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Health Care Fraud

All health care programs are subject to fraud, although Medicare and Medicaid programs are the most visible. Estimates of fraudulent billings to health care programs, both public and private, are estimated to be between 3 percent and 10 percent of total health care expenditures. The fraud schemes are not specific to any general area, but are found throughout the entire country. The schemes target large health care programs, public and private, as well as beneficiaries. Certain schemes tend to be worked more often in certain geographical areas, and certain ethnic or national groups tend to also employ the same fraud schemes. The fraud schemes have, over time, become more sophisticated and complex, and are now being perpetrated by more organized crime groups, to include traditional and non-traditional crime groups.

Health Care Fraud is expected to continue to rise as people live longer. This increase will produce a greater demand for Medicare benefits. As a result, it is expected that the utilization of long and short term care facilities such as skilled nursing, assisted living, and hospice services will expand substantially in the future. Additionally, fraudulent billings and medically unnecessary services billed to health care insurers are prevalent throughout the country. These schemes are becoming increasingly complex and can be perpetrated by corporate-driven schemes and systematic abuse by certain provider types.

Health care fraud investigations are among the highest priority investigations within the FBI and rank behind only Public Corruption and Corporate Fraud in the FBI's White Collar Crime Program Plan. National initiatives include the National Outpatient Surgery Initiative, the Medical Transportation Initiative, and the Pharmaceutical Fraud Initiative. Furthermore, numerous FBI field offices throughout the U.S. have pro-actively addressed significant crime problems through coordinated initiatives, task forces, and undercover operations to identify and pursue investigations against the most egregious offenders which may include organized criminal activity and criminal enterprises. Organized criminal activity has been identified in the operation of medical clinics, independent diagnostic testing facilities, durable medical equipment companies, and other health care facilities. The FBI also addresses large scale medical providers, such as hospitals and medical corporations, who engage in criminal activity and commit fraud against the Government which undermines the credibility of the health care system.

Current fraud schemes consist of traditional schemes that involve fraudulent billing, but also incorporate unnecessary surgeries, diluted cancer drugs, and fraudulent lab tests.

What is Health Care Fraud?

• Altered or fabricated medical bills and other documents.
• Excessive or unnecessary treatments.
• Billing schemes, such as:
--charging for a service more expensive than the one provided.
--charging for services that were not provided.
--duplicate charges.
• False or exaggerated medical disability.
• Collecting on multiple policies for the same illness or injury.

Medicare-Medicaid Fraud

Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., enacted in 1965 Pub.L. 89-97 (July 30, 1965), 79 Stat. 286, created the Federal Medicare and Medicaid programs and authorizes medical benefits for the aged, blind, and disabled. See generally United States v. Gold, 743 F.2d 800, 806 (11th Cir. 1984), cert. denied, 469 U.S. 1217 (1985). Frauds executed against these aid programs may be prosecuted via a number of criminal statutes. See Bucy, Health Care Reform and Fraud by Health Care Providers, 38 Villa. L. Rev. 1002 (1993); Bucy, Fraud by Fright: White Collar Crime by Health Providers, 67 N.C.L.Rev. 855 (1989). The 1965 statute was designed to "to provide a hospital insurance program for the aged under the Social Security Act with a benefits program and an expanded program of medical assistance to increase benefits under the Old-Age, Survivors, and Disability Insurance System, to improve the Federal-State public assistance programs, and for other purposes."

The Act included two programs popularly known as Medicare, 42 U.S.C. § 1395ff (Title 18 of Social Security Act of 1935), and Medicaid, 42 U.S.C. § 1396ff (Title 19 of Social Security Act of 1935). Medicare and Medicaid are administered by the Health Care Financing Administration (HCFA) of the United States Department of Health & Human Services (HHS). Investigations involving either program are conducted by the Office of Inspector General of HHS, the FBI and other agencies.

Medicare is a health financing program for the elderly. Its financing derives from a federally-administered trust fund. Claims for reimbursement are filed by beneficiaries or their health care providers and are paid by carriers and intermediaries (private insurance companies in each state which are the Federal government's agents) under contracts to perform this service. The carrier or intermediary is reimbursed for claims that are paid, and for administrative costs, out of the Federal trust funds.

Medicaid is a health financing program for low-income individuals administered by each state, pursuant to a state plan that must be approved by HHS. The states have some flexibility with regard to how they structure their respective programs. Each state is reimbursed by the federal government on a quarterly basis for a percent of the costs incurred in operating its program.

Beneficiaries and providers under either program can be prosecuted under Federal law for (1) making material false statements, (2) submitting false claims, or (3) being a party to a kickback scheme. The first two offenses are prohibited by 18 U.S.C. §§ 287, 1001; all three are prohibited by specific criminal provisions in the Medicare and Medicaid statutes. See generally 42 U.S.C. § 1320a-7b.

