Medical aid fraud a big problem

Listed medical scheme provider Discovery says fraud in the medical industry is "a big problem", with the firm saving R48m through investigating 3 991 suspected cases of fraud and abuse last year.

"Medical aid fraud is certainly a big problem and it contributes to the overall cost of healthcare," said the head of Discovery's group forensic services, Marius Smit.

This comes after advisory firm KPMG released its Medical Schemes' Anti-Fraud Survey, in which 70 percent of the medical aid schemes that responded said fraud was a problem.

One of the ten respondents to the survey was Discovery Health, the healthcare provision and medical aid scheme arm of Discovery Holdings, a listed financial group on the JSE.

The ten administrators represented 2.3 million, or 82 percent, of principal members of South African health schemes.

The highlight of the survey was that general practitioners, pharmacies and specialists were the biggest offenders in making fraudulent claims.

"It's a simple equation," said Smit. "There's a pot of money which members contributions are paid into. Apart from that, there are two outflows - administrative costs, and claims paid."

If costs increase, the need for more contributions from members increases. "Discovery spends roughly R10m a year on providing forensic services to medical schemes."

"It's important to stress that even though the impact of fraud is considerable, the majority of doctors do act in an ethical manner. The fraud is mainly perpetrated by a small minority," said Smit.

In all of the suspected cases of fraud investigated by Discovery last year, perpetrators involved were not only healthcare providers, but also members and brokers.

"It's estimated that as much as 10% of the claims in the industry are fraudulent or abusive," said Smit, who added that private healthcare schemes pay out about R60bn annually. This means that that as much as R6bn could be lost through fraud and abuse per year.

No increases in fraudulent activity
Smit said that the overall amount of fraud in the industry had remained fairly consistent over the last couple of years.

"But if you compare the rand amounts from year to year, there will be an increase as more cases are being uncovered."

He explained that the number fraudulent claims uncovered determined the amount of known fraud in an industry, but cautioned that fraudulent claims uncovered were not the same as the total amount of fraud in the industry.

Currently, medical aid schemes can only estimate how much fraud takes place; dedicating more resources to investigations and by uncovering fraudulent cases meant that there was an increase to the exposure of the amount of fraud that exists in the industry, as opposed to a rise in fraud.

"I would like to believe that the awareness created over the last few years has actually brought down the amount of fraud in the industry."

Spikes
Changes in the economic climate result in spikes of certain types of fraud, said Smit.

South Africans are struggling financially because of higher interest rates, inflation and the high price of petrol.

"Ultimately, if it is averaged out, there does not seem to be a sudden major increase in fraud."

Processes
There are a number of processes used by Discovery to uncover fraud. The group relies on technology to identify possible red flags on claims, and it also profiles claims data using historical data.

It also has various reporting and whistle-blowing channels available for members to supply it with info on fraud.

- Nicole Rego, Fin24.com, August 2008