Sunday, August 15, 2010



Contrary to popular belief, it is a misconception that fraud is a field of study at Farrington High School. In fact, fraud regularly is perpetrated by ordinary people like us. Before you get mad, let me explain some things.

There are two types of fraud. A "hard" or a "soft" fraud. A hard fraud is when someone submits a claim knowing that a loss did not take place. A soft fraud is one where there is a legitimate claim, but a person adds or pads the amounts of the loss suffered.

When a person falsifies the information on health insurance applications, he has committed fraud. If a person smokes cigarettes and knows there is a higher rate for smokers, and he emphatically states that he does not smoke just to qualify for the lower rate, he has committed fraud. When a person submits claims for services or treatment that's not provided, that is fraud. When a doctor tries to "help" his patient by padding the claim so that the patient's "deductible" is covered, that is fraud.

When a medical provider bills for services not provided (called "phantom" treatments), bill for more expensive services than were provided (called "upcoding"), perform a single procedure but bill it as a series of separate procedures (called "unbundling"), provide treatment or services not medically necessary (overtreatment), pay kickbacks and finders' fees to attorneys and others, bill for equipment for patients like wheelchairs that were never provided and diverting drugs, these are fraudulent acts.

Insurance companies and agents also sometimes commit fraud too. Agents can misrepresent coverage to get the sale, they may issue policies that are fakes and/or may divert premiums for their own personal use.

People in the legal profession could also be a part of fraudulent schemes. They sometimes steer legitimate, as well as dishonest patients to dishonest medical providers in exchange for a fee. They even use their legal practice to threaten and often sue for disability and medical claims to get large settlements. Some even shakedown medical providers unless a fee is paid. That's why medical malpractice insurance premiums are so high.

There are also people called "cappers" or "runners" who introduce patients to dishonest practitioners or dishonest lawyers in exchange for a referral fee. They troll nursing homes and even low income neighborhoods to look for people to come in for unnecessary tests and procedures.

Medicare fraud offers large payoffs so it's a lucrative activity to engage in. Further, even criminals who are convicted of violent crimes can easily obtain Medicare supplier licenses. Medicare fraud is estimated to be about $60 billion a year. Americans spent $2.24 trillion on healthcare in 2007. The FBI believes that fraudulent billings to health care programs to be up to 10% of that.

To be fair, many medical practitioners regularly order extra diagnostic procedures to avoid lawsuits. Nevertheless, this practice increases the cost for insurance coverage and for medical services rendered. The ideal situation is if the patient and the practitioner can decide together as to what services should be done and the patient pays the co-pay and signs off on the decision.

If you have a provider who offers to change the paperwork so that you don't have to pay a deductible or co-payment, then you are likely participating in health care fraud. I've even encountered people who tell me that their doctor is so good that he/she is able to eliminate the deductible for them.

The Deficit Reduction Act of 2005 has two "false claims" provisions to provide for whistleblower activities. It allows for a person who has knowledge of fraud against the U.S. Government (Medicare/Medicaid) to file a lawsuit. If the action is successful, then the person gets a percentage of the recovery. The law also allows for states to an increased share of 10% of the amounts recovered if the state enacts a false claims law that is modeled after the federal version.

Our kupunas are vulnerable when there is so much widespread corruption in the healthcare system. When the government gets involved, they offer regulations, but do not enforce or even provide funds for the enforcement of the regulations. Many would also argue that our politicians are just as corrupt (or more so) as those in the healthcare industry as mentioned earlier.

We all have larceny in our hearts. If there's a chance that we'll get caught, our propensity for larceny will be low. Sort of like picking one's nose, I suppose.  If the amount to be gained increases, the propensity increases. We all sell our integrity at some point, but at differing prices. As an entitlement society, we have, over the past decades lost our moral character.

If the majority of the people decide to redefine what fraud is as each situation presents itself, then we have no rules as to what is right and wrong. For instance, when Roosevelt made those who are in the top 5% of income pay 98% in taxes, I assume that 95% of the population agreed that this was a good thing. So the 5% of the population who had their wages consficated has no voice in the matter because the majority decided that those who earned high incomes had no rights to their wages.

Or, we sometimes redefine it another way. If we were to commit a fraudulent act, and in doing so, we are able to provide for the survival of others (like children or aged parents), then that act is not fraud because we have done a good thing because are keeping our children alive with the money saved. You may even get a free swimming pool if your doctor can declare that the pool is necessary for your good health.

We complain about how high insurance premiums and medical costs are. Insurance companies will not lose money. If they do, they will no longer be in business. They pass on the costs of fraudulent activities to policyholders who pay premiums.

It is up to us. We need to resist the temptation to be a participant in fraudulent activities, and to speak up and let others know when fraud is being committed. Become a whistleblower. If not, all will be lost. When the patient is as corrupt as the doctors, lawyers, insurance companies and the politicians, then we end up with a healthcare system in complete chaos.

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