The cynical optimist, I start from two positions: universal health care—first, good health care, accessible to all, at a reasonable price—must be a goal we need to embrace; second, some 20% to 30% of the $2.5 trillion health care industry ($500 to $750 billion) is lost to fraud.
Health care reform, regardless of whether you are for or against it, will be expensive. Peter Orszag, Director, CBO (Congressional Budget Office) recently suggested that as much as 30% of health spending is waste, that doesn’t affect patient outcomes. Therefore, eliminating such “waste” could save $700 billion a year, and make health care budget neutral: one of the selling points of both the Senate and the House health care bills.
Nowhere in what I’ve read by Orszag, does he mention “fraud,” “waste,” or “abuse.” His position that waste is 30% is new as of this past fall: in articles written about health care costs from June 2007 through September 2009, he does not mention waste, let alone fraud.
Malcolm Sparrow (License to Steal: How Fraud Bleeds America’s Health Care System, ISBN 0813368103) estimates the percentage of health care fraud in the low 20s. In 1982, the House Select Committee on Aging estimated Medicaid “fraud” at as high as 25%. In a Congressional hearing, the FBI testified that 90% of providers of health care services are in some way corrupt.
Ironically, other estimates are stunningly low. The recent 60 Minutes exposé estimating Medicare and Medicaid fraud at $60 billion, is one third what it probably is. The National Health Care Anti-Fraud Association gives a conservative estimate of fraud at 3% ( $75 billion). The Lewin Group’s report on health care “cost drivers” buries fraud within a $151 billion loss due to “transactions”—administrative waste, improving transaction efficiency, excess paper work, fraud and abuse, and poor connectivity between payers and providers—which can be inferred to be around $70 billion. To get to Orszag’s 30% waste, it must include fraud (therefore totaling $750 billion), if not, health care costs could be inflated due to fraud and waste at 60% ($1.5 trillion).
A final irony, descriptive of the prevailing bureaucratic and political attitude toward fraud, is former HHS Secretary Patricia Harris Former admonition to her staff to not use the word “fraud,” rather they were to call it “management inefficiency”
If fraud could run from $75 to $750 billion, and no one seems to care how much it actually is or even mention it, if it can be buried between evils of excess paper work and poor connectivity, if it can be called “management inefficiency,” how can a reform health care system be budget neutral, let alone ward of the inevitable increase in fraud?
Government, from Congress and committees (some 20) and the agencies that administer programs like Medicare, to the inspectors in the field, has failed to protect us. If reform is to work, we must look for fraud and hold our officials accountable.
Why doesn’t fraud get mentioned? One answer is organized crime. That's another rant.
Health care reform, regardless of whether you are for or against it, will be expensive. Peter Orszag, Director, CBO (Congressional Budget Office) recently suggested that as much as 30% of health spending is waste, that doesn’t affect patient outcomes. Therefore, eliminating such “waste” could save $700 billion a year, and make health care budget neutral: one of the selling points of both the Senate and the House health care bills.
Nowhere in what I’ve read by Orszag, does he mention “fraud,” “waste,” or “abuse.” His position that waste is 30% is new as of this past fall: in articles written about health care costs from June 2007 through September 2009, he does not mention waste, let alone fraud.
Malcolm Sparrow (License to Steal: How Fraud Bleeds America’s Health Care System, ISBN 0813368103) estimates the percentage of health care fraud in the low 20s. In 1982, the House Select Committee on Aging estimated Medicaid “fraud” at as high as 25%. In a Congressional hearing, the FBI testified that 90% of providers of health care services are in some way corrupt.
Ironically, other estimates are stunningly low. The recent 60 Minutes exposé estimating Medicare and Medicaid fraud at $60 billion, is one third what it probably is. The National Health Care Anti-Fraud Association gives a conservative estimate of fraud at 3% ( $75 billion). The Lewin Group’s report on health care “cost drivers” buries fraud within a $151 billion loss due to “transactions”—administrative waste, improving transaction efficiency, excess paper work, fraud and abuse, and poor connectivity between payers and providers—which can be inferred to be around $70 billion. To get to Orszag’s 30% waste, it must include fraud (therefore totaling $750 billion), if not, health care costs could be inflated due to fraud and waste at 60% ($1.5 trillion).
A final irony, descriptive of the prevailing bureaucratic and political attitude toward fraud, is former HHS Secretary Patricia Harris Former admonition to her staff to not use the word “fraud,” rather they were to call it “management inefficiency”
If fraud could run from $75 to $750 billion, and no one seems to care how much it actually is or even mention it, if it can be buried between evils of excess paper work and poor connectivity, if it can be called “management inefficiency,” how can a reform health care system be budget neutral, let alone ward of the inevitable increase in fraud?
Government, from Congress and committees (some 20) and the agencies that administer programs like Medicare, to the inspectors in the field, has failed to protect us. If reform is to work, we must look for fraud and hold our officials accountable.
Why doesn’t fraud get mentioned? One answer is organized crime. That's another rant.
References
WSJ Editorial: “Cost Control Bill of Goods” (12.14.09) http://online.wsj.com/article/SB10001424052748703558004574583962940536556.html Peter Orszag: “Health Costs are Real Deficit Threat” (05.15.09)
http://online.wsj.com/article/SB124234365947221489.html#printMode
“CBO’s Peter Orszag Releases Study on Rising Health Care” (11.13.07, comments on video link)
http://www.newamerica.net/events/2007/cbo_director_peter_orszag_release_new_study_rising_cost_health_care
“CBO Testimony Statement of Peter R Orszag, Director, Health Care and the Budget: Issues and Challenges for Reform” (06.21.07)
http://www.cbo.gov/ftpdocs/82xx/doc8255/06-21-HealthCareReform.pdf
Lewin Group: “Can We Reduce Health Care Spending?” (10.26.09)
http://www.lewin.com/content/publications/LewinReport-CostDrivers.pdf
60 Minutes: “Medicare Fraud: A $60 Billion Crime” (10.25.09)
http://www.cbsnews.com/stories/2009/10/23/60minutes/main5414390.shtml
CNN: Organized Crime’s New Target: Medicare and Medicaid (10.22.09)
http://amfix.blogs.cnn.com/2009/10/22/organized-crimes-new-target-medicare-and-medicaid/
