Medicare Fraud: The History, Incidence, Costs and Institutional Remedies

INTRODUCTION
In 1965, President Lyndon B. Johnson signed the Medicare Act into law. The purpose was to provide healthcare to individuals the age of 65 or older or individuals under the age of 65 diagnosed with specific medical conditions (Center for Medicare and Medicaid Services, 2013). The original intent was to provide immediate payment to those providing medical services for the less fortunate. The Medicare Act has since been revised to meet the current needs of the American population as well as the United States economy. In part, these revisions included identifying, combating, establishing punishment (criminal laws) and prevention for Medicare Fraud. This paper will provide a brief overview of the Medicare fraud history, incidence, costs and institutional remedies.
MEDICARE FRAUD: HISTORY AND DEFINITION
Fraudulent activities against the government were first addressed during the Civil War. The False Claims Act (qui tam statute), also known as the Lincoln Act, was passed during this time frame. The intent was to prevent the Union Army from being a victim of supplier fraud. Citizens were given, “the ability to file suits on behalf of the US government whenever they spotted fraud” (Medicare Fraud Center, 2015). The citizens were rewarded with a portion of the monetary fines (issued to the defendant) for addressing the crime. Currently, similar rewards remain in effect for reporting Medicare fraud and abuse.
When Medicare was enacted in 1965, there was minimal federal and state oversight. Health care reimbursements were based upon the honor system. Health care providers and organizations almost immediately began to abuse the system. In the early 1970’s, Congress conducted a series of congressional investigations and hearings spanning health care fraud and abuse. In 1977, Congress passed the Medicare-Medicaid Anti-Fraud and Abuse Amendments. The amendments “strengthen the capability of the government to detect, prosecute, and punish fraudulent activities under the Medicare and Medicaid programs,” (National Association of Medicaid Fraud Control Units, 2015) .
Medicare fraud has been characterized by the submission “of false statements or making misrepresentation facts or representations of fact to obtain a federal health care payment for which no entitlement would otherwise exist,” (Center for Medicare and Medicaid Services, 2013). In addition, fraudulent activity includes the solicitation, payment or receipt of benefits for items or service referrals and/or making prohibited referrals under the federal health system (Center for Medicare and Medicaid Services, 2013). Common examples of Medicare fraud include; record falsification (billing for appointments that were missed or canceled); services not provided; and up-billing (billing for higher paid codes than documented). Medicare abuse has been defined as to the charging of unnecessary costs (directly or indirectly) to the federal health care payment program (Center for Medicare and Medicaid Services, 2013). Further, abuse occurs when individuals or organizations deviate from the medically necessary standards of practice and care. Common examples of Medicare abuse include; upcoding or unbundling codes; charging for unnecessary services; and excessively for services or supplies.
COSTS
It is difficult to quantify the overall costs of Medicare fraud and abuse. The government has estimated Medicare fraud and abuse to be $60 billion annually (ten percent of the Medicare budget) (Edlin, A., Goldman, D. P., & Leive, A. A, 2014). The Federal Bureau of Investigations (FBI) estimated three to ten percent of all health care costs are fraudulent (Medicare News Group, 2015). In 2010, the U.S. Office of Management and Budget reported more than $47.8 billion of improper payments were issued by Medicare (Medicare Fraud Center, 2015) . In 2011, the Center for Medicare and Medicaid Services (CMS) estimated improper payments to exceed more than $65 billion (Novack, Sophie; Baker, Sam, 2014).
Specific regions within the United States have displayed a disproportionate amount of Medicare fraud. “Seventy-two percent of all Medicare claims nationwide for HIV/AIDS infusion injections were billed in Miami-Dade County in 2005,” (Medicare Fraud Center, 2015). The Medicare population residing in Miami-Dade County is one-third of the Los Angeles County, California Medicare population. In 2008, the Medicare home health care reimbursements for Miami-Dade County were six times those of Los Angeles County. Miami, Dallas, Houston, Detroit, Philadelphia, Chicago and Louisiana are considered to be “hot spots” for Medicare fraud (Department of Justice, 2015). Hot spots like these have cost tax payers a combined $214 million in Medicare fraud (Department of Justice, 2015).
Prior to the passing of the Patient Protection and Affordable Care Act (PPACA) providers and health care organizations were paid based upon quantity, not quality. “The U.S. Department of Justice reports that a single incidence of fraud might now involve $30- $50 million, whereas $1 million would have been a shocking figure ten years ago,” (Medicare News Group, 2015). Over the last three years, the government has recovered $7.70 for every dollar spent on health care fraud and abuse investigations (Department of Justice, 2015). This return is approximately $2.00 higher than in 1996. Rising health care costs, economic strains, questionable ethics and greed have contributed to the increase with this criminal activity. The Obama administration has made the elimination of Medicare fraud a top priority.

