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Medicare is  future Bankrupt

Excerpts from: article on abuses in Medicare/Medicaid

Malcolm Sparrow Testifies Before the Senate Subcommittee on Criminal Prosecution as a Deterrent to Health Care Fraud

May 22, 2009  Malcolm K. Sparrow Professor of the Practice of Public Management John F. Kennedy School of Government Harvard University

It was in 1993 that Attorney General Reno declared Health Care Fraud to be the number two crime problem in America, second only to violent crime.

In March 2000, the OIG published its investigation into provision of medical services to Medicare beneficiaries after their dates of death. They quickly found $20.6 million in such claims, paid in 1997. A significant volume of the claims showed new treatments for a patient, beginning more than a month after they had died.

Dead patients also showed up in Medicaid claims around the country. An OIG report in 2006 summarized findings from ten different states, revealing $27.3 million in Medicaid payments for services after death.

In March 2002, the OIG reported finding 43 deported Medicare beneficiaries for whom fee-for-service claims had been received and paid after the recorded date of deportation.

From 2000 to 2007 between $60 million to $92 million was paid for medical services or equipment that had been ordered or prescribed by dead doctors.

By contrast, estimates of fraud losses in the health industry range from 3% to 10% to 14%, depending on who you ask. Suppose for a moment the loss rate were 10%. That would be one hundred times the acceptable business risk threshold set by the credit card industry.


Why It's Easy to Steal From Medicare

Arrests in Detroit and Miami are another argument against importing to the rest of the health economy the model that enabled these scams.

One of the purported benefits of nationalized health care is that it will be more efficient than private insurers since it would lack the profit motive and have lower administrative expenses, like Medicare. But one reason entitlement programs are so easy to defraud is precisely because they don't have those overhead costs -- they automatically pay whatever bills roll in with valid claims numbers.

By contrast, private insurers try to manage care, and that takes money. Not only does administrative spending go toward screening for waste and fraud -- logical, given the return-on-investment incentives -- they also go toward building networks of (honest) doctors and other providers. Medicare doesn't pay for this legwork, so it simply counts fraud losses as more spending. Generally private insurers also attempt to pay for other things that consumers find valuable, such as high quality, while Medicare and Medicaid are forbidden by law from excluding substandard providers, unless they're criminals.