Wednesday, August 14, 2013

Fraud is Ten Times Worse When the Government is in Charge of Oversight

No surprise here, but nicely summarized by Dr. John Goodman at the NCPA:

... [T]he fraud rate for credit card transactions is much less than 1%? But the fraud rate for Medicare and Medicaid is estimated to be ten times higher than that. In principle it should be immeasurably easier to steal with someone else’s credit card that to steal from a government health care program. Think about how many times you hand a credit card to someone you don’t even know. Think about how many times it is out of your sight. Given the opportunities for abuse, it is remarkable how rarely credit card theft occurs.

Why is that? It’s because the credit card issuing businesses, in cooperation with each other, have set up systems to greatly reduce the expected gain from fraud and substantially increase the cost to the potential criminal. If we unleashed the marketplace (contract Medicare collections to VISA?) and allowed similar incentives to prevail in health care, about nine in ten dollars of Medicare fraud would go away. ...