The Right Prescription
Medi-Fraud for Everyone
Democrats argue that creating a new government-run health care program will bring efficiency to the system, but the existing programs are rife with fraud.
Guillermo Denis Gonzalez was released from prison in Florida in 2004 after serving 12 years for murder. By the end of 2006, he owned a health care business officially licensed by Medicare.
This August, the Miami Herald reported that Gonzalez pled guilty to filing $586,953 in phony Medicare claims for supplies that were never given to any actual patients — but this was only after he was arrested for murdering and dismembering another victim, to which he also confessed.
While it’s shocking that government policing efforts are so lax for Medicare that even a convicted murderer can be granted a license to sell equipment and file claims, Gonzalez is actually a small player compared to other cheats. Last June, for instance, the Washington Post ran a story about a high school dropout who scammed $105 million from the federal government by filing 140,000 fraudulent Medicare claims, buying herself a Mercedes-Benz and two condominiums with a portion of the proceeds.
The rampant fraud in existing government health care programs is nothing new, but the problem warrants increased attention given recent reports of growing momentum behind Democrats’ push to create a new government-run program modeled after Medicare.
Earlier this week, the Hill reported that House Democrats were discussing rebranding their so-called “public option” as “Medicare Part E,” or “Medicare for Everyone,” in hopes that it would be an easier sell. And on Thursday, ABC News cited sources who said that Senate Majority Leader Harry Reid planned to include some form of a government plan in Senate legislation.
“I thought the government plan was dead,” Republican Sen. John Thune said during a Wednesday conference call with bloggers. “I don’t think that anymore.”
Proponents of creating a new government plan argue that Medicare is much more efficient than private insurance and boast that it has administrative costs of just two percent. The number is highly misleading in that it doesn’t include many expenses that would be considered when calculating administrative costs in the private sector, because those expenses show up elsewhere in the federal budget. Examples include the cost of tax collection, office space, and staff salaries. The true administrative cost of Medicare is more like 6 percent to 8 percent, according to a 2006 report by the Council for Affordable Health Insurance. But to the extent that Medicare does have lower administrative costs than private insurance, the programs’ defenders ignore one of the consequences: lax oversight of claims that leads to widespread fraud.
Ironically, President Obama has insisted that he will cut several hundred billion dollars out of Medicare’s budget without affecting benefits simply by eliminating waste, fraud, and abuse — yet he simultaneously makes the case that creating a new government plan is necessary to improve efficiency in the health care system.
“He’s kind of put himself in a box,” said Jim Frogue of the Center for Health Transformation, editor of the book Stop Paying the Crooks: Solutions to End the Fraud That Threatens Your Healthcare. Obama’s argument, Frogue said, is “yes, there’s tons of fraud in these programs — massive amounts — but let’s create another one just like it. Now that’s a very tough position to make sense out of.”
There are tremendous difficulties in measuring precisely how much of money is lost to fraud in Medicare and Medicaid. Some estimates put the number at around $60 billion, while Sen. Tom Coburn has argued that it’s at least $100 billion, perhaps even double or triple that. Coburn based his figures on an estimate from health care fraud expert Malcolm Sparrow of Harvard University, who has said — at the low end — 10 percent of the roughly $1 trillion in spending on government health care programs may be lost to fraud.
“By taking the fraud and abuse problem seriously this administration might be able to save 10 percent or even 20 percent from Medicare and Medicaid budgets,” Sparrow said in May testimony before the Senate Judiciary Committee. But to accomplish this, Sparrow explained, the government would have to boost anti-fraud spending to as high as 2 percent of the cost of the programs from the roughly 0.1 percent now dedicated to the task.
At least anecdotally, accounts of massive fraud cases appear regularly in the news, and they are staggering.
In 2006, the Los Angeles Daily News wrote about the indictment of a Russian-Armenian crime syndicate “that gutted Medicare of more than $20 million using a network of clinics, paid kickbacks to marketers for patient referrals and billed Medicare for tests that were unnecessary or went undelivered.” And the Associated Press recently found that the mafia is increasingly resorting to Medicare fraud as a substitute for dealing drugs.
“Building a Medicare fraud scam is far safer than dealing in crack or dealing in stolen cars, and it’s far more lucrative,” the AP story quoted Lewis Morris, a lawyer the Department of Health and Human Services, as saying. There’s also a lower likelihood of getting caught, and even if caught, the penalties are much lighter.
