Covering Medicare Fraud:”The New Cocaine Cowboys”


“We have to be out there as the protectors, exposing problems, fixing things, and improving lives. It's not enough to cover, we have to uncover?and hold the powerful accountable.”

–Adrienne Roark, former news director, WFOR-CBS4 Miami

In 2009, CBS “60 Minutes” partnered with WFOR-CBS4, the CBS-owned & operated television station in Miami, for a joint investigation of Medicare fraud, which federal authorities claim costs U.S. taxpayers $60 billion a year.

The first report, the result of five months of research by WFOR-CBS4 reporter Stephen Stock was aired on October 26, 2009. A “60 Minutes” segment, which was based in part on Stock's research, aired one day earlier on October 25, 2009.

It unearthed some key facts:

South Florida is not only a hub of the national problem; it is a business “incubator” for similar fraud elsewhere.

Stock discovered that Miami-Dade County is responsible for a massive share of the nation's Medicare fraud. Federal sources told him that clinics in the county billed Medicare over $1.5 billion for fraudulent HIV-infusion treatments just in the first eight months of 2009.

In December 2009, the Office of Inspector General for the U.S. Department of Health and Human Services released a report that confirmed Miami-Dade County's unusually large role in Medicare fraud. Studying Medicare claims, they found that the area had far too many statistical anomalies, which they refer to as “outliers.”

According to the report, Miami-Dade County accounted for 52 percent of the approximately $1 billion in outlier Medicare payments for home health services across the nation, while just two percent of all Medicare beneficiaries receiving home health services reside in the county. (Home health services can be defined as services provided in the individual’s home including nursing, physical, occupational or speech therapy and those involving medical appliances.)

“South Florida is ground zero [for Medicare fraud],” Health and Human Services special agent Omar Perez added in an on-camera interview. “It's where [fraud] is developed, where it's tested; and once it's proven, it's shipped out to other parts of the country.”

It's easy to get in the business.

The first WFOR-CBS4 report captured how easy it was to start a phony Medicare operation, in an interview with Miami-based FBI Special Agent Brian Waterman:

“I'm talking about renting some space, ten feet by ten feet; you buy a couple of cabinets and a couple of shelves, a desk, maybe a computer, maybe not – get yourself an occupational license, you apply to Medicare, and you get a couple of other documents and you're in business.”.

Former drug traffickers are among the principal players.

According to Waterman, a large number of Miami-Dade County drug traffickers have figured out that there's more money to be made with Medicare fraud, less chance of getting caught, and fewer penalties if they do.

The fact that former drug dealers have switched to committing Medicare fraud was something Stock felt would intrigue viewers. The station decided to call one of the first installments in the series, “The New Cocaine Cowboys,” to reflect this interesting element of the story.

How the story got to air

Stock and “60 Minutes” producer Ira Rosen have known each other for years. So when Rosen approached him about working on this story, he was immediately interested.

Though several news outlets, including the Miami Herald, had reported on South Florida's problem with Medicare fraud, the debate over health care and its tremendous costs added urgency to the issue.

Rosen shared U.S. Justice Department contacts and the “60 Minutes” clout to get federal government cooperation at times, but Stock thinks the Medicare fraud story can be told, even without help from the big guns at a network news program.

He points to the fact that he did much of the legwork on the series himself.

“I did a lot of records-searching with the Florida Division of Corporations,” Stock said. The division provides a statewide registry and information resource for almost all business activity in Florida. Every state has something similar and one online source for links to your own state's registries can be found at,

When looking at state records, Stock said, “I started to identify red flags. For example, durable medical equipment (DME) providers would appear out of nowhere and then disappear.”

Stock wanted to know more about the fraudulent practices. How could someone open up shop, file false claims and then close down before getting caught?

Stock and his news director, Adrienne Roark, now at KTVT/KTXA-TV in Ft. Worth/Dallas, Tex., decided undercover video could effectively answer that question. The station uses hidden cameras only as a last resort, when it believes there is no other way to get information that tells the story and provides evidence. “We figured it would drive home how big a problem (Medicare fraud) is if we could actually show it,” Roark said.

Stock and Roark brought their plan to the corporate attorney and station management, who in turn discussed the situation with local officials from the FBI and the joint Department of Justice-Health & Human Services Medicare Fraud Strike Force (DOJ-HHS), which has been operating in Miami since March 2007.

According to its website (, the task force is a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing. In May 2010, Strike Force teams were operating in seven cities in the United States: Miami, Los Angeles, Detroit, Houston, Brooklyn, Tampa and Baton Rouge.

CBS 4 was seeking assurances that no one from the station would be arrested or forced to surrender the undercover video. With that understanding, the station moved forward with the coverage plan.

