Medicaid's $102 Million Anti-Fraud Program Catches $20 Million in Fraud


Yet another reason why it's best to be skeptical whenever a politician promises to root out waste, fraud, and abuse in the health system: We're wasting money trying to track down wasted money.

Bloomberg on a new Government Accountability Office report documenting the failures of anti-fraud auditing in Medicaid:

A program to fight fraud in the Medicaid health system for the poor has cost the U.S. at least $102 million in auditing fees since 2008 while identifying less than $20 million in overpayments, investigators found.

The majority of the audits conducted by 10 companies were discontinued, produced "low or no findings" or were "put on hold," the Government Accountability Office, the nonpartisan investigative arm of Congress, said today in a report. Three companies won't have their contracts renewed, and two others will be reassigned, said Peter Budetti, the director of program integrity at the Centers for Medicare and Medicaid Services.

"The results were extremely disappointing, way below what the expectations had been," Budetti said in a telephone interview. He declined to name the companies terminated because he wasn't sure whether the actions have been made public.

Medicaid and Medicare, the U.S. insurance program for the elderly and disabled, are plagued by $60 billion in fraud a year, the Justice Department estimates. The Medicaid audit program, which was supposed to identify erroneous payments to doctors and hospitals, has produced "a negative return on investment," aides to Senator Tom Carper, a Delaware Democrat, said in a staff memo to the Senate Homeland Security and Governmental Affairs committee.

Advocates of government-run health, and single-payer fans in particular, like to argue that government-run health systems are more efficient  than private payment systems. But even if you ignore the accounting trickery used to make this case, there's still the massive waste and fraud problem: Thanks to payment volume and a bias toward making reimbursements easier, these programs are built for fraud. GAO estimates that roughly 10 percent of Medicare payments are improper. A single payer system would only expand the opportunities to exploit these systems. 

Does this mean we shouldn't attempt to stop fraud? Not at all. But the best way to weed out fraudsters is to make it less profitable to do so by limiting the giant entitlement programs that make fraud so easy. 

NEXT: Why Can Obama Bend the Law for Young Immigrants, But Not for Drug Users?

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  1. Also, it's a sure bet that the amount of Medicare fraud will skyrocket if price controls are tightened. A huge amount of Medicare fraud is driven by reimbursement rates being below the market rates. Combined, of course, with third party payment.

  2. The problem with government bureaucracies is that everything is a blame game.

    "Who approved this and why wasn't it caught earlier?"

    It is more important to blame people than to actually root out the fraud.
    The result is that bureaucrats have an incentive to hide and cover the fraud rather than root it out, lest they be the unfortunate who gets blamed for it.

    1. I couldn't agree more. As long as you tick the boxes, you are going to slowly but surely move up the ladder and pay scale.

      If you are not being rewarded for great work and you are not really being punished for bad work, you have no incentive to improve. It's how communism worked.

      The profit motive really needs to be put to work here!

  3. "... limiting the giant entitlement programs that make fraud so easy."

    Maybe by certain state governments, maybe even in the very near future. The federal government? Rolmao. That's a pipe dream.

  4. We need to audit the auditors!
    Seriously, these firms probably assigned entry level auditors with inadequate supervision and they had no incentive to uncover anything. Maybe contingency fees would help? Maybe even paying more to investigate than what you uncover would be valuable if the fraudsters did perp walks? A "senior law" lawyer of my acquaintance believes the largest amount of medicaid fraud is in recipients giving way their assets within the lookback period and not getting caught. Maybe jail time would put the fear into others who are thinking to pull off the same scams.

    1. $20 million is unbelievable. Fraud is a huge problem in almost all welfare programs. But let's pretend that it isn't so we can have more of our money wasted.

      1. The problem is that a lot of the medical providers, with good reason, claim that they'd stop accepting Medicare patients if they couldn't commit this fraud in order to get their billing up to a profitable level.

        So no one really has an incentive to stop the bulk of the fraud. The really excessive fraud that goes too far, sure, but even that doesn't ruin it for everybody else.

        1. I didn't know that it was this systemic. Are you saying basically that 'fraud' is accepted practice?

          1. Yes. There is definitely systemic over- and misdiagnosis in Medicare billing. I used to get an email every month from FLDOH listing the docs who had their licenses to practice pulled which were 99% for either "over" prescribing narcotics or fraudulent billing of the state. Nurses got theirs pulled 99% for theft of medication or (horrifying to me) failing drug tests. Never saw a doc's license get pulled for that. They probably don't have to test.

          2. Yes, that's what I'm saying. Medicaid has reimbursement levels lower than Medicare is lower than private insurance. Doctors have a choice of limiting their Medicaid or Medicare patients (or not seeing them at all), or engaging in this kind of systemic fraud.

            It's not going to be stopped, because the government likes to pretend that it's keeping costs down, but it doesn't really want to limit access too much. Especially to politically active seniors; gov't is somewhat more willing to let the poor get fucked.

      2. I was going to say. I'm pretty sure when I worked for the FLDOH, they were finding more than $20M in fraudulent payments just in FL every quarter. Oh, but those probably don't count because they were state payments on a pass through.

  5. Obvious solution: start a third program to root out waste, fraud, and abuse in the auditing program.

  6. And off to the right, I'm getting an invitation to 'take charge of [my] health', offered by Medicare!
    Yep, that's me in charge right there.

  7. You're welcome, Peter.


  8. Anybody know who the unnamed companies are?

    A lot of fraud is going to be impossible to find using back office checks. If a doctor needs to pay for Xmas, he can find a poor uneducated person on his waiting list for hip replacements, order a wrong sized hip, and schedule a surgery. The patient will be back next year when the wrong sized part has ground the hip into even worse shape. Anyone with the savy or connections to call him to account isn't on Medicaid.

  9. Why doesn't somebody just ask the Justice Department? Aren't they the one who say there is at least $60B worth of fraud each year? Where are they getting their estimates?


    1. Crackers the DOJ is inflating their stat. If they see a bill for $10,000 that should have been $9,990, they call that a $10,000 improper bill.

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