How Much Does Medicare Fraud Cost You?

These laws protect you from fraud, waste, and abuse

The amount of money lost to Medicare fraud every year is astounding. It is not just physicians either. Clinic owners, hospital systems, insurance companies, laboratories, nurses, pharmacists, people on Medicare—anyone can commit fraud. Even more commit waste and abuse. The difference is that fraud involves an intentional scheme, whereas waste and abuse, though not intentional, result in unnecessary costs to our health care system.

Known Medicare Fraud Cases

Look at these cases from 2017. Unfortunately, more are sure to follow.

  • In February 2017, a New York clinic owner was sentenced to five years in prison and charged $8 million in penalties after paying homeless people to undergo medically unnecessary tests billed to Medicare and Medicaid.
  • In May 2017, two Medicare Advantage insurers agreed to a $32 million settlement after a whistleblower revealed that medical records were manipulated to made patients look sicker than they were, resulting in overpayments from the government.
  • In June 2017, Genesis Healthcare paid $54 million to settle allegations about billing for unnecessary hospice and rehabilitation care.
  • In July 2017, the Department of Justice took down a $1.3 billion fraud ring targeting Medicaid and Medicare. 57 doctors, 162 nurses, and 36 pharmacists were banned from all federal healthcare programs for opioid diversion and abuse.
  • In August 2017, a Texas physician was sentenced to 35 years in prison and fined $268 million for conspiracy and fraud against Medicaid and Medicare. He falsified medical records to order unnecessary medical tests and services.
  • In October 2017, three New York physicians were sentenced to 2.5 years in prison for taking kickbacks in a $100 million Medicare scheme with a laboratory company in New Jersey.

Why Medicate Fraud Is an Issue

There are limited Medicare funds available. It is no secret that the Medicare Trust fund is expected to run out by 2028. The United States cannot afford to lose any of that money to fraud, waste, and abuse. That is why the federal government has legislation in place to punish those who exploit the healthcare system and to recover lost funds.

These are the laws, how they work, and their penalties. Please note that the penalties are subject to inflation.

1
Anti-Kickback Statute (AKS)

Pink piggy bank with stethoscope
David Franklin / Getty Images

What Is It?

Enacted under the Social Security Amendments of 1972, the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits the exchange (or offer to exchange) anything of value (e.g. bribes, kickbacks, rebates) for referrals for services that are paid for by a federal healthcare program. 

Example

A heart-device company can offer a cardiologist a kickback to perform more surgeries with their devices.

What Are the Penalties?

Criminal penalties can include fines up to $25,000 per kickback and/or a five-year prison term. Civil penalties can be as high as $50,000. Violators of AKS will also be excluded from participating in federal healthcare programs for at least five years.

2
Civil Monetary Penalties Law (CMP)

What Is It?

The Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a) imposes civil penalties for violations of the Anti-Kickback Statute (AKS). In addition to addressing kickbacks, amendments to the law by the Affordable Care Act specifically penalize violators for arranging services with entities excluded from federal programs, making fraudulent statements on applications or contracts with federal programs, generating false claims, failing to report overpayments, and failing to give the government timely access to records.

Example

Medicare requests a chart audit for a specific date, but the physician's office does not make the medical records available on time.

What Are the Penalties?

Civil penalties range from $10,000 to $50,000 depending on the violation. Violators are also subject to pay damages up to three times the amount improperly claimed.

3
False Claims Act (FCA)

What Is It?

The False Claims Act, as we know it today, is based on a 1986 amendment to the original law passed in 1863. Also known as Lincoln's Law, it first came about during the Civil War when there was concern about fraudulent schemes to sell supplies to the Union Army. It is a law that prohibits anyone from knowingly submitting false or fraudulent claims to the federal government for payment.

Example

A dermatologist submits a bill for a skin biopsy he never performed.

What Are the Penalties?

Civil penalties (31 U.S.C. § § 3729-3733) range from $10,781 to $21,563 per claim, plus three times the damages the federal government sustained because of the false claim. Criminal penalties (18 U.S.C. § 287) include imprisonment and criminal fines up to $250,000 for an individual and $500,000 for a corporation for each claim.

4
Criminal Health Care Fraud Statute

What Is It?

The Criminal Health Care Fraud Statute (18 U.S.C. § 1347) is a provision of the Social Security Act which makes it a felony to intentionally execute (or attempt to execute) a scheme to defraud a healthcare benefit program or use false statements to obtain funds from a federal healthcare program.

Example

A pharmacist does not dispense the proper number of opioid pills to a patient. Instead, he diverts the pills for direct sale to other clients.

What Are the Penalties?

Criminal penalties can include fines up to $250,000 and/or imprisonment up to 20 years.

5
Stark Statute (Physician Self-Referral Law)

What Is It?

The Stark Statute (42 U.S.C. § 1395nn) prohibits a physician from making referrals for health services to an entity when the physician (or a member of his or her family) has an ownership/investment interest or a compensation arrangement.

Example

A physician refers patients with COPD to an oxygen supply company that is owned by his wife.

What Are the Penalties?

All payments from such referrals must be refunded to the proper parties. A penalty of $15,000 may be imposed for each service provided. There may also be a $100,000 fine for entering into an unlawful arrangement. Violators may be excluded from the Medicare program entirely.

A Word From Verywell

Billions of dollars are billed out of Medicare and Medicaid every year. Whether fraud is committed intentionally or waste and abuse occur inadvertently, there are laws in place to protect against those financial losses and to penalize those who wrongfully take money from the government.

What we need is enforcement of those laws. The future of the Medicare Trust Fund depends on it.

Sources:

Healthcare Frauds and Settlements in 2017: Running List. Healthcare Finance. http://www.healthcarefinancenews.com/slideshow/biggest-healthcare-frauds-2017-running-list. Updated November 10, 2017.

Medicare Fraud Strike Force. Office of the Inspector General. https://oig.hhs.gov/fraud/strike-force/.

Medicare Fraud, Waste, and Abuse: Prevention, Detection, and Reporting. https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/fraud_and_abuse.pdf. Published September 2017.

Physician Self Referral. Centers for Medicare and Medicaid Services. https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/index.html. Updated January 5, 2015.

A Roadmap for New Physicians: Fraud and Abuse Laws. Office of the Inspector General, U.S. Department of Health and Human Services. https://oig.hhs.gov/compliance/physician-education/01laws.asp.