Health care fraud: lessons from Malaysia’s million ringgit scheme

Health care fraud has become an increasingly prevalent and costly issue worldwide. A recent study estimates that losses in the health care sector due to fraud and corruption amount to around $455 billion of the $7.35 trillion spent globally each year.

Additionally, a survey by the Global Healthcare Anti-Fraud Network reveals that approximately $260 billion is lost annually to health insurance fraud, which represents about 6% of global health care spending.

Given these staggering figures, it is clear that the health care sector faces various risks associated with medicare fraud. Common practices include phantom billing, upcoding, prescription drug fraud, and the performance of unnecessary services. 

Recent events in Malaysia have brought this issue into sharp focus, underscoring the urgent need for vigilance across the health care sector worldwide.

Malaysia’s Perkeso false claim cases

The Malaysian Social Security Organisation (SOCSO), commonly known as Perkeso, recently uncovered a significant health care fraud scheme. Intelligence gathered by Perkeso’s Anti-Fraud, Ethics, and Integrity department led the Malaysian Anti-Corruption Commission (MACC) to expose a sophisticated operation run by a cartel.

The Jemaah Doktor (JD), or medical board, was arrested on suspicion of colluding with the cartel. For years, this group allegedly exploited false disability claims to siphon millions of ringgits—equivalent to hundreds of thousands of US dollars—from the organization.

The practice of upcoding, where doctors submitted false claims with fabricated diagnoses, was central to this fraud. These diagnoses falsely indicated that claimants had sustained fractures in their hands or legs. To lend credibility to these claims, the doctors issue medical certificates granting the claimants 90 days of medical leave.

Moreover, a panel of doctors was complicit in verifying these fraudulent claims. However, upon further investigation, including visits to the hospitals and examinations of actual X-rays, it was revealed that no fractures existed at all.

In this scheme, the claimants received 50% of the money, while the remaining half was distributed among the doctors and agents involved. Perhaps the most distressing aspect of this case is the involvement of medical professionals. Their profession is fundamentally reliant on public trust, and when that trust is broken, the consequences can be far-reaching.

The ripple effects of health care fraud

This case, like many instances of health care fraud worldwide, creates a ripple effect that impacts various aspects of society and the health care system.

• Monetary loss

The millions of ringgit fraudulently claimed from Perkeso represent funds that were intended to support genuinely disabled individuals. This misallocation of resources reduces the benefits available to those who truly need assistance.

• Erosion of public confidence

The involvement of doctors in this scheme is especially damaging, as it undermines the trust that patients place in the organization and medical professionals. When those entrusted to protect and support the community are found complicit in fraud, public confidence is significantly eroded.

• Delay access to care

As a consequence of fraudulent actions, genuine claimants face additional barriers to accessing health care services. Insurers and health care providers may implement more stringent checks and verifications, which can slow down the processing time for all claims, further complicating the situation for those in need of timely assistance.

Combating the fraud: a path forward

Perkeso and MACC have worked closely together to identify and apprehend those involved in the fraudulent activities. As part of the immediate response, 33 individuals, including the three doctors implicated in the scheme, were remanded, with more arrests expected. This decisive action sends a strong message about Malaysia’s commitment to tackling health care fraud.

In response, Perkeso has also announced plans to enhance its fraud prevention measures. These initiatives include implementing a more rigorous system of checks and balances for its panel of doctors and conducting additional due diligence, particularly in cases where only the claimant is involved.

On a broader scale, combating health care fraud requires a multi-faceted approach. Key strategies generally include:

1. Whistleblowing system

According to the Report to the Nation 2024, approximately 43% of fraud cases are uncovered through reports, with over half originating from employees. This underscores the importance of organizations implementing effective whistleblowing systems and promptly acting on such reports.

The same report highlights that fraud detected early results in losses that are 50% lower than cases identified later.

2. Enhanced data analytics

Leveraging big data and machine learning algorithms can help identify anomalies or unusual patterns in claims and billing, allowing for more accurate and timely fraud detection.

3. Increased collaboration

Partnerships between health care providers, insurers, law enforcement agencies, and third-party compliance experts are essential for sharing information and best practices in fraud prevention, detection, and mitigation.

4. Stricter regulations

Implementing more rigorous oversight and auditing processes for health care providers and claims can help ensure compliance and reduce opportunities for fraud.

5. Education and awareness

Training health care professionals and educating the public about the consequences of health care fraud, as well as how to report suspicious activities through whistleblowing systems, are vital components of an effective anti-fraud strategy.

In light of this, the health care fraud case underscores the challenges facing global health care systems, highlighting the urgent need for constant vigilance and strong fraud prevention measures.