THE Sydney Morning Herald (SMH) alleged on its front page that doctors are “rorting” $8 billion from Medicare each year, including by “billing dead people and falsifying patient records to boost profits”. Another twenty articles plus multiple 7.30 stories have repeated these claims.
Medicare’s challenges, particularly its budget, are under close scrutiny as we emerge from a pandemic, with many frontline workers arguing the system is in crisis due to under-funding.
This joint SMH, The Age and ABC investigation suggests that “ambulances ramping, public hospitals not cop[ing], and general practices in tatters” are “all part of the same problem”: doctors defrauding Medicare. We agree these issues need urgent attention, but there is little evidence to suggest that doctors’ dishonesty is their cause.
This investigation claims its figure of $8 billion in fraud per year is based on data from the PhD thesis of lawyer Dr Margaret Faux. Prominent doctors, including Australian Medical Association President Prof Steve Robson have been publicly chastised for not having read Dr Faux’s 474-page PhD before denouncing her allegations.
Dr Faux suggested we read her PhD.
So we did.
We found no evidence in her PhD to support the $8 billion estimate of fraud. We think that number is likely to be much lower.
Dr Faux’s thesis contains qualitative surveys and interviews of doctors regarding the Medicare claims process. It has zero original quantitative calculations estimating the prevalence or extent of fraud. In her abstract, Dr Faux does make a fair point:
Dr Flynn’s thesis also has no original quantitative analysis to support Dr Faux’s claims. It presents National Audit Office estimates of fraud and overservicing – notably, very different things – costing $600-700 million a year, and a “conservative guess” from two Medicare experts who suggest fraud could be 10-15% of all billing (page 18). A sentence quoting an interview with unnamed “staff” at the Health Insurance Commission suggests they thought fraud could be “twenty five per cent or higher” of all Medicare billing.
Dr Faux’s second source is a 2012 perspective from Dr Tony Webber, a GP and previous director of Medicare watchdog, the Professional Services Review. He estimates inappropriate Medicare spending at $2-3 billion, but does not differentiate between what proportion is fraud (intentional deception for personal gain) versus low-value care (e.g. blood tests ordered that may not be necessary). He does not detail methods behind his estimation, lamenting that there are “no attempts to quantify this figure more accurately”. Even adjusting this estimate for inflation does not support the magnitude of Dr Faux’s claims.
Medicare fraud certainly exists. The National Audit Office’s 2020 Report estimates that fraud and inappropriate practice represent less than 1% of health providers, that 95% of providers are compliant, and that 2-4% of providers have only “occasional or inadvertent non-compliance” (Figure 2.2). It estimates non-compliance (a much broader concept than fraud) costs between $366 million and $2.2 billion (page 22), estimates generated by management consultants and Department of Health analysts. International benchmarks seem to corroborate a ~1% fraud rate. The Health Minister said the figures presented by Dr Faux are “way out of whack with any other figure provided to government”. Neither Fairfax nor Dr Faux’s PhD explained why these government figures should be considered a “gross underestimate”.
As many medical leaders have argued this week, practitioners engaging in fraud should be prosecuted fully; but to suggest a quarter of all billing is fraudulent seems a substantial exaggeration. Waste (such as where a doctor might order a test that they think will benefit a patient despite evidence suggesting it may not be completely necessary) occurs and must be addressed, but this is completely different to fraud, and is unlikely to profit doctors. It seems like a particularly strange move to defund NPS MedicineWise, a successful service which exists for the precise purpose of reducing over-prescribing.
So where did the $8 billion come from? We can only guess.
If you take the Medicare budget ($31.4 billion) and multiply it by 25%, you get $7.85 billion. We can’t say that’s how the figure was arrived at, as despite extensive media coverage, no further detail has been provided. We think this is a significant overestimate, even if waste and non-compliance are incorrectly conflated with fraud. Dr Faux’s own paper from 2015 cites current estimates of “leakage” (not the same as fraud) to be $1-3 billion. Why would it now have trebled?
