Medi-Fraud for Everyone
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Guillermo Denis Gonzalez was released from prison in Florida in
2004 after serving 12 years for murder. By the end of 2006, he
owned a health care business officially licensed by Medicare.
This August, the Miami Herald
reported that Gonzalez pled guilty to filing $586,953 in
phony Medicare claims for supplies that were never given to any
actual patients — but this was only after he was arrested for
murdering and dismembering another victim, to which he also
confessed.
While it’s shocking that government policing efforts are so
lax for Medicare that even a convicted murderer can be granted a
license to sell equipment and file claims, Gonzalez is actually a
small player compared to other cheats. Last June, for instance,
the Washington Post
ran a story about a high school dropout who scammed $105
million from the federal government by filing 140,000 fraudulent
Medicare claims, buying herself a Mercedes-Benz and two
condominiums with a portion of the proceeds.
The rampant fraud in existing government health care
programs is nothing new, but the problem warrants increased
attention given recent reports of growing momentum behind
Democrats’ push to create a new government-run program modeled
after Medicare.
Earlier this week, the Hill reported
that House Democrats were
discussing rebranding their so-called “public option” as
“Medicare Part E,” or “Medicare for Everyone,” in hopes that it
would be an easier sell. And on Thursday, ABC News
cited sources who said that Senate Majority Leader Harry Reid
planned to include some form of a government plan in Senate
legislation.
“I thought the government plan was dead,” Republican Sen.
John Thune said during a Wednesday conference call with bloggers.
“I don’t think that anymore.”
Proponents of creating a new government plan argue that
Medicare is much more efficient than private insurance and boast
that it has administrative costs of just two percent. The number
is highly misleading in that it doesn’t include many expenses
that would be considered when calculating administrative costs in
the private sector, because those expenses show up elsewhere in
the federal budget. Examples include the cost of tax collection,
office space, and staff salaries. The true administrative cost of
Medicare is more like 6 percent to 8 percent, according to a 2006
report by the Council for Affordable Health Insurance. But to
the extent that Medicare does have lower administrative costs
than private insurance, the programs’ defenders ignore one of the
consequences: lax oversight of claims that leads to widespread
fraud.
Ironically, President Obama has insisted that he will cut
several hundred billion dollars out of Medicare’s budget without
affecting benefits simply by eliminating waste, fraud, and abuse
— yet he simultaneously makes the case that creating a new
government plan is necessary to improve efficiency in the health
care system.
“He’s kind of put himself in a box,” said Jim Frogue of the
Center for Health Transformation, editor of the book
Stop Paying the Crooks: Solutions to End the Fraud That
Threatens Your Healthcare. Obama’s argument,
Frogue said, is “yes, there’s tons of fraud in these programs –
massive amounts — but let’s create another one just like it. Now
that’s a very tough position to make sense out of.”
There are tremendous difficulties in measuring precisely
how much of money is lost to fraud in Medicare and Medicaid. Some
estimates put the number at around $60 billion, while Sen. Tom
Coburn has argued that it’s
at least $100 billion, perhaps even double or triple that.
Coburn based his figures on an estimate from health care fraud
expert Malcolm Sparrow of Harvard University, who has said — at
the low end — 10 percent of the roughly $1 trillion in spending
on government health care programs may be lost to fraud.
“By taking the fraud and abuse problem seriously this
administration might be able to save 10 percent or even 20
percent from Medicare and Medicaid budgets,” Sparrow said in May
testimony before the Senate Judiciary Committee. But to
accomplish this, Sparrow explained, the government would have to
boost anti-fraud spending to as high as 2 percent of the cost of
the programs from the roughly 0.1 percent now dedicated to the
task.
At least anecdotally, accounts of massive fraud cases
appear regularly in the news, and they are staggering.
In 2006, the Los Angeles Daily News
wrote about the indictment of a Russian-Armenian crime
syndicate “that gutted Medicare of more than $20 million using a
network of clinics, paid kickbacks to marketers for patient
referrals and billed Medicare for tests that were unnecessary or
went undelivered.” And the Associated Press
recently found that the mafia is increasingly resorting to
Medicare fraud as a substitute for dealing drugs.
“Building a Medicare fraud scam is far safer than dealing
in crack or dealing in stolen cars, and it’s far more lucrative,”
the AP story quoted Lewis Morris, a lawyer the Department of
Health and Human Services, as saying. There’s also a
lower likelihood of getting caught, and even if caught, the
penalties are much lighter.
Scam artists often file fake claims by paying people for
their Medicare numbers or somehow acquiring lists of
beneficiaries. In some cases claims have been filed by dead
doctors, or on behalf of patients who were dead or deported at
the time of the claim. In his testimony, Sparrow noted a July
2008 study by the Senate Permanent Subcommittee on Investigations
that found from 2000 to 2007 “between $60 million to $92 million
was paid for medical services or equipment that had been ordered
or prescribed by dead doctors.”
By contrast, only about 1.5 percent of private health care
claims are lost to fraud, because private insurers are more
aggressive about policing claims, Merrill and Meredith Matthews
write in a chapter of Stop Paying the
Crooks.
Frogue said that Medicare and Medicaid fraud can’t be
addressed by law enforcement, because it’s too expensive to
prosecute and imprison the cheats, and by the time they get
caught the stolen money has likely disappeared. Instead, he said
that the government had to do a better job at the front end,
through such measures as thorough background checks before
licensing Medicare vendors. He also suggested that the government
should flag the top half-percent of Medicare spenders to make
sure their claims are legitimate. As evidence that it’s possible
to police for fraud, Frogue pointed out that the credit card
industry handles about $2 trillion in transactions a year –
about the same as the health care sector — yet card fraud is
less than 1 percent.
Unfortunately, despite Obama’s talk about eliminating fraud
in government health care programs, legislation currently making
its way through Congress does very little to address the
problem.
“They’re not even close to scratching the surface,” Frogue
lamented.
Instead, Democrats are pushing for the creation of a
massive new government health care plan that will be a magnet for
criminals everywhere.
