Criminals Bilk Medicare of Billions Each Year

Hardened criminals

Medicare is now a magnet for miscreants, including not only dishonest doctors and white-collar crooks, but hard cases like Guillermo Denis Gonzalez, a convicted murderer. He bought a Medicare-licensed medical equipment company and submitted more than $500,000 in phony claims—two years after walking out of prison.

He pleaded guilty to defrauding Medicare in August but still faces murder charges. Florida investigators say that after an argument, he killed and dismembered an acquaintance. The victim’s body parts were found in six black garbage bags in three different dumpsters around the Miami area.

Calculating an exact national figure on the costs of Medicare fraud—estimates of losses range from $11 billion by the Centers for Medicare & Medicaid Services to $60 billion by industry experts—is difficult.

Criminals intent on stealing as much as they can as fast as they can “have a relatively easy time breaking through all the industry’s defenses,” Malcolm Sparrow, a one-time fraud investigator and now a professor at Harvard’s Kennedy School of Government, told a Senate committee in May.

He said that if the crooks learn to submit their bills correctly, then for the most part their bogus claims “will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all.”

Why is Medicare so vulnerable to crooks? The entitlement program is based on an honor system that many experts say is broken.

And Medicare officials admit that with their skimpy anti-fraud budget they are hamstrung because the system’s goal is to pay for medically necessary services quickly—within 14 days—which leaves little time to verify the millions of claims handled each week.

Shady health care operators have repeatedly proved they can circumvent Medicare’s weak technological defenses by simply altering computer billing codes to get their claims approved or by changing their scams to stay one step ahead of the system.

But this year Congress stepped up, allocating an extra $200 million for Medicare’s anti-fraud budget. Another $300 million is on tap for 2010. The money has enabled the agency to make more unannounced visits to providers, launch more audits of dubious claims and upgrade its computer software that flags suspicious bills. And Medicare crime fighting is becoming more resourceful to keep up with the crooks. Now, for example, the agency is trying to rein in billing for expensive home visits to Medicare patients that are not needed or never made.

Miami’s average cost for each Medicare home health care patient with diabetes and related illnesses runs $11,928 every two months, according to a new HHS report—32 times the national average of $378. “That’s how bad things have gotten in Miami,” says Cecilia Franco, who heads the Medicare office there. So her office is sending nurses and investigators door-to-door to see if beneficiaries that health care agencies claim as clients really need twice-daily visits by skilled nurses. To discourage this scam, in January federal officials will impose a 10 percent cap on payments while they investigate claims—a first in Medicare history.