Updated at 11:18 a.m. on Nov. 18.

These responses are a good indication of why fraud in Medicare and Medicaid has festered for decades and now reaches into the tens of billions of dollars annually. It largely goes unacknowledged and/or is dismissed in favor of discussing other issues. For example, the mention of tax evasion is completely unrelated to a health care blog (But on that topic, it is worth noting that tax evasion is highest in high-tax jurisdictions both domestically and internationally so lower, flatter taxes would go a long way toward ameliorating tax evasion).

Yes, we could talk about the jaw-dropping amounts of fraud in the TARP bill, the stimulus package, the General Motors bailout, the Long Island Rail Road pension program, or the antics of Bernie Madoff. But all of those are beyond the specific topic of fraud in Medicare and Medicaid and what to do about it.

Mr. Reinhardt’s concern about the lack of a concise definition of fraud is a pitch-perfect academic response. You can just picture a gathering of ivory tower college teachers sitting around for months debating what is fraud and what isn’t, while convicted murderers with seventh grade educations swindle Medicare for services never delivered. Here again I commend to readers the 60 Minutes piece that began with Steve Kroft’s warning that what you are about to see may, “raise your blood pressure.” Average Americans know theft when they see it.

Among Medicare’s bigger problems is lack of front-end authentication of new suppliers. Here, health information technology can play a significant role. Consider lessons from the credit card industry which processes $2 trillion in transactions every year, supports 700 million cards and involves millions of vendors selling countless products. The fraud rate in that industry is less than one-tenth of one percent because they actually keep bad actors out of the system in the first place and use advanced algorithms to detect and shut down suspect behavior within hours.

In his September 9th address to a joint session of Congress, President Obama spoke of the, “hundreds of billions of dollars of waste and fraud,” in our health care system. He was right. Unfortunately, the leading bills in Congress represent a colossal failure to deal with fraud in any serious way. The CBO says anti-fraud efforts in the Dingell bill will capture at most a few billion dollars in fraud over the next ten years combined. The CBO score of the Baucus bill was equally anemic. If Senators want to be serious about cracking down on fraud in Medicare and Medicaid, they can start by looking at the solutions provided in the bipartisan Seniors and Taxpayers Obligation Protection Act.

Joe Luchok, a communications consultant who has worked on health care issues for organizations including the March of Dimes and the now defunct Health Insurance Association of America, argues that health information technology might offer limited improvement, but that the biggest help would come from increased enforcement. Here’s what he has to say:

“Health care fraud will be very difficult to stop. We may be able to control some of it but stopping it is a daunting task. The system is so large that it would take a massive army of people to control it.

According to a recent report funded by the Robert Wood Johnson Foundation(RWJF), estimates of the cost of health care fraud ranges from $68 million to $220 billion. Speaker Gingrich splits the difference and assumes around $100 billion, but the bottom line is that we do not know how much fraud there actually is.

The report also estimates that 80% of the fraud is committed by providers,10% by consumers, and the remaining 10% by others such as insurers or their employees. It will take multiple systems to control all three.

A good IT system will help if there are enough skilled people to monitor the system but it will not eliminate the problem.

As long as the system is run by people there will be fraud. The basic rules of control are the same for all things, the bigger the system, the more difficult it is to control. A number of fraud laws have been enacted, such as the Federal False Claims Act, the Anti-Kickback Statute, and the Health Insurance Portability and Accountability Act, yet we still lose money to fraud.

The best we can hope for is to control some of the bigger abuses of the system and that will take more people working enforcement.”

Two features of Mr. Gingrich’s set-up stem stand out.

First, he does not offer a concise definition of fraud. Second, whatever he may mean by it, he seems to believe it occurs only or mainly in the public Medicare and Medicare programs.

Defined-benefit health insurance contracts, whether they are public or private, are among the most complicated contingency financial contracts. A third party promises to pay for all or a defined fraction of all expenses triggered by what is loosely defined as the “medically necessary” response to a perceived illness, real or imagined.

One should expect that such a contract would invite fraud and waste. Further-more, it is not easy to distinguish ex ante or ex post between waste and fraud.

Unlike, it seems, Mr. Gingrich, I believe fraud and waste are triggered by both public and private defined-benefit health insurance contract. We talk more about fraud in Medicare and Medicaid because these programs are at least semi-transparent. By contrast, the world of private health insurance is opaque and shrouded in carefully kept secrecy on virtually any feature of the insurance contracts.

In fact, I am not aware that we know in which sector – the private or the public – the incidence of fraud and waste is higher. Any estimates on that account probably are driven as much by ideology as by robust empirical evidence.

After all, payments under Medicare are not made by government directly, but by private intermediaries who also manage their own private health-insurance contracts. If these intermediaries are unable to detect fraud against Medicare, what would make us believe that they can detect fraud under their own private contracts?

Furthermore, the fraud against Medicare and Medicaid reported in the press usually involves small, fast-footed entrepreneurs who conduct hit-and-run raids against public programs. I am not sure how much of such fraud can be traced to established health systems.

