Medicare bilked for billions in bogus claims

The system of private contractors policing the $250 billion-a-year Medicare program is riddled with conflicts of interest, financial disincentives and regulatory breakdowns so severe that fraud and abuse bleed tens of billions of dollars from the program every year.

"It is utterly ridiculous," says Malcolm Sparrow, a health care fraud expert at Harvard University's Kennedy School of Government. "We are trusting insurance companies to do oversight of the medical profession, and they are riddled with corruption themselves."

Sparrow estimates Medicare fraud at $50 billion to $75 billion a year -- about twice the amount of Congress' most expensive proposal for helping senior citizens buy prescription drugs.

Fraud is so costly that it has helped force Medicare into drastic spending limits since 1997. Last year, the program cut doctors' reimbursement rates 5.4 percent, with an additional 12 percent reduction scheduled for the next three years. Lower rates have led many medical providers to drop Medicare patients, leaving millions of Americans without sufficient health care coverage.