It's estimated that as much as 10% of all the money spent on health care every year is paid out on fraudulent claims, which translates into hundreds of billions of dollars (yes, billions). Given its costly impact on the government and consumers, several agencies devote considerable resources to preventing, investigating, and prosecuting health care fraud.
Health care fraud is a crime in which someone uses lies, deceptions, or falsehoods when filing a health care claim in an effort to make a profit or to gain some type of benefit. There is no single type of health care fraud, and health care providers, patients, and even health insurers can commit this crime.
Health care fraud is a crime addressed by both state and federal laws, and one that has significant potential penalties.
State laws on healthcare fraud differ considerably. State healthcare fraud laws typically fall into one of three types for provider fraud: false claims laws, self-referral laws, and anti-kickback laws. Patient fraud claims often relate to providing false statements in order to obtain benefits, a form of insurance fraud. In some cases, a thief may steal someone else's health insurance card or identity to access medical care.
In addition to any state prohibitions against health care fraud, the federal health fraud law will apply in most situations. This law is very broad, applying when anyone makes an attempt to defraud any health care benefits program with the intent to gain control of money or property. The federal law applies in all states regardless of whether state law punishes health care fraud as a crime. (18 U.S.C. § 1347 (2022).)
The health care system has both private and public health insurers, and healthcare fraud can involve either of them. The two public health care insurers—Medicaid and Medicare—have long been targets of fraudulent claims, and there are a number of federal laws which apply to such situations.
Specific federal laws provide felony penalties for health care providers who make false claims or statements to the federal government, such as those seeking false reimbursement claims. It's also a crime to make any false statements or representations in connection with the delivery or payment of health care benefits. (18 U.S.C. §§ 287, 1001, 1035 (2022).)
Although anyone involved in the health care process can commit health care fraud, it is most commonly committed by providers in an attempt to obtain more money from insurers. Provider schemes cost the government and consumers billions of dollars. Patient schemes are also costly to the public, but even more harmful are those schemes involving stealing a victim's identity, which can destroy the victim's credit and take years to resolve.
Common fraud schemes by providers involve double-billing, filing claims for services never provided (phantom billing), misrepresenting non-covered treatments as medically necessary procedures, billing for more expensive services than were provided (upcoding), and providing kickbacks for referrals.
Common fraud schemes perpetrated by patients include faking a medical condition in order to receive medications that the patient then sells, falsifying medical claim information, or using someone else's insurance information or identity to receive health care services.
It's important to distinguish health care fraud from mere mistakes, omissions, or improper payments. To commit fraud, a person must knowingly engage in a plan, scheme, or activity to provide falsehoods, with the intent to achieve some financial gain. Fraud is not the same as, for example, making a mistake that results in a patient being billed for a treatment they did not receive. By contrast, when a health care provider knowingly provides unnecessary treatments or procedures and bills an insurer for those procedures in order to make a profit, such conduct is health care fraud.
At the state level, a defendant could face charges for health care fraud, insurance fraud, identity theft or fraud charges, or prescription fraud, to name a few. Federal law provides for both civil and criminal penalties for health care fraud. The difference between a civil penalty and a criminal one is that criminal penalties allow for fines, prison, and an order to pay restitution (compensate the victim for any money lost as a result of the fraud). Civil penalties result in an order to pay restitution (but no jail time or fine).
Making a false statement in relation to a Medicaid or Medicare claim can result in a 5-year prison sentence per offense, while a conviction for federal health care fraud can result in a 10-year sentence for each offense. If the fraud results in serious bodily injury to someone there is a potential sentence of up to 20 years in prison, while an act of health care fraud that results in someone's death has a potential life sentence.
Filing false insurance claims or providing false information to obtain benefits can also result in felony penalties. Often, these penalties are based on monetary losses to the company or health care benefits program. Similarly, the penalties for stealing someone's identity to receive health care benefits may be based on loss, which for health care benefits can easily be in the thousands of dollars and result in felony charges.
Anyone convicted of health care fraud also faces significant fines. For example, an individual making a false statement in a Medicaid or Medicare claim faces a fine of up to $250,000 per offense, while organizations which make false claims face up to $500,000 per offense. Organizations that engage in ongoing schemes which involve multiple counts of health care fraud violations can face millions, or even billions, of dollars in fines.
As part of a criminal fraud sentence, the judge can order defendants to pay back the amount of money they improperly obtained as a result of their fraudulent acts. For example, a doctor, who improperly billed an insurance company for tests not performed and received payment for these tests, can be ordered to pay this money back to the insurance company. This type of order is known as a restitution order.
Health care fraud can seem like a minor crime, especially when an individual commits an act that seems like it has little impact and doesn't really "hurt anyone." But a conviction carries serious repercussions beyond incarceration, fines, and restitution, including professional license revocation, denial of benefits, and a criminal record. If you're facing an investigation or criminal charges, talk to a criminal defense attorney right away.