More comments on Healthcare Fraud

According to a paper published last year by the National Health Care Anti-Fraud Association, there was nearly $2.3 trillion spent on health care in 2007, with somewhere between 3% and 10% ($70 – $230 billion) of that lost to fraud. The federal government estimates annual losses to public insurance plans (Medicare/Medicaid/VA, and the various Federal Employees Insurance Plans) to be somewhere north of $60 billion. Doing the math it appears conceivable that as much or more fraud exists with private insurers as with our current public options.

NHCAA estimates that every $2 million invested in fighting health-care fraud returns $17.3 million in recoveries, court-ordered judgments, denial of bogus claims, and related anti-fraud savings. The average private health insurance company Special Investigative Unit (SIU) has an annual budget between $1.9 and $2 million, employs a fulltime staff of 19, maintains 363 open cases, and worked 791 cases in 2007 (last year for which data was available). About 75% of these SIU’s employ forensic data fraud-detection software.

A George Washington University Medical Center paper, released in June, produced figures similar to the NHCAA’s, and detailed fraud schemes used by the offenders. Miscoding or up-coding, double billing, kickbacks, unbundling of procedure charges, forum shopping, ghost patients, unnecessary procedures, and billing for procedures that were never performed the most prevalent.

The paper’s authors called the issue "a systemic problem affecting public and private insurers alike, in the individual market, the employer-sponsored group market and public programs."

Private medical insurance providers are targets for those who would commit fraud. Some fraud is simply opportunistic, and healthcare providers commit a fair share, but the same organized criminals targeting the public payers perpetrate the lion’s share.

Although private insurance fraud probably equals or surpasses the public options, large Medicare and Medicaid fraud convictions get more press. There are several reasons for the publicity disparity. The federal government is required to report fraud in the government programs, and does so in semi-annual reports issued by the U.S. Health and Human Services – Office of the Inspector General (HHS-OIG). The trials of those violating the Federal False Claims Act are held in federal courts, prosecuted by ambitious Assistant U.S. Attorneys eager to see their name in print. Private insurance frauds are generally prosecuted on the state level where the publicity isn’t so splashy.

The private insurers themselves account for at least a portion of fraudulent activities reported. Earlier this year two South Carolina Blue Cross/Blue Shield employees received short prison sentences for falsely submitting phony medical reimbursement claims and reaping a portion of the rewards.

The Government Accounting Office (GAO) issued a report in 1999 titled “Improprieties by Contractors Compromised Medicare Program Integrity.” Culpable Medicare contractors were identified and their fraudulent actions detailed. The report authors found, since 1993, that criminal or civil actions have been taken against at least six contractors resulting from fraudulent actions while under contract with Medicare. BCBS was the largest offender, with subsidiaries in Alabama, California, Florida, Illinois, Massachusetts, Michigan, and Pennsylvania among those listed as having fleeced the system out of millions of dollars by falsifying or altering documentation. Many of the prosecutions were the result of whistleblowers within the BCBS organizations.

Certainly all of this shows that the problem of healthcare fraud is pervasive, widespread and probably under reported; that incompetence is endemic within the claims systems, both public and private, but more than anything it indicates that monitoring should be improved and enforcement enhanced. Assigning the fox to guard the henhouse is proving to be a dangerous option.

It leaves me wondering how anything that will safeguard taxpayer money will be accomplished with the practices of proprietary private industry and the multitude of carriers, both small and large. The fragmentation and lack of a central database is a glaring loophole in the enforcement system, allowing offenders to game the system. Perhaps, for this reason alone, it points to the validity of a government run (or managed) central health insurance claims center… or even a (Gasp!) single-payer option.

[Thanks to BadTux for the muse]