The Washington Post reports that a doctor in Texas bilked Medicare and Medicaid out of $375 million. That’s a lot of money, but improper payments represent somewhere between 10 and 20 percent of total spending on these two health programs. Thus, more than $100 billion of taxpayer funds could be going down the drain each year.
The top-down and bureaucratic Medicare and Medicaid systems are perfectly designed for scamming. For example, the government processes 1.2 billion Medicare claims each year by computer, generally without human eyes checking them for accuracy. The Texas doctor apparently just bombarded the system with fake claims, and it took the government six years to catch him.
The ease of ripping off federal health programs is one reason why these Soviet-style programs should be radically restructured. It would harder to perpetrate major scams on Medicare if it were a bottoms-up and more market-oriented system based on vouchers. Federal spending on health programs ought to be cut, and reducing fraud through restructuring would be one way to do it.
For more on fraud in federal subsidy programs, see here.
For more on restructuring Medicard and Medicaid, see here.
Chris Edwards is the director of tax policy studies at the Cato Institute, and editor of www.DownsizingGovernment.org. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.
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