By the numbers: fraud statistics
Measuring insurance fraud is an elusive target. No single national agency gathers omnibus fraud statistics. Insurance fraud data thus are relatively piecemeal, making our understanding of insurance fraud an ongoing work in progress.
Insurance companies, associations and diverse state and federal agencies each gather fraud data related to their own missions. But the kind, quality and volume of data they compile vary widely.
Some data in this statistics section also includes non-fraud numbers as context for the larger dimensions of a listed issue.
|Fraud costs for insurers||Workers compensation|
|Contractors||Medical identity theft|
- Conservatively, fraud steals $80 billion a year across all lines of insurance. (Coalition Against Insurance Fraud estimate).
- Fraud comprises about 10 percent of property-casualty insurance losses and loss adjustment expenses each year; and
- Property-casualty fraud thus equals about $32 billion each year. (Insurance Information Institute, March 2015
- Want the big picture? See and share this infographic.
State anti-fraud efforts
- 48 states plus the District of Columbia make insurance fraud a specific crime;
- Virginia and Oregon are the lone states without an insurance-fraud law;
- 43 states and the District of Columbia require insurers to report suspected fraud to the state fraud unit or some other law enforcement or regulatory agency. (Coalition Against Insurance Fraud, October 2015)
- 41 states and the District of Columbia have a fraud bureau dealing with multiple lines of insurance, solely workers compensation or both;
- Nine states have enacted a law since 2013 making counterfeiting of airbags a specific crime; (Coalition Against Insurance Fraud, October 2015)
- Fraud accounts for 5-10 percent of claims costs for U.S. and Canadian insurers. Nearly one-third of insurers (32 percent) say fraud was as high as 20 percent of claims costs;
- 57 percent of insurers predict an increase in personal-property fraud by policyholders. Around 58 percent say the same for personal auto insurance, and 69 percent expect a rise in workers-compensation scams;
- 61 percent predict an increase in auto-insurance fraud by organized rings, and 55 percent predict an increase workers-compensation scamming;
- About 35 percent say fraud costs their companies 5-10 percent of claim volume. More than 30 percent say fraud losses cost 10-20 percent of claim volume;
- Detecting fraud before claims are paid, and upgrading analytics, were mentioned most often as the insurers’ main fraud-fighting priorities; and
- One-third of insurers don’t feel adequately protected against fraud. (FICO, August 2013)
Most contractors are ethical and honest. Yet unlicensed and dishonest operators try to exploit often-traumatized homeowners after storms.
Contractors may demand large cash down payments, then disappear without doing the needed work. Shoddy workmanship with substandard materials are other problems. Contractor schemes can cost homeowners thousands of dollars in uninsured bills.
- Poor workmanship (50 percent) and fraud (36 percent) are a homeowner’s biggest concerns about hiring contractors;
- Consumers are alert to these red flags of potential fraud: demands cash upfront (81 percent) ... hesitates to provide proof of insurance (79 percent) ... has no physical business location or permanent phone (73 percent) ... and doesn’t sign a contract (70 percent);
- More than half (56 percent) paid cash for their last home repair or improvement. (HomeAdvisor, July 2013)
Bodily injury claims
Staged-crash rings fleece auto insurers out of billions of dollars a year by billing for unneeded treatment of phantom injuries. Usually these are bogus soft-tissue injuries such as sore backs or whiplash, which are difficult to medically identify and dispute.
- Automobile claim fraud and buildup added $5.6 billion-$7.7 billion in excess payments to auto-injury claims paid in the U.S. in 2012;
- Excess payments represented 13-17 percent of total payments under the five main private-passenger auto injury coverages;
- 21 percent of bodily-injury (BI) claims and 18 percent of personal injury protection (PIP) claims closed with payment had the appearance of fraud and/or buildup. Buildup involves inflating otherwise legitimate claims;
- Buildup was the most common abuse. Claims with the appearance of buildup accounted for 15 percent of dollars paid for BI and PIP claims in 2012; and
- Claims appearing to have fraud and/or buildup were more likely than other claims to involve chiropractic treatment, physical therapy, alternative medicine and pain clinics. (Insurance Research Council, February 2015)
Medical expenses reported by auto-injury claimants continue increasing faster than inflation even though injury severity continues downward.
