 |
 |
CHT Press Publication
Stop Paying the Crooks
|
Foreword by Newt Gingrich
We Americans are getting fleeced.Recently, 97 percent of Long Island Rail Road career employees retired on disability in one year, according to an October 20, 2008, story in the New York Times. Their retirement packages even included free golf. New York taxpayers have forked over $250 million to this racket since 2000.1
Eighty percent of California Highway Patrol assistant chiefs retired on disability, according to an ABC News story in 2006. Nearly as many deputy chiefs did so as well. California state law actually forbade requiring a second medical evaluation in these cases, even where fraud is suspected.2
The federal government is much worse. Neil Barofsky is the Special Investigator General for the $750 billion Troubled Assets Relief Program (TARP) signed by President George W. Bush in October 2008. In April 2009, Barofsky sent a 250page report to Congress stating that the TARP funds are inherently vulnerable to fraud, waste, and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering. Barofsky estimated that “we are looking at the potential exposure of tens if not hundreds of billions of dollars in taxpayer money lost to fraud” within TARP.3
The $787 billion stimulus package passed by Congress and signed into law in February 2009 is already rife with fraud. FBI director Robert Mueller said in June 2009, “The funds are inherently vulnerable to bribery, fraud, conflicts of interest, and collusion. There is an old adage that where there is money to be made, fraud is not far behind, like bees to honey.” Estimates are that $50 billion of stimulus money will be lost to fraud.4
General Motors sucked down $50 billion in bailout funds before declaring bankruptcy on June 8, 2009. The bailout of AIG has cost taxpayers more than $150 billion. A package of housing guarantees totaling $300 billion has failed to stem the tide of foreclosures and falling home prices.
The Congressional Budget Office estimates that the 2009 federal budget deficit will be nearly $2 trillion.5 That is roughly quadruple the largest deficit ever run during the presidency of George W. Bush.6 It is also well over double the entire cost of the war in Iraq to date.
Part of the backdrop to all this was the Bernard Madoff scandal, which cost private investors $50 billion.
Everywhere Americans look, we see fraud and waste on scales heretofore unimaginable. We are outraged, and with great justification. We may not know every detail of every last scam, but we are instinctively aware that corruption is virtually everywhere and that it is worst in the biggest institutions, be they government or private.
Fortunately, the fight back has begun.
On May 19, 2009, California voters delivered a decisive and powerful message to the ruling class in Sacramento. By an average margin of nearly two to one, voters crushed five ballot initiatives that would have allowed politicians to continue their irresponsible, spendthrift ways. Every one of California’s fiftyeight counties had majorities against all five initiatives, with only three exceptions.7
Healthcare Fraud
Healthcare is oneseventh of our nation’s economy. It is rife with endless examples of fraud, and wasted money is flying from the pockets of government programs into the hands of crooks. And yet too little attention is given to this fraud. Our healthcare sector made up 17 percent of America’s GDP, or $2.4 trillion, in 2008, en route to an estimated $4.3 trillion in 2017—20 percent of GDP.8 In contrast, healthcare made up only 11.9 percent of GDP in 1990.9 The costs of taxpayerfinanced Medicare and Medicaid will exceed $900 billion in 2009 with the infusion of $87 billion in stimulus money by Congress for state Medicaid programs. This level of growth is simply unsustainable, and if left unchecked will continue to drive the U.S. economy downward.
Amounts this large and institutions this expensive, particularly when teeming with perverse incentives, virtually guarantee significant fraud, waste, and abuse. Unfortunately, healthcare has more than its fair share, Medicare and Medicaid in particular.
Harvard professor Malcolm Sparrow, author of License to Steal, has been a leading thinker in healthcare fraud since the early 1990s. On May 20, 2009, he testified to the Senate Judiciary Committee. Among his statements was this: “The units of measure for losses due to healthcare fraud and abuse in this country are hundreds of billions of dollars per year. We just don’t know the first digit. It might be as low as one hundred billion. More likely two or three. Possibly four or five.” Sparrow also lamented, “One of my deep regrets is to discover that academia has paid almost no serious attention to this critical problem.”10
Oklahoma senator and physician Tom Coburn estimates that a full onethird of all healthcare spending—an amount in the neighborhood of $800 billion annually—is wasted on defensive medicine, paperwork, and outright fraud.
