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Obamacare Overlooks “Soft Fraud” in American Healthcare

Obamacare doesn't go far enough to outlaw physician-owned CT scanners & other medical services

Obamacare Should Outlaw Doctor-Owned Services

Obamacare remains a heated topic in this year’s election cycle, second only to “the economy and jobs” according to a report  this week in The New Journal of Medicine. But both Obamacare and the Republican alternative proposed by Governor Romney miss the boat on what may be America’s most crucial healthcare issue.

The increasing ethical bankruptcy of American medicine is discussed in detail in Our Healthcare Sucks. After reading it, a reasonable person might conclude that the outrage stirred up by advocacy media about Obamacare and  the politics of healthcare reform would be better directed at the practice of medicine itself.

This, of course, wouldn’t help ratings or restore a favored ideology to political power – the end game, after all – but it would certainly be more of a public service.

In its absence, let’s take the epidemic of unnecessary medical treatments responsible for much of our medical over-spending and contrast it with the more blatant medical frauds that make the news reports. Most doctors would agree that doctors who knowingly defraud patients, insurers, or government payers are unethical and should have their medical licenses revoked.

But fraud is also illegal, so they should also be subject to the pains and penalties provided under the law if found guilty. Few would argue this point.

“Soft Fraud” Is Even Worse

Those who defraud by billing for services they never rendered steal only money. Patients are generally not physically harmed in these medical frauds.

Contrast that with big-spending specialists performing unnecessary surgeries and invasive procedures that literally put patients’ lives at risk. Not only are they defrauding patients, insurers, and government payers, but they’re endangering patients’ lives in the process. This is more than hubris; more than negligence; worse than mere fraud.

And neither Obamacare nor the Romney health plan directly confront these pervasive unethical medical practices driving so much of our medical spending and medical errors that are responsible for a conservatively estimated 100,000 avoidable deaths every year. That’s as many Americans dying every week due to medical mistakes as died on 9/11.

The term “soft fraud” used in Our Healthcare Sucks fairly represents the gray zone of these practices from a legal perspective. But there’s nothing soft about their often deadly consequences. Cancers caused by excessive and unnecessary medical radiation exposure, for example, go well beyond merely defrauding their victims.

The “Informed Consent” process requiring patients to sign a consent form before undergoing high-risk invasive medical procedures is reviewed in MedSmart Patients. It’s noted there that performing procedures on patients without their “Informed Consent” is physical battery on patients a violation of the law.

Informed Consent requires patients be told the truth about their condition, the procedure to be performed, alternatives to the procedure, and the probabilities of both risks and benefits of the procedure and its alternatives.

Telling patients they need procedures – often dangerous procedures – they don’t really need is not truthful. “Informed Consent” received in doing so is fraudulently obtained – meaning unnecessary procedures arguably constitute physical battery on those patients.

It’s certainly reasonable to ask why the medical community isn’t up in arms about this insidious and pervasive “fraud and abuse” of the worst kind in states across America?

The obvious answer, of course, is that this is mainstream medical practice, defended as necessary because of malpractice concerns – called “defensive medicine” – but just as likely driven by the excess profits these practices generate. The evidence for this conclusion lies in states like Texas that long ago adopted so-called medical malpractice reform that capped patient damages. Yet Texas doctors continue to outspend most other states in America.

So much for malpractice reform representing an answer to our crisis of healthcare costs, as the Romney health plan proposes as a substitute for Obamacare. Nor will Obamacare itself do much to stem the tide of these practices since it failed to outlaw those that already exist.

Bogus “Entrepreneurs”

It’s not just Obamacare and our political leaders choosing to look the other way on this most crucial of our healthcare issues – allowing it to remain under the radar of public debate and removed from the public consciousness.

Where, for example,  was organized medicine in 2009 when it was time to testify against the New Jersey bill allowing physicians to self-refer patients to services in which they have an ownership interest?  This legislation, like that before it in states across America, injected financial incentives into decisions that should be free of conflicts-of-interest. It risks victimizing patients of these “physician-entrepreneurs” in the name of “choice” and “competition” – buzz words that are generally code for letting doctors exploit their control over where their patients are referred for further services.

Real entrepreneurs create something from an idea, from nothing. The current breed of “physician-entrepreneurs” – emblematic of a financial preoccupation that distinguishes this generation of physicians from those before it – isn’t creating something from nothing. They’re leveraging their assets – the patients whose interests they have a fiduciary duty to put before their own – for personal financial gain.

