Healthcare fraud is big business and started well before the Affordable Care Act (ACA) or the COVID-19 virus. It has existed for as long as anybody can remember. Fraud, in any industry, proliferates with technology, which stresses the internal controls of risk management and assessments to keep up. According to the 2018 National Money Laundering Risk Assessment, healthcare fraud was the largest source of illicit funds in the nation with over $100B in proceeds and accounted for more than 35 percent of all illegal proceeds laundered in the United States. Not surprisingly, fraud schemes mimic legitimate transactions with complicit doctors, and other medical professionals who can manipulate or bypass internal controls are of particular concern.
“Following passage of the Affordable Care Act, certain out-of-network medical providers—most notably in the substance use disorder area—attempted to manipulate the fact that health plans and insurers can no longer reject applicants based on their health status,” said Gregory Pimstone, partner of the health care litigation practice at Manatt. “By buying indigent patients private insurance and paying their premiums, waiving the patients’ cost share to make it free for them to treat with the out-of-network provider, and then letting the insurance lapse when the provider was through billing the insurer tens or hundreds of thousands of dollars for the treatment while paying a small fraction of that inpatient premiums.”
This practice raised the cost of healthcare, driving rates much higher for healthcare consumers who end up carrying the burden of additional fees. Some states currently have safeguards to monitor and protect against this unlawful practice but may not have the staffing to properly monitor, audit, regulate, and ultimately bring charges against this unintended loophole of the Affordable Care Act.
To understand the loophole, a quick overview of the intended function is necessary. PPO health insurance plans allow patients to seek care from out-of-network providers but at an additional, non-negotiated price with the insurance company. This enables out-of-network providers to charge what they want. Pimstone points out that PPOs have a higher insured cost-sharing requirement for out-of-network services to control healthcare costs. In the case of Kennedy v. Connecticut, Gen. Life Ins. Co., it was found that the reduced benefits for out-of-network services are a structural feature of PPOs that gives insured patients skin in the game, sensitizing them to healthcare costs.
“This problem is when out-of-network providers intentionally seek to throw a wrench into the PPO structure by giving patients financial incentive, or kickback, to treat with them,” said Gregory Pimstone of Manatt. “This creates a playing field making it more financially advantageous for the PPO member to go out of the insurer’s network than to stay in-network, where patients typically still have cost-share responsibilities.”
The other change that opened the door for fraudulent schemes was the removal of medical underwriting. Though many viewed this as a win for healthcare consumers by opening access to affordable coverage for patients with pre-existing conditions, it didn’t come without opportunistic fraudsters taking advantage. In addition to pre-existing conditions, one area of prominent fraudulent schemes was the mandate for private insurance programs to cover patients suffering from addiction.
Pimstone outlines a segment of the scheme that went unchecked for years.
“Certain out-of-network substance abuse treatment providers worked with recruiters to find people suffering from addiction without insurance and paid the recruiters a fee for each patient they found. While the details vary by provider, the recruiter or clinic would then find private insurance that offered out-of-network benefits and procure policies for the patients,” said Pimstone.
Pimstone continued by saying that recruiters or facilities paid the premiums for the patients and any other costs needed to get them in the door, such as airfare and housing. Then they waived the patient cost-sharing obligations outlined in the policies, effectively making it accessible for the patients to proceed out of network.
“Some patients cycled through various substance abuse treatment centers, and when treatment ended, and premium payments were no longer made on the patient’s behalf, their insurance lapsed, leaving the patient without insurance,” said Manatt’s Greg Pimstone. “For some insurers, the effect of these various incentives was to massively increase the out-of-network claims experience, driving up healthcare costs, and eventually the cost of insurance to their consumers.”
Insurers are fighting back, especially when federally funded healthcare coverage such as Medicare or Medicaid are targeted. This risk is more significant for fraudsters facing a clear violation of federal law as outlined by the Office of Inspector General, Special Fraud Alert for routine waiver of copayments and deductibles under Medicare part B.
“For federally funded healthcare programs, the Office of Inspector General has observed that a provider’s payment of a beneficiary’s premiums or waiver of coinsurance raises the costs to the Medicare program and implicates federal anti-kickback statutes and the prohibition on giving inducements to beneficiaries” added Pimstone. “These are incommodious issues that impact both insurers and consumers who ultimately pay for higher healthcare costs in the form of higher premiums.”
Today, as the pandemic continues its attack on our society and the healthcare system, the frequency of fraud is becoming widespread and even deadly. Overall, the public reveres our healthcare providers and professionals and operates with high ethics and integrity. Unfortunately, less than honorable people living among us will go to great lengths to profit from this nation’s healthcare system, especially during the current pandemic crisis.
2018 ·