In lieu of an abstract, here is a brief excerpt of the content:

Malcolm K. Sparrow Fraud in the U.S. HealthCare System: Exposing the Vulnerabilities of Automated Payments Systems IN 1993, ATTORNEY GENERALJANET RENO DECLARED HEALTH-CARE fraud the “number two crime problem in America” after violent crime—a remarkable status for a category of white-collar crime. In 1995, FBI Director Louis J. Freeh testified that cocaine-traffickers in Florida and California were switching from drug dealing to health-care fraud. The traffickers had discovered that health-care fraud was safer, easier, and more lucrative than the drug trade, and carried a smaller risk of detec­ tion (Freeh, 1995: 2). In 1997 the New York Times reported that mafia families in New York City and New Jersey were abandoning their tradi­ tional lines of business (extortion and bid-rigging rackets) in favor of new criminal enterprises, including health insurance (Raab, 1997: Al, B4). In 2003, Columbia HCA, America’s largest hospital chain, finalized a $1.7 billion settlement with the U.S. Department ofJustice, the largest in history, following 10 years of investigation into an array of whistle­ blower allegations (Department of Justice, 2003). In July 2008, Abner and Mabel Diaz, a couple in Miami Lakes, Florida, pleaded guilty to fraud, admitting they had submitted to Medicare $420 million in false claims for medical equipment (Weaver, 2008:1). social research Vol 75 : No 4 : Winter 2008 1151 All sorts, apparently, find attractive opportunities in health-care fraud. But why steal from the health-care system? Perhaps because, at least in the United States, that’s where the money is! No other nation on earth spends as much on health care as the United States, where health care expenditures for 2006 (the last year for which reliable figures are currently available) reached $2.1 trillion (CMS, 2006:1). Projections for calendar year 2008 put total costs at $2.4 trillion, equivalent to $7,868 per person or 16.6 percent of GDP (CMS, 2007, table 1). The future of American health care looks even more expensive, with costs projected to outpace economic growth by an average of 1.9 percent per year, so that by 2019 health care will account for 19.5 percent of GDP (CMS, 2007: 1). Current spending levels for the United States are roughly double the average for other Organization for Economic Cooperation and Development (OECD) countries, and several countries (for exam­ ple, the United Kingdom, Holland, Denmark, Japan) enjoy significantly better medical outcomes spending less than half as much. Health-care economists, in their attempts to explain how America spends so much compared with others yet fares worse in medical terms and leaves roughly 16 percent of the population without health insur­ ance coverage, pay little attention to the possibility that fraud contributes substantially to these costs. Scandals abound in which a person or busi­ ness is discovered to have stolen millions of dollars from health insurers without supplying any legitimate medical care at all. Nevertheless, reli­ able data regarding the underlying extent of the problem does not exist. Each scandal can be interpreted as evidence of “a few bad apples, thank­ fully detected, amidst an otherwise sound system,” or as “the tip of an invisible iceberg.” Each stakeholder group can choose whichever inter­ pretation it prefers, and the majority prefer not to consider the possibil­ ity that the integrity of major public programs—such as Medicare and Medicaid, each of which now consume more than $400 billion in public funds each year—has been severely undermined by criminal enterprise. STRUCTURAL FEATURES OF THE U.S. HEALTH SYSTEM The financial and operational structure of any given health-care system profoundly affects the types of fraud liable to emerge within it. 1152 social research Transparency International’s GlobalCorruptionReportfor 2006, focusing on corruption in health care, presents a wonderfully broad survey of healthsystem structures worldwide, and the distinctive patterns of corruption that emerge within them (Transparency International, 2006). The following structural features of the American system help to account for the distinctive nature of the major fraud types that appear here: ►Fee-for-Service structure: Reimbursement for medical providers is mostly on a fee-for-service basis. Bills are presented to insurers by health-care providers, their staff, or...

pdf

Additional Information

ISSN
1944-768X
Print ISSN
0037-783X
Pages
pp. 1151-1180
Launched on MUSE
2014-04-30
Open Access
No
Back To Top

This website uses cookies to ensure you get the best experience on our website. Without cookies your experience may not be seamless.