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People with Mental Illness, Targets for Fraud

I work from home, and even though we’re on the Do Not Call list, the phone rings all day. Robo-calls fish for people gullible or uninformed, and those with impaired judgment such as some with serious mental illness or cognitive decline are especially at risk.

As criminals prey on individuals, larger actors skim money from the organizations that pay for mental healthcare. In both cases the result is fewer resources available to meet the need for mental health services.

Fraud is an insidious form of theft.  The victim plays a willing, though uninformed, part in the loss of their own funds. In some sense, the criminal asks for the money and the victim hands it over. Promised services or products are skimped on or never delivered.

Through data mining well-organized rings can know an awful lot about the people they seek to defraud, and the elderly and those with mental illness jump to the top of the list of targets. The only protection against the constant phone solicitations is to say no all the time. But if judgment is impaired, this can be challenging.

Families act to protect their vulnerable members and may hide funds from the one who needs help in a well-meaning attempt to assist them. But secret savings accounts remain an asset of the one who’s money it is, and may impact their eligibility for benefits.

Setting up a trust for a family member with a serious mental illness is preferable. The individual in decline will also be wise to appoint someone as durable power of attorney to be an intermediary in financial decisions. Such a decision must ultimately be made by the individual protected, and surrendering independence, especially financial independence, is difficult. But protection from the predators of fraud may dictate such a move.

Trust is key, as is making these decisions before the person that needs protection is too impaired to make them. Otherwise courts get involved and the whole exercise can become expensive and unpleasant for all.

So it’s responsible for someone who was mentally acute but is now slipping to seek help with financial matters. Such arrangements can help all prevent fraud.

But fraud also strikes on a more global scale. As mental health services have shifted from state owned providers to private, for-profit providers, and as funding for services has shifted from state funds to federal funds, fraud has skyrocketed.

The Department of Health and Human Services estimates that 10% of all Medicare and Medicaid expenditures are lost due to fraud, and that the largest number of fraudulent claims are in psychiatry and psychology.

The total government funding lost to fraud in mental healthcare could exceed $4 billion per year. This loss of public funds especially impacts those with serious mental illness and the elderly who see their services cut in the face of state and federal budget challenges.

In fact, $4 billion could pay for a year of assertive outpatient treatment for the 350,000 people with serious mental illness in prison and the 216,000 with serious mental illness who are homeless. Or, 330,000 people could receive supported housing. This could fund housing for low or no income elderly citizens who struggle with mental illness and cognitive decline.

Billions are also lost by fraud against private insurers, although that has less impact on those with serious mental illness who most often rely on state and federal funds.

Fraud is stealing, and the money stolen most often impacts the most vulnerable and the least likely to afford the loss. Laws and enforcement can’t seem to keep up, and those impacted by fraud seem to have little voice to policy makers and regulators.

We must each seek to shelter our loved ones in private situations so that their assets remain protected, and to advocate for tighter oversight and enforcement of public programs so that services for the most disadvantaged of us can effectively continue.

People with Mental Illness, Targets for Fraud

George Hofmann

After much of a life spent in and out of hospitals, jobs, and relationships, George has spent the last dozen years living successfully with bipolar disorder 1. He teaches meditation as an adjunct therapy for mental illness, and writes about the therapies of meditation, movement, and meaningful work. Visit George at

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APA Reference
Hofmann, G. (2019). People with Mental Illness, Targets for Fraud. Psych Central. Retrieved on May 19, 2019, from


Last updated: 19 Feb 2019
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