LAWS AND STATUTES
The False Claims Act (FCA), Anti-kickbacks Statues (AKS), Stark Law (Physicians Self-Referral Law), Social Security Acts (SSA) and the United States Criminal Code are current bodies of law used to combat Medicare fraud or abuse (Medicare Fraud Center, 2015). Violations under these acts can result in a variety of actions. These actions range from non-payment of claims, exclusion from program participation and liability (civil and criminal) (Center for Medicare and Medicaid Services, 2013).
As previously stated, the False Claims Act has undergone several revisions since its enactment under the Civil War. The FCA still protects the government from fraudulent charges or claims. Under the FCA, civil liability as well as criminal penalties can be imposed for individuals who submit a false claim (Center for Medicare and Medicaid Services, 2013). Ignorance or reckless disregard does not warrant an individual free from prosecution under this act.
The Anti-Kickback Statute identifies kickbacks (to include the overall process) as a criminal offense. The AKS defines the violation as any individuals, who offer to pay, solicit or receive a reward or benefit for services or items by a Federal Health Program (Center for Medicare and Medicaid Services, 2013). Civil and criminal penalties include fines, imprisonment or both. Civil penalties fines may be up to three times the amount of the kickback.
The Stark Law places emphasis upon the physician referral and their financial relationships with these services (Centers for Medicare andMedicaid Services, 2014). The law consists of originally three separate provisions. The first provision, Stark I, was a provision to the Omnibus Budget Reconciliation Act (OBRA) of 1989. Stark I prohibited self-referrals for clinical laboratory services for Medicare patients. Stark II, which was part of the 1992 OBRA revisions, expanded the limitations to a number of services. As part of the Balanced Budget Act of 1995, Stark III contained additional revisions of physician limitations. However, the Stark III revision was vetoed (by then President Clinton) and finally passed in 2007. The final installment prohibited physicians from referring patients to businesses which the physician or immediate family members have a financial interest or relationship. Penalties under the Stark Law range from exclusion from all federal health care program participations, fines and claim repayments. Exceptions to the Stark Law include referrals to ancillary or physician services which are provided by the treating physicians group. The law can be found under the Social Security Act.
The Criminal Health Fraud Statute, Exclusion Statute and Civil Monetary Penalties Law (CMPL) are additional legislation used to combat fraud. The Criminal Health Care Fraud statute prohibits the attempts or organization to defraud the health care benefit programs. The fraudulent activities are defined as money or property which is part of the federal health care program. Penalties may include fines, imprisonment or both. The Exclusion Statute bars any provider convicted of Medicare fraud, patient abuse or neglect, felony convictions for fraud, embezzlement, etc. or convictions of manufacturing, distributing, prescribing or dispensing controlled substances illegally (Center for Medicare and Medicaid Services, 2013). Lastly, the CMPL allows for up to a $50,000 penalty per violation and up to three times the amount claimed per item/service.
The use of technology has aided with the identification and prediction process of potential fraud cases. The Fraud Investigation Database (FID) is an online, real-time monitor delivered through the internet (Center for Mediare & Medicaid Services , 2013). The FID tracks from the point of potential fraud through resolution. The program monitors Medicare and Medicaid provider payment suspensions as well as law enforcement inquiries.
CASES
In 2007, Nurse Tami Ramsey reported Atlanta’s St. Joseph’s hospital for committing Medicare fraud. From the period of 2000 to 2005, the hospital admitted patients for short stays when they should have remained under outpatient care (Thomas, Mar-Apr 2015). The hospital billed Medicare for patients procedures not covered under Medicare. Lastly, the hospital extended stays for patients to ensure Medicare reimbursement. Under the whistleblower program, charges were brought against the hospital under violation of the False Claims Act. The hospital settled for $26 million. Ms. Ramsey was rewarded $4.94 million for her due diligence.
In 2009, the Florida based Halifax Hospital Services was under investigation for potential violations of fraud under the Stark Law (also known as the physician self referral law) and FCA (R, 2014). The hospital entered into a contractual agreement with six oncologists and neurologists. The contractual agreement included the provision of incentive bonuses which were to be based upon certain financial performances. The agreement resulted in the thousands of Medicare patient referrals to Halifax Hospital by theses physicians. The government determined this was a direct violation of the Stark Law as well as FCA. The Medicare patients were “obtained” under fraudulent means. Therefore all Medicare reimbursements for these patients were considered a false claim. During that time frame, the hospital received over 27,000 illegal reimbursements (from 2001-2011). The cost of the fine for each illegal reimbursement is then tripled. In 2013, the defendants settled, agreeing to pay $85 million in damages. The settlement made this case one of the largest false claims under the Stark Law.
