Forensics Journal - Stevenson University 2015 | Page 70

STEVENSON UNIVERSITY

against individuals and organizations who committed both accidental
and purposeful healthcare fraud, waste and abuse (Meyer, 2013,
p. 2). On a state level, another $15 billion has been recouped from
criminal fines and civil settlements resulting from the prosecution
of healthcare fraudsters.

hospital growth, creating a surplus of care facilities (U.S. Congress,
2001, p. 119). Simultaneously, the creation of the Medicaid and
Medicare programs helped break down many pre-1965 financial
barriers to healthcare while participating care providers were
deliberately and generously reimbursed by the Federal government
to garner political support of the programs. These factors contributed
to the near tripling of national healthcare expenditures, from $27.1
billion in 1960, to $74.3 billion in 1970 (Patel & Rushefsky, 2014,
p. 37).

While the $39 billion in recovered overpayments from the last
27 years is only enough to cover a small percentage of one year’s
program costs, the amount of overpayment dollars recovered each
year by the Federal and state governments is growing exponentially.
On average only about $1.4 billion in overpayments was recovered
during that time period. However, in 2012 alone, $3.1 billion in
healthcare fraud judgments and settlements was recovered by the
Federal government (Meyer, 2013, p. 3). As Medicaid and Medicare
fraud, waste and abuse schemes and problems become more prevalent
and their financial toll increases. Federal and state governments
are also detecting and reclaiming money back on a larger scale.
This increase can be attributed to developments in policy created
to prevent and identify fraud, increased investigative and program
integrity funding, and technological improvements to fraud detection
programs, databases and software.

Almost immediately, the rampant and widespread fraud and abuse
within both programs became obvious. Public hearings held in the
mid-1970s represented a growing disdain for the programs because
of the waste and abuse associated with funding and expenditures. It
was at these hearings that the pervasive practice of kickback payments
within the healthcare industry – especially in the Medicaid and
Medicare programs – was first exposed on a national level (Teplitzky
& Holden, 1990, p. 788). Kickbacks had a long-standing presence
before the creation of Medicare and Medicaid and were often referred
to as fee splitting or commission drumming. Their existence was not
limited to the healthcare field, but appeared throughout various other
professions, including the funeral home industry whose undertakers
would sometimes pay out commissions to physicians who referred
their post-life services to families of the recently deceased. Before
Medicaid and Medicare were created, kickbacks were shunned mainly
because they created a black market of sorts where a patient’s needs
were exploited and over-served by the auctioning off of their referral
by their primary doctor to the highest bidding surgeon, physician,
pharmacist or medical supplier for next-level care. These exacerbated
healthcare costs for services that were often not needed were mostly
paid out of pocket, however, so only the patient’s checkbook was
affected (Rodwin, 1993, p. 22). With the creation of Medicaid
and Medicare, kickbacks no longer targeted the beneficiary’s money
to pay for the unneeded or excessive referred services but taxpayer
dollars were appropriated instead.

PROGRAM INTEGRITY
Because U.S. healthcare expenditures comprise such a large portion
of the country’s budget, the wasteful and fraudulent squandering
of those funds has captured the attention of the media, public
and legislative bodies, particularly in regard to the Medicaid and
Medicare programs. Since their inception, congressional and state
legislative bodies and representatives are consistently tasked fighting
such program waste. In their answer to this ever-present problem,
lawmakers, politicians and Federal and state governments have
created and enacted volumes of policy and regulation to squelch
program abuse and create solutions for fraud and waste detection
and mitigation. Trends in these policies and regulations have ebbed
and flowed as changes in the healthcare industry and the country’s
economic posture influenced public and political perceptions of
Medicaid and Medicare and the healthcare environment as a whole.

As a result of the outrage and growing waste due to unethical
kickbacks, Congress passed the Medicare and Medicaid AntiFraud and Abuse Amendments of 1977. The amendments offered
several updates to previous anti-kickback provisions, including the
upgrade of criminal charges for such offenses to the programs from
misdemeanors to felony indictments. The new amendments also
required individuals to disclose ownership or control of healthcare
entities in an effort to curb conflicts of interest. More substantial than
the anti-kickback amendments was the creation of the Office of the
Inspector General (OIG) of the Department of Health and Human
Services (HHS) via legislation in 1976. Prior to the creation of HHS
OIG, the Federal Bureau of Investigation and United States Postal
Service were primarily tasked with any investigation of violations
against Medicaid or Medicare antifraud abuse statues. While the
OIG is also tasked with other responsibilities including the oversight,

Prior to the 1970s, Federal healthcare policy was shaped by three
assumptions: the healthcare system did not possess enough care
facilities and services; major financial barriers stood between many
needy individuals and the few resources that did exist; and the
healthcare industry could not find success in competitive markets
and regulatory strategies (Patel & Rushefsky, 2014, p. 37). These
assumptions proved faulty as the market soon became saturated
while testing and treatment trends grew excessively due to the
unconstrained supply of hospitals and physicians, resulting in
increased healthcare costs. The 1970 loan guarantee expansion of
the Hospital Survey and Construction Act of 1946, known as the
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