The Treatment

Are Corporate Insurers Defrauding the Public?

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When it comes to health care fraud, Medicare scams have recently elicited some of the greatest public outrage and political attention. But private-sector fraud and abuses may also be proliferating within the current system--perpetrated not only by providers, but also by insurance companies and corporate suppliers themselves.

In a report documenting these alleged abuseswhich I mentioned in my earlier post on Medicare fraudresearchers from George Washington University claim that the “most serious health care fraud is not the result of small schemes, but instead flows from large-scale misconduct by major industry actors.” Earlier this month, for instance, the American Medical Association was awarded a $350 million settlement in a class-action lawsuit against UnitedHealth Group, having accused the company of using a database that was intentionally rigged to allow insurers to shortchange out-of-network reimbursements to doctorswhich would also force patients to pay more in out-of-pocket expenses. The AMA lawsuit was closely linked to New York Attorney General Andrew Cuomo’s yearlong investigation into UnitedHealth, which paid out $50 million in January to settle allegations that it manipulated its Ingenix database.

And it’s not just insurance companies who are accused of bilking customers and providers on a massive scale. The GWU report cites a $350 million class-action settlement this year with McKesson, a wholesale drug distributor accused of a “racketeering enterprise” to inflate the prices for prescription drugs. Likewise, Congress launched an investigation last month to determine whether Big Pharma artificially inflated wholesale drug prices in advance of the industry cutbacks proposed in the pending reform bill. 

But while public programs like Medicare and Medicaid are subject to strict reporting requirementsmaking it easier to detect abusesprivate companies aren’t subject to the same oversight. And though the current reform bill imposes new regulations on private insurers, as well as anti-fraud prevention and enforcement measures across the system, private industry still won’t be required to disclose the same data designed to keep public programs honest. (The public insurance option in the House bill is subject to the same anti-fraud and abuse protections as Medicare, but the legislation doesn’t apply these requirements to the private plans inside or outside of the exchange.)

According to GWU Professor Sara Rosenbaum, one of the co-authors of the report, the government would ideally adopt a “uniform approach” toward measuring and combating fraud, imposing the same disclosure requirements on both public and private entities. “It’s the same health-benefits companies that are selling to different markets…whether it’s an employer-sponsored or government-sponsored,” Rosenbaum told TNR. In the absence of such uniform requirements, it’s easy for fraud and abuses within programs like Medicare to capture the most attention, as there’s a disproportionate amount of data that public programs must make available.

So while some industry defenders claim that private companies don’t experience “anywhere near the volume of fraud or waste” as Medicare, such abuses may not be unique to the public sector. Under the current reform bill, corporate actors also stand to expand their reach in an increasingly complex system as millions more people are covered. And their recent track record suggests that greater oversight may be in order.

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