Do hospitals and governors make money off medical identity theft?

OK, here I'll go out on a limb. I would appreciate some help from any readers, because I'm a little out of my area of expertise, but I've been doing some more thinking about medical identity theft, and there's a scary possibility that hospitals and governors might actually profit from some forms of medical identity theft.

Here's my thinking. Contradictions welcome:

Let's start with something I know for sure. If you're an illegal immigrant in the United States, you're not supposed to work here. With some modest exceptions, though, illegal workers have found that they can beat the system if they steal the name and Social Security Number of an American. And in many industries, such as meat-packing, identity theft by illegal workers is endemic. All of those workers, then, have IDs in the name of an American and they also have that American's social security number, which they used to get their job.

Now suppose you're an illegal worker who's just been laid off from an Iowa meat packing company when you discover you've got a serious disease -- heart problems or cancer or diabetes, say. You can't afford treatment for such a thing. So you go to the local hospital, and they tell you that, under federal law, only legal immigrants can get subsidized nonemergency treatment.

This is a problem for you, and for the hospital. You still want treatment, and the hospital is full of people who would feel pretty bad about themselves if they turned you away. You might die untreated or go home to get what they consider substandard care. Doctors don't like to think they would turn away anyone just because they can't pay, but realistically they can't afford to treat all the poor illegal immigrants in the community. Most of them probably think Congress made a terrible mistake in refusing treatment to anyone in the U.S. But not strongly enough so they want to provide the care without reimbursement.

That tension sends the hospitals back to the rule book. Is there a loophole? Well, maybe. Exactly what, they ask, do you need to do to prove that you are a legal immigrant? In 1996, Congress said you had to produce actual evidence that you were here legally -- a passport or a birth certificate, mainly. But that was a hassle for Americans and for hospitals. Not to mention illegal immigrants. So Congress decided last year to ease the requirement. Now you only have to produce proof of identity, plus a social security number that matches your name.

That's good for deserving poor people who've lost their documents. But it's even better for illegal workers, many of whom have already obtained a driver's license in the name of some poor American, whose SSN they've also borrowed. If the illegal worker presents that license and SSN, everyone's problems are solved. The illegal immigrant gets treatment, the hospital workers feel good about themselves, plus they don't have to pay a price for feeling good about themselves, because Medicaid is picking up the tab. And the State, which is on the hook for reimbursing the hospital, can pass the cost on to the the federal government. Everybody wins, except for the federal budget and the poor schlub whose medical records will be screwed up forever.

In short, the state and the hospital have a powerful economic incentive to look the other way when patients use stolen identities to get medical treatment. If no one looks too closely, the hospital and the state will come out fine. They'll all get paid, and the patient will get treated. But if the state or the hospital cracks down on fraud and stolen identities, they'll end up stuck with patients who can't easily be turned away but whose care will go unreimbursed, costing the hospital or the state a lot of money.

So, what could mess this sweet deal up? Well, better security standards for driver's licenses could. The harder it is to get a license using a fake name, the more likely it is that illegal immigrants will not be able to fake their way into the Medicaid program. And that will put hospitals and state reimbursement authorities back in the moral and economic dilemma of how to handle illegal immigrants with serious diseases.

So getting rid of REAL ID and making sure that driver's license security continues to be bad may save the states money in two ways. First, they won't have to pay for things like validating breeder documents. And second, by making identity theft easier, it will allow states and hospitals to get federal reimbursement after they treat people who aren't actually eligible for Medicaid. As long as they don't look too closely at their patients' actual legal status.

So the complaint by governors that REAL ID will cost them billions might actually be true. Of course, not having REAL ID will cost federal taxpayers those same billions, but that's not the governors' problem.

Oh, and the risk that your medical records will be contaminated by an identity thief's blood type, allergies, and health conditions? Also not the governors' problem. They've got budget problems to worry about, and this is a twofer. What, did you think they were elected to worry about you?

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OK, that's harsh. And maybe I've missed something in the way the incentives of the Medicaid and Medicare programs work; that's not my field. I'm happy to correct myself if I've been too cynical about the way all this fits together. Let me know.