In all of the millions of hours of TV commentaries and thousands of words addressing all aspects of the upcoming Republican tax bill, few have discussed the costs of fraud, what it is costing American taxpayers and how it is depleting the federal budget.
Certainly there are Republicans who want “to starve the beast” and cut off almost all funding for entitlement programs, excluding the military budget, but members of both parties have conveniently failed to address the prevalent practice of fraud and how it contributes to the national deficit, while buttressing the growing practice of ignoring tax and ethical obligations.
Billions of dollars in fraud are taking place regularly in two major areas: Medicare-Medicaid and plain-old tax evasion. Both are established practices and part of major, complex systems, but the frauds are reaching astronomical proportions.
According to the April 2014 March Medicare Payment Advisory Commission (from the Committee on Ways and Means Subcommittee on Health, No. HL–11), the Medicare program paid out approximately $574 billion annually to over 1.5 million doctors, hospitals and medical suppliers. Citing a Government Accounting Office report, an estimated $44 billion annually is lost to fraud. The fraud stems from all levels of the medical system, including doctors and hospital administrators to home aid nurses and medical supply vendors.
On the tax evasion front, this is being made easier because the IRS has lost 17,000 employees since end of fiscal 2010, according to IRS Commissioner John Koskinen. In 2016 alone, the IRS workforce decreased by 2,000 to 3,000 workers, according to a report in The Hill.
Speaking before a Senate Finance committee last year, Treasury Secretary Jack Lew said at the time that the IRS needs more funds for enforcement to seek out and prosecute tax fraud.
In 2016, the IRS estimated that tax evasion cost the federal government on average $458 billion per year between 2008 through 2010.
How much does tax fraud cost? In 2016, the IRS estimated that tax evasion cost the federal government on average $458 billion per year between 2008 through 2010. The IRS calls this a “tax gap” and notes the I.R.S. expects to recover about $52 billion of that lost revenue, resulting in a net tax gap of $406 billion annually. But with the decreased IRS work force, that tax gap should increase, which will costs taxpayers more in lost federal revenues.
Medical Fraud on the Rise
On the Medicare and Medicaid fronts, fraud task forces have been busy, but they admit the scope of the problem is difficult to estimate. In July 2017, the Justice Department charged more than 400 people across the country in a major crackdown on health care fraud saying it cost the federal government $1.3 billion in false Medicare and Medicaid billings. Those arrested include over 100 doctors, nurses and other medical professionals.
In just one small example, one Washington Post expose found that since 1999, Medicare spent $8.2 billion to procure power wheelchairs and motorized scooters for 2.7 million people. As of 2014, the government said it cannot estimate how much money was paid to fraudsters. Then, there are many other ways to conduct Medicare fraud. One site lists 28 possible ways to do it involving everyone from providers and members to Medicare pharmacy benefits to brokers and agents, including wheelchair providers.
These are just recent examples, but the problem is decades old. One reason is that Medicare is the fourth largest federal expenditure after defense, Social Security and payments on the national debt. In a 1994 U.S. Senate Special Committee on Ageing hearing, experts said fraud cost 10% of the total Medicare and national health care budget, which in 1994 cost $10 billion to $20 billion annually. States with high elderly populations, such as Florida, especially south Florida, are main sites for the frauds.
In that 1995 hearing*, the senators cited three reasons for the widespread fraud:
- Methods used to commit Medicare fraud and abuses are difficult to detect. Some of those methods include-billing for services or supplies that are not provided; providing medically unnecessary services; altering billing codes to obtain higher payments.
- The resources allocated to combat fraud are inadequate. For example, the Office of the Regional Inspector General in Atlanta is responsible for the inspection of all Department of Health and Human Services (HHS) programs in eight Southeastern States. There are 300 different programs under the jurisdiction of HHS. Thirty-three agents and staff are assigned to cover these eight States, with 10 agents, and 2 support staff assigned to Florida, with only 4 agents in the Miami area.
- The lack of coordination between Federal agencies and the programs they oversee.
Is this fraud situation any better today? When the Justice Department made its arrests in 2017, it did so based on drug distribution, but this left over the larger areas of providing unnecessary, expensive and dangerous medical procedures and altering billing codes.
While the government has a program for citizens to call in Medicare fraud, the best way to prevent fraud is to enable, protect and reward nurses who see the frauds conducted on a daily basis. But the doctor, medical and hospital cultures relegate nurses to second class status. Worse, they are often the ones who have to administer the unnecessary, painful and dangerous unnecessary procedures to unsuspecting patients.
Nurses could stop the fraud and the unnecessary pain delivered to patients if they could report the fraud without the threat of losing their jobs and being blackballed in the medical industry. Without those protections, the medical fraud will continue.
To report Medicare fraud or abuse, call the Medicare fraud tip line at 1-800-HHS-TIPS (1-800-447-8477).
*Hearing before the Special Committee on Ageing, United States Senate, 103rd Congress, Second Session, Miami, Florida, April 11, 1994, Serial No. 103-17.