Waste, Fraud, Abuse and the Mafia

Tony Soprano

Source: Silive.com

One of the arguments against health care reform is the government’s inability to run an efficient and financially sound business. Government bureaucracies are considered breeding grounds for waste, fraud, and abuse.
Here’s a typical complaint I found online: “The Government Loses Over $200 Billion A year To Medicare/Medicaid Fraud!!!! Should they be taxing us more to grow their control of the system??? Isn’t it a bottomless pit???”
This individual continues:

The federal Health Care Financing Administration, which oversees Medicare & Medicaid …, estimates that the government loses 30 cents to every dollar from fraudulent practices in the medical community. This is a huge problem that must not be ignored.

Perhaps emotional passion accounts for the major exaggeration of the numbers here. A 2008 estimate of fraud in publically funded programs, including unemployment insurance, food stamps, and school lunches, puts the total at $72 billion. That’s four percent of expenditures. Medicare and Medicaid account for 50% of “improper payments.”

Medicaid has the highest improper-payment rate of any federal program. It may be as high as 10.5%. The exact numbers are elusive. According to the Department of Health and Human Services (DHHS): “Although we cannot measure the full extent of health care fraud in Medicare and Medicaid, everywhere we look we continue to find fraud in these programs.”

If the shoe doesn’t fit, go barefoot

There is almost no academic research on health care-related fraud. This is largely because the subject doesn’t fit neatly into an academic specialty. According to a Harvard professor of the practice of public management, health care fraud “falls awkwardly between the traditional disciplines of health economics, health policy, crime control policy, anomaly detection and pattern recognition.”

One interesting and unfortunate development in health care fraud is the recent increase in the role of organized crime. According to the DHHS, “Health care fraud is attractive to organized crime because the penalties are lower than those for other . . . offenses . . . there are low barriers to entry . . . schemes are easily replicated . . . and there is a perception of a low risk of detection.”

It costs money to fight fraud

The Centers for Medicare and Medicaid Services (CMS) have been significantly underfunded. It reminds me of the FDA budget when it comes to food safety. The CMS budget is lumped in with the money available for the National Institutes of Health (NIH) and the Centers for Disease Control and Prevention (CDC). “[T]he political interests of legislators are far better served by increasing the budgets [of the NIH and CDC] or protecting one of their threatened hospitals or nursing homes.”

President Bush repeatedly asked for an additional $579 million to fight health care fraud, but Congress rejected his requests year after year. The Congressional reasoning was that money spent reducing fraud was money not spent curing cancer and overcoming the obesity “epidemic.”

Health care reform legislation currently making its way through Congress recognizes the need to strengthen antifraud measures. Let’s hope this is one thing both parties can agree on.


(Links will open in a separate window or tab.)

John K. Iglehart, Finding Money for Health Care Reform — Rooting Out Waste, Fraud, and Abuse, The New England Journal of Medicine, July 16, 2009, Vol. 361, No. 3, p. 229-331.

The complaint about fraud is in the comments to Maggie Mahar, Health-Care Reform and the “Culture Wars”, The Health Care Blog, August 4, 2009


Sorry, comments are closed for this post.