Having served on the board of directors of both non-profit and for-profit hospital systems, I can attest to deep fear these boards have of the Office of Inspector General of Medicare and of similar state agencies. We have hotlines to report any hint of fraud against these public programs anywhere within the organizations, we have elaborate internal control departments, we have a V.P. of Compliance, we engage external consultants to make sure that our internal-control systems and hotlines work properly to preclude fraudulent billing – especially miscoding. And we have no such apparatus to watch over private billing.

I do believe there is fraud in our health system, but there is probably more waste than outright fraud, as John Goodman observes.

Furthermore, one cannot but agree wholeheartedly with Henry Aaron’s remark that there is something odd about the endless hand wringing over fraud in health care, often by people who shrug their shoulders at tax cheating. Perhaps these folks view cheating on income taxes as just good supply-side economics and thus good for the economy.

Scott Kimmel, founder of Biometric Technologies, Inc., argues that fraud prevention is all about health information technology, and he offers here an explanation of biometrics as one possible solution.

“Perhaps Mickey Mouse is the answer to eliminating health care, Medicare and Medicaid fraud. The Disney theme parks have 45 million visitors who enter their parks every year by placing their finger on a biometric device. The same technology can and should be used to eliminate health care fraud.

Blue Cross states that at least 75% of health care fraud is committed by the provider and 18% by the patient. The largest type of provider fraud (approximately 36%) is billing for services not rendered. By replacing a conventional sign in sheet with a biometric device, biometric software can provide the Government or insurance company with an auditable record consisting of the patient being billed, the physician submitting the bill and a biometric record which confirms patient presence on the date of the bill. This simple change to a biometric sign in product eliminates billions of dollars in phantom claims.

In addition, a biometric device eliminates “card swapping” fraud where one member loans his or her insurance card to another to receive fraudulent benefits. By linking each member’s ID to a given biometric template, if a patient were to use someone else’s insurance card, although the member ID would be the same, the biometric template is different for each person and would be rejected before service is provided.

Many of the solutions to eliminate fraud suggest hiring more prosecutors or using software tools for data analysis of claims to look for patterns of fraud. The problem with these suggestions is they do not adhere to the “K.I.S.S” principle. First, hiring more prosecutors is useless of you can’t catch the criminals you seek to prosecute. Second, software looks for patterns which flag a potential fraudulent claim. The “K.I.S.S” principle would suggest instead of looking for patterns, look for patients. We could all agree that in almost every instance if a patient never entered a medical office on the date of the submitted bill, it is not necessary to adjudicate a claim and perform data mining analysis. Only biometrics can confirm patient presence at the point of service as the patient must have physically entered the office to place his finger on the biometric product.

Importantly, Biometrics is entirely a pre payment solution. No more pay and chase and trying to recoup paid claims, with biometrics the insurance company or Government receives this confirmation PRIOR to the bill being paid.

Biometric use in health care is not just an anti fraud solution. Providers and patients are protected from medical Identity theft which is the fastest growing form of identity theft. By linking a patients ID to a biometric id, even if a patient were to have their medical identity stolen, although the member id would be the same, the biometric would never match . Biometrics protects a provider from liability by ensuring their electronic medical record is accurate and not filled with entries based upon medical id theft. As the movement to electronic medical records, catastrophic consequences await when a provider relies upon another physician's record which was based upon a false identity.

Lastly, the big brother argument about biometrics is archaic. A fingerprint is never stored, it is converted to a numeric code to protect patient privacy.”

Fraud on Medicare is a crime. Rooting it out should be a high priority—a much higher priority than it is today. That takes money to support enforcement agencies—the HHS Inspector General, the FBI, and others. Even with the meager resources now available to it, the HHS Inspector General currently identifies billions of dollars of fraud each year. No call to deal with health care fraud that does not endorse increased spending and more staff to deal with it should be taken seriously.

The idea that instituting health IT will contribute in any significant way to solving the fraud problem is breathtakingly naive. Electronic fraud is not materially harder than paper-based fraud. Tax computation, for example, is now largely electronic and the biggest frauds still go undetected. Why? Because enforcement agencies are starved for staff and budget to go after it.

Furthermore, tax fraud—genteelly labeled ‘evasion’—still vastly exceeds Medicare fraud. It would be refreshing if Mr. Gingrich would be as vocal in supporting staffing and funding adequate to root out tax fraud as he is on behalf of likely-ineffective technological ‘fixes’ to detect health care fraud. To root out both kinds of fraud will take bigger budgets and more staff than are now available for responsible enforcement agencies. Because fraud is serious, those talking about it should get serious!

The biggest waste of resources is not the result of fraud. It is the result of over consumption of care. Too many doctor visits, too many tests, too many procedures -- all because health care to the patient is free and because providers derive income from these services.

The answer is to empower patients, give them control over more of the health care dollars, and allow them to pay the full cost of the services they receive. This in turn, will cause providers to compete on price and compete in other ways that will lower costs and raise quality.

This is also the surest way to eliminate fraud.