Medicare is a social medical system established in the United States during the nineteen-sixties. It provides affordable health care to millions of Americans each year, primarily to those who are over the age of sixty-five.

Reimbursement for medical services and equipment is provided by the Federal Government and Medicare has become a popular target among organized crime and others who defraud the service.

The exact amount of Medicare Fraud is not known, in part because it is not always detected or when it is detected, the individuals have been defrauding the government for many years.

How Much is Lost to Medicare Fraud Each Year?

The exact amount Medicare Fraud is not known. In 2010, the OMB, or Office of management and Budget, estimated that Medicare Fraud totaled around $50 Billion for that year. They estimated that total payments to Medicare that year were around $530 Billion.

However, after closer examination, some of the payments marked as fraud by the OMB were later found to be legitimate payments.

In any-case, many millions of dollars are lost to Medicare fraud each year and often when the fraud is finally detected, it can be a large sum of money, like the American Therapeutic Corporation which was allegedly responsible for over $200 million in Medicare Fraud.

Different Kinds of Medicare Fraud

One of the most common types of Medicare Fraud is the practice of billing for procedures that have not actually been preformed by the company or are unneeded. Often, this is in the form of laboratory testing, although medical procedures and even durable medical equipment is also often billed and not provided or resold later.

Often referred to as Phantom Billing, this practice can also involve marketing products incorrectly. For example, a recent Medicare Scam involved repackaging penis enlargers as tools for several medical conditions, including prostate and bladder problems, and then selling them for a significant profit.

While in some cases, the Medicare recipient has no knowledge of the scam, with the patients number being used without permission or even stolen by an unrelated party, providing kickbacks to patients is also a common practice. This type of Medicare Fraud can be harder to track, because both the business and Medicare recipient are in on the scam.

Kickbacks are also often paid to patient recruiters who find Medicare patients, or even just their information, to be used in Medicare Fraud. During the recent American Therapeutic Corporation fraud, patients, halfway house operators, doctors, and marketers were all involved in the scam.

While traditionally billing fraud for home medical equipment, medications, medical testing, and medical procedures, increasingly things like Medical Transport have become popular targets. Investors have also been known to purchase an established medical practice, with the sole intention of using the good reputation of the medical group to defraud Medicare.

It is also common for shell companies to be setup, often hiding behind multiple business registrations and fake identities. This can make identifying the real source of the Medicare fraud much more difficult.

What Makes Medicare Such a Ripe Target?

One of the biggest reasons for the explosion in Medicare fraud cases is that in the past, the government has typically reimbursed claims first and questioned them later. Rather than auditing companies right away, a good deal of reimbursements can be retrieved by the fraudster before being caught.

When this is combined with a shell company and false identity, the scammers can simply pickup shop and move to a new location, repeating the fraud for some time.

The Government Cracking Down

In addition to proposed changes in how reimbursements are provided, including keeping a much closer eye on new medical businesses, the Federal Government has introduced a special Medicare Fraud Strike Force, which is dedicated to identifying Medicare Fraud.

The Strike Force has been responsible for identifying around $3 billion in fraudulent claims over the past five years.