Health Care Fraud and the Erosion of Trust

Katrice Bridges Copeland | August 27, 2023

In health care, trust is a foundational concept. Patients must trust that their medical practitioners are competent to treat them. The trustworthiness of medical practitioners encourages patients to disclose intimate facts about their medical issues. Further, patients must trust health care providers to demonstrate impartial concern for the patients’ well-being, also known as fidelity. In providing care, the needs of the patients, rather than financial incentives, must drive medical practitioners. Without this trust, patients may not cooperate with diagnosis and treatment. In addition to trusting providers, care outcomes are better if patients trust the health care system as a whole.

This Essay examines the importance of the government’s role in building and maintaining trust in health care providers and the health care system. Due to programs such as Medicare and Medicaid, the government is a “participant-payer” in the health care system as well as a “regulator-enforcer” of the system. As regulator-enforcer, the government has many laws and regulations aimed at promoting trustworthy conditions between patients, health care providers, and the health care system. For example, the Anti-Kickback Statute prohibits all health care providers that participate in federal health care programs from benefitting financially from referrals to other providers. It is a criminal law that has substantial penalties attached to it.

While the government’s efforts to promote trustworthy conditions as regulator-enforcer are not without criticism, most of the focus has been on the government’s failure (as participant-payer) to design a payment system that properly incentivizes health care providers to deliver cost-efficient quality care that prioritizes the well-being of patients. Historically, Medicare and Medicaid have used a fee-for-service reimbursement mechanism which reimburses providers for every item or service provided. This incentivizes providers to increase the volume of care, which drives up the costs of providing health care without improving patient outcomes. Thus, fee-for-service reimbursement misaligns the incentives of providers because it serves as an enticement for providers to put their financial aspirations above their patients’ well-being.

The government’s newest reimbursement method—value-based reimbursement—requires the government to pay for outcomes rather than volume of services. With value-based reimbursement, providers take on financial risk based on the quality of care they provide. Value-based reimbursement promotes relationships between providers and continuity of care. Thus, it also has the potential to increase trust in health care providers and the system as a whole because it takes away some of the improper financial incentives inherent in fee-for-service reimbursement.

While value-based reimbursement is promising, it carries its own fraud risks, such as manipulation of quality data, which are not currently addressed by the fraud and abuse laws. This Essay maintains that if value-based reimbursement is going to be successful at realigning incentives, the government as regulator-enforcer must enact criminal fraud laws and regulations to address the fraud risks in value-based reimbursement. Without assurance that the government is closely monitoring fraud and protecting the interests of patients, patients may not trust value-based reimbursement which could ultimately undermine trust in providers and the health care system.