How smart Medicare cards could cut America’s $60bn healthcare fraud bill

Last updated: 25 October 2016

Medicare cards

While both presidential candidates continue to debate questions of economic policy and government spend (albeit less than we’d like them to) as the November 8th election nears, few Americans know that there is a very important decision in front of Congress today: a bill that can stop Medicare fraud.

Every year, Medicare fraud is costing American taxpayers an estimated $60 billion, according to the Department of Justice. That’s right, $60 billion dollars. And about half of that cost is because, unbelievably for such a vital service, the 48 million Medicare recipients are identified by a flimsy paper card.

This paper Medicare card, which hasn’t been touched since it was introduced fifty years ago, is what senior citizens carry and present to receive Medicare services. The card also has the beneficiary’s ultra-sensitive Social Security Number printed on its front, increasing its holder’s risk of identity theft. The bill in question is asking to replace that card with a highly secure chip card.

How Congress votes on this bill will directly affects how our taxpayers’ money is spent, because at least $30 billion dollars can be saved each year with one simple measure. And even though it’s not promoted by big name celebrities, it is definitely worth our attention, and there is something we can do.


Under the current Medicare system, Medicare payment transactions are sent to the Department of Health and Human Services (HHS) without any verification or assurance that beneficiaries actually received care. That means that providers can submit fraudulent claims for unnecessary procedures or procedures never performed, and there is no way to verify the identity of the person treated, nor the number of people seen by the provider. This is called phantom billing.

The payment model that is currently in place at HHS is favorable to fraudsters, who are successfully cheating the system for billions of dollars each year. Under the befittingly termed ‘pay-and-chase’ model, the government pays all the bills it receives without checking their legitimacy, and then retro-actively deals with fraudsters, chasing them down to pay back the funds.

But currently, the government doesn’t have much of an alternative, as it has no means of easily verifying the authenticity of the transactions. That problem can be solved by modernizing the paper card.


Just like we’ve seen our credit and debit cards switched out this year with new, secure chip cards, Medicare cards can and should be upgraded to smart cards, too. The impact of smart cards on fraud reduction is huge. For example, Visa and MasterCard have already seen around a 50 percent drop in counterfeit card fraud compared to the previous year, thanks to the EMV chip cards.

That’s why Congress is currently considering the Medicare Common Access Card Act of 2015, which would mandate a chip card for Medicare recipients and authorized providers, in order to reduce fraud and protect seniors’ sensitive health information.

This new bill would call upon HHS to implement a pilot program where the current paper Medicare card would be upgraded to a secure, electronic smart card. The beneficiary’s identification information would be encrypted in the chip’s embedded micro-processor, which ensures the card cannot be tampered with or forged. The Social Security number would be removed from the face of the card and stored in the chip as well.

The benefit of introducing these smart cards is that only authorized Medicare providers and suppliers would be able to bill for Medicare services. Furthermore, each recipient smart card would be protected by a PIN code, and each provider smart card would be protected by a biometric (like a fingerprint), which would give HHS complete confidence in the authenticity of transactions. Plus, due to the digital nature of the card, any lost or stolen cards could be remotely deactivated in real time.


Beyond saving us all billions of dollars every year, upgrading to Medicare smart cards can have many more benefits for doctors and patients. Smart cards can be used to pull up health data records more quickly and securely while also reducing health record redundancies and errors. And they could decrease the amount of time it takes HHS to process transactions, meaning doctors can get paid faster.

The Medicare Common Access Card Act of 2015 comes up to vote in Congress soon. Please research what the pilot could mean for US citizens, and if you are convinced that this is a good thing, you can ask your Member of Congress to support the act. The easiest way to do that is online at:

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