Can Smart Cards Save the Medicare System 30 Billion Dollars Per Year?

Last updated: 05 February 2015

Fraudulent claims and identity theft are widely known as the bane of the Medicare system, as it suffers more than $60 billion in fraud every year through practices like phantom billing and durable medical equipment fraud.   The system in place pays first, and then chases the fraud after the fact.  Wouldn’t it be better to combat fraud before it happens?

US Senators Mark Kirk, Ron Wyden, Marco Rubio and US Representatives Jim Gerlach, Earl Blumenauer and John Shimkus agree.  They recently introduced legislation to use smart card technology “to combat a reported $60 billion lost to waste, fraud and abuse within the Medicare system.”

The idea is to use smart cards to verify the identities of Medicare patients in a privacy-enhancing way and make billing transactions more secure by also verifying the identities of the providers and suppliers – those who submit claims to Medicare.   The legislation recommends using the same smart card technology used by the United States Department of Defense (DoD) for their Common Access Card (CAC) program.  Of the 20 million CAC cards issued, the DoD says that not a single one has ever been counterfeited.

This is what Senator Kirk had to say about the proposed Medicare CAC card:
“Building on the smart cards already issued to all Americans in uniform, we can offer seniors more protection for their identities while reducing fraud and waste in the strained Medicare system. By removing a senior’s Social Security number from the front of the card and including the security upgrades used on the cards of our troops, this Secure Medicare Common Access Card will also help end Medicare’s current “Pay then Chase” policy that allows so much fraud and waste.”

The Medicare CAC card is a great proactive solution that will make the healthcare system more secure and efficient for senior patients and health care providers alike.  By combining electronic claims and smart cards, phantom billing and upcoding will be a thing of the past.  To protect provider privacy and security, using stolen NPIN (National Provider Identification Number) to submit a claim unbeknown to the victim, the provider, will also be mitigated.  It is already endorsed by AARP, Secure ID Coalition and the Smart Card Alliance, and I can see many more organizations following their lead.

It’s estimated that this new system would cost $19 per beneficiary  in cards, card readers and other infrastructure if it were to be deployed on a nationwide scale.  It is estimated that system would eliminate 50% of the fraud or $30 billion annually.  Nineteen dollars per person to save $30 billion dollars a year?  Sounds like a “no brainer”.  Prevention is better than cure after all.