitioners trying to avoid “an administrative burden”, corporatisation of the system, inadequate training, and time pressures.

“As the health system as evolved, governance of the compliance system of MBS payments is now inadequate – running the risk of piecemeal approaches to compliance and fraud and no holistic understanding of major trends and changes in the nature of healthcare delivery,” he said.

However Dr Philip he said most of the leakage came down to errors rather than “premeditated fraud”.

Labyrinth-like structure

The Australian Medical Association said the review showed that compliance issues in the Medicare Benefits Schedule (MBS) were overwhelmingly caused by the complexity of the system, rather than a lack of practitioner integrity.

“Today’s report confirms what we already knew, that Medicare is too complex and not keeping up with modern medical practice,” President Professor Steve Robson said.

Today’s report confirms what we already knew, that Medicare is too complex and not keeping up with modern medical practice

Professor Steve Robson

“This leads to mistakes in billing by doctors trying to map best-practice patient care to an out-of-date system, exacerbated by a lack of education and definitive advice about how to correctly bill some Medicare funded services.

“The report also highlights how Medicare’s labyrinth-like structure has not kept up with the community’s needs, the burden of disease or evolving medical care.”

The Review makes 23 recommendations, including:

• Strengthening governance models

• Removing the veto power of professional bodies like the AMA in the selection of the head of the Professional Services Review, which acts as the system regulator

• Amending Medicare integrity legislation to make sure it’s fit for purpose.

• Improving the detection and disruption of fraud and non-compliance

• Improving clarity for health providers through system improvements, simpler policies and better education of policy

• Improving technology and systems capabilities across Medicare.

Health minister Mark Butler says the government is working on a response to the review.

“The government is considering the recommendations in Dr Philip’s review and will now work closely with health professionals, patients and peak bodies to develop a comprehensive response,” he said in a statement.

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