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Medical Aid survey reveals that claims fraud is decreasing

10 January 2012 KPMG

The number of fraud cases in the medical aid industry is decreasing, as well as their average monetary value, reveals KPMG’s recently released Medical Schemes’ Anti-Fraud Survey.

The survey, which covers the three years from 2007 to 2009, is the third to be conducted by the professional services firm.

Camilla Singh, National Forensic Director in charge of healthcare at KPMG, explains, “We now have results for the last nine years, and we can clearly see the ratio of investigated fraud to claims is dropping. This is an achievement for South Africa’s medical aid administrators.”

The fraud-to-claims ratio has fallen from 0.70% (2001 to 2003), to 0.26% (2004 to 2006) to 0.15% for the survey period ending in 2009.

This most recent anti-fraud survey was sent to 15 administrators and the 8 respondents represented 84 percent of all principal members. Participating medical schemes included Discovery, Medscheme, Metropolitan and Momentum amongst others.

Notably, the survey shows that the number of fraudulent claims by members is also at a low, amounting to R67.3 million out of a claim value of R145 billion over the three-year period. “Clearly the ethical message to members is working,” says Singh. The most common reason cited for member fraud, amounting to just over 92 percent of all cases, is non-disclosure of prior ailments.

Service provider fraud, however, is increasing, with ‘code manipulation’ being the most common type investigated, followed by ‘services not rendered’.

“There has been a definite crackdown on fraud in this industry in the last decade,” Singh points out. “In KPMG’s 2001 to 2003 survey, only 49 percent of medical aid administrators responded that they never keep quiet about fraud cases. By 2009, this has risen to a very decisive 100 percent.”

This zero-tolerance approach could be due to the efforts of dedicated forensic investigative units maintained by most medical schemes, some with a budget in excess of R10 million. Respondents rank these forensic units as a crucial fraud risk management tool, on equal footing with hotlines for whistleblowers.

Internal controls include ‘maintaining a fraud policy’ and ‘maintaining a code of conduct’, both of which have been consistently rated over the last three surveys as the best ways of tackling fraud, with the use of detection software also ranking highly.

While medical schemes have all these and more anti-fraud processes and tools in place, and 99 percent respondents indicated that they will ‘sometimes’ report cases to the police, 72 percent cite a lack of confidence in the ability of the South African Police Services (SAPS) when they choose not to report cases to SAPS. A further 48 percent say they lack confidence in South Africa’s justice system.

“Interestingly, a fear of negative publicity came in at 34 percent, which is the first time it has featured as a factor in not reporting fraud, in the survey,” says Singh.

Perhaps less surprising, given the global recession, ‘economic pressures’ tops the list of social reasons why 67 percent of medical aid administrators believe that fraud is set to increase. At an organisational level, the use of electronic claims and receipts is also singled out as a factor that will contribute to an expected increase in fraudulent claims. In 2009, over 80 percent of all claims were submitted electronically.

A more optimistic 33 percent of respondents believe the instances of claims fraud will decrease, which, as KPMG’s survey reveals, seems to be the trend.

“In recent years, medical scheme administrators have taken very strong steps to reduce the possibility of fraud, the results of which are now showing,” says Singh.

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