Entrepreneurs take risks. There’s no risk in buying a multi-million dollar MRI or CT scanner when you know you and your physician partners control the flow of patients that will pay for it and double your income in the process. That’s not risk-taking; that’s a sure thing.

Healthcare’s A Rigged Market

What makes this so unethical is physician-owners of these scanners and other medical facilities effectively control the choices made by their patients. As discussed in Our Healthcare Sucks and Obamacare – The Good, the Bad & the Missing, this isn’t how free-markets act. It’s how rigged markets behave where the supplier of the service has unfair control over purchasing decisions.

And it goes on in states across America. Obamacare prevents it from expanding further, but does nothing about already-existing medical services owned by the doctors referring patients to these services.

And Governor Romney’s health plan is likely to exacerbate the problem with its emphasis on deregulation. These self-referral schemes thrive in America’s least regulated states. This means Romney’s approach is likely to metastasize nationally the medical abuses so prevalent now in Texas, Florida, and other states – as well as urban hot spots of fraud – I describe as “rip-off states” in Our Healthcare Sucks.

All this thinly-veiled bill-padding does is intensify the unnecessary use of expensive technologies in which these “physician-entrepreneurs” invest. Being responsible for a multi-million dollar equipment loan that has to be paid every month is a powerful inducement to “err” on the side of ordering tests you might otherwise not have ordered.

When cardiologists can earn half their incomes from imaging tests they order for their patients, this is no longer an ancillary service but their prime business. The cardiology itself devolves into the role of “feeder” for the often lucrative imaging business they control.

Obamacare permits the continuance of physician self-referrals and patient exploitation with unnecessary high-risk procedures to pad the incomes of specialists. As such, neither Obamacare nor the Romney health plan will get to the heart of the financial corruption in medicine that’s bankrupting our country.

And They ARE Bankrupting America

The continuing glut of highly-paid specialists perpetuating this culture of patient disregard to maintain their standard of living means the prognosis for American healthcare – and America itself – remains grim. This is true despite the tepid measures in Obamacare to contain this unethical medical behavior.

These aren’t just the findings of this analysis. Many within the medical profession have resisted the crass commercialization and over-medicalization of healthcare. In the epilogue to his book, The Last Well Person, Dr. Nortin Hadler of the University of North Carolina School of Medicine came to these conclusions:

“The institution of medicine is ethically bankrupt…Part of being ill is to feel the need to seek professional care, to subjugate some degree of autonomy to a degree of trust…

But staying well does not require a lessening of autonomy. On the contrary, it requires the utmost vigilance with regard to the conflicts of interest (in our medical care) …never….let your guard down or…relinquish your autonomy when you deal with the health-care delivery system…

Medicalization (meaning over-medicalization of personal traits and conditions not previously regarded as medical matters)…(is)…what I call ‘Type II Medical Malpractice’ – the act of doing something to you very well that you did not need in the first place (emphases added).”[1]

Dr. Hadler may have been overly generous in assuming unnecessary treatments are always performed “very well”. The evidence on medical errors and deaths due to prescription drug use suggests otherwise – that much of the unnecessary treatment that occurs is fraught with medical malfeasance, as are all medical treatments; there’s certainly no evidence to indicate otherwise.

Which means the offense is even more egregious and the need for personal vigilance all the greater. 

And if Obamacare is repealed under a Romney presidency, look for these abusive and exploitative medical practices to spread like wildfire as unethical doctors will see this as a green light to do so.

Rationalizing Medical Corruption

America’s medical profession feels very put upon. Despite earning twice what their counterparts in other developed countries earn, they see themselves as victims – victims of excess regulation and insurance red tape, victims of a litigious consumer culture and over-zealous malpractice lawyers. It’s easy in such a context for many of them to rationalize whatever measures they find necessary to enhance their incomes – even if it comes at the expense of patients they’ve sworn to protect and whose interests they’ve pledged to put before their own.

This is fundamentally an ethical failing – and it’s reached a tipping point in American healthcare. And neither Obamacare nor its Republican alternative will do much to correct it.

Obamacare or no Obamacare, the onus is on us, as patients, to be more vigilant, more skeptical, more discerning before agreeing to medical interventions that are too often not needed and very often harmful.

Because we can no longer trust our doctors to do this for us.


[1] The Last Well Person: How to Stay Well Despite the Health-Care System. Norton M. Hadler, M.D. McGill-Queens University Press.2004.pp. 202-3.

This article is provided for informational and educational purposes only.
It does not constitute medical advice and should not be relied upon as such.

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