Medicare Plagued by Waste, Fraud, Abuse

Published November 10, 2009

With cost savings through reduction of waste, fraud, and abuse in the Medicare system being offered as a key funding source for health care reform currently under consideration on Capitol Hill, eliminating this corruption could require Medicare to adopt private-sector reforms.

The proposal authored by Sen. Max Baucus (D-MT), currently pending in the Senate, relies on such reductions for more than $400 billion in funding over the coming decade.

“Officials estimate that Medicare is annually cheated out of some $60 billion in improper claims payments—an eighth of its entire budget,” said Kevin Wrege, regional state affairs director for the Council for Affordable Health Insurance in Alexandria, Virginia.

Private Firms Do Better

Wrege says fraud is rampant and unchecked throughout the Medicare system, while private carriers do a much better job of preventing it.

“Private carriers spend a lot on efforts [to prevent fraud], raising their administrative expenses in the process,” Wrege said. “By contrast, the Medicare program does not regularly review bills for accuracy and to prevent fraud.”

Medicare typically pays claims in full, and the Department of Health and Human Services’ Office of Inspector General (OIG) operates as a post-claim payment cop, flagging and investigating only those that appear suspicious, Wrege notes.

“Recovered funds, if any, are often only a fraction of the often millions of dollars taken,” Wrege added.

Scrutiny Advocated

Many Medicare abuses happen in the market for durable medical equipment (DME), such as wheelchairs and oxygen equipment. A draft OIG audit released in August 2008 flagged almost a third of the 2006 DME claims sampled as having been improperly reimbursed.

“A July report by the Government Accountability Office found that Medicare paid as much as $92 million since 2000 for equipment purportedly prescribed by doctors who were dead,” Wrege said. “Claimants have submitted counterfeit documents, forged doctors’ signatures, and filed bills on behalf of patients who were dead or had never been seen by the prescribing physician.”

In 2008 a single Florida businessman was convicted of submitting more than $5.5 million in fake Medicare claims. He had operated for months, using some of the money to purchase a Rolls-Royce, despite giving the agency an address that was actually a utility closet.

Thomas Cheplick ([email protected]) writes from Massachusetts.

For more information …

“Medicare’s Hidden Administrative Costs,” Council for Affordable Health Insurance:

“Improper Payments: Responses to Posthearing Questions,” Government Accountability Office:

“Medical Review of Claims for the Fiscal Year 2006 Comprehensive Error Rate,” Office of Inspector General, U.S. Department of Health and Human Services: