Health care fraud widespread -- in public and private sectors

Health care fraud accounts for as much as 10% of overall health spending and is occurring just as frequently among private insurance plans as public programs, according to a recent report.

The June study out of the George Washington University Medical Center in Washington, D.C., emerges as the Obama administration is becoming more vocal about cracking down on health care fraud as a priority in reforming the health care system.

The report's authors called the issue "a systemic problem affecting public and private insurers alike, in the individual market, the employer-sponsored group market and public programs." Researchers cited fraudulent billing, kickbacks, upcoding and bundling services among the most common examples of fraud. They estimated that 80% of health care fraud is committed by health care entities, 10% by consumers, and the balance by others, including private insurers and their employees.

While the public is more aware of Medicare and Medicaid fraud because the government is required to report it to taxpayers, "perhaps the most striking examples of fraud are those that involve the private insurance industry itself," according to the study.

Researchers pointed to a January settlement by UnitedHealth Group, totaling $450 million, over allegations that the insurance firm manipulated out-of-network prices for physician services, resulting in an estimated 10% to 28% increase in costs. The Litigation Center of the American Medical Association and State Medical Societies, along with other physician organizations, had sued United, which denied any wrongdoing.

Researchers also cited several multimillion-dollar settlements by pharmaceutical companies and large hospital systems for alleged false billing of Medicare and Medicaid.

Between 3% and 10% of the nearly $2.3 trillion spent on health care in 2007 was lost to health care fraud -- a figure that, if prevented, "would have been enough to cover the uninsured," the report said. "As the national health reform legislation takes shape, keeping an attentive eye on anti-fraud provisions will be a critical element of reform."