Opinion Column

Medical Loss Ratio Rule Should Encourage Health Care Fraud Fighting

Rankings of the nation’s best places to live — those with the best quality of life — generally count the crime rate as a key factor. It’s a calculation that translates to the health care system, too. Just as high crime erodes the quality of a neighborhood, the incidence of health care fraud erodes quality of care for patients.

That’s why fighting health care fraud isn’t just about recovering stolen money — it’s also about protecting patients from the devastating effect of fraud.

To maintain health care quality, it is essential that fraud-fighting be given greater urgency — by private insurers, the Centers for Medicare and Medicaid Services, and state and federal law enforcement agencies. And to its credit, the Obama administration has made fighting health care fraud a national priority. Congress has stepped up as well by authorizing an additional $350 million to fund anti-fraud programs in Medicare and Medicaid. Yet this commitment is being undermined by the National Association of Insurance Commissioners‘ recent draft regulation on medical loss ratios, which treats private plans’ spending on fraud detection and prevention as nonessential to quality health care.

There is undoubtedly a direct connection between health care fraud and health care quality. Consider the Kansas physician convicted of health care fraud linked to the death of patient. He had been running a “pill mill” in a small town, which led to more than 100 overdoses and at least 68 deaths. All the while, he submitted millions of dollars in false claims to government programs and private insurers. Or the New York eye doctor who preyed on the mentally ill by either performing unnecessary surgeries on them or not treating them at all, yet still submitting false Medicare claims.

Moreover, health care fraud is perpetrated by individuals and groups outside the healing arts. Organized crime groups, for instance, have used stolen insurance identification numbers to bill for phony medications and services. These schemes not only expose insurance plans to theft, but endanger the patients whose identities have been stolen by leading to false information being entered into their medical records.

The work of investigators in the private sector is vital to restricting the scope of these schemes and preventing more people from becoming victims. Private insurance plans staff teams of experienced, accredited investigators who can recognize anomalous health care claims and ferret out dishonest providers. In many cases, private plans have been instrumental in alerting law enforcement to suspicious activities, leading to the shutdown of several large-scale fraud operations.

On the public side, Kathleen Sebelius, secretary of Health and Human Services, and Eric Holder, the attorney general, created the Health Care Fraud Prevention and Enforcement Action Team (HEAT), an interagency effort to combat Medicare fraud. HEAT strike forces are successfully operating in several U.S. cities. At recent health care fraud “summit” meetings, the HHS and the Justice Department emphasized the need to partner with private health insurers to go after fraud.

As such, private health plans should be given every incentive to invest in the technology and manpower necessary to fight fraud. Yet, under the medical loss ratio definitions being proposed by the NAIC as part of health care reform implementation, private insurers will be discouraged from investing in critical anti-fraud programs. Ignoring the adverse impact fraud has on health care quality, the proposed definitions would classify the costs of fighting fraud as “administrative” rather than as costs that improve quality.

It makes no sense to discourage health plans from investing in anti-fraud efforts while the federal government is ramping up its anti-fraud spending in Medicare and Medicaid. NAIC should reconsider its definition for medical loss ratios and encourage private plans to invest in their fraud-fighting capabilities.

While the federal government is investing heavily in anti-fraud efforts, private insurers should be given the incentive to do the same. Only through a cooperative and concentrated effort to root out health care fraud can we effectively protect Americans’ quality of health care.