- Average claimed economic losses grew 8 percent annualized among personal-injury claimants from 2007 to 2012. That’s $14,207 per claimant in 2012, and includes expenses for medical care, lost wages and other out-of-pocket expenses.
- Average claimed losses among bodily-injury claimants grew 4 percent, reaching $10,541 in 2012. Measures such as claimants with no visible injuries at the accident scene suggest a continuing decline in severity of injuries. (Insurance Research Council, March 2014)
Premium rating errors
Dishonest drivers try to lower auto premiums by lying on their insurance application or renewal. Among the ruses: registering vehicles in states where premiums are lower; lowballing stated mileage; and saying a commercial vehicle is used mainly for personal use.
- Auto insurers lost $15.9 billion due to premium rating errors in private-passenger auto in 2009;
- Premium rating errors account for nearly 10 percent of the $161.7 billion in personal auto premiums written; and
- Misreporting vehicle garaging address and youthful drivers increased slightly, accounting for more than $2 billion in premium leakage. These most likely involved illicit efforts by policyholders to lower their auto premiums. (Quality Planning, now Verisk Insurance Solutions, November 2011)
- Insurers identified potential fraud in 7.4 percent of automobile claims within the first 125 days;
- The insurer couldn’t identify policyholders and/or place them at the stated garaging address in 21.5 percent of claims; and
- Fraudsters are beginning to use a “credit card” model to secure larger settlements. They file small initial claims to test the carrier and then lodge large multi-feature claims. (Inovatus, February 2013)
- Claimed losses for medical expenses, lost wages and other expenses related to injuries from auto crashes in the New York City area have risen 70 percent over the past decade. This surpasses the 49-percent increase in medical-care inflation over the same period;
- Nearly one in four claims (23 percent) involved the appearance of claim abuse — fraud, material misrepresenting of facts, or buildup;
- Claims from the New York City metro area were more than four times as likely to involve apparent abuse (35 percent v. 8 percent for the rest of the state); and
- More than half of apparently abusive claims (52 percent) stemmed from accidents in Brooklyn or Queens. (Insurance Research Council, November 2011)
- No-fault auto-insurance reforms (HB 119) enacted in 2012 helped reduce fraud and lower PIP premiums 13.6 percent; (Florida Office of Insurance Regulation, January 2015)
- No-fault fraud and abuse cost consumers and insurers about $658 million in 2011 in Florida alone; and
- The average two-car family in Florida pays nearly $100 more in auto premiums thanks to no-fault scams. (Insurance Information Institute, January 2011)
- Massachusetts launched task forces in 13 communities against widespread staged-crash rings amid public outcry after 65-year-old grandmother Altagracia Arias died in a setup crash in 2003.
- Drivers in the 13 communities have saved $875 in auto premiums per year;
- Drivers in Lawrence — the “worst hotbed of fraudulent claims” — have saved more than $68 million;
- Larger chiropractors in Lawrence have decreased in both clinic counts and billings by up to 90 percent. High-volume physical therapy clinics (billings exceeding $100,000 annually) have been eliminated, and attorney involvement in PIP claims has dropped; and
- Staged accidents in Massachusetts have been reduced dramatically as people around the state, who used to be involved in fraudulent activities, have taken notice of the crackdown and altered their activities. (Insurance Fraud Bureau of Massachusetts, April 2013)
- The state fraud bureau received 17,981 suspected fraudulent claims in FY 2012-13, assigned 721 new cases, made 401 arrests, and referred 304 submissions to prosecuting authorities. The potential loss amounted to $120.1 million;
- The fraud bureau assigned 231 new cases and made 222 arrests and 172 referrals to prosecuting authorities involving organized automobile activity in major urban areas. Potential loss amounted to $5.1 million; and
- District attorneys receiving grants in 10 counties prosecuted 204 cases involving organized automobile fraud activity. They included 448 defendants with chargeable fraud totaling $8.3 million. District attorney prosecution resulted in 180 convictions. (California Department of Insurance, August 2014)
Insurer use of anti-fraud technology is rising, more insurers see a positive ROI, and increasingly they rely on technology to counter emerging threats such as underwriting scams, money-laundering and cyberfraud.
