Medicare Fraud Blamed on Low Admin Spending

Last night, "60 Minutes" reported on the issue of rampant medicare fraud, and if you haven't seen the stunning report, I urge you to find and watch the video. After investigating the matter, even CBS acknowledged that it raised "troubling questions about our government's ability to manage a medical bureaucracy."

For the story, Steve Kroft traveled down to South Florida, where the Medicare fraud industry has become bigger than the drug trade, and visited a number of so-called clinics that billed millions of dollars to Medicare but were actually empty store fronts. He interviewed a Medicare cheat who stole $20 million from the government before getting caught, who described it as being so easy to steal that it was like "taking candy from a baby." And the show also visited with an elderly woman who in 2003 discovered phony health care charges being paid out in her name by the federal government. Even though she has been reporting these recurring charges to the Centers for Medicare and Medicaid Services for the past 6 years, no action has been taken by the government to stop the fraudulent payments.

The most relevant moment to our current health care debate came when Kroft asked Kim Brandt, Medicare's director of program integrity, to explain why the government couldn't do anything to prevent the widespread fraud.

"Well, it really does come down to the size and scope of the Medicare program, and the resources that are dedicated to oversight and anti fraud work," Brandt said. "One of our biggest challenges has been that we have a program that pays out over a billion claims a year, over $430 billion, and our oversight budget has been extremely limited."

Liberals keep touting Medicare's low administrative costs relative to the private sector. To start with, those estimates exclude a number of costs that show up elsewhere in the federal budget (office rent, staff salaries, the cost of raising capital through tax collection). But to the extent that the program does have lower administrative costs, the result is far more fraud than exists in the private sector, which is more aggressive about policing claims. Estimates of the amount stolen from the government each year vary from about $60 billion to several hundred billion if you include Medicaid.

That being the case, I would love for someone to explain to me how creating a multi-trillion dollar government insurance boondoggle is going to save us money by cracking down on fraud and abuse.