Fight against fraud, abuse and waste in healthcare

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

• Medicare and Medicaid billing errors resulted in $108 billion in improper payments.
• Fraudulent claims for Medicare caused a loss of $33 billion.
• Improper private payments cost about $100 billion.
• Health insurance fraud costs us about $68 billion.
• Fraudulent insurance payments have cost us $50 billion.
• Payments for medical errors amount to approximately $38 billion.
• About 10 percent of prescription drugs are counterfeit and cost about $12 billion a year.

All this means that we are wasting about $25 million an hour on medical fraud, waste and abuse. That’s way too much and it’s something we should all be concerned about because we’re all paying for it one way or another. We pay for it in higher taxes, higher medical expenses and higher health insurance premiums. The government does not “eat” the cost of medical fraud, waste, and abuse. Not even to insurance companies or doctors. As with all fraud, the costs are simply passed on to consumers. You and me. We pay for the fraud.

Medical fraud is committed everywhere, by just about everyone. Here is a short list of groups that commit healthcare fraud. Do you recognize one?

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 features of this system that makes it so susceptible to fraud is that there are so many players involved in providing services to a patient and then paying for that service. The first players in the system are the patient and the healthcare provider. However, it does not stop there. Once the patient has seen the provider, the payer (patient, insurance company, government) steps into the process. They are tracked by the employer who can pay all or a portion of the patient’s insurance premiums and/or pre-tax medical savings accounts, and vendors (e.g., drugstores, pharmaceutical companies, medical device vendors, and manufacturers). Medical fraud is complex and often involves at least three of these players.

Combating fraud, waste and abuse

So what can be done? We don’t need another investigation conducted by a government panel. We do need action. The place to start is with consumers and citizens. A comprehensive anti-fraud fraud prevention program starts with anti-fraud education for consumers and citizens. Everyone needs to know how ubiquitous medical fraud is and what it has cost us all. An effective anti-fraud program starts at the grassroots level with consistent and comprehensive attention. One story in the mainstream media every six months will never be enough. Only when citizens know what the problem is and what it costs, they will fight against the status quo.

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The more technical elements of an anti-fraud program to combat fraud, waste and abuse in healthcare are:

• Fraud prevention programs – internal control systems within all healthcare facilities to make it more difficult for individuals to commit fraud. Adequate review and approval processes coupled with proper oversight are the cornerstones of an internal control system.

• Fraud prevention programs – activities that increase the likelihood that fraud will be detected if it exists. The most common example of an anti-fraud program is conducting frequent proactive fraud audits. These are audits performed to uncover fraud when there is no evidence of fraud.

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

• Fraud Investigation Programs – reactive accountants and investigations conducted when there are indications that health care fraud has been committed.

• Fraud claim recovery programs – the payer, whether an insurance company or the government, must recover money lost through medical fraud and abuse. US Code 18 USC Sec 983(c)(3) establishes the right to enforce property forfeiture if the government can prove that property was used, facilitated, or involved in the commission of a criminal offense, and that a substantial connection between the home and the crime.

• Punishment for fraudsters – fraudsters conduct a cost-benefit analysis and usually determine, at least subjectively, that the costs of fraudulent activity (the risk of detection, prosecution and punishment and the cost of the fine imposed if punished) are lower than the assets (money) obtained through the fraudulent activity. When perceived benefits far outweigh perceived costs, fraud becomes a rational economic decision. Only by increasing the chance of being caught, prosecuted and punished and the severity of the sentence can the cost-benefit analysis be skewed so that the costs outweigh the benefits.


The fight 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 the government spends is your money. Ask your doctor and other healthcare providers what they do in their offices to reduce the risk of fraud. Send a note to your insurance company and ask what they do. You can give them some suggestions from the list above. Become a grassroots activist in the fight against fraud and abuse. You can help reduce healthcare costs.