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An Economic Explanation for Fraud and Abuse in Public Medical Care Programs

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  • Feldman, Roger

Abstract

This paper comments on David Hyman's theory of fraud and abuse in medical care. It agrees with Hyman that preventing fraud is difficult because providers, patients, and program administrators usually have weak incentives to do so. It extends Hyman's work by arguing that the root cause of fraud in public-sector medical programs is distorted prices (usually too high), coupled with limitations on efficiency-seeking activities that normally would occur when prices are distorted. The theory is illustrated with examples from Medicare, kickbacks and fee splitting, and a model of the behavior of fraud-control officers. Copyright 2001 by the University of Chicago.

Suggested Citation

  • Feldman, Roger, 2001. "An Economic Explanation for Fraud and Abuse in Public Medical Care Programs," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 569-577, June.
    • Handle: RePEc:ucp:jlstud:v:30:y:2001:i:2:p:569-77
    DOI: 10.1086/339291
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    Cited by:

    1. Jiong Gong & R. Preston McAfee & Michael A. Williams, 2016. "Fraud Cycles," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(3), pages 544-572, September.
    2. Thuy Nguyen & Victoria Perez, 2020. "Privatizing Plaintiffs: How Medicaid, the False Claims Act, and Decentralized Fraud Detection Affect Public Fraud Enforcement Efforts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 1063-1091, December.
    3. Pulina, Manuela & Paba, Antonello, 2010. "A discrete choice approach to model credit card fraud," MPRA Paper 20019, University Library of Munich, Germany.
    4. Bing Jing, 2011. "Seller honesty and product line pricing," Quantitative Marketing and Economics (QME), Springer, vol. 9(4), pages 403-427, December.

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