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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:
“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.
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The lack of transparency in the reports allows extreme overstatements to be made esp. on the rates and total costs… but the Actual cases e.g. https://www.psr.gov.au/case-outcome/psr-directors-update-september-2022 — if read does seem that there is a slow process full of members of the Association / Profession providing recommendations. If $250k was “taken” inappropriately in one year then there should be more than just being reprimanded, paying back the same amount (why not 200%) and don’t use these Medicare Rebate numbers of 12 months. Naming indivduals or the practice would provide a strong driver for due diligence – a simple solution could be somehthing like…. set a threshold value of 33% ( some would say 10%) of the Dr’s income – if this this benchmark is exceeded via fraud then name them!
I was always skeptical of the $8 billion figure that was splashed across the news headlines the other week, but people can’t really ignore the fact that waste exist in the system which the AMA and other bodies should really acknowledge.
In saying that, I did read Dr Faux’s thesis. I agree with Dr Cliff and Co. in that I couldn’t found any direct evidence in thesis that support the $8 billion rort claims but the thesis did found a significant gap between what health professionals know and what they actually do when billing medicare, which may suggest potential ‘unreported’ fraud maybe? but that claim is not supported by any robust facts but hearsay to be honest.
I think what I found interesting in Dr Faux’s findings were the legal cases around individuals who were brought to the courts for actual fraud. Those legal cases saw the courts applying a pretty high bar when concluding billing fraud in the system by individuals, so I suspect any future debate about any estimates on fraud should really consider those factors into future analysis. Otherwise, addressing waste and over-servicing in medicare billing is an easier target politically when trimming the budget bottomline and dealing with inflation.
There need be no surprise. Since medical school while resident at a College in Sydney University it became clear to me that there was a general antipathy to medical students and doctors quite apart from the use that evangelists of the left made of doctors as “fat cats” in the absence of Lords, Earls , Barons and other obscenely rich and powerful people. Successful Socialist revolution requires that a class of oppressors and oppressed are set up to harness zeal for redress of the unfair imbalance at the root of the social situation.
Read Solzhenitsyn and notice how the kulaks were given the same attribution.
Thank you, Dr Munford, for illustrating other examples, as I think a lot of the spotlight for the public, seems to be falling again upon GPs. Yes, it does occur and we do need to acknowledge it and address it within the profession.
[And thank you for being a positive and memorable supervisor during my anaesthetic term years ago! 🙂 ]
Obviously the $8 billion is a gross over estimate which as the article points out is probably just calculated from multiplying the total Medicare budget by the throwaway anonymous estimate of “up to 25%”. However, it does not mean that there is not a significant incidence of inappropriate billing; which might be described as “sharp practice” that verges on fraudulent, in the same way that some accounting practices blur the line between tax avoidance and outright tax evasion. Examples of this that I am aware occur include: some anaesthetists reviewing patients immediately prior to surgery then claiming as a separate attendance for pre-anaesthetic assessment (when I queried this practice I was told if you step outside to make a phone call or check something in recovery before returning to the patient it counts as a separate attendance); some anaesthetists again claiming for anaesthesia for cataract surgery where the procedure is done under topical local anaesthetic administered by the surgeon & the anaesthetic service consists of an intravenous cannula, a small dose of midazolam & putting on a pulse oximeter (and in one case the anaesthetic fee for this 20-30m procedure on the father of a colleague of mine was $800 ABOVE the Medicare & health fund rebates); also some general practitioners utilising non-medical staff to write standardised “cut & paste” care plans for patients with chronic disease. While I have no way of estimating the prevalence of such practices, it would be naïve to think that the examples I have witnessed are the only such ones that have ever occurred.
Meanwhile if another ABC investigation is to be believed, some “cosmetic surgeons” are apparently crossing the line completely into outright fraud by claiming Medicare rebates for cosmetic procedures rebranded as medically indicated surgery.
But ironically, the biggest incidence and offenders in this regard are the State health service sanctioned cost shifting initiatives – where creative administrative practices see services for public patients within public hospitals re-categorised as private outpatient services. Examples of this include: where public hospital clinics and their staff are “leased” by anaesthetists for a session or a day for preanaesthetic consultations on public patients which are then billed to Medicare; also where hospital radiology facilities are similarly redesignated as independent practices that perform procedures on public patients who are not recognised as such but then immediately post-operatively are admitted to that hospital as – you guessed it – public patients. While one might admit to a sneaking admiration for such creative machinations, they quite definitely fall outside the spirit and intent of the Medicare system. Once again it is unlikely that my own knowledge of such goings-on is a singularity.
So, while we can as a profession pick holes in Dr Faux’s thesis we should conversely recognise that there is no smoke without at least some fire. And to extrapolate the metaphor further, if we as a profession do not extinguish the fire ourselves, and be seen to be doing it, then external fire brigades will be sent in – i.e. yet more regulations, documentation, audits & penalties to deal with; which cynics, or some might say realists, will suspect will further penalise innocent mistakes, all while the cunning & clever find new ways around these.
