Defense Health Care

It is impossible to quantify precisely the amount lost to fraud in the military health care system, but the Defense Department (DOD) and the health care industry generally agree that fraud and abuse could account for as much as 20 percent of all health care costs. Because DOD spent $5.7 billion on managed care between 1996 and 1998, DOD could have lost more than $1 billion to fraud and abuse during this time. Fraud and abuse can also undermine the quality of care provided and can harm patients' health. For example, patients might receive incorrect diagnoses and inadequate treatment when a provider bills DOD for fabricated test results. DOD and its contractors have had limited success in identifying fraud and abuse in TRICARE--DOD's managed health care system. To its credit, DOD recognizes that it needs to reduce its vulnerability to fraud and abuse and has identified several revisions it could make to its antifraud policies and requirements. However, it has been slow to implement these policy changes, which would require contractors to establish a more aggressive fraud and abuse identification program.

GAO noted that: (1) it is impossible to precisely quantify the amount lost to health care fraud and abuse given the nature of such activities, but there is general consensus in DOD and the health care industry that fraud and abuse could account for 10 to 20 percent of all health care costs; (2) given TRICARE managed care contract expenditures of $5.7 billion between 1996 and 1998, DOD could have lost over $1 billion to fraud and abuse during this period; (3) in addition to the financial loss, health care fraud and abuse can also adversely affect the quality of care provided and may cause serious harm to patients' health; (4) DOD and its contractors have had limited success in identifying TRICARE fraud and abuse; (5) for example, contractors have identified a negligible number of potential fraud cases; (6) this low level of fraud identification has occurred, in part, because DOD contracts do not require contractors to aggressively identify and prevent fraud and abuse; (7) during this same period, DOD recovered about $14 million in fraudulent payments out of the $5.7 billion spent; (8) to its credit, DOD recognizes the need to reduce its vulnerability to fraud and abuse and has identified a number of revisions it could make to its antifraud policies and requirements; (9) however, it has been slow to implement these policy revisions, which collectively would require contractors to put into place a more aggressive fraud and abuse identification program; (10) once these revisions are implemented, existing contracts can be modified to include specific results-oriented goals and performance measures, thus putting DOD in a better position to evaluate contractors' progress in identifying and reducing fraud and abuse; (11) given the magnitude of potential financial loss and harm to patients' health, it is important that DOD place a high priority on, and establish a concerted strategy for, reining in health care fraud; and (12) DOD's strategic plan for the military health system, prepared in response to the Government Performance and Results Act of 1993, provides an appropriate vehicle for articulating DOD's strategy and establishing how the agency will identify and prevent TRICARE fraud and abuse.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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