Penny-Wise and Dollar-Foolish

I have often written here on the horrendous government waste of money when fraud investigators chase physician fines here and there when at the same time billions are spent on expensive high cost programs such as Medicare Advantage plans. I frequently see articles about the so-called massive amounts of Medicare, Medicaid and insurance fraud. News articles never fail to bring up how terrible these crimes are and how taxpayer dollars go to funding this kind of fraud.

Recently I read about the Eck brothers, chiropractors who apparently over an extended period of time siphoned off $3.7 million by using stolen physician Medicare numbers. To my mind, the government expense of two years worth of investigations of the Eck brothers by many government organizations for a fine of only $3.7 million is very hard to justify. I’m not condoning the Eck brothers fraud. I’m looking at the cost of two years of investigation by several government agencies compared to the fine imposed.

In an article by Rene Ebersole for AARP regarding another fraud case, she says:

The sad truth is that the crimes committed at Dolson Avenue Medical — crimes like double billing, unnecessary treatments and lethal malpractice — are anything but rare in our arcane and exploitable health care system. The Spina case is not an outlier; it is simply one example of an everyday occurrence. Health insurance fraud costs the U.S. economy an estimated $36.3 billion annually, according to the Coalition Against Insurance Fraud, an advocacy group comprising government agencies, insurance organizations, district attorneys, consumers and others.

Note that the number 36 billion per year is an estimate. No information is given as to how this number was determined. This 36 billion is less than half of the 88 billion  cost Medicare Advantage plans. Plans which could be eliminated by the President's stroke of a pen or a week of Congressional work. An article by David Lipschutz suggests the costs are much higher.

Ebersole reports that some experts suspect the losses could be substantially higher:

It’s a colossal waste of money and an enormous burden to taxpayers,” said Malcolm Sparrow, a Harvard University fraud control scholar and author of the book License to Steal: How Fraud Bleeds America’s Health Care System. “Medicare costs go up, resulting in higher taxes and higher copays. The bleeding goes on, year after year after year.”

In a 2011 interview The Nation, Sparrow was asked if he had a sense of the scale of Medicare fraud.

No, we don’t. It’s not because we don’t know how—we absolutely do. Basically, the audits they’re using on a random sample are nothing like fraud audits. The difference between a fraud audit and a medical review audit—a medical review audit, you’re taking all the information as if it’s true and testing whether the medical judgment seems appropriate. You can use these techniques to see where judgments are unorthodox or payment rules have not been followed, but almost nothing in these methods tests whether the information you have is true.

In this interview, Sparrow describes how a typical Medicare practice is to notice a problem with a program segment and then target an individual provider with criminal charges, and the program abuse throughout Medicare drops off markedly.

What often happens is that everybody knows a segment has gone bad; it might be DME [durable medical equipment] in Florida, or home healthcare in Texas, or community mental health clinics in Florida. For a good long time it was HIV infusion therapy. Then the authorities wake up and make one criminal case against one person, at which point you can sometimes see the whole billing for this procedure drop off by more than 90 percent. This tells you something about the level to which such practices had become widespread before law enforcement paid attention.

It is past time to fix wasteful Medicare Advantage plans costs reported by Steven Lieberman et al. in Health Affairs. Most importantly of all, it's time to stop scapegoating individual physicians to discourage rampant fraud throughout the healthcare industry. I’m not suggesting we don’t pursue fraud by individual physicians. I am simply suggesting that when the far greater fraud is actually being perpetrated by the large corporate hospitals and clinics, Medicare Advantage plans, and insurance companies, the government should hold the large players accountable for their fraud, not just a physician here and there to scare the bigger fraudsters into towing the line.

I no longer feel quite so much like a voice crying in the wilderness about government mismanagement of Medicare and Medicaid fraud.