The Disgrace and Waste That is Medicare Fraud

Many times we have talked about how the American political class allows hundreds of billions of dollars to be lost to waste, fraud, and other criminal activity every year from major and minor U.S. government programs. One of the biggest Federal programs that wastes taxpayer wealth is the Medicare program. Our research has found that most unbiased estimates of waste usually put the annual figure for Medicare waste between $60 billion and $90 billion.

If you take the lower number and assume that crooks are trying to defraud the Medicare program 365 days a year, 24 hours a day, then you find that the political class losses almost $7 million an HOUR to fraud, waste, and criminal activity just in this one Federal program. That is $7 million an hour, 24 hours a day, 365 days a year. Unbelievable.

The details on how this happens were recently laid out in an excellent, well researched article by Peter Suderman writing in the October, 2011 issue of Reason magazine. The article starts with a compilation of expert estimates of how much Medicare wastes and loses from various means every year:

• The Government Accounting Office issued a report this year which estimated the Medicare process makes an estimated $48 billion in "improper payments" (i.e., wasted taxpayer wealth) every year. However, this is a low ball estimate since it does not include "improper payments" made through Medicare's prescription drug program.
• An executive Director from the National Health Care Anti-Fraud Association told Congressional members last March that the nation's total health care fraud losses likely range from $75 billion to $250 billion each year.
• Senator Tom Coburn, an Oklahoma Senator, has estimated that the Medicare fraud in the $80 billion a year range.

Certainly a wide range of estimates but they all have one thing in common: the amount of mismanagement in the Medicare program wastes tens of billions (at least) of dollars every single year.

Some more Medicare statistics:

• Unfunded, future liabilities of the Medicare program are estimated to be $36 TRILLION so any reduction in fraud and waste today would make future funding requirements of this huge unfunded liability requirement less onerous.
• At the current rate, Medicare's financials will be insolvent around 2024, a mere thirteen years from now, given the current growth rate in the program and the current fraud rate in the program.
• Medicare is currently, and will continue to be the largest driver of our out sized national debt, which is currently over $15 TRILLION.
• In 2010, American taxpayers shelled out over $500 billion in Medicare expenses and reimbursements, or over $4,000 for every American household, money that could not be spent on expanding the economy and creating jobs.
• If we use the conservative estimate of fraud listed above of $60 billion, then the program wastes 12% of its budget every year on fraud, waste, and criminal activity. Any business in the private sector that wasted 12% of its budget every year would not be in existence very long.
• Between 2007 and early 2011, the Federal government claims to have won convictions against 990 individuals in fraud-related operations that ripped off $2.3 billion from the Medicare processes.

These numbers are certainly mind boggling. But it gets worse. The article reports on a typical crime effort, this one run by a Fred Dweck, a surgeon in two Broward County, Florida hospitals who also ran his own health care business in Miami. Mr. Dweck pleaded guilty to Medicare fraud but for four years before he was arrested, he ran the following operation:

• He cheated Medicare out of at least $24 million or about $6 million a year or an amazing $500,000 a month, on average.
• He put in claims for prescription drugs, insulin injections, in-home visits by nurses, and many other treatments for 1,279 patients, none of whom actually needed any of these treatments that the good doctor was reimbursed for.
• He had five nurses conspire with him to create fake patient records and payment forms.

One would have hoped that someone in the Medicare organization would have grown suspicious of this one doctor generating so much work over the years or the $500,000 a month he was billing. Unfortunately, it took many years to figure out this one scam, too many years.

And according to the article, this  is not an unusual case, especially in Florida where the fraud is most rampant and most outlandish. Again, one would have hoped that decades ago, the political class and the Federal government would have focused a little more intently on fraud in general and fraud in Florida especially since Florida Medicare fraud seems so obvious. But alas, hope is all that existed vs. criminal investigations.

The Federal government actually manages a website dedicated only to Medicare care fraud examples that occur only in the state of Florida. The site has reported on fraud cases that involved $200 million in claims for unnecessary mental health services, $24 million for a fraud scheme based on AIDS injections, $61 million in taxpayer dollars paid to a man running a network of false health clinics, and the fact that the criminals perpetrating the fraud own fine homes, expensive cars, and a report that one of the criminals had purchased half a million dollars worth of jewelry with Medicare fraud money.

The practice has gotten so lucrative in Florida that the article reports that Medicare fraud is now the preferred form of crime, overtaking illegal drugs. And the scam operators run the gamut from small time hoods to large organized crime syndicates.

These numbers are certainly unbelievable and a disgrace but even worse than the magnitude of the numbers, is the ease in which the fraud is executed. According to a a convicted fraudster, one who illegally defrauded Medicare out of almost $10 million in just four years, all you need is basic computer date entry skills, someone to recruit fake patients for you, and someone who can falsify patient and prescription records.

Once you can perform these simple tasks, then Medicare's incompetent, antiquated, and bureaucratic data systems take over and start spitting out fraudulent checks. It is so bad that several years ago, the General Accountability Office set up a Medicare sting operation with fake names, fake offices, fake bank accounts, etc., actually using an official government telephone number in the General Accountability Offices as the contact number.

Shortly after applying to Medicare, the sting operation was granted  Medicare billing privileges and billing numbers. This approval was granted even though no one in the sting operation was required to prove they were in the medical field or that they actually could provide the medical services they listed on their application.

What a mess, surely part of the government waste sewage example we discussed in yesterday's post. The article concludes with some ideas on how to fix the problem including better data systems, better coordination between health care providers and law enforcement, and certainly more realistic payout schedules for Medicare disbursement. The article contains examples where Medicare sometimes pays out more than ten times more for a piece of equipment or a medicine then the private sector, making these outlandish payment practices ripe for criminal activity.

However, the biggest thing needed to curtail this waste of taxpayer wealth is courage. The article correctly points out that cracking down on Medicare fraud may impose some impositions on honest doctors who submit legitimate bills for reimbursement. These honest
doctors are likely to complain to their political representatives and get their honest patients involved and complaining to their elected representatives.

And we all know what is likely to happen once our uncourageous politicians start hearing complaints. They will stop the necessary anti-fraud efforts lest they tick off a voter or two who are slightly inconvenienced by stronger anti-fraud activities.

Thus, as always, we again see the need for two of our favorite steps from "Love My Country, Loathe My Government:"

1. Step 34 would remove all politicians from their Congressional committees that do not adequately fulfill the duties of their committee posts. Wasting $7,00,000 an hour of taxpayer money certainly would fall into that category of duty dereliction. Thus, if Step 34 was in effect today, all members of Congressional committees with Medicare oversight would be replaced for incompetence and their inability to contain the fraud and waste.
2. Step 39 would impose term limits on all Federal politicians, they would all be "one and done." The hope is that with no chance of ever getting reelected, sitting politicians would finally grow some backbone and take the courageous and necessary steps to rein in the rampant Medicare fraud and waste. There would be no need to pander to doctors and patients who face some inconveniences due to the crackdown on criminal activity in the program. Better to have some inconveniences with Medicare today rather than have no Medicare program at all in the future due to its insolvency.

The waste that exists in Medicare, and other government programs, today, is a disgrace. Politicians that have ignored this problem and have allowed it to grow to insane levels of waste, both today and in the past, or no less disgraceful.








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