Scam artists often file fake claims by paying people for their Medicare numbers or somehow acquiring lists of beneficiaries. In some cases claims have been filed by dead doctors, or on behalf of patients who were dead or deported at the time of the claim. In his testimony, Sparrow noted a July 2008 study by the Senate Permanent Subcommittee on Investigations that found from 2000 to 2007 “between $60 million to $92 million was paid for medical services or equipment that had been ordered or prescribed by dead doctors.”
About the Author
Philip Klein is The American Spectator’s Washington correspondent. You can follow him on Twitter at: http://twitter.com/Philipaklein
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Grzmlyk| 10.23.09 @ 9:02AM
Sheesh! You conservatives are such down Debbies. Turn that frown upside down! Didn't Obama promise hope and change? You think he was lying?
Silly, cynical right wingers, it's going to be DIFFERENT this time. Why? Because Obama is so cool. Because Obama is so SMART. Because Obama is a citizen of the world! He's black, you know. Black people are just SOOO authentic, so hip, so above reproach. He's HEALING this nation.
Want proof? You should have seen us all high-fiving each other in my dorm on election day! You can't BUY that kind of inoculation against charges of racism, dude.
As for His inspiring each and every one of us to be social justice activists, you should have seen my crew watching the election returns and chortling about the comeuppance you capitalist pigs are in for as we divided up the profits from that pound of sweet weed we sold.
And Health Care will be The Messiah's Miracle. What you conservatives don't get is that The Great One cares so very, very much about those who are disadvantaged. He just wants everybody to be treated fairly. You could even see his concern for the downtrodden as he danced the night away that time they flew Earth Wind and Fire into the White House to dine on Kobe Steaks and perform a private concert. Why, Michelle won’t even wear any sneakers that cost more than $1,000 until every American has free health care. It makes me want to cry just thinking about their sacrifice. The Great One’s compassion knows no bounds.
I know what you're thinking, but you're wrong: Those pikes on the White House lawn upon which are affixed the heads of Fox News reporters and Chamber of Commerce members and GM Executives and Chrysler Bondholders and former Bush administration officials and tea partiers and insurance company representatives and other assorted Bitter Clingers are PROOF of his compassion! Everyone knows that to instill a truly compassionate society you gotta crack a few skulls.
Sure, Obama is running into difficulty because you racists don't want him to succeed. But he's really, really trying! My god, isn't that enough?
Don't you remember how much slack we liberals cut the Evil George Bush? We didn't start calling Iraq a Quagmire until at least 10 minutes after Shock and Awe started. It took at least an hour thereafter to come up with "Bush lied, people died!"
The Enslavement of Americans Act - oops - my bad - I mean "health care reform" - will work! We will insure an extra 50 million people, improve the quality of health care AND bring the price for everybody WAAAAY down. The Messiah said it, and the Messiah will make it so! Hello! Ever hear of the loaves and the fishes?
All we have to do is focus our minds on positive thoughts in unison - you know concentrate on rainbows, unicorns, non-fat lollipops, conservatives being pistol-whipped - and It Will Happen! Gosh, I don't see how you right wingers refuse to see the obvious.
If health care fails it won't be due to the blatant corruption of the Obama administration, Congress's cynical disregard of the truth, human nature's never-ending capacity for fraud, bureaucracy's inherent allegiance to political priorities to the exclusion of all else, or the fact that socialism has failed to bring anything but misery to the masses everywhere it's ever been implemented.
No, it'll be because you negative nellies didn't join with us enlightened liberals to create positive vibes. So come on. Put on your “War is not the Answer” sweatshirts and join our circle. We promise not to bayonet you until your wallet’s empty or you turn 65, whichever comes first.
I'm sorry, Liberal Reader, did I steal your thunder?
Eric Cartman! | 10.23.09 @ 6:13PM
Damn, Dude! I don't think there's anything left of the poor bastard! That was brutal!
