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A workable plan to fight Medicare scams

Example of a Medicare card.

Example of a Medicare card. Credit:

Crooks are continually attacking government systems to siphon off money.

Unfortunately, Medicare makes an attractive target; it’s big, has lots of money and safeguards are not the best. In December 2010, I saw a “60 Minutes” program about how the FBI was trying to stop crooks from using a medical equipment scam to steal from Medicare; by their own admission they weren’t too effective in catching them.

For the crooks, it was simple, bill Medicare for high-ticket equipment using a bogus Equipment Supply Company. That meant setting-up a legitimate looking business, obtain corporate papers from the state, buy stationery, rent a storefront office and P.O. box, all the normal trappings without having to outlay much of an investment.

Although there are lots of high-ticket equipment items, we’ll use the same example the FBI did, “Prosthetic Arms.” Their value ranged from $3,000 to $50,000, making it a great “mark” for crooks. Next, they needed to find an unsuspecting victim. That’s the easy part — use the internet to acquire Social Security numbers, names, addresses, telephone numbers, and they’re all set. Wait, they needed one more item, prescription pads with a doctor’s signature, forged or not.

With all the tools in place, all they had to do was submit phony claims. The Medicare loophole to exploit, turn-around time from submission to payment, it was short. With the correct paperwork, money flowed to the crooks within days of submission. Couple this with their scam philosophy, don’t spend a lot of time at one location. Run the scam, close-up shop and get-on to the next phony location to repeat the process. It worked. By the time the feds realized a scam had taken place, everything was gone. The problem to solve, how can the thieves be caught before they disappear?

To do this before time runs out requires the scam be identified in real-time, before the government pays. I had an idea of how this could be done, but first checked out the concept with some doctor friends. They all agreed it was a realistic approach and would work. Before I talk about details, here’s a simple concept example. Assume you want to get your child into a public school. It requires they have a birth and immunization certificate; simply stated, have a history. One can’t just show up with a kid and say they’re ready for school.

When a doctor bills for services, rather than write descriptions they use shorthand medical codes, i.e. 62323 to identify a spinal injection. These codes, in effect, establish a history of diagnoses, treatments and medications.

In the FBI prosthetic arm example, the crooks acquired a man’s Social Security number, and pertinent information needed to submit the claim. During the “60 Minutes” program, the man held up his two good arms to show he didn’t need a prosthetic arm; therefore he wouldn’t have any related history.

I harp on history since this is the key to catch a thief. If there’s no history to back up a request for equipment, the claim should be flagged as bogus or at least investigated. It’s necessary to assemble a code history for each piece of equipment of interest. The Medicare database would have to be scanned, locate the applicable hardware codes and collect its related history. For the prosthetic arm, what happened before the arm was required: amputation, birth defect, fitting of the arm, procedures and treatment. Multiple groupings would be needed to assemble a history database.

From a practical standpoint, there would be a code list of all the equipment the FBI thinks is being attacked. As Medicare entries are made, the system would scan the list for a match of suspect equipment. When one is found, the system would use the associated Social Security number to see if there is an applicable history. If none is found, it’s probably a bogus submission. But now the system has the name of the Medical Supply Company, address, telephone number, doctor who prescribed it, all in a few seconds.

I went down to the local FBI office and spoke with an agent. After he grasped the concept, he said he would forward my information to the right people, and they would contact me. The government never responded, so I sent an information letter to the Miami office where the “60 Minutes” program was filmed. I’m still waiting for a response; it has been only eight years!

Now the government may consider this concept too difficult or impossible to perform, which is interesting. A few years ago, I asked my city if it would put a light on a power pole on a corner where schoolchildren waited in the dark for the bus. The city said the power company indicated it would be impossible to do. That was interesting since the power company was petitioning the state to build a nuclear reactor.

I called a friend at the newspaper and suggested he contact the power company and ask what’s wrong with this picture, you want to build a nuclear reactor but can’t put up a light on one of your own power poles? The next day it took 15 minutes, to achieve the impossible!

Bill Kahn of Maitland, Fla., has lectured on automation and electronic communications at hundreds of academic and other venues. He wrote this for