LTC Bullet: LTC Insurance Fraud
Friday,
April 17, 2026
Seattle—
LTC Comment: As
health insurance fraud surges nationwide, we consider how it impacts LTC
insurance in the private and public sectors after the ***news.***
*** LTC
CLIPPINGS: Did you catch these stories recently? Our LTC Clippings
subscribers received them in real time including Steve Moses’s
trenchant, often ironic, sometimes humorous, usually concise “LTC
Comments.” To subscribe or for a free trial, contact Damon at 206-283-7036
or
damon@centerltc.com. Examples below:
4/13/2026,
“Report:
With spend-down of assets, US long-term care system ‘effectively penalizes
aging’,” by Kathleen Steele Gaivin, McKnights Senior Living
Quote:
“Costs associated with the provision of long-term care in a system that
requires lower- and middle-class older adults to spend down their assets
to pay for home care or life in an assisted living community or skilled
nursing facility perpetuates ‘cycles of wealth inequality,’ making it
difficult for future generations to build financial security, according to
a new
study published by the Roosevelt Institute. … ‘This spend-down process
interrupts the potential for intergenerational wealth building, after what
is often a lifetime of work and saving by low-income and middle-class
families, perpetuating cycles of wealth inequality,’ Forden said.
‘Meanwhile, these costs are increasingly captured by profit-driven
corporations and private equity firms.’”
LTC Comment:
Medicaid asset spend down is the most misunderstood concept in LTC
financing jargon. It crushes the poor and lower middle class but gives the
middle-class and affluent an off ramp. Unlike income spend down that
requires spending for care, asset spend down can be done simply by using
countable wealth to purchase exempt resources. I explained how that works
and estimated how much it costs Medicaid (and taxpayers) in “Medicaid’s
$100+ Billion Leak.” Blaming “profit-driven corporations” for the
damage spend down does to those in need is just socialist claptrap. It’s
the “progressive” political proclivity to give everything to everyone and
print the money to pay for it that is the root of the problem. To make
sense of what ails LTC, read the
Paragon Health Institute’s “Long-Term
Care: The Problem” and “Long-Term
Care: The Solution” and watch this “virtual
LTC event” featuring age wave visionary Ken Dychtwald and leading LTC
researchers. To find ample private funds for LTC, check out “Medicaid’s
$100+ Billion Leak.” For what not to do, see “Medi-Cal-amity:
California’s Reckless Expansion of Medicaid Long-Term Care to the Affluent.”
Much more on long-term care
here. ***
4/16/2026, “Henry
Paulson Says U.S. Should Prepare for a 'Vicious' Bond Crash,” by
Christopher Amstey, Financial Advisor
Quote:
“Former Treasury Secretary Henry Paulson called on U.S. authorities to
prepare a back-up plan in order to avert a potential collapse in demand
for Treasuries — an event that he warned would have ‘vicious’ effects. …
U.S. budget experts have for years warned of the potential for a ‘doom
loop,’ where investors start demanding higher yields on Treasuries due
to risks tied to the government’s swelling debt
burden, which then causes an increase in the government’s interest
payments — in turn widening the deficit. … ‘It’s going to take increased
revenues, taxes, and dealing with expenses,’ he said. It would also mean
overhauling Social Security and health care programs, he said. ‘You can
raise the revenues without a big drag on growth, if you close preferences
and loopholes in the tax code.’”
LTC Comment:
Remember when
Modern Monetary Theory told us the U.S. government could spend without
restraint by printing money to fill funding gaps? Whoops! Turns out
there’s a limit to that strategy. When you borrow so much that no one is
willing to loan you more, you’re stuck. This reality is what will finally
force America to confront problems like out-of-control entitlement
spending. The good news is that we have plenty of
realistic solutions to draw from to fix LTC.
LTC BULLET: LTC
INSURANCE FRAUD
LTC Comment:
LTC insurance fraud was a frequent topic at the recent Intercompany
Long-Term Care Insurance (ILTCI) conference in Orlando, Florida. We
covered that conference and its fraud sessions in detail a couple weeks
ago in
LTC Bullet: ILTCI 2026 Virtual Visit.
In the
meantime, your Center for Long-Term Care Reform has started digging deeper
into LTC insurance fraud. We’re especially interested in measures LTCI
carriers have taken to identify, mitigate, and prosecute fraud. We will
conduct a literature search and interview some of the experts who
presented at the ILTCI meeting. We also invite anyone with expertise on
this topic to share your insights and suggestions by contacting
smoses@centerltc.com.
