A Hidden Cost of Health Care

Taxpayers should be concerned at the headline claims by a former head of Medicare’s watchdog body that “Health rorts run rampant, billions lost”. (The Australian, 16 January 2012)

Alleging that the Medicare system was “riddled with misdirected incentives”, Dr Tony Webber claimed that there is $2 – $3 billion in inappropriate spending every year. This is a significant amount of money which (if true) costs every Australian citizen up to around $150 extra every year.

While Dr Webber has been criticised by the Australian Medical Association (AMA) for implying that the entire profession was no better than rotten apples, there does seem to be a need for a serious examination of what these misdirected incentives and the benignly named ‘benefit leakage’ cost consumers every year. Benefit leakage is the bland description for the rotten practice of fraudulent claims for services that are not supplied.

I first raised benefit leakage in a Senate speech in 2006, identifying that it was possibly costing the private health insurance industry as much as $800 million dollars every year, potentially adding $250 to the cost of every private health insurance policy. At the time, I detailed how one health fund identified $27 million in fraudulent activity in a single year using less than optimum fraud identification technology.

It is very clear that the vast majority of health care service providers and customers do the right thing. However, there is strong evidence that a small number clearly exploit the system to the tune of hundreds of millions (or possibly billions) of dollars every year.

The public doesn’t hear much about these unaligned claims that cost the taxpayers so dearly. More often than not, where false claims are being made, the service provider is simply asked to repay the money. In one case, a medical practitioner was forced to repay $136,000 they billed for services that were never delivered and yet no criminal penalty was applied.

During a recent Senate Estimates hearing, I asked the CEO of Medibank Private (Australia’s largest private health insurance provider) how many health providers were disciplined as a result of fraud. Only 14 cases resulted in removal from the electronic payments system while a further 86 matters were resolved through “restitution or a brief provided to police”. I haven’t ascertained how many of these individuals lost their professional accreditation to practice or supply medical services to the public but I would hazard a guess that it was very close to none.

If a financial planner is caught defrauding a client or an accountant is captured fiddling the books, the usual result is a professional disqualification and a court appearance. Yet when some of our most trusted professionals and service providers are caught deliberately and blatantly ripping off our universal health care system or taxpayer-subsidised private health insurance, a repayment of the misappropriated funds seems to be the remedy of choice to resolve the matter.

With health care costs already comprising a significant part of the government’s annual expenditure and set to increase markedly in the future, surely we need to be more vigorous in identifying the rorters and setting serious penalties.