A new book on health care fraud paints a grim picture of a crime that affects us all, and usually goes undetected.
Perhaps the most chilling thing about Professor Terry Leap's new book, “Phantom Billing, Fake Prescriptions and the High Cost of Medicine: Health Care Fraud and What to Do About It,” is the sheer number of different schemes people in the medical profession have come up with to steal money from insurance companies, patients, and the government.
Such schemes range from billing for procedures that were never performed and removing healthy body parts to reap the high surgery fees, to recruiting the homeless to undergo unnecessary procedures and the dilution of life-saving drugs, they are practices with the attitude that, as Leap writes, “Medicare will pay for it all.”
And that's just the beginning: “I probably could have written this book a second time using completely different examples,” says Leap.
Leap, whose interest in health care fraud began while he was researching a book on white-collar crime in 2003, spoke with Julia Dahl of The Crime Report from his home in Knoxville, where he is the head of the Department of Management at the University of Tennessee, Knoxville. He wasn't optimistic about the government's prospects for getting a handle on the criminal activity that resulted, according to his book, in $65 billion in Medicare and Medicaid pay-outs for “questionable” claims in 2009 alone.
TCR: What is the most common kind of health care fraud?
Terry Leap: I think the most common is billing Medicare for services that weren't provided, or were unnecessary. Medicare is a huge target for health care thieves, simply because of its size. Over the next few years we'll be approaching a trillion dollar budget. So there's all this cash that people can steal, and of course there are so many claims, that if you don't get too greedy you could just file claims that appear to be normal and no one really questions them.
TCR: Do we need new laws to help catch these people, or is the problem inadequate enforcement?
TL: I don't think we need new laws. The problem is that law enforcement gives most white-collar crimes a lower priority. And I can understand why—they have limited resources. I had a county prosecutor tell me that 'we settle our white-collar crime cases in civil court not in criminal court because we just don't have the resources. We have to go after the people who murder, commit sexual assault, armed robberies and that sort of thing.
TCR: And practically, it's not as easy to catch people committing crime on paper, or in the operating room.
TL: Yes. One of the big differences between white-collar crimes and so-called street crimes, is that with white-collar crime, detecting a crime is the hard part; but once you've detected that a crime has been committed you can usually figure out who did it pretty quickly.
On the other hand, if you go home today and see your apartment has been burglarized, you're not going to have any idea who did it. Law enforcement is used to tracking down the people when they don't know who they're looking for. With murder, the reporting rates are probably close to 100 percent. But in white-collar crimes the detection rate is much lower… because the victim has to be the one to detect it and make a report.
TCR: But with a billing scam, for example, it's not that easy to detect. If I come home and my TV is gone, I know it's been stolen. But if my doctor bills my insurance company for something I didn't get, I might not even notice.
TL: Which is why I think that one thing that needs to be done is to educate consumers. Just looking at your insurance statement to see (whether) I really did get those services??did I really get those medications??can make a difference. The problem is you can't read those explanations of medical benefits very well. I don't always understand what the insurance pays and what it doesn't pay. If they say you got a blood test and you know you didn't get a blood test, okay…but if you were in surgery, how do you know? Did you get a transfusion? How much anesthesia did they use?
When my father passed away about a year and a half ago, my mother got bills from doctors and other healthcare providers she knew absolutely nothing about. I told her, don't pay them, wait and see. Eventually they just went away.
TCR: Last year, Eli Lilly, one of the biggest pharmaceutical companies, settled with the government for more the $2 billion. That has to make a dent, right?
TL: It does, but one of the problems is that federal prosecutors go after the low-hanging fruit—the big pharmaceutical companies and the big hospital companies that are extremely well-heeled. And they can usually get out-of-court settlements that are huge because they don't want to take the chance of a court decision that might ban them forever from Medicare and Medicaid.
Eli Lilly recently had a $2.3 billion out of court settlement, so government prosecutors can say 'look, for every dollar we spend prosecuting these companies we get $15 in return.
Most health care fraud is more mundane and it's done on a much smaller level, but there's a lot of it and the cumulative effect is quite large. Government prosecutors don't want to “waste their time” going after somebody and collecting a couple million dollars when they can go after these big companies and make easy settlements approaching the billion dollar range. The settlements make a dent, but I think it's counter productive, because ultimately we the consumers end up paying for the settlements with higher prices.
TCR: And when big companies settle, it's rare that anyone actually goes to jail.
TL: Right, and I think one thing we have to do to make a difference is start throwing these crooked health care providers in prison. We have federal sentencing guidelines that allow people to receive fairly lengthy prison terms for conspiracy, money and wire fraud, money laundering, and obstruction of justice – the crimes that are often what health care fraudsters get convicted of. But judges often look at [the accused] and think he's one of us, he's not this terrible looking person with multiple tattoos and long scraggly hair, someone who looks like he belongs in prison.
TCR: Doesn't that send the message that if your company has enough money to settle, you can behave with impunity?
TL: Not only that, but [these defendants] can afford to hire really good legal counsel, and they're smart enough to help fight the case; whereas your typical criminal might use a court appointed attorney and not be of much help. Especially when you're dealing with medical doctors and other higher trained professionals, they can be pretty formidable in a court hearing when they also have good attorneys. On the flip side, federal prosecutors are going to become better and more skilled at prosecuting these cases…the more cases they handle, the better they get at prosecuting.
TCR: Are there political solutions to this problem? Would, for example, a single-payer system eliminate some of the fraud? And what about Obama's new health care law?
TL: That's easy: forms of fraud change, but it doesn't matter what system you have, the fraud's going to be there. The European union has fraud pretty much on the same scale in terms of percentage of health care expenditures as the U.S. I think you can have a more socialized, more government-run health care system, but the fraud is going to be there. I don't think that the structure of the system really matters that much in terms of the total amount of fraud. The types of fraud maybe.
I actually think Obama's health care plan is going to make matters worse, because it's not really health care reform. It's insurance reform, and insurance companies are the biggest targets [for fraud]. Consumers are targeted indirectly through their insurance companies. I think the more health insurance you have, the more fraud you're going to have.
Julia Dahl is Deputy Managing Editor of The Crime Report.