How Fraudsters Are Bilking the Government Out of Billions of Dollars
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Hello and welcome to another episode of the outlaws podcast i'm joe wasn't though .

and i'm Tracy all way.

Tracy, what do you think about a dose uh.

the coin or the the new department of government efficiency?

The latter.

I here here's what I will say. Part of me hates that government efficiency is being politicized in this way because if you think that government services are a desirable thing to have, then you should definitely be against waste and inefficiency and fraud in that market. Because at a minimum, if you're wasting money, you could be using that money to do even more. And then obviously, if you think that government is just bad in general, and I imagine that you will also think that wasting money is also Better.

So there is no good stick ency. There probably shouldn't be an ideological constituency or political constituency for waste, right?

Yeah exactly like I feel like we should all agree on this. But also I the way it's kind of unrolling, let let's put IT that way.

I would say I broadly agree waste is bad whether the existing makeup of this sort of quasi blue ribbon commission to get rid of waste, whatever that means, is actually gonna IT. Look, i'll be open minded, but I like the premise of cracking down on waste. I will just say that you know what the other thing is.

So I first of all, the part the issue here is that waste is probably difficult to define. Fraud in some cases is probably difficult to define. There will probably be political fights over certain types of spending that is like you call this waste, I call this uh, good allocation of whatever I imagine many of the political fights around this will sort of revolve around some of these questions. There's a lot there, but i'm glad we generally agree that fraud is bad, fraud d is bad, waste is bad.

But I think you're absolutely right that the definitions are gna be crucial, right? And this is where I worry about the politicization because you can just come in and say, like, oh, I don't like this so i'm onna, call this a waste and go on from there. But I think we should talk about IT because, you know this has come up in a number of episodes, specifically on the ppp post pandemic. And so it's clearly something that is on people's .

minds totally right now. We are recording this thursday, november fourteen. We are in a moment where resources in the economy are constraint, right? The unemployment rate is low. Inflation continues to be by some measures above the feds goal. IT is not crazy from like a macro standpoint to think we need to make things more efficient and Better to have a Better use of our real resources right now.

And this is your other middle age man thing you decided to become like a real resource constraint guy, right?

Yeah, I like h.

you have to make tough decision. Tough decisions.

We're taking the Candy away from the kids. I'm going to be one of those.

Here's a tough decision. If you're going to talk to someone about government waste, would you talk to elan or the veck? There's two.

Well, elan would get more downloads if we had about the cast. So I would talk to elan, but we actually have a Better guest. I think we have the perfect guest to talk about government waste fraud, where we might be able to move the dial in a substantive way on this kind of self.

We are going to be speaking with jetson leader Lewis. He is an assistant professor at the question school of business at boston university. He is also a faculty research fellow at the E E R.

And this is what he studies, particularly areas around fraud and how companies defraud the government, wasting millions, probably billions of dollars. So jan, thank you so much for coming on outlets. Thanks so much for having me. What did you describe your research? I kind of describe IT, but what what did you describe what you do in your background?

Yeah, that's great. So i'm a system professor. I study economics and in particular m interested in questions about fraud in government spending.

I received my P H. D. From M I T. Economics and twenty, twenty, twenty. And i've been a number of papers trying to explore the mechanisms the government can and does use to cut out fraud in IT in public expenditures.

Was there a particular moment or reason that drew you to this particular field?

I think fraud in government spending has historically been other analyzed. And in particular, in the health care system where i've one a lot of work, there are really big and impactful policies that are being used to try to eliminate fraud. But historical, we didn't really understand what worked and what didn't work and why IT worked.

And so I think, you know, there was a big opportunity, the research there, and have always been interested in questions of bad behavior. I have a paper that I started early in my career on fraud in the world bank, that we just got accepted at the journal world development. And so overall, i'm really interested, ed, in this question about where's the money going and how can we fix that to make sure that the federal funds are being used .

for people who need them. I definitely want to talk a little bit about fixing the problem and identifying the problem and solve, but I actually I really want to start on how to build the government because some no for you because I sometimes is will see headlines like so so arrested for insurance fraud of some sorry and you know that's bad. But I also like if there's like weird thing that happens in my head or my I wouldn't even know how to defraud.

tell us what's the most accessible way to do .

the government. So like give us an example. Or when we talk about, okay, fraud in the medical system, what are people doing? What is a classical form of, uh, defraying the government, uh, in the world of health care.