Robert Rosencrans| 10.23.09 @ 9:13AM
When comparing Medicare/Medicaid to the private sector there is another advantage for federal run programs. They don't have to pay state taxes on health insurance policies like private insurers giving them another 2 to 5% advantage depending on the state. Some states do not tax health insurance policies through insurers. However, it is highly unlikely your 9% administrative costs is realistic. I've read many studies about the costs of bureaucracies and I've never seen any study that indicates bureaucratic overhead costs are not massive compared to the private sector. Several well documented studies indicate for every dollar authorized in a budget process for a federal agency that provides social services, approximately .82 cents remains in the bureaucracy and the public receives approximately .18 cents in direct benefits. This assumes the complete absence of fraud. This is the main reason why government run institutions for social services are a bad deal for the public. Throw in the guaranteed fraud you have throughout government service and you have financial disaster.
Grzmlyk| 10.23.09 @ 9:34AM
I concur with Robert - I have researched this as well, and the 80/20 rule is accurate. It's just that bureaucracy divides up its overhead costs in order to hide them. There are myriad studies spanning decades that have all reached this conclusion.
Indeed, this should be obvious at the empirical level to anyone who has ever had to deal with a bureaucracy: it's 80% BS, 20% actual work. Yet somehow they think that, miraculously, health care reform will be different (well, the fools think that; the knaves are just poised to exploit the fools).
I had to laugh a couple of months back when Liberal Reader posited that Medicare was run with a 3% overhead vs. 33% for private insurance companies - of course he bought hook, line and sinker the ridiculous 3% number - common sense tells you NO entity of any size could exist with such low overhead costs (hell, toner cartridges alone probably account for that) - but he excoriated the 33% number attributed to private insurers for their evil practice of paying salaries and advertising.
Of course everyone knows the cushiest, most guaranteed jobs on this planet are with the U.S. government. You - and the army of colleagues around you - get paid top dollar, with Cadillac benefits, for doing NADA. And you want to talk about advertising? Propaganda is the mother's milk of bureaucracy. 95% of radio is PSA advertising paid for by the US taxpayer through the auspices of these various "caring" bureaucracies.
What people don't seem to realize is that the purpose of private companies is to sell the product they are selling. So all operations are tilted toward that end. Profits accrue to those companies who successfully sell something their fellow man wants to buy.
The true purpose of any bureaucracy is to grow the bureaucracy. It is utterly disconnected from its ostensible charter. That's why bureaucrats can hop among disparate bureaucracies without skipping a beat - because they don't have to have an area of expertise. They just have to be good at adding critical mass to the bureaucracy. I've worked with Medicaid, and I can assure everyone that any efficacy that program delivers to consumers at all is purely incidental to its real purpose.
But liberals never, ever learn this fundamental lesson - and so we are going to have to pay for their intractable, willful ignorance.
John II| 10.23.09 @ 1:46PM
"But liberals never, ever learn this fundamental lesson - and so we are going to have to pay for their intractable, willful ignorance."
I would have agreed with this remark a generation ago, but "willful ignorance" sooner or later morphs into malicious cunning--and I think that's where liberals are today. They know damn well what the consequences of their nostrums are certain to be, and those are precisely the consequences they want: a pliant population dependent on a nanny state run by the left's own self-important class of busybodies.
They want power, and they seek a Brave New World in which they can exercise power, pure and simple, without judgment or authority or responsibility.
Grzmlyk| 10.23.09 @ 6:10PM
Well, John, I agree with you to some extent. But our education system - long since hijacked by the propaganda arm of one-world socialism, teaches our kids from kindergarten through advanced degrees the false identity of the Caring Altruist. The fact is, those in power are cynical jackals - the knaves. But millions upon millions of people - callow youth and clueless aged among them - voted for Obama because they bought into the hope and change bullshit.
I am in the arts, and I promise you, 100% of my colleagues voted for Obama not because they understand how power works (although the resentment - the desire to storm the palace and loot the crown jewels - IS the fuel of the anti-capitalist zeitgeist), but because they actually believe we can all join hands one day and sing Kumbaya - just as soon as the greedy capitalists and warmongers get what's coming to them.
They never, ever learn.
The knaves couldn't rape the taxpayer if the fools didn't empower them.
John II| 10.23.09 @ 8:42PM
Yet my best students--the honest, smart ones--don't buy into any of it. They sometimes come to my office just to talk about this or that political imbecility they have to put up with in another class--and I keep the politics strictly OUT of my own classes, yet they somehow know they can talk with me. And some of them become classics majors just to pursue their interest in the humanities without "the political thing" constantly horning in.
