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
Linda Ruiz, who heads HCFA's program integrity unit, strongly disputes any notion that HCFA is oblivious to fraud. "In the time I've been with HCFA, not only my efforts but the efforts of the entire agency have been to continuously improve our ability to detect and combat fraud," she says. But even Ruiz agrees that for years HCFA's main priority was servicing claims: "We tended to remove the hassle factor, so to speak. We wanted to unburden the providers, make it easy to process claims."
One thing that greatly complicates the war on fraud is the lack of any central Medicare computer linking the entire system. Contractors use more than 30 different computer systems to process claims, so a contractor in Florida can't see if someone is submitting claims for the same patient in California. HCFA's ability to scrutinize such duplicate claims is limited, and the bad guys know this. In New York, a company called R. M. Lipsap Medical Supplies Inc. was found fabricating addresses for Medicare patients and then submitting $1.5 million in claims using their Medicare numbers in a variety of states. To plug that loophole, HCFA hired GTE in 1994 to develop a systemwide computer network. But last summer it canceled the plan after spending $60 million, complaining that the cost and pace of the project were not acceptable. GTE said that HCFA kept changing its requirements. A federal audit noted that the contract's cost had ballooned from $151 million to $1 billion in just five years.
Bruce Vladeck, who ran HCFA until last summer, says that efforts to get tough have encountered other bureaucratic and political barriers. "In the 1980s and early 1990s, attention to these issues was reduced to a very low level," Vladeck says: When budgets were tight, the first thing to get cut was funding for fraud detection. Lobbies for the large insurance companies meanwhile bristled every time someone suggested a reform that would change their contracts.
Federal and state investigators insist they are now determined to go after Medicare scam artists with unprecedented vigor. In 1996, Congress passed the Kennedy-Kassebaum bill, which contained tough antifraud measures, including $104 million to pay for 370 new agents, lawyers, and other personnel to prosecute fraud. Prosecutors have started using federal civil statutes to freeze claims and payments until they can build criminal cases. In Miami, federal agents have formed a special Medicare fraud task force, and the FBI recently used a home health care company as a front to ensnare a group now indicted on charges of laundering drug profits. In New York, agents nabbed a doctor who was prescribing unnecessary medical equipment and then planted a camera in her office. Equipment-company representatives kept calling on her, giving her money in exchange for her signature on their orders. Eight people pleaded guilty.
But officials also say they are simply overwhelmed by the sheer numbers, and ingenuity, that they come up against each day in the various parts of the fraud puzzle. "This program is such a massive cash cow. The more you clear, the more businesses you open up," says HHS's Varano. So broad and prosperous is the Medicare fraud business that, in some locales, it has become hopelessly intertwined with legitimate trade, even part of the local culture. Gabriel Hernandez says that when he was running fraudulent businesses, he knew of many legitimate clinics that had set up phony spinoffs. They collected names and Medicare numbers of patients in the real clinics and billed them again in the phony clinics.
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