Federal Program Fraud: A Guide for Medical Professionals
What is federal program fraud?
Federal program fraud is using false statements or omissions of fact to gain money or property from a program that receives funding from the federal government. More specifically, in terms of health care, it is generally when Medicaid and Medicare provide excessive payments for medical services or goods that were never performed or provided to patients.
For example, if a medical professional submits claims to Medicare or Medicaid for tests that were not performed on a patient who did not need them, then they would be subject to a federal program fraud claim. Healthcare fraud is a form of federal program fraud. Federal program fraud carries with it the possibility of hefty criminal penalties and civil implications.
If you have been charged with, or are under investigation for federal program fraud, contact an experienced attorney as soon as possible.
What is the law on federal program fraud?
Since the law, in this case, applies only to federal programs, the federal government’s laws control it. Federal law states individuals who unlawfully take money from government programs and use it for their own financial gain may be subject to government program fraud.
Under United States federal law, specifically 18 U.S.C. Section 666, it is illegal to fraudulently take federal funds or services in excess of $10,000 per year. To “fraudulently take” means to knowingly or willfully lie about some fact to unlawfully gain money, property, or services.
What elements does the government need to prove to prosecute federal program fraud successfully?
Under 18 U.S.C. Section 666, the government needs to prove three main elements to establish that someone has committed federal program fraud.
The statute requires the government to establish that:
- The defendant is an agent of an organization or a member of a state, local, or Indian Tribe government;
- That the organization, government, or agency receives benefits in excess of $10,000 in a one-year period pursuant to a federal program involving a “grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance”;
- That the defendant embezzled, stole, obtained by fraud, or otherwise without authority knowingly converted to the use of any person other than the rightful owner, or intentionally misapplied property that
- Has a value of $5,000 or more;
- Was owned by or under the care, custody, or control of such organization, government, or agency.
The Department of Justice Criminal Resource Manual confirms that government benefits unlawfully received may involve funds from grants, contracts, subsidies, loans, guarantees, insurance or any other form of Federal Assistance.
What acts can precipitate liability under the federal program fraud statute?
Acts of federal program fraud can include a doctor, psychologist, or other healthcare employee over-billing for Medicaid, or Medicare, or other forms of medical reimbursement. Other acts could include having other individuals illegally draw funds from federal unemployment insurance or other state health benefits programs.
Acts that qualify under 18 U.S.C. Section 666 as acts that are considered to be defrauding a government program include but are not limited to:
- Embezzling funds,
- Larceny or stealing government money,
- Obtaining money or property through fraud, and
- Wrongfully converting or misappropriating property that belongs to the government and that has a value of $5,000 or more.
What are the short-term negative effects of federal program fraud?
Federal program fraud contributes to the national debt. For example, in 2016, federal program fraud cost the United States government over $101.3 billion in improper payments for entitlement programs.
Additionally, healthcare fraud increases the cost of insurance premiums and insurance deductibles. This means it affects more than just the insurance agencies but the people who are insured by them as well. Medicare’s “fee-for-service” program improperly paid out $33.2 billion dollars in 2016 due to fraudulent claims.
Rampant federal program fraud and the result of an excessive loss of money means the government and its organizations and agencies have less money to expand the number of programs in existence and to improve the programs already in place.
What medical professionals are affected by federal program fraud?
If you are a doctor, pharmacist, or any other healthcare worker, you may be subject to claims of federal program fraud. Most frequently, medical professionals are charged with federal program fraud for actions taken to defraud the Medicare and Medicaid programs.
Could non-medical professionals be affected by federal program fraud?
Yes, other affected individuals may include government employees, universities, foundations, and business corporations. Police departments, hospitals and county governments may also be affected by federal program fraud.
Who usually files federal program fraud charges?
Federal agencies like but not limited to:
- The United States Department of Health and Human Services —
- Office of Inspector General (HHS-OIG),
- The Federal Bureau of Investigation (FBI),
- The Department of Justice (DOJ), and
- The United States Attorney General (USAG),
They all have the authority to investigate and prosecute federal Medicare-Medicaid, Supplemental Security Income (SSI), and other federal program fraud charges.
Do acts of federal program fraud have to be limited to Medicaid and Medicare violations?
No, the scope of federal program fraud violations that are subject to criminal prosecution is broad.
Many other types of government programs are subject to fraud under 18 U.S.C. Section 666, and these programs include improper government payments from other federal programs including:
Supplemental Nutrition Assistance Program (SNAP)
SNAP is a program created by the federal government to provide assistance to those who cannot afford or have trouble affording food. An example of federal program fraud under SNAP would be a person claiming children that are not theirs as their own to increase the amount of SNAP benefits they receive.
