An Insurance Fraud Year in ReviewJanuary 6, 2022 | Michael A. Sirignano |
The year 2021 will be remembered for many things, of course including that, as of this writing, a total of more than 800,000 Americans have died from COVID-19 since the beginning of the pandemic. For lawyers who represent insurance companies in cases seeking to challenge fraudulent claims and other types of insurance fraud, as well as for the federal and state attorneys who are on the front lines battling the same problem, 2021 also is likely to be recalled as the “Year of Insurance Fraud.”
Consider that during the past year there were important government reports examining the defrauding of health insurance programs, new trends and government initiatives relating to fraud, and insurance fraud cases involving significant numbers of defendants, others where extraordinarily large amounts of money were at issue, or both. When added together, it is not difficult to understand why insurance fraud remains such a key area of focus for government officials, carriers and attorneys.
Nearly one year ago, in mid-January, the U.S. Department of Justice (DOJ) announced that it obtained more than $2.2 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending September 30, 2020. See https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claims-act-cases-fiscal-year-2020. Of that amount, over $1.8 billion related to federal health insurance programs such as Medicare, Medicaid and TRICARE, the health care program for service members and their families. The defendants involved included drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories and physicians.
Then, in July, the DOJ and the U.S. Department of Health and Human Services (HHS) issued a report specifically focusing on health care fraud that illustrated that the HHS also is actively involved in protecting the bottom line of federal health insurance programs. See https://oig.hhs.gov/publications/docs/hcfac/FY2020-hcfac.pdf. Among other things, this report pointed out that, in fiscal year 2020, investigations conducted by HHS’s Office of Inspector General (HHS-OIG) resulted in 578 criminal actions against individuals or entities allegedly engaged in crimes related to Medicare and Medicaid, and 781 civil actions, which included false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure matters. HHS-OIG also excluded 2,148 individuals and entities from participation in Medicare, Medicaid and other federal health care programs.
At the end of March, in between those two reports, the DOJ discussed what it characterized as an “[h]istoric level” of criminal and civil enforcement efforts to combat fraud related to COVID-19, including schemes targeting unemployment insurance (UI) programs. See https://www.justice.gov/opa/pr/justice-department-takes-action-against-covid-19-fraud.
The fiscal year 2021 report issued by the Securities and Exchange Commission (SEC) in mid-November summarizing its enforcement actions, although not directly involving insurance fraud, is worth noting if for no other reason than the SEC explained that it was “a record year for whistleblower awards,” with the SEC awarding a total of $564 million to 108 whistleblowers and with the SEC’s whistleblower program surpassing $1 billion in awards over the life of the program. See https://www.sec.gov/news/press-release/2021-238. Whistleblowers also play a major role in many False Claims Act cases brought by federal and state authorities, including in matters involving allegations of insurance fraud – a trend that undoubtedly will continue this year and into the future.
The federal government made it clear during 2021 that it intends to ferret out and prosecute fraud related to COVID-19.
It has warned about troublesome developments, such as fraudsters creating websites mimicking unemployment insurance benefit websites, including state workforce agency (SWA) websites, for the purpose of unlawfully capturing consumers’ personal information. See https://www.justice.gov/opa/pr/justice-department-warns-about-fake-unemployment-benefit-websites.
Last year also saw at least three DOJ initiatives that have implications for insurance fraud.
First, in mid-May, U.S. Attorney General Merrick B. Garland directed the establishment of the “COVID-19 Fraud Enforcement Task Force” in a stated effort to enhance enforcement efforts against all forms of fraud related to COVID-19. See https://www.justice.gov/opa/pr/attorney-general-announces-task-force-combat-covid-19-fraud. This task force’s focus on fraud related to government programs enacted in the face of COVID-19 reinforces the view that all forms of fraud related to COVID-19 will remain a target this year.
Then, in October, the DOJ launched a “Civil Cyber-Fraud Initiative,” combining the DOJ’s expertise in civil fraud enforcement, government procurement and cybersecurity “to combat new and emerging cyber threats to the security of sensitive information and critical systems.” In a statement announcing the launch, the DOJ indicated that it would use the federal False Claims Act to pursue cybersecurity-related fraud by government contractors (of course including health care providers participating in federal health insurance programs) – and that, among other sources, it would be relying on, yes, whistleblowers. See https://www.justice.gov/opa/pr/deputy-attorney-general-lisa-o-monaco-announces-new-civil-cyber-fraud-initiative.
In December, the DOJ, together with the FBI, the U.S. Postal Inspection Service and five other federal law enforcement agencies, announced the completion of the fourth annual “Money Mule Initiative.” See https://www.justice.gov/opa/pr/us-law-enforcement-targets-fraud-facilitators-doubling-last-year-s-enforcement. This initiative targeted networks of individuals through which international fraudsters obtain proceeds of fraud schemes. These individuals, sometimes referred to as money mules, receive money from fraud victims and forward the illicit funds, often to overseas perpetrators.
In a statement, the government explained that, by receiving and transferring illicit funds, money mules facilitated a wide range of fraud schemes and also assisted the theft of monies earmarked for pandemic relief, including unemployment insurance funds.
