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Read More“The overwhelming majority of health care providers, including physicians, nurses, physical therapists and pharmacists are caring, honest professionals. Unfortunately, a very small number of providers and health care organizations have chosen to cheat insurers, their patients and clients by committing health insurance fraud. This fraud steals hundreds of millions of dollars every year that could have been spent to help people. All of us pay for this with higher insurance premiums and taxes.” [1] This quote is directly from the State of Connecticut’s Insurance Department website and echoes the sentiment felt in all 50 states.
We see news of fraud happening almost daily that affects our financial well-being, but what about the fraud that affects our physical well-being? Health care fraud is a dual threat: it affects both the financial and physical well-being of the victim. The fraud does not simply take money from individuals, insurance carriers or federal agencies. This fraud can compromise the health of the individuals affected by the fraud.
In 2016, the Centers for Medicare and Medicaid Services (CMS) spent $1.1 trillion on health coverage for about 145 million Americans, $95 billion of which included improper payments due to abuse as a result of fraud. [2] This amounted to about 8.6% of the total amount spent on health coverage. In 2018, $3.6 trillion was spent on health care in the United States. [3] This amount includes health care from the CMS, government agencies and insurance companies. Although there is no exact figure to calculate how much fraud exists in the health care system, it is estimated that 3% to 10% of all health care expenditures are fraudulent, which equates to upwards of $300 billion in fraud.
To put health care fraud into perspective the AARP (formerly the American Association of Retired Persons) determined in 2017 that Medicare fraud totaled $68 billion. [4] By way of comparison, the annual fiscal budget for the Department of Homeland Security and NASA totaled $42 billion and $19 billion, respectively. [5] The $60 billion of fraud estimated by the AARP is a small estimate compared to the other estimates totaling $300 billion of fraud in the United States.
These are the primary areas the FBI identified: [6]
With a wide array of tools and tactics to benefit fraudsters, what has been the government’s response to medical fraud? The Department of Justice (DOJ) is increasing its efforts to combat medical and insurance fraud. The DOJ relies on the False Claims Act — which prosecutes those who provide false claims for federal funds and property — to prosecute medical fraud. In 2020, the DOJ obtained $1.8 billion in settlements from medical fraud from civil cases prosecuted under the False Claims Act. [7] The False Claims Act has recovered about $64 billion in settlements since 1986, totaling, on average, $1.8 billion in settlements per year. The DOJ recognizes the threat of medical fraud and created a Health Care Fraud Unit (HCFU), whose sole mission is to prosecute cases related to medical and insurance fraud, involving either harm to the patient or large financial losses. [8]
The HCFU is a multi-government agency initiative, combining resources from the FBI, U.S. Department of Health and Human Services (DHHS), the CMS, and other state and local agencies. The HCFU’s largest single recovery came in 2019 from the drug industry. The HCFU recovered and settled $591 million from a drug company to resolve the claim that the company paid kickbacks to doctors who prescribed their drugs. [9]
In 2017, the HCFU charged 220 individuals who collectively charged $1.5 billion in fraudulent medical charges. [10] In 2020, that amount increased to 344 individuals who stole about $4.1 billion.
In response to the growing threat and losses due to health care fraud in 2014, DHHS and the CMS received $571.7 million in budgetary resources to identify, investigate, and prosecute health care fraud. In 2014, DHHS and the CMS recovered $3.3 billion related to settlements from medical and insurance fraud.
According to the U.S. Government Accountability Office (GAO) in 2010, 739 health care fraud cases were resolved. [11] Of those 739 cases, medical providers conducted 62% of the fraud and individual beneficiaries conducted 14%. [12] The GAO study illustrated that medical providers conducted the majority of the fraud. Although there have been several convictions for multimillion-dollar fraud schemes that defrauded the programs, the full scope and extent of the fraud is unknown. The GAO noted that Medicare and Medicaid programs are at high risk for fraud because of the size, scope and complexity of the programs, which make them vulnerable to fraud and abuse.