So in the world of health care, there are some really obvious frauds that have persisted for years and that I think we're finally maybe starting to wrap her hands around. And one that comes to my immediately is the ambuLance market.

Okay, see more. So this was .

actually described to me when I first heard IT IT by uh uh colleague, friend uh, who works for the federal government as the perfect health care fruit. And so ambuLance services are paid for by medicare. Medicare is the old age health insurance program for americans.

We spend more than eight hundred billion dollars year on this program. We spend another seven hundred billion dollars year on medicate. So we're going about one point five trillion dollars of outlay to these programs.

It's very hard for the government to ensure that every dollar that's going out is legitimate, right? It's just it's a volume problem. AmbuLance services are highly reivers and low overhead.

If you want to start an ambuLance company, you need to buy ambuLance that's like thirty grand used online. You can actually go and google IT yourself. You can go by ambuLance and then you need a couple of employees, is actually a super low overhead business, which means it's easy for people to start starting around. We think two thousand and three, the market for ambuLance services and in particular, repetitive non emergency ambuLance services, started getting expatriated by intentional fraudulent actors.

What's a non emergency ambuLance?

I non emergency ambuLance as a patient who needs to go to a service because they are sick and enough that they can't ride in a taxi or take the train and they the only safe way for them to get to a service is in an ambuLance. And in particular, this really blew up in the dialysis industry. Dialysis patients, they're about a half a million of them.

We actually spend, I think, you know, this one percent of the federal budget on the dialysis is program one dib, not one percent of medicine. One percent of the federal budget is the dialysis program. We do not, in general, pay for ambuLance rides or taxi rides for these people to go to in from the visits.

They are responsible for getting themselves to the clinic every day, three times a week, generally for a few hours, and that's in perpetuity. It's very chAllenging to get a kidney and therefore to get off dialysis. So we had this system, and this is sort of economic medicare for we build in a little thing for the few people who needed.

And that turns into a loops through which bad actors drive a trucks. So we'd built in this provision, which is if the only safe way that you can get to the dialysis clinic is in an ambuLance. Medical will pay for an ambuLance and they pay for IT at a competitive rate for the ambuLance companies that say two hundred and fifty dollars for a one way ride.

Now that's not that much money for a real ambuLance, but it's a heck of a lot of money for a taxi. And what happened is thousands of firms around the country opened with the express intention, not of giving people serious medical care, but of becoming an expensive ambuLance, taxi and build the government. We have hundred percent data from the dialysis is system.

We can see all of these payments, more than seven billion dollars for non emergency ambuLance transportation over the following ten years, seven point seven billion dollars. And a lot of IT was fraught. And the government crackdown, the government really tried to crack down. And in particular, they used a number of tools. The first one is they started throwing people in prison. This is what you say you see in the headline, yeah, but it's so easy to start an ambuLance company that we would see these stories where, you know, someone gets posted and their family member goes and opens a company next door the next day. And this persisted for years with thousands of companies in billions of dollars .

of spending just down the train. I imagine some of the difficulty is also deciding who genuinely needs an ambuLance ride and who doesn't, right? So this is something that I never quite understand about, U.

S. Health care in general. The first ten years of my adult od were in the U. K. And there is a national health there.

And if the doctor told you you needed something, you know, you got that something, maybe IT would take a while, but eventually would get IT. Wherein the us, you seem to have all these decision makers in the process. And yet we're talking about medical care, which you would think would need to be dictated by, like highly trained medical doctors. This is super .

interesting that that your intuition catheter, exactly how they fixed IT. So the way that medicare closed this looper was by requiring what's called prior authorization.

Now if instead of going to an ambuLance company and saying, you know, please give me this ride, or even worse, the ambuLance company come to the patient and saying, do you want a taxi ride, which is actually what was happening? Instead, they require that a physician sign off and say, look, this patient is actually set their bed written in. No other way that they can get to analysis this week. And if you didn't have the doctors note, medicare didn't pay. And we estimate that around the timing of them implementing this prior authorization requirement, which they rolled out in different states at different times, this is like what economists love .

in our researchers find an actual test.

a difference in difference exactly when they rolled this out in different, uh, places in different times. We see a sixty seven percent drop in spending the next month, sid. And not only that, we can then trace the patients and say, where these patients harm, did they actually miss their dialysis visit, end up in the hospital, and we find no evidence at all of negative patient health effects. And so we actually saved billions of dollars by putting in something that was so basic.

which is this, the doctor sign?

