Medicare and Medicaid Fraud

Medicare and Medicaid Fraud

Medicare is a government-run program that provides healthcare coverage to people over the age of 65, or others who meet special criteria. Medicaid is a partnership between the federal government and the states that provides health insurance primarily to families and individuals with low incomes and limited resources. Medicaid, and to a certain extent Medicare, are designed to encourage doctors to help patients in need that may not have the means to pay for medical services.

It should be noted that prosecution under the FCA does not require a specific intent to defraud. Deliberate ignorance or disregard for the truth or falsity of information related to a claim can make the provider liable under the law.

The Congressional Budget Office estimates that the federal government will spend $627 billion on Medicare and $330 billion on Medicaid in 2015. Unfortunately, much of this spending will go to fraudulent claims. Several factors make it difficult to reign in healthcare fraud. Healthcare providers depend upon the government to pay their claims quickly so they can continue to treat patients that can’t afford to pay themselves. To increase efficiency, claims are processed and paid electronically. Because of the enormous amount of money involved, the need to process an enormous number of claims quickly, and the countless variety of fraud schemes possible, Medicaid and Medicare fraud are difficult to detect.

The Role of the Whistleblower in Exposing Medicare and Medicaid Fraud

It is estimated that fraud and abuse account for around 10% of all Medicare and Medicaid expenditures annually, costing taxpayers billions of dollars a year and driving up the overall cost of healthcare. Though government resources dedicated to anti-fraud enforcement are limited, whistleblowers can increase the power and impact of those resources significantly. Individuals working in the healthcare industry are often in positions that give them inside information on Medicare and Medicaid fraud. The government, through the federal False Claims Act, provides whistleblowers with powerful incentives to take action when they discover abuse. Under the FCA, a whistleblower may receive a significant monetary award. The law also protects the whistleblower from employer retaliation.

Medicaid and Medicare fraud take many forms. Recent filings and settlements listed on the Department of Justice website demonstrate the broad nature of Medicare and Medicaid fraud and the important role that the whistleblower plays in exposing FCA violations.

  • December 3, 2014 – Rite Aid Corporation paid $2.99 million to resolve allegations that it violated the False Claims Act by using gift cards to induce Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies. Charges in the case were originally brought by a whistleblower who filed a qui tam lawsuit. The whistleblower will receive a reward of over $500,000.
  • November 5, 2014 – The owner of two Miami home health care centers was sentenced to prison for her role in a $74 million fraud scheme in which Medicare was billed for expensive physical therapy and home health care services that were not provided or not medically necessary.
  • October 31, 2014 – The Justice Department announced the sentencing of an owner and operator of two community mental health centers in Baton Rouge, Louisiana, and a patient recruiter for a community mental health center in Houston, Texas for their involvement in a $258.5 million Medicare fraud scheme. Elderly patients in nursing homes were recruited for partial hospitalization psychiatric services they did not need or receive. Some were involuntarily committed. The owner and recruiter were ordered to pay $43.5 million and $3.2 million in restitution and sentenced to 7.5 years and 5 years in jail, respectively. A psychiatrist who was the medical director of the Louisiana facilities and co-owner of the Texas facility was previously sentenced to 7 years in prison and ordered to pay $43.5 million in restitution.
  • October 10, 2014 – Extendicare Health Services Inc. (Extendicare), a Delaware company that operates a chain of 146 skilled nursing facilities in 11 states, agreed to pay $38 million to settle allegations that it billed Medicare and Medicaid for substandard and unnecessary nursing and rehabilitation therapy services. Two whistleblowers who exposed the fraud will share an award of over $2 million.

How a Whistleblower Can Stop Medicare and Medicaid Fraud

As noted above, the case brought against Rite Aid Corporation was initiated by a whistleblower who filed a qui tam lawsuit. This is a lawsuit that is filed by a private citizen on behalf of the U.S. government. Such actions are permitted under the federal False Claims Act (FCA). The Act encourages individuals with inside knowledge of fraudulent activity to take legal action themselves on behalf of the government. If the government joins the action and recovers illegally obtained payments – either through a settlement or trial – the whistleblower is entitled to receive between 15 percent and 25 percent of the money recovered. Even if the government does not join the suit, the whistleblower may proceed individually (although this is much less likely to be successful) and receive up to 30 percent of the amounts recovered.

If you are aware of Medicare or Medicaid Fraud and are considering taking legal action, please contact the whistleblower team at Baum, Hedlund, Aristei and Goldman.

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