Yet advanced tools such as predictive analysis and geo-mapping are far from widespread among insurers.
- 95 percent of responding insurers use anti-fraud technology, up from 88 percent in 2012;
- 71 percent say detecting claims fraud is the primary use of their anti-fraud technology;
- About half (53 percent) cite lack of IT resources as the main stumbling block in implementing anti-fraud technology;
- Most insurers (81 percent) use basic tools such as automated red flags/business rules. Far fewer use more-advanced technology such as link analysis (50 percent), predictive modeling (43 percent) and text mining (43 percent);
- About half (51 percent) say suspected fraud has increased to some degree. Seven percent say fraud increased significantly; and
- Insurers reporting cyber attacks have increased significantly since 2012. (Coalition Against Insurance Fraud, December 2014)
Data for insurance arsons are elusive. However, broader national arson figures provide some context for examining the trend of illegally burning homes and businesses for insurance payouts. In general, for example, fires and arsons have declined in recent years. The reasons are unclear.
- Insurance fraud was suspected in 8 percent of intentional fires;
- 5 percent of fraud cases were closed; and
- 1 percent of fraud cases were closed with arrest. (National Fire Protection Association, April 2014)
- 282,600 arsons were reported each year from 2007 to 2011. They caused $1.3 billion in direct property damages;
- Structure fires represent 86 percent of direct property damage caused by intentional fires;
- The bedroom was most common area of origin for intentional home fires (12 percent);
- The most common items first ignited for intentional fires were flammable or combustible liquids or gases, piping or filter (29 percent) and vehicle seats (28 percent); and
- The most common heat sources were matches (24 percent of fires), lighters (16 percent) and incendiary devices (13 percent). (National Fire Protection Association, April 2014)
- Arsons fell 5.4 percent in the first six months of 2015 compared 2014;
- Three of the nation’s four regions reported decreases in the number of arsons; and
- Arsons were down 14.6 percent in the Northeast, 7.1 percent in the South, and 4.4 percent in the West. Arsons in the Midwest, however, rose 0.5 percent. (FBI, January 2016)
- 19 percent of arson offenses were cleared by arrest or exceptional means in 2010. (Federal Bureau of Investigation, September 2011)
- An estimated 372,900 fires in residential buildings caused an annual average of 2,530 deaths, 13,125 injuries and $7 billion in property loss from 2011 to 2013;
- Cooking was the leading reported cause (48 percent) of residential building fires. Nearly all residential building cooking fires were small, confined fires (91 percent);
- Residential building fires occurred most frequently in the early evening hours. They peaked during the dinner hours of 5-8 p.m.;
- One- and two-family residential building fires comprised 65 percent of all residential building fires. They’re the largest subgroup of residential building fires; and
- Multifamily residential building fires comprised 28 percent of residential building fires. (U.S. Fire Administration, June 2015)
Non-residential fires and arsons have steadily declined over the decade from 2004 through 2013.
- 9,100 intentional fires were set in 2013, second only to cooking as a cause (27,400). Intentional fires caused $190.3 million in losses;
- Fires of all kinds declined 14 percent;
- Intentional fires fell 24 percent; and
- Dollar losses from intentionally set fires fell 33 percent. (U.S. Fire Administration, July 2015)
- 219,000 vehicle fires were reported in 2013, and 5.8 percent were intentional. (U.S. Fire Administration)
- The most common items first ignited were flammable or combustible liquids or gases, piping or filters (29 percent) and vehicle seats (28 percent); and
- The most common heat sources were matches (24 percent of fires), lighters (16 percent) and incendiary devices (13 percent). (National Fire Protection Association, April 2014)
- Declines in local house prices coincided with increases in arson, the number of fires, and the probability that fires were due to arson and misuse; and
- The relation between declines in house prices and arson is stronger in states that allow mortgage lender recourse. (Michael D. Eriksen, Texas Tech University & James M. Carson, University of Georgia, January 2015)
Tens of thousands of arsons may go unreported annually. Many likely are insurance arsons. Some unreported insurance fires also may have killed or injured the arsonists, innocent bystanders or fire fighters.
