Medicare Fraud: The Most Profitable Healthcare Crime in the US

The healthcare system in the United States is pretty complicated, no doubt about it. And with such a complicated system, there are always people trying to find ways around high medical costs. Medicare fraud is one of those ways that people try to scam the system. But just what is Medicare fraud? Let’s take a deeper look to see how it has become the most profitable healthcare crime in the US.


Medicare is the American national health insurance program that provides insurance to the elderly population and occasionally younger people with disabilities. It is administered by the Centers for Medicare and Medicaid Services according to the determinations of the Social Security Administration. There are currently about 60 million people in the United States that receive Medicare. Generally speaking, Medicare often covers up to 50% of the patient’s healthcare costs. The remainder of the costs are often covered by optional private insurance.

Medicare Fraud

Medicare fraud, at its most basic, is the attempt to receive monetary reimbursement from the Medicare program that the patient is not legally entitled to. There are a few different ways that Medicare fraud is enacted. Usually, Medicare fraud involves either doctors or beneficiaries attempting to receive excess or undeserved payment from the program. There are three main types of fraud:

  1. Phantom Billing

Phantom billing is when the medical provider bills Medicare for “phantom” medical procedures or items. In other words, the provider bills the program for medical procedures that never were performed, for medical tests never completed, for unneeded medical equipment or devices, or for equipment that is billed as new when it is actually used. In essence, Medicare is being billed for services that were not rendered.

  1. Patient Billing

Similar to the phantom billing, patient billing occurs when the patient is helping out the medical provider by giving them their Medicare number. This is usually done in exchange for monetary rewards for the patient, based on how much the provider is able to get from Medicare. If asked, the patient tells the Medicare program that they indeed did receive the procedures, equipment, or tests according to the billing.

  1. Upcoding Scheme and Unbundling

When a patient does actually need services like surgery, a medical provider may bill Medicare as if more expensive procedures were completed. Unless the patient checks the details of the statement or is familiar with billing codes and medical language, they may not realize that the bill is inflated. Thus, the facility will receive a larger reimbursement from Medicare.

  1. Other Fraudulent Activity

The above are just the three main types of Medicare fraud, but here are a few other things to look out for that constitute fraud:

  • Someone besides the Medicare cardholder uses that card to claim products, services, or reimbursements. In other words, don’t let anyone else use your Medicare card!
  • The cardholder requests unnecessary medication, services, or products, whether for himself or for another person.
  • A provider offers “free” consultations for Medicare patients, then uses their private information to bill Medicare.
  • Offering free medical equipment or devices in exchange for a patient’s Medicare number.
  • Offering gifts to incentivize potential Medicare patients to use a provider’s services.
  • A provider tells a patient that the more tests are run, the less the patient will pay out of pocket.

The Cost of Medicare Fraud

Unfortunately, Medicare fraud is one of the most costly scams occurring today. Let’s take a look at a few cases that resulted in extremely high costs.

  • In 2010, a group of Armenian gangsters committed a massive Medicare fraud scheme that created $160 million in fake billings. They created 118 “phantom” clinics that used the stolen identities of doctors and patients to create fake billings to Medicare. The case included over 70 defendants in on the scheme. In the end, they had received over $35 million in stolen taxpayer dollars.
  • In another case, nine hospitals were charged with fraudulent billing to the tune of $9.4 million. The billing included unnecessary overnight stays for what were typically outpatient procedures.

Eight nurses worked together to commit a scam in Florida, forging patient files. They said that these patients needed home health care services; these services were neither required nor received by the patients. The cost of this scam was $18.7 million.

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