DOJ’s Largest Health Care Fraud Takedown Ever Should Make Us Ask: Why Is Our System So Easy to Exploit?

America’s fragmented system rewards both organized crime and corporate abuse.

After a two year investigation, the U.S. Department of Justice announced what it called the largest coordinated health care fraud takedown in its history — 324 defendants charged in sweeping schemes spanning $14.6 billion in intended losses, from shady addiction treatment clinics to medically unnecessary skin grafts and catheter orders. It’s a massive win for taxpayers. But it’s also a glaring reminder that the U.S.’s fragmented, opaque and under-regulated health care system is fertile ground for fraud — whether it’s orchestrated by international criminal rings or by well-dressed executives at some of America’s largest health insurers.

What the International Criminals Did

Take just one part of this latest takedown: Federal prosecutors say a Pakistani national, Farrukh Ali, masterminded a $650 million Medicaid scam targeting Arizona’s American Indian Health Program. According to court filings, Ali conspired with at least 41 addiction clinics to bill the state for services that were never provided, or so worthless they failed to serve any medical purpose. Many so-called “patients” were homeless individuals or Native Americans recruited from reservations with the promise of treatment and free housing — care they never actually received. 

This was just one slice of the fraud. Other schemes involved transnational crime networks hawking billions in unnecessary urinary catheters or amniotic skin grafts stuck onto terminally ill hospice patients who could not consent or benefit from the treatment. 

As a result, the government says it netted millions in cash, luxury vehicles, cryptocurrency and other assets.

The “Legal” Middlemen Do It, Too

This type of behavior is not limited to international crime syndicates. Our health care system is so ripe for exploitation that entire industries do essentially the same thing — only their version is perfectly legal – all by design.

“The fact that it's even possible that you could have $15 billion to play in this endeavor is shameful. But that's how we're being attacked now and it's not done by small-time operators," Centers for Medicare and Medicaid Services Administrator, Dr. Mehmet Oz said. And he’s right. A $15 billion play is huge, but a fraction of some of the other schemes deployed on our health care system.

Look at the health insurance companies that run Medicare Advantage (MA) plans. For years, they’ve raked in billions by making their enrollees appear sicker than they really are — a tactic called “upcoding” — to pad government payments. Then they erect bureaucratic hurdles that drive genuinely sick patients away while keeping the healthy ones, a scheme known as “favorable selection.” The federal government overpays these insurers by at least $84 billion every year — money siphoned straight from taxpayers’ pockets under the guise of “managing” American seniors’ care.

Pharmacy Benefit Managers (PBMs) and other middlemen add another layer of legalized waste. By manipulating rebates, playing spread pricing games, or forcing patients into restrictive networks, they squeeze money out of the system while offering little in return.

Even our veterans aren’t immune. In the VA Program, health insurers (which manage many aspects of the VA) have bilked taxpayers twice — once through Medicare Advantage and again via the VA — for the same services, a racket estimated to cost $357 billion over the next decade if left unchecked.

The Real Crime Is the System Itself

It’s good news that the DOJ has the spine to chase down organized crime groups swindling Medicaid and Medicare. But let’s be honest — the real scandal is how our elected leaders keep looking the other way when Wall Street does it with a suit and a shareholder letter. Or worse, when elected leaders portray individuals, like patients on Medicaid, as the main drivers of fraud in the system.

We can’t pretend that waste and fraud in the U.S. health care system are just the work of a few bad actors overseas. Waste and fraud is baked into the way we let corporate giants “manage” Americans’ care with minimal oversight and maximum opportunity to bleed the system dry.

To stop the fraud for good, start with the entities that wrote the playbook: the corporate middlemen who have turned our health care system into their own personal cash machine — legally.

Let’s hope these recent DOJ fraud charges don’t stay the “largest in history” for long.