Feds Crack Down on Medicare Fraud

Published May 31, 2016

In a major crackdown by the U.S. Department of Justice, 114 individuals were charged with Medicare fraud by the federal government in what Attorney General Eric Holder called “the largest federal health care fraud takedown in our nation’s history.”

Individuals from nine cities were charged in mid-February with submitting more than $225 million in false Medicare billings to the federal government.


Significant Fraud Problem

Nationally, Medicare fraud involves a significant amount of money. According to the federal Centers for Medicare and Medicaid Services, the Medicare fee-for-service program made $34.3 billion in improper payments in Fiscal Year 2010, an improper payment rate of 10.5 percent. Medicare Advantage made $13.6 billion in improper payments that year, amounting to 14.1 percent of the program’s total payments.

Total improper payments for Fiscal Year 2010 were $47.9 billion, and even that figure may represent only a portion of overall Medicare fraud.

The individuals named in the indictment are charged with a variety of crimes, including billing Medicare for services that were not performed and bribing Medicare beneficiaries to claim they had received services they did not actually receive.


Part of Overall Crackdown

This sweep is only the latest in a string of arrests for Medicare fraud. In October of last year, 52 individuals linked to an Armenian organized crime operation were arrested in New York and Los Angeles. Ninety-four doctors were indicted in July 2010 for submitting hundreds of dollars in false Medicare billings.

This type of fraud is not surprising to some observers. Greg Scandlen, director of Consumers for Health Care Choices and a senior fellow at the Heartland Institute, says the very structure of Medicare is to blame.

“Medicare aids and abets fraud by not policing what is going on while it is still going on,” Scandlen says.

“Medicare boasts of its low administrative expense,” explains Scandlen. “They ‘save’ administrative money by paying each and every claim that comes in with absolutely no oversight. It is an invitation to crooks to file false claims on false services provided to false patients. Then some years later the government rounds up a few of these crooks and brings criminal charges. Most of the crooks are long gone.”


Fraud or Honest Mistake?

To combat Medicare fraud, the federal government created the Medicare Fraud Strike Task Force in 2007, which includes agents from a range of federal agencies such as the Justice Department and the Federal Bureau of Investigation. The task force has teams in nine cities.

Since its creation, the task force has charged more than 990 individuals with falsely billing Medicare over $2.3 billion in total. Scandlen notes this type of policing may also hit legitimate service providers.

“Many legitimate providers are caught in the web,” says Scandlen. “They have made an honest billing error but get charged with criminal fraud because that is the only way Medicare knows how to proceed.”

A proposal that may further expand this problem is the opening of Medicare billing records. Sen. Charles Grassley (R-IA) has been at the forefront of requests to release these records publicly, with the names of patients redacted. In 1979, the American Medical Association successfully sued the government to prevent the release of this information, but a lawsuit brought by the Wall Street Journal in January may force the courts to reconsider the issue.


Systemic Problems in Medicare

Scandlen says the problem of distinguishing fraud from legitimate billing practices is inherent in Medicare. He maintains the only way to fix it is to fundamentally change the structure of the system.

“Medicare should be turned into a ‘defined contribution’ program that subsidizes the purchase of private coverage,” recommends Scandlen. “This is what the Breaux/Thomas Commission proposed in the 1990s.”

In the late 1990s, President Bill Clinton appointed the National Bipartisan Commission on the Future of Medicare, headed by Senator John Breaux (D-LA) and Rep. Bill Thomas (R-CA). As Scandlen notes, this commission submitted a list of recommendations in 1999 that ultimately went nowhere.

“President Clinton killed the idea coming from his own commission, much like Obama has killed his own deficit commission recommendations,” Scandlen said.


Marc Kilmer ([email protected]) is a senior fellow at the Maryland Public Policy Institute.