Why Medicare Fraud Is a Blind Spot for Medigap Insurers

February 15, 2017| By Patricia Bailer | Medicare Supplement | English

Region: North America

Given the transactional nature of Medicare Supplement claims, inventory management tends to have more of a process versus risk orientation. However, simply processing a claim, and otherwise overlooking its complexities, leaves a lot at stake. For example, if claims are simply processed and complexities overlooked, what’s at stake includes:

  • Claim reimbursements at incorrect levels
  • Potential reimbursement of illegitimate claims
  • Increased exposure to a host of customer service and potential legal issues

The facts don’t lie. Medicare claims are fraught with fraud. No state or geographical location is immune, leaving Medicare Supplement (Medigap) carriers (and the insurance industry as a whole) vulnerable to fraud within the Medicare system. Fraud schemes continue to evolve, complementing those already known (e.g. ambulance services, dialysis, cosmetic surgery, etc.). In many instances, waste or abuse leads to the ultimate fraud.

CBS recently re-aired a 60 Minutes investigative report on this very subject, reminding us it has significant impact and is a multi-billion dollar crime.1 Similarly and citing a 2013 FICO study, the Coalition Against Insurance Fraud2 reports “Nearly one-third of insurers (32 percent) [said] fraud was as high as 20 percent of claim costs,” while others conservatively suggest healthcare fraud costs the nation about $68 billion annually.3

The blind spot for carriers is that the problem is seen as too big in scope and beyond their control, versus one that can be managed, thereby mitigating the risk. The impact on the insurance industry business, however, is too significant to ignore.

Systemic problems are often caused by inaction, and over an extended period they become much bigger issues than initially presented. Carriers choosing to look the other way - because the “federal government pays” - cost the industry billions of dollars each year. Ultimately, a lack of understanding of the controllable elements of fraud leads to inefficient claim processes and overall poor claim management.

In a future blog we’ll take a fraud case and dissect it to help pinpoint the actions that can be taken and how to take them. In the meantime, let us know if we can help you navigate the choppy waters of claim fraud.


  1. "Medicare Fraud: A $60 Billion Dollar Crime", CBS News, October, 2009.
  2. "FICO Insurance Fraud Survey Highlights 2013", FICO, August 2013.
  3. The National Health Care Anti-Fraud Association, cited at


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