Stock's initial research established that legitimate Medicare patients are the first targets of the scammers. Armed with names of patients and their Medicare numbers, fraudulent businesses will bill Medicare for services the patient either does not need or never receives—sometimes with the patients' collaboration.

The CBS-4 I-Team visited dozens of clinics with a hidden camera to gather evidence. In one instance, the office manager offered to pay a station employee for a list of Medicare names. To avoid charges of entrapment, the station employee simply told the office manager he had a list of names, but did not offer to sell them.

At least twice, the station recorded the manager on camera, offering to pay patients directly. Scenarios similar to the one recorded below played out in a number of clinics.

“I'll give you a thousand,” said an office manager.

“A thousand?” the patient with the undercover camera asks.

“Yeah. One thousand,” said the office manager.

The FBI also connected Stock with two undercover informants, both of them patients who were caught committing Medicare fraud before agreeing to work for the FBI. The station talked with the informants on camera, but agreed to protect their identities by airing their interviews in silhouette and altering their voices.

One of the informants, HIV-positive for years, recounted how he had received payments from medical clinics all over Miami, just for signing his name. He received neither treatment nor medicine, but was able to earn a tidy income.

“We averaged about $700 to $900 a day every Monday, Wednesday, Friday,” the patient said. The clinics themselves would receive at least that much from each fake patient they enlisted.

Another described how he had once worked as a “providore” – a term used in Florida's Medicare fraud community to describe a recruiter who drove Medicare patients around in a van to various clinics. The patients would then help the clinics defraud the government in exchange for some quick cash.

The I-Team concluded that much of the fraud is in effect enabled, ironically, by federal mandates built into the system, such as the requirement that Medicare payments must be processed speedily.

“….many of the medical supply storefronts stay open only long enough to get a Medicare number. Investigators say once the storefronts get the Medicare billing number, they then start billing the federal government without delivering anything. They close up shop and keep billing by mail, making the storefronts nearly impossible to catch.

By law, Medicare must pay out money for the bills within 15 to 30 days of the claims being filed. By the time the FBI or even some Medicare patients notice, it's too late, the money has already been paid and the storefront operations have moved on.

In fact, the CBS4 I-Team visited seven different medical clinics federal investigators were closing in on but found them closed. Many of these supposed clinics were located off the beaten path in warehouses or hidden office complexes.

One supposed medical supply company even operated out of a storage facility. Health and Human Services special agent Omar Perez told Stock that fraudulent operators sometimes rent a facility and enough equipment to look legitimate. But, he added, it's all a façade:

“The notion of having a storefront really doesn't exist anymore, You don't need it. You set up shop and Medicare comes out and they inspect you, get your provider number and then [you] close shop [and submit bills].”

An important part of Stock's reporting was an investigation into how the federal government handled fraud complaints and prosecuted offenders.

He found some of his sources just by checking letters to the editor in the Miami Herald. Medicare recipient Roger Shatanof, a former Miami-Dade school administrator, for instance, complained about the lackadaisical response he received when he tried to report fraudulent charges he found on his Medicare statement.

“We never needed a wheelchair for my wife, we never needed an inhaler. We never needed the medicines they had down.”

But when Shatanof called the federal government's Medicare fraud hotline (1-800-HHS-TIPS), he was put on hold for more than two hours. He finally gave up.

Even when a fraudulent operator was caught, the punishment was relatively light. According to Perez:

“The penalties that these perpetrators receive for committing these [Medicare] crimes are usually much less [than for drug crimes]. If you defraud the government for one million dollars, the time in jail would be much less that if you were caught with a couple grams of cocaine.”

Impact of the Story

Stock said a lot has happened since the first story aired. “We were overwhelmed, and continue to be, with people calling and sharing their experience,” Stock said. “They're angry.”

The reaction spurred the WFOR-CBS4 team into continuing their investigation. By March 2010, Stock had reported a series of seven stories on the issue—with no plans to stop.

Subsequent reports focused on a federal crackdown on Medicare scams that involved setting up fraud task forces in Tampa, Brooklyn and Baton Rouge, in addition to the special teams already in place in South Florida, Detroit, Los Angeles and Houston.

Other stories were prompted by tips from viewers, including a piece on a push by the American Orthotic and Prosthetic Association to get Congress to pass a House bill that would require Medicare pay only prosthetic or medical equipment suppliers that are specially licensed by the states.

Stock also reported on a state-run program called Florida Senior Medicare Patrol, which is a volunteer group that raises awareness of Medicare fraud and trains seniors in how to identify scams.

He also reported on a local inventor who was pitching the federal government on the use of biometrics to curtail Medicare fraud. It's the same technology Disney World has been using since 1995. Visitors have their fingerprints scanned to ensure only one person uses each annual pass or ticket.

In terms of local impact, Representatives Ron Klein, D-Boca Raton, who was featured in one of Stocks stories, and Ileana Ros-Lehtinen, R-Miami, have recently sponsored bi-partisan legislation to curb Medicare fraud.

