Health care insurance in the United States is too expensive; health care delivery is too expensive and is in serious need of reform. This is not a political statement; it is a simple statement of fact, and we should get away from the political win or lose mentality that has suffused the rhetoric about reform. In this article we will look at the parts that waste, abuse, fraud, and serious crime, play in that expense—excessive and correctable expense that needs reform. According to the Associated Press, the U.S. health care system squanders $750 billion a year–close to 30 cents of every medical dollar on unneeded care, byzantine paperwork, fraud, neglect, abuse, and other waste, based on information from the influential Institute of Medicine. Despite the very considerable effort and expense by law enforcement, the numbers have not changed significantly in the last decade.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national Health Care Fraud and Abuse Control Program (HCFAC) under the joint direction of the Attorney General and the Secretary of the Department of Health and Human Services (HHS). At its inception, the law recognized that much of what medical care costs the consumer, the insurance companies, and the government, comes from misuse or outright crime involved in medical care costs. By the law, acting through the Inspector General, a program of investigation and enforcement was designed to coordinate federal, state, and local law enforcement activities to monitor and to gain control of health care fraud and abuse.

Now in its twenty-third year of operation, the program’s continued success confirms the soundness of the concept of legally enforceable control and of a collaborative approach to identify and prosecute the fraud, especially the most egregious instances of health care fraud, and to prevent future fraud and abuse. It is presumed based on past experience that such expenses will only increase without greater scrutiny. It is imperative to protect program beneficiaries—i.e. the patients, as opposed to concentrating on the large companies primarily. It is also widely recognized that we need to do better, to bring costs down, and to rid the system of those who prey on innocent patients and payors.

During Fiscal Year (FY) 2017, the Federal Government won or negotiated almost two and a half billion dollars in health care fraud judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. As a result of these efforts, as well as those of preceding years, in FY 2017, $2.6 billion was returned to the Federal Government or paid to private persons. Of this $2.6 billion, the Medicare Trust Funds received transfers of approximately $1.4 billion, and $406.7 million in Federal Medicaid money was similarly transferred separately to the Treasury.

Enforcement actions in FY 2017 resulted in the Department of Justice (DOJ) opening 967 new criminal health care fraud investigations. Federal prosecutors filed criminal charges in 439 cases involving 720 defendants. A total of 639 defendants were convicted of health care fraud-related crimes during the year. Also, in FY 2017, DOJ opened 948 new civil health care fraud investigations and had 1,086 civil health care fraud matters pending at the end of the fiscal year. In FY 2017, the FBI investigative efforts resulted in over 674 operational disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of more than 148 health care fraud criminal enterprises. That year, investigations conducted by HHS’s Office of Inspector General (HHS-OIG) resulted in 788 criminal actions against individuals or entities that engaged in crimes related to Medicare and Medicaid, and 818 civil actions, which included false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure matters.

HHS-OIG also excluded 3,244 individuals and entities from participation in Medicare, Medicaid, and other federal health care programs. Among these were exclusions based on criminal convictions for crimes related to Medicare and Medicaid (1,281) or to other health care programs (309), for patient abuse or neglect (266), The amount reported as won or negotiated only reflects the federal recoveries and therefore does not reflect state Medicaid monies recovered as part of any global federal-state settlements. As a result of licensure revocations (973). HHS-OIG also issued numerous audits and evaluations with recommendations that–when implemented–would correct program vulnerabilities and save program funds.

The FBI is the primary agency for exposing and investigating health care fraud, with jurisdiction over both federal and private insurance programs. Health care fraud investigations are considered a high priority within the Complex Financial Crime Program, and each of the FBI’s 56 field offices has personnel assigned specifically to investigate health care fraud matters. Field offices proactively target fraud through coordinated initiatives, task forces, and strike teams, and undercover operations.

In 2011, $2.27 trillion was spent on health care and more than four billion health insurance claims were processed in the United States. It is an undisputed reality that some of these health insurance claims are fraudulent. Although they constitute only a small fraction, those fraudulent claims carry a very high price tag. Insurance companies generally must pass the costs of bogus claims–and of fighting fraud–onto policyholders. Victimized businesses must pass the cost of rising insurance premiums onto their customers by raising prices for goods and services. Many larger corporations also spend millions of dollars a year to investigate and prevent fraud. This contributes to a premium spiral that can price essential insurance coverage–often state required–beyond the reach of many consumers and businesses.

The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year. Think what the country could do for medical care for the needy with that money flowing into the proper coffers. At least $80 billion in fraudulent claims are made annually in the U.S., the Coalition Against Insurance Fraud estimates. This includes all lines of insurance. It’s also a conservative figure because much insurance fraud goes undetected and unreported.

Medical Care and other types of fraud imposes serious financial and personal costs on consumers, businesses, government and our society. Insurance swindles victimize innocent people of every income, age, education level, ethnic background, and region of the U.S.