Why didn't they do IT before? The structure of medicare is largely the aggregated, where individuals are able to go to different services as long as they qualify for them. And some of those are doctors visits, hospitals, medical equipment, pharmacy, euros.

We pay for a lot of things, and there is a real worry that requiring too much paperwork can burn in the system. We don't want to turn the medicare system into an even more heavily administrative burden system. So there are different qualification rules.

But largely what happens is the qualification rules are not always enforce of front. We do a lot of requiring people to follow the rules. Maybe we do some audits, maybe we chase after them with criminal lawsuit afterwards. But largely, the circumstances where nefer IOS actors is relatively hydro system nefer ious actors will find these loopholes and drive a truck to them. And I can talk about a million examples of.

well, let's talk about so, okay, the IT sounds like the ambuLance fraud is taken care of more or less.

So the ambuLance raud is less than I used to be. And that's the dialysis ambuLance for this paper was just accepted that the real political economy, so super, the ambuLance marking itself as other fraught. So we're talking about one type, which is this repetitive dialysis raud.

There are still lots of unnecessary ambuLance rides, ghost ambuLance rides where patients don't even get in the ambuLance and bills are sent. One question is, what can the government do? And part of IT, as I think that there needs to be a Better focus on using data to detect and stop the right .

yeah talked us about the data because I imagine, and like you are talking about government spending and programs, plus in some instances, the medical industry, there must be interesting data available here. So I have .

fantastic access to data. I use uh hundred percent sample medicare claims data from one thousand and ninety nine through twenty nine for all impatient outpatient services, durable medical equipment. I can see twenty percent of physician office visits and party pharmacy tics.

So it's ridiculous volume. And I am very equipped data. I teach da analysis and I have you know P H D. Students and other professors should work with me. And even for us, it's a big problem.

How do we actually grab our hands around? The government has not historically invested very well in its data analysis for anti flood. Part of the reason is that the organizations that are responsible for this, which are the department of justice and the office of the inspector general, those career lawyers are fantastic.

I cannot say enough positive things about my colleagues at the department of justice in the office of the inspector general, but there are too few of them. We do not pay them very well. And they are not data analysts, they are lawyers.

okay. So you mention there's still some ambuLance. The dialysis specifically sounds like that was uh mostly taking care of.

There's other ambuLance fraud out there. You mentioned some people that there's billing ambuLances. People never even write the ambuLance. What's hot right now? What's the new ambuLance for that?

So what's amazing here is that IT seems like it's a constantly evolving marketplace, right? We have to think fraud is a technology where people figure out a looper and then they tell their friends and these things spread and eventually the government catches up. And so we're playing catch mal every year right now. I think it's wounds .

care o say more about wounds care.

There's been a rise in these uh, expensive treatments for patients with non healing wound. So if you're diabetic, you're likely have neuropathy. And one of the things that comes with diabetic is that you often have wounds, particularly on their feet, where the patient doesn't heal.

There are some modern technology skin substitute things you can craft onto these wounds that seems like they pay pretty well and potentially even work. And then a few doctors have just started many millions of dollars on that. But that's a flash in the pan.

Historically, we see fraud really rife in the a durable medical equipment industry. There has been fraud in basically every everything that help health care touches. Another thing right now that's uh, really popular working a lot of fraud in vu lar care that is helping patients who have collapsed ans be able to receive intervene .

e treatments. But again, it's just species like durable medical equipment fraud. Yes, I I want to get into what what am I doing?

So you want to get into derby medical equipment fraud? Well, you're in luck because it's in durban. Medical equip has been the wild west of the health care system for twenty years OK with billions of dollars of raud.

I have to admit i'm writing a paper on IT right now. That's i'm excited. I know a lot about IT, so you remember the scooter store they used to like, advertise on late night TV. Are you an old person?

Do you like a free wheelchair?

yes. So there's been some excEllent investigative journalism on this. So dorval medical equip, I want people to think Walkers, wheelchairs, oxygen pumps, hospital beds in their home, or things that people need that are supposed to be permanent seat papishes.

And these are largely given by suppliers that are sometimes big national firms and sometimes small moment pop shops. I want you to think about Flora is a sort of a florida story. If you're a interested in selling someone a fraudulent ker or pump or something like that mean for g one .

doesn't work what you don't need.

I guess this is super interesting rates. So what do we mean when we say fraud? Healthcare fraud is different types.

And I can break that. There are three types of healthcare for. There's up coding.

That's where I tell you a little push wheelchair, but I go build the government for a super lucks automatic wheelchair. We call up coding. There is medical necessity fraud.

