The True Face of Medicare Fraud

A $712 million bust, the biggest in U.S. history, shows that the people most likely to bilk the system are doctors and medical providers, not “welfare queens.”

Attorney General Loretta Lynch and Secretary of Health and Human Services Sylvia Mathews Burwell announce a huge Medicare fraud bust Thursday. (Yuri Gripas / Reuters)

A specter is still haunting American politics—the mythological specter of the welfare queen. Even after Clinton-era welfare reforms, and despite an ever-growing list of state restrictions on how public benefits can be used, Americans remain convinced that there’s waste, fraud, and abuse in the system, and that stronger controls would keep undeserving citizens from bilking the taxpayer. There is fraud, it’s true. But it’s not nearly large enough to make a dent in the federal budget, and it’s not freeloading welfare queens who are taking advantage of the system.

Nearly lost Thursday in the response to the atrocity in Charleston was Attorney Loretta Lynch’s announcement of arrests in what she called “the largest criminal healthcare fraud takedown in the history of the Department of Justice.” A total of 243 people were arrested and charged with stealing $712 million from Medicare. The arrests included 46 doctors, nurses, pharmacy owners, and other medical professionals. Facilities billed the federal government for therapy sessions where patients were actually just moved, never treated. In a particularly disturbing case, a Michigan doctor allegedly “prescribed unnecessary narcotics in exchange for patients' identification information, which was used to generate false billings. Patients then became deeply addicted to the prescription narcotics and were bound to the scheme as long as they wanted to keep their access to the drugs.”

A doctor in Los Angeles is accused of being responsible for $23 million in losses alone, after he prescribed 1,000 power wheelchairs that were not medically necessary and in some cases weren’t even delivered to patients. People in three Texas cities were arrested for allegedly coaching patients so that they could get doctors to prescribe unneeded drugs.

Medicare’s prescription-drug program is a common target for fraud, it turns out. A 2013 investigation by ProPublica and NPR focused on the program. Reporters looked into the case of Ernest Bagner, a psychiatrist in whose name millions of dollars of drugs were prescribed. Bagner claimed his identity had been stolen and used to acquire the drugs, and while authorities weren’t convinced that his story was true, Medicare also never restricted his ability to prescribe drugs through the program.

While Thursday’s bust may be exceptionally large in scale, it isn’t unusual in type. Looking back through government news-release archives shows similar announcements: $260 million in false billing, including 27 doctors, nurses, and medical professionals, here; $223 million in false billing, again involving doctors, nurses, and medical professionals, there.

Are these numbers huge or tiny? Maybe both. It’s hundreds of millions of dollars, but it’s also only a fraction of the total estimated fraud, which runs into the tens of billions of dollars. It’s probably around 10 percent of the annual Medicare budget, which is more than $500 billion. And that’s still a tiny fraction of the overall federal budget.

A couple years ago, Slate’s Josh Levin investigated the origins of the welfare-queen myth, tracing it to a real figure, Linda Taylor. What Levin found was that Taylor’s story was far weirder than simply bilking the system—that might have been the least of her crimes. Despite being a singularly bizarre figure, the idea that there are hundreds of Linda Taylors out there making money off the safety net is a powerful political force. And that makes fraudulent schemes like the ones Lynch alleged today all the more pernicious. Not only are doctors who rip the system off stealing from taxpayers, they’re reshaping public opinion in ways that harm the people who truly need health care.