Health insurance fraud: Firms lose K6bn on bogus claims annually

Suspected fraud involving service providers and members is crippling the country’s medical aid schemes with up to over 25 percent of the claims paid by health insurance firms being falsified in nature.

In addition to fraud—which mainly involves collusion, forgery, intentional omissions and misrepresentations, waste and exploitation are other factors contributing to the high percentage of erroneous medical aid claims.

Two of the country’s major health insurance providers—Medical Aid Society of Malawi (Masm) and Horizon Health Malawi—confirmed in separate interviews that between 25 and 40 percent of claims they pay are bogus and cost them around K6 billion a year.

Their claim also corroborates a study by the Board of Health Care Funders of Southern Africa (BHFSA) headquartered in South Africa, which found that 40 percent of medical aid schemes’ claims in the region are forged.

The board membership, which includes medical schemes, administrators and managed care organisations, spans across eight countries comprising South Africa, Lesotho, Zimbabwe, Namibia, Botswana, Mozambique, Malawi and Swaziland representing over 1.6 million lives.

Masm chief executive officer Sydney Chikoti said besides the issue of fraud, there is also wastage.

“But there is a lot of abuse by the members of the schemes whereby they solicit more than what is necessary for their treatment,” said Chikoti.

Common schemes include billing for services not rendered, incorrect reporting of diagnoses or procedures, overutilisation of services and false or unnecessary issuance of prescription drugs.

For instance, Masm monthly claims, according to Chikoti, hovers around K2 billion. This translates to a minimum of K500 million, which is purportedly claimed illegally by the service providers in a month.

This means the country’s dominant health insurance provider, which has a membership of slightly above 130 000, single-handedly loses an estimated K6 billion annually through fraud, wastage and abuse.

Despite this development, three weeks ago, Masm board chairperson John Bizwick disclosed that the society posted a K1.9 billion surplus for 18 months, ending June 30 2019, after making a K1 billion loss between January and June 2018.

The country has three other major and recognised health insurance schemes besides Masm; these are Liberty General, Horizon Health Malawi and MedHealth.

While Chikoti said no inclusive local study has been conducted, they have a number of fraud cases.

“But we are trying to reduce the quantum of fraud that is occurring because as an industry we are now coming together after forming the Health Funders Association of Malawi [Hfam] and we hope to deal with these challenges,” he explained.

Hfam interim president Elsie Munthali, who is also chief executive officer for Horizon Health Malawi, said the most common fraud involves schemes’ members conniving with service providers to pay them cash, which in turn the service providers claim as if they provided the service.

“That is the most serious fraud we are currently facing as an industry. On our part as Horizon, we calculate that between 40 and 50 percent of our claims are fraudulent in nature because fraudsters have now become more sophisticated. So, that’s why we have come up with this association to start talking and acting with one voice,” she said.

Munthali cited as an example of “one distinguished health facility” that presented a dubious bill indicating that a patient was admitted to the institution for eight days after suffering from malaria.

“But when I inquired from the patient her immediate reaction was, and she told me, ‘madam I don’t want to put the doctor in a trouble,’ so you can just imagine,” lamented Munthali.

But acting registrar of Medical Council of Malawi (MCM) Richard Ndovi said while they have not directly received complaints pertaining to a specific registered doctor defrauding medical schemes was a serious ethical issue.

“It is unethical within the ethical guidelines of MCM if our member is involved in improperly obtaining money from patients or from medical schemes. It is also a serious disciplinary issue,” explained Ndovi.

Currently, the health insurance firms in Malawi are under the Reserve Bank of Malawi (RBM) and regulated by the Financial Act.

But health rights advocates have observed the loss of funds not only compromises the financial reliability of the schemes but also destabilizes their ability to provide quality healthcare services.

Executive director of Health and Rights Education Programme (Hrep) Maziko Matemba also observed that medical fraud directly puts lives of the vulnerable patients at risk.

“This is unfortunate to the right of patients who are in need of quality health care which is also key to attaining the right to health and life,” he said.