WEBVTT - How Fraudsters Are Bilking the Government Out of Billions of Dollars 0:00:03.080 --> 0:00:12.640 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:20.079 --> 0:00:23.800 Hello and welcome to another episode of The Odd Laws podcast. 0:00:23.840 --> 0:00:26.960 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, what do 0:00:27.000 --> 0:00:28.480 you think about DOGE. 0:00:30.200 --> 0:00:35.800 The coin or the new Department of Government Efficiency the latter. 0:00:38.120 --> 0:00:41.519 Here's what I will say. Part of me hates that 0:00:41.560 --> 0:00:45.639 government efficiency is being politicized in this way, because if 0:00:45.680 --> 0:00:50.640 you think that government services are a desirable thing to have, 0:00:50.800 --> 0:00:55.640 then you should definitely be against waste and inefficiency and 0:00:55.680 --> 0:00:58.520 fraud in that market, because at a minimum, if you're 0:00:58.560 --> 0:01:00.760 wasting money, you could be using that money to do 0:01:01.080 --> 0:01:03.880 even more. And then, obviously, if you think that government 0:01:03.960 --> 0:01:06.160 is just bad in general, then I imagine that you 0:01:06.319 --> 0:01:09.000 also think that the government wasting money is also bad. 0:01:09.680 --> 0:01:14.600 There's no constituency there probably shouldn't be an ideological constituency 0:01:14.680 --> 0:01:17.440 or political constituency for waste, right. 0:01:17.520 --> 0:01:19.919 Yeah, exactly, Like I feel like we should all agree 0:01:19.920 --> 0:01:22.839 on this, But also I hate the way it's kind 0:01:22.880 --> 0:01:25.400 of unrolling. Let's put it that way. 0:01:25.680 --> 0:01:30.400 I would say I broadly agree waste is bad. Whether 0:01:30.560 --> 0:01:34.880 the existing makeup of this sort of quasi blue ribbon 0:01:35.040 --> 0:01:38.720 commission to get rid of waste whatever that means is 0:01:38.800 --> 0:01:42.120 actually going to do it. Look, I'll be open minded, 0:01:42.440 --> 0:01:46.800 but I like the premise of cracking down on waste. 0:01:46.840 --> 0:01:48.240 I will just say that, you know what the other 0:01:48.280 --> 0:01:50.639 thing is. So first of all, part of the issue 0:01:50.640 --> 0:01:55.000 here is that waste is probably difficult to define. Fraud 0:01:55.080 --> 0:01:58.400 in some cases is probably difficult to define. There will 0:01:58.440 --> 0:02:01.800 probably be political fights over certain types of spending that 0:02:01.840 --> 0:02:04.600 it's like, you call this waste, I call this a 0:02:04.760 --> 0:02:09.640 good allocation of whatever. I imagine many of the political fights 0:02:09.840 --> 0:02:14.239 around this will sort of revolve around some of these questions. 0:02:15.400 --> 0:02:19.000 There's a lot there. But I'm glad we generally agree 0:02:19.040 --> 0:02:19.919 that fraud is bad. 0:02:20.200 --> 0:02:22.639 Fraud is bad, waste is bad. But I think you're 0:02:22.680 --> 0:02:25.480 absolutely right that the definitions are going to be crucial, right, 0:02:25.480 --> 0:02:28.040 And this is where I worry about the politicization, because 0:02:28.080 --> 0:02:29.919 you can just come in and say like, oh, well, 0:02:30.160 --> 0:02:32.040 I don't like this, so I'm going to call this 0:02:32.080 --> 0:02:34.960 a waste and go on from there. But I think 0:02:34.960 --> 0:02:37.040 we should talk about it because you know, this has 0:02:37.080 --> 0:02:40.360 come up in a number of episodes, specifically on the 0:02:40.720 --> 0:02:44.480 PPP post pandemic, and so it's clearly something that is 0:02:44.520 --> 0:02:46.560 on people's minds totally. 0:02:46.760 --> 0:02:51.160 Right now, we are recording this Thursday, November fourteenth. We 0:02:51.240 --> 0:02:56.200 are in a moment where resources in the economy are constrained. Right, 0:02:56.280 --> 0:03:00.680 the unemployment rate is low, inflation continue used to be 0:03:01.360 --> 0:03:04.600 by some measures above the Fed's goal. It is not 0:03:04.800 --> 0:03:08.040 crazy from like a macro standpoint to think we need 0:03:08.080 --> 0:03:11.000 to make things more efficient and better to have a 0:03:11.120 --> 0:03:13.480 better use of our real resources right now. 0:03:13.560 --> 0:03:16.440 And one, this is your other middle aged man thing. 