If Malcolm Sparrow – who is knowledgeable, thoughtful, and careful – is right to say that upwards of 10% of the $2.2 trillion spent on American health care each year is flat-out stolen via fraudulent claims (not just unnecessary care, but care that was billed for but not delivered) then the advocates of health care reform seem to have missed a trick by no allocating some funds to fraud investigation. As Sparrow points out, investigating fraud is not the same as auditing claims: you’re not just trying to refuse payment, you’re trying to detect patterns of systematic abuse and put the miscreants behind bars, pour encourager les autres.
Sometimes it’s not hard to tell that there’s something wrong with a claim: if, on the date of service, the patient was dead, or incarcerated, or had been deported, or if the provider was dead, then it’s quite likely that the service wasn’t provided, and that no on believed in good faith that it had been provided.
I wonder whether the principles of dynamic deterrence – trying to “tip” systems from high-violation to low-violation equilibria via sequential concentration – might usefully be applied to this problem.
The generalized populist claim that we could have more services and lower taxes if we just got rid of “fraud” is itself fraudulent. But health care (like tax evasion) may be a case where tighter controls, and a few exemplary incarcerations, could make a genuine difference. Remember that the “bogey” for health care reform was $100B per year; if Sparrow is right, cutting fraud in half would more than meet that target.