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The grandparent scam, Medicare fraud and Ponzi schemes target older Americans

by Alliance America
September 6, 2023


As people grow older, they often become more susceptible to financial scams, especially those that manipulate their emotions and vulnerabilities. Scams targeting older Americans are unfortunately common and can be devastating both financially and emotionally. While scams evolve with time and technology, some have been particularly prevalent among seniors. Let’s examine some of the top financial scams commonly perpetrated on older Americans.

What is the grandparent scam?

One of the most heart-wrenching financial scams targeting senior citizens is the grandparent scam. It operates on the principle of urgency and secrecy, aiming to trick grandparents into sending money to criminals posing as their distressed grandchildren. To understand how this scam works in reality, consider the following typical example involving key characters and the steps the scam takes to succeed.

The victim is Sarah, a senior citizen living alone, who becomes the unsuspecting target. John is Sarah's actual grandson, a college student. Fake John is the scammer posing as Sarah's grandson. The Fake Lawyer is another scammer, who serves as the "legal" face of the operation.

The scam unfolds when Sarah's phone rings. On the other end is a crying and emotional Fake John, who exclaims, "Grandma, it's me, John. I'm in trouble." The heightened emotions and urgency make it hard for Sarah to discern that she's not speaking to her real grandson.

Without wasting time, Fake John explains that he's been arrested for drunken driving after a minor car accident. He emphasizes that he needs bail money to get out of jail, further heightening Sarah's emotional distress. Seeing that Sarah is hooked emotionally, Fake John tells her that his lawyer will give her the details of how she can help. Shortly after, Fake Lawyer calls Sarah to provide the so-called legal aspects of the case.

During the call, Fake Lawyer discusses the bogus details of the arrest, including the bail amount and payment instructions. He may employ legal jargon and create a sense of urgency by saying something like, "If the bail isn't posted within the next few hours, John will have to stay in jail over the weekend."

Sarah then is told to wire the bail money, often thousands of dollars, to a particular bank account or through a money transfer service.

Throughout the scam, both Fake John and Fake Lawyer stress the need for secrecy. Sarah is told not to discuss this "sensitive" matter with anyone else, effectively isolating her and preventing her from seeking verification or advice. After Sarah has transferred the money, Fake Lawyer may call to confirm the receipt of funds and to thank her for her assistance. Alternatively, both scammers may simply disappear, severing all contact with Sarah.

The harsh reality sets in when Sarah eventually talks to the real John or another family member. By then, the money she sent is usually unrecoverable, and she realizes she has fallen victim to a scam.

The result is an insidious operation that capitalizes on the emotions and vulnerabilities of seniors. Awareness and education are crucial in combating this type of fraud. If you or someone you know is a older or vulnerable citizen, make sure to verify any "urgent" and "confidential" situations with other family members before taking any financial actions.

What is the Medicare scam?

someone trying to lure two elders into a trap with money inside the trap

In typical Medicare scams, fraudsters usually pose as Medicare representatives to get seniors to give them their personal information. Once they have it, they can use it to bill Medicare for fraudulent services or to acquire prescription medications that they can sell. They may also provide unnecessary medical equipment and bill it to Medicare. Despite numerous efforts by authorities to curtail such scams, criminals still find inventive ways to defraud the system and its beneficiaries. One of the more recent scams involves telemedicine services, which gained popularity especially since the COVID-19 pandemic. Consider the following example, which is intended to help raise awareness and protect vulnerable older Americans.

The characters in this Medicare fraud scenario are the victim, Betty, who is a retired older person living alone and a Medicare beneficiary. Dr. Smith is a legitimate telemedicine service provider. Fake Dr. Johnson is a scammer posing as a telemedicine doctor. There’s also the Fake Health Clinic, a fraudulent entity, posing as a legitimate health service provider.

The scam unfolds with unsolicited contact when Betty receives a phone call from the Fake Health Clinic offering free telemedicine consultations. Intrigued and unaware of the potential for fraud, Betty agrees

Shortly after, Fake Dr. Johnson calls Betty for a telemedicine consultation. He asks basic health questions and recommends several tests and durable medical equipment like orthopedic braces. He assures Betty that all the costs will be covered by Medicare.

Fake Dr. Johnson then asks Betty for her Medicare number and other personal information, supposedly to bill Medicare for the consultation and the recommended medical services and equipment. Betty, believing she's dealing with a legitimate medical professional, provides the information.