So I'm inclined to think that the heavy-handed lefty proselytizing is probably resisted or ignored (or cynically sucked up to) more so than not. But until the advent of the Obamanation, I had soothed myself with the thought that academia performs the important social service of acting as an asylum for people who really need to be kept off the streets and out of reach of the reins of power.
I don't really think that most of them believe in the Kumbaya thing, much less in anything serious. I think they are at bottom nihilists, and the vagrant lefty politics is something they use to stuff their empty hearts.
The smarter and more robust students are as revolted by them as I am, but their effect on the institution is way out of proportion to their numbers, and they plainly enjoy the taste of power, as they spend just about ALL their time plotting and politicking. Their culture, astonishingly, is now in the White House and is dominant in Congress.
Silverlining: Among their pet enthusiasms is a hostility to human reproduction. Few of them have families, and none of those with families have more than one or two children. In the not so long run (say, two more generations), they are breeding themselves out of existence.
But they can do a lot of damage in two generations.
Marc Jeric| 10.26.09 @ 6:18AM
Some years ago I got data on the average number of doctor visits we the geezers make per year. It was 33 visits/year. Every 10 days or so all the recipients of Medicare visit their doctors; incredible! That's FRAUD - widespread and increasing. One DC doctor billed Medicare in one year for an average of 71 patient visits per workday. That's one "patient" every 6 minutes.
Pingback| 10.23.09 @ 9:42AM
Twitter Trackbacks for The American Spectator : Medi-Fraud for Everyone [spectator.o links to this page. Here’s an excerpt:
Pingback| 10.23.09 @ 10:19AM
Headlines 10.23.2009 — ExposeTheMedia.com links to this page. Here’s an excerpt:
Pingback| 10.23.09 @ 10:47AM
Michelle Malkin » If you like Medi-fraud, you’ll love Obamacare links to this page. Here’s an excerpt:
The American Guardian | 10.23.09 @ 10:58AM
Stuff your pockets as fast as you can !!!
George True| 10.23.09 @ 12:07PM
Well stated, Grymzlyk. The idea that ANY government agency could do anything cheaper or better than the private sector is laughable.
I have been in the health insurance arena for 21 years. One of the products I have dealt with in recent years has been Medicare Advantage. The Centers for Medicare/Medicaid Services (CMS) is the federal agency within Health and Human Services that actually administers Medicare. CMS would like nothing more than to get every retiree off of Original Medicare and into a Medicare Advantage program with a private health insurance company. Why? Because quite simply it costs them less. According to CMS's own figures, their internal costs for administering the claims for those seniors on Original Medicare is 33-37% of every dollar spent. At the same time, the average costs of a private insurance company for administering their Medicare Advantage plans averages about 17%. This includes advertising, paying commissions to agents, and their general overhead costs. And they offer richer benefits than Original Medicare, saving the average retiree about $1000 a year in out of pocket costs.
CMS pays the private insurance companies a pre-set dollar amount per month for every person on their Medicare Advantage programs. And they are happy to write that check every month, because the cost to CMS is LOWER than if they were administering those people themselves through Original Medicare.
Some might say that the only way this can be is because the private insurance companies pay out less money for claims than CMS would, and they would be wrong. Private health insurance companies on average pay out about 80% of all premiums collected on claims. Again, the private companies provide RICHER benefits that save the comsumers money spent out of pocket. THe difference is that private companies are vastly more efficient and less wasteful than government agencies. Also, as the article stated, private insurance companies are extremely good at detecting fraud.
It does not surprise me that Obama wants to do away with Medicare Advantage, as it clearly proves that the private sector does healthcare and health insurance better and cheaper than government could ever hope to do.
John II| 10.24.09 @ 5:46PM
"The idea that ANY government agency could do anything cheaper or better than the private sector is laughable."
Well, I would refine that statement--but only slightly. I can't imagine Brinks or Pinkerton, for example, doing a better job than the FBI. And I sure as hell wouldn't want to live in a social order where, if you called one of the competing police agencies for help, you'd have to expect them to check your credit rating before sending help.
But then, law enforcement is a proper function of government, and the government agencies performing such functions tend to attract real talent.
So I would say MOST government agencies instead of ANY. And that's the trouble. As things have evolved over the past century, most government agencies do not perform functions proper to government--and thus attract morons and slackers in disproportionate numbers to the ranks of their hired functionaries.