In recent years, especially with the establishment of Federally funded Medicare Fraud Control Units in many states, fraud in the Medicaid program has come to be viewed as a state concern. The Federal government program has focused its attention more on its enforcement of fraud against its Medicare program.

Successful defense of a Medicare case will often require a sophisticated understanding of the reimbursement principles involved in that case. The reimbursement principles under Medicare have grown increasingly complicated over the years. Different entities are paid under different methodologies (e.g., cost-based, charge-based, or fee schedules) and may be subject to limits based on a number of factors. Some providers are paid directly, and some are paid by the patient, who is then reimbursed by Medicare.

Health care fraud imposes an enormous cost to the health care system and to our nation's economy as a whole. While no one has an exact figure, the General Accounting Office estimates that health care fraud, waste and abuse may account for as much as 10 percent of all health care expenditures. Health care expenditures now exceed one trillion dollars each year, so that more than $100 billion may be lost in fraud, waste and abuse annually. Health care fraud also undermines both the cost and quality of health care provided to patients

The Department of Justice relies heavily on the investigative and audit work of numerous federal and state law enforcement agencies committed to addressing health care fraud, each with different experience, expertise and program knowledge.

Federal Investigative Agencies: At the federal level, there are numerous law enforcement agencies with authority to investigate health care fraud including those listed below. The description of the primary responsibility of each agency to investigate fraud on particular health care programs shall not be interpreted to exclude any federal investigative agency with jurisdiction from investigating fraud on any other health care program.

The Department of Health and Human Services Office of Inspector General (HHS-OIG) focuses primarily on fraud on the Medicare and Medicaid programs and the health benefits programs of the United States Public Health Service (PHS) such as the Indian Health Service.

The Federal Bureau of Investigation (FBI) focuses on fraud on private health plans and on any health plan receiving federal funds such as Medicare, Medicaid, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), and the Federal Employees Health Benefits Program (FEHBP).

The Defense Criminal Investigative Service (DCIS), the investigative arm of the Office of the Inspector General), Department of Defense (DoD), is responsible for investigating alleged fraud and abuse in DoD programs. The programs include those which provide health care to active duty and retired military personnel, their dependents and survivors through: (1) direct care provided by a military medical treatment facility; and (2) civilian care provided through an indemnity type health insurance program known as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). The DCIS has primary investigative jurisdiction of all allegations of fraud committed by health care providers throughout the DoD Military Health Services System.

The Office of Inspector General of the Department of Veterans Affairs (VA-IG) focuses on fraud on the VA which provides health benefits to our veterans.

The Office of Inspector General of the Office of Personnel Management (OPM-IG) focuses on fraud on the FEHBP, which provides health benefits to federal civilian employees, retirees, and their dependents.

The Office of Inspector General of the Department of Labor (DOL-OIG) focuses on health care fraud in three major Federal health benefit and disability program administered by DOL that compensate or provide benefits to Federal workers and certain coal miners and longshore/harbor workers, who sustain job-related injuries, illnesses or diseases. DOL-OIG also devotes significant attention to fraud within private sector health and welfare benefit plans regulated under the Employee Retirement Income Security Act.

Other federal agencies investigate fraud by health care providers within their respective jurisdictions, e.g., the Internal Revenue Service of the United States Department of the Treasury, Federal Trade Communication, and the United States Postal Inspectors.

State and Local Investigative Agencies: Federal, State and local investigative agencies work as partners with each other:

Almost all of the states have Medicaid Fraud Control Units (MFCUs). The state Medicaid Fraud Control Units were established by federal law in 1977. The MFCUs are responsible for the investigation and prosecution (or referral for prosecution) of all criminal violations of state laws regarding fraud on the Medicaid program, as well as the investigation and prosecution of patient abuse and neglect in Medicaid-funded facilities. The MFCUs are certified by HHS-OIG and are required by federal law and regulation to meet certain minimal standards, including the employment of a multi-disciplinary team of attorneys, auditors, and investigators.

State Attorneys General may have jurisdiction to investigate health care fraud offenses under state law.

Many district attorneys' offices also enforce state and local laws relating to health care fraud.

Several state oversight agencies whose focus is not health care fraud and abuse nevertheless may reveal problems which may constitute or be related to health care fraud and abuse. For example, State Surveillance and Utilization Review Subsystems (S/URS). The S/URS staff reviews systems output and conducts preliminary reviews of Medicaid providers to determine whether they can substantiate a pattern of fraud. If so, such allegations must be referred for fraud investigation.

State Longterm Care Ombudsmen, funded through AOA, identify, investigate and resolve complaints involving the health and safety of residents of long-term care facilities.

State survey and certification agencies monitor quality of care in longterm care facilities. 

Investigations by Private Health Plans: Some private health plans investigate allegations of fraud.