- Chicago reported 61 building arsons though it experienced at least 192;
- Houston reported 25 intentional fires while having 224;
- Indianapolis reported no arsons despite experiencing at least 216;
- New York reported 11 arsons instead of 1,347 it really had;
- Up to half of the 3,000 fire deaths each year should be treated as homicides; and
- Much of the $15.5 billion paid last year by insurers (and clients) should be contested because arson often involves fraud. (Scripps News, November 2013)
A relatively large number of consumers remain at risk of committing this crime. They believe it’s acceptable to increase insurance claims to make up for deductibles. Even so, those numbers have declined in recent years.
- 24 percent say it’s acceptable to pad an insurance claim to make up for the deductible — 33 percent said it’s acceptable in 2002;
- 18 percent believe it’s acceptable to pad a claim to make up for premiums paid in the past;
- Younger males were much more likely to condone claim padding. And 23 percent of 18-34 year-old males say it’s alright to increase claims to make up for earlier premiums. This compares with 5 percent of older males and 8 percent of females of the same age;
- 86 percent of Americans think “insurance fraud leads to higher rates for everyone;” and
- 10 percent think “insurance fraud doesn’t hurt anyone.” (Insurance Research Council, March 2013)
- More than half (55 percent) of U.S. consumers say poor service from an insurance company is more likely to cause a person to defraud that insurer;
- More than three-quarters (76 percent) say they’re more likely commit insurance fraud during an economic downturn than during normal times (up from 66 percent in 2003);
- More than two-thirds of consumers (68 percent) say they believe insurance fraud happens because people believe they can get away with it (up from 49 percent in 2003);
- Some 72 percent of consumers believe insurance companies can identify fraud (down from 83 percent in 2003). (Accenture Ltd., September 2010)
Young adults (18-24) are:
- More than three times more likely to inflate an insurance claim than adults over age 40 (7 percent vs. 2 percent); and
- More than twice as likely to lie to their spouse, boyfriend, girlfriend or partner about something significant (48 percent v. 18 percent).
Regardless of age, people who believe lying and cheating are a necessary part of success are more likely to lie and cheat. This belief is one of the most significant and reliable predictors of dishonest behavior in the adult world. Cynics are:
- Three times more likely to inflate an insurance claim (6 percent vs. 2 percent) or lie to a customer (22 percent vs. 7 percent); and
- One-and-a half-times more likely to cheat on their taxes (20 percent vs. 13 percent).
Regardless of age, consumers who cheated on exams in high school twice or more are far more likely to be dishonest later in life. Compared to consumers who didn’t cheat, high-school cheaters are:
- Three times more likely to inflate an insurance claim (6 percent vs. 2 percent) and lie to a customer (20 percent vs. 6 percent); and
- Twice as likely to lie to or deceive their boss (20 percent vs. 10 percent). (Josephson Institute, October 2009)
Public-outreach can measurably increase people’s intolerance of insurance fraud, and decrease their likelihood of committing this crime. This was proven by a five-year public-outreach campaign by a state anti-fraud agency in Pennsylvania.
The social-market campaign centered around eight statewide TV and radio consumer spots working to encourage consumer attitude and behavior changes.
By 2013 the campaign recorded increases in consumers who:
- Believed they would be caught if they committed insurance fraud (8 percent);
- Knew the definition of insurance fraud (23 percent);
- Believed perpetrators deserve jail time (8 percent); and
- Would report scams (32 percent).
The number of people who would consider committing fraud decreased (73 percent);
The campaign cost slightly more than $18 per person to convince likely fraudsters to avoid committing this crime. Compare that with the IFPA’s average cost of $21,000 to $25,000 to investigate, prosecute and convict each insurance-fraud offender; and
Nearly all attitude gains had regressed by 2015 after IFPA deployed campaign resources to other projects. Website visitors also declined by nearly half. (Pennsylvania Insurance Fraud Prevention Authority, 2015)
- More than one in 10 small-business owners are concerned an employee will fake an injury or illness to steal workers-compensation benefits;
- Nearly one in four owners also installed surveillance cameras to monitor employees on the job;
- One in five owners feel unsure how to identify workers-compensation scams; and
- More than half agree these are fraud flags: Employee has a history of claims (58 percent); no witnesses to the incident (52 percent); employee didn’t report the injury or illness in a timely manner (52 percent); and the injury coincides with a change in employment status (51 percent). (Employers Holdings, July 2015)
Some businesses illegally try to avoid paying full state-required workers compensation premiums by misclassifying employees as independent contractors. Such schemes are spreading.
