By Adele Ferguson and Chris Gillett
Billions of dollars are being rorted from Medicare each year by medical practitioners making mistakes or charging for services that aren’t necessary or didn’t even happen – including billing dead people and falsifying patient records to boost profits.
The revelations come as GPs lobby the federal Labor government to boost Medicare funding and increase rebates, claiming the system is in crisis as patients struggle to find a bulk-billing doctor.
A joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 program has uncovered flaws in Medicare’s systems that make it easy to rort and almost impossible to detect fraud, incorrect payments and errors.
The leakage is estimated by some to represent nearly 30 per cent of Medicare’s annual budget, or about $8 billion a year.
The rorting, which continues largely unpunished, includes a doctor caught in February charging for dead people in aged care homes, a doctor prescribing drug addicts with oxycodone without due care and radiologists over-servicing terminally ill cancer patients.
The fraud and waste have been allowed to occur for decades despite repeated warnings to successive governments from experts, including Margaret Faux, who has a PhD in Medicare claiming and compliance.
“I think most Australians believe that doctors are honest people,” Faux said. “And I’d like to think that most of them are. But the reality is anywhere where you’ve got a huge pot of money that is super easy to access, you are going to get bad actors building business models just taking the money unlawfully. And it’s a huge problem in the Medicare system.”
Faux’s estimate of $8 billion annual leakage from Medicare is in line with Kathryn Flynn’s PhD published in 2004, which noted some believed fraud and inappropriate practice could be as high as 25 per cent.
Faux’s 30 per cent estimate has been corroborated by Dr Tony Webber, a GP and former head of Medicare watchdog the Professional Services Review. While running the regulator for six years until late 2011, he estimated misuse of Medicare was costing Australians up to $3 billion a year. “I’ve read [Faux’s] PhD, and I’d have to agree with what she’s said,” he said.
Webber said that he saw egregious misconduct from within his profession, including the ordering of pathology tests which were inappropriate for the clinical condition and had a huge impact on the health budget.
“And many of these private radiotherapy clinics are run by corporations, where their shareholders are overseas,” he said. “Medicare was never designed to both reimburse the doctor and an overseas shareholder.”
Margaret Faux estimates there is about $8 billion in annual leakage from Medicare. Credit: Janie Barrett
When Webber raised his concerns with health ministers from both sides of politics, or the federal health department, he was shut down.
“The administration of Medicare is a very political creature to work with, and it can be very difficult for change to occur,” he said.
“If one side of politics decides to make a radical change, the other side of politics can use it to beat them over the head in an election.”
A report by the Australian National Audit Office into Medicare compliance released in November 2020 estimated the cost of health provider non-compliance at up to $2.2 billion.
For comparison, that is about double the ABC’s annual taxpayer funding. Foreign aid costs about $4.5 billion a year, the Royal Australian Air Force about $7.8 billion and the CSIRO about $1.4 billion.
Faux has warned the 2020 estimate grossly underestimates the problem.
The inappropriate billing occurs in all areas of the health sector including GPs, surgeons, pathologists, anaesthetists, radiologists and dentists who use the child dental benefit scheme.
She said the doctor busted in February for billing Medicare for dead people in government-funded aged care facilities for consultations of varying lengths was not an isolated case. “Aged care facilities have some of the greatest vulnerabilities to Medicare fraud,” she said. “Billing dead people, billing for ward rounds that didn’t happen or billing residents who are cognitively impaired and don’t have a recollection of what was discussed make it an area of concern,” she said.
Hundreds of millions of Medicare claims are made each year – many of them are under $100 – but the high-volume, low-dollar transactions make it easy for fraud to fly under the radar.
Faux believes wrongful claims are being applied to millions of billings.
“We removed consumers and took them out of the transaction,” she said of changes to the administration of Medicare by doctors a few years ago. “Patients used to sign a piece of paper, so we knew they were there, now they don’t even do that, so you don’t know how much is billed when you walk out the door, and few check their Medicare records.”
Her business, Synapse Medical Services, is paid by doctors, hospitals and corporate medical practices to process their Medicare bills. Faux said she constantly finds problems in client billing practices and even her own personal Medicare records, which include services she never had and services that were recorded as having taken longer than they did to attract a higher Medicare fee.
A bulk-bill GP consult of less than 20 minutes is $39.75 and a bulk-bill GP consult that lasts at least 20 minutes is $76.95.
“The bottom line is we don’t know exactly how much is fraud, deliberate abuse and how much is errors. Whether it’s deliberate or unintentional, it has to stop,” she said.
“As long as a practitioner stays within the bell curve, they are very unlikely to come to the attention of Medicare, and be audited, even if 100 per cent of their claims are fraudulent.”
Faux said the government tells Australians we have the best health system in the world. “But unfortunately the reality is very different. Medicare is actually haemorrhaging. It is very badly broken and in need of urgent reform.”
Some of the biggest offenders are corporate health clinics including pathology chains and GP super clinics, as well as public hospitals where errors and fraud have largely been left unchecked.
