By: Jay Weaver

Source: From the AARP Bulletin print edition

November 1, 2009

The Benitez brothers of Miami—Carlos, Luis and Jose—can vouch for that, federal prosecutors say. The brothers, who operated fake storefront clinics there, were indicted last year on fraud charges after allegedly collecting $84 million from Medicare for phony medical treatments. They spent their Medicare millions on the helicopter, the horses, a rental car agency and tourist hotels—all items the government is now trying to seize and reclaim for taxpayers.

Medicare frauds are often inelegant—but they're outrageously lucrative and relatively low-risk. So lucrative, and so low-risk, the FBI reports, that a number of cocaine dealers in Florida and California have switched from illicit drugs to Medicare fraud.

Medicare loses billions of dollars to fraud each year. “Those billions of dollars,” said Eric Holder, U.S. attorney general, “represent health care dollars” that could be spent on medicine or care or hospital visits, “but instead are wasted on greed.”

Yet Congress has denied Medicare the money officials say it needs to truly police itself. Four years ago, as fraud began spinning out of control, lawmakers ignored Medicare's request for $300 million to fight these crimes—even though the agency's Office of Inspector General says that every dollar spent protecting the program returns $17.

Now, with Congress and the Obama administration hoping to help finance health care reform with $500 billion in savings wrung from Medicare over the next 10 years, cracking down on fraud is a fresh priority. And it shows. Just this year, anti-fraud efforts have seen a marked increase in money and agents.

Miami vice

The nation's first federal Medicare fraud strike force hit the ground in Miami two years ago—with agents from the FBI and investigators from the Department of Health and Human Services' Office of Inspector General, as well as federal prosecutors. Altogether, the strike force and the southern Florida U.S. Attorney's Office indicted 197 suspects in 2007, almost doubling Medicare fraud prosecutions.

In one Miami case alone, the team charged 16 people with orchestrating a $101 million fraud involving phony bills for medical equipment that Medicare patients neither needed nor received. Now, strike forces are operating in Medicare fraud hot spots like Los Angeles, Detroit and Houston, and officials say more cities will be targeted later this year. The scams are many, varied and spreading.

The Houston strike force, for example, shut down clinics billing Medicare for $3,000 “arthritis kits” that were only heating pads and knee and shoulder braces. A $16 million bust last July netted 32 doctors and executives. Some of the clinics, prosecutors charge, also were billing for liquid food supplements for patients who were deceased.

Since 2007, the strike forces have indicted nearly 300 defendants who allegedly stole $680 million, according to the U.S. Department of Justice. Sentences range from two to 15 years, with one doctor receiving 30.

Half of those defendants were arrested in Miami—the Medicare fraud capital of the nation. Schemes hatched there are perfected, then exported to other parts of the country.

“We know the fraud is viral and spreading to other communities,” says Kirk Ogrosky, deputy chief of the Justice Department's criminal fraud section, who coordinates the strike forces.

Take the case of the two Miami men who allegedly set up a chain of about 40 clinics—with names like Fast Cure Company—in Florida and then four other states. Prosecutors contend the two men ran a ring that bilked Medicare out of $100 million for therapies—never administered­—for cancer, HIV and other illnesses. Investigators found some of the “clinics” were empty storefronts with hand-lettered signs; others were post office boxes.

Scammers obtain Medicare numbers by buying or stealing them from doctors, clinics or patients. Ogrosky says that once a “professional” patient sells his Medicare number, it can be reused again and again—or sold to others cheating the system.

Just one Medicare number—in the wrong hands—tricked Medicare into paying more than $1.1 million for phantom treatments. Alexander McCray of Miami paid for his crack cocaine habit by helping dozens of clinic operators file false claims for phony HIV infusion treatments billed in his name.

Hardened criminals

Medicare is now a magnet for miscreants, including not only dishonest doctors and white-collar crooks, but hard cases like Guillermo Denis Gonzalez, a convicted murderer. He bought a Medicare-licensed medical equipment company and submitted more than $500,000 in phony claims—two years after walking out of prison.

He pleaded guilty to defrauding Medicare in August but still faces murder charges. Florida investigators say that after an argument, he killed and dismembered an acquaintance. The victim's body parts were found in six black garbage bags in three different dumpsters around the Miami area.

Calculating an exact national figure on the costs of Medicare fraud—estimates of losses range from $11 billion by the Centers for Medicare & Medicaid Services to $60 billion by industry experts—is difficult.

