Addressing an Epidemic of Fraud in the Healthcare Wasteland

A friend of mine whom I’ll refer to as Jasper (not his real name) is a 40-something year old male who was diagnosed a few years ago with Parkinson’s disease.  Several months ago he gave me a call, knowing that I have a health benefits background.  Jasper had learned from his physical therapist that he was approaching the limits his health plan placed on the annual number of physical therapy sessions.  The physical therapist had told Jasper not to worry, when the limit was reached, the office would re-file his case under a new diagnosis, which would trigger a new benefit-eligible episode of care, allowing it to continue delivering service, billing for it, and getting reimbursed for it.

Jasper was relieved to know that clinical services that seemed to be helping him maintain his strength and physical activity would be continued, but he realized he would continue to be responsible for a 20% co-payment.  “What do you think I should do,” he asked, “should I continue with my therapy?” 

“Well, let’s start with the question of how willing you are to commit insurance fraud,” I asked.  I explained that “filing under a new diagnosis,” when in fact it was just more service addressing the same old diagnosis, was fraudulent.  Undoubtedly, being able to continue billing under a fee-for-service arrangement would benefit the provider, but I asked Jasper to think about whether the additional physical therapy visits would benefit him.

Upon reflection, Jasper realized that he had not learned any new exercises or self-management strategies in his most recent visits to the therapist, and that he could easily continue to do those exercises at home.  With some additional discussion, he concluded that the costs of continuing his therapy -- 20% co-payments for each visit, plus the inconvenience and lost productivity cost – far outweighed any marginal benefit of additional visits.  To the best of my knowledge, Jasper didn’t factor into his decision the other 80% of cost that his self-funded employer would be paying for each unnecessary visit.

Cases such as Jasper’s are commonplace.  In "Eliminating Waste in US Health Care," Berwick and Hackbarth examined the total cost of waste by category. In the aggregate, they deemed approximately 34% of spending in the United States on healthcare services to be waste – $910 billion, including $177 billion attributed to fraud and abuse, and $192 billion to overtreatment.

The Affordable Care Act (ACA) allocates additional resources to the prevention and detection of fraud and abuse, and financial recovery when detected.  Among key provisions, the ACA provides an additional $350 million over 10 years for fraud prevention and detection, tightens controls on provider licensure and Medicare and Medicaid participation, increases penalties and recovery guidelines when fraud is detected, and facilitates data-sharing among various federal programs for fraud detection purposes.  The question is whether these increased resources and tightened policies are sufficient to cap the fraud gusher.

Jasper’s example suggests to me that we also need to continue to educate the public about the fraud and abuse epidemic.  Not only is over-utilization (whether deliberately fraudulent or just knowing that “erring on the side of caution” can be lucrative) wasteful and potentially harmful, it also is driving down our ability to cover services for the poor, elderly, and uninsured, and making it more difficult for American businesses to compete in a global economy.

Putting more of the economic burden on consumers through higher deductibles and other out-of-pockets may help to motivate the public to ask the right questions (what will this cost, how will it benefit me, etc.), but these efforts need to be coupled with extensive education on how health benefits work, how to be an informed consumer, and… how to avoid being an accessory to a crime.

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