Before False Claims Act Liability for Fraud: How Medicare Is Supposed to Work

05/16/2013 // Justice News Flash: Featured Column // Kathleen Scanlan // (press release)

Just 50 years ago, millions of seniors suffered profoundly for lack of medical care. Whether they needed medicine, a walking cane, or a life-saving operation, the elderly were often out of luck—insurance was unavailable or too steeply priced. Minorities were particularly hard hit. President Harry Truman first broached the idea of federally funded health care on a national scale, but he failed to galvanize Congress and the public around the idea. It wasn’t until 1965 that Congress created Medicare, which now extends health insurance to 50 million people. That’s one in six Americans. The majority of the program’s beneficiaries are age 65 and older, but Medicare also covers younger people with permanent disabilities.

Medicare is divided into three main areas: Part A, which covers hospital services; Part B, which covers physician services. There is also Medicare Advantage, or Part C, which at a higher cost allows beneficiaries to receive expanded, Medicare-covered benefits through a private insurance plan. Medicare Part D is the 21st century addition subsidizing the cost of prescription drugs for Medicare beneficiaries.

Naturally, this sprawling health care bureaucracy is costly. In 2011, Medicare spending accounted for 15 percent of the federal budget. With legions of baby boomers tumbling into old age, the program’s cost is expected to balloon from $560 billion in 2010 to over $1 trillion by 2022.

A program with such massive expenditures is vulnerable to massive fraud and abuse. Medicare fraud costs taxpayers billions each year and jeopardizes the welfare of beneficiaries. Straightforward examples include a doctor billing Medicare for services he never rendered. Or a hospital billing for tests that it never ran. These individual instances of deceit can multiply quickly. In October of last year, for example, a federal sting operation led to charges against 91 people—including doctors and nurses—for $429 million in false billing. And under the more recent Medicare Part D, pharmacies and health providers who submit claims for reimbursement for prescriptions uses not approved by the FDA and identified on the label (“off-label”) may be found liable for violating the False Claims Act. Obviously, Medicare fraud can be committed by an assortment of individuals, groups, and institutions, and can take many, many forms.

In recent years, the Department of Justice and the Department of Health and Human Services have joined forces to crack down on rampant healthcare fraud. The government recovered $4.1 billion in 2011, for a total of more than $10 billion since 2008. These massive recoveries are made possible, in part, with the help of doctors, nurses, health care administrators, home care workers, sales representatives and other individuals with knowledge of wrongdoing who come forward and become whistleblowers. According to the Department of Justice, in over 3,660 cases from 1987 to 2007, whistleblowers have helped return tens of billion to the federal government, including the Medicare program. The fact of the matter is that healthcare professionals understand how Medicare is supposed to work and they see when deviations occur. That’s why they are uniquely qualified when they come forward as whistleblowers to expose how the fraudsters cost the program billions.

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