Health Insurance Fraud and Its Impact on You
Wherever it’s found, fraud and corruption cost more than just the money some get away with. Like a stone dropped into a pond, the effects of fraud and corruption in a healthcare system can send ripples outwards, nudging everything in its wake from costs and resources in the sector.
The issues of fraudulent claims remain one big challenge the sector continues to face and there is an increasing use of technologies like AI to combat this. In today’s Pacific Prime article, we’ll take a step back to discuss what health insurance fraud is and how it impacts you.
Health System Fraud
Fraudulent practices come in different forms – some relate to actions taken by a patient, doctors, physicians, and other medical specialists, and others could be incidents where health providers and related entities commit fraud or partake in corruption to draw more profit.
Listed in the table below are common loopholes for fraudulent practices.
| Patients | Medical professionals | Contractors |
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Identifying Health Insurance Fraud
Health insurance can often be a factor in any and all of these incidents, simply by virtue of the fact that insurance is where the money is. Insurance fraud is often looked at as the simple act of misrepresenting facts or being deliberately dishonest to receive more from an insurance payout than normal.
While the fortunate fact is that only a small percentage of individuals and businesses engage in fraudulent and corrupt behavior in the health sector, that small number of people still end up costing tens of billions of dollars.
There are a number of common types of fraud in the health insurance sector, which can include:
- Performing medically unnecessary surgeries or treatments to generate higher insurance payments
- Accepting kickbacks for patient referrals
- Falsifying tests to justify unnecessary medical actions
- Billing insurers for services that were not rendered, or padding claims with charges for procedures that did not take place
- Upcoding, which is the act of billing for more expensive services or procedures than were actually performed
- Unbundling, which is the act of billing each step of a procedure as an individual procedure
- Misrepresenting non-covered treatments
- Waiving patient payments (co-pays or deductibles) and charging these costs to the insurer or benefit plan
- Billing a patient for more than their co-pay or deductible amount
Patients and insured individuals are more simple in their fraudulent actions. Many cases of patient fraud simply involve undisclosed pre-existing conditions or being dishonest about the nature and extent of an injury to receive higher insurance payouts.
Indeed, cases of completely fabricated claims, and physician-shopping to obtain multiple prescriptions are also common; all of which simply exacerbate the challenge the sector has in stamping out corrupt practices.
The Hidden Costs of Medical Fraud
Globally, healthcare losses due to fraud and error have risen steadily. In the United States, It is estimated that USD $308.6 billion is lost annually. Among those, fraudulent health insurance claims contribute over 50% of the loss.
In addition to the monetary loss from healthcare fraud, there are several serious hidden costs that everyone bears as those figures rise.
Overburdening the Healthcare System
Overtreatment takes valuable health resources away from those who need them. 2,106 physicians in the United States believed that 20.6% of all medical care was unnecessary; including 22% of prescriptions, 24.9% of tests, and 11.1% of procedures.
While the fear of malpractice and patient demands was said to drive most of their beliefs about overtreatment, more than 70% of doctors conceded that physicians would perform unnecessary procedures when they profit from them.
This disappointing finding is responsible for the overcrowding of health systems, and their hospitals and facilities. The first and most obvious impact is on patient health – struggling to find the needed services, facing long wait times, and experiencing below-standard treatments and services.
A nurse surnamed Chan at the protest in early 2019 told HKFP that hospitals were overcrowded and urged the government to spend more on healthcare: “It is very sad for patients and family members. I may have to stay in a hospital in the future too, and I don’t want the environment to feel like a battlefield. I have to take care of up to 20 patients at the same time. You will understand the quality of service we are providing, and that it is easy for us to make mistakes”.
Identity Theft
Insurance companies and their consumers have also been targets of identity theft. The ramifications for individuals can range from financial, where sensitive information such as addresses, credit cards, and social identity numbers can be stolen, to medical.
