Thursday, January 17, 2013

Reducing Health Care Costs by Reducing Fraud

The New York Times has reported that some health care providers may be billing for health goods and/or services that have not been performed.  In response, The New York Times reports that the current administration has warned health care providers that this will not be tolerated.

As an economist, I understand that there are incentive to commit fraud (not that I am in any way condoning or endorsing fraud), and that the optimal amount of fraud is positive (i.e. the additional benefits of reducing fraud eventually become less than the additional costs of reducing fraud).  Yet, reducing fraud in health care billing (which for the average final consumer is difficult to follow), the insurer does have a greater incentive to reduce fraud.  With the use of electronic medical records, it is possible to reduce fraud and thus to reduce health care costs.

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