How much fraud is there in health care? It’s hard to say with any accuracy. Consider this: how much fraud would be in any consumer market where the consumer only pays 10% of the cost, while third-party providers pay 90% of the cost? There would be a lot! When a third party pays the bills, unscrupulous providers (and those pretending to be providers) have perverse incentives. Fraud is killing U.S. healthcare (or maybe it’s more accurate to say third party payment is killing the health care system):
How can we reduce costs without compromising healthcare services? One non-medical-related item gobbles up to 10% of the total healthcare tab. Eliminating it could lower healthcare costs significantly, freeing up taxpayer dollars and increasing the availability of services.The culprit is healthcare fraud.
Ok, don’t even get me started on waste and abuse. Waste and abuse that doesn’t rise to the level of fraud are probably twice the size of fraud, but I digress. A back-of-the-envelope estimate (that is way too low) is that fraud probably costs Americans $300 billion a year. Health care fraud is caused by multiple fronts. Doctors, hospitals, criminal enterprises and even individuals.
Provider FraudMedical providers who commit medical fraud engage in practices like double billing, phantom billing, unbundling, and upcoding, according to the FBI.
A scam that’s been common for many years and it hard to eradicate is durable medical equipment (DME) fraud. DME is dominated by numerous small firms, some of which have an incentive to peddle their wares directly to seniors. This can range from small acts of questionable behavior like offering leg braces or arm braces to seniors that are of dubious need; to paying commissions to salesmen who pitch power wheelchairs to seniors better off walking. Seniors, like most people, like things that are free. They tend to error on the side of more care is better and fall easy prey to unscrupulous promoters. A few years ago, it was common for shady medical providers to congregate outside military bases and offer services to soldiers returning from a war zone. In some cases, these were compounded drug preparations where the Department of Defense was billed separately for each ingredient into a preparation, raising the cost to a multiple of what it should be.
As some point abuse and petty fraud becomes outright fraud. This is sometimes perpetuated by criminal networks whose goal it is to defraud third party payers by billing for services that were never rendered.
Fraud Committed by Criminal NetworksFraudsters may steal or con patient information in order to scam insurers for services that are never rendered, according to the FBI. They may, for instance, contact unsuspecting Medicare recipients, convincing them to provide their personal information and plan numbers. These criminals then use that information to bill for treatments never received.
There was an article from a few years ago about an old pharmacy storefront that closed in South Florida. Soon afterward the pharmacy reopened under new management and began to bill Medicare for thousands of dollars per day for nonexistent drugs supplied to seniors whose Medicare beneficiary information had been stolen.
Frauds Involving Prescription MedicationIndividuals may commit prescription fraud by selling medicine legitimately prescribed by a provider. Some even forge prescriptions to get medicine to sell.
While there are those who seek to get their hands on prescription medications with street value, it’s minor compared to other types of fraud. Indeed, past research on opioid fraud found that for every dollar lost in drugs where was an additional $34 dollars lost to drug seeking behavior, such as going to the ER to get drugs, etc.
The fraudulent activities mentioned above barely even touch on the topic of medical services that are of marginal need or unlikely to convey therapeutic benefit. If fraud is about 10% of medical expenditure, waste and abuse are likely double that figure.
There are numerous methods payers use to combat fraud and abuse, although Medicare lags behind in implementing them. Health insurance companies use algorithms to compare diagnosis, claims, location of patients compared to the location of the provider, and so on. An up-and-coming method to identify waste, fraud and abuse is the use of artificial intelligence (AI). A study in NEJM Catalyst looks at using AI tools to identify fraud.
The study found that 3,013 (0.1%) of 2,657,597 claims were flagged in real time by AI-based FWA screening for clinical review. Of those flagged claims, 1,623 (53.9%) were adjudicated for a reduction in the amount paid.
AI is a fancy word for algorithms, backed up with better computing power. Anything that can reduce the incidence of fraud, waste and abuse will lower our heath care bills. Let’s just hope the scammers don’t use AI to figure out vulnerabilities to scam.