Day Five of Good News: Health Care Fraud

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Today’s Managing Health Care Costs Indicator is $3 billion



Health care fraud is rampant and unconscionable.  Fraud fighters have made real progress in the last year.  

Many commentators think 10% or more of total health care costs represent actual fraud – as much as $250 billion a year. We’re not talking about honest mistakes (such as billing for a C-section that was necessary and actually performed but using the wrong code). We’re not talking about ‘abuse,’ such as billing for a laboratory test that was actually performed but medically necessary.  We’re talking about downright heists, like setting up a fake laboratory company, purchasing patient Medicare numbers, billing and collecting reimbursement, and shutting down the operation before anyone asks any questions. (Great Reuters story about these phantom firms at this URL)

The good news is that health care fraud is becoming more difficult due to aggressive enforcement action by the federal government, many state governments, and many private health plans.  The Department of Justice has had the second year of record settlements, including a $3 billion settlement with Glaxo Smith Kline for improper marketing of the diabetes drug Avandia, which has been associated with increased risk of heart failure.



  1. Here’s why I believe health care fraud will decline in the coming years
  2. New dollars for fighting health care fraud as part of the Affordable Care Act.  
  3.  Improved technology to detect fraud before payment, and willingness to submit claims to preadjudication audit. Medicare and health plans historically paid bills and then “chased” fraudulent providers after the fact. In many instances, that was simply too late
  4. Transition to bundled payment, which is less amenable to fraud than fee for service
  5.  Increased transparency – which will make some of the egregious cases visible to journalists who can start the investigation ball rolling

Here’s a list of pending health care fraud settlements from an advocacy group, Taxpayers Against Fraud.  

Health care represents such a large part of the economy that it will never disappear.  However, I believe that current efforts are already paying off.