Using Betty's Medicare information, the scammer bills Medicare for services and equipment that were neither necessary nor actually provided. They make hundreds or even thousands of dollars at the expense of the Medicare system and taxpayers.

The reality hits when Betty receives a statement from Medicare, detailing the services billed in her name — most of which she never received. Confused, she contacts her real telemedicine provider, Dr. Smith, who informs her that she may have been a victim of a scam.

The fraudulent activities eventually get flagged, leading to an investigation. While the criminals might face legal repercussions if caught, the Medicare system and genuine beneficiaries like Betty suffer from increased scrutiny and, potentially, increased premiums.

Medicare fraud scams like these exploit the trust and vulnerabilities of older Americans while siphoning funds from a system designed to help them. The best protection against such scams is education and vigilance. Always verify the credentials of health care providers, especially those you've never interacted with before. If you receive unsolicited calls offering medical services, it's a red flag. Double-check any unfamiliar Medicare charges and report suspicious activities to authorities to help protect not only yourself but also the integrity of health care systems designed to aid the aging population.

What is a Ponzi scheme?

hands reaching into the air trying to grab a dollar hanging by a hook

Financial exploitation of older Americans is a concerning issue, with perpetrators taking advantage of vulnerable seniors to deceive them out of their hard-earned money. Investment scams are among the most prevalent schemes. In the pursuit of higher returns, many seniors fall victim to con artists peddling too-good-to-be-true investment opportunities. One common investment scam that disproportionately targets older Americans is a Ponzi scheme. In a Ponzi scheme, new investors' money is used to pay previous investors, creating the illusion of a profitable business. The scam eventually collapses when there are not enough new investors to pay the old ones.

Older Americans are targeted when scammers present the bogus investment as a "once-in-a-lifetime" opportunity and use high-pressure sales tactics to encourage immediate action. Older Americans, who may feel the pressure of limited time to enhance their savings, can be susceptible to such schemes.

One of the most notorious Ponzi schemes that targeted older Americans was the Bernie Madoff investment scandal that came to light in 2008. Although this scheme was not exclusively aimed at older Americans, a significant number of the victims were retirees or those close to retirement. These individuals were particularly vulnerable because they were looking for safe and consistent returns on their investments to fund their retirement years.

Madoff promised steady and above-average returns through what he claimed was a unique and sophisticated trading strategy. He portrayed his investment fund as a selective and exclusive opportunity, often requiring new investors to be referred by existing ones. This exclusivity made people more eager to invest.

In reality, he was using the capital of new investors to pay off earlier ones, the classic hallmark of a Ponzi scheme. Many older Americans, some of whom invested their life savings or retirement funds, were devastated when the scheme collapsed, costing investors of an estimated $64.8 billion. Madoff was sentenced to 150 years and died in prison in 2021.

The Madoff case underscores the importance of due diligence and skepticism when considering investment opportunities, especially for older Americans who are often targeted for financial scams. It's crucial to verify the legitimacy of any investment firm by checking its registration and track record through regulatory bodies like the Securities and Exchange Commission (SEC).

While justice may have been served in the Madoff case, the impact on the victims serves as a somber reminder that the lure of high returns can often blind us to the risks, making it imperative to remain vigilant and informed.


Financial scams targeting older Americans are a growing concern, impacting victims both emotionally and financially. These include three particularly prevalent types of scams: the grandparent scam, Medicare fraud and Ponzi schemes.

The grandparent scam preys on the emotional vulnerabilities of seniors, convincing them to urgently send money to criminals posing as their distressed grandchildren. Medicare scams exploit trust and a lack of awareness to fraudulently bill Medicare for unnecessary services or equipment, damaging not just the individual but the health care system as a whole. Ponzi schemes lure older Americans with promises of high returns on investments, often leaving them financially ruined when the fraudulent operation collapses.

Each of these scams capitalizes on different aspects of vulnerability among older adults — whether it's emotional susceptibility, trust in health care systems or the pressure to secure one's financial future. While authorities are working to curb these fraudulent activities, public awareness and education remain key defense mechanisms.

It is imperative for older Americans and their families to be vigilant, skeptical and well-informed to protect themselves from falling victim to such scams. Verification through reliable sources and open communication among family members can go a long way in thwarting these fraudulent operations. Remember, caution today can prevent a crisis tomorrow.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

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