Continuing his struggle for health care reform, Obama announced that if his program is enacted, he will get serious about rooting out fraud. He even proposed to bring in private auditors to run down those suspected of fraud. To convey the determination of the administration, those private auditors were referred to as "bounty hunters". They will be men and women dedicated to bring scofflaws and cheats to justice. Their ruthlessness and determination will be ensured because they will be able to keep some of what they collect. While unwed mothers and cheats may be intimidated by bounty hunters, hospitals, doctors, and insurance companies will be much less so.
It is estimated that improper Medicare and Medicaid payments alone cost the government $54 billion in 2009. How much of the $54 billion was due to fraud as opposed to incompetence or mismanagement is unclear. A pilot program run in Texas, California, and New York did provide some encouragement that there was something to the administration's claim. They were able to recover $900 million in fraudulent claims from 2005-2008. However the fact that over $900 million was spent on fraudulent claims in just three states does little to reassure that the government will manage a federal health care plan effectively.
It is encouraging that the administration has chosen to get tough on fraud and waste. But given the prevalence fraud and waste in government, one has to suspect its ability. In the 2010 budget, only $140 million was identified as waste out of $3.6 trillion appropriated. There is certainly much more. No figure was given to the amount expected to be lost through fraud. The government rarely budgets for fraud.
The main problem with trying to ferret out waste is the assumption that waste is something distinct from the system. The truth is, waste is part of the system. According to the Heritage Foundation, there was $72 billion in improper payouts in 2008. That money was either paid to the wrong people or spent for the wrong reasons. Another $25 billion was spent to maintain vacant property owned by the government. $13 billion was either lost or stolen in Iraq. Fraud related to Hurricane Katrina cost another $2 billion. The GAO identified $202 billion in DOD cost overruns. The size of the federal government, the scores of agencies and bureaus, the tangle of regulations, and the vast number of employees ensure there will be redundancy, waste, and error. Bureaus are not machines and employees are not computers.
Human nature being what it is, it is inevitable that somewhere along the line money is going to be intercepted and misappropriated. It is to be expected that some people will try to avail themselves of the money offered by misrepresenting themselves or their circumstances. Some of those people are very good at it. A cumbersome bureaucracy with abundant money to spend and an opportunistic society is a recipe for fraud. One can change rules and systems, but one cannot change people. That is why there will always be people who rob banks.
The federal government has long demonstrated its inability to curb waste and fraud. The health care system in the U.S. is already riddled with it. From contractor fraud and insurance fraud to welfare fraud, there are always going to be people looking to take advantage of a situation. At least private insurance companies have an incentive to curb false and erroneous claims and cut waste. They want to make a profit. The government does not have to make a profit and so its incentives to save money will be far less compelling. A billion dollar federal health care plan can expect to lose untold tens, if not hundreds of millions of dollars in waste and fraud every year. You can tinker with agencies and regulations, but you cannot tinker with human nature.
If health care reform is enacted, the amount of waste and corruption in health care will only increase. Perhaps every two years or so we will hear campaign promises to ferret out waste and curb corruption. But it is unlikely there will be any more success in rooting in out than we experience now. If anything, there will be less. The FBI will not be investigating health care fraud. Nor will it examine the books. Accountants and bureaucrats will. And trusting Congress to curb waste would be futile.
If Obama succeeds in getting his plan passed, it better work as well as he claims. Otherwise, not only will the nation's health care suffer, but its bank account will be pilfered. The government may be able to do something to lessen the costs of fraud. But it will not be able to get rid of it. It is part of human nature. Neither will it be able to do much about waste and inefficiency. Those are part of government's nature. Nevertheless, work should be done to keep it pruned. I can only hope that Obama's promise was not really a threat that he intends to ignore fraud and waste if his bill is not passed. Government waste and fraud should be pursued vigorously regardless of whether health care reform is passed.
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