The Health Care Fraud Challenge

Worldwide, health care fraud is a lucrative, though illicit, line of work.

Some estimate that $260 billion(180 billion euros)—or approximately 6 percent of global health care spending—is lost to fraud each year. This amount is equivalent to the GDP of a country like Finland or Malaysia being stolen on an annual basis. But the most troubling aspect of global health care fraud is that its perpetrators have created a zero-sum game, wherein the money, care and resources needed to sustain and improve global health are essentially being rerouted toward greedy and immoral individuals and groups.

Global health care fraud has taken on several guises. For instance, the “profit” from such fraud schemes has proven so substantial that they have attracted the interest of criminal enterprises. These organized groups have defrauded insurance companies through elaborate schemes against government-sponsored programs, private health insurers and the property and casualty insurers. One of the most elaborate examples of the scope of international health care fraud rings was discovered earlier this year, when the U.S. Department of Justice announced the indictments of 102 members of an Armenian crime syndicate, accusing them of participating in massive health care fraud schemes. The gang operated a health clinic in Miami that paid individuals to refer “patients” of staged accidents and billing private insurance carriers “for treatments that were either not medically necessary or were not provided.” The Armenians allegedly had ties to Russian and Eastern European crime gangs as well as the Mexican Mafia.

Prescription drug diversion is another symptom of global health care fraud. The Journal of the American Medical Association (JAMA) estimates that abuse of prescription medications worldwide will soon outpace that of illicit drugs. International drug traffickers have shifted their activities towards the production and distribution of counterfeit pharmaceuticals, as well as the diversion of prescription medication. In North America, prescription drug abuse doubled over a ten-year period, according to the International Narcotics Control Board; in developing nations, where poverty and poor health care force many to obtain drugs on the black market, “25% to 50% of medicines consumed may be counterfeit,” according a to World Health Organization estimate. The consumption of counterfeit drugs present greater overdose risks and other health hazards than do legitimate ones.

The theft of medical identifications has also become a worldwide phenomenon. As information becomes increasingly globalized, the potential for medical IDs to be stolen or duplicated and then transmitted internationally exponentially. The theft of an individual medical ID is more than a financial concern—a compromised ID can lead to the addition of erroneous medical information into an individual’s medical record, and conversely, the subtraction of vital bits of medical histories. This can ultimately lead to serious health complications if the victim of a stolen ID subsequently needs legitimate medical procedures.

Given the breadth of these international challenges and their cumulative effects on the quality of health care, it is essential that government agencies and private insurers from around the world work closer to combat global health care fraud. The need for agencies and companies to share information is crucial; greater coordination will result in better preparedness to combat existing and emerging schemes. GHCAN was inaugurated with these principles in mind. Its partners share the confidence that through this coordination and exchange of ideas and best practices, the progress of global health care fraud can be stemmed and even reversed.

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