2018Let the Crime Spree Begin’: How Fraud Flourishes in Medicare’s Drug Plan

by Tracy Weber and Charles Ornstein ProPublica, Dec. 19, 2013, 10:57 p.m.

This story was co-produced with NPR. Tune into Morning Edition Friday morning for more on this story.

With just a handful of prescriptions to his name, psychiatrist Ernest Bagner III was barely a blip in Medicare’s vast drug program in 2009.

But the next year he began churning them out at a furious rate. Not just the psych drugs expected in his specialty, but expensive pills for asthma and high cholesterol, heartburn and blood clots.

By the end of 2010, Medicare had paid $3.8 million for Bagner’s drugs 2014 one of the highest tallies in the country. His prescriptions cost the program another $2.6 million the following year, records analyzed by ProPublica show.

Bagner, 46, says there’s just one problem with this accounting: The prescriptions aren’t his. “All of that stuff you have is false,” he said.

By his telling, someone stole his identity while he worked at a strip-mall clinic in Hollywood, Calif., then forged his signature on prescriptions for hundreds of Medicare patients he’d never seen. Whoever did it, he’s been told, likely pilfered those drugs and resold them.

“These people make more money off my name than I do,” said Bagner, who now works as a disability evaluator and says he no longer prescribes medications.

Today, credit card companies routinely scan their records for fraud, flagging or blocking suspicious charges as they happen. Yet Medicare’s massive drug program has a process so convoluted and poorly managed that fraud flourishes, giving rise to elaborate schemes that quickly siphon away millions of dollars.

Frustrated investigators for law enforcement, insurers and pharmacy chains say they don’t see evidence that Medicare officials are doing much to stop it.

“It’s kind of a black hole,” said Alanna Lavelle, director of investigations for WellPoint Inc., which provides drug coverage to about 1.4 million people in the program, known as Part D.

Lavelle said her team routinely refers doctors and pharmacies to the contractor Medicare hires to pursue fraud.  “Oftentimes we never hear back, positive or negative.”

Since it started in 2006, Part D has been lauded for its success in getting needed medications to more than 36 million seniors and disabled enrollees.

But over the past year, ProPublica has detailed how Part D is beset by weak oversight.  Medicare doesn’t analyze its prescribing data to root out doctors whose inappropriate drug choices endanger patients. Nor has it flagged those whose unchecked devotion to name-brand drugs, instead of generics, adds billions in needless expense.

For this story, ProPublica again scrutinized Medicare’s data, this time to identify scores of doctors whose prescription patterns bore the hallmarks of fraud. The cost of their prescribing spiked dramatically from one year to the next 2014 in some cases by millions of dollars 2014 as they chose brand-name drugs that scammers can easily resell.

Sometimes the doctors claimed they were unwitting victims of identity theft. In other cases they were paid for writing bogus or inappropriate prescriptions.

A reporter initially contacted Bagner to ask about the high cost of his prescribing, then learned that his flood of prescriptions had already drawn the attention of law enforcement, the fraud units of at least two insurers and Medicare’s fraud contractor by as early as mid-2010.

All these entities knew that Bagner claimed his identity had been stolen, documents and interviews show. Some of the investigators suspected he was not being wholly truthful about his involvement. Still, Medicare never blocked his national provider ID, which is used to fill prescriptions, Bagner said. The same was true with other physicians ProPublica identified.

The Centers for Medicare and Medicaid Services, which runs Part D, declined to make an official available for comment and would not answer specific questions. Instead, a spokesman sent a brief statement saying the agency “actively works to detect and prevent provider fraud” and refers cases to law enforcement if appropriate.

Law enforcement investigators and insurers say a marked increase in tips, complaints and cases suggests that Part D fraud is rising, but because pursuit of it is scattershot, gauging the extent is impossible.

Criminals are “coming up with new schemes, and drugs that are being diverted every day,” said Michael Cohen, an investigator with the inspector general of the Department of Health and Human Services (HHS).

Bagner’s case and others like it show how fast a single doctor can be used to run up a staggering tab.

Part D is vulnerable because it requires insurance companies to pay for prescriptions issued by any licensed prescriber and filled by any willing pharmacy within 14 days. Insurers generally must cover even suspicious claims before investigating, an approach called “pay and chase.” By comparison, these same insurers have more time to review questionable medication claims for patients in their non-Medicare plans.

Fraud rings use an ever-evolving variety of schemes to plunder the program.

In one of the most popular, elderly, broke, disgraced or foreign-trained doctors are recruited for jobs at small clinics. Their provider IDs are used to write thousands of Medicare prescriptions for patients whose identities also may have been bought or stolen. Once dispensed, the drugs are then resold, sometimes with new labels, to pharmacies or drug wholesalers.

In other schemes, investigators say, pharmacies are active participants, billing Medicare multiple times for prescriptions they never fill.

Doctors can readily disavow the prescriptions as forged, investigators say. And because the schemes don’t always involve painkillers, a law enforcement focus, they can escape notice.

Stymied by Medicare’s inaction, the task of pursuing such cases sometimes falls to local agencies such as Los Angeles County’s Health Authority Law Enforcement Task Force.

Sheriff’s Sgt. Steve Opferman, who heads that task force, said he doesn’t understand why Medicare does not make fraud more of a priority. Part D is “icing on the cake” for crooks, he said.

“Why is the government so reluctant to stop this?” he asked.

2018A Deal With the Devil’

In September 2006, federal officials called a meeting in Los Angeles to brief law enforcement on Medicare’s freshly launched prescription drug program.

When it was over, Opferman announced to a colleague:  “Let the crime spree begin.”

Sure enough, Opferman said, it did.

From a beat-up office in a county building in downtown Los Angeles, his team now spends about half its time chasing down Part D scams in one of the country’s Medicare fraud hot spots.

Opferman has the pony tail, tattoos and scruffiness that go with working undercover and an impressive ability to recall the intricacies of dozens of such scams. He said it didn’t take long for local organized crime rings to suss out Part D’s weaknesses.

The scams he works are usually tied to Armenian organized crime rings. They depend, in large part, on a steady supply of doctors who are either oblivious or corrupt enough to look the other way.

“These people aren’t very bright,” Opferman said. “They’ve made a deal with the devil.”

Some doctors get hooked in after answering Craigslist ads seeking “Medical Director for clinic.”  One doctor who did so got suspicious, but by the time she backed out, prescriptions already were being billed in her name, one of Opferman’s team members recalled.

In some cases, Opferman and others say, the doctors are paid a flat fee to review a small percentage of patient charts once a week,

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