Medicare and Medicaid Fraud: Causes, Scope, and Solutions

Overview of Medicare and Medicaid Fraud

While there is still little consensus regarding the best ways to enact healthcare reform, one issue that unites both Democrats and Republicans is the need to eliminate Medicaid and Medicare waste, fraud, and abuse. According to a 2009 CBS News report, "One tiny pharmacy in a Hialeah [Florida] strip mall went from billing Medicare $13,000 in May to billing nearly a million dollars a month later," and regulators took no notice (Rosen & Bach, 2009). The Federal Bureau of Investigation (FBI) has estimated that fraudulent billings to public and private healthcare programs account for 3–10% of total health spending — approximately $75 to $250 billion per year on average — and that figure represents only the fraud currently known (Morris, 2009). Although federal authorities have tried to grow more vigilant, healthcare fraud is becoming increasingly difficult to detect. Approximately $60 billion of the total costs of healthcare fraud have been linked to Medicaid and Medicare, at direct cost to taxpayers (Taitsman, 2011). "Since 1990, the Government Accountability Office (GAO) has designated Medicare as a high-risk federal program because its vast size and complexity make it vulnerable to fraud, waste, and abuse" (Iglehart, 2010).

Physician Involvement and Ethical Failures

This fraud is perpetrated not only by unscrupulous patients and criminals, but also by physicians. One manufacturer of a prostate-cancer drug, for example, told urologists that they could bill Medicare for free samples, even though "federal law prohibits physicians both from billing for free samples… Several urologists ended up paying tens of thousands of dollars in penalties for participating in the manufacturer's plan" (Taitsman, 2011). Undeterred by fines, professional sanctions, or even civil or criminal legal consequences, physicians every year are found guilty of "accepting kickbacks, upcoding bills, or making improper self-referrals" (Taitsman, 2011). When physicians are found guilty of such crimes, patients suffer. Many doctors are already reluctant to take patients covered by government-provided public insurance plans — particularly Medicaid, given that its reimbursement rates tend to be quite low compared with private insurance and even Medicare. Yet "more than 5,000 physicians are currently excluded from participation in the federal health care programs because of these types of violations and cannot treat any of the approximately 100 million Medicare and Medicaid beneficiaries" (Taitsman, 2011). Some doctors may even engage in fraudulent activities because they believe they are owed more for their Medicare and Medicaid services, given the lower rates of reimbursement.

While some physicians engage in fraud out of greed, others do so out of ignorance. There is little education for physicians in the administrative aspects of navigating the often complex dimensions of government insurance programs. Only 44% of deans and two-thirds of administrators at medical schools and residency programs "reported that their institutions provide at least some training on fraud and abuse for students, residents, or fellows" (Taitsman, 2011). There is also little consistency in the quality of education regarding Medicaid and Medicare law. The Office of Inspector General (OIG) of the Department of Health and Human Services has created a document for new physicians entitled "A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse," summarizing major pieces of legislation with which they should be familiar — including the False Claims Act, the Anti-Kickback Statute, and the Stark Law (Taitsman, 2011).

Institutional and Organized Fraud

It is not only doctors who are unwittingly or knowingly complicit in fraud. City of Angels Medical Center in Los Angeles, California, actually "recruited homeless people off the street to fill their empty beds, offering them cash and drugs plus clean sheets and three square meals a day, while billing Medicare tens of millions of dollars for their stay" (Taitsman, 2011). The recently passed Affordable Care Act (ACA) attempts to enable a more "rigorous crackdown on illegal activities that plague Medicare, Medicaid, and private insurers" (Iglehart, 2010). Some of the most dangerous forms of fraud involve professional criminals and organized criminal networks, according to the FBI (Iglehart, 2010). Not all criminals involved in Medicare and Medicaid fraud are criminal masterminds, however. As one petty criminal who ran a dummy medical supply company — ostensibly providing reimbursable, expensive equipment to Medicare patients — put it: "You're wakin' up every day makin' $20,000, $30,000, $40,000… you're like 'Wow I just won the lottery'" (Rosen & Bach, 2009). His offices served no patients but merely submitted false claim forms to Medicare.

References

Iglehart, J. K. (2010, July 22). The ACA's new weapons against health care fraud. New England Journal of Medicine, 363, 304–306.

Morris, L. (2009, September). Combating fraud in health care: An essential component of any cost containment strategy. Health Affairs, 28(5), 1351–1356.

Taitsman, J. K. (2011, January 11). Educating physicians to prevent fraud, waste, and abuse. New England Journal of Medicine, 364, 102–104.

Rosen, I., & Bach, J. (2009, October 23). Medicare fraud: A $60 billion crime. CBS News.