I’m an old GP who has worked solo, corporate, taught at Uni and for Black Dog and been on GP Divisions. I am so disappointed that Dr Faux failed to understand some basics. General practitioners have been fiscally and emotionally abused for the last decade or two. We know the personal problems our patients are struggling with and many of us cannot add to their woes by asking them for the adequate GP fees that a number of federal governments have denied us. We have been giving charity on a daily basis. The RACGP have long ago abandoned their role to represent their flock adequately. Vale caring GPs like me. It’ll be self help apps and EDs being smashed. Oh, I forgot there’s the pharmacists and their fab Guild. Good luck with that…
Female genital mutilation is a crime, but since July 2013, when gender was defined as a social rather than a biological construct, Medicare has being paying doctors for female circumcision. As a result,
* 2,007 girls and women were “circumcised” from 1 July 2013 to 31 July 2022.
* 815 (41.06%) were girls less than 5 years old!
* Another 155 (7.8%) were girls between the ages of 5 and 15.
970 (48.87%) of the females ‘circumcised” under Medicare were under 15!
Could this be coding errors?
When I checked the numbers I found:
• 1.5 times as many vasectomies as circumcisions, but
• 6.75 times as many ‘female circumcisions’ as ‘female vasectomies’!
• 970 circumcisions of girls under 15 but NO vasectomies of girls under 15!
• 815 circumcisions of girls under 5!
Female vasectomy rates are certainly anomalous, but female circumcision rates are 6.75 times higher!
Incorrect data entry?
Perhaps like billing person 4 instead of person 3 on a family Medicare card?
If so, why did Medicare record hundreds of circumcisions of girls under 15 but NO female vasectomies on girls under 15?
Why didn’t all these payments raise red flags?
Enough already!
The Medicare subsidy for circumcision should be subject to two requirements:
1 The patient must have a PENIS.
2 The MEDICAL NEED for the circumcision must be DOCUMENTED.
Surely this is not too much to ask.
I write regularly for my local paper. It’s a great way to engage with the community and the reporting isn’t driven by sensationalism.
I think every doctor reading this article should find a local platform to share this analysis. Online, spoken, or paper published if all of us do something locally using this analysis of Dr Faux’s thesis. This is one way we could match the reach of the big media companies promoting these lies about the extent of Medicare fraud.
I support Louise Stone’s excellent and considered viewpoint that the real rort is the undervaluation of what GPS do . Especially the thousands of hours in involuntarily donated to the piles of paper work and care for the elderly, underprivileged , disabled and complex patients.
Unfortunately though, there are tens of millions if not hundreds of millions wasted on unnecessary investigations/imaging, in outpatient management and hospital practice.
Too late…
Great article, as a working GP for over 25 years with most of that also as a Medical Director for our group of over 20 GP. I have often seen Doctors afraid of getting Medicare Audit that they bill nothing but level B all day long even for long and complex consultations. It is a great insult to suggest that we are trying to “game” the system and rorting the way reported. I certainly have not seen that in our group.
25% of all Medicare Consults are Fraudulent ??? As a profession, can we sue for defamation?
Journalists have never been known for their maths ability
Medicare is in need of a massive restructure.
There are individuals, groups, and organisations that exploit it.
If you haven’t seen it, then you can only comment that you have not seen it.
Unfortunately, I have seen it on a large scale (to the effect of millions over a few years) and I am glad that someone is pointing it out.
It’s interesting that the concepts of fraud and overservicing – vastly different concepts – have been replaced by “inappropriate practice”.
What is this?
Practice that your “peers” consider inappropriate.
But who are your peers? As long as they come from the same craft group as you, they are acceptable.
However those who have been accused of such practice often find that your peers are simply people who are content to do Medicare’s bidding.
In regards fraud, surely this is a criminal offence and should be tested in a court of law.
The outgoing Director of the PSR openly admitted that with the charge of inappropriate practice the practitioner could be dealt swiftly and made to repay whatever moneys Medicare demands.
However this prevents a practitioner from being able to access proper judicial processes and one is left to question as to whether the cost of funding a legal case against the Commonwealth is worth the trauma.
The system stinks and there is no justice in a large number of such cases.
Unfortunately, this will not be reaching the general public. Their opinion has been made based on the hit piece published by the SMH. Several more have been published in the recent days leading up to a budget announcement. Coincidence? I think not.
Most read headline news and not actual article.. also no point if preaching to the converted ie drs here on a med journal page.. we need a reporter to write this with opposing headlines!
Medicare is anachronistic and labyrinthine …. we need to train our junior doctors in correct billing practices as part of them gaining GP/specialist qualifications. In this way they can better navigate the system.
This is great! As other people have mentioned, please forward to media watch!
Yes Certainly Worthy of the Media Watch treatment based on the lack of real evidence used on such a major and Complex issue
It looks like this research suffers from the Wozzle effect. This research bias is clearly described in Wikipedia, so I won’t repeat the description here. It’s a very interesting research bias, exemplified by Dr Faux’s thesis.
Pity the headlines have bolted out of the gate, and there is dearth of critical thinking in the general public reading them.
Goodness me! Since when does a thesis have the same credibility as an investigative report, Senate inquiry or even a Royal Commission?! Not worth losing sleep over this one!
Succinct and easy to understand.
Perhaps this now can be forwarded to media watch for review of media coverage