Unfortunately, Medicare fraud is big business. Illegal, yes, but big business nonetheless. The US Office of Management and Budget says “improper payments” made by Medicare in 2010 amounted to more than $47.8 billion. That represents almost 10% of the $528 billion total Medicare spend that year. In the current era of shrinking budgets and unbalanced budgets, the US simply cannot afford to allow this level of fraud.

Generally speaking, Medicare fraud refers to companies or individuals who try to collect Medicare health care payments under false and illegal pretenses. Although many means and schemes exist to do this, they all seek the same thing: get some of the huge Medicare payments doled out yearly in America.

No one disagrees these figures represent an unusually high percentage of fraud.

Why is Medicare Fraud so rampant?

In large part, it’s due to a purposely designed feature of the program. You see, originally, the program was set up as an “honor system of billing”. The program’s founders wanted doctors who helped the needy to be paid quickly for their services. Claims are paid automatically, as expedience and not fraud detection, is the program’s goal.

Although Medicare fraud has many guises with new ones showing up almost daily, they can be broken down into three major categories:

1. Phantom Billing. In this scenario, the provider bills Medicare for procedures which are either unnecessary or not performed at all. Durable medical equipment false billings fall into this category as well. An example would be billing Medicare for a wheelchair or homecare hospital bed which is either unneeded or undelivered.
2. False Patient billing. In this scenario, often carried out in areas with large numbers of senior citizens, such as Florida, the patient himself may be duplicitous. For instance, for a kickback, a Medicare-eligible patient may provide his Medicare number and allow a provider to bill Medicare for tests and procedure either unneeded or unfulfilled.
3. Upcoding and upbilling. This fraud seeks to receive additional and unwarranted and illegal Medicare funds by using a code that may not be merited but results in the need for further services and tests, and, therefore higher reimbursements.

Some Recent Cases of Medicare Fraud

Two recent cases, one in California, and the other in Florida represent the kinds of fraud federal prosecutors investigate almost daily.

In California, the US Department of Health and Human Services and the California Department of Justice are investigating the Medicare claims of Prime Healthcare Services.

The giant Southern California healthcare management company has come under suspicion for two reasons. First, its unusually high reporting of septicemia cases. Septicemia is a severe case of blood poisoning characterized by widespread inflammation throughout the body.

Six Prime hospitals showed up in the 99th percentile of U.S. hospitals for septicemia and five were in the 95th percentile. This anomaly raised a red flag and has brought the chain under investigation for possible Medicare fraud.

In the other instance, Prime is under investigation for its widespread upcoding of elderly patients for malnutrition. In one of its hospitals, Shasta Regional Medical Center, the company reported 16.1% of its Medicare patients suffering from the malnutrition condition kwashiorkor. This compares to the California average of only .02% of such diagnosis.

As noted earlier, Florida, and south Florida specifically, is home to a disproportionate amount of Medicare fraud claims.

Consider these statistics:

• Fraudulent Medicare bills of $400 million were attributed to criminals in just two Florida counties in 2008.
• Seventy-two per cent of all Medicare claims nationwide for HIV/AIDS infusion injections were billed in Miami-Dade County in 2005.
• Miami-Dade County, in 2008, billed Medicare six times more for home health services than Los Angeles County, with a Medicare population three times larger.

The Federal government is not standing idly by. In fact, the Obama administration has made Medicare fraud one of the chief targets for the US Department of Justice.

The US Department of Health and Human Services, under whose department the Medicare program resides, works closely with the US Department of Justice and the Federal Bureau of Investigation to detect, investigate and prosecute those suspected of Medicare fraud.

The three agencies formed the Medicare Fraud Strike Force in Miami, Florida in 2007. In Miami, over two dozen agents from a variety of federal agencies dedicate full-time to fighting fraud.

They’ve met with such success that the Strike Force is being duplicated in other high-incidence of Medicare fraud cities.

Report Medicare fraud here.

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