Smart Cards Wouldn't Stop Most Healthcare Fraud, GAO Finds

Almost everyone supports weeding our fraud from government healthcare programs, such as Medicare and Medicaid. In 2014 alone, the Department of Justice spent $571 million to find and prosecute fraud and recover $3.3 billion in settlements.

But how much fraud could be prevented with better technology? That’s a question that the Government Accountability Office (GAO) asked when it looked at whether electronically readable card technology, or “smart cards,” could weed out fraud by properly identifying beneficiaries or providers at the point of care.

The GAO released a report yesterday that found smart cards could spot some types of fraud, but not most of it. That’s because the vast majority of cases involve schemes in which the beneficiaries or the providers—or both—were complicit in the action.

GAO ran tests of 739 fraud cases from 2010 to see of smart cards would have made a difference, and found that they would have stopped fraud in only 165 cases, or about 22%. In 20% of the cases, the cards would have stopped the fraudulent act completely, and in 2% they would have partly stopped the fraud.

The investigators gave several reasons why smart cards are not a cure-all for Medicare and Medicaid fraud. The most common fraud schemes involve billing for services that were not provided (43%) or for medically unnecessary services (25%), and in the case of Medicare especially, the patient may not even be aware that the service is not needed.

GAO also offered the example of illegal marketing of prescription drugs, which do not involve identity of either patients or providers.

Other schemes involve falsifying records to support fraud (25%) and fraudulently obtaining controlled substances or misbranding prescription drugs (21%).

One of the most celebrated examples of alleged fraud involved South Florida eye doctor Salomon Melgen, who faces federal charges of bilking Medicare out of $105 million. He is accused of diagnosing patients with age-related macular degeneration even if they did not have the condition. And, he is accused of illegally splitting vials of Lucentis and treating multiple patients, while billing Medicare as if he used a single vial on each eye, as called for on the FDA label. A federal lawsuit charges that Melgen left 2 patients blind. Melgen was released on bond last year and awaits trial.

If proven, the Melgen episode would be like most fraud cases: providers are complicit 62% of the time, while beneficiaries are at fault 14% of the time.