Fraud and Overuse
For today’s class, we’re going to talk more specifically about fraud and overuse. While we tend to think of “fraud” as outright illegal activity, such as billing for services that were never provided, there are many other ways that providers can “game” the system to increase their revenue. These are also often classified as fraud, even though they may not be illegal. We’ll cover the following areas and papers in this class.
Upcoding from Providers
Dafny and Gruber (2005) explores the reactions of hospitals to varying price structures in the healthcare market, particularly the extent to which hospitals adjust service volume, quality, and variety in response to changes in reimbursement rates. The study is an excellent example of how hospitals can adjust their behavior to maximize revenue, even when they are not engaging in outright fraud.
Upcoding from Insurers
Geruso and Layton (2020) investigates the phenomenon of upcoding in Medicare Advantage, examining how Medicare’s risk adjustment process may inadvertently incentivize this behavior. Again, this is an excellent example of overuse (or perhaps more accurately, overspending) that is not necessarily illegal but nonetheless a big driver of inefficiency.
Learning about Fraud
O’Malley, Bubolz, and Skinner (2021) examines the spread of fraudulent Medicare home health care billing in the U.S. from 2002-2016, focusing on the role of patient-sharing networks among healthcare agencies in propagating these fraudulent practices. Utilizing a novel bipartite mixture network index, the study finds a significant relationship between these networks and the diffusion of healthcare fraud. This research contributes to health economics by offering a deeper understanding of the structural aspects influencing healthcare fraud, highlighting the need for more targeted policy interventions.