Can We Control Medicare Fraud?

In my last blog I addressed Medicare fraud in the context of presenting ideas to save the American dream and turn the economy around. In this blog I look at the specifics of the Medicare fraud problem.

You may recall that the Obama Health Care Reform Act cited about $500 billion in Medicare fraud that is supposed to be recovered to help pay for the Act that was passed by Congress and has recently been challenged in the courts. I’ve wondered why the government has to wait until a new bill becomes law to recover ill-gotten gains from Medicare fraud. The truth is that Medicare fraud has been going on since the Social Security Act of 1965 was signed into law on July 30, 1965, by President Lyndon B. Johnson as amendments to existing Social Security legislation. There is no reason to believe we will be more successful fighting the fraud because of the Health Care Reform Act than we have been during the past 45 years. When you have a corrupt system manipulated by corrupt people, such people typically stay one step ahead of the regulators who are outmanned and underfunded in their efforts to curb the abuse.

The Medicare Fraud Strike Force recently charged 111 defendants in nine cities, including doctors, nurses, health care company owners and executives, and others, for their alleged participation in Medicare fraud schemes involving more than $225 million in false billing.  “With this takedown, we have identified and shut down large-scale fraud schemes operating throughout the country.  We have safeguarded precious taxpayer dollars.  And we have helped to protect our nation’s most essential health care programs, Medicare and Medicaid,” said Attorney General William Holder.  As the arrests prove, "we are waging an aggressive fight against health care fraud.” 

Dream on Mr. Holder. The National Health Care Anti-Fraud Association estimates that 3% of the more than $2 trillion spent on health care in 2007 is lost to fraudulent activity. Other organizations estimate fraud to account for up to 10% of all costs. Medicare fraud is legend, and most of the time it goes undetected, costing taxpayers billions of dollars each year.

According to court documents, the defendants participated in schemes to submit claims to Medicare for treatments that were medically unnecessary and oftentimes, never provided.  In many cases, indictments and complaints allege that patient recruiters, Medicare beneficiaries and other co-conspirators were paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could submit fraudulent billing to Medicare for services that were medically unnecessary or never provided.

Just to give you some examples, in Miami, 32 defendants, including 2 doctors and 8 nurses, were charged for their participation in various fraud schemes involving a total of $55 million in false billings for home health care, durable medical equipment and prescription drugs.  Twenty-one defendants, including three doctors, three physical therapists and one occupational therapist, were charged in Detroit for schemes to defraud Medicare of more than $23 million.  The Detroit cases involve false claims for home health care, nerve conduction tests, psychotherapy, physical therapy and podiatry. 

In Brooklyn, N.Y., 10 individuals, including three doctors and one physical therapist, were charged with fraud schemes involving $90 million in false billings for physical therapy, proctology services and nerve conduction tests.  Ten defendants were charged in Tampa for participating in schemes involving more than $5 million related to false claims for physical therapy, durable medical equipment and pharmaceuticals.

Nine individuals were charged in Houston for schemes involving $8 million in fraudulent Medicare claims for physical therapy, durable medical equipment, home health care and chiropractor services.  In Dallas, seven defendants were indicted for conspiring to submit $2.8 million in false billing to Medicare related to durable medical equipment and home health care. 

Five defendants were charged in Los Angeles for their roles in schemes to defraud Medicare of more than $28 million.  The cases in Los Angeles involve false claims for durable medical equipment and home health care.  In Baton Rouge, La., six individuals were charged for a durable medical equipment fraud scheme involving more than $9 million in false claims. In Chicago, charges were filed against 11 individuals associated with businesses that have billed Medicare more than $6 million for home health, diagnostic testing and prescription drugs.

As a society we need to come to grips with the fact that fraud and abuse is widespread in our economic system whether caused by Medicare fraud, Ponzi schemes, insider trading or other forms of business fraud that have cost investors and employees hundreds of billions of dollars. Nothing will change until the ethical foundation that built the greatest nation on earth and that has been crumbling for many years is rebuilt.