Why has Medicare Fraud Exploded Under Obama?

In the wake of a new report from the Department of Health and Human Services Office of Inspector General showing an astonishing 12 percent fraud rate for a key Medicare program, House lawmakers are taking a close look at why such fraud has exploded under President Obama.


The House Energy and Commerce Committee has convened a hearing on the issue May 24 that promises to raise some very awkward questions for the administration.

The Government Accountability Office estimated that the government spent $125 billion in waste, fraud and other “improper payments” in fiscal year 2014, a nearly twenty percent leap from the previous year.

Even by the standards of Washington, that’s a gigantic amount of money to basically light on fire. A key question is why there has been such a pronounced spike in the Obama era, particularly after the passage of Obamacare.

One answer is the Recovery Audit Contractor (RAC) program, which pays private auditors a portion of any fraudulently paid funds they help the government recover. RACs have helped the government successfully recover more than $10 billion in wasted taxpayer dollars since their inception in the Bush years, but Obama officials have been slowly strangling the program to death.

For example, the administration recently limited RACs to reviewing only .5 percent (1 in 200) of payments for hospitals and other institutions under review, making it extremely easy for even flagrant violators to avoid detection.

Behind the scenes, a major lobbying campaign by the beneficiaries of the fraud (essentially unscrupulous hospitals that pad their profit margins with Wild West billing practices to Medicare) is driving these new regulations. It turns out that $10 billion in fraud can buy a bigger lobbying army than the small percentage of that the auditors get.


However, the new IG report, combined with careful oversight from House Republicans, has the potential to turn the tide.

The IG report found that Medicare’s Fee-For-Service program had a startling 12 percent fraud rate, putting the agency “out of compliance” under federal law because that rate exceeds 10 percent. (Don’t get me started on whether 10 percent fraud is an appropriate benchmark for spending taxpayer dollars).

At that rate of fraud, the program is wasting $47 billion a year alone, which is more money than the GDP of a small country.

Everyone hates government waste, but even us conservatives acknowledge a small amount of it is probably inevitable. This is not that! This is not a small amount. This is not inevitable. This is a huge amount of money by any standard that could be going towards actually useful things. And the reason it isn’t is because crony capitalist companies have made it essentially their business model to profit from the illegal payments.

Good for the House Energy and Commerce Committee for taking a hard look at this. Lets hope they put the fear of God into some bureaucrats for enabling a tens-of-billions-of-dollars pillaging of the Treasury.



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