Healthcare Fraud

Over the course of one year, there are millions of health insurance claims submitted to the healthcare companies that help make quality care more affordable. Of these millions of claims, a small percentage of them are fraudulent, but that small percentage costs all Americans and the government an estimated tens of billions of dollars annually, leading to higher premiums and other out-of-pocket expenses.

Of all the types of insurance frauds recorded in America, medical insurance fraud and Medicare/Medicaid insurance fraud make up the majority of false claims, revealing why this is such an important problem.


The Types of Healthcare Fraud

Unfortunately, most cases of healthcare fraud come from a few dishonest care providers who do not have their patients’ best interest in mind. Healthcare fraud can occur in many different situations, from unnecessary and duplicate tests and procedures to hacking into a patient’s personal medical records to submit false claims.

According to the National Health Care Anti-Fraud Association (NHCAA), the most common types of healthcare fraud are:

  • Performing medically unnecessary services solely for the purpose of generating insurance payments
  • Accepting kickbacks for patient referrals
  • Falsifying a patient’s diagnosis to justify tests, surgeries or other procedures that aren’t medically necessary
  • Billing for services that were never rendered—either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding 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).
  • Unbundling, or billing each step of a procedure as if it were a separate procedure
  • Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments (i.e.  “nose jobs” are billed to patients’ insurers as deviated-septum repairs)
  • Waiving patient co-pays or deductibles and over-billing the insurance carrier or benefit plan
  • Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.


The U.S. Federal Bureau of Investigations (FBI) is the primary investigative agency with jurisdiction over both federal and private insurance programs, and they work hard to help combat and reduce the threat of healthcare insurance fraud on the nation.

Healthcare Fraud: Penalties and Consequences

The Health Insurance Portability and Accountability Act (HIPAA), along with a national Coordinated Fraud and Abuse Control Program help to regulate the laws and consequences for violations of health care insurance claims. HIPAA states that healthcare fraud and abuse is a federal criminal offense that can have significant penalties attached to it. For those that are found guilty of healthcare insurance fraud, they are eligible for a sentence of up to 10 years in a federal prison along with substantial monetary fines. HIPAA also states that if a patient was injured in the process of the false claims, the conviction and prison term can be doubled up to 20 years, and if the patient died as a result of these fraudulent acts, the person found guilty can be sentenced to life in prison.

Medicaid and Medicare Fraud

Medicare and Medicaid fraud is, unfortunately, not an uncommon occurrence, as some dishonest individuals, companies, and large healthcare organizations attempt to “cheat the system” and bill these programs for procedures that were not performed or were performed for illegitimate reasons. Under these programs, there are a lot of different sectors where fraud can occur – from falsifying ambulance costs, prescription drugs, durable medical equipment, hospice or long-term care, and more.

Many attribute the increasing rates of Medicaid and Medicare fraud to the system’s design; it was built primarily to reward those who were providing care to the needy and elderly with prompt payments and reimbursements, not to protect patients and the system as a whole from fraudulent acts.

Most claims for Medicare and Medicaid fraud fall into three main categories of dishonest practices:

  • Phantom Billing, where Medicare is billed for procedures which are either unnecessary or not performed at all.
  • False Patient Billing, where a patient may provide his Medicare number and allow a provider to bill Medicare for tests and procedure either unneeded or unfulfilled.
  • Upcoding and Upbilling, where a care provider seeks to receive additional, unwarranted and illegal Medicare funds by using a code that may not be merited.


Cracking Down on Healthcare Fraud

A number of federal agencies have come together to help eliminate the occurrence of healthcare fraud. Agencies like the FBI, EPA, and the FDA are teaming up with local and state agencies and private insurance groups to help crack down on fraudulent practices as well as identify the loopholes in the system that allow for these acts to occur unnoticed.

In response to increasing acts of health insurance fraud and Medicare and Medicaid fraud, the U.S. government created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) and the Medicare Fraud Strike Forces that are focused on investigating and eliminating all claims of healthcare fraud. These programs, led by members of the FBI, the Department of Justice, and the Department of Health and Human Services, have already convicted over 600 individuals guilty of health insurance fraud (FBI.gov).

Despite their efforts, healthcare fraud and abuse continues to pose a big threat to individuals as well as to the economic condition of the nation.

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