If the government cut Medicare fraud, it wouldn’t have to cut Medicare

President Biden says he’s not gonna let Republicans cut the financially challenged Medicare program. “A lot of Republicans, their dream is to cut Social Security and Medicare,” Biden said in February. “Well, let me say this: If that’s your dream, I’m your nightmare.” Well, how about at least cutting Medicare fraud?

Medicare and Medicaid fraud is rampant. The National Health Care Anti-Fraud Association recently estimated Medicare and Medicaid fraud totaling about $100 billion a year. Others believe that’s a conservative estimate.

New video from CNBC’s Contessa Brewer highlights some of the problems in South Florida, which is ground zero for Medicare fraud. Brewer says the “business of stealing Medicare and Medicaid cash has never been as brazen.”

Maybe, but it’s been very brazen for decades. A young Chris Wallace, then with ABC, reported on Medicare fraud in 1994. And here’s a “60 Minutes” report from 13 years ago in which reporter Steve Kroft warns viewers that the story may raise their blood pressure. And it should.

And while those stories are about Florida, here’s a decade-old National Public Radio story about a Texas doctor indicted for $375 million in fraudulent Medicare and Medicaid billing.

One reason criminals can steal so much is Medicare and Medicaid spend so much.

Total Medicare spending in 2022 was $982 billion, with $755 billion of that total coming from the federal government and $227 billion in premiums paid by Medicare beneficiaries to the government. Medicaid, which is a federal/state health insurance program for low-income families, spent $864 billion in 2022.

The federal government estimates that 7.5 percent of spending on traditional Medicare in 2022 was for “improper payments,” which includes both fraud and errors in billing.

For Medicaid, it was 15.6 percent.

What all the imprisoned criminals interviewed in these stories agree on is that defrauding Medicare and Medicaid is easy. Criminals open a small office because Medicare requires that vendors have an address. They put in a desk and chair, though there is seldom anyone actually in the office. Then they buy a list of stolen Medicare beneficiaries’ information and start billing the government.

The biggest scams often involve what’s known as durable medical equipment (DME), which includes a range of items such as wheelchairs, prosthetic limbs and oxygen-related equipment.

Note that this isn’t a rap on federal law enforcement trying to catch the fraudsters. They are doing their best, though they are understaffed and underfunded. And they do catch some of the criminals, as the news stories demonstrate.

Centers for Medicare and Medicaid officials boast that they have been reducing improper payments and fraud, and kudos to them for that. But no one really knows how much Medicare and Medicaid fraud there is, because many fraudsters may never be caught.

The best way to identify the criminals may be when they start getting really greedy. Here’s a good example from a series on Medicaid fraud that appeared in the New York Times in 2005. “It has drawn dentists like Dr. Dolly Rosen, who within 12 months somehow built the state’s biggest Medicaid dental practice out of a Brooklyn storefront, where she claimed to have performed as many as 991 procedures a day in 2003.”

Had Dr. Rosen kept her billings to, oh, say, 500 procedures a day, she might have stayed under the government’s radar. That’s a joke, but you get the point.

One Medicaid official in the Times story estimated that perhaps 40 percent of New York City’s Medicaid spending was fraudulent. 

Texas had its own Medicaid dental fraud. Several Texas dentists were charged and convicted of scamming the system of millions of dollars by putting braces on children who didn’t need them. As the Dallas ABC affiliate, WFAA, reported, “Medicaid records showed Texas spent $184 million on Medicaid orthodontics in 2010 — nine times more than California, which spent $19.5 million.”

It was WFAA that discovered and exposed the fraud, not federal or state officials.

The point is that if the federal government were better at preventing Medicare and Medicaid fraud, the programs could save perhaps $100 billion a year or more. While that wouldn’t solve Medicare’s long-term financial challenges, it would certainly help delay the day of reckoning.

No private sector company could survive with that much fraud. Credit card companies, and even private health insurers, have much lower fraud rates.

While no one defends the fraud, many politicians and bureaucrats don’t seem that interested in trying to fix it. Indeed, when Republican state legislators propose verifying state Medicaid rolls to ensure recipients are qualified, Democrats usually push back.

What’s clear is that there is a way to cut Medicare without hurting Medicare patients, and that’s to cut the fraud. But it’s much less work, and perhaps more politically rewarding, to just attack political opponents.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.