The Perfect Storm: Health Care Fraud

Health care fraud is all the rage today. Health care fraud is a real problem. This is true for all businesses and endeavors that are touched by humans, e.g. banking, credit, insurance, politics, etc. It is clear that there are many health care professionals who misuse their position and steal our trust. The same goes for those in other professions.

Why is health care fraud getting so much attention? Could it be that this is the ideal vehicle to push agendas for divergent group where taxpayers, consumers of health care and providers are con artists in a health-care fraud shell-game with’sleight of hand’ precision

This is not a game of chance. The problem with fraud in health care is not only the fraud itself, but also the fact that the government and insurance companies use it to their advantage while failing to hold them accountable for the fraud they allow to thrive.

1. Astronomical Cost Estimates

There is no better way to report fraud than to include fraud cost estimates.

“Fraud committed against public and private plans costs between $72 billion and $220 million annually. This increases the cost of health insurance and undermines public trust in our system. It’s no secret that fraud is one of the most prevalent and costly forms of crime in America… We pay these taxes as taxpayers, as well as higher premiums for health insurance… We must take proactive steps to combat fraud and abuse in the health care system… We must ensure that law enforcement has all the tools it needs to detect, deter and punish fraud in the health care system. [Senator Ted Kaufman (D–DE), 10/28/09 Press Release]

The General Accounting Office (GAO), estimates that healthcare fraud amounts to $60 billion to $600billion per year, or anywhere from 3% to 10% of the $2 trillion in health care budget. [Health Care Finance News, 10/2/09] GAO is Congress’ investigative arm.

The National Health Care Anti-Fraud Association reports that $54 billion in fraudulent medical charges is being committed each year to swindle us and our insurers. [NHCAA web-site] NHCAA is funded by insurance companies.

The reliability of these estimates is at best questionable. Insurance companies, federal and state agencies, as well as others, may collect fraud data for their own missions. However, the quality, quantity, and volume of data collected can vary widely. David Hyman, University of Maryland professor of Law, says that while the widely disseminated estimate of the incidence of abuse and fraud in health care (assumed at 10% of total expenditure), lacks any empirical basis, what little we know about abuse and fraud in health care is dwarfed both by what we don’t know and what isn’t. [The Cato Journal 3/22/02]

2. Health Care Standards

Because they are written in legalese, not plain talk, the laws and rules that govern health care can be confusing. They vary from one state to another and from payer to payer.

To report the treatment of conditions (ICD-9) or services rendered (CPT-4, HCPCS), providers use specific codes. These codes can be used to seek compensation from payers for services rendered patients. While these codes are universally applicable to allow for accurate reporting of providers’ services, insurers often instruct providers to report codes based only on what their computer editing programs recognize and not what the provider provided. Practice building consultants also instruct providers on which codes they should report in order to be paid. In some cases, codes may not accurately reflect the provider’s service.