Our special
interest in this topic is to identify best fraud control practices
developed by private LTCI carriers that may be transferable to ameliorate
the much bigger problem in public programs, especially Medicaid and
Medicare. For now, we’re scoping out the general subject of health care
fraud. These are some of the issues, suggested by AI, that we plan to
explore in a draft paper and op-eds.
Insurance
Fraud Incidence
Finding precise, "hard" data for long-term care (LTC) fraud is
challenging because it is often grouped into broader "healthcare fraud" or
"improper payment" categories. However, recent industry reports and
government snapshots provide these estimated figures for 2023–2025:
Private
Sector LTC Insurance Fraud
In the private sector, fraud is often measured as a percentage of
total claims paid.
- Estimated
Fraud Rate: Experts from firms
like illumifin and
the Coalition
Against Insurance Fraud estimate
that 5% to 10% of all LTC insurance claims involve some form of
fraud, waste, or abuse.
- Financial
Impact: With the industry paying approximately $14.1 billion in
benefits in 2023, the estimated annual loss to fraud is roughly $700
million to $1.4 billion.
- Case
Severity: For sentenced healthcare fraud cases in 2024, the median
loss per case was approximately $2.5 million, with nearly 20% of
cases involving losses over $9.5 million.
Health Care Fraud
LTCi becoming more of a target for fraud
What Data Says About Health Care Fraud
Public
Sector (Medicare & Medicaid) LTC Fraud
The public sector primarily tracks "Improper Payment Rates." It
is critical to note that while improper payments include fraud,
they also encompass administrative errors like missing documentation.
Medicare Program Integrity and Efforts to Root Out Improper Payments,
Fraud, Waste and Abuse
Fiscal Year 2024 Improper Payments Fact Sheet
- Medicaid
(FY 2025 Estimates):
-
Improper Payment Rate: 6.12% ($37.39 billion), an increase
from 5.09% in FY 2024.
-
Fraud Specifically:
Of these improper payments, only a fraction is confirmed fraud. Most
(over 77%) are attributed to insufficient documentation.
- Medicare
(FY 2025 Estimates):
-
Fee-for-Service (FFS): 6.55% ($28.83 billion).
-
Medicare Advantage (Part C): 6.09% ($23.67
billion), often due to lack of documentation for diagnoses.
-
Enforcement Outcomes (FY 2024): State Medicaid
Fraud Control Units (MFCUs) reported 1,151 convictions and
recovered $1.4 billion.
5 Key Facts About Medicaid Program Integrity – Fraud, Waste, Abuse and
Improper Payments
Fiscal Year 2025 Improper Payments Fact Sheet
Medicaid Fraud Control Units Annual Report: Fiscal Year 2024
Improper Payments and Fraud: How They Are Related but Different
Types of Corporate Fraud
Fraud
Tolerance
There is evidence suggesting that a
segment of the public, particularly younger generations, has developed a
higher tolerance for certain types of non-violent fraud, such as insurance
fraud and digital scams. While many still view these actions as
illegal, studies indicate a growing trend of rationalizing or accepting
"lower-level" fraud, often viewing it as a victimless crime against large,
wealthy corporations rather than individuals.
Survey Finds Younger Generations Have a Higher Tolerance For Insurance
Fraud – What Insurers Should Know
Fraud Types
Shared by Public and Private Insurers
-
"Phantom"
care and billing: Submitting claims for services never provided, such as
x-rays, drugs, or home
care hours.
-
Upcoding:
Misrepresenting a patient's diagnosis or severity to bill for a higher
rate of reimbursement.
-
Medical
Identity Theft: Fraudsters visiting facilities to collect Medicare or
Medicaid numbers under the guise of offering "free" services, later used
for bogus billing.
-
Kickbacks:
Financial incentives given to physicians or facilities to steer patients
toward specific high-cost therapies
or services.
-
These practices often involve predatory
actors working on both the public and private sides.
Common Red
Flags
- Early
Duration Claims: Claims filed soon after a policy is purchased.
- Unusual
Billing: Inconsistent, high, or rapidly increasing hours.
- Pressure
Tactics: Salespeople rushing decisions or pushing to handle all
documentation.
-
Too-Good-To-Be-True: Policies promising to cover everything.
Around 38.5% of companies surveyed
reported provider misrepresentation of services as a significant risk.
