The views and opinions expressed in this document are those of the author(s) and do not necessarily reflect the official policy or position of any organisation, employer, client, or affiliated institution.

Imagine you’re a 30-year-old woman in a small village in Andhra Pradesh, with two children, and one day, a health worker tells you that you qualify for a free surgery under a government insurance scheme. “It’ll protect your uterus,” she says. You’re unsure if you need it, but who says no to free care? Fast forward a few weeks - the surgery is done; your uterus is gone. And you find out later, through a news report, that the hospital did this to hundreds of women like you, completely unnecessarily, just to profit from reimbursements from publicly funded insurance schemes.

Since 2008, the expansion of publicly funded health insurance schemes has enabled crores of Indians to access free or subsidized healthcare. Over 540 million poor people are now covered under India’s National Health Insurance Scheme (Ayushman Bharat PM-JAY) alone, which exceeds the population of the European Union!

However, scaling up increases vulnerability, providing an opportunity for some providers to exploit the system unnoticed. When money flows into healthcare without proper oversight, healing can be sidelined, and harm can occur. The impact goes beyond financial loss; every rupee lost to fraud is a rupee not spent on patients who genuinely need care. Additionally, this fraud raises insurance premiums, making health coverage more costly for everyone.

Why Does Fraud Happen and Why Is It So Hard to Catch?

When people hear about fraud in hospitals, they often imagine billing scams or fake patients. But it’s deeper than that. A systematic study of the types of fraud uncovered under public health insurance schemes in India found not just financial fraud, but disturbing ethical violations encompassing unnecessary hysterectomies, kidney removals done without proper patient knowledge, unnecessary stent surgeries which led to patient mortality, and surgeries performed on children just to meet targets.

So why does this happen? Part of the problem is our fragmented health data system. The patient’s medical history is fragmented, with one file at a government hospital, another in a private clinic, some lab results in your email, and others nowhere easily accessible; therefore, no common patient identifiers exist. This disjointed system makes it easy for fraudsters to create fake patients or double-bill without detection. Furthermore, providers are paid per procedure rather than based on outcomes, resulting in waste and financially motivated, medically unnecessary procedures.

But perhaps the most significant enabler is the lack of patient awareness. Many beneficiaries trust the doctor and sign whatever forms are handed to them. There are heartbreaking cases from Chhattisgarh, where women were allegedly threatened with cancer if they didn’t undergo surgery. It’s not just fraud, it’s coercion.

How do we fix this? Around the world, there are promising ways to fight back. And it starts with seeing fraud not just as a technical issue, but as a people problem. Blockchain is another tool which makes health records secure and tamper-proof, especially if linked to biometric-based digital health IDs—so, no more fudging data or claiming procedures that never took place.

Having a biometric-linked Digital Health ID for each patient that securely and transparently stores their medical history will enable hospitals and insurers to cross-check all data in real time.

In PM-JAY, India’s Health Insurance Scheme, AI-based fraud detection systems are already saving crores by flagging suspicious patterns. For instance, if a hospital suddenly shows a spike in gallbladder surgeries for women aged 25-35, the system sends an alert. And mobile-based video audits, where a medical auditor speaks to the patient during treatment, can serve as a real-time check without requiring physical inspections.

But tech alone isn’t enough. We need laws. A National Health Insurance Anti-Fraud Act, similar to the U.S. False Claims Act, could set clear penalties for fraud and protect whistleblowers who report it. Whistleblower protections can encourage honest hospital staff to speak out. And ensuring quicker claims settlement can eliminate the excuse of “cash crunch” that some providers use to justify cutting corners.

Having blacklists for repeat offenders like a national negative registry, accessible to insurers and government agencies, would make it harder for hospitals committing fraud to resurface under new names.

Culture change is also important. If we truly want to reduce unnecessary surgeries, we need to start in medical colleges by teaching young doctors about ethics, not just anatomy. We should implement SMS (short message service) alerts to patients after procedures – “Did you undergo surgery at XYZ Hospital on this date?” Even simple messages like this can reveal fraud.

And we must make patients the watchdogs. Just as Ukraine launched a portal and hotline for reporting bribes and other malpractices, India could adopt public reporting platforms for health schemes. Let people ask questions. Let them report abuse. Let them be more than just recipients; let them be true guardians of the system.

Finally, there are lessons from outside healthcare as well. Consider how banks use KYC (Know Your Customer) standards or how Direct Benefit Transfers (DBT) employ biometrics to identify the correct individual. These methods can be adapted to prevent fake identities or ghost patients from draining public funds.

Conclusion

Ultimately, public health insurance is not just about access to hospital beds. It is about trust. If we want to create a system where free care genuinely means safe, fair, and ethical treatment, then we must illuminate the dark corners and address them collectively. Not through fear, but with intelligent tools, honest dialogue, and a strong sense of accountability. The battle against healthcare corruption is not solely about saving money; it’s about saving lives.