0:03:16.520 --> 0:03:18.919 You know, you've decided to become like a real resource 0:03:19.000 --> 0:03:19.800 constraint guy. 0:03:19.919 --> 0:03:22.280 Right yeah, I'm like, oh, we got we got to 0:03:22.320 --> 0:03:24.080 crack down. You have to make tough decisions, to make 0:03:24.120 --> 0:03:26.360 tough decisions. We're taking the candy away from the kids. 0:03:26.440 --> 0:03:27.240 I'm going to be one of those. 0:03:27.360 --> 0:03:29.080 Here's a tough decision. If you're going to talk to 0:03:29.080 --> 0:03:32.160 someone about government waste, would you talk to Elon or Vivek. 0:03:32.560 --> 0:03:33.080 There's two. 0:03:33.800 --> 0:03:36.600 Well, Elon would get more downloads if we had a podcast, 0:03:36.680 --> 0:03:38.640 so I would talk to Elon. But we actually have 0:03:38.680 --> 0:03:41.400 a better guest. I think we have the perfect guest 0:03:42.040 --> 0:03:45.880 to talk about government waste fraud where we might be 0:03:45.880 --> 0:03:48.720 able to move the dial in a substantive way on 0:03:48.840 --> 0:03:50.760 this kind of stuff. We're going to be speaking with 0:03:50.880 --> 0:03:53.640 Jetson Leader Luis. He is an assistant professor at the 0:03:53.720 --> 0:03:57.480 Questionroom School of Business at Boston University. He's also a 0:03:57.480 --> 0:04:01.560 faculty research fellow at the nb ARE and this is 0:04:01.560 --> 0:04:07.240 what he studies, particularly areas around fraud and how companies 0:04:07.280 --> 0:04:12.040 defraud the government wasting millions, probably billions of dollars. So, Jetson, 0:04:12.080 --> 0:04:13.240 thank you so much for coming. 0:04:13.000 --> 0:04:14.600 On odd Lots, Thanks so much for having me. 0:04:14.640 --> 0:04:17.760 Why do you describe your research? I kind of described it, 0:04:17.800 --> 0:04:20.120 but why did you describe what you do in your background? 0:04:20.200 --> 0:04:23.400 Yeah? That's great. So I'm an assistant professor. I study economics, 0:04:23.400 --> 0:04:26.599 and in particular I'm interested in questions about fraud in 0:04:26.760 --> 0:04:30.480 government spending. I receive my PhD from MIT Economics in 0:04:30.520 --> 0:04:33.400 twenty twenty, and I've written a number of papers trying 0:04:33.440 --> 0:04:36.159 to explore the mechanisms the government can and does use 0:04:36.279 --> 0:04:39.040 to cut out fraud in it in public expenditure. 0:04:39.360 --> 0:04:42.120 Was there a particular moment or reason that drew you 0:04:42.240 --> 0:04:43.960 to this particular field. 0:04:44.760 --> 0:04:49.240 I think fraud in government spending has historically been underanalyzed, 0:04:49.520 --> 0:04:51.520 and in particular in the healthcare system, where I've done 0:04:51.520 --> 0:04:55.000 a lot of work. There are really big and impactful 0:04:55.000 --> 0:04:57.320 policies that are being used to try to eliminate fraud, 0:04:57.440 --> 0:05:00.240 but historically we didn't really understand what worked and what 0:05:00.320 --> 0:05:03.000 didn't work and why it worked, and so I think, 0:05:03.000 --> 0:05:05.000 you know, there was a big opportunity in the research there. 0:05:05.080 --> 0:05:07.560 And I've always been interested in questions of bad behavior. 0:05:07.760 --> 0:05:09.479 I have a paper that I started early in my 0:05:09.520 --> 0:05:11.440 career on fraud in the World Bank that we just 0:05:11.480 --> 0:05:14.320 got accepted at the journal World Development. And so overall, 0:05:14.360 --> 0:05:16.360 I'm really interested in this question about, you know, where's 0:05:16.400 --> 0:05:18.919 the money going and how can we you know, fix 0:05:18.960 --> 0:05:20.880 that to make sure that the federal funds are being 0:05:20.960 --> 0:05:21.880 used for people who need them. 0:05:22.560 --> 0:05:25.280 I definitely want to talk a little bit about fixing 0:05:25.400 --> 0:05:28.560 the problem and identifying the problem and so forth, But 0:05:28.680 --> 0:05:31.719 actually I really want to start on how to defraud 0:05:31.839 --> 0:05:35.320 the government because no, for real, because I sometimes we'll 0:05:35.360 --> 0:05:39.360 see headlines it's like so and so arrested for insurance 0:05:39.400 --> 0:05:42.280 fraud of some sort, and you know that's bad, But 0:05:42.320 --> 0:05:44.840 I also like have there's like weird thing that happens 0:05:44.880 --> 0:05:46.640 in my head where I'm like, I wouldn't even know 0:05:46.680 --> 0:05:47.560 how to defraud. 