Health Care Fraud

Across the country, career criminals and organized crime have become involved in health care fraud. Both the House and Senate have introduced bills designed to combat waste, fraud, and abuse in Medicare programs. Under the proposed legislation, the purchase, sale, or distribution of two or more Medicare or Medicaid beneficiary identification numbers will be a felony. In the rent-a-patient scheme, organizations pay for--or "rent"--persons to go to clinics for unnecessary diagnostic tests and examinations. Medicare, Medicaid, and other insurers are billed for these services and for other services and equipment that is never provided. In a variation of this scheme, perpetrators buy individual health care insurance identification numbers for cash. In the pill mill scheme, separate health care individuals--usually including a pharmacy--collude to generate a flood of fraudulent claims that Medicaid pays. The patient sells the prescription medications to pill buyers on the street who then sell the drugs back to the pharmacy. The drop box scheme uses a private mailbox facility as the fraudulent health care entity's address, with the entity's "suite" number actually being its mailbox number at the private mailbox facility. The perpetrator then retrieves the checks and deposits them into a commercial bank account. The third-party billing scheme revolves around a third-party biller who prepares and remits claims to Medicare or Medicaid on behalf of health care providers. The biller may or may not be in on the scheme. Enacting the proposed legislation will give the Department of Human Services' Office of Inspector General additional enforcement tools with which to pursue health care swindlers.

GAO noted that: (1) in the rent-a-patient scheme, organizations pay for--or "rent"--individuals to go to clinics for unnecessary diagnostic tests and cursory examinations; (2) licensed physicians sometimes participate in the rent-a-patient scheme; (3) Medicare, Medicaid, and other insurers are billed for those services and often for other services or medical equipment never provided; (4) in a variation of this scheme, perpetrators merely buy individual health care insurance identification numbers for cash; (5) implementing the proposed legislation will make the purchase, sale, and distribution of two or more Medicare or Medicaid beneficiary identification numbers a felony and will establish universal product numbers for identifying the specific type of medical equipment or supply provided; (6) similarly, in the pill mill scheme, separate health care individuals and entities--usually including a pharmacy--collude to generate a flood of fraudulent claims that Medicaid pays; (7) after a prescription is filled, the beneficiary sells the medication to pill buyers on the street who then sell the drugs back to the pharmacy; (8) making the trafficking in Medicare and Medicaid numbers a felony would also likely help reduce the number of fraudulent claims submitted to insurance systems as part of pill mill schemes; (9) the drop box scheme uses a private mailbox facility as the fraudulent health care entity's address, with the entity's "suite" number actually being its mailbox number; (10) the fraudulent health care entity then uses the address to submit fraudulent Medicare, Medicaid, and other insurance claims and to receive insurance checks; (11) requiring on-site inspections of the entity's address and mandating background checks of the owners, as legislation proposes, should reduce the number of criminals involved in the drop box scheme; (12) the third-party billing scheme revolves around a third-party biller--who may or may not be part of the scheme--who prepares and remits claims to Medicare or Medicaid (electronically or by paper) for health care providers; (13) it is possible, however, for a third-party biller to defraud Medicare, Medicaid, and others by adding claims without the providers' knowledge and keeping the remittances or by allowing fraudulent claims to be billed to Medicare or Medicaid through its service; and (14) the proposed legislation will require unique Health Care Financing Administration billing numbers to reduce fraudulent claims filed by third-party billers.