A few back of the envelope calculations suggest how difficult to believe the $8 billion estimate is. If you presume every dollar is fraud (as has been portrayed), all 104 000 practitioners bill Medicare (many do not), and 1% of doctors actively defraud the system, they each pocket an outrageous $7.5 million per year. If you instead assume 5% of doctors defraud the system (a rate that would embarrass any profession) each doctor would pocket $1.5 million, a value that would look unusual to the Australian Taxation Office when added to the usual GP salary of around $253 000.
We would welcome further evidence, if it exists, to substantiate this figure and its calculation and allow for a robust debate about its true size.
If this $8 billion claim is indeed simply an unsubstantiated guesstimate, then the “Medicare rorts” media campaign is a dishonest attempt to unfairly suggest that GPs are cheating the government at a colossal scale, defrauding Medicare and taxpayers out of a quarter of its budget.
In fact, our highly skilled GPs are the essential bedrock who keep our health system running, and people’s trust in their doctors is essential to both their health and the health of Medicare. We should be very grateful to our honest and trustworthy GPs, who work tirelessly to keep us healthy.
Dr Eddie Cliff and Dr Tori Berquist are medical doctors and Fulbright Scholars. Dr Cliff completed a Master of Public Health at Harvard University, and Dr Berquist is a Master of Public Policy candidate at Harvard University.
The statements or opinions expressed in this article reflect the views of the authors and do not necessarily represent the official policy of the AMA, the MJA or InSight+ unless so stated.
Subscribe to the free InSight+ weekly newsletter here. It is available to all readers, not just registered medical practitioners.
If you would like to submit an article for consideration, send a Word version to mjainsight-editor@ampco.com.au.
Medicare’s challenges, particularly its budget, are under close scrutiny as we emerge from a pandemic, with many frontline workers arguing the system is in crisis due to under-funding.
This joint SMH, The Age and ABC investigation suggests that “ambulances ramping, public hospitals not cop[ing], and general practices in tatters” are “all part of the same problem”: doctors defrauding Medicare. We agree these issues need urgent attention, but there is little evidence to suggest that doctors’ dishonesty is their cause.
This investigation claims its figure of $8 billion in fraud per year is based on data from the PhD thesis of lawyer Dr Margaret Faux. Prominent doctors, including Australian Medical Association President Prof Steve Robson have been publicly chastised for not having read Dr Faux’s 474-page PhD before denouncing her allegations.
Dr Faux suggested we read her PhD.
So we did.
We found no evidence in her PhD to support the $8 billion estimate of fraud. We think that number is likely to be much lower.
Dr Faux’s thesis contains qualitative surveys and interviews of doctors regarding the Medicare claims process. It has zero original quantitative calculations estimating the prevalence or extent of fraud. In her abstract, Dr Faux does make a fair point:
“The research found that a principal cause of non-compliant Medicare billing in Australia is system issues, rather than deliberate abuse by medical practitioners. Medical practitioners have no choice but to try and comply with a complex system they cannot avoid, do not understand, and feel powerless to change.”Dr Faux seems to use two sources in attempting to substantiate her claims of fraud being “over 25% of [Medicare’s] total cost, and definitely not under 10%” (page 99). The first is Dr Katherine Flynn’s 2004 PhD, also referenced by The Age. We have also read Dr Flynn’s PhD, examining Medicare fraud between 1975 and 1995.
Dr Flynn’s thesis also has no original quantitative analysis to support Dr Faux’s claims. It presents National Audit Office estimates of fraud and overservicing – notably, very different things – costing $600-700 million a year, and a “conservative guess” from two Medicare experts who suggest fraud could be 10-15% of all billing (page 18). A sentence quoting an interview with unnamed “staff” at the Health Insurance Commission suggests they thought fraud could be “twenty five per cent or higher” of all Medicare billing.
