Federal Officials Identify Largest Medicare Fraud Operation in History

On Wednesday, federal prosecutors on Wednesday charged 73 people in several cities across the U.S. of attempting to defraud Medicare of $163 million through fake claims, in what prosecutors labeled as the largest case of fraud in the program's history, the AP/Chicago Tribune reports.

According to prosecutors, the leaders and members of the group were based in Los Angeles and New York, but there were additional arrests in Georgia, New Mexico and Ohio.

The case originated in New York, after investigators examined the theft of 2,900 Medicare beneficiaries' information, including Social Security numbers and birth dates (Hayes, AP/Chicago Tribune, 10/13).

The group also allegedly attempted to bilk auto insurance companies and commit credit card fraud and identity theft (Wilson/Rashbaum, New York Times, 10/13).

The New York portion of the group was able to successfully collect at least $35 million from Medicare by using stolen medical and personal identification data to set up 118 phantom clinics in 25 states, according to the New York Times. One official said the group likely collected far more than $35 million, but officials could only prove the $35 million for the sake of the indictment.

The clinics, which usually had addresses leading to mail-drop boxes, were used to submit fake bills for care. Though most of the claims were typical, many raised flags at Medicare (New York Times, 10/13).

Such "hard-to-believe" claims included:

• Bladder tests that allegedly had been conducted by ophthalmologists;
• Pregnancy ultrasounds that were done by ear, nose and throat specialists; and
• Heart screenings that were done by dermatologists (AP/Chicago Tribune, 10/13).

Many of such claims already were paid by the time they were discovered.

Charges in the case include:

• Racketeering;
• Health care fraud;
• Identity theft;
• Money laundering; and
• Bank fraud.

New York U.S. Attorney Preet Bharara said that Medicare was "sucker punched" in this case, adding, "By design, Medicare is user-friendly. It reimburses doctors in a timely fashion" (New York Times, 10/13).