At the same time the Centers for Medicare and Medicaid Services (CMS) is touting its new regulations to strengthen fraud-prevention efforts, a gang of “thugs” (based in New York and California) had pulled off the largest-ever Medicare fraud scheme by one criminal enterprise—to the tune of $163 million.1 How did they do it? Apparently, it was pretty easy—until, that is, the more than 60 perpetrators were arrested in October.

Medicare fraud has been around for a long time and oversight has been patchy. One providers says he believes the oxygen cap, competitive bidding, and lowered reimbursement imposed on dealers and providers by CMS are the result—a knee-jerk reaction to show Congress something is being done. The perpetrators in the case of the $163 million fraud opened nonexistent companies, stole the identity of unknowing physicians and patients, reported “notional” or nonexistent treatment, and collected the reimbursement. Unfortunately, due to Congress’ mandate that claims be paid within 15 days, by the time the fraud was discovered, it was too late—and the crooks had disappeared with their take and opened a new “phantom” facility.

They were only caught when information on 2,900 Medicare patients—including Social Security numbers and dates of birth—was reported stolen. Some claims were obviously suspicious, eg, dermatologists billing for heart exams.

Except for its astonishing scope, this is not a unique case. Fraud is lucrative all over the United States: Nationwide, nearly $60 billion have been defrauded from Medicare, which, of course, means taxpayers.2 Will the new prevention tools included in the Affordable Care Act be effective? CMS has been given $3.5 million for fraud prevention in the hopes that it will. As part of a general restructuring, CMS has established the Center for Program Integrity, which is focused on identifying and preventing fraud and protecting beneficiaries. CMS has proposed several new rules, which, if approved, will give the Center the tools it needs to increase scrutiny of the $900 billion in spending by Medicare, Medicaid, and the Children’s Health Insurance Program.3 Briefly, the new rules will suspend payment to a provider when there has been a “credible allegation” of fraud, including those from beneficiaries; require Medicaid programs to stop using medical providers who have been terminated from Medicare and authorize Medicare to suspend providers who have been terminated by Medicaid; require more visits to medical firms to ensure they are legitimate; and rate medical providers by their risk for engaging in fraud—high risk providers would be fingerprinted and investigated for criminal background.

In a September interview,4 Peter Budetti, MD, director of the Center for Program Integrity, said that the initiative “will allow us to go beyond what we’ve always called ‘pay and chase’ and to actually have the tools … to prevent much of the fraud we’ve seen in recent years.”4

An ambitious program, and, as I draw closer to being a Medicare beneficiary myself, I wish Dr Budetti success!

—Marian Benjamin
[email protected]


  1. Dozens Charged in $163M Medicare Fraud Scheme. Available at: Accessed October 15, 2010.
  2. Medicare: the Sixty Billion Dollar Fraud. Available at:;housing. Accessed October 15, 2010.
  3. New tools to fight Medicare fraud. Available at: Accessed October 15, 2010.
  4. Feds gain power over billions in Medicare fraud. Available at: Accessed October 15, 2010.