The Fraudulent Few Escalate Costs of Federal Entitlements

Medicaid and Medicare fraud are lucrative temptations for criminals that balloon healthcare costs for the majority of payers by hundreds of billions of dollars. A few unscrupulous physicians commit fraud by billing Medicaid/Medicare programs for services, drugs or supplies that are unnecessary, not performed, lower quality, more costly than what was actually performed, or that purportedly covered items that were not actually covered.

The Wall Street Journal reported that over 100 such deceitful individuals were recently charged with Medicare fraud in the United States. The fraud schemes amassed a total of $452 million in false claims, the Journal reports. Some of the criminals reportedly recruited individuals from homeless shelters and signed them up for mental-health services that were either never given or were medically inappropriate. This relatively small group of fraudulent physicians may be few in number, but their actions, and the actions of others like them, cause dramatic aggregate cost increases for the Medicare program.

Federal entitlement programs offer an enticing opportunity for system gaming and fraud in order to make a quick profit. Medicaid also suffers from similar fraud schemes, and the two programs are implementing various policies to rein in the deficit created by fraud, an expense that adds hundreds of billions of dollars to healthcare costs. Entitlement fraud is easy to commit and difficult to detect. Thus, low-level fraud is rarely punished.

Policy makers must take reformative action to prevent fraud, and decrease costs. Their options should focus on altering incentives and increasing monitoring. Monitoring efforts are already improving as new technology makes more detailed policing a reality. Shifting incentives is a more delicate matter, as many physicians are already opposed to even accepting Medicaid patients. Policy cannot simply decrease rewards for treating Medicaid patients, because that may induce many physicians to drop Medicaid patients all together. Rewarding physicians for good behavior may be a more effective tool curbing fraud. Regardless of the method used to eliminate fraud, it is essential that fraud be reduced in order to cut overall costs for federal programs.