The Challenge of Health Care Fraud
Everyone Shares the Burden of Health Care Fraud
In 2018, $3.6 trillion was spent on health care in the United States, representing billions health insurance claims. It is an undisputed reality that some of these claims are fraudulent. Although they constitute only a small fraction, those fraudulent claims carry a very high price tag, both financially and in how they impact our perception of the integrity and value of our health care system.
The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year. A conservative estimate is 3% of total health care expenditures, while some government and law enforcement agencies place the loss as high as 10% of our annual health outlay, which could mean more than $300 billion.
Whether you have employer-sponsored health insurance or you purchase your own insurance policy through HealthCare.gov, a state marketplace or the individual market, health care fraud inevitably translates into higher premiums and out-of-pocket expenses for consumers, as well as reduced benefits or coverage. For employers—private and government alike—health care fraud increases the cost of providing insurance benefits to employees which, in turn, increases the overall cost of doing business. For many Americans, the increased expense resulting from fraud could mean the difference between making health insurance a reality or not.
However, financial losses caused by health care fraud are only part of the story. Health care fraud has a human face too. Individual victims of health care fraud are sadly easy to find. These are people who are exploited and subjected to unnecessary or unsafe medical procedures. Or whose medical records are compromised or whose legitimate insurance information is used to submit falsified claims.
Don't be fooled into thinking that health care fraud is a victimless crime. There is no doubt that health care fraud can have devastating effects.
What Does Health Care Fraud Look Like?
The majority of health care fraud is committed by a small number of dishonest health care providers, and in some particularly distressing cases, by individuals only posing as legitimate health care providers. Sadly, the actions of these deceitful few ultimately serve to sully the reputation of perhaps the most trusted and respected members of our society—our doctors.
Unfortunately, the stock in trade of fraud-doers is to take advantage of the confidence that has been entrusted to them in order to commit ongoing fraud on a very broad scale. And in conceiving fraud schemes, this group has the luxury of being creative because it has access to a vast range of variables with which to formulate all sorts of wrongdoing:
- The entire population of our nation's patients (sometimes, incredulously, even patients that are deceased);
- The entire range of potential medical conditions and treatments on which to base false claims; and
- The ability to spread false billings among many payers and insurers simultaneously, including public programs such as Medicare and Medicaid, thus increasing fraud proceeds while lessening their chances of being detected by any a single insurer.
Some of the more common types of fraud committed by dishonest providers include:
- Billing for services that were never rendered—by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding otherwise legitimate claims with charges for procedures or services that did not take place.
- Billing for more expensive services or procedures than were actually provided or performed, commonly known as "upcoding"—i.e., falsely billing for a higher-priced treatment than was actually provided (which often requires the accompanying "inflation" of the patient's diagnosis code to a more serious condition consistent with the false procedure code).
- Performing medically unnecessary services solely for the purpose of generating insurance payments—this is seen very often in diagnostic-testing schemes such as nerve-conduction and genetic testing.
- Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments—this is widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as "nose jobs" are billed to patients' insurers as deviated-septum repairs.
- Falsifying a patient's diagnosis and medical record to justify tests, surgeries or other procedures that aren't medically necessary.
- Unbundling—billing for each step of a procedure as if they are separate procedures.
- Billing a patient more than the required co-pay amount for services that were prepaid or paid-in-full by the benefit plan under the terms of a managed care contract.
- Accepting kickbacks for patient referrals.
- Waiving patient co-pays or deductibles for medical or dental care and over-billing the insurance carrier or benefit plan (insurers often set the policy with regard to the waiver of co-pays through its provider contracting process; while, under Medicare, routinely waiving co-pays is prohibited and may only be waived due to "financial hardship").
Consider Some Risks of Health Care Fraud to You
False Patient Diagnoses, Treatment and Medical Histories
Health care fraud, like any fraud, demands that false information be represented as truth. An all too common health care fraud scheme involves perpetrators who exploit patients by entering into their medical records false diagnoses of medical conditions they do not have, or of more severe conditions than they actually do have. This is done so that bogus insurance claims can be submitted for payment.
