Well, I’d like to lose neither but Americans did lose both last year – whether from tax-payer funds dedicated to senior citizens, or private wealth of seniors saved over a lifetime of work.
These numbers may be much higher given that elderly victims of fraud don’t report the crime.
In order to get ahead of this pandemic, it’s important to understand why aging Americans are targeted, how extortion happens, and why current solutions may not be effective.
1. Aging Americans make an excellent target
A few simple reasons:
- There are many aging Americans & they have lots of money: If you think of fraud as a business and do customer segmentation to find the highest ROI segment, you’ll quickly realize that individuals over 65 are the largest growing demographic in the U.S. And unlike the millennials, this customer segment has a massive amount of private wealth in retirement savings, private pension, and home equity (median savings of $260K).
- Aging Americans are the key to a massive pot of public gold: Medicare, Social Security, and parts of Medicaid are dedicated public programs for individuals over 65. Therefore stealing the identity of an American over 65 (or leveraging their health and needs) is worth a lot of public money. Medicare alone spent $672B in 2016 on healthcare for individuals over 65.
- Individuals who live alone are more susceptible to fraud: As we age, many of us end up living alone (40%+ of individuals over 65 live alone). This creates a feeling of vulnerability, and an inability to seek council from a trusted partner who is in close proximity.
- Cognitive decline makes for easy exploitation: The 13% of Americans over 65 who have some form of cognitive decline are an easy prey and can be confused into handing over their assets and power of attorney to a fraudulent caregiver.
2. Scams come in all shapes and sizes
As expected, human creativity is at it’s best when there’s a large expected payoff. The list below is by no means exhaustive but a good sampling of common types of fraud used against America’s aging population.
With Medicare fraud, one might think that there’s no direct impact on the individual since this is theft from public funds. That’s incorrect. Medicare doesn’t offer unlimited coverage. If an individual is covered for one procedure, and a fraudster has already claimed it, then the individual will likely not get Medicare coverage for this procedure when they actually need it. Also, there are no consumer protections with Medicare fraud and people can get into legal trouble even if their Medicare ID is stolen and abused by someone else.
Finally, the more fraud within Medicare, the less resources are available for other forms of public assistance.
Why doesn’t private health insurance have such high fraud rates?
Because Medicare is legally bound to process claims within 30 days of filing. This limit is not imposed on private health insurance providers. Legacy systems and lack of efficient data flow combined with a 30 day cycle means Medicare can only check 1.8% of all claims filed for fraud.
Many older individuals experience loneliness. Over 40% live alone. The need for human connection and affection can override caution. These scams are also the least likely to get reported since there’s shame associated with being tricked by someone in exchange for love. Also, in cases where the manipulation is coming from a caregiver (family member or professional), the power dynamic makes it unsafe to report the fraud.
3. Existing mechanism are not working
Despite there being lots of literature available on this topic, elderly fraud is on the rise and represents 5M individuals every year. There are public and non-profit hotlines to report scam, but awareness and market penetration is low. Harvard University predicts that only 1 in 40 scams is ever reported by an aging individual. So why aren’t the existing systems working?
- Shame: In order to protect individuals from fraud, we can’t just take a logical approach. We have to account for the tremendous shame that people feel when they discover they have been duped. Much like other forms of abuse, victims blame themselves for it.
- Fear of giving over the reigns: Very often individuals fear that if they share their story with a younger family member, they will be judged and deemed unfit to live independently.
- Post, not pre: While there are several public and volunteer services where scams can be reported after they have happened, there are no scaled out solutions where an individual can ask a trusted professional if some unusual activity in their lives could result in a scam.
- I didn’t know myself: Medicare and Social Security fraud often goes unnoticed for a long time because people don’t review their medical claims – it’s tedious and irrelevant to their day to day life – until it’s not, and by then it’s too late.
- Too much information, not enough help: The nature of scams evolves rapidly. In order to stay on top of it, people are expected to do ongoing research and remain informed. Imagine if we expected every computer user to know everything about every computer virus out there, because that was the only way to stay protected. It just wouldn’t work.
In order to protect individuals from scams, we need to learn from the tactics of scammers since they’re so effective. Scammers understand the psychology of their victims, and leverage human connection and technology effectively to manipulate them.
Any solutions to combat this threat should consider doing the same.