0:05:47.960 --> 0:05:51.320 Tell us what's the most accessible way to defraud the government. 0:05:51.560 --> 0:05:55.120 So, like, give us an example, or when we talk about, okay, 0:05:55.560 --> 0:05:58.240 fraud in the medical system, what are people doing? What 0:05:58.400 --> 0:06:03.120 is a classical form of defrauding to government in the 0:06:03.120 --> 0:06:03.920 world of healthcare. 0:06:04.400 --> 0:06:06.359 So, in the world of healthcare, there are some really 0:06:06.400 --> 0:06:09.000 obvious frauds that have persisted for years and that I 0:06:09.000 --> 0:06:11.360 think we're finally maybe starting to wrap our hands around. 0:06:11.400 --> 0:06:14.080 And one that comes to mind immediately is the ambulance market. 0:06:14.160 --> 0:06:15.480 Okay, say more so. 0:06:15.680 --> 0:06:17.400 This was actually described to me when I first heard 0:06:17.400 --> 0:06:20.279 it by a colleague friend who works for the federal 0:06:20.279 --> 0:06:23.520 government as the perfect healthcare fraud. And so ambulance services 0:06:23.560 --> 0:06:25.599 are paid for by Medicare. Medicare is the old age 0:06:25.600 --> 0:06:28.240 health insurance program for Americans. We spend more than eight 0:06:28.320 --> 0:06:30.599 hundred billion dollars a year on this program. We spend 0:06:30.640 --> 0:06:33.159 another seven hundred billion dollars a year on Medicaid. So 0:06:33.160 --> 0:06:35.440 we're talking about one point five trillion dollars of outlays 0:06:35.440 --> 0:06:38.479 to these programs. It's very hard for the government to 0:06:39.240 --> 0:06:41.680 ensure that every dollar that's going out is legitimate, right, 0:06:41.680 --> 0:06:46.400 It's a volume problem. Ambulance services are highly reimbursed and 0:06:46.520 --> 0:06:49.120 low overhead. If you want to start an ambulance company, 0:06:49.120 --> 0:06:51.200 you need to buy an ambulance. That's like thirty grand 0:06:51.400 --> 0:06:53.560 used online. You can actually go and google it yourself. 0:06:53.560 --> 0:06:56.320 You can go buy an ambulance, and then you need 0:06:56.400 --> 0:06:59.119 a couple of employees. It's actually a super low overhead business, 0:06:59.120 --> 0:07:02.120 which means it's easy for people to start starting around. 0:07:02.240 --> 0:07:06.000 We think two thousand and three, the market for ambulance services, 0:07:06.240 --> 0:07:10.160 and in particular repetitive non emergency ambulance services, started getting 0:07:10.160 --> 0:07:12.920 saturated by intentional fraudulent actors. 0:07:13.200 --> 0:07:15.160 Wait, what's a non emergency ambulance? 0:07:15.160 --> 0:07:17.800 Non emergency ambulance is a patient who needs to go 0:07:17.880 --> 0:07:21.160 to a service because they are sick enough that they 0:07:21.160 --> 0:07:24.360 can't ride in a taxi or take the train, and 0:07:24.400 --> 0:07:26.200 they the only safe way for them to get to 0:07:26.240 --> 0:07:29.160 a service is in an ambulance. And in particular, this 0:07:29.240 --> 0:07:32.480 really blew up in the dialysis industry. Dialysis patients, there 0:07:32.520 --> 0:07:34.520 are about half a million of them. We actually spend 0:07:34.560 --> 0:07:36.400 I think you know this, one percent of the federal 0:07:36.440 --> 0:07:37.840 budget on the dialysis program. 