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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

March 23, 2000


Contact: Kathryn Serkes (202) 333-3855



Medicare fraud enforcement doesn't work, can't work and will never eliminate the billions paid for sham claims because the system is designed for fraud. Further, patients are hurt by overzealous enforcement.

That's the conclusion of a report, "MEDICARE: A SYSTEM DESIGNED FOR FRAUD," released today by the Association of American Physicians and Surgeons (AAPS). AAPS outlines its proposal to eliminate any possibility of fraudulent billings by unscrupulous providers by abolishing assignment of benefits (third-party payment) to providers. Instead, patients should be reimbursed directly, then pay providers for valid bills.

"Willie Sutton robbed banks because that's where the money is. Today, government-run Medicare is the modern-day target for the new Willie Suttons. The system is ripe for plunder, as the government signs the equivalent of blank checks to crooks who have figured out how to bilk the system," states the report.

HHS estimates the 1999 "error" rate of payments at almost 8%, amounting to approximately $13.5 billion in "improper" payments, with up to 70% for "medically unnecessary" services, such as claims for dead patients or OB-GYN services for men.

"The reason that Medicare is such an attractive target is that the money is easy and the risk of detection is still low. Simply, the system is ripe for plunder by design."

The report details how current enforcement creates more problems than it solves:

  • The terrifying use of over zealous prosecution has resulted in an atmosphere of fear and intimidation for physicians who treat Medicare patients. (Last month, AAPS released a survey which shows fewer physicians are willing to treat Medicare patients and restrict services they fear might be questioned.)
  • uption in the system protects the most egregious offenders;
  • system of using "bounties" has lead to outrageous abuse of power by government agents;
The HHS Inspector General admits 98% of doctors are honest, and the bulk of fraud is committed by big-time criminals who are out to bilk the system.

In contrast to credit card fraud, Medicare fraud is "non-self-revealing." With credit cards, the customer receives a clearly itemized statement, then pays the bill with his own funds. If he finds a discrepancy, it is in his financial self-interest to protest the charge. But in Medicare, the "customer" (patient) never sees the bill before it is paid by the government.

If HHS would make all reimbursements directly to Medicare beneficiaries rather than to providers, the risk of detection would be enhanced by making health-care fraud more likely to be "self-revealing." This would eliminate the potential for fraudulent billing for dead patients or for services which have not been provided--scams which have been proven to bilk the taxpayers of billions of dollars.

"The assignment of benefits makes it possible for multi-million dollar scams to operate by billing for fictitious services or for services of minimal value to the recipient, such as unnecessary laboratory tests."

The report concludes:

"If the U.S. government continues to harass the best and most honest physicians, only the most mediocre and less scrupulous providers will be left to care for our seniors. Patients will be the ones to suffer...

"If we want to stop the Willie Suttons from robbing the bank, we must stop giving them a blank check. Removing the incentive will work much better than retroactive enforcement. It will also preserve the rights of the innocent patients and physicians, and reduce the cost of medical care."