The agencies noted that law enforcement served approximately 4,670 letters warning individuals that their actions were facilitating fraud schemes during the time covered by the report. Civil or administrative actions were filed against 11 individuals, and through seizures and voluntary return of funds, law enforcement obtained nearly $3.7 million in fraud proceeds.
Additionally, more than 30 individuals were criminally charged for their roles in receiving and forwarding victim payments or otherwise laundering fraud proceeds.
The past year has seen a wide variety of insurance fraud cases. Of course, many involved allegations of fraud stemming from COVID-19 programs, but others were noteworthy for different reasons – including that they involved former professional athletes. A short sampling of some of these cases follows.
In late May, the DOJ brought criminal charges in a coordinated law enforcement action against 14 defendants for alleged COVID-19 health care-related fraud, with losses allegedly exceeding $143 million. See https://www.justice.gov/opa/pr/doj-announces-coordinated-law-enforcement-action-combat-health-care-fraud-related-covid-19.
The DOJ asserted that the defendants engaged in various health care fraud schemes designed to exploit the COVID-19 pandemic. For example, as alleged, multiple defendants offered COVID-19 tests to Medicare beneficiaries at senior living facilities, drive-through COVID-19 testing sites and medical offices to induce the beneficiaries to provide their personal identifying information and a saliva or blood sample. Then, according to prosecutors, the defendants misused the information and samples to submit claims to Medicare for unrelated, medically unnecessary and far more expensive laboratory tests, including cancer genetic testing, allergy testing and respiratory pathogen panel tests. As alleged, in some cases, the COVID-19 test results were not provided to the beneficiaries in a timely fashion or were not reliable, risking the further spread of the disease, and the genetic, allergy and respiratory pathogen testing was medically unnecessary and, in many cases, the results were not provided to the patients or their actual primary care doctors.
In connection with the charges brought in late May, the DOJ also asserted that, in another type of COVID-19 health care fraud, defendants exploited policies that were put in place by the Centers for Medicare & Medicaid Services (CMS) to enable increased access to care during the COVID-19 pandemic. For example, pursuant to the COVID-19 emergency declaration, telehealth regulations and rules were broadened so that Medicare beneficiaries could receive a wider range of services from their doctors without having to travel to a medical facility. One case brought by the DOJ involved charges for allegedly exploiting these expanded policies by submitting false and fraudulent claims to Medicare for sham telemedicine encounters that did not occur.
These charges were brought in seven districts across the country, including in the U.S. District Court for the Eastern District of New York. In this action, the government alleged that two individuals who owned and controlled several New York pharmacies and sham pharmacy wholesaling companies obtained billing privileges for multiple pharmacies by using nominees to serve as the purported owners and supervising pharmacists. The defendants then allegedly submitted false and fraudulent claims to Medicare, including by using COVID-19 “emergency override” billing codes to circumvent otherwise applicable pre-authorization requirements and limits on the frequency of refills for expensive drugs (primarily, the cancer treatment gels Targretin and Panretin). The defendants allegedly used an elaborate network of international money laundering operations to conceal and disguise the proceeds of the scheme.
In late July, in another matter, the United States intervened in six complaints alleging that Kaiser Permanente companies violated the federal False Claims Act by submitting inaccurate diagnosis codes for their Medicare Advantage Plan enrollees in order to receive higher reimbursements. The government subsequently filed a complaint in intervention in which it indicated that that it was seeking treble damages – with potentially as much as $1 billion at issue. See https://www.justice.gov/opa/press-release/file/1444936/download.
In early September, three former National Football League (NFL) players pleaded guilty for their roles in what prosecutors characterized as a nationwide scheme to defraud a health care benefit program for retired NFL players that had been established pursuant to the NFL’s 2006 collective bargaining agreement. The program provided for tax-free reimbursement of out-of-pocket medical care expenses that were not covered by insurance and that were incurred by former players, their spouses and their dependents, up to a maximum of $350,000 per player. See https://www.justice.gov/opa/pr/former-nfl-players-plead-guilty-nationwide-health-care-fraud-scheme.
Later that month, federal prosecutors announced that charges had been filed against 52 defendants in the U.S. District Court for the Southern District of Florida alleging over $308 million in losses from health care fraud schemes involving, among other things, durable medical equipment suppliers, home health care, pharmacies, payment of kickbacks and money laundering. See https://www.justice.gov/usao-sdfl/pr/national-health-care-fraud-enforcement-action-results-charges-over-308-million-intended.
Then, in October, 19 former National Basketball Association (NBA) players and the spouse of a former player were charged in the U.S. District Court for the Southern District of New York with defrauding the NBA Players’ Health and Welfare Benefit Plan for allegedly submitting nearly $4 million in fraudulent reimbursement claims for medical and dental services that had not actually been rendered and that they had never received. See https://www.justice.gov/usao-sdny/press-release/file/1440076/download.
As should be evident, insurance fraud continued to be widespread during 2021, notwithstanding the efforts of the DOJ and other government officials. There can be no doubt that it will remain a timely and vital subject during the New Year, with private and public actions continuing to be brought to bear in an effort to protect government coffers as well as insurer and policyholder interests.
Reprinted with permission from the January 6, 2022, issue of the New York Law Journal©, ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
- Michael A. Sirignano