A deep and alarming insight into US healthcare has recently been published by two authoritative figures within the system which holds profoundly worrying lessons for where UK healthcare may be heading under the Tory Health and Social Care Act of 2012. Healthcare in the US is a magnet for thieves. Medicaid hands out $415bn a year and Medicare, a federal scheme for the elderly, nearly $600bn.
Total health spending in the US is a colossal $2.7 trillion a year, or 17% of GDP, twice the proportion in the UK. Nobody knows exactly how much of that is stolen, but Donald Berwick, former head of the Centres for Medicare and Medicaid Services (CMS), and Andrew Hackbarth of the RAND Corporation have made the most thorough and detailed attempt to establish the facts. The have concluded that fraud, and the extra rules and inspections required to fight it, add as much as $98bn, or about 10%, to annual Medicare and Medicaid spending, and up to $272bn across the entire US healthcare system. By 2013 federal prosecutors had over 2,000 health-fraud probes in operation.
In one crackdown in Miami, capital city of medical fraud, a doctor was charged with fraudulently claiming $24m for kit, including a thousand power wheelchairs. Home-health fraud, such as charging for non-existent visits to give insulin injections, got so bad that CMS which runs the programmes stopped enrolling new providers in several large cities last year. Since tighter screening was introduced under Obamacare, the CMS has stripped 17,000 providers of their licence to bill Medicare.
But the sheer volume of transactions still makes it easier for felons to hide since every single day Medicare’s contractors process 4.5 million claims on average. Scams become more sophisticated with doctors, pharmacies and patients acting in concert, over-billing for real services rather than charging for non-existent ones, which makes them harder to detect. Some criminals are switching from cocaine trafficking to prescription-drug fraud because the risk-adjusted rewards are higher: the money is still good, the work safer and the penalties lighter. Federal investigators have seen caseloads quadruple over the past 5 years.
The ingenuity of medical fraud in the US is endless. Some pharmacies pay wholesalers to produce phoney invoices. Others bribe medical workers for left-over pills which they then repackage and sell as new, billing Medicare for the recycled medicines. Another scam is to turn a doctor’s clinic into a prescription=writing factory for painkillers and then resell them on the street. But as in the UK over tackling tax avoidance, the scams multiply but the budgets for suppressing them are continually whittled down. As a result of budget cuts New York now has a Medicaid investigations division of just 110 persons who are supposed to scrutinise $55bn of annual payments and 137,000 providers.