The number of employees and size of payroll are two important factors that workers-compensation insurers use to gauge a firm’s premiums. Typically such workers are paid off the books to hide the evidence.
Another scheme involves misclassifying employees in high-risk jobs as holding lower-risk jobs. A dishonest roofing firm, for example, might tell its insurer that its high-risk roofers are lower-risk sales staff or clerks.
Workers also are denied state-required workers compensation benefits.
And misclassification avoids taxes, wages and other expenses. Overall, this crime gives employers an unfair advantage over competitors.
The Obama Administration expanded the definition of “employee” under the Fair Labor Standards Act in July 2015 to crack down on employers that misclassify workers as independent contractors.
10-20 percent of businesses misclassify at least one worker as an independent contractor. (Economic Policy Institute, June 2015)
25 states have signed Memorandums of Understanding with the U.S. Department of Labor to combat misclassification. (U.S. Department of Labor, August 2015)
Identity theft has spawned a costly offshoot: medical identity theft. Thieves steal a consumer’s personal information to lodge fraudulent claims against the victim’s health policy. This crime appears to be on the rise.
Medical thieves can heist your health-insurance number, Social Security number and other personal information. Often the information is stolen by employees at medical facilities, and resold on the black market. Thieves also may hack into medical databases or break into medical facilities.
Medical ID theft can cost a victim thousands of dollars and great stress. A victim’s life and health could be jeopardized if an ID thief’s incompatible medical information such as blood type or medicines becomes part of the victim’s permanent medical records.
- Incidents increased 21.7 percent in 2014;
- 2.3 million Americans were victimized in 2014;
- 65 percent of victims paid an average of $13,500 to resolve the crime;
- Victims learned their medical identity was stolen an average of three months after the incident; and
- Victims spent an average of 200 hours correcting their compromised data.
Few consumers know what medical identity theft is or how much this crime can damage their credit and health.
- Only one in six insured adults (15 percent) say they’re familiar with medical identity theft. Of those, only one in three (38 percent) could correctly define “medical identity;”
- About one in five (22 percent) believe the most likely impact is that their health insurance could be cancelled. In truth, their health can be compromised by hazardous changes to their medical records; and
- Nearly one in five consumers (19 percent) mistakenly believe it takes less than two weeks to restore their stolen medical identity. More than half underestimate or don’t how much it would cost. (Nationwide Insurance, June 2012)
Cyber attacks are causing an epidemic of compromises at healthcare organizations around the U.S. The breach goals remain unclear, though stealing sensitive patient data could involve medical identity theft.
Many believe the healthcare sector is ill-prepared to deal with growing incidents of attacks. The healthcare sector also lags behind financial services, which has spent considerable time and resources hardening its infrastructure.
