For as long as insurance companies have existed, fraudsters have seen them as easy pickings, just requiring the right lies to unlock a flow of claims. Today, the healthcare industry’s rising complexity is generating a surprising bumper crop of frauds around the world from providers, specifically, doctors and hospitals.
Hard and soft frauds from providers
These providers perpetrate both hard and soft health insurance frauds. Hard frauds are those that deliberately and systematically seek to defraud insurers, and most frequently occur in the treatment and billing phases. They include fabrication of hospital bills, submission of false claims, systematic performance of unnecessary operations for financial gain, and the like. Criminal rings are sometimes involved in hard fraud schemes, and their costs to insurers can run into the billions.
Soft frauds, on the other hand, are generally opportunistic when they come from providers. Examples include: ordering extra and unnecessary tests, treatments and procedures; overbilling or double-billing for procedures; billing for procedures not performed and drugs not administered; and imposing huge markups on medical consumables such as brand-name drugs and home medical equipment.
More complex frauds such as unbundling (separating out the components of a procedure in order to charge for each piece independently) and up-coding (charging for a more expensive procedure than the one actually performed) also fall into the category of soft provider frauds. These frauds are generally carried out without a policyholder’s consent or even knowledge, and constitute the majority of provider-perpetrated health care frauds.
Determining how much health insurers worldwide lose every year to fraud is almost impossible. Some statistics do exist about the number, monetary value and percent of health care spending that frauds detected constitute, but the real total is undoubtedly much higher.
According to “Combating Health Care Fraud in a Post-Reform World: Seven Guiding Principles for Policymakers,” an October 2010 white paper from the National Health Care Anti-Fraud Association, a US-based trade group, estimated financial losses due to health care fraud in the US alone in 2008 ranged from US$70 billion to US$234 billion – that is, between 3% and 10% of what American spent on health care that year1.
The Coalition Against Insurance Fraud, another US-based trade group devoted to fighting insurance fraud, keeps track of the total arrests and convictions for various frauds by category. According to its most recent statistics, the most fraud convictions are for Medicare and Medicaid fraud, with the next highest number for false medical claims, and the third highest for diversion of addictive drugs, a category the Coalition’s research has found costs private insurers as much as US$72 billion annually, and is increasing among physicians and pharmacists2.
And fraud is not just an American problem. Most recent estimates from the UK’s Insurance Fraud Bureau state that undetected general insurance claims fraud totals £1.9 billion a year3. The Insurance Bureau of Canada, according to its most recent research, estimates that fraud related to home, car, and business claims alone costs insurers about C$500 million annually4.
While many of the more minor treatment- or billing-related frauds cited in this article are generally not medically harmful to individual patients, cumulatively they are harmful financially, both to individuals and to institutions.
Recently, for example, the Indian government uncovered a hard fraud being perpetrated within its National Health Insurance Scheme. The scheme, designed for Indian citizens living below the poverty line, provides family insurance cover of Rs30,000 (US$660) per family of five for a minimal “enrolment fee” of Rs30 (US$0.65). Scheme administrators uncovered a reported Rs60 million (US$1.3 million) fraud in the Indian state of Kanpur, where administrators at the majority of the NHIS-empanelled hospitals in the region had colluded with insureds to defraud insurers by claiming for fictitious conditions. The fraud came to light when the perpetrators carelessly claimed a hysterectomy for a 67-year-old male and a hydrocele testis operation for a 60-year-old woman5.
Some of the more shocking frauds perpetrated by providers are medically harmful. The BBC as well as several other news organisations reported in October 2010 that eight doctors working at the Santa Rita clinic in Milan, Italy – since dubbed “Clinic of Horrors” – were jailed for performing a total of 83 unneeded operations purely to receive reimbursements from the national health system. The surgeries included an unnecessary mastectomy on an 18-year-old girl and three lung operations endured by an 88-year-old woman when a single operation was all that was needed6.
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