A report submitted to the Congress has revealed that Medicare lost $60 billion of US taxpayers’ dollars. The report which followed an investigation by the US Government Accountability Office (GAO) states that the money was lost to fraud, abuse, waste and improper payments.

The report has sent shockwaves because of the sheer magnitude of the amounts involved. According to Centers for Medicare and Medicaid Services (CMS) – the federal body which administers Medicare, $60 billion accounts for more than 10 per cent of the total Medicare budget. The fact that it could have been lost is quite baffling.

The largest proportion of the loss came from payments to entities which aren’t medical service providers. The report identified 23,400 addresses which were on Medicare’s list of healthcare service providers. The only problem is that addresses didn’t belong to clinics, hospitals or doctors’ offices. They contained hamburger stands, mailbox shops or even vacant lots.

What isn’t clear from the report is whether the entities were deliberately set-up to defraud the system. There are clear precedents of fraudsters setting up fake practices to cheat government healthcare programs.

A case in point is a fake Florida business uncovered during a 1998 Senate investigation. The business received $6 million in healthcare payments, despite having an address which would have put in right in the middle of the Miami Airport.

However, not all wrong addresses are attempts of fraud. In some cases, it is just a matter of a genuine healthcare provider changing their address, and not notifying CMS within 30 days as is legally required.

The failure of the CMS to distinguish between cases of genuine fraud and lapses in updating addresses is causing some ire. The idea that Medicare can send taxpayers’ money to an address it hasn’t verified seems downright irresponsible.

What makes it worse is that the report claims that for years GAO has been urging CMS to use the US Postal Service to verify addresses. The Postal Service has a computer program which it uses to identify addresses. The program can identify whether an address is a building, an office, or a vacant lot.

Had Medicare used the program, at a minimum, it wouldn’t have sent money to vacant lots and hamburger stands. Why CMS refused to heed GAO’s recommendations is still unclear. Perhaps is just part of a pattern of weaknesses in the agency.

The GAO report stated that it had uncovered “a persistent weakness [in the CMS]… that increased the risk of enrolling entities intent on defrauding the Medicare program.”


The report also identified certain lapses in the physician verification processes at CMS. It found a number of physicians whose licences had been revoked for crimes in one state, but had moved to another state and were still billing Medicare.

Ultimately, the $60 billion Medicare loss seems symptomatic of wider problems at CMS – the agency charged with administering Medicare. A thorough shake-up of the CMS may be required to smoothen things out. Whether or not such a shake-up will take place remains to be seen. And even if it does occur, will the taxpayers’ money be recovered?