- Nearly 70 percent of healthcare organizations think they’re more-vulnerable to data breaches than other industries;
- Data breaches cost healthcare organizations an average of $2.2 million;
- Half of healthcare organizations have little or no confidence they can detect all patient data loss or theft;
- Most healthcare organizations still don’t have enough security budget to curtail or minimize data breach incidents; and
- Criminal attacks are the leading cause of data breaches in healthcare. Half of healthcare organizations say the breach was criminal. (Ponemon Institute, May 2016)
- More than four of five healthcare executives say their organizations were compromised by at least on malware, botnet or other cyberattack during the last two years;
- Only half believe they are adequately prepared to prevent attacks;
- 16 percent say they cannot detect in real-time if their systems are compromised; and
- Attacks are increasing. About 13 percent say they external hack attacks target them about once a day, and another 12 percent see two or more attacks a week. (KPMG, August 2015)
- Breaches of healthcare/medical facilities involving 176 million records were recorded for 2015 as of August 18, 2015; and
- They comprised nearly 35 percent of all 505 breaches —by far the largest portion of reported breaches. (Identity Theft Resource Center, August 2015)
- 333 health/medical facilities were breached in 2014, including 8.7 million health records. Both totals were by far the largest among 783 breaches spanning several broad categories; and
- 42.5 percent of breaches in 2014 involved healthcare/medical facilities. (Identity Theft Resource Center, December 2014)
- More than 40 million Americans suffered a breach of their health records from 2009 through 2014;
- There’ve been 1,170 large breaches of protected health information since 2009;
- 164 breaches of personal health information were reported to HHS in 2014 alone. The breaches affected nearly 9 million patient records. This was a 25-percent increase over 2013; and
- Criminal attacks are the leading cause of healthcare data breaches in healthcare. ... Criminal attacks on healthcare organizations are up 125 percent over the last five years. ... And 45 percent of healthcare organizations say criminal attacks are the root cause of data breaches;
- Half of healthcare organizations have little or no confidence in their ability to detect all patient data loss or theft; and
- More than 90 percent have had a data breach. ... 40 percent had more than five data breaches over the past two years. ... Healthcare data breaches cost more than $2.1 million apiece. (ID Experts, May 2015)
- More than 50 percent of the 2014 totals stemmed from hacking attacks. (Redspin, February 2015)
- Healthcare organizations recorded an average cost of $398 per breached record, compared to the overall mean of $217 per record for organizations across varied industries;
- Healthcare organizations experienced abnormally high churn rates (loss of customers); and
- 40 percent of incidents involved malicious or criminal attacks, which remain the primary and costliest cause of data breaches. Industries with the highest churn rates could significantly reduce breach costs by emphasizing customer retention, and preserving reputation and brand value. (Ponemon Institute and IBM, May 2015)
Biometrics is a way of electronically confirming people’s identity by authenticating their unique physical traits such as iris, voice, face, veins, fingerprints and palm prints.
The worldwide market for healthcare biometrics is largely driven by growing concerns of security that have gripped the global healthcare industry. Preventing medical identity theft is a major concern.
- The global biometrics market will grow to U.S. $5.8 billion in 2019, up from $.2 billion in 2012;
- This means 25.9 percent from 2013 to 2019; and
- North America is the leading healthcare biometrics market. (Transparency Market Research, February 2015)
The federal False Claims Act lets whistleblowers earn a portion of federal civil recoveries stemming from their exposing fraud against healthcare or other federal programs. The FCA also can lead to criminal charges. Whistleblowers tend to be insiders at the offending healthcare organizations, and thus have unique access to evidence.
- The federal government spent $574.6 million to recover $9.38 billion in federal civil healthcare fraud related settlements and judgments between 2008 and 2012. That’s a 16:1 ROI;
- The federal government collected more than $4.5 billion in federal criminal recoveries in False Claims Act cases. States collected $4.07 billion in civil recoveries. Overall, that’s a 20:1 ROI; and
- More than half of states such as New York, California and Virginia also have enacted state false claims acts. (Taxpayers Against Fraud Education Fund, October 2013)
- False claims against federal healthcare programs such as Medicare and Medicaid accounted for $2.3 billion of the record $5.69 billion the U.S. Department of Justice obtained in settlements and judgments from civil cases involving fraud and false claims against the government in FY 2014;
- That marks five straight years the justice department has recovered more than $2 billion involving false claims against federal healthcare programs;
- Whistleblower actions recovered $14.5 billion in federal healthcare dollars from January 2009 through FY 2014. Most recoveries involved scams against Medicare and Medicaid;
- Most of those scams involved pharmaceuticals. Cases involving hospitals, however, resulted in $333 million in FY 2014 settlements and judgments; and
- The government also had significant recoveries for home-health services. (U.S. Department of Justice, November 2014)
- Healthcare whistleblower recoveries for Medicare and Medicaid reached $2.3 billion in FY 2014; and
- The Justice Department has recovered more than $15.2 billion in healthcare whistleblower cases since January 2009. (U.S. Department of Health and Human Services, March 2015)
Scams against government and private healthcare insurers form by far the largest type of insurance fraud. The exact size of annual theft is unknown, and is the subject of considerable debate. Healthcare fraud likely steals tens of billions of dollars a year.
