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Fake companies steal billions from Medicare

MIAMI – A short while ago, while reporting on Medicare fraud – an outrageous $60 billion a year pilferage of America's social safety net for 43 million seniors and the disabled – I took one of those phone calls that stop you right in your tracks.

The caller was a federal law enforcement official who has spent much of his career fighting health care theft. He said a man that he and other authorities had been chasing for allegedly running a crooked medical supply company and bilking Medicare had just had an unfortunate run-in with police near Miami.

He and another man were confronted by officers who suspected them of breaking into cars outside a gaming resort. The other man was arrested, but, according to authorities, the one suspected of Medicare theft ran and dove into a lake, where he was promptly attacked and killed by an alligator! What??

Of course, upon hearing this I thought it was a joke and shouted, "You've got to be kidding!" He wasn't. It was true – the sort of morality tale, it seems, you can only hear in Florida.

As outlandish and unbelievable as that story was, however, it actually pales in comparison to the reality of the brazen, organized and widespread looting of Medicare, which seems all-too-easy prey for criminals hiding behind phony medical supply companies and clinics.

Often they pay off busloads of patients, along with unscrupulous doctors, to assure their cooperation. And in the process, they threaten the future of the already-stressed Medicare system and harm millions of honest patients, physicians and other legitimate health care providers.

Billing Medicare for millions, and getting paid

In Miami-Dade County, where Medicare fraud is considered the worst in the country by federal officials, you can actually go to certain buildings or shopping centers and see row after row of offices or storefronts that purport to be legitimate medical companies. 

FBI agents and prosecutors point out that often these offices are just empty "fronts" or shell companies that only exist to steal from Medicare. They do not have one thing to do with actual health care, but they each bill Medicare for millions of dollars. 

Delving into this morass, you see some disturbing things: low-life criminals living in mansions, wearing fancy jewelry and driving luxury cars bought with Medicare funds; AIDS patients taking money to sit for phony intravenous treatments so the clinic owners can over bill Medicare; and dangerous "medicines" given to the public and billed to Medicare that were homemade in the back of pharmacies by people who have no medical training. Federal officials say one of those people was actually an air-conditioning repairman. 

One purported medical company CEO turned out to be a worker at a tire repair shop. He'd been paid by criminals for the use of his name on the corporate records. Officials say he had enough money in his bank account to fund a federal anti-fraud strike force for six months.

'An absolute disgrace'

One afternoon, we sat with an 82-year-old woman named Muriel Sherman. Someone stole her patient number, and in the last few years Medicare has been billed for tens of thousands of dollars in her name for treatments and medicines she never got and doesn't need.  

On the books, it would appear she has AIDS and diabetes, is missing an eye, has artificial knees and elbows, needs a wheelchair and is taking enough medication to kill her on the spot – NONE of which is true. 

Muriel is just furious, and has actually gone out on her own to confront the medical supply companies listed on her explanation of benefits (EOB) statements, to no avail. "It's an absolute disgrace that they put on all those things," she said.

Sadly, there are thousands more victims just like her, preyed upon by criminals stealing billions each year from American taxpayers. As experts debate how to fix this enormous problem, it's easy to think again about that alligator.

See more of Mark Potter's reporting on Medicare fraud on NBC Nightly News with Brian Williams tonight.