The large gap in the estimation of fraud costs exists, in my opinion, because of the imprecise definition of fraud. Black’s Law Dictionary defines fraud as...
“a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.”Improper payment, the report goes on, is different from fraud. Improper payment is loosely defined as...
- errors in documentation
- errors in coding
- errors in reporting
- errors in verification
- ...and other technical matters related to administration
The current administration and a new CBS segment on '60 minutes' claim that $60 billion in healthcare 'fraud' can be eliminated and that these savings can be used to pay for health care reform.
Unfortunately, most 'fraud' is not like that perpetrated by the barely literate 'Tony' in the new CBS video The $60 Billion Fraud (14 minutes) and it may not even be fraud - witness the $992.7 billion recovered under the Recovery Audit Contractors (RAC) Demonstration project from March 2005 to March 2008 in six states (New York, California, Florida initially and Massachusetts, South Carolina, and Arizona added summer 2007)
About 85% of the recovered overpayments came from inpatient hospitals ($828.3 million). Most of these overpayments fit the description of 'incorrect payments' - not fraud.
Inpatient hospital administrators are hardly the type featured by CBS in their inflammatory video. Incorrect payments arise the complexity of billing and coding rather than 'a knowing misrepresentation'.
The RAC Permanent audits are already showing, in their first year (2009), a 3x higher rate of overturned appeals than the standard Medicare audits. This implies that RACs are incorrectly interpreting Medicare regulations and denying too many claims.
Another implication is that the rate of incorrect payments (at least under RACs) is inflated.
Do academics and the media have an agenda?
I wonder if the media (like CBS) inflates the rate of healthcare fraud for its own purposes?
The George Washington report goes on to say that:
"...80% of healthcare fraud is committed by medical providers..."Yet the same report lists the results of a legal search engine query from 2000-2009 based on the type of company: provider, insurer or pharmaceutical. The fraud was both public (Medicare) and private.
Humana Inc. is categorized with the insurers even though it is described as a 'major hospital corporation-affiliated private insurer'.
| Industry | Recovery (millions) | Per Cent |
|---|---|---|
| Provider | $2,122.25 | 38.9% |
| Insurer | $890 | 16.3% |
| Pharmaceutical | $2,459.75 | 44.9% |
| data from Rosenbaum et al. Health Insurance Fraud: An Overview. June 2009; George Washington University, School of Public Health | ||
It is worth noting that the Insurer group is made up of 4-5 major American companies (UnitedHealth Group, Humana, AmeriGroup, HealthNet, et al) and the Pharmaceutical group is made of just over 15 major, international companies (TAP, McKesson, Merck, Serono Group, Wyeth, AstraZeneca et al).
The Provider group, however, is made up of over 5,500 American hospitals, large and small, and innumerable private practices, group practices and billing entities with differing levels of compliance sophistication.
These data hardly support the "80% of health care fraud is from providers" assertion.
It also strains credulity to think that the $6 billion or so over the last 9 years could somehow morph into the expected $60 billion annual savings required to pay for health reform.