0:07:38.280 --> 0:07:39.600 Incredible, set not. 0:07:39.520 --> 0:07:41.960 One percent of medicare. One percent of the federal budget 0:07:42.000 --> 0:07:46.440 is the dialysis program. We do not in general pay 0:07:46.480 --> 0:07:49.280 for ambulance rides or taxi rides for these people to 0:07:49.320 --> 0:07:51.400 go to and from the visits. They are responsible for 0:07:51.400 --> 0:07:54.360 getting themselves to the clinic every day, three times a week, 0:07:54.440 --> 0:07:57.080 generally for a few hours, and that's in perpetuity. It's 0:07:57.160 --> 0:07:59.400 very challenging to get a kidney and therefore to get 0:07:59.440 --> 0:08:04.080 off of diale. So we had this system, and this 0:08:04.120 --> 0:08:06.680 is sort of the canonical Medicare fraud. We build in 0:08:06.760 --> 0:08:09.000 a little thing for the few people who need it, 0:08:09.200 --> 0:08:11.560 and that turns into a loophole through which bad actors 0:08:11.640 --> 0:08:13.480 drive a truck. So we built in this provision, which 0:08:13.480 --> 0:08:15.800 is if the only safe way that you can get 0:08:15.840 --> 0:08:18.320 to the dialysis clinic is in an ambulance, Medicare will 0:08:18.320 --> 0:08:20.320 pay for an ambulance, and they pay for it at 0:08:20.320 --> 0:08:22.720 a competitive rate for the ambulance companies, at say two 0:08:22.800 --> 0:08:25.360 hundred and fifty dollars for a one way ride. Now 0:08:25.560 --> 0:08:27.680 that's not that much money for a real ambulance, but 0:08:27.720 --> 0:08:29.360 it's a heck of a lot of money for a taxi. 0:08:29.800 --> 0:08:33.040 And what happened is thousands of firms around the country 0:08:33.120 --> 0:08:36.680 opened with the express intention not of giving people serious 0:08:36.720 --> 0:08:40.640 medical care, but of becoming an expensive ambulance taxi and 0:08:41.040 --> 0:08:43.880 build the government. We have one hundred percent data from 0:08:43.920 --> 0:08:46.120 the dialysis system. We can see all of these payments 0:08:46.440 --> 0:08:50.160 more than seven billion dollars for non emergency ambulance transportation 0:08:50.240 --> 0:08:53.760 over the following ten years, seven point seven billion dollars, 0:08:53.960 --> 0:08:56.040 and a lot of it was fraud, and the government 0:08:56.080 --> 0:08:58.960 cracked down. The government really tried to crack down, and 0:08:59.000 --> 0:09:01.440 in particular, the used a number of tools. The first 0:09:01.480 --> 0:09:03.280 one is they started throwing people in prison. This is 0:09:03.280 --> 0:09:05.200 what you say, you see in the headlines. Yeah, but 0:09:05.360 --> 0:09:09.200 it's so easy to start an ambulance company that we'd 0:09:09.200 --> 0:09:12.080 see these stories where, you know, someone gets busted and 0:09:12.360 --> 0:09:14.920 their family member goes and opens a company next door 0:09:14.960 --> 0:09:17.560 the next day. And this persisted for years, with thousands 0:09:17.559 --> 0:09:19.680 of companies and billions of dollars of spending just down 0:09:19.679 --> 0:09:20.000 the drain. 0:09:20.800 --> 0:09:25.080 I imagine some of the difficulty is also deciding who genuinely 0:09:25.160 --> 0:09:28.560 needs an ambulance ride and who doesn't. Right, So this 0:09:28.679 --> 0:09:32.720 is something that I never quite understand about US healthcare 0:09:32.880 --> 0:09:35.800 in general. The first ten years of my adulthood were 0:09:35.800 --> 0:09:38.439 in the UK, and there's a national health service there, 0:09:38.480 --> 0:09:41.280 and if the doctor told you you needed something. You know, 0:09:41.800 --> 0:09:44.400 you got that something. Maybe it would take a while, 0:09:44.440 --> 0:09:47.040 but eventually you would get it, whereas in the US 0:09:47.280 --> 0:09:50.360 you seem to have all these decision makers in the process, 0:09:50.559 --> 0:09:53.240 and yet we're talking about medical care, which you would 0:09:53.240 --> 0:09:56.120 think would need to be dictated by like highly trained 0:09:56.440 --> 0:09:57.400 medical doctors. 0:09:57.760 --> 0:09:59.640 This is super interesting that that's your intuition, because that's 0:09:59.679 --> 0:10:02.840 exactly how they fixed it. So the way that Medicare 0:10:02.880 --> 0:10:05.840 closed this loophole was by requiring what's called prior authorization. 