The COVID Test Gold Rush

In 2020, as the COVID-19 pandemic swept the nation, the Centers for Medicare & Medicaid Services (CMS) created a new billing code: K1034. It was designed for over-the-counter COVID test kits, reimbursed at roughly $12 per test. What happened next was one of the largest billing fraud schemes in Medicare history.

The $12 Code That Became a Gold Mine

K1034 — "COVID-19 OTC home test" — was meant to be simple. Seniors could get free test kits, and Medicare would reimburse providers about $12 per kit. But for some providers, this modest reimbursement became a pipeline to millions.

The math was straightforward: bill enough tests, and the money adds up fast. At $12 per test, billing one million tests generates $12.0M. And that's exactly what some providers appear to have done.

Case Study: $12.1M from One Nurse Practitioner

Seniors Got Tests They Never Ordered

NPR reported that seniors across the country received dozens of COVID tests they never requested. Boxes of test kits showed up at doorsteps, sometimes weekly, sometimes addressed to people who had never interacted with the billing provider. The scheme was simple: obtain Medicare beneficiary numbers, ship unrequested test kits, and bill Medicare for each one.

For a single beneficiary receiving a test kit per week for a year, that's roughly $624.00 in fraudulent billing. Multiply by thousands of beneficiaries, and the numbers become staggering.

The Nationwide Enforcement Response

In 2023, the Department of Justice announced a nationwide COVID healthcare fraud enforcement action that charged defendants with over $1.7B in alleged fraudulent billing. COVID test kit fraud was a central focus.

The HHS Office of Inspector General (OIG) identified COVID-related fraud as one of its top priorities, noting that the rapid deployment of new billing codes and relaxed oversight during the pandemic created "unprecedented opportunities for fraud."

How the Scheme Worked

1. Obtain beneficiary information — through call centers, door-to-door campaigns, or purchased lists
2. Ship unrequested test kits — sometimes to beneficiaries who were surprised to receive them
3. Bill Medicare via K1034 — at approximately $12 per test kit
4. Scale massively — bill thousands of kits per day, far exceeding what any individual provider could reasonably handle
5. Use individual NPIs — billing under a single practitioner's NPI rather than an organization, making volume anomalies even more suspicious

What Our Data Shows

Our analysis of CMS Medicare Provider Utilization and Payment Data reveals a cluster of providers with extreme K1034 billing volumes. Across the entire program, $2.8B was billed through K1034 — a staggering sum for a code that reimburses ~$12 per test. The statistical profile of these providers shows:

• Billing volumes hundreds of times higher than specialty medians
• Service counts that would require seeing a new patient every 1-2 minutes, 8 hours a day
• Markup ratios far exceeding any clinical explanation
• Geographic clustering in a few ZIP codes

What You Can Do

If you or a family member received COVID tests you never ordered, or if you notice unfamiliar charges on your Medicare statements, you may have been a victim of this scheme.