Documents obtained by the Herald, The Age and 7.30 show an online telehealth company was charging some patients fees of $38 or $50 and also bulk-billing them, which is illegal under the Health Insurance Act. Some records show the GP had overstated the length of the consultation, which attracts a higher rebate.
Separately, Tweed Health for Everyone in northern NSW, one of the country’s largest super clinics, alleged to have claimed hundreds of thousands of dollars – and possibly more than $1 million – for services that weren’t performed or potentially shouldn’t have been claimed.
Patients were allegedly misdiagnosed with diabetes for extra Medicare billings, patient records falsified and targets set for a certain number of monthly wound debridements, a procedure for treating a wound in the skin that attracts certain Medicare reimbursements of more than $250.
A former co-founder, director and GP at the clinic, Dr Austin Sterne, said that in 2015 he first discovered questionable Medicare billing. To support his suspicions, he pulled out the CCTV footage in the waiting room and compared it to the clinic’s appointment book, patient records and billings. He even called some patients, who denied they had seen the practitioner.
He informed the clinic, but they were reluctant to act. In one email he wrote: “The CCTV footage shows that [a health practitioner] bills 40 mins for each consult but typically spends only 10-15 minutes with the patient. Typically, [the practitioner] is billing $800-$900 per day but only legally should be claiming approximately $250 per day. On Monday, she should have claimed $50 but claimed $656 instead!”
Dr Austin Sterne uncovered incidences of some medical practitioners billing more than they were owed.Credit: Elise Derwin
Months later an investigation was launched and the practitioner resigned but continued to see some patients. Sterne said after getting legal advice, the clinic eventually informed Medicare that some billings had been claimed incorrectly but did not inform Medicare of the suspected fraudulent billing.
Sterne was also concerned about the way the clinic was claiming wound debridements, which didn’t fit Medicare criteria to qualify for the payment.
He said the practice was billing between $123,000 to $266,064 a year in wound debridements alone.
“The service was attractive for the GPs as the debridements paid $277 for only a couple of minutes of the GP’s time, with a wound care specialist nurse doing the debridement itself,” he said.
At one point in 2016, the clinic’s then-CEO prepared a spreadsheet for the wound business saying the clinic should double the number of wound debridements to make the numbers more profitable for the business. The CEO said 80 of the procedures a month should become the “target” because “we do not wish to reduce GP income”.
Sterne left in December 2017 after legal action that culminated in him signing a deed of release. Since then, there has been a change in senior management and the board.
In response to a series of questions, the clinic’s spokesman, who joined the clinic in 2013, said the questions refer to a period before the change of ownership and management of the clinic. He said the clinic takes compliance “extremely seriously and conducts regular training for doctors, providing them with continuous updates on compliance with the requirements of the Medicare Benefits Schedule.”
The Hawke government established Medicare (its predecessor, Medibank, was set up by the Whitlam government) in 1984 as a universal health system paid for by taxpayers through a levy that provides free or subsidised healthcare services to Australians.
It was set up as an honour system with the hope that doctors would bill correctly for the service provided.
However, armed with a patient’s name, date of birth and Medicare number, health practitioners can log into the portal and bulk-bill anything and patients are often none the wiser. The government would not ordinarily be alerted to any suspicious activity and patients don’t know because they rarely check their Medicare records.
Dr Tony Webber, a GP and former head of Medicare watchdog the Professional Services Review, corroborated Faux’s estimate.Credit: Brook Mitchell
A series of questions were sent to the Department of Health and Aged Care, including about Faux’s estimate that up to 30 per cent of Medicare claims were leaking from the system from fraud, errors and overservicing. A department spokesperson said it had a strong compliance program to ensure the integrity of Medicare, involving assessment of external tip-offs, analysis of claiming patterns and trends, and advanced analytics. It said it takes any allegations of non-compliance seriously.
The fresh revelations about the rorting of Medicare have been aired at a time when medical bills are rising and health spending comes under pressure due to a deteriorating economy and federal budget outlook.
“Ambulances ramping, public hospitals cannot cope, general practices in tatters – it’s all part of the same problem,” Faux said.
“So it is taxpayers who are paying for a system that they can no longer afford or access.”
Faux estimates more than $100 billion has been lost since 1974 from fraud and non-compliant billing. She estimates that Medicare has paid $400 billion to $500 billion since July 1975. She applied her estimate of a 30 per cent leakage, which is more than $100 billion. “We could have built more than a couple of hundred state-of-the-art hospitals and given the whole of Australia free dental services for that money,” she said.
But she warned the system is on its last legs. “Medicare doesn’t have a lot of life in it, unfortunately. I’d give it a couple of years max. It’s in really bad shape. Out-of-pocket costs are going to continue to soar and patients won’t be able to access the care that they need.”
Webber said: “The emperor has no clothes and everyone can see we have a problem but no one is willing to acknowledge it and do something.
“It’s like rearranging the deck chairs of the Titanic, when the boat has already sunk. That’s where we’re up to. We need to change the system.”
Watch the ABC’s 7.30 program on Monday, October 17 for more.
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