Finding Money for Health Care Reform — Rooting Out Waste, Fraud, and Abuse

Published: 2009-06-29 00:28:21
Author: John K. Iglehart | New England Journal of Medicine | June 10, 2009

In their quest to enact health care reform legislation, Democrats' major challenge is securing the money to pay for greatly expanded insurance coverage and more government regulation in the face of strong Republican opposition and an unsettled private sector. President Barack Obama has emphasized time and again, recently in a letter to Senators Max Baucus (D-MT) and Edward Kennedy (D-MA), that "health care reform must not add to our deficits over the next 10 years — it must be at least deficit neutral and put America on a path to reducing the deficit over time." As the administration and its congressional allies pursue revenue sources to pay the estimated costs of near-universal coverage ($1.2 trillion over a decade), one potential source that Obama has emphasized is an acceleration of government efforts to pursue waste, fraud, and abuse that sap the health care system of billions of dollars every year. 

The National Health Care Anti-Fraud Association, an organization of about 100 private insurers and public agencies, estimates that some $60 billion (about 3% of total annual health care spending) is lost to fraud every year, but that figure is considered conservative. In 2008, government-wide "improper payments" cost the U.S. Treasury $72 billion, or about 4% of total outlays for the related programs. Of that amount, 50% took the form of reimbursements to providers, medical suppliers, and other Medicare and Medicaid vendors. Medicaid had an estimated improper-payment rate of 10.5%, or $18.6 billion, for the federal share of Medicaid expenditures — the highest rate of any federal program. 

Improper payments have been a "long standing, widespread, and significant problem" for the federal government, but Congress has not always been willing to appropriate the monies that the executive branch seeks for antifraud activities. In 4 of the past 5 years, Congress rejected Bush administration requests to provide an additional $579 million to combat health care fraud on the grounds that doing so would reduce budgets for curing cancer and combating obesity. Virtually no academic researchers study health care–related fraud activities, largely because — as Malcolm Sparrow, a Harvard professor of the practice of public management, testified recently — it "falls awkwardly between the traditional disciplines of health economics, health policy, crime control policy, anomaly detection and pattern recognition."

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