Cato Scholars: Stimulus Could Lead to Scams to Make Madoff Blush


Here’s an uplifting gem from the folks at the Cato Institute. They assert President Obama’s stimulus package (and health care plan) could end up leading to major scams to seize money from the federal government — scams in which we’d all be investing. They speculate:

Government fraud has been in the news lately because analysts are expecting major abuses of the Obama administration’s $787 billion stimulus plan. One Deloitte expert argued that "swindlers, con men, and thieves could siphon off as much as $50 billion" of stimulus funds, which are vulnerable because policymakers are under pressure to shovel it out the door quickly.

Even more troubling is the potential for fraud and abuse created by President Obama’s other big spending proposals — particularly his giant health-care plan. Obama wants to inject hundreds of billions more tax dollars into federal health care instead of fundamentally reforming Medicare and Medicaid — broken programs that are already subject to Madoff-sized larceny. That is incredibly unfair to those of us paying the bills.

Take Medicare. The Government Accountability Office reports that the program makes about $17 billion in improper payments each year. And that doesn’t include problems in the new $60-billion-per-year prescription-drug plan, which is a juicy target for criminals. Harvard University’s Malcolm Sparrow, a specialist in health-care fraud, recently testified to Congress that official estimates are "lacking in rigor," are "comfortingly low and quite misleading," and exclude many kinds of fraud and abuse. He thinks that as much as 20 percent of the federal health-care budget is consumed by fraud, which would be $85 billion a year for Medicare.

Medicare makes a staggering 1.2 billion electronic payments each year, making it highly vulnerable to cheating by health-care providers and organized-crime rings. Criminals need only fill out the government forms carefully and the "claims will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all," according to Sparrow. A perfect example is the recent case of a high-school dropout in Miami who was able to single-handedly bilk Medicare out of $105 million from her laptop by submitting 140,000 separate claims for equipment and services.

So what do you think? Do you expect this to happen or do we all need to stop worrying so much?

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