Combating Health Care Fraud, WASTE and Abuse - Health Cost Containment

Updated December 2017

Cost Containment header

The attached PDF-format NCSL Issue brief was distributed to state legislators and legislative staff across the country and is available for download here. Material below provides updates from 2010-2017. 

Combating Health Care Fraud and Abuse -  PDF File
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Cost Containment Strategy and Logic

Health care fraud and abuse control programs are designed to prevent, identify and prosecute unlawful billings by health care providers, patients and insurers. Health care fraud is intentional deception-—a misrepresentation or failure to disclose pertinent information. A false claim involves an intentional false representation that causes the government to pay more than is allowable. Abuse involves substandard, negligent or medically unnecessary practices that increase the cost of health care. Abusive practices often indicate fraud.
Fraud and abuse, widespread in both the public and private health care sectors, account for 3 percent to 10 percent of Medicaid payments nationwide. Among 28 federal programs examined by the U.S. General Accountability Office in 2007, Medicaid had the highest number of improper payments.

Summary of Health Cost Containment and Efficiency Strategies - Brief #11- Combating Health Care Fraud and Abuse

State/Private Sector Examples  Strategy Description Target of Cost Containment Evidence of Effect on Costs
Ohio, Texas, New York and California
Medicaid RAC program, 9/11
Evidence shows concerted state anti-fraud and abuse efforts save states mil­lions—and in some cases billions—of dollars each year, and states poten­tially could double or even triple current collections. Medicaid expenditures for fraudulent claims cost states bil­lions of dollars each year. It appears the more anti-fraud tools a state has at its disposal, the greater likelihood of fewer unwarranted payments and larger recoveries.

Key Additional Resources

  • NCSL: "Improving the Health Care System"- A health system that delivers quality care more affordably is possible. State legislatures play important roles in cutting wasteful spending while improving their own state’s health systems. With support from The Commonwealth Fund, NCSL's new issue brief highlights seven target areas and strategies that have demonstrated results in states that are implementing them.   See "Ineffficiencies, page 1.  Published by NCSL, July 30, 2016.  PDF | Read the Full Report   *NEW*
  • How can a single urine test rack up $1,845 in medical billing? Watch via UTube video - Kaiser Health News ‏Verified account @KHNews Dec 28, 2017. learn the example of a lawsuit that revealed dozens of extra, unrequested lab tests on an individual patient, adding some $1,400 to the bill, which was challenged by Allstate.
  • If Obama Covers My Health Insurance, Who Will Cover My Time? A critical analysis by the Heartland Institute notes, "The up-to-20-minute block of time an average patient spends in an exam room receiving care from a doctor is often a fraction of the time patients spend on the premises of their doctor’s office. Patients spent an average of 84 minutes at clinics per visit in 2010, according to a 2015 study published by the American Journal of Managed Care (AJMC). The total dollar value the study assigned to the time patients spent on doctor appointments was $52 billion among America’s adult population in 2010. This includes, among the employed, $25 billion in the lost productivity of 1.1 billion hours spent on doctor appointments." Posted by The Heartland Institute, 8/18/2016. CPR #515
  • Fighting Medicaid Fraud SL Magazine - Read this story from State Legislatures Magazine to learn how states are sniffing out Medicaid swindlers and saving money. April 2013

  • "Paying Till It Hurts" - In a major series  of continuing on the costs of health care, Elisabeth Rosenthal of The New York Times examined the price of medical care in the United States, interviewing patients, physicians, economists, and hospital and industry officials.  Not all topics focus on fraud, waste or abuse.

    • The Price of Prevention: Vaccine Costs Soaring - Vaccination prices have risen significantly over the last 30 years, creating dilemmas for physicians and parents and straining public health budgets. NY Times, 7/2/2014

    • American Way of Birth, Costliest in the World (Pregnancy costs) - Maternity care and childbirth cost far more in the United States than in other developed countries, but studies show that their citizens do not have less access to care during pregnancy than Americans. NY Times 6/30/2013.

    • The Soaring Cost of a Simple Breath (Prescription costs) - The high price of commonly used medications for conditions like asthma contributes heavily to health care costs and certainly causes more widespread anguish.

    • The $2.7 Trillion Medical Bill‚Äč - (Colonoscopy costs) While the American medical system is famous for expensive drugs and heroic care at the end of life, a more significant factor in the nation’s annual health care bill may be the high price tag of ordinary services.

    • After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn’t Know (Surprise Bills) - In a growing practice, medical assistants, consultants and other hospital staffers, often called in without patients’ knowledge, are charging hefty fees. NY Times, 9/20/2014.

    • Even Small Medical Advances Can Mean Big Jumps in Bills (Type 1 Diabetes) - Some high-tech treatments help patients better control chronic diseases like diabetes, but they also drive an enormous surge in costs, and experts say many of them offer dubious benefits.  
      Follow-up coverage - Type 2 Diabetics Face a Flood of Drugs and Tests. NY Times, 5/22/2014.

