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At $1.2 Billion, Massive Medicare Fraud Case May Just Be Tip Of Iceberg

(CBS) -- A record Medicare fraud bust--totaling $1.2 billion in wasted tax dollars--may just be the tip of the iceberg in a case that keeps raising troubling and expensive questions.

CBS 2 Investigator Pam Zekman reports it is a tale that begins with the arrival of a box.

"There is all kinds of goodies in here," 77-year-old Paul Haak said after receiving his package.

"OK, let me see what this precious box has in it," added 84-year-old Rosann Kelly.

The boxes didn't contain anything "precious" and no "goodies." Rather, it was a bunch of medical braces--for legs, ankles, arms, and backs.

"I don't need these at all," said 81-year-old Nancy Mayer, after she opened her box of braces.

Haak didn't need any braces either, but his box contained five of them, for which Medicare paid $2,531.18.

"There's no way I'm going to get this on," said Haak, struggling with a knee brace that he had idea how to use.

Records show Dr. Kenneth M. Pelehac was the doctor who prescribed all five of Haak's braces.

Haak said he never heard of Dr. Pelehac, and never talked to a doctor regarding the braces. Approached outside his Southwest suburban house, Dr. Pelehac did not respond to CBS 2's questions. He also did not respond to repeated phone calls about Haak's case.

These types of braces have been arriving unwanted at the homes of Medicare recipients for years.

Medicare officials recently put out a warning about phone scams involving solicitations for medical braces.

In early April a massive Medicare fraud scheme involving medical braces began unraveling.

A total of 24 people and 130 medical equipment companies were named in federal criminal complaints in six different states. Federal investigators said the schemers have bilked taxpayers out of $1.2 billion so far.

Before getting their boxes of braces Haak, Kelly, and Mayer all received calls similar to this one:

"This is an urgent message for all patients on Medicare regarding your eligibility for top of the line braces to alleviate your pain and increase mobility. This is your final notice. If you do not act soon, Medicare will label you ineligible for coverage."

Investigators said offshore call centers contact Medicare patients and get personal information from many of them. A doctor then signs a prescription for a brace, sometimes after a brief phone consultation. A medical equipment company fills the order and bills Medicare, sending a kickback to the original conspirators.

"I feel like it's Christmas; getting a package and open it, and I see all this," Mabel Fowler told us back in the fall of 2018

The CBS 2 Investigators first exposed this scam last fall. Fowler and another Medicare recipient, Donald (who asked not to use his last name), received 15 braces which cost Medicare $7,625.

For months CBS 2 asked Medicare how much money the companies that sold these braces collected in total. We finally got our answer.

The five companies that sent the 15 unwanted braces to Fowler and Donald received $7.9 million from Medicare over 12 months for 11,021 braces.

None of those companies was involved in the recent brace bust.

Haak said he never heard of Dr. Pelehac, and never talked to a doctor during his phone conversations regarding the braces.

Confronted outside his Southwest suburban house, Dr. Pelehac would not respond to CBS 2's questions. He also refused to answer followup questions about Haak's case.

None of the companies or individuals that were named in CBS 2's reports so far were named in the recent indictments.

Lamont Pugh, the regional director for the Inspector General's office working with Medicare on the recent fraud case, said the investigation was not yet complete.

"This is a fraud scheme that has been uncovered that we're well aware of, and we're taking actions to hold people accountable, and I believe that will continue into the future," said Pugh.

Despite Medicare's investigation and all the indictments, for now, neither the Inspector General nor Medicare can say what changes have been made to prevent this type of fraud going forward.

If Medicare gets multiple orders for braces for the same person, doesn't it suspect something wrong and not pay the bill?

"Right, I agree with you. It's not that I don't agree with you. It's the system and how the system works," Pugh responded.

The victims of the scam say the system needs fixing.

"I don't have too much confidence in how Medicare works," Kelly said.

The CBS 2 Investigators have confirmed that Medicare recipients continue to get medical brace scam solicitations.

Pam Zekman and another staffer have received such calls since the initial indictments were announced. Meanwhile, Medicare says it does not make phone calls to recipients.

If you believe you have been the victim of this scheme the Inspector General asks you to call 1-800-HHS-TIPS to report it or visit their website:


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