The primary source of fraud in health care is through false claims.
False claims are illegal and punishable through The False Claims Act, otherwise known as "Lincolns' Law". This law was enacted during the Civil War, updated by Ronald Regan in 1986 and contains "qui tam" provisions allowing ordinary citizens to sue on behalf of the government and collect restitution. (Phillip and Cohen) Also, under U.S. Code Title 18 Part I Chapter 63 section 1347 health care fraud is punishable by fine, or imprisonment for up to 10 years, or in cases of death a life sentence.
There are many types of false claims. Services not rendered is best described as billing for services that were never delivered to patients. Physicians simply add on a few extra services that they did not perform for the patient. A common example would be when ordering a complete blood count (CBC) for a patient to bill for additional blood chemistry tests that doctors hadn't performed. In this very situation, two emergency room doctors were paid $92 million after bringing to light a "whistleblower" suit against Columbia/HCA. (Phillips & Cohen)
Lack of Medical Necessity is another term used to describe a situation when a doctor or health care provider bills the insurance for procedures that are not necessary. This type of fraud is combated by practices put into place by the insurance companies such as; yearly benefit maximums, and restrictions on the number of procedures you can have. However, too often illegitimate claims are made. For example, a New York radiologist was sentenced under the False Claims Act to one to three years in prison and excluded from Medicare and state health care programs for 10 years for billing Medicaid for "thousands of medically unnecessary, duplicative, forged and unreadable sonogram tests." (Phillips & Cohen)
Kickbacks are another borderline form of health care fraud. This is the most complicated and hidden form of fraud. It involves an improper monetary or material benefit to the health care provider for prescribing or using a certain product or service. In simpler terms, someone pays a doctor per patient he will prescribe a medicine to, or perform an expensive test on. A fine example comes from a group of five hospitals in Kansas and Missouri, which paid doctors per referral to it's "geriatric center". The group of hospitals was sentenced to pay $1.2 million in restitution under the False Claims Act. There is a anti-kickback statue written into Medicare, but often the kick backs are hard to track and difficult to discover. This is an area where "whistleblowers" are most effective as it alerts the proper authorities to a scam operating.
Health care fraud will continue to be an issue as long as our current system of health insurance and care is operating. There are many flaws in the system and it is barely limping along. Many other countries, notably France, Australia, and the Netherlands have developed systems that are proven to be much more cost effective than the current American system. Fraud will continue as long is there is opportunity; the solution is to significantly lessen the opportunity and increase the punishment.
An, Jane Saloner, Romy and Ranji, Usha The Henry J. Kaiser Family Foundation "U.S. Health Care Costs" Updated January