That's where we say that a patient needs something and they don't and then they're substandard care. That's where we have a patient who actually doesn't need something and we give them junk. And all of them happen in all forms of medicine. But in particular, and durable medical equipment, I think it's a lot of medical necessity fraught. T I think we have patients who are getting a knock on the door high. Do you want this fancy new device free to you? Now what's really interesting is, are actually supposed to collect a twenty percent copy for the durable medical equipment products, but the front and that's designed by medication to make sure that patients aren't getting stuff that they .

don't need you supposed to.

But if you're a fraudulent firm, you just don't collect IT. You're very happy to have the government's eighty percent and the patient wouldn't .

take IT if they had to pay. Yeah, what's been the i'm trying to think how to frame this, but I guess what's been the cultural or like incentive approach in government to stamp out fraud? If I am a government official and I design up a poor social service program of some sort that has a bunch of loops that ends up costing lots of money, do I get in trouble, or do I get rewarded if I manage to tweak the program so that IT doesn't have a lot of fraud in IT.

the government generally only invests in this Prices. Its anti fraud investments, by which I mean, when we consider how we are measuring what the government is doing to stop fraud, you're talking about these career civil servants and how we reward them. Historically, the focus has been on how much are you getting back.

And i've made this point in a bunch of research, and I recently released a White paper through the center for medicare and medicare medicare services, saying how much money you get back is irrelevant. That is the wrong number. That is, relieve the number that everyone in government is focused on when you say anti front recovery, we caught this many people, we put this many people in jail, and we got, you know, a billion dollars back this year.

And the point that i've made is the money you're getting back is just a small share of the effect of your anti flood efforts. What you should really care about is your deterrence effect. And i've shown in research, deterrence effects are in many cases, like ten times larger then these recovery dollars.

So you've got to the part of justice and you talk to their health care flood people. They want to report the congress every year. It's called the health care fraud and abuse report, and they put a number there for return on investment and and congress ask them tell us how much money did you spend and how what was your return on investment and they say the number is four.

And okay, first of all, four extra turn on investment or be very good. That immediately means that we should spend more resources there. But I think that's actually the wrong number.

I think the number forty, because the four is only counting money that they're getting written to them in terms of checks back, right? But if you count deterrence and you have to count deterrence, the value of these anti flood efforts is huge. So do we reward people in terms of the value they bring? This traces question in some sense? yes.

right. Look, there's a press release. They tried out the attack. Y general, maybe the the, the civil service gets the mini.

M, I could go to my boss. M, be like I saved twenty.

Llys, largely know we don't pay these people well, we don't retain them well, if you look at your average assistant, U. S. Attorney, they go to the government for a few years, do a fantastic tic works, and then realized that private industry pays three times as much in.

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When we are about the uh the regional dialysis ambuLance fraud IT sounded like there was a very elegant solution. Just get a doctor sign off. When you look at somebody to other emerging floods and you mentioned wounds care, for example, or you mentioned someone gets a really nice scooter that they didn't really need or something like that because and you mention that the requirement of putting up twenty percent copy is not that effective because the cellar, just like, you know, what will take the hit no, they take the eighty percent is a new big deal. How much of the chAllenge is on the data and identification, which we should talk a little bit more verses the versus the mechanism which you use to crack down on IT. So i'm actually .

really in favor of this program. We use the big whistle blower program called the false claims act o and i've writing extensively because of works.

No, no.

it's the the weird, coolest thing I mean for economist. okay. So there is a private market for anti fraud in the us. If you know about a company or person that is defrauding any public program not specific to health care, you can hire your own attorney. And there are firms that specializing this, you can sue that person in federal civil court, and the whistle blower gets a share of the money they bring back to the government. And this is a super effective program because that means that every nurse, every billing agent, every doctor in a hospital, if that organizations.

this is what we're going to into Tracy, i'm not going to do fraud because even I want to know how that works, but I do want to .

make i'm going to become a fraud bounty hunt.

K about it's bounty hunting.

yes, but bounty hunting is great because of two reasons. The first is there is this private information component. Rather than waiting for some analysts in washington to figure out today's fraud, just make a huge reward available for the individuals who know about IT, because there is lots of information, right?

If from economist perspective, the problem here is the problem, we have a lot of health care, its information accessory, the doctors and the hospitals and the nursing homes know so much more about the patient than the insurance company. And here the insurance company is the government. And so rather than trying to make just top down solutions, and there are some top down solutions, don't get me wrong, it's really important that we also allow the individuals who have the information, the valuable information, to be rewarded for that.

