Medicare Fraud 101 – by Jim Stueck

With more than 39 years in the insurance industry I’ve seen many changes in health care from providers, consumers and regulatory commissions. Even in my personal life I’ve had many occasions to work within the Medicare system. Both of my grandmothers were on Medicare when I began taking care of them in the 1970’s. I discovered early on that working with Medicare is no easy task as a consumer or insurance broker.

Since its inception in the early 1970’s, continuous changes to the rules regarding Medicare and what is covered makes tracking extremely difficult for both Medicare administrators and healthcare providers alike. The complexity of the Medicare system and the insurance industry in general makes it easy prey for unscrupulous healthcare providers.

This month it was reported by Insurance Broadcasting that a Miami businessman was sentenced to 50 years in prison for masterminding a healthcare fraud scheme that sought to bilk the U.S. Government (Medicare) out of $205 million. The Miami man was convicted for billing Medicare millions of dollars in false claims over an 8 year period for mental health services that were either unnecessary or never provided to his elderly or disabled patients.

It goes without saying; most healthcare professionals are honest and trustworthy and would never consider fraudulent billing. Medicare fraud, however, is fairly common. Why, or maybe a better question is; how does this happen? The answer is long and convoluted. The simple answer is: Medicare rules are so complicated and hard to understand for administrators and patients alike. The complexity of the system is a breeding ground for those who wish to take advantage of patients, doctors and insurance providers.

Medicare fraud is often difficult to spot. Some of the most common methods are:
1.    Over billing for services. This can be achieved by altering the claim. For example; a medical bill can be altered by simply placing an additional number in front of the amount charged. Or, the name on the form can be changed from a non-covered family member to covered family member.
2.    Added services.  Services never rendered are simply added to the invoice. For example; using dates of an actual medical exam the provider may add a series of x-rays to the examination.
3.    Code manipulation is fairly common problem for insurance providers. Each service provided is identified by the American Medical Association’s accepted coding system called the Physician’s Current Procedural Terminology (CPT). Medicare has developed fee schedules that use CPT codes and their descriptions as a basis for paying health care providers.
However, because the coding system has become so complicated, insurers often find it difficult to classify procedures and services rendered. This complex system makes it easy for codes to be modified to include a higher cost procedure than one that is actually provided.
4.    Upcoding. Upcoding is billing for a higher level of service than was rendered. One common form of upcoding involves generic substitution – filling a prescription with a less expensive drug, while billing for the more expensive form of the drug.

Adding to the reasons for potential fraud, payment to health care providers from Medicare has been has been greatly reduced over years in what Medicare considers to be an effort to reduce “waste” and overbilling. This often makes it nearly impossible for doctors and other healthcare professionals to collect on the full amount for service rendered on invoices to insurance providers. This may cause otherwise honest providers to make fraudulent modifications to the invoices provided to Medicare or other insurance providers just to cover their costs.

What can you do to help stop Medicare Fraud? Here are 5 steps that you can take.
1.    Make sure you keep dates of when you saw the doctor or had any procedure. You might see multiple charges and if you doubt them you should question the doctor’s office about those charges. Make sure the charges are for what you saw the doctor for.
2.    If you go into the hospital make sure you check the admission date and discharge dates. Make sure they are listed on the statement correctly and that there are not additional dates listed that you were not in the hospital. When my grandmother was in the hospital they had entered dates when she was not in the hospital.
3.    If you are caring for someone that is on Medicare, make sure that you check the statements and question what is being charged. If you do not recognize the charges or the procedures call and ask the provider.
4.    If a procedure is requested make sure that it actually is done and acurately billed.
5.    Protect your Medicare number and never give it out for free services or products. Your Medicare number is to be protected at all times and only give it to those who you know. Medicare never calls and asks for personal information.

Medicare fraud costs the country and all taxpayers over $48 billion dollars each year and recent studies show that it is increasing. This loss causes the premiums we pay for Medicare coverage to go up. The fraud also can reduce the money that is available to pay for other necessary treatments or care.

To further assist the public to report fraud the Office of the Inspector General maintains a hotline which offers a confidential means for reporting suspected fraud. The Hotline can be contacted at:

Phone: 1-800-447-8477

Jim Stueck is the President of J.D. Stueck & Comapny. He is licensed insurance agent providing insurance services to corporations, small businesses, and individuals.
Call: (805) 443-6432 or e-mail:

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