Critical
Vulnerability: Cognitive Impairment
A major finding in current research
is that populations with diminished capacity are disproportionately
targeted. Both private and public sectors are now prioritizing caregiver-specific
audits and specialized training for claim examiners to detect when a
patient is being manipulated into signing falsified
logs or timesheets.
Common LTC Fraud Schemes Targeting Vulnerable Seniors
Private
Sector Lessons Transferable to the Public Sector
Private insurers have pioneered
several strategies that are now considered best
practices for public side
enforcement:
6 Claims Best Practices for Life Insurance Fraud Prevention
The public sector can enhance its
anti-fraud efforts by adopting the private sector’s focus on individual-level
behavioral verification and formalized cross-payer data integration.
While programs like Medicare and Medicaid excel at large-scale algorithmic
detection, private insurers often utilize more "on-the-ground"
investigative techniques that can identify sophisticated schemes where the
billing data itself appears legitimate.
Fraud Control in the Health Care Industry: Assessing the State of the Art
1. Shift
from "Pay and Chase" to Real-Time Prevention
The public sector can adopt private-sector strategies to move from
reactive recovery to proactive prevention:
- Adopting
"Pre-Payment" Edits: Private insurers use sophisticated "claim
scrubbing" applications to flag anomalies before payment is
issued. Implementing similar real-time root-cause analysis in public
systems can reduce the need for expensive post-payment investigations.
-
Electronic Visit Verification (EVV) Optimization: Public programs
can learn from private insurers' use of GPS and biometric data to ensure
caregivers are physically present at the reported care location, a key
defense against "phantom" billing.
Public-Private Partnership to Prevent Health Care Fraud Announced by
Health and Human Services
Best practices for employers to combat claims-related healthcare fraud
Long-Standing State-Based Efforts to Combat Fraud Against Medicaid
Continue to Improve
2. Enhanced
Behavioral and Field Investigations
Private insurers often identify fraud
by looking beyond the billing codes to the actual lifestyle and behavior
of the parties involved:
- Targeted
Surveillance: Private sector "field investigations" frequently
uncover fraud—such as patients performing activities they claim to be
unable to do—that purely data-driven public audits might miss.
-
Caregiver-Specific Audits: Focusing research on the caregiver’s
lifestyle, professional licensing, and historical litigation can uncover
systemic fraud rings.
Long-Standing State-Based Efforts to Combat Fraud Against Medicaid
Continue to Improve
3.
Formalized Information Sharing Networks
Public-private partnerships are the most direct way for the public
sector to benefit from private-sector progress:
-
Healthcare Fraud Prevention Partnership (HFPP): This voluntary
program allows federal and state agencies to share data with private
plans to gain a "cross-payer" view. This helps identify "double billing"
where a provider bills both a private LTC policy and Medicare for the
same service on the same day.
- Unified
Fraud Hotspots: By sharing data on specific suspicious billing codes
and geographic fraud "hotspots," the public sector can direct its
high-intensity enforcement teams more effectively.
About the Partnership
Public-Private Partnership to Fight Fraud Formed
Public-Private Partnership to Fight Fraud Formed
Public-Private Partnership to Prevent Health Care Fraud Announced by
Health and Human Services
4. Improving
Public Awareness and Reporting
The public sector can refine its
"whistleblower" and awareness campaigns by studying what motivates
individuals in the private sector to report fraud:
The Public’s Self-Avoidance and Other-Reliance in the Reporting of Medical
Insurance Fraud: A Cross-Sectional Survey in China
-
Incentivizing Reporting: Research shows a "free-rider" mentality
often prevents people from reporting public insurance fraud.
Strengthening whistleblower protections and creating stronger
incentives—similar to those in private litigation—can improve the flow
of actionable leads to Medicaid
Fraud Control Units (MFCUs).
Long-Standing State-Based Efforts to Combat Fraud Against Medicaid
Continue to Improve
- Education
on Specific Red Flags: Adopting private-sector training that teaches
beneficiaries to look for "red flags" like pre-filled timesheets or
inconsistent care plans can empower them as a front-line defense.
Long-Term Care Fraud (NAIC)
Key Trend:
Both sectors identify Personal Care Services (PCS) as the highest
risk area. In Medicaid, PCS attendants and agencies accounted for the most
fraud convictions (326 in FY 2025), a trend mirrored in private sector
reports identifying home care as a "major industry challenge".
Medicaid Fraud Control Units recover $700,000 in assisted living cases,
with 300+ investigations still open |