Fight Insurance Fraud: False Claims Act
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Fight Insurance Fraud: False Claims Act
Insurance fraud hurts everyone. As premiums and healthcare costs rise, we all pay the price. From individual scammers to large corporations, fraud steals billions each year. However, average citizens have a powerful tool to combat this fraud – the False Claims Act (FCA).
The FCA, also known as the “Lincoln Law”, was originally passed in 1863 to stop overcharging and product substitution by Union Army suppliers. The law imposes penalties on those who “knowingly” submit false claims for payment to the government. This includes Medicare, Medicaid, and other federal programs. Penalties can be up to 3 times the amount claimed plus fines from $12,537 to $25,076 per false claim.
But the law’s real power comes from its “qui tam” provision. This allows private citizens, or “whistleblowers“, to file fraud lawsuits on the government’s behalf. The whistleblower, or “relator“, receives 15-30% of recovered funds as a reward. Over 80% of cases arise from whistleblowers rather than government investigations.
FCA Cases – Some Recent Examples
In 2022, drug maker Ultragenyx Pharmaceutical paid $6 million to settle claims it paid kickbacks to prescribe its drug Crysvita. Employees allegedly pressured doctors with lavish dinners, gifts, and other perks to boost prescriptions. Each prescription then constituted a “false claim” for reimbursement.
Medical center United Memorial paid $2 million in 2022. It allegedly billed Medicare for wound care services that were unnecessary or not provided. By upcoding visits and exaggerating patient conditions, millions in false claims were generated.
In 2021, drug maker Mallinckrodt paid $260 million. It was accused of underpaying Medicaid rebates to boost profits on its high-priced multiple sclerosis drug Acthar. By failing to account for all price rises, false reporting lead to underpayment of rebates owed to the government.
You don’t have to be a corporation to commit fraud, however. In 2020, a San Francisco doctor was sentenced to 1 year in prison. He referred patients for unnecessary cancer genetic tests and got illegal kickbacks from testing labs. Over $26 million in false claims were generated.
And it’s not just healthcare… Defense contractor Aegis Technologies paid $16 million in 2020. It allegedly overbilled on Army contracts by misclassifying job positions to charge higher rates.
Why Does Fraud Persist?
With such large penalties, why does fraud continue? For one, intent is required – accidents or mistakes don’t qualify. Complex regulations mean companies can often claim the rules are unclear. And getting caught may still cost less than obeying them.
Until recently, prosecutions also focused on individuals rather than going after corporations. But no longer… The DOJ is now aggressively targeting healthcare giants and other major firms. Executives may also face charges for leading systematic fraud.
The FCA has recovered over $70 billion since 1986, per DOJ data. Billions more likely go undetected. But increased incentives and anti-fraud task forces are helping whistleblowers and authorities catch more schemes. Advanced data analytics also make fraud easier to uncover.
Pros and Cons of the FCA
The FCA has many benefits – it deters fraud, recovers losses, and provides restitution. But critics argue:
- Qui tam lawsuits encourage “bounty hunting” by whistleblowers
- Innocent mistakes can lead to expensive litigation
- Compliance takes resources away from patient care
- Fear of liability may stop providers from trying innovative treatments
- Settlements may exceed actual damages, raising healthcare costs
However, the DOJ contests these claims. They argue financial incentives for whistleblowers are needed to uncover fraud. Settlements also avoid lengthy trials and provide swift restitution.
While penalties can seem harsh, they are “remedial” not “punitive” per the Supreme Court. Fines make up for hard-to-prove financial harm to government programs.
What Should You Do?
Step 1) Learn the law! Know proper billing codes, medical necessity rules, fair market value for compensation, etc. Ignorance is no excuse. Review guides like the OIG’s free healthcare compliance resources.
Step 2) Perform regular audits and stay current as regulations change. Identify problem areas before they balloon. Document your compliance efforts.
Step 3) Train all staff on compliance. Encourage questions without retaliation. Evaluate personnel and incentives to ensure no one benefits from fraud.
If issues emerge, investigate quickly and pay back any overpayments. Consider voluntary self-disclosure to avoid false claims charges. Finally, contact experienced legal counsel if you suspect violations.
The Bottom Line
The False Claims Act is a vital tool for insurers, taxpayers, and honest businesses against fraudsters. Rewarding whistleblowers to come forward makes the law particularly effective.
With advanced data analysis and increased enforcement, don’t expect getting caught to get easier. My advice? Spend the effort now to prevent issues through compliance and auditing. An ounce of prevention is worth pounds of legal headaches down the road!
We all win when fraud loses.
References:
DOJ False Claims Act Information