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Genetic testing scam preys on seniors' cancer fears and may be costing taxpayers millions

Massive Medicare scam exploits cancer fears
"Free" genetic testing scam exploits seniors' cancer fears and may be costing taxpayers millions 05:47

The trouble began for Ken and Judy Johnson – a pair of retirees from Austin, Texas – at a Fort Lauderdale arts festival.

"There was a couple of people in there saying 'come get your DNA tested,'" Judy recalled. The company, Genexe Health, billed itself as a genetic testing "one-stop shop." With a quick cheek swab, the Johnson's could learn if they carried any genes that made a cancer diagnosis more likely.

"I've had cancer. I had cancer six years ago. They indicated that they could give us some results that if it's genetic, that it could be passed on to my children. We've got four daughters," Judy said. 

They were also told the tests wouldn't cost them anything – Medicare would foot the bill – and that they would get the results in four to six weeks. That was almost a year ago. Since then, they've received nothing, but their Medicare accounts were charged for a slew of genetic tests amounting to thousands of dollars. Judy's account was billed more than $10,000 and Ken's more than $8,300.

"I mean, it hits me that we've been taken," Judy said.

Genexe is part of an explosion of marketing companies hiring local recruiters to go anywhere seniors hang out. The cancer test may be the hook, but the real goal is to collect as many Medicare numbers as possible.

CBS News found one woman who was convicted in 2017 of a half a million dollar securities fraud pitching cancer tests in Youngstown, Ohio, for another company similar to Genexe. She was still on probation at the time.

Ken and Judy Johnson aren't alone. CBS News uncovered dozens more people who were recruited by other marketers. One woman's Medicare account was billed $7,000 after she was swabbed at a Georgia home and garden show, a man in Texas was charged more than $10,000 and an 85-year-old, mentally disabled woman was swabbed by Genexe reps going door to door in North Carolina. That Medicare bill? More than $21,000.

While Genexe is headquartered in Denver, the company does its business through a web of entities that hires recruits throughout the country. A woman who asked us not to use her name was the office manager in Texas. Documents she shared with us show in her less than three months on the job, recruiters for Genexe swabbed more than 2,300 seniors.

Examples of brochures used by companies like Genexe Health CBS News

"It's just pure greed. Pure, pure greed. It had nothing to do with taking care of the community," she said. "These swabs get lost. I'd find them in the garbage."

She told CBS News that at the office where she worked, swabs weren't stored in a lab but in an old refrigerator. "This was in that office next to people's hamburgers," she said. "People were waiting for these tests and would never get them."

She says recruiters were promised up to $200 a swab – money they rarely saw even as Genexe management cashed in.

Ken and Judy Johnson along with CBS News' Jim Axelrod went to Genexe Health's Denver headquarters to see if someone there might know what happened to the couple's test results. They were greeted by Genexe Health's general counsel, a man named David Palladino.

Palladino told them he didn't know where the couple's test results were and claimed to have never seen a Genexe brochure that billed itself as a genetic testing "one-stop shop." Palladino told the couple, "Listen, folks, I did not charge you anything, so I think it's time for you to leave."

In all, Medicare was billed $19,000 for the Johnson's tests.  

"It doesn't matter whether it was out of our pocket, Medicare's pocket, it's wrong. It's a fraud," Ken said.

In a statement, Genexe Health says it performed a very limited service on an arms-length basis and had no involvement in either performing tests on samples or submitting claims to the government.

We've learned Genexe Health is under federal investigation and just last week, the government warned Medicare beneficiaries about what they call the latest scam, saying "only a doctor you know and trust should order and approve any requests for genetic testing."

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