This Trend in Medical Identity Theft Is Disturbing

NEW YORK (MainStreet)—It's as creepy as fraud gets. While you are sipping a latte in Williamsburg, across the river on Park Avenue your health insurance card is picking up the tab for five figures worth of elective surgery and maybe another $1,000 in prescriptions and health aids like crutches. The patient is you, with just one problem: you know nothing about any of it.

Until maybe six or twelve months later when downright nasty medical bill collectors are calling you, writing you, emailing you, demanding payment (probably because the check presented to cover the co-pay bounced) -- and all for work you never had done.

[Read: Do Cool Sh*t]

That's the reality of medical identity theft, a fraud that suddenly is exploding. "Last year there were 1.85 million victims in the U.S., up 25% from the year before," said Eva Velasquez, CEO of the Identity Theft Resource Center in San Diego.

She pegged the annual losses due to medical ID theft at $40 billion and, while doctors and hospitals and insurers pick up most of that tab, of course those costs get passed onto patients in higher fees.

The scam works like this, according to Don Jackson, a researcher with Dell SecureWorks who has been tracking what he called "a surge" in medical identity theft. A criminal puts together what is called a "kitz"- which includes a valid health insurance card, a supporting photo I.D. (usually a driver's license in the health cardholder's name but with the fraudster's picture), possibly even a credit card in the same name. That kitz, said Jackson, lately has been selling in online criminal bazaars for $1,200 and up - with most sellers taking Bitcoin, by the way, for buyers who want real anonymity.

The price is high, but do the math. Get $10,000 in work done and the buyer has reaped an $8,800 profit on a $1,200 investment, and that is a return even captains of private equity would salute.

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