Healthcare fraud is said to cost U.S. taxpayers hundreds of billions of dollars a year. Experts like the FBI's John Gillies say the problem has been getting worse all the time, as mob figures and violent criminals are lured by fabulously easy money and relatively light prison sentences into fraud targeting Medicare, the federal health insurer for more than 43 million elderly and disabled Americans.

Hardly a week goes by without authorities in Florida reporting another arrest, indictment or conviction for Medicare fraud, which has replaced the drug trade as the crime of choice among many criminals. The cases often involve multimillion-dollar schemes featuring bogus suppliers of wheelchairs, or other so-called durable medical equipment devices, and sham infusion therapies for the treatment of HIV and AIDs patients.

One case filed recently in South Florida included the indictment of 11 members of New York's Bonanno crime family, and prosecutors say the crimes are becoming more elaborate, involving kickbacks, stolen identities and manipulative billing practices.

The FBI estimates that fraud accounts for 3 percent to 10 percent of U.S. healthcare expenditure per year, and Gillies said it could easily cost about $200 billion annually. That is broadly in line with a Thomson Reuters report released on October 26. The report said that in 2007, when the United States spent nearly $2.3 trillion on healthcare and both public and private insurers processed more than 4 billion health insurance claims, fraud was estimated to reach as much as 10 percent of annual healthcare spending.

At that rate, due largely to fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams, the losses in 2007 would have been more than $220 billion. The National Healthcare Anti-Fraud Association, an organization of about 100 private insurers and public agencies, estimates that some $60 billion, or about 3 percent of total annual healthcare spending, is lost to fraud. But the Thomson Reuters report said that figure is considered conservative.

Although fighting fraud effectively can seem expensive, especially in economic hard times when state governments are scrambling to plug gaping budget holes, it saves money in the long run. The benefits of fighting fraud far outweigh the costs of detection services such as data mining to root out fake billing scams and forms of fraud.

Without adequate investment, at the state and federal level, criminals will continue to gorge on healthcare at the expense of taxpayers. This makes me wonder why the US Senate put almost nothing in its Trillion dollar health insurance modification. In the past, the Health Department's Office of Inspector General has documented significant numbers of paid Medicare and Medicaid claims for patients who were already dead at the time when they were supposedly being treated. Public healthcare officials were embarrassed recently by renewed focus on a report from the Senate's Permanent Subcommittee on Investigations about millions of dollars paid for medical services and equipment prescribed by dead doctors yet they have done nothing to make it more difficult to steal from Medicare but seem to be encouraging more, less sophisticated fraud since nothing will be done to stop it.

In congressional testimony in May, Malcolm Sparrow of Harvard's Kennedy School of Management cited the dead as a glaring example of how much more needs to be done “to properly excise the cancer of fraud” from healthcare. The healthcare industry does “a terrible job of crime control,” Sparrow told a Senate panel, with almost no procedures to routinely verify that medical claims presented were true, or that services provided were medically necessary. Yet this testimony, from the two bills presently pending before the Congress, was ignored. Criminals, who are intent on stealing as much as they can and as fast as possible, and who are prepared to fabricate diagnoses, treatments, even entire medical episodes, have no trouble breaking through the defenses created by the government and private insurers.

It is time, in my opinion, that the Congress should give more than lip service to the fight against fraud and actually make it a serious crime that is prosecuted by the Justice Department.

© 2009  Barry Zalma