Medicare Fraud: A $60 Billion Crime

A.G. Holder Tells "60 Minutes" More Oversight Is Needed; Scammer Explains How Easy It Is To Steal Millions

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This story was originally published on Oct. 25, 2009. It was updated on Sept. 2, 2010.

Of all of the financial problems facing the United States right now, none imperil the country's future more than soaring budget deficits and the astronomical costs of providing health care to an aging population.

And at the center of both of these issues is Medicare.

As we first reported last fall, the government insurance program pays out a half a trillion dollars each year in medical benefits to 46 million elderly and disabled Americans. But it also provides a rich and steady income stream for criminals who are constantly finding new ways to steal a sizable chunk of that money.

The Justice Department claims that Medicare fraud is now a $60 billion a year industry and has become one of, if not the most profitable crimes in America.

We caution you that this story may raise your blood pressure, along with some troubling questions about our government's ability to manage a medical bureaucracy.
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If you want to find Medicare fraud, the first place you should look is South Florida, where "60 Minutes" and correspondent Steve Kroft were told it has pushed aside cocaine as the major criminal enterprise.

It's a quiet crime - there are no sirens or gunfire. The only victims are the American taxpayers, and they don't even know they are being ripped off.

FBI Special Agent Brian Waterman, who "60 Minutes" rode with for several days, told us the only visible evidence of the crimes are the thousands of tiny clinics and pharmacies that dot the low-rent strip malls.

You don't even know they're there because there's never anyone inside. No doctors, no nurses and no patients.

"This office number should be manned and answered 24 hours a day," Waterman explained, standing outside one of those small, unstaffed businesses.

The tiny medical supply company billed Medicare almost $2 million in July of 2009 and a half million dollars while "60 Minutes" was there in August of 2009, but we never found anybody inside, and our phone calls were never returned.

Sometimes, they don't even have offices: we went looking for a pharmacy at 7511 NW. 73rd Street that billed Medicare $300,000 in charges. It turned out to be in the middle of a public warehouse storage area.

"They've already told us that there's no offices here," Waterman told Kroft. "There are no businesses here. In fact they are not even allowed to have a business here."

Waterman is the senior agent in the Miami office in charge of Medicare fraud. And Kirk Ogrosky, a top Justice Department prosecutor, oversees half a dozen Medicare fraud strike forces that have been set up across the country.

The office Kroft visited operates out of a warehouse at a secret location in South Florida and includes investigators from the FBI, Health and Human Services, and the IRS.

"There's a healthcare fraud industry where people do nothing but recruit patients, get patient lists, find doctors, look on the Internet, find different scams. There are entire groups and entire organizations of people that are dedicated to nothing but committing fraud, finding a better way to steal from Medicare," Waterman explained.

"Is the Medicare fraud business bigger than the drug business in Miami now?" Kroft asked.

"I think it's way bigger," Ogrosky said.

Asked what changed, Ogrosky told Kroft, "The criminals changed."

"Sophistication," Waterman added.

"They've figured out that rather than stealing $100,000 or $200,000, they can steal $100 million. We have seen cases in the last six, eight months that involve a couple of guys that if they weren't stealing from Medicare might be stealing your car," Ogrosky explained.

"You know, we were the king of the drugs in the '80s. We're king of healthcare fraud in the '90s and the 2000's," Waterman added, speaking about South Florida.