Penalties for Medicare Fraud

March 28, 2023

What is Medicare fraud? Medicare fraud is a serious act that can result in severe consequences both civilly and criminally. Medicare is the government health insurance program so not only does fraud against it hurt the taxpayers, but it may put vulnerable patients at risk. If you are aware of Medicare fraud, it is essential to understand the potential Medicare fraud penalties, whether you’re just a silent participant or a Medicare whistleblower. If you don’t speak up and say something, you might be the unwitting target of a criminal and civil investigation that threatens both your livelihood and your liberty. When the FBI comes knocking, you need to know your options. If you’re aware of fraud, your options have already started. Certain statutes like the False Claims Act allow you to blow the whistle, potentially receive a Medicare fraud whistleblower award, and help the system balance out. The penalties for Medicare fraud civilly through The Civil Monetary Penalties Law [42 U.S.C. § 1320a-7a] are from $10,000 to $50,000 per violation, and under the False Claims Act up to three times the fraud, plus $11,000 per claim filed [31 U.S.C. § 3729a, 64 Fed. Reg. 47099, 47103 at § 85.3]. Criminal penalties for Medicare fraud can result in individuals spending the rest of their lives in jail depending on the scope of economic harm to the country and actual harm to the patients.

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Medicare Fraud Penalties: What you need to know

The Medicare program is designed to provide critical healthcare assistance to those who need it the most, and any abuse of this system in addition to the fines and penalties could have consequences for licensing and/or the future ability to take government payor insurance. Some entities are put under a Corporate Integrity Agreement (CIA) if they want to continue to take Medicare after a finding of fraud and others are put on the Medicare exclusion list and outright prohibited from future access to the program for a lengthy period of time.

Possible Medicare fraud and abuse penalties include fines, imprisonment, and exclusion from Medicare and other federal healthcare programs. These penalties apply to individuals and organizations found guilty and/or liable of Medicare fraud. Criminal penalties for Medicare fraud can include fines, imprisonment, and probation. Civil penalties for Medicare fraud can include fines, exclusion from the Medicare program, and repayment of any improperly received funds with triple damages, as well as other economic penalties.

As the penalties for Medicare can be severe (and rightfully so to deter others from similar conduct and to punish the wrongdoing), 18 U.S. Code § 1347 outlines that in order to be found criminally guilty of Medicare fraud, the federal government must prove, beyond a reasonable doubt, the following:

  • The defendant knowingly and willfully executed or attempted to execute a scheme to defraud any health care benefit program or fraudulently obtain money or property owned by any healthcare benefit program.
  • The defendant knowingly and willfully executed or attempted to execute the scheme in connection with the delivery or payment of benefits, items or services under the healthcare benefit program.

Medicare Fraud Fines

Fines are one of the most common Medicare fraud penalties, which can range from thousands to millions of dollars, depending on the severity of the offense. For instance, an individual or organization found guilty of Medicare fraud can be fined up to $11,000 per violation and/or up to three times the amount Medicare was billed under the False Claims Act or from $10,000 to $50,000 per instance under other statutes.

For example, in 2023, a Virginia based durable medical equipment (DME) provider was ordered to pay $12 million to settle allegations that it submitted nearly 1,000 false and fraudulent claims to Medicare. The DME provider in question allegedly received over $600,000 in false reimbursements, which it requested through illegally purchased prescriptions. The owner and operator separately settled the allegations against his role in the scheme for $10,000 and a 3-year exclusion from federal healthcare programs [[1]].

Medicare Fraud Criminal Consequences

In addition to fines, individuals involved in Medicare fraud that is deemed criminal in nature can face imprisonment. According to the Department of Justice Health Care Fraud prosecution manual, “Health care fraud can be prosecuted both civilly and criminally under a variety of statutes and regulations that are discussed in several different chapters of the Justice Manual including 9-42.000 (Fraud Against the Government), 9-43.000 (Mail and Wire Fraud), and 9-46.000 (Program Fraud and ).”

Depending on the severity of the offense, an individual can serve many years in federal prison. 18 U.S. Code § 1347 details the punishments clearly: if the fraudulent activity results in serious bodily injury, the individual can serve up to 20 years; if the violation results in death, the individual may be imprisoned for life.

In 2021, the owner and operator of a Texas-based medical clinic was sentenced to 25 years in prison for an $11 million fraud scheme. [[2]] Allegedly, the clinic paid doctors to approve Medicare beneficiaries for home health services, then sold the approvals to various home health providers. As a result, the providers were billing Medicare for medically unnecessary, non-existent, and/or illegally induced services. The length of the sentence was determined in part by the length and scope of the scheme. Imprisonment is not a penalty to be taken lightly–nor is it ever the only one administered to healthcare fraudsters.



Exclusion from Medicare and Other Federal Healthcare Programs

Individuals and organizations found guilty of Medicare fraud can also be excluded from Medicare and other federal healthcare programs, per 42 U.S. Code § 1320a–7. The exclusion can be temporary or permanent, depending on the severity of the offense. Exclusion from these programs can be economically devastating for healthcare providers as they can no longer bill Medicare for services rendered. If a provider fails to comply with the terms of their exclusion, it may result in even more penalties.

