Current System Cares Well For Fraudsters

Parija Kavilanz, CNN Money

There's a group of people who really love the U.S. health care system – the fraudsters, scammers and organized criminal gangs who are bilking the system of as much as $100 billion a year.  Health care identity theft dominated all other crimes in the sector last year, according to Louis Saccoccio, executive director of the National Health Care Anti-Fraud Association (NHCAA), an advocacy group whose members include insurers, law enforcement and regulatory agencies.

The most common method of health care identity fraud occurs when someone with legitimate access, such as a hospital administrator or a doctor's assistant, sells patients' information to organized criminal groups. Increasingly, criminal groups are hacking into digital medical records so that they can steal money from the $450 billion, 44-million-beneficiary Medicare system. This makes the government the single biggest victim of health care fraud, according to Rob Montemorra, chief of the FBI's Health Care Fraud Unit.

All the stolen information includes medical insurance data and Social Security numbers, explained James Van Dyke, president of Javelin Strategy & Research, a research firm specializing in trends in security and fraud initiatives. Van Dyke said that, with the information, the fraudster falsely bills Medicare and private insurers for drugs, equipment or treatment that were never prescribed.

On a smaller scale, criminals also sell medical information to uninsured people who are desperate to get medical care. To collect the money, the criminals set up shell billing companies that disappear as soon as there's any indication of an investigation, according to the FBI.

The payoff for health care identity fraud is huge. In 2008, criminals pocketed more than $19,000 per incident of health care fraud – four times the amount gained through overall ID theft, according to Javelin. The cost to the individual victim was nearly $1,200.

Recognizing that to overhaul the health care system requires stopping the billions of dollars criminals are drawing as Medicare spending itself is soaring, the Obama administration created a multi-agency Medicare Fraud Task Force in 2009 to combat the problem. Prime target areas for health care fraud are those with lots of Medicare recipients, such as Miami's elderly population, or those where a large chunk of the population is getting government aid, such as Detroit.

President Obama has set a five-year deadline for all Americans to have electronic medical records, saying digital records will save billions by cutting waste and eliminating repeated tests and errors. Providers are rushing to transition to digital to gain a windfall from the administration's financial incentives and avoid penalties, according to Van Dyke.

“Our concern is that as they put more patient records online, they are not necessarily doing it in the most secure way to prevent breaches,” he said. “When you put a substantial amount of information online in a short period of time, it will lead to more open doors.”

This is an edited version of an article from CNN. The entire article can be found here -