The New Face of Medicare
Drug dealers and organized-crime groups have invaded the Medicare system and are taking the government and citizens for a billion-dollar ride
Win valuable prizes. The scams span the nation but are most often found in states where there are large Medicare and Medicaid populations. In New York, Florida, and California, federal agents say, Russian organized-crime figures run hundreds of clinics, testing centers, laboratories, and medical-equipment companies that siphon millions of Medicare and Medicaid dollars each year. A pair of Russian emigres in New York's Brighton Beach, according to an indictment, gave patients microwave ovens and air conditioners in exchange for their Medicare numbers and then used those numbers to bill Medicare for $12 million. In New Jersey, authorities believe members of the Genovese organized-crime family used a health-insurance brokerage to skim money from health care groups. One clinic owner suspected of Medicare fraud and drug dealing was shot down in 1996 outside his Miami clinic. Reputed narcotrafficker Frank Morfa swindled Medicare out of $7.5 million by billing for nutritional supplements, most of which were undelivered. Another scam artist, Akiyoshi Yamada, set up clinics in Miami after pleading guilty to investment fraud. Agents say that he may have stolen $200 million.
Bilking Medicare is so lucrative in Florida that some crooks have taken to kidnappings, burglaries, and home invasions to loot the profiteers. The fraud has even spawned a whole subculture of supporting illegality--recruiters to find willing elderly patients, accountants who expertly fill out bogus Medicare claims, shady physicians who sign off on procedures never performed--that is now hard to separate from legitimate health care. This week, the Senate Permanent Subcommittee on Investigations is set to hold hearings on the criminal invasion of Medicare. One key witness and informant, scheduled to testify behind a screen, is a big drug trafficker turned Medicare fraud practitioner. "There is so much money in the Medicare program, and it's so vulnerable to abuse, that it's relatively easy picking for criminals," says Sen. Susan Collins, subcommittee chairwoman. "It's similar to the old expression--when Willie Sutton was asked why he robbed banks: 'Because that's where the money is.' "
Avoiding hassles. When President Lyndon B. Johnson scratched his name on the parchment that made Medicare the law of the land 33 years ago, he could never have imagined the likes of Gabriel Hernandez. No one could: Back then, Johnson and his advisers were afraid that doctors or hospitals would refuse to take part in the unprecedented government program. Medicare guarantees comprehensive health care to people ages 65 and older or disabled. Medicaid, funded by both federal and state governments, provides health care for low-income people. Both had been branded by critics as one step away from socialized medicine. So everything about the system was designed to make it hassle free for doctors to accept Medicare patients. Paperwork was kept to a minimum, and a premium was placed on getting checks out the door so doctors, clinics, laboratories, and other medical service providers wouldn't have to wait for reimbursement.
Medicare officials today are racing to catch up with the explosion of fraud by screening health care providers more closely and by increasing criminal investigations. Despite that, the system still tilts heavily in favor of paying claims quickly over applying the necessary scrutiny. "You have to go back to 1965, when controls were not put in the system," says Richard Kusserow, who from 1982 to 1991 was the inspector general overseeing Medicare. "We've been jury-rigging it ever since, and 30 years later, we're struggling with the front end, where controls weren't put in." Yet some of the scams are so brazen that even the most cursory checks upfront would have exposed them. In Florida, for instance, officials found clinics using the provider numbers of doctors who had retired or died years earlier. No one had bothered to erase those old numbers from the billing computers. In other places, the addresses of many clinics and medical companies have proved to be post office boxes. One phony magnetic resonance imaging (MRI) clinic in New York had its post box in a mailbox-rental store--emblazoned with a huge "Mail Drop" sign. A medical-equipment company's address turned out to be the back of a laundromat. Near Miami, the listed mailing address of an MRI center is a metal door leading to an empty room. A Miami map showed that the company's stated "corporate address" would put its offices on the center line of Runway 9 Right at Miami International Airport. The owners, suspected narcotraffickers, have fled with $4 million in Medicare funds.
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