Health Care Fraud:

Schemes to Defraud Medicare, Medicaid, and Private Health Care Insurers

T-OSI-00-15: Published: Jul 25, 2000. Publicly Released: Jul 25, 2000.

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Pursuant to a congressional request, GAO discussed the various schemes used to defraud the Medicare and Medicaid programs and private insurance companies and how the proposed legislation contained in H.R. 3461 and S.1231 could strenghten federal and state health care programs.

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.

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