So the visible program, private information, there is also the private cause of action. The idea that every person can become, literally the legal term sometimes uses private tourney general, right? You can go and hire a lawyer and sue.

And that blows IT is on behalf of the states, america. And this has been an extremely effective program historically. See more about yes.

So I I ran a friend of .

information request on the department of justice for data on every whistleblower lawsuit from one thousand nine hundred eighty seven. Three, about twenty seventeen, when I first five. There are thousands of these cases. They've brought in billions of dollars for the government. Fifty five percent of them are in health care.

But there are also used all over the government VC cases related to the transportation department, the department of education, the department of defense, and the ideas the same, instead of trying to have the government figure out how to run anti fraud. Anti fraud d can pay for itself. There are lots of people who would love to earn a million dollars being a whistle blowers, and these whistles lowers get payed prety. Well.

since you mention transportation and education just then, can you talk about some examples of fraud outside of the medical sector?

absolutely. So I have a recent paper about the unemployment insurance uh, market during covered. So I be happy to talk about that.

That's great. So during covet, we had the this biggest expansion of unemployment insurance in history. I think you guys know about this.

You've talked a little bit about ppp, and there's some great research they're on fraud. Ppp was for companies. Unemployment insurance was for individuals who lost their job. And we expanded IT to also include gig economy workers through a program called PUA. You guys probably know about this.

So this is starting to feel like history. It's so crazy because this is .

like yesterday. But um so undelayed insurance rose heavy leader in the pandemic and with IT came a lot of fraud.

Now why is there fraud in the unemployment surge sector while the government's cutting and the government's cutting checks really fast? So you might remember, at the beginning of the pandemic, there is this immediate recession, and there was fear of the big macro economic consequences of everybody being out of a job, many people, I should say, of a job. And so the government really loosened and expanded its use of unemployment insurance.

But whenever the government says he, we're onna, write eight hundred billion dollars in checks, people get creative about ways to build the government. And in particular, this type of raud was really identity theft. IT is super easy, super easy to go on the dark web and buy a social charity number.

And so that's what a lot of uh, criminals and organized criminal groups did during the pandemic. There was a widespread fraud where individuals would go purchase identities, apply on mass to state unemployment insurance programs, collect the money, take IT out of the system. And then we think in many cases, IT was either offshore or rerouted to criminal organizations.

So this was so incredibly wide. But actually, my wife got a prepaid debit card in the mail for the unemployment agency, and SHE didn't lose her job. I've talked to just dozens of people across the country and in all sorts of sectors who said, yeah, this actually happened to me.

This leads to something that I want to ask as well, which is, how is fraud propagate? Because this kind of gets to joe question earlier, how do people actually do this? How do I learn to do from ah is IT like I just look IT up on the internet, or is IT like someone I associated with tells .

me so different fraud s have mechanisms by which people learn them. But in general, there is a social learning upon IT to this. absolutely.

So with some of the institutional fraud s that we have been talking about, a hospital that decides that are going to suddenly charge a lot of money through some loops. Often there are business decisions being made by executives, sometimes there are consultants involved. And big national chains often are the ones that spread these because they have kind of centralized management. The hospital administrators from different hospitals look at this. I'm thinking, for example, of the tenant hospitals, which paid nine hundred million dollars back to the government, a small little loophole that was supposed to be for an outlier payments program, and they just drove a truck through that loops.

they ended up.

So if you go in impatient in the hospital, the hospital to paid a fixed amount under medicare through what's got a prospective payment system, they don't pay per cost. They just say, you know, you have a nomo ia I we're going to pay this much.

The government was worried when they set this program up that some very expensive patients wouldn't get treatment because if the hospital knows that and they know that, they are going to lose money on you. Yeah, so they made this asteroid. K, A lot of these things are, ask risk, have an outlier payment system where if a patient is super expensive, then they pay extra.

And the tenant hospitals figured out how to make every patient look super expensive by manipulating some of their baLance sheet. And they ended up spending nine hundred million dollars to, excuse me, the end up to settle claims. So that tenant never admitted to faut, I should say.

But the government received nine hundred million dollars back from ten because you these allegations were, I think, true that that tenant had done this and and I estate actually that the government lost billions of dollars to that. Okay, so but I want to go back to this question. So how did that won happen?

