Medicare Fraud Costs Taxpayers More Than $60 Billion Each Year

March 17, 2010— -- A four month "Nightline" investigation into Medicare fraud makes one thing perfectly clear: this is a crime that pays and pays and pays. The federal government admits that a staggering $60 billion is stolen from tax payers through Medicare scams every year. Some experts believe the number is more than twice that.

Fraudulent pharmacies, clinics and medical supply companies seem to pop up like mushrooms in South Florida, the area widely considered to be ground zero in the fight against a crime that requires little training and involves few risks.

Former car mechanics and drug dealers, bus boys and clerks can be involved in individual scams, taking tens of millions of dollars every year from the government program designed to provide health care to the nation's elderly. As one government official told "Nightline," having a Medicare license is having a license to steal.

The victims of the schemes? American taxpayers.

Federal agents Brian Piper and Omar Peres of the Office of Inspector General are part of a special strike force in South Florida on the trail of some of the most elusive and richest criminals in the U.S.

We rode along with them over two days recently, as they ran down tips and knocked on doors in pursuit of people defrauding Medicare.

Our first stop with Piper and Peres is a place that is registered as a pharmacy that Medicare has paid $1 million to in two months. When they arrive, there is nobody there. The shelves are nearly bare. The chances are that it never sold so much as an aspirin.

It looks to be what the agents say is a typical scam: a fraudster buys a pharmacy along with its Medicare license and entire patient database. This one was sold five months ago for just $45,000.

"They've left the patient records for all of the Medicare beneficiaries that they were billing. So if these records had been thrown in the trash, they could be found by anyone," said Piper.

Piper and Peres have often seen the scam before.

"This is actually someone's name, Medicare number, address, phone number, and this person may not even know that they were being billed yet," Piper noted.

The scheme is relatively low-risk and requires little investment. Investigators allege that one person at a computer terminal could have submitted the million dollars worth of claims this pharmacy sent to Medicare in two months, before shuttering the place and disappearing.

"You don't have to hire anyone," said Piper. "If you buy an existing company like has happened here, one person can come in at night -- midnight -- submit all the claims and you never even have to open the business."

It's that easy because Medicare is based on trust. When the program was introduced in the 1960s it was assumed that no one would try to defraud a system designed to take care of the health needs of the elderly. The government was required to reimburse vendors in less than 30 days. To this day, in 99.9 percent of the cases, Medicare "auto-adjudicates" claims within 30 days. In other words, the computer decides if the right codes are in the right boxes. If they are, jackpot, the checks are sent.

"That means that if you check the right boxes and fill out the right forms, you're going to get paid," said Kirk Ogrosky, who until recently was the federal prosecutor in charge of all criminal Medicare fraud at the Department of Justice.

Ogrosky said criminals' forms are often filled out more completely than actual health care providers'.

"Real hospitals and doctors who are struggling every day to keep up with the paperwork sometimes miss things ...whereas if you are a criminal trying to steal, all the forms look perfect every time because the whole goal of the enterprise is to check the right boxes," he said.