Ileana Hernandez of Manatt Talks About How Healthcare Fraud Increases Premiums

We spoke with Ileana Hernandez of Manatt, Phelps & Phillips about healthcare fraud and how it increases insurance premiums for everyone.

In 2009 Congress announced the launch of the Fraud Enforcement and Recovery Act (FERA). The legislation aims to fight criminal fraud across all industries, but one that has had a particularly negative impact on the healthcare industry is healthcare fraud.

Hernandez outlined the actual cost of the crime and how it drives up rates for everyone. She also identified critical gaps in our current system’s ability to stop fraud before it occurs.

“It is estimated that the amount of healthcare costs attributed to fraud run between 2% and 10%,” Hernandez explained. “The true cost of the crime comes from two issues, firstly that criminals see health care as one of the least regulated sectors in the country, so it is an easy target.”

Secondly, she said, because of how medical transactions are coded, “every time any doctor or clinic bills for a service, it is coded something to do with that service, so each code is an opportunity for fraud.”

Hernandez gave examples of scams carried out by criminals, including billing for fictitious patient visits and surgeries, services not ordered by the doctor, double billing for the same service, and creating fake companies to charge Medicare.

“Fraud is the third leading cause of increased premiums, with over $80 billion being paid out each year in false claims.”

Another key example that highlights just how cost-ineffective health care fraud is protecting Americans’ health care comes from a recent report by the National Health Care Anti-Fraud Association (NHCAA). According to the study, which included interviews with more than 200 healthcare officials and experts from across the country, criminal health care fraud is rising.

The report found that of those surveyed:

  • 22% had experienced an increase in cases since 2011;
  • 49% said health care fraud was a serious or very serious problem in their state;
  • 61% said the number of cases reported to law enforcement is either slightly or not at all sufficient to address the problem.

In addition, almost two-thirds of respondents in a separate survey said they had observed an increase in abuse and neglect in nursing homes over the past five years.

“We are seeing an increase in fraud cases. Some of the biggest issues include sample collectors who offer to pay for your urine or blood samples,” explained Hernandez. “The demand for these services has exploded because more Americans are now covered by insurance creating more opportunities for fraud.”

Hernandez said that while there are no comprehensive statistics on the cost of health care fraud, some analysts estimate that upwards of $200 billion per year is lost to remuneration for unnecessary medical services.

“There are several ways to measure the impact on premiums, including increases resulting from increased costs from over-billing and insurance companies having to pay fines as part of settlements with federal authorities,” Hernandez explained. “However, there is no doubt that the cost of insurance for everyone will continue to rise as a result of fraud, and if we do not take proactive steps to address this problem, the trend will continue.”