Unless and until this discovery is made (and inevitably this occurs when circumstances are particularly challenging for a patient) these phony or inflated diagnoses become part of the patient's documented medical history, at least in the health insurer's records.
A Miami-Dade psychiatrist, for example, pleaded guilty in 2016 to several fraud-related counts of conspiracy, was ordered to pay $50 million in restitution and was sentenced to more than twelve years in federal prison for his role in a fraud scheme that regularly involved entering false psychiatric diagnoses into the medical records of patients. For instance, the physician documented false information such as auditory hallucinations, bipolar disorder, and depression with psychosis in the medical record of an FBI informant’s medical file. According to a signed statement by the defendant as part of his guilty plea, the psychiatrist’s false diagnoses resulted in more than $20 million in undeserved disability payments to various “patients” between 2002 and January 2016.
Medical Identity Theft
As a consumer, you are surely aware of the perils of identity theft and the devastating affects it can have on your financial health—jeopardizing bank accounts, credit ratings and your ability to borrow. But are you as familiar with the risks posed by medical identity theft? You should be, considering that more than 2 million Americans have been victims of this escalating crime, according to the Medical Identity Theft Alliance (MIFA).
When a person's name or other identifying information is used without that person's knowledge or consent to obtain medical services or goods, or to submit false insurance claims for payment, that's medical identity theft. Medical identity theft frequently results in erroneous information being added to a person's medical record, or even the creation of an entirely fictitious medical record in the victim's name.
Victims of medical identity theft may receive the wrong medical treatment, could become uninsurable for life insurance coverage, and may find that their medical record shows diagnoses they don’t actually have. A medical identity theft victim may unexpectedly fail a physical exam for employment because a disease or condition for which he's never been diagnosed or received treatment has been unknowingly documented in his health record.
Untangling the web of deceit spun by perpetrators of medical identity theft can be a grueling and stressful endeavor. The effects of this crime can plague a victim's medical and financial status for years to come.
Physical Risk to Patients
Shockingly, the perpetrators of some types of health care fraud schemes deliberately and callously place trusting patients at significant risk of injury or even death. It's distressing to imagine, but there have been many cases where patients have been subjected to unnecessary or dangerous medical procedures simply because of greed. Unnecessary procedures can result in countless irreversible outcomes such as patients losing their ability to have children or losing full physical mobility.
In December, 2015, an Ohio cardiologist was sentenced to 20 years in federal prison for performing unnecessary catheterizations, tests, stent insertions and causing unnecessary coronary artery bypass surgeries as part of a scheme to overbill Medicare and other insurers by $29 million.
In an ongoing 2019 case, a Virginia OB/GYN was arrested and accused of performing unnecessary surgeries on female patients to collect insurance payments. So many concerned former patients have contacted federal authorities that a hotline for potential victims has been established. Some of the medically unnecessary surgical procedures alleged to have been performed include hysterectomies, dilation and curettages, and the removal of ovaries and fallopian tubes.
Health Care Fraud and Organized Criminal Groups
Health care fraud is not just committed by dishonest health care providers. So enticing an invitation is our nation's pool of health care money, that in some geographic areas, law enforcement agencies and health insurers have witnessed the migration of criminals from illegal drug trafficking into the safer and far more lucrative business of perpetrating fraud schemes against Medicare, Medicaid and private health insurance companies.
Enterprise crime, as it’s often called, can be far reaching and move quickly from place to place. In 2007, Medicare Fraud Strike Force Teams began to be established in various locations across the nation considered to be hotbeds of fraud activity with the goal of harnessing the collective resources of Federal, State, and local law enforcement entities to prevent and combat health care fraud, waste, and abuse. Strike Force “takedowns” often involve dozens of defendants involved in elaborate enterprise-wide fraud schemes. Strike Force Teams currently operate in Miami; Los Angeles; Detroit; Houston; Brooklyn; Baton Rouge and New Orleans; Tampa and Orlando; Chicago; Dallas; Washington, D.C.; Newark and Philadelphia; and the Appalachian Region.
