This post was written by Alis Wang

Fraud and abuse of healthcare services costs the US about $125 to $175 billion per year, with Medicare and Medicaid fraud and abuse costing taxpayers about $98 billion per year, according to a 2012 study by a RAND analyst. The healthcare system is especially vulnerable to abuse and fraud because of the high number of individuals and companies involved in the process. Medicare, for example, is a mammoth program with payments dispersed among countless providers, making it difficult to patrol. This allows fraudsters to target the program without a high risk of being caught. 

 For example, in 2010, a crime ring billed Medicare for over $100 million and collected $35 million over a span of four years. Manhattan US Attorney, Preet Bhanara, named it the “single largest Medicare fraud ever perpetrated by a single criminal enterprise.” The ring stole the identities of patients and doctors from medical facilities in New York and used the information to file fraudulent reimbursement requests for services that never were performed at 118 fake clinics. Similarly, in the fall of 2012, federal authorities undertook a seven-city takeover, charging 91 individuals with fraud originating from $430 million in fraudulent health billing. The list goes on.

 To help combat fraud, the Department of Justice and the Department of Health and Human Services have joined forces to create the national Health Care Fraud and Abuse Control Program. Combatting healthcare fraud is difficult however, and to date, only about 3-5% of fraud is actually detected. Because Medicare is such a large system and utilizes multiple ill-integrated databases, even simple data analysis can take a great amount of time. Authorities are making progress, however, and $4.1 billion—a record amount for a single year—was recovered in 2011.

The use of data analytics and big data is helping to make the task easier. An anti-fraud expert states: “technology is playing a role in helping identify unusual activity that indicates fraud. From a [healthcare] industry perspective, we’re at the early stages in using technology to identify fraud and abuse. But eventually I think we’ll have the good success that the credit card industry has.” A 2011 McKinsey & Company study found that using big data to solve public sector problems has huge potential and if “US healthcare were to use big data creatively and effectively to drive efficiency and quality, the sector could create more than $300 billion in value every year.” Two-thirds of that amount could be used to reduce healthcare spending by approximately 8%. Hopefully the use of data analytics techniques thus far to combat fraud and abuse in healthcare is only the beginning of a larger effort to mitigate this financially costly problem.