Friday, June 10, 2011

DoD's health care costs have become a national security issue (is fraud to blame?)

The skyrocketing cost of the military health care system has become a national security issue.  Last year the New York Times quoted DoD Secretary Bill Gates saying “’Health care costs are eating the Defense Department alive.’”  In fact, health care costs now exceed 10% of the total DoD budget, far more than the DoD spends on major weapons systems.  The Times also observed “Defense budget analysts say that rising health care costs will make less money available for new weapons, repairs to a worn-out arsenal and quality-of-life programs like schools on military bases.”  (Click here for another NYT story.)  

Sec. Gates, however, continues to fight to keep costs down.  Click here and here for Sec. Gates' recent Congressional testimony on the DoD budget and his efforts to reduce DoD's health care costs.

The chart below shows that in 2001, the DoD spent about $19 billion on health care.  But just ten years later, the cost has exploded to over $50 billion, with costs expected to rise to $64 billion by 2015.  The Government attributes most of these cost increases to the expansion of eligible TRICARE beneficiaries (i.e., reservists and retirees) and the increased costs associated with treating wounded war vets.  However, as reflected in the pie graph below, 24% of the increase is attributable to “Medical Care Inflation” and 9% is from “Factors Not Accounted For.”  Thus, 33% of the increase from $19 to $50 billion comes from factors that to some extent most likely are a result of health care fraud.
I’ve blogged about the prosecution of U.S. Army Cardiologist Major (Dr.) Jason L. Davis, who recently pled guilty to accepting almost $5,000 from Boston Scientific.  From my observations of having prosecuted health care fraud cases against corrupt providers, health care fraud is one of main reasons why costs continue to go up and up.  Illegal relationships like the one between Major Davis and Boston Scientific is one explanation for that 24% cost increase due “medical care inflation.”  And that 9% increase due “factors not accounted for,” well I think we know some of those factors.    

Given that we are now engaged in 3 military campaigns in the Middle East, every dollar is precious.  

To learn more about that military health care system, click here and here.

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