The CMS categorizes fraud and integrity issues into four categories:
Prosecutors and investigators use several civil and criminal laws against fraudsters, including the False Claims Act, Anti-Kickback Statute, Physician Self-Referral Law, Social Security Act, Civil Monetary Penalties Law and the United States Criminal Code. [14] Government officials use these laws as a way to prosecute health care fraud and also as a deterrent by enforcing steep penalties.
Why should we care about health care fraud? If this type of fraud affects insurance companies or government programs, how does that affect me or my clients?
As mentioned previously, we can all do our part by closely reviewing EOBs and ensuring all entries are correct. However, having a keen eye on all types of medical billing can assist in identifying some of the red flags of medical fraud, including the following:
As discussed previously, fraudsters will use any means possible to defraud the health care system without any thought to the people they may hurt. Health care fraud is not a victimless crime, and it preys on individuals and corporations without hesitation.
Fraudsters do not care if the world is amid a pandemic. Fraud related to the COVID-19 pandemic has not yet been quantified; however, the FBI and other agencies are aware of the many schemes that have evolved as a result of the pandemic. DHHS issued an alert related to fraud schemes during the COVID-19 pandemic. According to DHHS, scammers have been using telemarketing calls, text messages, social media platforms and door-to-door visits to conduct COVID-19 scams. [15] Parts of these schemes include using the pandemic as a pretense to offer fraudulent COVID-19 tests, providing prescription cards in exchange for personal information, fraudulently billing federal health care programs and committing identity theft.
How are fraudsters using the COVID-19 pandemic to benefit themselves? The U.S. Treasury Financial Crimes Enforcement Network identified several instances of potential fraud related to health care benefit programs, health insurance and COVID-19 relief funds. [16]
Medical and insurance fraud continues to be a big problem in the United States. Health care fraud has existed and will continue to exist well after the COVID-19 pandemic. Fraud tactics may change over time, but the impact on our society will remain the same. To minimize the lasting effects of fraud, we must be diligent in ensuring our personal information is correct and adequately guarded. We must also ensure our elder family members are educated and aware of the threat.
As this article has already highlighted, health care fraud is a pervasive problem, starting with the individual up to the federal government. If the federal government and companies cannot stop fraud with all the resources and tools they have, how can we protect ourselves and our clients from becoming victims of fraud? Consider these tips:
We would like to thank our colleagues Jacob Hough, CFE, and Howard Silverstone, MBE, CPA, CFF, FCA, CFE, for providing insights and expertise that greatly assisted this research.
Jacob Hough is a Senior Consultant in J.S. Held’s Economic Damages & Valuations practice. Jacob "Jake" Hough, CFE, joined J.S. Held in January of 2024 as part of J.S. Held's acquisition of Forensic Resolutions, Inc. Jake has almost a decade of experience quantifying economic claims in dispute. He has extensive experience analyzing financial and nonfinancial data, conducting thorough analyses, and assessing economic damages in personal injury, wrongful death, and commercial damages, among other areas. Jake has comprehensive experience determining economic damages in numerous jurisdictions throughout the United States.
Jacob can be reached at [email protected] or +1 856 433 6433.
In addition to the resources already mentioned in this article, the following is a list of useful governmental and other agencies that deal with fraudulent activity:
[1] "What Can We Do To Combat Health Insurance Fraud?” State of Connecticut Insurance Department, https://portal.ct.gov/CID/Fraud/Fraud/What-Can-We-Do-To-Combat-Health-Insurance-Fraud (accessed July 14, 2021).
[2] Drabiak, K. and Wolfson, J., “What Should Health Care Organizations Do to Reduce Billing Fraud and Abuse?” AMA Journal of Ethics, https://journalofethics.ama-assn.org/article/what-should-health-care-organizationsdo-reduce-billing-fraud-and-abuse/2020-03 (accessed July 14, 2021).
[3] “The Challenge of Health Care Fraud,” National Health Care Anti-Fraud Association, https://www.nhcaa.org/tools-insights/about-health-care-fraud/the-challenge-of-health-care-fraud/ (accessed July 14, 2021).
