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Obamacare and the ‘Health Care Hustle’

The U.S. Supreme Court’s debate over the constitutionality of the Affordable Care Act and the future of health care in America has dominated the national conversation for weeks. What’s not been as widely discussed is a little known provision in “Obamacare”, which, if overturned completely, could end up costing the taxpayers billions of dollars.

President Obama signing the Affordable Care Act on March 23, 2010
President Obama signing the Affordable Care Act on March 23, 2010

Health-care fraud is an $80 billion-a-year national epidemic, with some estimates at twice that much. President Obama’s signature piece of legislation is providing the blueprint for the government’s war against this fraud. The little-known provision in the bill provided an additional $350 million in anti-fraud funding, coordinated an unprecedented partnership among law enforcement agencies, and created real-time fraud prevention systems.

In fiscal year 2011, a record $4.1 billion in taxpayer money was recovered by authorities, according to the Departments of Justice and Health and Human Services.

“We have a simple message to criminals thinking about committing Medicare fraud: don’t even try,” HHS Secretary Kathleen Sebelius said at a recent Health Care Prevention Summit in Chicago. “Thanks to health [care] reform and our Administration’s work, we have new tools and resources to catch criminals and stop Medicare fraud before it happens.”

The Feds call their three-year crackdown on health-care fraud “HEAT”—short for “Healthcare Fraud Prevention Enforcement Action Team”—a joint operation of the DOJ and HHS. It’s made up of nine joint strike-force teams across the country. Each HEAT team combines the resources and expertise of federal, state and local investigators.

CNBC’s Investigations Inc. team spent six months with federal agents from the New York office of the HHS Office of the Inspector General(HHS-OIG), for the documentary "Health Care Hustle." CNBC shadowed federal agents and the HEAT teams on raids, getting a rarely seen firsthand look at the front lines of health-care fraud.

“I think there's just a lot of, so to speak, dirt bags. Now we’re dealing with organized crime, people that have no health care experience whatsoever,” said Tom O’Donnell, special agent in charge at the New York office of HHS-OIG. “They’re just in it to defraud the system.”

The fraudster’s schemes against the taxpayer have become more widespread and costly. For example, from 2000 to 2007, Medicare paid an estimated $60 million to $92 million in Durable Medical Equipment claims that contained identification numbers assigned to nearly 18,000 dead physicians, according to a 2008 report by the Homeland Security & Governmental Affairs Permanent Subcommittee on Investigations.

Despite the government’s expanded effort to crack down on health-care fraud, critics contend that it’s not nearly enough. They may have a point. The $4.1 billion recovered in 2011 is a tiny fraction of the total amount of fraud, as little as 3 percent.

“It’s not enough. We can’t continue to have $100 billion worth of fraud in federal government health-care programs,” Senator Tom Coburn (R-Okla.) told CNBC. “So you know, they may be making some headway, but they lack the processes and the direction to have gotten there quicker. And that’s my big criticism.”

Many believe the real solution to the fraud epidemic is to fundamentally overhaul Medicare and Medicaid. Coburn is currently a co-sponsor of a Republican plan that would change Medicare by shifting more seniors into private insurance, where Coburn says patients get better care for fewer dollars, and force the government to compete with that.

“So you can say, ‘I promise as a politician I’m not changing Medicare’, well that’s an out and out lie. It’s gonna change. Because the numbers won’t ever work,” Coburn said. “It has to change if in fact we want to keep that commitment to seniors.”

The government says detractors like Coburn are wrong and that their efforts are working. They claim that for every dollar that’s invested in anti-fraud measures, the taxpayer gets over seven dollars in return.

“I think if anybody bought a stock that returned $7 on every dollar invested, they’d buy it,” O’Donnell said.

The technology responsible for that hefty return is real-time data analytics, created by Obamacare funding. Investigators can now see claims submitted to Medicare and Medicaid in real-time and determine if and where there are any abnormal spikes or trends.

“We couldn't have done that 10 years ago,” O’Donnell said. “There's no way. We didn't have the tools, the expertise. We didn't have it.”

Gary Cantrell, deputy HHS inspector general in charge of investigations, agrees that the new technology is groundbreaking.

“Maybe we see a scheme in Miami, for example, that is emerging. So with that information from our Miami agents we can then create an algorithm to look across the country to see if that kind of scheme exists somewhere else,” Cantrell said.

The problem for investigators is that Medicare and Medicaid are honor systems, the provider bills the government for services, and it’s up to the government to determine later if the billing was for legitimate services or if the services were ever provided at all.

“We're trying to be more proactive and look at spikes and trends and things like that,” O’Donnell said. “We look at the data. We see some aberrations in billing. And then we react to it.”

But Coburn insists that a health-care system run by the free market is the way to get rid of fraud.

“I guarantee you there’s not near the fraud in the private insurance market. Why is that? Because they’re watching it,” Coburn said. “They have the systems perfected. They also know who the good doctors are, who the junky doctors are, who the cheaters are, and they’re not gonna be a part of their team.”

The debate over Obamacare and its effect on the health-care system will endure in the national spotlight for years to come. And while it does, behind the scenes, the never-ending task of combating health-care fraud and recovering your taxpayer dollars will quietly continue.

“We have way more tools now at our disposal to crack down on some of this fraud,” O’Donnell said. “And I think the schemes are getting more advanced. But so are we.”

Contact Investigations Inc.: Health Care Hustle

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  • Scott Cohn develops in-depth features, special reports and documentaries for CNBC and CNBC.com.