The Economist provides some sobering statistics on healthcare fraud:
Health care is a tempting target for thieves. Medicaid doles out $415 billion a year; Medicare (a federal scheme for the elderly), nearly $600 billion. Total health spending in America is a massive $2.7 trillion, or 17% of GDP. No one knows for sure how much of that is embezzled, but in 2012 Donald Berwick, a former head of the Centres for Medicare and Medicaid Services (CMS), and Andrew Hackbarth of the RAND Corporation, estimated that fraud (and the extra rules and inspections required to fight it) added as much as $98 billion, or roughly 10%, to annual Medicare and Medicaid spending—and up to $272 billion across the entire health system.
Federal prosecutors had over 2,000 health-fraud probes open at the end of 2013. A Medicare “strike force”, which was formed in 2007, boasts of seven nationwide “takedowns”. In the latest, on May 13th, 90 people, including 16 doctors, were rounded up in six cities—more than half of them in Miami, the capital city of medical fraud. One doctor is alleged to have fraudulently charged for $24m of kit, including 1,000 power wheelchairs.
Distressing as that may be I think that it understates the problem if anything. IMO Medicare and Medicaid fraud are widespread, endemic, and structural. Medicare does not cover chronic care. In the interest of their patients (and to get paid for their efforts) some physicians bill chronic care as acute care because there’s no other way they can get paid for what they think of as doing their duty.
The stories of all of the patients in a care facility being fitted with hearing aids regardless of need are widespread. And how do you characterize bundling overhead costs into the charges for small things to the point of absurdity, e.g. the $25 aspirin or the $100 diapers?
Additionally, patients, particularly elderly patients, are strongly inclined to believe that when their doctors tell them that this or that test or this or that procedure is necessary that it is. Especially when they’re not paying for it.
Note that I’m not trying to make a case for the abolition of Medicare or Medicaid on grounds of widespread fraud. I’m just observing that the structure of our system lends itself to fraud.