The majority of health care fraud is committed by a very small minority of dishonest health care providers.

The most common types of fraud committed by dishonest providers include:

• Billing for services that were never rendered, e.g. by utilizing identity theft, by fabricating entire claims out of whole cloth, or by padding claims with charges for procedures or services that did not take place.
• Billing for more expensive services or procedures than were actually provided or performed, commonly known as “upcoding”-i.e., falsely billing for a higher-priced treatment than was actually provided such as inflation of the patient’s diagnosis code to a more serious condition consistent with the false procedure code.
• Performing medically unnecessary services solely for the purpose of generating insurance payments-such as nerve-conduction and other diagnostic-testing schemes to pad billing.
• Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments. This is widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as “nose jobs” are billed to patients’ insurers as deviated-septum repairs, or eye-lid cosmetic procedures under the guise of “repair of drooping eyelids interfering with vision.”
• Outright falsification of a patient’s diagnosis to justify tests, surgeries, or other procedures that aren’t medically necessary.
• Unbundling – billing each step of a procedure as if it were a separate procedure.
• Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.
• Accepting kickbacks for patient referrals.
• Waiving patient co-pays or deductibles for medical or dental care and over-billing the insurance carrier or benefit plan (insurers often set the policy with regard to the waiver of co-pays through its provider contracting process; while, under Medicare, routinely waiving co-pays is prohibited and may only be waived due to “financial hardship”.

There are also crimes of violence against people and property in which people’s health, lives, and property, often are endangered by insurance schemes. Such crimes fall under the following categories of criminal behavior:

• Staged auto crashes. Lives are jeopardized when innocent motorists are maneuvered into car crashes staged by crime rings to collect large injury payouts from auto insurers. A family of three was burned to death when a setup crash went awry after their car was hit by two large trucks on a California freeway. A grandmother in Queens, N.Y. died when her car went out of control after she was maneuvered into a staged crash.
• Murder for life insurance. Someone murders a spouse, relative, or business partner, etc. to collect on the victim’s life-insurance policy. Coverage often is worth $200,000 or more.
• Unneeded surgeries. Patients are maimed, disfigured, and forced into lives of permanent pain when dishonest doctors perform unneeded and often botched surgery to inflate their insurance billings. Cancer, spine, heart, and eye, surgery are among the procedures and surgeries inflicted on trusting patients. Many victims are elderly, poor, and homeless. The patients, the insurance companies, and governments, are all victims of these crimes.
• Arson. Homes and businesses are burned down for insurance money. The lives of firefighters, family members, and neighbors, are jeopardized. Numerous people have died or have been seriously injured by insurance arsons. Arson fires also often burn nearby homes and businesses, thus magnifying the property damage and insurance costs. Doctors and hospitals must rally to care for the injured victims, often without pay.
• Stolen premiums. Most insurance agents are honest. However, there are corrupt agents who pocket client insurance premium checks without buying the promised coverage. This leaves the clients dangerously uncovered and surprised to find out that they are bare of insurance when payments come due. Agents also increase a policyholder’s premiums by secretly adding unwanted coverage to policies.

These crimes spend scarce taxpayer resources. Fighting insurance fraud is a major expense for federal, state and local governments. The efforts–while necessary–divert often scarce government resources needed to fight other serious crimes:

• State fraud bureaus. States conduct extensive anti-fraud efforts, funded by taxpayers and insurance companies. Most states, for example, have anti-fraud agencies that investigate suspected insurance swindles and refer cases for prosecution.
• Police and other law enforcement. Federal, state and local law enforcement all investigate insurance cases, often jointly with insurance companies.
• Prosecutions. Taxpayer-funded prosecutors devote considerable time and resources to pursuing fraud cases in court. Many cases are complex and require extensive time and expense to earn convictions.
• Federal government. The federal government annually spends several billion dollars fighting Medicare and Medicaid scams. This diverts scarce taxpayer resources from meeting the important healthcare needs of America’s elderly and poor.

All of the efforts to pursue medical care crime cost a great deal of money and will cost more in the years to come.

To date, $80 Billion a year is lost to Americans through insurance fraud: That figure is the equivalent of providing a new car or truck for 2.4 million drivers, enough for every driver in Oklahoma. You could buy 219,280 new homes, an amount equal to half of annual home buyers in the U.S. We could fund global humanitarian aid for more than the next three years. We could finance UN peacekeeping for nearly ten years. We good people could fund federal cancer research and training for the next sixteen years, or pay 8.75 million in-state students’ tuition for their first year at a four-year public undergraduate university; or we might pay salary of every high school teacher in the U.S. for two years.

There is another way of looking at that large sum of money that is now lost to us. Think of insurance criminals creating their own company. That company would rank in the top 10 percent among the Fortune 500 in yearly revenue. It would be 35th overall in the nation. However you look at it, eighty billion dollars is a lot of money—too much to throw away to crooks or by losing it in foolish ventures.

