May 7, 2010

A recent ABC News story on Medicare fraud finds that the problem has taken a darker turn. Organized crime’s defrauding of Medicare has reached the point that investigators from the Department of Health and Human Service’s inspector general’s office are now receiving firearms training.

The article cites one estimate that suggests criminals steal $60 billion from government health care programs annually, but the actual figure is probably higher. The chief investigator for the HHS IG’s office told ABC News that “[i]t’s so easy to steal from Medicare and Medicaid, it attracts a violent criminal element so they can cash in on their schemes.” 

The situation would make a good script for a movie:
According to the government, the groups across the country will beat or threaten witnesses to prevent them from testifying against them. They don’t hesitate to bribe or threaten patients in order to get them to submit false claims, and they back up those threats with paramilitary-style high powered weapons, including 50 caliber sniper rifles. At one so-called medical equipment company in Dallas, a huge weapons cache was discovered with approximately 60 assault weapons.
As part of one investigation into a Medicare fraud case, a search of a doctor’s property in the Northeast turned up explosives and landmines, and authorities have seized dozens of rifles and handguns in San Francisco from a facility operated by a gun runner who worked with a Mexican cartel.
The exotic weapons that Health and Human Services investigators have collected look like something out of a Hollywood blockbuster – pistols that shoot like machine guns and other special equipment. Medicare fraud has turned into an arms race.
As usual, HHS says they’re cracking down on the fraud. But as a previous Medicare fraud exposé from ABC News points out, the system’s design makes it easy for fraudsters to steal taxpayer money: 
It’s that easy because Medicare is based on trust. When the program was introduced in the 1960s it was assumed that no one would try to defraud a system designed to take care of the health needs of the elderly. The government was required to reimburse vendors in less than 30 days. To this day, in 99.9 percent of the cases, Medicare “auto-adjudicates” claims within 30 days. In other words, the computer decides if the right codes are in the right boxes. If they are, jackpot, the checks are sent. 
A fundamental problem with government programs is that officials don’t have the incentive to be careful with the money because it isn’t theirs. The story gives two perfect examples:
Paula Teller spent three years trying to convince Medicare that fraudulent charges were being made using her Medicare number.
“Every week there was a charge of maybe $1,000 or $2,000,” Teller said, “Thousands of dollars for treatments that I didn’t even know what they were actually – some kind of diabetes medication. … I called Medicare and they kind of questioned if I was sure I hadn’t had it done.”
Teller estimates that $50,000 in phony claims was made under her Medicare card.
Judge Marshall Ader, who sat on the Florida state bench for decades, said he even had trouble getting Medicare to pay attention. When he saw that Medicare was being billed for two prosthetic legs using his Medicare number – for the record he has both of his legs – he hit the roof.
“I saw that there was a report for some prosthesis that I, of course, didn’t use and had never used,” said Ader, who has both of his legs and no need for prosthesis. “The bill was something like $30,000.”
“I called Medicare, the investigative fraud unit …Nobody seemed to care,” he said. Ader told us it took over a year to sort out the situation.
As a taxpayer, it is frustrating to read these stories. But it is even more frustrating that the Obama administration has expanded federal health care programs while promising that a government crackdown on fraud is going to save taxpayers’ money without changing the structure or size of the program. The only way to really make a dent in fraud is to cut the government programs

See this essay for more on fraud and abuse in government programs.


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