This is the second of a two-part series. In the first part, I outlined how rampant fraud has supported the business model of health insurance companies providing services to self-insured employers. In the process, it has created a growing legal exposure for self-insured organizations (where the majority of the American workforce receives health benefits) due to a breach of fiduciary duty under ERISA regulations.
A spate of cases have sprung up on the edges of ERISA, but now this issue is moving to the core of ERISA fiduciary duties. ERISA experts state that the fact that healthcare costs are hitting the middle class and the heartland so hard is accelerating the movement by class action lawyers to reform health benefits.
This simply follows what has already been done in retirement benefits (the other half of ERISA). In effect, there has been a redistribution tax from the middle class and their employers to a highly wasteful healthcare industry. Class action attorneys consider themselves to be the defender of the average Joe. With ever-increasing premiums, deductibles, and medical bill-driven bankruptcies, the same scrutiny that has long been the purview of 401(k) plans is now about to shine a light on the rampant fraudulent practices within health benefits.
National security threat will heighten focus on lax health benefits practices
With a former Health & Human Services Secretary on the board and former Treasury Secretary as an investor of a company led by a graduate of the Naval Postgraduate School and military officer, they don’t take lightly the national security implications of outdated security and fraud prevention tactics that are common among health insurers. Dave Adams, CEO and Founder of HealthcarePays, stated the following:
“We have seen numerous, almost daily, cases of foreign nations, organized criminal groups, and other ‘Bad Actors’ using the gaps and weakness of our healthcare payment system to steal billions of healthcare dollars from both private and public payers. It is almost impossible to imagine that terrorist organizations, like ISIS, have not seen this weakness as well and may even today be using this as a way of funding their terror activity against the United States and our allies war on terror. As a retired military officer this gives me great concern.”
Attention on healthcare fraud often focuses on Medicare fraud (e.g., see list of international fugitives here), however, fraud perpetrated against employers—and by extension the middle class—has gone relatively unnoticed. As the Economist reported, thieves love America’s health system as it provides easy pickings. Fig-leaf fraud protection that happens after the fact is like trying to stop fraud with a musket in an era of unmanned drones.
Adams finds it particularly disturbing that America’s adversaries have found what amounts to an open bank vault that no one is guarding, especially amongst corporate America. As I speak with corporate executives, they have had an unsettled feeling things weren’t quite right but couldn’t pin down the reason. When they hire companies such as HealthcarePays to scrutinize blindly paid claims (e.g., 95% “auto-adjudication” is common), they not only find stunning sums of money that have gone out the door for clearly fraudulent claims (e.g., a middle-aged man having 7 circumcisions), they find they are unwittingly funding organizations that seek to harm to America.
Having seen typical IT systems inside of health plans as an IT consultant, it’s remarkable how antiquated they are. Friends who do consulting have recently shared stories such as a Blue Cross that literally couldn’t find over $60 million—it just vanished.
Why are incumbent healthcare organization so outdated? The biggest reason is that a dynamic has been created where spending “other people’s money” in a cost-plus model is rewarded by driving up costs. Fraud prevention, for example, adds costs and reduces money flowing through their system and the accompanying money-making opportunities outlined in part one. The problem is we are all “the other people” in that “other people’s money” dynamic. To add insult to injury, those dollars are leaving the U.S. economy. Worse yet, they are funding criminal and terrorist activities.
We don’t need a right solution or a left solution. We need an American solution.
Status quo protectors in any industry know that politicizing a topic is a time-tested way to preserve the status quo. Increasingly, Americans recognize that they are getting played when healthcare gets politicized (which is very easy to do). In my 7-year quest to find all of the structural fixes to the healthcare’s epic under-performance, the great news is that so-called conservative ideas are being implemented by progressives and so-called progressive ideas are being implemented by conservatives. These organizations realize that the best way to slash healthcare costs is to improve benefits.
When there is a great national threat, Americans have proven time and again that they will put aside tired political labels. With the middle class dealing with an economic depression longer than the Great Depression and terrorist-connected fraudsters emptying our coffers to fund doing harm to America, the threat to the American Dream has never been clearer.
The combination of Congress getting sensitized to the terrorist threat and class action lawyers fighting on behalf of the American middle class has the potential to have a greater impact than Obamacare. There is no party divide when it comes to protecting the homeland and the American Dream.
This was posted on Pulse on 11/01/16. It has been republished here with the author’s permission.