8. Medical Fraud Costs The Nation $100 Billion Annually
-- or More
SOURCE: MOTHER JONES, March/April 1995, "Medscam"; Author
SYNOPSIS: The United States' $1 trillion annual health bill
is 14 percent of the gross domestic product, making the medical industry
the largest business in the land.
Of this sum, a staggering amount is stolen. According to the National
Health Care Anti-Fraud Association, the yearly swag totals between $31-$53
billion; according to the authoritative General Accounting Office, the
annual take is $100 billion; according to other investigators the amount
is as high as $250 billion. In fact, an extensive Mother Jones investigation
discovered no one really knows how much money is stolen from the medical
system every year -- and, possibly even worse, no one has any way of
Although Medicare and Medicaid were created in 1965, no specialized
police force was established until 1978, giving the bad guys, according
to Bill Whatley Jr., president of the National Association of Medicaid
Fraud Control Units, "a 13-year head start, and we never caught
up. The people who put this program together didn't believe that the
[health care providers] in the program would commit fraud, because medicine
was such a high calling."
The irony of all this is that prosecuting medical insurance fraud is
one of the government's few profit centers, returning about $72 for
every taxpayer dollar spent; even allowing for the usual bureaucratic
exaggeration, the monies recovered are substantial-to say nothing of
the money that is saved when a fraudulent practitioner is removed from
COMMENTS: Investigative author L.J. Davis felt the story was
"reported, if at all, anecdotally and poorly, but not systematically.
It made the news, for example, when National Medical Enterprises (NME),
a centi-million-dollar hospital chain, was raided by the FBI in one
of the largest operations in recent history, but no attempt was made
to discover if NME was symptomatic of a larger phenomenon -- which it
was. This is typical, I have found."
The general public would benefit from wider exposure of the medical
fraud story since it would "discover how grossly its tax and insurance
money is ripped off," Davis said. "And, it might occur to
the public that if medical fraud were halted, the nation could afford
just about any kind of health system it could think of."
Davis charged that corrupt healthcare providers and medical equipment
companies benefit most obviously from the limited coverage given medical
fraud. "Of these, easily the greatest beneficiaries are the private,
for profit hospital chains, a form of company unknown in this country
until the creation of Medicare -- and whose obsession with the bottom
line has allowed, and often actively encouraged, massive fraud."
Davis concluded, "After 30 years in the business, the editorial
mind remains something of a mystery to me. For example, I brought the
story of AIDS fraud and quackery to another magazine, which shall remain
nameless. Because of editorial agendas, quackery -- a great tragedy
-- vanished entirely. The story concentrated on home health-care fraud,
an important story, but not the whole story. At another magazine, I
proposed a story on how the hospital chains are migrating into managed
care -- and the rich opportunity for a whole new fraud. 'How do I know
you're right?', said the editor. In a related event, Joe Sharkey produced
a splendid book, Bedlam, on psychiatric fraud. It sank without a trace."