Diagnosis: Fraud

The federal government spends upwards of $550 billion (with a B) a year on health care in this country, meaning taxpayers like you and me are anteing up staggering amounts of our hard-earned cash to cover Medicaid and Medicare expenses for the elderly.

Now don't get me wrong: I'm a firm believer in taking care of our Greatest Generation because, frankly, my generation is not all that far behind. What fries my bacon, however, is the fact as much as 10 percent of that $550 (with a B) billion – or $50 Billion-plus – goes out the window due to fraud. Actually, not out the window. More like into the pockets of health care companies like Omnicare, the pharmaceutical giant which currently controls more than 80 percent of the prescription drug market for senior citizens in long-term care facilities in the United States and Canada.

CBS News has been investigatingthe Kentucky-based company for several months now. It began last spring the way a lot of investigations do - with a tip, in this case, from a health-care insider to a series of whistle-blower lawsuits filed against the company. The only problem: false claim acts, as they are officially known, are routinely sealed by the courts. So we put on our thinking caps and started calling around, finding, lo and behold, groups like Taxpayers Against Fraud and state attorney generals had Omnicare in their sights for a long time.

Sights are one thing…action quite another. It wasn't until this fall when Michigan Attorney General Mike Cox indicted the head of a major Omnicare subsidiary, charging more than 150 counts of health care fraud, that the wheels of our story really began to turn, quickly picking up steam, in late October, when Omnicare decided to settle the case, paying $52.5 million, the largest civil fraud settlement in the history of the state of Michigan.

Yet we weren't sure we had a big national story. That is, until the news last month of another Omnicare fraud settlement. This one was massive in scope -- 42 states and another $50 million or so. Good but something was still missing. I've always believed even investigative pieces need characters to build stories around. Readers or viewers are inundated with facts and figures every day – the number of dead in Iraq; the cost of reconstruction; the latest political poll. No, to be effective, to be memorable, stories must have humanity.

So say hello to Beatrice Schiff -- who died at the grand old age of 98 in Michigan but whose bill for prescriptions drugs from Omnicare had lived on for five more months. Thanks to the efforts of the Michigan AG and family members who supplied much-needed photos, which helped personalize our story; so did our whistle-blower, a woman with more than 30 years in the health care field, who took months to find and weeks to convince to be interviewed in shadow.

As a life-long caregiver she said she was appalled by the actions of Omnicare – the switching of tablets for far costlier tablets; the long-term contracts between Omnicare pharmacies and nursing homes that, she said, compromised choice and limited the quality of care. It was that kind of personal outrage that drove her decision to speak with us. To me, she was a crucial part of our story – an insider with intimate knowledge of how, she believed, companies like Omnicare manipulated the health care system to their full financial advantage.

Frankly, I'm not sure what the prescription for savings is when it comes to health care fraud in this country. Certainly, a more aggressive attitude by state attorney generals (like Mike Cox in Michigan) and U.S. Attorney's office (like the one in Boston leading the federal investigation) is one solution. Perhaps the solution.

Because if I've learned one thing while reporting this story it is this: the opportunity for fraud is far too easy, far too lucrative – that's 50 billion with a B -- to rely on a system for which there appears to be very little honor.