Federal Unemployment Insurance
The federal government provides temporary monetary compensation to those who have lost their jobs to keep them on their feet. An example of fraudulent use of this program is when someone who is actually employed files for benefits or does not actively try to suspend benefits if they have been properly receiving them in the past.
Supplemental Security Income (SSI)
SSI is a federal program that provides cash assistance to people with low-income and limited assets who are either aged 65 or older, blind, or disabled. An example of federal program fraud in the context of SSI would be someone who does not file a death certificate for another to continue to receive that deceased person’s SSI benefits.
Children’s Health Insurance Program (CHIP)
CHIP is a federal program that provides insurance to children whose families have too high an annual income to qualify for Medicaid, but either are not offered insurance through their job or do not make enough to pay for health insurance for the whole family. Fraudulent CHIP payments accounted for 15% of the total amount of fraudulent payouts the United States made in 2009.
Emergency Response Subsidies
Emergency response subsidies exist to help communities rebuild after natural disasters like hurricanes, tornadoes, and flooding. FEMA has paid out or misappropriated large sums of federal dollars to fraudulent scammers.
How common is federal program fraud in the medical industry?
Medical fraud remains a critical problem with federal program fraud. In fact, the Government Services Administration estimates that Medicare, Medicaid, and Social Security fraud costs the government at least 100 million dollars per year.
Doctor’s offices are not the only actors to commit federal program fraud and Medicare and Medicaid fraud. One defendant, a high school dropout, billed Medicare out of $105 million by only using her laptop computer and submitted over 140,000 fraudulent claims over four years for equipment and services.
What investigative measures may be taken to address federal program fraud?
Audit and investigation guidelines apply to all healthcare fraud investigations. Their purpose is to notify the accused and to ensure each affected participant receives the due process they are entitled to under the law.
Investigative measures commonly include:
- Agents from the Department of Justice, FBI and the Office of Inspector General, reaching out to those suspected of federal program fraud,
- The issuance of administrative or criminal subpoenas,
- The issuance of search warrants for healthcare organizations,
- Internal investigations of government programs and organizations with inside or outside counsel,
- Witness interviews and financial audits with auditors, accountants, corporate officials, and underwriters.
If you are a medical professional, what can happen to you if you violate the federal program fraud statute?
A recent Government Service Agency report confirms that medical professionals can lose their security clearances or have it proposed they do, as well as lose their jobs, and lose any professional licenses they may have.
A doctor’s medical license can be suspended or permanently terminated, as can any other medical professional’s. If your license is not taken away, the mark that a charge of federal program fraud could leave on your reputation in the medical community may also prevent you from future employment.
Hospitals, medical clinics, and other healthcare practitioners can also be disqualified from receiving federal benefits and federal contracts. The effects of losing Medicare and Medicaid coverage can be devastating to any healthcare practitioner.
What are the penalties for federal program fraud conviction?
The criminal penalties are severe, and include:
- 10 years for each count of government program fraud,
- $100,000 to $250,000 fine per violation,
- A reimbursement of twice the amount of illegally obtained funds.
What are defenses to federal program fraud?
Good Faith Defense
Legal defenses in government fraud cases involve using the “good faith defense.” This defense is used to exclude healthcare practitioners from legal liability under the theory, that they acted in good faith and not negligently based upon their patients’ failure to disclose significant facts.
The argument goes that these facts would have enabled them to diagnose or treat their systems properly or to obtain proper medical equipment to resolve their underlying medical problems.
Statute of Limitations
In addition, defense attorneys may thwart federal and state fraud prosecutions by using procedural defenses of the statute of limitations or laches.
Lack of Necessary Intent
Most government fraud cases are built on the intent to deceive or defraud. Therefore, an action that lacks the intent to deceive or is not knowingly or willfully made is not considered fraudulent by the courts. (United States v. Lichenstein, 610 F.2d. 1272, 1277 [5th Cir. 1980]).
What is the scope of the federal program fraud statute?
Prosecutors have broadened the scope of 18 U.S.C. Section 666 to allow prosecution of state agents who take money and property from a state agency.
A District Attorney who uses federal dollars from his employer’s account to buy a $6,000 car might therefore even be subject to prosecution under a broad reading of the statute that prohibits “the illegal taking of any property or funds of an organization or of a state of a local government agency that receives federal assistance.”
Alleged wrongdoers under this statute could be ordinary criminals of federal program fraud or employees of local police departments. The list could include federal housing contractors, university officials, corrupt doctors, and even court-appointed lawyers who receive federal funds from state agencies who receive more than $10,000 per year through fraudulent means.
What should you do if you are audited, investigated, or accused of federal program fraud?
If accused of healthcare fraud, you should contact an experienced healthcare defense attorney. A proactive lawyer will assist you in avoiding incriminating statements, protecting your patient’s confidential information, and in handling positive patient and societal perceptions. Effective counsel will ensure proper assent with legal requirements and minimize the risk of future harm.