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What are the most common types of healthcare fraud?
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The Most Common Types of Healthcare Fraud
Healthcare fraud is a huge problem in the United States. Criminals steal billions of dollars from Medicare and Medicaid each year through various fraudulent schemes. In this article, we’ll break down the most common types of healthcare fraud and how they work.
Billing for Services Not Provided
One of the most basic types of healthcare fraud is billing for services that were never actually provided. For example, a doctor might bill Medicare for office visits that the patient never had, or a medical equipment company might bill for wheelchairs that were never delivered. This is outright theft, and it accounts for a large portion of healthcare fraud.
Criminals take advantage of the fact that Medicare and Medicaid pay out claims quickly without a lot of verification. So it’s easy for unscrupulous providers to submit fake claims that simply go unnoticed. The FBI estimates that around 10% of healthcare expenditures are lost to fraudulent billing schemes.
Upcoding Services
Upcoding is another common type of fraud that involves billing for more expensive services than were actually provided. For example, a routine doctor’s office visit might be fraudulently billed as a more complex consultation. Or a basic wheelchair might be billed as a more advanced motorized chair.
Upcoding is harder to detect than outright fake billing because the services were provided – just at a lower reimbursement level. Criminals rely on the complexity of medical billing codes to disguise their fraud. But upcoding still cheats Medicare and Medicaid out of billions per year.
Kickbacks for Referrals
Under Medicare rules, providers are not allowed to pay kickbacks for patient referrals. But some unethical providers will offer kickbacks to doctors and clinics who send patients their way. For example, a shady hospital might offer a cash payment for each patient a doctor refers for surgery. Or a medical equipment company might give doctors a cut of their sales in exchange for prescriptions.
This violates federal anti-kickback laws. But criminals will chance it because more referrals mean more money billed to Medicare. The patients often don’t even know their provider got a kickback for sending them somewhere.
Prescription Drug Schemes
There are various ways criminals defraud healthcare programs to obtain prescription drugs. Some shady doctors will write medically unnecessary prescriptions for addictive opioids and other controlled substances. They might accept cash payments from patients who just want drugs. Or they’ll send the prescriptions to shady pharmacies that fill them without question.
Other schemes involve stealing Medicare or Medicaid IDs to obtain drugs for resale on the black market. The cost of all this prescription drug fraud runs into the billions per year.
Identity Theft
Stealing someone’s Medicare or Medicaid ID is a simple way for criminals to bill for services and prescriptions under that person’s name. Oftentimes, the victim is elderly and might not notice small irregularities in their benefits statements. The stolen ID can then be used to bill for all sorts of fraudulent services and equipment.
Medical identity theft often goes hand in hand with other types of fraud, as criminals use the stolen IDs to enable their schemes. It can also really harm the victim, whose medical history gets corrupted with charges from the thief.
Home Health Care Fraud
Home health agencies provide nursing and therapy services to homebound patients. These services are reimbursed by Medicare, and some fraudsters have taken advantage. Some common home health frauds include billing for services that weren’t medically necessary, billing for patients who were not actually homebound, and kickback arrangements with referring physicians.
There have been several large fraud cases involving home health agencies in recent years. With Medicare’s shift toward more home-based care, this area may be an increasing target for criminals.
Hospice Fraud
Similarly, hospice care is reimbursed by Medicare for terminally ill patients expected to live six months or less. Some corrupt hospices will enroll patients who aren’t that sick to bill Medicare for expensive hospitalizations and treatments that should not be covered by hospice. They will also falsify Medicare paperwork to make patients appear sicker than they really are.
Some hospices will pay kickbacks to nursing homes that refer dying patients to them. There have been major fraud prosecutions involving this type of scheme as well.
Ambulance Transportation Fraud
Medicare covers medically necessary ambulance transportation for patients who cannot safely use other means. Criminals take advantage by billing for patients who didn’t actually need an ambulance or by transporting patients longer distances than necessary. Others bill for more advanced life support services than were really provided.
Some companies recruit patients just to transport them unnecessarily by ambulance and split the proceeds. There are always new ambulance fraud cases popping up around the country.
Fraud by Patients
While many healthcare fraud schemes originate on the provider side, some patients also attempt fraud. For example, a patient might report their Medicare card lost to get a replacement, which they can use to obtain double benefits or prescriptions to sell. Patients also work with shady providers and accept kickbacks to take part in fraudulent billing schemes.
Some patients will sell their Medicare IDs to be used in fraudulent billing, provide false medical histories to qualify for services, or share drugs obtained through fraudulent prescriptions. As beneficiaries, patients can enable certain frauds that providers couldn’t do alone.
Fraud by Medical Professionals
Doctors, nurses, dentists, chiropractors, and other licensed medical professionals also commit healthcare fraud. A shocking number of clinicians have been caught prescribing unnecessary procedures, tests, and services to maximize their Medicare reimbursements. Others take bribes for referrals or prescriptions. Some bill for procedures they never performed.
Most medical professionals are ethical, of course. But Medicare’s trusting nature and limited oversight create opportunities for fraud even within the ranks of licensed clinicians. There are many cases of seemingly legitimate doctors who crossed over to outright fraud and illegal kickbacks.
How Criminals Get Away with Healthcare Fraud
After learning about all these schemes, you may wonder how criminals get away with stealing billions in healthcare funds every year. There are a few key factors that enable healthcare fraud to flourish:
- Medicare and Medicaid pay claims quickly – There is limited pre-payment scrutiny, allowing fraudulent claims to slip through.
- Too few investigators – Medicare employs just a few thousand investigators to oversee over $1 trillion in spending.
- Criminals exploit coding complexity – The intricacy of medical billing codes helps hide upcoding and other frauds.
- Penalties are often weak – Getting caught may result in having to repay funds but rarely jail time.
- New frauds emerge constantly – As rules tighten in one area, criminals find creative new schemes in others.
For these reasons and more, healthcare fraud remains rampant. The criminals are always staying one step ahead of the understaffed investigators and exploiting new vulnerabilities that emerge in the massive federal health programs.
How to Report Suspected Healthcare Fraud
If you suspect any type of healthcare fraud, please report it. Medicare and Medicaid depend on people speaking up when they see something suspicious. Here are some ways to report fraud if you think it’s occurring:
- Call the Medicare fraud hotline: 1-800-MEDICARE
- Call the HHS Office of Inspector General: 1-800-HHS-TIPS
- Report online to the HHS OIG: https://oig.hhs.gov/fraud/report-fraud/
- Contact your local FBI office: https://www.fbi.gov/contact-us/field-offices
- File a complaint with the Department of Justice: https://www.justice.gov/fraudtaskforce/report-fraud/chart
You can report anonymously if you prefer. The government takes all reports of potential fraud seriously, so your information can help launch an investigation. Healthcare fraud impacts taxpayers, patients, and ethical medical providers – so reporting it helps protect everyone.
The Bottom Line
Healthcare fraud takes many forms, but the result is always the same – criminals stealing billions meant for patient care. Schemes range from billing for fake services to kickbacks to identity theft and more. Medicare’s size and complexity allows this fraud to fester, often going undetected.
If you see something suspicious, say something. Reporting fraud is vital to help investigators stop these schemes. With healthcare costs rising every year, it’s more important than ever to combat fraud and ensure Medicare and Medicaid dollars get to patients in need.