Combating Health Care Fraud, Abuse and Waste

Our health-care system is broken in many ways and legislation is not likely to solve the problems. In 2009 we each spent about $8,000 on health care. That totaled $2.5 trillion or almost 18 percent of the nations gross domestic product. Unfortunately about one quarter of that was budgeted not for health care, but for fraud! Here are some recent fraud statistics.

• Medicare and Medicaid billing errors resulted in improper payments of $108 billion.

• Fraudulent claims for Medicare accounted for $33 billion in losses.

• Improper private-pay payments cost about $100 billion.

• Health insurance fraud costs us about $68 billion.

• Fraudulent insurance payments cost us $50 billion.

• Payments for medical errors run about $38 billion.

• About 10 percent of prescription drugs are counterfeit, costing about $12 billion a year.

All of this means that we are wasting about $25 million per hour on medical fraud, waste and abuse. That’s way too much and it is something that all of us should be concerned about because, one way or another, we all pay for it. We pay for it in higher taxes, higher medical costs, and higher medical insurance premiums. The government doesn’t “eat” the cost of medical fraud, waste and abuse. Neither to insurance companies or doctors. The costs, as with all frauds, are just passed on to the consumers. You and me. We pay for the frauds.

Medical fraud is committed everywhere, by just about everyone. Here is a short list of groups that commit health-care fraud. Recognize any?

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Who Commits Medical Fraud

• Criminal groups

• Employees who approve claims for themselves or friends

• Providers

• Vendors and suppliers

• Insured patients

• Uninsured patients

One of the attributes of the this system that makes it so susceptible to fraud is that so many players are involved in providing services to a patient and then paying for that service. The initial players in the system are the patient and the care provider. However, it doesn’t stop there. Once the patient has seen the provider the payer (patient, insurance company, government) step into the process. They are followed by the employer how may pay all or part of the patient’s insurance premiums and/or pretax medical savings accounts, and vendors (for examples, drug stores, pharmaceutical companies, medical equipment vendors and manufactures). Medical frauds are complex and often include at least three of these players.

Fighting Fraud, Waste and Abuse

So what can be done? We don’t need another study conducted by a government panel. We do need action. The place to start is with consumers and citizens. A comprehensive fraud prevention program to combat fraud starts with anti-fraud education for consumers and citizens. Everyone needs to know how pervasive is medical fraud and what it cost each one of us. An effective anti-fraud program begins as the grass-roots level with consistent and comprehensive attention. One story in the main-stream media every six months will never be enough. Only when citizens know what the problem is and what it costs will they being fight against the status quo.

The more technical elements of an anti-fraud program to combat health-care fraud, waste and abuse include:

• Fraud prevention programs – internal control systems within all health-care organizations to make it harder for individuals to commit fraud. Adequate review and approval processes coupled with good supervision are the keystones of an internal control system.

• Fraud deterrence programs – activities that increase the probability that fraud will be detected if it exists. The most common example of a fraud deterrence program is the conduct of frequent pro-active fraud audits. These are audits that are conducted to uncover fraud when there is not indication that fraud exists.

• Fraud detection programs – data mapping, mining and analysis process to detect fraud when it exists.

• Fraud investigation programs – reactive auditors and investigations conducted when there are indications that health-care fraud has been committed.

• Fraud loss recovery programs – the payer, either an insurance company or the government, must recover funds lost through medical fraud and abuse. The U.S. Code 18 U.S.C. Sec 983(c)(3) claims to right to force property forfeiture if the Government is able to establish that property was used, facilitated or was involved in the commission of a criminal offense, and that there was a substantial connection between the property and the offense.

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• Fraud perpetrator punishment – individuals who commit fraud perform a cost-benefit analysis and usually determining, at least subjectively, that the cost of fraudulent activities (the risk of detection, prosecution and punishment and the cost of the penalty imposed if punished) are less than the assets (money) gained through the fraudulent activity. When perceived benefits greatly out weigh perceived costs fraud becomes a rational economic decision. Only by increasing the probabilities of detection, prosecution and punishment, and the severity of punishment can the cost-benefit analysis be skewed so that costs are greater than benefits.


The battle against medical fraud, waste and abuse starts with you. Become an informed consumer. Let your representatives and senators know that you are tired of paying for medical fraud. After all, the money that the government spends is your money. Ask your doctor and other health-care providers what they are doing in their offices to reduce the risk of fraud. Send a note to your insurance company and ask what they are doing. You might provide them some suggestions from the list above. Become a grassroots activist in the fight against fraud and abuse. You can help reduce medical care costs.

Source by David S Murphy

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