From the President

Use advanced tools to fight Medicare fraud

Fraud, waste and abuse emerge in most areas. But, theoretically, the health care system is where most people should least expect them. Of course, fraud has long been a problem in this sector. And most recently Medicare Advantage — the private-sector arm of the U.S. national health system for elderly Americans — and the insurers that manage it have come under intense scrutiny for allegedly submitting false diagnosis codes to inflate payments from the government.

Some of the biggest U.S. health insurers now face federal lawsuits for falsely making patients seem sicker than they really were, all in the name of increasing profits. Lawsuits accuse these companies of making billions this way and using carrots (bottles of Champagne) and sticks (tying compensation to the “right” codes) to encourage physicians to make bogus diagnoses for bigger government payouts. They’ve also allegedly used data-mining technology to fraudulently manipulate diagnoses in their favor. (See “‘The Cash Monster Was Insatiable’: How Insurers Exploited Medicare for Billions,” by Reed Abelson and Margot Sanger-Katz, The New York Times, Oct. 8, 2022.)

In this issue’s cover story, Fraud Magazine examines the coding structure of Medicare Advantage, how insurers are allegedly exploiting the system and what CFEs think should be done to tackle fraud in this corner of the U.S. health market. Medical coding — the numbering system of medical procedures and tests used to speed along payments from the government — is incredibly complex. Rogue medical personnel and offices have long abused this tangled network of letters and numbers to receive unwarranted payments. Now the focus has turned to the insurers.

Fraud has burgeoned during the ballooning of the Medicare Advantage market. Similar to the rollout of the pandemic stimulus, the U.S. federal government doesn’t have adequate resources to handle the increased volume, and controls are simply insufficient.

Whistleblowers, the one tried-and-true anti-fraud control, have exposed large-scale malfeasance in the health care system and driven most of the recent Medicare Advantage lawsuits. But CFEs still need new tools to dive deeper into these exhaustive datasets if they’re to catch fraudsters who are using advanced technology to their advantage.

We must use artificial intelligence and machine learning to uncover these problems earlier. The 2022 ACFE/SAS Anti-Fraud Technology Benchmarking Report demonstrates that most organizations are fighting fraud with data analysis techniques, like exception reporting, anomaly detection and automated red flags. And many more organizations plan to adopt these methods in the months ahead.

Solving the algorithmic manipulation and data mining in the Medicare Advantage system will require all these tools, not to mention the skill set of analyzing and interpreting the results. We know the presence of anti-fraud controls — including the use of proactive data analytics — is associated with lower fraud losses and quicker fraud detection. Seniors using Medicare deserve our attention.

Bruce Dorris, J.D., CFE, CPA, is president and CEO of the ACFE. Reach him at: