Medicare Protecting You From Fraud, Waste, and Abuse

The amount of money lost to Medicare fraud every year is astounding. It is not just fraudalent physicians either. Clinic owners, hospital systems, insurance companies, laboratories, nurses, pharmacists, people on Medicare—anyone can commit fraud.

Even more commit waste and abuse. The difference is that fraud involves an intentional scheme, whereas waste and abuse, though not intentional, result in unnecessary costs to our healthcare system.

a doctor speaking with an elderly patient

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Known Medicare Fraud Cases

Look at these cases from 2020 and 2019. Unfortunately, more are sure to follow.

  • In January 2020, a Philadelphia doctor was sentenced to 12 years in prison and charged $100,000 in penalties after distributing oxycodone which was not intended for medical purposes.
  • In November 2019, a New Jersey doctor was found guilty for accepting bribes and kickbacks from a pharmaceutical company in exchange for illegally prescribing the drug Fentanyl, which resulted in Medicare paying more than $847,000 for prescriptions that were medically unnecessary.
  • In October 2019, a California doctor was found guilty for his role in a $12 million scheme to provide medically unnecessary procedures to Medicare beneficiaries, upcode claims submitted to Medicare (to be more expensive), and re-package single-use catheters for reuse on patients.
  • In September 2019 in California, charges were brought against a total of 26 individuals, of which 14 were doctors or medical professionals, for their alleged involvement in Medicare and Medicaid fraud schemes resulting in a total of $257 million. 

Why Medicare Fraud Is an Issue

There are limited Medicare funds available. In fact, Medicare spending is expected to rise from 15% (in 2018) to 18% of total federal spending by 2029. Therefore, the United States cannot afford to lose any money to fraud, or waste and abuse.

That is why the federal government has legislation in place to punish those who exploit the healthcare system and to recover lost funds. These are the laws, how they work, and their penalties. Please note that the penalties are subject to inflation.


Anti-Kickback Statute (AKS)

Enacted under the Social Security Amendments of 1972, the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits the exchange (or offer to exchange) anything of value (e.g. bribes, kickbacks, rebates) for referrals for services that are paid for by a federal healthcare program. 


A heart-device company can offer a cardiologist a kickback to perform more surgeries with their devices.

The Penalties

Criminal penalties can include fines and imprisonment. Civil penalties can be as high as three times the kickback value plus as much as $100,000 per kickback. Violators of AKS will also be excluded from participating in federal healthcare programs for at least five years.


Civil Monetary Penalties Law (CMP)

The Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a) imposes civil penalties for violations of the Anti-Kickback Statute (AKS). In addition to addressing kickbacks, amendments to the law by the Affordable Care Act specifically penalize violators for arranging services with entities excluded from federal healthcare programs, making fraudulent statements on applications or contracts with federal healthcare programs, generating false claims, failing to report overpayments, and failing to give the government timely access to records.


Medicare requests a chart audit for a specific date, but the physician's office does not make the medical records available on time.

The Penalties

Depending on the violation, violators are also subject to pay damages up to three times the amount improperly claimed.


False Claims Act (FCA)

The False Claims Act, also known as Lincoln's Law, first came about during the Civil War when there was concern about fraudulent schemes to sell supplies to the Union Army. It is a law that prohibits anyone from knowingly submitting false or fraudulent claims to the federal government (Medicare or Medicaid) for payment.


A dermatologist submits a bill for a skin biopsy he never performed.

The Penalties

Civil penalties (31 U.S.C. § § 3729-3733) include fines plus three times the damages the federal government sustained because of the false claim. Criminal penalties (18 U.S.C. § 287) include imprisonment and criminal fines up to $500,000 for each claim.


Criminal Health Care Fraud Statute

The Criminal Health Care Fraud Statute (18 U.S.C. § 1347) is a provision of the Social Security Act which makes it a felony to intentionally execute (or attempt to execute) a scheme to defraud a healthcare benefit program or use false statements to obtain funds from a federal healthcare program.


A pharmacist does not dispense the proper number of opioid pills to a patient. Instead, he diverts the pills for direct sale to other clients.

The Penalties

Criminal penalties can include fines in addition to imprisonment.


Stark Statute (Physician Self-Referral Law)

The Stark Statute (42 U.S.C. § 1395nn) prohibits a physician from making referrals for health services to an entity when the physician (or a member of his or her family) has an ownership/investment interest or a compensation arrangement.


A physician can refer patients with COPD to an oxygen supply company that is owned by his wife.

The Penalties

Penalties can include fines as well as exclusion from federal healthcare programs.

A Word From Verywell

Billions of dollars are billed out of Medicare and Medicaid every year. Whether fraud is committed intentionally or waste and abuse occur inadvertently, there are laws in place to protect against those financial losses and to penalize those who wrongfully take money from the government.

What we need is enforcement of those laws. The future of the Medicare Trust Fund depends on it.

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Article Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Department of Health and Human Services. Office of Inspector General. Medicare fraud strike force.

  2. Kaiser Family Foundation. The facts on Medicare spending and financing. August 20, 2019.

  3. Centers for Medicare and Medicaid Services. Medicare fraud & abuse: prevent, detect, report. February 2019.