Healthcare fraud, abuse and waste siphon hundreds of billions of dollars annually from the U.S. economy, diverting critical resources that could otherwise be used to support patients, expand access to care, and improve medical services. It is estimated that 3% to 10% of total annual healthcare spending is lost to fraudulent and abusive practices.

With U.S. healthcare expenditures reaching $5.6 trillion in 2024, this translates to an estimated $159 billion to $530 billion lost to fraud, abuse and waste each year. These crimes range from isolated acts of deception by individuals to highly organized, complex schemes involving networks of providers, suppliers, and intermediaries.

At its core, healthcare fraud, abuse and waste involve intentional misrepresentation or deceptive practices designed to obtain unauthorized benefits from healthcare programs, private insurers, or government agencies—undermining system integrity and eroding public trust.

This is a Multiple-Part Newsletter: Part One defines Healthcare Fraud and Abuse; Part Two reviews Costs to consumers, Identify and prevent Healthcare Fraud, Abuse and Waste and how to file a complaint. Additional newsletters will explore how our government is identifying and combating fraud and abuse.

Before we review what, Medical Fraud, Abuse and Waste are, I would like to share a personal story I experienced. I am Gary Prala, Co-Founder of Healthcare Advocacy Insights.

Several years ago, I received a bill from my Primary Care Doctor for $185.00. As I examined the statement, I determined it was for an office visit 2 years old. I was certain my insurance plan had paid the bill. The following are the steps I took to determine what happened and why I owed $185.00:

1. I called the billing department of my Primary Care Physician and asked what this was for and why you waited 2 years to bill me. They said the insurance company took back the original payment for the office visit and now it was my responsibility. I asked why and they said the insurance company denied the claim because it was not medically necessary. I asked them to appeal the claim, and they refused stating that there was nothing they could do. They maintained that all was correct in their end and I would need to talk to my insurance company. I asked them to write off the bill because of the age. They refused, stating it was my responsibility. At that time, I said OK and will call the insurance company.

2. Their explanation sounded very weak to me. I did not receive an Explanation of Benefits from my insurance company and found that unusual. NEXT THE INSURANCE COMPANY.

3. Called my insurance company. The first agent I spoke to did not or could not tell me why they took back the payment other than it did not meet their payment criteria. I asked what that meant and did not get a straight answer. I asked to be transferred to a supervisor. The supervisor and I had a similar conversation, no straight answers. I finally threatened to send a complaint to the state’s insurance department that regulates insurance companies. After the threat, the answer to the question was answered. The claim was audited by the insurance company, and it was determined the billing code on the claim was not supported by documentation in my medical record. THIS IS CALLED UPCODING, BILLING FRAUD. Now it all made sense to me. NEXT THE BILLING DEPARTMENT OF MY PRIMARY CARE DOCTOR.

4. Called the Billing Department. Explained to them what the insurance company told me. Caught them totally off guard. Told them to write off the bill or I would go to the State Medical Society and Local News Station with my story. They wrote off the bill and I fired my Primary Care Doctor.

5. I am sure this story happens multiple times per day and the healthcare consumer has no idea what to do other than pay the bill.

6. My suggestions if this happens to you:

a. Always match your billing statement with your insurance explanation of benefits before paying the bill. This will ensure you know what you are paying and is correct.

b. Question the bill if you do not understand it. If the bill is very old, more than likely your healthcare provider made a mistake.

c. Lastly, I realize this is a long story for a $185.00 bill, but what if the bill was $1000, $5000 or more. Would you arbitrarily pay it? I doubt it. Use the outline of the steps above to make sure the bill is legit.

Let’s start by taking a deep dive by defining healthcare fraud, abuse and waste.

WHAT IS HEALTHCARE FRAUD

Per the FBI, Health care fraud can be committed by medical providers, patients, and others who intentionally deceive the health care system to receive illegal benefits or payments.

