Medicare/Medicaid Fraud


Curbing Fraud Could Save Billions

Curbing waste, fraud, and abuse won't eliminate the deficit, but it can save the government tens of billions of dollars every year and avoid cuts elsewhere. What's more, the federal government is already making big gains in this area that have attracted little notice -- and the Obama Administration has been especially aggressive on this front.

The biggest low hanging fruit is Medicare and Medicaid fraud. Rampant overbilling and defrauding of these programs costs taxpayers up to $40 billion a year -- with some figures ranging much higher. Some of the costliest frauds have been perpetrated by leading pharmaceutical companies, which have misled public healthcare programs about the actual cost of prescription drugs and conspired with doctors to systematically overcharge the government for drugs. (These schemes allow Big Pharma to offer fat financial rewards to doctors who prescribe their drugs.) It used to be the defense industry perpetrated the most fraud against the U.S. government; now it is Big Pharma.

But, for nearly a decade now, federal and state authorities have been trying to stop such fraud -- with some success. According to an authoritative study by Public Citizen, the government has settled 80 cases with pharmaceutical companies accused of overcharging public healthcare programs since 1991, with most of those settlements in recent years. All told, these companies have paid $2.3 billion penalties in such cases -- and many billions more to settle other charges.

This crackdown on Big Pharma started during the Bush years, but the Obama Administration has ramped up the pressure. Absurdly, as I have written elsewhere, not a single top pharmaceutical exec has been indicted for any crimes -- even though, clearly, major crimes have occurred. Still, it seems the crackdown is having some effects.

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Medicare Fraud and the Criminality of Doctors

Once upon a time, when top U.S. law enforcement leaders announced a sweep of arrests, it was typically mafia leaders or drug kingpins who were being led away it handcuffs. Now it is more likely to be doctors and healthcare providers. That was the case today, when U.S. Attorney General Eric Holder announced charges against 111 defendents in nine cities on charges of defrauding Medicare of $225 million through false billing -- the "largest federal healthcare fraud takedown in our nation's history," as Holder described it.

Those charged included numerous doctors and nurses, as well as healthcare executives. In New York, for example, charges were filed against Dr. Boris Sachakov "in connection with an approximately $22.5 million scheme to defraud Medicare and private insurance carriers by submitting false and fraudulent claims for purported proctology services," according to U.S. officials. Another doctor busted in New York for medicare fraud was a podiatrist who named Leonard Langman who tried to bilk the government for $250,000. In Miami, the sting snared 30 people, including three doctors. 

Others charged in Miami included healthcare executives and marketers Lawrence S. Duran, Marianella Valera, Judith Negron, Sandra Jimenez, Hilario Morris, Joseph Valdes, and Margarita Acevedo, who were involved in two companies, ATC and Medlink, that allegedly engaged incheating and kickback schemes. As reported here,

According to court documents, the defendants participated in a scheme to defraud Medicare by submitting false claims for mental health services administered at ATC facilities that were medically unnecessary or not provided at all.  The indictment alleges that various defendants paid kickbacks to patient brokers and owners and operators of halfway houses and assisted living facilities (ALFs), in exchange for delivering patients to ATC facilities.  Various defendants are charged with participating in an extensive and complicated money laundering scheme related to the cash for kickback payments.

Federal authorities have come to see the healthcare industry as among the most corrupt sectors of the U.S. economy and estimates of losses to Medicare and Medicaid fraud run into the tens of billions. The corruption runs deep and keeps appearing in new areas of healthcare. As U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida stated,

“Health care fraud has evolved from DME fraud, to infusion fraud, to home health care fraud, and now, as this case shows, to community mental health treatment fraud. Worse yet, health care fraud has come to permeate every level of the health care industry, from the owners and managers of dirty clinics, to complicit doctors, program directors, therapists, marketers, and patient recruiters.

It is hard to speculate about the motives of the doctors involved, or the other well-educated professionals who orchestrate these schemes. These are people who already have much more opportunity and income than most Americans, and now face jail time on felony charges. Yet as I argued in The Cheating Culture, the criminality of doctors may not be so surprising after all. Many people enter this profession hoping for significant financial rewards, only to find that their pay doesn't exactly buy an opulent lifestyle and that their days entail much drudgery in dealing with insurers. When the chance of easy money comes along, quite a few doctors it seems are ready to pounce.


