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Fraud in the U.S. Health-Care System: Exposing the Vulnerabilities of Automated Payments Systems

This paper examines the structural features of the U.S. Health Care System that make it particularly vulnerable to fraud, and which help to account for the types of fraud that arise and the difficulties authorities confront in controlling them. These structural features include the predominance of fee-for-service structures, private sector involvement in health care delivery and health insurance, highly automated cl aims processing systems, and a processing culture and audit mentality that emphasize process accuracy over verification. The paper also discusses the underlying pathology of fraud as a white-collar crime problem, and explains how the more general challenges of controlling fraud (in any industry) are exacerbated by particular features of the health system. The central and unsolved problem of False Claims is examined in some detail. A series of recent governmental responses to medically impossible claims of various types (claims involving, for example, dead patients, dead doctors, or previously deported patients) is shown to align more closely with a claims-process-improvement mindset than with a crime-control approach. A more mature (and less trusting) crime-control orientation is a pre-requisite for any serious progress in reducing the levels of fraud in the U.S. health system