There is a consultancy and new jersey that was going around telling people, hey, do you know about this hell payment system and that's how we think that fraud spread and it's spread all over the country. So there are some of these corporate learning from other companies, and there's also a lot of social learning. So in the case of unemployment ance fraud or ppp fraud, you can go and you can find telegram groups and facebook groups of people that are like years, how you apply for A P, P P one.

There's a great newspaper by john griffin, texas, on these facebook groups. And like they're called like fraud kings, like they know what they were, maybe ppp lone kings. There's only way it's a really obvious what they're doing and everyone knows.

And so in the case of health care fraud and the case of not healthcare fraud, often it's you're surrounded by people who know how to do this or you meet them through digital platforms and then people learn. And so a lot of the fraud we see propagate through communities. In the case of the ambuLance market, we saw that there were certain eastern european groups that were responsible for this in different parts of the country and often from the same, from original areas. So generally the the understanding, at least from the government, is that there must have been some social learning going there. Very hard to prove.

of course, right? Someone figures IT out. Tell something that's right. That makes, let's talk about detection via data and more, and you talk about how you have access to all of this data and so forth. Obviously, you can describe fraud qualitatively by said, this is how an ambuLance company cheat the government IT said. A, what did the fingerprints of fraud look like when you look at a on the micro scale, what do you would pop up on the data that would at least be a yellow flag and say, this is something we need to look?

So there are. Huge run ups in spending in every type of raud of ever see in every type of I mean that the whole point is if you're not making money, it's not a good fraud, right? And so if you just make a plot of spending against, you know, time, you can often just see these really big exponential growth.

Now some of those are legitimate because if there's a new great medical technology and people start using IT, that also looks like a technological adoption cut, right, of a kind of big upper great. But when it's fraught IT, first, all that looks like massive year over your increases. The second is that it'll often be way too much to the point where it's obvious that nobody he's getting this.

For example, sometimes you'll see a doctor who is just building from too many home care visits, but like the homecare visits of sixty minutes and the doctor is billing in for five thousand and them a year and like, well, that's five thousand hours. There aren't five thousand work hours in the year. The government able to detect that you just not pay those.

So where the failure is, is not in how hard IT is to detect in data. K, that is not that hard to detect data. It's on the incentives for the enforcers to look at that data and use IT appropriately. And that's where we get back to this limited enforcement capacity.

How do you measure benefits on the other side? Because that seems again like A A potential avenue where there could be some disagreement.

So I think it's super important that we preserve access to the public programs. And my research has not focused at all on, you know, how do we take things away from people. And in particular, I always try to measure very hard whether there are health effects associated with this.

So in the case of the ambuLances, we able to show pretty definitively that there are no negative health ex associated with cutting this. And this is something I do in all my papers. You really have to ask the question where people losing care that they needed.

And so super, super, greg question in the context of some of these very obvious fraud. Ds, sometimes people are even getting the service. So if the governments paying for something and nobody ever got IT, taking IT away is causeless.

So that's the best efficient thing that we could do is just stop paying for things that aren't happening, right? Let's not even talk about wait, let's just talk about these outright fronts. And so how do you measure IT? I mean, if you look at very large scale claim data, as I do and the government can, you can see, okay, we caught t out this provider.

Let's look at their patients. Did they go to the hospital or that's an empirical question, right? And so there's no reason that I just has to be a guess, right? This is something that we should be measuring as part of our data analysis associated.

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So it's very obvious why whether we're talking about the government or private insurance is just rules on top of rules, on top of rules and asteroids and so forth, because this is very stuff. Rules also create problems, and compliance by the rules can strict adherence ance to the rules can also have negative effects. I have to imagine, for example, that there are so many people in the U S.

Currently on the some sort of G L P one drug, but maybe technically they don't have the thing, but you know they're lot there seem to be a lot of benefits from weight loss. And so worth, have you found examples in your research in which there is some sort of positive externality from deviation from the rule? Absolutely, absolutely.

Thanks for queuing this up. I A great story. So let's talk about the hospice industry. Hospice care is an end of life benefit for patients who have a prag nosis of six months or less. So if you're dying, and physician certifies that you're dying within six months, you qualify for hospice.

What is hospice? You give up the curative care and you stop taking all of these meds with the horrible side effects, and you stop going to the hospital is often, and you can die peacefully at home with pain medication. And I think this is a great program.

I think it's really important. We spent twenty billion dollars a year on the federal hospice program and more than fifty percent of medicare patient who die every year. Well, i've had a hospice claim.

