Health Care Fraud: The Silent Bandit

By Ford, Joseph L. | The FBI Law Enforcement Bulletin, October 1992 | Go to article overview
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Health Care Fraud: The Silent Bandit

Ford, Joseph L., The FBI Law Enforcement Bulletin

Each second, Americans spend approximately $24,000 on health care, (1) making it the second largest industry in the United States, next to education. (2) In the time that it takes to read this article, Americans will spend an additional $12 million on health care. And these figures will continue to skyrocket.

The U.S. Chamber of Commerce estimates that by 1994, spending on health care will reach $1 trillion, and this amount will probably double again by the turn of the century. (3) In 1982, by contrast, expenditures on health care totaled just $280 billion. (4)

Unfortunately, this dramatic increase has been fueled, in part, by growing levels of fraud in the health care industry. While the vast majority of health care practitioners provide competent, equitable services, those who commit fraud cost this Nation significantly. While estimates vary, as much as 10 cents of every dollar spent on health care may be lost to fraud and abuses in the industry. (5)

To a large degree, this occurs because Americans tend to place their trust in health care professionals. People expect good health care and do not mind paying for services that will make them well. To them, cost does not matter when it comes to proper medical treatment for troubling health problems. At the same time, they assume that they will be billed correctly for the treatment received and will not be subjected to unnecessary treatments, tests, or drugs. Unfortunately, this is not always the case.


Investigators must remember that fraud affects every level of the health care system--from a doctor who charges exorbitant fees and authorizes unnecessary tests, to a hospital or nursing home that overbills Medicare, to a pharmacist dispensing generic drugs at brand name prices. In addition, another major component of the system easily defrauded by unethical providers includes durable medical equipment (DME) suppliers, who may conspire with other segments of the health care system to commit a host of fraudulent activities.

Unfortunately, though, not all cases of fraud can be clearly defined. Because malpractice suits can destroy entire careers, the actions of many health care providers are governed by the need to protect themselves from liability. These practitioners believe it is better to perform a battery of tests and authorize extensive treatments rather than find themselves involved in a malpractice suit resulting in a multimillion-dollar settlement. While such cases may border on fraud, they can be considered more accurately as simple abuse of the system.

Fraud, on the other hand, encompasses clear and distinct activities by practitioners and businesspersons in the health care field to make money illegally, primarily by bilking patients, private insurers, or the Federal Government. For the most part, the audit systems established by the various Federal and State regulatory agencies do not detect this type of criminal activity. Law enforcement, then, must take action.


Federal, State, and local law enforcement all must play a role in combating health care fraud. Jurisdiction, investigative expertise, and Federal and State laws govern the levels of involvement of the various agencies. However, success in curtailing the activities of fraudulent health care providers depends on closely coordinated efforts of the entire criminal justice community. No one agency can solve the problem of health care fraud independently; Federal agencies must work with those on the State and local levels to stem the tide of this devastating crime.

Federal Agencies

Several Federal agencies devote extensive resources and a vast number of workhours to health care fraud investigations. These include the Drug Enforcement Administration (DEA), the Food and Drug Administration (FDA), the U.S. Postal Service, the Department of Health and Human Services (DHHS), the U.

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Health Care Fraud: The Silent Bandit


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