Medicare Funds Totaling $60 Billion Improperly Paid, Report Finds

Billions of dollars went wasted, according to the GAO.

— -- They are supposed to be doctor's offices, clinics or hospitals, not hamburger stands, vacant lots and mailbox shops, but that's what some of the 23,400 potentially fake or bad addresses on Medicare's list of health care providers are, according to a report released today to Congress from the U.S. Government Accountability Office (GAO).

The report says that the Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicare, estimates that last year some $60 billion of American taxpayer money, or more than 10 percent of Medicare’s total budget, was lost to fraud, waste, abuse and improper payments.

"This is money that costs the Medicare trust fund real money," Sen. Tom Carper, D-Delaware, who requested GAO look into the issue, told ABC News. "We pay into the Medicare trust fund, those of us who are working, our employers pay into the Medicare trust fund."

The GAO investigation, obtained by ABC News, follows three previous reports by the agency revealing "a persistent weakness ... that increased the risk of enrolling entities intent on defrauding the Medicare program."

In 2013, an Inspector General report found utilizing addresses as “essential for identifying trends in fraud, waste, and abuse because they were the source of the most inaccuracies and inconsistencies.”

The law says to get paid, Medicare doctors have to bill from the actual office where they practice medicine, but the newly released report continued to find issues with address registration among enrolling physicians. "It's not a new problem," Carper said. "In fact about three years ago, we heard about this problem. The General Accountability Office, GAO, brought this problem, this concern, to us in the Congress."

Going even further back, in 1998, a Senate investigation into Medicare fraud found $6 million in payments to a “business” whose fake address would have been smack in the middle of the Miami Airport.

The report released today shows no improvement, but investigators say it is not that hard to fix the problem. ABC News went to one of the locations listed in the report that was on Chicago’s Southside next to a porn shop, with no doctor’s office evident, where Medicare sent nearly $600,000 using an ineligible mailbox shop location as a billing address until 2013.

Congress held a hearing today on the report, with lawmakers demanding once more that taxpayer money isn’t sent to ineligible addresses. The GAO says it has been telling Medicare for years to utilize the United States Postal Service computer program, which can tell Medicare what kind of building is behind the address.

"It's not rocket science," Carper said. "The U.S. Postal Service actually puts out lists that can be purchased by Medicare, lists that say, these are the addresses of pretty much everybody, all the mailing addresses in our country. Medicare can use those to match. We have the ability to work with the postal service to find, is that a real building, is that a real office, or not?"

ABC News went to Capitol Hill to ask the man in charge of billing for Medicare why the program isn't used, two years after members of Congress requested that it be implemented.

“Well, I think we have to be very careful," said Shantanu Agrawal, the deputy administrator and director for the CMS Center for Program Integrity. “So we have for example, a provider that might move from one site to another, who is a legitimate provider, and merely forgot to update their enrollment record.”

By law, a provider must update their record within 30 days of moving. Some of the addresses found by the GAO report had been listed for years. ABC News wanted to ask him more, but his aides rushed him away. A request for a follow-up interview was denied, but CMS did send a statement stating that they are committed to protecting the integrity of the program.

“With help from tools provided by the Affordable Care Act, we have greatly enhanced our ability to screen providers and identify those that may be at risk for committing fraud," the statement said. These screening methods, including unannounced site visits, fingerprinting, and revalidation of all Medicare providers have resulted in billing privileges deactivated for 540,000 provider and supplier locations, and more than 34,000 provider and supplier enrollments revoked, saving Medicare $2.4 billion. But there is more work to do. We will review GAO's report, and develop additional strategies to continue this progress."

CMS added: "Improper payments are not necessarily fraudulent. An improper payment often results from a legitimate service billed by a legitimate provider—the documentation is missing, or the provider made a coding mistake. In fact, 60 percent of the improper payment rate is driven by such documentation issues and not by fraud."

The GAO report also found CMS did not properly check medical licenses for physicians. It found hundreds of physicians who had their licenses revoked for crimes, but not in the state where they were currently billing Medicare. In some cases, doctors who have been convicted of felony health care fraud have been found to have registered their medical licenses in other states and continued to bill Medicare.

Medicare responded to the finding saying they don’t have the authority to cross-check state license revocation or suspension in states where a physician is not set up to bill Medicare.