0:10:06.200 --> 0:10:08.839 Now if instead of going to an ambulance company and saying, 0:10:08.840 --> 0:10:11.120 you know, please give me this ride, or the even worse, 0:10:11.120 --> 0:10:13.800 the ambulance company coming to the patient and saying do 0:10:13.840 --> 0:10:16.120 you want a taxi ride, which is actually what was happening, 0:10:16.480 --> 0:10:18.800 instead they required that a physicians signed off and say, look, 0:10:18.800 --> 0:10:21.160 this patient is actually sick, they're bedridden. There's no other 0:10:21.160 --> 0:10:23.160 way that they can get to dialysis this week. And 0:10:23.200 --> 0:10:25.280 if you didn't have the doctor's note, Medicare didn't pay. 0:10:25.640 --> 0:10:28.240 And we estimate that around the timing of them implementing 0:10:28.320 --> 0:10:31.120 this prior authorization requirement, which they rolled out in different 0:10:31.160 --> 0:10:33.480 states at different times. This is like what economists love 0:10:33.760 --> 0:10:36.560 in our research and actual test a difference, and difference 0:10:36.600 --> 0:10:40.240 exactly when they rolled this out in different places, in 0:10:40.280 --> 0:10:42.760 different times. We see a sixty seven percent drop in 0:10:42.800 --> 0:10:46.400 spending the next month, persistent, and not only that, we 0:10:46.400 --> 0:10:49.240 can then trace the patients and say were these patients harmed? 0:10:49.240 --> 0:10:51.520 Did they actually miss their dialysis visits and end up 0:10:51.559 --> 0:10:53.839 in the hospital, And we find no evidence at all 0:10:53.880 --> 0:10:56.320 of negative patient health effects, And so we actually saved 0:10:56.360 --> 0:10:59.880 billions of dollars by putting in something that was so basic, 0:11:00.000 --> 0:11:01.320 which is this the doctor sign? 0:11:01.720 --> 0:11:03.360 Why didn't they do it before? 0:11:04.520 --> 0:11:10.600 The structure of Medicare is largely disaggregated, where individuals are 0:11:10.640 --> 0:11:12.960 able to go to different services as long as they 0:11:13.000 --> 0:11:16.000 qualify for them, and some of those are doctor's visits, hospitals, 0:11:16.240 --> 0:11:19.559 medical equipment, pharmaceuticals. We pay for a lot of things, 0:11:19.600 --> 0:11:22.959 and there is a real worry that requiring too much 0:11:23.000 --> 0:11:25.920 paperwork can burden the system, and we don't want to 0:11:25.960 --> 0:11:29.160 turn the Medicare system into an even more heavily administrative 0:11:29.160 --> 0:11:33.120 burden system. So there are different qualification rules, but largely 0:11:33.200 --> 0:11:38.520 what happens is the qualification rules are not always enforced upfront. 0:11:38.720 --> 0:11:41.400 We do a lot of requiring people to follow the rules, 0:11:41.400 --> 0:11:43.400 maybe we do some audits, maybe we chase after them 0:11:43.440 --> 0:11:47.319 with criminal lawsuits afterwards. But largely there are circumstances where 0:11:47.520 --> 0:11:51.400 nefarious actors, it's a relatively high trusystem. Nefarious actors will 0:11:51.600 --> 0:11:53.679 find these loopholes and drive a truck through them. And 0:11:53.720 --> 0:11:55.199 I can talk about a million examples of this. 0:11:55.480 --> 0:11:58.640 Well, let's talk about so Okay, it sounds like the 0:11:58.720 --> 0:12:02.400 ambulance from taken care of more or less. 0:12:02.600 --> 0:12:05.360 So the ambulance fraud is less than it used to be. 0:12:05.440 --> 0:12:07.800 And that's the dialysis ambulance fraud. Oh yeah, this paper 0:12:07.840 --> 0:12:09.760 was just accepted at the General Political Economy, So we're 0:12:09.800 --> 0:12:11.000 super happy. Shout out to my. 0:12:10.960 --> 0:12:13.160 Congratulations who did a great job there. 0:12:13.800 --> 0:12:16.240 The ambulance market itself has other frauds, right, we're talking 0:12:16.240 --> 0:12:18.840 about one type, which is this repetitive dialysis fraud. There 0:12:18.840 --> 0:12:22.679 are still lots of unnecessary ambulance rides, ghost ambulance rides 0:12:22.679 --> 0:12:24.679 where patients don't even get in the ambulance and bills 0:12:24.679 --> 0:12:27.480 are sent. One question is what can the government do? 0:12:27.960 --> 0:12:29.640 And part of it is I think that there needs 0:12:29.679 --> 0:12:32.440 to be a better focus on using data to detect 0:12:32.640 --> 0:12:33.440 and stop the fraud. 