NCPA - National Center for Policy Analysis

Some Medicare Contractors Are Ripping Off The System

September 21, 1999

Companies that contract with Medicare to process claims -- and who are supposed to guard against fraud among claimants -- are themselves defrauding the system, investigators report. Doctors and hospitals were originally accused, but now the finger of blame has belatedly shifted to contractors -- whose potential for wrongdoing was initially ignored by investigators.

  • In the last two years, at least four of the 44 companies that run Medicare's day-to-day financial operations have pleaded guilty to criminal charges in schemes to defraud the government -- and executives at two other contracting firms have been found guilty of similar charges.
  • The Department of Health and Human Services inspector general is investigating 19 current and former Medicare contractors.
  • Eight contractors have paid more than $275 million to the government to settle fraud charges, and for falsifying records or using money from the Medicare trust fund to pay costs that should have been paid by private insurers.
  • The General Accounting Office found that contractors had filed false claims, improperly destroyed thousands of claims to reduce the backlog of work and simply turned off the telephones when they could not answer customers' calls in the prescribed amount of time.

In a new report, GAO says that "deceptions and improprieties became a way of doing business" at some companies, as employees taught one another how to cheat the government and cover up mistakes.

Those familiar with the probes say Medicare officials are rarely the first to spot evidence of fraud. Most of the big cases begin with complaints from whistle-blowers who have to struggle to get the government to take an interest in misconduct at the companies where they work.

Source: Robert Pear, "Fraud in Medicare Increasingly Tied to Claims Payers," New York Times, September 20, 1999; "Medicare: HCFA Oversight Allows Contractor Improprieties to Continue Undetected," T-HEHS/OSI-99-174, September 9, 1999, General Accounting Office, Washington, D.C.


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