Ask a politician how he wants to balance the budget and, he’ll say cutting “waste, fraud, and abuse.” For my latest readers, just walk away!
Ask a politician how he wants to balance the budget and, nine times out of ten, Normally, the correct response to this is contempt and mockery: What drives federal spending isn’t office supplies walking out the back door with a rogue secretary at the Merit Systems Protection Board — what drives federal spending is Social Security, Medicare, and Medicaid. And you know where there’s a lot of waste, fraud, and abuse? Social Security, Medicare, and Medicaid.
Identifying small-ball efficiencies at obscure federal agencies would not do very much to get federal spending under control, but getting a grip on the shenanigans that plague the major entitlements — especially the health-care entitlements — could mean substantial savings, “substantial” here meaning hundreds of billions of dollars.
Medicare and Medicaid together account for about $1 trillion in federal spending annually, and estimates suggest that $1 out of every $10 of that spending is fraud. Some estimates go much higher. We do not have a very good idea of exactly how extensive fraud in the system is because the federal government has put a fair amount of effort into not knowing.
You can use these techniques to see where judgments are unorthodox or payment rules have not been followed, but almost nothing in these methods tests whether the information you have is true.” Which is to say, investigators are asking whether a certain treatment was, in fact, appropriate for what ails Mrs. Jones, not whether Mrs. Jones exists.
Fraud tends to cluster in certain areas and in certain treatment categories. The reason for that is that this fraud is not random, not just the result of some yahoo general practitioner in Eucheeanna padding his bills. It’s the work of organized crime. As Sparrow points out, when there is a criminal case filed against one of these fraud artists, then billing in a particular category — some years ago, it was HIV fusion treatments — falls off steeply, by as much as 90 percent.
The implication here is that fraudulent billing may make up the majority of Medicaid and Medicare spending in some categories. This is a major criminal enterprise, one involving transnational crime syndicates looking for a better return than that provided by drug smuggling and the other familiar rackets.
According to The Economist:
Some criminals are switching from cocaine trafficking to prescription-drug fraud because the risk-adjusted rewards are higher: the money is still good, the work safer and the penalties lighter. Medicare gumshoes in Florida regularly find stockpiles of weapons when making arrests. The gangs are often bound by ethnic ties: Russians in New York, Cubans in Miami, Nigerians in Houston and so on. What to do? On a dollar-per-dollar basis, the Department of Health and Human Services fraud-recovery units by most accounts do relatively effective work — but do not do very much of it, has recovered less than $2 billion in fraud losses in fiscal 2016.
And there were only 1,160 convictions in fraud cases in 2016, or barely one fraud conviction a year for every two staffers in the anti-fraud division.
There might be some benefit to beefing up the conventional in-house anti-fraud investigations (Sparrow has suggested setting aside 2 percent of the budget to protect the other 98 percent), especially if the additional funds are used in support of more-intelligent investigatory approaches.