[4] “Statistics,” Blue Cross Blue Shield Blue Care Network of Michigan, https://www.bcbsm.com/health-care-fraud/fraud-statistics.html#:~:text=The%20National%20Heath%20Care%20Anti,trillion%20in%20health%20care%20spending (accessed July 14, 2021).
[5] Eaton, J., “Medicare Under Assault from Fraudsters,” AARP, https://www.aarp.org/money/scams-fraud/info-2018/medicare-scams-fraud-identity-theft.html (accessed July 14, 2021).
[6] “Health Care Fraud,” FBI.gov, https://www.fbi.gov/scams-and-safety/common-scams-and-crimes/health-care-fraud (accessed July 14, 2021).
[7] “Justice Department Recovers Over $2.2 Billion from False Claims Act Cases in Fiscal Year 2020,” U.S. Department of Justice, https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claimsact-cases-fiscal-year-2020 (accessed July 27, 2021).
[8] “Health Care Fraud Unit,” U.S. Department of Justice, https://www.justice.gov/criminal-fraud/health-care-fraud-unit (accessed July 14, 2021).
[9] See footnote 7.
[10] Facts & Statistics, U.S. Department of Justice, https://www.justice.gov/criminal-fraud/facts-statistics (accessed July 14, 2021).
[11] Jimenez, A., “Health care Fraud During a Pandemic: Fast Facts for Financial Institutions,” Thomson Reuters, https://legal.thomsonreuters.com/en/insights/articles/health care-fraud-during-a-pandemic#3 (accessed July 14, 2021).
[12] “Health Care Fraud: Information on the Most Common Schemes and the Likely Effect of Smart Cards,” U.S. Government Accountability Office, https://www.gao.gov/assets/gao-16-216.pdf (accessed July 14, 2021).
[13] “Medicare Fraud & Abuse: Prevent, Detect, Report,” Medical Learning Network, https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/Fraud-Abuse-MLN4649244.pdf (accessed July 14, 2021).
[14] See footnote 12.
[15] “Fraud Alert: COVID-19 Scams,” U.S. Department of Health and Human Services, https://oig.hhs.gov/fraud/consumer-alerts/fraud-alert-covid-19-scams/ (accessed July 14, 2021).
[16] “Advisory on COVID-19 Health Insurance and Health Care-Related Fraud,” FinCEN Advisory, https://www.fincen.gov/sites/default/files/advisory/2021-02-02/COVID-19%20Health%20Care%20508%20Final.pdf (accessed July 14, 2021).
[17] U.S. State Attorney’s Office, District of NJ, “District of New Jersey Announces Charges in Health Care Fraud Cases as Part of Nationwide Federal Law Enforcement Effort, U.S. Attorney’s Office District of New Jersey,” https://www.justice.gov/usao-nj/pr/district-new-jersey-announces-charges-health-care-fraud-cases-part-nationwide-federal-law (accessed July 14, 2021).
[18] U.S. State Attorney’s Office, District of NJ, “Five People Charged, Two Others Admit Guilt, in $93 Million Health Care Fraud Scheme,” U.S Attorney’s Office District of New Jersey, https://www.justice.gov/usao-nj/pr/five-people-charged-two-others-admit-guilt-93-million-health-care-fraud-scheme (accessed July 14, 2021).
[19] Serreze, M., “Feds Settle Fraud Lawsuit Against N. Smithfield Medical Clinic,” Patch.com, https://patch.com/rhode-island/northsmithfield/feds-settle-fraud-lawsuit-against-n-smithfield-medical-clinic (accessed July 14, 2021).
[20] U.S. State Attorney’s Office, District of CA, “Former Chiropractor Found Guilty of Health Care Fraud Charges that She Schemed to Defraud health Insurers Out of $2.2 Million”, U.S. Attorney’s Office Central District of California, https://www.justice.gov/usao-cdca/pr/former-chiropractor-found-guilty-health-care-fraud-charges-she-schemed-defraud-health (accessed July 14, 2021).
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