While Medicare and Medicaid are government programs, the government offers many of these benefits through private companies. To ensure that taxpayer money is properly spent, there are minimum Medical Loss Ratios in place that require providers to spend at least 85 percent of their Medicare and Medicaid revenue on medical services. The remaining 15 percent can pay for overhead and administrative expenses, and can be recognized as profit.
Medicare and Medicaid providers, however, sometimes engage in fraudulent practices to create the illusion that 85 percent of their revenue is paying for medical services, when, in reality, the ratio is much lower. Fraudulent practices include (1) misclassifying administrative services as medical services, (2) reporting false information to the government to inflate the Medical Loss Ratio; and (3) paying duplicative or excessive claims to medical providers.
Loss ratio fraud is extremely difficult to catch without the help of whistleblowers. If you have evidence of loss ratio fraud, you should talk to a qualified whistleblower attorney.