From time to time someone among our newer Chapter members working in the insurance industry reports confronting instances of Medicaid and Medicare fraud for the first time. I thought it might be helpful to present some of the more common health care fraud scenarios that beginning fraud examiners are likely to confront in actual practice in the governmental health care space.
Abuses of the Medicaid and Medicare programs exist in myriad shapes and sizes and continue to evolve constantly. While Medicaid and Medicare fraud, waste and abuse appear to be the most egregious program issues, incidental and accidental waste also threaten program integrity, including outright criminal exploitation of governmental health care payments. Altogether, the overpayment of Medicaid and Medicare dollars represents the largest portion of misused government money, accounting for 59 percent of the $102.2 billion the government improperly distributed among all its agencies in 2017 (ACFE). Issues involving these exorbitantly expensive improper payments can be attributed, in part, to the complexities of the programs themselves and to ever-changing policies among the various states.
It’s important for new anti-fraud practitioners to be aware that while Medicaid and Medicare are considered universal programs, each state is able to operate its own version of the programs autonomously and independent of any collective standard. This autonomy creates wide-ranging policy inconsistencies due to the differences among states, and, in many ways, embodies the ideals of American federalism. How states administer programs like Medicaid and Medicare is largely influenced by the bureaucratic style employed by the state legislature. These variations and inconsistencies can facilitate inaccuracies and misunderstandings in every aspect of both programs, from recipient eligibility, billing protocols, coding standards and licensure requirements. Doctors offering Medicaid or Medicare services are not easily able to transfer their practices from one state to another without first exploring expectations and requirements of the new state. These hard state boundaries create the potential for provider, beneficiary and administrative confusion, which ultimately equates to billions of program dollars misappropriated each year.
Beyond the innocent misappropriation of program dollars are the much more serious problems with the Medicaid and Medicare programs manifesting in the form of illicit and purposeful instances of fraud, waste and abuse perpetrated by recipients and providers. Medicaid and Medicare identity theft (instances of which have been recently investigated by one of our Chapter members) much like general identify theft, has continually resurfaced as a bane since the programs’ inception. It is estimated that three percent of $50 billion of the nation’s annual identity theft losses is associated with some type of medical identity theft. Because of their likelihood of being enrolled in government-facilitated insurance programs like Medicare or Medicaid, individuals aged 50 or older are most likely to fall victim to this type of identity theft. Fraudsters steal these identities to access services, such as prescriptions for drugs with high black-market value i.e. OxyContin, Fentanyl and Morphine, intended for legally enrolled, authorized recipients. Once the prescription is obtained, the thieves sell the drugs for cash or abuse them themselves.
A similar identity theft scheme involves the sale of durable medical equipment prescribed to recipients. By stealing a beneficiary’s Medicaid or Medicare number, the perpetrator can place orders for equipment i.e. slings or braces, all paid for through program dollars, and re-sell the goods online or via newspaper classifieds for cash.
Physicians participating in the Medicaid and Medicare programs also have access to a wide range of possible fraud, waste and abuse schemes. Double billing is a common provider fraud scheme that involves the submission of duplicate claims to Medicaid or Medicare in an attempt to receive double the amount of payment for services that were only provided once. Those physicians wise to the high detectability of billing duplicate claims to either program via simple data analysis will also often send one bill to a private insurance company and a duplicate bill to Medicaid or Medicare so that the duplication does not appear within one data set. Other fraud schemes include up-coding bills to Medicare or Medicaid to represent more complex, lengthy or in-depth procedures when a simpler or lower-level service was actually provided or performed.
Usually, complex procedures are paid at a higher dollar amount than their simpler counterparts, which leads providers to be paid more money than what they actually earned during the office visit or procedure. This fraud scheme takes advantage of small but specific variations in the current procedural terminology (CPT) coding system standardized for both Medicaid and Medicare coverage. Similar to up-coding is the fraudulent unbundling of CPT codes billed as individual entities that per regulation should be grouped together and billed under one umbrella code. Usually, the umbrella code pays a discounted rate for all the services combined. Each individual code gets paid an amount that, when totaled together, equals more than what the umbrella code pays.
Dishonest Medicaid and Medicare providers also bill for services that are not medically necessary. In this scheme, providers perform and bill for services and/or testing beyond what patient need requires. Under this scheme, hospital stays are lengthened, additional diagnostic testing is ordered, entitled hospice enrollment is invoked too early, and equipment and tools are wasted for beneficiaries who really require less care and fewer services. This fraud scheme not only wastes program dollars but also strains other areas of the general healthcare system by inducing and allowing individuals to linger, thus monopolizing unnecessary services and care that could be better applied to other more worthy beneficiaries. But please be aware, while Federal regulation does not contain a definition of medical necessity, states are granted authority to develop and apply medical necessity criteria as they see fit. Providing and billing for services beyond the required needs of the beneficiary may be intentional and/or fraudulent, but because of differing state criteria, instances where unnecessary services are provided and billed may also be simply accidental or well-intentioned.
Anti-fraud professionals of all kinds should also bear in mind that, while Medical identity theft, double billing, up-coding, unbundling and billing for services not medically necessary represent only a portion of the known problems and schemes that weaken the Medicaid and Medicare programs, there are many other types of program fraud, waste and abuse occurring on a daily basis that have yet to be discovered; in this area of practice, expect the unexpected. According to the ACFE, in the past 27 years the Federal government has recovered approximately $24 billion in settlements or judgments against individuals and organizations who committed both accidental and purposeful healthcare fraud, waste and abuse.
On a state level, another $15 billion has been recouped from criminal fines and civil settlements resulting from the prosecution of healthcare fraudsters. While the $39 billion in recovered overpayments from the last 27 years is only enough to cover a small percentage of one year’s total program costs, the amount of overpayment dollars recovered each year by the Federal and state governments is growing exponentially. On average only about $1.4 billion in overpayments was recovered during that time period. However, in 2016 alone, $3.1 billion in healthcare fraud judgments and settlements was recovered by the Federal government. As Medicaid and Medicare fraud, waste and abuse schemes and problems become more prevalent their financial toll increases. Federal and state governments are also detecting and reclaiming money back on a larger scale. This increase can be attributed to developments in policy created to prevent and identify fraud, increased investigative and program integrity funding, and technological improvements in fraud detection programs, databases and software; Certified Fraud Examiners (CFE’s) will increasingly find themselves at the forefront of the effort to strengthen health care program integrity at the Federal level and within each state.