Washington Ratchets Up the Fight Against Medicare Fraud

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John Gillmoure / Corbis

When Thuy Thi Le started making presentations to senior citizens in Orange County, California, about guarding against Medicare fraud, she quickly realized that her visits were way overdue. More than 30 seniors from just one apartment building, the Solara Court Apartments in Anaheim, approached her to say that, yes, as a matter of fact, services and medical devices they knew nothing about had been appearing on their quarterly Medicare Summary Notices (MSNs), from doctors they had never heard of — in some cases, for years. "We ignored these before so many times, but maybe the Holy Spirit told me this time to call and tell them this doctor was collecting from Medicare when I had never heard of him before ... He was not writing the truth and I felt angry," recalled one Solara resident, a septuagenarian Filipina-American, who attended the talk but insisted on anonymity for fear of retribution from gangs who are a major factor in health care fraud. (For much the same reason, Thuy Thi Le asked that her real family name not be used.)

Thuy's employer, the nonprofit California Health Advocates, alerted Medicare investigators who quickly determined that most of the fictitious services and medical devices were from the same referring physician, Dr. Charles Darryl Williams, 58. Playing a role in a scheme that collectively ripped off $122 million from Medicare in three years earned Williams a place on the Los Angeles district attorney's list of the 50 most abusive doctors, according to Albert H. MacKenzie, the lead state prosecutor on the Williams case, which closed in 2008. Williams ended up serving two years in state prison, but he still owes the government more than $8 million. The trouble is he only saw $80,000 of that, and now, stripped of his medical license, it's unclear how he is even expected to make a living. "He was just a shill for some gang and you can be sure that money is long ago overseas, safely laundered, in some place like Dubai or Armenia," says MacKenzie.

The Williams case is just one small instance of the proliferating array of scams targeting Medicare and Medicaid. There is no official figure for how much fraud costs the government health programs each year, but the National Health Care Anti-Fraud Association (made up of 100 private insurers and public agencies) conservatively estimates that at least $60 billion is lost on an annual basis, close to about 10% of Medicare and Medicaid's combined annual spending. And experts like Harvard professor of public management Malcolm Sparrow says this probably underplays the real cost. Since the system has long assumed that providers are essentially honest, much of the fraud goes undetected; once fraudsters learn to file without raising any red flags they can only get caught by an unlikely tip or by time-consuming, and expensive, investigations.

The stakes in such a huge system — each day Medicare processes 4 million claims and pays out $1 billion — are daunting, and growing. There are already 47 million Medicare beneficiaries, and that number is expected to rise to 80 million by 2030, according to the Centers for Medicare and Medicaid Services (CMS), which administers these government programs. Mindful of the huge potential cost, especially at a time of growing deficit pressures, the Obama Administration committed $1.7 billion this past fiscal year for fighting health care fraud, waste and abuse, significantly more than the figure in previous years. Those resources are helping to propel law-enforcement efforts, now concentrated in interagency teams, known as HEAT strike forces (Health Care Fraud Prevention and Enforcement Action Teams) that are focused on seven cities (including Detroit, Houston, Los Angeles and Miami) that senior fraud investigators and enforcement officers believe are particularly plagued by fraud. "We are just beginning to scratch the surface," Gerry Roy, deputy inspector general for investigations at the Health and Human Services (HHS) Office of Inspector General, says of the HEAT campaign, which hopes to expand to 20 cities.

Just as crucial is the government's renewed effort to focus as much on fraud prevention as fraud detection. A key part of that is the government's efforts to enlist the help of seniors, who are viewed as the first line of defense. Educating seniors is the mission of the Senior Medical Patrols (SMPs), volunteers across the country spreading the word from one senior gathering to another. The SMPs are supported by the HHS Administration on Aging, and work with partner organizations in every state, like California's Council on Aging and the local Health Advocates. The SMP annual budget was recently doubled to $18 million; it's not a lot, but senior advocates, like AARP, say there is great potential for these kinds of efforts.

The biggest help seniors can offer is stunningly simple: just keep track of their Medicare Summary Notices [MSNs], which detail services and equipment they have had been provided, to make sure nothing fraudulent is being tacked on. As it is, too few seniors even spend the time to check their statements. Many complain the forms are too complicated, though Washington is trying to make them more user-friendly by excising technical jargon and complex coding.

The government is also thinking about another seemingly simple remedy: switching back to monthly MSNs. They are currently only sent out on a quarterly basis to save on mailings, but a pilot project in South Florida will determine whether monthly statements can help catch more fraud. It should. By law, Medicare has to pay out claims within 30 days, and even without being alerted to potential fraud, the government is now struggling to be able to review this claims data before it pays out. That's critical because fraud is increasingly perpetrated by groups that can close up shop quickly and move on once they think they have been exposed.

Another key weakness of the current system is the hundreds of thousands of providers — doctors, medical-equipment suppliers, home health agencies, billing agencies — which have Medicare billing numbers that entitle them to submit claims. Thousands more apply each month, overwhelming efforts to screen for illegitimate ones. "The number that has most impressed me since I took this job is the not the trillions and billions, it's the fact that we get 18,000 new requests to be Medicare providers every month," says Peter Budetti, director of the HHS Center for Program Integrity, Washington's antifraud point man.

The government hopes that more doctors are aware of the legal risks of being lured into Medicare scams, as in the case of Williams, but criminal gangs are ratcheting up their game as well. The increasing use of identity theft frees them from needing cooperating doctors at all. That was amply demonstrated by the recent crackdown against an L.A.-based Armenian-American gang in mid-October. The gang married stolen doctor information (birth dates, Social Security and Medicare-billing numbers) with legitimate beneficiary information (also stolen) to bill Medicare $163 million from 118 bogus clinics in 25 states. They only got tripped up by being greedy and sloppy — for example, having a dermatologist file for administering heart tests.