Okay, this is important. This is the way that we're treating people at the end of life. It's really hard to know who's dying within six months. That is not a trivial estimate. And history, ally, there was subjectivity in this.

So over the twenty year period, one thousand ninety nine to twenty nine, there was a quite rubin of four profit hospices, and many of them increasingly took alzheimer's s and dementia. why? Because they stay for a long time on these hospice programs.

And the hospice programs are paid about two hundred dollars a day. 嗯， and the federal government cried fraught, and we saw hundred and sixty three federal whistleblower lawsuits against four proper hospital companies, more than three hundred million dollars in settlements, saying this is fraud. You shouldn't take in the patients.

You ouldn't known that they weren't dying fast enough that they did not qualify for. So I wrote a paper with a john gruber at M. I.

T. As well as one of our P. H. D. Students in David Howard at emory, some really top noch economists. And we looked at this program, we said, okay, this is something people are really concerned about. And what we found really knock your socks off.

The fraud actually was not as bad as people said in particular, because did some patients go to hospice who may others SE not have because they were not dying fast enough? Sure, but it's still a heck of a lot cheaper to go to hospital for six months. Then IT is to go to the hospital in the nursing home, in the home care agency, in the double medical arma euros.

And we estimate that these patients saved tens of thousands of dollars. And the patients like that, they in their families are picking hospice. This is something that they want.

They don't want the hospital, so they're getting a service they want and the government is saving money. And yet we've decided that this is fraud because there is this rule. When you think about IT from that way, six months, totally arbitrary.

Why is IT six months or not? Eight months? And so this paper is called dying or line IT. Just h was accepted last week at the A E R. IT shows pretty conclusively that the policies aimed at limiting fraud through the baby .

out with the bath or um you know we started this conversation mentioning dodge, the new department of government efficiency. I guess one obvious question to ask you would be, you know if you were in elon or vax shoes, what would be your you know the first thing you would start with when IT comes to rooting out fraud? Or I don't know if you want to get to wider types of inefficiencies, but what's the first thing you would do?

Yeah, they make you, they make you the real point person on this. How do you start?

So first, i'm optimistic about the department of government efficiency because I think that there are some clear evidence based obvious wins that we have left on the table in terms of saving government money.

The first is we know that anti fraud efforts, particularly in the medicare and medicare programs, have huge return on investments, and we underfund that so we could staff up those offices at the department of justice, at the department of justice districts, at the office of the inspector general, and literally just chased on the leads that we already know that we don't even have to go after other leads. If you look at your average civil assistant, U. S.

Attorney, they have got thirty good cases on their desk, and they get to pick two of. So there, in many of these cases, alleged millions of dollars of fraud. And they say, i'm sorry, we have a number.

We can go under anything right now, less than ten million and they and they drop the case. So if even if we just doubled the number of people or at the department of justice who who focus on fraud, the government that would pay for itself many times over, okay, so that's an obvious one. The second is to start getting serious about data.

If we do not hire and recruit excEllent analysts to look at government data from the government, we are going to miss obvious rights. Everything i've talked about so far is not rocket science. We're talking about huge amounts of billing for patients who obviously don't needed IT in some of these cases.

And the government pays IT and they miss IT what they have access to that date in real time, they're writing the checks. Why are we not screening that? And the answer is not a lot of data analyst work at the department of justice.

And there are some there are some that work at the office in the inspector general of health and human services, but not that many. why? Because they pay like seventy thousand dollars a year. And if you're a good data analyst, you don't go to work for the government for seventy thousand dollars a year. If the government wants top talent, it's got ta be willing to recruit and those are competitive positions.

And so if we get serious by data, we get serious about machine learning, we get serious about investing in the attorneys who are doing the good work and just the programmes work really well. The second is rigorous evaluation, right? We need to know when we try policies, do they work or do they not work? When we put in a prior authorization program, when we put in A A new screening for people to take a cell y on their phone before we pay their unemployment insurance claim, that's actually how we fix the unemployment.

The problem IT was an identity. That problem, you just got to take a cell y on your phone. These ideas work, but we need to evaluate them as serious policy. Unless I just .

have one more question, and I don't even know like whether this is capable of being ascertained in a subsidy way. But when you think about this stuff that you research and we're talking about, like you know, big question is, can we meaningfully move the dial on fragile lent spending or maybe watered spending? And do we have a number that exists? Do we know how much could potentially be saved?

So I think health care fraud alone in the united states is something like one hundred billion dollars a year now that's across private public. But we spend one point five trillion dollars on medicare and medicaid. So the idea that is a big chance.

