Health care reform: forgetting fraud

[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/08/07/chernoff.fraud.cnn.art.jpg caption="Theresa Langlois says when she read her insurance statement she knew her podiatrist had been cheating Blue Cross Blue Shield of Michigan."]

When Theresa Langlois read her insurance statement she knew her podiatrist had been cheating Blue Cross Blue Shield of Michigan.

"It was like robbery," said Langlois.

She had visited Dr. Jeffrey Cooke to have her discolored big toe examined. Cooke billed the insurance company thousands of dollars, claiming he had surgically removed dozens of warts.

"I turned the bill over and there was a fraud hot line, directly to Blue Cross to report fraud. So I called that immediately," said Langlois.

The insurer audited Cooke's billings, interviewed Langlois and other patients who had seen Cooke, then contacted law enforcement, which ultimately led to Cooke's arrest, conviction on health care fraud charges, and imprisonment. Blue Cross Blue Shield of Michigan won a restitution award of $273,000.

"We open about 1,500 cases a year for in-depth investigation," said Greg Anderson, who heads Blue Cross Blue Shield of Michigan's Special Investigative Unit devoted to tracking down corrupt doctors and pharmacists. "They're taking money out of our pocket and depriving people who need the actual service. There's only so much money in the pie to go around when people are taking it."

Health care fraud – perpetrated by physicians, hospitals, medical equipment providers and even organized crime gangs – is rampant. A Senate investigation found Medicaid between 2000 and 2007 paid nearly half-a-million claims to people posing as doctors who were dead.

Such fraud costs every American; driving up prices for medical insurance, treatment and drugs.

"It's just a domino effect that ends up with the consumer. Somebody's got to reimburse for it, somebody's got to fund that and ultimately it gets passed down," said Douglas Falduto, director of the Special Investigations Unit at Horizon Blue Cross Blue Shield of New Jersey.

The National Health Care Anti-Fraud Association estimates fraud accounts for a minimum of 3% of all health care spending: $72 billion a year.

"That's a conservative estimate," said Association Executive Director Louis Saccoccio. "It's a cost drain."

Other experts say fraud may account for 10% or more of health care spending.

"We don't actually know the dollar amount being lost but we know the order of magnitude. It's hundreds of billions of dollars. We just don't know how many hundreds of billions of dollars," said Harvard Professor Malcolm Sparrow, author of License to Steal: How Fraud Bleeds Americas Health Care System.

President Obama warns health care reform is necessary to get medical costs under control.

"If we do not reform health care, your premiums and out-of-pocket costs will continue to skyrocket," the president said July 22 during a press conference to promote his health reform initiative.

But one of the key factors driving higher costs – fraud – is getting little mention in Washington's reform effort.

"They are certainly aware of this problem. They don't seem to know the magnitude or the seriousness. They don't seem to be acting with the kind of urgency that I would like," said Professor Sparrow.

The health reform bill approved in the House, "America's Affordable Health Choices Act of 2009" – 1018 pages long – devotes only 40 pages to the issue of fraud. This and other bills still under discussion in the Senate would allocate just $100 million dollars a year to combat fraud, waste and abuse. That's the amount of health care fraud occurring in this country every 12 hours, using the most conservative estimates.

Experts warn that if fraud isn't addressed more aggressively American taxpayers will be paying billions more than necessary to provide health insurance for those who don't have it.