Under the Ros-Lehtinen/Klein legislation, penalties for filing a false Medicare claim would increase from one to two years in prison and would double from five to 10 years for paying kickbacks.

In addition, the legislation would create a new offense for illegally selling a Medicare operator’s license or a beneficiary’s ID for healthcare services. The penalty for those convicted is as much as three years in prison.

The bill also calls for criminal background checks on all Medicare providers, including finger-printing, and random site visits to high-risk Medicare operators.

It also requires the Department of Health and Human Services to supply real-time claims and payment data to law enforcement, such as the FBI, to fight fraud immediately.

Lastly, the bill would fund an HHS pilot program for biometric technology to ensure that Medicare beneficiaries are physically present at doctor’s offices, clinics and other sites to receive services covered by the government program.

Lessons for reporting

Stock feels strongly that more reporters could be tackling the Medicare fraud issue. “Medicare was meant to work on the honor system in the 1960s,” he said. “No one envisioned the massive fraud.”

The techniques, he added, are available to print and broadcast journalists working in any state.

“Wherever you are, my first call would be to Roberta Baskin at the Inspector General's office in Washington's Health and Human Services,” Stock said. “The feds want this story out. If every market in the country would do this story they would be happy.”

Stock said Baskin can put reporters in touch with local offices and agents, but he also encourages reporters to “do the dirty work.”

“Read letters to editor; when (people that sound like) cranks call, listen to them,” Stock said. “If they say they're being billed for something they never received, go look at the bill. We hung out at senior centers – especially poor senior centers where the temptation is great. We talked to people who work with seniors to see what they had heard.”

The federal government has already identified the cities of Miami, Los Angeles, Detroit, Houston, Brooklyn, Tampa and Baton Rouge as hotspots for Medicare fraud. And on the HHS-DOJ “STOP Medicare Fraud” website (, you can search state-by-state for fraudulent activity occurring in your area.

Stock said that once you do your first story, the information you need for follow-ups will start coming to you. For example, he found that some in the medical insurance industry were eager to talk about the issue and he found them a valuable resource.

Needless to say, support from news directors who understand the scope and implications the story is key. CBS-4 TV news director Roar concedes that with the economic crunch facing the news industry, few television stations are investing in in-depth reporting. But “we're growing our investigative unit,” she said. “We have to be out there as the protectors, exposing problems, fixing things and improving lives. It's not enough to cover, we have to uncover — and hold the powerful accountable.”

Roark says exposing the problem was a first step. But the next phase of coverage is asking who can fix the problem.

“TV gets criticized for doing one story and then never following up,” she said. “We can't just do one-hit wonders. We can't change things that way—it often takes 5 to 10 stories before the public knows what's going on; we have to stay on it.”

ED NOTE: This report, along with other case studies, was made possible through a generous grant from the Harry Frank Guggenheim Foundation.

Useful Resources and Links


WFOR – CBS 4 Reports

I-Team Uncovers Billions Lost to Medicare Fraud

I-Team: Medicare Fraud, The New Cocaine Cowboys

I-Team: Biometrics May Fix Medicare Fraud Problem

I-Team: Congress Trying To Act on Medicare Fraud

I-Team: Feds Find Medicare Fraud Rampant in SOFLA

I-Team: Feds Crackdown On Medicare Fraud In Miami

I-Team: Seniors Beginning to Patrol Medicare Fraud

I-Team: Medicare Fraud Law Changes Proposed



“Miami Serves As Model In Medicare Fraud Crackdown”

CBS News

“Medicare Fraud: A $60 Billion Crime”

Miami Herald

“Medicare fraud scheme, threats lead to prison”

ABC News

“Medicare Fraud Costs Taxpayers More Than $60 Billion Each Year”

Baltimore Sun

“Citizens can police Medicare fraud – Info on the False Claims Act”


Roberta Baskin

expert consultant for the U.S. Department of Health and Human Services

Phone: 202-205-8058


Ellen Podgor, Professor

Steston University College of Law

Editor, White Collar Crime Prof Blog

Phone: 727-562-7348

Lanny Breuer

Assistant Attorney General of the United States

Phone: 202.514-2001



STOP Medicare Fraud

U.S. Department of Health and Human Services/Department of Justice website

-Includes state-by-state breakdown of news about Medicare fraud and details of federal enforcement efforts

Healthcare Fraud – Criminal Investigation

-This section of the Internal Revenue Service site provides links to statistical data on healthcare fraud investigations initiated, prosecutions recommended, indictments, convictions and months to serve in prison.,,id=117524,00.html

Coalition Against Insurance Fraud

-The site bills itself as the nation’s only anti-fraud watchdog that speaks for consumers, insurance companies, legislators and regulators.

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