The federal investigation into the relationship between Democratic donor Dr. Salomon Melgen and Sen. Bob Menendez (D., N.J.) has exposed the rampant culture of Medicare and Medicaid fraud, which by some estimates cost taxpayers as much as $98 billion in fiscal year 2011.
The raid by the FBI and the Department of Health and Human Services (HHS) of Melgen’s eye center in Florida spanned two days in late January. The involvement of HHS indicated “the search-and-seizure raid has ties to a possible Medicare fraud inquiry,” the Miami Herald reported. The FBI reportedly went in after authorities spotted a shredding truck; boxes and bags of evidence were removed from Melgen’s office.
“Normally, federal searches of businesses occur during the day during normal business hours. The fact that this search began on Jan. 29 and lasted some thirty-plus hours and ended Jan. 30, tells us the scope of this search was major,” Ken Boehm, chairman and cofounder of the National Legal and Policy Center, said by email. “Also, the presence of crow bars and drills would seem to indicate that materials being sought were locked up. By any conventional yardstick, all of this activity tells us this is a very serious investigation.”
The exact scope of Medicare fraud in America is unknown. However, the GAO has long identified Medicare as a high-risk program, and it has issued frequent reports on identifying fraud and finding ways to help combat it.
The Obama administration recently touted its efforts in combating Medicare fraud, claiming in a release last week it had “record-breaking” recoveries of $4.2 billion for FY 2012 from individuals and companies who attempted to defraud Medicare and Medicaid.
However, while the numbers were impressive and reported by many media outlets, critics say such recovery figures are suspect.
“I don’t know where they’re getting their numbers,” former Florida Republican Senator George LeMieux told the Free Beacon.
The reported figures are “far inflated over what CMS [the Centers for Medicare and Medicaid Services] reported,” he said.
The Obama administration has also been criticized for not fully implementing the fraud prevention system as required under the 2010 Small Business Jobs Act. That provision, which LeMieux wrote into the act, could be saving billions of dollars in identifying fraudulent claims before they are paid out.
“They never really implemented the provision,” he said. “If the provision was properly applied, you would save billions of dollars every year.”
The CMS reported in December that it “stopped, prevented, or identified an estimated $115.4 million in payments.” The CMS figures were also questioned by lawmakers, who believe the numbers were closer to $31 million.
The office of inspector general of the Department of Health and Human Services in a report last fall expected $6.9 billion in recoveries for FY 2012.
A GAO report in May 2011 questioned the accuracy of the annual HCFAC reports, claiming its findings were not sufficiently supported.
A GAO report from October 2012 supported LeMieux’s argument. The Fraud Prevention System “has not yet been integrated with the agency’s payment-processing system to allow for the prevention of payments until suspect claims can be determined to be valid,” it stated.
“Moving from responding once fraud has already occurred to preventing it from occurring in the first place is key to ensuring that federal funds are used efficiently and for their intended purposes,” Kathleen King, the director of health care for the GAO, said in testimony last year before the House Committee on Energy and Commerce subcommittee on oversight and investigations.
Florida is a hot spot for Medicare fraud.
“Florida’s the health care fraud capital in the country,” LeMieux said, adding that suspicious claims should be stopped before payment is made.
He also criticized the two vendors hired by the Obama administration, Northrop Grumman and Verizon, who are “not experts in doing this.”
“Folks are stealing hundreds of millions of dollars,” LeMieux said. “We’re just scratching the surface.”
Manuel Dobrinsky, of the Freidin Dobrinsky law firm in Miami, deals with whistleblowers in Medicare fraud cases.
“Medicare fraud is pervasive, and I would assume that only a small percentage is ever detected,” Dobrinsky said. “We turn down about 95 percent of cases we review. Factors we consider are strength of case, size of the fraud, and the likelihood of a recovery.”
“The government is making a concerted effort, but they don't have the personnel to fully address the problem,” Dobrinsky said. “One of best tools are these qui tam (whistleblower) cases, where private individuals are incentivized to come forward with concrete facts and disclose these cases.”
A whistleblower receives a portion of the penalty imposed by the government on misbehaving businesses in a qui tam case.
“The government only pursues a fraction of cases brought by private citizens, and again, this is due to staffing restraints,” Dobrinsky said. “They tend to concentrate on the larger cases, and these can take well over a year for them to fully investigate.”