Taxpayers Funding the 'Good Life' for Criminals

May 6, 2009— -- "It's faster and easier than selling drugs."

Those are the words of a convict, once a Miami drug dealer, who left the street life to participate in a scheme to make even bigger money: Medicare fraud.

And it worked. In seven years, he estimates he made about $8 million.

"Ferrari, Porsche, Lamborghini, exotic cars -- had a nice, I lived a good life," said the man, who is now serving time in a federal prison for his crimes. The FBI requested that ABC News not use his name or share the details of his case because he is a cooperating witness for the government.

But that good life, paid for with money stolen from Medicare, came at a cost to taxpayers.

"We would make anywhere between a million to $2 million in a short time frame, maybe two, three months," he said.

The scam was simple. He set up phony businesses and billed Medicare for millions of dollars in medical equipment he never sold. His scam was just one example of the many fraudulent schemes criminals have used to bilk Medicare of taxpayer money.

The National Health Care Anti-Fraud Association, a public-private partnership dedicated to fighting such crimes, says that fraudsters are able to take down an estimated $68 billion a year, and the group says that estimate is a conservative one.

ABC News traveled to south Florida, where bogus companies in three counties in that part of the state have taken in more than $1.5 billion in the last three years -- and that figure includes only those operations caught by law enforcement.

Federal agents recently carried out Operation "Wack-A-Mole," in which they made unannounced visits to the 1,581 durable medical equipment businesses in the area. They found that a third of them -- 491 -- were phony, even though they were billing the government.

"My friends were doing it," the informant said. "And I was growing pot at the time and they said, 'stop what you are doing and this is faster money and easier money.'"

Medicare Fraud: 'The Risk Might Be Worth the Reward' for Criminals

Timothy Donovan, the assistant special agent in charge of the FBI's Miami field office, explained that the sentencing guidelines for white collar crime historically have not been as strict or as severe as other crimes, such as drug trafficking. "The risk might be worth the reward" for some criminals, he said.

"We saw a number of people that were making money, certainly back in the '70s and '80s, involved in drug trafficking," Donovan said. "We've seen sort of a shift toward white collar crimes, a shift toward health care fraud."

During a ride along with the FBI, ABC News got to see firsthand what authorities say is a stunning level of fraud.

"Well, the reason we're here today is because in the month of March, they billed over a million dollars for durable medical equipment," FBI special agent Brian Waterman said as he approached one business.

But the agents say all signs indicate that the company is a fraud.

After attempting to call the phone number on the office door, agents discovered that the line is no longer associated with the business. And neighbors across the street tell them that they haven't seen anyone at the office in several months.

Of five medical equipment companies visited, four showed no signs of being in business, even though agents said they were taking in millions of Medicare dollars.

"This is the easy part," said Waterman, noting that one office building didn't even have a door handle. "Fraud here is easy to find."

Looking through the window and mail slot on the door, the agents noted that there was no equipment inside the building, just a group of stacked boxes and some mail on the floor.

But the company still managed to bill Medicare $158,000 in the month of March, according to the FBI.

At another address, agents found an empty office space not much bigger than a typical walk-in closet. The FBI said that company billed $400,000 in March, and more than $1.1 million total.

Waterman pointed out that the company purported to sell durable medical goods, but the office wasn't big enough to store any of the wheelchairs, ventilators or other supplies a legitimate business would have on hand.

Medicare's 'Honor System' Up Against Fraudsters

"I think you'll find it's easy," special agent in charge Christopher Dennis said of the alleged fraud schemes, "because Medicare is set up on rules and regulations that were set up decades ago. We're trying to govern, detect and prevent fraud with a system that was established many years ago, in 2009."

Dennis works out of the Department of Health and Human Services' internal watchdog body, the Office of the Inspector General. That office has released numerous reports documenting suspected health care fraud in south Florida.

Medicare "was originally set up on the honor system," Dennis said. "And, of course, here in south Florida, we're finding that the perpetrators are not all that honest."

One phony company prosecuted in south Florida got the Medicare ID numbers of 200 people and billed the government 200 times for the use of the same motorized wheelchair -- at a cost of $1 million.

"They're called wheelchair parties," said Alex Acosta, the U.S. attorney for the southern district of Florida. And with some of the chairs costing up to $20,000, he said there's money to be made.

"It's the same wheelchair over and over… a million dollar wheelchair. It's billed again and again and again, never given to a patient," Acosta explained. "The patients don't need it. It's all fraud."

Acosta showed ABC News the wheelchair used as evidence in the case. It's stored in a warehouse, along with the boxes and boxes of case files for that and other health care fraud cases.

In some cases, even patients are part of the scam. One undercover video provided by the FBI shows a staff member at an HIV clinic paying a patient a $250 bribe to keep quiet.

The clinic then billed Medicare $12,000 for services never rendered, one of many fraudulent claims totaling more than $2 million. Federal prosecutors won convictions against the owners of that clinic and a physician who worked there.

"The level of Medicare fraud down here is utterly disgusting," said Acosta.

"It is an epidemic down here, but I think it's important, too, to say, it's not just in south Florida," he added. "It is across the nation, and it is disgusting and it really needs to stop."

It's 'Too Easy to Steal from the Government'

But as long as criminals believe these types of scams are easy, they're unlikely to stop, the FBI informant said.

"It is too easy to steal from the government ... it's too easy to steal the money, and everyone is just going for the easy money," he said.

Your money, stolen by the millions, every day.