Specific examples of fraud are endless. In January 2009, the Government Accountability Office issued a report that found “10 percent, or $32.7 billion, of Medicaid payments made in 2007 were improper.”11
In July 2005, the New York Times ran an excellent series on fraud in New York’s Medicaid program. The authors interviewed James Mehmet, the former chief state investigator of Medicaid fraud and abuse for New York City. Mehmet said his team believed that 10 percent of Medicaid spending was flatout fraud and another 20 to 30 percent was unnecessary spending. “So we’re talking about 40 percent of all claims are questionable,” according to Mehmet. That would have been $18 billion in 2005. That is in one state’s Medicaid program in one year.12
The Miami Herald has also done impressive investigative work on healthcare fraud. In August 2008, the paper reported that in 2005, South Florida clinics (mostly in MiamiDade County) billed Medicare $2.2 billion for HIV infusion therapy. This amount “was 22 times more than the total HIV infusion claims submitted to Medicare by healthcare clinics in the rest of the country combined. The trend continues to this day.”13
Compare the above examples with credit card fraud. The U.S. credit card industry processes more than $2 trillion in transactions annually, making it approximately the same size as the healthcare industry. There are 700 million credit cards circulating, millions of vendors, and countless products for purchase. Yet total credit card fraud is a fraction of 1 percent. This industry is able to combat fraud very effectively, while healthcare is orders of magnitude worse.
We are at a tipping point in American history, when average voters are waking up to how badly we are being fleeced by institutions ranging from federal and state governments to healthcare to big businesses with politicians in their pockets.
We have several objectives with this book. The first is to begin a serious national discussion about healthcare fraud, the incentives that allow it to flourish, and potential fixes. We want to give the reader a real sense of the vastness and to suggest key strategies for ending the waste. This discourse is long overdue.
It is also our goal to leave you with an understanding of how dramatically waste, fraud, and abuse impact your access to healthcare services. These massive, unnecessary additional costs inevitably lead to costlier healthcare services and/or reduced access to care. Honest doctors and hospitals should also pay close attention, because fraud by the bad actors is a major contributor to lower reimbursement rates for legitimate care.
This book is a collaboration of experts from a variety of fields: healthcare, information technology, the credit card industry, andmore. Each author brings a unique point of view to the world of healthcare fraud, and each offers creative and doable solutions. No one solution is a fixall, nor do we pretend that this book is a comprehensive look at all healthcare fraud. Instead, we hope to facilitate collaboration and proper discussion on the topic of healthcare fraud—the effective opposition of which we believe is vital to the longterm success of America’s healthcare and economy. Our intention is to spark a chain reaction of people coming forward with ideas and solutions. So every physician, nurse, front office staff member, hospital custodian, union representative, insurance claims processor, patient, and anyone else with a story to tell, please contact us at fraud@healthtransformation.net. We look forward to the discussion.
Newt Gingrich, July 2009
Former Speaker of the U.S. House of Representatives
Founder of the Center for Health Transformation
1 Walt Bogdanich, “A Disability Epidemic Among a Railroad’s Retirees,” New York Times, September 20, 2008.
2 Vic Lee, “More Questions in CHP Disability Fraud Probe,” ABC7, November 24, 2006, available at http://abclocal.go.com/kgo/story?section=news/local&id=4792870 (last visited June 22, 2009).
3 “Quarterly Report to Congress,” Office of the Special Inspector General for the Troubled Asset Relief Program, April 21, 2009.
4 Greg Morcroft, “Fraudsters eye huge stimulus pie, consultant says,” MarketWatch, June 12, 2009.
5“A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook,” Congress of the United States Congressional Budget Office, March 2009.
6 “Revenues, Outlays, Surpluses, Deficits, and Debt Held by the Public, 1969 to 2008,” Congressional Budget Office.
7 The only exceptions were Santa Clara, San Francisco, and Santa Cruz counties, which voted to pass the education funding payment plan. These were the only three counties to pass any of the five ballot initiatives.
8 “Health Insurance Costs,” National Coalition on Health Care, available at http://www.nchc.org/facts/cost.shtml (last visited June 22, 2009).
9 “Health Care Spending in the United States and OECD Countries,” Kaiser Family Foundation, January 2007.
10 Malcolm K. Sparrow, “Criminal Prosecution as a Deterrent to Health Care Fraud,” Testimony to Senate Committee on the Judiciary: Subcommittee on Crime and Drugs, May 20, 2009.
11 “HighRisk Series: An Update,” GAO Report to Congress, January 2009.
12 Clifford Levy and Michael Luo, “New York Medicaid Fraud May Reach Into Billions,” New York Times, July 18, 2005.
13 Jay Weaver, “Medicare fraud rampant in South Florida,” Miami Herald, August 3, 2008.
