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Healthcare fraud: The war is far from over

No wonder thieves still try
No wonder thieves still try
Photo by Joe Raedle/Getty Images

Unless America proactively targets healthcare fraud through coordinated initiatives, task forces and undercover operations, it will continue to cost the country tens of billions of dollars each year.

According to the Federal Bureau of Investigation (FBI), healthcare fraud costs America tens of billions of dollar each year. Across the country, law enforcement officials and experts agrees that it is a rising threat, especially with national healthcare expenditures estimated to exceed $3 trillion by the end of 2014 (FBI, n.d.). A large body of evidence shows that in 2011, the United States lost between $82 billion and $272 billion to medical fraud and abuse (Economist, 2014). A quick review of recent cases on healthcare fraud will provide a compelling evidence that the medical professionals(including doctors) continue, and may be more willing, to engage in activities that will risk patient harm in furtherance of their schemes.

The quest for profit

Generally speaking, because a lot of money is involved in America’s healthcare system – no other country spends nearly as much on pills and procedures – it is not surprising that crooks are madly in love with the country’s healthcare sector. Besides, unlike a bank, America’s healthcare system is barely guarded, even though crooks are bleeding it of vast quantities of cash.

It should be noted here that some of the healthcare scams in U.S. are so simple to carry out that the scammers are actually having a ball. Here’s a simplified version of how it works: Dishonest patients claim benefits to which they are not entitled; doctors bill for services that were not provided or submit duplicate claims for the same service. In some cases, unscrupulous suppliers fraudulently charge Medicaid for non-existent services, with or without the patient’s knowledge. While more sophisticated schemes may involve a syndicate of doctors, health workers and patients. For instance, in the words of Susan Abram, a reporter for Los Angeles Daily News: “Unsealed court documents also revealed that some physicians’ offices paid patient recruiters for years to supply beneficiary information so that healthcare providers could then submit fraudulent bills to Medicare for prescription drugs, physical therapy and other services that were medically unnecessary or never performed” (para. 3).

What about those scammers who scour nursing homes for old people willing, for a few hundred dollars, to let pharmacists supply their pills but bill Medicare for much costlier ones? The facts that there are people who engage in this form of fraud is scary. And, of cause, the incentive in all the cases described so far is money and low risk. Thus criminal gangs are switching from narcotics to prescription drugs since the later has juicy rewards with less risk of being shot or arrested. In one particular case, a clinic in New York allegedly wrote bogus prescriptions for more than 5.5 million painkillers, which were then sold to the drug dealers and black market for more than $500 million (Lopes, 2014).

The stealing of medical records is also very popular among crooks. To the identity thieves, medical records are more valuable than credit card numbers. When a crook steals a credit card, it won’t take long for the victim to notice that his or her account has been compromised. But making a photocopy of a patient’s Medicare card gives the crook the power to bill Uncle Sam for years undetected. Unfortunately, it is hard to secure a vast system like Medicare – a system that processes almost 5 million claims a day (Economist, 2014). In a practical sense, pointless complexity of Medicare’s system make it even harder to secure. Besides, the problem was complicated by a toxic mix of incompetence and political gridlock on the part of Medicare. For instance, Medicare was supposed to vet and check new suppliers for links to companies that has previously been caught embezzling – an important function which the agency often fails to carry out. Even though there’s a new bill in Congress aimed at addressing this malfunction, fraud experts have for many years endorsed the removal of social security numbers from Medicare cards to deter thieves but the government turned a deaf ear to this recommendation.

Matching to the right tune

From a realistic perspective, the main antidote to healthcare fraud should involve cracking down on the criminals. For all its flaws, Obamcare can be lauded for including some useful measures. One of those measures includes careful and methodical screening of suppliers. And if, during the screening process, Medicaid blacklists a fraudulent provider, it now shares this information with Medicare – a practice that is also commendable since it wasn’t the norm before. It should be observed here that taxpayers recover eight out of every dollar spent on probing healthcare fraud. So it would be a good practice for Washington to boost the budget for fighting this type of crime since, at the end of the day everybody is made better off.

As an additional strategy for fighting healthcare fraud, America needs to simplify its healthcare. Even though the British single-payer National Health Service is not a perfect system, it is still simpler, cheaper and relatively difficult to defraud when compared to the U.S. system. Under the National Health Service model, doctors do not have the incentive to make more money by recommending unnecessary tests and operations – or billing for non-existent ones – since they (that is, the doctors) are paid to keep people well, not for every extra thing they do. The U.S. should benchmark this system not only to check fraud but also to reduce waste caused by administrative complexity and unnecessary treatment which bleeds the health sector dry even more than fraud does.


Abram S. (2014): L.A. Doctors Nabbed in Nationwide Medicare Fraud Sweep. Loss Angeles Daily News. Retrieved June 11, 2014 from

Economist (2014): Healthcare Fraud in America – That’s Where the Money Is. Retrieved June 9, 2014 from

FBI (N.D.): Health Care Fraud. Retrieved June 9, 2014 from

Lopes M. (2014): Two Dozen Charged in $500 Million New York Pain-Pill Scheme. Reuters. Retrieved June 11, 2014 from

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