“Cancer of fraud” permeates U.S. healthcare system
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It’s a crime so profitable that even dead people are in on the act.
A U.S. Senate committee revealed last year that public health insurer Medicare had paid as much as $92 million from 2000 to 2007 for medical services or equipment ordered or prescribed by doctors who were dead at the time.
Many had died more than five years before the date when they supposedly ordered or authorized the service.
Healthcare fraud said to cost U.S. taxpayers hundreds of billions of dollars a year has garnered increased attention amid the congressional debate about overhauling the U.S. healthcare system—especially since President Barack Obama wants to cover some of the cost of reforms by fighting abuse.
Yet interviews with several law enforcement and healthcare experts indicate the president may be disappointed.
Some fear the focus on fraud may come as too little, too late after years of government complacency and inaction.
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.
“There are so many schemes involved. Take any aspect of the healthcare industry and there’s a fraud going on in there right now,” Gillies, special agent in charge of the FBI Miami Division, told Reuters in a recent interview.
GROUND ZERO FOR FRAUD
Florida has long been known for its unsavory association with cocaine cartels, political shenanigans and swampland real estate deals. Gillies says the state is also now “ground zero for healthcare fraud” since so many elderly Americans have retired to end their days in its famous sunshine.
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.
“When we shut down one scheme they just move onto the next scheme,” said Gillies, referring to fraudsters perpetrating one of the most lucrative financial crimes in America today.
“I do not see it slowing down any time soon,” he said.
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 Oct. 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.
The Justice Department and Department of Health and Human Services launched a special strike force in Miami in 2007 to combat Medicare fraud in South Florida and similar units have been set up in Los Angeles, Houston and Detroit.
But critics say far more is needed in terms of meaningful steps to attack fraud in healthcare, which drains the system of resources and forces up insurance premiums.
“We haven’t really enlisted all of the troops,” said Peter Budetti, who chairs the Department of Health Administration and Policy at the University of Oklahoma’s College of Public Health.
“Even though there are a lot more resources going in now, it is still grossly inadequate compared to the amount of fraud,” Budetti said.
Fighting fraud effectively can seem expensive, especially in economic hard times when state governments are scrambling to plug gaping budget holes. But Budetti said the benefits far outweigh the costs of detection services such as data mining to root out fake billing scams and forms of fraud.
“Every study that looks at what the return on investment is for fighting fraud shows anywhere from $5 to $7 to as much as $15 to $17 returned for every dollar spent,” said Budetti, who formerly headed Taxpayers Against Fraud, a non-profit public interest watchdog group.
Without adequate investment, at the state and federal level, criminals will continue to gorge on healthcare at the expense of taxpayers, Budetti and other experts say.
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.
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.
“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 a relatively easy time breaking through all the industry defenses,” he said.
Senator Jay Rockefeller, the West Virginia Democrat who chairs the Senate Commerce, Science and Transportation Committee, is among lawmakers preparing to champion new anti-fraud measures in Congress.
“Fraud is a crime against the American people, imposing billions in hidden costs to consumers and law-abiding (healthcare) providers,” Rockefeller told Reuters.
“Congress needs to put the resources and teeth behind the effort to crack down on fraud,” he added.
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* Fraud problem getting progressively worse, FBI says
* Big return on investment seen in fighting the crime
* Industry accused of “terrible job” in crime control
By Tom Brown
MIAMI (Reuters)
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