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Medicare Fraud ‘Strike Forces’ to Grow Under Bill

The FBI and Health and Human Services raided the Courtesy Medical Group in Florida as part of a Medicare fraud case in 2009. Photographer: Joe Raedle/Getty Images
The FBI and Health and Human Services raided the Courtesy Medical Group in Florida as part of a Medicare fraud case in 2009. Photographer: Joe Raedle/Getty Images

Aug. 6 (Bloomberg) -- Congress is set to grant President Barack Obama’s request for a record $1.7 billion to fight health-care fraud, in part to almost triple investigations into crime rings that steal from Medicare.

The money, included in both House and Senate versions of a fiscal 2011 spending bill for the Health and Human Services Department, amounts to a $250 million increase. Almost half of that, $116 million, would go toward expanding a program of fraud “strike forces” to 20 cities from seven.

UnitedHealth Group Inc., based in Minnetonka, Minnesota, and smaller health insurers stand to benefit from an increase in the federal government’s fraud effort. Insurers are often victimized by the same criminals that target Medicare, said Louis Saccoccio, executive director of the National Health Care Anti-Fraud Association, a Washington-based group.

“If a certain health provider is defrauding Medicare there’s a good chance they’re defrauding the private side as well,” Saccoccio said.

UnitedHealth, the biggest U.S. health plan by sales sees helping companies battle medical fraud as one of the “strong growth areas” for Ingenix, its information-technology and consulting unit, said Andrew Slavitt, Ingenix’s chief executive officer, said in a July 20 call with analysts.

McKesson’s Opportunity

McKesson Corp., based in San Francisco, and other sellers of technology to help detect fraud, also may emerge as winners.

UnitedHealth, the biggest private administrator of Medicare benefits, increased 3 cents to $33.45 at 9:49 a.m. in New York Stock Exchange composite trading. The Minnetonka, Minnesota-based company had gained 9.7 percent for the year before today.

Humana Inc. of Louisville, Kentucky, the No. 2 Medicare insurer, rose 33 cents to $50.30 and has increased 14 percent this year before today. McKesson slipped 15 cents to $62.69 and was unchanged for the year before today.

Medicare estimates that about 7.8 percent of the $308 billion it spent in fiscal 2009 was “improper,” a term that encompasses non-criminal waste along with fraud. There is no similar estimate for the private market, Saccoccio said, though his group estimates that about 3 percent of national health spending is lost to fraud every year. National health spending totaled about $2.3 trillion in 2008, according to the most recent estimate from the government’s Centers for Medicare and Medicaid Services.

Stopping Fraud

The strike force program has stopped fraud schemes totaling about $1.9 billion and led to charges against more than 800 people, according to Laura Sweeney, a departmental spokeswoman.

The amount of fraud the strike forces have deterred from happening is “far higher but nearly impossible to calculate” said Kirk Ogrosky, a partner at Arnold & Porter LLP in Washington and a former federal prosecutor who began the strike force program in Miami in 2007.

In the strike force’s first year operating in south Florida, Ogrosky said, Medicare observed a $1.2 billion decrease in claims from the area for purchases of home medical equipment, the industry that prosecutors first targeted.

The Obama administration estimates that a budget increase for anti-fraud programs will pay for itself and then some, bringing in $10 billion for the government over a decade.

Miami Vice

Jay Darden, another former federal prosecutor who is now a partner at Patton Boggs LLP in Washington, said that the government should consider intensifying its law enforcement in places like Miami -- a hotbed for health-care fraud -- before expanding to more cities.

“I think there’s 20 cities where Medicare fraud is a problem,” Darden said in a phone interview. “I’m not sure you could say there are 20 cities where Medicare fraud is the size of the problem as it is in Miami and Los Angeles and in the southern district of Texas.”

The southern district includes Houston and McAllen, a town that was the focus of a New Yorker story last year examining differences in Medicare spending across the U.S.

The legislation carrying the extra money for fraud-fighting is stalled in Congress due to a partisan debate over government spending. Senator Tom Harkin, the Iowa Democrat who is chairman of the appropriations subcommittee that wrote the bill, said last week that it is unlikely to become law before the end of the year. The full Senate Appropriations Committee approved the bill last week on an 18-12 vote. The additional cities weren’t identified.

The legislation is S.3686.

With assistance from Alex Nussbaum in New York. Editors: Robert Greene, Ken Sands

To contact the reporter on this story: Alex Wayne in Washington at

To contact the editor responsible for this story: Adriel Bettelheim at

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