Unbiased Analysis of Today's Healthcare Issues

Medicare Fraud: $630 million

Written By: Jason Shafrin - Aug• 21•06

Why is publicly provided health care so expensive?  One reason is the the fraud which is bound to occur.  The New York Times reports (“Hospital Grew…“) that New Jersey’s largest health care provider–St. Barnabas Health Care System–bilked $630 million from the federal government between 1995 to 2003. 

Medicare pays extra cash to hospitals for the very sick and very expensive patients they call outliers.  In the St. Barnabas case, the fraud occurred when the hospital chain inflated the bills of these outliers.  For those who say that ‘this is just the thing that happens when hospitals only look at the bottom line’ it is interesting to note that St. Barnabas is listed as a non-profit hospital chain.  I wrote in March questioning the validity of tax breaks for non-profit hospitals and this evidence helps to buttress my argument.  Patrick Burns, an analyst at Taxpayers Against Fraud, stated:

“The way the system has operated, it’s almost irresponsible corporate governance for hospitals not to cheat Medicare.”

This is not the only case of Medicare fraud in recent years.  According to the San Francisco Chronicle (“Tenet settles…“), Tenet Healthcare, one of the largest U.S. hospital chains has paid $727 million to settle an overbilling fraud investigation.  Brian Martin, a sociology professor at the University of Wollongong in Australia has a nice summary of how Tenet deceived the federal government.

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  1. The good news is that anyone can take action to expose this type of fraud and receive monetary rewards for doing so. Under federal law, if someone knows that a medical provider is committing medicare or medicaid fraud, they can file a claim to recover triple the amount defrauded, and the typically get to keep 15% to 30% of the monies recovered as a reward. You can learn how, and read about every major case for the past 20 years, at http://www.FederalFraud.com

  2. […] Healthcare Economist has an interesting piece on Medicaid fraud. Apparently one NJ healthcare system alone stole $630 million from its state’s Medicaid program from 1995 to 2003. A lot of single-payer sycophants like progressive bloggers Ezra Klein and Matthew Holt love to tout the ‘2% Myth’ – that socialized health insurance programs would be obviously better than a system of private insurers because Medicare keeps it’s administrative costs at 2% while private insurers are closer to 15%. But it’s a myth because it doesn’t count the fact that public programs like Medicare and Medicaid go wildly fraudulent in the effort to keep down administrative costs. Fraud and abuse in public insurance programs total billions and billions of dollars a year and, when factored into the ‘2% Myth’, they make socialized, single-payer systems seem less desirable than supporters would have us believe. […]