Research & Commentary: Bipartisan Support for State-Led Effort Against Medicare and Medicaid Fraud

Published March 4, 2010

President Barack Obama’s February Blair House summit made little difference in the push toward national health care reform, but an increasingly popular idea for cutting costs was raised by Sen. Tom Coburn (R-OK), a doctor himself: rooting out fraud and waste in Medicare and Medicaid.

Coburn suggested the president consider a program to send “undercover patients” into doctors’ offices to find out whether the physicians were willing to break Medicaid or Medicare rules. The proposal has received bipartisan support in the past, but a lack of support from the American Medical Association has prevented its inclusion in any national legislation.

Those on both sides of the political aisle are calling for targeted crackdowns on known areas of abuse. Persistent fraud is a hallmark of entitlement systems, and it is increasingly apparent that states must lead the way in responding to these crimes.

The following articles offer information about the extent of Medicaid and Medicare fraud and some proposed solutions.


An Easy Path to Billions: Medicare and Medicaid Fraud
A 60 Minutes report provides jarring statistics on the amount of fraud: “The tiny medical supply company billed Medicare almost $2 million in July and a half million dollars while 60 Minutes was there in August, but we never found anybody inside, and our phone calls were never returned.”

Coburn Comments to Obama on Fraud Solutions
A transcript of Sen. Coburn’s remarks at Blair House, including the following: “Tomorrow, if we got together and fixed fraud [in government-run health care systems], we could cut health care [costs] 7.5 percent tomorrow for people in this country. So what we ought to do is do the Willie Sutton thing. We ought to go for where the money is.”

How to Stop Medicaid Fraud: States Must Act
A 2006 article by Stephen Malanga in City Journal outlines state-level options on responding to fraud: “Texas’s Medicaid program, which at $18 billion a year is about 60 percent smaller than New York’s, has four times as many people working to uncover fraud and prevent billing errors. In 2004, the inspector general’s office recommended 257 cases for prosecution, compared with just 37 fraud cases prosecuted in New York.”

The True Costs of Medical Fraud: Wide-Ranging Effects
Two leading University of Miami health academics, both of whom support national health care reform, say fraud cuts off resources to people who need them.

Pennsylvania Medicaid Fraud Survey Shows High Error Rates
This report from Health Care News documents the fraud and abuse problems in Pennsylvania’s Medicaid system: “Auditors found the Pennsylvania Department of Public Welfare, which administers the state’s Medicaid program, erroneously approved benefits for 1,600 of 11,700 randomly selected Medicaid recipients between January 2005 and March 2008, a 13.6 percent error rate.”

Solutions for Payment System Reform: Stop Paying the Crooks
This 2009 book edited by James Frogue of the Center for Health Transformation outlines the proper responses to fraud and abuse: “[T]he healthcare industry might consider emulating the payments industry, which has perfected the entire verification process–a cornerstone of low fraud rates.”

Resources on Fraud in the News
The Center for Health Transformation documents fraud on a running tally of news stories, updated nearly every day with stories from around the country.


For further information on the subject, visit the Health Care News Web site at or The Heartland Institute’s Web site at

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Health Care News Web site, contact Managing Editor Ben Domenech at 312/377-4000 or [email protected].