Medicare may start operating more like an insurance company by requiring prior authorization for expensive operations and procedures. Medicare has announced a test program to see how this might work, and it will focus on states where patterns of fraud and abuse are high. Good news for Arizona:  we’re not on the list!

Medicare Advantage plans, which are run by insurance companies, require doctors to get prior authorization for hospitalization (except in an emergency), operations of any kind, and many expensive procedures and tests like MRIs or CT scans. But Medicare does not operate this way, and the result is billions of dollars in payments for medical services that are not necessary.

Medicare isn’t going to require doctors to get approval before providing services, but doctors have been put on notice that their bills will be audited before they get paid. And if the auditors determine the service was unnecessary, Medicare will not pay the bill.

The full story can be found at Forbes. Here is an excerpt:

In Florida, in fact, 100% of stent, ICD, and pacemaker implantation procedures will undergo review before payment. Similar programs will take place in California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina, and Missouri, but the precise percentage and mix of cases that will undergo auditing has not yet been stated.

On November 15 the demonstration program was announced by CMS:

The Recovery Audit Prepayment Review demonstration will allow Medicare Recovery Auditors (RACs) to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments. These reviews will focus on seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO) for a total of 11 states. This demonstration will also help lower the error rate by preventing improper payments rather than the traditional “pay and chase” methods of looking for improper payments after they have been made.