Medicare and Medicaid Fraud

What Is Medicare and Medicaid Fraud?

Medicare and Medicaid fraud refer to illegal practices aimed at getting unfairly high payouts from government-funded healthcare programs. Fraud involves deceit with the intention to illegally or unethically gain at the expense of another, in this case in order to illegally gain at the expense of government-sponsored healthcare programs.

Key Takeaways

  • Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties.
  • Medicare and Medicaid are government programs to provide affordable healthcare to certain populations.
  • Common examples of Medicare or Medicaid fraud include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible.
  • The Medicaid Fraud Control Units, or MFCUs, operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud.
  • Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year.


2:07

Medicare Vs. Medicaid

Understanding Medicare and Medicaid Fraud

Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients or program participants, and outside parties who may pretend to be one of these parties.

There are many types of Medicare and Medicaid fraud. Common examples include:

  • Billing for services that weren't provided, in the form of phantom billing and upcoding.
  • Performing unnecessary tests or giving unnecessary referrals, which is known as ping-ponging.
  • Charging separately for services that are usually charged at a package rate, known as unbundling.
  • Abusing or mistreating patients.
  • Providing benefits to which the patients or participants who receive them are not eligible, by means of fraud or deception, or by not correctly reporting assets, income, or other financial information.
  • Filing claims for reimbursement to which the claimant is not legitimately entitled.
  • Committing identity theft to receive services by pretending to be someone who is eligible to receive services.

$60+ billion

According to the government, Medicare fraud costs U.S. taxpayers more than $60 billion per year.

The Challenges of Fighting Medicare and Medicaid Fraud

Medicare and Medicaid fraud are a multibillion-dollar drain on a system that is already expensive to maintain. The departments that oversee these programs have internal staff members who are charged with monitoring activities for signs of fraud. In addition, there are also external auditors who are responsible for reviewing suspicious claim patterns.

These entities that provide investigation and oversight related to potential fraud include the Medicaid Fraud Control Units, or MFCUs, which operate in 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Most MFCUs operate as part of the Attorney General’s office in that state, and must be independent and separate from the state’s Medicaid office.

In an effort to help prevent fraud that is related to identity theft, Medicare implemented a new program in the spring of 2018. Beginning in April 2018, Medicare participants started to receive new ID cards that include a Medicare Number instead of the participant’s Social Security number.

Detecting and preventing fraud is an important priority for the people and departments that oversee these critical programs. The wasted funds that are lost to fraud and other illegal tactics represent resources that could be used to support participants who really need assistance.

$86.5 billion

Medicaid fraud is estimated to be even larger than Medicare fraud, costing taxpayers around $86.5 billion in 2020.

The CARES Act of 2020

On March 27, 2020, President Trump signed into law a $2 trillion coronavirus emergency stimulus package called the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also:

  • Increases flexibility for Medicare to cover telehealth services.
  • Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.
  • Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment.

For Medicaid, the CARES Act clarifies that non-expansion states can use the Medicaid program to cover COVID-19-related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option.

Examples of Medicare and Medicaid Fraud

Charging the government for medically unnecessary drugs, procedures, or tests in order to profit is one example of healthcare fraud. In 2022, for example, a Florida man who owned and operated several telemedicine platforms was sentenced to 14 years in prison for fraud that cost Medicare more than $20 million dollars. He marketed and prescribed medically unnecessary genetic tests to Medicare beneficiaries in exchange for kickbacks and bribes. The accused knew that the genetic laboratories involved would bill Medicare for medically unnecessary goods and services.

Another way of committing fraud is to impersonate a licensed provider. For example, in 2022, a Texas woman was accused of using her ex-husband’s provider number to submit fraudulent claims to Medicaid for counseling services that were never provided, receiving more than $600,000 in fraudulent claims.

How Do You Report Medicare or Medicaid Fraud?

If you witness or suspect Medicare or Medicaid fraud, you are encouraged to report it, which can be done anonymously. You should contact the federal government's tip line at 1-800-HHS-TIPS or online here. State governments often also have their own Medicaid fraud tip lines.

Who Investigates Medicaid Fraud?

State Medicaid Fraud Control Units (MFCUs) investigate and prosecute Medicaid provider fraud as well as abuse or neglect of residents in health care facilities.

What Are the Penalties for Medicare and Medicaid Fraud?

Depending on the severity of the case, those found guilty of Medicare or Medicaid fraud can face both prison time and fines. You may also become ineligible for future benefits, Medical professionals may face further sanction such as suspension of their medical license.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Senate, "Health Care Reform: SAVING TAXPAYER DOLLARS."

  2. U.S. Department of Health and Human Services, Office of Inspector General. "Medicaid Fraud Control Units (MFCUs)."

  3. Centers for Medicare & Medicaid Services. "2020 Estimated Improper Payment Rates for Centers for Medicare & Medicaid Services (CMS) Programs."

  4. Congress. "H.R.748 - CARES Act."

  5. U.S. Dept. of Justice. "Owner and Operator of Telemedicine and Telemarketing Companies Sentenced to 14 Years for $20 Million Fraud Scheme and $4 Million Tax Evasion."

  6. Click2Houston. "Katy woman accused of defrauding Medicaid out of more than $600K using her ex-husband’s therapist information."

  7. Centers for Medicare and Medicaid Services. "Reporting Fraud."

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Service
Name
Description