0:12:33.559 --> 0:12:35.520 Yeah, talk to us about the data because I imagine, 0:12:35.559 --> 0:12:39.560 like you're talking about government spending and programs, plus in 0:12:39.559 --> 0:12:42.640 some instances the medical industry, there must be interesting data 0:12:42.880 --> 0:12:43.640 available to you. 0:12:44.320 --> 0:12:47.240 So I have fantastic access to data. I use one 0:12:47.320 --> 0:12:50.080 hundred percent sample Medicare claims data from nineteen ninety nine 0:12:50.120 --> 0:12:53.839 through twenty nineteen for all inpatient and outpatient services, durbal 0:12:53.880 --> 0:12:56.200 medical equipments. I can see twenty percent of physician office 0:12:56.240 --> 0:13:00.319 visits and party pharmaceuticals. So it's an ridiculous volume. And 0:13:01.080 --> 0:13:03.520 you know, I'm very equipped with data. I teach data 0:13:03.520 --> 0:13:05.640 analysis and I have you know, PhD students and other 0:13:05.640 --> 0:13:07.600 professors who work with me. And even for us, it's 0:13:07.600 --> 0:13:09.480 a big problem. How do we actually wrap our hands 0:13:09.520 --> 0:13:13.120 around this? Yeah, the government has not historically invested very 0:13:13.160 --> 0:13:16.679 well in its data analysis for anti fraud. Part of 0:13:16.720 --> 0:13:20.160 the reason is that the organizations that are responsible for this, 0:13:20.360 --> 0:13:22.199 which are the Department of Justice and the Office of 0:13:22.280 --> 0:13:26.760 the Inspector General. Those career lawyers are fantastic. I cannot 0:13:26.760 --> 0:13:29.800 say enough positive things about my colleagues at the Department 0:13:29.840 --> 0:13:31.720 of Justice and the Office of the Inspector General, but 0:13:31.760 --> 0:13:34.160 there are too few of them. We do not pay 0:13:34.200 --> 0:13:36.720 them very well, and they are not data analysts. They 0:13:36.760 --> 0:13:37.280 are lawyers. 0:13:37.760 --> 0:13:42.520 Okay, so you mentioned there's still some ambulance the dialysis specifically, 0:13:42.800 --> 0:13:46.480 sounds like that was mostly taken care of. There's other 0:13:46.640 --> 0:13:50.800 ambulance fraud out there. You mentioned that some people that 0:13:50.840 --> 0:13:54.439 there's billing ghost ambulances or people never even ride the ambulance. 0:13:54.720 --> 0:13:57.360 What's hot right now, what's the new ambulance fraud? 0:13:57.520 --> 0:14:00.360 So what's amazing here is that it seems like it's 0:14:00.400 --> 0:14:03.760 a constantly evolving marketplace. Right We have to think fraud 0:14:03.840 --> 0:14:07.200 is a technology where people figure out a loophole and 0:14:07.240 --> 0:14:09.360 then they tell their friends and these things spread and 0:14:09.400 --> 0:14:11.800 eventually the government catches up, and so we're playing cat 0:14:11.840 --> 0:14:14.680 and mouse every year. Right now. I think it's wound care. 0:14:14.960 --> 0:14:16.440 Okay, say more about wound care. 0:14:16.480 --> 0:14:20.120 There's been a rise in these expensive treatments for patients 0:14:20.120 --> 0:14:22.400 with non healing wounds. So, if you're diabetic, you're likely 0:14:22.400 --> 0:14:23.960 to have neuropathy, and one of the things that comes 0:14:23.960 --> 0:14:27.360 with diabetic neuropathy is that you often have wounds, particularly 0:14:27.360 --> 0:14:29.800 on their feet, where the patient doesn't heal. There are 0:14:29.840 --> 0:14:33.800 some modern technology skin substitute things you can graft onto 0:14:33.800 --> 0:14:36.440 these wounds that seem like they pay pretty well and 0:14:36.640 --> 0:14:38.920 potentially even work, and then a few doctors have just 0:14:38.920 --> 0:14:40.880 started spending millions of dollars on that. But that's a 0:14:40.880 --> 0:14:44.560 flash in the pan. Historically, we see fraud really rife 0:14:44.560 --> 0:14:48.360 in the durable medical equipment industry. There's been fraud in 