In FY 2018 alone, investigative efforts of the FBI resulted in over 812 operational disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of more than 207 health care fraud criminal enterprises.
A Federal Crime with Stiff Penalties
In response to these realities, Congress—through the Health Insurance Portability and Accountability Act of 1996 (HIPAA)—specifically established health care fraud as a federal criminal offense, with the basic crime carrying a federal prison term of up to 10 years in addition to significant financial penalties. [United States Code, Title 18, Section 1347.]
The federal law also provides that should a perpetrator's fraud result in the injury of a patient, the prison term can double, to 20 years; and should it result in a patient's death, a perpetrator can be sentenced to life in federal prison.
HIPAA also established a comprehensive program to combat fraud committed against health plans, private as well as public. It mandated the establishment of a national Health Care Fraud and Abuse Control Program (HCFAC), under the joint direction of the Attorney General and the Secretary of the Department of Health and Human Services (HHS) acting through the Department's Inspector General (HHS/OIG). HCFAC coordinates federal, state and local law enforcement efforts against health care fraud and abuse. Since 1997, the Department of Justice (DOJ) and HHS have produced an Annual Report detailing the Control Program’s activities and outcomes.
Many states also have responded vigorously to the threat of health care fraud, not only by strengthening their insurance fraud laws and penalties, but also by requiring health insurers to meet certain standards of fraud detection, investigation and referral as a condition of maintaining their licenses in the state.
Private-Public Cooperation Against Fraud is Essential
Founded in 1985 by a handful of private insurers and law enforcement personnel, the National Health Care Anti-Fraud Association is a private-public non-profit organization focused solely on improving the private and public sectors' ability to detect, investigate, prosecute and, ultimately, prevent fraud and abuse committed against our private and public health insurance programs.
Today, NHCAA represents the combined efforts of the anti-fraud units of the vast majority of our country's private health payers and the entire spectrum of federal and state law enforcement and regulatory agencies that have jurisdiction over the crime of health care fraud, along with hundreds of individual members from the private health insurance sector as well as from federal, state and local law enforcement.
The NHCAA pursues its mission by fostering private-public cooperation against health care fraud at both the case and policymaking levels, by facilitating the sharing of investigative information among health insurers and government agencies and by providing information about health care fraud to all interested parties.
The NHCAA Institute for Health Care Fraud Prevention, a non-profit educational foundation, provides unmatched professional education and training to industry and government anti-fraud investigators and other personnel.
What Can You Do to Avoid or Prevent Health Care Fraud?
Here are some simple ways you can protect yourself from health care fraud, and keep health care costs down for everyone:
- Protect your health insurance ID card like you would a credit card. In the wrong hands, a health insurance card is a license to steal. Don't give out policy numbers to door-to-door salespeople, telephone solicitors or over the Internet. Be careful about disclosing your insurance information and if you lose your insurance ID card, report it to your insurance company immediately.
- Report fraud. Call your insurance company immediately if you suspect you may be a victim of health insurance fraud. Most insurers now offer the ability to report suspected fraud online through their Website.
- Be informed. Be knowledgeable about and aware of the health care services you receive, keep good records of your medical care, and closely review all medical bills you receive.
- Read your policy and benefits statements. Read your policy, Explanation of Benefits (EOB) statements and any paperwork you receive from your insurance company. Make sure you actually received the treatments for which your insurance was charged, and question suspicious expenses. Are the dates of service documented on the forms correct? Were the services identified and billed for performed?
- Beware of "free" offers. Is it too good to be true? Offers of free health care services, tests or treatments are often fraud schemes designed to bill you and your insurance company illegally for thousands of dollars of treatments you never received.
Health care fraud is a serious crime that affects everyone and should concern everyone—government officials and taxpayers, insurers and premium-payers, health care providers and patients—and it is a costly reality that none of us can afford to overlook. By taking steps to protect yourself from health care fraud, you are helping protect the integrity of our nation’s health care system and enormous, yet finite, resources we devote to it.