Medicare Unmasked: Law-Enforcement Officials Estimate Fraud Accounts for as Much as 10% of Medicare's Yearly Spending

Eleven armed FBI agents crept around a stone-and-glass house here just before dawn. An AR-15 rifle and four other guns were registered to the man in the house.

"FBI warrant," the agents called out, and a man in a T-shirt and shorts emerged.

It was no drug lord. The target was a doctor who moonlighted as a movie producer with an Alec Baldwin comedy to his credit. The Justice Department charged the doctor, Robert A. Glazer, with writing prescriptions and certifications resulting in $33 million of fraudulent Medicare claims.

The raid in May capped a year-long investigation by the Medicare Fraud Strike Force, a joint effort by the Justice Department and Department of Health and Human Services. Raids that day in six cities resulted in the busts of 90 Medicare providers, including 16 doctors, who were separately charged with generating a total of $260 million of false Medicare billings.

The odds are slim of retrieving much of that money if the providers plead guilty or are convicted. Law-enforcement officials involved in the effort estimate that fraud accounts for as much as 10% of Medicare's yearly spending—which would amount to about $58 billion in bogus payments in the 2013 fiscal year. Yet the U.S. government recovered just $2.86 billion in Medicare funds that year.

"Usually the money gets away," said Special Agent-in-Charge Glenn R. Ferry, who oversees HHS/Office of Inspector General's strike-force operations in Los Angeles, which charged Dr. Glazer. "As soon as it hits an account, it disappears."

Many strike-force investigations, including the Glazer case, start with an agent behind a computer screen, eyeing page after page of Medicare claims data, looking for unusual billing patterns. In April, the government publicly released data on doctor billing for the first time after a legal effort by The Wall Street Journal to make the information public.

Federal prosecutors alleged that the Glazer fraud stretched over eight years and involved prescribing patients equipment and hospice and home-health services they didn't need—and in a lot of cases didn't receive. In return for referrals, the equipment and service providers allegedly paid kickbacks to the 68-year-old Dr. Glazer.

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