Criminals intent on stealing as much as they can as fast as they can “have a relatively easy time breaking through all the industry's defenses,” Malcolm Sparrow, a one-time fraud investigator and now a professor at Harvard's Kennedy School of Government, told a Senate committee in May.

He said that if the crooks learn to submit their bills correctly, then for the most part their bogus claims “will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all.”

Why is Medicare so vulnerable to crooks? The entitlement program is based on an honor system that many experts say is broken.

And Medicare officials admit that with their skimpy anti-fraud budget they are hamstrung because the system's goal is to pay for medically necessary services quickly—within 14 days—which leaves little time to verify the millions of claims handled each week.

Shady health care operators have repeatedly proved they can circumvent Medicare's weak technological defenses by simply altering computer billing codes to get their claims approved or by changing their scams to stay one step ahead of the system.

But this year Congress stepped up, allocating an extra $200 million for Medicare's anti-fraud budget. An additional $300 million is on tap for 2010. The money has enabled the agency to make more unannounced visits to providers, launch more audits of dubious claims and upgrade its computer software that flags suspicious bills. And Medicare crime fighting is becoming more resourceful to keep up with the crooks. Now, for example, the agency is trying to rein in billing for expensive home visits to Medicare patients that are not needed or never made.

Miami's average cost for each Medicare home health care patient with diabetes and related illnesses runs $11,928 every two months, according to a new HHS report—32 times the national average of $378. “That's how bad things have gotten in Miami,” says Cecilia Franco, who heads the Medicare office there. So her office is sending nurses and investigators door-to-door to see if beneficiaries that health care agencies claim as clients really need twice-daily visits by skilled nurses. To discourage this scam, in January federal officials will impose a 10 percent cap on payments while they investigate claims—a first in Medicare history.

Report Medicare fraud: 1-800-447-8477
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By: Jim Toedtman

Source: From the AARP Bulletin print edition

November 1, 2009

There may be no greater challenge in reforming the health care system than eliminating waste. Federal examiners estimate that at least 10 percent of the $500 billion spent annually on Medicare is wasted—from overblown or fraudulent bills, or payments to misidentified or nonexistent patients, doctors or institutions.

Consider power wheelchairs. As the population has aged, their use—and cost—has soared. Under Medicare, several hundred suppliers across the country buy wheelchairs from manufacturers and then generally lease them to beneficiaries. In 1997, Medicare and Medicare beneficiaries paid just over $100 million to buy or lease power wheelchairs; today they pay more than $1 billion.

The Office of Inspector General (OIG) for the Department of Health and Human Services has examined thousands of vouchers and invoices for wheelchairs and reported that the average annual cost to Medicare in 2007 was $4,018, nearly four times the $1,048 paid by suppliers.

For more elaborate power wheelchairs, the average Medicare allowance was $11,507, almost twice the $5,880 price paid by suppliers.

Efforts to address the excess have been stymied—classic Washington. The medical equipment lobby, which spent $6.3 million in presidential and congressional campaign contributions last year, is as effective as any group of federal lobbyists. The Centers for Medicare & Medicaid Services, in its oversight role, has been slow to act. And Congress has blocked attempts to impose competitive bidding.

Industry leaders complain that servicing the machinery is getting more expensive and that their companies have been hurt by inflation and reduced Medicare rates. Medicare compensation has indeed been scaled back with a 9.5 percent cut in payments. According to the OIG, that brought the average payment down to $3,641 in 2009, still three times the price paid by suppliers.

The problem has been explored intensely over the past five years by the OIG, the Government Accountability Office, the Senate Finance Committee and the FBI, which brought dozens of arrests and convictions from Florida to California.

Medicare officials agreed with most of the OIG's recent suggestions that the fee structure be reevaluated. But they balked at the conclusion that the payments were “grossly higher” than the suppliers' cost.

Sen. Chuck Grassley, R-Iowa, has a different perspective: “At a time when every health care dollar counts, it's infuriating to learn that the government is throwing away money and is still overpaying for power wheelchairs. This translates into hundreds of millions of dollars wasted and cost beneficiaries millions of dollars in copayments. It's only common sense that you don't pay more for something than is on the price tag.”

He's right. The disparity in prices to supplier and to beneficiary defies common sense. The longer this imbalance continues, the greater the threat to Medicare. And the failure to crack down on waste threatens the credibility of the ambitious effort to overhaul the nation's health care system.