The Fraud

Fraud in our healthcare system is rampant and much too huge to cover in detail for our small business purposes. We'll just highlight the most relevant scams here, but for more in-depth information you might check out the Medicare and the Federal Trade Commission websites.

Employee Health Insurance Frauds -- The major frauds here are false Workers' Compensation claims. Bogus group insurance claims will rarely benefit the employee, as most are paid to the provider directly, not the claimant.

Agent Health Insurance Frauds -- Insurance agents can defraud their company and benefit themselves by, for example, creating fictitious groups, putting otherwise ineligible people on a health policy and charging them a fee in addition to the premiums.

Provider Health Fraud -- Providers account for the major portion of health insurance fraud in the U.S. It's estimated that 10 percent of the roughly $3 trillion cost of healthcare per year can be attributed to fraudulent claims.

• Pharmacists can profit from a myriad of frauds such as shorting the number of tablets prescribed, substituting cheaper drugs but billing the insurer for the most expensive, filling false prescriptions in collusion with providers or provider staff, and splitting the take from illegal sales.
• Physicians and labs can mis-code (upcode) diagnosis and treatments, bill for treatment not rendered, create fictional patients, and divert payments to themselves.
• Kickbacks are another type of provider fraud. Payments for referrals (sometimes called "bird dog fees") or accepting payments from vendors of supplies to select them as a preferred source are examples.
• Hospitals and nursing homes are no exception when it comes to insurance billing frauds, especially when it comes to Medicare and Medicaid cases.

The Flaw

Much of healthcare fraud is institutional greed. In the case of Medicare and Medicaid, it's often justified as a strategy to offset severe losses due to payments lagging months or even years.

The Fix

Regular auditing by insurers can catch much physician fraud, but the fix for institutional fraud would be mending the broken payment system. Hospitals and nursing homes need cash flow to survive and when the government's single payer system clogs up, the creditors must borrow funds to meet payroll and operating expense. They attempt to overbill to recoup these unnecessary extra costs forced on them by the slow pay policy of the states and federal government. Of course, there is no justification for fraud.