- Healthcare expenditures in the U.S. are projected to reach $3.2 trillion in 2015 — or about $10,000 per person. (Centers for Medicare & Medicaid Services, 2015) (See second table, NHE Projections 2014-2024)
- Medicare spending is projected to reach $616.8 billion in FY 2014. (Centers for Medicare & Medicaid Services, 2015)
- Financial losses from healthcare fraud are amount to tens of billions of dollars annually. (National Health Care Anti-Fraud Association, 2015)
- Global healthcare fraud and error losses have risen 25 percent to 6.9 percent total since 2008;
- This means $487 billion lost in a year — one-fifth of total U.S. healthcare expenditures for 2011; and
- Reductions in fraud and error losses of up to 40 percent are possible within one year — freeing up to $195 billion globally. (BDO International, March 2014)
Fraud plots are getting more complex, and often involve multiple industries rather than solely insurance. An insurance investigation, for instance, might reveal evidence of financial fraud.
- 84 percent of insurance organizations say fraud cases they investigate involve more than one industry;
- 76 percent of cross-industry fraud cases have a moderate to high impact on insurance organizations;
- More than half say these cases (61 percent) have severe impact on responding insurance organizations;
- Fraud schemes of high concern: identity theft (49 percent), hacking (45 percent), employee-agent (37 percent) and claims (34 percent).
(LexisNexis, June 2016)
Medicare & Medicaid
Medicare is designated as a high-risk program because of its size, complexity and vulnerability to improper payments.
- The Health Care Fraud and Abuse Control program has returned more than $29.4 billion to the Medicare Trust Funds since 1997. That’s $6.10 returned for each $1 invested in the last FY.
- More than $2.77 billion of Medicare and Medicaid recoveries are expected from audits and investigations during the first half of FY 2016 (October-March);
- 428 criminal actions and 383 civil actions were reported during this period;
- 1,662 individuals and entities were excluded from Medicare and Medicaid. Most stemmed from criminal convictions, patient abuse or neglect, or revoked licenses;
- Strike Force efforts resulted in charges against 87 individuals or entities, 100 criminal actions and $116.8 million of investigative receivables;
- 75,050 OIG fraud hotline contacts were reported; and
- Civil recoveries have increased nearly five-fold over the last three years.
Medicare strike force
Defendants collectively have billed Medicare more than $7 billion since Medicare Strike Force operations began in 2007. During this time, the Strike force has:
- The Medicare Fraud Strike Force has charged more than 2,536 suspects involved in more than $8 billion in fraud since 1997. Many charges stemmed from coordinated, multi-district national takedowns.
- The Strike Force’s largest-ever takedown resulted in charges against a record 243 suspects for $712 million in false Medicare and Medicaid billing.
- The Medicare Fraud Strike Force has a 95-percent conviction rate and jail terms average four years; and (Centers for Medicare & Medicaid Services, February 2016)
Recoveries & improper payments
- The Department of Justice obtained more than $1.9 billion in settlements and judgments from civil healthcare fraud cases in FY 2015. DOJ has recovered more than $17.1 billion since January 2009. (Centers for Medicare & Medicaid Services, February 2016)
- CMS has deactivated more than 500,000 medical providers — billing privileges were stopped for these providers.
- CMS has barred more than 34,000 providers from re-entering the Medicare program for one to three years.
- Stronger screening and enrollment have saved Medicare more than $2.4 billion since 2010. (Centers for Medicare & Medicaid Services, February 2016)
The federal health reform marketplace is vulnerable to fraud. CMS is at risk of granting eligibility to, and making subsidy payments for, ineligible healthcare enrollees.
- About 431,000 applications from the 2014 enrollment period, with about $1.7 billion in subsidies, had unresolved inconsistencies as of April 2015 — several months the coverage year closed;
- CMS didn’t resolve SSN inconsistencies for about 35,000 applications or incarceration inconsistencies for about 22,000 applications; and
- In undercover testing, the federal marketplace approved subsidized coverage for 11 of 12 fake GAO phone or online applicants for 2014. The GAO sent false or no documents to resolve application inconsistencies. (Government Accounting Office, February 2016)