Medical issues arising from identity theft can have more serious consequences, from unauthorized use of finite health benefits to having the perpetrator’s medical information mixed with the victim’s. This could lead to dire consequences related to incorrect medication or blood types.
| Case Study
In January 2019, Dr. Paul Biddle, a 54-year-old, New York-based anesthesiologist who also operates a medical marijuana practice, pleaded guilty to medical identity theft. He stole patient identity data so that he could write prescriptions and divert opioid medication to his home and office. According to reports, Biddle was illegally ordering controlled substances by using the Personally Identifiable Information (PII) of 23 patients and was responsible for 888 fraudulent prescriptions for opioids which included hydromorphone, fentanyl, and morphine over four years. |
Physical or Lethal Harm to Patients
Whether it be the demand of a patient or doctor, ordering too many tests increases the risk of misdiagnosing, or overdiagnosing a disease, which can lead to harmful or even fatal consequences such as the prescription of risky medications and treatments.
Overdiagnosis is where an anomaly is identified, such as cancerous cells, however, it is viewed – either mistakenly or deliberately, as being important enough to warrant immediate medical attention. Some cancers can regress themselves, without the need for chemotherapy or radiation.
In more serious cases, healthcare fraud can lead to deaths. Years ago, a healthcare provider was sentenced to 10 years in prison for cheating Medicare, Medicaid, and private insurers out of more than USD $20 million.
The worst part is that this criminal activity resulted in the death of at least two patients – One nursing home resident had their chest imaging misread, failing to detect congestive heart failure, while the second patient underwent elective surgery despite her imaging showing mild congestive heart failure.
Driving Up Health Insurance Premiums
According to an article in The Telegraph, frauds have long been a driver of accelerated insurance inflation. Health insurance fraud has cost both governments and private insurers hundreds of millions in recent years, and yet these losses need to come from somewhere.
In the case of government-provided social health coverage, fraud and corruption losses generally come out of hospital and health sector budgets. Patients of public services suffer, as under-resourcing and overburdening further reduce the quality and standard of the care they seek.
For private insurers, fraud losses are instead levied amongst consumers. Insurance companies are risk managers. Suppose fraudulent activities are becoming more frequent or bolder, you can expect the insurance premiums to be adjusted to soften the blow these incidents inflict on their shareholders.
They are, after all, businesses. One of the biggest barriers to maintaining premium stability for many insurers is the lack of regulatory methods for measuring, identifying, and understanding just how much fraud is accurately being carried out.
What Can I Do to Help Combat Health Insurance Fraud?
Individuals might not have enough power to combat all health insurance frauds, but every little makes a mickle. What you do can influence others as well. To help uphold the integrity of the healthcare and insurance system, consider taking the following steps:
- Keep your health insurance and personal information protected.
- Be informed about your role as a patient or insurance consumer, and don’t be afraid to question your healthcare provider about procedures or billing items you don’t understand.
- Seek out an independent opinion about treatments or care if necessary.
- Be responsible for your own healthcare and treatment, and seek services from an appropriate source.
- Report fraud if you come across it.
Note: If you’re a company, check out our previously written article on the steps you can take to tackle fraud.
Where Can I Find Insurance Plans from Reliable Insurers?
By working with a reputed broker like Pacific Prime, you’ll have access to independent, unbiased advice about healthcare providers in the insurance system. You’ll be guaranteed to secure a policy from scaled insurance providers with the human or technological resources to regulate their medical partners.
We’ve built a reputation for simplifying insurance through delivering healthcare coverage solutions and support to individuals and corporate clients for over 20 years. You’ll be assigned a team that cares about your well-being and priorities and is responsible for the growth and improvement of the entire industry.
If you’re interested in securing health insurance and dealing with a leader of integrity, contact the team at Pacific Prime today!
Since joining Pacific Prime, Eric was exposed to a new world of insurance. Having learned about insurance products extensively, he has taken joy and satisfaction in helping individuals and businesses manage risks and protect themselves against financial loss through the power of words.
Although born and raised in Hong Kong, he spent a quarter of his life living and studying in the UK. He believes his multicultural experience is a great asset in understanding the needs and wants of expats and globe-trotters.
Eric’s strengths lie in his strong research, analytical, and communication skills, obtained through his BA in Linguistics from the University of York and MSc in Teaching English to Speakers of Other Languages (TESOL) from the University of Bristol.
Outside of work, he enjoys some me-time gaming and reading on his own, occasionally going absolutely mental on a night out with friends.
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