Health-reform efforts are overlooking fraud

By Arthur L. Caplan

and Donald W. Simborg

President Obama's efforts to extend health insurance to all Americans have been widely criticized for failing to address rising costs. How can the country afford expanded coverage without reducing costs?

The president and his supporters frequently note that much of the money spent on health care is being wasted on fraud. Sadly, that's true. But due to pressure from organized medicine, the need to eliminate fraud isn't being taken seriously as health-care information systems are modernized.

Health-care fraud is huge. As much as 10 percent of all health-care transactions are fraudulent, which means that more than $250 billion is wasted every year.

So what does the federal government propose to stop this hemorrhaging of funds that we could be using to cover the uninsured? Not enough.

The Department of Justice, the Department of Health and Human Services' Office of Inspector General, and the Centers for Medicare and Medicaid Services are all making efforts to fight fraud. But one federal agency isn't, and it's the one that could have the greatest impact. It's the Office of the National Coordinator for Health Information Technology.

This relatively obscure agency was set up within Health and Human Services in 2004. President George W. Bush declared at the time that every American would have an electronic health record by 2014, and this was the office charged with making that happen.

Two expert panels commissioned to advise the office have concluded that adopting modern health-care information technology is critical for improving the safety, quality, and efficiency of care. But they have also warned that this technology could increase fraud.

That's because electronic health records can be stolen or hacked more easily than the archaic, paper-based records now in general use. As we rely more heavily on electronic records, fraudsters will likely develop ways to generate greater volumes of false bills that are much more difficult to detect. Because of the potential for abuse, the advisory panels recommended that a number of protective steps be required as part of the shift toward electronic health records and billing.

Incredibly, though, the Office of the National Coordinator has chosen not to pursue such antifraud measures. Its recently published five-year plan for federal health information technology mentions fraud, but it has no plan to deal with it.

Given the need to go electronic and to recapture the money wasted on fraud, why not?

Of course, the bad doctors and corrupt health-care administrators now enjoying a bonanza from fraud don't want anything done. But many honest doctors and administrators also fear that increased efforts to detect fraud will lead to more false accusations of fraud against them. As one prominent consultant to medical practices said, "Physicians will not purchase the gun that shoots them."

The fear that good guys will get caught in the antifraud net is not based on reality. Sound antifraud mechanisms - the kind that keep your credit cards, utility bills, and bank deposits secure - are a threat to crooks and no one else. Well-designed systems need be feared only by those with a hand in the $250 billion-a-year rip-off that the current, paper-based system allows.

Doing nothing going forward will let bad guys increase their siphoning of public funds as physicians convert to electronic systems. The only way to stop the abuse and cover more health care for all is to put fraud prevention front and center as health-care reform proceeds.