Bipartisan Support for Fighting Medicare Fraud?

The two political parties can't seem to agree on very much these days, especially when it comes to spending federal dollars. New Republican leaders are determined to cut every discretionary domestic program in sight. But maybe, just maybe, they'll go along with a proposed increase in spending by the Department of Justice to go after healthcare fraud -- spending that would more than pay for itself.

This week DOJ went before Congress to ask for a whopping 22 percent increase in its budget to fight fraud for next year, or $283.4 million. (See testimony below.) The request came just weeks after DOJ and HHS announced that it had recovered $4 billion in funds lost to healthcare fraud. Given that success, it's hard to argue against investing more in anti-fraud efforts. As Senator Tom Harkin pointed out at a hearing this week, "On average, every dollar that the Federal Government spent on these efforts returned $6.80 to the U.S. Treasury."

Republicans have famously argued for years that they are people you elect if you want to go after "waste, fraud, and abuse" in government programs. Too often, though, their anti-government zeal has led them to underfund efforts aimed at nailing fraudsters. Meanwhile, in the past two years, the Obama Administration has shown that it is serious about saving billions of taxpayer dollars by attacking fraud, especially in the healthcare sector.

Yet even as evidence piles up of the Administration's success on this score, it seems that GOP fiscal hawks aren't paying attention. They have proposed deep cuts in funds aimed at reducing healthcare fraud -- cuts that are likely to increase the deficit. Some Republicans may have different ideas, though. At this week's hearing on fraud, organized by Harkin, a top Republican, Senator Richard Shelby of Alabama, agreed that more must be done to address the problem. Does that mean that he'll defy Tea Party types and support DOJ's budget hike? Stay tuned.

DOJ statement on fighting healthcare fraud


Fraud Crackdown Nets $4 Billion

It is no secret that tens of billions of dollars are lost annually to Medicare and Medicaid fraud -- as much as $100 billion total. Indeed, when it comes to the fabled problem of "waste, fraud, and abuse," the healthcare sector leads the way and this is an area where the government can save a boatload of money through greater enforcement efforts.

The potential scope of savings was demonstrated over the past year, when the government pulled in an impressive $4 billion in recovered money from healthcare fraudsters -- the highest amount ever over a 12-month period.

The money is rolling in, along with indictments, thanks to far-reaching cooperation between the Health and Human Services Department and the Justice Department, along with Treasury. In 2009, the Obama Administration created the Health Care Fraud Prevention & Enforcement Action Team (HEAT) "to prevent waste, fraud and abuse in the Medicare and Medicaid programs and to crack down on the fraud perpetrators who are abusing the system and costing American taxpayers billions of dollars." There is also a Health Care Fraud and Abuse Control Program (HCFAC) and Medicare Fraud Strike Force that has been ramped up to operate in growing number of cities.

The scope and variation of the healthcare frauds that the feds are going after is breathtaking, and laid in detail in document below. And the sheer number of individuals nailed is shocking. As the government reported,

Strike Force enforcement accomplishments in all seven cities during FY 2010 include:

  • 140 indictments involving charges filed against 284 defendants who collectively billed the Medicare program more than $590 million;
  • 217 guilty pleas negotiated and 19 jury trials litigated, winning guilty verdicts against 23 defendants; and
  • Imprisonment for 146 defendants sentenced during the fiscal year, averaging more than 40 months of incarceration.

Including Strike Force matters, federal prosecutors opened 1,116 criminal health care fraud investigations as of the end of FY 2010, and filed criminal charges in 488 cases involving 931 defendants. A total of 726 defendants were convicted for health care fraud-related crimes during the year.

Medicare Fraud Report


How the Healthcare Reform Law Will Reduce Fraud

Amid all the debate about the cost and instrusiveness of the healthcare reform law passed by Congress last year, little attention was given to a crucial component of the new law: It tough provisions designed to dramatically reduce Medicare and Medicaid fraud, along with fraud that hits other healthcare programs. The does this in variety of ways and the likely savings annually may rise into the billions. As summarized by the White House:

Numerous provisions of the Affordable Care Act will help the Obama Administration continue to proactively work to prevent and fight fraud, waste and abuse in health care programs.