It is generally accepted that only somewhere around ten percent of all medical fraud and crime are detected, investigated, brought to trial, convicted, and pay significant fines, and/or serve prison terms. An important reason for that low incidence is that there are not enough law enforcement officers to handle the loads. We need more people, money, and training, to improve by 20-30%. The DOJ and FBI estimate that $2.7 billion could be saved by improving oversight, stopping fraud, and abuse, within the Medicare Advantage and Medicare prescription drug programs alone.

Lest you think I am exaggerating, let me share some examples:

• In 2001, HCA [Hospital Corporation of America] reached a plea agreement with the U.S. government that avoided criminal charges against the company and included $95 million in fines. In late 2002, HCA agreed to pay the U.S. government $631 million, plus interest, and to pay $17.5 million to state Medicaid agencies, in addition to $250 million paid up to that point to resolve outstanding Medicare expense claims over and above fines. In all, civil lawsuits cost HCA more than $1.7 billion to settle, including more than $500 million paid in 2003 to two whistleblowers.
• In July, 2010, the Medicare Fraud Strike Task Force announced its largest fraud discovery ever when charging 94 people nationwide for allegedly submitting a total of $251 million in fraudulent Medicare claims. The 94 people charged included doctors, medical assistants, and health care firm owners; and 36 of them have been found and arrested.
• In October, 2010, a network of Armenian gangsters and their associates used phantom healthcare clinics and other means to try to cheat Medicare out of $163 million, the largest fraud by one criminal enterprise in the program’s history. The operation was under the protection of an Armenian crime boss–known in the former Soviet Union as a “vor,”–Armen Kazarian. Of the 73 individuals indicted for this scheme, more than 50 people were arrested on October 13, 2010 in New York, California, New Mexico, Ohio and Georgia.
• In June, 2015, Federal officials charged 243 people including 46 doctors, nurses, and other medical professionals with Medicare fraud schemes. The government said the fraudulent schemes netted approximately $712 million in false billings in what is the largest crackdown undertaken by the Medicare Fraud Strike Force
• In April, 2019, Federal officials charged Philip Esformes of paying and receiving kickbacks and bribes in the largest Medicare fraud case in U.S. history. The largest case of fraud brought to the Department of Justice took place between 2007 and 2016. Philip Esformes, 48, owner of more than 20 assisted living facilities and skilled nursing homes was the leader of the ring. Former Director of the Outreach Program at Larkin Hospital in South Miami, Odette Barcha, 50, was Esformes’ accomplice along with Arnaldo Carmouze, 57, a physical assistant in the Palmetto Bay Area. These three constructed a team of corrupt physicians, hospitals, and private practices in South Florida. This is how that complex scheme worked: bribes and kickbacks where paid to physicians, hospitals, and practices to refer patients to the facilities owned and controlled by Esformes. The assisted living and skilled nursing facilities then admitted the patients and billed Medicare and Medicaid for unnecessary, fabricated, and sometimes even harmful procedures. Additional charges to Medicare and Medicaid included prescription narcotics prescribed to patients addicted to opioids to entice the patients to stay at the facility in order for the bill to increase.
• According to Medscape Medical News, August 9, 2019 (by Ken Terry), a Washington DC physician was indicted for nearly $13 million in Medicare fraud. The scheme involved submitting false claims to Medicare for complicated procedures that were never performed, according to the DOJ [Department of Justice].In an indictment filed July 30 in the District of Columbia, physiatrist Frederick Gooding, MD, aged 68, of Wilmington, Delaware, was charged with 11 counts of healthcare fraud. He was arrested on August 1.

The indictment stated that from January 2015 to August 2018, Gooding participated in a healthcare fraud scheme in which he submitted Medicare claims for injections and aspirations that were not medically necessary, not provided, or both. Gooding allegedly knew that the injections were not provided. To disguise his scheme, he allegedly falsified medical documents to make it appear as if the purported medical services billed to Medicare were medically necessary.

Gooding submitted or caused the submission of more than $12.7 million in claims to Medicare, the indictment alleges.

In 2010, the Delaware Medical Board suspended Gooding’s medical license for 6 months after one of his patients died after receiving an injection to treat pain, He was also barred from administering cervical block injections.

The indictment of Gooding resulted from an investigation led by the Medicare Fraud Strike Force, which is a joint initiative of the DOJ and the Department of Health and Human Services. Since it was formed in 2007, the Medicare Fraud Strike Force has charged nearly 4000 persons who collectively billed the Medicare program for more than $14 billion, the DOJ press release stated.

And 2019 is only half over. It may eventually cause an minor increase in taxes to assemble a larger and more effective policing and investigative service, but any cost would be far overshadowed by the monetary rewards accruing to the government, to say nothing of the human benefit to the patients.