It's no it's it's not that big of a time we spent, you know two point three trillion dollars overall. And so to say, fifty to one hundred billion dollars a year, a rag. yeah.

I think that that numbers reasonable. yes. So can we move the needle IT? absolutely. We there are things that we know work really well. Huge treatment effects at very low cost.

Now government spending overall, we spend about six, seven trillion dollars a year in the government. Yeah, when we look at these other public programs, there are some that have obvious frauds going on. Like I mentioned, the unemployment insurance system that had tens or possibly a hundred billion dollars of raud there as well.

The ppp program we spent in one hundred billion dollars are at least on fraud in that program. And so not every program is right with raw, the programs that are very hard to draught. It's hard to defraud social security, why they have your full earnings record and they pick the number.

And thank you, a check, very limited fraud and social security system. I think that there's probably a lot of fraud in some of the infrastructure and defense. And so our framework has to be like where does the government know the least? The government doesn't really know what's going into every element of the defense spend or every element to know how is the road being built or what is the hospital doing.

And when you have those big information is symmetries, is that where the big product? So if I think that there's one hundred billion dollars just for medicare and medicare spending or maybe throw in the advances spending and know other the federal employees health benefits and va get to a hundred billion of that health care for D, I think that is very easily. That hundred billion dollars also occurs yeah yet again in some of these are like defense, i'm sure.

Jason leader Lewis, amazing. Thank you so much for coming on the house. thanks.

Tracy, I am pro getting rid of fraud. No, I for real, I don't take a lot of IT IT seems like a low bar.

although you did ask repeatedly how you could commit IT, but I I know that was for informational purposes only. No.

I to actually i'm not going to get into the business of medical fraud. I am going to get in to the business of being one of those independent White sounds great, but I feel like I to know how work so I can identify. But I really do think you know setting asset, setting aside everything.

fraud is bad. I do think, and I kind this in the beginning, that we can all agree that fraud and waste is bad, like no matter where you fall on the political of structure. Um because if you free up money that's not doing anything, then you you could in theory, put IT to a different use and and get more for your box and speak.

I think obviously, and we touched on this like a lot of these decisions over what's fragile and or especially what's wasteful, maybe not necessarily fraud come down to specific judgments, and they can be subjective. And I think that's where a lot of the disagreement is going to be going forward. But I do think the point about using the data Better, the government must have some amazing data. And we kind of talked about IT, especially in these specific sectors like healthcare.

Two things on the data, they're really interesting. So one is just this idea that if you're a talented data scientist, go to the D O G. And this has come up in some of our past episodes that we've done with a few other guest. There does seem to be the structural issue, right, of how government pays and whether the how compelling a job in government is inside a and so there does seem to be an issue with how do you staff up a big team of data scientists that are incentive and have the agency and capacity to use their data, do something when they discover IT. And then, you know, was a very interesting comment that last one about it's very hard to defraud social security.

And so this idea of like where's the fraud most likely to exist, areas in which there is some limited asem trc as economies like to use information, which is, you know, the government doesn't know what happens when your, not you and I go to a doctor, right? They're some level of information asymmetry IT doesn't really know what kind of Walker your eyes are going to need in a thirty or forty years to get around in seta. And then furthermore, we didn't touch on IT, but I do think or absolutely as as a pog are going to need to do more should do way more on defense spending.

There are million angles that we have to do on that. But you could see like we don't really know what went into the assembly of this in the cost of this programme. And is this part really worth this much money? Or maybe as a competition thing, there is a lot of fruit there, future episodes.

But I do think one of the big tensions here is the sort of government generalist verses like the experts that there listening to. What I mean is, for instance, if you're a defense contractor and your building, I don't know, like a submarine launch powder, whatever, like the government official isn't necessarily gonna all the nuts and bolts that need to go into that. And so yeah, I always wonder how you sort of overcome that informational gap.

There's a lot there. Let's do more on this.

right? So we leave IT there for now.

Let's leave at there.

This has been another episode of the all sorts podcast. I'm Tracy l way. You can follow me at .

Tracy elway and I is, you can follow me at the store. Follow our guest jets and leader Lewis at jets and icon. Also, he has a number of papers on his website that you can just click on and go read.

They're all really fascinating. Follow our producers, common rud rigas at common arman dash bennet, a dash bot, and kill Brooks at kill Brooks. Thank you to our producer moses for more odd ts content to a bloomberg dog cosrich h od lots.

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