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Health Care Fraud: A $272 Billion Malady

by Michael Tasselmyer / /

Medicaid and Medicare disburse over $1 trillion in benefits per year, representing a massive portion of the $2.7 trillion that goes into healthcare-related spending in the U.S. each year. On top of that, the bureaucratic system that determines who receives those benefits (and how much) has grown increasingly complex over the years: next year, Medicare alone will have nearly 140,000 different codes doctors must choose from to describe their patients' injuries if they want to make a claim through that program. The massive amount of money in the system, combined with the complicated and often difficult-to-enforce regulatory checks in place, makes it a target for those looking to rip off taxpayers for their own monetary gain.

The estimated cost of healthcare fraud for taxpayers? $272 billion.

A recent article in The Economist makes note of some of the ways fraudsters can take advantage of the system, including overbilling for treatments and partnering with doctors and pharmacies to obtain, and then resell, prescription drugs for profit. Federal investigators report that incidences of healthcare fraud have increased by four times over the past five years. The problem takes significant resources to fight, but with fraud so rampant and lucrative, doing so can yield significant savings for taxpayers: the Department of Health and Human Services reported earlier this year that over the past three years, enforcement teams have recovered $8 for every $1 they spend to investigate fraud. Last year, the government recovered $4 billion, which is just a fraction of the total amount lost to fraud but represented a record-high success rate.

Still, the high cost of health care fraud illustrates the dangers that overly-complicated entitlement programs can pose to taxpayers -- they are easy targets for thieves looking to take advantage of a system that offers millions of transactions to hide behind every day.