0:14:48.520 --> 0:14:52.800 basically everything that healthcare touches. Another thing right now that's 0:14:53.080 --> 0:14:56.560 really popular. We're seeing a lot of fraud in vascular 0:14:56.600 --> 0:15:00.280 care that is helping patients who have collapsed vain be 0:15:00.360 --> 0:15:02.920 able to receive intravenous treatments. But again, it's just like 0:15:03.200 --> 0:15:03.440 just to. 0:15:04.360 --> 0:15:08.840 Drill into specifics, let's just durable medical equipment fraud. Yes, 0:15:09.080 --> 0:15:12.320 I want to get into it. What am I doing so? 0:15:12.840 --> 0:15:14.760 Or you want to get into durable medical equipment fraud, 0:15:14.760 --> 0:15:16.440 Well you're in luck because it's you know, durable medical 0:15:16.440 --> 0:15:18.760 equipment has been the wild West of the healthcare system 0:15:18.760 --> 0:15:21.880 for twenty years with billions of dollars of fraud. I 0:15:21.880 --> 0:15:23.520 have to admit I'm writing a paper on it right now. 0:15:23.560 --> 0:15:25.600 That's I'm excited. I know a lot about it. So 0:15:25.920 --> 0:15:28.200 you remember the scooter store they used to like advertise 0:15:28.240 --> 0:15:30.640 on late night TV. Are you an old person? 0:15:32.360 --> 0:15:32.600 Number. 0:15:32.640 --> 0:15:35.240 Would you like a free wheelchair? Yeah? So there's been 0:15:35.280 --> 0:15:39.120 some excellent kind of investigative journalism on this so durable 0:15:39.160 --> 0:15:42.480 medical equipment. I want people to think walkers, wheelchairs, oxygen pumps, 0:15:42.480 --> 0:15:45.400 hospital beds in their home. Things that people need that 0:15:45.480 --> 0:15:48.480 are supposed to be permanent. You know, seatpat machines, yep. 0:15:49.440 --> 0:15:54.440 And these are largely given by suppliers that are sometimes 0:15:54.480 --> 0:15:57.480 big national firms and sometimes small mom and pop shops. 0:15:57.760 --> 0:15:59.800 I want you to think about Flora. This is sort 0:15:59.800 --> 0:16:03.760 of a Florida story. If you're interested in selling someone 0:16:04.440 --> 0:16:07.880 a you know, a fraudulent walker or pomp or something 0:16:07.960 --> 0:16:09.320 like that, it's actually. 0:16:09.080 --> 0:16:10.760 Wait, what does it mean? A fraudulent walker one that 0:16:10.840 --> 0:16:11.960 doesn't work well. 0:16:11.840 --> 0:16:12.440 That you don't need. 0:16:12.560 --> 0:16:15.080 I guess this is super interesting, right, So what do 0:16:15.120 --> 0:16:18.040 we mean when we say fraud? Healthcare fraud has different types, right, 0:16:18.080 --> 0:16:19.520 and I can break it. There are three types of 0:16:19.520 --> 0:16:21.960 health care fraud. There's upcoding. That's where I sell you 0:16:22.040 --> 0:16:24.360 a little push wheelchair, but I go build a government 0:16:24.400 --> 0:16:27.200 for a super lux automatic wheelchair. We call that upcoding. 0:16:27.600 --> 0:16:31.280 There's medical necessity fraud. That's where we say that a 0:16:31.320 --> 0:16:34.960 patient needs something and they don't. And then there's substandard care. 0:16:35.200 --> 0:16:37.440 That's where we have a patient who actually does need 0:16:37.480 --> 0:16:39.960 something and we give them junk. And all of them 0:16:40.000 --> 0:16:43.240 happen in all forms of medicine, but in particular and 0:16:43.320 --> 0:16:45.680 durable medical equipment. I think it's a lot of medical 0:16:45.720 --> 0:16:48.400 necessity fraud. I think we have patients who are getting 0:16:48.400 --> 0:16:50.800 a knock on the door, high do you want this 0:16:50.920 --> 0:16:53.800 fancy new device free to you? Now, what's really interesting 0:16:53.800 --> 0:16:56.720 is we're actually supposed to collect a twenty percent copay 0:16:57.160 --> 0:16:59.760 for the durable medical equipment products. But the fraud and 0:16:59.800 --> 0:17:02.800 that's designed by medicare to make sure that patients aren't 0:17:02.800 --> 0:17:05.399 getting stuff that they don't need, so they. 0:17:05.240 --> 0:17:06.200 Have to have some skin in the game. 0:17:06.200 --> 0:17:08.440 They're supposed to do. But if you're a