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We all pay for healthcare fraud. People who commit healthcare fraud are stealing from you and me. Insurance fraud inflates premiums at least 10%. Doctors, hospitals and other healthcare providers who defraud Medicaid take our tax dollars away from important services like education and health coverage for children. At least 8% of Medicare spending (over $12 billion per year) is wasted through fraud and other improper payments--money that could be spent on prescription drug benefits. See Fraud Control Under-Funded
Most fraud is perpetrated by health care providers. Doctors, pharmacists, chiropractors, dentists, transportation providers, nursing homes, hospitals and other healthcare providers commit the largest frauds, because they can. Providers can bill Medicaid, Medicare and insurance for huge amounts and get paid. Patients don't have the same ability to rip off these programs.
See Who Steals for a description of what motivates people to steal money through healthcare fraud.
See Fraud Cases for articles about fraud cases by various kinds of providers.
Health care fraud is common, but we don't know how common. Overall estimates vary from 10% to 30% of healthcare spending or $140 to $420 billion. There have not been many efforts to measure fraud, and we know we're only catching a fraction of the fraud, so we really don't know how much there is.
In the US, we may be spending almost as much on healthcare fraud as on education. Healthcare spending is about 13% of the Gross Domestic Product (GDP), so we can estimate that one to four percent of our economy is healthcare fraud. That is a huge amount of money, especially when you consider that we only spend 4.5% of GNP for primary and secondary education.
Sources:
National Center for Education Statistics
Kaiser Family Foundation
We have no idea whether fraud is increasing, decreasing or staying the same. The problem is so out of control that we are only catching a small fraction of the scams. If we find more fraud, it only means we're looking harder. The vast majority of fraud remains invisible to us, so we don't know whether it is increasing.
Measure Fraud
There are three reasons Medicare and Medicaid fraud are in the news more often than it was 5 or 10 years ago:
1) Under the Clinton administration, Janet Reno made healthcare fraud the number two priority for the Attorney General's office (right behind violent crime). Investigations started during that period are starting to produce large court cases.
2) Economic conditions are forcing state and federal government to look for big savings. Healthcare fraud control allows governments to cut spending without cutting services.
3) Technology is improving. Medicare and Medicaid programs use sophisticated software and fraud control specialists to identify fraud and build better cases.
The government is a big target because it is a big payer. Government programs make up about 45% of total healthcare spending and private health insurance only makes up 35%.
Medicaid and HMOs may be at higher risk. We've all heard of credit card fraud, so when we get our bills, we check to make sure we recognize all the purchases. If we lose our card or see something odd on the bill, we call the credit card company immediately. When it comes to health insurance, we often don't act the same way. In healthcare, the person receiving services does not pay for the services. That makes it harder to identify fraud. Whenever the patient does not have to pay any of their medical bill, they have no incentive to look at the bill to make sure it is correct. Medicaid and HMO patients may never see a bill, so they can't help stop fraud.
Source for healthcare statistics: Kaiser Family Foundation
The government is only spending five to ten percent of what it should to control fraud. Right now, for every dollar spent on healthcare fraud control we're recovering at least ten dollars. That makes fraud control a great investment, but that kind of return is only possible, because we're only finding the easiest cases. Ninety percent of fraud is not caught, because we don't have enough people looking for it.
See Fraud Control Underfunded
The qui tam provision of the False Claims Act allows private individuals to bring civil cases against entities who have submitted false claims to the government. The whistleblower who brings the case to the government's attention (and their lawyers) can win a substantial portion (15-30%) of the final settlement or judgment. This provision has been used extensively in Medicaid and Medicare fraud cases.
The qui tam provision is a great incentive for people to turn in their bosses for committing fraud. However, it only helps stop a small amount of fraud. The settlement amounts seem large, but the amount of fraud that goes unpunished is at least ten times larger.
In 2002 the Federal Government used various provisions of the False Claims Act to recover almost $1 billion in healthcare settlements and judgments. Some of the big cases in 2002 were:
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See Fraud Cases for articles about a wide variety of frauds by various kinds of providers. To find a specific kind of fraud use the search feature available at the upper right-hand corner of each page.
Depends. Sometimes, for a little while.
I'm going to do more research in this area. For now, the best information I've found is in a lecture that includes information from a 1992 study that found 38% of medical providers convicted of Medicaid fraud were sentenced for some jail time, compared to 79% of grand theft convicts. Source: Criminology Lecture