Insurance fraud is a major financier of the nation’s large-scale diversion of addictive prescription drugs, but too few insurers realize fraud may cost them billions of dollars in total diversion-related losses a year, says a new report by the Coalition Against Insurance Fraud.
“Swindlers and drug abusers obtain the bulk of their illicit prescription narcotics through fraudulent insurance claims for bogus prescriptions, treating phantom injuries and other illegal deceptions,” says the report Prescription for Peril. The report is based on a comprehensive review of data and dozens of interviews with law enforcement, regulators, insurers, policymakers and others involved with drug diversion.
Diversion-related insurance schemes cost private insurers up to nearly $25 billion total annually in bogus claims and hidden costs of treating abusers who obtain their drugs through insurance fraud, Prescription for Peril reveals. The largest health plans may lose up to $857 million apiece annually.
Doctor shopping by addicts and abusers is the most common of many diversion schemes. Crooked doctors and pharmacies also make bogus prescription claims to obtain drugs for resale on the black market.
“(Insurers) cannot afford to treat drug diversion in a ‘low-dollar’ vacuum at the case level. The overall dollar costs are unacceptably high, and the potential for legal liability could magnify those costs. Payers must better research — and measure — the large costs that doctor shopping and other diversion schemes add to total medical expenses,” warns Prescription for Peril.
Nearly half of suspected frauds by Aetna, Inc. plan members involved prescription-benefit scams such as prescription forgeries in 2006, says the insurer, which aggressively combats diversion. One member obtained insurer-paid prescriptions from 72 doctors over 22 months, according to the report.
Prescriptions for suspected doctor shoppers cost nearly seven times more than for normal users, Medco Health Solutions found in its own member study.
Workers compensation insurers also are major victims; narcotic painkillers form a major portion of the workers comp industry’s $3 billion annual prescription tab.
Surprisingly, the largest fraud-related losses may not involve prescriptions themselves. Suspected prescription abusers incurred $41 in claims for office visits and outpatient treatment for every $1 in suspicious narcotic prescription claims, WellPoint, an aggressive diversion fighter, found in a study of suspected doctor-shopping plan members.
Some insurers respond effectively, but most respond inconsistently and with little impact, reveals the coalition’s report. “Most insurers focus almost entirely on traditional frauds by healthcare providers. They generally ignore scams by their plan members, who account for the bulk of drug-diversion losses,” Prescription for Peril says.
Beyond direct fraud-related losses, insurers could face costly lawsuits for failing to prevent a plan member’s prescription abuse. One pharmacy already is being sued, so the legal climate may be ripening for more suits, the coalition’s report warns.
Insurers should support better point-of-sale controls at pharmacies; improve datamining to identify doctor shoppers earlier; tighten reimbursement requirements; and push for strong state prescription monitoring programs, the report urges.
“Combating fraud and drug diversion is a sound business decision. But it’s also a corporate responsibility to the public,” the coalition’s report says.
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