fraudulent firm, 0:17:08.600 --> 0:17:10.840 you just don't collect it. You're very happy to have 0:17:10.880 --> 0:17:13.720 the government's eighty percent, and the patient wouldn't take it 0:17:13.760 --> 0:17:14.520 if they had to pay. 0:17:14.640 --> 0:17:17.679 Yeah, what's been the I'm trying to think how to 0:17:17.680 --> 0:17:20.960 frame this, but I guess what's been the cultural or 0:17:21.359 --> 0:17:26.119 incentive approach in government to stamping out fraud. If I 0:17:26.160 --> 0:17:30.160 am a government official and I design a poor social 0:17:30.600 --> 0:17:33.000 service program of some sort that has a bunch of 0:17:33.000 --> 0:17:36.399 loopholes that ends up costing lots of money. Do I 0:17:36.400 --> 0:17:38.920 get in trouble or do I get rewarded if I 0:17:39.000 --> 0:17:42.000 managed to tweak the program so that it doesn't have 0:17:42.040 --> 0:17:42.919 a lot of fraud in it. 0:17:43.960 --> 0:17:50.040 The government generally underinvests and miss prices. It's anti fraud investments, 0:17:50.160 --> 0:17:52.960 by which I mean when we consider how we are 0:17:53.080 --> 0:17:55.560 measuring what the government is doing to stop fraud. You're 0:17:55.560 --> 0:17:59.760 talking about these career civil servants and how we reward them. Historically, 0:18:00.160 --> 0:18:03.359 the focus has been on how much are you getting back? 0:18:03.960 --> 0:18:05.919 And I've made this point in a bunch of research, 0:18:05.920 --> 0:18:07.960 and I recently released a white paper through the Center 0:18:08.000 --> 0:18:11.520 for Medicare and Medicare Medicaid Services saying how much money 0:18:11.560 --> 0:18:14.159 you get back is irrelevant. That is the wrong number. 0:18:14.400 --> 0:18:16.800 That is really the number that everyone in government is 0:18:16.840 --> 0:18:20.160 focused on. When you say anti fraud recovery. We caught 0:18:20.480 --> 0:18:23.040 this many people, we put this many people in jail, 0:18:23.280 --> 0:18:26.560 and we got a billion dollars back this year. And 0:18:26.600 --> 0:18:28.560 the point that I've made is the money you're getting 0:18:28.640 --> 0:18:32.320 back is just a small share of the effect of 0:18:32.359 --> 0:18:35.159 your anti fraud efforts. What you should really care about 0:18:35.359 --> 0:18:38.640 is your deterrence effect. And I've shown in research deterrence 0:18:38.640 --> 0:18:41.920 effects are in many cases like ten times larger than 0:18:41.960 --> 0:18:44.040 these recovery dollars. So you go to the Partner of 0:18:44.080 --> 0:18:45.960 Justice and you talk to their healthcare fraud people. They 0:18:45.960 --> 0:18:47.919 write a report to Congress every year. It's called the 0:18:47.920 --> 0:18:51.320 Healthcare Fraud and Abuse Report, and they put a number 0:18:51.400 --> 0:18:54.120 there for return on investment, and Congress asks them, tell 0:18:54.200 --> 0:18:56.479 us how much money did you spend and how what 0:18:56.600 --> 0:18:58.760 was your return on investment? And they say the number 0:18:58.800 --> 0:19:02.160 is four, And okay, first of all, four ex return 0:19:02.200 --> 0:19:04.879 on investment already very good. That immediately means that we 0:19:04.880 --> 0:19:07.119 should spend more resources there. But I think that's actually 0:19:07.119 --> 0:19:09.200 the wrong number. I think the number is forty because 0:19:09.200 --> 0:19:12.359 the four is only counting money that they're getting written 0:19:12.400 --> 0:19:14.840 to them in terms of checks back. But if you 0:19:14.880 --> 0:19:16.760 count to terrence, and you have to count to terrence, 0:19:17.160 --> 0:19:19.920 the value of these anti fraud efforts is huge. So 0:19:20.000 --> 0:19:22.480 do we reward people in terms of the value. They 0:19:22.520 --> 0:19:26.320 bring this to Tracy's question in some sense, yes, right, Look, 0:19:26.440 --> 0:19:28.919 there's a press release they trot out the attorney general, 0:19:29.280 --> 0:19:31.679 maybe the civil servant gets exact and. 0:19:31.760 --> 0:19:33.600 A minimum I could go to my boss and be like, 0:19:33.640 --> 0:19:35.600