The Trump administration recently announced charges against 455 defendants, including 90 doctors and other healthcare professionals, in connection with more than $6.5 billion in alleged healthcare fraud.
This is a form of national organized crime, with both taxpayers and patients bearing the financial loss.
As a healthcare broker who has spent a lifetime working in this industry, I found it encouraging to see investigators finally targeting what is likely one of the biggest drivers of inflated medical costs in the United States.
The scale of the operation was unprecedented. It spanned 56 federal districts and involved a record 50 state Medicaid Fraud Control Units, making it the largest coordinated healthcare fraud enforcement action in Department of Justice history. Investigators worked with international partners to apprehend suspects in Turkey, Estonia, Somalia, and the Philippines.
Any serious effort to tackle healthcare fraud needs that level of seriousness and tenacity. The National Health Care Anti-Fraud Association estimates that fraud costs the United States tens of billions of dollars every year, using a longstanding conservative estimate that fraud accounts for roughly 3 percent of healthcare spending. Some government and law enforcement agencies believe that the true figure could be closer to 10 percent.
Those losses ultimately feed through to taxpayers, employers, and patients in the form of higher insurance premiums, out-of-pocket expenses, healthcare costs, and even lack of access to care.
One area where fraud can cause real harm is in the area of prescription drugs. About 10% of U.S. spending is on drugs, and over half of that is on specialty drugs for cancer patients, children with rare diseases, etc.
Lawmakers across party lines who want to lower overall healthcare costs have understandably looked at lowering drug costs, most recently by targeting pharmacy benefit managers (PBMs), the companies that use their purchasing power to buy more drugs at a lower cost. No market system is perfect, and PBMs have room to improve when it comes to transparency. But the Justice Department’s takedown of the gigantic fraud network is a powerful reminder that fraud remains one of the largest—and too often overlooked—drivers of unnecessary healthcare spending.
Aiming at easy political targets like PBMs might be convenient, but the facts show they are not to blame for high healthcare prices. A recent HHS Office of Inspector General report found that vertically integrated Medicare Part D plans had similar overall drug costs to other plans, although patients often experienced different premiums and out-of-pocket expenses. Meanwhile, everyone loses out when fraud happens — taxpayers see money flushed down the toilet, patients lack care, and lawmakers now have to justify raising taxes to angry constituents.
Congress has spent the last few years trying to do a catch-all approach to reducing healthcare costs — which may be why it has been so ineffective. The latest appropriations bill enacted sweeping PBM reforms…but no serious bipartisan effort is trying to address fraud. In fact, many Democrats are ignoring or outright defending high-fraud programs like Medicaid as unassailable, and they are accusing the Trump administration of discrimination when it does the hard work of addressing fraud in blue states like Minnesota and California.
Meanwhile, in blue and red states alike, PBMs are being treated as though they are the problem in healthcare. A ban in Arkansas was blocked by a court; one in Tennessee is probably heading towards the same fate as legal observers argue that similar requirements in other states, including Tennessee, would likely face the same legal scrutiny
And while taxpayer dollars are locked up in those fights, pharmacies may close - putting the same patients who are shafted by Medicaid fraud in yet another unnecessary financial and medical pickle.
Healthcare fraud takes many forms, including phantom billing schemes, fraudulent medical equipment claims, hospice fraud, and illegal kickback arrangements. These schemes divert billions of dollars that could otherwise be spent on patient care or lowering costs.
Congress has an opportunity to make meaningful progress by focusing on three practical steps.
First, expand the use of data analytics and AI-powered fraud detection to identify suspicious billing patterns before improper payments are made.
Second, increase penalties and accelerate prosecutions so those committing fraud face swift and meaningful consequences.
Third, improve information sharing between federal and state agencies so investigators can identify schemes more quickly, recover funds, and prevent fraudsters from exploiting gaps between different parts of government.
These reforms would not only punish fraudsters after the fact, but also make it much harder for fraudulent claims to enter the system in the first place and spare us the need to recover stolen money years later through lengthy investigations.
By taking these relatively simple steps, Congress could deliver real savings that ultimately benefit patients and taxpayers alike. Congress has wasted years of attention to PBMs. It’s time to bring that same urgency to tackling healthcare fraud.
Matt Cover is a healthcare and employee benefits consultant and a former Washington, D.C. political journalist.
