Will Healthcare Reform Kill Robin Hood?

Medical identification theft is on the rise, a new study shows. But will federal healthcare reform, as recently affirmed by the Supreme Court reverse that trend? I believe it's tough to make a prediction.

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A large portion of the medical ID theft that occurs today is what Larry Ponemon, chairman and founder of research firm Ponemon Institute, calls "Robin Hood" fraud. That's when a person who has health insurance looks the other way while his or her ID is used by an uninsured relative or friend to obtain healthcare services, explains Ponemon, whose firm recently completed its third annual survey on medical ID theft.

Once healthcare reform kicks in, starting in 2014, Robin Hood fraud could decline as more people are able to acquire legitimate healthcare coverage, for example, through state health insurance exchanges. But there could be a subtle shift in the motivation for medical ID theft. Rather than seeking health insurance coverage, some fraudsters will commit ID theft in hopes of obtaining better coverage than new bare-bones policies provide.

And here's another factor to consider. Healthcare reform mandates that individuals obtain health insurance or pay a penalty. Many individuals could refuse to buy coverage and instead opt for the tax penalty or hope to fly under the radar. And some of those who remain uninsured could resort to using others' insurance credentials in a pinch.

So even if healthcare reform leads to a decline in the number of uninsured, providers and payers will need to remain vigilant to ensure that medical ID theft does, indeed, decline.

ID Theft Trends

The Ponemon study, sponsored by Experian's ProtectMyID, found the number of medical ID thefts and their costs are on the rise. Based on his research, Ponemon estimates that medical identity theft will affect 1.85 million Americans this year, at a cost of $41.3 billion. That's up from 1.49 million affected last year at a cost of $30.9 billion.

In 2012, as was the case in previous year's studies, nearly 70 percent of the medical ID theft incidents involved others fraudulently using credentials to obtain healthcare services. In more than half of the medical ID theft cases, the victims didn't report the incidents to law enforcement, often because they knew the person who stole their identity.

Often with Robin Hood medical ID theft, the attitude of the thief and the enabler is that it's not really a crime, Ponemon says. "It's helping Uncle Joe because he doesn't have insurance."

Also, when someone steals the medical ID of another to obtain services, it's often to tap into government programs like Medicare, which covers the elderly and disabled, or Medicaid, which provides coverage for the poor, Ponemon says. Because the health benefits are coming from the government, many involved in medical ID theft consider the benefits "a free good," he says.

What's Ahead?

The Obama administration estimates that healthcare reform could bring coverage to 30 million uninsured who lack coverage. We'll have to wait and see if that prediction is accurate.

But would a substantial drop in the number of uninsured lead to a substantial drop in medical ID theft? Maybe not.

That's because not all health insurance policies are created equal. Some of the least expensive new offerings expected to be obtainable on the market, or provided through the expansion of states' Medicaid and Children's Health Insurance Program, might not offer all the benefits someone wants, Ponemon says.

That means new forms of Robin Hood medical ID theft to obtain payment for uncovered services could materialize. And with more people having healthcare insurance, there will be more medical IDs to steal and more crimes to commit.

New ID Crimes

Some newer forms of medical ID theft are already emerging. For instance, Ponemon says he's seen cases of medical ID theft in which an individual uses another's credentials to obtain durable medical equipment - such as electronic scooters - only to sell them on eBay.

But advanced technologies, including biometrics, that can improve authentication of patients could help defuse some new forms of medical ID theft, Ponemon predicts.

Meanwhile, Deborah Peel, M.D. founder of the consumer advocacy group Patient Privacy Rights, thinks another tactic could be effective in discouraging medical ID theft, especially in cases where thief is using credentials of someone who has tacit knowledge of the fraud: The threat of dropped coverage.

"If you give your card to someone else to use, you should lose your benefits," Peel says.

Backers of the Affordable Care Act say it will generate savings in the long run as it brings coverage to millions of the previously uninsured. But providers, payers and patients need to stay vigilant for the signs of medical ID theft. Otherwise, any savings generated by healthcare reform could be offset by fraud.