Bending the curve via fraud control

If 10% of health care dollars are flat-out stolen, then it was a mistake not to include fraud control as a major part of health care reform. But it’s not too late to fix that mistake.

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.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

6 thoughts on “Bending the curve via fraud control”

  1. I don't understand your comment:"the advocates of health care reform seem to have missed a trick by no allocating some funds to fraud investigation."

    New Resources to Fight Fraud: The Affordable Care Act provides an additional $350 million over the next ten years to help fight fraud through the Health Care Fraud and Abuse Control Account (HCFAC) from FY 2011 through 2020. The Act also allows these funds to support the hiring of new officials and agents that can help prevent and identify fraud.

    Is what you are saying different. or were you not aware that this money was being invested into fighting fraud?

  2. $35 million a year, aimed at a $200 billion target, sounds to me like chickenfeed.

  3. Mark, so your "not allocsting some funds" is hyperbolic; you meant "not allocating sufficient funds"

    it is an additional $35 million; don't know how much is already allocated.

    I guess it also may be a question of how cleverly the existing funds + $35 million is used.

  4. The federal government building medical schools that are not controlled by the tightest union in the United State, the AMA, and giving free tuition to anyone who will work in undeserved areas will drop medical costs like a stone.

    There is not one single doctor that is worth $750,000 per years.

    There is not a single employee of any government that is worth over $300,000.

    There is not a single banking executive that is worth over $250,000.

    There is not a single gambler on Wall Street that should not be in prison. Much less get multi billion dollar bonuses.

    Bernie Maddox stole more money than all of the past, present and future convicts that have been in prison in the United States. His wife got a paltry $2 million for her "needs." Bernie didn't steal all of that money, a lot was paid to his cohorts, who have not been investigate for RICO participation in a Ponzi scheme.

    Plus all nurses and EMTs should be evaluated for Post Traumatic Stress Disorder and eligible for SS disability pay. I hate all but one doctor in the Veterans Administration, but I have to admit that they have spent too long on the front lines, retire them with full pay and benefits. If you want to keep them working, put them in the elementary schools to monitor the blossoming students and the failures. PTSD is catching, I saw a new psychiatrist at the VA in Phoenix go from patient care to load them up with drugs and get them out of my sight.

    When the Afghan and Iraq survivors come home, the political parties had damned well better have programs paid for and implemented or all hell is going to break loose.

  5. I don't know how many docs get $750K salary. Heart or brain surgeons, maybe, but they may earn it (and train for a long time). Other docs get big $ from partnerships (including owning testing firms).

  6. A lot depends on how pervasive the fraud is. If it's concentrated on a relatively few (say 100,000 or so bad actors, each trousering an average million a year, with the rest of the fraud bill spread out at low levels) then there you might be able to concentrate enough enforcement to find a tipping point. But if it's more uniformly spread out with lots of people just adding one more visit or lab test or whatever every now and then, enforcement could appear pretty random, leading mostly to the kind of bad press you see with anti-file-sharing enforcement.

    The article is behind a paywall, so does Sparrow give any indication of what he thinks the typical fraudster's turnover might be?

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