In January 2024, a California man was sentenced to 10 years in prison for billing Medicare approximately $234 million, despite being excluded from Medicare in two cases in both 1990 and 2001. After these prior convictions, the Department of Human Health and Services Office of Inspector General advised that he could be considered for reinstatement via written application–but the individual in question continued to operate clinics without seeking reinstatement. [1]

As mentioned above, should a wrongdoer seek to continue participating in federal healthcare program, the Centers for Medicare and Medicaid Services may make them enter a CIA. These CIAs typically last around 5 years and contain a host of requirements centered around compliance, transparent training and reporting practices, and regular reports to update the OIG on the entity’s activities. Breaches of a CIA may result in more monetary penalties or extended exclusion from federal health care programs. This case is a prime example of how exclusion from Medicare programs and a refusal to adhere to such exclusions can lead to even greater consequences.

False Claims Act

One of the main ways to combat fraud against the government is through the False Claims Act. With healthcare fraud, the False Claims Act imposes a variety of Medicare fraud and abuse penalties on professionals who are accused of submitting false medical claims, engaging in fraudulent medical billing, or producing false records. It is a powerful tool used by the federal government to pursue fraud and allows whistleblowers to expose fraud against the federal government. The False Claims Act has helped recover billions of dollars of Medicare fraud over the years, thanks to incentivizing whistleblowers to come forward by awarding them up to 30% of what the government recovers as a Medicare fraud whistleblower reward.

The Anti-Kickback Statute

The Anti-Kickback Statute is specifically related to healthcare and has become a strong weapon against a common–but still fraudulent–practice in the healthcare industry. According to the Anti-Kickback Statute (AKS), a kickback is anything of value that one party gives to another in exchange for business referrals or other actions that benefit the first party. If found guilty of offering or accepting kickbacks, medical professionals could be punished similarly to those found guilty of filing false claims. Kickbacks are considered a felony under the AKS and can result in up to $100,000 in fines, prison for up to 10 years, or both. [42 U.S. Code § 1320a–7b]

Qui Tam Lawsuits and Whistleblowers

The federal government is not the only entity that initiates investigations into fraud. Through their jobs, relationships with family and friends, or other connections, people occasionally learn about instances of health care fraud against the federal government. It is precisely because of this insider knowledge that provisions exist throughout federal legislation to allow whistleblowers to step forward. According to the “qui tam” provisions in the Federal False Claims Act, a private party may file a lawsuit under seal jointly in their name and the federal government in order to try to hold the defendant accountable for health care fraud, and in turn, should the case be successful, receive a portion of the government’s recovery as a whistleblower award.

Qui tam lawsuits are very complicated, both in terms of the conditions under which they can be brought and in terms of how they are handled. There are deadlines known as statutes of limitations after which the suit may not be brought. Additionally, only the first party to file a claim has the right to recover a whistleblower reward, so it’s imperative to file matters promptly.

There is also a prohibition from filing a qui tam under the False Claims Act “pro se,” or as an individual representing themselves, meaning anyone who seeks to file a whistleblower case needs to use a whistleblower law firm to file the case. A whistleblower lawyer can both provide information, and also assist in determining whether a qui tam lawsuit potentially has any merit, and also go over the many factors involved with moving forward. Anyone with information or questions about bringing a potential qui tam action should speak with a lawyer as soon as possible or your rights may be prejudiced.

Whistleblower Protections

Whistleblowers play a crucial role in uncovering Medicare fraud, but that does not mean it is all smooth sailing. Many whistleblowers who report wrongdoing may face problems in their workplace, so the FCA and other related acts have strong protections for whistleblowers from their employers. Some common whistleblower protections include:

  • Anti-Retaliation Laws: These laws protect whistleblowers from retaliation by their employer, such as termination, demotion, or harassment, and for reporting illegal or unethical activities.
  • Confidentiality: Whistleblowers using the FCA initially file the matter confidentially under seal, so their identity is not disclosed to their employer/defendant. Eventually, though, the identity will be revealed under the FCA, so you should speak with your lawyer about the timing of the seal’s expiration and plan your parachute. Under other statutes like the SEC whistleblower statute or the AML whistleblower statute, you can potentially remain anonymous from start to finish.
  • Financial Incentives: Some whistleblower programs provide financial incentives for individuals who report illegal or unethical activities, such as a percentage of any recovered funds or fines. In the last decade, whistleblowers have received aggregate whistleblower awards in the hundreds of millions of dollars annually.

Since whistleblowers are so pivotal in reporting Medicare Fraud, the federal government wants to ensure that whistleblowers are both protected during the process and incentivized to start it. The False Claims Act (FCA) provides incentives and protections for whistleblowers who report Medicare fraud. Whistleblowers who report fraud can receive a percentage of the recovery amount, which can sometimes be in the millions of dollars.

Some of the best whistleblower law firms focus their practice on representing whistleblowers in a variety of industries, such as healthcare, finance, and government. If you or someone you know has information related to a potential incident of Medicare fraud, we highly encourage you to reach out promptly to a law firm that focuses a part of its practice on protecting whistleblowers for a free, confidential consultation.  Look for False Claims Act law firms that have a track record of success and has former Department of Justice Alumni to seamlessly interface with the DOJ to present your case. There may be a statute of limitations on certain legal claims, and also, the first to file rule can crush you if you delay, so it is important to act swiftly to help justice take its course and potentially reward you with whistleblower compensation if your case exposing Medicare fraud succeeds.