Medicare Fraud
The Problem of Bogus Billing
By Daniel Muniz

As with so many other welfare programs, Medicare fraud is out of control. And what is so outrageous is the gargantuan scope of the scamming that goes on. This entitlement program has a staggering mandate to cover 43 million senior citizens and disabled Americans which opens itself up to a lot of filching.

So just how big of a problem is Medicare fraud?

The soaring cost of this program now tops well over 250 billion dollars annually but it is estimated that thieves are ripping off around a whopping 60 billion dollars a year. And because of such rampant bilking, Medicare has been labeled as a “high-risk” government program by the Governmental Accounting Office.

The amount of theft per year is mind boggling but how did it get so ridiculously out of control?

To start off with, the common thread is relatively simple; a lack of internal controls, which is a concept that is taught in basic accounting. And this flaw is totally indifferent to the size of an organization because if there are not any practical internal controls in place, it can and will be ripped off by unscrupulous employees, customers, and vendors.

And that is precisely the problem with Medicare.

Vendors have set up bogus shops and they have illicitly acquired the identifying details of Medicare recipients. There are 43 million such people using this program so finding them is not that difficult of a task. And armed with Medicare patient identification numbers, these vendors then submit fake bills to the government for reimbursement for services that were never rendered and for products that were never delivered.

Now imagine a vendor cramming a multitude of bogus bills to every stolen Medicare recipient number that they have on file year after year. A colossal fraud reaching 60 billion dollars now seems in reach.

Of course there are other people in on it as well. There are a number of doctors who are part of this illegal billing scam as well as Medicare patients who fully cooperate with the fraudsters for a cut of the take.

But as with all big bloated bureaucracies, here is the real problem. There is practically no enforcement of laws or auditing of internal control policies. And even worse, when ordinary citizens report these abuses, Medicare doesn’t care. For years, multitudes of patients have contacted Medicare and provided documentation that they never ordered or received any of the expensive medications or costly durable equipment that was allegedly sent to them. And in typical big government fashion, the bureaucrats simply ignored solid evidence of fraud.

As a result, it didn’t take long for these hucksters to realize that the government doesn’t care so this apathy emboldened them to continue ripping off Medicare. And even if the thieves are caught, they have only been getting a slap on the wrist which in no way stops them from resuming their pilfering.

The solutions are very obvious but huge bureaucracies are notoriously oblivious to implementing them as long as taxpayers keep shoveling more money into their budgets.

First and foremost, vendors have to be authenticated in that they actually do have a real business that provides medical services and products and it has to be verified on an annual basis. Too many fraudsters simply run their companies out of their kitchen or have a bogus storefront with absolutely no inventory. In other words, that means surprise inspections of these companies and an examination of their inventories and ledgers.

States have been highly effective in monitoring the inventories of their alcoholic beverage industry with surprise inspections. In restaurants, night clubs, and bars, everything is tagged and properly marked and stiff penalties are meted out against violators (after all, taxes on alcohol is a very lucrative revenue stream for many states). The same thing has to be done with every vendor in which the books have to be opened up and everything accounted for.

Perhaps the biggest downfall is that Medicare is woefully ill prepared for this kind of verification. Compared to private insurers, Medicare only devotes a tiny fraction of their budget to preventing fraud. After all, private insurers are out to make a profit so they want to make sure that there isn’t any bogus billing. Unfortunately, too many governmental agencies don’t care about fiscal responsibility because their money comes from the taxpayer. That kind of attitude has to change which means this agency needs better leadership.

But just as important, stiff fines and real prison sentences have to be handed out to these violators. Of course it won’t discourage all the thieves but people who are stealing from the government need to be locked up in jail.

And finally, as just about any governmental entity and law enforcement agency already knows, the biggest source of tips about violators comes directly from the public.

For example, although the IRS has a massive software system in place to detect people who cheat on their taxes, they still get most of their leads from ex-spouses, disgruntled employees, and ordinary people who inadvertently discovered fraud. And since the IRS tosses in a reward, more people have stepped forward to report tax cheats. The same thing can be done with Medicare especially since so many recipients can immediately identify the fraud. It is time for this agency to recognize and utilize this massive source of tips.

Medicare is broken and it needs to be fixed and cosmetic touch-ups are worthless because this program needs to be overhauled. There are too many billions of dollars of taxpayer money that is getting flushed down the toilet because of lack of leadership and no sense of stewardship. And when baby-boomers flood the system, there will be many more hucksters out to make a quick buck.

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