How very, very, clever

The gang constructed a parallel universe that was entirely make-believe but which mirrored the structure of the real Medicare system. To begin with they stole the identities – including the dates of birth, social security numbers and medical licence details – of dozens of doctors.

They then set up 118 phantom health clinics in 25 states across the country, and applied for permission to treat patients under the terms of Medicare, a scheme to support over 65-year-olds and certain categories of disabled people.

Once accepted on to the programme, the fraudsters began billing for treatments such as ear, nose and throat procedures, skin allergies and bladder tests on behalf of 2,900 patients whose identities they had also stolen. The more than $35m that was already paid out by Medicare before the arrests were made went to bank accounts set up under false identities.

And there is also (as always!) a political point to be made here. Medicare is commonly held up in the US political screaming matches as an example of a terribly efficient system. The management expenses of the system are low (some 4% or so isn\’t it? As opposed to the 20% or so of the private insurers?) and thus everything is peachy.

But, as we can see, (and this isn\’t the only Medicare fraud, not by a long way) having low administrative expenses may well mean that your system is open to breaches in, umm, your administrative system.

Oh, and, of course, the cost of the FBI isn\’t appearing in the Medicare budget either, even though private insurers would have had to employ private investigators on their own budgets to uncover something similar in the private insurance system.

So Medicare\’s not got admin expenses which are all that low after all.

3 thoughts on “How very, very, clever”

  1. This happened in NZ, with ACC. ACC for a long time had far lower admin expenses than private insurers. Far higher total costs, admittedly, particularly with all the back injury claims, but far lower admin expenses.

    Now ACC has higher admin expenses.

  2. When comparing admin costs as a percentage of something (of premiums, of claims, whatever) it is important also to keep in mind that the Medicare cost is roughly 3X’s that of private insurance. That follows mainly because of the difference in disease prevalence between the populations. Fraudulent claims add to this difference, as do other factors such as Medicare’s lack of modern utilization-management techniques. Result: the Medicare numerator is much larger no matter what the denominator may be.

  3. Another important thing to keep in mind is that public bodies lie, lie, lie and then lie some more to put an icing of lies on the original lies.

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