Medicaid Fraud: How to Detect and Report Fraud

Medicaid fraud is a major problem in the United States. Each year, according to the U.S. Centers for Medicare & Medicaid Services (CMS), nearly 15% of payments are processed improperly, usually for fraudulent reasons, which imposes a direct cost to taxpayers of more than $57 billion.

Aside from the direct costs of improper payments, Medicaid fraud drives up the cost of coverage for all beneficiaries, reduces the efficiency of the billing process and diverts resources toward investigations and prosecutions of suspected cases. Better knowledge among the public of how to report Medicaid fraud has the greatest potential to reduce these wasted resources.

What Is Medicaid Fraud?

The term “Medicaid fraud” describes several types of unethical behaviors. Some of these practices are most commonly done by individuals, while others are more typical of medical providers and other institutions that are authorized to bill the Medicaid program. These are some examples of provider-directed fraudulent practices:

Billing for Services and/or Supplies Not Provided

This is one of the most common forms of Medicaid fraud. Fraudulent providers sometimes file a request for payment for services or supplies they did not provide.

An example would be a doctor billing for 2 hours of exam time when only 1 hour was provided. Another example is a transport company billing for extra miles to inflate the cost of a trip.

Billing for Unnecessary Services and/or Supplies

Billing for unnecessary services is a more subtle form of fraud. In this case, a doctor could charge for expensive consultations that were not necessary.

Another example would be a transport company billing for a wheelchair rider at the higher gurney transport rate. It can be difficult to detect this type of Medicaid fraud, since many of the decisions to provide more expensive care are subjective and require review by an equally medically qualified investigator.

Upcoding Services

Every Medicaid-eligible service or item has a unique Medicaid billing code. Use of these codes helps ensure the right item or service is being billed and that providers are properly reimbursed. Some unethical billers submit the wrong codes in order to inflate a Medicaid invoice. This sometimes happens accidentally, without any fraudulent intent, and so cases must be carefully investigated before fraud is alleged.

Unbundling Items

Some items or services are bundled together in the billing phase, which all authorized Medicaid providers should be aware of. By unbundling these items and billing them separately, such as charging separate invoices for orthopedic devices and for the fitting of an orthopedic device, some providers can inflate their bill total.

Other types of fraud can be committed by individuals, often Medicaid beneficiaries working with unethical providers. These are the most common fraudulent practices in this category:

Card Sharing

Card sharing is the fraudulent sharing of benefits between people seeking treatment. In this practice, one person may be an authorized Medicaid beneficiary who lets another person, not a beneficiary, use their card for medical services. This may or may not happen with the knowledge of a healthcare provider.

Kickbacks

A kickback is an illicit payment from one person to another in exchange for services they would not otherwise provide. In the context of Medicaid fraud, kickbacks commonly occur when an unethical provider offers a Medicaid beneficiary a cash payment in exchange for getting unnecessary procedures. It can also take the form of a provider distributing medical appliances, such as wheelchairs, to a person enrolled in Medicaid who doesn’t need them. The recipient can then sell the items and keep the money.

Drug Diversion

Drug diversion involves writing unnecessary prescriptions for controlled substances, which then often get sold on the street. Apart from the fraudulent aspect of this practice, this is extremely dangerous and a major factor in the prescription drug abuse problem the United States is dealing with.

Multiple Card Use

Multiple card use works in both directions. When providers do it, it is often because they have accepted multiple Medicaid cards from the same beneficiary to generate multiple invoices. When beneficiaries engage in this activity, they often present altered or falsified cards for free or reduced-cost treatments.

Eligibility Falsification

Medicaid services are intended for only the named beneficiary. Some providers knowingly submit invoices for people who are not eligible for Medicaid in order to generate a false invoice. Likewise, some non-beneficiaries claim to have coverage in order to fraudulently obtain medical services.

Collusion

Collusion is a blanket term that describes any agreement between a provider and Medicaid beneficiary to commit Medicaid fraud. This can be an unspoken understanding that one party is falsely billing the program, or it may be an overt agreement to order multiple unnecessary visits and procedures to inflate the bill Medicaid must pay.

Can You Go to Jail for Medicaid Fraud?

Yes, you can go to jail for extreme cases of Medicaid fraud. All of these activities are against the law, and there are potentially serious consequences for engaging in any of them. The minimum consequence for fraudulent claims may be the denial of payment.

Medicaid may also suspend or revoke authorization to bill for a provider suspected of fraud, and it may sue in a civil court to recover fraudulently claimed benefits. Serious cases of suspected fraud may also be referred to a prosecutor’s office for criminal charges, which may result in prison time for convicted fraud participants.

How is Medicaid Fraud Detected?

All 50 states, plus the District of Columbia, Puerto Rico and U.S. Virgin Islands, operate their own Medicaid Fraud Control Units (MFCUs).

These MFCUs are charged with taking reports from the public, reviewing billing decisions and invoices, inspecting facilities for fraud, waste and abuse, and referring suspected fraud cases to the authorities. Most MFCUs also investigate claims of abusive care of Medicaid beneficiaries, such as in nursing homes and other live-in facilities. 

How to Report Medicaid Fraud

If you know about or suspect irregularities in Medicaid billing or other practices, you may want to tell someone, but you might also be unsure of how to report Medicaid fraud in a way that will stop the abuse. At a federal level, the Department of Health and Human Services coordinates fraud and abuse reporting among the states.

The department maintains an online directory of state-level MFCUs. Each entry on the directory has a contact name, mailing and email address, and a phone number you can call to report suspected cases of fraud. You may submit your report anonymously in all 50 states.