Pingback| 10.23.09 @ 12:45PM
Twitter Trackbacks for The American Spectator : Medi-Fraud for Everyone [spectator.o links to this page. Here’s an excerpt:
Grzmlyk| 10.23.09 @ 12:49PM
Thank you, George, for your real-world examples of the inefficacy of bureaucracy.
I don't know why conservatives aren't assiduously trumpeting the truth about these government programs; they ought to be shouting it from the highest mountaintops on TV and radio with every dime the RNC can raise. My god, the evidence is everywhere.
Instead we have a typical anemic, flaccid, half-hearted resistance. As long as people like Lindsey Graham have a job courtesy of the American taxpayer, the Republican Party deserves its exile.
Government programs aren't programs; they're spoils systems and patronage banks. They - and the Americans who choose to be parasites on the taxpayer by working at these agencies - are hydrochloric acid on the institutions of this country.
It ought to be common sense that private, profit-driven companies are inherently more efficient than giant bureaucracies that do not have to worry about where the money is coming from and the spigot is never shut off - on the contrary, it just gets bigger every single year, and the more bureaucrats that can get in the boat, the bigger the government makes the boat.
These people have nothing but contempt for the American people - even the hopelessly naive Liberal Readers of the world who blindly follow these thuggish dictates in the vain - and vainglorious - hope that THEY can be part of building a utopia on the backs of other people, whom they would drag to altruism at the point of a gun. They never see the irony of their vision, nor do they understand that, by their very assumption that they have surmounted the squalidity of human nature, they are exhibiting the hubris that proves they have not.
This is tyranny, straight up (to borrow the execrable Jeanine Garofalo's argot).
Oldefarte| 10.23.09 @ 2:25PM
Of course there is fraud involved in Medicare/Medicaid because-------IT'S THE GOVERNMENT!!!! Fraud runs rampent through government because of the ineptness/inexperience of their employees and/or managers, and their resultant lack of managerial control over government operations. As has been said, if you want to see what healthcare will look like if the government takes over from insurance companies, just look at the post office, public education, etc operations. Even the military is inefficiently run from an administrative standpoint [remember the $400 hammers/toilets that the US military has paid for?]. The government cannot run anything efficiently and will destroy the healthcare system if they get control of it!!!!
Marc Jeric| 10.23.09 @ 3:19PM
Some years ago I read Medicare statistics amd made a few calculations. An average retiree makes 31 doctor visits a year - and I just could not believe it. I myself have made 2 doctor visits in the 14 years since my retirement in 1995. I also read about fraud; one DC doctor billed Medicare for an average of 71 patient visits per workday.
Tish | 10.23.09 @ 3:20PM
Some years ago there was an effort to use computers to catch fraud in Medicare and Social Security. The notion was squashed before it ever reached committee because it dawned on some that it might be so efficient that it would not only drastically reduce fraud incidence, but result in the redundancy of half the clerks and a chunk of the middle managers who pretend to oversee them.
Computing has progressed light-years since then, as have the algorithms used for matching and tagging.
Marc Jeric| 10.23.09 @ 3:22PM
Some years ago I read Medicare statistics amd made a few calculations. An average retiree makes 31 doctor visits a year - and I just could not believe it. I myself have made 2 doctor visits in the 14 years since my retirement in 1995. I also read about fraud; one DC doctor billed Medicare for an average of 71 patient visits per workday.
Louis Jenkins| 10.23.09 @ 4:23PM
Or how about the Doc who visits grandma in the nursing center. He stands at the door and has a short conversation, looks at Grandma's chart, says she is doing well, and moves on to the next patient. Then charges medicare for a patient visit? Seen it happen to one resident, can't necessarily say he charged medicare, but I wouldn't doubt it.
Gerald Stephens| 10.24.09 @ 8:42AM
After reading the superior analysis inherent in government uselessness, I thought what more could one add... until I read Marc Jeric, supra.
His comprehension of the issue illustrated by the example of a DC doctor(presumably a Doctor of Chiropractic) wherein 71 patients were seen in a single working day is amusing. Assuming his reported facts are accurate, and assuming the doctor worked eight hours, he would have invested 6.7minutes per patient. Aside from being quite exhausted at days end, it would demonstrate a remarkable administrative control of patient flow. And I'll bet most of his patients were absolutely delighted with the attendant minimal time waiting to be seen.
