What Types of Fraud, Waste and Abuse Exists in Global Healthcare and Travel Insurance?

With everyone, including President Trump and Elon Musk, talking about fraud, waste and abuse we explore the different types of fraud that exist in global healthcare and travel insurance markets. These can be broadly categorized as insurance claims fraud and provider fraud. However, the issue is often discussed under the umbrella term of Fraud, Waste, and Abuse (FWA), which encompasses more than just intentional deception.

We also take a look at the iPMI Global, Insurance Fraud, Waste and Abuse Strategies Round Table and help you break down the different types of fraud, waste and abuse that are far too common today, and look at some actual cases of fraud, waste and abuse.

Here's a breakdown of the types of fraud and abuse that exist in the global healthcare and travel insurance market:

Insurance Claims Fraud: This involves fraudulent activities by insured individuals.

Examples include:

• Submitting false or exaggerated claims: This can involve collusive activities between insured individuals and service providers.
• Using another person’s insurance card to obtain medical services.
• Falsifying healthcare records or signatures.
• Misrepresenting healthcare services that were rendered or diagnosed to receive higher payments.
• Submitting claims for services or goods that were known to have never been provided3.
• Sophisticated travel cancellation scams using false names and documents to submit multiple claims.
• False disability claims: Fraudulent claims related to COVID-19, including false disability claims and travel insurance claims.

Related Reading: Insurance Fraud, Waste and Abuse Strategies Round Table

2. Provider Fraud:This involves fraudulent activities by medical service providers.

Examples include:

• Medical facilities colluding with patients to create fictitious or exaggerated claims.
• Over-charging insurers for treatment without customers’ knowledge.
• Premium diversion, which is noted as the largest cause of provider fraud.
• Medical billing fraud, such as submitting fraudulent treatment claims for reimbursement. This can involve generating fictitious treatment records and inflating charges for services never provided.
• Performing unnecessary services.
• Misrepresenting the setting of the service.
• Misrepresenting dates of service.
• Falsifying medical records.
• Forging or altering prescriptions.
• Prescribing drugs inappropriately (pill mills).
• Billing for services by fictitious providers.
• Overcharging for services or supplies.
• In a specific case, a doctor stole genuine patients' details to set up and claim on false insurance policies.
• Inflated costs for extended accommodation in COVID-19 cases.
• Over-prescription of drugs for unapproved uses.
• Attempting to overcharge egregiously for follow-up procedures by quoting excessive costs for common complications.
• Charging excessively for standard treatments, as seen in a case where a patient was charged USD 5300 for tonsillitis treatment by a house call doctor.

3. Waste:This is defined as the overutilization of services or other errors and inefficiencies that result in unnecessary costs. It's not considered to be caused by criminally negligent actions but rather misuse of resources.

Examples include:

• Ordering excessive, unnecessary laboratory tests.
• Redundant medical procedures or treatments.
• Using brand drugs when generic equivalents are available and equally effective.
• Administrative inefficiencies that lead to unnecessary costs.
• Issues such as over-utilization, medical necessity discrepancies, coding errors, unbundling, use of outdated coding, non-adoption of generic drugs, inappropriate care levels, excessive hospital stays, and unnecessary specialized consultations.

4. Abuse:This includes practices inconsistent with sound fiscal, business, or medical practices that result in an unnecessary cost or in reimbursement for services that are not medically necessary or fail to meet professionally recognized standards for healthcare, but it might not be done with criminal intent.

Examples include:

• Billing for unnecessary medical services.
• Overcharging for services or supplies.
• Misusing codes on a claim, such as upcoding or unbundling codes.
• Practices where self-pay patients receive significantly higher discounts than insurers, which may border on abusive, unfair, and capricious.
• Overtreatment and overutilization of services that generate unnecessary expenses.
• In a specific case, billing two identical Operating Room (OR) charges for a procedure that usually takes one day was considered abusive overcharging.
• Administering unnecessary medical devices and procedures.

5. Other Types of Fraud:

• Premium diversion, where insurance premiums might be misappropriated (mentioned under provider fraud but can be a separate category).
• Identity theft.
• Phantom Policies.
• Organized Insurance Fraud Rings.
• Payer fraud, where travel insurers issue letters of guarantee that they fail to honour.
• Fraud committed by Employees, Insurers / Health Plans, Medical Device Manufacturers, Pharmacies, and Pharmacy Benefit Managers (PBMs).
• Telemedicine fraud, exploiting technological and psycho-social loopholes.
• Fraud related to COVID-19 vaccines, such as demanding fees for access.
• Unemployment fraud, filing false claims for benefits using stolen identities during the pandemic.
• Charity scams related to COVID-19 relief.
• Supply Chain and Procurement Fraud, price gouging, and counterfeit goods during the pandemic.

iPMI Global analyst Christopher Knight concludes, “At iPMI Global we use the "iceberg risk concept" that is used to represent the many hidden layers of healthcare fraud, waste, and abuse that standard techniques might miss. The economic climate can also heighten awareness of fraud. It's important to note that the legal interpretation of fraud can vary across jurisdictions, making prosecution challenging.

The importance of a fraud, waste, and abuse prevention plan cannot be overstated. Such a plan provides financial protection, helps maintain regulatory compliance, safeguards an organization's reputation, results in cost savings, and is crucial for maintaining the quality of patient care. A FWA plan also needs to be continuously reviewed, revised, and updated to adapt to changing fraud trends.

In conclusion, this article highlights the persistent and evolving threat of FWA in the global healthcare and travel insurance sectors. We underscore the need for a proactive and adaptable approach that combines technological advancements with human expertise and collaboration to effectively combat these challenges and protect the integrity of the industry.”

Related Reading: Insurance Fraud, Waste and Abuse Strategies Round Table