Dr Faux’s second source is a 2012 perspective from Dr Tony Webber, a GP and previous director of Medicare watchdog, the Professional Services Review. He estimates inappropriate Medicare spending at $2-3 billion, but does not differentiate between what proportion is fraud (intentional deception for personal gain) versus low-value care (e.g. blood tests ordered that may not be necessary). He does not detail methods behind his estimation, lamenting that there are “no attempts to quantify this figure more accurately”. Even adjusting this estimate for inflation does not support the magnitude of Dr Faux’s claims.
Medicare fraud certainly exists. The National Audit Office’s 2020 Report estimates that fraud and inappropriate practice represent less than 1% of health providers, that 95% of providers are compliant, and that 2-4% of providers have only “occasional or inadvertent non-compliance” (Figure 2.2). It estimates non-compliance (a much broader concept than fraud) costs between $366 million and $2.2 billion (page 22), estimates generated by management consultants and Department of Health analysts. International benchmarks seem to corroborate a ~1% fraud rate. The Health Minister said the figures presented by Dr Faux are “way out of whack with any other figure provided to government”. Neither Fairfax nor Dr Faux’s PhD explained why these government figures should be considered a “gross underestimate”.
As many medical leaders have argued this week, practitioners engaging in fraud should be prosecuted fully; but to suggest a quarter of all billing is fraudulent seems a substantial exaggeration. Waste (such as where a doctor might order a test that they think will benefit a patient despite evidence suggesting it may not be completely necessary) occurs and must be addressed, but this is completely different to fraud, and is unlikely to profit doctors. It seems like a particularly strange move to defund NPS MedicineWise, a successful service which exists for the precise purpose of reducing over-prescribing.
So where did the $8 billion come from? We can only guess.
If you take the Medicare budget ($31.4 billion) and multiply it by 25%, you get $7.85 billion. We can’t say that’s how the figure was arrived at, as despite extensive media coverage, no further detail has been provided. We think this is a significant overestimate, even if waste and non-compliance are incorrectly conflated with fraud. Dr Faux’s own paper from 2015 cites current estimates of “leakage” (not the same as fraud) to be $1-3 billion. Why would it now have trebled?
A few back of the envelope calculations suggest how difficult to believe the $8 billion estimate is. If you presume every dollar is fraud (as has been portrayed), all 104 000 practitioners bill Medicare (many do not), and 1% of doctors actively defraud the system, they each pocket an outrageous $7.5 million per year. If you instead assume 5% of doctors defraud the system (a rate that would embarrass any profession) each doctor would pocket $1.5 million, a value that would look unusual to the Australian Taxation Office when added to the usual GP salary of around $253 000.
We would welcome further evidence, if it exists, to substantiate this figure and its calculation and allow for a robust debate about its true size.
If this $8 billion claim is indeed simply an unsubstantiated guesstimate, then the “Medicare rorts” media campaign is a dishonest attempt to unfairly suggest that GPs are cheating the government at a colossal scale, defrauding Medicare and taxpayers out of a quarter of its budget.
In fact, our highly skilled GPs are the essential bedrock who keep our health system running, and people’s trust in their doctors is essential to both their health and the health of Medicare. We should be very grateful to our honest and trustworthy GPs, who work tirelessly to keep us healthy.
Dr Eddie Cliff and Dr Tori Berquist are medical doctors and Fulbright Scholars. Dr Cliff completed a Master of Public Health at Harvard University, and Dr Berquist is a Master of Public Policy candidate at Harvard University.
The statements or opinions expressed in this article reflect the views of the authors and do not necessarily represent the official policy of the AMA, the MJA or InSight+ unless so stated.
Subscribe to the free InSight+ weekly newsletter here. It is available to all readers, not just registered medical practitioners.
If you would like to submit an article for consideration, send a Word version to mjainsight-editor@ampco.com.au.
Loading comments…
More from this week
Newsletters
Subscribe to the InSight+ newsletter
Immediate and free access to the latest articles
No spam, you can unsubscribe anytime you want.
By providing your information, you agree to our Access Terms and our Privacy Policy. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.