3 Reasons Fraud Costs All of Us

Forbes reported federal programs in the U.S. lost $1.2 trillion since 2004. Improper payments caused these losses. Many countries have similar problems in social benefits, health care, taxes, insurance, banking, etc. Fraud makes up part of these costs. Forbes noted:

• $1 billion was paid for dead people under Medicare, Medicaid, and Social Security 
• $10 billion paid for Social Security for people at least 112 years old (even though only 40 exist worldwide)
• $67 billion overpaid for Medicare and Medicaid recipients 

U.S. annual health care costs are about $3.8 trillion now. At 3%, a conservative estimate is $114 billion lost to fraud. I think the cost is higher as not all fraud is reported. I would double this amount.

Why should we all care?

Fraud costs all of us. In general, fraud hurts us in three ways.  

First, fraud results in higher prices. Amazingly, banks stop more fraud than allow it. Banks lost about $14 billion in fraud in 2017. Yet, banks still made money. How? Banks set their fees to cover these fraud losses. As consumers, we pay those fees. Fraud also means higher health care costs and property and casualty insurance premiums. So, the costs of fraud are baked into the prices we pay each day. 

Second, fraud in government results in opportunity costs. Government revenues lost to fraud cannot be used for other things we want. Fraud means dollars lost for education. It means fewer police and fire fighters. Every time I hit a pot hole in a road, I think how fraud kept that hole from being filled. Fraud might also cost me a new tire. 

So, we all pay the costs of fraud. Consumers pay more. Taxpayers get less.

I worked in government for nearly 25 years. In my youth, I worked directly with recipients of public funds. I wanted to get payments correct. Sometimes a recipient would say to me, “You act like this is your own money.” They meant I should not worry about errors or fraud. In their view, the government had plenty to go around. 

Well, I knew that money for social benefits came from taxes. I paid those taxes every two weeks from my paycheck. So, it was my money I was protecting. I also knew my computer was old. The copier was always broken. My health insurance premiums were going up faster than my pay. We could have used more funding. Losing that funding to fraud was a problem for me. I’ve dedicated over 20 years to fighting fraud. 

Third, fraud and identify theft go together. Over 16 million Americans suffered identity theft in 2017 according to the Identify Theft Resource Center. Victims of identity fraud incur many additional costs. This is collateral damage. It may seem small but costs millions. Moreover, identity fraud takes an emotional and physical toll on its victims. 

International Fraud Awareness Week is November 17th-23rd. Take time to learn how you can fight fraud. 

Protect yourself and your family. Learn how to avoid fraud and identity theft. Also, keep your eyes and ears open for potential fraud. Learn how to report fraud. 

Remember, fraud costs all of us, including you. 

Want to learn more? Here are some resources to help:

The Association of Certified Fraud Examiners https://www.acfe.com/

National Healthcare Anti-Fraud Association https://www.nhcaa.org/

U.S. Department of Justice, Fraud Section https://www.justice.gov/criminal-fraud

U.S. Health & Human Services, Office of Inspector General https://oig.hhs.gov/fraud/

Identity Theft Resource Center https://www.idtheftcenter.org/

Image: Fraud by Nick Youngson CC BY-SA 3.0 ImageCreator