Medicare Fraud: $2.75 Billion Recovered

Late June, the Department of Justice released its 2024 Healthcare Fraud Enforcement Action, detailing actions against nearly two hundred individuals, encompassing Medicare fraud totaling $2.75 billion in recovered losses ($1.6 billion in actual cash losses).

One of the major problems with Medicare, aside from its structural financing, is that it is bureaucratically bloated, full of convoluted billing and claims rules, creating billions in fraud – annually. While the recent recovery announcement sounds impressive, considering how much time and money was spent to achieve the recovery and of course, the amount of fraud exposure still outstanding.

The Justice Department’s announcement revealed criminal charges against 193 individuals, including 76 doctors, nurse practitioners, and other licensed medical professionals across 32 federal districts in the United States. They are accused of involvement in multiple health care fraud schemes, which aimed to defraud about $2.75 billion and resulted in actual losses of $1.6 billion. The announcement is here: Office of Public Affairs | National Health Care Fraud Enforcement Action Results in 193 Defendants Charged and Over $2.75 Billion in False Claims | United States Department of Justice

Medicare fraud is estimated to cost the program $100 billion annually though in actuality, because of the lack of real current enforcement, often reliant on whistleblowers for case identification, the amount is likely much higher.

The surge in Medicare fraud has overwhelmed the inspector general’s office and its 450 agents nationwide. The financial implications are immense: Medicare allocates approximately $901 billion annually for 65 million beneficiaries, and Medicaid disburses $734 billion each year to provide medical care to over 85 million poor and disabled Americans, per CMS (Centers for Medicare and Medicaid Services). The inspector general’s annual reports characterize the fraud as widespread and creative, frequently involving both career criminals and doctors and healthcare workers. Only about two cents of every one hundred dollars spent by the Department of Health goes toward fraud oversight and enforcement.

A Wall Street Journal analysis of billions of Medicare records revealed that private insurers in the government’s Medicare Advantage program issued hundreds of thousands of dubious diagnoses from 2018 to 2021. These diagnoses led to additional taxpayer-funded payments. Per the analysis, the insurers made $50 billion from diseases “billed” but not treated by a physician. This is perhaps, the most common type of Medicare fraud – care billed but not necessary or not provided. It is difficult, via Medicare’s claims processes, to identify the fraud. More here: Insurers brought in $50B through ‘questionable’ Medicare Advantage coding: WSJ (beckerspayer.com)

One of the more egregious fraud cases in the Department of Justice report involved wound graft treatments (unnecessary) for elderly, often terminally ill, patients. The charges were filed in Arizona.

Four individuals were accused of submitting $900 million in fraudulent claims to Medicare for amniotic wound grafts intended for Medicare patients. The allegations state that the defendants targeted elderly Medicare patients, many of whom were terminally ill. They are accused of indiscriminately applying medically unnecessary and costly amniotic grafts to these patients’ wounds, without consulting the patients’ primary care physicians or providing proper infection treatment, to wounds that were superficial and did not require such treatment, often using grafts much larger than the wound size.

Over a period of 16 months, Medicare paid over $600 million to two of the defendants as a result of this fraudulent scheme, averaging over a million dollars per patient for these unneeded grafts. The two defendants were owners of Arizona-based wound care companies, allegedly receiving over $330 million in illegal kickbacks for purchasing the grafts charged to Medicare. As part of the legal proceedings, the government confiscated assets worth more than $70 million, including luxury vehicles, gold, jewelry, and cash.

The most interesting part of the report is the case breakdown. It covers, in summary, all 145 cases charged. It is available here: Criminal Division | Case Summaries (justice.gov)