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.