Medicare Fraud: "They would pay first and send an auditor later. "

Proponents of the "public option" like to point to MediCare. It ain't the panacea they say, as 60 Minutes reported:

President Obama says rising costs are driving huge federal budget deficits that imperil our future, and that there is enough waste and fraud in the system to pay for health care reform if it was eliminated.

At the center of both issues is Medicare, the government insurance program that provides health care to 46 million elderly and disabled Americans. But it also provides a rich and steady income stream for criminals who are constantly finding new ways to steal a sizable chunk of the half trillion dollars that are paid out each year in Medicare benefits.

In fact, Medicare fraud - estimated now to total about $60 billion a year - has become one of, if not the most profitable, crimes in America.

An example:

Once criminals like Tony get their hands on usable patient numbers, they try and charge Medicare for the most expensive equipment possible, which requires having access to a list of Medicare codes.

Asked what some of the best codes were, Tony told Kroft, "Artificial limbs, electric arms, electric wheelchairs. I mean, a regular patient, you can put them on two artificial legs and an artificial arm and they'll pay for it."

And that's what happened to former Federal Judge Ed Davis. He was one of those patients who started getting charges on his Medicare statement for artificial limbs.

"And I looked at it and it had charges for prosthesis. And I knew I had my arms," Judge Davis explained.

Though he has two healthy arms, his statement showed Medicare had been billed for a left and a right arm.

"Didn't anybody in Medicare check to see if any of these charges were valid?" Kroft asked Tony.

"Sometimes they'll do it. But by the time they did it, it was too late," Tony said. "We've already made $300,000, $400,000, $500,000 on it. And then we will never send 'em nothing back. And then at 30 days they'll send an inspector to your office. And by that time…it's all closed down."

They would pay first and send an auditor later.

How could this happen?

Kim Brandt, Medicare's director of program integrity...[said] "Well, it really does come down to the size and scope of the Medicare program, and the resources that are dedicated to oversight and anti fraud work. One of our biggest challenges has been that we have a program that pays out over a billion claims a year, over $430 billion, and our oversight budget has been extremely limited," Brandt said.

About that there is little dispute: Medicare has just three field inspectors in all of South Florida to check up on thousands of questionable medical equipment companies.

"Clearly more auditing needs to be done and it needs to be done in real time," Attorney General Eric Holder said.

Asked why it has taken Medicare so long to figure out they were being scammed, Holder told Kroft, "I think lack of resources probably. And then I think people I don't think necessarily thought that something as well intentioned as Medicare and Medicaid would necessarily attract fraudsters. But I think we have to understand that it certainly has." {emphasis added}

That statement by Holder is about as naive as it gets.