Medicare Fraud Acute in South Florida Medicare fraud claims are suspected to be about $35 billion a year. The problem is especially acute in South Florida, where companies are over-billing Medicare for medical equipment and infusion drugs for HIV/AIDS patients. The scam is even replacing the drug trade as the crime of choice.


Medicare Fraud Acute in South Florida

Medicare Fraud Acute in South Florida

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There's a nationwide crime epidemic going on that rakes in $35 billion or more each year. Exactly how much is being stolen is impossible to say, because the federal government doesn't try to measure it.

It's Medicare fraud. The $368 billion federal program is a tempting target for crooks, and there are signs the problem is growing. It is particularly acute in South Florida, where it seems to be replacing drug trafficking as the crime of choice for those who want to get rich quick.

The smart action is in something called "durable medical equipment," which includes items such as wheelchairs, back braces, canes, walkers, electric beds and shower-transfer tubs.

It sounds mundane, but the numbers involved are mind-boggling. Fraudulent Medicare claims estimated at between $300 million and $400 million were prosecuted in just two South Florida counties in the past year. And those are just the cases that have drawn the attention of the courts. Estimates of total losses range as high as 10 times that much.

Medicare fraud has now become a favorite career path of many former drug dealers. The FBI has interviewed drug dealers and asked them why they're moving from cocaine to wheelchairs and walkers.

Why the Shift?

Malcolm Sparrow of Harvard's Kennedy School of Government says former drug dealers give three reasons.

"There's more money, there's much less chance of being caught and if I do get caught, I'll be treated like a white-collar criminal, not like a drug dealer," Sparrow says.

There's also a fourth reason: They're less likely to be killed in a drive-by shooting.

Tim Delaney runs the white-collar crime program at the FBI's Miami office. He has 27 agents working just on health-care fraud, and they stay busy. Since March, when a new Medicare Strike Force went into operation in Miami, 120 people have been charged.

Many of those arrests are for scams involving durable medical equipment. DME companies have been favorite fronts for people engaging in Medicare fraud for a long time because they're easy to set up.

"It's a field where you can be a relatively recent immigrant new to America and not know anything about the health-care system and open up your own company and start billing," Delaney says.

Investigators say they see start-up companies that immediately bill the government for tens of thousands of dollars a month for equipment and services that Medicare beneficiaries never receive.

In South Florida, a federal investigation earlier this year found that nearly half of the suppliers of durable medical equipment were not in compliance with Medicare rules. The problem of DME fraud is so widespread that federal authorities revoked Medicare approval from every single company operating in South Florida and told them they would have to reapply for billing privileges.

Patients Join the Scam

But as federal authorities began to crack down on that kind of fraud, resourceful criminals moved into a new area. The new scam involves clinics that administer drugs intravenously to people with HIV and AIDS. Investigators call that "infusion-therapy fraud."

A single treatment of these drugs can cost thousands of dollars. The scam involves billing the government for the expensive drugs, then administering only saline solution — or nothing at all — to AIDS and HIV patients.

In one recent case, people behind the fraud went so far as to doctor blood samples — lowering platelet counts — to convince medical personnel that an expensive AIDS drug was needed.

A darker side of infusion-therapy fraud is that people with AIDS or who are HIV-positive are often in on the scam.

"They're often paid kickbacks," Delaney says. "Hundreds of dollars to sit in that chair and take that injection."

In many cases, though, Medicare beneficiaries are the victims, not the perpetrators of the fraud. In one big case last year, an employee at the Cleveland Clinic in Naples, Fla., stole billing records for more than 1,000 patients.

Before long, one of those patients — Tom Bisceglia — received a notice from Medicare about treatment he had supposedly received.

"It was for wound treatments, apparently for wounds that wouldn't heal," Bisceglia says. "And they were treatments I never had done."

The Medicare reimbursement for the treatment was $6,000. Bisceglia testified at a trial in which two people were convicted for identity theft and fraud.

In that case, the two people involved were cousins. That's not unusual. Medicare fraud often involves networks of acquaintances and family members.

"These kinds of frauds are conspiracies," says the Kennedy School's Sparrow. "You can't do them alone. You require lawyers, clinics, administrators, accountants ... You use an existing trusted network within which the loyalties are stronger than they are to the authorities."

A Trusting System

Medicaid and private insurance companies are also struggling with fraud. But there are a few factors that make Medicare almost a perfect target.

One is that it's a trusting system, set up to serve honest physicians — with few safeguards designed to weed out false claims. Also, most claims are paid automatically, so there's little or no person-to-person contact.

The companies Medicare hires to handle its claims say they are working to improve fraud detection. But their main mission is not to root out fraud; it is to pay claims quickly and smoothly.

One of the most surprising things about Medicare fraud is that no one actually knows how big the problem is.

The federal government does track the "error rate," but Sparrow says that's mostly a check of paperwork that misses outright fraud. In the early 1990s, at the behest of the Clinton administration, he spent months studying the issue and wrote a book, License to Steal.

In 1997, Congress responded with more than $100 million to combat health-care fraud — money that pays for 400 FBI agents, including those on the South Florida strike force.

But Medicare still winds up spending just 3/100 of 1 percent to ensure the integrity of the program.

"Why is this operation not 50 or 100 times the size," Sparrow asks. "Why wouldn't we spend 1 percent of the Medicare budget on program integrity? Then we might get serious about controlling a problem that might be 15 percent or 20 percent of the budget."

If fraud and abuse account for 20 percent of the current Medicare budget, that would amount to more than $70 billion.