Dummy Firms Squeeze Millions From Medicare

Fraudsters using complicated networks of ghost companies are sucking hundreds of millions of dollars out of Medicare every year and it's a bit like taking candy from a baby, a Reuters investigation finds. The probe—which officials say will likely lead to a criminal investigation of the firms involved—found that the "companies" of many Medicare providers are registered to nonexistent addresses, or the addresses of abandoned buildings. The thieves use stolen doctor and patient data to bill Medicare for as much money as possible in a short time.

Last year, one gang alone used phantom firms to bilk Medicare of $163 million. Incorporation laws vary from state to state, and often make it easy to set up fake companies, say investigators, who compare stopping the constant stream of scams to playing "whack-a-mole." Part of the problem, investigators say, is that Medicare lacks the resources to review the addresses and backgrounds of providers, leading to a system in which Medicare pays first and asks questions later. But Medicare may soon be able to get ahead of the scams: Health care reform includes $350 million over a decade for anti-fraud measures, and new screening procedures will be introduced next month. (More Medicare stories.)