It’s not every day that your line of research gets mentioned in a press release from the federal government. On February 25, Secretary Robert F. Kennedy declared from the White House that Health and Human Services was “replacing the old ‘pay and chase’ model with a real-time ‘detect and deploy’ strategy.”
For Gies College of Business Assistant Professor of Finance Riley League, the statement was surprising. He and his coauthors have spent years documenting the failures of a “pay and chase” model by studying ambulance fraud – rides to and from dialysis facilities that don’t meet Medicare’s rules for reimbursement.
The announcement from HHS introduced a number of policy changes, including a moratorium on Medicare enrollment for certain durable medical equipment suppliers and a deferral of over $259.5 million in Medicaid funding to Minnesota pending a fraud investigation. But what caught League’s attention was the framing: a public shift away from the model he’d argued against in his research.
“It’s very exciting,” said League. “The big idea behind the research that we do is trying to influence the way that policymakers think about policy. So it’s really great to see the ideas that we’re encouraging becoming adopted.”
One “traditional” approach to combatting fraud, which Medicare relied on for years, is often called “pay and chase.” In that model the government pays for claims, detects irregularities after the fact, and then tries to recover the misspent money through litigation. League and his team have provided clear evidence that this cycle routinely fails. Bad actors are rarely deterred, and litigation only recovers a fraction of what’s lost to fraud.
By analyzing Medicare claims information from the United States Renal Data System, the researchers uncovered a pattern. In areas that shifted to require prior authorization for nonemergency ambulance rides, Medicare spending on those nonemergency rides dropped 68% – with no negative impact on patient outcomes. They estimate that changing the rules to require prior authorization in 2003 would have saved taxpayers about $4.8 billion.
“I really do think that our paper was lucky in its timing,” said League. “We came out and made this point that pay and chase can often fail. It’s not a brand-new idea, but it was one that was lacking a lot of empirical support and one that’s not often engaged in theory or academic literature. So, it worked out – we had this study that’s a great empirical test of how we’ve been doing things, at a time when there’s been a lack of satisfaction with the way we’ve been doing things.”
The alignment between HHS’ reform priorities and League’s research reflects a broader reality. The federal government spends hundreds of billions in Medicare and Medicaid expenditures and estimates that improper payments are costing American taxpayers quite a lot of money. The question of how to address that problem has fiscal and human consequences, but League and his coauthors have laid out a case that the federal government could better utilize data to cut down on fraud. Whether the policy outcomes match the administration’s ambitions remains to be seen, but the conversation is moving in a direction that League’s research has been advocating.