A $60 Billion Problem: Annual Medicare Losses Due To Fraud And Abuse

According to the Senior Medicare Patrol, Medicare loses an estimated $60 billion every year to fraud, errors, and abuse. From telehealth billing scams to genetic testing fraud, DME schemes to PBM misconduct, and other unlawful schemes, Medicare fraud is a serious—and seriously expensive—issue that affects all taxpayers. The scale of this waste highlights the critical role of the False Claims Act and whistleblowers in protecting the integrity of federal programs and the public fisc.

Estimates of the Impact of Medicare Fraud

While it's impossible to determine the exact amount lost to Medicare fraud every year, the National Health Care Anti-Fraud Association (NHCAA) conservatively estimates the financial scope of health care fraud to be around 3% of total health care expenditures (which are generally in the trillions of dollars). Federal agencies like the National Institute of Health (NIH) hypothesize an even larger value, estimating that 3-10% of annual health care expenditures, or nearly $300 billion, could be lost every year to waste, fraud, and abuse.

Fortunately, the Department of Justice (DOJ) is constantly working to recover funds wrongfully expended because of Medicare Fraud. Recently, on June 30, 2025, the DOJ announced a national health care fraud takedown that resulted in charges for 324 defendants in connection with over $14.5 billion in alleged fraud. The takedown involved multiple schemes across various states. According to the press release, "the government seized over $245 million in cash, luxury vehicles, cryptocurrency, and other assets as part of the coordinated enforcement efforts."

Common Types of Medicare Fraud Schemes

Medicare fraud schemes generally involve the wrongful submission of claims for payment or reimbursement to Medicare. Of course, the details of these schemes take many forms. As technology and anti-fraud practices evolve, so, unfortunately, do fraudulent actors. The following are some of the most common schemes that the Department of Health and Human Services (HHS) encounters every year:

Telehealth Fraud

Since the COVID-19 pandemic, remote healthcare services have become a substantial and valuable option within the healthcare industry. But the telehealth industry's spike in popularity has coincided with an increase in false reimbursement submissions to Medicare for telehealth services that were not provided or were not medically necessary. In fact, these false claims have risen dramatically in the last five years. Telehealth schemes are also frequently employed in conjunction with other forms of Medicare fraud, wherein telehealth physicians are retained to provide unnecessary prescriptions or referrals to other medical products or services.

Genetic Testing Fraud

Another growing health care sector with a proportionally growing opportunity for fraud is genetic testing. As the technology and applications for genetic testing have advanced exponentially in recent years, so has genetic testing fraud. Recent false claims to Medicare for genetic testing have also involved telehealth physicians, who are retained for the express purpose of referring patients to unnecessary genetic testing services. The referring physicians are then paid for making the referrals, the genetic testing companies send kickbacks to the perpetrators of the scheme, and the unnecessary physician appointments and genetic tests are billed to Medicare.

Durable Medical Equipment Fraud

Durable medical equipment (DME) refers to medical equipment that can withstand frequent use such as wheelchairs, crutches, or any other medical device that could be used by a patient on a daily or semi-daily basis. DME fraud schemes often involve DME companies providing kickbacks to physicians in exchange for unnecessary prescriptions.

Pharmacy Benefit Manager Fraud

Pharmacy benefit managers (PBMs) are third party companies that work as intermediaries between Medicare, pharmacies, drug manufacturers, and Medicare Advantage (MA) private insurers. Because of their access to so many stages of the pharmaceutical prescription pipeline, PBMs have multiple opportunities for fraud. Common schemes involve paying physicians, MA insurers, or specialty pharmacies to prescribe, cover, or stock a particular drug so that the PBM can later receive kickbacks from the drug manufacturer for increasing sales of the drug.

Exposing Medicare Fraud through the False Claims Act

Under the False Claims Act, private individuals with knowledge of Medicare fraud, known as whistleblowers or relators, may bring suit on behalf of the government through a qui tam action. If litigation is successful and a settlement or judgment is reached, the whistleblower may be entitled to between 10-30% of the total monetary recovery, depending on the value of the information the whistleblower provided and the scope of the government's involvement in the lawsuit.

Whistleblowers are critical in exposing Medicare fraud, as these schemes are often complex and shielded from public view. The DOJ relies heavily on the information provided by whistleblowers throughout their investigation of potential fraud actions and subsequent litigation.

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