Healthcare fraud remains a significant challenge in the United States, costing the system tens of billions of dollars annually. In fact, every year, this problem drains an estimated $100 billion through fraudulent claims, waste, and abuse, making it one of the most expensive financial leaks in the nation. That’s more than $300 annually for every American1.
This financial burden is exacerbated by weak identity verification processes and a complex and highly fragmented regulatory framework involving private insurers, federal programs like Medicare and Medicaid, and state-level healthcare systems. Unlike many European countries that utilize centralized health card systems with robust security features, U.S. insurance cards often lack standardized authentication measures. Moreover, the absence of a unified healthcare infrastructure complicates efforts to implement cohesive national solutions.
Healthcare fraud is an especially pervasive issue in the United States, involving deceptive practices by both patients and physicians. Patients may engage in medical identity theft, using stolen medical identities to obtain healthcare services or goods. They might also impersonate beneficiaries to access services they are not eligible for or submit false claims for treatments they never received. These fraudulent activities not only compromise the integrity of the healthcare system but also lead to significant financial losses.
There are also instances in which fraudulent activities may occur in healthcare billing. These can include billing for services not rendered, upcoding to charge for more expensive services than those provided, or unbundling procedures to inflate charges. In some cases, providers may receive kickbacks for referring patients to specific services or facilities, which can result in biased medical advice or unnecessary treatments. Additionally, there may be situations where medically unnecessary services are billed, or the type or level of service provided is misrepresented.
Stronger Security Protocols Needed
However, any approach must also account for U.S.-specific considerations around patient privacy rights under HIPAA, varied levels of digital infrastructure across providers, and differing interpretations of ethical responsibility in patient identity management.
The challenge to prevent this type of fraud lies in implementing stronger security protocols while maintaining accessibility and interoperability across healthcare providers, insurers, and government programs.
European countries, including Germany and France, have successfully adopted national health cards equipped with biometric authentication and encrypted chips. These cards enhance security, reduce fraud, and improve interoperability among hospitals, pharmacies, and insurers. While these centralized systems offer compelling models, they benefit from a more homogeneous healthcare structure and higher levels of public trust in government-administered digital identity frameworks, which are not directly comparable to the U.S. environment.
For instance, Germany’s electronic health card (eGK) integrates various applications, including emergency data and electronic prescriptions, providing a secure platform for healthcare transactions. Adapting similar models in the U.S. could help improve identity verification and claims processing, though widespread adoption would require overcoming significant regulatory, infrastructural, and public trust hurdles.
What Are Health ID Smart Cards?
The health ID smart card system is a significant innovation in healthcare, offering enhanced security, efficiency, and patient care. By integrating Public Key Infrastructure (PKI) functionality and a photo for two-factor authentication, these cards ensure secure identification and prevent unauthorized access to sensitive health data. This dual-layer security is vital in combating fraud, such as Medicaid misuse, by verifying insurance status and patient eligibility during medical service checks. The system’s ability to reduce duplicate or fraudulent claims underscores its role in safeguarding healthcare resources.
A key feature of the health ID smart card system is its reliance on the Card Application Management System (CAMS), which manages data preparation, personalization, and lifecycle control. CAMS integrates seamlessly with existing healthcare databases, ensuring scalability and adaptability to evolving needs. The system employs durable Polyvinylchloride (PVC) cards compliant with ISO-7816 standards, featuring chips powered by the STARCOS® operating system for secure data storage and fast processing. This robust architecture supports multiple applications while allowing post-issuance updates to accommodate new functionalities.
Personalization is central to the system’s effectiveness. During the personalization phase, application structures and personal content are securely embedded in the chip, ensuring only authorized users can access or modify data. Middleware components like the OffCard API further enhance integration with existing IT infrastructures, enabling secure messaging and cryptographic operations essential for healthcare applications.
Still, any implementation in the U.S. must be viewed through an ethical lens—considering who controls the data, how consent is managed, and what mechanisms ensure transparency in usage. Patient advocacy groups and privacy watchdogs will be essential stakeholders in shaping equitable and secure systems.
Digital ID & AI Solutions
Digital identity solutions, such as biometric verification, offer a promising avenue for enhancing the security of patient records. By leveraging technologies like facial recognition and fingerprint scanning, healthcare providers can ensure that only authorized individuals access sensitive information.
Additionally, artificial intelligence (AI) and machine learning can play an important role in detecting fraudulent patterns in Medicare and Medicaid claims. The U.S. Department of Health and Human Services (HHS) reported that improper payments in Medicare alone exceeded $46 billion in recent years2. AI-driven systems can analyze vast amounts of data to identify anomalies and prevent improper payments before they occur. However, AI systems are only as effective as the data they are trained on, and false positives may lead to denial of legitimate claims, disproportionately affecting vulnerable populations.
Despite the clear benefits, several barriers to implementation must be addressed. Balancing security with accessibility is paramount, ensuring that patients can easily access their healthcare services without compromising data privacy. Integrating new systems with existing healthcare infrastructure poses another challenge, requiring coordinated efforts from policymakers and industry leaders. Establishing national standards for secure health card adoption is essential, and public-private collaboration can drive innovation while addressing concerns around cost, privacy, and scalability.
Furthermore, ethical and legal frameworks must evolve in parallel with technological adoption to ensure fairness, transparency, and accountability—particularly in a country where healthcare access is often linked to employment, immigration status, and varying levels of digital literacy.
The U.S. healthcare system remains highly vulnerable to fraud due to outdated identity verification methods. Learning from global best practices and leveraging digital identity and AI technologies can contribute to mitigating fraud risks, but no single solution will suffice.
Addressing these challenges requires coordinated efforts from government agencies, healthcare providers, and technology innovators to create a more secure and efficient system. By adopting advanced security measures, respecting patient rights, and fostering trust-based collaboration, the U.S. can pave the way for a healthcare system that is both resilient and trustworthy.
1: https://ideas.darden.virginia.edu/artificial-intelligence-healthcare-fraud
2: https://oig.hhs.gov/reports/all/2025/medicaid-fraud-control-units-annual-report-fiscal-year-2024/
Jim Marsh
Jim Marsh is the President and Managing Director of Veridos America, a joint venture between Giesecke+Devrient and Bundesdruckerei. The company supplies governments and authorities with tailor-made complete solutions for secure identification. For more information, please visit www.veridos.com.
