The Justice Department’s Medicare Fraud Strike Force (cue theme music) has announced the arrest of 38 people who allegedly defrauded Medicare by charging outrageous amounts for items that were never delivered … like an $869 air mattress … and … I’m sorry, I nodded off. 


This is nothing new. In Medicare Meets Mephistopheles, David Hyman quotes former Medicare administrator Bruce Vladeck:

“There are plenty of $400 toilet seats in the Medicare program…”

Nor is the amount of money involved impressive. In all, these people allegedly defrauded Medicare for $142 million, or 0.038 percent of annual Medicare outlays. HHS Secretary Michael Leavitt estimates that further anti‐​fraud efforts could save as much as $2.5 billion, or 0.67 percent of Medicare outlays … I’m sorry, I nodded off again. Here’s some more from David Hyman:

In fact, no one knows how common fraud and abuse are, but 72 percent of the American public believes that Medicare would have no financial problems if fraud and abuse were eliminated. This perception is utterly uninformed by any connection with reality…

Fraud is bad, mmm‐​kay? But while Medicare’s anti‐​fraud laws occasionally nab some real bad guys, according to Hyman they probably inflict as much damage as they prevent:

The vast sums of money spent by Medicare create the demand for [anti‐​fraud] laws to restrain the avarice of providers. Provider avarice triggers a search for ways around those laws, which, in turn, results in the broadening of those laws. As the laws are broadened, they discourage organizational innovation and market entry and catch more innocent providers. This, in turn, triggers a backlash against the law and widespread violation thereof. Plus, lawyers get rich off each step.

We’re barking up the wrong tree, here. If you’re looking for real and substantial fraud in Medicare, look no further than the politicians who have promised Medicare benefits well in excess of the program’s ability to pay, or who pooh‐​pooh the program’s future funding shortfalls. Again, Medicare Meets Mephistopheles:

The legal system imposes harsh penalties on pyramid scheme organizers, because defrauding hundreds or thousands of people is much worse than defrauding a handful of people. Indeed, if anyone other than the United States government were running the Medicare program, those responsible would already be serving long prison terms for fraud.

Now that’s an anti‐​fraud operation to get excited about.