Millions of people stand to enroll in health plans via state-based insurance exchanges as the federal health reform effort rolls out. But unless states and payers take precautionary measures, those exchanges could prove to be a goldmine for scammers and others seeking to defraud the health care system.
At HIMSS13 in New Orleans, Michael L. Nelson, vice president, strategy and business development at national credit bureau Equifax, described how the health care industry, already teeming with fraudulent activity, faces a tidal wave of even more unless steps are taken now. “Why is there so much fraud?” he asked. “It’s easy money.”
Nelson said that payers have traditionally attacked fraud after the fact, using the “pay and chase” model of detection. But it’s an expensive undertaking, he said, urging payers to take a more proactive approach and try to identify likely culprits before fraud occurs. Nelson noted that fraud detection activity is an administrative activity that can throw off the medical-loss ratio—another regulated area under health reform. The medical loss ratio describes how much of a payer’s budget must go to clinical claims, so a payer has limited resources it can draw on for fraud detection.
Equifax developed a customized fraud prevention system for a commercial payer seeking to pre-screen providers who signed on with the health plan. Equifax’s system combed through some 1,900 variables, including past credit history, geographic data and other professional sanctions, noted Erik Rolf, a principal at the company, to come up with a custom fraud risk score. Nearly 4 percent of the providers Equifax analyzed posed significant or elevated fraud risks, he said.
In the case of insurance exchanges, states will need to closely monitor who is applying for health insurance, verifying that the person enrolling is who they say they are, Nelson noted. That will stop one type of fraud in which consumers present themselves as plan enrollees but in fact have no insurance. Knowledge-based authentication systems—in which someone logging onto a site must answer a series of personal questions—can help, Nelson said. But he cautioned that while many vendors offer this technology, often the questions can be answered by searching publicly available databases.
Predictive analytics crunching numbers from large data repositories can go a long way toward pointing out likely scammers, Rolf said. He added that Medicare is relatively easy to scam because so many of its provider enrollment processes are manual, requiring staff to shift through reams of paper documentation.
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