Medicare Fraud: The Dirty Truth

NEW YORK (MainStreet) -- Medicare fraud is so vast and measured in so many billions of dollars, nobody knows for sure how big it is at any given time. It is estimated according to the FBI's website that health care fraud costs the country an estimated $80 billion a year.

The impact of this fraud indirectly affects everyone who has commercial health insurance policies, as well, as the Medicare patients themselves. Medicare is often viewed as the benchmark for commercial health insurance companies. If there is fraud surrounding the benchmark, it drives up the cost of services, and it is also linked to commercial health insurance costs in other ways. For example, some commercial policies reimburse doctors at a Medicare rate only. Customers who hold those policies may not even be aware of this, and they may be as young as recent college graduates. They certainly are aware of how much it is costing them every pay period to have insurance and that this cost continues to rise.

There are several different ways these crimes can be set up. Daniel Purdom, a partner in the health care and white collar practice in Hinshaw & Culbertson's Chicago office, taught a health care fraud investigation course at the FBI Academy in Quantico and pinned down why the gambit can work in such an undetected way.

"Providers can bill for services never rendered," he said. For example, someone running billing codes out a motel is just collecting checks. It can also happen when providers can bill for more sophisticated services than were rendered. A good example of this is when a chiropractor might bill physical therapy codes to collect insurance money. "Then there is billing for unnecessary procedures," he said. This happens more often in hospitals and surgery centers when patients are sent for multiple tests like X-rays during the time they are admitted.

"There is also medical supply fraud," said Ross Blair, a senior vice president at eHealthMedicare.com, an online marketplace for Medicare. This happens when a company that provides medical supplies for Medicare beneficiaries purchases medical equipment for patients who never receive or never needed the supplies. Lastly, there is prescription drug fraud. In these instances, a pharmacist provides drugs for a patient who does not need the drugs, or never receives the drugs he needs.

Still, a healthy 30-year-old man might not feel affected by all this. He may not go to the doctor period. This type of person is still impacted indirectly by Medicare fraud. He will see a growing deduction taken out of his paycheck to meet rising health insurance costs.

"If the government is paying inflated or unnecessary costs stemming from fraud, patients utilizing healthcare systems will be affected," Purdom said. "When healthcare providers are cheated, and the government has to pick up the tab, that drives up the price of everything, including hospital and insurance costs."

Due to the fact that this is affecting us all, Purdom explained, the government has gone through massive compliance and regulatory changes over the past 10-15 years, most notably expansion under the False Claims Act (FCA). The government is forcing organizations to police themselves using Corporate Compliance Programs to uncover and correct fraud independently. In 1986, a whistleblower provision was put in the act for anyone who made a false claim to get paid in instances such as this. Criminals are on the hook if they get caught for $11,000 per false claim.

There is also an Anti-Kickback Statute in place that makes it a criminal offense to pay or solicit to receive patient referrals or services reimbursable by Medicare or Medicaid. For example, it is illegal for a drug company to pay a physician to prescribe a new drug.

The profile of who commits Medicare fraud can range from a network of sophisticated mobsters to a local physician.

"The worst victims are seniors on original Medicare. Original Medicare has no cap on out-of-pocket costs and cost-sharing for nearly everything," Blair said. "So, the seniors who are victims of fraud will receive medical bills they may not understand and pay more out-of-pocket than they are supposed to."

This is only followed by insurance companies and Medicare itself who are the next victims. Due to these false claims, sophisticated audits must be put in place, and that requires money to be spent. Then next in-line are taxpayers and Medicare recipients. Fraud increases costs, which creates more debt for taxpayers and raises premiums for seniors with private supplemental Medicare insurance.

Due to the huge amount of money this is costing and the wide range of victims and criminal profiles, the Office of the Inspector General (OIG) is committed to fighting fraud.

"We are the only Federal agency focused full time on combating fraud, waste, and abuse in Medicare and Medicaid," said Katherine Harris, a spokesperson for the OIG. "Medicare is a fraud target because of its enormous size. Most recent figures: Medicare processes about 4.8 million claims daily, and every day, some 10,000 new beneficiaries join the program. In 2012, more than 50 million people were enrolled in Medicare, and there is a new citizen eligible for Medicare every eight seconds."

The offenses run the gamut. OIG has investigated cases involving stolen identities from beneficiaries and providers to perpetuate this crime. "Doctor Shopping" involves individuals who travel to large geographic areas to aggregate medically unnecessary prescriptions for diversion purposes. There are even some Medicare beneficiaries partaking in these crimes by selling their Medicare number. Medicare drug diversion is attracting former street drug criminals who have found this criminal behavior to be potentially safer and more lucrative." Harris also spoke about data analysis that can identify fraud hotspots and billing spikes and the OIG's list of most-wanted fugitives for this crime. She concluded with information about the HEAT task force (Health Care Fraud Prevention and Enforcement Action Team) that was created by the Department of Justice. HEAT's Medicare Fraud Strike Force has coordinated takedowns as big as $530 million in just one case and has expanded into nine cities. Since 2007, HEAT's group of investigators has charged more than 1,400 defendants who collectively falsely billed the Medicare program more than $4.8 billion.

"With the creation of HEAT the fight against Medicare fraud became a Cabinet-level priority," Harris explained. "HEAT's work is directed by HHS Secretary Kathleen Sebelius and Attorney General Eric Holder."

--Written by Leigh Held for MainStreet

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