Articles Posted in Medicaid and Medicare Fraud

This week the House GOP budget chairman, Rep. Paul Ryan, released a proposed budget plan that, he claims, would eliminate the federal deficit in ten years. To accomplish such a feat, the proposal calls for significant cuts in various programs, including Medicare and Medicaid. It eliminates the provisions of the Affordable Care Act (Obamacare), while keeping the revenue enhancements in place.

While we all might have different views on how to handle these budgetary issues, virtually everyone agrees that waste and misspent funds within these programs should be rooted out. When we are considering eliminating support for programs that many vulnerable community members depend on, at the very least it is critical to ensure that the money that we are spending is going toward vital services and not unnecessarily enriching those abusing the process.

Yet, cases still pop up of doctors (and entire facilities) failing to follow Medicare and Medicaid guidelines–milking significant funds from public coffers unnecessarily. Not only that but significant harm can actual befall patients as a result of this misconduct.

In recent weeks we have discussed the federal False Claims Act which seeks to protect taxpayers from wasteful spending on programs like Medicare and Medicare. Unfortunately, with hundreds of billions of dollars spent each and every year it remains difficult for federal regulators to ensure that every dollar spent is going toward necessary, efficient care. For those service providers with less scruples, it may be tempting to game the system, cut corners, and act outright fraudulently to attract more and more reimbursements.

One need only look so far as the front page of any newspaper today to identify the need to be serious about efficiency with public funds. Today marks the beginning of the “sequestration” cuts, which will enact nearly $85 billion in automatic budget reductions affecting many different programs and agencies. Medicaid and Medicare are mostly spared from this particular round of cuts, but any compromise to end the cuts may include reduction in payouts for these programs.

Understanding that background makes stories like the one posted in the Star Tribune quite infuriating. The reports explain how government investigators recently revealed that over $5 billion in Medicaid funding may be wasted on certain skilled care–specifically in bad nursing homes. The findings were part of a report released by the inspector general from the U.S. Department of Health and Human Services.

Medical care is expensive. Insurance costs alone are a large part of many family and business budgets. State and federal government budgets are no exception, as virtually all budget shortfalls are connected in one way or another to extensive spending on programs like Medicare and Medicaid. Policymakers have long-been considering ways to cut those costs.

For example, in recent years there has been a crackdown on improper billing and fraudulent actions by providers of healthcare and support services. To combat the problem, lawmakers passed the False Claims Act. This law includes many different provisions aimed at minimizing Medicare and Medicaid payouts that are not necessary. According to some estimates, in the last three to four years alone, the U.S. Justice Department has been about to recover over $14 billion in funds that were paid out unnecessarily.

The vast majority of those reclaimed funds were received via one particular method allowed by the False Claims Act. The law includes qui tam provisions, which is essentially an incentive for whistleblowers to come forward and share information about fraudulent actions of which they may have personal knowledge. All told over $10 billion of the $14 billion total in recovery in recent years has stemmed from these whistleblower lawsuits by former employees of hospitals, nursing homes, and other facilities where fraudulent billing might take place.

Healthcare costs are a hot topic these days (and everyday for the past many years). At one point or another virtually everything under the sun has been blamed for rising costs-from lack of insurance to lawsuits. Unfortunately, receiving far too little attention are the incentives of medical care providers themselves to ensure that prices go up and the quantity of medical care provided is as high as possible.

With pay per service medical care, there is an incentive for medical facilities to provide more can than a patient may need in order to receive payment for that care. This is not a condemnation of medical providers but a concession to the obvious reality that when a business is paid to provide a service, the business has incentives to increase the need for the service. When it comes to medical care, that means increase the need for certain treatments, tests, procedures, or other care.

Because of that inherent situation, it is critical for observers to put systems in place to prevent abuse of those financial incentives. Taxpayers are ultimately the ones who foot the bill for much medical care (via the Medicare and Medicaid programs), and they are the ones who suffer when medical facilities violate rules and take more in payments than necessary.

With all of the headlines about mass dysfunction in federal politics and the endless deadlock, it is easy to become disillusioned about the process. Yet, for that very reason, it is important to share information about those times (perhaps too few and far between) where bipartisan effort does work to pass needed reform. That was recently evidence by the President’s signature on a new piece of legislation that may affect all those who rely on Medicare support and who may be harmed by the misconduct of others.


The head of the American Association for Justice recently shared information on the passage of a bill known as the SMART Act. It stands for Strengthening Medicare and Repaying Taxpayers Act. In general, the bill changes the operation of the Medicare Secondary Payer (MSP) system to make it more streamlined and efficient.

