Association for Public Policy Analysis & Management

Medicare, the public health insurance program for the elderly and disabled, accounted for 15% of Federal spending in 2015, a figure that is projected to increase rapidly in response to the aging population and spread of health technology. Healthcare fraud and abuse, widely defined by Medicare as “any practice, either directly or indirectly, that result in unnecessary costs to the Medicare program”, can include a number of illicit activities such as billing for unnecessary or never provided services, providing medically inappropriate services, practicing without a license, and unlawful manufacturing or distributing controlled substances. It total, fraud and abuse was estimated to cost payers between $84 billion and $270 billion in 2011 and represent between three and ten percent of total healthcare spending.

Although popular press articles highlight instances of patient harm to defraud Medicare including unnecessary surgeries, care by untrained and unlicensed providers, and inappropriate prescription drug dissemination, patterns of exposure to fraud and abuse have not been well-characterized. We address this gap by linking the identities of all providers excluded from Medicare and Medicaid between 2013 – 2015 from the Office of the Inspector General’s List of Excluded Individuals and Entities (LEIE) to Medicare Part B summary data from 2012 – 2014. In 2012 alone, nearly 250,000 Medicare beneficiaries were treated by providers who were subsequently excluded for program fraud or abuse. These patients were more likely to be Medicaid dual-eligibles (46% vs. 30%), more likely to be disabled (36% vs. 22%), and more likely to be non-White (28% vs. 22%) than patients cared for by non-fraudulent providers. Differences were all statistically significant at p < 0.05.

In addition to well-recognized financial harms, our work indicates that fraud and abuse may pose a significant health threat to Medicare beneficiaries, with low-income and minority patients disproportionately exposed to this risk. Findings have important implications for policy decisions about fraud detection and prevention programs.