[Insurance-Medical, Coexistence or Mutual Destruction] Hospitals Encouraging Fraud... Insurers Falling Victim Despite Awareness

(Part 1) 'Medical Moral Hazard' Raising Insurance Premiums

Insurance Claims for Colds After Obesity Treatment
False Reporting of Dental Surgery Counts
Strengthened Non-Covered Service Management... Eating Away at the Medical Community

[Editor's Note] 'Medical Moral Hazard' is undermining the insurance industry. Despite the financial authorities' determination to eradicate it, fraudulent and excessive medical treatments leading to inflated insurance claims, or even medical professionals being involved in insurance fraud to deceive patients, are widespread. Even in the era of the Fourth Industrial Revolution, the simplification of claims for indemnity health insurance and the healthcare sector remain trapped behind barriers. As the insurance and medical industries fail to coexist harmoniously, insurance premiums rise annually, and consumer harm spreads due to numerous cases of giving up on complicated insurance claim procedures. Experts warn that if 'medical moral hazard' is left unchecked, both the insurance and medical industries will inevitably self-destruct. Asia Economy explores the insurance and medical sectors at the crossroads of coexistence and mutual destruction in a three-part series.

[Asia Economy Reporters Oh Hyung-gil and Ki Ha-young] An internal medicine clinic located in Daegu was found to have a doctor husband and nurse assistant wife colluding with professional brokers to disguise obesity treatment as cold treatment, fraudulently claiming over 500 million KRW in insurance money. Financial authorities and investigative agencies have referred 257 individuals to the prosecution, including one doctor, one nurse assistant, three brokers, and 252 patients involved in this scheme.

They administered obesity treatment injections (Saxenda), which are not covered by indemnity insurance, but disguised them as cold treatments eligible for indemnity insurance claims, issuing false medical receipts. Patients submitted these fabricated medical records and receipts to insurance companies to receive insurance payouts.

Detection Status by Type of Insurance Fraud (Source: Financial Supervisory Service)

◆ Hospitals and clinics committing insurance fraud... serious moral hazard = Cases where 'medical moral hazard' leads to insurance fraud are widespread.

The insurance industry points out that the scale of medical professionals caught committing insurance fraud rarely decreases because new diseases or methods keep emerging. Although the behavior of false or excessive treatment is similar, the 'various forms of fraud' are carried out depending on the disease or treatment method.

Insurance fraud involving alveolar bone grafting surgery disguised as multiple implant surgeries to claim more insurance money is also frequent. A dentist working at a clinic in Suwon performed implant surgeries on several adjacent teeth at once but falsely prepared and issued medical records and diagnosis certificates as if the surgeries were performed multiple times. Through this, a total of 36 patients fraudulently claimed insurance money amounting to 74.8 million KRW over 89 instances.

One patient underwent implant surgery on 10 teeth and 8 teeth while simultaneously receiving alveolar bone grafting but obtained 12 false diagnosis certificates as if each tooth was operated on individually, fraudulently claiming a total of 27.6 million KRW in insurance money. The court sentenced the doctor to a fine of 15 million KRW and the patient to a fine of 4 million KRW for this insurance fraud.

A hospital director who hired professional patient brokers as staff to recruit fake patients was also arrested. Five patient recruitment brokers were employed as administrative staff and were paid base salaries plus performance bonuses based on the number of patients recruited.

They led false and excessive treatments and hospitalizations for inpatients and forged medical records to fraudulently claim indemnity insurance money. It was revealed that approximately 700 false patients were recruited in this manner.

Top 5 Non-Reimbursable Medical Services in Clinics and Hospitals (Source: Financial Supervisory Service)

◆ Rising insurance loss ratios → worsening hospital profits 'vicious cycle' = Loss ratios for indemnity insurance and automobile insurance have continued to rise. The reason is that even for the same non-covered treatments, medical fees vary drastically between medical institutions.

A representative example is cataract surgery. Cataracts, the most common disease among major surgeries covered by health insurance, cause symptoms where objects appear foggy or blurred and are known to be experienced by 70% of the population over 60 years old.

To cover cataract treatment, indemnity insurance terms were revised in 2016 to exclude non-covered multifocal intraocular lens costs from indemnity insurance compensation. However, some hospitals drastically reduced the cost of multifocal intraocular lenses and increased non-covered examination fees.

Then, from September last year, as ocular ultrasound and eye measurement tests became covered, some ophthalmology clinics saw an increase in non-covered treatment material costs (multifocal lens fees). As a result, indemnity insurance claims for cataracts increased about threefold from 18 billion KRW in 2017 to 52.3 billion KRW in 2019.

Due to such leakage of non-covered insurance payments, financial authorities have decided to analyze the status of non-covered insurance claims by disease and medical institution type, as well as major areas of excessive treatment this year.

Since March, a council comprising the Financial Supervisory Service, National Health Insurance Service, and other cooperating agencies has been formed to jointly investigate insurance fraud cases, high-cost nursing care expenses, and indemnity insurance leakage cases, and has begun continuous operation.

Strengthening the management of non-covered treatments ultimately boomerangs back as worsening profits for the medical community. The behavior aimed at fraudulently obtaining insurance money affects the entire medical sector.

A financial authority official said, "Although it is the behavior of some medical institutions, we inevitably have to strengthen management over the entire medical community," adding, "We plan to systematically organize and analyze statistics on non-covered medical fees and share any abnormal signs with relevant authorities."