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Criminals Target Medicare Benefits to Reap Millions

Guard your Medicare number to steer clear of crooks

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Getty Images/AARP


When criminals steal from you, the pain is raw, immediate and personal. But in arguably the costliest fraud in America, crooks use you merely as a tool for getting to a bigger target — your tax dollars that fund the federal government’s health care programs.

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In any given year, an estimated 5 to 10 percent of the entire budget for Medicare is lost to fraudulent billing — often seeking reimbursement for services never provided. These schemes succeed by manipulating Medicare members or stealing and misusing their private information.

COVID-19 has made the problem worse. Early in the pandemic, Medicare administrators loosened telehealth restrictions to allow patients to meet with their doctors by telephone or online rather than visit their medical offices. As Medicare patients flocked to telehealth, criminal organizations followed, ultimately bilking the program of billions of dollars in fraudulent claims, according to the U.S. Department of Justice.

A federal prosecution in Florida shows how a syndicate of doctors, lab owners and middlemen was able to steal from Medicare.

In November, Leonel Palatnik, the 42-year-old owner of diagnostic testing laboratories in Florida and Texas, was sentenced to 82 months in prison after pleading guilty to crimes that led to $73 million in fraudulent Medicare billing. Here’s how the Miami-area man and his affiliates pulled it off.

A marketing company based in Fort Lauderdale used social media and sales calls to advertise expensive genetic tests it claimed could determine a patient’s risk for cancer, heart problems and other health conditions, prosecutors say. The advertisements promised free DNA tests for Medicare members.

But Medicare does not pay for genetic tests like these unless they are ordered by a doctor under extremely limited conditions. To get around this barrier, Palatnik illegally bought Medicare member information from the crooked marketing company. He then turned to Michael Stein, a second Florida man charged by federal prosecutors. Palatnik paid Stein $50,000 a month, disguised as an IT contract, for access to a stable of shady doctors and other telehealth providers Stein recruited, according to prosecutors.

How to stay safe

  • Never give your Medicare number to anyone who calls on the telephone. Share it only with your health care providers or if you have placed a call to Medicare.

  • If someone offers you free genetic testing in person or online, it’s a scam. Medicare does not pay for these tests unless they are ordered by a medical professional.

  • If someone calls and promises you COVID-19 tests, medical equipment or medical services in return for your Medicare number, hang up. It’s fraudulent activity.

  • Medicare will not reach out to you regarding enrollment. If someone calls and makes a pitch to help you enroll in the program, that’s a scam.

In exchange for referrals of Medicare patients, the telehealth providers agreed to order the expensive genetic testing for program beneficiaries at Palatnik’s labs.

Working in concert, each group then submitted fraudulent bills to Medicare. Palatnik billed for millions of dollars in DNA testing. The telehealth providers flooded the program with bills for medical consultations that were unnecessary or never provided. “They did this to the tune of millions and millions of dollars,” said Isaac Bledsoe, a special agent with the Department of Health and Human Services’ Office of Inspector General.

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One nurse practitioner involved in the scam billed Medicare for more than $820,000 in 2020, according to court documents. Many of those invoices were for totally fake “consultations,” investigators say.

That scam is one example among many. In another case, 14 medical providers and corporate executives were charged last May with defrauding Medicare of $143 million through fraudulent billing for diagnostic testing and other services.

The emergence of pandemic-related fraud comes as no surprise to Malcolm Sparrow, a Harvard University professor and leading expert on Medicare fraud. In times of crisis, fraud control can be viewed as less important than ensuring access to care, he says. “I think consumers need very clear advice on what to look for” in potential Medicare scams, Sparrow says.

Medicare Fraud Tips — AARP

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