Marc Jeric's bashing a doctor of chiropractic is truly funny given the rate of reimbursement for each of the visits in question. Before retiring in 1994 the medicare fee allowed was $5 per visit, and that assumed one was even paid following receipt of a "not medically necessary" love note from the government.
Go get em Marc!
Dr. Gerald Stephens
Hartford, CT
Pingback| 10.24.09 @ 9:43AM
Morning Conservative Reading List - October 24, 2009 - AIP Blog - American Issues Pr links to this page. Here’s an excerpt:
Yosemeti Sam| 10.24.09 @ 12:24PM
LOL.
The picture of Dingy and the Empress of HR
are a descriptive deliciously telling allegorical photogenic prize.
Whatever the ongoing agenda of BHO and Co. ,
these representative bold-some two of the Democrat Party hitched their wagon to a black hole and are being inexorably drawn into it?
Pure poetry!
Bob| 10.24.09 @ 12:32PM
Philip, it would be nice if you did due diligence on your estimate of Medicare fraud instead of just depending on an insurance lobbying agency and conservative estimates, but the fact is that estimates range from $13 billion to $80 billion and no one knows for sure. Many of the estimates conflate total health care fraud with Medicare fraud -- and you've bought into some of that.
However, I agree with you on the thrust of your argument on virtually all other accounts. But let me take the argument one step further. Government doesn't stop fraud because there is no incentive for government workers to do so. This is the fundamental problem with government management of programs. For an organization to be successful, jobs must be at risk. Those who perform poorly should be fired and those who take initiative should be rewarded. For many years at GE, the bottom 10% of all employees were fired each year. I know this sounds harsh, but it is our money that supports government organizations.
On the other hand, insurance companies have state monopolies which also wastes money. The amount of money we give to insurance companies for their monopolistic practices is even more than the total of Medicare fraud.
The fact is that we need to change the nature of government employment and bring competition to the health insurers. I would be for outsourcing Medicare to private companies if we had real competition for government contracts instead of lobbying and campaign donations determining who gets these contracts.
You are certainly right in your conclusions, but the left is also right that solving the health care problem is key to our economy. Neither the Dems or Republicans have real solutions because they are politicians who create policy on being reelected rather than the facts.
DaveS| 10.24.09 @ 2:20PM
The AMA was against the 1965 Medicare action. Was it just sly? No, I think it was prescient.
Doctors who contemplate cheating risk WAY too much - yet I don't doubt a goodly (sic) number did.
Now, Obama, the resident of the WH, and the Dems think that something that has swelled to 50x what was originally forecast is in the interests of the country. NOTHING this clown does is in the interest of the citizenry. [Well, he could do one thing (resign), but twenty-five in-line sycophants also would have to resign.]
The example given at the beginning, though true, is a canard. Fraud is not the issue, i.e. cost; it's whether or not we should go down this road even it were for pennies. The resistance has allowed cost to be the leading objection - an objection that can be mitigated by sweetening language.
When you get caught up in the cost argument you've relented over such vagaries as 'out' years and 'the true cost is..' kind of nonsense.
The correct answer to all the reform is to kill it dead, dismember the progeny, and do some American-like reform instead. Insurance purchasing is a choice for most (like buying mobile phones.) Sorry, there is no slution but open markets. And, dear bishops of my RC church, health care is NOT a right. [Note to Dolan, et al]
Pingback| 10.25.09 @ 8:38AM
Headlines 10.25.2009 — ExposeTheMedia.com links to this page. Here’s an excerpt:
bill984| 10.26.09 @ 8:55AM
no one in washington cares about fraud, after all, it helps buy more votes.
Ke Shaosheng| 11.5.09 @ 12:49AM
The revelations, as reported in your story, is disturbing and shocking.
U.S. media has long reported on the culture of corruption in the
Republic of Armenia and its negative effect on the U.S., including the
widespread fleecing of American business people, as well as scams
emanating from Armenia to “obtain” Medicare and Medicaid reimbursement
dollars and U.S. aid dollars.
This newest transgression of pervasive fraud further must be a wakeup
call to Armenian leadership to address their culture of corruption.
KSS
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