Fraud and Abuse


Fraud and abuse cost the Medicare program and its beneficiaries tens of billions of dollars annually. However, the actual amount of money lost is unknown. The lack of empirical evidence on the extent of fraud and abuse—and on the effects of activities to combat these illegal practices—seriously hinders efforts to battle them.

Fraud and abuse can be found in all segments of the health care system. Examples include overcharging or double-billing health insurance companies or the government for services provided, charging for services not provided, and providing care that is not needed.

Those who suspect Medicare fraud and abuse are encouraged to report it by calling 800-HHS-TIPS. However, to be sure they are reporting accurate information, that is, not based on a misunderstanding or an error in billing, they should first discuss the issue with their doctor, provider, or supplier.

Our current health care system—with more than 1,000 payers, hundreds of thousands of providers, and billions of annual claims—makes detection of fraud and abuse extremely difficult. In addition, previous government detection efforts were typically underfunded. Private-sector payers have met with even less success in combating fraud and abuse because they lack the legal and administrative tools available to the federal government.

Several relatively recent legislative and regulatory actions have facilitated efforts to combat health care fraud and abuse. Since its inception, the national Health Care Fraud and Abuse Control Program has returned more than $11 billion to the Medicare trust fund. Broader federal efforts to close loopholes, reduce improper payments, and discourage inappropriate conduct saved about $25 billion for Medicare during fiscal year 2011.

Enforcement efforts are partially supported by funds recovered from inappropriate Medicare and Medicaid reimbursement, as well as related fines and penalties received by federal investigators and prosecutors. However, according to government reports, recovered funds cannot be fully accounted for; some may have been spent by federal agencies for activities unrelated to Medicare and Medicaid.

The Affordable Care Act increased funding for the abuse control program by about $350 million over ten years.

Fraud and Abuse: Policy


In this policy: FederalLocalState

Restrictions on physician self-referral and provider-kickback schemes must be strengthened and enforced.

Adequate resources should be provided to support antifraud and anti-abuse efforts at all levels of government, as well as within the private sector, and to educate consumers about becoming involved in such efforts. A balanced approach to enforcement should be taken to ensure that antifraud and anti-abuse activities do not have unintended negative effects on patient health care, for example, by adversely affecting access to care or resulting in the withholding of medically necessary treatment.

The Department of Health and Human Services (HHS) and the Department of Justice should continue their enforcement activities, including research to determine the extent of fraud and abuse and to assess the effects of initiatives to combat them. Both agencies must continue investigations, operations, and prosecutions to reduce the impact of fraud and abuse on federal health care programs and beneficiaries. Congress should continue to oversee the effectiveness of these enforcement activities to ensure that they are appropriate and do not adversely affect access to care.

HHS should expand and intensify its efforts to educate health care providers about compliance with Medicare billing rules and should assist them in preventing and correcting billing errors.

Medicare and Medicaid funds and related fines and penalties recovered as the result of enforcement efforts should be spent for the benefit of Medicare and Medicaid—including continued enforcement activities to reduce fraud and abuse in these programs—and not redirected to unrelated programs.