Wednesday, September 22, 2010

Emergent fraud: Anthem and automatic payment denials

Anthem, so someone wrote, puts the Hell in Health Care. Today's particular slice of Hades is a lovely example of how fraud evolves when natural selection meets entropy. Nobody has to plan this kind of scam, it just happens when you add incentives to markets.

I uncovered this example when I phoned to double/triple/quadruple check that a costly (age sucks) preventive medicine procedure was covered by my consumer driven health care plan.

Indeed, I was told, it is. I didn't hang up though. I'm too paranoid experienced. I pressed a bit more. The pleasant representative let slip that there was one catch.

When she said this, I swear I heard her pray that the call recording would go unheard, lest her children go unfed. Imagination, I'm sure.

The catch is that the claim will always be initially denied. It will, however, be promptly paid after a customer calls to "Appeal". If a customer doesn't appeal, however, they will have to pay the claim themselves.

I am pretty sure I know how this scam came to be.

The plan I'm in was, I believe, once part of a small consumer-driven healthcare plan startup that was acquired by a larger company. The two companies would have had different IT systems. The larger company probably outsourced IT integration, but, as often happens, I expect that didn't go well.

If I'm right then Anthem still doesn't have the right software to manage our kind of plan. When Anthem receives a claim, the software must choose between paying for claims that should be denied, or denying claims that should be paid.

You can imagine how long it took to make that decision, and how different the outcome would be with different incentives.

Since they really aren't crooks, just regular people in a hard job, they wrote Appeals process documentation so their agents would pay on Appeal. Probably 95% of their customers do appeal.

Five percent or so, however, probably don't appeal. They pay, or go bankrupt, or whatever. That five percent is pure margin. That margin probably made someone a VP.

Fixing the problem would unmake a VP. There's no money for IT anyway.

And so it goes.

It's a scam, but there's no intelligent designer. Just evolution in action. Health insurance companies can't help but be evil. It's in their incentives.

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1 comment:

Steven Popkes said...

I don't believe it's accidental or the result of non-intelligent design. There's a similar thing that happens with car insurance. When your car is struck and the assessor comes out he/she is REQUIRED to assess only visible damage. The majority of the problem damage is, of course, within the car and not visible but the assessor is REQUIRED not to look. He then submits his assessment and the bill is paid or whatever.

That's where it stops for most people.

However, there's this little thing called the supplemental assessment which they will give you but you must ask for it-- or, rather, the autobody people you have given your power of attorney, first blood, rights to all subsequent earnings and 20% of any funds to, will ask them. The amount of the supplemental is often 2 to 3 times the amount found on the visual assessment.

And, like bent frames, it's the stuff that's important.