New Analysis Examines Fraud In Both Private And Public Health Insurance Markets

Main Category: Health Insurance / Medical Insurance
Also Included In: Public Health
Article Date: 25 Jun 2009 - 3:00 PDT

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A new report from The George Washington University School of Public Health and Health Services, Department of Health Policy challenges the notion that fraud is a problem only in public health insurance markets and finds that fraud is a system-wide problem affecting private and public health insurance alike. The report finds that some of the most striking examples of fraud come from fraud committed directly by the private insurance industry itself. In 2007, when the U.S. spent nearly $2.3 trillion on health care and public and private insurers processed more than 4 billion health insurance claims, fraud was estimated to reach as much as 10 percent of annual health care spending. At this rate, the losses in 2007 alone over $220 billion would have been enough to cover the uninsured. The National Health Care Anti-Fraud Association (NHCAA) has estimated conservatively that 3 percent of all health care spending or $68 billion is lost to health care fraud.

The report finds that no segment of the health care industry or geographical area is immune from fraud. It is estimated that 80 percent of healthcare fraud is committed by medical providers, 10 percent by consumers, and the balance by others, such as insurers themselves and their employees. Fraudulent billing, kickbacks, up-coding services and bundling are common examples of fraud. Avoidance of sick and high need members, along with the systematic misrepresentation of the cost of care to group plan sponsors, represent major examples of fraud in the private insurance industry.

The report also notes the distinction between fraud and improper payments. Fraud is a misrepresentation of the truth or concealment of material facts. Improper payments, on the other hand, tend to involve technical questions associated with verification of claims or related matters. The report also describes recent efforts to improve fraud detection and recovery across the public and private insurers, including Medicare and Medicaid.

"The evidence presented in this analysis should put to rest the notion that the problem of fraud is limited to public programs. Because fraud can arise in any sector of the health industry, comprehensive efforts to both detect and deter fraud system-wide are essential to national health reform," said Sara Rosenbaum, Professor and Chair, Department of Health Policy.

Source: George Washington University