Does Fraud Count as Administrative Cost?

Could your business survive a 10% fraud rate? http://www.realclearpolitics.com/printpage/?url=http://www.realclearpoli tics.com/articles/2009/09/15/health_reform_should_begin_with_ending_frau d_98308.html "We believe that fraud constitutes at least ten percent ($100 billion) of the nearly one trillion in taxpayer dollars that Medicare and Medicaid will spend this year. That is likely a conservative estimate. Harvard's Dr. Malcolm Sparrow, author of the seminal book "License to Steal," estimates that the losses could easily be in the 20 percent or 30 percent range, even as high as 35 percent, but he insists that we ought not to have to guess. He believes the government should measure the losses and report them accurately."

"The story of convicted murderer Guillermo Denis Gonzalez illustrates the vulnerability of government run health programs to fraud. Gonzalez was released from prison in 2004 after serving a twelve year sentence for a murder conviction. Two years later he bought a Medicare-licensed equipment supply company and duly notified Medicare authorities that he was the new owner. In 2007 he submitted $586,953 in false claims to Medicare and got paid for some of them. In 2008 he is alleged to have killed and dismembered a man.

The fact that a convicted murderer with a seventh grade education could so easily become a supplier to our largest health program and begin defrauding it illustrates how pervasive fraud is in America's government-run health care programs. If only the Gonzalez case were an isolated incident. Miami Dade Country is notorious for health care fraud. There are more licensed home health agencies in Miami Dade County than the entire state of California. In 2005, billing submissions from Miami Dade to Medicare for HIV infusion therapy were 22 times higher than the rest of the country combined. New York also has a serious problem with fraud. A private study of New York's Medicaid in 2006 found that one-quarter of that then-$44 billion program cannot be explained."

http://www.cato-at-liberty.org/?s=medicare+administrative+cost&submit=GO
This is the first of several posts on this blog on the same topic:
Medicare’s top officials said in 2006 that they had reduced the number of fraudulent and improper claims paid by the agency, keeping billions of dollars out of the hands of people trying to game the system. But according to a confidential draft of a federal inspector general’s report, those claims of success, which earned Medicare wide praise from lawmakers, were misleading.
In calculating the agency’s rate of improper payments, Medicare officials told outside auditors to ignore government policies that would have accurately measured fraud, according to the report. For example, auditors were told not to compare invoices from salespeople against doctors’ records, as required by law, to make sure that medical equipment went to actual patients.
As a result, Medicare did not detect that more than one-third of spending for wheelchairs, oxygen supplies and other medical equipment in its 2006 fiscal year was improper, according to the report. Based on data in other Medicare reports, that would be about $2.8 billion in improper spending. That same year, Medicare officials told Congress that they had succeeded in driving down the cost of fraud in medical equipment to $700 million. Some lawmakers and Congressional staff members say the irregularities that the inspector general found were tantamount to corruption and raise broader questions about the credibility of other Medicare figures.