Thursday, December 12, 2013

Obama Care and Fraud

The FBI estimates that the pre-Obamacare cost of health-care fraud is around $80 billion a year. The total annual spending on health care is around 2.7 trillion. Essentially, the math shows that for every dollar spent on health care in this country, almost four cents is paid out as a result of fraud. That’s a great deal of money.

With the recent furor surrounding Obamacare, I decided to see if anyone was looking at the potential for fraud under the Affordable Care Act. Apparently, the opportunities for fraud within the new system are abundant.

A huge opportunity for fraud involves the self-reporting of income required during the application process online. There is little to no oversight and verification of reported income planned, and applicants will be able to report less income than they make thereby qualifying for larger subsidies. They will receive those subsidies for a year, until the IRS receives their tax returns and sees that their income was higher than they stated. Of course, that’s assuming the taxpayer files accurate returns.

If a discrepancy is identified, the law creating Obamacare does not allow the IRS to collect the overpayment of funds except in the case that the taxpayer is owed a refund. The IRS can then collect the money from the refund. If the taxpayer has no refund due, the repayment cannot be collected without the voluntary cooperation of the taxpayer. Obamacare does not allow for liens or garnishments.

While some of these income discrepancies will be inadvertent because the applicant must estimate what their income will be for the next year, you know that plenty of people will take advantage of the system to supplement their income without having to pay Uncle Sam back later.

I imagine that fraud perpetrated by doctors, pharmacies and other peripheral medical entities will continue to climb as Obamacare reduces the amounts paid to these providers. Private insurance historically pays higher amounts than Medicare, but Obamacare will pay providers significantly less than private insurance. That will encourage some providers to falsify claims to keep their billings higher. Certainly, the majority of health-care providers will remain ethical; however, there will be greater pressure as billings begin to fall. Some may opt to leave the medical system altogether, which will create more difficulties since it is already estimated that there are currently not enough doctors and nurses to handle the Obamacare system.

It will be interesting to watch and monitor how the fraud numbers react as Obamacare becomes active and functioning.


  1. That's was pretty good opportunity you presented back then! Though the validation does not carry anymore but Hopping for more of such offers to pass by... Thank you.

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