The legal system is complex. When working with local families on these issues, each Chicago medical malpractice lawyer at our firm often explains the basic procedural elements of the case. In learning about the process many community members are most surprised by the challenges that remain even after a judgement or settlement is secured. While reaching a specific damage amount might seem to be the end of the mattter, sometimes it is only half of the battle. That is because there is much work to be done between earning the award on paper and actually ensuring as much of it as possible actually goes to those harmed.

Part of the problem arises from actually collecting the funds from insurance companies or the defendants themselves. Another part of the problem stems from protecting the award from others who may claim to have a stake in it.

In fact, the U.S. Supreme Court will soon hear a case on just that issue, related to the rights of certain states to take large amounts of an award for re-payment for Medicaid programs.

Money makes people do strange things. Unfortunately, that is true even for professionals who are able to make a healthy living without resorting to unscrupulous conduct. The striving to maximize profits, get more and more at all costs, is at the root of so much abuse, mistreatment, and crime. The perverse motivations can be found everywhere, from the legal world to the medical world. It is never acceptable, and it must be called out in order to have accountability and fairness.

In the medical arena, for example, the problem often manifests itself in the form of Medicare fraud. The reasons are simple. Medicare (and Medicaid) programs pay for a large percentage of medical care in the United States. When a doctor performs work, the payment for that work will often come from one of those programs. Functionally, this means that the doctor will send a bill to Medicare which will then make a payment to the doctor for those services, usually for a set amount that both sides know will be paid for the work. This system means that there is trust placed with the doctor to ensure that the billing is accurate and approprate. Sadly, some medical providers are tempted to breach rules with regard to that billing, ultimately trying to syphon off more money from the public coffers.

Challenging Medicare Fraud

Yesterday we mentioned the high-profile new federal fraud case against a Chicago psychiatrist, Dr. Michael J. Reinstein. The case stems from allegations that the doctor made choices about what drugs to issue to patients–including many residents in Illinois nursing homes with mental illnesses–based on money that he received from the makers of those drugs. A closer examination of the specifics of the lawsuit offer a reminder of the extreme lengths that some unscrupulous medical professionals might go to in order to pad their own pockets at the expense of those counting on their care.

A copy of the federal complaint which initiated the case can be found here. The complaint details the arrangements that the doctor had with those making clozapine. The drug was created first by a company called Novartis. For many years, the defendant-doctor in this case had special arrangements with the company. He was actually paid by the company to help promote the drug, which went under the trade name Clozaril. During this time a staggeringly large number of the doctor’s patients were given the medication–far higher than national averages.

In 1998 the company’s patent on the medication expired, allowing others to make the drug at far cheaper rates. But, likely in order to preserve his personal relationship to Novartis, the doctor did not switch his patients over to the cheaper version of the drug. It was only in 2003, when Novartis ended its relationship with the doctor, that he began seeking alternatives for his mental health patients.

An often forgotten reality of trial law is the struggle that ensues just to get the full scope of information about a situation to see daylight and presented in front of a jury. While the justice system is the best tool we have to root through disagreement and get to the bottom of a situation, it is not without its challenges. For one thing, in many cases, including medical malpractice lawsuits, the opposing side is not willing to easily give up various pieces of information. The process known as “discovery” is when each side collects this information–in the form of document requestions, written questions, and depositions (interviews with relevant parties). The discovery process is usually the longest aspect of a case and, at times, it can get quite heated.

Beside fights over what material needs to be handed over by a party, in certain situatoins there may also be accusation of tampering with the witnesses. This involves various actions where a party seeks to unfairly influence or intimidate the story presented by a witness or relevant party to a particuar event. On many occassions that witness might be a former employee or co-worker who has unflattering or relevant (but damaging) information about the professional or incident. Unfortunately, some actors invovled in these legal battles are willing to do whatever it takes to deny liability, reject responsibility, and avoid being held accountable for their conduct.

Witness Intimidation Claims

The Newsweek article published last week on patient safety provides helpful insight into the true scope of the problem of medical errors. The article is an excerpt from the author’s (a doctor) helpful book entitled: Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care.

The story reminds readers of a 2010 New England Journal of Medicine study which found that as many as one in four medical patients suffered some form of medical error as a result of their hospital stay–about 100,000 of those patients would die as a result of that error. While these basic statistics are often repeated, there is continued need to raise the alarm about the problem. That is because most political and policy talk focuses not on cutting back the staggeringly high number of deaths but cutting back the legal rights of those hurt. This unbalanced and inappropriate focus needs to be shifted.

Keeping Problem Doctors Hidden

Lawyer Monthly - Legal Awards Winner
The National Trial Lawyers
Elder Care Matters Alliance
American Association for Justice
Fellow Litigation Counsel of America
Super Lawyers
Contact Information