Medicare Fraud, Waste, and Abuse: A Primer

Much has been written about curtailing fraud, waste, and abuse in Medicare cases. Let's take a closer look at what these terms actually mean.

What is Fraud?

 If I simply "take" your property without permission, that could be stealing or it could be a mistake. Whether or not I have committed a civil or criminal wrong depends upon my subjective state of mind and whether or not there is a statute against my behavior. If in taking your property, I am simply mistaken in thinking I have a right, I may have to give the property back, but usually will not be punished for the act. On the other hand, if I knowingly take your property without right, then I have committed and act for which society says I can be civilly or criminally punished.

Fraud in the healthcare context is generally defined as "an intentional deception, or intentional misrepresentation, that a person makes in order to gain a benefit to which the person is not entitled."

What is Waste?

The second way to get into trouble is "waste," which has only recently been inserted into the discussion. Waste is "the careless, inefficient, or unnecessary use of public resources." For example, waste can occur when public money is spent on unnecessary program administration.

Unlike fraud and abuse, "waste" would not seem to necessarily involve "rule breaking." Because waste is a fairly new designation, and therefore there are few regulations imposing fines, the solution is for the government to threaten to simply strike a wasteful provider from the list of approved providers. While "waste" isn’t "fraud," the government may simply refuse to pay for anything deemed "wasteful," such as hospital acquired infections.

What is Abuse?

The third way to get in trouble with the government is "abuse." Abuse is any practice that is inconsistent with sound fiscal, business, or medical practices and results in unnecessary program cost. For example, abuse can include reimbursement for services that are not medically necessary, or that do not meet professionally recognized standards. Unlike fraud, abuse can occur when there is no intentional deception or intentional misrepresentation.

Whether a practice is "fraudulent," "abusive," or merely "wasteful," goes hand in hand with the question: Will a pattern of conduct result in paying back the money received, criminal action, or simply civil money penalties? The answer isn’t entirely simple to provide. A practice or "scheme," whether malum in se, or malum prohibitum, is normally occasioned within a continuum, or range of mental states – from innocence, to negligence, gross negligence, conscious indifference, willful ignorance, knowing, or intent to defraud. Because the potential penalty is (by definition) punitive, normally at a minimum, a "knowing" violation is required.

It is up to the government to decide which charge, or allegation to bring, based upon the strength of the evidence.  It is up to the jury to decide if the charge or allegation is true. In practice, "fraud or abuse" is usually prosecuted as a crime for behaviors which are fairly close to "stealing." See, Hooper, Patrick, Health Care Fraud And Abuse, Los Angeles: ABA Health Law Section, pp. 197-251 (2001) "Abuse," is more or less synonymous with "medically unethical". . . but without the intent to defraud or steal.

Next week we shall look as some specific examples of fraud, waste, and abuse.