Fraud: An American health care epidemic


According to Time Magazine, the next Ebola outbreak will cost the World Bank in excess of $30 billion dollars. In 2014, America spent in excess of $1.16 million dollars to treat two victims of the dreaded disease.

While Ebola and other microorganisms of the deadly variety are scary creatures there is another far more sinister threat to the fiscal solvency of our land. If left untreated, this silent killer will infect every single state, city, and town across America. According to published reports, data scientists are feverishly working to find a cure to this dreaded epidemic, but to date, the problem is getting worse and few Americans realize it is even in their community.

So what is this silent killer that eclipses Ebola as an American Health Care Epidemic? Fraud

While there are many strains of fraud, the Medicare and Medicaid strains stand to cripple this nation with combined reported “programmatic losses” exceeding $60 billion dollars, year-over-year. That is DOUBLE the amount the World Bank cautions Ebola would cost, should it spread again.

In 2014, Medicaid (not including Medicare) cost Americans $488 billion dollars. According to, in 2014, the federal government published the “Improper Payment Rate” at 5.8% of the annual spend, or an alarming $28 billion in “programmatic losses”.

Note: ”Fraud” is not a word most like to say, so “programmatic losses” makes it sound less scary!

Most Americans realize that Medicaid plays a major role in our country’s health care delivery system, but the following statistics are not widely known by most of the populous:

  • Medicaid accounts for about one-sixth of all U.S. health care spending
  • 40 percent of Medicaid is composed of long-term care expenditures
  • Medicaid serves more than 66 million low-income Americans...
    • Including 32 million low-income children
    • Approximately 18 million adults and 16 million elderly and/or disabled
    • And more than 9.5 million low-income Medicare beneficiaries (dual eligible beneficiaries)

With passage of the Affordable Care Act (“Obamacare”), Medicaid enrollment rates are expected to increase by 5% across all US states. This massive increase in Medicaid recipients will cause Medicaid expenditures to exceed $1 trillion dollars, (yes, with a T), and the states will collectively share nearly $76 billion of the total costs to administer the program.

If the current published rate of 5.8% from 2014 holds true in 2015 and beyond, then America would “lose” $58 billion dollars in Medicaid alone.

So, what, if anything, is being done to manage this epidemic?

As a result of rising health care costs and an insidious fraud problem, states are increasingly moving away from the historical Fee-for-Service (FFS) payment model and outsourcing administration of Medicaid programs to Managed Care Organizations (MCO), as well as other risk and value-based payment models.

With this shift in the payment paradigm, states cannot merely assume that outsourcing to MCOs will cause the fraud epidemic to disappear with the legacy FFS system; rather, the incentives for fraud will only have changed and the Medicaid Program Integrity Units, Office of Inspector’s General, and Medicaid Fraud Control Units alike, will need to develop a clear strategy to combat the fraud epidemic in this new payment frontier.


About Author

Ricky D. Sluder, CFE

Principal Solutions Consultant

Ricky D. Sluder, Certified Fraud Examiner, is a Principal Solution Architect in the Security Intelligence Practice at SAS. He has ~20 years of investigative experience in white collar crime, Medicare and Medicaid fraud, waste and abuse. In 2012, five major cases identified under his investigative/data analytic operational model resulted in DOJ criminal prosecutions exceeding $846 million in fraud.

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