Health-Industry Fraud Eats Up Billions Yearly

CALL it white-coat crime. Using phony claim forms and padded invoices, crooks are stealing billions of dollars each year from private insurance companies and government health-care programs such as Medicare and Medicaid.

``Ripping off the system has become the way to do business for many health-care providers,'' says Sen. William Cohen (R) of Maine, commenting on a minority staff report of the Special Senate Committee on Aging.

``Losses over the last five years are almost four times the total cost to date of the savings-and-loan crisis,'' Senator Cohen reports. Provisions he has sponsored to combat health-care fraud are included in the omnibus crime bill before Congress. All of the major health-care bills also contain antifraud provisions.

The US General Accounting Office has estimated that fraud, abuse, and waste consume 10 percent of the nation's total annual expenditures on health care - about $100 billion yearly.

Some insurance industry and law-enforcement estimates are lower. But all experts agree that health-care fraud is a huge - and growing - problem.

A 1993 survey of 86 insurance companies by the Health Insurance Association of American (HIAA) in Washington, a trade group, found that between 1990 and 1992, the number of fraud cases investigated by the companies increased by more than 75 percent - from 15,246 to 26,755.

Part of the increase in investigations probably is attributable to better fraud-detection programs by insurers, says Kathleen Fyffe, a spokeswomen for HIAA. Companies have found that for each dollar spent to combat fraud, they save about $9, she says.

Even so, ``The sheer volume of fraud is rising, along with the rapid growth of the health-care sector,'' says William Mahon, executive director of the National Health Care Anti-Fraud Association (NHCAA) in Washington. Members of the nonprofit association include federal and state officials and the directors of private insurers' antifraud programs.

Sometimes patients commit fraud, such as listing false employment dates on claim forms or forging drug prescriptions. But physicians, care facilities, medical laboratories, and other providers are responsible for 90 percent of health-care fraud, the NHCAA's Mr. Mahon says.

Providers can manipulate the figures in scores of patient or customer accounts, and they can spread the fraud among numerous third-party payers. ``Most people who defraud do it knowingly and systematically,'' Mahon says, adding: ``We are seeing more multistate schemes by corporations where fraud is the business plan.''

IN recent years, prosecutions of National Health Laboratories and National Medical Enterprises for multimillion-dollar scams have captured national headlines.

Until a few years ago, it was hard to get overburdened law-enforcement agencies interested in health-care fraud, both Ms. Fyffe and Mahon say. But that is changing. In Los Angeles and several other major cities, federal and state law-enforcement agencies and prosecutors have formed joint task forces to investigate health-care fraud. And in 1992, the Federal Bureau of Investigation made health-care fraud ``a top national priority,'' an FBI official, Thomas Kubic, recently told a congressional subcommittee.

Some of the key antifraud proposals in Congress include:

* Make health-care fraud a specific federal crime with strong penalties. Currently it is prosecuted at the federal level under mail- and wire-fraud statutes.

* Increase law-enforcement resources.

* Let private insurers sue multistate defrauders in federal court, as Medicare and Medicaid can do under the federal Civil False Claims Act. Currently, private insurers can bring civil actions to recover fraud-induced payments only in state courts. (Mahon says one NHCAA member is having to sue a defrauder in 20 different states).

* Improve the procedures whereby health-insurance companies share information about fraud with law-enforcement agencies and with each other.

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