Medical Fraud’s Staggering Price Tag

As the nation engages in a contentious debate over health care, one thing that almost everyone agrees on is the need to fight rampant fraud.  Rip-offs add billions of dollars a year to the tab for health care in America. How much money could be saved by eliminating fraud?  "It's just an extraordinary sum," Malcolm Sparrow of Harvard University told National Public Radio. Unsure if fraud costs $100 billion or $600 billion, Sparrow told NPR he is sure that whatever the first digit is, it has 11 zeroes after it. To address the problem, the Senate health committee on July 23 voted 23 to 0 for an amendment by Senator Bernie Sanders  that would double penalties for health care fraud. “What we have seen for many years is the systemic fraud perpetrated by private insurance companies, private drug companies, and private for-profit hospitals ripping off the American people and the taxpayers of this country to the tune of many billions of dollars,” Sanders said.

Sanders’ amendment would authorize double the current penalties under the False Claims Act for fraudulently billing new health exchanges created by the reform bill. Convicted companies would face fines of up to six times the amount of the fraud. “I worry very much that for many international corporations getting hit with treble damages may well be worth it and passed along as a cost of doing business,” Sanders said. “What we have to tell these big multi-national corporations is that if they are going to engage in fraud they’re going to pay for it dearly.”

Virtually all of the major hospital chains, private insurance companies, and pharmaceutical companies have been involved in massive health care fraud over the past decade, the senator added. He also pointed to a string of criminal and civil cases against many of the leading corporate health care providers in the country, including:

  • Earlier this year, a jury found Pfizer owed Wisconsin $9 million for violating the state Medicaid fraud law more than 1.4 million times by purposely overcharging the state for prescription drugs. The company faces potential fines from $140 million to $21 billion.
  • Also in 2009, UnitedHealth, a leading insurance company, paid $350 million to settle lawsuits brought by the American Medical Association and other physician groups for shortchanging consumers and physicians for medical services outside its preferred network.
  • In 2003, GlaxoSmithKline paid $88 million in civil fines for overcharging Medicaid for its anti-depressant Paxil.
  • Also in 2000, Humana paid $14.5 million to settle federal charges of overcharging government health programs.
  • In 2000, the Hospital Corporation of America agreed to pay $745 million to settle civil charges that it systematically defrauded Medicare, Medicaid and other federally-funded health programs.

In addition to the Sanders Amendment, other initiatives to fight fraud include a new Obama administration task force made up of officials from the Department of Justice and the Department of Health and Human Services. A House version of the health care overhaul bill also includes anti-fraud provisions, such as $100 million a year to fight fraud and increased penalties for perpetrators, according to NPR.

To watch the senator discuss health care fraud at a health committee hearing, click here.

To read or listen to the NPR report, click here.