What is Health Care Fraud?

04.01.2024 | 5 min read

A concerned Black woman reads a document.

Health care fraud is not a victimless crime.

Every year, the United States loses about $75 billion because of health care fraud, according to the Institute of Medicine of the National Academies. It is a felony that can lead to a rise in health insurance premiums for everyone. Health care fraud can also expose insurance carriers to unnecessary medical procedures, increased taxes, and reduced services.

Blue Cross Blue Shield of Michigan has a dedicated team of investigators that work hard to protect members against fraud, waste and abuse. We use many tools to proactively identify dishonest behavior. The investigations team also has a dedicated hotline where individuals can report suspicious activity or billing concerns.

Health care fraud occurs when an individual, group of people, or company knowingly mis-represents or mis-states something about the type, the scope or the nature of the medical treatment or service provided. It is done to obtain unauthorized payments, health care benefits, services, and other things of value from a health care organization, its subsidiaries, or its customers.

Examples of health care fraud

Here are some common instances of health care fraud, according to the FBI:

Fraud committed by providers

Services not rendered: Charging for a service that was not provided. This can include medical services as well as prescriptions that were billed but not dispensed by a pharmacy.
Durable medical equipment: A DME company will use different provider numbers or business names to bill for both the rental and purchase of the same piece of equipment or will bill for equipment or supplies never received by the patient.
Unbundling: Providers bill separately for procedures and supplies that are considered part of a single procedure or included as part of a global fee in order to maximize their reimbursement.
Telemarketing fraud: Providers not actively involved in the medical care of a patient, but telemarketers promote high-cost products that offer little to no medical benefit to the member.
Misrepresenting services: Billing procedures under different names or Current Procedural Terminology (CPT) codes in order to obtain coverage for services, such as cosmetic or experimental procedures, which are otherwise not covered by the member’s plan.
Upcoding: The provider submits a claim for a more expensive service, supply or piece of equipment than was actually provided.
“Free” screenings: Providers advertise for tests such as hearing tests or chiropractic screenings as “free” in order to obtain a member’s insurance information. The information is then used by the providers to bill the member’s insurance company for the cost of the “free” tests and other unnecessary or unwanted services.
Unlicensed providers: Individuals who are unlicensed or have had their license suspended or revoked will see patients and bill the cost of their services by using the name of another health care professional or an address located in a different state.
Kickbacks: Providers exchange money and/or things of value for the referral of patients for services that are not medically necessary or that have no validity or diagnostic value.

Fraud committed by subscribers

Doctor shopping: Using multiple doctors or visiting several emergency rooms in order to obtain multiple prescriptions for controlled substances.
Identity swapping: Instances where an insured individual allows the use of his or her insurance or pharmacy cards by an uninsured person.
Identity theft: Illegally assuming the identity of another individual to obtain medical services or drugs.
Ineligible dependents: Keeping an ex-spouse or dependents who are no longer eligible on a contract or enrolling non-family members on a health insurance policy.

Fraud, waste, and abuse

Abuse and waste are two acts that are sometimes confused with fraud, which is an act meant to intentionally deceive or misrepresent.

Waste: Activities involving the Company’s payment or reimbursement or attempts to receive payment or reimbursement, for items or services where there was no intent to deceive or misrepresent, but rather the Company incurred unnecessary costs as a result of poor, inaccurate or inefficient invoicing, billing, processes or treatment methods.

Abuse: Activities that are inconsistent with sound business, financial, or medical practices, that may result in unnecessary cost to the Company or its customers, including but not limited to payment for services not medically necessary or that fail to meet professionally recognized standards for health care.

In simpler terms when comparing the three, think of it this way:

Abuse bends the rules.
Waste is inefficient but not intentional.
Fraud is intentionally deceptive.

Recognizing health care fraud and protecting against it

Sometimes fraud is easy to spot, like when someone steals your insurance information to get prescription drugs. But other times, it is not so easy, like when a doctor orders unnecessary services to increase payments from an insurance company.

Here are three ways you can protect yourself and others against fraud.

Review medical bills to verify that amounts are billed correctly.
Review Explanation of Benefits (EOB) forms to verify that dates and services were accurately billed.
Protect your health insurance ID as much as you would a credit card; do not share your membership info unless it is necessary, and only with professionals.

How to report health care fraud

Here’s how you can contact us to report suspected fraud, waste or abuse. Remember, all information is confidential, and callers can remain anonymous.

Visit bcbsm.com/health care fraud or download the BCBSM app.

The web site address above links to an online fraud reporting form that can be completed and sent to Investigations electronically.

Contact by Email: stopfraud@bcbsm.com.

Call the BCBSM toll free Fraud Hotline at 844 STOP FWA or the Medicare and government business Fraud Hotline at 888 650 8136.

Contact by Mail:
Corporate and Financial Investigations
600 E. Lafayette Blvd, MC 1325
Detroit, MI 48226 2998

Fax: 1-800-590-4616

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Photo credit: Getty Images