Per the FBI, Common Types of Health Care Fraud

Fraud Committed by Medical Providers

• Double billing: Submitting multiple claims for the same service

• Phantom billing: Billing for a service visit or supplies the patient never received

• Unbundling: Submitting multiple bills for the same service

• Upcoding: Billing for a more expensive service than the patient actually received

Fraud Committed by Patients and Other Individuals

• Bogus marketing: Convincing people to provide their health insurance identification number and other personal information to bill for non-rendered services, steal their identity, or enroll them in a fake benefit plan

• Identity theft/identity swapping: Using another person’s health insurance or allowing another person to use your insurance

• Impersonating a health care professional: Providing or billing for health services or equipment without a license

Fraud Involving Prescriptions

• Forgery: Creating or using forged prescriptions

• Diversion: Diverting legal prescriptions for illegal uses, such as selling your prescription medication

• Doctor shopping: Visiting multiple providers to get prescriptions for controlled substances or getting prescriptions from medical offices that engage in unethical practices

How fraud impacts you

• Receive higher health care costs, including copays, deductibles and cost sharing

• Be subjected to unnecessary or unsafe medical procedures or treatments

• Find that your insurance benefits have unexpectedly been exhausted

• Have erroneous information added to your medical records

• Receive the wrong medical treatment

• Be deemed uninsurable as a result of medical identity theft

Let’s move on to healthcare abuse

What is HEALTHCARE ABUSE

Healthcare abuse concerns practices or incidents inconsistent with accepted and sound medical, business, or fiscal practices. When these practices result in unnecessary costs to Medicare, Medicaid, or other insurers, or result in reimbursement for services that are not medically necessary or otherwise fail to meet proper medical standards, they amount to abuse.

What are examples of healthcare abuse?

• Billing for Goods/Services not Provided. …

• Paying “Kickbacks” in Exchange for Referring Business. …

• Billing for Medically Unnecessary Tests. …

• Charging Personal Expenses to Medicaid. …

• Inflating the Bills for Services Provided. …

• Double Billing. …

• Consumer Deception Fraud.

• Misusing codes on a claim

Understanding Financial Abuse And How Abuse Impacts Me

Financial abuse in healthcare can manifest in various ways, often intertwining with concepts like healthcare fraud and financial toxicity.

It typically involves practices that exploit patients for financial gain, leading to unnecessary costs or services that are not medically necessary. This can include:

· Fraudulent Billing: Charging for services that were never provided or upcoding services to receive higher reimbursements from insurance companies.

· Unnecessary Treatments: Recommending or performing medical procedures that are not needed, solely to increase billing.

· Medical Identity Theft: Using a patient’s medical identity to obtain services or goods fraudulently, which can lead to financial loss for the patient.

What is Healthcare Financial Waste in the U.S.

Healthcare financial waste refers to spending in the U.S. health system that is unnecessary, inefficient, or fails to deliver commensurate health benefits. It is a major driver of the country’s high health expenditures and is estimated to cost $760–$935 billion annually — roughly 25% of total U.S. healthcare spending JAMA Network+1.

Key Drivers of Waste

• Clinical waste: Includes low-value care, undertreatment, overtreatment, and poor care coordination. Clinical waste accounts for 5.4–15.7% of total U.S. health spending, with overtreatment alone contributing 2–8.4% Health Affairs.

• Administrative complexity: The U.S. spends far more per capita on administrative costs than other wealthy nations. In 2021, U.S. administrative costs totaled about $1,055 per person, with $266 billion of that being administrative waste Peter G. Peterson Foundation. Multiple payers, complex billing, and prior authorization requirements add to inefficiencies.

• Overtreatment: The fee-for-service model incentivizes high-volume care, leading to unnecessary procedures and tests. Estimates suggest overtreatment and low-quality waste cost $12.8–$28.6 billion annually Forbes.

• Operational inefficiencies: Inefficient resource use, redundant processes, and poor care coordination further inflate costs Health Affairs.

Why It Matters

Financial waste is often called “financial pollution” because it depletes resources that could be used for preventive care, underserved populations, or cost containment JAMA Network. It contributes to:

• Higher insurance premiums and out-of-pocket costs, pushing more people into underinsurance.

• Delayed or forgone preventive care, worsening health outcomes.

• Strain on the federal budget (34% of U.S. healthcare spending is federally funded) Peter G. Peterson Foundation.

Potential Solutions

Experts recommend:

• Policy interventions to reduce administrative burdens, such as simplifying billing and coding requirements.

• Value-based payment models to shift incentives from volume to quality.

• Care coordination improvements to reduce duplication and errors.

• Evidence-based guidelines to limit overtreatment and ensure only necessary services are provided.

• Cross-sector learning from environmental policy to address systemic inefficiencies JAMA Network+1.

In short, addressing healthcare financial waste is critical to making the U.S. health system more affordable, equitable, and sustainable.

WOW…..Healthcare Fraud, Abuse and Waste is a complicated and very costly for healthcare consumers. We all end up paying for it.

The next newsletter will review what healthcare consumers can do find and report Healthcare Fraud, Abuse and Waste.