A physician’s signature is required to certify Medicare services were required and delivered. In 2012, Texas physician, Dr. Jacques Roy was charged with submitting hundreds of fraudulent Medicare claims for reimbursement. “Dr. Roy allegedly sold his certification as ‘a commodity’ to nearly 500 home health care companies in Texas,” (Cloherty, Jack; Thomas, Pierre, 2012). In return for his, “signature,” Dr. Roy received a portion of the claims, pocketing millions of dollars in reimbursements for services or treatments that were not warranted or conducted. The Medistat Group and Associates, Dr. Roy’s company, placed his signature on more than 11,000 patients, spanning 500 home health agencies. These numbers indicated Dr. Roy, “certified more Medicare beneficiaries for home health services and more patients, than any other medical practice in the United States,” (Cloherty, Jack; Thomas, Pierre, 2012). He billed Medicare for $350 million and $24 million to Medicaid. Dr. Roy’s actions resulted in a six month moratorium on home-health Medicare and Medicaid payments in Houston and Dallas. Due to the nature and complexity of the fraud, the trial date was delayed until June 2015 (Goodman, 2015). Dr. Roy
CURRENT EFFORTS TO COMBAT FRAUD AND ABUSE
The Department of Health and Human Services (DHHS) worked closely with the Department of Justice (DOJ) and the Federal Bureau of Investigations (FBI). These relationships support the DHHS mission of eradicating Medicare fraud and abuse (Department of Justice, 2015). In 2014, the joint efforts recovered $3.3 billion in Medicare funds from fraudulent activities. In addition, new technological advances coupled with new enrollment techniques have directly aided with the rapid identification of fraudulent behaviors. The Heath Care Fraud and Prevention Enforcement Team (HEAT), HHS Office of the Inspector General and DOJ are working jointly with utilizing real-time technology. The new technology allows for quicker response in regards to identification and prosecution. Technological advances, joint task forces, and new procedures have prevented erroneous payouts, eliminating the initial financial loss. The Patient Protection and Affordable Care Act (PPACA) were passed in 2010 with an effective compliance date of 2014 (111TH Congress 2009-2010, 2014). The PPACA placed focus upon quality instead of quantity. Payments are now linked to the quality of service provided and preventative efforts. Health care providers and organizations will not be reimbursed for patients re-hospitalized for reoccurrence or nosocomial infections. The PPACA required all Medicare providers (physicians, long term care hospitals, inpatient rehabilitation facilities, cancer treatment hospitals, and hospice facilities) to participate in the Physicians Patient Quality Reporting Initiatives (PQRI). Incentives are paid to participants. Penalties are issued for those who fail to comply with the PQRI requirements. Penalties include removal from the federal health care program. Further, the PPACA provided assistance in combating Medicare Fraud. The PPACA established the Center for Medicare and Medicaid Innovation (CMMI). The CMMI must create service and delivery payment models for dual eligible beneficiaries (individuals who qualify for both Medicare and Medicaid). The CMMI will increase cost effectiveness while reducing delays and payment redundancies.
The DOJ and HHS formed the Medicare Strike Force. Medicare Strike Force prosecutors filed more than 963 cases, charged more than 2,097 defendants since its creation (Department of Justice, 2015). In total, the 2,097 defendants billed Medicare for over $6.5 billion. The Medicare Strike Force success has resulted in additional funding, allowing for their mission to continue throughout 2015.
The Centers for Medicare and Medicaid Services (CMS) has instituted safeguards, ensuring the enrollment of legitimate providers. Under the PPACA, CMS had to revalidate all providers and suppliers by March 2015 (111TH Congress 2009-2010, 2014). The revalidation process had to incorporate the new requirements and safeguards. The revalidation process revoked 28,000 enrollments and deactivated 470,000 enrollments (Department of Justice, 2015). Individuals whom were revoked may not re-enter the Medicare program from one to three years. The reactivation and revocations will prevent billing under these individuals. “Similar to technology used by credit card companies, CMS is using Fraud Prevention System,” (Department of Justice, 2015). The Fraud Prevention System identifies suspicious billing patterns for all Medicare fee-for service claims. The service allows for an immediate response, thwarting fraudulent claim payments.
CONCLUSION
Approximately 315 million Americans reside within the United States (Anderson, 2014). By the year 2030, the 65 year or older population will exceed 72 million. As the population ages so does the incidence of chronic or high risk diseases. A majority of the 72 million Americans will rely upon Medicare or some form of federal health care assistance. The United States health care field has operated under a severe deficit for an extended period of time. The deficit includes personnel, supplies as well as monetary support.
The incidence of Medicare fraud and abuse will most likely increase as the population pool increases. The government must take aggressive maneuvers to continue combat those who rob or manipulate the federal health care payment system. The ethics, morals and values of health care providers and organization would become questionable. Providers would fail to treat appropriately, if at all. Patients may be exposed to unnecessary procedures or treatments, compromising the standards of care. Failure to regulate the Medicare system through laws, statutes, and innovative technological advances, aggressive and joint task forces would result in a lack of morals, values, ethics as well as the inability to sustain the Medicare system financially.

REFERENCES
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