    • Patients’ Costs Skyrocket; Specialists’ Incomes Soar (Dermatology costs) - Patient costs have risen as doctors have become more entrepreneurial, protecting their turf through lobbying by medical societies and increasing revenues by offering new and more lucrative procedures. NY Times, 1/14/2014.

  • 2013 Study Shows Spending Variations - Kaiser Health News discusses a recent journal new research completed by Dartmouth Institute regarding Medicare spending waste and inefficiencies related to variations in geographic locations. The new research, totled “Medicare Spending Variations Mostly Due To Health Differences, Study Concludes”- notes, “that health differences around the country explain between 75 percent and 85 percent of the cost variations.” Written by Jordan Rau and published on May 28th, 2013.
  • Insurers and HHS Join to Cut Health Care Fraud -Read article online - Joining to Cut Health Care FraudMajor private insurers and HHS officials announced a new collaboration to " crack down on health care fraud by sharing and comparing claims data."  New York Times, July 26, 2012.
  • Combating Medicaid Fraud and Abuse - presentation at Legislative Summit by Kavita Choudhry, Pew Charitable Trusts, Washington, D.C, August 7, 2012. - "PowerPoint" (PDF file-7 pages)
  • HHS  announces over $2 billion in anti-waste measures at Cabinet meeting HHS discussed a new initiative to fight waste and fraud in Medicaid that will save taxpayers an estimated $2.1 billion.  HHS news release, 9/14/2011.
  • Medicaid Final Rule on RAC- published Sept, 14, 2011 (140 pp)
  • Anti-fraud efforts by Atorneys-General and Dept. of Justice are resulting in billions.  The Affordable Care Act created some needed means to start controlling ever-rising health care costs. Many — like preventive care or delivery reforms — will take some time to realize savings. In contrast, new anti-fraud efforts look to be paying off right away, in amounts much bigger than expected. The health reform law provided $350 million. Posted on: May 25, 2012.
  • Attorney General Holder and Secretary Sebelius Team up at Health Care Fraud Prevention Summit in Boston:  Massachusetts Home to the Largest Health Care Fraud Settlement in History.  As part of the Obama Administration’s ongoing efforts to prevent and fight fraud in our nation’s healthcare system, Attorney General Eric Holder and U.S. Department of Health and Human Services Secretary Kathleen Sebelius visited Boston today, where they participated in the fourth Regional Health Care Fraud Prevention Summit. The summit brings together a wide array of federal, state and local partners, beneficiaries, providers and other interested parties to discuss innovative ways to eliminate fraud within the U.S. health care system. More... Department of Justice, Office of Public Affairs- 12/16/10.
  • Fraud Detection Systems: Centers for Medicare and Medicaid Services Needs to Ensure More Widespread Use- Government Accountability Office Report, 6/11.
  • Costs of Vermont’s Health Care System: Comparison of Baseline and Reformed System- Vermont Legislative Joint Fiscal Office and the Department of Banking, Insurance, Securities and Health Care Administration, 11/1/11.

Recent Articles and Opinions

  • J.&J. Fined $1.2 Billion in Drug Case - An Arkansas court ordered the near-record payment after a jury found that the pharmaceutical manufacturer companies had" minimized or concealed the dangers associated with an antipsychotic drug." - New York Times, April 12, 2012.
  • Transforming Health Care Through Technology - Information technology and telecommunications are transforming health care, by helping to improve care and prevent possible fraud. " Health Care Fraud Is Costly. Health care fraud costs insurers anywhere between $70 billion and $234 billion each year, harming both patients and taxpayers. In October 2010, the National Health Care Anti-Fraud Association (NHCAFA) stated that one of the most important principles to fight health insurance fraud was to consolidate data and create real-time analysis of insurance claims. These tools allow health insurers to devote resources to apply fraud prevention before paying claims, rather than the current-and-costly “pay and chase” model most use to combat health care fraud. States also can use predictive modeling and analytics to prevent costly fraud, waste and abuse." More NCSL LegisBref, published September 2011.
  • Health Reform Law Has Far-Reaching Impact on Compliance World  - Reprinted from REPORT ON MEDICARE COMPLIANCE (c),  12/8/10. "The new law “makes significant amendments to existing criminal, civil and administrative anti-fraud statutes, most of which went into effect March 23, 2010,” said Dallas attorney Frank Sheeder, with Jones Day.  For example, providers must disclose and return overpayments within 60 days of identification. “The statute specifically provides that once an overpayment is identified, providers must report and repay the overpayments within 60 days or they can be subject to liability under the False Claims Act,” Sheeder said Nov. 8 at a health reform conference sponsored by the Health Care Compliance Assn."

About this NCSL project

NCSL’s Health Cost Containment and Efficiency Series describes more than a dozen alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is is led by Richard Cauchi (Program Director) and Martha King (Group Director) with Barbara Yondorf as lead researcher. 

NCSL gratefully acknowledges the financial support for this publication series from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado.