Health Insurance Fraud: How Shell Companies Get Paid for Non-Existent Products and Services

After retiring, nurse Linda Hennis checked her Medicare bill. She found 65 charges totaling $10 for urinary catheter procedures. But she had never needed or ordered any catheters, writes NBC Chicago.

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The government spent nearly $950 billion to fund Medicare in 2022, according to Medicare and Medicaid Services data, but fraudsters stole 6% of those funds, which amounted to about $60 billion, according to the Justice Department.

How does it happen? You can detect Medicare fraud by seeing strange charges on your account for medical items and services that you did not receive and that your doctor did not prescribe for you.

The bills were from a company called Pretty in Pink Boutique in El Paso, Texas. When Hennis visited their website, she saw a warning that described her situation exactly: “If you are calling about urinary catheters, you may be a victim of Medicare fraud.”

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The company has received dozens of calls from people like Hennis. But here's the kicker: Pretty in Pink Boutique doesn't sell any of these products, let alone bill Medicare.

The real culprits are shell companies registered in the system as Pretty in Pink Boutique. At least five such companies have been identified.

Travis Trumitch of the nonprofit AgeOptions calls them "shell companies" that "quickly withdraw money and disappear."

According to Trumitch, the scheme typically goes like this: A call center overseas obtains a person's insurance details from the dark web or other sources, calls the benefit recipient to confirm the information, and then sells it to a front company selling medical equipment.

Trumitch said other devices, such as special knee or back supports, are also often used in Medicare fraud. But catheter scams are the most common.

When Hennis discovered the charges, she immediately reported the fraud to Medicare. Although she was not directly billed, she knew she could face unpleasant consequences for fraud in the future.

"If your Medicare is billed for a device or equipment that you actually need later, you may be denied," she explained.

"If the consumer doesn't need specific medical products or services in the future, the fraud won't really affect their interests," Trumitch said. "But the real harm is that taxpayer money is going into the pockets of fraudsters."

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How to Avoid Medicare Fraud:

• Be wary of unsolicited calls asking you to verify your medical information. Medicare will not call you with such requests.
• Keep records of the medical services you actually received.
• Keep an eye on your Medicare payment notifications, even if you have private insurance and receive payment statements. These notifications will show you if your insurance information has fallen into the hands of fraudsters.
• Report Medicare fraud here: https://oig.hhs.gov/fraud/report-fraud/

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