Health Care Fraud Recoveries Can’t Keep Pace With Spending

Success in Health Care Fraud Enforcement is generally expressed in terms of dollars recovered and “return of investment.”  For instance, the OIG’s 2015 report to the appropriations committee stated that it expected recoveries for the fiscal year were a staggering $5.8 billion.  The report also stated that it expected an impressive ROI (Return on Investment) of approximately $8.00 for each one dollar allocated to the Health Care Fraud and Abuse Program.

Enforcement data of this type has found its way in press releases and reports for many years, and they give us the feeling of progress in the war on fraud.  However, impressive as these numbers results are, in the context of our actual healthcare spending and current estimates of healthcare fraud, the picture they present is not as optimistic as one might think.

Healthcare spending in the U.S. of 17.4% of the GDP$2.9 trillion, an amount which CMS estimates will increase to 3.2 trillion in 2015.  This makes the U.S. the world leader by a large margin with France a distant second at 11.6 % of GDP.  The principle spenders in 2013 were Medicare at $585.7 million, Medicaid at $449.4 billion, and Private insurers who spent $961.7 billion.

For obvious reasons, estimates of fraud are much harder to pin downrange widely with the Coalition Against Insurance Fraud stating there estimates range anywhere from 6.9% to 25% .  A 2012 study published in the Journal of American Medical Association Journal, however, estimated the level of fraud to be approximately 10%, and this is a figure often used and cited.

The “other perspective” I’m referring to becomes clear once we apply the 10% fraud estimate to actual Medicare and Medicaid spending.  That is, if fraud accounts for 10% of health care billings then Medicare lost $58.5 billion and Medicaid lost $44.9 billion — or over $103 billion in all.  Even if the fraud estimates are wrong and we cut them in half, the federal/state loss would exceed $50 billion!

At the end of the day, the scope of health care fraud, does not diminish the successes or efforts of health care fraud enforcement as each case settled is a victory, and each dollar recovered is important.  It does, however, remind us of how far enforcement has gone — and how much farther it has to go.


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