September 19, 2017

Fraud and Abuse

Unnecessary health care (overutilization or overtreatment) is when medical services are provided with a higher volume or cost than is appropriate. In the United States, overutilization is the predominant factor in its health care expense. Factors that drive overutilization include paying health care providers more to do more (fee-for-service) and covering patients’ costs by a third-party (public or private insurance) payer. These factors leave both doctors and patients with no incentive to restrain health care prices or use.

It is projected that fraud and abuse account for between 3 to 15 percent of annual expenditures for healthcare in the United States. The National Healthcare Antifraud Association Report (March 2008) suggests that the cost ranges between 3 to 10 percent; the GAO 2008 and the Congressional Budget Office place the estimated cost at 10 percent; and the U.S. Chamber of Commerce Report places it at 15 percent. Using these data as a base, the estimated cost of fraud and abuse ranges from $100–170 billion annually.

According to

  • Medicare and Medicaid billing errors resulted in improper payments of $108 billion.
  • Fraudulent claims for Medicare accounted for $33 billion in losses.
  • Improper private-pay payments cost about $100 billion.
  • Health insurance fraud costs us about $68 billion.
  • Fraudulent insurance payments cost us $50 billion.
  • Payments for medical errors run about $38 billion.
  • About 10 percent of prescription drugs are counterfeit, costing about $12 billion a year.

According to Managed Care:

As much as $850 billion spent on medical care each year “can be eliminated without reducing the quality of care,” says a 2008 report (“Waste and Inefficiency in the U.S. Health Care System,” subtitled “Clinical Care: A Comprehensive Analysis in Support of System-wide Improvements”) by the New England Healthcare Institute. That is enough to extend insurance coverage to more than 30 million people, according to the Congressional Budget Office.

Misuse and overuse run from simple antibiotics to sophisticated surgeries. More than $58 billion is spent on inappropriate drugs, such as antibiotics for upper respiratory infections that do not respond to medication, according to the institute report. About $21 billion is spent treating nonurgent cases in the emergency department, where physicians rely more on duplicative and costly tests because they are unfamiliar with their patients’ histories. The largest potential area for savings — up to $600 billion a year — is the variation in hospital procedures such as the number of Caesarean sections and coronary bypass surgeries performed. Vaginal delivery is far safer than a C-section, and prescription medications can stabilize many heart patients without dangerous surgical complications, Rosof told the Post. Less invasive and risky alternatives are also less expensive.