U.S. health care needs a tourniquet

  • Article by: THE ECONOMIST
  • Updated: May 30, 2014 - 6:28 PM

To stop crooks from bleeding Medicare and Medicaid, simplify the system.

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Medical science is hazy about many things, but doctors agree that if a patient is losing pints of blood all over the carpet, it is a good idea to stanch his wounds. The same is true of a health care system. If crooks are bleeding it of vast quantities of cash, it is time to tighten the safeguards.

In America, the scale of medical embezzlement is extraordinary. According to Donald Berwick, the ex-boss of Medicare and Medicaid (the public health schemes for the old and the poor), America lost between $82 billion and $272 billion in 2011 to medical fraud and abuse.

The higher figure is 10 percent of all medical spending and a whopping 1.7 percent of America’s GDP.

It’s as if robbers had made off with the entire output of Tennessee — or nearly twice the budget of Britain’s National Health Service (NHS).

Crooks love American health care for two reasons. First, like a bank, it’s where the money is — no other country spends nearly as much on pills and procedures. Second, unlike a bank, it is barely guarded.

Some scams are simple. Patients claim benefits to which they are not entitled; suppliers charge Medicaid for nonexistent services. One doctor was recently accused of fraudulently billing for 1,000 powered wheelchairs, for example. Fancier schemes involve syndicates of health workers and patients. Scammers scour nursing homes for old people willing, for a few hundred dollars, to let pharmacists supply their pills but bill Medicare for much costlier ones.

Criminal gangs are switching from cocaine to prescription drugs — the rewards are as juicy, but with less risk of being shot or arrested. One clinic in New York allegedly wrote bogus prescriptions for more than 5 million painkillers, which were then sold on the street for $30-$90 each.

Identity thieves have realized that medical records are more valuable than credit-card numbers. Steal a credit card and the victim quickly notices; photocopy a Medicare card and you can bill Uncle Sam for ages, undetected.

It is hard to make such a vast system secure: Medicare’s contractors process 4.5 million claims a day. But pointless complexity makes it even harder.

Does Medicare really need 140,000 billing codes, as it will have next year, including 10 for injuries that take place in mobile homes and nine for attacks by turtles? A toxic mix of incompetence and political gridlock has made matters worse. Medicare does not check new suppliers for links to firms that have been caught embezzling (though a new bill aims to fix this). Fraud experts have long begged the government to remove Social Security numbers from Medicare cards to deter identity thieves — to no avail.

One piece of the solution is obvious: Crack down on the criminals. Obamacare, for all its flaws, includes some useful measures. Suppliers are better screened. And when Medicaid blackballs a dodgy provider, it now shares that information with Medicare — which previously it did not. For every dollar spent on probing health care fraud, taxpayers recover eight. So the sleuths’ budgets should be boosted, not squeezed, as now.

But the broader point is that American health care needs to be simplified. Whatever its defects, Britain’s single-payer National Health Service is much simpler, much cheaper and relatively difficult to defraud. Doctors are paid to keep people well, not for every extra thing they do, so they don’t make more money by recommending unnecessary tests and operations — let alone billing for nonexistent ones.

Too socialist for America? Then simplify what is left, scale back the health care tax perks for the rich and give people health accounts so they watch the dollars that are spent on their treatment.

After all, Berwick’s study found that administrative complexity and unnecessary treatment waste even more health dollars than fraud does. Perhaps that is the real crime.

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