Enhanced Screening and Other Enrollment Requirements: The Affordable Care Act requires providers and suppliers who wish to enroll in the Medicare or Medicaid programs or CHIP to undergo a rigorous screening process appropriate to the risk of fraud, waste or abuse such providers and suppliers present to the programs.  The new law also allows the Secretary to prohibit new providers from enrolling in the programs to prevent or combat fraud, waste or abuse.

Stopping Payment of Suspect Claims:  The new law allows Medicare payments to be withheld from program providers or suppliers if there is a pending investigation or action regarding a credible allegation of fraud.  The law also requires States to withhold payments to Medicaid providers where there is pending an investigation of a credible allegation of fraud.

New Resources to Fight Fraud: The Affordable Care Act provides an additional $350 million to ramp up anti-fraud efforts, including placing more “feet on the street” by allowing for the hiring of more law enforcement agents and others to fight fraud in the health care system.

Sharing Data to Fight Fraud: Building on the Obama Administration initiatives to improve coordination across agencies working to stop fraud, the law requires certain claims data from Medicare, Medicaid and CHIP, the Veterans Administration, the Department of Defense, the Social Security Disability Insurance program, and the Indian Health Service to be centralized, thereby making it easier for agency and law enforcement officials to identify criminals and prevent fraud on a system-wide basis.  The Obama Administration has already improved access to data for law enforcement, and the Department of Justice (DOJ) and the OIG continue to benefit from improved access to data to help identify criminals and fight fraud.

New Tools to Prevent Fraud: The Affordable Care Act strengthens the government’s authority to require certain high-risk providers and suppliers to undergo a higher level of scrutiny before enrolling in the program based on the risk of fraud, waste or abuse they pose to the program.  DMEPOS suppliers and home health agencies providers could be required to post surety bonds as a condition of enrollment to ensure they are legitimate suppliers or providers and financially solvent.  In addition, the Affordable Care Act authorizes CMS to require providers and suppliers who order and refer certain items or services for Medicare beneficiaries to enroll in Medicare and maintain documentation on those orders and referrals. In addition, providers and suppliers must establish compliance plans ensuring that they are aware of anti-fraud requirements and good governance practices and have incorporated these into their operations. Other preventive measures focus on certain categories of providers and suppliers that historically have presented concerns including Durable Medical Equipment (DME) suppliers, home health agencies, and Community Mental Health Centers (CMHCs). For example, CMHCs will now be required to serve at least 40 percent non-Medicare beneficiaries in order to ensure that only legitimate CMHCs bill Medicare.

Expanded Overpayment Recovery Efforts: The law expands the Recovery Audit Contractors (RACs) program to Medicaid, Medicare Advantage (Part C) and Medicare drug benefit (Part D) programs.   Under these expansions, RACs will help identify and recover over and underpayments to providers across Medicare and Medicaid for the first time. The Affordable Care Act also requires providers, suppliers, Medicare Advantage plans, and Part D plans to report and return Medicare and Medicaid overpayments within 60 days of identification.

Enhanced Penalties to Deter Fraud and Abuse: The Affordable Care Act provides the OIG with the authority to impose stronger civil and monetary penalties on those found to have committed fraud. The Secretary also is provided new authority to prevent problematic providers from participating in Medicare or Medicaid.  Under the new law:

  • Providers and suppliers who lie on their application to enroll in Medicare or Medicaid may be excluded from the programs.
  • Providers who identify an overpayment from Medicare or Medicaid but do not return it within 60 days may be subject to new fines and penalties.
  • Providers who are terminated from a state’s Medicaid program will be terminated from Medicaid programs in other states.                                                                                   

Tough New Rules and Sentences for Criminals: The Affordable Care Act increases the Federal sentencing guidelines for health care fraud offenses by 20-50% for crimes that involve more than $1,000,000 in losses.  The law makes obstructing a fraud investigation a crime and makes it easier for the government to recapture any funds acquired through fraudulent practices. And the law makes it easier for the DOJ to investigate potential fraud or wrongdoing at facilities like nursing homes.

Greater Oversight of Private Insurance Abuses: The new law also provides enhanced tools and authorities to address abuses of multiple employer welfare arrangements and protect employers and employees from insurance scams. It also gives new powers to the Secretary and Inspector General to investigate and audit the health insurance exchanges. This, plus the new rules to ensure accountability in the insurance industry, will protect consumers and increase the affordability of health care.