Health Care Reform Should Begin with Ending Fraud

Published October 13, 2009

During his September 9 primetime address, President Barack Obama said health care in America is “a system that is currently full of waste and abuse” where “too much of the hard-earned savings and tax dollars we spend on health care don’t make us any healthier.” In fact, he said, there are “hundreds of billions of dollars in waste and fraud” in Medicare that “don’t improve the care of seniors.” We agree.

We believe fraud constitutes at least 10 percent ($100 billion) of the nearly $1 trillion taxpayers will spend on Medicare and Medicaid this year. That is likely a conservative estimate. Harvard’s Dr. Malcolm Sparrow, author of the seminal book License to Steal (Basic Books), estimates the losses could easily be in the 20 percent to 30 percent range, even as high as 35 percent, but he insists we shouldn’t have to guess. He believes the government should measure the losses and report them accurately.

The American people firmly support anti-fraud efforts. In a July 2009 Zogby poll, 88 percent of respondents identified “eliminate fraud” as their preferred way to pay for modernizing our health care system. “Reduce medical errors” came third on that list with only 72 percent support.

Moreover, an Insider Advantage poll, also from July, found that by a margin of 61-27, Americans believe the issues of fraud and waste in Medicare and Medicaid should be addressed prior to the creation of a new government-run health program.

Rampant Fraud

The story of convicted murderer Guillermo Denis Gonzalez illustrates the vulnerability of government-run health programs to fraud.

Gonzalez was released from prison in 2004 after serving a 12-year sentence for murder. Two years later he bought a Medicare-licensed equipment supply company and duly notified Medicare authorities that he was the new owner. In 2007, he submitted $586,953 in false claims to Medicare and got paid for some of them. In 2008, he is alleged to have killed and dismembered a man.

The fact that a convicted murderer with a seventh-grade education could so easily become a supplier to our largest health program and begin defrauding it illustrates how pervasive fraud is in America’s government-run health care programs. If only the Gonzalez case were an isolated incident.

Florida’s Miami-Dade County is notorious for health care fraud. There are more licensed home health agencies in Miami-Dade County than in the entire state of California. In 2005, billing submissions from Miami-Dade to Medicare for HIV infusion therapy were 22 times higher than the rest of the country combined.

New York also has a serious problem with fraud. In 2006, a private study of New York’s Medicaid program found one-quarter of the expenses from the $44 billion that program cost that year cannot be explained.

More Accountability

In August, Medicaid’s internal inspector said the program’s current data-gathering capabilities are not timely, accurate, or comprehensive for detecting waste, fraud, and abuse. Essentially, one of the largest government-run health programs admits it has no idea how much fraud occurs as a result of its antiquated computer systems and collection methods.

In January 2009, the Government Accountability Office reported 10 percent of Medicaid payments made in 2007, or $32.7 billion, were improper. Last summer, U.S. Sen. Charles Grassley (R-IA) and a group of leading senators estimated there is $60 billion of waste, fraud, and abuse in the Medicare program annually.

For years, Congress has known the problem of health care fraud, particularly in Medicare and Medicaid, is massive. Yet, instead of targeting the crooks who are stealing from poor and elderly Americans dependent on Medicaid and Medicare, Congress routinely deals with runaway Medicare and Medicaid outlays by slashing payments to honest doctors and hospitals. That is a long-term recipe for total collapse of our health care system.

This past May, Sen. Coburn, coauthor of this article, introduced a health care reform bill, the Patients’ Choice Act, along with Sen. Richard Burr (R-NC) and Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA). Besides increasing patient choice, lowering costs, saving states $960 billion, and putting government health spending on a sustainable course, the Patients’ Choice Act would use private-sector technologies to significantly reduce waste, fraud, and abuse. This could save taxpayers about $100 billion a year.

Credit Card Model

Congress should look to the credit card industry as a model of fraud containment. It processes more than $2 trillion in payments every year from 700 million credit cards being used at millions of vendors to buy countless products. Fraud in that industry is one-tenth of 1 percent, while fraud in Medicare and Medicaid is at least 100 times higher.

At the very least, Congress should require Medicare to authenticate new suppliers by Visa, Mastercard, or American Express. No more proof is needed that the bureaucrats currently in charge of Medicare and Medicaid have failed to combat the fraud that exists in those programs today. Expanding the role of government in health care without combating fraud will only guarantee more of the same.

Tom Coburn ( is a family doctor and Republican U.S. senator from Oklahoma. James Frogue ([email protected]) is vice president of the Center for Health Transformation and editor of the new book Stop Paying the Crooks (CHT Press, $19.95). This column was distributed to the press for general release and is printed with the authors’ permission.